FLNG FLEX LNG Ltd

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Interim Financial Information

Flex LNG Ltd.

Fourth Quarter 2019

February 26, 2020

February 26, 2020 - Hamilton, Bermuda

Flex LNG Ltd. ("Flex LNG" or the “Company”) today announced its unaudited financial results for the fourth quarter and year ended December 31, 2019.

Highlights:

•	Reported revenues of $52.0 million for the fourth quarter 2019, compared to $29.8 million for the third quarter 2019.

•	Reported net income of $23.9 million for the fourth quarter 2019, compared to a net income of $0.5 million for the third quarter 2019.

•	Average Time Charter Equivalent¹ ("TCE") rate of $94,000 per day for the fourth quarter 2019, compared to $58,222 per day for the third quarter 2019.

•	Adjusted EBITDA¹ of $41.9 million for the fourth quarter 2019, compared with $21.8 million for the third quarter 2019.

•	In October 2019, Flex LNG Fleet Management AS, a related party, received the Document of Compliance qualifying the Company for in-house technical ship management services.

•	In November 2019, the Company received firm commitments from a syndicate of 11 banks and the Export-Import Bank of Korea ("KEXIM") for a $629 million financing for five of the newbuildings scheduled for delivery in 2020. The facility agreement was signed in February 2020.

•	In November 2019, the Company entered into a long-term time-charter with Clearlake Shipping, a subsidiary of Gunvor Group, for the newbuilding Flex Artemis. The period under the charter is up to ten years, where the first five years are firm.

•	In December 2019, the Company entered into a 12-month time-charter with Endesa for the vessel Flex Ranger, with charterer's option to extend by an additional 12 months. The firm period of the charter will expire around June 2021.

•	In January 2020, a 12-month extension option was exercised under the time-charter agreement for Flex Enterprise, giving a firm period until the end of the first quarter 2021.

•	Further strengthening of the commercial team with the appointment of Ben Martin as Chief Commercial Officer, who will join Flex LNG on or about April 1, 2020.

•	The Board of Directors has declared a cash dividend for the fourth quarter of $0.10 per share.

¹ Time Charter Equivalent rate and Adjusted EBITDA are non-GAAP measures. A reconciliation to the most directly comparable GAAP measure is included in the back part of this earnings report.

Øystein M Kalleklev, CEO of Flex LNG Management AS, commented:

“2019 was an eventful and productive year for Flex LNG. We continue to build our organization with exceptional people, most recently with today's announcement of the recruitment of Ben Martin who will join us from Trafigura as our Chief Commercial Officer.  Furthermore, we are taking a greater responsibility of the management of our fleet with Flex LNG Fleet Management currently managing four of our six vessels on water. Ship management continues to perform excellent with no loss time injuries recorded for the second year in a row.

We took delivery of two LNG carriers in June and August 2019, and these two vessels were put directly into a strong spot market in the second half of 2019. Given the fact that we positioned our fleet for a stronger winter market we were able to achieve trading results in fourth quarter of 2019 similar to what we did in the fourth quarter of 2018, when rates were at all-time high. We are thus pleased to announce the best-ever financial results for Flex LNG with net income of around $24 million for the fourth quarter. Based on fixtures to date, we anticipate the TCE for the first quarter 2020 to be close to $70,000 per day, despite the demand slump in the first quarter due to a record warm winter and the recent coronavirus outbreak.

We are also pleased that several of our charterers are returning customers, with recent contract extensions for both Flex Ranger and Flex Enterprise, as well as the long-term charter announced with Gunvor for the newbuilding Flex Artemis due for delivery this summer. During the year we were also successful in securing about $1.3bn of attractive long-term financing, which boosted our liquidity position and enables us to run our ships at industry low cash break-even levels.

Due to the uncertainty and disruptions created by the coronavirus and associated low gas prices, we have elected to be cautious by maintaining a $0.10 dividend for the fourth quarter, and for the time being rather preserve liquidity, which stood at close to $130 million at year-end. This gives us a comfortable financial position to handle the current market situation. While the freight and gas markets are currently challenging, LNG continues to be a long term story with expected annual growth of around 3 to 4 per cent for the next two decades as natural gas, and to greater extent LNG, is the transition fuel for a cleaner and more sustainable future.”

Ben Martin commented:

“I’m delighted to be joining Flex LNG as Chief Commercial Officer at an exciting time for the company. The LNG market is undergoing unprecedented changes and Flex LNG, with its market leading ships and strong financial position, is well positioned for the future. I look forward to working with the current leadership team to grow market share and increase shareholder value.”

Business Update

In November 2019, the Company entered into a long-term time charter with Clearlake Shipping, a subsidiary of Gunvor Group, for the newbuilding LNG carrier Flex Artemis. The period under the time-charter is up to ten years, where the first five years are firm. The time-charter will commence upon delivery of the vessel from the shipyard, scheduled for the third quarter 2020. The time-charter will have elements of variable rate of hire.

In December 2019, the Company entered into a time-charter with Endesa for the vessel Flex Ranger. Endesa, a subsidiary of Enel, is a leading company in the Spanish electricity sector and the second largest operator in the Portuguese market. The firm period under the time-charter is 12 months and will commence in direct continuation of an existing time charter with Enel, which expires around June 2020. Endesa will also have the option to extend the time charter by an additional 12 months subsequent to the firm period maturing around June 2021.

In January 2020, a 12-month extension option was exercised under the time-charter agreement for Flex Enterprise entered into in March 2019. Following the extension, the firm period will mature at the end of the first quarter 2021. The time-charter rate under the agreement is variable as a function of overall market conditions and the charterer has remaining extension options.

In October 2019, Flex LNG Fleet Management AS, a related party, received the Document of Compliance qualifying the Company for in-house technical ship management services. The technical ship management for the first four vessels was transferred to Flex LNG Fleet Management AS between November 2019 and February 2020, with the remaining vessels scheduled to be transferred during 2020. The Company believes that the transfer of the technical ship management to Flex LNG Fleet Management AS will put the Company in a better position to attract longer term business opportunities, as well as improving the ability to control total cost of ownership for the fleet.

The Company now has six vessels on the water and an additional seven newbuildings under construction, which are scheduled for delivery between the second quarter 2020 and the second quarter 2021.  With this fleet, Flex LNG has the ability to be present in all three major basins (the Atlantic Basin, Pacific Basin, and Middle East Basin) providing for enhanced customer relationships, increased vessel utilization and shorter distance to load ports. Our fleet's characteristics are expected to meet charterers' preference for the improved unit transportation cost of larger and more fuel efficient vessels. The Flex LNG fleet represents a diversified portfolio of two stroke vessels with both M-type Electronically Controlled Gas Injection ("MEGI") and Generation X Dual Fuel ("XD-F") propulsion systems. Three of the vessels are equipped with Full Re-liquefaction Systems ("FRS") and four are equipped with Partial Re-liquefaction Systems ("PRS"), which reduces the boil off rate to 0.035% and 0.075% respectively, making these vessels particularly suitable for long-term charters.

Results for the three months ended December 31, 2019

The Company reported vessel operating revenues of $52.0 million for the fourth quarter 2019, compared to $29.8 million in the third quarter 2019. The increase in vessel operating revenues was driven by significantly improved market conditions in the fourth quarter of 2019 compared to the third quarter of 2019. Voyage expenses, which include voyage specific expenses, broker commissions and bunkers consumption, were $0.4 million in the fourth quarter 2019, compared to $1.0 million in the third quarter 2019. The decrease in voyage expenses was due to high utilization in the fourth quarter.

Vessel operating expenses were $8.1 million in the fourth quarter 2019, compared to $4.6 million in the third quarter 2019. Vessel operating expenses in the fourth quarter were impacted by additional costs related to planned maintenance and training on the vessels, as well as a full quarter of six vessels on the water following the delivery of Flex Courageous during the third quarter 2019.

Administrative expenses were $1.9 million in the fourth quarter 2019 compared to $2.3 million in the third quarter 2019. Administrative expenses in the third quarter were impacted by an initial listing fee and legal expenses in connection with the listing at the New York Stock Exchange ("NYSE").

Adjusted EBITDA was $41.9 million for the fourth quarter 2019, up from $21.8 million for the third quarter 2019.

Depreciation was $8.7 million in the fourth quarter 2019 compared to $7.8 million in the third quarter 2019. The increase was due to a full quarter of depreciation on all six vessels in the operating fleet.

Interest expense was $11.1 million in the fourth quarter 2019, compared to $9.4 million in the third quarter 2019.  The increase was mainly due to drawdown of the final $125 million tranche under the $250 million term loan facility (the "$250 Million Facility") upon delivery of Flex Courageous in August 2019 and a full quarter of interest under the $300 million sale and charterback transaction with Hyundai Glovis (the "Hyundai Glovis SCB") for the vessels Flex Endeavour and Flex Enterprise, which was executed at the end of July 2019. In the third quarter 2019, the Company recorded a write-off of debt issuance costs of $3.4 million due to the re-financing of the $315 million term loan facility (the "$315 Million Facility") entered into in December 2017. The $315 Million Facility was fully prepaid in July 2019 upon closing of the Hyundai Glovis SCB and drawdown of the $100 million term loan and revolving credit facility entered into in July 2019 (the "$100 Million Facility"). There was no write-off of debt issuance costs in the fourth quarter 2019.

The Company recorded an unrealized gain on the change in fair value of interest rate swaps of $1.6 million in the fourth quarter 2019, compared to an unrealized loss of $0.9 million in the third quarter 2019.

Net income for the fourth quarter 2019 was $23.9 million and earnings per share of $0.44, compared to a net income of $0.5 million and earnings per share of $0.01 for the third quarter 2019.

Result for the year ended December 31, 2019

Vessel operating revenues were $120.0 million for the year ended December 31, 2019 compared to $77.2 million for the year ended December 31, 2018. The increase is mainly due to increased fleet size following delivery of Flex Ranger in June 2018, Flex Rainbow in July 2018, Flex Constellation in June 2019 and Flex Courageous in August 2019.

Voyage expenses were $6.3 million for the year ended December 31, 2019 compared to $5.2 million for the year ended December 31, 2018. The increase in voyage expenses in 2019 of $1.1 million is primarily due to more vessels being in operation than in 2018, offset by an increase in utilization of the vessels during the period.

Vessel operating expenses for the year ended December 31, 2019 amounted to $22.4 million compared to $21.0 million for the year ended December 31, 2018. Vessel operating expenses for owned vessels increased by $7.5 million as a result of the increased fleet size, however for the year ended December 31, 2018, vessel operating expenses included $6.1 million in relation to chartered-in vessels, which were redelivered by the end of the first quarter of 2018.

Adjusted EBITDA for the year ended December 31, 2019 was $83.6 million compared to $46.4 million for the year ended December 31, 2018.

The Company reported a net income of $17.0 million for the year ended December 31, 2019 compared to a net income of $11.8 million for the year ended December 31, 2018.

Cash Flow for the three months ended December 31, 2019

Total cash, restricted cash and cash equivalents were $129.1 million as of December 31, 2019, an increase of $72.5 million during the fourth quarter 2019.

Net cash provided by operating activities in the fourth quarter 2019 was $37.3 million, compared to the $8.4 million in the third quarter 2019. The increase in net cash provided by operating activities was mainly due to a significantly tighter market with higher time-charter rates which resulted in: a net income of $23.9 million; adjustments of non-cash items of $8.1 million; and positive working capital adjustments of $5.3 million.

Net cash used in investing activities in the fourth quarter 2019 was $0.1 million, compared to $145.2 million in the third quarter 2019. The net cash used in the third quarter was related to the final payments due on delivery of Flex Courageous.

Net cash provided by financing activities was $35.4 million in the fourth quarter 2019, compared to $166.9 million in the third quarter 2019. Net cash provided by financing activities in the fourth quarter include drawdown of $49.3 million under the revolving tranche of the $100 Million Facility, partly offset by repayment of long-term debt of $8.6 million and dividends paid of $5.4 million. Net cash provided by financing activities in third quarter include proceeds from the $300 million Hyundai Glovis SCB, the $100 Million Facility and drawdown of the final $125 million tranche under the $250 Million Facility, partly offset by repayment of long-term debt of $9.1 million, prepayment of the $294 million outstanding under the $315 Million Facility, prepayment of $50 million outstanding under the revolving tranche of the $100 Million Facility and financing costs of $5.0 million.

Balance Sheet as at December 31, 2019

During the year ended December 31, 2019, $363.5 million was capitalized to vessels and equipment net, relating primarily to the delivery of Flex Constellation and Flex Courageous.

As at December 31, 2019, total long term debt was $778.8 million compared to $455.0 million as at December 31, 2018. The increase was due to the drawdown of the $250 Million Facility upon delivery of Flex Constellation and Flex Courageous and additional debt drawn under the Hyundai Glovis SCB and the $100 Million Facility in connection with the re-financing of the $315 Million Facility. As at December 31, 2019, the current portion of long term debt was $34.6 million compared to $23.4 million as at December 31, 2018.

Finance update

In November 2019, the Company received commitments from a syndicate of 11 banks and the Export-Import Bank of Korea ("KEXIM") for a $629 million financing for the five newbuildings Flex Artemis, Flex Resolute, Flex Freedom, Flex Aurora and Flex Amber, all scheduled for delivery in 2020. The facility will be divided into a commercial bank loan of $250 million (the "Commercial Loan"), a KEXIM guaranteed loan, funded by commercial banks, of $189.1 million (the "KEXIM Guaranteed Loan") and a KEXIM direct loan of $189.9 million (the "KEXIM Direct Loan").

The amount available for drawdown upon delivery of each vessel will be limited to the lower of (i) 65% of the fair market value of the relevant vessel and (ii) $125.8 million. The facility will also include an accordion option of up to $10 million per vessel subject acceptable long-term employment. Further, the Company may request to replace any two of the vessels with the two remaining newbuildings Flex Volunteer and Flex Vigilant.

The combined repayment profile for the KEXIM Guaranteed Loan and the KEXIM Direct Loan will be 12 years, while the Commercial Loan will be structured as a non-amortizing loan, giving an overall repayment profile for the facility of 20 years. The Commercial Loan will bear interest at LIBOR plus a margin of 2.35% per annum and have a term of five years from delivery of the final vessel. The KEXIM Guaranteed Loan will bear interest at LIBOR plus a margin of 1.20% per annum and the KEXIM Direct Loan at LIBOR plus a margin of 2.25% per annum. The KEXIM Guaranteed Loan will have a term of six years from delivery of each vessel and the KEXIM Direct Loan a term of 12 years from delivery of each vessel, provided however that these loans will mature at the same time as the Commercial Loan if the Commercial Loan has not been refinanced at terms acceptable to the lenders.

The facility will include a minimum value clause, and financial covenants that will require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1.0; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million or 5% of the net interest bearing debt.

The financing remains subject to customary closing conditions, and is expected to be drawn upon delivery of the vessels from the relevant shipyard.

LNG Market Update

During the fourth quarter of 2019, spot LNG freight rates continued to strengthen with average reported headline rates for MEGI/X-DF LNG carriers increasing by 66% from $74,800 per day  to $123,800 per day. Rates increased steadily due to higher demand preparing for winter in Northern Asia, as well as continued floating storage. Trading patterns and LNG pricing however, continue to favor Europe as the main destination for incremental uncommitted LNG volumes due to the low spread in gas prices between Asia and Europe, as well as greater infrastructure capacity in Europe for regasification and storage.

According to industry sources, global LNG exports reached 362 million tonnes for the full year of 2019, which represents year on year growth of approximately 11%. The forecast of a record year for LNG Final Investment Decision (FIDs) in 2019 proved to be true with approximately 71 million metric tonne per annum (“mmtpa”) sanctioned in 2019, as FID was reached on Nigeria LNG Train 7 with a total capacity of 7.7 mmtpa before year-end. However, the sharp increase in global liquefaction capacity is far from over yet, as several large greenfield and brownfield projects are also expected to take FID in 2020 and 2021.

Four LNG carriers were reported delivered in the fourth quarter of 2019, bringing the year count to 38 LNG carriers and three floating strorage and regasification units ("FSRUs"). During the fourth quarter 2019, fourteen new orders for LNG carriers were reported. By the end of the quarter, there were 510 active vessels above 125,000 cbm in the global LNG carrier fleet, excluding FSRUs. The order book at the end of the quarter amounted to 116 conventional LNG carriers, of which 40 were reported as ‘uncommitted’. In the first quarter of 2020, we expect another six conventional LNG carriers to be delivered from yards.

Lower than expected tonne mile growth due to muted US - Asia trade and limited arbitrage opportunities has been a challenge for the LNG freight market. In spite of the lower than expected tonne mile growth, LNG freight rates performed well in the fourth quarter of 2019, suggesting that recent years fleet growth to a large degree has been absorbed by the market.

The glut of liquefaction volumes continues to affect LNG prices, with the average Asian benchmark prices ("JKM") averaging 5.4 $/Metric Million British Thermal Unit ("MMBtu") in the fourth quarter 2019 compared to 9.1 $/MMBtu for the same period last year. Average European LNG prices ("NBP") came in at 4.9 $/MMBtu in the fourth quarter 2019 compared to 8.2 $/MMBtu for the same period last year. The low LNG price environment continues as liquefaction capacity and production grows faster than LNG demand due to a warm winter also in 2019/2020, economic slowdown in China as well as the recent coronavirus outbreak which has caused disruptions in the logistical chains. These factors have contributed to a slump in demand resulting in both the TTF gas price in Europe and the JKM gas price in Asia to hit all time low levels. With less demand for gas and all time low gas prices in backwardation, demand for shipping has been adversely affected so far in 2020. Consequently, availability of ships has increased rapidly while freight rates have been tumbling to a current level of about $50,000 per day for modern two stroke propulsion LNG carriers as of end of February 2020.

The severity and duration of the coronavirus and associated demand slump is difficult to predict, but industry sources expects China’s import growth to be reduced by approximately 2.6 to 6.3 million tonnes in 2020. However, low gas prices also stimulate demand growth, so we do expect demand growth to pick-up again once the coronavirus situation is less disruptive. The long term outlook for the LNG industry continues to be well supported with expected annual growth in LNG trade over the next two decades to be about 3 to 4 per cent annually. With a fleet of large modern ships with the latest generation efficient propulsion systems, Flex LNG is well positioned to capitalize on the global shift for cleaner energy.

Fourth Quarter 2019 Result Presentation

Flex LNG will release its financial results for the fourth quarter 2019 on Wednesday February 26, 2020.

In connection with the earnings release, a webcast and conference call will be held at 3:00 p.m. CET (9:00 a.m EST). In order to attend the webcast and/or conference call you may do one of the following:

Attend by Webcast:

Use to the follow link prior to the webcast: https://edge.media-server.com/mmc/p/7yprvtvc

Attend by Conference Call:

Applicable dial-in telephone numbers are as follows:

Norway: +47 21 56 31 62

United Kingdom: +44 (0) 203 0095710

United Kingdom (local): 0844 493 3857

United States (Toll Free): +1 866 869 2321

Confirmation Code: 1758646

The presentation material which will be used in the teleconference/webcast can be downloaded on www.flexlng.com and replay details will also be available at this website.

Forward-Looking Statements

Matters discussed in this press release may constitute forward-looking statements. The Private Securities Litigation Reform Act of 1995 provides safe harbor protections for forward-looking statements in order to encourage companies to provide prospective information about their business. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, and underlying assumptions and other statements, which are other than statements of historical facts. The Company desires to take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and is including this cautionary statement in connection with this safe harbor legislation. The words "believe," "expect," "anticipate," "estimate," "intend," "plan," "target," "project," "likely," "may," "will," "would," "could" and similar expressions identify forward-looking statements.

The forward-looking statements in this press release are based upon various assumptions, many of which are based, in turn, upon further assumptions, including without limitation, management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although management believes that these assumptions were reasonable when made, because these assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company’s control, there can be no assurance that the Company will achieve or accomplish these expectations, beliefs or projections. The Company undertakes no obligation, and specifically declines any obligation, except as required by law, to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

In addition to these important factors, other important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward-looking statements include: unforeseen liabilities, future capital expenditures, the strength of world economies and currencies, general market conditions, including fluctuations in charter rates and vessel values, changes in demand in the LNG tanker market, changes in the Company’s operating expenses, including bunker prices, dry-docking and insurance costs, the fuel efficiency of the Company’s vessels, the market for the Company’s vessels, availability of financing and refinancing, ability to comply with covenants in such financing arrangements, failure of counterparties to fully perform their contracts with the Company, changes in governmental rules and regulations or actions taken by regulatory authorities, including those that may limit the commercial useful lives of LNG tankers, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, vessel breakdowns and instances of off-hire, and other factors, including those that may be described from time to time in the reports and other documents that the Company files with or furnishes to the U.S. Securities and Exchange Commission (“Other Reports”).  For a more complete discussion of certain of these and other risks and uncertainties associated with the Company, please refer to the Other Reports.

Board of Directors of Flex LNG Ltd.

February 26, 2020