Q4 2023 SFL Corp Ltd Earnings Call
Total revenues were $209 million in the quarter and EBITDA was $132 million, which were in line with the third quarter.
Over the last 12 months, the EBITDA equivalent has been $481 million.
So net income came in at around $31 million in the quarter or <unk> 25 per share.
Net income was impacted by some one off items in the quarter, including negative mark to market on hedging instruments and accounting effects on Hercules, which our CFO <unk> <unk> will explain in more details later in the presentation.
In line with improved results in our commitment to return value to our shareholders. We are again, increasing our quarterly dividend. This time to <unk> 26 per share.
We have no pay dividends every quarter since our inception in 2004, and this has accumulated to more than $30 per share or nearly $2 $7 billion in total.
Our fixed rate backlog stands at approximately $3 2 billion and importantly, this backlog is concentrated around long term charters to very strong end users and.
And the backlog figure excludes revenues from the vessels traded into short term market and also excludes future profit share Optionality, which we have seen can contribute significantly to our net income.
And with that I will give a word over to our chief.
Gritting Officer, Tim Shirley.
Thank you.
We have 73 maritime assets in our portfolio and our backlog from owned and managed shipping assets stand at $3 2 billion.
The currency is made up of 15 Drybulk vessels 36 container ships 13 tankers, two drilling rigs and seven call carriers were six are in the water and one is still under construction in China.
Okay.
The latest new billing is scheduled for delivery in March 24.
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 Lam majority offshore assets 10 years ago, two container vessels now being the largest segment with just under 50% of the backlog.
Most of our vessels on long term charters, but we have over the last eight to 10 years completely transformed the company's operating model and have moved away from financing type bareboat charters and instead of seeing through operating exposure, which makes us relevant for large industrial end users like Maersk line up myeloid and all of those.
In.
In the fourth quarter at 95% of charter revenues from all assets came from time charter contracts and only 5% from bareboat or dry leases.
In addition to fixed rate charter revenues, we've had significant contribution to cash flow from profit share arrangements over time, both relating to charter rates and cost savings on fields.
Okay.
Out of that.
Current 73 vessels, we have 13 on variable type contracts and 60 on time charter and spot trading our operation is quite complex with vessels across multiple sectors, we have our own commercial operation out of <unk> and operational management out of Singapore in Stavanger.
Yeah.
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 so far as well as investments to increase cargo carrying capacity and reducing energy consumption.
This has become increasingly important with the implementation of imo's carbon intensity indicator, which will impact vessels operational profile, including routing and speed.
In Q4, we had a total of over 6400 operating days defined as calendar day less technical off hire and dry dockings two vessels have been in dry dock in the quarter.
Our overall utilization across the shipping fleet was 99, 7% in Q4 and 99% for the drilling lease.
The charter revenue from our fleet was $209 million in Q4 in Opex for the fleet was $76 million.
Hello, the key ESG targets for <unk> is a reduction of carbon emissions in our fleets.
Such reduction cannot be met by fleet renewal and more efficient ships and with green fuels increased efficiency of existing fleet or a combination of both.
As part of our fleet Rejuvenation program, we are working with our main container charterers, Maersk and Hapag Lloyd to increase energy efficiency of our container fleet.
601 million vessels, we are investing in energy saving devices improved haul formed with new bulb was Basel, new propellers, and fittings Supreme anti <unk> and anti fouling paint and excess gas scrubbers.
Furthermore, we are boosting the cargo intake after nominally 15400 teu by increased deadweight and modifications to lessen bridges and lashing gears we.
We estimate that fuel consumption and emissions protein carriage is down by approximately 20%.
We have also had similar work done on vessels too.
Whether <unk> is in the same region or better.
And with that I will give the word over to our CFO Aksel Olesen, who will take us through the financial highlights of the quarter.
Thank you for joining on this slide we're showing a pro forma illustration of cash flows for the fourth quarter. Please note that this is on a guideline to assess the company's performance and is not in accordance with U S. GAAP.
Net of extraordinary and noncash items.
Continental generated gross charter hire of approximately $209 million in the fourth quarter.
Approximately 93% of the revenue coming from our fixed charter rate backlog, which currently stands at $3 2 billion, providing us strong visibility on our cash flow going forward.
In the fourth quarter, the container fleet generated gross charter hire approximately $92 million, including approximately $3 4 million and profit share related to fuel savings on some of our seven are for large container vessels.
It's five car carriers on charter following the delivery of our second <unk> LNG carrier in November gross charter hire increased approximately $22 million in the fourth quarter compared to approximately $9 million in the third quarter.
Our tankers are 15 tankers on long term charters generated approximately $30 million and going to start to hire during the fourth quarter in line with the previous quarter.
The company has 15 Drybulk carriers, which are employed on long term charters for vessels generated approximately $21 million in gross charter hire in the fourth quarter.
Seven of these vessels were employed in the spot and short term market and contributed approximately $7 3 million in net charter hire compared to approximately $6 2 million in the previous quarter.
And surveillance to modern harsh environment drilling rigs the large pack of Recliners and the semi submersible ultra deepwater rigs are in place during the fourth quarter <unk> generated approximately $44 9 million in contract revenues.
Compared to approximate $64 1 million in the third quarter.
And this is under long term contract with Conocophillips on the greater equity field in Norway until the end of 2023.
During the quarter license revenue was approximately $19 million compared to approximately $16 6 million in the previous quarter.
Hercules completed a drilling contract with Exxon Mobil in Canada in September and commenced the contract with <unk> in mid November after a short stay in Las Palmas for preparations.
During the quarter Pirquitas revenues was approximately $25 9 million compared to approximately $47 5 million in the previous quarter.
Same contract revenue for the herpes related to fewer contractors in the quarter as their extent about half of the quarter and mobilization mode.
In the U S. GAAP mobilization revenue and costs are deferred and recorded over an estimated contract duration. Accordingly, we expect to record additional net mobilization revenue for approximately $3 6 million in the first quarter.
Listen to ordinary operating revenue under our contracts.
Our operating and G&A expenses for the quarter was $80 million compared to $86 million in the third quarter as fed fewer dry dockings and lower rig operating expenses in the quarter.
This summarizes to an adjusted EBITDA of approximately $132 million in the fourth quarter compared to $130 million in the previous quarter.
And then move onto the profit and loss statement.
Fourth quarter report total operating revenues according to U S. GAAP of approximately $209 6 million, which is in line with the $209 5 million of charter hire actually received.
During the quarter. The company recorded profit sharing income of approximately $3 4 million from fuel savings for some of our large container vessels on the card carrier.
The increase in operating revenue is primarily driven by revenue from commencement of new charters for our car carriers.
Also we booked an extra $8 3 million of accrued income.
Two car carriers as the vessels chartered extent since under U S. GAAP are subject to averaging the previous charter rate and the higher charter rate until the end of the extensions.
An additional positive effect of approximately $1 1 million in the first quarter before we recorded approximately 800000 lower earnings versus actuals received higher per quarter until the end of the extended charter.
On the financial items were negative noncash mark to market effects from derivatives of approximately $5 1 million.
Nathan market Mark effects from equity investments of approximately $1 4 million and an increase of approximately 300000 on credit loss provisions.
So overall and according to U S. GAAP the company reported a net profit of approximately $31 4 million or 25 cents per share compared to approximately $29 3 million or <unk> <unk> per share in the previous quarter.
Moving on to the balance sheet.
At quarter end.
Approximately $165 million of cash and cash equivalents.
Furthermore, the compound multiple securities approximately $5 4 million. In addition to $8 per vessel with an estimated market value of more than 100 million. Following the debt repayment of approximately $20 million related to our five supermarkets drybulk vessels.
In terms of Capex commitments, we had $77 million of remaining capex at quarter end on two car carriers under construction.
<unk> are fully financed by individual yieldco financing arrangements and Nicole and the combined net cash proceeds upon delivery from the yard is estimated to approximately $45 million.
Furthermore, our harsh environment Jackup rig line is scheduled to undergo a tenant special periodic survey in the second quarter of 2010 before.
With an estimated net capital expenditure of approximately $30 million, which will be funded with cash at that time.
Based on the Q4 numbers the company has a big equity ratio of approximately 28%.
Then to conclude.
The company has delivered another strong quarter and the board has declared the atheist consecutive cash dividend, which has been increased to $10 <unk> per share.
Our fixed charter backlog currently stands at $3 2 billion, which provides us with strong visibility on our cash flow going forward.
The company has a strong balance sheet and.
And our liquidity position with $165 million of cash at quarter end and our significant investment capacity.
And finally at the Hercules on back to back contracts with Gulf Menacme, nor in 2024 and delivery of a new building car carriers together with new contracts for exit for our existing vessels. This is strong revenue generation in the quarters to come.
And with that we conclude the presentation and move on to the Q&A session. Thank.
Thank you, Sir we will now open up for Q&A session.
Have you who are following this presentation pursue please please use the race and function to ask a question. When her name is called out. Please UN mute your speaker to ask your question. Thank you.
Our first question from whether it be placed on mute to speaker to ask your question.
Okay. Thanks.
Afternoon, guys. Appreciate the time here I guess I wanted to first start off with across the portfolio as Youre looking out to 2024, where do you see the opportunities here I guess, where would you be thinking about potentially deploying incremental capital to across the portfolio.
Thank you.
We are looking pretty broad.
Market opportunities in several segments.
I would say many of the segments are fundamentally under supplied so there could be good growth opportunities.
We are we have done quite a few deals on the tanker side, we'll be happy to do more there.
Low order books.
We believe there is long term sustainable growth opportunities there.
We have done several car carriers recently.
With the deliveries of new dual fuel vessels.
Also a market with good underlying growth.
A long gap and with very few new buildings for a period of around 10 years structurally.
Structurally under supplied.
With the significant growth, particularly out of China.
And where you have industrial counterparties.
Who are willing to then look at longer charters same thing also on the liner side generally on containers.
There is a there is a significant order book and some of the larger sizes.
But as we have seen.
The liner companies are very focused on efficiency.
And you could look at.
So even though there isn't a good order book.
Still would be very interested in adding new capacity, both with the new fuels and with improved cargo capacity.
So we.
And we're turning over stones I would say last year. It was a little slow generally I mean for two reasons one we.
We saw an increase in new building prices or you get bulk replacement cost for assets.
Okay.
And also a combination with interest rates coming upwards.
And.
As we are discussing of course, we are we are very well when we look at project opportunities. We also look at the cost of it operating costs.
<unk> of it et cetera.
And.
It takes a little time, when you have underlying fundamental factors moving upwards for that to filter into.
I'll call it our chartering counterparties.
You know this decision mode. We think that is changing now we think.
Our our discussions partners or are taking in that.
This is <unk>.
It's more of a long term development and not a short term sort of spike.
Therefore, it could be more open.
Open to do more business also at the levels that we see now so we are optimistic on 2024 looking at multiple opportunities, but kind of course not comment on any of those until until they are concluded.
Understood maybe I could follow up on the container side. So I guess, maybe a two part question here. So you noted maybe some.
Interest on the chartering there can you maybe talk a little bit about what you are seeing a little surprising there, but I guess, maybe there is a potential for some duration or bid in that market and I guess, maybe in connection with that as you think about operational changes that you may have seen and you may be seeing from the liner.
In terms of how they are handling some of the disruptions that are out there whether it be red Sea Suez Canal.
Diversions or if it's Panama canal low water levels, and even sort of east coast potential labor issues later in the fall I don't know if youre seeing specific changes from the way that these companies want to operate the vessels that could potentially lead to incremental capacity being put to work.
Yes.
We reached almost some of some of the companies out there on the liner side I saw this.
Exceptional windfall profits.
And particularly in 2021 and 2022.
And we've seen the market normalize more.
Generally I would say that the liner business.
More similarities to the airline industry and general shipping markets like tankers of bunkers. It's all about efficiency. It's all about cost per produced unit.
And that is why now when we also see longer transportation lags.
Post by you know it could be canal issues and other factors.
It's all down to.
Using the most fuel efficient vessels on where they are and fuel efficient I mean fuel efficient per produced box for the liner company. Because they are also measured on emissions. In addition to the cost set it is to transport. This so.
The modifications with data some of our existing vessels is a good example.
Our very modern vessels electronic engine. They were all designed after the financial crisis. So they are so called wide beam designs and we can with a relatively modest investment make them.
As I say effectively as good as a brand new vessel that you would construct today with that engine configuration type of course.
When a company it's also all about.
Making sure that they are positioned for new fuels.
So that's also something that we would be very interested in looking at but mindful that when we do that we want to some charter duration.
As it is not set in stone quite yet what will be the long term call. It fuel for the future. So we will be happy to look at we have some dual fuel LNG vessels in our fleet, we would be happy to look at methanol and others.
We'll types if we can work in cooperation with our with our customers.
We have very strong vessel operations.
I think what we what we hear from our customers is that they like our mindset. The light the way we we focus on efficiencies every single day, we have.
And.
We tried to make sure that we facilitate our customers with with good long term logistics assets.
Okay.
Okay.
Alright, Thank you Oliver.
Our next question comes from Gregory Lewis.
Please mute your immune to ask your question.
Yeah, Hey, good afternoon, everybody and thanks for taking my question.
I did want to talk a little bit about the asset portfolio.
I am always asking about the rigs spot on I guess I first wanted to ask about.
The Drybulk fleet I mean, it's a handful of vessels.
The prices seen firm.
It's difficult to it seems like it's difficult to find multi year charters just kind of curious on your views on how that.
How that how the dry bulk assets fit into the portfolio and how you're thinking about those assets longer term.
Thank you.
As you rightly say.
For the Super Micro is on the <unk> there isn't really a lot of interesting long term charter opportunities. That's why these vessels are being traded.
In the short term market. We believe we have a robust set up to to get maximum.
Salts out of that and they have been trading.
Okay quite well we think.
For a company like SFO, it would be perhaps wrong to say that these are strategic assets.
<unk>.
We when we're looking at new projects, it's very difficult to make sort of dichotomy of ships work in our model due to the lack of long term charters available at least at the moment.
So.
Regarding how long they will be in our portfolio I think that depends on the market going forward as we have shown before we will if the right market conditions prevail we will.
Seldom, but right now I think on balance it makes more sense to keep them.
But of course, if we see a strong drybulk market.
Coming then.
We might want to change our myeloma.
And as part of the thought process, just as I try to work through this.
Clearly the assets are fine are doing fine and generating.
Our return.
It is part of the issue.
Finding an opportunity to recycle that cash is that kind of what we need to be thinking about as kind of the trigger that.
To monetize those assets.
Yeah, absolutely I mean for now.
As Tom said, I mean, therefore for whom performing quite well most of most of these vessels are debt free.
And.
And they're generating quite good cash flow, even in today's not too exciting market.
So of course, we enjoy that but.
But longer term, our mindset and as we have seen in the past we have a we've turned over I mean over the 20 years.
The company has been in business, we have we have continuously sort of effectively recycled vessels by selling them.
After end of the of the long term charter periods or when we see when we feel that they don't they are not so easy to find long term charters for and then reinvest it in other vessels, where we can find you know call. It that the dynamic so our core focus is obviously on.
Modern vessels, we can put on long term charters to very strong Counterparties and then we manage all of the other vessels and try to optimize return on those so whether we continue charter them and enjoy the cash flow or we dispose of them at some stage at the right price that that all depends on.
On our <unk>.
My name is something bergland and I'm an analyst in SFO.
Our CEO ULE target will kick off the call with an overview of the fourth quarter highlights.
Then our Chief operating Officer, Tim Shirley, we'll comment on vessel performance matters, followed by our CFO exit Wilson, who will take us through the financials.
The conference call will be concluded by opening up for questions and I will explain the procedure to do so right to the Q&A session.
Before we begin our presentation I would like to note that this conference call will contain forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 90 95.
Words, such as expects anticipates intends estimates or similar expressions are intended to identify these forward looking statements.
Forward looking statements are not guarantees of future performance. These statements are based on our current plans and expectations and are inherently subject to 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 important factors.
That could cause actual results to differ include but are not limited to conditions in the shipping offshore and credit markets you should therefore not to place undue reliance on these forward looking statements.
Please refer to our filings within the Securities and Exchange Commission for a more detailed discussion of risks and uncertainties, which may have a direct bearing on our operating results and our financial condition.
Then I will leave the word over to our CEO, who will be our target with highlights for the fourth quarter.
Thank you Sundar, we're now celebrating our 18th dividend and have a unique profile as a maritime infrastructure company with a diversified fleet.
The total charter revenues were $209 million in the quarter and EBITDA was $132 million, which were in line with the third quarter.
Over the last 12 months, the EBITDA equivalent has been $481 million.
The net income came in at around $31 million in the quarter or <unk> 25 per share.
The net income was impacted by some one off items in the quarter, including negative mark to market on hedging instruments and accounting effects on Hercules, which our CFO <unk> <unk> will explain in more details later in the presentation.
In line with improved results in our commitment to return value to our shareholders. We are again, increasing our quarterly dividend. This time to <unk> 26 per share.
We have no pay dividends every quarter since our inception in 2004, and this has accumulated to more than $30 per share or nearly $2 7 billion in total.
Our fixed rate backlog stands at approximately $3 2 billion and importantly, this backlog is concentrated around long term charters to very strong end users.
And the backlog figure excludes revenues from the vessels traded into short term market and also excludes future profit share Optionality, which we have seen can contribute significantly to our net income and.
And with that I will give the word over to our chief.
Operating officer, Tim Shirley.
No.
We have 73 maritime assets in our portfolio and our backlog from owned and managed shipping assets stand at $3 2 billion.
The currency is made up of 15 Drybulk vessels 36 container ships.
14 tankers, two drilling rigs and seven call carriers were six are in the water and one is still under construction in China.
Okay.
The latest new billing is scheduled for delivery in March 24.
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 <unk>.
Originally 100% tankers, a majority offshore assets 10 years ago.
Container vessels now being the largest segment with just under 50% of the backlog.
Most of our vessels on long term charters, but we have over the last eight to 10 years completely transformed the company's operating model and have moved away from financing type bareboat charters and instead assume true operating exposure, which makes us relevant for large industrial end users like Maersk K line up by Lloyd and all this.
In.
In the fourth quarter and 95% of charter revenues from all assets came from time charter contracts and only 5% from bareboat or dry leases.
In addition to fixed rate charter revenues, we've had significant contribution to cash flow from profit share arrangements over time, both relating to charter rates and cost savings on fuels.
Okay.
Out of that.
Current 73 vessels, we have 13 on variable type contracts and 60 on time charter and spot trading.
Our operation is quite complex with vessels across multiple sectors, we have our own commercial operation levels, low and operational management out of Singapore in Stavanger.
Yeah.
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 so far as well as investments to increase cargo carrying capacity and reducing energy consumption.
This has become increasingly important with the implementation of imo's carbon intensity indicator, which will impact vessels operational profile, including routing and speeds.
In Q4, we had a total of over 6400 operating days defined us calendar day, less technical or fire and dry dockings.
Vessels have been in Drydock in the quarter.
Our overall utilization across the shipping fleet was 99, 7% in Q4 and 99% for the drilling lease.
The charter revenue from our fleet was $209 million in Q4 in Opex for the fleet or 7% to $6 million.
Among the key ESG targets for a sofa is the reduction of carbon.
We view the fourth quarter highlights then our chief operating officer, Tim Shirley we'll comment on vessel performance matters, followed by our CFO exit Wilson, who will take us through the financials.
The conference call will be concluded by opening up for questions and I will explain the procedure to do so prior to the Q&A session.
Before we begin our presentation I would like to note that this conference call will contain forward looking statements within the meaning of the U S. Private Securities Litigation Reform Act of 90 95.
Words, such as expect.
<unk> anticipates intends estimates or similar expressions are intended to identify these forward looking statements.
Forward looking statements are not guarantees of future performance. These statements are based on our current plans and expectations and are inherently subject to risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in our forward looking statements.
Factors that could cause actual results to differ include but are not limited to conditions in the shipping offshore and credit markets you should therefore not to place undue reliance on these forward looking statements.
Please refer to our filings within the Securities and Exchange Commission for a more detailed discussion of risks and uncertainties, which may have a direct bearing on our operating results and our financial condition.
And then I will leave the word over to our CEO, who will be our target with highlights for the fourth quarter.
Thank you Sundar, we're now celebrating our ATF dividend and have a unique profile as our maritime infrastructure company with a diversified fleet.
The total charter revenues were $209 million in the quarter and EBITDA was $132 million, which were in line with the third quarter.
Over the last 12 months, the EBITDA equivalent has been $481 million.
The net income came in at around $31 million in the quarter or <unk> 25 per share.
Net income was impacted by some one off items in the quarter, including negative mark to market on hedging instruments and accounting effects on Hercules, which our CFO <unk> <unk> will explain in more details later in the presentation.
In line with improved results and commitment to return value to our shareholders. We are again, increasing our quarterly dividend. This time to <unk> 26 per share.
We have no pay dividends every quarter since our inception in 2004, and this has accumulated to more than $30 per share or nearly $2 7 billion in total.
Our fixed rate backlog stands at approximately $3 2 billion and importantly, this backlog is concentrated around long term charters to very strong end users and.
And the backlog figure excludes revenues from the vessels traded into short term market and also excludes future profit share Optionality, which we have seen can contribute significantly to our net income.
And with that I will give the word over to our chief.
Gritting Officer, Tim Shirley.
Okay.
We have 73 maritime assets in our portfolio and our backlog from owned and managed shipping assets stand at $3 2 billion.
The currency is made up of 15 Drybulk vessels 36 container ships.
14 tankers, two drilling rigs and seven call carriers were six are in the water and one is still under construction in China.
Okay.
The latest new billing is scheduled for delivery in March 24.
We have evolved from having a single asset class chartered to one single customer to a diversified fleet and multiple counterparties and the fleet composition has varied from <unk>.
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.
Most of our vessels on long term charters, but we have over the last eight to 10 years completely transformed the company's operating model and have moved away from financing type bareboat charters and instead assumed through operating exposure, which makes us relevant for large industrial end users like Maersk line up by Lloyd and all this.
In.
In the fourth quarter at 95% of charter revenues from all assets came from time charter contracts and only 5% from bareboat or dry leases.
In addition to fixed rate charter revenues, we've had significant contribution to cash flow from profit share arrangements over time, both relating to charter rates and cost savings on fuel.
Okay.
Out of that.
Current 73 vessels, we have 13 on variable type contracts and 60 on time charter and spot trading our.
Our operation is quite complex with vessels across multiple sectors, we have our own commercial operation levels, low and operational management out of Singapore in Stavanger.
Yeah.
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 so far as well as investments to increase cargo carrying capacity and reducing energy consumption.
This has become increasingly important with the implementation of imo's carbon intensity indicator, which will impact vessels operational profile, including routing and speeds.
In Q4, we had a total of over 6400 operating days defined us calendar day, less technical or fire and dry dockings.
Vessels have been in Drydock in the quarter.
Our overall utilization across the shipping fleet was 99, 7% in Q4 and 99% for the drilling lease.
The Chuck revenue from our fleet was $209 million in Q4 in Opex for the fleet was 7% to $6 million.
Among the key ESG targets for SSL is a reduction of carbon emissions in our fleets.
Such reduction can either be met by fleet renewal and more efficient ships and with green fuels increase efficiency of existing fleet or a combination of both.
As part of our fleet Rejuvenation program, we are working with our main container charterers, Maersk and Hapag Lloyd to increase energy efficiency of our container fleet while.
While the 600 million vessels, we are investing in energy saving devices improved Hawthorne with new bulbous bow, new propellers and fittings Supreme.
And if antifouling paint and <unk> scrubbers.
Furthermore, we are boosting the cargo intake after nominally 15400 teu by increased deadweight and modifications to lessen bridges atlassian gifts.
We estimate that fuel consumption and emissions per teu carriage is down by approximately 20%.
We have also had similar work done on vessels two mercy, whether energy saving is in the same region or better.
And with that I will give the word over to our CFO upset Wilson, who will take us through the financial highlights of the quarter.
Thank you Tim on this slide is showing a pro forma illustration of cash flows for the fourth quarter. Please note that this is on a guideline to assess the company's performance and is not in accordance with U S. GAAP.
Net of extraordinary and noncash items.
Continental generated gross charter hire of approximately $209 million in the fourth quarter.
Approximately 93% of the revenue from <unk>.
Our fixed charter rate backlog, which currently stands at $3 2 billion, providing us with strong visibility on our cash flow going forward.
In the fourth quarter, the container fleet generated gross charter hire approximately $92 million, including approximately $3 4 million and profit share related to fuel savings on some of our center for large container vessels.
With five car carriers on charter following the delivery of our second <unk> LNG carrier in November.
Charter hire increased approximately $2 million in the fourth quarter compared to approximately $9 million in the third quarter.
Our tankers are 15 bankers on long term charters generated approximately $30 million and going to start to hire during the fourth quarter in line with the previous quarter.
The comp assist in Drybulk carriers, which are employed on long term charters.
Vessels generated approximately $21 million in gross charter hire in the fourth quarter.
Seven of these vessels were employed in the spot or short term market and contributed approximately $7 3 million in net charter hire compared to approximately $6 2 million in the previous quarter.
And surveillance to modern harsh environment within weeks, the large pack of Recliners and the semi submersible ultra deepwater rig hopeless during the fourth quarter <unk> generated approximately $44 9 million in contract revenues.
Approximately $64 1 million in the third quarter.
Lauren this is under long term contracts with Conocophillips on the greater <unk> field in Norway until the end of 10% to <unk>.
During the quarter non us revenue was approximately $19 million compared to approximately $16 6 million in the previous quarter.
<unk> completed a drilling contract with Exxon mobile and candidly in September and commenced the contract in the Gulf in the Gi and Omidria in mid November after a short stay in Las Palmas for preparations.
During the quarter purchase revenues was approximately $25 9 million compared to approximately $47 5 million in the previous quarter.
Reduction in contract revenue for the Hercules relates to fewer contract dates in the quarter, a similar extent about half of the quarter and mobilization mode.
In the U S. GAAP mobilization revenue and costs are deferred and recorded over an estimated contract duration. Accordingly, we expect to record additional net monetization revenue of approximately $3 6 million in the first quarter.
Two ordinary operating revenue under our contracts.
Our operating and G&A expenses for the quarter was $80 million compared to $86 million in the third quarter as fed fewer dry dockings and lower rig operating expenses in the quarter.
This summarizes to an adjusted EBITDA of approximately $132 million in the fourth quarter compared to $130 million in the previous quarter.
And then move onto the profit and loss statement for the <unk>.
Fourth quarter report total operating revenues according to U S. GAAP of approximately $209 6 million, which is in line with the two $109 prime enough charter hire actually received.
During the quarter. The company recorded profit sharing income of approximately $3 4 million from huge savings for some of our large container vessels on the card carrier.
The increase in operating revenue is primarily driven by revenue from commencement of new charters for our car carriers.
Also we booked an extra $8 3 million of accrued income.
Car tariffs as the vessels charter extend since under U S. GAAP was subject to our reaching the previous charter rate and the higher higher charter rate until the end of the extensions.
We expect an additional positive effect of approximately $1 1 million in the first quarter before we recorded approximately 800000 lower earnings versus actual received higher per quarter until the end of the extended charter.
On the financial items were negative noncash mark to market effects from derivatives of approximately $5 1 million.
I think their market power market effects from equity investments of approximately $1 4 million and an increase of approximately 300000 on credit loss provisions.
So overall and according to U S. GAAP the company reported a net profit of approximately $31 4 million for 25 cents per share compared to approximately $29 3 million or <unk> <unk> per share in the previous quarter.
Moving on to the balance sheet.
At quarter end.
Approximately $165 million of cash and cash equivalents.
Furthermore, the continental multiple securities approximately $5 4 million. In addition to $8 per vessel with an estimated market value of more than 100 million. Following the debt repayment of approximately $20 million related to our five supermarkets drybulk vessels.
In terms of Capex commitments, we have $77 million of remaining capex at quarter end from.
Two car carriers on the construction.
The vessels are fully financed by individual yieldco financing arrangements and Nicole and the combined net cash proceeds upon delivery from the yard is estimated approximately $45 million.
Furthermore, our harsh environment Jack up rig line is scheduled to undergo a tenant special periodic survey in the second quarter of 10% before with.
With an estimated net capital expenditure of approximately $30 million, which will be funded with cash account.
Based on the Q4 numbers the company or the big extra ratio of approximately 28%.
That does conclude.
The company has delivered another strong quarter and the board has declared the eighth consecutive cash dividend, which has been increased to $10 <unk> per share.
Our fixed charter backlog currently stands at $3 2 billion, which provides us with strong visibility on our cash flow going forward.
The company has a strong balance sheet.
The position with $165 million of cash at quarter end and our significant investment capacity.
Finally at the Hercules on back to back contracts with <unk> in 2024 and delivery of a new bidding car carriers together with new contracts Brexit for our existing vessels. This is strong revenue generation in the quarters to come.
And with that we conclude the presentation and move on to the Q&A session.
Thank you OXXO, we will now open up for a Q&A session.
Those of you who are following this presentation pursue please please use the raise hand function to ask a question when a name it's called out. Please on mute your speaker to ask your question. Thank you.
Our first question from whether it be placed on mute to speakers to ask your question.
Okay. Thanks.
Good afternoon, guys. Appreciate the time here I guess I wanted to first start off with across the portfolio as Youre looking out to 2024, where do you see the opportunities here I guess, where would you be thinking about potentially deploying incremental capital to across the portfolio.
Thank you.
We are looking pretty broad at the market opportunities in several segments.
I would say many of the segments are fundamentally under supplied so there could be good growth opportunities.
We are we have done quite a few deals on the tanker side, we'll be happy to do more there.
Low order books.
We believe there is long term sustainable growth opportunities there.
We have done several car carriers recently.
With the deliveries of new dual fuel vessels.
Also a market with good underlying growth.
Our non-GAAP and with very few new buildings for a period of around 10 years structurally.
Structurally under supplied.
With the significant growth, particularly out of China.
And where you have industrial counterparties.
Who are willing to then look at longer charters same thing also on the liner side generally on containers.
Yes, there is a there is a significant order book and some of the larger sizes.
As we have seen.
The liner companies are very focused on efficiency.
And you could look at.
So even though there isn't a good order book.
Could still be very interested in adding new capacity, both with the new fuels and with improved cargo capacity.
So we.
And we're turning over stones I would say last year. It was a little slow generally I mean for two reasons one we.
We saw an increase in new building prices or your bulk replacement cost for assets.
Okay.
And also a combination with interest rates coming off ports.
And.
As we are discussing of course, we are we're very well when we look at project opportunities. We also look at the cost of it operating costs.
<unk> of it et cetera.
And.
It takes a little time, when you have underlying fundamental factors moving upwards for that to filter into.
Recall that our chartering counterparties.
This decision mode. We think that is changing now we think.
Our our.
Discussions partners or are taking in that.
It's more of a long term development and not the short term sort of spike.
And therefore, it could be more.
Open to do more business sold so at the levels that we see now so we are optimistic on 2024 looking at multiple opportunities, but kind of of course not comment on any of those until until they are concluded.
Understood maybe I could follow up on the container side. So I guess, maybe a two part question here. So you noted maybe some.
Interest on the chartering there can you maybe talk a little bit about.
What you are seeing a little surprising there, but I guess, maybe there is the potential for some some duration are bid in that market and I guess, maybe in connection with that as you think about operational changes that you may have seen and you may be seeing from the liner companies in terms of how they are handling some of the disruptions that are out there whether it be red Sea Suez Canal.
Diversions or it's Panama canal, low water levels, and even sort of east coast potential labor issues later in the fall I don't know if youre seeing specific changes from the way that these companies want to operate the vessels that could potentially lead to incremental capacity being put to work.
Yep.
We saw some of some of the companies out there on the liner side I saw this.
Exceptional windfall profits.
And particularly in 2021 and 2022.
And we are seeing the market normalize more.
Generally I would say that the liner business.
More similarities to the airline industry and general shipping markets like tankers of brokers. It's all about efficiency. It's all about cost per produced unit.
And that is why now when we also see longer transportation legs.
Post by you know it could be canal issues and other factors.
Oil down to.
Using the most fuel efficient vessels on where they are and if fuel efficient I mean.
Fuel efficient per produced box for the liner company because they are also measured on emissions. In addition to the costs that it has to transport. This so.
The modifications with data some of our existing vessels is a good example, they are very modern vessels electronic engine. They were all designed after the financial crisis. So they are so called wide beam designs and we can with a relatively modest investment make them.
Say effectively as good as a brand new vessel that you would construct today with that engine configuration type of course for liner companies. It's also all about making sure that they are positioned for new fuels.
So that's also something that we would be very interested in looking at but mindful that when we do that we want to some charter duration.
As it's not set in stone quite yet what will be the long term call. It fuel for the future. So we will be happy to look at we have some dual fuel LNG vessels in our fleet, we would be happy to look at methanol and others.
Fuel types, if we can work in cooperation with our with our customers.
We have very strong vessel operations.
I think what we what we hear from our customers is that they like our mindset. The light the way we we focus on efficiencies every single day, we have.
And.
We tried to make sure that we facilitate our customers with with good long term logistics assets.
Yeah.
Okay.
Alright, thank you.
Our next question comes from Gregory Lewis with.
Please allow me to ask a question.
Yeah, Hey, good afternoon, everybody and thanks for taking my question.
I did want to talk a little bit about the asset portfolio.
I am always asking about the rigs spot I guess I first wanted to ask about.
The Drybulk fleet I mean, it's a handful of vessels.
The prices seen firm.
It's difficult to it seems like it's difficult to find multi year charters just kind of curious on your views on how that.
How that how the dry bulk assets fit into the portfolio and how youre thinking about those assets longer term.
Thank you.
As you rightly say the.
For the Super Micro is on the <unk> there isn't really a lot of interesting long term charter opportunities. That's why these vessels are being traded.
In the short term market, we believe we have a robust set up to get maximum.
Salts out of that and they have been trading.
Okay, and quite well we think.
For a company like SSL, it would be perhaps wrong to say that these are strategic assets.
<unk>.
We when we're looking at new projects, it's very difficult to make sort of dichotomy of ships work in our model due to the lack of long term charters available at least at the moment.
So.
Regarding how long they will be in our portfolio I think that depends on the market going forward as we've shown before we will if the right market conditions prevail we will.
Cell lung, but right now I think on balance it makes more sense to keep them.
Okay.
Of course, if we see a strong drybulk market.
Coming then.
We might want to change our myeloma.
And as part of the thought process, just as I try to work through this.
Clearly the assets are fine are doing fine and generating.
Our return.
It is part of the issue.
Finding an opportunity to recycle that cash is that kind of what we need to be thinking about as kind of the trigger that.
Monetize those assets.
Yeah, absolutely I mean for now.
As Tom said, I mean, therefore for home performing quite well most of most of these vessels are debt free.
And they're generating quite good cash flow, even in today's not too exciting market.
So of course, we enjoy that.
But longer term, our mindset and as we have seen in the past we have a we've turned over I mean over the 20 years.
<unk> has been in business, we have we have continuously sort of.
Affectively recycled vessels by selling them.
After end of the of the long term charter periods or when we see when we feel that they don't they are not so easy to find long term charters for.
And then reinvested in other vessels, where we can find call. It that dynamic. So our core focus is obviously on on the modern vessels. We can put on long term charters to very strong Counterparties and then we manage all the vessels and try to optimize the return on those so whether we can.
<unk> charter them and enjoy the cash flow or we dispose of them at some stage at the right price.
That all depends on our on our on our market view at the time, but this these vessels are relatively it's a relatively small proportion of our fleet.
In terms of numbers, but certainly in terms of implied values and cash flow. So.
Over time, we've always had I would say is it up between 10% to 20% of our fleet.
Actively in the short term market and I think right now we are maybe on the on.
On the lower end of that percentage.
Okay.
Thank you. Our next question comes from our a plummet placed on mute to ask a question.
Yes, Hello, Thank you for taking my question.
First of all another good quarter. Thank you very much and thank you for the good prospects going forward.
I wanted to ask about.
A geopolitical issue.
Recently, there were problems in and around the Red Sea.
And I'm wondering what effect that has on <unk> business do you see for example, an increase in demand for more fuel efficient boats or could you go into a little detail on that please.
Oh, yes. Thank you, yes, I mean, we have seen.
Quite changing market dynamics.
Relating to that and I would say also relating to the Panama Canal, where you have seen the restrictions and reduction in capacity going through the canal due to drops the issues.
In that region.
So first of all I mean all.
Our vessels are on long term charters. So our customers are paying their daily hire I would say irrespective of where the vessel goes whether it goes.
Whether it used to go through the Suez Canal or whether you know the vast these vessels went around Africa.
And for the for our customers.
That was also a question of economics and logistics are you taking a vessel through the Suez Canal had some significant costs and canal juice.
Just to be mindful of that I mean, we talk about our ships.
If you look at the country Egypt.
They used to have around $10 billion and canal fees as part of their part of their revenue stream and now that of course is dramatically reduced as a consequence of the of the turmoil and the deviation of the assets, so, but but for our customers.
They spend more days at sea.
Burning more fuel and that is you are absolutely correct for them. It's all about having the most fuel efficient vessels as they now trade the vis vessels longer.
But we hope of course that.
That noise.
Will will succeed and that we can return to a more normalized.
Well, if the transition level through that region.
But I would say in the near term, we don't see so much direct impact on our numbers.
Because we don't really have many vessels.
In the spot market that would normally trade through those areas.
Okay. Thank you.
Okay.
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You.