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spk02: Good day and thank you for standing by. Welcome to the Vantage Drilling International Fourth Quarter 2022 Quarterly Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Douglas Stewart, the company's CFO and General Counsel.
spk00: Thank you. Good morning, everyone, and welcome to the Vantage Drilling International fourth quarter 2022 earnings conference call. On the call today is also Ehab Thoma, our CEO. This morning, we released our earnings announcement for the quarter and year ended December 31st, 2022. The earnings release is available on our website, advantagedrilling.com. Please also note that any comments we make today about our expectations of future events and projections are forward-looking statements pursuant to the Private Securities Litigation Reform Act. We have based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, our expectations regarding future results, including expectations regarding our liquidity position, future costs and expenses related to upgrades and reactivation work, as well as contract preparation costs and expenses. Forward-looking statements in today's call are subject to a number of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from the projections made in today's conference call. We refer you to our earnings release and SEC filings available on our website. Vantage does not undertake the updating of any such statement or risk factor that could cause actual results to differ materially from our expectations. We have prerecorded our prepared remarks and are participating in the call remotely to manage the question and answer session segment of the call. In the event there are issues with sound quality or of a similar nature, please accept our apologies in advance. and thank you for your understanding. Now, let me turn over the call to our CEO, Mr. Ehab Thoma.
spk01: Thank you, Douglas, and good morning and good afternoon, everyone. I would like to take the opportunity during this earnings call to reflect on the successful year of 2022. We were all happy to see that 2022 solidified the industry's recovery and reflected a clear shift in focus from simply reutilization generating healthy returns through strong day rates 2022 was a very successful year for vantage operationally where all our owned managed and supported rigs performed safely and efficiently to the full satisfaction of our clients in line with the improved market conditions and thanks to our customer focus and unwavering commitment to operational excellence Our fleet of rigs was fully contracted during 2022 and is already contracted for a significant portion of the year 2023. One of the main events for Vantage during 2022 was the closing of the sale to Addis of the Emerald Driller Company, consisting of our three jackets and cutter, as well as signing a three-year support services agreement for the three rigs. The sale significantly delivered our balance sheet and paved the way for our successful refinancing earlier this month. Also, 2022 was the year when we finally had clear ability to significantly improve day rates as owned and managed rigs started coming off legacy contracts. This trend continues in 2023, and we see this being the year of repricing of the full fleet, with no rigs left behind on legacy day rates. I'm now going to walk you through my prepared remarks by following our three corporate goals as I normally do. These goals are, one, maintaining our stellar health, safety, environmental, and operational performance, two, putting all our rigs to work on higher day rates, and three, preserving cash and liquidity are now with focus on free cash flow generation. Beginning with our goal number one and starting with safety, we continue to strive for incident-free operations as underscored by our perfect day, everyday vision. Advantage, we strongly believe in cultivating this perfect day, everyday culture, which is achieved through our ongoing efforts to train, coach, and mentor our crews. I'm immensely proud of our crews for the overall safety performance during 2022, despite all the challenges and complexities they faced. In 2022, despite significantly more exposure with a 64% more man hours work compared to 2021, we maintained the same high standards and results. We did that with the number of rigs actively under our management increasing throughout the year from seven to 10, and with eight of those rigs going through a mix of company transitions, reactivations, mobilizations, and startups in new countries of operation. There were a number of significant safety highlights in 2022, which included five of our 10 rigs not having any recordable incidents and the Platinum Explorer and the Sapphire Driller, both achieving zero injuries of any type over the course of the year. It is worthy to note that the Platinum Explorer has now achieved zero injuries for the third year running, a truly remarkable achievement. This achievement is a great testament to the level of effectiveness of our India operation, thanks to the professionalism and hard work of our offshore crew and local management in India. Moving to health, our well-tested COVID-19 protocols to combat the spread of the virus within our workforce have largely protected our employees, contractors, and partners, and have minimized disruption to our operations in 2022. Beyond our focus on our employees' safety and health, we continued our vigilant focus on protecting the environment where we work. We also resolved in 2022 to bring greater focus on our efforts on sustainability. While we were already going to great lengths to deliver on the E in QHSC, quality, health, safety, and environment, 2022 was the first year where we formalized a more comprehensive approach to environment, social, governance, ESG. We established a working group that developed and published an internal report on our ESG efforts with right size targets for 2023 based on data gathered in the prior two years. We believe that diversity is a critical aspect of our ESG efforts as it is a powerful attribute that many organizations strive to achieve. Advantage, the diversity of our workforce is a core part of who we are as evident by the 48 nationalities that comprise our workforce. Within our total population, 71% come from Asia, Africa, Middle East, Latin America, and Eastern Europe, and 30% of our onshore-based employees are women. Our management team is also diverse, with representation from 19 different nationalities. This strength and diversity will continue to be a fundamental part of our success in the future. Now, operationally, the overall fleet revenue efficiency for the fourth quarter was 93.6%, with the jack-up fleet delivering 97.3% and the deep-water fleet achieving 92.9%, in part due to cyclone weather conditions in India in October and December. For the entire year of 2022, revenue efficiency for the fleet was 97.3%, with the Jacob fleet at an impressive 99.9% efficiency and the deep water fleet achieving a commendable 96.3%. To summarize, we are proud of our safety and operational performance in 2022, which has always been the primary reason why clients choose to work with Vantage. Moving now to goal number two of maintaining all our rigs working, I'm pleased to report that all of our rigs are working and our goal now shifted from a simple focus on utilization to focusing on achieving higher day rates. Our total backlog at the end of 2022 stood at $217.2 million compared to $177.4 million at the end of Q3 2022. As usual, I'm going to update you on our contracting activities and on our fleet status in regards to both owned and managed rigs. Beginning with our shallow water rigs, the Topaz Driller started operations with Petrobras in Egypt early in the fourth quarter through a bare boat charter arrangements with Addis Egypt. As mentioned during our previous call, Vantage is earning a fixed bare boat charter fee from Addis Egypt plus a variable monthly fee tied to the achieved drilling contract margin. During the fourth quarter, we received a letter of award from ENI for the rig for 90 days of work in Morocco for a total contract value of $23.8 million. Since such time, the drilling contract has now been signed. We expect the Topaz driller to mobilize to Morocco after completion of the Petrobras Egypt work. Please note, we have also received letter of award from Petrobel for an extension of the existing contract at better terms for a period of 75 days before mobilizing to Morocco. Moving to the Suhana, the rig continues to work for Medco Indonesia, where it is expected to continue until sometime in Q3 2023. We are in the final stages of contracting the rig at a materially higher day rate and for a relatively long-term contract in direct continuation with the current contract. We have invested significantly in the crew and the vessel since the rig was added to our fleet, and as a result, the Suhana is now a much desired rig in the region. Shifting now to the Deepwater Fleet. The Platinum Explorer contract with ONGC in India will continue until late Q4 2023. The rig, apart from having a tremendous safety record, is operating successfully for ONGC in some extreme currents on their prestigious East Coast projects. We recently had visits offshore by the chairman of ONGC and his leadership team and have received praise on the rig performance and its contribution to the success of ONGC over the years. The Platinum Explorer have only worked for ONGC since it was built and has consistently delivered safe and efficient operations to their full satisfaction. We look forward to many more years working for ONGC and we are very proud of what our onshore and offshore teams in India have achieved year after year. Finally, the Tungsten Explorer finished its successful campaign with EniCypress in December 2022, underwent contract preparation and plan maintenance and mobilize to Namibia where after rig acceptance we started the new contract with Total Energies at the beginning of March. Total Energies have exercised the first contractual option bringing the firm term of the contract through Q1 2024. It is worth noting that the contract preparation and mobilization were done on budget and on time with the valuable cooperation of our long-term esteemed client, Total Energies. I will now spend time discussing our operations and management services business. During the fourth quarter of 2022, and after concluding its reactivation work in Labuan on time and on budget, the Polaris mobilized to India and started its new contract for ONGC. This campaign will keep the rig busy until the end of Q3 2023. Moving to the Capella, the rig concluded its contract in Indonesia in October 2022 and has gone through planned maintenance and recertification work. During Q1 2023, we were awarded a 45-day firm contract in East Africa for the rig with a total value of $37 million. and the RIG is now mobilizing to commence this contract, which is expected to start during April. Upon conclusion of this contract, the RIG will return to Indonesia for its contract with several operators there with close to a one year of firm work in addition to some yet to be exercised options. Lastly, the Aquarius is in Las Palmas undergoing future reactivation de-risking work and is being actively marketed for work worldwide. The managed services business line has been highly successful, generating significant value for the owners and serving as a strong revenue stream for Vantage. We aim to capitalize on this success by pursuing further managed services opportunities, leveraging our effective and efficient management platform. On the market outlook, 2022 has proven to be the pivot year we expected it to be for the offshore drilling industry. We remain optimistic about the long-term prospects for the industry as the renewed focus on energy security and reliability continues to drive increased demand for offshore drilling. Looking ahead to 2023, we expect to see continued recovery in the offshore drilling market, especially in the areas of exploration and appraisal drilling, where we anticipate an increase in demand for deepwater drilling services as new discoveries are made in previously untapped areas. In terms of regional performance, we see strong demand for drilling services in the various regions of the world, largely in the Middle East, Latin America, West Africa, and Asia Pacific, where new exploration and development activities are strongly on the rise. Higher day rates and longer-term contracts are being fixed as customers are trying to secure available rigs for future work and lock in today's day rates as day rates are expected to continue to increase driven by a very tight supply and demand balance. As I said at the beginning, we plan to take the tighter market opportunity to reprice the full fleet in 2023 with no rigs left on legacy day rates.
spk04: It is
spk01: Worth noting, however, that the recent global banking sector turmoil and the immediate impact it had on the price of oil is a reminder of the outside forces that cause oil price volatility. To conclude my prepared remarks, I will discuss corporate goal number three of preserving cash and liquidity, which was a fundamental pillar while going through a very prolonged industry downturn. Douglas will provide you with more color in his prepared remarks, but I would like to highlight some important cash events. We closed the year with total cash of $93 million, inclusive of aqua drill cash of $29 million, or a net vantage drilling international cash of $64 million. During the fourth quarter, we paid down $170 million of our debt, bringing the outstanding debt down to $180 million and pivoting the way for the successful refinancing earlier this month, with the issuance of a $200 million secured bond with a 9.5% coupon or all-in yield to maturity of approximately 10.3% maturing in 2028. With our four owned rigs, two of the managed rigs, and three supported rigs, all operational, and our capital structure optimized, we expect 2023 to be a turning point for positive free cash flow generation for the company. This is the year where our focus for goal number three is shifting from simply preserving cash to a sharp focus on generating positive free cash flow. With that, I would like to turn the call over to Douglas to take us through the numbers.
spk00: Thank you, Ihab. Good morning and welcome everyone. During this portion of the call, I briefly will go through the details of our recent refinancing and then focus on my customary discussion of how the company performed financially for the quarter and year ended December 31, 2022. As he had mentioned in his prepared remarks during the fourth quarter of 2022, we redeemed 170 million of our formerly outstanding nine and a quarter percent first priority senior secured notes due 2023 by using proceeds from the sale of our EDC rigs that closed in the second quarter of last year. Of course, earlier this month, we redeemed the remaining $180 million of the nine and a quarter percent bonds and paid the associated accrued interest using the proceeds from the issuance of the new nine and a half percent first priority senior secured notes due 2028. In addition to the redemption, the proceeds of the new bond were used to cover financing fees and for general corporate purposes. We are obviously very pleased with our refinancing, especially given the recent volatility in the financial markets. Moving to the company's financial performance for the quarter and ended December 31, 2022, the company ended the year with approximately $93.3 million of cash. including $19.2 million in restricted cash and $29.0 million of cash pre-funded by our managed services customers to address near-term obligations associated with the operation of their rigs. This compared to $262.3 million, which included $18.7 million in restricted cash and $19.7 million of cash pre-funded by our managed services customers at the end of the third quarter. The decrease in our cash is primarily due to 170 million partial payment on the nine and a quarter first lien notes and 17.8 million dollar interest payment. Working capital for the fourth quarter 2022 ended at approximately 96.2 million compared to 269.1 million in the third quarter of 2022. The decrease is mainly due to the partial payment of the nine and a quarter first lien notes. For the fourth quarter of 2022, we achieved revenues of approximately $76.2 million compared to $49.8 million for the fourth quarter of 2021. The increase is mostly due to higher utilization, especially in the deepwater segment, which partially offset the decrease in the jackup segment due to the sale of the EDC rigs, which was completed in the second quarter of 2022. In addition to the company's own rigs, our managed services segment contributed $36.4 million in revenue in the fourth quarter 2022, which compares with approximately $5.9 million in the comparable quarter of 2021. Total revenue for the year ended 2022 was $278.7 million compared to $158.4 million. The increase was mostly due to higher utilization in the deepwater segment partially offset by lower revenue in the jack-up segment due to the sale of the EDC rigs. The managed services segment contributed $99.5 million in revenue during the year and to 2022, of which $86.1 million constituted reimbursable revenue. Total revenues for the fourth quarter of $76.2 million compared favorably to the $71 million reported in the third quarter of 2022 driven mostly by higher revenue related to the Polaris' contract with ONGC in India in December, partially offset by lower revenue on the deepwater segment due to slightly lower utilization of the tungsten explorer as it completed its
spk05: highlighted by Ehab in his remarks.
spk00: For the quarter, our deepwater fleet achieved 92.86% efficiency, and our jackup fleet achieved 97.25% efficiency. Operating costs for the fourth quarter of 2022 totaled $65.1 million and were unfavorable to the $43.9 million in the comparable quarter of 2021, primarily due to higher utilization of our owned and managed rigs partially offset by the lower costs associated with the jackups due to the sale of the EDC rigs. Operating costs for the year end of 2022 totaled $234.8 million compared to $150.7 million in 2021. The increase is mostly due to higher utilization in the deepwater segment, partially offset by the lower operating costs in the jackup segment due to the sale of the EDC rigs. General and administrative expenses for the fourth quarter of 2022 totaled approximately $5.3 million as compared to $5.5 million for the comparable quarter in 2021. Interest expense for the fourth quarter of 2022 was approximately $8.8 million in line with the interest expense for the fourth quarter of 2021. The net result was a loss of $16.4 million for the quarter, or $1.25 per share. As of the end of the quarter, we had approximately $217.2 million of contract drilling backlog, which included $61.2 million related to the Polaris, where we entered into a contract directly with ONGC and leased the rig through a bare-boat charter from our managed services client. One last item to note is that in 2022, we experienced several email-related cybersecurity breaches, referred to as the 2022 Cyber Matters. that resulted in immaterial amounts being paid to a bad actor's account, amounts which we are still attempting to recover. We have retained forensic experts and counsel to assist with our investigation, which is ongoing. Although our investigation to date has not revealed any information that suggests that the 2022 Cyber Matters will result in a material loss to the company, we are not able to determine the likelihood of loss, if any, arising for this matter at this time. Separately, in regards to the timing of the filing of our 10-K, our auditors continue to work through their audit procedures so that we may file by the end of the month. However, it is possible that they will not have concluded the procedures by such time. I will now turn the call back over to the operator to begin the Q&A.
spk03: Thank you.
spk02: As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for questions.
spk03: And as a reminder, to ask a question, please press star 11 on your telephone.
spk02: And I'm showing no questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect. Thank you. Hello. We'll be right back.
spk07: music music
spk02: good day and thank you for standing by welcome to the vantage drilling international fourth quarter 2022 quarterly earnings conference call at this time all participants are in a listen-only mode after the speaker's presentation there will be a question and answer session to ask a question during the session you'll need to press star 1 1 on your telephone you will then hear an automated message advising your hand is raised to withdraw your question please press star 1 1 again Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Douglas Stewart, the company's CFO and General Counsel.
spk00: Thank you. Good morning, everyone, and welcome to the Vantage Drilling International fourth quarter 2022 earnings conference call. On the call today is also Ehab Thoma, our CEO. This morning, we released our earnings announcement for the quarter and year ended December 31st, 2022. The earnings release is available on our website, advantagedrilling.com. Please also note that any comments we make today about our expectations of future events and projections are forward-looking statements pursuant to the Private Securities Litigation Reform Act. We have based forward-looking statements on management's current expectations and assumptions and not on historical facts. Examples of these statements include, but are not limited to, our expectations regarding future results, including expectations regarding our liquidity position, future costs and expenses related to upgrades and reactivation work, as well as contract preparation costs and expenses. Forward-looking statements in today's call are subject to a number of risks and uncertainties, many of which are beyond our control and could cause actual results to differ materially from the projections made in today's conference call. We refer you to our earnings release and SEC filings available on our website. Vantage does not undertake the updating of any such statement or risk factor that could cause actual results to differ materially from our expectations. We have pre-recorded our prepared remarks and are participating in the call remotely to manage the question and answer session segment of the call. In the event there are issues with sound quality or of a similar nature, please accept our apologies in advance. and thank you for your understanding. Now, let me turn over the call to our CEO, Mr. Ehab Thoma.
spk01: Thank you, Douglas, and good morning and good afternoon, everyone. I would like to take the opportunity during this earnings call to reflect on the successful year of 2022. We were all happy to see that 2022 solidified the industry's recovery and reflected a clear shift in focus from simply reutilization generating healthy returns through strong day rates 2022 was a very successful year for vantage operationally where all our owned managed and supported rigs performed safely and efficiently to the full satisfaction of our clients in line with the improved market conditions and thanks to our customer focus and unwavering commitment to operational excellence Our fleet of rigs was fully contracted during 2022 and is already contracted for a significant portion of the year 2023. One of the main events for Vantage during 2022 was the closing of the sale to Addis of the Emerald Driller Company, consisting of our three jackets and cutter, as well as signing a three-year support services agreement for the three rigs. The sale significantly delivered our balance sheet and paved the way for our successful refinancing earlier this month. Also, 2022 was the year when we finally had clear ability to significantly improve day rates as owned and managed rigs started coming off legacy contracts. This trend continues in 2023, and we see this being the year of repricing of the full fleet. with no rigs left behind on legacy day rates. I'm now going to walk you through my prepared remarks by following our three corporate goals as I normally do. These goals are, one, maintaining our stellar health, safety, environmental, and operational performance. Two, putting all our rigs to work on higher day rates. And three, preserving cash and liquidity are now with focus on free cash flow generation. Beginning with our goal number one and starting with safety, we continue to strive for incident-free operations as underscored by our perfect day, everyday vision. Advantage, we strongly believe in cultivating this perfect day, everyday culture which is achieved through our ongoing efforts to train, coach and mentor our crews. I'm immensely proud of our crews for the overall safety performance during 2022, despite all the challenges and complexities they faced. In 2022, despite significantly more exposure with a 64% more man hours work compared to 2021, we maintain the same high standards and results. We did that with the number of rigs actively under our management increasing throughout the year from seven to 10, and with eight of those rigs going through a mix of company transitions, reactivations, mobilizations, and startups in new countries of operation. There were a number of significant safety highlights in 2022, which included five of our 10 rigs not having any recordable incidents and the Platinum Explorer and the Sapphire Driller, both achieving zero injuries of any type over the course of the year. It is worthy to note that the Platinum Explorer has now achieved zero injuries for the third year running, a truly remarkable achievement. This achievement is a great testament to the level of effectiveness of our India operation, thanks to the professionalism and hard work of our offshore crew and local management in India. Moving to health, our well-tested COVID-19 protocols to combat the spread of the virus within our workforce have largely protected our employees, contractors, and partners, and have minimized disruption to our operations in 2022. Beyond our focus on our employees' safety and health, we continued our vigilant focus on protecting the environment where we work. We also resolved in 2022 to bring greater focus on our efforts on sustainability. While we were already going to great lengths to deliver on the E in QHSC, quality, health, safety, and environment, 2022 was the first year where we formalized a more comprehensive approach to environment, social, governance, ESG. We established a working group that developed and published an internal report on our ESG efforts with right size targets for 2023 based on data gathered in the prior two years. We believe that diversity is a critical aspect of our ESG efforts as it is a powerful attribute that many organizations strive to achieve. Advantage, the diversity of our workforce is a core part of who we are as evident by the 48 nationalities that comprise our workforce. Within our total population, 71% come from Asia, Africa, Middle East, Latin America, and Eastern Europe, and 30% of our onshore-based employees are women. Our management team is also diverse, with representation from 19 different nationalities. This strength and diversity will continue to be a fundamental part of our success in the future. Now, operationally, the overall fleet revenue efficiency for the fourth quarter was 93.6%, with the jack-up fleet delivering 97.3% and the deep-water fleet achieving 92.9%, in part due to cyclone weather conditions in India in October and December. For the entire year of 2022, revenue efficiency for the fleet was 97.3%, with the Jacob fleet at an impressive 99.9% efficiency and the deep water fleet achieving a commendable 96.3%. To summarize, we are proud of our safety and operational performance in 2022, which has always been the primary reason why clients choose to work with Vantage. Moving now to goal number two of maintaining all our rigs working, I'm pleased to report that all of our rigs are working and our goal now shifted from a simple focus on utilization to focusing on achieving higher day rates. Our total backlog at the end of 2022 stood at $217.2 million compared to $177.4 million at the end of Q3 2022. As usual, I'm going to update you on our contracting activities and on our fleet status in regards to both owned and managed rigs. Beginning with our shallow water rigs, the Topaz Driller started operations with Petrobras in Egypt early in the fourth quarter through a bare boat charter arrangements with Addis Egypt. As mentioned during our previous call, Vantage is earning a fixed bare boat charter fee from Addis Egypt plus a variable monthly fee tied to the achieved drilling contract margin. During the fourth quarter, we received a letter of award from ENI for the rig for 90 days of work in Morocco for a total contract value of $23.8 million. Since such time, the drilling contract has now been signed. We expect the Topaz driller to mobilize to Morocco after completion of the Petrobras Egypt work. Please note, we have also received letter of award from Petrobel for an extension of the existing contract at better terms for a period of 75 days before mobilizing to Morocco. Moving to the Suhana, the rig continues to work for MEDCO Indonesia, where it is expected to continue until sometime in Q3 2023. We are in the final stages of contracting the rig at a materially higher day rate and for a relatively long-term contract in direct continuation with the current contract. We have invested significantly in the crew and the vessel since the rig was added to our fleet, and as a result, the Suhana is now a much desired rig in the region. Shifting now to the Deepwater Fleet. The Platinum Explorer contract with ONGC in India will continue until late Q4 2023. The rig, apart from having a tremendous safety record, is operating successfully for ONGC in some extreme currents on their prestigious East Coast projects. We recently had visits offshore by the chairman of ONGC and his leadership team and have received praise on the rigged performance and its contribution to the success of ONGC over the years. The Platinum Explorer have only worked for ONGC since it was built and has consistently delivered safe and efficient operations to their full satisfaction. We look forward to many more years working for ONGC, and we are very proud of what our onshore and offshore teams in India have achieved year after year. Finally, the Tungsten Explorer finished its successful campaign with any Cypress in December 2022, underwent contract preparation and planned maintenance, and mobilized to Namibia, where after rig acceptance, we started the new contract with Total Energies at the beginning of March. Total Energies have exercised the first contractual option, bringing the firm term of the contract through Q1 2024. It is worth noting that the contract preparation and mobilization were done on budget and on time with the valuable cooperation of our long-term esteemed client, Total Energies. I will now spend time discussing our operations and management services business. During the fourth quarter of 2022 and after concluding its reactivation work in Labuan on time and on budget, the Polaris mobilized to India and started its new contract for ONGC. This campaign will keep the rig busy until the end of Q3 2023. Moving to the Capella, The RIG concluded its contract in Indonesia in October 2022 and has gone through planned maintenance and recertification work. During Q1 2023, we were awarded a 45-day firm contract in East Africa for the RIG with a total value of $37 million, and the RIG is now mobilizing to commence this contract, which is expected to start during April. Upon conclusion of this contract, the RIG will return to Indonesia for its contract with several operators there with close to a one year of firm work in addition to some yet to be exercised options. Lastly, the Aquarius is in Las Palmas undergoing future reactivation de-risking work and is being actively marketed for work worldwide. The managed services business line has been highly successful, generating significant value for the owners and serving as a strong revenue stream for Vantage. We aim to capitalize on this success by pursuing further managed services opportunities, leveraging our effective and efficient management platform. On the market outlook, 2022 has proven to be the pivot year we expected it to be for the offshore drilling industry. We remain optimistic about the long-term prospects for the industry as the renewed focus on energy security and reliability continues to drive increased demand for offshore drilling. Looking ahead to 2023, we expect to see continued recovery in the offshore drilling market, especially in the areas of exploration and appraisal drilling, where we anticipate an increase in demand for deepwater drilling services as new discoveries are made in previously untapped areas. In terms of regional performance, we see strong demand for drilling services in the various regions of the world, largely in the Middle East, Latin America, West Africa, and Asia Pacific, where new exploration and development activities are strongly on the rise. Higher day rates and longer-term contracts are being fixed as customers are trying to secure available rigs for future work and lock in today's day rates as day rates are expected to continue to increase driven by a very tight supply and demand balance. As I said at the beginning, we plan to take the tighter market opportunity to reprice the full fleet in 2023 with no rigs left on legacy day rates. It is worth noting, however, that the recent global banking sector turmoil and the immediate impact it had on the price of oil is a reminder of the outside forces that cause oil price volatility. To conclude my prepared remarks, I will discuss corporate goal number three of preserving cash and liquidity, which was a fundamental pillar while going through a very prolonged industry downturn. Douglas will provide you with more color in his prepared remarks, but I would like to highlight some important cash events. We closed the year with total cash of $93 million, inclusive of Aquadrill cash of $29 million, or a net advantage drilling international cash of $64 million. During the fourth quarter, we paid down $170 million of our debt, bringing the outstanding debt down to $180 million and pivoting the way for the successful refinancing earlier this month. With the issuance of a $200 million secured bond with a 9.5% coupon, or all-in yield to maturity of approximately 10.3% maturing in 2028. With our four owned rigs, two of the managed rigs, and three supported rigs, all operational, and our capital structure optimized, we expect 2023 to be a turning point for positive free cash flow generation for the company. This is the year where our focus for goal number three is shifting from simply preserving cash to a sharp focus on generating positive free cash flow. With that, I would like to turn the call over to Douglas to take us through the numbers.
spk00: Thank you, Ihab. Good morning and welcome, everyone. During this portion of the call, I briefly will go through the details of our recent refinancing and then focus on my customary discussion of how the company performed financially for the quarter and year ended December 31, 2022. As he had mentioned in his prepared remarks, during the fourth quarter of 2022, we redeemed $170 million of our formerly outstanding 9.25% first priority senior secured notes due 2023 by using proceeds from the sale of our EDC rigs that closed in the second quarter of last year. Of course, earlier this month, we redeemed the remaining $180 million of the 9.25% bonds and paid the associated accrued interest using the proceeds from the issuance of the new 9.5% first priority senior secured notes due 2028. In addition to the redemption, the proceeds of the new bond were used to cover financing fees and for general corporate purposes. We are obviously very pleased with our refinancing, especially given the recent volatility in the financial markets. Moving to the company's financial performance for the quarter and ended December 31, 2022, the company ended the year with approximately 93.3 million of cash, including 19.2 million in restricted cash and 29.0 million of cash pre-funded by our managed services customers. to address near-term obligations associated with the operation of their rigs. This compared to $262.3 million, which included $18.7 million in restricted cash and $19.7 million of cash pre-funded by our managed services customers at the end of the third quarter. The decrease in our cash is primarily due to a $170 million partial payment on the nine and a quarter first lien notes and a $17.8 million interest payment. Working capital for the fourth quarter 2022 ended at approximately 96.2 million compared to 269.1 million in the third quarter of 2022. The decrease is mainly due to the partial payment of the nine-quarter first lien notes. For the fourth quarter of 2022, we achieved revenues of approximately 76.2 million compared to 49.8 million for the fourth quarter of 2021. The increase is mostly due to higher utilization especially in the deepwater segment, which partially offset the decrease in the jackup segment due to the sale of the EDC rigs, which was completed in the second quarter of 2022. In addition to the company's own rigs, our managed services segment contributed $36.4 million in revenue in the fourth quarter of 2022, which compares with approximately $5.9 million in the comparable quarter of 2021. Total revenue for the year ended 2022 was $278.7 million compared to $158.4 million. The increase was mostly due to higher utilization in the deepwater segment, partially offset by lower revenue in the jackup segment due to the sale of the EDC rigs. The managed services segment contributed $99.5 million in revenue during the year and to 2022, of which $86.1 million constituted reimbursable revenue. Total revenues for the fourth quarter of 76.2 million, compared favorably to the 71 million reported in the third quarter of 2022, driven mostly by higher revenue related to the Polaris' contract with ONGC in India in December, partially offset by lower revenue on the deepwater segment due to slightly lower utilization of the Tungsten Explorer as it completed its contract with the United Cypress during December. lower management fees as the Capella finished its contract in Indonesia in early October 2022, and lower revenue efficiency associated with the Platinum Explorer, as highlighted by Ehab in his remarks. For the quarter, our deepwater fleet achieved 92.86% efficiency, and our jackup fleet achieved 97.25% efficiency. Operating costs for the fourth quarter of 2022 totaled $65.1 million, and were unfavorable to the $43.9 million in the comparable quarter of 2021, primarily due to higher utilization of our owned and managed rigs, partially offset by the lower costs associated with the jackups due to the sale of the EDC rigs. Operating costs for the year ended 2022 totaled $234.8 million compared to $150.7 million in 2021. The increase is mostly due to higher utilization in the deepwater segments. partially offset by the lower operating costs in the jack-up segment due to the sale of the EDC rigs. General and administrative expenses for the fourth quarter of 2022 totaled approximately $5.3 million as compared to $5.5 million for the comparable quarter in 2021. Interest expense for the fourth quarter of 2022 was approximately $8.8 million in line with the interest expense for the fourth quarter of 2021. The net result was a loss of $16.4 million for the quarter, or $1.25 per share. As of the end of the quarter, we had approximately $217.2 million of contract drilling backlog, which included $61.2 million related to the Polaris, where we entered into a contract directly with ONGC and leased the rig through a bare-boat charter from our managed services client. One last item to note is that in 2022 we experienced several email related cyber security breaches referred to as the 2022 cyber matters. That resulted in immaterial amounts being paid to bad actors account amounts which we're still attempting to recover we've retained forensic experts and counsel to assist with our investigation, which is ongoing. Although our investigation to date has not revealed any information that suggests that the 2022 Cyber Matters will result in a material loss to the company, we are not able to determine the likelihood of loss, if any, arising for this matter at this time. Separately, in regards to the timing of the filing of our 10-K, our auditors continue to work through their audit procedures so that we may file by the end of the month. However, it is possible that they will not have concluded the procedures by such time. I will now turn the call back over to the operator to begin the Q&A.
spk03: Thank you.
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spk03: And as a reminder, to ask a question, please press star 1 1 on your telephone. And I'm showing no questions at this time. This concludes today's conference call.
spk02: Thank you for participating. You may now disconnect.
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