Welcome to Flex LNG first quarter 2026 result presentation. My name is Marius Foss. I am the CEO of Flex LNG, and today I am joined with our CFO, Knut Traaholt, who will walk you through the financials later in the presentation. Today, we will cover the first quarter results and provide an update of the LNG shipping market. As always, we will conclude the webcast with a Q&A session.
If you would like to ask questions, please use the chat functions in the webcast or send questions by email to ir@flexlng.com. Before we start, we would like to highlight the following. We are using certain non-GAAP measures such as TCE, adjusted EBITDA, and adjusted net income. These are supplements to the earnings report, reported in accordance with US GAAP. The reconciliations of these non-GAAP measures are available in the earnings report, which we released today. There are certain limitations to the completeness of our presentation. Therefore, we encourage you to read the quarterly report together with the presentation. With that, back to you, Marius.
Thank you, Knut. Let's begin with the highlights of the quarter. We sailed in revenues of $80.5 million or $78 million, excluding the EUAs related to the EU Emissions Trading System. The fleet average TCE during the quarter ended up at $65,700 per day. Net income for the first quarter came in at $19.5 million, implying an earnings per share of $0.36. When adjusting for unrealized gains of interest rate swaps and FX, we ended up with an adjusted net income of $16.9 million or adjusted earnings per share of $0.31. This has been an active quarter for Flex LNG. We have added more contract coverage. First, the charter of the Flex Resolute and Flex Courageous has declared the two-year extension options from 2027 to 2029, and the vessels are now fully employed until 2032.
We have fixed the Flex Aurora for a new two-year firm time charter until 2028 with additional 2 + 2+ 2 years options, potentially an eight-year charter if all options are declared. We have now completed the dry dockings of both Flex Volunteer and Flex Freedom during the quarter. The Flex Vigilant will enter dry dock later in May. Based on the added new backlog and improved spot market, we are updating our full year 2026 guidance as follows. We now expect the revenues to come in between $345 million-$370 million, around 10% increase from the previous guidance. The TCE is expected up 8% between $73 thousand-$78 thousand per day. We expect the adjusted EBITDA to come in around $255 million-$280 million, up 11%. With improved earnings visibility and continued robust financial position, the board has declared another dividend of $0.75 per share.
This is the 19th consecutive dividend of $0.75 per share, and we have distributed around $810 million since 2021. Our last 12 months' dividend is $3 per share, implying a dividend yield of around 9.2%. We have completed two out of the three dry dockings so far in 2026. The dry docking of the Flex Volunteer was completed in January, and she is now trading in the spot market. Flex Freedom completed her dry docking in March, and she went straight back to service under the current charter. Both dry dockings were completed ahead of schedule. The third and final vessel to be dry docked in 2026, Flex Vigilant, is expected to enter dry dock later this month in Europe. She will, upon completion of dry dock, return back to charter. We expect the average cost of the three dry dockings to be around $6 million.
Flex Vigilant marks the final five-year special survey in our fleet of 13 vessels. Let's have a look at the contract backlog. Flex Constellation was delivered to her new charter in early March, and she has now commenced her 15-year contract. In March, we were also pleased to announce that the charter of Flex Resolute and Flex Courageous exercised their option from 2027 to 2029 for both vessels. The vessels have firm employment until 2032, and the charters have additional options, potentially extending the employment until 2039. In March, Flex Aurora was fixed on a new two-year firm contract with Supermajor and entered service almost in direct continuation after she was re-delivered from her previous 3.5-year contract. The new contract also has 2+2+2 year options, potentially extending until 2034.
Flex Artemis and Flex Volunteer have both been trading in the spot market in the first quarter. Flex Artemis is currently employed on a multi-month contract until end of September. Flex Volunteer is also fixed on a multi-contract and will come open early July. We are marketing both vessels for spot and term contracts. Looking at the total contract coverage, 91% of the remaining available days in 2026 are now fully fixed. We have today 54 years of minimum backlog, which may grow up to 81 years if the charters declare all options. We are also pleased to re-present the revise of our full year guidance. The guidance we provide in the fourth quarter presentation in February reflected a muted outlook for LNG shipping for this year.
Following the war in Iran and the closure of Strait of Hormuz, and shutdown of LNG production in Qatar, 20% of the global LNG export capacity is currently lost. This has resulted in strong LNG shipping markets in the short term, which has positively impacted our open vessels. The addition of new contract backlog in the firm spot markets for LNG shipping have resulted in improved earnings outlook for Flex LNG. We are therefore upgrading our financial guidance for the full year. We hike our expectation for the full year TCE rates to range between $73,000 and $78,000 per day. This is an increase around 8% from the previous guiding. The revenue range is increasing between $345 million to $370 million, which is an increase of around 10% from the previous range.
Adjusted EBITDA is now expected to come in between $225 million-$280 million for the full year, an increase of around 11%. On the decision factors for the dividend, we maintain the market outlook on the orange level. This reflects near term stress alongside medium term uncertainty driven by a heavy schedule of new buildings deliveries. We remain confident in the long term demand story supported by the third wave of U.S. LNG export capacity currently under construction. This quarter we also have downgraded the other considerations to orange given high geopolitical risk. There are uncertainties around duration of the Iran conflicts and the normalization of the Qatari supply. Given the potential long term implication of LNG trade and shipping markets, we believe it's prudent to reflect this risk into our dividend decisions framework.
Taking all factors into account, the board has declared another quarterly dividend of $0.75 per share. This brings dividends paid over the last 12 months to $3 per share. The dividend will be paid on or around 11th of June for shareholders on record of 29th of May. With that, over to you Knut for a review of the results.
Thank you, Marius. The first quarter results were a somewhat softer quarter-over-quarter, mainly driven by seasonal lower revenues. Revenues excluding EUAs was $78 million, driven by fewer available days in the quarter and off-hire related to scheduled drydockings of two ships, plus a seasonal weaker spot earnings early in the quarter for the Flex Volunteer and Flex Artemis. This was partly offset by the start of Flex Constellation's 15-year charter at a higher rate in March. We booked $5.8 million in various expenses this quarter compared to $3.8 million in the fourth quarter. The $2 million increase was mainly driven by higher bunker cost and gas up and cool down expenses related to drydock and repositioning of vessels in the spot market. On the cost side, vessel OpEx was lower quarter-over-quarter as fourth quarter included higher scheduled maintenance.
The average OpEx per day in the first quarter was close to $16,000 per day. We continue to maintain our OpEx guidance of $16,000 per day for the full year. Interest expenses improved, reflecting lower loan margins and active management of our RCF facilities. We booked $4.9 million in gains on our interest rate, the derivatives, of which $2.4 million was realized gains and $2.5 million was unrealized gains. Net income came in at $19.5 million or $0.36 per share. Adjusting for non-cash items, like unrealized gains from the interest rate derivatives, the adjusted net income was $16.9 million or adjusted earning per share of $0.31.
Overall, this was a quarter impacted by scheduled drydockings and a weaker spot market early in the quarter, but with underlying cost control. As highlighted in our revision of the full year guidance, we expect stronger contribution from the new contract for Flex Aurora and the two ships operating in the spot market from the second quarter. During the quarter, we generated cash flow from operations of $37 million. We recorded $18 million in negative change in working capital and had $9 million of drydock expenses. The buildup of receivables during the quarter is particular for the first quarter as charter pays January hire in December, while April hire for four ships were paid early in April, causing a negative change in working capital. We repaid the $28 million in scheduled debt installments and distributed $41 million to our shareholders.
In sum, our cash position was reduced with $59 million. This left us with $389 million of cash at the end of the quarter. Looking at our balance sheet, in addition to the cash position of $389 million, we maintain a book equity of 27%. As noted before, our book equity values reflect historical cost adjusted with regular depreciations. Our interest rate, the portfolio, was valued at $20 million at the end of the first quarter. The notional value of the portfolio is $775 million, with an average rate fixed at 2.46%. We expect to maintain a hedge ratio net of RCF utilization of around 70% into mid-2027. Since January 2021, this swap portfolio has generated unrealized and realized gains of around $137 million. With that, I hand it back to you, Marius, for the market section.
Thank you, Knut. A robust balance sheet is important to maintain commercial flexibility of our open ships. This was an important factor for the first quarter when we could position our open ships to capture the very strong LNG market that surfaced following the war in Iran. Let's have a look at the LNG trade. Global LNG trade volumes have continued to expand despite a reduction of Qatari export volumes year-to-date. Trade volumes grew 3% in the first four months of the year compared to the same period last year. The shortfall from Qatar due to the closure of Strait of Hormuz has largely been offset by stronger supply growth from U.S. alongside continued growth from Australia and other exporters. On the demand side, Europe imports strongly as it rebuilds inventories ahead of winter.
The more mature Asian importers, JKT, remains resistant while we see continued softness from China. The key takeaway is that despite Qatari shortfall, global trade volumes continue to grow. From shipping markets, much of the new supply is coming from the Atlantic Basin and will move over longer distances to Asia. Looking at the left side, we see the U.S. LNG exports continue to grow, supported by the ramp up of Plaquemines first loading from Golden Pass and Corpus Christi expansion. On an annual basis, total U.S. export volumes amount to around 130 million tons, up 18% from full year of 2025. On the right-hand side, the growth from U.S. is offset by shortfall of Middle East volumes. Following the war in Iran, Qatar has been forced to shut down production and declared force majeure reported until June.
Therefore, Qatar export drops dramatically during March and April, removing about 20% of the global supply from the LNG market. The net effect is a tighter LNG shipping market with strong growth from U.S. For LNG shipping, this tightness reshapes the trade flow with importers increasingly relying on Atlantic Basin supply to replace lost Middle East volumes. Here, we are seeing two important dynamics shaping LNG shipping today. First, Asian demand for U.S. LNG remains strong and the arbitrage is open. Despite very low European gas inventories, U.S. cargos continue to move east. Second, Europe is entering into injection season with low storage levels. That suggests Europe needs to remain active in the LNG market, rebuilding inventories ahead of winter, particularly given constrained supply from Qatar and the Middle East. The trade flow dynamic we saw on the previous slide is translating into higher ton-mile demand.
Average sailing distance have been increasing over the past years, driven by growing Atlantic export, especially U.S. export serving Asian importers. That structural shift toward longer haul trade is supportive for the supply-demand balance and reinforces the long-term demand outlook for modern LNG tonnage like Flex LNG. This is a slide known to many of you. I would like to highlight three points. First, new building orders so far in 2026 are now exceeded 2025. We count 38 fresh orders so far this year, compared to 35 in 2025. Some of these orders are made on a speculative basis. This signals growing confidence in the firm shipping market later in this decade, a period that aligns well with our open exposure.
New building prices for the standard 174,000 cubic meter LNG carrier built in Korea remain stable at around $245 million-$250 million. This is supportive for asset value for existing tonnage, including our fleets. We are seeing term rates for five and 10 years increasing and moving into more attractive territory. Looking at the new building order book, we count some 290 new buildings being delivered over the next five years, with 20 new buildings being delivered as per end of April this year. The order book to fleet ratio is around 40%, and we note that the number of vessels without contract remain low, estimated around 45 vessels. From a slow start in January, February, the LNG shipping market reset following the war in Iran.
Spot rates moved from around $30,000 in February into more than $250 in March. While the initial spike has since normalized, rates remain well above historical levels for the time of the year. This shows how tight vessel availability can become when trade flows are disrupted. Looking forward, both the FFA curve and the assessments from various ship brokers indicate strong spot market throughout 2026. Ideally, we would like to grab the firm spot market when they're going into the winter market. The Flex Volunteer comes open early July, and the Flex Artemis is open in September. We believe Flex LNG is well-positioned to capitalize the winter market for the remaining open days we have. The long-term LNG supply growth story remains intact.
These slides show operating liquefaction capacity today in dark blue versus capacity under construction in light blue, the key points is that the global project pipeline is substantial. The U.S. stands out as the largest contributor to further growth as the liquefaction capacity is set to double. Thus, it is important for LNG shipping because U.S. volumes are often long-haul cargos supporting ton-mile demand. Qatar also has a large expansion program under construction. Although, given the current situation, the timing of the new Qatari volumes is pushed into 2027. We also see additional growth from coming out of West Africa and Mozambique. While the timing of individual project may shift, the pipeline of project remain large. This supports continued demand for LNG shipping capacity. Before we move on to the Q&A section, I would like to highlight three points.
Firstly, we have no vessels inside the Strait of Hormuz. Secondly, Flex LNG have now 91% covered available days for the remainder of the year. Lastly, we are increasing our full year guidance. I would also like to thank all seafarers and onshore personnel for all the hard work and safe operations. With that, let's move on to the Q&A section.
Thank you, Marius, and thank you all for submitting questions to the chat and on our IR email. You mentioned here in the highlights on the situation or our fleet status in the Strait of Hormuz. There's a number of questions regarding that. Also, if we have vessels inside. During the quarter, maybe you can tell a little bit about the operations and the status of the fleet regarding Strait of Hormuz and the Arabian Gulf.
Thank you. We have lately had a lot of questions for the same, and I can confirm that neither of our 13 vessels operating in the global market today has been trading inside the Strait of Hormuz. Right now it's closed, so it's impossible to trade in. Our charters also elected other alternatives during this period.
We today announced multi-month contracts for two ships. There's a number of questions regarding what the prospects are for these two spot operating ships for the remainder of the year.
Both Flex Volunteer and Flex Artemis remain open. The prospects are much better now than we saw when we spoke last in February. If we are able to fix those two ships on, say, last done levels that we see in the current spot market, I believe Flex LNG is close to touch all-time high revenues for 2026. It's quite exciting to look at what's gonna happen going forward on those two ships.
While we mentioned in the presentation high fixture activity and also on the spot trading vessels, there are questions regarding long-term contracts, the activity levels, and when do you expect the ships to be contracted on long-term contracts?
We are continuing marketing our vessels for long-term contracts. Now when the long-term levels is ticking up, we are engaging those tenders that are surfacing the markets. We have 54 years of backlog already and aim to expand that further going forward. We are disciplined and waiting for the right contract to the right contract partners.
The final questions are regarding the dividend and dividend sustainability. We had this question on the last quarter as well. I think we'll guide you to the slide we have in the presentation on our decision factors. These are the decision factors that the board are using in declaring the dividend and which is an assessment that we do at each quarter. We maintain the market section in orange level or the outlook. That was in a downgrading last quarter as we had more ships open. This quarter we have secured employment for minimum two years for the Flex Aurora, which can be extended by additional six years. We still remain more open exposure into 2027 and 2028.
We keep it for now on orange level. We have also increased the sort of other decision factors, which is more on geopolitical risk given the uncertainty with the situation with the war in Iran. I think it's highlight that we've mentioned before, we have a robust balance sheet. We have cash of close to $390 million, a strong contract backlog, and no debt maturities before 2029. With that concludes the Q&A session.
Thank you very much, Knut. Thank you for everybody participating today's presentation. We are looking forward to see you all back in middle of August. Thank you very much.