Welcome to SFL's Third Quarter 2023 Conference Call. My name is [indiscernible] and I'm an analyst in SFL. Our CEO, Ole Hjertaker will start the call by briefly going through the highlights of the quarter. Following that our Chief Operating Officer, Trym Sjølie will comment on vessel performance matters before our CFO, Aksel Olesen will take us through the financials. The call will be concluded by opening up for questions and I will explain the procedure to do so before 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 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. Forward-looking statements are not guarantees of future performance. These statements are based on our current plans and 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 within the Securities and Exchange Commission for a more detailed discussion of risks and uncertainties which may have a direct bearing on our operating results and our financial condition. Then I will leave the word over to our CEO, Ole Hjertaker with highlights for the third quarter.

Thank you, [indiscernible]. The charter revenues were $214 million in the quarter, which is up 23% from the previous quarter, primarily due to the drilling rig Hercules now back in service. The EBITDA equivalent cash flow in the quarter was approximately $130 million, which was also higher than the second quarter and over the last 12 months the EBITDA equivalent cash flow has been $485 million in total. The net income came in at around $29 million in the quarter or $0.23 per share. The net income was impacted by some one-off items in the quarter including gains on a vessel sale in the third quarter and some mark-to-market effects. This was offset by two tankers that were dried up in the quarter and an unscheduled of fire of around 14 days on the jack-up rig lines due to repair works on the top drive with associated higher OpEx in the quarter. In line with the improved results and commitment to return value to our shareholders, we are also increasing our quarterly dividend to $0.25 per share. We have not paid dividends every quarter since our inception in 2004 and this has accumulated to $30 per share or more than $2.6 billion in total. And we have a robust charter backlog supporting continued dividend capacity going forward. Our fixed rate backlog stands at approximately $3.4 billion and importantly, the backlog is concentrated around long-term charters to very strong end users. This transition has been gradual as we have changed the business model from a maritime leasing company to maritime infrastructure provider over the last 10 years. This includes switching from primarily bareboat charters or financing arrangements to long-term time charters to end users. And I would note that the backlog figure excludes revenues from the vessels traded in the short-term…

Thank you, Trym. On this slide, we have shown our pro forma illustration of cash flows for the third quarter. Please note, that this is only guideline to assess the company's performance and is not in accordance with US GAAP and also net of extraordinary and non-cash items. The company generated gross charter hire of approximately $214 million in the third quarter, including approximately $2.6 million of profit share with approximately 94% of the revenue coming from our fixed charter rate backlog, which currently stands at $3.4 billion providing us with strong visibility on the cash flows going forward. In the third quarter the container fleet, generated gross charter hire of approximately $91 million including approximately $2.6 million in profit share related to fuel savings on seven of our large container vessels. During the quarter, we took delivery of the first of our four dual-fuel LNG car carriers. With four car carriers on charter at the end of the quarter, our gross charter hire increased approximately $9 million in the third quarter compared to approximately $6 million in the second quarter. Our tanker fleet generated approximately $30 million in gross charter hire during the third quarter, compared to approximately $35 million in the previous quarter. During the quarter two Suezmax tankers were off-hire for a total of 46 days in connection with scheduled periodic dry dockings. These costs are expensed directly per shipping fleet and OpEx for the tankers in the quarters was therefore higher than normal. The company has 15 dry bulk car carriers, which eight were employed on long-term charters during the quarter. The vessels generated approximately $20 million in gross charter higher in the third quarter seven of these vessels were employed in the spot and short-term market and contributed approximately $6.2 million in net charter hire…

Thank you, Aksel. We will now open up for a Q&A session. For those of you who are following this presentation through Zoom, please use the raise hand function to ask a question. When your name is called out, please unmute your speaker to ask your question. Thank you.

Hi, guys. Can you hear me.

Absolutely

Thank you. I couldn't find the raise hand function. So, I figured I'd just hop in. This is Greg Lewis [ph] . How are you?

Hi, Greg.

I had a few questions. I was hoping we could walk through. It was good to see the dividend increase. And I guess, two things one is, as you think about managing the trajectory of the dividend over the next I don't know one to two years, how should we think about balancing potential dividend growth and the drilling rigs just because, it seems -- it's clearly a very cyclical industry. We're clearly in a strong part of the cycle and those assets look like they're in a probable of the Hercules looks like it's going to be able to generate a lot of cash here over the next two to three years, but maybe not as it's definitely a more volatile asset than say your car carriers or container ships. So just trying to understand, how you think about uses of cash from the Hercules as we recontract this over the next couple of years?

Yes. I appreciate that. I mean the Hercules as you mentioned, we just spent quite a bit of money on that rig in the first and second quarter of the year when it was out of service. And now it's really only got started. So the charter rate in Canada, that was fixed more than a year ago. So it was at a lower rate. So that charter rate should be mounting now, as it is expected to start drilling in Namibia, already next week. And the charter rate in Namibia is based on the -- if we include both mobilization to and from Namibia under drilling rate, should be well above the drilling rate we had or the rate we had in Canada. And then it's going back to Canada later next year, for an even higher rate. And in fact, the drilling rate we have on Hercules, it's the highest drilling rate I would say in this cycle today. So this rig is a very capable unit and customers are clearly willing to pay for the services. Of nature, that market is a shorter-term charter market. So this is not a market where you normally get sort of 8, 10, 15-year charters. It's typically shorter charters and we have deliberately not been so keen on fixing it long term because we see this market really building and you don't really want to fix something at the low end of the cycle. We think this is a cycle that has legs. And therefore, we're holding back a little bit before we want to - what we say look for really long-term charters on that unit. I think if we were to look at long-term charters for the unit you would have to accept lower rates than what we are…

Yeah. Super helpful. Thank you for that. I did want to ask kind of a bigger picture question. Clearly, across the more conventional shipping space where it's definitely a market that you continue to look at and have assets and as SOFR has gone up, spreads have gone up. How has that changed the potential opportunities for SFL i.e. I'm talking to some ship owners and they're looking at 8%, 9% or even higher borrowing costs. Has that created more opportunities for SFL i.e. is the transactions team busy here as we sit here in November relative to maybe where they were earlier this year? Or is it hey, the market's been good for a couple of years and it's kind of steady as she goes?

Yeah. It's a good question. I mean if you go back to 2022, we screened or did really work on more than $20 billion of potential deal flow and we ended up doing one in the end for various reasons. I think this year has been -- the volume has been lower in aggregate. And I think with the rising interest rate market, it's also I would say the way we see it, it's a time lag from where the underlying metrics and interest rates is one, asset replacement cost is another, maybe to a certain degree operating expenses to the extent there has been call it a little inflation in those metrics. It takes a little time for that to filter through in a customer's willingness to pay off for those services. So that's why I think 2023 has been I would say the more interesting deal flow opportunities has been I would say on a gross number, a little lower than 22%, but I think this is going to pick up again. But I think the ones -- I mean if you look at the ones you offer more financing structures, maybe for them there is more deal flow opportunity right now, simply because funding cost is higher. And therefore, the alternative cost of doing like a bareboat type lease is relatively smaller. But we have strategically moved a little away from the bareboat type offering because what we have seen is that for those kind of deals, you typically do that with intermediaries. You don't do a bareboat deal with an end user. And therefore, there is a risk element here that I think is underappreciated, right now most of the shipping segments are booming, strong markets, nobody talks about it. But we've been through this over…

Okay. Great. And then I just have one other question on the balance sheet. I noticed that we saw I guess sequentially some of the long-term lease liability went into short-term lease liabilities. Is that just going to unwind? Or should we think about that being either renewed or extended over the next call? I don't know couple of quarters.

It's Aksel here. So I think you should look at us like our ordinary traditional debt on the vessels that there are opportunities to basically roll this going forward as well. We haven't finally concluded if we can do in New York or do that bit additional bank financing, but both options are likely, so could just assume rolling that on the same level.

Okay. Perfect. Thank you for that. Thanks, everybody.

Thank you.

Thank you.

[Operator Instructions] And the next question will come from Richard Diamond. Please unmute and speak.

Great quarter, great job building cash flow. Ole, you and the team have incredible deal flow at SFL. What do you think are the most interesting areas looking out to the fourth quarter and next year?

Yes. Thanks for that Richard, and thanks for the kind words. We are focusing across the Board, our preference are for deals that are I would say logistics sort of oriented i.e. where we go into a logistics chain with counterparties. So car carriers for instance is a segment that we've been spending quite a bit of time on. We've grown a lot in that segment. We still think there could be interesting opportunities on the container side. Yes, the market is volatile. And yes, I can say, it's not the super cycle we saw a year or two ago. But there's still underlying demand for transportation capacity. And certainly with modern high-end assets the more fuel efficient that is reducing both call it the energy footprint or emissions footprint per loaded box where that matters. And that's also where we have concentrated our investments. We've also seen some of the opportunities on the tanker side. So I would say there are opportunities across the Board here. The only segment you can say, we don't have in our portfolio that would be natural would be LNG in particular. But our dilemma there has been one it's sort of the investment level in that segment and the charter rates where you don't really amortize down so much of the investment, which means that we have been a little conservative in our willingness to take on residual exposure in that segment. But otherwise, we are active across the Board and looking at opportunities and I think we have quite good access to deal flow.

Thank you.

Yes. Thank you.

Thank you.

As there are no further questions from the audience, I would like to thank everyone for participating in this conference call. If you have any follow-up questions to management, there are contact details in the press release, or you can get in touch with us through the contact pages on our webpage, www.sflcorp.com. Thank you very much.