SFL Corporation Ltd (SFL) 2017 Q4 法說會逐字稿

Good day, and welcome to the Q4 2017 Ship Finance International Limited Earnings Conference Call.

Today's conference is being recorded.

At this time, I'd like to turn the conference over to Ole Hjertaker.

Please go ahead.

Thank you, and welcome to Ship Finance International and our fourth quarter conference call.

With me here today, I have our CFO, Harald Gurvin; and Senior Vice President, André Reppen.

Before we begin our presentation, I would like to note that this conference call will contain forward-looking statements within the meaning of the U.S. 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 actives 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.

The board has declared a quarterly dividend of $0.35 per share.

This dividend represents $1.40 per share on an annualized basis or 9.2% dividend yield, based on the closing price of $15.15 yesterday.

This is our 56th consecutive dividend, and we have now paid more -- nearly $24 per share in dividends or around $2 billion in aggregate since 2004.

The reported net income for the quarter was $20 million or $0.20 per share.

This is after several nonrecurring and one-off items, which reduced the result by approximately $5 million in the quarter.

Aggregate charter revenues recorded in the quarter, including 100% owned subsidiaries accounted for as investment in associate, was approximately $152 million.

And the EBITDA equivalent cash flow in the quarter was approximately $117 million.

Last 12 months, the EBITDA equivalent has been approximately $468 million.

And during the fourth quarter, we strengthened our balance sheet by converting $121 million of convertible notes into equity, leaving only $63 million notional remaining of what was originally $350 million convertible note issue in 2013.

9.4 million shares were issued at the time, and subsequent to quarter-end, the remaining notes were settled with a combination of a cash payment of $63 million and 650,000 additional shares.

The only convertible note outstanding now is, therefore, the $225 million due in 2021.

In the fourth quarter, we earned a small profit share on the Capesize bulkers on charter to Golden Ocean.

The base rate in the quarter was approximately $80,100 per day including interest adjustment.

And based on market analyst estimates, there is positive guidance for 2018, with a potential for more profit share this year.

Owning a significant fleet of vessels, also means that we will have to continuously renew and diversify the fleet.

We have recently sold 19-year-old VLCC front Circassia and the vessel has been delivered to its new owner already.

The net sale proceeds were approximately $17.5 million.

And in addition, the company will receive an interest-bearing loan note of approximately $8.9 million from Frontline Shipping Limited, as compensation for the early termination of the charter.

The sale is not expected to have a material book impact.

And following the sale, Ship Finance's 8 VLCCs remain on long-term charters.

Yesterday, we also had some positive news relating to the Seadrill Chapter 11 restructuring.

We have now succeeded in reaching a global settlement with unsecured bondholders and other major creditors in Chapter 11 cases.

As a result of the settlement, approximately 78% of Seadrill's unsecured bondholders have now signed an agreement to support the restructuring.

There is no change in the terms for our leases, and with a new agreement, there is hope that the Chapter 11 proceedings can be finalized and become effective relatively soon.

Based on other similar cases, we believe this could be during the second quarter this year.

In terms of number of vessels, we have more vessels operating in the liner market than any other segment.

Our focus has primarily been on new design container vessels between 9,000 and 19,000 TEU, and most of our vessels are chartered to the world's 2 largest container lines.

Only the 2010-built 1700 TEU vessels SFL Avon is currently operated in the short-term charter market, and all the other container vessels are employed on long-term charters.

Our business model allows us to be flexible with respect to deal structuring, where we can also invest in older vessels from time-to-time if risk-reward has been attractive.

We have done that in the past and may also look at it going forward.

But our main focus is on modern eco-design vessels in combination with long-term employment.

We also have 2 car carriers, the Glovis Conductor and the Glovis Composer, which were on long-term charters until the third quarter of 2017, and thereafter, rechartered until mid-2018 to the same counterparty.

Net rate is currently approximately $13,200 per day, which is lower than the initial 5-year period.

Given the balance in the car carrier market, with few vessels under construction, our preferences has been to charter out these vessels for a shorter period at this stage instead of looking in the vessels for longer period now.

We now have 8 crude oil carriers remaining on charter to Frontline Shipping Limited, which is a subsidiary of Frontline Limited.

This is down from nearly 50 vessels at the peak in 2004.

The profit share arrangement on these vessels has provided us with interesting leverage to the tanker market and kicks in from $20,000 per day.

In 2015, we also changed the profits bid calculation basis from annual to quarterly, adding optionality value for us.

And we now benefit by this as the spot market in the third and fourth quarter has been below the threshold, but no clawback of the $5.6 million profit split earned earlier in 2017.

For the 8 remaining vessels, the charter rates in the fourth quarter was just marginally below $20,000 per day, but the market has weakened into the first quarter, and based on market information, we cannot expect the profit share in the first quarter.

With the market below the base rate, the cash buffer in Frontline Shipping Limited, which had previously been built up to more than $2 million per vessel, will continue to be reduced.

This is also why we agreed to take an interest-bearing note in connection with the sale of Circassia instead of a cash settlement for the termination of the charter.

In addition to the Frontline vessels, we also have exposure to the crude oil tanker market through 2 modern Suezmax tankers, which have traded in a pool with sister vessels owned by Frontline.

For these vessels, the average charter rate in the fourth quarter was approximately $20,400 per trading day compared to our breakeven level of approximately $17,000 per day after interest and amortization for the vessels.

In the fourth quarter, we also had full cash flow effect from our 2, 114,000 deadweight product tankers on time charters to Phillips 66.

The vessels have been chartered out until 2024 at the minimum plus 5 optional years, and annual EBITDA contribution from the vessels is estimated to approximately $11 million on average per year.

And in addition, we also have 2 2008-built chemical carriers to Sinochem, which have been a variable charter since new.

The initial charter expires in 2018, and we are in discussions for potential renewal of the charters.

Alternatively, the vessels will be traded in the short-term charter market.

We have 22 dry bulk vessels in the fleet, with 15 larger vessels chartered up on long-term basis and 7 Handysize vessels traded in the spot market.

One of our long-term objectives is to combine stability and predictability in cash flows with optionality.

And we have seen over time that market volatility can generate super returns from time-to-time.

And the charters to Golden Ocean is an example of this.

As discussed earlier, we have a 33% profit split on top of the base rate, which is $17,600 per day plus interest adjustment or $18,100 per day currently.

Based on broker reports, the Capesize market is currently below the profit threshold level due to the seasonal correction with lower activity around Chinese New Year.

But there is positive guidance from analyst for the remaining of the year.

The profit's base -- will be based on actual performance by these specific vessels, so we cannot give any guidance on when the profit share will materialize.

But as the profit share is calculated and payable on a quarterly basis, we believe there is good probability for profit shares over the remaining 7 to 8 years charter period.

And the volatility of that market is illustrated in the graph, and it could be -- can be very, very interesting at times.

For the 7 Handysize dry bulk carriers we currently trade in the spot market, the rates achieved this quarter were approximately $9,000 per trading day, a significant improvement from the $6,700 per day average in the previous quarter.

From an employment perspective, we intend to continue trading these vessels in the spot market.

As previously discussed, Seadrill commenced Chapter 11 proceedings and filed prearranged cases in the Southern District of Texas U.S. in September 2017.

This was part of a comprehensive restructuring plan entered into with various creditors, including Ship Finance, certain third-party and related-party investors and substantially all their secured lenders on a recapitalization of Seadrill.

As mentioned earlier, Seadrill succeeded yesterday in reaching a global settlement with an ad hoc group of bondholders, the official committee of unsecured creditors and other major creditors.

Assuming the new global settlement is approved by the court, Ship Finance has agreed to reduce the contractual charter hire for the 3 rigs by approximately 29% for a period of 5 years, beginning effective January 2018, with reduced amounts added back in the period thereafter.

The term of the leases for West Hercules and West Taurus will also be extended by 13 months until December 2024.

We have concurrently agreed with our financing banks that the loan term will be extended by 4 years, starting from the original maturity date of each of the 3 separate loan facilities, with reduced amortization during the extension period compared to the current level.

Assuming the restructured finance approved, the cash flow from the 3 rigs during the extension period, net of interest and amortization, is estimated to be approximately $29 million per year.

Seadrill will continue to pay full charter hire until this restructuring plan is approved.

And net of interest and debt optimization, the contribution from these 3 rigs was approximately $15.2 million or $0.15 per share in the fourth quarter.

The proposed terms are already reflected in net income in the fourth quarter as Mr. Gurvin will discuss later.

Seadrill has subchartered the harsh environment jack-up rig West Linus to ConocoPhillips until the end of 2028.

The harsh environment semisubmersible rig, West Hercules, has recently been awarded 2 consecutive sub charters in the North Sea with expected startup in April 2018, and while the semisubmersible rig West Taurus is currently in lay up in Spain.

Including the West Linus, we have reduced the debt from $1.9 billion initially to around $750 million currently.

And of this aggregate outstanding loan balance, only $235 million or 30% is currently guaranteed by Ship Finance.

In addition to the 3 rigs to Seadrill, we also have the 2007-built drilling rig, Soehanah, which is employed under a drilling contract with the national oil company in Asia until June 2018, with an option to extend the charter until June 2019.

This is through Apexindo in Indonesia, and the net payable revenues to us are approximately $10,000 per day or around $900,000 per quarter.

This rig is debt-free, so there are no financing expenses.

We also own some offshore support vessels chartered to a subsidiary of Solstad Farstad ASA.

These vessels generated revenues of approximately $2.4 million in the fourth quarter.

The charters were originally agreed in 2007 and 2008, and the charter rates were reduced in 2017, due to the downturn in the offshore markets in order to reduce their breakeven levels for the charter.

The market for offshore support vessels remain challenging, and these vessels are currently not deployed on subcharters.

If we then switch to our performance last 12 months, the normalized contribution from our projects, including vessels accounted for as investment in associate, the EBITDA, which we define as charter hire plus profit share less operating expenses and general and administrative expenses, was $468 million in the period.

Net interest was $119 million or approximately $1.24 per share, and our normalized ordinary debt installments, relating to the company's projects, was $176 million or approximately $1.84 per share in the 12-month period.

This is excluding prepayments relating to sale of older assets or refinancings.

Net contribution after this was $172 million or $1.75 per share over the last 12 months.

For the same period, we have declared dividends of $1.50 per share or $147 million in aggregate.

And for illustration, in the fourth quarter alone, the net contribution from our assets, after interest and ordinary debt installments, was approximately $0.43 per share, while the declared dividend is $0.35 per share.

From our inception more than 14 years ago, we have paid out approximately 80% of net income in dividends, which illustrate the moderate dividend policy, and it has allowed us to significantly grow our business organically.

And with that, I will give the word over to our CFO, Harald Gurvin, who will take us through the numbers for the fourth quarter.

Thank you, Ole.

On this slide, we have shown our pro forma illustration of cash flows for the fourth quarter compared to the third quarter.

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

Total charter revenues for the third quarter -- for the fourth quarter were $147.7 million, slightly above the previous quarter.

Revenues from tanker was up in the quarter, due to full quarter earnings on the 2 product tankers employed under 7-year charters to Phillips 66, partly offset by the sale of 1 Suezmax tanker in the third quarter and lower earnings on the 2 Suezmaxes tradings and accruals.

Liner revenues were down in the quarter due to lower earnings on the 2 car carriers currently deployed under short-term charters, following spiral to long-term charters in the third quarter.

Dry bulk revenues were up in the quarter, mainly due to improved earnings for the Handysize dry bulk carriers trading in the spot market, while offshore revenues were in line with the previous quarter.

There was no profit share on the tanker vessels of Frontline, but we had our first quarter of profit share on the Capesize vessels on charter to Golden Ocean, due to the improved dry bulk market in the fourth quarter.

So overall, this summarizes to an adjusted EBITDA of $117 million for the quarter, up from $115 million in the previous quarter.

As Ole mentioned, the numbers of outstanding shares increased by 9.4 million during the quarter, following the early conversion of convertible notes and the adjusted EBITDA per share was, therefore, lower in the fourth quarter compared to the third quarter.

We then move onto the profit and loss statement as reported under U.S. GAAP.

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

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

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

If you wish to gain more understanding of our accounts, a separate webcast which explains the finance lease accounting and investment in associates in more detail can be viewed on our website, shipfinance.bm, under Investor Relations and Webcast.

Overall for the quarter, we report total operating revenues according to U.S. GAAP of $96 million.

This includes the full quarter earnings on the 2 product tankers to Phillips 66 and also the first profit share from the Capesize dry bulk carriers.

Total operating expenses were $57.5 million, resulting in an operating income of $39 million.

Result in associates reflects the net income from the 3 nonconsolidated subsidiaries owning the rigs on charters of Seadrill.

The leases for these -- for the 3 rigs were revised in September 2017 in connection with the Seadrill restructuring.

Although, the agreed rate reductions are effective from January 2018, the revised leases reflect reduced interest income on the leases also in the fourth quarter.

We recorded a positive mark-to-market of derivatives of $3.5 million during the quarter, included under income related to nondesignated derivative and an impairment charge of $4.4 million relating to available-for-sale securities, included under other financial items.

So overall and according to U.S. GAAP, the company reported net income of $20 million or $0.20 per share.

Moving on to the balance sheet.

We showed $153 million of consolidated cash at the end of the quarter.

In addition, we had $17 million in cash in a 100% owned but nonconsolidated subsidiary and $29 million freely available for drawdown under revolving credit facilities.

On the liability side, we strengthened the balance sheet through the early conversion of $121 million of notes due 2018 in October 2017, whereby the 9.4 million new shares were issued.

The remaining outstanding principal amount was $63 million, also redeemed as maturity in February, with a principal amount settled in cash and the balance in approximately 650,000 new shares.

Stockholder's equity was approximately $1.2 billion, giving a book equity ratio of 40% at the end of the quarter.

Then looking at our liquidity and financing statements.

We have a strong liquidity position with total available liquidity of $199 million at the end of the quarter.

In addition, we had available-for-sale securities of $94 million, which includes investments in senior secured bonds and other securities with a fair value of $43 million at quarter-end and also our 11 million shares in the Frontline with a market value of approximately $46 million based on the closing share price yesterday.

We have taken several steps to strengthen the balance sheet and debt maturity profile over the last quarters.

In addition to the previously mentioned earlier conversion and subsequent settlement of the convertible bond, we had several debt-free assets at the quarter-end, including the 2 car carriers, the jack-up drilling rig Soehanah and 3 1,700 TEU container vessels.

The combined charter value of these assets was $176 million at quarter-end, based on average broker vessels.

In addition, we agreed the 4-year extension of the 3 launch relating to the Seadrill rigs in connection with the restructuring.

Subject to approval of the restructuring plan, the loans now mature between November 2022 and June 2023.

With continued amortization of the loans, the amount to be refinanced at the new maturity dates has been significantly reduced compared to the original loan maturities in 2018 and 2019.

The main short-term maturity is the facility relating to vessels on chartered to Frontline, which matures in end June 2019.

Following the recent sales, we only have 8 VLCCs remaining on charter, and the final thing is just about current scrap level for the vessels.

Then to summarize.

The board has declared a cash dividend of $0.35 per share for the quarter.

This represents a dividend yield of 9.2% based on a closing share price yesterday.

Net income for the quarter was $20 million or $0.20 per share.

We have strengthened our balance sheet through the early conversion and settlement of the convertible notes due to February 2018.

Seadrill yesterday announced a global settlement agreement without any changes to the terms affecting Ship Finance.

We have a strong liquidity position and a focus on growth opportunities.

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

(Operator Instructions) Our first question today comes from Magnus Fyhr from Seaport Global.

Just a question on the -- I mean, I guess the announcement here with -- from Seadrill.

Does that change your outlook?

You are now maybe getting a little bit more active on the acquisition front.

I mean, you have prudently been on the sidelines here for some time.

And so just curious to see if you plan to maybe get a little more active?

Yes.

Thank you, Magnus.

Yes, we can confirm that.

I mean, we have been cautious relating to the Seadrill restructuring.

Because the outcome, of course, has -- there have been some, what we say, elements in the restructuring that wasn't perfectly clear.

Now with the announcement yesterday when we also see that many of the unsecured bondholders who have publicly stated that they disagreed with the terms of the restructuring support agreements they -- when they now have signed up and there is a super majority, we believe there is a much higher probability that everything will be approved as per the plan.

Of course, it still remains to be approved by the court, but given the support from essentially all the major stakeholders in Seadrill now, certainly, all the creditors, we believe that the probability of this happening relatively soon is good, and we expect it to take place within the second quarter based on similar cases.

So also on the back of that, we believe that this is a much better time for us to be more active, as we are -- have cleared away a lot of the uncertainty that could still remain relating to the Seadrill restructuring and the effect for us.

We think it's very positive that all the new stakeholders support our agreement that we announced back in September.

So there is no change in terms for us nor are there any changes for the secured lenders in the revised agreement.

But I can definitely confirm with you that we are quite active now evaluating projects, and of course, if we have expectation to do new deals in 2018.

And we cannot be specific on the deals we're looking at.

I could say that we are looking generally across the board.

We are looking at several container opportunities.

We are looking at some bulker opportunities.

Also, on the tanker side, despite the near-term weak outlook, we believe that there could be some interesting opportunities there.

And we have always had an interest for LNG.

So far, we have not done anything in that segment, partly because we believe it's been -- gives a -- there have been players who have been offering very low rates, but maybe the market there is balancing better now.

All right.

And just one more question, if I may.

The payout ratio, I mean, on a trailing basis at 85%.

I guess, going forward -- I mean, you have a strong balance sheet and strong liquidity position.

How comfortable are you to fund, I guess, in 2018?

It looks like the payout ratio will be above 1. How soon you think you can get back to that kind of historical 80%, 85% payout ratio?

Well, you have to remember, of course, that in the numbers -- if you look at our balance sheet, we have quite significant cash.

We have many assets without leverage, and we also have some unsecured notes.

So the question is what could it look like if we invest sort of call it our investment capacity assays.

Also, if you look at our earnings, just as an illustration, in the fourth quarter, the net cash flow per share was around $0.15 per share from the Seadrill rigs.

While the earnings effect, because it's been adjusted already, was only $0.07 per share or half of that.

So you have a few effects here that -- and also, I would maybe add that some of the other assets, like, for instance, the remaining vessels to Frontline, we have paid down the debt so significantly that net cash flow coming out from those vessels is much higher than the earnings, call it, contribution from the vessels.

That's predominantly because we have been conservative and paid down debt, and therefore, have lower amortization currently than the -- you could say, that implied depreciation.

The depreciation on many of our assets are straight line.

Typically, operating assets are straight line, and we normally depreciate our assets over 25 years.

However, with some assets, and this -- specifically the Frontline assets but also the Seadrill rigs, they have lease accounting.

And the lease accounting is structured effectively as an annuity, where the amortization effect is smaller at the beginning and much larger at the end.

And therefore, correspondingly, the net income effect is higher at the beginning and much smaller towards the end.

So you also have an effect of that that's affecting the numbers.

But over time, we do still, of course, believe that we will find you creative investments, also, on an earnings base.

But our principal focus when we do deals and when we -- and also when we look at our dividend capacity in the long run is based on net distributable cash flow after debt service relating to those specific investments.

We will now go to our next question from Fotis Giannakoulis from Morgan Stanley.

Ole, can you give us your estimate about the timing of the closing of this restructuring?

When do you expect -- how long do you expect that this will happen -- will take?

Yes, given -- yes, thanks.

Given that we now have so many of the creditors signed up and the restructuring support agreement, we do believe that it cannot be, call it, accelerated compared to the process so far.

But of course, this -- it all remains subject to approval by the court and the processes take their time.

But our expectations -- and this is only based on similar cases previously is that we can hope that the court will approve it maybe in April -- and already in April and then with potential, call it, effective date later in the quarter, possibly June.

But again, as I said, this is down to the court who takes the decisions.

So we do not have any sort of official estimate from the court on this.

But given that we now have so much support, we believe that there is a good case that this can be accelerated from here on.

But more importantly, for us, we believe that the latest announcement takes away quite a bit of uncertainty is my understanding also from what we have from investors about potential changes to our terms if terms had to be adjusted.

And there we -- but we and the secured creditors have not changed any terms in the revised agreements or linked to the new, call it, creditors joining the restructuring support agreement.

I want to follow up on Magnus' question about your gross plan and the investment of the capital -- the excess capital that you have.

Can you please first clarify how much is the success capital?

I'm asking if there are any maturities that you might have to use part of this capital?

And secondly, what kind of returns do you see out there available across the different segments?

And if you can also specifically talk about the tanker market where you said that you might be even looking in buying tanker vessels.

Would you consider buying vessels without strong free cash flow, at least in the front years?

Yes.

Thank you for this.

At quarter-end, we reported around $200 million in available liquidity.

And then, we also had $94 million in available-for-sale securities, which can be sold if and when we wanted.

And in addition to that, we had vessels without leverage with a combined charter-free broker value of around $170 million to $180 million.

So we believe there is a good buffer.

Exactly how much of that we will invest?

We do not want to give any specific guiding on.

But we're certainly, well, well, well above any covenants relating to our financing agreements in terms of minimum cash.

Also I think that we -- given our capital structure and our relatively conservative leverage, we could also go and raise capital in the market if need be if we had new large projects that were accretive to cash flow and earnings for us.

So -- but the most important thing is that -- is really to find and do the right projects, and we're looking at many different types of projects.

Our principal focus is assets with long-term charter coverage.

But we also have a preference for time-charter structure instead of bareboat-charter structure simply because then you have better technical control over the vessels.

But from time-to-time, we can also take some, as we call it, some advantage of market opportunities, which would typically be when the market is weak and there could be opportunities to acquire assets relatively cheap and then potentially charter it out at a later stage.

So we are looking at many various, call it, structures.

But the principal basis is long-term charter coverage.

And I would say over time, call it, the spot base has generally not been more than, say, around 10% of our portfolio.

So it's always been a relatively small proportion.

But that's also where you have opportunities in downturn and a market cycle, and that, of course, is something we watch closely.

And can you clarify there was other financial items charge of $7.5 million this quarter.

Was it related to the buyback of a convert?

I assume this is a one-time item?

Yes.

This is Harald here.

That $7.5 million does includes the $4.4 million impairment charge on some of the available-for-sale securities, and also some, I would say, one-off items on the settlement of the convertibles.

And one last question about the car carriers.

If I remember well the debt was maturing at the end of last year.

Have you refinanced this debt?

And what kind of free cash flow shall we expect with vessel being rechartered after the termination of the prior charter?

Well, the debt on those vessels originally matured in 2018.

But we decided to prepay that debt earlier, so we prepaid that in the third or early...

Fourth quarter.

In the fourth quarter.

So those vessels -- the vessels are debt-free, and they remain debt-free at this moment.

So the current charter rates of around $13,200 per day is -- and from that you can subtract around $6,000 per day, roughly operating expenses, if not cash flow generated by those vessels.

(Operator Instructions) We have a question now Randy Giveans from Jefferies.

Quick question for me.

For the drilling rigs, the Soehanah, it's currently employed until June 2018 with the option for another year.

When does that option expire?

And if not taken, what are the alternative charter options for that drilling rig?

Yes.

Thank you, Randy.

That rig, as you said, chartered, fixed until June and they have a 30-day -- and all company has a 30-day, call it, window before expiry when they can exercise the option.

So we haven't heard anything.

So currently it runs until June.

As far as we understand, there are much longer drilling plans at the field where that rig is operating.

So we believe that there is a good chance that the vessel may be employed longer.

But of course, we do not know that for sure at the moment.

If the charter is not extended, that rig will, of course, then be marketed for new charters.

And the charter rates and the market currently is, I would say, sort of, in the range may be marginally higher than the charter rate that rig is on currently.

So we -- and there are some other charters in the Southeast Asian region that the rig then could potentially be bid into.

The good thing here is that we have a relatively newly classed drilling rig that is warm and working, which, of course, is a very big plus when you are going to market -- drilling rig for operations.

Sure.

Okay.

And then looking at the VLCCs, you still have, I guess, 8 outstanding was most of them.

I guess, 6 of them about 16 years of age or order.

Now who makes that decision for selling the older tonnages?

Is that front-line, and then they kind of give you that compensation for early charters termination or is that making the sale decision?

There are no -- Frontline does not have any options relating those assets.

So any sale we've done over the year has always been on a negotiated basis on a vessel-by-vessel basis.

So there are no -- so there are 8 main vessels remaining as you say and the charter -- the average charter coverage on the remaining vessels is around 7 years.

So we still have significant charter cover on those vessels, and that's really all we can say at the moment.

We did have up to 50 vessels at the peak, and now we are down to only 8 vessels.

So we have sold off a lot of vessels, particularly the older vessels over the years.

And now the last of the 90s built vessel has been sold.

So the oldest vessel now is built in 2001.

Okay.

And then just one quick modeling question, just kind of reconcile some of the numbers.

It looks like the majority of the miss was due to the other income financial items line item.

So what was the variance there?

And what were the one-off charges?

I think you said a $4.4 million impairment charge and I'm reading here another $2 million one-off vessel operating costs.

So basically, what went into that $7.5 million loss there?

What's one-time items?

And what's kind of a good guidance for 2018?

Was it -- I mean, the $2 million was in operating expenses.

And in the other financial items, we had -- there was -- that also includes maintenance fees and agency fees, and I think the debt on the loans.

And there was also a foreign exchange loss on that relating to settlement of swaps on the Norwegian bond we had outstanding.

There were some swaps maturing in the fourth quarter, although the bond itself was repaid in the third quarter.

So most of these were extraordinary items, I would say.

It's around $6 million in, sort of, one-off items.

And I think also worth mentioning is that the effect of the Seadrill rigs is already reflected to a very significant degree in that P&L.

So just if you go back to the first and second quarter of 2017, the net contribution per share, on a P&L basis, was $0.12 per share per quarter in the first and second quarter.

Well, now in the fourth quarter, the contribution per share was only $0.07 per share.

So I think that also could be an effect that many analysts -- that's very difficult, of course, to predict.

But that many analysts probably had in -- the full basis, since we still receive the full charter rates from Seadrill.

It's just that the lease have been adjusted to reflect the new structure, and therefore, much less is coming through P&L and most of it is then -- the cash flow you receive is repayment of investment and finance leases.

Sure.

And then for that $4.4 million negative impact arising from impairments?

Yes.

Is that part of other financial items that...

It was just part of the marketable securities, yes.

Is that included in the $7.5 million other financial items as well?

That's included in the $7.5 million, yes.

As we have no further questions.

I'd like to turn the conference back to your host for any additional or closing remarks.

Then I would like to thank everyone for participating in our fourth quarter conference call.

And if you have any follow-up questions, there are contact details in the press release or you can get in touch with us through the contact pages on our webpage, www.shipfinance.bm.

Thank you.

Thank you.

That would conclude today's conference call.

Thank you for your participation, ladies and gentlemen.

You may now disconnect.