Vantage Drilling Intentl

Good day and thank you for standing by. Welcome to Advantage Drilling Q1 2024 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 this session you will need to press star 1 1 on your telephone. You will then hear an automated message advising you 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, Companies General Counsel. Please go ahead.

Thank you. Good morning, everyone, and welcome to the Vantage Drilling International Limited First Quarter 2024 Earnings Conference Call. On the call today is also Ehab Thoma, our CEO, and Rafael Bladner, our CFO. This morning, we released our earnings announcement for the quarter ended March 31, 2024. The earnings release is available on our website, advantagefilling.com. Please 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 out-of-service 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. 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 refer you to our earnings release and financials available on our website. We have prerecorded our prepared remarks today. and are participating in the call remotely to manage the question and answer session segment of the call. In the event that 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.

Thank you, Douglas, and good morning and good afternoon, everyone. I'm pleased to say that we had a successful first quarter of 2024 in which we operated safely and efficiently and achieved some significant milestones. As previously mentioned, we entered into a binding agreement with Total Energies during the quarter to create a joint venture that will own the tungsten explorer with Vantage managing it on behalf of the JV, and had option three of our drilling contract for the rig exercised by Total Energies. Subsequent to quarter end, we finalized the drilling contract for the Tupac driller with CPOC, and I'm happy to announce that we secured a $25 million revolving credit facility to prudently manage near-term liquidity requirements. Rafael will give you more details on this call. I will now take you through our performance for the first quarter against our three corporate goals of one, maintaining stellar safety and operational performance, two, contracting of our fleet, and three, achieving excellent stakeholders' returns. I will begin with our corporate goal number one of maintaining stellar safety and operational performance, which is our license to operate as a company. We clearly recognize that our people are our most important asset, and by creating a positive safety culture, we ensure that every individual within our workforce feels supported and protected. This commitment extends beyond mere compliance with the regulations. It is a fundamental principle ingrained in our operations and promoted throughout the company. During the first quarter, we remained focused on achieving our vision of a perfect day every day through regular training, coaching, and mentoring of our crews across our owned, managed, and supported fleets. In Q1 2024, we continued what we started in 2023 of reintroducing our perfect day leadership behavioral based safety program. We are also working with a company to introduce an AI flavor to our approach to training and education. The AI technology will provide us with our own AI augmented post-training solution in a bid to enhance the level of knowledge retention of our employees. We are in the early stages of implementation, but so far the signs are promising. During Q1 2024, in regard to incident prevention, I would like to highlight that the Suhana achieved four years without a lost time incident and the Tungsten Explorer reached two years without one. The Qatar-supported jackups also had a very good quarter, with the Emerald Driller achieving two years without a recordable incident. These are fantastic achievements and clear indications that the Perfect Day Leadership Program and its reintroduction are having the desired effect, although we are aware we cannot let our guard down and must continue to strive to achieve our goal of zero incidents across the company. Safety is just one aspect of our comprehensive approach to sustainability. We are committed to seamlessly embed sustainability into our decision-making processes. This not only strengthens our business for the future, but also generates positive impacts on society. As part of this ongoing process, we are actively developing our second internal sustainability report for the company. On the environmental side, we have had a good quarter with no overboard environmental spills reported. Our focus continues to be on reducing our GHG emissions through the implementation of energy efficient strategies, such as engine management and fuel usage. We are fortunate to have supportive clients who are taking an active interest in supporting our efforts to improve energy efficiency of our operations. In terms of our social initiatives, we continue to prioritize our commitment to diversity. This fosters innovation, enhances problem-solving capabilities and cultivates a more inclusive and dynamic workplace culture. Additionally, we maintain a strong focus on governance, ensuring adherence to the highest ethical standards across all operational regions. This entails regular training on governance issues, rigorous internal and external audits and meticulous vetting of counterparties. Switching to operations, revenue efficiency for the owned fleet during the first quarter of 2024 was 91%, with the Deepwater fleet and the Jacob fleet ending at 86% and 98.9% respectively. The lower-than-usual revenue efficiency for the quarter was primarily due to the downtime event on the Tungsten Explorer, which I mentioned during the last earnings call and have since been resolved. It is noteworthy to highlight again that this Namibia campaign is an industry first for a rig to drill three consecutive wells in over 10,000 feet of water. The well program was successfully completed and the drill ship has now arrived in Congo in continuation of the client's West African well campaign. In regards to the other drill ships we own or manage during the quarter, the Platinum Explorer achieved approximately 99.4% revenue efficiency in first quarter. while the managed drill ship's revenue efficiency, which is not reflected in our company revenue efficiency, was also approximately 99.7% for first quarter. Our efficient operations, strong safety record, and cost-effective management platform make us a trusted manager, providing clear benefits to those for whom we manage and operate rigs. I'll now walk you through our fleet status, which directly ties to our second corporate goal of contracting our rigs and securing full fleet utilization. The Suhana had an uninterrupted quarter working for Medco Indonesia on its 776-day contract at $119,900 per day. The rig is fully contracted until the latter part of 2025. The Topaz Driller had an excellent quarter with revenue efficiency of over 99.3% while working for Foxtrot in the Ivory Coast after commencement of operations in early January. The rig is now on its route to a Singapore shipyard where it will undergo upgrades and contract preparation prior to commencing its two-year firm contract at $125,000. Per day, in the joint development area of Malaysia and Thailand, the contract, which also includes nine months of unpriced options, is expected to commence in the third quarter of 2024. The upgrades include the increase in accommodation quarters capacity and the addition of significant offline handling and pumping capabilities. and under-deck cantilever cranes. These upgrades will position us to achieve higher future day rates as they bring the Topaz driller specifications to comparable levels of rigs that were built and delivered years later and adds distinct benefits that are specially tailored for the Southeast Asian market. Switching to Deepwater, the Platinum Explorer contract with ONGC in India concluded in February of 2024. The rig is now in Malaysia, undergoing the planned out-of-service period, including scheduled maintenance, thrusters change-outs, five-yearly equipment recertification, cyclical overhauls, and the upgrade of the BOP from 5 rams to 6 rams. The rig should be available for work in the third quarter of 2024, and we continue to pursue various opportunities across the globe. Moving on to the Tungsten Explorer, the client has exercised the third contractual option, which should keep the rig busy into 2025. Additionally, as previously announced, total energies and Vantage have entered into a binding memorandum of understanding. whereby the Tungsten Explorer will be sold for $265 million to a joint venture owned 75% by Total Energies and 25% by Vantage. The joint venture will sign a fixed day rate drilling contract for 10 years, subject to cost escalations, with the potential for five additional years. The joint venture will also enter into a management services contract with Vantage for an average daily management fee of $47,500. The end date of the final option and the completion of the joint venture agreement will coincide with each other at a time to be mutually agreed. In terms of backlog for our owned fleet, at the end of the first quarter, our backlog totaled $189.7 million, of which $99.6 million pertains to the exercise of the third option of the tungsten explorer contract by Total Energies. In addition, shortly after the quarter ended, the contract for the Topaz driller was executed, adding approximately $107.3 million of additional backlog. Finally, regarding the managed services segment, the Polaris was successfully returned to Cedril in March, while the Capella is currently operating for Mubadala in Indonesia. We expect the rig to be returned to Cedril in the third quarter of 2024. We are committed to this segment of our business and we continue to pursue opportunities to add rigs under our management to replace the outgoing seed drill rigs and grow our managed services business. In this regard, we have recently signed a marketing agreement with Hanwha Drilling to market their new build drill ship, the Tidal Action X Libra. We are actively introducing this rig to our clients and we see clear evidence of interest in this rig for a 2025 commencement. Now, turning our attention to market dynamics. Despite the ongoing discussions about postponements leading to white space in 2024, long-term sentiment remains robust. Particularly noteworthy is the continued trend among customers in the drill ship segment who are securing capable rigs for term contracts covering multiple projects. Moving to our third corporate goal, achieving excellent stakeholders' returns. During the first quarter of 2024, we achieved $15.6 million of EBITDA. As previously mentioned, we have proactively entered a $25 million revolving credit facility to prudently manage near-term liquidity requirements. To conclude, we remained focused on our objectives of outstanding safety performance and pursuing profitable long-term drilling contracts to deliver strong future returns to our stakeholders. With that, I would like to turn the call over to Rafael to take us through the numbers and speak to the recently executed revolving credit facility.