SFL Corporation Ltd

Welcome to SFL's fourth quarter 2023 conference call. My name is Sander Borgli, and I'm an analyst in SFL. Our CEO, Ole Gjertaker, will kick off the call with an overview of the fourth quarter highlights. Then, our Chief Operating Officer, Trym Kjøli, will comment on vessel performance matters, followed by our CFO, Axel Olsson, 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 US 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. 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 operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include, but are not limited to, conditions in the shipping, offshore, and credit markets. You should therefore not place undue reliance on these forward-looking statements. Please refer to our filings within the Securities and Exchange Commission for a more detailed discussion of risks and uncertainties, which may have a direct bearing on our operating results and our financial condition. Then I will leave the word over to our CEO, Ole Artakir, with highlights for the fourth quarter.

Thank you, Sander. We are now celebrating our 80th dividend and have a unique profile as a maritime infrastructure company with a diversified fleet. The total charter revenues were $209 million in the quarter, and EBITDA was $132 million, which were in line with the third quarter. Over the last 12 months, the EBITDA equivalent has been $481 million. The net income came in at around $31 million in the quarter, or 25 cents per share. The net income was impacted by some one-off items in the quarter, including negative mark-to-market on hedging instruments and accounting effects on Hercules, which our CFO, Axel Olesen, will explain in more details later in the presentation. In line with the improved results and commitment to return value to our shareholders, we are again increasing our quarterly dividend, this time to 26 cents per share. We are now paid dividends every quarter since our inception in 2004, and this has accumulated to more than $30 per share, or nearly $2.7 billion in total. Our fixed rate backlog stands at approximately $3.2 billion. And importantly, this backlog is concentrated around long-term charters to very strong end users. And the backlog figure excludes revenues from the vessels traded in the short-term market and also excludes future profit share optionality, which we have seen can contribute significantly to our net income. And with that, I will give a word over to our Chief Operating Officer, Trim Shirling.

Thank you, Ola. We have 73 maritime assets in our portfolio and our backlog from owned and managed shipping assets stand at $3.2 billion. The current fleet is made up of 15 dry bulk vessels, 36 container ships, 13 tankers, two drilling rigs, and seven car carriers, where six are on the water and one still under construction in China. The latest new building is scheduled for delivery in March 24. We have evolved from having a single asset class chartered to one single customer to a diversified fleet and multiple counterparties. And the fleet composition has varied from originally 100% tankers via majority offshore assets 10 years ago to container vessels now being the largest segment with just under 50% of the backlog. Most of our vessels are long-term chargers, but we have over the last 8-10 years completely transformed the company's operating model and have moved away from financing type bare boat chargers and instead assumed full operating exposure, which makes us relevant for large industrial end-users like Maersk, K-Line, Hapag-Lloyd and others. In the fourth quarter, 95% of charter revenues from all assets came from time charter contracts and only 5% from bare boats or dry leases. In addition to fixed rate charter revenues, we've had significant contribution to cash flow from profit share arrangements over time, both relating to charter rates and cost savings on fuels. Out of the Current 73 vessels, we have 13 on bare boat type contracts and 60 on time charter and spot trading. Our operation is quite complex with vessels across multiple sectors. We have our own commercial operation out of Oslo and operational management out of Singapore and Stavanger. Our OPEX philosophy is to continuously invest in our fleet to optimize the vessel's performance and maintain a high level of service to our customers. This includes investing to minimize on fire as well as investments to increase cargo carrying capacity and reducing energy consumption. This has become increasingly important with the implementation of IMO carbon intensity indicator, which will impact vessels operational profile, including routing and speed. In Q4, we had a total of over 6,400 operating days, defined as calendar day, less technical or fire, and dry dockings. Two vessels have been in dry dock in the quarter. Our overall utilization across the shipping fleet was 99.7 in Q4 and 99% for the drilling rigs. The chart revenue from our fleet was $209 million in Q4 and OPEX for the fleet was $76 million. Among the key ESG targets for SFL is the reduction of carbon emissions on our fleet. Such reduction can either be met by fleet renewal in more efficient ships and with greener fuels. Increased efficiency of existing fleet or a combination of both. As part of our fleet rejuvenation program, we are working with our main container charters, Maersk and Hapag-Loyd, to increase energy efficiency of our container fleet. For the six Hapag-Loyd vessels, we are investing in energy-saving devices, improved hull form with new bulbous bow, new propellers and fittings, supreme anti-fouling paint, and exhaust gas scrubbers. Furthermore, we are boosting the cargo intake up to normally 15,400 TEU by increased dead weight and modifications to lashing bridges and lashing gears. We estimate that fuel consumption and emissions per TEU carried is down by approximately 20%. We have also had similar work done on vessels to Maersk, where the energy saving is in the same region or better. And with that, I will give the word over to our CFO, Axel Olsson, who will take us through the financial highlights of the quarter.