SFL - Earnings call 3 2023 | SFL Corporation Ltd.

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Unknown Analyst

Welcome to SFL's Third Quarter 2023 Conference Call. My name is [indiscernible] I'm an analyst in SFL.

Our CEO, Ole Hjertaker, will start the call by briefly going through the highlights of the quarter.

Following that, our Chief Operating Officer, Trym Sjolie will comment on vessel performance matters before our CFO, Aksel Olesen will take us through the financials. The call will be concluded by opening up for questions, and I will explain the procedure to do so before the Q&A session.

presentation, statements like the within our will conference U.S. begin forward-looking contain the we I this would call Before meaning of Private Act Reform Securities of Litigation XXXX. intended estimates as similar anticipates, such these intends, Words expressions statements. expects, are to identify forward-looking or

statements. of not results expectations based could and set are performance. These to that and are Important cause conditions be forward-looking from uncertainties of in to that inherently subject factors future but Forward-looking on guarantees those cause statements current and include, our forth in operations materially not results statements actual offshore future credit markets. could are and the activities plans and different are to to the risks differ shipping, limited

forward-looking You and should bearing results risks a will over quarter. statements. to financial the filings for on our Commission to highlights Exchange and the have condition. operating word Then therefore third detailed Securities within our Ole uncertainties not with refer place discussion Hjertaker, these direct a CEO, our on Please more for may of leave our which undue the and I reliance

Ole Hjertaker

was The equivalent cash came been net share. $XX the repair effects. by second the than around the income the the Thank the of some quarter, equivalent in you, was results quarter in around vessel or works charter $XXX has from were in gains the primarily quarter. quarter, were This we in And the service. and flow and the over flow [indiscernible]. to impacted with cash $XXX which share. now days higher XX% to quarter, was offset mark-to-market due some which sale improved up due approximately million higher on revenues $X.XX an EBITDA value lines the jackup OpEx to top back Hercules million, drilling in XX XX million also is one-off dried . The In at EBITDA last fire in our rig million in The a previous The the X was $XXX quarter income in also commitment net up are by of the total. quarter per the drive that dividend unscheduled third to quarter shareholders, tankers and quarterly items associated return on in including on rig the the $X.XX per quarter. to with increasing months, in line our

billion share quarter has our We than more have $X.X backlog and And forward. going not we supporting have robust XXXX, a or dividends in paid in inception $XX to since dividend every total. per this accumulated capacity continued charter

changed approximately from billion. have short-term market we optionality, provider time note the income. includes excludes switching And over primarily gradual profit can the Our business This users. excludes the backlog bareboat has the and to as around arrangements would contribute $X.X This we backlog end financing have also backlog And net company charters XX maritime to a fixed is last very stands rate at maritime leasing concentrated been strong importantly, transition years. end users. model to long-term I the revenues charters our vessels traded share from figure charters long-term seen that significantly which from to to the or in future infrastructure

Volkswagen together in years vessels [indiscernible] fuel charter the Europe. carrier to car Group In dual XX for with will September, a vessel, sister Volkswagen we will of X on of The to we took go delivery our deliver named newbuilds. and first the vessel

per $X.X to X a in months. Europe right generating million red we is only market in EBITDA short-term vessel very a secured piping now, from have the shipyard The and attractive period charter around over hot interim of Asia

for extended charter per on we the in generating new have to firm per million additionally vessel extension X plus also to EBITDA years have X vessels addition existing Volkswagen year. builds, approximately been In options that $XX.X

Line on with at very charter a to relationship XX for to charter until with have a This TEU adding option than vessels $XX business current the vessel long-term mid-XXXX. a charters. recently close million X,XXX higher extend is We the charter backlog. time Maersk rate exercised Maersk an the rate, Line

addition, In share [ that benefits share profit have where we scrubber ]. a relating our vessel, XX% is on to currently

million bond been remaining In issued in the repaid Norwegian there was opportunistically rest approximately the a also $XX balance. where This million, our equivalent fully originally we paid loan This XXXX, down cash market. was already had repurchased loan of from and at kroner-denominated third quarter, maturity. was the in [indiscernible] the

environment we drilled an and in the and a This back in to recently take harsh don't months, from mobilization see our value is been finalized the million, customer. was raised to rig $XX in This optional the XXX,XXX X including terms a new well again, stopover approximately This implying rate in and Exxon and we calculate semisubmersible day Hercules mobilized X is scheduled October, for start bond Palmas half When approximately started in and a the for refinance then, Las new with funding Asia and Canada in Las near debt [ loan next for this period. have significant attractive a term. upgrade and day rates, is wells since to in compensated day estimated the with for the in works well Palmas financing ] amounts after contract per of of is the early the first [indiscernible] include repaid has by of has the to very rig September and around testing Namibia average Namibia drilling week. extensive in rig mobilization. We plus Mobil. to the XXXX, the recently And SPS need at estimated

new And move the to contracts for rig transit implying semisubmersible The to will only balance. period Operating Officer, then well. rig positive months, optional duration our prospects approximately ultra-deepwater from onwards. This commence and contract to be X day to the contract a market period. on with per give available quarter After our tender environment analysts activity is And $XXX,XXX X fourth with X plus XXXX the Canada, to handful rig long-term for day of Canada recent and back Namibia well opened a Trym a are X that, supply-demand firm The for based the rigs rate of market of the including will to word X over is I the contract for will is Equinor. Sjolie. harsh tighter Chief and from

Trym Sjølie

Ole. you, Thank

X $X.X structure, a maritime XX of and infrastructure portfolio are fleet on XX now the where and bulk backlog The up fleet company the assets in Over owned stands carriers, maritime X made from and we water delivery car assets in remaining in X the changed vessels, under years, November. with our shipping is dry for we China. container and rigs current . over ships, and our have XX both our are scheduled starting newbuildings The months X construction billion. at tankers, XX X are mine composition next and drilling are

from vessels XXX% multiple being now of just a single segment customer counterparties. single We X largest varied asset XX via originally a and the years the with charter tankers offshore composition to has have majority fleet under diversified And backlog. to from to class container XX% assets fleet the involved having ago,

This Maersk, are exposure. of we assume transformed charters and instead Most the the moved financing that makes and vessels relevant large our end XX company's last [indiscernible] like charters model on Volkswagen, operating away full years, for over long-term industrial others. bareboat from have, users operating completely have and type us

the contracts quarter, only from or all In charter time X% from leases. XX% and bare came from third dry boats revenues of assets charter

months, rate on on contribution flow to charter arrangements vessels, type XX share and time, contracts charter of have and significant more had XX spot. revenues, cost fixed rates than has million. we've Last cash relating been from the fuel. both on the current aggregate savings to share addition and variable $XX profit profit XX we Out to charter over time XX In

[indiscernible]. own and operation vessels have our out we management operation well Oslo commercial and multiple quite as of Our complex Singapore is as operational out of with sectors, across

become also to year. maintain service with our implementation well capacity investing important as indicator, consumption. the operational and has to to This Our investments our as vessels OpEx becoming off-hire increasingly fleet carrying from to increase EU including vessel's IMO carbon minimize for ETS live the [indiscernible] intensity includes to continuously and which routing and high profile, reducing next of another issue energy performance level optimize This of will impact customers. a speed. in invest is cargo

our overall XX.X% Three was had operating quarter. as fire across QX, of been shipping or for the dry-docked calendar And the the QX In [indiscernible] technical days drilling and and a XX% defined we X,XXX in rigs. in dockings. over vessels have days, dry fleet utilization total

on are not drilling the For transit off in days rigs, days spent rate. covered by port, rate and days days mobilization fees, well hire less on or as explained, operating in

adapted ships These quarter, the One efficient are met in bunkering. the both. LNG our fleet of increased vessels new part the the China, high-pressure fleet fleet carrier of in on type hull of construction modern fleet. either greener are carriers been Such vessels dual-fuel renewal is the of market. can left. a and was efficient car can combination of ship has of emissions of for picture. optimized delivered and to the targets by a ESG as which improved [indiscernible], during or more among so X LNG SFL we with And under be seen port LNG X the our fuels efficiency The and key carbon X both in the is with ship-to-ship reduction for be as a reduction And ships system and renewal the and program, existing in fuel have most

carried LNG In carbon [indiscernible]. CEU standard a expect compared conventional lower we XX% vehicle to per mode, footprint XXXX a

be also X in connection being vehicles. to the are vessels ships carry fuel operation hydrogen emissions to fitted addition cell to port. EVs, also short in able carry with for will And the able The

[indiscernible], X delivered through to financial first us I will time. will of Olesen, week's shift on give And word will in be take first [indiscernible] and is the the The with the CFO, Volkswagen highlights who her Europe about to to Aksel from she quarter. that, our voyage Asia over under

Aksel Olesen

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

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

$XX approximately savings million of including hire of charter gross related vessels. share generated approximately profit fleet our to container $X.X million, on fuel the quarter, third X container the In in large

dual charter $X we delivery charter second X compared in During With carriers. car $X to of carriers the hire the quarter. end our the approximately our the in at of quarter quarter, X the fuel gross million approximately of took quarter, increased car LNG third the on first million

Our quarter generated in compared suite previous hire $XX to approximately gross quarter. third million $XX the approximately tanker the during charter in million

generated During and the The the on these net were long-term shipping [indiscernible] tankers has to OpEx XX $X.X charters X compared directly contributed car for in These in $X.X gross than higher in quarter quarter. costs fleet in million approximately Suezmax dry charter of short-term spot off-hire X [indiscernible] days The quarter. the company the quarter, during higher X dry approximately periodic vessels carriers was charter and scheduled the are previous bulk employed connection approximately million third $XX and during normal. a tankers expensed dockings. therefore million were of for quarter. the hire the in with the quarters in total market in per

owns X semisubmersible Jakobi rigs, Lines driven environment and the rig harsh the Hercules. SFL

repair in which In quarter for million second approximately contract the during During the for under off-hire [indiscernible] $XX $XX.X generated rig quarter. repair for unscheduled revenues in The million the revenues, end trial. contract the quarter. the budgeted OpEx the than is an also the currently third [indiscernible] XXXX. ComcoPhilip million contract the works, quarter, the was is from generated approximately $X $XX $XX third until to compared rig million top approximately quarter, approximately the Due the down in higher rigs million XX Scandinavia long-term to approximately of in the days second to of relating the to

contract September commence the shortly. the ExxonMobil Canada Namibia, completed contract with Hercules been drilling to expected mobilized now for in which is and Energia in Galp to has

approximately recorded through been period the by is same The paid recognized actual mobilization drilling the associated GAAP. the rig applied to pursuant principle was million During and contract contract fees the quarter, $XX the the U.S. drilling mobilization in fees after revenues costs as for ExxonMobil completed. due has

and back for in to EBITDA quarter summarizes G&A $XX repair approximately the million in and the Hercules being the the quarter, lines. previous $XX dry adjusted million in and million quarter $XXX operating Our third on dockings million the was in the downtown to compared for primarily operation, quarter. $XXX expenses compared previous to This due scheduled

We on on the loss to and then [indiscernible] move reported the profit U.S. GAAP. as

capital GAAP This business described a earnings of assets and are as leases And classified shipping associates accounting company. part statements charter as those of portion our accounting different revenues entities as purposes. in long-term previous investment leasing. in contracts, large focuses of US type, our are charter operating As a from significant calls, we in have our leaseback of from classified a traditional investment activities strategy revenues direct sales revenues. from financing are repayment excluded includes and Therefore, for our on

report reasons just operating than less is approximately according to $XXX actually third million, for of approximately total charter $XXX of mentioned. The U.S. hire which received revenues GAAP million quarter

approximately the car container large $X.X recorded quarter, the and of our profit vessels During company a some on from savings carrier. income fuel share of million

of the items, in from in back the million. the result this revenue. and mentioned, during $XX [indiscernible] gain previously the impacted As was in with VCC and Hercules third noncash Furthermore, sale $X for contributed a operation nonrecurring approximately the was net by including quarter contract million

$X.X A net approximately of [indiscernible] investments positive provisions. positive effect decrease from equity and a mark-to-market a mark-to-market $XXX,XXX of million, from credit effect $XXX,XXX on loss

taxes [indiscernible] approximately types expects Canada, company Namibia. and similar taxes the also related SFL the in million to quarter of taxes taxes also in recorded the pay corporate of the third to With customer Hercules. in $X.X

compared U.S. and million share [indiscernible] quarter. or overall, $X.XX GAAP, or previous $XX So share according of company approximately per reported a $X.XX per the the to net profit approximately to in

revenues the where near-term of a is commence expect lower terms due fourth for period In Hercules Canada to to the outlook, mobilization Gulf from long Namibia, to the contract to we Energy quarter rig due in shortly.

fees in from the drilling we GAAP be will drilling As has quarters due allocated were of standards, mentioned to revenue previously, Hercules commencement the only recognized throughout U.S. from accounting respective date and operations. compensation

are newbuildings QX, second with we revenues X to delivering result carriers, second from set car as our delivered QX For to [indiscernible] being the increase had from November. China half of

to the million estimated newbuilding and conductor handover first per the SFL the the year. Volkswagen another and plus Composer QX of of per second optional for $XX.X with well years EBITDA Volkswagen to QX, X during continue years an charters as Following and vessel will contribution

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

company capital the under was of unlock on fully on million by been cash expenditure our car $XX be balance net to construction outstanding with outstanding of $XXX sheet. fully quarter, X million redeemed million yet which The has During $XXX drawn. [indiscernible] carriers the approximately financing bond of financed

vessel effect to and million has gain During the million a in cash the sale following the redelivered the book quarter. $XX had of relating the positive The secured [indiscernible] the quarter, option. approximately of company debt of repayment recorded third our system after $X corresponding declaration purchase been a

dividend numbers, declared with the and another revenues consecutive a to book So This price ratio EBITDA. liquidity in closing represents XXth based conclude, a the dividend cash growth dividend X% The based share Board approximately Friday. company the strong to delivered of equity approximately on $X.XX and on had has strong company QX per the has quarter increase a balance company last position. share. of a The yield XX.X%. Then to both sheet

on bonds balance new recently XXXX, and attractive which new on financed of liquidity with free far we the are billion, additional sheet. more cash Furthermore, up X in repaid buildings So arrangements up secured [indiscernible] $X delivery. fully our company long-term financing, than financing will with

billion, currently backlog flow rate charge visibility at forward. on stands cash provides fixed with us Our going our $X.X which strong

together in strong generation And newbuilding for charters presentation commencing. in back Hercules this the car with vessels, on the to And contracts delivered quarters operation revenue carriers finally, new let now with the of delivery session. existing and new that, with conclude come, and the and move Q&A assesses me to

Unknown Analyst

Thank you, Aksel.

our to now Instructions] will session. Q&A open We up [Operator

Gregory Lewis

the find couldn't function. hand raise I

This could about just in. from guess It increase. hop things, how was just I X to dividend the the X should I'd drilling figured a very to we dividend they're assets because than, container volatile one over more next, going managing the ships. about of to think good it probable of questions. hoping it's strong Greg [indiscernible]. but -- your X I think is the cyclical rigs cash lot and the next a I seems you a through. And few industry. know, was dividend to as looks cycle, We're car clearly and don't like Hercules X growth not a I here balancing of I like be in part the is the of it's walk say, So carriers see the trajectory we had as potential look a years, able generate those over it's or a in clearly X asset definitely to maybe years,

to over couple of as of just cash about from this next how we understand years? uses the So think the Hercules trying you recontract

Ole Hjertaker

the in got service. And quarter was that. mentioned, spent the and now first the bit really it's it appreciate when only started. a out quite we rig just that as money year, you I I of on of Hercules, Yes. of mean second

year more a charter was that the ago. fixed rate Canada, in than So

it a at So lower was rate.

in charter next now, So well on be -- be above to the that rate this expected drilling is as the the we had on if the already in say, rate higher start And in have the next should and under in rate or is Namibia drilling to rate in it's week. rate, for rate. back Namibia should both And to rate rate based even it highest Hercules, mounting mobilization include charter drilling year Canada. we it's the drilling from drilling Namibia we had later fact, would And today. an then Canada I cycle we going

unit pay for is are a rig Of services. is and to the very that market. clearly this charter So a willing shorter-term customers capable nature, market

So a this building, of is we get charters. been want XX-year and on X-, cycle. have little for shorter look say We really bit deliberately don't so And we cycle this charters, market holding not we we're low at to sort has it of end normally long really fix a market not the where think keen is on long-term fixing you something because we see before and term you It's really XX-, that typically to what -- back unit. want this the legs. a that therefore, charters

charters were long-term we fixing the at look accept unit, if what think to for it I lower have rates at we you are would currently. to than

asset. So that's X

good do this Chapter and But offered history very the alternative minds, on you take ended round, be Of I we also company a a [indiscernible] in big the But a poor, drilling it, it's from the were rates returns now a I the in of treatment to a rig, to have drilling been had course, been. to setting honest the restructuring. our at decision is because that call XX. spectacularly the really than very up this would with side look mean -- rate charter see around history it better and used is it's we rate. say in We in that is And X last decided think the that can We to on back. we've that that the be asset. if

carriers, have it from could construction bought then XX% spectacular, at have used of , the vessels, another look quite some car the think segment. of then costs the both you moving I X you X this that, vessels, we If of just if a other ordered sort vessel, X the make we we Asia more look vessel transportation assets, to that, than to of on it's and where we these Europe. and at call vessels We

own older bits and So by with a of vessels other lot dividend provide and X to where was lot pieces where Volkswagen generating to we that's the increased the have be of we of quite here it happy Volkswagen you compared seem rechartering negotiated have then cash the X because we we assets those also originally it a times flow. and we And simply to the service them.

elements XX here. return Otherwise, our to in but [indiscernible] in that in been So why we've the quarters piece, And principal company also is, our having a quarter shareholders. been SFL course, we're over distribution. portfolio our point of adding. our and rig really be money not is do cash X every yes, is made are there it's is mindset And that there now, other to we objective like that's operationally also single mean on based always would don't time. any I

in terms really at some yes, the our starting that minds, think, these I we just I of in point of where we think So flow from so -- are assets. cash

potential is forward. there more dividend going hopefully, So also

Gregory Lewis

a as goes? relative or that this helpful. borrowing in here up, Super where she maybe even we changed transactions hey, of continue it's November to it, as bigger is earlier to have are that SFL and good going market How the has the were shipowners some year [indiscernible] did market's question. I is and kind [indiscernible] opportunities created busy they [indiscernible] of definitely costs. for the Clearly Or want and at more to to couple kind look has of you Has across for it's steady the a space a potential team higher I'm that shipping where picture at i.e., years, for ask SFL, Yes. as and gone conventional opportunities talking year? they're been up. assets looking more sit

Ole Hjertaker

if good to back end the did Yes. really various on question. up for flow, of mean than doing billion we you work screened in $XX more It's and go reasons. or potential ended a deal one I 'XX, we

in a I And rising with this asset it, has say, a rate year replacement in been I volume degree, from the think It for think time takes in to metrics. I maybe the is those aggregate. the call those it's cost interest little rates been, for the another certain lower off interest to has operating see through metrics expenses, filter lag it, customer's a is been market, to there time services. one, -- it's we has the also, where extent pay would little inflation willingness underlying and that way a to a

more pick I this going on I XX%, 'XX -- been, number think I a but has again. than would I why lower opportunities think interesting deal little is been, that's the a to So up has flow say, would say, gross

opportunity at for But seen we the offering that a do deals, is bareboat lease from type relatively have you ones funding you But maybe kind I the strategically because think the is that deal we mean, is now doing cost for if higher. there -- you simply ones flow alternative structures, And them, more I look is because the cost financing a little right have therefore, more offer of with what moved typically intermediaries. bareboat of smaller. away those like type

And now, We've here a You end of is the some that deal years. element the there don't most with risk But are nobody an I through user. XX this over is bareboat strong over talks therefore, segments shipping underappreciated about cycle seen booming, now. markets, years do right it. a we've been think

with do do is and many deal deals counterparties out wrong deals. need for do The and So be focus assets if when transportation when a do because the right answer short done there. they nervous on on just but to that's users strong and that our to the flow deals, is deal a the maybe There focus a quarter getting you you that's is desperate is to deals be logistics don't continued solutions that. there water, don't a

screening We opportunities. deal are constantly

but opportunities. We looking are specifically the are But at, potentially be done. deals We to It's of look to be asset. try be at we there got cannot that right we what could disciplined. communicate type

the guy. just think, anybody the do a markets but hopefully, can we're history do some are more who's and over I risk after to the forward. little we a down cycles. through the volatile our have cycles is hope in with we value And we along brings maybe residual you to this on is this kind deal problem are structure? that's an that we a is next residual willing deal counterparty? who right, upcycle a focus on up to the even We yes, importantly, managed deal, set seen going that the Is take volatile, what's that's i.e., that's, an financing a as it, obligation exposure, market, what of than enough someone The counterparty pretty pay counterparty, cycle their we've And how what you is that in strong honor because rough manage market, can down cycles. also underlying And something years call better

Gregory Lewis

don't lease And Great. the have I of balance either over I Is some Okay. liabilities. [indiscernible] the should then we call? short-term Or that on unwind? other going just X just into next went . lease extended being sheet. that we that I or the saw, about to renewed long-term noticed know sequentially, liability guess, think question I

Aksel Olesen

here. It's Aksel

at the on there yes. are same I to So our that you -- debt like as think level opportunities basically the look vessels all just that should assume that our on ordinary traditional rolling

Unknown Analyst

[Operator from Instructions]. And the come Richard next Diamond question will .

Richard Diamond

areas building next and to Ole, SFL. year? you you quarter out flow. looking quarter, incredible deal team think the cash job are fourth most flow What Great interesting the have do and at great the

Ole Hjertaker

Thanks that, for and Yes. kind for the words. thanks Richard,

We are go into preference would with we i.e., focusing are logistics oriented, sort I a that across the chain logistics say, are, counterparties. Board, of where our for deals

been think could volatile. we've the on our say quite car for yes, spending I interesting still So opportunities grown segment. container time carriers, We've transportation it's energy is we on a that a both, still And box on. is But of with market per that in And lot that's efficient be can We segment underlying bit side. Yes, high-end loaded there ago. instance, cycle super is the investments. a or demand a not the emissions have X fuel assets, saw year where reducing the matters. footprint modern call the And concentrated for it, that where also certainly, we or that capacity. more footprint there's

seen We've tanker some of the on the also opportunities side.

conservative to of we segment. across deal so amortize segment Board you otherwise, I opportunities, across active would Board flow. which natural on that our and quite it's can there LNG that been The investment sort have here. be the down really don't that and are means I has level the only say charter segment are have and investment, the But would the take portfolio dilemma in that our exposure little one, looking think good be willingness in in there in rates say of we don't our particular. you in we we opportunities the at been, a But much where So have to residual would access

Unknown Analyst

would there like no questions this I audience, are conference further thank everyone for in the from As call. participating to

press contact pages If you very in Thank management, you www.sflcorp.com. are to details through us can touch the in you with our there much. or on page, any get web release questions contact the follow-up have

SFL (SFL) 8 Nov 232023 Q3 Earnings call transcript