Shelf Drilling has announced results for the third quarter of 2024 ended September 30.
Greg O’Brien, Chief Executive Officer, commented: 'During the third quarter of 2024, our Adjusted EBITDA increased to $114 million, primarily due to the acceleration of mobilization revenue for two suspended rigs in Saudi Arabia. As anticipated, we were impacted by a lower level of utilization with a few rigs preparing for new contracts.'
O’Brien added: 'Since the end of the second quarter, we have achieved several important milestones. We secured firm contract awards totaling $558 million across West Africa, Southeast Asia and the North Sea, which included a multi-year contract which commenced in late October 2024 for one rig redeployed from Saudi Arabia to West Africa, where we see additional attractive opportunities for our rigs. We received regulatory approval for the Shelf Drilling Barsk to return to operations and commence its long-term contract in Norway as well as closed the sale of the Baltic. Lastly, in October, we successfully completed the acquisition of Shelf Drilling North Sea, which simplifies our capital structure, improves our cash flow profile and significantly enhances our fleet composition on a fully consolidated basis. While the rig suspensions in Saudi Arabia have created some short-term challenges and uncertainty, we are confident that our strong customer relationships, proven operating track record and leading position in key markets will allow us to capitalize on the right long-term opportunities in our sector.'
Third Quarter Highlights and Subsequent Events
- Q3 2024 adjusted revenues of $264.7 million, including $45.2 million for the acceleration of mobilization revenue on two suspended rigs in Saudi Arabia related to future years.
- Q3 2024 adjusted EBITDA of $114.2 million, representing an adjusted EBITDA margin of 43%, including $(4.9) million adjusted EBITDA from Shelf Drilling (North Sea), Ltd. ("SDNS") and $119.1 million from the rest of the business.
- Q3 2024 net income attributable to controlling interest of $67.5 million.
- Q3 2024 capital expenditures and deferred costs totaled $34.9 million, including $9.2 million at SDNS.
- The Company’s cash and cash equivalents balance at September 30, 2024 was $220.1 million, including $26.6 million at SDNS.
- In September 2024, the Company sold the Baltic rig for total net proceeds of $56.5 million.
- In September 2024, the Company secured a contract for the Shelf Drilling Mentor covering 10 wells and an estimated duration of 450 days in direct continuation of its current contract in Nigeria.
- In October 2024, the Company obtained the regulatory approvals for the Shelf Drilling Barsk rig in Norway, and the contract is expected to commence in November 2024.
- In October 2024, the Company acquired the remaining 40% shares in SDNS by issuing 42.0 million shares of SDL stock and cash of $30.1 million to previous SDNS shareholders. SDNS has become a wholly owned subsidiary of SDL upon completion of the transaction. Total SDL issued and outstanding common shares at the completion of transaction are 255.7 million.
- In October 2024, a $50.0 million settlement and release agreement was signed with the insurance underwriters declaring the Trident VIII rig a total loss.
- Subsequent to September 30, 2024, the Company secured the following new contract awards and extensions:
- Three-year contract, with a two-year option for the Shelf Drilling Achiever which commenced in late October 2024.
- Two-year contract extension, with a one-year option for the Adriatic I rig expected to commence in February 2025.
- Two-year contract extensions commencing in H2 2025 in Thailand for the Shelf Drilling Chaophraya and the Shelf Drilling Krathong, in direct continuation of their current contracts.
- Financial guidance for the full year 2024 revised; details are included in the "2024 Financial Guidance Revised" section of the Q3 2024 results highlights presentation on our website.
Third Quarter Results
Adjusted revenues were $264.7 million in Q3 2024 compared to $230.8 million in Q2 2024. The $33.9 million (15%) sequential increase in adjusted revenues was driven by the acceleration of mobilization revenue on two rigs for which operations were suspended in Saudi Arabia, partially offset by lower effective utilization.
Effective utilization decreased to 77% in Q3 2024 from 80% in Q2 2024, primarily due to the suspension of five rigs in Saudi Arabia, planned maintenance and shipyard for one rig in Saudi Arabia and the sale of one rig in September 2024 previously operating in West Africa. This was partially offset by the commencement of a new contract for one rig in Vietnam in August 2024. Average earned dayrate marginally decreased to $81.8 thousand in Q3 2024 from $82.0 thousand in Q2 2024.
Total operating and maintenance expenses decreased by $9.2 million (6%) in Q3 2024 to $132.6 million compared to $141.8 million in Q2 2024. The sequential decrease was primarily due to lower operating costs for four suspended rigs in Saudi Arabia, two rigs in West Africa, one that suffered structural leg damage and one that was sold in September 2024, and lower shipyard costs for one rig in Vietnam that commenced operations in Q3 2024. This was partially offset by higher mobilization costs for one rig which commenced a new contract in West Africa in late October 2024.
General and administrative expenses increased by $0.4 million in Q3 2024 to $16.6 million as compared to $16.2 million in Q2 2024. The sequential increase was primarily due to a net increase in provision for credit losses and certain one-time costs related to the SDNS merger transaction, partially offset by a decrease in compensation and benefit expenses.
Adjusted EBITDA for Q3 2024 was $114.2 million compared to $71.5 million for Q2 2024. The adjusted EBITDA margin of 43% for Q3 2024 increased as compared to 31% in Q2 2024. The significant increase in Adjusted EBITDA resulted primarily from the acceleration of mobilization revenues on two suspended rigs in Saudi Arabia.
Capital expenditures and deferred costs of $34.9 million in Q3 2024 decreased by $3.1 million from $38.0 million in Q2 2024. This sequential decrease was primarily due to lower contract preparation expenditures for one rig in Vietnam which commenced a new contract in Q3 2024 and one rig in Norway expected to commence a new contract in November 2024 and lower spending on fleet spares. This was partially offset by higher contract preparation expenditures for one rig in West Africa and one rig in the United Kingdom that commenced new contracts in September 2024, higher spending for one rig in West Africa expected to start operations in December 2024 and planned maintenance and shipyard costs for one rig in Saudi Arabia.
Q3 2024 ending cash and cash equivalents balance was $220.1 million. The increase of $81.8 million from $138.3 million at the end of Q2 2024 was primarily due to the receipt of net proceeds of $56.5 million for the sale of the Baltic rig and lower debt service payments in Q3 2024.
The Form 10-Q Equivalent, which includes the Condensed Consolidated Financial Statements, and a corresponding slide presentation to address the results highlights for Q3 2024 are available on the Company’s website.
Source: Shelf Drilling
