Prosafe SE

Welcome to this third quarter 2024 result presentation for Prosafe. If there are any questions in the audience, please use the microphone.

And online, there is a chat function and we'll read out the questions at the end. So last quarter was a rather eventful quarter for Prosafe.

Luckily, it was not an eventful quarter when it came to safety. So that was we ran our vessels, we actually had over 1.5 years now without any LTIs.

And operation as such, I would say, is sound. We had utilization of the vessel that's at 57%.

Of course, the vessels that are on charter is more between 98% and 100%. So I think the operation for the company and the vessels are very strong.

Also, then during the quarter, we converted the LOIs for Boreas and Caledonia into firm contracts. Very happy with that.

We're building up our backlog. And we also extended the Concordia.

So the Concordia will now be on contract until the 9th of March when she is due for an SPS. We also are very close to an extension on Safe Zephyrus.

It's a 2.5-year contract extension with Petrobras. There are still a couple of things outstanding, but we expect that to be extended.

And I would say sort of the economics, we're not going to say the rate, but overall the economics is improved compared to the current charter. We're going to sort of reveal the rate when that is actually firm.

But it's both sort of a component on earnings, but also they are paying for more fuel. So all in all, there is an improvement in the economics for the Zephyrus.

So that means, including the Zephyrus, that the backlog is now $400 million. And in the quarter, if that is -- if Zephyrus is done, and that's almost double in the year.

And that's always been our strategy is, first and foremost, to build the backlog. And I think we are where we should be now -- or we can be rather.

So the numbers for the year -- for the quarter, we came in at $34.6 million EBITDA -- of revenue and $5 million in EBITDA. We'll come back and Reese will go through that later.

And the liquidity end of the quarter was $63.5 million, down approximately $2 million from the previous quarter. So that means that our strategy to improve the backlog, that's very much been the core of what we're looking for in order to strengthen our liquidity and do sort of the refinancing to have a sustainable capital structure.

So what we are saying is that, in total, we are looking to refinance approximately $400 million. Including in that number is $343 million, which is the debt that is falling due at the end of 2025.

And then there is reactivation and CapEx that sort of makes up the balance. So we have -- the refinancing is continuing and our plan and our expectation is that, that will be completed during the first half of 2025.

And just to be clear, it is very likely that the refinancing will include an equity component, as we say. The number -- the size of that will -- remains to be seen.

That depends on how the whole refinancing process and where we end up, but I think it is likely that it is going to be an equity component to the refinancing. The market, I'll come back to it later.

But in general, we see sort of a solid market, more activity. And so we are rather positive when it comes to the market going forward.

So this is the fleet. As you see, the Zephyrus is expected, it's a 2.5-year contract.

It's actually 954 days extension of the current contract. And we hope to be able to announce sort of a firm contract within short.

We are dealing with a client, so it is sometimes difficult to sort of be very precise when they will come back to us. Zephyrus, as you know, is on to Petrobras until '27.

Likewise, Notos, till '26. Notos, we'll do an SPS towards the end of next year.

And I think usually Petrobras sort of come out with a retender approximately a year before sort of the contracts are due. So I think sort of a year ahead of the Notos expiry, so it's summer of '25, I think we will sort of hopefully be in a position to discuss an extension -- or not an extension, but a tender for Notos.

The Safe Concordia as I said, is on a contract now, firm contract, until 9th of March next year. So that means that she's actually been on contract over 1.5 years on the current contract.

So that worked out sort of quite well for us. What we are planning to do there is unless waiting for -- unless you get a contract that makes sense and justify the sort of the CapEx, SPS cost for Concordia, we will lay her up until that is done.

The Boreas is fixed as now on a firm contract in Australia and she will leave Norway and be on a heavy lift out of Norway in April next year and then go to Singapore and thereafter relocated to Australia for the contract. Likewise, Safe Caledonia will commence the contract in June 2025.

Scandinavia and the Nova, Vega, there are no news. I will come back to Scandinavia later.

So when it comes to the market, so we say that we define our market as -- our competitive market as 23 units. And this is where in '25 where they predominantly will be.

So if you take our 6 active units of the 23, that means that we have approximately 25% market share worldwide and more or less the same in Brazil where we have 3 active vessels. So here, you can see sort of where the 23 units will be operating predominantly in 2025.

So in North Sea, there will be 5 vessels. One vessel, the Safe Concordia, is in the U.S.

And a total of 11 vessels are going to be in Brazil and that's up 1 vessel from this year. So that sort of underpins the fact that there are more and more sort of vessels actually active in Brazil.

So they are using -- utilizing approximately 50% or the total availability. And that is an important market, but it's going to be an even more important market going forward.

And also, you can see that there are 2 vessels in Australia next year. So that's also a very active market.

This is sort of -- we showed this last quarter as well, but I think this is important. So you see sort of a base on a bottom-up analysis that we have done that there is going to be increased demand.

This is comparing a little bit apples with pears because on the supply side is the number of vessels and the demand side is vessel years. So I think when you reach sort of the utilization here in the high 80s, you are basically fully utilized because you need to mobilize or remobilize vessels.

You need to do the SPSs and so forth. So basically, if you look then into 2025, '26, '27, you are back to utilization that we saw in 2012, '13, '14, which, of course, the rates were much, much higher than what they are today.

We see that in Brazil there is -- they're going to increase the demand, as I said. And also in the North Sea, we see that there is, for '25, I think that's sort of spoken for now.

But in '26, we see demand in the U.K., both for '26 and '27, demand that could fit Caledonia quite well. So we're actively working with clients to see if we can find work for the Caledonia, that she is very suitable for U.K.

and that's sort of a continuous process. But then we're also sort of looking a bit further out.

We see also in Norway, especially for '28 that there are activity that could suit us quite well. And based on our contracts now, both the Boreas and the Zephyrus can be back in Norway for the '28 season and we think that is quite a good position to be in.

A little bit more on Brazil. So Petrobras is out with a tender these days for a 2-year contract.

It's a pretty low-spec unit. It's as expected.

And we also think that they will come out with a further demand for longer contracts, more 4-year contract later in the year. So Petrobras is delivering.

And also one of the independents are actually looking for a vessel, for a contract for late this year and next year. So there is more activity.

And I mean if you look at sort of the driver behind this, it's, of course, the increased production in -- the oil production in Brazil. They are currently producing approximately 3 million barrels per day.

And there, their plan in the early '30s is to increase that to between 5 million and 6 million barrels. And what we see -- to take care of that increase, they have actually contracted 19 new FPSOs.

And in order to reach the goal, they need to contract a further 20. And what we see is that Petrobras, in particular, typically use an accommodation unit 2, 3 years into the contract.

And that's a recurring demand. Then it goes now 2, 3 years and we are back.

I mean, the sheer sort of corrosiveness in Brazil means that they need to do lot of maintenance on these FPSOs, in particular. So I think a lot of the revenue here is both sort of is longer term, up to 4 years, and it is recurring.

So that's sort of the driver here, we think, is interesting. And we also see that some of them, called the non-Petrobras clients, MODEC, others, are starting to -- the corrosiveness is not only happening on the sort of the FPSOs that belongs to Petrobras.

It's also -- their competitors experience exactly the same. So we see that long term, now they have 11 units, 3 to 5 units more are going to be deployed in Brazil.

So this is going to be the big driver for our market in the years to come. But we also -- then you have countries like Guyana, the same that they're starting there.

Namibia could be an interesting market that has a very similar sort of weather pattern and swells that we have seen in Brazil. This is -- really, the message here is that it's going to take a long time until anybody builds a new accommodation unit.

I mean, if you were to -- so of the contract, the Boreas or Zephyrus today, we think that's going to cost you around $350 million apiece. And maybe Notos and the others, slightly.

So basically, what we see here is that if you add 2 times $350 million, that's $700 million and maybe $500 million for the sort of slightly less sophisticated units, you're up to $1.2 billion. And then you can add another sort of $100 million for the remaining units.

So it's highly unlikely that there will be ordered any new accommodation units for a long time to come. So I think the supply side here is very much under control.

And by all means, if there are new units coming to the market, I think that's great news for everybody. That means the rates have come up.

And of course, we do control -- sort of, of the 23 units, there are 3 newbuildings still at the yard where we control 2 of them. So we are sort of in a good position here also going forward.

As I said, the vessels that are in operations are performing very well. So we had between 99% to 100% utilization with Petrobras.

And the safety performance is very good. Concordia, high utilization.

And we, as also previously mentioned, we are going to see -- unless we get a contract that justifies SPS, she will go into lay-up. The Safe Scandinavia, she has been in lay-up now for a number of years.

It doesn't cost us that much, it's about $1 million per year. But then the question how long should we do that, so we are now testing with our clients that she can work in Norway.

So we are telling our clients unless you sort of really have a demand for her, we need to start to find alternative use. So we'll see what the alternative use, but we are starting to explore that because we can't sort of spend that kind of money even though it's limited.

We are looking at it as like option premium, but we need to make a decision on the Safe Scandinavia, I would say, during -- at least 2025 what we are doing with her. This is the development of the backlog.

So that's more or less doubled since the trough in Q1. So all in, including options and Zephyrus, the backlog is now up to $400 million.

And I think that's sort of the visibility for Prosafe into '25 and also to a certain degree into '26 is very high. The movements here for '26 is really the Caledonia, the fact that she is fixed for '25, we need to find work for '26.

And also when we do the commencement on the Boreas in Australia. She has a wide commencement window.

So yes, Reese, over to you to do the numbers.

Thank you, Terje. Walk everyone here through the numbers today.

On operating revenue, very much, as Terje said, it's been very stable operations, [ 90% ] to 100% utilization. So we've had quarter-on-quarter also very stable revenue.

We do have a slightly increased cost this quarter if we compare it to other previous quarters. I think that's driven by 2 main elements.

Those 2 main elements are: one, we do see a slightly higher activity level. We are starting the reactivation process for Caledonia and for Boreas and also we have 2 SPSs coming next year.

So there is a small increase already in the amount of activity we need to support those reactivations. But in addition, it's worth mentioning that in Q1 and Q2, we also had some positive one-off effects that impacted those numbers positively.

But all in all, very, very stable operations and very stable both revenue and cost base the past quarters. Looking a little briefly at the income statement, I think very limited changes outside of the EBITDA and the cash flow, some slightly higher taxes.

We have a very efficient tax structure, as we've talked about, with a large loss carryforward in Norway, but we still have some small local taxes depending on where we're operating. On the balance sheet, I'll touch a bit more on this in the coming slides.

Of course, cash, just on liquidity, has been a very key focus area when we're looking at the balance sheet. And I think to cover that straight off, we still have -- we've been communicating very consistently that we see headroom into Q2, Q3 next year.

I think that's still very much the case. And I think as we've shown on this slide, we have managed to keep the -- to manage the cash well, I would say.

We are receiving prepayments on Caledonia and we'll receive also prepayments on Boreas. So that is having a positive working capital effect, which is partly offsetting the underlying cash burn if we take into account also our interest and debt repayment profile.

So an only slight decline in the cash in this past quarter. And again, we see sort of clear runway liquidity-wise into Q2, Q3 next year.

Touching a little bit more on the refinancing need. Terje also already mentioned that approximately indicative in the $400 million range.

That includes the $343 million debt maturity that we have coming up at the end of next year. But in addition, we wanted to give people sort of indicatively how do we see the other components of that $400 million.

As we've mentioned several times before, we have a bit of a wave of CapEx and reactivation spend ahead of us, approximately in the $80 million range. If we take that into account, in addition to the EBITDA and positive EBITDA contribution we expect next year, but also interest expense, debt repayments, taxes, we see an indicative outflow of approximately $80 million next year.

Again, there are several pluses and minuses on this, but it's in that ballpark, we believe. And we think that the year-end cash balance give or take a few million, but broadly in the $50 million range.

And we have a covenant of $28 million. Of course, some of this will be dependent on the refinancing solution we achieve, but we think ballpark $400 million is the number.

And we are, as Terje said, we are into the process today and we hope to complete this in H1 of '25. With that, I'll hand it back over to Terje to wrap it up and take questions at the end.

Yes. Thank you, Reese.

So this is basically the summary that we are -- I think we are in a good position in terms of where we are market-wise. We have approximately 25% market share, and we have a very strong position in Brazil.

The earnings potential here, especially the 2 legacy contracts in Brazil is coming off for renewal in '26 and '27, is significant. So we are now working towards sort of the refinancing and achieving sort of what we call a sustainable capital structure going forward.

So I think I'll end it with that and take any questions.

So if you have questions in the audience, please use the microphone so the people online also can hear you.

Could you talk a bit about the opportunities you're seeing for the Scandinavia? And if you're not going to secure any accommodation work, would it be a sale for scrap?

Or do you see kind of conversion opportunity for alternative use?

Well, Scandinavia is really a TSV and she can be used for alternative use. I think as an accommodation vessel, she is moored and she has, in Norway, in particular, fairly limited capacity POB.

So I think most likely that she will be used for some alternative works because she has a very good -- sort of steel is in good condition. She has a lot of good equipment on board.

So hopefully, we'll find someone that can use her for alternative use. That's clearly our primary goal.

But if that's not the case, I mean, then there is no need for her and then we need to take the consequence of that. Hopefully, we'll avoid the scrapping, but I think that's -- time will tell.

And then on the Concordia, is it mostly in the Gulf of Mexico, you're seeing opportunities? Or is there more opportunities in other markets as well?

I would say that Concordia is a Tier 2 rig in a way that she is only DP 2. So I think that the market that she is more sort of Africa, U.S.

Gulf. I think unlikely North Sea is in the U.K., unlikely.

So I think it could be some short-term work in Brazil, but also unlikely. So I think it's more the Tier 2 Africa, sort of the more sort of ad hoc markets that she is suitable.

But there are contracts there as well. Any questions from...

There was a question around if we see any additional opportunities from Petrobras given developments in the Buzios field in the recent contract -- recent tender.

Yes. No, we touched upon that.

I mean, we do see there's one tender out now. We think the short term, more tiers, lower-quality unit.

We think there will be another sort of longer-term contract tender coming out later in the year. But we also have a constant dialogue with Petrobras and they are also discussing even longer contracts.

So I think the answer to that is very much sort of we see that there is -- obviously, we said 3 to 5 more units in Brazil over the coming years. So I think that sort of summarizes our view when it comes to the total demand in Brazil and Petrobras, of course, being an important part of that.

Okay. If there are no other questions, then thank you very much for attending, and look forward to see you next quarter.