SFL Corporation Ltd

Welcome to SFL's second quarter 2024 conference call. My name is Sander Borgli. I'm Vice President for Investor Relations in SFL. Our CEO Ole Gjertaker will start the call with an overview of the second quarter highlights. Then our Chief Operating Officer Trym Kjøli will comment on Vessel Performance Matters, followed by our CFO Axel Olsson to 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 with the meaning of the US Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intents, 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 of 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 operating results and our financial condition. Then I will leave the word over to our CEO, Ole Gertrude, with the highlights for the second quarter.

Thank you, Sander. We are now announcing our 82nd dividend and have built a unique profile as a maritime infrastructure company with a diversified fleet. We had full cash flow effect from our car carry new bills this quarter, but charter revenues from drilling rigs were lower, partly due to US GAAP accounting rules, where mobilization fees received for the transit to Canada and corresponding costs will be recognized in the third quarter. We also coincidentally had liners out of service most of the quarter in connection with a scheduled periodic survey. We reported revenues of nearly 200 million dollars this quarter and the equivalent cash flow in the quarter was approximately 131 million dollars. Over the last 12 months, the equivalent has been 545 million dollars. The net income came in at around 21 million dollars in a quarter or 16 cents per share. We had a positive contribution relating to profit share on Cape size bulkers of 1.6M dollars and fuels cost savings of 2.8M dollars in the quarter. And in line with our commitment to return value to shareholders, we are paying a quarterly dividend of 27 cents per share for around 9% dividend yield. Our fixed rate backlog stands at approximately $4.9 billion, and importantly, the backlog is concentrated around long-term charters to very strong end users. And this backlog figure excludes revenues from the vessels trading in the short-term market and also excludes revenue on the new dual-fuel chemical carrier that will operate in a pool with Stolt Nielsen. and it also excludes future profit share optionality which we have seen can contribute significantly to our net income most of our vessels are on long-term charters and we have over the last 10 years completely transformed the company's operating model making us relevant for large end users like maersk volkswagen group and vital And we continue to build the asset portfolio and have taken delivery of four vessels so far this year and expect to take delivery of another three vessels by October. And most of these new vessels have dual fuel propulsion. We have also added massively to the backlog through multiple charter extensions on existing vessels and recently through the ordering of five large container ships in combination with 10-year charters. Our COO, Trim Shirley, will talk more about this later. And in order to fuel further growth and build long-term distributable cash flow per share, we raised $100 million in a public offering a few weeks ago. And with that, I will give the word over to our Chief Operating Officer, Trim Shirley.

Thank you, Ole. Including vessels to be delivered, we have 81 maritime assets in our portfolio, and our backlog from owned and managed shipping assets stands at $4.9 billion. The current fleet is made up of 15 dry bulk vessels, 39 container ships, 18 tankers, two drilling rigs, and seven car carriers. We have a diversified fleet of assets charted out to first-class charters on mostly long-term charges. Container vessels is now our largest segment with just under 50% of the backlog. We have over the last 10 years completely transformed the company's operating model from bear boat leases to time chargers, and the majority of our customer base is large industrial end users. In the second quarter, 95% of charter revenues from all assets came from time charter contracts and only about 5% from bear boats or dry leases. In addition to fixed rate charter revenues, we've had significant contribution to cashflow from profit share arrangements over time, both relating to charter rates and cost savings on fuel. In Q2, profit split arrangements have contributed $4.3 million. Out of the 81 vessels and rigs, we have 11 container ships on bare boat type contracts and the rest on time charter and spot trading. In Q2, we had a total of 6,400 operating days, defined as calendar day, less technical or fire and dry dockings. Two vessels and one rig have been in dry dock in the quarter. Our overall utilization across the fleet in Q2 was 97.6%, mainly due to these dry dockings. The charter revenue from our fleet was $199 million in Q2, which is down from Q1, mainly due to reduced revenues from our two drilling rigs. Hercules left Namibia mid-May and commenced operations in Canada in mid-July. Due to US GAAP accounting rules, mobilization fees from the Canada campaign and associated costs are deferred and amortized over the drilling period. Therefore, we will accordingly record high revenues and costs in the third quarter from Hercules. Linus went in for its 10-year special periodic survey in mid-May and spent about 10 weeks in dock for the class survey. The rate was back on rate end of July. In the third quarter, we expect revenues to be materially higher than in the second quarter from both drilling rigs. In July, a judgment was made in the High Court case against Allseas ref the Green Ace Charter for 27.4 million US dollars in favor of SFO. Subsequent to this judgment, the Allseas guarantor has become subject to administration, which means there are challenging prospects for recovery of the awarded judgment. SFL are currently considering next steps. 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 oil fire as well as making investments to increase cargo carrying capacity and reducing energy consumption. Such investments and cooperation with our charterers is important as a way to grow our ship and increase backlog from existing vessels. So far this year, we have increased the backlog to Maersk with new five-year charges for seven of our large container vessels, which is a result of close relationship and cooperation on vessel upgrades and performance enhancements. On the back of our container experience, we have also recently placed orders for five 16,000 TEU dual-fuel LNG container ships in China. These ships will be chartered out on 10-year time charters to a leading liner company. On the Hapa-Gloy charters, the first two upgraded container ships have been delivered already, and the third is scheduled for delivery from the yard this month. On the tanker side, we have delivered the first of three LR2 new buildings to Vito from the yard in China. The second vessel is scheduled for delivery in about one week time. And we are also pleased to announce that we have just this morning taken delivery of the 33,000 ton deadweight chemical tanker SFL Aruba for deployment in the Stolt tanker's pool. We further aim to take delivery of the sister vessel by the end of the month for delivery to Stolt under an eight-year time charger. I will now give the word over to our CFO, Axel Olsson, who will take us through the financial highlights of the quarter.