SFL Corporation Ltd

everybody in and then we'll start let's say to pass thank you Welcome to SFL's fourth quarter 2025 conference call. My name is Espen Jøsund, and I'm vice president of investor relations in SFL. Our CEO, Ole Erdraker, will start the call with an overview of the fourth quarter highlights. Then our chief operating officers, Trum Sjöli, will comment on 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. Please note that 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 resource 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 resources and our financial condition. Then I will leave the word over to our CEO, Oli Aftako, with highlights for the fourth quarter.

Thank you, Espen. We are pleased to announce our 88th consecutive dividend as we continue to build SFL as a maritime infrastructure company with a diversified high-quality fleet. For the fourth quarter, we reported revenues of $176 million and an EBITDA-equivalent cash flow of $109 million. Over the past 12 months, EBITDA amounts to $450 million, reflecting the continued strength and stability in our operations. In recent quarters, we have taken decisive steps to strengthen our charter backlog, securing long-term agreements with strong counterparties and deploying high-quality assets. And we have made significant investments in efficiency upgrades across the line of fleet, which has enabled a very strong fleet performance. Our Chief Operating Officer, Tim Shirley, will elaborate on this later. In December, we announced two transactions with a charter of four Suezmax tankers, where we agreed to sell a pair of 2015 built Suezmax tankers in the market at very strong price. The vessels were acquired for $47 million per vessel back in 2022, and we agreed to sell the vessels to a third party for approximately $57 million per vessel with a profit share agreement with the charterer. One vessel was delivered in December and we recorded a book gain of approximately $11.3 million in the fourth quarter. Net cash effect after repayment of debt and profit share to the charterer was approximately $26 million. The second vessel was delivered to the buyer earlier this week, and a similar gain will be reported in the first quarter. This transaction has been very profitable for us, with an annualized return on equity above 25%. In parallel, we also agreed to release the charters on two other 2020-built Suez Max tankers against a compensation of $11.5 million per vessel, instead of selling the vessels in the market to a third party. Similar to the two other vessels, the return on this investment has been very strong, based on prevailing values at the time of the agreement in December. We decided to keep these vessels as they are Korean built and very fuel efficient. They're also newly dry docked and more attractive for new potential long-term charters compared to the two older vessels. Based on US GAAP accounting rules, the full settlement compensation was expensed as a cost in the fourth quarter, which turned a net profit into a net loss for the quarter, despite the very strong return on investment so far. The positive side of this is that we have the vessels on our books at only $55 million, while charter-free values, according to shipbrokers, is currently in excess of $80 million. The vessels are currently traded in the spot market, and the market has strengthened significantly since the deal was agreed with less than two months ago. Net cash flow contribution is currently higher from these two vessels alone than all four vessels in the original charter agreement. I would note that the charter hire for vessels in the spot market is accounted for on a low to discharge basis based on US GAAP. So we can expect some volatility in the profit and loss statement from quarter to quarter due to vessel positioning. We will look for new long-term charter opportunities in due course, and market analysts predict a very strong tanker market next few quarters. We have seen an unprecedented consolidation recently in the supply side for the larger 2 million barrel VLCCs and very high charter rates in that segment, which is expected to also have a positive spillover effect on the 1 million barrel Suezmax market, as these two segments over time has shown a high correlation. Thank you. Turning to our offshore assets, the harsh environment drilling rig Linus performs very well on the long-term contract with Conoco, while the harsh environment drilling rig Hercules remains warm-stacked in Norway, pending new employment. The offshore drilling sector is gaining tangible structural support, driven by recent strategic industry developments that underscores higher day rates, extended contract duration, and rising demand for premium high-specification rigs. First, the announced all-stock merger between Transocean and Valaris, announced earlier this week, marks a pivotal consolidation in the space. And secondly, a recent new three-year contract for the noble Great White drilling rig in Norway, which started up in 2027, illustrates the strengthening contract fundamentals. With this backdrop, we remain optimistic about securing new employment for Hercules in due course. So with the announced 20-cent dividend, SFL has now returned more than $2.9 billion to shareholders over 88 consecutive quarters. This represents a dividend yield of around 9% based on yesterday's share price. And our charter backlog stands at $3.7 billion, with two-thirds contracted to investment-grade counterparties, providing strong cash flow visibility. Over time, we have consistently demonstrated our ability to renew and diversify their asset base, supporting a sustainable long-term capacity for shareholder distributions. Our solid liquidity position, including on-road credit lines and unlevered assets at quarter-end, ensures that we remain well-positioned to continue investing in equative growth opportunities. And with that, I will now hand the call over to our Chief Operating Officer, Trim Sjöling.

Thank you, Ole. We have a diversified fleet of assets charted out to first-class customers on mostly long-term charters, and the majority of our customer base is large industrial end-users. After the sale of two Suez Maxes in Q4, our current fleet is made up of 57 maritime assets, including vessels, rigs, and contracted new buildings. Our backlog from owned and managed shipping assets stands at approximately $3.7 billion, and the fleet following Q4 is made up of two dry bulk vessels, 30 container ships, 14 large tankers, two chemical tankers, seven car carriers, and two drilling rigs. Our charter backlog is mainly derived from time charter contracts, and with the exception of four container ships on bare boat leases, the rest are on time charter or in the short-term or spot market. The charter revenue from our fleet was about $176 million, and we had a total of 4,808 operating days in the quarter. Our overall utilization across the shipping fleet in Q4 was about 98.6%. And adjusted for unscheduled technical or fire only, the utilization of the shipping fleet was about 99.8%. This quarter, we had two vessels in scheduled dry dock at a cost of about 4.2 million US dollars. Furthermore, we had a chemical tanker in shipyard to carry out upgrades to the LNG dual fuel system to better handle gas boil off. A sister vessel will have the same upgrade done in Q1. This is part of our drive to ensure we can fully utilize our dual fuel capabilities. All of our six LNG dual fuel vessels are actually operating on LNG, which aligns with our ambitions to reduce greenhouse gas emissions from our fleet. I will now give the word over to our CFO, Axel Olsson, who will take us through the financial highlights of the quarter.