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Ship Finance Worldwide (NYSE:SFL)
This fall 2021 Earnings Name
Feb 16, 2022, 10:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:

Operator

Good day, and thanks for standing by. Welcome to the This fall 2021 SFL Company earnings convention name. Presently, all members are in an solely listen-only mode. After the audio system’ presentation, there will likely be a question-and-answer session.

[Operator instructions] Please be suggested that right this moment’s convention is being recorded. [Operator instructions] I might now like to show the convention over to your speaker right this moment, Ole Hjertaker. Please go forward.

Ole Hjertaker — Chief Government Officer

Thanks, and welcome to SFL’s fourth quarter convention name. I’ll begin the decision by briefly going by the highlights of the quarter and following that, our CFO, Aksel Olesen will take us by the financials and the decision will likely be concluded by opening up for questions. Earlier than we start our presentation, I want to be aware that this convention name will comprise forward-looking statements inside the which means of the US Personal Securities Litigation Reform Act of 1995. Phrases similar to expects, anticipates, intends, estimates, or related expressions are supposed to determine these forward-looking statements.

Ahead-looking statements usually are not ensures of future efficiency. These statements are primarily based on our present plans and expectations and are inherently topic to dangers and uncertainties that might trigger future actions or outcomes of operations to be materially completely different from these set forth within the forward-looking statements. Vital components that might trigger precise outcomes to vary embrace, however usually are not restricted to, circumstances within the delivery, offshore, and credit score markets. It’s best to subsequently not place undue reliance on these forward-looking statements.

Please check with or filings with the Securities and Trade Fee for extra detailed discussions over dangers and uncertainties, which can have a direct bearing on our working outcomes and our monetary situation. The introduced dividend of $0.20 per share is a rise of 11% over final quarter’s dividend and represents a dividend yield of round 9% primarily based on the closing value yesterday. That is our 72nd quarterly dividend, and over time we now have paid greater than $28 per share in dividends or $2.4 billion in whole. And we now have an growing fixed-rate constitution backlog supporting continued dividend capability going ahead.

The whole constitution revenues have been $166 million within the quarter, with round 75% of this from vessels and long-term charters at round 25% for vessels employed on short-term charters and within the spot market. This contains or included the seven handysize bulkers we now have offered. So going ahead, we count on a better relative share from long-term charters. The EBITDA equal money circulate within the quarter was roughly $121 million, or 10% increased than the earlier quarter.

Over the past 12 months, the EBITDA equal has been roughly $434 million and the web earnings got here in at round $80 million within the quarter or $0.63 per share. But once more, referring to the sale of the bulkers of $39 million, and in any other case, there have been solely minor one-offs within the quarter, together with a detrimental mark to market impact on curiosity hedging devices. There have been additionally round $1.1 million increased working prices within the quarter as a consequence of further crew rotation prices linked to COVID restrictions. We count on an identical impact additionally on this quarter, however hope that the restrictions will ease quickly, and just about all our crew are actually vaccinated already.

Our fixed-rate backlog has elevated and stands at roughly $2.8 billion from owned and managed vessels. After current acquisitions and disposals offering continued money circulate visibility going ahead. The backlog determine excludes revenues from the vessels traded within the short-term market and in addition excludes future revenue share optionality. As well as, we now have excluded constitution hires referring to the drilling rigs to be conservative in gentle of the continuing monetary restructuring in Seadrill.

We proceed constructing the portfolio with fashionable property on long-term charters and have lately agreed to accumulate 4 fashionable LR2 product tankers together with time charters to Trafigura. The construction is much like the three Suezmaxes we introduced final quarter and the deal contains some attention-grabbing optionality options if the market ought to strengthen throughout the constitution interval, the place a sale could be triggered with a revenue cut up. And if not, the long-term charters amortize the vessels right down to a cushty low degree with a very good base return, supported by the $160 million constitution backlog linked to those vessels. Within the quarter, we additionally finalized a sale of the seven handysize vessels for an mixture web gross sales value of round $98 million.

Along with the gross sales value, there was round $15 million web money circulate from buying and selling the vessels at excessive charges till supply. So that they had a really good contribution for us in 2021. We’ve got additionally sourced a number of new financings at engaging phrases and see mortgage margins creeping downwards. And we absolutely redeemed the remaining $145 million convertible notes in money throughout the quarter.

Through the fourth quarter, we took supply of three of the seven tankers, that are two of the Trafigura, and we now have already taken supply of three extra, leaving just one Suezmaxes nonetheless to be delivered anticipated later this month. Excluding the drilling rigs, the backlog from owned and managed vessels was 2.8 billion on the finish of the quarter. Through the years, we now have modified each fleet composition and construction, and we now have 75 delivery property in our portfolio. Along with the long-term chartered vessels, we now have eight vessels treading into short-term market forex and 4 to 5 coming off their long-term charters later this 12 months.

We’ve got additionally had vital contributions to money circulate from revenue share over time each referring to constitution charges and gasoline financial savings. The combination revenue share was round $20 million final 12 months and $7.5 million within the fourth quarter alone. We should not have a set combine within the portfolio that focuses on evaluating deal alternatives throughout the segments and attempting to do the proper transactions from a risk-reward perspective. Over time, we consider this may stability itself out, however we tried to watch out and conservative in our investments with a give attention to expertise and transition over time to extra fuel-efficient expertise for propulsion.

The 2 drilling rigs usually are not included in our reported constitution backlog figures and with respect to Seadrill and the continuing monetary restructuring, we can’t give extra particulars than what we now have disclosed in our press releases or as in any other case publicly accessible. After Seadrills’ plan of reorganization was accredited by the court docket, they estimate emergence from Chapter 11 inside the first quarter of this 12 months. We acquired greater than 70% of the lease rent below the prevailing constitution association for West Linus and West Hercules throughout Seadrill’s Chapter 11 proceedings. Each rigs are lively and dealing for all corporations and the constitution price is ample to cowl that service referring to the rigs.

And we’re, in fact, happy to see strengthening drilling markets on the again of the very agency oil value. We’ve got entered into a brand new settlement referring to the tough surroundings semi-sub West Hercules. Beneath this new settlement with Seadrill, the West Hercules is contracted to be employed with oil main Equinor in Norway and Canada till September, October, and thereafter, redelivered to SFL in Norway. SFL continues to obtain a bareboat rent of round $60,000 per day whereas the rig is employed below a contract and producing revenues for Seadrill and roughly $40,000 per day in all different modes, together with when the rig is idle and mobilized to and from Canada for the Equinor [Inaudible].  The rig is now on its solution to shore for some upgrades required for this job and is anticipated to maneuver to Canada within the second quarter.

With reference to the West Linus, which is on a sub constitution to an oil main within the North Sea till the tip of 2028, we proceed to have a constructive dialogue with Seadrill and the end-user for the continued operations of the rig below the contract. We’ve got not but agreed on remaining phrases with Seadrill, however that is anticipated earlier than the emergence of Chapter 11. Given the continuing discussions, we are able to sadly not remark anymore on this in the intervening time. Through the years, we now have gone from a single asset class constitution to at least one single buyer to a diversified fleet and a number of counterparties.

And over time, the combination of property in constitution backlog has different from 100% tankers in the beginning to just about 60% offshore 10 years in the past to container vessels now being the biggest section with practically 60% of the backlog. If you happen to have a look at the counterparties it’s now primarily to end-users and market leaders of their respective segments, and comparatively few are intermediaries the place we now have much less visibility on using the property and high quality of operations. Strategically, this additionally offers us entry to extra deal circulate alternatives such because the repeat enterprise with Maersk, MSC, Evergreen, and Trafigura as examples. Our technique has subsequently been to take care of a powerful technical and industrial working platform in cooperation with our sister corporations within the wider Seatankers Group.

This offers us the flexibility to supply a wider vary of companies to our clients from structured financing successfully to full-service time charters. And with full management over vessel upkeep and efficiency, together with vitality effectivity and emission minimizing efforts, we are able to affect enhancements to our vessels by the lifetime of the property and never solely be passively proudly owning vessels employed on bareboats the place the shopper could not all the time have an incentive to make such enhancements. As well as, we are able to retain extra of the residual worth within the property once we constitution out on a time constitution foundation. And within the present surroundings, with rising uncooked materials prices and inflation driving alternative prices for vessels, this worth is for the good thing about SFL and our stakeholders.

For bareboat offers, this worth is often retained by the charters by fixed-price buy choices. That is illustrated by the current sale of seven handysize bulkers we’re working platform has enabled us to commerce the vessels within the spot market throughout a delicate market and when the market values doubled final 12 months, we may promote the vessels with a big revenue. And with that, I’ll go away the phrase over to our CFO, Aksel Olesen who will take us by the monetary highlights of the quarter.

Aksel Olesen — Chief Monetary Officer

Thanks, Mr. Hjertaker. On this slide, we now have proven a professional forma illustration of money flows for the fourth quarter. Please be aware that that is solely a suggestion to evaluate the corporate’s efficiency and isn’t in accordance with US GAAP and in addition web of extraordinary and non-cash gadgets.

The corporate generated gross constitution rent of roughly $166 million within the fourth quarter, together with $7.5 million of income with roughly 75% of the income coming from our fastened constitution price backlog, which at the moment stands at $2.8 billion, offering us with sturdy visibility on our money circulate going ahead. Within the fourth quarter, the liner fleet generated gross constitution rent of roughly $90 million, together with roughly $3.1 million in income with contribution associated to gasoline financial savings on a few of our giant container vessels. Of this quantity, greater than 90% was derived from our vessels on long-term charters. Following the corporate’s current acquisitions, SFL’s line of fleet backlog at the moment stands at roughly $2 billion with a mean remaining constitution time period of roughly 4.4 years or roughly 7.3 years, if weighted by constitution rent.

Together with lately introduced transactions, SFL has six in crude oil, product, and chemical tankers with the bulk employed on long-term charters. Our tanker fleet generated roughly $17.5 million and gross constitution increased throughout the quarter. The online constitution hires acquired the place the 5% was derived from our vessels on long-term charters, amongst others, from [Inaudible] and Phillips 66. The online cost price from the corporate’s two Suezmax tankers employed within the short-term market was roughly $3.1 million in comparison with $1.7 million within the earlier quarter.

Late within the fourth quarter, SFL took supply of 1 Suezmax tanker and two LR2 product tankers with five-year charters to Trafigura. The remaining two Suezmax tankers and two LR2 product tankers will likely be delivered throughout the first quarter with full quarterly earnings impact from the second quarter. Our fleet generated roughly $46.3 million in gross constitution increased within the fourth quarter, together with $4.5 million in revenue share contribution from our vessels on constitution to [Inaudible]. Through the quarter, the corporate had a fleet of twenty-two dry-bulk vessels, of which 11 vessels are employed on long-term charters and the opposite 11 are buying and selling within the short-term on the spot market.

The 11 vessels buying and selling within the spot or short-term markets generated roughly $21.2 million in web constitution rent throughout the quarter in comparison with roughly $20.7 million within the earlier quarter. Through the quarter, the corporate accomplished a keep within the seven smaller handysize dry bulk vessels to a nation purchaser and the gross sales generated web gross sales proceeds of roughly $19 million along with sturdy spot earnings throughout the fourth quarter previous to supply. In addition to on two drilling rigs, which have been modified out from subsidiaries to Seadrill on [Inaudible]. Within the fourth quarter, we acquired roughly $12.3 million in constitution rent from the rigs.

This summarizes an adjusted EBITDA of roughly $121 million for the fourth quarter in comparison with $112 million within the third quarter. We then transfer on to the revenue and loss assertion as reported on the US GAAP. As we now have described in earlier earnings calls, our accounting statements are completely different from these of a standard delivery firm. Because the enterprise technique focuses on long-term constitution contracts, a big a part of our actions are categorised as capital leasing.

Consequently, a good portion of our constitution revenues are excluded from US GAAP working revenues and as a substitute booked as revenues categorised as compensation of funding within the finance enterprise and vessel loans, leading to associates and long-term investments and curiosity earnings from [Inaudible]. So for the fourth quarter, we report whole working income in keeping with US GAAP of roughly $152 million, which is lower than roughly $166 million of constitution rent really acquired for the explanations simply talked about. Through the quarter, the corporate recorded revenue cut up earnings of roughly $4.5 million from our [Inaudible] vessels on constitution to Ocean along with roughly $3.1 million from gasoline financial savings preparations on a few of our giant container vessels. The corporate additionally recorded a $39.3 million acquire referring to the sale of our seven smaller handysize dry bulk vessels, which have been additionally delivered with a brand new purchaser earlier than year-end.

The working bills of our fleet are up in comparison with the earlier quarter is a mixture of latest vessels getting into the fleet and bills referring to COVID-19 measures, amongst others, as a consequence of our efforts to take care of a normalized cruise change cycle for seafarers regardless of difficult journey restrictions across the globe. As well as, we additionally noticed a rise in depreciation as a result of new additions to our fleet and in addition the consolidation of the West Hercules throughout the third quarter. General and in keeping with US GAAP, the corporate reported a web revenue of roughly $80 million or $0.63 per share. Transferring on to the stability sheet.

At quarter-end, SFL had roughly $146 million of money and money equivalents. Moreover, the corporate had marketable securities of roughly $25 million base market costs on the finish of the quarter. Moreover, the corporate had seven debt-free vessels with a mixed constitution market worth of roughly $170 million, together with two LR2 product tankers, which the corporate took supply of earlier than the tip of the quarter should pay with roughly $80 million of money. We count on to attract down financing for all LR2 product tankers throughout the first quarter.

Roughly $430 million of the remaining capex of lately accounted acquisitions is anticipated to be financed by debt services, much like SFL’s different property with long-term charters. Through the quarter, roughly $145 million was used to repay the stability of the convertible be aware, which was due in October. Moreover, the corporate acquired roughly $98 million in money proceeds from the sale of our seven handysize dry bulk vessels throughout the fourth quarter. So primarily based on This fall numbers, the corporate had a ebook fairness ratio of roughly 28.4%.

Then to summarize, the board has declared a money dividend of $0.20 per share for the quarter, a rise of roughly 11% in comparison with the earlier quarter. This represents a dividend yield of roughly 9% primarily based on the closing share value yesterday. That is the 72nd consecutive quarterly dividend. And because the inception of the corporate in 2004, greater than $28 per share or greater than $2.4 billion in whole has been returned to our shareholders by dividends.

SFL has efficiently dedicated greater than $1 billion to its current acquisitions in 2021. And within the course of, we now have expanded our relationship with a few of our key shoppers by investing in fashionable eco-design container ships and tankers and on the identical time, expose of older, much less environment friendly property demonstrating our dedication to additional enhance our present footprint pursuant to our ESG technique. Following the current investments, our backlog from our delivery property now stands at $2.8 billion, offering sturdy visibility on future money circulate, debt service, and continued distribution capability. With a powerful operational platform and our entry to attractively priced capital SFL is well-positioned to execute on new accretive investments within the quarters to return.

And with that, I give the phrase again to the operator, who will open the road for questions.

Questions & Solutions:

Operator

Thanks. [Operator instructions] And the primary query comes from the road of Randy Giveans. Please go forward.

Randy Giveans — Jefferies — Analyst

Howdy, workforce, SFL. How’s it going?

Ole Hjertaker — Chief Government Officer

Hello there, Randy. Good to listen to from you.

Randy Giveans — Jefferies — Analyst

Sure, sir. So your fleet right here, you latterly took supply of quite a few tankers. You offered a few of your dry bulk vessels. Now, at the moment dry bulk is simply about 11% of your contract backlog, principally the smallest sector in that.

After which with the current pullback in asset values over the previous couple of weeks and even months, regardless of additional strengthening and constitution charges, is the drive of the asset class of alternative for progress in the intervening time? If not, what sector is it?

Ole Hjertaker — Chief Government Officer

Yeah, we have a look at alternatives throughout the board and all of those segments. I might say usually after which definitely we’d be would not thoughts doing extra offers within the dry bulk area. However we additionally must be cognizant of the type of market construction in that section. The usually dry bulk vessels are traded extra within the spot market and on long-term type of logistical sort options.

So our desire is, in fact, the longer-term charters and there usually are not that many long-term charters name it within the dry bulk market regardless of, the quite a few vessels there. So we’re chasing transaction alternatives wherever we are able to discover them. And I believe with our diversification, as you level out, we are able to have a look at the deal alternatives in lots of segments on the identical time and usually are not tied to just one subsector. So, sure, we have a look at alternatives there as we do elsewhere as effectively.

And however they form of be particular. We all the time — we’re pleased to announce offers as we do them. However we can’t type of speculate on how a lot we should always spend money on every section.

Randy Giveans — Jefferies — Analyst

Certain. That is honest. I do not count on you to provide all of your playing cards away right here. I used to be going to ask some questions concerning the drilling rigs, but it surely sounds such as you’re on that for now, which is comprehensible.

So trying on the dividend, nice to see that, form of persevering with to rise. Is the plan there to slowly improve that going ahead? And what are type of hurdles or perhaps catalysts for additional will increase?

Ole Hjertaker — Chief Government Officer

Completely. I imply, we’re all the time pleased to please our pricey shareholders. And we have been paying dividends now 72 occasions. So we have been beginning to get the observe of that one, and the dividend and that is extra primarily based on our dividend you possibly can say coverage or communication coverage round dividend.

We are going to by no means information on forwarding dividends. The dividend is about each quarter by the Board and on the discretion of the Board. However in fact, as you effectively know, over time and over these 72 quarters, it is usually been secure or growing and with solely — with, in fact, some changes when there was market occasions type of driving it. So in fact, as we now have been doing fairly a little bit of enterprise — new enterprise final 12 months and 1 billion new investments, and so on, that can come on stream money circulate from these tanker vessels, as an example, we may have fairly a bit of money circulate from these vessels already within the first quarter and full money circulate impact within the second quarter and in addition a variety of transactions is, in fact, we do that solely with the one sole mindset that, we hope to do improve distribution capability going ahead.

However precisely how a lot and after I can’t inform you.

Randy Giveans — Jefferies — Analyst

Yeah, no, that is honest. Nicely, thanks once more. That’s my two questions.

Ole Hjertaker — Chief Government Officer

Thanks very a lot.

Aksel Olesen — Chief Monetary Officer

Thanks.

Operator

Thanks. The subsequent query comes from the road of Greg Lewis from BTIG. Please go forward.

Greg Lewis — BTIG — Analyst

Hey, thanks. And good afternoon, all people, and sorry, I missed you in New York final week. Query of the spherical simply following up on Randy’s query across the dividend, clearly, you are not going to provide any steerage across the dividend, but it surely does appear that we’re form of focusing on, some type of proportion of money circulate. Not less than that is what it regarded like during the last couple of quarters.

Is that form of a good manner to consider the dividend going ahead? Or is it extra a perform of your outlook available on the market?

Aksel Olesen — Chief Monetary Officer

I believe as Ole mentioned, we do not form of give any steerage and guarantees on dividends. I believe what’s vital for us is to see that we now have a very good money circulate going ahead as the type we are able to have a sustainable dividend going ahead. And because the enterprise, it is form of pure that we’re in a position to additionally improve the dividend over time. So it should — we do not suppose it is a particular proportion, and so on.

So it should see what the sustainable, what is the contribution from the money circulate in every quarter, and what is the outlook going ahead as effectively. After which as I’ll say after going ahead as effectively, and that is [Inaudible].

Greg Lewis — BTIG — Analyst

OK. That is sensible. OK. OK.

After which so I imply, you are — within the press launch, you talked about that seven vessels are unencumbered. You talked about, the precise estimated honest market worth of these vessels. Is there any manner to consider the potential borrowing means on these vessels? How ought to we take into consideration that?

Aksel Olesen — Chief Monetary Officer

Completely. I imply we intend to attract up the ability on — for LR2 product tankers later this quarter.

Ole Hjertaker — Chief Government Officer

And I might say, although, that a part of the rationale for having that and having a number of the widespread vessels is that it allows us given our monetary flexibility and allows us to go forward and shut our transactions early and never wait on the financing to be organized to get a deal performed. So you possibly can say the web issue is that we get the good thing about the money circulate from the vessels early after which we safe and supply the financing and naturally, the absolute best phrases, some weeks later. In order that was type of the incident. We even have some smaller, I might say, just like the older vessels which can be unencumbered, and we have no speedy plans essentially to place leverage on them.

However we now have the flexibleness all the time and may do it on quick discover if we have to. So you possibly can say it is type of a — we now have — it is type of a — so you possibly can say it is part of spare, name it, funding capability. And with our portfolio of property, there will likely be conditions the place some have decrease leverage and perhaps we are able to refinance if we expect that the leverage has come down too far in comparison with asset values and vice versa. So it is an ongoing, name it, dynamics in any firm.

Aksel Olesen — Chief Monetary Officer

Precisely, our portfolio strategy. And as a common commentary, we see that there we now have growing entry to — very engaging capital with both extra new banks coming in competing on phrases. So I believe for us all, it is an excellent surroundings.

Greg Lewis — BTIG — Analyst

After which as I have a look at the portfolio, I imply, clearly asset costs have gone up virtually exponentially in container ships. Clearly, that is your largest pool of property within the portfolio. As you are fascinated with that enterprise and, as you are fascinated with these property and also you’re speaking to your lenders realizing that the majority of your property is on long run contracts, perhaps we’re not full — we’re probably not going to learn from the energy and charges which can be driving these asset costs increased. That being mentioned, or would we — is there a possibility to placed on further leverage on any of these — whether or not it is container ships or different property the place costs have gone increased? Although a variety of these vessels are on long-term contracts?

Aksel Olesen — Chief Monetary Officer

I imply you possibly can probably — that is probably not how we take into consideration that. I believe, as a shareholder, I might suppose that the worth of our backlog is de facto form of the worth of the counterparties. And when you see that almost all of the backlog round $2 billion is to, I might say, most likely investment-grade counterparties, I believe that is the energy of the corporate. And you’ve got extraordinarily good visibility on that money circulate, and we now have been very specific on selecting the counterparties that they’ve within the portfolio that these are corporations that we consider will carry out even when form of the constitution advertising and marketing will soften, which it is going to sooner or later.

So it is extra form of having substance within the firm and never essentially form of utilizing that to leverage up since you even have minimal worth clauses in mortgage agreements, and so on. So that you simply must be very prudent in deciding what to do.

Greg Lewis — BTIG — Analyst

OK. Hey, all people, thanks for the time.

Ole Hjertaker — Chief Government Officer

Thanks.

Operator

Thanks. The subsequent query comes from the road of Liam Burke from B. Riley. Please go forward.

Liam Burke — B. Riley Securities — Analyst

Sure, thanks. Asset values are up, not solely with containers however just about throughout the board in all of your vessel lessons, how has that affected your acquisition backlog? I imply are you continue to seeing any alternatives? Or have your alternatives gone down? Or are you continue to a gorgeous pipeline?

Aksel Olesen — Chief Monetary Officer

I believe when you have a look at our aggressive benefit, I might spotlight the equally sturdy operational platform that we now have and the truth that when you have a look at the portfolio, roughly 90% of revenues are from time charters and solely 10% from bareboats. We principally have a special strategy to deal origination, and we additionally see a variety of form of repeat inquiries from present shoppers, which ought to be form of relationships that we have constructed over a few years. So I believe by way of form of new alternatives, we, in fact, each communicate to see brokers however we additionally discuss to our shoppers. We see a pleasant, I believe, it is a whole lot circulate.

If we see extra deal circulate by way of time charters then we see extra financially pushed offers like bareboats as lots of the banks are coming strongly again to lend in addition to form of cash. So I believe for us, we proceed to see engaging alternatives.

Liam Burke — B. Riley Securities — Analyst

Truthful sufficient. You talked about in your ready feedback that expertise is vital for apparent causes on emissions going ahead. Are there any vessels in your fleet than you’d suppose, OK, may present technological danger? May provide technological danger to permit you to promote sooner?

Trym Sjolie — Chief Working Officer

Nicely, the danger is perhaps a powerful phrase there. But when we have a look at our fleet, the vessels which can be perhaps the type of the least excessive deal going ahead can be smaller bulk carriers. The vessels the place we see — which we’re fairly constructive to that the large tankers, they’re — is not going to have an issue from that perspective. And in addition, our giant container ships are in a very good place.

And particularly if we have a look at our new constructing packages with the LNG dual-fuel automobile carriers, they’re additionally going to contribute very effectively towards the general fleet carbon depth indicator observe as a result of once we are coming into 2023 and ahead, it should be an more and more aggressive goal as that they had. However with our present fleet, we’re well-positioned, we expect.

Ole Hjertaker — Chief Government Officer

And I believe perhaps simply so as to add to Trym’s remark there, he’s Trym Sjolie, our chief working officer, perhaps additionally add to that, that we are going to have our ESG report out in a number of weeks’ time for the final 12 months. I believe you will notice when you evaluate the report from the earlier 12 months, you will notice a really vital change in our fleet composition and the metrics. As a mixture of our acquisitions of very environment friendly vessels, together with twin gasoline new buildings and the sale of much less environment friendly small bunkers. That may even be disposed of final 12 months and in addition many small feeder container ships that have been disposed of in the midst of the 12 months that which have been usually fairly previous and subsequently had a detrimental affect on our common on these metrics.

So I might say we’re very targeted on these points and naturally, our mindset is that we should always proceed to develop our portfolio over time with that, in fact, as considered one of our key determination components.

Liam Burke — B. Riley Securities — Analyst

Nice. Thanks.

Ole Hjertaker — Chief Government Officer

Sure.

Operator

Thanks. The subsequent query comes from the road of Chris Wetherbee from Citigroup. Please go forward.

Unknown speaker

Hey, thanks, guys. That is Eli will likely be on for Chris. Possibly we are able to begin with COVID feedback shortly. I am simply curious if we are able to quantify what the COVID affect on the cruise was from an expense standpoint by way of the headwind?

Trym Sjolie — Chief Working Officer

Sorry, I did not fairly catch the query there. I imply the price of the COVID prices for us is spherical numbers, $1 million per quarter. And that appears to be fairly regular. It was throughout final 12 months, and it appears to be roughly the place we’re in the intervening time, too.

And this has to do with journey prices and quarantine and common type of delays in transferring individuals round.

Unknown speaker

Can we speak about capex. So the place will we at the moment stand with that, trying ahead right here? What is the combine and the methods going ahead there?

Aksel Olesen — Chief Monetary Officer

Sure. I believe actually the one excellent capex at the moment is for carriers twin gasoline new buildings arising of China with 10-year charters to [Inaudible] group and [Inaudible] respectively. We’re in lively discussions with a number of monetary establishments. It is — I might say it is extra about optimizing the monetary phrases than the rest.

We’ve got acquired extraordinarily sturdy curiosity primarily based on the form of, yeah, high quality of the ship’s gasoline of a 3rd of the counterparties in an attention-grabbing section with a very good provide demand outlook. So, yeah.

Ole Hjertaker — Chief Government Officer

So after which — and naturally, we now have to pay down installments to the shipyards for all these 4 vessels as effectively. So, we do not count on a really vital, name it, capex — web money capex as a result of many of the remaining investments in these vessels could be coated by financing.

Aksel Olesen — Chief Monetary Officer

Precisely.

Ole Hjertaker — Chief Government Officer

And naturally, we give attention to optimizing that and minimizing the price of that capital, in fact, however — from an total perspective, with a $4 billion stability sheet, I believe we now have a really low capex in a type of relative numbers.

Unknown speaker

Certain, simply following up on that one factor you mentioned, I am simply curious, what’s the backlog or the congestion within the shipyards you are seeing proper now?

Trym Sjolie — Chief Working Officer

Congestion, effectively, we see if you wish to go on to get new vessels. Sometimes, automobile carriers, container ships, now you may most likely be 2024, even 2025. So if you wish to go to type of first or second-tier yards in Asia like China or Korea, so I do not suppose you will discover many ’23 deliveries in the intervening time. So we’re looking at late ’24, early ’25.

I believe that solutions your query.

Ole Hjertaker — Chief Government Officer

And in addition costs have been going up. There may be inflation of each in uncooked materials, however so — and in addition labor, in these nations the place many of the ships are being constructed. So that is additionally serving to our total fleet construction, or I might say, any delivery corporations within the fleet portfolio as a result of it is — new constructing costs are in a manner pulling off additionally secular values as a — there is a proportion of alternative value, which is benefiting us. So we do not thoughts calling it the growing shipyard costs.

And as we do new transactions, so long as we are able to get charters, that’s reflective and offers us an honest return even when costs are coming off, we’re nonetheless good to do information transactions and better costs.

Trym Sjolie — Chief Working Officer

And a few yards are reluctant to take orders going a lot additional in or additional out, I imply than a type of mid ’24 due to the danger of rising metal costs and common inflation. So, the yards are additionally a bit reluctant to take new orders very far into the long run.

Unknown speaker

Certain, that is sensible. Thanks, each.

Ole Hjertaker — Chief Government Officer

Thanks.

Operator

Thanks. And with that, I want to hand it again over to the audio system for remaining remarks.

Ole Hjertaker — Chief Government Officer

Thanks. Then I want to thank everybody for collaborating in our convention name and in addition thanked the SFL groups onboard the vessels and onshore for his or her continued efforts day and night time in delivering worth for our shareholders. If you happen to do have any follow-up questions, there are contact particulars within the press launch the place you may get in contact with us by the contact pages on our internet web page www.sflcorp.com. Thanks.

Operator

[Operator signoff]

Length: 41 minutes

Name members:

Ole Hjertaker — Chief Government Officer

Aksel Olesen — Chief Monetary Officer

Randy Giveans — Jefferies — Analyst

Greg Lewis — BTIG — Analyst

Liam Burke — B. Riley Securities — Analyst

Trym Sjolie — Chief Working Officer

Unknown speaker

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This text represents the opinion of the author, who could disagree with the “official” advice place of a Motley Idiot premium advisory service. We’re motley! Questioning an investing thesis — even considered one of our personal — helps us all suppose critically about investing and make choices that assist us change into smarter, happier, and richer.