FLEX LNG Announces Q3 2010 Financial Results (UK)

FLEX LNG is pleased to announce that the Q3 2010 financial report was approved by the Board of Directors on 25 November 2010.

Financials, Third Quarter and Year to Date 2010

During the third quarter the FLEX LNG group of companies (“the Group”) has continued to develop what it expects could be amongst the world’s first LNG Producers. In the quarter costs of $2.1m ($4.5m) were capitalised on the four units and year to date $10.9m ($19.9m).

The cash balances at 30 September were $13.1m ($21.1m) with $3.7m ($2.5m) net outflow in the quarter and $12.5m ($28.4m) year to date. In the nine months in 2010 the operating cash outflow was $5.9m (principally the operating loss and working capital movements); investing activities outflow $11.0m (capitalised asset costs); and financing activities inflow $4.4m (proceeds from deferred payments to Samsung).

The loss before tax was $3.7m ($2.1m) in the quarter and $8.5m ($7.4m) year to date, with a year to date retained net loss of $8.6m ($7.5m). 2010 has been impacted by a FX revaluation loss on its non USD denominated liabilities and 2009 included an option cost credit following the extension of the expected vesting dates for options and warrants held by staff and founders.

Outlook

The Group continues to focus on securing employment for the LNG Producers and is discussing alternative commercial arrangements for the employment, such as integrated projects consisting of gas supply contracts with oil and gas companies, product handling agreements for the services of the LNG Producers, and LNG sales and purchase contracts with LNG off-takers as well as more traditional charter arrangements. The Group is currently pursuing a number of opportunities.

In November 2010 the Group announced that the talks with an Asian National Oil Company to join a floating liquefaction project had ceased. The Group may look to continue the cooperation it initiated with SAIPEM, in connection with this project, for alternative opportunities. In June 2009 FLEX Petroleum Limited, a wholly owned subsidiary of FLEX LNG, entered into an option agreement setting out the terms to acquire control of Jersey-based Minza Oil & Gas Limited (“Minza”), additional details in note 5. In Q2 2010 the seismic surveys and interpretation were completed for the “Anita” and “Wombat” structures. Preliminary results support a significant increase in the estimated gas resources of the main Chuditch structure and surrounding structures. Compared to the previous resource estimates the most recent analysis shows a potential increase in the Gas Initially In Place (GIIP) of up to 30-40%. This would bring the estimated GIIP figure for the Chuditch Main, Chuditch West and Wombat structures to a combined total of more than 3 tcf. In 2010 an option period extension was signed to the original option agreement allowing more time to agree terms with a development partner. The option extension period expired in October 2010 and the Company continues discussions with the Seller as to the best way to continue the commercialisation of the gas reserves.

Financing and Risks

The Company acknowledges the current challenging fund raising environment it faces and the impact that this has on the ability of the Group to finance its funding requirement. Following the raising of $10m of additional capital as part of the listing on Oslo Axess on 30 October 2009, the Company expects to have sufficient financial resources to enable it to continue trading and to meet its payment obligations until the next hull payments are due to be made to Samsung in December 2010.

Under the Principle Agreement with Samsung the resumption notice had to be given by 31 May 2010, see note 9. The Company’s decision not to issue any resumption notice by that date, resulted in a right to Samsung to cancel all the four shipbuilding contracts as well as the EPCIC contract for M-FLEX 1, additional details in note 4. Samsung has informed FLEX LNG that it will work with the Group with the aim of amending the terms of the Principle Agreement. In addition Samsung has informed FLEX LNG that it presently has no intention of exercising any right of termination and that the instalment profile needs to be amended and linked to the achievement of FID.

This will also include the deferral of the instalments due in December 2010. The Group aims to rearrange its obligations and raise capital, if necessary, to allow the Company more time to achieve a final investment decision for at least one of the LNG Producers. These steps would allow the Group to finance its operations over the year.

The Board believes the going concern position and risks remains as described in the 2009 statutory accounts and as updated by the Q3 financial report.

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Source: FLEX LNG, November 26, 2010;