Ship Finance International Limited 4Q 2016 Results

Transcription

1 Ship Finance International Limited 4Q 2016 Results February 28,

2 FORWARD LOOKING STATEMENTS This presentation contains forward looking statements. These statements are based upon various assumptions, many of which are based, in turn, upon further assumptions, including Ship Finance management's examination of historical operating trends, data contained in the Company s records and other data available from third parties. Although Ship Finance believes that these assumptions were reasonable when made, because assumptions are inherently subject to significant uncertainties and contingencies which are difficult or impossible to predict and are beyond its control, Ship Finance cannot give assurance that it will achieve or accomplish these expectations, beliefs or intentions. Important factors that, in our view, could cause actual results to differ materially from those discussed in the forward looking statements include the strength of world economies, fluctuations in currencies and interest rates, general market conditions including fluctuations in charter hire rates and vessel values, changes in demand in the markets in which we operate, changes in demand resulting from changes in OPEC's petroleum production levels and world wide oil consumption and storage, developments regarding the technologies relating to oil exploration, changes in market demand in countries which import commodities and finished goods and changes in the amount and location of the production of those commodities and finished goods, increased inspection procedures and more restrictive import and export controls, changes in our operating expenses, including bunker prices, dry-docking and insurance costs, performance of our charterers and other counterparties with whom we deal, timely delivery of vessels under construction within the contracted price, changes in governmental rules and regulations or actions taken by regulatory authorities, potential liability from pending or future litigation, general domestic and international political conditions, potential disruption of shipping routes due to accidents or political events, and other important factors described from time to time in the reports filed by the Company with the Securities and Exchange Commission. 2

3 4Q 2016 Highlights Quarterly dividend of $0.45 per share 12.3% dividend yield (1) Net income of $28.5m ($0.31/share) for the quarter Aggregate charter revenue of $154m ($1.64/share) (2) Adjusted EBITDA (3) of $121m ($1.29/share) Successful placement of $225 million convertible notes, due 2021 Primarily used to repurchase a part of our $350m convertible note due 2018 Approximately $40 million net cash proceeds Charter revenues 4Q-16 TANKERS DRY BULK LINERS OFFSHORE 24% 18% 24% 34% 1) Quarterly cash dividend, annualized / SFL share price $14.65 as of Feb 27, ) Charter revenues include total charter hire from all vessels and rigs, including assets in 100% owned subsidiaries classified as Investment in associates and accrued profit share. 3) Adjusted EBITDA is a non-gaap measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 4Q-16 press release Appendix 1: Reconciliation of Net Income to Adjusted EBITDA. 3

4 Recent Events 2 x 19,200 TEU container vessels 15 year bareboat charters to MSC First vessel delivered in December 2016 and second expected in March 2017 Total EBITDA contribution estimated to ~$31m per year after delivery 2 x 114,000 dwt LR2 product tankers 7 year time charters to Phillips 66 Expected delivery from Korean shipyard during second half of 2017 Total EBITDA contribution estimated to ~$11m per year after delivery Sale of 19 year old tanker VLCC Front Century (1998), expected delivery to new owners in March

5 Drilling Assets Positioned for a Market Downturn West Hercules West Taurus Frontloaded charter revenues (3) $ th gen. semi BB to Seadrill (1) 2023 Current debt (2) : $274m SFL guarantee: $75m 6th gen. semi BB to Seadrill (1) 2023 Current debt (2) : $245m SFL guarantee: $75m $ $ $ $ $ $ $0 15 year charters, but ~70% of aggregate charter hire already received Hercules/Taurus: Average charter rate per day E 2019E 2021E 2023E Year West Linus Soehanah Limited corporate guarantees Initial Debt $2.0bn Heavy-duty jackup BB to Seadrill (1) 2029 Current debt (2) : $348m SFL guarantee: $90m 375ft jackup Currently Idle Current debt: $0m SFL guarantee: n/a Corporate guarantees: $240m, only 28% 1) Charter fully guaranteed by Seadrill Limited. 2) Current Debt as of 28 Feb ) For illustrative purposes only - average bareboat charter hire for West Hercules and West Taurus, based on actual hire received until 4Q 2016 and estimate of future average hire with adjustments based on current interest rate levels. The charter on West Linus is structured with a similar frontloaded profile, but with different charter rate levels during the charter. 5

6 Modern Liner Vessels with Long Term Contracts 2 x 19,200 TEU Built: Charterer: MSC #2 liner worldwide (1) 3 x 9,500 TEU EBITDA: ~$31 million/year Built: Charterer: Maersk Line #1 liner worldwide (1) EBITDA: ~$32 million/year 4 x 8,700 TEU Built: Charterer: Hamburg Süd #7 liner worldwide (1) EBITDA: ~$46 million/year $990 million of contracted revenue (2) 9.3 Average length of current charters in years (2) 150,000 Other liner vessels with long term contracts Type Quantity x Size Contract expiry Charterer Container 2 x 1,700 TEU 2020 Heung-A Container 7 x 4,100 TEU MSC Container 2 x 5,800 TEU 2019 MSC Car carrier 2 x 6,500 CEU 2017 Hyundai Glovis Aggregate TEU (3). 1) Based on operating fleet. Source: Alphaliner 2) As of Dec 31, Average length weighted by charter revenues and excluding option periods. 3) Approximate capacity, as of Dec 31, 2016, including newbuildings. 6

7 Tankers: Continued Profit Share Potential 12 x vessels to Frontline 10 x VLCCs: $20,000 base rate 2 x Suezmax: $15,000 base rate 50% profit share above daily base rates, paid quarterly 2 x Suezmax tankers 2009/2010 built vessels with eco upgrade Trading in pool with sister vessels owned by Frontline and significant charter coverage in 2017 Other tanker vessels 2 x 2008 built Chemical tankers on bareboat charters until x 114dwt LR2 Product tankers on time charters until 2024 Contracted Profit Share/Spot $23M $36M 63 % 37 % $740 million of contracted revenue (1) 7.7 Average length of current charters in years (1) 3.9 Million aggregate dwt (2) 4Q-16 Contracted Revenue 4Q-16 Actual Revenue 1) As of Dec 31, Average length weighted by charter revenues and excluding option periods. 2) Approximate capacity, as of Dec 31, 2016, including newbuildings. 7

8 Early Signs of Recovery in the Dry Bulk Market Significant upside optionality from larger Capesize vessels 8 x Capesize vessels delivered in 3Q year charters with Golden Ocean 33% profit share above daily base rates, paid quarterly Historical Capesize earnings Jan 2017 (1) $590 Million of contracted revenue (2) 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10, Capesize Earnings SFL avg base rate 7.4 Average length of current charters in years (2) 2.1 Million aggregate DWT (3) Other dry bulk vessels with long term contracts Kamsarmax 2 x 82,000 DWT 2022 Sinochart Supramax 5 x 57,000 DWT Hyundai Glovis 1) Source: Clarksons Platou. 2) As of Dec 31, 2016 average length weighted by charter revenues and excluding option periods. 3) Approximate capacity, as of Dec 31, 2016, including newbuildings. 8

9 Contribution from Projects last 12 months (1) Large performing fleet generating significant cash flows $503m adjusted EBITDA-equivalent last twelve months $221m net cash flow from projects after interest and debt amortization (3) $ mill % Charter Revenues (2) Profit Share OPEX+ G&A Net interest Loan Amort. (3) Distributable Cash 168 Dividend 1) Not as accounted per US GAAP and including cash flow in subsidiaries accounted for as investment in associate. 2) Charter revenues and return on financial investments, including dividend from Frontline. 3) Ordinary installments relating to the Company s projects. Excluding prepayments when vessels are sold. 9

10 SFL Operational Performance Pro-forma illustration of cash flow (1) Not as accounted for under US GAAP Used as an internal guideline to assess the Company's performance Excluding extraordinary and non-cash items 4Q Q 2016 $ mill. $/share $ mill. $/share Charter hire VLCC Suezmax (2) Chemical Tankers Liner (Container and Car Carriers) Drybulk Offshore Sum charter hire, excluding profit share Vessel operating expenses (2) and G&A (32.6) (0.35) (34.8) (0.37) Profit share Financial investments Adjusted EBITDA including profit share ) Including cash flow in subsidiaries accounted for as investment in associate 2) In this table, revenues and vessel operating expenses for Suezmaxes trading in the spot market are net of voyage expenses 10 10

11 Income Statement (in thousands of $ except per share data) Three months ended Full year 2016 Dec 31, 2016 Sep 30, 2016 (unaudited) Charter revenues - operating lease Charter revenues - finance lease (1) Revenues classified as Repayment of investment in finance leases (1) (7 345) (7 214) (31 380) Profit share income (2) Cash sweep income Total operating revenues Gain (loss) on sale of assets and termination of charters - (181) (167) Vessel operating expenses (33 001) (34 201) ( ) Administrative expenses (2 049) (2 235) (9 072) Depreciation (23 738) (24 251) (94 293) Vessel impairment charge (3) (5 314) - (5 314) Total operating expenses (64 102) (60 687) ( ) Operating income Results in associate Interest income from associates and long term investments Interest income, other Interest expense (4) (16 497) (14 763) (60 871) Amortization of deferred charges (2 623) (2 686) (10 972) Other financial items (5) (8 098) Income (expense) related to non-designated derivatives (514) Taxes Net income Basic earnings per share ($) Weighted average number of shares (6) Common shares outstanding (6) (1) 19,200 TEU container vessel delivered December 2016 accounted for as finance lease (2) $6.8m from 50% profit share with Frontline in 4Q 2016 (3) $4.8m impairment on 2003 built 1,700 TEU container vessel and $0.5m impairment on 1998 built VLCC held for sale (4) Interest expense includes $225m convertible notes issued October 2016 and lease financing of 19,200 TEU container vessel delivered December 2016 (5) Includes $8.8m one-time expense from repurchase of $166m nominal amount of convertible notes due 2018 (6) Excluding 8m shares lent under a share lending arrangement in connection with the $225m convertible notes 11

12 Balance Sheet (in thousands of $) Dec 31, 2016 Sep 30, 2016 Dec 31, 2015 (audited) ASSETS Short term Cash and cash equivalents (1) Available for sale securities Amount due from related parties Other current assets Long term Newbuildings and vessel deposits Vessels and equipment, net Investment in finance leases (2) Investment in associate Amount due from related parties - Long term Other long term assets Total assets (1) Excludes $205m available under revolving credit facilities (2) 19,200 TEU container vessel delivered December 2016 included under Investment in finance leases (3) Lease financing of 19,200 TEU container vessel included under Other long term liabilities (4) Book equity ratio of 39% LIABILITIES AND STOCKHOLDERS EQUITY Short term Short term and current portion of long term interest bearing debt Other current liabilities Amount due to related parties Long term Long term interest bearing debt, net of deferred charges Other long term liabilities (3) Stockholders equity (4) Total liabilities and stockholders equity

13 Liquidity and Capex Strong liquidity position $267m in total available liquidity at quarter end o $62m cash and cash equivalents o $205m freely available under revolving credit facilities $118m in available for sale securities (1) o tradeable shares and senior secured bonds Limited remaining capital expenditure commitments 1 x 19,200 TEU container vessel o Expected delivery early 2017 o ~$15m net remaining capex after financing 2 x 114,000 dwt LR2 product tankers o Expected delivery in second half 2017 o ~$38 million remaining capex per vessel before financing 1) Market value as per Dec 31,

14 Financing $225m convertible notes issued October % p.a. coupon and initial conversion price ~$17.77 per share o Higher coupon compared to $350m convertible notes in exchange for lower adjustment in strike price when we pay dividends o Only adjusted for dividends in excess of $0.225 per quarter = less potential dilution for shareholders Proceeds mainly used to repurchase part of our 2018 notes o ~$184m net outstanding under $350m notes following repurchase o Net proceeds of approximately $40m Staggered debt maturity schedule (1) $mill Q-17 2Q-17 3Q-17 4Q-17 1Q-18 2Q-18 3Q-18 4Q-18 Bank debt - scheduled repayments Bank debt - amounts to be refinanced Senior Notes Steep repayment of loans and no debt maturities until 4Q ) Including debt in subsidiaries accounted for as investment in associate and assuming all loans are fully drawn 14

15 4Q 2016 Summary Quarterly dividend of $0.45 per share o 12.3% dividend yield (1) Net Income of $28.5m o $154m Aggregate charter revenue (2) o $121m Adjusted EBITDA (3) Successful placement of $225 million convertible notes Delivery of first 19,200 TEU container vessel with 15 year charter to MSC Strong liquidity position and limited remaining capex 1) Quarterly cash dividend ( annualized) / SFL share price of $14.65 (February 27, 2017). 2) Charter revenues includes total charter hire from all vessels and rigs, including assets in 100% owned subsidiaries classified as Investment in associates and accrued profit share. 3) Adjusted EBITDA is a non- GAAP measure and includes assets in 100% owned subsidiaries classified as 'Investment in associates'. For more details please see 4Q-16 press release Appendix 1: Reconciliation of Net Income to EBITDA. 15