My memory is hazy, but I seem to recall that the 3 rigs leased to SDRL started out as 10-year contracts with payments of around $200K per day, at a time when day rates for new ultra-deepwater rigs were $500-600K. I don't know if those contracts are intact but I would assume the day rates were lowered and/or the durations were extended with the SDRL restructuring. I believe the lease payments are covering SFL's cost of ownership plus a small margin... if not, SFL would sell the rigs and take the loss rather than continuing to own something that loses money while hoping for a turnaround in offshore. Meanwhile the pressure stays on SDRL because they suffer the loss if revenue from a rig does not cover the lease payments. That loss may be significant when you consider a case like the West Taurus, an ultra-deepwater rig which has not had a contract for exploration/drilling since it was delivered. (Layover for an idle rig is cheap but the lease payment is still there). When the leases expire on these 3 rigs I assume as a worst case that they will not get contract renewals and they will be sold, possibly for scrap, depending on the market. But by that time the debt will be further reduced and the charges, whatever they may be, will be taken. I would note that SFL just sold the debt-free jackup rig with sizable proceeds and took small losses or small profits on 5 VLCCs. Mgmt has also provided information on how the leases with SDRL were structured to weight payments to the front end, and on what SFL's liability is to current debt on these rigs. So that part doesn't scare me. What has scared me in the past and kept me out of SFL until this November is debt refinancing. With the recent activity in that area, I think that picture has improved so I'm back in. What things will be like in 4-5 years is guesswork so it's live for today. Or, as Emily Dickinson wrote,
"My candle burns at both ends,
It will not last the night.
But, ah my foes, and oh my friends,
It gives a lovely light."