Paratus Energy Svcs Ltd

Good day, everyone. Welcome to the second quarter 2024 results presentation for Paritus Energy Services Limited. My name is Robert Jensen and I am the CEO of Paritus. Joining me on the call today is Baton Hajimemedi, our CFO. Before we begin today's presentation, I would like to inform everyone that we may make forward looking statements on this call. So we recommend everyone to read the disclaimer in the back of the presentation. With that out of the way, I'm very pleased to welcome you all to our first quarterly presentation as a public company. The second quarter was an extremely busy quarter for Paritas. We began our life as a public company following the successful listing on the Oslo Euronext Growth in late June. I would like to take the opportunity to thank everyone involved in making this happen. In conjunction with the IPO, we issued 15.3 million new shares, raising gross proceeds of $75 million. This transaction was very well received and ended up being more than 10 times oversubscribed. Prior to the IPO, we also completed a partial refinancing by issuing a new five-year bond of 500 million with a 9.5% coupon. Following this, we now only have 215 million of debt coming due prior to 2029. As for the quarter itself, we reported revenues of 124 million and an adjusted EBITDA of 70 million on continued strong operational performance across both of our operating entities. Credit for this performance goes to our operational teams who have delivered more than 99% utilization, which is an impressive feat. We exited Q2 with a cash balance of 246 million and 518 million in net debt. In May, we announced that Sea Gems, our 50% owned joint venture, added 1.8 billion of new backlog by successfully recontracting all of its six vessels for three years with Petrobras in Brazil. Today, we also announced that Sea Gems have added a further 74 million of new backlog from contract extensions with the same customer. Last but not least, today we announced our shareholder return program. As we stated during our IPO Roadshow, we believe that our cash flow belongs to our shareholders. And as a result, Paratus intends to return a majority of its excess free cash flow to shareholders. through stable long-term sustainable distributions or share repurchases. Any such distribution will always be subject to allowance under existing indentures and board review. The intention is for this distribution to be on a quarterly basis. As a first step, the board of directors yesterday approved a quarterly cash distribution of 22 cents per share for Q2. The dividend will be payable on or about September 23rd. In addition, the board of directors have approved a share repurchase program of up to 100 million. The timing and amount of any share repurchases will be based on evaluation of market conditions and other factors as permitted by security laws and other legal requirements. The program comes with no fixed expiration date and may be modified, suspended, or discontinued at any time. Now, let's move on to the operational update for each of our two operating entities. We'll begin with CGEMS, and please note that all numbers referred to on this slide is on a 100% basis, of which we own 50%. CGEMS reported Q2 revenues of $104 million for the quarter and an EBITDA of 56 million. Revenues were slightly below Q1, mainly due to an average achieved day rate of $201,000 per day compared to $209,000 per day for Q1. The lower day rate was partially offset by technical utilization of 99.3% in the second quarter versus 98.7% in Q1. OPEX was also slightly lower in Q2, resulting in EBITDA margin of 58% for the quarter versus 55% for Q1. CapEx spending amounted to 11 million for the quarter, and the total backlog stood at 2.1 billion at the end of the quarter. As noted earlier, we also announced today that we have received some extensions following the end of the quarter. Ruby has been awarded a 235-day extension to its existing Petrobras contract, adding a total incremental backlog of 62 million. Similarly, the Esmeralda has received a short-term extension to its existing contract, increasing the duration by 60 days. The total value of the backlog for this extension is 12 million. Both vessels will complete these new commitments prior to the start of the new three-year contracts awarded by Petrobras earlier this year. These extensions will likely also have some positive effect on the CAPEX spending this year due to the delayed startup of the new three-year contracts. Overall, the fleet is now fully contracted until late 2027 and well into 2028 in some cases. Moving over to Fontys Energy. Our wholly-owned drilling company reported Q2 revenues of $72 million for the quarter and an EBITDA of $47 million. The notable sequential increase in revenues was due to recognition of $15 million of revenues that had previously not been billed, as well as higher day rates following the market indexation we achieved in February. Fontys achieved an average contractual rate of $127,000 per day in Q2 versus $118,000 per day in Q1. Technical utilization continued at a very high level with 99.8% for the quarter, largely in line with 99.6% in Q1. Cap expense was only 2 million for the quarter, but we note that the majority of the cap expense this year will occur in the second half. We closed the quarter with a contract backlog of 369 million. With that, I will leave the word over to Barton to walk you through the financial results in some more detail. Thank you, Robert.

As this is the first time that the company releases its quarter and half year report after the IPO, I would like to spend a couple of minutes to explain our way of reporting and presenting our financials. The table to the left, as you can see on the slide, provides a financial summary of our results for the quarter versus previous quarter. The column to the left labeled reported consolidated numbers reflects our financial reporting under the US GAAP, which accounts for our 50% share in the net income from CGEMS based on the so-called equity method. While the column to the right, which we call management reporting group numbers, here we show our financial results, which includes our 50% share of the CGEMS income statement on a proportional basis. which means on a line-by-line basis. This way of presenting reflects the way we operate and report our operational and financial performance in the company. For further information and description of this, margin reporting is defined and described in more detail in our alternative performance measure section in the financial statements and the notes. Just for information, the graphs to the right shows our main KPIs, revenue and EBITDA per segment on a quarterly and half-yearly basis with comparison figures from last year. Okay. Now I will talk more about the main highlights of the group financials for the quarter compared to Q1. Starting from the top with the revenues, the group contract revenues stood at $124 million compared to $109 million in Q1. which represents an increase of $50 million or 14% from previous quarter driven by the revenue increase in Fontys, which is mainly related to the recognition of revenue from previously unveiled escalations, as mentioned by Robert earlier. While the contribution from Sea Gems was broadly in line with Q1. Moving further down into NPL, on the cost side, total rig Total group rig and vessel OPEX in the quarter amounted to $42 million, which is slightly down compared to $43 million in Q1. The SG&A for the group was $9 million compared to $6 million in Q1. And the increase in SG&A from Q1 was mainly due to one-off transaction costs, expense in connection with the IPO placement, and placement of bonds expense the transaction fees were expensed during the Q2. These items along with the higher revenues in Fontys explains increase in our adjusted EBITDA from $56 million in Q1 to $70 million in Q2, which represents an increase of around 20% plus. Moving on to financial expenses, further down in the P&L, the net financial expense amounted to $13 million in Q2, which was down from $80 million in Q1. The decrease in net financial expense relates mainly to unrealized FX gains of CGM's operations in Brazil and unrealized currency reevaluation effects of the tax provisions in Mexico at quarter end. With that, we are pleased to report net income after tax of $34 million for the quarter, representing more than a threefold increase compared to Q1. The half-year results are explained in more detail in our financial statements in the MD&A sections. So I will refer you to that. OK, moving on to cash flows, which is in page 7 of the presentation. At Paratus consolidated level, we exited the quarter with a cash balance of $232 million, which was up with $123 million from last quarter. In the following, I will go through the main cash flow items during the quarter, explaining the increase in cash. Operating cash flow of $54 million was primarily driven by solid operating performance and higher collection of our outstanding receivables. During the quarter, the company collected $90 million from our client in Mexico, up from $60 million in Q1. As we have noted before, we expect the fluctuations in payments in Mexico to continue. CAPEX additions during the quarter were $2 million compared to $3 million in Q1. And as previously announced, pursuant to an agreed plan amongst the joint venture shareholders, including Paratus, CJEMS distributes all excess cash to its shareholders. During Q2, VJV distributed $40 million to Paratus compared to $24 million in Q1. The net proceeds, as you can see on the graph there, from the private placement in relation with the IPO was 73 million dollars net of issue costs and transaction costs and the company paid interest of 16 million dollars which was at the same level as q1 on the top of the reported cash of 232 million dollars as explained here the company's share of the cash in cgms was 40 million dollars as of q2 taking the total group cash to 246 million dollars I have now turned to page eight, and we'll talk about our flexible capital structure. Here we show our current debt and results of the recent partial refinancing in July, as mentioned by Robert. We now have the majority of our debt pushed out to 2029 maturity. We believe that with this capital structure, we have great flexibility in how we can deal with the remaining portion of the 2026 notes of $250 million, down from $715 million. It is also important to note that there is flexibility in our bond terms for distribution to shareholders. As mentioned by Robert, we expect to be able to distribute most of our excess free cash flow to shareholders and still be within our incurances test as per the bond terms. And in addition, as per the terms of the agreement, we maintain a basket of $100 million until end 2017, plus proceeds from the IPO of $75 million, which can be distributed outside of our distribution test. Looking at other selected balance sheet items of importance in this slide, our outstanding accounts receivable The balance was $250 million as of Q2, down from $222 million compared to the previous quarter, Q1. However, please note this number included in the, sorry, the $222 million number also reflects the recognition of previously unbilled revenues of around $20 million, including VAT, which was mentioned earlier. So actually the trend for the receivable balance is therefore more positive than what may be seen from this chart. Okay, and with that, I will give the word back to Robert.

Thanks, Baton. As we close the first half of 2024, we have also narrowed the financial guidance for the year slightly higher due to the strong results achieved during the first half. For the full year, we expect contract revenues in the range of 435 to 475 million. For EBITDA, we now expect adjusted group EBITDA in the range of 220 to 240 million compared to our previous guidance of 210 to 240. CapEx is now expected to be 30 to 45 million dollars compared to our previous guidance of 45 to 55 million dollars. Most of this reduction should be assumed to be deferral into next year. Before we open up for Q&A, I'd just like to reiterate some of the key highlights for Paratus. We have an exceptional cash flow position today, and this will be further improved as we transition over to the new PLSV contracts in Brazil in the next several quarters. We have a very efficient balance sheet with about two turns of leverage. We have flexible terms and most of the maturities, as mentioned before, pushed out to 2029. We have a substantial backlog that with an average remaining contract duration of about three and a half years, and although market fundamentals currently appear very solid for both of our operating segments, this backlog creates security, stability, and visibility on earnings. With that, I think we can hand it back over to Jan, who will inform you on how we conduct the Q&A session.