Earnings Call: Q3 2020

Nov 17, 2020

Okay. Thank you, and welcome to Flex LNG's 2023rd Quarter Presentation. My name is Oosthen Kalliklev, and I'm the CEO of Flex LNG Management. I will be joined today by our CFO, Harald Gerwin, who will go through the numbers as well as providing our financial update. A replay of the webcast will also be available at flexlng.com. So Slide number 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 support as well as our 20 F Annual Report. So Slide number 3, the highlights. Not surprisingly, the spot market stayed weak during the spring summer due to the fallout from the COVID-nineteen 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 start to improve by August as restrictions were eased and 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 recently became the 3rd named tropical storm, breaking the record of 27 named tropical storms from 2,005 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 ETF and JKM going from summer lows of $1 about $2 per 1,000,000 BTU to about $5 $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 expectation that we would see a lot of floating storage this year due to the strong contangoing 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 pull from Asia, which has pushed freight rates above $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 percent uptime and excellent safety record. Cargoes have been delivered without disruption or delays to our customers. We have also taken delivery of 4 new LNG carriers from Yars in South Korea on budget as planned during July to October. And I will provide a bit more color on the operations shortly. In Q2, we delivered average time charter equivalent earnings of TCE of $47,000 per day. At our Q2 presentation in August, we guided that revenues would be higher in Q3 compared to Q2 as our fleet have been growing with additional new bids. Revenues does grow from about $26,000,000 to $33,000,000 We also guided that TCE for Q3 was expected to be similar to Q2 despite the cost associated with mobilizing the 3 new buildings we took delivery in Q3. This estimate was indeed very accurate as RTC 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 very tough market conditions caused by the pandemic in Q2 and Q3 without depleting any cash. In Q3, our adjusted profit was $1,200,000 Net income was higher at $3,800,000 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 the 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 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 fairly good trading results with TCE of $68,000 With the guidance of $70,000 to $75,000 for Q4, we are thus generating pretty good results in the 2 winter quarters this year. Overall, for the year, we should end up at around $60,000 per day, which is well above our cash breakeven 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 3 ships in the quarter, our remaining CapEx have now been reduced to 5 12,000,000 or reduced to about $380,000,000 following the Amber delivery in October subsequent to quarter end. We actually have $533,000,000 in available debt for this CapEx as we paid approximately $18,000,000 in prepayments for Flex Amber as part of an agreement to move the delivery offer from end of August to mid October. This in order to fit her into the schedule under the variable time charter, which we have secured for. Given the fact we have financed Flex Amber under $156,400,000 Chinese lease, our cash balance of $76,000,000 at quarter end improved by about $26,000,000 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 Q1 next year. In Q1, we expect to add 2 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 those more ships available, but nevertheless, we have already booked about 2 thirds of our available days, which includes these 2 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 breakeven levels as well as light in the tunnel when it comes to COVID-nineteen given 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-nineteen 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 4, which provides an overview of our fleet composition. As of today, we have 3 ships on fixed TCs. This is FlexRanger, which commenced a new TC with Spanish utility Endesa at the end of May. In July September, we took delivery of Flex Aurora and Flex Resolute and both these 2 ships were fixed on shorter term TCs of 8 11 months respectively. The Flex Aurora time charter has recently been extended to 11 months in total similar to Flex Resolute. Today, we also have in total 3 ships currently operating under 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 faith market. As we've been bullish on a considerable higher rates in Q4, we are thus benefiting from increased earnings on these ships now. The ships serving such contracts are Flex Enterprise, Flex Artemis, which was delivered under our long term variable TCs 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 4 ships operating in the spot market. The ships currently trading spot are Flex Endeavor, Flex Rainbow, Flex Constellation and Flex Courageous. For our spot ships, we do try to find a balance between maximizing rates and periods as we do have 3 additional ships for delivery next year and thus like to also add earnings visibility. We are thus pleased that we have already booked 2 thirds of available days in Q1 next year as mentioned. We have agreed with Teilhard to slip Flex Freedom into next year and thus making her our 2021 vintage. Was originally scheduled for delivery end of November this year. By postponing her to January 21, we are setting out our dry docks with 4 ships being 18 vintage, 2 ships 19 vintage, 4 ships 20 vintage and the remaining 3 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 our sea and gas trials and she can also be available early next year, but our scheduled delivery slot is end February. Our last new billing 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 Q2 next year. Our earnings capacity will thus increase by 30% early next year compared to Q4 this year. And finally, all our invested equity will start generating income in contrast to 2018, 2019 2020 when a very large portion of our equity have been tied up in newbuildings, which generates zero income and thus dragging down our 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-nineteen situation with all its implications. With the outbreak of the COVID-nineteen, countries have locked down and put up a lot of travel restriction and impediments for crew changes and 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 IMO report from September, there were 400,000 seafarers overdue under contract and another 400,000 seafarers at home unable to join their ships. 400,000 is 1 third of the 1,200,000 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 60,000 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 ports. And by the way, port workers has also been deemed essential worker. So there is a large discrepancy here and it's tempting to use another D word 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 is 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 and off signing crew in order to safeguard crew, our operations and the society we serve. The standard operating procedure includes controlled quarantine and a PCR testing regime with a minimum of 3 negative tests as tests can sometimes be unreliable in reference 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 tested through third parties involved in our emergency drills. These procedures have been critical in avoiding any outbreak on our ships. As COVID-nineteen have impeded our ability to regularly visit ships, we have carried out regular video conference meeting with senior officers on board to make sure they receive the attention needed to coordinate through changes and ensure morale on board. We have been ultra 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 6 months period during May to October, we carried out 32 successful fuel 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 cruise 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 the contracts. That leaves us with 7% of our crew overdue on the contracts. This is unfortunate and something which could be avoided if rules were different. However, as mentioned, we are very focused on minimizing overdue stage. And I'm pleased to say that 20% of this 7% is overdue by less than 30 days, while the remaining is less than 60 days. So we have no clue staying more than 60 days overdue. With some countries now easing restriction of seafarers, we do hope to bring these numbers down to 0 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 6 months, usually in connection with discharge. With travel limitations, it's been extremely difficult to carry out these inspections. But this has not stopped us from finding new smart ways to walk as society have made more progress on remote walking the last year than the last decade, even in a conservative business like shipping. So far, we have carried out 2 remote sirens in order to keep the certificates up to date. We have also carried out 2 remote change of management of our ships during this period as well as 2 remote annual class service. So it's impressive to see that the technical personnel are able to get work done despite all the obstacles thrown at them. Our newbuilding team have also faced logistical challenges in relation to delivery and manning of our newbuildings. Despite obstacles, our ships have been crewed, mobilized and delivered according to budget and plans. So I would like to also extend my gratitude to our newbuilding team before handing over to Harald for our financial review. Thank you, Aristein. Looking at the income statement on Slide 6, revenues for the quarter came in at $33,100,000 up from $25,800,000 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 3 vessels during the quarter, increasing the number of vessel days. Adjusted EBITDA for the quarter was $21,900,000 up from $17,400,000 in the previous quarter. The result for the quarter includes a gain on derivatives of $2,100,000 relating to our interest rate swaps, which includes an unrealized non cash gain of $3,500,000 This compares to a loss of $6,600,000 in the previous quarter, of which $6,200,000 was unrealized. At quarter end, we had entered into interest rate swaps totaling 710,000,000 dollars 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 twenty twenty due to the COVID-nineteen pandemic. Net income for the quarter was $3,800,000 up from a net loss of $6,700,000 in the previous quarter. Adjusted net income for the quarter was 1,200,000 dollars 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 30 on Slide 7. Following delivery of the 3 newbuildings, our assets at quarter end consisted of 9 vessels on the water with an aggregate book value of 1,700,000,000 dollars In addition, we have booked vessel purchase prepayments of $218,000,000 relating to the 4 new buildings still to be delivered at quarter end. This represents the advanced payment on these, including the $17,800,000 we prepaid on Flex Ambre in July to postpone delivery to October. In connection with the vessel deliveries, the first three tranches totaling SEK 38 $7,000,000 were drawn under the $629,000,000 ECA facility we entered into in February, increasing the total debt by quarter end to 1,100,000,000 dollars of which approximately $54,000,000 is due over the next 12 months and thus classified as current liabilities. Total equity as per quarter end was $816,000,000 giving a strong equity ratio of 41%. Looking at our cash flow on Slide 8. Cash flow from operations was close to $20,000,000 in the 3rd quarter. This includes positive working capital adjustments of $9,600,000 mainly due to an increase in prepaid hire following the stronger market in the 4th quarter compared to the 3rd quarter. Scheduled loan installments were $9,300,000 and in addition, we had financing costs of 6,000,000 mainly relating to upfront and commitment fees on the $629,000,000 ECA facility and also the new $125,000,000 facility for Flex Volunteer. Total newbuilding CapEx for the 3 newbuildings delivered during the quarter was 415,000,000 dollars This was part financed by a drawdown of $397,000,000 under the $6,900,000 ECA facility with the remaining $27,000,000 funded from our liquidity. In addition, as mentioned, we prepaid $17,800,000 under the purchase agreement for Flex Amber in July. This brings total net payments towards new billings and financing fees during the quarter to $51,000,000 which is the main reason for the $40,000,000 decrease in cash to $76,000,000 at quarter end. As mentioned, flax Amber was delivered early October, whereby the $156,400,000 sale and leaseback was executed. $17,800,000 prepared in July was deducted from the final amount payable on delivery, giving a positive net cash effect from the financing of $25,700,000 dollars thus boosting the liquidity to just over $100,000,000 post quarter end. Moving on to Slide 9. We have now secured attractive financing for all our vessels, including the 4 new rebillings still to be delivered at quarter end. Following the delivery of 3 vessels in the 3rd quarter and the prepayment on Pex Amber, the remaining CapEx at quarter end was $512,000,000 compared to secured financing of $533,000,000 giving a positive net cash contribution of approximately $20,000,000 for the remaining 4 newbuildings 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 a 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 capital market. And with that, I hand over back to Oosten, who will give an update on the market. Thank you, Aral. So let's start by a quick recap of the spot market for LNG shipping on Slide 10. So despite COVID-nineteen, 2020 have for the most part follow the usual seasonal pattern, but with much softer rates during the spring summer compared to previous years due to lost demand caused by their lockdowns. Given the scale of cargo cancellation, there have been plenty of ships in the market and this has depressed headlines portrayed as well as ballast bonus conditions. However, as we stated in our Q2 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 an arrow on the graph to the right indicating that we were expecting a rebound in ballast bonus condition and this have come to fruition with spot voyage now being done on full round trip economics or even better. This means that achieved earnings in the spot market are now typically on par or even better than headline rates, while we are during the summer, so a lot of voyages being done with higher only for the laden leg, shaving the achieved TCE rate 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 3 available ships worldwide in the market on Friday. Given the limited vessel availability, spot rates are now in excess of $100,000 per day for modern tonnage and similar through 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 U. S. Caused supply disruption, which delayed the typical seasonal uptick in freight rates. 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 just a positive signal for the start of 2021. However, with about 50 new billings 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 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 winters 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 weather prognosis rule out our 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 product 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 boom. Prior to the COVID-nineteen pandemic, we already experienced very low seasonal gas prices due to the 2 consecutive warm winters impacting storage level as well as generally weaker 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 amplified these pre existing conditions and resulted in a cash in global gas prices. We have seen record low gas prices during the summer with European gas for some time actually trading below $1 per 1,000,000 BTU, which is unprecedented. Dollars 1 per 1,000,000 BTU equates to oil at around $6 per barrel. Asian spot prices have for short periods been trading below $2 and Henry Hub hit a 21 year low in June at $1.40 As we presented in our Q2 presentation in August, gas prices started to recover and this rally have continued with Asian gas prices now well above pre COVID-nineteen levels and at higher levels than during last winter season. JKM and TTF are currently at about $7 $5 respectively. This is still cheap on absolute and seasonal historical level, but the price point which is much more conductive for the freight market than the rock bottom prices during the summer. Following the coronavirus outbreak, we also saw an oil price cash 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 cancellation, these are minuscule compared to the oil industry with the big 9,700,000 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 6 months delay, so LNG spot prices are at similar levels to oil price linked LNG today. As mentioned earlier, the future markets predict that gas price will hold up in 2021 with some spreads between TTF and Henry Hub of about $2 If gas prices stay at this level, there shouldn't really be any economic incentives for a repeat of the massive cargo cancellation in the U. S. Next year. Since the TTS derivative market is highly liquid, players can already hedge their position to avoid having to pay a tolling fee of about $2.5 for cargoes not being lifted next year. That future prices have a mixed record of predicting actual future prices. The key determinant of cargo cancellation are as mentioned winter temperatures 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. Slide 12 is a review of the 2 main import markets for LNG, Asia and Europe, which together makes up about 95% of the market. So, Eurasia 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 glut of available LNG. In this regard, similar to what happened in 2019 after the very warm 2018, 2019 winter caused by the El Nino. As European lockdowns took effect and inventories were piling up, European buyers became exhausted by the summer and this drove gas prices to new lows resulting in a wave of U. S. Cargo 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 national pipeline company. Furthermore, China continues to roll out city gas heating where penetration have yet far to go, notwithstanding another 7,000,000 households being connected to gas heating this than have thus balanced the market and it now looks much sounder than what was the case during the summer, Nadir, 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 twenty twenty, this fell to only 19% in Q3 as Asia increased its shares from about 70 6% in the first half of the year to 74% in Q3. Global exports have thus been trending upwards with September 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 pulls cargoes from the Atlantic basin into Asia, which result in a big increase in sailing distances and thus generating more shipping demand. Slide 13. So let's review the supply model another time. The model we this model we introduced in our July webinar and we have updated it with the recent export numbers. The model illustrates monthly and cumulative export growth with associated cargo cancellation in the U. S. Please note that it's important to differentiate between imports and export numbers. Export numbers is a better proxy for shipping demand. About 3% to 4% of exports are consumed by ships as boil off gas during transit and cargo operations depending on voyage length and whether it involves floating storage, which also drive freight demand. At the beginning of the year, we were expecting about 25,000,000 tons increased exports in 2020 and the trajectory in Q1 was ahead of the curve. During Q2, Asian demand halted and Europe initially soaked up these volumes by injecting cheap gas for storage as mentioned earlier. However, during June, July August, low gas prices incentivized cargo cancellation and export volumes thus declined. July August ended up as the peak cancellation months. As gas prices have recovered, cargo cancellations have tailed off. In total, Platts reckons at 179 U. S. Cargoes were canceled in 2020 and we expect around 280 cargoes to be lost in total compared to the estimates during 2020. Despite the doom and gloom, LNG market will grow this year and we now expect export growth of 5,000,000 tons for 2020. This is only half of the growth we expected back in July when we expected 10,000,000 tons of growth. And the main reason for the 5,000,000 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 Gorgen and Bintulu. The fire and shutdown of Smerwitz in Norway and the fact that the resumption of exports from 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 not which were unforeseen and I will provide some more details on that shortly. However, in sharp contrast to other 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 explain 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 flexible offtake contracts where customers can typically notify a cargo cancellation 60 days prior to loading by paying their fixed tolling fee, which tend to be around $2.5 per 1,000,000 BTU. This flexibility enable offtakers 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 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 are selling cargoes into regulated markets where global gas prices are not the key determinant. So during August, we did, as earlier mentioned, see that global gas prices were bouncing back and this removed 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 18/51. Particularly, 3 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 LoRa, Eta and Delta, which had pretty big impact on feed gas delivered to U. S. Export plants. U. S. Feed gas levels are now at record high of around 10,500,000,000 cubic feet a day. Adjusting for about 15% of feed gas utilized for liquefaction, this equates to annualized U. S. Export volumes of about 70,000,000 tons today, which is about their nameplate capacity. So on Slide 15, we provide an overview of the 10th largest exporters and our expected output in 2020. For those not being too fond of vexillology or the study of 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, Algeria and then Oman. The multicolored flag represents the rest of the world with output of about 42,000,000 tons 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 60,000,000 tons in 2020. Despite flat exports in Australia, Australia continues to punch below its rate as its export capacity is around 86,000,000 tons. The main reason for the shortfall in Australia is due to the operation of Prelude FLNG being suspended since February due to COVID-nineteen concerns. Prelude has an annual export capacity of 3,700,000 tons of LNG. Furthermore, Train 2 at Gorgen has been suspended since May due to issues with our heat exchangers. This train has an export capacity of about 5,200,000 tons and we expect it to commence operation again shortly. But needless to say, significant volumes have been lost compared to what was planned our planned regular maintenance. Other notable disruptions are the recent reported outages of Train 1, 3 and 7 as they've been 2 LNG plant in Malaysia due to disruptions in the feed gas supply. These trains account for 9,600,000 tons or 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, Hungary and Oman, while the rest of the world is fairly flat at 42,000,000 tons, where the main deviation is the shutdown of Melkor in Norway following the fire, which has resulted in about 1,500,000 tons 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 core base as the world's largest gas exporter behind 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 13,000,000 tons have been curtailed through cargo cancellation this year. During 2020, we have seen several trains commencing operation and next year we have Train 3 at Corpus Christi expecting to start up in Q1. With this train, U. S. Nameplate capacity is around 75,000,000 tons of which about 71,000,000 will be available next year. Energy Information Administration in the U. S. Provides monthly update on their oil and gas forecast in a report called short term energy outlook. In the 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 65,000,000 tons of LNG or a growth of about 16 to 17,000,000 tons. While this is a big improvement, it still leaves about 6,000,000 tons to be canceled next year, representing around 85 cargoes, which is about half the level we've seen in 2020. For shipping, less U. S. Cargo cancellation is crucial, particularly if they are pulled away from the Atlantic basin and into Asia as these voyages are shipping intensive. So we would expect these U. S. Volumes to add about 2 ships for each tonne or about 32 ships, which is about 2 thirds of the order book for next year. Hence, 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 contingent go curve, which could provide more incentives for floating storage next autumn than what has been the case this year following the gas price rally. By 2022, we do expect U. S. To take over the throne as the country with the highest nameplate capacity, pacing ahead of both Australia and Qatar. That is at least until Qatar expand the capacity to 110,000,000 tons by 2025,000,000 and 126,000,000 tons by 2027. However, at that time, U. S. Will also have the 15,000,000 ton Golden Pass project up and running and are thus able to also produce more than 100,000,000 tons each year. So then we are on Slide 17, which is a summary of the 2021 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 pretty big potential for LNG exports if we avoid too many cargo cancellation. If we use the IEA numbers, U. S. Will add 16,000,000 tons next year. It's fair to assume that Prelude will resume operations 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. The assumption of Prelude production will add about 3,500,000 tons next year. Then we have Egypt. Egypt exported close to 3,500,000 tons in 2019, which is about half of the nameplate capacity of Itco. Given the low gas prices in 2020, the exports have been curtailed, but they have now started up again. 50% production at Itco will add about 3,000,000 tons. Gorgon in Australia, I've also mentioned. A function of normal Gorgon operation would at least add 2,000,000 tons. Bear in mind that these volumes are sold on long term offtake agreements. Then we also have Bintoulou in Malaysia as mentioned where we would expect the feed gas issues to be corrected and production to increase by about 2,000,000 tons next year. Yamal Train 4 is also scheduled to start operation and is expected to add close to 1,000,000 tonne. Russia also have the Portovie project, which will add another 1,500,000 tons. Then we have Melkoye, Norway, which we assume will be closed down until October and thus dragging down volumes by about 3,000,000 tons. Adding these together bottom up leaves us at around 26,000,000 tons growth in 2021. This compares to Energy Aspects' estimate of around 24,000,000 tons 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 6,000,000 tons. We could also add 3,500,000 more tons if it grew in Egypt produced at full capacity. In Egypt, there is also another terminal called Damietta, which have a capacity of 5,000,000 tons of export, which has been suspended for a long period due to disagreement in the consortium. Earlier this year, it seems that the parties, Unangaz Fenussa, a JV between ENI and Naturgy and the Egyptian National Energy Company, Airgas and Airgas PSC, had a recent agreement and this was repeated in October. So far our solution has not materialized and the outcome remains uncertain, but our solution seems to be in the horizon. That said, Egyptian cargoes are closer to 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-nineteen 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 percent uptime and taken delivery for new buildings. The gas price rally we started to see in August have continued and increased prices and increased demand coupled with pull from Asia have fired up the freight market with spot rates for modern tonnage in excess of $100,000 per day, resulting in our booking Q4 at expected TC 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 in dividend for Q3. With 3 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 breakeven 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. There are no question at this time. Please continue. Yes. I think I got some chat questions there. So I can maybe take those. I've been talking for such a long time now. So I'm going to try to keep it a bit short. So the questions we received there is as follows. Should we consider the dividend of 10% as fixed? So that's certainly not the case. Our income is variable. It goes up and down. If you look at it yesterday, so adjusted income adjusted earnings per share is $0.18 We started paying dividend last year Q3, so we paid $0.10 In Q4, we delivered fantastic results last year, dollars 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 a 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 the uncertain nature of the market developments. 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 the $0.10 again for this quarter. When we are delivering numbers in Q4 next year February, of course, we will most likely have our earnings report 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 find appropriate level of the dividend. But in general, we are positive to dividends. And like the other companies in the Greater John Frederiksen 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 2 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 RTC guidance. But in general, when you have booked 2 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 joined for the day. There are no questions that came through. Please continue. Okay. Thank you everybody for joining the webcast today. The dividends, maybe provide some data on that. I think it's payable 17th 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 Flex stocks or something nice for your loved ones. So thanks a lot again for joining and we'll be back in February.