Odfjell Drilling Ltd

Good afternoon, everybody, and welcome to the Oddfield Drilling Q1 2024 results presentation. My name is James Crothers, and I'm the investor relations officer at the company. I'm joined today by our chief executive officer, Jetty Gersdal, and our chief financial officer, Frodo Cieslik. Before we begin, your attention is brought to the important information slide of our presentation, which we would encourage participants to read in full. Note that this presentation is only a summary of the quarter, and a more comprehensive review of the quarter is available separately. Both that report and today's presentations are available on our website, www.oddfielddrilling.com. Our call today will begin with a brief summary of the quarter, with Chet taking us through some of the key highlights. We will then move on to discussing our operations during Q1, and then move on to our financial review with Frodo. We will then summarise the presentation and close the call. Following the presentation, we'll open the Q&A session and we invite all participants to submit something either via telephone line or electronically via the webcast tools which are available. And with that, I'll hand over to Chet, our CEO, who will take us through the key highlights.

Thank you, James, and good afternoon, everybody. So we had a busy start to the year. A lot of progress has been made across the company. And if we're looking first at our key financial results, you can see that during Q1, we achieved a revenue of $194 million, which is a new record for our company, and an EBITDA of $85 million. Our own fleet achieved a financial utilization of 97% during Q1. That is despite what has been a tough winter with a lot of weather, particularly in the North Sea. Our balance sheet continues to get stronger and stronger. The leverage ratio has now reduced to 1.8, and our equity ratio is 62%. And as noted previously, we have also repaid the $53 million Samsung Yard credit during Q1. And as of this quarter, our fleet is now fully booked until 2026, following the exercise of priced options by Equinor for the use of DFC Stavanger. And we have also made considerable progress on our upcoming SPS programs with the Deep Sea Atlantic now planned to take place in late June, early July. And as noted in a report published today, we have increased our capex allocation for the three remaining SPS programs, which I will go a little bit deeper into later into the presentation. And lastly, we have declared yet another quarterly dividend of 14.2 million dollars for Q1 2024. So moving down then into operations, all of our fleet was active during the period with five of our units operating offshore in Norway and three working offshore Namibia. As per previous quarters, the Deep Sea Aberdeen, the Atlantic and the Stavanger were all working with Equinor. The Atlantic and Stavanger were working on Johan Svadrup phase two and on various exploration projects, while the Aberdeen was working on the Svalinn field before moving back to the Bredablik field towards the end of the period. The Deep Sea Nordkapp remained working with AKBP on the Alvheim development throughout the quarter. The Jantai was working with Neptune Energy and Vorenergy on appraisal and explorations campaign. The Deep Sea Mira continued to work with Total Energies on exploration campaigns around the Venus discovery. And post-period is moving to new projects in Congo. It is actually on transit there as we speak. The Deep Sea Boat Star was working with Shell throughout Q1 before it begins its SPS program in Namibia during Q2. uh and i'm sure as many of you are well aware the hercules um successfully completed the mopane exploration well which um and had a significant discovery being made uh galp energy the operator suggested uh resources of at least 10 billion which reiterates the scale of opportunity that's being proven in in namibia And as a result of these movements, we are likely to see all of our units no longer drilling offshore Namibia during Q2. The operators are considering the next step for that basin. But given the potential that has been discovered so far and the likelihood of resources to extend also into South Africa portion of the Orange Basin, we remain very excited about the potential for this area. and it to be uh it's good and we believe it's going to be a significant source of demand in in a not so distant future in that area further our fleet as i said is officially sold out with firm backlog until 2026. uh the first contract in opportunity tuning is done the deep sea aberdeen in early 2026. The backlog remains strong with 1.1 billion of firm contract revenue secured, giving our company an exceptional see-through for cash generation going forward. And as can be seen in the lower chart on the slide here, the value of the 2025 backlog indicates that we are gradually rolling our fleet over to higher day rates. and marking a significant increase if you compare to 2023 levels. Further contract awards are expected to be secured during 2024 with the company being actively involved in new tenders and contract discussions. And before I move on, just a reminder, all of our backlog figures and contract values are clean day rates, and they don't include any services on top, nor any bonuses on performances and fuel and so on. If you look at the market, as we noted in our results statement this morning, we reiterate our view that the market dynamics that we've seen over the past year or so, that they will persist. We also see that there remains a clear preference for tier units, tier 1 units with deepwater capability, which offers a more efficiently and more flexible solution for our clients. and ultimately delivers a lower well cost. Demand also continues to look strong in the medium to long term. Demand from our core area of Norway is set to increase. New resource discoveries in Namibia and South Africa we believe could be a driver of quite a significant demand in that basin also as we move towards development training. So ultimately, we believe that the market is in a great state of balance, which ultimately works for both operators and rig owners, and we expect day rates going forward to continue to increase for work beginning around 2025 and 26. Then also before I hand over to Frode, I would like to update you on our SPS programs. So currently we have three SPS programs ahead of us for our own fleet. We haven't completed the Deep Sea Null Cup at the end of last year. The total cost of that SPS is estimated to be about 40 million dollars. The DFC Atlantic SPS will be completed next, and this is now scheduled to begin late June, early July. This was originally planned to be executed in April, May, but it has slided into late June, early July. This is due to the fact that the work on Johan Svaderup's field has taken longer than originally anticipated. The scope for the Atlantic SPS, that includes multiple upgrades to the unit to prepare it for its planned deepwater campaign in the UK. And this will include an increase of the variable deck load capacity, installation of a new ultra deepwater BOP and a new control system. And the Atlantic SPS, as I said, originally planned to begin early Q1, but it has not now slided. This is also one of the main reasons that we see that the cost has increased in combination with also a general cost inflation, but also some changes in scope of work added new changes to the work. So all of this has resulted in increased cost to complete the SPS. And to install the new BOP, which is now, the installment of the BOP is now estimated to cost around 50 million dollars. Out of this, 20 million is funded by Equinor. And the average CAPEC allocation for the remaining three SPS programs is now estimated to be around 50 million dollars per rig. And with that, I will pass it on to you, Frode, to take us through the financial review.

Thank you, Kjetil. I will begin with highlights from the profit loss statement on page 11. As can be seen, operating revenue in Q1 24 was $194 million compared to $171 million in Q1 23. Operating revenue for the owned fleet in the quarter was $151 million, while the external fleet was $42 million. EBITDA for owned fleet was $81 million, a margin of 54%. The EBITDA for the external fleet was $6 million, a margin of 16%. Less corporate overhead and other adjustments, the group EBITDA was $85 million. The company delivered a net profit of $14 million in Q1, reduced from last quarter due to a positive impact of deferred tax assets being recognized in Q4 23. Our net profit over the last 12 months was $70 million. And as can be seen, we are trending the right way on last 12 months revenue and EBITDA figures. Moving to page 12 and the balance sheet. We see continuing deleveraging of the balance sheet with net interest bearing debt of 575 million as of the end of the quarter and the leverage ratio now reduced to 1.8. The company has a robust balance sheet with an equity ratio of 62% based on total assets of approximately $2.2 billion. The available liquidity is $240 million, including the undrawn RCF of $145 million. As planned, this is reduced from prior quarters as the company in January repaid the five-year seller's credit of $53 million to Samsung related to Deep Sea knockup. We are continuing our consistent generation of operating cash. Q1 produced cash flow from operations of 75 million. Net interest paid was 7 million and tax paid 5 million. CapEx for the quarter was 27 million dollars. Of this, SPS was 17 and the BOP on Atlantic was 9 million. Net cash flow from financing activities was minus 69 million. This includes the Q4 dividend payment of 14 million dollars made in Q1. In accordance with our dividend policy, we maintain a dividend payment of six cents per share for the quarter with the last day including dividend rights being 23rd of May and payment to be made on the 13th of June. This will be the fourth consecutive quarterly dividend payment made after the dividend program was implemented. The company's ambition, as earlier communicated, is to grow the cash distributions in the medium term in line with increasing underlying earnings and reducing CapEx commitments. Finally, we wanted to remind stakeholders of an upcoming dilution effect as a result of an issuance of new shares to Akastor under a six-year warrants agreement. This was initially arranged in 2018 in relation to the acquisition of stranded asset Sterna Midmax, now known as Deepsea Nordkapp. These warrants mature on the 31st of May and has a subscription price for Acasto of one cent per share. Based on the share price at yesterday's closing, the warrants will result in around 2.7 million shares being issued to Acasto. The exact number of shares which are issued will depend on the share price on the 30th of May. The indicative impact at various example share prices is shown on the right hand side of this slide. With that, I'll pass back to Kjetil who will summarize the presentation.