Thank you, and welcome, everyone, to Ship Finance International on our Third Quarter Conference Call. With me here today, I also have our CFO, Harald Gurvin; and Senior Vice President, André Reppen. 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. The Board has declared a quarterly dividend of $0.35 per share. This dividend represents $1.40 per share on an annualized basis, or 9.4% dividend yield based on closing price of $14.95 yesterday. This is our 55th consecutive dividend, and we have now paid more than $23 per share in dividends or more than $1.9 billion in aggregate, since 2004. The reported net income for the quarter was $29 million or $0.31 per share. Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associate, was approximately $150 million, and the EBITDA equivalent cash flow in the quarter was approximately $115 million. Last 12 months, the EBITDA equivalent has been approximately $472 million. During the quarter, we took delivery of two 114,000 deadweight ton product tankers, also called LR2 type. The vessels have been chartered out on time charter basis to Phillips 66 with…

Thank you, Ole. On this slide, we have shown our pro forma illustration of cash flows for the third quarter compared to the second quarter. Please note that this is only a guideline to assess the Company's performance and is not in accordance with U.S. GAAP. Total charter revenues for the third quarter were $146.8 million or $1.57 per share, in line with the previous quarter. VLCC and Suezmax revenues were slightly down in the quarter due to the sale of one VLCC and two Suezmaxes in the second and third quarter and lower earnings on the two Suezmaxes trading in the pool. We took delivery of the two product tankers with seven-year charters to Phillips 66 in the third quarter, which will have full earnings effect in the fourth quarter. Offshore revenues were slightly up due to an extra day of earnings in the third quarter compared to the second quarter. As Ole mentioned, Seadrill will continue paying full charter hire until their restructuring plan is approved, but the agreed rate reduction will be effective from January 2018 so that any overpaid hire during the beginning of the year will be deducted from the remaining part of 2018. Further, the jack-up drilling rig, Soehanah, commenced its new bareboat charter at a minimum rate of $10,000 per day in end June, which have full effect in the third quarter. Income from financing investments was down in the quarter, mainly due to no dividend received on our shareholding in Frontline. So overall, this summarizes to an adjusted EBITDA of $150 million for the quarter or $1.23 per share, slightly down from $1.26 in the previous quarter. We then move on to the profit and loss statement as reported under U.S. GAAP. As we have described in previous earnings calls, our accounting…

Thanks much, sir. [Operator Instructions] Today's first question is going to come from Mr. Magnus Fyhr calling from Seaport Global. Please go ahead.

Yes. Hey, guys. Just a – first question, with the restructuring of the Seadrill contracts behind and strong liquidity position, are you guys ready to start playing offense? And with that in mind, what asset classes are you currently looking at? And maybe you can shed some light on your different views there.

Absolutely, and thank you. Yes, we are very much focused on, what we say, deal flow, and what we say, building the portfolio, and that has intensified after we finalized the negotiations with Seadrill. As you pointed out, we have a good, robust balance sheet. We have, call it, significant liquidity available. And I would say, our main focus is right now on the container segment, on the tanker segment, then I would say also bulker segment. So all our three main segments, with the exception of offshore where we are, I would say, a bit more careful at the moment. And we are screening projects, I would say, on a daily basis. Call it, the difficult part here always is to make sure that you take the right risk-adjusted return, call it, the positions in the market. The easiest thing in the world is to buy something. You just pay more than the next guy and you get it. The tricky part is to actually get the return over time. And I think with our track record now being 14 years profitable every single quarter, we have invested quite a bit. Since Harald Gurvin and I joined 11 years ago, we have invested $7 billion in new transactions. So we definitely have – yes, we have definitely proven in the past that we have been able to put capital to use. It's all about trying to do the right deals. But I think in several of the segments, we see interesting dynamics. We see strong good counterparties who are interested in doing transactions. We see the financing market, the traditional bank market changing, which also creates more opportunities for us. So I think, definitely, we have a growth mindset. But again, discipline, we don't want to run out and just buy the first thing just because we have the money in our hands.

Yes. You forgot one segment there, LNG. With the recent strength in both spot rates and there's been some time charters here recently looking at those returns and probably under 10% unlevered, is that a segment you would look at? And what kind of benchmarks would you look at as far as returns?

Yes, absolutely. I mean, in my mind, it's all about what – it's the tankers, call it, the type segment, but of course, with its own characteristic. I would say, if you say from a counterparty characteristic, maybe you can stay a bit through the line of it. You have – basically, industrial is part of logistics chain and where you see counterparties willing to commit to long-term charters. We have looked at that in the past, and I would say, it would fit very nicely in our portfolio. It's all about finding the right, call it, risk return parameters. What we have seen in the LNG side has been a technology shift. I would say, we have also seen to a certain degree, the same in the container business. But the fact is that a modern, a new – call it, the new LNG vessels that you build now, they burn 100 ton less fuel per day than vessels that were built, say, 10 years ago. So it's a combination of trying to buy the right type of assets and then get the right type of return out of that. But definitely, yes, we also have that on our target list.

And there's been – seems like there's been increased appetite for bareboat charters here recently. Have you looked – I mean, looks like there are pretty attractive returns on those. I mean, have you passed on those? Or are there opportunities out there?

Well, we have – if you look at our portfolio, we have a mix of time charters and bareboat charters. What we have – like I said, there are benefits and drawbacks with both of them. If you run a vessel on time charter, you, of course, run the risk that they could be more costly to operate. At the same time, you know what the vessel will look like when you get it back, and that is the flip side of bareboat. Bareboat typically looks great in an Excel spreadsheet. The problem is that when you get it back, who is going to set the – who's going to determine what it should look like? And also, if your counterparty hasn't got clear economic incentives to maintain it like it was their own, you could very well risk getting a vessel back that has been poorly maintained and where it will be very expensive to bring it back into trading. So we do have both and we can do both. We are, I would say – structurally, we are agnostic in terms of chartering structure. We just have to be aware of the risk to take also on a bareboat structure. But we have – how many vessels on bareboat do we have? I think we probably have 20, maybe more than 20 vessels on bareboat, so we know how that works. Typically, we do that with – we do that on older vessels where we have very low, call it, residual exposure or we have other, call it, risk-mitigating factors where we don't run the risk of having a very expensive vessel returned to us without being properly maintained.

Okay. Thank you. And just one last. Can you refresh my memory on the profit sharing you have with Golden Ocean? I know they signed seven time charters here at $17,000 a day. I assume those are not included in the ones that you have with them. And are they restricted from getting time charters? Or are they going to be in the spot market?

Well, there are no specific restrictions relating to our vessels. And the profit share is linked to the actual earnings by these specific customers. The profit share kicks in at $17,600 per day. And it's a 33% profit share, dollar-by-dollar above that level, and it's a calculation that's done on a quarterly basis. So what can we say, a strong quarter followed by a weak quarter doesn't mean that there is any clawback in profit share. We do not have specific – we have not given them specific instructions on trading, what we say, up to 12 months, simply because we believe they are closer to the Capesize market, and therefore, closer to establish and determine what is an optimal charter structure for the vessels in the market. But we have seen that market strengthening, and we see broker reports in the fourth quarter well in excess of the profit stake. So we can hope that we are now getting closer to a territory where the profit share will accumulate.

Okay. So do you know if any of those seven vessels that they chartered at $17,000 a day, are they any of your vessels?

I think, I cannot comment specifically on that. I would just say that we have lasted to Golden Ocean to freight our vessels where we – in the spot market or up to 12 months, and we follow their judgment on how our vessels should be traded within those parameter.

Okay, great. Thanks, Ole. That's it for me.

Thank you.

Thank you much, sir. We'll now go to Fotis Giannakoulis calling from Morgan Stanley. Please go ahead.

Yes. Hi, Ole and thank you. Can you please remind us of the time schedule of Seadrill restructuring? When do you expect that this is going to be officially approved? What are the next steps that we should wait?

Yes. When they filed – they had a time schedule that was effectively, I believe it was nine months from – when the filing took place and – or actually more than that. I think you have two levels here. One is when the plan is finally approved by the court and then one, when it's finally implemented. My understanding again, just following the process, seems to be that the time plan seems to be pretty much in line with what was laid out. I think they allowed for some relatively good time during the process with the hope that potentially the process can be accelerated. I think at this – so far, we haven't heard anything negative about our charters in the discussions that have been. We understand that they currently – Seadrill is in a – what they call, a go-shop period, i.e. where they are going out to various parties in the market to see if there are any better alternatives out there. And we just have to follow that process, but usually these processes takes time. The good thing of course, for us is that we get full charter hire on our rigs. We have been – and there’s been no interruption in charter payments in connection with the filing. And also, as we have communicated to the market, as part of the restructuring agreement, we have agreed to reduce our charter rates with economic effect from January 1. But we will receive the full charter hire until Seadrill emerges from Chapter 11 and after the plan is approved. So of course, if something adverse should happen, we will have received the full charter hire until that time. But as I said, so far it seems – it looks like it's proceeding, I would say, according to schedule and it's really – there's nothing more really we can – more likely we can share on it. I believe there is quite a bit of information available through – in the public domain relating to the proceedings in the court as well.

No, that's very clear. It seems that any delay in the process as so long as everything goes well that – your benefit at this point?

Well, yes, as long as we get the full charter hire, of course we don't mind. But we also think that it's in everybody's benefit to have a strengthened Seadrill coming out of Chapter 11. And also we all know that these processes are extremely expensive in terms of lawyers' fees and various advisers' fees, et cetera. So of course we hope that they will emerge sooner and – so they can focus on their main business activity, which is running the drilling rigs and not be distracted by the financial restructuring.

Okay. Thank you, Ole. And one more about the opportunity that you see out there, how do the returns compare between each sector and I also wonder if you can focus on the tanker sector given the fact that your fleet has been reduced significantly. It seems that most of your recent deals are in containerships. How do you view the differential in returns across each of the sectors?

Well, the return, it's a mix of a couple of things. It's, of course, a mix of where you think to invest in the cycle and also who you are chartering to. And who you are chartering to will have an influence on the financing. You can structure. So for instance, the Phillips 66 vessels that we recently delivered, we have long-term financing, very attractive rates on that one. If we buy tankers and we run them, call it more in the spot market or short-term market, of course financing will be different. So it's a difficult question to answer because returns vary a bit between segments and they also vary more, depending on your chartering counterparties. But I would say that from a financing perspective, if you have a long-term charter, say, five, seven, 10-year charter, you can typically get 75% to 80% financing. The two latest containerships we did, we had in excess of 80% financing, but we utilize, call it – it was a Chinese lease structure without any guarantees from Ship Finance. Again, that's also an area where we focus because most shipping companies out there. They put their balance sheet behind each and every deal. We try to be disciplined and we try to limit guarantees if we can or, certainly, have a very risk focus on when we give full corporate guarantees and when we don't. So typically, if we buy vessels at scrap value, say if there are opportunities there that we think is attractive. We wouldn't mind guarantee it 100% because the risk is very low, i.e. the exposure is very low. If we buy a very sophisticated vessel, shorter charter, more exposure, we would be more hesitant to guarantee because – simply because the risk balance is different. So all these factors goes together, and it's all about trying to create a long-term risk-adjusted return that we feel is attractive for us as a Company, but at the same time also where we can get the charter rates that are attractive for our counterparties.

Thank you, Ole. And trying to understand a little bit better the competitive dynamic in each of these sectors, where do you see the other shipping companies or more competition are being focused on, particularly the Chinese leasing companies? Are there any specific sector that you see more people bidding for the same deals and some other sectors that you see less interest or less capacity from the side of your competition to bid for these transactions?

Well, I wouldn't necessarily call Chinese capital a competition. As I mentioned, the containerships, it's complementary. We work together and create better, call it financial structure for our counterparties. But we have seen, call it, Chinese and also Japanese call it, leasing companies quite active on the container segment. We've seen the Japanese being very active in the dry bulk segment. I would say also, for the very big dry bulk vessels, both Chinese and Koreans have been active. And we've also seen quite a few investments made in the LNG space. I would say, generally, if there is a very long-term charter behind it, you will – and if it's a bareboat charter, in particular, you will have many, call it, very financial players focused on a potential deal. Of course, our strength there is – I would say, one is access to capital. We are among the biggest listed shipping companies out there. We have access to various sources of capital. But we also importantly, we believe we have very good access to deal flow, and this is through our association with the Fredriksen system. I think we see a lot of potential deals and – which is also equally important, making sure that. If we see deals before others do, hopefully we can share and pick some deals off the market before others do. But you have to remember, this is a very big market and we have a $4.1 billion balance sheet. We’re still – we’re still a small – we're a bigger fish in a very small pond is probably the way to phrase it. We could easily double or triple our portfolio without really making an impact in the market. So there is room for a lot of people. The maritime space is a very capital intensive business, and we hope to take – and get deals done that are – have the right risk adjusted return profile for us and our investors.

Thank you very much Ole.

Thank you.

Thank you, sir. [Operator Instructions] We'll now go to Mr. Richard Diamond calling from Castlewood Capital.

Hi, good afternoon. Ole, can you talk about financing markets available to traditional ship owners outside SFL, especially the traditional sources such as European banks?

Yes. What we have seen is that – or a more clear impression is probably the way to phrase it, is that the traditional financing source for the, call it, traditional ship owner and the traditional ship owner, I would say is typically private equity, family office. Typically, families have been invested in shipping for a long time. They have a handful of vessels, maybe a mixed bag of tankers and bulkers. And they've been used to go to their sort of house bank and they can finance anything at almost the same rates as the much stronger companies out there. But what we have seen certainly in the European market is that with the change in regulations and also with the downturn we've seen in some of the sub-segments, we've seen several European banking institutions, call it reallocate their capital. So they switch from lending smaller amounts to virtually anyone with a decent asset to focusing on counterparties with stronger balance sheet and who have other access to other capital sources, like us and – or the likes of us. So what we have seen recently and I think that is a growing trend, we've seen more capital funded in the private equity market. We have seen more project secured, project bonds, we've seen a few here in the Scandinavian market quite recently, and I think that is a process that will intensify. Of course, it's relatively expensive capital, but at the same time, if the traditional sources are not as abundant, readily available. It's the way many will have to go. So I think from a competitive perspective, if you look at cost of capital, I think the bigger companies will get an increasing competitive advantage over the smaller participants out there. But of course, call it funding is just one part of it. If you make an investment, there are a couple of things, factors going into that. The other is of course, also residual value, so if you are very extremely optimistic on your residual value, it's very – you can still make a calculation work even with expensive funding. I think part of our – call it, part of our DNA is to try to structure deals with a fairly conservative residual value assumptions when we make investments, and hopefully, over time, that will prevent us from maybe making the worst mistakes. But we cannot promise anything, of course. But we only have to look at our business, and we think the competitive landscape is changing. But that doesn't mean that there's not capital out there, be it from the Asian markets or we saw the German market being extremely active a few years ago, the KG market. We've seen the U.S. private equity market being invested in shipping, so there are many participants and players looking at the space.

Well, all I want to say, Ole is, from someone in Texas that it's not bragging if it's true. And you folks have done a splendid job of navigating a very difficult current. Thank you.

Thank you very much. End of Q&A

Thank you, Mr. Diamond. [Operator Instructions] We do not appear to have any further questions at this time. I'll turn the call back over to the organizers for any additional or closing remarks. Thank you.

Thank you. Then I would like to thank everyone for participating in our third quarter conference call. And if you have any follow-up questions, there are contact details in the press release or you can get in touch with us through the contact pages on our webpage, www.shipfinance.bm. Thank you.