Shelf Drilling (North Sea) (SDNS) Q3 2024 earnings summary

Executive summary

• Achieved strong operational performance in Q3 2024 with fleet uptime at 99.4% and a slight increase in incident rate to 0.16, but operated incident-free in Q4 to date.

• Completed the merger and full acquisition of Shelf Drilling North Sea (SDNS), now a wholly owned subsidiary, enhancing fleet composition and future earnings potential.

• Managed significant rig redeployments and asset sales, including the sale of the Baltic for $60 million and insurance settlement for Trident VIII.

• Faced major financial impact from multiple rig suspensions by Saudi Aramco, but successfully redeployed some rigs to Nigeria and are actively marketing others.

• Backlog stood at $2.0 billion with 91% marketed utilization as of September 30, 2024.

Financial highlights

• Adjusted revenue for Q3 2024 was $265 million, up 15% sequentially, driven by a $45 million one-time acceleration of mobilization revenue from suspended Saudi rigs.

• Adjusted EBITDA reached $114 million (43% margin), up from $72 million (31%) in Q2, primarily due to mobilization revenue and lower operating costs.

• Net income attributable to controlling interest was $68 million, including a $45 million gain from the Baltic sale, while SDNS reported a net loss of $71 million for the nine months ended September 30, 2024.

• Operating and maintenance expenses decreased to $133 million, reflecting lower costs from suspended and sold rigs.

• Consolidated cash balance as of September 30 was $220 million, up $82 million from June, mainly due to asset sales and lower debt service.

Outlook and guidance

• Revised full-year 2024 adjusted EBITDA guidance to $320–$345 million, up from $290–$335 million previously, including $45 million of accelerated mobilization revenue.

• Full-year revenue guidance improved by $25 million, mainly from the $45 million mobilization revenue acceleration.

• Capital spending guidance for 2024 increased to $140–$160 million, reflecting additional contract preparation.

• SDNS FY 2024 contribution forecasted at a loss of $10–$15 million, reflecting contract delays.

• Expect strong earnings and cash flow visibility in 2025, with all SDNS rigs under contract and redeployment of suspended rigs anticipated by mid-2025.