Q2 2020 SFL Corporation Ltd Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the SFL Corporation earnings Conference call.
At this time all participants.
After the speaker presentation, they'll be a question answer session.
Good question during the session you'll need to press.
Right.
The conference is being because its day.
The conference I, but you'll see could stay.
Yes.
So.
Thank you and welcome.
Second quarter conference call I will start to crude by briefly going through the highlights for the quarter.
Yeah, so when it will take us through the financials unequal let me conclude in my opening up for questions.
Before we begin or presentation I'd love to note that this conference call will contain forward looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 words, such as expects anticipates intends estimates or similar expressions are intended to identify these.
Forward looking statements. These statements are based on our current some expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward looking statements.
Factors that could cause actual results to differ includes conditions and the shifting offshore in credit buckets for further information. Please refer to SFS reports and filings with the Securities and Exchange Commission.
[noise] dividends was 25 cents per share represent the dividend yield of around 10.5% based on closing price yesterday, and this or 66 quarter with dividends over.
Over the years, we've paid more than $27 per share in dividends were 2.3 billion in total and we have a significant fixed rate charter back to support continued dividend capacity going forward.
The total charter revenues to $158 million was in line with the first quarter with more than 90% or this from vessels on long term charters and less than 10% from vessels employed on short term charters on in the spot market.
Customers a current on the charter payments and we have good cash flow visibility into the current quarter.
The EBIT da equivalent cash flow into quarter was approximately $121 billion and last 12 months. The EBITDA equivalent cash flow has been approximately $481 million demonstrating the stability.
With a very large proportion of long term charters. Some the fact that all customers are currently charter payments the underlying business remains robust and cash position was more than $150 million after repayment of up on loan in June.
In addition, we had $35 million in marketable securities at quarter end.
Or fixed rate backlog stands at approximately $3.4 billion. After recent vessels acquisitions charter extensions and vessel sales, providing cash flow visibility going forward.
We have been cautious in light of the uncertainty caused by the Colvin 19 outbreak, but in my May we acquired a new built VLCC with long term charter.
The net purchase price was $65 million, which is significantly below current broker estimates for VLCC resales, effectively providing SFL with a very attractive risk profile.
We're chartering counterparty and the non bridge group has secured a three year sub charter to an oil major providing good cash flow visibility.
There are a purchase options for the charter during the charter period first time after three years and at the end of the charter there is a purchase obligation.
The net contribution after debt service during the first three years is estimated to more than $4 million, an average, but full cash for FX from this quarter.
We have been active extending charters on our existing fleet and so far this year, we have added $172 million to we're trying to backlog what existing vessels.
$38 million was linked to an extension agreed in the second quarter for seven container vessels, we extended by another 4.5 years.
And with the large fleet of assets, there will always be acquisitions on disposals and two of the vessels on charter to the Hunter group has been repurchased by that.
100 deals was to sign to give us a very high return on low risk profile in exchange for flexibility on hunters point.
This is a good example of a cost of capital arbitrage will be we could utilize our premium access to low cost funding and at the same time give flexibility that hunter was willing to pay for.
Delivery took place earlier today, and the cash sauces $23 million repayment of the associated financing and there was one vessel remaining with Hunter inner fleet after that.
We have also been active in the financing market over the last months and I've addressed most of the financing maturities this year.
Terms have been attractive and we have seen lower all in interest cost than ever before despite the general market volatility.
We believe part of the reason for this is to consistent performance SFL the loss 16 years, and our ability to source capital from a much wider market than most other maritime companies.
During the second quarter, we refinanced for large container vessels that historic low interest cost, we sort $50 million, so nonrecourse financing on than on the new VLCC, we acquired and we repaid the Norwegian kroner denominated bond loan due in June from our cash position.
The co bit 19, pandemic Cas cost massive disruptions in most transportation markets and for us offshore assets.
As early as January we implemented a robust emergency management plan with the goal of ensuring the health and safety over crew on board the vessels and onshore while maintaining our business operations as efficiently as possible.
In addition to our own requirements all proving managers are following the guidance issued by the World Health organization and international Chamber of shipping to ensure that the proper protocol sorry place on board the vessels.
We are hosting regular meetings with all crewing managers and older sectors to discuss and handle any issues in particular challenging facing a crew and safe operations as they arise.
Well, we have good strong protocols in place on border vessels during the normal ship in port operations or biggest concern instrument crude changes.
Logistics challenges of testing and moving people across borders safely without infection are enormous and in many countries imports such movements not even allow.
This means that you have had to postpone crude changes and extend the contracts. So many of our CFR us over this period after the outbreak.
Well they have shown great understanding of the situation. There are many individuals who have suffered due to this and we acknowledge their vital contribution in this challenging times.
In addition to crude transfers we have also experienced some delays and shipyards in connection with Drydockings scrubber retrofitting of vessels.
85 vessels currently only three are idle.
And we have seen some improvements in the market in several of the segments.
Recently.
After all the vessels more exposed to near term market developments represent less than 10% over charter revenues and the 90% fixed rate revenues from more insulated to short term market movements close by.
Effects.
That we could not predict.
Despite the impact of covered 19 on global trade. All are Counterparties are currently charter hire payments with good visibility for the current quarter as mentioned before.
But we will of course continue to closely monitor developments in our customers end markets in order to be able to react quickly to any potential business disruptions.
Following the recent charter extensions sort charter backlog now stands at approximately 3.4 billion and of this more than two $420 million has been add that the last 12 months over the years, we have changed both fleet composition as structure and we now have 85 assets in our portfolio.
And no vessels remaining from the initial fleet in 2004.
You have gone from a single asset class charted to one single customer to our diversified fleet and multiple counterparties and over time the mix of the try to backlog has varied from 100% tankers to nearly 60% offshore at one stage two container being the largest segment now with 55% of the backlog.
We do not have a set mixed in the portfolio focuses on evaluating deal opportunities across the segments and tried to do the right to sections from a risk reward perspective.
Overtime, we believe this will balance itself.
What we tried to be careful and conservative in our investments and not just invest with gross margin is burning in our pockets.
With the exception so two car terrorist that are currently idle into shipping space, all or their assets are generating cash flow some segments like the drybulk market and containership market. That's also improved over the last few months.
The commercial market, however remains very challenging.
We have three weeks on charter to Seadrill at two of the rigs are harsh environment units working in the North Sea Best Lino sub chartered to Conoco Phillips on a very long charter until the end of 2028 and invest teresopolis.
Semi submersible is sub chartered to ignore until next year.
In addition, there are some options for equity to work for extended the employment.
The third rig towers is idle and laid up in Norway.
Seadrill this paying the agreed charter hire on all three rigs and we continue reducing the debt on the rigs Sps schedule. This means that we have reduced debt by nearly 30% Seadrill filed for chapter 11 in 2017.
Seadrill has disclosed studies currently engaged in discussions with its lenders to provide operational flexibility and additional near term liquidity.
We believe it will be an all stakeholders interest to have a financially stronger counterparty and we are in a constructive.
Hi, Ken Unfortunately, not comment anymore on this right now.
But given our fleet composition most of our cash flow comes from shipping assets and unlike most other companies with a financing profile in the maritime World nearly two thirds of our cash flow comes from vessels on time charter and only a third from bareboat chartered assets.
Our strategy has been to maintain a strong technical and commercial operating platform incorporation with our sister companies Indicee tankers group.
This gives us the ability to offer a wider range of services to our customers from structured financing to full service time charters, but more importantly, we also believe it gives us unique access to deal flow inner core segments.
With that I will give the what over to our CFO Mr. Wilson, who will take us through the financial highlights for the quarter.
Thank you ms. yet okay.
On this slide yes, solar pro forma illustration of cash flows for second quarter.
Please note that this is on that guideline to assess the company's before.
And it's not in accordance with you again and also net of extraordinary and non cash items.
The covenant generated gross charter hire of approximately 168 million in the second quarter.
With more than 90% of the revenue coming from our fixed charter rates backlog.
Which currently stands.
Good handler, providing us the strongest ability on the cash flow going forward.
The line the feed generated gross charter hire for approximately 18 million.
This amount approximately 97% through from our vessels or long term charters.
At the end of the quarter as of the fleet sector was approximately 1.8 billion.
Rich remaining charge in term of approximately five years, where approximately eight year weighted but fact revenue.
Approximately 84% of design the backlog.
The world's largest lines liner operators Myrisk line and then Missy.
During the quarter fill extended its charters for seven 4100 to you container vessels.
Missy.
Third quarter of 20 to 25.
The extension added approximately 38 million since it fills fixed charter rate backdrop.
Thank you Peter generated approximately 27 million in gross charge higher.
Using 4.5 million in profit split contribution from our two vlccs on charter different side.
The two vlccs earned approximately $72000 on average per trading day in the second quarter.
And during the quarter the vessel commenced new time charters.
So this would trade until the fourth quarter at similar rates.
Ensuring stability on quarterly profits with contribution also run next two quarters.
As for Suezmax tankers revenue was down for the quarter.
The vessels uneven special survey scrubber retrofit installations.
During the quarter.
Furthermore, the company acquired the Twentytwenty build scrubber seated VCC laundry system in combination with a seven year bareboat charter lavish group.
This was delivered in May.
Charter for two years since oil major on time talked to basis.
The acquisition close to 65 million was financed by 50 million on recourse debt facility.
Just section will a tool earnings afek in the third quarter.
Today August 18, Twentytwenty the comp the redelivered to this exceeds the group authentic duration of purchase options.
Thanks, and increased at the filled cash balance by approximately $23 million.
During the second quarter Drybulk fleet generated approximately 26 million.
Of this amount approximately 84% will survive from our vessels long term talkers and approximately 16% through.
So some short term charters.
More profit contribution from our Capesize vessels on starts to go notion during the quarter.
Colin 19th and then make negatively impacted drybulk demand.
Anything relative logistical issues, including portfolio first quarter in time restrictions.
The soft troubled markets also impacted the revenue on a 10 vessels trading in a short term mark.
At the end of the second quarter NFL on three drilling rigs.
Well for drilling rigs or long term bareboat charters to fully guarantee the fielded Seadrill limited.
Again rated approximately 25 million in charter hire.
The harsh environment I could brigus sinus subcharter to clinical Phillips until the end of 10 to 28.
Harsh environment Semisubmersible rig this focus is employed consecutive shorter term subcontract tick nor in the north sea.
Semisubmersible rig.
Total is currently in lift in Norway.
This summarizes and adjusted EBITDA, approximately 121 million for second quarter or $1.11 cents per share.
It is in line with you this quarter.
And then move on to the profit then we'll statement as reported on the Euroscan.
We have described Mpvs earnings calls are counting statements are different from those of the traditional shipping company.
Thats our business strategy focuses on long term talk to contract.
A large part of our activities are classified as capital leasing.
As a result, a significant portion of our charter revenues are excluded from U.S GAAP operating revenues.
Instead the.
Revenues classified as repayment of investments in finance thesis loans.
Missiles, and this also a long term investments and interest income from associate.
So for second quarter report total operating revenues according to schedule of approximately 118.5 million.
It is a smaller number on the $158 million talked are actually received recently just mentioned.
Furthermore, the company recorded a nonrecurring are noncash items, including negative mark to market effects related to interest hedging.
This was an equity investments accidents, when 3 million.
Payment of interest on the swaps 4.5 million.
Station of deferred charges of 2.6 million credit loss provision of 1.4 million.
Adjusted for these items.
Net income would have been sent to 7.8.
Yes.
So overall according to us.
The company reported net profit of 11.8 million or 11 cents per share.
Moving on to the bounce it in terms of liquidity. The company continues to have a solid cash cash position at approximately 152 million in cash and cash equivalents, excluding approximately 50 million held in sweetly owned Nonconsolidated subsidiaries.
In addition, the company also 8 million in restricted cash related to equity securities.
At quarter end, the comp and marketable securities of approximately 19 million net.
Just a repurchase obligations on securities.
This includes 1.4 million shares in frontline limited international investments unsecured bonds and other securities.
During the second quarter SSL sold approximately 2 million shares in frontline expanding the drop in the book value marketable securities.
This quarter.
And of the approximately 300 million or short term debt.
Submitted 200 million, it's really senior bank financing on the sell through at the fill unsecured charter extensions.
To 24, and 10 to 25 at attractive terms.
This includes fee 8700 to you container vessels on charter tumors.
Seven 4102 vessels on charter Tim Missy.
The balance of approximately 100 million is related to ordinary schedule loan amortization on a 16 million purchase obligation on the front bench here.
At quarter end SFL had said that vessel with a combined sort through value of approximately 30 million based on average broker appraisals.
So based on Q2, Twentytwenty seekers become the book equity ratio for approximately 25%.
That's a sunrise.
The board has declared a cash dividend of 25 cents for the quarter.
Which represents a dividend yield of approximately 10.5% based on the closing share price yesterday.
This is this.
Thank you do quarterly dividends since inception of the company in 2004 more than $27 per share $2.3 billion in aggregate and return to shareholders to dividends.
And well continue to collect revenue from 2.4 billion six our trade backlog.
The also.
Upside from corpus bit arrangements from RBC.
Listen to profits bit arrangements relates to Q savings.
Some of for large container vessels.
Despite the relatively volatile market Incented Sandy we have already added approximately $230 million fix short read backlog.
Continue to explore new business opportunities.
And while recent premiums and the Gen shipping investments have increased with the recent volatility international markets.
It's the same time risk new feed financing at all time low cost of debt.
And Thats continued to expand its group of lending banks.
As it does business model as continuously being tested throughout 16 years suffixes.
Let's be Sabine highly successful in navigating periods of volatility.
On the debt revert back to the operator, we'll open the lines for questions.
Thank you, ladies and gentlemen, if you would like to ask a question compressed.
Keith.
Turning to BNS.
If you'd like to cancel your request.
Okay.
Once again.
Good question.
Keith can so.
Your next question status on the line as Greg release.
Please go ahead.
Hi, Greg.
Good afternoon everybody.
All.
Kind of curious.
Yes.
You kind of touched on it and at the end of the prepared comments about.
The challenges that capital are having.
In your traditional.
Investments in your traditional investment wheelhouse, just kind of two questions around that one.
Could that trigger you to start Lucky now side of your.
Traditional wheelhouse SaaS conventional shipping.
And I guess first step back that that would be my first question.
Thanks.
You are absolutely correct.
We.
To understand that.
So.
We're not tied to one specific segment.
We have been focusing on the maritime space for for a number of years.
Costs. This is where we have seen more I would say deal flow and also where we've seen more deal flow and said, we also think maybe seeing deals before others see them.
Partly due to our affiliation with Mr. Fredrickson and welcome to say the deal flow that then you can say trickles down to us if there were a long term employment opportunities around that so so thats been thats been a nice that equal that way for us to generate business simply by being in the.
Based off of an information flow if you wish, but we're not quite to democratize space. We can we can move into other infrastructure I think the principal focus for us is to.
Have a have a structure have a deal flow.
To ensure that we can pay a predictable long term dividend to our to our shareholders with the right type of risk profile.
We we have so far not really ventured far away from the merchant our space.
I would say maybe one of the reasons could need that if you go into a new space, where we don't have will it an infant leverage on information.
We don't see the deals before others do.
The riskiest that we end up paying too much for we we take a deal after someone else's.
Before we access.
Too low return to get in but.
Again, it's all down to finding the right deals and we could do we could do them also outside the normal shipping space.
Okay, Great and then just kind of.
Asking that question a different way just given that the.
Lee.
Not the exit as but the lack of capital interested in the maritime space.
Seems like that we've seen develop over the last 12 to 18 months.
As I mean.
Has that has realized you haven't done a lot of transactions and the ongoing pandemic might have something to deal with it but have you started to notice any any increases in the potential returns of transactions you're looking at or is it kind of are we in an environment where.
Theres less capital, but theres still enough capital that's kind of keeping returns.
On that and kind of flattish world.
Yes.
Good point, an observation I think the way we see it is that.
Capital.
Shipping is priced correctly.
There's also.
Quality traditional lenders SAR are attracting from the market. So.
Together this less capital available on this in general is but the quality.
Develops.
We have gained two to even larger pool of bank.
We have access to capital lower cost.
Cost of capital.
Able to define transaction can take advantage of the capital costs arbitrage at the trick thats attractive risk reward.
Metric.
Good examples that is still recent language transaction required brand, new scrubber fitted VLCC $65 million.
On the payables basis.
On the client lenders group has.
Correct.
Shipping Tom talked a bit basis attached to it and we believe that very trustee attractive risk reward in terms of the capital raises deploy on the return are able to achieve and I think thats a trend that will continue going forward.
Okay. Thank you very much.
Thank you.
Thanks, Keith the next question is from the line of Randy given from Jefferies. Please go ahead.
Hi, gentlemen has gone.
Hi, good good Victor.
You as well.
All right I guess first just looking at the balance sheet, obviously is in great shape plenty of cash substantial free cash already booked for the subsequent quarters.
So I guess with that two questions on it can you provide some more details on the rationale for issuing 13 million or so of shares to the ATM.
And secondly are there certain kind of leverage ratios, you're looking to to get to in the near term or how do you kind of view your balance sheet at these levels.
Yes, I think first of all.
We issued relatively few shares compared to our share confidence, it's really quite marginal.
And.
Yeah, and part of that listening to a dividend reinvestment plan.
So so but yes, there are issues.
The important thing is really how can we make sure that we are investing capital in an accretive manner per share.
So for instance, when we did this CEO, we have we havent or turn on are invested equity, there, which is which is way higher than than the yield.
Specifically hair linked to a link to those shares we issued.
So the way we the way we look at it we look at transactions and then we find deals down at the asset level and then we saw it we have capital either resources from the bond market resources from the convertible market for the equity market and then we can use that as effective equity into the deeds.
So so this is this is theres nothing in particular relating to that it's really for us to ensure that we have an ongoing business that we can continue invest here in the long run we will be will tap the equipment various markets with the aim to create value per share.
Got it okay.
And then I guess next question in the presentation here you took out the slide on kind the offshore market and the drilling rigs. So I guess around that what is the kind of status of those it seems like that really is accounting for most of the risks and uncertainty around asset sale around the dividend what have you done for those CJR.
Your conversations is there a timeline maybe around these talks and it's the most likely scenario.
Possible charter reduction and extension or what are your thoughts on that.
Yes. The reason why we did put it in this this quarter risks that simply that hasn't rebounded median any change since since last quarter Crazy things are pretty much as same as they were then only differences that we have had another three months of cash flow and pay down debt associated to those assets.
And we guarantee around 50% of the outstanding loans relating to sort of the seadrill assets.
I kind of fortunate not really comment much on the Seadrill colon situation.
Apart from that we are we think it's sort of positive to into stronger counterparty.
And.
And we think it does make sense in the in the current environment to sort of trend balance sheet.
Two activity levels, what we are of course happy to see is that.
In an otherwise challenging offshore market two of our rigs are working one is on a very long term charter to clinical Phillips.
So so at least there are we have to.
The relative to your warm rates and active rigs in the harsh environment space today.
But I cannot guide you on timeline for four for Seadrill I'm sure. They will comment on that when they report I believe.
In a week or so.
Right.
I will then I guess last quick question for the tanker market you return to the hundred vessels and assuming the third soon.
Brought in one on the 2020 side.
Is that more of a strategic plan, just making sure you have that clunker presence or again was it just days sector agnostic kind of capital arbitrage play now you're really looking to grow the tanker clinker exposure here.
The last deal was appeal or capital cost of capital arbitrage. So it's just an opportunity where we can get in get a very attractive risk profile. We think we could sources efficient financing around that.
To generate the nice return on the capital we invest.
But of course, we know the tanker space very well and we don't mind investing in the tanker space with for the REIT structure.
What we what we have not seen though is a lot of long term chartering opportunities to end users.
So so so thats something we of course have been exploring we've looked at many opportunities as you can imagine.
But we cannot really comment on what we havent done specifically, but but we are we are active out there I think people know that we can do and we here we can both deliver everything from like the last deal cost of capital arbitrage to deliver a full service time charter products like to have with Phillips 66.
Where we have.
As our two product tankers on seven year time charters.
Sure.
Greg right Thats. It for me, Thanks, again hope all as well.
Thanks, a lot.
Thank you. Jason next question is from the line of Liam Burke from B. Riley. Please go ahead, yes. Thank you good afternoon.
Good afternoon.
You mentioned for obvious reasons covenants disrupted the market, but looking specifically in the container space rates and capacity is tightening rates are coming up things look to be a little farmer.
How does that translate when you're looking at deal flow here or things getting clear or do you do you see any more color or do you have any more confidence is looking at deals.
Yes. Thanks.
It's actually an interesting observation.
In recent today.
To me.
The way I look at it is that because the liner operators.
Hi, However, relative recent experience from the financial crisis in 2008, 2009, and the effects of that I think they've taken a very different approach approach to call. It the market disruption this time.
Back then.
Impression was that they were to focus was on utilization of the assets. It was also more fragmented business in the first place, but their focus was on utilization so.
Operator started cutting rates to ensure that the refilling.
The vessels.
Effect of that offset the demand side that drop inevitably.
So the effect was that one you had lower volume and you have lower lower revenues as well because of your cost cutting or show your charter and cutting measures. This time.
What the liner companies have done instead.
Volume.
I'm, blanking sailings and and by doing that therapy tremendous cost savings.
The operations also the fuel costs has been really positive further liner operators, that's really dropped the loss since pre covered 19. So.
So with that so if you then adjust for call. It the other negative effects, it's actually a positive and for instance.
One the the alliance the group they swung back with a massive improvement in profits in the first quarter as a result, so this MBS. We're also seeing as I'm sure I'm sure you also follow closely.
The Ace Us East coast pricing at record high levels. So what you're seeing now is that good luck the liner companies as they see that revenues holdup, they seem to be filling in with more volume to sort of to take officer mr. to enter to sort of to to make sure that that there is sufficient capacity for four.
The market.
This of course for us is very positive it.
Mr rates that our customers are taking the steps to protect our business and to create and shows resilience to market disruptive.
Got it effects like this that nobody units could anticipate just a few months ago. So yes, it's sort of helps our our decision making of course also and putting more money also enter into the liner space.
Great and I know this is a small part of the business.
In the talking on the Bulker side.
You do have a larger than average percentage in the spot market.
Can you generate acceptable returns in the spot market in the bulker space and I know, it's not conducive to the longer term charters or where you would possibly see where the VLCC or in the entire container space, but how do you address you spot market on the bulk or so.
Yes, it's enforcing its a very good question what is a reasonable rate in that space.
All the all the bulk of vessels that we have.
Where the when they when they were ordering of course at one stage there have been well being on on longer term charters.
And some of them up come off charter and been written redeliver. It after after the charter period.
What we then typically do is that we don't necessarily re charter them. If we feel that we are really low in the market, we would be would prefer to trade the vessels.
And hope to fix them and for longer term as the market recovers instead of just taking whatever that market may offer at the time.
So yes, we have in terms of number of vessels relatively few vessels there, but in terms of magnitude it is reasonable.
So so so for now we've been we've been sort of training them into market.
The market was soft.
In particular now in the second quarter, we do see infant a smaller bolt or is that the market is improving and based on based on market observations like back toxins.
Where they indicate attended sizes now are often.
Around $9000 per day level at that level. That's that's not that that you can live basis, but of course, if you're down to two to 3000 Boes per day that we've seen that some assumptions points that is thats not really good business.
So the question is also in this and this sort of segment can be fine you longer term employment or what should we move in the asset. So so thats of course, something we we when we discuss everyday.
Thank you very much.
Okay.
Thanks, Keith Your next question is from the line.
Please go ahead.
Good afternoon, guys is James that Chris.
One follow up on that prior question around containers.
Highlighted the fact that the improvement profitability is driven from sort of supply discipline. One day actually make sure that you also we're seeing some sort of green.
Deal flow containers, despite that and as soon as secondary question to that one does that mean that we might see a particular focus in this capital deployed back on containers similar to what was prior to open 19.
I don't think we will I think generally we are looking at all at all sectors I know segment here well it in parallel.
Of course, we had going into the sort of the recorded 19 equal. This disruption we had many container ships in our fleet. So so we paid of course extra attention to that space and how our customers are end users.
Our adapting to that challenging situation.
So so so that gives us more more comfort when we see that that they seem to be so far have managed.
Quite well and certainly much much better than I think most people anticipated.
Some months ago, when when the assess what last I was at its height.
It's not over yet I mean, the we still we still have to expect more uncertainty.
Surrounding it.
So going forward, but for up from our from our side.
It does help to see.
For the discipline.
And users share the liner companies.
Who make through sort of make sure that they and their business remains robust.
And are able to react as quickly as swiftly.
Hi.
In this situation.
Re on our side, we've seen we've seen some transactions in this space I would say that.
I haven't been lot of I think thats, a new building orders have slowed down I think generally I think gives a newbuilding order book.
This is quite low and most sectors holds we also see that's on the tanker side on the and the Drybulk space.
And let's say that again is is helping quoted market dynamics because if there is not too much concluded supply of assets or vessels out there at the dose could in it could indicate that you could be able to two to generate better effectively earnings on your assets.
[music].
Over time, so so we woke me well come back we work with discipline also on the on dewatering side.
As as we see as on the financing side and and hopefully that could prove to be create good returns for all who are active in the market.
Got it and then.
Obviously doing with the current backdrop you're monitoring.
Credit risk within your portfolio you have commented that seemingly on liner side.
It's relatively stable or are you seeing any pockets of credit risk outside of ops or are there in both for.
Tankers that you think is worthy of calling out or mostly comfortable with what you're seeing.
I would say.
If you look at where we are active.
I would say of course offshore is challenged.
As I commented on earlier.
Well since there was a thats been a massive disruption in really in oil both exploration and production activity, both onshore and offshore.
So so so that's that's of course been focused on a lot in the media generally.
And.
Oil price collapse did not help there if you look at or other sub sectors. We have you have to current carriers that are piling right now.
One came off charter in mid May.
And the second came off a charter just.
Two weeks ago or so.
The generally.
We are.
What you're seeing is more activity.
On.
On the chartering side in that segment as well, we've seen idle fleet drop for more than 250 vessels, you know some weeks ago to roughly half of that.
That doesn't mean that the market isn't isn't good sense, yet, but it means that there is a significant change in dynamics, there where at least according to market balance or the market activity is going into right direction.
We only have two of these.
So it doesn't have a big impact on our on our on immuno on or mid.
Well of course, we would be happy to see them back trading, earning a return on capital.
Thank you.
Patrick.
Thank you once again, ladies and gentlemen, if you do have any further questions.
Keith.
Keith you'd like to Ken.
Hello.
Any questions today.
Pete you have no further questions at this time.
The speakers.
Thank you.
Thank everyone for participating in our second quarter conference call and also tanks Esso fun team both on board the vessels on onshore for their efforts in a very challenging time commitment to continue building our business. If you have any follow up questions there or contact details in the press release or you can get in touch with us through the contact pages on our web page W.
W. W. SFL core dotcom. Thank you.
Thank you that does conclude the conference for today. Thank you for participating and you may now disconnect.
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Okay.
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