Prosafe SE

Welcome to the second quarter 2024 presentation for Prosafe. In the quarter, we had a very good safety performance.

We actually had no LTIs for the last 12 months. The utilization of the operating fleet was 56% and close to 100% for the 4 vessels that's actually were working.

In the quarter, we have secured letters of intent both Boreas and Caledonia, and we expect those to firm up during August. Numbers-wise, the EBITDA came in at $6.6 million in the quarter.

That was in line with the first quarter and very much in line with expectations. We saw a significant improvement compared to last year, where actually revenue for the first half of this year, revenue more than doubled, and EBITDA came in at $14 million versus minus $16 million last year.

Cash stands at $66 million, up from $63 million last quarter. We have runway into second, third quarter of 2025 versus our covenants and liquidity.

And the improvement is very much due to the payment terms we have managed to negotiate for the letter of intents that we have secured. So going forward, we are factoring a CapEx of total $80 million.

That is related to SPS for the vessels that are due for that, thruster overhauls, mid-life work as well as mobilization and reactivation for Boreas and Caledonia. Loans mature in 2025, as you are aware, and we will start financing, refinancing this in good time before they are maturing and on the back of the increased backlog that we now are securing.

Outlook-wise, we have good visibility for 2025 and also into 2026. And we expect the options on Concordia.

The Concordia is fixed until November this year. We expect the options to be declared.

We have -- yes, fairly sort of high expectation that they will be declared so that she will run until February next year. When it comes to the vessels, this is how it looks.

Here, we have indicated the letter of intents and the options. So you can see we're also here, sort of indicated when we are planning to do the SPS and CapEx work for the different vessels.

Go a little bit into the Safe Boreas. So she will go into a 15-month firm contract with 6 months option in Western Australia.

She will mobilize towards the beginning of next year. And currently, there is a 6-month delivery window.

That will narrow as we go forward. And we'll sort of keep you informed when the commencement of that contract will start.

The contract value is between $75 million and $100 million, depending on where the patients are declared. And as I said, the execution is expected to happen fairly soon.

I would say sort of within August, we expect to sign a final contract. Likewise, for the Safe Caledonia, she has entered into an LOI or we have entered into an LOI with the Ithaca Energy in the U.K.

for the Captain field, and that will be 6 months per period with options of 3 months. And there, the contract value is between $23 million and $37 million.

We need to do the SPS and reactivation costs on her as well before we start, and we expect to execute that contract also within April this -- no, sorry, within August of this year. When it comes to the market, we have sort of define that to be for the active competing supply.

So the total market that we are competing with is 23 vessels. That is up 1 vessel in the quarter, and that's due to the [indiscernible] that's already been delivered.

So this is very much sort of the -- what we see as supply. But you should note here, the demand picture here is vessel years.

Of course, they are mobilizations, they are off-hire. There's work.

So when you reach a utilization, I'll show it on the next graph, of 80%, 90%, it's more or less fully utilized. So we are -- this is not comparing really apples with apples.

It's vessel -- number of vessel versus the vessel years. So I think that this is -- it looks very favorable going forward, especially when you see the trough in the early '20s here.

This is based on what you saw on the previous graph, what this will actually look like going forward in terms of utilization. So you can see we are actually back to levels that we saw '14, '15 in terms of utilization, and then time will tell what that will mean in rates.

But back then, I mean, we saw rates of $175,000 in Brazil and over $300,000 in the North Sea. So this is sort of the picture.

In addition to the 23 vessels, there are actually 6 vessels that could come in and add to the supply here. That will change the picture somewhat.

But of those 6 vessels, we control 3 of them, 2 newbuildings and the Safe Scandinavia that is in layup. So we feel that we are well positioned to capture this.

And of course, the utilization will be affected by entry of new vessels, the 6 potential vessels, but it also -- we haven't sort of factored in any sort of scrapping or deletion of any vessels here. So Brazil is by far the most important markets.

The big driver in Brazil is increase in production. They are talking -- currently, they produce about -- in total, about 3 million barrels.

They are planning to increase that between 5 million and 6 million barrels in 2030. Whether that's happening in 2030 or somewhere thereafter, time will tell.

But this is sort of the main driver and is very much FPSO market. So we see that currently, there are actually 19 FPSOs on order, and we expect sort of additional pipeline of 20 FPSOs.

This week, Petrobras came out with a tender for 4 new FPSOs. So this is going to sort of moving forward.

And in order to reach sort of the production goal of 3 -- for 5 million, 6 million barrels, this is actually something that needs to happen. So also, what we see when we do sort of a deep dive into when are the sort of the bigger FPSOs starting to utilize accommodation vessels.

Petrobras, in particular, started to do that 2 to 3 years after they have been delivered. So it's very much a preventive maintenance strategy that they have, and that's going to drive demand for accommodation vessels going forward.

So we see that we can be -- going forward, currently, there are about 10 vessels or there are 10 vessels -- accommodation vessels in Brazil. This year, that can increase with 3 to 5 vessels going forward.

So as strong this is going to be a market that is going to drive the accommodation market going forward. And I just indicated that it's not only Petrobras that is active in this market.

We have the lease operators like Modec, SBM, Yinson, but also the smaller E&P companies are now starting to sort of indicate that they need accommodation vessels going forward. When it comes to the North Sea, currently, there are 5 units operating in the North Sea.

That's up from 3 last year. In 2023, it was actually the first year ever.

There was no accommodation vessels operating in the U.K. sector.

And that is very much due to sort of the tax regime that they have introduced in the U.K. But this year, we see more -- we see units also active in the U.K.

sector. That's -- going forward, I think this is going to be a fairly stable market.

Might pick up a little bit towards 2026 as the hook up of the sort of -- especially the Norwegian projects that are coming online, but we see this to be a steady market going forward. U.K., there is this sort of unfavorable tax regime, but also, the assets there also, they do need maintenance of those vessels.

And in Norway, we also see a further potential for electrification coming into the latter part of this decade. I will say that the market-wise, the market in Norway now is approximately $150,000 to $200,000 and in the U.K., $125,000 to $175,000.

Rest of the World. This is a little bit of a mixed bag, everything from you can see higher rates in Canada of the $300,000 more.

So the second-tier work in Africa, $100,000 per day, but there is sort of more. There is scattered demand throughout.

I mean in Australia now, there are 2 vessels operating next year. So we actually see that there is a steady demand also going forward in the -- for the rest of the world.

And there's going to be like 3, 4 vessels that's going to operate in these markets. It's more difficult to predict.

And of course, the market -- the rates are depending on where we operate. So this is also part of the demand picture going forward.

This, you have seen before, but I think it's an important one. Currently, in this quarter, we made $6.6 million of EBITDA.

But if you sort of annualize that based, and if you have reset all our vessels to the current market, we would have had an EBITDA today, if all the vessels have been activated, except for Scandinavia, of $125 million. So this sort of shows the earnings potential in the current market.

And if you could then go back to what the market was back in the peak, we would have made $200 million of EBITDA. And in a growth case, if the sort of the utilization sort of proves to come through the way we hope and believe, there is a significant earnings potential and likewise, then you see sort of that earnings compared to our debt level.

So the earnings capacity is there to service the current debt level. Again, just comparing this to other sort of some other segments of the market, you can see that the vessels EV compared to replacement value for our segment or at least our company is very favorable.

And when it comes to EV compared to what sort of the underlying broker values is favorable and also compared to newbuilding parity. And if you say that the 2 most modern vessels are worth $350 million apiece, so the total value, the sort of newbuilding cost of our fleet, yes, I would say it's between -- as we indicated, $1 billion and $1.5 billion.

So even on that basis, that matrix, we are very favorably valued. Operation.

Again, as I said, very stable operation during the quarter. We've had more or less 100% utilization on the Safe Concordia.

Very high utilization of the 2 rigs -- 3 rigs in Brazil, and the letter of intent for Safe Boreas and Safe Caledonia will then come into the market for next year. So you see here in the sort of the very last quarter this year with some particular slight decrease in utilization.

That's because here, it's only a firm backlog. So we have not included the extension of the Concordia.

So this is a nice graph to show. I mean, hopefully, these letter of intents will be materialized.

We have high hopes and expectations that, that will happen. So finally, we can actually show an increase in our backlog.

So a 56% increase if we include all the options in this quarter compared to the last quarter. And we're also in discussion with Petrobras regarding the extending the Zephyrus in Brazil under the current contract.

Financial, Reese, do you want to take us through that?

Thank you, Terje, and I'll take a quick run through the financials here in the quarter. Looking at revenue, I think revenue and EBITDA has been very steady.

As Terje mentioned, we had 4 rigs in operation, very high uptime. And I think we're also able to keep the cost very much under control.

So looking at a very steady revenue picture and also on the EBITDA, hovering around about the $7 million number quarter-on-quarter. And I guess looking ahead briefly in the remaining quarters of '24, as Terje said, expecting the extension on Concordia, we think that the revenue and the EBITDA picture will continue to be relatively stable.

On the income statement, other than, of course, the positive development of revenue driven by the higher utilization, I think it's important to note also that the interest level has stabilized out. Of course, we've all seen the increase in interest rates.

We have a flexible interest rate picture on our balance sheet. So we're not hedged.

So as the interest rates went up, we saw an increase in cost, but that has obviously stabilized out, and let's see how that develops in the future. But quarter-on-quarter and half year on quarter pretty stable, and of course, a large increase in the overall result year-on-year, driven by having these vessels on a stable operation.

Balance sheet. I think the main issue on the balance sheet is actually related to cash flow.

That continues to be our main focus area. There has not been too much -- too many other material changes in our balance sheet picture.

So looking at the cash, was a positive quarter cash flow-wise. Important to note that the majority of that increase was driven by prepayment received with respect to Boreas.

I think that's a very positive development that we're seeing in the market and links very much with the increase in utilization across the accommodation space is that we see that clients probably for the first time since the last decade 2013, 2014, we see clients willing to actually prefund or pay in advance significant sums, and we already have received the first portion of that with respect to the Safe Boreas. So that was a significant portion of the net working capital change.

I think looking ahead, our focus is shifting very much to 2025 in the liquidity picture. As Terje has said, we see that we have liquidity and headroom to the covenant into Q2, Q3 next year.

And the focus is very much on investigating and continuing to follow measures to improve that liquidity picture. It's driven largely from reactivations.

We'd have secured these LOIs. We need to reactivate those rigs.

That's a very positive story, of course. But in addition, we see that at the same time, we have to do the SPSs on the vessels in Brazil, and we're coming up against the thruster overhaul.

So 2025, as Terje has said, we see a picture of $80 million in potential CapEx reactivation spend, which, of course, is a large -- quite a large number but a significant portion of that on the back of good news, which is that the market is improving, and we're getting the rigs out. So with that, I'll hand it back to Terje to wrap it up.

Thank you.

To sum it up, so performance. Operational-wise, has been good, both safety and uptime in a quarter.

Of course, we're very excited about the LOIs for the Boreas and Caledonia going into 2025. It's been quite a while since we actually have secured new contracts.

So we are encouraged by that and positive that they actually will be executed. Again, if we then can do the extension of the Zephyrus, we're talking approximately -- now we're discussing about roughly 2 years extension.

That will, of course, improve our backlog further. We think that the markets, as I alluded to earlier, is very favorable, and this is going to be driven very much by the Brazilian market.

The other sort of segments in the market in total, we see a stable demand, but the demand going, coming from Brazil is going to sort of drive utilization going forward here. We do see inquiries from clients both in Norway and the U.K.

Actually in the U.K. also for 2025, it's going to be quite a challenge for them, but we see also the inquiries for work in 2026 both in Norway and U.K.

And we think that U.K. is also going to be an important factor due to the aging infrastructure in the U.K.

And again, we -- of course, we are acutely aware of our liquidity situation. We are managing that.

We're very much focused on it. And the runway we had, as we have said earlier, is into Q2, Q3 next year both in terms of covenants.

So this is something that we're managing, and we are looking at ways that, that can sort of be dealt with in good time before we get there. So I think that is summarizing sort of what we have to say.

We're are more than happy to take any exceed from the room here or if you have, you can sort of send it on the chat, and then Reese can read them up. I don't know if Reese, if you ever see any.

No, we haven't received any questions so far. So we got questions in the room.

[indiscernible] Bård from Pareto. On Caledonia, after the current contract, can you update us on the outlook there?

I think Caledonia is a vessel that is very sort of suitable for the U.K. market.

So going into 2026, I think that's sort of a natural home for her. She is a moored unit.

So she has -- she can know DP. So we will have to be moored, and that's the U.K.

market is something where she can actually work. So we do have a dialogue with clients for '26, and she is actually starting to work for Ithaca 1st of June.

So there's potential. There could also be a window before that.

So I mean -- so there -- again, there is demand. We see that for both for '26 and thereafter, but they are also sort of a -- '25 is not totally closed out yet, let me put it that way.

Following up on Concordia in the Gulf, upcoming SPS. That's quite expensive.

It's not the highest earning vessel. What's your latest thinking there?

The thinking on Concordia is very much in line with what we said last quarter. So she -- hopefully, she will be on contract until February, then she is due for SPS in March and there's a significant sort of CapEx amount that need -- we need both SPS and life extension.

So our thinking there is, unless we can sort of secure a contract that one can justify that CapEx, she will go into layup. I mean we -- in the current circumstances, we are not going to spend that cash unless we have visibility on the earnings for her and the cash flow.

From the outlook for that, Terje. I mean as you said, you have quite a few clients now aware of their need to pay up-front if they want to keep vessels.

So just on the outlook there for, I don't know, maybe the current clients or other clients? What's the dialogue?

With regards to Concordia?

Concordia, yes.

Yes. Concordia, again, is an older unit.

She is more suitable for U.S. Gulf, West Africa, those kind of markets.

I mean it's not comparable to the Boreas or the Zephyrus in terms of sophistication. She is DP2.

She doesn't have 6 thrusters. So there's a little bit sort of limit.

So it's more a Tier 2 rig, I would say, Tier 2 vessel. But we do have a dialogue, but we -- again, we need -- with our current financials, we need a significant up-front payment for that to make sense.

But yes, we do have dialogue with different clients, but I don't want to sort of oversell that at the current moment. So sort of base cases that she will go into layup.

And just continuing on Zephyrus Brazil. Right to assume that for Petrobras to give an extension outside of their ordinary tendering.

There needs to be no change in the scope of the contract and the day rate would sort of have to be flattish.

I think flattish is probably -- let's see. But again, it is part of the ongoing discussions.

So clearly, we have ambitions. And then the question is whether those ambitions will be met, I think that's the best way to summarize the situation when it comes to the Zephyrus.

Okay. Anything else, Reese?

No, no questions.

Okay. Well, thank you very much for attending this presentation.