Prosafe SE

Good morning, and welcome to Prosafe's Third Quarter 2021 Presentation. My name is Jesper Kragh Andresen, I'm the CEO of Prosafe, and joining me today and as usual, is Stig Christiansen, CFO.

Turning quickly to the disclaimer, which we will leave for a few seconds and hopefully, long enough for all to realize that it's identical with previous disclaimers. And then turning now to the agenda on Page 3.

It's a familiar agenda to most, I would suspect. Stig will shortly give an update on the financial restructuring process, possibly for the last time, if our timeline expectations are correct.

I will go through the highlights for what has been a good quarter for Prosafe in more than one respect. Stig will take us through the numbers and the financial results, and I will wrap us up with a commercial update and overview and a summary of the presentation.

So I will give the word, Stig, to you to provide an update on the financial restructuring process.

Okay. Thank you, Jesper, and good morning, everyone.

Turning to Slide #4, update on financial restructuring process. The long and short of it is that we are well on track.

I think we worked on this for about 20 months or so. I'm glad to say that we are well on track.

The solution, as proposed and announced, have been sanctioned in the Singapore courts under the Singapore Scheme. The Norwegian reconstructing -- restructuring process is ongoing, as you will know.

There will be a voting next week and then followed by a sanctioning, hopefully, by the Norwegian courts and then the so-called hardening period before we can take the process to final close. So on the basis of this, as announced for quite some time, the company continues to believe that we should be able to reach the so-called effective date and get this implemented and effective before year-end 2021, hopefully, a little bit ahead of upcoming Christmas.

And of course, as a reminder, the solution will result in a significant deleveraging of the balance sheet to the tune of about 75%. Debt servicing going forward will then be based on no mandatory repayments of the debt, but a cash sweep mechanism to balance the company's cash flow and liquidity needs with ability to service debt over the 4-year period until maturity at the end of 2025.

Following the restructuring, the debt will be about $340 million plus the sellers credit in favor of Costco for the Safe Eurus of about $90 million compared to close to $1.5 billion today. Existing shareholders following the transaction, as announced earlier, will retain about 1% of the share capital, whereas lenders, primarily and creditors, will be initially owning 99% of the share capital.

But the long and short of it, the process is on track, and we are very much looking forward to get it implemented such that we can move on as from early 2022. So with those words, I'll pass the word back to you, Jesper.

Thanks, Stig. Then we can turn to Page 5 and quickly onwards to Page 6 with the highlights for the quarter.

And I think as I mentioned, it has been a good quarter for Prosafe. As Stig has just explained, we are seeing the end of the restructuring process and is looking very much forward to that and focus solely on creating value for the future.

And secondly, the quarter has been very active in Prosafe, high fleet utilization and reasonable solid earnings in the quarter. And more importantly, we have in the quarter, and shortly thereafter, secured work for 2022, which means that 2022 will, in all probability, be a very meaningful improvement on the 2021 results.

So looking at the highlights, fleet utilization came in just above 70%. EBITDA for the quarter amounted to $12.5 million and cash from operations, a positive of $17.3 million.

Our liquidity reserve is just about $100 million. Our operations and HSE performance has been good in the quarter, no incidents.

And 7 of -- sorry, 6 of our 7, not 7 of 6, 6 of our 7 vessels have been in operation, which means a very busy quarter. We've had some good fortune on the existing contracts for Boreas, Zephyrus, Caledonia and Concordia, as we have seen options exercised and future options added.

So when we get to the end of this year, I think we will have more operating days than we had at the beginning of the year when adding all options. So we have more than 100% of what we expected would be operating base.

Very good, and that is mainly due to the options and additional period extension. Zephyrus, as previously informed, was awarded a 10-month contract with 4 months of options for BP in 2022, a contract we very much look forward to and which possibly could be the best contract for Prosafe since 2014.

Caledonia was then awarded a 9-month contract, also fairly long for North Sea standards, followed by a 30-day option for Total, also a contract that we look very much forward to. And as you know, Caledonia has been at the Elgin field for numerous times.

And we have also agreed with Total that the Caledonia will stay at the field, standby over the winter period on what you may call a pay-per-use basis, and that implies some savings and possibly additional revenue compared to having to demobilize the vessel before mobilizing it back to field again when the contract commences in March. And we have ongoing bids in Brazil, which we expect will be concluded on very shortly.

So a good quarter for Prosafe. I will turn back the word to Stig to give a bit few or more details on the results for the quarter.

Stig, over to you on Slide 7 and 8.

Yes. Thank you, Jesper.

Looking at the income statement, of course, Jesper say that the highlights have reduced a bit. You have already well covered, Jesper.

So I feel that I will now be almost repeating the highlights. But anyway, for sake of order, let's go through it.

The P&L statement, income statement. As alluded to by Jesper, it's been a very good quarter by basically all measures.

And in terms of fleet utilization, very close to 71% compared to 16.4% in the same quarter last year. [ Due to ] high utilization, 6 of 7 vessels, as Jesper alluded to, of course, results in corresponding higher revenues, combining utilization with the day rate levels, obviously.

And that also is reflective or resulting in somewhat higher operating expenses, clearly to reflect the high operating activity. I think as all of you would know who have followed the company for years, we have and continue to work continuously to control spend and cost and turn every stone to be as cost efficient as possible.

On the other hand, there are some emerging inflationary measures in the industry following the increasing activity level. In general, of course, we, like the rest of the industry, have been through and remain in still, to some extent, COVID-19 situation, which has some impact that you have seen from many other companies as well, all companies, I would say.

And then there are also, from time to time, some specifics in terms of local content, et cetera, in various countries, Brazil being one example, such that there are elements that is impacting the costs as well that we, to some extent, need to accept and then continue to see if we can compensate through other measures. But generally, the expenses are reflecting the high activity level and some of these other elements that I alluded to.

In sum, this led to an operating profit before depreciation and amortization, EBITDA, in the quarter of $13 million plus compared to a negative $1 million in the same quarter last year. Other financial items in the quarter primarily relates to the financial restructuring process, which I'm glad to say is soon coming to an end.

I think a few quarters back, I was quite open on the spend to date. And I think at that point, 2 or 3 quarters ago, I talked about a number of about $9 million.

We have now added to that. And hopefully, at the end of the process, we will be looking at total costs of around USD 20 million, give or take, over a close to 2-year period.

So a high number over that period. But I think generally, compared to many other such cases, it's a relatively competitive number or costs, keeping in mind the solid strengthening of the balance sheet as a consequence of it.

At the end, this then led to a net loss in the quarter of $9 million compared to a loss of $24 million in the same quarter last year. I would also like to add at this point that cash flow from operations in the quarter as a result of the activity level was plus USD 17 million compared to a negative of USD 12 million in the same quarter last year.

So that's also a very positive. Moving then on to the next slide, the balance sheet.

Given that we are in the restructuring and soon hope to close, I think I'll keep it short. Total assets currently is at USD 550 million.

That, of course, is significantly higher, basically leading us to have a booked equity negative at the moment of about USD 1.1 billion. I think the key point to mention now is, as alluded to by Jesper, the liquidity position at the end of the quarter was USD 107 million.

And of course, we are basically just looking forward to get the restructuring done, implemented effective such that we can resurface with a somewhat improved balance sheet and then move on from early 2022 on that basis. So I guess with that, I'll pass the word back to you, Jesper.

Thanks, Stig. Then we can turn to Page 11, showing our contract backlog and the many overlapping blue bars for the quarter as a visual representation of the high utilization of the fleet, excluding the Safe Scandinavia.

At this time of the year, most of the bidding for at least the North Sea for 2022 is complete and therefore, it's time to look forward to what the picture looks like in 2022. As you can see on top of the contract backlog, the Safe Boreas will be at Ekofisk in Norway next year as we have announced a long time ago and looking very much forward to that.

The Safe Caledonia, with the extension -- with the contract award for '22 from Total and the winter utilization, as you can see, the Caledonia will be at the Elgin field for a period exceeding 1.5 years when we get to the end of '22, a very good utilization of that rig. The Safe Concordia is currently in Trinidad, and we have options going into 2022.

There may be more options following that. And we also have -- we're also bidding that vessel for work in the summer period for 2022.

Safe Eurus as business as usual, continue its good work for Petrobras in Brazil. And as I mentioned earlier, the Safe Notos is coming to the end of its firm contract and there's a period we have marked in blue of about 240 days following that, which we expect will be concluded very shortly.

Safe Scandinavia is the only available semisubmersible floatel in the North Sea next year. It could be an opportunity for us.

And we are also looking at a few special cases for the Scandinavia, which fits its special capabilities. Safe Zephyrus shows the 10 plus 4-month contract award for BP at ETAP next year, which will commence on, I think, 17th of January next year.

Turning to Page 12. We have an updated order backlog, which, as you can see from the note, does not include the latest sizable contract with Total for Caledonia in 2022.

And I think one aspect to be mindful of is when looking at the contract backlog, the positive aspect is that most of this backlog will liquidate in 2022. So when you've previously seen contract backlog they had was stretched over multiple years, whereas most of this will be liquidated in 2022 and of course, impacts positively the earnings in 2022.

Turning to the summary on Page 13, I will refrain from repeating the first bullets highlighting the positive events of the quarter, but only mention the last 2 bullets. We have previously communicated our ambition to reduce emissions by 2030 and onwards, and that we are well underway on that path and working on several initiatives.

And the final item is consolidation, which remains on our agenda and which is something we hope that we can accelerate as soon as we reemerge from the financial restructuring process. That concludes the third quarter presentation, and we will be very happy to take questions.

Stig will check the e-mail. And otherwise, we can take questions live.

Let's see if any questions are coming. I will just leave at least the microphone open for some time to allow for questions before thanking for the participation.

Okay. Thanks.

Well, then I would like to thank everybody for attending the third quarter presentation and wish you all a good day. Thank you very much.

Thank you.