Q1 2025 Noble Corp PLC Earnings Call
Okay.
Barry: Thank you for standing by my name is Barry and I will be your conference operator today.
Barry: At this time I would like to welcome everyone to the Noble Corporation first quarter 2025 earnings call.
Barry: All lines have been placed on mute to prevent any background noise.
Barry: After the Speakers' remarks, there will be a question and answer session.
Barry: If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
Barry: If you would like to withdraw your question again press Star and one.
Speaker Change: I would now like to turn the call over to Ian Macpherson, Vice President of Investor Relations you may begin.
Ian Macpherson: Thank you operator, and welcome everyone to Noble Corporation's first quarter 2025 earnings Conference call you can find a copy of our earnings report along with the supporting statements and schedules on our website at Noble Corp Dot com.
Speaker Change: We will reference an earnings presentation Thats posted on the Investor Relations page of our website.
Speaker Change: Today's call will feature prepared remarks from our president and CEO, Robert Eifler as well as our CFO Richard Barker. We also have with US Blake Denton Senior Vice President of marketing and contracts. During the course of this call. We may make certain forward looking statements regarding various matters related to our business and companies that are not historical facts such statements are.
Speaker Change: Upon current expectations and assumptions of management and are therefore subject to certain risks and uncertainties. Many factors could cause actual results to differ materially from these forward looking statements and noble does not assume any obligation to update these statements.
Speaker Change: Also note we are referencing non-GAAP financial measures on the call today, you can find the required supplemental disclosure for these measures, including the most directly comparable GAAP measure.
Speaker Change: Associated reconciliation in our earnings report issued yesterday and filed with the SEC now I'll turn the call over to Robert Eifler, President and CEO of noble.
Robert Eifler: Thanks, Ian and good day.
Speaker Change: Hi, everyone and thank you for joining us as we present our results for the first quarter.
Speaker Change: I'll begin with financial and operational highlights from the first quarter recent commercial activity our perspective on the market and then hand, it over to Richard to cover the financials.
Speaker Change: As usual I'll wrap up with closing remarks before we go to Q&A.
Richard Barker: In the first quarter, we delivered strong results with adjusted EBITDA of $338 million and free cash flow of $173 million.
Richard Barker: We continue to execute on our return of capital program $80 million in dividends and repurchasing $20 million of shares during Q1, yes.
Richard Barker: Yesterday, our board declared another 50 cents per share dividend for the second.
Richard Barker: Quarter of 2025, and I'm pleased to highlight that we have now surpassed $1 billion in combined dividends and buybacks since Q4 2022, including this quarter's announced dividend.
Richard Barker: On the integration front, our progress has been right on target.
Richard Barker: Legacy Diamond Fleet recently went live on Noble's ERP system ahead of schedule and positioning us to achieve our previously stated synergies of at least $100 million by the end of the year.
Richard Barker: We are also pleased to share a number of significant commercial and operational successes.
Richard Barker: As we announced yesterday, we have recently been awarded long term contracts by two major oil companies comprising nearly 14 rig years of additional backlog across four rigs with a total revenue potential between 2.0 and $2 5 billion.
Richard Barker: First the Novo Voyager and another seven G drillship to be named were awarded four rig years, each by shell for operations in the U S. Gulf.
Richard Barker: These contracts provide for base day rate value of $696 million per rig plus the potential to earn up to an additional 20% based on the operational performance of each rig.
Richard Barker: Voyage or is expected to commence in mid 2026, and the second drillship is slated to commence in Q4 of 2027.
Richard Barker: And those contracts have four one year options following the phone four year term at mutually agreed day rates.
Richard Barker: As part of the shell contracts, we will be making certain upgrades to the rigs, including increasing the Derrick has slowed from two five to $2 8 million pounds.
Richard Barker: Adding a controlled mud line system, which is essentially an alternative approach to managed pressure drilling install.
Richard Barker: Installing active heave compensated cranes, and finally installing closed bus power system upgrades for reduced carbon footprint.
Richard Barker: All of which are intended to make these units among the most high spec drillships in the world for the remaining life of the assets.
Richard Barker: In total these upgrades are expected to comprise $60 million to $70 million of Capex per rig, which we anticipate being spread among 2025 2006 and 2007.
Richard Barker: So all in we are incredibly happy to be awarded these landmark long term contracts from shell in a premier basin and look forward to getting started.
Richard Barker: Next we have also recently been awarded strategic contracts from total energy and Suriname for two rigs.
Richard Barker: <unk> drillship, yet to be named and also the <unk> mine level developer.
Richard Barker: The contract spans 16 wells per rig or approximately 1060 days each and are expected to commence between Q4 2026 in Q1 2027.
Richard Barker: Together.
Speaker Change: <unk> revenue of the two contracts is $753 million.
Speaker Change: And the contracts allow for an additional $297 million in revenue.
Speaker Change: The collective operational performance.
Speaker Change: There are also four one well options available across best contracts.
Speaker Change: We don't have any significant capex associated with these programs.
Speaker Change: Again, we are immensely proud to be selected by its hotel or their marquee development program in Suriname, which affords us the opportunity to expand not only a very robust and long standing relationships with hotel.
Speaker Change: But also our comprehensive presence throughout the Guyana, Suriname region, where we have been able to develop highly valuable based on scale and expertise.
Speaker Change: Each of these new long term contracts in Suriname in the U S. Gulf carries customary cost escalation provisions as well.
Speaker Change: We firmly believe that novel shines brightest and long term and collaborative relationships.
Speaker Change: And we look forward to delivering meaningful efficiency and risk management through these four new contracts.
Speaker Change: Based on an abundance of internal performance data and learnings from across our fleet.
We generally expect that quote normal operational performance on these contracts and yield a significant amount of incentive revenue capture.
Speaker Change: And we are booking an average across the four contracts of approximately 40% of the combined variable revenue components in our backlog.
Speaker Change: Which we believe represents a reasonable estimate at this time.
Speaker Change: Although we can certainly envision realistic upsides to that through the course of the campaigns.
Speaker Change: These performance contracts provide a great alignment with our customers, enabling substantial economic upside to both parties as drilling efficiencies are realized.
Speaker Change: In other words, if we're getting paid at the high end of the range everyone is happy.
Speaker Change: Now turning to other new contracts and extensions.
In Colombia on Petrobras has exercised an option for an additional 390 days on the noble discover and its existing day rate, which we expect will extend this campaign into August 2026, and keeps the discover well positioned for additional development opportunities. Following the largest gas discovery in the history of Colombia.
Speaker Change: Additionally, we recently announced new short term contracts for the noble Viking will intrepid and noble Regina Allen, which are detailed in our earnings release and fleet status report.
Speaker Change: Combined these 15 total rig years of New awards, bringing our current backlog to $7 5 billion, which represents an increase of 30% since last quarter and marks the first crucial step in our significant backlog inflection that we had been anticipating and forecasting over our past couple of earnings.
Speaker Change: Calls.
Speaker Change: We're also seeing several opportunities for additional contract awards to build on these recent bookings and we'll look forward to bringing you more news on this front and then not too distant future.
Speaker Change: Now for a word on the markets more broadly.
Speaker Change: First of all I would say is that obviously throughout an incredible amount of market volatility recently across virtually all risk assets in commodities.
Speaker Change: Throughout all of this turmoil not only has offshore drilling remained open for business. So too has our commercial pipeline remains very much intact as our customers around the world appear to remain engaged and active in sourcing their rig needs for 2026 and 2027.
Speaker Change: While we certainly see signs that our customer base is reacting to near term oil prices by taking actions with their 2025 spending. It is very important to note that long term strip pricing for Brent crude has remained in the mid to high <unk> as the curve has flipped into contango. This is not a throwaway fact is it really.
Speaker Change: To long cycle offshore planet.
Speaker Change: We generally see that the middle part of the strip is the most relevant indicator for the economics of our business.
Speaker Change: In this price range in the mid $60 per barrel, it's only down by about $5 versus a year ago.
Speaker Change: Still quite supportive of project economics in most cases.
Speaker Change: I would also note that over 90% of the 15 rig years' worth of backlog. We've just announced were signed after the April 2nd market correction.
Speaker Change: No. One here is glib about the state of financial markets and we are of course concerned like everyone else about looming tariff effects on global demand.
Speaker Change: We also derive strength and stability from our alignment with a large swath of customers that have generally resilient capital programs and less pushy planning factors when it comes to offshore projects.
Speaker Change: We still see a choppy spot market for deepwater and jackups throughout 2025 and into 2026.
Speaker Change: But we also believe the medium to long term fundamentals are actually enhanced by every month of curtailed investment and spare capacity unwind.
Speaker Change: Contracted EDW utilization has been flat.
Speaker Change: With total rig count having dipped only slightly from 100 rigs to 99 rigs since the time of our last earnings call offset by a two rig reduction in marketed supply, leaving marketed utilization essentially unchanged at 90%.
Speaker Change: We still expect this contracted rig count to Sag a bit lower through the rest of this year with an anticipated inflection sometime in 2026, although admittedly forecasting precision is definitely hampered right now, but again, we do have decent visibility for some additional work for our own fleet, which would support a materially.
Speaker Change: Improved contracted position by next year.
Speaker Change: In the meantime, recent contract awards indicate day rate resilience for high end deepwater rigs firmly in the low to high four hundreds per day with long term visibility, which we think is completely at odds with prevailing market pessimism.
Speaker Change: We remain committed to managing our cost and marginal idle capacity in a prudent manner.
Speaker Change: As a first mover in what is likely to become a broader scrapping cycle for uncompetitive idle assets recall that we recently announced the disposal of our cold stacked drillships in the ultimate <unk>.
Speaker Change: We've now entered into a definitive agreement to sell these vessels in a manner intended to effectively retire them.
Speaker Change: We expect to finalize this transaction mid year.
Speaker Change: Now I'll provide a little more color on the status and outlook for our rigs with near term market exposure.
Speaker Change: In the U S. Gulf the novel Valeant has recently completed its contract in the Novo Black line is due to roll off contract in July.
Speaker Change: We are in active discussions with customers for both of these units for a limited amount of 2025 jobs as well as a larger 2026 opportunity set.
Speaker Change: While we will also work to fill 2026 availability for the recently committed novel voyage Youre ahead of its shelf program that rig is more likely to be warm stacked in 2025, as we prioritize the valeant and black Rhino for near term jobs.
Speaker Change: Turning to our sixth Gen rigs are three D class semis have a promising outlook with the developer and discover both well contracted in the Americas and the deliver looking well aligned for multiple perspective contracts that are expected to start in 2026.
Speaker Change: In contrast, the ocean great price near term outlook is softer and.
Speaker Change: And we anticipate the rig will be idled for the balance of the year. Following the conclusion of its campaign in the UK North Sea in late May.
Speaker Change: However, there are long term programs worldwide that align with the rigs high spec ultra harsh capabilities with start dates in 2026 and 2027.
Speaker Change: Looking at our Globetrotter shifts we are still pursuing various intervention scopes globally and expect to have a clearer outlook for these opportunities fairly soon.
Speaker Change: If it is not a green light scenario for both units, we would likely then move to cold stack or retirement decision on one of the units.
Speaker Change: Lastly, with respect to the moored floaters apex and endeavor, which are scheduled to roll off contract. This summer we remain encouraged by a healthy amount of harsh environment P&A activity in the pipeline that is well aligned for both of these assets.
Speaker Change: Now on the Jackups.
Speaker Change: The headwinds from the Saudi suspensions and day rate concessions continued to pressure international and benign environment Jackup market.
Speaker Change: The harsh jackup market, where our fleet primarily competes as remained insulated from these specific dynamics.
Speaker Change: That said there has been a recent downtick in demand in the southern North Sea of a couple of rigs and we do expect softer utilization across our Jackup fleet in 2025 compared to 2024.
Speaker Change: Our recent bright spot has been the Intrepid <unk> recent contract award from DNO, which will mark that rigs reentry into the Norwegian market.
Speaker Change: Which is still relatively subdued, albeit ticking up a bit as we get back up to three of our CJ 70, Jackup contracted NCS.
Speaker Change: So with that I'll pause here and turn it over to Richard now to discuss the financials.
Richard Barker: Good morning, or good afternoon in my prepared remarks today I will briefly review our first quarter results provide an update on our integration progress and then discuss our outlook for the remainder of the year.
Richard Barker: Starting with our quarterly results contract drilling services revenue for the first quarter totaled $832 million adjusted EBITDA was $338 million and adjusted EBITDA margin was 39%.
Richard Barker: Adjusted EBITDA was positively impacted by approximately $20 million related to insurance proceeds the legacy repair work on the noble Regina Allen, which is accounted for as a reduction in operating expense as well as overall strong cost management.
Richard Barker: Q1 cash flow from operations was $271 million net capital expenditures were $98 million and free cash flow was $173 million.
Richard Barker: We continue to remain focused on controlling costs, which includes managing our stacking cost accordingly to that.
Richard Barker: I understand that the medical Med school Coke will eliminate associated stacking cost of $40 to 50000 per day on a combined basis as well as bringing in net proceeds of over $35 million.
Richard Barker: As summarized on page five of the earnings presentation slides, our total backlog as of April 28 stands at seven 5 billion up approximately 30% versus the prior quarter.
Richard Barker: This includes approximately $1 $9 billion that is scheduled for revenue conversion over the remainder of 2025 and on the back of our recently announced contract awards. This now includes approximately $2 one $1 5 billion scheduled for revenue conversion during 2026 and 2027.
Richard Barker: As a reminder, our backlog excludes reimbursable revenue as well as revenue from ancillary services.
Richard Barker: Our integration remains on track and we continue to expect to realize $100 million of annual cost synergies on a run rate basis by the end of the year.
Richard Barker: As of the end of the first quarter, we have achieved approximately $70 million of synergies a tremendous amount of hard work its being done throughout the organization I would like to extend my gratitude to everyone who is contributing to the great progress on the integration to date.
Richard Barker: Referring to page 10 of the earnings slides, we are maintaining our full year guidance ranges, including total revenue between $3. Two five to 345 billion adjusted EBITDA between $1 <unk> to one $1 5 billion in capital expenditures, which excludes customer reimbursements of between 375 to 420.
Richard Barker: $5 million.
Richard Barker: As it relates to the adjusted EBITDA guidance range. We are currently approximately 95% contracted at the midpoint of this range based on year to date results and remaining backlog for 2025.
Speaker Change: Illustrative Lee if you include options than the mid point would essentially be fully contracted.
Speaker Change: Due to strong cost management, the midpoint of the EBITDA range corresponds to the low part of the revenue guidance range.
Speaker Change: Noting and clarifying here that our legacy Diamond.
Speaker Change: Lease payments of approximately $26 million this year.
Speaker Change: As part of operating expenses.
Speaker Change: As we look ahead, we anticipate Q2, adjusted EBITDA to track down quarter on quarter, when excluding the Q1 impact of the Regina Allen insurance proceeds.
Speaker Change: As expected decrease in Q2 is primarily due to fewer operating days, resulting from contract rollovers on the variant Intrepid and Regina Allen as well as the planned out of service time, the noble Sam Croft Fps, which is expected to take 60 days during Q2.
Speaker Change: On the tariff front the situation remains very fluid.
Speaker Change: We are confident in our ability to navigate these uncertainties as they evolve by leveraging our supply chain and procurement capabilities.
Speaker Change: It is clearly dynamic and everything can change quickly. We currently expect the tariffs to have less than a $15 million cost impact in 2025, and this is incorporated into our guidance.
Speaker Change: So in summary, a solid start to the year from a financial perspective has set us up well for the remainder of 2025, despite the macro uncertainty.
Robert Eifler: And the recent suite of strong contract awards supports the constructive long term view for a market with that I'll pass the call back to Robert for closing remarks.
Robert Eifler: Thank you Richard.
Speaker Change: To wrap up I'd, just like to emphasize that our first choice offshore strategy remains at the core of everything we do at noble.
Speaker Change: We've been working very hard over the past four years and taking the company to the next level.
Speaker Change: And now we are really beginning to see the fruits of our labor.
Speaker Change: Throughout today's call, we highlighted a number of proof points significantly increasing and enhancing our backlog with strategic contract awards.
Our integration synergies.
Speaker Change: Livery and customer programs with a focus on safety and efficiency and reaffirming the resiliency of our cash flow and dividend.
Speaker Change: On the latter point, we're now eclipsing $1 billion of capital returned to shareholders over the past couple of years, which represents almost one third of our market cap from where we sit today.
Speaker Change: We also acknowledged the challenges of an exceptionally volatile macroeconomic environment.
Speaker Change: Doing what we can to demonstrate reliability for our customers and shareholders.
Speaker Change: But the crucial backlog infection now at hand, and additional tangible contracting opportunities also within view.
Speaker Change: We remain confident about the medium to long term fundamentals for our business.
Speaker Change: And recent fixture activity in the low to high four hundreds is solid.
Speaker Change: With our demonstrated commitment to the dividend and its current nearly 10% yield.
Speaker Change: The recent 30% increase in our backlog.
Speaker Change: Over $1 billion in capital returns thus far.
Speaker Change: Tangible results building up from our scale and first choice offshore strategy. It seems the value proposition and novel is compelling to say the least.
Operator, we're ready to go to questions now.
Speaker Change: At this time I would like to remind everyone in order to ask a question press star and the number one on your telephone keypad.
Speaker Change: Your first question comes from the line of David Smith, Pickering Energy Partners. Your line is open.
David Smith: Hey, good morning, congratulations on the strong quarter and the very impressive backlog addition.
Speaker Change: Thank you.
Speaker Change: Yes.
Speaker Change: You asked about the relatively large performance on this opportunity in the cell and <unk> contracts.
Speaker Change: Is it fair to think that your willingness to take some risk on their performance component yes.
Speaker Change: Might be somewhat informed by your Olympic experience generating some pretty strong efficiency gains with your Drillships and Guyana.
Speaker Change: And is it fair to think that performance component risk is.
Speaker Change: Has a lot to do with the duration of the programs and maybe the <unk>.
Speaker Change: The drilling program, so we might not necessarily be expecting these kind of performance bonus opportunities for for a shorter duration or multi basin type programs.
Speaker Change: It's a great question.
Speaker Change: What I would say is first of all we're extremely happy with both of these programs and very honored to have had been entrusted with them.
Speaker Change: This is something we've been looking at.
Speaker Change: For quite some time.
Speaker Change: And we think our customers have wanted something like this for even longer.
Speaker Change: I would repeat what we said earlier, we see it very much is a win win but to your point that it definitely doesn't work in every scenario in fact, I would say that it only works.
Speaker Change: On a relative few scenarios from what you see globally.
Speaker Change: We mentioned in the remarks, but we've spent a lot of time.
Speaker Change: Looking at our own performance data and getting our organization to a place where we were comfortable.
Speaker Change: Not only analyzing our capability, but also projecting those capabilities against programs like this.
Speaker Change: And we got to a place that we think we.
Speaker Change: We think works.
Speaker Change: For for both sides.
Speaker Change: And I'd say I guess.
Speaker Change: We mentioned the word strategic that's obviously deliberate.
Speaker Change: These were very our approach I think it's very very strategic not only in the structure.
Speaker Change: We've described a little bit but also.
Speaker Change: And where that structure has applied the basins the type of program et cetera.
Speaker Change: I appreciate that color.
Speaker Change: And the follow up if I may.
Speaker Change: We start to see more performance based contracts industry wide.
Speaker Change: Talk about how the CA index pricing mechanism takes performance based contracts and to account for.
Joseph: Joseph concern right there.
Speaker Change: Yes.
Speaker Change: There appears to be maybe.
Speaker Change: Maybe about $140000 a day spread between the base rate and full bonus potential.
Speaker Change: Where on that spectrum would we look for the right that contributes to the CE index rate.
Speaker Change: It's also a good question not one obviously that was forecasted are contemplated when we came up with this when it was at six or seven eight years ago longer maybe now.
Speaker Change: So I guess, what I would say is that mechanism is not mechanical.
It was designed to be flexible.
Speaker Change: And it was designed to take in a number of different market considerations at each at each six month turn.
Speaker Change: So we've had this come up in certain other kind of nuances or they go into rates, whether it's types of cost serve texas or whatever.
Speaker Change: And it is flexible enough to also take into account.
Speaker Change: This type of structure.
Speaker Change: And so we haven't had this conversation yet so I don't want to really say anything more than that but it is a mutually agreed rate that we get together and decide on every six months, we both sides put in.
Speaker Change: Data.
Speaker Change: As both sides see it and we take that data and.
Speaker Change: And Ah mutually agree and as you know to the extent that we have trouble with that sometimes we'll bring in a third party and as well so.
Speaker Change: We spent a fair amount of time on the prepared remarks.
Speaker Change: Giving some thoughts and ideas as to where.
Speaker Change: Where we think we could land on achieving these these larger performance components.
Speaker Change: And we're going to have to go through some type of that as we as we as we move through the <unk>.
Speaker Change: Perfect really appreciate it.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: Your next question comes from the line of Arun <unk> with JP Morgan Your line is open.
Arun: Yes, good morning, gentlemen.
Robert Eifler: Robert just wondering if you could go through.
Robert Eifler: Some of the competitive tensions in maybe both of these are awards and maybe specifically on the on the Shell Award.
Robert Eifler: Is this incremental demand are you displacing an incumbent but talk to us about opportunities for these are really interesting opportunities with shell.
Robert Eifler: Well thanks.
Robert Eifler: So.
Robert Eifler: The Suriname contracts are obviously incremental.
Robert Eifler: The shell contracts in the U S.
Robert Eifler: Key basin for them.
Robert Eifler: And I think the thing that that really.
Robert Eifler: Even as attractive as anything else here for us was.
Robert Eifler: That these rigs if we perform we've set up a contract that rewards performance.
Robert Eifler: Our customers, obviously expect performance out of us and we firmly believe.
Robert Eifler: If we perform.
Robert Eifler: And deliver what's expected of us that these rigs will spin deca.
Robert Eifler: Decade, plus without really having to make a substantial mobilization. So when we say strategic.
Robert Eifler: It's a big piece of it for us.
Robert Eifler: Rigs are getting to be either about little over 10 years old. So if you think about accounting lives et cetera.
Robert Eifler: An outside chance that these things can can close it out right right there in the in the Gulf of America.
Robert Eifler: We do we do believe that.
Robert Eifler: That we're displacing that this is not incremental right now.
Robert Eifler: But for US the bigger piece of this was the longevity of.
Robert Eifler: The potential work here.
Speaker Change: Great and maybe my follow up Richard you went through kind of the sequential.
Robert Eifler: Sure.
Robert Eifler: Changes in your Opex expectations could you maybe elaborate on what you see in <unk> and maybe give us a sense of how you see the back half of the year in terms of Opex because that was.
Robert Eifler: Significantly lower than our model in <unk>.
Robert Eifler: Yes sure.
Robert Eifler: Quick question Arun so.
Speaker Change: Note. It in the prepared remarks that obviously, we had a $20 million impact from the Regina Allen So.
Robert Eifler: Net against cost helps you that's not going to reoccur.
Robert Eifler: We will in Q2 going on.
Robert Eifler: If you back that out our <unk>.
Robert Eifler: Operating costs, if you will on the income statement and I think it would have been about 480 485.
Robert Eifler: Inflation is real so we do expect some inflation.
Robert Eifler: As we've talked about before in the low to mid single digit type area through the rest of the year. So I think that I think that kind of guide if you will how we think about operating cost for the rest of the year. Obviously, we talked about from a guidance perspective low end of our revenue equals midpoint of EBITDA as well and really cost management is doing is really what's driving that.
Robert Eifler: Obviously very focused on managing cost here.
Robert Eifler: We would expect hopefully to continue to be aggressive from an opex perspective going forward.
Robert Eifler: Great I'll turn it back thanks.
Robert Eifler: Your next question comes from the line of Scott Gruber with Citigroup. Your line is open.
Scott Gruber: Yes, good morning, congrats on the new contracts.
Scott Gruber: And I appreciate your assumption on the bonus is captured there.
Scott Gruber: All of the bonuses.
Scott Gruber: We paid out if achieved that.
Scott Gruber: Reviewed after.
Scott Gruber: Certain number of wells.
Scott Gruber: Performance review kind of an annual basis, just a little color on when you could collect on the bonuses that'd be great.
Scott Gruber: It's well by well in actually both contracts as well by well.
Scott Gruber: So collection would happen after you'd have to do some sort of reconciliation of data et cetera, and then payment terms or whatever but they are well by well bonuses move.
Scott Gruber: Okay, but fairly frequent throughout the contracts then okay.
Scott Gruber: <unk>.
Scott Gruber: And then can you provide some more color on the downtime associated with the rig upgrades required on the shell contracts.
Scott Gruber: And then how should we think about finding some shorter term work for those rigs before the long term contracts start.
Scott Gruber: Yes, I think it's kind of a.
Scott Gruber: A couple of months to for us to do the actual work that would pull us out of.
Scott Gruber: Being able to carry on other work.
Scott Gruber: And so we said we've got a number of conversations ongoing right now for things that would fit in between.
Scott Gruber: And we'll see how that plays out but yes.
Scott Gruber: In the scenario, where we're able to fill substantially all of that time.
Scott Gruber: We would need a couple of months to do the final installation.
Scott Gruber: Okay.
Scott Gruber: Appreciate it.
Scott Gruber: Thank you.
Speaker Change: Your next question comes from the line of <unk> Kim with Barclays. Your line is open.
Speaker Change: Hey, good morning.
Speaker Change: Just wanted to ask about the performance based nature of the contracts.
Speaker Change: Which make up a meaningful proportion of the total potential value of the contract could you maybe just give us a sense or are an example of what sort of metrics or milestones. This is based on.
Speaker Change: And you mentioned that kind of normal operations with more or less equate to achieving around 40% of the performance bonuses.
Speaker Change: Tracks and please correct me if I, if I heard that incorrectly, but what more would be needed to get closer to realizing the full value of those performance bonuses.
Speaker Change: Yes so.
Speaker Change: They're very different they are different mechanisms I'd say between the two contracts for sure.
Speaker Change:
Speaker Change: I think the important.
Speaker Change: The important takeaway here is that both of them have a very heavy component of.
Speaker Change: <unk>.
Speaker Change: Time time drilling days.
Speaker Change: Days days per well.
Speaker Change: And so that's where we've spent a lot of time.
Speaker Change: And.
Speaker Change: I'd say I don't want to give any real breakdown, our specifics is proprietary to our customers as well as us but.
Speaker Change: There is obviously other components to performance their safety.
Speaker Change: And other things.
Speaker Change: All of which we pride ourselves on.
Speaker Change: But I think think about a very important driver being.
Speaker Change: The time time against the curve on a on a well.
Speaker Change: And that's really I mean, all of it is where the win win comes in but in a big development. There is.
Speaker Change: Probably more.
Speaker Change: More to play with there in terms of the.
Speaker Change: Self funded pool.
Speaker Change: Got it got it that's very helpful.
Speaker Change: And my follow up is just on the.
Speaker Change: Contract expenses.
Speaker Change: Tracked prep expenses on these so you mentioned the upgrade capex on the two rigs with shell, but.
Speaker Change: On a contract prep expenses for these.
Speaker Change: Larger than some of your other multiyear contracts, you've announced previously or are they more or less.
Speaker Change: In line.
Speaker Change: I was going to say it has a much much more in line, obviously, the capex and capital on the shell contracts, we've spoken about that but but think about kind of the contract prep expense is very much in line.
Okay.
Speaker Change: Great.
Speaker Change: Thanks for the color I'll turn it back.
Speaker Change: Your next question comes from the line of Greg Lewis with <unk>. Your line is open.
Speaker Change: Alright. Thank you. Thank you and good morning, and thanks for taking my question.
Speaker Change: Robert.
Speaker Change: We appreciate that.
Speaker Change: Okay.
Speaker Change: The decision to maintain the dividend obviously, that's a board decision Mexico through frequently.
Speaker Change: We think about that over the next two three years longer term as I imagine youre working through the dividend clearly this year, it's going to be paid out with free cash flow. It looks based on some of the announced today that is going to be the case.
Speaker Change: How do you Big picture think about.
Speaker Change: David.
Speaker Change: Yes.
Speaker Change: And seen all the moving piece resolved.
Speaker Change: The lower oil price against the strong backlog just kind of like any kind of.
Speaker Change: How is the board thinking about that dividend kind of curious on that.
Speaker Change: Yes, so we're committed to the dividend.
Speaker Change: I would say.
Speaker Change: We have got if you look at our first quarter results and our power.
Speaker Change: Our guidance you can do the math to put us to about $250 million per quarter EBITDA run rate here.
Speaker Change: And we said in the remarks, we see that taking up with with these contracts we have just announced.
Speaker Change: And I guess the color I would add to that is that we mentioned twice in the script very deliberately that we also have line of sight to a number of additional contracts and so.
Speaker Change: There is.
Speaker Change: There are multiple different paths.
Speaker Change: To that uptick.
Speaker Change: Occurring sooner than the start of these contracts.
Speaker Change: Too early to tell so I don't want to I don't want to say too much now here sitting here in early 2025.
Speaker Change: But we're encouraged frankly by the level of conversations we're having by the behavior, we're seeing the contracting behavior, we're seeing out there in the market.
Speaker Change: And so.
Speaker Change: Yes, where we were pretty confident here.
Speaker Change: In.
Speaker Change: And our return on capital structure.
Speaker Change: Okay, Great and then just on the realized limited in what you can and cannot say, but in terms of the timing of the contracts with <unk> and with shell. A question. We often get asked is okay, well, that's great, but when did the negotiation around the pricing actually start.
Speaker Change: Just kind of any kind of color around that and then and then on the on the <unk>.
Speaker Change: I guess in the press release, we talk about the noble being players right.
Speaker Change: Or something specific about those rigs that the customer wanted as opposed to like I guess, one of the black rigs is rolling off and it looks like a big like that could be able to potentially.
Speaker Change: Have been slotted in for that one.
Speaker Change: Sure Yes.
Speaker Change: Look I'd say initial pricing happened a little while back but.
Speaker Change: The reality is that final pricing is but it happens effectively when you sign a contract, especially in a volatile market like this.
Speaker Change: So yes, I would say these are very very current this is very current pricing.
Speaker Change: The V ships.
Speaker Change: These customers are very strong supporters of the.
Speaker Change: The V class rigs.
Speaker Change: The Valiant won.
Speaker Change: Excuse me rig of the year from total last year.
Speaker Change: And.
Speaker Change: And both shell and hotel.
Speaker Change: We shipped multiple times through time.
Speaker Change: So they are just big big Big supporters of those rigs and those really were the preferred vessels. So in the case of the U S, which has some to.
Speaker Change: The different kind of a different type of work required higher.
Speaker Change: Excuse me requires higher hook load in some instances there is a more limited number of higher hook load rigs out there. So we were really happy to upgrade these as part of that contract.
Speaker Change: And along with the other few upgrades, we mentioned for the for the U S work these are going to be.
Speaker Change: There with the with some of the highest spec rigs on Earth and that's going to be.
Speaker Change: It's something that I mentioned before we hope that.
Speaker Change: To be right, where we are for a very long time, but that's something also that would be valued by a very wide variety of.
Speaker Change: Of clients should should things change.
Speaker Change: So, yes look everything kind of matched up nicely they have really high thrust or power. So they can hold position in Suriname, which is important but just the spec matched up very nicely for both of these programs.
Speaker Change: Great Super helpful. Thank you.
Speaker Change: Your next question comes from the line of Fredrik Stene with Clarksons Securities. Your line is open.
Speaker Change: Yes.
Fredrik Stene: Hey, there.
Speaker Change: I guess, it's been said many times already but congratulations on the very long and I'm very nice contract.
Fredrik Stene: I also have a couple of questions relating to those contracts.
Speaker Change: So first.
Speaker Change: Thank you said that.
Speaker Change: On the back of the bookings that you've made so far and my understanding from the prepared remarks was that the comment then pointed to the shell up the tower work that there could be.
Speaker Change: More coming down the same line I was wondering if you could give some.
Speaker Change: Additional color on that because obviously these four rigs will be tied up for three or four years.
Speaker Change: To meet kind of natural to assume that this could be.
Speaker Change: Similar long term programs.
Speaker Change: The older rigs on shelf for example, they have.
Speaker Change: All the rigs that are rolling off similarly too.
Speaker Change: <unk>.
Speaker Change: When the startups are for the two that they've already contracted.
Speaker Change: So any color on what you meant by these comments would be super helpful. Thank you.
Speaker Change: Sure, Yes, I guess the comments in the prepared remarks were really intended to address some more near term white space in our in our fleet, where we have a number of active conversations right now.
Speaker Change: So.
Speaker Change: Too early to tell on all of that and there's obviously competition, but were encouraged with the level of detail and there are a number of conversations that we're having right now as you look kind of at that.
Speaker Change: Spots with near term availability in our fleet.
Speaker Change: I would say.
Speaker Change: I said earlier about the U S. Gulf, It's a premium base in there we think that those rigs could say they are a very long time.
Speaker Change: And I would say also our experience elsewhere.
Speaker Change: Perhaps in relation to Suriname, but it really applies anywhere.
Speaker Change: Is that in in a collaborative.
Speaker Change: Setting where.
Speaker Change: The collective team is delivering very strong results.
Speaker Change: You do open up additional work so yes.
Speaker Change: We're addressing the to some extent, we're addressing the issue of <unk>.
Speaker Change: Of efficiency, where we get paid for higher efficiency, but I think sometimes on.
Speaker Change: Noticed piece of that is that efficiency leads to more work in and of itself.
Speaker Change: So we're particularly excited really about both of these basins, but especially in really a new basin like Suriname about the potential of really unlocking kind of the maximum amount of of work ultimately.
Speaker Change: In the area.
Speaker Change: Yes.
Speaker Change: Very helpful, which brings me to my follow ups, which goes back to the incentive structures.
Speaker Change: I think for the shale work.
Speaker Change: Looking about 20%.
Speaker Change:
Speaker Change: The base rates that you can earn on it seems to be related to.
Speaker Change: The speed of the world really, but it's worth it a bit differently for the.
Speaker Change: So power contract.
Speaker Change: Does that mean.
Speaker Change: Potential additional revenue is that potential additional day rates revenue for you guys with no additional cost or is it in the older type of additional revenue that might be a lower margin.
Speaker Change: Revenue or.
Speaker Change: Related to additional services or anything if you could give some clarity on that that would also be very helpful. Thanks sure. Yes, it's a very good question actually.
Speaker Change: No no that now that you've brought it up no. It's all day rate there.
Speaker Change: There is nothing in there that's like that's margin, it's all it's all 100% margin.
Speaker Change: Potential there.
Speaker Change:
Speaker Change: The wording is different only because we've worked with our customers to print.
Speaker Change: What what works for all parties.
Speaker Change: That's where we ended on the wording, but no there is nothing to read between the lines. There. These are these are truly day rate bonuses.
Speaker Change: Alright.
Speaker Change: Very clear. Thank you so much have a good day. Thank you.
Speaker Change: Your next question comes from the line of Noel Parks with Tuohy Brothers. Your line is open.
Noel Parks: Hello, just wanted to.
Speaker Change: Follow up on sort of a housekeeping thing.
Noel Parks: <unk>.
Noel Parks: Remarks.
Noel Parks: <unk> there was something about.
Noel Parks: Uh huh.
Noel Parks: Items leftover from.
Speaker Change: From the acquisition so could could you just go over those again.
Noel Parks: Sure.
Noel Parks: So.
Noel Parks: Diamond.
Noel Parks: So essentially just wanted to state that there isn't running through operating expenses, if you will.
Noel Parks: So just wanted to be clear on where that hits on the on the financial statements.
Noel Parks: So it's about it's about $26 million here in 2025.
Speaker Change: Great. Thanks, Sir thanks for the clarification.
Noel Parks: Okay.
Speaker Change: Wonder if at this point and I realize of course, we have a backdrop of uncertainty any inkling.
Noel Parks: Weather per have the potential to.
Noel Parks: Move the needle on suppliers input costs.
To a degree of that.
Noel Parks: Anything could get passed on as you as you look out to future projects.
Noel Parks: Sure.
Noel Parks: The short answer is yes provided it's a very fluid.
Noel Parks: Situation right now.
Noel Parks: <unk> talked about as it relates to 2025 <unk>. We estimate this will impact less less than 5 million, obviously, sorry $15 million in that that can change things.
Noel Parks: Things things play out so.
Noel Parks: On the steel side Thats, something we will see you focused on at all but.
Noel Parks: Ultimately we would expect.
Noel Parks: <unk> cost increases.
Noel Parks: Generally you get passed through to US were obviously managing that as well as we can.
Noel Parks: And so that's why we wanted to provide some guidance as we see the world today from a 2025 perspective, but obviously this.
Noel Parks: If things change materially from that then obviously, we would expect a bigger impact to us.
Noel Parks: Going forward maybe into 2026 as an example.
Noel Parks: Great. Thanks, a lot.
Noel Parks: There are no further questions at this time, Mr. Robert Eifler I will hand, the call back over to you.
Speaker Change: Thanks, everyone for joining us today, we look forward to.
Speaker Change: To catching up with you at the next quarter.
Speaker Change: Sure.
Okay.
Speaker Change: Thank you. So much. This concludes today's conference call you may now disconnect.
Speaker Change: Please wait the conference will begin shortly.
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