Good afternoon, ladies and gentlemen. Thank you for standing by and welcome to the Second Quarter 2019 Ship Finance International Limited Earnings Conference Call. At this time, all participants are in listen-only mode. There will be a presentation, followed by a question-and-answer session. [Operator Instructions] I must advise you, the conference is being recorded today, Tuesday, the 20 of August, 2019.I would now like to hand the conference over to your first speaker today, Ole Hjertaker, CEO. Please go ahead.

Thank you and welcome all to SFL's second quarter conference call. With me here today I have our CFO, Aksel Olesen; and Senior Vice President, André Reppen. I will start the call by briefly going through the highlights of the quarter, and following that Mr. Olesen will take us through the financials and the call will be concluded by opening up for questions.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 SFL's reports and filings with the Securities and Exchange Commission.The Board has declared a quarterly dividend of $0.35 per share. This is our 62nd quarter with profits and dividends and the dividend represents $1.40 per share on an annualized basis, or nearly 11% dividend yield, based on closing price of $12.82 yesterday.Over the years, we have paid nearly $26 per share in dividends or more than $2.2 billion in total and we have a fixed rate charter backlog of $3.7 billion, which should support continued dividend capacity going forward. The total charter revenues was $152 million in the quarter with 90% of this from vessels on long-term charters and 10% from vessels employed on short-term charters and in the spot market.The EBITDA equivalent cash flow in the quarter was approximately $121…

Thank you, Mr. Hjertaker. On this slide we have shown a pro forma illustration of cash flows for the second quarter. Please note that this is only guideline to assess the company's performance and is not in accordance to the U.S. GAAP and also net of voyage expenses, extraordinary and non-cash Items.Total charter hire for the second quarter was approximately $149 million, down from $155 million in the previous quarter. Reduction is primarily due to reduced revenues on the SG&A after scheduled rate reduction in May, lower revenues from the Suezmax tankers trading in the short-term market, as well as offer in connection with scheduled dry-dockings.Net income in the quarter was $28.1 million down from $36.6 million in Q1. The adjusted net income excluding one-offs and nonrecurring items was approximately $24.4 million, marginally down from the previous quarter.The Liner fleet generated approximately $81 million in charter hire which is in line with the previous quarter. Of this amount approximately 67% was derived from time chartered vessels and approximately 33% from bareboat charter vessels.Our Tankers generated approximately $13 million in charter hire, including a profit share contribution of approximately $0.5 million. Of this amount, 95% was derived from time and voyage chartered vessels.Our Dry Bulk vessels generated approximately $25 million in charter hires in the second quarter with approximately 80% from vessels on long-term charters and approximately 20% from vessels trading in the short-term market.On the Offshore side, we received charter hire of approximately $30 million from all our Seadrill rigs. Our three drilling rigs are chartered to fully guaranteed affiliates of Seadrill Limited. The harsh environment jack-up rig West Linus has been sub-chartered to ConocoPhillips until the end of 2028, while the harsh environment semi-submersible rig West Hercules is employed on consecutive shorter-term subcharters in the North Sea.The semi-submersible rig…

Thank you. [Operator Instructions] Your first question comes from the line of Randy Giveans. Please ask your question.

How are you gentlemen? How's it going?

Hi. Nice to speak to you.

Yeah. So first couple of questions here, so 29 vessels scheduled to be upgraded with scrubbers, what is the quarterly cadence of the installations and CapEx spend of that $50 million? And then how many of these 29 retrofits are being paid for upfront by the customers?

I think in terms of the CapEx, Randy, that's going to be funded by a mix of cash on balance sheet, but most of the portion will be financed through senior bank financing as some of these investments also come with charter extensions. So that's part of kind of the cash flow basis going forward and it's more or less evenly spread over the next say three quarters.

Just want to add to that. The gross investments that we will fund is relatively limited. So from a capital perspective it's not a big ticket for us at least not now. But we do -- we keep discussions on with some of our clients and we -- there could be more vessels being upgraded.Of course when you -- when -- the scrubber upgrades for vessels with -- on time charter, the benefit really goes to the charterer. So, we're always happy to do that if we get a good return on our capital and if we believe that it's accretive for us and if some of our customers want to install it for their own account we're happy too because they will add expensive equipment to our vessels and of course once it's integrated on the vessel it's our property.

Sure. All right. That makes sense. And then I guess switching gears, can you talk a little more about the three small container vessels that were acquired. I know on recent calls you're saying tankers, maybe shallow tankers, maybe LNG carriers were kind of the three targets, but then your most recent acquisition was three small containerships. So, can you give more color on maybe the age of those and why this asset class instead of a different either larger asset class within containerships or a different sector entirely.

Well, if you look at the product offering, as Aksel mentioned, we have a fairly large toolbox as we like to say. So, we -- our focus on the container side has been on the larger containerships, 10,000 plus modern design, sort of eco-style containerships that we believe will have a long economic life going forward because they are much more fuel efficient and therefore delivers a lower cost per transported box for the customers.At the same time, if -- from a risk/reward perspective, if we can do a deal and like these three vessels we mentioned, they are really I would say almost like an add-on to the 15 vessels we did last year where we effectively buy them at around recycling value and we amortize them virtually down to zero. It's a super low risk from an asset exposure perspective, and I would almost call it more of a structured financing really than an asset where we take a shipping risk. So, we will not operate these. These are bareboat.And as I said, you know amortizing down from a very comfortable level and as we understand the customer, they also put scrubbers on some of these for their own accounts, again adding call it effectively the security if you can call it that in the lease for us.So, you shouldn't -- so we should look at these call it investments in different lights. In some investments like bigger containerships, we're willing to take more, I would say effective residual exposure, i.e. charters that don't amortize them to zero because we believe they have a very long commercial life while on other assets. We take an opportunistic view where we don't have much residual risk at all.

Okay. And I guess one more for me. Looking at the cash balance certainly stands out after the follow-on bond offering and some other things more than $200 million plus the free cash that's coming in the next few quarters. So, just could you touch on expected uses of this cash if acquisitions or those three sectors, those crude tankers shallow tankers LNG still the top three priorities? And then any thoughts on share repurchases?

We are -- I can say, fair to say we are evaluating projects continuously here, and our ambition is of course to put this money to work in new accretive transactions to support a continued distribution capacity, of course and increase the backlog. We've -- when we've talked about this before, on previous calls, I mean, we of course, would love to do more on the tanker side. We believe, call it a relative proportion on tanker side is lower now than it's ever been. But at the same time, we have to make sure we do the right deals, buy the right assets with charters to the right counterparties with the right type of exposure.So, we wouldn't buy ships just because we have to, call it add-in in a specific segment. It's all about relative risk/rewards. So, I would say our focus remains on the tanker side. We think there are interesting fundamentals on the tanker side that could potentially materialize also in deal flow for us.We did look at LNG transactions. There are many LNG vessels coming out and projects there. On the dry bulk side, there are also opportunities. I would say there are opportunities across the board, but we cannot guide specifically on how we would deploy capital in each of them because we don't want to tie to the masks so to speak in terms of how we should invest. But as I said, our ambition is to invest the capital or have a very big party.

Exactly or a combination. I guess lastly there with the share repurchases, your yield is 11% trading at a pretty good discount to NAV?

It's – I would say, we're always evaluating, call it optimization of the capital structure. The small tap, we've just did is maybe an illustration of that where we just had an interesting opportunity where we could take some what we think was relatively reasonably priced capital, although it's small. So, we're always benchmarking that. And the fact that we haven't bought back shares is maybe an indication that we think that we'll be able to deploy some of the capital in transactions that are, call it more accretive per share. In the end, that's what we work for to build, call it distributable cash flow on a per share basis. So, repurchases of shares or buying back bonds or managing the balance sheet is I would say continuing evaluation on our side.

Sounds good. Okay. That's it for me. Thanks again.

Thank you.

The next question comes from the line of Greg Lewis. Please ask your question.

Hey. Thank you and good afternoon, everybody.

Hi, Greg.

Ole, just real quick. On those three vessels you bought post the quarter any kind of guidance you can give us around revenue EBITDA. I mean, obviously this is a scrap financing deal it sounds like but just kind of curious any kind of numbers you can throw out on this?

I think first of all, it's a relatively marginal transaction. It added around $30 million to the backlog. So $30 million on a $3.7 billion backlog is as I said isn't a big number. So, it's I would say – but we cannot disclose the price because the price is confidential unfortunately.

Yeah. Okay.

But I don't think it will make a big dent in our cash position quarter-over-quarter.

Sure. Understood. And then I guess obviously everyone's aware of the issues that the offshore space is having. You wrote down those vessels. I mean, push comes to the shove is there – are these sellable assets? Or just given what Solstad is going through these vessels are kind of just going to be locked up inside that company for the medium long-term?

Well, on those vessels specifically they are – I mean, we have sort of signed up with we'd effectively call it the standstill together with the other creditors and stakeholders in Solstad. They are – so they remain on long-term call it bareboat charters and Solstad is responsible for call it maintenance et cetera, and they have costs et cetera on those vessels. So, certainly until the standstill expires we cannot do anything legally. Of course after that, we – there are many – there was – if that call it transaction should collapse, I mean, we can take the vessels back we could potentially redeploy them or sell et cetera.I think it's also important there to highlight that – their relative importance here on these vessels. When they were included in our backlog and they are not included anymore they used to represent only between 1% and 1.5% of the backlog. Also from a book value perspective they are – it's a very marginal investment for us, mainly because we have amortized down these assets so much since we acquired them back in 2007 and 2008.So – we of course focus on – we focus on all our call it our whole portfolio. We took a small impairment this quarter relating to a note we got from Deep – what was Deep Sea Supply Limited which is now a subsidiary of Solstad. It was an unsecured note in connection with the sale of a vessel. It was an interest-bearing note. They did service it for some time, but now given the uncertainty around the whole situation we thought that to be conservative, it would be prudent in our books to keep it at zero. But of course, we – the claim remains and it's also part of effectively what we would call the standstill agreement.

Okay. Great.

So, we expect that to do – what we say more to happen there out during the fall and maybe have more of a solution towards the end of the year.

Okay. Great. And then just one more for me, I mean, obviously you guys are always in the market looking at transactions. As you think about the cadence of what this looks like when you're looking at deals currently are – what are the holdups like are the holdups the fact that hey heading into IMO 2020 maybe some potential transactions people want to take a wait-and-see approach, is it kind of like some macro headwinds that are out there?Just as you think about maybe what is preventing you guys or slow playing some of these transactions you're obviously looking at what sort of thing – like what would you kind of characterize as some of the and maybe there aren't any maybe it's just timing just sort of what do you – as you look to deploy capital, what do you think are some of the specking points that are preventing you guys from maybe getting to the finish line, if that's a fair characterization?

Yeah. It's a very good question. And I would say, generally, I mean, it's extremely easy to buy something you just pay more than the next guy, so I would say, anyone can deploy capital. The question is, how do you deploy the capital in a way where you think that you'll get a true return on the capital? And that is the tricky part. Of course, now with the changes in regulation, if you buy something and you might find a charter of course you have the counterpart, you have to evaluate relative risk, you have – you look at of course the financing structure, you can structure around a charter.But I think very importantly and that's where we try to be a little conservative we look at the residual value proposition .i.e. after that charter whether it's a five-year or 10-year or 15-year charter where are we then we know on that specific asset? What kind of -- when we know that there could be an infinite number of new vessels in that period where do we want to be to be conservative in light of new regulations and what is developing in the market.So it's -- I would say it's a cocktail that goes into project evaluation, and of course also benchmarking deals between segments is important, because what we see is that in upturn markets if you are invested in one single segment alone it's so easy to get ahead of yourself and run out and just buy like crazy because the equity markets are open but it may not be a good investment still in the long run. So we try to be -- we know what we say we try to be conservative and careful, but of course also with a very commercial mindset and certainly open to do the business.

Okay. Thank you very much.

The next question comes from the line of Jay Mark [ph]. Please ask your question.

Yes. Hi, gentlemen. The questions basically I was going to ask have been answered already. So I really don't have a question right now. I just want to say congratulations on buying a company and not paying for the company with the 24 liners you bought last year, so that's about it and congratulations. Thank you.

Thank you very much.

The next question comes from the line of Chris Wetherbee. Your line is now open. Please ask your question. [Operator Instructions] Your next question comes from the line of Chris Wetherbee. Please ask your question.

Hi guys. Can you hear me?

Yeah. Hi, Chris. We couldn't hear you previously.

Pardon me. James on for Chris. Just wanted to actually touch on the bulker market and get your current view. Trying to understand what you might have to see there before a deal looks appealing and how far you think you are away from a market where you might be able to put your -- some of your existing vessels on longer term charters?

Yes in the dry bulk segment we have 22 vessels, 13 of those are already on longer term charters and nine are on shorter term charters. Of the nine, two are Supramax bulkers that are -- have just recently come off long-term charters to go this and now they're traded in a pool while seven Handysize bulkers have been trading in the spot market or spot related for some time.We cannot define necessarily exactly when we would like to look in those chartered vessels on longer term charters, and I think the market for -- in this asset class has been I would say relatively slow for a couple of years.What we do hope now is that the market is firming and there are, of course, several near-term effects in the market that's created some market noise, but at least the order book on the dry side has come down and certainly on the smaller-sized vessels, it's quite moderate.So our long-term call, it our long-term objective for all our assets, I would say, is to employ them on longer-term charters if possible. And if not we can either continue trading them or potentially sell them.If we look at the relative in call it investments the smaller dry bulk vessels are of course among the smaller in our portfolio, and therefore, like I say the less -- the least capital intensive. And we've through -- and that is probably one to our -- I hope that one of our strengths is that as these vessels have come off their previous charters, we have been able to trade them in the spot market and we haven't had to effectively flip them, because we haven't had the operational platform to manage the vessels both operationally and commercially without being ripped off by call it service providers. So we keep the focus on them, and of course, hope to call it, optimize the value there and get them on charter.

Got it. And then I also wanted to touch on the seven scrubber deal there one more time. Sort of -- what sort of appetite is there out there for similar deals? And do you think that sort of scrubber -- has the outlook for scrubber penetration sort of increased more over the past three months relative to sort of where you were at the beginning of the year? Trym Sjølie: Hi. This is Trym Sjølie, COO. I mean, the scrubbers -- I mean, we -- I think, it's fair to say that the scrubber appetite has been quite strong, and we see that even, I mean, more ships are being slated for scrubber installations. And I think we'll see that also during next year that more and more ships will be fitted, especially if their docking cycles are favorable for that.

And from -- if you look at the fuel price spread with forward rates for next year, the price differential between high sulfur fuel oil and low sulfur fuel oil, which is the alternative if you don't have -- the cheapest alternative, if you don't have a scrubber installed remains at around $200 per ton. Isn't that right, Trym? Trym Sjølie: Yeah. That's right. It's around $200. And when you -- and if you put the $200 and even if you're conservative looking at that over several years and take into consideration that it's probably going to full for big ships and for ships with large engines and high consumption, it certainly makes a lot of sense especially as a hedge for the future.

Okay. Got it. Thank you. Trym Sjølie: Thank you.

We have no further questions at this time. Please continue.

I would like to thank everyone for participating in our second quarter conference call and also thank the SFL team for their efforts. We are committed to continue building the company and we believe there will be good investment opportunities for us going forward with attractive risk reward profile.If you do 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 web page www.sflcorp.com. Thank you.

That concludes the conference for today. Thank you for participating. You may all disconnect.