SFL (NYSE:SFL) Q3 2020 Earnings Call

0:00 Thank you for standing by and welcome to the Q3 2020 FSL Corporation Earnings Song for School. At this time, all participants are in listen-on mode. There will be a presentation followed by a question and answer session at which time, if you wish to ask a question, please post one on your telephone. I must advise you that your conference is being recorded today, Thursday, the 12th of November 2020. I would now like to hand over to Eftafeld's speaker for today, Mr. Ole Bjarte Hjertaker, CEO. Please go ahead.

0:30 Ole Bjarte Hjertaker Thank you and welcome all to Eftafeld's third quarter conference call. I would start the call by briefly going through the highlights of the quarter and following that our CFO, Aksel Olesen, will take us through the financials and the call will be concluded by opening up for questions. 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, intents, estimates, or similar expressions are intended to identify these forward-looking statements. Forward-looking statements are not guarantees of future performance.

1:15 These statements are based on our current plans and expectations and are inherently subject to 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, but are not limited to, conditions in the shipping, offshore, and credit markets. You should therefore not place undue reliance on these forward-looking statements. Please refer to our filings with the Securities and Exchange Commission for more detailed discussions over risks and uncertainties, which may have a direct bearing on our operating results and our financial condition. The announced dividend of 15 cents per share represents a dividend yield of around 8% based on closing price yesterday, and this is our 67th consecutive quarter with dividends.

2:12 In light of the continued uncertainty surrounding Seadrill and outcome of their pending financial restructuring, the Board decided to adjust the dividend down to 15 cents and thereby effectively exclude all contribution from offshore rigs for the time being. We believe that the market has already discounted this in the SFL share price as we prior to this dividend adjustment were trading at more than 13% yield based on the prior dividend which is a very high number in the current low interest rate environment. When the CEDRIL situation is resolved, the Board will reassess the situation and possibly reinstate contribution from the RIGS and the dividend again. And our focus will be on building the portfolio with accretive transactions in order to build the distribution capacity, also by adding new assets going forward.

3:06 Over the years, We have paid more than $27 per share in dividends, or $2.3 billion in total, and we have a significant fixed-rate charter backlog supporting continued dividend capacity in the future. The total charter revenues of $157 million in the quarter was in line with the previous quarter, with more than 90% of this from vessels on long-term charters and less than 10% from vessels employed on short-term charters and in the spot market. The EBITDA equivalent cash flow in the quarter was approximately $117 million, and last 12 months the EBITDA equivalent has been approximately $481 million, similar to the situation the last 12 months in the prior quarter.

3:54 Excluding cash in the rig-owning subsidiaries, the consolidated cash position at quarter-end was more than $200 million, Up from around $150 million at the end of the second quarter. In addition, we had $33 million in marketable securities at quarter-end, and after quarter-end, we have used some of the cash to take out the financing of the drilling rig, West Taurus, but we still have a strong position with more than $100 million remaining. Our fixed rate backlog stands at approximately $3.2 billion after recent charter extensions and vessel sales, providing significant cash flow visibility going forward. Of this, $2.4 billion relates to shipping assets alone and excludes revenues from 16 vessels trading in the short-term market and also excludes future profit share optionality.

4:51 The profit share contribution, which I mentioned adds optionality value, was around $6 million in the third quarter. This was primarily from the two VLCCs on charter to frontline, but also from fuel savings from container vessels with scrubbers and a small contribution from bulkers. Following the immediate impact of COVID-19, some trades, including the car carrier market, came to a virtual halt. We have two vessels in this market, and they were due to come off charters in May and in August this year. And consequently, We put them in lay-up in order to save costs, as we believed at the time that it would take some quarters before the market would recover again. We are very happy to see that it happened much quicker than anyone anticipated, and both vessels are now trading out, chartered out again, one on a 100-day charter and one for 11 months. And the charter rates are essentially back to pre-COVID-19 levels already.

5:58 While the CEDRIL restructuring is pending, we have already addressed the bank structures on two of the rigs. We have repurchased all the debt on the idle rig Vest Turrets at the discount, essentially limited to the $83 million corporate guarantee, the cash in the rig-owning subsidiary, which was already pledged to the banks anyway, plus a margin. We have also agreed to guarantee the financing on Vestlinus in exchange for more flexible financing terms. With a large fleet of assets, there will always be acquisitions and disposals and the remaining vessel on charter to the Hunter Group has been repurchased by them and delivered earlier this month. The Hunter Deal was designed to give us a very high return on a low risk profile in exchange for flexibility on Hunter's part. This is a good example of cost of capital arbitrage where we could utilize our premium access to low cost funding and at the same time give flexibility that Hunter was willing to pay for.

7:01 The delivery took place yesterday and that cash to us is more than $10 million after repayment of the associated financing. And the proceeds are expected to be reinvested in new accretive transactions. Excluding the drilling rigs, which I will cover on the next page, The backlog from shipping assets was $2.4 billion at the end of the quarter. Over the years, we have changed both fleet composition and structure, and we now have 81 shipping assets in our portfolio and no vessels remaining from the initial fleet in 2004. We have gone from a single asset class, chartered to one single customer, to a diversified fleet and multiple counterparties.

7:47 and over time, the mix of the charter backlog has varied from 100% tankers to nearly 60% offshore at one stage to container market being the largest right now. In addition, we have 16 vessels traded in the shorter market, which we define as up to 12-month charters, and also from time to time, as I mentioned earlier, significant contributions from profit shares on assets. We do not have a set mix in the portfolio. Focus is on evaluating deal opportunities across the segments and try to do the right transactions from a risk-reward perspective. Over time, we believe this will balance itself out. But we try to be careful and conservative in our investments and not invest just because money is burning in our pocket.

8:38 Our strategy has been to maintain a strong technical and commercial operating platform in cooperation with our sister companies in the Sea Tankers Group. This gives us the ability to offer a wider range of services to our customers, from structured financings to full service time charters, which is the bigger part of our portfolio. But more importantly, we also believe it gives us unique access to deal flow in our core segments. And with full control over vessel maintenance and performance, including energy efficiency and emission minimizing efforts, We can impact improvements to our vessels through the life of the assets and not only be passively owning vessels employed on beer boats where the customers may not always have an incentive to make such improvements.

9:26 So unlike most of the companies with a financing profile in the maritime world, more than three quarters of our shipping charter's revenues comes from vessels on time charter and a smaller proportion from beer boat chartered assets. And even if we include the drilling rigs, which are all on bare-board charters, the time charter portion is still more than two-thirds. SFL owns three drilling rigs chartered to subsidiaries of Seedrill. All three rigs were employed on bare-board charters at Seedrill and generated approximately $24 million in charter hire in the third quarter. Net of interest and amortization The contribution was approximately 8 million, or around 7 cents per share.

10:14 The harsh environment Jacob Rig Vest Linus has been subchartered to ConocoPhillips until the end of 2028, while the harsh environment semi-submersible rig Vest Hercules is employed on consecutive subcharters to Equinor in the North Sea. The semi-submersible rig Vest Taurus has been stacked since 2015. CEDRIL has disclosed that it is currently engaged in discussions with its financial stakeholders with regard to a comprehensive restructuring of its balance sheet, and that such a restructuring may involve the use of a court-supervised process similar to the 2017 restructuring. At that time, the loan balance on the rigs was much higher, and we have reduced leverage by more than 50% in this three-year period, as we illustrate on this slide.

11:08 At the end of the second quarter, Cedril reported a cash position of $1 billion, and while Cedril did pay full charter hire in the third quarter, no charter hire has been received so far in the fourth quarter. Cedril has also not paid interest on its bank debt recently, and announced a forbearance agreement with its financial banks and some other stakeholders in mid-September, which was subsequently extended through October. The non-payment of Charter Hire by CEDRIL does constitute an event of default under the leases and in certain of the corresponding financing agreements. Unless cured or waived, this could result in enforcement of such default provisions.

11:58 From the start of the transaction with Seadrill all the way back from 2008, all the revenues from the subcharters of these assets, and in this instance more importantly here now, from the two drilling rigs that are working, the West Linus and West Hercules, the revenues from the subcharter have been paid into accounts pledged to SFL's rig-owning entities and our financing banks. As a result of the current event of default situation caused by CEDRIL, CEDRIL will need prior approval to access these funds to pay for operating expenses and other expenses and will have to source this from their cost cash position until the situation is resolved.

12:47 The gross hire is significantly higher than the bear bought hire to us and keep accumulating on the pledged account for now. We can unfortunately not make any further comments relating to the RIGS or the pending restructuring. But our objective is, as always, to maximize long-term value for our shareholders. In the meantime, we have adjusted the quarterly distribution to exclude all distribution from these offshore assets. And when the CEDRIL situation is resolved, the Board will reassess the situation and possibly reinstate contribution from the RIGS in the future. And with that, I will give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.

13:34 Thank you, Mr. Hjertaker. On this slide, we are shown a performant illustration of cash flows for 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 and also net of extraordinary and non-cash items. The company generated gross charter hire of approximately 157 million in the third quarter, with more than 90% of the revenue coming from a fixed charter rate backlog, which currently stands at 3.2 billion. And while the current charter backlog relating to our offshore assets may be impacted by the pending serial restructuring, the backlog from our shipping portfolio stands at a solid 2.4 billion, providing us with strong visibility on our cash flow going forward.

14:23 At quarter end, SFL had a liner fleet of 48 container vessels and two car carriers. The liner fleet generated cross-charter hire of approximately 80 million. Of this amount, approximately 98% was derailed from our vessels on long-term charters. At quarter end, SFL's liner fleet backlog was approximately 1.8 billion, with an average remaining charter term of approximately four and a half years, were approximately 7 years if weighted by charter revenue. Approximately 84% of the liner backlog is to the world's largest liner operators, Maersk Line and MSC, with a balance of approximately 16% to Evergreen.

15:09 Our tanker fleet generated approximately 24 million in gross charter hire during the quarter, including 4.8 million in profit split contribution from our two VTCs on charters to frontline. The vessels are fixed on profitable subcharters until the end of the quarter, ensuring visibility on the quarterly profit split, also for the fourth quarter. The net contribution from the company's two Swissmax tankers was approximately 3.3 million in the third quarter, and the vessels are traded in a shorter market for the time being. On November 11, the company re-delivered the last VCC to the Hunter Group after declaration of a purchase option. After repayment of the associated financing, the transaction increased SFL's cash balance by approximately 10.7 million.

15:59 In the third quarter, our drive bulk-free generated approximately 28.4 million in gross charter hire. Of this amount, approximately 70% was derived from our vessels on long-term starters. During the quarter, the company had 10 hand-sized vessels employed in spot and short-term markets. The vessels generated approximately 7 million in net charter hire, compared to 2.4 million in the previous quarter. At the end of the third quarter, SFL owned three drilling rigs. All of our drilling rigs are long-term available charters to fully guaranteed affiliates of SeaDry Ltd, and generated approximately 24.4 million in charter hire during the quarter. This summarizes to an adjusted EBITDA of approximately $170 million for a third quarter, or $1.08 per share.

16:57 We then move on to the profit and loss statement as reported on the US GAAP. As we have described in previous earnings calls, our accounting statements are different from those of a traditional shipping company. And 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 US GAAP operating revenues, and instead booked as revenues classified as repayment of investments in finance leases and vessel loans, resulting in associates and long-term investments, and interest income from associates. For the third quarter, we report total operating revenues according to USGAP of approximately 160 million, which is less than approximately 157 million of charter hire actually received for the reasons just mentioned.

17:56 In the quarter, the company reported profit split income of 4.8 million from our tanker vessels on charter to frontline, and 800,000 from profit split arrangements related to fuel savings on some of our large container vessels. Beginning in 2020, assets classified as financial assets, including several of SFL's vessels and rigs on long-term leases, are subject to general credit loss provisions similar to those requirements for banks and financial institutions. The net change in such provisions is recorded in the income statement each quarter. In the third quarter, the credit loss provisions increased by approximately 6.2 million, primarily in wholly owned non-consolidated subsidiaries.

18:44 Furthermore, the company recorded non-recurring and or non-cash items, including negative mark-to-mark effects relating to interest hedging, currency swaps, and equity investments of 600,000, and amortization of deferred charges of 2.3 million. So overall, and according to US GAAP, The company reported a net profit of 16 million, or 15 cents, per share. Moving on to the balance sheet. At quarter end, SFL had approximately 206 million of cash and cash equivalents, excluding 22 million of cash held in wholly owned non-consolidated subsidiaries.

19:29 Furthermore, the company had marketable securities of approximately 33 million, Based on market prices at the end of the quarter. This included 1.4 million shares in Frontline, 4 million shares in ADS Crude Carriers, and other investments in marketable securities. In connection with the sale of three older wheel CCs to ADS Crude Carriers back in 2018, Espel took shares in the company as part payment. ADS has now sold all the vessels at attractive prices, and it is expected that the net proceeds from the vessel sales will be returned to investors. When including the dividend received, the value is estimated to approximately 12 million, illustrating how SFL, from time to time, takes steps to maximize value for our shareholders.

20:23 At quarter end, SFL had five debt-free vessels with a combined charge-free value of approximately 40 million, based on average broker appraisals. Q3 2020 figures, the company had a book equity ratio of approximately 26%. Then to summarize, the board has declared a cash dividend of 15 cents per share for the quarter. This represents a dividend yield of approximately 8% based on the closing share price yesterday. This is the 67th consecutive quarterly dividend, and since inception of the company in 2004, More than $27 per share, or $2.3 billion in aggregate, has been returned to shareholders through dividends.

21:14 And while we continue to collect revenue from our fixed short rate backlog, we also have upside from profit split arrangements from our VHCCs, in addition to profit split arrangements related to fuel savings on some of our large container vessels. Despite a relatively volatile market in 2020, We have added more than 250 million statistics chart rate backlog over the last 12 months. And we actively continue to explore new business opportunities. And while risk premiums on energy and shipping investments have increased with the recent volatility in financial markets, SFL has at the same time raised new attractive financing and expanded its group of lending banks, especially in the Far East, who now represent more than 40% of our lending volume.

22:06 SFL's business model has been continuously tested throughout its 16 years of existence and has previously been highly successful in navigating periods of volatility. And with that, I give the word back to the operator who will open the line for questions. Thank you. Ladies and gentlemen, if you do have questions or comments, Please press star 1 on your phone and wait for your name to be announced. If you wish to cancel your questions, please press the pound and the hash key. Once again, it's star 1 for any questions or comments, and it's the pound and the hash key to cancel. We have the first questions coming from the line of Chris Weatherby.

22:51 Please go ahead and say your company name.

22:54 Chris Weatherby Yeah, hi, thanks. It's Chris Weatherby from Citi. I appreciate you taking the question. I guess I wanted to start on the offshore side and could you give us a sense of, you know, from a cash perspective, how far in arrears we are with the payment here in 4Q and sort of what are the quarterly cash, maybe give us a little bit more clarity on sort of the quarterly cash impacts of not paying charters.

23:21 Yes, and thanks for calling in. We were paid in full in the third quarter, around $24 million. The charter rate is in the region of around $90,000 per day on average for these vessels. and of course that hire has not been paid in October and has so far not been paid in November. But importantly here, two other rigs are employed on profitable subcharters, as I mentioned, As part of the, call it, chartering structure, we agreed from the outset that all the charter hire is being paid into pledged accounts that is pledged in favor of us. So all the revenues they get in from their respective subcharters, be it ConocoPhillips from one of the rigs and Equinor on the other, everything goes into an account where CEDRU cannot use that money unless we give our prior consent.

24:30 So there is an amount much bigger than the charter hire due to us that is accumulating on those bank accounts right now that is really sort of, that's what we say, sitting there. Right now, you could say status quo. You know, there is more money accumulating. But of course, over time, I mean, you know, some of this money, you know, is, you know, should be used for operating expenses. So CEDRIL needs to fund that from other sources right now. So, but I guess, again, this is what we say, we continue our discussions and negotiations. And CEDRIL, of course, has similar discussions and negotiations with other stakeholders.

25:16 So we cannot give any comments on the details of that or exactly how this could play out over time.

25:26 Okay, understood. That's very helpful information, so I appreciate that. And then when you think about what that could, assuming that nonpayment continues through the quarter, how that impacts your thought process around dividends and distributions as you go forward?

25:43 Yeah, so that is, in order to I would say eliminate questions around that. The Board took the step to reduce the dividend to 15 cents, which is more than covered from the shipping side alone. By that, we hope that at least given the uncertainty right now relating to the to those rigs and the charters to CEDRIL and how that restructuring is playing out, we have some significant contribution from those other assets. And while there are financing right now on two of the three vessels have financing agreements attached, one with a more flexible quality structure and the other with more regular payments, of course, The one rig with the financing with a limited guarantee, our liability is limited to that guarantee unless we agree to do something else.

26:54 I think we have 81 vessels and rigs outside of the drilling rigs here, and we have significant cash flow from all of them, and importantly, Even if there could be issues in one, you could say, box here, like on the offshore side on each of those rigs, that has no impact on contribution and cash flow from the other assets.

27:24 Okay, that's helpful. And one final, if you'll allow me, would just be on the West Linus. Can you talk a little bit, any of the specific terms that you were able to get in terms of the amended...

27:38 Unfortunately, I cannot give you any specific comments on that right now. We will get back to that in due course, but we have agreed more flexible terms in exchange for increasing the guarantee. This is also the rig that has a subcharter that runs through 2028, so there is a lot of visibility on the underlying cash flow coming from that asset. and that's also why we, for now, has increased the guarantee on that one.

28:14 Okay. All right. Well, thanks very much for the time. I appreciate it.

28:17 Thank you. The next questions come from the line of Andy Givens from Jefferies. Please ask your question.

28:28 Howdy, gentlemen. How's it going?

28:31 Good, thank you. How are you?

28:35 In the past, you've touted your strategy, your balance sheet, as having the ability to buy when other ship owners in other sectors cannot. With that, how do you view your fleet today? What asset classes are most attractive? Clearly, dry bulk and tanker asset values remain depressed. So has there been any interest from dry-bulk owners for sale and leasebacks to SFL? And then last time we talked, you wanted to expand your tanker exposure, but asset values were too high. Clearly those have come in as well. So how do you view both dry-bulk and tankers in terms of acquisitions at these levels?

29:18 Yeah, thanks. We, of course, continuously evaluate the opportunities in multiple sectors. and we are looking literally at opportunities in all the sectors right now. But we typically never comment on transactions that we don't do, so we will notify when we do it, and in the meantime we are screening a lot, we are going further than that on other deals, and hopefully we have the last 12 months concluded, we have added $250 million to the backlog, and of course we have ambitions to grow the business also going forward, certainly outside the offshore side for now, until the whole sea level situation is sorted.

30:12 You are correct, we try to time transactions, we try to be mindful of cycles and we typically try to be careful if segments are peaking. I would say generally this year there was good activity, good volume at the beginning of the year and then for a period I think most operators out there were more or less paralyzed I think by COVID-19 and uncertainty surrounding that. I sense that the market is picking up more now. What we have seen on the financing side is that we are now concluding financings at All in cost, if you add margin and underlying interest, we are financing ourselves cheaper than we have seen earlier. So that at least is positive, there is good access to capital.

31:09 But we have to be mindful of the asset risk we take on. But we can do many things. I mean, we can do, you know, straight operating type charters where we run the vessels, time charter it. But we also do deals like we did with the Hunter vessels. We structure that with, you know, what's more like a structured financing, you can say. It was really a cost of capital arbitrage where we could utilize our access to very attractive funding. And they were willing to pay up for that because they needed the flexibility So we got a risk-adjusted return of more than 20% on effectively around 60% leverage on the assets.

32:00 So we're looking at both those types of deals across the sectors, but we typically will not tell you how much we will do in any single one. It's really all about André Reppen, Mikkel Storm

32:43 I think when we reduced it from 35, it was

33:11 I would say more relating to general risks, you know, caused by the whole COVID-19 situation, where we saw, you know, some assets, you know, where we saw charter rates come down sharply in some segments, and we also had, you know, the car carriers that came off charter and where we put them in layups. So instead of generating revenues, you know, you could say, You have a negative, call it cash flow, because you're paying for layoff costs while they don't earn any money. So that was really a factor more relating to that. And as we have seen, I would say the offshore and the rig side, and this is of course linked also to the oil price, but it's been deteriorating, I would say, over the last few months. We believe, and this is the board's decision, of course, but we believe that it would be appropriate to effectively eliminate all quality cash flows that has previously been in there from the drilling rigs, from the distribution capacity and show that it's with a good margin to cash flow generating from the other assets.

34:27 And of course, depending on the outcome of the serial quality restructuring, when we're on the other side of that, of course, it's easier for the board then to to look at the distribution capacity and possibly reinstate some of that reduction that has been taken up. Also, as we used some cash to buy back the loan on the drilling rig, of course you can argue that if that hadn't been bought back, you could have reinvested that in other assets which could have generated and some contributions. So that is really the reasoning around this latest adjustment.

35:08 All right. Well, I'll leave it at that. Thanks so much.

35:11 Thank you. Bye-bye. The next question comes from . Please ask your question and the company name.

35:32 On the container side of the business, you mentioned potentially acquiring assets, not specifically in the container space, but the rates are pretty strong and you are benefiting there. What does it look like in terms of adding assets in containers with rates so strong?

35:56 We also look at the container market, obviously. When we look at opportunities, we look at it from a long-term perspective. Of course, right now, and certainly in the short term, we see booming container rates, and we see the liner operators generating a lot of cash flow now from the markets. I would say it's very reassuring to see, and of course, given that we have a lot of container ships on a portfolio to the larger container operators, we are very happy to see that there has been a very good discipline in the market and where they have been building buffers amidst the uncertainty and the disruption caused by COVID-19.

36:44 So yes, we are also looking at container shipped assets and would be happy to add more also in that sector if we find the right asset at the right price and where we can get, you know, structure the right financing around it so it gives us a good risk-adjusted return. So yes, absolutely.

37:06 And, you know, looking at your fleet, some of the smaller bulkers and tanker vessels that are not on longer-term charters, is that consistent, or will that stay consistency in your overall strategy where it's, you know, match the financing to the contract, or how does that work out in the long term?

37:29 Our reasoning for having vessels that are not employed on long-term charters is It's not because we have sort of acquired them to keep them in the spot market. Typically, vessels that we trade in the short-term market has been assets that has been on longer-term charters and that have come off those charters. And because we have an operating platform where we can manage those vessels, if we had been a pure, call it financial profile, we would have to either recharter at what we think is at the bottom of the market or sell those assets. Instead we can trade them in the market and of course our ambition is to find longer term charters as the market improves. So that is really the reasoning behind it. We also have, call it variable, call it cash flow from the profit share arrangements, which you can say to a certain degree is similar.

38:20 You agree to maybe a little lower base rates in exchange for getting optionality linked to profit share, which is a way for us to Thank you very much. The next questions come from the line of Craig Lewis.

39:06 Please ask a question and ask your company name.

39:10 Yeah, hi, thank you, and good afternoon, everybody. In realizing, you know, you can't talk much about the seed drill restructuring, you know, just curious, you know, you mentioned the cash account that's building. When post the, you know, the last, if we were to look back, The last time CDRIL came out of restructuring, how long after their reemergence from restructuring was SHIP Finance able to access that capital? Or did you still receive that payment?

39:50 I'm not sure if I got you right. There was some noise on the line here. But if I read you correct, are you asking me how long a time it took Procedura to emerge from bankruptcy? No, no, no.

40:02 Yeah, correct. Not how long because we won't know that. But as I think about the process and maybe it differing or being very similar to what it was last time, Post their re-emergence, how long was it before Ship Finance received that cash in that account?

40:27 At that time, and this is back in 2017, the charter rate at that time was higher. We also had a lot more financing at the time back then. We did receive full charter hire all the way through the Chapter 11 process, and that was part of what we say the pre-agreement between the stakeholders at the time, that we would be paid full charter hire. So the adjustment in the charter hire took effect when CEDRIL emerged out of Chapter

41:06 11. Okay, and then just one other one for me around this. Realizing that it's a much smaller piece of the portfolio this time around, but really as we think about this, the last time this happened, despite maybe there being opportunities in the market, SHIB Finance, my recollection was, really stayed out of the market in terms of acquiring assets. Is there any reason to think that this time that could potentially be different?

41:39 No, I would say that was more coincidental. We have no intentions of staying away from the market. We took out the financing on one rig and we still have good capacity to do new deals. So that is certainly not our intention. But of course, it all boils down to finding the right deals and doing them. and, of course, we want them to be truly accretive to distribution capacity.

42:11 Perfect. Okay, thank you.

42:13 Thank you. Sir, I have no further questions at this time. Sir, please continue.

42:31 Then I would like to thank everyone for participating in a third quarter conference call and also thank the SFL team for their tremendous efforts in a challenging time with disruption caused by COVID-19 situation both on board the vessels and on shore. Situation around the drilling rigs does remain unresolved as we have discussed today, but at least two of the harsh environment rigs are producing significant cash flows for seed drill, which is very positive in the circumstances. and we will remain very focused on the situation in order to create the best possible outcome for SFL and our stakeholders. But our rigs are only part of the puzzle there, so we cannot control the timing for a resolution, but we'll of course notify you all when there are developments.

43:16 If you do have follow-up questions, there are contact details at the press release, or you can get in touch with us through the contact pages on our webpage, www.sflcore.com. Thank you. Thank you for participating. You may now disconnect your lines.