Seadrill Limited

Good morning and thank you for standing by. My name is Kelvin and I will be your conference operator today. At this time, I would like to welcome everyone to the Cedrals fourth quarter and full year 2024 earnings call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, please press the pound key or star two. Thank you. I would now like to turn the call over to Kevin Smith, Vice President of Corporate Finance and Head of Investor Relations. Please go ahead.

Welcome to Cedrals fourth quarter and full year 2024 earnings call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations. I'm joined today by Simon Johnson, our President and Chief Executive Officer, Samira Lee, Executive Vice President and Chief Commercial Officer, and Grant Creed, Executive Vice President and Chief Financial Officer. Our call will include forward looking statements that involve risk and uncertainty. Actual results may differ materially. No one should assume these forward looking statements remain valid later in the quarter or year, and we assume no obligation to update them. Our filings with the U.S. Securities and Exchange Commission provide a more detailed discussion of our forward looking statements and the risk factors affecting our business. During the call, we will also reference non-GAAP measures. Our earnings release furnished to the SEC and available on our website includes reconciliations with the nearest corresponding GAAP measures. Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release. I'll now turn the call over to Simon.

Hello, and thank you for joining us on our quarterly conference call. Today I'll cover recent achievements, market outlook and operational updates. Samira will then discuss our commercial activity and outlook, and Grant will review our financial results and 2025 guidance. In 2024, we delivered against our EBITDA guidance range, returned over $500 million in capital shareholders, added $1.3 billion in contracted backlog, and invested non-core assets for cash proceeds of approximately $400 million. Our share repurchase program has returned a total of $792 million to shareholders through the end of the year. During the fourth quarter, we repurchased $100 million of shares and have reduced our issued share count by 22% since the commencement of the program in September 2023. In December, we announced two long-term contract awards in Brazil, commencing in 2026, adding $1 billion in backlog. And we sold Jackup rig West Prospero for cash proceeds of $45 million, monetizing a non-core asset that had been cold-stacked for eight years at a favorable valuation compared to recent sales by our peers. This marks the completion of our exit from the benign Jackup market. Moving to market outlook. As we consider the current landscape, demand deferral is showing up in near-term rig availability, leading to a softening market in 2025, with some trade rivals offering lower day rates. Our view is unchanged. Depleting resources require investment, and Beatwater provides some of the most advantaged and profitable projects with the lowest carbon emissions intensity. We expect future demand to increase, but visibility is unclear. We've preached about volatility on many previous occasions and believe we remain well positioned to navigate the downside and capitalize on the upside. We have a strong balance sheet, and our marketed fleet of 75% contracted for calendar year 2025. We also benefit from $3 billion in durable contract cover that extends meaningfully through 2028 and into 2029. Turning to operations. Starting in Brazil, the Westeriga and West Polaris commenced their initial contracts with Petrobras on December 20 and February 18, respectively. The Westeriga commencement date was consistent with previous guidance, while the West Polaris was impacted by the commissioning and testing of upgraded systems. In connection with the West Polaris contract commencement, we're pleased to have delivered the first next generation managed pressure drilling system to Petrobras, which enhances key elements of MPD. We're already seeing strong interest from multiple clients for this time-saving technology. The CEDRIL continues its thought leadership in managed pressure drilling. We've also upgraded the power management and dynamic positioning system on the rig, closing the gap with seventh generation drill ship capabilities. The West TALUS incurred 50 days of downtime during the first quarter, responding to regulatory matters. This marks the sixth regulatory delay for a drilling rig in Brazil in the last six months. We are working closely with our clients and industry bodies to understand and navigate new regulatory expectations. In the US Gulf, the West Neptune continues to deliver after 10 years of continuous partnership with ELLOG and is fully contracted into 2026. The rig recommenced drilling on February 16, following the completion of its SPS and upgrades. The timeline was impacted by vendor issues and adverse weather. I want to emphasise that we don't take the challenges encountered and their inconvenience to our customer lightly, and our teams are addressing these issues. The West Valor continues to build on its proven track record following reintegration into our fleet and drilled its most recent well significantly ahead of schedule. Given the exceptional operational delivery, the rig secured additional work at a strong rate. While some like to focus on specifications, it is increasingly clear to us that our customers prefer performance. While we've incurred an uncharacteristically high amount of non-revenue days to begin 2025, this is not reflective of our historical performance and all of the contributing units are back in operation. Before moving on, I'd like to take a moment to recognise the West Jupiter, which was awarded 2024 Rig of the Year within our fleet. The award is a testament to outstanding performance against numerous QHSE operational and financial metrics. We ended 2024 with a total recordable incident frequency rate that was nearly 20% below the IADC average, and our safety performance is trending favourably to begin 2025. I want to thank our offshore crews for continuing to improve outcomes in this fundamental aspect of their business. Finally, I wanted to comment on a few legal matters. In January, Cedro received notices from Petrobras asserting penalties against the Cedro subsidiary in Brazil. The alleged penalties arise from contracts awarded in relation to the SESHE Brazil project dating back to 2012. Under this contract, three drill ships were to be constructed by SESHE and operated by Cedro for Petrobras. The construction of these rigs was never completed. SESHE has since been declared bankrupt, and Petrobras' actions during the Operation Car Wash scandal were a contributing factor to the failure of SESHE. SESHE recently filed a lawsuit directly against Petrobras relating to the collapse of the project. We understand that Petrobras issued similar notices to multiple local Brazilian drilling contractors, and a European peer also participated in the SESHE project. The amount claimed by Petrobras is approximately $213 million in delayed penalties, with potential for further assessments over the remaining term of the drilling contracts for the three SESHE drill ships. These contracts limit aggregate penalties to 10% of the total estimated contract value as defined in the contract. Petrobras indicated it may attempt to set off its claims against certain amounts payable to our subsidiary under existing contracts for five of our drill ships operating in Brazil, but has not done so to date. We are engaged in discussions with our clients to suspend the penalties. We are evaluating all options, including potential counterclaims against Petrobras. This matter is in its early stages, and we intend to vigorously defend our position. Earlier this month, the Norwegian Court awarded the owner of the Hercules a rig that we managed from 2008 to 2022, $48 million, inclusive of penalties and interest relating to our re-delivery of the rig. We disagree with the Court's findings and will appeal the decision. As we move into 2025, CEDRA will continue to be a flexible and agile organisation that can quickly pivot during periods of market volatility. We have demonstrated that we will act decisively on stacking decisions, as evidenced by the cold stacking of the West Phoenix, and we endeavour to remain disciplined stewards of shareholder capital with a continuous focus on optimisation of our cost base. We have a proud record of executing on our declared objectives. With that, I'll turn the call over to Samir.

Thanks, Simon. I'll start by reviewing our recent contracting activity before providing an update on the market. CEDRA has captured a disproportionate share of the global backlog awarded since our last earnings call. Securing approximately 65% of the backlog awarded to the four largest publicly traded offer drillers while only representing 18% of the drill strip fleet operated by this group. This is an incredible achievement given the contracting environment over the past few months. In the US Gulf, the Westfella is currently working for Talos and drilled its most recent well ahead of schedule, which would have led to a contract completion in July. Due to the exceptional operating performance, the rig secured 40 days of incremental work and 20 million of backlog, keeping the rig operating into September. We remained very optimistic that the rig will book additional work given its proven track record. The Savon, Louisiana, secured additional work with Walter Oil and Gas, keeping the rig working until June. And in Brazil, the West Jupiter and the West Talos were each awarded three-year contracts with Petrobras commencing in 2026. These fixtures provide incremental backlog of $1 billion and a mobilization fee exceeding $70 million. Importantly, these awards provide visibility into our earnings in 2026 and beyond. Moving to the market, we continue to see a slow pace of contracting in 2025, tied to capital discipline and supply chain constraints. We were the first to suggest the potential for white space, and we continue to think it will persist through this year and into 2026. There are around 30 floaters available, or coming available globally in 2025 without a firm contract. While many of these rigs will find follow-on opportunities, the absence of visible demand continues to soften the market. Grocery market utilization, a measure of market tightness, now hovers in the mid-80s. Down from the high 90s in 2023. We believe it will continue to trend lower throughout the year as more assets become available. Fortunately, we are relatively insulated. We benefit from having approximately 75% of available rig days contracted across our market fleet in 2025. And we are working to book contracts with the remaining capacity. I'll now briefly touch on the outlook the rigs with availability for the remainder of the year, starting with the Savon Louisiana. As we have previously indicated, recent contracts suitable for the rig specification have been both short in their lead times and duration. However, we are in advanced dialogue to keep the rig working when it becomes available in June. Next, the West Capello recently finished its highly successful drilling campaign in Korea. The rig remains one of the few MPD equipped assets in Southeast Asia. Now we are pursuing several short-term opportunities starting mid-year. However, we are prepared to make the hard decisions if we do not have line of sight to additional work. Moving to the three rigs we operate through our Saundral joint venture. The West Gemini, the Kingela, and the Lavangos all become available in 2025. In Angola, we're already seeing the competition for capital across customers global portfolios. Demand in the country is facing headwinds. However, due to our advantage relationship with our JV partner, we believe we have a competitive edge for near-term opportunities. We see incremental demand in 2026 and beyond as operators return to the country and West Africa more broadly. As we navigate this market, we are focused on securing work where we have uncommitted capacity and will remain disciplined in managing our fleet. Although demand has shifted to the right, it reinforces our conviction in the durability of the current cycle. We are pleased to report three billion in backlog and a 700 million net increase to our previously reported numbers in the period when many of our peers are experiencing backlog erosion. And with that, I'll turn it to Grant.

Thanks, Surya. I will now summarize our full-year results and review fourth quarter performance before providing full-year guidance for 2025. For the full year 2024, we delivered $378 million of adjusted EBITDA on $1.4 billion of revenue. Capital expenditure was $418 million. Adjusting for the disposal of the Qatar Jackup fleet, we delivered adjusted EBITDA within the guidance range previously provided. Turning to fourth quarter performance, as anticipated, results were adversely impacted by a reduction in operating dates, planned -of-service time, and costs associated with contract preparations and upgrades. Total operating revenues were $289 million, down from $354 million in the prior quarter. The decrease primarily relates to fewer operating days attributable to the West Neptune, which began planned -of-service time for upgrades in November, the cold stacking of the West Phoenix following its contract completion in August, and the West Vela and West Capella, which achieved fewer revenue days as we reintegrated and prepared for new contract commencements in October and December, respectively. Fourth quarter total operating expenses were $323 million, up from $307 million in the prior quarter. The sequential increase is largely attributable to increase in merger and integration expenses related to the handover of the final two aqueduct rigs. The reintegration of these structures in procedural sleep marks an important milestone for the company, eliminating costly and complex management fees and exceeding synergy targets of $70 million per annum ahead of the stage timeline. SG&A expenses were $31 million, a -and-quarter increase of $4 million pertains to adjustments to year-end accruals and severance costs, following a reduction in falls completed in November as we continued to take steps to reduce our cost base. Moving on to the balance sheet and cash flow statements, we continue to maintain a strong balance sheet and sound capital structure. At year-end, gross principal debt was $625 million and we held $505 million in cash, including $27 million of cash, resulting in a net debt position of $120 million. Cash flow from operations was $7 million for the fourth quarter, which includes $94 million of outflows for long-term maintenance capex. Investing cash flows included capital upgrades of $38 million, and notably, we also received $45 million in cash proceeds following the sale of the West Prospero in December. In the fourth quarter, we continued our share of purchase program, completing $100 million of share of purchases and our current $500 million authorization. Since initiating our share of purchase program in September 2023, we have returned a total of $792 million to shareholders through the end of the fourth quarter, reducing issued share counts by 22%. And now on to our outlook for the year ahead. The operational updates highlighted earlier in the assignment will adversely impact first quarter and full year 2025 EBITDA by approximately $55 million. Importantly, these matters are now behind us. We anticipate total operating revenues between $1.3 billion and $1.36 billion, which excludes reimbursable revenues of $35 million. We anticipate adjusted EBITDA in the range of $320 to $380 million, with full year capital expenditures in the range of $250 to $300 million. I'd like to take the opportunity to provide some insight into the assumptions underpinning the guidance ranges provided. First, I'd like to highlight the midpoint of our 2025 revenue guidance includes $1.2 billion, or approximately 90% of contracted backlog. Any additional backlog, a cappella, beyond completion of the recent contracting career, would be incremental to the midpoint of guidance. And we continue to characterize the Savant Louisiana as a show me rig, forecasting revenue only when we have a clear line of sight. Additionally, full year 2025 adjusted EBITDA includes a non-cash net mobilization expense of $27 million. And finally, turning to capex, the guidance range provided includes some rollover capex from 2024 into 2025, and $20 million of long lead items following the recent contract awards for West Jupiter and West TELUS ahead of their 2026 contract commencements. The actions we have taken to date provide a solid platform to protect against market volatility. We closed 2024 with a robust balance sheet and strong cash position. Recent contract awards have added durable backlog at favorable margins that will benefit earnings and cash flows beginning in 2026. With that, back to you, Simon.

Thanks Grant. In closing, we are proud of what Cedar Road accomplished in 2024. It was the year in which we saw four drill ships reintegrated into our fleet. The rationalization of our benign jackup assets, including the sale of the Qatar rigs and the West Prospero, and the delisting of our shares on the Oslo Stock Exchange. We have executed our strategy to be a pure play floater company with the right rigs in the right regions. We've increased our net backlog by delivering superior performance and operational innovations, and we have robust backlog, both in terms of total amount and profile through time. We remain focused on delivering safe and efficient operations to our customers and look forward to 2026 when we will see the benefit of contract repricing. Thank you to our dedicated employees onshore and offshore for your commitment to excellence that continues to drive us forward. Thank you to all of our valued customers, trade partners and shareholders for your continued support. With that, we'll open the line for questions. Operator?

Thank you. Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone to ask a question, press star followed by the number one on your telephone keypad. As we enter the question and answer session, we advise that you please limit your input to one question and one follow up. If you would like to withdraw your question, please press the pound key or star two. One moment please for your first question. Your first question comes from the line of David Smith of Pickering Energy Partners. Please go ahead.

Hey, good morning. Thank you for taking my call. My question. Good morning, Doug. Hey, it's Dave. Yeah, Dave Smith. Any caller you can provide on the 50 days of downtime in Q1 for the TELUS? I mean, was there an incident, a stricter interpretation of existing rules or something else? And is there any theme you're seeing among the other impacted rigs that you could proactively address to minimize potential for additional regulatory NPT in Brazil this year?

Yeah, thanks, Dave. Simon here. Yeah, we did in fact incur 50 days of downtime on the West TELUS. The rig's back in operation now. The regulatory environments are, you know, by their very nature, dynamic through time. So the rules haven't changed, but rather the regulations, the regulators interpretation of the rules. So we were able to recover quickly, but, you know, getting clearance was a much more protracted process in terms of the to and fro. So, you know, we're working with our clients and also the regulatory bodies to understand and navigate these, you know, these new regulatory expectations.

Okay, appreciate that. And if I could, wanted to circle back to the litigation issues from the remarks, I wanted to make sure I heard right if that claim from Petrobras related to the SETE rigs, was that $213 million? And if so, I wanted to ask if this is, you know, an entirely new claim, you know, have similar claims related to the SETE rigs, you know, come up in the past? Just recognizing this was from a very long time ago, so wondering if there's any relevant, historical context here?

Well, we were as surprised as you are, Dove. You know, as mentioned in the prepared comments, there are caps in the drilling contracts that limits the penalties to 10% of the contract value. Each of the contracts for the three SESHEA rigs were the 15-year terms and valued around about 5 billion reos per rig at the time of execution. Because the ongoing nature of the dispute, you know, we can't provide any more additional information at this time. We're in the early stages of understanding what it means, and we intend to look at all possible defenses to these claims, including, you know, wherever that might take us. So, yeah, we're in the early stages of understanding where this is and how long it might persist for.

Alright, I appreciate the color. I'll turn it back.

Thanks, Dove. Your next question comes from the line of Kurt Halyard of Benchmark. Please go ahead.

Hey, good morning,

everybody. Morning, Kurt.

So, Simon, maybe kind of start with you and if it carries over to Samir, that's great too. So, can you give us or can you characterize or how can you characterize, you know, the tone and tenor of conversations that you've been having, you know, with certain clients with respect to, you know, their outlook for project economics and in connection with that, right, there's been recent discussion from some of your peers about an acceleration in contracting activity, particularly as we get into the middle of 2025. And those are for projects that are supposed to start either 25 and then more so in 26 and 27. But very much curious in terms of how you characterize the nature of the discussions and the tone and tenor related to those.

Yeah, sure. Well, perhaps let me start and then see if we can get into the detail. But, you know, I think an interesting feature of recent conversations and activities in fact is that we're seeing more expiration on a relative basis. We did a bit of a straw poll recently and around about 30% of our rigs are currently drilling expiration wells. That's a big change from recent years and I think that's a significant factor to bake into how you might see the market going forward. The immediate outlook for 2025 is a bit cloudy. We don't know yet how long the weakness is going to persist. I believe that it's time bound and that once we get into 2026, we'll see a rapid improvement as the deferred demand starts to intersect with a long-standing inventory of major projects that have passed FID and committed to other critical long lead items like FPSOs and trees and surf support equipment, but where they've yet to select a rig. So, you know, I think that's what underpins our optimism and that of our peers. But, you know, Samir, anything to add?

Yeah, I completely agree with Simon. And I'd say, you know, as we look at the market, you're starting to see clients FID programs for starts in 26 and 27. So, you know, that demand is starting to swell back up. You know, in terms of economics, Kurt, your question, wells are economic at current levels and even significantly lower oil prices, right, or commodity prices. So, I think it's not just the economics of it, it's the getting the long lead times ordered and kind of placed. So, we're seeing FPSOs, flow lines, well heads, all the precursors to the things that we, you know, a client would need to drill a well are kind of in flight now and you're starting to see the FIDs follow it.

Gotcha, gotcha. Hey, just for your reference, you know, FTI was out earlier today and they talked about a high degree of visibility on FID for subsidy projects out through 2030, which I have to imagine there's still a number of those projects that are yet to be kind of drilled or so on. So, I would think that's a positive commentary, you know, with respect to your business as well. Now, separately for Grant, Ken, I appreciate the revenue and EBITDA got its numbers for the year. I was hoping that you could give a little bit of color maybe around the progression, you know, first half versus second half, how you would weight that dynamic and also if you could give us a little bit of color on, you know, on your expectation for operating expenses for the year.

On the timing of the EBITDA, look, we don't break down by quarter because there are a number of factors impacting that. I would say that there's more EBITDA, I think like Q1, we're going to wait for a lot of the Neptune and the Polaris to come back. So, Q1, perhaps slightly weaker, Q2, we got a fuller fleet working. And then toward the end of the year, there's some, and certainly we said in the prepared remarks, Capella and Louisiana are foamy rigs, quote unquote, and so to the extent that we pick up work there, there could be upside, if that helps you. And then, Kurt, what was the other question? It was... No, just

so you know, just give us a general sense on what we should be, for what you guys are thinking in terms of operating expense on a four-year basis.

Yeah, look, I think OPEX, you know, if you just break it down, the key KPI we look at per day operating expenses, circle 150k per day across the drill ship fleet. That includes OPEX overhead, but excluding SG&O overhead and excluding any sort of integrated service costs.

Okay, great. Thanks, guys. Appreciate it. Thanks, Kurt.

Your next question comes from the line of Greg Lewis, BTIG. Please go ahead.

Yeah, hi. Thank you and good afternoon and thanks for taking my questions. You know, Greg, I guess just following up on Kurt's question, as we think about the OPEX, and I guess this is a two-part question, so I apologize. As we think about the OPEX budget that you have for 2025, how should we think about, you know, a rig that maybe doesn't have a line of on work like the Capella, how we should think about you managing that, at least in the guidance. And then on another note, it seems like other companies have, you know, have kind of looked at some of their, you know, non-core rigs and decided to retire those. You know, not that we're going to retire any rigs this year. Maybe we will, maybe we won't. But as we think about any kind of color you can give us around the, you know, if we looked at the non-, the stacked fleet, like what's that, you know, quarterly or annual run rate on the cost of those stacked vessels?

Yeah, thanks, Greg. Look, I'd say, you know, for Capella, as an example, we're going to be stackable and then to the extent we don't have clear work, we're going to stack that. And then to get to the crux of your question, stacking costs, you're looking at a one-off cost of circa $6 to $10 million, depending on what region of the world and where it's going to be stacked, and then a run rate of approximately $5,000 per day.

Yeah. In relation to the quality of the assets, and Greg, what I'd say is that there's been a lot of speculation around the durability of sixth-generation rigs and, you know, there's a broad spectrum of capability across the sixth-generation fleet, and the very best sixth-gen drill ships, for example, are pretty much comparable to the latest generation, seventh-generation drill ships. So we have three units in that category, the Polaris, the Gemini and the Capella, but they're rigs that are equipped with dual derricks, and, you know, they have room for a second BOP, they can take MPD, and we have an ability to upgrade certain aspects of their dynamic positioning system, as we mentioned earlier, too. So, you know, I think the concern about, you know, what the future is for, you know, for that class of rig, I think is much less of a factor for our fleet than it is for some of our competitors.

Okay, great. And then my other question was around Brazil, but maybe I'll ask it a little differently, and maybe I'm dating myself. But yeah, right? I mean, I feel like we've seen this before where it seems like AMP is, I don't know what's going on, but it seems like they are being more diligent around rig working. I don't even know how to frame it, but it seems like they're looking to put rigs off higher more so than maybe they have in the last couple years. Has there been any change we need to be aware of at AMP that maybe is driving this, just simply because it does seem like it, you know, and it's not just, and I'm delicate to the fact that I think you guys have six rigs with across Brazil and Ecuador and Brazil, but it doesn't seem like this specific to sea drill.

No, no, it's affecting the whole industry. There's been a handful of rigs that have been affected. We obviously listen very carefully to the directions that we get from the regulator. And we've worked in a lot of regulatory regimes around the world, including highly regulated places like Norway. So we understand that their focus can shift through time, and you need to listen carefully and respond positively to that. So there has been some disruption. We'll have to wait and see as to sort of where it goes from here. But we think we have an understanding of where their current focus areas are, and we're well positioned to respond. So this is not unique to Brazil. We see it from time to time in other marketplaces as well.

Okay, Super Apple, thank you very much.

Thanks, Greg. Have a great day.

Your next question comes from the line of Frederik Steen of Clarkson Securities. Please go ahead.

Hey, Simon and team. Hope you are well. Thanks for the commentary, the guidance and also the additional code on the litigation. I think most of my questions around that has been answered already. But given the state that the industry is in right now, where there's high degrees of uncertainty around 2025 and 2026, particularly in the very near term of that, fleet adjustments, as you've done, as some of your peers have done, but also the ever recurring question of M&A or other strategic initiatives appear equally as much now as before. So I wanted to get your high level thoughts around where do you see Seagull in that landscape right now? Do you think the sell-off broadly in equities for drillers have made new rounds of transactions easier or harder to get through? Did you feel like you are a company that could be acquired or that you're a company that could acquire someone else now that you're effectively done streamlining it on fleet by selling off the non-crasters?

Thanks. Obviously we're not going to comment on anything specific to us relating to M&A, but in abstract what I would say is that I'm a long-standing proponent of industry consolidation. I think there are too many subscale drillers who aren't resilient enough through the business cycle. We are one of the larger guys and we look at the impact of the revenue disruption we've experienced this quarter. So 2025 is going to be a difficult year for the industry in general. I think everyone's pretty much been impacted to roughly the same degree, but I would expect that we need a period of stability at whatever market level to allow any deal making to take place without either party feeling disadvantaged. So that's what I'd say on M&A generally. At the moment everyone's focusing on running their businesses as best they can and seeking to navigate this period of uncertainty.

Yeah, that's helpful. And then one quick one turning back to Brazil and the regulators. ANP, to my understanding, had new leadership last year and they seem to have been a bit more scrutinizing for the last six to nine months as evidenced by the number of that. But again, high level, I wouldn't even though ANP is independent, it's hard for me to envision that they can regulate the Brazilian oil industry to death. But obviously, new stock makes already concerned investors even more concerned. So you think this is ANP trying to prove a point now in the new leadership or do you think this is the new standard that you have to adhere to on an ongoing basis? And by an extension of that, capex requirements, anything kind of changes in terms of the cost to run the rigs in Brazil on the back of that?

Yeah, well, what I'd say is that I think there have been some leadership changes, but we're still waiting confirmation of some key positions as well. That's awaiting a confirmatory hearing in the Senate in Brazil, I believe. So there's still some more to come, I think, until that is complete. Only then will we understand what the way forward looks like. At the moment, like I said, we've just tried to work with our customers. We don't deal directly with the regulator. We stand behind our customers and it's the customers who make the submissions to the regulator. So we lack a little bit of intimacy in the process, to be perfectly honest. But my feeling is that I'm hoping this is just a flurry of activity and we'll soon be able to understand the new areas of focus and we'll adjust and we'll go back to operation as normal. But at this point, it's too early to tell.

Yeah, well, but that's a good color in any case. I appreciate the comments, guys, and have a good day. Thank you.

Your next question comes from the line of Ben Nolan of Stifl. Please go ahead.

Yeah, I appreciate it. Maybe this is for Graham or Simon, however. As it relates to your buyback program, obviously, you guys have been pretty active on that. Although here we see the share price down a bit. Given your commentary about just sort of the outlook for 2025 and maybe even some of this litigation stuff, at this point, still a good balance sheet. Do you think about when the share price is lower, we really double down on buying back shares or is there an element that we're just given the uncertainty you need to be a little bit more cautious?

Maybe I can start at a high level, Ben, and then I'll pass to Grant. Obviously, there's a bit of uncertainty in the market, certainly through 2025. We'll see if that extends into 26. So cash conservation is obviously at the front of our minds. That said, and as a point you make, the shares are trading very attractive levels relative to what we believe to be our intrinsic value. So we have an outstanding facility of around about $208 million for share repurchases, but we'd need to consult closely with our board before we acted, given the environment. It's an active discussion through time and we consult on a real-time basis. But perhaps, Grant, you want to add some power to that?

Yeah, I think you got it right, Simon. I think what I'd add, I've talked about our finance policy on other calls, which at a high level is sound balance sheets, comfortable liquidity projections and a net leverage ratio target of one time is kind of first step in the hurdle. And then to the extent we got cash at the bottom of the waterfall, looking at the creative capex and or buybacks. What I'd say is that finance policy, the inputs that go to it are not static. They're checking in and evaluating at regular points in time going forward.

Okay, I appreciate that. And then this is a little bit maybe bigger picture, but it seems as though we're increasingly hearing from particularly oil majors and the likes of de-emphasizing some of their alternative energy policies and moving back more towards traditional oil and gas. I don't know, Simon, if you could just sort of understanding that these things take time to play out, but as you are seeing the likes of, I think the most recent was BP talking about re-emphasizing traditional oil and gas, how long does that take? How long did it take before it drives actually business for you guys in terms of that focus? Any thoughts there?

Yeah, look, it's difficult to know. I mean, I think the calorific value of a barrel of oil has been underappreciated of late and it's good to see some common sense start to prevail in terms of how our principal customers are allocating capital. We believe that we're seeing some of that shift in expenditure already and it'll only intensify given the actions of people like BP here in recent days. There's also a lot of people talking about the change in the US administration. We believe that the lower 48 drillers are the principal immediate beneficiaries of that, but the offshore drillers are continuing to benefit from what is a much more powerful and longer term pattern of preferential investment in deep water reservoirs relative to land because that's where the volumes and the flow rates are. So I think it's good for our business, but in particular, the shift in investment patterns is particularly good for the offshore deep water business.

Yeah. All right. Well, I appreciate it. Thank you.

Cheers, Ben. Thank you.

Your next question comes from the line of Noel Parks at Two Wee Brothers. Please go ahead. Hi,

good morning. Good morning. Apologize if you touched on this already, but I just wondered, from the customer standpoint, it does seem that the 2025 experience has made pretty clear that in fundamental terms, they're just not afraid of kind of kicking the can down the road and coping with wherever prices might be, assuming that we have a rebound activity this year in the 26th and 27th. So in just discussions with them, are they simply just kind of blocking and tackling what's in front of them, or do you see any signs that if we see, say, a trend up in day rates, that some of them might be inclined to be a little bit more aggressive on maybe a little further out contract term?

Sure. This is Samir. It depends on the client. Some are blocking and tackling. Some of the more nimble clients that can kind of react a little more quickly if they start seeing day rates move upward again. They've already said that they're planning to come back to market pretty quickly. So I think you have the full spectrum there of some clients absolutely blocking and tackling. Some are a little more, can get back to the market quickly. But I think beyond that, for us, as we talk to our client base, they know they need to start drilling in 2026. And back to that, there are FID projects. You're seeing this upswirl of demand coming in 26 and 27 that's layering on top of the baseline demand that we were already expecting. So you have a bit of a compounding effect that we're expecting to happen over the next 18 to 24 months.

Great. And to the degree, it's still not huge, but there are signs of the industry dipping its toe a bit more into exploration. I'm just wondering, to the degree you talked to the people around their future planning, is there any sense that maybe customers are looking to go more top of the line with the drills they're doing for slightly higher risk projects or attempting to be maybe a little bit more conservative and maybe not be so demanding of the latest features and so forth?

Look, I think some good headlines on the exploration piece are that ANP in Brazil recently emphasised the importance of exploration in their new licensing realm. So that was a real focus of what they were saying to people making applications. Pre-salt production in Brazil declines from 2030. So they have a lot of work to do to fill the ullage that will be created from those natural decline curves. And the reason I mention Brazil is that they are obviously the biggest player in the deep water market. And what they're seeing, what they're experiencing is true for all the IOCs and indeed the smaller players around the place. So I think one of the big issues is that the exploration departments of our principal customers, they take time to build and it takes time to generate prospects. They don't have a magic filing cabinet full of information. So it does take a while for intent to translate into activity. But we are starting to see that, as I mentioned earlier, we've got a much larger proportion of our rig fleet now engaged in exploratory work than we've certainly seen over the last 10 years. So we're quite happy with it. We think that's an important theme. And again, it's one of these many factors that underpins our optimism about the market, notwithstanding that 2025 is going to be a bit of a tricky year. Great. Thanks a lot for the perspective. Pleasure. Thank you. Thanks for the question.

Your next question comes from the line of Josh Jane of Daniel Energy Partners. Please go ahead.

Thanks. Good morning. I just really had one company specific question that I wanted to dive into. So when you look back at 2024 in totality, you guys executed on a number of initiatives just between the asset sales, simplifying the structure of the company, bought back a lot of stock. I think obviously the answer would be, you know, everyone wants to contract more rigs in a trillion days. But maybe just as you look into 2025, what are the main things that you're focused on internally as a company on executing this year to best position the company going forward?

Yeah, well, I think the number one priority at Cedral is always improving our safety performance. We had a pleasing turnaround year in 2024 there, but there's much more work to be done. So there's a lot of energy in the organisation from the top to the coalface on how we might improve outcomes in that really important aspect of our business. So that's a focus area. Obviously, we haven't got off to the best start in terms of our revenue performance. So with that, we need to keep laser-like focus on the cost base. So we have a number of initiatives that we're looking at across the business to continually adjust and improve what we do on the cost side. A number of projects in a range of areas. I think for people who have been in the industry a long time, one thing that you never lose sight of is the importance of being a low cost operator. And unfortunately, the industry has had a, you know, a dubious history of not doing so well in that regard as the revenue side of things improves. That's not going to be the case at Cedral. So we're committed to having an agile, efficient organisation. And we've got a lot of projects that we're looking at right now that we believe can materially improve the cost base from where it is today.

Thank you very much. I'll turn it back.

Thanks, Josh.

Your next question comes in.

What is the true possibility of the Capella and Vela being re-contracted this year? And specific to Capella, when would you think that you would make a decision to stacking it for the time being?

Sure. I'd say, you know, if we look at the Capella, in my prepared remarks, I mentioned we are chasing multiple opportunities that start middle of this year to late, or second half of this year. So, you know, we're still chasing those. If we don't see clear line of sight of being able to achieve one of those, I think we will take the steps necessary to stack the rig. So, you know, it is a evolving situation, but it's not going to take us months or quarters to figure out. We're going to figure that out here in the next, you know, weeks to days. So that is already happening. In terms of the Vela, you know, we were able to add 40 days on the existing program, which is a great achievement. We were able to conquer that well pretty quickly. So, you know, it gave us the ability to add more term at a very good rate. So, you know, given that performance, we do think that we can continue to market that rig in the Gulf of Mexico and other places if necessary, but our intention is to keep her in the Gulf, and we're already in active dialogue on additional work for that rig.

Okay. And then my last question was just on the arena in Brazil. This one did not get an extension. Is there anything specific to that rig that there was a reason or is that related to your ongoing, you know, I'll call it dispute Petrobras for, you know, what happened 12 years ago?

No relation whatsoever to what's going on with the dispute with Petrobras. That rig, you know, Petrobras only took two rigs that lot, and so we won those two rigs in various lots. So, for us, you know, we are still looking at other clients potentially in Brazil. Petrobras is obviously an option to keep the rig working. We do expect that Petrobras will be out for more rigs, but beyond Petrobras, you have other clients, and we do have some short, you know, one-well, two-well opportunities to fill gaps in Brazil, but we're not limiting ourselves just to the Brazilian market with the Carina, right? She is a true seventh generation rig. She's capable of dual activity, you know, able to take two BOPs on. So, we have the ability and the ability to market that rig wherever we want in the world.

Okay, thank you.

Thanks. There are no further questions at this time. With that, ladies and gentlemen, that concludes your conference call. We thank you for participating and ask that you please disconnect your lines.