Akastor Asa Asa

Good afternoon and welcome to the presentation of Akastor's third quarter results. My name is Eivind Polske, CFO, and I'm joined today by our CEO, Mr Karl-Erik Kjellstad. We are also pleased to have HMH with us from Houston, represented today by Eirik Bergsvik, CEO, and David Bratton, SVP Finance. As usual, Calle will begin with some key highlights, followed by Eirik and team who will present the HMH update. I will then take you through Akastor's consolidated financials before handing it back to Calle. Toward the end, we'll open for questions through the web-based Q&A solution where you can post questions at any time.

With that, I'll turn it over to Calle. Thank you, Eivind, and good afternoon and good morning to our US participants, and thank you so much for joining us for this earnings call. Let us start on slide two with the key highlights for the third quarter. Acosto continues to be in a solid financial state. We have a positive net cash position and no draw on our corporate RCF. With this, we are very pleased to announce another cash distribution to our shareholders, this time NOK 0.4 per share, supported by the realization of our holding in Oddfed Drilling. This is aligned with our strategy to return excess capital to shareholders while maintaining a sound capital structure. Turning to HMH, the company continues to deliver robust financial performance and demonstrate resilience, even in the challenging offshore drilling market. Despite headwinds affecting service activity and spare part sales, HMH achieved a adjusted EBITDA of US$42 million, a solid quarter with a margin of 19%. Importantly, the company also delivered a strong cash flow, underscoring the quality of its operation and its ability to generate value also in a demanding environment. The value of our shareholding in HMH now represents 77% of our total net capital employed, with a book value of NOK 3.4 billion at the end of the third quarter, or NOK 12.5 kroner per Acosto share, somewhat higher than last quarter due to positive earnings in the period. Then, Arcov's offshore. Arcov's Santos vessel was formally awarded the four-year MPSV contract in the quarter, expected to commence in January 2027, safeguarding long-term earnings for Arcov's. Arcov's earnings for the quarter were impacted by the planned 45-day yard stay required to complete the five-year classing of the Arcov seafarer vessel. Except for this scheduled yard stay, all vessels, including Seafarer, delivered strong operational performance. It is again worth noting that our current book value of ARCOVS, where the value related to our equity holding in the third quarter was reduced to nil, reflects a conservative measure driven by historic costs and the company's negative earnings to date. This does not in any way fully capture the underlying asset value of Akofs. We continue to see significant upside potential and remain focused on ensuring this value is increasingly recognized and understood. DDB Offshore, all vessels recorded 100% revenue utilization through the quarter, delivering an EBITDA of NOK 43 million. The book value for our investment in DDV Offshore stood at 1.2 NOK per Acosta share, based on an average book value per vessel of $11 million. Finally, the third quarter, we completed the sale of our remaining shares in Onfed Drilling, in line with the Acosta strategy of realizing assets to enable capital distribution to shareholders. This transaction generated proceeds of NOK 118 million in September, bringing the total proceeds from the sale of Oddfell shares during 2025 to NOK 222 million. Slide 2. I would like to have a few more comments on the Oddfell investment. Back in 2018, we in Acosto made initial investment of 75 million US dollars in Ordfeld Drilling through a preference shares and warrant agreement structure, supporting the acquisition of Stena Midmax that today is called Deep Sea Norcap. In November 2022, we sold the preference shares back to Ordfeld Drilling for 95 million dollars while we retained the warrants. In May 2024, we exercised these warrants and received just over 3 million ordinary shares. And during the second and third quarter of 2025, we realized these shares generating, as mentioned, 222 million Norwegian kroner. All in all, these investments have delivered a total return of about 750 million kroner, corresponding to 2.2 times multiple or an IRR of about 19% in Norwegian kroner terms. Needless to say, we are pleased with the outcome of this investment and also a bit sad to sell the shares as we have great belief in Ordfeld Drilling going forward, but we are pleased to be enabled to get another distribution to our shareholders following the realization. With that, I'm pleased to introduce HMH CEO, Erik Bergsvik, that will take us through HMH third quarter results. So Erik, the word is yours.

Thank you, Coleric. Good day, everyone, and thank you for joining us on the call. I'll begin by sharing a summary of our third quarter highlights and then provide some perspective on our current market conditions. After that, David will take us through the financials in greater detail. Starting with our results for the third quarter, we reported revenue of $217 million, which is up 3% year on year. Our EBITDA for the quarter came in at $42 million, representing an increase of 8% compared to the same period last year. but up 16% versus prior quarter. This resulted in an EBITDA margin of 19.3%. Our performance this quarter on cash was strong. We generated 35 million in unlevered free cash flow this quarter, primarily driven by improvements in working capital management and the collection of project milestone payments. Order intake for the quarter totaled $171 million, down versus last year, as expected, as offshore activity works through the current white space. I want to take a moment to thank the global HMH team. Our team continues to work hard to advance our strategic initiatives focused on strengthening margins and driving operational efficiency. This is positioning as well for the continued growth in the future. Now turning to current market conditions, we are seeing continued signs of stabilization and improvement in broader contracting and utilization trends with deepwater offshore markets, benefiting both our customers and HMH. Speaking with our customers, despite the pipeline for early 2026 jobs still being limited, they are seeing significant opportunities for contract activity in mid-2026 and early 2027. Provided oil prices remain reasonably stable, our customers are anticipating a gradual move toward a tighter market with improved backlog as we approach the inflection point sometime in 2026. With that, I'll hand it over to David to walk through the financials in more detail.

Thanks, Arik. I'll begin with the total company results and then move into the segment details. Revenue for the quarter was $217 million, up 3% year on year and up 7% quarter on quarter, primarily due to aftermarket services, partly offset by a decrease in projects and products. Adjusted EBITDA in the quarter was $42 million, down 8% year on year, primarily due to spares and product volume, partly offset by an increase in contract services, an increased 16% quarter-on-quarter driven by contract services, and a rebound in spares from prior quarter, partially offset by a decrease in projects. The adjusted EBITDA rate was 19.3% in the quarter. Orders for the quarter were $171 million, down 12% year-on-year, and down 1% quarter-on-quarter driven by a reduction in projects and spare parts due to the continued white space in the offshore market, This was partially offset by an increase in service orders. Finally, on cash flow, unlevered free cash flow in the quarter was positive $35 million in the quarter, driven by project milestone collections and strong working capital management. We ended the quarter with $57 million in cash and cash equivalents on hand. Next, I'll walk you through the product line results in more detail. In aftermarket services, revenue was $105 million in the quarter, up 26% year-on-year, and up 14% quarter-and-quarter driven by contract services. Aftermarket service order intake was $99 million in the quarter, up 42% year-on-year, mainly driven by contract services, partially offset by lower field service and repair activity. Quarter-and-quarter order intake increased 25%, supported by digital technology orders and contract services, with some offset from field service and repair activity. Spares revenue was 58 million in the quarter, down 6% year-on-year, driven by softer global offshore activity, but up 12% quarter-on-quarter due to higher output of our topside spares volume compared with the prior quarter. Spares order intake was 56 million, down 18% year-on-year, and down 13% quarter-on-quarter, driven again by the lower offshore spares order volume partially offset by an increase in international land spares activity. In projects, product, and other, revenue in the quarter was $54 million, down 16% year-on-year, driven by lower product volume, and down 8% quarter-on-quarter, driven by a decrease in projects, partially offset by increased product volume. Lastly, moving to net interest-bearing debt. We end the quarter with $57 million in cash and cash equivalents and a net debt of $144 million. Overall, as Eric said, we're proud of the team's performance this quarter and continue to advance strategic initiatives to strengthen our margins and improve operational efficiency. And with that, I'll turn the call back over to the team in Oslo.

Thank you, David. I will then take you through DaCastor's financials, starting on this slide 10 with our net capital employed. The carrying value of HMH, where Acosta's net capital employed, corresponds then to 50% of the book equity value in the company, increased by 54 million compared to Q2, driven by positive net profit in the period. The net capital employed related to NES remained stable, while DDVNC declined somewhat in the period, driven by lower net working capital, which was turned to cash in the period. The net capital employed of Akofs was reduced to zero in Q3, as Kalle mentioned, down from 79 million in Q2, reflecting our share of the net loss for the third quarter. As Kalle noted, continued losses have gradually reduced our book value, which by the end of Q3 then stood at zero. This means we now carry no value of our equity holding in ACOFS in our books. Again, we emphasize that this outcome is driven by accounting principles based on our historical cost and does not reflect the underlying asset values. We do carry the shareholder loans provided to Akos Offshore, totaling 418 million at the end of the period. These loans are included in our reported net interest bearing debt. The value of our listed holdings, which per end of Q3 included ABL and Maha Capital, decreased by a total of 134 million in the period related then to the sale of Oddfjell Drilling, partly mitigated by increased share price in Maha. The negative value of other, which includes smaller financial investments, pension accruals and other provisions, was reduced by 20 million in the quarter. And the balance here mainly relates to pension obligations. In total, our net capital employed decreased by 209 million in Q3, primarily driven by the sale of Oddfjell, as well as the net losses in Akoffs offshore. Then over to our net cash position and an overview of development in the period. In Q3, our total net cash increased by 134 million, reaching 279 million at the end of the period. This improvement was primarily driven by the divestment of odd-field drilling shares and positive operational cash flow in DDV, partly offset by the dividend of a NOC 0.35 per share, which we paid out in July. The Q3 net cash position includes a net debt position of 169 million in DDV offshore, improved from 228 million last quarter due to positive cash flow during the period. Total net interest bearing debt at quarter end stood at a net cash position of 970 million, which includes interest bearing positions towards ACOFS Offshore and HMH, as well as the remaining seller credit to Mitsui of 39 million, which are to be settled in Q4. Looking ahead, the cash balance in Q4 will be impacted by the seller credit payment as well as the approved dividend payment totaling about 110 million, scheduled for payment in November. Our external financing facilities remained largely unchanged from last quarter, except for a cancellation of an undrawn NOK 70 million share financing facility following the divestment of Oddfjell Drilling. The DDV term loan was reduced to approximately $24 million after one scheduled installment during the period. We are in discussion to refinance this term loan and expect completion of this in Q4. Our corporate RCF remained fully available and undrawn at the end of Q3, and we have agreed with our banks to extend this facility to June 2027, with only final documentations remaining. at quarter end total available liquidity was 816 million including 69 million of cash held through ddv that then includes the undrawn rcf with 300 million Then our consolidated P&L. As a reminder, most of our holdings are not consolidated in our group financials. Therefore, the consolidated revenue and EBITDA represent a small portion of our total investments. DDV Offshore delivered revenues of 128 million for the quarter, with all vessels on contract throughout the period. EBTA was 43 million, up year on year and quarter on quarter, driven by higher fleet utilization. EBTA was, however, impacted by some FX effects and certain non-recurring vessel costs. Other revenues were NOK 2 million, while other EBITDA was negative 16 million. As a result, consolidated revenue in EBITDA for the quarter ended at 130 million and 27 million respectively. Our net financials contributed positively by 54 million, driven by value increases across most holding, including then Oddfjell Drilling and Maha Capital. FX accounting effects were negative 23 million, reflecting a smaller weakening of the US dollar versus the Norwegian kroner. Net interest and other financial income added 4 million, bringing total net financial items to a positive 38 million for the quarter. Share of net profit from equity-accounted investments was neutral overall, with Akovs contributing negatively by 81 million, while HMH contributed positively by the same amount. And with that, I'll pass the word back to Kalle for the last section.

Thanks, Erwin. Let me run off this presentation with some ownership agenda reflections. Firstly, on slide 16, our investment portfolio was in the quarter reduced from nine investments to eight following the mentioned exit from Oddfeld Drilling. Let us now move to slide 17, covering HMH. It's been already covered by Eirik to some extent, but let me anyhow add some few reflections as HMH owner. First of all, our ownership agenda for HMH remains firm. It is to expand the business through organic growth and also do value-adding acquisitions. It is to maintain a leading market position and also continue to target to make HM investment liquid at some point in time. We remain somewhat cautious regarding the short-term outlook for the drilling market. That said, and also as Erik stated, we do see encouraging signs when looking further ahead. 2026-2027 shows signs of becoming a start of a new offshore rig upcycle driven by the deepwater offshore development. Regarding the listing process, there is no concrete news at this point, but HMH is steadily keeping its S-1 registration filing updated and is, as such, continuing to prepare for a listing. Timing of possible public offering is subject to a variety of factors and difficult to comment at this time. Let us move to slide 18 and covering Nesfaircraft. Nesfaircraft continues to deliver solid results, with both revenue and EBITDA increasing by 5% compared to the third fiscal quarter of 2024, despite a continued somewhat challenging environment for recruitment. As mentioned earlier, the company is exit ready, and together with the main owner, AEA Investors, we have for some time been exploring several alternatives for an exit. There is nothing specific to report at this stage, and we will revert with an update when there is more clarity on this. In addition to our focus on making this investment liquid, a key priority is to continue growing the company, both organically and also through M&A, to enhance value for all shareholders. Slide 19, covering ARCOs offshore. As mentioned, all Arcov's vessels remained on contract through the quarter. Arcov A4 achieved a revenue utilization of 97%, while Arcov Santos delivered 94% revenue utilization in the quarter. As noted last quarter, Arcov C4 fair earnings was impacted by its scheduled five-year class renewal survey, resulting in 45 days of fire. We are pleased to see that the survey was completed in line with the budget and on planned time, but it led to a revenue utilization of 49% for the period due to this. The total revenues for Arcos Dan were US$28 million, with an EBITDA of US$3 million. Looking ahead, CFER will transition to new contract terms late in the fourth quarter, and this will increase the running rate earnings. We were also pleased to see that Arcos formally awarded the new four-year MPSV contract with Petrobras, commencing in January 2027. This contract value, as previously disclosed, will further strengthen Arcos' earnings and cash flow once it commences. During the third quarter, we also reached an agreement with our co-owner, MOL, to restructure Santos' financing, addressing historical, what I would call, misalignment from the shareholder loan structure, and fully aligning ownership interests. As a part of this, Santos' senior debt will be extended by one year to first quarter 2027, with commitments in place. Then, DDV Offshore. All three vessels remain on contract in Australia throughout the third quarter, delivering 100% revenue utilization. EBITDA for the quarter was NOK 43 million, impacted by certain non-recurring vessel costs. Scandi Emerald's contract with Petrofac ended in late October, and the vessel has since demobilized to Singapore, where it's currently on a short-term contract before entering the spot market ahead of its scheduled fiber classing early next year. Looking ahead, our focus remains on maximizing fleet utilization, supported by solid contract backlog that provides operational and financial visibility. Our ultimate target is unchanged, and we continue to actively assess second-hand market opportunities for potential sale of all three vessels. Then, finally, let's look at slide 21 regarding some key priorities for our customer going forward. Our strategy remains firm in place. Our core objective is to develop the companies in our portfolio, and when timing and values are right, to execute value enhancing exits. With a strong net cash position and no draw on corporate facilities, we are well positioned to maximize values when opportunities arise and at the right time. Today, we are pleased to announce our second-ever dividend of NOK 0.40 kroner per share, marking another important milestone in our commitment to return value to our shareholders. So I believe that concludes the formal part of this presentation. And we will move over to a Q&A session and take a brief pause to allow you to submit questions. There are already some questions on the screen here. So, Ovid, can you please facilitate that session?

Yeah. Thank you, Calle. I guess we can go right to the questions. First, a question for you, Calle. With the current liquidity position of Acasto, would you be able to pay a Q4 dividend from existing resources, or do you intend to maintain the policy of distributing proceeds from assets realizations only? I'll hand that over to you.

Thank you. As I said, we are committed to distribute the values to our shareholders, but their future distributions will be when we do transactions, because we also want to maintain a solid financial state with flexibility to act in the most optimal way when it comes to realize our assets.

Thank you. Then we have a few questions on the same topic. I'll take one of them regarding HMH. I'll pass that over to Eirik. Eirik, this is a question from the audience. Do you see potential for increased revenues related to reactivation of some of the rigs that are now experiencing white space? It's commented that You might have the BOP for a few of the Ennoble and Valaris rigs currently idle with contracts commencing in late 2026. So I'll pass that question to you, Eirik.

Yeah, thanks. Well, it's limited what I can say about that. But if you look at what we've been hearing from our clients, from the drillers, what we've been seeing them presenting on the various events this autumn, it looks very clear that we could expect some reactivations because of utilization becoming as high as it, I would say, never been before, according to what the drillers says. So yes, we look positive on those possibilities. And yeah, that I think is what I can say about that right now.

Thank you. Thank you, Erik. Then I guess lastly, there's also a few questions on the same topic, but I'll pass that to you, Calle, even though you commented on it briefly. But given the appetite for IPOs, do you see an opportunity to list NES Fircroft and is the company ready for an IPO?

The company is ready for an IPO. So that's, of course, an option to make the investment liquid. And the other alternative is to do a trade sale of the company. So all options are on the table, is what I can say.

Thank you. And with that, I think we are actually through the questions and we'll just then like to thank you all for your attention and welcome you back for our presentation of the fourth quarter results on February 12th next year. Thank you very much.