SFL (SFL) 15 Feb 232022 Q4 Earnings call transcript

Thank you. And welcome all to SFL’s Fourth Quarter Conference Call. I will start the call by briefly going through the highlights of the quarter, and following that, our CFO, Aksel Olesen, will take us through the financials, and the call will be concluded by opening up for questions.

Our Chief Operating Officer, Trym Sjølie, will also be present in the question-and-answer 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. Act Reform Litigation Securities of XXXX. Private

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

Forward-looking and plans those the of based guarantees and different uncertainties inherently statements from These cause risks operations are are future forward-looking to could statements materially activities subject future to in on of expectations statements. set and performance. current forth that and results are our not be

but cause markets. actual limited results Important are factors includes, shipping, credit not conditions differ and that the in could to, to offshore

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

Please results discussion Securities and on and our to bearing may Exchange detailed and filings risks direct more which financial uncertainties, condition. a refer with our have our operating Commission our the a for on

charter on in of around The charters quarter. which were the the compared market. spot vessels total majority XX% XX% and vessels revenues on million from quarter, long-term to were $XXX short-term up was charters employed it third is from and the revenues The

million. equivalent X% The up approximately million, equivalent was $XXX in the the been quarter XX the is EBITDA has $XXX flow and months, last which last quarter, from cash over EBITDA

investments. the The previous on in interest at $XX net and quarter mark-to-market positive contributions swaps arrangements which also This around income from share, rate or equity included line million came per quarter. in $X.XX the bond and in was with profit and share

charter hire the a in delayed in quarter. million also We Seadrill of received payment excess $XX from

more around our dividend, capacity in per paid $X.X forward. on billion price share than $X.XX and dividend have yield continued will is a from based charter backlog up the The closing of years, quarter more we announced represents is we going have dividend XXth total $X.XX and third robust over dividend yesterday. a $XX This quarterly the per supporting share of than X.X% or

billion from and last from vessels owned continued has acquisitions $X.X at significantly and providing over and stands backlog approximately rate fixed visibility. the charters, managed increased year Our flow cash

from market backlog in seen figure net which excludes the significantly short-term we traded vessels future excludes the quite quarter-to-quarter. And from contribute also our importantly, to can revenues income profit share have optionality, and

semi-submersible was was harsh to December long-term and SFL bareboat Seadrill. The now and Odfjell Hercules on to originally rig charter operationally Drilling. a redelivered is environment managed technically It by in

periodic rig the in the mobilizing May, to contract have SPS. for Exxon will Before special the with survey drilling complete a rig or scheduled

preparing to contracts. make rig for are for We upgrades long-term the some to also more attractive it

million, undergoing, upgrades. will the estimate to while operating be including $XX and quarter, this Currently, the not SPS while There on we costs approximately accrue. costs in cost will revenues is any first rig

in The including approximately duration charter be is The will gross course. days due value be estimated then with quarter there in is rig good contract XXX Exxon new Canada and million on of contracts opportunities, will of a which announced for $XX available charter new progress around to mid-third the mobilization. from

analysts are of the fully tight market and prospect tender activity to Arctic handful positive to equipped The rigs only drill rig environment, recent in one is balance. market harshest on a based and supply-demand of a

has seen and XXXX rigs environment XXXX quickly. particularly for drilling recently, deepwater harsh features have prospects international been We believe has harsh these market we the without The that risen but market is for promising. lagging

Transocean million. Norway of the which EBITDA in $XX implies three-year in North announced fixtures an last contract charter where, excess recent by confirmed example, an in a at rate, a autumn Sea, as annual is This

our vessels container Koch tankers in to carrier a four to fixed a car of we of Industries, During the addition optionality and fourth took chartered share quarter, newbuild $XXX vessel out vessels saving. Eukor. long-term fuel Suezmax chartered to million last charters. to with four This the Maersk two delivery These on backlog, chartered includes profit to Line four added

be proceeds raised The we refinance $XXX bond used unsecured maturing and new January, sustainability-linked loan. million In a bond to working purposes. XXXX loans for will capital in

have we approximately is $XXX $XX currently, September. in a approximately with nominal back of due on note quarter bond and May approximately million, bought $XX notes After amounts million convertible kroner-denominated a end, Norwegian million and in there due remaining in

XXXX are of for is We This also strong spot have has reflected a the tanker a now of market, trading the build number been we announced sale today of in market taking also tanker. advantage vessel the a years which in value. Suezmax and

newer $XX of million estimated and in and is and of older after more million $X selling quarter. strategy Net vessels this line book This proceeds gain we vessels. associated a of repayment expect with fuel-efficient reinvesting cash is approximately in the approximately to debt

years, now from owned and backlog the XX both we and fleet Over our stands composition and have portfolio $X.X at have structure, changed billion. in assets maritime and our we ships managed

asset fleet the years customer chartered with diversified one of XX% the XXX% class a segment we from single nearly multiple XX to composition the varied offshore gone single a to XX% around now container counterparties, vessels largest and Over to the to has have tankers backlog. years, ago, and fleet from being

Most or long-term our in quarter, X% came only time dry and assets of bareboat charter lease. the from XX% fourth are from of on shipping charters, charter contracts and the vessels from revenues

have we profit months, has XX cash share to from million quarter. $XX revenues, the aggregate contributions time, in flow over $X the million, savings. charter to addition share fixed had to Last been around and rates profit charter around rate fourth both with fuel significant In relating

on but to the the in risk reward We from portfolio, a time and to technology transition transactions fuel-efficient we this will across over is balance do right do vessels. deal we perspective. a segments our believe more Over and focus time, the evaluating itself, be with opportunities to try and not careful set have investments, on a in try mix conservative focus

like contracted PXX, Volkswagen backlog. strength And the Maersk, our is operators quantify and assess Exxon diversification The to with of itself ConocoPhillips, counterparties lately for few. and when our list Hapag-Lloyd, we our name and a speaks market leading key portfolio

Strategically, the example. Relatively flow and quality business customers repeat the assets such are have of had our gives less opportunities de as use of we Evergreen the MSC, access and Trafigura, visibility where with this for more operations. of have us few also to we Maersk, intermediaries on

Our we doing our Group. full strategy to finance wider has services more a a and the been to sister on maintain ability in therefore gives strong platform one from of. in our technical Seatankers hand with us of are service charter, which structured offer cooperation range to customers time operating the to commercial companies This

bareboat emission including improvements to passed impact the full vessels we and not the have may energy over vessels can employed be always improvements. incentive only with through control minimizing And efforts, and vessel owning maintenance an not life customers our of the performance, to and where on make the efficiency assets such

the out material In the retain we this residual value is charter in a addition, for costs costs value current driving of assets charter when replacement and benefit the for more of basis, time rising our stakeholders. on and in with inflation raw vessels, and can we environment, SFL the

options. by usually this fixed For the purchase price is through value charterer retained bareboat deals,

take over And us with CFO, to our will give will that, who quarter. Olesen, word the the highlights through for I the financial Aksel

guideline quarter. not noncash we this company’s have is of accordance cash is Mr. Please and only a that a assess GAAP, of with Hjertaker. performance forma to this pro extraordinary you, the shown note flows and U.S. also illustration On and the Thank fourth net in slide, items. for

approximately which profit including rate company share, our at our fourth $X backlog, $X.X of the with approximately gross quarter, visibility charter stands The approximately million currently cash generated hire revenue the billion, $XXX XX% charter us of forward. strong going coming providing from in million of on flow fixed

one of $XX in generated million, profit fuel including the the charter of car carrier. related our savings gross large liner on In share approximately million approximately fourth vessels hire container seven to quarter, fleet $X.X and

quarter, the if fleet approximately backlog of liner by X.X the hire. average charter weighted years an fourth was approximately At with years billion, term of remaining $X.X or end charter X.X SFL’s

carriers. Our $X.X our backlog charter backlog car of approximately seven includes billion from

XX product crude chemical oil, In the SFL on tankers, and a with fleet long-term had majority the fourth quarter, employed charters. of

during generated the Our in approximately million tanker gross the in compared fleet quarter. $XX charter hire quarter, $XX.X approximately previous to million

tankers Suezmax The net the $XX.X compared hire vessels approximately to and charter from was million market. fourth third these in tankers $XX.X trading short-term smaller approximately two the spot in two had SFL quarter. chemical quarter, million and in the

of a associated to in end, record for debt to and Subsequent proceeds repayment $X estimated Suezmax quarter a approximately we SFL approximately of sold cash XXXX total to as consideration is a $XX million. the accounting of expect quarter. sale an gain million Net million first approximately be $XX built tanker of

approximately $XX.X approximately eight were charters the XX fleet, hire SFL dry has of long-term company generated charter million quarter. bulk dry The during profit employed $XXX,XXX in share. of bulk including which from the on gross carriers,

and employed $X approximately net compared $XX were in in million and vessels from previous Seven quarter approximately the in short-term charter to vessels contributed six the hire the during market quarters. spot million

and rig with rigs, year currently is under built two semi-submersible the is the rig on North built and XXXX jack-up The field XXXX owns employed Linus environment SFL contract Hercules. of in harsh greater Linus the long-term drilling XXXX rig until end the ConocoPhillips a the Ekofisk Skandinavia Sea.

the million approximately fourth revenues. the $XX.X quarter, During contract in rig generated

charter SFL during $XX.X received million Seadrill reduced up hire relating XX. for catch addition, previously to In payments Chapter from

until Seadrill was end was semi-submersible rig, December the rig environment the to XXXX, bareboat to of charter redelivered on harsh The SFL. whereupon Hercules, a

we revenues. During in the charter approximately million quarter, received $X

the in G&A first and operations for full the fourth recorded liners. quarter was we as higher of operating the Our expenses quarter

for In the addition, expenses to shipping vessel higher normal due during we operating fee than had deliveries quarter.

approximately summarizes adjusted quarter, financial previous derived $XXX from of This in in the to to from $X million $XXX million fourth million income approximately the income EBITDA primarily an Other quarter. compared of interest is investments.

profit We as and statement on move the to then reported the U.S. loss GAAP. on

long-term as are previous statements earnings As part accounting a our business strategy calls, different charter and capital our have company as in leasing. of traditional activities on described large a we those of focuses shipping classified from our contracts, are

of leaseback investment repayment accounting in excluded and from assets U.S. in revenues classified a leases This Therefore, our associates sales portion revenues. are charter operating entities investment from purposes. revenues as and significant financing for includes direct GAAP of

the revenue reasons of approximately $XXX actually than received million, the report we just U.S. mentioned. hire operating GAAP to charter for of is total which for million $XXX approximately So according quarter, less fourth

in During from charter profit the related a relating related addition and debt equity to and credit $XXX,XXX in from positive recorded company of to investments, bulk approximately Capesize million effects the to $X.X one loss a $XXX,XXX provisions. SFL our Also, from recorded car $X.X received seven million dry carrier, $XX.X vessels. gain eight reduced share Chapter XX. container mark-to-market million hire to decrease capture for our and approximately income payments large during from savings of the vessels Seadrill fuel quarter, comp Furthermore, previously of

And fixed fixed our related a at or benefits gain with comp related recorded XX% rates, million a finally, see raise mark-to-market financing to the quarter rate financing by of now results. recent swap end, was to positive And $X.X interest we interest of strategy. effects hedging the the in conservative financial instruments, and to approximately

Similar proven flexibility to give to have diversification our our structure aimed terms in in as both of significant us to have more we time. chartering has and base, over geography, strategy, funding this

on Based levels vice distributable interest per estimate quarter lower current per $X.XX increase equals rates that X we assumptions, and in cash share our flow from versa. in percentage approximately

fix and evaluating we a fixed include the an project rate duration interest the of assuming rate interest conservative or generally during charter the light new with to costs then opportunities investment approach with rates. rates interest back-to-back in seek adjustment a charter the on the And

the for mentioned, operations in full shifting higher and vessels As expenses quarter during higher for a to our many G&A due first operating deliveries quarter Linus. quarter. fourth we was the than previously the normal expenses of recorded We fleet as had operating

a U.S. approximately to So, reported or profit of according overall, $XX.X million share. company net $X.XX and GAAP, per the

million million securities on market to end $X approximately investment of Moving SFL of Furthermore, marketable of balance quarter. the the and end, had quarter at the prices the cash equivalents. At had sheet. approximately company $XXX cash

with approximately based average seven vessels has $XXX at company of the value addition, million a quarter combined In appraisals. charter end, fair debt-free broker on

the company also years. During $XXX four for long-term Japanese of The million. in the combined term amount vessels SFL financing for was fourth newly is long-term TEU entered vessels and quarter, leasing the two $XXX into million the secured financing Suezmax market. arrangements seven facilities acquired X,XXX container

linked facilities sustainability proceeds SFL XXXX. issued maturity $XXX January, used with will In a million be in new purposes. for and of capital unsecured refinancing existing bond working The debt

equivalent in bond due September convertible approximately $XX due As outstanding of to outstanding and today, current under million million approximately note Norwegian kroners $XXX May under currently XXXX. in is XXXX the is

at was fourth XXXX XXXX. dual of The construction four end delivery had expenditures $XXX expected in instalments remaining the book quarter in related XX.X%. equity on LNG by end. to million quarter, for had car a QX The the majority fuel due capital of SFL course. under facilities debt And to approximately financed ratio At company carriers the this numbers, approximately of and be based is yard the

the and price has both growth per declared revenues approximately on yesterday. dividend to conclude, has based of quarter a increase share The dividend to X.X% with in to closing company dividend Then consecutive Board another delivered yield a represents $X.XX EBITDA. XXth cash the share. This strong the

the balance on $XXX in addresses balance senior the due strong liquidity note unsecured a million bond, and May sustainability upcoming has company The the NOK and bond together recently we maturities convertible and in cash raised linked which, in sheet sheet, with September. position

charter currently cash visibility $X.X in fixed provides forward. billion a billion going $X.X our rate at on XXXX, stands adding backlog which after flow Our strong

well And sector. to recovery year increased level strong two rigs environment and seen have drilling our the of are benefit drilling positioned harsh finally, beginning the in from since we market in the the activity a offshore the

I the that, word the give back the for open Operator, questions. will to with And who line

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open. your Please Wetherbee, is line your Your open. question. line ask Chris is

and take next We the Greg the are BTIG. from Lewis question going comes of from line to question the

ask Your line your is open. question. Please

did I couple a questions mentioned. of taking and you good the around my Ole, rigs Yes. everybody, you thanks questions. have and for Thank afternoon,

ahead You mentioned CapEx rig contract the million Canada. $XX the with of of Exxon

potentially You long-term about upgrades mentioned work.

As rig are longer we for, we kind you MPD, employment? color associated Hercules, costs think upgrades, the with it’s give related as rig. rig could you high we is upgrades upgrades this the that I about the this capital around When guess, quality BOP, that about to us like think -- those is of these and any bid term

and and Absolutely quite It not. we what in. you whether are or main harsh of, thanks consists rigs -- goes could any environment say, for for that Yeah. two run saying, -- to platform the drilling functionality It calling drilling rig, are drilling it’s marine top the which water you then drilling sit stable parts. side, say under really stable the It’s under the where where and of piece, in operations. the you or -- itself can is have sort expensive

needs also relatively rigs have the say, a that and And pretty would quality this been -- be weather, cold where yard then with have to got extreme you has which one that Barents in is built side. one can conditions. Sea drilling winter from up steel and extreme the withstand, -- it few quality is and to drilling It’s and I a steel under during rig ultra-harsh them, of

mean overhauled. be is you this drilling to both part, generators renewed, to we marine course, and any can like of call time, normal procedure. I need painted, will be have change, of parts Over equipment the ship, just it, say, sort

a equipment is has ship that and end engine a The rig through done. basically scheduled board. pushed to more a as and rig but the you more drilling small equipment the more lot go as and that high drilling is value there be on through consequence, And maintenance, your work in lot ship big like difference is a the bathtub, you a a normal a with water

upgrades an breakdown new, doing to have while regular So It’s would drilling, been you maintenance rig element-by-element. which would it relating upgrades, say, have for that that as of exploration have you today. it’s kind also mentioned, yeah. that more qualify over are more, will will I it more rig see are I working it as say some last, we can development is doing since really, just a -- is one a to, and standard on of give this full bit able while the we was we where than be do then piece, you we where more But some

of $X upgrades waters around call as and upgrades rig have is relating specific for specific an this then you in for in be So -- requirements Canadian qualify if of contract contracts, there million the really this example. you at needs drilling also to to for need and that sort some done Canada, for, look instance, to it,

So The They thing it’s sister Drilling. Odfjell spec a with hear working good rigs. have are mix I of we elements. would say, very similar we several, rigs,

So they have experience lot of a this. in

for also equipment, -- terms through say, since came everyone. period because we that that now weather, the -- Also also the in XXXX, and but been drillers spares I manufacture have and involved and that’s only be of the and equipment that value it in under the has XXXX, when this where suppliers whole a would procuring not chain, parts And been market segment anyone the equipment down. for themselves, is

you activities So of of, make the course, really are now things do. you can are that time we facilitating drilling the all when up, in parts sort for but not cost reeving to going also sure manage, back to only have

So that in actually to you is piece also need here get an everything time. important

we time. Also rig are with drilling any looking -- looking over this is for this sold any at what and -- or equipment is

replace As perspective. because sometimes longer where from things, of the a service -- time, have equipment, it manufacturer you to equipment cannot you with have timing

into So the that overall is also that something cocktail. going is

Yeah.

have in these last Continental of was But $XX EBITDA million was Norwegian the there to other flow year on cash cash sort is years a flow example, drilling the than more that per side rigs, drilling this flow, of announced potential that three we cash Transocean Shelf, because an on rig contract. fall generating relating

surveys, special a cash recently through very take these but rigs and market. maintain and upgrade to hot potential when expensive there’s in flow are they significant work yes, also So,

a the on dividend paying maybe to XX-month that the dividend, drive the about to maybe obviously -- dividend. color or it, to rigs investment talking a be try how rigs, those time contract and a six-month should I But was how not previous core or I weren’t viewed the the flow flow it think and rig that? am when potential want rates maybe us years if dividend the doubt I about initial think -- like longer rigs understand like think there generating is to business the mentioned, then additive well. on think and to somewhat I can SFL, trying all I term is a a under about as really additive really, investors to spend the downturn, being the No about think was way the fair people Is offshore are any you around obviously dividend, it, rigs in is, six-year we the portfolio year. that’s that the a what SFL about about doesn’t to question. in think higher, as can but I to probably the we about it was rig way kind we about you is Yeah. Hercules it as especially from those guess assets elsewhere realize maybe the the cash deployed and contract, is as where multiyear seven-year be in guess, market, to when give impact obviously, thinking as offshore -- as to make two important for any to of to cash on long that back

attempt that. for Thanks answer that. Yeah. to I may

has contract, I you the start see both think linked. with long-term which as market rigs, is liners, on a it you

for rigs when dividend. to, work cash as in I of expectations to XXXX, XXXX we kind terms to ourselves I come should through call flow think, we now the think, expect distributable from of that’s market in it, the XXXX and and contributing I see the

that’s kind think looking we are the I timeframe of at.

interesting you in reset also well. And of international the for in the see same then I that’s basically months the now that covered, as type supply-demand migrating on North with leaving market the think if many semis higher we positive rigs it’s have where Sea with the North liner day actually than is out see you every an six Sea. rates many semis, rigs and

business, You think see really looks and visibility to a precise you dividend, that’s can can you but very when more more that, the on cash have we kind support you it lower have guidance on we on term accessible of a interesting. that guide indeed and OpEx, the see

add to on also that… maybe And

Okay. Great.

it I new an mean, maturities effectively that the bond or we if through have you maturities take recently loan this investment cash XXXX. taking at year. flow significant end cash bond is expense, of but SPS, at We course, that we position look of quite raised have it’s as this out the -- you

effectively likely we on on construction the asset have we side, facilities. are under carriers remaining by as the And fully be the that will covered invested car installments debt most

there cash of be out actually may be those. So coming

think we and would down and/or So quite and long-term. if wouldn’t is distribution we now, been SFL say, capacity do don’t the accretive money from that a while and perspective, we for I the that -- this to is this have, something of put course, prepared for, that that we

kind don’t era rates not, Yeah. like know of lease clearly, And in about then more bigger or Is picture medium-term and higher. free there if is. yields money XXX%. how of gone your but should have least -- I the looks pivoting we the at it returns, think really over interest a to is and No. just

given say diversity kind just neutral and maritime also we thinking it, of there Could been -- across deploying some in have shakeout as it should be any some like we about companies could the positive or pockets for money interest the we and best? a space. returns is your -- where there looks Asia -- We different there actually is call, see any of that will leasing SFL have we for in at higher just crackdowns has around a -- seen market? capital that be Has SFL

finance the look call structured deals, that we effectively it, bareboat some structured at are finance, assets two sides. type deals. I you mean have have more a financial, type You if

becoming we SFL, whereas it -- it, go competitive bank investors are You can those return that who looks like an otherwise it, companies call seen that, borrow say of investors they other, time, in a who a way, the could because strategy, have not absolute more in or rate, have over has but more as services, call to companies vehicles which not it have come the was That and those, it, requirement, use at call floating might, off. financing lower. in

we more we interaction we our I we have over But time, if looked, on From sort direct rate perspective, have mean, focus way out. managed hedge time also we charter tried contracts, more look to end interest because the the have risks you users. at then with that of have

So do generally. deal, the interest structure we rate we a and then financing hedge the when we

have, means we rates they then wants up have interest embedded for rate who will are can into in charter for account charter rechartering, it time. interest because that but cost that you to take when anyone I would element exposure, of at an vessel, call which we have out So come -- yes, themselves to have also -- then financing an a they their

So the we of We do think it, on opportunities. interest longer we rate more deals call at are perspective, on coming But the line. will say, neutral I down deal bareboat would lot be side. a are perhaps looking more, type there the

billion we various for counterpart that total. cetera. didn’t less think, work I deals doing that, be could As an example, proper around return on profile, end reward, did we It reasons. $XX et up ended worth Of $X work did us, a we like than the last XXXX, billion year, in of for after risk didn’t the we maybe tally

be of selective do lot disciplined try a screening deal when are we then opportunities to we So deals. and and

And that financing an I of I on banks, Yeah. it, over et last note cetera, and our Japanese year. improved access has leases, to a think, think, call general in terms

I track able think, we are financing. with competitive extremely think I to our name, an achieve record,

could although it’s market bareboat to as alluded done providers, we Chinese been see financial of And competitors you previously the is, limitations going in which argue kind haven’t more the the we Ole away bareboats. you have ours, type to,

of gives there So now us potentially more has kind think is I -- opportunities. and financing market that the smaller

helpful. Super the Okay. Thanks for color.

Yeah. you. Thank

Thank There questions. I our speaker no Ole over are for like now conference would hand to you. the Hjertaker closing to further remarks.

would to questions, in there press get thank details our for in touch and in us are Thank the pages you I like can have release call, everyone you. Then if or Thanks. website. contact any follow-up do through contact you conference with participating on this the

for conclude does That our today. for Thank conference you participating.

may all You disconnect. nice a day. now Have