Prosafe Se

Good morning, and welcome to ProSafe's Q4 2021 presentation. This is our first presentation after completing the financial restructuring around Christmas last year. And therefore, the presentation is a bit more elaborate compared to the most recent quarterly presentations. If we turn quickly to the disclaimer, the trained eye will note that it's identical to the disclaimers you have seen previously and are familiar with. Turning to the agenda for today's presentation, I will shortly kick us off with an introduction to where ProSafe stands after the financial restructuring. As you will see in many ways, it's a fresh start for ProSafe, and 2022 looks to be a very good starting point. Thereafter, I will leave the words to Stig Christiansen, who will take us through the highlights for the quarter, the financial results, and the commercial updates. And I will round us off with an overview of the status and strategy in ProSafe and our key markets. As always, questions are most welcome. Please use the Q&A function, which sends an email to Stig, and you can find that on our website. Turning to page four, the completed restructuring leaves ProSafe revitalized and well positioned for the coming years. Our net debt of $354 million is practically all-time low, and it matures end 2025. There is an annual cash sweep mechanism in place, which ensures repayment of debts in a flexible way, and it allows ProSafe to maintain a good cash buffer of about $60 million. When we completed the restructuring in December, we guided an EBITDA for 2022 in the $50 to $60 million range, and we see additional positive developments. We are more or less sold out in 2022. Yes, we have a few open periods which we are working to close, but at the beginning of this year, we have quite a comprehensive contract coverage for our fleet in 2022. Only Scandinavia is without contracts, and that is actively being marketed. Our operations this year will span key geographical markets, including Norway, UK, Brazil, and also Trinidad and Tobago. So we're off to a good start in 2022. Looking further ahead, we see positive longer-term market indicators. The energy transition must and will happen, but oil and gas will remain an indispensable and sizable part of the energy mix for the long term. The main demand drivers for flowtails come from fields in production, and optimizing the use of the existing infrastructure also seems to be the main focus for our customers. Looking at enhancing recovery, tying back nearby discoveries and extending the life of what is orphaned and aging infrastructure. Our activity level in 2022 is also a good reflection of the tightening market conditions we see in the North Sea and Brazil in particular. In addition to us being practically sold out, there is generally very limited available capacity in the market right now. The current commercial activity is centered around Brazil, which I'll come back to. We have an ongoing process with Petrobras and we are also preparing for the next round of opportunities with Petrobras, which are likely to come later this month or in March. Our customers in the North Sea have a very high project activity. And in Brazil, Petrobras and other operators have an extensive FPSO program coming on stream in the near years and that will drive demand for our services in the years to come. All in all, ProSafe is revitalized after the financial restructuring and 2022 looks to be a promising start to the new chapter. With that, I will hand over the word to Stig to take us through the next section starting with the highlights for the quarter.

Thank you very much, Jesper. And good day, everyone. It is a very good day. It's Friday, and as always in Stavanger, the sun is shining and the sky is blue. We also, just for information, is looking forward to... Next time, physically be in the market and meet you face-to-face. I believe, we hope, post-COVID and everything, that this will be the last time we will be addressing you via webcast. Next time, we'll try to be physically present. It is indeed a pleasure from my side to present the fourth quarter financials. After 26 months in restructuring, then I have to say that being able to present a clean balance sheet with positive book equity and a cash balance well above our only financial covenant, minimum cash, is, from our side at least, a sight for sore eyes. Adding to that, as Jesper has alluded to already, activity has been high throughout the year and in Q4, and the fleet utilization in the quarter was close to 60%. while the fleet utilization for the full year 2021 was around 55%, which is basically the highest fleet utilization since 2015. Five of seven vessels operating in the quarter or were operational in whole or in part in Q4, resulting in a good cash flow from operations. Finally, in the quarter earlier in Q4, we had, or in Q4, we had, of course, the notos extended in Brazil till July 2022. And of course, yesterday, we were very pleased to be able to announce the new contract for Concordia in Trinidad and Tobago with BP, which is a direct continuation of the current contract that she is on, taking her through to end August 2022. and in addition to that we also came first yeah we are the front runner in the last uh auction uh undertaken by petrobras in brazil with the notos uh and we are currently in the what we call the post auction process and then we'll see where that takes us and of course over and above that there is uh probably more to come in the period ahead Moving on to the next slide, looking briefly at the income statement, which I'm sure you have all taken a look at yourself. We had 29 million US dollars of revenue in the quarter compared to 60 million dollars in the same quarter last year. High in 2020. Reflecting, of course, the strong utilization of the fleet that we have addressed already. EBITDA in the fourth quarter 2021 as a result of the utilization was 4 million US dollars compared to 1 million dollar in the fourth quarter of 2020. Looking at the full year 2021 EBITDA was 25 million dollars compared to minus 10 in the same or sorry compared to minus 10 in 2020. As you will see or note, interest expenses are, of course, significantly down in the quarter and for the full year 21, reflecting, of course, the effects of the billion dollar debt reduction that was agreed and undertaken as part of the restructuring. Equally, other financial items, as you will note, was a billion dollar plus positive due to the gains resulting from the financial restructuring. And bottom line is this resulted in a positive earnings per share for the first time, I believe, since 2016, which is also in itself a positive. Moving on to the next slide, which is the balance sheet. In short, as you will see the total assets were 493 million dollars at the end of the quarter ie at the end of 2021 compared to 588 million dollars at the end of 2020. of course reflecting some major movements the obvious one being the debt to equity conversion second element of course being depreciation of the fleet during the year and then of course finally the cash that we spent as part of implementing the financial restructuring. Liquidity sitting at 74 million U.S. dollars at the end of the quarter, at the end of 2021, compared to minimum cash covenant, which is currently 18 million U.S. dollars. So we are in good shape also from a financial flexibility point of view, as measured by liquidity. Importantly as well, we have all-time low net debt, and even though it's not major, we also again have a positive book equity. And then we can hopefully build from there. Moving on to the next slide, which is the fleet overview, contract overview, as we have already alluded to. Contract coverage is showing that we have five of seven vessels operating in parts or throughout Q4 2021. Looking ahead, we see that we will have six of seven vessels working in parts or throughout 2022. So utilization is likely to be better at the end of the day in 2022 than in 2021. which combined with some rate improvements as we saw in the press release yesterday led us as part of the restructuring in december to guide an ebitda for 2022 in the range of 50 to 60 million us dollars compared to the 25 million us dollars that we delivered in ebitda in 2021 so Then, if we move on to the next slide, which is my last slide, that will be the order backlog for end of 2021. And in short, as the picture shows, I think we're just pleased to note that The order backlog has not only stabilized, but now also started to improve. And of course, our main focus going forward after the revitalization is to do our utmost to achieve commercial outperformance and continue to build the order backlog and improve our performance in the quarters ahead. But I will leave any further comments about outlook and how we see the world to Jesper. So I guess with that, Jesper, I will pass the word back to you.

Okay, thanks, Stig. Then we turn to the section we call status and strategy, where we'll provide an overview of where ProSafe stands today and put that into a historical context as the market we're in have a cyclical tendency. I'll touch upon the activity in our main markets and a bit also on the longer-term outlook as Stig just mentioned. Going to page 14, let's start with costs. As you can see on both graphs on page 14, Proceq has been through a fairly remarkable cost journey with a continuous improvement in recent years. SG&A overhead is trending significantly down and so are the operating expenses for our vessels in all regions. We are seeing some inflationary pressure on costs, but in respect of costs, I'm quite confident that history will not repeat itself and that we should manage to stay around the current cost levels for the coming years. Naturally, the cost for the vessels can be influenced by the scope we have to deliver to our clients, but the cost reductions that you can see are achieved through sustainable and initiatives and efficiencies, which I'm confident have come to state. Turning to page 15, I guess the key point here is that in a historical context, we are also much leaner and well-positioned than we have been in the past. The net interest bearing debt of $54 million is down 70% from 2015-2016 levels and consequently the interest cost of $10 million are down 90% compared to that not too distant past. We have introduced a flexible and scalable cost model. which means that our permanent headcount of 58 is also down about 60%, and so are our overheads or SG&A costs. In the same period, the number of vessels are reduced by about 50%, but be mindful that the vessels which were disposed of or retired were mainly employed on bare boat contracts, which do not require overheads or headcount to any significant extent. The average age of the fleet is 18 years, which really covers two generations. Four of our seven vessels are very modern and have six years of age in average. So in a historical perspective, we stand at an attractive starting point for a recovery. Page 16 tells the same story when looking at the financial metrics for ProSafe. The net interest bearing debts at 354 million, as I mentioned, implies a net interest bearing debt per RIC of only $51 million. We have a good cash position and a flexible amortization structure, and the earnings in 2022 shows a very significant improvement on 2021. Our markets tend to be cyclical, and if history repeats itself, ProSafe is at an attractive starting point for that recovery. Turning to page 17, we have another variant of the contract backlog, and I'll add a bit to the contract status. We have recently added meaningfully to our contract backlog, and we have, as I have mentioned, ongoing processes which could add substantially further to our backlog. Steve just mentioned, so yesterday we were pleased to announce a contract for Concordia in Trinidad and Tobago until August this year and followed by options. That means that Concordia's original contract in Trinidad was 117 days, and when we come to the end of August, that will exceed 400 days. The activity in Brazil is the center of our current commercial endeavors. There was recently an auction for a four-year contract with Petrobras, where ProSafe was the frontrunner. You may have seen that in the news. Petrobras is focusing on the safe notice, which was bid at $75,000 a day for the four years. The post-auction qualification process is ongoing and Petrobras has confirmed that the notice is technically compliant with Petrobras requirements, which is really no surprise as the vessel is already operating for Petrobras. And I would expect a conclusion of this ongoing process. auction during this month or early next month even though there's always some uncertainty when it comes to processes in Brazil. Interestingly Petrobras has announced additional another three auctions which will be held I think immediately after conclusion of the auction when Lotus is the frontrunner. The three auctions are two contracts for four years duration and one contract for 650 days. And these additional auctions are in addition to the activity for which notice is planned and negotiating. So the additional three auctions represents an acceleration and slight increase in Petrobras' expected flow-till procurement plans. For the upcoming tree auctions, there are, to my knowledge, tree flow tills presently in Brazil which can comply with Petrobras' technical requirements. So activity is high in Brazil and higher than we expected. Final point on this slide is that we often get a question about how to view options from financial point of view. And we can just say that historically, well above 50% of options are called. And normally, we are hesitant to give options, especially in a tightening market. But of course, we always allow our customers a reasonable flexibility around their projects. Interestingly, the total number of vessel days in 2021 exceeded the sum of firm and option periods at the beginning of the year. And I think we will see the same result for 2022 based on the Concordia contract, which was announced yesterday. So there's more potential. If we turn to page 18, the demand drivers for the use of our floatels fits very well with our customers' current key focus, which is to maximize what they can get out of the existing producing infrastructure. Float cells are mainly used in connection with modification of producing installations in the North Sea, life extensions of fields, and looking forward, electrification projects both in Norway and UK, as well as carbon capture and storage, could be additional demand drivers. A case study is the contract for safe Zephyrus in 2020 at ETAP for BP. ETAP was previously considered for decommissioning, but the tie-in of the nearby seagull discovery implied a modification and life extension of ETAP, which translates into 10 plus 4 months contract for safe Zephyrus in order to get the new production on stream as soon as possible. Turning to page 19, we have a quick glance at the macro picture. As we mentioned, the energy transition must and will happen, and ProSafe will play our part. But regardless, oil and gas will remain an indispensable part of the energy mix for many years to come. The transition will take time, and all of the main scenarios of the stated policy scenario, announced pledges or announced policy scenario and sustainable development scenarios all have oil and gas as a sizable source in the energy mix for many years to come. And new investments are required if the current depletion ratio is to be slowed. focus will be on maximizing production from the existing infrastructure and new discoveries are also needed. And perhaps additionally the current focus and awareness of the high gas and high electricity prices in our part of the world will refocus some of the attention to ensuring security of sufficient energy supply in societies. This would possibly benefit the more politically stable producing regions such as the North Sea, which of course is one of our core markets. On page 20, we have a snapshot of the status in the North Sea and Brazil right now. As already alluded to, you can see demand and supply is tightening. In the North Sea, All floaters, except Scandinavia, are contracted for longer or shorter periods of 2022. And there are a few open months for vessels, but utilization is generally high, not just for us, but across the industry. The demand picture in the North Sea, if you look at that historically, demand in the period 2017 to 2019 was impacted by a large number of hookup of new fields, which drove demands. In 2022, you can see the dramatic drop, which is due to COVID-19 that put activity to a halt. Much of that activity in 2020 was postponed to 2021, but these effects are now gone, and in 2022 we see sufficient activity to employ all competitive vessels in the North Sea. In Brazil, activity is also increasing, and as I mentioned, Petrobras have now tightened their technical requirements, which practically limits supply to the most efficient modern DP-3 semi-submersible floaters. And as I already mentioned, at the upcoming three auctions for Petrobras later this month or in March, there are three vessels available that meet the technical requirements in Brazil. Turning to page 21, when we look at the situation in the North Sea, we see high activity with our customers, many projects underway. The timing of each project is difficult to predict, and also exactly how and when that spills over into flow-till demand. As most are aware, there's a tax incentive package in Norway supporting projects approved before the end of this year, and that would lead to a high number of projects to be executed in the period up until 2025 or end of 2025. In the UK, one of the focus areas is electrification, which we think will be a key theme for the coming period, and that could also spill over to flow-till activity. Finally, if we go to page 22, a bit about the activity level in Brazil. As you can see to the right, there is a picture of not less than 15 new FPSOs which are planned to come on stream in the coming years. And as you know, Brazil is a very corrosive environment and the flow tills are used to maintain the producing infrastructure. And it is worth noting that the new FPSOs coming on stream are larger and more complex than the current FPSOs. Many have 60% larger top sites, and naturally that means that maintenance and the labor intensity of that is more extensive for the larger FPSOs coming on stream. So that bodes well also for demand in the years to come. On page 23, allow me to just remind of some of our strategic priorities. We will drive consolidation in the offshore accommodation industry. We'll continue to strive for the best safety and cost performance in the industry. We will continue to strive for the best for commercial outperformance. This is really EBITDA per vessel. And I think for 2022, we have positioned ourselves reasonably well. And naturally, finally, we will keep a key focus on reducing our greenhouse gas emissions from our vessels, which is very much a work in progress. Turning to the last slide before taking questions, I think I'll just round off the way I started by saying that following the financial restructuring process is revitalized and well positioned for the coming years.

and it looks like 2022 will be a very good and promising start that concludes the presentation and then uh steve will see if there are any questions we can help answer yes thank you jesper so far there are none as far as i can see so maybe the presentation was crystal clear let's hope so but let's maybe give it a little bit of time yesterday and see if something comes through We will not keep you guys hanging too long, of course, on a Friday morning, but a few more seconds while I am talking slowly and then passing the word back to you, Jesper, to, I guess, gradually close off the session as still there are no questions.

Yeah, no, there's no reason to drag that out either, as the sun is still shining in Stavanger. So thanks to all for listening in, and we look forward to updating you on the positive next developments. Thank you, and have a nice Friday and weekend.