Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Odfjell Drilling Ltd (ODFJF, Financial) achieved a high financial utilization rate of 98% for its own fleet, contributing to an EBITDA of $85 million from a revenue of $191 million.
- The company secured a significant contract with Equinor for the Deepsea Aberdeen, valued at $121 million, extending its backlog until early 2027.
- Odfjell Drilling Ltd (ODFJF) successfully completed the Deepsea Atlantic SPS and upgrade project ahead of schedule and within budget, enhancing the rig's capabilities.
- The company's order backlog increased to $2.1 billion, with all units having firm backlog until at least mid-2026.
- Odfjell Drilling Ltd (ODFJF) declared a quarterly dividend of $0.06 per share, with plans to increase future dividends as units transition to higher day rate contracts.
Negative Points
- The company's net profit for Q2 was $16 million, which may be considered modest relative to its revenue and EBITDA figures.
- Odfjell Drilling Ltd (ODFJF) faces potential competition from benign units in West Africa, which could impact day rates for harsh environment rigs.
- The company has ongoing CapEx commitments, with significant payments expected for the remaining SPS programs, potentially impacting cash flow.
- There is uncertainty regarding the timing of the Deepsea Aberdeen SPS, which could affect operational schedules and financial projections.
- Despite a positive outlook, the company acknowledges the need for careful management of M&A opportunities to ensure they are accretive for shareholders.
Q & A Highlights
Q: Could there be spillover effects on rates due to competition from benign asset types in West Africa?
A: Kjetil Gjersdal, CEO: Yes, especially for shorter-term work, there might be clients who use benign units, particularly during the summer season. However, we remain confident that harsh environment rigs are the right tool for year-round operations in that area.
Q: Can you provide some color on the CapEx profile for the remainder of the year and into 2025, especially regarding the SPS cycle?
A: Frode Syslak, CFO: The bulk of CapEx is typically paid in the same quarter as the SPS is completed, but some payments can spill over into subsequent quarters. For example, 20% of the Deepsea Nordkapp's SPS CapEx remains unpaid as of June 2024.
Q: What areas will drive demand for harsh environment rigs from 2027 and beyond?
A: Kjetil Gjersdal, CEO: We expect high activity levels on the Norwegian continental shelf and increased international activity, particularly in South Africa, leading to more opportunities and longer-term contracts.
Q: What are Odfjell Drilling's ambitions regarding M&A?
A: Kjetil Gjersdal, CEO: We continue to explore opportunities that are accretive for shareholders. While we have a strong outlook, we remain open to deals that enhance shareholder value.
Q: How does Odfjell Drilling see its dividend strategy evolving?
A: Kjetil Gjersdal, CEO: As rigs transition to higher market rates, significant cash generation is expected from 2025 onwards. We aim to start increasing dividends with the Q4 results and see further potential for increases in 2025 and beyond.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
