SFL Corporation Ltd Stock

Welcome to SFL's Third Quarter 2026 Conference Call. My name is Espen Gjosund, and I'm Vice President of Investor Relations in SFL. Our CEO, Ole Hjertaker, will start the call with an overview of the third quarter highlights. Then our Chief Operating Officer, Trym Sjølie, will comment on vessel performance matters, followed by our CFO, Aksel Olesen, who will take us through the financials. The conference call will be concluded by opening up for questions, and I will explain the procedure to do so prior to 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. Please note that forward-looking statements are not guarantees of future performance. These statements are based on our current plans and expectations and are 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 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, Espen. Last quarter, we celebrated our 90th dividend and a $0.22 payout, and we continue at the same pace this quarter. Nearly $33 per share have now been returned to shareholders, which means more than $3 billion accumulated since 2004. And with the recent growth initiatives and backlog additions to very strong customers, we have firmly positioned SFL as a maritime infrastructure company with a diversified high-quality fleet and with a unique long-term cash flow visibility.

In the third quarter, we reported revenues of $202 million and an EBITDA equivalent cash flow of $122 million. And over the past 12 months, aggregate EBITDA has been $469 million, reflecting the continued strength and stability of our operations. Net income in the quarter was $37 million or $0.26 per share, and the dividend declared is $0.22 per share. The backlog has been building massively this year and is now up to $5.0 billion with a very strong counterparty profile where most of the backlog is to customers with investment-grade rating. In fact, if we include the backlog to a customer with credit rating just 1 notch below investment grade, it would cover nearly 80% or $4 billion of the backlog.

At the beginning of the third quarter, we announced 4 newbuild car carriers and also long-term charters for 2 of the vessels. We covered this in more detail in the second quarter presentation in August, but this deal added $150 million in backlog on the 2 vessels with charters, which could increase to $300 million if the optional periods are declared. Two vessels are still unfixed, but with quite attractive delivery positions in 2029, we expect to secure long-term charters in due course.

In September, we announced a significant charter extension for 6 15,400 TEU container vessels with Hapag-Lloyd. The vessels were originally on a 5-year charter ending in 2028 and 2029, and we have now agreed to extend the charters by additional 7 years. The vessels are then chartered until 2035 and '36, and this adds approximately $750 million to our fixed rate charter backlog. And we have done more business in the Container segment lately.

Last week, we announced the acquisition of 2 8,800 TEU container vessels in combination with 8-year firm charters to an existing investment-grade customer. Acquisition cost is around $256 million, and the vessel will have scheduled delivery already in 2027. This transaction adds around $250 million to our backlog and maybe more if options are exercised. The extension options are 2x 2 years and the charterer will also have purchase options in year 8 and also in year 10 and '12 if the extension options are exercised. The options are at a level where we will have a strong return on our invested capital, and it includes a profit share feature on top, which may be valuable to us when we get there.

We have also recently ordered 3 very large ammonia carriers with a cargo capacity of 93,000 cubic meters. The vessels will be able to carry a wide range of petrochemical gases and will have dual fuel propulsion and the latest technology for fuel efficiency and cargo intake optimization. Delivery is scheduled in the second and third quarter of 2028, and the aggregate yard construction cost is expected to be approximately $336 million. All the vessels have been chartered out on long-term time charters from delivery with 2 vessels going to an oil major and 1 to a global leader in the commodities industry, adding around $250 million to our fixed rate charter backlog.

The exact duration of the initial charter period for the vessels to the oil major will be determined within the next 6 months, and the backlog may increase at that point if they choose 7 years and not 5 years initially. The charter will also have options to extend the time charter by up to 4 years. The period for the vessel to the commodities trading company is fixed at 5 years plus 2 1-year extension options. We have also added a flexible sales clause in this deal where we may agree to develop a sale of the vessel during the last 2 years of the fixed period, subject to a profit share mechanism with SFL.

We have seen in the past that these arrangements have been very profitable for us. And this was actually demonstrated in October when we announced the agreement to sell 4 2014- and 2015-built LR2 product tankers and 3 2019-built Suezmax tankers we have had on time charter to Trafigura since 2021 and 2022. These charters, similar to the gas carrier I mentioned earlier, had a profit share mechanism in the event of a profitable sale. The actual sale price per vessel is confidential, but we will have significant net cash proceeds from the transaction estimated at $275 million after repayment of associated debt.

And the aggregate book gain is estimated to approximately $175 million, indicating a stellar return on invested capital. The gains will be recorded in the quarter the vessels are delivered, so some of it already now in the fourth quarter. This last quarter, we have also had significant benefits of having 2 modern Suezmax tankers employed in the spot market. These vessels were previously on a long-term charter at around $30,000 per day per vessel until December last year.

We have now chartered 1 of the vessels to an investment-grade oil major for a period of 3 years at a charter rate that is higher than what both vessels earned combined last year. This means that the charter rate from the other vessel is a net incremental cash flow for us. In the third quarter, the vessels earned around $80,000 per day on average. And so far into the fourth quarter, we have covered 2/3 of the vessel days at an average charter rate in excess of $200,000 per day.

But please note that charter hire for vessels in the spot market is accounted for on a load-to-discharge basis pursuant to U.S. GAAP, where we only recognize revenues when there is cargo on board the vessels. So the final reported number will depend on trading towards the end of the quarter, including ballast days. And the drilling rig Hercules is in the process of preparing for a 400-day drilling campaign in Canada from March onwards next year. Having 0 revenues on the rig this quarter is, of course, weighing on the reported results, but this is changing next year when the rig is expected to generate significant revenues. And with that, I will now hand the call over to our Chief Operating Officer, Trym Sjølie.

Thank you. As Ole mentioned, this has been a very active period for us, and I would like to spend a moment on what the recent transactions mean for the shape of the portfolio. Including the newbuildings we have ordered, our portfolio now comprises 66 maritime assets, 32 container vessels, 11 car carriers, 3 gas carriers, 16 tankers, 2 drilling rigs and 2 dry bulk vessels. 7 of the tankers have been agreed sold to Trafigura as explained, and are scheduled to leave the fleet over the fourth and first quarter. The 3 ammonia carriers take us into a new sector and broaden the diversification of the fleet further.

The majority of our customers remain large industrial end users, and this is where we continue to focus. Looking at contract duration, the weighted average remaining charter term on the container fleet is now 8.3 years, a direct result of the Hapag-Lloyd extensions and the new 8,800 TEU vessels. The car carriers follow at 5.7 years, the gas carriers at 5.0 years and the tankers at 3.2 years, while the energy sector is at 1.9 years and the dry bulk vessels are on short-term employment. It is worth noting that these figures exclude our charters extension options, so they are a conservative measure of how long the assets are likely to stay employed.

On the right-hand side, our fixed rate backlog stands at approximately $5.0 billion. Container vessels make up around 71% of this, car carriers, 11%, the rigs, 7%; and gas carriers and tankers around 5% each. The weight towards containers reflects both the size of the vessels and the length of the charters, and it gives us a very stable core of earnings well into the next decade. The backlog figure also excludes the dry bulk vessels, charters options and any future profit share. So there is an additional earnings potential on top.

Around 58% of the contracted revenue is with investment-grade counterparties. The remaining part is mainly with large, well-established industrial operators that we have long relationships with. And as Ole mentioned, a significant share of it is with a customer rated just notch below investment grade. Now turning to the operational performance. With the exception of 4 container vessels on bareboat charter, representing around 9% of the container revenue, our entire fleet is employed on time charter or voyage charter, where we provide crew and technical management to the charter.

This means operational performance feeds directly into our earnings and is a key part of the service our customers pay for. We had a total of approximately 4,670 operating days across the fleet in the quarter and utilization was strong across the shipping sectors. Container vessels and tankers both ran at 100%, car carriers at 98% and dry bulk at 97% -- the slightly lower figure for the car carriers reflects the fourth special survey dry docking of SFL Conductor, which was completed during the quarter. The energy sector ran at 50% with Linus operating through the quarter, while Hercules is being prepared for its campaign in Canada.

Charter revenue from the fleet was around $194 million in the quarter, and container vessels contributed $85 million, tankers, $56 million; car carriers, $27 million; the rigs $23 million and dry bulk $3 million. The tanker contribution was supported by the strong spot earnings on our 2 Suezmax tankers that Ole just mentioned. Operating expenses for the shipping fleet, excluding emission allowances, came in at about $36 million, of which $15 million on the container vessels, $12 million on tankers, $7 million on the car carriers and $2 million on dry bulk. And the car carrier figure includes approximately $2.3 million of drydocking costs related to the SFL Conductor. I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

Thank you, Trym. Turning now to our cash flow overview. This slide provides a clear view of the fleet's underlying operating performance, excluding certain noncash items and items we consider nonrecurring. Before walking through the numbers, a brief reminder. This presentation includes non-GAAP measures that management uses to assess underlying performance. These measures are not prepared in accordance with U.S. GAAP and should not be considered in isolation or as a substitute of GAAP measures. A full reconciliation of the most direct comparable GAAP measures is included in our earnings release filed this morning.

With that context, let me take you through the performance of our fleet. Across the fleet, we generated approximately $195 million in gross charter hire during the quarter. Our container fleet accounted for approximately $85 million, remaining our largest contributor. Turning to car carriers. Our 11 vessels generated approximately $27 million in gross charter hire, a slight improvement from the previous quarter. Our tanker fleet generated approximately $56 million in gross charter hire compared to $62 million in the previous quarter. The decrease was mainly due to lower recorded revenue from our 2 Suezmax tankers trading in the spot market, partly reflecting the timing of voyage revenue recognition.

As a reminder, under U.S. GAAP, voyage revenue is recognized on a load-to-discharge basis with revenue allocated on the days when cargo is on board. Our 2 Kamsarmax dry bulk carriers continue to trade in the short-term market, generating approximately $3 million in revenue. Average daily time charter equivalent was approximately $15,400 per vessel compared to $16,100 in the previous quarter. Moving to energy. The harsh environment rig Linus generated approximately $23 million in revenue, broadly in line with the previous quarter. The rig remains contracted to ConocoPhillips until May 2029, which gives good visibility on future cash flows.

The Hercules is preparing for its upcoming contract in Canada, which is expected to commence in March '27. As preparation progresses, we expect elevated rig operating expenses in the fourth and first quarter. Vessel and rig operating expenses together with G&A totaled approximately $73 million compared to $69 million in the previous quarter. As a result, adjusted EBITDA was approximately $122 million compared with $130 million in the previous quarter. Turning to our results on U.S. GAAP. Total operating revenues were approximately $202 million, in line with the previous quarter.

Operating expenses were approximately $85 million, up from $74 million in the previous quarter. The increase was mainly due to higher operating expenses for Hercules, reflecting the ongoing mobilization of the contract with Suncor in Canada as well as higher voyage expenses and scheduled dry dockings. The results included noncash mark-to-market gains of approximately $13.3 million on derivatives and $1 million on equity investments. We showed these separately so that investors can distinguish valuation movements from underlying operating performance. Including these gains, net profit was approximately $37 million or $0.26 per share compared with $34 million or $0.25 per share in the previous quarter.

Turning to the balance sheet. We had approximately $112 million in cash and cash equivalents at quarter end and a further $160 million available on the undrawn credit facilities. This gave us total available liquidity of more than $272 million. At quarter end, we agreed to sell 7 tankers currently on time charter to Trafigura. After settlement of profit share obligations and repayment of associated debt, we expect aggregate net cash proceeds of approximately $275 million. The vessels are expected to be delivered to the buyers during the fourth and first quarter, and we expect to recognize an aggregate book gain of approximately $175 million as they are delivered.

Following our recent announcements, remaining capital commitments under our newbuilding program totals approximately $1.7 billion. Of our 40 newbuildings, 12 have long-term charters in place, representing an aggregate charter backlog of approximately $1.9 billion. Deliveries are scheduled from the second half of '27 throughout the end of 2029, and expect to fund the commitments through a combination of existing cash and primarily pre- and post-delivery credit facilities. Before handing the call back to Espen, let me close with a few key points.

The Board has declared our 91st consecutive quarterly cash dividend of $0.22 per share. Our charter backlog stands at approximately $5.0 billion after adding additions of more than $1.6 billion so far this year. This gives us substantial visibility on future cash flows and supports both shareholder distribution and continued investments. The sale of the Trafigura tankers crystallizes value not previously reflected in our book values and releases significant capital.

The gains should be recognized over the next 2 quarters as the vessels are delivered, strengthening our capacity to fund further growth alongside our newbuilding program. With a diversified fleet, strong access to capital and disciplined approach to investments, we remain focused on generating attractive long-term returns for shareholders. Thank you for joining us this morning. I'll now hand it back to Espen for questions.

Thank you, Aksel. We will now open for a Q&A session. And we will have our first question from [ Mr. Franklin ]. With one of the spot vessels now coming on a time charter contract, is the plan to get the other vessel on the time charter contract as well?

Thank you. We had a plan of effectively hedging those 2 vessels in the market. We have already chartered out the vessel at a charter rate more than double what both vessels earned before in 2025. We see a booming market, and we believe this extreme market could last for some while. So the plan is to keep it in the spot market for now. But we have to remember that incremental cash flow, every single dollar in charter rate on that vessel is incremental charter rate cash flow for us.

So just as an illustration, we -- I believe we earned a net contribution after OpEx and debt service on those vessels before used to be around $0.02 to $0.03. With the revenues that we recorded in the third quarter, the contribution per SFL share was around $0.08 -- and this is growing exponentially if the market should be higher. As I indicated, the market now, depending on who you talk to in the broker reports say some quote around $300,000 per day, some quote maybe $400,000 per day. Of course, what matters is what will the ship earn over time, but we're talking astronomical sort of cash flows. So for now, we think we will keep that vessel in the spot market. But of course, down the road, we may find long-term charter there as well. But we -- our ambition is to ride the market a little bit on that.

Thank you, Ole. Another question from [ Tiffany Johnson ]. With the increased backlog that you've added this quarter, when are the next vessels coming off the contract? And what are your plans on those vessels?

Yes. Thanks. We have then effectively 3 vessels in the spot market, the Suezmax I just mentioned and also 2 Kamsarmaxes that are being traded there. They are around $15,000 per day in the third quarter. And so far this quarter, we are north of $20,000 per day, but they are 13, 14 years old. So I think we will just keep trading those in the spot market for now.

If you look at the vessels that are on longer-term charters currently, the next vessel really to come off charter is in 2028. It's a car carrier. That market is very strong. We also have 2 newbuild car carriers coming in 2029 that could be very attractive positions. This is on the back of a booming market in that segment, I would say, partly or to a significant degree driven by exports out of China. So we are quite comfortable with those positions.

And as you have seen, we have added massively to our backlog so far this year. And of that $5.0 billion, we have added $1.6 billion, $1.7 billion just this year alone. So it's been a very active year. And a part of that has been rechartering or extending charters on vessels that we already had on charters, and we expect that to continue going forward.

Thank you, Ole. 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 the management, 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 for listening.

Welcome to SFL's Second Quarter 2026 Conference Call. My name is Espen Gjosund, I'm Vice President of Investor Relations in SFL. Our CEO, Ole Hjertaker, will start the call with an overview of the second quarter highlights. Ben, our Chief Operating Officer, Trym Sjølie, will comment on metal performance matters, followed by our CFO, Aksel Olesen, who will take us through the financials.

[Operator Instructions] 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.

Please note that 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 support in the forward-looking statements.

Important factors that could cause actual results to differ include, but not limited to, conditions in the shipping, offshore and credit markets. We should, therefore, not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for a more detailed discussion of risks and uncertainties which may have a deck faring on operating results and our financial condition.

Then I will leave the word over to our CEO, Ole Hjertaker, who will highlight for the second quarter.

Thank you, Espen. We are pleased to celebrate our 90th consecutive dividend and $3 billion in accumulated dividend payouts today. Over the years, we have firmly positioned SFL as a maritime infrastructure company with a diversified high-quality fleet and we keep adding new business.

For the second quarter, we reported revenues of $201 million and an EBITDA equivalent cash flow of $130 million, which is 20% higher than the first quarter. Over the past 12 months, EBITDA amounts to $461 million, reflecting the continued strength and stability in our operations. Net income in the quarter was $34 million or $0.25 per share, and the dividend declared is $0.22 per share.

In aggregate, we have now returned more than $32 per share in dividends since 2004, not missing a single quarter on the way. And we have a robust charter backlog of $3.8 billion with a very strong counterparty profile, where 2/3 of the backlog is to customers with investment grade credit trading.

During the quarter, we agreed to charter our older car carriers, SFL conductor and SFO Composer on new 3-year charters back to back with the current Volkswagen charters. We are not at liberty to disclose the name of our charterer, but it is linked to a leading global liner company based in Asia.

Despite being 20 years old, the vessels are maintained to a high standard which makes them attractive in the chartering market also for premium customers. The new charter adds $83 million to our charter backlog. We have also recently ordered 4 dual fuel, 7,000 CEU capacity car carriers with delivery into 2029.

The aggregate yard cost is approximately $360 million with a majority payable closer to delivery. And 2 of the vessels have already been charted out on 5-plus 5-year charters from delivery to a major Asia-based car manufacturer. The first fixed 5-year period adds $150 million in backlog, which could increase to $300 million if the optional period is declared.

The other 2 new buildings are open for Charter, and we are in some discussions already. In the past, we have been reluctant to order vessels without charters attached but we believe the dynamics in the car [ tire ] market remain attractive with most shipyards sold out well into 2030.

We, therefore, expect to find charters for these as well in due course. During the second and third quarter, we raised an aggregate of $100 million in equity in the market, utilizing our at the market or ATM and dividend reinvestment plan, or DRIP, programs.

A total of 8.8 million shares has been issued, and we actually managed to raise the capital at a premium to the volume-weighted average price or VIVA in this period. With good liquidity and a rising share price, we saw this as an opportunity to add investment capacity with limited dilution compared to an ordinary share offering, which normally carries significant discounts and fees.

We have already deployed some of the capital into new projects, but for the avoidance of doubt, we have no plans to issue additional shares in the foreseeable future. This last quarter, we have also had significant benefits of having 2 modern Suezmax crude oil tankers employed in the booming spot market.

These vessels were previously on a long-term charter at around $30,000 per day until December last year. This year, the market has been on fire. And in the first quarter, we earned an average rate of $54,000 per day and then up to $133,000 per day in the second quarter which is more than $100,000 per day per vessel higher than the charter rate last year.

So far into the third quarter, we have covered 63% of the vessel days at an average charter rate of around $93,000 per day. But please note that the charter hire from vessels in the spot market it's accounted for on a load to discharge basis pursuant to the U.S. GAAP, where we only recognize revenues when there is cargo on board the vessels.

So the final reported number will depend on trading towards the end of the quarter, including ballast days. And while we are enjoying phenomenal cash flow from these vessels right now, we will look for new long-term charter opportunities for these vessels in due course.

The 2 dry bulk vessels in the spot market also had increased revenues in the second quarter. But this is a very different market with less volatility compared to the large crude oil tankers. So the difference in revenue is only marginal from an aggregate perspective.

And with that, I will now hand the call over to our Chief Operating Officer, Trym Sjølie.

Thank you, Ole. We have a diversified fleet of assets chartered out to first-class customers on mostly long-term charters and the majority of our customer base is large industrial end users. Following the car carrier newbuilding orders placed during the quarter, our portfolio now comprises 61 maritime assets, including vessels, rigs and contracted newbuildings. The fleet is made up of 30 containerships, 16 tankers, 11 car carriers, 2 dry bulk vessels and 2 billing rigs. .

Our backlog from owned and managed shipping assets stands at approximately $3.8 billion, up from $3.7 billion at the end of the first quarter, reflecting the new car carrier charters and newbuilding commitments added in the period.

The backlog is well diversified across segments. Container vessels account for close to 70% of contracted revenue, car carriers around 15%, our energy assets around 10% and tankers to the balance. On duration, the weighted average remaining charter term is 7.1 years on the container fleet, 5.9 years on the car carriers and 3.5 years on the tankers.

This gives us long visibility on the core of the portfolio. And around 2/3 of 65% of our contracted revenue is with investment-grade counterparties, which gives us a high degree of confidence in the earnings visibility of this portfolio even in the volatile market environment.

So I would like to spend a moment on the car carrier segment where we have added meaningful scale and visibility during the quarter. First, we agree 3-year time charter contracts for 2 of our existing [indiscernible] vessels with new charters, adding firm backlog of approximately $83 million. Second, we have ordered 4 7,000 CEO LNG dual-fuel PCTC newbuildings with deliveries scheduled for 2029.

As Ole just explained to these vessels have already secured long-term charters with the leading Asian car manufacturers, and we are working on employment for the remaining to Taken together, these transactions added around $233 million of firm backlog in the quarter.

Our total car carrier charter backlog now stands at $578 million with a weighted average firm charter duration of 5.9 years. This reflects our long-standing strategy in the car carrier segment pairing modern fuel-efficient tonnage with strong industrial counterparties on long-term contracts.

Our existing charters with Volkswagen and KLN extend well into the next decade, and the new orders and charters further strengthened both the earnings profile and environmental credentials of this fleet.

Our charter backlog is mainly derived from time charter contracts and with the exception of poor container ships on bareboat leases, the rest of the fleet is on time charter or operating in the short-term spot market.

Gross charter higher from our fleet, including profit share was around $199 million in the second quarter, and we had a total of approximately 4,620 operating days across the fleet. And utilization was strong across all the shipping segments.

Container vessels run at 99.3%, car carriers at 10 tankers at 99.8% and dry bulk at 99.4%. The Energy segment ran up 50%. This reflects the lines drilling rig operating through the quarter, while Hercules remains one stack ahead of its upcoming contracts.

OpEx for the shipping fleet came in at about $37 million in the quarter, of which $2.2 million is drydocking cost. Two of our large container vessels completed their special survey drydockings and upgrade works during the quarter. And for reference, a typical cost for a 10 year is for special survey drydocking on a container vessel like this. is around $2.5 million.

I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

Thank you, Trym. Turning now to the cash flow slide. And financeable because it gives investors a clear view of the underlying operating performance, separate from the effects of noncash and nonrecurring items in the GAAP results.

Before I begin, I would like to flag the required disclosure. This cash flow presentation is a non-GAAP measure prepared as a management tool to assess underlying performance. It's not prepared in according to U.S. GAAP, and it should not be considered in isolation or as a substitute for any GAAP measure.

A full reconciliation of the most direct comparable GAAP figures is included in our earnings release filed this morning. The presentation also excludes certain noncash charges and items we consider nonrecurring, which can at times obscure the underlying run rate of the business. With that context, let me take you through the performance of the fleet.

In total, we generated approximately $199 million in gross charter hire during the quarter, a significant increase compared to the previous quarter. Of that total, approximately $83 million was from our container fleet which remain our largest contributor by charter hire.

Turning to car carriers. The fleet generated approximately $27 million in gross charter hire during the quarter, a slight improvement from the first quarter. In tankers, the fleet generated approximately $62 million in gross charter hire up from approximately $46 million in the prior quarter, a significant quarter-over-quarter improvement driven by our 2 Suezmax vessels trading in the spot market.

On the U.S. GAAP, revenues for spot traded vessels are recorded on a low to discharge basis, whereby revenues are graded on today's cargo is on board. During the second quarter, Suezmax tankers achieved an average state spot time charter equivalent, or TCE per vessel of approximately 133,000 compared to 54,000 in the first quarter.

Our 2 counter [indiscernible] vessels trading in short-term market achieved average daily spot TCE per vessel of approximately 16,100 compared to 10,700 in the first quarter.

As a result, in the second quarter, we recorded revenue of approximately $3 million compared to $2 million in the prior quarter. Moving to Energy. Revenue from our energy assets was approximately $24 million for the quarter.

This was driven by the [ Line Strien rig, ] which remains on a long-term contract with [ Conoco Phillips ] running through May 2029 and providing substantial contracted cash flow visibility. The Hercules is currently preparing its upcoming contract in Canada and is expected to begin contributing revenue in the first half of 2027.

On the cost side, net operating and G&A expenses for the quarter came in at approximately $69 million, all in line with the prior quarter. So putting it all together, adjusted EBITDA for the quarter was approximately $130 million compared to approximately $108 million in the first quarter.

Turning now to results on the U.S. GAAP. For the quarter, we reported total operating revenues of approximately $201 million compared to approximately $174.5 million in Q1. Operating expenses were approximately $69 million, in line with the previous quarter. We'd like to clearly identify the nonrecurring and noncash items that affected the GAAP net results this quarter so that the investors can appropriately adjust their models.

Mark-to-mark gain on hedging derivatives of $3 million mark-to-market gain on equity investments of $1 million. After accounting for these items, we report a GAAP net profit of approximately $34 million for the quarter or $0.25 per share. This compares to a net profit of $26 million or $0.20 per share in Q1.

Turning to the balance sheet. At quarter end, we had cash and cash equivalents of approximately $113 million with an additional $ 160 million available under undrawn credit facilities giving us a total available equity in excess of $270 million.

In April, we completed a $75 million tap issue of our 2030 USD senior unsecured bonds at 13.5%, implying a yield of approximately $6.8 million. an outcome, we believe, reflects the bond market's confidence in SFL's credit profile and use part of the proceeds together with cash on the balance sheet to redeem SFL's $150 million bond due in May 2026 at maturity.

Furthermore, we raised $63 million in new equity through ATM and try programs, we refer $37 million risk subsequently to quarter end. On new buildings -- the company has approximately $1.2 billion of remaining capital expenditures across 5 container vessels and 4 PCTs in new buildings, 7 of which have long-term charters in place.

Finally, our book equity ratio as of quarter end stood at approximately 29%. Before I hand the back -- the call back to Espen, let me close with a few summary points. The Board has declared our 90th consecutive quarterly cash dividend of $0.22 per share. At current prices, that represents an annualized dividend yield of approximately 7%. Our charter backlog now stands at approximately SEK 3.8 billion. Approximately 2/3 of that backlog is its customers carrying investment-grade credit ratings.

That combination, scale, duration and counterparty quality, provides exceptional cash flow visibility and gives us the confidence to continue investing in growth. We have strong balance sheet, ample liquidity and disciplined capital allocation, we remain well positioned to pursue accretive investment opportunities.

The American mass market continues to evolve and VidSL is uniquely positioned for long-term charter model, diversified fleet and access to capital to continue generating value for shareholders. Thank you all for joining us this morning. I'll now hand the call back to Espen in order to open the line for questions.

Thank you, Aksel. [Operator Instructions] And we will have our first question from Sherif.

Starting with the car carrier market, could you just shed a little bit of light on what it is about that market that's giving you confidence to order new builds on spec, especially because demand has been so strong across the shipping space.

Yes, maybe I can answer that, Ole. It's the -- the big story on the car can market is the growth of the China volumes and it's been growing consistently over many years, while the investment in car carrier vessels, although strong in the past few years in many years with low investment volume.

So that means there will be a lot of older vessels that will have to be phased out at some point. And when we look at the balance of the demand for ships going forward, we see there's sort of a gap between supply demand growing from sort of 2029, 2030 and onwards even with a strong ordering activity that has been lately.

Got it. And then I'm just trying to pivot over to the rigs for a second. Given given persistent disruptions in the Middle East, I'm wondering if that's changed the conversation you're having with charterers around the term of work for the Hercules -- and then maybe also if you could just remind us how long the extension options for the Hercules run.

Yes. The Hercules is in Norway at the moment. It's being prepared for Canada operations will move in February. And we are doing some upgrades on the rig, including removal or replacing some obsolete equipment, et cetera. .

So that rig will be ready to go and can work for a long time once it's active. There are -- the program is 400 days fixed with various options that could stretch it for for roughly a similar additional period in total, if all options are being exercised. We do see an underlying strengthening in the oil exploration and production market.

But remember that -- this is a slow process where all companies typically work on longer schedule. So it's not like the turnaround quickly and and do a lot of extra activity. But we see now in several markets that they are refocusing, looking at how they should invest more, including oil exploration and build-out of existing fields.

So we remain positive on the long-term prospects for the drilling sector. And also, if you look at that specific unit, it's a high-end harsh environment drilling unit, till the new 1 would probably cost you north of $1 billion.

And the charter rates we see are -- will -- does not at current level justify building a new one. So there is a significant uplift potential in the market before we expect to see much new supply coming in.

So our, of course, objective is to have that rig out working and keep it working, but we cannot make any promises on how the market will develop. And what kind of charter rate we will have in the long run. But it's -- we really look forward to having the rig out, producing cash flows again.

And we'll take our next question from [ Mr. Kunal Mala. ]

I want to start by following up on the Car carriers new builds. I mean you went for LNG defer propulsion on those assets. Could you talk a bit about the reasoning for that? Is this something your customers generally ask for? Or do you expect the economics from JV or fuels to justify the higher price line?

It's clear that on -- Well, first off, nobody is building car carriers with conventional fuel only today. So the option you really have is whether to do LNG, methanol or ammonia, dual fuel vessels. It's in what is maybe unique in the car carrier space that the customers, i.e., the car manufacturers and their car buyers ultimately demand or expect green transportation.

Now we happen to believe that LNG is the best fuel at the moment based on availability. And sort of technical usability. And we -- on the ships that we have already that are running on LNG dual fuel -- and they are actually running exclusively on LNG.

So typically, in the case of Volkswagen and Keyline, which then transport on behalf of the Volkswagen and Toyota manufacturers mainly they are running all their dual-fuel vessels on the dual fuel, which is kind of the point.

So we are very confident that this is the right way to go. There are other fuel types available. But for us here, we believe in LNG for the moment and that, that is the best sort of intermediate solution for reducing emissions over time.

And then maybe adding in on that, what we have seen, and this is more a general observation in the market, when you have transportation of a product that is, I would say, close to finished and close proximity to the end user, if you could call it that like vehicles and also finished goods and certain goods that are transported on container ships, you see a distinct willingness to pay for the, call it, I would say, call it, the greener fuels, the fuels with less emissions despite the higher cost. .

If you look at more raw materials, be it dry bulk or on the tanker side, we see the opposite. There, it's more focused on is there an arbitrage. Do we save money on buying the alternative fuel? If not, there is very limited willingness to pay off even from larger oil companies, industrial manufacturers they typically don't focus so much on that on the raw material side.

But we have now a number of car carriers both on the water and to be constructed, we have large container ships with LNG dual fuel, and we have 2 chemical carriers. So we have now a significant portion of the fleet with alternative fuels and we think that is the way to go, having a balanced fleet, modern future proof.

Now as a comprehensive answer. So thanks for the color I also wanted to ask a bit about your overall backlog how many of your contracts have purchase options on behalf of the charter and should we expect any to be diverse soon.

Well, we have, for instance, some tankers that are soon through with their initial 5-year charter period where there are extension options that are coming up later in the year and into next year.

As an example, we have 7 tankers, 3 Suezmaxes and 4 [indiscernible] all those options are compared to the current spot market, well in the money. The charter market is much higher than the charter rates that we have agreed in the optional period.

And remember, the optional periods were based and were started or are structured when the price level and the values of these assets and our acquisition cost was much lower than the prevailing market. So that is our charters options to potentially exercise that and keep those vessels longer.

But what we have structured, which could be potentially very interesting for us with some of these charters, we have structured a profit split type functionality where we can agree to sell the vessels in the market instead of extending the charter period.

And then with the profit share mechanism where charter will get a part of that profit, and we will get a part of that profit. And for -- in the tanker market, as you've seen with our spot-traded Suezmax tankers, it's really on fire. Both on the charter rate side but also on the asset value side. So depending on our charters choice of option is really can really go 2 ways, either we continue with vessels on the long-term charters, producing good cash flows for us or we can get a windfall of a profit -- if they would like to go that way.

So for us, it's really 2 good options, but one of the options would be to get a lot of cash in our hands and book a big gain if we get there. If not, we will keep the vessels longer and hopefully have a very good trading life long term.

Okay. 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 the management, there are contact details in the press release or you can gain touch with us through the contact pages on our web page, sflcorp.com. Thank you, everyone, for tuning in.

Welcome to SFL's First Quarter 2026 Conference Call. My name is Espen Gjosund, and I'm Vice President of Investor Relations in SFL. Our CEO, Ole Hjertaker, will start the call with an overview of the first quarter highlights. Then our Chief Operating Officer, Trym Sjølie, will comment on vessel performance matters, followed by our CFO, Aksel Olesen, who will take us through the financials. The conference call will be concluded by opening up for questions, and I will explain the procedure to do so prior to 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. Please note that 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 results and our financial condition. Then I will leave the word over to our CEO, Ole Hjertaker, with highlights for the first quarter.

Thank you, Espen. We are pleased to announce our 89th consecutive dividend, and we have firmly positioned SFL as a maritime infrastructure company with a diversified high-quality fleet. For the first quarter, we reported revenues of $174 million and an EBITDA equivalent cash flow of $108 million. Over the past 12 months, EBITDA amounts to $443 million, reflecting the continued strength and stability of our operations. Net income in the quarter was $26 million or $0.20 per share, and dividend has been increased to $0.22 per share this quarter. In aggregate, we have now returned $3 billion or more than $30 per share in dividends since 2004. And we have a robust charter backlog of $3.7 billion with a very strong counterparty profile where more than 2/3 of the backlog is to customers with investment-grade credit rating.

In the quarter, we announced a new contract for the ultra-deepwater harsh environment drilling rig Hercules, which would be employed in Canada from the first quarter of 2027. The third part of the contract is 400 days and represents a backlog increase of approximately $170 million. There are also shorter options in addition to that, which could extend the contract beyond the 400 days. Generally, we see a significant demand for harsh environment, deepwater capable semisubmersible drilling rigs towards the end of the decade and believe this contract could position the rig attractively for prospective drilling campaigns in harsh environment areas. It is the only rig in the market with a valid Canadian safety case and has previously also worked in Norway and Namibia.

This last quarter, we have also had the pleasure of having two 2020-built Suezmax tankers employed in a booming spot market. You may remember that we agreed to release the charters on these vessels against the compensation of $11.5 million per vessel in December last year instead of selling the vessels in the market to a third party. We used to have four vessels to the same charterer, and we sold the other 2 older vessels with net cash proceeds after debt repayment of approximately $52 million in aggregate. So adjusted for the compensation to terminate the charters on the newer vessels, we took nearly $30 million cash off the table. The vessels are currently traded in the spot market, and the market has strengthened significantly since the deal was concluded in December.

In fact, net cash flow contribution is now higher from these two vessels alone compared to all four vessels in the original charter arrangement. We reported nearly $54,000 per day on a time charter equivalent basis in the first quarter, which compares to a cash breakeven below $20,000 per day after debt service. But this is dwarfed by the earnings into the second quarter where we have experienced a historically strong market on the back of market disruptions caused by the war in the Middle East.

So far, we have covered 53% of vessel days at an average charter rate of around $185,000 per day. But please note that reported charter hire for vessels in the spot market is accounted for on a load-to-discharge basis pursuant to U.S. GAAP. We, therefore, expect the average for the full quarter to be lower than the booked revenue so far due to expected ballast days in the remainder of the quarter. Also, the spot market is lower than the charter rate we have booked so far this quarter, but still, we expect a very firm quarter in the second quarter.

While we are enjoying phenomenal cash flows from these vessels right now, we will look for new longer-term charter opportunities in due course. Recently, we also successfully raised $77.6 million in a tap issue of our 2030 senior unsecured bond loan, where we issued $75 million at a price of $103.5 million of par value. The original bond loan has an interest rate of 7.75%, and we are pleased to see an implied interest rate in the tap issue of only 6.8% -- this tap issue was not planned, but something that came about after reversing expiries from bondholders who wanted to increase their exposure to SFL at premium pricing. So we decided to act opportunistically in the situation, and the transaction was executed on very short notice. And with that, I will now hand the call over to our Chief Operating Officer, Trym Sjølie.

Thank you, Ole. We have a diversified fleet of assets chartered out to first-class customers on mostly long-term charters and the majority of our customer base is large industrial end users. Following the sale of two Suezmaxes, the SFL Ottawa in Q4 last year and SFL Pelon, which was delivered to its new owners in February, our current fleet stands at 57 maritime assets, including vessels, rigs and contracted newbuildings. Our backlog from owned and managed shipping assets stands at approximately $3.7 billion, and the fleet is made up of 2 dry bulk vessels, 30 container ships, 16 large tankers, 2 chemical tankers, 7 car carriers and 2 drilling rigs. 2/3 of our contracted revenue is with investment-grade counterparties, which gives us a high degree of confidence in the earnings visibility of this portfolio even in the volatile market environment.

Our charter backlog is mainly derived from time charter contracts and with the exception of four contract container ships on bareboat leases, the rest are on time charter or operating in the short term or spot market. Charter revenue from our fleet was about $174 million in Q1, and we had a total of 4,598 operating days across the fleet in the quarter. Utilization was strong across most segments as container vessels ran at 100%, car carriers at 100% and tankers and dry bulk came in at 99%. The Energy segment ran at 50%, reflecting that our Hercules rig remains warm stacked in Norway in preparation for its new contract.

OpEx for the shipping fleet came in at $42 million in Q1, broadly in line with the budget. And this quarter, we had 3 Maersk S-Class container vessels in or completing dry dock, the Maersk Sarrat, Maersk Shibling and Maersk Skarstil, all undergoing significant upgrades under the new 5-year charter agreements with Maersk. This is part of our ongoing effort to maintain and improve the quality and earning capacity of our assets over the long term. I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

Thank you, Tim. Turning now to the cash flow slide. I find this one valuable because it gives investors a clear view of the business' underlying operating performance, separate from the effects of noncash and nonrecurring items in the GAAP results. Before I begin, I want to flag the required disclosure. This cash flow presentation is a non-GAAP measure, repair as a management tool to help assess underlying performance. It is not prepared in accordance with U.S. GAAP, and investors should not consider it in isolation or as a substitute for any GAAP measure. The presentation also includes certain noncash charges and items we consider nonrecurring. With that context, let me take you through the performance of our portfolio.

Across the fleet as a whole, we generated approximately $177 million of gross charter hire during the quarter. Of that total, approximately $81 million came from our container fleet, including profit share income related to fuel savings on 7 of our large container vessels. The container market backdrop remains constructive and the long-term contracted portfolio continues to generate strong visible cash flows.

Moving to car carriers. The fleet generated approximately $26 million of gross charter hire, consistent with the previous quarter. All vessels are employed on charters with high-quality counterparties, providing strong earnings visibility. In tankers, the fleet generated approximately $46 million of gross charter hire, up from approximately $42 million in the prior quarter, a meaningful sequential improvement. This reflects the continued strength of charter arrangements across the tanker fleet. As previously disclosed, the portfolio now includes two Suezmax tankers trading in short-term market where we have been well positioned to capture favorable spot rates.

Turning to dry bulk. As many of you are aware, we have been strategically divesting vessels over recent quarters as part of our fleet renewal. We now have 2 Kamsarmax vessels remaining, both trading in the short-term market. Revenue from these vessels was approximately $2 million compared to $3 million in the prior quarter. The dry bulk market has shown encouraging improvements, which reflected an improving day rate environment so far in the second quarter.

Moving to Energy. Revenue from our energy assets was approximately $23 million for the quarter. This was driven primarily by the Lynas Drilling rig. which remains on a long-term contract with ConocoPhillips running through May 2029, providing substantial contracted cash flow visibility. We're also pleased to announce that the Hercules has secured a new contract that will contribute revenues from the first half of 2027. While we're not in a position to share full details at this stage, this is an important development. It extends the earnings visibility of a key asset and reinforces our confidence in the long-term demand outlook for high-specification drilling units.

On the cost side, total operating and G&A expenses for the quarter came in at approximately $69 million, broadly in line with the prior quarter. Putting it all together, adjusted EBITDA for the quarter was approximately $108 million, also consistent with Q4 '25. The sequential stability is a meaningful indicator of the quality of our contracted cash flows and the resilience of our business model across varying market conditions. I would remind the listeners that adjusted EBITDA is a non-GAAP measure. We define it as net income before interest, taxes, depreciation, amortization and certain nonrecurring and noncash items. A reconciliation to GAAP net income is provided in today's earnings release.

Turning now to our results under U.S. GAAP. For the quarter, we reported total operating revenues of approximately $174.5 million compared to approximately $175.5 million in Q4 '25. Vessels contributed approximately with $151.5 million Other rigs contributed with approximately $23 million. Operating expenses were approximately $69 million, in line with the prior quarter. I want to clearly identify the nonrecurring and noncash items that affected the GAAP net results this quarter so that investors can appropriately adjust their models. Gain on sale of assets, $11.5 million, mark-to-market gain on hedging derivatives of $2.5 million and mark-to-market gain on equity investments of $1.9 million. After accounting for these items, we reported a GAAP net profit of approximately $26 million for the quarter or $0.20 per share. This compares to a net loss of $4.6 million or $0.04 per share in Q4, a meaningful swing that reflects both the operational improvement and the nonrecurring items I just noted.

Turning to the balance sheet. As of March 31, 2026, we had cash and cash equivalents of approximately $128 million with an additional approximately $160 million available under undrawn credit facilities, giving us a total available liquidity in excess of $280 million. We believe this is a solid and well-positioned balance sheet as we move through 2026.

Furthermore, I would like to highlight several noteworthy developments. First, we have refinanced the facilities related to both the Hercules and the Land rigs on favorable terms. This confirms that the bank lending market for high-quality offshore assets remains open and we're very pleased with both outcomes. Second, subsequent to quarter end, we completed a $75 million tap issuance of our 2030 U.S. dollar senior unsecured bonds at 103.5% of par, implying a yield to maturity of approximately 6.8%. This was an opportunistic transaction that extends our liquidity runway, and we believe reflects the bond market's confidence in SFL's credit profile.

Regarding upcoming maturities, our $150 million senior unsecured bonds issued in 2029 mature shortly now in May. We intend to redeem these notes using available liquidity, and we are well positioned to do so. During the quarter, we made approximately $56 million in scheduled loan amortization. more than $220 million annualized. This reflects the systematic deleveraging of our fleet, and it is a structural feature on how we manage the balance sheet.

On newbuilding's, our 5 contracted container newbuilding's represent remaining capital expenditure commitments of approximately $850 million. We expect to fund these through a combination of pre and post-delivery financing and we are seeing strong lender interest, which reflects the quality of the assets, the strength of the charter counterparty and the favorable financing environment for modern fuel-efficient tonnage. Finally, our book equity ratio as of quarter end stood at approximately 27% -- before I hand the call back to Espen, let me close with a few summary points.

First, the Board has declared our 89th consecutive quarterly cash dividend of $0.22 per share, an increase of 10% from the prior quarter. At current prices, that represents an annualized dividend yield of approximately 7.5%. Second, our charter backlog now stands at approximately $3.7 billion. More than 2/3 of that backlog is with customers carrying investment-grade credit ratings. That combination, scale, duration and counterparty quality provides exceptional cash flow visibility and gives us the confidence to continue investing in growth. Third, with a strong balance sheet, ample liquidity and disciplined capital allocation, we remain well positioned to pursue accretive investment opportunities.

The maritime asset market continues to evolve, and we believe SFL is uniquely positioned through a long-term charter model, diversified fleet and access to capital to continue generating value for shareholders. Thank you all for joining us this morning. I will now hand the call back to Espen to open the line for questions.

Thank you, Axel. We will now open for a Q&A session. [Operator Instructions] We will have our first question from Gregory Lewis.

Clearly, these are interesting times across all of maritime shipping. But I was hoping to talk a little bit more about the tanker sector. Backlog is good at a little over, what, 3.5 years. But we do have some vessels on spot that you alluded to and then even some vessels that are rolling off their existing contracts, not just over the next couple of quarters, we'll just say.

As we sit here today, just given a lot of the volatility in tanker rates and some of the uncertainty out there, how should we be thinking about the opportunities for SFL maybe to put some of these vessels or either extend existing charters maybe that have options or just kind of maybe build out on that backlog portfolio for the tanker market, just given the strength we're seeing in tanker rates?

Yes. Thank you, Craig. This is Ole. Thanks for the question. We -- you can say that we were lucky in the way we ended up with the 2 Suezmax tankers in the spot market. We did expect that market to firm, but we did not anticipate the extent of how it has firmed. And it's important here to understand that this is, of course, partly due to the market disruption caused by the Arabian Gulf, but also by a significant consolidation on the supply side for VLCCs, i.e., the larger 2 million barrel vessels.

So we see a combination here that is unprecedented. We've never seen that before. We will look for -- because our principal business is long-term charters. So we will look for longer-term charters also for these 2 vessels in due course. But for now, we've been enjoying the very strong spot market. We do have some vessels that are coming up later in the year, but there are extension options on those. And given the charter rate and the prevailing market for the -- these are Aframax LR2 tankers, we would not be surprised if those vessels were extended for another year or 2. So we do not have sort of any sort of spot vessels where we effectively control the trading in that sector right now. We've also seen values go up significantly, but also backed by higher charter rates. So we are looking at also new opportunities also in the tanker space, but I cannot comment on -- we cannot be specific until or unless we actually do a deal.

Great. And then I did want to talk a little bit about the 10% dividend increase. That was good to see. That was a nice move higher. I mean I guess it's never just one thing when you think about increasing the dividend. just given the focus by the company on returning cash to shareholders. But I would be kind of curious how we're thinking about the dividend, maybe what drove that? I mean, I'm assuming it was a combination of the backlog. You had some positive developments on the Hercules. Just kind of if you could walk us through from a cash flow perspective, you could arguably pay out a lot more than you're currently paying. So just if you could kind of walk us through when you were speaking with the Board, how we kind of came up with the decision for the 10% move.

Yes. I think from a Board perspective, we never give guidance for dividends. But the dividend and the dividend discussion is also always backed by the long-term, call it, expectations for cash flows going forward. And we have a combination of multiple effects there. And then you mentioned some, we have more clarity now on the Hercules. And that also includes upgrades and investments we need to do on the rig to -- before that contract. There were other contract opportunities where we might have had to invest a lot more in the rig than what we need to do to put it back to work in Canada. So there is lower CapEx really on that one.

Also, incidentally, if you look at the net cash flow from the 4 vessels we had with CP Industries in the past. The incremental cash flow in the first quarter from just those 2 vessels were around $0.02 per share. So -- but that's a coincidence. It's not a direct link to that uplift. But there's certainly more cash flow and more less, I would say, uncertainty around our portfolio. And we also have to remember that we have lots of vessels that are performing -- have a stellar performance, close to 100% utilization, strong cash flow, strong counterparties. So that is really the confidence the Board then had to lift the dividend this quarter from $0.20 to $0.22. And of course, our long-term objective is, of course, to return cash flow to shareholders. So that is our driving force and that's all of our incentives are really focused on returning capital to our investors, and we're happy to do that, increase it this quarter.

We'll take our next question from [indiscernible].

I also wanted to ask about the Hercules. Paolo, you briefly touched upon this, mentioning that upgrades for the contract you secured maybe a bit lower than for other contracts you had looked at. But could you talk a bit more about this and how much you currently plan to spend?

From -- we have not been sort of specific on the numbers. What we are doing, but there are relatively low, call it, tactical upgrades required. We are doing some replacement of equipment, a rig, there are some equipment on board that is coming to the end of the effective life cycle. So we are doing that -- those upgrades in parallel. These are more longer term. This is really to make the rig capable for really long-term deployment in harsh environment. But the rig was -- the last employment for the rig was in Canada, and it's going back to Canada. And therefore, very limited upgrades that we have to pay for. We have our customer who will pay for some upgrades that they see as a benefit for them in those vessel operations. So it's a relatively small number. And we guided on CapEx for all our vessels.

And I would say half of the CapEx that we guided in the press release is so is relating to the Hercules. And the other part is relating to our other vessels in the portfolio. But it's -- compared to our asset base, it's -- we're talking small numbers on an aggregate scale. Of course, also, as you move into -- move closer to the mobilization to Canada, we need to increase staffing on the rig. Right now, it's warm stacked, but we need to put a full crew on before drilling operation starts, et cetera. So that will happen. But this is more to say, that's just how we plan for it and how we ensure that this rig is ready to go and can start to produce cash flow for us at the first opportunity within the commencement window in Canada in the first quarter.

That's very helpful. I also wanted to ask about the index-linked contract on the Linus. Could you remind us when the index-linked hire is revisited? And based on recent market trends, do you expect to see any change in the daily hire under the long-term contract?

The charter rate for the liners has been increasing gradually. It's set by a market panel, and it's been scraping upwards. The contract runs until May 2029. We all know that Conoco, and this is like 2 years ago or 2 or 3 years ago, they had -- they increased the scope or they extended the license from 29 to 2049. So they have another 20 years. And with the increased focus now on energy, call it, production, particularly, I would say, in the Northern Hemisphere, and this is on the Norwegian Continental Shelf, we believe there will be a lot more activity on the U.K. side. And same thing also in Canadian waters. We expect that there will be a need for high-end units on that field or other similar fields nearby in the foreseeable future. But it's still 3 years out. So it's a little early to start discussing anything specific.

Okay. Makes sense. And final question for me. You've been clear you'll be looking for a long-term contract for the 2 spot Suezmaxes when the time is right. Should we expect the same approach to be applied to the 2 spot Kamsarmaxes? Or is the sale maybe more likely for these 2 vessels?

Yes. Well, it's a good question. We have been looking for contracts also for those vessels. But I would say for medium-sized bulkers, there's typically not a very long term. It's difficult to find longer-term charters. So typically, the charters would do, say, up to 1 year. But that is also the time they can themselves hedge out through FFAs, et cetera. So we don't find that attractive for SFL, then we rather take the marginal premium of having the vessels in the spot market compared to locking into on a time charter basis and effectively keep that margin ourselves. So when we look we typically look for longer terms than 1 year.

Typically, I would say our sweet spot would be maybe 3 to 5 years, depending on charter rate, et cetera. But it's all down to finding the right counterparty, finding the right structure of the charter, et cetera. So this is something that we will work on what we say. We watch the market closely. We have very good market intelligence, but we cannot be specific on the charter rate or term at this stage. We will be opportunistic.

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

Welcome to SFL's Fourth Quarter 2025 Conference Call. My name is Espen Nilsen, and I'm Vice President of Investor Relations in SLF. Our CEO, Ole Hjertaker will start the call with an overview of the fourth quarter highlights, then our Chief Operating Officer, Trym Sjolie will comment on this on performance matters on the call by our CFO, Oxy Olesen, who will take us through the financials. The conference call will be concluded by opening up for questions, and that will explain the procedure to do so prior to 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 anticipates, intends, estimates or similar expressions are intended to identify these forward-looking statement statements. Please note that forward-looking statements are not guarantees of future performance. These statements are based on our current clients and expectations and are hardly 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 statement 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 are therefore not only is 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 operating results and our financials.

[Audio Gap] Transaction has been very profitable for us with an annualized return on equity above 25%. In parallel, we also agreed to release the charters on 2 other 2020 built Suezmax tankers against a compensation of $11.5 million per vessel instead of selling the vessels in the market to a third party. Similar to the 2 other vessels, the return on this investment has been very strong based on prevailing values at the time of the agreement in December. We decided to keep these vessels as they are Korean built and very fuel efficient. They're also newly dry-docked and more attractive for new potential long-term charters compared to the 2 older vessels.

Based on U.S. GAAP accounting rules, the full settlement compensation was expensed as a cost in the fourth quarter, which turned a net profit into a net loss for the quarter despite the very strong return on investment so far. The positive side of this is that we have the vessels on our books at only $55 million, while charter free values according to ship brokers is currently in excess of $80 million. The vessels are currently traded in the spot market, and the market has strengthened significantly since the deal was agreed only with less than 2 months ago.

Net cash flow contribution is currently higher from these 2 vessels alone than all 4 vessels in the original the charter agreement. I would note that the charter hire from masses in the spot market is accounted for on a low to discharge basis based on U.S. GAAP. So we can expect some volatility in the profit and loss statement from quarter-to-quarter due to vessel positioning. We will look for new long-term charter opportunities in due course and market analysts predict a very strong tanker market next few quarters. We have seen an unprecedented consolidation recently in the supply side for the larger 2 million-barrel VLCCs and very high charter rates in that segment, which is expected to also have a positive spillover effect on the 1 million-barrel Suezmax market as these 2 segments over time has shown a high correlation.

Turning to our offshore assets. The harsh environment drilling rig lines performs very well on the long-term contract with Conoco while the harsh environment drilling rig Hercules remains warm stacked in Norway pending new employment. The offshore drilling sector is gaining tangible structural support, driven by recent strategic industry developments that underscores higher day rates, extended contract duration and rising demand for premium high-specification rigs. First, the announced all-stock merger between Transocean and Valaris announced earlier this week marks a pivotal consolidation in the space. And secondly, a recent new 3-year contract for the Noble GreatWhite drilling rig in Norway with start-up in 2027, illustrates the strengthening contract fundamentals. With this backdrop, we remain optimistic about securing new employment for Hercules in due course.

So with the announced $0.20 dividend, SFL has now returned more than $2.9 billion to shareholders over 88 consecutive quarters. This represents a dividend yield of around 9% based on yesterday's share price. And our charter backlog stands at $3.7 billion, with 2/3 contracted to investment-grade counterparties, providing strong cash flow visibility. Over time, we have consistently demonstrated our ability to renew and diversify their asset base, supporting a sustainable long-term capacity for shareholder distributions. Our solid liquidity position, including undrawn credit lines and unlevered assets at quarter end, ensures that we remain well positioned to continue investing in accretive growth opportunities.

And with that, I will now hand the call over to our Chief Operating Officer, Trym Sjolie.

Thank you, Ole. We have a diversified fleet of assets chartered out to first-class customers on mostly long-term charters and the majority of our customer base with large industrial end users. After the sale of 2 Suezmaxes in Q4, our current fleet is made up of 57 maritime assets, including vessels, rigs and contracted newbuildings. Our backlog from owned and managed shipping assets stands at approximately $3.7 billion. And the fleet following Q4 is made up of 2 dry bulk vessels, 30 container ships, 14 large tankers, 2 chemical tankers, 7 car carriers and 2 drilling rigs.

Our charter backlog is mainly derived from time charter contracts. And with the exception of 4 containerships on bareboat leases, the rest are on time charter or in the short term or spot market. The charter revenue from our fleet was about $176 million, and we had a total of 4,808 operating days in the quarter. Our overall utilization across the shipping fleet in Q4 was about 98.6% and adjusted for unscheduled technical off-hire only, the utilization of the shipping fleet was about 99.8%. This quarter, we had 2 vessels in scheduled dry dock at a cost of about USD 4.2 million. Furthermore, we had a chemical tanker in shipyard to carry out upgrades to the LNG dual fuel system to better handle gas boil-off. A sister vessel will have the same upgrade done in Q1.

This is part of our drive to ensure we can fully utilize our dual fuel capabilities. All of our 6 LNG dual-fuel vessels are actually operating on LNG. which aligns with our ambitions to reduce greenhouse gas emissions from our fleet.

I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

Thank you, Tim. Turning to this slide, we present a pro forma illustration of our cash flows for the quarter. Please note that this is on a guideline to assist the company's underlying performance. It is not prepared in accordance with U.S. GAAP and excludes extraordinary and noncash items. The company generated approximately $176 million of charter hire during the quarter. Of this, around $1 million came from our container fleet including profit share related to fuel savings on 7 of our large container vessels. The car carrier fleet generated approximately $26 million of charter hire compared to $23 million in the prior quarter reflecting that all vessels were fully back in service during the period, following a scheduled drydocking last quarter. In tankers, the fleet generated approximately $42 million of charter hire, down from around $44 million in the previous quarter due to a scheduled dry locking.

In dry bulk, we have divested the majority of the fleet over recent quarters. and now have 2 Kamsarmax vessels remaining, both trading in the short-term market. Revenue from these vessels was approximately $2.7 million or the equivalent of approximately $15,000 per day per vessel. Revenue from our energy assets was approximately $23 million, mainly generated by the liners, which is in a long-term contract with ConcoPhilips through May 2029. Net operating and G&A expenses for the quarter were approximately $67 million, broadly in line with the previous quarter. Overall, this resulted in an adjusted EBITDA of approximately $109 million, which is in line with the third quarter.

Turning now to the profit and loss statement and the U.S. GAAP. For the quarter, we reported total operating revenues of approximately $176 million compared to $178 million in the previous quarter. The net result for the quarter was impacted by several nonrecurring and noncash items, including a gain of sale of Suezmax tankers of approximately $11.3 million. settlement compensation of $23 million relating to 2 Suezmax tankers positive mark-to-market effects from hedging derivatives of $600,000 positive mark-to-market effects from equity investments of $700,000 and an increase in credit loss provisions of 200,000. As a result of U.S. GAAP, the company reported a net loss of approximately $4.7 million.

[Audio Gap] partly cash dividend of $0.10 per share tending a dividend yield of approximately 9%. Charter backlog stands at approximately $3.7 billion with more than 2/3 linked to customers with investment-grade ratings, providing strong cash flow visibility. With a solid balance sheet and liquidity position, we remain well positioned to act on accretive investment opportunities.

With that, I will hand the call back to Espen, who will open the line for questions.

Thank you, Aksel. [Operator Instructions] And we will have our first question from Mr. Gregory Lewis. Gregory, please unmute your speaker to ask your question.

Thanks for highlighting the activity in Suezmax with your Suezmax ships. I guess I'd be curious how you're thinking about those vessels. Clearly, the crude tanker spot market seems to be surprising to the upside, everybody's expectations rates are strong. I know the focus is on putting out long-term charters. We've definitely seen some short, I guess, 12-month charters for some of the larger vessels, some these -- but I'm just kind of curious, just given the strength in rates and where we are in the first part of 2026. Are we starting to see signs or interest from customers or charters around multiyear contracts? Or is it as we think about these vessels, should we just be thinking more, hey, the spot market is good, the outlook is good for the next couple of years, and we're just going to use this kind of as a trade?

Yes. Greg, and thanks. Yes, we find that market segment quite interesting right now for a couple of reasons. And just to also be clear about that, we -- when this transaction, call it, opportunity came about, this was based really backed by the agreement we had there with this customer where we, after a certain period of time, gave them the opportunity to effectively trigger a sale with a profit share as long as we were over a level that gave us a very good return in the first place. And then the market has been moving up, and they were interested in doing that. So we sold it to older Chinese-built vessels. And if you look at the equity returns we generated on that those with the implied profit split that we got out of it too, we're talking sort of high 20s in return on equity on those deals.

So I would say it was a really strong deal and much better than we anticipated when we did that deal back in the days. And they also wanted to do the same with the other 2 vessels. But the other 2, the Korean built vessels are more attractive for long-term charters. They are Korean built. They're sort of eco-design. they have scrubbers. We just had them through a dry dock. And we believe they are more attractive also for longer-term charter opportunities. What we did not anticipate back in December was the way the market moved upward sharply. So over this 2-month period, both 1-year charter, as indicated by brokers and also the index, the TD 20 index that sort of is used for hedging in this market is up 20% in that short period of time.

A couple of reasons for that. I mean you have some trading pattern issues. But I think one very important underlying factor here on the tanker side, which I would call almost unprecedented in the market, at least in the history, I've seen is that you have one party or a group of people who are working together who effectively control around 1/3 of the available or traded tanker VLCC fleet out there. And we believe they are willing to hold back ships if they don't get the rate -- charter rate where they want it to be, which implicitly would give also the other owners out there, confidence to hold back and not just drop their plan, so to speak, and fix at lower levels.

So I think that is a very -- I would say, fundamental shift in the market. And then we have to look at the correlation between the VLCC market and the Suezmax market where over the last 25 years, the Suezmax have earned around 85% of the VLCC charter rate. So we believe that with the dynamics on the VLCC market and also trading patterns, which is quite interesting for the Suezmax size we think the market could remain firm for some time. But our ultimate objective here is to find new longer-term charters for these vessels. But then of course, in the meantime, we enjoy the spot market.

And just to be clear, I mean, we used to have 4 vessels. The 2 vessels that are remaining are generating more net cash flow than all 4 vessels did in the previous chartering arrangement. So far, we are generating more cash out of 2 vessels compared to 4 vessels in the past.

Yes. No, it's definitely good to be a tanker owner at the moment. And then I'll -- I was hoping realizing that it's always -- it's a Board decision. There's lots of variables that go into how the company thinks about the dividend. But as we kind of think about, I guess it will be later this year. And I think next quarter, it will be the dividend would have been lowered for about a year now. I think at the time, one of the drivers of that dividend was the lack of visibility on the Hercules but to the sustainability of the model, the dividend is still below 50% of operating cash, it's well covered on a net income basis.

I guess 2 questions here. How are we thinking about the dividend over the next 12 months? And to that point, is one of the -- to that point, how is the market looking for in the secondhand market, i.e., opportunities, clearly, in tankers, prices are high. chart rates are catching up to do. How is the opportunity for growth looking in kind of the containership market, which seems to be maybe where numbers, the economics might look a little better in doing purchase in charter out.

Yes, thanks. I mean to start with the dividend, call it, question, the Board never guide some dividend going forward. But the underlying sort of structure or what goes into that evaluation is long-term sustainable cash flows. If you look at the last year, we did sell a number of vessels so that we're coming to the end of the charter period. We sold some older feeder container shapes, et cetera. So which freed up quite a bit of capital. And of course, to have a sustainable distribution, you have to have producing assets, call it, generating those returns. So that's one thing.

And also, I would say, last year, for geopolitic reasons with that sort of we call it a trade war or at least trade friction mounting, we sensed that many of the players out there were stepping a little bit back. They were very uncertain about how this all would evolve. And then it's difficult to get, call it, counterparties to commit long term. So we sense now that the dynamics is more -- is better. We see more interest in engaging for new business, but we cannot really comment on anything before we potentially do it.

And from a Board perspective, I mean it's very -- we try to be disciplined try not to -- what can we say, run out and just spend the money because we have capital available. It's all about trying to do the right deals, long-term deals, and then from time to time, you may get lucky like we did on the Suezmax tankers with a much stronger return than we expected. So that's what you should expect from us. We should try to deploy the capital in a hopefully balanced way, build distributable cash flow. We still have the drilling at Hercules idle, that used to produce a lot of cash flow for us in 2024, so there are a few factors here going into that. But still, we are looking at north of $100 million in dividends per year, even at this level.

So we are paying a lot of cash flow out to shareholders. It's more than $2.9 billion over the 88 quarters. So I think we've shown a disciplined approach to it that we've been standing firm through pretty rough cycles. And hopefully, we will have good capacity also going forward.

Then we'll also have a question from Mr. [indiscernible]. Kindly unmute your speaker to ask your question.

I joined a few minutes late, so you may have touched upon this, but I wanted to follow up on Greg's question on the charters you terminated. Could you remind us what was the rate on the previous contract? And secondly, could you talk a bit about the fixtures you have secured to date in the spot market?

Yes. We -- this was a deal that was done back in 2022. The 2 Chinese-built vessels were acquired for, at that time, around $46 million, $47 million, if I'm not mistaken. We had on charter rates of around $27,000 per day for that period. And then we sold them now for $57 million net. So we've enjoyed strong cash flows, depreciated the assets and then sold them for 20% more gross than we bought them for 3 years earlier, hence, the very strong returns on that deal.

Similar dynamics on the newer Korean build vessels. They were more expensive. So we bought them for around $64-ish million, if I'm not mistaken. And if you look at the broker reports now, and you have, for instance, the broker firm lease they just increased their valuations on Tucker assets and the no guide 5-year-old Suezmax tankers at $85 million. So it's a significant uplift also for these assets.

If you look at the spot market, we typically will not guide on spot market there and then. I mean you can you can look after the brokers, they will typically guide you on what the charter rates are -- but just to give you a guiding right now, and this is just from a broker report the guide at a 1-year TC for a modern Suezmax tankers would be in the high 40s, they guided 47,500. While if you use the Suezmax TD20 index, they -- you could do 12 months now in excess of $60,000 per day based on the index alone. So the market is quite strong as a guide. As I mentioned, we were below $30,000 in the old structure. And remember also on those vessels -- on the vessels, you have to subtract operating expenses, you have to subtract interest and amortization on the loans.

So we are now in this market generating more than we did from the 2 vessels that we did from all 4 vessels combined on a net basis. I would mention though that based on U.S. GAAP, well, first of all, we had to expense the termination fee on the 2 modern vessels. despite having a very low book value level on those vessels, because we own them already, it has to be -- had to be taken straight through P&L in the fourth quarter. So that had that effect. Also, when you trade vessels in the spot market being tankers or bulkers based on U.S. GAAP, you have to account for the revenues on a low to discharge basis. And typically, these assets, they go empty and balanced as we call it, one way and you load it and then you go load it the other way. So you will see some volatility in the P&L effect for these assets, all depending on the position they are, whether they -- through the specific quarter were more loaded than empty in that rotation.

When we got them back off the charter, and this is again a coincidence, but both vessels were just coming off a loaded journey and, therefore, started with some balance days. But this is something that will balance and equal out over the year. But from quarter-to-quarter, there may be some, call it, earnings volatility due to U.S. GAAP.

Yes, makes sense. And after recent sales on the dry bulk side, you only have to remain in Panamaxes. Those seem clearly noncore. Is that a fair assessment? And secondly, there has seemingly been some interest from potential charters on long-term contracts on new [indiscernible] newbuilds. What are your thoughts on potentially reallocating some capital towards driving?

Yes. Thanks. I mean we've always been invested in the dry sector. And you can say, I would say it's more of a coincidence now that we are down to 2 vessels. We are segment agnostics. So we would look at deals in all the segments and -- including the dry bulk segment and have looked at multiple transactions. But to get to a deal, it has to make sense for us from a -- one thing is the purchase price, the charter rate, the counterparty, the financing structure we can build around it. And of course, our charter would want to pay the charter rate we need to have to make that work for us. So this is sort of a balance. And you are correct. We are only 2 vessels left now.

I wouldn't say they are noncore. Those vessels were on 10-year time charters and have been, over time, quite profitable for us, but we are traded more in the short-term market currently. So we look at opportunities on the dry side as we do in other sectors. And as I said, agnostics, it's all about a good risk-adjusted return.

All right. Then we have some written questions. Could you please share any updates on the Hercules?

Yes. The Hercules has remained idle since November '24. So it was idled through 2025. generated very strong cash flows when it was working. Now it has remained idle. We are -- we have been looking for employment. That market has been a little slow. It's fair to say, but we now see signs both with -- from a consolidation perspective, where we had the big merger announced earlier this week, Transocean and Volaris. We also saw a drilling rig with, I would call it, similar sort of harsh environment ultra-deepwater features, that was recently fixed on a 3-year charter with start-up in 2027. .

So based on what we see from brokers, it looks like there is more market dynamics and more employment opportunities there going forward. But we cannot comment specifically on the rig or we cannot comment on discussions we may have on this rig specifically. We will announce contracts if and when they materialize.

Thank you. We also have another one here. How do you see the long-term evolution of the contracted revenue mix across the different shipping segments due to the container newbuild orders signaled the strategic direction the company intends to pursue?

The new build container ships were done or we were ordered those vessels in 2024. It's typically what we like to do long-term time charters to investment-grade counterparties, modern technology that enables where we -- through the long-term charter are able to amortize that investment down significantly. So we are not specifically focused on one single segment. But we try to position us as logistics partners for strong industrial-focused partners, and then the containership market has been an interesting market for us. But we would be happy also to look at other segments.

And related to different segments, what segment are you currently most optimistic about in relation to potential future growth, i.e., in what niche do you see the best economics?

It's -- I would say, it's almost an impossible question. I mean, as we look across the board between the segments, we don't have any sort of favorite. What we have seen over time is that there have been more longer-term charters in typically liner type assets, container ships, car carriers, but we also see that from time to time on tankers where you see longer-term charters and also on dry bulk. And we also have some chemical carriers in our portfolio where we also have good interaction with logistics players. So we look across the board. And hopefully, we will build the portfolio in more than one segment. .

We also have a question. What is the status of SFL Composer?

Right. I think I'll interpret that question as after the collision we had in Q3 the vessel was going into dry dock when she was hit by another container vessel or by a container vessel. She -- we were going into dry dock anyway at that time. And we had a slot available, so we didn't really lose any time. And all of the damage repairs were covered by insurance, including also the off-hire related to the incident. So for SFL, we did not lose really out on this at all. The vessel is now back in service with Volkswagen and operating in EMEA Atlantic as normal.

One last question here. all can you say something about the size of the new rig financing facility?

Sure. So you are relating to the new Hercules facility and that being kind of negotiating and prepared, and that's in the amount of $100 million.

Thank you, Aksel. 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 the management, 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 all.

Welcome to SFL's Third Quarter 2025 Conference Call. My name is Espen Nilsen, and I'm Vice President of Investor Relations in SFL. Our CEO, Ole Hjertaker, will start the call with an overview of the third quarter highlights. Then our Chief Operating Officer, Trym Sjølie, will comment on vessel performance matters, followed by our CFO, Aksel Olesen, who will take us through the financials.

The conference call will be concluded by opening up for questions, and I will explain the procedure to do so prior to 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.

Please note that 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 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, Espen. We are pleased to announce our 87th consecutive dividend as we continue to build SFL as a maritime infrastructure company with a diversified and high-quality fleet. For the third quarter, we reported revenues of $178 million and an EBITDA equivalent cash flow of $113 million.

Over the past 12 months, EBITDA amounts to $473 million, reflecting the continued strength and stability of our operations. In recent quarters, we have taken decisive steps to strengthen our charter backlog, securing long-term agreements with strong counterparties and deploying high-quality assets. At the same time, we have made substantial investments in cargo handling and fuel efficiency upgrades across our fleet while divesting older and less efficient vessels.

Our Chief Operating Officer, Trym Sjølie, will elaborate on this later. As part of our fleet renewal strategy, 5 57,000 deadweight ton dry bulk vessels built between 2009 and 2012 have been sold with the final vessels delivered in the third quarter. In addition, 8 older Capesize bulkers were redelivered to Golden Ocean and 7 2002-built container ships were redelivered to MSC during the second and third quarters.

These actions, combined with our efficiency upgrades have materially improved the operational and fuel efficiency profile of our fleet, delivering tangible benefits to both SFL and our customers. We have also advanced our commitment to cleaner technology with 11 vessels now capable of operating on LNG fuel, including 5 newbuildings currently under construction. During the third quarter, we announced new 5-year charters for 3 9,500 TEU container vessels on charter to Maersk, adding approximately $225 million to our charter backlog from 2026 onwards.

These vessels will be upgraded with advanced cargo handling and fuel efficiency features in line with our larger containership fleet. Turning to the Offshore segment. The drilling rig Hercules remained idle also in the third quarter. While we continue to evaluate strategic alternatives for Hercules, we remain optimistic about securing new employment for the rig in due course. Hercules remains warm stacked and can be mobilized on relatively short notice. So it is difficult to provide timing guidance at this stage.

With the announced $0.20 dividend, SFL has now returned approximately $2.9 billion to shareholders over 87 consecutive quarters. This represents a dividend yield of over 10% based on yesterday's share price. Our charter backlog stands at $4 billion with 2/3 contracted to investment-grade counterparties, providing strong cash flow visibility and resilience amid current market volatility.

Over time, we have consistently demonstrated our ability to renew and diversify their asset base, supporting a sustainable long-term capacity for shareholder returns. Our solid liquidity position, including undrawn credit lines and unlevered vessels at quarter end ensures that we remain well positioned to continue investing in accretive growth opportunities.

And with that, I will now hand the call over to our Chief Operating Officer, Trym Sjølie.

Thank you, Ole. Our current fleet is made up of 59 maritime assets, including vessels, rigs and contracted newbuildings. Over the last 12 months, we have sold 22 of our older vessels at an average age of more than 18 years. This has reduced the fleet average by about 2 years to a new average age of less than 10 years per vessel.

We have a diversified fleet of assets chartered out to first-class customers on mostly long-term charters and the majority of our customer base is large industrial end users. Our backlog from owned and managed shipping assets stands at approximately $4 billion, and the fleet following Q3 is made up of 2 dry bulk vessels, 30 container ships, 16 large tankers, 2 chemical tankers, 7 car carriers and 2 drilling rigs.

Our backlog is mainly derived from time charter contracts. And from Q3 onwards, we have 4 container ships left on bareboat leases, the rest on time charter. The charter revenue from our fleet was about $178 million, and we had a total of 4,748 operating days in the quarter. Operating days is defined as calendar day less technical off-hire and dry dockings or stacking for the rigs.

Following several quarters with high number of ships in dry dock, this quarter, we had 2 vessels in dry dock at a cost of around $3.8 million. The 2 vessels in dry dock were 1 car carrier and 1 tanker. Our overall utilization across the shipping fleet in Q3 was about 98.7%. Adjusted for unscheduled technical off-hire only, the utilization of the shipping fleet was 99.9%, a very high availability. In August, our car carrier SFL Composer had a collision in Denmark when approaching Golden [ Ocean ] pilot station going in for a special survey dry docking at Farahead.

The collision happened when an overtaking container vessel struck the port quarter of the SFL Composer. There were no injuries to personnel nor pollution as a result of the incident. And furthermore, the vessel was empty of cargo in preparation for upcoming dry docking. She went straight into Farahead after the incident and completed her dry docking as well as damage repairs in a total of 34 days. We are fully covered for the extra time required for repairs by our loss of hire insurance as well as the damage repairs less USD 200,000 in deductible by our Hull & Machinery insurance.

It is likely we will recover part of the deductible following the outcome of court proceedings, alternatively a settlement with owners of the other vessel. The current commercial and regulatory environment means that energy efficiency and emissions reduction is fundamental to SFL's ability to attract and retain first-class charters. Our toolbox includes energy efficiency measures, operational optimization and not least new low-emission fuel technology.

We have taken significant strides in optimizing and renewing our fleet to meet these challenges by installing scrubbers, energy efficiency devices and investing in new tonnage with dual fuel capabilities. By modernizing and enhancing our fleet, we position ourselves for growth, either by providing new vessels with modern technology or extending the life of existing ones. On the container side, we have, over the last 2 years, upgraded 13 container vessels with 3 more to come by carrying out major upgrades to cargo systems, energy saving technologies, propeller enhancements or replacements and Hull modifications like [indiscernible].

The upgrades amount to almost USD 100 million, fully or partly funded by our charterers and have been instrumental in securing new charters or charter extensions. On notable vessel acquisitions, we have since 2023, bought 2 dual-fuel chemical tankers and taken delivery of 4 LNG dual-fuel newbuilding car carriers.

We also have 5 16,000 TEU dual-fuel LNG container vessels on order for charter to a leading European container operator.

I will now give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

Thank you, Tim. Starting with our financial performance. This slide illustrates how our diversified portfolio of vessels contributed to an adjusted EBITDA of $113 million for the quarter.

Starting on the left, our container vessels remain the largest contributor at $82 million, supported by long-term charters with leading counterparties such as Maersk, Hapag-Lloyd and MSC. Our car carrier fleet added $23 million compared to $26 million in the second quarter as SFL Composer underwent a scheduled dry docking.

The Tanker segment generated $44 million, benefiting from 17 vessels on long-term charters, further supported by strong underlying tanker market. Dry bulk contributed with $6 million, down from $19 million as over the last few quarters have divested certain dry bulk carriers as part of our overall fleet renewal strategy.

And finally, revenue from our energy assets of $24 million came mainly from the LINUS, which is on a long-term charter contract to ConocoPhillips until May 2029. Altogether, these operations produced $179 million in gross charter hire, including profit share income. After accounting for net operating expenses for about $66 million, we arrived at an adjusted EBITDA of $113 million, which highlights the strong underlying cash generation capacity of our diversified fleet of maritime assets.

We then move on to our income statement. SFL delivered solid operational results in the third quarter, supported by stable charter hire income and disciplined cost control. Total operating revenue for the quarter was $178 million, including $1.8 million in profit share. Vessel charter hire contributed with approximately $154 million, reflecting strong utilization across our shipping fleet, while the rigs contributed with approximately $26 million. Total operating expenses were $69 million compared to $86 million in the previous quarter, reflecting the recent divestments of vessels and fewer dry dockings during the quarter. After accounting for depreciation and financing costs, net income for the quarter was $8.6 million or $0.07 per share.

Turning to our balance sheet. Our financial position remains strong and well capitalized. We ended the quarter with approximately $278 million in cash and cash equivalents, supplemented with approximately $40 million of undrawn credit lines, giving us total liquidity of approximately $320 million. On the financing side, we made ordinary loan repayments of $56 million during the quarter. We have remaining capital expenditures of $850 million remaining on 5 container newbuildings expected to be funded through pre- and post-delivery financing, in addition to approximately $25 million on our existing fleet relating to efficiency and general upgrades.

Looking at the capital structure, our book equity ratio stands at approximately 26% at the end of the third quarter. Let me close with a quick summary of SFL's position today. We currently own and operate 59 maritime assets across key shipping sectors, including container, car carriers, tankers, dry bulk and offshore energy units. The diverse asset base gives us balanced exposure to multiple markets and long-term counterparties.

At quarter end, we have $278 million in cash and cash equivalents, reflecting a strong liquidity position and prudent financial management. Our fixed rate charter backlog now stands at approximately $4 billion, offering excellent visibility on future cash flows and earnings. These contracted revenues underpin both our dividend capacity and our ability to reinvest in modern fuel-efficient vessels.

And finally, the Board has declared a quarterly dividend of $0.20 per share, marking our 87th consecutive quarterly dividend, a track record that very few companies in our industry can match.

And with that, I give the word back to Espen, who will open the line for questions.

Thank you, Axel. We will now open for a Q&A session. [Operator Instructions] We have our first question coming in through the chat. Do you guys expect Hercules to be leased in the new year? And the Gulf of America [ our ] Continental Shelf Oil and Gas Lease Sale 262, also referred to as lease sale BBG 1 under the Big Beautiful Bill Act is scheduled for December 10, 2025. Is that going to affect the Hercules lease potential?

Thank you. I think the best way to maybe explain that is that we are, of course, looking for all opportunities out there for the Hercules. However, referring specifically to the Gulf of Americas, this rig is a harsh environment, a specialized harsh environment drilling rig equipped to drill in winter season in the Northern Hemisphere. And the last campaign it was in Canada, where it was drilling partly during -- going into the winter season. So there are a lot more rigs that can work in a more benign environment weather-wise like in the Gulf of Americas.

And therefore, do not need the specifications and the features that the Hercules represents. So we have predominantly focused the marketing effort in the areas where this rig has unique capabilities and where there are relatively few rigs competing. And that includes the North Sea and specifically the Norwegian Continental Shelf. It's typically west of Shetland in the U.K. region.

You have Canada, which also have very harsh environments. And you have certain areas in southern part of Africa like Namibia and potentially also South Africa. So we have focused the marketing effort there because there's relatively less competition, and there are fewer rigs that can do that work.

Thank you, Ole. We will take our next question from Sherif Elmaghrabi.

Ole, just maybe to start off with a follow-up. It's very helpful commentary around where the Hercules might work. But I'm interested also in the type of work, are you considering well intervention opportunities for the Hercules? Or do you feel that that's something that might preclude you from drilling work?

No, we are looking for any opportunity to bring the rig out to work. So it could be well intervention or it could be exploration drilling. What we also did, and this is back in 2023 after we took the rig back, that rig had been working as an exploration rig for many, many years.

And we did some upgrades to the rig to make it feasible also for development drilling where you have the potential for longer contracts. So we -- our focus is to bring the rig back to work and produce positive cash flow. And exactly what work it's going to do doing that, there we are more flexible.

And then shifting to the tanker fleet. Most of your fleet is fixed past next year. But for those rolling off, given the sustained strength we're seeing in tanker spot rates and the order book, of course, is it too soon to think about securing long-term work for these vessels?

Yes. It's too soon. The vessels that run off first have 2-year options attached. So there is a possibility for the charterer to extend that charter. While saying that, there is also a profit share feature relating to those vessels, and these are 4 LR2 product tankers that have been on now almost 4 years on charter to Trafigura.

And the profit share feature, and this is in case the vessels are being sold, these vessels would be significantly in the money. So it's too early to have an opinion on what could -- how that could -- what that could transpire into. But we believe there is significant value beyond the book value embedded in those vessels linked to the profit share.

We now have another question that we've gotten through the -- we got through the system here. It's from [ Harris Shannon]. Can SFL please provide any updates on the implementation of the $100 million buyback?

Sure. Just to briefly comment on that. So we have about $80 million remaining on the buyback. And so far this year, we've bought back equivalent of $10 million of share at an average price of approximately $7.98 per share.

We have another question from [ Climent Molins ].

Today, we've seen some news on the office mentioning they may pause their attacks on commercial shipping in the Red Sea. If this truly holds, how fast do you think container ships operator will -- how long do you think it will take for them to go back to the region?

Thank you. I think for now, it's a little bit of a wait-and-see procedure. There have been periods in the past where the [ Hoodie] said that they were going to put sort of an ease to it and then suddenly, they started attacking vessels again.

We are very -- of course, always very concerned with the safety of the crew and the vessels. And while you can get insurance coverage for the -- to take vessels through there, we are in close dialogue with our customers. And that is one good thing with working with, I would say, sort of blue-chip counterparties like work and others is that they are as concerned in doing this as we are.

So I think there is a risk evaluation that will go on now. everybody noticed the sort of the statement. But we also, as I said, seen that they changed their minds. So I think it's going to be a relatively sort of slow, call it, rollback in activity through the Red Sea. I think for some of the countries around that, like Egypt, who have seen a massive decrease in canal fees, I mean, they certainly welcome it.

So hopefully, we will see some more efficiencies in the fleet from that. From our perspective, in SFL, since we have our vessels on time charter, long-term time charter, we don't make -- this will not transpire into a higher time charter rate. But when -- if and when our vessels move back into the Red Sea and you have shorter travel distances, we expect to see a reduction in operating expenses because one of the effects of the trading where many vessels that used to go through the Red Sea now go around Africa means that these vessels have had to run at higher speeds through the sea and therefore, have had higher engine loads and thereby been using more lubrication oil, for instance, and other factors than normal. So that's, I would say, more the direct effect on us if this actually materializes and if that trade goes back to normal.

Okay. We have another one coming into the system from [indiscernible]. Do you have purchase obligations in any of your charter contracts? And if yes, can you share any details?

Yes. In terms of purchase obligation, that's something more in the past. I think the most recent ones are the 7 MSC vessels that were called or delivered back to MSC at, I believe, quarter end Q2.

And then we have 4 more remaining in the associate that are on long-term bareboat to MSC. As we have mentioned on previous calls, we have kind of transformed the business from bareboats where you have various customers that have these purchase obligations to now run the ship on a time charter basis where we maintain and keep the upside in the residual value of the vessels. So predominantly, we own the residual. And in some instances, as Ole mentioned, we also have a profit sharing on those vessels where we take a significant part of the market upside as well.

Another question from [indiscernible]. What is the outlook for new transactions outside of the Container segment?

Yes. we are segment agnostics. So we look at opportunities, I would say, across the maritime space. What we look for are opportunities where we can charter, I would say, more commodity type, not too specialized type vessels to very strong counterparties. So we've done deals in addition to the container segment, we've done car carrier deals with very strong counterparties.

We've done tanker deals with very strong counterparties. We have relatively few dry bulk vessels left, but it's definitely a segment we would like to do more business in. But it's all down to structuring the right deals with the right return characteristics that fits our sort of threshold.

So we are constantly looking for opportunities. We're using our network to explore what we can do, but we cannot give specific guidance on how much we will invest in any specific segment. We will announce deals if and when they materialize. And what we've seen in the past is that we don't have a stable investment sort of per quarter type investment profile.

We try -- some quarters, there are fewer investments and then some quarters, there are no investments. And then in other quarters, there are higher investments. So I think this is balancing well out over time, but we definitely have investment capacity for new transactions currently.

As there are no further questions from the audience, we would like to thank everyone for participating in this conference call. If you have any follow-up questions to the management, 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 for joining.