Earnings Call: Q1 2021

May 28, 2021

Good day and thank you for standing by. Welcome to the Flex LNG First Quarter 2021 Earnings Presentation Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Oestin Kallichev. Please go ahead. Thank you, and welcome to today's Flex LNG webcast. I'm Glad you could make it. I'm Christian Karl Leclerc, the CEO of Flex LNG Management. And I will be joined today by our new CFO, Knut Rohrld, who will walk you through the numbers as well as providing a financial update a bit later on. Today, we will be presenting the Q1 results for 2021, And this is the presentation we have been looking forward to share with you. Please also note that a replay of this webcast will be available at flexlng.com and also on the FlexLNG YouTube channel. So Slide 2 disclaimer. Before we start the presentation, I will remind you of the disclaimer with regards, 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 we also released today. So let's kick off on Slide number 3, the highlights. The LNG market has been remarkably strong this year. We started off with a boom at the start of the year with both LNG product prices and freight rates going sky high. However, it's fair to say that these very high levels reflected our market more or less sold out for both cargoes and ships. So only a few cargoes and spot voyages were able to catch these levels. And this is also basic economics. When something is scarce, it tends to be expensive if in high demand with limited price elasticity and substitution. So the market cooled off by mid February, driven by warmer winter in Asia, a flurry of newbuilding deliveries at the start of the year as well as the disruptions in U. S. Due to the big freeze in February. The market, however, quickly rebounded by end of March And a quick turnaround also increased appetite by charters for term deals. Nobody really wants to be short shipping after the experience from last winter, particularly given the low gas inventories, which increases the odds for winter volatility this next season. We have utilized a strong market to execute on our strategy of securing a higher degree of employment visibility and thus derisking The company's freight exposure with about 22 years of minimum fixed higher employment secured since last reporting And these charters are done at attractive levels and I will cover this in more details shortly. In 2019 2020, we had a multitude of factors playing against this strategy being the trade war between U. S. And China, 2 record war winters in a row, adversely impacting gas demand. And then finally, the COVID-nineteen pandemic rampaging the world economy and thus also the energy demand. This also included LNG demand, Even though LNG in contrast to nearly all other energy sources recorded a small increase in demand of about 1% in 2020, but this fell well below expectations of about 7%. However, this year, we will catch up a lot of this growth with 7% to 8% growth expected as we do not expect cargo cancellation this summer given the strong demand growth. With the world economy set to grow healthy this year and a cold winter which has dragged down gas inventories, The LNG market has rebalanced and freight rates have thus strongly bounced back. During the quarter, we took delivery of 2 more ships being Flex and Flex volunteer. And we will have completed our $2,500,000,000 investment program with FlexVigilant set for delivery by end of May. So by end of the May, we will have 2 in state of the art LNG carriers on the water. Despite the challenges imposed by COVID-nineteen, when it comes to crew changes, inspections and services, We have continued to operate our ships with excellent safety and operational performance. Our LTI Lost time injury was 0 in 2018, 2019 2020. There is actually a typo here. We recently had a small injury. So the LTI frequency, which is injuries per 1,000,000 hour walk last 12 months is currently 0.09%. Although this is way below the industry standard, we intend to bring this back to 0 again. I'm also pleased to say that only 2% of ARPU is currently overdue under contract, which compares very favorable to the rest of the industry. So once again, a great thanks to our seafarers and onshore personnel for making the propeller run. Our technical team has more than 200 years of experience, so they are not new to shipping. Our top management consisting of Knut, Ben, Marius and myself have also worked in shipping and LNG for most of our carriers. James Meyer actually made me aware today that Flex LNG is the only shipping company in is research coverage with a straight A rating for management. In terms of financials, I am pleased that we delivered revenues of €81,300,000 in line with guidance of €80,000,000 to €90,000,000 when we reported on February 17. At the time of reporting, we had 13% of remaining days to be booked as well as 3 ships on variable hire contracts linked to the spot market rates. The market took a no start from the middle of February until end of March for reasons already described, and this is why we ended up in the lower end of the guidance range. Nevertheless, we delivered a TCE of 75,400 in 1st quarter, slightly ahead of 73,700 in 4th quarter. This resulted in an adjusted net income for the Q1 of $34,200,000 or $0.64 per share. As long term interest rate rebounded in 2021 driven by improved economic outlook, We booked a €13,000,000 gain on our interest rate swaps utilized for hedging. And our official net income was therefore $47,200,000 for the quarter translating into $0.88 per share. As you might recall, our official Earnings number last year were dragged down by unrealized losses on such derivatives due to plummeting long term interest rate, but we see a reversal of this now as the world are recovering gradually from the pandemic. It's also worth reminding You all that we have secured long term effective financing for all our ships, including Flex Vigilant set for delivery by end of the month. And we also have a super strong liquidity position with $139,000,000 of cash at hand at the end of first quarter. This healthy financial situation, coupled with the strong contract coverage, gives us ample room to pay an attractive dividend and also potentially buy back more of our stock. Hence, we are therefore pleased to announce an increase in the dividend from $0.30 for Q4 to $0.40 per share for the Q1. With the current stock price of around $13 I believe it's a bit up today. This translates into an annualized yield of about 12%, which should be effective in the current low interest rate environment. Our stock is still trading below book value of about $16 per share. Our book or balance sheet consists of brand new ships on the water acquired at active prices compared to today's newbuilding prices, which are going up. Additionally, all our ships are attractively financed. And today, the ships comes with an attractive backlog as well. Thus, we still find it attractive to buyback our stock. During the Q1, we therefore bought back 593,000 shares, representing about $0.10 per share, bringing the total to 800,000 shares bought back. The Board has therefore decided to increase the cap under the buyback program from $12 to $14 per share, which is still approximately 12% discount to book value. Slide 4. So in flex LNG, we don't execute. We flex execute. As mentioned in the highlights section, the LNG market has recovered and rebalance. The Asian and European spot LNG or gas prices, JKM and TTF, which fell below $2.01 at the nadir of the COVID-nineteen pandemic are now at around $10 $9 This is 5 to 9 times higher than last year at this time of the year and strong also in historical perspective for this time of the year. With better market, there are also been better opportunities for us to carry out our intended strategy of fixing our modern ships on longer term contracts. When we expanded our fleet in 2018 from fixed to 30 ships, we also took the decision to recruit and build up a top notch in house technical management. Flex LNG Fleet Management received this driver license or document of compliance as it's called in shipping about a year later in October 2019. And during the end of 2019 and into 2020, we gradually took over the management of all our ships in house. Having the ships in house means we are more in control of how we operate our ships. And this should, in our view, As we have said before, put us in a better position to attack longer term contracts as major LNG traders tend to prefer owners within our organization given the mission critical nature of LNG ships in the LNG value chain. However, long term contracts doesn't Just arrived at the doorstep, charters want to see the organization actually delivering great performance and this we have certainly evidenced through the stress test imposed by COVID-nineteen. We also took the prudent decision to finance the company with ample equity and flexible long term financing for all ships to be able to trade our ships spot and rather picked the right moment to execute on our strategy when the time was right. And 2020 was certainly not the right year to fix ships on long term fixed hire contract given the upheaval in the market. So during the last month or so, we have fixed 6, possibly 7 of our ships on attractive term employment. On April 14, we announced an agreement with Cheniere to fix 3 ships in 2021 with them and 1 or possibly 2 ships in 2022. Flex Vigilant will be delivered to Cheniere on a 3 year contract ex yard End of the month. Flex Endeavor has already commenced a charter with Cheniere as we agreed early delivery of this vessel with the charter duration thus expanding to about 3.75 years minimum duration. We also plan to deliver FlexRanger on a 3.5 year contract to Cheniere in Q3. Next year, Cheniere will take 1 or 2 of our ships. This also on 3.5 years time charters. These vessels will be nominated ahead of delivery, so it's still not sure which vessel will be delivered to Cheniere. Under the agreement, the charter also have the option to extend all vessels by up to 2 additional years. Then on 17th May, we agreed a 3 year time charter for Flex Constellation with our major trading house. The time charter was based on prop delivery, so Flex Constellation has already commenced this charter. Under this agreement, the charter also has the option to then the charter by up to 3 additional years. And lastly, last night on May 20, we agreed to fix Flex Freedom on a 3 or 5 year time charter with the portfolio player with commencement of this contract in direct continuation of our existing time charter elapsing in 1st or early part of Q2 of 2022. We will be notified in advance whether it will be 3 or 5 year minimum term period and such notification is due in Q3 this year. The charter will also have the option to extend this contract by 2 additional years. This time charter remains subject to final documentation and customary closing conditions. So Slide number 5, fleet composition. So let's have a look at our fleet composition after the recent flurry of flex execution. In total since reporting in February, we have added 22 years of firm backlog to our fleet with up to an additional 20.5 years of optional backlog. Hence, our earnings visibility has been transformed as a consequence of these fixtures. Today, we have 3 ships linked to the spot market through variable hire contracts. These are Flex Enterprises, which is on her 3rd year of her variable hire contract with firm contract coverage until end of Q1 next year, but where the charter has the option to extend that by another 2 years. Flex Ambo is on a similar contract into Q4, but the charter can also extend by 2 additional years. Last The vessel on variable aircraft is Flex Artemis, which we secured a minimum 5 year contract with Gunvor at the end of 2019 with commencement of our charter in connection with delivery of the ship in August last year. Gunvor has the option to extend this contract by up to 5 additional years. We now also have a substantial part of our fleet on long term fixed hire contracts. As mentioned, Black Freedom is currently fixed on a 10 month time charter maturing in end of Q1 next year, with our 3 or 5 year time charter in direct continuation with our portfolio player. Flex Constellation was recently fixed on a 3 year time charter with a major trading house. Then we have Flex Endeavor, which has already commenced her 3.75 years Charla with Cheniere with Flex Vigilant set to join her on May 31 and FlexRanger during Q3. Then Cheniere will take 1 or possibly 2 ships on 3.5 years time charter in Q3 next year. Hence, we can pick and choose from our existing ships. First for simplicity, we have included Flexscore Aegis and Flex Aurora as optional and Flex Aurora as the optional ship for the Cheniere contract. FlexCo AAGES is currently on a 11 month fixed hire time charter and will be redelivered to us at the end of Q1 next year. Flex Aurora is also fixed on a fixed higher time charter where the charter has the option to extend the shift for an additional 6 months taking her into Q1 next year. FlexResolute is also on a similar contract where the 3 months extension was recently declared but where the charter can extend by another 3 months. In any case, these two positions are very attractive, so we would We're perfectly fine trading these 2 ships in the spot market in case they are not extended. Then We have Flex Rainbow, which is fixed on a 12 month time charter in Q1 this year with redelivery in Q1 next year where the charter has the option to extend by another a year into Q1 2023. And lastly, we have 1 ship remaining in the spot market today, Flexvolitaire, which is fixed into Q3. Given the positive outlook, we are very happy trading out in the spot market. So Slide number 6, the backlog. So let's talk about visibility. As we have secured substantial backlog during the last month or so, our forward earnings visibility has also increased substantially with a minimum of 88% of the remaining days in Q2, Q3 and Q4 covered. As mentioned on last slide, we only have 1 ship Flexvolunteer trading in the spot market with the possibility of having also Flex Aurora and Flex Resolute redelivered in Q3 or Q4 this year. But again, as I mentioned, these are very good position. We would be happy trading spots as these periods also coincide with the winter market. We also have 3 ships linked to the spot market through the Higher contracts. So we are exposed to the spot market through these 4, possibly up to 6 ships, while the rest of the fleet are on fixed hire contracts. This means we can fairly accurately predict the revenues for the company for the rest of the year under normal operations. As we have been in investment phase through 2018 to Q2 this year, we have incrementally grown our fleet of ships on the water during this period. We started off 2019 with 4 ships on the water and closed the year with 6 ships on the water. During 2020, we added another 4 ships on the water, while we are adding the remaining 3 ships to our fleet in 2021. Hence, it should not come as a surprise that our revenues are growing. This also means that finally all the Equity invested in the company is being employed in productive assets. As in the past, a substantial part of our equity has been tied up in vessels under construction, which returns are 0. 2nd quarter is normally the weakest quarter in the year and this we also expect to be the case this year with around $65,000,000 of assumed revenues for this quarter. The quarter is fully booked, so the unknown factor is the earnings we will be making under the 3 variable hire contracts in our portfolio. In Q3, we have also a high booking. So variation here is mostly linked to spot earnings for volunteer and the earnings under the variable hire contracts. But we expect Revenues to bounce back to the level of Q1, as you can see from the graph. For 4th quarter, which tend to be the strongest quarter, Although this year Q1 was slightly stronger than Q4, we also have a high degree of days covered as mentioned, But we expect revenues to grow closer to $100,000,000 for this quarter. As we have had 3 ships for delivery in the first half of the year with FlexVigilant set for delivery by end of May, we also have No more CapEx commitment in the second half of the year. Hence, cash flow available for distribution to shareholders will therefore also be higher. So next slide, number 7. So just to give a summarize before handing over to Knut. As we have mentioned in the past, we have the industry low cash breakeven of around $45,000 As you can see from what I've described, we have substantial backlog not only in 2021, but also for 2022, 2023 and $24,000,000 This gives us ample room to pay our dividends. As mentioned our earnings adjusted earnings per share In the Q1 was $0.64 We are paying out $0.40 as dividend. We have bought back shares for around $5,500,000 bringing the Distribution to $0.10 per share. And then we also had 2 ships for delivery. So kind The payments to the other was around $0.12 per share for those 2 ships. But given COVID, we have added some extra spares to the ships. Usually when you take delivery of a ship, you are Using around $2,000,000 for spares and stores, we have more been more like $3,000,000 each of these ships. So these are kind of CapEx which are invested in spares for the ships because it can be hard to get spares these days. So we have our payout ratio of the free cash flow here of in excess of 100%. But this is very covered with €139,000,000 of free liquidity, no debt maturities before second half of twenty twenty four and The strong balance sheet I mentioned. So then maybe Knut, you can go through the financials. Thank you, Steen. Let's turn to Slide 8 and the income statement. Revenues for the quarter came in at €81,300,000 in line with our guidance for the quarter of €80,000,000 to €90,000,000 This is up from €67,400,000 in the previous quarter. The increase is due to the delivery of the new buildings Flex Freedom and Flex Volunteer in January and a slightly improved market with the fleet delivering a TCE rate for the quarter of $75,400 per day, up from $73,700 per day in the previous quarter. Operating expenses were $14,300,000 in the Q1 compared to $14,500,000 in the 4th quarter, despite that we had a larger fleet this quarter. This resulted in an OpEx per day of dollars 12,900 per day versus $15,300 per day in the last quarter. The difference is explained by higher COVID related expenses in Q4. And despite the positive reduction in the operating We continue to face higher COVID related expenses caused by challenging crude changes and quarantine, increased lube oil prices and additional cost of transporting spares and services to our vessels. These costs can be a bit bumpy as illustrated in Q4, but we are now back to a normalized level in Q1 and we expect smoother OpEx once the restrictions are gradually lifted. Adjusted EBITDA for the quarter was 64,000,000 up from $50,200,000 in the previous quarter. Interest expenses were up in Q1 Due to a full quarter of interest on the depth related to the vessels delivered during the Q4 and a full quarter of interest related to Flex Freedom and Voluntear delivered in January. Net income for the quarter was dollars 47,200,000 or $0.88 per share, up from about $28,000,000 or $0.48 per share in the previous quarter. Adjusted net income was 34,000,000 or $0.64 per share, up from $24,000,000 or $0.45 per share in the previous quarter. The difference between earnings per share and adjusted earnings per share is, as I understand, related to our interest rate hedging where we recorded a net gain of $13,000,000 in Q1 due to long term interest rates bouncing back. But we used the adjusted numbers to smooth out this mark to mark change of the interest rate instruments. Then moving to Slide 9 and our balance sheet. At 31st March, we had 12 vessels in operation and booked as vessels and equipment. During the quarter, we took delivery of 2 new buildings and added $372,500,000 from vessel prepayments to vessels and equipment, increasing in aggregate book value of the vessels to $2,200,000,000 We have $54,000,000 as remaining vessel prepayment relating to our last new building, Flex Vigilant, is scheduled to be delivered on the 31st May to our fleet. As mentioned previously, once all ships are delivered, Our balance sheet will be about $2,500,000,000 comprising of 13 ships as well as our substantial cash holdings. Total interest bearing debt stood at $1,400,000,000 at the quarter end, reflecting $20,000,000 increase of the RCF under the original $100,000,000 Ranger facility. And adding drawdown of 125,000,000 in connection with the delivery of Flex Volunteer and offset by $20,000,000 in scheduled repayments. At the quarter end, we had a strong cash position at $139,000,000 Total book equity was $861,000,000 giving a solid equity ratio of 35% compared to our 25% requirement under some of our notes. Turning to Slide 10 and looking at our cash flow for the Q1. In the Q1, we had a positive net cash flow of 10,000,000 This comes from cash flow from operations of $48,400,000 and we had negative working capital adjustment of $4,500,000 compared to a positive working capital adjustment of $14,400,000 in the 4th quarter. The adjustment is mainly related to higher prepaid charter hire due to a stronger market at the end of the 4th quarter compared with the Q1. On average, these working capital balances tend to even out, but as we are operating on On a time charter basis, we received charter hire in advance, which is advantageous from a working capital perspective. Scheduled loan installments were $20,000,000 and in total $20,700,000 including this scheduled reduction of the amortizing Ranger RCF. Net newbuilding CapEx was 11,900,000 And as mentioned previously, we increased the RCF under the original $100,000,000 Ranger facility with a 20,000,000 dollar non amortizing tranche adding additional liquidity and flexibility. In November, we announced a share buyback program of about of up to 4,100,000 shares. And during the Q1, we purchased an additional 597,000 shares for $5,300,000 or 8 point and $0.80 per share on average. This together with the $0.30 per share dividend for the 4th quarter of $16,100,000 was paid out during the Q1. In conclusion, We had a positive net cash flow of €10,000,000 which leaves us with a robust total cash balance of €139,000,000 at the end of the quarter. Turning to Slide 11. This is a familiar slide to our frequent followers. We have over the last year secured a total of SEK 1,700,000,000 of attractive financing for the fleet of 13 vessels. At the same time, we have diversified our funding base with the mix of bank financing, lease financing and ECA financing. As communicated at the Q4 presentation, we had secured commitment for the SEK 20,000,000 increase under the SEK 100,000,000 Ranger facility. And the amendment was signed in March and then the amount was fully available thereafter. We have hedged the interest rate risk with interest rate swaps for a nominal amount of And use the positive value to enter a new swap at a lower fixed rate. The average fixed rate fixed interest rate for our swaps is 1% 1.15%. Together with the leases on fixed rate, we have a hedge ratio of about 66 percent. All in all, we have a very comfortable debt maturity profile with the first maturity due in July 2024. And this is provided by a pool of 15 different financial institutions. And over the years, we have demonstrated our ability to raise attractive funding Also during challenging times, both in the physical and the financial markets, as we have a very strong support from our wide banking group. And with that, I hand the word back to Aesten, who will give an update on the market. Thank you, Krit for the financial review. Plain sailing for you. You really picked the right job. So Slide number 12. We start off the market section with a snapshot of LNG exports and imports in the Q1. In the Q1 of 2021, Exports were close to 102,000,000 tonnes 101,000,000 tonnes according to Kepler data. This was slightly it was in line with last year despite the lost cargoes due to the big freeze in Texas during as well as some other supplier disruptions during the quarter. Keep in mind, volume growth in Q1 of 2020 was very high as this was prior to the COVID-nineteen pandemic going viral on a global scale. What is different from last year is that we saw considerably more pull from Asia and particularly China as the winter weather in Asia at the start of the year was very cold with snow records in Japan and the coldest winter in Beijing since 1966. So strong demand from Asia also resulted in increased sailing distances and this coupled with Panama congestion sparked an unprecedented rally in both freight and product prices at the start of the year. As we explained both in our Q3 report in November and our Q4 report in February. We have been very bullish on volume growth in 2021 With estimated export growth of about 25,000,000 tons in 2021, as product prices started to rally last autumn And this have now started to become the consensus view. So as you can see from the graph to the right hand side, we expect 7% to 8% export growth in 2021, which will be supportive of the freight market, which we will cover on the next two slides. So turning to Slide 30, the spot market for freight. As mentioned in the highlights, the boom at the end of 2020 continued into 2021 before softening by the middle of February when we are reporting our Q4. However, the downturn was short with the market bouncing back by end of April. As usual, we saw the first saw this first with the balance Conditions going from full round trip basis in January to one way economics by end of February before we started to see green shoots in March with ballast bonus conditions turning back to full round trip again by the middle of April and thus pushing up the time charter equivalent earnings and the spot market. By end of April going into May, the freight market was unseasonably strong with spot rates For modern tonnage, I. E. Large Magio XDF ships approaching $100,000 per day in the Atlantic with Somewhat lower rates in the Pacific as newbuilding deliveries kept vessel availability higher in this basin. As you can see from the graph on the right hand side of the slide, availability of ships in Atlantic have been very low except for during the big freeze in February in the U. S. When export of U. S. Was for a short period curtailed and more vessels became available in the Atlantic. The high freight rates have, however, affected the relays into the market And we have seen the market softening during the last 2 weeks due to slightly more vessel availability and rates for modern tonnage returning to around $80,000 per day in both the Atlantic and Pacific basin. But these are very solid numbers for May as you can On the graph to the left, however, the realets in the market are typically only available for shorter durations as the traders and portfolio players typically want these ships back before winter season approaching. And this is thus not affecting the term market significantly as I will illustrate on the next slide. So, the market Slide 14. Let's have a look at the term market for freight. In this graph, we show the term rates were 1, 3 5 years over the last year following the COVID-nineteen pandemic. As you can see, the 5 year TCA assessment flatlined during most of the last year as there was also limited interest for such periods by charters, which could fix vessels cheap in the spot market or for shorter term business. The 1 year TCE last year were around $55,000,000 to $57,500,000 before turning sharply up from the beginning of April and now hovering close to $100,000 per day. The 3 year TC rate, which is less liquid Then the 12 month TC followed the 12 months close months TC rate closely before also picking up from April now being at around $80,000 per day. So given the attractiveness of term business during the last Approximately 12 months until we started to see green shoots at the end of March, we elected to rather tread the water, play in the spot market. At the start of the year, 8 of our 13 ships were either trading spot or on variable hire contracts. Plus we also had our last new building open. Despite pursuing this strategy, we managed to sail in $60,000 in time charter equivalent earnings for 2020, while keeping our options open, which was much more attractive than fixing ships on port rates for longer durations. Of course, we were in the fortunate position that we have financed our ships in advance and sat with a big chunk of cash, so we could afford to take the wait for better times approach, which was not the case for all owners. With term rates picking up recently, we have utilized the momentum to fix a large part of our fleet on term contracts at much more attractive rates than what was achievable last year and 2019 for that matter. So there is definitely some truth to patient being our virtue. So gas prices on Slide 15. As previously highlighted, gas prices started to recover over the summer last year. As we highlighted in our Q2 report last August, There was already at that time a La Nina alert for the winter 2020, 2021, which normally means the winter weather will be cold and longer in the major gas importing nations. We therefore elected to keep substantial spot exposure over this period and made healthy trading results for both Q4 and Q1 as recently explained. The winter came a bit late, but when it arrived, it was freezing cold and it also lasted for a very long time, especially here in Europe. Last autumn, we also experienced the most active hurricane season on record in the U. S, which caused supply disruption. In the short term, these supply disruptions were negative of freight due to lost cargoes, but the supply disruptions also fueled the product prices with Asian LNG Benchmark JCM going from a low of $1.8 during the early part of the summer last year to a high of $32.5 early 2021. The average price of the February JKM contract was $18 10 times the price during last summer. As you can see from the graph, the big freeze in the U. S. Also led to a spike in the U. S. Gas prices, here represented by the Henry Hub Index. Given the bull run-in oil prices, U. S. Shale drilling have become increasingly profitable, So natural gas prices have returned to sub-three dollars level with forward prices also in this level. JKM prices are today close to $10 while European TTS gas prices is slightly below $9 driven up by increased demand, significantly higher carbon prices increasing the switching ban from coal to gas As well as due to significant restocking demand due to very low gas inventories after this cold winter, which I will return to on next slide. So last point to make is forward prices for gas are at an entirely different level this year than last year. And this gives no incentive to cancel cargoes in U. S. Or for that matter Egypt, which has become the new swing producer. And that's why we are also confident on big volume increases this year. So Slide 16, gas inventories. Gas inventories, As we started to highlight in our December 2020 presentation, the strong demand from Asia at the end of 2020 was pulling cargoes away from the Atlantic basin and away from European buyers with rapid depletion of gas inventories in Europe as a consequence. The Asian demand pool continue into 2021, as I illustrated earlier, resulting in severe congestion in the Panama Canal and Booming faces at the start of the year. We therefore continued to highlight in our January February presentation that European buyers were being starved off from gas deliveries and therefore had to continue to run down their inventories quickly. This was further aggregated By a cold and long winter in Europe with record snowfall in Madrid and the high carbon price in Europe with CO2 prices hitting about €50, which meant that gas become increasingly competitive towards coal despite higher gas prices. Hence, we have been arguing for strong restocking demand over the summer minimizing the chance of a repeat of the summer cargo cancellations. We thus became increasingly comfortable with the market situation for 2021 and elected to keep a very high proportion of our fleet exposed to the spot market at the start of the year, as mentioned, until we have no acted on term opportunities. European inventories to date stand at only 33.5% full, which is less than half the levels last year. European inventories are about 70,000,000 ton equivalent of LNG. So the shortfall in European inventories are almost twice the volumes of U. S. Cargo cancellation last year. And it is almost inconceivable that European buyers will be able to fill up inventories ahead of next winter and this can spur gas prices and volatility, particularly if economic recovery is strong and or if the winter is not, not even cold, but just normal. So Slide 17, the fleet composition. Last quarter presentation, I had a very About the new decarbonization rules for all ships or EEXI as it's called. We expect the new rules to be agreed by IMO in June and these rules will create headaches, particularly for the owners of all the steam tonnage, but opportunities for owners of state of tar ships. I'm not going to repeat the lecture from last presentation, but it's available on our webpage for those who missed it. What I would like to point out is that the order book, which some analysts thought was too big this year to make for our conductive freight market is tailing off and a number of available uncommitted vessels have come down a lot with the recent increase in term interest. The mix of Few available MEGHEX dev ships, EEXI rules, generally higher newbuilding prices and the fact that a lot of older tonnage is coming off long term contract will result in more opportunities for us to fix ships on attractive term charters. We are now focusing on our The two positions given our high coverage for 2021 and the recent forward fixture of Flex Freedom illustrates this point and opportunity. So that's my last slide before summarizing. As I mentioned, revenues in line with guidance, we have substantial backlog for 20 21 already booked dividend. We are increasing this now to $0.40 in addition to the buybacks. All ships will be on order by end of the month. As I've covered in great detail, we have a positive market outlook with some restocking. And we are in a very good financial position with All ships financed, Supertong balance sheet and lots of liquidity. So that's it for me. I'm happy to take some questions if There are no questions at this time. Okay. Once again, everything is very clear. It seems like telephone is going out of vogue. So maybe we should try to focus more on the chat function for questions next time. But Until then, I wish you a very good weekend, a good spring. We will be back In August with our 2nd quarter results, probably somewhere middle of August, I think Market will be very healthy at that time. Don't rule out flat rates going into 6 digits by that time. We will probably see contango But you're developing in the gas prices because of fear of Panama congestion. So I think I'm really looking forward to Q2 as well. So with that, I wish you a good day.