Sea1 Offshore

Good day, everyone, and welcome to the review and presentation of our results for the first quarter. My name is Bant Omdahl and I'm the chief executive officer of the company. I'm joined by our CFO, Vidar Jasta, and together we will take you through this presentation. CM Offshore's report for the first quarter was released prior to the market opening today and in this presentation we will cover the main highlights of the report and will refer to the presentation issued together with the financial report. And at the end of the presentation we will open for questions. Looking at the highlights for the quarter, we had 28 vessels in operation and all vessels delivered a positive EBITDA margin. We had US dollars 76.5 million in revenue and we delivered 37 million in EBITDA, which is equivalent to 48% EBITDA margin. Our cash position was 106.5 million at the end of the quarter. and our book equity ratio was 37%. We continue to deliver safe and efficient operations in all regions. This is a result of high focus on safety at all levels in the company. The utilization of the fleet was 89% in the first quarter. That is excluding vessels in layup. We had two vessels in layup at the end of the quarter. It's also worth mentioning that we received $12 million as a down payment on a seller's credit. On the contract side, the CM Barracuda was awarded a contract or an extension by seven months. The vessel is working on a wind farm called Highwind Tampen and our end client is Equinor. CM2 Pass is also working within the renewable market, and we managed to secure a contract in Taiwan with a firm commitment into fourth quarter this year. Moving on, Vidal Jasta will now give you some more details regarding the results.

Thank you, Bernd. CM Offshore has had a good first quarter. The company has a revenue of $76.5 million. This is up from $61 million same quarter last year. Operating expenses ended at $34.3 million, down from $38.9 million last year. Reduction in operating expenses is mainly explained by the $3.7 million reversal of impairments. This is related to the sale of CM Marlin in 2019. Operating margin for the quarter was 37 million, up from 16.7 million. When comparing these figures, please also remember that we had some one-off effects in the first quarter of 2022, with low utilization due to steaming and docking of several vessels, and also some increased operating expenses. Still, even adjusted for this, today's figures support our belief that we are in a long-term positive market trend. Depreciation was 16.9 million. There were no impairments or any reversal of impairments in the quarter. Operating profit ended, therefore, at $20.1 million. Interest expenses were 7.7 million, up from 4.9 million same quarter last year. Increasing interest rates impact the company negatively. Having said that, 38% of our debt has fixed interest rates. Net financial items ended positive by 9.9 million. The reason behind the positive net figure is unrealized currency gain of 9.5 million and also $5.8 million in reversal of impairment. This is also related to the sale of CM Marlin in 2019. Net profit before taxes are 30.3 million and after taxes 30.4 million. After adjusting for minority shareholders in one of our subsidiaries, we end up at $31 million. This slide shows operating margin distributed on segments. The figures are before G&A and also excluding reversal of impairments. Our subsidy segment consists of four OSCV vessels, two well intervention vessels, and the Scientific Core Drilling Vessel, JOIDIS Resolution. The segment had an operating margin of 28 million in the quarter. This is up by 9 million from same quarter last year. The PSVs generated 2.6 million in margin. This is up by 3 million. Our anchor handlers, which now also include Avalon-C, had an operating margin of 6.5 million, up by 5.8 million from same quarter last year. Our Brazilian vessels, our fast crew and oil spill recovery vessels generated 0.8 million down from 2.1 million. Summarized, we see a positive market trend materializing. That's our belief. And let us take a look at the balance sheet. The book equity of the company is continuing to grow. The company has now $381 million in book equity and a book equity ratio of 37%. Gross interest bearing debt is $552 million and net interest bearing debt is $445 million. CM Offshore's financial position is good and it continues to improve. CM Offshore is an attractive and solid business partner from a commercial and operational perspective, but also from a financial perspective. And let's take a look at the cash flow for the quarter. We started the year with $95 million in cash. We have received $39 million in cash from operations. We have paid $4 million in interest. we have invested $10 million in the vessels, and we have repaid debt for $19 million in the quarter. And also some other changes, we end at the cash position at the end of the quarter of $107 million. And now the contract backlog. At the end of first quarter, the backlog amount is $430 million, and this is with quality and solid counterparties. The subsea segment consists of seven vessels dominate the backlog with 78% of the backlog. Our six PSVs has 12% of the backlog. Our anchor handling vessel segments are represented by 5% of the backlog. And our fast crew and oil spill recovery vessels also has 5% of the backlog. On this slide, you see firm contracts and options in green and vacant vessel capacity in blue. Especially this short backlog for the anchor handling vessels represent a large degree of exposure to the markets, implicating market risk and market opportunities going forward. However, under the current long-term trend of improving markets and continued focus on energy security, we believe the available capacity going forward in general represent an attractive earnings potential.

Back to you, Bernd. Our fleet consists of 28 vessels, as mentioned. In addition, we have three vessels under our management. There are no changes in the fleet composition since the last presentation. Thus, we will not spend more time on it. The company has a really good global footprint, which is important for the utilization of the fleet. And we will continue to move vessels around the world where we can perform safe operation with sustainable conditions. For the anchor handler segment, there are mainly shorter contracts and campaigns. Currently, we have CMO Pal, CMO Merle and CMO Pearl trading the North Sea spot market. We have the CM Sapphire and CM Amethyst performing an installation campaign in India. And the anchor handler CM 2 Pass are in Taiwan, and CM Aquamarine is mobilizing for a project out of Singapore. And CM Ruby is still supporting a drilling campaign in Suriname, and the L&C is on a term contract in Canada. On the construction vessels, we have the CM Barracuda in the North Sea on a medium-term contract supporting the high-wind tampon for Equinor, which is a floating wind project. CM Spearfish is on a firm contract, which gives utilization throughout the year. And CM Stingray is currently in the North Sea and has commenced a long-term contract with Subsea 7. And then we have the CM Dorado, which is on a firm contract currently operating in Brazil. Then we also have the two well intervention vessels, CMLX1 and CMLX2. They are also in Brazil working on long-term contracts. We have six PSVs in our fleet, most of them on long-term contracts. CM Tima and CM Pilot on term contracts in Australia. CM Atlas and CM Giant are both in Brazil on long-term contracts. And we have CM Pride on a long-term contract in the North Sea. And CM Symphony is on a term contract in Canada. For the smaller Brazilian fleet, oil spill recovery vessels, CM Maragogi and CM Maritimes are both on term contracts with Petrobras. and the fast crew vessels CM Pendo Tiba and CM Viata. They are both in layup. And then we have the core drilling vessel during this resolution. She continues working around the globe on a term contract. The weld stimulation vessel, Big Orange, still working in the North Sea. And as shown on previous slide, we have a good contract coverage for this year, the same time as Vida mentioned. It is important to have vessels available in an improving market to increase the potential earnings. We continue our focus on our ESG strategy. A lot of good work has been done by our onshore and offshore staff. We have full focus on reducing our carbon footprint. Many good initiatives are in process. and we can refer to our annual ESG report which are available on our webpage. Moving on to the market. The first quarter was good with generally high activity in all segments and then in all regions. The sport market in the North Sea had a slow start, however, with good activity towards the end of the quarter. The anchor handler segment was positive also outside the North Sea, where Australia and India campaigns contributed to better earnings and utilization of the fleet in a period that is normally challenging. We also saw high utilization for the construction vessel, which has a positive effect on the day rates. Although processing is slower than expected, the increase in activity in Brazil, West Africa and the North Sea is showing signs of realization with higher day rates and longer periods of firm contracts within several segments. The high activity offshore is driven by strong energy prices and wind installation campaigns. And we believe that there is a growing demand for our fleet in the years to come. So to summarize, we had a strong quarter with high activity. We improved our financial position. We continue delivering first-class operations with an excellent HSEQ performance. We have a strong backlog with quality clients. And we have a positive long-term market outlook in all segments. Okay, we will now open up for questions, please. There's one question raised in the chat here. Will any of the subsea vessels see increased rate in second and third quarter, or will repricing happen late 2023 and into 2024? And there's another question. Can you comment on the most important charter options in the fleet? Are these priced or unpriced? Let's start with the first question there for the subsea vessels. Most of our vessels have firm employment. There's a couple coming off contracts at the end of the year. And we believe that we will be able to secure term contracts for those two vessels as well. What we have seen and what we see is that the day rates are picking up or increasing. So we believe we are in a good position to secure favorable contracts for the company. You comment on the most important charter options in the fleet. Are these priced or unpriced?

Yeah, we will, of course, we can't comment on specific contracts, but as Frank mentioned, we have a few vessels now available in the end of the year, and we expect we will be able to increase the rates going forward for all type of segments.

Some vessels have rates to be mutually agreed and some have fixed rates. Okay, there's one more question here. Recently we have seen one six million contracts and one three-year contract on high-end anchor handle vessels in the North Sea. Do you see opportunities to secure long-term work on some of the anchor handlers vessels in your fleet? Yeah, I mean, whenever there is term contracts, we will, of course, be in a position to secure contracts. We believe that there will be more tenders, especially in Brazil. In the North Sea, not that many, but there might be some out in Australia as well going forward. There's another question here. Have you secured any project work on the North Sea, Anchor Handlers, RubyPool and Opal in 2023?

Yeah, it's some few opportunities out there. But again, we can't comment specific contracts before we are sending it out. But it's absolutely some opportunities.

We have had a strong presence in Australia with the anchor handler fleets, but no anchor handler vessels in the region at the moment. How do you see the demand for anchor handlers in Australia going forward? Well, Australia is challenging countries operating but still we believe that there will be a couple of rigs moving into the region and there will be some opportunities in Australia as well. So in general we see increased activity in all regions also in Australia.

A few questions on finance. There is a question regarding the seller's credit. And we have a book value of the remaining debt to MPL that is roughly between 17 and 18 million dollars. However, the nominal amount is 22 million dollars. And of course, we would do the utmost to receive everything from that. What is the planned debt amortization for 2023? Well, we do not do any guiding and we are having cash sweeps. So if I told you clearly that, that would be maybe too much guiding. But as you can see from this quarter that we really pay down debt considerably and we will continue to do so.

And there is another question here. What kind of contract duration are you looking for at the different segments? I think that depends on what the day rate is obtainable. So it's hard to give any comments to it. I mean, high rates on long-term contracts, of course. Will you consider moving vessels between regions going forward? Yes. I mean, that is what we are good at. We have a good global footprint and we have a really flexible organization that is able to handle vessels moving from one region to another region. So the answer is yes. Any further questions, please? There's one more question here. Would you consider acquiring vessels going forward? If there is good vessels out there at favourable prices, yes, we would consider that. One more question here. Are clients starting to realize they need to secure vessel capacity earlier than in recent years? The answer is yes. I mean, for example, for the construction vessels, before it was more like summer campaigns. Now they're asking for contracts for 365 days and multiple years.

There is a question regarding the refinancing of debt maturing in the fourth quarter of 2024. We have a debt bullet coming up in the fourth quarter of 2024 that has high attention from the management. We are in good dialogue with creditors and investors. and we are really optimistic when it comes to the refinancing coming up in 18 months time.

All right, there's another question here. Are you involved in tenders for floating offshore wind and when do you expect a meaningful volume in this segment? We are participating in some studies and tenders for floating wind. We believe it will take some years before we see a meaningful volume in that segment. Another question, could you say something about Christian CM's acquisition of Solstar shares? No, we cannot. We are representing CM Offshore and not Christian CM. There's one more question here. With the strong demand and lack of vessel in certain segments, do you expect new build announcement in the industry in 2023? That's a good question. There might be some placing an order or two this year. I'm not sure, but as the day rates are increasing, there might be someone placing an order for a new building. Hard to say. Alright, then there is, I don't see any further questions here, so we thank you all for attending this call and wish you all a good day. Thank you.