Sep 23 2026 09:36 PM EST

SFL Corp Q2 Earnings Rise on Spot Tanker Rates and Expanded Container Backlog

SFL Corporation Ltd. (NYSE: SFL) reported a 30% jump in adjusted EBITDA for the quarter ended June 30, 2026, as spot‑time‑charter‑equivalent (TCE) rates on its Suezmax tankers surged and new long‑term container charters were signed. The earnings beat reinforced the market’s view that the company’s diversified charter‑backlog strategy is delivering cash‑flow visibility despite a still‑elevated debt load.

Quarter Results Highlight Key Drivers

Operating revenues rose to $201 million, up from $174.5 million in Q1 2026. Adjusted EBITDA increased to $130 million, roughly 20% higher than the prior quarter’s $108 million. Net income under U.S. GAAP reached $34 million, or $0.25 per share, compared with $26 million ($0.20 per share) in Q1.

The earnings uplift was driven primarily by two Suezmax crude‑oil tankers that earned TCE rates of about $133,000 per day in Q2 versus $54,000 per day in Q1, reflecting the market tailwinds from Red Sea disruptions and the Strait of Hormuz blockade.

Backlog Extensions Add Earnings Visibility

On September 11, 2026 the company announced a seven‑year charter extension with Hapag‑Lloyd for six 15,400 TEU vessels, adding roughly $750 million to its fixed‑rate backlog and extending coverage to 2035‑2036. A simultaneous extension with Maersk for three 9,500 TEU vessels contributed about $225 million to the backlog through 2031.

Including the new Hapag‑Lloyd deal, total charter backlog now stands at approximately $4.6 billion, two‑thirds of which is with investment‑grade counterparties. Management has highlighted the backlog as a core source of cash‑flow certainty that supports leverage management and funds the remaining $1.2 billion capex program for newbuildings.

Balance Sheet, Liquidity and Capital Allocation

Cash and undrawn facilities total roughly $270 million, while total debt is about $2.5 billion, giving a debt‑to‑equity ratio of 2.04. The interest‑coverage ratio sits at approximately 1.7×, and the current ratio is 0.42.

During the quarter the company raised $100 million through ATM/DRIP equity programs and tapped $75 million of senior unsecured 2030 bonds at a 6.8% yield, using the proceeds to redeem a $150 million bond that matured in May 2026. The dividend for the quarter was set at $0.22 per share, the 90th consecutive payout, translating to an annualized yield near 7% at current share prices.

Macro Context and Sector Dynamics

The tanker market has benefited from ongoing Red Sea disruptions and a blockade of the Strait of Hormuz that began in February 2026, tightening VLCC and Suezmax spot markets. Spot TCE rates for VLCCs have reached the $200,000‑per‑day level, underscoring the upside potential for SFL’s remaining tankers, which have an average remaining charter term of 3.5 years.

In the container segment, steady demand for long‑term charters supports the newly signed extensions, while broader industry trends toward dual‑fuel LNG vessels align with SFL’s four LNG‑dual‑fuel car‑carrier newbuilds slated for delivery in 2029.

Risks and Uncertainties

The company’s leverage remains high, with a debt‑to‑equity ratio above 2.0, making it sensitive to any tightening of credit markets or upward pressure on interest rates. A slowdown in tanker spot rates, or a resolution of the Red Sea and Hormuz tensions, could erode the premium TCE rates that powered Q2 earnings.

The energy segment contributes modest cash flow, as the Hercules drilling rig remains warm‑stacked at roughly 50% utilization, and the next contract is not expected until H1 2027. Delays in the deployment of the dual‑fuel car‑carrier newbuilds could also affect the projected backlog expansion.

Finally, the company’s dividend coverage depends on continued charter cash flow. A prolonged market downturn could pressure the ability to sustain the 7% yield, prompting a reassessment of the dividend policy.