Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- All 22 delivered rigs are contracted and committed, with high utilization rates.
- Generated $253 million in adjusted EBITDA year-to-date, positioning well to meet full-year guidance of $500 million to $550 million.
- Strong cash position with nearly $200 million in cash and an undrawn $150 million RCF.
- Board approved a quarterly dividend of $0.10 per share, amounting to approximately $100 million in annual dividends.
- Secured new contracts at accretive day rates, including a long-term contract for the Arabia in Brazil.
Negative Points
- Total operating expenses increased by $18.4 million compared to the first quarter.
- Decrease in operating days for Arabia I due to contract termination.
- Cash position decreased by $88.5 million in the quarter.
- Higher number of special periodic surveys in 2024, leading to increased costs.
- Potential competitive pressure in some markets due to Aramco suspensions.
Q & A Highlights
Q: Patrick, you're going from a situation where you guys are using cash for the newbuilds to next year where you're going to have just a huge amount of cash flow and a lot of that will turn into free cash flow. How are you guys thinking about the uses of free cash?
A: Patrick Schorn (CEO): We expect an increased cash flow year-over-year of over $200 million due to reduced CapEx and higher day rates. This can be used for dividends, share buybacks, or debt repayment. Magnus Vaaler (CFO) added that the Board will decide the best use of this cash, considering shareholder preferences and market conditions.
Q: You mentioned the Vale is going to be delivered this week and assigned to an Africa contract. Can you provide more details on the potential opportunities for the Var?
A: Patrick Schorn (CEO): While we can't disclose specifics, we have sufficient opportunities lined up for the Var. The commercial environment remains favorable, and we are confident in securing work by the time the Var is delivered.
Q: The jackup market seems quite bifurcated currently. Are you comfortable maintaining high rates despite competitive pressures?
A: Patrick Schorn (CEO): We don't have much availability, so we don't need to bid aggressively. Bruno Morand (CCO) added that while some markets like Asia are more competitive, other regions still offer robust pricing opportunities. Our rigs' unique capabilities and strong performance help maintain high rates.
Q: Your guidance for the year is $500 to $550 million. What factors will determine if you end up at the low or high end of that range?
A: Patrick Schorn (CEO): We are confident in our guidance but won't narrow the range due to potential market volatility. Factors like unexpected contract suspensions can impact our earnings, but we aim to deliver within the current bracket.
Q: You won a significant contract in Brazil. What are the cost and risk considerations for operating there?
A: Patrick Schorn (CEO): Brazil has its challenges, but we have partnered with a local company to mitigate risks. Bruno Morand (CCO) added that the contract includes a substantial mobilization fee, and the work scope is relatively simple, focused on P&A and intervention.
Q: How do you assess the risk of a third wave of suspensions in Saudi Arabia?
A: Patrick Schorn (CEO): While another wave of suspensions is possible, the fundamental need for offshore development in Saudi Arabia remains. We believe the current suspensions are temporary measures to curb CapEx, and the work will eventually resume.
Q: Can you provide prospects for the Ran and Thor rigs after their current contracts end?
A: Bruno Morand (CCO): The Mexico market offers opportunities, and new working models could open more. We also see potential in other regions like Surinam and Trinidad. For the Thor in Asia, despite a competitive landscape, its unique capabilities make it well-sought-after.
Q: Have there been any changes in market dynamics that suggest newbuild orders could be made?
A: Patrick Schorn (CEO): There is appetite for small orders, but shipyards are busy, delaying deliveries. Bruno Morand (CCO) added that newbuild orders would need to be backed by long-term commitments and improved day rates. The industry will eventually need new rigs due to the aging fleet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
