Hello, and welcome to Archer's second quarter 2024 earnings release call. My name is Elliot, and I'll be coordinating your call today. If you would like to register your question during today's event, please press star followed by one on your telephone keypad. I'd now like to hand over to Dag Skindlo, CEO. Please go ahead.
Thank you, Elliot. Good morning, ladies and gentlemen, and thank you for joining this conference call for the second quarter of 2024. Archer's Chief Financial Officer, Espen Joranger, is joining me on the call today. In today's call, I will touch upon the key highlights in the second quarter, outlook and recent acquisitions, while Espen will summarize Archer's operations for the second quarter and walk us through the financial section and the guidance. Towards the end of the call, we will open the line for questions. Moving to slide two, I would like to note that information provided in today's call includes forward-looking statements as well as non-GAAP financial measures. Forward-looking statements do not guarantee future performance and involve risks and uncertainties. Further information about these risks and uncertainties are set forth in the most recent annual report for 2023. Next slide, please.
Just to remind everyone of the core of Archer, the well company. What we do is to drill wells and provide technology and services to ensure that the well is performing. We are a global company with operations in some 40 countries. Another key aspect of Archer is our growth track record, as illustrated in the graph on the right. Archer has, over the last few years, delivered significant growth in financial performance, and last year, we grew EBITDA by 36%. In 2024, we continue to guide for further 15%-20% growth. If we added Iceland Drilling on a pro forma basis, we would increase the growth by additional 6%-7% in 2024, increasing annualized EBITDA growth from 2020 to 18%. Our objective is to combine this earnings growth with increased cash contribution.
Our cash contribution has also grown over the last years, and it's set to grow further this year. One of our primary targets is to deleverage Archer over time. This will increase our financial flexibility and create value for all stakeholders. Over the last years, also fueled by the refinancing in 2023, we have reduced our leverage ratio to 2.8, with a target of reducing this further towards the end of 2024. Next slide, please. During Q2, we generated revenue of $309 million, representing a 5% increase compared to the same period last year. Our profitability also saw significant improvement, with Q2 EBITDA reaching $32.8 million, a 9% increase year- over- year. For the first half of the year, our EBITDA stands at $63.7 million, reflecting a solid 15% year-over-year growth.
These results underscore the success of our operational strategy and our focus on driving efficiency across the business. In addition to a strong operational earning, we achieved a positive net income of $1 million in Q2. Our backlog remains robust, with a firm backlog of $2.5 billion and a total of $4 billion by including options. This provides us with a solid foundation and visibility for growth. Given these positive results and the strength of our backlog, we are reiterating our guidance for 2024. We remain confident in our ability to meet our ambitious targets, continuing to deliver value for our stakeholders as we progress through the year.
I will elaborate on the subsequent events in the following slide, but we have been active in the quarter with strategic bolt-on acquisitions, which are all well aligned with our strategy for expansion of our service offering and fuel growth. Next slide, please. As we look ahead, the outlook for our key markets remains promising, with strong sentiment across several regions. Starting with the U.K. market, we are seeing solid growth, potentially driven by our expanded service offering and the growing plug and abandonment market. Our focus remains on production improvements in existing fields, particularly through intervention and workover services. In addition, our expertise in integrated P&A projects position us well to capitalize on the expected increase in demand for these services. We are working with several clients to position ourselves for larger upcoming P&A campaigns.
Moving to the international markets, the growth sentiment for our services is robust. The market for Archer's core services continue to expand, presenting us with expansion opportunities. Our international presence in well services is currently moderate, but we see a substantial opportunity to grow both our presence and service offering. It's worth noting that the P&A market is expected to double over the next decade, regardless of variation in oil prices, providing a solid foundation for our growth plans. Turning to the Norwegian market, we maintain a positive outlook with moderate growth sentiment. Activity levels remain stable. Our efforts are focused on production and late life operations, with a particular emphasis on intervention and workover services. Moreover, we continuously work to expand our service offerings, ensuring we deliver increased value to our clients.
Finally, in Argentina, there are numerous governmental and client-driven initiatives that support the short- and long-term growth of drilling and completion activity in the Vaca Muerta Basin, recently evidenced by new legislation for large investments in Argentina and Pan American Energy's 20-year agreement for gas export with FLNG provider, Golar LNG. Together with YPF's strategy and related investment commitments, these new agreements set the foundation for increased oil and gas export and provide the condition for our continued growth in Argentina. Next slide, please. We are pleased with the acquisition of the managed pressure drilling service provider, ADA Argentina. This acquisition aligns with the Archer strategy, pursuing synergistic. This aligns with our strategy for pursuing synergistic and accretive bolt-on acquisitions. As mentioned, the market outlook for these services is growing in Vaca Muerta.
ADA Argentina is a well-regarded provider of managed pressure drilling services in the Vaca Muerta Basin, one of the world's largest and most promising unconventional oil and gas reserves. ADA currently operates three MPD systems, with four systems to be provided as part of this transaction. Integrating ADA's advanced MPD technology with our fleet of high-spec drilling rigs will enhance our service offering and support our clients' growing activity in the Vaca Muerta field. Our biggest competitor in the area, Nabors, is delivering integrated MPD services as part of their rig offering already. This purchase will be financed through cash generated from Archer's existing operation in Argentina, with total amount being settled over three years. We anticipate that the acquisition will be cash positive within less than two years, and will increase Archer's EBITDA 2%-4% in 2025. Next slide, please.
We have, during the quarter, also moved into offshore wind solutions with the Archer Wind. First, I wanted to elaborate on what Archer Wind actually develops and delivers. If you look at the picture on the left, you see a large floating yellow substructure being lifted into the water. This is what Archer Wind will deliver. The fabrication of the yellow steel will be outsourced to fabricators and shipped to assembly point. The quayside or yard will be rented for the project, as we do not need to own our own yard or crane. We will manage assembly of the substructures with subcontractors. The turbine vendor will assemble and erect the turbine and blades, which are not part of the scope Archer Wind will deliver.
The acquisition of Moreld Ocean Wind, now Archer Wind, represents an important step in advancing our long-term strategic goals and reinforces our commitment to services in the renewable energy industry long term. The floating offshore wind market is still in its early days, but it's predicted to grow in the coming decade. This acquisition gives us an attractive entry point to capitalize on these market developments. We see many people misjudge the service and technology players in the renewable space back in 2020 and 2021. Investors and analysts had very unrealistic expectations to grow profitability and valuation of these firms early on, and investors are obviously disappointed with their investments. Our approach has been to find attractive, low-cost entry points and build from there.
We are now in a position where we perform, deliver $60-$70 million of annual revenue, with 10%-15% EBITDA margin, and we are cash positive. Regarding our investment in offshore wind, we have a flexible approach as to how we best construct and develop the company going forward. Strategically, with this acquisition, it is a deliberate choice to support some of our key energy customers' ambitions in the energy transition. Several of our gas customer have commitments and plans with floating offshore wind, and it's natural for Archer to take a position in this segment. Archer Wind has an asset-light business model. This model aligns well with our strategic focus on maintaining a flexible and scalable operational framework. We do not need a big organization, nor invest heavily in equipment.
Furthermore, we will not tie up cash in working capital, as we expect larger contracts to be cash positive from day one. Archer Wind has, in cooperation with Ocergy, developed a cost-efficient floating offshore wind solution, which has been selected by several leading developers. We based our acquisition on the client validation, the pipeline of projects, and the asset-light business model. Next slide, please. This morning, we announced that we buy an additional 10% of the shares in Iceland Drilling, and thus increasing our ownership to 60%. We have been a joint venture partner with Kaldbakur since 2022, in a period where we jointly have contributed to the improved performance of the company.
As you may recall, Iceland Drilling is an international leader in high-temperature geothermal drilling, with offerings across renewable service segments such as deep drilling for power generation, wells for district heating, and wells for carbon storage. The company has close to 200 employees, with its main operations currently located in Iceland and the Philippines. Geothermal energy is an important part of the future energy mix, and has a direct overlap and synergies with Archer's core services. We have a clear ambition to increase our well service, services participation in the growing geothermal market, and we are monitoring opportunities to deploy idle and lower-specification land rigs from our land drilling operations to geothermal projects globally. The market for geothermal drilling and district heating is expected to grow significantly meaningfully over the next few decades, and Iceland Drilling is well positioned to capture market share.
We will continue to support growth and development of Iceland Drilling. The increased ownership means that Iceland Drilling will be consolidated into Archer's financials. The inclusion of Iceland Drilling is projected to increase Archer's full year 2024 pro forma revenue by approximately 4% and EBITDA by 6%-7%. With that, I will hand the word over to Espen.
Thank you, Dag. Operational revenue in platform operations reduced moderately over the quarter, ending at $108 million. EBITDA came in at $14.8 million, a 24% increase compared to previous quarter, and 55% above the result in the second quarter, 2023. The improved EBITDA reflects higher efficiency from our modular rig, Topaz, and reduced overall repair maintenance costs on the platforms we maintain, which contributed to the overall improved margin. The strong financial performance is achieved despite a reduction in number of active drilling strings on our contracted platforms. During the summer months, more maintenance work has been performed than normal, which impacts our operations. We expect more active strings in the months to come based on operators' plans. In the quarter, we closed the acquisition of 65% of Vertikal Service AS.
Vertikal performs work using advanced industrial rope access techniques on complex structures, such as offshore and onshore wind turbines, hydropower stations, and offshore oil and gas installation, and fits well within our service offerings. I will revert to further details on our backlog, but wanted to mention that we secured an important contract extension for Equinor in Brazil for Peregrino A and B, and also secured a two-year contract extension for Ithaca in U.K. Next slide, please. Our well services segment has grown considerably over time, as illustrated in the longer time period in the graph to the left. As we see, the trend is strong and positive, both for revenue and EBITDA contribution, but with considerable fluctuation from quarter to quarter. This is unnatural for this business area, which is more short-term activity-driven.
The quarter was, as a consequence of quarterly fluctuations, muted with reduced revenue and EBITDA compared to previous quarters. During the quarter, well services continued its international growth, primarily fueled by Brazil and West Africa operations. The quarter also presented some challenges, particularly in Norway, where well services faced a temporary slowdown in activity. Several platforms in the North Sea were placed on revision stops, while others used coil tubing operation rather than our well intervention solutions, explaining lower than expected overall levels of activity during second quarter. This reduction in operational momentum in Norway is seen as a temporary setback, largely due to the cyclical nature of the industry and the maintenance schedules of platforms involved. In addition to challenges in Norway, we encountered client delays in the Middle East and Norway for our contract operations.
Finally, we secured a 2-year contract extension for well services in the North Sea with Equinor. Next slide, please. Our revenue from land drilling increased by solid 24% compared to previous quarter, ending at $97.3 million. EBITDA ended at $8.9 million, representing an increase in excess of 24% compared to previous quarter on the back of higher activity and strong performance. Argentina has, from time to time, imposed heavy capital controls, limiting our ability to repatriate USD out of the country. We have nonetheless been able to repatriate more than $70 million since 2016. More than $5 million of this has been taken out so far during 2024, and we anticipate to repatriate an additional $2 million-$3 million by the end of the year.
In other words, we are currently able to get cash out of the country, an important milestone to better accommodate the need for investment in Argentina, as we now see drillers starting to move rigs into the country. As the market improves, we see increased demand for high-spec rigs in Vaca Muerta area, in particular. Nabors and H&P is both investing in new capacity, but we believe there is excess demand for rigs to absorb the additional supply. Following our investments of three new rigs in fourth quarter last year, we mobilized the second flex rig for Pan American in the south of Argentina during the quarter. Despite efforts by the government, the inflation and salary increase remains significantly higher than the ongoing devaluation of the Argentine pesos, having a negative impact on our financials so far in 2024. Next slide, please.
Looking at slide 12, total revenue in the quarter of $309 million represents an increase of $14.1 million, or 5% compared to same quarter last year, driven by increased activity in platform operations and land drilling divisions. With an underlying EBITDA of $32.2 million, our adjusted EBITDA margin ended at 10.4%. After adjusting for positive exceptional items of $0.6 million in the quarter, EBITDA reported ended at $32.8 million. This is an increase of $2.8 million or 9% compared to second quarter last year. As already mentioned, the increased EBITDA is attributable to general increase in activity. Our net interest expense in second quarter totaled $12.1 million, in line with previous quarter, but slightly lower than second quarter last year.
Net income for the second quarter ended at $1 million. The adjusted net income, when adjusted for primarily foreign exchange impact and amortization of prepaid debt fees, offset by positive, P&L effects from adjustment of historical acquisition prices, ended at $0.7 million in the quarter. Next slide, please. Moving to slide 13, we note that cash and cash equivalents at the quarter-end was $51.6 million, roughly $0.5 million lower than the year-end 2023. Equity of $181.4 million reduced compared to year-end, following translation adjustments of Norwegian kroner denominated goodwill, as well as recorded loss year-to-date. The net loss year-to-date have been driven by foreign exchange losses related primarily to tax credits in Argentina and intercompany finance arrangement in non-functional currency.
As outlined in the graph, we note that we are reducing the leverage ratio and came down from 2.9 at the end of 2023, down to 2.8 at the end of second quarter. Slide 14, please. We have built a robust backlog, currently totaling $4 billion when we include options, giving us good visibility for the future and being a solid foundation for future operations. This strong backlog, including various contract options, provides critical stability and long-term visibility for our ongoing activities. Throughout 2024, we have managed to grow our firm order backlog by 80%, underscoring Archer's sustained success in securing significant contracts. Key contract awards contributing to this solid backlog includes a 4-year platform drilling contract extension for the operation of nine installation in the North Sea with Equinor.
A 2-year platform drilling contract with Trident Energy in Brazil, expanding the company's footprint in the region. A 2.5-year contract extension for 3 drilling rigs, and a new 2-year contract for an additional rig with Pan American Energy in Argentina. A 2-year platform drilling contract extension for two installations in the U.K. A 2-year platform drilling contract extension for two installation in Brazil with Equinor. And lastly, a 2-year contract extension for the frame agreement for well services with Equinor in the North Sea. These contract wins highlight the company's ability to secure long-term commitments from key clients, providing a clear path for sustained growth and operational efficiency. Slide 15, please. We are reiterating our financial guidance for 2024 and expands our guidance to also include revenue. We are on track to reaching these key metrics.
Our financial guidance includes the acquired companies, as we currently don't know when these deals will close, and therefore we keep the growth interval for our guidance of 15%-20% for 2024. However, we see these acquired companies as important for our future growth, and setting us up for 2025 and onwards. Archer expects solid improvements in financial performance in 2024 compared to 2023 on the back of a strong backlog and market position. Revenue to increase by 4%-10% compared to 2023. EBITDA for 2024 is expected 15%-20% higher than 2023. CapEx between 4%-5% of revenue, and we expect leverage ratio between 2.4 and 2.7 towards the end of the year.
With that, I will hand the call over to the operator for any questions.
Thank you, Elliot. Will you please open the line for questions?
Yes, thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to withdraw your question, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted locally. First question comes from Christopher Møllerløkken from SB1M. Your line is open. Please go ahead.
Yes, good morning. This is Christopher Møllerløkken from SB1M. Just two quick questions from me. With regards to the recent purchases you have made of both, Moreld Ocean Wind, ADA, and, and the stake down in Iceland Drilling, could you say how much that would represent of cash outlay in third quarter or, or going forward, just, you know, the purchase prices? And the second question would be, with the increased stake in Iceland Drilling, could you please disclose in which divisions that part of the business will be reported? Thank you.
Thank you, Christopher. As we've mentioned in the press releases, it's a combination of installments during third quarter and then later on in 2025. So the expected cash outflow for these acquisitions during third quarter is $5 million. And as we've highlighted, the acquisition in Argentina is fully financed through cash flow generated locally in Argentina from our operations. And then, sorry, your next question was related to Iceland Drilling and what segment it will be reported under?
Yes, that's correct.
So we'll come back to that in the next quarter, but you know, we find it not natural when the transaction closes to start a new segment for renewables. But we'll come back to that in a later stage when the transaction is closed and can be more firm on it at that point.
Thank you.
As a reminder, if you'd like to ask a question, please press star one on your telephone keypad now. We have no further questions, so I'll hand back to Dag Skindlo, CEO, for final remarks.
Thank you, Elliot. We appreciate everyone joining us for this quarter's call, and we look forward to speaking to you next quarter. Thank you, and have a great day.
Ladies and gentlemen, today's call is now concluded. We'd like to thank you for your participation. You may now disconnect your lines.