Good afternoon, ladies and gentlemen, and thank you for standing by. Welcome to today's First Quarter 2019 Ship Finance International Limited Earning Conference call. At this time, all participants are in a listen-only mode. There will be a presentation followed by a question-and-answer session. [Operator Instructions] I must advise you that this conference is being recorded today, Tuesday 21, of May 2019. And now, I would like to hand the conference over one of your speakers today, Ole Hjertaker. Please go ahead.

Thank you, and welcome everyone to Ship Finance International, our first quarter conference call. With me here today I have our CFO, Aksel Olesen; and Senior Vice President, Andre Reppen. I will start by briefly going through the highlights for the quarter and following that, Mr. Olesen will run us through the financials and as the operator indicated 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 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. The Board has declared a quarterly dividend of $0.35 per share. This is our 64th -- 61st quarter with profits and dividends and the dividends represents $1.40 per share on an annualized basis or nearly 11% dividend yield based on the closing price yesterday. Over the years, we have now paid more than $25 per share in dividends or more than $2.1 billion in total and we have a fixed rate charter backlog of $3.8 billion, which should support continued dividend capacity going forward. The reported net income for the quarter was approximately $34 million or $0.31 per share. This is from total charter revenues of around $160 million, primarily from vessels employed…

Thank you, Mr. Hjertaker. On this slide, we have shown our pro forma illustration of cash flows for first quarter compared to the fourth quarter. Please note that this is only guideline to assess the company's performance and is not in accordance with US GAAP and also net of voyage expenses, extraordinary, and non-cash items. Total charter hire for the first quarter was $155 million, up from $154 million in the previous quarter. On the tanker side, SFL has nine crude oil product and chemical tankers, most of which are employed on long-term charters. The vessels generated approximately $18.1 million in charter hire in first quarter, including approximately $1 million profit share contribution from our VLCCs on charter to Frontline. The charter hire from our tankers was up despite divestment of two VLCCs in the previous quarter. Thus crude tanker rate benefited from solid Q4 rate levels and good charter coverage going into Q1. On the liner side, SFL has a fleet of 45 container vessels and two car carriers. All of our container vessels are employed on long-term fixed rate charters. The liner fleet generated approximately $81.4 million in charter hire compared to $75.5 million in the previous quarter. The increase in charter hire for liner segments is firstly due to the two 19,400 TEU container vessel delivered in December 2018, had their first full quarter of charter hire in the first quarter and generated an EBITDA of approximately $7.8 million. The vessels are charted out for a period of 15 years to MSC, the world's second largest container line. And secondly, a full quarter of charter hire from all of our three 10,600 TEU container vessels on long-term charters to Maersk line. These vessels generated an EBITDA of approximately $10.3 million in the quarter that charted out for…

Thank you so much. Now, ladies and gentlemen, we will begin the question-and-answer session. [Operator Instructions] And the first question comes from the line of Chris Wetherbee from Citi. Please go ahead.

Yeah. That sounded good, operator. Thank you very much. Thanks, guys. I guess, I wanted to start a little bit on your thoughts on the container market, in particular sort of the impact of -- some of the preparations for IMO 2020 that could be occurring over the course of the next couple of quarters. Do you get a sense that or can you give us a sense of what you think that sort of impact the capacity might be as some vessels are going to be fitted for scrubbers, but other vessels are going through sort of the tank cleaning process to get new lower sulfur fuel on board kind of in late 3Q or 4Q. Will that have an appreciable impact, do you think it has a benefit to rigs?

Yes. I think, we have got two levels, I would say to that question. If you're a liner operator, you have your, call it running expenses think your vessels, which is, either renting them, owning them yourself, running them and paying for the fuel. And the other is, how can they get effectively a fuel surcharge from their customers. And I think generally most of the liner companies have positioned themselves to be quite -- get a significant compensation for the expected increase in fuel costs count 2020. But of course, as we all know, if every dollar saved on the cost side go straight to the bottom line. So therefore, several of the large container lines have focused on installing scrubbers and most of the scrubbers that are committed on the vessels we own are container ships on long-term charters to liner operators. Due to confidentiality process, we cannot specifically disclose which vessel it is. But I would say generally it's the larger vessels where you see most of the -- we call it fuel oil, call it consumption. And just to give you some sort of -- some feel for the numbers, with the forward rate currently of around $200 per ton. You can see an annual saving for larger container ships and this is by that I say sort of around 9,000 TEU/NOK. You can see a payback time effectively of less than one year. A large container ships, say of 20,000 TEU would consume around 35,000 tons per day on, I would say, normalized speed adjusted for days at sea, while sort of 9,000 to 10,000 would have a consumption of around 22,000 -- 23,000 tons per year. So matching that up with the savings, again at these levels, we're talking say around $7 million savings for a very large container ship and maybe $4 million, $4.5 million saving on a $9,000 to $10,000 TEU set. So this can be very significant for the liner companies. So the question is that, of course, if you are liner company, how much of the fuel surcharge will you be able to keep for yourself and how much of that will you have to share with your customers and that is of course down to the competitive landscape. What do I think, we will see also is an added effect also in this segment because of the number of vessels that is expected to go in force proper retrofitting and the time that it will take both during the actual job, but also the rotation effect of taking it out of service before it started into service. You could see a significant the utilization impact of this, which should also benefit hopefully the -- on the cost side for these liner operators.

Okay. That's helpful. And that last part kind of answers the question of thinking about. And then, in terms of your exposure in the SFL fleet on the container side through the rest of the year, can you give us a sense of what's available, what's open for rechartering and do you think you have the opportunity to maybe take advantage or maybe extend duration on some vessels as you go through the end of 2019?

Yeah. The only vessels we have coming off in -- at the end of this year are two small feeders vessels 1,700 TEU vessels that are coming off 12-year charters and while all the other vessels are chartered much longer and I will say all the bigger vessels are chartered well beyond '19 -- 2019 and 2020 call it period where we do expect to see most of the volatility or potential volatility in fuel oil prices. I would add that, we are currently discussing on some vessels, call it, scrubber installations and we can get scrubber from, call it, what I would say, call it the premium makers. We can get them ready installed in about six months time. So the lead time here, to get this equipment installed maybe shorter than at least the some thought that would be, if you go back around six months.

Okay. That's very helpful. Thanks very much for the time. I appreciate it.

Yes. Thanks.

Thank you so much. And the next question comes from the line of Randy Giveans. Please go ahead.

This is Chris Robertson on for Randy. Thanks for taking our call. Just to clarify on the scrubbers, will any of the 25 vessels have exposure to the spot market at any point during 2020?

Yes. Of that, I mean, two of the vessels we are installing scrubbers for our own account on two Suezmax tankers. So they will be exposed to the spot market and of course, fingers crossed, there will be call it, there will be some positive effects there relating to the fuel oil. Also, there will be -- also on two VLCCs, we have also doing some upgrades there, which we are doing in conjunction with Frontline. On two vessels where we will benefit from, the profit split about $20,000 per day with our proportionate share. So, but all the others are tied in long-term charters. And then it's really more a question of how do you share the costs and what's the return on capital, if we are going to pay for it, or as we have indicated, we are also opened to discuss a profit-sharing arrangement, if we think that we can get a very good and of course, a significantly higher return on our invested capital, if the market -- the price volatility on fuel oil will develop as we think it will into next year.

Okay. Thanks for that. That's really good color. And then in terms of the cadence of the installations, are any being completed during the second quarter, will all 25 be complete by January 2020 and kind of what's the pacing of installations for the rest of the year?

Well, I think, right now, it's relatively few. I think on the vessels we have, the bulk of it will be in the second half of this year and based on what we say, our intelligence from the various shipyards, of course, this is wrapping up, you only have relatively few scrubbers installed generally in the market now and there is some expectations for 2,000 installations during the year. So it will be very interesting to follow and see what kind of efficiencies sort of these yards have and whether or not there will be delays in the installation. The equipment itself is not super sophisticated, I would say, it's a big shovel system. Of course, you need to put the piping in right and it needs to be configured right. So it does what it's supposed to. But of course given the huge volume of these that could be logistical issues in getting these scrubbers ready at the various yards that where they're going to install it. And they call also potentially be a lack of, I would say skilled workers to do the job because the water in particular -- the wash water in particular is very acidulous. So you have to be and be very careful with the material you use and also the craftsmanship of putting it in to ensure that it will not malfunction after a short time. So we are definitely going to very interesting times and for engineers this is, it's the time of their life.

Got you. Last question from me. On those charter extensions that you completed where the charters extended kind of added similar rate or would they readjusted based on the current market?

Well, I think, it's a combination of, some as current rate and some as the slightly lower rate, but for a longer period. So I would say not material -- not really material, sort of downward adjustments, but it's really more reflection of vessel age and the length and the structure of the charters. I cannot give you specific details on each of them, but we will -- we are sharing as always our full charter backlog vessel-by-vessel which you can get by emailing us or either directly or through our webpage, www.sflcorp.com.

All right. I'm going to try to sneak in one last question, if you don't mind. You guys are largely insulated from the rate volatility associated with this US-China trade war tensions going on. But in your opinion, kind of, what does the container ship market look like, if a deal is reached this year versus no deal reach this year?

Well, of course, it's a big question. Isn't it? Because it is affecting, obviously trade in general. And we don't have our own independent analysis on the detailed effects of that, call it, trade dispute. I do hope that it is relatively shorter of nature, when We make our investments of course, we have a very long-term view and hopefully this is what I visit -- this is will end up being, what I would call market noise more than the long-term fundamental shift in world trade. But of course, all container lines will be affected, if it is a very lasting effect. Where you would expect to see lower utilization on vessels and then as a consequence, most likely higher level of vessels taken out of service. But I do think that the vessels that we have concentrated our capital, which is sort of what we call new design vessels from around 9,000 TEU and upwards, with a more optimal engine and whole configuration and with better fuel consumption parameters will be, if the preferred units also through and after such, call it, market disruption, if you can call it that. But so far, we are watching it and it looks like it's something that's being played out over Twitter. So we'll see how this goes.

Got it. Appreciate the time. Thank you.

Thank you.

[Operator Instructions] And there are no further questions at this time. So, please go ahead.

Thank you. Then I would like to thank everyone for participating in our first quarter conference call and also thank the SFL team for their great efforts. We are committed to continue building the company and we believe, there will be good investment opportunities for us going forward with attractive risk reward profiles. If you do 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 web page which is www.sflcorp.com. Thank you.

Thank you so much. And that does conclude our conference for today. Thank you for participating. You may all disconnect.