Q2 2026 NorAm Drilling Co AS Earnings Call

August 26, 2026

Speaker #1: All right, I think we can start. Hi everyone, and welcome to the NorAm Drilling Q2 2026 results presentation. My name is Sander Borgli. I am the Director of Strategy and Investor Relations here at NorAm Drilling. Also with me today, I have the company's CEO and CFO, Marty Jimmerson, in Houston.

Sander Borgli: All right. I think we can start. Hi, everyone, and welcome to NorAm Drilling's Q2 2026 results presentation. My name is Sander Borgli. I am the Director of Strategy Investor Relations here at NorAm Drilling. Also with me today, I have the company's CEO and CFO, Marty Jimmerson, in Houston. We'll first go through representation of the quarter results and recent market development before we open up for our questions and answer session at the end of the presentation. Before I begin the presentation, I would like to note that this conference call will contain forward-looking statements. Words such as expects, anticipate, intends, estimates or similar expressions are intended to identify these forward-looking statements. Forward-looking statements are not guarantees of future performance.

Speaker #1: We'll first go through a presentation of the quarter results and recent market developments before we open up for a question and answer session at the end of the presentation.

Speaker #1: Before we begin the presentation, I would like to note that this conference call will contain forward-looking statements. Words such as "expects," "anticipates," "intends," "estimates," or similar expressions are intended to identify these forward-looking statements.

Speaker #1: Forward-looking statements are not guarantees of future performance. These statements are based on our current plans and expectations and are inherently subject to risks and uncertainties that could cause future activities and results of operations to be materially different from those set forth in the forward-looking statements.

Sander Borgli: These statements are based on our current plans and expectations and are inherently subject to risks and uncertainties that could cause future activities and results or operation to be materially different from those set forth in the forward-looking statements. You should therefore not place reliance on these forward-looking statements. With that, Marty, please begin.

Speaker #1: You should therefore not place reliance on these forward-looking statements. So with that, Marty, please begin.

Speaker #2: Thank you, Sander, and hello to everyone joining us today. Starting on page 3, I'll go over our highlights for the second quarter. I am pleased to report that our financial results improved, with revenue increasing 12.3% quarter over quarter, as all of our rigs remained contracted and operational throughout the second quarter.

Marty Jimmerson: Thank you, Sander, and hello to everyone joining us today. Starting on page 3, going over our highlights for Q2. I am pleased to report that our financial results improved with revenue increasing 12.3% quarter-over-quarter as all of our rigs remain contracted and operational throughout Q2. We continue to have seven of our 11 rigs contracted with super major E&Ps, with contracts on all of our rigs ranging from pad to pad intervals up to 12-month contract terms. Permian rig counts increased 17 during Q2 to 258, driven primarily by private E&Ps. We'll talk about that a little bit more shortly. WTI began the quarter at approximately $111 a barrel and finished the quarter at $68. Since the Iran war started, WTI has been extremely volatile, trading as high as 113 and as low as the upper 60s.

Speaker #2: We continue to have 7 of our 11 rigs contracted with super major E&Ps, with contracts on all of our rigs ranging from pad-to-pad intervals up to 12-month contract terms.

Speaker #2: Permian rig counts increased by 17 during the second quarter to 258, driven primarily by private E&Ps. We'll talk about that a little bit more.

Speaker #2: WTI began the quarter at approximately $111 a barrel and finished the quarter at $68. Since the Iran war started, WTI has been extremely volatile, trading as high as $113 and as low as the upper 60s.

Speaker #2: WTI is currently trading at $80. Adjusted EBITDA, defined as earnings before interest, tax, depreciation, and amortization plus non-cash stock option expense, improved 40% quarter over quarter to $6.3 million.

Marty Jimmerson: WTI is currently trading at 80. Adjusted EBITDA, defined as earnings before interest, tax, depreciation, and amortization, plus non-cash stock option expense improved 40% quarter-over-quarter to $6.3 million. Our backlog as of yesterday was $30.3 million. Turning to the next page, we'll cover recent events and outlook. During Q2, we increased our dividend payout by 26% quarter-over-quarter. Our current backlog of $30.3 million is supported by the majority of our fleet being currently working for super majors and major E&Ps and over half of our rigs working on contract terms of six to 12 months. As stated earlier, Permian rig counts increased 17 during Q2 and have already increased another nine rigs up to 267 as of last Friday. WTI has continued to increase and is currently $80.

Speaker #2: Our backlog as of yesterday was 30.3 million. Turning to the next page, we'll cover recent events and outlook. During the second quarter, we increased our dividend payout by 26% quarter over quarter.

Speaker #2: Our current backlog of $30.3 million is supported by the majority of our fleet currently working for supermajors and major E&Ps, and over half of our rigs working on contract terms of 6 to 12 months.

Speaker #2: As stated earlier, Permian rig counts increased 17 during the second quarter, and have already increased another 9 rigs up to 267 as of last Friday.

Speaker #2: WTI has continued to increase and is currently at $80. Based upon the current commodity prices and ongoing uncertainty surrounding the Iran war, and our discussions with operators, we continue to believe that major EMPs are maintaining their original 2026 capital expenditure plans, while some private operators are increasing theirs.

Marty Jimmerson: Based upon the current commodity prices and ongoing uncertainty surrounding the Iran war, our discussions with operators, we continue to believe that major E&Ps are maintaining their original 2026 capital expenditure plans while some private operators are increasing theirs. As a result of the increase in WTI subsequent to Q2, we have witnessed an increase in inquiries for available rigs, primarily from private E&Ps. Turning to the next page, let's talk about the forward-looking curve of WTI given the volatility and what we think that means for rig counts. Turning to the macro backdrop, the Middle East conflict has lifted the WTI forward curve since the start of the year, and you can see that on the graph on the left. The curve now sits above the break-even levels of US E&Ps needed to drill profitably a new well based upon the Dallas Fed Energy Survey.

Speaker #2: As a result of the increase in WTI subsequent to the second quarter, we have witnessed an increase in inquiries for available rigs, primarily from EMPs or private EMPs.

Speaker #2: Turning to the next page, let's talk about the forward-looking curve of WTI, given the volatility, and what we think that means for rig counts.

Speaker #2: So, turning to the macro backdrop, the Middle East conflict has lifted the WTI forward curve since the start of the year. You can see that on the graph on the left.

Speaker #2: The curve now sits above the break-even levels of U.S. EMPs needed to drill profitably a new well, based upon the Dallas Fed's energy survey.

Speaker #2: The Permian Midland break-even sits right in the range at $69 a barrel, so we are now in the zone where new drilling makes economic sense near term.

Marty Jimmerson: The Permian Midland break even sits right in the range at $69 a barrel. So we are now in the zone where new drilling makes economic sense near term. That is supporting higher rig counts and further drawdown of the DUC backlog. However, Permian DUC inventory has halved over the last two years, and we are seeing increasing questions around the economic viability of much of what remains. Bottom line, DUCs are becoming a less reliable short-term way to offset production declines, so we do expect any rig demand to benefit from this. Near term, we believe private E&Ps are likely to be the marginal driver of that demand as majors continue to hold to their original 2026 CapEx plans. In closing, I would like to thank all of our employees for their hard work and dedication.

Speaker #2: That is supporting higher rig counts and further drawdown of the DUC backlog. However, Permian DUC inventory has halved over the last two years, and we are seeing increasing questions around the economic viability of much of what remains.

Speaker #2: Excuse me. Bottom line, ducks are becoming a less reliable short-term way to offset production declines, so we do expect any rig demand to benefit from this.

Speaker #2: Near term, we believe private EMPs are likely to be the marginal driver of that demand, as majors continue to hold to their original 2026 CapEx plans.

Speaker #2: In closing, I would like to thank all of our employees for their hard work and dedication. Our entire team deserves the credit for our continued, exceptional operational performance.

Marty Jimmerson: Our entire team deserves the credit for our continued exceptional operational performance. Now let me turn it back to Sander for key operational figures for the quarter.

Speaker #2: And now, let me turn it back to Sander for the key operational figures for the quarter.

Speaker #1: Thank you, Marty. In the second quarter, we achieved a rig utilization of 98.6%, up from 90.3% in the first quarter. Revenues came in at $29.4 million, up from $26.2 million in Q1. Our adjusted EBITDA was $6.3 million, up from $4.5 million in Q1.

Sander Borgli: Thank you, Marty. In Q2, we achieved a rig utilization of 98.6%, up from 90.3% in Q1. Revenues came in at $29.4 million, up from $26.2 million in Q1. Our adjusted EBITDA was $6.3 million, up from $4.5 million in Q1, as a result of all of our rigs being contracted and working during Q2. Our all-in fully burdened breakeven, including direct costs, overhead, and maintenance CapEx, was around $18,700 per day. This is an increase of $800 per day compared to Q1, primarily due to higher maintenance CapEx related to spares and customer requirements. In the income statement for Q2, we had an operating profit of about $4.8 million, compared to $3 million in Q1. In Q2, we had a net financial expense of $24,000 as a result of interest expense associated with financing insurance premiums.

Speaker #1: As a result of all of our rigs being contracted and working during Q2, our all-in, fully burdened break-even—including direct costs, overhead, and maintenance CapEx—was around $18,700 per day.

Speaker #1: This is an increase of $800 per day compared to Q1, primarily due to higher maintenance CapEx related to spares and customer requirements. In the income statement for the second quarter, we had an operating profit of about $4.8 million, compared to $3 million in Q1.

Speaker #1: In Q2, we had a net financial expense of $24,000 as a result of interest expense associated with financing and insurance premiums. Second quarter net profit after tax was $4.2 million versus $2.6 million in Q1 2026.

Sander Borgli: Second quarter net profit after tax was 4.2 million, versus 2.6 in Q1 2026. Turning to our balance sheet and cash flow statement. NorAm has a debt-free balance sheet and minimal investment requirements. We ended the quarter with a cash balance of 8.1 million. We also have available an RCF of up to 4.5 million, where we had no amounts drawn during the quarter. The company paid out $4.9 million, or NOK 1.08 per share in monthly dividends in the second quarter, and have declared two quarterly dividends so far in Q3 2026. We will continue to pay dividends subject to continued positive net cash flow from operations. I will now hand it back to Marty for closing comments.

Speaker #1: Turning to our balance sheet and cash flow statement, NorAm has a debt-free balance sheet and minimal investment requirements. We ended the quarter with a cash balance of $8.1 million.

Speaker #1: We also have available an RCF of up to $4.5 million, with no amounts drawn during the quarter. The company paid out $4.9 million, or $1.08 per share, in monthly dividends in the second quarter, and has declared two quarterly dividends so far in the third quarter of 2026.

Speaker #1: We will continue to pay dividends, subject to continued positive net cash flow from operations. I will now hand it back to Marty for closing comments.

Speaker #2: Thank you, Sander. And concluding our prepared comments, in this presentation, NorAm has a fleet of 11 superspec rigs, fully upgraded, with a track record of drilling the longest wells in the Permian, and are among the very top performers in terms of drilling efficiency, measured by feet per rig per day.

Marty Jimmerson: Thank you, Sander. In concluding our prepared comments in this presentation, NorAm has a fleet of 11 super spec rigs, fully upgraded with a track record of drilling the longest wells in the Permian and are among the very top performers in terms of drilling efficiency measured by feet per rig per day. We maintain a top-quality customer portfolio of five E&Ps, ranging from super majors to small private companies in the Permian. The company has an industry-low cash breakeven and minimum investment requirements in the rigs to keep them at the top of the market. We have a clear dividend policy of returning all excess cash to our shareholders. Since our listing, we have now returned over $100 million to our shareholders, equal to about NOK 24 per share, and our latest monthly cash distribution implies an annual yield of approximately 11% as of the closing price yesterday.

Speaker #2: We maintain a top-quality customer portfolio of five EMPs, ranging from super majors to small private companies in the Permian. The company has an industry-low cash break-even and minimum investment requirements, as well as the rigs to keep them at the top of the market.

Speaker #2: We have a clear dividend policy of returning all excess cash to our shareholders. Since our listing, we have now returned over $100 million to our shareholders, equal to about $24 NOK per share, and our latest monthly cash distribution implies an annual yield of approximately 11% as of the closing price yesterday.

Speaker #2: Thank you for listening. Go ahead, Sander. Sorry.

Marty Jimmerson: Thank you for listening to. Oh, go ahead, Sander. Sorry.

Speaker #1: Oh, all right. No worries. Thank you for listening to the presentation. We will now open the floor for questions from the audience. Please use the raise hand function to ask a question and you will be unmuted.

Sander Borgli: Oh, no worries. Thank you for listening to our presentation. We would now like to open for questions from the audience. Please use the Raise Hand function to ask a question, and your speaker will be unmuted. We have our first question from Marcus Monsen. Please unmute to ask your question.

Speaker #1: We have our first question from Marcus Monson. Please unmute to ask your question.

Speaker #3: Hey, Marty and Sander. Congrats on the good results. I was just thinking, as you highlighted, private EMPs appear to be driving incremental rig additions right now.

Marcus Monsen: Hey, Marty and Sander. Congrats on the good results. I was just thinking, as you highlighted, private E&Ps appear to be driving incremental rig additions right now. What kind of oil prices do you see these guys need to continue drilling? Would you expect them to pull back if oil falls below $70 to $80? Or is this a sustainable increase? How do you see it?

Speaker #3: What kind of oil prices do you see these guys need to continue drilling? Would you expect them to pull back if oil falls below $80, $70 to $80, or is this a sustainable increase?

Speaker #3: How do you see it?

Speaker #2: Hey Marcus, thank you for the question, and great to catch up. We'll look forward to seeing you here in a couple of weeks. Very similar to what we saw early in the second quarter when WTI declined, I think most private E&Ps probably don't— their blood pressure doesn't go up as long as WTI is above $70.

Marty Jimmerson: Hey, Marcus. Thank you for the question and great to catch up. We'll look forward to seeing you here in a couple of weeks. Very similar to what we saw early in Q2, when WTI declined, is I think most private E&Ps, their blood pressure doesn't go up as long as WTI is above 70. I think as it gets between 65 and 70, they're probably less likely to be looking at contract terms beyond pad to pad or 3 months. Probably start feeling a little bit of pressure on pricing. As it gets below $65, I think you will start to see some privates either cut their budgets or slow down their drilling plans. In essence, we're still well above, but I do think it's in that low to mid-$60 WTI that we start to see some impact on private E&Ps' decision-making regarding their plans.

Speaker #2: I think as it gets between 65 and 70, they're probably less likely to be looking at contract terms beyond pad-to-pad or three months. They'll probably start feeling a little bit of pressure on pricing.

Speaker #2: As it gets below $65, I think you will start to see some privates either cut their budgets or slow down their drilling plans.

Speaker #2: So in essence, we're still well above, but I do think it's in that low to mid-$60 WTI that we start to see some impact on private E&Ps' decision-making regarding their plans.

Speaker #3: Thank you. And just to follow up on that, I mean, the major E&Ps have been largely disciplined, focusing on their 2026 CapEx plans— not much changes to that.

Marcus Monsen: Thank you. Just to follow up on that, the major E&Ps have been largely disciplined, focusing on their 2026 CapEx plans, not much changes to that. Do you see this change as we move into 2027 and they set new budgets for next year?

Speaker #3: Do you see this change as we move into 2027 and they set new budgets for next year?

Speaker #2: Yeah, so what I think we're seeing right now is two things. Number one, they are staying steadfast to their budgets for 2026, but you do kind of see them starting to position for 2027.

Marty Jimmerson: Yeah. So what I think we're seeing right now is two things. Number one, they are staying steadfast to their budgets for 2026, but you do kind of see them starting to position for 2027. To what extent does that mean they're going to be adding a significant amount of rigs or a couple rigs, shall play out over time. But what we really have seen that I've kind of been pleased for NorAm is that some of the super majors are taking advantage of this increase in WTI, and they are upscaling the rigs that they have under contract. Because there are some rigs still moving around in the market, in the Permian, and if a good super spec rig becomes available, we have seen instances where a super major will trade that out for, let's call it a rig that's not performing as well.

Speaker #2: Now, to what extent does that mean they're going to be adding a significant number of rigs or just a couple of rigs? That shall play out over time.

Speaker #2: But what we've really seen—and I've been pleased about this for NorAm—is that some of the, excuse me, some of the super majors are taking advantage of this increase in WTI, and they are upscaling the rigs that they have under contract.

Speaker #2: Because there are some rigs still moving around in the market in the Permian, and if a good superspec rig becomes available, we have seen instances where a super major will trade that out for a, let's call it, a rig that's not performing as well.

Speaker #2: And we think that probably will continue. We do believe the superspec market is becoming very tight in the Permian. Now, that doesn't mean that you can't put a rig to work tomorrow, but I think the availability of superspec rigs that have already been upgraded and have crews available—I think that's not a very long list.

Marty Jimmerson: And we think that probably will continue. We do believe the super spec market is becoming very tight in the Permian. That doesn't mean that it can't put a rig to work tomorrow, but I think the availability of super spec rigs that have already been upgraded and have crews available, I think that's not a very long list. Less than the number of fingers you have on your hand.

Speaker #2: Less than the number of fingers you have on your hand.

Speaker #3: Thanks. In terms of the Permian, the rig count is up quite a lot year to date. On contract extensions, are you able to increase pricing, or how do you see pricing going forward?

Marcus Monsen: Thanks. In terms of, the Permian rig count is up pretty much quite a lot year to date. On contract extensions, are you able to increase pricing, or how do you see pricing going forward?

Speaker #2: Yeah, so let me give you a little direction on that. We continue to see most of our customers looking for contract terms that are six months or longer.

Marty Jimmerson: Yeah. Let me give you a little direction on that. We do continue to see most of our customers continuing to look for contract terms that are 6 months or longer. I think given what I'm going to describe as most recent WTI volatile curve over the last week, my sense would be, I think we can still get some modest increases upon renewal, but I think that the pressure's mounting a little bit as WTI's at 80. But we still do believe that we can still move the needle a little bit on most, if not all, renewals.

Speaker #2: I think, given kind of what I'm going to describe is the most recent WTI volatile curve over the last week, my sense would be I think we can still get some modest increases upon renewal, but I think that the pressure's mounting a little bit as WTI is at $80.

Speaker #2: But we still do believe that we can move the needle a little bit on most, if not all, renewals.

Speaker #3: Thanks. I can just take one short last one. Just on CapEx, how do you see that for the second half compared to the first half of the year?

Marcus Monsen: Thanks. I can just take one short last one. Just on CapEx, how do you see that for H2 compared to H1 of the year?

Speaker #2: Yeah. So the majority of the first half of our CapEx was predominantly spent on customer requirements related to Rig 23 and Rig 32, getting them reactivated, as well as spares.

Marty Jimmerson: The majority of the H1 of our CapEx was predominantly spent on customer requirements related to Rig 23 and 32, getting it reactivated, as well as spares. As we move forward, we certainly do not see the customer requirement upgrades, or albeit if they do, it will be compensated in the day rate. I do think that we will continue to finish the year. Our outlook is still kind of $3 million to $4 million total for CapEx. With the H2, if we do hit the high end of that range, that will likely include some drill pipe. It is not concluded whether we are going to need any or not as of yet. So anything in the last H2 of the year will be somewhere between the $1 million to $2 million, and most of it will probably be spares and vehicles, stuff like that.

Speaker #2: As we move forward, we certainly do not see customer requirement upgrades—or, albeit, if they do, it'll be compensated in the day rate.

Speaker #2: I do think that we'll continue to finish the year. Our outlook is still kind of $3 to $4 million total for CapEx. In the second half, if we do hit the high end of that range, that will likely include some drill pipe.

Speaker #2: It's not concluded whether we're going to need any or not as of yet. So anything in the last half of the year will be somewhere between $1 million to $2 million, and most of it will probably be spares and vehicles, stuff like that.

Speaker #3: Perfect. Thanks for the call. That was it for my questions. Have a good day.

Marcus Monsen: Perfect. Thanks for the color. That is it for my questions.

Speaker #2: You too.

Marty Jimmerson: Thank you, Marcus.

Marcus Monsen: Have a good day.

Speaker #1: And again, please use the "raise hand" function to ask a question, or write in the chat if you have any. Right. Then I think we can conclude, since there are no further questions.

Marty Jimmerson: Thank you.

Sander Borgli: Again, please use the raise hand function to ask a question, or write in the chat if you have any. Right. Then I think we can conclude since there are no further questions in the audience. I would like to thank you for listening to the call. We hope to see you again next quarter, and thank you to the NorAm family of employees for the great efforts made during Q2. Thank you.

Speaker #1: I would like to thank everyone in the audience for listening to the call. We hope to see you again next quarter. And thank you to the NorAm family of employees for the great efforts made during the second quarter.

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Q2 2026 NorAm Drilling Co AS Earnings Call

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