Prosafe Se

Good morning and welcome to ProSafe's Q4 2022 presentation here on the last day of February and welcome to the new surroundings here at Hotel Continental. We have literally moved out of the basement and thanks for joining us for that. I think it's an improvement for the better. There's no improvement or change on the disclaimer. I expect that all will read that or are well familiar with it. The key highlights for the quarter would show good operations. I think financials in line are perhaps a bit better than expected and a continued very positive outlook for our industry. The Q4 utilization came in at 56.1%, which is good. quite good for fourth quarter, where typically the vessels go off higher in the North Sea due to the seasonality. Takes full year utilization around 70%, the highest since 2014. On reflection, I think actually it's even in the low range of what I expected at the beginning of the year. We haven't had much luck in our option exercises on the contracts we've had in 2022, but still a good utilization. HSE and Ops performance good and our backlog stands at $332 million. Financials revenue just below 40 and EBITDA just below 10. More or less in line with expectations or slightly better, I think. Very good cash conversion, $24.7 million positive, which shows that the working capital is decreasing and therefore liquidity stands at 91.6. So we have seen strong improvement in demand and activity in 2022. For 2023, we still see that the North Sea is slow, just like we said last time. Still time for something to pop up, but overall it is slow. And we are, I think, entering an expensive period where we are investing in four vessels at the same time. We have Zephyrus to Brazil, Concordia to the US and two off-hire periods planned in Brazil, possibly only one. that we will come back to. And that means that we are monitoring our liquidity and reducing the spend on that to the extent possible. And as you recall, our liquidity covenant 23 million this year, 28 million next year. In some scenarios, it can be touch and go. And we definitely have different handles to manage that. So too early to say. And if we decide to tap the market should we go that route. I think that is something we would deem is quite manageable, given what we would be looking for in that sense. Outlook remains very positive both in our both key markets in the North Sea and in Brazil. As you will have seen here in 23, looking at some of our customers coming out, for instance BP, reducing the guided reduction in production as a double negative. Reducing the decline means more production or investment increase towards 2030 compared to previous plans. It means that for us it underlines our view that we are at the beginning of a significant investment cycle. Our customer seems to be focusing on that and that spills over on activity on us, not today, but in the years to come. So I think the events in 2023, looking at how our main customers are communicating, we are looking to start a very significant investment cycle. With that, Rhys will take us through the financials and operations.

Thank you, Jesper. Yeah, I'll talk a little bit about the operations first. It was actually a very busy quarter for ProSafe, the fourth quarter. We had two vessels that were coming off higher. We had the Boreas, which came off of the contract in the UK and is now actually laid up in Skipevike, just north of Bergen. We also had the Caledonia, which also came off-hire. She's now laid up in Scapa Flow. But I think it was quite a good achievement of the team to get these two vessels safely and efficiently on-hire, off-hire, and get them safely laid up. So it was a lot of work by the team, but very well exercised. Zephyrus, also very exciting. She completed her contract and she's actually on her way now to Brazil. I'll come back to that briefly. And the Euro-Sonotis continued strong performance in the quarter. Concordia was actually in Curacao, where she is currently starting the mobilization work for the project in the Gulf of Mexico. Backlog, we did a tripling of the backlog over the year, which I think was quite a large increase from the previous year. And I think one thing to note also in our backlog is the time of the backlog. So we have long contracts in Brazil, both for EURUS and NOTUS and also Zephyrus now coming on to a relatively long contract, 650 days. And let's see once she's on hire how that goes. We do see in Brazil that they're struggling with getting units and have an increasing demand. And Jesper will come on to that. So, you know, we look very positive, I think, to the Brazilian market and Zephyrus getting down there. I think Petrobras has also been very happy to see the vessel coming down. Yeah, that links, I think, well into sort of the fleet status and where we are. As Jesper mentioned, actually a very busy quarter or first half coming now. Both Q1 of this year and Q2 going to be very active for the company in terms of mobilizations. Zephyrus, she's actually just passing Cape Verde now. In fact, I was just looking this morning on Twitter. online, so she's well on her way. Look to start 1st of May. So far, everything more or less on track there. Concordia startup sometime between July and September. That's the sort of startup window that has been announced. And the work is really starting to ramp up now. And then we have at the same time, EURUS and NOTUS off-hire period for whole cleaning and SPS on the EURUS. We actually had some, I think in our view, some pretty positive news over the weekend that Petrobras is considering actually delaying the entire SPS for EURUS, not the SPS, but the whole cleaning off-hire and we will delay the SPS to 2024, which would of course be very positive news for us. But that is still yet to be to be fully inked, but looking like a possibility and obviously deferment of that we would welcome. But looking ahead, two vessels still laid up that we are working hard to get new opportunities, particularly looking into 2024 and the two units still at the yard. I'll come on a bit to the financials now. two was a very good year. I think both EBITDA for the whole year around about 61 million. I think that was in line basically with the guidance that was given at the time and as Jesper said EBITDA at the fourth quarter right around 10. It was a little bit lower than I think maybe some of the analysts were thinking. I think there's an element here of costs for the mobilization You know, some of that cost has landed, actually did land in December. So I think that was the main impact there being slightly lower than I think the 10 billion that a lot of people were looking for. But by and large, I think, you know, very positive year. And you see continue the cyclical cycle that the business has with the contracts in the North Sea in the summer and then lower going through the winter season. On the income statement, the only thing I really wanted to point out was, you know, we talked already I think about the EBITDA, but interest expense, we are unhedged after the restructuring. We don't have any hedging lines in the interest expense. So it is a very favorable facility with a 2.5% margin. over software, but with that increasing, we do see an increased interest cost both in the quarter and I think that's something we will see in the year. So let's hope for interest rates to moderate or to at least stabilize this year. Maybe that applies not only for companies, but also for many of us privately as well. Taxes, just to highlight that taxes in 2022 was quite high. That was related to a specific contract in Trinidad, but I think the tax number going forward will be back to sort of a moderate number. We have a very efficient tax structure with a large tax loss in Norway, which we're able to make quite efficient use of. Balance sheet, I think the most notable item on the balance sheet was the cash, cash conversion. We had a very strong cash conversion in the last quarter. I think that was to be expected as we came off the contracts. We see that we are essentially unwinding the working capital and getting the receivables in from the clients. We have quite strong customer base, so very few issues in collecting out. So we saw that the cash increased substantially in the fourth quarter. We do see, as Jesper said, that there is an impact from the slowing, both the slow market in 23 and the investments coming through. And we are taking measures to improve the liquidity situation. Those include both deferrals, which I mentioned before with EURUS, potentially some minor asset disposals. We're not talking about large disposals, but we do have potentially some spare equipment that we could unload. Of course, working capital, a big focus in this business. You see that working capital goes up and down over the summer season. So working to see what we can do there and ultimately, We think that the gap is relatively limited. We have about a 20 to 30 million spend to get Eurus, Notus, Zephyrus and Concordia in situ. So we don't see that the gap is very big and we're working and monitoring that very closely. I think I talked a lot about cash again, very favorable quarter. And I think we will still continue even in Q1 to see some impact of the unwinding. But we will also at the same time going to see a lot of the costs and the mobilizations coming through. We do have a very favorable debt package coming out to the restructuring with both a low margin at 2.5%, but I think is even more favorable is the long maturity horizon and no amortization. So it's to the end of 2025. And we think that it's very wise to maintain and to protect this flexibility that we have with the current facility and hence why we are taking the measures which we think are very prudent to keep the flexibility we have, I think, in this very favorable financing. With that, I think I'll hand it over to Jesper to talk a little bit more about the market and what we see there going forward.

Okay, just a quick reminder, when you use an accommodation reg like ours, we are late in the cycle. If we take the full picture and I guess the main usage as you will be aware is relating to new fields and the MMO. operations and maintenance. And I think getting the most out of the existing infrastructure seems to be key to our customers, life extensions, tiebacks. And that is in the sweet spot for the use of our vessels and where we see our customers investing. Then this is probably also a slide you've seen before, but nevertheless, I think it's very interesting. It shows that this industry is in a very interesting position ahead of this cycle we are going into. This is a global snapshot on the supply side, about 23 give or take. And like the rest of us, the rigs tend to get a year older with every year. So the 23, I think we'll probably have a flat or declining trend. We are in a industry without a significant supply overhang. There's very little limited available capacity and we don't see any new builds on the horizon. So the supply side is quite firm. Demand is of course more volatile on a global basis and I just want to remind that the 13 vessels we see is basically 13 vessel years. And if you look at the North Sea, normally it takes about two vessels to do one vessel year. So it's not because only 13 of the 23 vessels have operated this year. On the contrary, 13 to 15 is very tight and we are almost back. 22 is almost back around 2014 levels that were the previous peak, although there's some way to go. Utilization also shows an improving picture. What is interesting also is that some of the fringe regions from a floater point of view, such as Australia and the US have actually been quite active and that they supplement the core regions of the North Sea and especially Brazil, the biggest market, which I think will absorb a lot of supply. So I think the The snapshot of the industry, even though we will see some volatility and demand and utilization, is quite interesting when we go into this cycle and means that on a regional basis, it does not take a lot until there is an imbalance from a supply and demand point of view. And I think that will definitely happen in the years to come. Day rates, if we start in Brazil, the latest data point is the 112 we have on the Zephyrus. And you also have to go almost back to 2014 to get to that level. And more interestingly, the trend is quite clear in Brazil. There's an ongoing auction there where the Arendelle Spirit looks to be in prime position with a bit of 125. So we would expect that the rates to remain at that level or increase, even though Petrobras are expanding or being more flexible on the technical specifications and more tenders will come. Looking at the North Sea, the picture is a bit more murky. I think the point is here that there's a long way until we get to 2014 levels, but hopefully that will happen sooner rather than later. The latest data point we have of 140 is probably a bit too low. There's a jack up fixture, which is not in there for some years down the road of 180, 190. And then there are a few fixtures that are probably around the 200 mark or just below, which are not public. So we could not include those. But I think the point here is that we see a fairly clear trend in the North Sea as well as we can see in Brazil. And then finally at the bottom, a reminder, this is not a day rate game. It's an EBITDA game and 130k a day in Brazil. When you adjust that for Utilization and OPEX is almost as good as six months at 250 in the North Sea. Just as a reminder that this is not a day rate game. But I think the trend is quite clear and we expect it to continue. Two quick snapshots on the activity drivers in the North Sea and in Brazil starting in the North Sea. The activity has been positive and rebounding, as you can see from COVID in previous years. First the COVID catch up effects and then perhaps a bit. And now a fairly active year dominated by the dark blue, the maintenance and modification, which also was the predominant activity we saw in the previous cycle. Although I'm quite sure that given the soft 23, we will not have a straight line in demand. I think there's definitely some way to go in terms of activity. And I think we will get there in this investment cycle. One indicator, there are plenty, and I think what the customers are saying is normally the best indicator looking at that. But one indicator is the PDOs in Norway that had record high, partly because of the tax incentive. Nevertheless, and even though you cannot see the time lag on the graph, there is a time lag from PDO until basically we get into play. And I think the picture speaks for itself that will translate into activity. It's just one of more indicators. Looking at Brazil, the picture is a bit more simple because there's a strong correlation with the installed base and the use of flow tills because our vessels are used for planned maintenance and modification, at least for Petrobras. So the increase of the number of FPSOs is a clear driver and we expect Petrobras to be out with additional two to three tenders this year to basically satisfy their demands. We also expect that Equinor may also be out with what we would characterize as some of the more meaty jobs in Brazil. And then there will be Other opportunities for the other operators, SBM, OMODEC, PetroRio, Perenco, TRIAR and what have you. Some smaller, some larger. But Brazil looks to be very active and I think it will absorb a lot of flow-till supply. A quick snapshot on the tendering activity. Don't get too carried away over this one. It's partly a cleansing exercise as we become insiders every time we participate in a tender. So we would like to be transparent about it. There are more tenders coming, but this is the snapshot. If we say that we expect one to three additional tenders for the North Sea in 2024, Then the simple math is you have two ongoing tenders and then additional one to three means that you have three to six tenders for 2024. And how many vessels do we have? We have three to four in region. as an option on the Flowtail Superior and the Flowtail Endurance. And we have two, Boreas and Caledonia. So 3-6 and 3-4 vessels available. But this is the snapshot story. And as I mentioned, we expect that Petrobras will basically continue to issue a tender when the current tender is completed during this year. You've also seen this slide. I think, as you know, looking at share price and everything, we are trading well below half of new building parity. And we are quite a long way from where we were at the last peak of the last cycle. But it seems that we are at the very beginning of something which could be very interesting. And whether that will happen in 2024, 2025, 2026, or all of the years is very difficult to say, but I think we can see positive indications both in our core markets in the North Sea, in Brazil, and also in some of the fringe markets. We see a long 12 months opportunity in Australia, in the US. So, yeah, I would expect it to be some busy years that we have ahead. Not in a straight line, but overall a large volume. In summary, I think summing things up, high activity, as you have seen, slow 23 markets in the North Sea. Let's see if something pops up. We'll be with short notice. That has happened before. And right now we are focusing on getting our vessels in situ, as we said, basically investing in their earnings a bit later this year, 1st May from Zephyrus and over summer for Concordia. And then we, of course, looking at managing our liquidity in an ordinary way. And we have mentioned some of the tools we have to manage liquidity and nothing extraordinary in this sense. And we'll see how that pans out. And I think, as I have said a few times already, they're all indicators from customers in the North Sea. What we see in the investor base in installed base in Brazil points in one direction, indicating that we will have some quite busy years ahead of us. I think that concludes the quick run through of the fourth quarter. And then I think we are ready to take questions starting in the room. Go ahead.

Thank you. Thank you. So I was thinking a bit about 2023. You're saying that there's low visibility, you have to manage your liquidity, etc. Do you think there's any chance that you'll get more 2023 work or is that kind of out of the question for now and you have to live with the backlog that you have for 2023 and instead just throw that year away and look into 2024?

there's always that opportunity. If you look historically, what have been lead times, I think we had one for SYNOC was it's four to six weeks we were called off to do. I think we had one for in 19 or 18, we had basically six weeks lead time. So, yes, these things pop up and it can be different drivers that basically get customers calling you. And I think one of the Common themes if you follow other communications is that both the regulator in Norway and the UK are keenly focused on asset integrity of the installed base. There have been some issues in Norway with gas leaks and so on. And in the UK, we know it's a strong focus. We have seen some, you know, you try to delay, of course, some of the maintenance. What can you do to make a bigger campaign? And sometimes that goes as planned and other times you have to accelerate it. So is it statistically feasible that something will pop up? Yes. Are we bidding on something right now? No, as you can see on the tenders.

Just moving to Brazil as well, you said that it's likely that Petrobras will come with a few new tenders when they've finished up what they're currently doing. Would that be then for 2024 startups or 2023 or even 2025 if you look further out in time?

I'm not sure, but I think actually the startup time may depend slightly on how quick they are to get the tenders done. You need some lead time and to have some availability of vessels. This tender they have now, they said start up 1st August. It's fine, but that probably requires that they conclude the process kind of swiftly for RIGS to be available. So therefore, I would expect that they launch the new center as soon as possible and kind of set a commencement date. late 23, late 24. I don't think they're into 25. I think they want to keep this going. And when they have a start date that says 1st August, indicates that there is a concrete plan. It's not just X number of months after. They actually probably have a plan for where the vessel needs to be on 1st August. So we think that the tenders will basically have a commencement that follows logically from the tender.

And final one for me I think just in terms of general contracting strategy I believe we've discussed this before and I think you said that you were risk on in a way and is that still the case given how we've seen 2023 develop?

Yeah, Risk On, did we use that? I'm not sure, but we have definitely used it before, Risk On. And this is, of course, the normal game theory game. What is attractive on the table now or later? That's the normal game we play. And I think we have been. I think Risk On, there were two awards to Floatel from Acker BP, two simultaneous one or two year seasons. I'm not sure. at a reasonably attractive economics, I think. And the question is, of course, do you secure visibility or would you prefer to have the available capacity, which would in this case most likely be the only available rigs in Norway for 26? And in that sense, too, we have been risk on and then time will tell whether that was a good or bad call. But looking at how this cycle looks, we think that will be very good activity. So we have not focused on securing visibility at the present.

Thanks. Yes. Hi, I was just wondering about the initiatives you're going to take to remain in compliance with the liquidity covenants. Just wondering if you don't get any more work for 2023, how comfortable are you that you will remain above that covenant level?

Reece, do you want to answer?

Yeah, no, I think indeed there's, and that's, I guess, why it is mentioned is that there are scenarios where you can see that it's very tight. What are the kind of things that we can do? I think they're the things we mentioned. There are some minor asset disposals. We're talking about, okay, maybe some spare equipment that we have sitting around, which we can, of course, dispose of. We also have working capital measures that we can work on, which you actively have a dialogue with customers or clients to do some things there. And we also have, of course, you know, deferrals of costs, Euros being one that we can actively work on. And we don't have exactly a clear picture on 2023 yet, as Jesper mentioned, things can happen. But we have to plan and be prepared and take the actions that we can if we look, you know, looking ahead. And ultimately, I mean, if we have to, you know, the gap as we see it today is sort of in that range of the sort of mobilization spend that we're having to incur to get on these contracts. That is this 20, 30 range. And our feelings, that's an amount also that's very manageable, either internally or ultimately, if we have to go raise some, tap the market and raise a little bit, then that's probably also... a manageable sum and given sort of the outlook and the longer contracts you know that we're coming on to with Concordia and also Zephyrus and again you know the tightening market in Brazil we you know we're not overly concerned about it but we have these different measures which we're actively taking so perfect thank you yeah

Any more questions in the room? Otherwise, let's just check if we have anyone online.

There was one question online, visibility for 23, but I think we touched upon that. There was a question, expected SPS capex per rig. I think we can say that's approximately 4 to 6 million. Depends a bit on the age of the rig. SG&A and OPEX figures do not include the SG&A. The SG&A comes on top of the OPEX figures. So that was the only questions we got. Okay. Okay. Thank you very much. Thank you very much. Thank you.