[Management View]
SFL Corporation reported revenues of $194 million for Q2 2025, primarily from time charter contracts. Adjusted EBITDA was $112 million, down from $160 million in the previous quarter due to elevated dry docking and upgrade activity. The total charter backlog stands at $4.2 billion, with two-thirds attributed to investment-grade customers. The Board has decided to adjust the dividend to $0.20 per share for Q2 2025, citing capacity constraints and market volatility.

[Outlook]
Management expects dry dock costs to normalize for the remainder of the year. Liquidity was enhanced by vessel divestitures and new financing, leaving over $300 million available for investment at the end of Q2 2025. The company plans to continue investing in fleet renewal, new technology, and vessel upgrades to meet strict regulatory demands and position for organic growth.

[Financial Performance]
Revenue: $194 million (non-GAAP) for Q2 2025
Adjusted EBITDA: $112 million for Q2 2025, down from $160 million in Q1 2025
Net profit (U.S. GAAP): $1.5 million for Q2 2025, compared to a net loss of $32 million in Q1 2025
Dividend: $0.20 per share for Q2 2025

[Q&A Highlights]
Question 1: What's the status with the lawsuit with Seadrill?
Answer: The larger lawsuit relating to the redelivery of the Hercules will be scheduled sometime in 2026. SFL was awarded a judgment in the first instance of approximately $45 million to $50 million, depending on the currency rate, and has received a guarantee for that amount by Seadrill, including interest rates.

Question 2: Can you walk us through your thought process on the decision to lower the dividend?
Answer: The decision to adjust the dividend to $0.20 per share was influenced by the idle status of the Hercules rig, which incurs a warm stack rate of $60,000 per day and related interest and amortization costs. The Board felt it prudent to ensure the distribution is not subsidized due to the rig being out of service. The sale of older vessels and the resulting investment capacity also played a role in the decision.

Question 3: How should we think about dry docking costs for the back half of the year?
Answer: Dry docking costs are expected to be very low in Q3 and Q4, averaging out for the year despite a busy first half. Costs per vessel docking will vary, with large container ships around $2 million and smaller ones around $1.5 million. Q3 costs may be around $3 to $3.5 million, and Q4 around $1 to $2 million.

Question 4: What are the opportunities for potential acquisitions?
Answer: SFL continues to look at opportunities, focusing on counterparty strength, asset types, and residual exposure. The market has been slower due to general uncertainty, but SFL has capacity for new investments, having added more than $2 billion to its charter backlog and invested over a billion dollars in the last eighteen months.

Question 5: Should we expect the organic EBITDA contribution from the energy side to come in at around $3 million per quarter until a new contract for the Hercules is secured?
Answer: The organic EBITDA contribution from the energy side is expected to be slightly higher than $3 million per quarter, mainly from the Linus rig. The Hercules rig will continue to have a negative drag until new employment is secured.

Question 6: Are the deliveries of the container ship newbuilds still expected in 2028?
Answer: Yes, the deliveries are expected in 2028, with construction commencing approximately one year before delivery. Installments will start in Q1 2027, and the ships will be delivered throughout 2028.

Question 7: What are the vessel operating expenses and stacking costs for the Hercules rig?
Answer: Vessel operating expenses are expected to come down, and the stacking costs for the Hercules rig are being reduced to an efficient number, aiming for around $60,000 per day.

[Sentiment Analysis]
Analysts expressed concerns about the dividend adjustment and the idle status of the Hercules rig. Management maintained a cautious yet optimistic tone, emphasizing prudent capital allocation and strategic investments amid market volatility.

[Quarterly Comparison]
| Metric | Q2 2025 | Q1 2025 |
|-----------------------|---------------|---------------|
| Revenue | $194 million | $187 million |
| Adjusted EBITDA | $112 million | $160 million |
| Net Profit (U.S. GAAP)| $1.5 million | -$32 million |
| Dividend | $0.20 per share| $0.27 per share|

[Risks and Concerns]
The idle status of the Hercules rig and market volatility pose risks to near-term cash flow and financial results. Elevated dry docking costs and the impact of vessel divestitures on cash flow generation are also concerns.

[Final Takeaway]
SFL Corporation's Q2 2025 performance was impacted by elevated dry docking costs and the idle status of the Hercules rig. The decision to adjust the dividend reflects a cautious approach to capital allocation amid market volatility. Management remains focused on fleet renewal, new technology investments, and strategic opportunities to enhance long-term operational efficiency and shareholder value.