SFL .(US:SFL)2025-02-13 12:33Financial Data and Key Metrics Changes - The company reported an adjusted EBITDA of approximately $132 million for Q4, down from $167 million in the previous quarter, with a total EBITDA equivalent of $581 million over the last 12 months [7][33][100] - Net income for the quarter was around $20 million, or $0.15 per share, compared to approximately $44.5 million, or $0.34 per share, in the previous quarter [8][36][100] - The fixed-rate backlog stands at approximately $4.3 billion, with two-thirds of this backlog attributed to customers with investment-grade ratings, enhancing cash flow visibility [8][41][100] Business Line Data and Key Metrics Changes - The container fleet generated approximately $85 million in gross charter hire during Q4, down from the previous quarter due to scheduled dry dockings and efficiency upgrades [27][30] - The tanker fleet generated approximately $42 million in gross charter hire, an increase from approximately $37 million in the previous quarter, as all five tankers acquired in 2024 were delivered [29][30] - The energy assets generated approximately $55 million in contract revenues, down from approximately $86 million in the previous quarter, primarily due to the Hercules rig finishing its contract with Equinor [32][34] Market Data and Key Metrics Changes - The overall utilization across the shipping fleet in Q4 was 98.3%, primarily affected by 108 days spent in dry dock [21][115] - The rig market index rate increased by 2.3% in Q4, with the Hercules rig recording revenue of $34 million and costs of approximately $26 million [24][116] - The company has a diversified fleet consisting of 15 dry bulk vessels, 38 containerships, 18 tankers, 2 drilling rigs, and 7 car carriers, with container vessels making up almost 68% of the backlog [17][111] Company Strategy and Development Direction - The company has transformed its operating model over the last 10 years to focus on long-term charters with large end users, such as Maersk and Volkswagen Group [10][100] - There is a strong emphasis on vessel maintenance and upgrades to meet tightening regulatory requirements for emissions reduction, which is critical for customer relationships and organic growth [19][112] - The company is segment agnostic and seeks to pursue the right deals with strong counterparties across various shipping segments, with a focus on dry bulk investments if the right opportunities arise [68][70] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the Hercules rig's prospects in the second half of 2025, despite a slow market at the beginning of the year [45][46] - The company anticipates stable cash flow fundamentals due to two-thirds of its backlog being with investment-grade counterparties, which supports the stability of dividends [52][56] - Management noted that the shipping industry is currently experiencing a historic low order book and reduced shipbuilding capacity, which could lead to favorable market conditions in the future [86][88] Other Important Information - The company raised approximately $1.3 billion in financing, including $220 million in senior unsecured bonds in 2024, and a new $150 million senior unsecured bond loan was raised post-quarter end [11][39][40] - A ruling in favor of the company against Seadrill ordered approximately $48 million in compensation, which is subject to appeal [12][105][76] Q&A Session Summary Question: Regarding the Hercules rig's operational expenses while warm stacked - Management indicated that the Hercules rig is currently warm stacked and undergoing upgrades, with expectations for lower stacking costs in the future [44][116] Question: Stability of the dividend and payout ratio - Management confirmed that the dividend is set on a quarter-over-quarter basis, with discussions focused on long-term prospects and stable cash flow fundamentals [49][50] Question: Impact of tariffs on shipping operations - Management reassured that strong counterparties like Volkswagen Group mitigate risks associated with tariffs, and the company is not directly exposed to these issues [60][61] Question: Future investments after Golden Ocean's purchase options - Management stated that they are segment agnostic and will pursue the best deals regardless of sector, with a focus on dry bulk if suitable opportunities arise [68][70] Question: Commentary on the Seadrill ruling and potential appeals - Management noted that the ruling is public and the appeal process could take up to 12 months [76] Question: Upgrades required for the Hercules rig to operate in Norway - Management indicated that while some investments are necessary, they are manageable and typically compensated by oil companies [78][81] Question: Shipping segments with the most potential in the next 2-3 years - Management emphasized that they focus on long-term charters rather than the spot market, and they see potential in dry bulk and tanker segments due to low order books [83][86]