Good afternoon, and welcome to the presentation of Akastor's Third Quarter Results for 2022. My name is Øyvind Paaske, CFO in Akastor, and together with me is our CEO, Mr. Karl Erik Kjelstad. Also, we are happy to have with us from HMH in Houston, represented today by Tom McGee, CFO, and David Bratton, SVP of Finance, who will later take us through HMH's third quarter financials. As a reminder, we will, as usual, open for Q&A through the webcast solution towards the end of the presentation. 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 them in time. I will later take you through our financials, but first I will leave the word to Karl for the key highlights. Please, Karl.
Thank you, Øyvind, and thank you to all for listening in to this presentation of our third quarter earnings. Let us start on slide number two. The key value indicator for Akastor is the value of each of the investments we have. The majority of these investments today are held through joint ventures with different partners. The value of our investments for the third quarter is illustrated here through our net capital employed. As you see from this overview, the equity value of Akastor by the end of third quarter was approximately NOK 16 per share, and that is in line with the second quarter. On October 1st, we celebrated the one-year anniversary of the establishment of HMH, where Akastor has a 50% shareholding.
Following this establishment, Akastor is an investment company with limited upstream cash flow from our portfolio companies, and we depend on realization of assets to provide positive free cash flow. There were no realizations in the third quarter, our net interest-bearing debt increased during the quarter with NOK 123 million to NOK 1.45 billion. Most of this increase in our net interest-bearing debt was related to non-cash effects. HMH continues to be our by far most valuable investment, and the book value of our shareholding in HMH is equal to about 50% of our net capital employed. HMH had a value of about NOK 3 billion by the end of the quarter, and that corresponds to NOK 11.1 per Akastor share.
HMH delivered a strong year with a year-to-year EBITDA growth, and we remain positive regarding the outlook for the HMH business going forward. We expect that the activity will increase with a strong momentum into 2023, driven primarily by an increased rig activity. In the quarter, HMH acquired all shares in Electrical Subsea & Drilling, or also called ESD. HMH had for several years been a shareholder in ESD with a shareholding of 20% before this transaction. ESD develops technology for electric blowout preventers and rotating control devices for riserless drilling and also for managed pressure operations. ESD technologies are beneficial in terms of weight and space reduction that contributes to a lower overall carbon footprint for drilling, which is a very important goal for HMH.
AKOFS Offshore delivered a good operational performance and revenue utilization for all vessels was high in the quarter. Aker Wayfarer secured a new four-year contract with Petrobras in the quarter, and it expected to commence on this new contract after the current five-year contract ends, first part of 2023. We continue also to be very pleased with NES Fircroft performance, and the company is continuing to demonstrate its attractive business model with a strong and robust growth continuing in the third quarter. In the quarter, NES Fircroft also raised a $300 million Nordic bond that provides a financial framework for continuous growth going forward. In the quarter, DDW Offshore secured a one-year contract for the Skandi Atlantic vessel with Petrofac in Australia. By this, only one of the five DDW Offshore vessels is without contract. Akastor equity story remains.
Today, our shares trades with a significant discount compared to book values at a time where we see positive market development for all our portfolio companies and all our portfolio companies deliver solid performance and growth. At the same time, our M&A track record from previous transactions shows that we have realized our holdings at attractive terms with investments done above book values. That is our simple equity story. With that introduction, I'm pleased to introduce HMH CFO and EVP Thomas McGee that will take us through HMH third quarter earnings and key priorities going forward. Tom, please, the word is yours.
Yeah.
Tom, are you there?
Now we're here. Good morning. You thought we'd figure that out by now. As Karl Erik said, we had a good quarter. So you know, we continue to see very positive tailwinds in our industry. When you look at the drilling contractors and, you know, look at the day rates that they're receiving today on what is a lower cost base than they had five or six years ago. We see a lot of really positive signs from our customers. You're seeing rig reactivations continue. Those conversations are continuing. We're you know, as opposed to a year and a half ago where we told you that no cold stacked rig would ever come back, we think there's the possibility that those rigs will come back into service.
We continue to see a lot of strength from our customer base on rig reactivations. We continue to expect that will continue the rest of this year. While we had a strong book-to-bill, we did have an ERP implementation that went live on the business we extracted from Baker Hughes. That did cause some of our orders and deliveries to be pushed into the fourth quarter, and we expect to make that up, and David will cover that in a minute. I would also just set the backdrop on some of the offshore energy policy shifts that we're starting to see that we think are positive.
Obviously, as energy security continues to become a larger and larger issue globally, we expect to see more of what you see in places like the U.K., where energy policy starts to shift to be more favorable to our industry. As Karl Erik said, it's our one-year anniversary, or just was our one-year anniversary. I wanna touch on a couple highlights, and you've heard most of these before, but I just wanna kind of summarize the year for you, that we've had. I think first, and I think really significantly, was the first joint commercial win. You know, our legacy MHWirth, now ESS business, worked very hard to secure this project. It took extensive contract negotiations, to get this project with the Chinese.
When we closed HMH, we were able to pull the pressure control part of that project through in weeks. It really does speak to the power of the combination of the businesses, so we continue to be very proud of that. We placed a bond in Norway earlier this year. As you all know, we got that done very quickly. I think really to be proud of there is we at post-close, getting all the audits in place and getting the financing package in place in time to really hit the window before the market got really choppy. I think we're very proud of our efforts there, and we expect to list that bond really within the next couple weeks.
We merged our operations in places where we had overlap, U.S., U.K., Singapore and Brazil. Sitting here in the U.S., you know, we can really see that success on a daily basis of how we've been able to put these businesses together. As we talked about, you know, when you extract a business from someone like Baker Hughes, you have to stand up a corporate infrastructure on its own, and it can be challenging. We put our ERP system in place, went live, shipped a product at 9:00 A.M. the day after we went live. We're very proud of that effort. It leads to immediate cost savings.
We're now gonna transfer and unify the ERP system, bring ESS onto that system and really modernize it and refresh that whole system for the ESS side of the business. That puts us on track for synergies and the synergy targets that we've talked to you about in the past, and so we feel good, and we've got good line of sight on those synergy targets. Finally, as Karl Erik mentioned, we did our first acquisition, a small acquisition, but I think it can be very significant for us, going forward, on the floater and on the jackup side, in terms of Electric BOPs. I would flip to the next page.
I think most of you have seen this before if you've seen our bond presentation, but I just wanted to highlight something. Take a step back. Look, you know, vast majority of our business is offshore. It's oil and gas. We get it. We do have some other things going on. We've got some things we talk about that are more in the future, like subsea mining and offshore wind. We have something going on today that I just wanna highlight and spend a few minutes on. That's the slurry pumps. We have a market leadership position in this. We're one of a handful of companies that can produce a quality product in this space. Ultimately, these pumps are used to, for lack of a better description, mine for things that go into electric vehicles.
That's the easiest way to comprehend it. If you go to the next slide, just stepping back, why do we like this business? We've got a good install base. We've had some really significant project wins this year, but the tailwinds in this business are significant. When you look at base metal demand here, which I think everybody is aware of the trends there, but I think when you step back and look at the base metal demand and look at the number of mines required in order to meet that demand, we feel very good about our product. We also have an example here of where the organizations can effectively work together. Historically, Germany has not had a lot of presence in North America.
Our people here are working hard at pulling them through into the North American market and the South American market. I think it's also kind of an example of where the organizations have thrived together. Just wanted to touch on that real quickly as a non-oil and gas segment, and then pass it on to David, who will hit the highlights on our financial results.
Thanks, Tom. I'll begin with the total company results and then move into the segment details. Revenue for the quarter was NOK 160 million, up 18% year-over-year, driven by delivery of project and product backlog. Down 6% sequentially with specific termination effect in 2Q22, not repeating in the same extent in 3Q22. Adjusted EBITDA on the quarter was NOK 28 million, up 58% year-over-year, driven by increased volume and final termination related fees. It's important to note that excluding these fees, HMH's Adjusted EBITDA would still have shown improved EBITDA results of, on a year-over-year basis.
Adjusted EBITDA rate was 17.8% in the quarter, again, positively impacted by the final termination fees previously mentioned. Orders for the quarter were NOK 172 million, up 1% sequentially, with product orders offsetting services orders being pushed to fourth quarter due to ERP implementation and down year over year, driven by non-repeat of certain large product orders booked in the third quarter of 2021. Finally, on cash flow, free cash flow in the quarter was NOK 7 million, with NOK 54 million cash and cash equivalent on hand at the end of the quarter. Moving to the next page, I'll walk you through the segment results in more detail. In aftermarket services, revenue continued to increase sequentially despite ERP go-live limitations, and we again see an improved output in the fourth quarter.
Aftermarket order intake was up 6% year-over-year, driven by market tailwinds, but down 24% quarter-over-quarter. The sequential drop was driven by HMH's first wave of ERP implementation, in which we experienced a two-week system blackout and to undertake manual processes. We have line of sight for a rebound in aftermarket order intake in the fourth quarter. In projects, product, and other, revenue in the quarter was NOK 54 million, up year-over-year as we continue to execute on the GMGS project and down sequentially, driven by lower Valaris 10-K related fees and GMGS volumes.
Moving to the next page. On net interest-bearing debt, we ended the quarter with net debt of NOK 142 million. Leverage in the third quarter was below targeted capital structure at 1.4x, driven by strong performance on cash and EBITDA in the quarter. Overall, we're very pleased with the team's execution in the third quarter. With that, I'll turn the call back over to Tom.
Yeah, just to wrap up here, you know, strong quarter, feel great about the market. I think that where we are in the cycle, a couple points in cycle. One is we're in the cycle where as a management team, you have to shift. You're shifting over the course of the past year from survival to growth, right? I mean, things are good now. We have to embrace it, we have to be happy about it, and we have to lean forward and get excited. We're excited. We're shifting into growth mode. I think that's positive. We're also at the point in the cycle where our customers are talking about capital discipline and balance sheets and the rigs they have stacked that they're gonna bring back, and they're never gonna build a new build again.
That's kinda where we are in the cycle. I do think, you know, will that change? Yes. I think it will change eventually. I think right now, we're in this cycle of our customers reactivating rigs, our install base growing, selling discrete products to them, as they bring them back in service and continue to service our install base, as the market continues to strengthen. Again, we feel good about the future. We're happy with where we are, and with that, we'll pass it back to Akastor.
Thank you very much, Tom. I will now take you through the Akastor financials, starting then at slide 11 with the financial highlights. As before, please bear in mind that many of our holdings, including then HMH and AKOFS Offshore, are not consolidated into our group financials, and thus our reported group revenue and EBITDA only represents a very minor part of our total net capital employed. With that in mind, AGR delivered yet another strong quarter with positive year-on-year growth from both revenues and EBITDA. Total revenues ended at NOK 184 million, with an EBITDA of NOK 14 million. Activity level was slightly lower than previous quarter, explained mainly by seasonality and the holiday season. DDW Offshore, included here under other, delivered revenues of NOK 35 million in the quarter, increased both year-on-year and quarter-on-quarter, driven by increased utilization of the fleet.
DDW delivered a positive EBITDA of NOK 5 million this quarter, compared to a negative contribution in Q2. Corporate costs in the quarter included around NOK 8 million in costs related to the DRU contracts. With that, and including positive contribution also from cost absorption, our consolidated revenue and EBITDA for the period came in at NOK 251 million and - NOK 3 million, respectively. Our JV holding. As Tom and David has already been through, HMH delivered yet another good quarter with an EBITDA of $28 million in the period, adjusted for specific integration costs of around NOK 4 million. The results and intake then in the period affected by the ERP implementation already mentioned, with a catch-up effect expected in Q4.
For AKOFS, they delivered a solid operational performance on all vessels, also in Q3, with total revenues for Q3 for AKOFS ending at $37 million in the quarter, roughly in line with previous quarter, and an EBITDA at $12 million. During Q3, Seafarer was out of operations for a shorter period in connection with demobilization of coiled tubing equipment after having delivered a successful coiled tubing campaign for Equinor during the summer. The vessel has now returned to its normal well intervention assignments. Skandi Santos went to yard in July in order to prepare for the new contract with Petrobras, expected to commence in December this year. The two other vessels remain in normal operations through the rest of this year.
Over to the next slide for a further look at our consolidated P&L, focusing here on net financial items that came in at a net positive of NOK 104 million in the period. Under net financials in Q3, the preferred equity instrument in Odfjell Drilling contributed positively with NOK 27 million, which included a negative non-cash effect of NOK 2 million related to the valuation of the warrant structure. NES contributed positively with NOK 28 million in the quarter, in line with previous quarters. HMH and AKOFS Offshore contributed negatively with NOK 2 million and NOK 65 million respectively equal to then 50% of the net income in the period, plus a positive true-up effect for HMH related to previous periods following completion of the 2021 audit in Q3.
Net foreign exchange effects were positive with NOK 137 million in Q3, driven by the U.S dollar NOK exchange rate that further increased during Q3 and had positive accounting effects on our dollar holdings. Let us turn to slide 13 for an overview of the net debt movements in the period. You see here that our net bank debt increased by NOK 158 million during the quarter, driven primarily by non-cash foreign exchange effect of NOK 111 million included in the graph under other. Of our total reported net bank debt of 1.9 billion, DDW Offshore constituted NOK 521 million per end of period, while net debt in AGR was NOK 133 million.
Net interest-bearing debt per end of the quarter was NOK 1.45 billion, netted then against our interest-bearing positions towards AKOFS and HMH primarily. As also mentioned last quarter, funding of approximately $5 million to AKOFS is required in connection with the Santos yard stay and will have cash effect in the fourth quarter. Also, in addition to normal corporate cash flow, the guaranteed preferred return to Mitsui and MOL in connection with Aker's offshore divestment in 2018 will have cash effect in Q4. Over to the next slide for an overview of our external debt financing facilities.
With the effect mentioned on the previous slide, the drawing on our corporate banking facilities increased to NOK 1.2 billion per end of September, an increase of around NOK 110 million, of which around NOK 80 million was non-cash and related to FX through an increased draw on the U.S. dollar facility when translated to NOK. There was no draw under the subordinated liquidity facility from Aker Holding AS per end of the third quarter. Per end of quarter, our undrawn corporate credit facilities stood at NOK 0.25 billion, somewhat down compared to Q2 as a result then of cash flow in the period. Our corporate bank facilities mature in the first quarter of next year. We are currently in dialogue with our banks on this and are targeting an extension in order to bridge time to realization.
As also mentioned in the second quarter presentation, Aker today is an investment company with limited upstream cash flow from its portfolio companies. We thus depend on realization of assets to reduce debt and also then to improve liquidity. Going forward, we are targeting to increase the liquidity buffer through realization of assets. Depending on timing of such realizations, additional financing could be required. As part of this, we have initiated a dialogue with our financial sponsors regarding potential increase of current facilities should this be required. With that, I will pass the word back to Karl Erik Kjelstad for some additional comments on the portfolio. Please, Karl Erik Kjelstad.
Thanks, Øyvind. Let me run off this presentation with some ownership agenda reflections. First on slide 16, you see our portfolio overview. That is, unchanged compared to the last quarter. Let's move quickly on to slide 17, covering HMH, where Tom has already gone through the operational performance. Aker are happy with the outlook for the HMH business, and we believe the company is very well positioned to take part in the upturn driven by focus on energy security worldwide going forward. As HMH shareholder, our key focus is to support the HMH management in the integration work, including realization of both cost and revenue synergies. In addition, we are supporting the management's effort to grow the company both organically and through M&A.
Akastor, together with our co-owner Baker Hughes and the HMH management team, are targeting to make this investment liquid through an IPO as soon as the company is ready and equity market is offering interesting valuation of our HMH investment. Let us move on to slide 18, covering AKOFS Offshore. As mentioned in previous quarter, the key objective for AKOFS Offshore in 2022 was to ensure award of new contracts for Aker Wayfarer after the contract with Petrobras ends early 2023. With the formalization of the Wayfarer for a new long-term contract, we have ticked this objective off. By this all AKOFS's vessels will be on long-term contracts. That is an important prerequisite for exploring different structural solution for the company, including combination between AKOFS Offshore and other industry players.
Akastor's core market, the subsea well intervention business, are in the early phase of a current upcycle for the offshore oil and gas project. We see that the supply side for subsea well interventions looks to be tightening rapidly, which can create interesting opportunities for Akastor going forward. Slide 19, covering NES Fircroft. NES Fircroft is the clear global leader within its niche. The market has, however, still potential for further consolidation and growth. When it comes to growth, we have a strong demonstration of that in the third quarter, with an LTM for the company growing with approximately 30% compared with one year ago. NES Fircroft is what I would call exit-ready, and different alternatives are being explored, including a potential listing in Oslo.
The NOK 300 million bond that was raised in September for NES Fircroft fits very well into the plan to list NES Fircroft as soon as the IPO markets offer interesting valuations. Let's move to slide 20. AGR continues high activity level within consultancy business, especially driven by the Norwegian market, with an all-time high revenue and EBITDA recorded for the consulting business in the third quarter. The high well management activity in Australia also continued in this quarter. Our ownership agenda for AGR is to continue to profitably grow AGR business, both organically and also potentially through M&A. Finally, on slide 21.
We continue to believe that the realization of our financial investments, such as Odfjell preference share instrument and our shareholding in NES Fircroft, will probably be the realizations that come first, and we are working on several initiatives in this regard. As already mentioned by Øyvind, realizations are important to strengthen our balance sheet and increase liquidity buffer going forward and is therefore a key priority for us. The DRU arbitration case is on track, and we expect a clarification here during early or medium 2023 as the arbitration process is finally concluded.
For HMH, the clear target is to do a separate listing of this 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 guess, Øyvind, we should pause for a minute or two to provide opportunity for people to raise questions. Thank you.
Thank you. We'll be back in just a short minute or so. Okay. We'll start with a question from Mr. Martin Gulestøl to HMH team, asking if you could please provide some additional color to the impact of the first wave of the ERP implementation and how that pushed orders into Q3 and how this negatively impacted the results. Tom, maybe you could shed some more light on that.
Sure. I'll try to describe what actually occurred first, and David can give you some color. We're effectively blacked out for a period of time, right? When you think about your system, when you're switching systems, it's turned off. You're trying to do things manually. We had weeks in the quarter, multiple weeks in the quarter, we effectively couldn't book orders into the system and ship product. It's fairly typical in that situation. I'm very pleased it was only a matter of weeks. You know, ERP implementation's gone wrong, you know, you have problems like that for months, so it went very smoothly. It was all expected, but the reality is, stuff gets moved out in the quarter. David, I don't know if you want to add anything to that or not.
Yeah, no. I think, you know, it was a material impact from an order intake standpoint. For the fourth quarter, like we said, we're anticipating a strong rebound in that regard.
Thank you, Tom and David. We have one question, I guess, that goes to you, Karl. Which positive triggers do you see potentially come in in Q4? I guess that's something you can comment on.
Yeah, yeah, of course. It's a sensitive subject, but there are twofold. One is, of course, the general market that our portfolio company's operating in, that they are continuing to grow and deliver solid results as they have done in the previous quarters. That's a trigger. Then as we being an investment company that are focusing on doing transactions, also potential transactions or could be a positive trigger. I think I leave it with that answer, Øyvind.
Thank you, Karl. We have one additional question for Tom and David. Can you comment on the underlying EBITDA in HMH adjusted for the termination fees? That's from Jørgen Øyehaug of Pareto. Maybe Tom, if you maybe give us some-
Yeah. I'll at a high level step back, and it's kind of similar to what we said last quarter. You know, absent the fee, and if the project had been running along, we would have seen quarter-over-quarter growth and year-over-year growth. David, I don't know if you wanna elaborate on that more. I think that's the easiest. That's kind of similar to what we said last quarter.
That's right, yeah. Seasonally normalizing for it, still growth year-over-year in that regard.
Thank you. Thank you, David. Let's see. I guess there's another question from PTB caller, which I have to translate from Norwegian on live here.
Good luck with that.
Pardon me for if there's, this comes out funny.
Yeah.
Are you looking on strategic additions to the portfolio of subsea or supply companies and are you assessing to buy shares or own or increase ownership in other similar companies? I guess that's a question on whether we consider new investments at this time, basically.
Akastor's strategy is to develop the companies that we have and do potential add-ons to the existing portfolio. Currently, to do new platform investments is not a part of our strategy. As we realize investments, our balance sheet will be strengthened and there's opportunity to also assess new investments. When it comes to the portfolio company, especially for HMH, together with Tom and the team, we are looking into different options in order to grow the company also through M&A. I think that's it.
Thank you. Okay, there is no more questions, as of now. With that, I think we are through, and I would like to thank you all for your attention and welcome you all back for our presentation then of the fourth quarter results on February 15th, next year. Thank you very much.