Good morning or good afternoon, all, and welcome to the Archer Limited Q4 2023 Trading Update and 2024 Outlook Presentation. My name is Adam, and I'll be your operator today. If you'd like to ask a question in the Q&A portion of today's call, you may do so by pressing star, followed by one on your telephone keypad. I will now hand the call over to Dag Skindlo to begin. So, Dag, please go ahead when you are ready.
Thank you, Adam. Good morning, ladies and gentlemen, and thank you for joining this Q4 Trading Update and 2024 Outlook Presentation. My name is Dag Skindlo, CEO of Archer. I have been with Archer since 2016, but in my current role since early 2020. I have a long and international career behind me in the industry, working for large service companies like Schlumberger and Aquamarine Subsea. With me, I have Espen Joranger, our CFO. Espen has been with Archer since 2013, the first years as Financial Director for North Sea and Group Controller, before he became the CFO in 2020. What best summarizes Archer is our slogan, we are the well company. What we do is to drill wells and provide tools, technology, and services to ensure that the well is performing.
We are now a sizable company with close to $1.2 billion in annual revenue and more than 4,800 employees worldwide. We have over time transformed our business mix and exposure. If you look back to 2016, we were largely a company performing platform operation and handling. Since then, we have focused on growing within well services, a business segment which contributes with more than 40% of our EBITDA. Our solid performance in 2023 resulted in an EBITDA of $117 million. In average, our EBITDA growth has been about 16% each year since 2020. With the current market backdrop, we think we can continue this growth going forward. Next slide, please.
Before we move on, I will call your attention to the disclaimer regarding forward-looking statements and our use of GAAP and non-GAAP performance measurements. Moving to slide four. First, we wanted to summarize the key messages in this trading update. We delivered a record fourth quarter, resulting in a 14% EBITDA increase year-over-year. Following a series of record quarters delivered in 2023, full year EBITDA ended at $117 million, representing a 36% increase compared to last year. This growth exceeded the upper range of our full year EBITDA guidance and demonstrates that our strategy is paying off and that our key markets support continued growth.
Strong growth and operating cash flow in 2023, as well as the refinancing in the first half of the year, has reduced Archer's leverage ratio to 2.9 at year-end, compared to 5.3 one year ago. For 2024, we expect a 15%-20% EBITDA growth, continuing our positive trend. On the back of solid growth and operating execution, we will see a further reduction in our leverage ratio to between 2.4 and 2.7 during 2024. Next slide, please. We have had several quarters to deliver solid growth. Our fourth quarter is no exception. With an EBITDA of $30.9 million on the back of a total revenue of $305 million.
The year-on-year growth in quarterly revenue is 15%, which translates to roughly the same year-on-year growth in our adjusted EBITDA, which ended at $33.4 million in the quarter. We have grown our EBITDA by 10% each quarter in average since the first quarter of 2022. This EBITDA growth clearly demonstrates our ability to grow both organically and by accretive M&As. On Wednesday this week, we announced award of additional $125 million contracts awarded in Argentina by Pan American Energy, which I will elaborate on later. Slide six, please. 2023 has been a rewarding year for Archer. The year-on-year growth in our revenue was 20%, resulting in gross revenue of close to $1.2 billion. The general activity growth across all divisions, combined with margin expansion, resulted in 36% EBITDA growth in 2023.
As mentioned, we believe the market fundamentals for our services will continue to support our growth, and we forecast further EBITDA growth for 15%-20% in 2024. We started the year with an important refinancing of the company, moving the maturity of our facilities into 2027. We expanded our service portfolio by acquiring Romfor Brado and further strengthen our business portfolio in the UK by acquiring Baker Hughes coiled tubing business. In August, we secured a large multi-year integrated P&A contract in the UK, demonstrating our unique service offering within the growing P&A market. We also continued to innovate and sign a development contract with Petrobras for their subsea P&A challenges in Brazil. Cash contribution increased by 14% from 2022- 2023, and we expect cash contribution to increase as we grow the business. Next slide, please.
As the heading indicated, we delivered ahead of our 2023 promises. We forecasted a revenue growth of 10%-20% in 2023, and we ended up at the upper range of the interval. For EBITDA, we positively stated that we would be able to grow our EBITDA by 25%-35% in 2023, compared to 2022. Despite unfavorable foreign exchange movements in both Argentine pesos and Norwegian kroner over the year, we surpassed our guidance and grew EBITDA by 36%. Preparing for further growth in all our business lines, we exceeded our CapEx guidance and we report capital expenditure for 2023 at roughly 4.4% of revenue. The strong operational performance in land drilling has allowed us to reinvest local pesos in hard assets and capital equipment.
We have upgraded and recertified our rig in the Vaca Muerta, which will start drilling in Q1 this year, and we acquired three drilling rigs from H&P in December 2023, which will drive EBITDA growth in 2024. Moving to slide eight. One of our absolute primary target is to delever Archer over time. Our focus is to generate positive cash flow, to reduce our net interest-paying debt, while increasing our operational results to ensure that the leverage ratio come downs. Reduced leverage ratio will reduce cost of capital and increase cash flow to equity. Over the last years, fueled by the refinance in 2023, we have reduced our leverage ratio to below three, compared to 9.5 back in 2019, in 2016.
Our focus on devotion to delever will continue also going forward, continuing to pass from roughly $800 million in net debt in 2016 to be like $400 million on, on the turn of 2023. Through the refinancing and some operations, we have sufficient liquidity, which totaled $77 million at the end of the year. Having learned some lessons from earlier boom cycles, we will continue our CapEx discipline and cost control to ensure that our growth is sustainable. Compared to peers, our CapEx levels remain modest. Moving to slide 10, we continue to be optimistic about the development of the oil service industry in general, and for Archer in particular.
We start to see continued long-term growth in both the number of well interventions to be executed in Archer's core markets, and an even more elevated growth within the number of wells to be decommissioned in the years to come. Looking at our core market areas, we anticipate a particular high growth rate for operations in the UK, driven by increased well P&A activity and a broader offering within well services following the acquisitions of the coiled tubing business and the Romfor Brado during 2023. We are certainly climbing the value chain in the UK. As we will outline later, our growth has been particularly high in our well service division, and this growth has been driven by international expansion. International growth within well services is set to continue as they are a large untapped market for our services.
In Norway, we have a very strong market position with both platform operation and well services. We will continue to drive operational excellence and increase offerings, exploiting our large organization and presence on platforms to drive margin and revenue also going forward. Argentina, Argentina has a meaningful growth potential in the medium to long term, given that the country is successful in developing their vast oil and gas resources. We are pleased with our growth in Argentina over the recent years, and we are close to reaching our pre-COVID level of EBITDA in 2024. Next slide, please. We see positive market fundamentals for Archer's P&A service offering for several decades to come. Decommissioning is a term used to describe the final stage of an energy project.
In oil and gas, when a field production cycle comes to an end and all the economical fuel has been processed, the facilities must be dismantled and the surrounding area returned to its natural condition. This process involves plugging the well and removing the infrastructure. The offshore decommissioning market is huge, and we estimate the liability of operators to represent some $200 billion globally. Of the total decommissioning activity, roughly 50% is related to the plugging and abandonment of the wells, which is Archer's core competence. The potential is particularly high in our home market, with an estimated $80 billion in total decommissioning spend, or some 40% of the global activity. The strongest activity and near-term increase in the deco market is in the UK, where operators will spend an estimated $26 billion towards 2040.
The global offshore deco market has grown considerably in the last three years, and it's furthermore expected to grow by more than 100% over the next 10 years. This market, which only for lesser degree, is impacted by fluctuations in the oil price, will underpin profitable growth for Archer for decades to come. Archer's unique Archer offers a unique combination of drilling operation and a broad set of well services fitted for the plugging and abandonment tasks, as the Archer strategy is to become the preferred P&A service provider in the industry. Archer has developed a cutting-edge technology within P&A and decommissioning over the years, and recent acquisitions have complemented our internal service offering, which has resulted in Archer having the broadest and most advanced P&A tool offering within the industry. Slide 12, please.
As you know, in August, Repsol has awarded an integrated well decommissioning contract to Archer, where we will execute the plug and abandonment of 30 wells on the Fulmar field and two wells on the Halley field. The contract is a fully integrated P&A project covering the complete work scope, including drilling services, using a modular P&A rig and a full suite of well services. Next slide, please. This slide gives an overview on how we position our services in P&A, as well as how we strategically develop additional technologies and services. Our core technologies are centered around P&A service on platforms, where we perform drilling services via existing drilling facilities or deploy a modular drilling rig. From a well services perspective, we can offer the broader, most advanced services and tools to plug and abandon the well.
On platforms, there is a drive from operators to be able to perform more of the work scope offline without use of the drilling facilities. In this respect, Archer is working with several of our clients to develop offline capabilities using pulling units, wireline, and coiled tubing to perform offline work. For subsea wells, the majority of the drilling services need to be performed by a mobile offshore drilling unit, a MODU. Archer does not perform drilling services for subsea wells, but again, we have the broadest and most advanced well service offering. For subsea wells, the drive is to perform increased scope from a light well intervention vessel before the scope is completed by a more extensive MODU. An example here is the development project with Petrobras, where we want to develop a solution where we plug their subsea wells using coiled tubing from a vessel.
Successful development can potentially open up a large market for Archer. Note, the method and technology to plug and abandon wells are in continuous development, and Archer is committed to be a leader in this space. Next slide, please. Platform operation is one of our key three key business divisions, with about 35% of our EBITDA. Archer is managing the drilling operation on about 50% of the platforms in the North Sea. This is a stable, profitable business with strong cash generation. It has contributed about $40 million in annual cash contribution over the last four years, even during COVID. We have a significant contract portfolio with the North Sea major Equinor. As a testimony to our service quality and the performance we deliver, we have over time managed to secure a market share with Equinor of about 50% on their platforms.
In addition to being a great standalone business, platform operations enables us to upsell our well services business. As you might understand, being present on about 40% of the platforms in the North Sea gives a significant competitive advantage in this respect. We own two modular rigs that are particularly critical for multi-year P&A projects. One rig is being prepared for the Repsol contract to commence offshore drilling operations in 2025, while one is operating already on a three-year P&A program in the UK for TAQA. These two rigs have significant potential within the P&A market over the next decades. In 2024, we anticipate a modest reduction in activity, driven by lower activity for our modular rigs, with only one active. While looking into 2025, our backlog suggests increased activity above 2023.
For 2024, our focus here will be to ensure excellence in our operation and increase drilling efficiency to support our customers' ambitions to increase production on their platforms, while maintaining safety in all we do. Furthermore, we will continue the work we do to position and tender large P&A contracts like Fulmar. Slide 15, please. Our well service division is our most valuable business division today. In this division, we offer tools, technology, and services, services that help improve well performance and in the end, close down the well. We divide well services into wireline, oil tools, and coiled tubing. The wireline services business has a strong backlog with leading customers. Oil tools is our core tech business that is growing internationally, while coiled tubing is largely a UK-centric business.
Archer's well services division delivered an impressive 57% EBITDA growth in 2023, on which approximately 40 was organic. The division has delivered an organic compounded average growth rate of 26% in the period from 2017 to 2023. The company expects continued strong EBITDA growth from this division in 2024. When adjusting our revenue for reimbursable revenue, which is a pass-through revenue related to one of our wireline contracts, we are also pleased with the continuous margin expansion in the business. The margin expansion is a reflection on the expanding volume and international presence with higher prices. As our market in Norway for this business is mature, our focus for 2024 is to continue our growth internationally in well services. Next slide, please.
Our operation in Argentina, the oil and gas industry in the Vaca Muerta Basin, is often overshadowed by the development on in the Argentine macroeconomic, economic. However, the oil and gas production in the region continues to grow. Attractive oil and gas resources are in place in Vaca Muerta, where Archer is well-placed with high-spec rigs and a good market position. The drilling services market is expected to improve as new transportation infrastructure is coming in place. Land drilling delivered strong operational and financial results in 2023. The strong operational performance in land drilling has allowed us to reinvest local currency and build for the future. Firstly, we mobilized one additional rig in Q2 with increased activity in second half of 2023. Secondly, we upgraded and recertified an additional rig in Vaca Muerta, which will start drilling in Q1 this year.
Lastly, we acquired three drilling rigs from H&P in December 2023, which will drive EBITDA growth in 2024. In 2023, we used an uncertain political and financial situation in Argentina to focus on service quality, capitalize on opportunities, and build for the future. We expect our land drilling EBITDA to grow by 15%-20% in 2024, following the deployment of one additional drilling rig and new contract terms. Inflation and currency fluctuation is, in general, large in rate for Archer's EBITDA over time. So also in 2023, with devaluation of more than 350% and inflation of roughly 210%. However, the revenue reported in U.S. dollar will fluctuate as inflation and devaluation develops. With current volatility, inflation, and devaluation rates, we have concluded not to guide on revenue in 2024.
However, again, we are able to forecast 2024 EBITDA as our contracts and cost base minimize impact from inflation and devaluation on EBITDA. Currently, there are restrictions on repatriation of US dollars out of Argentina. However, Archer has taken out net $66 million cash in 2015, of which $4 million in 2023. All investments and growth in Argentina is self-funded. For 2024, we will focus on improving operational efficiency of our rig fleet. We will see possible future devaluation events occurring in 2024, and will take protective measures against negative effects from further devaluations. Furthermore, we will relentlessly seek opportunities to repatriate cash from our land drilling business. As we announced on Wednesday, we are pleased with the award of two contracts by our long-term customer in Argentina, Pan American Energy, totaling $125 million in value.
The first contract is a 2.5-year extension with improved commercial terms for the H&P rigs, both in Q4, that will replace the three drilling rigs currently operating Pan American's [Sierra Dragon] field. The contract extension has a value of approximately $100 million and runs until the fourth quarter of 2027. The second contract is for one additional drilling rig in Vaca Muerta. This contract has a value of roughly $25 million over two years. The rig will mobilize in the first quarter of 2024. Due to the economic instability, Argentina is a challenge from an ownership perspective. However, the oil and gas activity in the country is good, and the new political leadership has expressed a clear intent to enhance drilling and production activities.
These new contract awards improves the visibility and profitability of our local operations, and we believe this, over time, will result in further value creation for Archer shareholders. Some of the investment reporting of fourth quarter are linked to these contracts and enable us to secure additional work in Argentina. Moving to slide 18, Archer expects solid improvements in financial performance in 2024 compared to 2023. This is based on backlog, current activity level, market growth, and our market position. We estimate a further revenue growth of 15%-20% in 2024. CapEx is expected at somewhat elevated level compared to historic levels to support growth, including Emerald recertification and upgrade for the Fulmar project. CapEx is expected to amount between 4%-5% of revenue.
With further growth and cash flow generation, we expect to end 2024 with a leverage ratio between 2.4 and 2.7. Next, slide please. Before rounding up this presentation, open up a question, I want to summarize some investment highlights for Archer. Firstly, our growth rate is a catalyst for value creation for our shareholders. Secondly, we have delevered, and our leverage ratio is expected to be half from 2022 to end of 2024. As you know, reduced leverage ratio will reduce cost of capital and increase cash flow to equity. Thirdly, we believe there is limited market downside for Archer, given the strong field and growing P&A activity. This has also been demonstrated historically, when we have largely maintained earnings in challenging times.
And finally, we note that our current valuation multiples remains far below our historic trading averages, below the multiples of relevant peers, and finally, below the valuation multiples than this following Archer is estimating at fair multiples. The ultimate purpose and target of our strategy remains to create shareholder value for our owners. We believe the best way to create shareholder value is to grow and delever, enhancing our flexibility, both financially and operationally in the years ahead. With that, I will hand the call over to the operator for any questions.
Thank you. As a reminder, if you'd like to ask a question today, please press star followed by one on your telephone keypad now to enter the queue. When preparing to ask your question, please ensure you are unmuted locally. That's star followed by one to ask a question. Final reminder, that's star one to ask a question. We have a question from Lucas Steel from Arctic. Lucas, please go ahead.
Yeah. Hi, good morning, guys.
Good morning.
Dag, I just didn't quite catch it. Did you acquire three rigs in Argentina in December? Was that what you said?
Yes, we did. We acquired three rigs from H&P at a very attractive terms, in combination with our new contracts.
Okay, and you have already paid for them in 2023, or is that something that is incorporated in your 2024 guidance?
So, we have paid for the rigs in 2023. What we would pay for in 2024 is the, you know, the final standup of the rigs. But the, you can say the cash, the CapEx that we have in 2024 related to these rigs, for the standup of, you know, the rigs, is offset by, mobilization fees that we receive at the time we mobilize the rigs. And so, it's largely cash neutral, the CapEx for these H&P rigs in 2024 versus the mobilization fees we are receiving from the clients.
Okay.
We're kind of taking a cash hit in 2023.
Okay. And the upgrade and preparation of Emerald, what kind of number are you looking at?
You know, we are in the $5-$6 million range this year because for 2024, of course, we have an ambition still to mobilize it at the end of the year, and, you know, that will improve our guidance for 2024 or results for 2024, but we are a bit more cautious, saying that that activity will start in 2025, the drilling activity. We do a lot of operations already offshore for well services, but the real drilling campaign and, you know, the value creation will really start in 2025 for that Fulmar project.
Mm-hmm. Okay, and then on your debt service, did you continue to pay your interest in cash?
Yeah, we have done that in 2023, and the intention is that to do also that in 2024.
Okay, great. Thanks.
Final call for questions, that's star one. As we have no further questions, I'll hand it back to Dag for any concluding remarks.
Thank you all for joining us today, and we look forward to next time when we release the Q1 full results, where we also include all the cash flow statements and the net income and the notes to the results. So, thank you all and have a good day.