SFL NYSE: SFL reported first-quarter 2026 operating revenue of about $174.5 million and GAAP net income of approximately $26 million, or $0.20 per share, as management highlighted stable contracted cash flows, a growing offshore backlog and unusually strong tanker spot-market earnings.
Chief Executive Officer Ole Hjertaker said the company generated an “EBITDA equivalent cash flow” of $108 million in the quarter, with EBITDA over the past 12 months totaling $443 million. SFL also increased its quarterly dividend to $0.22 per share, marking its 89th consecutive quarterly dividend. Hjertaker said the company has returned about $3 billion, or more than $30 per share, to shareholders through dividends since 2004.
The company’s charter backlog stood at approximately $3.7 billion, with more than two-thirds tied to customers with investment-grade credit ratings. Management said that counterparty profile supports earnings visibility across the fleet.
Hercules Contract Adds Offshore Backlog
Hjertaker highlighted a new contract for the ultra-deepwater harsh-environment drilling rig Hercules, which is expected to begin work in Canada in the first quarter of 2027. The firm portion of the contract covers 400 days and adds about $170 million to backlog, with shorter options that could extend the work beyond the firm term.
Hjertaker said SFL sees “significant demand” for harsh-environment, deepwater-capable semi-submersible drilling rigs toward the end of the decade. He noted that Hercules is the only rig in the market with a valid Canadian safety case and has previously worked in Norway and Namibia.
During the question-and-answer session, Hjertaker said the upgrades needed for the Canada contract are relatively limited compared with other opportunities the company had evaluated. He said some equipment replacement is planned, while the customer will fund certain upgrades that benefit its operations. He did not provide a specific dollar figure, but said roughly half of the capital expenditures referenced in the company’s press release relate to Hercules.
Tanker Spot Exposure Boosts Cash Flow
SFL’s tanker segment benefited from two 2020-built Suezmax tankers operating in the spot market. Hjertaker said the company had previously agreed to release charters on those vessels in exchange for compensation of $11.5 million per vessel rather than selling them. SFL sold two older Suezmaxes previously chartered to the same customer, generating aggregate net cash proceeds after debt repayment of approximately $52 million.
Hjertaker said the market strengthened significantly after the company made the decision in December, and that cash flow contribution from the two remaining vessels is now higher than the contribution from all four vessels under the prior charter arrangement.
The two Suezmaxes earned nearly $54,000 per day on a time-charter-equivalent basis in the first quarter, compared with a cash breakeven below $20,000 per day after debt service. Hjertaker said the second quarter has been even stronger due to disruptions tied to the war in the Middle East. As of the call, SFL had covered 53% of vessel days for the quarter at an average charter rate of about $185,000 per day, although he cautioned that reported U.S. GAAP revenue for spot-market vessels is recognized on a load-to-discharge basis and that the full-quarter average is expected to be lower because of anticipated ballast days.
Asked about tanker strategy, Hjertaker said SFL’s principal business remains long-term charters and that the company will seek longer-term employment for the two Suezmaxes “in due course.” He said some Aframax LR2 tankers have extension options later in the year and that, given current rates, SFL would not be surprised if those vessels were extended for another year or two.
Fleet Performance Remains High
Chief Operating Officer Trym Sjølie said SFL’s current fleet consists of 57 maritime assets, including vessels, rigs and contracted newbuildings. The fleet includes two dry bulk vessels, 30 container ships, 16 large tankers, two chemical tankers, seven car carriers and two drilling rigs.
Sjølie said charter revenue from the fleet was about $174 million in the first quarter, with 4,598 operating days. Utilization was 100% for container vessels and car carriers, while tankers and dry bulk vessels operated at 99% utilization. The energy segment ran at 50% utilization because Hercules remains warm stacked in Norway ahead of its new contract.
Operating expenses for the shipping fleet were $42 million, broadly in line with budget. Sjølie also said three Maersk S-class container vessels — Maersk Sarat, Maersk Shivling and Maersk Skarstad — were in or completing drydock for significant upgrades tied to new five-year charter agreements with Maersk.
Segment Results and Balance Sheet
In the financial review, SFL said gross charter hire totaled approximately $177 million across the fleet. The container fleet generated about $81 million, including profit-share income related to fuel savings on seven large container vessels. Car carriers contributed approximately $26 million, while tankers generated about $46 million, up from about $42 million in the prior quarter. Dry bulk revenue was about $2 million, down from $3 million in the prior quarter, as SFL has reduced exposure through vessel divestments. Energy assets generated approximately $23 million, primarily from the Linus drilling rig, which remains on a long-term contract with ConocoPhillips through May 2029.
Total operating and general and administrative expenses were approximately $69 million. Adjusted EBITDA, a non-GAAP measure, was approximately $108 million, consistent with the fourth quarter of 2025.
On a GAAP basis, SFL reported total operating revenue of about $174.5 million, compared with about $175.5 million in the prior quarter. The quarter included an $11.5 million gain on sale of assets, a $2.5 million mark-to-market gain on hedging derivatives and a $1.9 million mark-to-market gain on equity investments. The company’s net profit of $26 million compared with a net loss of $4.6 million, or $0.04 per share, in the fourth quarter.
As of March 31, SFL had cash and cash equivalents of about $128 million and roughly $160 million available under undrawn credit facilities, for total available liquidity exceeding $280 million. The company also refinanced facilities tied to the Hercules and Linus rigs and, after quarter-end, completed a $75 million tap issuance of its 2030 U.S. dollar senior unsecured bonds at 103.5% of par, implying a yield to maturity of about 6.8%.
SFL said it made approximately $56 million of scheduled loan amortization during the quarter. Remaining capital expenditure commitments for five contracted container newbuildings total about $850 million, which the company expects to fund through pre- and post-delivery financing. Book equity ratio at quarter-end was approximately 27%.
Dividend Decision Tied to Cash Flow Visibility
In response to an analyst question about the 10% dividend increase, Hjertaker said the board does not provide dividend guidance, but bases dividend discussions on long-term cash flow expectations. He cited improved clarity around Hercules, lower required capital spending for that rig than under some other contract alternatives, strong vessel utilization and stable counterparties as factors supporting the increase.
Hjertaker said SFL’s long-term objective remains returning cash flow to shareholders, while continuing to manage the fleet through long-term charters and disciplined capital allocation.
About SFL NYSE: SFL
Ship Finance International Limited NYSE: SFL is an independent owner of modern, large-size ocean-going vessels that provides finance and leasing services to the global shipping industry. The company’s fleet encompasses a diversified mix of crude oil tankers, product and chemical tankers, liquefied natural gas (LNG) carriers, dry bulk carriers, container vessels and floating production storage and offloading (FPSO) units. By structuring long-term charter agreements and bareboat leases with major oil companies, commodity traders and offshore operators, Ship Finance International seeks to deliver stable cash flows and risk-adjusted returns for its shareholders.
In its core business, Ship Finance International acquires or finances vessels through forward sales agreements and then charters them out under fixed-rate contracts, typically ranging from five to 20 years in duration.
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