SFL Corporation Ltd. (NYSE: SFL) announced today a strategic divestment of two 2015-built Suezmax tankers currently under charter to a Koch Industries, Inc. subsidiary. The transaction is expected to generate approximately $57 million per vessel in gross sales price. After accounting for debt repayment and a termination fee to Koch, as per a pre-existing profit-sharing agreement, net proceeds are projected to be around $26 million per vessel.
The deliveries of these vessels are slated for the fourth and first quarters, respectively. SFL anticipates recognizing an aggregate book gain of approximately $23 million from this sale.
In conjunction with this divestment, SFL has also agreed to terminate the charters for two 2020-built Suezmax tankers with Koch. This termination will involve a fee paid by SFL, again in accordance with the established profit-sharing arrangement. The two retained vessels are described as Korea-built, eco-design, and equipped with scrubbers. These ships will initially operate in the spot market, with the company potentially exploring longer-term charter opportunities for them in the future.
Ole B. Hjertaker, CEO of SFL Management AS, highlighted the strategic advantage of this move. “This transaction underscores the inherent value within our fleet, enabling us to realize substantial profits from the sale of two ten-year-old vessels merely three years after their acquisition, while simultaneously benefiting from robust cash flows generated during their charter period,” Hjertaker stated. He further elaborated that a portion of the proceeds will be reinvested into younger, more fuel-efficient vessels that are well-positioned to capitalize on the current strong charter market, where prevailing rates significantly exceed the existing fixed charter rates.
**About SFL Corporation Ltd.**
SFL boasts a distinguished history in the maritime sector, maintaining a consistent record of quarterly dividend payments since its New York Stock Exchange debut in 2004. The company’s diverse fleet encompasses tanker vessels, bulkers, container ships, car carriers, and offshore drilling rigs. SFL’s capacity for long-term distributions is underpinned by a robust portfolio of long-term charters and consistent growth in its asset base. Further details can be found on the company’s website.
**Navigating Market Dynamics and Fleet Modernization**
This strategic maneuver by SFL reflects a broader trend within the shipping industry: the deliberate optimization of fleet composition to align with evolving market demands and regulatory landscapes. The sale of older tonnage, particularly when it yields significant profits and frees up capital, allows companies to reinvest in newer, more environmentally compliant, and operationally efficient vessels.
The Suezmax tanker segment, crucial for transporting large volumes of crude oil, is subject to global energy market fluctuations, geopolitical events, and increasingly stringent environmental regulations. Companies like SFL are navigating this complexity by divesting assets that may face higher operating costs or regulatory scrutiny in the future, while simultaneously acquiring vessels that offer superior fuel efficiency, lower emissions, and enhanced chartering flexibility.
The decision to initially deploy the retained, modern vessels into the spot market suggests SFL’s confidence in short-term rate strength. However, the contemplation of longer-term employment indicates a balanced approach to risk management and revenue stream stability. The inclusion of scrubbers, devices that reduce sulfur oxide emissions, further positions these vessels to meet current and anticipated environmental standards, potentially commanding premium charter rates.
The acquisition of assets by Koch Industries, a diversified global conglomerate, points to their ongoing strategic interest in the energy and logistics sectors. Such transactions often involve complex negotiations and are driven by a company’s specific operational needs and market outlook. The pre-agreed profit-sharing arrangement underscores a sophisticated relationship between charterer and owner, designed to share upside while mitigating risks.
As the maritime industry continues its decarbonization journey and adapts to shifting trade patterns, SFL’s proactive fleet management and strategic capital allocation are key indicators of its forward-looking approach to maintaining competitiveness and delivering shareholder value.
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