Odfjell Drilling Ltd

Good afternoon, everybody, and welcome to the Oddfell Drilling Q4 2024 and Preliminary Full Year 2024 results presentation. My name is James Crothers, and I'm the Investor Relations Officer at the company, and I'm joined today by our Chief Executive Officer, Cheta Gyoza, and our Chief Financial Officer, Frodo Cislak. Before we begin, your attention is brought to the important information slide of our presentation, which would encourage participants to read info. note that this presentation is only a summary of the quarter and the quarterly report should be read separately both that report and today's presentation are available on our website www.oddfieldrilling.com our call today will begin with a brief summary of the quarter with jeff taking us through some of the key highlights we'll then move on to discussing our operations during q4 and move on to our financial review with further we'll then summarize the presentation and close the call Following the presentation, we will open a Q&A session and invite all participants to submit a question either by the telephone line or electronically by the webcast tools which are available. We'll endeavour to get through as many questions as we can as that part of the process, but if there isn't any other unanswered questions, we will fully try and get in touch with you afterwards as well. We have a lot to talk about today, so I won't delay any more and I'll hand over to Chetil, who will take us through the key highlights.

Thank you, James, and very good afternoon to everybody. We are delighted to present our Q4 results, which indicates the direction our EBITDA is heading. Operationally, our fleet performed well. Despite what was a challenging and stormy winter season, we achieved a financial utilization of 96%. When combined with our managed fleet, delivered EBITDA of 92 million, from a revenue of $204 million. Our revenue and EBITDA generation reflect new records for the business since we did the spin-off from Oddfeld Technology in 2022. In addition, we have more than doubled our quarterly dividend for the quarter, increasing from 6 cents per share to 12.5 cents per share, resulting in a total dividend in Q4 of $30 million. Later on, Frode will discuss our dividend in a bit more detail in his section. But what I would say at this point is that we remain very well positioned to further increase shareholder distributions in the quarters to come. Post-period, we also secured more backlog for our fleet, resulting in firm contract backlog at $1.9 billion with $100 million of priced option in addition. This is a result of the extension of the existing contract we had with Equinor for the use of Deepsea Atlantic. And this contract extension was secured at a very healthy day rate of around $500,000 per day, which I think is a great data point for our sector these days. During the period, we also worked with our lenders to secure an agreement, which results in a reduction in quarter installments on the Deepsea Nordkapp term loan facility, resulting in deferment of $34 million to Q1, 2029. And finally, our balance sheet and liquidity remain strong. with the company now having a leverage ratio of 1.6 and an equity ratio of 63%. Moving on to our operation, as per previous quarters, the Deep Sea Aberdeen, Deep Sea Atlantic and Deep Sea Stavanger were all working with Equinor. The Deep Sea Atlantic was working on various exploration projects while the Deep Sea Aberdeen remained on Breida Blik field. The Stavanger, in addition to working on exploration campaigns for Equinor, also commenced a carbon storage well towards the end of the period, reflecting the first time warfare drilling has worked on such a well. Carbon storage wells are drilled in a similar manner to conventional wells, and we see signs that there could be an incremental demand coming from carbon storage campaigns for our rigs in the future. In addition to the work done by Stavanger, the Deepsea Nordkapp also has a carbon storage well scheduled for Q1. Returning to operations, the Deepsea Nordkapp remained working with AKBP on various exploration projects, and the Deepsea on Tai was also in Norway working with the Ollén Group. The Deepsea Mira and the Deepsea Båstad were both operating offshore Namibia for Total and Chevron respectively. and the deep sea bosta since completed its work for chevron and will begin mobilizations to norway shortly and finally the hercules was in yard in norway from mid november last year looking ahead our fleet remains well secured for the next two years with all units set to transition onto higher day rates in the first half of 25. as you can see from the chart You can see several day rate milestones happening soon and already. The deep sea Aberdeen, for instance, will be moving from $345,000 per day to around $447,000. And the North Cape will also be moving up from $343,000 to $416,000. Later in the year, we also see significant day rate increases on the deep sea Atlantic and the Stavanger. And as a reminder, rates shown on this slide reflect clean day rates and do not include any bonuses, fuel incentives or any add-on sales, which in the past have been, I would say, meaningful to these rates. Next slide. This chart shows what the backlog looks like in terms of yearly revenue, while also showing average secure day rate per rig. and an indicative OPEX cost per rig. As you can see on the OPEX line, this is largely flat with cost increases covered through our contracts. As is demonstrated, you can see a significantly increasing margin with increasing yearly revenue and a well-controlled OPEX. Our COPEX expectations aren't changed from prior quarters. We have two SPSs still ahead of us with Deepsea Stavanger and Deepsea Aberdeen. anticipated to begin their SPS programs in Q2 2025 with a capex cost of approximately 50 million dollars each and two to four weeks of downtime. Detailed planning for the yard stays is ongoing with the majority of the SPS scope being completed while in operation. We feel we are ready and well prepared for with both programs progressing as planned. following the completion of these sbs programs however we do not have any material copies cost ahead of us until late 20 28. and then we turn to the market um i would say that our market view remains largely largely unchanged from prior quarters Demand from Norway remains well balanced between supply and demand with tenders currently outstanding for future work. As many of you will be aware, we are seeing a clear trend from our clients that they are renewing their focus on oil and gas and presenting an interest in maintaining and also increasing their current production. And needless to say, this will require a lot of drilling in the years to come. We expect this trend to continue and result in increasing work for our sector. Incremental demand we expect to come from new developers who are also seeking to grow in the basin while demand from carbon storage as mentioned is unknown at this point but could create some further demand. Internationally, we do not see a stronger market as Norway, with a few shorter-term contracts potentially available in 2025. We expect longer-term contracts to increase as new exploration projects mature into development in the coming years. On the other side of the market, we now expect supply likely to reduce with some retirement of vessels in our sector expected, and no new builds likely to happen. There are a few stranded or incomplete vessels in our sector also, which we do not believe is likely to create any meaningful competition in the near future. Ultimately, with our own fleet largely coming off contract in 27, we see good interest from clients to secure tier one assets in this period. And with that, I will now pass on to Frode to go through our financial review.

Thank you, Kjetil. As always, I will begin with the summary of the income statement. Operating revenue in Q4 24 was 204 million compared to 192 million in Q4 23. Operating revenue from the owned fleet was 158, while the external fleet was 45 million. For the year, the revenue was 775 million and the EBITDA 345 million. We are starting to see the effects of higher day rates in Q4, with an EBITDA for the owned fleet of 87 million, a margin of 55%. The EBITDA for the external fleet was $9 million, with a margin of 20%. Less corporate overhead and other adjustments, the group EBITDA was $93 million. In other words, a strong quarter, despite that we saw a slight cost increase in Q4 related to some downtime and minor repairs on Deep Sea Nordkarp, as is also reflected in the lower financial utilization of that rig. These are one-off effects. The company delivered a net profit of 15M dollars in Q4. As you can see, this is somewhat lower than the 24M in net profit in Q4. There are two main reasons behind this. Number one, there was a positive tax impact from our relocation. of the rig ownership to Malta in Q4-23. And secondly, in Q4-24, we have a one-off effect with a write-down of the value of the small BOP that we took off Deepsea Atlantic in relation to the BOP upgrade. For the full year, the net profit was $65 million. Moving to page 12 on the balance sheet, net debt is reduced further this quarter by 28 million to 504 million. The leverage ratio is at a very comfortable level of 1.6. Equity ratio 63% based on total assets of around $2.2 billion. The available liquidity is $217 million, including undrawn RCF of 99 million. We'll take a closer look at the cash flow for Q4 as we now move to the next slide. Q4 saw 108 million of cash generated from operations. Net interest paid was 22 million, including semi-annual interest payment on the bond. CapEx for the quarter was 43 million dollars. Net cash flow from financing activities and minor FX adjustments was minus 28 million. Of this, the net drawing on the RCF was 5 million for the period. Dividends paid in Q4 were 14 million dollars related to Q3 results. And as said, we ended the quarter with a total available liquidity of $217 million. Moving on to page 14 for a quick look at our debt. As you can see, we have no final maturities until 2028. Also worth noting here is that annual repayments are reduced significantly in the years to come when compared to 2024, particularly so for 2025 and 26, following the agreement we did in Q4 to defer installments totaling $34 million until first quarter of 2029. Together with increasing day rates and reduced capex commitments, this agreement further adds to the strong distribution capacity of the company. Our balance sheet is robust with a very comfortable debt level today, which will continue to decrease going forward. With our first call date on our bond being in November 25, we of course will evaluate what is the best timing to extend debt maturities, lower interest costs and flatten the repayment profile more. and with that to further increase the free cash available to equity holders. That said, it's important to bear in mind that our distribution capacity increases significantly also without any near or medium term adjustments to the debt profile. Moving then to the dividend section. As we promised, we have increased our dividend compared to previous levels and are happy to announce a cash dividend of $30 million, or 12.5 cents per share, being the first step in increasing our dividend. This substantial increase highlights our strong financial performance and visibility of future cash flow. With the SPS programme nearing completion and our rigs continuing going on to higher contracted day rates, we're in a strong financial position to return more capital to our shareholders going forward. We're being asked today whether further dividend increases will depend on completion of the SPSs on Dipsy Stavanger and Dipsy Aberdeen. which are currently scheduled for April and May. To answer that question, I can confirm that there is both capacity and ambition to declare a further dividend increase when we announce our Q1 results in May. And with that, I'll pass the word back to Kjetil to sum up the presentation.