Good afternoon, and welcome to the presentation of Akastor's first quarter results of 2022. My name is Øyvind Paaske, CFO, and I have with me Mr. Karl Erik Kjelstad, Akastor's CEO. Also, we are happy to have with us from HMH Mr. Pete Miller, CEO and Chairman, and Mr. Tom McGee, CFO, as well as Steven Brooks, Director of Finance. As usual, we will take you through the presentation that has been uploaded to our webpage this morning. Karl will start by presenting the key highlights of Akastor before Pete and Tom and Steven will take you through HMH's first quarter results. I will then present the financials before Karl will wrap it up. After this, we will open for questions through the webcast solutions.
Questions can be posted at any time during the presentation, and preferably as early as possible in order to make sure we receive your postings in time. I will then leave the word to Karl for the key highlights of the quarter. Please, Karl.
Thank you, Øyvind, and thank you for listening to this presentation of Akastor's first quarter 2022 earnings. Let's get started on slide two. As you might recall from our fourth quarter earnings, Akastor's capital employed is now mostly held in JVs and financial holdings that are not consolidated into Akastor group financials. The key value indicator for Akastor is thus that the value of each holding, illustrated on this slide through our net capital employed. As you see from this overview, the net capital employed and the equity value of Akastor was per end of the first quarter 2022 in line with the fourth quarter 2021. The value of our shareholding in HMH is equal to 50% of the book value of HMH.
HMH continues to be, by far, our most valuable investment with a book value of 9.5 NOK per Akastor share. HMH had a somewhat soft first quarter, mainly due to seasonality, and that first quarter is normally a slower month for the service business. We expect that activity will increase going forward, especially through the second half of 2022, with a strong momentum into 2023. In January, HMH successfully secured a bond loan of $150 million, with the proceeds used already to refinance the bridge loan facility that was established at the establishment of HMH in October 2021. AKOFS Offshore delivered a good revenue utilization for all vessels in the quarter, despite some downtime related to COVID-19 outbreaks.
Further, the tender process for renewal of the Aker Wayfarer contract that ends in December 2022 is progressing. Aker Seafarer started in late March a 48-day planned yard stay to expand its service offering with Equinor and is expected to be back in operation in May. This is affecting revenue utilization during the planned yard stay since the charter rate is reduced to 50% during the yard stay. We continue to be very pleased with the NES Fircroft performance and the company is continuing to demonstrate its attractive business model with a strong robust growth also in the first quarter. Strong growth in the renewable segment continued also in the first quarter. During the first quarter, Odfjell Drilling contemplated split of the company, spinning off the well service business into Odfjell Technology that is now listed on Oslo Stock Exchange.
Akastor's exposure after the split to both the preferred shares and the warrant instrument is towards the drilling company, Odfjell Drilling, solely. The so-called DRU arbitration is progressing according to plan, and arbitration proceeding is now formally scheduled and set in February next year. The outcome is expected during the first half of 2023. Akastor's equity story remains. Today our shares trades with a discount of about 60% compared to the book values and in time at the time where we see more positive market development for all of our portfolio companies. At the same time, our track record from previous divestment shows that we have realized our holdings at attractive terms.
With that, I'm happy to introduce HMH Chairman and CEO Pete Miller that will take you through the HMH first quarter earnings and key priorities going forward. Pete, please, the word is yours.
Okay. Thanks, Karl-Erik. Thanks everybody for calling in on this call today. I wanna make a couple of macro comments, and then I'll turn it over to Tom to dive into the numbers a little bit. First off, as Carl-Erik said, the first quarter was a little soft, due predominantly to seasonality. The thing that I really wanna emphasize today are the green shoots that we're seeing in this business. Offshore is showing very good signs of life. One of the benchmarks that I use when I talk to people about this is Transocean recently put a rig to work for $395,000 a day, which they announced in the Gulf of Mexico.
While that's a little bit lower or substantially lower than what it would have been at the height of the boom in 2014, the fact of the matter is that at $395,000, they've lowered their cost so much that they're almost getting the same free cash flow. I think that's a good indicator, and many of our customers are talking about bringing some rigs out of warm stack, obviously, but even some out of cold stack to put to work. As you look at the activity rate for a lot of the floaters is starting to surpass the 80% level, which is really where the pricing mechanism switches over to the contractors. We're very excited about what's going on there.
Same thing to a certain extent, while our business is integrated land, we're seeing a lot of land green shoots as well, both in the Middle East, North Africa and in the U.S. basins, in Colombia, places like that. We think that overall on the macro basis, the winds at our back. This has obviously manifested itself when you look at the oil and gas prices. You know, oil today has stayed over $100 a barrel, and those of you that live in Europe understand what's happening in the gas business and what's happening with LNG. You know, one of the things that I emphasize to everybody around here, I'm not sure we're in the oil and gas business as much as we're in the gas and oil business right now.
I think people are again starting to realize that natural gas is going to be the bridge fuel to the energy transition, and it's not going anywhere fast. I'd also like to say that one of the things that we've discovered, especially since the Ukraine situation started, is the new mantra in our business is energy security. It's no longer, "Hey, what are we gonna do over here? How are we gonna replace this?" Everybody's starting to understand we need to have energy, and if we're going to have vibrant functioning economies, we need to keep energy, and I think that's playing well into what we're doing. We feel good about the combination so far, and I'll come back to that in a little bit.
At this time, though, I'll turn it over to Tom to look at the numbers.
Okay. Thank you, Pete. You said revenues up year- over- year, down sequentially due to seasonality. Margin a little bit lower primarily due to mix. When you look at the order intake and equipment backlog continue to be strong, and we'll touch on that when we talk about services in particular because I think it'll tie this together nicely. Free cash flow primarily due to the supplier payments for projects. We got a lot of payments in Q4 related to a couple projects. Some of that flowed out, and there continues to be noise with the Valaris, you know, 20K BOP project and the China Merchants drill ship. You're gonna continue to see some volatility, short-term volatility in working capital.
Getting to the next page I think is really where we can tie this together, and that's. You look at the order rate on aftermarket services in 3Q 2021. You got about a six-to-nine-month conversion cycle from order to revenue and profit. You know, I would point to that, and you saw some seasonality, like we said, but also some supply chain and stuff pushed out starting in Q3 that's coming back now. You look at the order rate we had this quarter at 133 on the aftermarket side. That will start to show up, you know, in the second half of this year. We see very good progress, and it's something that was not unexpected to see Q1 look like this.
Candidly, the order rate in Q1 on aftermarket exceeded our expectations, so we continue to see very good things happening in the back half of this year. Specifically, I don't know if you wanna add any of the specific reactivations you wanna highlight or-
Yeah, I think I'll just add a couple of things to what Tom said. You know, when you think about offshore business, well, let me contrast it with land because in the United States, if you decide you're gonna drill a land well, you're moving your rig within 10-15 days. Somebody out in Permian Basin says, "We're gonna sink a well." Good. Let's get a rig. Let's go out there. Boom. You're ready to go. Offshore is totally different. As Tom just pointed out, you know, you're talking about six to nine months. I talked about that $395,000 a day for Transocean. That rig will not go out until late Q3, Q4.
We're getting orders for things to go on rigs like that right now, but at the same time, it doesn't happen. If you look at the middle graph right here, the order intake, you'll see in the third quarter, it was a soft quarter for us, and that manifests itself in the revenues in the first quarter of this year. The fourth quarter and the first quarter of 2022 is much stronger. When you see that first quarter of 2022, that will start to manifest itself in our numbers in the third quarter of 2022, fourth quarter of 2022. That's kind of the dynamics of this business. The good news is it's getting better.
The interim news is we wish it would get better faster, but we feel very good about where we are. Tom, why don't you go through the debt?
All right. Thank you. To go to the next slide, very quickly, Karl-Erik really already mentioned this. You know, we took the $150 million bridge, refinanced it, three-year note over there, and that was done in the first quarter. As we talked about, you know, a little bit of volatility on the cash side, given the projects that we're managing, but still very strong liquidity. We continue to have our revolving credit facility undrawn. We'll point out that that senior secured shorter-t erm loan is being amortized now at a little over $7 million a quarter. You'll see that come down over the course of this year. That's it.
If you look at the last page here on the summary and outlook, you know, again, as I've said, we're seeing green shoots. We feel good about where we are. We think there are gonna be more and more rigs picked up. I think the third bullet point right there, our DigiTech orders are really starting to come into focus. You know, a lot of people are understanding many of the things we're doing with ESG, which DigiTech really kind of plays into that. I wanna emphasize we feel very good about the integration of the two companies at this point in time. We're on schedule. We feel very good with what we're doing, and we do believe that by the time we roll into 2023, if the opportunity presents itself, we will be IPO ready.
That's a very brief and quick synopsis of what we're doing at HMH. As you can tell, we feel good about it. We're excited. We think the timing of putting these two companies together has been very good, and we look forward to the future and some of the things that are gonna happen the rest of this year. With that, Øyvind, I'll pass it back to you to go over the Akastor numbers.
Thank you very much, Pete. I will then take you through the quarter financial update, starting with slide nine, with the key financial highlights of the first quarter. Again, please bear in mind that our JV holdings, HMH and Aker Offshore, are not consolidated in our group financials, and thus, that our consolidated figures again represents only a minor part of our total net capital employed. AGR delivered a strong quarter, yet again driven by the Norwegian consultancy market, with total revenues ending at NOK 208 million and an EBITDA of NOK 35 million in the period. Both revenues and EBITDA in Q1 was positively affected by accounting effects related to the creation of Føn Energy Services joint venture, which was completed in Q1. Adjusted for this, EBITDA in Q1 was NOK 14 million, in line with the recurring EBITDA in previous quarter.
DDW Offshore, included on this slide under other, contributed negatively with NOK 6 million in EBITDA in Q1, affected by a delayed startup of a new contract for one of its vessels, which resulted in a period of standby mode in Australia at the high OPEX rate. Corporate costs in the quarter included around NOK 10 million in costs related to the DRU claims. With that, our consolidated revenues and EBITDA in the period came in at NOK 264 million and NOK 7 million respectively. Our JV holdings. As Pete and Tom has already been through, HMH delivered a somewhat lower quarter with regards to earnings compared to Q4 last year with then an EBITDA of NOK 13 million in the period, adjusted for specific integration costs of around NOK 6 million, illustrated here on this slide in NOK figures.
The run rate and margin is expected to increase in the second half of the year based then on, again, on assumed aftermarket activity pickup. AKOFS Offshore delivered a solid operational performance also in Q1. However, with around eight days of downtime on the Wayfarer vessel related to a COVID-19 outbreak on board. Also, Seafarer, as Karl mentioned, arrived at yard on the fourteenth of March for a 40-day mobilization for coiled tubing operation, which then reduced revenue utilization in Q1 somewhat. Total revenues thus ended at $35 million in the quarter, in line with previous quarter and around 13% higher than last year, explained mainly by improved utilization on Wayfarer, which was at yard for its five-year SPS in Q1 2021. EBITDA in Q1 2022 ended at $7 million for AKOFS Offshore, shown again here on this slide in NOK.
Over to the next slide for a further look at our consolidated P&L, focusing here on our net financial items. Under net financial items in Q1, the preferred equity instrument in Odfjell Drilling contributed positively with NOK 46 million, which included a positive non-cash effect of NOK 21 million related to the valuation of the warrant structure. NES contributed positively with NOK 26 million in the quarter, in line with previous quarters. Aker Offshore contributed negatively with NOK 49 million under net financials, equal then to 50% of the net income in the period. HMH contributed negatively with NOK 99 million under net financials, representing 50% on net profit in the quarter, but also included approximately $4 million in a non-cash accounting effect related to 2021 tax cost, identified as part of the annual audit completed in Q1 this year.
If we then turn to the next slide for an overview of net debt movement in the period. You here see that our net bank debt increased by NOK 84 million during the quarter, driven by cash flow in the period. Of our total reported net bank debt of NOK 1.4 billion, DDW Offshore constituted NOK 446 million per end of Q1, while AGR net debt was NOK 130 million. Net interest-bearing debt per end of the quarter was NOK 1.06 billion, including the net interest-bearing positions toward AKOFS and HMH. Over to the next slide for an overview of our external financing facilities. There has been no changes to this structure during Q1. The drawing under our corporate banking facilities was NOK 805 million per end of March.
There was no draw on the subordinated liquidity facility from Aker Holding AS. Per end of the quarter, our liquidity reserve through the undrawn credit facilities was NOK 0.5 billion. With that, I will pass the word over to Karl for the next session. Please, Karl. Karl ?
Thanks, Øyvind. Let me run through this presentation with some reflection about our ownership agenda for the portfolio companies. First, on slide 14, we see our portfolio overview, and this is unchanged compared to the last quarter. Let's move to slide 21, HMH, where Pete has been through the operational performance and some views on the market outlook. Let me from the owner perspective add some comments. That is that we are very happy with the outlook for the HMH business, and we believe that the company is very well positioned to take part in the upturn driven by the increased focus on the energy security situation worldwide. We expect high activity, especially from 2023 and onwards. This overview is driven by several factors.
One is dimension increased drilling activity, and right now 7th and 6th generation drill ships are practically sold out, and it's not that many stacked rigs available for the deepwater market either. Activation of these cold stacked rigs will normally take 12+ months. We also see that the jackup market is very strong, driven by the Middle East market that, again, give knock-on effects on other regions as well. The Norwegian harsh environment market is somewhat soft in 2022, but we expect this market to develop positively from 2023 and onwards due to the overall increased activity driven by the Norwegian tax incentive program for the new field development, among others. In addition, the current fleet rig, the rig fleet, with some few exceptions, are based on technology from the last new building boom.
Since then, a lot of new technology have been developed to ensure more efficient operations and reduce carbon footprint. The market for upgrades and implementation of new technology, as Pete mentioned, digital solution and so on, is therefore expected to contribute positively going forward. As owners of HMH, our key focus is to support HMH's management in ongoing integration work, including realization of both cost and revenue synergies. Akastor, together with our co-owner, Baker Hughes, and the management team, are targeting to make this investment liquid, as Pete mentioned, and we would like to do an IPO as soon as the company is ready and the equity market is offering interesting valuation for our HMH investment. Let us move to slide 16.
For AKOFS Offshore, a key objective for 2022 is to ensure the mentioned award of a new contract for Aker Wayfarer, where the current contract is ending at the end of 2022. A tender process with a similar scope as Wayfarer current contract was initiated by Petrobras in February, and the tender process is ongoing as we speak. If Petrobras keep its indicated timeline, we expect that result of that process will be ready before the summer. As mentioned, despite an excellent operational track record, high quality vessels and technology, AKOFS Offshore remain somewhat vulnerable with a fleet of only three vessels. We are therefore open to assess different structural options for the company, including different structural solutions with other players in the industry.
Let's move to slide 17 and some words about NES Fircroft. We continue to be very pleased with our ownership in NES Fircroft that we entered into in 2017. Since then, the company has grown from close to 6,000 contractors worldwide to about 22,000 contractors today. The company is today the clear global leader in this industry. However, the market still has potential for further consolidation and growth, and we find NES Fircroft's strong growth within the renewable segment particularly exciting. As illustrated in the graph on this slide, activity has increased significantly over the last 12 months, illustrated by the double-digit growth in the LTM revenues and combined with strong margin growth driven by successful integration with Fircroft. Last month, close to 50% of new contracts was within the renewable market that demonstrates NES Fircroft's strong position in the energy transition.
Slide eighteen. Aker continues to deliver strong underlying operational results, and the first quarter results were positively affected, as mentioned by everybody, Føn energy services joint venture that we established together with Aker Offshore & Marine. Føn is now up and running as an operational entity, and I will get back to you with some more details on the next slide. Our ownership agenda for Aker continues to be to grow the company in a profitable way, both organically and through M&A, as demonstrated by the Føn joint venture establishment. To slide nineteen and some few words about Føn. Føn aims to be a global service provider for offshore wind industry. Føn has from the start about 100 employees with a revenue of about NOK 100 million. That is a solid foundation for developing the company further.
We are targeting that Føn should become a global service provider within feed and operation and maintenance in offshore wind by leveraging on the strategic and commercial capability of its owners. We think that Føn is well-positioned to capitalize on the strong market fundamentals within the O&M market for wind and look forward to following their, Føn's journey going forward. Finally, on slide 20, you see the illustration of Akastor's roadmap related to realizing our investment, as presented earlier as well. We continue to believe that a realization of our financial investment will probably come first, as realization of our industrial investment probably will take some more time and could also require more structural solutions. Let me repeat to HMH, the clear target is to do a separate listing of the company as soon as the company is ready and the equity market is attractive.
With that, I think we are through the presentation, and we will move over to the Q&A session, and I think we will pause for a minute or two for you to provide your questions. Thank you for your attention.
Okay. We have received one question from Mr. Renlin Wang. I will leave that for the HMH team. Could you please provide a little more color on the service mix that's caused HMH EBITDA margins to be lower this quarter? Is this mix expected to persist? Tom or Pete, will you care to comment on that?
Go ahead.
Yeah, we don't expect it to persist. Again, there's some noise in regards to seasonality and, you know, kind of a one-quarter mix shift. We continue to think that it reverts to where we were before and, you know, indicative looking at the strong order rate in the quarter tied with expectations that it normalizes.
Thank you. With that, we have not received any other questions, so I would then just like to thank you all for listening in, and we wish you all a good day and welcome you back for our presentation of the second quarter results on July 14th. Thank you very much.
Thank you all.
Thank you.