Q4 2021 Transocean Ltd Earnings Call
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Good day and welcome to the Q4 2021 Transocean earnings Conference call. Today's conference is being recorded at this time I would like to turn the conference over to Mr. Khail Gillingham. Please go ahead Sir.
Thank you Cynthia.
Morning, and welcome to Transocean fourth quarter 2021 earnings conference call a copy of our press release covering financial results, along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted on our website at deepwater dot com.
Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer, Keelan, Adamson, President and Chief Operating Officer, Mark Mey, Executive Vice President and Chief Financial Officer, and Roddie Mackenzie Executive Vice President and Chief Commercial officer. During the course of this call Transocean management may make.
Certain forward looking statements regarding various matters related to our business and company that are not historical facts such statements are based upon current expectations and certain assumptions and therefore are subject to certain risks and uncertainties.
Many factors could cause actual results to differ materially please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results.
Also please note that the company undertakes no duty to update or revise forward looking statements.
Following Jeremy and Mark's prepared comments, we will conduct a question and answer session with our team. During this time to give more participants an opportunity to speak please limit yourself to one initial question and one follow up. Thank you very much I'll now turn the call over to Jeremy.
Thank you Jill and welcome to our employees customers investors and analysts participating in today's call.
As all of you are acutely aware the past seven years have been unbelievably challenging for our industry and with the global spread of multiple variants of the COVID-19 virus. The past couple of years have exacerbated the challenges and introduce complexities and uncertainties never before experienced in offshore drilling.
Through it all due to the resilience commitment and expertise of the Transocean team. We've delivered the same consistent high level of service that our customers have grown to expect from us by proactively adapting to unique circumstances of each customer project and operating jurisdiction.
We've also been able to accomplish extraordinary results in the face of a dynamic of dynamic environments by taking the necessary actions to ensure the safety of our employees and all parties aboard our rigs who helped to generate our superior operational results.
Although the pandemic has presented unique challenges we did what we have always done and we'll continue to do great technical and logistical solutions that enable our customers to execute their drilling campaigns as efficiently as possible and.
In fact in 2021, we surpassed both our internal and our customers' expectations as we generated the highest uptime performance in the history of Transocean and earned a record number of customer bonuses due to outstanding operating performance.
As reported in yesterday's earnings release for the fourth quarter, we delivered adjusted EBITDA of $250 million on $671 million and adjusted revenue.
The strong operating performance was driven by our team of experienced professionals and resulted in a fleet wide revenue efficiency of over 94, 5% for the quarter and 97% for the year, our highest annual revenue efficiency rate in transactions history.
Our record setting annual revenue efficiency is even more impressive considering the specific operational challenge we faced last quarter that resulted in unplanned downtime for the deepwater Pontus and the U S Gulf of Mexico.
I am pleased to report that there were no injuries and the rig is once again operational.
Despite this event, we still delivered fleet uptime above 97% and generated $185 million in operating cash flow in the fourth quarter.
Now turning to the fleet.
Starting in the U S Gulf of Mexico, I am pleased to announce Chevron added one well with the deepwater Conqueror at a rate of $335000 per day immediately following completion of the current program.
With nearly six years of continuous service with Chevron. The rig is now anticipated to remain on contract through December 2022.
Also in the Gulf the discoverer inspiration and secured one firm well plus two option wells within the.
The firm term carries a rate of $290000 per day with the two option wells that escalating rates of 300003 hundred $10000 per day.
The firm work is in direct continuation of the inspirations current contract with Hess and it is expected to take the rig through September .
If both options are exercised the inspiration will be fully booked through the end of the year.
Remaining in the Gulf the deepwater Invictus secured a one well extension with BHP at an increased day rate of $305000 per day.
The additional well keep the rig busy through September 2022, and continuing several years of continuous service for BHP.
Rounding out the Gulf of Mexico, the deepwater Asgard has been awarded a two well contract at a rate of $395000 per day, excluding any integrated services.
The campaign is planned to commence immediately following current operations.
As one of seven seventh generation premium $2 8 million pound hook load drillships in our fleet the Asgard affords our customers maximum flexibility for their well programs.
Heading south to Trinidad the development Driller III completed a successful campaign with BHP in December .
Given the strong and well deserved reputation of the rig we are in advanced discussions on multiple opportunities for work commencing in the next few months.
Moving down to Brazil in December Petrobras recognized transaction with a 2020 best supplier award for operation of drilling rigs.
While this award reflects performance for calendar year 2020, we continued providing Petrobras with excellent service throughout 2021 and into 2022.
We are proud of the hard work and dedication of our crews on the Petrobras 10000, deepwater mykonos and deepwater corcovado displayed over the last two years in Brazil.
Over in Norway, We added a one well extension to the Transocean Spitsbergen campaign at a rate of $305000 per day that occupies the rig through September 2022.
The agreement also contains provisions for additional work at escalating rates through 2023, according to the government in the period.
And finally in the UK, the Paul B Loyd secured a one well contract with U K independent Zurich energy at a day rate of $160000 per day commencing this summer.
As we look toward our upcoming opportunities for 2022, we're encouraged by the market and industry trends, we observed a developing throughout the past year.
Oil prices, while volatile remain highly supportive of steadily increasing the onshore activity defying uncertainties brought by new Covid variance.
Indeed, now in the $90 per barrel range prices remain substantially above most offshore field breakeven.
Numerous factors have contributed to the rising commodity prices prices cheaply. The industry is separate from structural Underinvestment in reserve replacement a metric that affects future production capabilities at capital that would have been allocated to traditional sources of energy is increasingly being returned to shareholders through dividends or share repurchases are directed to green energy initiatives such as wind.
Solar.
According to the International Energy Forum global oil and gas discoveries fell to a 75 year low in 2021 as upstream investment declined a staggering 23% from pre pandemic levels.
Additionally, recent energy consumption levels have proven resilient as vaccines became more readily available and various restrictions continue to be eased.
Oil demand bounce back in 2021 and is expected to exceed pre pandemic high this year at greater than 100 million barrels per day.
Finally, OPEC plus production discipline last year kept supply in check as the group committed to stay with its gradual production plan. Despite pressures from large consumers like the United States for further increases.
Further there is growing uncertainty and evidence of OPEC plus ability to even meet production levels.
While oil balances and prices are displayed some volatility due to the market's concerns about demand and inflation. The majority of indicators point toward a sizeable bullish inventory imbalance in the next 12 to 24 months.
In January many analysts revise their oil price forecast up from prior projections for later this year and next.
We're now seeing a growing number of projections ranging from around $90 per barrel, which we've already achieved more than $100 per barrel between now and the third quarter.
The positive outlook for energy markets is also becoming clear for offshore drilling, particularly in the regions in which we have concentrated our fleet.
From January 2021 January 2022, the number of floaters on contract globally increased to 114 rigs up from 98.
This trend should continue as industry analysts project global demand measured in rig years will increase approximately 6% per year on average through 2026.
We anticipate as demand continues to strengthen the upward trajectory of day rates will accelerate as utilization has driven higher.
To that point active utilization for sixth and seventh Gen. Drillships has surged to over 90% globally up from the low mid <unk> towards the latter half of last year.
Many of these high specification assets are concentrated in the U S. Gulf of Mexico, where we continue to see the most significant growth in day rate trajectory.
Throughout 2021, we observed a pronounced increase in day rates of the ultra deepwater fleet with rates in the Gulf climbing from a low 200, thousands to well over $300000 per day.
Historically, the Gulf of Mexico has served as a barometer for the offshore deepwater drilling industry and we're excited to see the healthy progression of day rates.
We are also observing a considerable uptick in direct negotiations to secure ready to work assets in the region.
With the majority of the active fleet contracted through the better part of 2022, we anticipate supply will remain tight.
Several rigs are planned to enter the region over the next year, including our two new builds the deepwater Atlas in the deepwater Titan. However, these floaters will arrive already contracted for various programs.
Looking at other markets, Brazil accounted for approximately 34% of floater awards in 2021 absorbing the majority of the active fleet in the region.
Sequentially floaters from other areas, we will be required to meet additional demand, which should remain strong over the next several years as the number of project approvals is expected to double in 2022 from 2021 levels and remain generally robust through 2026.
In addition to the many Petrobras prospect on the horizon medium to long term opportunities with <unk> and other indices, including Ecuador shell Petronas and total energies are expected to commence in 2023.
Given our experience and operational track record in Brazil, We believe we are very well positioned for these incremental opportunities.
In West Africa, while regional demand and utilization levels continue to lag the U S. Gulf in Brazil, we remain encouraged by the number of opportunities surfacing in the area.
Floater demand is anticipated to be between 12, and 15 rig years annually through 2025 with a substantial portion of the demand driven by Angola and Ghana.
If this demand materializes, we will expect the number of rig years required for opportunities in the region will reach pre pandemic levels later this year.
In Norway, the Norwegian Petroleum Directorate recently confirm that 2021 was a record breaking year for the country with the highest oil and gas revenues in history, driven by a combination of higher production of oil and gas robust demand and strong commodity prices.
The MPD anticipate production in Norway, We will continue to increase over the next two years with new discoveries and field development projects coming online.
This outlook matches broader expectations for stronger Norwegian market from 2023 as a record level of sanctioning is expected by year end due to the expiring tax incentives.
In fact, one projections estimate a 255% increase in project sanctioning on the Norwegian Continental shelf from 2021 to 2022.
In summary, we are very excited for a stronger 2022, and our outlook remains as positive as it did when we spoke at the end of the third quarter. In fact, our outlook has been further reinforced by recent fixture trends in various indicators, including customer conversations industry analyst reports and market projections for commodity supply demand balances.
We're also encouraged by the additional consolidation of our competitors, including the planned merger of Maersk and noble announced in November and the ongoing restructuring of the <unk> group we.
We anticipate these transactions will further enhance the overall health of the industry.
As our recent fixture suggests customers value the access assets expertise and consistency of performance that transition provides.
In the context of a steadily rising market, we will continue to manage our portfolio of rigs prudently to obtain the optimal combination of rate and term. This also applies to potential reactivation as the market demands.
If the market ultimately supports reactivation, it's important to note that Transocean currently has 13 sixth and seventh Gen stack.
Or idle rigs. Therefore, we are best positioned to capitalize on the uptick in demand.
We will evaluate these opportunities on a case by case basis, ensuring that the financial return results and value creation for all stakeholders.
As day rates increase the substantial cash generating capability of our fleet will contribute meaningfully to the strengthening of our balance sheet and as we have consistently demonstrated our team will also execute deleveraging and liquidity enhancing actions when appropriate ensuring we conduct transactions in the right way.
The recent court of appeals dismissal of a challenge to our successful exchange transactions. In 2020 is a clear example that underscores our ability to effectively implement sound strategies in the best interest of the company and our shareholders.
We will continue making prudent use of our capital and other options available to best position the company moving forward.
In conclusion, it is increasingly clear that the strategic rationalization of our fleet over the past seven years has created a competitive advantage for transocean.
When combined with our experienced crews crews and shore based support teams, we remain the logical choice for our customers' most challenging environments and we are proud to have positioned ourselves as the clear leader in ultra deepwater and harsh environment drilling.
Our industry, leading $6 5 billion backlog provides us with the visibility to future cash flows to continue to invest in our people the maintenance of our assets and new technologies, which we continue to deploy across our fleet.
And with all signs pointing toward a continually improving market characterized by the increasing scarcity of the most capable rigs and related increases in day rates. We are growing increasingly confident that the recovery will progress as anticipated.
We expect increasing utilization of our fleet and we'll continue to execute on our strategic priorities to further strengthen our position as the industry leader in offshore drilling.
Mark.
Thank you Jeremy and good day to all.
During today's call I will briefly recap our fourth quarter results.
Then provide guidance for the first quarter as well as an update of our expectations for the full year 2022.
Lastly, I'll provide an update on our liquidity focus through the first half of 2023.
As reported in our press release, which includes additional detail on our results for the fourth quarter of 2021.
We reported net loss attributable to controlling interest of $260 million or <unk> 40 per diluted share.
After certain adjustments as stated in yesterday's press release, we reported adjusted net loss of $126 million.
Highlights for the fourth quarter and crude.
Adjusted EBITDA of $250 million.
<unk> generally good performance despite the unexpected downtime on the <unk>.
Cash flow generated from operating activities during the fourth quarter was approximately $185 million.
$141 million and the <unk>.
This quarter.
Largely due to the timing of interest payments and reduced income tax payments free cash flow generated during the fourth quarter was $114 million.
Looking closer at our results during the fourth quarter, we delivered adjusted contract drilling revenues of 671 million.
And every day rate of $352000.
This is consistent with our guidance and reflects strong group generation across the fleet Roxanne John time for an operational event previously discussed.
Operating and maintenance experience for the fourth quarter was $430 million.
This is above our guidance, primarily due to the identification of certain excess materials and supplies that resulted in a $28 million non cash charge in the period.
Turning to cash flow and balance sheet, we ended the fourth quarter with total liquidity of approximately $2 $7 million.
Including unrestricted cash and cash equivalents of approximately $175 million.
Approximately $370 million of restricted.
Restricted cash for debt service and $1 $3 billion from our Undrawn revolving credit facility.
Let me now provide an update on our expectations for the first quarter and full year financial performance.
Before we get to the guidance, let me address the omni prism inflation concerns we.
We have seen pressure on cost as follows.
Both offshore and onshore labor costs have increased as a result of our annual collective bargaining negotiations.
In non unionized countries, we've provided compensation increases for the first time since the downtime downturn started in 2014.
The cost of materials and supplies are also increasing but manageable rates logistics costs in the country.
Lower in 2022 than we experienced in the second and third quarter of 2021.
Most importantly, our long term contracts provide us with the opportunity to recover most of these costs from our customers and with new contracts with day rates, rising, which would offset the inflationary impacts.
And finally increased costs are included in our focus blood.
For the first quarter of 2022 rigs peak adjusted contract drilling revenue of approximately $600 million based upon an average fleet wide revenue efficiency of 96, 5%.
This is lower than the fourth quarter of 2021, largely due to the day rate decrease from the deepwater skyros and deepwater Conqueror rolling off their legacy hydrogel rig contracts, coupled with low activity on that.
Development Driller III, the Nautilus <unk> junior in the first quarter of 2022.
There is some offset from increased activity on the Transocean Barents, Transocean Norge and discoverer inspiration.
For the full year, we are anticipating adjusted revenue to be approximately $2 $7 billion also based on $96 five revenue efficiency.
We expect the first quarter O&M experience to be approximately $425 million.
The slight quarter over quarter decrease is attributable to the noncash.
Materials and supplies charge taken in the fourth quarter, partially offset by increased activity on the Barents Norbert and exploration.
<unk> in the first quarter.
For the full year, we're anticipating O&M expense to be approximately $1 $7 billion.
We expect G&A expense for the first quarter to be approximately $44 million and ranging between $175 million to $180 million for the full year.
Net interest expense for the first quarter is forecasted to be approximately $104 million.
This includes capitalized interest of approximately $15 million.
For the full year, we anticipate net interest expense of approximately $402 million, including capitalized interest of approximately $71 million.
Capital expenditures, including capitalized interest for the first quarter or forecasted to be approximately $121 million. This includes approximately $92 million for our newbuild drillships under construction and $30 million.
This capex.
Cash taxes are expected to be approximately $9 million for the first quarter and approximately $30 million for the year.
Our expected liquidity on June 23, 2023, including our current $3 billion revolver that matures on that date is forecast to be between one four and $1 $6 billion, including restricted cash of approximately $275 million shipyard financing for our first eight generation Joseph.
Deepwater Atlas.
And anticipated secured financing of our second generation drillship deepwater attraction.
This liquidity forecast includes an estimated 2022 capex of $1 $3 billion in the first half of 2023, capex expectation of $130 million.
The 222, Capex includes $1 $2 billion related to our new builds and $100 million for maintenance Capex.
With rig supply and demand currently well balanced we anticipate beginning to retrofit costs like rig soon as always we will be disciplined when assessing these opportunities to ensure that all costs are supported by the duration and day rates associated with any new drilling contracts.
In conclusion this.
Pursuant to the safe reliable and efficient operation of our rigs.
We will maintain our focus on optimizing cash flow generation through both revenue enhancement as the market continues to improve and cost control initiatives.
As we demonstrated in 2021 through various liability management transactions.
Strengthening our balance sheet and improving liquidity remains a priority.
We will continue to monitor and pursue opportunities to delever and extend our liquidity runway through a variety of actions using all appropriate tools available in the market.
This concludes my prepared comments I will now turn the call back over to Kyle.
Thanks, Mark Cynthia we're now ready to take questions and as a reminder, participants limit yourself to one initial question and one follow up question.
Thank you.
If you would like to ask a question. Please signal by pressing star one on your telephone keypad. If you are using a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions.
We will take our first question from Thomas Jonsson with Morgan Stanley .
Please go ahead.
Hey, good morning, congrats on the strong quarter everyone.
Just to.
To start off here on the heart side of things.
The last couple of quarters, you guys had highlighted the UK as a potential area of strength kind of moving through 2022.
Could you guys just kind of give us.
Maybe an update on your outlook for Norway.
Versus the U K and maybe how that outlook has changed over the last few months.
Yeah, Hey this.
This is ronnie.
I think what I would take you through on that for the UK. What we're seeing now is that things are beginning to pay off you have to remember that the UK is activity level dropped down to very very low levels. So everything from here it looks like.
Good growth so what we're expecting to see is.
There's more demand coming on by the end of 'twenty, two and into 'twenty three.
On the supply chain issues of having <unk>.
Limited availability to wellhead equipment and that kind of stuff has delayed that a little bit, but certainly now we're seeing a lot more tenders as Jeremy and ice there we got.
At close the contract for the Paul B Loyd, and we're working on several follow on bits of work. There. So we're feeling pretty good about that and certainly also the PNA and decommissioning work.
Being pushed through in the U K should see.
Market uptick in activity in 'twenty three.
In terms of Norway.
We continue to see a similar level of activity.
We have to remember that in Norway. It was the first place to see the recovery so to speak so our uptick in activity over the past couple of years has been particularly good.
And what we're seeing now is.
Because of the tax scheme, that's been put in place in the PD ones that are expected to get approvals this year.
He is going to be booming in the second half of 'twenty three 'twenty four.
And in fact, most projections show that we will be at 100% utilization of all assets at that point. So it remains to be seen in all of those <unk> are approved but certainly the outlook for Norway looks particularly strong.
And again <unk>.
Delivered by the macro there is fantastic across the world at the moment, but also the tax schemes that we put in place by various jurisdictions. So.
We really think harsh environment has a very positive outlook.
For 'twenty three 'twenty four.
Great. Thank you and then maybe just shifting to the benign side of things.
Day rate.
Recent Derek you guys have shown in the Gulf of Mexico has been really strong.
You've seen kind of operators there start to market those projects.
As advantageous from just a carbon footprint per barrel basis in the past you guys had spoken about some of the technology that <unk> implemented across the fleet kind of limit emissions and increase efficiencies.
Could you guys just give us an update and kind of how you're seeing emission and kind of different carbon reduction.
Gold kind of start to make their way into tenders.
Yes, So I think we would probably all agree that the pace of the recovery that we've seen.
And the drillship side of things has probably exceeded everybody's expectations.
Which is great.
When we see that really high level of utilization.
Above 90%.
Real high spec rigs.
Essentially 100% utilization at the moment.
The question in terms of the things as you say like emissions. So.
It is true that.
It's widely touted that Gulf of Mexico provides a particularly efficient carbon footprint per barrel.
And that's one of the reasons that occur.
Our customers invest in that particular basin, but also because the break evens are particularly good in the size of the developments are profound so.
Very constructive business environment in the U S Gulf.
In terms of that specific technologies as you will have heard us say vail.
<unk> conferences and what have you we do have several initiatives around reducing carbon footprint as far as you, possibly can doing so in a safe manner. So not throwing caution to the wind certainly exploring all ways that we can reduce fuel consumption and also produce.
Lower emissions per.
Liter fuel consumed so we do have several initiatives that we have everything from fuel additives to how we manage our power plants, but.
We kind of engage with customers on an individual basis on those kind of things the reason being that.
A lot of them involve capital investment may involve upgrades so.
It's certainly something that benefits everybody, but.
From our point of view, we are looking for a partnership on that investment before we push forward.
Whole scale on that simply because that.
The investment has.
As a return period on it that we need to see reasonably long contracts to justify that kind of upgrade but is the hot topic just know for sure.
Many of the operators they engage with us regularly on that.
And we've got several more initiatives that youll see come out over the coming years.
Thanks.
I'll leave it there.
As a reminder, if you would like to ask a question. Please press star one.
We will take our next question question from Karl Blunden with Goldman Sachs. Please go ahead.
Good morning, Thanks, very much for the time.
You made some comments about our very strong outlook for 2023 and second half of 'twenty three 'twenty four in Norway.
Interested in any color you can provide on how you see contract rates and also length evolving through the first half of 'twenty three.
And the reason I asked that is you do have some bonds that are coming due in 'twenty. Three 'twenty four that are currently backed by contracts and I'm trying to figure out what the what the right base case assumption should be in terms of how you refinance or address those could that be done.
Backed by contracts again.
Other approach more feasible.
I'll answer the market part of the question and then I'll kick it over to Mark for the financing piece of it and in terms of the market. So theres already a couple of tenders out there that are looking at much longer term. So it is true that.
As the harsh environment has recovered over the past couple of years.
There's kind of a mix between.
Longer term contracts and some shorter term contracts so.
As I mentioned before that tax incentive is really.
<unk> kicks in place this year, so youll see the follow on activity in 'twenty and into 'twenty four for that one but yes.
Yes, I think overall that market looks.
Quite well balanced at the moment and certainly looks to be very very strong when you get into the 2003 to 2004 timeframe.
Yes. This is mark so as you know each of the Cat D rigs there for three year options. So clearly if those get exercised.
Ability or the intention to go out and.
<unk> the balloon payments over both periods would be probably number one however, we have other options as well and if you look at our five year plan, we actually anticipate paying off debt as balloons not refinancing them. So anything that we do with regard to refinancing against contract backlog will be a benefit to our liquidity forecast.
But as I said, we have several things we're working on I don't want to get into that right now, but just watch the space.
Fantastic. Thanks, Mark maybe just one quick follow up on liquidity.
Oliver you mentioned is due in the middle of next year.
Is the right timeframe for addressing that.
Some folks who think sooner rather than later, but with the macro improving.
Does that affect the right timing for four looking to extend that.
Yes, Carl I think you got it spot on we have been talking about the macro improving now for a few years.
Timing couldnt be better so.
Clearly, we're waiting to see a few more fixtures with posted to ensure that all markets, including the bankruptcy that the market is improving but you can expect us to start this process in the next few months.
Hopefully.
Treated by you or by the end of the year.
Thanks very much.
Once again, if you would like to ask a question at this time. Please press star one we'll pause for just a moment.
Again star one for questions and we will go next to Samantha Hoh with Evercore ISI. Please go ahead.
Hey, guys. Thanks for taking my question.
Jeremy Thank you.
Last call that you're being approached by customers to revisit the business model maybe figure out different.
Different partnerships.
The downturn in upturn and clearly we're in a luxury now in workday.
Fixtures that you posted I'm just kind of curious.
Those dialogues are going in.
If you could actually share what type of arrangements.
Scott.
Yes, I'll hand that one to writing because he is engaged in those conversations daily but thanks for the questions Matt.
Yes.
As things improve as you might imagine.
The discussion changes is no longer boat.
Trying to find a spot for the rigs and whether we'll be able to keep them busy discussion for the future. It is now about.
What the economics look like so.
We are heavily engaged in discussions around value proposition. So that's not just the day rate so yes, you've seen.
A really big increase in Dayrates comparatively speaking over the past 12 months, but we also see.
A lot more kind of value discussions around how his compensation linked to performance. So we've done.
Fantastic Jobber heart health <unk> killer and the operations team for <unk>.
Delivering first class performance.
Not only results in really good revenue efficiency, but also our bonus capture opportunity so.
We are in the tens of millions of bonus capture per year. So.
That's something we probably we'd never have said in years past, but.
I do remember the debate some years ago.
<unk>.
Really embracing that I think transmission embraced at wholesale.
We have a number of contracts that we've done, particularly well in that so there's definitely that performance linked.
Compensation element in addition to that in terms of like long term partnerships and we do have partnerships with several of the of the operators that that last for many years by budget contracts, but we're in constant dialogue with them on how to.
Essentially enhance our service delivery how to meet more of their goals.
Similar to the previous questions around ESG initiatives and reduce carbon footprint.
And the discussions take place part and parcel with performance with long term contracts.
Investment in the rigs.
I will just add to that cement that it's not just about the rates.
Or the structure of the economic structure, it's really around rig availability or cut now recognize that the availability of active high specification assets is rare and <unk>.
Supply is tight and the cost not only the cost but at the time to reactivate a rig or bring out a newbuild because of the supply chain challenges, we're facing around the world due to Covid is really a problem for them itself. So the partnerships are both around what is the business model look like going forward and how do I get access to the best rigs that are currently available.
Hot.
Yes.
Some of the sort of.
<unk> technologies.
Operators are looking for now the conversation is actually reactivate a rig.
And I think for example.
Managed pressure drilling is kind of the same line where that rig tenders, but beyond.
Michelle.
If not what other sort of.
Sure.
Yes.
Great. Thanks, Dave.
Yes, so we are other than the ones that you mentioned.
We are heavily engaged in performance related technologies. So.
For example, ADP, but.
Also Baltimore drilling automation.
If you are an avid follower of a Linkedin page you would've seen we just posted the robotic horizon bolting system, which is the first robots to be brought to drill floor.
A very interesting technology, because it provides a far safer drill floor operation relatively speaking to the traditional means but also provides time savings.
The benefit to the customers well program so.
Yes, we have a we have a list of these things we probably have about 10 key technologies that were currently.
Discussing with customers, we kind of have a.
A package of them.
Presentation of all these different techs that we that we take to the various drilling departments around the world, but the uptake was slower during the downturn, but we've seen a marked increase in the number of technologies that are being deployed on the rigs and the pilots that are kicking off so we're pretty encouraged to see that customers are.
Now finally getting into that kind of investment.
I think the key for us.
Theres been on technologies that can improve safety reliability uptime and efficiency both drilling efficiency.
And improving our environmental footprint and so those have been the technologies, we continue to invest and despite the downturn and I'm proud that we have and we've continued to develop those and even deploy some and now we're getting at this stage with the customers actually willing to pay for it and so that's the that's the encouraging piece and so if we can get the customers to actually pay for these technologies when they see the value in them then.
We can deploy more quickly.
Now it's been a very measured deployment, just because of a lack of capital.
Wonderful Thanks, guys I will definitely take a look ahead.
Okay.
Okay.
We will take our next question from Erinn Rosenthal with Jpmorgan. Please go ahead.
Hey, good morning, Thanks for taking my question.
Just wanted to follow up on the liquidity number detailed earlier I think I heard about $1 billion in June 2023.
Yes, that's correct just kind of wanted to verify at prior year end points either in the green.
<unk> weapons.
Branch.
From that figure.
Danny interim six months or one five times.
Thank you.
Yes, sorry.
Very global I cannot tell you I think you asked the liquidity in mid 2023.
Range I gave was one four to $1 6 billion, including a $1 $3 billion revolving credit facility, which matures on that date.
So, yes, sorry, yet you weren't able to hear me.
The one four to $1 60 in June of 2022 or 2023.
23.
Okay, and then the prior year and 2022.
Liquidity figure of between $1 $82 billion is that still in place.
Yes, it is and obviously the reason why we give you.
Specific data in 'twenty, three because thats the day that the revolver matures, obviously prior to that time, we will either replace it or extended it. So we'll have a better number for you one fed exercise is complete.
Yes, understood there and then I guess.
From year end 2002 to call it June of 2023.
At the midpoint, that's about 400 or so million of.
Liquidity falling can you just kind of elaborate on the bridge. There I guess you kind of laid out an initial capex number, but if you could just give us some incremental color would be appreciated.
Yes, the vast majority of that is debt repayments.
If you recall the previous question where.
We have one of the <unk> bonds maturing in that time period, So we're paying it off.
During the first several months.
Okay perfect. Thank you very much and then just one more I guess on the on the <unk> Guide.
I guess can you just elaborate further on the moving pieces there with respect to I guess downtime.
Perhaps on the Gulf of Mexico.
As well as some of you guided opex figures.
Are you asking about Q1 of 2022.
Yes, Sir.
So the biggest change there is the <unk>.
Fact that we've had two of our high day rate rigs, which were long term contracts with <unk>.
The Conqueror roll off to lower day rate contracts, that's about $13 million. You also have two less days in the first quarter because of February 28 days. So that's another $12 million and we're also forecasting.
Less reimbursable <unk> for the first quarter versus the fourth quarter, and that's about $7 million, but as you know that can fluctuate based upon what we.
We get asked to Pi for customers during the quarter, but those are the three components that drive the difference.
Perfect. Thank you.
Thank you.
This will conclude today's question and answer session I would now like to turn the call back over to Cal Gillingham for any additional or closing remarks.
Thank you Cynthia and thank you everyone for your participation on today's call. We look forward to talking with you again, when we report our first quarter 2022 results have a good day.
This concludes today's call. Thank you for your participation you may now disconnect.
Yes.
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