Q2 2023 SFL Corporation Ltd Earnings Call
To do this before the Q&A session.
Yeah.
Speaker 1: I will explain the procedure to do this before the Q&A session.
Conditions in the shipping offshore and credit markets you should therefore not place undue reliance on these forward looking statements. Please refer to our filings within the Securities and Exchange Commission for more detailed discussion of risks and uncertainties, which may have a direct bearing on our operating results and our finance.
Condition.
And then I'll leave the word over to our CEO Ali asked a kid with highlights for the second quarter.
Thank you Mario is the.
Total charter revenues were $174 million in the quarter, which were down from the previous quarter, primarily primarily due to the sale of four split credit tankers earlier this year.
Over the last 10 years, we have changed the business model from a maritime leasing company to maritime infrastructure with long term time charters to end users.
Only around 9% over charter revenues were from seven brokers in our container vessels are employed on short term charters on the spot market.
The EBITDA equivalent cash flow in the quarter was approximately $109 million in line with the previous quarter and over the last 12 months. The EBITDA equivalent has been $480 million.
The net income came in at around $17 million in the quarter or <unk> 13 per share.
The net income continues to be impacted by the drilling rig Hercules, which had no revenues in the second quarter, but with full operating expenses, while finalizing its comprehensive special survey or Sps and upgrades.
The Sps was finalized in mid June and we then started the mobilization to Canada.
We have been paid the mobilization fee from Exxon for the transit, but due to U S. GAAP accounting rules all of this will be recognized in the third quarter together with the mobilization costs.
There was also a $6 million gain in the quarter relating to sale of the last split traded Suezmax tanker.
This is our seventh to eighth quarterly dividend and over the years, we have paid more than $2 6 billion in total and closing in on $30 per share and we have a robust charter backlog supporting continued dividend capacity going forward.
The announced dividend of <unk> 24 per share is in line with the previous quarter represents a very strong dividend yield at current share price levels.
Our fixed rate backlog continued to increase and stands at approximately $3 $6 billion from owned and managed vessels. After recent charters.
This provides continued cash flow visibility going forward with significant additional cash flow from the drilling rig Hercules and the Newbuild car carriers from the third quarter onwards.
And importantly, the back book figure excludes revenues from the vessels traded in the short term market and also excludes future profit share Optionality, which we have seen can contribute significantly to our net income.
The Sps and upgrade work on our harsh environment semi submersible Hercules was completed in mid June and the rig then moved under its own power to Canada to commence a contract with Exxonmobil, Canada to drill one well, which started mid July the.
The duration is estimated to approximately 135 days, including mobilization to and from Canada and the contract has an estimated value of $50 million implying.
Implying a day rate of approximately $375000 per day for the period.
Thereafter, the rig will move to Namibia and commence a contract with a subsidiary of gout and idea for two wells plus an optional well testing.
Excluding optional days the duration will be approximately 115 days, including mobilization with an estimated contract value of another $50 million implying.
Implying a day rate of approximately $435000 per day for that period.
After Namibia, the rig will move back to Canada to commence the recently announced contract with a subsidiary of <unk>. The.
The contract is for one well plus one optional wells.
The duration for the firm contract period is approximately 200 days, including transit to and from Canada, implying a day rate of approximately $520000 per day for the period.
The rig will then be open for new contracts from the fourth quarter 2024 onwards.
The secured backlog on the Hercules is now in excess of $200 million and we estimate.
<unk> approximately $100 million EBITDA from the rig over the next 12 months.
This rig is only one of only a handful harsh environment ultra deepwater semi submersible rigs available and market analysts are positive to market prospects based on recent tender activity and the tight supply demand balance.
The harsh market prospects into 2025 is particularly promising and we now see day rates in excess of $500000 per day as evidenced by our recently announced contract with <unk> for next year. This is up 50% from last year and most of that goes straight to the bottom line.
And we continued to renew our fleet and divest the world or tankers, we sold four tankers traded in the spot market earlier this year and we have now sold the land bridge wisdom, which is the only remaining bareboat charter tanker in our fleet.
This is a VLCC on a relatively low bareboat charter rate and the charter or exercised a fixed price purchase option.
A short while ago, whereby we will sell the vessel back to them later in August .
The net cash proceeds is estimated to approximately $10 million and book gain in the third quarter is estimated to around $2 million.
In May the board of directors has authorized the repurchase of up to an aggregate of $100 million of <unk> shares.
So far around $1 1 million shares have been repurchased at an average cost of $9 27 per share or just over 10% of the authorized amount and there is $90 million remaining.
Further purchases may be made at our discretion in the form of open market repurchase programs.
<unk> negotiated transactions accelerated share repurchase programs or a combination of these methods.
The timing and amount of any repurchases will depend on legal requirements market conditions stock price alternative uses of capital capital availability and the Companys determination that share repurchases are in the best interest of our shareholders and all the factors.
We see this as a tool in the shareholder value toolbox and would note that the company is not obligated under the terms of the program to repurchase any over common shares.
This fiber program is valid until June 32024.
And with that I will give the word over to our chief operating officer shortly.
Thank you.
Over the years, we have changed both fleet composition and structure and we now have 73 maritime assets in our portfolio in a busload from owned and managed shipping assets stands at $3 $6 billion.
Our current fleet is made up of 15 Drybulk vessels 36 container ships 13 tankers, two drilling rigs and seven car carriers with three are on the water on four under construction in China.
The new buildings are scheduled for delivery over the next 10.
Months starting in September .
We have evolved from having a single asset class charter to one single customer to a diversified fleet and multiple counterparties and the fleet composition has varied from originally 100% tankers, a majority offshore assets 10 years ago.
Two container vessels now being the largest segment with just under 50% of the backlog.
We are now a maritime infrastructure company.
Most of our vessels are on long term charters, but we have over the last 810 years completely transformed the company's operating model and have moved away from financing type bareboat charters and instead assumed full operating exposure, which makes us relevant for large industrial end users like for example, Volkswagon Mers.
Exxon and others.
In the second quarter at 92% of charter revenues from all assets came from time charter contracts.
And only 8% from bareboat or dry leases.
In addition to fixed rate charter revenues, we allowed a significant contribution to cash flow from profit share arrangements over time, both relating to charter rates and cost savings on fuel.
Last 12 months the aggregate profit share has been more than $25 million.
Okay.
Okay.
Although the current 73 vessels, we have 13 on variable contracts and 60 on time charter and spot trading our operation is quite complex with vessels across multiple sectors. We.
We have our own commercial operation audible slow and operational management, Singapore and Stavanger.
Our opex philosophy is to continuously invest in our fleet to optimize the vessel's performance and maintain a high level of service to our customers. This includes investing to minimize all fire as well as investments to increase cargo carrying capacity and reducing energy consumption.
This has become increasingly important with the implementation of IMO carbon intensity indicators, which will impact vessels operational profile, including routing and speed.
In Q2, we had a total of over 6000 operating days defined us calendar days less technical of fire oral fire for Drydocking, our overall utilization across the fleet is 99, 4% in Q2, a number we are continuously striving to maintain as high as possible.
The charter revenue from our fleet was $174 million in Q2, and our Opex in.
In the quarter was $38 million.
One of the key metrics for <unk> is the reduction of carbon emissions by improving our fleet weighted average.
Our annual efficiency ratio.
<unk> intensity indicator as a measure of how carbon intensive our fleet is by calculating the emissions per actual capacity in distance sales.
While Mark will convention, Emil and implemented requirements for reducing carbon intensity of all ships larger than 5000 gross tons from 2023 onwards.
The requirement to obtain an acceptable <unk> rating will be gradually structure each year towards 2030.
Such requirements can either be met by fleet renewal increased efficiency of existing fleet or a combination of both.
Although ci compliance is certainly challenging <unk> is well positioned to manage imo's trajectory towards 2030.
As part of our fleet renewal program, we have for LNG dual fuel pump carriers under construction in China that when entering into service will be among the most modern and efficient ships in the car carrier market.
On the energy efficiency front, we have carried out an investment program for all vessels in our fleet.
Including energy saving devices and technology to capture and analyze data from onboard sensors for real time performance management and voyage optimization.
Furthermore, we are cooperating closely with several of our key charterers on further vessel upgrades. The scope includes exhaust gas scrubbers are going take boost automotive vacations, new propellers, and propeller fixtures as well as enhanced and falling systems.
We also collaborate with key charterers on data integration for more optimal weather routing and performance management.
In addition to reducing carbon emissions. We believe these investments will make our vessels more attractive in the market. When the vessels are either up for re delivery of a potential charter extensions.
And with that I will give the word over to our CFO , Oxford origin, who will take us through the financial highlights of the quarter.
Thank you Tim.
On this slide from our pro forma illustration of cash flows for the second quarter. Please note that it is on a guideline to assess the companys performance and is not in accordance with U S. GAAP and also net of extraordinary and noncash items.
The company generated cash flow gross charter hire of approximately $174 million in the second quarter, including approximately $2 2 million of profit share approximately 92% of the revenue coming from our fixed charter rate backlog, which currently stands at $3 6 billion, providing us the strongest stability like cash flow going forward.
In the second quarter.
Dana fleet generated gross charter hire of approximately $90 million, including approximately 2 million in profit share related to fuel savings on seven of our large container vessels.
Well. Thank you fleet generated approximately $5 million in gross charter hire during the second quarter compared to approximately $4 7 million in the previous quarter.
Good to hear from our vessels trading in the spot market in the second quarter of $2 2 million compared to $10 million in the first quarter. Following the sale and delivery of the three remaining spot vessels during the second quarter. Consequently, we did not expect any contribution from tankers trading in the spot market from Q3 onwards.
Although remaining 13 tankers are employed on long term contracts with high quality charters.
The complement system Drybulk carriers, which are employed on long term charters during the quarter.
The vessels generated approximately $24 million in gross charter hire in the second quarter.
All of these vessels were employed in the spot and short term market and contributed approximately $7 $2 million in charter hire during the quarter compared to approximately $4 6 million in the previous quarter.
<unk> two harsh environment drilling rigs, the jackup rig lines and the semi submersible rig Hercules.
The loan is current on a long term contract with Conocophillips Scandinavia until the end of 2028.
During the second quarter, the rig generated approximately $19 million contract revenues in line with the first quarter.
As in the first quarter recorded operating expenses on purpose, which were approximately $7 million.
Furthermore, there has been no revenue from the Hercules during the quarter due to the special periodic surveys and upgrades, which were completed in mid June before the rig mobilized to Canada, who commenced the drilling contract with excellent Canada.
Although the Hercules commences mobilization tourists, Canada in mid June we recorded no revenue in the second quarter due to us GAAP accounting standards for drilling service contracts, which recognizes revenue only from the drilling commencement dates.
Accordingly, mobilization and demobilization revenue and cost reduction contracts will therefore be amortized over drilling days in the third quarter and recorded in the Q3 P&L.
And finally, a clear car carriers generated gross charter hire of approximately $6 million during the second quarter, including approximately 200000 and profit share related to fuel savings on one of the vessels.
Our operating and G&A expenses for the quarter was $68 million compared to $75 million in the previous quarter.
This summarizes to an adjusted EBITDA of approximately $109 million in the second quarter compared to $110 million in the previous quarter.
We then move onto the profit and loss statement as reported on the use of.
As we have described in previous earnings calls our accounting statements are different from both of a traditional shipping company.
So business strategy focuses on long term charter contracts, a large part of our activities are classified as capital leasing.
Therefore, a significant portion of our charter revenues are excluded from U S. GAAP operating revenues.
This includes repayment of investment in sales type direct financing leases and leaseback assets and revenues from some entities classified as investment in associates for accounting purposes.
So the second quarterly report total operating revenues. According to U S. GAAP of approximately $165 million, which is less than approximately $174 million of charter hire actually received for the reasons just mentioned.
During the quarter. The company recorded a profit sharing income of approximately $2 2 million from Q settings, and sulfur large container vessels on the car carrier.
And we will record in the area full quarter of operating expense on the <unk>, we did not record any revenue on the rig due to temporary state and as just mentioned revenue from the Hercules will do to US GAAP accounting standards, we recognized only from the drilling commencement date and has been reflected in our P&L in the third quarter.
Furthermore, the metric total impacted by nonrecurring non cash items, including a gain from the sale of the Suezmax tanker antibiotics of approximately $6 4 million.
Net positive mark to market of $1 9 million I think the mark to market effect from equity investments of $1 million and a decrease of 200000 on credit loss provisions.
So overall and according to U S. GAAP the company reported a net profit of approximately $17 million with <unk> per share.
While reported another transitional quarter, it's worthwhile to mention that we expect revenue to increase from Q3 onwards, We will report our first quarter of revenue from the Hercules rig holding and the commencement of <unk> contract in July .
Also expect revenue effect from our core car carriers, new buildings delivered during the next three quarters.
The new three year charters for two car carriers composer and conductor will commenced in Q4 and Q1, we estimate the EBITDA from these vessels to be approximately $47 million per year significant increase in existing contracts, which was approximately $9 million per year.
Moving on to the balance sheet.
A courtroom FFL had approximately $2 1 billion of cash and cash equivalents.
Furthermore, the constant and multiple securities approximately $5 9 million based on market prices at the end of the quarter in June as Phil's notified about the purchase option on the VLCC on bareboat charter with <unk> delivery to take place at the end of August .
A $10 million positive cash effect as expected after repayment of debt.
Secured debt relating to the vessel with a corresponding gain of approximately $2 million recorded in the third quarter.
In May the company announced a 100 million share buyback program. So far the company has acquired approximately $1 1 million shares with an average price of approximately $9 in 2007 cents per share.
During the quarter <unk> refinanced the drilling rigs Hercules and liners in two separate loan facilities with $150 million per rig.
Our surplus and land loans to maturity in the fourth quarter of 'twenty five and in the second quarter of 2006, respectively.
Furthermore, the company a range to of course with two existing vessels the car carrier agency on the container vessel more scalable.
Financing source acute at very attractive rates.
With matching maturities that much long term chartering contracts another net positive cash flow effect of more than $80 million in the second quarter as the vessels for that degree.
Capital expenditure of $194 million on our core card carriers under construction with the first vessel is expected to be delivered during the third quarter, that's been security Yieldco arrangements.
And during the second quarter, we drew down $33 million on a pre delivery facility in respect to the two loss car carriers under construction.
The remaining capex repairs for special periodic survey.
Chris on the Hercules.
Now it is completed will be funded with cash on hand, and the same Gulf really outstanding amount of approximately $48 million bond maturing in September .
So based on the Q2 numbers the company's book equity ratio for approximately 27, 6%.
Then to conclude the board has declared a cash dividend of <unk> <unk> per share for the quarter.
This represents a dividend.
Of approximately 9% based on the closing share price yesterday.
And my the company announced a 100 million share buyback.
So far the Companys acquired approximately $1 1 million shares.
For a price of approximately $9 77 per share a fixed charter backlog currently stands at $3 6 billion, which provides us with strong visibility on the cash flow going forward.
The latest financing facilities concluded the company still building and capital expenditure program is now fully financed materially all of the short term debt is refinanced new long terminals and.
In summary <unk>.
<unk> secured new financing arrangements, so far in 2023 in excess of 1 billion.
Billion.
The amount is split across two different facilities and a wide array of products.
Securing and continued to build diversified funding platform for the company going forward.
Furthermore, the recent contract awards for two car carriers on complex as well. So again, it's a commencement in Q4 and Q1, we estimate the EBITDA from these vessels is approximately $47 million per year, a significant increase from existing contracts. This was approximately <unk> 9 million per year.
Finally, we announced a new contract award for harsh environment semi submersible drilling rig Hercules.
Permian tightening supply demand balance and a strong market outlook, which is now materializing and attractive day rates and a strong cash flow generation.
And with that we conclude the presentation and move on to the Q&A session.
Thank you Axel.
We will now open up for a question and answer session.
For those of you who are following this presentation through assume please use the raise hand function to ask a question.
When your name is called out please on mute your speaker to ask your question. Thank you.
And we will have our first question from.
Richard Diamond please on nature speaker to ask your question.
Yes.
Afternoon, everyone.
Given the lack of shipyard capacity in <unk>.
Rising shift.
Is it fair to assume the purchase options in general.
Represent in the future.
Second value to <unk> shareholders.
Okay.
Well, yes.
With the with the new building prices coming off the very substantial both on the back of.
As a full order book at the shipyards, where they now also will start to actually make a little bit of profit.
Instead of losing a lot of money as they used to do.
You also have inflation in both the raw material cost that goes into building the shifts and of course labor building, it which means that when your ownership.
Typically.
Secondhand values overtime will have will be linked to new building prices. So if we had sort of the old the old model, where we were just a sort of a financial leasing provider in the shipping space. We would typically have to give the giveaway purchase options.
In order to do deals that's what most people do when there are in that game.
And then of course, there is a higher probability of those purchase options being exercised and therefore called away from us. So the good example, here. We think is two existing car tires, we have.
If they have been on a more financial lease.
The charter of would've exercise those purchase options, because but instead now we can re charter them at a much higher rate than we had in the first charters and that is of course sprint go straight to the shareholders. So so I think rising new building prices is definitely benefiting.
<unk> shareholders.
Thank you.
Thank you Richard.
We will take our next question from.
Clement Molly please mute your speaker to ask your question.
Hi, Joel and team. Thank you for taking my questions.
I want to start by asking about the west <unk>, which is employed on a contract, earning a market adjusted rate, which if I remember correctly adjusted semiannually, how should we think about the vessels contribution going forward given the strengthening market environment.
Thank you.
So that is correct so the.
The licenses on.
Contracted clinical affiliates until the end of 2028 on.
On the equities fear on the northern side in the North Sea.
You correctly point out.
The contract is adjust semiannually basically.
End of April and end of October .
The day rate is.
It's around just shy of 200000 Boes per day for time being that market is.
It is somewhat kind of neutral.
So going forward it needs to be expected day rate to stay in that three incident for the time being but we also expect over time activity on.
And then we should continental shelf to increase and that that could potentially then reflect in the higher contribution from from there.
Thanks for the color.
I also wanted to ask about the carriers to be delivered over the next year could you provide some commentary in the cash flows to specialists are expected to generate.
And secondly is incremental debt to round down to finance the vessels.
Alright.
Okay.
The total.
Yes.
So.
The cash contribution from new buildings.
It's considered substantial I would say the especially for the first two vessels coming.
Although we will have.
An initial voyage, there, but I think Ken.
Yeah.
So.
Okay.
Well, yes.
We do not disclose sort of contribution per vessel on an individual basis. So.
<unk> was pointing out.
Aspen re delivered first we will have one.
<unk> from Asia to Europe , where the vessels will then be delivered to Volkswagen.
The spot market for car tariffs right now is Super Hot So we will have a very hopefully very significant contribution on the voyage from Asia to Europe .
Market is currently quoted well in access of $100000 per day.
So with Opex of around $6000 per day for similar for vessels like this needless to say there is a lot of cash flow coming there and then they will commenced their 10 year charters at the pre agreed charter rates and that's also when the new charter rate will kick in on the existing vessels. So we have several sort of elements coming.
In.
But we haven't provided full breakdown of that but what we do have.
Everyone asks us to once it is our full charter backlog, where you can back out effectively the charter rates that are being generated by the vessels also including the new bills.
So basically if you look at.
Our strategy is to seek salt.
On long term charters with Coca Cola Cola.
Low teens returns on equity are so so the contribution will be accordingly.
For the financing of course that this two refinanced.
That will be drawn down on the two first ones in connection with pre delivery. It is in there and the financing is form of Japanese operating leases.
The attractive terms do not go into exact details on that.
The margin provided that is extremely attractive to the blended partner thing is it's.
It's going to be fixed upon upon delivery.
The all in considering kind of the long dated financing is yes. It is.
It's far more competitive and defined in our traditional banking months.
Makes sense final question for me looking at the second half of the year and into 2020 for each year that your cash flow will improve markedly.
How should we think about potential dividend raises going forward.
And secondly, how do you plan to balance that sort of potential dividend races with share repurchases.
Yes, so when we see of course, he both SaaS as you know.
Shareholder returning capital effectively to shareholders direct and indirect.
Our aim is of course.
The thing to do is is focused around building this distribution capacity to shareholders.
But we never communicate though I will never give sort of guidance on what the dividend will be <unk>.
This quarter or quarters after that but typically when we've seen in the past usually we when we increase dividends, we managed to stay there and also the board.
Piece of call. It the board deliberations around the dividend every quarter is the long term sustainability of the dividend level sort of being being discussed your.
You're correct third quarter onwards, we will we'll have significantly more cash flow hopefully event first and second quarter, that's primarily due to one rate of being out of service we have costs.
Being occurred in extra and paid and that rig is now back working and then we got the new bills.
But we kind of guide you specifically on on what the dividend might be next quarter or after.
Nor will be communicated specifically how much how many shares we will buy back we have bought back.
Just over 1 million share shares so around 1%.
On the shareholding.
And we have an authorization to buy more than that from the board.
And that will be communicated every quarter as we report our quarterly numbers going forward.
Makes sense that's all for me. Thank you for taking my questions. Thank you. Thank you and thank you Tim and our next question comes from our reefs Amit.
Please yes.
First I'd like to complement the management team on continuing to do a good job.
Hi.
I have two questions.
Requests Okay. The first question is you've reduced some inventory and certainly have cash to reinvest what areas appear attractive now both for new builds and for used assets.
Yeah.
We are looking Amit we are UK, so call it segment agnostics.
So the focus across the board in the maritime space.
And which is also reflected in our in our vessel Mitch.
We we look at transaction opportunities in all of these segments.
In parallel.
And.
Just as an example last year, we screened at birth modeled out transactions.
With an aggregate value of around 23 billion.
And beyond ended up doing only a small fraction of that.
That's a coincidence or software office there were many many reasons for why we you don't do a deal.
It's got to be the right counterparty with the right asset.
We are very mindful of sort of the near.
<unk> fuel.
And what mosaic, where we're about is driving and what kind of assets, we want to own long term.
The financing we think is available for the specific for specific asset with a specific charter et cetera. So so so that in and of course, we are greedy.
And we want appropriate returns as we do deals.
If we if we hadn't been if we haven't if we were if you will.
Except really low returns, we could have done and of course, a lot lot more so so all this comes together.
And it's all about trying to deliver long term value for shareholders.
And we we don't guide on specific allocation of capital between segments.
So over time, we are seeing that and sometimes we were investing more on the energy space at other times.
Over the history of the company, we have invested more on the liner side, specifically container ships and also car carriers.
So we hope to build the business.
And.
Exactly which segment.
We will recover we cannot say I would say maybe embedded to round out that is that some other segments. There are relatively fewer long term chartering opportunities for instance on the tanker side on the Drybulk side there are more.
Frequent to see long term charters, which we.
Prefer because to understand the source of cash flow visibility.
But we find deals there as well as as you can see from our portfolio. So we look across the board.
Okay. So theres no specific area that looks like a good trend right now.
No I think that we have.
With Doctor shipping analysts they typically focus on just the near term call. It market cycle in there of course, you have like the tanker market right now near term, which has sort of a record low order book.
Just on Manhattan, and many people sort of attention right now but of course, when we do a deal is that we look for 10 year charters you have to look through the near term cycles sort of close to 10 years you can in theory build as many ships as you want in any specific segment. So that it's more important to look for the right technology the right.
Counterparty and the right structure, where we end up with a call. It a residual call it asset exposure of value that we think makes sense at the end of the charter in addition to taking in.
Counterparty risk et cetera in the charter and I would say the way we have call. It <unk> read on our business model going from a more financial oriented company, where we did a lot of bare bolt on bareboat like structures.
That is typically done with intermediaries who done.
The who done give service to the end users so from changing that to a more.
No more integrated.
Maritime logistics type.
Setup means that we do more directly with end users and we think that also.
It gives us better risk reward.
Operationally on the overtime.
Okay, well that's cell activity in your acquisition that's part of the reason for my compliment at the beginning Okay. My next question is.
You talk about income cash flow increasing substantially in the next couple of quarters can you make an estimate of how big a jump you see the up in the operating income.
No.
I think we've tried to give some more.
Tom will likely be too specific on.
On quarter by quarter in advance I think what you'll see in Q3 that you'll see contribution from the hurricanes.
In particular.
As a guide the accounting for that rig will be according to service contracts for it basically.
I think that the overdue actually.
Startup and commencement of the drilling just including periods, including mobilization demobilization also the costs of.
Basketball is the debit bumpy quarter to quarter going forward.
Then in Q4, you'll see basically the first car carriers contribution coming in.
Same in in Q1, so it can be kind of building up I think into Q1, and then Q2, you'll see that full contribution from from the rig and the car carriers. So.
It looks promising but I think I mean everything is locked in this no more spot contribution on the tankers somewhat on the drybulk without that marginal, but I think it looks solid.
And if you look at this market based on the drilling rig.
First Charlie is around $375 or so per day and then the recent debt non charter is in excess of 500 and most of that go straight to the bottom line.
So that will be have a good effect, but that of course. This over time and then well into next year, yeah. Okay that all sounds great. So what it sounds like is for the next quarter there might be a modest jump, but this will steadily increase and by the middle of next year, we might be looking a lot better is that right I think instead, we will be building up step by.
Thank you good so fair to say that I think third quarter will be significantly up from the second quarter because in the second quarter, we had that drilling rig out of service or <unk> revenues, but bandwidth costs.
I wonder if they don't have to of course, you have some cost you are sitting on for the next quarter right.
So we still have some costs into next quarter, but then we also have the revenues from the rate but.
But that's what I'm, saying is that you have costs that you Couldnt book in this quarter, So youre going to book them next quarter. So the revenues won't be as good.
It's the only 14 approximately 14 15 days from the second quarter that they are being transferred into the third quarter.
10 months, Okay that all sounds great. Okay I have one.
Request and that is I know when you do a deal you don't usually disclose the details, but what would be very helpful. It would be to know what the change in the cash position of the company is once the deal has closed or what the new cash cash position of the company is so if you could consider giving that information out when.
When you announce a deal that would be helpful.
Absolutely I think book to do today is they do it on a quarterly basis down I think one of our strengths as a company is to turn around quickly and close transactions and sometimes we may use.
Cash from balance sheet, just to close out the transaction and then in order to find optimal than the best possible price financing there and do the financing later, so that will be quite accurate actually.
To report that that flow of things that I think.
Mainly trying to eradicate kind of open on a quarterly basis and I think that's I think what's what's feasible for our company.
Yes.
Yeah.
Okay. It sounds very good and.
What I just wanted to say as of last time in the last quarterly announcement.
Presentation is sound was terrible and Heron zoom, it's fine. So thank you very much for that and.
For taking my questions Bye bye. Thank you. Thank you. Thank you. Thank you all right.
Our next question comes from the line of Christian Wetherbee. Please on mute to ask your question.
Hey, Thanks, guys. Thanks for taking the question.
So I actually had a question on the container side, so curious to get a sense of what youre hearing from your customers just as it pertains to overall demand in the market I know, obviously charters are going to give you some insulation from fluctuations in the spot market, but just general thoughts on peak in terms of utilization of the vessels and then anything that you can kind of think about.
In terms of that market, we've seen spot rates on some of the trans Pac business begin to inflect a bit higher.
Curious if there's any discussion of potential stabilization in that business over a longer term perspective, or if you think this is a bit of a blip before we were to see more capacity come online out of the new building programs across the industry over the course of the next several quarters.
Yes.
It's difficult to.
To be very precise on almost charterers see because but in our discussions and from the utilization of our fleet, we see that utilization is high.
There is no waiting on any of our ships.
On the container side, all our charterers are looking to invest in our ships.
Together with us.
And.
I'll deal with the type of ships that we have as well of course not all sizes are the same but of course in the sort of.
Big theaters to two large telcos.
10% to 15000 Teu ships.
To be really the bread and butter for the for the lines.
So from our discussions there is definitely no.
No panic Koreans are equal worry that we hear about things.
Things seem to be they all seem to be looking forward.
And even if the rates of bulk slots are full of Madison issue.
And the volumes at least from what we see here are very healthy.
So I think of the <unk>.
What's the container lines are looking at.
They are not really so focused on ships, but they are focused on.
Logistics and they are really they are not really.
Shipping companies anymore. So they are looking at lowest colstrip container carriers.
And to get the carbon emissions on the costs down and.
And we believe that owners that can help them do lots are in a good position.
And that has become a.
Leaning more more and more important, especially from the likes of minus can hop alloys that are big with us we see that that's their focus really.
Okay. That's very helpful. I appreciate the color on time, thank you very much.
Thank you.
Thank you Christian.
Yeah.
I might have one more question if I could briefly.
Jonathan.
Has to do with a change in law in Bermuda corporate law I'm, just wondering if thats going to affect.
The company at all.
I assume you're referring to the Osce global taxation or is it.
I read I read just recently that they're proposing a change that could be what you just said, but I'm not sure it's definitely about corporate taxation.
So I think that's a global initiative.
Yes.
Certain thresholds.
Thresholds to two to meet that I don't think we are kind of at that threshold, yet I think.
Many shipping companies are also under different Thomas tax structures, So thats of course.
Both the Lithia and some of our fleet is.
Is already a mid afternoon cypress. So so so manage spend down the board is evaluating and following that closely okay. Thank you.
Thank you again RF.
Mr. Arnell for questions from the audience I would like to thank everyone for participating in this conference call. If you have any follow up questions to management. There are contact details in the press release or you can get in touch with us through the contact pages on our webpage Www <unk> Corp Dot com.
Thank you very much.
Thank you.
Yeah.
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Yes.
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Okay.
Yes.
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