Good day and thank you for standing by. And welcome to the Q1 2023 SFL Corporation Earnings Conference Call. [Operator Instructions] I would now like to hand the conference over to Ole Hjertaker, CEO. Please go ahead, sir.

Thank you and welcome to SFL's first quarter conference call. [technical difficulty] briefly going through the highlights of the quarter. Apologies for that interruption. Welcome to SFL's first quarter conference call. First, I will start the call by briefly going through the highlights of the quarter. Following that, our CFO, Aksel Olesen, will take us through the financials, and the call will be concluded by opening up for questions. Our Chief Operating Officer, Trym Sjølie, will also be present for the Q&A session. 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. Forward-looking statements are not guarantees of future performance. These statements are based on the current plans or expectations and are inherently subject to 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 but are not limited to conditions in the shipping, offshore and credit markets. You should therefore not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for more detailed discussion of risks and uncertainties, which may have a direct bearing on the operate operating results and our financial condition. The total charter revenues were $182 million in the quarter, which went down from the previous quarter primarily due to one rig out of service and lower dry bulk rates in the first quarter. The previous quarter also included a $10 million one-off payment relating to the Seadrill restructuring. The vast majority of revenues…

Thank you, Mr. Hjertaker. On this slide, there's pro forma illustration of cash flows for the first quarter. Please note that this is only a guideline to assess the company's performance and is not in accordance with U.S. GAAP, and also net of extraordinary and non-cash items. The company reported generated gross charter hire of approximately $182 million in the first quarter, including approximately $5 million of profit share with approximately 86% of the revenue coming from our fixed charter rate backlog, which currently stands at $3.7 billion, providing us a strong visibility on our cash flows going forward. In the first quarter, the liner fleet generated gross charter hire of approximately $97 million, including approximately $5 million in profit share related to fuel savings on seven of our large container vessels and one car carrier. Our tanker fleet generated approximately $47 million in gross charter hire during the first quarter compared to approximately $49 million in the previous quarter. During the quarter, SFL had two Suezmax tankers and two smaller chemical tankers trading in the spot and short-term charter market. The net charter hire from these vessels was approximately $10 million. These four vessels were sold during the quarter and only one vessel, which has to be delivered to its new owners. The company has 15 dry bulk carriers which eight were employed on long-term charters during the quarter. The vessels generated approximately $20 million in gross charter hire in the first quarter. Seven of the vessels are employed in the spot and short-term market and contributed approximately $4.6 million net charter hire during the quarter. SFL owns two harsh-environment drilling rigs, the jack-up rig Linus and semi-submersible rig Hercules. The Linus is currently on a long-term contract with ConocoPhillips Skandinavia until the end of 2028. During the first…

[Operator Instructions] The first question from Sherif Elmaghrabi from BTIG. Please go ahead. Your line is open.

Hi, good morning and good afternoon. Thanks for taking my question. So first just looking past the most recent contract for the Hercules, what are the long-term employment prospects for that rig? Is the plan to have a stay Namibia? Yes.

Yes, thanks. We -- this one contract after Exxon in Canada is in Namibia, and as you can imagine, it's a fairly long transit. But the oil companies are more than happy to compensate for that, but this rig can work in multiple places. So, we are, of course, opportunistic in terms of where we want to employ the rig in order to maximize long-term cash flow. Of course, our objective is to secure longer-term employment for the rig over time, but for now, we think that it's -- the timing is better right now to have it on relatively shorter contracts as we see the charter rates coming off fairly sharply as you may also have seen on the graph we included in the presentation where we have seen the daily rates coming off very, very fundamentally over the last year or so.

Yes. And that said, I mean in terms of location, we are -- I mean there are tenders in several geographic locations in North America. You have several in the North Sea. Namibia has become a hotspot as well and if Petrobras also requiring more rigs, you have recently see two North Sea rigs going down to Australia. So, I would say, I mean the opportunities are currently worldwide.

That's helpful. Thank you. And then looking at the tanker fleet, I see two product tankers are rolling off next year. And tanker fundamentals are looking pretty constructive recent weakness notwithstanding. So are you starting to have conversations about work for those vessels and really how are charterers looking at crude and product tankers right now?

Yes, I think looking at the two further tankers you're mentioning, they are the two charter P66. I think, they're very happy with the vessels. They fit very well in their program as we understand, and also, the charters -- optional charter rates -- and the charter at they are on today is way under the spot market today. So, if you ask anyone certainly now, you wouldn't hesitate to extend the charters. But this charters and this extension options are of course in the charterer's options. So, we have to wait and see if they exercise them, and if not, I would say it would be an upside for us.

That's very helpful. I'll turn it over. Thank you.

Thank you.

Thank you for your question. We are now taking the next question, please standby. And the next question is from Richard Diamond from Castlewood Capital. Please go ahead. Your line is open.

Good morning, good afternoon. I want to commend you on the buyback. And given that there are significant cognitive dissonance regarding the stock price and the outlook for the company, it's really -- SFL is in the best shape it's been both in chartering operations and financing since I started following the company in 2014, and I wondered if you could provide some color on how you visualize deploying the buyback now that it's been approved. And I have one more question.

Thank you, Richard, and thank you. You're speaking to the car here obviously. No, we think that having multiple quality tools and the investor call it -- or value enhancement, the toolbox is good for the company. As you know, we've had sort of a dividend reinvestment plans and ATM, call it, optionality sort of in that toolbox that we have used very sparingly, but we have used it in the past. We just renewed that now and we believe that also having share repurchase optionality as part of our, I would say, capital allocation strategy-wise. We cannot give you sort of specific numbers for how much of that we will utilize, if any, I mean that we cannot disclose. But clearly, we have seen the share price coming down in a market where we think the underlying for, call it, value backing for, I would say, most shipping stock with replacement cost of the assets coming off and also that we own most of the residual in these assets is a clear benefit for SFL. Just illustrated by the car, the renewal of the car carriers where if this has had been more like a normal -- sort of one of those bareboat charters that maybe we could have done some years ago, the charterer would have kept that all that value. Instead, we own these vessels and we keep that residual value, which we think is much better for our stakeholders. The same thing with a drilling rig Hercules that we spent some time on here on the call. We think that the market dynamics there is very interesting. Of course, it's all about timing. It's a very expensive asset. The SPS process that we're going through now is, of course, very expensive for us. But we still believe that this will be a very -- this could really contribute to earnings per share from later in the year and onwards. So, what we see there is softness in the share price, having opportunity to buyback from time to time, could enhance value -- long-term value for our stakeholders. So, I hope that was vague enough, but precise enough for you, Richard.

Absolutely. And the second question is, as you look over shipping markets and you decide where you want to allocate capital, what do you think are the most interesting areas today?

Yes, it's a tricky question. We look at market opportunities, across the board across all these segments. And we see opportunities everywhere, but given where the segments are in their cycle, you would structure the deals different. So tanker market, for instance, have come up quite rapidly with values, which means that the deal we would do a year, year and a half ago, where we would have -- where we would accept effectively you get a lower rate than a deal, but with more optionality on the upside, now, we would probably look more for fixed rate and to ensure that we take it down to a more mid-level depreciated book or market value at the end of the charter period. At the same time, we see an underlying value, I would say, the underlying -- the floor here is coming off because there is a reduced shipbuilding capacity out there and the values measured in dollars are coming off both newbuilding prices and also secondhand on prices now over time. So that means that what you pay now maybe -- may have you can say, call it an inflation hedge in itself owning a maritime asset out there. So that is mitigating some of that risk that you would take risk you will take on if you invest a little higher in the cycle than our preference. So, I would say, it's more down to structuring. We look at deals now on the tanker side, we look at deals on the dry-bulk side, we look also into container segment, although, of course, there, we are quite careful and the car carrier market has been quite interesting over the last two years. So across the board, but we're also patient, so we don't feel that we need to invest a certain amount every single quarter. It's all about finding the right deals and deploying the capital when we think that the dynamics are right for us and our stakeholders, which means that maybe a quarter or two, we won't invest. But then, when we see the right deal, we can invest a lot more. So, that is the balance. And then also back to the share repurchase program, having that also then as a tool for capital allocation hopefully will benefit shareholders long term.

Okay.

Thank you for your question. We are now taking the next question please standby. And the next question from Climent Molins from Value Investor's Edge, Please go ahead.

Yes. Hi, thank you for taking my questions. I wanted to start with a modeling question about the Hercules. You've lined up two strong short-term contracts. And I was wondering, do mobilization costs come on top of the contracted revenues you mentioned on the press releases?

The mobilization contract is a part of the contract amount mentioned; correct, yes. It depends on - but yes it becomes basically have a certain days that we calculate based no-mobilization and demob.

All right, that's helpful. And after recent disposals on the tanker space, you have gradually used year overall spot exposure, but you still own some bulkers trading on spot. How should we think about those going forward? Are they, let's say, non-core or are they still an important part of your fleet?

It's a good question. I would say, any aspect -- I would say, in our shop, anything is for sale at the right price, if we think about it's beneficial for shareholders. But generally, I would say that those vessels are trading in the market and, of course, we did sell -- we did own seven Handy size dry bulk vessels in the past and we sold them and what we believe was at -- optimistically sort of good timing. So, for now, we keep these vessels, we keep trading them, and they generate good cash flow and certainly, a good return on invested capital. But whether or not we may sell them at some point, that we cannot say. There is no -- they are definitely not identified and defined as sales candidates or being marketed as such in the market. But if you have a lot of cash and want to invest them, I mean, we would be happy to entertain an offer by you.

All right. That makes sense. Thank you for taking my questions.

Thank you.

You're welcome.

Thank you for your question. There are no further questions at the moment, I will hand back the conference for closing remarks.

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

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