Prosafe SE

All right. Welcome to this Quarter 1 2024 Presentation.

As usual, if you are joining us virtually, you can ask questions in the chat, and we'll read them out loud here at the end of the presentation. And if you are here in person, more than happy to answer your questions, but let's take it at the end.

So the first quarter this year I think operationally, the four rigs that are working, worked very well. I mean, they have high uptime, high utilization.

So there are no sort of specific issues. We had 56% utilization in the quarter for -- and that's for the four working rigs.

They are more or less working all the time. We had some off hire on Safe Eurus, due to some minor repairs.

But I think it's steady states as far as the operation is concerned. On the financials, EBITDA came in the quarter at $7.2 million compared to last year.

Of course, that was stronger, everything is relative. And in the totality last year was a negative EBITDA year.

So of course, we are sort of trailing better, relatively speaking, in 2024. Liquidity cash, end of the quarter is $63 million.

That was in line with our expectations. As we have communicated earlier, we are saying that we have runway into 2025 as far as cash is concerned.

That is highly dependent on new contracts and sort of the structure on the mobilization fees you can get there. So I mean, so it will be sometimes into 2025.

And as I'm sure you all are aware, the debt is maturing at the end of 2025. So this is sort of, I think, the cash flow runway and refinancing needs to be seen sort of as one measures that we need to deal with.

And of course, the financing as such, the refinancing of such will then be highly dependent on the backlog that we are managing to build up. I'll come back to the backlog a little bit later.

But of course, that this will be an important component of the other refinancing. When it comes to the outlook, I will say that we are still optimistic.

We did not secure any contracts in the quarter. That's, of course, a little bit disappointing.

But when that is said, the activity remains the same. It's just taking longer time.

But we see that there is good activity across the different regions. In the North Sea, we are -- we are the only available units for '25 and to a large extent into 2026.

So what do you think, we have a good position there or we do have a good position there. What we see more specifically is that there is one tender out for '25 work in North Sea in the U.K.

and we expect at least one more tender to come out. And as you know, we have two available units that can work in the North Sea, the Boreas and the Caledonia, that are both laid up, ready to work, warm stacked.

We see we have good dialogue with clients outside the North Sea as well in different regions. We talk to clients in Africa, we talk to clients in Guyana and so forth.

So we see that there is activity for work coming into '25 and beyond. But as I said, it has taken longer than what we anticipated to get this across the line.

One thing to be specific on Zephyrus, Safe Zephyrus is on to Petrobras. She is expiring in February 2025.

And there, Petrobras has expressed an interest to extend the Zephyrus. So that's a dialogue that we will enter into, of course, she can also work in different markets.

But I think that's a quite an interesting development. And obviously, I can come back to the market in Brazil, but it's around $120,000-ish, I would say, the market rate for -- remain the $115,000 to $120,000 in Brazil.

So we are optimistic that we'll add more backlog for '25 and beyond, but has taken a little bit more time, but we still think the fundamentals look strong. To be then on the fleet, to be a bit more specific, Zephyrus, we talked about.

I think the contract there extension is most likely to be if we do entertain that, and if we sort of get into a contract situation, you're talking about a 2-year extension of that contract. She is due SPS in 2025.

There are some details in the back in terms of the costs and so forth, but roughly, we're talking $10 million for the extension and also the SPS of the Zephyrus, which was very much in line with what we paid for years when she had a SPS last year. Eurus is onto Petrobras, as you can see until the beginning of 2027 at the rate of $86,000 per day.

Notos likewise on to Petrobras until 2026 at $75,000 per day. Just to give you an idea, if you take the Notos and the Eurus, as sort of readjust those contracts, legacy contracts due to current rates.

You're talking sort of an uptick in earnings, EBITDA of about $25 million to $30 million. Of course, they are not going to be readjusted at the current moment, but market-to-market, that's sort of to give you an idea of the potential earnings uplift on those two contracts.

So we decided on the Notos to shift those of you that pay sort of detailed attention to this, the SPS into '25 from '26. I mean, we're talking months here, sort of beginning of '26 to the end of '25.

That's to optimize it versus Petrobras and you do not want to have an SPS towards end of the year in Brazil, that can result in the sort of quite a lot of off-hire unnecessary. So we have moved that forward, just talk a couple of months.

The Concordia is on a contract in November. And there, the client has 2x to 1x options.

We are sort of fairly cautiously optimistic that those options will be declared. Time will tell.

But she is due for SPS in March 2025. And the SPS and life extension for Concordia is quite expensive.

So what we have said there is that unless we get sort of a good contract that can fund that SPS and life extension, we're going to put here into layup until such time. She is a Tier 2 rig.

So her earnings capacity is not the same as you have with Boreas or others. But I mean, we are talking about that -- I wouldn't sort of -- I wouldn't rule out that we get work for her, but we will not sort of do to our -- we need to manage our cash very thoroughly.

So we are not going to go ahead and spend that CapEx unless we have visibility on the earnings. Boreas, she is laid up in Norway, warmly up, I would say that it will take, give or take 4 months for her to get ready from when we push the button until we see is ready to work.

That has to do. We need to crew her up.

We have to do some proprietary work. So I would say to say 4 months, and she's also due for an SPS.

And as we communicated before, we are a little bit more granular at this time. So you have good visibility.

But we say that give or take $15 million for SPS and reactivation work on the Boreas. She can work worldwide, including Norway.

I mean, there are not -- there are basically 4 rigs in addition to a jackup that are -- that can work in Norway and Boreas is one of them. Caledonia, likewise laid up, warm stacked, will also need to go through SPS and reactivation will take about 4 months as well to get her out and ready to work.

You should note that she is a moored unit and she cannot work in Norway. She's actually most suitable to work in the U.K.

So I think priority-wise, we are very much prioritizing to get Safe Boreas back into action. That's important to us.

And there are, as I said, a number of opportunities that we are working on. And Caledonia, there's also sort of a fairly tailored opportunity for her.

That we can work in 2025. For '24, I think as time has passed, we've been fairly sort of vocal about that before, that we see limited opportunities.

There are some sort of a scattered opportunity, but I wouldn't sort of put it into my model. I think that will be a positive surprise.

But right now, we are working on a few things, but again, fairly low probabilities. But there is activity around not only the North Sea and Brazil, but we see that there is activity in Ghana.

We see that there's activity in the Gulf of Mexico, Africa and other places. And then there the two sort of Chinese units, nothing new there, basically.

I think, you can, as have said before, look upon those more or less like an option for us to take delivery. They are already at the yard in China.

Markets. We've been through this before.

This is the last print. Nothing much to add.

I think, the sort of the latest here was a contract with Equinor for Oscar that was awarded in January to a competitor, and that's sort of our take on what the rate was on that. Of course, this is our subjective view on that.

And I think when it comes to Brazil, as I said, there our assessment is that the market there is around 120-ish. And likewise, just below $200,000 in the North Sea.

But there has been fairly limited activities in those two markets recently. This is, of course, and this is the most interesting and most important market for us, Brazil.

Nothing much has changed. We expect 11 units to work in Brazil in 2024.

And we do expect that there will be another tender coming out from Petrobras later in the year, and this is an addition then to do a potential extension of the Zephyrus. This is our assessment.

We know that Petrobras is doing their own sort of review of their demand for the flotels going forward. And of course, we are very close to Petrobras and discussing with them.

So this is our assessment. Driving this has increased oil production in Brazil, which is going from the currently 3 million barrels per day, up to 5 million barrels per day.

That's their target in 2030, whether that they will hit that in 2030 or a couple of years later, time will tell. But that means that the FPSOs operating in Brazil is going to go from the current sort of low 70s up to 90 units.

And many of those are actually contracted. So this is something that is going to happen.

And we see it in other markets sort of the general activity level in Brazil is very, very interesting indeed. So if you look at our market, if you say that the total supply is 24 units worldwide, including some jack-ups and mono-hauls.

So you see almost 50% of the total demand is then used in Brazil. So the market has changed in terms that the demand in the North Sea is not the same as it was 5, 10 years ago, but then Brazil is very much out of the base load here has picked up a lot of the capacity, and we think that's going to continue.

So looking a little bit further ahead here when it comes to market, we think that in the North Sea, one potential sort of driver sort of in Norway is the electrification of the Norwegian field. That will most likely also mean a life extension of some of these fairly big production units.

And when we talk to our clients, that's what they say. The electrification of the Norwegian shelf is going to happen.

I mean, I know the politicians and other people are discussing whether we are going to electrify. When we talk to the clients, they are actually making the decisions right now.

So we are sort of fairly confident that, that will happen and that will also then lead to demand for the flotels going forward. You're talking probably '27, '28, '29, '30 might be some work coming in '26, but I think the sort of the major sort of demand here is going to come from the latter part of this decade.

And that could be quite substantial. That could be quite interesting.

It's early days yet, but that's what we see. Others said even to look further ahead, I think that we talked about that before also.

Namibia is a very interesting market for Prosafe. That's the sort of a market that's very similar to Brazil in terms of the corrosiveness.

I mean, you're talking 3x to 5x as high corrosiveness in Brazil as in North Sea, and we sort of expect very much the same sort of environment in Namibia. But again, you're talking for first production shelf, talking for first production there 2029.

So then you're into the 30s. But I mean, my point here is that there is definitely a market for our units going forward.

I think that the North Sea, the U.K. windfall tax, of course, what's happened there.

They've extended that. That's not a positive, but there are other markets that will pick up the demand there going forward.

This is something we have shown before, but it is important to sort of show you what our earnings capacity is. And this is the sort of the -- to the left here, the current market.

This is, if all the rigs with these assumptions are then reset at market-to-market based on what we assess to be the current market, we would have made today $125 million. We would love to have done that, but that sort of gives an impression about the earnings capacity.

And then likewise, if you go into the peak market and if you get the rigs back and work, you're talking over $200,000 per day. And then you can look at that compared to our market cap and sort of the debt level.

Again, looking at -- I mean, our EV today, our net debt is $355 million. You had the market cap.

We get over $400 million of EV. And then you can compare that to broker value, so you can compare that to other segments of the market.

So compared to the newbuilding parity, most of the segments in the oil service industry is attractive price, but I would say that the flotel market, in particular, are attractive price. I usually say that for simplicity that the two most modern and most sophisticated rigs would cost $350 million per day.

That's $350 million to build. And then, we have other two, that's a little bit older and a little bit less sophisticated.

They will cost about $250 million. So if you just look at the four modern units that we have in our fleet, you're talking about $1.2 billion in replacement value.

And then you add on, let's say, for the sake of a good measure, $100 million for the three legacy assets. And then you are $1.3-ish billion replacement value.

So based on that data point, of course, we are very attractively priced. Operations, not very much to add.

I said it initially. I think that our operation, we are the biggest operator in Brazil.

We have three units operating in Brazil. Our nearest competitor has two.

So -- and this is something that our sort of position in Brazil is something that is very valuable. And we also see that we have a very close and good dialogue with Petrobras, and that's something that when issues pop up, we are the first one they reach out to, and that's a relationship that is highly valuable also going forward in terms of looking at new business.

And this could be a market where the Chinese newbuildings could be sort of added into when that timing is right. So the two units had 100% utilization there.

As Safe Eurus I mentioned, there was some small issues. Obviously, we'll have 95%.

And Safe Concordia, even though she is an old lady, she is performing very well in the Gulf of Mexico. And the Scandinavia is laid up in Norway.

And Boreas and Caledonia, we talked about. Backlog gone down, unfortunately, but that's just where we are, and that's something we are focusing and working a lot to build the backlog going forward.

And as I said, I think we covered it before, we are somewhat -- yes, this is something we had expected to turn, but I think we need a little bit more time for this to materialize. Yes.

That's -- Reese, do you want to go through the numbers?

All right. Thank you very much, Terje.

I'll take a brief look at the numbers in the quarter as well. First, on the revenue and the EBITDA, I would say that very much in line with our expectation.

This last quarter, we have a very stable operation on the four rigs, as Terje mentioned, a good high uptime. And we were also very happy with the cost level that we were able to maintain in the quarter.

So revenue around $34 million and EBITDA just over the 7% mark. And I think if we look a little bit forward, as Terje showed on the previous slide, we see that we have pretty stable operations ahead of us for the next few quarters.

So we expect that this trend -- the positive trend, particularly versus last year when it comes to EBITDA. We'll continue, and we don't have any large SPS' or planned downtime in the coming couple of quarters.

So we're very happy with the result that we were able to achieve in Q1. Looking on the income statement.

Of course, EBITDA, we talked about that. I think the only other point to really point out on the full income statement is the interest.

We have a very favorable interest rate than the current package we have. So we're talking about 8% interest.

If you look at sort of competitors in the market who've done refinancing, we're talking about interest rate levels, 10% plus. So that's obviously a benefit and the seller's credit, although we have in the P&L and implied interest, it's actually until the middle of this year, it's actually interest payable free.

So I think we have a favorable financing cost up until, of course, the refinancing, which Terje mentioned is due at the end of next year. Also have a very efficient tax structure.

I think we have large tax losses in Norway that has enabled us, obviously, to maintain a very low level of actual tax payable and a tax that is payable is largely some local taxes that we have to pay in Brazil. Basically jump over, I think the balance sheet.

I think, the main topic of interest when it comes to the balance sheet is very much the cash position and liquidity looking ahead. What we saw in this last quarter, and that was very much in line, as Terje mentioned, again, with our expectation was that we had the SPS on Eurus in the back part of last year, in Q4 of last year, and we saw those payables unwind in this quarter.

So we did the work in November, December. And then, of course, we had to pay the vendors a bit later.

So that $7 million net working capital was largely impacted by that, by the net working capital unwind. And again, you have the interest and the debt repayment.

The debt repayment is again the minimum amortization on the Costco sellers credit for the Eurus. So I think cash generation, looking ahead, as Terje mentioned, we see getting into 2025, and we're monitoring very well, very closely how that liquidity will look subject to contracts and backlog going forward.

I'll hand it back to Terje who will wrap things up, and then we'll move on to the Q&A.

Yes. So, I think, for Prosafe, it's very much sort of working on the market, the backlog, and that's our very much our focus.

We are optimistic on the market. We see that there are opportunities going forward in a different basis.

And hopefully, we can come back to you with some news on that, going forward. We think that, in particular, the Brazilian market is strong, and we have a good position in the North Sea.

And as far as the sort of the debt and the refinancing is concerned, that is, of course, something that we are managing. We are proactively looking at it, not -- also sort of working on it and -- but it will depend on how the backlog.

So it is that sort of the -- how the sequence will play out here. So first, the backlog and then we'll sort of base on that, we'll start to have a clear view on how the final refinancing is going to look.

So I think I'll end the presentation with that and very happy to answer questions if there are any.

There was one question here from coming in from the web, which was with respect to the tenders in the North Sea. Are those for high-end units only or can walk-to-work solutions compete in the U.K.?

And sort of to answer that, in Norway, you cannot have walk-to-work for unmanned installations. So that's sort of a specific requirement in Norway.

In the U.K., you can have walk-to-work, but our assessment is that the tender that is out walk-to-work is less likely. It's not ruled out, but it's less likely the requirement of that job is such a nature that we think flotel is best suitable.

Okay. There's no more questions from lines.

Okay. Any questions from the audience?

Yes. Please.

Look, maybe, we can ask somebody to get him a mic.

Could you please comment on the SPS cost for Notos and Caledonia?

Sure. Reese, do you want to...

Yes. So the SPS for Notos, this will be her 10-year SPS that will need to be done, will be carried out in Brazil.

What we have seen is that the 5-year SPS, we did on Notos cost us $8 million. The SPS that we recently did on Eurus cost us $10 million.

And that's not only the special survey that also includes the fact that you need to clean the hole in Brazil, you need to come into sheltered water and also you need to do certain life extension repairs. And when you're getting on to 10 years working in Brazil, you also have some fabric maintenance and upgrade work that needs to be done.

So that figure, that we have put in, which we estimate to be sort of in this range, $9 million to $11 million, is including, of course, all of those items that work scope. It doesn't include thruster overhaul.

That is something actually that you usually do around about the 10-year mark or you start to begin a rotational program around overhauling, maybe not all, but some, and that's something that we will also be looking into and plan to execute with respect to Zephyrus and Notos in the coming, I think, as we indicated, 24 to 36 months. Caledonia was the next one.

Caledonia moored unit laid up in the U.K. She's in layup status, but she needs to do an SPS before she can work again, and she needs to be reactivated.

And that total cost, we have estimated in the range of $11 million to $13 million and sort of the midpoint being approximately $12 million. That includes, of course, the cost of crew ramp-up, crew familiarization, and operating cost elements as well.

Okay. If there are no further questions, I think we will end it there.

Thank you very much for attending both online and here in the audience.