Q2 2023 Eneti Inc Earnings Call

Thank you for joining us today welcome to the <unk>, Inc. Second quarter 2023 earnings conference call on the call with me are manually Laura Chief Executive Officer, Robert Bugbee, President Cameron Mackey, Chief operating officer.

Hugh Baker, Chief Financial Officer, Sebastian Bray CEO .

Jack.

Today, we issued our second quarter earnings press release, which is available on our website at <unk> Dot com.

Information discussed on this call is based on information as of today August eight 2023 and may contain forward looking statements that involve risk and uncertainty.

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

A discussion of these risks and uncertainties you should review the forward looking statement disclosure in the earnings press release issued today as well as in any angst SEC filings, which are available at <unk> Dot com.

Dot Gov called.

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 archive of the webcast will be made available on the Investor Relations page of our website for approximately 14 days, while we might not be going through slides. There is an earnings presentation on our website under the Investor Relations page.

Reports and presentations.

After opening remarks, we will go to Q&A now I'd like to introduce our Chief Executive Officer Emmanuel anymore.

Thank you James and welcome and thank you everybody for joining us today.

In the second quarter, the company generated close to $59 million of revenue.

Adjusted net income of $8 million, a district presents a strong improvement from the first quarter.

During this quarter one slide that shows we're on.

On employment contracts.

Today, we announced the <unk> deposit.

Deposits are adopted.

For a price of $17 million.

Which we have previously identified.

Core and discussed the fact that we were marketing them.

<unk>.

Let's say defense enforces our commitment to focusing on wind turbine and foundation installation in it.

Addition, create liquidity and we expect cash proceeds of 67 million.

Oscar debt prepayments.

In June , but importantly, we've entered into a business combination agreement with cabin there as we've previously announced.

The combination remains subject to regulatory approval this transaction remains on schedule.

To close during the fourth quarter of this year.

We believe the combination.

For all stakeholders for our shareholders customers.

As we previously discussed also to our employees.

As a combined entity the scale in our respective capabilities will create significant value.

At this time, we're not sure we need reliable partners and reliable solutions, which we think we would be able to offer.

The track record of <unk> has been doing.

The time is that for about for sure.

Professionals and we're delighted that caldolor shares the same doctors.

The combination is a testament to our shared vision for the future of offshore wind.

And I went unwavering commitment to creating value.

Management, all the nephew remains one of the largest shuttle bus as a combined entity and I wouldn't be nominated to serve as vice chairman.

We're confident this combined entity will continue to drive outcomes for our shareholders customers and employees and we're excited about the future together.

Thanks, very much for your continued support and look forward to updating you on the progress on further progress in the upcoming quarters.

I'd like now to turn to pull to change crews.

Thank you Emmanuel.

We will now go to Q&A.

We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing a key to withdraw from the question queue. Please press Star then two.

My first question is from Sharif, Oh, My God Grubby, a P. T. I G. Please go ahead.

Yeah.

Hey, good morning, Thanks for taking my questions. So I think maybe just starting pretty broadly pretty much every other W. D. I V. Operator has a smaller fleet than that year Cadillac and many of them are not W. I D focused anyway. So could this combination sparked further consolidation in the industry and is that something that.

You guys are thinking about at this time.

I'll take a huge amount of wind that thanks for the question I'll take the second question first.

At this time I don't think that our.

Antibody and probably a little of Nike He's thinking about further consolidation we're focused on the process, which we are facing.

And looking at closing this transaction.

The day after the transaction is closed.

Oh, Oh Oh.

Old doors will be open and we'll see what what age.

We talked about opportunity in these markets may put in front of all the capital.

Having said that they seem to be mature for what else do you think about it at this stage. We are a couple of months away from closing a meaningful transaction and this is what we're focusing on.

Okay and peace of mind, we actually want the first parts of the question was because I missed there.

Or is it pretty much the same but for the industry more broadly just because everybody else has a smaller fleet than natty ORC Adler.

I'm not sure Sebastian do you have any.

Using this.

I don't have any.

Pacific views them other than obviously, it's a big growing industry.

I think having scale is very important so so at some point that that may prompt.

Activity again, not from the cabinet side at all from that.

Oh from our competitors.

Okay, and and I'm interested in and how the validation installation vessels I'm sorry go ahead.

I was just gonna, it's Robin I'll, just I'm going to say look I think that's the most important part of it is that what you're what you're pointing out is that okay.

Combined hadn't ever Nike is tremendous.

Advanced.

Oh.

Relative to the competitive industry and I think that's gonna so benefits for customers as well as an operation.

Yeah.

Okay, Thanks, Robert and and all the foundation installation vessels I'm curious how do they figure into the W. T. I V fleet are they typically chartered in sort of kind of a package deal with W. T. I vs or does their work tend to be exclusive them and to make it a two parter does the combination of any bear.

Being on your foundation installation JV with Transocean.

Okay.

Okay.

I think from the foundation stone going because we know.

The combined company would have exposure to foundation because cabinet adds to all food states can you be big outfits that they're coming in that domain focusing more on the foundation stays as strong as they make these concerns we can go up there.

Still talking about today foundations are possible or would you be things are capable of installing foundations. However, they are not that's not the focus.

At least for the time being is not you know, but you know of course at this stage with.

With the transaction with <unk>.

Progressing.

We are not looking at expanding our assortment of new Standalone.

Standalone Company B B Foundation exposure, we would be looking at.

Putting all our energy and our commitment into into the combined company post closing, which as we discussed we expect by.

By the end of this year.

Okay. Thank you thanks for taking my questions.

Sure.

The next question is from Liam Burke of B Riley FBR. Please go ahead. Thank you.

Looking at your larger vessels.

Pretty much booked are done for for for fiscal 'twenty three.

Have there been any discussions for charter, particularly those erickson for 2024.

I'm sorry, this is sebastian.

Hi, Sebastian.

Hi, there.

Yes.

There are discussions with Zara kind of James can you just.

There was a press release made around that can you just confirm that.

Yes, we've signed a reservation agreement for this area 10 for next year when it comes to the larger vessels.

Okay.

It's probably just on the on the on the Saar Times. He said is there is as James had reservation agreement for next year, but you got to semi.

We haven't made an announcement about that but we are in a lot of.

In dialogue about multiple contracts for next year and it's I'll just highlight the fact that there is very very limited availability of vessels. So I see that more more more of an opportunity rather than anything else. It's very very tight market next year.

It is one of the largest vessels from the waters are well placed to benefit from these dynamics great.

Great and I guess just for James on the macro front, there's some rumblings that ESG is losing a little shall we say interest in Europe .

Does that I mean have you seen anything where you would want to focus more on southeast Asia or do you see opportunities in the European market still.

Well I think from an ESG perspective, what what we've done is disposed of the noncore assets, which as you know we're working in offshore wind, but also oil and gas and so as we complete that sale all our vessels in the fleet for that he will be operating in offshore Landon as Emmanuel highlighted focusing on foundation.

By an escalation so we would fare very well from an ESG perspective.

Thanks Bastian Thanks James.

The next question is from Ben Nolan of Stifel. Please go ahead.

Hey, guys.

I guess my my first question are really my only question is around the sale of the G 25 hundreds.

You know you guys have been talking about that for a while although.

There have also been pretty successful in winning incremental business and those had been pretty cash flow generator.

Hum.

The sales price of a little bit lower than I had thought.

It was curious yeah, you know what what the thinking was on deciding to pull the trigger.

For selling those assets or is it part of the cattle are deal or.

Just maybe.

Walk me through how you were thinking about the math on a on that.

And then it's a good question. Thank you.

I think that the.

Part of the decision was made.

Widely discussed and it changes just restaurants default are focusing on.

<unk> side of the business and sort of leaving the legacy oil and gas exposure with these assets.

<unk> brought into the interplay there even though they were.

Contracted to do some.

The maintenance business on the.

Offshore wind space.

We've seen an uptick on demand on the oil services industry may be exploration, especially in the Arabian Gulf going on and the demand on the.

Well the demand for deployment in that space was coming mainly from there.

On the as far as the price is concerned there were a number of our buyers over the past month instead, they have showed in growth and even higher numbers than what we have been able to conclude the sale from the people with the numbers that what we estimate it.

<unk> been able to go through the same and it was difficult to gouge.

You know how many of you will be impressed with their work in a volatile market in a changing environment and where.

In a space, where we have decided not to be the focus on them. So we've taken the decision to pull the trigger.

With a buyer that we thought the most reliable.

Buyer out there that could have performed.

You know moving away from a standalone business in a combined company.

We thought it would be sort of legacy assets that actually could free up.

Also.

The crew are in order to get the crude focuses on that new buildings, which the combined company would take the Liberty yard in 2024. So there was a combination of doctors, which has contributed to the stopped all.

Put indicator at this time, we'd be spire.

Okay. That's helpful and then since.

Since I'm thinking about it just going back to when you talked about for the foundation vessels and <expletive> arrangement with Transocean mm is the thinking that that would continue even even post combination that.

Is that the combined company would would still you know.

Probably be working in some way with Transocean.

We are going to have meetings regarding news in September lead Transocean and discuss O N E.

<unk> continued cooperations are what the policies would work going forward. So it is premature for me to Oh.

So this question at this stage because we haven't had that in detailed discussion, but we don't see them at the same table yet.

Okay makes sense.

I appreciate it and thanks for taking my question.

Sure. Thank you.

The next question is from Rod Hall.

Perfect then.

Clarksons Securities. Please go ahead.

Hi, Thanks for taking my question.

Just first to circle back to Ben's question on the Angi. Two 500. So can you give any more details on sort of the sales process. There were there any.

Wasn't sale are result of bilateral discussions are bidding around.

Any color on that would be helpful.

And as I said Gotta wear a number at all.

Buyers interested.

In acquiring the assets, we only entertain discussions with the outright buyers more buyers which were subject to.

Raising funds, both equity and debt in order to.

Therefore, the acquisition and all of those buyers that are worldwide, we've chosen to be specific one we changed.

<unk> expressed their desire to remain.

Private.

So we haven't disclosed either by region. However, I can tell you that people are very well established middle eastern buyer that means has decades of experience in the.

In this specific segment.

Okay. Thank you.

And then we have shown in multiple offshore wind projects being delayed or canceled.

Summer Ah so how do you see these delays and terminations potentially affecting the outlook on utilization.

So when I said rates over the next three to four years.

The Boston.

Yeah sure. So I think it's a growing industry I think that you know we had some.

The issues in the early days in Europe , I think we're all aware that the.

The timeline has been aggressive for a while we have been aware of that and that hasn't been possible to adapt to ever would've been possible to install.

<unk>.

The kind of design capacity as it well do it with a forecast of capacity to date or in the next couple of years I think that while it will create.

Headaches.

Frank just going back to Robert's point, I think if you're a part of the combined density does scale I don't think that that will have a meaningful impact on the company and and again from my point of view I actually look at it from a macro perspective, we're looking at a number of projects being delayed but every month or every couple of months with talking about a whole new markets being up.

Send up in South America bearish.

Areas in Asia more have you so I I see the overall the overall dynamics of the industry remaining very robust I think that the combined entity is going to be very well positioned to.

To weather any.

Small storms and like I said, it's kind of a long term prospect I think remain.

Healthy so I don't think that'll be a meaningful impact on utilization rates, we haven't seen it yet.

Okay I appreciate your perspective, thank you that was it for me.

Okay.

Thank you.

The next question is from Adam Foresight as long for research. Please go ahead.

Hi, there one one narrow question one rather wider question if I may firstly, the narrow one just again on the N G. Two five hundreds and the new contracts the timing of food is it likely that you will get the benefits of 100% of fee income on these contracts before the sale goes ahead or is it.

Possible sale will conclude early and if so is there any adjustment mechanism and the sale price and that's just the also going back to the earlier question on the sort of wider wind turbine installations situation with projects being canceled I wonder if what you're seeing is there any kind of competitive response from your competitors are decisions being delayed in terms of.

Oh decision, making on further new wind turbine installation vessels from for many of the competing group out there.

What are you seeing in that regard.

Okay.

Thanks for the question Tom do you want to take the first part.

Sure. Thank you Emmanuel the delivery of the 25 hundreds are under discussion.

And so we cannot say at the moment for sure when they will be delivered but we expect on the outside.

For it to be within this calendar year.

And again, just an adjustment mechanism if any has not been agreed at the moment.

Okay.

Yeah.

Thank you Sebastien, maybe you wanted to hold the second part of the question. Thank you.

Sure so.

All the competitors do we think that there's going to be a reduced likelihood.

You asked that's being built in.

In the future.

How does that is that the question gets approach yes.

Think I think it will I think that we said before that the barriers to entry are there have always been very high in this business for a variety of reasons I think that as you start bringing in.

More queries or questions such as delayed projects.

Okay.

Okay great.

Bachmann for an existing plant with me.

Again, I think the timing of the contract.

The combined entity is going to be actually very very well positioned leave us very well positioned.

Does that answer your question.

Yes, It does yes, no that helps.

Thanks very much.

Yeah.

This concludes our question and answer session I would like to turn the conference back over to Emmanuel a laurel for any closing remarks.

Thank you very much operator, we do not have any closing remarks about from thanking everybody for your time today forward to speaking on.

You in the future thanks, a lot and goodbye.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.