Ladies and gentlemen, welcome to Dolphin Drilling Second Quarter and Half Year 2024 Financial Results. Thank you for joining us today as we review our financial performance, our operational highlights, and events for the six months of the year. I'm Bjørnar Iversen, the CEO of Dolphin Drilling, and joining me today I have our Chief Financial Officer, Stephen Cox, and Ingolf Gillestad from Investor Relations. Before we dive into the specifics of our financial performance for the quarter, I'd like to take a moment to highlight some of the key developments that underscore our progress. We have continued the successful operation and drilling campaign with strong safety records and nearly a perfect uptime of our newly acquired rig, Paul B. Loyd Jr.
That has proven our Dolphin Drilling's in-house management system and personnel is anchored in our key values that emphasize trust, excellence, delivering safe and cost-efficient drilling operations to our customers. Next page, please. After this presentation to read the important elements of our disclaimer. Next page, please. In today's session, we will be discussing our Q2 financials, safety and operational performance, and also the strategic decisions we've made. The company's firm revenue, backlog position as well, and the ongoing efforts we have to ensure all of the three rigs remain contracted. After our presentation, we will open up for questions, and we look forward to a productive discussion. Thank you all for your continued support and interest in Dolphin Drilling. Let's begin by reviewing the key financials and material events that took place in the second quarter, as well as subsequent developments.
With that, I give the word to our Chief Financial Officer, Mr. Stephen Cox. Stephen, please. Next page.
Thank you, Bjørnar. Good morning. Good afternoon. Q2 revenues of $16.4 million are mainly derived from the Paul B. Loyd Jr. contract, plus smaller amounts of equipment rented to third parties. The unit continues to perform to a high standard, with nearly 100% operating efficiency and robust safety metrics. Consistent with prior quarters, all earnings from the Blackford Nigeria contract have been de-recognized. This includes a contractual demobilization fee. More information on the Blackford and the Nigeria situation follows in the coming pages. The negative EBITDA number is a result of the impact of paying for two operations, but only being compensated for one. Blackford OpEx was just over $7 million in the quarter, well below previous running costs, but clearly still a drag on the business as we work through the issues in Nigeria.
The adjustments to EBITDA are principally legal costs relating to Nigeria, alongside some smaller costs in relation to the UK tax case. Overall, our G&A costs decreased slightly as we continue to focus closely on cost control. Within quarter, we announced and completed a $40 million equity raise. We again very much appreciate the shareholder support through that process. Disappointingly, the Nigeria situation worsened shortly after the equity raise, necessitating the cancellation of the follow-on repair process. As previously noted, we were granted permission by the UK Supreme Court for a hearing on the legacy tax case. We feel this is a positive indication as our position and the position found by the original court process in which we were successful is strong. The hearing is currently scheduled for February next year.
The risk remains of a negative result, however, it is unlikely to be known until later in the half of next year. Following the end of the quarter, the Blackford exited Nigeria. The Leader was sold for $5.9 million, and cash proceeds were received. The Borgland SPS has successfully continued, with more information on that later in the pack. Firm backlog consists of the same contracts as per previous quarter. Some values dropped from the options and LOI amounts due to the uncertainty created in the UK by the changing government and related policy concerns, which we will cover in the market update later in the call. Moving on to further discuss details, and as discussed on the previous page, the P&L resulted in an EBITDA loss. Unadjusted, this is $6.3 million.
Walking to the net result of a $14.1 million loss includes depreciation and amortization for four units, along with FX tax and interest expense. I refer you to the preliminary earnings report for more detail. However, we can note that operating costs, including G&A for the business, were largely in line with the previous quarter. The addition of the Leader to the fleet was offset by the removal of the Bideford, and the overall EBITDA quarter over quarter was improved by the earnings from the Paul B. Loyd Jr. The company ended the quarter with total cash of $54.5 million. $28.2 million of this was considered restricted by nature of supporting various bonds and guarantees, or because it was held within a bank account in a jurisdiction outside of our main banking locations.
By far, the largest item included as restricted was the $20 million bond, which was posted to secure the removal of the injunction against the Blackford leaving Nigeria. This bond was recovered during July, and that cash is now freely available within Dolphin. In addition to this, a $3 million bond associated with the temporary import of the Blackford to Nigeria is expected to be recovered in the coming weeks. Total debt is comprised of the MAP facility and the shareholder loan, and has grown, gross of a $6.5 million restricted cash amount. Year-to-date, capital expenditures are shown on the bottom right side. Excluding the acquisition of the two UK rigs, the Borgland has been the main area of spend, with the initial elements of the SPS being capitalized. Next page, please. On to backlog.
Backlog coverage for 2025 is largely complete at this time. All three units will be on contract, with the available days block representing the Borgland's availability post the EnQuest contract in the UK, and the small slice of option days being related to the Blackford's contract in Oil India. We now have solid and lengthy contracts for both the Paul B. Loyd and the Blackford, and so the absolute key area for us is to secure continuous work for the Borgland. The total value of our rig-level EBITDA backlog today exceeds $200 million. This is almost double the market cap currently attributed to Dolphin based on current pricing levels. An update on the rig fleet and our main strategic priorities from Bjørnar.
Thank you, Stephen. Dolphin Drilling was reborn in 2019 on the basis of bringing very well-maintained and efficient standard moored rigs back to work, to what they are best at, drilling wells at safe, low cost, with low emission and high efficiency for our clients. Since then, we have signed up contracts for Blackford Dolphin and Borgland Dolphin, and Paul B. Loyd was acquired with a contract, and which later was extended by several years. It is fair to note that it has taken a bit longer to achieve a situation with all rigs contracted, but this delay can be explained by changes in our customer behavior, COVID-19 setbacks, and the change in the fiscal regimes, particularly in the U.K.
We at Dolphin Drilling, as goes for most of the drilling contractors, continue in our pursuit for delivering safe operations at the right economics for ourself and our clients, and we are very disciplined in our approach, demonstrated by the recent removal of the Bideford and the Leader from our fleet. And we believe overall fleet, rig fleet optimization strategies is set to continue, and we intend to play our part in that. The acquisition of Paul B. Loyd Jr. was a result of such a strategy. We are a specialist operating standard mode, floater rigs in the harsh and mid-water territory, and we saw the rig as a very good fit to ours to further improve our operational footprint. Next, please. The core rig fleet of Dolphin contain three semi-submersible rigs, each of them today backed by firm contract. Paul B. Loyd Jr.
in the UK for Harbour Energy. Borgland has been relocated to Las Palmas ahead of its special periodic survey, and thereafter, contract for EnQuest in the UK from April 2025. Blackford, as mentioned, is on her way to India to commence her drilling contract with Oil India. Our fleet has been streamlined from last quarter as we maintain discipline and avoid financing costly layups, especially given the ongoing delays by E&Ps to previously planned drilling activities in the UK. All three semi-submersibles are moored rigs capable of operating in shallow to mid-water offshore basins, with Blackford offering additional deepwater drilling capacities, up to 1,850 meters of water depth. These rigs are equipped with close to the same topsides and topside equipment and features as provided by recent newer rigs.
Our fifth generation rigs offer the E&Ps and our clients the highest level of safety and efficiency drilling wells. Next page, please. We are pleased to see the early results of the successful integration of the recently acquired semi-submersible Paul B. Loyd Jr, with its personnel and strong safety and operational performance. A warm welcome to the more than 100 personnel that entered the Dolphin team during the second quarter, and we are committed to provide robust support as you embark this exciting journey with us. Together, we look forward to achieving great success and driving excellent performance towards our clients. We are proud of the good safety record, with no lost time incidents recorded since the rig entering the Dolphin Drilling fleet. And Dolphin Drilling has extensive worldwide experience working with exploration and production companies, across most offshore basins for decades.
And we have the in-house know-how that enable the efficient integration of people and equipment into our well-established systems. Paul B. Loyd Jr. is secured with Harbour Energy on a long-term contract with options, potentially seeing continued work into the next decade after 2030 and onwards. Our rig is one of the truly small remaining U.K. fleet of moored semi-submersible rigs that can continue to drill and support the drilling and decommissioning projects in the U.K. It's worth noting that there are more than two thousand subsea wells that will require P&A at some future point in this area, and we see a continuing uncertainty being driven by the fiscal regime in the U.K. with the pending budgetary announcements. Several units were already scheduled to leave the region, and a further reduction of rigs in the U.K. is looking likely.
This will represent a significant challenge for the UK operators, and we see international markets, including market inquiries and tenders increasing at the same time, which is offering more attractive economics in the long term outside the UK. Next page, please. Moving on to the Borgland Dolphin, specifically. This unit was moved to Las Palmas from Norway in May this year, where the special periodic survey is now ongoing. Our crew has kept the Borgland in great condition. Equipment and services have been tested and run periodically, and the steel and structures have received extra attention, with technical personnel performing scheduled maintenance during the whole layup period. An extensive exercise has been completed on the hull and structure, and the results reveal no major steel replacement is required.
The shipyard team is highly experienced and skilled with these types of rig service, and we are confident that the execution will be swift and effective, and in line with our previous estimates shared. Worth mentioning, the ultrasonic thickness measurements that is covering the whole rig is more or less finished, and the review has been very successful, revealing no new major steel replacement. Normally, this is one of the drivers for delays and cost overruns in a Special Periodic Survey projects, so we are happy about that. Next page, please. The Blackford Dolphin is heading towards India. The next drilling campaign is for Oil India, and the Blackford is scheduled to work for Oil India for at least fourteen months, with a potential total duration of up to 21 months if the option is exercised.
We have seen increased costs as a result of the delayed departure from Nigeria, alongside market rate increases for tow and support vessels. We continue to assess the overall impact of this. Following the departure from Nigeria, the arbitration with the former clients continues, and we will report any material developments. The 20 million bank guarantee was released in July, following the departure of the rig, as Stephen was commenting on previously. The Blackford is expected to arrive in India within the next 45 days. We see also a significant interest in the unit from multiple operators in the region, and we see good prospects for long-term drilling. India's oil demand is projected to double in the next 10-20 years, and part of this demand growth is plan covered from increased focus on domestic oil and gas production within India. Next, please.
Our fleet status now showing three contracted rigs, with the majority of 2025 now booked. As a reaction to the delayed decision to sanction drilling campaigns in the UK, we made a decision in Q1 to recycle Bideford Dolphin and sold the rig for the net of $4.1 million. Last quarter, we decided to do the same with Dolphin Leader, which, post quarter-end, was sold for $5.9 million. From the end of fourth quarter next year, we see that Dolphin Drilling will run on all cylinders and have all three rigs on contract. Next page, please. Next on the agenda is how we see the market for our semi-submersible rigs is developing. Next page, please. This slide shows the historical total rig supplies for all floaters, upper left corner.
The total available and competitive floater fleet continues to diminish. On the right side, we show the rig utilization development covering the moored segment. In our opinion, the medium-term outlook for the offshore floater rig segment, it's largely driven by rig supply characteristics and the actual available rig supply. Following a decade of weak rig demand, the total floater fleet has been reduced by one third due to the reduced willingness by E&P companies to make longer term commitments to plan for exploration and development. The moored rig segment, in which all of our rigs are characterized, has seen the total rig fleet being reduced by 75% in the same period. I repeat, 75%. The remaining moored fleet and units considered available for international drilling campaigns continue to shrink, leaving potentially less than 10 rigs available to service the global rig market.
Shallow and mid-water areas requiring moored rigs includes parts of South America, North America, Africa, Asia, and Pacific, as well as the North Sea region, which earlier was the key demand driver and region for moored rigs. Although we note a large pipeline of potential drilling and decommissioning campaigns, many of them are short-term, and on a standalone basis, does not justify costly reactivation and time-consuming mobilization periods. Other long-term campaigns are delayed due to overall constraints for timely delivery of services and equipment from the whole oil and gas value chain. We, as offshore drilling contractors, have to be disciplined and offer other services where it makes sense financially, resulting in greater willingness to reduce the rig fleet.
Moreover, we note the current massive focus from the E&Ps to either optimize existing production portfolios or entering into M&A activities versus organic growth. This has resulted in delayed demand for drilling services, but we expect that to come back. Next page, please. This page shows in detail the moored fleet. The moored rig fleet, specifically the international fleet, can barely now fill up a football team, and the risk for further supply reduction is high, unless longer-term contracts are offered. As you see from this page, Dolphin owns three rigs: the Blackford, Borgland, and the Paul B. Loyd Jr. Diamond owns the Ocean Patriot and Ocean Endeavor and the Ocean Apex in Australia. Valaris owns the MS-1 in Australia. Constellation owns the Atlantic Star, currently in Brazil. Japan Drilling owns Hakuryu-5 in Malaysia.
Essar owns the Wildcat on her way to Pemex in Mexico, and COSL Nanhai 8, which is currently planned for Brazil and Petrobras. As we see from this page, not many compete in these segments, as contractors have opted to optimize their rig fleet with one set of rig characteristics versus focusing on an offering of a broad and diversified scale. With that said, we are confident that the rigs in the green colored area, with eleven up in the chart, will continue to experience high utilization rates for the foreseeable future going forward, as the total rig supply is now down just to the bare minimum. Dolphin Drilling is prepared to drill and market our rigs in most offshore basins, but we will do so only towards financially robust business opportunities.
We need to be compensated for the mobilization, the retaining of crews, and we require sufficient day rates in order to maintain efficient and safe rigs, alongside the generation of an appropriate return on our investment. Next page, please. Then zooming a little bit in on the U.K. market. Specifically, the U.K. region has seen its total rig fleet reduced from more than 20 rigs to less than a handful of capable semi-submersible rigs. The potential result being that future drilling campaigns, including decommissioning work, may require rigs to be sourced from other regions at significant cost. The vast reduction in the supply side of the industry, coupled with the international dynamics, could also result in a severe undersupply situation in the U.K. in the very near future.
The international outlook remains attractive from an overall rig supply point of view, but timing of actual commitments to move forward with drilling plans could indicate some project delays, particularly in the UK then. Next page, please. We are then at the summary section of this quarterly presentation. Next page, please. As we summarize the status of Dolphin Drilling for the quarter, we would like to sum up that we own and operate a rig fleet of three rigs. We have secured contract for all three rigs. Borgland Dolphin will receive additional attention in terms of marketing initiatives going forward to backfill the EnQuest contract.
... Through the company's legacy, we are positioned to find work in most offshore basins, and we have the in-house systems required to participate in most rig tenders for our rigs, as well as marketing and operation of other rigs. The firm backlog is $431 million as of date of reporting, which should result in a strong cash flow generation in 2025. With that, we open up for the Q&A session. Next page, please.
Okay, so just as a reminder, you can submit questions via the webcast. We do have some questions rolling in here, and we will do our best to answer those in a sequence and not duplicate. So I think first one we'll go to is around the Borgland. So the question is, "Is it correct that previous LOIs on the Borgland have lapsed, since it does not longer seem to be included in the backlog? And can we talk more about the U.K. market and the impacts and the likelihood of more work on the Borgland in 2025, along with opportunities in other regions?" So I'll hand that to Bjørnar.
Thank you very much, Stephen. Yes, the LOI has lapsed. Due to the political situation in the U.K., the project we were working on was slipping and slipping from our customer sides until it lapsed. So now, from this quarter, we are showing that the rig is free and clear, and of course, that has generated interest from a lot of other clients. And it was important for us to show that in the market. When it comes to other opportunities, we have several opportunities both in the U.K., but also foremost internationally for the Borgland on longer contract and I would say contracts on a higher day rate level than we had in that letter of intent. So we have. We're working hard to get back-to-back work for the Borgland after the EnQuest contract, which will end some time in August next year.
Okay, thanks. So a couple other questions. I'll take these ones. There's a specific question about the Blackford moving costs to the drilling location in India. It's a specific question. It's not one we can really give a specific answer to, however, 'cause you'll appreciate there's a number of moving parts here, not least the timeline. What I can confirm, though, is we lump sum contracted the tow vessel, so the additional time is not hurting us too badly. There is additional cost there, but it's not maybe as bad as you would think. The daily costs are rough metrics when we look at adding the boat cost in to the OpEx on the rig. The rig is obviously now on a lower crew.
We are starting to onboard the Indian crew, so it will ramp up from there. But we're in the low hundreds type territory for the Blackford, including the boat as we move. So that will obviously reach its location in the next couple of months, and we'll be able to update better in the Q3 reporting as to how that landed. There's a kind of related question to this, which is more about the timing of India arrival and what does that look like from the perspective of additional financing, equity issuance, et cetera. You know, the way that we think about that right now is, obviously, we always assess the capital structure for the business. We should always note the Blackford and the Borgland have contracts on them that are unencumbered at this time.
As I think any good stewardship would do, we've looked carefully at what things we should attempt to do there. I think it'd be fair to say, right now, we continue to assess those options. There is flexibility for us there to do something, but as at this point in time, no plans currently. I think we've got some more questions just coming in. Okay, I'll pick this one. "What's a longer term goal for the company, acquiring or building out with more assets and market share?" Bjørnar, do you want to take that?
I can take that one, Stephen. Just to repeat the focus on the company as of today, and then I will move on the longer term perspective. For us now, keep the Paul B. Loyd Jr. rolling and delivering strong free cash flow. Two, get the Blackford on contract with Oil India. Three, do the SPS on the Borgland and bring her to EnQuest. And four, build the backlog at the back of Borgland, either in the UK or internationally. On top of that, the company has organizational capacity to chase management opportunities for other rig owners without that access to clients and with that operational capacity. And we are also, I would say, opportunistically looking at other opportunities to grow the company and take part of a further consolidation of the market.
Growth on top of the current three assets is, of course, something that we are chasing. Stephen, back to you.
Thanks. A couple of questions here, kind of related topics as well. When the company be stable to be looking at dividends and the kind of valuation that's attached to the equity in the company today versus our EBITDA backlog. So I mean, we'll sort of wrap those up, right? Obviously, we're in a phase right now where we're highly focused on getting the three rigs on contract, and then building that longer backlog out attached to Borgland. As Bjørnar said earlier, we're looking at several opportunities there to make sure we have continuous work on those rigs. Obviously, 2025 is a large transitional year for the company with the amount of backlog we've already got booked, to get that done, and adding on any other opportunity we can.
But obviously, we want to get to that point before we start talking about what happens next. And again, assessing that capital structure as we're doing that, making sure it's optimum for everybody, all stakeholders in the company, is of paramount importance to us. So that is our focus, operational excellence, delivering the contracts, getting this backlog executed, and getting the result of three rigs on contract. I think we will look very, very different in a few months' time. There's actually nothing else come in question-wise at this point. So I think, Bjørn, if you wanna wrap up, we are-
Yeah
through the whole list.
Yes, thank you for that, Stephen. And as you said there, the company will look different, and we will have, as we said, sometime in October, the Blackford on contract, according to our plans today. Then we will have the Borgland on contract with EnQuest around 1st of April 2025. And after that, as you said, Stephen, the company will look different, and we are chasing other opportunities on top of that. So, I would say on that note, I would like to thank you all for calling in and showing interest in the company and backing the company and asking questions. So on that note, I would like to thank you all for calling in, and thank you very much, and looking forward to report on the company to you guys also in the next quarter. Thank you very much.