Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Shelf Drilling Ltd (SHLLF, Financial) reported a strong safety performance with a year-to-date total recordable incident rate of 0.10, an improvement from the previous year's 0.12.
- The company achieved a high uptime of 99.4% across its fleet, demonstrating effective operational capabilities.
- Shelf Drilling Ltd (SHLLF) successfully mobilized rigs to West Africa, indicating strategic positioning in a region with growing demand.
- The company secured a 15-month contract extension with Chevron in Angola, reflecting strong customer relationships and operational excellence.
- Shelf Drilling Ltd (SHLLF) completed the sale of the Baltic rig for $60 million, which is expected to provide a significant cash inflow.
Negative Points
- The company faced regulatory challenges in Norway, with the rejection of compliance for the Shelf Drilling Barsk, causing delays and financial shortfalls.
- Shelf Drilling Ltd (SHLLF) experienced multiple rig suspensions by Saudi Aramco, impacting revenue and utilization rates.
- The Trident VIII rig in Equatorial Guinea suffered severe damage, leading to operational disruptions and an ongoing insurance claim process.
- The company reported a sequential decline in adjusted revenue by 8% due to contract suspensions and operational issues.
- Shelf Drilling Ltd (SHLLF) revised its full-year 2024 financial guidance downward, reflecting challenges in contract commencements and market conditions.
Q & A Highlights
Q: What is the financial impact of the Barsk rig's delayed start, and how will the cash need at Shelf Drilling North Sea (SDNS) be addressed?
A: The delay results in a monthly cash impact of $7 million to $8 million due to lost revenue. The cash need at SDNS, estimated at $40 million, will likely be addressed using liquidity from Shelf Drilling rather than raising equity at the parent company level. - Gregory Obrien, CEO
Q: With the Harvey H. Ward rig facing suspension, what factors will determine whether Shelf Drilling meets its EBITDA guidance range?
A: The suspension will likely result in lost revenue in Q4, but the impact is expected to be modest. The main factor affecting the EBITDA range is the start dates for new programs for two rigs moving to West Africa. The timing of these contracts will significantly influence the final EBITDA outcome. - Gregory Obrien, CEO
Q: How does Shelf Drilling view the current market dynamics in India and Egypt, and what are the prospects for fleet optimization?
A: In India, despite recent tender cancellations, there is potential for growth due to domestic energy needs and smaller companies entering the market. Egypt faces economic challenges, but opportunities are being explored outside the region. Fleet optimization may involve selling assets, as seen with the Baltic rig sale, to capitalize on market opportunities. - David Mullen, CEO
Q: What is the situation with the Saudi rig suspensions, and is there a risk of further suspensions?
A: The suspensions were unexpected, attributed to production cuts and increased condensate production. While further suspensions in 2024 are not anticipated, the situation remains uncertain. The remaining rigs have unique capabilities, making them less likely to be suspended. - David Mullen, CEO
Q: What are the plans for the Harvey Ward rig, and when can we expect updates on West Africa contracts?
A: The Harvey Ward rig is being considered for an opportunity within the region, with details to be disclosed soon. Contracts for rigs moving to West Africa are expected to be announced in the coming weeks as the rigs arrive and commence operations. - David Mullen, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
