SFL - Earnings call transcript Q1 2024

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Sander Borgli

Welcome to SPL's First Quarter 2024 Conference Call. My name is Sander Borgli, I'm Vice President for Investor Relations in SFL.

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

The conference call will be concluded by opening up for questions, and I will explain the procedure to do so prior to the Q&A session.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. 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 of based guarantees and uncertainties inherently statements not These cause in risks operations are are future could statements activities subject results forth factors future to that statements. Important on of expectations and performance. shipping, be current that and to results are to our include, credit the differ in markets. materially conditions different from forward-looking limited but and offshore are cause the these not actual to, set could

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

Ole Hjertaker

Thank you, Sander.

million, over We are quarter. our a also items, a was new primarily million $XX million income our net $X.XX XX% we and previous as positive million. The which company equivalent improved contribution in cost some $XXX profit quarterly up XX gain announcing car quarter also also revenues $X.X of increasing one-off quarter the our EBITDA infrastructure in delivery million drilling are return last fuel built in and And line significantly shareholders, previous than per on And the carriers relating to commitment share. charter the $XXX maritime a bulkers results increased which share minor a to this around Hercules. $X.XX the months, the time, with approximately or $X.X the been was Capesize unique The with and higher and relating on rig, profile the value We to at XXst on rate fleet. The to has cash the in were have again interest the flow million $XXX equivalent EBITDA our is revenues of due the million total to from quarter, diversified per quarter dividend had $X.X swaps. In share. dividend, mark-to-market and to including savings. came now

dividends has increasing And We forward. going than total. accumulated this since $XX than have in share more and paid supporting robust a or every inception charter to capacity have dividend XXXX, more quarter billion per and $X.X continued backlog our in we

pool approximately the in excludes market, trading around seen revenues operate users. the significantly rate would can figure billion. that fixed a to also the on dual-fuel profit net backlog short-term I note very the is carriers importantly, backlog in income. at $X.X backlog chemical Stolt-Nielsen. And concentrated excludes share from it the excludes contribute will to which optionality, end stands Our future And long-term that charters And and strong new also revenues with we have our vessels

XXX,XXX propulsion new in acquisitions currently eco-design several million, are China under vessels construction the to time company. of commodities X for aggregate latest price a have announced product an and new purchase we The and with world-leading features. energy combination and long-term conventional in with charters system the charters. $XXX March, acquisition ton deadweight recently announced have In of LRX We tankers approximately

will options. around after have the This purchase million to October this period expect adds of to charter and The June of plus our optional fixed-rate extension X options up between the X be minimum the and backlog, vessels $XXX propulsion to vessels years delivery deadweight ton year, We system. subject April, years. to take approximately excluding will years The announced acquire steel the LNG dual-fuel million. we SFL. In profit an built with tanks fitted and price X with carriers $XXX to aggregate stainless and agreement year to the are a cargo XXXX X purchase vessels mechanism is in XX,XXX XXXX and with X, and share charterer chemical

up take arranged vessel with affiliates with a one addition purchase years will in of fixed-rate and and world-leading in long-term share the vessels. The to mechanism Stolt-Nielsen. pool July extension a year time the Both logistics employed of vessels X vessels with for options a charter subject a vessel and X have We where similar-sized in be after of years, to employment vessel profit Tankers, options SFL. subsidiary a for chemical of company, be delivery will of expect to has employed fixed-rate X, be to on the vessels Stolt one minimum will X

and very X,XXX a exercised the now. X-year X,XXX have Line to to TEU TEU. XXXX, from to vessels vessels relationship XX extend them until for business X also have charters and long-term close extension recently XX,XXX Maersk other We charters with on Maersk vessels X ranging agreed options on We pre-agreed

sustainability-linked million fixed charter have this, Green our on and time. In to scrubber related of share in a the unsecured expected be late profit million In market. debt Nordic $XXX for a loan Maersk the corporate have we and XXXX, is charter senior existing coupon this in X.XX%. aggregate, for a and the for addition also additional approximately we raised of X,XXX April, we that add general backlog, adds some over quarter to our bond refinancing purposes. to $XXX to short-term In Proceeds feeder, until revenues are to the Ace, will in vessels is second Maturity benefits XXXX. on us addition, new

with have of use of due $XX As June end equivalent loan kroner-denominated quarter. And the we will with million I the facility, word to Officer, Norwegian at Trym the that, of outstanding the Operating first part the our XXXX, in of repaid Sjølie. Chief bond give this a over

Trym Sjølie

$X.X made container XX ships, assets The tankers, bulk be Ole. you, year, our of managed car delivered billion. rigs at vessels, backlog to and fleet and XX have X assets XX stands in our is XX Thank portfolio we this dry owned maritime vessels drilling Including current X and from shipping carriers. up

long-term on with the mostly Container just We assets to now fleet diversified backlog. of charters segment is charters. have out a XX% under largest first-class vessels of our charted

over have, Stolt or bareboat from leases. on years, dry XX% away from and transformed charters contracts completely a model assets chemical time last segments. The third We have operating to time is relevant exposure. came of instead operating wet Stolt, the pool from company's Tankers and in moved industrial end and like makes tankers example X and both full of all assume -- dry recent with from the this. In for new charter quarter, the and financing-type large XX the X This to us revenues charter charter bareboats only X% dual-fuel users

significant in cash split about contribution have time, flow In fixed-rate from on QX, bareboat fuel. of both charter arrangements we to and spots. arrangements rates charter on on over time to we've share contributed charter contracts $X.X profit and profit vessels, addition savings had And and relating XX XX the to revenues, XX million. Out cost have

quarter. as we of been operation dry off-hire with and of operational almost is we complex management X,XXX dry days, across has operation defined a have total the all One technical dockings. Stavanger. In quite and commercial Our vessels out calendar in our dock QX, had of vessel multiple Singapore and own operating and less in day, sectors,

QX from million. fleet our utilization OpEx XX.X%. The charter fleet was fleet was in for revenue in was Our across the and million overall $XXX QX the $XX

charters investments is as and to carrying energy as Our to off-hire in customers. investments to and increase well investing the performance grow minimize as a with fleet includes important, to of OpEx service a way existing optimize continuously our is Such vessels. cargo and to high philosophy invest This our backlog consumption. vessel's our relationship cooperation capacity level our increase reducing and maintain to from

who dry With into investments that X-year important as XX,XXX of efficiency a modifications As new XX,XXX X dock. we lashing with of to in lashing are with investing form Olesen, delivered working vessels over financial fittings, Hapag-Lloyd, These long-term charters devices, take fleet Hapag-Lloyd give the Maersk, new propellers and with upgraded we and to hull exhaust increase modifications Hapag-Lloyd, with mentioned, part and highlights time. And the time vessels are bulbous improved increased is of vessels, upgrade to consideration. Of that, Maersk down to new consumption the attractive TEU various and program, the gears. and per up including just boosting fleet efficiency ensure our bow, main energy container charterers, paint container carried vessels the which our to we in deadweight in we the Ole are scrubbers. Furthermore, will already was the fuel emissions entered making quarter. from estimate cargo word that charters through us energy the and chartered and are over measures, we hull our efficiency modification CFO, Maersk, of propeller of across by TEU our to by bridges are for approximately containerships anti-fouling energy Aksel XX%. And we and TEU have I remain and X the fleet. energy-saving been an gas will X intake nominally

Aksel Olesen

the first compared charter flows a items. The fuel forward. In you, of million, visibility and illustration not generated quarter, net container savings to charter going the guideline. approximately Thank with also increased currently million of X approximately related accordance This only $XX carriers this the U.S. approximately with that million $X performance gross including the share at we strong on quarter. approximately in quarter, large X revenue first fourth carriers noncash pro on from XX% quarter. company vessels. With profit and container hire gross have delivery hire quarter, of stands fleet $XX first coming our some GAAP, this is forma the for is charter rate providing dual-fuel shown is extraordinary our gross the in car on slide, note the of cash cash flow in first in our generated billion, of Please the hire charter million approximately $XX during million car $X.X in company's of the following On backlog, with LNG Trym. to quarter which $XXX remaining a of fixed-charter us approximately the and

] dry large in million gross these bulk the first share quarter, car approximately the previous carriers vessels The the and harsh million in Our approximately generated carriers, $XX contributed charters. hire generated hire Ocean. X Linus; first of approximately charter the generated bulk million short-term million in previous during and including long-term the charter profit of were were modern charter dry -- jack-up, XX vessels in market to in vessels approximately with $XX line net employed in $X chartered from $X.X environment on has our $X.X company quarter, employed which which ultra-deepwater quarter. The on X million rig, tankers gross X approximately charters the rigs: quarter. SFL X hire [ to drilling Capesize Hercules. semi-submersible, in and the Golden spot compared owns long-term

rigs the million quarter, first compared generated approximately the in in $XX.X $XX During quarter. the fourth approximately contract million to revenues

was million. Hercules approximately connection net the recording was be expect the the U.S. previous periodic and and of rig for currently on lower to approximately approximately contract. quarter in of in mode. with for million currently quarter, $XX.X revenue record the is Norway approximately weeks. In income compared in half $XX the Canada $XX first Namibia, the and special in $XX previous its quarter. over quarter a SPS, accordingly Linus SFL at Energia to yard $XX of in In rig cost fees Hercules survey, organization contract During The capital amortized the the was and with Equinor, the off-hire is GAAP million on we million to costs an are with rig Galp approximately The million XX-year is quarter, in the second mobilizing contract the compared expenditure to X revenue the deferred quarter. course with and and expecting for estimated spent to of mobilization

This quarter. million adjusted $XX $XXX statement the quarter reported $XX in move and in contract million fourth to operating the EBITDA on the and on for G&A the loss compared to was U.S. quarter to then compared million Our on as the as summarizes for the $XXX an GAAP. of previous to the approximately quarter. We million Hercules' full expenses profit

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

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

During savings vessels, container from share from company dry charter recorded some income our car profit the carrier of on quarter, fuel to our X million the and our $X.X large vessels Ocean. approximately bulk Golden of Capesize

items, approximately on increase mark-to-market tax linked credit Furthermore, $X.X from of the and positive to an had from we of noncash of of we a financial mark-to-market $XXX,XXX; equity operations investments $XXX,XXX On approximately in increase million; the effects provisions. loss had approximately negative Namibia. in swaps an Hercules effects

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

on $XXX million $X.X marketable had securities vessels, end, cash additional cash million moving $XXX of company more the market in Furthermore, At to sheet. and an than the approximately million. balance estimated SFL value of debt-free of equivalents. So quarter have approximately with

In we CapEx million approximately approximately financing. of total CapEx be financed with to of million, with expect which terms commitments, $XXX X tankers senior recently acquired of we $XXX bank

approximately placed million jack-up environment addressing end, a for general to harsh previously our with the a an a terms [indiscernible] expenditure estimated addition, long-term of $XXX bond capital of to attractive the Maersk In its $XX new Phuket, corporate undergo SPS the scheduled million, of NOK the Linus, container rig, debt-free maturity XXXX addition vessel, successfully financing bond and for has $XX net company quarter range very to sustainability-linked million. Subsequent at in maturity company proceeds is matching senior purposes. Furthermore, charter.

delivered QX EBITDA. of has based of and company represents growth and book-to-equity a dividend, $X.XX X%. conclude, So with quarter in increased on XXst dividend the revenues another approximately the The which yield XX%. Then has per share, strong numbers, company to cash declared ratio the dividend both the to consecutive Board a approximately has

currently we to on $X.X forward. And presentation cash the backlog move visibility rate with the with strong billion, charter a flow conclude fixed stands Q&A provides the going Our at and us which on that, session.

Sander Borgli

have we'll our from question [Operator Climent Instructions] And first Molins.

Climent Molins

usual them But to insight Adding about one wanted employing on in one Stolt-Nielsen's the recent of with aligned pool? I long-term chemical for you reasoning by acquisitions. could on is start tanker of some a your them asking contract structure. provide the

Ole Hjertaker

Absolutely.

Nielsen or in of call these So for visibility the vessels. And on reasoning relating combination therefore, is There They in with is very opportunity higher charter have logistics. then near-term customers. on right they the the on rate have is, with X of -- call affreightments, the we contracts market of chemical it, contract coverage a market, significantly leader of the on a one the proportion operating are reality, the vessels that then the than on to it, the the market, vessel. the is revenues a vessel. those i.e., rate. one fixed volume support the of doing COA but their high And fixed vessel charter based And and now, other have we the exposure market

it rate. basis, relating the very proportion of we of fixed you also good But some to saving are assets. the received at looks exposure. overall that, we that fuel and rates for term. From the have have on some balance But also assets an other profit charter on look the time, share So the market on and be we if near time top vast to on in taken to earnings

will we low order these these there participate on see are believe increasingly are good be specific vessels large remain where that will companies from very to an market, dual-fuel which attractive way market is book this be segment. Also, to we LNG, for perspective, based reasons Stolt-Nielsen going have this also as a also in believe and a customers quite employed. this vessels the this in forward, we the of will dual-fuel it, propulsion, portfolio firm believe So chemical that the

Climent Molins

Makes ask to the sense. about I also [indiscernible]. X wanted

the commentary quarter-over-quarter. contract? the for component what's attributable some could long-term the revenue that And bid contracts? secondly, index-linked Hercules, to on the on increased the Is you Linus, Regarding provide of

Ole Hjertaker

with Hercules. on way to Canada its I mean, is from Equinor. drilling the start start Namibia now to Hercules Yes. mobilizing for to

in to July. So in we expect Canada that early start

yet. look monitoring But rig So until rig are will Exact market. quarter. perspective, will the This when it be the specific a at that be is that this makes We're But when we rig of relatively clear redrilling not opportunities forward. the few just transit charter market. we a XXX% in on scope -- during looking be wells. environment, meantime, in market. But a time the to going runs a is of of so the timing fourth course, depends needed is and are period caliber. the on for that and we that are, in so drill good that harsh a sense that released. From contract there. all it week There is commences work transit realistic or started tight for rigs believe the to naturally and we at employment the and time the the -- opportunities very the -- out It's cannot quarter fourth ago. That deepwater also

very So we believe could there prove interesting having over asset this to time. be

call of is day, XX%. the us to linked that we'll normally from with index for is up contracts market an go from charter per per second arrived We is adjustment does rig this -- this contract. In dry to adjustment to If and fact -- with go commercial Linus, it, day onwards. increasing. It just now And there the in May coming really is a that it's special the you rate over from see just off-hire to at look shipyard at not a the now rigs be XX-year index rig dock contract charter between $XXX,XXX balance the That -- for this have will $XXX,XXX around any, that survey. quarter, you yesterday.

That We be the expect the to the end a weeks, so long-term work at to the around very has expect again rig month. back of out take X charter. we rig

will back until charter of end to So that the then the runs it to XXXX. go ConocoPhillips

Conoco had ago. We year we a also partner XXXX and more that, Ekofisk field, license over license and XXXX potential And that there to to commercial Conoco work believe good extended their for be just we employment some Linus of could will beyond the from be hope at believe deployment continue XXXX. time are away still job any do discussions around future a rig. for could from opportunities then that and quite there But extended their we

Operator

take our from Gregory Lewis. next will question We

Gregory Lewis

hoping I to how could was cash is should thinking be dividend a the talk mean, returning guess shareholders. and little I we increase. another to I this you just about

I room as at the cash increase think increases. Clearly, that, just to dividend even even we definitely more. but there's income, X been there net look not is consecutive flows,

how of kind good like this, looking XX% was was about that realizing than like backlog something looks backlog, thinking it more be may to Just see, the the up sequentially. it curious Board roughly at but just

about can you're looks that lot the give So kind charter like your on for market color of just assets. in a of there long-term real the thinking dividend, depth realizing it is any that you how

Aksel Olesen

income, a so Aksel and a of It's Thank here. It's observation. that's, good you, good. quarter. course, Increased it's Greg. solid Yes, net very

have contract more added. backlog We being

and taking on I think, X now, dividend I over Board's quarters, step time long-term I perspective, sustainable of and step. at as been by say, that the view the is our think quarter-by-quarter from taking consecutive increasing least kind something

dividend say, the conservative, of kind being somewhat and would in there's grow of kind the kind that's now of approach the for think opportunities further there's a investment realizing kind lot kind over market of time. also I to significant of the time, at So increase same capacity. I the of to company

the quarter-by-quarter, dividend increase kind see to the of much we how totality So kind of have yes. of you

Gregory Lewis

is going options And obviously Hercules. Okay. on to firm work, more does color really work right we opportunities I is, drilling for and around to the on back some what more -- have believe wondering of customer that how mean realizing the when now moving little hoping there's that and kind because urgent. to rigs was exercise do there's Canada. those of I'm the how curious fix I'm options, a frame multiple for some to rig the then be for simply -- is windows I time that I obviously on customer becoming the rig

kind around of I'm curious that. So

Ole Hjertaker

Yes.

is up which that is drilling. the depends is the reason specific way handling too So why some The wells, it. opportunity testing efficiency, the it on a on exact combination the the with also rig X simply we say, days drilling on you but drilling is in scope Canada floor, number of, of down all drilling the the course, cannot rock of to around the can is where linked actually rig drilling is whole operation be

time -- the we in to scope So exact will it terms little vague it's and have a bit be take. of

went Namibia, rig opportunities. a mean pointed drilling be in quarter. quarter, drilled major mean, I was you -- it's -- other for drilling for and Canada for definitely It Galp, X have said, expect very out, there was good the the been specific. That quarter probably the of fourth for most into fourth be as a We it the XXX% success has we successful wells chunk rig for Exxon. the employed yes, are to cannot still, But was probably I when to third Galp.

more to that of fund XX more estimated massive. think than I than It's they oil. billion barrels --

we it's benign believe of deep capacity to to wells water, sort course, in that winterized. of are in then drilling in course, also equipment that. very trigger that rig help And hopefully think happy the capability that very water, it with This area. of we will activity the we, assisting has that sort given harsh being them has drill more drill that and do ultra of the also but environment, having So

features have from few a and we available it that rigs are believe into XXXX. So that of rigs very a late and few other lot very 'XX has

additional are closely, when for really only comment So we have we monitoring and market this secured work rig. but can naturally the be specific

Gregory Lewis

Okay. of right? did able around you interesting, tanker in year. were It's that to another kind it Like more a there's of container through always, on period long-term then where acquisition the like always in Great. And seems maybe opportunities take gone we've to than are market often the this squeeze question the market, not, I but or want not for just opportunities advantage contracts. opportunities there earlier

getting As tanker the you looks of returning in depth -- kind term in tankers could long-term -- has the short in are is real I think of be question not guys I'm surprised -- SFL, just years see the necessarily going these the from company if increasing and as to market? which were charters in and be market, the Or some couple -- we kind from like that should continue investors we been the term to at one-offs? we the but to there last charter seeing landscape is see, tanker market really, of in nature, really we more

Ole Hjertaker

look crude market is it at tanker spot-oriented do and market, tanker you by more call players call voyage dominated the If it charters. that oil product regular, that market

of and other typically. movement day-to-day up on Scorpio there, product more oil, like are the picking oil on oil of We in side, side here the Frontline cargo who have have players Tankers more segments the sort various players and active one you and who other do crude

chain very for be opportunities looking employment of an contribute to been asset. have [ we than effectively more transport logistics and is counterparties what and owner strong more ] a So part of with do long-term a

to this, example has of market it cargoes going a and market terminals vessel good logistics board in market on have very mixes one chemical sometimes a liner-type going tanker the also a resemblance various operations spot-traded more the really from think we system. I and at time than is of more complex where moving a

that So we are with in market a in are, won also in other pool vessels. with participating that a in the we they we market type also deal we're given leaders quite there, and way, Stolt, And bit because did that similar segment. with a excited have

market we So it's at. a looking are definitely

are It's dividend the the can there. right counterparty capacity. Because type enough the the evaluating we with we and that's strong contribute reflecting, But already operations the objective that of that also with good both to these believe, -- asset, the of are segment agnostics. service of to right Maersk pride emissions our a think that we for and about us makes and of is on have on structure being sense We the logistics. been how that of emissions and in from course, opportunities sustainable effectively charter ourselves that all is deal finding boost optimizing doing long, helping also and announced deals do customer, is And also really, reducing fuel rates new is the that course, both is in with that. we us. to helps had -- years believe long-term charter and those that And happy dividends. really build multiple focus both Maersk And vessels reducing of ultimate -- we try we doing on are reducing someone, for have high fuel believe extensions are here several us in we one, on very at vessels costs market the deals which quite we terms robust; vessels. We two, consumption, premium the these

going further where something -- that's So believe opportunities also be there could we forward. we

Sander Borgli

from thank participating would I further conference the there to as Instructions] like in no questions are everyone for this call. audience, [Operator

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

SFL (SFL) 14 May 242024 Q1 Earnings call transcript