Good day, and welcome to the Q1 2018 Ship Finance International Limited’s Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ole Hjertaker. Please go ahead, sir.

Thank you, and welcome to Ship Finance International and our first quarter conference call. With me here today, I 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 US 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. The dividend represents $1.40 per share on an annualized basis or just below 10% dividend yield based on closing price of $14.40 yesterday. This is our 57th consecutive dividend and we have now paid more than $24 per shares in dividends or more than 2 billion in aggregate since 2004. The reported net income for the quarter was approximately $25 million or $0.24 per share. This is after a couple of non-recurring and one-off items and our CFO, Harald Gurvin, will comment on it later. Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries, accounted for its investment in associate, was approximately $133 million and the EBITDA equivalent cash flow in the quarter was approximately $100 million. Last 12 months, the EBITDA equivalent has been approximately 449 million. During the first quarter, we redeemed the remaining 63 million…

Thank you, Ole. On this slide, we have shown a pro forma illustration of cash flows for the first quarter compared to the fourth quarter. Please note that this is only a guidelines to assess the company's performance and is not in accordance with US GAAP. Total charter revenues for the first quarter were 129.4 million, down from 147.7 million in the previous quarter. The main reason for the reduction is the reduced income from the three rigs on charter to Seadrill with a agreed rate reduction of approximately 30% became economically effective from the first quarter. Although we continue receiving full charter hire until restructuring plan is implemented, which is expected within July, the reduced charter rates are already reflected in our accounts and in the revenues in the table. Revenues from tankers were slightly down in the quarter due to the sale of one VLCC in the first quarter and lower earnings on the two Suezmaxes trading in the pool, while liner revenues were in line with the previous quarter. Drybulk revenues were slightly down in the quarter. Most of the vessels are on long term charters, but we have 7 Handysize drybulk carriers trading in the spot market. These 7 vessels achieved higher revenues per trading day, but overall revenues were down due to drydocking and fewer days trading. So overall, this summarizes to an adjusted EBITDA of 99.5 million for the quarter or $0.96 per share, down from 116.8 million in the previous quarter. Going forward, we will get the benefit from our recent acquisitions. In the beginning of April, through a delivery of the 15 container vessels employed on the seven new bareboat charters, which are estimated to contribute approximately 5 million of EBITDA per quarter. In addition, the four 14000 TEU vessels announced today…

[Operator Instructions] We will now take our first question from Christopher Robertson of Jefferies.

Hi, good morning. Thanks for taking my call and congratulations on the recent acquisitions. As part of the fleet renewal and kind of the first vacation strategy, are there any particular subsectors that interest you more than others or is it entirely driven by the details of the deal?

Well, of course, it's all down to the details of the deal. It's down to where we are also optionality value. It’s also interesting for us. I would say generally, our preference is larger vessels over smaller vessels. So in the container space, we typically focus on 9000 TEU vessels and tankers, we have more vessels that are, I would say from Afarmax size and all and are also on the bulker side, it's really Panamax is our key focus area. But all of this down to the individual deal and how we can structure it and how we also manage, what is the residual value in it. So, we don't have anything stepping stone and it's all about creating long term value.

Sure. Okay. And I guess on the flip side of that, are there any ideal age or type of vessels that you would consider for divestment? Or again, is not purely just driven off of the details if someone approaches you guys.

It's more on the details. Like when we sold the 1700 TEU container ship, it was the only vessel we had trading in the short term market in that segment. And we find out that it was better to reinvest that capital in other assets instead of keeping focus on that segment and being at that relative disadvantage, not having a lot of vessels there to trade. For the 7 handysize bulk carriers, it's a little different. Again, we have more vessels and therefore, you have a more active, good accepting in the market. Same thing with the two Suezmax tankers that we are trading in the spot market, in a pool with some sister vessels on by Frontline. Again, we have several vessels and you are not so dependent on that one single point when you charter your vessel up.

Okay. One last question for me. If you can, on that acquisition of the four larger container vessels, was that maybe closer to six times the annual EBITDA or closer to a ten times EBITDA.

I would say it would probably be a bit closer to somewhere – I would rather say around midpoint there, maybe on the low side hopefully, but it certainly, as we see, it’s very accretive to our business, not least that because we have a very strong cash flow from a well known liner company with good financials and we think there is very good appetite in the financing market for -- to finance that deal. We have received some indications already at attractive terms, but as we mentioned, we wanted to close the deal first and because then, you can go out and source financing, I would say more with force instead of doing it on a hypothetical basis. So again, hopefully, that transaction shows our ability to lift significant transaction on short notice and also the support we have from our largest shareholder, affiliates of Hemen Holding who were willing to extend that bridge facility also on short notice. We also had banks approaching us with similar structures, but we got better terms here and also it was an unsecured structure, so we thought that was very beneficial for our stakeholders.

[Operator Instructions] We’ll now move to our next question from Magnus Fyhr of Seaport Global.

Just a follow up question on the Frontline vessels as they’re running short on cash, is the contribution at the $12300 per day or any other costs that are getting reduced from that? I mean, because that's about 5.5 million below that $20,000 threshold.

Well, the 12300, that was in the first quarter. They’ve paid the full charter hire for the full first quarter, so the comments on not being able to subsidize effectively the charter rates is really from here going forward. So, it has not affected the first quarter numbers. Right now, all depending on which broker you're looking at, we see sort of spot rates in the, I would say, in the $10,000 to $11,000 per day range right now, but of course, these vary a lot than as we all know. I mean, if you just look at, in 2017, I mean you know, they're very with a huge swing in the revenues. So going forward if they do not pay us the full 20,000 base rate, of course, the balance there is a claim we have. So whenever they make more than that, we of course get that paid back immediately. So, I would say, it's more a postponement of hire in light of the unusual long period of lower rates. When we did negotiate this overall structure with Frontline back in 2015, we did look at historic averages over time and for many periods, the markets had, on average, been below the threshold in the segment and that's how we sort of to invest the minimum cash buffer we thought was appropriate. We have now seen that the market has been lower for longer, not least due to the cut in OPEC volumes and also drawn in stock, so there has been, I would say, maybe, the market has proven to be softer than many expected, even in the last year. But at least now, there are some signs that things may turn, certainly on the stock pro side, also on OPEC. So fingers crossed that the market may recover, but as I said, right now, it's still well below the base rate level for our vessels.

All right. Thanks for clarifying that. And hopefully, we'll see those rates pick up here after OPEC steps up. So anyway, moving on, looking at the payout ratio on your slide 9, it looks like that’s been increasing here and given that you, I mean, you've been very busy here in the last two years, dealing with the Seadrill restructuring, and I guess you can quantify 2018 as the transition year with the payout ratio maybe temporarily increasing above the dividend level, but I guess with these acquisitions that you now announced, I guess we should see some of the positive impact on that further down the road? And at what point in time –

I would say tomorrow already.

At what point in time, I mean, do you -- I mean $1.40 dividend being sustainable in the long run with the new acquisitions you’ve made, but what's kind of the targeted payout ratio that you would feel comfortable? I mean, you have a pretty big cash position on the balance sheet, so.

Well, yes, I think, it's important to stress that the dividend is not a percentage of earnings specifically. The dividends is typically set quarter by quarter by the board and the Board looks at the long term picture and not necessarily on short term developments. You're absolutely correct. We have been quite careful and we've been holding back on investments and over the last two years, I would say, particularly in light of the Seadrill restructuring, so we were very happy to see the Seadrill, call it, restructuring being approved by the courts. And after that, we have put more than $500 million of capital to work and added around 20% decrease to our charter backlog. So I think, we -- and we continue to see opportunities out there. So I think we are definitely active in the market now. If you look at the distributable cash flow, as we indicate on slide 9 in the presentation, that’s of course after the continued steep loan amortization on our financings. So, you can say that the distributable cash flow after interest is much, much higher than the 152 last 12 months, compared to the dividend payout. So -- and I think we still have decent investment capacities. So, I cannot give any sort of specific guiding, but I would say the board generally is quite conservative in their assessment and hopefully the dividend and potentially growth going forward, but no promises, again dividend is set every quarter, but over time, we’ve seen that the dividend has very rarely been adjusted downwards. It's usually been stable or increasing.

Okay. And just one final question, you mentioned a little bit, I mean, most of the focus has been on the container sector here with longer term contracts. I didn't mention the LNG segment. I know we've been talking about that in the past, but I guess there was some changes there in the technology that was keeping you on the sideline. What's your view currently as putting some more money to work in that sector and are there returns there that would satisfy your criterias?

Well, so far, we haven't done anything there. So then, I think the assumption must be that we haven't seen the returns we would like to see. Typically, what we prefer our assets, we want the modern assets, we don't want all technology assets and I feel now the difference between a container vessel built say 10 to 12 years ago and a modern LNG vessel now could be built up to 100 tons per day in fuel consumption difference. That's a huge difference. So our focus has always been on newer assets and the more efficient assets for our customers. But of course, you have to match that also with the charter that only, not only call it covers the operating expenses, but also – financing, but also gives us a reasonably decent yield to the equity we've put in. So, it's a balance here and look, these, which is equally important in our minds is what kind of residual exposure do you take, i.e., what's your -- you can have a base case, but we also run a risk case and we want also to have a conservative portfolio of roles. So, so far, we haven't done anything. Hopefully, it's a segment that would fit spot on with our long term strategy, which is large vessels to typically to oil major with long term charter coverage. So we'll see what we can develop going forward in that segment.

There are no further questions at this time. I'd now like to turn the conference back to your host for any additional or closing remarks.

Thank you. Then, I would like to thank everyone for participating in our first 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 which are www.shipfinance.bm. Thank you.

That concludes today's call. Thank you for your participation. You may now disconnect.