SFL Corporation Ltd (SFL) 2013 Q2 法說會逐字稿

Good day and welcome to the Q2 2013 Ship Finance International Limited earnings conference call.

Today's conference is being recorded.

And at this time I would like to turn the conference over to your host today, Ole Hjertaker.

Please go ahead, sir.

Thank you, and welcome, everyone, to Ship Finance International and our second-quarter conference call.

With me here today I also have our CFO, Harald Gurvin, who will take us through the financials; and also Senior Vice President, Magnus Valeberg.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of that US Private Securities Litigation Reform Act of 1995.

Words such as expects, anticipates, intends, estimates, or similar expressions are intended to identify these forward-looking statements.

These statements are based on our current plans and expectations and involve risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Important factors that could cause actual results to differ include conditions in the shipping, offshore, and credit markets.

For further information, please refer to Ship Finance's reports and filings with the Securities and Exchange Commission.

Net income for the quarter was $25 million or $0.29 per share.

Aggregate charter revenues recorded in the quarter, including 100%-owned subsidiaries accounted for as investment in associate, was $153 million, which is in line with the previous quarter.

This is excluding any cash sweep from the Frontline vessels in the quarter.

For comparison, in 2012, the average cash sweep was $0.16 per share per quarter.

The EBITDA equivalent cash flow in the second quarter was approximately $121 million; and last 12 months, the EBITDA equivalent was $523 million.

The Board of Directors declared a cash dividend of $0.39 per share, which is in line with the previous quarter.

The $0.39 dividend represents $1.56 per share on an annualized basis, or nearly 10% dividend yield based on the closing price yesterday.

We have now declared dividends for 38 consecutive quarters, totaling more than $16 per share since 2004.

In the second quarter, and including all 100%-owned assets, more than 50% of our charter revenues came from offshore segments, less than 30% from tankers, and the remaining 20% split between our dry bulk and container assets.

We have invested nearly $1 billion this year and see additional growth opportunities, particularly in the container and offshore segments.

With our robust financial position, we believe we have significant firepower for the right opportunities.

The recently-ordered newbuildings will be delivered in 2014 and 2015 from Daewoo's main shipyard in Korea.

We are also building the 18,000 TEU newbuildings for Maersk line.

These vessels will be built to very high specifications, including high reefer capacity and the latest in eco-design features.

As a consequence, our vessels will be best in class in terms of consumption and can be operated efficiently in a wide range of speeds, providing a lot of flexibility for container lines.

The 9,000 to 10,000 TEU class is regarded as the new Panamax size, and while even bigger vessels can traverse the new expanded canal from 2015 onwards, this size will have more flexibility in container ports with size and depth restrictions.

We have not yet chartered the vessels, but have initiated dialogue with some potential charterers and expect to fix the vessels well before delivery from the shipyard.

Bank financing will also be arranged in due course, and we expect the equity investment to be up to approximately $25 million per vessel, or $100 million in total.

The West Linus transaction was finalized just before quarter end, and we paid $195 million of the purchase price in June.

The drilling rig is expected to be delivered from the Jurong shipyard in Singapore in December of this year, and we will then pay the remaining $405 million.

The total financing of the transaction is a combination of $125 million of equity investment and $475 million of bank financing.

And the remaining payment in December is fully covered by the committed bank facility.

North Atlantic Drilling is responsible for yard supervision, and there are no additional expenses for Ship Finance linked to delivery and commencement of the charter contract.

The rig will be mobilized to Norway, and expected start-up on the subcharter to ConocoPhillips is in April 2014.

The charter rig to North Atlantic Drilling from the subcharter is approximately $375,000 per day for a period of 5 years, with extension options up to 9 years.

Our charter rate with North Atlantic is approximately $85,000 per day during the mobilization period of approximately 4 months, and this will effectively cover the interest on the financing, plus also some returns on our invested equity.

Thereafter, the charter rate increases to $222,000 per day for a period of 5 years, and there will be a very significant reduction in debt over this period.

Afterwards, the charter rate will be reduced in line with the reduced debt level, and the structure is designed to give us a stable cash return on the invested equity over time of approximately 15%.

As for the Seadrill rigs, North Atlantic will compensate us for fluctuations in the interest rate environment.

And we have a put option at the end of the 15-year charter period which, similar to the Seadrill rigs, then, means that the rig will be accounted for as an equity investment under US GAAP.

The backbone of our business is our significant portfolio of long-term charters.

Most of our vessels are chartered out on a long-term basis, and we have more than 10 years weighted average charter coverage.

Full details on a vessel-by-vessel basis is available by contacting us on email at IR@shipfinance.no.

We had $5.8 billion of fixed-rate order backlog at quarter end, which is the equivalent of approximately $62 per share.

At the EBITDA equivalent, backlog is $4.7 billion or around $50 per share.

These numbers include only the reduced base rates from the Frontline vessels and do not include expectations for cash sweep or profit share.

Any rechartering at the end of current charter are also excluded.

We have a total of 17 customers, and nearly 40% of the portfolio is with companies with a market cap in excess of $5 billion.

If we include all listed companies, the percentage is 86%.

In addition, the majority of the backlog in the private segment is with companies with a public rating.

If you look at the average weighted charter tender, as indicated on the right side, we see that around two-thirds of the portfolio is in excess of 10 years, and only 5% shorter than 5 years.

In light of the soft tanker market, we would again like to highlight our financial exposure relating to the vessels we have on charter to Frontline.

The original fleet of 47 vessels was acquired in 2004 and another 5 vessels added in 2005, but after that we have only reduced the number of vessels, and we are now down to 22 vessels after recent sales.

This has been through the sale of the oldest vessels in the fleet.

We are amortizing down the debt on these vessels very quickly and have reduced the financing amount by nearly two-thirds over a period of only 4 years.

Compared to reported scrap value levels, the financial leverage is moderate, and the schedule amortization continues with more than $70 million per year, even with the reduced base rates.

And currently, only approximately 50% of the loans relating to these vessels are drawn.

The graph on the right side illustrates the difference between the loan amount over time and the scrap value of the fleet basis the current scrap price of around $400 per ton.

While there has been no cash sweep effect in the first and second quarters, the cash sweep effect for 2012 was $52.2 million or approximately $0.16 per share per quarter on average.

As the cash sweep is based on an annual calculation, we would need nearly $6,000 per VLCC and $2,000 per Suezmax in excess of the base rates for the remainder of the year in order to be in a position for a cash sweep this year.

Given the soft market right now, we do not expect this to happen.

And if in a worst-case scenario Frontline should default on their payment obligations to us, we will then be able to play the vessels in the market with a low cash breakeven rate and retain 100% of any chartering upside.

Ship Finance also expects, as part of the free renewal strategy, to continue selling all the vessels and correspondingly reduce the counterparty exposure to Frontline over time.

I would like to note that Frontline is current with all their charterer payments to us, and they reported more than $83 million of free cash at the end of the second quarter.

And they also have some other assets, including a stake in Frontline 2012 with a market value of approximately $67 million.

In the second quarter, the share of our EBITDA contribution from the Frontline vessels was approximately 18%.

If we then switch to outperformance last 12 months, the normalized -- the contribution from our projects, which includes vessels accounted for as investment in associate, the EBITDA, which we define as charter hire plus profit share, less operating expenses and general administrative expenses, was $523 million in the period.

This is equivalent to $6.23 per share.

Net interest was $120 million or approximately $1.43 per share, but more importantly, when normalized, ordinary debt installments relating to the Company's projects was $301 million or approximately $3.60 per share.

This is excluding prepayments relating to sale of other assets and assuming all loans were fully drawn.

The illustration shows a $102 million net contribution if all loans were fully drawn.

But in reality, the debt amortization was lower, as we had not drawn all loans fully, and particularly the loans relating to our Frontline vessels.

And the amortization on the Frontline vessels was $74 million in the period.

If we keep significant amounts undrawn on revolving credits, there will be a lower cash payment in order to service the debt, leaving more to the net contribution.

Since 2004, aggregate net income has been approximately $23 per share, while aggregate dividends have been $16 per share in the same period, illustrating the conservative long-term distribution profile of the Company.

And, with that, I will leave the word over to Mr. Harald Gurvin, our Chief Financial Officer, who will take us through the numbers for the second quarter.

Thank you, Ole.

On this slide we are showing our pro forma illustration of cash flows for the second quarter compared to the first quarter of 2013.

Please note that this is only a guideline to assess the Company's performance and is not in accordance with US GAAP.

For the second quarter, total charter revenues were $153.7 million or $1.78 per share, slightly up from $152.8 million in the first quarter of 2013.

Suezmax and OBO earnings were down in the second quarter, due to the sale of the Suezmax and the loss of our OBOs in the first quarter, while offshore earnings were up due to an extra day of earnings on the bareboat charters in the second quarter compared to the first quarter.

Vessel operating expenses and G&A were $34.8 million, slightly up from $33.6 million in previous quarter, mainly due to the amendment from bareboat charters to time charters for two of the vessels in May 2013.

We also had income of $2.5 million on financial investments during the first quarter, in line with the previous quarter.

There was no cash sweep from Frontline in the second quarter, but we recorded a profit share of $100,000 relating to one of the Handysize dry bulk carriers.

So overall, this summarizes to an EBITDA of $121.5 million for the quarter or $1.41 per share, in line with the $121.6 million in the previous quarter.

We then move on to the profit and loss statement as reported under US GAAP.

As we have described in previous earnings calls, our accounting statements are slightly different than those of a traditional shipping company.

As our business strategy focuses on long-term charter contracts, a large part of our activities are classified as capital leasing.

As a result, a significant portion of our charter revenues are excluded from our booked operating revenues and instead booked as revenues classified as repayment of investment in finance leases, results in associates and long-term investment, and interest income from associate.

If you wish to gain more understanding of our accounts, we will also this quarter publish a separate webcast which explains the finance lease accounting and investments in associate in more detail.

This webcast can be viewed on our website, shipfinance.org.

Overall for the quarter, we reported total operating revenues according to US GAAP of $66 million.

As mentioned, there was no cash sweep accrued from Frontline in the first quarter while we recorded a profit share of $100,000 on one of the Handysize dry bulk vessels.

Interest expenses were down in the quarter, mainly due to lower amounts drawn on the revolving credit facilities and the refinancing of the 8.5% senior notes during the first quarter of 2013.

So overall, and according to US GAAP, the Company reported net income of $25.1 million or $0.29 per share for the quarter.

It should also be mentioned that the number of common shares outstanding at quarter end includes the 8 million new shares issued in connection with the public offering in June 2013.

Moving on to the balance sheet, we showed $41 million of cash at the end of the quarter.

In addition, we had approximately $220 million available for drawdown on the revolving facility.

Available for sale securities of $66.7 million includes a $47.6 million invested in short-term tradable securities as a short-term liquidity placement.

In addition, the second year notes and horizon lines are recorded under available for sale securities at $19.1 million or 40% of par value, including accrued interest.

Newbuilding and vessel deposits increased during the quarter due to the investment in the four 8,700 TEU container vessels and further installments paid on the 4,800 TEU container vessels.

The three ultra-deepwater units on charter to Seadrill are included in the balance sheet under investment in associate and amount due from related parties long-term.

Our investment in the subsidiaries owning the units is in the form of both equity and shareholder loans from the parent company.

The total equity investment in the rigs is thus a combination of the two, and the space between equity and shareholder loans from quarter to quarter will depend on intercompany accounting.

In addition, the newbuilding harsh-environment jack-up drilling rig, West Linus, will be equity accounted similar to the Seadrill rigs, due to the conservative nature of the transaction.

The total investment is $600 million, of which $195 million was paid in June 2013.

The $195 million investment is included under amount due from related parties long-term in our consolidated balance sheet.

Short-term debt and current portion of long-term debt includes a $70 million short-term predelivery facility relating to West Linus, which will be repaid from the proceeds of the $475 million long-term postdelivery facility upon delivery of the unit.

It is also worth mentioning that Frontline took an impairment on the carrying value of 3 of the vessels on charter from Ship Finance in the second quarter.

The impairment relates to Frontline's expected future cash flows from the 3 individual vessels compared to the carrying value of these vessels in their account.

They have not made any impairment on the lease obligation to Ship Finance.

Ship Finance carries out an impairment review of all vessels each quarter, which also includes the residual value of the vessels, which, of course, is ours.

Based on the analysis, no impairments have been made in the quarter.

Stockholder equity stands at approximately $1.35 billion, including the $145 million of deferred equity.

The book equity ratio including deferred equity was approximately 42% at the end of the quarter.

Then, looking at our liquidity and financing status -- as mentioned, the Company had total available liquidity of approximately $261 million at the end of the quarter, which includes $41 million in cash and approximately $225 million that is available on the revolving credit line.

We also had $67 million in available for sale securities at quarter end, as previously described.

On the debt side, we had approximately $2.9 billion of gross interest-bearing debt outstanding the end of the quarter, of which $1.1 billion is consolidated bank loans and approximately $1.2 billion is bank loans in our subsidiaries accounted for as investment in associate.

In addition, we had approximately $650 million of consolidated senior unsecured notes outstanding as per June 30.

The figure includes the new $500 million bonds maturing in 2014, of which $72 million is net outstanding; and the new $600 million bonds maturing in 2018, of which $99 million is net outstanding.

The figure also includes the new $350 million convertible notes maturing in 2018 and $125 million convertible notes maturing in 2016.

Both our outstanding convertible notes can be repaid in shares at the Company's option at maturity.

We have been active in both the capital and banking markets over the last month and have refinanced a significant portion of upcoming debt maturities and also entered into new financings at attractive terms.

We continue to demonstrate our premium access to the bank market through the refinancing of the two ultra-deepwater drilling units, West Polaris and West Hercules, and the financing of the newbuilding harsh-environment jack-up rig West Linus.

The five-year, $420 million facility for West Polaris was drawn in January 2013; and a six-year, $375 million facility for West Hercules was drawn in June 2013.

We also received a commitment for a $475 million post-delivery facility for West Linus.

The facility is currently in documentation, and we will draw upon delivery of the rig, which is expected in December 2013.

The facility has a term in excess of 5 years and will mature in the second quarter of 2019.

Ship Finance only has a limited guarantee obligations for the three facilities.

All of the facilities were oversubscribed and demonstrated in the banking environment, where many owners have no or limited access to bank financing.

The banks focus on the core clients, benefiting strong owners like Ship Finance.

In January 2013, we also issued $350 million of convertible notes due 2018.

The offering was significantly oversubscribed, and the offering was upsized from the originally targeted amount of $250 million to $350 million.

The majority of the remaining debt maturities in 2013 related to ultra-deepwater drilling rig, West Taurus, which matures in the fourth quarter of 2013.

The loan has a final payment of $376 million, representing less than 55% of the current charter-free market value of the unit.

The facility will be refinanced in due course while we, in the meantime, enjoy the benefits of the attractive margin on the existing financing.

The next slide provides some more detail on our newbuilding program and the remaining payments through shipyards.

As per June 30, we had 1 jack-up drilling rig and 8 container vessels under construction.

The graph shows the committed financing in the blue bars compared to the remaining shipyard installments.

The $600 million investment in the newbuilding harsh-environment jack-up drilling rig, West Linus, has a final payment of $405 million due upon scheduled delivery in December 2013, which will be fully funded by the long-term bank facility.

The upfront payment of $195 million was paid in June 2013 and is not included in the above numbers.

In May 2013, we entered into contracts for 4 newbuilding 8,700 TEU container vessels in Korea, with expected delivery in late 2014 and early 2015.

The total contract price is $340 million, with the majority of the payments due upon delivery of the vessels.

We have not yet entered into any financing with respect to these vessels, but have seen interest from both commercial banks and export credit agencies.

We will arrange financing for the vessels in due course and expect an equity investment is up to $100 million.

We also have the four 4,800 TEU container vessels under construction, with expected delivery between the fourth quarter 2013 and the second quarter 2014.

We have arranged a 12-year financing for the vessels at attractive terms and have already paid significant amounts to the yard, while we have chosen not to fully utilize all available pre-delivery financing in order to reduce the interest expense during the construction period.

The net remaining equity investment on the 4 vessels is only $14 million.

We are in compliance with all financial covenants under our loan agreement.

Free cash was $245 million compared to the minimum requirement of $25 million.

This includes $204 million available on the revolving credit facilities with maturity in excess of 12 months.

Working capital was $74 million compared to the requirement of being positive.

And the book equity ratio was 42% compared to a minimum requirement of 20%.

And on the loan agreements, where we have minimum-value clauses, we were fully in compliance at the end of the quarter.

It is worth noting that Ship Finance has been in full compliance with all financial covenants for each of the 38 quarters since the Company was established.

Given the financial turmoil in the pressed shipping markets over the last years, this gives us a very strong standing in the banking market, as recently demonstrated on the refinancing of the two ultra-deepwater drilling units and the financing of the harsh-environment jack-up rig.

Then, to summarize.

Net income for the quarter was $25 million or $0.29 per share.

The aggregate EBITDA was $122 million or $1.41 per share.

The Board has declared a quarterly cash dividend of $0.39 per share for the quarter.

This represents a dividend yield of 9.9% based on the closing share price as of August 27.

We have premium access to the banking capital markets and have raised more than $2 billion in bank debt, bonds, convertible notes, and equity over the last 12 months.

We see growth opportunities in multiple segments and have since made investments close to $1 billion in state-of-the-art units in the offshore and container space.

And with that, I give the word back to the operator, who will open the line for any questions.

(Operator Instructions).

Fotis Giannakoulis, Morgan Stanley.

Good morning, guys.

I want to ask you about the potential builds that you see in the market right now.

We have seen the last couple of months asset prices for more shipping segments moving higher.

For most of the traditional ship owners, that means assets are more expensive.

It's more difficult to acquire vessels.

What does it mean for you, given the fact that you are looking at transactions that they come with secured cash flows?

Are the cash flows that you see, the charters that you see, more attractive right now?

And in which sectors do you see more opportunities in acquiring vessels?

We still see good opportunities in several sectors.

And while we have seen that prices at least stabilized, I wouldn't say that we have seen any dramatic movements upwards.

And we are talking from historic low levels in many segments.

I think part of that is that we saw the shipyards taking in a lot of orders in the first half of the year.

Maybe they are now a little bit more relaxed as they have covered more of their more pressing and immediate positions, and therefore not so aggressively selling yard positions where they may actually take a loss on building vessels.

Overall, I think it is still a very interesting time to invest in shipping assets.

And we have, as also demonstrated by where we have put our money -- we still think both the offshore space and the container space, at least for us, are the segments where we more easily can see the mix of attractive asset acquisitions and also cash flow characteristics matching our expectations.

But that said, I mean, we definitely also look at other segments, and there are also opportunities there.

I think between the four main segments, in addition to rigs and containers, we also think there could be deals to be done in the tanker space and also the dry bulk space.

But we seem more long-term charter prospects in the two first mentioned segments.

Thank you, Ole.

Can you be a little bit more specific about that chartering of the containers and vessels that you mentioned that you are in active discussions about these vessels?

When do you think that these discussions will bring some results?

And at what levels do you see the cash flow yields for these vessels being developing?

Yes.

We, of course -- as we have not finalized anything, we cannot be too specific on commenting on those vessels other than that we are in discussions with some potential charterers.

These vessels are not delivered.

The first vessel has delivery in October next year, so we have more than a year until delivery.

We know that the yards are basically full.

We hear yards now quoting potential deliveries towards the end of 2015 and into 2016 for new ordering in certain sizes, and particularly this size.

So if that is the case, we believe there could be a value in holding these positions, because we believe these vessels are very, very efficient for container lines, and therefore we hopefully can get some nice charter rates on them.

So therefore, also as we are in some -- have some discussions, I don't want to be specific on charter rates, either, other than that we, of course, hope that these vessels will be accretive; and also that we may, over time, also develop our investments in this sector.

Thank you.

Thank you for your answer.

Can you also give us a little bit on the positioning of each sector?

I understand that the offshore sector is pretty robust, and the growth there looks positive, and it's a pretty stable market.

But there is a lot of focus on the recovery of the traditional shipping markets, particularly the dry bulk sector.

What is your view?

At which point of the recovery are we right now?

How quickly do you think that this recovery is going to come?

And also, for most of the people it was a little bit strange that your focus is still on the container ship market.

Can you explain to us how do you view the container ship market vis-a-vis the dry bulk market and also the tanker markets?

Yes.

When we make investments, and particularly when we make investments where we hope to charter these outset assets out long-term, we have to look beyond, call it, the near term cycle.

So when we make an investment, we focus on several factors.

One is, of course, where is the entry point, i.e., what level we are buying the assets at.

Who is the counterparty?

Are they speculative players, or are they industrial players in terms of the use of these assets?

And of course, also, what kind of residual do we think we can expect at the end of the charter period?

The interesting thing with both shipping and offshore assets is that these are assets typically built in Korea, China, Singapore, while they are quoted in US dollars.

So you have an interesting dynamics there, where we buy and invest in US dollars, but they are really built with local input factor, with most of the input factor being local currency.

And we have in some of these areas seen very significant inflation, which, of course, could -- if that continues, it will have an impact on replacement costs over time.

In terms of the charter coverage, what we see is that typically on the dry bulk side, you see more spot-oriented players, shorter-term charters.

And you don't see that many long-term charters to industrial players.

So while we, of course, always look for interesting opportunities and can also take market positions from time to time, our core business is really long-term charter coverage.

And then there are not as many opportunities on the dry side for us as it is in some of the other segments.

And in terms of where, when, and to what extent the market will recover short term, I would leave the question over to you, because you are probably more better positioned to answer that.

We have a more long-term view on our investments and are not so focused on the near-term movements in charterings.

I was counting on some, I hope, help for my work.

(Laughter) But thank you for your answer.

My last question is a usual topic.

I think you have answered this question many times about the risk of Frontline.

Hans earlier at the conference call was not very optimistic about at least the near-term prospects of the crude tanker market.

I understand that the Company has sufficient cash for the next couple of quarters.

What will happen if Frontline is not able to serve the capital lease obligations to you?

What will be the impact to your bottom line, both revenue and operating expenses?

And is there a mechanism in place to take over these assets and operate them yourself?

Yes.

To answer the last question first, absolutely.

We can very easily -- if they should default, we can -- I mean, we own the vessels, and we have them on time charter to Frontline.

So we can easily charter them out in the market ourselves.

But I just want to stress that Frontline is paying the charter hire on time, and they do have other assets that had more than $80 million of cash as of second quarter.

And they have some other assets there as well.

Our key focus over the last year and a half, after we restructured in 2011, has been to de-lever these assets quite rapidly.

Before the restructuring, we are talking November 2011, we had approximately $750 million of debt associated with these vessels.

We are now down to around $420 million, if all loans were fully drawn.

But as we have $220 million, nearly, undrawn, only half of that is drawn.

And that compares to a scrap value, which, depending on the market quotation and your expectations for scrap value, could be in the region of the $300 million to $330 million, perhaps.

Gives us a relatively good caution, also -- just also comparing that to, call it, scrap values, if that was what it came to.

But we believe these vessels do still have a commercial life, and we started off with a full interdependency between us and Frontline.

We had all our vessels chartered to Frontline.

That was 100% of our cash flow.

In the second quarter only 18% of our EBITDA came from the Frontline vessels.

And as we expand our business with the new rig, and hopefully with the new containerships that are coming onstream, that percentage hopefully will continue to be marginalized.

So the short answer is that of course we monitor the situation.

Of course we will take care of our interests if the market should continue as weak as it is right now.

But we have a lot of other assets and a lot of cash flow coming from elsewhere, and we are not so dependent on Frontline as we used to be.

Thank you very much, Ole, for your answers.

Thank you.

John Reardon, Crowell, Weedon.

Good afternoon.

Just to address the prior questioner's concerns -- in addition to the other assets that Frontline has, they also have a relatively recently announced equity funding mechanism with Morgan Stanley.

So I think there is plenty of coverage.

Ole, when I look around the world, it seems like with the exception of a few land shale plays, all the big oil exploration is offshore.

The deep Gulf; the Gulf of Guinea; Angola; Madagascar; and now, of course, the [Parrot] Sea; and the Arctic is looming.

Could you just give us an overview of what you think of the offshore drilling environment, and in particular, the harsh drilling environment going forward, given your recent investment?

Yes.

Absolutely.

First of all, I am not an oil market expert.

So call it detailed analysis on the oil market and expectations, I would leave to the professionals who do that for a living.

But of course we have a view of the oil market when we invest in drilling rigs.

What we have seen is that the offshore oil production has been relatively stable over a long period.

But we have seen a very significant increase in assets deployed in the exploration.

And what we are seeing is that the wells are becoming more and more complex.

And of course, we see a lot of -- we see more expensive equipment going into production from offshore.

For the most recent investments, of course part of our analysis was linked to who are going to use this rig.

Is it what we call a standardized-type asset, where the oil companies will be attracted to it?

And we see that -- you know, there is a sister rig, [West Laura], that has been operating for Statoil for a long period very successfully.

This rig here, we'll go and charter a five-year charter to ConocoPhillips.

But that is not only ConocoPhillips.

They are only fronting it for the license.

You have several other oil companies who are fully committed to pay the charter hire to North Atlantic during that charter period.

And the charter can be extended to 9 years.

So there is a lot of cash flow there that we see coming for this rig from production drilling.

So what we see is that it is an interesting market.

The oil companies, they want the newest, most efficient equipment.

And another factor here is also the supply side.

You have relatively few yards who can build these highly sophisticated units.

And therefore you have some dynamics there that is also interesting from a commercial perspective.

So we do think it is still a very interesting area to invest in, and particularly when we combine it with long-term charters to good-quality counterparts.

So given that outlook, do you see on a going-forward basis Ship Finance getting more involved in the offshore drilling and harsh-environment drilling area on -- of course, on a price opportunity basis?

Yes.

I can confirm that.

It is definitely -- I mean, we have the 3 deepwater -- harsh-environment, call it deepwater drilling units in our portfolio already.

We have jack-up -- the harsh-environment jack-up, and then we also have a more standard, benign-water jack-up drilling rig built 2007.

And we have some PSVs and anchor handlers.

But it is definitely an important part of our portfolio.

Thank you very much.

Thank you.

Eirik Haavaldsen, Pareto Securities.

Yes.

I actually had my question answered previously.

But how are you thinking in terms of your cash position?

You're now at $41 million.

How comfortable are you with that going forward?

Well, the way we manage our liquidity is to -- we think it is more efficient for us to reduce drawn amounts on our revolving credit instead of necessarily holding them on deposit accounts, earning virtually nothing.

So the combined, call it, available liquidity at quarter end was around $260 million or so, and we can draw on that any day if we would like to.

So we are quite comfortable with our liquidity position.

All right.

Thank you.

Thank you.

(Operator Instructions).

It appears that we have no further questions.

Okay.

So thank you.

Then, I would like to thank everyone for participating in our second-quarter conference call.

And if you have any follow-up questions, there are contact details in the press release.

Have a nice day.

Ladies and gentlemen, that will complete today's conference call.

Thank you for your participation.

You may now disconnect.