Good day, and thank you for standing by. Welcome to the Q1 2022 SFL Corporation Earnings Conference Call. At this time, all participants are in listen only mode. After the speaker presentation, there will be a Q&A session. To ask the question during the session, you will need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require assistance during your conference, please press star zero. I would now like to hand over the conference to your speaker today, Mr. Ole Hjertaker. Please go ahead, sir.
Thank you, and welcome all to SFL's first quarter conference call. I will start the call by briefly going through the highlights of the quarter. Following that, our CFO, Aksel Olesen, will take us through the financials, and the call will be concluded by opening up for questions. Our Chief Operating Officer, Trym Sjølie, will also be present for the Q&A session. 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 expect, anticipate, intends, estimates, or similar expressions are intended to identify these forward-looking statements. Forward-looking statements are not guarantees of future performance.
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 includes, 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 of our risks and uncertainties, which may have a direct bearing on our operating results and our financial condition. The announced dividend of $0.22 per share is an increase of 10% over last quarter's dividend and represents a dividend yield of around 8.8% based on closing price yesterday.
This is our 73rd quarterly dividend, over and over the years, we've paid more than $28 per share in dividends or nearly $2.5 billion in total. We have an increasing fixed rate charter backlog supporting continued dividend capacity going forward. The total charter revenues were $166 million in the quarter, with the vast majority from vessels on long-term charters and only 20% from vessels employed on short-term charters and in the spot market. The EBITDA equivalent cash flow in the quarter was approximately $119 million, and over the last 12 months, the EBITDA equivalent has been approximately $455 million. The net income came in at around $47 million in the quarter or $0.37 per share.
There was also a positive mark to market on interest rate swaps and equity investments, but only a small portion of the total economic effect of the swaps flow through our profit and loss statement. Most is defined as hedging in accounting, and the book effect would have been around $10 million higher otherwise. In the quarter, there were around $1 million higher operating costs in the quarter due to additional crew rotation costs linked to COVID restrictions in some areas and increased airfare, and also higher legal expenses in connection with the Seadrill bankruptcy and redelivery of the rigs. We expect this to come down when travel restrictions ease and the rigs are redelivered to us later this year.
Our fixed rate backlog has increased significantly and stands at approximately $3.6 billion from owned and managed vessels after recent acquisitions and charters, which provides continued cash flow visibility going forward. The backlog figure excludes revenues from the vessels traded at the short-term market and also excludes future profit share optionality. In March, we announced the $540 million added backlog on our six large 14,000 TEU container vessels. The vessels will finish their initial 10-year charters to Evergreen in 2023 and 2024, and we have now added another 5 years to Hapag-Lloyd, taking the charter coverage to 2029. Hapag-Lloyd is the world's fifth-largest container line, and the transaction highlights the value and importance of our strong operational platform and our time charter strategy, enabling us to build strong customer relationships with industry-leading counterparties.
In connection with Seadrill's Chapter 11 process, we agreed to take over the charter contract on West Linus with effect, when all government approvals are in place. Based on current charter rate, around $500 million was added to the backlog. Given the market-adjusted charter rate, this could increase if the drilling market strengthens. West Hercules will be redelivered when the current drilling assignment for Equinor in Canada is finalized towards the end of the year. Thereafter, that rig will be managed by Odfjell, a market-leading operator of harsh environment drilling rigs, and we will drop the West prefix on the rig names. The sale of the last two VLCCs on charter to Frontline marks the end of an era and demonstrates the transformation SFL has gone through. Initially, Frontline was our only customer, and the fleet consisted of nearly 50 crude oil tankers.
The two remaining vessels were 18 years old, and we sold them after the quarter end for approximately $70 million, including a compensation from Frontline. We expect to book a gain of approximately $2 million in connection with the sale. Subsequent to quarter end, we have also delivered the 19-year-old 1,700 TEU container vessel, MSC Alice, which has been on a hire purchase agreement to MSC for the last five years. This transaction illustrates the value of having optionality, where the final payment was intended to be marginal as the vessel had effectively been paid down over the five years. We negotiated a profit share agreement into the deal at the time. While we of course hoped that there would be some value in that option, we didn't expect it to be more than $1 million or $2 million .
Zooming five years forward to today, the very strong container market currently meant that we ended up with a profit split of nearly $12 million instead. The vessel was debt-free, and SFL expects to record a gain of approximately $12 million in the second quarter. Excluding the drilling rigs, the backlog from owned and managed shipping assets was $3.6 billion at the end of the quarter, up from $2.8 billion in the previous quarter. Over the years, we have changed both fleet composition and structure, and we now have 71 maritime assets in our portfolio after the latest transactions. Over the years, we have gone from a single asset class chartered to one single customer to a diversified fleet in multiple counterparties.
Over time, the mix of the assets and charter backlog has varied from 100% tankers to nearly 60% offshore 10 years ago, to container vessels now being the largest segment with nearly 60% of the backlog and tankers only at around 10%. Most of the vessels are on long-term charters, and in the quarter, only 12% of hire was from vessels in the spot market. Also, we have nearly 90% of charter revenue from our shipping assets on time charter contracts and only 11% on bareboat or dry lease arrangements. We've also had significant contribution to cash flow from profit share over time, both relating to charter rates and fuel savings. The aggregate profit share was $22 million last twelve months and $4.5 million in the first quarter.
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. We try to be careful and conservative in our investments with a focus on technology and decisions over time to more fuel-efficient vessels. SFL owns two harsh environment drilling rigs, the West Hercules and West Linus, which have been chartered to subsidiaries of Seadrill since new. We have now been through two Chapter Eleven rounds in Seadrill, and while we have been paid charter hire during the processes, we have decided to end the chartering relationship with Seadrill.
The long-term drilling contract for West Linus with ConocoPhillips will be assigned to us as soon as customer and Norwegian regulatory approvals have been obtained, currently expected to be completed in the third quarter. Thereafter, the rig will be managed by Odfjell Technology, a leading supplier of offshore operations, who is already performing extensive drilling services for ConocoPhillips on the fixed installations. The West Linus has been drilling for ConocoPhillips at the Greater Ekofisk area since it was new in 2014, and its contract runs until the end of 2028 at an in-market index charter rate. It was ordered against the contract and has several features which makes it particularly effective at the Ekofisk field on the Norwegian Continental Shelf.
The Ekofisk field was the first oil discovery in Norway and has produced more than 6 billion barrels of oil equivalent since its startup in 1971. Recently, the production licenses in the greater Ekofisk area was extended from 2028 to 2048, and the area's license partners has recently announced new significant investments in future productions, given the size and proximity to European markets. The harsh environment, semi-submersible rig, West Hercules, will remain on charter to Seadrill while it finalizes a drilling contract with Norwegian oil major Equinor in Canada. This is expected through the fourth quarter this year, and thereafter the rig will be redelivered to SFL in Norway. It will then undergo a scheduled 5-year special survey estimated to take around 3 months before the rig is ready to work again.
Odfjell Drilling, a market-leading harsh environment drilling rig operator, will perform commercial and operational management of the rig after redelivery from Seadrill. The rig is one of only a handful of rigs fully equipped to drill in the harshest Arctic environment, and market analysts are positive to market prospects after the strong oil price development and the realization that there has been a fundamental underinvestment in the segment for a number of years. We follow the market closely, of course, and we'll announce future employment in due course. The strength of our counterparties and diversification is key when you assess our portfolio and quality over contracted backlog. The list speaks for itself with market-leading operators like Maersk, MSC, ConocoPhillips, Phillips 66, and Volkswagen, to name a few.
Relatively few of our customers are intermediaries where we have less visibility on the use of the assets and quality of operations. Strategically, this also gives us access to more deal flow opportunities, such as the repeat businesses with Maersk, MSC, Evergreen, and Trafigura, for example. Our strategy has therefore been to maintain a strong technical and commercial operating platform in cooperation with our sister companies in the Seatankers group. This gives us the ability to offer a wider range of services to our customers, from structured financing to full service time charters. 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 bareboat, where the customer may not always have incentive to make such improvements.
In addition, we can retain more of the residual value in the assets when we charter out on time charter basis, and in the current environment, with re-rising raw material costs and inflation driving replacement costs for vessels, this value is for the benefit of SFL and their stakeholders. For bareboat deals, this mass value is usually retained by the charterers through fixed price purchase options. With that, I will give the word over to our CFO, Aksel Olesen, who will take us through the financial highlights of the quarter.
Thank you, Ole Hjertaker. On this slide, they're shown a pro forma illustration of cash flows for the first quarter. Please note that this is only a guideline to assess the company's performance, and it's not in accordance with U.S. GAAP, and also net of extraordinary and non-cash items. The company generated gross charter hire of approximately $166 million in the first quarter, including $4.5 million of profit share, with approximately 85% of the revenue coming from a fixed charter rate backlog, which currently stands at $3.6 billion, providing us with strong visibility on our cash flow going forward. In the first quarter, the liner fleet generated gross charter hire of approximately $88 million, including approximately $4.4 in profit share contribution related to fuel savings on some of our large container vessels.
Following the company's recent acquisitions and charter extensions, SFL's liner fleet backlog increased to approximately $2.5 billion, with an average remaining charter term of approximately 5 years or 7.7 years if weighted by charter hire. A smaller container vessel, which has been on a hire purchase arrangement during the last 5 years, was delivered to the buyer subsequent to quarter end against a total purchase price of $13 million. SFL expects to record a gain of approximately $12 million in the second quarter. The vessel was debt-free. In the first quarter, SFL had a fleet of 16 crude oil, product, and chemical tankers, with the majority employed on long-term charters. A tanker fleet generated approximately $30 million in gross charter hire during the quarter, compared to $17.5 million in the previous quarter, as additional Trafigura vessels joined the fleet.
The net charter hire from the company's two Suezmax tankers employed in the short-term market was approximately $2.3 million, compared to $3.1 million in the previous quarter. Subsequent to quarter end, SFL sold the 2004-built VLCCs, Front Force and Front Energy, and simultaneously agreed to terminate the vessel charter arrangements with a subsidiary of Frontline. The sale price was approximately $70 million, including a compensation from Frontline for the early termination of the charters. SFL expects to record a gain of approximately $2 million in the second quarter as a result of the sale. During the quarter, the company had a fleet of 15 dry bulk vessels, of which 10 vessels are employed on long-term charters, and the other five are trading in the short-term market.
The dry bulk fleet generated approximately $26 million gross charter hire in the first quarter, including approximately $100,000 in profit share contribution from Capesize vessels on charter to Golden Ocean. The five vessels trading in spot or short-term market generated approximately $8 million in net charter hire, compared to approximately $8.6 million in the previous quarter. SFL owns two drilling rigs, which have been chartered out to subsidiaries of Seadrill on bareboat terms. In the first quarter, the company received charter hire of approximately $21 million from the rigs, including approximately $7 million in a lump sum payment relating to the termination of the West Linus charter. This summarizes an adjusted EBITDA of approximately $119 million for the first quarter, compared to $121 million in the fourth quarter. We move on to the profit and loss statement as reported under U.S. GAAP.
As we have described in previous earnings calls, our accounting statements are different from those of a traditional shipping company. As our business strategy focuses on long-term charter contracts, part of our activities are classified as capital leasing. As a result, a portion of our charter revenues are excluded from U.S. GAAP operating revenues and instead booked as revenues classified as repayment of investment in finance leases and vessel loans, resulting in associates and long-term investments and interest income from associates. First quarter report total operating revenue according to U.S. GAAP of approximately $152 million, which is less than approximately $166 million of charter hire actually received for reasons just mentioned.
During the quarter, the company recorded profit share income of approximately $100,000 from our 8 Capesize dry bulk vessels, in addition to approximately $4.4 million from fuel saving arrangements on some of our large container vessels. The operating expenses of our fleet is up compared to the previous quarter due to a combination of new vessels entering our fleet and expenses relating to COVID-19 related logistical challenges. In addition, we also saw increase in depreciation due to new additions to our fleet during the quarter. Furthermore, the company recorded a $7.3 million gain related to positive mark-to-market effects related to interest rate swaps. A $2.5 million gain related to positive mark-to-market effects related to equity and debt investments. Overall, and according to U.S. GAAP, the company reported a net profit of approximately $47 million, or $0.37 per share.
Moving on to the balance sheet. At quarter end, SFL had approximately $149 million of cash and cash equivalents. With the sale of three vessels subsequent to quarter end, our cash position increased by an additional approximately $48 million. Furthermore, the company had marketable securities of approximately $24 million based on market prices at the end of the quarter. Following the sale of a small container vessel subsequent to quarter end, the company had four debt-free vessels with a combined charter present value of approximately $73.5 million based on average broker appraisals. The approximately $247 million of remaining CapEx on our four car carriers under construction is expected to be financed by senior debt facilities similar to SFL's other assets with long-term charters.
Based on the Q1 numbers, the company has a book equity ratio of approximately 28%. To summarize, the board has declared a cash dividend of $0.22 per share for the quarter, an increase of approximately 10% compared to the previous quarter. This represents a dividend yield of approximately 8.8% based on the closing share price yesterday. This is the 73rd consecutive quarterly dividend, and since inception of the company in 2004, more than $28 per share or $2.5 billion in aggregate has been returned to shareholders through dividends. Last year, SFL successfully committed more than $1 billion towards accretive investments.
So far in 2022, we added more than $1 billion to the backlog, which now stands at $3.6 billion, providing strong visibility on future cash flow, debt service, and dividend distribution capacity. With a strong balance sheet and approximately $200 million in cash, SFL is very well positioned to execute on new accretive investments. In addition, we have seen a strong recovery in the offshore drilling market since the beginning of the year, and our two harsh environment drilling rigs are well positioned to benefit from the increased activity level in the sector. One rig is employed on a long-term market adjusted charter rate, while the other rig is available for new contracts in 2023. With that, I give the word back to the operator, who will open the line for questions.
Thank you very much. As a reminder, to ask the question, you will need to press star one on your telephone. To withdraw your question, press the pound or hash key. Please stand by while I compile the questions. The first question comes from Greg Lewis from BTIG. Please go ahead, sir.
Yeah. Hey, so thank you and good afternoon, and thank you for taking my questions. You know, I did wanna talk a little bit about you know, the fleet management and how we should be thinking about additional potential asset sales. I believe the smaller, what was that? Like, a feeder or a feeder intermediate container ship. There was a purchase option on that which was exercised. As we look out over the next. Correct me if that's not right. As we look out over the next handful of quarters, is there any way to think about other potential vessels that may have those options attached, just given the strength in the overall market, that probably a lot of those will get exercised if there are any?
Hi, Greg. This is Ole. Yes, we have some, call it older. I would say sort of smaller midsize container ships. One was just chartered for another three years with Maersk at a fairly high rate reflecting the current market. We have one more that will come open and will be available for chartering again in a few months. No options relating to either of those two assets. We also have a couple of older 4,100 TEU vessels and 5,800 TEUs. Those are on and have been on long-term charter to MSC, which they have been effectively structured. You can call it as hire purchase type deals. Therefore, you know, we haven't really got that, call it market exposure.
I think, you know, I would be very surprised if those options were not exercised, but that was also the design at the time. If you look at the assets where we have more capital, you know, at risk you can call it, that's predominantly on the larger ships, container ships from 9,000 and up, and they're all built, you know, from 2013 onwards. Which means that they are all the new generation, you know, electronically controlled engines and designed after the financial crisis, which means that they have a configuration that we believe will be long-term viable in the market. They're on those vessels, we have the first coming up for rechartering in potentially 2024. There are extension options at similar levels.
Based on where we see the market and where we see replacement cost for assets, and even if you adjust for, you know, a new vessel being, you know, marginally more efficient than any sort of v essel on the water, we think that there is a very high probability, even in a more normalized market, that those charters will be exercised. Which means that we will take those charters then effectively out through, you know, well into 2025 and some of them all the way into 2028. I think, you know, generally we have very long charter coverage on our larger, you know, call it significant container ships, you know, and particularly now when we charter the six 14,000 TEU forward starting in 2023, 2024 and fix them all the way through to 2029.
Okay, great. I'm not as familiar with the car carrier sector. I mean, clearly, you know, the contract with Volkswagen is great. You know, as we try to think about that opportunity, right? I mean, like for us, it's, you know, we look at global trade, we can kind of see the strength in the container market. You know, as you look out at, like, you know, the car carrier sector, is, you know, are there opportunities in that market to continue to find, deploy capital or, you know, I'm just not, like I said, I'm not really familiar with that. It seems like a great sector for you guys.
You know, it's a little bit on, you know, there's only a handful of vessels in there. Is that an area where, like, there could be opportunities to continue to deploy capital there? Or is that just kinda like a couple niche one-off projects where you were able to step in and set up some good contracts?
Hi, Trym Sjølie here. Well, the car carrier market is very interesting for us, as you say. It's a market where SFL has an edge, I would say. You can typically I mean, the operators have an industrial view, they have long-term fleet planning. There is a huge space there now for fleet renewal. You have older ships being sort of redundant due to new emissions regulations coming in, where they either have to be replaced or where they have to reduce speed quite drastically in some cases. The fleet today is about 700 vessels in total, and there's quite a big number of those.
I think at least a couple of hundred ships would have to be sort of built in the next 5, 6, 7 years just to replace the current fleet. We see it as quite interesting. The challenge is finding the right vessels, the right new building slots and the right counterparties. We feel we have an edge here.
Okay. No, that's great to hear. Yeah, it's like I said, I'm you know just not as familiar with the car carrier sector. So yeah, any color around that is always super helpful. Then I did wanna touch on the offshore rigs. I mean, clearly the West Linus is you know on long-term contract and you know in a very attractive position. But I was kind of curious you know how maybe we're thinking about the West Hercules. You know, it looks to me that asset prices are firming for that type of rig. Like, how are the comps? Is there opportunities to monetize that?
Is it, you know, really we're just working with our, you know, using our rig relationships to, you know, to try to find that rig a home and get it on contract, and then once it's on contract, maybe then we could revisit maybe potentially monetizing that asset.
Yeah. You know, it's a good question. You know, our focus on that rig is to you know, recontract it. We've hired Odfjell Drilling, who is, I would say, world leader in harsh environment operations. The rig is one of very few rigs that can work in Arctic conditions through the winter.
Mm-hmm.
Which is quite unique. Then we have a market dynamic right now where I think a lot of players and oil companies realize that it's been a fundamental underinvestment in the segment for a long time. We see an energy squeeze, I would say particularly in Europe, you know, who has been so reliant on gas, natural gas from Russia now needing to source that from elsewhere. Of course, the North Sea is very close. There are lots of pipelines, but you need to do a lot of drilling to get that production going. That shows one area. We also see a lot of, call it, focus on deep water.
You know, it could be deep water of Brazil, deep water West Africa, where that rig also would be fully compatible. You wouldn't utilize, call it, the winterized sort of features of the rig, but it would still work perfectly well also in normal, sort of harsh environment type areas. I think it's a rig with a lot of flexibility. I don't think this is the time to necessarily sell that rig, if that's what you alluded to. I mean, our focus is cash flow and getting it contracted and build backlog also on this unit. We are of course encouraged by the strong oil price and, you know, the fact that we finalized our negotiations with Seadrill in February, and then as we all know, oil prices popped 50% after that.
Market has changed quite dramatically over the last few months.
No, absolutely. Good to hear. Okay. Well, hey, thank you very much for the time.
Thank you.
The next question comes from Chris Robertson from Jefferies. Please go ahead, sir.
Hello, gentlemen, and congratulations on a lot of positive developments here.
Thank you.
I just had a question related to the West Linus. On the $500 million in revenue backlog that you talked about, how sensitive is that to the market index rate? Can you kind of talk around that?
Absolutely. I mean, that was basically based on call it market index rate at the time. We currently have a bareboat rate with Seadrill during the transition period, whereas Odfjell is supplying for the DOC, which is applicable on the Norwegian continental shelf. I think if you look at the market rate development going forward, that is positive and it's also supported by recent fix of same type design among others from Maersk Drilling to Aker BP on five-year deals. As you see kind of that market index rate potentially increasing going into 2023 and 2024, that will of course have a positive impact on kind of the backlog number.
Okay, that's fair. On the Hercules going into special survey, how long do you expect that will take? Will that commence during the first quarter of next year? How long do you think it will take before I guess it's secured on a new charter after that?
I'll start with the timing of redelivery from Seadrill. I think that's currently estimated to. I'd say it's end of the fourth quarter. Exact date is still to be confirmed, and we are preparing the necessary preparations with Odfjell Drilling for the SPS. I think base case, I mean, we will kind of assume about 90 days for the SPS. Then we are currently now marketing the rig for various employment opportunities, and an exact commencement date is not confirmed yet. I think what I can comment on is that if you look over the last couple of months, the tender activity has increased significantly, both in kind of the harsh environment area, but it's also potential worldwide operations. Our focus having a, I think, first in class exploration harsh environment rig is to kind of keep the rig in kind of Norway, potentially Canada or U.K. sector.
Then with respect to the current employment, in Canada, it just started drilling, you know, a couple of days ago. Therefore, you know, we will not know until the first well in that program of offshore Canada is drilled. We don't know exactly how long time it will take to finish the rest of the work. Therefore, we have to await that before we can sort of be very specific on timing for when the rig will be redelivered in Norway, and therefore when the SPS process, you know, can start. It should be around year-end. At least that's our expectation. This also has some bearing on sort of, call it contract discussions we have for employments, redelivery and SPS.
Okay. Yeah, thanks for the color on that. I guess my follow-up question to that would be the travel time from Canada to Norway, and then if it's redeployed back into Canada, what the travel time would be.
I think that somewhat depends on the weather. I think that could be 2.5, 3 weeks, give or take, kind of in normal circumstances. The rig will be at least on the base case now kind of finalizing operations in October. At that time, kind of, the weather in the North Atlantic can be a bit choppy. I mean, it all depends a bit, but I think it's approximately estimated 3 weeks kind of transfer back to Norway.
Okay. I appreciate that. Thank you for the time.
Thank you.
The next question comes from Richard Diamond from Castlewood Capital Partners. Please go ahead, sir.
Yes. Ole, I have two questions for you this morning. One is philosophical and one is directional. On the philosophical question, in certain segments such as you know, dry bulk, could we potentially be entering a super cycle given the lack of new building, the restructuring of you know, trade routes such as coal coming from Australia to Rotterdam, et cetera, et cetera? The second question is, you know, looking forward, what areas do you think are the most interesting to allocate capital in the future?
Thank you, and thanks for calling in. Yes, you know, I would say the dry segment looks very interesting. Both the dry segment and also the tanker space. I mean, in both segments you have sort of what you would see, historic low order books at least, you know, in recent history. I think for tankers you have to go back 20-25 years to see similarly sort of low order books. As we all know, you know, the shipping market in general has always been, you know, heavily what you would say, influenced by owners sort of destroying their own markets, i.e., when market seems reasonably good, everybody runs out and orders vessels.
When those vessels are finished at the shipyard, you know, there are suddenly too many vessels available and the market crashes. A good example of this was how the dry bulk market worked, you know, in several years after the ordering boom in 2014, where you had a consistently nice, high, you know growth and demand, but there were just ordered way many more vessels and therefore it took several years to catch up. As you point out, you know, you have the yards basically full. If you want to order this series of vessels, you're now talking late 2025 and into 2026 to get them delivered.
In either of the dry bulk market and also the tanker market, if you really want to sort of order, you know, a series of vessels, you have to wait quite a long time. In the meantime, of course, you know, it could be a very interesting market, given that there is a lack of supply. Also, what could impact the market going forward from 2023 is the new, you know, EEXI/CII regulations that would potentially limit the, or reduce the ton-mile capacity because older vessels, less energy efficient vessels, may have to reduce power to be sort of approved and therefore, and this is based on IMO, the new IMO regulations, and therefore effectively take out transportation capacity from the existing fleet.
This is also an effect you see on the tanker side, not to the same extreme, same degree as on the dry bulk vessels. Maybe as car carriers was a question here earlier, car carriers are probably the segment where you could see more of this effect because you have a relative, you know, low dead weight cargo capacity compared to the size of the vessels because they carry typically cars and rolling equipment. I think generally in several of these segments, there are very interesting market dynamics. Then on top of that, you know, if you are, you know, worried about the potential inflation risk, you know, owning vessels, that's in many ways an inflation hedge because they are real hard assets.
If there is inflation, that will pull up also the value and residual value of these assets. Turning to your second question, where do we see investment opportunities? I would say we do see investment opportunities in all these segments. You know, we have to be. You know, we cannot comment specifically on what we look at. We are looking at many opportunities in several of these sectors. You know, we try to be careful when we invest. You have to have a certain degree of paranoia when you make investments in volatile markets.
What we try to do is you know charter out vessels to end users that are typically industry leaders and larger entities because we think that over time will give us a lower risk in the portfolio and therefore higher probability of a very strong long-term return. I hope that answered the question you had there.
Yes. Thank you very much.
Thank you.
Thank you very much for your questions. I will now hand back the call to the speakers for the closing remarks.
Thank you. I would like to thank everyone for participating in this conference call. Also thank the SFL teams on board the vessels and on shore for their continued efforts in delivering value for our stakeholders. 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 webpage, www.sflcorp.com. Thank you.
This concludes today's conference call. Thank you for participating. You may now disconnect.