SFL Corporation Ltd. (SFL): Business Model Canvas [11-2024 Updated]

In the competitive maritime industry, SFL Corporation Ltd. (SFL) stands out with its robust business model that leverages strategic partnerships and diverse operational capabilities. This post delves into the components of SFL's Business Model Canvas, highlighting key aspects such as value propositions, customer relationships, and revenue streams. Discover how SFL navigates the complexities of shipping and drilling services while ensuring sustainability and profitability.

SFL Corporation Ltd. (SFL) - Business Model: Key Partnerships

Collaborations with Shipping Companies like MSC and Golden Ocean

SFL Corporation Ltd. has established significant partnerships with leading shipping companies, including MSC (Mediterranean Shipping Company) and Golden Ocean Group. These collaborations are pivotal for enhancing SFL's operational capacity and market reach.

As of September 30, 2024, SFL had seven container vessels on long-term bareboat charters to MSC, which are accounted for as sales-type leases. These vessels are under charter until the second quarter of 2025, with a fixed price purchase obligation at the end of the charter period.

SFL recorded $41.1 million in operating lease income from Golden Ocean during the nine months ended September 30, 2024. Additionally, SFL has a profit-sharing arrangement related to eight Capesize dry bulk vessels chartered to a subsidiary of Golden Ocean, resulting in $5.5 million of profit share revenue for the same period.

Long-term Contracts with Oil and Gas Companies for Drilling Operations

SFL maintains long-term contracts with prominent oil and gas companies for drilling operations, which are crucial for generating consistent revenue streams. The drilling rig Linus has been operational with ConocoPhillips since September 2022, while the Hercules rig was under a contract with Galp Energia in Namibia until May 2024 and subsequently commenced operations with Equinor in Canada.

During the nine months ended September 30, 2024, SFL reported drilling contract revenues of $181.8 million, marking a 78% increase compared to the same period in 2023. This growth is attributed to the enhanced operational uptime following the completion of the scheduled Special Periodic Survey (SPS) for Hercules.

Partnerships with Shipyards for Vessel Construction and Upgrades

SFL collaborates with various shipyards for the construction and upgrading of its fleet. As of September 30, 2024, SFL had made commitments approximating $866.3 million related to shipbuilding contracts for five new dual-fuel 16,800 TEU container vessels, with expected delivery in 2028.

In the nine months ended September 30, 2024, SFL incurred costs of $170.2 million for the delivery of two newbuild car carriers. Furthermore, the company has invested $156.5 million in two newbuild LR2 product tankers and $113.6 million in two chemical tankers.

Partnership Type	Partner	Details	Financial Impact (9M 2024)
Shipping Collaboration	MSC	7 container vessels on long-term charters	Operating lease income: $41.1 million
Shipping Collaboration	Golden Ocean	8 Capesize vessels with profit-sharing	Profit share revenue: $5.5 million
Drilling Contracts	ConocoPhillips	Operational contract for drilling rig Linus	Drilling revenues: Part of $181.8 million
Drilling Contracts	Equinor	Operational contract for drilling rig Hercules	Drilling revenues: Part of $181.8 million
Shipbuilding	Various Shipyards	Newbuildings and upgrades	Commitments: $866.3 million

SFL Corporation Ltd. (SFL) - Business Model: Key Activities

Operating a diverse fleet of container ships, tankers, and drilling rigs

SFL Corporation Ltd. operates a varied fleet that includes 23 container vessels, seven car carriers, 15 dry bulk carriers, seven Suezmax tankers, eight product tankers, and one chemical tanker. This diverse fleet allows the company to cater to different segments of the maritime industry, ensuring a steady stream of revenue.

As of September 30, 2024, the total cost of vessels and equipment was approximately $4.17 billion, with net vessels and equipment valued at $3.22 billion after accounting for accumulated depreciation of $946.4 million.

Engaging in sales-type leases and leaseback arrangements

SFL engages in sales-type leases and leaseback arrangements, particularly with MSC Mediterranean Shipping Company S.A. The company had seven container vessels accounted for as sales-type leases as of September 30, 2024. These vessels are on long-term bareboat charters until the second quarter of 2025, with fixed price purchase obligations at the expiry of each charter.

During the nine months ended September 30, 2024, the company recorded interest income of $1.93 million from sales-type leases, a decrease from the $5.28 million reported in the same period in 2023, primarily due to the disposal of vessels. The total lease debt financing outstanding as of September 30, 2024, amounted to approximately $716.1 million.

Managing and executing maintenance and upgrades on vessels

Maintenance and upgrades are crucial for SFL's fleet operations. The company recorded $43.3 million for Special Periodic Surveys (SPS) and capital upgrades performed on its drilling rig, Linus, during the nine months ended September 30, 2024. SFL incurred significant expenses related to maintenance, with total operating expenses for the same period reaching $433.4 million, up from $394.2 million in 2023.

Furthermore, the company paid $96.7 million in installments and capitalized interest for newbuilding contracts for the construction of five new dual-fuel container vessels, expected to be delivered in 2028.

Key Metrics	As of September 30, 2024	As of December 31, 2023
Total Cost of Vessels and Equipment	$4.17 billion	$3.45 billion
Net Vessels and Equipment	$3.22 billion	$2.65 billion
Interest Income from Sales-Type Leases	$1.93 million	$5.28 million
Total Lease Debt Financing	$716.1 million	$573.5 million
Total Operating Expenses	$433.4 million	$394.2 million
Maintenance and Upgrades Expenses (SPS)	$43.3 million	N/A
Newbuilding Contracts Paid	$96.7 million	N/A

SFL Corporation Ltd. (SFL) - Business Model: Key Resources

Fleet of Vessels

SFL Corporation Ltd. operates a diverse fleet that includes:

• 23 container vessels
• 7 car carriers
• Multiple drilling rigs, specifically two drilling rigs: Linus and Hercules

The total cost of vessels and equipment as of September 30, 2024, is approximately $4.17 billion, with net vessels and equipment valued at $3.22 billion after depreciation.

Recent acquisitions include:

• Two dual-fuel 7,000 car equivalent unit (CEU) newbuild car carriers at a total cost of $170.2 million
• Two newbuild LR2 product tankers for $156.5 million
• Two chemical tankers for $113.6 million.

Financial Resources

SFL has secured substantial financial resources through various means:

• In April 2024, the company issued $150 million in senior unsecured sustainability-linked bonds due 2028, with an interest rate of 8.25% per annum.
• As of September 30, 2024, total debt principal amounts to approximately $2.62 billion.
• The company generated $231.7 million in net cash from financing activities during the nine months ended September 30, 2024.

Debt financing includes:

Debt Type	Amount (in millions)	Due Date
7.25% senior unsecured sustainability-linked bonds	150	2026
8.25% senior unsecured sustainability-linked bonds	145.2	2028
NOK750 million senior unsecured floating rate bonds	71	2029
Lease debt financing	716.1	Various

Skilled Workforce

SFL Corporation Ltd. employs a skilled workforce specializing in maritime operations and management, which is essential for maintaining operational efficiency and safety across its fleet. The company has made significant investments in its workforce development, ensuring that its team is well-equipped to handle the complexities of maritime logistics and drilling operations.

Human resources are crucial for the operation of:

• Time charter operations for 23 container vessels, 7 car carriers, and various tankers
• Drilling operations for the Hercules and Linus rigs.

SFL Corporation Ltd. (SFL) - Business Model: Value Propositions

Reliable shipping solutions with a focus on sustainability

SFL Corporation Ltd. emphasizes sustainability in its operations, which is evident from the issuance of senior unsecured sustainability-linked bonds totaling $150.0 million in April 2024. These bonds bear a fixed interest rate of 8.25% per annum and are aimed at reducing carbon emissions by improving the fleet's Annual Efficiency Rating by a minimum of 2% by 2026.

As of September 30, 2024, the company reported total assets of $4.1 billion, with net vessels and equipment valued at $3.2 billion. The focus on dual-fuel vessels and newbuilding contracts reflects the commitment to environmentally friendly shipping solutions. For instance, during the nine months ended September 30, 2024, SFL took delivery of two dual-fuel car carriers at a total cost of $170.2 million.

Competitive charter rates and profit-sharing arrangements

SFL has strategically positioned itself in the market with competitive charter rates. In the nine months ended September 30, 2024, the company generated time charter revenues of $457.8 million, a significant increase of 18% compared to the same period the previous year. This increase is attributed to the delivery of new vessels and higher rates on existing charters. Furthermore, SFL's profit-sharing income rose to $14.1 million during the same period.

The profit-sharing arrangements provide an additional revenue stream, enhancing the overall profitability of the company. This model allows SFL to share in the earnings generated by the vessels beyond the fixed charter rates, thus aligning the interests of SFL with those of its clients.

Long-term commitments to clients ensuring stability and trust

SFL Corporation maintains long-term commitments with its clients, which fosters stability and trust. The company engaged in long-term charters for new vessels, such as the dual-fuel car carriers and LR2 product tankers delivered in 2024, with contracts extending for up to 10 years. This level of commitment not only secures steady revenue but also enhances customer loyalty and satisfaction.

As of September 30, 2024, SFL's total operating revenues reached $675.3 million, reflecting a 24.4% increase compared to the prior year. This growth is bolstered by the long-term contracts that ensure consistent cash flows and operational predictability. Moreover, the company has a solid cash position, reporting $163.8 million in cash and cash equivalents.

Key Financial Metrics	As of September 30, 2024	As of September 30, 2023
Total Assets	$4.1 billion	$3.7 billion
Net Vessels and Equipment	$3.2 billion	$2.7 billion
Time Charter Revenues	$457.8 million	$388.5 million
Profit Sharing Income	$14.1 million	$9.8 million
Total Operating Revenues	$675.3 million	$542.7 million
Cash and Cash Equivalents	$163.8 million	$N/A

SFL Corporation Ltd. (SFL) - Business Model: Customer Relationships

Strong ties with charterers through long-term contracts

SFL Corporation Ltd. has established robust relationships with its charterers through long-term contracts, which are crucial for ensuring stable revenue streams. As of September 30, 2024, the company reported time charter revenues of $457.8 million, an increase from $388.5 million in the same period in 2023, reflecting an 18% growth in time charter revenues largely due to the delivery of new vessels and higher charter rates .

Regular communication and updates on fleet performance

The company emphasizes regular communication with its charterers, providing updates on fleet performance and operational efficiency. This practice not only fosters trust but also enhances customer satisfaction. SFL reported a total operating revenue of $675.3 million for the nine months ended September 30, 2024, compared to $542.7 million during the same period in 2023, indicating a 24.4% increase .

Customer-centric approach in service delivery and flexibility

SFL adopts a customer-centric approach, tailoring service delivery to meet the specific needs of its clients. This includes offering flexible charter terms and accommodating changes in customer requirements. For example, SFL has secured long-term charters with Maersk for several vessels, including contracts for four 8,700 TEU container vessels for a duration of five years .

Metrics	2024 (9 months)	2023 (9 months)	Growth (%)
Total Operating Revenues	$675.3 million	$542.7 million	24.4%
Time Charter Revenues	$457.8 million	$388.5 million	18%
Drilling Contract Revenues	$181.8 million	$102.0 million	78%
Profit Share Revenue	$14.1 million	$9.8 million	43.9%

This focus on customer relationships is reflected in SFL's financial performance, positioning the company favorably in a competitive market. The company's ability to maintain strong ties with its charterers and adapt to their needs has been instrumental in driving revenue growth and enhancing customer loyalty .

SFL Corporation Ltd. (SFL) - Business Model: Channels

Direct sales through contractual agreements with clients

SFL Corporation Ltd. primarily engages in direct sales through contractual agreements, focusing on long-term charters and sales-type leases. For the nine months ended September 30, 2024, SFL reported time charter revenues of $457.8 million, which represented an increase from $388.5 million in the same period of 2023. This growth is attributed to the delivery of new vessels and higher charter rates achieved during the period.

Online platforms for investor relations and financial reporting

The company utilizes its corporate website and online investor relations platforms to communicate financial performance and updates effectively. As of September 30, 2024, SFL had total cash and cash equivalents of $163.8 million and a net income of $110.5 million, showcasing its financial health and operational success. The company also reported total operating revenues of $675.3 million for the nine months ended September 30, 2024, a 24.4% increase compared to $542.7 million in the corresponding period of 2023.

Financial Metrics	September 30, 2024	September 30, 2023
Total Operating Revenues	$675.3 million	$542.7 million
Net Income	$110.5 million	$52.6 million
Time Charter Revenues	$457.8 million	$388.5 million
Cash and Cash Equivalents	$163.8 million	N/A

Industry conferences and trade shows for networking and visibility

SFL actively participates in industry conferences and trade shows to enhance its visibility and network within the maritime and offshore sectors. This engagement allows SFL to showcase its capabilities, establish connections with potential clients, and explore new business opportunities. The company's strategic positioning in these events complements its direct sales efforts and enhances its market presence.

SFL Corporation Ltd. (SFL) - Business Model: Customer Segments

Oil and gas companies needing transportation and drilling services

SFL Corporation Ltd. serves major oil and gas companies by providing essential transportation and drilling services. The company operates two drilling rigs, Linus and Hercules, which are contracted to companies like ConocoPhillips and Equinor. Revenues from drilling contracts amounted to $181.8 million for the nine months ended September 30, 2024, marking a significant increase of 78% compared to the previous year.

Shipping companies requiring container and bulk transport solutions

SFL also caters to various shipping companies that require container and bulk transport solutions. The company’s fleet includes 23 container vessels and multiple bulk carriers. Time charter revenues for the nine months ended September 30, 2024, were reported at $457.8 million, an increase of 18% from $388.5 million in the same period in 2023. The growth is attributed to the delivery of new vessels and higher charter rates.

Customer Segment	Service Offered	Revenue (9M 2024)	Revenue Change (%)
Oil and Gas Companies	Drilling and transportation services	$181.8 million	+78%
Shipping Companies	Container and bulk transport solutions	$457.8 million	+18%

Investors seeking reliable returns from maritime operations

SFL Corporation is also focused on attracting investors who seek stable returns from its maritime operations. The company issued $150 million in senior unsecured sustainability-linked bonds in April 2024, with a coupon rate of 8.25% per annum, aimed at refinancing existing debts and supporting corporate objectives. The total operating revenues for the nine months ended September 30, 2024, reached $675.3 million, reflecting a 24.4% increase year-over-year.

Investor Segment	Investment Type	Amount Issued	Coupon Rate (%)
Institutional Investors	Sustainability-linked bonds	$150 million	8.25%

SFL Corporation Ltd. (SFL) - Business Model: Cost Structure

Significant operational costs related to vessel maintenance and crew

As of September 30, 2024, SFL Corporation Ltd. reported total operating expenses of $433.4 million for the nine months ended September 30, 2024, compared to $394.2 million for the same period in 2023. A substantial portion of these expenses includes:

• Vessel and rig operating expenses: $240.7 million (2024) vs. $217.4 million (2023)
• Depreciation: $177.0 million (2024) vs. $157.7 million (2023)
• Administrative expenses: $15.8 million (2024) vs. $11.8 million (2023)

The increase in operating expenses is attributed to the acquisition of new vessels and the operational costs associated with the drilling rig Hercules, which has been under short-term contracts following its scheduled Special Periodic Survey (SPS).

Financing costs from bond issuances and loans

In April 2024, SFL issued $150.0 million in senior unsecured sustainability-linked bonds due 2028, carrying an interest rate of 8.25% per annum. As of September 30, 2024, the total debt principal amounted to $2.6 billion, with the following breakdown:

Debt Type	Outstanding Balance (in millions)
U.S. dollar floating rate debt	$1,243.6
NOK750 million senior unsecured floating rate bonds due 2029	$71.0
7.25% senior unsecured sustainability-linked bonds due 2026	$150.0
8.875% senior unsecured sustainability-linked bonds due 2027	$150.0
8.25% senior unsecured sustainability-linked bonds due 2028	$145.2

The increase in interest expense for the nine months ended September 30, 2024, was $134.6 million, compared to $124.7 million for the same period in 2023.

Variable costs linked to fuel prices and regulatory compliance

During the nine months ended September 30, 2024, SFL recorded $8.6 million from fuel-saving arrangements related to seven container vessels. The company faces variable costs influenced by fuel prices, which have fluctuated significantly due to global market conditions. Additionally, SFL incurs costs for regulatory compliance, particularly in relation to environmental standards, which are becoming increasingly stringent across the shipping industry.

As of September 30, 2024, SFL's total operating revenues were $675.3 million, reflecting an increase of 24.4% compared to $542.7 million in the same period in 2023.

SFL Corporation Ltd. (SFL) - Business Model: Revenue Streams

Time Charter Revenues from Fleet Operations

For the nine months ended September 30, 2024, time charter revenues amounted to $457,784,000, an increase of 18% compared to $388,492,000 for the same period in 2023. This revenue was generated from the operation of:

• 23 container vessels
• 7 car carriers
• 15 dry bulk carriers
• 7 Suezmax tankers
• 8 product tankers
• 1 chemical tanker

The increase in time charter revenues was primarily due to the delivery of four newbuilding car carriers and higher rates earned on existing vessels.

Drilling Contract Revenues from Oil and Gas Projects

During the nine months ended September 30, 2024, drilling contract revenues reached $181,775,000, reflecting a substantial increase of 78% from $102,007,000 in the prior year. This growth was attributed to:

• The operational engagement of the drilling rig Linus with ConocoPhillips.
• The rig Hercules operating under a drilling contract with Galp Energia and then with Equinor in Canada.

The increased revenues were linked to the rig's operational efficiency and the successful completion of scheduled maintenance.

Interest Income from Sales-Type Leases and Profit-Sharing Arrangements

For the nine months ended September 30, 2024, interest income from sales-type leases and leaseback assets amounted to $1,931,000, a decrease from $5,276,000 in the same period of 2023. Additionally, profit-sharing income rose to $14,091,000, compared to $9,773,000 previously. The decline in interest income was primarily due to the disposal of certain vessels previously accounted for under sales-type leases.

Revenue Stream	2024 Revenue (in $)	2023 Revenue (in $)	Change (%)
Time Charter Revenues	457,784,000	388,492,000	+18%
Drilling Contract Revenues	181,775,000	102,007,000	+78%
Interest Income (Sales-Type Leases)	1,931,000	5,276,000	-63%
Profit Sharing Income	14,091,000	9,773,000	+44%

Updated on 16 Nov 2024

Resources:

1. SFL Corporation Ltd. (SFL) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of SFL Corporation Ltd. (SFL)' financial performance, including balance sheets, income statements, and cash flow statements.
2. SEC Filings – View SFL Corporation Ltd. (SFL)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.