Paratus Energy Svcs Ltd

Welcome to the Paratus Energy Q1 2026 earnings call. There will be a question and answer session after the presentation, and you can submit your questions by the form at the bottom of the player. I will now hand you over to your host.

Thank you. Good day everyone and welcome to this first quarter 2026 results presentation of Paratus Energy Service Limited. My name is Baton Hajmemete and I'm the CFO and interim CEO of Paratus. Before we begin today's presentation, I would like to remind all participants on this call that some of the statements in this call may involve forward-looking statements. Forward-looking information involves risks and uncertainties by nature that may cause actual results to differ materially from those projected in such statements. I therefore refer you to the latest public filings of the company. The year 2026 has so far been very busy and also eventful for the company. In March, we announced a transformative transaction for Paratus, the $400 million sale of our Jacko business, Fontys Energy. This transaction marks an important milestone in the continued evolution of Paratus, simplifying the company and sharpening our strategic focus. Let me just recap from the last time we spoke. Following completion of the transaction, Paratus becomes a focused PLSV holding company with exposure towards long-term contracts with strong cash flow visibility in a niche market. while at the same time we significantly improve our risk profile by exiting the mexican jackup segment where we had exposure to payment irregularities and backlog breaks second this is the leveraging story where our depth reduced from 625 million to around 250 million dollars and net leverage coming down from 2.2 times epita to around 1.4 pro forma basis q126 And lastly, with current strong financial position and significantly improved cash flow visibility, we have strong confidence in a credible path to sustaining our current dividend per share over the long term. As previously announced, the closing of the Fontys transaction is expected in second half year 26 and is mainly subject to competition authority approval in Mexico. Overall, the transaction arrangement is reflected by a high degree of deal certainty. In early May we successfully completed a private placement of 250 million dollars of five-year senior secured bonds with a coupon of 8.125 percent and a borrowing framework of up to 500 million dollars. The primary use of proceeds is to refinance the existing 26 notes. Let me now move over to some quarterly or overall quarterly results and please note that the That Fontys financial results is accounted for as discontinued operations with associated assets and liabilities held for sale. Therefore, we are not showcasing any Fontys figures in the operational update, as we have done previously. We released Q1 trading update in connection with a bond issue in May, and there are no material changes to those figures. We reported Q1 revenues of $75 million for seed gems and combined segment EBITDA of $46 million compared to $74 million and $50 million in the fourth quarter respectively. The small decline in EBITDA is mainly explained by the one-time positive effect which was booked in Q4 last year from reclassifying certain withholding taxes from OPEX to income tax. We exceeded Q1 with a cash balance of $128 million and $254 million in net debt performed for the Fontys transaction. Finally, consistent with the previous quarters, the board has approved a $0.22 per share dividend for Q1, maintaining our stable distribution practice. Now let's move over to the quarterly performance of our joint venture, SeaGems in Brazil. As usual, figures referred to here are on 100% basis, unless otherwise cited by me. CJEMS delivered another strong quarter. I will go through the highlights. Q1 revenues of $150 million and EBITDA of $96 million, supported by strong technical utilization of 98%, and significant day rates averaging close to 280,000 per day. The modest revenue increase from Q4 reflects higher day rates driven by positive FX impact, foreign exchange impact, and whereas in Real dominated component of the day rates. Compared to Q1 last year, the strong revenue increase is mainly due to the full fleet operating under the new Petrobras contracts. As mentioned, EBITDA was lower compared to Q4, mainly due to one-off tax reclassification effect mentioned earlier. During Q1, the JV distributed $83 million, around $41.5 million to Paratus, up from $76 million in Q4. At quarter end, backlog stood at approximately $1.3 billion. As discussed on our previous earnings call and in reports, Petrobras is in the market with a PLSV tender for startup in 28, offering four-year contracts across different lots with varying technical specifications. The tender deadline was originally due in February, but has now been pushed to mid-June 26. And CGM is well positioned to submit a bid with at least one vessel as a Jade vessel. PLSV is scheduled to finish its current contract in Q3 next year. Now let's go through the Q126 financial results compared to both the previous quarter and the same quarter last year. As mentioned earlier, please note that Fontys has accounted for a discontinuing operation with comparison figures in this table updated. Peralta's reported net income from continuing operations after tax of $19 million, up from $60 million in Q4, and compared to a loss of $30 million in Q1-25. The key drivers were as follows. Revenue increased slightly quarter-in-quarter, while year-on-year growth was driven by higher day rates from new Petrobras contracts. EBITDA was slightly lower quarter-in-quarter due to one-off positive impact in Q4. The year-on-year EBITDA increased primarily driven by higher revenues. Financial expenses were in line with the previous quarter and significantly lower compared to last year, mainly due to the upfront fee related to monetizing receivables in Mexico during Q1-25. Income tax benefited from a lower than provided tax. Auditor settlement in Mexico and the previous mentioned one of withholding tasks, reclassification effect in Q4, broadly in line with the last year. Finally, the strong free cash flow in the quarter compared to both Q1 and Q4 last year was driven by higher distributions from CGMs and lower interest payments compared to Q4, reflecting only the quarter payments on the 26th notes. So overall, the Q1 financial results reflected continuous strong operation performance, solid earnings and improved cash flow generation. Now let's take a look into the main cash flow items during the quarter. At Paratus consolidated level, we closed Q1 with a cash balance of $141 million, which represented a decrease from $178 million at year-end 25. The $37 million decrease in cash was primarily driven by net cash used by discontinuing operations, meaning Fontys, was $36 million spent, mainly due to lower collections from Fontes' client in Mexico and a payment for a tax audit claim settlement in a quarter. Cash from continued operations of $4 million was primarily reflecting transaction-related costs and other temporary cash outflows. Capital distribution from C-GEMS as mentioned was $41 million up from $38 million in Q4. Net interest payments of $4 million down from $28 million in Q4 reflecting the interest payments on the 26 nodes only. And finally, we returned $36 million to our shareholders consistent with the last quarter. After these movements, we ended the quarter with $141 million in cash at Paratus level. In addition to this, our pro-rata share of cash in the C-GEMS was $15 million, bringing the total group cash position to $156 million at the end of Q1. In summary, Paratus continues to maintain a strong liquidity position supported by stable distributions from C-GEMS. Moving over to our capital structure and in particular to review it on a pro forma basis post the expected Fontys transaction. Sale of Fontys significantly improves net debt from 625 million in Q1, as you can see here, to a pro forma level of 254 million dollars, while also removing exposure to payment irregularities in Mexico. This corresponds to a reduction in leverage from 2.4 times EBITDA to around 1.4 times EBITDA on a performer basis. As announced in April, 29 bondholders approved amendments to allow the seller's credit as part of the Founties transaction to be treated as a permitted debt and deducted from the net debt calculation. This provides additional flexibility as the seller's credit structure incentivizes early repayment with a step-up in coupon. while also giving us opportunity to either address 29 bonds or support future growth initiatives if you chose to do so. Subsequently to Q1, we successfully issued a new 250 million in bonds, maturing 2031, primarily to refine the 26 nodes, as you can see here in our maturity profile.

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