Ship Finance Adds LR2 Newbuild Pair, Sells Tanker Oldies

John Fredriksen’s Ship Finance International took delivery of two 114,000 DWT LR2 newbuilding product tankers in August 2017.

Both vessels, SFL Sabine and SFL Trinity, commenced their respective seven year time charters to Phillips 66 immediately upon delivery, with options for the charterer to extend the period up to 12 years.

The duo was built by DSME’s Daehan shipyard.

In addition, during the quarter the company completed the sale of two older tanker vessels, the 1998-built Suezmax tanker Front Brabant and the 2000- built VLCC Front Scilla, which have been delivered to their new owners.

The combined net proceeds from the sale of the vessels totaled USD 39 million, including compensation from Frontline for the early termination of the charters.

Ship Finance recorded a book loss of USD 2.7 million as a result of the two sales.

Image Courtesy: SFL

The company also agreed to sell the 1997-built Suezmax tanker Front Ardenne, and the vessel was delivered to its new owner in the third quarter. The agreed net sale price was USD 12 million, including compensation for the early termination of the charter.

Ship Finance expects a minor book gain from the sale, which will be recorded in the third quarter.

Following this sale, Ship Finance has nine crude oil tankers remaining on charter to Frontline, all of which are VLCCs. The total EBITDA contribution from these two vessels is estimated to be approximately USD 11 million per year.

SFL reported net operating income for the quarter of USD 38.7 million, and a net income of USD 20.1 million. The company secured USD 150 million of total charter revenues during the second quarter.

“In light of the pending financial restructuring in Seadrill and also a softer tanker market, the board has adjusted the dividend to USD 0.35 per share this quarter. We believe this is a prudent action that resets our dividend to a more sustainable level going forward.

“Today’s declaration brings total accumulated dividends to more than USD 23 per share since 2004 and we have a large, diversified fleet of 70 vessels and rigs in operation, a significant charter backlog, and remain in a very strong financial position,” Ole B. Hjertaker, CEO of Ship Finance Management AS said.

As of June 30, 2017, the fixed rate charter backlog from the company’s fleet of 70 vessels and rigs stood at USD 3.4 billion, with an average remaining charter term of nearly 5 years, or more than 8 years if weighted by charter revenue.

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