The Next Generation of LNG Carriers - Marine Money Week June 2017
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June 2017 Marine Money Week The Next Generation of LNG Carriers June 2017 | 1
Disclaimer
§ THIS PRESENTATION (THE “PRESENTATION”) HAS BEEN PRODUCED BY FLEX LNG LTD. ("FLEX LNG" OR "THE COMPANY”), SOLELY FOR
PRESENTATION PURPOSES AND DOES NOT PURPORTE TO GIVE A COMPLETE DESCRIPTION OF THE COMPANY, ITS BUSINESS OR ANY OTHER
MATTER DESCRIBED HEREIN.
§ THE PRESENTATION DOES NOT CONSTITUTE AN OFFER, INVITATION OR SOLICITATION OF AN OFFER TO BUY, SUBSCRIBE OR SELL ANY
SECURTIEIS. THIS PRESENTATION IS STRICTLY CONFIDENTIAL AND MAY NOT BE REPRODUCED OR REDISTRIBUTED, IN WHOLE OR IN PART, TO
ANY OTHER PERSON.
§ NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY OR COMPLETENESS OF ANY INFORMATION INCLUDED
HEREIN IS GIVEN BY THE COMPANY, AND THAT NOTHING CONTAINED IN THIS PRESENTATION IS OR CAN BE RELIED UPON AS A PROMISE OR
REPRESENTATION BY THE COMPANY, WHO DISCLAIM ALL AND ANY LIABILITY, WHETHER ARISING IN TORT OR CONTRACT OR OTHERWISE.
§ THE PRESENTATION SPEAKS AS OF THE DATE SET OUT ON ITS FRONT PAGE. THE COMPANY DOES NOT INTEND TO, OR WILL ASSUME ANY
OBLIGATION TO, UPDATE THE PRESENTATION OR ANY OF THE INFORMATION INCLUDED HEREIN.
§ THE CONTENTS OF THE PRESENTATION ARE NOT TO BE CONSTRUED AS FINANCIAL, LEGAL, BUSINESS, INVESTMENT, TAX OR OTHER
PROFESSIONAL ADVICE. EACH RECIPIENT SHOULD CONSULT WITH ITS OWN PROFESSIONAL ADVISORS FOR ANY SUCH MATTER AND ADVICE.
§ AN INVESTMENT IN THE COMPANY INVOLVES RISK, AND SEVERAL FACTORS COULD CAUSE THE ACTUAL RESULTS, PERFORMANCE OR
ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS THAT MAY
BE EXPRESSED OR IMPLIED BY STATEMENTS AND INFORMATION IN THIS PRESENTATION.
§ THE PRESENTATION CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS RELATING TO THE BUSINESS, FINANCIAL PERFORMANCE AND
RESULTS OF THE COMPANY AND/OR THE INDUSTRY IN WHICH IT OPERATES, SOMETIMES IDENTIFIED BY THE WORDS "BELIEVES”, "EXPECTS”,
“INTENDS”, “PLANS”, “ESTIMATES” AND SIMILAR EXPRESSIONS. THE FORWARD-LOOKING STATEMENTS CONTAINED IN THIS PRESENTATION,
INCLUDING ASSUMPTIONS, OPINIONS AND VIEWS OF THE COMPANY OR CITED FROM THIRD PARTY SOURCES, ARE SOLELY OPINIONS AND
FORECASTS WHICH ARE SUBJECT TO RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE ACTUAL EVENTS TO DIFFER MATERIALLY
FROM ANY ANTICIPATED DEVELOPMENT. THE COMPANY DOES NOT PROVIDE ANY ASSURANCE THAT THE ASSUMPTIONS UNDERLYING SUCH
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ACCURACY OF THE OPINIONS EXPRESSED IN THE PRESENTATION OR THE ACTUAL OCCURRENCE OF THE FORECASTED DEVELOPMENTS. NO
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ACTUAL RESULTS.
§ THIS PRESENTATION IS SUBJECT TO NORWEGIAN LAW, AND ANY DISPUTE ARISING IN RESPECT OF THIS PRESENTATION IS SUBJECT TO THE
EXCLUSIVE JURISDICTION OF THE NORWEGIAN COURTS.
June 2017 | 2
FLEX LNG at a Glance
COMPANY SNAPSHOT
1. FLEX LNG is focused on providing safe, reliable, and 3. FLEX LNG’s fleet will provide Charterers with highly
cost effective solutions in the LNG shipping industry efficient tonnage to cut fuel consumption and reduced boil off
• FLEX LNG aims to become a leading supplier of LNG rate (BOR)
Carriers and floating storage & regasification units (“FSRUs”) • MEGI propulsion has ~30% lower fuel consumption than Tri-
Fuel Diesel Electric (TFDE) vessels
2. FLEX LNG is listed on the Oslo Axess Stock Exchange with
a market capitalization of NOK 3.6bn / USD 430m 4. FLEX LNG is actively pursuing opportunities in the FSRU
• Majority shareholder Geveran Trading Co Ltd is committed market
to building up FLEX LNG into major player in LNG shipping • Opportunities may include FSRU newbuildings for long-term
and floating regasification charters and/or conversions of existing vessels
FLEX LNG FLEET
Owned Fleet Chartered-In Vessels
6 173,400 173,400 173,400 173,400
4 173,400 170,000 160,000 155,000
174,000 174,000
• 4 chartered-in TFDEs for 6 months firm period (+6
• 6 LNG MEGI vessels on order (Owned) months option) from March 2017
• Under contruction at DSME and SHI in Korea • 155k-174k TFDE vessels
• Delivering Q1-Q2 2018, Q2-Q3 2019 • Building market presence and operational experience
June 2017 | 3
LNG Carrier (R)evolution
# Vessels
600
4-Stroke Diesel Engines:
First Dual Fuel (DFDE) in 2004
First Tri Fuel (TFDE) in 2008
500
400 2-Stroke Engines MEGI/X-DF:
First MEGI in 2016
Steam Turbine: First X-DF in 2017
First LNG Vessel 1969
300
200
100
0
1970 1995 2020
# LNGC Existing Fleet Orderbook
June 2017 | 4LNG Shipping – Technological Evolution
Steam Turbine Propulsion:
• Steam turbine propulsion was the norm for nearly 40 years
• Propulsion system capable of burning gas
• Higher consumption fed by higher Boil-Off Rates (BOR)
Tri Fuel Diesel Electric Propulsion:
• Technical innovation allows diesel generators to burn gas. Multiple generators provide electricity to propulsion motors
• Improved fuel consumption by ~35% vs. Steam vessels
• Lower BOR containment systems developed allowing for increase in delivered volumes of LNG
MEGI / XDF Two-Stroke Propulsion:
• Direct gas injection into medium speed direct drive engines
• Improved fuel consumption by ~25% vs. TFDE and >50% vs. Steam vessels
• Lower consumption levels mean excess BOG at slow speeds. Re-liquefaction systems developed to recover excess boil-off
LNGC Fleet and Orderbook by Propulsion Type
# Vessels MEGI ST DFDE/TFDE Other XD-F
The LNG fleet is
50
undergoing a
transformation
40 to 2-stroke
5% 44% tonnage (MEGI
and X-DF)
8%
30
20
41% 2%
10
-
'72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12 '14 '16 '18 '20 '22
Source: Affinity LNG
June 2017 | 5LNG Trend: Bigger, Better Ships, at Lower Shipyard Prices
LNGC Ships Have Grown in Cargo Capacity and LNGC Newbuilding Average Prices vs. Average Vessel Size
Improved Fuel Efficiency and Boil Off Rates, Whilst
Shipyard Prices Have Decreased US$ million
Average Price Average Size
Size m3 (‘000)
250 200
• Average newbuilding price per cubic meter of cargo
Thousands
180
capacity has decreased over the last ten years
200 160
• The average delivered vessel size has increased by 140
~13% since 2000 150 120
• The average newbuilding price per cubic meter 245 100
decreased by ~15% 100 205
220 220 212 202 202 201 209 205 200
80
185 190 185
173 165
150 155 60
50 40
Unit Transportation Costs (UTC) have declined basis 20
same Charter Rates - -
2000 2003 2006 2009 2012 2015 2017
• Increased cargo capacity
• Decreased fuel consumption Unit Transportation Cost: Comparison of LNG Ship Types
• Steady to decreasing contract prices $ / mmbtu
• Modern two stroke LNGC provide improved shipping 1
efficiency for Charterers/Consumers
0.8
0.6
0.4
0.2
0
ST 138k TFDE 160k TFDE 174k X-DF 174k MEGI 174k
Source: DSME, MAN, FLEX LNG
June 2017 | 6Unit Transportation Cost Breakdown – U.S. to Japan
On a Unit Transportation Cost basis, the LNGC Comparative Analysis: 145K ST vs. 160K TFDE vs. 174K MEGI
vessels will be on par with other vessel
performance classes: Generic
Vessel
Class
Specifica0ons
• TFDE at US$ 100,000 pd Vessel
Class
145k
ST
160k
TFDE
174k
MEGI
• 145,000 m3 ST ~US$ 73,000 pd Capacity
Cubic
Meters
145,000
m3
160,645
m3
174,000m3
• 174,000 m3 MEGI ~US$ 118,000 pd
Tonnes
(@
98.5%)
65,414
72,472
78,497
Propulsion
System
ST
TFDE
MEGI
Daily
Boil-‐Off
Rates
0.15%
0.10%
0.06%
Vessel UTC is affected by two major factors: 3,133,341
3,591,128
3,950,462
Delivered
Mmbtu
• The daily boil-off rate of the containment
Charter
Hire
Rate
(US$
/
day)
72,784
100,000
118,364
system
Voyage
DuraMon
48.86
days
48.86
days
48.86
days
• The fuel efficiency and flexibility of the
Transit
Speed
16.5
kts
16.5
kts
16.5
kts
propulsion system
Laden
HFOE
ConsumpMon
/
day
142
91
68
Ballast
HFOE
ConsumpMon
/
day
146
102
69
Total
Trade
Costs
(US$)
Charter
Hire
3,556,118
4,885,859
5,783,098
Fuel
Costs
47,726
38,933
34,348
Boil-‐Off
1,551,970
1,061,014
814,872
Port
Charges
312,000
312,000
312,000
Canal
Fees
583,600
637,732
683,940
Total
Voyage
Costs
6,051,414
6,935,537
7,629,518
Unit
Cost
Per
MMBtu
Charter
Hire
1.13
1.36
1.46
Fuel
Costs
0.02
0.01
0.01
Voyage Assumptions: Sabine Pass to Tokyo Bay
Boil-‐Off
0.50
0.30
0.21
via Panama Canal (9278 nm), Round Trip, BOG
Port
Charges
0.10
0.09
0.08
priced at US$ 5.50 / MMBtu
Canal
Fees
0.19
0.18
0.17
Total
Voyage
Cost
Per
MMBtu
1.93
1.93
1.93
Source: Poten & Partners
June 2017 | 7Efficiency Commands a Premium in LNG Shipping
Brokers began publishing assessed two-stroke (MEGI and X-DF) spot charter rates in January 2017
US$/ day US$/ day
120,000 80,000
70,000
100,000
60,000
80,000
50,000
60,000 40,000
30,000
40,000
20,000
20,000
10,000
0 -
2014 2015 2016 2017 January-17 February-17 March-17 April-17 May-17
ST TFDE
ST TFDE MEGI/X-DF Assessment
There are currently ten MEGIs on the water (all under term TC contracts)
Sources: Arctic Shipping Research, Fearnley LNG, Clarksons
June 2017 | 8Right Ships at the Right Time
Only 11 Open LNGCs out of 101 through 2021
# Vessels Most of the vessels in the orderbook are committed to
50 long term charters
45
• Currently, there are 101 LNGC newbuildings under
5 construction
40
• 90% of the LNGC newbuildings built by 2021 are
committed for long term charters
35
30
1 FLEX LNG owns 6 out of the 11 open LNG newbuildings,
four of which delivers in 2018 and two in 2019
25
5
• Limited ordering – only 8 LNGC newbuildings contracted
20 41
over the last 18 months
15 • Ramp up of LNG global supply is expected to drive strong
28
demand for term charters of modern tonnage
10 19 • Incremental LNGC demand 30-50 vessels by 2021
5 • Most of the recent long term charters has been MEGI or
XDF vessels
0
2
2017 2018 2019 2020-2021
Term Charters Uncommitted
Source: FLEX LNG
June 2017 | 9FLEX LNG Strategic Focus FLEX LNG has the goal of becoming a leading supplier of LNG Carriers and FSRUs by leveraging on its state of the art LNGCs and extensive experience in the FSRU sector The LNG market is growing rapidly and 30-50 additional vessels will be required by 2020 • New export projects will add 25-30 mtpa of LNG per year over through 2020 • The current orderbook is insufficient to meet this demand for LNGCs • FLEX LNG is well positioned to provide customers with superior transportation efficiency • Further newbuildings will be considered as the market evolves FLEX LNG has chartered in LNG vessels at competitive rates going into an improving market • Four LNGCs chartered-in will allow FLEX LNG to become operational one year before the delivery of the newbuild vessels • FLEX LNG is building strong relationships with Charterers whilst developing our operational capabilities and reputation in market • Having LNGCs on charter also allows FLEX LNG to offer flexible delivery timing and charter periods in combination with the owned fleet FLEX LNG is actively pursuing opportunities in the FSRU market to leverage its experience with the development and implementation of FSRU projects • Opportunities may include FSRU newbuildings for long-term chartering contracts and/or conversions of existing vessels June 2017 | 10
Thank You
June
June 20172017
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