Hello, welcome to the Archer third quarter 2022 earnings release call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question at the end of the presentation, you can press star one on your telephone keypad. If you would like to withdraw your question, you may press star two. I will now hand over to your host, Dag Skindlo, CEO, to begin. Please go ahead.
Thank you, Alex. Good morning, ladies and gentlemen, and thank you for joining this conference call for the 3rd quarter 2022. 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 and summarize Archer's operation for the third quarter. Espen will thereafter walk us through the financial section and outlook.
Towards the end of the call, we will open the line for questions. Moving to Slide 2. 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 risk and uncertainties. Actual results may differ materially from projections as a result of risks and uncertainties.
Further information about these risks and uncertainties are set forth in our most recent annual report for the year ending December 31, 2021. Next slide, please. Revenue in the quarter of $240.2 million represents a decrease of $6.4 million compared to the second quarter. However, more relevant, our operating revenue increased by 5% compared to the previous quarter. Reimbursable revenue is mainly linked to procurement on behalf of our clients and does not, excuse me, have a strong correlation to Archer's own activity.
Our Adjusted EBITDA came in at $23.7 million, representing a quarterly increase of 13%, broadly in line with guidance and expectations. Both the reported revenue and EBITDA was impacted by unfavorable movement in key currency rates, which I will come back to in greater detail in the next Slide.
Despite being impacted by unfavorable currency movements, we delivered strong cash flow in the third quarter. The overall cash generation led to a reduction in our net interest-bearing debt of $21 million quarter-over-quarter. Excluding acquisitions, our net interest-bearing debt is down $34 million year-over-year, demonstrating that we deliver on our commitment to be cash positive.
Later in the presentation, I will cover the all the contract award, but wanted to spend a few seconds on the PD contract awarded in the U.K. In September, we secured a five-year contract for platform drilling operations and maintenance services on seven installations with an operator in the U.K.
The new contract commenced on November first in direct continuation of the current contract. The scope of the contract includes platform drilling operations, maintenance services, certain well services, facility engineering, and equipment rental.
We closed the acquisition of 50% of the shares in Iceland Drilling in November. With investment in this international geothermal drilling and well services company, Archer is entering a new chapter in our sustainability strategy. Geothermal energy is a renewable energy source that offers a stable baseload and has direct overlap and synergies with Archer's core services.
We look forward to further develop and expand Iceland Drilling together with management and our industrial partner, Kaldbakur . Slide 4, please. Quarter-over-quarter, adjusted for unfavorable ForEx movements, our operating revenue grew by 9% and EBITDA by 18%. Archer has most of its operation in Norway and other non-U.S. denominated countries. As we report in U.S. dollars, we are exposed to movements in foreign exchange rates.
In this Slide, we illustrate the impact of the movement in British pounds and Norwegian kroners in operational revenue and EBITDA compared to the second quarter. From the graph on the left, we see that both the Norwegian kroner and the British pound have an average depreciation against U.S. dollars by 6% compared to the average rate in second quarter. When we estimate impact on the operational revenue, we would have reported an increase of 9% quarter-over-quarter if the exchange rates had been stable compared to the previous quarter.
This compares to the actual reported increase in operating revenue of 5%. Looking at the corresponding effect on the underlying EBITDA, we estimate that the growth in EBITDA would have been 18% as opposed to the reported increase of 13% when comparing to second quarter.
The background for these graphs is to illustrate that underlying growth in activity and performance is higher than what we can read from the financial report. If we in 2022 had same NOK to dollar and pound to dollar as in 2021, we would have increased this year's revenue by approximately $60 million and our EBITDA by $5 million.
Slide 5, please. At the end of August, Archer was awarded a drill pipe pool service contract in Norway for Equinor. The contract award is new scope for Archer. Under the contract, Archer will handle all of Equinor's drill pipe and all of their assets in the North Sea. Services to be delivered includes management, maintenance, storage, repair, and purchase of drill pipe and equipment for and on behalf of Equinor. The total scope of work will be delivered by Archer in cooperation with subcontractors.
I am proud that Archer was elected for such large additional scope, we are fully committed to and aligned with Equinor's vision and drive for optimization of equipment and resources. It is important to emphasize that the contract will create synergies with our platform drilling operation and further strengthen our North Sea position.
Slide 6, please. I'm happy that the third quarter is the strongest financial quarter in our wealth services division ever. Our focus on technology and growth is paying off. The segment contributed with an EBITDA of $11.5 million for the quarter. The performance is a result of solid contribution from both Wireline and A-Star. The increase in EBITDA from previous quarter amounted to $4.6 million.
Operational revenue increased by $7.8 million, while a reduction in reimbursable revenue led to a net increase in revenue of $4.1 million. During the quarter, we set a world record in long well intervention. The previous world record was above 35,000 ft, and we now surpassed 40,000 ft. This is meaningful and will open critical market opportunities for us as we explore with premium pricing, as we can make the service more robust.
We can, with the solution, help our clients produce more from the full well bore and extended reach wells. The long reach trial well was done with a major national oil company in the Middle East. We regularly include a graph displaying the number of runs in the quarter. This metric is meant to be an indicator of the activity in the well service segment.
We note, however, that number of runs are not the only driver for financial performance. Favorable product and services mix, a few high-value contract runs, and high margin tool sales in Archer drives growth in both revenue and EBITDA in the quarter. Slide 7, please. Moving to Slide 7, revenue for platform drilling, engineering and our [moderating] decreased by $17 million compared to the previous quarter. Of which $13.2 million is related to a reduction in reimbursable revenue.
When adjusting for the decrease in our reimbursable revenue which has been mixed margins, reduction in operating revenue over the quarter was $4.1 million. The weakening of the Norwegian kroner and British pound had a particular high impact on our platform drilling division. Despite having one less rig in active mode, underlying activity was stable quarter on quarter.
EBITDA in the quarter increased compared to the second quarter, despite being impacted by deteriorating Forex rates. EBITDA would have increased by an estimated $0.5 million if Norwegian kroner and British pound had remained at second quarter levels. Slide 8, please. We recently announced our entry into renewable energy with acquisition of 50% in Iceland Drilling.
We formed a JV with Kaldb akur. I want to emphasize that Iceland Drilling is operating profitable with a positive cash flow. On this Slide, we illustrate a typical geothermal energy drilling site compared to the drilling rig setup we typically have in the conventional and unconventional sites in Argentina. We are expecting to realize synergies between geothermal drilling and integrated well services. We are a well company. Geothermal is a natural expansion for us.
IEA and other agencies have predicted annual growth of 10%-50% within this segment. Next Slide, please. Our revenue for land drilling increased by $6.8 million in the third quarter and by $18.8 million compared to corresponding quarter in 2021. We will look a bit on market fundamentals in Argentina on the next slide.
We are pleased with positive trend in activity for our Argentinian operation. Despite increased activity, Adjusted EBITDA came in at $3.1 million or $1. million lower than previous quarter. We experienced increased tender activity, in particular in the Vaca Muerta Shale Play in Neuquén, indicating increased activity in the region going forward. Our operation in Comodoro remains challenging. We are not anticipating increase in activity. Inflation in Argentina remains high.
We are in general accustomed to ensure inflation is compensated for in our customer contracts. In the last two quarters, inflationary pressure above the general inflation level in certain cost categories led to weakening margin for us. We are currently in constructive negotiations with our client to compensate for this exceptional cost. If successful, this will be reflected in our Q4 financials.
Moving to Slide 10. We will, in the next slide, look a bit more into the market and anticipate in Argentina going forward. First of all, drilling and production has been constrained by limitation in infrastructure. To facilitate and further develop the vast resources in Vaca Muerta, a series of infrastructure projects has been matured and is currently sanctioned under construction. These projects are targeted to increase transportation of liquid and gas from Neuquén Basin toward both national consumption and export to neighboring countries.
Secondly, the maturing of the operation has led to substantial reduction in production costs. Over the last 67 years, YPF have managed to cut lifting costs by $20 per barrels to an estimated $7 this year. The cost reduction of 60%-70% brings lifting costs to the level seen in the Permian Basin.
Vaca Muerta is an attractive commercial shale play for our customers. The development in production has been fairly stable in Argentina over the last years, as seen in the upper-right graph. The picture does not show the shift from unconventional to, from conventional to unconventional. However, the production is expected to increase substantially on the back of infrastructure build-out.
New transportation infrastructure for both oil and gas will allow for significant increase in Argentinian oil export, where they will be able to capitalize on higher oil prices compared to domestic oil prices. As Argentina targeted double oil production and increase gas by 30%, there will be a shortage of rigs suitable for drilling in the shale play, which in turn will significantly improve market conditions for offshore. With that, I hand the words over to Espen, who will take us through the financials in greater details.
Thank you, Dag. Looking at Slide 11, we see that our total revenue for third quarter amounted to $240.2 million compared to $242.8 million last year, a decrease of $2.6 million. When netting off the reimbursable revenue, we see that the operating revenue decreased by $3.7 million compared to third quarter 2021.
For the quarter, the Adjusted EBITDA was $23.7 million, $0.2 million higher than corresponding quarter in 2021. While EBITDA increased by $2.4 million to $22.9 million as we incurred $0.9 million of exceptional charges. The majority of these costs are related to severance payments in Argentina. The Norwegian kroner and British pound have depreciated by 14% and 15% over the comparable period.
If we adjust for this effect, underlying growth in operating revenue and EBITDA would be 9% and 11% respectively. We report a net income before tax of $3.4 million in the quarter, while tax costs of $4.4 million leads to a net loss for the quarter of $1.1 million.
Slide 12, please. Total assets decreased by $4.6 million compared to year-end 2021. The reduction is mainly explained by foreign exchange movements on assets held in NOK-dominated currencies, such as our goodwill, which has reduced following the strengthening of U.S. dollar.
The increase in cash is a result of both operational cash flow and the drawdown of our loan facility during the first quarter, offset by a reduction in our carrying value of our goodwill and property, plant and equipment following the strengthening of U.S. dollar. Net interest-bearing debt came out at $488 million, which is a decrease compared to year end of roughly $12 million.
The reduction in net interest bearing debt occurred despite final installment relating to the DeepWell acquisition, as well as settlement for the Ziebel acquisition, which was settled in the first quarter. These settlements totaled roughly $7 million. Adjusting for these items, our net interest bearing debt would have reduced by almost $20 million so far in 2022.
The reduction in equity is a result of the loss year to date, as well as foreign exchange effect on goodwill. The book value of our equity is $52.9 million at the end of September. We continue to preserve our liquidity and have more than $110 million in available liquidity, which include undrawn and committed credit lines after paying roughly $5 million in installment at the end of third quarter.
Slide 13, please. Before rounding up the call with our financial outlook, we wanted to shed some light on the market outlook. As I'm sure you know from other sources, the market is improving, and the improved oil and gas prices will likely continue to drive increased spending at the E&P companies, with the largest share expected to be allocated to brownfield and decommissioning.
Archer has about 90% of our business linked to brownfield and P&A operations. This mega-trend will clearly benefit our business in line with the overall oil service sector. Energy security will be important for a long period. We enter into a period with high activity within oil and gas services. Slide 14, please. We stated in our second quarter call that the first half of 2022 turned out to be a transition period for Archer. The Russian invasion of Ukraine was a wake-up call for energy security.
This, in combination with the under-investment in new oil and gas developments, puts pressure on oil and gas prices, which incentivizes investments going forward. Looking beyond 2022, we remain optimistic on the market fundamentals for Archer's activity and operations. We reconfirm our guidance for 2022 despite the weakening in European currencies.
If the exchange rate for 2022 had been at 2021 level, guidance would have been lifted by 5%-10% to reflect the increased underlying growth in both revenue and EBITDA. As we see today, we reiterate our 2022 guidance for both revenue and EBITDA to be moderately higher in 2022 than in 2021. The modest increase in EBITDA for full year 2022 compared to 2021 implies a substantial ramp up in second half compared to first half.
A strong half-year result for the last six months of 2022. We continue to guide our CapEx of approximately 3% of revenues and continue to expect that we generate positive cash and reduce our nib year-over-year when adjusting for the acquisition during the year.
The settlement of Iceland Drilling of $8.25 million was paid during fourth quarter and will impact our net interest-paying debt at year-end. Looking into 2023, we believe the activity for Archer's operations will expand, resulting in an increase in EBITDA of 15%-20%.
We believe that operators' plans for increased drilling in the North Sea, the positive development in Argentina, increased activity in our well service division, as well as general increase in oil and gas activity will positively impact Archer's revenue and EBITDA into 2023. With that, I will hand the call over to the operator for any questions. Thank you. Alex, will you please open the line for questions?
Thank you. As a reminder, if you'd like to ask a question, you can press star followed by one on your telephone keypad. If you would like to withdraw your question, you may press star two. Please ensure you're unmuted locally when asking your question.
It's easier to have the computer.
As a reminder, if you'd like to ask a question, you can press star one on your telephone keypad. Okay, we have no questions for today, so I'll hand back to Dag Skindlo for any further remarks.
Thank you. We appreciate everyone joining us for this quarter's call. We look forward to speaking to you next quarter. Thank you. Have a nice day.