Hello, everybody, and welcome to today's Archer Q4 2025 trading update and 2026 outlook presentation. My name is Seb, and I'll be the operator for your call today. If you would like to ask a question at the Q&A session, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two. I will now hand you over to Dag Skindlo to begin the call. Please go ahead.
Thank you. Good morning, and thank you for joining Archer's trading update covering 2025 and our outlook for 2026. I am Dag Skindlo, CEO of Archer. I'm joined on today's call by our CFO, Espen Joranger. Moving to slide 2. As a reminder, today's discussion includes forward-looking statements and certain non-GAAP and IFRS measures historically. These statements involve risks and uncertainties, and actual results may differ materially. Please refer to the presentation and our disclosures for additional information. Please note that we have changed our accounting standard from U.S. GAAP to IFRS. Unless stated otherwise, we will refer to financial measures as per IFRS in this today's call. I will go through the major impact on our finances in a few minutes. Next slide, please.
We will start by walking through our Q4 and 2025 highlights before we will provide a business update to each of our segments. Lastly, we will go through our outlook and guidance for 2026 before we open the call for questions and answers. With that, let us move to slide 4. Archer has more than 50 years of operating history and has developed into a global oil service company. We generated $1.2 billion in revenue in 2025 and employ approximately 4,500 people across 40 locations globally. Our operations are organized into 4 business areas: well services, platform operation, land drilling, and renewable services. Together, these span the full life cycle of wells and energy infrastructure, with a strong operation track record and a backlog of around $4 billion at the year-end.
Well services and platform operations together account for roughly three quarters of our total activity. While the majority of operations remain in the North Sea, we continue to expand internationally into new regions and additional service lines. With land drilling, Archer is one of the major drilling and workover players in Argentina, competing with larger international peers such as H&P and Nabors. As part of our continued focus on efficiency and strategic clarity, we announced last week the divestment of our workover business in the south of Argentina, allowing us to further streamline the organization and sharpen our focus on the growing Vaca Muerta shale region. Finally, we last year formalized renewable services as a separate business area. This segment includes mainly geothermal and wind-related services, and generated revenue of more than $100 million in 2025.
With that, we'll move on to the next slide. 2025 was a pivotal year. Archer delivered a solid year in 2025, growing EBITDA by 12% year-over-year and achieving an impressive average annual EBITDA growth of approximately 21% since 2022. This growth has been driven by higher activity levels, improved margins, and continued strategic focus on core markets, including disciplined M&A. Notably, the company achieved growth last year despite muted market development in Argentina, in the U.K., and the U.S. Key events in 2025 includes the refinancing early 2025 by issuance of a $425 million senior secured bond, which extends our debt maturity to 2030, reducing our ongoing cost of debt and strengthens liquidity. We launched the shareholder return program with quarterly cash distributions commencing in Q2 2025, with an approximately yield of 10%.
We strengthened our P&A capabilities and client reach through a $20 million acquisition of the U.S.-based Premium Oilfield Services, while a small bolt-on acquisition of WellConnection further streamlined well pipe inspection and repair services in Norway. We secured several significant long-term P&A and platform drilling contracts, including major awards with NEO Energy and Equinor. These key wins further elevate our position as a leading P&A provider and underpin strong momentum and growth opportunities into 2026 and beyond. While our land drilling division secured a $600 million five-year drilling contract with YPF for seven high-spec rigs in Argentina. Last Friday, we completed the sale of our workover business in southern Argentina, enabling strategic focus on the growing business in Vaca Muerta. More on this later. Slide 6, please.
In Q4, we continued to grow, with revenue approximately $309 million, up 3% year-on-year, and EBITDA of about $45 million, up 14% year-on-year. For full year 2025, revenue was about $1.2 billion, up 8%, with EBITDA of roughly $167 million, up 12%. We continued our strong capital discipline in the fourth quarter, approving a distribution of $6.1 million to shareholders and a further distribution of $6.4 million in Q1 this year, reflecting both solid cash generation and a confidence in the outlook. Operationally, we strengthen the backlog and capabilities with major contract awards. As mentioned, we secured a major drilling contract with YPF in Argentina. This is strategically important that strengthens our position as a leading provider of drilling services in the Vaca Muerta field, and provides long-term predictable revenue.
To fulfill our obligations under the contract, we will rent 2 high-spec rigs from Patterson-UTI. In the U.K., we signed a contract with NEO Energy for the development or the deployment of a P&A unit, further expanding our late-life and decommissioning portfolio. We also achieved extensions of existing platform drilling contracts, both in the U.K. and Norway, reinforcing long-standing customer relationships and support high utilization across the fleet. Not long into the new year, we were also awarded integrated P&A contracts, both on the Norwegian Continental Shelf and in the Deepwater Gulf of Mexico. These awards highlight our differentiated integrated offering and our ability to execute complex P&A projects across multiple geographies. Moving to slide 7. During the quarter, we converted our financial reporting from U.S. GAAP to IFRS, effective from and including Q4 2025.
The main reason for this change is to align with the majority of companies listed on the Oslo Stock Exchange, improving comparability for investors and analysts. Going forward, all financial reports and representation will be prepared under IFRS, unless we explicitly state otherwise. Importantly, this is a change in accounting presentation, not a change in the underlying business performance or cash generation. The conversion primarily affects how revenue and EBITDA are presented. Under IFRS, reimbursed services and products are no longer reported as revenue. This means reported revenue now reflects operational revenue only, which explains the reduction in top-line figures versus U.S. GAAP. The main impact on EBITDA reported is operating lease costs are classified below EBITDA, together with depreciation and amortization. As a result, EBITDA increases under IFRS. Additionally, some R&D and certain intangible assets are more likely to be capitalized and amortized under IFRS, rather than expensed immediately.
Looking at Q4, revenue goes from $352 million under U.S. GAAP to $309 million under IFRS, driven by the removal of reimbursements. At the same time, Q4 EBITDA increased from $38.9 million- $44.5 million, reflecting the reclassification of lease costs and also the capitalization of completed R&D project in Q4. The same effects are visible on full-year 2025 basis. Revenue moves from $1.385 billion- $1.209 billion, while EBITDA increases from $149 million- $166.5 million under IFRS. In summary, IFRS conversion results in lower reported revenue, but higher EBITDA. Slide 8, please. Last year, Archer has added substantial backlog across all core business areas, materially improving long-term revenue and earnings visibility.
The awards are characterized by long duration, high technical content, and strong counterparties. I'll start with platform operations, where we continue to strengthen our long-term contract base across the North Sea. In the UK, Archer was awarded a 5-year late-life and P&A service contract with NEO Energy, covering its UK platform portfolio, as well as a 5-year contract for compact P&A unit. We also secure extensive platform drilling contracts in both the UK and Norway, including a 3-year extension with Aker BP, reflecting strong operation performance and customer relationship. Moving to Well Services, we saw several important contract awards that further strengthens our international P&A position. In Norway, we secured a 7-year frame agreement with Equinor for subsea P&A well engineering, providing strong long-term visibility. Early this year, we were awarded the execution scope of 30 subsea well for offshore execution.
In January this year, Archer was awarded an integrated P&A services in the Gulf of Mexico, delivering together with SLB, highlighting our ability to execute complex integrated P&A projects. In addition, Archer received a 3-year renewal of platform services for major operator in the Gulf of Mexico. Finally, turning to land drilling. Our focus remains on building scale and long-term visibility in the Vaca Muerta shale region. In Argentina, Archer signed a major 5-year drilling service contract with YPF, covering 7 high-spec rigs and MPD services, representing a major long-term award. In August, we secured a 2-year contract renewal with Pan American for 2 rigs in the Vaca Muerta. Together, these two contracts build a solid foundation for predictable recurring cash flow.
We also secured a 3-year renewal of our contract with Pan American Energy in the south of Argentina for the provision of 9 pulling units and 8 workover units. As we'll come back to this later, this workover business has now been divested. Slide 9, please. Archer is starting 2026 with a solid contract backlog. Following the divestment of the workover business in southern Argentina, we now have a contract backlog of $3.6 billion, giving high visibility of our revenue going forward. For the next 2 years, we have about 75% coverage on fixed scope contracts, not including the biggest part of well services, which are driven by frame agreements and purchase orders. For 2026, our current backlog for the year already represent more than 80% of full-year operational revenue in 2025.
If you assume current margin by division, the total backlog represent about $550 million of EBITDA for Archer. Our contract backlog is divided between our four divisions, but with around 50% of the backlog with platform operation in line with historic figures. Next slide, please. We have strengthened our balance sheet in 2025. In the beginning of the year, we secured a new long-term financing Archer. We have $425 million secured bond, reducing our cost of capital and extending our long-term financing to 2030. The growth in recent years and the completed refinancing 2025 enabled Archer to start our first shareholder distribution program in Q2 2025. With the cash distribution approved by the board for this quarter, we now complete 4 quarters cash distribution with a yield of about 10%-11%.
As part of our equity raise to acquire Premium Oilfield Services in 2025, our previous largest shareholder, Paratus Energy, exited our shareholder base. In this transaction, the largest shareholder in Paratus, including Hemen, acquired shares in Archer directly. Consequently, Hemen increased their direct shareholding to 30.6%, and the share of the free float increased to almost 70%, increasing the liquidity in the stock. Slide 11, please. As mentioned, we have finalized the sale of our workover business in southern Argentina to a regional player. The sale of the legal entity includes 12 workover units, 12 pulling units, and about 750 employees. The conventional oil and gas business in the South used to be where Argentina produced most of their oil and gas.
The activity for Archer reached its peak in 2015, where we had more than 2,500 employees and 15 active drilling rigs. Last year, operators again reduced drilling and workover activity, and we needed to release about 600 employees. With the sale now, we have 0 employees left in the province of Chubut. In 2025, this business represented about 12% of Archer's total revenue, and the business has historically delivered EBITDA margins below 5%, with limited or no cash contribution. The sale triggered a one-off write-down of $20 million, with no cash impact, mainly re-representing intercompany balances. Excluded from the sale, we retained key drilling and workover assets, including 4 drilling rigs, 5 workover units, and 4 pulling units. Our plan is to optimize the value of these assets and generate cash flow for Archer.
These assets are expected to be sold, rented, or deployed for work in Vaca Muerta going forward. The divestment of the workover business aligns with Archer's strategy to streamline its land drilling portfolio and concentrate on the growing business in Vaca Muerta. Following the divestment, Archer's land drilling business unit will primarily operate drilling and workover services in the conventional Vaca Muerta field, where we are, we are awarded a major drilling contract with YPF in Q4 2025. Next slide, please. We will now go through our business segments and our history, historic EBITDA development. Next slide, please. This slide highlights a key strength of our business, our resilient EBITDA performance over time. Here we can see our historic EBITDA from 2017 through our 2025 results.
It shows a steady upward trend, with only moderate dips following major disruptions, such as COVID in 2020 and 2021. The message is clear: Our EBITDA is resilient, even under volatile market conditions. Why is that? It comes down to our business model and the nature of our exposure. We are focused on more resilient, OpEx-driven activities. We are largely exposed to brownfield operations, which are significantly less sensitive to swing in commodity prices. This large exposure to brownfield work and well P&A makes Archer somewhat unique in the industry. Brownfield operations take place in mature producing fields where infrastructure is already in place. These services are essential for our clients to maintain production at a low cost per barrel, forming the backbone of their activities, securing their cash flow. For Archer, this provides a more stable and predictable demand for our services.
While low oil price and market volatility can reduce client spending, the impact on brownfield and P&A is seldom major. Brownfield production is what funds dividends, share buybacks, and future greenfield development for operators. This business mix makes our performance more predictable and less cyclical than many of our peers, as summarized in the comments to the right. We have delivered 13% EBITDA growth since 2017, driven by organic and inorganic growth. Especially the last few years, we have delivered strong EBITDA growth of 21% since 2022. Our EBITDA margins have expanded over time. The fabric of the business have shifted towards higher value, higher margin business. We expect further improvement in 2026 as higher margin activity ramps up. In 2025, our EBITDA grew 12% year-on-year, while large oil service peers report decline, a clear sign of our more stable business profile.
And importantly, even after selling the lower-margin Southern Argentina workover business, we still expect single-digit EBITDA growth in 2026, supported by backlog and new project startups. Next slide, please. Our well services segment delivered high-end, deliver high-end solutions that ensure optimal well performance for clients globally. We also maintain a leading position in plug and abandonment services, a key growth area for Archer in the coming years. Over the period 2017 to 2025, we have achieved strong annual growth of nearly 20% in the well service segment. This has been accompanied by revenue growth and significant expansion in margins, reflecting both operational efficiency and the value of our service portfolio. Strategic acquisitions in the U.S., including WFR and Premium Oilfield Services, strengthen our capabilities in P&A and fishing services, supporting further growth and market penetration.
We have secured multiple integrated P&A projects, notably a milestone contract with Equinor for subsea well P&A, demonstrating the trust clients place in our technical expertise and execution capabilities. Looking ahead, we are preparing to commercialize new P&A technologies in 2026, which we expect will further enhance efficiency and cost reduction for our clients while reinforcing our competitive edge in the market. Slide 15, please. Platform operation is a leading platform drilling provider in the North Sea, supported by long-term contracts and major operators and an estimated backlog approaching $2 billion, including options. The business is well-positioned for late life and P&A activity. In 2025 and 2025, we are making targeted growth investment in lighter P&A units, with deployment plan in both the North Sea and the U.S. Gulf of Mexico, allowing us to expand geographically while leveraging existing capabilities.
We have also secured recent contract extension for platform drilling in North Sea, reflecting strong operation performance and solid customer relations. Finally, frankly, platform operations have delivered stable and resilient cash contribution over time, supported by predictable activity levels and disciplined capital allocation. While 2026 is expected to be lower than 2025, this mainly reflects no MDR activity and the timing of new P&A unit startups, with three units likely to commence operating during the third quarter. Overall, platform operations remain a core contributor to Archer's earnings and cash flow, with a diversified service offering across platform drilling, engineering, P&A rigs, and rental services. Slide 16, please. Land drilling in Argentina is a cash-positive business focused on the growing Vaca Muerta play. The sale of the Southern work business increased focus on higher return drilling operations in Vaca Muerta.
The $600 million contract with YPF strengthens visibility and market share in the region. The export infrastructure for oil and gas is under construction, and industry experts predict the oil production from Vaca Muerta to grow from just below 600,000 barrels a day to well over 1 million barrels per day by 2030. This is that projects rig demand to increase by 40% over the next few years. We are in discussion with clients to add additional drilling capacity to Vaca Muerta towards the end of 2026 or early 2027. For the YPF contract just announced, we demonstrated that we could secure additional rigs to the basin without significant investment. We are hopeful we can replicate this success and continue to grow the business and cash flow going forward. Slide 17.
Following the development of our workover business, our land drilling position in Argentina is strengthened and more focused. We now operate a fleet of high-spec and super-spec rigs under long-term contracts with YPF and Pan American, supported by a mix of owned and leased MPD packages. This gives us a high-quality operation base in one of the fastest-growing and unconventional regions globally. The contract backlog provides strong visibility, as shown on the right. We have commitments well into 2030, and as I highlighted on the previous slide, we continue to see attractive opportunities for incremental growth, particularly as activity levels in Vaca Muerta rise. We are also tendering for work with services used to retain legacy assets from the sold business. This capitalizes opportunities that could further broaden our service offering and deepen our relationship with key customers.
Overall, the streamlined portfolio positions us to capture the upside in Vaca Muerta while delivering stable earnings from a modern contracted fleet. Slide 18, please. Let me expand on the recent contract award from YPF, which represents one of the most significant land drilling awards in Argentina in recent years. The total contract value is $600 million, covering 7 high-spec rigs on a firm 5-year term, with an additional 2-year option. All 7 rigs will operate with integrated MPD, reinforcing our position as the technology leader in Vaca Muerta. YPF, Y-YPF, as you know, is the largest operator in Argentina, and this award further strengthens our strategic partnership with them. To support the campaign, we will also introduce 2 new super-spec rigs brought into the country through a lease agreement with Patterson-UTI. This allows us to scale efficiently while maintaining capital discipline.
This award is a true milestone for Archer. It provides long-term activity visibility, increase our market share in Vaca Muerta, and position us squarely as one of the leading drilling service providers in the basin. It also reinforces the momentum we are seeing across our land business and support the broader growth outlook, as outlined earlier. Slide 19, please. Let me briefly touch on renewable service business. We provide a broad range of services across geothermal, wind, hydropower, and carbon storage. 2025 was a record year for our geothermal drilling, reflecting both market demand and our strong technical deliveries. In total, we generated more than $100 million in revenue from the renewable segment in 2025. The one challenging area is the floating offshore wind foundation project with TotalEnergies, which has seen delays and higher than planned costs.
We're now expecting towing to take place in the first half of 2026, and are working closely with the clients to secure a safe and efficient completion. Next slide, please. Finally, I'll cover guidance and capital allocation before we move to Q&A. Slide 21, please. For 2026, we expect single-digit growth in EBITDA despite the sale of the Southern workover business. We continue to trend on margin expansion. More favorable products and service mix is expected to lift EBITDA margin by 2-3 percentage points in 2026. We see lower activity in the first half as we have no active P&A units. We get the impact from the loss of the Peregrino activity in Brazil and due to lower seasonal well service activity.
However, second half 2026, EBITDA is expected to be 20%-30% higher than the first half of the year, with 3 P&A units, 2 YPF rigs, and several integrated North Sea P&A projects commencing. CapEx is estimated at 6%-10% of revenue as we build full equipment requirements for new contract awards. This is expected to give higher cash generation going forward. CapEx investment has been running between 5%-6% of operating revenue the last 5 years, in the last few years to sustain the EBITDA growth. The slightly elevated CapEx is driven by growth investment from contract awards. Our maintenance CapEx is expected to remain stable around 3% of revenue, in line with levels for the last 3 years. Our growth in earnings is expected to support increased shareholder distribution in H2 2026. Slide 22, please.
Our capital allocation framework remains highly disciplined. Firstly, we are committed to sustainable quarterly shareholder distributions, growing over time in line with earnings. Second, we will continue to pursue selective, accretive bolt-on M&A, focused on synergies and strong financial terms. On CapEx, we plan to maintain investment of 5%-6% of operational revenue, with larger growth project targeting 30%-50% return. And finally, we continue to strengthen the balance sheet as we grow, targeting long-term leverage of 1.5-2 times, while maintaining solid liquidity, liquidity at all times. This framework ensure we create value while remaining financially resilient. Slide 23. Let me close with a brief summary. Archer today is a leading well company with a resilient and focused business model. Close to 90% of our revenue comes from brownfield operation and P&A, providing stability through the cycle.
We have delivered more than 20% annual EBITDA growth over the last 3 years, supported by strong multi-year contract backlog across key markets. The broader P&A and decommissioning market is expected to double by 2050, and we are exceptionally well positioned to capture that growth. At the same time, we continue to deliver consistent value to shareholders through our regular quarterly cash distributions, yielding about 10% at the current share price. In summary, Archer is executing on this strategy, strengthening its market position, and is very well positioned for profitable growth going forward. With that, I will now hand the call over to operator for Q&A session. Thank you. Will you please open the line for questions?
Thank you. As a reminder, if you would like to ask a question, it's star one on your telephone keypad. If you would like to withdraw your question, please press star two. So, Dag, we have no questions on the line at this time. I'll just hand back to you if you have any closing comments.
Thank you, and 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 good day.
This concludes today's call. Thank you all very much for joining. You may now disconnect.