Core Viewpoint - The previous update on SFL Corporation Ltd. highlighted the durability of its high yield due to a long-dated backlog that provides cash insulation [1]. Company Summary - SFL Corporation Ltd. is noted for its strong yield, which is supported by a substantial backlog that helps secure cash flow [1]. Industry Insights - The article reflects a positive outlook on the future of Bitcoin, indicating a belief in its potential growth and investment opportunities [1].

Core Viewpoint - SFL Corp. has reduced its quarterly dividend by 26% to $0.20 per share due to the ongoing unemployment of the Hercules vessel and decreased revenues following asset disposition [1]. Group 1: Dividend Cut - The quarterly dividend has been cut from a previous amount to $0.20 per share, representing a 26% reduction [1]. - The decision to cut the dividend is attributed to the continued unemployment of the Hercules vessel [1]. - Reduced revenues following the disposition of assets have also influenced the company's decision to lower the dividend [1].

[SEC Filing Information](index=1&type=section&id=SEC%20Filing%20Information) Details the filing of Form 6-K by SFL Corporation Ltd. for August 2025, including official signatures [Form 6-K Details](index=1&type=section&id=1.1%20Form%206-K%20Details) SFL Corporation Ltd. filed Form 6-K for August 2025 as a foreign private issuer - **SFL Corporation Ltd.** filed Form 6-K for August 2025, reporting as a foreign private issuer[1](index=1&type=chunk)[2](index=2&type=chunk) [Signatures](index=3&type=section&id=1.2%20Signatures) Official signatures authorize the Form 6-K report on behalf of SFL Corporation Ltd - The report was signed by **Ole B. Hjertaker**, Principal Executive Officer of SFL Management AS, on August 19, 2025[8](index=8&type=chunk)[9](index=9&type=chunk)[10](index=10&type=chunk) [Preliminary Q2 2025 Earnings Overview](index=5&type=section&id=Preliminary%20Q2%202025%20Earnings%20Overview) SFL announced preliminary Q2 2025 results, a $0.20 dividend, and strategic fleet management, despite rig challenges [Announcement and Highlights](index=5&type=section&id=2.1%20Announcement%20and%20Highlights) SFL announced preliminary Q2 2025 results, a $0.20 dividend, strengthened charter backlog, and asset sales - SFL announced preliminary Q2 2025 results and a quarterly cash dividend of **$0.20 per share**[14](index=14&type=chunk) - The company strengthened its charter backlog with strong counterparties and deployed high-quality assets, including cargo-handling and fuel-efficiency upgrades[16](index=16&type=chunk) - Continuous fleet renewal involved selling and redelivering older dry bulk and container vessels, generating over **$200 million**[19](index=19&type=chunk) | Metric | Q2 2025 | | :----- | :------ | | Net income | $1.5 million | | EPS | $0.01 | | Charter hire received | $194 million | | Adjusted EBITDA (consolidated) | $104 million | | Adjusted EBITDA (associated companies) | $8 million | [CEO Commentary](index=6&type=section&id=2.2%20CEO%20Commentary) CEO discussed strategic steps to strengthen charter backlog, improve fleet efficiency, and dividend adjustment from asset sales and reduced cash flow - Decisive steps taken to strengthen charter backlog, including investments in cargo-handling and fuel-efficiency upgrades and divesting older, less efficient vessels[16](index=16&type=chunk) - The market for the **Hercules drilling rig** remains challenging, impacting near-term financial results, but the company remains optimistic about new employment[17](index=17&type=chunk) - Asset sales increased available capital but reduced near-term cash flow, leading to a dividend adjustment to **$0.20 per share**[17](index=17&type=chunk) - SFL has distributed **$2.9 billion** to shareholders through 86 consecutive quarterly cash dividends since 2004, demonstrating ability to renew and diversify its portfolio[18](index=18&type=chunk) [Financial Performance Summary](index=8&type=section&id=Financial%20Performance%20Summary) SFL reported Q2 2025 financial results, including a $0.20 dividend, GAAP figures, and segmented performance [Quarterly Dividend Declaration](index=8&type=section&id=3.1%20Quarterly%20Dividend%20Declaration) The Board of Directors declared a quarterly cash dividend of $0.20 per share for Q2 2025, payable around September 29, 2025 | Dividend Metric | Value | | :-------------- | :---- | | Quarterly Cash Dividend | $0.20 per share | | Payment Date | On or around September 29, 2025 | | Record Date (NYSE) | September 12, 2025 | | Ex-dividend Date (NYSE) | September 12, 2025 | [Q2 2025 Consolidated Financial Results (U.S. GAAP)](index=8&type=section&id=3.2%20Q2%202025%20Consolidated%20Financial%20Results%20(U.S.%20GAAP)) SFL reported Q2 2025 GAAP operating revenues of $192.6 million and net income of $1.5 million, impacted by non-recurring items - Total U.S. GAAP operating revenues were approximately **$192.6 million** in Q2 2025, which is lower than cash received due to accounting classifications[22](index=22&type=chunk) - Net income was impacted by non-recurring items such as a **$4.2 million** net gain on vessel sales, negative mark-to-market effects from hedging derivatives (**$2.4 million**), and equity investments (**$1.0 million**)[23](index=23&type=chunk) - Scheduled drydocking activity in the quarter temporarily reduced revenues and increased expenses, with lower activity expected in future quarters[24](index=24&type=chunk) | Income Statement Item | Q2 2025 (in thousands of $) | Q1 2025 (in thousands of $) | Full Year 2024 (audited, in thousands of $) | | :-------------------- | :-------------------------- | :-------------------------- | :---------------------------------------- | | Total operating revenues | 192,588 | 186,739 | 904,404 | | Gain on sale of vessels | 4,242 | — | 5,374 | | Total operating expenses | (151,347) | (176,077) | (603,061) | | Operating income | 45,483 | 10,662 | 306,717 | | Net income/(loss) | 1,460 | (31,871) | 130,653 | | Basic earnings/(loss) per share ($) | 0.01 | (0.24) | 1.01 | [Segmented Financial Performance](index=19&type=section&id=3.3%20Segmented%20Financial%20Performance) SFL's Q2 2025 financial results are segmented into Shipping and Energy, with Shipping contributing positively and Energy reporting a loss | Income Statement Item (in thousands of $) | Shipping | Energy | Total | | :-------------------------------------- | :------- | :----- | :---- | | Total operating revenues | 166,644 | 25,944 | 192,588 | | Gain on sale of vessels | 4,242 | — | 4,242 | | Total operating expenses | (117,451) | (33,896) | (151,347) | | Operating income/(loss) | 53,435 | (7,952) | 45,483 | | Net income/(loss) | 14,919 | (13,459) | 1,460 | [Shipping Segment Performance](index=19&type=section&id=3.3.1%20Shipping%20Segment%20Performance) The Shipping segment reported total operating revenues of $166.6 million and net income of $14.9 million for Q2 2025 | Shipping Segment (in thousands of $) | Q2 2025 | | :--------------------------------- | :------ | | Total operating revenues | 166,644 | | Operating income | 53,435 | | Net income | 14,919 | [Energy Segment Performance](index=19&type=section&id=3.3.2%20Energy%20Segment%20Performance) The Energy segment generated $25.9 million in operating revenues but incurred an operating loss of $7.9 million and net loss of $13.5 million | Energy Segment (in thousands of $) | Q2 2025 | | :------------------------------- | :------ | | Total operating revenues | 25,944 | | Operating loss | (7,952) | | Net loss | (13,459) | [Adjusted EBITDA Reconciliation](index=20&type=section&id=3.4%20Adjusted%20EBITDA%20Reconciliation) SFL reported a consolidated Adjusted EBITDA of $104.1 million for Q2 2025, including contributions from associates - Adjusted EBITDA is a non-U.S. GAAP measure representing cash receipts from operating activities before net interest and capital payments[53](index=53&type=chunk)[71](index=71&type=chunk) | Adjusted EBITDA (in thousands of $) | Shipping | Energy | Total | 49.9% owned associates | | :-------------------------------- | :------- | :----- | :---- | :--------------------- | | Net cash provided by operating activities | 68,707 | 1,429 | 70,136 | 4,539 | | Adjusted EBITDA | 97,490 | 6,560 | 104,050 | 7,769 | [Business Operations and Fleet Update](index=8&type=section&id=Business%20Operations%20and%20Fleet%20Update) SFL's Q2 2025 charter backlog, diversified fleet details, and operational updates across segments [Charter Backlog and Fleet Overview](index=8&type=section&id=4.1%20Charter%20Backlog%20and%20Fleet%20Overview) SFL's fixed rate charter backlog was $4.2 billion as of June 30, 2025, with a weighted remaining term of 6.7 years | Metric | Value | | :----- | :---- | | Fixed Rate Charter Backlog (as of June 30, 2025) | ~$4.2 billion | | Weighted Remaining Charter Term | 6.7 years | | Number of Vessels/Newbuildings | 60 | | Backlog from Investment Grade Customers | ~66% | - Some charters include purchase options that may reduce backlog but increase capital, and profit-sharing features that may improve operating results[26](index=26&type=

Financial Data and Key Metrics Changes - The company reported revenues of $194 million for the quarter, with an EBITDA equivalent cash flow of $112 million [5][24] - The EBITDA equivalent over the last twelve months was $526 million [5] - The net profit for the second quarter was approximately SEK 1.5 million or $0.01 per share, compared to a net loss of approximately SEK 32 million or $0.02 per share in the previous quarter [26] Business Line Data and Key Metrics Changes - The container vessel segment generated approximately $2 million in revenue, while the car carrier fleet generated approximately NOK 26 million, slightly up from the last quarter [21][22] - The tanker fleet's gross charter hire decreased to approximately NOK 41 million from NOK 45 million in the previous quarter due to scheduled dry dockings [22] - The overall utilization across the shipping fleet was 98.1%, with an adjusted utilization of 99.9% [15] Market Data and Key Metrics Changes - The charter backlog currently stands at $4.2 billion, with two-thirds of this backlog from customers with investment-grade ratings [10][29] - The company has a diversified fleet consisting of 60 maritime assets, including 30 containerships, 16 large tankers, and two drilling rigs [12] Company Strategy and Development Direction - The company is focused on strengthening its charter backlog by securing agreements with strong counterparties and investing in cargo handling and fuel efficiency upgrades [6][10] - The company has divested older, less efficient vessels and is committed to fleet renewal and new technology, with 11 vessels now capable of operating on LNG fuel [7][12] - The company aims to enhance its fleet to position itself for organic growth and comply with strict regulatory demands aimed at reducing shipping emissions [13][14] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about finding new employment for the idle drilling rig Hercules, despite current market volatility and oil price fluctuations [8][9] - The decision to adjust the dividend to $0.20 per share was made to ensure that distributions are not subsidized by idle assets, particularly the Hercules rig [10][36] - The company has a strong liquidity position, including undrawn credit lines and unencumbered vessels, which will enable continued investment in new assets [11][27] Other Important Information - The company has returned nearly $2.9 billion to shareholders over 86 consecutive quarters [10] - The average age of the vessels sold was about 18 years, reducing the fleet average by about two years [12] Q&A Session Summary Question: What’s the status with the lawsuit with Seadrill? - The company is involved in two lawsuits, with the larger one regarding the redelivery of the Hercules scheduled for 2026, and a guarantee for an adjustment amounting to approximately $45 million to $50 million has been received from Seadrill [30] Question: Can you walk us through your thought process on the decision to lower the dividend? - Management acknowledged disappointment regarding the dividend adjustment, attributing it to the idle status of the Hercules rig and the need to ensure that distributions are not subsidized by non-operational assets [34][36] Question: What are the expected costs for dry docking in the second half of the year? - Management expects dry docking costs to be significantly lower in Q3 and Q4 compared to Q2, with estimates around $3 million to $3.5 million for Q3 and $1 million to $2 million for Q4 [42][44] Question: How is the company viewing opportunities for potential acquisitions? - The company continues to look for acquisition opportunities, although the market has been slower due to general uncertainty. They have significant investment capacity following recent divestitures [46][47] Question: What should be expected for the organic EBITDA contribution from the energy side? - The energy segment is expected to have a negative drag going forward, but the shipping fleet is generating solid contributions and cash flow [50][54]

Financial Highlights - The company announced a dividend of $0.20 per share[5, 26], marking the 86th consecutive quarterly dividend[5] - The company reported a net income of $1 million, with earnings per share of $0.01[5] - The company's adjusted EBITDA was $112 million[5, 16] - The company's gross revenue reached $194 million[5, 16], which includes charter hire from all vessels and rigs[6] Contracted Revenue and Backlog - The company's fixed revenue backlog stands at $4.2 billion[5, 8, 26], with over two-thirds contracted to investment grade counterparties[5, 8] - The company extended three container vessels with Maersk for five years, adding approximately $225 million to the fixed backlog[5] - 71% of the company's contracted revenue is from container vessels[8] Operational Performance - The company's fleet utilization remains strong, with container vessels, car carriers, tanker vessels, and dry bulk vessels all reporting utilization rates at or near 100%[13] - The company's cash and cash equivalents at quarter end was $156 million[24, 26] Portfolio Composition - The company's portfolio includes 30 container vessels, 18 tanker vessels, 7 car carriers, 3 dry bulk vessels, and 2 energy assets[8] - The company's contracted revenue is diversified across various sectors, with container vessels accounting for 71%, tanker vessels for 11%, car carriers for 11%, and energy for 7%[8] Client Base - The company has a strong portfolio of industry-leading clients, including a world-leading chemical logistics company (29% of contracted revenue), a publicly listed investment grade shipping company (21% of contracted revenue), and other major players in the container shipping, energy, and automotive industries[11]

Core Insights - The company is set to present its preliminary second quarter results on August 19, 2025 [1] Group 1 - The presentation of the second quarter results is enclosed in the provided link [1] - The attachment includes the detailed results presentation for the second quarter of 2025 [2]

Core Viewpoint - SFL Corporation Ltd. announced preliminary financial results for Q2 2025, reporting a net income of $1.5 million and a quarterly cash dividend of $0.20 per share, reflecting ongoing efforts to strengthen its charter backlog and improve operational efficiency [1][4][5]. Financial Performance - The company reported a net income of $1.5 million, equating to $0.01 per share for the second quarter [7]. - Charter hire received in the quarter totaled $194 million, with approximately 87% from shipping and 13% from energy [7]. - Adjusted EBITDA from consolidated subsidiaries was $104 million, with $97 million from shipping and $7 million from energy, plus an additional $8 million from associated vessel owning companies [7]. Strategic Actions - SFL has taken decisive steps to enhance its charter backlog by securing agreements with strong counterparties and investing in cargo-handling and fuel-efficiency upgrades [3]. - The company has divested older, less efficient vessels, which has improved the operational and fuel consumption efficiency of its fleet [3]. - A five-year time charter extension for three 9,500 TEU container vessels with Maersk is expected to add approximately $225 million to the backlog from 2026 through 2031 [7]. Dividend Information - The Board of Directors declared a quarterly cash dividend of $0.20 per share, to be paid on or around September 29, 2025, with a record date of September 12, 2025 [5][6]. - Since its inception in 2004, SFL has distributed a total of $2.9 billion to shareholders through 86 consecutive quarterly cash dividends [5]. Market Conditions - The market for the legacy drilling rig Hercules remains challenging due to recent market uncertainty and oil price volatility, which has delayed new employment opportunities [4]. - The company is optimistic about finding new employment for the rig while exploring strategic opportunities [4].

Group 1 - SFL Corporation Ltd. plans to release its preliminary financial results for Q2 2025 on August 19, 2025 [1] - A conference call and webcast will be held on the same day at 10:00 AM (EST) / 4:00 PM (CET) for stakeholders [1] - Relevant materials will be available on the Company's Investor Relations section of its website on the same day [1] Group 2 - SFL has maintained a unique track record in the maritime industry, paying dividends every quarter since its NYSE listing in 2004 [3] - The Company's fleet includes tanker vessels, bulkers, container vessels, car carriers, and offshore drilling rigs [3] - SFL's long-term distribution capacity is supported by a portfolio of long-term charters and significant growth in its asset base over time [3]

[Unaudited Condensed Consolidated Statements of Operations](index=4&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations) The company reported a net loss in Q1 2025, a significant decline from net income in Q1 2024, primarily due to a vessel impairment charge Unaudited Condensed Consolidated Statements of Operations (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------- | :-------------------------------- | :-------------------------------- | | Total operating revenues | 186,739 | 229,064 | | Operating income | 10,662 | 85,474 | | Net (loss)/income | (31,871) | 45,302 | | Basic (loss)/earnings per share | (0.24) | 0.36 | | Diluted (loss)/earnings per share | (0.24) | 0.36 | - The company reported a significant vessel impairment charge of **$34,093k** in Q1 2025, compared to none in Q1 2024[9](index=9&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss)](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income%2F%28Loss%29) The company reported a comprehensive loss in Q1 2025, a reversal from comprehensive income in Q1 2024, influenced by fair value adjustments Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss)/income | (31,871) | 45,302 | | Fair value adjustments to hedging financial instruments | (4,401) | (1,768) | | Other comprehensive income/(loss) | 149 | (21) | | Other comprehensive loss, net of tax | (4,252) | (1,789) | | Comprehensive (loss)/income | (36,123) | 43,513 | [Unaudited Condensed Consolidated Balance Sheets](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets) Total assets and stockholders' equity decreased as of March 31, 2025, while cash and cash equivalents increased Unaudited Condensed Consolidated Balance Sheets (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Total assets | 4,032,048 | 4,107,769 | | Cash and cash equivalents | 173,945 | 134,551 | | Vessels, rigs and equipment, net | 3,463,645 | 3,552,298 | | Total liabilities | 2,979,659 | 2,979,347 | | Stockholders' equity | 1,052,389 | 1,128,422 | [Unaudited Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Operating cash flow increased, while investing cash outflow decreased, and financing activities shifted to a net cash outflow Unaudited Condensed Consolidated Statements of Cash Flows (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss)/income | (31,871) | 45,302 | | Net cash provided by operating activities | 78,608 | 63,005 | | Net cash used in investing activities | (20,089) | (80,356) | | Net cash provided by/(used in) financing activities | (19,125) | 20,012 | | Net change in cash and cash equivalents | 39,394 | 2,661 | | Cash and cash equivalents at end of the period | 173,945 | 168,153 | [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity) Stockholders' equity decreased in Q1 2025, reflecting a net loss, share repurchases, and dividend declarations Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Number of shares outstanding (at end of period) | 145,236,426 | 137,673,524 | | Shares repurchased | (494,158) | — | | Dividends declared | (36,167) | (32,978) | | Net (loss)/income | (31,871) | 45,302 | | Total stockholders' equity | 1,052,389 | 1,050,357 | [Notes to the Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20the%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the company's financial position, performance, and cash flows, including accounting policies and significant events [1. Interim Financial Information](index=9&type=section&id=1.%20INTERIM%20FINANCIAL%20INFORMATION) The interim financial statements are prepared in accordance with U.S. GAAP, consistent with the annual audited statements, and include all necessary adjustments. Management's estimates are based on current market conditions, acknowledging potential volatility. The company operates as a single reportable segment - The condensed consolidated financial statements are prepared in accordance with U.S. GAAP[25](index=25&type=chunk) - Management believes accounting estimates and assumptions are appropriate despite market volatility from U.S. and international trade policies, sanctions, or hostilities[30](index=30&type=chunk) - The Company operates within a single reportable segment, as management does not evaluate performance by geographical region or asset type[31](index=31&type=chunk) [Recently Issued Accounting Standards](index=9&type=section&id=Recently%20Issued%20Accounting%20Standards) New accounting standards, including ASU 2024-03, require disaggregated expense disclosures and are currently being evaluated for their impact - ASU 2024-03 requires disaggregated income statement expense disclosures for public business entities, effective for annual reporting periods beginning after December 15, 2026[28](index=28&type=chunk) - The Company is currently evaluating the impacts that ASU 2024-03 and ASU 2025-01 will have on its financial statements' presentation and disclosures[28](index=28&type=chunk) [Recently Adopted Accounting Standards](index=9&type=section&id=Recently%20Adopted%20Accounting%20Standards) The company adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective January 1, 2025, with no material impact - The Company adopted ASU 2023-09, 'Improvements to Income Tax Disclosures,' effective January 1, 2025, which did not have a material impact on its financial statements[29](index=29&type=chunk) [2. Loss on Sale of Vessels](index=10&type=section&id=2.%20LOSS%20ON%20SALE%20OF%20VESSELS) The Company reported no loss on sale of vessels in Q1 2025, compared to a $17,000 loss in Q1 2024 from the disposal of two sales-type lease vessels Loss on Sale of Vessels (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Proceeds from disposal of sales-type leases | — | 11,983 | | Gain/(Loss) on disposal | — | (17) | [3. Earnings/(Loss) Per Share](index=10&type=section&id=3.%20EARNINGS%2F%28LOSS%29%20PER%20SHARE) Basic and diluted loss per share for Q1 2025 was $(0.24), a decrease from earnings per share of $0.36 in Q1 2024, reflecting the net loss available to stockholders. The weighted average number of common shares outstanding increased Earnings/(Loss) Per Share (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss)/income available to stockholders | (31,871) | 45,302 | | Basic (loss)/earnings per share | (0.24) | 0.36 | | Diluted (loss)/earnings per share | (0.24) | 0.36 | Weighted Average Shares Outstanding (in thousands): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Basic weighted average number of common shares outstanding | 133,925 | 125,763 | | Diluted weighted average number of common shares outstanding assuming dilution | 134,380 | 126,346 | [4. Other Financial Items](index=11&type=section&id=4.%20OTHER%20FINANCIAL%20ITEMS) Total other financial items, net, resulted in a gain of $2.180 million in Q1 2025, a significant improvement from a loss of $0.714 million in Q1 2024, primarily driven by a net gain from foreign currency translations Other Financial Items, Net (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Change in allowance for expected credit losses | 192 | (59) | | Dividend income | 153 | 189 | | Loss on repurchase of bonds | (147) | — | | Other items | 1,982 | (844) | | Total other financial items, net | 2,180 | (714) | - Other items in Q1 2025 include a net gain of **$2.4 million** arising from foreign currency translations, compared to a loss of **$0.5 million** in Q1 2024[38](index=38&type=chunk) [5. Investments in Equity Securities](index=12&type=section&id=5.%20INVESTMENTS%20IN%20EQUITY%20SECURITIES) The Company's equity securities consist of approximately 1.3 million shares in NorAm Drilling Company AS. A mark-to-market loss of $0.4 million was recognized in Q1 2025, consistent with Q1 2024, alongside a foreign exchange gain - Equity securities comprise approximately **1.3 million shares** in NorAm Drilling Company AS[39](index=39&type=chunk) - A mark-to-market loss of **$0.4 million** was recognized in Q1 2025 (Q1 2024: loss of **$0.4 million**)[39](index=39&type=chunk) - A foreign exchange gain of **$0.3 million** was recognized in Q1 2025 (Q1 2024: loss of **$0.3 million**)[39](index=39&type=chunk) [6. Vessels, Rigs and Equipment, Net](index=12&type=section&id=6.%20VESSELS%2C%20RIGS%20AND%20EQUIPMENT%2C%20NET) The net value of vessels, rigs, and equipment decreased to $3.464 billion as of March 31, 2025, from $3.552 billion as of December 31, 2024. This was primarily due to a $34.1 million vessel impairment charge, including $6.8 million for a Supramax dry bulk carrier classified as held for sale and $27.3 million for six other dry bulk carriers Vessels, Rigs and Equipment, Net (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Cost | 4,389,942 | 4,527,621 | | Accumulated depreciation | (926,297) | (975,323) | | Vessels, rigs and equipment, net | 3,463,645 | 3,552,298 | - Recognized capital upgrades of **$22.7 million** in Q1 2025 for nine container vessels and one Suezmax tanker[40](index=40&type=chunk) - Recognized an impairment loss of **$6.8 million** for the SFL Yukon dry bulk carrier, classified as held for sale[41](index=41&type=chunk) - Recorded an impairment loss of **$27.3 million** on six dry bulk carriers due to updated disposal expectations, future cash flows, and market conditions[42](index=42&type=chunk) [7. Capital Improvements in Progress and Newbuildings](index=12&type=section&id=7.%20CAPITAL%20IMPROVEMENTS%20IN%20PROGRESS%20AND%20NEWBUILDINGS) Total capital improvements in progress and newbuildings increased to $165.9 million as of March 31, 2025, from $162.3 million as of December 31, 2024. This includes advances for upgrades on rigs and container vessels, and installments for five newbuilding dual-fuel container vessels expected in 2028 Capital Improvements in Progress and Newbuildings (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Capital improvements in progress | 17,301 | 15,758 | | Newbuildings | 148,620 | 146,496 | | Total | 165,921 | 162,254 | - Capital improvements in progress include advances for upgrades on two rigs and five container vessels[43](index=43&type=chunk) - Paid **$148.6 million** in installments and capitalized interest for five newbuilding dual-fuel 16,800 TEU container vessels, expected delivery in 2028[44](index=44&type=chunk) [8. Investments in Sales-Type Leases](index=13&type=section&id=8.%20INVESTMENTS%20IN%20SALES-TYPE%20LEASES) As of March 31, 2025, the Company had seven container vessels accounted for as sales-type leases, all on long-term bareboat charters to MSC, with fixed-price purchase obligations at charter expiry. These vessels are expected to be redelivered to MSC by the end of Q2 2025 - As of March 31, 2025, the Company had **seven container vessels** accounted for as sales-type leases, all on long-term bareboat charters to MSC[45](index=45&type=chunk) - MSC has fixed price purchase obligations at the expiry of each charter[45](index=45&type=chunk) - The vessels are expected to be redelivered to MSC by the end of the second quarter of 2025[45](index=45&type=chunk) [9. Short-Term and Long-Term Debt](index=13&type=section&id=9.%20SHORT-TERM%20AND%20LONG-TERM%20DEBT) Total debt principal increased to $2.899 billion as of March 31, 2025, from $2.862 billion as of December 31, 2024. The Company issued new sustainability-linked bonds and repurchased some, while a significant portion of debt is due within one year, for which refinancing discussions are ongoing Short-term and Long-term Debt (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Total debt principal | 2,899,266 | 2,862,240 | | Short-term debt and current portion of long-term debt | 623,494 | 689,045 | | Long-term debt | 2,252,626 | 2,150,417 | Interest Rate Information: | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Weighted average interest rate on floating rate debt | 5.89 % | 5.96 % | | Weighted average interest rate on lease debt financing | 5.11 % | 5.06 % | | Weighted average interest rate on fixed rate debt | 8.28 % | 8.40 % | - A significant portion of the Company's outstanding debt will be due within one year, and discussions for refinancing have been initiated[46](index=46&type=chunk) [Fixed Rate Debt and NOK Bonds](index=14&type=section&id=Fixed%20Rate%20Debt%20and%20NOK%20Bonds) The company issued new sustainability-linked bonds and repurchased some, adjusting its fixed-rate debt portfolio - In January 2025, the Company issued **$150.0 million** in **7.75%** senior unsecured sustainability-linked bonds due 2030[50](index=50&type=chunk) - The Company repurchased **$11.2 million** of the **7.75%** senior unsecured sustainability-linked bonds due 2030 in Q1 2025, with **$138.8 million** net outstanding[50](index=50&type=chunk) - The Company resold **$2.4 million** of **8.25%** senior unsecured sustainability-linked bonds due 2028, with **$147.6 million** net outstanding as of March 31, 2025[48](index=48&type=chunk) [U.S. dollar floating rate debt](index=15&type=section&id=U.S.%20dollar%20floating%20rate%20debt) Total U.S. dollar floating rate debt decreased, with an early repayment of a senior unsecured term loan facility U.S. dollar floating rate debt (in $'millions): | Facility | Balance outstanding as of March 31, 2025 | Balance outstanding as of December 31, 2024 | | :--------------------------------------- | :--------------------------------------- | :------------------------------------------ | | Total U.S. dollar floating rate debt | 1,438.6 | 1,503.9 | - The **$8.4 million** senior unsecured term loan facility was repaid early in Q1 2025[54](index=54&type=chunk) [Lease Debt Financing](index=16&type=section&id=Lease%20Debt%20Financing) Lease debt financing decreased from December 31, 2024, to March 31, 2025 Lease Debt Financing (in $'millions): | Metric | Balance outstanding as of March 31, 2025 | Balance outstanding as of December 31, 2024 | | :--------------------------------------- | :--------------------------------------- | :------------------------------------------ | | Total lease debt financing | 657.4 | 702.2 | - Lease debt financing decreased from **$702.2 million** to **$657.4 million**[57](index=57&type=chunk) [10. Financial Instruments](index=17&type=section&id=10.%20FINANCIAL%20INSTRUMENTS) The Company uses interest rate and cross-currency swap agreements to manage interest rate and foreign currency risks. As of March 31, 2025, the total net notional principal amount subject to interest rate swap agreements was $0.6 billion, and for cross-currency swaps, it was NOK750.0 million. Fair value movements on non-designated derivatives resulted in a loss of $1.809 million in Q1 2025 Fair Values of Derivative Instruments (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Total derivative instruments - long-term assets | 13,643 | 15,523 | | Total derivative instruments - long-term liabilities | 2,503 | 103 | Movements in Consolidated Statement of Operations (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net (loss)/gain in fair value movements of non-designated derivatives | (1,809) | 1,822 | | Total cash movement and valuation (loss)/gain on non-designated derivatives | (985) | 3,003 | - The total net notional principal amount subject to interest rate swap agreements was **$0.6 billion** as of March 31, 2025 (December 31, 2024: **$0.5 billion**)[60](index=60&type=chunk) - The total net notional principal amount subject to cross currency swap agreements was **NOK750.0 million** as of March 31, 2025 (December 31, 2024: **NOK1.4 billion**)[61](index=61&type=chunk) - There is a concentration of revenue risk with Maersk A/S, ConocoPhillips Skandinavia AS, and Hapag-Lloyd AG[69](index=69&type=chunk) [11. Share Capital, Additional Paid-In Capital and Contributed Surplus](index=20&type=section&id=11.%20SHARE%20CAPITAL%2C%20ADDITIONAL%20PAID-IN%20CAPITAL%20AND%20CONTRIBUTED%20SURPLUS) The Company repurchased 494,158 shares for $4.1 million under its Share Repurchase Program in Q1 2025, with $85.8 million remaining authorized. 22,060 new shares were issued from option exercises Share Capital (in thousands of $, except share data): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Issued and fully paid share capital (common shares) | 146,825,679 | 146,803,619 | | Share capital ($) | 1,468 | 1,468 | - During Q1 2025, the Company repurchased **494,158 shares** for **$4.1 million** under its Share Repurchase Program[71](index=71&type=chunk) - Approximately **$85.8 million** remains under the authorized Share Repurchase Program as of March 31, 2025[71](index=71&type=chunk) - **22,060 new shares** were issued in Q1 2025 following the exercise of **315,000 share options**[73](index=73&type=chunk) - Common shares outstanding were **145,236,426** as of March 31, 2025[73](index=73&type=chunk) - A dividend of **$0.27 per share** was declared on February 12, 2025, and paid on March 28, 2025[74](index=74&type=chunk) [12. Share Option Plan](index=20&type=section&id=12.%20SHARE%20OPTION%20PLAN) In Q1 2025, 315,000 share options were exercised, resulting in the issuance of 22,060 new shares. Additionally, 465,000 new options were awarded to officers, employees, and directors with a five-year term and three-year vesting period - **315,000 share options** were exercised in Q1 2025, leading to the issuance of **22,060 new shares**[75](index=75&type=chunk) - **465,000 options** were awarded in March 2025 to officers, employees, and directors, with a five-year term and three-year vesting period[76](index=76&type=chunk) - The initial strike price for the newly awarded options was **$8.39 per share**[76](index=76&type=chunk) [13. Related Party Transactions](index=22&type=section&id=13.%20RELATED%20PARTY%20TRANSACTIONS) The Company has various transactions with related parties, including loans to River Box Holding Inc. and leasing/service contracts. Golden Ocean ceased to be a related party on March 12, 2025, after Hemen sold its shares. Golden Ocean exercised purchase options on eight Capesize vessels for $112.0 million Amounts Due From and To Related Parties (in thousands of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Total amount due from related parties | 5,682 | 5,201 | | Total loans to related parties - associated companies, long-term | 45,000 | 45,000 | | Total amount due to related parties | 1,455 | 1,296 | - Golden Ocean Group Limited ceased to be a related party on March 12, 2025, after Hemen Holding Limited sold its shares[78](index=78&type=chunk) - Golden Ocean exercised purchase options on **eight Capesize vessels** for **$112.0 million**, with redelivery expected in Q3 2025[80](index=80&type=chunk) - The Company earned **$1.5 million** in rental revenue from leasing equipment to Northern Ocean in Q1 2025[81](index=81&type=chunk) - Received **$1.1 million** in interest income from a **$45.0 million** loan to River Box Holding Inc. in Q1 2025[83](index=83&type=chunk) [14. Commitments and Contingent Liabilities](index=23&type=section&id=14.%20COMMITMENTS%20AND%20CONTINGENT%20LIABILITIES) The Company has significant capital commitments, including $848.1 million for five newbuilding container vessels and $21.5 million for optimization upgrades on existing vessels. It is also involved in litigation, notably a favorable ruling in the Seadrill Hercules redelivery case for approximately $48 million, which Seadrill has appealed Assets Pledged (in millions of $): | Metric | March 31, 2025 | December 31, 2024 | | :--------------------------------------- | :------------- | :---------------- | | Book value of consolidated assets pledged under mortgages | 3,413 | 3,497 | - Capital commitments for five newbuilding dual-fuel 16,800 TEU container vessels total **$848.1 million**, with expected delivery in 2028[88](index=88&type=chunk) - Committed to pay **$21.5 million** for optimization upgrades on nine container vessels and two chemical tankers, with installations expected in 2025[89](index=89&type=chunk) - The Oslo District Court ruled in favor of SFL's subsidiary, ordering Seadrill to pay approximately **$48 million** in compensation for the Hercules rig redelivery breach, which Seadrill appealed[91](index=91&type=chunk) - The Company was fully acquitted and awarded legal costs in the Capital Spares Case, where Seadrill had sued SFL for approximately **$8.0 million**[92](index=92&type=chunk) [15. Subsequent Events](index=24&type=section&id=15.%20SUBSEQUENT%20EVENTS) Subsequent to March 31, 2025, the Company delivered the SFL Yukon dry bulk vessel to its new owner for $10.1 million and agreed to sell the SFL Sara for $11.2 million. A dividend of $0.27 per share was declared, payable in June 2025, and an additional 758,499 shares were repurchased for $5.9 million - In April 2025, the SFL Yukon dry bulk vessel was delivered to its new owner for **$10.1 million**[94](index=94&type=chunk) - In April 2025, the Company agreed to sell the SFL Sara dry bulk vessel for approximately **$11.2 million**, with expected delivery in Q2 2025[94](index=94&type=chunk) - On May 14, 2025, a dividend of **$0.27 per share** was declared, payable on or around June 27, 2025[95](index=95&type=chunk) - Subsequent to quarter end, an additional **758,499 shares** were repurchased for **$5.9 million**[96](index=96&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, liquidity, and capital resources for the reporting period [General](index=25&type=section&id=General) SFL Corporation Ltd. is a Bermuda-based company engaged in the ownership and operation of vessels and offshore assets, including charter, purchase, and sale. It operates globally through various subsidiaries and branches - SFL Corporation Ltd. is a Bermuda-based company primarily engaged in the ownership and operation of vessels and offshore related assets, and also involved in the charter, purchase and sale of assets[100](index=100&type=chunk) - The Company operates through subsidiaries and branches located in Bermuda, Canada, Cyprus, Liberia, Namibia, Norway, Singapore, the United Kingdom and the Marshall Islands[101](index=101&type=chunk) [Recent and Other Developments](index=25&type=section&id=Recent%20and%20Other%20Developments) The Company made capital investments in container vessels and a Suezmax tanker, agreed to sell several dry bulk and container vessels, and saw Golden Ocean exercise purchase options on eight Capesize dry bulk carriers. New charter contracts were secured, and new sustainability-linked bonds were issued. Share repurchases and option awards continued, and dividends were declared [Acquisitions, Deliveries, Capital Investments and Disposals](index=25&type=section&id=Acquisitions%2C%20Deliveries%2C%20Capital%20Investments%20and%20Disposals) The company made capital investments, agreed to sell several vessels, and saw purchase options exercised by Golden Ocean - Recorded **$22.7 million** for capital upgrades on nine container vessels and one Suezmax tanker in Q1 2025[102](index=102&type=chunk) - Agreed to sell the 1,700 TEU container vessel, Asian Ace, for approximately **$9.5 million**, expected delivery in Q2 2025[103](index=103&type=chunk) - Golden Ocean exercised purchase options on **eight Capesize dry bulk carriers** for **$112 million**, with redelivery expected in Q3 2025[103](index=103&type=chunk) - Agreed to sell the SFL Yukon dry bulk carrier for **$10.1 million**, recognizing a **$6.8 million** impairment loss[104](index=104&type=chunk) - Agreed to sell the SFL Sara dry bulk vessel for approximately **$11.2 million**, expected delivery in Q2 2025[106](index=106&type=chunk) [New Contracts, Extensions and Changes](index=26&type=section&id=New%20Contracts%2C%20Extensions%20and%20Changes) The company secured new five-year time charter contracts for container vessels and extended an existing charter option - Three 8,700 TEU container vessels (San Felipe, San Felix, San Fernando) commenced **five-year time charter contracts** with Maersk[107](index=107&type=chunk) - Maersk declared a further **12-month extension option** for the 9,500 TEU container vessel, Maersk Skarstind[108](index=108&type=chunk) [Corporate Debt and Lease Debt Financing](index=26&type=section&id=Corporate%20Debt%20and%20Lease%20Debt%20Financing) The company issued new sustainability-linked bonds to fund investments and for general corporate purposes - In January 2025, the Company issued **$150 million** senior unsecured, sustainability-linked bonds, maturing in 2030 with a **7.75% coupon**[109](index=109&type=chunk) - The net proceeds from the bond issuance are intended for new investments and general corporate purposes[109](index=109&type=chunk) [Issuance/repurchase of Shares, Share Options, Grants and Exercises](index=26&type=section&id=Issuance%2Frepurchase%20of%20Shares%2C%20Share%20Options%2C%20Grants%20and%20Exercises) The company issued new shares from option exercises, awarded new options, and continued its share repurchase program - In February 2025, **22,060 new shares** were issued in settlement of options exercised by employees, officers, and directors[110](index=110&type=chunk) - In March 2025, **465,000 options** were awarded to employees, officers, and directors, with a five-year term and three-year vesting period[111](index=111&type=chunk) - In March 2025, the Company repurchased **494,158 shares** for **$4.1 million** under its Share Repurchase Program[112](index=112&type=chunk) - Subsequent to quarter end, an additional **758,499 shares** were repurchased for **$5.9 million**[112](index=112&type=chunk) [Dividend](index=26&type=section&id=Dividend) The company declared and paid a dividend of $0.27 per share in Q1 2025, with another declared for Q2 2025 - On February 12, 2025, a dividend of **$0.27 per share** was declared and paid on March 28, 2025[113](index=113&type=chunk) - On May 14, 2025, a dividend of **$0.27 per share** was declared, payable on or around June 27, 2025[113](index=113&type=chunk) [Operating Results](index=26&type=section&id=Operating%20Results) The Company experienced a significant decline in operating income and a net loss in Q1 2025 compared to Q1 2024, primarily due to an 18.5% decrease in total operating revenues, largely driven by a 66% drop in drilling contract revenues and a $34.1 million vessel impairment charge. Time charter revenues increased due to new vessel acquisitions, while profit share revenues decreased [Total operating revenues](index=27&type=section&id=Total%20operating%20revenues) Total operating revenues significantly decreased in Q1 2025, primarily due to a substantial decline in drilling contract revenues Total Operating Revenues (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Total operating revenues | 186,739 | 229,064 | - Total operating revenues decreased by **18.5%** in Q1 2025 compared to Q1 2024[115](index=115&type=chunk) [Time charter revenues](index=27&type=section&id=Time%20charter%20revenues) Time charter revenues increased in Q1 2025, driven by the delivery of new chemical, product, and car carrier vessels Time Charter Revenues (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Time charter revenues | 156,497 | 150,902 | - Time charter revenues increased by **4%** in Q1 2025, mainly due to the delivery of one chemical tanker, three product tankers, and one newbuilding car carrier[117](index=117&type=chunk) [Voyage charter and pool revenues](index=27&type=section&id=Voyage%20charter%20and%20pool%20revenues) Voyage charter and pool revenues increased in Q1 2025, mainly due to the addition of the chemical tanker SFL Aruba Voyage Charter and Pool Revenues (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Voyage charter and pool revenues | 4,420 | 2,981 | - Voyage charter and pool revenues increased by **48%** in Q1 2025, mainly due to the addition of the chemical tanker SFL Aruba[118](index=118&type=chunk) [Drilling contract revenues](index=27&type=section&id=Drilling%20contract%20revenues) Drilling contract revenues significantly decreased in Q1 2025 as the Hercules drilling rig was warm stacked, awaiting new employment Drilling Contract Revenues (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Drilling contract revenues | 22,441 | 66,503 | - Drilling contract revenues decreased by **66%** in Q1 2025, mainly because the drilling rig Hercules was warm stacked in Norway, seeking employment opportunities[119](index=119&type=chunk) [Interest income - sales-type leases](index=27&type=section&id=Interest%20income%20-%20sales-type%20leases) Interest income from sales-type leases decreased due to the disposal of two container vessels in March 2024 Interest Income - Sales-Type Leases (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest income - sales-type leases | 471 | 840 | - Interest income decreased due to the disposal of two container vessels in March 2024[120](index=120&type=chunk) [Profit share revenues](index=27&type=section&id=Profit%20share%20revenues) Profit share revenues decreased in Q1 2025, with no profit share from Capesize dry bulk vessels and lower fuel saving arrangements Profit Sharing Income (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Profit sharing income | 1,466 | 5,540 | - Profit share revenue from Capesize dry bulk vessels decreased to **$0.0 million** in Q1 2025 (Q1 2024: **$2.2 million**)[121](index=121&type=chunk) - Recorded **$1.5 million** from fuel saving arrangements in Q1 2025 (Q1 2024: **$3.3 million**)[122](index=122&type=chunk) [Loss on sale of vessels](index=28&type=section&id=Loss%20on%20sale%20of%20vessels) The company reported no loss on sale of vessels in Q1 2025, contrasting with a minor loss from vessel disposals in Q1 2024 Loss on Sale of Vessels (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Loss on sale of vessels | — | (17) | - No vessels were sold during Q1 2025[123](index=123&type=chunk) - In Q1 2024, a net loss of **$17,000** was recorded from the disposal of two container vessels[123](index=123&type=chunk) [Operating expenses](index=28&type=section&id=Operating%20expenses) Total operating expenses increased in Q1 2025, primarily due to a significant vessel impairment charge, despite lower rig operating expenses Operating Expenses (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Vessel and rig operating expenses | 75,797 | 81,234 | | Depreciation | 60,911 | 56,878 | | Vessel impairment charge | 34,093 | — | | Administrative expenses | 5,276 | 5,461 | | Total operating expenses | 176,077 | 143,573 | - Vessel and rig operating expenses decreased by **$5.4 million**, mainly due to the drilling rig Hercules being warm stacked[124](index=124&type=chunk) - Depreciation increased by **$4.0 million** due to new vessel acquisitions and capitalized SPS costs/upgrades[125](index=125&type=chunk) - A vessel impairment loss of **$34.1 million** was recorded in Q1 2025[126](index=126&type=chunk) [Interest income](index=28&type=section&id=Interest%20income) Total interest income slightly increased in Q1 2025, mainly due to higher interest earned on bank and short-term deposits Interest Income (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest income | 3,006 | 2,838 | - Total interest income increased by **$0.2 million**, mainly due to higher interest received on bank and short-term deposits[128](index=128&type=chunk) [Interest expense](index=29&type=section&id=Interest%20expense) Interest expense increased in Q1 2025, driven by new loans, lease debt financing for recent vessel acquisitions, and higher floating interest rates Interest Expense (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Interest expense | (46,207) | (42,879) | - Interest expense increased due to new loans and lease debt financing for vessels purchased in 2023 and 2024, and increased interest rates on floating rate debt[129](index=129&type=chunk) [Other non-operating items](index=29&type=section&id=Other%20non-operating%20items) Other non-operating items shifted to a net gain in Q1 2025, influenced by foreign exchange fluctuations and derivative valuations Other Non-Operating Items (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Loss on investments in equity securities | (360) | (415) | | Interest and valuation (loss)/gain on non-designated derivatives | (985) | 3,003 | | Other financial items, net | 2,180 | (714) | | Total other non-operating items | 835 | 1,874 | - The movement in other non-operating items was mainly affected by a loss on valuation of non-designated derivatives, repurchase of bonds, and more favorable foreign exchange fluctuations[130](index=130&type=chunk) [Equity in earnings of associated companies](index=29&type=section&id=Equity%20in%20earnings%20of%20associated%20companies) Equity in earnings of associated companies decreased, primarily due to the company's ownership in River Box Holding Inc Equity in Earnings of Associated Companies (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Equity in earnings of associated companies | 625 | 778 | - The decrease in equity in earnings of associated companies is primarily from the Company's **49.9% ownership** in River Box Holding Inc[131](index=131&type=chunk) [Tax expense](index=29&type=section&id=Tax%20expense) Tax expense decreased in Q1 2025, mainly due to the operational location change of the drilling rig Tax Expense (in thousands of $): | Metric | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Tax expense | (792) | (2,783) | - Tax expense decreased mainly due to the operations of the drilling rig Linus in Norway in Q1 2025, compared to the Hercules rig in Namibia in Q1 2024[132](index=132&type=chunk) [Liquidity and Capital Resources](index=29&type=section&id=Liquidity%20and%20Capital%20Resources) As of March 31, 2025, the Company had $173.9 million in cash. Cash from operations increased, while cash used in investing activities decreased significantly due to lower spending on acquisitions. Financing activities shifted to a net cash outflow, driven by increased debt repayments and share/bond repurchases. The Company is actively pursuing refinancing for significant debt maturities due within one year - As of March 31, 2025, the Company had total cash and cash equivalents of **$173.9 million**[133](index=133&type=chunk) - Net cash provided by operating activities increased to **$78.6 million** in Q1 2025 from **$63.0 million** in Q1 2024[134](index=134&type=chunk) - Investing activities used **$20.1 million** in Q1 2025, a decrease from **$80.4 million** in Q1 2024, primarily due to lower spending on vessel acquisitions and newbuilding installments[135](index=135&type=chunk) - Net cash used in financing activities was **$19.1 million** in Q1 2025, a reversal from a net cash provided of **$20.0 million** in Q1 2024, driven by increased debt repayments and repurchases of bonds and shares[136](index=136&type=chunk) - A significant portion of outstanding debt is due within one year, and the Company has initiated discussions for refinancing, believing it can secure the necessary financing[138](index=138&type=chunk) Overall Summary of Borrowings (in millions of $): | Metric | As of March 31, 2025 | | :--------------------------------------- | :------------------- | | Total bonds | 656.2 | | Lease debt financing | 657.4 | | U.S. dollar denominated floating rate debt | 1,438.6 | | U.S. dollar denominated fixed rate debt due 2026 | 147.0 | | Total borrowings | 2,899.2 | | Finance lease liabilities in associated companies | 180.1 | | Total borrowings and lease liabilities | 3,079.3 | - As of March 31, 2025, the Company was in compliance with all covenants under its long-term debt facilities[141](index=141&type=chunk) [Cautionary Statement Regarding Forward-Looking Statements](index=31&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section highlights the inherent uncertainties and significant risks that could cause actual results to differ materially from forward-looking projections - Forward-looking statements are subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond the Company's control[144](index=144&type=chunk) - Important factors that could cause actual results to differ materially include world economies, inflationary pressures, financing availability, market conditions in the seaborne transportation industry, oil and gas price volatility, and regulatory changes[145](index=145&type=chunk) - Other risks include cybersecurity threats, ESG practices, trade restrictions, international hostilities (e.g., Russia-Ukraine war, Middle East conflicts, Houthi attacks), and potential liability from litigation[146](index=146&type=chunk)[148](index=148&type=chunk) - The Company undertakes no obligation to publicly update or revise any forward-looking statement[147](index=147&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report was formally signed by the Principal Financial Officer, Aksel C. Olesen, on May 15, 2025 - The report was signed by Aksel C. Olesen, Principal Financial Officer, on May 15, 2025[152](index=152&type=chunk)

Financial Data and Key Metrics Changes - The company reported revenues of $193 million for the quarter, with an EBITDA equivalent cash flow of $116 million. The EBITDA equivalent over the last twelve months was $545 million [4] - A net loss of $32 million was recorded for the quarter, translating to $0.24 per share, compared to a net profit of approximately $20.2 million or $0.15 per share in the previous quarter [4][23] - The company has returned over $2.8 billion to shareholders through dividends over 85 consecutive quarters, with the latest dividend yielding approximately 13% based on the share price [4][25] Business Line Data and Key Metrics Changes - The container fleet generated approximately $85 million in gross charter hire, while the car carrier fleet contributed about $25 million, and the tanker fleet generated approximately $43 million [19] - The seven dry bulk vessels employed in the spot market contributed approximately $4.4 million in net charter revenue, down from $7.2 million in the previous quarter [19] - The overall utilization of the shipping fleet was 98.6%, with adjusted utilization at 99.8% when excluding unscheduled technical off-hire [12][13] Market Data and Key Metrics Changes - The charter backlog stands at $4.2 billion, with more than two-thirds of this backlog attributed to customers with investment-grade ratings, providing cash flow visibility [8][25] - The company has identified that approximately 27 vessels in its fleet will be affected by new U.S. tariffs on Chinese-built vessels, primarily impacting car carriers and tankers [14][15][86] Company Strategy and Development Direction - The company aims to enhance its fleet through investments in new technology and vessel upgrades, focusing on organic growth and compliance with stricter regulatory demands [11] - The strategy includes maintaining long-term charters with strong industrial players, which provides stability amid market volatility [42] - The company is exploring strategic opportunities for its rigs while remaining optimistic about future employment for the Hercules rig [7][8] Management's Comments on Operating Environment and Future Outlook - Management noted that recent market volatility and recession fears have made it challenging to trade vessels profitably in the spot market [5][7] - The company remains cautious about the current economic environment but is optimistic about finding new employment opportunities for its rigs [7][33] - Discussions with customers have resumed, indicating a potential increase in business transactions as market stability improves [42] Other Important Information - The company has been active in share repurchases, acquiring $10 million worth of shares below $8 per share [5][25] - The company has a strong liquidity position, with approximately $174 million in cash and cash equivalents and undrawn credit lines of about $48 million [23][25] Q&A Session Summary Question: Inquiry about vessel and rig operating expenses - Management confirmed a decrease in operating expenses, attributing it to cost savings at Hercules and noted that 17 vessels are scheduled for dry docking this year, which is higher than usual [27][28] Question: Update on Hercules rig - The Hercules rig remains warm stacked in Norway, with ongoing discussions for new contracts, but no specific timeline can be provided [32][33] Question: Asset acquisition opportunities - Management indicated that market uncertainty has slowed decision-making processes, but discussions for long-term charters with strong industrial players are picking up again [42] Question: Long-term distribution potential and share repurchases - The company maintains a sustainable dividend level based on cash flow from owned assets, balancing capital allocation between investments, debt repayments, share buybacks, and dividends [64][65] Question: Impact of new U.S. tariffs on vessels - Approximately 27 vessels will be affected by the new tariffs, primarily impacting car carriers and tankers, but the company expects charterers to absorb these costs [14][15][86]