SFL Corporation's Q1 2025 Earnings Call: Unraveling Contradictions on Operating Expenses, Rig Employment, and Dividend Stability

Hercules rig operating expenses, appetite for asset sale/acquisition opportunities, Hercules rig employment status, and dividend stability and cash flow management are the key contradictions discussed in SFL Corporation Ltd.'s latest 2025Q1 earnings call.



Dividend and Share Repurchase:
- SFL reported revenues of $193 million for Q1 2025, with an EBITDA equivalent cash flow of $116 million.
- The company declared its 85th consecutive cash dividend with a dividend of $0.27 per share, maintaining a yield of approximately 13%.
- The company also repurchased $10 million worth of shares below $8 per share, aligning with its capital allocation strategy to maximize long-term distribution capacity per share.

Impairments and Asset Sales:
- SFL reported a net loss of $32 million or $0.24 per share in Q1 2025, primarily due to impairments of $34 million on older dry bulk vessels and the Hercules rig being idle.
- The impairments were a result of vessels not finding new long-term charters due to design, fuel efficiency, and current market volatility.
- The company sold one Supramax vessel and agreed to sell another, with expected impairments totaling $34 million in aggregate, reflecting the challenges in the spot market.

Vessel and Rig Performance:
- The company's 79 maritime assets, including vessels and rigs, performed well with utilization rates of 98.6% for the shipping fleet and 97.2% including rigs.
- The Linus rig earned $20.3 million in Q1, with three days of downtime, maintaining consistent performance as the Rig of the Month for ConocoPhillips.
- The Hercules rig remains stacked due to market volatility, with ongoing upgrades to enhance attractiveness for future contracts.

Port Fees and Trade Patterns:
- Approximately 27 vessels in SFL's fleet are expected to be impacted by Annex 2 and 3 fees from the U.S. Trade Representative's recent measures.
- This impacts mainly car carriers and tankers, with potential estimated fees of $26 million if applied to SFL's 2024 trading pattern.
- The company is considering adjustments in trading patterns to mitigate these additional costs and is engaging with charters to understand the practical implementation of these fees.