Q1 2025 Vantage Drilling Co Earnings Call

Okay.

Good day and thank you for standing by welcome to the Vantage drilling International Q1, 2025 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question answer session.

Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please be advised that today's conference is being recorded I would now like to hand, the conference over to you.

Speaker Change: Speaker today Rafael Blattner CFO. Please go ahead.

Thank you.

<unk> Thoma: Good morning, everyone and welcome to the vantage drilling International Limited first quarter 2025 earnings conference call on the call with me today is <unk> Thoma are CEO.

<unk> Thoma: Morning, We released our earnings announcement for the quarter ended March 31 2025.

The earnings release is available on our website advantage drilling dot com.

<unk> Thoma: Please note that any comments, we make today about our expectations of future events and projections are forward looking statements pursuant to the private Securities Litigation Reform Act.

We have based forward looking statements on management's current expectations and assumptions.

<unk> Thoma: On historical facts.

<unk> Thoma: Examples of these statements include but are not limited to our expectations regarding future results, including expectations regarding our liquidity position.

<unk> Thoma: Costs and expenses related to upgrades and out of service work as well as contract preparation costs and expenses.

<unk> Thoma: Forward looking statements in today's call are subject to a number of risks and uncertainties.

<unk> Thoma: Many of which are beyond our control and could cause actual results to differ materially from the projections made today.

<unk> Thoma: Vantage does not undertake to update any such statement or risk factor that could cause actual results to differ materially from our expectations.

<unk> Thoma: We refer you to our earnings release and financials are available on our website, we have prerecorded our prepared remarks and are participating on the call remotely to manage the question and answer session segment of the call in the event there are issues with sound quality or of a similar nature. Please accept our apologies in advance and thank you for your understanding.

Speaker Change: Now, let me turn the call over to our CEO, Mr. Ahab Thoma.

Ahab Thoma: Thank you Rafael and welcome everyone.

Ahab Thoma: I am pleased to report a successful first quarter of 2025, driven by safe and efficient operations.

Ahab Thoma: I'd like to summarize some highlights before moving onto our three corporate goals.

Ahab Thoma: At the very start of the year, we finalized and executed the definitive agreement with total energy.

Ahab Thoma: The joint venture purchase of the tungsten explorer, which will occur later this year.

Ahab Thoma: In April we secured a conditional letter of award for the Platinum explorer.

Ahab Thoma: With a 90 day validity period.

Ahab Thoma: Which the parties are working to enter into a firm contract.

Ahab Thoma: The contract value is circa $80 million.

Ahab Thoma: With an anticipated 260 days required to render the campaign inclusive of mobilization time contract preparation time and day mobilization time.

Ahab Thoma: Additionally, the company entered into a marketing agreement with Eldorado drilling two markets the seventh generation Dorado drillship.

Ahab Thoma: Drilling opportunities in various locations in Africa, the Mediterranean Asia and Australasia.

Speaker Change: Now I would like to take you through our progress in relation to our three corporate goals of one.

Ahab Thoma: Maintaining our stellar safety and operational performance.

Speaker Change: Two.

Speaker Change: The contracting of our entire fleet and three.

Speaker Change: Achieving excellence stakeholder returns.

Speaker Change: I will begin with our first corporate goal of maintaining our stellar safety and operational performance.

Speaker Change: We delivered strong safety performance during the first quarter, whereby vantage as a company achieved one year lost time incident free.

Speaker Change: This is a testament to the focus and commitment of our teams and ensuring that we follow our processes and implement our perfect day leadership principles.

Speaker Change: In collaboration with our joint venture partner, we celebrated international World Safety day.

Speaker Change: Presentations were conducted by the managing director of Teva, Our JV company.

Speaker Change: Our Dubai office and by the clients corporate team onboard the tungsten explorer highlighting the importance of maintaining a strong safety culture offshore.

Speaker Change: In addition, one of our employees on the tungsten explorer was awarded the observation card of the year for 2024 by two adult energies E P Congo.

Speaker Change: From a sustainability perspective, we launched a malaria awareness campaign in Congo, distributing health education materials, and malaria prevention packed focusing on a congolese cruise and their families.

Speaker Change: In addition, during Ramadan vantage supported a number of programs that provided if TARP meals for labor camps across the U a E.

Speaker Change: In food assistance to disadvantaged people across the middle East.

Speaker Change: These are important initiatives within the company that highlight our commitment to improving the welfare of people in the areas, where we work.

Speaker Change: Switching to operations.

Speaker Change: Revenue efficiency for the tungsten explorer during the first quarter of 2025 was 100%.

Speaker Change: Revenue efficiency for the two operated rigs in our managed fleet during the quarter was 90, 665%.

Speaker Change: Combined revenue efficiency of both fleets was 90, 775%.

Speaker Change: I'll now walk you through our fleet status, which directly tied to our second corporate goal of contracting our entire fleet.

Speaker Change: Starting with our own fleet, our focus is to convert the conditional letter of award for the platinum explorer into a contract.

Speaker Change: Signing of the contract the platinum will undergo pre contract preparations in advance of commencing its mobilization.

Speaker Change: Moving onto the tungsten explorer the rig continues its campaign in Congo.

Speaker Change: It is currently operating on the last of its three exercised contractual options.

Speaker Change: Upon conclusion of this contract the rig will demobilize from the Congo and be sold to the JV at which time, the 10 year management contract will commence.

Speaker Change: Thereafter, the rig will undergo an out of service work scope, including periodic maintenance re certifications and upgrades.

Speaker Change: On completion of such out of service period.

Speaker Change: <unk> will mobilize to West Africa to commence its maiden contract under the ownership of the JV for two firm wells and four optional wells contract with a firm duration of 160 days and a further optional duration of up to 290 days.

Speaker Change: As a reminder, the <unk>.

Speaker Change: <unk> explorer will be sold to the JV for $265 million 190, $875 million in cash and $66 $25 million in JV equity, providing vantage with 25% JV ownership.

Speaker Change: At the end of the first quarter, our total backlog was $211 million with $192 million coming from our managed fleet.

Speaker Change: Switching to the managed services segment last year, we expanded our portfolio with the two to three year management agreement for the Topaz Driller and so Honda along with the three year support services agreement for the Emerald Driller in this quarter, we entered into an agreement with Eldorado drilling to market with <unk>.

Speaker Change: Seventh generation Dorado drillship for drilling opportunities across Africa, the Mediterranean Asia and Australasia.

Speaker Change: Reflecting our strong reputation as rig managers.

Speaker Change: We remain focused on expanding our managed services business by adding more rigs to our portfolio.

Turning to market dynamics, the long term fundamentals of the deepwater segment remained constructive despite near to midterm delays and macroeconomic pressures, including new tariffs and the resulting recent pullback in crude oil prices.

Speaker Change: While we continue to anticipate idle periods for certain floaters rolling off contract in 2025 and into the first half of 2026, we expect utilization to begin improving thereafter as market tightness gradually returns.

Speaker Change: In the Jackup segment, rumors and speculations regarding further suspensions continued to negatively impact sentiment.

Speaker Change: Despite this we remain of the view that most of the suspended premium jackup rigs are likely to find new work in the long term supported by our broadly resilient global demand environment.

Speaker Change: However, we do expect day rates to remain under pressure in the near term before a more meaningful recovery in utilization materializes to pre suspensions levels.

Speaker Change: Moving to our third corporate goal.

Speaker Change: In first quarter of 2025.

Speaker Change: With regard to our cash position, we ended the first quarter with a cash balance of $76 4 million, including $3 3 million of restricted cash $5 $8 million.

Speaker Change: Of managed services.

Speaker Change: Funded cash and $15 $5 million.

Speaker Change: Pre funded by total energies to support the planned upgrade for the tungsten explorer.

Speaker Change: As previously announced to ensure sufficient liquidity before the tungsten explorers planned out of service period.

Speaker Change: We issued $50 million in new notes during the fourth quarter of 2020 for Rafael will provide more color on liquidity and capital resources.

Speaker Change: In conclusion, we remain focused on achieving exceptional safety performance and securing profitable long term drilling contracts to deliver strong future returns for our stakeholders.

Rafael Blattner: With that I would like to turn the call back over to Rafael to take us through the numbers.

Rafael Blattner: Thank you <unk> and welcome everyone I will now provide an overview of our financial performance for the quarter ending March 31 2025.

Rafael Blattner: The company ended the first quarter with approximately $76 4 million in cash, including $3 3 million and restricted cash of $5 $8 million pre funded by our managed services customers for near term obligations and $15 $5 million pre funded by total energies to support the planned.

Rafael Blattner: <unk> for the tungsten explore compared to $67 million in.

Rafael Blattner: In the same quarter of the prior year, which included $10 8 million and restricted cash and $11 $1 million pre funded by our managed services customers for near term obligations.

Rafael Blattner: As a reminder, in the fourth quarter of 2024, the company raised $50 million in new senior notes to maintain adequate liquidity for the planned out of service work on the tungsten explore.

Rafael Blattner: At the start of the year total energies and vantage executed all definitive agreements and formed the joint venture, which will purchase the tungsten explore after the conclusion of the current total Energy's campaign in the Congo.

Rafael Blattner: At closing vantage will receive 190 $875 million in cash and $66 $25 million and joint venture equity Vance.

Rafael Blattner: Vantage will also manage and operate the drillship for 10 years with an option to extend for up to five more years.

Rafael Blattner: Working capital for the quarter ended March 31, 2025 was approximately $101 9 million.

Rafael Blattner: Compared to $129 million in the same quarter of the previous year.

Rafael Blattner: Decline in working capital was primarily attributed to the decrease in activity associated with the completion of the platinum explorer campaign in the first quarter of 2024.

Rafael Blattner: And the conclusion of management agreements for the Polaris and the Capella in the first and the third quarter of 2024, respectively, and the sale of the Somohano until pass driller in the fourth quarter of 2024.

Rafael Blattner: For the first quarter of 2025, we achieved revenues of approximately $31 9 million compared.

Rafael Blattner: Compared to $76 1 million for.

Rafael Blattner: For the first quarter of 2024.

Rafael Blattner: The decrease in revenue of $44 2 million.

Rafael Blattner: It was primarily attributable to the sale of the Topaz driller and the silvana during the fourth quarter of 2024, which contributed $27 9 million in the first quarter of 2024.

Rafael Blattner: The remaining $16 3 million reduction in revenue was due to the conclusion of the platinum explorer campaign in the first quarter of 2024 and management agreements for the Polaris and the Capella in the first and third quarter of 2024, respectively.

Rafael Blattner: Revenue efficiency for the first quarter of 2025 for the tungsten explore in the managed fleet was 100% and 96, 7% respectively.

Rafael Blattner: Operating costs for the first quarter totaled $46 4 million these were lower compared to $71 $2 million in the comparable quarter of 2024.

Rafael Blattner: The overall decrease in cost was primarily driven by the sale of the Topaz driller and the sore Hana, resulting in a reduction of approximately $12 1 million.

Rafael Blattner: Additionally, the conclusion of management agreements for the Polaris and Capella in 2024 contributed to a further decrease of approximately $10 7 million and the completion of the platinum explorer campaign by an additional $2 million.

Rafael Blattner: General and administrative expenses for the first quarter of 2025 totaled approximately $8 3 million as compared to $7 3 million for the comparable quarter in 2024.

Rafael Blattner: The cost increase is primarily due to accumulative adjustment of noncash share based compensation expense of $2 $6 million.

Rafael Blattner: Partially offset by lower professional fees for.

Rafael Blattner: For the first quarter interest expense was approximately $1 6 million compared to $5 3 million in the same quarter of 2024.

Rafael Blattner: The decrease in expense was primarily due to the redemption of notes during the fourth quarter of 2024 totaling $184 9 million cap.

Rafael Blattner: Capital expenditures for the first quarter of 2025 totaled $4 6 million.

Rafael Blattner: Finally, investing cash flows include a positive $4 million purchase price adjustment related to the sale of the solar Hana the.

Rafael Blattner: The net result for the first quarter was a net loss of $18 9 million attributable to shareholders. Please.

Rafael Blattner: Please note we will post our March 31, 2025 quarterly report to our website later today.

Rafael Blattner: And with that I will now turn the call back over to the operator to begin the Q&A.

Rafael Blattner: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Rafael Blattner: Please standby, while we compile the Q&A roster.

Speaker Change: Our first question comes from the line of Garrett Fellows from J H Lane partners.

Speaker Change: Please state your question.

Speaker Change: Could you just give us your best idea of when the program in the Congo will be gone and then sort of walk us through puts and takes of cash next year.

Speaker Change: Excess cash we'll have available.

Speaker Change: Well tell me the other items are cleaned up thank you.

Speaker Change: I think I'll take the first part of the question, we expect it to happen.

Speaker Change: Inside of the third quarter.

Speaker Change: More than early part or not required but we are.

Speaker Change: At the moment.

Speaker Change: Going with the assumption that is going to be in there in Q3.

Speaker Change: In terms of.

Speaker Change: In terms of cash we have not discussed that yet.

Speaker Change: Okay.

Speaker Change: Further comments on that we have not discussed publicly.

Speaker Change: Yes, we cannot we cannot speak about.

Speaker Change: Anything with the proceeds of the sale of the Thompson score at this time.

Speaker Change: Okay. Thanks.

Speaker Change: Thank you.

Speaker Change: Thank you.

Speaker Change: A reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.

Speaker Change: At this time I am showing no further questions. This concludes today's conference call. Thank you for participating you may now disconnect.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: [music].