Earnings Call Transcript - FLNG Q1 2021

Operator, Operator

Good Day and thank you for standing by. Welcome to Flex LNG First Quarter 2021 Earnings Presentation Conference Call. At this time all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, Øystein Kalleklev. Please go ahead.

Øystein Kalleklev, CEO

Thank you and welcome to today's Flex LNG’s webcast. I am glad you could make it. I am Øystein Kalleklev, the CEO of Flex LNG Management. I will be joined today by our new CFO, Knut Traaholt, who will walk you through the numbers and provide our financial updates later on. We will be presenting the first quarter of the Sales for 2021. This is a presentation we have been looking forward to sharing with you. Please also note that the replay of this webcast will be available at flexlng.com and on the Flex LNG YouTube channel. Slide #2 is a Disclaimer. Before we start the presentation, I will remind you of the disclaimer regarding forward-looking statements, non-GAAP measures, and completeness of details. 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 #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 rate high levels reflect a market that is more or less sold out for both cargoes and ships. 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, particularly when in high demand with limited price elasticity and substitution. The market cooled off by mid-February, driven by a warmer winter in Asia, a flurry of new building deliveries at the start of the year, as well as disruptions in the U.S. due to the big freeze in February. However, the market quickly rebounded by the end of March, with 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 next season. We have utilized a strong market to execute our strategy of securing a higher degree of employment visibility and thus reducing the Company's freight exposure with about 22 years of minimum fixed hire employment secured since our last reporting at attractive levels, which I will cover in more detail shortly. In 2019 and 2020, we faced several factors against this strategy, such as the trade war between the U.S. and Cheniere, two record warm winters in a row, adversely impacting gas demand, and finally, the COVID-19 pandemic devastating the world economy and energy demand. This included LNG demand, which, in contrast to nearly all other energy sources, saw a small increase in demand of about 1% in 2020, but this fell well below our expectations of about 7%. However, this year we expect to catch up significantly with about 7% to 8% growth since we do not foresee cargo cancellations this summer given the strong demand growth. With the world economy recovering and cold winters impacting gas inventories, the LNG market has rebalanced and freight rates have thus strongly bounced back. During the quarter, we took delivery of two more ships, Flex Freedom and Flex Volunteer, and we will have completed our $2.5 billion investment program with Flex Vigilant set for delivery by the end of May. By the end of May, we will have 13 state-of-the-art LNG carriers on the water. Despite the challenges posed by COVID-19, when it comes to crew changes, inspections, and services, we have continued to operate our ships with excellent safety and operational performance, achieving a lost time injury frequency rate of 0.09, which is significantly below the industry standard. Only 2% of our crew is currently overdue on contracts, which compares very favorably to the rest of the industry. Our technical team has more than 200 years of experience, so we are not new to shipping. Our top management, consisting of Fergus, Ben, Marius, and myself, have also worked in shipping and LNG for most of our careers. In terms of financials, I am pleased to report that we delivered revenues of $81.3 million in-line with guidance of $80 million to $90 million when we reported on February 17. At the time of posting, we had 13% of remaining days to be booked, as well as three ships on valuable hire contracts linked to spot market rates. The markets can all start from mid-February until the end of March, which is why we ended up in the lower end of the guidance range. Nevertheless, we delivered a time charter equivalent of 75,400 in the first quarter, slightly ahead of 73,700 in the fourth quarter. This resulted in an adjusted net income for the first quarter of $34.2 million or $0.64 per share. As long-term interest rates rebounded in 2021 driven by an improved economic outlook, we booked a $13 million gain on our interest rate swaps utilized for hedging, and our operational net income was therefore $47.2 million for the quarter, translating into $0.88 per share. It's worth reminding you that our official numbers last year were dragged down by unrealized losses on such derivatives due to its limiting long-term interest rate. However, we see a reversal of those losses now as the world gradually recovers from the pandemic. It's also worth noting that we have secured long-term effective financing for all our ships, including Flex Vigilant, which is set for delivery by the end of the month. Additionally, we have a super strong liquidity position with $139 million in cash at hand at the end of the first quarter. This healthy financial situation coupled with strong contract coverage gives us ample room to pay out an attractive dividend and potentially buy back more of our stock. Consequently, we are pleased to announce an increase in the dividend from $0.30 for our fourth quarter to $0.40 per share for the first quarter. With the current stock price of around $13, which I believe is undervalued today, this translates into an annualized yield of about 12%, which should be attractive in the current low interest rate environment. Our stock is still trading below the estimated value of about $16 per share. Our balance sheet consists of brand new ships on the water, acquired at competitive prices compared to today's new building prices, which are increasing. Additionally, all our ships are effectively financed, and today's ships come with enticing catalog offerings as well. Thus, we still find it attractive to buy back our stock. During the first quarter, we 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 capital under the buyback program from $12 to $14 per share, which still reflects an approximately 12% discount to book value. Slide #4 illustrates that, in Flex LNG, 'We Don't Execute, We Flexecute.' As highlighted, the LNG market has recovered and rebalanced. The Asian and European spot LNG or gas prices JKM and TTF, which fell below $2 and $1 at the nadir of the COVID-19 pandemic, are now around $10 and $9, which is 5 to 9 times higher than last year at this time, as evidenced in historical perspectives for this time of year. With a better market, there have 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 6 to 30 ships, we also decided to recruit and build up our proficient in-house technical management. Flex LNG fleet management received its private 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 have more control over how we operate those ships, and this should, in our view, position us better to establish long-term contracts as a major LNG trader and preferred owners with in-house organizations, given the mission-critical nature of LNG ships in the LNG value chain. However, long-term contracts don't just arrive at the doorstep. Charters want to see organizations delivering great performance, which we have certainly evidenced through the stress test imposed by COVID-19. 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 pay those ships spot and to seize the right moment to execute our strategy when the time was right. 2020 was certainly not the right year to fix ships on long-term contracts due to market upheaval. During the last month or so, we have fixed 6, possibly 7 of our ships on effective term employment. On April 14, we announced an agreement with Cheniere to fix three ships in 2021 with them and one or possibly two ships in 2022. Flex Vigilant will be delivered to Cheniere on a charter contract by the end of the month. Flex Endeavor has already commenced the charter with Cheniere, as we agreed early delivery of this vessel with the charter duration expanded to about 3.7 to 5 years. We also plan to deliver Flex Ranger on a three and a half year contract to Cheniere in the third quarter. Next year, Cheniere will take one or two of our ships, also on a 3.5 years time charter, with these vessels to be nominated ahead of delivery. Thus, it's still not clear which vessel will be delivered to Cheniere, and our agreement allows the charterer the option to extend all vessels by up to additional years. Then on May 17, we agreed on a three-year time charter for Flex Constellation with our major trading house. The time charter was set for delivery, and Flex Constellation has already commenced this charter. Under this agreement, the charterer also has the option to extend the contract by up to three additional years. Lastly, on May 20, we fixed Flex Freedom on a three to five-year time charter with a portfolio player, with the commencement of this contract in direct continuation of the existing time charter ending in the first or early part of the second quarter of 2022. We will be notified in advance whether it will be for three or five years, with such notification due in the third quarter this year. This time charter remains subject to final documentation and customary closing conditions. So slide #5 discusses Fleet Composition. Let's look at the fleet composition after the recent flurry of flexecution. Since reporting in February, we have added 22 years of firm backlog to our fleet, along with an additional 20.5 years of optional backlog. Hence, our earning visibility has drastically transformed as a consequence of these fixtures. Today, we have three ships linked to the spot market under valuable hire contracts. These are Flex Enterprize, which has shown consistent long contract coverage until the end of the first quarter of next year, with an option to extend for another two years; Flex Amber on a similar contract into Q4, with the same extension option; and lastly, Flex Artemis, which we secured on a minimum five-year contract with Gunville at the end of 2019, commencing in connection with delivery of the ship last August. Substantial parts of our fleet are now under long-term fixed hire contracts. Flex Freedom is currently under a 10-month time charter maturing at the end of Q1 next year with a five-year time charter coordinated with a portfolio player. Flex Constellation was recently fixed on a three-year time charter with a major trading house. We also have Flex Endeavor, which already commenced her 3.7 to 5 years charter with Cheniere, with Flex Vigilant set to join her on May 31st and Flex Ranger during the third quarter. Cheniere will take one of possibly two ships on a three and a half year time charter in the third quarter next year. Hence, we can pick and choose from our existing ships. For simplicity, we have included Flex Courageous and Flex Aurora as optional and Flex Aurora as the optional ship for the Cheniere contract. Flex Courageous is currently on an 11-month fixed time charter and will be redelivered to us at the end of Q1 next year. Flex Aurora is also fixed on a fixed hire time charter with an extension option for an additional six months, taking her into Q1 next year. Flex Resolute is on a similar contract where a three-month extension option was recently declared, but the charterer can extend by another three months. In any case, these three positions are very attractive, so we would be perfectly fine trading these two ships in the spot market if they are not extended. We also have Flex Rainbow, which is fixed on a 12-month time charter in Q1 this year, with redelivery in Q1 next year, where the charterer has the option to extend by another year into Q1 2023. Lastly, we have one ship remaining in the spot market today, Flex Volunteer, which is fixed until Q3. Given the positive outlook, we are very pleased it's trading in the spot market. Slide #6 discusses the backlog. Let's talk about visibility, as we have secured significant backlog over the last month. So all our earnings visibility has also increased substantially with a minimum of 88% of the remaining days in Q2, Q3, and Q4. As mentioned on the last slide, we only have one ship, Flex Volunteer, exposed to the spot market, with the possibility of Flex Aurora and Flex Resolute being redelivered in Q3 or Q4 this year. However, as mentioned, both ships are well positioned in the market and we would be glad to trade them in spots as this period also coincides with the winter market. We also have three ships linked to the spot market under valuable hire contracts, which means we are exposed to the spot market through these four ships, up to six, while the remainder of the fleet is on fixed hire contracts. This means we can fairly accurately predict revenues for the Company for the rest of the year under normal operations. Having been in an investment phase through 2018 to the second quarter of this year, we gradually increased our fleet, starting with 4 ships on the water in 2019 and closing the year with 6. In 2020, we added another four ships to our fleet, while we will add the remaining three ships to our fleet in 2021; thus, it should not come as a surprise that our revenues are growing. This means that finally, all the equity invested in the Company is being employed in productive assets. Previously, a significant part of our equity has been tied up in vessels under construction, which yield zero revenue. The second quarter is typically the weakest quarter in the year, and we also expect this to be the case this year with around $65 million of assumed revenues for this quarter. The quarter is fully booked, so the unknown factor remains the earnings from the three valuable hire contracts in our portfolio. In the third quarter, we also have a high booking, so valuation will mostly be linked to spot earnings for Volunteer and earnings under the valuable hire contracts, but we expect revenues to bounce back to the levels of Q1, as you can see from the graph. For the fourth quarter, which tends to be the strongest, although this year Q1 was slightly stronger than Q4, we also have a high degree of days covered. We expect revenues to approach $100 million for this quarter. With three ships for delivery in the first half of the year, including Flex Vigilant, scheduled for delivery by the end of May, we also have no further CapEx commitments in the second half of the year. Hence, cash flow available for distribution to shareholders will also be higher. Now, to summarize before handing over to Knut. We have industry-low cash flow even of around $45,000, substantial backlog not only in 2021, but also for 2022, 2023, and 2024. This gives us the ability to pay dividends as mentioned; our adjusted earnings for the first quarter was $0.64, and we are paying out $0.40 as dividends. We have both fixed ships for around $5.50 million, bringing the distribution to $0.10 per share. We also had two ships for delivery. So, the payments for those were around $0.12 for those two ships, but given COVID, we have added extra space for the ships. Typically, when taking delivery of a ship, you use around $2 million for staff space and stores, but we have been more like $3 million each for these ships due to space constraints. Our pay-off ratio of the free cash flow is over 100%. Coupled with $139 million of free liquidity before the second half of 2024 and the strong balance sheet I mentioned. With that, I will hand it over to Knut for the financial details.

Knut Traaholt, CFO

Thank you, Øystein. Let's turn to slide 8 and discuss the income statement. Revenues for the quarter came in at $81.3 million, in line with our guidance of $80 million to $90 million. This is an increase from $67.4 million in the previous quarter due to the delivery of our new ships, Flex Freedom and Flex Volunteer in January, and a slightly improved market, with the fleet delivering a TCE of 75,400 per day, up from 73,700 per day in the previous quarter. Operating expenses were $14.3 million in Q1, compared to $14.5 million in Q4, despite having a larger fleet this quarter, resulting in an opex per day of $12,900 versus $15,300 in the last quarter. The difference is attributed to higher COVID-related expenses in Q4. Despite the positive reduction in operating expenses, we continue to face higher COVID-related expenses caused by challenges with crew changes and quarantine, increased lube oil prices, and added costs for transporting supplies and services to our vessels. These costs can fluctuate, as illustrated in Q4, but we are back to a normalized level in Q1 and expect smoother operating expenses as restrictions are gradually lifted. Adjusted EBITDA for the quarter was $64 million, up from $50.2 million in the previous quarter. Interest expenses were up in Q1 due to a full quarter of interest on debts related to the vessels delivered during the fourth quarter and a full quarter of interest related to Flex Freedom and Flex Volunteer delivered in January. Net income for the quarter was $47.2 million or $0.88 per share, an increase from about $28 million or $0.48 per share in the previous quarter. Adjusted net income was $34 million or $0.64 per share, up from $24 million or $0.45 per share in the previous quarter. The difference between earnings per share and adjusted earnings per share, as Øystein explained, is related to our interest rate hedging where we recorded a net gain of $13 million in Q1 due to long-term interest rates bouncing back. However, we use the adjusted numbers to smooth out this fluctuation in the interest rate instruments. Now, turning to slide 9 and examining our balance sheet; as of March 31, we had full vessels in operation booked as vessels and equipment. During the quarter, we took delivery of two new vessels and added $372.5 million from vessel prepayments to vessels and equipment, increasing the aggregate book value of the vessels to $2.2 billion. We have $64 million as remaining vessel prepayments related to our last new building, Flex Vigilant, which is scheduled for delivery on May 31. Once all ships are delivered, our balance sheet will comprise approximately $2.5 billion, which includes 13 ships alongside our significant cash holdings. Total interest-bearing debts stood at $1.4 billion at the quarter end, reflecting a $20 million increase in the revolving credit facility under the original $100 million ranger facility, and the drawdown of $125 million in connection with the delivery of Flex Volunteer, offset by $20 million in scheduled repayments. At the quarter end, we maintained a strong cash position of $139 million. Total book equity was $861 million, representing a solid equity ratio of 35%, compared to the 25% requirement under some of our loans. Moving on to slide 10, let's evaluate the cash flow for the first quarter. We experienced a positive net cash flow of $10 million. This stems from cash flow from operations of $48.4 million, along with a negative working capital adjustment of $4.5 million, compared to a positive working capital adjustment of $14.4 million in the fourth quarter. The adjustment primarily relates to higher prepaid charter hire due to a stronger market at the end of Q4 compared to Q3. On average, these working capital balances tend to even out, but as we operate on a time charter basis, we receive charter hire in advance, which is beneficial from a working capital perspective. Scheduled loan installments accounted for $20 million in total. Net new building CapEx was $11.9 million, and as mentioned, we increased the revolving credit facility under the original $100 million ranger facility with a $20 million non-amortizing tranche, providing additional liquidity and flexibility. In November, we announced a share buyback program of up to $4.1 million shares. During the first quarter, we purchased an additional 597,000 shares for $5.3 million, averaging $8.87 per share. Together with the 37% per share dividend for the fourth quarter, $16.1 million was paid during the first quarter. In conclusion, we achieved a positive net cash flow of $10 million, which leaves us with a robust total cash balance of $139 million at the end of the quarter. Turning to slide 11, which will be familiar to our frequent followers. Over the past year, we have secured a total of $1.7 billion in attractive financing for our fleet of 13 vessels. At the same time, we have diversified our funding base, combining bank financing, lease financing, and ECA financing. As communicated in the fourth quarter presentation, we secured a commitment for a $20 million increase under the $100 million ranger facility, and the amendment was signed in March, making this amount fully available thereafter. We have hedged the interest rate risk with interest rate swaps for a nominal amount of $674 million at quarter end. During the quarter, we terminated two swaps and used their positive value to enter a new swap at a lower fixed rate. The average fixed rate for swaps is 1.15%. Together with leases on fixed rates, we have a hedge of about 66%. Overall, we maintain a very comfortable debt maturity profile, with the first maturity due in July 2024, backed by a pool of 15 different financial institutions. Over the years, we have proven our capability to raise attractive funding, even during challenging times in physical and financial markets, thanks to strong support from our extensive banking group.

Øystein Kalleklev, CEO

So slide #12. We topped off the market section with a snapshot of LNG exports and imports in the first quarter. In the first quarter of 2021, exports were close to 102 million tons according to Kepler data. This was slightly in line with last year, despite the loss of cargoes due to the big freeze in Texas during February, as well as some other supplier disruptions during the quarter. It's important to note that volumes in the first quarter of 2020 were exceptionally high as it was before the COVID-19 pandemic spread globally. What is different from last year is that we observed considerably more fuel demand from Asia, particularly China, as winter weather in Asia at the start of the year was notably cold, with record snowfall in Japan and the coldest winter in Beijing since 1966. This strong demand from Asia also led to increased sailing distances, and combined with Panama congestion, resulted in an unprecedented rally in both freight and product prices at the start of the year. As we've highlighted in our reports, we remain very optimistic about volume growth in 2021, estimating an export growth of about 25 million tons this year as product prices began to rally last autumn, and this has become the consensus view. As you can see from the graph on the right-hand side, we expect a 7% to 8% export growth in 2021, which will support the freight market, covered in the next two slides. Turning to slide #13, we will discuss the spot market for freight. The boom at the end of 2020 continued into 2021 before softening by mid-February when we reported our fourth quarter. However, the downturn was brief, with the market bouncing back by the end of April. As usual, we observed the first with balance bonus conditions transitioning from 200 basis points in January to one-way economics by the end of February, before we began to see positive momentum in March with balance bonus conditions reverting to full long trips again by mid-April, subsequently pushing up time charter equivalent earnings in the spot market. By the end of April, moving into May, the freight market was unseasonably strong, with spot rates for modern tonnage approaching $100,000 per day in the Atlantic, while rates were somewhat lower in the Pacific as new building deliveries kept vessel availability higher in that basin. As depicted on the graph on the right-hand side, availability of ships in the Atlantic has been quite low, except during the major freeze in February in the U.S., which briefly hindered U.S. exports, leading to an increase in vessel availability in the Atlantic. The high freight rates, however, impact the rate for vessels entering the market, and we have observed some softening in the market over the last two weeks due to slightly increased vessel availability, with rates for modern tonnage dropping to approximately $80,000 per day in both the Atlantic and Pacific basins. Nonetheless, these rates are substantial. However, as shown in the graph to the left, the softening in the market typically only lasts for shorter durations, since traders and portfolio players usually want their ships back before the winter season approaches, which does not substantially affect the term market, as we will review on the next slide. Slide #14 provides insight into the term market for freight, showing term rates of one, three, and five years over the last year. Following the COVID-19 pandemic, the five-year TCE assessment flat-lined for much of the last year, with limited interest from charters who could secure cheaper vessels in the spot market or for shorter-term deals. One-year TCE rates last year were around $55,000 to $57,500 before sharply rising from the start of April, now holding close to $100,000 per day. The three-year TCE rate, less liquid than the 12-month TCE, has also increased, now being around $80,000 per day. Given the unattractiveness of term business over the last approximately 12 months, until we started seeing green shoots at the end of March, we chose to position our vessels predominantly in the spot market. Despite pursuing this strategy, we managed to achieve $60,000 in time charter equivalent earnings for 2020 while keeping our options open, which was much more attractive than fixing ships on COVID for longer durations. Fortunately, we were in a position where we had financed all ships in advance, leaving us with ample cash. So we could afford to wait for more favorable conditions, which was not the case for all owners. With term rates picking up recently, we've taken advantage of the momentum to secure a large portion of our fleet under term contracts, a much more favorable proposition than what was achievable in prior years. Our gas prices are illustrated on slide 15; as previously highlighted, gas prices began to recover over the summer last year. In our Q2 report last August, we noted the El Niño alert for winter 2020-2021, which typically means colder and longer winters for major gas-importing nations. Thus, we chose to maintain substantial spot exposure during this period and made profitable trading vessels for both Q4 and Q1, as previously detailed. The winter came a bit late, but when it arrived, it was prolonged and severe, particularly in Europe. Last autumn, we also experienced the most active hurricane season on record in the U.S., resulting in supply disruptions. In the short term, these disruptions negatively impacted cargo availability but increased product prices. Notably, the Asian LNG benchmark JKM surged from a low of $1.80 during early summer last year to a high of $32.50 in early 2021. As seen earlier, during February, JKM reached a price of $18, ten times higher than prices in the summer. This also triggered a spike in U.S. gas prices due to a brief decrease in supply from Texas. With rising oil prices, U.S. shale drilling has become increasingly profitable, returning natural gas prices to below $3 levels, with forward prices remaining at this level. JKM prices currently hover around $10, while European gas prices are slightly below $9, driven by increased demand, significantly higher carbon prices, and a robust restocking drive resulting from very low gas inventories after the cold winter, which I will address in the next slide. Lastly, on slide 16, gas inventories. As we discussed in our December 2020 presentation, strong demand from Asia at the end of 2020 caused cargoes to be diverted away from the Atlantic basin and European buyers became increasingly starved of LNG deliveries. This situation was exacerbated by a prolonged cold winter in Europe and high carbon prices, pushing gas prices to around EUR 50, making gas more competitive than coal despite increased gas prices. Thus, we argued for strong restocking demand over summer as European inventories remain critically low, minimizing the risk of recurrence of summer cargo cancellations. This also makes us more confident about volume increases this year as we maintain a high exposure of our fleet to the spot market at the beginning of the year until we identified term opportunities. European inventories today stand at just 33.50% capacity, considerably less than last year levels, which demonstrates how severe the shortfall in inventories is. The current shortfall is almost twice the volumes of U.S. cargo cancellations last year. It is nearly inconceivable that European buyers can fill their inventories ahead of next winter, which could lead to increased gas prices and volatility, particularly if economic recovery is strong or if the upcoming winter is merely average. Slide 17 showcases fleet composition. In our last quarter presentation, I discussed the new decarbonization measures applicable to all ships known as EEXI. We expect the new rules to be finalized by the IMO in June. These regulations will pose challenges for older vessels, while providing opportunities for our fleet of modern ships. I won't reiterate my previous presentation; however, it is available on our webpage for those who missed it. What I would like to highlight is that the order book, which some analysts deemed too weak this year to support a conducive market, is tailing off, leading to increasing commercial vessel availability. Given the recent rise in term interest rates, the number of available ships has diminished significantly. The mix of a few available MEGI-equipped vessels and escalating new building prices stand out prominently, while many older ships are exiting long-term contracts leading to more opportunities to secure attractive term charters. Our focus now shifts to the 2022 positions given our high coverage for 2021. That's my last slide; to summarize, we have achieved revenues in line with guidance, substantial backlog for 2021, and are increasing our dividend to $0.40 in addition to the buybacks. All of our ships will be operational by the end of the month, and based on the positive market outlook and restocking, we are in a strong financial position with all of our ships financed and ample liquidity.

Operator, Operator

There are no questions at this time.

Unidentified Analyst, Analyst

Øystein Kalleklev, CEO

Yeah. Okay. Once again, everything is very clear. It seems like telephone is going out of vogue. So maybe we should focus more on the chat function for questions next time. But until then, I wish you a good weekend and a pleasant spring. We will return in August with the second quarter results, probably in the middle of August. I believe the market will be very healthy at that time. Prices might approach six digits. By then, we could also see contango fractures developing in gas prices due to ongoing Panama congestion. I’m looking forward to the second quarter as well. With that, I wish you a good day.

Operator, Operator

This concludes today's conference call. Thank you for participating. You may now disconnect.