Release Date: May 14, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- SFL Corp Ltd (SFL, Financial) announced its eighty-fifth consecutive dividend, returning more than $2.8 billion to shareholders over the years.
- The company reported revenues of $193 million for the quarter, with an EBITDA equivalent cash flow of $116 million.
- SFL Corp Ltd (SFL) has a charter backlog of $4.2 billion, with more than two-thirds of this from customers with investment-grade ratings, providing cash flow visibility and resilience.
- The company has been active in share repurchases, buying back $10 million worth of shares below $8 per share, aligning with its capital allocation strategy.
- SFL Corp Ltd (SFL) maintains a strong liquidity position, including undrawn credit lines and multiple unlevered vessels, enabling continued investment in newer assets.
Negative Points
- SFL Corp Ltd (SFL) recorded a net loss of $32 million or $0.24 per share for the quarter, impacted by impairments and idle drilling rigs.
- The company faced impairments of $34 million related to older dry bulk vessels, which struggled to find new long-term charters due to age, design, and fuel efficiency issues.
- The Hercules drilling rig has been idle since Q4 2024, with market turmoil and oil price volatility delaying new employment opportunities.
- Recent tariffs and market volatility have made it difficult to trade certain vessels profitably in the spot market.
- The Trump administration's fees on Chinese-built and operated ships could impact approximately 27 vessels in SFL Corp Ltd (SFL)'s fleet, primarily affecting car carriers and tankers.
Q & A Highlights
Q: Can you provide more details on vessel and rig operating expenses, particularly regarding dry dockings and the Hercules rig?
A: (COO, Tim Shirley) This year is particularly busy for dry dockings, with up to 17 vessels scheduled, which is more than usual. The majority of these costs will be incurred in Q1 and Q2, tapering off in Q3 and Q4. Regarding the Hercules rig, it remains warm stacked in Norway, incurring costs of around $80,000 per day. We are exploring new contract opportunities but cannot provide specific guidance on timing. (CEO, Uliakaka) The rig is being kept ready for quick deployment, with some upgrades being made to ensure market attractiveness despite current market volatility.
Q: How has the market environment affected SFL's asset acquisition opportunities and customer appetite for long-term charters?
A: (CEO, Uliakaka) The market was hesitant in April due to uncertainty around tariffs and port fees, slowing decision processes. However, discussions are picking up again. Our strategy focuses on long-term charters with strong industrial players, which are less dependent on short-term market fluctuations. We have decent capital available and strong relationships with funding institutions, allowing us to pursue new projects as opportunities arise.
Q: Could you elaborate on the upgrades being conducted on the Hercules rig and their costs?
A: (CEO, Uliakaka) We are currently upgrading the flooring in the living quarters and the drilling control system to state-of-the-art standards, with costs around $7 to $8 million. These upgrades ensure the rig remains attractive for future contracts. We are also replacing some electrical systems to enhance reliability, with additional costs expected later in the year.
Q: How do you view the long-term distribution potential and balance it with share repurchases?
A: (CEO, Uliakaka) The dividend is set based on long-term sustainable cash flow from our assets. While the Hercules rig's prolonged layup could impact cash flow, our capital allocation strategy includes investments, debt management, share buybacks, and dividends to maximize long-term distribution per share. Recent share repurchases were made at attractive levels, complementing our dividend strategy.
Q: Are container vessels still the preferred segment for building the contract backlog?
A: (CEO, Uliakaka) We maintain a diversified approach, considering various segments like container ships, car carriers, tankers, and gas carriers. Our focus is on high-end assets with strong counterparties. Container ships have been a significant part of our portfolio due to their operational performance and financing structures, but we continue to explore opportunities across different segments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
