Good day, and welcome to the Q4 2013 Ship Finance International Limited Earnings Conference Call. Today's conference is being recorded. At this time, I would now like to turn the conference over to Ole Hjertaker. Please go ahead, sir.

Thank you, and welcome, everyone, to Ship Finance International and our fourth quarter conference call. With me here today, I also have our CFO, Harald Gurvin; and Senior Vice President, Magnus Valeberg. Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Words such as expects, anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statements. These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements. Important factors that could cause actual results to differ include conditions in the shipping, offshore and credit markets. For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission. Net income for the quarter was $18.3 million or $0.20 per share. Aggregate charter revenues recorded in the quarter, including 100%-owned subsidiaries accounted for as investment in associates, was $152 million, which is marginally lower than the previous quarter. This is excluding any cash sweep from the Frontline vessels in the quarter. And in 2012, for reference, the average cash sweep was $13 million or $0.16 per share per quarter. The EBITDA equivalent cash flow in the second quarter was approximately $114 million and last 12 months, the EBITDA equivalent was approximately $480 million. The board has increased the cash dividend to $0.40. The dividend represents $1.60 per share on an annualized basis or 9% dividend yield based on closing price yesterday. The dividend declared in the quarter is higher than the reported net income and is a reflection of the long-term view taken by the Board of Directors…

Thank you, Ole. On this slide, we have shown our pro forma illustration of cash flows for the fourth quarter compared to the third quarter of 2013. Please note that this is only a guideline to assess the company's performance and is not is in accordance with U.S. GAAP. For the fourth quarter, total charter revenues were $151.9 million or $1.63 per share compared to $156.4 million in the previous quarter. Revenues from VLCCs was slightly down due to the sale of 2 older VLCCs during the fourth quarter, while revenues for the Suezmaxes were up in the fourth quarter due to 2 of the vessels trading in the spot market for the full quarter. The increased revenues for the Suezmaxes were offset by increased wage expenses included on the vessel operating expenses for the 2 vessels. The reduction of revenues from offshore is due to a scheduled step-down in the charter rate for one of the ultra-deepwater drilling rigs on a long-term payable charter to Seadrill. It is important to note that the scheduled rate reduction is balanced by reduced interest in debt repayments on the related financing. Vessel operating expenses and G&A were $41.2 million compared to $37.7 million in the previous quarter, mainly due to the increased voyage expenses on the 2 Suezmaxes trading in the spot market. In addition, operating expenses for the fourth quarter includes a dry docking expense of $800,000. There was no cash sweep from Frontline in the fourth quarter, but we recorded a profit share of approximately $500,000 relating to 4 of the Handysize drybulk carriers. We also had the income of $3.2 million on financial investments during the fourth quarter, slightly up from the previous quarter. So overall, this summarizes to an EBITDA of $114.3 million for the quarter or $1.23…

[Operator Instructions] Our first question today comes from Herman Hildan of RS Platou.

My first question relates to the cash sweep at Frontline. I mean, is the tanker market exposed [ph] on the upside? Has there been any discussions in the board meeting with respect to whether you're going to let that have an immediate impact on shareholders in terms of ramping up dividends on top of the $0.40 per quarter?

Well, I think that, for now -- I mean, we have good expectations, of course, for 2014, but we have only concluded the 2013 annual account. So I think that is -- that will be a discussion the board would have in when we look into the first quarter numbers. But I would say, so far, at least the tanker market has been quite firm -- very firm in the first quarter. And also, if you look at the, what do you say, the guiding from some of the leading analysts, there is at least -- there is room to be hopeful for also cash flow for the full year. But as we all know, while we account for the cash sweep on a quarter-by-quarter basis, the actual cash payment is on an annual basis. So it's really too early to tell exactly what that sort of -- what the number can be for the year.

Okay. That [indiscernible] understand that. And also, I mean, if you listen into the Frontline conference call early on today, they were saying that the strong balance sheet and more positive view on the spot market should create opportunities. And I mean, you, as well, have a pretty robust balance sheet at the moment with significant cash buffer. Is it -- has there been any discussions internally in terms of potential additional deals with Frontline on the sale-lease back side?

Well, we have, what you say, ongoing discussions with many parties on for deal opportunities. And if there is anything specific and we have a deal, we, of course, will announce that. We have an extensive relationship with Frontline, 20 vessels there and significant upside potential through the cash sweep, which is -- which could be material in -- both in 2014 and 2015. If we then look at the agreements at Frontline, the base rates hops up with the equivalent number of the cash sweep the year after. And with our extremely low leverage against these vessels, there could be very significant cash sweeps or I would say, cash revenues coming from those assets. But I cannot comment on any specific negotiations or discussions we may have with various parties, until and unless we have concluded a deal.

That sounds great. Because, I mean, you just referred to the container market and the offshore market as interesting opportunities, but that doesn't rule out that there's going to be any kind of potential in the other segments?

No, no. And I think that's maybe one of our benefits, be it by having a multiple-segment approach, we can look at deals in -- across the board, and we can benchmark the deal from segment to segment. We highlight containers and also offshore, because that's where we have seen and where have pulled together deals that we do think makes a lot of sense. But we've also looked at deals recently on the tanker side, we're looking at deals on the drybulk side. So I think there is -- there are quite [indiscernible] to look at. But of course, what we are focused on is the long term from -- I would say, sort of a risk -- both risk management and also what we think is -- as a long-term sustainable cash stream and also risk associated with the counterparts. And I think, the 4 -- between the 4 segments, what we have seen in down cycles is that we've seen more defaults on the counterpart side in the drybulk segment than we have in the other sectors. So I would say, we are generally more careful on the dry side, but that doesn't mean that we cannot do deals say, for the restructured, right?

Yes. I mean, concerning -- hypothetically, if -- from what's required, 6 vessels a season for Suezmaxes, what would be the key in -- after having been through 2 years on a weak market, how would you structure that yield differently from the vessels you already have structured?

Well, I think if you look at the vessels we have to Frontline, I think we have to look at that also with the eyes of, call it, the original deal, and that was -- that deal also happened before both Harald Gurvin and myself joined the company. So if you look at the deals we have done over the last 5 years, we only -- we did the deepwater -- sort of we did the jack-up drilling rig at Linus last year. But we haven't done any other deals with any related parties for more than 5 years. So we have a much wider market perspective and, of course, we are looking at deals wherever they may be. And whether that may end up to being some company with -- over the common shareholder or not, that is secondary. Important thing for us is to build our portfolio with quality assets where we think that we can get nice cash flows with a right kind of risk profile and where we can add on good financing packages and grow the business.

And the final question, I mean, your open container vessels under construction in Korea, clearly, there's a huge fuel savings on those assets and you see that the operators are very keen on getting hold of new tonnage [ph]. The later you get the delivery, are you able to kind of reap a bigger portion of that fuel savings in the charter rate? Is that kind of the thinking between keeping that open as long as possible?

Well, that remains to be seen. Of course, I cannot go into details about the discussions we're having with some of the container lines. But I would say that there is definitive interest in the vessels. And it's also clear that, if you look at vessels, call it older-type vessels with older technology type vessels, and the charter rate there, we see that a lot of companies are willing to pay up for more efficient -- and both from a fuel efficiency perspective, but also from a load factor and in terms of loaded container you can put on the vessel. So we have seen charters relatively recently for similar size vessels in the $39,000 to $40,000 per day range for sort of 3- to 5-year contracts. So it's good to see that the market is firm, and we -- as we also said in our press release, we are quite comfortable with the position and also that we will find long-term employment for these vessels well before delivery.

Let me rephrase that question. I mean, if you -- what's the initial thought behind keeping those assets open that you would be able to reap a bigger or higher rate irrespectively of the -- call it the market move, and that's why you kept them open because I think you initially mentioned that there's -- already give interest for the vessel and it's kind of -- did -- seems to have chosen not to fix them out yet.

Absolutely. Sorry, I misunderstood you a little bit. Well, I think you have 2 types of transactions you can do for a complete setup like us. One, if you do it back to back with the charter, typically, that will be based on the yard contract and the liner company or the tanker company. Whoever the counterparty is, they could have gone out and ordered those vessels themselves. So that is really more a cost of capital arbitrage. If you take a position like we've done on the container ships and no one can go to a shipyard and ask for those kind of deliveries, because if they do, the yard will probably close the delivery 1.5 to 2 years later, then you're talking about the, call it, some market leverage, which of course, has an impact on the negotiations. So the question is then, okay, if you really need the capacity at the time where we have the vessels and if there are not really a lot of competitors out there, you can imagine that, that has an impact on the negotiations we're having with that counterpart. But I would say that the negotiations, it isn't really down to what is the fuel saving and how many percentage will I have of this or that. It's -- I would think it's more of an overall discussion on -- we have our expectations for what we think is a good charter rate. It also boils down to who is the counterpart, is it a very strong counterpart, what kind of financing can we structure around it. So there are other factors also going into what makes a great deal and what makes an okay deal.

Yes. And a final question. There's a bit of debate around the yard capacity. But if you went to the yards that -- toward 8,700 teu vessel, when do you think you will get it delivered?

I would think that if you did that, you would probably -- you may be able to squeeze in a few slots in 2016, and the yards will probably rather give you vessels in 2017, so we're talking 2 to 3 years. But as you know, of course, for those who work with the shipyards and have seen this over time, what we believe is, that the shipyards, they have booked up a lot of capacity quite interestingly for the first time for 6 or 7 years. They have now booked more capacity than their actual building capacity. They're sort of building their backlog. But usually, the yards also have some flexibility up their sleeve, [indiscernible] more efficient yards that they may offer from time to time. But I would say that generally, the 2016 order book seems to be filling up quite significantly, at least for bigger vessels, and we are now looking more into 2017 for volume deliveries.

So it's the reason why it's going to -- for realistic purposes, most [indiscernible] in 2017 is because there's been a lot of -- like we have to see [indiscernible] newbuilds taking up this upside, you would build these vessels up?

Yes. And also, fair to say, I think there are also some clients of the shipyards out there who still hold some options. So maybe if you order 5, 6 vessels, you get a few options. And of course, until and unless those options are exercised or lapsed, the yard will be careful to sort of double the capacity. But we -- it's an interesting dynamic, and you also see that in terms of newbuilding prices, where that also has moved north.

[Operator Instructions] We'll take our next question from Ceki Medina of Southpaw Asset Management.

On the cash sweep, I see a cap and I don't see a lot of profit share. I know profit share accrues after accruing $50 million, which was prepaid. But why is there a cap on the cash sweep if it includes the profit share?

Well, you know the cash -- we have to look at the 2 different asset types. We have the Frontline vessels where there's sort of the big volume, and then we also have some profit split on some Handysize drybulk vessels. So if you look at the profit split for 2013, we had zero cash sweep nor profit split from the Frontline vessels, but we had a total of $1 million of profit split relating to drybulk vessels. If we then switch to the Frontline vessels, which where I think your question was, because the Frontline prepaid $50 million, nonrefundable profit split to us back in 2011, we would have to accumulate $50 million of profit split and this is after the cash sweep. We have a profit split where we get 25% of, call it, revenues above the cash sweep. But because they prepaid $50 million of that, we have to accumulate $50 million before there will be any sort of cash payments. So I think for all, call it, realistic purposes, at least, for the next 2 years, we do not guide any expectations for profit split on top of the cash sweep. We think that the cash sweep in itself is quite meaningful and a very significant number.

[Operator Instructions] We have no further telephone questions queued.

Okay, thank you. Then, I would like to thank everyone for participating in our fourth quarter conference call. As a close, a wise person who said we shall endeavor to safeguard and further strengthen our position for our shareholders in the deliberate predictable and prosperous way. If you have any follow-up questions, there are contact details in the press release. Have a nice day.

That will conclude today's conference call. Thank you for your participation, ladies and gentlemen. You may now disconnect.