SFL Sells Seven Tankers to Trafigura for $275m in Cash

John Fredriksen-linked SFL Corporation has agreed to sell seven tankers to commodities giant Trafigura, generating approximately $275m in net cash proceeds, according to TradeWinds. The deal includes the sale of four 2014- and 2015-built LR2 product tankers and three 2019-built Suezmax tankers, all of which are currently on time charter to Trafigura. SFL's fleet list identifies the LR2s as the 115,000 dwt SFL Puma, SFL Panther, SFL Tiger, and SFL Lion, while the suezmax trio comprises the 150,000 dwt Marlin Sicily, Marlin Santorini, and Marlin Shikoku.

Transaction Details

The transaction, which is expected to generate a book gain of roughly $175m, is set to be completed over the course of the fourth quarter of 2026 and the first quarter of 2027. SFL acquired the LR2s from Frontline-linked companies for a combined $160m in late 2021, attaching minimum five-year charters to Trafigura. The agreements gave Trafigura the ability to initiate a sale during the charter period, subject to a profit-sharing mechanism with SFL. SFL also acquired the three scrubber-fitted suezmaxes separately in 2021, adding another $140m in fixed-rate backlog, with the same type of sale and profit-sharing arrangement. Trafigura declined to comment on the specific sale prices.

Financial Implications

SFL's CEO, Ole Hjertaker, stated that the company had enjoyed strong cash flows from the vessels over the last five years and had retained a meaningful share of the upside in asset values. After accounting for profit-sharing arrangements built into the original charters and repayment of associated debt, SFL expects to receive approximately $275m in net cash proceeds from the deal. The transaction represents a significant financial gain for SFL, reflecting the appreciation in the value of the vessels over their holding period.

Market Trends

The deal underscores the current trend in the shipping industry where trading houses and state energy companies are acquiring vessels to ship crude and products amid disruptions to shipping through the Strait of Hormuz and growing risks in the Red Sea, according to gCaptain. Strong demand for prompt availability of oil carriers has pushed the resale values of tankers higher. A 10-year-old Aframax, the same size as an LR2 tanker, was assessed at $72.5m last week, while a Suezmax of the same age could sell for $110m, based on Clarkson data.

Impact on Future Investments

SFL plans to reinvest the proceeds from the sale into new accretive investments that will build its long-term distribution capacity. This strategy aligns with SFL's focus on generating returns through its operating platform and maintaining a flexible approach to its fleet composition. By selling the vessels, SFL is able to unlock significant value from its assets while positioning itself for future growth opportunities.

What This Means for Operators

The sale of these seven tankers to Trafigura highlights the current market conditions where asset values are appreciating and charter rates are rising. For operators, this transaction serves as a benchmark for the profitability of holding onto charter agreements that include profit-sharing mechanisms. It also indicates the potential for significant gains from strategic asset management and timely disposition of assets to capture value in a buoyant market.

The deal also signals a trend towards trading houses and energy companies investing directly in shipping assets to secure supply chains, which could impact the availability of vessels for charter and potentially drive up rates. Operators should be prepared to adapt their strategies to capitalize on these changing dynamics in the market.

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