Release Date: July 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenues for Q2 2024 increased to $365 million, showing significant growth from both Q1 2024 and Q2 2023.
- Net income for Q2 2024 was $32 million, a substantial improvement from a net loss of $26 million in Q1 2024.
- Adjusted EBITDA for Q2 2024 was $97 million, indicating strong operational performance.
- Cash and liquidity remain strong with $275 million in cash and $370 million in liquidity at quarter end.
- Robotics segment had an exceptional quarter with high utilization and strong performance in trenching projects globally.
Negative Points
- Negative operating cash flow of $12 million and negative free cash flow of $16 million for Q2 2024.
- Shallow water abandonment results were impacted by a later start to the season due to weather and timing of operator spending.
- Significant transit and mobilization periods expected in the second half of 2024, which will defer approximately $20 million of EBITDA into 2025.
- Soft shallow water decommissioning market in the Gulf of Mexico, leading to underperformance in that segment.
- Potential decline in EBITDA contribution from production facilities in 2025 due to declining production rates from existing fields.
Q & A Highlights
Q: Are you seeing some rig operators start to bid on Well Intervention contracts? And is that more prevalent in some basins versus others?
A: (Scotty Sparks, COO) Yes, we are seeing some longer-term contracts fill for rigs and operators using the white space to undertake some well intervention. We expect high utilization for the coming years at better market rates as we come off legacy contracts. In the North Sea, we are not really competing against drilling white spaces or different diver-based operations.
Q: Can you remind us of the typical seasonal cycle for robotics? And is that changing as you start to taper off related to that?
A: (Scotty Sparks, COO) Robotics can be seasonal, especially in wind farms that are generally in shallow water, leading to seasonality and winter breaks on the trenching side. However, this winter, we expect a very strong season with a good pipeline of trenching works going into 2025. The trenching business used to have short contracts, but now we are looking at multi-year contracts with a very good pipeline of opportunities.
Q: Could you talk about discussions for further work and how comfortable operators are contracting your fleet out beyond 2026 and 2027?
A: (Kenneth Neikirk, General Counsel) We are in good negotiations with solid clients for some of the larger well intervention assets at much higher rates and longer-term contracts, some of which are two to three years in duration. We expect to announce where those assets will end up before the end of the year.
Q: How are you managing the shallow water abandonment business today, assuming there will be a turnaround in the next couple of years?
A: (Owen Kratz, CEO) It's a balancing act, especially with people being the biggest bottleneck. We are incurring additional costs to maintain our capacity to respond to a potential rebound in 2025. The market this year has been softer than anticipated, but we are adjusting our resources to be appropriate for the expected pace of work next year.
Q: Why was the utilization in Q4 of the last two years so strong, and is there potential for less seasonality going forward for those assets?
A: (Kenneth Neikirk, General Counsel) Last year, we had a very good contract where one of the vessels went to the Mediterranean, providing good weather periods for the whole season. This year, we see opportunities and are in discussions with clients for winter work. We are being conservative based on historical seasonal downturns in the UK due to weather.
Q: Can you expand on the potential variability in your Q4 EBITDA guidance?
A: (Owen Kratz, CEO) The variability in Q4 depends largely on the timing of transit days and the costs and revenue that are deferred and amortized over the term of the contract. The impact to Q4 will depend on how many days fall in 2024 versus 2025, which we cannot assess until the mobilization actually begins.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
