Hello and welcome to today's Archer Limited fourth quarter and preliminary 2022 results conference call. My name is Bailey, and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star followed by one on your telephone keypad. I would now like to pass the conference over to our host, Dag Skindlo, CEO of Archer. Dag, please go ahead when you're ready.
Thank you, Bailey. Good morning, ladies and gentlemen. Thank you for joining this conference call for the fourth 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 operations for the fourth quarter. Espen will thereafter walk us through the financial section and the outlook. 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 involves risks and uncertainties. Actual results may differ materially from projections. Further information about these risks and uncertainties are set forth in our most recent annual report for the year ending December 31st, 2021. Next slide, please. Before we start on the Q4 results, I wanted briefly to talk about Archer.
What 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 the well is performing. We are a sizable company with about $1 billion in annual revenue and with more than 4,500 employees worldwide. We have, over time, transformed our business mix and exposure. If you look back at 2016 and 2017, we were largely a company performing platform operation and land drilling. Since then, we are focused on growing within well services, a business segment which is expected to represent about 40% of our EBITDA in 2023. In total, our EBITDA growth over the last years has been about 12%. With the current market backdrop, we think we can surpass this growth trend line going forward.
Although the past years have been challenging as we navigated the downturn and COVID-19, we have been able to generate free cash flow throughout the downturn with about $50 million in annual free cash flow from operations. Our ability to generate cash flow has helped us to delever and continuously develop our company regardless of market situation. When you compare Archer to other service companies, you will notice that we are mainly focused on the production and late life phases of oil and gas fields, providing us with a relatively stable demand for decades to come. Next slide, please. I am pleased that we are growing and delivering strong financial results in the last quarter of the year. The growth is driven by solid operational performance and improved market conditions.
Revenue in the quarter of $264 million is an increase of 10% compared to previous quarter. Our adjusted EBITDA of $29.2 million representing a quarterly increase of 23%. Both for the fourth quarter and for the full year, 2022, we report a positive net income. Our Q4 net income was $16.4 million, and the full year we ended at $9.8 million. Of key non-financial highlights, we need to mention that we finalized the acquisition of 50% of the shares in Iceland Drilling in November. With the investment in this globally recognized geothermal drilling and well services company, Archer is entering a new chapter in our energy transition strategy.
We have strengthened our well services division capabilities and product offerings through the acquisitions of Romar- Abrado and Baker Hughes coiled tubing business in the U.K. Both transactions are accretive to Archer and improve our service offering. These acquisitions, combined with in-house product development and innovation, have resulted in the broadest and the most advanced P&A tool offering in the industry. Going into 2023, we have a backlog of $2.3 billion, with additional $2.2 billion in contracted options. We expect improvements in financial performance in 2023 on the back of strong backlog and market position and have raised our guidance for 2023 once more to 25%-35% above 2022. Slide five, please. I wanted to briefly touch base on our recent acquisition of Romar- Abrado. This bolt-on acquisition positions Archer with the broadest well P&A solutions in the industry.
From before, we had a broad portfolio of our own developed tools, but we were missing section milling and swarf handling. The acquisition is highly accretive as we acquire the company at around 2.5x estimated 2023 EBITDA. Slide six, please. The second M&A transaction I would like to highlight is the coiled tubing acquisition in the U.K. This transaction has not been closed yet, but the purchase agreement has been signed, and it is only pending final approval by CMA. As such, we have included the financials in our 2023 estimates.
Here, we are taking the opportunity to buy a very attractive EBITDA multiples, as Baker needed to divest and could not and would not sell to any other providers of coiled tubing in the U.K. The coiled tubing and pumping business fits well within our brownfield and P&A strategy and allows us to broaden our integrated P&A services in the U.K. I want to round off by saying that there are similar opportunities like Romar-Abrado and Baker Coiled Tubing business out there. There are not many buyers, but there are several owners looking to exit. Archer has a clear strategy of participating in the consolidation of well services. Next slide, please. Platform operations is one of our three key business segments, expected to contribute about 40% of total EBITDA in 2023. Archer is managing the drilling operation on about 50% of the platforms in the North Sea.
This is a stable brownfield business with strong cash generation, having contributed about $40 million in annual cash flow over the last years, even during COVID-19. We have a firm backlog of $1.2 billion with North Sea oil majors like Equinor, with further upside of $1.6 million from contracted options. As a testimony to our service quality and the well performance we deliver, we have managed to secure a market share with Equinor about 60%. In addition to being a great standalone business, platform operations enable us to sell up our well services business. Being present on about 50% of the platforms in the North Sea gives us a competitive advantage in such respect. In addition, we own two modular rigs that are critical for multi-year P&A projects.
One rig has been in New Zealand and will during this year return to the U.K. The second rig is starting up on a three-year P&A program in the U.K. late this quarter. We believe these two rigs have significant potential within P&A programs over the next decades. Next slide, please. In well services, we develop tools, technology, and services that help improve well performance and eventually close and seal the well, our P&A or P&A, as we say in the industry. Well services is expected to account for more than 40% of total EBITDA in 2023. The division will deliver annual EBITDA growth of about 25% from 2016 to 2023, of which 16% has been organic. To continue our profitable growth within the segment, we have mainly three focus areas for 2023.
Increase footprint outside of the North Sea, position Archer as the broadest provider of well services within Well P&A, continue to consolidate the market and drive expanded offering and synergies. We cannot talk about well services without talking about technology. The development of new products and solutions have accelerated in the last few years, especially development of new tools within heavy workover and P&A solutions have supported our growth. Our Oiltools have grown about 20% annually since 2017. Slide nine, please. Our third and final business segment is land drilling, which is divided into Argentina North and South, in addition to Bolivia, with most of our drilling rigs, and especially our high-spec drilling rigs, located in Vaca Muerta in the North. Archer Argentina is a well-run operation and is the second-largest drilling contractor in the country, with a market share just shy of 30%.
We are by many regarded as the best drilling contractor in the country, and our rigs were preferred and mobilized first after COVID-19, and this in competition with major drilling contractors like H&P, Nabors, and Ensign. As you can see from the historic activity, we ran as many as 17 rigs in 2019 and are now rebuilding activity after COVID-19 with 11 active rigs planned for this year. The market is now improving on the back of new oil and gas pipelines coming into place, wherewith Vaca Muerta set to account for the majority of Argentina's oil production growth. Demand for rigs needed for Vaca Muerta is expected to exceed supply of drilling rigs in the country. This market situation should be good for utilization rates going forward. With that, I hand the word over to Espen.
Thank you, Dag. As Dag mentioned, we delivered overall very well in Q4. Revenue from platform operations increased by $14.5 million compared to previous quarter, of which $8.5 million is related to an increase in reimbursable revenue. The increase in operating revenue over the quarter was $6 million. EBITDA for platform operations increased substantially quarter-over-quarter. The increase in EBITDA was a combination of a strong operational quarter and extraordinary rate adjustment with retroactive effect from third quarter. The revenue in our well services division increased by $2 million compared to previous quarter, explained by an increase in reimbursable revenue. Operating revenue decreased over the quarter, resulting in a reduction in EBITDA compared to Q3. Bearing in mind that Q3 was an exceptional good quarter, the result in Q4 was reduced, but still above first and second quarter in 2022.
The segment contributed with an EBITDA of $7.2 million for the quarter. Our revenue for land drilling increased by $6.2 million in fourth quarter, continuing the trend we have seen throughout 2022. On the back of increased activity, we report a substantial increase in EBITDA, which came in at $7.3 million, which is more than double of what we have reported the previous quarters. Finally, we want to mention that our investment in KLX Energy Services had a positive increase in value following the good market trend and market fundamentals in the U.S. onshore oil service market. Overall, we have a strong financial performance in the quarter. Slide 11, please.
I will not bore you with market slides, but just wanted to briefly highlight the market is improving and we are likely in the start of a multi-year upcycle, where years of under-investment and improved oil and gas prices drive increased spending with E&P companies. We believe that the market fundamentals are positive for all our business divisions, but we expect the growth to be particularly high in our Well Services reporting segment. Next slide, please. Looking at slide 12, total revenue for the fourth quarter amounted to $264 million. Two-year revenue for 2022 amounted to $970 million, an increase of 4% compared to 2021. If we adjust for unfavorable foreign exchange movement in 2022, revenue grew by 10% applying average FX rates from 2021.
Reported EBITDA for fourth quarter grew by 22% compared to the same period last year, ending at $27.4 million for Q4. Net positive income for fourth quarter ended at $16.4 million compared to a loss of $12.7 million last year. The net result was positively impacted by positive mark-to-market adjustment of our investment in KLX Energy Services, which experienced an increased market activity and overall improved financial performance. Next slide, please. As mentioned before, our business is largely built on multi-year agreements with majors. Looking at our backlog, we have a strong earnings visibility for the next years with a backlog of $2.3 billion, in addition to $2.2 billion in contract options. The backlog, as you can see, is well diversified across divisions. Platform operation and the North Sea are the main contributors.
The current backlog is largely related to base business, creating a robust foundation for additional growth and additional sales of high-margin services on top. Slide 14, please. We believe that Archer has good prospects to continue growth in EBITDA going forward. We have demonstrated this historically by growing EBITDA by 12%. Going into 2023, we have a firm backlog of $2.3 billion with additional $2.2 billion in options. We see a considerable improvement in our well services division and are expecting to see a 65%-75% growth in EBITDA for 2023 in well services division. We predict this segment will account for more than 40% of our total EBITDA in 2023. We expect a moderate growth in our platform operation division in 2023 over 2022.
The expectation for our land drilling division is to grow EBITDA by 25%-40% in 2023. We have better backlog and contract coverage for our land rigs entering into 2023 compared to 2022 and remains optimistic that Argentina's oil and gas infrastructure projects will increase rig demand going forward. Archer expects solid improvements in financial performance in 2023 on the back of a strong backlog and market position. Revenues for 2023 is expected to increase by 10%-20% compared to 2022. EBITDA for 2023 is expected 25%-35% higher than 2022. Growth primarily in second half of 2023. CapEx between 3%-4% of revenue. With that, I will hand the call over to the operator for any questions. Thank you. Bailey, will you please open the line for questions?
Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. If for any reason you would like to remove that question, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speaker phone, please remember to pick up your handset before asking your question. We'll just pause here briefly as questions are registered. Our first question today comes from the line of Carlos Asperura from [Como MUSA Capital. Please go ahead. Your line is now open.
Okay. Hi, guys. It's been a great quarter. Could you please, can you tell us the Baker Hughes EBITDA multiple, the acquisition multiple or not?
Thank you for the question. We have agreed with Baker Hughes not to disclose the transaction value nor the multiples. We have agreed not to disclose that, but I can say. All I can say it's a high liquidity transaction for us, with also good synergies and good positioning. I think you will. You know, it's adding good to our growth next year. The cash flow impact of this acquisition in 2023 is quite limited.
Okay, great. Then, you mentioned that you have, like, similar opportunities, that there are a lot of sellers in this market. Do you feel like every year you'll be able to do one or two of these kind of acquisitions, or you cannot predict?
It is very hard to predict. If you have seen in the last, you know, six to eight months, we have been very active, because we're taking opportunities when they arise, and we have been following some of these companies for a long time. It is really about finding the right opportunity that fits with us, that fits also well with the seller and their mindset of selling. We are continuously looking at opportunities. There's many opportunities. Many we just pass on because they don't fit with our strategic direction, or we get the sense that, you know, the sellers are very optimistic about the sales price and the process they want to run with, you know, high competition. We try to not enter very competitive processes.
I would say that we expect to continue this trend.
Unfortunately, we have just disconnected from the main speaker line. Please bear with me just one moment, and we'll get them back. Thank you.
Good morning again. Sorry for we dropped the line here for some reason, but we are back on the line. I don't know where we broke off on the question or if you're happy with the answer.
Yeah. Yeah, I guess, you'll see if you have the opportunities. Great. Going into the Argentina eastern hemisphere, it seems like you did, like, around $60 million of EBITDA this year, the guidance is not for so much growth. It's, like, $21 million or so, and you are doing $80 million revenue, like, this, quarter. That implies pretty low margins or even no growth in revenue. I guess pretty low margins. I guess your peers, like, Calfrac, they expected 20% EBITDA margin. You have mentioned that you may have problems, getting money out of Argentina. Why aren't you more positive around Argentina?
We are positive in the market outlook for Argentina, but we also recognize that it's a difficult country to operate. We have, over the last few years, been quite conservative in our guidance for Argentina. That's not because we don't believe that right now there's a good opportunity. But we like to see the year unfold before we kind of take a very positive view. In Argentina, historically, there has been incidents, not every year, but every second year that there is something happening in the business. When we guide, we also assume that there can be setbacks also this year, you know. That I think it's a conservative estimate, if I can say that.
Mm-hmm. Okay.
... what we are seeing right now. This is what we're seeing right now. This is our learning and experience, is that you have to be in these countries. Sometimes you have very good news, and sometimes you don't have so good news. You need to try and balance the outlook. For sure, we have better utilization in 2023. We have better rates for some of the rigs that has been upgraded, and we are also upgrading one of the last rig this year in Q1, and we will have then stronger rates from Q2 onwards. We are discussing with two clients to increase activity this year. We will wait to see if they materialize before we consider updating our guidance.
Okay. Do you believe that there's a realistic possibility that the Argentinian cycle for services could be even better than in other geographies because of the political instability of the country, that the supply may be more static than in other places or not?
We think so. That is our evaluation. I think the positive thing about Argentina today is both the government and the oil companies are investing in the required infrastructure. They kinda proved the play and the productivity on gas and oil in Vaca Muerta, now they're investing in infrastructure. As long as that investment continue, it's very attractive to be in the play, okay? For the oil companies and for the government. With the challenging situation, you know, to drill these wells in Vaca Muerta, you need a high-spec rigs. A typical replacement value for those rigs to bring them from, let's say, the U.S. or other places is more than $30 million to be able to drill those long horizontal wells.
We don't think anyone is going to invest in new capacity. That is what is going to set us up for upgrading more rigs than we can do, and also get good rates and high utilization of the assets we have.
Okay. Great. You didn't mention the debt refinancing process. It seems like you have a positive outlook. Can you say something, what can we know about the cost of the new debt? A possible dilution or not?
We cannot give any further details currently, but, other than what we have commented on earlier, that we are exploring alternatives for our debt, and that we believe we will have a solution well ahead of the maturity first of October in this year. We will get back.
Okay.
When we have further information we can share with the markets.
Okay, great. Great. Finally, 2024, it seems like 2023 will be a good year for Archer in Well Services. Even your peers are saying that 2023 will be a good tendering year for 2024. There will be even more growth in 2024. What's your view on that?
For sure there is more tendering activity than we have seen before for many, many years. We are also, as we see today, quite positive about the growth prospects for 2024. That actually includes in all the 3 divisions for 2024.
Okay. Okay. And finally, you had the Iceland Drilling, you put like an arrow going up and green, like it seems like that division is growing a lot. Is that so? Like, is geothermal such a growth division or not?
No, I think the, you know. We don't consolidate the acquisition of Iceland Drilling, just to be sure. This will be accounted for as an.
Associated.
-associated company. It is in a good market. The revenue for 2023 is going to be higher than 2022. We just have to play it out and see with our partner how we can grow that business globally over time, but also venture that company into not only district heating in Iceland, but also district heating in Europe. I think over the next two-t hree- four years, this is an exciting journey to be part of. For sure, we will put resources and our minds to how to grow that business over the next, you know, five- 10 years. Over time, become a very important part of Archer.
Okay, great. Thank you. Those were my questions.
Sure. Thank you.
Thank you. As a reminder, if you would like to ask a question, please press star followed by one on your telephone keypad. There are no additional questions waiting at this time, so I'd like to pass the call back over to Espen Joranger for any closing remarks. Please go ahead.
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 Tuesday.
This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.