Expro Group Holdings N.V.

earnings presentation. My name is Emily and I'll be coordinating your call today. After the presentation, we will be taking any questions which you can ask by pressing start followed by the number one on your telephone keypads. I'll now turn the call over to Quinn Fanning, Chief Financial Officer. Please go ahead.

Welcome to Expro's third quarter 2023 conference call. I am joined today by Expro CEO Mike Jarden. First, Mike and I have some prepared remarks and we'll open up for questions. We have an accompanying presentation on the third quarter results that is posted on the EXPRO website, expro.com, under the investor section. In addition, supplemental financial information for the third quarter and prior periods is downloadable on the EXPRO website, likewise under the investor section. I'd like to remind everyone that some of today's comments may refer to or contain forward-looking statements. Such remarks are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements. Such statements speak only as of today's date and the company assumes no responsibility to update forward-looking statements as of any future date. The company has included in its SEC filings cautionary language identifying important factors that could cause actual results to be materially different from those set forth in any forward-looking statements. A more complete discussion of these risks is included in the company's SEC filings, which may be accessed on the SEC's website, sec.gov, or on our website, again, at expro.com. Please note that any non-GAAP financial measures discussed during this call are defined and reconciled to the most directly comparable GAAP financial measure in our third quarter 2023 earnings release, which can also be found on our website.

With that, I'd like to turn the call over to Mike. Good afternoon, everyone. As Quinn noted, we posted slides with Q3 highlights to the EXPRO website. We'll refer to several of these slides during our prepared remarks today. In my remarks this afternoon, I'll begin by reviewing the third quarter financial results presented in today's earnings release. I'll also discuss the overall macro environment, which we believe supports a favorable multi-year outlook for energy services and the international and offshore markets to which EXPRO is most levered. Clayton will then share our revised outlook for the fourth quarter and full year 2023. As highlighted in our press release, third quarter revenue was $370 million and adjusted EBITDA was $50 million or 14% of revenue. Adjusted EBITDA for the three months ended September 30th includes $15 million of LWI related demobilization and other unrecoverable operating costs. Excluding such costs, the adjusted EBITDA would have been 66 million or 18% of revenue. Our net loss for the third quarter was $14 million or $0.13 per diluted share compared to a net income in the second quarter of $9 million or $0.08 per diluted share. Adjusted net income for the third quarter of 2023 was $6 million or $0.06 per diluted share compared to the second quarter adjusted net income of $19 million or $0.17 per diluted share, primarily reflecting lower adjusted EBITDA. Our third quarter was a challenging quarter with headline results and several discrete issues masking what we believe to be a favorable long-term outlook and good business momentum for Expro. We acknowledge headwinds in certain geographies and several Expro specific challenges as well, all of which we are addressing with appropriate urgency. We also want investors to understand underlying business trends and what we are doing to capitalize on these trends. As a recap, on September 27th, we issued a press release describing an incident offshore Australia that occurred on September 19th that involved our vessel deployed LWI system and our suspension of vessel deployed LWI operations. We have not yet recovered our equipment, but we are coordinating recovery operations with our customer and other stakeholders and expect to recover our equipment within the next several months, after which we will then be able to determine the time and cost required to return our LWI system to operational status and a path forward for our vessel-deployed LWI business. We believe that there is strong customer demand for cost-effective subsidy interventions and vessel-deployed light-well solutions, and that the value proposition for our technology is compelling. Less clear at this point is the best service delivery alternative and most appropriate apportionment of commercial risk amongst stakeholders. As we gather additional information and refine our go-to-market strategy, we will try to be as transparent with investors as circumstances permit. Quinn will have some additional comments on this topic in a few moments. In addition to LWI-related costs, our third quarter results reflected reduced activity in our North and Latin America region. NLA results fell short of expectations for several reasons. First, revenue from our U.S. onshore tubular running services business, which is a part of our well construction product line, was down about 10% sequentially to approximately $7 million. continuing what has been a multi-quarter reduction activity and weaker pricing in the U.S. onshore TRS market. Overall, Expro currently generates less than 5% of its revenue from U.S. onshore TRS operations, but quarterly revenue is about 40% lower than our expectations when we prepared our 2023 budget. Similarly, the quarterly shortfall in contribution margin has been about $3 million. Consequently, we are simply not generating acceptable returns for this business. In our view, there's too much marketed TRS capacity in the U.S. onshore market and several competitors appear to be prioritizing market share more so than pricing. As a result, we have begun to rationalize our TRS operating footprint in the U.S. land market and to redeploy equipment to select U.S. basins as well as to international markets. While rationalizing costs and repositioning assets may take a few quarters, I believe we will achieve better utilization, pricing, and returns with a more focused U.S. onshore strategy. Second, consistent with recent comments from some of our public peers, Q3 results also reflected drilling-related softness in some of the offshore markets within NLA, which we believe will rebound over the near to medium term. In Mexico, a series of dry wells negatively impacted scheduled well test activity, which is captured within our well flow management product line. In addition, during the third quarter, several contracted rigs in the U.S. Gulf of Mexico and the Caribbean were undergoing maintenance or conducting non-drilling operations, which negatively impacted offshore TRS activity within the NLA region. Relative to expectations, the impact on Q3 revenue and contribution margin was approximately $17 million and $10 million, respectively, in NLA. As noted in our press release, sequentially lower revenue resulting from dry wells and rigged schedules should be transitory in nature, and we expect a rebound in NLA offshore activity in the coming quarters. Results for Europe and Sub-Saharan Africa, the Middle East, North Africa, and the Asia Pacific, excluding LWI, regions were generally consistent with what our expectations were in the quarter. Activities picking up and our business mix is trending in a positive direction. In addition to a number of technology awards that are highlighted in our press release, We had a number of operational and commercial highlights during the third quarter. In North and Latin America, we delivered a well cementing project for a large international operator in the U.S. Gulf of Mexico. Compared to offset wells, we saved approximately 18 hours of cement related drill out, clean out, and waiting on cement time. We are building momentum within our cementing technologies offering that was bolstered with the recent acquisition of cementing specialist Delta Tech. As we've discussed on previous earnings conference calls, Delta Tech supplements our offering of low-risk, open-water cementing solutions, including CURE technology, which allows customers to increase operational efficiency, reduce rig time and costs, and improve the quality of cementing operations. In the Europe and Sub-Saharan Africa region, our ENI Congo project designed, construct, operate, and maintain a fast-track onshore LNG pretreatment facility continues to progress on time and on budget with the first production scheduled for the first half of 2024. During the third quarter, the ENI Congo project team achieved 250,000 hours LTI free and long lead items have begun to arrive on site for assembly. We really appreciate the Congo team's dedication to safe and sustainable operations and best in class service delivery. The Congo facility expansion is designed to allow incremental gas production for low-carbon electricity generation. It will link to ENI's offshore floating LNG operations, supporting both the local energy market and increased global demands for LNG to help secure energy supplies back to Europe. In the Middle East and North Africa, Expro completed the first worldwide installation of our Kinley check valves using a non-explosive technology for an Omani customer that was challenged with a failed electric submersible pump on a production well. Following two successful runs and a gas lift simulation, the well achieved over 2,000 barrels per day production. We completed the first worldwide installation of our Kinley check valves using a non-explosive technology for an Omani customer that was challenged with a failed electric submersible pump on a production well. Following two successful runs and a gas lift simulation, the well achieved over 2,000 barrels per day production. Lastly, in the Asia Pacific region, we achieved 5.5 million man hours without a lost time incident, which is a tremendous testament to the Asia Pacific team's commitment to overall champion safety. Also in Asia Pacific, EXPRO's Octopoda annulus intervention technology was utilized to assist with remediation of sustained casing pressure for a major LNG project. Following the success of the work provided, Octopoda is now being used on a multi-well trial project. Octopoda is the only certified annual intervention system in the world that enables direct intervention of a live annulus without the expense of a heavy work-over rig and with a reduced environmental footprint. The system offers a safe and efficient method for addressing sustained casing pressure. It can be deployed to replace annulus fluid, increase hydrostatic pressure, and solve casing shoe leaks by placing sealing material on the bottom of the annulus. Utilizing a unique design, Octopoda is deployed on annulus inlets removing work-over-rig requirements, offering an alternative that can be rapidly deployed across all types of installations, both onshore and offshore, to maximize operational uptime while reducing overall HSE exposure. In terms of commercial activity, we started 2023 with a healthy order book, and I'm pleased that we have continued to build on this momentum. During the third quarter, we captured approximately $235 million in new contract awards, including an integrated service contract worth Russell Moore- roughly $30 million for a customer in Norway, in which extra will provide drilling well test subsea and our proprietary coho services again just as a reminder cohoes as a cost effective lightweight alternative to traditional cold tubing interventions. Russell Moore- Other notable contract awards during the quarter included several well test contracts in the Middle East, North Africa and well construction contract. and Europe, Sub-Saharan Africa for a customer with whom we are currently providing well flow management services. I will also note that where we have complimentary services and operating footprints, EXPRO is increasingly working with the larger energy services companies to deliver integrated solutions for our common customers, leveraging our reputation for safety, service delivery, and cost-effective innovative solutions. At quarter end, our backlog was approximately $2.4 billion or up approximately 6% from the June 30th period. In early October, we also completed the previously announced acquisition of PRT Offshore. And just as a reminder, PRT Offshore is a Houston-based company and is the only company that provides a complete hook-to-hanger solution, enabling comprehensive well completions, interventions, and decommissioning services from surface to subsea. Its unique system is designed to allow customers to access the well more safely and efficiently, all while reducing the number of personnel on board. The PRT acquisition will enable EXPRO to expand our portfolio of cost-effective technology-enabled services within the subsea well access sector in the North and Latin America region, and also to accelerate the growth of PRT offshore surface equipment offering in the Europe and Sub-Saharan Africa and Asia Pacific regions. As was noted in our press release, October 1 marked the second anniversary of our completing the business combination of EXPRO and Franks International. In addition to broadening our services and solutions offering and leveraging complimentary operating footprints and customer relationships, the Expo Franks merger has allowed us to substantially reduce support costs and improve the combined company's operating leverage in advance of an anticipated upcycle. Over the last five quarters, support costs have averaged 20% of revenue and improvement of approximately 10 percentage points relative to pre-merger overheads. Over the same period, capital expenditures have remained within our guidance range of 7% to 8% of revenue. As we progress through what we believe will be a multi-year growth phase, cost and capital discipline should result in margin expansion and a step change in free cash flow generation. Also in October, Quinn and his team reached an agreement to amend our revolving credit facility and extend the maturity of the facility for a further three years. Total bank commitments are $250 million, of which two-thirds is available for drawdowns as loans and one-third is available for letters of credit. EXPRO can increase the facility size to $350 million, utilizing a conventional accordion feature. We very much appreciate the support of our bank group during the amend and extend process and their vote of confidence in our business plan. On September 30th, a $50 million draw was placed on the facility in anticipation of closing the PRC offshore transaction $35 million of which was repaid this week. Total liquidity, including cash on the balance sheet and borrowing capacity under the amended credit facility, is currently in excess of $350 million. Turning to our outlook for the remainder of 2023 and into 2024, we expect the energy services market to further strengthen as oil demand continues to increase with consumption expected to reach an all-time high of more than 102 million barrels per day in the fourth quarter of 2023. With positive macroeconomic data from China and a continuing stabilization of U.S. and European economies, demand is forecast to further rise in 2024. Against this, supply remains constrained following the announced production cuts from OPEC Plus and additional voluntary cuts by Saudi, resulting in a liquids market that is in balance if not trending towards a deficit. As of now, supply-demand fundamentals are supporting the recent rise in oil prices, with EIA revising upwards their average Brent price forecast to $84 per barrel in 2023 and $95 per barrel in 2024. The impact on both supply and demand and conflicts in Europe and the Middle East, of course, remains a key risk factor for the energy services industry as well as the overall economies. In the gas markets, Robust stores in Europe and slower demand growth in Asia have eased upward pricing pressure, resulting in a global gas market that remains in an uneasy near-term equilibrium, seemingly tied to winter demand in the Eurozone. As with liquids, the ongoing conflicts in Europe and the Middle East increase near- to medium-term risk for supply and demand and gas prices. Longer term supply demand dynamics, energy security, and diversification of supply considerations support continued investment in LNG as a structural source of low carbon electricity generation and a critical transition fuel on the path towards global net zero. Strong and generally stable commodity prices are allowing operators to reduce debt, increase investments in conventional and renewable resources, and increase distributions to shareholders. Consequently, our sense is that operators, Particularly the IOC, but increasingly the NOCs too, are taking a balanced portfolio-type approach to their medium-term spending plans, which we expect will result in a steady but a more sustainable upcycle. Operators are prioritizing projects with high and sustainable returns with significant emphasis on both cost and carbon intensity. While the recent announcements by ExxonMobil and Chevron highlight the premium operators place on scale-based economies, There is also recognition that if global liquids demand will remain above 100 million barrels per day, at least through 2030, significant investment is required to replace produced reserves. Operators' desire to maximize production from existing well stock and reduce emissions is driving increased demand for our production-related activities within our well flow management and well intervention and integrity product lines, especially across the Asia Pacific and Latin America regions. Perhaps more importantly, despite some near-term macroeconomic uncertainty, long cycle development, and particularly deep water development, is generally cost and carbon advantaged, and offshore project sanctioning has grown significantly in 2023 with further growth expected in 2024 and a robust pipeline of projects poised to be sanctioned between now and 2030. The growth in our backlog reflects positive trends in international and offshore markets, especially across our Europe and Sub-Saharan Africa, Asia Pacific regions, and in Latin America and the Caribbean as operators look to progress new developments such that we have observed in Norway, Angola, India, Indonesia, Brazil, and Guyana. In recent investor meetings, I've noted that Africa has been underrepresented in the recently sanctioned projects. If, as I suspect will be the case, we see additional projects sanctioned in Africa in 2024 and 2025, That will be a sign that the current growth cycle will likely have legs into 2027 or beyond. This combination of increasing investments and sanctioning is driving demand for our services and solutions, especially within our well construction, subsea well access, and elements of our well flow management businesses, for which we expect good growth in 2024 and beyond. In support of the industry's sustainability goals and demand for low-carbon energy sectors, we're also seeing additional activity in the geothermal sector, and increased investment in carbon capture, use, and storage projects, further indicators of a growth of expected growth in offshore activity and a positive long-term outlook. Despite the positive macroeconomic outlook and robust commodity pricing, the number of mature assets reaching the end of their economic and environmentally sustainable life also continues to increase. This is underpinning increased activity, particularly in Europe and the Gulf of Mexico, in the decommissioning market and additional demand for cost-effective plug and abandonment solutions, which we expect will become a growth driver for the energy services industry and EXPRO overall. A significant increase in global activity and capacity constraints across the energy services sector, both for people and equipment, should support net pricing gains for value-adding service providers over the next several years. As a result of EXPRO's global operating footprint and differentiated offering across our product lines, we should be able to extract more value from our services and solutions. All combined, the outlook for Expro and the broader sector remains quite positive. With that, I will hand the call over to Quinn to discuss our updated outlook for the fourth quarter and the full year 2023. Thank you, Mike.