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 would 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. 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 56 consecutive dividend. And we are now paid more -- nearly $24 per share in dividend for 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 a several non-recurring and one off items which reduce the result by approximately $5 million in the quarter. Aggregate charter revenues recorded in the quarter, including a 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 a $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…

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 fourth quarter were $147.7 million slightly above the previous quarter. Revenues from Tanker was up in a quarter due to a full quarter of earnings on the two product tankers employed under seven year charters, to a bit of VLCC partly offset by the sale of one Suezmax tanker in the third quarter and lower earnings on the two Suexmax's trading and approval. Liner revenues were down in the quarter due to lower earnings of the Car carriers currently employed on the short-term charters, the following expiry of the long-term charters in the third quarter. Drybulk revenues were up in the quarter, mainly due to improved earnings for the Handysize drybulk carriers trading in the spot market. While offshore revenues were in line with the previous quarter. There was no profit share on the back of vessels of Frontline but we had our first quarter of profit share on the Cape size of the vessels on charter to Golden Ocean due to the improved drybulk 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 number of outstanding shares increased by 9.4 million during the quarter following the early conversion of convertible notes and just an example share was therefore lower in the fourth quarter compared to the third. With that, I'll move on to the profit and loss statement as reported on U.S. GAAP. As we have…

Thank you. [Operator Instructions] Our first question today comes from Magnus Fyhr from Seaport Global. Please go ahead.

Yes, good afternoon, guys. Just a question on the -- I mean I guess the announcement here with from Seadrill, does that change your outlook here now maybe getting bit more active on the acquisition front? I mean you have prudently been on the sidelines here for some time and just curious to see if you plan to maybe get 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, there has been some 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 publically stated that they disagreed with the terms of the restructuring support agreements when they now have signed up under as 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 have cleared away a lot of the uncertainties that could still remain relating to the seasonal restructuring and the [indiscernible]. 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 now evaluating projects. And of course, we have expectation to do new deals in 2018. And we cannot be specific on the deals we are looking at. I can 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 -- I can say there have been players who have been offering very low rates, but maybe the market there is balancing better now.

All right. Thank you. 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 long 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 as is? 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 rates while the earnings effects because it's been adjusted already was only $0.7 per share or half of that. So you have a few effects here that -- and also maybe add to that some or 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've been conservative and pay down debt and therefore have lower amortization currently than you could say that implied depreciation. The depreciation on many of our assets are straight line, you know, 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 serial rates they have lease accounting and the lease accounting is a structure effectively in 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 new accretive investments also on earnings phase. 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.

All right, thanks for clarifying, Ole.

Yes, thank you.

Thank you. We'll now go to our next question from Fotis Giannakoulis from Morgan Stanley.

Yes, hi gentlemen, and congratulations for very positive outcome of the Seadrill restructuring for you, 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? Thanks.

Yes, given the effects, given that we know how so many of the creditors signed off 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 remains, 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 as you can call it effective date in later in the quarter possibly June. But again as I said, this is down to the court who takes the decision, so we do not have any sort of official estimate from the court on this but given that we know so much important 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 hear from investors about potential changes to our terms, if terms had to be adjusted and there we but we and the security creditors have not changed any terms in the revised agreements or link to the new call it creditors joining the restructuring support agreement.

Thank you, Ole, for this very detailed response. I want to follow up on Magnus's question about your growth plan and the investment of the capital, the excess capital that you have. Can you please first clarify how much is this excess 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 then 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 the $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 the 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 or we do not want to give any specific guiding on but we are certainly well, well above any covenants relating to our financing agreements in terms of minimum cash. Also I think that we've given our capital structure and our relatively conservative leverage could also go and rise capital in the market, 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 are looking at many, many different types of projects and our principal focus is assets with long-term charter coverage or we also have a preference for time charter structure instead of the air charter structure simply because time you have better technical control over the vessels but from time to time, we can also take some call it, as we call it some advantage of market opportunities which could typically be when the markets is weak and there could be, I think could be opportunities to acquire assets relatively cheap and then potentially charter it out at the later stage. So we're looking at many areas call it structures but the principal basis is long-term charter coverage and I would say over time call it the support 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 in a market cycle. So and that's of course something we watch closely.

Thank you very much, Ole. And can you clarify there was other financing items charge of $7.5 million this quarter, was it related to the buyback over, the convert I assume this is one-time item?

Yes, this is Harald. That $7.5 million does include $4.4 million impairment charge on some of the available-for-sale securities and also some obviously want to buy them on the settlement of the intervals.

Thank you, Harald, for that; 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 with that and what kind of free cash flows shall we expect with vessel being re-chartered after the termination of the prior charter?

Well, the depth on those vessels originally matured into 2018 but we decided to prepay that earlier. So we've prepaid in the fourth quarter, so those vessels are debt free and the remain debt free at this moment, so the current charter rate of around $13,200 per day is from that you can subtract around $6000 per day roughly operating expenses. It's net cash flow generated by those vessels.

Thank you very much gentlemen and congratulations for a good quarter and outcome of the Seadrill restructuring?

Thank you very much.

Thank you. [Operator Instructions] we have a question now from Randy Giveans from Jefferies. Please go ahead.

Hey guys. Quick question for me for the drilling rig the Soehanah it's currently employed until June 2018 with the option for another year, when does that option expire and it's not taken where the alternative target options for that during rig?

Yes, thank you Randy. That rig is as you said the charter that fixed until June and they have a 30 day and the oil company has a 30-day call it window before expiry when they can exercise option. So we haven't heard anything, so currently and it runs until June. As far as we understand as 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 in the market currently is I would say sort of in the range maybe modularly higher that the charter rate that rig is on currently, so we and there are some are there charters in the Southeast Asian region that the rig that could potentially 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 great plus when you're going to market a drilling rig for operations.

Sure. Okay. And then looking at the VLCCs, you still have I guess eight outstanding with most of them I guess six of them about 16 years of age or older that who makes that decision for selling the older ones that Frontline and then they kind of give you that compensation for early charters termination or is that SFL making the sale decision?

There are no Frontline does not have any options relating to those assets, so any sale we've done over the year has always been on the negotiated basis on a vessel-by-vessel basis, so there are eight main vessels remaining as you say and that the charter of the average charter coverage on the remaining vessels is around seven years. So we still have significant charter cover of 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're down to only eight vessels, so we have sold off a lot of vessels particularly older vessels over the years. And then now the last of the 90s built vessel has been sold, so the oldest vessel now has built in 2001.

Okay, then just one quick modeling question, just kind of reconcile from 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, what were the one off charges I think you said a $4.4 million impairment charge I'm reading here another $2 million one off vessel operating cost, so they could be went into, what went into that $7.5 million loss there, what's onetime items and what's kind of a good guidance for 2018?

Well, I mean the $2 million was in operating expenses. And in the other financial items that we have the, there was one that also introduce maintenance fees and agency fees and I think that's on the loans and there was also a foreign exchange loss on that relating to the settlement of swaps on region bond we had outstanding. There was some swaps maturing in the fourth quarter although that the found itself was retail in the third quarter, so most of these were extraordinary items I would say has around $6 million in sort of one off items.

I think also worth mentioning is that the effect of the Seadrill leases 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, that the net contribution per share on the 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 very difficult of course to predict but that many analysts probably had in that the full basis since we still receive the full charter rates from Seadrill. It's just that the leases have been adjusted to reflect the new structure and therefore much less is coming through P&L. And most of it is down of the cash flow to receive this repayment of investment in final leases.

Sure and then for that $4.4 million negative impact of arising from impairments?

Marketable securities, yes.

Is that included in the $7.5 million other financial item loss?

I think have in 7.5. Yes.

Perfect. Hey, that's it from me. Thanks again and yes congrats on the restructuring there.

Thank you. 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 our contact details of 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.