Odfjell Technology Ltd

Welcome to Oddfjell Technology's Q1 presentation. My name is Gert Haugland. I'm the SVP for Finance and Investor Relations in Oddfjell Technology. I'm joined by our CEO, Simon Leung, and our CFO, Jone Torstensen. You'll find the presentation on our website. And we'll start with Simon talking about the key highlights and the market outlook, backlog, and contract status before Jone go through the financials figures. We'll conclude with a Q&A session, and you can submit your questions either through the VET portal or by using the dial-in numbers. I hand it over to you, Simon, for the first part.

Thank you, Gert, and thank you all for calling into the Q1 presentation. I'll start with Just to give you all the reminder of the company's highlight or key numbers regarding size. We are today a company with 2,500 employees. We operate in more than 30 countries, as you see on the map right there. We have a strong balance sheet and I will come more into the details here. So if you can take the next information. On the highlight side, The quarter is in line with Q4 and reflects our steady performance without any major lows or highs. We have an EBITDA of 193 million NOC. We have a revenue of 1.3 billion. And the numbers will be presented more in detail somewhat later. In the 193, this quarter included 4 million in restructuring costs related to our improvement program, which we in detail presented in the previous quarter. So we are on track on that. Operation delivers on historic average levels. Project and engineering continue to experience high activity and delivers to this sport strong margins. Well services delivers consistent revenue while the shift in product line mix has lowered the margin. It is one of our main targets to get back to the level of mid-30s regarding the margin level, which we have been historically stable. Stability and consistency might feel like a letdown based on our ambition to grow our business, but in the current market situation, we believe this is absolutely acceptable. We also expect improvements in the second half of the year based on contracts, projects, and the new revenue side regarding new contracts. Our priorities will be to focus on margin improvements initiatives while continuing to seek growth opportunities. Highlights. We had this unfortunate information yesterday that the termination of Brunei workable contract is unfortunate for us and we are not allowed to showcase our capabilities and solutions. We worked hard for that contract. A number of opportunities for our concept in Southeast Asia is still there. All is definitely not lost. We have a very good relationship with our clients. Engineering and operation preparation is very relevant for other opportunities in the region. The financial impact on 2025 is enormous. is absolutely minimal, and we will get our cost compensated by the client. On the EBITDA, we actually expect a low single-digit effect in the 2026 EBITDA also. This termination is just to give us some more reflection on that. We absolutely have got information from our client that this has nothing to do with what we have done. It's other parts of the project that the client had to consider to conclude with a termination. At the same time, we have... a very constructive dialogue with the client and there are more activities in the region so we so we are positioning us for for future operations in a very attractive region for both work over jobs and plug environment activities powered wired drill pipe project for war energy with expect startup start of in 2026 is progressing according to plan We also did an additional acquisition of 2,000 meters with powered drill pipe, so-called 5-inch. We're also going to serve for war energy with the earliest startup already later this year. I guess in October, November, we will have a startup of that package, which will deliver empathy contribution in this year. We have also been awarded extension of platform for dealing contracts and approved TRS contract for ConocoPhillips in Norway. And as we have shown on this chart, we deliver 60 million NOC dividend for the third quarter on growth, which equals to a direct yield of approximately 14%. Main exposure in the North Sea and with production operations reducing cyclicality and providing greater earnings visibility. No exposure. We have no exposure to U.S. operations land. So our expectation forward will be relatively stable regarding both operations and the level we are working on today. So with that, I take the next slide, Gert. This is the market outlook. We have, as I said, we have a solid backlog. We have kept the level now for several quarters. We expect a higher activity level from Q3 this year. This map shows tenders we are chasing as we speak. They are typically grouped in different regions, so I don't need to go into those regions, but typically the tender value today where we are active is about 8 billion NOK. We expect to take our share of that. We also see that in regions like South America and also Asia-Pacifics and also Africa. We see also that there are more to come and we expect more activity within the drilling segment later this year and more into the late 26. We see definitely a ramp up from major clients that the more the activity level will increase. We are well positioned for growth in our new regions. We are now well established in Houston. We are working with a partnership with another company, which is local in the Gulf of Mexico. and we will not address the land market in the US for us good reasons but we certainly are close with several clients both within oil companies and drilling companies in the Gulf of Mexico and Brazil so we have optimistic view on the market development in the Americas from Gulf of Mexico and South We also see that in the future, there might be more activity up in Atlantic Canada, but we don't see that as a kind of immediate development, but there are future projects up there, which is under development. where we will hopefully take part of those operations following the drilling campaign for one of the bigger projects Equinor are developing up in Atlantic Canada. So we are certainly following the drilling market close, serving the semi-submersibles that's going to operate in that region. We see a very stable and active market in the North with North Sea, Norway and UK. This is today compared to the rest of the world. While the rest of the world, especially within drilling, Jacobs deepwater has a drop in activity level. We see actually a quite high and stable operation for serving oil and gas production, especially in Norway. Of course, driven by the need for increased delivery of hydrocarbons to Europe because of the unfortunate and tragic war with Russia and Ukraine. We also see, we have announced that we are building up our capabilities within the plug abandonment market. And the market we are targeting here, this is something we will see as a long view. plug abandon market is something we have a long haul a long view on we believe that market will be significant for a company like us in the future We have a special good focus on the European market with the UK as the strongest market for the time being. We see also that the Norway, Norwegian market will be more present with plug abandonment. later this decade but we also have a quite interesting view on the plug abandon activity in the gulf of mexico or what they call now girl from america but but we have now been invited by couple of companies to to to to investigate over capabilities for serving tools, plug abandonment tools down hole with some players in that part of the market. P&A in the Gulf of Mexico is coming stronger and we certainly believe that that's going to be a very interesting market down the road. So please take the next. as I said we have a strong and robust backlog we are winning a lot of contracts this part of the slide to the right side shows typical the numbers from big contracts to smaller contracts and they are we are every almost every week we are picking up activity and by that also maintaining the or the where we have had all the last quarters. Just to mark, that 30.1 billion, the backlog from the Brunei termination is already taken care of. So still, without that backlog, we have still 30.1 billion NOK in backlog, which is a strong message. So, within the three divisions, operations where services plug about protein engineering, you see how that's been split. And it's quite interesting to also see that within P&E, where we have uh in the various when we split the the the company we had that level but we have actually almost doubled the level of backlog in the p e department delivering today strong margins which is actually quite good with a high utility level utilization level sorry take the next uh this is uh this is an interesting slide we are still one of the top performers regarding uh shareholder return over the last 12 months we have delivered 225 million NOC in dividend we have established that dividend program and we have said consistently that we want to have a program which is predictable and stable um we since since the since the listing we have delivered to back to shareholders 325 million knock and today with the 14 in private annual direct yield uh it's quite an impressive level actually compared to what has been delivered from from all the competitors and and what we expect in the future so we are absolutely in the high high high level of of actually stand behind our capability of generating cash and doing what we do for growth and at the same time deliver significant dividend which shows a company very stable company with with a strong value sheet and operational capabilities so you can take the next thank you well our priorities is of course to to make sure we are operating safe and and effective I think one of the good things by determination from Shell in Brunei was that they were very impressed about our performance regarding preparations, you know, safe and secure operation because this is a new market for us. So it's very unfortunate that the other part of the project could not deliver, but we absolutely got a very good feedback on our very consistent and and thorough way of planning and executing over part of the project was which actually impressed the client and in all the sadness of losing the contract i think we have given the people that has done that fantastic job a good feedback and they wish they have absolutely deserved We are working, we are on track with our improvement program. We said that one of the things that we actually are holding on, we believe we will have a stronger second half of the year. regarding performance, financial performance, that is, of course, based on new contracts, establishing new operations and, of course, also the results from over-improvement programmes, which is very, very important. We will consistently present how we are developing according to the ambitions in that programme. So with that, I think I'll leave the word to Jone Torstensen, the CFO. Thank you.

Thank you, Simon. It's a positive start to the year with stable activity for all business area. EBITDA in line with previous quarter, while EBITDA margin is improved due to improved margin in operation and in project and engineering. Our improvement programme contributes positively in many commercial perspectives, including margin improvement, and we expect, as Eben said, this to continue, especially in Q3 and Q4 this year. There has been approximately 4 million in one-off costs in Q1 due to restructuring related to our programme, which means that the adjusted EBITDA in Q1 is 197. O2L has a strong balance sheet, which gives us high flexibility to positioning OTL for strategic and profitable growth, both organically and through acquisition in existing and new markets. Next is wealth services. Financial performance is as expected in Q1, with lower activity in UK. Europe, Namibia, offset by high activity in the Middle East. EBITDA level in Q1 is affected negatively due to activity shift from higher profitable product lines to lower profitable product lines. We expect this to improve in Q3 and Q4. There is a high ongoing tender activity now in both existing and new regions. Jone Peter Reistadler, We have successfully secured an extension of the trs contract combo phillips make office, as well as additional work for war, energy, using power wide wave pipe. Jone Peter Reistadler, The next area is operation good start to the year with stable and predictable revenue, along with improved it there and if they are marching. We expect that this trend will continue in the next quarter with strong focus to further improve efficiency in our contract portfolio. There are also high tender activity ongoing here globally, both for traditional drilling operation and for P&A projects. The Brunei work over contract termination will have limited financial impact in 2025. The last one is project engineering. Good start to the year with stable and predictable revenue and improved EBITDA and EBITDA margin level. We expect this trend to continue in the coming quarters with a strong focus on maintaining the current high utilization level through efficient deliverables in existing order backlog, expansion of client base, and introduction of new service offering. SPS work for key clients at Feld Drilling has been an important element of our development over the last year. In parallel, we have developed solid positions and contracts within modification and upgrade segment at fixed installation platforms and floating storage units with clients, for example, as Equinor and Agrabp to balance our portfolio. Cash flow is affected by high investments related to contract wins, equipment replacement, and acquisition of 10% of real wealth. We expect significant reduction in investments in Q3 and Q4. However, we will of course always consider investment in high margin business cases going forward. As expected, the working capital increased by 73 million in Q1. At the end Q1 2025, working capital stands at 353 million, representing 6% of the LTM revenue. We have maintained the dividend level at 60 million in Q1. Available liquidity is 938 million, plus additional 600 million from the bond TAR agreement. The graph are showing LTM revenue and EBITDA development at forecast since Q1 2022. Stable and predictable revenue level for EBITDA. We expect improvement in the LTM EBITDA figures from Q3 2021. Finally, key takeaways. Order backlog remains stable and robust with good revenue visibility. We expect financial improvement from Q3 and Q4. We have a very strong cost discipline approach, and we are on track on our improvement program. And finally, strong commitment to shareholders with consistent dividend payments, delivering on high direct yield, and OTL has probably the highest direct yield compared to our peers. It's now time for Q&A.