Q1 2025 SFL Corp Ltd Earnings Call

Operator: Our CEO Ole Hjertaker will start the call with an overview of the first quarter highlights and then our Chief Operating Officer Trym Sjlie will comment on vessel performance matters followed by our CFO Aksel Olesen who will take us through the financials.

Our CEO, who will start the call with an overview of the first quarter highlights and then our chief operating officer I'm Shirley we'll comment on vessel performance matters, followed by our CFO Olson will take us through the financials.

Operator: 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.

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.

Operator: 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 1995. Words such as expects, anticipates, intends, estimates, or similar expressions are intended to identify these forward-looking statements. Please note that 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 statement. Important factors that could cause actual results to differ include, but are not limited to, conditions in the shipping, offshore, and credit markets.

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 1995 words, such as expects anticipates intends estimates or similar expressions are intended to identify these forward looking statements.

Please note that forward looking statements are not guarantees of future performance. These statements are based on our current plans and expectations and are 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.

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 place undue reliance on these forward looking statements.

Operator: You should therefore not place undue reliance on these forward-looking statements.

Operator: 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 operating results and our financial conditions.

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 operating results and financial condition.

Ole Hjertaker: Then I will leave the word over to our CEO, Uli Hjertaker, with highlights for the first quarter. Thank you Espen. We are now announcing our 85th dividend and continue building our business as a maritime infrastructure company with a diversified fleet. We reported revenues of $193 million this quarter and the EBTA equivalent cash flow in the quarter was $116 million. Over the last 12 months, the EBITDA equivalent has been $545 million.

And then I will leave the word over to our CEO Julio.

Tucker: Tucker with highlights for the first quarter.

Julio Tucker: Thank you Ashwin, we are now announcing or 85th dividend and continue building our business as a maritime infrastructure company with a diversified fleet.

Julio Tucker: We reported revenues of $193 million this quarter and the EBITDA equivalent cash flow in the quarter was $116 million.

Over the last 12 months, the EBITDA equivalent has been $545 million.

Ole Hjertaker: The first quarter's result was impacted by several one-off items, including impairments on some older dryboat vessels traded in the spot market and also the drilling at Hökules being idle in the quarter. We therefore recorded a net loss in the quarter of 32 million dollars or 24 cents per share. With a dividend of $0.27 per share, we have returned more than $2.8 billion to our shareholders over 85 consecutive quarters. and the latest dividend represent a yield of approximately 13% based on share price yesterday. We have also been active in repurchasing shares in the recent market softness, and have bought back $10 million worth of shares below $8 per share over the last few weeks.

Julio Tucker: The first quarter. This result was impacted by several one off items, including impairments on some older dry bulk vessels traded in the spot market and also the drilling a calculus being idle in the quarter.

Julio Tucker: We therefore recorded a net loss in the quarter of $32 million or 24 cents per share.

Julio Tucker: With a dividend or <unk> 27 per share we have returned more than $2 $8 billion to our shareholders over 85 consecutive quarters.

Julio Tucker: And the latest dividend represents a yield of approximately 13% based on share price yesterday.

Julio Tucker: We have also been active repurchasing shares from the recent market softness and have bought back $10 million worth of shares below $8 per share over the last few weeks.

Ole Hjertaker: This is based on our overall capital allocation strategy with the aim to maximise long-term distribution capacity per share. The seven dry book vessels between 57,000 and 82,000 deadweight ton were previously on long-term charters and have thereafter been employed in the spot market. The vessels are built in China between 2009 and 2012, and we have not been able to find new long-term charters for these vessels due to a combination of age, design, and fuel efficiency.

Julio Tucker: This is based on our overall capital allocation strategy with the aim to maximize long term distribution capacity per share.

Julio Tucker: The seven dry bulk vessels between 57080 2000 deadweight ton were previously on long term charters and have their after being employed in the spot market.

Julio Tucker: The vessels are built in China between 2009, and 2012, and we have not been able to find new long term charters for these vessels due to a combination of H design and fuel efficiency.

Ole Hjertaker: The recent market volatility and recession fears after the recently implemented tariffs makes it even more difficult to trade the vessels profitable in the spot market, and we have now sold one of the vessels and agreed to sell another. While the impairments are $34 million in aggregate, the actual cash-on-cash returns from the investments in these vessels have actually been quite decent, and in the 12-15% range on a leveraged basis for two of the supermax bulkers we have agreed to sell. The reason is that the vessels were on high charters initially, but according to USGAP, we have had to amortize the vessels on straight line basis from new.

Julio Tucker: The recent market volatility and recession fears after the recently implemented tariffs it makes it even more difficult to trade the vessels profitable in the spot market and we have no sold one of the vessels and agreed to sell and other.

Julio Tucker: While the impairments are a $34 million in aggregate the actual cash on cash returns from the investments in these these vessels have actually been quite decent and in the 12% to 15% range on a level levered basis for two of the supermarket smokers, we have agreed to sell.

Julio Tucker: The reason is that the vessels are on high charters initially, but according to U S. GAAP, we have had to amortize the vessels on straight line basis from new.

Ole Hjertaker: For other assets like the container ships and car carriers, the charter-free values were around a billion dollars higher than carrying costs at quarter end, so we have a significant buffer there.

Julio Tucker: For other assets like the container ships and car carriers. The charter free values were around a $1 billion higher than carrying cost at quarter end. So we have a significant buffer stare.

Ole Hjertaker: The drilling ring Hercules has been idle since the fourth quarter of 2024, and the recent market turmoil and oil price volatility has delayed new employment opportunities for the rig, which is impacting our near-term financial results. We remain optimistic about finding new employment for the RIG and continue to explore strategic opportunities for the RIGs in parallel, but it is difficult to give any guiding on timing for this. The rest of the portfolio on long-term charters is performing very well and we have upgraded several vessels in the quarter, boosting both cargo intake and fuel efficiency in connection with charter extensions at higher rates than before.

Julio Tucker: The drilling Hercules has been idle since the fourth quarter of 2024, and the recent market turmoil and oil price volatility has delayed new employment opportunities for the rig which is impacting our near term financial results.

Julio Tucker: We remain optimistic about finding new employment for the rig and continues to explore strategic opportunities for the rigs in parallel, but it's difficult to give any guidance on timing for this the rest of the portfolio on long term charters is performing very well and we have upgraded several vessels in the quarter boosting both cargo in.

Julio Tucker: Take in fuel efficiency in connection with charter extensions at higher rates than before.

Ole Hjertaker: Our Charter Backdog is currently $4.2 billion, and importantly, more than two-thirds of this is to customers with an investment-grade rating, giving us a unique cash flow visibility and resilience in light of the current market volatility. And we have a strong liquidity position, including under a portion on credit lines and also multiple unlevered vessels, which should enable us to continue investing in new recreative assets.

Julio Tucker: Our charter backlog is currently $4 $2 billion and importantly, more than two thirds of this is to customers with investment grade rating, giving us a unique cash flow visibility and resilience in light of the current market volatility and.

And we have a strong liquidity position, including Undrawn portion of our credit lines and also multiple unlevered vessels, which should enable us to continue investing in new accretive assets.

Trym Sjlie: And with that, I will leave the word over to our Chief Operating Officer, Trym Sjlie. Thank you all. Our current fleet is made up of 79 maritime assets, including vessels, rigs, and contracted new buildings. In April, we sold the SuperMaxx at UConn and in May, we will be selling the last of our two old 1700 TU container ships, the Asian Ace. She is scheduled to be delivered to buyers later this week.

Julio Tucker: And with that I will leave the word over to our chief operating officer trim Shirley.

Julio Tucker: Thank you.

Julio Tucker: Our current fleet is made up of 79 maritime assets, including vessels rigs and contracted new buildings.

Julio Tucker: In April we sold the supermarket you call in May we will be selling the last about two old 1700, Teu container ships. The Asian Ace. She is scheduled to be delivered to buyers later this week.

Trym Sjlie: and other supermarkets also in the process of being sold. As previously reported, Golden Ocean, the charter for our eight cape-sized bulk carriers, have declared their purchase option. and we expect the vessels to be delivered to Golden Ocean in July. Our backlog from owned and managed shipping assets stands at $4.2 billion, and the fleet in Q1 was made up of 15 dry bulk vessels, 38 container ships, 16 large tankers, two chemical tankers, seven car carriers, and two drilling rigs. We have a diversified fleet of assets charted out to first-class customers on mostly long-term charters, and a majority of our customer base is large industrial end users.

Julio Tucker: Another supermarket is also in the process of being sold.

Julio Tucker: As previously reported gold notion that charter for our eight capesize bulk carriers.

Julio Tucker: The purchase option.

Julio Tucker: And we expect the vessels to be delivered to Golden Ocean in July.

Julio Tucker: Our backlog from owned and managed shipping assets stands at $4 $2 billion and our fleet. In Q1 was made up of 15 Drybulk vessels 38 container ships 16 large tankers two chemical tankers seven car carriers.

Julio Tucker: And two drilling rigs and we have a diversified fleet of assets chartered out to first class customers, mostly long term charters and a majority of our customer base is large industrial end users.

Trym Sjlie: Container vessels dominate our backlog accounting for about 67% of our portfolio. Key to remain an effective partner is to ramp up investments in fleet renewal, new technology and vessel upgrades, which we are doing.

Julio Tucker: Dana vessel enrolment at Outback loan accounting for about 67% of our portfolio.

Julio Tucker: Key to remain an attractive partner is to ramp up investments in fleet renewal, new technology and vessel upgrades, which we are doing.

Trym Sjlie: stricter regulatory demands. Particularly from the IMO and the EU aimed at cutting shipping emissions is another driving By enhancing our fleet, we position ourselves for organic growth, either by supplying new vessels to clients or extending the life of existing ones. and container operators in particular are receptive to collaborative projects involving major upgrades like cargo capacity increases, energy saving technologies, propeller enhancements and hull modifications. These investments deliver significant cost savings and emissions reductions, benefiting both our operations and our clients. In Q1, 95% of charter revenues from all assets came from time charter contracts and only 5% from bare boats or dry lease.

Julio Tucker: Stricter regulatory demands.

Julio Tucker: Particularly from the <unk> in the EU aimed at cutting shipping emissions is another driving factor.

Julio Tucker: Enhancing our fleet, we position ourselves for organic growth either by supplying new vessels to clients or extending the life of existing ones.

Julio Tucker: And container operators in particular are receptive to collaborative projects involving major upgrades like cargo capacity increases energy saving technologies propeller announcements and modifications these investments deliver significant cost savings and emissions reductions benefiting both our operations.

Julio Tucker: And our clients.

Julio Tucker: In Q1, 95% of charter revenues from all assets came from time charter contracts and only 5% from bareboat or dry leases. The charter revenue from our fleet was about $193 million in the quarter.

Trym Sjlie: The Chartered Revenue from our feet was about $193 million in the quarter. We had a total of almost 6,600 operating days, defined as calendar days, less technical or fire and dry dockings or stacking. Six vessels have been in dry dock in the quarter, including major upgrade projects. It's worth mentioning that the time at the shipyard required for these container ship upgrades beyond the 15 days required for a normal dry docking is for charters accounts. Our overall utilization across the shipping fleet in Q1 was 98.6%. Adjusted for unscheduled technical or fire only, the utilization of the shipping fleet was 99.8%, a testament to a high quality of our vessel management.

Julio Tucker: We had a total of almost 6600 operating days they find us calendar days less technical file and dry dockings or stocking.

Julio Tucker: Six vessels are in dry dock in the quarter, including major upgrade projects, it's worth mentioning that the time at the shipyard required for these containership upgrades beyond the 15 days required for a normal dry docking is for charterers account.

Julio Tucker: Our overall utilization across the shipping fleet in Q1 was 98, 6% adjusted for on schedule technical off hire only the utilization of the shipping fleet was 99, 8%.

Julio Tucker: Testament to our high quality of our vessel management.

Trym Sjlie: When including the drilling rigs, utilization was 97.2%, mainly due to the Hercules rig being idle in the quarter.

Julio Tucker: When including the drilling rigs utilization was 97, 2%, mainly due to the Hercules rig being idle in the quarter.

Trym Sjlie: The Trump administration's recent imposition of fees on Chinese-built and operated ships has garnered significant attention lately. These fees originate from a 2024 Section 301 investigation under the Biden administration, which scrutinized China's dominance in global shipbuilding, maritime, and logistics industries. Initially proposed in February 2025 by the U.S. Trade Representative, the fees target Chinese-built and Chinese-owned vessels docking at U.S. ports in an effort to bolster U.S. shipbuilding and reduce dependence on China's maritime infrastructure.

Speaker Change: The Trump administration's recent imposition of fees on Chinese built and operated ships has garnered significant attention lately. These fees originate from a 2024 section 301 investigation under the burden of administration, which scrutinized China's dominance in global Shipbuilding Maritime and logistics industries initial.

Speaker Change: The proposed in February 2025 by the U S trade representative the vies target Chinese built in Chinese owned vessels docking at U S ports in an effort to bolster your shipbuilding and reduce dependence on China's maritime infrastructure.

Trym Sjlie: for SFL. The relevant provisions are Annex 2 covering Chinese-built vessels and Annex 3 addressing foreign-built car carriers, a new addition not part of the original February proposal. This effectively applies to nearly all non-U.S.-flagged vehicle carriers. So, of our 79 vessel fleet, approximately 27 will be affected by these fees in our estimation, primarily car carriers and tankers. with potential impacts on larger container ships later depending on our fleet composition going forward. However, since our vessels are on long-term charters, these fees will be passed on to charters. We are currently investigating the practical implementation of these fees, particularly the payment processes, which we are discussing with our charter.

Speaker Change: For SSL.

Speaker Change: The relevant provisions are annexed to covering Chinese built vessels and annex three addressing foreign built car carriers and New addition, not part of the original February proposal.

Speaker Change: This effectively applies to nearly all non U S flagged vehicle carriers.

So of our 79 missile fleet approximately 27 will be affected by these fees in our estimation, primarily car carriers and tankers.

Speaker Change: And potential impacts on larger container ships later, depending on our fleet composition going forward.

Speaker Change: However, since our vessels are on long term charters these fees will be postponed to charterers.

Speaker Change: We are currently investigating the practical implementation of these fees, particularly the payment processes, which we are discussing with our charterers.

Trym Sjlie: On the energy side, the Lioness rig earned $20.3 million in Q1, more or less flat from Q4, with three days of downtime in the quarter. Due to good performance, the rig was recognized as ConocoPhillips Rig of the Month for all three months in the quarter. OPEX was $12.2 million in Q1, slightly down from Q4. Subsequent to quarter end, the marketing X-rate of Linus has been adjusted up by 2% from May 1st. The Hercules rig is currently warm stacked in Norway and being marketed for opportunities later in 2024 and 2025 and 2026. During the first quarter, the rig recorded $2 million in revenue relating to equipment rental income.

Speaker Change: On the energy side, the Linus rig earned $23 million in Q1, more or less flat from Q4 with three days of downtime in the quarter.

Speaker Change: Due to good performance in rigorous recognized as clinical Phillips rig of the month for all three months in the quarter.

Speaker Change: Opex was $4 2 million in Q1 slightly down from Q4.

Speaker Change: Subsequent to quarter end marketing X rate of liners have been adjusted up by 2% from first.

Speaker Change: The Hurricane this rig is currently warm stacked in Norway and being marketed for opportunities later in 2024, and 2000 2025 and 2026.

Speaker Change: During the first quarter and the ring recorded $2 million in revenue relating to equipment rental income. The majority of this equipment has been returned to SFO subsequent to quarter end and we do not expect to receive further rental income.

Trym Sjlie: The majority of this equipment has been returned to SFO subsequent to quarter end and we do not expect to receive further rental income. Rig OPEX was approximately $6 million in the quarter reflecting warm stacking costs of the rig.

Speaker Change: Opex was approximately $6 million in the quarter, reflecting warm stacking costs of the rig.

Aksel Olesen: I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter. Thank you, Trym. On this slide, we have shown a performance illustration of cash flows for the first quarter. Please note that this is only a guideline to assess the company's performance, and it's not in accordance with US GAAP and also net of extraordinary and non-cash items. The company generated gross charter hire of approximately $193 million during the first quarter, with approximately $85 million coming from our container fleet, including approximately $1.7 million in profit share related to fuel savings on seven of our large container vessels.

Oxford: I will now give the word over to our CFO, Oxford, all suddenly will take us through the financial highlights of the quarter.

Oxford: Thank you Tim on this slides from our pro forma illustration of cash flows for the first quarter. Please note that this is only a guideline to assess the company's performance and is not in accordance with U sculpt and also net of extraordinary and noncash items.

Speaker Change: The company generated gross charter hire of approximately 193 million during the first quarter with approximately $85 million coming from our container fleet, including approximately $1 7 million and profit share related to fuel savings on seven for large container vessels.

Aksel Olesen: As in the previous quarter, revenue was impacted by scheduled dry dockings and efficiency upgrades on some of our large containers. The car carrier fleet generated approximately 25 million of gross charter hire in this quarter, including profit share from fuel savings, which is slightly down from the previous quarter, as one vessel underwent a scheduled dry docking during the quarter. A tanker fleet generated approximately 43 million in gross charter hire, slightly off from the previous quarter, as all five tanker vessels acquired in 2024 are the first full quarter of revenue. as well as 15 dry bulk vessels, of which 8 are employed on long-term charters.

Speaker Change: As in the previous quarter revenue was impacted by scheduled dry dockings and efficiency upgrades most of them are for large container vessels.

Speaker Change: The car carrier fleet generated approximately $25 million of gross charge higher in this quarter, including profit share from true savings, which is slightly down from our previous quarter as one vessel underwent a scheduled drydocking during the quarter.

Speaker Change: Well. Thank you Kate generated approximately $43 million in gross charter hire slightly up from the previous quarter. That's all five. Thank you vessels acquired in 2024, and the first full quarter of revenue.

Speaker Change: That's the Villa assistant Drybulk vessels of which eight are employed on long term charters the vessels generated approximately $18 million in gross charter hire in the first quarter. The seven vessels employed in the spot and short term market contributed approximately $4 4 million and that charter revenue compared to approximately seven.

Aksel Olesen: The vessels generated approximately $18 million in gross charter hire in the first quarter. The 7 vessels employed in the spot and short-term market contributed with approximately $4.4 million in net charter revenue compared to approximately $7.2 million in the fourth quarter. SFL owns two harsh environment drilling rigs, the large stack of rig liners and the ultra-deepwater semi-submersible rig hooks. The risk generated approximately 22.4 million of charter hire in the quarter. Our operating and G&A expenses for the quarter was approximately $78 million, down from approximately $104 million in the fourth quarter, as operating expenses on the Hercules is reduced in the current warm stacking mode, compared to in full operating mode when the rig is on contract.

Speaker Change: $2 million in the fourth quarter.

Speaker Change: It's the Netherlands, too harsh environment drilling rigs large pack, a big liners and the ultra deepwater semi submersible rig cookies.

Speaker Change: <unk> generated approximately $22 4 million of charter hire in the quarter.

Speaker Change: Our operating and G&A expenses for the quarter was approximately $78 million.

Speaker Change: From approximately $104 million in the fourth quarter.

Speaker Change: Operating expenses on the Hercules is reduced in the current warm stacking mode comparison to improve operating mode. When the rig is on contract.

Aksel Olesen: Going forward, we estimate operating expenses for approximately $80,000 per day for Hercules in the current warm stacking mode, excluding potential upgrades. This summarizes the adjusted EBITDA of approximately $116 million compared to $132 million in the previous quarter.

Speaker Change: Going forward, we estimate operating expenses of approximately 80000 per day for the Hercules in the current warm stacking mode, excluding potential upgrades.

Speaker Change: This summarizes to an adjusted EBITA of approximately $116 million compared to $132 million in the previous quarter.

Aksel Olesen: We then move on to the Profit and Loss Statement as reported on the U.S. For the first quarter report total operating revenues approximately 187 million compared to approximately 229 million in the previous quarter. The contribution from our vessels was approximately $171 million compared to approximately $177 million in the previous quarter. But the rigs contributed with approximately $22.4 million, down from approximately $54.9 million in the previous quarter, as Hercules was idle in the first quarter. Vessel operating expenses in the quarter was approximately $58 million, including $10 million related to scheduled dry dockings, compared to approximately $64 million in the previous quarter, including $14 million related to scheduled dry docking.

Speaker Change: We then move on to the profit and loss statement as reported under U S. GAAP for the first quarter reported total operating revenues approximately $187 million compared to approximately $229 million in the previous quarter.

Speaker Change: The contribution from our vessels was approximately $110 million to $1 million compared to approximately $177 million in the previous quarter, while the rigs contributed approximately $22 4 million down from approximately $54 9 million in the previous quarter, our surplus was idle in the first quarter.

Speaker Change: Vessel operating expenses in the quarter was approximately $58 million, including $10 million related to scheduled dry dockings compared to approximately $64 million in the previous quarter, including $14 million related to scheduled dry dockings.

Aksel Olesen: Drydock expenses for ships are being expensed when incurred, and the vessels are out of service during the drydock period, reducing revenues temporarily. The net result in the first quarter was also impacted by non-recurring or non-cash items, including investment impairments of $34.1 million relating to seven non-core drivebook vessels trading in the spot market. So overall and according to US GAAP, the company reported a net loss of approximately 31.9 million or 24 cents per share, compared to a net profit of approximately 20.2 million or 15 cents per share in the previous quarter.

Speaker Change: Dry docking expenses four ships are being expensed when incurred and the vessels are also serviced during the dry dock period, reducing awareness temporarily.

Speaker Change: The net result in the first quarter was also impacted by nonrecurring and noncash items, including the impairment of $34 1 million relating to seven non core drybulk vessels trading in the spot market.

Speaker Change: So overall and according to U S. GAAP the company reported a net loss of approximately $31 9 million or 24 per share compared to a net profit.

Speaker Change: Smith at $20 2 million or <unk> 15 per share in the previous quarter.

Aksel Olesen: Moving on to the balance sheet. At quarter end, SFL has approximately 174 million of cash and cash equivalents, in addition to undrawn credit lines in amount of approximately 48 million. In addition, the company has unencumbered assets with a market value of approximately $187 million at quarter end.

Speaker Change: Moving on to the balance sheet.

Speaker Change: At quarter end, <unk> had approximately $174 million of cats and <unk> in addition to <unk>.

Speaker Change: Undrawn credit lines, and the amount of approximately $48 million.

Speaker Change: Additionally, the covenant unencumbered assets with a market value of approximately $187 million at quarter end.

Aksel Olesen: The company has conducted share repurchases of approximately 10 million, and approximately 40% of this has been acquired by Quarter End. During the quarter, the company repaid debt facilities in the amount of approximately $47 million in addition to ordinary loan installments of approximately $65 million. We also have vessel upgrades related to some of the large container vessels of approximately 20 million during the quarter, most of which will be reimbursed through charter rate increases. We furthermore have remaining capital expenditure of about $850 million remaining on five large container vessels, expected to be funded through pre- and post-delivery funding.

Speaker Change: The company has conducted share repurchases of approximately $10 million approximately 40% of this had been acquired by quarter end.

Speaker Change: During the quarter the company paid its facilities in the amount of approximately $47 million. In addition to ordinary loan installments of approximately $65 million.

Speaker Change: We also have the vessel upgrades related some of the large container sales of approximately $20 million during the quarter, most of which will be reimbursed to charter rate increases.

Speaker Change: Furthermore, had remaining capital expenditure of about $850 million remaining on five large container vessels expected to be funded through pre and post delivery funding.

Aksel Olesen: Those vessels are expected to be delivered in 2028. So based on the Q1 numbers, the company had an equity ratio of approximately 56%.

Speaker Change: Those vessels are expected to deliver incentives.

Speaker Change: So based on the Q1 numbers the company.

Speaker Change: The ratio of approximately 36%.

Aksel Olesen: tend to compute.

Speaker Change: Then to conclude.

Aksel Olesen: The board has declared the 85th consecutive cash dividend. With a dividend of 27 cents per share, we have returned more than 2.8 billion dollars to our shareholders over the years. We've also been actively repurchasing shares in the recent market softness as part of our overall capital allocation strategy, with the aim to maximizing long-term distribution capacity per share. Our charter backlog is currently $4.2 billion, and importantly, more than two-thirds of this is the customers with investment-grade rates. giving us a unique cash flow visibility and resilience in the light of the current market volatility.

Speaker Change: <unk> declared a fifth consecutive cash dividend.

Speaker Change: A dividend of <unk> 10 to seven cents per share, we returned more than $2 $8 billion to shareholders over the years.

Speaker Change: We've also been active repurchasing shares in the recent market softness as part of our overall capital allocation strategy with the aim to maximizing long term distribution capacity per share.

Speaker Change: We're talking backlog is currently $4 2 billion and importantly, more than two thirds of this is the customers with investment grade rating, giving us some unique cash flow visibility and resilience in the light of the current market volatility.

Aksel Olesen: Furthermore, our strong balance sheet and liquidity position provides us flexibility in the current market environment and enables us to pursue new investment opportunities.

Furthermore, our strong balance sheet and liquidity position provides us flexibility in the current market environment, and then enables us to pursue new investment opportunities.

Aksel Olesen: And with that, I give the word back to the operator who will open the line for questions. Thank you, Aksel.

Speaker Change: And with that I can revert back to the operator, who will open the line for questions.

Operator: We will now open for a Q&A session. For those of you who are following this presentation through Zoom, please use the raise hand function under reactions in the toolbar to ask the question. When your name is called out, please unmute your speaker and ask your question. Thank you.

Speaker Change: Thank you Allison will now open for a Q&A session for those of you who are following this presentation to resume please use the raison function under reactions in the toolbar to ask the question why the name is called out. Please submit your speaker and ask your question. Thank you.

Gregory Lewis: And we will have our first question from Gregory Lewis. Greg, please unmute your speaker to ask your question. Yes, thank you. And good afternoon, everybody. And thanks for taking my questions.

Speaker Change: And we will have our first question from Gregory Lewis, Greg place Amit Your speaker to ask your question.

Yes, Thank you and good afternoon, everybody and thanks for taking my questions.

Gregory Lewis: Um, I was hoping for a little bit more color on on on kind of vessel and rig operating expenses. I mean, clearly, that was their nice step down sequentially. I'm assuming that's a little bit around maybe some cost savings at the Hercules, but you did mention some. some dry dockings.

Speaker Change: I was hoping for a little bit more color on.

Speaker Change: Vessel and rig operating expenses I mean, clearly that was they're not nice step down sequentially Im assuming thats, a little bit around maybe some cost savings at the Hercules.

But you did mention some.

Speaker Change:

Speaker Change: So some dry dockings.

Gregory Lewis: I'm kind of curious as we look out over, you know, the rest of the year, you know, Q2, Q3, Q4, and any kind of color around planned out-of-service days around dry dockings, and then in the event that we were able to, or when we do get work on, eventually get work on the Hercules, how should we think about the scaling of OPEX related to that rate?

Speaker Change: Im kind of curious as we look out over.

Speaker Change: The rest of the year Q2, Q3, Q4, and any kind of color around planned out of service days around dry dockings and then.

Speaker Change: In the event that we were able to.

Speaker Change: When we do get work on.

Speaker Change: Eventually didn't work on the Hercules, how should we think about the re scaling of opex related to that rig.

Trym Sjlie: Hi Gregory, Trym Sjlie here. I think relating to your question on dry dockings and OPEX, this year is a very busy dry docking year. I think we're looking at, I mean, some dates can move, but up to sort of 17 vessels. which in a if you just straight line it sort of an average year would be 10. So it's more than usual.

Hi, Gregory seem shortly here.

Speaker Change: I think relating to the question on on dry dockings and Opex. We this year is a very busy dry docking year.

Speaker Change: I think we're looking at.

Speaker Change: Some someday it can move but after sort of 17 vessels.

Speaker Change: If you just straight line it sort of an average year would be 10, so it's more than usual and.

Trym Sjlie: And we we had We had a heavy dry dock schedule in Q1, and Q2 will also be more than usual, and then it will taper off in Q3 and Q4 and into next year. So the brunt of the dry dock related costs... I'll sort of take it in Q1 and Q2 this year.

Speaker Change: And we had.

Speaker Change: We had a heavy drydock schedule in Q1.

Speaker Change: And Q2 will also be.

Speaker Change: More than usual and then it will taper off in Q3, and Q4 and into next year. So the brunt of the Drydock related costs.

Speaker Change: Sort of taken in Q1 and Q2 this year.

Gregory Lewis: I'll leave it to Olle to give some colour on the Hercules, that's a little bit of a different issue. clear enough from the dry docking question or would you? No, that's super helpful. Okay. Thank you.

Speaker Change: I'll leave it all too.

Speaker Change: To give some color on the Hercules, that's a little bit of a different.

Speaker Change: Issue.

So I think.

Speaker Change: Thats.

Speaker Change: Clear enough from the dry docking question or would you not super helpful.

Speaker Change: Okay.

Speaker Change: Okay.

Ole Hjertaker: and maybe Ole on the Hercules? Well, you know, we have both rigs, you know, incurring OPEX liners, you know, the regular OPEX has been working, has had a very high utilization through the charter, has been, you know, rig of the month every month during the first charter quarter, which is with ConocoPhillips, which is very good. The Hercules remains stacked in Norway, awaiting new contract opportunities.

Speaker Change: And maybe on the on the Hercules.

Speaker Change: We are both both the rigs are.

Speaker Change: Incurring opex.

Speaker Change: Opex Linus.

Speaker Change: The regulatory Opex.

Speaker Change: He has been working has had a very high utilization through the charter.

Speaker Change: As Ben you know rig of the month every month during the first charter quarter Which's with Conocophillips, which is very good.

Speaker Change: The Hercules remains stacked.

Speaker Change: <unk> way awaiting new contract opportunities.

Ole Hjertaker: We cannot be specific. I mean, we are discussing opportunities, but we cannot be specific on that. We have to, we will report that when we have concluded something. While the rig is there, we are keeping it warm stacked, which means that there is a run rate cost for the rig. It's in the region of around $80,000 per day to keep a rig like that warm, so it's ready to go out on very short notice. We're also doing some upgrades on the rig to ensure that it's a very attractive rig in the market. But in light of the recent market volatility and oil price volatility, we have seen that all companies, and this is both, you know, onshore and offshore, are a little careful with their, you know, investments.

Speaker Change: We cannot be specific I mean, we are discussing opportunities, but we cannot be specific on that we have to we will report that when we have concluded.

Speaker Change: Something.

Speaker Change: While the rig is there we are keeping it warm stacked which means that there is a there is a run rate.

Speaker Change: Cost for the rig it's in the region of around $80000 per day.

Speaker Change: To keep a rig like that warm so it's ready to go out on very short notice. We're also doing some upgrades on the rig to ensure that it's a very attractive rate in the market but.

Speaker Change: In light of the recent.

Speaker Change: Market volatility and oil price volatility, we have seen that all companies and this is both onshore.

Speaker Change: On shore and offshore.

Speaker Change: <unk> are a little careful with their investments and therefore, we've seen several oil companies are guiding that their capex.

Ole Hjertaker: And therefore, we've seen several oil companies guiding that their CAPEX, you know, is adjusted downwards, given the uncertainty. So, you know, we But at the same time, you know, that specific rig is one of relatively few rigs with capabilities of drilling in harsh environment during winter. So we do believe there will be good demand for the rig down the road, but we cannot be specific on exactly when.

Speaker Change: <unk>.

Adjusted downwards, given the uncertainty so you know we are.

Speaker Change: But.

Speaker Change: At the same time, you know that specific Greg.

Speaker Change: One of relatively few rigs with capabilities of drilling in harsh.

Speaker Change: Environment during winter.

Speaker Change: So we do believe there will be good demand for the rig down the road, but we cannot be specific on exactly one.

Speaker Change: Yes.

Gregory Lewis: Yes, super helpful. And just following up on that, you know, if I were to think, just if I pick a date for the rig to go to work, is it kind of safe? I mean, you're spending money to keep the rig hot, active, ready to go. Is it safe to just assume that, you know, in the quarter leading up before work, before putting that rig back to work, you know, maybe there's a couple million dollar impact to OPEX or not, or something even?

Speaker Change: Yes, so super helpful and just following up on that.

Speaker Change: If I were to think just if I pick a day.

Speaker Change: For the rig to go to work is it kind of safety.

Speaker Change: Spending money to keep the rig hot and ready to go.

Is it safe to just assume that in the quarter, leading up before before putting that rig back to work. Maybe there is a couple of million dollar impact to opex or not or something like that.

Aksel Olesen: Yes, so Greg Aksel here. Absolutely correct. So I would assume in the quarter before it goes on the contract, it's more like run rate contract as per on a normal contract. Yeah, so there's a step up in that period. You basically have to put more people on the rig, and they have to prepare. And you typically earn the charter rate when the rig starts drilling. So in the weeks ahead of that, you have always a ramp up of OPEX up to run rate level. So that's just a normal part of that. That's why you get the mobilization cost effectively, right?

Greg: Yeah, So Greg extra here.

Speaker Change: Absolutely correct.

Speaker Change: You mean in the quarter before it goes on the contract. It's a it's more like run rate contract as per on a normal contract. So theres a step up in that period, you basically have to put more people on the rig.

Speaker Change: And they have to prepare and and you typically earn the charter rate when the rig starts drilling. So in the weeks ahead of that you have always a ramp up of opex up to run rate levels. So that's just a normal part of that.

Speaker Change: Brian I guess the mobilization costs.

Gregory Lewis: Yeah, perfect. Okay.

Speaker Change: Effectively yes.

Gregory Lewis: And then just, you know, clearly there's a lot of uncertainty out there, you know, around, you know, I guess there's multiple issues happening.

Speaker Change: Perfect. Okay, and then just clearly theres a lot of uncertainty out there.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Multiple issues happening.

Gregory Lewis: You know, I guess what I wonder is, you know, just given the business model of redeploying capital, you know, on accretive deals, how have, what is kind of, I guess, in terms of asset sale opportunities. And I mean, or I should say asset acquisition opportunities for SFL. You know, how has that changed over the last few months? And then and then really, what has been the appetite for customers to actually you know, look to charter in tonnage longer term, just because, you know, for SFL, you know, you need you need to be able to get your hands on the asset.

Speaker Change: I guess, what I Wonder is you know just given the business model of redeploying capital.

Speaker Change: On accretive deals.

Speaker Change: How has what has kind of I guess in terms of asset sale opportunities.

Speaker Change: I mean, our I shouldn't say asset acquisition opportunities for SSL.

Speaker Change: <unk>.

Speaker Change: How has that changed over the last few months.

Speaker Change: And then really what has been the appetite for customers to actually.

Speaker Change:

Speaker Change: Look to charter in tonnage longer term just because.

Speaker Change: For Astra Bell.

Speaker Change: You need you need to be able to get your hands on the asset and then you also need to be able to contract. The asset just kind of curious how that has kind of evolved over the last few months and yeah I'll stop there.

Gregory Lewis: And then you also need to be able to contract the asset. Just kind of curious how that's kind of evolved over the last few months. And yeah, I'll stop there. Yeah.

Ole Hjertaker: Well, I think, you know, There was a distinct difference between, what do you say, February, early March and, you know, what was it going into April with all the noise around the tariffs, you know, and board fees and whatnot. So, you know, our sense is that, particularly in April, everyone in the market were a little hesitant because nobody could see, had visibility on what was actually going to happen in the various segments, and so it's basically across the board. Higher uncertainty means that decision processes take longer. At the same time, you know, the customers then, if you look at our core feed and where our strategy is, which is long-term charters to very strong industrial players, you know, as you know, we have like two-thirds of our backlog to investment-grade companies.

Speaker Change: Well.

Don: Thank you Don.

Don: There was a distinct difference between Oregon with a February early March and and.

You know, what where is it going into April with all the noise around the tariffs are you know on board fees and whatnot.

Don: So our sense is that particularly in April.

Don: Everyone in the market, where Orlando has a time because nobody could see had visibility on what was actually going to happen in the various segments. So it's basically across the board high higher uncertainty means that decision processes take longer at the same time you know the customers then and if you look at our core fleet.

Don: And where our strategy is which is long term charters to very strong industrial players.

Don: As you know we have like two thirds of our backlog to investment grade companies. These are not companies that are that sort of liver dies on the spot market right. These are companies of a more longer term logistics mindset, and therefore arent necessarily so dependent on on the short term market. So we see.

Don: You already know that.

Don: Organization discussions we had earlier in the year, where we with that sort of went a little slow down for a period is now picking up again, so we think that with some more stability and predictability in our you know around world trade and tariffs in particular will we hope that will.

Ole Hjertaker: So we think that with some more stability and predictability in, you know, around world trade and tariffs in particular, you know, we hope that will, you know, lead to more business, call it executable business transaction.

Don: No lead to more business call. It executable business transaction also along alongside with that.

Ole Hjertaker: Also, alongside with that. both as cash, we have on-drawn facilities and also some assets available. And I think importantly, we have built up a standing over more than 20 years now as a very reliable, call it customer for funding institutions, banks, particularly in Asia, you know, and we are very active in the Japanese market, for instance. So with long-term, you know, predictability, you know, we're there, you know, we always perform, you know, means that we think we have pretty good access to capital for new projects now. And, you know, that is, you know, at least based on our interaction.

Don: You had a very hot year last year and the year before.

Don: The new building side, where where shipyards are working <unk> kept rising are you know are the prices so with a little lower activity. Maybe you can also see some softening on price expectation, which also comps nicely together with investment opportunities and we have you know quite decent.

Don: Capital available both as cash we have undrawn facilities and also some assets available and I think importantly, we've built up.

Our standing over more than 20 years now as a very reliable call it customer for funding institutions banks.

Don: Particularly in Asia, and we were very active in the Japanese market for instance, so with long term predictability.

Don: Are there you know we always perform.

Don: <unk>, we think we have pretty good access to capital and our four new projects now.

Don: That is what these based on our interaction, but as always we will never guide you know on how much we will do in any specific quarter beforehand. We report deals as we do them.

Ole Hjertaker: But as always, we will never guide, you know, on how much we will do in any specific quarter beforehand. You know, we report deals as we do them. And historically, as you've seen, some quarters, we are very active, others quarters, we are not. It's all about trying to do the right deals and not, you know, just do it on a program basis to get the right deal.

Don: And historically as you've seen some quarters, we are very active others quarters. We are not it's all about trying to do the right deals or not.

Just do it on a program basis to get the right deals.

Gregory Lewis: Super helpful. Thanks very much, gentlemen. Yes, thank you.

Speaker Change: Super helpful. Thank you very much gentlemen.

Don: Yes. Thank you.

Climent Molins: Alright, then we will take our next question from, and sorry if I'm mispronouncing your name, Climent Molins. Please unmute your speaker to ask your question. Hi, good afternoon. Thank you for taking my question. I wanted to start by following up on Greg's question on the Hercules. You've been clear it's difficult to provide any guidance regarding when the asset will come back, but would you talk a bit more on the upgrades you're conducting and your expected costs? I'm sorry, you know, upgrades to the Herculis specifically. Yeah, exactly. Yeah.

Speaker Change: Alright, then we will take our next question from.

Don: Sorry, if I mispronounced your name.

Don: Please speaker to ask a question.

Don: Okay.

Don: Hi, good afternoon. Thank you for taking my questions.

Don: I wanted to start by following up on Greg's question on the Harkness using clear it's difficult.

Don: We will provide any guidance regarding when the asset will come back.

Don: Could you talk a bit more on the upgrades you're conducting and your expected cost.

Speaker Change: I'm sorry, you know upgrade show to the Hercules, specifically I think of it.

Speaker Change: Yeah exactly yeah, yeah, yeah. So so what we're doing you know as right as we speak we are.

Ole Hjertaker: So, what we're doing, you know, as we speak, we are, you know, when the rig is idle or hot stacked like now, you know, for instance, we are doing some work on the flooring, which is, you know, effectively part of the claim, you know, with seed drill that where we were awarded, you know, toilet money from seed drill, that's, you know, one of the items there was that the flooring in the living quarters there was not maintained as it should, and therefore it needs to be, you know, redone. And that's very difficult to do when the rig is working because then you have to shut down sections of the living quarters.

Speaker Change: When the rig is.

Speaker Change: Idaho, Lauren or hot stacked like now you know for instance, we are doing some work on the flooring.

Speaker Change: Which is which is.

Speaker Change: Effectively part of the of the claim you know with <unk> that we were awarded another component from seed robots.

One of the items there was that.

Speaker Change: The flooring in the living quarters there.

Speaker Change: It was a it was not a maintain is insured and therefore really needs to be redone and and that's very difficult to do when the rig is working because then you'll have to shutdown sections of the living quarters. So that is something that we're doing now.

Ole Hjertaker: So that is something that we're doing now. We're talking, you know, a couple of hundred thousand dollars, you know, expense to do that, but that is something that we, you know, hopefully when the seed drill court case is finalized in the end, you know, that's part of money we will be effectively compensated for. We also upgraded the drilling control system to the state of the art, you know, controls fully automated systems, which is something you typically need in the harshest of environments when the rig is working. And the cost level for that is, you know, seven, $8 million.

Speaker Change: We're talking a couple of hundred thousand dollars, you know expense to do that but that is something that we you know.

Speaker Change: Hopefully when when the Seadrome Court cases is finalized and the and you know that's part of money, we will be effectively compensated for you.

Speaker Change: We're also upgraded drilling control system to the state of the art are you know controls fully automated systems, which is something you typically need in the harshest of environments. When the rig is working in and the cost level for that this is a <unk>.

Speaker Change: $708 million were also replacing some electrical systems at the same time to make ensure that its more reliable.

Ole Hjertaker: We're also replacing some electrical systems at the same time to make sure that it's more reliable, which are also expenses that will come, you know, some of them later in the year with a couple of million dollars. So we are active on the rig. We are making sure that it's very attractive for all companies to use and make sure that it's a safe and warm asset. These are these are assets that. If you put a rig in what they call coal stack, i.e. you leave it there and with minimal manning, if any, and don't keep running the equipment and maintaining it, it takes a relatively short time until it becomes very expensive to reactivate the rig.

Speaker Change: Which are also expenses that will come you know some of them later in the year with a couple of million dollars. So we are where we are active on the rig we are making sure that it's very attractive.

Speaker Change: For all companies to use and make sure that it's a safe and warm asset.

Speaker Change: These are these are assets that.

Speaker Change: If you put a rig and what they called Cold stack I E. You leave it there and with minimal mining at Fannie and and don't keep running the equipment and maintaining it. It takes a relatively short time until it becomes very expensive to reactivate the rig.

Ole Hjertaker: And we believe that it's better value for us to do these investments, including keeping the warm stack costs, which will then hopefully enable us to find work for the rig.

Speaker Change: And we believe that.

Speaker Change: It's better value for us to to do these call it investments, including keeping the warm stack costs.

Speaker Change: Which will then hopefully enable us to find work for the rig.

Ole Hjertaker: We have to remember that this rig is a legacy asset in SFL. We were never supposed to own and operate, or call it, never supposed to operate the CEDREL, back in the day, they had a purchase obligation that was really a financing structure. So after two rounds of Chapter 11's in CEDREL, we ended up taking it back. We were awarded around 48 million dollars by a court after we sued them for lack of maintenance that has been appealed. That case is coming up next year. So we believe we have a very strong case as supported by the first round, but we have not recorded anything in our accounts.

Speaker Change: We have to remember that this is a.

Speaker Change: This rig is a it's a legacy asset in <unk>, we were never supposed to own and operate or.

Speaker Change: There was a point to operate the rate.

Speaker Change: Roll back in the day, they had a they had a purchase obligation that was really a financing structure and.

Speaker Change: So after two rounds of chapter Elevens and <unk>.

Speaker Change: We ended up taking it back.

Speaker Change: We were awarded around $48 million.

Speaker Change: You know by by a court.

Speaker Change: After we.

Speaker Change: Sue them for you know.

Speaker Change: You know call it lack of maintenance.

That has been appealed that case is coming up next year. So so are we believe we still we believe we have a very strong case are supported by the first round.

Speaker Change: But but.

Speaker Change: We have not recorded anything in our accounts.

Climent Molins: We have expensed legal fees along the way and have nothing in our accounts as value for that potential final court award when that comes up. If you look at the other assets we have in our portfolio, which is really our core assets, there we control the maintenance ourselves and we can do all the preventive maintenance we need to do and therefore have a very different dynamics in terms of what it costs to keep these vessels operating. as we go with customers like Maersk, Hapag-Lloyd, Volkswagen, K-Line and others. That's very helpful. Thank you.

Speaker Change: We have expense legal fees, along the way and have nothing in our accounts I saw us call it value for that potential court. The final Court award when that comes up.

If you look at the other assets, we have in our portfolio, which is really our core assets are there we control the maintenance ourselves and we can do all the preventive maintenance, we need to do and and therefore have a very different dynamics in terms of what it costs to do to keep.

Speaker Change: These vessels are you know.

Speaker Change: As we go.

Speaker Change: With with the customers like Maersk and Hapag Lloyd Volkswagon Kinder Calite on others.

Speaker Change: That's very helpful. Thank you actually also wanted to ask about the 35 million in remaining Capex, you mentioned, which is attributable to efficiency upgrades on the container ships, how should we think about the cadence for those.

Climent Molins: I actually also wanted to ask about the $35 million in remaining CAPEX you mentioned, which is attributable to efficiency upgrades on the container ships. How should we think about the cadence for those? I've seen when they will, I mean Yeah, exactly. So like, when will you incur into the I think most of the costs remaining, which is for the container ships, it's around 18 million at the moment for the upgrades and they will be incurred in Q2 and Q3.

As in when they will I mean.

Speaker Change: Yeah, exactly so like when will you.

Speaker Change: We're into the expense.

Speaker Change: I think.

Speaker Change: Most of the costs remaining.

Speaker Change: It is.

Speaker Change: For the containership just around the <unk>.

Speaker Change: Tampa is around $18 million at the moment for the upgrades and they will be incurred in Q2 and Q3.

Climent Molins: Thanks for the talk. And they will be on these vessels, particularly that we are talking about, they will be 100% covered by a rate increase on the chart. and it also includes the offer that we that we incur. due to the longer dock duration. over and above a normal dry docking of about 15 days. Makes sense.

Thanks, Thanks for that and they will be and there will be on these vessels, particularly that we are talking about they will be 100% covered by by a rate increase and on the on the charter.

Speaker Change: And it also includes the fire that we that we incur.

Speaker Change: Due to the longer dock.

Speaker Change: <unk>.

Speaker Change: Over and above our normal dry docking of about 15 days.

Speaker Change: Makes sense. Thank you and final question from me the board decided to maintain the dividend despite the Hercules remaining open.

Aksel Olesen: Thank you. And final question. The board decided to maintain the dividend despite the Hercules remaining open. Could you provide an update on how you view the, let's say, long-term distribution potential and how do you balance that with ShareReport? Yes, we The dividend is set on a quarterly basis, so we never provide any guiding on the dividend as a matter of principle and never have. But the dividend typically, or I would say the mindset behind the dividend is a long-term sustainable level based on cash flow, net cash flow produced by the assets we own. So the comment relating to Hercules here and the employment was really in the context of a prolonged layup and therefore associated costs and no revenues for that rig for the long run.

Speaker Change: Could you provide an update on how you view, the let's say long term distribution potential.

Speaker Change: How do you balance that with share repurchases.

Speaker Change: Yes.

Speaker Change: Uh huh.

Speaker Change: The dividend this are set on a quarterly basis. So we never provide any any guiding on the dividend as a matter of our principal and I'm never happy.

Speaker Change: But the dividend typically or I would say the mindset behind the dividend.

Speaker Change: It's a long term sustainable level based.

Speaker Change: Based on the cash flow and that cash flow produced by the assets we own.

Speaker Change: So the.

Speaker Change: The the comment related to Hercules here.

Speaker Change: And the employment was really in the context of a prolonged lay up and therefore associated costs are no revenues for that rig for the long run, but we felt that it was appropriate to dimension that you know that.

Aksel Olesen: But we felt that it was appropriate to mention that depending on how long that will take, that will have an impact on the cash flow to the company and therefore eventually also the distribution capacity that we have. If you look at capital allocation, you know it's a combination of investments, debt insurance, debt repayments, share buyback and dividends. So that is really how that is allocated between those is really a question of maximizing long-term distribution per share and effectively overseen by the board. So like the share buyback we did, it's around $10 million if you look at the dividend now, it's more than 30.

Speaker Change: Depending on how long that will take you know that will have an impact on the cash flow to the company on and therefore eventually also the distribution capacity.

Speaker Change: That we have.

Speaker Change: If you look at capital allocation.

Speaker Change: Combination of investments.

Speaker Change: Debt issuance of debt repayments share buybacks and dividends.

Speaker Change: So so that is really how that is allocated between those is really a question of maximizing long term distribution per share and effectively overseen by the board.

Speaker Change: So like the share by buyback we did it's around $10 million, mainly if you look at the dividend now it's more than 30. So it's it's a it's not a huge proportion relative to the dividend, but but but the board felt that it was a very attractive level. It was below $8 on average.

Aksel Olesen: So it's not a huge proportion relative to the dividend. But the board felt that it was a very attractive level. It was below $8 on average. And we also bought back some shares in 2023. So that is a part of that toolbox that the company has to maximize returns over time. and it could be any combination of these elements.

Speaker Change: And we've done you also bought back some shares and in 2023.

Speaker Change: So that is a part of that toolbox.

Speaker Change: But the company has to maximize returns over time.

Speaker Change: It could be any combination of these elements.

Gregory Lewis: Thanks for the call and thank you for taking my questions. Thank you.

Speaker Change: Thanks for the color and thank you for taking my questions. Thank you.

Operator: All right, before we go to Mr. Baldoni, I see we've gotten some questions in here via text, so here's the first question. Is our container vessel still the preferred segment for building the contract backlog going forward? Yeah, we look at many, many segments in parallel, we have a diversified, you know, call it the market approach in the maritime space. So we look at, you know, we have, you know, we look at container ships, that, you know, we have done, you know, a few car carriers in the past. We're looking at tankers, you know, we were looking at, you know, chemical carriers, and we also looked at the gas carriers and, you know, recently, so I cannot guide specifically on that.

Speaker Change: Before we go to Mr. Baldoni, I've seen we've gotten some questions in here.

Speaker Change: Text. So that's the first question is are our container vessels still the preferred segment for building the contract backlog going forward.

Speaker Change: Yes.

Speaker Change: Yeah.

Speaker Change: We looked at many many segments in parallel we have a diversified you know call. It the market approach in the maritime space. So we looked at you know we are looking to container ships that you know we have done do you know if your car carriers in the past.

Speaker Change: We're looking at tankers are you know, we we were looking at chemical carriers and we've also looked at looked at the gas carriers.

Speaker Change: So I cannot guide specifically on that but what's important here is for us as you know.

Ole Hjertaker: But what's important there, here is for us is, you know, high end assets, modern high end assets, to very strong counterparties, where we can have a real value for them, you know, in their value chain. And the reason why we have built up a number of ships in the container ship segment is that we can do just that. We have very strong operational performance and can combine that with access to attractive financing structures, and can therefore be competitive, you know, for these companies, you know, and add on in their, you know, value proposition, you know, and part of the value proposition is, you know, to run the ship as efficiently as possible.

Speaker Change: Hi, Hi, and assets modern high end assets to very strong Counterparties, where we can have a real value for them you know in their value chain and the reason why we have built up a number of ships in the containership segment is that we can do just that our we have very strong.

Operational performance.

Speaker Change:

Speaker Change: And then combine that with access to attractive financing structures and can therefore be competitive you know four for these companies you know.

Speaker Change: On in there you know value proposition.

Speaker Change: And part of the value proposition is.

Speaker Change: To run the ship are sufficiently as possible. So part of the investments that Tim mentioned on the container ships or investments that are.

Ole Hjertaker: So part of the investments that Trim mentioned on the container ships are investments that are making moving boxes more efficient, and we calculate on these vessels around 20% efficiency improvement, which is a combination of both hull modifications, maybe new propeller, the increasing cargo intake, and all of that are bringing down the fuel, effective fuel costs per box, which is creating a better value for a liner company, or in other segments, it could be, you know, an energy company, if you look at the tanker. So this is something we always work on.

Speaker Change: That are making equal at moving boxes more efficient and we calculate on on these vessels around 20% efficiency improvement, which is a combination of both hollow modifications, maybe do propeller, increasing cargo intake and all of that are bringing down the few effective here.

Speaker Change: Cost per box, which is creating a better value for for a liner company or in other segments that could be you know an energy company. If you look at the tanker. So this is something we always work on it.

Ole Hjertaker: And, you know, we kind of guide on specific segment allocation. Thank you a lot.

Speaker Change: And you know.

Speaker Change: We cannot we cannot guide on specific segment allocation.

Thank you Willa and another one here.

Aksel Olesen: And another one here, given your backlog to diversified majority investment grade counterparties, and the fact that you've become an energy infrastructure company now, can you work to decrease your debt interest costs, in particular your credit spreads over SOFR? Your recent refinanced debt still has a rather large credit spread versus your diversified long-term backlog and strong cash slash balance sheet. Thank you for that. I think if you look historically, in terms of where we have the margins we obtain in the market, I think... The six years I've been here, it's been coming in quite significantly, especially over the last 12 to 24 months, in terms of what we're achieving in both the conventional commercial bank market, but also when doing Japanese operating leases.

Speaker Change: Given your backlog two diversified majority investment grade Counterparties and the fact that you've become an energy infrastructure company. Now can you work to decrease your debt interest costs in particular your credit spreads over sofa, you recently refinanced that still has a rather large credit spreads versus sort of diversified long term backlog and strong cash.

Speaker Change: Slash balance sheet.

Speaker Change: Sure.

Speaker Change: Uh huh.

Speaker Change: Thank you for that.

Speaker Change: Yeah.

Speaker Change: There are I think if you look historically in terms of where we are.

Speaker Change: The margins, we obtain in the market I think.

Speaker Change: These are the six years I've been here, it's been coming coming coming in quite significantly, especially over the last 12 to 24 months.

Speaker Change: What we're achieving in both the conventional.

Speaker Change: Call It a <unk>.

Speaker Change: Bank market, but also when doing indebtedness operating leases so.

Aksel Olesen: I think almost a good price, very competitive, at least on the asset back, the financing that we're achieving, also in terms of colleague profiles, covenants, et cetera, that they have, and also the partly guaranteed, the partly guaranteed to do most of these facilities. So, yeah.

Speaker Change: Do you think all of those things were priced very competitively at least on the on the asset back financing that we're achieving all of a sudden in terms of quality profiles covenants et cetera that slowed the partner guaranteed.

Speaker Change: The parts of guarantees who do most of these facilities so yeah.

Aksel Olesen: Thank you, Aksel.

Hello.

CJ Baldoni: And then we'll go to CJ Baldoni. Please unmute your speaker to ask your question. Hi, good morning. Can you hear me okay?

CJ Baldoni: And then we'll go to CJ Baldoni I pleased Amit your speaker to ask your question.

Speaker Change: Hi, good morning.

Speaker Change: Can you hear me okay.

CJ Baldoni: Bye. Okay.

Speaker Change: Alright.

Ole Hjertaker: Sorry, another question on the Hercules. How long can it remain a warm stack? With the stacking, call it methodology or you could say the stacking plan we have on that rig, that can remain, you know, stacked for quite some time without causing a problem. Part of what we've done, for instance, in the stacking now is that we are doing work that will effectively delay the next SPS or dry dock, call it, position on the key equipment on board the rig. But that's also, you know, a reflection of the capital or the stacking costs that we are spending on the rig to ensure that it is remarkable.

Speaker Change: Okay.

Speaker Change: Oh I am sorry, another question on the Hercules, how long can it remain a warmed warm stacked.

Speaker Change: With with the stacking of call it the methodology or or or the you can say the staffing plan, we have our own back Craig it can be kind of that can remain.

Speaker Change: Stacked for for quite some time.

Speaker Change: The causing a problem part of what we've done for instance in the stacking now is that we are doing work that will effectively delay the next the Sps or dry dock a call. It a position on the key equipment onboard the onboard the rig but that's also you know I I.

Speaker Change: A reflection of the capital or that the stacking costs that we are spending on the rig to ensure that it is remarkable.

Ole Hjertaker: If we had dropped that, of course, you could drop it down significantly. But then you are running into a situation where you may have to replace a lot of equipment on the rig to bring it back out working. And then you would need a much longer contract at high levels to justify that. So I would say for now, we can keep it like that for several quarters. But of course, we are, you know, we look at that continuously. And from our perspective, it's always a question of investing capital versus getting capital back. So this is, you know.

Speaker Change: If we had dropped that to of course, you can drop it down significantly. But then you are running into a situation where you may have to replace a lot of equipment on the rig to bring it back out working and then you would need a much longer contracts at high levels to justify that so.

I would say for now we can we can keep it like that four four for several quarters.

Speaker Change: But of course, we are you know, we we look at that continuously.

Speaker Change: From our perspective, it's always a question of investing capital versus get the capital back. So so this is a you know.

CJ Baldoni: It's something that we spent quite a bit of time on. since it's a costly asset and the stacking costs are relatively high. Yeah, understood. I just for some reason, thought that maybe there was, you know, time limit, you know, so to speak, you know, where, you know, I understand there's a, you know, a lot of different factors involved. And I suspect that you wouldn't be spending the money if you didn't think that there were opportunities to, you know, recontract it. You're absolutely right. What we have seen in the past, we've seen companies who have cold stacked rigs, and then you're talking a matter of months before it's almost not remarkable.

Speaker Change: It's something that we that we spent quite a bit of time on.

Speaker Change:

Speaker Change: Since it's a it's.

Speaker Change: It's a costly asset and.

Speaker Change: You know the stacking costs are relatively high.

Speaker Change: Yeah understood I just for some reason I thought that maybe there was.

Speaker Change: At.

Speaker Change: A time limit so to speak where.

Speaker Change: Yeah, I understand there's a you know a lot of different factors involved and I suspect that you wouldn't be spending the money. If you didn't think that there were opportunities too.

Speaker Change: Re contract it.

You're right you're absolutely right.

Speaker Change: We.

Speaker Change: What we have seen in the past if you we've seen companies who are dropped call.

Speaker Change: Okay.

Speaker Change: We have sort of what was cold stacked rigs.

Speaker Change: And Daniel and then Youre talking a matter of months before it's all almost not a re market for them because what we what you have to remember is that a drilling a drilling rig has a very different.

Ole Hjertaker: Because what we have to remember is that a drilling rig is a very different concept really than a ship. A ship, that's basically where you carry cargo on the ship. But a drilling rig is really just the platform or whatever, where you put all the drilling equipment. So for an oil company, who are extremely focused on safety and performance and operational issues, you know, they would be very careful on taking in a rig where the system hasn't been maintained and run properly.

Cause it concept really then benno ship a ship, that's basically where your target cargo you know on the ship, but the drilling rig is really just.

The platform or whatever where you put all the drilling equipment. So so for an oil company.

Speaker Change: Who are extremely focused on safety.

And performance on our operational issues.

Speaker Change: They would be very careful in taking in a rig where the system hasn't been maintained at run properly. We are working together with with ultra drilling here. They are the manager for us on the high class.

Ole Hjertaker: We are working together with Oddfeld Drilling here, they are the manager for us on the Hercules. The rig has had a very strong performance, first for Exxon in Canada, then for Gulp in Namibia, then back for Ecuador in Canada. So they pride themselves in having very high-end standards, which is of course also helping us in the marketing of the rig, you know, with oil majors because they know that, okay, this rig, you know, has been kept at the highest standards, you know, this rig is being effectively maintained and systems are run, which means that there is a lower risk of taking the rig out compared to something that's been mothballed for a long period.

Speaker Change: The rig has had a very strong performance first the four for Exxon in Canada than for golf in Namibia bound back for Ecuador in Canada.

Speaker Change: So so they pride themselves and having very high standards, which is of course also helping us in the marketing of the rig.

Speaker Change: The oil majors, because they know that okay. This rig you know has been kept at the highest standards. You know this rig is being effectively maintained and systems are run which means that there is a lower risk of taking the rig out compared to something about Spain, most bold for for a long period.

CJ Baldoni: Right, right. And I also suspect, you know, there's multiple, you know, solutions, you know, to this.

Speaker Change: Right right now and I also suspect.

Speaker Change: There's multiple.

Speaker Change: Solutions to this summer.

CJ Baldoni: And, you know, some of them might, you know, involve us some creativity, you know, to kind of insulate the broader company at a whole. So I can leave it at that.

Speaker Change: Some of them might.

Speaker Change: Involve us some creativity.

Speaker Change: To kind of insulate the broader company out of a hole so.

Speaker Change: Can leave it at that but thanks and then.

Aksel Olesen: But thanks. And then, so you mentioned that, you know, the new build spend, I mean, most of the remaining 800 and odd million dollars is going to need to be placed closer to delivery, or are there still more payments to be made? No, yeah, I think the remaining I mean, so far we paid approximately $150 million last year. And then you have some additional pre delivery installment starting 12 months before each ship is delivered. So starting in Q1 2027. which we are in discussions with various banks and financial institutions in terms of fully funding in a combination of pre-delivery and then post-delivery financing.

Speaker Change: So you mentioned that you know the Newbuild spend I mean, most of the remaining.

Speaker Change: 800 odd million dollars is going to need to be placed closer to delivery or are there still more payments to be made.

Speaker Change: Oh, Yeah, I think the.

Speaker Change: The remaining I mean, so far we paid approximately $160 million last.

Speaker Change: Last year, and then you have a.

Speaker Change: Some additional pre delivery installments, starting at 12 months before each ship is delivered so starting in Q1 'twenty 'twenty seven.

Speaker Change: We are in discussions with various banks and financial institutions in terms of funding in combination.

Speaker Change: A combination of pre delivery and post delivery financing.

Speaker Change: Okay.

Aksel Olesen: And could you elaborate maybe on the Annex 2 and 3, you know, 27 vessels impacted? So are those, you know, how many of those are, they're impacted if they trade to the to the United States? Can you just elaborate on that? In our fleet, we have 38 now Chinese built vessels. And then we have the car carriers that are not Chinese, four of them are Chinese built and three of them are, sorry, five Chinese built and two not. But all the car carriers are sort of, and when we say impacted, we mean that they would be impacted by calling the U.S.

Speaker Change: And could.

Speaker Change: Could you elaborate maybe on the annex two and 327 vessels impacted.

Speaker Change: Are those how many of those are they're impacted if they trade to the edge of the United States, Yes could you just elaborate on that.

Speaker Change: On the plane in our fleet, we have 38 now.

Speaker Change: Chinese built vessels.

Speaker Change: And then we have a car carriers that are not China.

Speaker Change: Furthermore, Chinese built in three of them or sorry, five Chinese both in two months.

Speaker Change:

Speaker Change: But all the car carriers are all sort of and when we say impacted we mean that they would be impacted by calling in the U S.

Aksel Olesen: So, and some of the vessels are exempt, like they can be Chinese built, but below a certain size, like small container ships, or below 4000 EU, and bulkers below a certain size. So, when... But when we look at the numbers, and based on the way that our ships trade, we see that right now, the most affected sectors are car carriers. and tankers in the SFL fleet. Our container ships are not really impacted because they're either not built in China, which is most of them, or they are smaller. And if you just give you some Some idea of what we are talking about for us, if you look at SFL's trading pattern last year and our U.S.

Speaker Change: So.

Speaker Change: And some some of the vessels are excel like they can be Chinese built but below a certain size like small container ships or below 4000 Teu.

Speaker Change: And volcker's below a certain size.

Speaker Change: So when.

Speaker Change: But when we look at the numbers and based on the way that our ships trade, we see that right now.

Speaker Change: Affected.

Speaker Change: Sectors, our car carriers.

Speaker Change: And tankers.

Speaker Change: The <unk> fleet.

Speaker Change: Our container ships are not really impact because they're either not built in China, which is most of them while they are smaller.

Speaker Change: And if you just give me some.

Some idea of what we're talking about for US if you look at <unk> trading pattern last year and our U S coals.

Aksel Olesen: calls. We would incur about $26 million in port fees. given the 2025 sort of fee schedule, if you sort of impose them on what we did last year. Now, we believe that our charters will probably change their trading pattern slightly due to this. But we don't see much change for the car carriers actually, because it applies to all car carriers. So the only thing that can reduce that number is less trade to the US in general. We do not expect that though. and it's important to say that. It's, we look at this as charters costs.

Speaker Change: We would incur about $26 million in port fees.

Speaker Change: Given the 2025 sort of fee schedule, if you sort of impulse them on what we did last year.

Speaker Change: Now, we believe that our charterers will probably change their trading pattern.

Slightly due to this.

Speaker Change: But we don't see them, but we don't see much change for the car carriers actually because it applies to all car carriers. So the only thing that can reduce that number is less trade to the U S. In general.

Speaker Change: We do not expect that though.

Speaker Change: And it's important to say that.

Speaker Change: It's.

Speaker Change: We look at this as charterers costs.

Aksel Olesen: And the only thing that, and the thing that we are sort of looking at is how the fees will be handled in practice, i.e. who has to pay them? Is it part of the clearance of investment to the port? Or how is it actually going to work? And it's too early to say. So we are working with our charters to find out exactly how it's going to be handled in practice.

Speaker Change: And the only thing that.

Speaker Change: And then the thing that we are sort of looking at is how the fees will be handled in practice I E.

Speaker Change: You have to pay them as a part of the clearance of divestments the port or.

Speaker Change: Actually going to work in it.

Speaker Change: Early to say so we are working with our charters to find out exactly how it's going to be handled in practice.

Aksel Olesen: Okay, great. Thank you for that. I appreciate it. That's all I have. Thank you.

Speaker Change: Okay.

Speaker Change: Great. Thank you for that I appreciate it that's all I have.

Speaker Change: Okay.

Speaker Change: Okay, then I would like to thank everyone for participating in this conference call. If you have any follow up questions to the 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 Dot Corp. Dot com. Thank you all for listening.

Operator: Then I would like to thank everyone for participating in this conference call. If you have any follow-up questions to the 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.sflcorp.com.

Operator: Thank you all for listening.

Speaker Change: Yes.

Speaker Change: Sure.

Speaker Change: Yeah.

Speaker Change: [noise].