Prosafe Se

Good morning, and welcome to ProSafe's Q3 2020 results and business update. We turn to page two of the presentation you can see online. We have the disclaimer, and you will be pleased to note that it's of a similar content as we have used previously. Turning to page three, we have a brief agenda for today. I will just take us through the highlights of the presentation shortly. Then Stig Christiansen will update us on the numbers and the financial situation of the company. And I will cover the strategy and summarize, including our key focus areas and commercial activity right now. Turning to page four, we have summarized the highlights for the quarter. We have, first of all, successfully protected our order backlog through the COVID-19 crisis. And that implies postponing a lot of the work which was planned to be carried out this year to next year. And that, of course, has an unfortunate effect on the utilization percent for the fleet. as gathering large number of people offshore on a floetel during the peak of COVID-19 has not been a predominant activity. So utilization for the quarter stands at 16%, and the EBITDA is negative by 1.2 million, and the cash flow was negative of just around $12 million in the quarter. Commercially, there has been a few developments, positive developments. We were able to announce last week a contract award on the Norwegian continental shelf in 2022, a 90-day contract with 60 days options. The contracts we have for Total and Shell on the UK continental shelf have both been agreed to be moved from 2020 to 2021 in order to protect our backlog. And in Brazil, both the safe notice and the safe euros are after a period of suspension now back in operation and on hire. And we have several ongoing tenders for work in 2021 and 2022, which we expect will conclude and materialize either before year end this year or early in the next year. We have, of course, also implemented COVID-19 plans for people and our assets to ensure that we are able to perform our services in a safe manner, given the prevalence of COVID-19. And I think we have managed to do that and also comfort from customers that we are capable to perform our operations in the current circumstances. Of course, we have also looked at initiatives to protect our liquidity, including cost-saving initiatives. The liquidity situation or the total liquidity reserve stands at $164 million at the end of the quarter. And as we have continuously updated on, we remain in a constructive dialogue with our lenders. regarding a sustainable financial solution, and we aim to conclude that process by the end of 2020. Naturally, that is not something which is entirely under our control, but that remains our aim. And although it's too early to say what the solution with the lenders may look like, it's anticipated that there will be a significant equitization of debt, which is likely to result in minimal or no recovery for current shareholders. And that is the unfortunate logic of the current financial situation of ProSafe, a situation that we share with many other companies in the oil services or drilling industry which are undergoing these processes. And naturally, if equitization is part of the final result, that is something which will be put to a vote among the shareholders at a general meeting. And I'll turn to page five and leave the word to Stig to take us through the latest numbers. Stig?

Thank you Jesper, and good morning everyone. So after such a comprehensive and good highlight section, I will be brief on the next few slides. I am now on slide number six, update on financial situation. And as Jesper has already highlighted the key points in his introduction, All I want to underscore is that the process with our lenders across the board remains very constructive. The fact that these processes take time is more normal than not. The key point is that the dialogue remains constructive and everyone is looking for a solution for ProSafe. And as such, we continue to trade on a business-as-usual basis, and we target to find a solution that is sustainable as soon as possible. And we stick to the ambition of having such an agreement in principle in place before the end of this year, 2020. Moving on to the financial results and the profit and loss statement on slide number eight. And as you note, and as alluded to in the introduction, revenues in the quarter reflects utilization of 16.4%, which is basically the notos and the euros being back on higher in Brazil for Petrobras from early August. And the 16.4%, of course, compares to the 48.2% of utilization in the same quarter last year, basically reflecting what Everybody knows on the one side it's a generally low activity level, but clearly in 2020 in isolation, it's also about COVID-19 and the effects of that. Although we have been able to protect the business, clearly it impacts the activity level in the short term. Jesper will come back to that later. The reduced depreciation you already are aware of, but let me just for sake of order mention that that is of course a consequence of the reassessment of the values of the fleet that we did earlier in the year in light of current and future outlook for the market and anticipated earnings potential. Consequently, the EBITDA in the quarter is a negative of 1.2 million dollars. Having said that, and as you will see on the comments to the right, I think it's important to underscore that although we are never done or it's an ever going process, I think it's fair to say that in general terms, we are pleased with the continuous cost performance across the company, whether it's offshore in operation or in layup, as well as onshore in our office environments. Moving then on to the balance sheet on slide number 9, and in short, we have at the moment a material negative book equity, again following the reassessments made earlier in the year. However, Just to repeat again, we are in a constructive process with the lenders. And of course, the whole point is to find a sustainable solution, which in essence means what Jesper alluded to, a sustainable balance sheet that is adapted to the new reality and will allow the company to protect and create value from a new basis going forward. What is very important to underscore, of course, is that in the meantime, while the process is ongoing, we have sufficient liquidity for a long period, all else equal, as we are allowed by our lenders to maintain or retain, rather, the cash in the company. And as such, we are continuing to trade on a going concern basis and remain open for business and have also, as you know, recently established been awarded a new contract for one of the blue chip clients in our industry. So with that, I think I'll just pass the word back to you, Jesper. Thank you.

Okay, thank you, Stig. Then I think we can turn to page 11 and go through the final slides before we are ready to take questions. So on page 11, ProSafe's goal remains to protect and create value from being a leading provider for offshore accommodation services globally. And on the commercial front, some of our focus has been to keep our vessels working. We have faced that, remains to face in most regions, a situation of oversupply. And we have managed to keep our vessels working while optimizing our earnings or EBITDA for the same. And I think we have captured more than our fair share in a difficult market. On the cost side of things, we believe we are best in class in terms of operating expenses, both when it comes to the vessels being in operation and in an oversupplied market, equally important when the vessels are laid up waiting for the next job in order to protect our liquidity. We drive efficiency through our core teams and our safe and efficient operations, or as we say here, our HSSEQ excellence. Finance and liquidity we've already covered. We have a strong focus on reducing costs and spend to preserve our cash. And Stig has mentioned, and I have mentioned too, the process that we have with our lenders to in search of a sustainable long-term financial solution. Fleet enhancement and consolidation is something that remains on the agenda, probably not just for ProSafe, but for others in the industry, and that is a necessity to bring some sustainability to the market. The West Concord case that you know about is ongoing as we speak. There's a hearing right now. The hearings in court will continue until the end of this month, and then we expect to have a final judgment in the first quarter next year. And I can note that that is not something the court has indicated, but is our best guess. On ESG, we are adopting ISO 50001 on energy management. And we are exploring various energy efficiency measures, which basically aims at reducing our environmental footprint. Turning to page 12. That's a brief overview of the fleet status, and I would expect that we would add to the backlog and more contracts in the coming months. If we go quickly through the status for the vessels in the fleet to the right, Concordia is laid up in Brazil waiting for its next assignment, and we have some prospects that we think could be suitable for Concordia next year. SafeNotice is back in operation in Brazil. And the contract is coming to an end. And I would expect that the notice remains in Brazil and in operation. Safe Euros has a long-term contract in Brazil and is back in operation as well after having been on standby for a period during the peak of COVID. And the Zephyrus or the Boreas, we can choose to perform the job I mentioned under the highlights in 2022 on the Norwegian continental shelf. Next year the Zephyrus will work for Shell at Shearwater in the UK and the Caledonia will work for Total at Elgin Franklin in the UK. The Regalia as we said the sales process for recycling has commenced but the Regalia as you may recall performed its special periodical survey last year and remains in good physical and operating condition and if an opportunity arise for the regalia then we will of course make sure that it is employed before we move on with the recycling process for that vessel. Turning to page 13 is a Brief overview of the dramatic development of the order backlog for ProSafe, which is reflective of the industry as such. As you can see that the order backlog at the end of Q3 was equal to $114 million, which was largely in line with almost where we started the year, and we still have an ambition to add further to that before we reach the end of the year and all possibly early next year. The addition since last is basically the 90-day contract in Norway in 22, which I have mentioned. Page 14 should be a familiar illustration to those following ProSafe. It shows the significant oversupply in the industry on a global basis, and I think as I Caveat when we see the slide is that the red line was supplied. It's important to note that not all of the 38 vessels included in the global supply compete for every job, which is illustrated in the demand bar leading up to the 15 vessel years or so. So regardless of those details, the illustration shows clearly that there is a significant oversupply, which will inevitably lead to scrapping of vessels and also scrapping of vessels that are not that old and I think also some vessels may leave the offshore accommodation segment for alternative use in adjacent business areas. Turning to the final slides on page 15 which is a summary of what we have just been through. As I mentioned we have protected successfully our backlog through the Corona crisis and I think we remain ready to resume operations as we've done in Brazil, also in the North Sea. Utilization in this special period of the year and special situation with Corona is only 16% as most of the jobs have been deferred. EBITDA was negative at 1.2 and cash flow was negative at 12.3 million dollars. The commercial updates, I've already repeated, a new contract awarded in Norway. Good to see that. It's been some time ago that a contract was awarded in Norway, but we see more tenders in Norway currently. The UK jobs we had this year are successfully moved to next year, and we are back in operation in Brazil and would expect that especially the notice will continue in Brazil also next year. We have safeguarded our assets and people and remain capable of operating in a safe and efficient manner also during the corona situation. Liquidity is still at a decent level at $164 million and the dialogue with lenders we have covered in some detail. Hopefully we will see a meeting of the minds of a sustainable solution before the year ends and which we will then look forward to presenting. And then, as I mentioned, we see some uptick in center activity, especially in the North Sea pertaining to jobs both in 2021 and 2022. I think that summarizes the presentation and we will be now happy to take any questions.

Yes, thank you Jesper. And on that note, As hopefully the listeners would know, the questions shall be raised via email on the page where you hook up to the presentation. And so that was a reminder for those of you who might have questions. But in the meantime, we have three questions. And for efficiency, Jesper, I think I'll read them. I think I can have a crack at responding. And then I'll leave the word to you to supplement as required, if that's okay. So we have three questions from Magnus Sherman at REORG in London. Question number one, what is your target net leverage post-restructuring? That is a relevant question, Magnus, but we cannot be precise on that. Let's just agree that it needs to be very different from what it is today. And you could probably do a lot of benchmarking around that, but it's really... many parties that will need to agree on a sustainable solution, and what that will eventually look like is not for us to say at this point in time, so we cannot be precise on that. But I think the word sustainability says it all. Second question, does your solution include new money at this point from existing or new investors? We are not the ones who are making the decisions, and we shall be careful of being bombastic, but I think if you look around us these days in asset-heavy offshore, new money is not normally part of the equation in these restructurings. I cannot rule out anything, but I think that's less likely than not to put it that way, that that is part of the solution. in general terms. When it comes to the last question, question number three from Magnus, what is your expectation in terms of restructuring costs? And that's, of course, another relevant question. What I would say to that is we have clearly a view on that and our target is to spend as little as possible. Having said that, we all know that these processes tend to become somewhat expensive for various reasons. What I can say is that for those of you who have a view on how much it will cost to be, for example, in Chapter 11, then certainly our target is to stay miles away from that. However, where we will end up is too early for us to be too precise on. What I can share, though, is that we have now been working on this for close to a year, I would say, Jesper, and so far we have incurred costs of about, yeah, somewhere between four and five million US dollars. And given our ambition is to find the solution by the end of the year, then it gives you a flavor of at least where we are at the moment. And then we'll see.

Jesper, feel free to... Yeah, I just have one supplementing remark regarding the new money. I think As we can see from the numbers, the current liquidity reserve is fairly healthy of $164 million. So as such, the company is not in need of additional cash to fund its operations. And we would also expect that the company retains a healthy and sufficient cash reserve to reflect the operations that we have after a restructuring solution is So unlike others in the industry, we are not running out of cash. I think that was just the only reflection, Stig, on the new money.

And that was a very important one, Jesper. Thank you. Okay, Jesper, I think I'll pass the word back to you. People have had a few minutes to write emails while we have been talking, and so far there are no further questions coming in. So over to you, Jesper.

Okay, well that's just left for me to say thank you for attending and we will hopefully revert with any relevant updates for the company. Thank you and have a nice day.