Q3 2021 Eneti Inc Earnings Call

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D C is the operator.

Today's conference is scheduled to begin shortly please continue to standby. Thank you for your patience.

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Speaker 1: Hello, and welcome to the Eneti Incorporated third quarter 2021 conference.

Hello, and welcome to the energy incorporated third quarter 2021 conference call I would now like to turn the callback to Hugh Baker Chief Financial Officer. Please go ahead Sir.

Speaker 1: I would now like to turn the call over to Hugh Baker, Chief Financial Officer. Please go ahead, sir.

Thank you operator.

Speaker 3: Thank you for joining us today. On the call with me are Emanuele Lauro, Chairman and Chief Executive Officer, Robert Bugbee, our President, Cameron Mackey, Chief Operating Officer, James Doyle, Senior Financial Analyst, David Morantz.

Thank you for joining us today on the call with me are normally Lauro, Chairman and Chief Executive Officer, Robert Bugbee, President Cameron Mackey, Chief Operating Officer, James Doyle Senior financial Analyst David Bryant.

Speaker 3: Managing Director, Tim Sanger, Managing Director, and Sebastian Brook, Chief Operating Officer of CJAC.

You can director, Tim singer, managing director and Sebastian Brook, Chief operating officer of <unk>.

Speaker 3: The information discussed on this call is based on information as of today, Wednesday 12 December 2021 and our Press Release and Earnings Press Release presentation as of this morning, which may contain forward-looking statements that involve risk and uncertainty. Actual results and events may differ materially from those set forth in such statements.

The information discussed on this call is based on information as of today Wednesday, the 12th of December 'twenty, 'twenty, one and our press release and earnings press release presentation as of this morning, which may contain forward looking statements that involve risk and uncertainty.

Actual results and events may differ materially from those set forth in such statements for.

Speaker 3: For a discussion of these risks and uncertainties, you should review the forward-looking statement disclosure in the presentation issued today and in the press release that we issued today, as well as Eneti, Inc.'s SEC filings, which are available at www.eneti-inc.com and www.sec.gov.

For a discussion of these risks and uncertainties you should review the forward looking statement disclosure in the presentation issued today and in the press release that we issued today as well as in that's he inks SEC filings, which are available at www.

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Speaker 3: Call participants are advised that the audio of this conference call is being broadcast live on the internet and is also being recorded for playback purposes. An archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.

Call participants are advised that the audio of this conference call is being broadcast live on the Internet and is also being recorded for playback purposes, an archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days.

Speaker 3: In addition to the call today, there is a short presentation that has been uploaded to our website on the Investor Relations page under Reports and Presentations. Now I'd like to introduce

In addition to the call today Theres, a short presentation that has been uploaded to our website on.

On the Investor Relations page under reports and presentations.

Now I'd like to introduce minimally Laura.

Thank you Hugh and thanks, everybody for joining us today.

We've discussed the company at length. Most recently in conjunction with our equity raise debated says has placed us.

On the front foot in building the world's leading a wind turbine installation base of business.

We're looking forward to execute on our plans.

And.

On what we said we would do.

In the meantime, the integration of the <unk> business continues when we are delighted at the quality of the platform and the reputation it enjoys with customers and then personally also extremely happy to have found the business from by great people.

The business remains profitable and continues to generate strong cash flows.

There is volatility which is pertaining specifically to the industry in the names, but as I said profits.

Profitable and generating strong cash flows we are optimistic about the outlook for offshore wind in general and more specifically for the markets.

We operate in.

As I said before we're focused on execution at this stage.

And have already exercised the second option well actually the option for the second vessel at <unk>. This will deliver in R&D 2025.

And as far as the Jones Act project is concerned it is an exciting development area for us discussions continue with customers and capital providers Slash U S local content partners.

<unk> has certainly accelerated following the recent equity raise and we look forward to update you as soon as we have tangible news, which we expect in the not too distant future.

We also expect a steady flow of contract announcement of news flow through the inflection point with the delivery of the new builds in Q4 of 24 in Q1 25.

From an industry perspective, the visibility through 2030 and beyond is getting clearer everyday.

Non card for our services continues to steepen against an ongoing under supply of wind turbine installation vessels.

We're excited about our prospects as the leading U S listed company in the growth industry of offshore wind.

Both as far as the U S market and the international market is concerned.

And more importantly, we look forward to many years of partnership with so many new substantial shareholders.

Two our agents there.

After the transition it feels good now that we have.

Exceeded our legacy.

Conventional shipping business.

<unk>, we'd see Jacobs.

Included our equity raise we do look forward as I've mentioned before to execute on our plan going forward was starting from now really.

I do not have any more opening remarks, so I think operator, we can turn the call to questions.

Thank you and as a reminder to ask a question simply press star one on your telephone to remove your question press the pound key.

We have a question from the line of Randy <unk> with Jefferies. Your line is open.

Randy Your line is open.

Hey, guys. This is Chris Robertson on for Randy Thanks for taking our call.

Sure Hi.

Hi, Yes, just.

Wanted to ask about.

I guess the dividend at this point why maintain it.

As it stands with kind of uncertainty around the new building program just things can come up.

Not just preserve that cash on hand, just to be safe.

Okay.

I think it's a very minimal dividend I think that it could have a.

Rather than chopping and changing around I think it's much better to keep that dividend in there at the moment.

And you know we have we clearly have.

You know enough cash and enough liquidity to to a.

Deal with all the things that we are competing with going forward.

And.

Being an appropriate question. Another time I don't think it's relevant now related to that.

The cash savings and we would we would expect over the coming months to announce.

Merit increases and secure.

Secure revenue going forward and I thought I think it will if it's not clear to people now I think it would be clear to people recently shortly but.

The balance sheets in good shape for the commitments that we have at the moment.

Okay, Yes, that's fair.

Moving onto our next question just in terms of the proceeds that were raised with the offering.

I guess why that specific amount and can you talk about the use of the proceeds.

Okay.

Well I do.

The use of the proceeds.

Defined in to to exercise an in the money option.

A dog shipyard.

And.

To put us in a position to.

Put in a more permanent financing than we have at the moment.

You too.

And quite a solid balance sheet from which to go forward and put us in a position to.

Try and news on the you know the American Jones Act.

Angel.

Gotcha.

And one quick market question, if I could sneak a third one in.

There was an article recently talking about the demand for <unk> vessels on Asia, and not taking some of the European vessels out of that market, where they can earn a higher rate in the Asian market do you have any commentary just on the the vessels on the water right now in terms of the markets that are operating in is there any chance that they might be shifted over.

To the Asian market, if they're not already there.

Yeah.

Yeah, I would just do one because the Boston chat chat on this is that.

I think in a more broader context, whatever Sebastian it says in the short term and the longer term I think that youre going to see activity in and many of the regions of the world now the developing agent market as you've said and continuation in Europe. The United States you are likely from time to time.

In a tightening market, especially as there'll be projects that will be extended all vessels the.

So it protects need more vessels that you are likely to see opportunities of arbitrage between the two markets.

Increase more and more that Sebastien, if you could do about it.

That was quite sudden.

Yeah, I mean, I think the big change that happened in the last couple of years as we've gone from one local market to now having kind of full regional markets, whether that be Europe Asia Pacific America, and even within Asia Pacific a couple of Cam cool market there.

And as Robert said.

Each of those markets will end up having their own dynamics based on the available supply and demand.

And.

It will create opportunities and yes, as we've shown with the seller we book of pad two.

To translate over to Asia Pacific in order to achieve.

Day rates, just based on the local demand and supply characteristics in the area. So.

Yes, it's a mobile fleet and people will shift out to.

After the areas towards.

Towards the regions, which offer the best economics.

We will obviously create shortages and opportunities.

As they go.

Okay, great Yeah, it's good to hear that the current fleets is it going to be just as mobile as the older Drybulk fleet.

Thanks for taking our questions.

Thank you.

Thank you and I'm, Sorry reminder, to ask a question simply press star one on your telephone.

We have a question from Greg Lewis with BP.

Hey, Thank you and good morning, everybody.

Hey, guys I was hoping for a little bit more clarity around the seat jacks performance this quarter I realizing that the.

The deal closed mid mid August I believe could.

Can you talk about the full quarter financials around that.

Okay.

Greg we cant talk about that in too much detail and we're obviously aware of that are the financials really only show the performance of <unk> from the period, which we bought it but if you go to the presentation. That's been uploaded on our website, you'll see that we've provided additional.

Detailed in terms of the revenues that see Jackson's between July the first and the time of acquisition.

And that is you'll see that we've shown revenue around $30 million for the quarter.

Prior to that period in the AR from July the first August 12th with is it showing revenues of $35 5 million. So we have a combined revenue figure for the quarter and the same St with our operating expenses and project costs.

Alright, that's what we can we can provide at this time.

Okay, that's fair enough thanks for that.

And then I guess, while I got Guayaquil got your voice right now could you talk a little bit about I saw the pro forma.

I believe me.

N G facility was retired.

I believe you know more recently, you've talked about coming up with a new new.

I guess at a new facility to replace the two existing facilities and any kind of progress or timing of any any kind of color you can give around that.

Yeah. So I think we can certainly you know in our equity.

Equity issuance the perspective supplement we talked about our proposal we've received.

And we are developing.

That proposal and other proposals.

To be in a position to refinance our existing debt facilities in.

In the first quarter, but potentially might drag out into the second quarter.

So there is a.

Refinancing underway.

And that process is.

We're never in a hurry so that process is going on but.

And.

Well, certainly probably be able to report more.

Quarter.

Okay perfect. Thank you guys very much for the time.

Thank you.

Thank you and we have a question from the line of William Bird with B Riley. Your line is open.

Thank you.

Just a quick follow on to Greg's question on the I N G facility.

That you have left on the balance sheet is subordinated does that mean that your current vessels are unencumbered.

No no.

Liam the debt that we have on the balance sheet is is secured by the operating fleet, we own on the war chest. So but you know it's it's.

It's the five C jacks vessels that we acquired and the security for that learns so.

It's not subordinated it has secured okay. So all the vessels you have or are secured by the current debt.

Yes, okay.

And I guess, you I guess you didn't stay at a backlog number but directionally could you give us a sense as to how the backlog is shaping up.

I think probably all pushed that to Sebastian Brook.

Yes.

So from a backlog perspective.

As we discussed previously the contracting horizons for the engie twenty-five hundreds of.

Relatively short it's kind of.

At the end of the budget and at the end of the calendar year and first quarter of next year, but we do see.

Quite a high number of inquiries coming for next year.

With regards to the existing fleet. This is because it got dark time sheets.

Ah.

On the top line installation of a key to next year and we have ongoing conversations about well into the next year and beyond and with Scylla cheese contracted through next year at the Grace Chang Wall project.

Advanced discussions about.

Projects.

For the following year.

Can't give much more detail than that at the moment, they're also about the new builds.

Multiple projects being pursued from delivery and onwards.

<unk>.

That the message that begin previous state that we expect.

Announcements or contract awards made sometime.

Sure.

Okay well. Thank you. Thank you Sebastian.

Yeah.

Thank you and our next.

Sean Collins from Turner Holm with Clarksons Plateau. Your line is open.

Hey, good morning, gentlemen, thanks for thanks for taking the questions. So first one is on the on the Jones Act project I was just wondering if you all could kind of outline the milestones for that project I mean, I guess with.

With the November.

Sure issue, you've now kind of secured your equity piece of the deal, but kind of what are the next steps.

Kind of progressing the project from from <unk>.

Concept equity raise our funding partners.

Eventually to sort of contract and then the second part of that question is just.

If theres been any feedback from your clients so far after you've announced it yet.

The project.

Sorry my.

My line was to start can you repeat the question. Please I apologize.

I don't know why it was.

Yeah.

Okay. Yeah, maybe it was an issue with my headphones forgive me that no. Its my first question is just on the Jones Act Newbuild project I was just wondering if you all could kind of guided through the milestones on that project and you kind of.

The equity now through the share issue in November for your portion of the deal but.

What are what are the events that we should expect.

Coming ahead for that and then as a kind of a corollary to that question what has been the response from customers with.

With the developments in the U S with regards to <unk>.

Youre Jones at concept thanks.

Thanks, very much I'll start and then my colleagues can chime in as they pleased I think it's difficult to give clear guidance on what the milestones are for the Jones Act project because there are a number of things that.

Are being discussed in parallel.

Namely the.

The U S partner the financing of it.

Contractual position with the yard as well as the employment so the contractual position on the employment side. So it is difficult to depict and give details.

On this topic at this stage, that's why I was a little vague in my opening remarks, saying that we're going to get back as soon as we have relevant <unk>.

<unk>.

Not too distant future. We legally is what we expect to we expect that.

All of these aspects to come together.

Relatively promptly however, it is as I said difficult to their peak then give you.

More detailed guidance at this stage, where we cannot really disclose.

Anything in more detail.

And then the second part of your question was partner.

It was just around the customer response to the second Jones Act Newbuild riding, but it's only the second unit in the market. So I was just curious how customers are reacting to the plans for the project.

Tim do you want to take this.

Very well the phone keeps ringing, but 10, Mark Sebastian do you want to take this.

Sure I think.

It's about the pace.

Very excited about the opportunity of having a <unk>.

There are other solutions available, but it's a highly attractive one that minimizes installation risk at.

At the end of a long and expensive projects.

We've been receiving a lot of phone calls.

And discussions.

A very advanced with the number of customers.

I understand okay.

Just moving on.

We've been hearing from.

Some of your some of your competitors and hearing some talk in the market that the maintenance market.

So I guess, a little bit at the lower end of the <unk> market.

Has actually been heating up quite well and that.

There's been some improvement in day rates are you all seeing any difference.

Maybe for the Leviathan hydro crack in terms of what the market opportunities are for those assets. As you look forward into 2022, maybe between 223 compared to what you've kind of experienced over the last year or two.

Yeah.

All right I got it Sebastian Joe.

So I think that there are a number of factors that go into the 2500 and the <unk>.

Market going through next year and the following one of which is some of the deferred projects from last year and this year in the previous year due to Covid, but in addition, yes I would agree with what the market tax rate, which is the a lot of this first generation of turbines are approaching 10 years instead of useful life.

And recline, requiring increasing amounts of maintenance so.

We are hearing and seeing more inquiries.

And generally with some of them there are indications that they are across multiple years.

So yes, the direction of travel is is in the right direction for us I think but its got to maintenance.

Very good and then and then just one high level question I mean, it's been now.

Three or four months since you since you closed the transaction between <unk> and T. Jackson and I know, it's a short period of time, but I'm just wondering if theres been any directional change.

In terms of.

We believe for the outlook for this market, especially in regards to the new builds in the higher end assets like this go round as airtime.

Is there any is there any difference to report or is it kind of.

Strong as it was when you close a transaction.

I think that's more than the changes that have been confirmation. So the direction of travel really remains the same the thesis remains the same we had three or four very busy transformative quarters.

Now on the back of all of Us and.

We really are looking forward to be able.

To execute on the plan.

Starting two weeks ago, when two or three weeks ago. When we close the the equity raise which has allowed us to sort of cement our position and be able to give us a chance to go and execute which is what we're doing and we are.

Understand that we couldnt.

Australia for us as well not being able to do.

Give you the level of detailed disclosure that we want to do Asap.

We're working as hard as we can to get there and it shouldn't take long to start seeing the first step.

Coming together so it's.

It's exciting.

The position now and.

Look forward to push things through.

Okay. Thanks, so much and best of luck next year right.

Thank you Dan.

And I'm not showing any further questions I will pass the call to Mr. Baker for any final remarks.

Thank you operator.

We have no further no further comments so we thank everyone for being on the call.

Thank you. This concludes today's conference call. Thank you for participating and you may now disconnect have a great day.

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