Q1 2024 Borr Drilling Ltd Earnings Call
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Yeah.
Operator: Good day, and thank you for standing by. Welcome to the Borr Drilling Limited first quarter 2024 results presentation webcast and conference call.
Yeah.
Speaker Change: Good day and thank you for standing by welcome to the ball drilling Ltd first quarter 'twenty 'twenty four results presentation webcast and conference call. At this time, all participants are in listen only mode.
Operator: At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 11 on your telephone keypad. You will then hear an automated message advising that your hand is raised. To withdraw a question, please press star 11 again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. Please be advised that this conference is being recorded. I would now like to hand the conference over to our first speaker today, Mr. Patrick Schorn, CEO. Please go ahead.
Speaker Change: After the speaker's presentation, there will be the question and answer session Jessica.
Speaker Change: To ask a question during this session you need to press Star one one on your telephone keypad, you wouldn't hear and automatic message advising your hand is waste.
Speaker Change: Do we draw a question. Please press star one again.
If you wish to ask a question via the webcast. Please use the Q&A box available on the webcast link any time during the conference.
Speaker Change: Please be advised that today's conference is being recorded.
Patrick Arnold Henk Schorn: Good morning, and thank you for participating in the Borr Drilling first quarter 2024 earnings goal. I'm Patrick Schorn, and with me here today are Bruno Morand, the Chief Commercial Officer, and Magnus Vaaler, the Chief Financial Officer. Next slide, please. First, I cover the required disclaimers. I would like to remind all participants that some of the statements will be forward-looking. These matters involve risk and uncertainties that could cause actual results to differ materially from those projected in these statements. I therefore refer you to our latest public filing. Next slide.
Speaker Change: I would now like to hand, the conference all the trucks first speaker today, Mr. Patrick Shouldnt feel please go ahead.
Speaker Change: Thank you.
Speaker Change: Good morning, and thank you for participating in the board drilling first quarter 'twenty 'twenty four earnings call.
Speaker Change: I'm, Patrick Schorn, and with me here today is Bruno Moron.
Speaker Change: Our chief commercial officer, and Magnus Pfahler.
Speaker Change: Chief Financial Officer.
Speaker Change: Next slide please.
Speaker Change: First covering the required disclaimer I would like to remind all participants that some of the statements will be forward looking these matters involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
Speaker Change: Therefore, we refer you to our latest public filings.
Speaker Change: Next slide.
Patrick Arnold Henk Schorn: The first quarter results have been strong, driven by solid operational performance, with technical utilisation coming in at 99% and economic utilisation at 98.6%. We currently operate a fleet of 22 rigs and have two new builds join the fleet later this year. The adjusted EBITDA margin increased this quarter to 47.2%, keeping us right on track to meet our annual plan. We finished the first quarter with all 22 delivered rigs operating. However, after the close of the quarter, one rig in Saudi Arabia has been suspended.
Speaker Change: The first quarter results have been strong driven by solid operational performance with technical utilization coming in at 99% and economic utilization at $98 six.
Speaker Change: We operate currently a fleet of 22 rigs and have two new bills joined the fleet later this year.
Speaker Change: The adjusted EBITDA margin increased this quarter to 47, 2% keeping us right on track to meet our annual plan.
Speaker Change: We finished the first quarter with all 22 delivered rigs operating however, after the close of the quarter one rig in Saudi Arabia has been suspended.
Patrick Arnold Henk Schorn: We expect this rig to be recontracted in a different region by the end of Q3 based on current customer discussions. On the contracting front, we continue to deliver strong results, securing $318 million in revenue backlog year to date, translating to an average day rate of approximately $183,000 per day. Notably, in the second quarter, we achieved our first ever contract exceeding $200,000 per day on a clean day rate basis. This milestone not only underscores the premium quality and operational excellence of our fleet, but it is a positive confirmation of our views of a well-balanced market despite the recent developments in Saudi Arabia.
Speaker Change: We expect this rig to be re contracted in a different region by the end of Q3 based on current customer discussions.
Speaker Change: On the contracting front, we continued to deliver strong results securing 318 million in revenue backlog year to date translating to an average day rate of approximately $183000 per day.
Speaker Change: Notably in the second quarter, we achieved our first ever contract exceeding $200000 per day on a clean day rate basis.
Speaker Change: This milestone not only underscores the premium quality and operational excellence of our fleet, but it is a positive confirmation of our views of a well balanced market. Despite the recent developments in Saudi Arabia.
Patrick Arnold Henk Schorn: Given the high utilization of our rigs and limited near-term availability, we expect that the new build rig Vaali, which is to be delivered from the shipyard by the end of 2024, will immediately join the operational fleet to cover the newly contracted work scope. On the back of the strong operational performance and the positive market outlook, the board has approved an increase in the quarterly dividend to 10 cents per share. This doubling of the dividend versus the previous quarter is in line with our stated ambition to gradually increase the dividend in line with our earnings projection. Lastly, we also reiterate our Full Year Adjusted EBITDA guidance for 2024 to be in the range of 500 to 550 million dollars. Magnus will now step you through the financial details of the first quarter.
Speaker Change: Given the high utilization of our rigs and limited near term availability.
Speaker Change: We expect that the new build rig Bali, which is to be delivered from the shipyard by the end of 2024 will immediately joined the operational fleet to cover the newly contracted work scope.
Speaker Change: On the back of the strong operational performance and a positive market outlook. The board has approved an increase of quarterly dividend to <unk> 10 per share.
Speaker Change: This doubling of the dividend versus the previous quarter is in line with our stated ambition of progressively increased the dividend in line with our earnings projections.
Speaker Change: Lastly, we also reiterate.
Speaker Change: Our full year adjusted EBITDA guidance.
Speaker Change: For 2024 to be in the range of $500 million to $550 million.
Speaker Change: Magnus will now step you through the financial details.
Unknown Executive: The first quarter.
Speaker Change: Yeah.
Magnus Vaaler: Q1 2024 results continue the sequential increases that we have experienced over the previous eight quarters with increases in revenue of 6% and adjusted EBITDA of 5% quarter on quarter. The Q1 2024 operating revenues were 234 million, an increase of 13.4 million compared to the fourth quarter. The increase is largely due to an increase in day rate revenues, primarily due to more operating days for the rigs GERD and HILT than in the previous. Rig operating and maintenance expenses increased by $5.5 million to $104 million, a natural increase resulting from the increase in the number of operating days.
Speaker Change: Thank you Patrick.
Unknown Executive: Q1, 2024 results continue the sequential increases that we have experienced over the previous eight quarters with increases in revenue of 6% and adjusted EBITDA of 5% quarter on quarter.
Unknown Executive: The Q1 2024 operating revenues were $234 million, an increase of $13 4 million compared to the fourth quarter.
Unknown Executive: The increase is largely due to an increase in direct revenues, primarily due to more operating days for the rates dirt sales than in the previous quarter.
Unknown Executive: Rig operating and maintenance expenses increased by $5 5 million to $104 million and that's really increase resulting from the increase in number of operating days.
Magnus Vaaler: Net income for Q1 2024 was $14.4 million, a decrease of $14 million for Q4. The decrease is mainly explained by positive one-offs in income tax expense in the fourth quarter of 2023 of approximately $25 million. The same did not occur in Q1 2020.
Unknown Executive: Net income for Q1, 2024 was $14 4 million a decrease of 48 million for Q4.
Unknown Executive: The decrease is mainly explained by positive one offs in income tax expense in the fourth quarter of 2023 of approximately $25 million.
Unknown Executive: The same did not occur in Q1 2020.
Magnus Vaaler: Adjusted EBITDA for the quarter was $116.8 million, an increase of $5.3 million or 5% compared to the previous quarter. Our free cash position at Endo Q1 was 282.7 million. In addition, we have the undrawn RCF facility of $150 million.
Unknown Executive: Adjusted EBITDA for the quarter was $116 8 million, an increase of $5 3 million or 5% compared to the previous quarter.
Unknown Executive: Our free cash position at the end of Q1 was $282 $7 million. In addition, we have the Undrawn <unk> facility of $160 million. So in total the company has approximately $432 million of available liquidity.
Bruno Morand: So in total, the company has approximately 432 million of available liquidity. The cash in the quarter increased by 180.2 million, and taking a closer look at the cash flows, we can see that the net cash provided by operating activities was 23.9 million, which includes 6.3 million of cash interest paid and 12.8 million of income tax. Cash provided by operating activities in the quarter was impacted by working capital build-up due to some late invoicing for certain contracts, including invoicing for a mobilization fee at the start of a contract, which led to an increase in accrued revenue.
Bruno Morand: Net cash used in investing activities was 18.7 million. This includes 15.2 million used in JACEP additions, consisting of activation costs incurred in 2023 but with cash payments this year, costs for special periodic service and fleet spares, in addition to 3.3 million used for new building additions for the activation costs of our two new buildings. Net cash provided by financing activities was 175.2 million, primarily as a result of the net proceeds of the issuance of additional senior secure notes due in 2028 of 208.3 million. It was offset by 23.8 million used for the payment of cash distributions to shareholders and 10.6 million used for the repurchase of our convertible bond. With this, I will pass the word to Bruno.
Unknown Executive: The cash in the quarter increased by $180 2 million and taking a close look at the cash flows we can see that the net cash provided by operating expense.
Unknown Executive: <unk> was $23 9 million, which includes $6 3 million of cash interest paid.
Unknown Executive: Yeah.
Unknown Executive: $12 8 million of income taxes paid.
Unknown Executive: Cash provided by operating activities in the quarter was impacted by working capital buildup due to some late invoicing for certain contracts, including invoicing for a mobilization fee at the start of a contract and that may lead to an increase in accrued revenues.
Unknown Executive: Net cash used in investing activities was $18 7 million.
Unknown Executive: It's $15 2 million used in jackup additions consisting of activation costs incurred in 2023, and we cash payments this year.
Unknown Executive: Our special periodic surveys and fleet spares. In addition to $3 3 million used for new building additions for activation costs or juniors.
Net cash provided by financing activities was 175 point.
Unknown Executive: 2 million, primarily as a result from the net proceeds of issuance of additional senior secured notes due in 2028.
Unknown Executive: $283 million.
Unknown Executive: This was offset by $23 8 million used for the payment of cash distributions to shareholders and $10 6 million used for the repurchase of our convertible bonds.
Speaker Change: With this I will pass the word over to Bruno.
Bruno Morand: Thanks Margaret.
Bruno Morand: 2024 has been a robust year for Borr Drilling on the commercial front. So far this year, we've secured 11 new commitments, adding over four years and $318 million in backlog at marketing bidding rates. As Patrick mentioned, this newly secured backlog includes our first contract with a clean day rate above $200,000 a day. This milestone confirms the positive data trend and strength of the market despite any concerns arising from the recently announced Aramco suspensions. Let me give you some context on some of these new fixtures.
Bruno: 2024 has been a robust year for board drilling on the commercial front so.
Bruno: So far this year, we've secured 11, new commitments, adding over four years and 318 million backlog at marketing billing rates.
Speaker Change: Patrick mentioned is newly secured backlog includes our first contract with a clean day rate above $200000 a day.
Speaker Change: This milestone confirm deposit data trend and strength of the market. Despite any concerns are rising from the recently announced aramco suspensions.
Speaker Change: Let me give you some context on some of these new features.
Bruno Morand: Firstly, Prospector One has secured two new contracts in the UK and Netherlands, extending its firm commitments into 2025. In Southeast Asia, we secured new contracts for the Gun Law Denture. The gun lot has secured and subsequently commenced a new 90-day contract with an undisclosed operator in Malaysia. We are currently in advanced discussions with other customers in the region and remain confident that the rig will be continuously contracted through to 2025.
Speaker Change: Firstly the prospector one has secured two new contracts in the U K and Netherlands, extending its firm commitments into 2025.
Speaker Change: In Southeast Asia, we secured new contracts with a gun law that door.
Speaker Change: Got a lot of secured and subsequently commenced a new 90 day contract with an undisclosed operator in Malaysia.
Speaker Change: We are currently in advanced discussions with other customers in the region and remain confident that the rig will be continuously contracted through to 2025.
Bruno Morand: The TOR has secured two new commitments that will start in direct continuation to its current contract in Indonesia. These awards will keep the tour contracted until Q4 2024 when we see other prospective opportunities for it. In Africa, the Norwa has secured two new commitments.
Speaker Change: The door has secured two new commitments that will start in direct continuation to its current contract in Indonesia.
Speaker Change: These awards will keep the door contracted until Q4, 2024, where we see other prospective opportunities for it.
Speaker Change: In Africa, the Norba has secured two new commitments.
Bruno Morand: The first is a further extension with BWE in Gabon, which will keep the rig contracted until mid-October 2024. The second is a 120-day contract with an undisclosed customer starting in February 2024. Additionally, I'm pleased to report that we have received two letters of award for a combined term of 660 days at the leading edge rate. The first program, which we previously announced, is expected to commence in Q1 2025 and has a total duration of 480 days. The second program, just awarded this week, is expected to commence in Q4 and has a total duration of 180 days.
Speaker Change: <unk> is a further extension with VW in Gabon, which will keep the rig contracted until mid October 2024.
Speaker Change: Second is that 120 day contract with an undisclosed customer start in February 2025.
Speaker Change: Additionally, I'm pleased to report that we have received two letters of award for a combined term of 660 days at leading edge rates.
Speaker Change: The first program, which we previously announced is expected to commence in Q1 2025 and has a total duration of 480 days.
Speaker Change: The second program just awarded this week is expected to commence in Q4 and has a total duration of 180 days.
Bruno Morand: These contracts exemplify the current state of the industry and Borr Drilling's unique competitive position. We continue to see positive demand for jackup services with many of our customers accelerating programs backed by strong oil prices. As customers seek to secure near-term brick capacity, we leverage the high quality and uniformity of our fleet to provide flexibility in rig allocations, enabling us to meet our customer needs while maximizing our fleet utilization. For further information on our fleet and contracts, I'll refer you to the latest Fleet Status Report published by the company on our website.
These contracts exemplifies the current state of the industry and borderlands unique competitive position.
Speaker Change: We continue to support the demand for the Jackup services with many of our customers accelerating programs backed by strong oil prices.
Speaker Change: As customers seek to secure near term rig capacity, we leverage high quality any foreign to you of our fleet to provide flexibility and rigor locations, enabling us to meet our customer needs, while maximizing our fleet utilization.
Speaker Change: For further information on our fleet and contracts I'll refer you to the latest fleet status report published by the company on our website.
Bruno Morand: With these 11 new contracts, our contract coverage has now reached 93% for 2024 and 71% for 2025, including firm contract and price options. We believe these levels provide a healthy balance between revenue visibility at market-leading rates and operational leverage amidst a favourable rate environment, as demonstrated by recent fictions. On a broader market perspective, utilization for modern jackups remains strong at approximately 95%, not adjusted for a Romco suspension of the 22 rigs, including our Arabia 1.
Speaker Change: With 11, new contracts or contract coverage has now reached 93% for 2024 and 71% for 2025, including firm contract in priced options.
We believe these levels provide a healthy balance between revenue visibility at market, leading rates and operational leverage amidst the favorable rate environment as demonstrated by our recent fixtures.
Speaker Change: On a broader market perspective utilization.
Speaker Change: Utilization for modern Jackups remained strong at approximately 95% non adjusted for our ronco suspension or the 22 rigs, including our radio one.
Bruno Morand: We note that some of the suspended rigs have already been recontracted elsewhere, while others may not be competitive international markets due to their vintage capability and lack of international footprint of their current operators. We anticipate that around 13 of these rigs are potentially competitive international markets, which would result in utilization remaining at healthy levels above 90%. However, we see this fluctuation utilization to be temporary as incremental demand levels should offset and surpass the number of rigs potentially available in Saudi.
Speaker Change: We note that some of the suspended rates have already been re contracted elsewhere, while others may not be competitive international markets due to vintage capability lack of international footprint of their current operators.
Speaker Change: We anticipate around 13 of these rigs are potentially competitive international market, which would result in utilization remaining at healthy levels above 90%.
Speaker Change: However, we see this fluctuation utilization could be temporary as incremental demand levels should offset and surpassed the number of rates potentially available in Saudi.
Bruno Morand: Based on the current standards and discussions with our customers, we continue to project incremental demand of 20 to 25 rigs within the next 12 to 18 months. On that note, we remain optimistic about our ability to recontract the Arabia One during the third quarter. While we have witnessed some competitor fixtures below general market rates in certain geographies, we expect this dynamic should be short-lived as, fundamentally, the Jakob market remains well-balanced and tight.
Speaker Change: Based on the current vendors and discussion with our customers we continue to project incremental demand.
Speaker Change: 20 to 25 rigs within the next 12 to 18 months.
Speaker Change: On that note, we remain optimistic about our ability to re contract Arabia, one during the third quarter.
Speaker Change: While we have witnessed some competitor fixtures below general market rates in certain geographies. We expect these dynamics should be short lived as fundamentally the jackup the jackup market remains well balanced and tight.
Bruno Morand: In the first phase of the jackhammer rebound, selected NLCs, particularly Aramco, absorbed most of the available capacity. This rapid absorption has left several customers with limited choices for high-quality assets to fulfill their programs. We now appear to be entering a second phase of the rebound, whereby IOCs and other NOCs are seizing the opportunity to secure capacity and accelerate programs amidst the favorable oil price environment. With that, I'll now hand the call back over.
Speaker Change: In the first phase of the Jackup a rebound.
Speaker Change: Nrc's, particularly around coal absorbed most of the available capacity is.
Speaker Change: These rapid absorption at less several customers with limited choices for high quality assets to fulfill their programs.
Speaker Change: We now appear to be entering a second phase of the rebound whereby ioc's and other nlc's are seizing the opportunity to secure capacity and accelerate programs amidst the favorable oil price environment.
Speaker Change: With that I'll now hand, the call back over to Patrick.
Patrick Arnold Henk Schorn: Thank you Bruno.
Patrick Arnold Henk Schorn: So in conclusion, there are three main messages I would like to leave you with. Firstly, our ability to add backlog at market-leading rates remains intact and is strengthening our future earnings. Secondly, our adjusted EBITDA guidance is $500 to $550 million for the full year 2024. Lastly, the board approved a doubling of the quarterly dividend to 10 cents per share, reflecting our positive outlook. We would expect dividends to continue increasing over time in line with our earnings outlook.
Patrick Arnold Henk Schorn: So in conclusion, there are three main messages I would like to leave you with.
Patrick Arnold Henk Schorn: Firstly.
Patrick Arnold Henk Schorn: Our ability to add backlog at market, leading rates remains intact and is strengthening our future earnings.
Patrick Arnold Henk Schorn: Secondly, our adjusted EBITDA guidance is $500 million to $550 million for the full year 2024.
Patrick Arnold Henk Schorn: Lastly.
Patrick Arnold Henk Schorn: The board approved a doubling of the quarterly dividend to <unk> 10 per share, reflecting a positive outlook.
Patrick Arnold Henk Schorn: We would.
Patrick Arnold Henk Schorn: Spec dividend to continue increasing over time in line with our earnings outlook.
Patrick Arnold Henk Schorn: Ladies and gentlemen, I would like to end our prepared remarks here, and we can go to Q&A. Thank you. As a reminder, to ask a question, you need to press star 11 on your telephone keypad and wait.
Speaker Change: Ladies and gentlemen, I would like to end our prepared remarks here and we can go to Q&A.
Operator: Thank you. As a reminder, to ask a question, you need to press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 11 again. Please kindly ask one question and, if possible, a follow-up question at the time to leave room for other participants. If you do have any further questions, you can please rejoin the queue. If you wish to ask a question via the webcast, please type it in the question box and click submit.
Speaker Change: Thank you as a reminder to ask a question you need to press Star one one on your telephone keypad and wait finance will be announced to withdraw. Your question. Please press star. One again. Please ask one question and possible follow up question at the time to leave room for other participants if you do have any further questions you can please rejoin.
Speaker Change: Q if you wish to ask a question via the webcast. Please type it in the question box and click submit.
Speaker Change: Okay.
Operator: Any calls on the audio line? There are no questions at this moment on the audio line.
Operator: There are no questions at this moment on the audio lines.
Speaker Change: And it goes on the audio line there are no questions at this moment on the audio lines.
Operator: Are we starting to see any questions on this on the web?
Speaker Change: Very good.
Speaker Change: Are we starting to see any questions on the web.
Operator: We have one question. Patrick, why was the rig suspended in Saudi Arabia? Very good.
We have one question.
Speaker Change: Patrick why was the rig suspended in Saudi Arabia.
Speaker Change: Okay.
Speaker Change: Very good.
Patrick Arnold Henk Schorn: So what we saw earlier this year is that there has been a change in strategy in Saudi Arabia, in which a large number of rigs have been suspended. In the order of 20 rigs have been suspended as their focus has changed from certain developments offshore to more developments onshore, which has caused them to have an oversupply after the very large influx of rigs that they have seen over the last two years.
Speaker Change: So what.
Speaker Change: What we had seen earlier this year is that there has been a change in strategy.
Speaker Change: In Saudi Arabia.
Speaker Change: In which a large number of rigs have been suspended.
Speaker Change: In the order of 20 rigs have been suspended.
Speaker Change: Their focus has changed from certain developments offshore to more developments onshore.
Speaker Change: Which has caused them to have a oversupply after the very large influx of rigs that they have seen over the last two years.
Speaker Change: So this has been the reason for the suspension under which we had one rig effected by that we have a total of three rigs. The other two rigs remain operating normally but so one of the 22 rigs suspended was ours.
Patrick Arnold Henk Schorn: So this has been the reason for the suspension under which we had one rig affected by that. We have a total of three rigs; the other two rigs remain operating normally, but so one of the 22 rigs suspended was ours.
Operator: Thank you, Patrick. We have one more. Can you confirm the number of new rigs coming online in the next few years?
Speaker Change: Thank you Patrick we have one more can you confirm the number of new rigs coming online in the next few years.
Patrick Arnold Henk Schorn: We can say a few things about that. And Bruno, maybe you can shed a bit of light on our rigs coming online as well as what we believe to be coming into the market. Very good, Patrick. Yeah.
Speaker Change: We I can say a few things around it and Bruno maybe you can shed a bit of light on our rigs coming online as well as what we believed to be coming into the market.
Bruno Morand: Very good, Patrick. Yeah, as we mentioned in our prepared remarks... Two of our new builds are scheduled to come out of the shipyard by the back end of this year, one of each. We remain positive that the commitment that we currently have on the books will be an appropriate allocation for all of them, and we continue to work on finding a commitment for the second one. In the bigger picture, and in the overall market, there are somewhere around 15 to 20 rigs that are currently under construction, or allegedly currently under construction in the shipyard.
Patrick Arnold Henk Schorn: Very good Patrick Yes, as we mentioned in our prepared remarks.
Patrick Arnold Henk Schorn: Two of our new abuse are scheduled to come.
Out of the shipyard by the back end of this year one of each we remain positive that the commitment that we currently have in our books will be.
Speaker Change: A appropriate allocation for warn them and we continue to work on on finding a commitment for the second one.
Speaker Change: In a bigger picture and the overall market.
Speaker Change: There is somewhere around 15 to 20 rigs that are currently under construction or allegedly current construction that shipyard.
Bruno Morand: That said, we've looked at several of those units which are dubbed to be under construction, and effectively, they are not more than just buildings that were abandoned long ago, and they would really struggle to come to the market. In general terms, we estimate that somewhere around five to six rigs could actually be coming to the market in the next 18 to 24 months, and we think that this is quite a low number of rigs that are likely to affect the general supply.
Speaker Change: We've looked at several of those units, which are dumped to be under construction and effectively they are not more than just construction that were abandoned long ago. When you would really struggle to come to the market in general terms, we estimate that somewhere around five to six rigs could actually be coming to the market. The next 18 to 24 months.
Speaker Change: And we think that this is a quite relative quite low number of rigs that are unlikely to affect the general supply.
Bruno Morand: Thanks, Bruno.
Speaker Change: Thanks Bruno.
Operator: Are you considering any acquisitions or M&A given the excess of liquidity available? Andreas, any further questions? Yes. Are you considering any acquisitions? Perhaps we might have lost you, but we have another question that came in here. Can you talk about Arabia One regarding the contracting by Saudi Aramco by Q3 this year? Sure.
Speaker Change: Are you considering any acquisitions or M&A, given the excess liquidity available Andreas any further question.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Are you considering any acquisition.
Speaker Change: I might have lost him.
Speaker Change: We have another question that came in here.
Speaker Change: Can you talk about the Arabia, one regarding contracting by Saudi Aramco by Q3 this year.
Bruno Morand: Sure. We have obviously been looking at a variety of prospects for the rig. The rig has finished its campaign now in May, so it's effectively available now if we can find a commitment for it. We are looking for several contracts or options around the globe for potential deployment of the rigs. At the moment, we don't have anything firm, but as I said, we do have a nice pipeline of opportunities that gives us confidence that the rig will be contracted near term.
Speaker Change: Sure.
Speaker Change: We obviously.
Speaker Change: <unk> had been looking at variety of prospects for the rig.
Speaker Change: The rig has finished its campaign now in May.
Speaker Change: So it's effectively available now we see if we can find a meeting for it we are looking for several contracts our options around the globe potential deployment, where the rigs at the moment, we don't have anything firm, but as I said, we do have a nice pipeline of opportunities.
Speaker Change: Give us the confidence that the rig will be contracted near term work and highlight that the Arabia. One was originally came out with shipyard I had a stellar operational performance since that and obviously at the moment. This is something that speaks very highly for our customers and gives a good consequence of their interest.
Bruno Morand: It is worth to highlight that the Arabia One was a rig that came out of the shipyard and has had a stellar operational performance since then. And obviously, at the moment, this is something that speaks very highly for our customers and gives us good confidence in their interest.
Speaker Change: Any further questions.
Operator: There are several questions. There's one question.
Speaker Change: There are several questions. There is one question can you talk about working capital how are you.
Magnus Vaaler: Can you talk about working capital? Have you collected on these receivables? And can you discuss the free cash flow from Q2 to Q4? And I can address that.
Speaker Change: Collected on these receivables.
Magnus Vaaler: As we mentioned in our cash flow operations, we had some buildup in accrued revenues over a quarter, which mainly related to some invoices going out a bit late on our side, but these haven't then subsequently come in at quarter end and been collected. So we are par with that again.
Speaker Change: The free cash flow in Q2 to Q4, I'm not going to address that as we mentioned on our cash from operations, we have some buildup.
Speaker Change: Grid revenues over the quarter, which mainly related to some invoices going out.
Speaker Change: A bit later on on our site.
Speaker Change: But these subs.
Speaker Change: Subsequently to court granted.
Speaker Change: And collection so we are.
Bruno Morand: Also, there's normally a question about Mexico collections. We continued with collections in Mexico in Q1 of 15 million, while in the regular quarter we would expect around 30 million. However, just after Q1 ended, we collected these additional 15 million, which took us to a 30 million collection in Mexico during the quarter, which is in line with what we expect to receive there on a quarterly basis. I can go back to the new question on the contracting, which of the rigs TBD jobs is intended for your new build, lolly?
Speaker Change: Par with us again.
Speaker Change: Also there.
Speaker Change: A question about <unk>.
Speaker Change: Mexico collections, we continued.
Speaker Change: Collections in Mexico in Q1 of $15 million, while in the regular quarter, we would expect around $30 million. However, just after Q1 and then we collected this additional $15 million, which took us to get there Amy collection in Mexico during the quarter, which is in line with what we expect to receive there on.
Speaker Change: Quarterly basis.
Speaker Change: You can go back to a new.
Speaker Change: A question on the contracting.
Speaker Change: Which of the rigs.
Speaker Change: <unk>.
Speaker Change: As intended for Newbuild.
Speaker Change: Raleigh.
Bruno Morand: So let me talk a little bit about that because it is clear that we have, on purpose, done press releases regarding the new contracts twice this year. And I think it needs to be understood that our commercial strategy by customer and region needs to be safeguarded. And part of that is also the rig assignments that we do as such. Therefore, we have not been particularly clear regarding which particular customer and or region has, for instance, the $200,000 per day daily rate, nor which rig we are going to use in every particular instance.
Speaker Change: Sure.
Speaker Change: So let me talk a little bit about that because it is clear that.
Speaker Change: We have.
Speaker Change: On purpose.
Speaker Change: Done press releases.
Speaker Change: Regarding the new contracts twice in this year.
Speaker Change: And I think it needs to be understood that our commercial strategy by customer and region needs to be safeguarded and part of that is also the rig assignments that we do as such and therefore, we have been.
Speaker Change: Not particularly clear regarding which particular customer end or region has for instance, the 200000 dollar per day day rate.
Speaker Change: Norwich rigs, we're going to use in every particular instance.
Bruno Morand: We take this purely from a commercial and a competitive point of view. We will inform you of the contracts that we have, but these assignments are, at this moment, somewhat fluid. And that's why we have described it as we have. And all I can tell you is that the Arabian one will be in the mix, as will the Valley. But I can't give you further color on the exact contract they will be deployed on.
Speaker Change: We take this purely from a <unk>.
Commercial and a competitive point of view.
Speaker Change: We inform you of the contracts that we have but these assignments at this moment are somewhat fluid and Thats why we have described it as we are and all I can tell you is that the Arabia, one will be in the mix as the valley will be as well.
Speaker Change: But I can give you further color on the exact contracts they will be deployed.
Operator: I think with this, we have a question on the phone line, so we can turn the call over to the operator, please. Yes, of course. Thank you.
Speaker Change: Thanks.
Speaker Change: Hi.
Speaker Change: Question on the phone line so concerned about.
Operator: Yes, of course. Thank you.
Speaker Change: All over to the operator, please yes of course, thank you.
Operator: And we have the question from Lan of Nikhil Bhatt from JP Morgan. Your line is open. Please ask your question.
Speaker Change: And we'll have the question from the line of Nikhil.
Speaker Change: From Jpmorgan. Your line is open please ask your question.
Speaker Change: Good afternoon, Thanks for taking my questions.
Speaker Change: <unk> on the any further on.
Operator: There is one question about capital distributions, or several questions about capital distributions. So, in addition to dividends, do you think that given the shares paid at a significant discount to replacement value, a share repurchase would be increased?
Speaker Change: There is one question about capital distributions several questions about capital distributions.
Speaker Change: So in addition to dividends.
Speaker Change: You think that given.
Speaker Change: The shares trade at a significant discount to replacement value a share repurchase would be accretive.
Patrick Arnold Henk Schorn: So clearly, the board has looked at both of the opportunities to return cash back to the shareholders. At this moment, it was deemed to be more attractive to start a proper dividend distribution with meaningful numbers before considering the buyback option. I think that it is, however, true that the board, as well as management, feel that the share is quite undervalued at this moment. So these discussions do take place on the board quite frequently. But at this moment, as you have seen in our prepared remarks, the decision has been made to increase the dividend.
Speaker Change: So clearly the board has.
Speaker Change: Looked at both of the.
Speaker Change: Opportunities to return cash back to the shareholders.
Speaker Change: At this moment it was deemed to be more attractive to start a proper dividend distribution with meaningful numbers before considering.
Speaker Change: The buyback option I think that it is however, true that the board as well as management feel that the share is quite under.
Speaker Change: Valued at this moment. So these discussions do take place.
Speaker Change: In the board quite frequently but at this moment as you have seen in our prepared remarks. The decision has been to increase the dividend.
Bruno Morand: Then one more question on marketing. Which regions do you see the highest incremental demand and the most robust pricing? And I can add another one. Are you worried about lack of discipline and day rates from certain players regarding extra capacity?
Speaker Change: Then one more question on the marketing.
Speaker Change: Which regions do you see the highest incremental demand and the most robust pricing.
Speaker Change: And I can add on.
Speaker Change: Are you worried about lack of discipline in day rates from certain payers regarding extra capacity there.
Bruno Morand: All right, thank you. I think, very much in line with our earlier reports, we have been monitoring very closely incremental demand across regions. And obviously, West West Africa has been one that has been providing some positive surprises; Southeast Asia has been quite robust as well. And India is showing that demand, open demand at the moment is unaddressed. And I think that speaks for a large chunk of the incremental demand around the world.
Speaker Change: Alright, thank you.
Speaker Change: Thanks, very much in line with our.
Speaker Change: Earlier reports, we have been monitoring very closely incremental demand across regions and obviously.
Speaker Change: West Africa has been one that has been provided some positive surprise southeast Asia has been quite robust as well.
And India is showing obviously remained open demand at the moment is unaddressed and nothing that explore a large chunk of the incremental demand around the globe.
Bruno Morand: In terms of discipline, it's hard for us to comment on the actions and decisions by our competitors. What we see is a market that remains well balanced and a utilization level that should continue to support strong day rates and encourage training, improving day rates. With this incremental capacity, which has recently absorbed some of the extra supply that could come from Saudi Arabia, we see no reason why the competitive peer group should act differently. Speaking for ourselves, we have continued to experience very solid performance.
Speaker Change: In terms of.
Speaker Change: Disciplined it's hard for us obviously comment on the actions and decisions by our competitors. What we see is a market that remains well balanced and a utilization level that should continue to support.
Speaker Change: Strong day rates and a continued training improvement day rates.
Speaker Change: With incremental capacity shortly absorbed some of the extra supply that could come from problem.
Speaker Change: Saudi Arabia, we see no reason why the competitive peer group should should act differently, but.
Speaker Change: Speaking for ourselves we have continued to experience very solid rates.
Patrick Arnold Henk Schorn: Very good. Then I would like to thank everybody for their participation in this call. We see the future to continue to be quite bright, as you have seen from our presentation, and we look forward to talking to you again within the next months and giving you further updates on our business. Thank you very much.
Speaker Change: Very good then I would like to thank everybody for their participation in this call.
Speaker Change: We see the future to continue to be quite bright as you have seen from.
Speaker Change: Our presentation, given and we look forward to talking to you again within the next months and give you a further update on our business. Thank you very much.
Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
Speaker Change: That does conclude our conference for today. Thank you for participating you may now all disconnect have a nice day.
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