FLEX LNG : Management's Discussion and Analysis of Financial Condition and Results of Operations (Form 6-K)

Management's Discussion and Analysis of Financial Condition and Results of Operations

The following presentation of management's discussion and analysis of financial condition and results of operations for the six month period ended June 30, 2021 should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes thereto included elsewhere herein, which have been prepared in accordance with United States generally accepted accounting principles ('U.S. GAAP'). For additional information relating to our management's discussion and analysis of results of operations and financial condition, please see our annual report on Form 20-F for the year ended December 31, 2020, or our Annual Report, filed with the U.S. Securities and Exchange Commission, or the SEC, on March 17, 2021.

Unless otherwise indicated, the terms 'FLEX LNG,' 'we,' 'us,' 'our,' the 'Company' and the 'Group' refer to FLEX LNG Ltd. and its consolidated subsidiaries. We use the term 'LNG' to refer to liquefied natural gas, and we use the term 'cbm' to refer to cubic meters in describing the carrying capacity of the vessels in our fleet.

Unless otherwise indicated, all references to 'U.S. dollars,' 'USD,' 'dollars,' 'US$' and '$' in this report are to the lawful currency of the United States of America, references to 'Norwegian Kroner,' and 'NOK' are to the lawful currency of Norway, references to 'Swiss Franc,' and 'CHF' are to the lawful currency of Switzerland and references to 'Great British Pounds,' and 'GBP' are to the lawful currency of the United Kingdom.

The below discussion contains forward-looking statements that reflect our current views with respect to future events and financial performance. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth in the section 'Risk Factors' included in our Annual Report.

General

FLEX LNG Ltd. is an exempted company incorporated under the laws of Bermuda. Our common shares currently trade on the New York Stock Exchange ('NYSE') and the Oslo Stock Exchange ('OSE') under the ticker symbol 'FLNG'.

We are a growth-oriented owner and commercial operator of fuel efficient, fifth generation LNG carriers. As of September 1, 2021, we own and operate thirteen LNG carriers, which we collectively refer to as our 'Operating Vessels' or our 'Fleet.'

Our business currently focuses on the expansion of our Fleet and execution of our chartering strategy to seek balanced employment for the vessels in our Fleet through actively marketing our vessels in both the term and spot market.

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FLEX LNG Ltd.

Our Fleet

The following table sets forth additional information about our Fleet as of September 1, 2021:

Vessel Name	Cargo Capacity (cbm)	Propulsion	Year Built	Shipyard(1)	Charter expiration(2)
Operating Vessels
Flex Endeavour	173,400	MEGI	2018	DSME	Q1 2025(3)
Flex Enterprise	173,400	MEGI	2018	DSME	Q1 2022(4)
Flex Ranger	174,000	MEGI	2018	SHI	Q1 2025(3)
Flex Rainbow	174,000	MEGI	2018	SHI	Q1 2022(5)
Flex Constellation	173,400	MEGI	2019	DSME	Q2 2024(6)
Flex Courageous	173,400	MEGI	2019	DSME	Q1 2022
Flex Aurora	174,000	X-DF	2020	HSHI	Q1 2022
Flex Artemis(10)	173,400	MEGI	2020	DSME	Q3 2025(7)
Flex Resolute	173,400	MEGI	2020	DSME	Q1 2022
Flex Amber	174,000	X-DF	2020	HSHI	Q4 2022(8)
Flex Freedom	173,400	MEGI	2021	DSME	Q1 2027(9)
Flex Volunteer	174,000	X-DF	2021	HSHI	Spot
Flex Vigilant	174,000	X-DF	2021	HSHI	Q2 2024(3)

(1)	As used in this report, 'DSME' means Daewoo Ship building and Marine Engineering Co. Ltd., 'SHI' means Samsung Heavy Industries, and 'HSHI' means Hyundai Samho Heavy Industries Co. Ltd. Each is located in South Korea.
(2)	The expiration of our charters is subject to re-delivery windows ranging from 15 to 45 days before or after the expiration date.
(3)	The charterer has the option to extend the charter for an additional two years.
(4)	The charterer has options to extend the charter for an additional two years, in 12-month periods.
(5)	The charterer has the option to extend the charter for an additional one year.
(6)	The charterer has the option to extend the charter for an additional three years.
(7)	The charterer has options to extend the charter for an additional five years, in 12-month periods.
(8)	The charterer has the option to extend the charter for an additional one year.
(9)	Flex Freedom's existing charter with Asian-based energy company expires in Q1 2022 and the vessel will commence a new charter in direct continuation with an LNG portfolio player which will expire in Q1 2027. The charterer has the option to extend by an additional two years.
(10)	Formerly known as Flex Reliance.

Fleet Development

In January 2021, we successfully took delivery of our eleventh newbuilding LNG carrier, Flex Freedom, which was constructed at DSME. In connection with the delivery of the vessel, we made a final payment of $130.5 million to an entity related to Geveran Trading Co. Ltd., or Geveran, our largest shareholder. The final payment was part financed with a drawdown of $125.8 million under the $629 Million Term Loan Facility (as defined below) and the balance with cash on hand.

In January 2021, we successfully took delivery of our twelfth newbuilding LNG carrier, Flex Volunteer, which was constructed at HSHI. In connection with the delivery of the vessel, we made a final payment of $127.0 million to an entity related to Geveran. The final payment was financed with a drawdown of $100 million term tranche under the $125 Million Facility (as defined below), and the balance with cash on hand.

In May 2021, we successfully took delivery of our thirteenth newbuilding LNG carrier, Flex Vigilant, which was constructed at HSHI. In connection with the delivery of the vessel, we made a final payment of $127.0 million to an entity related to Geveran. The final payment was part financed with a drawdown of $123.3 million under the $629 Million Term Loan Facility, as defined below, and the balance with cash on hand.

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FLEX LNG Ltd.

Employment of Our Fleet and Our Customers

In April 2021, the Company entered into fixed rate time charter agreements with Cheniere Marketing International ('Cheniere') for four LNG carriers with the option for a fifth LNG carrier. Under the agreements: Flex Endeavourwas delivered to Cheniere in April 2021 with a firm period ending in the first quarter 2025; Flex Vigilantwas delivered to Cheniere subsequent to delivery from the yard in May 2021 with a firm period ending in the second quarter 2024; Flex Rangerwas delivered to Cheniere in August 2021 with a firm period ending in the first quarter 2025. The fourth vessel will be delivered to Cheniere in the third quarter 2022 with a firm period expected to be ending in the first quarter 2026. Cheniere will also have the option to add a fifth vessel during the third quarter of 2022 with a firm period expected to be ending in the first quarter 2026. Under each time charter agreement, Cheniere has options to extend the charter period for each vessel by up to two additional years. The time charter agreements remain subject certain customary closing conditions in connection with the delivery and acceptance of each of the remaining optional vessels.

In April 2021, the Company entered into a fixed rate time charter agreement with a large Asian-based energy company for the vessel, Flex Freedom. The time charter commenced at the end of April 2021 and has a firm period ending in the first quarter 2022.

In May 2021, the Company entered into a fixed rate time charter agreement with an international trading house for the vessel, Flex Constellation. The time charter commenced in May 2021 and has a firm period ending in the second quarter 2024 with options to extend the term of the charter by up to three years.

In May 2021, the Company agreed a fixed rate time charter agreement with an LNG portfolio player, for a firm period of a minimum of five years for Flex Freedom. The charter will commence in the first quarter 2022 immediately following the expiration of the existing time charter. The charterer has the option to extend the period by an additional two years.

In August 2021, an option was declared extending the variable rate time charter with an international energy major for Flex Amberby one additional year. The initial term of the time charter was scheduled to expire in the third quarter 2021 and following the exercise of the option the term is now scheduled to expire in the third quarter 2022. The charterer has the option to extend the time charter by one additional year.

Additionally, options were declared on Flex Auroraand Flex Resolute, which extended their fixed rate time charters by an

additional six months on each charter at rates higher than the fixed rates of the initial charters.

Recent and Other Developments

On November 19, 2020, the Company's Board of Directors authorized a share buy-back program (our 'buy-back program') to purchase up to an aggregate of 4,110,584 of our ordinary shares for the purpose of increasing shareholder value with a maximum amount to be paid per share under our buy-back program (a 'maximum price') of $10.00 or the equivalent in NOK if purchased on the Oslo Stock Exchange. On February 16, 2021, the Company's Board of Directors authorized the increase of the maximum price from $10.00 to $12.00, or equivalent in NOK if bought at the Oslo Stock Exchange. On May 20, 2021, the Company's Board of Directors increased the maximum price from $12.00 to $14.00; and on August 16, 2021, the Company's Board of Directors further increased the maximum price from $14.00 to $15.00. The timing and amount of any repurchases will depend on legal requirements, market conditions, stock price, alternative uses of capital and other factors. The Company is not obligated under the terms of the program to repurchase any of our ordinary shares. Our buy-back program commenced on November 19, 2020 and is scheduled to end on November 19, 2021. During the period from November 19, 2020 through September 1, 2021, the Company has repurchased an aggregate of 980,000 ordinary shares for an aggregate purchase price of NOK81.5 million, or $9.4 million, at an average purchase price of NOK83.13, or $9.64, per share. As of September 1, 2021, 3,130,584 ordinary shares remain available for repurchase.

COVID-19 update

The spread of the novel coronavirus (hereinafter referred to as COVID-19), which was declared a pandemic by the World Health Organization on March 11, 2020, has had and continues to have a significant negative impact on the global economy and has caused significant volatility in the financial markets, the severity and duration of which remains uncertain. The COVID-19 virus outbreak has negatively impacted, and may continue to impact adversely, demand for energy including LNG. This has resulted in greater volatility in the price of LNG, which has seen a sharp decline. The reduced demand and low price of LNG has resulted in many LNG cargoes, especially from the US, being cancelled. This has reduced the demand for LNG carriers and resulted in lower utilization and charter rates for LNG carriers, including the vessels in our Fleet, and may continue to do so in the future. Securing employment for our Fleet has also been more challenging in the current environment.

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FLEX LNG Ltd.

COVID-19 has introduced uncertainty in a number of areas of our business, including operational, commercial, administrative and financial activities. We are focused on maintaining our efficient operations and, above all, the health and safety of our seafarers and shore-based employees. Because of port restrictions and various quarantine measures, we continue to experience challenges with crew changes on our Operating Vessels and crewing of our newbuildings prior to delivery from the relevant shipyard. In light of these challenges our crew have had to and may in the future have to stay on board for longer periods and increased costs may occur in conjunction with crew changes on our Operating Vessels and crewing of our newbuildings. Our share price has declined significantly this year, due in part to the impact of the COVID-19 virus. The uncertainty in global capital and bank credit markets has also affected access and cost of new financing. In addition, the sharp decline in both short and long-term interest rates has reduced the overall cost of our floating rate debt, but has resulted in a significant loss, most of which is unrealized, on our interest rate swaps.

We are unable to reasonably predict the estimated length or severity of the COVID-19 pandemic on our future operating results.

RESULTS OF OPERATIONS

Six months ended June 30, 2021 compared to the six months ended June 30, 2020

Amounts included in the following discussion are derived from our unaudited condensed consolidated financial statements for the six months ended June 30, 2021 and 2020.

Vessel operating revenues

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Vessel operating revenues	147,103	63,945

Vessel operating revenues increased by $83.2 million to $147.1 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was primarily due to the increase in our Fleet from six to thirteen LNG carriers between the period of July 2020 and May 2021.

Voyage expenses

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Voyage expenses	(2,277)	(1,522)

Voyage expenses, which include voyage specific expenses, broker commissions and bunkers consumption, increased by $0.8 million to $2.3 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was primarily due to the increase in our Fleet from six to thirteen LNG carriers between the period of July 2020 and May 2021.

Vessel operating expenses

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Vessel operating expenses	(29,715)	(14,001)

Vessel operating expenses increased by $15.7 million to $29.7 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was primarily due to the increase in our Fleet from six to thirteen LNG carriers between the period of July 2020 and May 2021.

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FLEX LNG Ltd.

Administrative expenses

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Administrative expenses	(4,252)	(3,139)

Administrative expenses increased by $1.1 million to $4.3 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. This is primarily due to the expansion of the management and administrative function in line with the expansion of our Fleet, increased directors and officers insurance expenses, in addition to performance bonuses paid to staff in the six months ended June 30, 2021.

Depreciation

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Depreciation	(33,361)	(17,171)

Depreciation increased by $16.2 million to $33.4 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was due to the increase in our Fleet from six to thirteen LNG carriers between the period of July 2020 and May 2021.

Interest income

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Interest income	12	143

Interest income decreased by $0.1 million to $0.0 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020.

Interest expense

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Interest expense	(27,534)	(19,603)

Interest expense increased by $7.9 million to $27.5 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The increase was due to the increase in long-term debt between July 2020 and May 2021 following the drawdown of $636.5 million under the $629 Million Term Loan Facility; $156.4 million under the Amber Sale and Leaseback; $125 million under the $100 Million Facility; and an additional $20 million drawn under an addendum to the revolving tranche of the $100 Million Facility.

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FLEX LNG Ltd.

Gain/(loss) on derivatives

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Gain/(loss)on derivatives	10,152	(28,551)

Gain on derivatives increased by $38.7 million to $10.2 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. The gain of $10.2 million during the six months ended June 30, 2021 is primarily due to the improvement of longer term interest rates. The loss of $28.6 million during the six months ended June 30, 2020 is due to the increase in notional value of interest rate swaps to $610.0 million from $175.0 million as at December 31, 2019 and the significant reduction in longer term interest rates during the period.

Other financial items

(unaudited figures in thousands of $)	Six months ended
June 30,
2021	2020
Other financial items	(123)	(1,618)

Other financial items have decreased by $1.5 million to $0.1 million in the six months ended June 30, 2021, as compared to the six months ended June 30, 2020. Other financial items consists primarily of expenses as a result of foreign exchange rate fluctuations.

LIQUIDITY AND CAPITAL RESOURCES

We operate in a capital-intensive industry and have financed the purchase of the vessels in our Fleet through a combination of cash generated from operations, equity capital and borrowings under our financing agreements. Payment of amounts outstanding under our debt agreements, and all other commitments that we have entered into are made from the cash available to us.

Cash

As of June 30, 2021, we reported cash, cash equivalents and restricted cash of $144.2 million, which represented an increase of $15.3 million, compared to $128.9 million as of December 31, 2020. In the six months ended June 30, 2021, the movements in cash primarily consisted of $91.2 million from operations, $266.2 million capital expenditure resulting from the delivery of Flex Freedom, Flex Volunteerand Flex Vigilant, financed by a drawdown of $125.0 million under the $125 Million Facility and $123.3 million under the $629 Million Term Loan Facility. Other movements in cash during the period were $32.5 million in regular repayment of long term debt, payment of $1.3 million in financing costs, $37.4 million in dividends, $5.6 million paid for treasury shares and a positive $0.1 million due to the effect of exchange rate fluctuations on our cash balances

Financing information

$125 Million Facility

In January 2021, the Company drew down $100 million under the term loan tranche of the $125 Million Facility upon delivery of our twelfth newbuilding LNG carrier, Flex Volunteer.

$100 Million Facility

The Company signed an addendum to the $100 Million Facility in March 2021, whereby the revolving tranche under the facility was increased by $20 million. The $20 million increase is non-amortizing and bears interest at LIBOR plus a margin of 2.25% per annum for any drawn amounts.

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FLEX LNG Ltd.

$629 Million Term Loan Facility

In May 2021, the Company drew down $123.3 million under the $629 Million Term Loan Facility upon delivery of our thirteenth newbuilding LNG carrier, Flex Vigilant.

Loan Covenants

Certain of our financing agreements contain, among other things, the following financial covenants, which are tested quarterly, the most stringent of which require us (on a consolidated basis) to maintain:

•a book equity ratio of minimum 0.25 to 1.0;

•a positive working capital; and

•minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of:

i.$25 million; and

ii.an amount equal to five per cent (5%) of our total interest bearing financial indebtedness net of any cash and cash equivalents.

Our financing agreements discussed above contain, among other things, restrictive covenants which, to the extent triggered, would restrict our ability to:

i.declare, make or pay any dividend, charge, fee or other distribution (whether in cash or in kind) on or in respect of its share capital (or any class of its share capital);

ii.pay any interest or repay any principal amount (or capitalized interest) on any debt to any of its shareholders;

iii.redeem, repurchase or repay any of its share capital or resolve to do so; or

iv.enter into any transaction or arrangement having a similar effect as described in (i) through (iii) above.

Our secured credit facilities may be secured by, among other things:

•a first priority mortgage over the relevant collateralized vessels;

•a first priority assignment of earnings, insurances and charters from the mortgaged vessels for the specific facility;

•a pledge of earnings generated by the mortgaged vessels for the specific facility; and

•a pledge of the equity interests of each vessel owning subsidiary under the specific facility.

A violation of any of the covenants contained in our financing agreements may constitute an event of default under the relevant financing agreement, which, unless cured within the grace period set forth under the financing agreement, if applicable, or waived or modified by our lenders, provides our lenders, by notice to the borrowers, with the right to, among other things, cancel the commitments immediately, declare that all or part of the loan, together with accrued interest, and all other amounts accrued or outstanding under the agreement, be immediately due and payable, enforce any or all security under the security documents, and/or exercise any or all of the rights, remedies, powers or discretion's granted to the facility agent or finance parties under the finance documents or by any applicable law or regulation or otherwise as a consequence of such event of default.

Furthermore, certain of our financing agreements contain a cross-default provision that may be triggered by a default under one of our other financing agreements. A cross-default provision means that a default on one loan would result in a default on certain of our other loans. Because of the presence of cross-default provisions in certain of our financing agreements, the refusal of any one lender under our financing agreements to grant or extend a waiver could result in certain of our indebtedness being accelerated, even if our other lenders under our financing agreements have waived covenant defaults under the respective agreements. If our secured indebtedness is accelerated in full or in part, it would be difficult for us to refinance our debt or obtain additional financing and we could lose our vessels and other assets securing our financing agreements if our lenders foreclose their liens, which would adversely affect our ability to conduct our business.

Moreover, in connection with any waivers of or amendments to our financing agreements that we have obtained, or may obtain in the future, our lenders may impose additional operating and financial restrictions on us or modify the terms of our existing financing agreements. These restrictions may further restrict our ability to, among other things, pay dividends, make capital expenditures or incur additional indebtedness, including through the issuance of guarantees. In addition, our lenders may require the payment of additional fees, require prepayment of a portion of our indebtedness to them, accelerate the amortization schedule for our indebtedness and increase the interest rates they charge us on our outstanding indebtedness.

As of June 30, 2021, we were in compliance with all of the financial covenants contained in our financing agreements.

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FLEX LNG Ltd.

Cash Flows

The following summarizes our cash flows from operating, investing and financing activities for the six months ended June 30, 2021 and 2020.

(in thousands of $)	Six months ended
June 30,
2021	2020
Net cash provided by operating activities	91,200	17,982
Net cash (used in)/provided by investing activities	(266,175)	106
Net cash provided by/(used in) financing activities	190,155	(29,482)
Effect of exchange rate changes on cash	65	(1,711)
Net change in cash, cash equivalents and restricted cash	15,245	(13,105)
Cash, cash equivalents and restricted cash at beginning of period	128,962	129,098
Cash, cash equivalents and restricted cash at end of period	144,207	115,993

Operating Activities

Cash provided by operating activities was $91.2 million for the six months ended June 30, 2021, compared to $18.0 million in the same period in 2020. The increase was primarily due to the increase in Operating Vessels from six to thirteen between the period of July 2020 and May 2021, higher achieved charter rates in 2021 and positive cashflows from working capital adjustments in 2021.

Investing Activities

Net cash flow used in investing activities was $266.2 million in the six months ended June 30, 2021, compared to cash provided of $0.1 million in the same period in 2020. Net cash used in investing activities in the in the six months ended June 30, 2021 is primarily as a result of the final payments and capital expenditure upon delivery of the newbuildings Flex Freedom, Flex Volunteer andFlex Vigilant.

Financing activities

Net cash provided by financing activities was $190.2 million in the six months ended June 30, 2021, compared to net cash used of $29.5 million in the same period in 2020. For the six months ended June 30, 2021, the Company paid $32.5 million in regular installments of long-term debt, financing costs of $1.3 million and dividends of $37.4 million. In the same period of 2020, the Company paid $16.9 million in regular installments of long-term debt, financing costs of $6.5 million and dividends of $5.4 million.

We believe that cash on hand and borrowings under our current credit facilities will be sufficient to fund our requirements for, at least, the twelve months from the date of this interim report.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our activities expose us to a variety of financial risks including market risk (including currency risk and interest rate risk), credit risk and liquidity risk. Our overall risk management program considers the unpredictability of financial markets and seeks to minimize potential adverse effects on our financial performance, in a cost-effective manner.

Currency Risk

The majority of our transactions, assets and liabilities are denominated in U.S. dollars, our functional currency. However, we incur expenditures in currencies other than the functional currency, mainly overhead costs in GBP, CHF and NOK. A portion of our dividends, if any, may also be paid in NOK due to our listing on the OSE. Historically, we have not hedged these exposures. There is a risk that currency fluctuations in transactions incurred in currencies other than our functional currency will have a negative effect of the value of our cash flows.

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Interest rate risk

We are exposed to interest rate fluctuations primarily due to our floating rate interest bearing long term debt. The international LNG transportation industry is a capital-intensive industry, which requires significant amounts of financing, typically provided in the form of secured long-term debt or lease financing. Certain of our current bank and lease financing agreements bear floating interest rates, based on LIBOR. Significant adverse fluctuations in floating interest rates could adversely affect our operating and financial performance and our ability to service our debt.

As of June 30, 2021, we had entered into eighteen interest rate swap transactions to reduce the risks associated with fluctuations in interest rates, whereby the floating rate has been swapped to a fixed rate. The total amortized notional principal of all of our interest rate swaps was $722.1 million. Please see 'Note 12. Financial Instruments' to our unaudited interim condensed consolidated financial statements.

Liquidity Risk

We monitor the risk of a shortage of funds using a cash modeling forecast. This model considers the maturity of payment profiles and projected cash flows required to fund the operations. Historically funds have been raised via equity issuance, lease finance and loan finance. Market conditions can have a significant impact on the ability to raise equity, lease finance and loan finance. While equity issuance may be dilutive to existing shareholders, lease and loan finance will contain covenants and other restrictions.

Our objective is to maintain a balance between continuity of funding and flexibility through the raising of funds from investors. Upon delivery of the respective vessels from the yards, we expect to finance remaining delivery payments that are due through available liquidity, debt financing and lease financing.

Credit Risk

We are exposed to credit risk, which is the risk that a counterparty will be unable to pay amounts in full when due. There is a concentration of credit risk with respect to cash and cash equivalents to the extent that substantially all of the amounts are carried with Skandinaviska Enskilda Banken AB ('SEB') (S&P Global rating: A+), Nordea Bank AB ('Nordea') (S&P Global rating: AA-), Danske Bank AS ('Danske Bank') (S&P Global rating: A) and DNB ASA ('DNB') (S&P Global rating: AA-).

Price Risk

We are also subject, indirectly, to price risk related to the spot/short term charter market for chartering LNG carriers. Charter rates may be uncertain and volatile and depend upon, among other things, the natural gas prices, the supply and demand for vessels, arbitrage opportunities, vessel obsolesce and the energy market, which we cannot predict with certainty. Currently, no financial instruments have been entered into to reduce this risk.

Operational Risk

The operation of a LNG carrier has certain unique operational risks. Our vessels and their cargoes are at risk of being damaged or lost because of events such as marine disasters, bad weather, business interruptions caused by mechanical failures, grounding and fire, explosions and collisions, human error, war, terrorism, piracy, labor strikes, boycotts and other circumstances or events. These hazards may result in death or injury to persons, loss of revenues or property, higher insurance rates, damage to our customer relationships and market disruptions, delay or rerouting.

If our LNG carriers suffer damage, they may need to be repaired at a dry-docking facility. The costs of dry-dock repairs are unpredictable and may be substantial. We may have to pay dry-docking costs that our insurance does not cover at all or in full. The loss of revenues while these vessels are being repaired and repositioned, as well as the actual cost of these repairs, may adversely affect our business and financial condition.

At a commercial level it also includes the ability to secure employment contracts on reasonable terms for the vessels under construction; and obtaining financing and working capital on reasonable terms.

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INDEX TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Page
Condensed Consolidated Statements of Operation for the six months ended June 30, 2021 and June 30, 2020 (unaudited)	11
Condensed Consolidated Statements of Comprehensive Income for the six months ended June 30, 2021 and June 30, 2020 (unaudited)	12
Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020 (unaudited)	13
Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and June 30, 2020 (unaudited)	14
Condensed Consolidated Statements of Changes in Equity for the six months ended June 30, 2021 and June 30, 2020 (unaudited)	15
Notes to the Unaudited Interim Condensed Consolidated Financial Statements	16

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FLEX LNG Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

for the six months ended June 30, 2021 and 2020

(in thousands of $, except per share data)

Six months ended
June 30,
2021	2020
Revenues
Vessel operating revenues	147,103	63,945
Operating expenses
Voyage expenses	(2,277)	(1,522)
Vessel operating expenses	(29,715)	(14,001)
Administrative expenses	(4,252)	(3,139)
Depreciation	(33,361)	(17,171)
Operating income	77,498	28,112
Other income/(expenses)
Interest income	12	143
Interest expense	(27,534)	(19,603)
Gain/(loss) on derivatives	10,152	(28,551)
Other financial items	(123)	(1,618)
Income/(loss) before tax	60,005	(21,517)
Income tax expense	(36)	(17)
Net income/(loss)	59,969	(21,534)
Earnings/(loss) per share:
Basic and diluted	1.12	(0.40)

The accompanying notes are an integral part of these consolidated financial statements.

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FLEX LNG Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

for the six months ended June 30, 2021 and 2020

(in thousands of $)

Six months ended
June 30,
2021	2020
Net income/(loss)	59,969	(21,534)
Total other comprehensive income/(loss)	-	-
Total comprehensive income/(loss)	59,969	(21,534)

The accompanying notes are an integral part of these consolidated financial statements.

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FLEX LNG Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED BALANCE SHEETS

as of June 30, 2021 and December 31, 2020

(in thousands of $, except share data)

June 30,	December 31,
2021	2020
ASSETS
Current assets
Cash and cash equivalents	144,151	128,878
Restricted cash	56	84
Inventory	4,075	3,656
Receivables due from related parties	522	166
Other current assets	8,886	25,061
Total current assets	157,690	157,845
Non-current assets
Derivative instruments	3,100	109
Vessel purchase prepayment	-	289,600
Vessels and equipment, net	2,378,876	1,856,461
Other fixed assets	4	5
Total non-current assets	2,381,980	2,146,175
Total assets	2,539,670	2,304,020
EQUITY AND LIABILITIES
Current liabilities
Current portion of long-term debt	(77,674)	(64,466)
Derivative instruments	(12,958)	(23,434)
Payables due to related parties	(376)	(312)
Accounts payable	(665)	(3,373)
Other current liabilities	(40,624)	(40,247)
Total current liabilities	(132,297)	(131,832)
Non-current liabilities
Long-term debt	(1,555,348)	(1,337,013)
Total non-current liabilities	(1,555,348)	(1,337,013)
Total liabilities	(1,687,645)	(1,468,845)
Equity
Share capital (June 30, 2021: 54,110,584 (December 31, 2020: 54,110,584) shares issued, par value $0.10 per share)	(5,411)	(5,411)
Treasury shares (June 30, 2021: 827,344 (December 31, 2020: 202,797)	7,297	1,661
Additional paid in capital	(1,190,251)	(1,190,333)
Accumulated deficit	336,340	358,908
Total equity	(852,025)	(835,175)
Total equity and liabilities	(2,539,670)	(2,304,020)

The accompanying notes are an integral part of these consolidated financial statements.

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FLEX LNG Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

for the six months ended June 30, 2021 and 2020

(in thousands of $)

Six months ended
June 30,
2021	2020
Operating activities
Net income/(loss)	59,969	(21,534)
Adjustments to reconcile net income/(loss) to net cash provided by operating activities
Depreciation	33,361	17,171
Amortization of debt issuance costs.	2,380	863
Share-based payments	(82)	137
Foreign exchange loss/(gain)	43	1,582
Change in fair value of derivative instruments	(13,467)	28,021
Other	(4,137)	6,683
Changes in operating assets and liabilities, net:
Inventory	(419)	(552)
Trade accounts receivable, net	4,050	4,726
Accrued income	2,075	2,136
Prepaid expenses	8,809	(9,363)
Other receivables	1,241	(2,003)
Receivables due from related parties	(356)	(464)
Payables due to related parties	64	304
Accounts payable	(2,708)	(290)
Accrued expenses	1,100	(3,088)
Deferred charter revenue	(3,735)	(6,458)
Other current liabilities	2,914	19
Provisions	98	92
Net cash provided by operating activities	91,200	17,982
Investing activities
Purchase of other fixed assets	(2)	-
Purchase to vessels and equipment	(266,173)	106
Net cash provided by (used in) investing activities	(266,175)	106
Financing activities
Purchase of treasury shares	(5,636)	-
Repayment of long- term debt	(32,514)	(16,875)
Proceeds of revolving credit facility	181,448	48,684
Repayment of revolving credit facility	(137,763)	(49,342)
Proceeds from long-term debt	223,290	-
Financing costs	(1,269)	(6,538)
Dividends paid	(37,401)	(5,411)
Net cash provided by (used in) financing activities	190,155	(29,482)
Effect of exchange rate changes on cash	65	(1,711)
Net (decrease) increase in cash, cash equivalents and restricted cash	15,245	(13,105)
Cash, cash equivalents and restricted cash at the beginning of the period	128,962	129,098
Cash, cash equivalents and restricted cash at the end of the period	144,207	115,993
Supplemental Information
Interest paid, net of amounts capitalized	21,652	19,265
Income tax paid	95	-

The accompanying notes are an integral part of these consolidated financial statements.

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FLEX LNG Ltd.

UNAUDITED INTERIM CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

for the six months ended June 30, 2021 and 2020

(in thousands of $, except number of shares)

Six months ended
June 30,
2021	2020
Number of shares outstanding
At beginning of period	53,907,787	54,110,584
Shares issued	-	-
Treasury shares purchased	(624,547)	-
At end of period	53,283,240	54,110,584
Share capital
At beginning of period	5,411	5,411
Shares issued	-	-
At end of period	5,411	5,411
Treasury shares
At beginning of period	(1,661)	-
Treasury shares purchased at cost	(5,636)	-
At end of period	(7,297)	-
Additional paid in capital
At beginning of period	1,190,333	1,190,049
Shares issued	-	-
Stock option expense	(82)	137
At end of period	1,190,251	1,190,186
Accumulated deficit
At beginning of period	(358,908)	(356,195)
Net income/(loss)	59,969	(21,534)
Dividends paid	(37,401)	(5,410)
At end of period	(336,340)	(383,139)
Total equity	852,025	812,458

The accompanying notes are an integral part of these consolidated financial statements.

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FLEX LNG Ltd.

NOTES TO THE UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. GENERAL

FLEX LNG Ltd. ('FLEX LNG' or the 'Company') is a limited liability company, originally incorporated in the British Virgin Islands in September 2006 and re-domiciled to Bermuda in June 2017. The Company is currently listed on the Oslo and New York Stock Exchanges under the symbol 'FLNG'. The Company's activities are focused on seaborne transportation of liquefied natural gas ('LNG') through the ownership and operation of fuel efficient, fifth generation LNG carriers. As of June 30, 2021, the Company had thirteen LNG carriers in operation.

2. ACCOUNTING POLICIES

Basis of accounting

The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company's audited consolidated financial statements and, in the opinion of management, include all material adjustments, consisting only of normal recurring adjustments considered necessary for a fair statement of the Company's consolidated financial statements, in accordance with accounting principles generally accepted in the United States of America ('U.S. GAAP'). The unaudited interim condensed consolidated financial statements should be read in conjunction with the annual consolidated financial statements and notes included in our Annual Report on Form 20-F for the year ended December 31, 2020, filed with the Securities and Exchange Commission (the 'SEC') on March 17, 2021.

The unaudited interim condensed consolidated financial statements do not include all the disclosures required in an Annual Report on Form 20-F.

Significant accounting policies

The accounting policies adopted in the preparation of the unaudited condensed consolidated interim financial statements are consistent with those followed in the preparation of the Company's annual financial statements for the year ended December 31, 2020.

3. RECENT ACCOUNTING PRONOUNCEMENTS

In March 2020, the FASB issued ASU 2020-04 (ASC 848 Reference Rate Reform), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update are elective and apply to all entities, subject to meeting certain criteria, that have contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this update are effective for all entities as of March 12, 2020 through December 31, 2022. We are currently evaluating the impact of electing the expedients and exceptions for applying GAAP provided by the update on our Condensed Consolidated Financial Statements.

Other recently issued accounting pronouncements are not expected to materially impact the Company.

4. EARNINGS PER SHARE

Basic earnings per share amounts are calculated by dividing the net income/(loss) by the weighted average number of ordinary shares outstanding during that period.

Diluted earnings per share amounts are calculated by dividing the net income/(loss) by the weighted average number of shares outstanding during the period, plus the weighted average number of ordinary shares that would be issued on conversion of all the dilutive potential ordinary shares into ordinary shares. If in the period there was a loss then any potential ordinary shares have been excluded from the calculation of diluted loss per share, because the effects were anti-dilutive.

The following reflects the net income/(loss) and share data used in the earnings per share calculation.

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FLEX LNG Ltd.

(in thousands of $, except share data)	Six months ended
June 30,
2021	2020
Net income/(loss)	59,969	(21,534)
Weighted average number of ordinary shares	53,487,062	54,110,584
Share options	156,000	-
Weighted average number of ordinary shares, adjusted for dilution	53,643,062	54,110,584
Net income/(loss) per share:
Basic and diluted	1.12	(0.40)

5. CASH, CASH EQUIVALENTS AND RESTRICTED CASH

The following identifies the balance sheet line items included in cash, cash equivalents and restricted cash as presented in the consolidated statements of cash flows:

(in thousands of $)	June 30,	December 31,
2021	2020
Cash and cash equivalents	144,151	128,878
Restricted cash	56	84
Cash, cash equivalents and restricted cash	144,207	128,962

Restricted cash consists of cash that is restricted by law for the Norwegian tax authorities in relation to social security of employees.

6. OTHER CURRENT ASSETS

Other current assets includes the following:

(in thousands of $)	June 30,	December 31,
2021	2020
Trade accounts receivable, net	-	4,050
Accrued income	3,949	6,024
Prepaid expenses	2,535	11,344
Other receivables	2,402	3,643
Total other current assets	8,886	25,061

Trade accounts receivable are presented net of allowances for doubtful accounts amounting to $nil as of June 30, 2021 (December 31, 2020: $nil).

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FLEX LNG Ltd.

7. OTHER CURRENT LIABILITIES

Other current liabilities includes the following:

(in thousands of $)	June 30,	December 31,
2021	2020
Accrued expenses	(15,113)	(14,013)
Deferred charter revenue	(21,606)	(25,341)
Other current liabilities	(2,971)	(57)
Provisions	(934)	(836)
Total other current liabilities	(40,624)	(40,247)

8. VESSEL PURCHASE PREPAYMENTS

The table below summarizes the movement in vessel purchase prepayments applicable to the Company for the six months ended June 30, 2021 and twelve months ended December 31, 2020.

(in thousands of $)	June 30,	December 31,
2021	2020
At beginning of period	289,600	349,472
Deposits to vessels purchase prepayments	-	125,800
Transfer to vessels and equipment	(289,600)	(185,672)
At end of period	-	289,600

9. VESSELS AND EQUIPMENT, NET

Movements in the six months ended June 30, 2021 for vessels and equipment, net is summarized as follows:

(in thousands of $)	Vessels and equipment	Dry docks	Total
Cost
At December 31, 2020	1,919,441	25,000	1,944,441
Additions	347	-	347
Newbuildings	547,926	7,500	555,426
Disposals	-	-	-
At June 30, 2021	2,467,714	32,500	2,500,214
Accumulated depreciation
At December 31, 2020	(80,370)	(7,610)	(87,980)
Charge	(30,369)	(2,989)	(33,358)
Disposals	-	-	-
At June 30, 2021	(110,739)	(10,599)	(121,338)
Net book value
At December 31, 2020	1,839,071	17,390	1,856,461
At June 30, 2021	2,356,975	21,901	2,378,876

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FLEX LNG Ltd.

In January 2021, the Company successfully took delivery of its eleventh LNG carrier, Flex Freedom, which was constructed at Daewoo Ship building and Marine Engineering Co. Ltd. ('DSME') in South Korea. Flex Freedomwas capitalized at a cost of $189.1 million, of which $181.6 million was reclassified from Vessel purchase prepayments. The capitalized cost includes the fixed purchase price of $186.0 million as per the purchase agreement and $3.1 million relating to change orders, pre-delivery crew expenses, fit out, spares and studies.

In January 2021, the Company successfully took delivery of its twelfth LNG carrier, Flex Volunteer, which was constructed at Hyundai Samho Heavy Industries Co. Ltd. ('HSHI') in South Korea. Flex Volunteerwas capitalized at a cost of $182.9 million, of which $54.0 million was reclassified from Vessel purchase prepayments. The capitalized cost includes the fixed purchase price of $180.0 million as per the purchase agreement and $2.9 million relating to change orders, pre-delivery crew expenses, fit out, spares and studies.

In May 2021, the Company successfully took delivery of its thirteenth LNG carrier, Flex Vigilant, which was constructed at HSHI in South Korea. Flex Vigilantwas capitalized at a cost of $183.4 million, of which $54.0 million was reclassified from Vessel purchase prepayments. The capitalized cost includes the fixed purchase price of $180.0 million as per the purchase agreement and $3.4 million relating to change orders, pre-delivery crew expenses, fit out, spares and studies.

The net book value of vessels that serve as collateral for the Company's long-term debt (Note 11) was $2,378.9 million as at June 30, 2021 (December 31, 2020: $1,856.5 million). The net book value of the vessels Flex Rainbow, Flex Enterprise, Flex Endeavourand Flex Amber further referred to in Note 11 was $737.0 million as at June 30, 2021 (December 31, 2020: $748.5 million).

10. COMMITMENTS AND CONTINGENT LIABILITIES

Capital commitments and contingent liabilities for the Company as at June 30, 2021 are summarized in the table below.

(in thousands of $)	1 year	2 years	3 years	4 years	5 years	Thereafter	Total
Long-term debt obligations	82,522	85,375	180,002	259,653	422,473	623,692	1,653,717
Total	82,522	85,375	180,002	259,653	422,473	623,692	1,653,717

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FLEX LNG Ltd.

11. SHORT TERM AND LONG-TERM DEBT

(in thousands of $)	June 30,	December 31,
2021	2020
U.S. dollar denominated floating rate debt
$250 Million Term Loan Facility	226,563	232,813
$50 million term loan under $100 Million Facility	45,396	46,711
Flex RainbowSale and Leaseback	135,844	139,781
$629 million term loan facility	627,383	513,200
Flex AmberSale and Leaseback	152,050	156,400
$100 million term loan under $125 Million Facility	98,438	-
Total U.S. dollar floating rate debt	1,285,674	1,088,905
U.S. dollar denominated fixed rate debt
Hyundai Glovis Sale and Charterback	277,647	283,643
Total U.S. dollar denominated fixed rate debt	277,647	283,643
U.S. dollar denominated revolving credit facilities
$50 million revolving tranche under $100 Million Facility	65,396	46,711
$25 million revolving tranche under $125 Million Facility	25,000	-
Total U.S. dollar denominated revolving credit facilities	90,396	46,711
Total debt	1,653,717	1,419,259
Less
Current portion of debt	(82,522)	(68,340)
Long-term portion of debt issuance costs	(15,847)	(13,906)
Long-term debt	1,555,348	1,337,013

Flex RainbowSale and Leaseback

In July 2018, the Company, through its wholly-owned subsidiary, Flex LNG Rainbow Ltd., which owned Flex Rainbow, entered into a sale and leaseback transaction (the 'Flex RainbowSale and Leaseback'), for the vessel with a Hong Kong-based lessor for a lease period of 10 years. The gross sales price under the lease was $210 million, of which $52.5 million represented advance hire for the 10 years lease period. The agreement includes fixed price purchase options, whereby we have the option to re-purchase the vessel on or after the second anniversary of the agreement, and on each anniversary thereafter, until the end of the lease period. The bareboat rate payable under the lease has a fixed element, treated as principal repayment, and a variable element based on LIBOR plus a margin of 3.50% per annum calculated on the outstanding under the lease. The facility includes a covenant that requires us to provide additional security, by way of a deposit, as necessary to maintain the fair market value of the vessel at not less than a specified percentage of the principal amount outstanding under the lease. As of June 30, 2021, the net outstanding balance under the lease was $135.0 million (December 31, 2020: $138.8 million).

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FLEX LNG Ltd.

$250 Million Term Loan Facility

In April 2019, the Company, through two of its vessel owning subsidiaries, entered into a $250 million secured term loan facility (the '$250 Million Term Loan Facility') with a syndicate of banks for the part financing of the newbuildings Flex Constellationand Flex Courageous. The first $125 million tranche was drawn in June 2019 upon delivery of Flex Constellation, and the remaining $125 million tranche was drawn in August 2019 upon delivery of Flex Courageous. The facility has a term of five years from delivery of the last vessel, Flex Courageous, and bears interest at LIBOR plus a margin of 2.35% per annum. The facility contains a minimum value clause, and financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million and an amount equal to 5% of our total interest bearing debt net of any cash and cash equivalents. As of June 30, 2021, the net outstanding balance under the facility was $225.1 million (December 31, 2020: $230.9 million).

$100 Million Facility

In July 2019, the Company, through one of its vessel owning subsidiaries, entered into a $100 million term loan and revolving credit facility (the '$100 Million Facility') with a syndicate of banks to refinance the vessel Flex Ranger. The new facility is divided into a $50 million term loan and a $50 million revolving credit facility. The facility has a term of five years and bears interest of LIBOR plus a margin of 2.25% per annum. The facility contains a minimum value clause, and financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million and an amount equal to 5% of our total interest bearing debt net of any cash and cash equivalents. As of June 30, 2021, the net outstanding balance under the facility was $110.7 million (December 31, 2020: $93.3 million).

In March 2021, the Company signed an addendum to the $100 Million Facility, whereby the revolving tranche under the facility was increased by $20 million. The $20 million increase is non-amortizing and bears interest at LIBOR plus a margin of 2.25% per annum for any drawn amounts.

As of June 30, 2021, the total available commitment under the revolving tranche of the $100 Million Facility of $65.4 million was fully drawn. This is split as $45.4 million and $20.0 million between the amortizing and non-amortizing portions, respectively.

Hyundai Glovis Sale and Charterback

In April 2019, the Company, through two of its vessel owning subsidiaries, entered into sale and time charter agreements with Hyundai Glovis Co. Ltd. ('Hyundai Glovis') for the vessels Flex Endeavourand Flex Enterprise(the 'Hyundai Glovis Sale and Charterback'). The transactions were executed at the end of July 2019, whereby the vessels were sold for a gross consideration of $210 million per vessel, with a net consideration of $150 million per vessel adjusted for a non-amortizing and non-interest bearing seller's credit of $60 million per vessel. The vessels have been chartered back on a time-charter basis to the vessel owning subsidiaries for a period of 10 years. The agreements include fixed price purchase options, whereby the Company will have annual options to acquire the vessels during the term of the time-charters. The first option is exercisable on the third anniversary of closing of the transactions and the last option at expiry of the 10 years charter periods. At the end of the 10 years charter periods, Hyundai Glovis will have the right to sell the vessels back to the Company for a net consideration of $75 million per vessel, net of the $60 million seller's credit per vessel. As of June 30, 2021, the total net outstanding balance under the leases was $275.5 million (December 31, 2020: $281.3 million).

$629 Million Term Loan Facility

In February 2020, the Company, through five of its vessel owning subsidiaries, entered into a $629 million term loan facility (the '$629 Million Term Loan Facility'), with a syndicate of banks and the Export-Import Bank of Korea ('KEXIM') for five newbuildings scheduled for delivery during 2020. The facility is divided into a commercial bank loan of $250 million (the 'Commercial Loan'); a KEXIM guaranteed loan, funded by commercial banks, of $189.1 million (the 'KEXIM Guaranteed Loan'); and a KEXIM direct loan of $189.9 million (the 'KEXIM Direct Loan').

The amount available for drawdown upon delivery of each vessel is limited to the lower of (i) 65% of the fair market value of the relevant vessel and (ii) $125.8 million. The facility includes an accordion option of up to $10 million per vessel subject acceptable long-term employment, which was utilized to increase the Commercial loan on the Flex Artemis by $10 million in July 2020.

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FLEX LNG Ltd.

The Commercial Loan bears interest at LIBOR plus a margin of 2.35% per annum and has a final maturity date being the earlier of (i) 5 years from delivery of the final vessel or (ii) November 30, 2025. The KEXIM Guaranteed Loan bears interest at LIBOR plus a margin of 1.20% per annum and the KEXIM Direct Loan at LIBOR plus a margin of 2.25% per annum. The KEXIM Guaranteed Loan has a term of 6 years from delivery of each vessel and the KEXIM Direct Loan a term of 12 years from delivery of each vessel, provided however that these loans will mature at the same time as the Commercial Loan if the Commercial Loan has not been refinanced at terms acceptable to the lenders.

The facility includes a minimum value clause, and financial covenants that will require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least 6 months, being the higher of $25 million and an amount equal to 5% of total interest bearing debt, net of any cash and cash equivalents.

In July 2020, the Company drew down $125.8 million in connection with the delivery of our seventh vessel, Flex Aurora.

In August 2020, the Company drew down $135.8 million in connection with the delivery of our eighth vessel, Flex Artemisand utilized the option under the facility to replace the newbuilding Flex Amberwith the sister vessel Flex Vigilant, scheduled for delivery in the second quarter of 2021.

In September 2020, the Company drew down $125.8 million in connection with the delivery of our ninth vessel, Flex Resolute.

In December 2020, the Company drew down $125.8 million in connection with the delivery of our eleventh vessel, Flex Freedom, which was delivered January 1, 2021. The final payment was deposited and pre-positioned into escrow accounts in December 2020, and recognized under vessel purchase prepayments until final payment upon delivery of the vessel.

In May 2021, the Company drew down $123.3 million in connection with the delivery of our thirteenth vessel, Flex Vigilant.

As of June 30, 2021, the net outstanding balance under the facility was $614.6 million (December 31, 2020: $502.8 million).

Flex AmberSale and Leaseback

In June 2020, the Company, through one of its vessel owning subsidiaries, entered into a sale and leaseback transaction (the 'Flex AmberSale and Leaseback') with an Asian based leasing house for the newbuilding Flex Amber, which is scheduled for delivery in 2020. Under the terms of the transaction, the vessel will be sold for a gross consideration of $206.5 million, with a net consideration of $156.4 million adjusted for an advance hire of $50.1 million. The vessel will be chartered back on a bareboat basis for a period of 10 years. The agreement includes fixed price purchase options, whereby the Company has options to re-purchase the vessel at or after the first anniversary of the agreement, and on each anniversary thereafter. At the end of the lease period, the Company has an obligation to purchase the vessel for $69.5 million. The bareboat rate payable under the lease has a fixed element, treated as principal repayment, and a variable element based on LIBOR plus a margin of 3.20% per annum calculated on the principal outstanding under the lease. The agreement includes financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least 6 months, of $25 million. As of June 30, 2021, the net outstanding balance under the lease was $150.2 million (December 31, 2020: $154.4 million).

$125 Million Facility

In June 2020, the Company, through one of its vessel owning subsidiaries, entered into a $125 million term loan and revolving credit facility (the '$125 Million Facility') with a syndicate of banks for the financing of the newbuilding, Flex Volunteer, which is scheduled for delivery in the first quarter 2021. The facility is divided into a $100 million term loan and a $25 million revolving credit facility. The facility bears interest at LIBOR plus a margin of 2.85% per annum and has a term of five years with an overall repayment profile of 20 years. The amount available for drawdown upon delivery of the vessel will be limited to the lower of (i) 65% of the fair market value the vessel and (ii) $125 million. The facility includes a minimum value clause, and financial covenants that require the Company, on a consolidated basis, to maintain: a book equity ratio of minimum 0.25 to 1; a positive working capital; and minimum liquidity, including undrawn credit lines with a remaining term of at least six months, being the higher of $25 million and an amount equal to 5% of our total interest bearing debt, net of any cash and cash equivalents.

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FLEX LNG Ltd.

In January 2021, the Company drew down $100 million under the term loan tranche of the $125 Million Facility upon delivery of our twelfth newbuilding LNG carrier, Flex Volunteer. The $25 million revolving tranche under the $125 Million Facility was not drawn upon delivery of the vessel.

As of June 30, 2021, the net outstanding balance under the facility was $122.0 million (December 31, 2020: $0.0 million), including the total available commitment under the revolving tranche of $25.0 million, which was fully drawn.

12. FINANCIAL INSTRUMENTS

Derivative instruments that economically hedge exposures are used for risk management purposes, but these instruments are not designated as hedges for accounting purposes.

Credit risk is the failure of the counterparty to perform under the terms of the derivative instrument. When the fair value of a derivative instrument is positive, the counterparty owes the Company, which creates credit risk for the Company. When the fair value of a derivative instrument is negative, the Company owes the counterparty, and, therefore, the Company is not exposed to the counterparty's credit risk in those circumstances. The Company minimizes counterparty credit risk in derivative instruments by entering into transactions with major banking and financial institutions. The derivative instruments entered into by the Company do not contain credit risk-related contingent features. The Company has not entered into master netting agreements with the counterparties to its derivative financial instrument contracts.

Market risk is the adverse effect on the value of a derivative instrument that results from a change in interest rates, currency exchange rates or commodity prices. The market risk associated with interest rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken.

The Company assesses interest rate risk by monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating economical hedging opportunities.

In order to reduce the risk associated with fluctuations in interest rates, the Company has entered into a total of 18 interest rate swap transactions, whereby LIBOR on an amortized notional principal of $722.1 million as per June 30, 2021 (December 31, 2020: $759.1 million), has been swapped to a fixed rate.

Our interest rate swap contracts as of June 30, 2021, of which none are designated as hedging instruments, are summarized as follows:

(in thousands of $)	Notional principal	Inception date	Maturity date	Fixed Interest Rate
Receiving floating, pay fixed	25,000	June 2019	June 2024	1.38	%
Receiving floating, pay fixed	50,000	June 2019	June 2024	2.15	%
Receiving floating, pay fixed	50,000	August 2019	June 2024	2.15	%
Receiving floating, pay fixed	25,000	September 2019	June 2024	1.40	%
Receiving floating, pay fixed	50,000	July 2020	July 2025	1.38	%
Receiving floating, pay fixed	25,000	July 2020	July 2025	1.22	%
Receiving floating, pay fixed	25,000	July 2020	July 2025	1.22	%
Receiving floating, pay fixed	75,000	July 2020	July 2025	1.39	%
Receiving floating, pay fixed	48,125	August 2020	August 2025	0.35	%
Receiving floating, pay fixed	24,063	August 2020	August 2025	0.35	%
Receiving floating, pay fixed	25,000	September 2020	September 2025	1.38	%
Receiving floating, pay fixed	35,000	September 2020	September 2025	1.03	%
Receiving floating, pay fixed	75,000	September 2020	September 2025	1.43	%
Receiving floating, pay fixed	25,000	September 2020	September 2025	0.37	%
Receiving floating, pay fixed	48,750	October 2020	October 2025	0.41	%
Receiving floating, pay fixed	41,146	February 2021	February 2026	0.45	%
Receiving floating, pay fixed	25,000	March 2021	June 2024	0.35	%
Receiving floating, pay fixed	50,000	June 2021	November 2025	0.74	%
722,084

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FLEX LNG Ltd.

At June 30, 2021, the Company had a liability of $13.0 million (December 31, 2020: $23.4 million) and asset of $3.1 million (December 31, 2020: $0.1 million) in relation to these interest rate swaps. The Company recorded a gain on the interest rate swaps of $10.2 million of which $13.5 million was unrealized gain in the six months ended June 30, 2021, compared to a loss of $28.6 million, of which $28.0 million was unrealized loss in the six months ended June 30, 2020.

13. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The principal financial assets of the Company at June 30, 2021 and December 31, 2020, consist primarily of cash and cash equivalents, restricted cash, other current assets, receivables due from related parties and derivative instruments receivable. The principal financial liabilities of the Company consist of payables due to related parties, accounts payable, other current liabilities, derivative instruments payable and secured long-term debt.

The fair value measurements requirement applies to all assets and liabilities that are being measured and reported on a fair value basis. The assets and liabilities carried at fair value should be classified and disclosed in one of the following three categories based on the inputs used to determine its fair value:

Level 1: Quoted market prices in active markets for identical assets or liabilities;

Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data;

Level 3: Unobservable inputs that are not corroborated by market data.

The fair value of the Company's cash and cash equivalents and restricted cash approximates their carrying amounts reported in the accompanying consolidated balance sheets.

The fair value of other current assets, receivables from related parties, payables due to related parties, accounts payable and other current liabilities approximate their carrying amounts reported in the accompanying consolidated balance sheets.

The fair value of floating rate debt has been determined using Level 2 inputs and is considered to be equal to the carrying value since it bears variable interest rates, which are reset on a quarterly or semi-annual basis. Carrying value of the floating rate debt is shown net deduction of debt issuance cost, while fair value of floating rate debt is shown gross.

The fixed rate debt has been determined using Level 2 inputs being the discounted expected cash flows of the outstanding debt.

The following table includes the estimated fair value and carrying value of those assets and liabilities.

(in thousands of $)	June 30,	December 31,
2021	2020
Fair value hierarchy level	Carrying value of asset (liability)	Fair value asset (liability)	Carrying value of asset (liability)	Fair value asset (liability)
Cash, cash equivalents	Level 1	144,151	144,151	128,878	128,878
Restricted cash	Level 1	56	56	84	84
Derivative instruments receivable	Level 2	3,100	3,100	109	109
Derivative instruments payable	Level 2	(12,958)	(12,958)	(23,434)	(23,434)
Floating rate debt	Level 2	(1,357,493)	(1,376,070)	(1,120,172)	(1,135,616)
Fixed rate debt	Level 2	(275,529)	(291,665)	(281,307)	(306,621)

There have been no transfers between different levels in the fair value hierarchy during the six months ended June 30, 2021.

Assets Measured at Fair Value on a Recurring Basis

The fair value (Level 2) of interest rate swap derivative agreements is the present value of the estimated future cash flows that we would receive or pay to terminate the agreements at the balance sheet date, taking into account, as applicable, fixed interest rates on interest rate swaps, current interest rates, forward rate curves and the credit worthiness of both us and the derivative counterparty.

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FLEX LNG Ltd.

Concentration of Risk

There is a concentration of credit risk with respect to cash and cash equivalents to the extent that substantially all of the amounts are carried with SEB (S&P Global rating: A+), Nordea (S&P Global rating: AA-), Danske Bank (S&P Global rating: A) and DNB (S&P Global rating: AA-).

14. RELATED PARTY TRANSACTIONS

Related Party Balances

A summary of balances due from/(to) related parties at June 30, 2021 and December 31, 2020 is as follows:

(in thousands of $)	June 30,	December 31,
2021	2020
Seatankers Management Co. Ltd	(22)	-
Frontline Ltd	486	135
Frontline Management (Bermuda) Limited	(43)	(29)
Frontline Corporate Services Ltd	(8)	(13)
Frontline Management AS	(66)	(33)
Flex LNG Fleet Management AS	(237)	(234)
SFL Corporation Ltd	-	(2)
Northern Ocean Limited	36	31
Golden Ocean Management AS	-	(1)
Related party balance	146	(146)

Related Party Transactions

A summary of (expenses)/income incurred from related parties is as follows:

(in thousands of $)	Six months ended
June 30,
2021	2020
Seatankers Management Co. Ltd	(22)	(112)
Seatankers Management Norway AS	(44)	(40)
Frontline Management (Bermuda) Limited	(133)	(45)
Frontline Management AS	(130)	(81)
Flex LNG Fleet Management AS	(1,666)	(743)
SFL Corporation Ltd	-	(2)
Northern Ocean Limited	2	-
FS Maritime SARL	(257)	(75)
Total related party transactions	(2,250)	(1,098)

In January 2021, the Company made a final payment of $130.5 million to a related party of Geveran Trading Company Ltd ('Geveran'), our largest shareholder, upon the delivery of our eleventh LNG carrier Flex Freedom. In December 2020, the Company pre-positioned and deposited $125.8 million of the $130.5 million final payment into escrow accounts, which were released for payment upon delivery of the vessel in January 2021.

In January 2021, the Company made a final payment of $127.0 million to a related party of Geveran upon the delivery of the twelfth LNG carrier Flex Volunteer.

In May 2021, the Company made a final payment of $127.0 million to a related party of Geveran upon the delivery of the thirteenth LNG carrier Flex Vigilant.

For more information see Note 8: Vessel Purchase Prepayments and Note 9: Vessels and Equipment, Net.

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FLEX LNG Ltd.

General Management Agreements

We have an administrative services agreement with Frontline Management AS ('Frontline Management') under which they provide us with certain administrative support, technical supervision, purchase of goods and services within the ordinary course of business and other support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. Frontline Management may subcontract these services to other associated companies, including Frontline Management (Bermuda) Limited. In the six months ended June 30, 2021, we paid Frontline Management and associated companies $0.3 million for these services (June 30, 2020: $0.1 million).

We also have an agreement with Seatankers Management Co. Ltd. ('Seatankers') under which it provides us with certain advisory and support services, for which we pay our allocation of the actual costs they incur on our behalf, plus a margin. In the six months ended June 30, 2021, we paid Seatankers $0.1 million for such services (June 30, 2020: $0.2 million).

Technical Management and Support Services

In October 2019, Flex LNG Fleet Management AS, a related party owned by Frontline Ltd., received a document of compliance under the ISM Code, qualifying it for technical ship management services. Flex LNG Fleet Management AS is responsible for the technical ship management of all of our vessels. Under the agreements between Flex LNG Fleet Management AS and our vessel owning subsidiaries, Flex LNG Fleet Management AS is paid a fixed fee of $272,500 per vessel per annum for the provision of technical management services for each of our vessels in operation. The fee is subject to annual review. During the six months ended June 30, 2021, we paid $1.7 million to Flex LNG Fleet Management AS for these services (June 30, 2020: $0.7 million).

Consultancy Services

In April 2020, Flex LNG Management Ltd entered into a consultancy agreement with FS Maritime SARL for the employment of our Chief Commercial Officer. The fee is set at a maximum of CHF437,995 per annum and is charged on a pro-rated basis for the time allocation of consultancy services incurred. During the six months ended June 30, 2021, we paid $0.3 million to FS Maritime SARL for these services (June 30, 2020: $0.1 million).

15. SHARE CAPITAL

The Company had an issued share capital at June 30, 2021 of $5.4 million divided into 54,110,584 ordinary shares (December 31, 2020: $5.4 million divided into 54,110,584 ordinary shares) of $0.10 par value.

16. TREASURY SHARES

On November 19, 2020, the Company's Board of Directors authorized a share buy-back program of up to an aggregate of 4,110,584 of the Company's ordinary shares for the purpose of increasing shareholder value. The maximum amount to be paid per share is $10.00, or equivalent in NOK if bought at the Oslo Stock Exchange. The Company is not obligated under the terms of the program to repurchase any of its ordinary shares. The program commenced on November 19, 2020 and will end on November 19, 2021.

In February 2021, the Company's Board of Directors authorized to increase the maximum amount to be paid per share under the share buy-back program from $10.00 to $12.00, or equivalent in NOK if bought at the Oslo Stock Exchange. The other terms of the program remain unchanged.

In May 2021, the Company's Board of Directors authorized to increase the maximum amount to be paid per share under the share buy-back program from $12.00 to $14.00, or equivalent in NOK if bought at the Oslo Stock Exchange. The other terms of the program remain unchanged.

As of June 30, 2021, we have repurchased 827,344 shares at an aggregate cost of $7.3 million pursuant to the buy-back program approved on November 19, 2020. At June 30, 2021, the number of remaining shares that can be purchased under the buy-back program was 3,283,240.

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FLEX LNG Ltd.

17. ADDITIONAL PAID IN CAPITAL

In June 2021, the Company reversed the previously recognized compensation cost of 30,000 share options due to forfeitures of these awards due to personnel leaving, three months after the requisite service period ended, pursuant to the Company's share option award policy.

18. SUBSEQUENT EVENTS

Between July and September 1, 2021, the Company repurchased 152,656 shares, under its buy-back program, at an aggregate cost of $2.2 million, bringing the total aggregate amount repurchased to 980,000 shares as of September 1, 2021.

In August 2021, an option was declared extending the variable rate time charter with an international energy major for Flex Amber, by an additional one year. The time charter was originally due to expire in the third quarter 2021 and will now expire in the third quarter 2022. The charterer has the option to extend the time charter by an additional one year period.

On August 16, 2021, the Company's Board of Directors declared a cash dividend for the second quarter of 2021 of $0.40 per share. The dividend will be paid on or around September 16, 2021, to shareholders on record as of September 2, 2021. The ex-dividend date was September 1, 2021.

On August 16, 2021, the Board of Directors authorized to increase the maximum amount to be paid per share under the Company's buy-back program from $14.00 to $15.00, or equivalent in NOK if bought at the Oslo Stock Exchange. The other terms of the program remain unchanged.

On August 16, 2021, the Company issued 585,000 share options to members of top management. The share options will have a five-year term from September 7, 2021, with a three-year vesting period, whereby: 25% will vest after one year; 35% will vest after two years; and 40% will vest after three years. The options have an exercise price of: $14.00 for those vesting after one year; $15.60 for those vesting after two years; and $17.20 for those vesting after three years. The weighted average strike price of the options is $15.84 per share. The exercise price will be adjusted for any distribution of dividends made before the relevant options expire. The following allocation of options have been made:

•Øystein Kalleklev, CEO of Flex LNG Management AS, has been allocated 250,000 options;

•Halfdan Marius Foss, Head of Commercial Flex LNG Management AS, has been allocated 185,000 options;

•Knut Traaholt, CFO of Flex LNG Management AS, has been allocated 120,000 options; and

•Fergus Bristow, CAO of Flex LNG Management Ltd, has been allocated 30,000 options.

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