Archer Limited

Welcome to the first quarter 2020's results, conference call for Archer. For the first part of this call, all participants are in a listen-only mode. Afterwards, we will have a question and answer session. To ask a question, please press five star on your telephone keypad. I will now hand the word over to Doug Skinlow, CEO, and Esben Yolanda, CFO. Please begin.

Thank you, Shell. Good morning, ladies and gentlemen, and thank you for joining us for Archer's first quarter 2020 trading update conference call. The call is hosted jointly from Oslo and Stavanger, and I am on the call together with Espen Johanger, our recently appointed chief financial officer. In today's call, I will touch upon the key highlights before handing the call over to Espen, who will summarize Archer's Q1 financial results, before I again will walk you through the operational update. Esten will, towards the end of the call, provide an updated outlook for 2020. Moving to slide two. I would like to note that information provided in today's call includes forward-looking statements as well as known gap financial measures. Next slide, please. First quarter 2020 was an extraordinary quarter. Archer delivered strong operational performance and results for Q1, despite the ongoing COVID-19 pandemic and sharp drop in global oil prices. We increased our underlying EBITDA to $28.1 million compared to $25.9 million in the corresponding quarter in 2019. We are very pleased to have concluded on our refinancing of our main facilities over the last few months. The agreements were closed end of April. The refinancing gives us time to focus on our operation and cash preservation and provide sufficient liquidity towards 2023. We will revert to this topic later in the presentation. We are also extremely happy that both our modular rigs have been contracted and are currently mobilizing for a scheduled work in New Zealand and North Sea respectively. We will from third quarter see the full financial impact of having these rigs back to work. We saw a reduction in activity towards the end of March in most of our business areas, following the spread of the COVID-19 virus and the oil price drop. ARCHA has since the virus emerged monitored the situation closely to ensure the safety of our colleagues, customers and the communities in which we operate, while continuously delivering efficient operations to our customers. In order to mitigate the impact of reduced activity, we have effectuated a series of cost reduction initiatives, which includes reduction in force and cancellation of investments. We will provide further details about the impact and our response later in the call. I will now hand the words over to Espen, who will take us through the financial summary.

Moving to slide four, operating revenue in the quarter amounted to $237.1 million, an increase of 11.4 million, or 5%, relative to the corresponding quarter last year. The growth in revenue came in eastern hemisphere with particular strong growth in platform drilling, engineering and oil tools. This was moderately offset by reduced revenue in land drilling as we have fewer rigs operating. EBITDA before exceptional items ended at 28.1 million dollars or 11.9% of revenue. Compared to Q1 2019, the increase is 2.2 million or 8.6%. Our engineering and oil tools division contributed most to the growth in EBITDA before exceptional items. as well as our operation in the south of Argentina. With a total of $6.4 million in exceptional items incurred in the quarter, reported EBITDA was $21.7 million. The substantial amount of exceptional items are primarily incurred in our platform drilling division and is associated with redundancy costs following reduced activity in our platform drilling operation in the UK. Our reported net interest-bearing debt came in at $588.3 million at the end of Q1. In the refinancing executed post Q1, our NID was reduced by debt forgiveness in the magnitude of $45 million. We thus present a pro forma NID incorporating this effect, showing that the NID would be $5444 million. At the end of Q1 we have a total of 121 million dollars in available liquidity, cash and committed credit lines at our disposal. We believe that this is more than we actually need going forward in most scenarios and agreed with our banks to reduce the committed credit lines by 31.7 million dollars as well as to make an installment of 10 million euro on our Hermes facility when executing the refinancing. The Proforma liquidity of 91 million dollars is taken into consideration the reduction in our credit facility through the refinancing. we are comfortable that the remaining $91 million in liquidity is sufficient for us going forward. Next slide, please. On slide five, we have brought the development in some of our key matrix over the last five quarters. The gross development in our USD reported revenue is supporting the underlying increased activity in Archer in the period. However, the USD has strengthened compared to NOC, Argentina pesos and the British pound in which we incur a substantial amount of revenue in. So the graph somewhat understates the increased activity we have seen. The development in EBITDA before exceptional items is also strong over the period. As mentioned, several of our business units have contributed to the growth over time in EBITDA. In particular, oil tools, engineering and land drilling in the south of Argentina have improved their results. Our platform drilling operations remain strong despite somewhat lower EBITDA contribution in current quarter. Wireline continue to underperform and we have also seen reduction in rig operation in land drilling in the north of Argentina. We spent a total of $6.7 million in CAPEX in the quarter, which is substantially lower than Q3 and Q4 in 2019, where we had large investment programs in relation to rig upgrades for contracts in our land drilling operation. In Q1, most of the CAPEX was spent in Eastern Hemisphere, in particular for mobilization of modular rigs, additional plugs for oil tubes, and recertification and overhauls required for our platform drilling contracts. Following the outbreak of COVID-19, we have reviewed our CAPEX program for the future and have postponed or canceled non-critical CAPEX. We maintain a strong focus on development of our net interest-bearing debt. The quarter ended with a mid of $588.3 million, which was a modest increase compared to end of Q4 2019. The debt forgiveness from Seedrill relating to our refinancing will reduce our debt by $45 million. Taking into consideration the debt forgiveness, we would end the quarter with a pro forma need of $544 million. I will now hand the word over to Dag.