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spk01: Hello, and welcome to the Anetti, Inc. Second Quarter 2023 Conference Call. I would now like to turn the call over to James Doyle, Head of Corporate Development and IR. Please go ahead, sir.
spk10: Thank you for joining us today. Welcome to the Anetti, Inc. Second Quarter 2023 Earnings Conference Call. On the call with me are Emanuele Loro, Chief Executive Officer, Robert Bugbee, President, Cameron Mackey, Chief Operating Officer, Hugh Baker, Chief Financial Officer, Sebastian Brooke, CEO of CJAX. Earlier today, we issued our second quarter earnings press release, which is available on our website, annettiinc.com. The information discussed on this call is based on information as of today, August 8th, 2023, and may contain forward-looking statements that involve risk and uncertainty. Actual results and events may differ materially from those set forth in such statements. For discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the earnings press release issued today, as well as Annette Inc.' 's SEC filings, which are available at annetteinc.com and sec.gov. Call participants are advised that the audio of this conference call is being broadcast live on the Internet, and it is also being recorded for playback purposes. An archive of the webcast will be made available on the investor relations page of our website for approximately 14 days. While we will not be going through slides, there is an earnings presentation on our website under the investor relations page and reports and presentation. After opening remarks, we'll go to Q&A. Now, I'd like to introduce our Chief Executive Officer, Emanuele Loro.
spk08: Thank you, James, and welcome and thank you everybody for joining us today. In the second quarter, the company generated close to $39 million of revenue and an adjusted net income of $8 million. This represents a strong improvement from the first quarter. During this quarter, all five vessels were on employment contracts. Today, we announced the sale of the ENG2500 for a price of $70 million. These are assets which we had previously identified as non-core and discuss the fact that we were marketing them for sale. The sale itself reinforces our commitment to focusing on wind turbine and foundation installation. In addition, it creates liquidity and we expect cash proceeds of $57 million after debt repayments. In June, more importantly, we've entered into a business combination agreement with Cabela as we've previously announced. While the combination remains subject to regulatory approval, the transaction remains on schedule and we expect it to close during the fourth quarter of this year. We believe the combination is right for all stakeholders, for our shareholders, for our customers, and as we previously discussed, also for our employees. As a combined entity, the scale and our respective capabilities will create significant value at a time when offshore wind needs reliable partners and reliable solutions, which we think we will be able to offer. The track record of CGICS has been built on tireless efforts of our shore and seagoing professionals, and we're delighted that Cadillac shares the same values. The combination is a testament to our shared vision for the future of offshore wind and our unwavering commitment to creating value. Senior management of Eneti will remain as one of the largest shareholders in the combined entity, and I will be nominated to serve as vice chairman. We're confident that this combined entity will continue to drive positive outcomes for our shareholders, customers, and employees. and we're excited about the future together. Thanks very much for your continued support and look forward to updating you on further progress in the upcoming quarters. I'd like now to turn the call to James, please.
spk09: Thank you, Emanuele. We will now go to Q&A.
spk01: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw from the question queue, please press star, then 2. The first question is from Sharif El-Maghrabi of BTIG. Please go ahead.
spk02: Sharif El- Hey, good morning. Thanks for taking my questions. I think maybe just starting pretty broadly, pretty much every other WTIV operator has a smaller fleet than Nettie or Cattler, and many of them are not WIT-focused anyway. So could this combination spark further consolidation in the industry? And is that something that you guys are thinking about at this time?
spk08: I'll take it to Manuela. Thanks for the question. I'll take the second question first. At this time, I don't think that anybody in Cavalier or Enetti is thinking about further consolidation. We're focused on the process which we are facing and looking at closing this transaction. The day after the transaction is closed, all doors will be open and we'll see which other opportunity this market may put in front of Caddler. Having said that, I think that it's premature for us to think about it at this stage. We are a couple of months away from closing a meaningful transaction, and this is what we're focusing on. And please remind me actually what the first part of the question was, because I've missed it.
spk02: The same, but for the industry more broadly, just because everybody else has a smaller fleet than Nettie or Caddler.
spk06: I'm not sure, Sebastian, do you have any views on this?
spk07: I don't have any specific views other than obviously it's a big growing industry and I think having scale is very important. So at some point that may prompt activity, again, either from the catalyst side or from the competitors.
spk02: Okay, and I'm interested in how the foundation installation vessels – I'm sorry, go ahead.
spk11: I was just going to – it's Robert here. I was just going to say, look, I think the most important part of it is what you're pointing out, is that a combined Cadillac and Etsy has tremendous, you know, advantages of sales relative to the competitors in the industry. And I think that's going to show benefits for customers as well as in operations.
spk02: Okay, thanks, Robert. And on the foundation installation vessels, I'm curious how they figure into the WTIV fleet. Are they typically chartered in sort of kind of a package deal with WTIVs, or does their work tend to be exclusive? And to make it a two-parter, does the combination have any bearing on your foundation installation JV with Transocean?
spk08: I think from the foundation standpoint, as we know, the combined company will have exposure to foundation because Cadillac has two assets, two new building assets that are coming in that domain, focusing on the foundation space as far as the net is concerned, which is what we're still talking about today. Foundations are possible. Our new buildings are capable of installing foundations. However, that's not the focus. at least for the time being is not, you know, but you know, of course at this stage with the transaction that is, you know, progressing, we are not looking at expanding from an energy standalone company the foundation exposure. We would be looking at putting all our energy and commitment into the combined company post-closing, which as we discussed, we expect by the end of this year.
spk02: Okay, thank you. Thanks for taking my questions. Sure.
spk01: The next question is from Liam Burke of B. Reilly FBR. Please go ahead.
spk00: Thank you. Looking at your larger vessels, they're pretty much booked or done for fiscal 23. Have there been any discussions for charter, particularly the Zareton, for 2024?
spk07: Sorry, this is Sebastian.
spk00: Hi, Sebastian.
spk07: Hi there. Yes, there are discussions with Zaratan and James. I think there was a press release made around that. Can you just confirm that?
spk10: Yes, we've signed a reservation agreement for the Zaratan for next year, Liam.
spk07: When it comes to the larger vessels, the Scylla is... Sorry, just on the Zaratan piece, there is, as James said, a reservation agreement for next year. And with regards to Scylla... We haven't made an announcement about that, but we are in a lot of dialogue about multiple contracts for next year. And I just highlight the fact that there is very, very limited availability of vessels. So I'd see that more as more of an opportunity rather than anything else. It's a very, very tight market next year. And so there's one of the largest vessels on the water. So well-placed to benefit from those dynamics.
spk00: Great. And I guess this is for James. On the macro front, there's some rumblings that ESG is losing a little, shall we say, interest in Europe. Does that, I mean, have you seen anything where you would want to focus more on Southeast Asia, or do you see opportunities in the European market still?
spk10: Well, I think from an ESG perspective, what we've done is dispose of the non-core assets, which, as you know, we're working in offshore wind, but also oil and gas. And so as we complete that sale, all our vessels or the fleet of Ferranetti will be operating in offshore wind, and as Emmanuel highlighted, focusing on foundation and turbine installation. So we would fare very well from an ESG perspective.
spk00: Great. Thanks, Sebastian. Thanks, Samson.
spk01: The next question is from Ben Nolan of Cecil. Please go ahead.
spk03: Hey, guys. I guess my... My first question, or maybe my only question, is around the sale of the MG2500s. You guys have been talking about that for a while, although have also been pretty successful in winning incremental business, and those have been pretty cash flow generated. The sales price was a little bit lower than I had thought. It was curious what the thinking was on deciding to pull the trigger for selling those assets? Was it part of the Cattler deal or just maybe walk me through how you were thinking about the math on that.
spk08: Ben, it's a good question. Thank you. I think that part of the decision was as we widely discussed and as James has just referenced, the fact of focusing on the renewable side of the business and sort of leaving the legacy oil and gas exposure, which these assets may have brought into play, even though they were contracted to do some maintenance business on the offshore wind space. We've seen an uptick on demand on the oil services industry with the exploration, especially in the Arabian Gulf. going on and the demand for employment in that space was coming mainly from there. As far as the price is concerned, there were a number of buyers over the past months that have showed interest even at higher numbers than what we have been able to conclude the sale, some at lower numbers than what we have been able to go to the sale. And it was difficult to gauge, um, uh, you know, how many real, really interested parties there were in a, in a volatile market, in a changing environment and where, um, in a space where we had decided not to really focus on. So we've taken the decision to pull the trigger, uh, with a buyer that we thought the most reliable, um, buyer out there that could have performed. And, um, moving on away from a standalone business in a combined company. We thought that these were legacy assets that actually could free up also the crew in order to get the crew focusing on the new buildings, which the combined company would take the liberty of in 2024. So there were a combination of factors which have contributed to the fact of pulling the trigger at this time with this buyer.
spk03: Okay, that's helpful. And since I'm thinking about it, just going back to what you talked about for the foundation vessels and the arrangement with Transocean, is the thinking that that would continue even post-combination, that the combined company would still, you know, probably be working in some way with Transocean.
spk08: We are going to have meetings regarding this in September with Transocean and discuss how and if a continued cooperation is what the parties would want going forward. So it is premature for me to answer this question at this stage because we haven't had a detailed discussion with all parties sitting at the same table yet.
spk03: Okay, makes sense. I appreciate it, and thanks for taking my question. Sure, thank you.
spk01: The next question is from Roald Hartvigsen of Clarkson Securities. Please go ahead.
spk12: Hi, thanks for taking my question. Just first to circle back to Ben's question on the NG-2500s. So can you give any more details on sort of the sales process there? Were there any Was the sale a result of bilateral discussions or betting around anything? Any call around that would be helpful.
spk08: As I said, there were a number of buyers interested in acquiring the assets. We only entertained discussions with outright buyers, not buyers which were subject to raising funds, both equity and debt, in order to perform the acquisitions. And of those buyers that were outright, we've chosen this specific one, which has expressed the desire to remain private. So we haven't disclosed to the Bayerine. However, I can tell you that it is a very well established Middle Eastern Bayer that has decades of experience in this specific segment. Okay, thank you.
spk12: And then we have seen multiple offshore wind projects being delayed or cancelled over the summer. So how do you see these delays and terminations potentially affecting outlook on utilization and also potential rates over the next three to four years?
spk07: So I think it's a growing industry I think that you know we had similar issues in the early days in Europe I think we're all aware that the timeline has been aggressive you know, for a while we've all been aware of that and that it hasn't been possible to, I don't think it ever would have been possible to install the kind of desired capacity, as it were, or the forecasted capacity to date or in the next couple of years. I think that while it will create short-term headaches for some contractors, going back to Robert's point, I think if you're part of a combined entity that has scale, I don't think that that will have a meaningful impact on the company. And again, from my point of view, I actually look at it from a macro perspective. We're looking at a number of projects being delayed, but every month or every couple of months, we're talking about whole new markets being opened up in South America, various areas in Asia and what have you. I see the overall dynamics of the industry remaining very robust. I think that the combined density is going to be very well positioned to weather any small storms. And like I said, the kind of long-term prospects, I think, remain healthy. So I don't think there will be a meaningful impact on utilization and or rates. We haven't seen it yet.
spk12: I appreciate your perspective. Thank you. That was it for me. Thank you.
spk01: The next question is from Adam Forsyth of Longsborough Research. Please go ahead.
spk05: Hi there. One narrow question, one rather wider question, if I may. Firstly, the narrow one, just again on the NG2500s. The new contracts, the timing of those, is it likely that you will get the benefit of 100% of the income on these contracts before the sale goes ahead? Or is it possible that sale will conclude early? And if so, is there any adjustment mechanism in the sale price? And just also going back to the earlier question on the sort of wider wind turbine installation situation with projects being canceled, I wonder if what you're seeing is any kind of competitive response from your competitors. Are decisions being delayed in terms of decision making on further new wind turbine installation vessels from any of the competing groups out there? What are you seeing in that regard? Thanks.
spk08: Thanks for the question. Tom, do you want to take the first five?
spk04: Sure. Thank you, Emmanuel. The delivery of the 2500s are under discussion. And so we cannot say at the moment for sure when they will be delivered. But we expect on the outside for it to be within this calendar year. And again, adjustment mechanism, if any, has not been agreed at the moment.
spk06: Thank you.
spk08: Sebastian, maybe you want to take the second part of the question.
spk07: Thank you. Sure. So the competitors, do we think that there's going to be a reduced likelihood of new assets being built in the future is what I heard. Is that the question?
spk05: Yes, that's right. Yes.
spk07: I think it will. I think that we said before that the barriers to entry have always been very high in this business for a variety of reasons. I think that as you start bringing in more queries or questions such as delays to projects, it just adds to these barriers to entry, which again creates a positive environment for an existing player with masks. So again, I think the timing of the CADLA and the combined entity is going to be actually very well positioned, leave us very well positioned.
spk06: Does that answer your question? Yes, it does. Yes. No, that helps the confirmation. Thanks very much.
spk01: This concludes our question and answer session. I would like to turn the conference back over to Emanuele Laro for any closing remarks.
spk08: Thank you very much, operator. We do not have any closing remarks apart from thanking everybody for your time today. I look forward to speaking in the future. Thanks a lot. Goodbye.
spk01: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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