Q3 2024 Valaris Ltd Earnings Call

October 31, 2024

To ask a question you May Press Star then one on your Touchtone phone to withdraw your question. Please press Star then two please.

Please note. This event is being recorded I would now.

Like to turn the conference over to Nick Georges Vice President Treasurer, and Investor Relations. Please go ahead.

Nick Georges: Welcome everyone to the Valores third quarter 2024 conference call with me today are president and CEO, and Tom <unk>, Senior Vice President and CFO, Chris Weber.

Senior Vice President and CEO, Matt line and other members of our executive management team.

We issued our press release, which is available on our website at <unk> Dot com.

Any comments, we make today about expectations are forward looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations.

[music]

Please refer to our press release and SEC filings on our website that define forward looking statements and list risk factors and other events that could impact future results.

Also please note that the company undertakes no duty to update forward looking statements.

During this call we will refer to GAAP and non-GAAP financial measures. Please see the press release on our website for additional information and required reconciliations.

Earlier this week, we issued our most recent fleet status report, which provides details on contracts across our rig fleet and.

An updated investor presentation will be available on our website after the call.

Speaker Change: Now I'll turn the call over to Anton <unk>, President and CEO.

Thanks, Nick and good morning, and afternoon to everyone during.

Anton: During today's call I will begin with an overview of outperformance during the quarter and provide an update on the offshore drilling market I.

I will then hand, the call over to Matt to highlight our recent contract awards discussed the floater and Jackup markets in more detail and provide some additional color on our contracting outlook.

Nick Georges: After that Chris will discuss our financial results and guidance before I finish with some closing comments.

To begin I want to highlight a few key points.

[music]

First we delivered excellent operating performance and financial results in the third quarter, which helped us generate a $111 million of free cash flow during the period.

Nick Georges: Second we maintain our conviction in the strength and duration of this up cycle and we believe <unk> is well positioned to drive long term value creation.

Good day, and welcome to the Valeris Third Quarter 2024 Results Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero.

While we have seen some customer demand deferred the pipeline of future opportunities in 2026 and beyond remains robust we are focused on securing attractive long term contracts and prudently managing our fleet to support our earnings and cash flow growth.

After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on your touch-tone phone. To withdraw your question, please press star then 2.

Third as expected our free cash flow profile improved relative to the first half of the year and we repurchased $100 million of shares during the third quarter. We remain committed to returning all future free cash flow to shareholders unless there is a better or more value accretive use for it.

Please note this event is being recorded. I'd now like to turn the conference over to Nick Georgas, Vice President, Treasurer, and Investor Relations.

Speaker Change: Please go ahead.

Welcome everyone to the Volaris third quarter 2024 conference call. With me today are President and CEO Anton Dibowitz, Senior Vice President and CFO Chris Weber, Senior Vice President and CCO Matt Lyne, and other members of our executive management team.

Turning to operations, we delivered another great quarter of operating performance with fleet wide revenue efficiency of 98% achieve.

Achieving sustained high levels of operational performance has been an area of emphasis across the organization. This year and I'm pleased that this was our third consecutive quarter of at least 97% revenue efficiency. These results demonstrate the entire companies focus on this key objective since delivering safe reliable and efficient operation.

We issued our press release, which is available on our website at volaris.com

Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations.

<unk> is vital in building long standing customer relationships.

I'd like to thank the amazing men and women offshore and all those onshore who support them for their efforts in helping us to achieve such outstanding performance. This year.

Please refer to our press release and SEC filings on our website that define forward-looking statements and list risk factors and other events that could impact future results.

Speaker Change: Also, please note that the company undertakes no duty to update forward-looking statements.

Particularly like to congratulate the crews of Polaris <unk> for achieving 100% revenue efficiency. During the third quarter. This is a fantastic accomplishment for a rig that began its contract late in the second quarter. Following a reactivation and demonstrates the organization's ability to deliver complex capital projects and.

During this call we will refer to GAAP and non-GAAP financial measures. Please see the press release on our website for additional information and required reconciliations.

Earlier this week, we issued our most recent Fleet Status Report, which provides details on contracts across our rigged fleet. An updated investor presentation will be available on our website after the call. Now, I'll turn the call over to Anton Dibowitz, President and CEO.

Exceptional operating performance for our customers from day one.

On the safety front, we are proud to be recognized for the second year in a row by the center for offshore safety with its safety leadership award for the development of our restricted zone analysis tool.

Thanks, Nick, and good morning and afternoon to everyone.

During today's call I will begin with an overview of our performance during the quarter and provide an update on the offshore drilling market.

This innovative visual planning tool identifies safe restricted and no go zones for activities like pipe handling pressure testing and complex lifts.

I will then hand the call over to Matt to highlight our recent contract awards, discuss the floater and jackup markets in more detail, and provide some additional color on our contracting outlook.

By helping to ensure that only authorized personnel access high risk areas. This tool significantly reduces exposure to hazard resumes enhancing the safety of our offshore operations.

After that, Chris will discuss our financial results and guidance, before I finish with some closing comments.

Speaker Change: To begin, I want to highlight a few key points.

In addition, we had several rigs celebrate safety milestones during the quarter for <unk> reached three years without a recordable incident and DSA DSA nine Dia 17, 122, and Thunder horse all achieved one year recordable free and excellent accomplishment by each of these teams.

First, we delivered excellent operating performance and financial results in the third quarter, which helped us generate $111 million of free cash flow during the period.

Second, we maintain our conviction in the strength and duration of this upcycle, and we believe Valeris is well positioned to drive long-term value creation.

Nick Georges: Moving to our financial performance adjusted EBITDA increased to $150 million in the third quarter up from $139 million in the second quarter.

Speaker Change: While we have seen some customer demand deferred, the pipeline of future opportunities in 2026 and beyond remains robust.

Nick Georges: This was better than our guidance, primarily due to the team achieving strong operating performance during the quarter.

We are focused on securing attractive long-term contracts and prudently managing our fleet to support our earnings and cash flow growth.

Nick Georges: This strong operating performance also contributed to solid free cash flow generation, and we repurchased $100 million of shares during the third quarter.

Speaker Change: Third, as expected, our free cash flow profile improved relative to the first half of the year and we repurchased $100 million of shares during the third quarter. We remain committed to returning all future free cash flow to shareholders unless there is a better or more value accretive use for it.

This will provide further details of our financial results and guidance a little later.

Nick Georges: Turning now to the broader offshore drilling market.

In terms of market fundamentals global demand for hydrocarbons continues to increase in offshore production, particularly deepwater is expected to play an increasingly important role in providing secure and affordable energy to meet the world's growing energy needs.

Turning to operations, we delivered another great quarter of operating performance with fleet-wide revenue efficiency of 98%.

Speaker Change: Achieving sustained high levels of operational performance has been an area of emphasis across the organization this year.

Deepwater production is attractive to customers due to the size of deepwater fields compelling program economics, and a lower carbon emissions intensity relative to other sources of production.

and I'm pleased that this is our third consecutive quarter of at least 97% revenue efficiency. These results demonstrate the entire company's focus on this key objective since delivering safe, reliable and efficient operations is vital in building long-standing customer relationships.

While spot Brent crude prices declined during the third quarter and have shown increased volatility of late longer dated Brent crude prices have remained relatively stable.

I'd like to thank the amazing men and women offshore and all those onshore who support them for their efforts in helping us to achieve such outstanding performance this year.

The five year, Brent forward price is around $70 per barrel, a level at which more than 90% of undeveloped offshore reserves are expected to be profitable.

I'd particularly like to congratulate the crews of Valaris DS7 for achieving 100% revenue efficiency during the third quarter. This is a fantastic accomplishment for a rig that began its contract late in the second quarter following a reactivation.

As a result commodity prices remain very supportive of continued investments in long cycle offshore projects.

Nick Georges: The commodity pricing environment and the demand drivers for deepwater in particular have provided a strong project pipeline that said this year, we have seen a year over year decline in the pace of contracting and a meaningful amount of customer demand being deferred into 2026.

Speaker Change: and demonstrates the organization's ability to deliver complex capital projects and provide exceptional operating performance for our customers from day one.

On the safety front, we are proud to be recognized for the second year in a row by the Center for Offshore Safety with its Safety Leadership Award for the development of our Restricted Zone Analysis Tool.

Nick Georges: The primary drivers of these deferrals are availability of production equipment delayed <unk> protracted regulatory approvals and customers' capital discipline. While these factors have created some headwinds for next year. It is important to note that projects are being delayed as opposed to being cancelled demonstrating.

This innovative visual planning tool identifies safe, restricted, and no-go zones for activities like pipe handling, pressure testing, and complex lifts.

Our customers commitment to deepwater production as a key component of their production portfolios.

By helping to ensure that only authorized personnel access high-risk areas, this tool significantly reduces exposure to hazardous zones, enhancing the safety of our offshore operations.

Our conviction in the strength of the market is bolstered by recent developments, including major.

Such as total <unk> 10, 5 billion Grand mortgage development offshore Suriname, and Exxon's reported $10 billion investment in a deepwater project offshore Nigeria.

In addition, we had several rigs celebrate safety milestones during the quarter.

Speaker Change: Valeris Stavanger reached three years without a recordable incident and DS8, DS9, DS17, 122 and Thunder Horse all achieved one year recordable free an excellent accomplishment by each of these teams

In addition, we have seen further progression of tender processes for several long term programs for work offshore, Brazil, West Africa, and Southeast Asia.

And we are also seeing continued strength in day rates, particularly for high specification Drillships.

Nick Georges: Average day rate for seventh generation Drillships have continued to increase year to date, averaging approximately $500000 in the third quarter.

This strong operating performance also contributed to solid free cash flow generation and we repurchased $100 million of shares during the third quarter.

Nick Georges: The fact that average day rates remained strong despite a recent modest decline in marketed utilization demonstrates that customers see this relative softness is temporary and they are willing to pay solid rates to secure the best assets for their projects.

Chris will provide further details of our financial results and guidance a little later.

Turning now to the broader offshore drilling market.

From our floater fleet management perspective, our first priority is securing attractive long term contracts for our assets and we see a solid pipeline of opportunities for our high spec floater fleet in 2026 and beyond.

In terms of market fundamentals, global demand for hydrocarbons continues to increase, and offshore production, particularly deepwater, is expected to play an increasingly important role in providing secure and affordable energy to meet the world's growing energy needs.

We're also focused on securing well programs that can provide a meaningful bridge to this longer term work.

Deepwater production is attractive to customers due to the size of deepwater fields, compelling program economics, and the lower carbon emissions intensity relative to other sources of production.

Nick Georges: At the same time prudent management of our active fleet and operating cost is also a priority. If a rig is expected to have a meaningful gap between contracts, we will warm stack it to lower daily operating cost as we are currently doing on GPS five and DS 10 until we secure its next contract.

While spot Brent crude prices declined during the third quarter and have shown increased volatility of late, longer dated Brent crude prices have remained relatively stable.

Nick Georges: Moving to shallow water the global Jackup market remains healthy with contracted rig counts utilization and day rates all relatively stable.

The five-year Brent Ford price is around $70 per barrel, a level at which more than 90 percent of undeveloped offshore reserves are expected to be profitable.

Nick Georges: Marketed utilization for the global Jackup Fleet is currently 93% and average day rates for the key markets, where we operate have remained firm.

As a result, commodity prices remain very supportive of continued investment in long-cycle offshore projects.

In the North Sea day rates are in the mid 100, thousands and in niche markets, where we have a strong presence such as Australia and Trinidad day rates are in the mid to high 100000.

The commodity pricing environment and the demand drivers for Deepwater in particular have provided a strong project pipeline. That said, this year we have seen a year-over-year decline in the pace of contracting and a meaningful amount of customer demand being deferred into 2026.

Looking more broadly at the Jackup market of the 27 rigs suspended in Saudi Arabia earlier. This year. Each of these rigs have already been re contracted elsewhere and one is expected to be scrapped.

Speaker Change: The primary drivers of these deferrals are availability of production equipment, delayed FPSOs, protracted regulatory approvals, and customer's capital discipline.

Of the remaining rigs, we expect that less than half a competitive internationally. We mentioned on our last conference call that Polaris Jackups $1, 47, and $1 48, which were leased to Arrow had received contract suspension notices from Aramco.

While these factors have created some headwinds for next year, it is important to note that projects are being delayed as opposed to being cancelled, demonstrating our customers' commitment to deepwater production as a key component of their production portfolios.

Nick Georges: Together with Arrow, we elected to terminate this contract and the rigs are now stacked in the UAE alongside Valero is $1 43.

Speaker Change: Our conviction in the strength of the market is bolstered by recent developments, including major FIDs, such as Total Energy's $10.5 billion Grand Morgue development, offshore Suriname, and Exxon's reported $10 billion investment in a deepwater project offshore Nigeria.

We intend to keep these rigs preservation stacked until we see sufficiently attractive opportunities that warrant, making the necessary investment to bring them back into our active fleet. We have five rigs leased to arrow that are due to complete their existing contracts at the end of 2024 or in 2025 and we are in active.

In addition, we have seen further progression of tender processes for several long-term programs for work offshore Brazil, West Africa, and Southeast Asia.

<unk> with Aramco about extending these rigs in.

And we have also seen continued strength in day rates, particularly for high-specification drill ships.

Nick Georges: In the North sea market conditions remained balanced with all 20 active jackups in the U K Danish and Dutch sectors currently contracted and just three rigs stacked in the region.

Speaker Change: Average day rate for 7th generation drillships have continued to increase year-to-date, averaging approximately $500,000 in the third quarter.

Despite some long anticipated changes to the energy profits levy in the UK, which were confirmed yesterday and the new UK budget, we see continued customer interest in the region, including multi year opportunities that are expected to start in late 2025 or early 2026.

The fact that average day rates remain strong despite a recent modest decline in marketed utilization Demonstrates that customers see this relative softness as temporary and they are willing to pay solid rates to secure the best assets for their projects

Nick Georges: We have good contract coverage through 2025 for our north sea rigs and see customer demand that lines up well with our limited availability next year.

From a float-to-fleet management perspective, our first priority is securing attractive long-term contracts for our assets.

Now I'll hand, the call over to Matt to highlight our recent contract awards discussed the floater and Jackup markets in more detail and provide some additional color on our contracting outlook.

We're also focused on securing well programs that can provide a meaningful bridge to this longer term work.

Speaker Change: At the same time prudent management of our active fleet and operating cost is also a priority. If a rig is expected to have a meaningful gap between contracts, we will warm stack it to lower daily operating cost as we are currently doing on TPS, five and DS 10 until we secure its next contract.

Thanks, Anton and good morning, and afternoon, everyone I wanted to begin by stating that our team is focused on building contract backlog by securing attractive contracts at solid day rates and.

And we see a few opportunities in late 2025, and a strong pipeline of projects commencing in 2026 and beyond that will further support <unk> as expected earnings and cash flow growth since our second quarter earnings call, we secured new contracts and extensions with associated contract backlog of approximately.

Moving to shallow water the.

The global Jackup market remains healthy with contracted rig counts utilization and day rates all relatively stable.

Market utilization for the global Jackup Fleet is currently 93% and average day rates for the key markets, where we operate have remained firm.

Nick Georges: $257 million.

These awards were primarily for our Jackup fleet, including a three year contract for <unk> 2018, with BP offshore Trinidad at a solid day rate. This contract strengthens our position in this attractive niche market, where we currently have two jackups with long term work at day rates in the mid to high one hundreds in addition.

In the North Sea day rates are in the mid 100, thousands and a niche markets, where we have a strong presence such as Australia and Trinidad day rates are in the mid to high 100 thousands.

Looking more broadly at the Jackup market of the 27 rigs suspended in Saudi Arabia earlier. This year eight of these rigs have already been re contracted elsewhere and one is expected to be scrapped.

Nick Georges: And we secured a 300 day extension for <unk> 117, offshore Mexico and added backlog to the $2 47 offshore Australia amongst our floaters, a customer recently exercised a six month priced option for the <unk> nine and we are either in active discussions or participating in ongoing.

Tenders for several of our rigs.

Together with Arrow, we elected to terminate these contracts and the rigs are now stacked in the UAE alongside Valero is $1 43.

While these discussions and tenders can take time, we expect that these will be concluded between now and our next earnings conference call and we look forward to providing updates in due course moving on to the opportunities we see in the market. The pipeline for work commencing primarily in 2026 remains strong we have recently seen some pro.

We intend to keep these rigs preservation stacked until we see sufficiently attractive opportunities that werent, making the necessary investment to bring them back into our active fleet we.

We have five rigs leased to arrow that are due to complete their existing contracts at the end of 'twenty 'twenty four or in 2025, and we are in active discussions with aramco about extending these rigs.

Nick Georges: Graham's awarded and a few other new opportunities arise and as a result, we are still tracking approximately 30 long term floater opportunities that we expect will turn into contracts.

In the North sea market conditions remained balanced with all 20 active jackups in the U K Danish and Dutch sectors currently contracted and just three rigs stacked in the region.

Consistent with previous quarters, we continue to see the greatest number of opportunities for programs offshore Africa.

We are currently tracking roughly a dozen long term opportunities, which could lead to incremental demand requiring up to four additional rigs in the region by the end of 2026.

Nick Georges: These opportunities include several multi year programs with IOC offshore Nigeria that have expected start dates in 2026.

We anticipate that we may see contract awards for at least one of these ongoing tenders before the end of the year with a further two expected to follow in early 2025.

We also see long term demand in several other countries offshore Africa, including Egypt, Ghana, and Mozambique in Namibia, We anticipate the significant exploration success over the past couple of years will lead to long term development programs commencing later in the decade offshore Brazil, Petrobras recently awarded to long term.

We contracted in just three rigs stacked in the region.

Nick Georges: Contracts for its hunker door program.

We have good contract coverage through 2025 for our north sea rigs and see customer demand that lines up well with our limited availability next year.

Petrobras has a further two tenders in process for up to an additional seven rigs for which we expect to see contract awards confirmed in the coming months. These programs will keep many rigs occupied into 2028 and 2029, demonstrating the longevity of customer demand in Brazil. This positive long term.

Now I'll hand, the call over to Matt to highlight our recent contract awards discussed the floater and Jackup markets in more detail and provide some additional color on our contracting outlook.

Nick Georges: Outlook is further supported by reports that Petrobras is new five year plan could see an 8% increase in capex and a greater focus on maintaining oil and gas production. In addition, Brazil's National Petroleum Agency recently announced plans to add three new pre salt areas to its 2025 bidding.

Thanks, Anton and good morning, and afternoon, everyone I wanted to begin by stating that our team is focused on building contract backlog by securing attractive contracts solid day rates and.

Nick Georges: <unk> further reinforcing the country's focus on exploring and developing its prolific pre salt resources.

In summary, we expect Brazil to continue to be the largest market for benign environment floaters with potential for incremental demand through a combination of Petrobras and IOC programs moving to the Gulf of Mexico. We expect this market to remain fairly balanced with demand largely met by existing supply in the region, while we do not.

$257 million.

These awards were primarily for our Jackup fleet, including a three year contract for Polaris 118, with BP offshore Trinidad at a solid day rate. This contract strengthens our position in this attractive niche market, where we currently have two jackups with long term work at day rates in the mid to high one hundreds in addition.

Nick Georges: Spectra Gulf of Mexico to be a meaningful driver of incremental demand recent contracting activity in the basin has been positive with.

And we secured a 300 day extension for <unk> 117, offshore Mexico and added backlog to the $2 47 offshore Australia amongst our floaters, a customer recently exercised a six month priced option for the <unk> nine and we are either in active discussions or participating in ongoing.

With the number of drillship fixtures rig years awarded and day rates all higher through the first nine months of 2024 compared to the same period last year outside of the major floater markets, we see incremental demand from Suriname supported by total Energy's recent F E.

Tenders for several of our rigs.

Which is expected to require two floaters for multiyear programs. Starting in 2026, we have also seen an uptick in demand in southeast Asia with several operators looking at opportunities that could require incremental rigs in the region.

With one long term program expected to be awarded before the year end.

As Anton noted the global Jackup market remains healthy.

Graham's awarded and a few other new opportunities arise and as a result, we are still tracking approximately 30 long term floater opportunities that we expect will turn into contracts.

Nick Georges: And the major benign environment regions, we have seen southeast Asia, China, and India, all adding rigs so far this year offset by a decline in the contracted rig count in the middle East primarily driven by the decrease in Saudi Arabia in the North Sea market conditions remain balanced and we are currently tracking around <unk>.

Consistent with previous quarters, we continue to see the greatest number of opportunities for programs offshore Africa. We are currently tracking roughly a dozen long term opportunities, which could lead to incremental demand requiring up to four additional rigs in the region by the end of 2026.

10 opportunities for work with <unk>, our independent operators that are expected to start in late 2025 or early 2026. These are mostly new energy projects and plug and abandonment campaigns as well as a few oil and gas programs that are well suited for our rigs in the region the expected firm.

These opportunities include several multi year programs with IOC offshore Nigeria that have expected start dates in 2026.

We anticipate that we may see contract awards for at least one of these ongoing tenders before the end of the year with a further two expected to follow in early 2025.

<unk> of these opportunities is more than one five years on average which is a good sign for the continued health of this market I am now going to review our outlook for rigs with 2025 availability starting with our floaters.

We also see long term demand in several other countries offshore Africa, including Egypt, Ghana in Mozambique in Namibia, we anticipate that the significant exploration success over the past couple of years will lead to long term development programs commencing later in the decade offshore Brazil, Petrobras recently awarded to long term.

<unk> <unk> finished its contract in early August.

After more than six years of continuous work offshore Nigeria.

The rig had excellent operational performance for its customer during this time and we feel very positive about its prospects for future work that is expected to commence in late 2025 or early 2026.

Term contracts for its hunker door program <unk>.

The <unk> 12, and <unk> are both expected to complete their current contracts in 2025 with DS 12 expected to continue its current program with BP offshore Egypt into February and the <unk> contracted to Chevron in the Gulf of Mexico until August we are pursuing opportunities for Boe.

<unk> is further supported by reports that Petrobras is new five year plan could see an 8% increase in capex and a greater focus on maintaining oil and gas production.

Nick Georges: With rigs that could commence in 2025 and 2026 also in the Gulf of Mexico Dps five completed its contract with Eni in July and is currently idle.

In addition, Brazil's National Petroleum Agency recently announced plans to add three new pre salt areas to its 2025 bidding rounds further reinforcing the countries focused on exploring and developing its prolific pre salt resources.

We are in active discussions regarding opportunities for the rig in the Gulf of Mexico and other regions.

We are focused on building a meaningful work program for the rig next year.

Nick Georges: It generates solid EBITDA and cash flow.

Nick Georges: But if we are unable to do so we will consider removing the rig from our active fleet.

Nick Georges: In Australia.

Nick Georges: One is due to finish its current contract in the second quarter and we are in active discussions for work commencing in the second half of 2025.

That would suit a moored rig like the EMS one.

The Gulf of Mexico to be a meaningful driver of incremental demand recent contracting activity in the basin has been positive with.

Our other floater in Australia, Dps, one could work into the third or fourth quarter of next year, depending on whether the customer exercises its option.

After that opportunities, we see today for a dynamically positioned rig like the Dps one in country are expected to start in mid 2026 in terms of our Jackup fleet. We have only two jackups operating in a benign environment regions outside the middle East with meaningful availability in 2025, <unk> hundred 40 <unk>.

Which is expected to require two floaters for multi year program. Starting in 2026, we have also seen an uptick in demand in southeast Asia with several operators looking at opportunities that could require incremental rigs in the region.

Nick Georges: Even in Australia, and <unk> 106 in Indonesia, we have good visibility into additional work for these rigs either through new programs or the expected exercise of options in the middle East. We are in ongoing discussions with the ramp co regarding extensions for five rigs that are due to complete their existing.

With one long term program expected to be awarded before the year end.

As Anton noted the global Jackup market remains healthy.

And the major benign environment regions, we have seen southeast Asia, China, and India, all adding rigs so far this year offset by a decline in the contracted rig count in the middle East primarily driven by the decrease in Saudi Arabia in the North Sea market conditions remained balanced and we are currently tracking around.

Lease terms at the end of 2024 or in 2025.

Lastly, we have strong contract coverage in 2025 for our North Sea Jackups with less than one year of availability across our nine rig active fleet.

Side from some short term gaps as rigs transition between contracts were complete planned out of service periods. We expect our active north sea fleet to be fully sold out in 2025.

In summary, we continue to focus on building contract backlog and capitalizing on the robust pipeline of opportunities that will support our expected earnings and cash flow growth I will now hand, the call over to Chris to take you through the financials.

<unk> of these opportunities is more than one five years on average which is a good sign for the continued health of this market I'm now going to review our outlook for rigs with 2025 availability starting with our floaters.

Chris Weber: Thanks, Matt and good morning, and afternoon, everyone. In my prepared remarks, I'll begin with an overview of the third quarter results and then walk through our outlook for the fourth quarter.

<unk> finished its contract in early August.

Chris Weber: Starting with our third quarter results.

Revenue was $643 million up from $610 million in the prior quarter and adjusted EBITDA was $150 million up from $139 million in the prior quarter.

After more than six years of continuous work offshore Nigeria.

The rig had excellent operational performance for its customer during this time and we feel very positive about its prospects for future work that is expected to commence in late 2025 or early 2026.

Adjusted EBITDA increased in the third quarter, primarily due to a full quarter of operations for <unk>. Following its contract start up late in the second quarter and higher average daily revenue for the floater fleet, primarily related to <unk> 16, which started a new higher day rate contracts late.

The <unk> 12, and <unk> are both expected to complete their current contracts in 2025 with DS 12 expected to continue its current program with BP offshore Egypt into February and the DSA teen contracted to Chevron in the Gulf of Mexico until August we are pursuing opportunities for Boe.

In the second quarter.

These items were partially offset by lower utilization for Dps, five and DS 10, which completed contracts during the third quarter and out of service time and repair costs for the 249 due to leg repairs.

Rigs that could commence in 2025 and 2026 also in the Gulf of Mexico Vps five completed its contract with Eni in July and is currently idle.

Our third quarter EBITDA came in better than our guidance, primarily due to our strong operating performance.

We are in active discussions regarding opportunities for the rig in the Gulf of Mexico and other regions.

Third quarter Capex came in at $82 million, which is slightly lower than our guidance due to timing as some spend shifted from the third quarter to the fourth quarter.

We are focused on building a meaningful work program for the rig next year.

It generates solid EBITDA and cash flow.

But if we are unable to do so we will consider removing the rig from our active fleet.

We ended the quarter with cash and cash equivalents of $392 million and our $375 million revolving credit facility remains fully available providing total liquidity of $767 million.

In Australia <unk>.

One is due to finish its current contract in the second quarter and we are in active discussions for work commencing in the second half of 2025.

That would suit a moored rig like the EMS one.

During the quarter, we generated $193 million of cash flow from operations, which benefited from a partial unwind of the working capital build in the prior quarter.

Our other floater in Australia, Dps, one could work into the third or fourth quarter of next year, depending on whether the customer exercises its option after that opportunities. We see today for dynamically positioned rig like the Dps one in country are expected to start in mid 2000.

This was partially offset by capital expenditures, providing $111 million of free cash flow.

We repurchased $100 million of shares in the third quarter at an average price of $57 per share.

26 in terms of our Jackup fleet, we have only two jackups operating in the benign environment regions outside the middle East with meaningful availability in 2025, Valores $2 47 in Australia, and Valores 106 in Indonesia, we have good visibility into additional work for these rigs either through new program.

In total we have repurchased $300 million of shares since we started our program last year, and we still have $300 million of remaining capacity under our share repurchase authorization.

Moving now to our fourth quarter outlook, we expect total revenues in the range of $570 million to $590 million down from $643 million in the third quarter.

Or the expected exercise of options in the Middle East we are in ongoing discussions with the Ram co regarding extensions for five rigs that are due to complete their existing lease terms at the end of 2024 or in 2025.

Revenues are expected to decrease primarily due to lower utilization for the floater fleet largely due to DS 10, and Dps five they are expected to be idle in the fourth quarter.

Lastly, we have strong contract coverage in 2025 for our North Sea Jackups with less than one year of availability across our nine rig active fleet.

DS 15, completing its short contract with BP and reverting to its legacy contract with total energies, which is at a lower day rate.

Aside from some short term gaps as rigs transition between contracts were complete planned out of service periods. We expect our active north sea fleet to be fully sold out in 2025 in.

Chris Weber: And lower amortized revenue for Valero is 247 as mobilization revenue and expense associated with its move from the North Sea to Australia was largely recognized in the third quarter.

Chris Weber: We expect contract drilling expense of $400 million to $410 million down from $462 million in the third quarter.

Chris Weber: Is expected to decrease primarily due to lower amortized mobilization expense associated with the 247 as I just mentioned.

Thanks, Matt and good morning, and afternoon everyone.

My prepared remarks, I'll begin with an overview of the third quarter results and then walk through our outlook for the fourth quarter.

Chris Weber: <unk> expense for <unk> four as its costs are being capitalized during its shipyard upgrade project prior to the start of its next contract with Petrobras later in the fourth quarter and lower cost for the DS 10, and EPS five as we transition the rigs to warm stack mode.

Starting with our third quarter results revenue was $643 million up from $610 million in the prior quarter and adjusted EBITDA was $150 million up from $139 million in the prior quarter.

Chris Weber: We anticipate G&A expense of approximately $30 million compared to $31 million in the third quarter.

Adjusted EBITDA increased in the third quarter, primarily due to a full quarter of operations for malaria <unk> seven following its contract startup late in the second quarter and higher average daily revenue for the floater fleet, primarily related to <unk> 16, which started a new higher day rate contracts late in.

Adjusted EBITDA is expected to be $135 million to $155 million.

Compared to a $150 million in the third quarter.

Chris Weber: This will provide an expected full year 2020 for EBITDA of approximately $490 million at the midpoint of our fourth quarter guidance range.

The second quarter.

This is at the lower end of our prior guidance as we no longer expect DS 10, nor Dps five to work for the remainder of the year.

Chris Weber: Total capex in the fourth quarter is expected to be $120 million to $130 million.

Our third quarter EBITDA came in better than our guidance, primarily due to our strong operating performance.

Chris Weber: This is higher than capex in the third quarter due to spin related to the upgrade projects for Valero DS four and $1 44 prior to their long term contracts offshore, Brazil, and Angola, respectively.

Third quarter Capex came in at $82 million, which is slightly lower than our guidance due to timing as some spend shifted from the third quarter to the fourth quarter.

Chris Weber: As well as the Capex spend that I previously mentioned shifting from the third quarter to the fourth quarter.

We ended the quarter with cash and cash equivalents of $392 million and our $375 million revolving credit facility remains fully available providing total liquidity of $767 million.

Looking ahead to 2025, we plan to provide full year 2025 guidance on our fourth quarter earnings call. When we expect to have better visibility on the outlook for rigs that are completing contracts next year.

During the quarter, we generated $193 million of cash flow from operations, which benefited from a partial unwind of the working capital build in the prior quarter.

I'll now hand, the call back to Anton for some closing remarks.

Thanks, Chris I want to reiterate some of the key points we covered today.

Anton: First thanks to the outstanding execution of the entire <unk> team, we delivered another good quarter with strong operating performance and financial results, including solid free cash flow generation.

This was partially offset by capital expenditures, providing $111 million of free cash flow.

We repurchased $100 million of shares in the third quarter at an average price of $57 per share.

Chris Weber: Second while we have seen some customer demand deferred the pipeline of future opportunities in 2026 and beyond remains robust we are focused on securing attractive long term contracts and prudently managing our fleet to support our earnings and cash flow growth.

In total we have repurchased $300 million of shares since we started our program last year, and we still have $300 million of remaining capacity under our share repurchase authorization.

Moving now to our fourth quarter outlook, we expect total revenues in the range of $570 million to $590 million down from $643 million in the third quarter.

Chris Weber: Third as expected our free cash flow profile improved relative to the first half of the year and we repurchased $100 million of shares during the third quarter.

Revenues are expected to decrease primarily due to lower utilization for the floater fleet largely due to DS 10, and <unk> that are expected to be idle in the fourth quarter.

Chris Weber: We remain committed to returning all future free cash flow to shareholders, unless there is a better or more value accretive use for it.

Chris Weber: In summary, we believe that the allowance is well positioned to benefit from the strength and duration of the structural up cycle and deliver long term value to our shareholders. We thank our employees customers and investors for their support we have now reached the end of our prepared remarks operator. Please open the line for questions.

DS 15, completing its short contract with BP and reverting to its legacy contract with total energies, which is at a lower day rate.

And lower amortized revenue for Valero 247, as mobilization revenue and expense associated with its move from the North Sea to Australia was largely recognized in the third quarter.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

We expect contract drilling expense of $400 million to $410 million down from $462 million in the third quarter.

Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.

Is expected to decrease primarily due to lower amortized mobilization expense associated with the 247 as I just mentioned.

Speaker Change: Our first question comes from Eddie Kim from Barclays. Please go ahead.

Lower expense for <unk> four as its costs are being capitalized during its shipyard upgrade project prior to the start of its next contract with Petrobras later in the fourth quarter and lower cost for the DS 10, and Dps five as we transitioned the rigs to warm stack mode.

Hey, good morning, Thanks for all that market color.

Speaker Change: Yeah, just in light of the the white space for next year and some deferred demand.

Wanted to ask about your expectations on the trajectory of day rates and we've been kind of a high four hundreds for some time now.

We anticipate G&A expense of approximately $30 million compared to $31 million in the third quarter.

Chris Weber: Right.

For next year, I mean should we expect some pressure for for leading edge day rates to drift lower may be into the mid four hundreds type of range before ramping up again in 2006.

Adjusted EBITDA is expected to be $135 million to $155 million compared to $150 million in the third quarter.

This will provide an expected full year 2020 for EBITDA of approximately $490 million at the midpoint of our fourth quarter guidance range.

Curious, how you're thinking about the progression over the next 12 to 18 months.

Speaker Change: That's a good question, let me let me start off and then maybe Mike can add some color. If he was like I think it's gratifying to see that day rates have continued to increase quarter over quarter through the year I think we can see some variety.

This is at the lower end of our prior guidance as we no longer expect DS 10, nor Dps five to work for the remainder of the year.

Total capex in the fourth quarter is expected to be $120 million to $130 million.

In day rates as we go forward to next year, especially with some white space, what we see is that customers.

This is higher than capex in the third quarter due to spend related to the upgrade projects for <unk>, four and $1 44 prior to their long term contracts offshore, Brazil, and Angola, respectively.

Speaker Change: Are willing to pay solid day rates.

In the in the ranges you're talking about mid to high <unk>.

As well as the Capex spend that I previously mentioned shifting from the third quarter to the fourth quarter.

Hundreds into the five hundreds as we have seen and as we've recently contracted for example in 17 for high specification assets in the right market. So I think it's going to be a little bit dependent on the quality of the asset that's being contracted the market's been contracted into but we may see some variety, especially.

I'll now hand, the call back to Anton for some closing remarks.

Speaker Change: After as people Chase kind of bridge work or shorter term programs to bridge to a longer term work.

Thanks, Chris I want to reiterate some of the key points we covered today.

First thanks to the outstanding execution of the entire <unk> team, we delivered another good quarter with strong operating performance and financial results, including solid free cash flow generation.

Speaker Change: But we think the outlook for day rates are solid.

Speaker Change: Got it adequately here.

And just my follow up is on the commentary.

Around seeing some customer demand deferred.

Second while we have seen some customer demand deferred the pipeline of future opportunities in 2026 and beyond remains robust we are focused on securing attractive long term contracts and prudently managing our fleet to support our earnings and cash flow growth.

Is this both on deepwater and shallow water work or was that more of a deepwater comment and separately we highlighted.

The availability of production equipment and delayed Fps <unk> some of the reasons why we're seeing these delays any any additional color you can provide on maybe one of the bottlenecks in the shipyards breath Dsos is expected to I guess the concern is that if these bottlenecks last longer than expected that it's possible that in a white space could extend beyond <unk>.

Third as expected our free cash flow profile improved relative to the first half of the year and we repurchased $100 million of shares during the third quarter.

We remain committed to returning all future free cash flow to shareholders, unless there is a better or more value accretive use for it.

Next year as well so just any color on that would be great.

Both of your questions, let's say, it's more more deepwater phenomenon. These kind of large long term developments. The odds are really really busy <unk> are taking longer to come out of the arden have been some delays and I think our customers are prudently.

In summary, we believe that the allowance is well positioned to benefit from the strength and duration of the structural upcycle and deliver long term value to our shareholders. We thank our employees customers and investors for their support we have now reached the end of our prepared remarks operator. Please open the line for questions.

Prudently managing their business in time, when the wells are drilled to when the production equipment and the <unk> are ready to produce that but.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: As with a lot of things in the supply chain they become more even if delivery times for example of equipment stopped being extended our sustained its about being more prepared and aligning with the realistic timeline for production equipments to be developed so we see it more as a as a transitory.

Speaker Change: Youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then two at this time, we'll pause momentarily to assemble our roster.

Speaker Change: Our first question comes from Eddie Kim from Barclays. Please go ahead.

Chris Weber: Issue that now.

And then an ongoing issue because expecting that Nf BSO will take a year or two longer because the yards are are are taking longer to build them and they're busy.

Hey, good morning, Thanks for all that market color.

Yeah, just in light of the the white space for next year and some deferred demand.

Speaker Change: Wanted to ask about your expectations on the trajectory of day rates have been.

Ultimately that supply chain gets stabilized as we saw.

In our business with with delivery of all of oilfield equipment.

Kind of a high four hundreds for some time now.

But.

Right right, Okay, great. Thanks for that color I'll turn it back.

Speaker Change: For next year.

Speaker Change: Should we expect some pressure for for leading edge day rates to drift lower may be into the mid four hundreds type of range before ramping up again in 2006 just.

Chris Weber: Absolutely.

Speaker Change: The next question comes from David Smith from Pickering Energy Partners. Please go ahead.

Curious, how youre thinking about the day rate progression over the next 12 to 18 months.

Hey, good morning, and thank you for taking my question.

Speaker Change: I wanted to do.

That's a good question, let me let me start off and then maybe Mike can add some color. If he was like I think it's gratifying to see that day rates have continued to increase quarter over quarter through the year I think we can see some variety.

Regarding the rigs that had been warm stacked.

Could you just share some color on your ability to reduce the cost of that idle period.

Kind of the timing and magnitude and how we should think about any catch up Cox one.

<unk> work.

In day rates as we go forward to next year, especially with the white space, what we see is that customers.

Sure absolutely.

Speaker Change: I think I would think about it this way.

So what are we going to do when we warm stack a rig so one would be reducing manning so down two to class required minimum manning to run the rate.

Are willing to pay solid day rates.

In the in the ranges you're talking about mid to high <unk>.

There had been some some maintenance and projects and if possible you would you would bring the rig key side. So you can reduce fuel costs now that's not always possible, but where that is possible. So I think you can think of in terms of over a period of time, maybe about 90 days getting costs down to the kind of.

Speaker Change: Hundreds into the five hundreds as we've seen and as we've recently contracted for example in 17 for high specification assets in the right market. So I think it's going to be a little bit dependent on the quality of the asset that's being contracted the markets being contracted into but we may see some variety, especially.

Speaker Change: $60000 range.

After as people Chase kind of bridge work or shorter term programs to bridge to a longer term work.

And a similar ramp up.

What that means for bringing the rig back to work. There are very few of these programs you don't contract a deepwater rig and then go to work next week. So you certainly have enough enough time based on the way that the contracting cycle works to ramp those rigs up with just about any opportunity that's available.

But we think the outlook the day rates are solid.

Got it got it great to hear.

Just my follow up is on the commentary.

Speaker Change: Around seeing some customer demand deferred.

Is this both on deepwater and shallow water work or was that more of a deepwater comment and separately the highlighted.

Speaker Change: What's your.

Cost to put that back one will be ramping up the crews and then also <unk>.

The availability of production equipment and delayed <unk> some of the reasons why we're seeing these delays any any additional color you can provide on maybe one of the bottlenecks in the shipyards breath Dsos is expected to let that I guess the concern is that if these bottlenecks last longer than expected that it's possible that white space could extend beyond <unk>.

<unk> up on some of the maintenance as you minimize just spend during the warm stack period, and that's largely dependent on how long that would be warm stacked, but I would think about that in terms of kind of that.

$5 million to $10 million number.

Speaker Change: For a reasonable warm stack period, yes, and I would add for a ship. We're looking at about 60000, a day for Opex in warm stack mode. Like Anton said it takes about three months to ramp down to that so for example in the DSA and we expect to be exiting the year at that run rate level.

Next year as well so just any color on that would be great.

Speaker Change: Both of your questions, let's say, it's more more deepwater phenomenon. These kind of large long term developments. The odds are really really busy <unk> are taking longer to come out of the organ have been some delays and I think our customers are prudently.

<unk> five is about 50000, a day and again expect to be kind of hitting that run rate level by the end of the year.

Prudently managing their business in time, when the wells are drilled to win the production equipment in the Dsos are all ready to produce that.

Speaker Change: Appreciate that color.

Speaker Change: Follow up is I think you touched on it with commentary for the EPS five but.

As with a lot of things in the supply chain they become more even if delivery times for example of equipment stopped being extended in a sustained its about being more prepared and aligning with the realistic timeline for production equivalents to be.

Can you. Please talk about your process for evaluating whether or not to preservation stack, a rig and add that relevant criteria might vary by asset classes.

Speaker Change: Okay.

Speaker Change: Good question very broadly when we think about when you think about preservation stacking versus cold stacking.

Developed so we see it more as a as a transitory issue that not been an ongoing issue because expecting that Nf BSO will take a year or two longer because the yards are are are taking longer to build them and they're busy.

There is a cost to preserve equipment.

Speaker Change: And then in the mid single digit millions and then a longer and more attractive protracted periods.

Chris Weber: Bring it out of out of cold stack.

Chris Weber: If you add the.

Ultimately that supply chain gets stabilized as we saw in our business with delivery of oil equivalent.

Chris Weber: Preservation stacked so.

Chris Weber: That's not something that you necessarily want to do if you see a pipeline to future opportunity, which we do see is strong in all the talks about a robust pipeline of opportunities, especially as we head into 2026, so kind of the breakeven on preservation stacking an asset you need to not have line of sight to opportunities.

Speaker Change: Right.

Okay, great. Thanks for that color I'll turn it back.

Sure absolutely.

The next question comes from David Smith from Pickering Energy Partners. Please go ahead.

Hey, good morning, and thank you for taking my question.

Around that.

David Smith: I wanted to do.

The two year Mark so given what we see in the market. We think it makes sense to warm stack these rigs.

Regarding the rigs that had been warm stacked.

Could you share some color on your ability to reduce the cost of that idle period.

Prudent cash.

Chris Weber: Cash management capital management until we can see which we can see the long term accretive opportunities that these that these rigs will have.

Kind of the timing and magnitude and how we should think about any catch up costs once that <unk> work.

Speaker Change: Sure absolutely.

Chris Weber: What you don't want to do it.

I think I would think about it this way.

Is to keep a rig at full operating cost chasing short term intermittent work with full operating cost.

Speaker Change: So what are we going to do when we warm stack a rig so one would be reducing manning so down too.

In between on the GPS five versus the ships, which are generally have slightly longer term contracts.

Speaker Change: Class required minimum manning to run the rate.

There've been some some maintenance and projects and if possible you would you would bring the rig key side. So you can reduce fuel costs now that's not always possible, but where that is possible. So I think you can think of in terms of over a period of time, maybe about 90 days getting costs down to the kind of.

Chris Weber: That rig operates in a market where the contracts are by nature generally shorter term. So our view on that is we can put.

Chris Weber: A an EBITDA positive cash generating program together for us in 2025.

And have line of sight to that we will absolutely keep it warm stacked.

Speaker Change: $60000 range.

Speaker Change: And Ah.

A similar ramp up.

Seek that work, but just by nature I was talking about before chasing short term work with high operating cost in between but we don't believe that it's possible that might be a candidate for preservation stacking, but that's going to depend on kind of line of sight to opportunities over the next few months.

Speaker Change: Appreciate all the color. Thank you that's it for me.

What's your.

The next question comes from Fredrik <unk> from Clarksons <unk> Securities. Please go ahead.

Speaker Change: Cost to put that back one will be ramping up the crews and then also.

Catching up on some of the maintenance as you minimize just spend during the warm stack period, and that's largely dependent on how long the rate would be warm stack, but I would think about that in terms of kind of that.

Speaker Change: I hope you're well on thank you for taking my question.

Speaker Change: So I.

Speaker Change: I wanted to.

Speaker Change: There's been some some.

$5 million to $10 million number.

Speaker Change: Press around the circle.

Speaker Change: For a reasonable warm stack period, yes.

Speaker Change: The potential merger between some of your peers.

Speaker Change: And I would add for a ship.

Speaker Change: Couple of weeks.

Looking at about 60000, a day for Opex in warm stack mode like Anton said it takes about three months to ramp down to that so for example in the DSA and we expect to be exiting the year at that run rate level Dps five it's about 50000, a day and again expect to be kind of hitting that run rate level by the end of the year.

So I was just wondering if you were able to comment on.

Speaker Change: The largest player in the M&A World currently if you see opportunities if you want to be part of <unk>.

Anything are you still happy being in mix player.

You bet.

Speaker Change: Endpoint, obviously consolidation.

Appreciate that color.

Speaker Change: On the way forward.

Follow up is I think you touched on it with commentary for the EPS five but.

Speaker Change: Absolutely.

Speaker Change: Thanks for the question look we still believe that there is room in this market for additional consolidation.

Can you. Please talk about your process for evaluating whether or not to preservation stack, a rig and add that relevant criteria might vary by asset classes.

The offshore drilling space in general.

Some of the M&A that we've seen thus far has been drilling contractors looking to.

Okay. Yeah. Good good question very broadly when we think about when you think about preservation stacking versus cold stacking.

High grade their fleets or chase additional high spec capacity in order to gain a scaled fleet. We already have the scale that we need to be competitive in this business with the largest the largest fleet of border and we're in a very fortunate position.

There is a cost to preserve equipment.

In the mid single digit millions and then a longer and more attractive protracted periods.

Bring it out of out of cold stack.

If you add the preservation stacked so.

<unk> about 13 ships at seventh Gen.

Speaker Change: That's not something that you necessarily want to do if you see a pipeline to a future opportunity, which we do see is strong you all talked about a robust pipeline of opportunities, especially as we head into 2026. So it kind of the breakeven on preservation stacking an asset you need to not have line of sight to opportunities.

The assets that are preferred by customers.

Speaker Change: So we feel very good about our fleet position that being said, we will look at opportunities for M&A, if it's accretive and value creative for our shareholders will absolutely engaged in it but we are certainly not in a position where we need to we are compelled to pursue M&A to either high <unk>.

Speaker Change: Round.

The two year Mark.

Speaker Change: So given what we see in the market, we think it makes sense to warm stack these rigs be prudent cash.

Great off lethal to gain the scale that you need to be a player in this market.

Cash management capital management until we can see which we can see the long term accretive opportunities that these that these rigs will have.

That's very helpful. I guess that kind of brings me to the second.

Speaker Change: Part of it.

Speaker Change: Sure.

Emerged from chapter 11, some years back now you have to reactivate them quite a few assets on there are still some.

What you don't want to do it.

Is to keep a rig at full operating cost chasing short term intermittent work with full operating costs.

More high quality assets on the sideline the DSO level in 13 and 14.

In between on the GPS five versus the ships, which are generally have slightly longer term contracts.

Speaker Change: But given the utilization.

But the market is currently facing.

Speaker Change: That rig operates in a market where the contracts are by nature generally shorter term.

Already discussed the warm stacking up to be yet.

Speaker Change: 10 for example are.

Speaker Change: Our view on that is we can put.

Are you able to give us some.

Stated thinking on how you view those assets that are already on the sideline and I guess, what I'm most interested in.

A an EBITDA positive cash generating program together for us in 2025.

Speaker Change: And have line of sight to that we will absolutely keep it warm stacked and seek that work, but just by nature I was talking about before chasing short term work with high operating cost in between but we don't believe that it's possible that might be a candidate for preservation stacking, but thats going to depend on kind of line of sight.

Cause an updated timeline for the potential activation of the VF 11, 13, and 14, but also.

The fact that in our warm stacking from other floaters and jackups for that matter.

<unk> accelerates.

Speaker Change: Any.

Speaker Change: Scrapping or retiring of the.

Two opportunities over the next few months.

Less capable assets that are also already on the sideline.

Speaker Change: Appreciate all the color. Thank you that's it for me.

Speaker Change: Sure.

Speaker Change: The next question comes from Fredrik <unk> from Clarksons <unk> Securities. Please go ahead.

Speaker Change: Youre, absolutely right and I didn't.

All of the things I've missed on answering your previous question was we have organic growth built into our fleet with the 11 13 and 43 three highest spec seventh Gen <unk> assets sitting on the timeline.

And one on <unk>.

Speaker Change: Well. Thank you for taking my question.

Speaker Change: So I.

Speaker Change: I wanted to.

Speaker Change: There's been some some.

Sitting on the sidelines, we bought those.

Press around the circle.

Those assets the 13 14 at very attractive prices and given the pipeline of opportunities that we see 'twenty six 'twenty seven and on.

The potential merger between some of your peers.

Speaker Change: Couple of weeks.

So I was just wondering if you were able to comment on.

Speaker Change: We continue to believe that those will be accretive purchases for our shareholders.

Speaker Change: The largest player in the M&A World currently if you see opportunities if you want to be part of.

That there will be a place for those rigs in the market.

Anything are you still happy being a mixed player.

Speaker Change: Absolutely you're right we have some some headwinds coming in some white space for next year and our priority is first keeping our active fleet.

Speaker Change: Yeah.

Speaker Change: And point to obviously consolidation.

Speaker Change: On the way forward.

Speaker Change: Highly utilized.

Speaker Change: Absolutely.

Speaker Change: Ah.

Thanks for the question look we still believe that there is room in this market for additional consolidation.

I don't think I can answer the question is as as far as timing to bring 11, 13 14 back to market they will come back to market.

The offshore drilling space in general.

When the right opportunities all there to bring those back to market.

Some of the M&A that we've seen thus far has been drilling contractors looking to buy.

Speaker Change: I think that's the.

Speaker Change: High grade their fleets or chase additional high spec capacity in order to gain a scaled fleets. We already have the scale that we need to be competitive in this business with the largest the largest fleet of motor and we're in a very fortunate position.

To answer your question.

Speaker Change: Yes.

Speaker Change: I guess.

Speaker Change: To exactly pinpoint.

I guess is it fair to assume that they will now come.

Speaker Change: Slightly later than previously anticipated because you're prioritizing your warranty.

<unk> about 13 ships seventh Gen.

Absolutely absolutely our first priority is keeping the active fleet.

The assets that are preferred by customers.

Speaker Change: The fleet's highly utilized.

So we feel very good about our fleet position that being said, we will look at opportunities for M&A, if it's accretive and value creative for our shareholders will absolutely engaged in it but we.

Warm stacking is.

Prudent cash management and fleet management in the interim but we can bring those rigs back relatively accelerated time Brian.

We're certainly not in a position where we need to we are compelled to pursue M&A to either high grade off lethal to gain the scale that you need to be a player in this market.

90 days versus the reactivation from preservation stack, which is around the year and there will be an opportunity to put 11 13 and 14 I think it is fair to say its on a on a on a slightly.

Speaker Change: Delayed timeline for what we would've expected kind of six to nine months ago.

Speaker Change: That's very helpful. I guess that kind of brings me to the second.

Speaker Change: I had an answer to the other part of your question I think this may be an opportunity and I'm speaking for the market in general.

Speaker Change: Part of it.

Speaker Change: <unk>.

Emerged from chapter 11, some years back now.

Overall to potentially see some less capable assets come out of the market because it won't make sense to to preservation stack or keep lower spec sixth generation assets.

Speaker Change: Reactivate them quite a few assets on there are still some.

More high quality assets on the sideline to Vietnam and in 13 and 14.

Speaker Change: But given the utilization.

But the market is currently facing.

Stacked for a protracted timeline. So I think we may see dependent on.

Already discussed the warm stacking up to be yet.

Speaker Change: 10% for example are you.

How the next year or so develops we may see some additional capacity coming out of the market, but from an overall market perspective.

Well to give us some.

Updated thinking on how you view those assets that are already on the sideline and I guess, what im the most interested in.

That's very helpful and thank you for.

Cause an updated timeline for the potential activation of the VF 11, 13, and 14, but also.

For such a thorough answer our.

I'll leave it at that.

Speaker Change: Have a good day.

Speaker Change: Thanks for the questions.

Speaker Change: The fact that in our warm stacking from other floaters and Jackups for that matter will accelerate.

The next question comes from Kurt <unk> from benchmark. Please go ahead.

Speaker Change: Any.

Speaker Change: Hey, good morning, everybody.

Speaker Change: Scrapping or retiring of the <unk>.

Speaker Change: Thanks Carter.

Less capable assets are also already on the sidelines.

Alright, I appreciate the color and the insights.

I'm kind of curious.

Speaker Change: Sure.

Speaker Change: Youre, absolutely right and I didn't one of the things I missed on answering your previous question was we have organic growth built into our fleet with the 11 13 and 43 three highest spec seventh Gen <unk> assets sitting on the timeline.

As you have indicated right a little bit of a.

A lull here that we're going through.

Speaker Change: <unk>.

Is it how would you think about the priority or the strategy with respect to.

Speaker Change: These idle assets right. There was some commentary from one of your competitors on an earlier call about a very robust pipeline as I think you've also indicated post 2025. So are you are you more interested in getting these assets back into the market are you willing to kind of sit tight for a little bit.

Speaker Change: Sitting on the sidelines, we bought those.

Those assets, the 13 and 14 at very attractive prices and given the pipeline of opportunities that we see 'twenty six 'twenty seven and on.

Speaker Change: We continue to believe that those will be accretive purchases for our shareholders.

Other people take a little bit of a lower rate.

Speaker Change: And you can get a better rate maybe late in 'twenty five and into early 2000, <unk>. So kind of curious on how you guys are strategizing.

That there will be a place for those rigs in the market.

Speaker Change: Absolutely you're right we have some some headwinds coming in some white space for next year and our priority is first keeping our active fleets.

Speaker Change: No I think the overall market comments all right.

Speaker Change: From a market fundamentals perspective, we feel good about the pipeline of opportunities.

Speaker Change: Highly utilized.

Speaker Change: Okay.

Speaker Change: I don't think I can answer the question is as far as timing to bring 11, 13 14 back to market they will come back to market.

Especially into 2006 and beyond one of the reasons you need scale in this business is to be able to manage your fleet as the portfolio and given the opportunities have prudent fleet management during the interim period, where there is some headwinds minimized costs.

Speaker Change: When the right opportunities all there to bring those back to market.

I think that's the.

Speaker Change: To answer your question.

Speaker Change: Yes.

Speaker Change: I guess, it's difficult to exactly pinpoint.

Speaker Change: Lower operating costs warm stack rigs take people off them manage the maintenance spend and wait for the right opportunity.

Speaker Change: But I.

I guess is it fair to assume that they will now come.

View on it is we are looking at the right long term opportunities for our assets to support our earnings and cash flow growth over the next few years.

Slightly later than previously anticipated because you're prioritizing your warranty.

Speaker Change: Absolutely absolutely our first priority is keeping the asset flute for active fleets highly utilized.

Speaker Change: If we can find.

Bridge programs meaningful bridge programs to those we will put the rigs to work. That's what we are going to do but we're not going to do is.

Warm stacking is prudent cash management and fleet management in the interim but we can bring those rigs back relatively accelerated time Brian.

Speaker Change: These spending full operating costs chasing one well.

90 days versus the reactivation from preservation stack, which is around the year and there will be an opportunity to put 11 13 and 14 I think it is fair to say its on a on a.

So value not accretive opportunities that at the end of the day. When you when you add up the periods that you are full operating costs plus what you're working it doesn't make sense for the business and for our shareholders. So we're willing to put to put rigs on the sidelines.

Speaker Change: Slightly.

Delayed timeline for what we would've expected kind of six to nine months ago.

Sorry, I didn't answer the other part of your question I think this may be an opportunity and I'm speaking for the market in general overall to potentially see some less capable assets come out of the market because it won't make sense to preservation stack or keep lowest spec sixth generation.

At warm stack for the right long term opportunity with the bridge to that and if those opportunities aren't there then.

We will manage the costs accordingly.

And we continue that path, we have a scaled bleeds and we have a number of rigs on long term contract.

<unk> assets.

Speaker Change: Okay.

Appreciate that.

Speaker Change: Stock.

So maybe one maybe one follow up.

Speaker Change: The timeline, so I think we may see depending on on.

Speaker Change: Again, given how.

On how the next year or so develops we may see some additional capacity coming out of the market from a from an overall market perspective.

The stock has been trading over the past year, you would think that day rates are about to be cut in half and.

Realizations going into the tank, but.

That's very helpful and thank you for for such a thorough answer.

Speaker Change: Again, it seems like all indications are that your customer base has a high degree of comfort.

Speaker Change: I'll leave that up.

Speaker Change: Our conviction in and what their economics are for these programs. So I'm kind of curious as to what you guys can teach us that we don't know.

Speaker Change: Good day.

Speaker Change: <unk> thanks for the questions.

The next question comes from Kurt <unk> from benchmark. Please go ahead.

Or that the market doesn't know that you guys do that and your customers know that maybe.

Hey, good morning, everybody.

Speaker Change: Good morning, Kurt.

I always appreciate the color and the insight.

Speaker Change: Shed some light on.

Speaker Change: The prospects here again.

So I'm kind of curious.

It looks like the stock is trading like the cycle is over.

Speaker Change: As you.

Have indicated right a little bit of a.

Speaker Change: I agree markets.

Speaker Change: A lull here that we're going through.

Markets are fickle, but well I think what we look at is that global demand for hydrocarbons continues to increase.

Speaker Change: <unk>.

Is it how would you think about the priority of the strategy with respect to.

Offshore production and in particular deepwater.

Speaker Change: Is set to be a solid and increasing part of that based on.

Impelling economics of these programs the need for the demand for secure and affordable energy.

Speaker Change: <unk> and.

Our customers need to too.

Speaker Change: To.

Other people take a little bit of a lower rate.

Find new reserves in order to replace depletion. So we feel really good about the strength and duration of the cycle.

And you can get a better rate maybe late in 'twenty five in early 2000, <unk>. So kind of curious on how you guys are strategizing.

No I think the overall market comments all right.

Speaker Change: And.

Speaker Change: Our job is to is to manage into and through through this up cycle. So I.

From a market fundamentals perspective, we feel good about the pipeline of opportunities.

I don't want to speculate on why why the stock moves back and forth, but I tend to agree with you. We feel we feel good about about the future and we will manage to a market that is driven by macro fundamentals that we see a solid for our business.

Speaker Change: Okay I appreciate it thank you.

Speaker Change: Thanks.

The next question comes from Josh Jayne from Daniel Energy Partners. Please go ahead.

Speaker Change: Lower operating costs warm stack rigs take people off them manage the maintenance spend and wait for the right opportunity.

Speaker Change: Yes.

Thanks, Good morning, and Tom just to follow up on that point, a little bit I think in your opening remarks, you talked about $70 a barrel of oil price and noted that 90% of offshore projects are still profitable at that level and I wanted to dig in a bit there.

And it is we are looking at the right long term opportunities for our assets to support our earnings and cash flow growth over the next few years.

Speaker Change: If we can find.

That was for all of offshore correct, not just deepwater and then maybe any additional color on the price of which deepwater projects specifically that are being contemplated would not move forward I know, it's going to vary by region and operator, but maybe just some insights there would be helpful.

Speaker Change: Bridge programs meaningful bridge programs to those we will put the rigs to work that's what we're going to do but we're not going to do is be.

Speaker Change: <unk> spending full operating costs chasing one well.

Low value not accretive opportunities that at the end of the day. When you when you add up the periods that you are full operating costs plus what you're working it doesn't make sense for the business and for our shareholders. So we're willing to put to put rigs on the sidelines.

No absolutely I mean that number is for all offshore.

Speaker Change: I think if you go look at our Investor deck, we have that we have a slide in there about where.

At each price level, where we're where the production costs are I'd say the.

At warm stack for the right long term opportunity with the bridge to that and if those opportunities aren't there then.

Speaker Change: The most significant.

The band, where the most significant amount of that production is well clear of $70 a barrel.

We will manage the costs accordingly.

And we can do that because we have a scaled fleets and we have a number of rigs on long term contract.

Speaker Change: In the 2030 $40 range and a lot of these large developments that our customers are chasing are in that range.

Okay. That's fair appreciate that.

So maybe one maybe one follow up for you on.

<unk> 30, so there is plenty of clear space beyond where we're current even spot.

Speaker Change: Again, given how.

The stock has been trading over the past year, you would think that dayrates are about to be cut in half and.

Speaker Change: And long term Brent is that justify the economics for these programs are compelling they are compelling at at that at that price level.

Utilization going into the tank, but.

Speaker Change: Again, it seems like all indications are that your customer base has a high degree of comfort.

Speaker Change: And then maybe just to address sort of.

Or conviction in and what their economics are for these programs. So I'm kind of curious as to what what you guys can teach us that we don't know.

You talked about the warm stacking rigs a little bit and I just wanted to follow up on that.

On a capital equipment call. This quarter. It was noted that some drillers.

Speaker Change: Or that the market doesn't know that you guys do that and your customers know that maybe.

Speaker Change: Who potentially has some pockets of utilization softness might be taking advantage of some rig upgrades, while rigs may not be working over the course of 2025 could you speak to that at all so sort of in addition to potentially progressive stacking a rig.

Speaker Change: Shed some light on.

The prospects here right.

It looks like the stock is trading like the cycle is over.

I agree markets.

Given your confidence in the cycle in 2006 and beyond the other things you may be looking to do.

Markets are fickle, but I think what we look at is that global demand for hydrocarbons continues to increase.

Speaker Change: Certain rigs as some of these projects have been pushed to the right would be helpful. Thanks.

Offshore production and in particular deepwater.

Is set to be a solid and increasing part of that based on.

Speaker Change: Yes, absolutely I mean, I think as you as you.

Speaker Change: As you ramp down.

Pelling economics of these programs the need for the demand for secure and affordable energy.

You look to minimize your costs and minimize your cash spend.

You have about a 90 day.

<unk> and.

And our customers need to too.

Ramp up period in order to get the rig back to work and you would take that opportunity too.

Speaker Change: Two.

<unk> new reserves in order to replace depletion. So we feel really good about the strength and duration of the cycle.

Speaker Change: To maybe do some stuff. So that you don't have to stop the rate later down the line.

So to put hard piping on for example for an MPD system, So youre ready to operate in MPD mode.

Speaker Change: And.

Speaker Change: Our job is to is to manage into and through through this up cycle. So.

Speaker Change: We are pursuing the HFC upgrade so that we can run.

I don't want to speculate on why why the stock moves back and forth, but I would tend to agree with you. We feel we feel good about about the future and we will manage to a market that is driven by macro fundamentals that we see a solid for our business.

Speaker Change: Unless engines and lower the emissions of the rigs. So you take the opportunity while while you're working on a rig and ramping up to do prudent things that will serve you as you get back to work.

Speaker Change: That is right.

Okay. Appreciate it thank you.

A fair assumption and something that we focus on MPD and EHS upgrades would be would be two that come to mind.

Speaker Change: Thanks.

The next question comes from Josh Jayne from Daniel Energy Partners. Please go ahead.

Speaker Change: Okay. Thanks, very much I'll turn it back.

Speaker Change: Yes.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Nick Georges for any closing remarks.

Nick Georges: Thanks, Jason and thanks, Thanks, again to everyone on the call for your interest in <unk>. We look forward to speaking with you again, when we report our fourth quarter 2024 results have a great rest of your day.

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

Speaker Change: No absolutely I mean that number is for all offshore.

I think if you go look at our Investor deck, we have that we have a slide in there about where.

At each price level, where we're where the production costs soar and say the.

Speaker Change: The most significant.

The band, where the most significant amount of that production is well clear of $70 a barrel.

Speaker Change: In the 2030 $40 range and a lot of these large developments that our customers are chasing are in that range. The 2030. So there is plenty of clear space beyond where we're current even spot and long term Brent is that.

That justify the economics for these programs all compelling they are compelling.

Speaker Change: At that price level.

And then maybe just to address sort of.

You talked about warm stacking rigs a little bit and I just wanted to follow up on that.

On a capital equipment call. This quarter. It was noted that some drillers.

Who potentially had some pockets of utilization softness might be taking advantage of some rig upgrades, while rigs may not be working over the course of 2025 could you speak to that at all.

Speaker Change: <unk> sort of in addition to potentially progressive stacking a rig.

Given your confidence in the cycle in 2000 and beyond the other things you may be looking to do.

Speaker Change: Certain rigs as some of these projects have been pushed to the right would be helpful. Thanks.

Yeah, absolutely I mean, I think as you as you.

Speaker Change: As you ramp down.

Speaker Change: You look to minimize your costs and minimize your cash spend.

Speaker Change: Have about a 90 day.

Speaker Change: The ramp up period in order to get the rig back to work and you would take that opportunity too.

To maybe do some stuff. So that you don't have to stop the rate later down the line.

Speaker Change: You know to put hard piping on for example for an MPD system, So youre ready to operate in MPD mode.

Speaker Change: We are pursuing the HFC upgrade so that we can run.

Unless engines and lower the emissions of the rigs. So you take the opportunity while while you're working on a rig and ramping up to two prudent things that will serve you as you get back to work, but I think that's that is up.

Speaker Change: A fair assumption and something that we focus on MPV and EHS upgrades would be would be two that come to mind.

Okay. Thanks, very much I'll turn it back.

Speaker Change: Okay.

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

Speaker Change: The conference.

Speaker Change: Vince has now concluded. Thank you for attending today's presentation you may now disconnect.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: Yes.

Speaker Change: Thank you.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Sure.

Speaker Change: [music].

Speaker Change: Okay.

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