Q2 2026 Odfjell Drilling Ltd Earnings Call

August 18, 2026

Speaker #1: Good afternoon, everybody, and welcome to the Odfjell Drilling Q2 2026 results presentation webcast. My name is James Crowthers, and I'm an Investor Relations Officer at the company.

James Crothers: Good afternoon, everybody, and welcome to the Odfjell Drilling Q2 2026 results presentation webcast. My name is James Crothers, and I'm an investor relations officer at the company. I'm joined today by our Chief Executive Officer, Jesper Rjosdal, and our Chief Financial Officer, Ørjan Lunde. Before we begin, your attention is brought to the important information slide of our presentation, which we would encourage participants to read in full. Note that this presentation is only a summary of the quarter, and a more comprehensive quarterly report should be read separately. Both that report and today's presentations are available on our website, www.odfjelldrilling.com. Today's call will follow the traditional structure, with Jesper taking us through the key highlights before moving on to our operational review.

Speaker #1: I'm joined today by our Chief Executive Officer at Tesla Yardstyle and our Chief Financial Officer at Orion Lender. Before we begin, your attention is brought to the important information slide of our presentation, which we would encourage participants to read in full.

Speaker #1: Please note that this presentation is only a summary of the quarter, and the more comprehensive quarterly report should be read separately. Both that report and today's presentations are available on our website.

Speaker #1: www.odfjelldrilling.com. Today's call will follow the traditional structure, with Ches taking us through the key highlights before moving on to our operational review. Ches will then continue with an overview of the market as we see it today, before handing over to Orion, who will go through our financial review.

James Crothers: Jesper Rjosdal will then continue with an overview of the market as we see it today before handing over to Ørjan Lunde, who will go through our financial review. Jesper Rjosdal will then summarize the presentation before we open up our Q&A session for analysts and investors. As always, the Q&A session will be conducted over both telephone lines and the webcast tools. We will try to get through as many of the questions put to us as possible. However, if we do not get a chance to get through your question, I will endeavor to follow up with you directly after the call. We make an effort to answer all of the questions asked, so we do encourage you to use this feature. With that, I will pass over to our CEO, Kjetil Gjersdal. Kjetil.

Speaker #1: Ches will then summarize the presentation before we open up our Q&A session for analysts and investors. As always, the Q&A session will be conducted over both the telephone lines and the webcast tools.

Speaker #1: And we will try to get through as many of the questions put to us as possible. However, if we don't get a chance to address your question, I will endeavor to follow up with you directly after the call.

Speaker #1: We make an effort to answer all of the questions asked, so we do encourage you to use this feature. With that, I'll pass over to our CEO, Ches Yardstyle.

Speaker #1: Ches.

Speaker #2: Thanks, James, and a very good afternoon, everybody. As I was quoted in our report, which was published earlier today, the results emphasize the resilience and capability of our organization.

Kjetil Gjersdal: Thanks, James, and a very good afternoon, everybody. As I was quoted in our report, which was published earlier today, results emphasize the resilience and capability of our organization. Even though we have had one rig off hire for much of the quarter, we still have been able to return solid financial results, deleverage our balance sheets, and we are continuing to return cash to our shareholders. From revenue of $251 million, we have recorded EBITDA of $162 million and achieved a net profit of $57 million. These numbers are positively impacted by the insurance proceeds from the Deepsea Atlantic incidents. After write-off of lost equipment and expenses incurred related to the insurance claim, there is a positive EBITDA effect of $32 million. Meanwhile, we have continued to deleverage, reducing our leverage ratio now to 1.5 times net debt to EBITDA and our net debt to $862 million.

Speaker #2: Even though we've had one rig off hire for much of the quarter, we have still been able to return solid financial results. The leverage on our balance sheet remains strong, and we are continuing to return cash to our shareholders.

Speaker #2: From revenue of $251 million, we have recorded EBITDA of $162 million and achieved a net profit of $57 million. These numbers are positively impacted by the insurance proceeds from the Atlantic incidents.

Speaker #2: After the write-off of lost equipment and expenses incurred related to the insurance claim, there is a positive EBITDA effect of $32 million. Meanwhile, we have continued to deleverage, reducing our leverage ratio now to 1.x times net debt to EBITDA, and our net debt to $862 million.

Speaker #2: At the same time, we have announced a dividend for the quarter of $25 per share. While we are still seeking to increase our dividend to a long-term sustainable level, we believe that, given the incident, for this quarter, it was prudent to maintain our distribution level at $25 per share. We will touch more upon this later in the presentation.

Kjetil Gjersdal: At the same time, we have announced a dividend for the quarter of $0.25 per share. While we are still seeking to increase our dividend to a long-term sustainable level, we believe that given the incident for this quarter, it was prudent to maintain our distribution level at $0.25 per share. I will touch more upon this later in the presentation. In addition, we have also added more backlog, resulting in our own fleet now having firm contract backlog of $2.1 billion. As many of you know, we have successfully brought Deepsea Atlantic back on hire following the incident after total of hire of 106 days.

Speaker #2: In addition, we have also added more backlog, resulting in our own fleet now having firm contract backlog of $2.1 billion. And, of course, as many of you know, we have successfully brought DFC Atlantic back on hire following the incident, after a total off-hire of 106 days.

Speaker #2: Within the 3 to 4 months guidance, which we gave during our Q1 results presentation. And while the incident was a tough hit, I would say that the response from our organizations, our vendors, insurers, our clients, peers, and the wider industry has just been exceptional.

Kjetil Gjersdal: Within the three to four months guidance, which we gave during our Q1 results presentation. While the incident was a tough hit, I would say that the response of our organizations, our vendors, insurers, our clients, peers, and the wider industry has just been exceptional. We did this the Odfjell Drilling way, and it speaks volumes to all involved that we were able to bring the unit back into operations within 106 days. I would like to sincerely thank everybody who has been involved in making this happen. On that topic, as we move on to the operational review, we wanted to make sure we provided an update on what has been going on with the Deepsea Atlantic. Since the incident, the company has been working hard to bring the rig back on hire. This started by locating, cleaning out, and recovering the BOP, which had been dropped to 1,100 meters of water depth.

Speaker #2: We did this the Odfjell way, and it speaks volumes to all involved that we were able to bring the unit back into operations within 106 days.

Speaker #2: And I would like to sincerely thank everybody who has been involved in making this happen. And on that topic, as we move on to the operational review, we wanted to make sure we provided an update on what's been going on with the DFC Atlantic.

Speaker #2: Since the incident, the company has been working hard to bring the rig back on hire. This started by locating, cleaning out, and recovering the BOP, which had been dropped to 1,100 meters of water depth.

Speaker #2: This was not easy, but working with various suppliers, we were able to recover the BOP by using specialist equipment and by using the DFC Atlantic itself.

Kjetil Gjersdal: This was not easy, but working with various suppliers, we were able to recover the BOP by using specialist equipment and by using the Deepsea Atlantic itself. Inspections of this dropped BOP suggest that it will be likely repaired and refurbished. Following this, the rig sailed to yard for repairs and to install a now upgraded BOP, which the company had in stock. The rig subsequently returned to site for testing and final acceptance in mid-July before going back on rate on 2 August. The company has so far recognized $83 million worth of insurance proceeds related to recovery and repair following the incident. As mentioned, the company's had a positive EBITDA effect of $32 million in Q2 related to the insurance proceeds and has had a positive EBIT effect of $4 million following an impairment loss of $28 million relating to the damaged equipment.

Speaker #2: Inspections of this dropped BOP suggest that it will likely be repaired and refurbished. Following this, the rig sailed to the yard for repairs and to install a now-upgraded BOP, which the company had in stock.

Speaker #2: The rig subsequently returned to site for testing and final acceptance in mid-July before going back on rate on August 2. The company has so far recognized $82 million worth of insurance proceeds related to recovery and repair following the incident.

Speaker #2: As mentioned, the company has had a positive EBITDA effect of $32 million in Q2 related to the insurance proceeds, and has had a positive EBIT effect of $4 million following an impairment loss of $28 million relating to the damaged equipment.

Speaker #2: As regards to cash, the estimated net impact from the incident, all effects taken into account, is negative—approximately $35 million—compared to what it would be if the incident had not happened.

Kjetil Gjersdal: As regards to cash, the estimate, the net impact from the incident, all effects taken into account, is negative, approximately $35 million compared to what it would be if the incident had not happened. I would like to add that over the past couple of months, we've naturally have had a lot of people asking what the cause of the incident was. While there's still a formal investigation ongoing, I think we can with confidence say that the cause of the incident was equipment errors and not operating errors. Then moving on to our backlog and general operations performance. Despite the incident on Atlantic, our units perform extremely well during the quarter. Notably, both the Deepsea Nordkapp and Deepsea Stavanger averaged a financial utilization of 99% during the period, above our 10-year average of 97%.

Speaker #2: And I would like to add that, over the past couple of months, we naturally have had a lot of people asking what the course of the incident was.

Speaker #2: And while there's still a formal investigation ongoing, I think we can, with confidence, say that the cause of the incident was equipment errors and not operating errors.

Speaker #2: And then, moving on to our backlog and general operations performance, and despite the incident on Atlantic, our units performed extremely well during the quarter.

Speaker #2: Notably, both the DFC North Cup and DFC Star Anger averaged a financial utilization of 99% during the period, above our 10-year average of 97%.

Speaker #2: Meanwhile, we also added another year of backlog to the DFC North Cup after Aker BP elected to exercise options to extend backlog for the unit for another year, ahead of schedule.

Kjetil Gjersdal: Meanwhile, we also added another year of backlog to the Deepsea Nordkapp after Aker BP elected to exercise options to extend backlog for the unit for another year ahead of schedule. The day rates for this contract will be defined by two independent rig brokers before the end of this year. With this extension, Deepsea Nordkapp's firm contract backlog is now secure until at least 2028, and all of our units are now secure until at least late 2027. Deepsea Atlantic is the first unit with availability. However, Equinor still has priced options for the unit, which extends into early 2028. Our focus over the next couple of months will be on securing more backlog in the market that we believe will continue to strengthen going forward. On that point, I think we can have a look at our view on the market.

Speaker #2: The day rates for this contract will be defined by two independent rig brokers before the end of this year. And with this extension, DFC North Cup's firm contract backlog is now secure until at least 2028, and all of our units are now secure until at least late 2027.

Speaker #2: The DFC Atlantic is the first unit with availability; however, Equinor still has priced options for the unit, which extend into early 2028. Our focus over the next couple of months will be on securing more backlog in a market that we believe will continue to strengthen going forward.

Speaker #2: And on that point, I think we can have a look at our view on the market. Starting with the supply side, the story really hasn't changed that much.

Kjetil Gjersdal: Starting with the supply side, the story really hasn't changed that much. The average age of harsh environment units continues to increase while limited new supply is being added or is likely to materialize in the near future. New builds remain unlikely and the high-spec unit market is increasingly tight. When you look at the availability of tier 1 rigs in 2027 and 2028, it is notably low. We consider the utilization in our sector to currently be at around 90%. If you consider historic trends, as utilization goes above 90%, day rates tend to often follow. We believe that this tightening of the supply market is largely due to the strength of the Norwegian market, which we have been vocal about for some time now.

Speaker #2: The average age of harsh environment units continues to increase, while limited new supply is being added, or is likely to materialize in the near future.

Speaker #2: New builds remain unlikely, and the high-spec unit market is increasingly tight. When you look at the availability of tier-one rigs in 2027 and 2028, it is notably low.

Speaker #2: We consider the utilization in our sector to currently be at around 90%. And if you consider historic trends, as utilization goes above 90%, day rates tend to often follow.

Speaker #2: We believe that this tightening of the supply market is largely due to the strength of the Norwegian market, which we have been vocal about for some time now. Operators continue to reaffirm their strategy of drilling to arrest production decline, and they are looking to secure rig availability into the future.

Kjetil Gjersdal: Operators continue to reaffirm their strategy of drilling to arrest production decline, and they are looking to secure rig availability into the future. This is emphasized by recent contract awards in our sector, such as for the Transocean's Cat D's as well as the Deepsea Nordkapp. In addition to this, we continue to see good interest from overseas, notably Namibia, Suriname, Canada, and the UK. In addition to exploration work, many of these areas are looking at development opportunities which could mean further increased utilization of rigs in our sector. Ultimately, with these conditions, we believe that the market is likely to facilitate more strong day rates for future contracts. I think we do certainly echo comments made by our peers of a strengthening overall drilling market and particularly for the harsh environment sector.

Speaker #2: I think, and this is emphasized by recent contract awards in our sector, such as for Transocean's Cat D's, as well as the DFC North Cup.

Speaker #2: In addition to this, we continue to see good interest from overseas, notably in Namibia, Suriname, Canada, and the UK. In addition to exploration work, many of these areas are looking at development opportunities, which could mean further increased utilization of rigs in our sector.

Speaker #2: And ultimately, with these conditions, we believe that the market is likely to facilitate stronger day rates for future contracts, and I think we certainly echo comments made by our peers of a strengthening overall drilling market, and particularly for the harsh environment sector.

Speaker #2: And with that, that concludes my section, and I will pass it on to my CFO, Orion, to go through our financial review.

Kjetil Gjersdal: With that concludes my section and I will pass it on to my CFO, Ørjan, to go through our financial review.

Speaker #1: Thank you, Kjetil. I'll start with a summary of the income statement. Our operating revenue continues to benefit from higher day rates, although it was negatively impacted by the off-hire time on DFC Atlantic in Q2.

Ørjan Lunde: Thank you, Kjetil. I will start with a summary of the income statement. Our operating revenue continues to benefit from higher day rates while it was negatively impacted by the off-hire time on Deepsea Atlantic in Q2. Operating revenue in Q2 2026 was $251 million compared to $219 million in Q2 2025. Operating revenue from our own fleet was $221 million while the external fleet generated a revenue of $29 million. Reduction in revenue from the own fleet compared to Q1 is explained mainly by off-hire time related to the incident on Deepsea Atlantic. Q2 EBITDA for the own fleet segment was $160 million, representing a margin of 72%. The EBITDA on margin has been impacted by recognition of insurance proceeds, write-off of lost equipment, and expenses incurred related to the insurance claim, resulting in a positive EBITDA effect of $32 million.

Speaker #1: Operating revenue in Q2 2026 was $251 million, compared to $219 million in Q2 2025. Operating revenue from our own fleet was $221 million, while the external fleet generated revenue of $29 million.

Speaker #1: The reduction in revenue from the own fleet compared to Q1 is explained mainly by off-hire time related to the incident on DFC Atlantic. Q2 EBITDA for the own fleet segment was $160 million, representing a margin of 72%.

Speaker #1: The EBITDA and margin have been impacted by the recognition of insurance proceeds, write-off of lost equipment, and expenses incurred related to the insurance claim, resulting in a positive EBITDA effect of NOK 32 million.

Speaker #1: Following an impairment loss of $28 million relating to damaged equipment, EBIT was positively impacted by the recognition of insurance proceeds of $4 million.

Ørjan Lunde: Following an impairment loss of $28 million relating to damaged equipment, the EBIT was positively impacted by recognition of an insurance proceeds by $4 million. The EBITDA for the external fleet segment was $5 million, which is a margin of 16%. Less corporate overhead and other adjustments, the group EBITDA was $162 million. As was stated in the highlights section of our reports, excluding insurance proceeds and other accounting impacts related to the insurance claim, the EBITDA for the quarter would have been $129 million. The company delivered a net profit of $57 million in Q2. On to our balance sheet development and status, which remains solid. Our net debt is decreasing.

Speaker #1: The EBITDA for the external fleet segment was $5 million, which is a margin of 16%. Less corporate overhead and other adjustments, the group EBITDA was $162 million.

Speaker #1: And as was stated in the highlights section of our report, excluding insurance proceeds and other accounting impacts related to the insurance claim, the EBITDA for the quarter would have been $129 million.

Speaker #1: The company delivered a net profit of $57 million in Q2. Onto our balance sheet development and status, which remains solid. Our net debt is decreasing.

Speaker #1: Following the increase in debt level in Q4 2025 related to the acquisition of DFC Bergen, we have, during the first half of 2026, reduced our net debt to $863 million.

Ørjan Lunde: Following the increase in debt level in Q4 2025 related to the acquisition of Deepsea Bergen, we have, during the H1 of 2026, reduced our net debt to $863 million, which corresponds to a leverage ratio of 1.5. The equity ratio is largely flat at 55% out of total assets of approximately $2.6 billion. The available liquidity is $308 million, including undrawn RCF of $248 million. Details of the cash flow for Q2 follows on the next slide. In Q2 2026, we generated $128 million in cash from operations. The impact from insurance proceeds, as discussed in our P&L, is the main explanation of the negative change in working capital of -$35 million for the quarter, as insurance proceeds remained fully unpaid to the company per quarter date. The interest paid was $6 million on facilities and leases, while tax paid was also $6 million.

Speaker #1: Which corresponds to a leverage ratio of 1.5. The equity ratio is largely flat at 55% out of total assets of approximately $2.6 billion. The available liquidity is $308 million.

Speaker #1: Including undrawn RCF of $248 million. Details of the cash flow for Q2 follow on the next slide. In Q2 2026, we generated $128 million in cash from operations.

Speaker #1: The impact from insurance proceeds, as discussed in our P&L, is the main explanation for the negative change in working capital of $35 million for the quarter.

Speaker #1: As insurance proceeds remained fully unpaid to the company per quarter date, the interest paid was $6 million on facilities and leases, while tax paid was also $6 million.

Speaker #1: Cash flow from investing activities was minus $20 million, whereof $3 million was related to the DFC Atlantic incident and $9 million was related to periodic maintenance.

Ørjan Lunde: Cash flow from investing activities was -$20 million, whereof $3 million was related to the Deepsea Atlantic incident and $9 million was related to periodic maintenance. The remaining $8 million was client-specific upgrades that have or will be fully covered by our customers. Net cash flow from financing activities was $44 million, including minor FX adjustments. We paid $14 million in scheduled installments on our bank facilities and leases. In addition, we made net repayments of $30 million on the revolving credit facilities during the quarter, increasing the available amounts under the RCFs to $248 million. Dividends paid in Q2 were $60 million and was related to Q1 results. Finally, despite a strong operational performance from the rest of the fleet, we are conscious that off-hire time related to Deepsea Atlantic has impacted our business.

Speaker #1: The remaining $8 million was client-specific upgrades that have been or will be fully covered by our customers. Net cash flow from financing activities was $44 million, including minor FX adjustments.

Speaker #1: We paid $14 million in scheduled installments on our bank facilities and leases. In addition, we made net repayments of $30 million on the revolving credit facilities during the quarter.

Speaker #1: Increasing the available amounts under the RCFs to $248 million. Dividends paid in Q2 were $60 million, and were related to Q1 results. And then finally, despite a strong operational performance from the rest of the fleet, we are conscious that off-hire time related to DFC Atlantic has impacted our business.

Speaker #1: While we maintain our view that we want to continue to increase our dividend to a point that we believe is sustainable in the long term, we believe that it would be financially prudent to maintain our quarterly dividend at $0.25 per share for Q2.

Ørjan Lunde: While we maintain our view that we want to continue to increase our dividend to a point that we believe is sustainable in the long term, we believe that it would be financially prudent to maintain our quarterly dividend at $0.25 per share for Q2. Today's dividend translates to a total dividend payment of $60 million for the quarter and corresponds to an annualized yield of 10%, based on yesterday's close. The shares will trade ex-dividend on 3 September, and payment will be made on or around 17 September 2026. I will pass back to you, Kjetil, who will summarize our presentation.

Speaker #1: Today's dividend translates to a total dividend payment of $60 million for the quarter, and corresponds to an annualized yield of 10% based on yesterday's close.

Speaker #1: The shares will trade ex-dividend on the 3rd of September, and payment will be made on or around the 17th of September 2026. I'll pass back to you, Kjetil, who will summarize our presentation.

Speaker #2: Thank you, Orion. So in summary, the second quarter showed, for sure, the capability of our organization. I believe that our company had a solid response and recovery from the DFC Atlantic incident, while the rest of the fleet continued to perform very well.

Kjetil Gjersdal: Thank you, Ørjan. In summary, Q2 showed for sure the capability of our organization. I believe that our company had a solid response and recovery from the Deepsea Atlantic incident while the rest of the fleet continued to perform very well. Putting this incident behind us, we are very excited about what is ahead of us. We continue to deleverage while strengthening our balance sheet with increased liquidity. Our market is strong now, and I think it is likely to become even stronger in the months ahead. Finally, putting the Atlantic incident behind us, we are excited about the strong backlog and the cash generation that we have ahead of us. Thank you very much for listening. James, please take over.

Speaker #2: Putting this incident behind us, we are very excited about what's ahead of us. We continue to deleverage while strengthening our balance sheet, with increased liquidity.

Speaker #2: Our market is strong now, and I think it's likely to become even stronger in the months ahead. And finally, putting the Atlantic incident behind us, we are excited about our strong backlog and the cash generation that we have ahead of us.

Speaker #2: So, thank you very much for listening. And James, please take over.

Speaker #3: Yeah. Thank you very much, Kjetil and Orion. As a reminder, if you'd like to ask a question, you can do so either via the telephone line controls, for which our operator, Sergio, is in control of that. So Sergio, if you could open the telephone lines.

James Crothers: Yeah. Thank you very much, Kjetil and Ørjan. As a reminder, if you would like to ask a question, you can do so either via the telephone line controls, for which our operator, Sergey, is in control of that. Sergey, if you could open the telephone lines.

Speaker #4: Sure. Ladies and gentlemen, as a reminder, to ask a question over the phone, please signal by pressing star one on your telephone keypad. You may also submit your questions via the webcast.

Sergey: Sure. Ladies and gentlemen, as a reminder to ask a question over the phone, please signal by pressing star one on your telephone keypad. You may also submit your questions via the webcast. Again, it is star one to ask a question over the phone. We will now take our first question from Fredrik Stene from Clarksons Securities. Please go ahead.

Operator: Sure. Ladies and gentlemen, as a reminder to ask a question over the phone, please signal by pressing star one on your telephone keypad. You may also submit your questions via the webcast. Again, it is star one to ask a question over the phone. We will now take our first question from Fredrik Stene from Clarksons Securities. Please go ahead.

Speaker #4: Again, it is *star one* to ask a question over the phone. We will now take our first question from Frederick Stene from Clarkson's Securities.

Speaker #4: Please go ahead.

Speaker #5: Hi Kjetil, Orion, James, hope you are well. And congratulations on handling the Atlantic incident faster than what I had in my model, so I had to revise that.

Fredrik Stene: Hi, Kjetil, Ørjan, James. Hope you are well. Congratulations on handling the Atlantic incident faster than what I had in my model. So I had to revise that. That is good. That is not my question. I wanted to talk a bit about the market first. You are clearly painting a picture here about the stronger harsh environment market going forward. I would also argue that one can read into the Nordkapp extension, for example. I think the last one before this extension was agreed in November last year, and now they are adding that in July, even before they know what the rate will be. Even though that is the same for you. It clearly shows to me at least that operators are also willing to contract new capacity further out in time than before.

Speaker #5: So, that's good. But that's not my question. I wanted to talk a bit about the market first. You were clearly painting a picture here about a stronger market environment going forward.

Speaker #5: And I would also argue that one can read into the Nordkapp extension, for example. I think the last one before this extension was agreed in November last year, and now they're adding that in July, even before they know what the rate will be.

Speaker #5: Even though that is the same for you, it clearly shows, to me at least, that operators are also willing to contract new capacity further out in time than before.

Speaker #5: So with that backdrop, how should we think about potential new contract announcements on the Atlantic and even on the Bergen? They still have one year plus left on their current contracts, but if the market is tight and E&Ps want high-spec rigs, can we see contract announcements already this year, do you think, or do we have to wait until 2027?

Fredrik Stene: With that backdrop, how should we think about potential new contract announcements on the Atlantic and even on the Bergen? They still have one year plus left on their current contracts, but if the market is tight and E&Ps want ice-spec rigs, can we see contract announcements already this year, you think? Or do we have to wait until 2027?

Speaker #2: No, I think—oh, hi Frederick. I think we can definitely see something happening this year. We do have good dialogues. We do have very exciting conversations and talks.

Kjetil Gjersdal: No. Hi, Fredrik. I think we can definitely see something happening this year. We do have good dialogues. We do have very exciting conversations and talks. As you pointed out, the Deepsea Atlantic still has priced options in there which are valid. We will probably see something happening around that. Also on the Deepsea Bergen, it is a great opportunity. The rig is free of options now, and we have good interest in that rig. I think the likelihood of us being able to do something around that rig beyond the year of option that Equinor chose not to exercise, I think that is a fairly good chance for that.

Speaker #2: So, and as you pointed out, the Atlantic still has priced options in there, which are valid. We'll probably see something happening around that. And also on the DFC Bergen—yeah, it's a great opportunity.

Speaker #2: The rig is free of options now, and we have good interest in that rig. I think the likelihood of us being able to do something around that rig beyond the year of option that Ecuador chose not to exercise—I think there's a fairly good chance for that.

Speaker #5: Right, thank you. And next one, maybe for Orion. There's a cash impact of $35 million from the incident. And apologies if I didn't catch it, but can you confirm if that includes loss of hire during the downtime, or is that an additional cash impact?

Fredrik Stene: Right. Thank you. The next one is maybe for Ørjan. There is a cash impact of $35 million from the incident, and apologies if I did not catch it, but can you confirm if that includes loss of hire during the downtime, or is that an additional cash impact? Just for clarity.

Speaker #5: Just for clarity.

Speaker #1: Yeah. Thank you, Frederick. Obviously, I'm not surprised by that question on this webcast. But I can confirm that that's also taken into account loss of hire.

Ørjan Lunde: Well, thank you, Fredrik. Obviously not surprised by that question on this webcast. I can confirm that that is also taken into account, loss of hire. That is really the main effect, is the loss of hire during the period. In addition to that, insurance also covers costs incurred during the recovery period and incremental rig and equipment repair costs in addition to lost and damaged equipment. So that is how we calculated the net effect, is really to compare what could have been if the incident had not happened. That leads us to an estimate of $35 million, and the distribution then $7 million to Q2 and the remainder in the following quarters.

Speaker #1: That's really the main effect—it's the loss of hire during the period. But in addition to that, insurance also covers costs incurred during the recovery period and incremental rig and equipment repair costs.

Speaker #1: In addition to lost and damaged equipment. So that's how we calculated it—the net effect is really to compare what could have been if the incident hadn't happened.

Speaker #1: And that leads us to an estimate of 35 million, with the distribution then being 7 million to Q2 and the remainder in the following quarters.

Speaker #5: All right. No, that's very helpful. And then just a final one, if I may. You kept your dividends flat this quarter to be prudent about your balance sheet, but clearly you see potential for that to grow further in the future.

Fredrik Stene: All right. No, that is very helpful. Just a final one, if I may. You kept your dividends flat this quarter to be prudent about your balance sheet, but clearly you now see potential for that to grow further in the future. Now that the five rigs are on contract again, is it fair to assume that you will kind of resume the growth pace already from the next quarter, or should we expect this being steady a bit before you potentially add to the payments? Thanks.

Speaker #5: Now that the five rigs are on contract again, is it fair to assume that you'll kind of resume the growth pace already from the next quarter, or should we expect this being steady a bit before you potentially add to the payment?

Speaker #5: Thanks.

Speaker #2: We'll decide the level of dividend going forward. But I think we were vocal about it in both our presentation and the report that we have a long-term vision of continuing to increase dividends, to find that right long-term sustainable level.

Kjetil Gjersdal: Well, eventually it is up to the board to decide the level of dividend going forward. But I think, we were vocal about it in both our presentations in the report that we have a long-term vision of continuing to increase dividends to find that right long-term, sustainable level. And we certainly see that there is capacity in the company to do that. But you will not get any promises from me here now, Fredrik.

Speaker #2: And we certainly see that there's capacity in the company to do that. But you won't get any promises from me here now, Frederick.

Speaker #5: Well, I tried. Thank you all for answering my questions. That’s it from me. Have a good day.

Fredrik Stene: Well, I tried. Thank you all for answering my questions. That is it from me. Have a good day.

Speaker #1: No worries. Thank you, Frederick, as always.

Ørjan Lunde: No worries. Thank you, Fredrik, as always.

Speaker #4: Thank you. As a reminder, to ask a question over the phone, please signal by pressing star one. We will pause for just a brief moment.

Sergey: Thank you. As a reminder to ask a question over the phone, please signal by pressing star 1. We will pause for just a brief moment to allow you to signal. It appears there are currently no further questions over the phone. With this, I would like to hand the call back over to James for any webcast questions. Over to you, James.

Operator: Thank you. As a reminder to ask a question over the phone, please signal by pressing star 1. We will pause for just a brief moment to allow you to signal. It appears there are currently no further questions over the phone. With this, I would like to hand the call back over to James for any webcast questions. Over to you, James.

Speaker #4: I'll now allow you to signal if there are no further questions over the phone. With this, I'd like to hand the call back over to James for any webcast questions.

Speaker #4: Over to you, James.

James Crothers: Sure. Thank you very much. Thank you so much for the questions submitted so far. Again, we will try to get through as many of these as we can. We may run out of time before we can answer them all, however. One question, can you talk about the dynamics around new builds? Given the global supply and demand situation and the aging global fleet, when does the time come for the industry to make a new build order?

Speaker #3: Sure, thank you very much. Thank you so much for the questions submitted so far. Again, we'll try to get through as many of these as we can.

Speaker #3: We may run out of time before we can answer them all, however. So, one question: can you talk about the dynamics around new builds?

Speaker #3: Given the global supply and demand situation and the aging global fleet, when does the time come for the industry to make a new build order?

Speaker #2: Yeah. Oh, that's a very good question, and I think, yeah, I'll try to answer it. But as for now, I mean, we just cannot see it happening.

Kjetil Gjersdal: Yeah. That is a very good question, and I think, I will try to answer it, but as for now, we just cannot see it happening. There is no contract or market out there that supports a new build close to a billion-dollar. The price of a new build would be so high you would need a long-term contract with day rates way beyond what we are seeing today. There is just no basic support for that happening. Even if you sort of come to a point where somebody could find a yard that is willing to take that on, you are looking at totally different payment terms. You are looking at least, I would think, a four-year lead time. New builds for us is just totally out of the question for short to medium term to discuss it.

Speaker #2: There is no contract or market out there that supports a new build close to a billion dollars, or the price of a new build would be so high that you would need a long-term contract with day rates far beyond what we're seeing today.

Speaker #2: So there's just no basic support for that happening. And even if you sort of come to a point where somebody could find a yard that's willing to take that on, you're looking at totally different payment terms.

Speaker #2: You're looking at, at least, I would think, a four-year lead time. So, new builds for us are just totally out of the question for the short to medium term, to discuss it.

Speaker #2: So, I think it's much more likely that you will see life enhancement projects around the existing fleet before we see any new builds coming in.

Kjetil Gjersdal: I think it is much more likely that you will see life enhancement projects around existing fleet before we see any new builds coming in. Certainly with the way we operate our unit, as I say to my organization, we need to take good care of them because we are going to have them for a long time. We also do that, take that into account in our maintenance philosophy and so on. Yeah, don't see new builds happening. Cannot see it happening at all.

Speaker #2: And certainly, the way we operate our unit, we are—as I say to my organization—we need to take good care of them because we're going to have them for a long time.

Speaker #2: And we also take that into account in our maintenance philosophy, and so on. So, yeah, I don't see new builds happening. Cannot see it happening.

Speaker #2: At all.

Speaker #3: Great, thank you. Similarly then, I believe this is a follow-on question. What about your own fleet? A couple of them are 15 years old or more.

James Crothers: Great. Thank you. Similarly then, I believe this is a follow-on question. What about your own fleet? A couple of them are 15 years old plus. What sort of lifespan do you forecast for your own fleet units?

Speaker #3: So, what sort of lifespan do you forecast for your own fleet units?

Speaker #2: Well, the last rig that we scrapped—I believe it was Deepsea Bergen in '21—was 37 years old. It was operating all the way to the end.

Kjetil Gjersdal: The last rig that we scrapped, I believe it was the Deepsea Bergen in 2021, was 37 years. It was operating all the way to the end. I can easily see our rigs at least operating up till 35 years. I think, if you dive into life extensions program and so on, you could probably see it work even longer. We are going to drill for many years with the rigs that we have in our fleet today.

Speaker #2: So I can easily see our rigs at least operating up to 35 years. And I think if you dive into sort of life extension programs and so on, you can probably see it work even longer.

Speaker #2: So, we're going to live—we're going to drill for many, many years with the rigs that we have. Enough said for today.

Speaker #3: Thank you. Again, we've had a few questions on M&A, as we always do, so I suppose the question is: What are your thoughts on M&A?

James Crothers: Thank you. Again, we have had a few questions on M&A as we always do. I suppose the question is, what are our thoughts on M&A? Are we still considering it or are we too busy with the BOP incident, as one person has asked?

Speaker #3: Are we still considering it, or are we too busy with the BOP incident, as one person has asked?

Speaker #2: No, no, no. We can handle more than one thing. But I think we did the Deepseaburger deal here before Christmas. I think that sort of represents a deal that we are interested in looking into.

Kjetil Gjersdal: No. We can handle more than one thing. I think we did the Deepsea Bergen deal here before Christmas. I think that sort of represents a deal that we are interested in looking into should we do something more. It needs to be a good quality asset. It needs to come with a good contract, with a reputable client. It needs something to sort of fit both the fleet structure that we have and the company profile. We are always keeping an eye out. We have a very good overview of what is out there. There are rigs in our management fleet that we know very well, and they are good rigs and we continue to follow their situation when opportunities are out there. I will not rule out anything. We are definitely open to expand our own fleet even more, given the right circumstances.

Speaker #2: Should we do something more? It needs to be a good-quality asset. It needs to come with a good contract with a reputable client.

Speaker #2: And yeah, it needs something to sort of fit both the fleet structure that we have and the company profile. So we're always keeping an eye out.

Speaker #2: They have a very good overview of what's out there. And yeah, there are rigs in our management fleet that we know very well, and they are good rigs.

Speaker #2: And we continue to follow their situation and the opportunities out there. And I won’t rule out anything. We are definitely open to expanding our own fleet even more, given the right circumstances.

Speaker #3: Yeah, thank you. With net debt continuing to decrease and the balance sheet strengthening, how do you currently prioritize capital allocation between higher dividends, buybacks, and investments in additional rig capacity over the next couple of years?

James Crothers: Yeah. Thank you. With net debt continuing to decrease and the balance sheet strengthening, how do you currently prioritize capital allocation between higher dividends, buybacks, and investments in additional rig capacity over the next couple of years? Ørjan, do you want to talk about how you see that?

Speaker #3: Aaron, do you want to talk about how you see that?

Speaker #1: Yeah, I think we already covered a few of the aspects in that question. The shareholder mentioned the level of dividend is up to the Board.

Ørjan Lunde: Yeah. I think we already covered a few of the aspects that are in that question. As Kjetil mentioned, the level of dividend is up to the board, and we are in a capacity development that we could still increase to find a sustainable level for our business. Also considering potential M&A opportunities. I feel that the Deepsea Bergen acquisition was good proof of what we can do as our balance sheet is continuing to strengthen through de-leveraging. We were able to do that acquisition based on our own balance sheets, and that could be a potential for the future as well.

Speaker #1: And we are sort of in a capacity development phase that we could still increase to find a sustainable level for our business. But also, considering potential M&A opportunities, I feel that the Deepseaburger acquisition was a good proof of what we can do, as our balance sheet is continuing to strengthen through deleveraging.

Speaker #1: We were able to do that acquisition based on our own balance sheets, and that could be a potential for the future as well.

Speaker #3: Yeah, okay. Thank you very much. We’ve had a follow-on question about the new builds. So, if there are no new build orders happening in the next two to three years, what is your expectation of day rates?

James Crothers: Yeah. Okay. Thank you very much. We have had a follow-on question about new builds. There are no new builds orders happening in the next 2 to 3 years. What is your expectation of day rates, and how high could they get for the next period?

Speaker #3: And how high could they get over the next period?

Speaker #2: Well, as I said, we are around, I believe, around 90% utilization now for the rigs in our sector, especially the Tier 1 rigs in our sector.

Kjetil Gjersdal: Well, as I have said, we are around, I believe, 90% utilization now for the rigs in our sector now, especially the tier 1 rigs in our sector. All history shows that as market tightens up, day rates have a tendency to follow. To speculate on a day rate level, I will not do that. I think we are confident. I think we have an average day rate for our fleet now of around 275, 280. No, sorry, 475, 480, 427 and 28. I think that sort of gives the level that we believe at least that we will stay on for a period. It might be that as the market tightens up further, that they will continue to increase.

Speaker #2: And all history shows that as the market tightens up, day rates have a tendency to follow. To speculate on a day rate level, I won't do that.

Speaker #2: But I think we are I think we have a average day rate for our fleet now of around 275, 280 no, sorry, 475, 480, 427, and 28.

Speaker #2: And I think that sort of gives a level that we believe, at least, that we will stay on for a period. And it might be that, as the market tightens up further, they will continue to increase.

Speaker #3: Great. So we've had a question here: once the Deepsea Nordcap day rates are disclosed, should investors expect earnings per rig from '28 onwards to increase, decrease, or remain broadly in line with current levels?

James Crothers: Great. So we have had a question here. Once the Deepsea Nordkapp day rates are disclosed, should investors expect earnings per rig from 2028 onwards to increase, decrease, or remain broadly in line with current levels? We struggle to give guidance. We do not really give guidance as a standard. Maybe we want to talk just generally about how the Deepsea Nordkapp contract is structured such that we have to agree to the day rates. The two independent brokers have to agree day rates.

Speaker #1: We struggle to give guidance. We don't really give guidance as a standard. Maybe we want to talk just generally about how the Deepsea Nordcap contract is structured, such that we have to agree that the day rates—the two independent brokers have to agree on day rates?

Speaker #2: Yeah, so the two independent brokers, they set the rate based on—and this is important—it’s not only about the recent day rates and fixtures that’s made in the market, but it’s also about asset quality and the capability of the certain assets.

Kjetil Gjersdal: Yeah. The two independent brokers, they set the rate based on, and this is important, it is not only about sort of the recent day rates that the fixtures that is made in the market, but it is also about asset quality and capability of the certain assets. I think Deepsea Nordkapp is one of the absolute best ones out there. They will take all of these measures into account and eventually come up with a day rate. I think, yeah, it should indicate when that rate is set, I think it will be around probably around November. It sort of gives an indication of both what the market are then and how we can think about things going forward.

Speaker #2: And I think Deepsea Nordcap is one of the absolute best ones out there. So, they will take all of these measures into account and eventually come up with a day rate.

Speaker #2: So I think it should indicate when that rate is set. I think it would be probably around November. It sort of gives an indication of what the markets are now, or then, and how we can think about things going forward.

Speaker #3: Great. We'll take one more question here. Which geographies are the tenders coming from for development work? And is Odfjell participating in any current development tenders?

James Crothers: Great. We will take one more question here. Which geographies are the tenders coming from for development work, and is Odfjell Drilling participating in any current development tenders? Again, we do not comment specifically on any tenders that we are operating in, but maybe you would want to give a more general view of where we see opportunities coming from, which geographies we are looking at.

Speaker #3: Again, we don't comment specifically on any tenders that we're operating in. But maybe you'd want to give a more general view of how we see opportunities coming from which geographies we're looking at.

Speaker #2: Absolutely. So, we do have development work coming up in Canada—quite substantial, actually—with various operators. There’s work in Namibia as well; I think it’s very well known that things are progressing down there.

Ørjan Lunde: Absolutely. We do have development work coming up in Canada, quite substantial actually, with various operators. There is work in Namibia. I think that is very well known that things are progressing down there. There is also things happening in the UK, believe it or not. All of those sectors are currently in the market for development work.

Kjetil Gjersdal: Absolutely. We do have development work coming up in Canada, quite substantial actually, with various operators. There is work in Namibia. I think that is very well known that things are progressing down there. There is also things happening in the UK, believe it or not. All of those sectors are currently in the market for development work.

Speaker #2: There are also things happening in the UK, believe it or not. So, all of those sectors are currently in the market for development work.

Speaker #3: Yeah, okay. I think, given the time, we'll close the call there. Thank you all for joining the conference call. Our next Capital Markets event will be on the 3rd of November.

James Crothers: Yeah. Okay. I think given the time, we will close the call there. Thank you all for joining the conference call. Our next after-market event will be on 3 November, and we look forward to speaking to you then. Thank you all so much.

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Q2 2026 Odfjell Drilling Ltd Earnings Call

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