SFL .(SFL) - 2025 Q1 - Quarterly Report

Unaudited Condensed Consolidated Statements of Operations 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] Unaudited Condensed Consolidated Statements of Comprehensive Income/(Loss) 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 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 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 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 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 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] - Management believes accounting estimates and assumptions are appropriate despite market volatility from U.S. and international trade policies, sanctions, or hostilities[30] - The Company operates within a single reportable segment, as management does not evaluate performance by geographical region or asset type[31] Recently Issued Accounting Standards 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] - 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] Recently Adopted Accounting Standards 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] 2. Loss on Sale of Vessels 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 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 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] 5. Investments in Equity Securities 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] - A mark-to-market loss of $0.4 million was recognized in Q1 2025 (Q1 2024: loss of $0.4 million)[39] - A foreign exchange gain of $0.3 million was recognized in Q1 2025 (Q1 2024: loss of $0.3 million)[39] 6. Vessels, Rigs and Equipment, Net 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] - Recognized an impairment loss of $6.8 million for the SFL Yukon dry bulk carrier, classified as held for sale[41] - 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] 7. Capital Improvements in Progress and Newbuildings 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] - Paid $148.6 million in installments and capitalized interest for five newbuilding dual-fuel 16,800 TEU container vessels, expected delivery in 2028[44] 8. Investments in Sales-Type Leases 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] - MSC has fixed price purchase obligations at the expiry of each charter[45] - The vessels are expected to be redelivered to MSC by the end of the second quarter of 2025[45] 9. Short-Term and Long-Term Debt 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] Fixed Rate Debt and NOK Bonds 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] - 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] - 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] U.S. dollar floating rate debt 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] Lease Debt Financing 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] 10. Financial Instruments 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] - 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] - There is a concentration of revenue risk with Maersk A/S, ConocoPhillips Skandinavia AS, and Hapag-Lloyd AG[69] 11. Share Capital, Additional Paid-In Capital and Contributed Surplus 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] - Approximately $85.8 million remains under the authorized Share Repurchase Program as of March 31, 2025[71] - 22,060 new shares were issued in Q1 2025 following the exercise of 315,000 share options[73] - Common shares outstanding were 145,236,426 as of March 31, 2025[73] - A dividend of $0.27 per share was declared on February 12, 2025, and paid on March 28, 2025[74] 12. Share Option Plan 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] - 465,000 options were awarded in March 2025 to officers, employees, and directors, with a five-year term and three-year vesting period[76] - The initial strike price for the newly awarded options was $8.39 per share[76] 13. Related Party Transactions 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] - Golden Ocean exercised purchase options on eight Capesize vessels for $112.0 million, with redelivery expected in Q3 2025[80] - The Company earned $1.5 million in rental revenue from leasing equipment to Northern Ocean in Q1 2025[81] - Received $1.1 million in interest income from a $45.0 million loan to River Box Holding Inc. in Q1 2025[83] 14. Commitments and Contingent Liabilities 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] - Committed to pay $21.5 million for optimization upgrades on nine container vessels and two chemical tankers, with installations expected in 2025[89] - 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] - 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] 15. Subsequent Events 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] - 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] - On May 14, 2025, a dividend of $0.27 per share was declared, payable on or around June 27, 2025[95] - Subsequent to quarter end, an additional 758,499 shares were repurchased for $5.9 million[96] Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the company's financial performance, liquidity, and capital resources for the reporting period 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] - The Company operates through subsidiaries and branches located in Bermuda, Canada, Cyprus, Liberia, Namibia, Norway, Singapore, the United Kingdom and the Marshall Islands[101] Recent and Other Developments 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 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] - Agreed to sell the 1,700 TEU container vessel, Asian Ace, for approximately $9.5 million, expected delivery in Q2 2025[103] - Golden Ocean exercised purchase options on eight Capesize dry bulk carriers for $112 million, with redelivery expected in Q3 2025[103] - Agreed to sell the SFL Yukon dry bulk carrier for $10.1 million, recognizing a $6.8 million impairment loss[104] - Agreed to sell the SFL Sara dry bulk vessel for approximately $11.2 million, expected delivery in Q2 2025[106] New Contracts, Extensions and Changes 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] - Maersk declared a further 12-month extension option for the 9,500 TEU container vessel, Maersk Skarstind[108] Corporate Debt and Lease Debt Financing 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] - The net proceeds from the bond issuance are intended for new investments and general corporate purposes[109] Issuance/repurchase of Shares, Share Options, Grants and Exercises 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] - In March 2025, 465,000 options were awarded to employees, officers, and directors, with a five-year term and three-year vesting period[111] - In March 2025, the Company repurchased 494,158 shares for $4.1 million under its Share Repurchase Program[112] - Subsequent to quarter end, an additional 758,499 shares were repurchased for $5.9 million[112] 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] - On May 14, 2025, a dividend of $0.27 per share was declared, payable on or around June 27, 2025[113] Operating Results 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 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] Time charter revenues 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] Voyage charter and pool revenues 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] Drilling contract revenues 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] Interest income - sales-type leases 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] Profit share revenues 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] - Recorded $1.5 million from fuel saving arrangements in Q1 2025 (Q1 2024: $3.3 million)[122] Loss on sale of vessels 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] - In Q1 2024, a net loss of $17,000 was recorded from the disposal of two container vessels[123] Operating expenses 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] - Depreciation increased by $4.0 million due to new vessel acquisitions and capitalized SPS costs/upgrades[125] - A vessel impairment loss of $34.1 million was recorded in Q1 2025[126] Interest income 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] Interest expense 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] Other non-operating items 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] Equity in earnings of associated companies 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] Tax expense 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] Liquidity and Capital Resources 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] - Net cash provided by operating activities increased to $78.6 million in Q1 2025 from $63.0 million in Q1 2024[134] - 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] - 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] - 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] 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] Cautionary Statement Regarding Forward-Looking Statements 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] - 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] - 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][148] - The Company undertakes no obligation to publicly update or revise any forward-looking statement[147] 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]