FLEX LNG Ltd. (FLNG) Q3 2020 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to the Flex LNG Q3 2020 Earnings Presentation Conference Call. At this time, all participants will be in a listen-only mode. After the speaker presentation, there will a question-and-answer session. [Operator Instructions]. I must advise you that this conference is being recorded today. And I would now like to turn the conference over to your speaker, Mr. Øystein Kalleklev. Thank you. Please go ahead. Øystein Kalleklev: Okay, thank you, and welcome to Flex LNG’s 2020 third quarter presentation. My name is Øystein Kalleklev, and I'm the CEO of Flex LNG Management. I will be joined today by our CFO, Harald Gurvin, who will go through the numbers as well as providing our financial updates. A replay of the webcast will also be available at flexlng.com. So, Slide #2 is a disclaimer with regards to, among others, forward-looking statements, non-GAAP measures, and completeness of details. And the full disclaimer is available in the presentation, and we recommend that the presentation is read together with the earnings report as well as our 20-F Annual Report. So, Slide #3, the highlights. Not surprisingly, the spot market stayed weak during the spring and summer due to the fallout on the COVID-19 pandemic. This adversely affected demand for natural gas, resulting in record low prices and thereby incentivizing a flurry of cancellation of flexible U.S. cargoes. Nevertheless, the market started to improve by August as restrictions were eased and the economic activity picked up. The improvement in the freight market was, however, somewhat derailed and delayed by the most active hurricane season on record in the U.S., resulting in temporary shutdowns of LNG export plants in the Gulf of Mexico. The tropical storm, Iota, easily became the third named tropical storm, breaking the record of 27 names – tropical storms from 2005 when Hurricane Katrina devastated New Orleans. However, the supply disruptions in the U.S. as well as other places like Australia and Norway, together with the seasonal increased gas demand, spurred a big rally in global gas prices during the autumn with TTF and JKM going from summer lows of $1 and to – about $2 per million BTU to about $5 and $7, respectively today. The gas rally has thus improved economics markedly for the industry. The strong prompt prices for LNG has resulted in floating storing being more or less liquidated at the time when floating storage typically tend to build up. Hence, our expectations that we would see all of the floating storage this year due to the strong contango in gas prices during the summer vanished due to this incredibly strong gas price rally. The strong gas prices have resulted in cargo cancellations tapering off and this, together with significantly more pool from Asia, which has pushed freight rate about $100,000 again by October. I'm pleased to say that despite the many challenges caused by the pandemic, we have continued to operate our ships with 100% of time and excellent safety record. Cargoes have been delivered without disruption or delays to our customers. We have also taken delivery of four new LNG carriers from yards in South Korea on budget as planned during July through October, and I will provide a bit more color on the operations shortly. In Q2, we delivered average time charter equivalent earnings of TCE, or TCE of $47,000 per day. After our Q2 presentation in August, we guided that revenues would be higher in Q3 compared to Q2 as our fleet have been going with additional new business. Revenues does go from about $26 million to $33 million. We also guided that TCE for Q3 was expected to be similar to Q2, despite the cost associated with mobilizing the three new buildings we took delivery in third quarter. This estimate was indeed very accurate as our TCE in Q3 was exactly the same as in previous quarter at $47,000 per day. This means that we have been able to navigate through a very tough market conditions caused by the pandemic in Q2 and Q3 without depleting any cash. In Q3, our adjusted profit was $1.2 million, net income was higher than $3.8 million due to favorable changes in the valuation of our portfolio of interest rate derivatives, which is utilized to hedge our interest expenses. These financial instruments fluctuate with interest rate level in the U.S. and interest rates have recently picked up a bit. The overall adjusted profit for Q2 and Q3 was just about $500,000. Given the fact that we have been through the worst downturn since the Great Depression, this illustrates how robust our business is as we have certainly not received any financial support or handouts from governments to cope with the economic consequences of the pandemic. In Q1, prior to the virus going viral on a global scale, we delivered a fairly good trading results with TCE of $68,000. With the guidance of $70,000 to $75,000 for Q4, we are just generating pretty good results in the two winter quarters this year. Overall, for the year, we should end up at around $60,000 per day, which is well above our cash break-even level of about $47,000 per day, despite the headwinds we have faced this year. This also illustrates how well we can do in a market where we are enjoying tailwinds. As we have taken delivery of three ships in the quarter, our remaining CapEx have now been reduced to $512 million, or reduced to about $380 million following the Amber delivery in October, subsequent to quarter-end. We actually have $533 million in available debt for this CapEx as we paid approximately $18 million in prepayments for Flex Amber as part of an agreement to move the delivery from end of August to mid-October. This in order to fitter into the schedule under the variable time charter, which we have secured for. Given the fact we financed Flex Amber on $156.4 million Chinese lease or cash balance of $76 million at quarter-end improved by about $26 million in connection with this delivery. Hence, we have a very healthy cash position, which we will continue to build up during Q4 as we expect to generate substantial cash flow, given the guidance provided today. We are also pleased that we have been able to utilize a strong freight market to book significant portion of the first quarter next year. In first quarter, we expect to add two ships to our fleet, Flex Freedom in January, which was on the front page of our presentation; and Flex Volunteer in February. Hence, we have thus more ships available, but nevertheless, we have already booked about two-thirds of our available days, which includes these two new buildings. As we have several ships on variable hire, it's too early to guide on TCE numbers for Q1 next year, but we will be able to provide more color on this during our Q4 presentation in February next year. Hence, with strong cash position, our fully financed fleet consisting entirely of the next-generation ships, coupled with good earnings visibility and the industry's lowest cash break-even levels, as well as light in the tunnel when it comes to COVID-19, given the recent progress when it comes to vaccines. The Board has, therefore, decided to reinstate the dividend. We have suspended the dividend for the last two quarters, given the risk and uncertainty created by the COVID-19 pandemic. Now, we have demonstrated that we can manage this risk very well, and we are thus pleased to again reinstate the dividend, which the Board, for Q3, has set at $0.10 per share. So moving on to slide four, which provides overview of our fleet composition. As of today we have three ships on fixed TCs. This is Flex Ranger, which commenced on UTC with Spanish utility Endesa at the end of May. In July and September, we took delivery of Flex Aurora and Flex Resolute, and both these two ships were fixed on shorter-term TCs of 8 and 11 months respectively. The Flex Aurora time charger has recently been extended to 11 months in total, similar to Flex Resolute. Today, we also have in total three ships currently operating under a variable higher TCs. These variable higher TCs provide us with what could be described as utilization insurance in soft markets while we maintain exposure to the overall freight market. As we've been bullish on the considerably higher rates in Q4, we are just benefiting from increased earnings on these ships now. The ships serving such contacts are Flex Enterprise, Flex Artemis, which was delivered under our long term variability fees to Gunvor in August as well as Flex Amber, which we took delivery of in October subsequent to quarter end. With improved spot market, we are also pleased to have four ships operating in the spot market. The ships currently trading spots are Flex Endeavor, Flex Rainbow, Flex Constellation, and Flex Courageous. For these ships we do try to find a balance between maximizing rates and pay rates as we do have three additional ships for delivery next year and thus like to also add earnings visibility. We are thus pleased that we have already booked two thirds of available days in first quarter next year, as mentioned. We have agreed with [indiscernible] to slip Flex Freedom into next year and thus making her our 21 vintage. She was originally scheduled for delivery end of November this year. By postponing her to January 21 we are spreading out all dry docks with four ships being 18 vintage, two ships 19 vintage, four ships 20 vintage, and the remaining three ships being 21 vintage. We expect to take delivery of Flex Freedom early January and we are now actively marketing her for potential clients. Flex Volunteer have already carried out sea and gas trials and she can also be available early next year but the scheduled delivery is end of February. Our last new building will be Flex Vigilant which is scheduled for delivery end of May. With Flex Vigilant on the water our new building program is complete with 13 large ultra-modern LNG carriers on the water by the second quarter of next year. Our earnings capacity will thus increase by 30% early next year, compared to fourth quarter this year. And finally all of the invested equity will start generating income in contrast to 2018, 2019 and 2020 when a very large portion of our equity have been tied up in new buildings which generates zero income and thus dragging down all return on equity numbers for those who pay a lot of attention to those. So Slide 5, before handing over to Harald for our financial review, I want to touch upon a very important matter, which is always on the top of our agenda, but even more so this year due to the COVID-19 situation, with all its implications. With the outbreak of the COVID-19, countries have locked on and put up a lot of travel restrictions and impediments for crew changes and the repatriation of seafarers. This has resulted in what can only be described as a humanitarian crisis with significant concern for the safety of seafarers. According to IMA report from September there were 400,000 seafarers overdue on the contract and another 400,000 seafarers at home unable to join those ships. 400,000 is one third of the 1.2 million seafarers, a staggering and depressing number. While domestic employees in the transportation sector as well as in international aviation have been shielded from the restrictions as they have been deemed essential workers in order to ensure that food, medicines, and other goods is flowing, this has not been the case for seafarers. Close to 90% of goods are being transported at sea on about 60% cargo ships. While we are not transporting the last mile to consumers, the last mile transportation can't take place unless the goods on ships are being offloaded at port. And btw port workers offered has also been deemed essential workers, so there is a large discrepancy here, and it's attempting to use some of the word [ph] in this context to categorize these double standards. That said, it's positive to see that more countries are realizing that seafarers are essential to shipping and that shipping makes the world go on. So how have we in Flex coped with the situation given these limitations, let's just say we have been very busy. We have implemented strict standard operating procedures for joining or signing crew in order to safeguard crew or operations and the society. This standard operating procedure includes controlled quarantine and a PCR testing regime with a minimum of negative test as tests can sometimes be unreliable in that sense Elon Musk's recent COVID tests. We have also developed an outbreak management plan which we have shared with key clients and response has been very positive. The outbreak management plan has also been stress tested through third parties involved in emergency drills. These procedures have been critical in avoiding any outbreak on our ships. As COVID-19 have impeded our ability to regularly visit ships, we have carried out a regular videoconference meeting with senior officers on board to make sure they receive the attention needed to coordinate crew changes and ensure morale on board. We have been focused on seeking every possible opportunity to carry out crew changes to minimize overdue contracts. I think our results in this regard are impressive. In the six months period during May to October, we carried out 32 successful crew change operations. I would very much like to take the opportunity to thank our crew and onshore personnel for their dedication, patience, and hard work in organizing these crew changes, which I can ensure you have not been straightforward. I'm happy to say that 93% of our crew is on time i.e., they are not overdue on their contracts. That leaves us with 7% of our crew overdue on the contract. This is unfortunate and something which could be avoided if reticent. However, as mentioned, we are very focused on minimizing overdue days, and I am pleased to say that 20% of the 7% is overdue by less than 30 days, while the remaining is less than 60 days. So we have no crew staying more than 60 days overdue. With some concessional easing restrictions on seafarers we do hope to bring these numbers down to zero as fast as possible. Another issue faced by the travel restriction is conducting regular ship inspection report program or what we call SIRE. We are required to carry out these inspections regularly at least every six months, usually in connection with discharge. With travel limitations it's been extremely difficult to carry out this inspection. But this has not stopped us from finding new, smart ways to work as society have made more progress on remote working the last year than the last decade, even in a conservative business-like shipping. So far, we have had about two remote SIRE in order to keep the certificates up to date. We have also carried out two remote change of management of our ships during this period, as well as two of the remote annual service [ph]. So it's impressive to see that the technical personnel are able to get worked on despite all the obstacles thrown at them. Our new building team have also faced logistical challenges in relation to delivery and manning of our new buildings. Despite obstacles our ships have been mobilized and delivered according to budget and plans so I would like to also extend my gratitude to our new building team before handing over to Harald for our financial review.

Thank you Øystein. Looking at the income statement on Slide 6, revenues for the quarter came in at 33.1 million up from 25.8 million in the previous quarter. The time charter equivalent rate for both quarters was 47,000 per day, and the increase is due to delivery of three vessels during the quarter, increasing the number of vessel days. Adjusted EBITDA for the quarter was 21.9 million, up from 17.4 in the previous quarter. The results for the quarter includes again on derivatives of 2.1 million relating to our interest rate swaps, which includes an unrealized non-cash gain of 3.5 million. This compares to a loss of 6.6 million in the previous quarter of which 6.2 million was unrealized. At quarter end, we had entered into interest rate swaps totaling 710 million at an average interest rate of approximately 1.2%. The gain on interest rate swaps was a result of the increase in longer-term interest rates during the quarter following a significant drop during the first half of 2020 due to the COVID-19 pandemic. Net income for the quarter was 3.8 million, up from a net loss of 6.7 million in the previous quarter. Adjusted net income for the quarter was 1.2 million or $0.02 per share compared to an adjusted net loss of 700,000 or $0.01 per share in the previous quarter. Then moving on to our balance sheet as per September 30th on Slide 7. Following delivery of the three new buildings our assets at quarter end consisted of nine vessels on the water with an aggregate value of 1.7 billion. In addition, we have booked vessel purchase for prepayments of 218 million relating to the four new buildings still to be delivered at quarter end. This represents the advance payment on these including the 17.8 million we prepaid on Flex Amber in July to postpone delivery to October. In connection with the vessel deliveries, the first three tranches totaling 387 million were drawn under the 629 million ECA facility we entered into in February. Increasing the total debt by quarter end to 1.1 billion, of which approximately 34 million is due over the next 12 months and that's classified as current liabilities. Total equity as per quarter end was 816 million, giving a strong equity ratio of 41%. Looking at our cash flow on Slide 8, cash flow from operations was close to 20 million in the third quarter. This includes positive working capital adjustments of 9.6 million mainly due to an increase in prepaid hire following the stronger market in the fourth quarter compared to the third quarter. Scheduled loan installments were 9.3 million and in addition we had financing costs of 6 million mainly relating to upfront and commitment fees on the 629 million ECA facility and also the new 125 million facility for Flex Volunteer. Total new building CapEx for the three new buildings delivered during the quarter was 415 million. This was part financed by a drawdown of 387 million under the 629 million ECA facility, with the remaining 27 million funded from our liquidity. In addition, as mentioned, we paid 17.8 million under the purchase agreement for Flex Amber in July. This brings total net payments towards new buildings and financing fees during the quarter to 51 million, which is the main reason for the 40 million decrease in cash to 76 million at quarter end. As mentioned, Flex Amber was delivered early October, whereby the 156.4 million sale on leaseback was executed. The 17.8 million prepaid in July was deducted from the final amount payable on delivery giving a positive net cash effect from the financing of 25.7 million, thus boosting the liquidity to just over 100 million post quarter end. Moving on to Slide 9, we are now secured financing for all our vessels, including the four new buildings still to be delivered at quarter end. Following the delivery of three vessels in the third quarter and the prepayment on Flex Amber, the remaining CapEx at quarter end was 512 million compared to secured financing of 533 million giving a positive net cash contribution of approximately 20 million for the remaining four new buildings at quarter end. We have a very comfortable debt maturity profile with the first maturity due in July 2024. Our diversified sources of funding split between bank loans, ECA financing, and lease financing also gives us staggered debt maturity profile, mitigating refinancing risk. We have not only diversified our financing sources, but also our pool of lenders, which now includes 15 different financial institutions demonstrating our ability to raise attractive funding in a challenging captive market. And with that, I will hand it over back to Øystein who will give an update on the market. Øystein Kalleklev: Thank you, Harald. So let's start by a quick recap of the spot market for LNG shipping on Slide 10. So despite COVID-19, 2020 have for the most part followed the usual seasonal pattern, but with much softer as during the spring and summer compared to previous years due to lost demand caused by the lockdowns. Given the scale of cargo cancellation, there have been plenty of ships in the market and this has [indiscernible] as well as ballast bonus conditions. However, as we stated in our second quarter presentation in August, we were starting to enjoy better sentiment in the spot market and particularly when it comes to ballast bonus condition. In our Q2 presentation we put -- on the glass to the right, indicating that we were expecting a rebound in ballast bonus condition and if that comes to fruition with spot variation being down on long term economics or even better. This means that achieve earnings in the spot market are now typically on par or even better than headline rates while we are doing the sum, so a lot of voyages being done with higher only border [ph] laden leg shaving the achieved TCE rates to about half of the headline rates. In addition, while we saw a lot of vessel availability during the summer resulting in idle days, we now have a very strong market with very limited risk of idling, as Clarkson was quoting only three available ships worldwide in the market on Friday. Given the limited vessel availability, spot rates are now in excess of a $100,000 per day for more than tonnage and similar to the levels seen last year. So some of you might wonder why our TCE guidance in Q4 is not higher than 70,000 to 75,000 in Q4 when rates are now in excess of 100,000. The reason is that the unusual active hurricane season in the U.S. caused supply disruption, which delayed the typical seasonal uptick in sites [ph]. Spot rates didn't really start to rally before end of October, which is a bit later than usual. Keep in mind that ships are often booked more than a month in advance as it takes a ship about this time to sail from Asia to the U.S. So the rates being quoted now in November are typically for Pacific loads in December or U.S. loadings in late December or early January next year. This is thus a positive signal for the start of 2021. However, with about 50 new buildings set for delivery next year, the key drivers influencing the trajectory of spot rates will be the winter weather, together with the shape of economic recovery as we also mentioned in our presentation in August. In 2017 and 2018, we experienced a relative cold winter and consequently the spot market held up well in Q1. The last two winters we have, however, experienced extremely mild winter and this together with the COVID lockdowns in China implemented in February this year, have resulted in spot rates plummeting after New Year. This year, most of the prognosis rule out very warm winter due to La Nina as we also highlighted in our presentation in August. And the signal from the futures market is that LNG project market will hold up in Q1, something I will explore in more detail on next slide. So Slide 11, gas prices. This year have been a story of gloom and doom. Due to COVID-19 pandemic we already experienced very low seasonal gas prices due to the two consecutive warm winters impacting storage level, as well as generally weak Asian demand due to the general economic slowdown in China following the trade war with the U.S. The lockdowns and reduced economic activity following the outbreak further amplify these pre-existing conditions and resulted in a crash in global gas prices. We are seeing record low gas prices during the summer with European gas for some time actually trading below $1 per million BTU, which is unprecedented. $1 per million BTU equates to oil of around $6 per barrel. Asian spot prices have for short periods been trading below $2 and Henry Hub hit the 21-year low in June at $1.40. As represented in our Q2 presentation in August, gas prices started to recover and this rally have continued with Asian gas prices now well above peak COVID-19 levels and at that higher levels than during last winter season. JKM and TCs are currently at about $7 and $5 respectively. This is still cheap on an absolute and seasonal historical level with a price point, which is much more conductive for the Fed market than the rock bottom prices during the summer. Following the corona virus outbreak we also saw an oil price crash affecting the price of contractual LNG linked to oil. Oil linked LNG still represents about 70% of the market. While there have been production cuts in LNG with cargo cancellations, these are minuscule compared to the oil industry with the big 9.7 million barrel cut by OPEC in Russia, as well as lower output from the shale base in the U.S. The LNG linked to oil price are typically priced with about six months delay, so LNG spot prices are at similar levels to oil price linked LNGs today. As mentioned earlier, the future markets predict that gas prices will hold up in 2021 with similar spreads between TCs and Henry Hub of about $2. If gas prices stay at these levels there shouldn't really be any economic incentives for a repeat of the massive cargo cancellation in the U.S. next year. Since the TCs derivative market is highly liquid, players can already hedge their position to avoid having to pay a trolling fee of about $2.5 per cargo not being lifted next year. Gas future prices have a mixed record of predicting actual future prices. The key determinant of cargo cancellation are as mentioned, winter [ph] which will affect the storage levels and thus available injection capacity during the summer, as well as the shape of the economic recovery impacting gas demand. Slide 12, is a review of the two main import markets for LNG, Asia and Europe, which together makes up about 95% of the market. So Asia is definitely the LNG continent. In the early phase of the corona crisis Europe through its ample import and storage capacity, came to rescue acting as a buyer of last resort, absorbing the last of available LNG. In this regard, similar to what happened in 2019 after the very warm 2018-2019 winter caused by the El Nino. After European lockdowns took effect and inventories were piling up, European buyers became exhausted by the summer and this caused gas prices to new lows resulting in a wave of U.S. global cancellation, which I also will provide some more details on later. However, as we are approaching autumn, Asian demand took off driven particularly by the V shaped recovery in China, which quickly managed to contain the virus. China is also pushing forward with reforms in the gas industry, liberalizing third party access and stimulating competition with a new international pipeline company. Furthermore, China continues to roll out city gas heating where penetration is yet far to go, notwithstanding another 7 million households being connected to gas using this season. The Asian demand grew together with Europe avoiding tanks [ph] have thus balanced the market. And it now looks much sounder than what was the case during the summer. Now this when a lot of LNG carriers were tied up in non-economic floating storage in order to smooth out the logistics. So while European buyers grabbed about 28% of volumes in the first half of 2020, this fell to only 19% in Q3 as Asia increased its sales from about 76% in the first half of the year to 74% in Q3. Global exports have thus been trending upwards with September and October export volumes being marginally below last year, mostly due to supply disruption in this period and not really due to lack of demand. Increased Asian demand is also positive for the freight market, as this puts cargoes from the Atlantic Basin into Asia, which result in a big increase in sailing distances and thus generating more shipping demand. Slide number 13, so let's review the supply model another time. The model -- this model we introduced in our July webinar and we have updated it with recent export numbers. The model illustrates the model [ph] community of export growth with associated cargo cancellation in the U.S. Please note that it's important to differentiate between import and export numbers. Export numbers is a better proxy for shipping demand. About 3% to 4% of exports are consumed by ships as -- gas during passage and cargo operations depending on voyage length and whether it involves floating storage, which also drives freight demand. At the beginning of the year, we were expecting about 25 million tonnes increased exports in 2020 and the trajectory in first quarter was ahead of the curve. During second quarter, Asian demand caught up and Europe initially soaked up these volumes by injecting cheap gas for storage as mentioned earlier. However, during June, July and August, low gas prices incentivized cargo cancellation and export volumes thus declined. July and August ended up as the peak cancellation months. As gas prices have recovered, cargo cancellations have tailed off. In total flat seconds, a 179 U.S. cargoes were cancelled in 2020 and we expect around 280 cargoes to be lost in total compared to the estimates due in 2020. Despite the doom and gloom, energy market will go this year and we now expect export growth of 5 million tons for 2020. This is only half of the growth we expected in July when we expected 10 million tons of growth and the main reason for the 5 million shortfall compared to July have been -- have not been the cargo cancellation in the U.S. as we did expect them to continue in the autumn. The shortfall has rather been related to supply disruptions in Australia and Malaysia related to Gorgon and Bintulu the final shutdown of Melkoeya in Norway and the fact that the assumption of expose on Prelude FLNG has been further postponed are the main reasons for the shortfall. On top of this, the hurricane season in the U.S. has caused cargo cancellation, which were unforeseen and I will provide some more details on that shortly. However, in sharp contrast to all the hydrocarbons and even gas transported pipelines, LNG has managed to grow despite the pandemic and given the curtailment of cargoes this year. And given the curtailment of cargoes this year, the export potential for next year is considerably higher, which I will also expand a bit further. So Slide 14, take a closer look at U.S. exports. As we highlighted in our July webinar U.S. producers are inherently more at risk for cargo cancellations due to the cost base and the flexibility of their contracts where customers can typically notify our cargo cancellation 60 days prior to loading by paying the fixed tolling fee, which tends to be around $2.5 per million BTU. This flexibility enable operators to cancel a lot of cargoes during the spring and summer months for economic reasons. During this period European and Asian gas prices were at similar levels as U.S. gas prices and it didn't make financial sense to take delivery of these cargoes, but rather just paying the tolling fee and avoid lifting them. That said, not all volumes were canceled, as some buyers can have different incentives as they could either be hedged or they are selling cargoes into a regulated market where global gas prices are not the key determinant. So during August, we did as earlier mention, see that global gas prices were bouncing back and this could move the economic incentive for canceling U.S. cargoes. But at that time, when exports were recovering, we were hit by the most active hurricane season on record. And this record goes way back -- all the way back to 1851. Particularly three of these 30 tropical or subtropical storm disrupted U.S. exports, and we have pointed them out in the graph on the left hand side, these being Laura, Beta, and Delta which had pretty big impact on feedgas delivered to U.S. export plants. U.S. feed gas levels are now at record high of around 10.5 billion cubic feet per day. Adjusting for about 15% of feed gas utilized for liquefaction, this equates to annualized U.S. export volumes of about 70 million tonnes today, which is about the nameplate capacity. So on Slide 15, we provide an overview of the 10 largest exporters and our expected output in 2020. For those not being too fond of Vexillology or the study or flag, it might be worth mentioning that the largest exporter sorted after size is as follows Qatar, then Australia, U.S., Russia, Malaysia, Nigeria, Indonesia, Trinidad, and Tobago, Aldjazair and then Oman. The multicolored flag represents the rest of the world with output of about 42 million tonnes expected for 2020. U.S. is the main growth market in terms of exports, despite the 179 cargo cancellations earlier mentioned. At full capacity we would expect U.S. to be able to produce in excess of 60 million tonnes in 2020. Despite the exports in Australia, it continues to punch below its weight as its export capacity is around 86 million tonnes. The main reason for the shortfall in Australia is due to the operation of Prelude FLNG being suspended since February due to COVID-19 concerns. Prelude has an annual export capacity of 3.7 million tonnes of LNG. Furthermore, trying to that Gorgon has been suspended since May due to issues with the heat exchanges. This train has an export capacity of about 5.2 million tonnes and we expect it to commence operation again shortly but needless to say, significant volumes have been lost compared to what was planned upon regular maintenance. Although notable disruptions are the recent reported outages of paying one fee and seven at the Bintulu LNG plant in Malaysia due to disruptions in the feed gas supply. These plants account for 9.6 million tonnes of roughly a third of the facility's nameplate capacity. Hence the volumes from Malaysia are also on the soft side this year. We also see a somewhat lower volume this year from Trinidad and Tobago City and Oman while the rest of the world is fairly affected 42 million tonnes while the main deviation is the shutdown of Melkoeya in Norway following the fire, which has resulted in about 1.5 million tonnes lost in 2020. These volumes are close to the European market, so they don't matter nearly as much as U.S. cargo cancellation in terms of freight demand. Despite this shutdown, Norway can maintain its fourth base as the world's largest gas exporter, by Russia, Qatar and the U.S. as most of its exports are linked by pipeline to the European continent. Slide 16, we are returning to U.S. As mentioned about 13 million tonnes have been curtailed through cargo cancellation this year. During 2020 we have seen several times commencing operation and next year we have same thing at Corpus Christi expecting to start up in the first quarter. With this planned U.S. nameplate capacity is around 75 million tonnes, of which about 71 million will be available next year. Energy Information Administration in the U.S. provides monthly updates on the oil and gas forecast in a report called Short Term Energy Outlook. In November report they expected exports to grow 31% in 2021 from 6.4 BCF in 2020 to 8.4 BCF next year. This equates to 65 million tonnes of LNG or a growth of about 16 million to 17 million tonnes. While this is a big improvement, it still leaves about 6 million tonnes to be cancelled next year, representing around 85 cargoes, which is about half the level we've seen in 2020. For shipping, less user cargo cancellation is crucial, particularly if they are pulled away from the Atlantic Basin and into Asia, these voyages are shipping intensive. So we wouldn't expect these U.S. volumes to add about two ships for each tonne of about 32 ships which is about two thirds of the order book for next year. As U.S. volume next year will be critical and this will depend on the tightness of the LNG product market. A tighter LNG product market will usually also create a [indiscernible] which could provide more incentives for floating storage next autumn than what has been the case this year following the gas price value. By 2022 we do expect U.S. to take over this -- country with the highest nameplate capacity facing ahead of both Australia and Qatar. That is at least until Qatar expand the capacity to 110 million tonnes by 2025 and 126 million tonnes by 2027. However, at that time, U.S. will also have the 15 million tonne Golden Pass project up and running, and are thus able to also produce more than 100 million tonnes each year. So, then we are on Slide 17, which is a summary of the 21 projections prior to summarizing today's presentation. 2021 will be an exciting year for LNG shipping. We have, as mentioned, quite a few ships for delivery next year. But we also have a very big potential for LNG exports if we avoid too many cargo cancellations. If we use the IEA numbers, U.S. will add 16 million tonnes next year. It's fair to assume that Prelude will resume operation soon, given the vast amount of capital employed to this project and the fact that the project is also producing condensate in addition to LNG. Resumption of Prelude production will add about 3.5 million tonnes next year. Then we have Egypt, Egypt exported close to 3.5 million tonnes in 2019, which is about half of the nameplate capacity of Idku. Given the low gas prices in 2020, the exports have been curtailed but they have now started up again. 50% production at Idku was at about 3 million tonnes. Gorgon in Australia, I have also mentioned. The function of normal Gorgon operation would at least add 2 million tonnes. Bear in mind that these volumes are sold on long-term offtake agreements. Then we also have Bintulu in Malaysia, as mentioned, where we would expect the feed gas issues to be corrected and production to increase by about 2 million tonnes next year. Yamal Train 4 is also scheduled to start operation and is expected to add close to 1 million tonnes. We also have the Portovaya project, which will add another 1.5 million tonnes. Then we have Melkoeya in Norway, which we assume will be closed down until October, and thus dragging down volumes by about 3 million tonnes. Adding these together, bottom-up leaves us at around 26 million tonnes growth in 2021. This compares to energy aspects estimate of around 24 million tonnes in the recent LNG outlook. However, it's fair to say that some estimates are considerably lower than this. That said, there is, however, upside to these numbers. If the U.S. is running full steam, we could add another 6 million tonnes. We could also add 3.5 million more tonnes if it Idku in Egypt produce actual capacity. In Egypt, there is also another terminal called Damietta, which have a capacity of 5 million tonnes of export, which has been suspended for a long period due to disagreements in the consortium. Earlier this year, it seemed that the parties Union Gas Fenosa, a JV between Eni and Naturgy and Egyptian National Energy Company, EGAS and EGPC, had reached an agreement and this was repeated in October. So far, our solution has not materialized and the outcome remained uncertain. But our solution seem to be in the horizon. That said, Egyptian cargoes are closer to the end users than U.S. and Russian cargoes. So Egyptian cargoes are much less important for the freight demand unless these are pulled to Asia. So Slide 18 and the summary. I'm happy to say, we have managed to navigate well through the difficult conditions created by the COVID-19 pandemic. This has been a real stress test for everyone involved and we have passed with flying colors, both operationally and financially. Despite all the obstacles, we have been able to operate with 100% of time and taken delivery of four new buildings. The gas pipe rally, we started to see in August, have continued and increased prices and the increased demand coupled with pool from Asia, has fired up the freight market with spot rates for more than tonnage in excess of $100,000 per day, resulting in us booking Q4 with expected TCE of $70,000 to $75,000 per day, which would put us in position to generate substantial cash flow. While we have been through some tough days during the summer when we have fixed ships on voyages with pretty bad economics, our patients have been rewarded and we are now benefiting from this improved market sentiment as we have 70% of our fleet exposed to the spot market. It's therefore also time to reward our shareholders and we are now reinstating the dividend and declaring $0.10 per share dividend for the third quarter. With three more ships joining the fleet next year, we are finally fully invested and we have a fleet of 13 state-of-the-art LNG carriers on the water with premium in earnings capacity compared to the older steam and diesel electric ships. It's not like that we think 2021 will be a walk in the park, given the high inventory levels and the rather large order book of ships for delivery next year. However, we are confident that we are well positioned with the ultra-modern fleet, managed in-house and operated at industry low cash break-even levels. We have demonstrated that we can operate in challenging market condition and we are now seeing the light in the tunnel with demand picking up and more clients favoring the newer, more fuel efficient, and environmentally friendly ships. I have lectured you on the fuel saving and environmental credentials of our ships and LNG as a fuel for the last couple of years. So I think I will conclude today's presentation with that and thank you for listening in. I'm happy to take your questions. So let's open up for some questions from the operator. Thank you.

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. [Operator Instructions]. There is no question at this time. Please continue. Øystein Kalleklev: I think I got some chat questions here. So I can maybe take those. I've been talking for such a long time now, so I am going to try to keep it a bit short. So the questions we received here is as follows. Should we consider the dividend of 10% [Sic] [$0.10] as fixed? So that's certainly not the case. All income is variable, it goes up and down. If you look at it yesterday, so our adjusted income -- adjusted earnings per share is $0.18. We started paying dividends last year, Q3, so we paid $0.10. In Q4, we delivered fantastic results last year, $94,000 on a TCE basis, but we did not increase the dividend. And the reason was, we were in February 2020, the lockdowns had started in China and there was a lot of uncertainty. So we decided just to stay with the dividend of $0.10 for Q4. And then as the virus spread and we had our Q1 report in May, we decided to suspend the dividend, given an older uncertain nature of the market development. So we have suspended it for Q1 and Q2, and now we are delivering Q3 and adjusted EPS for these three quarters are $0.18. We think it's appropriate to start with $0.10 again for this quarter. When we are delivering on both in Q4 next year, February, of course, we will most likely have our earnings support with significantly more earnings, given the guidance provided today. So then we will really just assess the outlook, the bookings for Q2 and Q1 to define the appropriate level of the dividend. But in general, we are positive to dividends and like the other companies in the case of John Fredriksen Group like Frontline, Golden Ocean and SFL. We do favor dividends, and it's not like the management is going to keep all the cash, we rather want to distribute that to shareholders. So, the dividend is certainly not fixed in any way. And then we have one more question, I think, we can take and it's been a question about the TCE expectation for Q1? As I mentioned, we haven't provided our TCE number for Q1 next year. It's too early. We have booked, as I mentioned, around two-thirds of the available days. But, keep in mind, that we have several of our ships on variable time charter. So, we don't know what the rate will be on those ships. We know they will be employed, but not the rate. So it's a bit premature for us to provide a TCE guidance. But in general, when you have booked two-third of your fleet for Q1 next year, we are fairly positive on the outlook for that quarter. So that's it. So unless there's any more questions on the phone, I think, we are done for the day.

There are no question that came through. Please continue. Øystein Kalleklev: Okay. Thank you, everybody, for joining the webcast today. The dividends maybe we have some based on that. I think it's payable 17th of December. So it won't be in your bank account in – ahead of Black Friday, but at least it will be in your bank account ahead of Christmas season. So I hope you can spend it well either on buying fresh stocks or something nice for your loved ones. So thanks a lot again for joining, and we'll be back in February.

Thank you. This does conclude our conference for today. Thank you all for participating. You may now disconnect.