Seadrill Limited

Welcome all to our second quarterly earnings call this calendar year and the first call of the 2023 financial period. On the line today, Grant and I are joined by Leif Nelson, our Chief Operating Technology Officer, and Sameer Ali, our Chief Commercial Officer. Grant and I will shortly take you through our prepared remarks before we open up for a Q&A session. For further information regarding today's presentation on the first quarter earnings, I invite you to read the full earnings release published to the market earlier today, which is accessible on the CEDRAL website. On slide two, you'll find a disclaimer relating to today's presentation. This outlines important points around forward-looking statements made in the earnings report and to be discussed on this call, which are based on current expectations and are subject to certain risks and uncertainties. There are many factors that could cause actual performance and results to differ materially. For further information, please take the time after the call to read this disclaimer and refer to the full quarter earnings report as well as our other SEC filings. In addition, please note that we'll be referencing non-GAAP measures on our call and a reconciliation of operating income to adjusted EBITDA can be found in today's full earnings release. We've started this year strongly with an adjusted EBITDA more than doubling on a quarter-on-quarter basis to $85 million. This represents a 32% EBITDA margin. The significant improvement in financial performance was mainly due to a full quarter of operations for our drill ships operating in Brazil. As of today, Cedral's backlog stands at approximately $2.6 billion, which is especially strong in the context of our fleet size. This backlog total includes the three-month extension secured for the West Neptune, which added $39 million, reflecting our longstanding relationship with OLOG. We ended the quarter with an adjusted net cash position of $133 million. Going forward, free cash flow generated by the enterprise will be a key metric. Across our own fleet, We had good operational performance, with technical utilisation coming in at 96%, while our economic utilisation was 95%. As CEDRAL stands today, we have a fleet of 22 units, including 13 ultra-deepwater floaters. We are delighted that most floaters are contracted, including all of our 10 high-specification drill ships, primarily deployed across the Golden Triangle. Ultra and our fleet, our two harsh environment units, continue operations on the NCS. We have three benign jackups operating through our Qatari joint venture, and lastly, 110 resist units operating in Thailand. Finally, we're proud to announce that we've received a B rating under the Carbon Disclosure Project framework, the equal highest rating amongst all offshore drillers, which reflects our commitments to minimizing our impact on the environment. I'll be covering ESG in a little more detail later in the presentation. Moving to slide four, I will touch on the market backdrop. Despite some volatility recently, the price of Brent has generally remained above the $70 mark and oil and gas market fundamentals continue to be supportive for offshore drilling. Many analysts expect oil demand year on year to increase by around 1.5 to 2 million barrels per day in 2023. Whilst on the supply side, OPEC announced further production cuts earlier this year. Coupled with the healthy economics of offshore projects, This demand-supply balance is a positive read-across for our activity in the sector. Taking a close look at offshore drilling, in the benign ultra-deepwater floater segment, marketed utilisation for drill ships has remained around the 95% mark, while leading-edge day rates continue to increase, with a recent fixture close to $500,000 per day. In our view, we expect to see a five-handle fixture at the leading edge in the second half of the year as the market tightens further. Brazil continues to be the main driver of floated demand, with petrobras in particular moving to secure more capacity. In the near term, we anticipate additional requirements for Brazil and results from ongoing petrobras tenders, leading to more rigs mobilising to the region from different geographies. We also forecast incremental floated demand offshore Africa, with active requirements for Angola, Nigeria, Namibia and Mozambique. To round off the Golden Triangle outlook, Gulf of Mexico demand visibility is typically limited with a lot of contracting activity undertaken via direct negotiations. However, this region is effectively sold out and we remain positive about its utilisation outlook. With that all said, although demand is very important, we continue to believe that supply-side discipline amongst drillers is the most salient factor as to how this upcycle progresses. Turning to the harsh environment segment, we have one CJ70 jack-up on long-term contract with ConocoPhillips and one floater, the West Phoenix, operating with VAR Energy on the NCS that is currently estimated to roll off in the second half of 2024. On the supply front, we've seen a string of announcements about floaters exiting the North Sea for contracts outside the region, including notably Namibia and Australia, with more announcements to follow soon. On the demand side, anticipated requirements in 2024 and 2025 are beginning to materialise. Furthermore, we are seeing interest in the West Phoenix for harsh environment operations outside the North Sea. Altogether, we view these dynamics as supportive for our re-contracting prospects next year. Overall, we are very optimistic about market developments in offshore drilling and continue to believe that we're in the constructive early stages of a multi-year up cycle. I'll now hand over to Grant, who will outline our first quarter financials, then cover a few points on a capital structure and set out our guidance for the full year of 2023. Over to you, Grant.

Thank you, Simon, and welcome again to everybody joining us today. Before I jump into the figures, please note that our Q1 results do not include the effects of our actual acquisition that closed on April 3rd. The operating results and the assets and liabilities of Aquadrill will be consolidated from April 3rd and presented as part of our next quarterly earnings. And our full year 2023 guidance, which I'll outline later in this presentation, includes the consolidation of Aquadrill for a period of nine months from the closing date to year end. Now to the key quarterly figures. Q1 revenue was $266 million, an increase quarter and quarter, primarily due to a full period of operations in respect of our four drill ships offshore Brazil. We also benefited from a higher day rate on the West Neptune and from the Savannah, Louisiana, achieving higher economic utilization. That was slightly offset by no further revenue from West Hercules, which demobilized and was returned to the rig owner in Q4. Moving to OPEX, Q1 OPEX was $219 million, a reduction quarter-on-quarter, mainly driven by the demobilization and re-delivery of the West Hercules to the rig owner, partly offset by a full period of operations for our drill ships in Brazil. As a result of these movements, we recorded adjusted EBITDA of $85 million, which marked a substantial increase compared to Q4. Further, this translated to an adjusted EBITDA margin of approximately 32%, which screens well compared to our peer group. On the balance sheet, unrestricted cash decreased to $376 million at the end of the period. This was largely driven by the settlements of liabilities for accrued expenditures in relation to our recent rigged startups in Brazil and voluntary prepayments made under our seconding debt facility of $150 million. This was partly offset by the receipt of $43 million in net proceeds in respect of our sale of Paratus Energy Services, which closed in February. Elsewhere on the balance sheet, the settlements of accrued expenditures and voluntary prepayments that I just outlined were the main drivers of the reduction in our current and non-current liabilities, respectively. I'll now take a moment to focus a bit more on our leverage and capital structure more broadly. Over the last year, we've been proactive in respect of our debt profile by making several mandatory and voluntary prepayments under our second lien debt facility, including those in Q1 that I highlighted on the previous slide. This put us in an adjusted net cash position of $133 million at the end of March, as mentioned by Simon earlier. We are delighted that we have delevered our balance sheet and in turn reduced our interest expense in light of the prevailing economic climate. Nevertheless, as said in our prior earnings call, we are now focused on further optimizing and simplifying our capital structure, and we believe that we are well positioned following closing of the acquisition. We are in active discussions with our board and capital market advisors as to the form this may take. On slide seven, you'll find our financial guidance for the full year of 2023, which includes the consolidation of Aquedrill into Cedral from April 3rd. We anticipate total operating revenues to be between $1.435 and $1.485 billion. Our adjusted EBITDA range stands at $435 to $485 million. And lastly, we expect CapEx and long-term maintenance to be between $210 and $250 million. I'd like to draw your attention to a footnote in the earnings release, which essentially says our 2023 EBITDA guidance includes net $12 million in non-cash costs related to the amortized mobilization revenues received and costs incurred prior to January 1, 2023. I'll now hand the line back to Simon.

Thanks, Grant. On screen, you'll see Cedarall's Ultra Deepwater floater fleet. During the last year, we pivoted strategically to this segment through two transformative M&A transactions in the belief that this part of the rig market will produce outsized growth and value for our shareholders. Now, taking a closer look at the fleet, all 13 floaters on screen are at least 10,000 foot capable in terms of water depth. We have 10 drill ships that are all dual activity and seven that are of seventh generation design which typically have better specification, require less maintenance spend, and deliver superior contract economics as a result. Lastly, on managed pressure drilling, CEDRAL is a trailblazer in this adaptive drilling technology, and we continue to be amongst the market leaders on this equipment, with six units currently outfitted across our fleet. We've contributed strongly to industry knowledge and technology in this important drilling approach, which will be increasingly vital for penetrating the deeper geological horizons in our targeted ultra-deepwater markets. Moving to the next slide, I want to focus on our ESG strategy, which has delivered our leading position as part of the carbon disclosure project. As a major offshore driller, we have a critical role to play in the global energy transition. Our aim at CEDRAL is to deliver oil and gas wells to our customers responsibly and with the best carbon footprint possible. In our latest sustainability report, we published CEDRAL's ESG framework with its contributions towards the United Nations Sustainable Development Goals. I won't outline all of the elements here, but there are two of particular focus for us, which I'll explain in a little bit more detail. First, on the environmental front, we are committed to adopting greenhouse gas reducing technologies. In offshore drilling, CEDRAL has developed the first methanol injection system for an offshore drilling rig, and we pioneered the introduction of MODU hybrid power technology. More recently, we installed a closed bus tire system on the West Satin, working for Econor in Brazil, enabling the rig to position itself dynamically with fewer engines running, which is a substantially more efficient operating mode, reducing fuel burn and emissions. We've also deployed the first version of NOV's DOOLS technology, which enables remote operation of the mud system, and we continue to advance automation of the drilling process. Second, I want to highlight our commitment to the development of our employers with the Sea Drill Development Academy, which we rolled out earlier this year. The program uses an enhanced facility that is owned and managed by Seedrill, complete with a state-of-the-art drilling simulator. Seedrill has a best-in-class workforce that is integral to the development of safe and efficient operations for our customers. And investments such as this one illustrate our commitment to operational excellence and also our employees' development and growth. Furthermore, in the expanding business environment, our ability to train our own people will be critical to service delivery quality and cost control. To wrap up, we're very pleased with our start to the year with a nearly fully utilised fleet and the closing of our Aquadrill acquisition in April on an accelerated timeline. The offshore outlook is promising and looking ahead into future quarters, we're focusing on further refining our fleet and enhancing our exposure to our core segments, including through organic transactions, if accretive, whilst optimising our capital structure to enable the implementation of a sustainable shareholder returns policy. We've demonstrated during the past 12 months that our management team has a bias for action and put simply, we fully intend to continue to deliver on what we promise. That brings an end to today's presentation. I'll now hand the line back to the operator who will handle the Q&A session to answer any questions that you may have for the management team.

Ladies and gentlemen, if you'd like to ask a question, please press star followed by one on your telephone keypad. That's star followed by 1 on your telephone keypad. To withdraw your question, press star followed by 2. And please do also remember to unmute your microphone when it's your turn to speak. Our first question comes from Gregory Lewis from BTIG. Gregory, your line's now open. Please go ahead.

Yeah, hi. Thank you, and good afternoon, everybody. know simon i i realize the the ink is barely dry on the the aqua drill acquisition but um all that being said you know what a lot of you know common questions thematic we continue to get from investors is around um you know you know continued consolidation across the offshore drilling sector um you know just kind of curious maybe you know how active you know, the company is at this point, you know, realizing we're still integrating AquaDrill and really, as you think about a bigger picture, do we think that there's still opportunities, whether it's C-Drill or others, to help continue to consolidate the market, realizing at this point, as I look at most publicly listed drillers, you know, whether it was this year or last year or even, you know, over the last couple years, you know, each one of you is kind of put a stake in the ground and done some M&A. Just kind of curious on your thoughts around that.

Yeah, thanks, Greg. Look, I don't think the window is closed for consolidation, but obviously as the community shrinks, it gets harder and harder to do interesting deals. So, you know, we believe there's still considerable market upside, and that's really the most important factor. You know, we're still, you know, there's a lot of work, a lot of room for improvement with leading edge day rates. We're early in the business cycle, we believe. We think that as people progress their refinancing efforts and the restrictive covenants that act as somewhat of a barrier to further consolidation, some of those will fall away. So that could be a catalyst for further combinations across the space. But I think that most deals will continue to likely be stock transactions. Few of us have enough cash consideration at this point to do outright cash deals today. So we've been active in concentrating our asset base There's an opportunity for some of our peers to do similar things. So I think it may not be sort of large-scale M&A necessarily, although there's probably room for some terminal transactions for certainly our larger peers. I think there's the possibility of people specialising and concentrating their asset base. So, yeah, no, I don't think it's behind us. I think there's still a lot of opportunities for people to choose the part of the market they want to play in and focus their... their asset acquisition and divestment activities around that.

Okay, great. Thank you. Thank you for those thoughts. And then I did want to touch on a couple of the rigs. You know, I, you know, the West Polaris, which is, you know, is being managed, you know, it's still, it's being managed by, you know, a third party manager. You know, I guess September's going to be here before we know it. Unfortunately, summer's going to fly by. But, you know, could you maybe talk a little bit about the outlook for that rig, you know, and how we should be thinking about the, you know, the continuation or termination of that management contract?

Yeah, you bet, Greg. Well, let me start, and then I'll throw to Samir, and he can give you the market color. So, I mean, when we announced the Aquadrill transaction, you'll recall that we anticipated realizing all of the synergies within the first two years. So, as a practical matter, transition of management is still some time off, and we've only really started the conversations with the existing rig managers and the customers who would be affected. So, there's not much to report at this time other than to let you know that we had started those conversations. But Samir can probably put a little bit more granularity around that.

Hey, Greg, you know, so I'd say, you know, we are in active dialogue with the current client that they have an open tender in the same region. So we think we're well positioned, but in this business, it's not done until it's signed. So, you know, we're optimistic that we'll be able to keep her working where she is today. But, you know, we are also looking at other opportunities for the rig and we are bidding her around the world. But our working assumption right now is that she will stay in India and continue on with ONGC.

Okay, that's kind of what I was curious about. And then, you know, Samir, while I have you, realizing that, you know, the bulk of the fleet is contracted out, but there are, you know, as we look out over the next 12 months, there are rigs that start to, you know, at least roll off their contracts. Any kind of sense realizing that there's always a spot market in the U.S. Gulf of Mexico for short-term work? But as we look, you know, maybe in West Africa, Brazil, Asia, how far ahead are customers at this point looking to fix out, i.e., we're in May of 23, you know, is any way to characterize, you know, maybe on a quarterly forward basis as you're looking at the market, you know, are we seeing tenders pop up for work?

next summer next fall next spring how far out is is it going just to kind of get a feel for you know how anxious maybe some customers are starting to get sure um so you know i'd say as a sign of the market continuing to tighten clients are looking for rigs further and further out um there's one data point where there's a client looking for a rig in 26 so that's you know probably the the outermost part of where clients are right now but i'd say you are seeing it elongate out, right? Clients are starting to come to us earlier and saying, hey, can we talk about, you know, options that aren't due for a while? Or can we talk about, you know, rigs in 24, 25? So you are seeing it as a reaction just to a tightening market. They're looking to secure supply as they build up their, you know, drilling plans. We are seeing an elongation of the kind of time before award and when customers are looking to secure rigs.

Okay. Super helpful. Thank you all for the time. Thanks, Greg.

Our next question comes from Frederick Steen from Clarkson Securities. Frederick, your line is now open. Please go ahead.

Hey, Simon and team. Hope you're well and congratulations on the nice performance this quarter. I wanted to touch a bit more on the fleet here. You're mostly locked up for 2023 and a large part of 2024 is also locked up. But then, of course, as we touched upon, I think, last quarter as well, you have your stacked assets. And first, since we spoke last time, have anything kind of changed in your approach to those assets? Simon, you talked about supply discipline. So I guess my question is, either have you changed anything in your requirements to take those rigs back, or have you since then noticed a difference from your clients in terms of more opportunities and more active discussions for those rigs?

Hi, Frederick, and good to hear your voice. Look, firstly, I'd say that we consider those assets to be fungible, and whereas it is possible that we may even divest them, but insofar as reactivating is concerned, I think we've been pretty forceful in our views that we require a full recovery of the capital up front from any potential customer. I'll pass this to Mir to talk about the individual market opportunities, but Nothing's changed in our position or approach in terms of what we require. And I think as we go further into this cycle, we're just going to be, you know, increasingly resolute in that stance. But Samir, perhaps you care to add something to that.

Yeah, so, you know, we're definitely looking at opportunities for our stacked fleet. But, you know, we're going to remain disciplined, right? I mean, there is significant cost to reactivate these rigs. And given supply chain constraints, those costs aren't going down. They're actually going up. So for us, it's making sure that we can find the right job, the right opportunity to invest in the rig and bring her back out. So we're absolutely chasing opportunities for our stack fleet, but we are going to be judicious about it, and we're going to make sure that we're getting a return on our capital, and we're not going to take it on our balance sheet just because.

Thanks. A follow-up to the comment about potential divestment there. If you were to divest some of those stacked assets to other players, would you be willing to divest it to competitors or would you try to channel them into local or non-internationally competitive markets or owners if you were to do that?

I think we look at every opportunity on its merit, so I don't think necessarily we would be averse to selling to a competitor, whatever shape and form that may take. So, yeah, no, I think it's whatever would generate the best return for us, Fredrik, so we have an open mind.

Okay, thanks. And specifically on the West Phoenix, just turning away from the stacked fleet, You've got an extension now until August, if I remember correctly. But you said that that rig was also being bid outside Norway or outside the NTS. So do you have any thoughts or comments around your preference in terms of keeping that rig in Norway? I guess kind of in a way you're right now a big sub-scale in that region? Would it be better if it actually worked elsewhere? Or do you think, based on your market view, that the is actually going to tighten quite significantly in 2024 and 2025, that you would like to keep it there still, even though you're exploring other opportunities?

Hey, Fredrik. It's Samir. So I'd say our preference is going to be to keep our Norway, but that is from a cash flow perspective. Right. Setting up another shore base in another location, unless it's a region that we operate in, that's our preference is to maximize cash flow, wherever that is. And the math would tell you that that's most likely Norway, but by no means are we married to keeping the rig in Norway. That is, again, it is a maximizing our return profile and our cash flow. So if we can co-locate the rigs, that does help us in the long term. But if we find the right opportunity outside of Norway, and I would say there are a number of opportunities outside of Norway for that rig now. The harsh environment market, you've seen some of our peers pull out rigs from that market. You're going to continue to probably see rigs leave that market. And the market's starting to tighten in Norway. So you're finding that perfect storm in 24 and 25 in the Norwegian market. So for us, we will maximize cash flow. Ideally in Norway, but we have no problems taking the rig outside.

Perfect. Thank you so much all for the answers. I'll leave it at that. Have a good day.

Our next question comes from Hamad Korsan from BWS. Hamad, your line is now open. Please go ahead.

Hi. So the first question I had was about Aquadrill, just given that you've only provided Q422 numbers. Is there any operational enhancements or improvements since then, or is that because they're all fully operational rigs now, that's going to be the operating kind of rate per quarter for them?

So let me try to take it. I'm not sure I fully understand the question. But so Q1 doesn't include any results from Aquadrill, right? So from a financial perspective, you don't see anything in there from Aquadrill. You'll start seeing that come through Q2. From a financial perspective, Q2 will, of course, include Auriga, Vela and Polaris and some of Capella. Capella is just starting up now. or has just recently started up, but you won't get a full court from Capella. From Q3 onwards, you'll get full run rate performance on the four Aquadrill drill ships. I hope that answers your question from a financial perspective, but if you're looking for more of an operational sort of technical asset type answer, I can hand over to Lee for science.

No, that was exactly what I was looking for. Thank you. And then as far as your fleet is concerned, just given the lockup trends right now with your fleet, is there much to do as far as contracting goes? I mean, you're talking about customers looking out for 24 and 25, but you're pretty much locked in. Is there any advantage to getting in those conversations now, just given the trajectory of day rates?

I think one of the, you know, part of the rationale for the Aquadrill transaction was to get, you know, more exposure to the spot market. And, you know, we had some opportunities there with, you know, the Polaris. There's one that's, you know, crystallized for the Capella here in the near term. So I think relative to the comments that Suniya made about opportunities in the marketplace and how that's stretching out, we think that what you've mentioned may have been a weakness in our story maybe three, six months ago, but is increasingly irrelevant in terms of how we see the market developing going forward and the spread of availability of the units. that are either rolling off contracts over the next couple of years or will be available. Samir, anything to add?

No, I think that's right. And I think as clients are starting to look further out, that's where we're spending our time is starting to layer in contracts and build a layered approach to our contract with some short-term duration and some long-term duration. I think that's what we're focused on kind of going forward for 2025.

Got it. And my last question was, are you seeing any customer conversations talking about, you know, bringing those cold-stacked or warm-stacked fleets online?

There's some conversation around that, right? So you've seen a few of the new, you know, stranded assets get brought back into the market. You know, the cost of bringing these things back is increasing. So we are having conversations with clients about our stacked fleet. But I'd say, you know, it's We haven't reached a point, obviously, of where we can announce a contract and we feel comfortable bringing a rig back. I'd say we are progressing those conversations, but the market's not there yet in our view, given we just can't get that return profile where we need it to be. But I'd say if the market continues the way it is, we should be seeing some of those conversations materialize or kind of crystallize later this year or next year. Okay, great. Thank you.

As a reminder, to ask a question, please press star followed by one on your telephone keypad. That's star followed by one on your telephone keypad. Our next question comes from Konstantin Shinarov from Apture Capital. Konstantin, your line is now open. Please go ahead.

Hi, guys. Thanks so much for taking my questions. When I think about just the TVDA guidance, so that range of 435 to 485. Could you please talk a bit more about what's behind that guidance? Is it basically just saying that you can execute the backlog that you've locked in for this year, or there are some other assumptions behind that? And also curious if that guidance includes any synergies from microdrill acquisition. That's my first question.

Hey, Konstantin, thanks. So I would break it down by looking at the old seed or legacy fleet, first of all, and I'd say that that is That's pretty clear. You saw Q1 was that fleet, and so that kind of gives you a good idea what to expect from Cedral for the rest of this year in that sort of, I think it was a relatively good quarter, so the 80 to 85 region for the rest of the quarter on the Cedral Legacy fleet. On the Aquadrill fleet, Auriga, Valar, they come into the 2023 results Well, all the Aquedrol fleet, I should say, comes in from April 3rd. Auriga Vela, of course, on contract for the full year, so you get the benefit of all of those. Like I said earlier to Hamed, Capella just started up recently. And then Polaris is the only other variable then because she has a firm term ending end of August. So Q4, you do need to take a view on what the recontracting assumption is. And there's a range of possibilities and a range of outcomes. And that's what we've sort of taken into account when setting the guided range. Final part of your question, I think, was whether there are any synergies coming in. And the answer to that is no for now. We said to you that Um, we said, when when announcing the transaction that that will take some time, it'll take a period of, you know, well, at least up to the 1st, 2 years to to realize those synergies. So we just gotta wait for the. Um, for those Ecuador rigs to roll off their existing contracts. Sure, and that that answer, Constantine, I should just add that that's in relation to the. the key synergy area of the MSA. There are a smaller amount of synergies to be realized in respect to their overheads. We said that that was $10 million per annum. We will start realizing those synergies sort of more late Q3, Q4. So there's a small element of that. It does take some time to start realizing those, but there will be an element, albeit small, for that piece.

Got it. And you're still looking to get 70 million of run rate signatures out of Aquadrill transaction?

That's right. It's on a recurring basis, yes, once the rig falls.

And that's from 2024? And is that from 2024 or from 2025?

We said two years, yeah. So I think 2025. We said two years from when the deal closed and allow the contracts to roll off. Got it.

I see. And do you have a sense of adjusted EBITDA number if you were to effectively deploy the whole fleet, including Aquadrill at the moment at the current spot market? just to get a sense of the earnings power of the combined business.

You'll see on our website an investor deck where we do an analysis like that, where we assume the entire fleet is contracted at spot, and then you take a view on what spot is. So I encourage you to go and look at that deck, but it's more or less a billion dollars EBITDA in that range when you start getting $450,000 to $500,000 a day. So it's the Yeah, 800 to a billion when operating between that 450 to 500 for a seventh gen. Got it.

And then if I look at page six, the capital structure, it looks somewhat deficient. So I guess some of your peers went out and took advantage of the high-yield market and raised debt. Are you looking to optimize the capital structure anytime soon, maybe return capital to shareholders? What's your latest thinking there?

So we see our existing debt facilities as suboptimal, both in terms of pricing as well as the covenants contained in them. And so we are looking into what a refinancing would look like. We did take the view that The best approach was to complete the Aquadrill transaction so that we could go to market on a refinancing with a stronger collateral package. We've now done that, of course, in April and been working since then on a refinancing. And like I said in the prepared remarks, we're in active discussions with our board to discuss the pros and cons of the options we see in front of us.

Is the idea to run an unlevered balance sheet? At the moment, net debt is actually zero, which is arguably suboptimal. How do you think about optimal leverage for the business? Related to that, this year on an unlevered basis, the business is going to be cash generative. Wondering what you're thinking to do with excess cash flow. Would you invest in the business or you might buy back shares or whatever? Like, what's your what's your latest thinking there?

So on the quantum of debt, like I said, we're in active discussions with the board, so I don't want to get too far out in front of that discussion. But I can say at a at a high level, you know, we'd expect to have some debt on the balance sheet, but but but but certainly not It's certainly going to maintain a prudent or conservative balance sheet. So talking about net leverage, you know, certainly not exceeding the two times net leverage on a through cycle basis. But like I said, those discussions are live with our board, so I can't give too much for you at this stage. And then as it relates to what we do with the cash, Let me hand over to Simon and he can give you some comments there. Sure.

Yeah, I think we mentioned earlier, Constantine, that our loan docs currently prohibit the issuance of dividends. So as Grant said, we recognise that we have a need to refinance first, and that's an area of current focus. But we've been explicit through time on the need or the potential to return capital to be it via dividends or buybacks, if we can't use those funds, you know, elsewhere within the enterprise. So you're going to be hearing something from us very soon on this. It's a topic of constant discussion and debate. But we do believe that dividends should be supported by sound capital structure and strong cash flows. And we think they're well placed in that regard. When we look at our peer group, we see a lot of people who are either highly leveraged or have poor cash flows in the near term. And we think that's an area where C2O represents extremely good value compared to our competitors.

Got it. Makes sense. And finally, on the asset base, are there any assets that you're planning to retire anytime soon? Or are there any sort of non-core assets that you might consider selling? Let's say jackups or sudden drill ships, anything like that on the horizon?

Yeah, sure. I think we've been pretty open and there's some things that we've communicated in our 20F. We're actively considering options to dispose non-core assets. We can't provide any specific comments at this time. We'll come back to you if you have any news in that regard. But I think generally speaking, we want to be an important player in a smaller number of asset segments so that we can be more efficient and harness economies of scale across the cost base. So we're focusing our asset base through time. So you should expect to see movement from us as we continually refocus and refine other parts of the market that we want to play in. Got it.

Okay, thanks for your comments.

We currently have no further questions. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.