Q1 2025 Transocean Ltd Earnings Call
Please standby we're about to begin.
Good day, everyone and welcome to the Q1 2025 Transocean earnings call. At this time all participants are in a listen only mode. Later, there will be a question and answer session.
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Speaker Change: I'd like to turn the floor over to the director of Investor Relations Allison Johnson. Please go ahead.
Allison Johnson: Thank you Jamie good morning, and welcome to Transocean first quarter of 2025 earnings Conference call a copy of our press release covering financial results, along with supporting statements or schedule, including reconciliations and disclosures regarding non-GAAP financial measures are posted on our website at deepwater dot com.
Speaker Change: Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer, Keelan, Adamson, President and Chief Operating Officer, Todd Beta Executive Vice President and Chief Financial Officer, and Roddie Mackenzie Executive Vice President and Chief Commercial Officer.
Speaker Change: During the course of this call Transocean management may make certain forward looking statements regarding various matters related to our business and company that are not historical facts.
Speaker Change: Such statements are based upon current expectations and certain assumptions and therefore are subject to certain risks and uncertainties.
Speaker Change: Many factors could cause actual results to differ materially please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results. Also please note that the company undertakes no duty to update or revise forward looking statements.
Speaker Change: Following Jeremy Keelan, and Bobs prepared comments, we will conduct a question and answer session with our team.
Speaker Change: During this time to give more participants an opportunity to speak please limit yourself to one initial question and one follow up. Thank you very much I'll now turn the call over to Jeremy.
Jeremy Keelan: Thank you Allison and welcome to our employees customers investors and analysts participating on today's call.
Jeremy Keelan: Before diving into our first quarter results I am pleased to announce that keelan Adamson officially become transitions president and CEO effective may one.
Jeremy Keelan: While that typically provide me a few more days in a row. We believe it is prudent to begin the handover a few days early and continuing the honor of leading todays call.
Speaker Change: Most of you know keelan, but for those of you do not you started an operations here at Transocean nearly 30 years ago and has progressed his way through the organization and the executive ranks, where he served as our president and Chief operating officer for the past several years.
Speaker Change: I've had the distinct pleasure of working closely with keelan in various capacities since I became CEO 10 years ago, and I can assure you that human possesses a comprehensive understanding of the offshore drilling business and transocean.
Speaker Change: Importantly, he recognizes and appreciate the challenges that we constantly face in this business and embraces the oftentimes difficult decisions that are required to persevere overcome and succeed.
Speaker Change: Keith one is a very well rounded thoughtful courageous inspiring and humbled leader to depth of experience will be a key attributes and serve them well if he enhances transitions leadership position by safely optimizing performance introducing innovative technologies and maximizing shareholder returns.
Speaker Change: While transitioning out of the B O role is certainly bittersweet I will continue as a board member with the company through our annual General meeting on May 30.
Speaker Change: Shareholders are asked to elect chilling to the board Electric current Board Chair, Chad Deaton director and allow me as chairman.
Speaker Change: At that time, Chad will transition to the role of lead independent director.
Speaker Change: Irrespective of the market conditions, we may encounter I am confident we have the right team assembled under <unk> leadership to meet any challenge.
Keith One: With that I'll turn it over to Keith.
Speaker Change: Okay.
Keith One: Thank you Jeremy and thank you for those very kind comments.
Keith One: As reported in yesterday's earnings release for the first quarter Transocean delivered adjusted EBITDA of $244 million on $906 million of contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 27%.
Keith One: After we released our fleet status report on April 16, we signed a priced option on the deepwater Asgard that if exercised will extend its second firm period by one year.
Keith One: Additionally over the weekend. The next two options on the Transocean equinox were exercised at $540000 per day.
Keith One: This extends the rigs firm periods through August 2026, and represents $40 million of backlog.
Keith One: over the weekend. The next two options on the Transocean Equinox were exercised at $500 and represents $40 million of backlog.
Keith One: Operation Lee, so far this year, we have commenced two programs ahead of schedule on rigs moving to contracts with new customers. The Transocean Barrens started in the Black Sea with OMV Petron 10 days earlier than planned and the Deep Border Invictus commenced its work with BP in the US Gulf 15 days ahead of its planned start.
Keith One: Now I'd like to take a few minutes to discuss industry and recent macro dynamics
As expected,
Keith One: We have observed a couple of relatively quiet corners for showing pictures.
Keith One: This is evidence of our customers continued capital discipline, supply chain delays and business restructuring activities
Keith One: Importantly, our customers have unambiguously pivoted to once again endorsing hydrocarbons as a core business
and the Priority Investment for the Future. Thank you.
Keith One: In Australia bids were recently submitted for Chevron's Gorgon phase III tender, we expect them to issue the award sometime in the fourth quarter for 12 to 24 months of work beginning late 2026.
Keith One: Impacts is expected to tender later this month for its five year program commencing in the second quarter of 2027.
Keith One: With the current demand, including opportunities with the local independents are two rigs the transocean equinox and Transocean endurance are well placed and could remain in Australia beyond their current programs.
Keith One: Shifting now to the traditional harsh environment regions are four rigs in Norway. The Transocean Spitsbergen, Transocean Norge, Transocean encourage and Transocean enabler are on contract into 2027.
Keith One: Given projected demand, which suggests two incremental rigs will be required in Norway in 2000 to 2027 and the push from Norwegian regulators for more exploration and development activities. We are confident our rigs will be placed on programs directly following their current contracts.
Keith One: In the U K BP released its west of Shetlands tender, which will require one rig for a firm duration of three years, beginning the first quarter of 2027.
Keith One: And finally in Canada, Suncor recently tendered for its one year Terra Nova programs beginning in 2027.
Keith One: Okay.
Keith One: In summary, we remain optimistic about the global offshore drilling market and are encouraged by our continued conversations with customers.
Keith One: At this point, we do not believe that present macroeconomic uncertainty will cause delays to the programs, we expect to be awarded to the industry over the next several quarters many of which are linked to long term developments.
Keith One: Independent projections in key industry metrics continue to point towards increasing offshore drilling activity across the board with growth coming from deepwater basins.
Speaker Change: According to Fearnley offshore the combined proved reserves at the majors have declined from approximately 93 billion barrels in 2012 to around 76 billion barrels at the end of last year, while the majors collective reserve to production ratio declined by approximately 20% over the same period.
Keith One: As we progressed through 2025.
Speaker Change: Priorities remain largely the same.
Speaker Change: We are committed to delivering safe reliable and efficient operations for our customers and are focused on the conversion of our seven $9 billion of backlog to revenue and that revenue to cash to create sustainable value for our shareholders.
Speaker Change: With that I will now hand, it over to Pat to discuss our results and guidance.
Pat: Thank you Kayla and good day to everyone.
Pat: During today's call I will briefly recap our first quarter results provide guidance for the second quarter and conclude with an update of our expectations for the full year.
Pat: As disclosed in our press release for the first quarter, we reported a net loss attributable to controlling interest of $79 million.
Pat: Or a net loss of <unk> 11 per diluted share.
Pat: During the quarter, we generated EBITDA of $244 million.
Pat: And cash flow from operating activities of $26 million.
Pat: Free cash flow of negative $34 million reflects the $26 million of cash flow net of $50 million of capital expenditures.
Pat: During the first quarter, we delivered contract drilling revenues of $906 million at an average daily revenue of approximately $444000 contract drilling revenues exceeded our guidance range due primarily to higher than anticipated utilization on the Transocean Spitsbergen and Transocean endurance as a result of delayed out of service periods.
Pat: And the early commencement of the Transocean Barents.
Pat: At $618 million operating and maintenance or O&M expense in the first quarter was within our guidance range.
Pat: Lower costs related to the aforementioned delays and out of service periods were offset by an unfavorable conclusion to a customer dispute that resulted in a $34 million noncash charge associated with the write off of an uncollected receivable during the period.
Pat: G&A expense in the first quarter was $50 million.
Pat: We ended the first quarter with total liquidity of approximately $1 3 billion.
Pat: This includes unrestricted cash and cash equivalents of $263 million.
Pat: $428 million of restricted cash the majority of which is reserved for debt service.
Pat: And $576 million of liquidity from our Undrawn credit facility.
I will now provide guidance ranges for the second quarter and an update on our expectations for the full year.
Pat: For the second quarter, we expect contract drilling revenues to be between $970 million and $990 million based upon an average fleet wide revenue efficiency of 96, 5% on our working rigs as you know revenue efficiency can vary based upon uptime performance weather and other factors.
Pat: This estimate also includes between 55 and $65 million of additional services and Reimbursable expenses.
Pat: Please recall that these additional services in customer Reimbursable generally carry a low single digit margins.
Pat: The expected quarter over quarter increase in contract drilling revenues is primarily due to higher activity on the Barents and the deepwater invictus and our expectation for improved revenue efficiency and more operating days in the quarter, partially offset by the scheduled unpaid out of service period on the Spitsbergen.
Pat: We expect second quarter O&M expense to be within a range of approximately $610 million to $630 million. This slight quarter over quarter increase was primarily due to additional costs incurred during due to out of service periods on the Spitsbergen and endurance and the timing of in service maintenance across the fleet, partially offset by the write off associated.
Pat: <unk> with the customer dispute that I mentioned, a moment ago.
Pat: We expect G&A expense for the second quarter to fall within a range of $45 million to $50 million.
Pat: Net cash interest expense for the second quarter is forecasted to be approximately $140 million.
Pat: Comprising interest expense and interest income of about $147 million and approximately $7 million respectively.
Pat: Capital expenditures for the second quarter are forecasted to be approximately $20 million and cash taxes to be paid are expected to be approximately $30 million.
Pat: For the full year 2025 contracted drilling revenues are still expected to be between $3 85 billion and $3 95 billion the range primarily.
Merrily reflects potential variances in revenue efficiency.
Pat: Our guidance also includes between $235 million and $245 million of additional services and Reimbursable expenses.
Pat: We expect our full year O&M expense to be between $2 3 billion and $2 4 billion.
Pat: In line with our previous guidance, and we anticipate G&A costs to be between $185 $195 million.
Pat: $5 million lower than previously forecasted.
Pat: For the full year, we are anticipating net cash interest expense between 550 and $555 million combining.
Pat: <unk> interest expense and interest income of about $580 million and between 25% and $30 million respectively.
Pat: This excludes any impact from the bifurcated exchange feature of our 2029 exchangeable bonds.
Pat: Cash taxes for the full year are forecast to be between $75 million and $80 million somewhat higher than our earlier guidance due to longer than expected activity in higher tax jurisdictions.
Pat: We now expect 2025 capital expenditures to be approximately $115 million reduced from our prior guidance of $130 million of which approximately $50 million is related to customer required capital upgrades for upcoming projects and capital spares and approximately $65 million of sustaining capital investment.
Pat: Our projected liquidity at year end 2025 is now forecasted to be between $1 45 billion and $1 $5 5 billion.
Pat: This reflects our revenue cost and capital expenditure guidance and includes the impact of our cost savings initiative to date, our undrawn revolving credit facility and restricted cash of approximately $450 million as a reminder, for the terms of our credit agreement the capacity of the facility declined to $510 million from five.
Pat: <unk> hundred $76 million effective late June 2025.
Pat: At the present time, we have not explicitly included the potential impact of tariffs in our guidance.
Pat: As you know the situation is continuously evolving and highly uncertain.
Pat: We anticipate that any tariff exposure will fall into two broad categories direct meaning directly related to our importation of materials into the U S from foreign countries and indirect which relates to additional costs are U S based suppliers pay to imported goods and materials needed to manufacture the products they supply.
Pat: We currently do not expect our exposure to direct tariffs to be significantly more likely to drive a meaningful increase in our costs.
Pat: A significant portion of our sourcing has already done in the jurisdictions in which we operate for example, roughly 87% at the good use in our U S operations are procured domestically.
Pat: We were also able to utilize foreign trade zones for certain components.
Pat: Further and coincidentally as part of our cost savings initiative, which I will discuss shortly we have already increased local procurement and other countries and continue to make significant progress in this regard.
Pat: As evidenced by Brazil, our second largest operating area. Our local content is over 60% today up from about 30% in 2023.
Pat: In relation to our indirect exposure to tariffs we have observed some preemptive supplier price increases intended to mitigate the potential impact of tariffs on their own supply chains.
Pat: This is not yet widespread at most of our suppliers still appear to be assessing the situation.
Pat: We think that any indirect or pass through cost increases have a greater potential to affect our cost structure over the longer run if reciprocal tariffs are not curtailed.
Pat: We continuously engaged with our suppliers to understand the potential impact of the tariff regimes and work to mitigate increases wherever possible.
Pat: We also continue to review our contracts with customers to determine our eligibility for relief through cost escalation or change in law provisions.
Pat: Finally, as I mentioned when we spoke in February on our 2024 year end call. We had initiated an enterprise wide evaluation to identify areas in which we can reduce our costs without compromising our ability to provide safe and reliable operations. Thus.
Pat: Thus far we have identified approximately $100 million of cash.
Pat: Cash cost savings that we expect to be realized over the course of 2025 predominantly in the second half of the year with a similar quantum of savings expected in 2026.
Pat: This effort is ongoing we expect to identify additional opportunities to improve efficiencies in our cost structure.
Pat: Our capex in overhead guidance reflect a portion of these anticipated savings. However, our 2025 O&M guidance range is currently unchanged from last quarter due in part to embedded in offsetting noncash charges and accounting accruals the.
Pat: The full impact of these cash cost savings is most clearly visible on our current liquidity forecast, which we have increased by approximately $100 million.
Pat: As we discussed previously we anticipate using a portion of these cost savings to accelerate the deleveraging of our balance sheet.
This concludes my prepared remarks, and I'll now turn the call back to chew on for additional comments before we start Q&A.
Speaker Change: Thanks Pat.
Speaker Change: Before we move to Q&A I will take this opportunity to recognize and thank Jeremy for his exceptional leadership over the past 10 years.
Speaker Change: <unk> tenure as CEO of Transocean was nothing short of transformational.
Speaker Change: Upon his arrival in 2015, he quickly developed a strong understanding of this business established a clear vision and strategy and successfully guided the company through arguably the worst downturn in the history of the offshore drilling industry.
Speaker Change: We protected the interests of our shareholders and had the foresight to take proactive actions to position the company for even greater success in the industry recovered.
Speaker Change: In this regard he presided over a significant restructuring of our asset base. The embrace the unique and singular objective of building the most differentiated and highest capability pure play, Florida fleet in the industry, one that when operated and supported by the men and women of Transocean has and continues to deliver.
Speaker Change: Outstanding performance to our customers generate leading edge day rates and an industry leading backlog.
Speaker Change: But the outside World has seen are simply the outcome of his leadership skills and style.
Speaker Change: As important to the longevity and future success of the company are things that don't necessarily make headlines such as his commitment to developing talent and building high performance teams.
Speaker Change: His inspirational leadership unlocks potential motivates and mobilize our global workforce and empowers us team to execute.
Speaker Change: Every CEO wants to leave a company in better shape than they found it.
Jeremy Keelan: I believe Jeremy can move to the next chapter in his career knowing that he absolutely achieve that.
Jeremy Keelan: Jeremy Thank you sincerely for all you've done for Transocean over the past 10 years, and we look forward to your continued guidance on our board of directors.
Allison Johnson: And now I will turn the call back to Alison for Q&A.
Allison Johnson: Thanks, Caylin, Jamie we're now ready to take questions and as a reminder to the participants please limit yourself to one initial question and one follow up question.
Speaker Change: Thank you ladies and gentlemen at this time, if you would like to signal for a question simply press star one on your telephone keypad, you may give yourself from the queue by pressing star Q again, Thats star one to signal and started you remove yourself.
Speaker Change: We will hear first from Eddie Kim with Barclays. Please go ahead.
Eddie Kim: Hey, good morning.
Speaker Change: Jeremy Congratulations coordinating.
Speaker Change: Guiding the company through an incredibly difficult time and wish you all the best and whatever comes next.
Speaker Change: Thanks Eddie.
Speaker Change: My first question is on.
Speaker Change: Kind of contract announcements timing you laid out a very constructive outlook as you went through on a region by region on the upcoming tenders and programs, mostly with 2026 start dates and I know, it's always difficult to predict when these contracts.
Contracts will be announced but whats your best estimate on that timing should we see most of these to be announced.
Speaker Change: Around mid year or more.
Speaker Change: More towards the end of this year or early next year, just just your thoughts on.
Speaker Change: When that contract announcement timing could take place.
Speaker Change: Okay.
Speaker Change: Hey, Eddie this is Ravi I'll take that one.
Speaker Change: Yes so.
Speaker Change: I think we said this a few quarters in a row that we do expect a lot of contracted assets this year.
Speaker Change: Last quarter on quarter before we're at a bit quiet.
Speaker Change: But I think you just saw noble and exiting several long term contracts.
Speaker Change: Yesterday.
Speaker Change: And then we believe that many of the things that <unk> discussed in his comments there will be awarded pretty soon we think essentially there'll be several awards over the summer.
Speaker Change: Summer period, but also all the way up towards the end of the year in.
Speaker Change: In fact, we think the second half of the year could be very prolific in terms of long term awards.
Speaker Change: And as you pointed out theres not a whole lot of stuff for 25.
Speaker Change: But.
Speaker Change: We are currently 97% and 25% so we feel pretty good about that.
Speaker Change: And that's through the through the year from from this point forward, we're 93% contracted so yes, a lot of the stuff stops in 'twenty six.
Speaker Change: But we think that suits us very well actually.
Speaker Change: Got it got it that sounds great.
Speaker Change: My follow up is just on.
Speaker Change: Yeah.
Speaker Change: Did kind of day rates on those contracts, we should expect in the second half of this year.
Speaker Change: Up until now I mean, leading edge.
Speaker Change: Floaters are still kind of in that mid to high four hundreds range.
Speaker Change: There is a lot more idle rigs today than there were six months ago. So just just curious if you expect.
Speaker Change: We might see some day rate pressure.
Speaker Change: On these upcoming contracts or if they should.
Speaker Change: Frankly resilient at current level.
Speaker Change: Yeah. So.
Speaker Change: The way that we look at it is if you think about <unk>.
Speaker Change: 2025 projections are give or take about 120 working rigs floaters.
Speaker Change: On that.
Speaker Change: That sharply increasing to $1 30 in 2007 and goes up to like $1 42, and 29. So our view on the rates are that you could probably see some near term pressure for short term work, but we think for long term market makes a lot more sense that.
Speaker Change: We continue at rates similar to what we've seen over the past year.
Speaker Change: So certainly that's been our experience in a lot of the discussions we've had with our customers that the rates are kind of largely unchanged going forward.
Speaker Change: But it's definitely possible that youll see some some near term pressure for those trying to fill some gaps and maybe and maybe just to add something on top of that it really it really depends on when these when these jobs were bid.
Speaker Change: And the timing of those jobs, whether they were by tender or direct negotiations. So it could be a bit of a mixed bag in the near term.
Speaker Change: But as Rodney has already indicated we obviously see progression to a higher utilization.
Speaker Change: The industry's fleet in by the end of 'twenty six 'twenty seven.
Speaker Change: Got it alright, thanks for that color I'll turn it back.
Speaker Change: We'll hear next from Arun <unk> with Jpmorgan. Please go ahead. Your line is open.
Arun: Yes. Good morning, I was wondering if you could or getting a few.
Arun: Buy side questions on the shallow words from noble I was wondering if you could talk about the implications from Transocean because you do obviously have a couple of an incumbent rigs working for shell today.
Arun: Yes.
Arun: Yes, sure no problem ill take that.
Speaker Change: First of all congratulations to noble for them for picking up a couple of slots there.
Speaker Change: Yes, so the way we view that obviously, we were very involved in the process with shell.
Speaker Change: We.
Speaker Change: We simply took the portfolio view that we werent.
Speaker Change: To kind of go to those levels for this.
Speaker Change: Class of asset, but that being said, we actually think <unk>.
Speaker Change: Shell themselves.
Speaker Change: Have additional demand required in the Gulf of Mexico, and we've had a long relationship with shell and we sincerely appreciate all of that work.
Speaker Change: It's been a fabulous partnership through the years and I'm sure it's going to continue and so we think.
Speaker Change: There's there's still plenty of opportunities as I kind of said in the last question, Nick we chose to.
Speaker Change: Take a longer view, there's a much higher period of activity just around the corner.
Speaker Change: And the rigs that we're talking about in our fleet.
Speaker Change: The first one off doesn't finish for more than a year and the second one for more than two years. So we kind of think about adding four years that will run you entered 2013 in 2031 that we would we would take a longer view on what those rates should be.
Speaker Change: So in addition to that we've also had a lot of inbounds on this class of rig.
Speaker Change: From other operators in the Gulf and elsewhere. So.
Speaker Change: We kind of wind down this track before with Alaska.
Speaker Change: We were very successful in placing her.
Speaker Change: Elsewhere.
Speaker Change: We're also excited about starting that project. So I think we're in very good shape there.
Speaker Change: We're quite pleased to see the beginning of these long term contracts now being enhanced.
Speaker Change: And maybe maybe just another piece on top of that I think shallow have.
Speaker Change: We have obviously looked at their portfolio of assets that they are using and based on the programs that they've got have elected to use a wider portfolio of capabilities.
Speaker Change: And in that case, our 70 <unk> plus assets.
Speaker Change: There's plenty of opportunities for them in the timeframe that these contracts were in.
Speaker Change: And we feel very strongly about keeping them.
Speaker Change: Available at that point in time for the wrong for the right rates and contracts.
Speaker Change: Shallow of a very very important customer to us.
Speaker Change: And we know that they will have activity and perhaps even more activity than they currently have and we look to continue that relationship going forward.
Speaker Change: Yes.
Speaker Change: Great and maybe just a follow up I was wondering if you can elaborate on your activity assumptions.
Speaker Change: West Africa, you highlighted a couple of opportunities for rigs, but do you see that being a potential growth area late 'twenty six 'twenty seven.
Speaker Change: Yes, it's interesting you should ask that.
Speaker Change: And a lot of the stuff we've discussed over the past six months or so we've just not been a lot in West Africa.
Speaker Change: Certainly Brazil.
Speaker Change: Latin America is very very strong just as it is the Gulf of Mexico, but that last piece of the Golden Triangle was really woken up so as <unk> mentioned in Dave's prepared comments, we're looking at.
Many countries in West Africa, with multi year opportunities multi rig opportunities. So we're kind of excited about that and we think there is a few rigs over there.
Speaker Change: <unk> will benefit from all of that activity and in fact, we actually predict that.
Speaker Change: The region will consume a few rigs more than it currently has so.
Speaker Change: That's looking very good again in that 2006 timeframe.
Speaker Change: And that's the third leg of the stool that we're looking we're still looking for the Golden triangle to boost up and so it's really upside there in that area of the world for us.
Speaker Change: Great I wanted to pass on my best to Jeremy Jeremy If you do write a book on.
Speaker Change: 2014 to toy I'd love to read that one.
Speaker Change: Thanks I appreciate it.
Speaker Change: Okay.
Speaker Change: We'll turn now to Fredrik stene with Clarksons <unk> Securities. Please go ahead.
Speaker Change: Hey, Tim.
Speaker Change: And.
Speaker Change: Hey, Brett Congratulations Jeremy.
Speaker Change: Bolden I'm sure. Thank you Hakan notification.
Speaker Change: So.
Speaker Change: Hi.
Speaker Change: I wanted to you had a good breakdown.
Speaker Change: The market that's some good color on the on the previous questions here I wanted to touch a bit on the cost.
Speaker Change: Cost savings that you.
Speaker Change: You mentioned.
Speaker Change: I just wanted to make sure that I heard it correctly.
Speaker Change: You talked about $100 million that could be identified in 2025, and then an additional $100 million in 2056 or was it the 100 million mainland in total across those two years just want to make sure that I heard.
Speaker Change: Correctly no.
Speaker Change: You heard correctly.
Speaker Change: $100 million that we've identified for 2025 and while this is an ongoing process, we continuous to assess.
Speaker Change: Opportunities here, our current expectation is going to be in about the same range. So about $200 million in aggregate over the next two years, obviously, we've not provided specific guidance for 2026, yet, but just to give you an indication of the magnitude of savings.
Speaker Change: Anticipated.
Speaker Change: Okay are there will you incur any costs to save those those costs.
Speaker Change: At this point good question at this point nothing significant.
Speaker Change: Again this is the beginning of the process.
Speaker Change: We are focused mostly on O&M costs as I mentioned, there is some in SG&A and capital expenditures, but right now that comprises mostly things like renegotiation of contracts with our vendors.
Speaker Change: Some new technology that was sort of already underway that produces a net savings.
Speaker Change: Using national crews things of that nature, and then some elements of the capital expenditure related to <unk>.
Speaker Change: Spares and things of that nature, where we find that we can actually reduce the quantum and the cost over time.
Speaker Change: Given our views of maintenance and things of that nature. So at this point, we've not identified any significant costs associated with achieving.
Speaker Change: The savings.
Speaker Change: Okay.
Speaker Change: Okay. That's very helpful and then I wanted to.
Speaker Change: Touch briefly on your.
Speaker Change: Fleet as well and I guess this goes mostly kind of across your Ireland and cold stacked vessels.
Speaker Change: First the DD three under discover inspiration.
Speaker Change: Use on that process. It seems like they are still held for sale and also on the cold stack.
Speaker Change: Assets, particularly on the deepwater.
Speaker Change: Sides.
Speaker Change: Do you have any some competitors have started to scrapped cold stacked assets are you planning on doing the same or are there any.
Speaker Change: Thank you you still have a legacy balance sheets and away from some technicality, Scott with Tinder you're doing.
Speaker Change: <unk> in terms of impairment.
Speaker Change: Et cetera. Thank you.
Speaker Change: Yes Fredric.
Fredric: Same same as before the the inspiration of the DD three are still held for sale and we are looking at alternative opportunities for those particular two that are warm.
<unk> and idle at the moment, we look at that quarter by quarter with respect to the cold stack fleet, Yes, that's something that we look at it on a quarterly basis I'll remind you that.
Fredric: The sustaining costs required to keep them cold stack is minimal.
Fredric: <unk> provides us with optionality on that fleet.
Fredric: And a lot of the cost to put them into cold stack. That's obviously been sunk already so something we look at every quarter and we'll continue to do so and.
Fredric: <unk> with respect to your question about sort of the mechanics.
Fredric: Theres nothing in any of our debt covenants or accounting policies or anything like that.
Fredric: And cover the ability to transact with any of these assets.
Fredric: Yes.
Fredric: One thing I think we also hear a similar message from our competitors that.
Fredric: Go for it.
Fredric: Uncompetitive assets when they go idle if theyre not part of our core fleet or a forward looking.
Fredric: Scenario, there and it's quite possible youll see many of these rigs retired from the industry in general.
Fredric: Yes.
Fredric: Alright I appreciate it.
Fredric: The answers.
Fredric: I'll leave it to the next one we show a good day.
Speaker Change: Thanks, Patrick.
Speaker Change: We will take our final question from Noel Parks with Tuohy Brothers. Please go ahead.
Noel Parks: Hi, good morning.
Noel Parks: What kind of come back to one of my recurring questions, which is.
Noel Parks: And an upside case.
Noel Parks: I've been interested in what you think producers.
Noel Parks: What producer behavior might be like as they they face needing to crowd through the door. These recent contracts we heard they're encouraging.
Noel Parks: It sounded like.
Noel Parks: Some of them are recognizing that their advantages marketing and a little sooner rather than later.
Noel Parks: So.
Noel Parks: With those now under under the industry's belt. So what what do you think things look like if if 2026.
Noel Parks: Okay.
Noel Parks: We're going to be particularly strong.
Roger: Hey, Al I'll take that one this is Roger again.
Speaker Change: Yes, so look as we think about.
Speaker Change: That we talked about the macro inception table of course.
Speaker Change: A couple of recent announcements.
Speaker Change: Tad a sudden OPEC numbers have caused that short term volatility, but something thats been kind of overlooked is over the past three months the majors, particularly the European majors have basically come out and said we are refocusing on oil and gas we are going to play to our strengths.
Speaker Change: Going to invest in upstream.
Speaker Change: And specifically BP shell and Ecuador.
Speaker Change: Talking about spending more money on exploration.
Speaker Change: And if when you look at what's projected in terms of Capex spend.
Speaker Change: We had expected to see around a 40% increase for deepwater between 2025 and 2029. So that's because as I had mentioned that the investment economics. The returns expected for deepwater developments are superior to most other forms of investment.
Speaker Change: So we think that that will play heavily into what's going to happen in the offshore market today.
Speaker Change: So in terms of that.
Speaker Change: Active utilization, we definitely see that.
Speaker Change: Our aligned with the projections that sure we could be adding 20 rigs between now and the next three or four years.
Speaker Change: We also believe that we will see more exploration that will trigger yet further.
Speaker Change: Sure.
Speaker Change: Development.
Speaker Change: This is all driven by.
Speaker Change: Overarching theme that the IEA for example, just republished their projections that show oil and gas will increase in consumption.
Speaker Change: 2050, so previously all of those curves came down at some point in 2030 as of 2014, but the most recent projections show that even in the weakest economic case oil and gas consumption will continue through the middle of the century. So for US we think that's very solid fundamentals.
Can only support positive activity and positive day rates going forward.
Speaker Change: Okay.
Speaker Change: Great. Thanks. So then would you say it would be fair to say that.
Speaker Change: Given the last couple of years have had shown these signs based on just very limited.
Speaker Change: Industry supply of high spec rigs have shown decides of.
Speaker Change: Very positive.
Speaker Change: Demand fundamentals and.
Speaker Change: So is it safe to say at this point that.
Speaker Change: At this point new contracts, even in low mid <unk>.
Speaker Change: 400, and at that level sort of as a proof point that this is essentially.
Speaker Change: A strong cycle fundamentally as opposed to whatever fears there may have been out there that Oh, my gosh to get to get these rigs signed we're going to have to see a big raw Bakken and pricing is would you say that that that fear is pretty much off the table now or should be.
Speaker Change: Yes, I do I mean, I think there was maybe a moment in time there were there was a tremendous amount of pressure, but I think many of the drillers.
Speaker Change: Yeah.
Speaker Change: Looking past.
Speaker Change: 25, looking to 'twenty six 'twenty seven.
Speaker Change: So from our point of view that.
Speaker Change: Pretty solid.
Speaker Change: You may be seeing a floor for those long term contracts again, as we said before near term stuff short term stuff. Yeah. I think there are many things possible there, but the fundamentals are just too good on a long term basis.
Speaker Change: So certainly we would not make sense to lock in premium assets at below market rates, yes.
Speaker Change: When we look at the operators and their decision processes.
Speaker Change: What they're looking to do with their portfolios as Roger indicated clearly we believe it's up into the right.
Speaker Change: And when it comes to the assets that are available to work.
Speaker Change: There are there are barriers to how many assets can actually go to work and the timing of those and so we think.
Speaker Change: It's a very constructive space that we're heading into and so each driller. It takes a portfolio approach and focuses on their own particular strategies and in our case.
Speaker Change: And we believe.
Speaker Change: That perhaps now is not necessarily the right time to lock up.
Speaker Change: For those future years, but we continue to believe strongly in the future.
Speaker Change: Great. Thanks for the reminder, about the timing barriers to getting.
Speaker Change: Getting rig rig adds diet, it's also really important dynamic.
Speaker Change: I appreciate it thanks for the update.
Bill: Thanks Bill.
Speaker Change: Ladies and gentlemen that will conclude today's question and answer session. At this time I would like to turn the floor back over to Allison Johnson for any additional or closing comments.
Allison Johnson: Thank you Jamie and thank you everyone for your participation on today's call. We look forward to speaking with you again, when we report our second quarter 2025 results have a good day.
Speaker Change: Once again, ladies and gentlemen that will conclude today's call. Thank you for your participation. You may disconnect at this time and have a wonderful rest of your day.
Dana: Hi, Dana.
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