SFL Buys LR2 Tanker Pair from Frontline

SFL Corporation Ltd. on Monday announced it has agreed to acquire four Aframax LR2 product tankers from tanker shipping company Frontline for an aggregate purchase price of $160 million in combination with long term time charters to a subsidiary of commodity trading and logistics company Trafigura.

The vessels are built in 2014 and 2015 and have modern eco-design features including exhaust gas cleaning systems, SFL said. The vessels are expected to be delivered to their new owner between December 2021 and February 2022.

Hemen Holdings Ltd., who owns approximately 20% of the SFL’s issued and outstanding shares, is also a major shareholder in the seller Frontline.

The charter period of the vessels will be for minimum five years with extension options thereafter, adding approximately $160 million to SFL’s fixed-rate backlog. The charterer will also have the option to develop a sale of the vessels during the charter period, subject to a profit share mechanism with SFL.

Ole B. Hjertaker, CEO of SFL Management AS, said, “We are very pleased to further expand our presence in the tanker market and the transaction demonstrates our ability to develop opportunities and achieve sustained growth through repeat transactions with our customers. We have this year added more than $1 billion to our charter backlog and will continue to explore new opportunities going forward.”

Lars H. Barstad, CEO of Frontline Management AS, said, “We are very pleased with this transaction. LR2 asset prices have appreciated firmly this year, and although we believe the tanker market in general looks promising going forward, we found it compelling to capture value at this point in the curve. Frontline has increased its position significantly in the VLCC segment during 2021 and this divestment from our LR2 fleet will in part finance our growth ambitions for the larger crude carriers.”

Frontline said that after repayment of existing debt on the vessels, the transaction is expected to generate net cash proceeds of approximately $67 million, and the company expects to record a total gain divided between the fourth quarter of 2021 and the first quarter of 2022 of approximately $11.2 million.