20-F: SFL Corp. Reports 2025 Net Loss Amid Fleet Restructuring

SFL Corporation Ltd. reported a net loss of $26.4 million for 2025, a significant decline from the $130.7 million net profit in 2024, driven by vessel disposals and reduced drilling activity.

Summary

• A net loss of $26.4 million was recorded for the year ended December 31, 2025, a significant decrease from the net profit of $130.7 million in 2024.
• Total operating revenues decreased by 18.9% to $733.0 million in 2025 from $904.4 million in 2024.
• Operating expenses decreased by $41.5 million to $589.2 million in 2025, primarily due to reduced operating costs for the drilling rig Hercules, which was warm stacked.
• A net loss of $7.2 million was recorded on the sale of assets and settlement of charters in 2025, contrasting with a net gain of $5.4 million in 2024.
• A vessel impairment charge of $34.1 million was recognized in 2025 on seven dry bulk carriers, with no such charge in 2024.
• Drilling contract revenues decreased by 59% in 2025 compared to 2024, mainly due to the Hercules rig being warm stacked in Norway.
• The dividend per share decreased to $0.94 in 2025 from $1.07 in 2024.
• Total debt principal outstanding decreased to $2.6 billion in 2025 from $2.9 billion in 2024.
• Cash and cash equivalents increased to $150.8 million in 2025 from $134.6 million in 2024.
• A new drilling contract for the Hercules rig in Canada was secured in March 2026, with an estimated value of approximately $170 million for a minimum term of 400 days, expected to commence in the first quarter of 2027.
• The company has committed $848.1 million for five newbuilding dual-fuel 16,800 TEU container vessels, expected to be delivered in 2028, with minimum 10-year time charters to a leading liner company.

Sentiment

Score: 4

Explanation: StockSavvy.ai views this as a mixed report with significant financial underperformance in 2025, marked by a net loss and revenue decline, offset by strategic fleet investments and a favorable legal ruling. The high leverage and ongoing geopolitical risks temper optimism despite some positive market trends.

Positives

• A new drilling contract for the Hercules rig in Canada was secured, valued at approximately $170 million for a minimum 400-day term, commencing Q1 2027.
• The company is acquiring five LNG dual-fuel 16,800 TEU container vessels under construction, expected delivery in 2028, with minimum 10-year time charters to a leading liner company.
• The $150.0 million senior secured term loan facility for the Linus rig was successfully refinanced in March 2026 with a new $150.0 million three-year senior secured revolving credit facility.
• Total debt principal outstanding decreased to $2.6 billion in 2025 from $2.9 billion in 2024.
• Cash and cash equivalents increased to $150.8 million in 2025 from $134.6 million in 2024.
• Interest expense decreased to $180.5 million in 2025 from $183.0 million in 2024, mainly due to lower overall debt and a decrease in average SOFR rates (4.24% in 2025 vs 5.15% in 2024).
• A favorable ruling in the Oslo District Court in February 2025 ordered Seadrill subsidiaries to pay approximately $48 million in compensation for breach of contract related to the Hercules rig.
• The company was fully acquitted and awarded legal costs in the Capital Spares Case against Seadrill in April 2025.
• Compliance with all financial covenants in financing agreements was maintained as of December 31, 2025.
• The tanker market remained firm during 2025, with average spot earnings for VLCCs at approximately $54,200 per day (up from $33,500 per day in 2024) and Suezmax tankers at approximately $51,900 per day (up from $44,900 per day in 2024).
• The containership charter market ended 2025 on a strong note, experiencing consistent demand and record-high rates despite the Red Sea conflict.
• The offshore drilling market has shown signs of recovery, driven by increased global demand for oil and gas, diminishing supply of older rigs, and rising utilization rates (currently estimated at over 90%, up from 83% in 2020).

Negatives

• A net loss of $26.4 million was reported in 2025, a significant decline from the $130.7 million net profit in 2024.
• Total operating revenues decreased by 18.9% in 2025 compared to 2024.
• Drilling contract revenues decreased by 59% in 2025 compared to 2024, mainly because the drilling rig Hercules was warm stacked in Norway.
• A net loss of $7.2 million was recorded on the sale of assets and settlement of charters in 2025, compared to a net gain of $5.4 million in 2024.
• A vessel impairment charge of $34.1 million was recorded in 2025 on five 57,000 dwt Supramax dry bulk carriers and two 82,000 dwt Kamsarmax dry bulk carriers.
• Profit sharing revenues decreased to $5.6 million in 2025 from $16.7 million in 2024, attributed to less favorable rates for Capesize dry bulk vessels and their disposal, and lower fuel saving arrangements.
• The dividend per share decreased to $0.94 in 2025 from $1.07 in 2024.
• The dry bulk market is expected to soften during 2026, with demand growth projected at 1.9% alongside fleet growth of 3.5%.
• Capesize earnings averaged approximately $20,700 per day in 2025, down 18% from 2024; Kamsarmax earnings averaged $12,800 per day, down 13%; and Supramax earnings averaged $14,000 per day, down 4%.
• Product tanker demand declined by approximately 1.8% in 2025, while the product tanker fleet expanded by 5.5%.
• Seadrill filed appeals to the Oslo District Court regarding the $48 million compensation for Hercules and the Capital Spares Case, with proceedings scheduled for Q2 and Q3 2026.
• A significant portion of the company's outstanding debt and finance lease liabilities are coming due within one year of March 16, 2026, requiring refinancing.
• The company is highly leveraged, with total outstanding indebtedness of $2.6 billion as of December 31, 2025.

Risks

• The seaborne transportation industry is cyclical and volatile, potentially leading to reductions in charter hire rates, vessel values, and results of operations.
• Macroeconomic conditions, including rising inflation, high interest rates, market volatility, economic uncertainty, and supply chain constraints, may increase operating costs and the cost of borrowing.
• Refinancing risk exists for balloon payments and revolving credit facilities due to elevated interest rates persisting longer than expected.
• Difficulties may arise in obtaining financing commitments or refinancing existing and future credit facilities on acceptable terms.
• Global risks such as political instability, terrorist attacks, international hostilities (e.g., Russia-Ukraine war, Israel-Gaza conflict, Israel-Iran conflict), economic sanctions, or other trade restrictions may adversely affect business.
• Potential disruption of shipping routes due to low water levels in the Panama Canal and ongoing vessel attacks in the Red Sea.
• Trade tariffs, trade embargoes, or other economic sanctions (e.g., U.S. sanctions targeting Russian oil, U.S.-China trade tensions) could negatively impact global trade and shipping demand.
• The growth of the 'shadow fleet' may distort market dynamics, increase regulatory and insurance risks, and negatively impact operations, asset values, and commercial prospects.
• The company has provided parent company guarantees for certain subsidiaries' obligations, which could expose it to material liabilities.
• Safety, environmental, and other governmental requirements expose the company to liability, and compliance with current and future regulations could require significant additional expenditures.
• Developments in safety and environmental requirements relating to vessel recycling (e.g., Hong Kong Convention, EU Ship Recycling Regulation) may result in escalated costs and decreased residual values.
• Climate change, greenhouse gas restrictions, and a shift in consumer demand for oil may adversely impact operations and markets, potentially increasing costs for 'greening' vessels.
• Territorial taxonomy regulations (e.g., EU Taxonomy) in operating geographies might jeopardize access to capital or increase its cost.
• Regulations relating to ballast water discharge (IMO BWM Convention, U.S. EPA rules) may require substantial costs for compliance.
• Vessels calling at ports in sanctioned countries or territories, or engaging in transactions violating applicable sanctions laws, could lead to monetary fines, penalties, and adversely affect reputation and share price.
• The highly competitive international seaborne transportation industry may prevent the company from competing for charters profitably.
• Future exploration and drilling results are uncertain and involve substantial risks and costs, including unexpected drilling conditions, equipment failures, and inflation.
• The offshore drilling sector is highly dependent on volatile oil and gas prices, which may lead to reduced demand for drilling rigs and intensified competition.
• New technologies may cause current drilling methods to become obsolete, resulting in a competitive disadvantage and substantial implementation costs.
• Increased inspection procedures, tighter import and export controls, and new security regulations could increase costs and disrupt business.
• Failure to protect the information security management system against security breaches could adversely affect business and results of operations, including on vessels and rigs.
• Increasing scrutiny and changing expectations from investors, lenders, and other market participants regarding ESG policies may impose additional costs or expose the company to additional risks.
• Technological innovation and quality and efficiency requirements from customers could reduce charter hire income and the value of vessels.
• Prolonged or significant downturns in the tanker, dry bulk carrier, container, and offshore drilling charter markets may adversely affect earnings.
• Governmental and environmental laws and regulations may add to the costs of drilling rig charterers or limit their drilling activity, affecting their ability to make payments.
• Inherent operational risks (e.g., marine disasters, mechanical failures, piracy, war, terrorism) may not be adequately covered by insurance, leading to significant losses.
• Maritime claimants could arrest or attach one or more vessels, interrupting cash flows and requiring significant payments.
• Governments could requisition vessels during a period of war or emergency, resulting in a loss of earnings.
• The aging of the fleet may result in increased operating costs or loss of hire in the future.
• Risks are associated with the purchase and operation of second-hand vessels, including unknown condition, costly repairs, and fluctuating market prices.
• Delays in the delivery of any newbuilding or secondhand vessels could harm operating results.
• Changes in the dividend policy could adversely affect holders of common shares.
• Dependence on charterers for operating cash flows and the ability to pay dividends and repay outstanding borrowings.
• The amount of fuel saving payments received under certain charters depends on volatile prevailing fuel costs.
• The charter-free market values of vessels and drilling rigs may decrease, limiting borrowing or triggering breaches in financial covenants.
• Volatility in the international shipping and offshore markets may cause counterparties to fail to meet their obligations.
• Fluctuating demand and supply for maritime transportation services, as well as volatile prices of commodities and consumer/industrial products.
• Certain directors, executive officers, and major shareholders (e.g., Hemen Holding Limited) may have interests that differ from other shareholders, potentially leading to conflicts of interest.
• U.S. tax authorities could treat the company as a 'passive foreign investment company' (PFIC), which could have adverse U.S. federal income tax consequences to U.S. shareholders.
• The company may have to pay tax on U.S. source income, which would reduce earnings.
• Changes in tax laws (e.g., OECD's Pillar Two global minimum tax initiative) and unanticipated tax liabilities could materially and adversely affect financial results.
• As an exempted company incorporated under Bermuda law, operations may be subject to economic substance requirements, potentially leading to financial penalties.
• Volatility of interest rate benchmarks (e.g., SOFR, NIBOR) under financing agreements could affect profitability, earnings, and cash flow.
• A change in foreign exchange rates could materially and adversely affect the financial position.
• Difficulty managing planned growth properly, including undisclosed liabilities, recruiting challenges, and integrating newly acquired operations.
• The company is highly leveraged and subject to restrictions in financing agreements that impose constraints on operating and financing flexibility.
• Potential for litigation that, if not resolved favorably and not sufficiently insured against, could have a material adverse effect.
• The market price of common shares may be unpredictable and volatile, and future sales could cause the market price to decline.
• Worldwide inflationary pressures could negatively impact results of operations and cash flows.
• As a foreign corporation, shareholders may not have the same rights as in a U.S. corporation.
• Difficulty for shareholders to bring suit against the company or enforce a judgment obtained against the company in the United States due to offices and most assets being outside the U.S.

Future Outlook

The company anticipates securing necessary refinancing for credit facilities maturing in 2026 and early 2027, and expects cash flow from charters to be adequate for short to medium-term debt service and working capital. Strategic plans include expanding and diversifying the asset base through newbuilding orders and second-hand vessel acquisitions, while also pursuing medium to long-term fixed-rate charters and shorter charters with profit sharing. The tanker market is expected to experience increased volatility due to geopolitical events, and the dry bulk market is projected to soften in 2026. The containership fleet is expected to grow, but demand risks persist. The offshore drilling market outlook has improved due to tightening supply, but short-term demand reductions may impact day rates. The company is also preparing for new IMO and EU environmental regulations, including the IMO Net-zero Framework and FuelEU Maritime, which will require additional compliance and administration costs.

Management Comments

• "We believe that our cash flow from the charters will be sufficient to fund our anticipated debt service and working capital requirements for the short and medium term."
• "Given our extensive history and successful track record in obtaining financing and refinancing, we believe that we will be able to secure the necessary refinancing for all such facilities before their maturity dates."

Industry Context

StockSavvy.ai notes that the shipping industry remains highly susceptible to geopolitical events, as evidenced by the Red Sea conflict impacting containership routes and the Israel-Iran conflict threatening the Strait of Hormuz. The firm tanker market and strong containership rates in 2025 highlight the sector's ability to capitalize on supply chain disruptions, while the softening dry bulk market and volatile offshore drilling sector underscore the inherent cyclicality and sensitivity to global economic shifts and energy prices. The increasing regulatory focus on ESG, particularly IMO's GHG reduction strategies and EU Taxonomy, indicates a significant long-term shift towards decarbonization, which will necessitate substantial capital expenditure across the industry.

Comparison to Industry Standards

• The company's average fleet age of approximately nine years as of December 31, 2025, is relatively modern compared to the global fleet average, which often includes a significant number of older vessels, particularly in the tanker and dry bulk segments.
• The containership market's consistent demand and record-high rates in 2025, despite the Red Sea conflict, align with broader industry reports of strong container shipping performance, exemplified by major liner companies like Maersk and Hapag-Lloyd (both company customers) benefiting from rerouting and capacity constraints.
• The recovery in the offshore drilling market, with utilization rates over 90% (up from 83% in 2020), is consistent with the broader industry trend of tightening supply due to older rig demolitions and increased capital expenditures by oil and gas majors, similar to peers like Transocean or Valaris.
• The decline in dry bulk earnings (Capesize down 18%, Kamsarmax down 13%, Supramax down 4% in 2025) reflects a general softening in the dry bulk market, which has seen increased fleet growth outpacing demand, a trend observed across the sector affecting companies like Golden Ocean Group (a former related party and customer).
• The company's commitment to five newbuilding dual-fuel 16,800 TEU container vessels, expected in 2028, aligns with the industry's push towards more fuel-efficient and environmentally compliant "eco-vessels" and alternative fuels (like LNG) to meet stricter IMO and EU emissions regulations, a strategy adopted by leading carriers to future-proof their fleets.

Management Changes

Corporate Governance

Legal Proceedings

• SFL Hercules Ltd., a subsidiary, filed a claim against Seadrill in the Oslo District Court on March 5, 2023, alleging breach of contract regarding the redelivery condition of the Hercules drilling rig.
• In February 2025, the Oslo District Court ruled in favor of SFL's rig-owning subsidiary, ordering Seadrill subsidiaries to pay approximately $48 million in compensation, including late payment interest and legal costs.
• Seadrill filed an appeal to the Oslo District Court on March 5, 2025, regarding the Hercules rig compensation.
• In April 2025, the company was fully acquitted and awarded legal costs in the Capital Spares Case, where Seadrill had pursued SFL for approximately $8.0 million.
• Seadrill has also appealed the ruling in the Capital Spares Case, with appeal proceedings scheduled to commence in the second and third quarters of 2026.
• The company and its ship-owning subsidiaries are routinely involved in various litigation matters, including contract disputes, personal injury claims, environmental claims, and other commercial disputes arising from vessel operations.

Related Party Transactions

• Hemen Holding Limited is the largest shareholder, beneficially owning 17.8% of outstanding common shares as of March 11, 2026, through trusts established by Mr. Fredriksen.
• Certain directors also serve on the boards of other Hemen Related Companies, including Frontline plc, Archer Limited, NorAm Drilling Company AS, and Northern Ocean Ltd., potentially creating conflicts of interest.
• Received operating lease income of $10.7 million from Golden Ocean (a company related to Hemen until March 12, 2025) in 2025.
• Golden Ocean exercised purchase options on eight dry bulk carriers in February 2025, with redelivery in July 2025.
• Received profit share revenue of $0.6 million from Golden Ocean in 2025 (down from $6.4 million in 2024).
• Earned rental revenue of $1.7 million from leasing equipment from the Hercules rig to Northern Ocean in 2025.
• Entered into a promissory note with Northern Ocean for $2.1 million in 2025, earning $0.1 million in interest income.
• Paid vessel management fees of $2.1 million to subsidiaries of Frontline in 2025.
• Paid vessel management fees of $4.0 million to a subsidiary of Golden Ocean in 2025 (until disposal).
• Paid administration and support services fees to Seatankers ($0.8 million in 2025) and Front Ocean ($0.6 million in 2025).
• Leases office space in Oslo from Front Ocean Management AS and in London from Frontline Corporate Services Ltd.
• Provides services to Seatankers, Paratus, and NorAm, receiving a fee at cost plus margin.
• Holds a $45.0 million loan receivable outstanding with River Box (49.9% owned by SFL, 50.1% by a Hemen subsidiary), earning $4.6 million in interest income in 2025.
• Acquired three LR2 product tankers from entities related to Hemen for $231.0 million in 2024.
• Held 1.3 million shares in NorAm Drilling (a related party) with a fair value of $4.1 million as of December 31, 2025, and received $0.5 million in dividend income from NorAm Drilling in 2025.

Stakeholder Impact

• Shareholders: Experienced a decrease in dividend per share in 2025 and a net loss, which may negatively impact equity value and future returns. The market price of common shares may remain volatile. The significant ownership by Hemen Holding Limited could lead to potential conflicts of interest.
• Employees: Compensation includes cash and stock options, with ongoing cybersecurity training provided to enhance skills and mitigate risks.
• Customers: Long-term charters provide revenue stability, but market volatility and geopolitical events can affect their ability to meet contractual obligations. New environmental regulations may increase operating costs for charterers, potentially impacting their business.
• Suppliers: The company regularly reviews suppliers to manage the effects of inflation on operating costs.
• Creditors: The company's highly leveraged position and restrictive covenants in financing agreements pose risks, requiring successful refinancing efforts to avoid defaults and maintain financial flexibility.

Next Steps

• Refinance credit facilities maturing in 2026 and early 2027 to ensure adequate liquidity.
• Continue to expand and diversify the asset base through newbuilding orders and second-hand vessel acquisitions.
• Identify and consummate accretive acquisitions or joint ventures in the maritime industry.
• Obtain required financing for future growth plans and capital expenditures.
• Integrate newly acquired vessels and drilling rigs with existing operations to optimize efficiency.
• Enhance customer relationships and add new customers in the international shipping, maritime, and offshore markets.
• Commence the Hercules drilling contract in Canada in the first quarter of 2027.
• Oversee the delivery of five newbuilding dual-fuel 16,800 TEU container vessels in 2028.
• Complete the installation of capital upgrades on three 9,500 TEU container vessels, one chemical tanker, and one drilling rig in 2026.
• Address the appeal proceedings filed by Seadrill in the Oslo District Court, scheduled for Q2 and Q3 2026.
• File a prospectus supplement under a new shelf registration statement on Form F-3ASR to renew and continue the Dividend Reinvestment Plan (DRIP) and At-The-Market (ATM) Program.
• Monitor and comply with evolving IMO and EU environmental regulations, including the IMO Net-zero Framework and FuelEU Maritime, which will require ongoing adjustments and investments.

Key Dates

Recommendation

While the company reported a net loss and reduced dividends in 2025, driven by asset disposals and temporary rig stacking, it has secured significant long-term charters for newbuild container vessels and a new contract for the Hercules rig, indicating future revenue stability. The reduction in overall debt and proactive refinancing efforts are positive. However, ongoing geopolitical risks, market volatility in certain segments (dry bulk, product tankers), and substantial capital commitments for newbuildings warrant a cautious approach. A "hold" recommendation reflects the balance between current headwinds and long-term strategic positioning.

Keywords

Shipping, Offshore, Tankers, Container Vessels, Dry Bulk Carriers, Car Carriers, Drilling Rigs, Maritime, Logistics, Vessel Operations, Chartering, Debt, Capital Expenditures, ESG, Geopolitical Risk, Sanctions, Climate Change, Cybersecurity, Share Repurchase, Dividends, SEC Filing, 20-F, Financial Results