Hello, everyone, and a warm welcome to DOF's Q3 results presentation. Today, we will cover the operational and financial highlights. As per usual, we finish off with a Q&A session. You can post your questions in the Q&A function on the webcast player at any time. You can start now if you want, then we will cover them at the end. With that, I will hand it over to you, Mons, to take us through the first couple of slides.
Thank you, Mr. Vardøy, and welcome. We start on the next slide, please. That is DOF at a glance. Of course, most of you have seen that before. Not many changes since last. We operate 78 boats, and the backlog of $6.6 billion. We talk much more about the backlog later on in the presentation. I guess what to remember, of course, is that we expect that backlog to grow quite a lot the next few weeks and months. We have quite a few deals that are nearing signature, which, of course, then will, you could almost say, de-risk not only 2027, but also into 2028 and 2029. It is one of those periods where we are really optimistic on building backlog. Then on revenues and split and all that, we will come back to that later on.
Next one is just of our business model, and of course, you have seen that before. There have been a few changes on the fleet. Today, we own 57 vessels in operations. We also then hire in nine boats, so we, of course, also then control commercially, and then we have management on a few boats. We own a very large pool of subsea equipment ROVs. I guess we are between the top four, five owners of ROVs globally. Then you see the numbers here that has last 12 months has been $848 million, and you know the business model there. We have the boats, we add on the services, and we sell the solutions and services and projects to the oil service industry globally. Here are the highlights for the quarter. Martin will come back more on the details on the numbers.
Just to highlight this, that we did $240 million in EBITDA in the quarter. Excluding the gain on sale on two boats, we had $219 million here, which is 13% better than last year. Utilization of 86%, so of course, there is still room for improvement on the utilization, and we hope to see that growing a bit into next year. Then, as we said, the backlog after, if you include the contract we have released after the balance date, we are at $7 billion. As I said, I do not repeat, we are repeating myself, we expect that to grow a bit, and we have a few slides on that as well. We sold a couple of few boats. We delivered them in the quarter.
I guess most important is, of course, that we announced the sale of the vessel called Skandi Implementer just a week or two ago. Of course, he was kind of not an obvious sales candidate. I guess, see the comments from analysts is that it came as a surprise. Of course, it is a high-end boat. I think you need to read that sale as when you get an offer, you know, that with such a high price, you need to use your brain and sell the boat. That is what we did. I guess for the, or for, let us say, strategic position and subsea earnings, we still have four boats left in that market. We took the opportunity.
We will do a very, very nice profit on it. I guess we, on our own internal numbers, you know, we are between 7x and 8x on the sales. We found that it would make sense. Debt level 1.6x now at the end of the quarter. We have increased the dividend to $0.4 per share, to be paid on 30th of November. So increasing the dividend a bit. That is how it is. Martin will do a bit more on the numbers later on. On the contract side, been a few. Of course, we say we will be much more going forward. I do not control all of them. I think what is interesting is, of course, that it has been a quarter where we have done a lot of contract on our anchor handling fleet.
Of course, that is not something that happened often, because we have three contracts in Canada. We have the Skandi Hera, which is, of course, very important for us, the first long-term contract we get in Suriname, which, of course, is a very promising country going forward. So we, of course, hope and expect to see more opportunities in Suriname going forward. That is very interesting, it is an anchor handler with crane. We will not only deliver the boat, but also our services on top. We had a few extensions on the Skandi Vega and some more anchor handlers. So it has been a good ride on the anchor handlers in the quarter. We have had, perhaps also worth mentioning, of course, is the seven-year contract on one of our smaller DSVs. Of course, it is now giving a backlog into 2033, I think.
So it is building longer backlog. A few awards on the subsea side. Perhaps this award is worth mentioning, it is a SURF project. So it is very interesting for us. That is something we want to do more of going forward. We think that is a segment that can contribute to lifting the earnings of our all in the DOF Group. So I think I will leave that slide like that. We thought we should show the anchor handling side, because we have enjoyed a very good spot market in the North Sea this year on a few boats. Of course, DOF is not a typical spot-oriented player. We like long-term contract, we like subsea projects. So when you see now, we have only one boat trading the North Sea spot now from over until 2026.
Next year, we have overall six boats that are not on long-term contracts, and four of them with cranes, which gives an exposure to a different market than the vessels without crane. They are typically used for projects, mainly mooring projects, but also normal subsea projects. There is a balanced fleet approach. You see also there are a few green dots here on the Skandi Sandefjord, the Skandi Saltfjord, and the [Fjordas], which are projects we are going to do, big mooring projects we are going to do, where we have the flexibility. On this slide, we have only included that project on two boats. If the market is weak, we have an opportunity to take four boats from our own fleet, because we have an obligation to deliver two, but we can deliver four if we want. It gives us the flexibility.
I think the point of this slide, of course, is that we have a very good backlog for them, and the boats we do not have backlog for, they are needed for our subsea mooring business. To give a complete offering in that space, we need a boat or two with crane, and we need a couple of boats without crane. We are where we want to be on the anchor handling side. Then, I guess, perhaps this is the most important slide in this presentation, is that Petrobras, a few days ago, they, how do you say it, they classified or they approved or they their contracts for the Recife and Olinda and Buzios, also three big pipe layers done from early 2028 to early 2032.
It is three, four-year contracts, and what remains there is to just read through the draft of the contract and sign them. I think within a few weeks, we will send a press release on those, if everything goes according to plan. Of course, no guarantees, but at least Petrobras have approved them, and that is normal, a sign of getting close to a signed contract. What is interesting is, of course, that these boats, if you look at them, those three boats alone, if you look at the earnings for 2026, they represent between 8% and 9% of the overall EBITDA for the whole DOF Group. It is a major contract, and as you see, it will represent more than $500 million in backlog for us. Hopefully, within a week or two or three, we will send a release if everything goes according to plan.
Of course, that brings us to the backlog slide. We have roughly $7 billion in the backlog now. If you go down to the pipe layers, you are at $7.5 billion. As we are saying in the outlook slide, we are saying that we have a few contracts close to signing, so we expect, of course, that to grow a bit more than only with the PLSVs. You could say that we should be hopefully closer to $8 billion than $7 billion when those contracts hopefully are announced. No guarantees, of course. Of course, that means that 2027 is getting close to $1.7 billion, in backlog. If you add on the pipelines for 2028, you are at roughly $1.45 billion. Then we are saying hopefully that will grow further.
So if it goes according to plan, we will de-risk not only 2027, but also 2028. Of course, these contracts also lift the backlog in 2029 and onwards. What we are trying to say is, of course, this looks. We are optimistic on the inflow of new contracts and that we will keep the good momentum for many years going forward, with the pipeline we see of new work. So it is looking. We are into a period where it looks quite optimistic on the backlog and contracts side. This is then back to the Skandi Implementer we are selling and delivered and after probably we have Guyana delivering then towards the end of Q2. There was a reduced net up the lot. As we say, we will have four similar vessels in our fleet to do projects.
Certainly we do not think our clients will notice much difference as we still have quite high capacity in that space. This kind of busy, this. What we have said is that we shall. The sale and purchase together with. The sale and purchase of vessels should be cash neutral. Of course, this graph will illustrate that after, of course, the Skandi Implementer, as I say, we are freed up quite a bit of cash. So, we have a very disciplined approach to, let us say, to new vessels and renewing fleet. Of course, we have a plan and of course to gradually make the fleet, high-grade the fleet. Of course, also then back of mind, of course, is also the average age of the fleet where we gradually make that a bit younger, as we talked about on the capital market.
Then it is Mr. Martin Lundberg. Please, Mister.
Thank you, Mons. Again, as Mons said, it is another good quarter in the long lines. It is up 13% on the same quarter last year, $240 million being a strong quarter. Of course, $ 219 million operational. I think we should keep in mind that the sales gain of $21 million is also value creation from what we have in our books. So, although we primarily focus on the $219 million and compare that to quarter-on-quarter, it is certainly the sales have been a good contribution for the last few quarters. The biggest improvement on this quarter is the ship owning, or the strongest portion of the quarter is the ship owning business, similar as last quarter. The JV with the DOFCON JV and the Norskan is pretty stable from previous quarter.
The subsea regions is the, I would say, as usual, the most fluctuating part of our activity with $26 million. I think it is, of course, important to keep in mind also that the biggest client from the ship owning business is the internal subsea regions. The value creation remains in those regions, although the earnings end up with the ship owner. On leverage, it has been a, yeah, a strong quarter again with some little reduction on the gross debt improvement in cash position, reducing net debt to a level where we are at 1.6 x net interest-bearing debt to EBITDA on the last 12 months. We had a couple of, we had the delivery of the recently purchased Skandi Sandefjord and the associated debt increase from that transaction.
We had the reduction of debt through the sale of vessels, and we also had a refinancing of Skandi Açu, one of the joint venture vessels that performed during the quarter. Quite a bit of activity, although the gross level is somewhat changed from $1.919 billion to $1.881 billion. Only a small change there. In the longer picture, it is a solid development. On this one, I would say worth mentioning is, again, similar to last quarter, a good operational cash flow, positive change in working capital. It is, yeah, strong contribution from sale of vessels, but of course, also payments on both the initial installment on the two 250-ton vessels that we purchased, as well as the main bulk of the Skandi Sandefjord, as I mentioned on the last slide as well.
It is also a quarter where we have had a bit of docking activity and also got delivered a couple of ROV systems impacting the CapEx to the extent shown on the overview. On the financing side, you see the refinancing of Skandi Açu, contributing with $54 million on our share of that company, $40 million proceeds from the Skandi Sandefjord debt, and also seeing that those ROVs that we delivered under the CapEx is financed through financial leases. Repayment of debt is the normal amortization plus the debt associated with the vessels that we sold. Yeah, we also mentioned increase in dividends from $0.38 to $0.40, lifting the overall payable dividend to $99 million this quarter, and the total then since we commenced first dividend payments in June of 2025 to about $600 million.
Yeah, we are on guiding and of course not big adjustment, very small adjustment, so we have lifted the revenue a bit. On EBITDA, we have reduced that with ton from, we used to be $840 million- $ 860 million, now $830 million-$ 850 million, so I guess, we also mentioned it was tax payable, we have reduced that with ton, yeah. So, I guess, and then CapEx is unchanged, yeah. So it is more or less similar to what it was, yeah. Only minor adjustments. Then, yeah, as normal, let us say the outlook, so we are going now $830 million -$ 850 million. Backlog for the coming two years at all-time high levels already, and then we expect high order intake over the next months.
We have added in the same saying that we have several new long-term contracts adding to the significant backlog gearing for finalization, yeah. That is why we are a bit more optimistic than usual on growing that backlog, yeah. We had our first glance at our 2027 budget, and that provides then comfort for continued strong earnings, yeah. Yeah. The pictures of the boats, I guess, just remind us, the one on the, is that on the right-hand side? The pipe layer, of course, is there because we have these three four-year contracts representing more than $500 million in backlog that now are approved by Petrobras, and we are just waiting for them to be finally signed.
We have the Skandi Hera, which is, I think, starting her new four-year contract in Suriname within 10 - 14 days, which is a milestone for us. We have a picture of Skandi Implementer that we sold for a very nice price. We have the Skandi Angra here, which is of our own class, and there we have done three long-term contracts for those boats. We didn't mention it, but on average, some of them are renewals, and I think we are on average up compared to the old contracts around $8,000 per vessel per day compared to what we used to have. It is a small uptick in earnings on the contracts we are signing these days compared to what we have had on the same boats. That was that, I think, yeah.
I guess we, Mr. Vardøy , we are into the Q&A.
Yes, we are indeed. As a reminder, you can use the Q&A function in the webcast there to submit your questions, and then we will cover as many as we can now over the next period. Starting off with one here. You are now at 1.6 x leverage, and you have sold the Skandi Implementer, which will generate healthy proceeds next year. How are you thinking about the balance between further deleveraging, fleet investments, and shareholder distributions going into 2027?
Yeah, that was a big question, Mr. Vardøy, and who want to start?
You can start.
Of course, I think we know our, you know, on the dividend side, we are at 12.5%, yeah, on today's exchange, you know, share price. I guess what do we say about that, Lundberg?
I think it is. Of course, we do meet quite a bit of people, and we do get questions on the sustainability of the dividend that we have today. Of course, it's a discussion worth having, whether you should make sure that the market perceives the dividend that you already have as sustainable. I think that is certainly a priority and a balancing act. I do not think we give any direction from here. I think the strategy has not changed, but we do see that 12.5% of dividend yield is high, and with the backlog visibility and the market we see ahead, we consider it sustainable on today's level. I think the lift from $0.38 to $0.40 should be seen as a result of that strong visibility and balanced position of the company, I would say.
I think, as Martin say, our job now is to get people to understand that the dividend level is sustainable. Of course, we see that the backlog is becoming longer and longer, and higher and higher, and de-risking is ahead. Of course, that is the main message for us, of course, is that we believe that the 12.5% sustainable dividend yield is quite okay. Then we will have to discuss internally and with the board how we allocate the capital going forward.
Very well. Could you please elaborate a bit on the reason behind the drop in earnings in the subsea regions, both in absolute terms, but also in the margin?
Of course, it's because part of it is, of course, that we have increased the vessel rates a bit on, yeah, so on the internal charters, yeah, we adjust them according to market. So they are up a bit. Then, we have had two regions performing very well this year. I guess they have increased their EBITDA and their margins. Then we have had, in Brazil, we have had, especially first half, we have had what you can call a startup or a startup of a new contract. We started this big PIDF project this year, and we mobilized three new boats for it, and we didn't really start to make money on that project before in May. So, of course, you will see that the whole boats are working and everything is going according to plan, so, of course, that will increase.
Also in Brazil, we have had quite a few RSVs mobilizing for their new contracts. Yeah, so it's been a year. Of course, I think we thought, I believe we said that at the start year that it will be kind of a, I don't know what the English word, but a transition year or a mobilization year, or in Brazil this year. Of course, then we expect that to, when all the boats are mobilized, we expect that to have stronger earnings, stronger margins going forward. Then we have had one region that has underperformed this year, and, of course, that is and I get that that is the main explanation for the somewhat disappointing results. Of course, also there we will see we are taking some actions to fix it.
We have really had a couple of charter in boats, and we are moving boat out to that region, and we are left with more long-term contracts, and we expect to call the earnings from in 2027 to get back to what we call the normal level. I guess that was a long answer on that, but that is the explanation for it. We have to admit that in that region that underperformed, we made a wrong decision on a boat early in the year, and that has led to idle time. We did the contract commencing. We had one contract early in the year, and we have one contract middle of the year, and we have struggled with utilization between. Of course, that is costing money when you have a boat sitting idle. That is the main for it.
Then we, as I say, we expect those two regions that have performed very well this year to continue to perform well, and we expect them to actually do better next year. Then we expect Brazil also to do better next year. Then we expect the last region to do much better than last year. The next year than this year. It is soon behind us, yeah.
Very well. The anchor handling spot market has overall been very strong this year, but seems to have slowed down a bit recently. Could you please share how you see that for Q4, and if you have taken that into account for your revised guidance?
Yeah, I guess if you flip back to that slide on, Mr. Vardøy. Because here you see, if you focus now on 2026 and Q4, I think we had the first we did was that we sent the Skandi Saltfjord and Skandi Master that traded the North Sea spot. They went on contract in Guyana on the 1st of September. So they are now fixed to under the year at what you could call decent. They were all more very decent rates, yes. Then we were left with two boats on the spot, and then the Skandi Sandefjord and the Skandi Minder, and they did well in September. They did well in October, at least until, let us say, late October, and then it has been slow now in November.
You see the Skandi Minder will go on a small term contract at a decent level, very nice decent level, from around 20th of November to the end of the year. We are left then with one spot boat in Q4. To predict that spot market is very difficult because last year, fourth quarter was probably the strongest quarter in the North Sea spot, and it is still fully possible that there will be periods in the remainder of this year where you will see good earnings in that market. It is a bit up and down, and it is even depending on the weather. It is how it is, but we choose to take down the exposure to two boats from September onwards. In September and October, that did pay off, but it was in November, that has not paid off.
It is a balance. Let us see how it ends. Who has done the right thing and who has done the wrong thing remains to be seen.
Thank you. In terms of your high-grading strategy and sale of vessels, are there any obvious candidates left in terms of older and less capable vessels that you would look to potentially sell?
There is not many left, but let us say there are one or two boats that we are considering. That might happen, but when it happens and how long time it will take, nobody knows. To implement a sale, I think that process took more than a year, so this can go fast and it can go slow. There might be a few more boats that we will sell.
All right. Then on the other end, potentially acquiring vessels. There is a big vessel that is coming on the market with Seven Borealis. Is that something you would consider buying to bolster your SURF position?
No, you know, to be honest, I do not consider, I do not know, of course, if they all depend on price. But of course, it is a very sophisticated boat. It is probably one of the most complex boats in the Subsea7 fleet. So it is, let us say, it is not an obvious target for DOF. And of course, on the other hand, if it was an obvious target for DOF, I would not say it, but I do not think we are. It is a bit too heavy for us.
Excellent. Coming back to Skandi Implementer, do you expect to meet her as competition after she has been delivered?
No, I mean, we do not think we will see her as a competitor for the first few years after we deliver in August, so we do not expect that.
Thank you. You talked about expected high order intake over the next months. Looking away from the PLSVs in Brazil, are you able to expand on where you see that, the regions and the types of contracts?
Of course, it's. Well, you saw we just yesterday, we announced a seven-year contract for a small CSV. We announced a 15-month, an extension of Skandi Constructor in Guyana. We could expect then to see, let's say, new contracts, both in Africa and in. And all over. So all over, many places. So of course we do contract in Australia. If you look at the economy we won in so far in this year, of course, it's global. So I can't go in specific and say what regions we expect to sign, but. But we expect that through the year we will do contracts on a global basis.
Thank you. A couple of questions related to DOFCON, starting off with the utilization. What is the reason behind the rather mediocre utilization for the quarter?
The quarter, and of course, also the full year has been utilization-wise affected from dockings and maintenance. So if we go back to first quarter, it was the Skandi Açu being docked at an extensive duration of the docking, impacting that quarter. And this quarter, it was one of the older assets that had maintenance and a bit of downtime. So, there is nothing outside of that. So there has been, the vessels has been on their contracts, but have suffered a bit of downtime and specifically a docking.
All right. For the potential new PLSV contracts, what should we think about in terms of CapEx needed for those?
That I have to say, I don't have in the top of my head. But of course, that means that if it was big amounts, I would have remembered it. Yeah.
Fair enough. Then also in DOFCON, the cash balance has increased quite significantly there. How should we think about dividends coming from that joint venture, and are there any restrictions?
Of course, there are no restrictions beyond that it is a ring-fenced part of the business, so it needs to have sufficient liquidity to operate and to have a bit of, yeah, a bit of a buffer. I think the biggest reason why there is a big cash balance now is the refinancing of the Skandi Açu drawn in this quarter. So, there are no changes with regards to the strategy that this is not a place where we keep surplus cash to an extent more than necessary. We do expect it to come out at some point.
Thank you. Could you remind us of remaining CapEx and payment schedule relating to the newbuilds you currently have in the order book?
Skandi Norseman, to be delivered next year. As for this year, we have guided, so I'll skip any remainders of 2026. Skandi Norseman next year have $12 million-$13 million to be paid in the final installment. The two 250-ton vessels have a remaining 5% of the total price to be paid early in the year. One is scheduled for delivery towards the end of the year. We have not said the overall exact price for that vessel, so I won't say the amount, but it is the remaining 85% of one of the boats. The second comes early 2028, as planned. The RSVs in Brazil have no payments in 2027.
Thank you. On the anchor handling capacity, you comment that you might require third-party vessels to support the subsea projects. Is this related to projects already in the backlog or new potential projects you see coming?
The boat, the one we had on the Skandi Saltfjord and Skandi Sandefjord in Q4 next year, is a project we have won. On that, I think they require in total five boats for that project, and we have promised them two. If we don't have availability on our boat, we will have to go to the market and sort that in also.
Thank you. Coming back to the subsea regions, how do you see activity levels and earnings developing into Q4 compared to Q3, and also 2027 compared to 2026?
No, I guess 2027, I've already commented, yeah. I think 2027 will be, as I said, better than 2027, no, 2026. Q4, that's a good question, but—
I guess we have provided guidance and updated guidance for Q4, for the rest of this year. But on the subsea region specifically, it's—
Yeah, it's a good answer. Yeah, I guess they guided the full year, then we are saying that 2027 looks like it's going to be better also for the regions in 2027. Yeah.
Perfect. Thank you. As you say, you have commented now quite a bit on 2027 improving compared to 2026, and you have previously commented on 2028 being better still. Do you still see that as the case, and what are the drivers for that, if so?
Of course, the driver, of course, is that we, you know, have a few assets that will go on higher rates in 2028 than they have in 2026 and 2027. We have a few projects already in 2028 that will be very well paid. We have more boats. We get the Skandi Norseman in, let's say, summer, Norwegian summer next year, whenever that is. Then we have the two new 250-ton boats delivering around year-end 2027.
Yeah, and I think that sums it up well. That was also the last question on the list for today. So thank you all for listening in and for submitting your questions. Thank you to Mons and to Martin for the presentation and the Q&A session.
Thank you very much, and have a nice evening .
Yeah.
Yeah.
Thank you.
Thanks.
All right. Take care.