SFL - New long term charters for four 8,700 TEU container vessels

Rhea-AI Summary

SFL has secured new five-year charters for four 8,700 TEU container vessels, extending their partnership with A.P. Moller-Maersk. These agreements will add around $240 million to SFL's fixed rate charter backlog. The current charters, initially set to expire in 2025, will now extend to 2030. Built between 2014-2015, these vessels will undergo upgrades costing approximately $20 million to increase cargo capacity to 9,500 TEU and enhance energy efficiency. This move aligns with SFL’s customer-focused strategy and aims to optimize operational performance and reduce emissions, benefiting both SFL and Maersk. The company has added nearly $2 billion to its fixed rate charter backlog in 2024.

Positive

• New 5-year charters for four vessels add approximately $240 million to SFL's fixed rate charter backlog.
• SFL will invest $20 million to upgrade vessels, increasing cargo capacity to 9,500 TEU and adding energy efficiency features.
• SFL has added approximately $2 billion to its fixed rate charter backlog in 2024.

Negative

• None.

Financial Analyst

SFL Corporation Ltd.'s new 5-year time charters for four 8,700 TEU container vessels signifies a strategic move to enhance its charter backlog by approximately $240 million. This decision is financially astute, securing long-term revenue streams and reflecting strong demand for container shipping capacity. Such actions provide stability in an often volatile market and demonstrate the company’s capability to maintain strong partnerships with industry leaders like Maersk.

From a financial perspective, the estimated $20 million investment in vessel upgrades to increase cargo capacity and improve energy efficiency is a prudent allocation of capital. The enhancements to 9,500 TEU and the addition of energy efficiency features should not only boost operational performance but also ensure compliance with increasingly stringent environmental regulations. This forward-looking approach is likely to make the vessels more competitive in the future, increasing their residual value post-charter in 2030.

Retail investors should note that while the upfront investment is significant, the long-term benefits of a solidified and extended charter agreement, coupled with improved vessel efficiency, are likely to outweigh the costs. This move also aligns with broader industry trends towards sustainability and operational excellence.

In terms of financial health, the new charters and investments should strengthen SFL's cash flow, minimize earnings volatility and enhance shareholder value over the charter period.

Market Research Analyst

The container shipping market is currently experiencing robust demand and SFL's ability to secure new charters with Maersk further underscores this trend. The decision to extend charters and invest in vessel upgrades is indicative of a market focusing on efficiency and sustainability. Increasing the cargo capacity to 9,500 TEU means SFL can capitalize on economies of scale, potentially reducing per-unit transportation costs and increasing profit margins.

Moreover, enhancing energy efficiency aligns with global moves towards greener shipping. These upgrades will likely reduce fuel consumption and emissions, making the charters not only more environmentally friendly but also more cost-effective in the long run. This move should appeal to environmentally conscious investors and stakeholders, enhancing SFL's reputation in the market.

For retail investors, the long-term sustainability and efficiency improvements are essential considerations. They align with global shipping trends and regulatory pressures, which can help SFL stay competitive. The market's positive reaction to such forward-thinking strategies could lead to long-term value appreciation in SFL's stock.

SFL Corporation Ltd. (NYSE: SFL) (“SFL” or the “Company”) announced today that it has agreed new 5-year time charters on four 8,700 TEU container vessels, which will add approximately $240 million to the Company’s fixed rate charter backlog.

The vessels have been on charter to A.P. Moller - Maersk (“Maersk”) since they were new and the current charters were due to expire in 2025. The vessels were built in 2014-2015 with a modern, wide-beam design and fuel-efficient electronic engines. In connection with the new charters, SFL will make certain investments in the vessels, including increasing the cargo capacity to 9,500 TEU. The Company will also add new energy efficiency features, and the total upgrade investment is estimated to be approximately $20 million in aggregate.

Ole B. Hjertaker, CEO of SFL Management AS, said in a comment: «The new charters on four existing container vessels demonstrate the benefit of a customer focused approach, where we in close cooperation with Maersk have analyzed how to optimize the vessels’ operational performance and reduce emissions. This benefits both our customer and us during the charter period, whilst we will have more attractive vessels when the new charters expire in 2030. With the acquisitions and charter extensions announced so far this year, we have added approximately $2 billion to our fixed rate charter backlog.»

July 8, 2024

The Board of Directors
SFL Corporation Ltd.
Hamilton, Bermuda

Investor and Analyst Contacts:
Aksel Olesen, Chief Financial Officer, SFL Management AS
+47 23 11 40 36
André Reppen, Chief Treasurer & Senior Vice President, SFL Management AS
+47 23 11 40 55
Sander Borgli, Vice President - IR, SFL Management AS
+47 23 11 40 73

Media Contact:
Ole B. Hjertaker, Chief Executive Officer, SFL Management AS
+47 23 11 40 11

About SFL

SFL has a unique track record in the maritime industry and has paid dividends every quarter since its initial listing on the New York Stock Exchange in 2004. The Company’s fleet of vessels is comprised of tanker vessels, bulkers, container vessels, car carriers and offshore drilling rigs. SFL’s long term distribution capacity is supported by a portfolio of long term charters and significant growth in the asset base over time. More information can be found on the Company's website: www.sflcorp.com

Cautionary Statement Regarding Forward Looking Statements

This press release may contain forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including SFL management’s examination of historical operating trends, data contained in the Company’s records and other data available from third parties. Although SFL believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, SFL cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions.

Important factors that, in the Company’s view, could cause actual results to differ materially from those discussed in the forward looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions in the seaborne transportation industry, which is cyclical and volatile, including fluctuations in charter hire rates and vessel values, changes in demand in the markets in which the Company operates, including shifts in consumer demand from oil towards other energy sources or changes to trade patterns for refined oil products, changes in market demand in countries which import commodities and finished goods and changes in the amount and location of the production of those commodities and finished goods, technological innovation in the sectors in which we operate and quality and efficiency requirements from customers, increased inspection procedures and more restrictive import and export controls, changes in the Company’s operating expenses, including bunker prices, dry-docking and insurance costs, performance of the Company’s charterers and other counterparties with whom the Company deals, the impact of any restructuring of the counterparties with whom the Company deals, and timely delivery of vessels under construction within the contracted price, governmental laws and regulations, including environmental regulations, that add to our costs or the costs of our customers, potential liability from pending or future litigation, potential disruption of shipping routes due to accidents, political instability, terrorist attacks, piracy or international hostilities, the length and severity of the ongoing coronavirus outbreak and governmental responses thereto and the impact on the demand for commercial seaborne transportation and the condition of the financial markets, and other important factors described from time to time in the reports filed by the Company with the United States Securities and Exchange Commission. SFL disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

 

This information is subject to the disclosure requirements pursuant to Section 5-12 the Norwegian Securities Trading Act

FAQ

What recent charters has SFL secured?

SFL has secured new five-year charters for four 8,700 TEU container vessels.

How much will SFL 's new charters add to its fixed rate charter backlog?

The new charters will add approximately $240 million to SFL 's fixed rate charter backlog.

When were the new charters for SFL 's vessels originally set to expire?

The current charters were originally set to expire in 2025.

What upgrades will SFL make to their vessels?

SFL will invest approximately $20 million to increase the cargo capacity to 9,500 TEU and add energy efficiency features.

What is the total backlog added by SFL in 2024?

SFL has added approximately $2 billion to its fixed rate charter backlog in 2024.