Business Context and Reporting Period
SFL Corporation Ltd. (SFL) is a Bermuda-incorporated international maritime and offshore asset-owning company listed on the NYSE (Ticker: SFL). The company operates a diverse fleet including tankers, dry bulk carriers, container vessels, car carriers, and offshore drilling rigs. This Form 20-F covers the fiscal year ended December 31, 2025. As of the reporting date, the company owned 17 tankers, 2 dry bulk carriers, 21 container vessels, 7 car carriers, and 2 drilling rigs, with 5 new container vessels under construction for delivery in 2028.
Key Financial Metrics
| Metric | 2025 | 2024 |
|---|---|---|
| Total Operating Revenues | $733.0 million | $904.4 million |
| Net Operating Income | $136.7 million | $306.7 million |
| Net (Loss)/Income | ($26.4) million | $130.7 million |
| Basic EPS | ($0.20) | $1.01 |
| Operating Cash Flow | $267.1 million | $369.9 million |
| Total Debt Outstanding | $2.6 billion | $2.9 billion |
| Cash and Cash Equivalents | $150.8 million | $134.6 million |
| Dividends Paid | $0.94 per share | $1.07 per share |
Material Changes vs. Prior Period
- Revenue Decline: Total operating revenues decreased 18.9% to $733.0 million, primarily driven by a 59% drop in drilling contract revenues ($96.3 million vs. $236.7 million) as the semi-submersible rig Hercules was warm-stacked in Norway awaiting new contracts.
- Net Loss: The company reported a net loss of $26.4 million compared to a net profit of $130.7 million in 2024. This was largely due to a $34.1 million impairment charge on seven dry bulk carriers and a net loss of $7.2 million on the sale of assets and settlement of charters.
- Asset Portfolio Shift: Significant disposals occurred in 2025, including the sale of 13 dry bulk carriers and one Suezmax tanker. Conversely, the company acquired three LR2 product tankers and two chemical tankers in late 2024, and two newbuilding car carriers in early 2024.
- Interest Expense: Interest expense decreased slightly to $180.5 million from $183.0 million, aided by lower average SOFR rates (4.24% in 2025 vs. 5.15% in 2024) and reduced overall debt levels.
Guidance, Outlook, and Risks
Outlook and Management Commentary: Management expects cash flow from charters to be adequate for short-to-medium-term debt service and working capital needs. The company is actively negotiating refinancing for credit facilities maturing in 2026 and early 2027. In March 2026, the company secured a new drilling contract for the rig Hercules in Canada, valued at approximately $170 million, commencing in Q1 2027.
Key Risks and Contingencies:
- Geopolitical Instability: Ongoing conflicts in the Middle East (Red Sea, Strait of Hormuz) and the Russia-Ukraine war continue to disrupt shipping routes and increase volatility in charter rates and insurance costs.
- Regulatory Compliance: Stricter environmental regulations (IMO 2023 Strategy, EU ETS, FuelEU Maritime) are increasing compliance costs and may impact vessel values and operational flexibility.
- Debt Covenants: The company is subject to financial covenants including minimum liquidity ($25 million), positive working capital, and book equity ratios. As of December 31, 2025, the company was in compliance with all covenants.
- Legal Proceedings: The company is involved in litigation with Seadrill regarding the redelivery of the rig Hercules. While a lower court ruled in SFL's favor for approximately $48 million, Seadrill has appealed, and the outcome remains uncertain.
Investor Verification Checklist
- Refinancing Status: Verify the successful refinancing of debt facilities maturing in 2026 and early 2027, given the $606 million in debt repayments due within one year.
- Drilling Rig Utilization: Monitor the commencement date and performance of the new Hercules drilling contract in Canada to assess recovery of drilling revenue streams.
- Asset Impairments: Review future vessel valuations, particularly for dry bulk carriers, given the $34.1 million impairment recorded in 2025 due to market conditions and trade policy impacts.
- Geopolitical Exposure: Assess the impact of escalating tensions in the Red Sea and Persian Gulf on charter rates, insurance premiums, and potential vessel rerouting costs.
- Environmental Compliance Costs: Track capital expenditures required for upcoming environmental upgrades (e.g., ballast water treatment, scrubbers) and the financial impact of EU ETS and FuelEU Maritime regulations.