Good afternoon, and welcome to the presentation of Akastor's second quarter results for 2022. My name is Øyvind Paaske, CFO, and with me, I have our CEO, Mr. Karl Erik Kjelstad. Also, we are happy to have with us from Houston, HMH team, represented today by Mr. Pete Miller, CEO and Chairman, Mr. Tom McGee, CFO, and David Bratton, VP Finance. HMH team will later take you through HMH's second quarter results. Towards the end of the presentation, we will open for questions through the webcast solutions. Please note that questions can be posted at any time during the presentation and preferably as early as possible in order to make sure we receive the questions in time. I will now leave the word to Karl for the key business highlights. Please, Karl.
Thank you, Øyvind. Firstly, thank you to all for listening to this presentation of our second quarter earnings. Let's move to slide two. Key value indicator for Akastor is the value of each of our investments. The majority of our investments today are held through partner investments together with different partners. The value for investments for the second quarter is illustrated here to our net capital employed. As you can see from the overview, on this slide, the net capital employed active value of Akastor by the end of the quarter was approximately NOK 16 per share. That is an increase of NOK 1 per share since the previous quarter.
That is mainly driven by FX effects most, since most of our holdings are denominated in U.S. dollars. Following the establishment of HMH in 2021, Akastor became an investment company with limited upstream cash flow. We depend on realization of assets to provide positive free cash flow. As there were no realization in the second quarter, our net interest-bearing debt increased during the quarter to NOK 1.329 million. Roughly half of this increase in the net interest-bearing debt was related to non-cash effects. HMH continues to be by far our most valuable investment.
The book value for our shareholding in HMH is equal to 50% of the book equity value of HMH at the close of the transaction last year, and that's NOK 3 billion as per the end of the quarter, and that's similar to NOK 10.7 per Akastor share. HMH showed good growth in the activity in the quarter and growth quarter-over-quarter, and we remain positive regarding the outlook for HMH business going forward. We expect that activity will increase, especially through the second half of 2022, with a strong momentum into 2023, driven primarily by an expected increase in the service activity. AKOFS Offshore delivered good operational performance and revenue utilization for all three vessels in the quarter.
Also in the quarter, AKOFS Seafarer concluded the yard stay to prepare the Seafarer vessel for coiled tubing operations, and later in the quarter, performed the first ever coiled tubing operation for a monohull vessel. The operation was safe and successfully performed early June at the Norne field in the North Sea, confirming the strong value proposition that Seafarer vessel is offering to its clients. We see this as a great achievement for AKOFS and also a manifestation of the capabilities of the AKOFS team. AKOFS Wayfarer was in the quarter selected by Petrobras for a new four-year contract with Petrobras, expected to commence after the current five-year contract ends. Formal documentation and approvals remain, and we will revert once this is in place.
We continue also to be very pleased with the NES Fircroft performance and the company is continuing to demonstrate its attractive business model with a strong and robust growth continuing also in the second quarter. In the quarter, we also bought out the banks from the so-called profit split of the DDW Offshore vessel, Skandi Peregrino. After this, DDW also holds the full economic exposure toward that vessel. We believe that this will be a positive for the DDW asset values in this segment, since this segment has continued to enhance values. Our equity story remains. Today our shares trades with a discount of close to 60% compared to our book values. At the same time, we see signs of more positive market development for all portfolio companies.
With that, I am pleased to introduce HMH Chairman and CEO, Pete Miller, that also in this quarter will take you through HMH second quarter earnings and key priorities going forward. Pete, the word is yours.
Thanks, Karl Erik. I appreciate it. Thanks everybody for listening in to this call this morning. I wanna make a few general comments about the HMH business, and then I'll turn it over to Tom McGee, our CFO, to take you through some of the numbers. In general, we're very pleased with the direction the business is heading. We're seeing a lot of green shoots. We're seeing a lot of rig reactivations. We're excited about that. We think the integration of the two companies is going well. One of our big challenges is our ERP system, and we think that's going to come online here very soon. We're excited about the potential that that's gonna give us for the company. It really is helping to bring a lot of the organization together right now.
One of the things that we did do this quarter is we divested ourselves of our Frontica Engineering group, and that was sold to Aker Solutions. This is a great group of people, great group of engineers, but it really wasn't core to what we were doing, and we think they found a great home in Aker Solutions. We'll continue to use them as projects arise, but again, it being a pure engineering group, it really didn't fit with what we were trying to accomplish. We're excited for them, and again, it's a great group of people. We think the rig reactivations are going to continue, and they're a great source of revenue for us, as you'll see as we go through some of the numbers.
Again, the information and the vibes we're getting from our customers and our customers' customers show that, there's gonna be a continued resurgence in this industry, over the next couple of years at a minimum, and I think quite frankly, it'll go a lot further than that. You can see it when we talk about our order intake, and we'll get to that in just a minute. At this time, I'd like to turn it over to Tom, and he'll take you through some of the financial highlights of the last quarter.
Thank you, Pete. I think looking first, let's hit the termination of the Valaris 20,000 psi BOP project. I'm gonna read you very quickly what our customer said in regards to that project. As a result of the contract termination, Valaris will receive an early termination fee that is more than sufficient to cover expenses and commitments incurred by Valaris on the project. We make the same statement in regards to HMH. Secondly, to quote their CEO, "While we are disappointed that this contract has been terminated, the floater market and day rates have improved meaningfully since this contract was entered into in July of 2021. We expect there will be other attractive projects for a high-specification drillship like Valaris DS-11 with similar earlier commencement dates." We are tied together with our customer on that statement.
The reason I mention that is it did have an impact on the quarter, a positive impact, a one-time impact. Without going into the details, we cannot reveal due to customer sensitivity. I will say that if you were to look at Q2 2021- Q2 2022, that increase of NOK 19-NOK 31, absent this termination, had the project continued as planned, we would have seen year-over-year growth in EBITDA. It's consistent with that. We'll talk a little bit more on the order rate, and I'm gonna table that till we get into the specifics, particularly about aftermarket, 'cause really that's the story there, and it's a very positive story.
On the free cash flow, I think it's important, and you guys know that we've been, you know, backing out one-time expense was really IT. We talked about the ERP project. We continue to spend a lot on that to get that stood up and to get that unified across the organization. Even though it is adjusted for that, cash flow is not. That's one reason you see volatility in cash flow. The other reason is because of the project, you know, the some of the project payments. It's not really the aftermarket, it's really the projects. You do see some working capital volatility over the last couple of quarters. That said, we had a good solid cash flow quarter, even including a lot of the one-off expense we had on IT.
I think go to the next page, please. Can we flip to the next page, please? Thank you. Oh yeah, I think the story, and Pete may wanna add some color here, after I say it, but I think look at this middle chart, you really see the story. We're having exceptionally strong order rates for the aftermarket business. As we said on the last call, you look at a, you know, six to nine-month conversion cycle on those. If you're looking forward, we obviously feel very good about what's coming. We do see that, you know, these order rates are starting to break some of the traditional seasonal patterns. I think it's true underlying growth and green shoots in the industry.
It's really the place you're starting to see it in our results, not yet in the P&L. It's in the order rates, and we expect those to convert over the next 12 months into a higher base revenue. I don't know if you have any color.
Yeah. I might add a little bit on that. You know, it's as we go back over the last couple of years, the real strength has been in the harsh environment market, and it's Norway predominantly in the North Sea. But what we're seeing now is strength throughout the world. I mean, we're seeing it all over. I think in particular, Brazil has turned very hot. Where even the U.K. sector of the North Sea is much more active. You're seeing it everywhere, the Gulf of Mexico, West Africa. This is really a broad, very broad-based improvement in the business, and that's really beneficial to us as we're worldwide, and we've got operations everywhere and can take care of these rigs wherever they go.
I think that's one of the positive things that we're seeing right now. It's not a one-trick pony. It's really business is doing great all over the world.
I think that, you know, on the product side, we actually had to adjust, you know, for the Valaris 20,000 psi project. I will say, without getting into specifics, we feel good about the second half of the year on a product order basis. We can't say more than that now, but we definitely would say that we have a good outlook. Next page, very briefly, just talk about net interest-bearing debt. I think the point. Couple points here. One is we continue to pay down the term loan to the bank. Revolving credit facility remains undrawn, and we have ample liquidity, so we're very happy with the way the year has played out on the capital structure side of things. Next page for Pete.
Yeah. Finally, you know, just to kind of a summary in the outlook. It's really what I've talked about before. Again, we're feeling very bullish about the market at this point in time. I was in an IADC meeting in France a couple of weeks ago and made a presentation there, and all of the contractors that got up to talk were very bullish. This isn't me saying it, you know, I'm getting it directly from like the CEO of Transocean, the CEO of Polaris, other people. Seeing a lot of positive things in that regard. I think the one bullet point I wanna point out here, though, is as you know, you know, the end game for us is an IPO.
We are working very diligently to be prepared for that. I think as we get into 2023, we will have all the systems and the situation in place to be able to do an IPO, given what the equity market might look like at that point in time. We're excited about where we're going. The two companies have come together very, very well. A lot of good things happening out there and we look forward to having improving results as we move through the next year. At this time, I'll turn it back to Karl-Erik and Øyvind, and then we'll be here for questions that you might have later. Thank you.
Thank you, Pete. I will then take you through the financials for Akastor, and starting then at slide nine with the financial highlights. Again, please note that our JV holdings, HMH and AKOFS, are not consolidated into our group financials, and thus our consolidated revenue and EBITDA only represents a very minor part of our total net capital employed. In Q2, AGR delivered a strong quarter, yet again driven by the Norwegian consultancy market. Total revenues ended at NOK 193 million, with an EBITDA of NOK 15 million. Adjusted for the specific effects related to the creation of the Føn Energy Services booked in Q1, both revenues and EBITDA in AGR in Q2 was above previous quarter and last year.
DDW Offshore, included under other, delivered revenues of NOK 20 million in the quarter, down from NOK 65 million last year, explained by the financial lease effects related to the agreements with OceanPact booked last year. DDW Offshore contributed negatively with NOK 4 million in EBITDA in Q2, improved compared to Q1, but lower than last year, again due to the OceanPact effects. Corporate costs in the quarter included around NOK 10 million in costs related to the DRU arbitration process. With that, our consolidated revenues and EBITDA for the period came in at NOK 260 million and negative NOK 17 million, respectively.
Our JV holdings, as Pete and Tom has already been through, HMH delivered good numbers, compared to both previous quarter and last year, with an EBITDA then of $31 million in the period, adjusted for specific integration cost of around $9 million, and then including the positive accounting effects related to the Valaris termination fee. Activity in HMH is then expected to increase going forward. For AKOFS Offshore, they delivered a solid operational performance on all vessels in Q2 and increased revenues and earnings compared to Q1. Total revenues for Q2 ended at $40 million in the quarter, up compared to previous quarter and in line with last year. EBITDA ended at $15 million. Seafarer was at the yard from start of the quarter until mid-May related to the mobilization for the coiled tubing, reducing then revenue utilization in the period.
However, as Karl mentioned, we are happy to see that AKOFS Seafarer, after that yard stay, has been delivering coiled tubing operations to the great satisfaction of the customer and at very high utilization rates. The coil tubing equipment will be demobilized in July, and the vessel will then return to normal well intervention assignments. Looking forward, for AKOFS Offshore, Skandi Santos went to dock in July in order to prepare for the new contract with Petrobras, expected then to commence in December this year, which will affect utilization of this vessel in Q3. The other two vessels remain in normal operations for the rest of the year, with only then the short yard stay in Q3 for AKOFS Seafarer to demobilize coil tubing.
If we turn to the next page for a further look at our consolidated P&L, focusing here on our net financial items that came in positive NOK 117 million in the period. Under net financials in Q2, the preferred equity instrument in Odfjell Drilling contributed positively with NOK 90 million, including a negative non-cash effect of NOK 7 million related to valuation of the warrant structure. NES Fircroft contributed positively with NOK 27 million in the quarter, in line with previous quarters. HMH and AKOFS Offshore contributed negatively with NOK 18 million and NOK 50 million, respectively, equal then to 50% of the net income in the period. Net foreign exchange effects were positive with NOK 189 million in Q2, driven by the U.S. dollar NOK exchange rate that has increased significantly during the quarter, leading to positive accounting effects related to our dollar holdings.
Let's turn to the next slide for an overview of net debt in the period. You here see that our net bank debt increased by NOK 351 million during the quarter, driven by cash flow in period, but also then a non-cash foreign exchange effect of NOK 188 million. In addition to normal corporate cash flow, cash flow in the second quarter included funding of Aker in connection with the Seafarer yard stay, as well as the buyout of the mentioned DDW profit split related to one of the vessels. Also, certain transaction costs related to the HMH transaction that closed last year had a cash effect in Q2. Of our total reported net bank debt of NOK 1.7 billion, DDW Offshore constituted NOK 483 million per end of period, while AGR net debt was NOK 133 million.
Net interest-bearing debt per end of the quarter was NOK 1.3 billion, net of the interest-bearing positions towards Aker and HMH. Our receivable against Aker increased through Q2 as a result of the funding in period. In the second half of the year, in addition to normal corporate cash flow, we expect that additional funding of approximately $5 million to Aker will be required in connection with the Santos yard stay. On to the next slide for an overview of our financing facilities. With the effects mentioned on the previous slide, the draw on our corporate banking facility increased to NOK 1.1 billion per end of June, an increase of around NOK 300 million, of which NOK 140 million was non-cash and re-related to FX. There was no draw under the subordinated liquidity facility from Aker Holding AS.
Per end of the quarter, our undrawn corporate credit facility was NOK 0.3 billion, down compared to Q1 as a result of cash flow in the period. As Akastor today is an investment company with limited upstream cash flow from its portfolio companies, we then depend on realization of assets to reduce debt and improve liquidity. Going forward, we aim to re-increase the liquidity reserve through the realization of assets. In the short to medium term, however, an increase of financing facilities could be required, and Akastor has initiated the dialogue with its financial sponsors on this basis. With that, I will pass the word over to Karl again for the next section. Please, Karl.
Thank you, Øyvind. Let me try to round off this presentation with some reflection about our ownership agenda. On slide 14, you see an overview of our portfolio, and there is no change in that portfolio since the last quarter. Let's move to slide 15, where Pete has already gone through the operational highlights for the quarter. I would just like to mention that we are very happy with the outlook for the HMH business, and we believe that the company is well-positioned to take part in the upturn that we see driven by the increased focus on energy security worldwide.
As owners of HMH, our key focus is to support Pete and his team in the ongoing integration work, including realization both of cost and revenue synergies, and we are very happy with the progress and performance that Pete and the team is showing. The HMH core market is, as mentioned, improving, and it will be a key to ensure that HMH has the capacity and the capability to take part in the market upturn, both through organic growth but also through M&A. Also, as mentioned previously, together with our co-owner, Baker Hughes, and Pete and the management, we are targeting to make this investment liquid through an IPO. We'll do that as soon as the company is ready and of course, also subject that the market is offering interesting valuation for HMH.
Let's move to slide 16, which is covering AKOFS Offshore. A key objective for us in 2022 was to ensure award for a new contract for AKOFS after the current contract with Petrobras ends in December 2022. With the selection of Wayfarer for a new long-term contract in the second quarter, we are close to having ticked this objective off. By this, all AKOFS vessels will be on long-term contracts. That is an important prerequisite for exploring different structural solutions for the company going forward. Let's move to slide 17, covering NES Fircroft. NES Fircroft had, in 2017, about 6,000 contractors worldwide. This has grown significantly, and today we have 23,000 contractors worldwide, and the company is now the clear global leader within its niche.
However, the market still has potential for further consolidation and growth. We find NES Fircroft's growth within renewable business very interesting, but we also see that it's continuing with a strong growth in the oil- and gas-related businesses. Current trading is strong, and last 12 months earnings continued to increase month by month. In fact, earnings is up by more than 100% compared to last year, which we obviously are very happy with. Let's move to slide 18. Again, continued high activity level with consultancy driven by Norway, with a number of contractors close to all-time high. Also worth mentioning is that we also see high well management activity in Australia in the quarter. Our ownership agenda for Aker continue to be to profitably grow the business both organically and also through M&A. Finally, slide 19.
Here you see the illustration of Akastor roadmap related to realization of our investments, as we have presented earlier.
We continue to believe that realization of our financial investment will most probably come first, and we work on several initiatives in this regard. For example, realization of the Odfjell Drilling preferred equity. Realization of our industrial investment could require more structured solution, and we believe that such solution will become more and more available as the market continues to develop positively. For 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, we are through the presentation, and we will move over to a Q&A session. I believe we will pause for a minute or two in order for you to provide the questions. We pause.
Okay. We have received a question from Martin Kulsrud in Nordea that goes to the HMH management. It relates to the Valaris effects. In total, what were the termination fee of the Valaris 20,000 psi project? What were the expected quarterly EBITDA contribution from this contract? Maybe Tom or Pete, could you please comment on that?
I would circle back to the press release that I read and reference our customer's press release. We can't say more due to the customer situation. That's all we're allowed to say.
Okay. With that, as we haven't received any additional questions, I believe we are through. I would like to thank you all for your attention, and we wish you a good day and welcome you back to our presentation of the third quarter results on October twenty-seventh. Thank you very much.