Q2 2024 Transocean Ltd Earnings Call
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Operator: Please stand by; your program is about to begin. Should you need audio assistance during today's program, please press star zero. Good day, everyone, and welcome to today's second quarter 2024 Transocean earnings call. At this time, all participants are in a listen-only mode.
Please stand by, your program is about to begin. Should you need audio assistance during today's program, please press star zero.
Operator: Please stand by; your program is about to begin. Should you need audio with the St. James program?
Operator: Please press star zero. Good day, everyone, and welcome to today's second quarter, 2024, Transocean earnings call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question-and-answer session.
Operator: Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and one on your telephone keypad. Please note this call is being recorded, and I will be standing by if you need any assistance. It is now my pleasure to turn the program over to Alison Johnson, Director of Investor Relations. Thank you, Brittany.
Speaker Change: Good day everyone and welcome to today's second quarter 2024 TransOcean earnings call. At this time all participants are in a listen-only mode.
Operator: You may register to ask a question at any time by pressing the star and one on your telephone keypad. Please note this call is being recorded, and I will be standing by if you need any assistance.
Later, you will have an opportunity to ask questions during the question and answer session.
You may register to ask a question at any time by pressing the star and 1 on your telephone keypad.
Please note this call is being recorded and I will be standing by if you need any assistance. It is now my pleasure to turn the program over to Alison Johnson, Director of Investor Relations.
Alison Johnson: It is not my pleasure to turn the program over to Alison Johnson, director of Investor Relations. Thank you, Brittany. Good morning, and welcome to Transocean's second quarter 2024 earnings conference call.
Alison Johnson: Good morning and welcome to Transocean's second quarter 2024 earnings conference. A copy of our press release covering financial results, along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures, Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer... Sadhveda, Executive Vice President and Chief Financial Officer. Such statements are based upon current expectations and certain assumptions and are therefore subject to certain risks and uncertain consequences. Many factors could cause actual results to differ materially.
Alison Johnson: Thank you Brittany. Good morning and welcome to TransOcean's second quarter 2024 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.com.
Alison Johnson: A copy of our press release covering financial results, along with supporting statements and schedules, including reconciliation and disclosures regarding non-GAAP financial measures, or website at Deep Water Dogs. Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer; Keelan Adamson, President and Chief Operating Officer; Sad Beta, Executive Vice President and Chief Financial Officer; and Rodney McKenzie, 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.
Speaker Change: Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer, Keelan Adamson, President and Chief Operating Officer, Thad Veda, Executive Vice President and Chief Financial Officer, and Roddy McKenzie, 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.
Speaker Change: Such statements are based upon current expectations and certain assumptions, and therefore are subject to certain risks and uncertainties.
Alison Johnson: Many factors could cause actual results to differ materially.
Alison Johnson: Please refer to our FUC filings for 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.
Speaker Change: Many factors could cause actual results to differ materially. Please refer to our FCC filings for 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.
Alison Johnson: Following Jeremy, Keelan, and Dad for third comment, 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.
Speaker Change: Following Jeremy, Keelan, and Thad'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.
Jeremy Thigpen: I'll now turn the call over to Jeremy.
Jeremy Thigpen: Thank you, Alison, and welcome to our employees, customers, investors, and analysts participating in today's call. Needless to say, I'm very proud of our team's continued commitment and diligence. Over the past several quarters, the Transocean team worked together to overcome numerous challenges as we mobilized nearly 40% of our active fleet across multiple jurisdictions worldwide, all the while maintaining the highest standards of safety, reliability, and efficiency. Next, as we disclosed yesterday, BP awarded the Deepwater Invictus a three-year contract at a rate of $485,000 per day, which also includes up to two years of options at mutually agreed-upon rates, which will likely be determined at some point in 2025.
Jeremy Thigpen: Thank you, Alison, and welcome to our employees, customers, investors, and analysts participating on today's call. As reported in yesterday's earnings release for the second quarter, 2024, Transocean delivered adjusted EBITDA of $284 million on $861 million of contract-driven revenues, resulting in an adjusted EBITDA margin of approximately 33%. Needless to say, I'm very proud of our team's continued commitment and diligence. Over the past several quarters, the Transocean team worked together to overcome numerous challenges as we mobilized nearly 40% of our active fleet across multiple jurisdictions worldwide, all the while maintaining the highest standard of safety, reliability, and efficiency.
Speaker Change: Thank you very much. I'll now turn the call over to Jeremy.
Jeremy Thigpen: Thank you, Alison, and welcome to our employees, customers, investors, and analysts participating on today's call.
Jeremy: As reported in yesterday's earnings release, for the second quarter 2024, Transocean delivered adjusted EBITDA of $284 million on $861 million of contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 33%.
Speaker Change: Needless to say, I'm very proud of our team's continued commitment and diligence. Over the past several quarters, the Transocean team worked together to overcome numerous challenges as we mobilized nearly 40% of our active fleet across multiple jurisdictions worldwide, all the while maintaining the highest standard of safety, reliability, and efficiency.
Jeremy Thigpen: This resolved to allow us to, once again, achieve superior up-time performance for our customers, driving revenue efficiency of approximately 97% in the quarter. Thank you to each and every member of the Transocean team for what you do day in and day out. Largely due to this consistent, reliable operational performance, and the effort, knowledge and tenacity of our marketing and contracts team, was strong support from our legal team. We enjoyed an incredibly exciting past few weeks, culminating with the announcement of extensive contracting activity on our fleet, particularly with respect to our fleet in the US Gulf of Mexico.
Speaker Change: This result allowed us to once again achieve superior uptime performance for our customers, driving revenue efficiency of approximately 97% in the quarter.
Speaker Change: Thank you to each and every member of the Transocean team for what you do, day in and day out.
Speaker Change: Largely due to this consistent, reliable operational performance, and the effort, knowledge, and tenacity of our marketing and contracts team, with strong support from our legal team, we enjoyed an incredibly exciting past few weeks culminating with the announcement of extensive contracting activity on our fleet, particularly with respect to our fleet in the U.S. Gulf of Mexico.
Jeremy Thigpen: First, Becker Offshore Energy awarded the Deepwater Atlas a two-well contract at an industry-leading rate of $580,000 per day, including additional services. The estimated 150-day contract is expected to commence in direct continuation of the contract we received in April, and includes two contingent 45-day, 20-K completions at a rate of $650,000 per day. As a reminder, the contract that was awarded in April consists of four wells at a rate of $50,000 per day, including additional services. The program also provides for three contingent completions for up to a combined 120 days at that same rate. Next, as we disclosed yesterday, BP awarded the Deepwater Invictus a three-year contract at a rate of $485,000 per day, which also includes up to two years of options that mutually agree upon rates, which will likely be determined at some point in 2025.
Speaker Change: First, Beacon Offshore Energy awarded the Deepwater Atlas a two-well contract at an industry-leading rate of $580,000 per day, including additional services.
Speaker Change: The estimated 150 day contract is expected to commence in direct continuation of the contract we received in April and includes two contingent 45 day, 20K completions at a rate of $650,000 per day.
Speaker Change: As a reminder, the contract that was awarded in April consists of four wells at a rate of $505,000 per day, including additional services.
Speaker Change: The program also provides for three contingent completions for up to a combined 120 days at that same rate.
Speaker Change: Next, as we disclosed yesterday, BP awarded the Deepwater Invictus a three-year contract at a rate of $485,000 per day, which also includes up to two years of options at mutually agreed-upon rates, which will likely be determined at some point in 2025.
Jeremy Thigpen: The contract is expected to commence in the first quarter of 2025. Of note, as the Invictus is now subtly booked throughout the period of time in which it was previously assigned to a three-year contract for work in Mexico, that contract will now be reassigned at our election to one of the remaining rigs in a pool of similarly capable rigs, including the Deepwater Velasa, Deepwater Proteus, Deepwater Conqueror, and Deepwater Asgard. Additionally, the Invictus was also awarded a 40-day contract in direct continuation of a current program at an undisclosed rate, enabling us to begin filling gaps, mitigating, and hopefully, ultimately eliminating white space.
Speaker Change: The contract is expected to commence in the first quarter of 2025.
Speaker Change: Of note, as the Invictus is now solidly booked throughout the period of time in which it was previously assigned to a three-year contract for work in Mexico,
Jeremy Thigpen: Also, since our police sat's report update last week, we secured a letter of intent for one of our rigs in the Gulf of Mexico that had some availability and expect to add additional wealth to the other rig in the Gulf of Mexico that has availability in the very near future, effectively taking them off the market for other near-term opportunities. We will update you on our progress as appropriate.
Jeremy Thigpen: Also, since our Fleet Status Report update last week, we have secured a letter of intent for one of our rigs in the Gulf of Mexico that had some availability and expect to add additional wells to the other rig in the Gulf of Mexico that has availability in the very near future, effectively taking them off the market for other near-term opportunities. We will update you on our progress as appropriate. In Brazil, Petrobras exercised a 279-day price option on the deepwater Mykonos at a rate of $366,000 per day.
Jeremy Thigpen: Lastly, for the U.S. goal, the Deepwater Asgard received a one-year contract extension with Hess at a rate of $515,000 per day, including additional services. In Brazil, Petrobras exercised a 279-day price option on the Deepwater Mecanos at a rate of $366,000 per day. As a reminder, the option pricing for this campaign was submitted in May of 2022, which explains why this day rate, while still healthy, represents a fairly meaningful discount to current leading edge rates. Importantly, the firm duration now extends through October 2025 and generates meaningful cash flow, which can aid our deleveraging efforts. Moving to the harsh environment fleet, in Norway, the Transition Norgo was awarded a three-wheel extension with Wintershell, DEA at a current rate of $517,000 per day, extending the rig's firm duration into the second quarter of 2028.
Speaker Change: Lastly, for the U.S. Gulf, the Deepwater Asgard received a one-year contract extension with HESS at a rate of $515,000 per day, including additional services.
Jeremy Thigpen: Importantly, the firm duration now extends through October 2025 and generates meaningful cash flow which can aid our deleveraging effort at a current rate of $517,000 per day, extending the REG's firm duration into the second quarter of 2028. It was this combination of day, rate, and term that provided the impetus to execute our strategy to acquire the remaining balance of this unique, high-specification asset. The firm period now extends through mid-2025, and with the remaining options, the rig is expected to remain in Australia until at least the second quarter of 2026.
Speaker Change: Moving to the harsh environment fleet. In Norway, the Trans-Ocean Norgo was awarded a three-whale extension with winter shawl.
Jeremy Thigpen: It was this combination of day-rate and term that provided the impetus to execute our strategy to acquire the remaining balance of this unique high-specification asset. Also in Norway, the Transition Spitzbergen was awarded a three-wheel extension with Equinor at a current rate of $483,000 per day. The program is expected to commence in direct continuation of the rig's fixed price option and keeps the rig off the market through the first quarter of 2026. In Australia, Woodside exercised a one-well option on the Transocean Durant at a rate of $390,000 per day. The firm period now extends through mid 2025, and with the remaining options, the rig is expected to remain in Australia until at least the second quarter of 2026.
Speaker Change: It was this combination of day, rate, and term that provided the impetus to execute our strategy to acquire the remaining balance of this unique, high-specification asset.
Jeremy Thigpen: With these contracts, our working fleet is more than 90% committed through the end of 2025, and based upon advanced discussions with our customers and reflecting L.O.I.s and strong verbal commitments, we believe that, aside from some small activity gaps which could arise in our customer drilling programs, our fleet that is currently working could soon be completely booked well into 2026. As such, our customers may soon need to consider financing the reactivation of cold-stacked assets to meet their future program requirements. We are certainly pleased with these new contract awards, some of which have been a long time in the making, as they demonstrate materially increasing day rates in lengthy terms, which combined reinforce our confidence in the strength and longevity of the offshore drilling market.
Jeremy Thigpen: With these contracts, our working fleet is more than 90% committed through the end of 2025. And based upon advanced discussions with our customers and reflecting LOIs and strong verbal commitments, we believe that, aside from some small activity gaps which could arise in our customer drilling programs, our fleet that is currently working could soon be completely booked well into 2026. We are certainly pleased with these new contract awards, some of which have been a long time in the making, as they demonstrate materially increasing day rates and lengthening terms, which combined reinforce our confidence in the strength and longevity of the offshore drilling market. Based on what we see today, we expect the U.S. Gulf of Mexico to remain balanced for the next several quarters, with a number of gap-filler-type programs still to be awarded.
Speaker Change: We are certainly pleased with these new contract awards, some of which have been a long time in the making, as they demonstrate materially increasing day rates and lengthening terms, which combined reinforce our confidence in the strength and longevity of the offshore drilling market.
Jeremy Thigpen: As discussed on previous calls, we expect deep water prospects to become an even more important source of the world after the next several years, and we are not alone in this expectation. According to Rice Add Energy, the equivalent of 56 billion million barrels per day of newly discovered oil will be required to satisfy global oil consumption by 2030, and over 16% of this incremental supply is expected to come from deep water production. Accordingly, global offshore greenfield exploration and production investments are projected to grow to $110 billion in 2027. That's up from $48 billion in 2024, a 129 percent increase, with approximately half of this increase expected to be driven by activity in South America, in Africa.
Keelan Adamson: I'm now headed over to Keylin to talk about the regions in our fleet. Thanks, Jeremy, and good morning, everyone. As Jeremy mentioned, many of the programs for which we are in discussions with our customers have commencement dates well into the future. Based on what we see today, we expect the U.S. Gulf of Mexico to remain in balance for the next several quarters, with a number of gap filler type programs still to be awarded. Looking forward, our customers remain committed to developing their existing deep water assets and adding to their portfolios. Our customers continue to move forward with their 20K development plans, and as an example, on Tuesday, BP announced taking their final investment decision on the Cascita project, with nearby Tiber expected in 2025.
Speaker Change: I'll now hand it over to Keelan to talk about the regions in our fleet.
Keelan Adamson: Based on what we see today, we expect the U.S. Gulf of Mexico to remain in balance for the next several quarters, with a number of gap-filler-type programs still to be awarded.
Keelan Adamson: Looking forward, our customers remain committed to developing their existing deepwater assets and adding to their portfolios.
Jeremy Thigpen: Our customers continue to move forward with their 20K development plans, and as an example, on Tuesday, BP announced taking their final investment decision on the Cascada project, with nearby Tiber expected in 2025. In 2018, Transocean took the strategic decision to upgrade the hook load, drilling, completions, and 20K capability on both of the new 8th-generation drill ships, the Deepwater Atlas and Deepwater Titan, to best position these rigs for the anticipated Gulf of Mexico 20K programs.
Speaker Change: Our customers continue to move forward with their 20K development plans, and as an example, on Tuesday, BP announced taking their final investment decision on the Cascada project, with nearby Tiber expected in 2025.
Keelan Adamson: This investment decision sets an important development emotion, unlocks the potential future development of 10 billion barrels of discovered resources in place across the Cascita and Tiber catchment areas. And marks another data point of additional 20K opportunities, being sanctioned by our customer base. In 2018, Trans Ocean took the strategic decision to upgrade the Huckload, drilling, completions, and 20K capability on both of the new eighth-generation drill ships, the Deepwater Atlas and Deepwater Titan. To best position these rigs for the anticipated Gulf of Mexico 20K programs. As a result, they are effectively purpose-built for our customers' 20K operations, and their design will facilitate efficiencies in well delivery, not achievable from the highest specification seventh-generation rigs.
Keelan Adamson: This investment decision sets an important development in motion.
Jeremy Thigpen: As a result, they are effectively purpose-built for our customers' 20K operations, and their design will facilitate efficiencies in well delivery not achievable from the highest specification 7th generation rig. Also, over the last two weeks, Petrobras issued a new tender for four rigs, which is consistent with our expectation that they will continually roll over their existing fleet to support production targets that require at least 30 operational floaters through 2030. We believe it is likely the entire West Africa region will require at least four additional deepwater rigs from 2026 onwards, which could possibly require the reactivation of some currently cold-stacked assets. The KG-1 is well placed to secure this program.
Keelan Adamson: to best position these rigs for the anticipated Gulf of Mexico 20K programs.
Keelan Adamson: As such, we believe we are well-qualified for any of the multiple 20K opportunities currently being discussed in the Gulf of Mexico. Moving to Brazil, we expect Petra Bras's Roncador tender will be awarded in the next few months and the Sepia tender thereafter for a combined five rig awards. Also, over the last two weeks, Petra Bras issued a new tender for four rigs, which is consistent with our expectation that they will continually roll over their existing fleet to support production targets that require at least 30 operational floaters through 2030. While we expect these rigs to be largely renewals of floaters already in country, we do believe an incremental rig or two could mobilize to the Brazilian market to satisfy this demand.
Keelan Adamson: While we expect these rigs to be largely renewals of floaters already in country, we do believe an incremental rig or two could mobilize to the Brazilian market to satisfy this demand.
Keelan Adamson: In West Africa, we expect substantial rig demand beginning in early 2020. Nigeria is expected to require four rigs, two more than are currently in the region. In Angola, there are seven floaters operating, and we expect this level of demand to be sustained. Ghana, Ivory Coast, and Namibia could also add to the rig demand in 2025 and 2026, with four programs expected to commence in this timeframe. If all programs proceed as expected, three drill ships could be required from outside of these countries. We believe it is likely the entire West Africa region will require at least four additional deep water rigs from 2026 onwards, which could possibly require the reactivation of some currently cold-stacked assets.
Speaker Change: In West Africa, we expect substantial rig demand beginning in early 2020.
Keelan Adamson: Nigeria is expected to require four rigs, two more than are currently in the region. In Angola there are seven floaters operating and we expect this level of demand to be sustained.
Keelan Adamson: Ghana, Ivory Coast and Namibia could also add to the rig demand in 2025 and 2026 with four programs expected to commence in this time frame.
Speaker Change: If all programs proceed as expected, three drill ships could be required from outside of these countries.
Speaker Change: We believe it is likely the entire West Africa region will require at least four additional deepwater rigs from 2026 onwards, which could possibly require the reactivation of some currently cold stacked assets.
Keelan Adamson: Lastly, for the ultra-deep water markets in India, we anticipate the award of our alliances tender in the coming weeks and continue for the KG-1 is well placed to secure this program. Moving now to the high-specification harsh environment market, assuming outstanding options are exercised, the Trans-Ocean fleet is effectively sold out through 2025. Looking ahead, we believe Norway will be undersupplied by two rigs in 2026. Our recent pictures in Norway underscore the strength of that market as our customers are contracting rigs like the Trans-Ocean Norway up to four years in advance. Regarding the Norway, as you know, in June, we successfully completed a transaction to acquire the 7% outstanding in the joint venture that owned the rig.
Speaker Change: Lastly, for the ultra-deepwater markets, in India, we anticipate the award of Reliance's tender in the coming weeks and continue to
Speaker Change: The KG-1 is well-placed to secure this program.
Speaker Change: Moving now to the high specification harsh environment market. Assuming outstanding options are exercised, the Transocean fleet is effectively sold out through 2025. Looking ahead, we believe Norway will be undersupplied by two rigs in 2026.
Keelan Adamson: Our recent fixtures in Norway underscore the strength of that market as our customers are contracting rigs like the Transocean Norge up to four years in advance.
Keelan Adamson: Regarding Norgay, as you know, in June, we successfully completed a transaction to acquire the 7% outstanding. In addition to the commencement of the Aquilas contract with Petrobras, during the last six months, we have relocated and commenced operations on the Transocean Endurance and Transocean Equinox in Australia, reactivated and commenced operations on the Deepwater Orion in Brazil, and recommenced operations I now hand the call back to Jeremy. Thanks, Keelan. The offshore drilling industry is in its best condition since 2014.
Speaker Change: Regarding the Norgay, as you know in June we successfully completed a transaction to acquire the 7% outstanding
Keelan Adamson: It was always our intention to eventually own the rig outright in line with our asset strategy, as it is one of the most capable harsh environment semi-submersibles. Additionally, we have dedicated substantial resources to automating drill-floor pipe handling operations on the rig, and are very pleased with the progress we have achieved to date. We will continue to pursue opportunities for automation in our fleet with the ultimate goal of driving significant improvement in safety and operational performance while simultaneously reducing our carbon footprint.
Keelan Adamson: venture that owned the rig. It was always our intention to eventually own the rig outright in line with our asset strategy, as it is one of the most capable harsh environment semi-submersibles in the world.
Keelan Adamson: Additionally, we have dedicated substantial resources to automating drill floor pipe handling operations on the rig and are very pleased with the progress we have achieved to date.
Speaker Change: We will continue to pursue opportunities for automation in our fleet with the ultimate goal of driving significant improvement in safety and operational performance, while simultaneously reducing our carbon footprint.
Keelan Adamson: Before I pass the mic, I'd like to strongly reiterate Jeremy's gratitude to the entire Trans-Ocean team and specifically recognize our people for the tremendous efforts in mobilizing and preparing the Deepwater Aquila for her majoring contract in Brazil. As a result of the significant collaboration across the organization, we commenced operations in late June, nearly a week ahead of schedule. In addition to the commencement of the Aquila's contract with Petrobras, during the last six months we have relocated and commenced operations on the Trans-Ocean Endurance, Trans-Ocean Equinox in Australia, reactivated and commenced operations on the Deepwater Orion in Brazil, and recommenced operations on the KG-1 in India.
Speaker Change: Before I pass the mic I'd like to strongly reiterate Jeremy's gratitude to the entire Transocean team and specifically recognize our people for the tremendous efforts in mobilizing and preparing the Deepwater Aquila for her major contract in Brazil.
Speaker Change: As a result of this significant collaboration across the organization, we commenced operations in late June, nearly a week ahead of schedule.
Speaker Change: reactivated and commenced operations on the Deepwater Orion in Brazil and recommenced operations on the KG-1 in India.
Keelan Adamson: These are all examples of our extensive experience to reliably bring new build-deep market, reactivating warm stacked assets, and relocating active rigs to different geographic markets and customers safely and efficiently. I now have the call back to Jeremy.
Speaker Change: These are all examples of our extensive experience to reliably bring new-build, deep-water aquaculture to the market, reactivating warm-stacked assets, and relocating active rigs to different geographic markets and customers safely and efficiently.
Jeremy Thigpen: Thanks, Keelan. The offshore drilling industry is in its best condition since 2014. As we discussed on our first quarter 2024 earnings call, the average contract duration for new ultra-deep water fixtures has remained above 500 days for the last two years. And currently, as mentioned earlier, day rates have continued to increase. These two indisputable data points define the positive investment thesis for the industry and particularly for Transocean. Looking specifically at Transocean's fleet, in 2022, our average new contract fixture was approximately $359,000 per day. In 2024 to date, our average is $504,000 per day, a 40% increase.
Speaker Change: I now hand the call back to Jeremy.
Jeremy Thigpen: Thanks Keelan. The offshore drilling industry is in its best condition since 2014.
Jeremy Thigpen: As we discussed on our first quarter 2024 earnings call, the average contract duration for new Ultra Deepwater fixtures has remained above 500 days for the last two years. Concurrently, as mentioned earlier, day rates have continued to increase.
Jeremy Thigpen: These two indisputable data points define the positive investment thesis for the industry and particularly for Transocean.
Jeremy Thigpen: Looking specifically at TransOcean's fleet, in 2022, our average new contract fixture was approximately $359,000 per day. In 2024 to date, our average is $504,000 per day, a 40% increase.
Jeremy Thigpen: While we, like our competitors, are certainly benefiting from positive market dynamics, the industry-leading capability of our assets and the consistently safe, reliable, and efficient performance we provide to our customers, combined with our deep understanding of the market, enable us to differentiate ourselves from our peers, which you can see in our leading-edge day rates in our industry-leading $8.64 billion backlog that we announced with our recently stash report, which, by the way, excludes the $531 million backlog associated with the BP contract we announced yesterday. As we have reiterated for the past several quarters, we continue to be highly encouraged by the conversations with our customers and are certainly excited by the momentum created by our recent fixtures.
Jeremy Thigpen: While we, like our competitors, are certainly benefiting from positive market dynamics, the industry-leading capability of our assets and the consistently safe, reliable, and efficient performance we provide to our customers, combined with our deep understanding of the market, enable us to differentiate ourselves from our peers, which you can see in our leading-edge day rates and our industry-leading $8.64 billion backlog that we announced with our recent police stats report, which, by the way, excludes the Thank you, Jeremy, and good day to everyone.
Jeremy Thigpen: while we, like our competitors, are certainly benefiting from positive market dynamics.
Speaker Change: The industry-leading capability of our assets and the consistently safe, reliable, and efficient performance we provide to our customers.
Speaker Change: Combined with our deep understanding of the market, enable us to differentiate ourselves from our peers, which you can see in our leading edge day rates and our industry-leading $8.64 billion backlog.
Speaker Change: that we announced with our recent police stats report, which, by the way, excludes the $531 million backlog associated with the BP contract we announced yesterday.
Keelan Adamson: As we have reiterated for the past several quarters, we continue to be highly encouraged by the conversations with our customers and are certainly excited by the momentum created by our recent fixtures.
Jeremy Thigpen: As many of you will remember, with the nine months ago, the entire offshore drilling community pressed on the timing for the first contract to exceed $500,000 per day. Now we are seeing rates in the 500 more often than not, fixed across the entire space, with Trans Ocean once again leading the way with ever-improving fixtures for both $15K and $20K work. And while we will always endeavor to identify and seize the appropriate opportunities to test day rates, we also recognize and appreciate the value of term and adding to our industry-leading backlog, providing us clear visibility to future cash flows.
Keelan Adamson: As many of you will remember, less than nine months ago, the entire offshore drilling community pressed on the timing for the first contract to exceed $500,000 per day.
Keelan Adamson: Now we are seeing rates in the 500s more often than not, fixed across the entire space, with Transocean once again leading the way with ever-improving fixtures for both 15K and 20K work.
Speaker Change: And while we will always endeavor to identify and seize the appropriate opportunities to test day rates, we also recognize and appreciate the value of term and adding to our industry-leading backlog, providing us clear visibility to future cash flows.
Jeremy Thigpen: As such, Trans Ocean will continue to strategically manage its portfolio of assets, striking the appropriate balance between day rate and term to maximize shareholder value.
Speaker Change: As such, TransOcean will continue to strategically manage its portfolio of assets, striking the appropriate balance between day rate and term to maximize shareholder value.
Jeremy Thigpen: In closing, we continue to believe the underlying fundamental support a multi-year growth cycle for our assets and services. Given our backlog, and the visibility provides the future cash flows, along with a future reduction in cap-ex requirements as our new builds are now all out of yards and on contract, we expect our unlevered free cash flow to continue incrementally increasing each quarter for the next several quarters. Which can enable us to deliver our balance sheet and ultimately division us to design, to communicate, and implement a sustainable strategy to make distributions or otherwise return value to our shareholders.
Speaker Change: In closing, we continue to believe the underlying fundamentals support a multi-year growth cycle for our assets and services.
Speaker Change: Given our backlog and the visibility it provides to future cash flows, along with a future reduction in CapEx requirements as our new builds are now all out of yards and on contract,
Speaker Change: We expect our unlevered free cash flow to continue incrementally increasing each quarter for the next several quarters which can enable us to deliver our balance sheet and ultimately position us to design, communicate, and implement a sustainable strategy to make distributions or otherwise return value to our shareholders.
Sad Beta: With that, I'll now call over to that to discuss our financial results.
Keelan Adamson: With that, I'll now turn the call over to Thad to discuss our financial results.
Sad Beta: Thank you, Jeremy, and good day to everyone. As is our practice during today's call, I will briefly recap our second quarter results, provide guidance for the third quarter, and conclude with an update on our expectations for the full year 2024. As reported on our press release for the second quarter, we reported a net loss attributable to controlling interest of $123 million, or a loss of $0.15 per diluted share. During the quarter, we generated EBITDA of $284 million in cash flow from operations of approximately $133 million. Positive free cash flow of $49 million in the second quarter reflects $133 million of operating cash flow, net of $84 million of capital expenditures.
Thad Veda: Thank you, Jeremy, and good day to everyone. As is our practice during today's call, I will briefly recap our second-quarter results, provide guidance for the third quarter, and conclude with an update on our expectations for the full year 2024.
Jeremy Thigpen: As reported in our press release, for the second quarter, we reported a net loss attributable to controlling interest of $123 million, or a loss of $0.15 per diluted share. During the quarter, we generated EBITDA of $284 million and cash flow from operations of approximately $133 million. Contract drilling revenues are slightly below our guidance, mainly due to the prolonged 15 kpsi drilling operations of the Deepwater Atlas, which delayed the start of the rig's higher 20 kpsi day rate.
Thad Veda: As reported in our press release for the second quarter, we reported a net loss attributable to controlling interest of $123 million, or a loss of 15 cents per diluted share.
Keelan Adamson: During the quarter, we generated EBITDA of $284 million and cash flow from operations of approximately $133 million.
Keelan Adamson: Positive free cash flow of $49 million in the second quarter reflects $133 million of operating cash flow, net of $84 million of capital expenditures.
Sad Beta: Capital expenditures for the quarter included $53 million related to the new build at Deepwater or Keelan, with a balance associated with various other projects across the fleet. During the second quarter, we delivered contract drilling revenues of $861 million at an average daily revenue of $1,000. Contract drilling revenues are slightly below our guidance, mainly due to the prolonged 15 KPSI drilling operations of the Deepwater Atlas, which delayed the start of the rig's higher 20 KPSI day rate. Recall with the rig's 15 KPSI operating day rate, which was negotiated in the second quarter, is about $268,000 per day.
Keelan Adamson: Capital expenditures for the quarter included $53 million related to the new build at Deepwater Aquila, with a balance associated with various other projects across the fleet.
Keelan Adamson: During the second quarter, we delivered contract drilling revenues of $861 million at an average
Keelan Adamson: $1,000
Keelan Adamson: Contract drilling revenues are slightly below our guidance, mainly due to the prolonged 15k PSI drilling operations of the Deepwater Atlas, which delayed the start of the rig's higher 20k PSI day rate.
Jeremy Thigpen: The call at the RIG 15k PSI operating day rate, which was negotiated in the second quarter of 2021, is about $268,000 per day. The 20k PSI operating day rate is $455,000 per day. The customer-delayed commencement of the KG-1 in India also adversely affected our contract drilling revenue. However, these factors were partially offset by higher fleet revenue efficiency, 96.9%, and the commencement of the Deepwater Aquila in Brazil on June 25th, about a week earlier than anticipated. G&A expense for the second quarter was $59 million, generally in line with our guidance.
Speaker Change: Recall that the RIG's 15k PSI operating day rate, which was negotiated in the second quarter of 2001, is about $268,000 per day. The 20k PSI day rate is $455,000 per day.
Sad Beta: The 20 KPSI day rate is $455,000 per day. The customer delayed commencement of the KG1 in India; also adversely affected our contract drilling revenue. These factors were partially upset by a higher fleet revenue efficiency, 96.9%, and the commencement of the Deepwater Akila in Brazil on June 25th, about a week earlier than anticipated. Operating and maintenance expense in the second quarter was $534 million. This is below our guidance, primarily due to the delay of in-service maintenance in the active fleet and the favorable resolution of old contingencies. G&A expense in the second quarter is $59 million, generally in line with our guidance.
Keelan Adamson: The customer-delayed commencement of the KG-1 in India also adversely affected our contract drilling revenue. These factors were partially offset by higher fleet revenue efficiency, 96.9%, and the commencement of the Deepwater Aquila in Brazil on June 25, about a week earlier than anticipated.
Keelan Adamson: Operating and maintenance expense in the second quarter was $534 million. This is below our guidance primarily due to the delay of in-service maintenance in the active fleet and the favorable resolution of old contingencies.
Keelan Adamson: G&A expense in the second quarter is $59 million, generally in line with our guidance.
Sad Beta: We ended the second quarter with total liquidity of approximately $1.5 billion, including unrestricted cash and cash equivalence of $475 million, about $400 million unrestricted cash, $350 million of which is reserved for debt service, and $576 million of capacity from our undrawn revolving credit facility.
Keelan Adamson: We ended the second quarter with total liquidity of approximately 1.5 billion dollars including unrestricted cash and cash equivalents of 475 million dollars
Keelan Adamson: About $400 million of restricted cash, $360 million of which is reserved for debt service, and $576 million of capacity from our Undrawn Revolving Credit Facility.
Sad Beta: I will now update you on our expectations for our financial performance for the third quarter and full year 2024. As always, our guidance excludes speculative reactivations and upgrades. For the third quarter, we expect contract drilling revenues to approximate $940 million, based upon an average fleet ride revenue efficiency of 96.5%, which, as you know, can vary based upon uptime performance, weather, and other factors. This estimate includes approximately $55 million of additional services and reimbursable expenses. Please recall that the additional services and customer reimbursables generally carry low single-digit margins. The sequential increase in revenue is mainly due to first, a full quarter of activity for the depot or Akila following conventions of the rig's initial contract in Brazil.
Jeremy Thigpen: This estimate includes approximately $55 million of additional services and reimbursable expenses. Please recall that additional services and customer reimbursables generally carry low single-digit margins. The sequential increase in revenue is mainly due, first, higher utilization on the KG-2, KG-1, and Transocean Equinox, which had contract preparation activities in the second quarter. And lastly, a higher contractual day rate for the Deepwater Atlas as the rig started its 20 kpsi operation on July 7, and the aforementioned resolution of various contingencies that had no comparable activity in the third quarter.
Sad Beta: Second, higher utilization on the KG2, KG1, and Transition Equinox, which had contract preparation activities in the second quarter. And lastly, a higher contractual day rate for the depot or Atlas as the rig started 20 KPSI operation under July 7th. We expect third quarter ONM expense to be approximately $610 million; the quarter-over-quarter increases are primarily due to the changes in activity that I just reviewed. An increase of end-service maintenance costs, some of which is deferred from the second quarter, and the aforementioned resolution of various contingencies that have no comparable activity in the third quarter. These are partially offset by the absence in the second quarter of cost paid to the joint venture that owned the Transocean Norgah, as you would expect. These were eliminated as the result of the acquisition of the outstanding interest in the entity.
Jeremy Thigpen: These are partially offset by the absence in the second quarter of costs paid to the joint venture that owned Transocean Norga. As you would expect, these were eliminated as a result of the acquisition of the outstanding interest in the entity.
Sad Beta: We expect GNA for the third quarter to be approximately $50 million. This quarter-over-quarter decrease is primarily related to lower personnel costs and professional fees. Net interest expense of the third quarter is forecast to be approximately $145 million. Capital expenditures and cash taxes are expected to be approximately $35 million and $10 million, respectively. For the full year 2024, our revenue guidance of approximately $3.6 billion is unchanged at this time. This guidance includes approximately $215 million of additional services and reimbursable expenses, of which about $105 million were realized in the first half of the year. Full year own M expense is still expected to be between $2.2 and $2.3 billion.
Keelan Adamson: Net interest expense for the third quarter is forecast to be approximately $145 million.
Jeremy Thigpen: Capital expenditures and cash taxes are expected to be approximately $35 million and $10 million, respectively. For the full year 2024, our revenue guidance of approximately $3.6 billion is unchanged at this time. This guidance includes approximately $215 million of additional services and reimbursable expenses, of which about $105 million were realized in the first half of the year. Our projected liquidity at year-end 2024 is unchanged from last quarter at approximately $1.4 billion, which includes the full $576 million capacity of our undrawn revolving credit facility, as well as restricted cash of approximately $390 million, most of which is reserved for debt service. Of the approximately $135 million expected for sustaining and contract preparation CapEx, approximately $65 million has already been incurred.
Keelan Adamson: For the full year 2024, our revenue guidance of approximately $3.6 billion is unchanged at this time. This guidance includes approximately $215 million of additional services and reimbursable expenses, of which about $105 million were realized in the first half of the year.
Sad Beta: Finally, full-year GNA costs are expected to be around $215 million. Our projected liquidity at year end 2024 is unchanged from last quarter at approximately $1.4, which includes the full $576 million capacity of our undrawn revolving credit facility, as well as a restricted cash of approximately $390 million, most of which is reserved for debt service. This liquidity forecast includes 2024 CAPEX expectations of $250 million, of which approximately $115 million is related to the deep order of KELA. About 15 million of CAPEX associated with the KELA remains of the approximately $135 million expected for sustaining and contract preparation CAPEX. Approximately $65 million has already been incurred.
Keelan Adamson: Our projected liquidity at year-end 2024 is unchanged from last quarter at approximately $1.4 billion, which includes the full $576 million capacity of our undrawn revolving credit facility, as well as restricted cash of approximately $390 million, most of which is reserved for debt service.
Keelan Adamson: Of the approximately $135 million expected for sustaining and contract preparation CapEx, approximately $65 million has already been incurred.
Sad Beta: We continue to actively manage our balance, making decisions that we believe prioritize the long-term interest of the company and our shareholders. In June, we issued $55.5 million shares and $130 million in aggregate principal amount of our 8% senior notes due to 2027 as part of the consideration to acquire the outstanding 67% ownership interest in the joint venture which owns Trans-Ocean Norge. In addition to the qualitative benefits KELA mentioned earlier, this transaction is anticipated to provide an incremental $40 million in free cash flow per year on average over the next five years, which can be used to reduce our debt.
Jeremy Thigpen: In June, we issued 55.5 million shares and $130 million in aggregate principal amount of our 8% senior notes due 2027 as part of the consideration to acquire the outstanding 67% ownership interest in the joint venture which owns Transocean Norga.
Keelan Adamson: In June, we issued 55.5 million shares and $130 million in aggregate principal amount of our 8% senior notes due 2027 as part of the consideration to acquire the outstanding 67% ownership interest in the joint venture which owned Transocean Norga.
Jeremy Thigpen: In addition to the qualitative benefits Keelan mentioned earlier, this transaction is anticipated to provide an incremental $40 million in free cash flow per year, on average, over the next five years, which can be used to reduce our debt. And, as a reminder to the participants, please limit yourself to one initial question and one follow-up. Good morning.
Sad Beta: We remain committed to maximizing the conversion of our industry-leading backlog into cash. We will continue to ensure that our capital allocation aligns with our priority of delivering the balance sheet and also allows us to effectively manage our portfolio of assets. We believe this approach fosters sustainable growth in the up cycle and enables us to capitalize on opportunities that maximize value creation.
Keelan Adamson: We remain committed to maximizing the conversion of our industry-leading backlog into cash. We will continue to ensure that our capital allocation aligns with our priority of leveraging the balance sheet and also allows us to effectively manage our portfolio of assets.
Alison Johnson: This concludes my prepared remarks, and I'll turn it back over to Allison for Q&A. Thanks, Dad.
Keelan Adamson: This concludes my prepared remarks and I'll turn it back over to Alison for Q&A.
Operator: Brittany, we're now ready to take questions. Another reminder for the participant. Please limit yourself to one initial question and one follow-up question. At this time, if you would like to ask a question, please press the star key on your telephone keypad. You may remove yourself from the queue at any time by pressing Start Two. Once again, that is start end one.
Alison Johnson: At this time, if you would like to ask a question, please press the star and 1 on your telephone keypad. You may remove yourself from the queue at any time by pressing star 2. Once again, that is star and 1 if you would like to ask a question. We will take our first question from Eddie Kim with Barclays. Your line is now open.
Eddie Kim: If you would like to ask a question, we'll take our first question from Eddie Kim with Barclays. Your line is now open.
Eddie Kim: Hi, good morning. I just wanted to start off with VP's FID of the cascaded development recently, which will need a 20 KPSI rig. Would the Atlas be a good candidate for that when it comes off contract with Beacon in early 27, or do you think VP will need a rig earlier than that? In which case, what do you see as a likelihood of maybe another upgrade to 20 KPSI capabilities? And how much would you expect to be the cost of that type of upgrade?
Eddie: I just wanted to start off with BP's FID for the Casketa development recently, which will need a 20 kpsi rig. Would the Atlas be a good candidate for that when it comes off contract with Beacon in early 27? Or do you think BP will need a rig earlier than that? In which case, what do you see as the likelihood of maybe another upgrade to 20 kpsi capabilities? And how much would you expect to be the cost of that type of upgrade?
Eddie Kim: Hi, good morning. I just wanted to start off with BP's FID of the Casquita development recently, which will need a 20 KPSI rig. Would the Atlas be a good candidate for that when it comes off contract with Beacon in early 27? Or do you think
Eddie Kim: BP will need a rig earlier than that, in which case, what do you see as a likelihood of maybe another upgrade to 20 kpsi capabilities? And how much would you expect to be the cost of that type of upgrade?
Roddie Mackenzie: Thanks, Eddie.
Roddie Mackenzie: Kind of a two-part question. I'll let Roddie handle the marketing side of it, and Keelan will address what it takes to actually upgrade an existing seventh-gen rig to 20 KKPSI. Yeah, so as we've illustrated before, the point of us doing the proactive upgrade to that rig was to be the rig available when the 20 k completion activity really kicked off. So that would be a logical choice, I think, and certainly having a rig available, not only in that time frame, but a hot rig that's gone through all of the upgrades, and it's been operating for some time in 20 K.
Speaker Change: what it takes to actually upgrade an existing 7th gen rig to 20k capable.
Speaker Change: Yeah, yeah, so, um...
Speaker Change: That would be a logical choice, I think, and certainly having a rig available, not only in that time frame, but a hot rig that's gone through all of the upgrades and has been operating for some time in 20K, I think that opportunity would suit us very well.
Roddie Mackenzie: I think that opportunity would suit us very well.
Roddie Mackenzie: And maybe just to pick up on the second part of that question on what it takes to upgrade another rig. First of all, you obviously got to buy all the equipment at the lead times. It's associated with that, and today I think it's probably in the 40-month mark to be able to get a 20 KBLP if you ordered it today. On top of that, there's a lot of other inflammatory equipment that's required for the riser system. And then you've got to go and take a hole and upgrade all of the internal piping systems for that rig that related to the pressure control system up to 20 KPSI as well.
Speaker Change: First of all, you've obviously got to buy all the equipment with the lead times associated with that. Today, I think it's probably in the 40-month mark to be able to get a $20,000 DLP if you ordered it today. On top of that, there's a lot of other ancillary equipment that's required for the riser system.
Roddie Mackenzie: And that is an intrusive and long process.
Roddie Mackenzie: So, if you think about a seventh-generation rig that's currently working, they'll have to come out of service, and there will probably be an opportunity cost associated with that for 46 KPSI to be able to at least get that upgrade completed, along with the lead times for the other equipment that's required. You're looking at three to four years in advance and multiple 200 million plus to be able to complete that upgrade without even considering the opportunity cost that's lost. Right.
Jeremy Thigpen: to be able to complete that upgrade without even considering the opportunity cost that's lost. And I suggest also that while the rigs would technically be characterized as warm-ish, we've taken a number of steps to ensure that they are marketable, but the costs associated with keeping them in that condition are as low as possible. Okay, got it. Understood and very clear. Thank you. I'll turn it back. Thank you, Eddie
Speaker Change: Thank you for your time.
Roddie Mackenzie: So we're in a pretty good position.
Roddie Mackenzie: I'm hearing it's difficult to upgrade, which both will be the Alice and the Titan. I've got it.
Keelan Adamson: [inaudible]
Speaker Change: They're in a pretty good position. I'm hearing it's difficult to upgrade which bodes well for me.
Eddie Kim: My follow-up is just on the four-year 24 EBITDA guidance, which you maintained. Just wondering what the assumption is on your idle rig. So you're too rigged idle today, the DD3 and the inspiration. Does your latest guidance, the midpoint, if let's say assume incremental work for these rigs this year, and to the extent they get no work this year, does that put us kind of at the low end of your EBITDA guide? I just actually think about that. Yeah, so, you know, in our guidance and in our marketing strategy, we are not expecting to put those rigs to work this year.
Speaker Change: Does your latest guidance, the midpoint of it, let's say, assume incremental work for these rigs this year? And to the extent they get no work this year, does that put us kind of at the low end of your EBITDA guide? How should we think about that?
Sad Beta: So, that's already baked in there that they will not be active during this year. I think, as we said before, we're basically going to only put them on the right opportunities, but we're not going to try and compete with them for short term work. So, we're basically keeping them dry for longer opportunities. So, yeah, our guidance numbers have no activity on those rigs. You know, it's just also that while the rigs would technically be characterized as warm-ish, we've taken a number of steps to ensure that they are marketable, but the cost associated with keeping them in that condition are as low as possible.
Speaker Change: I think as we've said before...
Speaker Change: And I suggest also that while the rigs would technically be characterized as warm-ish, we've taken a number of steps to ensure that they are marketable, but the costs associated with keeping them in that condition are as low as possible. Okay, got it. Understood and very clear. Thank you. I'll turn it back.
Eddie Kim: Okay. Got it. Understood and very clear. Thank you.
Eddie Kim: I'll turn it back.
Operator: Thank you.
Operator: Thank you. We'll take our next question from Greg Lewis with BTIG. Your line is now open.
Greg Lewis: We'll take our next question from Greg Lewis with BTIG. Your line is now open.
Speaker Change: Thank you. We'll take our next question from Greg Lewis with BTIG. Your line is now open.
Greg Lewis: Hey, thank you, and good morning, and thanks for taking my questions. Hey, you know, congratulations on locking up the Invictus.
Gregory Lewis: Hey, thank you, and good morning. And thanks for taking my questions. Hey, you know, congratulations on locking up Invictus. I did want to talk a little bit about your strategy in the Gulf of Mexico, though. I mean, that rig was kind of like the hammer rig over the last couple of years, pushing rates higher. You kind of locked that rig up.
Greg Lewis: Hey, thank you and good morning, and thanks for taking my questions. Hey, you know, congratulations on locking up the Invictus.
Greg Lewis: I did want to talk a little bit about your strategy in the Gulf of Mexico, though. I mean, that rig was kind of been like the hammer rig over the last couple of years. You know, pushing rigs higher. You kind of lock that rig up.
Douglas Goldstein: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show.
Jeremy Thigpen: I mean, you know, realizing that the Conqueror is on contract into kind of the middle of next year. Is that going to cause us to think about that rig being, you know, a spot rig bouncing around the Gulf of Mexico? Or are we at a point in the cycle now where, you know, customers are really starting to lock up any and all available 7G hot rigs? Thanks, Greg. So, there's really not been any change in our approach to the balance sheet. I mean, we do have the discipline of debt associated with the third financing, the regular amortizations.
Greg Lewis: I mean, you know, realizing that the conquerors on contract and the kind of the middle and next year, is that kind of going to should we think about that rig being a, you know, a spot rig bouncing around the Gulf of Mexico? Or are we at a point in the cycle now where, you know, customers are really starting to lock up any and all available 7G hot rigs?
Speaker Change: pushing rates higher, you kind of lock that rig up. I mean, you know, realizing that the Conqueror is on contract into kind of the middle of next year, is that kind of going to, should we think about that rig being a
Speaker Change: you know, a spot rig bouncing around the Gulf of Mexico, or are we at a point in the cycle now where you know, customers are really starting to lock up any and all available 7th G hot rigs?
Roddie Mackenzie: Yeah, hi, I think I'll take the last part of that first. And so, yeah, that's exactly the mode that the customers are in at the moment. Right assets. They're really looking to lock them up. So you know, Jeremy had mentioned them. We do have an L.O.I. on one of those rigs and we, we never give the details of that and we're kind of, we kind of would rather not. But we're, you know, very confident that those rigs are going to have good work immediately ahead of them.
Speaker Change: Yeah, I think I'll take the last part of that first.
Speaker Change: So, yeah, that's exactly the mood that the customers are in at the moment.
Jeremy Thigpen: right assets, they're really looking to lock them up. So, you know, as Jeremy had mentioned, we do have an LOI on one of those rigs, and we never give the details of that, and we kind of would rather not. But we're
Speaker Change: I feel very confident that those rigs are going to have good work immediately ahead of them. Hopefully we'll have some updates very, very soon for you on that.
Roddie Mackenzie: Hopefully we'll have some updates very, very soon for you on that. But as we think about, you know, the strategy on the Invictus, as you point out, that was our flex rig. You know, she was the market mover at some point and, you know, now we're, we really got a fantastic opportunity here with a new customer for us to put her away on some very meaningful work that opens up a number of very other, very interesting other opportunities. And I think that's kind of the, what we see at the moment, we're basically, you know, it was Jeremy alluded to very close to being sold out.
Speaker Change: But...
Speaker Change: as we think about, you know, the strategy on the Invictus.
Speaker Change: As you point out, that was our flex rig, she was the market mover at some point and now we've really got a fantastic opportunity here.
Speaker Change: with a new customer for us to put her away on some very meaningful work that opens up a number of very interesting other opportunities. And I think that's kind of the...
Speaker Change: What we see at the moment, Greg, we're basically...
Roddie Mackenzie: But, you know, we've certainly seen a significant increase in contracting activity over the last couple of months. In fact, you know, as we think about having booked 1.4 billion dollars already this year, 1.2 of that has happened just within the last few months. So, we've seen a real acceleration in the number of awards. And of course, covering a lot of the white space that we had that now is really a very, very small amount of white space left in the working.
Speaker Change: As Jeremy alluded to, very close to being sold out, but we've certainly seen a significant increase in contracting activity over the last couple of months.
Speaker Change: In fact, you know, as we think about having booked $1.4 billion already this year.
Speaker Change: 1.2 of that has happened just within the last few months so we've seen a real acceleration in the number of awards and of course covering a lot of the white space that we had that now is really a very very small amount of white space left on the working fleet.
Greg Lewis: I guess bad; you know, kind of curious how you're thinking about the balance sheet.
Speaker Change: Okay, great, and just...
Speaker Change: You know, I guess that, you know, kind of curious how you're thinking about, you know, the balance sheet. I mean, I get the sense from investors, you know, definitely you guys have been doing a lot of keeping busy, you know, but I think the goal is to, you know, maybe start getting that, you know, total debt level down.
Greg Lewis: I mean, I get the sense from investors; definitely, you guys have been doing a lot to keep them busy. But I think the goal is to maybe start getting that total debt level down.
Sad Beta: And so, as we're here, you kind of have 24 guidance. You know, the table is that any kind of long range, long-term kind of targets you're thinking about, you know, around, you know, that debt level as kind of we look out, you know, in the over the next couple of years. Thanks, Greg. So there's really not been any change in our approach to the balance sheet. I mean, we do have the discipline of debt associated with the third financing, the regular amortizations. You know, we have talked about our interest in getting to a credit rating level of, you know, double B-ish, which towards all the rights and privileges that one could have being essentially a, you know, a junk rated, with a junk rated balance sheet.
Speaker Change: And so, you know, as we're here, you kind of have 24 guidance.
Speaker Change: you know, the table is that any kind of long range, long term kind of targets you're thinking about, you know, around, you know, that that that level is kind of as kind of we look out, you know, in the over the next couple of years.
Speaker Change: Thanks, Greg. So there's really not been any change in our approach to the balance sheet. I mean we do
Jeremy Thigpen: The discipline of debt associated with the third financing
Jeremy Thigpen: You know, we have talked about our interest in getting to a credit rating level of, you know, double B-ish, which affords all the rights and privileges that one could have being essentially a junk rating with a junk rated balance sheet. No change there. We think that we can get to that place somewhere in the 2026 period of time. And I suggest also that that's not necessarily anything more than mathematics.
Jeremy Thigpen: the regular amortizations. You know, we have talked about our interest in getting to a credit rating level of, you know, double B-ish, which affords all the rights and privileges that one could have being
Sad Beta: No change there; we think that we get to that place somewhere in the 2026 period of time. And I suggest also that that's not necessarily anything more than mathematics. We do need to continue to reduce the overall gross debt on our balance sheet, but we've not really articulated any specific targets at this point. But no change to our, to our plans.
Speaker Change: No change there. We think that we get to that place somewhere in the 2026.
Speaker Change: period of time. And I'd suggest also that that's not necessarily anything more than mathematics. We do need to continue to reduce the overall gross debt on our balance sheet, but we've not really articulated any specific targets at this point, but no change to our to our plans.
Jeremy Thigpen: We do need to continue to reduce the overall gross debt on our balance sheet, but we've not really articulated any specific targets at this point. But there will be no change to our plan. Okay, thank you all very much for your time. Hey, good morning, and thank you for taking my question. What's that?
Greg Lewis: Okay. Thank you all very much. Thank you, Greg.
Speaker Change: Thank you all very much for your time.
Operator: Thank you. We'll take our next question.
David Smith: David Smith with Pickering Energy Partners. Your day.
Ed: Thank you, Ed.
Speaker Change: Thank you. We'll take our next question from David Smith with Pickering Energy Partners. Your line is now open.
David Smith: Good morning. And thank you for your question. Good morning, Dave. Was a very impressive harsh environment rate in Q2. I think the reported average of almost 450,000 a day, which was, you know, substantially better than the 386,000 a day average, you know, that was beyond the last fleet data support for Q2.
David Smith: Hey, good morning and thank you for taking my question.
Jeremy Thigpen: Very impressive harsh environment rates in Q2. I think the reported average of almost 450,000 a day, which was substantially better than the 386,000 a day average that was on the last fleet status report for Q2. And I was just going to ask if you could remind us about the moving pieces that contribute to that day rate outperformance. Okay, I appreciate it. And I know this isn't, you know, really direct competition with you, and you don't have that much availability for the next year and a half anyway.
dad: Morning Dad. What's up?
Jeremy Thigpen: Very impressive harsh environment rates in Q2. I think the reported average of almost 450,000 a day which was you know substantially better than the 386,000 a day average.
David Smith: And I was just going to ask if you could remind us about the moving pieces that contribute to that direct performance. Yeah. And hey, I think what we actually posted was like a 482 and a 517. So there's substantially higher than the 300 rates that you mentioned before. And this really happened because of the, the, the exodus of rigs from Norway really tightened up that market. And of course, with the rigs finding gainful employment elsewhere, that remarket remains particularly tight. And I think going forward, we see that there's going to be another call on rigs to go back to Norway, which I think can only bolster those numbers.
Speaker Change: that was on the last fleet status report for Q2. And I was just gonna ask if you could remind us about the moving pieces that contribute to that day rate out performance.
Speaker Change: Yeah, hey, I think what we actually posted was like a 483 and a 517.
Speaker Change: So they're substantially higher than the 300 rates that you mentioned before.
Speaker Change: and this really happened because of the...
Speaker Change: The exodus of RIGS from Norway really tightened up that market, and of course with the RIGS finding gainful employment elsewhere, that remark remains.
Jeremy Thigpen: [inaudible]
David Smith: So I would expect that a lot of those fixtures are going to be in those very high floors and fives as numbers going forward. Yeah, I appreciate it. Right. Definitely. I was, I was more referring to, you know, not, 24, which, you know, on the press releases, 449,600. And just kind of thinking about that and comparison to the FSR from last April, right, where, you know, you've got estimated average contract rates of 386,000 for the harsh environment fleet in the second quarter. And I know there's, there's some other, you know, items that can explain a different. I was just asking for a request around those items. Yeah, Dave, I'm trying to think back, but if I recall, second quarter of last year, we had quite a bit of waiting on weather, which would have been at lower day rates.
Speaker Change: Yeah, hey, I appreciate it, right? Definitely.
Speaker Change: I was more referring to, you know, not leading edge, but the average daily revenue, you know, realized in Q2'24, which, you know, on the press release is $449,600. And just kind of thinking about that in comparison to...
Speaker Change: The FSR from last April, right, where, you know, you've got an estimated average contract rate of 386,000.
Speaker Change: for the harsh environment fleet in the second quarter. And I know there's some other items that kind of explain that difference. I was just asking for a refresh around those items.
Speaker Change: Yeah, Dave, I'm trying to think back, but if I recall, second quarter of last year, we had quite a bit of waiting on weather, which would have been at lower day rates, so that probably factored into that. I don't have the information readily available, but I think that's probably part of it. That, coupled with the higher day rates that we booked here of late,
David Smith: So that probably factored into that. I don't have the information readily available, but I think that's probably part of it. That coupled with the higher day rates that we booked here of late and then roll over contracts, where options are priced higher. So the combination of all of those three, I think, is what led to the fairly significant increase in day rate for those pictures. Okay, appreciate it.
Speaker Change: and then rollover contracts where options are priced higher. So the combination of all of those three, I think, is what led to the fairly significant increase in day rate for those fixtures.
David Smith: And I know this isn't, you know, really direct competition with you. And then you don't have that much availability for the next year and a half anyways. But, yeah, just thinking about the pretty, pretty notable, you know, the plan for new contracts on the benign, ultra deep water simmies. You want to ask if you're seeing any change in the competitive behavior of Joe's asset owners, including maybe more aggressive pricing competition to try to get work away from the tier one rigs. Yeah, we are. Are you talking about in the UK primarily, or earlier than nine families, where we've had, you know, pretty light contractions for the benign? What are some.
Jeremy Thigpen: I appreciate it and I know this isn't you know really direct competition with you and you don't have that much availability for the next year and a half anyways but yeah just thinking about the
Jeremy Thigpen: But yeah, just thinking about the pretty, pretty notable decline in new contracts on the benign Ultra Deepwater CIMIs. Wanted to ask if you're seeing any change in the competitive behavior of Joe's asset owners, including maybe more aggressive pricing competition to try to get work away from the tier one rig. Yeah, are you talking about the UK primarily, or Yeah, look, I think we have very little exposure to that point out, but I think the operators at the moment are very focused on booking the higher specification assets, and I think as those run out, which is happening very rapidly, you'll probably see a lot more attention going to those benign environment semis and the 6th gen fleet.
Speaker Change: Pretty pretty notable, you know decline for new contracts on the benign ultra-deep water semis
Jeremy Thigpen: Wanted to ask if you're seeing any change in the competitive behavior, you know of Joe's asset owners Including maybe more aggressive pricing competition to try to get work away from the tier one rigs
Speaker Change: Yeah, are you talking about in the UK primarily or...
Jeremy Thigpen: We're benign semis. We've had pretty light contracting for the benign deepwater semis.
David Smith: Yeah, look, I think we're, we have very little exposure to that point out, but I think the operators at the moment are very focused on booking the higher specification assets. And I think as those run out, which is happening very rapidly. You'll probably see a lot more attention going to those benign environment semies and the six gen fleet. But, yeah, for now, it's all about trying to make sure people get time on the rigs that they really need to drill a program.
Jeremy Thigpen: Yeah, look, I think we have very little exposure to them.
Jeremy Thigpen: But I think the operators at the moment are very focused on booking the higher specification assets.
Jeremy Thigpen: And I think as those run out, which is happening very rapidly, you'll probably see a lot more attention going to those benign environment semis in the sixth gen fleet.
Jeremy Thigpen: But for now, it's all about trying to make sure people get time on the rigs that they really need to drill their programs.
David Smith: Next reference. Thank you.
Jeremy Thigpen: But for now, it's all about trying to make sure people get time on the rigs that they really need to drill a program. Thank you. We'll take our next question from Kurt Hallead with Benchmark. Your line is now open. Hey, good morning. I always appreciate the color.
Speaker Change: makes perfect sense. Thank you.
Kurt Hallead: We'll take our next question from Kurt Hilled with Benchmark. Your line is now open.
Speaker Change: Thank you. We'll take our next question from Kurt Haled with Benchmark. Your line is now open.
Jeremy Thigpen: Thank you. Thanks a lot. I appreciate it. Thank you very much.
Kurt Hallead: Hey, good morning. I always appreciate the color. Thank you.
Kurt Hallead: Morning, Kurt. Hey, I guess, let me, let me just start by, by this. Let's start it this way: you know, given that it's an offshore drilling day on conference calls. So I'm just kind of calibrate. We've heard from a couple of other peer groups, and it sounds like between now and 2026. There could be incremental demand for 70 drill ships, and the range of somewhere between the five to 10. Is that a number that you guys like when kind of parse through your commentary? Is that a number that we could get to as well? Yeah, absolutely.
Kurt Hallead: Hey, good morning. I always appreciate the color. Thank you.
Kurt: Good morning, Kurt.
Speaker Change: I guess let me just start by, let's start it this way, you know, given that it's offshore drilling day on conference calls.
Speaker Change: So, just kind of calibrate, we've heard from a couple of the other peer group and it sounds like...
Kurt Hallead: Between now and 2026, there could be incremental demand for 7G drill ships in the range of somewhere between 5 to 10. Is that a number that you guys, like when kind of parsed through your commentary, is that a number that we could get to as well?
Kurt Hallead: That would, in fact, be our number basically five to 10 incremental over the meat mix. All the sense in the world.
Speaker Change: yeah absolutely that would in fact would be our number basically five to ten incremental over the
Jeremy Thigpen: Okay, that's awesome.
Speaker Change: It makes all the sense in the world.
Jeremy Thigpen: So Jeremy, maybe for you or Keelan; either way, you know, there had been a relative wall in the cadence of contracts. It seems up until recently and the contracts that have been signed have now, you know, busted above that $500,000 a day marker. How do you see things evolving from here? Do we expect maybe there just to be a kind of a digestion period of what's been announced, then potentially another kind of spurt as we get toward Iran? There was that spurt going to be more of a 2025 kind of dynamic. Yes, I'll take that in, and Roddy and Keelan can chime in as appropriate.
Speaker Change: Okay, that's awesome.
Jeremy Thigpen: So, Jeremy, maybe for you or Keelan, either way, there has been a relative lull in the cadence of contracts, it seems, up until recently, and the contracts that have been signed have now busted above that $500,000-a-day marker.
Kurt Hallead: How do you see things evolving from here? Do we do we expect maybe there just to be a kind of a digestion period of what's been announced and then potentially another kind of spurt as we get toward year-end or is that spurt going to be more of a 2025 kind of dynamic?
Speaker Change: Yes, I'll take that, and Roddy and Keelan can chime in as appropriate. You know, we said at the last call, because there was a lot of talk about the lull in contracting activity, we said, listen, we haven't been this busy in the last decade.
Jeremy Thigpen: You know, we said in the last call because there was a lot of talk about the low and contracting activity. We said, "Listen, we haven't been this busy in the last decade." We are in there are all direct negotiations of the vast majority of them. So you don't see them. You don't see all the conversations that are taking place behind the scene. But we said they're a little bit slower to execute these contracts because the dollar values are so substantial now. You know, back during the downturn, when you're talking about one or two, well, the $253,000 a day, our customers could get those approved really quickly because it didn't make that much of a financial impact to them.
Speaker Change: We are, they're all direct negotiations, the vast majority of them, so you don't see them. You don't see all the conversations that are taking place behind the scenes. But we said they're a little bit slower to execute these contracts because the dollar values are so substantial now.
Speaker Change: You know, back during the downturn, when you're talking about one or two wells at $250,000, $300,000 a day, our customers could get those approved really quickly.
Jeremy Thigpen: Now we're talking about $500,000 a day plus over multiple years. And the approval process is pretty lengthy, and the terms and conditions and negotiating of those get pretty onerous. And so it just takes a little longer to work through the system. And as we saw here recently with our fleece ad report and then the recent announcement of BP, sometimes they all come in a flurry. It doesn't mean there's so much activity that's going on in the background right now. And there's so much still in front of us. I mean, I would hope and expect that we'll have more announcements like these as we move through the rest of the year because we're in deep negotiations, deep conversations with our customers who all want to push these programs forward.
Speaker Change: because it didn't make that much of a financial impact to them. Now we're talking about $500,000 a day plus over multiple years.
Speaker Change: And the approval process is pretty lengthy, and the terms and conditions and negotiating of those get pretty onerous. And so it just takes a little longer to work through the system. And as, you know, as we saw here recently with our police status report and then the recent announcement of BP, sometimes they all come in a flurry. It doesn't mean there's so much activity that's going on in the background right now, and there's so much...
Speaker Change: still in front of us. I mean, I would hope and expect that, you know, we'll have more announcements like these as we move through the rest of the year because we're in deep negotiations, deep conversations with our customers who all want to push these programs forward. It just takes a little bit longer for them to get all the necessary approvals internally and through their partners.
Jeremy Thigpen: It just takes a little bit longer for them to get all the necessary approval internally and through their partners. And so the cadence, I couldn't tell you; I don't know that we will see a great flurry like we did here over the course of the last couple of months all at once.
Speaker Change: And so the cadence, I couldn't tell you. I don't know that we will see a great flurry like we did here over the course of the last couple of months all at once, but I do expect multiple contracts to be executed and announced over the course of the coming weeks and months.
Roddie Mackenzie: But I do expect multiple contracts to be executed and announced over the course of the coming weeks. Yeah, I'll just add a little bit to that. I think there's a bit of a misunderstanding or a disconnect between what's reporting this supply and demand amongst the analysts and what we actually see. So, to Jeremy's point, we've never seen a law in contracting activity. There may have been a pause in some of the time when the fixtures were made, but as we had articulated before, the decisions are much bigger now, right? So you're talking about much larger programs, higher day rates, and those take longer, but now we're seeing a rapid acceleration in these awards.
Speaker Change: I'll just add a little bit to that. I think there's a bit of a misunderstanding or a disconnect between what's reported as supply and demand.
Jeremy Thigpen: in amongst the analysts and what we actually see. So to Jeremy's point, you know.
Jeremy Thigpen: We've never seen a lull in contracting activity.
Speaker Change: there may have been a kind of a pause in some of
Speaker Change: when the pictures were made.
Speaker Change: but as we had articulated before...
Speaker Change: The decisions are much bigger now, right? So you're talking about much larger programs, higher day rates, and those take longer. But now we're seeing a rapid acceleration in these awards.
Roddie Mackenzie: And 2024 is already, to this point of the year, a great contracting year for us, and we expect it to be even better by the end. So it could be one of our best ever contracting years. So there's obviously a tremendous number of announcements on our fleet that we're very proud of, but we expect a significant number more still to come. And I think you'll see that our backlog is already claimed. If we include the BP fixtures that we just announced, we're sitting currently at 9.1 billion, and we expect that to grow even farther.
Jeremy Thigpen: And 2024 is already, to this point of the year, a great contracting year for us.
Speaker Change: You'll see that our backlog has already climbed if we include the BP fixture that we just announced. We're sitting currently at $9.1 billion and we expect that to grow even further. So I think it's going to be a prolific year.
Roddie Mackenzie: So I think it's going to be a prolific year. Awesome.
Sad Beta: And then one for once with that. So that, you know, given where the backlog currently sits today and the average rates in the backlog and so on, how can we think about the prospect of converting that backlog into cash flow and then into outlet debt reduction, maybe following on one of the questions that were really set earlier. But again, assuming no change in current backlog or day rate structure, how does that convert the cash flow and how much debt can you take out of the system over the next couple of years? So, you know, as I mentioned, we do have one of that associated with other cases.
Speaker Change: Awesome, and then one for Thad.
Speaker Change: that, you know, given where the backlog currently sits today and the average rates in the backlog and so on,
Speaker Change: How can we think about the prospect of converting that backlog into cash flow and then into Outlay debt reduction may be following on one of the questions that were really said earlier but again assuming no change in current backlog or day rate structure
Kurt Hallead: How does that convert to cash flow and how much debt can you take out of the system over the next couple of years?
Speaker Change: So, you know, as I mentioned, we do have...
Sad Beta: And sort of from this point on, we anticipate that there'll be a steady growth in cash flow available to address the balance sheet. You know, in the natural course, we anticipate that by the end of 2026 or thereabouts will be in the neighborhood of, you know, $4.7 billion of debt, and that goes down significantly in the next. The objective here is to put every available dollar or cash flow that makes sense into improving the condition of the balance sheet. It's going to be a capital allocation exercise. You know, we anticipate that there will be opportunities to put some of our coal stack assets back to work.
Speaker Change: I'm a debt associator with RTK.
Speaker Change: And sort of from this point on, we anticipate that there'll be a steady growth in cash flow available to address the balance sheet. You know, in the natural course, we anticipate that by the end of 2026 or thereabouts, we'll be in the neighborhood of
Speaker Change: you know, $4.7 billion of debt, and then it goes down significantly in the next...
Speaker Change: The objective here is to put every available dollar of cash flow that makes sense into improving the condition of the balance sheet.
Speaker Change: It's going to be a capital allocation exercise. We anticipate that there will be opportunities to put some of our cold stacked assets back to work. There's always going to be a timing difference, notwithstanding the discipline that we'll exercise in ensuring that customers pay for those and we get the appropriate return.
Sad Beta: There's always going to be a timing difference, notwithstanding the discipline that we'll exercise in ensuring customers pay for those, and we get the appropriate return. But given that our valuation is predicated primarily on our ability to reduce debt, it makes sense for us to deploy every dollar that we can to that purpose. That's great. Thanks a lot. Appreciate it.
Speaker Change: But given that our valuation is predicated primarily on our ability to reduce debt, it makes sense for us to deploy every dollar that we can to that purpose.
Sad Beta: Thank you.
Douglas Becker: We'll take our next question from Doug Becker with Capital One. Your line is open.
Kurt Hallead: That's great. Thanks a lot. Appreciate it.
Jeremy Thigpen: Thank you. We'll take our next question from Doug Becker with Capital One. Your line is open.
Douglas Becker: Thank you. So it looks like the Atlas contract makes a distinction between drilling and 20K completion activity and then taking a look at the Invictus. I'm guessing there's probably some castita drilling associated with that as well.
Speaker Change: Thank you. So it looks like the Atlas contract makes a distinction between drilling and 20k completion activity, and then taking a look at the Invictus.
Douglas Becker: So curious if you're seeing the 20K drilling versus completion market evolving in a way that the contracts are going consistently making some type of distinction between drilling versus completion. Yeah, hey, look, that's not the case going forward. This is actually just a small anomaly that, essentially, the plan here was always to make the atlas a completion centric vessel, simply because you have the features of 20K that nobody else does. That we would expect to keep her focused on 20K completions going forward. So this is really just the evolution of what, from when we took delivery of the rig all the way through its kind of made in contract and then into these extensions that we've had.
Kurt Hallead: I'm guessing there's probably some cascada drilling associated with that as well. So, curious if you're seeing the 20K drilling versus completion market evolving in a way that the contracts are going to consistently making some type of distinction between drilling versus completion.
Speaker Change: Yeah, look, that's not the case going forward. There's actually just a small anomaly that essentially...
Speaker Change: The plan here was always to make the Atlas a completion-centric vessel.
Speaker Change: simply because you have the features of 20K that nobody else does. So we're basically at the point now that
Speaker Change: The $20K market is now mature enough and there's a pipeline of many, many different prospects that we would expect to keep her focused on $20K completions going forwards.
Speaker Change: So this is really just the evolution of what, from when we took delivery of the rig all the way through its maiden contract and then into these extensions that we've had. And going forward after that point, she will be very focused on 20k because now there's very significant demand for 20k.
Sad Beta: And going forward after that point, she will be very focused on 20K because now there's very significant demand for 20K. It completely makes sense.
Sad Beta: And then a quick one for FAD. The email guidance seems to imply that O&M expense will decline in the fourth quarter. We're just hoping you could talk about that at just a high level, but some of the meeting parts might be on that. I think the O&M guidance is generally consistent with what we articulated in the past quarter. There may be a slight decline. It's going to be a function of the amount of the O&M costs that were deferred in this period. Our spread over the next couple of quarters, but generally I'd expect it to be close to flat.
Kurt Hallead: It completely makes sense. And then a quick one for Thad. The annual guidance seems to imply that O&M expense will decline in the fourth quarter. I was just hoping you could talk about that at just a high level, what some of the moving parts might be on that.
Speaker Change: I think the O&M guidance is generally consistent with what we articulated in the last quarter.
Speaker Change: There may be a slight decline. It's going to be a function of the amount of the O&M costs that were deferred in this period are spread over the next couple of quarters, but generally I'd expect it to be close to flat. There's a rounding element in there as well.
Sad Beta: There's a rounding element in there as well.
Douglas Becker: Thank you very much. Thank you.
Josh Jayne: And in that interest of time, our final question will come from Josh Jane with Daniel Energy Partners. Your line is now open.
Jeremy Thigpen: Thank you very much.
Speaker Change: Thank you and in the interest of time our final question will come from Josh Jane with Daniel Energy Partners. Your line is now open.
Josh Jayne: Thanks. First one I had is just on the Gulf of Mexico and your prepared comments. You talked about it, the market being in balance, but that there are a number of gap filler type programs to be awarded.
Kurt Hallead: Thanks. First one I had is just on the Gulf of Mexico and your prepared comments you talked about it, the market being in balance.
Josh Jayne: I was hoping you could elaborate on that and those opportunities a little bit, and then also just expand on your outlook for the Gulf of Mexico over the next 12 to 24 months. Yeah, so look, as we see it there, we have to talk about, you know, gap filler, but you know, as we mentioned before, one's under an LLI. We expect another one that's got options. So the likelihood of them actually being gap filler is very small. They're going to hopefully turn into firm term very soon. And that really puts us in a fantastic position for visibility.
Speaker Change: but that there are a number of gap filler type programs to be awarded.
Kurt Hallead: I was hoping you could elaborate on that and those opportunities a little bit and then also just expand on your outlook for the Gulf of Mexico over the next 12 to 24 months.
Jeremy Thigpen: Yeah, so look, as we see it here, we have to talk about, Oh, I'm sorry, you're talking about the Total Greenfield Exploration CapEx, not our CapEx. We thought you were talking about our CapEx, which is declining. No, no, no. No, no, no. Sorry about that.
Speaker Change: Yeah, so...
Jeremy Thigpen: Look, as we see it, we have to talk about gap fillers, but as we mentioned before, one's under an LOI, we expect another one that's got options, so the likelihood of them actually being gap fillers are very small. They're going to hopefully turn into firm term very soon.
Roddie Mackenzie: So you ask about the outlook for the Gulf of Mexico. As we look at it, our fleet in the Gulf, assuming that we closed these last couple of little pieces, is essentially sold out for a very significant period of time. Some of the rigs sold out for several years going forward, but as we think about the availability that we have, we have very little availability over the next 24 months. And the great thing about that is not only do we have the visibility to the activity, but all of the rates that we've booked in the Gulf of Mexico for these longer term pieces are very attractive.
Speaker Change: And that really puts us in a fantastic position for visibility. So you ask about the outlook for the Gulf of Mexico.
Speaker Change: As we look at it, our fleet in the Gulf, assuming that we close these last couple of little pieces...
Speaker Change: is essentially sold out for a very significant period of time. Some of the rigs sold out for several years going forward, but as we think about the availability that we have, we have very little availability over the next 24 months.
Speaker Change: The great thing about that is not only do we have the visibility to the activity, but all of the rates that we've booked in the Gulf of Mexico for these longer-term PCs are very attractive.
Roddie Mackenzie: So that's expected to generate very substantial cash loads, and really part of the strategy that we've had all along about keeping the right assets available for the right opportunities. And now we're seeing that coming through.
Speaker Change: So, that's expected to generate very substantial cash flows, and really part of the strategy that we've had all along about keeping the right assets available for the right opportunities, and now we're seeing that coming through in spades.
Josh Jayne: Thanks, and then one thing I wanted to go back to it that was also in the prepared marks. I think I've missed the detail, but you talked about a level of cat-backs increasing from 2024 through 2027 that was largely going to be driven by expansions in South America and Africa. I just was hoping you could go back to that a little bit and then for that level of cat-backs increase, because you talked about how many rigs ultimately you would expect that to consume. You talked about the five to ten, maybe 12 months from now, but just how you're thinking about that level of cat-backs increase and what the rig count, what it could consume in 2027.
Speaker Change: Thanks and then one thing I wanted to go back to it that was also in the prepared remarks I think I've missed the detail but you talked about a level of CapEx increasing from 2024 through 2027 that was
Speaker Change: largely going to be driven by expansions in South America and Africa. I just was hoping you could go back to that a little bit and then for that level of CapEx increase, could you talk about how many rigs ultimately you would expect that to consume? You talked about the 5 to 10 maybe.
Speaker Change: 12 months from now, but just how you're thinking about that level of CapEx increase and what the rate count, what it could consume in 2027. Thank you.
Josh Jayne: Thank you. Sorry, could you repeat the question? It was a little bit muffled. Sorry about that. Yeah, I'm here. Sorry. In the prepared marks, you said something about a level of cat-backs that was expected to increase. I think it was more than 100% from 2024 through 2027, which was going to be driven by deep water activity in South America and Africa, and I was just curious if you could repeat those numbers and talk about how many rigs that would ultimately consume from going from sort of where we are today to then. Oh, I'm sorry. You're talking about total green collect variation cat-backs, not our cat-backs.
Speaker Change: Sorry, could you repeat the question? We're all, it was a little bit muffled.
Jeremy Thigpen: Sorry about that. Josh, are you still there? Yeah.
Speaker Change: So, in the prepared remarks, you had said something about a level of CapEx that was expected to increase. I think it was more than 100% from 2024 through 2027, which was going to be driven by deep water activity in South America and Africa.
Speaker Change: and I was just curious if you could repeat those numbers and talk about how many rigs that would ultimately consume going from sort of where we are today to then.
Jeremy Thigpen: Oh, I'm sorry, you're talking about the Total Greenfield Exploration CapEx, not our CapEx. We thought you were talking about our CapEx, which is declining.
Josh Jayne: We thought you were talking about our tactics, which is declining. No, no, sorry. Sorry about that. So in the prepared remarks, it was global offshore greenfield exploration and production investments are projected to grow to $110 billion in 2027, that's up 129% from $48 billion in 2024. And so that is what we believe is going to be driving the incremental five to ten rigs that we discussed earlier on the column, one of the Q&A sessions. So I mean, just that level of incremental capital is obviously going to lead to an increase. And so that's really what's giving us the kind of the confidence that we will see an increase in rig count.
Jeremy Thigpen: So in the prepared remarks, it was global offshore greenfield exploration and production investments are projected to grow to $110 billion in 2027. That's up 129% from $48 billion in 2024. And so that is what we believe is going to be driving the incremental five to 10 rigs that we discussed earlier on the call in one of the Q&A sessions. So, I mean, just that level of incremental capital is obviously going to lead to an increase.
Speaker Change: No, no, no. Sorry about that. For the industry, yes. Thank you. So in the prepared remarks, it was, global offshore greenfield exploration and production investments are projected to grow to $110 billion in 2027.
Jeremy Thigpen: That's up 129% from $48 billion in 2024. And so that is what we believe is going to be driving the incremental 5 to 10 rigs that we discussed earlier on the call in one of the Q&A sessions. So, I mean, just that level of incremental capital is obviously going to lead to an increase.
Jeremy Thigpen: And so, that's really what's giving us the...
Jeremy Thigpen: and so that's that's really what's giving us the
Josh Jayne: And since we're 98% utilization on the active fleet, this is going to lead to customer finance reactivations. And so that does give us some confidence that we will ultimately begin reactivating some assets here in the not too distant future. Understood. Thank you very much.
Jeremy Thigpen: the confidence that we will see an increase in rig count. And since we're already at 98% utilization on the active fleet, this is going to lead to customer finance reactivations. And so that does give us some confidence that we will ultimately begin reactivating some assets here in the not too distant future.
Alison Johnson: Thank you, and I will now turn the call back over to Alison Johnson for any additional or close remarks.
Speaker Change: Understood. Thank you very much.
Jeremy Thigpen: Thank you and I will now turn the call back over to Alison Johnson for any additional or closing remarks.
Alison Johnson: Thank you, Brittany. And thank you, everyone, for your participation on today's call. We look forward to talking with you again when we report our third quarter of 2024 results.
Jeremy Thigpen: Thank you, Brittany, and thank you, everyone, for your participation on today's call. We look forward to talking with you again when we report our third quarter 2024 results. Have a good day.
Operator: Have a good day. Thank you.
Operator: This task concludes today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.
Speaker Change: Thank you, this does conclude today's program. Thank you for your participation. You may disconnect at any time and have a wonderful day.
Jeremy Thigpen: [inaudible]
Jeremy Thigpen: [inaudible]
Jeremy Thigpen: [inaudible]