Flex LNG Ltd. Q3 FY2021 Earnings Call

Good day and thank you for standing by. Welcome to the Flex LNG Q3 2021 Earnings Presentation. Please be advised today's conference is being recorded at Tuesday, 16th of November 2021. I'd now like to hand the conference over to CEO, Mr. Oystein Kalleklev. Mr. Oystein Kalleklev, please go ahead, sir.

Hi, thanks, thank you. And hi, everyone and welcome to the Flex LNG's third quarter 2021 webcast, I am Oystein Kalleklev, the CEO of Flex LNG management. I'll be joined today by our CFO, Knut Traaholt who will walk into our Q3 numbers a bit later in the presentation before we conclude with our Q&A session. If you would like to ask a question in the Q&A session you can either ask a question through your teleconference or you can use the chat function in this webcast. It is getting cold here in Norway, so I have a bit of a sore throat today. However, it is not COVID but please bear with me. Before we start the presentation, I will remind you of the disclaimer regarding forward-looking statements, non-GAAP measures and completeness of details. We also recommend that the presentation is held together with the earnings report which we are also releasing today. Okay, so let's begin with the summary of the recent highlights. As we noted in our second quarter presentation in August, the LNG market was very tight with elevated prices, and we therefore highlighted the possibility of a blow-out in the market. Even though we are just at the start of the winter season, the market has nevertheless already blown out with both LNG prices and freight rates booming. We hear that tight LNG public markets with very high cargo economics should create ample room for charters to pay premium rates. At the same time, we have argued that there has been a disconnect between spot rates and term rates, and that the buoyant share market should create spillover effects for the spot market sentiment. This has certainly played out as we expected, with spot rates now hovering around all-time high levels since the end of September. We have maintained 30% exposure to the spot market, and thus we are rewarded handsomely for it in the fourth quarter. We have also continued to build a premium backlog with the recent announcement of two new time charters, starting early next year, which I will cover shortly. All together, we have fixed eight ships on term charters since April, most likely the tally will increase to nine ships as we expect Cheniere to also declare its fifth optional ship. This means that we are today very well positioned with 13 state-of-the-art LNG carriers on the water after taking delivery of the last three ships during the first half of the year. The third quarter is thus the first quarter with the entire fleet in operation. All LNG carrier fleet are fitted with the latest fuel-efficient engines, MEGI/XDF and the average age of the fleet is only two years. COVID-19 issues are getting less attention in the news media these days but continue to be a challenge in shipping. Approximately three out of four LNG cargoes are ending up in Asia, where restrictions are more prevalent, particularly regarding fuel changes. Notwithstanding these challenges, we have continued to operate our ships with excellent performance. So once again, thanks to our crew and technical team for their great work. In terms of financials, we are once again delivering according to our guidance; revenues for the quarter were $82 million, in line with guidance of approximately $80 million. Our quarterly earnings were $33 million or $32 million if you adjust for approximately $1 million derivative gain which we booked in the quarter. This translates to earnings per share of $0.62 or adjusted earnings of $0.60 per share. We are today also announcing a very attractive sale and leaseback for Flex Volunteer, the vessel was originally financed in the midst of the COVID-19 crisis last year, and we are now taking advantage of better credit markets and the improved credit profile of Flex LNG in order to optimize our financing. Knut will cover the details of this financing in the finance section, but the long and short is that we raised $160 million of long-term financing for the ship at an all-in cost of about 4%. This will add more than $38 million to our cash pile, which already stood at $138 million. This will not be our last refinancing as we aim to continue to optimize our balance sheet by opportunistically refinancing some of our existing loans at even better terms than we have today with the aim of allocating $100 million which Knut will also explain in more details. With a very comfortable liquidity situation, healthy earnings, strong outlook and improved earnings visibility, the board has decided to lift our dividend level from $0.40 per share to $0.75 per share. This gives all investors a yield of about 14%, which we think should be compelling in this low interest rate environment. Talking about the strong outlook, with 30% spot exposure, we all benefit from improved earnings in the spot market, and are therefore revising our revenue guidance for the fourth quarter from $85 million to approximately $100 million to $110 million. This means we are estimating about $30 million higher revenue in the fourth quarter. Given our fixed costs, based on a dollar increase in revenues, we therefore expect a similar increase in earnings. Hence, we think it makes sense to significantly lift our dividend level given our charter coverage and the positive outlook I mentioned. Lastly, we see that the new decarbonization rules for shipping are creating business opportunities for us. In 2023, the energy efficiency existing ship index or EEXI and the carbon intensity indicator will come into force. We do see that more charters are focused on chartering in new ships when it comes to fleet renewal or growth projects. Our thesis that new ships will replace old ships is therefore coming to fruition. This we think will create additional opportunity for us to lock in further attractive contracts for ships. Yes, so let's touch upon our recent Charter announcement. On November 1, we announced two new time charter contracts for Flex Courageous and Flex Resolute for a minimum period of three years, with the option for two additional two-year periods bringing the total to seven years. If both options are declared, the end user is an energy major, and the ships will be delivered to the charterer in direct continuation of the existing time charters, which are expected to end in February and March next year. Having worldwide delivery and direct continuation is a valuable benefit, particularly at this time of the year, as the spot market tends to soften around this time. Week 11, i.e., the middle of March, has historically been the low point of the spot market. This might result in idle time if you have ships redelivered in this period, as there are usually a lot of ships coming out of the yard at the start of the year. However, we avoid this risk altogether. With these two new charters we just have three ships going from shorter term time charters to longer term charters at the end of Q1 next year, with Flex fleet being the third ship, which will commence a minimum five-year charter around the same time. The rates for the two new time charters reflect that the term market has continued to be strong, and we are therefore adding additional high-margin backlog to our fleet. So with these recent fixtures, we have to bring back the flexecute slide. Since the middle of April, we have announced new term contracts for ships. As mentioned, we expect Cheniere to declare the fifth ship increasing this number to a total of nine ships. In April, we announced the significant deal with Cheniere where they have already taken Flex Vigilant, Flex Endeavor, and Flex Ranger on time charter with duration of 3 to 3.8 years. Flex Endeavor was originally 3.5 years but will later enjoy early delivery of the ship, which allows us to move into a longer-term period. In the third quarter of next year, we will take one ship with the option for our fifth ship as mentioned. We are now planning for the fourth and fifth ship to be Flex Aurora and Flex Volunteer, as we have the option of nominating them before firming contracts for this contract, which has provided us some flexibility in pursuing our charter. In May, we booked two ships, Flex Constellation for pump delivery to a big trading house for a period of three years with an option for another three years, and Flex Freedom as I mentioned going to our portfolio player for a minimum five-year period during the first quarter next year. Lastly, Flex Courageous and Flex Resolute were recently announced as being fixed with an energy major for a minimum period of three years. Another slide that we had to bring back was the sold-out slide. This we previously used three years ago when we booked our fourth quarter at TCE of about $95,000. This is on the level where we also expect the TCE number to be for the fourth quarter this year. But we now managed to do so with 30% spot exposure versus 50% in Q4, 2018. As you can see, the backlog is solid; when we started the year, we only had one ship on time charter with a longer duration than one year. However, we have utilized a strong market to add significant backlog during the year. The contracts for the first eight ship sales from Flex Freedom to Flex Resolute already covered in the previous slide. What I would highlight is that several of the ships are coming off shorter time charters and are commencing longer-term charters with higher earnings. Thus, we are revising our portfolio to attract better levels for longer periods, i.e., stronger for longer. Flex Rainbow is currently nearing the end of its 12-month time charter, and the charter has the option to extend for another 12 months at a rate substantially higher than the initial 12-month term period. As highlighted already, we have kept 30% exposure to the spot market with four of our ships. This is Flex Volunteer, which is trading in the spot market and which is now booked to end of December or early January. We are now planning for Flex Volunteer to be the fifth ship under the Cheniere contract. Therefore, we will either trade during the spot or potentially lay on a multi-mode compact during the interim period. Additionally, we have three ships on variable hire contracts. This means the earnings are linked to the general spot market earnings. We have Flex Artemis, which is on a long-term variable hire contract until the third quarter of 2025 with options for another five years. Flex Artemis was the only ship that we fixed on longer-term charter prior to the contracts presented on the previous slide, and she was fixed on a variable hire contract, while all long-term contracts so far this year have been on fixed hire contracts. Finally, we have Flex Enterprise and Flex Amber which are also on variable hire contracts. In the past, we have received many questions about how all variable hire contracts have been structured. However, we hope that the fourth quarter guidance demonstrates that we are getting substantial upside on earnings under these contracts when the freight market is as hot as it is today. Now moving on to slide 6; I have already covered our backlog extensively. The slide illustrates how this looks for the next couple of years, with 75% coverage for next year and not far off that level in 2023. Most of the backlog is not fixed hire but we also have some variable hire backlog despite their earnings. There are residual areas, options or vessels which we can trade in the spot market. In all, a balanced and comfortable mix. We think our backlog stretches well beyond this three-year period. So we might have to override this slide next time with a longer period. Regarding dividends, we covered our dividend philosophy in great detail during our second-quarter presentation, so I will not repeat all the factors and considerations. However, what I would like to point out is that we use a balanced and measured approach to conclude on the appropriate sustainability of this level, aiming to distribute free cash flow over the cycle to owners. Such distribution will primarily be through dividends, but we have also utilized share buybacks with about 1 million shares bought back during the last year at very attractive levels. As we mentioned in our second-quarter presentation, we are chasing green lights and expect more traffic lights to turn dark green by the third quarter, given the improved guidance. The only parameter not being dark green is order considerations. Despite recent progress on vaccine rollout in rich economies and successful trials of COVID-19 antiviral pills by Merck and Pfizer, the lockdown which has proven 89% success in preventing serious illnesses, leaves us with some uncertainty, which will keep us with a light green color for this factor for the time being. With that upbeat message, I think it's a convenient time for Knut to provide you with some upbeat financial numbers before I will return with the market update afterwards.

Thank you, Oystein. And let's turn to slide 9 for the financial highlights. As already mentioned, our TCE earnings for the quarter were $68,300 per day. The $10,500 per day increase is mainly driven by seasonal improvement in market rates and the effect of placing some of the long-term contracts announced in the first half of the year. Regarding operating expenses, we were less impacted by COVID costs this quarter, and OpEx per day came in at $13,000 for the quarter and $13,400 per day for the nine months. That means year-to-date, it's about $500 per day directly related to COVID costs, and we expect to maintain OpEx per day around the year-to-date level. We have been pleased to see that the underlying operating expenses, excluding COVID costs, remain below the guided level of $13,000 per day. Gross revenues for the quarter came in at $82 million, slightly above our guided level of $80 million, and revenue increase year-on-year demonstrates the earnings potential of the 13 vessels fleet now fully operational. Adjusted EBITDA was $65 million and adjusted net income was $32 million, with adjusted earnings per share coming in at $0.60 per share. The numbers are adjusted for about $1 million gain on interest rate derivatives which includes unrealized gains of $2.7 million. On the financing side, interest expenses are slightly up reflecting the third quarter on interest on the debt drawn for Flex Vigilant earlier in Q2. Now moving to the balance sheet which is now plain and straightforward. On the asset side, we have cash of $138 million and vessels booked just shy of $2.4 billion. The quarter-on-quarter cash development will be explained on the next slide. The only material change since last quarter is the normal depreciation of the vessels. The increase in current assets is related to a charter payment of $2.5 million received on the 30th of September; however, recorded on our account on the first of October, consequently was not qualified as cash on account but was considered working capital. On the liability side, we have $1.6 billion of long-term debt from international banks and financial institutions. As a reminder, in times of increasing interest rates, we have an interest rate portfolio of $720 million, with an average interest rate of 1.13%, including the existing fixed-rate leases. The hedge ratio is 67%. Adding the announced fixed-rate refinancing for Volunteer, the hedge ratio will during Q4 increase to 69%, net of termination of interest rate swaps related to the existing Volunteer financing. We are therefore well-hedged against potentially higher long-term interest rates. Book equity stands at $861 million, which gives a solid book equity ratio of 34%. Let's turn to slide 10 and cash flow for the quarter. During the quarter, we generated about $50 million of free cash flow from operations. Working capital tends to fluctuate up and down depending on the timing of charter hires. All in all, however, we have a negative working capital, although $5.4 million less negative this quarter. During the quarter, we had $27 million in scheduled amortizations. Please note that amortizations are higher in Q1 and Q3 due to our Korean export loan that has semi-annual installments. We also distributed $23.4 million to shareholders where $2.2 million was for share buybacks and $21 million in cash dividend payments, leaving us with a comfortable cash position of $138 million at the end of the quarter. With the closing of the refinancing of the Volunteer, expected mid-December, we will further boost our cash balance by approximately $38 million. So let's have a look at the Volunteer refinancing. We announced today that we have signed the agreement for a $160 million silent charter back transaction with an Asian-based lease provider. The lease has a duration of 10 years, further adding length to our debt maturity profile. The transaction is based on the market value from brokers of $215 million for Volunteer, and the net amount of $160 million will be booked as long-term debt. The repayment of the existing financing frees up $38 million in cash, as mentioned. At maturity and year term, the balloon is $80 million and reflects a 20-year repayment profile. The all-in fixed interest rate for the 10-year transaction is attractive at 4%. We have signed the MOA and the Bareboat charter agreement, and the remaining is subject to customer clauses and conditions. As mentioned, we expect to conclude this by mid-December. This takes us to the next slide and our $100 million balance sheet optimization program. The Flex Volunteer is the first transaction under this program. This is based on our solid backlog of attractive long-term contracts secured during the last nine months which has increased earnings visibility and derisks the company. We aim to optimize the debt funding with a series of refinancing to reflect the improved credit profile. The original debt funding of the company was done to maintain flexibility to trade vessels in the spot market until long-term contracts were secured. As now eight vessels, possibly nine have been fixed on long-term contracts and three on variable hire contracts, there is room to further optimize the debt both in terms of size and cost. The target is to free up $100 million, reduce the cost of debt, and maintain our industry-leading breakeven level. We have a number of debt facilities that will be considered under this program, and looking at the debt profile on the rise, it is likely that the debt maturities for 2024 will be addressed and therefore pushed even further out. The 2025 maturity is related to the commercial tranche under the $629 million ECA facility with KEXIM, where the ECA tranches mature later. Hence, we envision that this facility will remain and the commercial file to be refinanced due to the attractive long-term ECA commitment. All in all, we have a solid funding platform with a supportive lending group and no immediate maturities, providing us with the flexibility to optimize the debt funding which we aim to utilize under this program. So with that, back to you Oystein.

Thank you, Knut. Slide 13 marks the start of our market section. In our last presentation, the headline was Chimerica dominance in the first half and goals set to accelerate in the second half. Chimerica will set lessons for the two superpowers, China and America. This is very much still the case, particularly on the export side, with more than 60% growth in US exports in 2021 compared to last year. We don't expect the US to export close to full nameplate capacity this year without around 70 million tons of exports. This is 5 million tons higher than the EIA estimate a year ago, which estimated about 6 million tons lost due to cancellations while the actual number is about 0.5 million tons. This means the US is now on a solid baseline with Australia and Qatar. The reasons for such staggering growth in US exports are twofold. First, the most obvious reason due to the outbreak of the COVID-19 pandemic last year, global gas prices plummeted, making it uneconomical to export US flexible volumes, resulting in a wave of commercial cancellations outside of the winter season, with approximately 180 cargos canceled. This year there have been no commercial cancellations, with a total of seven cargos canceled. The cancellation this year comprises five due to the Big Freeze in Texas and two cargos in January due to a lack of available ships given the tight market at the time. Avoidance of cancellations adds about 13 million tons to US exports. The second reason is the ramp-up of new export capacity which was commissioned last year or during 2021, contributing about 9 million tons. In our Q2 presentation in August, we noted that export growth in the first half of the year was 4%. However, we estimated that export growth in the second half would accelerate to about 10%, hence reaching our overall goal of about 7%. We have already achieved the 7% estimate with two months to go. Although growth for the remaining two months will normalize at a slower pace, as there were very few cargo cancellations in these two months last year. Australia is on track to surpass Qatar this year as the biggest exporter for the first time. Australia has a higher nameplate capacity than Qatar, with about 86 million tons capacity versus 77 million tons in Qatar. Supply outages at facilities like Gorgon and Toulouse have resulted in Australia trending below its rate. Eventually, however, Qatar will return to the top again with a huge 49 million-ton expansion project. In our Q3 2020 presentation a year ago, we presented what was then an extremely bullish forecast for the 2021 export goals with estimates of a 24 million-ton goal. I say extremely bullish as estimates at the time were 8 million tons in 2021, while base case forecasts were about 15 million tons; we all know we ended up at about 20 million tons in 2021. The main reason for the shortfall versus our estimate is feed gas issues in Trinidad and Tobago and Nigeria, which has cut off about 3 million tons of exports from both countries. Extended outages for the Melkoya LNG plant in Norway have also contributed negatively. Egypt, however, has bounced back strongly as we forecasted a year ago, with a 5 million-ton goal so far this year. Let's then take a look at the other side of the export equation, which is imports. As I alluded to in the previous slide, China is the biggest growth market; by the end of October, China has grown its imports by 10 million tons compared to October last year. This is a growth factor of 18% in a country which still faces quite a number of COVID-19 restrictions given their zero-tolerance policy. This means that China has now surpassed Japan as the world's largest LNG importer. LNG demand in South Korea has also been strong with an impressive 19% goal, adding 6 million tons compared to October 2020. There are two other outliers, the first being Brazil, which has grown its imports by a staggering 350%, increasing from just 1.4 million tonnes to 6.2 million tonnes. The high import growth in Brazil is caused by drought affecting hydro balances adversely. The other outlier is Europe, where imports have declined by 12%. This is not due to energy demand being soft in Europe, as evidenced by the energy crisis and core for Putin to encase Russian pipeline exports. The reason is, firstly, that European imports were very high in 2020 as European buyers were able to take advantage of low gas prices and buy gas at rock-bottom prices for storage. The second reason is that there has been fierce global competition for scarce LNG and companies have been willing to pay a higher price and thus value LNG from Europe. An example of this is China, which on September 30 ordered state-owned energy companies to do whatever it takes to secure fuel. This brought back memories to the euro crisis in 2012 when Mario Draghi coned the European bond markets with the three famous words: whatever it takes. The result of Europe being unable to source enough LNG cargos is that inventories in Europe are now well below normal levels, with inventory levels around 75% versus 94% last year. Another cold winter in Europe could thus result in rapid depletion of gas inventories, high volatility in gas prices, and very low gas inventories at the end of the heating season, which will create significant demand for restocking over the summer of 2022. We are witnessing this today, as European gas prices surge due to delays in the approval process of new projects. Consequently, the gas markets will remain tight, reflected in high gas prices both in spot and future markets, as I will cover on the next few slides. Before diving into gas prices, let's step back and digest how elevated prices have become. Spot LNG prices in Asia have come down from the peaks in October but remained at high levels, with the current price per million Btu around $30, as there are 5.8 million Btu in a barrel of oil. This means that spot LNG is at approximately $180 per barrel, more than twice the price of oil, despite oil prices also being at such elevated levels that President Biden is urging OPEC, particularly the Saudis, to increase exports to get petrol prices down in the US. However, it's fair to say that the price of natural gas varies greatly depending on location, as I will show on the next slide. The price of natural gas in the US, measured by Henry Hub, is about $5. A large LNG cargo has a value of about $20 million in the US or $23 million if we add 15% on top of Henry Hub for liquefaction. In addition, there are also tolling costs of $2 to $3 per MMBtu. These are, however, the same costs for buyers in the short term. In Europe, which imports about 20% of all cargoes, natural gas prices are about $25, giving a value of a large cargo of about $100 million. In Asia, which is the main import region covering about 75% market share, the LNG price is as mentioned about $30, giving a cargo value of $120 million. The average cost spent is thus very attractive, and traders prefer shipping the cargoes to Asia, where the cargo values and arbitrage profits are the highest. As you can see, the farther you need to ship the cargo from the US, the higher the LNG price. Shipping distances are longer and shipping is today highly costly, particularly with the Panama congestion. Please note that these prices are from Friday, November 12. Given the uproar in the gas market this week with regards to North American prices, they are even higher now. Slide 15 illustrates inter-basin trade: our exports from the Atlantic basin to the Pacific basin are up significantly this year. By the end of October, it's up by a whopping 48% as cargoes have to be shipped longer. This has resulted in ton mileage also increasing by an impressive 18%. The ton mile goal has been very supportive of freight demand, so it’s no surprise that the shipping market is tight. This happened despite most industry experts this year predicting a big surplus of ships, given approximately 55 new building deliveries this year, which is a significant number compared to recent years, and also when we look into 2022 and 2023, where we have an average of about 30 ships set for delivery. Now, moving on to gas prices, this graph displays the gas prices measured by the local US gas price, Henry Hub, the Northwest European gas price TTF, and the Asian spot price JKM, with the dotted line representing LNG prices linked to oil with about 25% discount, typical for contract prices for LNG under long-term oil-linked contracts. Since our second-quarter presentation in August, gas prices have been on the rise, with the Asian spot price JKM hitting an all-time high of $56 on October 6, before falling back to $36 the next day after President Putin of Russia spoke on the European gas prices with promises of increased flows from Russian pipelines. However, the supply response from Russia has been muted, meaning gas prices continue to stay at elevated levels, reflecting the fact that a cold winter can result in a quick rundown of inventories. Thus, the market is definitely balancing on a tightrope. Looking forward, we see that the futures markets continue to offer gas at very high levels throughout 2022, which makes sense given the restocking likely needed next year. Nonetheless, we observe a slow and gradual normalization of prices by the middle of 2023 when they are expected to converge towards the typical oil-linked LNG price, so although gas prices are currently a bit too hot for comfort, which could cause some demand destruction, we are converging towards more normalized levels. Turning to slide 19, we can now discuss the spot market for freight. As you can observe from the slide, the spot market is booming. Vessel availability remains very tight, with Clarksons quoting just one ship available for charter in the next 14 days; they have no ships coming open currently and only have one steam turbine ship available in the window 15 to 28 days. Additionally, they have stocks of MEGI/XDF ships opening after 29 days. Given the current cargo economics we are seeing and the arbitrage spread, we are observing favorable conditions in the varied term spot market. The rate presented here is the freight assessment for alternative routes by the Baltic Exchange and Spark as of November 12. Both Baltic and Spark have released fresh numbers today, which are even higher. Spark is reporting an average of $19,000 while the Baltic LNG rates are up by an average of about $15,000. Please note that these rates are time charter equivalent earnings (TCE) numbers, which include positioning and ballasting bonuses. As I've explained in the past, ballasting bonuses can vary greatly depending on the market. Today, ballasting bonuses are considerably more favorable than just the basis. This results in earnings typically being higher than the headline rates. As LNG is more expensive than fuel oil, the Baltic LNG rates are around $280,000 to $340,000 depending on the route for high fuel mode. In LNG mode, Baltic LNG rates are assessed to be $235,000 to $290,000 per day. The Spark rates align with this but be aware that Spark adds an approximately $60,000 premium for MEGI/XDF ships, as these are more fuel-efficient and can transport a larger cargo than a standard 160,000 cubic high fuel ships. Okay, slide 20. Let's look at the forward spot earnings expectations. The forward-facing agreement market (FFA) is a forward market for freight, which has become more liquid and mature in LNG shipping. The benchmark ship for this contract is also the 160,000 cubic hydrogen ship. As we see from this graph, we expect the freight markets to continue to exhibit seasonal behavior as in the past. Right now, the freight market is hot, but we anticipate it to calm down during the first quarter of next year. All in all, it's fair to say that the Q1 FFA at $125,000 per day is a solid level. The second quarter, which is typically the softest quarter, is projected at $70,000, while the third quarter is slightly higher at $75,000. The fourth quarter, as we know from the past, is unpredictable; however, the market is currently pricing this at $110,000 today. Altogether, this averages out at $95,000, keeping in mind that these rates are for high fuel ships which are typically about 10 years old. Thus, if there were an FFA market for new MEGI/XDF ships, these rates would certainly be at a substantial premium to this level, which is also evident from the term market, which I will cover on the next slide. The last slide before we conclude: the long-term market one year time charter rate is the best proxy for future earnings in the spot market. This has also been not needed for the last 4-5 months. For most of the transit period, the one-year time charter rate was hovering around $60,000 per day. This was the case at the start of 2021, until the market sentiment abruptly turned more positive in April. This is also why we did not lock in any ships on term contracts prior to the market shifting, except for Flex Artemis, which was, as mentioned, a ship I fixed on a variable contract linked to the spot market. Since April, the one-year time charter rate has doubled, currently at $125,000 per day for more than tonnage. The firm one-year time charter rate is also pushing up longer-term charter rates, with Affinity quoting three-year time charter rates at close to $100,000 per day, which is not surprising given the decreasing availability of slots for 2025 deliveries. At the same time, new building prices have been moving steadily upwards, approaching $210 million, meaning new builds also require higher rates than before. We have a minimum of two ships for redelivery by the end of 2024, with two ships potentially coming open depending on options. Thus, we expect to be well positioned to fix those ships on attractive employment given the lack of available modern ships in this window. To summarize today's presentation: revenues for the third quarter came in at $82 million, in line with guidance. We have raised our Q4 revenue guidance from $85 million to about $100 million to $110 million, reflecting super strong spot earnings on all four ships exposed to the spot market. We have successfully continued to build a high-quality effective backlog by maintaining spot exposure to enhance our earnings. This enables us to almost double our dividends from $0.40 to $0.75, providing investors with an appealing 14% annualized yield, and we are comfortable with this dividend level. As you might have already noticed, the outlook remains positive both in the short and long term, and finally, our balance sheet continues to improve with an attractive new sale and leaseback which will grow our already sizable cash pile to new heights. That's it from us. I'm happy to take questions. So let's open the floor for questions from the operator.

I'm happy to take questions now, so let's open the floor for questions. No questions came in over the phone, sir. Please continue.

Okay, thank you. I guess you are all just kind to me since I have this sore throat and not dragging me into a long Q&A session. So I appreciate that. Thank you for listening in, and we will be back with our Q4 numbers in the middle of February, I expect. So thank you, everybody, and have a good day.

Thank you. This concludes our conference today. Thank you all for participating. You may all disconnect. Have a good day everyone and stay safe.