Shelf Drilling has announced results for the fourth quarter and full year of 2023 ended December 31.
David Mullen, Chief Executive Officer, commented: 'The fourth quarter of 2023 concluded a very positive year for Shelf Drilling. We generated EBITDA of $88 million, bringing the full year total to $311 million, in line with the guidance we provided at the beginning of 2023. We delivered the best safety performance in our company’s history, and we completed our most intense period of major out of service projects, in aggregate on time and on budget. The execution of our refinancing transaction late in the year has resulted in a significantly improved capital structure with a clear runway until 2029.'
Mullen added: 'Oil and gas consumption has reached record levels and is expected to increase for many years to come with shallow water activity in our markets playing a critical role. Global jack-up utilization has reached 94%, and dayrate momentum has accelerated over the past 18 months. There may possibly be some reduction in Saudi Arabia in the quarters ahead, but we expect incremental demand in other regions to sustain strong level of jack-up activity and utilization for the foreseeable future. As of December 31, 2023, our backlog was $2.3 billion, with 35 of our 36 rigs under contract, and we have a solid pipeline of new marketing opportunities for uncontracted days in 2024 and 2025. Our long-term track record of diligent cost management and financial discipline, combined with our operational execution capabilities and streamlined capital structure, will position Shelf Drilling very well to create long-term value for all our stakeholders.'
Fourth Quarter Highlights
- Q4 2023 adjusted revenues of $238.8 million.
- Q4 2023 adjusted EBITDA of $88.0 million, representing an adjusted EBITDA margin of 37%, including $(3.0) million adjusted EBITDA from Shelf Drilling (North Sea), Ltd. ('SDNS').
- Full year 2023 adjusted revenues of $893.8 million, adjusted EBITDA of $311.5 million and adjusted EBITDA margin of 35%.
- Q4 2023 net loss attributable to controlling interest of $16.8 million. This includes $27.7 million loss on debt extinguishment related to our debt refinancing transaction in October 2023.
- FY 2023 capital expenditures and deferred costs totaled $225.8 million, including $11.5 million at SDNS.
- The Company’s cash and cash equivalents balance at December 31, 2023 was $98.2 million, including $27.7 million at SDNS.
- Contract backlog of $2.3 billion at December 31, 2023 across 35 contracted rigs with weighted average dayrate of $83.4 thousand.
- In December 2023, the Shelf Drilling Perseverance secured a new contract with PetroVietnam Domestic Exploration Production Operating Company Limited which is expected to start in Vietnam in July 2024 for a firm term of approximately 16 months.
- In February 2024, the Baltic secured a new contract expected to start in April 2024 in Nigeria for a firm term of approximately 70 days.
- On March 1, 2024, the Company executed an agreement related to the revolving credit facility that increases the total facility size from $125.0 million to $150.0 million.
- Financial guidance for full year 2024 is included in '2024 Financial Guidance' section of the Q4 2023 results highlights presentation on our website.
Fourth Quarter Results
Adjusted revenues were $238.8 million in Q4 2023 compared to $264.2 million in Q3 2023. The $25.4 million (10%) sequential decrease in revenues was primarily due to lower effective utilization across the fleet, as four fewer rigs were operating for the full quarter of Q4 2023, as well as a decline in other revenues as one rig in Norway completed its bareboat charter contract in Q4 2023.
Effective utilization decreased to 85% in Q4 2023 from 90% in Q3 2023, primarily due to the contract preparation project for one rig in India, the contract completion of one rig in West Africa in September 2023 and planned out of service for two rigs in Saudi Arabia, partially offset by the commencement of new contracts for three rigs in mid-Q3 2023 in West Africa, United Kingdom and Italy, and for one rig in India in Q4 2023. Average earned dayrate decreased to $80.2 thousand in Q4 2023 from $81.5 thousand in Q3 2023 mainly due to lower revenue contribution for two rigs in West Africa.
Total operating and maintenance expenses increased by $6.0 million (5%) in Q4 2023 to $134.9 million compared to $128.9 million in Q3 2023. The sequential increase was primarily due to higher shipyard costs for one rig in India ahead of its new contract commencement expected in March 2024, higher demobilization costs for two rigs in West Africa, one that completed its contract in September 2023 and one rig that commenced a new contract in October 2023, and higher demobilization and maintenance costs for one rig in Norway which completed its contract in Q4 2023. This was partially offset by lower maintenance costs for one rig in the United Kingdom that started a new contract in Q3 2023 and lower expenses for fleet spares.
General and administrative expenses decreased by $6.6 million in Q4 2023 to $13.6 million as compared to $20.2 million in Q3 2023. The sequential decrease was primarily due to the $5.7 million provision for credit losses recorded in Q3 2023, primarily at SDNS.
Adjusted EBITDA for Q4 2023 was $88.0 million compared to $114.8 million for Q3 2023. The adjusted EBITDA margin of 37% for Q4 2023 decreased from 43% in Q3 2023.
Capital expenditures and deferred costs of $47.6 million in Q4 2023 increased by $12.8 million from $34.8 million in Q3 2023. This increase was primarily related to higher spending for two rigs in Saudi Arabia undergoing out of service projects in Q4 2023, one rig in India preparing for a new contract and higher spending on fleet spares. This was partially offset by lower spending for one rig each in Italy and India which started their new contracts in Q3 2023 and early Q4 2023.
Q4 2023 ending cash and cash equivalents balance of $98.2 million decreased by $46.5 million from $144.7 million at the end of Q3 2023. The Q4 2023 ending cash and cash equivalents balance for SDNS was $27.7 million, leaving $70.5 million of cash and cash equivalents for SDL excluding SDNS. The decrease in cash and cash equivalents was primarily due to the successful completion of the comprehensive debt refinancing transaction and a sequential decrease in EBITDA, partially offset by a favorable impact from changes in net working capital.
The Form 10-K Equivalent, which includes the Consolidated Financial Statements, and a corresponding slide presentation to address the results highlights for Q4 2023 are available on the Company’s website.
Source: Shelf Drilling
