Business Context and Reporting Period
Company: Flex LNG Ltd.
Filing Type: Form 6-K (Unaudited Condensed Consolidated Interim Financial Statements)
Reporting Period: Six months ended June 30, 2025
Business Overview: Flex LNG is an owner and operator of fuel-efficient, fifth-generation LNG carriers. As of August 20, 2025, the fleet consists of 13 vessels. The company is delisting from the Oslo Stock Exchange (OSE) effective September 16, 2025, while maintaining its listing on the New York Stock Exchange (NYSE).
Key Financial Metrics
| Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 |
|---|---|---|
| Vessel Operating Revenues | $174.4 million | $174.9 million |
| Operating Income | $91.2 million | $96.4 million |
| Net Income | $36.4 million | $55.1 million |
| Earnings Per Share (Diluted) | $0.67 | $1.02 |
| Net Cash Provided by Operating Activities | $67.1 million | $82.4 million |
| Cash and Cash Equivalents (End of Period) | $412.7 million | $370.3 million |
| Total Debt (Gross) | $1,814.5 million | $1,823.3 million |
| Dividends Paid | $81.1 million | $80.7 million |
Material Changes vs. Prior Period
- Revenue Decline: Vessel operating revenues decreased by $0.5 million due to lower spot market rates affecting the variable rate contract for Flex Artemis and lower hire rates for Flex Constellation while in the short-term market. This was partially offset by revenue from amended time charters for Flex Resolute and Flex Courageous.
- Expense Increases: Voyage expenses rose by $3.7 million, primarily due to a $3.6 million accrual for European Union Allowances (EUAs) under the EU Emission Trading System. Vessel operating expenses increased by $1.8 million due to crew changes and auxiliary engine maintenance.
- Interest Expense Reduction: Interest expense decreased by $7.4 million to $46.4 million, driven by a decline in average 3-month SOFR and reduced average debt drawn down following refinancing in late 2024.
- Derivative Loss: The company recorded a net loss on derivatives of $8.6 million (compared to a $10.8 million gain in 2024), primarily driven by a $16.7 million unrealized loss on interest rate swaps.
- Debt Extinguishment: The company incurred $1.6 million in extinguishment costs related to the refinancing of Flex Courageous.
Guidance, Outlook, and Risks
Management Commentary and Outlook
- Fleet Employment: Firm contract coverage is 85.7% for the remainder of 2025. The aggregate firm contract backlog is 56 years, potentially extending to 85 years if all options are exercised. Spot market exposure for the remainder of 2025 is 14.5%.
- Refinancing Activity: In May 2025, the company completed a sale and leaseback for Flex Courageous ($175 million proceeds), resulting in net cash proceeds of approximately $43 million. In July 2025, a new $180 million term loan facility was signed for Flex Constellation.
- Dividends: The Board approved a Q2 2025 dividend of $0.75 per share, payable in September 2025. A $200 million reduction in Share Premium Account was approved to increase distribution capacity.
- Delisting: Shares will be delisted from the OSE on September 16, 2025, with a share migration process to the NYSE.
Risks and Contingencies
- Market Volatility: Exposure to fluctuations in spot charter rates and LNG market conditions.
- Geopolitical Risks: Conflicts in Ukraine, the Middle East (Israel-Hamas, Houthi attacks), and potential trade wars impacting shipping routes and insurance costs.
- Regulatory & Environmental: Compliance with EU ETS (carbon allowances) and evolving environmental regulations affecting vessel operations and costs.
- Interest Rate Risk: Despite hedging $850 million of debt, the company remains exposed to SOFR fluctuations on $818.4 million of variable-rate debt.
Investor Verification Checklist
- Contract Backlog: Verify the 56-year firm contract backlog and the specific terms of the new 15-year charter for Flex Constellation commencing in 2026.
- Refinancing Terms: Review the specific interest rate margins and repayment profiles for the new Flex Constellation ($180M) and Flex Resolute (Sale & Leaseback) facilities.
- EU ETS Impact: Assess the long-term financial impact of EU Emission Trading System costs on voyage expenses and charterer pass-through mechanisms.
- Derivative Exposure: Analyze the $16.7 million unrealized loss on interest rate swaps and the company's hedging strategy against rising SOFR.
- Delisting Process: Confirm the timeline and mechanics for OSE shareholders to migrate shares to the NYSE following the September 16, 2025 delisting.