Odfjell Technology Ltd

Welcome to Altiel Technology's Q1 presentation. My name is Gert Haugland. I'm the SVP for Finance and Investor Relations in Altiel Technology. I'm joined by our CEO, Simon Leung, and our CFO, Eirik Lutzen. Today's presentation is available on our website, and please take notice of the disclaimer on page two. Simon will cover the key highlights and market outlook, backlog and dividend, and I will thereafter go through the financials before we open for a Q&A session. You can submit your questions through the webcast portal or by using the dial-in numbers. Over to you, Simon.

Thank you, Gert. And welcome to the call. Let me start with the highlights of the quarter. In March, we closed the acquisition of Casium and Razor. to technology and service companies providing proprietary wireline intervention and P&A plug abandonment tools and services. This established over intervention and plug abandonment platform. A scalable footprint in a part of the market with the strong structural drivers. We secured a 5.5 year contract on EcoFISC with ConocoPhillips recently. This adds material to our firm backlog. We have also established an alliance with Halliburton in Norway to complete our offerings within intervention and service. I will come back to that somewhat a little later. Last week, we also secured a three-year contract with Enquest in the UK for platform dealing on the Magnus field. Operations are expected to begin third quarter this year. This also gives us an opportunity to add on type of rail services, engineering services, modifications services, and so on, on top of the platform for drilling activities. So these wins are important to build our backlog. On the financing side, we completed a NOK 600 million bond tap at 225 basis points, and we paid the drawn portion over our revolving credit facility. We ended the quarter with approximately 1 billion of available liquidity. I will return to each of these points later in the presentation. Revenue in Q1 was 1.37 billion NOK, on the same level as 25 last year average. Adjusted EBITDA was 204 million with a margin of 14.8%. The reported figure reflects acquisition cost and 33 days of K7 ownership into the numbers. The CFO IDIC will go into more details later in the presentation. Backlog stands at 11.6 billion NOK. Q1 contract awards were NOK 1.7 billion with the Comico-Phillips contract at EcoFisk as the main driver. Last 12-month revenue is approximately 5.6 billion. Last 12-month adjusted EBITDA is NOK 832 million. The latter does not include any contribution from Casium and Razor. On the market side, the market backdrop is more or less the same from 25 into 26. However, we see a general move in the global energy market that 27 and onwards will be a stronger market with more activities, both onshore, midwater, and deepwater activities. Also, we see the same stable high level of activity in the harsh environment areas like North Sea, UK, Norway, and also more up in Atlantic Canada. South Africa is also ramping up in 27 with the South African and Navier activity. This is typical harsh environment markets. In the North Sea, activity is steady and tendering is elevated. Internationally, operators remain disciplined on spend, but we see an increased activity both in the Middle East and offshore Americas. Demand for plug abandonment and intervention work continues to build. Aging fields and decommissioning commitments are the structural drivers, and we see this carrying into 2027 and onwards. Our position is stronger in that respect in the North Sea, UK and Norway, where we have secured multi-year contracts in place. Through KCM and Razor acquisitions, we are scaling our intervention and plug abandonment platform. This, together with the said alliance with Halliburton in Norway, makes us a fully-fledged provider of these kinds of services. Our recent contract with ConocoPhillips on EcoFish will be the pilot in this respect. In rail services, we continue to invest in differentiating technology. Power-wide drill pipe being a current example. And to this example, we actually see more and increased interest from several major clients in the world. Capital allocation stays disciplined, and Carpex is moderating from recent levels. And finally, comments to Casium and Razor. The integration of the two companies is on track, and the focus is now on delivery. A little more comment on the backlog. Backlog at the quarter's end, 11.6, that includes options in platform drilling activity. that 7.3 billion is firm we work with most of the major energy companies in the regions where we operate and these are long-standing relationships q1 or the intake was 1.4 billion knock spread across wide range of customers from super major awards and two very large awards and through a long list of smaller contracts the backlog is important, then the backlog gives us a stable and very predictable platform going forward. Regarding dividend, our dividend policy is unchanged. However, as previously communicated, we are pausing the dividend payment in 2.2 and 2.3. Reason being is that we are a company with growth ambitions And we have strong ambitions to build and have a robust balance sheet going forward. And we see a lot of type of opportunities where we will secure that we are never stressed on the balance sheet and in any commitment to anybody. So the board of directors, together with the administration, have advised us, and we have decided to pause the dividend for up to two quarters. We have a clear view that we will come back to pay dividends later in this year, late second half. We have so far paid out 624 million to shareholders, which has delivered a yield of 11% in 2025, and total return per share up to 213.16 since listing. over a business to return capital to shareholders remains central as a part of the overcapital allocation strategy. Now I think I'll leave it to Eirik to go into more of the financial information.

Thank you, Simon. In general, we have a stable activity level in Q1 with a good financial performance given the acquisition activity in the quarter. Revenue in Q1 was 1.37 billion NOK, stable quarter-on-quarter and up 3% compared to Q1 last year. Epidea in Q1-26 was 188 million NOK. Reported margin is 13.7%, however this includes 16 million NOK in one of mainly related to acquisition costs for K-Zoom and Razer. Adjusted epidea is 204 million NOK, giving a margin of 14.8%, which is broadly in line with previous quarters. K7 Razor were only consolidated for 23 days in Q1, contributing approximately 11 million NOK in the day up. On a full quarter basis, that run rate is approximately 45 million NOK, which will benefit the following quarters. Cash from operations was 45 million NOK in Q1. This is lower than Q4, as expected. as Q1 typically builds working capital as activity increases heading into the year. Liquidity is above 1 billion NOK after 600 million NOK in bond PAP in Q1, followed by acquisition of KSM Eraser and repayment of the drawdown RCS. And finally, on the OOFO tax case, the Guillotine Court of Appeal ruled in our favor in April 2026, and the Norwegian Tax Authority has one month to appeal. The next one is wealth services. Q1 was a solid quarter for wealth services, with revenue of 525 million NOK, up year-on-year, driven by strong operational activity and contribution from the KSM and Razor acquisitions. Compared to Q4 2025, revenue was lower following a particularly strong Q4 2025. EBITDA came in at 154 million NOC in Q1 2026, compared with 176 million NOC in Q4 2025. The EBITDA margin was 29% versus 32% in Q4 last year. The quarter-on-quarter decline mainly reflects temporary and non-recurring Q4 effects, including equipment sales. Excluding these effects, the underlying business activity remains solid through Q1. Geographically, NOA remained the largest market, accounting for approximately 50% of the revenue, with strong performance also from the UK and the Middle East Asia regions. KSMR rates have contributed 21 million NOC in revenue and 11 million NOC in EBITDA following transaction completion on 9th of March this year, meaning Q1 only included a limited contribution from the acquisitions, with a full quarterly impact from Q2 onwards. We also continue to maintain a disciplined approach to CapEx, keeping investments targeted and aligned with operational requirements and high margin priorities. The next listed area is operations. The activity level is steady and predictable. Operations remains the stabilizing backbone of the group. Q1 revenue was 640 million NOK, in line with Q1 last year and slightly lower compared with Q4 last year. The quarter-on-quarter development was mainly driven by contract mix effects and some rigs shifting into maintenance mode during the quarter. EBITDA came in at 42 million NOC compared with 50 million NOC in Q4 last year. EBITDA margin was 6.5% compared with 7.7% in Q4 and 6.8% in Q1 last year. The lower profitability in the quarter mainly reflects lower bonus achievements. At the same time, the improved Equinor bonus scheme increased earnings quality and predictability going forward. Furthermore, two significant commercial wins in Q1. We secured a five-and-a-half contract with ConocoPhillips and a three-year contract with Enquest, strengthening the backlog and providing strong future visibility. The next business area is projects and engineering. Revenue in Q1 is 142 million euro. stable quarter-on-quarter. The reduction compared to Q1 last year reflects the very high SPF activity on the oilfield drilling rig in the first half of 2025. EBITDA is 60 million NOC compared to 11 million NOC in Q4 2025. The EBITDA and the margin improved to 11.5% as we have accomplished to align capacity for the current activity level. Lastly, we expect the Activity to strengthen later this year as commercial leads will materialize. Cash flow in Q1 is significantly impacted by the KSMO Razor acquisition. Operating cash flow was negative by 3.5 million NOC compared to a positive 383 million NOC in Q4. Working capital increased by 124 million NOC in Q1 versus a release of 210 million NOC in Q4. This is a normal seasonal pattern as activity builds through the year. It's also driven by paid social security and other taxes in this quarter. CapEx was 61 million NOK, down from 77 million NOK in Q4. Capital discipline and CapEx spending will remain a focus going forward. The case man raised to acquisition resulted in a net cash outflow of 334 million NOK. The 600-billion non-SAT placed in February funded acquisitions with a net change in debt of 390 million NOK after the RCS repayment. The total liquidity is therefore 1 billion NOK, including 489 million NOK in undrawn RCS. This slide shows the development in the revenue and EBITDA over time. Q1-2026 revenue is 1.37 billion NOK, stable compared to Q4-25 and up 3% versus Q1-25. Q1-26 adjusted EBITDA is 204 million NOK, including 60 million NOK in one-off costs. Excluding NOKs, the underlying EBITDA is broadly in line with recent quarters. Q1 is traditionally the weakest quarter of the year, so delivering 204 million NOK is a good starting point for the full year. Then over to our improvement program. The improvement program delivered in 2025 good results, approximately 100 million NOC in improvement and savings to structural cost reductions, bonus improvement, and margin improvement across selected regions and product lines. We are continuing with the program also in 2026. Already in Q1, we can see the effect. Project and engineering has improved margins through structural cost reductions and adjusting the cost base to the activity level. The focus in 2026 is on increased margins and cash conversion through a further enhanced operating model, higher return initiatives, and clear targets and accountability across the organization. The ambition is to accelerate earnings growth, strengthen the cash generation, and further improve the balance sheet. So, to summarize, Q1 was a transition quarter. Reported figures reflect the K2 and Racer consolidation and wall of cost. Looking forward, three things position us for the rest of 2026. Our earnings base is broader. K2 and Racer are consolidated for the full quarter from Q2, adding intervention and P&A capability in a structurally growing segment, with a margin profile that creeps into the group. Revenue visibility has improved. Firm backlog stands now at 7.3 billion NOC, supported by the Multia, ConocoPhillips and NQuest awards. Special role P&A and intervention demand is also growing. The balance sheet is stronger. NOC 600 million bond tap completed. The RSS is fully undrawn. And we have more than 1 billion NOC of available liquidity. Capital allocation remains focused on cash conversion across the group. We are therefore of the opinion that the building blocks are in place for an improved performance through the remainder of the 2026. And this summarizes our presentation, and we do now open for questions.

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Yes, we have a few questions. We'll start with one question regarding Casium and Razor. Could you please give us some details on the Casium and Razor acquisition regarding the company's actual expected annual revenue and margins?

Yeah, I can briefly start with that. For Q1, and as was noted in the report, the full quarter revenue was approximately 72 million, and the full quarter EBITDA for the case manager was approximately 45 million. So that leaves with an attractive EBITDA margin of more than 60%. And we don't guide on any future numbers for these two companies, but I think that's a good starting point from what we can expect to go forward.

Yeah. And then we have another question on the dividend level. The dividend level going forward will remain subject to our... Inorganic growth ambition is the statement that makes this potentially a very volatile as observed this year. Have you considered a level that is sustainable alongside your growth ambitions? How does your market outlook impact the specific growth and margin trajectory in each of your three segments in 26 and beyond? Are you now done with restructuring one option?

I can start that, to answer it. Just to go back to the dividend question, we have said last year, and I've repeated many times, that Optrel Technology is a company where we are building a platform for growth. These latest acquisitions, both within investment in Polo Pipe, in Wheatstocks with Makarian we have bought earlier, and with the case of Racer now. Build as a stronger footprint for providing also technology into the services we are looking for. So, forcing the dividend two quarters now. We do it because we want to have robustness and predictability in our balance sheet. So there's no point for us to kind of stretch, and this is what we have also discussed. We force it for the good reasons, because we expect to come strong back on the development of the new platforms, the new business areas we are looking after, and that's also why we have established exclusive alliance with Halliburton here in Norway to be a fully-fledged provider of type of late-life activity, down-haul activity, plug-and-ban activity, intervention activities, and all that kind of thing. So we can provide tools and equipment and technologies into those services, integrated services. So when we finally go through the next two quarters, and go back to the dividend distribution. We will again make it as a predictable and stable distribution. And if in the future it comes potentially new opportunities where we again decide to go to pause or do something different, we will do it for the good reasons. But we have no more ambitions or plans to do more acquisitions. We're just going to build on the platforms we have now established And we have just won a big contract with Conoco on Ecoviz, which is a huge field operation, including all the type of service I talked about here. So this will be the pilot for providing the services that is expected for the next, I would say, almost decades of activities in that respect. Are you now done with restructuring one-offs? I would say yes. for the time being, absolutely yes. We have done, we are still working with improvement programs. We are going to do that continuously. That's all over DNA to be, to kind of make the organization all time fit for purpose. So we are, so yes, we are done with restructuring one-offs as we have done now over the last years. But we still continue to have continuous improvement programs. Anything else from that part?

Yeah. It seems OTL has some difficulties growing outside of Norway and UK. Would you say this statement is correct, or maybe it's just a cycle's rhythm? Or if correct, what would you say we need to improve our position internationally?

I think the statement there is that when we launched OTL, we had something like 60% of our business in Norway and 40% outside Norway. We are today about 50-50, and we see now that we don't expect a significant growth with operations platform drilling outside Norway, UK. Some potential projects could come. but we don't see in the future, in the close future, any big growth there. However, within services, rail services, and also with KCM and Racer, we see significant growth potentials, both in US, America, South, and in the Middle East, especially maybe within, I mentioned Kuwait, Saudi Arabia, and that region. So we expect to have and distribution of those tools and services internationally with expected, I would say, ambitious growth targets.

I think we have one last question regarding working capital. Should we expect the same seasonal pattern as in recent years with negative contribution from Q1 to Q3 and then a release in Q4?

I think that's fair to assume. And I would also like to note that in this quarter in particular, we were impacted by a new legislation when it comes to payment of taxes on salaries in Norway. So we have to now from January on, we are paying taxes on salary every month in conjunction with salary payments. So that means that in this quarter, we actually paid the full quarter of the Scupta Tech in Norwegian, in addition to the two months that we also had to pay for last year. So there was in total five months to pay this quarter. So that impacted the working capital somewhat, and we expect the work capital to improve going forward and into the remainder of the year.

Yeah. There are no further questions, so I think we'll conclude the webcast here. Please reach out to me if you have any additional inquiries, and thank you for participating in today's call. Thank you. Thank you.