Welcome to this presentation of the financial results for the second quarter of 2026 for SED Energy Holdings. My name is Kurt Waldeland, and I am the Chief Executive Officer of SED Energy Holdings. I am joined today by Viggo Pedersen and Sveinung Alvestad. Before we begin, I kindly ask you to review the disclaimer slide regarding forward-looking statements. SED Energy Holdings is an industrial holding company focused on the offshore energy service industry, uniquely positioned with a robust backlog and a conservative capital structure. Our two subsidiaries, Energy Drilling and SeaBird Exploration, are both leaders in their respective segments, operating in highly attractive niches of the oil and gas service industry, with primary exposure to brownfield development. Since the establishment of the company last year, a key priority for us has been to distribute available liquidity to our shareholders.
This commitment remains unchanged, and we are very pleased to announce our sixth consecutive quarterly distribution for the second quarter of 2026. SED Energy Holdings continued the strong performance in the second quarter of this year. We are very pleased to report record earnings for the quarter, supported by high utilization across the portfolio and all rigs and vessels on contract. Operational performance during the quarter remained strong, with rig and vessel utilization continuing at high levels. Revenue for the quarter came in at $72 million, with an adjusted EBITDA of $43 million. The firm revenue backlog remains robust, standing at $342 million at the end of the quarter, providing earnings visibility for the remainder of the year and into 2027. The balance sheet continues to be very strong. Net debt at quarter end was $80 million, corresponding to an industry-low debt-to-EBITDA level ratio of 0.1x.
We are very pleased to be able to announce that the board has proposed a distribution of $25 million for the second quarter as we continue to deliver on our strategy and commitment to distribute available liquidity to our shareholders. In sum, SED Energy Holdings is in a very solid position. While the current geopolitical situation is creating increased volatility, we remain optimistic on the outlook for our businesses. Our capital allocation policy remains unchanged, and we reiterate our commitment to distributing available liquidity to our shareholders. For the second quarter of 2026, the board has proposed a cash distribution of $25 million. Including the proposed distribution for the second quarter of 2026, we have distributed $132.5 million to our shareholders since we established SED Energy Holdings.
This corresponds to approximately 30% of the market capitalization at the time of the creation of the company and confirms our strong commitment to shareholder distributions. For the full year of 2026, we reiterate our distribution guidance of $90 million- $110 million. As with previous distributions, the proposed distribution for the second quarter will be done as a repayment of previously paid-in capital and is subject to EGM approval, and we expect payment in the fourth quarter of 2026. I will then hand it over to Viggo to cover the highlights for Energy Drilling.
Thank you, Kurt. Q2 was still another good quarter for Energy Drilling. We had strong operational performance with all the rigs working on good contracts, creating good revenue. Execution remained very good, with high technical and economical utilization demonstrating continued operational excellence across the fleet. Economically, Q2 was one of the best quarters so far for Edrill, with revenue increasing to about $64 million and adjusted EBITDA at about $41.6 million. This represents EBITDA margin of roughly 65%. This is the highest margin delivered by the business in recent years, and it reflects both the quality of operations and the continued cost discipline. Compared to the same quarter last year, EBITDA increased about 78% for Edrill, supported from GHTH and the higher rates of T-15.
Year to date, CapEx remains within the budget, as we continue to optimize the equipment that we have and the timing of replacements. There is really no change to that as we see it for the rest of the year. As an example of how we run our business and our ongoing five-yearly maintenance programs, during the quarter, we replaced the top drive on the T-15 without incurring any downtime. Another testament to the effectiveness of the tender rig concept, whereby key drilling equipment can be maintained and replaced with minimal interruption to operations. As such, operationally all rigs are performing well and we continue to benefit from a solid position in the Southeast Asian tender rig market. While demand remains healthy, geopolitical uncertainty and the ongoing situation in the Middle East continue to delay tenders.
This has of course affected E-Drill and I will revert to this on the subsequent slides. However, overall, Energy Drilling enters the second half of 2026 on a strong operational note. We can now move on to slide number nine and I will go through a little bit back on the backlog. The firm backlog at the end of the quarter stood at about $318 million. It does provide substantial earnings visibility as we move into the second half of 2026. During the quarter, no new contracts were signed, but overall, the drilling market in Asia Pacific remains healthy. However, as I just said, we have seen significant delays in recent long-term tenders. The uncertainty in the Middle East has affected Southeast Asia in multiple ways and significantly slowed processes as confidence has taken a hit.
E-Drill is currently engaged in about six different tenders concurrently, none of which has been concluded to date. All these processes are still ongoing, and given the sensitivities and uncertainties, we are currently unable to give you additional color on expected timings, et cetera. Although the award timelines have generally moved slower than expected during recent months, we remain confident in our ability to secure continued employment across the fleet. Our incumbent position, long operating track record and strong operational performance provide a solid foundation when we are competing for new work. Now moving on to slide 10 for a more general update on the market. If you are looking at the shallow water market, the overall activity in Asia Pacific remains pretty good. The main driver continues to be energy security in the region, and more importantly, the long-term underlying demand outlook remains constructive.
At the end of Q2, the region had approximately 80 rigs operating, up slightly from the previous quarter. The recovery in the broader shallow water market has taken longer than many expected. The main reason being the uncertainty linked to the Middle East, which has impacted operator confidence and delayed a number of tender awards. However, these delays should not be interpreted as a deterioration in demand. Operators across the board continue to plan new drilling campaigns, and we see a large number of opportunities across Southeast Asia. The active tender assist fleet is largely working and the supply sign remains disciplined. Taken together, we continue to view the medium-term outlook positively. Once uncertainty around project timing subsides, we believe the current activity pipeline should support strong utilization and attractive contracting opportunities across the region.
With that, I'll hand it over to Sveinung for an update on SeaBird and the financials for the quarter.
Thank you, Viggo. Now, as said, I will go through SeaBird Exploration before taking you to the group's financial performance. For those of you less familiar with the business, SeaBird Exploration is a specialized provider of marine seismic source vessel services focused primarily on the ocean bottom node or OBN market. The company owns and operates two high-end source vessels, the Eagle Explorer and the Fulmar Explorer. The OBN market remains one of the strongest segment of the seismic market, supported by operators' focus on maximizing recovery rate from existing fields and improving reservoir imaging. SeaBird is therefore positioned in an attractive niche with limited vessel supply and favorable long-term fundamentals. SeaBird reported revenues of $7.3 million in the second quarter at an EBITDA of $1.6 million. This corresponds to an EBITDA margin of about 21%.
For the first half of 2026, revenue amounted to $15.3 million and EBITDA was $3.2 million. Operationally, technical utilization improved sequentially to 94%, compared with 91% in the first quarter. Economical utilization was 76%, mainly reflecting Eagle Explorer completing her OBN source contract late May and entered into a mobilization period before commencing a newly awarded contract in India. Fulmar Explorer continued her OBN contract in the Gulf of America throughout the quarter and completed the project shortly after quarter end, before moving to her scheduled five-year classing. Overall, the quarter was impacted by normal contract transitions and mobilization activity, but operational performance remained solid and visibility has improved as we move into the second half of the year. SeaBird's firm backlog stood at $24 million at quarter end when including contract award after the balance sheet date.
This compares to $15 million in the comparison period and represents a meaningful improvement in earnings visibility. The Eagle Explorer is currently mobilizing for a 2D seismic contract offshore India. Operations are expected to start towards the end of the third quarter, and the project is expected to keep the vessel utilized throughout the first half of 2027. With Eagle positioned in India, we see multiple opportunities emerging in the region, and we believe the vessel is well positioned to secure follow-on work beyond its current contract. Fulmar Explorer has completed her previous campaign and is currently at the yard for her five-year classing. Upon completion, she will mobilize for a source contract in West Africa, expected to commence during September. For Fulmar, we see multiple opportunities that currently are being tendered in the region, and we are actively pursuing follow-on work in that region. Turning to the market.
The seismic market continues to experience some short-term uncertainty driven by geopolitical volatility and delay in customer investment decisions. However, the long-term fundamentals remain constructive. The OBN segment continues to gain market share of total exploration spending, supported by operators increasing focus on field optimalization and near field exploration and higher recovery rates from producing assets. At the same time, source vessel supply remains limited. The addressable OBN source fleet currently counts 12 vessels, and we see limited new capacity coming into the market. Against this backdrop, we believe SeaBird remains well positioned. The contract recently secured for Eagle and Fulmar provides near-term visibility, while the limited vessel supply provides meaningful upside should the market activity continue to strengthen going forward. Turning to the financials. As in previous quarters, the figures presented in the comparison periods in these presentations are pro forma figures to show the combined company.
The report is prepared based on IFRS standard, and hence SeaBird Exploration has only been included from the transaction date, which was May 26th, 2025. Reconciliation between management reporting and the consolidated financial statement is provided in the appendix of this presentation. SED Energy Holdings delivered another strong quarter, supported by high utilization across the fleet and continued solid operational performance. Revenue for the second quarter amounted to $71.5 million, representing a record level for the company and an increase of close to 40% compared to the prior year quarter. Revenues for the first six months was $141.3 million, up approximately 25% year-on-year. The performance reflects that all drilling rigs and vessels operated on contracts during the period at attractive day rates. SG&A for the quarter was $4.3 million. We continue to expect SG&A of approximately $4 million per quarter with normal quarterly fluctuations.
EBITDA for the quarter was $42.6 million, representing a more than 60% increase compared to the underlying result in the prior year quarter. EBITDA for the first six months was $81.1 million, an increase of more than 30% year-on-year. The improvement, similar to revenues, reflects a strong operational performance across both Energy Drilling and SeaBird Exploration. Net profit for the quarter was $25.6 million, while the net profit for the six first months was $47.4 million. Including the proposed distribution in Q2, the group will have returned $50 million to shareholders for the first six months of 2026. This represents a payout ratio of about 100% of the net profit. This underpins our commitment to distribute excess cash to shareholder while maintaining a robust balance sheet and financial flexibility. The balance sheet remains solid.
At the end of June, the group had a senior secured bank loan of $61 million and lease liabilities related to GHTH of $10 million, resulting in a total interest-bearing liability of $71.2 million. The group held $39.4 million in unrestricted cash and $14.2 million of restricted cash. The restricted cash is primarily related to performance bonds and debt service reserve requirements. The net interest-bearing debt at quarter end stood at $17.6 million, which compares to $30.5 million at the end of first quarter and $46.1 million at year-end 2025. The resulting leverage ratio was only 0.1x the last 12 months EBITDA, placing the group amongst the least levered companies in the sector. Turning to the cash flow, the strong financial performance translated into strong cash generating during the first half. We started the year with $21 million in unrestricted cash.
Operating cash flow before working capital amounts to $72.7 million, while working capital contributed a further $7.9 million. Total cash generated from operating activity was therefore approximately $80.6 million during the first six months of 2026. Capital expenditure amounted to $8.1 million, and we continued to expect about $18 million of CapEx for the full year. The group also paid $42.5 million in shareholder distribution, repaid $5.6 million of debt, and paid $2.4 million in interest during the period. Unrestricted cash at June 3rd remained at $39.4 million, or $55 million when included the restricted cash. With that, I will hand the presentation back to Kurt for the summary and outlook.
Thank you, Sveinung. SED Energy Holdings is well-positioned to continue to generate strong cash distribution to our shareholders. As Sveinung has described, the balance sheet remains exceptionally strong. At the end of the quarter, we had a net debt of $18 million and a net debt- to- EBITDA ratio of 0.1x, which is in the very low end in our industry. This provides us with significant financial flexibility. The conservative leverage profile ensures resilience and distribution capacity in all market conditions and gives us significant optionality to pursue value-enhancing initiatives. The key pillar in our capital allocation strategy remains unchanged. We will aim to distribute available liquidity to our shareholders on a quarterly basis.
As mentioned, the board has proposed a distribution for the second quarter of 2026 of $25 million, taking total distribution since the creation of SED Energy Holdings last year to $132.5 million, or approximately 30% of the market capitalization at inception. Our strong backlog creates a strong foundation for distributions going forward. As described, we expect the total distribution for the full year to reach between $90 million- $110 million. Looking further ahead, as described by Viggo and Sveinung, the team is continuously working to add to the contract backlog. Our markets remain active, and we are optimistic that the backlog coverage for 2027 and beyond will increase in the near term. To summarize, strong backlog, high cash conversion from operations, and a robust balance sheet will enable significant shareholder distributions for 2026.
The board has proposed a distribution of $25 million for the second quarter, and we expect total distribution for the year to reach between $90 million- $110 million. We continue to assess accretive strategic opportunities within the broader oil and gas services value chain. As always, we will remain disciplined and focused on opportunities that support our distribution policy. With that, we will continue to question-and-answer and go through any questions that have been submitted.
Okay. A couple of questions here. Firstly, I think this is for you, Viggo. Obviously, a lot of questions regarding the timing and everything with the contract you discussed in the presentation. Can you give a bit more flavor on how you see the process moving forward now? There is also a couple of questions regarding the potential options on these rigs.
Yeah. Look, these contracts contain obviously options for quite a significant period of time. Obviously, there's other avenues for the contractor to keep the rigs working on a very flexible basis, shall I say. So for example, there's well-in-progress type of clauses that can be exercised fairly liberally by the oil companies. So let's say you're on a platform, and then you're halfway into a program, they want you to continue, you can keep on going there. So these are pretty sensitive stuff, and we would obviously, once anything is executed, press release any extensions. But what I'm saying is that there's quite a lot of flexibility and timing of when options needs to be exercised. In terms of timings, I think I said it pretty clear. We can't really speculate now beyond what we've already said.
There are certain of the tenders that are taking a lot longer time. Other tenders are moving from where we perceive it to be in normal timing. But given circumstances, it's very difficult to give people comfort beyond that, except there is a defined drilling demand, right? There are programs that are being planned, and people are planning to have wells to be drilled. You need to drill on these older fields to keep production going. Sorry, go ahead, Sveinung.
Yeah. No, thank you for this, Viggo. I think also a question for you, Kurt. You mentioned it shortly in the presentation as well, but how do you want to use your balance sheet going into 2027? There is a couple of questions with regards to increased distribution, with using the balance sheet in order to increase distribution or other type of opportunities you see out there.
I think the capital allocation strategy of the company has been firmly described basically since we started the company last year. We are distributing available liquidity on a quarterly basis. We will continue to do that. We expect distributions to continue to be significant and strong. Then we have the optionality and the flexibility that the balance sheet currently gives us with regards to both doing potentially accretive transactions, but also giving us the resilience of the distribution model that we have. We are not currently, as it stands, making any changes to the distribution policy that we have.
Thank you. Also, there is a couple of questions about the seismic market and what we are seeing there. We definitely see increased tendering activity in the seismic market. What we do experience is that oil companies use a bit longer time to sanction these projects, but we have seen a meaningful uptick in requests about vessel availability. As I said in the presentation as well, the Eagle Explorer is now on her way to India for a project which will keep her busy until mid-2027. But what we are seeing there is quite a lot of other programs coming out for tender there as well. We argue that we are in a good position with the Eagle Explorer in that region. In terms of West Africa, we see also quite a few projects coming to award here as well.
With having the vessel, Fulmar Explorer, in West Africa, we believe that we are well-positioned for more work for her there as well. Then I think there is one more question regarding CapEx. I think this will be for you, Viggo. Do you see any increase in the CapEx into next year? We have guided on the 2026 CapEx to $18 million. There is a couple of questions with now the rigs coming off contract, if we should expect any additional CapEx. Maybe you can give a bit of flavor on that.
Yeah. In terms of regular maintenance CapEx, I think there's no additional big things coming up in 2027. What we do see is on the certain jobs that are being tendered, there are certain modifications that needs to be done, but nothing elaborate and stuff that we can't do relatively easy as we pass from one location to another. Those would be reimbursables anyways. I think 2027, from our perspective, is pretty much like a normal CapEx year, and we don't expect any major CapEx in between jobs.
Yep. Thank you for that. I think with that, we have covered the questions posted here. Sveinung, for closing remarks.
I think that concludes the call. We look forward to speaking with you again in three months' time. Thank you, everyone.