Odfjell Technology Ltd

Welcome to Oddfjell Technologies Q2 presentation. My name is Gert Haugland. I'm the FTP for Finance and Investor Relations. I'm joined today by our CEO, Simon Leung, and our CFO, Jone Tostensen. The full presentation is available on our website, and I ask you to take note of the disclaimer on page two. Simon will start with the key highlights, including market outlook, backlog, and contract status. Jona will then take you through the financial results before we conclude the Q&A session. You can submit your questions through the webcast portal or by using the dial-in numbers. I now give the word to Simon.

Thank you, Gert. Thank you so much and welcome to the Q2 conference call, all of you. Just to start with a quick focus on the company itself. We have still a global presence. We operate in more than 30 countries and we are actually looking at also new areas. We have a strong liquidity position. We have a substantial equipment pool with 4.6 billion NOK as a value. And we have maintained a very strong order backlog over the period. From highlights... This one, yeah. Sorry. Sorry, I just flipped a little bit wrong here. Sorry. Highlights are... Financial highlights are... As I said, the revenue is approximately 1.4 billion. We have achieved 193 million NOC EBIT DA. If we adjust for the restructuring costs, we will come back to later, and some one-offs, the underlying operations are about 204, which indicates a trend. for increased earnings and margins, as we have also indicated earlier in the second half of 2025. The order backlog, as I said, maintained at a high level, and the good news is that we also see more activity within the rail services sector, which has also grown their backlog over the period. still pay 60 million dividend. We have done that for a while now, which yields approximately 11 percent over the period. This one, market outlook, thank you. In general, we need to share somewhat information what we see on the market side. We operate in a market where over the last period has been some softening, but we still see quite heavy activity within the sectors we are operating in. The tender pipeline about, as we talked about, about 8 billion NOC is just the extract of what we actually have put on our priority list. which is a mix between the different business areas. There are quite a lot within rail services. There are actually more and more activity within plug abandonment activities, especially in the UK and in the Middle East and somewhat also now in Norway. But UK and Southeast Asia is more active regarding plug abandonment. We also see now that there are activities within operations, typical potentially wins in that direction. And of course, we also see that the activity level within project and engineering are quite active. We have now finalized all the SPSS for ODL, but we see still quite much activity for engineering projects coming over the next period. What we see now is that, yes, we have spent CAPEX for growth. The company has delivered well over the period. But we also see now that we will start to put priority on investments that could bring the company to a next level. And that's also one of the reasons we have increased CAPEX over the period, because they are invested against both maintaining the position we have, but also future future spends. We will, for the type of growth thinking, we are looking at the potential M&A market. We will still, we have already invested in our book heavily within wild pipe, power pipe. where we can come back to more details. But we today have three contracts within that area, two with power pipe and one with extension with regular wire pipe. And the reasons we are – has increased CAPEX is also that we Due to fact that there are delivery time on equipment that we see are relevant for many of those tenders we are working with, that we need to make sure that we have CARPEX in time and place, that we can meet and win the requirements from the different tenders we are working with. That means, as I said, some want front-end loading of that, but still we never invest against the type of leads that doesn't bring us up to the level we want regarding both margins and cash flow. For the next, for the order backlog slide, nothing really more to say. I think the good thing there is a strong backlog within rail services. Operations are always very stable. We also report the options, but within platform operations, the options are in very much up to us and ours to lose. So we report them. But the rail services, we are quite conservative when we estimate the rail services backlog. We know that many of those contracts are based on frame agreements and not that fixed as a type of term contract. So this is just an extract of the potential we need. Approximately, I think less than 50% we are reporting as a backlog. So there are much more potential in here, but we don't take that into grant just to be careful on that side. We have recently also within rail services signed new contracts in the Middle East and Central Asia. We finally signed a very important contract for us in Turkmenistan with Dragon Oil, and we also have signed a new fishing and retrieval contract in Kuwait. In addition to that, we have also announced that we have one strategic contract with what I call a blue chip client for drilling rental tools, which will start from Q4 and onwards. Quite important, these contracts are all on the right side of the margin level we are looking for, and this is also why we are investing in that direction. We pay dividend. We have paid stable dividend over the period. Since listing, we have paid 444 million NOK to shareholders since we listed in 2022. That means quite a unique position and we still prioritize both growth and dividend. While saying that, we will carefully look forward now because there are some very interesting leads we are looking for, especially in South America. and within some P&A type of activities. We are looking for, maybe we will do some focused investments in that direction based on, of course, winning contract and based on the right level of margins and on tools and services. P&A will be important for us but I have stressed many times that even though the market are very I would say attractive interesting growing we see all over the place that plug abandonment will be more and more but I think clients are looking for solutions that are more I would say maybe smart disruptive to the regular way of doing it and which will require also more new technology and different way of executing those kind of So, we see a P&A market which fits very well into OTL as a company that integrates both service operations and engineering, and with the right mix of tools and partnership, we are quite focused to go in that direction. I actually forgot to mention our partnership in the Gulf of Mexico with OSP. We expect now that the first contracts with rentals and support both in the Gulf, in South America, and also synergies against the Middle East market will pay off and start later this year. OSP is a very strategic partnership for us and has very complementary equipment and technologies that will fit into our portfolio of services. So yes, we focus growth over the next period. We will see that we have indicated a higher income, higher earnings, higher revenue. Second half, we see the same going on in 26. And that's why we also have done the performance and improvement program, which is part of the growth history we have. We started early back in 24, initiated that program in significant I would say total program within the company, streamlining operation resource base, taking down manning, doing things more efficiently regarding process analysis. Today we have reduce the headcount in more than 80 people. We have today 50 million in restructuring costs. We still see some restructuring costs coming out the next half, but all these activities within improvements will gain and start to bring to the results in the company later this year will be a part of the second half increase in both in earnings and efficiency and we see the full I would say, potential being taken out in 26. So we have absolutely not forgotten any or reduced the focus on the improvement program. I also can mention that our organization down in Manila will also be streamlined more in direction with what we actually are doing there, also to reduce cost, manning, and increase efficiency. So with that, We look at the market as a quite potential positive for us. We indicate increased earnings second half. We see that the CAPEX level, well, could be viewed somewhat high currently, but that will be stabilized and will be done against the contracts and investments which yields the right level of return. So with that, thank you, Jone, and start on the financial update.

Thank you, Simon. This is Jone. Steady activity level with underlying margin improvement. The quarter is in line with Q1, reflecting steady performance without highs and lows. EBITDA of 193 million includes 11 million in restructuring costs related to our performance improvement program, which means that adjusted EBITDA is 204 million in Q2. The improvement program is on track, and we have had 50 million in restructuring costs year to date, and that's the majority cost is behind us. The underlying improvement in the last two quarters, I expect to continue into second half of 2025. We have, as Simon said, already reduced our workforce with 80 employees in 2025. Available liquidity remains solid despite high front-loaded strategic capex and working capital build-up. We expect improvement in cash position, improved working capital, and reduction in capex in Q4. The order backlog remains stable around 13 billion NOK. Next, please. The next is wealth services. EBITDA margin improved. compared to Q1 due to improved product mix. EBITDA margin is 31% and 34% if we exclude pass-through charges. Secure extension of Kuwait and Turkmenistan contracts and the high performing wide-wheel contract prolong. There's a high tender activity is ongoing globally with focus on high margin business opportunities. We expect that the high front-loaded COPEX combined with effects on ongoing improvement program will contribute positive on EBITDA and cash flow from Q3. Operations, the activity level is steady. RIGMIC stability supports predictable earnings and margin lift on the way from performance improvement program. Operation remain focused, optimize operation structure, continuous improvement of efficiency in operation, and optimize the cost level. There's a high tender activity ongoing globally, both for traditional drilling operation and for P&A projects. One of our main commercial priorities for operation is to secure work with Brunei Shell Petroleum in Brunei, using the technology and experience from our previous collaborations. Engineering delivered a strong quarter with high revenue and strong EBITDA margin. Increased activity in Q2 due to high activity on SPS for Deep Sista Vanger and Deep Siaverdin, which was successfully completed on time, on budget. SPS work for client, for key client Rotfeld Drilling has been an important element of our development over the last years. In parallel, We have developed solid position and contract within modification and at fixed installation platforms and floating storage with key clients as Equinor and Akka BP to balance our portfolio. This is showing GDPR and revenue development since Q1 2022 for revenue, stable, predictable and controlled growth in revenue. solid EBITDA growth until Q2-24, small drop in Q3-Q4 and Q4-24, and improvement from Q1-25. We expect this improvement to continue into the next upcoming quarters. To summarize, stable operation with margin improvement, dividend of 60 million equal to direct yield of 11%, strategic 25th CARPEX front loaded from wide wheel path and growth projects, strong cost discipline approach and on track with our performance improvement program. And finally, positioning for a stronger second half driven by contract ramps up at the well service product mix and ongoing efficiency initiatives.