Good afternoon, everybody, and welcome to the Odfjell Drilling Q2 2024 results presentation. My name is James Crothers, and I'm the Investor Relations Officer at the company, and I'm joined today by our Chief Executive Officer, Kjetil Gjersdal, and our Chief Financial Officer, Frode Syslak. Before we begin, your attention is brought to the important information slide of our presentation, which we would encourage participants to read in full. Note that the presentation is only a summary of the quarter, and the more comprehensive quarterly report should be read separately. Both that report and today's presentation are available on our website, www.odfjelldrilling.com. Our call today will begin with a brief summary of the quarter, with Kjetil taking us through some of the key highlights. We'll then move on to discussing our operations during Q2, and then move on to our financial review with Frode.
We'll then summarize the presentation and close the call. Following the presentation, we'll open the Q&A session and we'll invite all participants to submit a question, either via the telephone line or electronically via the webcast tools which are available. And with that, I'll hand over to Kjetil, who will take us through the key highlights.
Thank you, James, and good afternoon, everybody. Once again, Odfjell Drilling is pleased to report another successful quarter. Operationally, all of our fleet performed well, with our own fleet achieving a financial utilization of 98%. Combined with our managed fleet, delivered an EBITDA of $85 million from a revenue of $191 million. And in addition, we were delighted to secure further backlog on our own fleet, agreeing a new contract with Equinor for the use of Deepsea Aberdeen. That is for eight wells at a contract value of $121 million. This will see the Deepsea Aberdeen working on the Troll field for a total of eight wells. Further to this award, we also agreed to add additional scope from the Breidablikk contract to the end of this period on Troll.
This has resulted in the Deepsea Aberdeen now having a firm backlog until early 2027. Altogether, this has resulted in our order backlog now increasing to $2.1 billion, and means that now all of our units have firm backlog until at least mid-2026. Also, during the quarter, we completed preparations for the Deepsea Atlantic SPS and upgrade projects. As we mentioned several times before, this was a key focus of us this year. We are extremely pleased to successfully complete the Deepsea Atlantic SPS in early Q3, and that was completed ahead of schedule and on budget. Finally, we once again have declared a dividend for the quarter of $14.4 million. That equals $0.06 per share.
Moving on to our operations, and as per previous quarters, the Aberdeen, the Atlantic, and the Stavanger were all working with Equinor. The Atlantic and the Stavanger were working on the Johan Sverdrup Phase two and various exploration projects, respectively. While the Deepsea Aberdeen had returned to the Breidablikk field, having worked on the Svalin field in Q1. The Deepsea Nordkapp remained working with Aker BP on the Alvheim development, and the Deepsea Yantai was working with Neptune Energy and Vår Energi on exploration and appraisal campaigns. The Deepsea Mira remained with Total and was operating in Congo, while the Deepsea Bollsta was working with Shell Offshore Namibia until midway through the quarter. Following completion of operations with Shell, the Deepsea Bollsta then started its SPS in Walvis Bay in Namibia.
And finally, the Hercules completed operations with Galp offshore Namibia, before it was mobilized to Las Palmas and further moved to Canada to start its contract work for Equinor there. Then we can turn to our backlog, and as you can see, we remain very well positioned for significant revenue generation, particularly from twenty-five and onwards. All of our own fleet now has firm backlog until 2027, except the Deepsea Atlantic, which has firm backlog until mid-2026. Thereafter, it has priced options agreed until mid-Q4 2026. And as you can see from the lower charts, in the second half of 2024, we start to move off legacy day rates and onto higher rate contracts. This has already begun with the Deepsea Atlantic, which, after completion of its SPS, has now gone to a new higher day rate.
In 2025, our units will significantly be above $400,000 per day average. In addition to this, there will be performance incentives. If you compare that to this quarter, the Q2, it will go up to $100,000 on average per rig. A significant step change in day rates ahead of us. We move on to the Deepsea Atlantic project. I wanted to highlight this successful completion and upgrade project. Speaking to the whole project organization and the crew on board the rig, I think we would agree that this was easily the most technically challenging yard stay that we have ever done in offshore drilling.
This was not just the five-year classification survey, but a significant upgrade and maintenance project that has materially increased the capability of the rig. And as we mentioned, the Atlantic SPS and upgrade project was a key focus for our business and required significant planning and project management to complete effectively and within time and budget. And despite having to delay the execution into beginning of the yard stay into July, which is, of course, the Norwegian summertime vacation in Norway, the crew and everybody involved in the project were able to do this and completely transform the unit within the allotted time. And as such, the Deepsea Atlantic now has a new, brand-new BOP for deepwater operations. It has an increased VDL, variable deck load, as well as several other upgrades, and it has cleared its classification survey.
The Deepsea Atlantic is now beginning a new contract with Equinor, and as mentioned, this is at a higher day rate than it was on before. Further, we can go to the total SPS updates. With Atlantic and Nordkapp now, SPS is now completed. We have two down and two to go. And in particular, with the Atlantic completed, we have now de-risked the most complex and CapEx demanding projects, and as such, we have moved closer to increased dividends. Our CapEx allocation for the remaining two SPS programs that remains around $50 million per unit, with an estimated two to four rigs of hire time per rig. The timing of the Deepsea Stavanger remains unchanged at Q2 2025, and the Deepsea Aberdeen is still expected to begin in Q4 2024.
However, the company is considering optimizing the timing, which could result in the Aberdeen SPS beginning in 2025. But I want to highlight that this will not impact the timing of increased dividends. Okay, then we can look at the market, and we remain unchanged in our view that the outlook looks bright for our units. We see no reason that dayrates for the use of our units should not continue to climb upwards to increase, and particularly for work in our core market here in Norway. And we're also listening to our remarks of our peers earlier this week and the last week, and we will also agree that we anticipate the need for more rigs to meet the demand in Norway, where we continues to see growth ambitions and increased activity levels on the Norwegian Continental Shelf.
Internationally, we expect demand to pick up in 2025 and in 2026, particularly in West Africa. We also expect to see longer-term contracting opportunities in 2025 and 2026, as some of the new exploration projects, such as the one in the Orange Basin offshore Namibia and South Africa, are beginning to mature. To summarize the market, we maintain our positive outlook for our fleet to command very healthy day rates ahead of us. With that, I will now pass on to Frode to go through our financial review.
Thank you, Kjetil. I will begin with a summary of the income statement. This is on page 12. As you have seen, operating revenue in Q2 twenty-four was $191 million, compared to $184 million for the same quarter last year. Operating revenue for the own fleet in the quarter was $145 million, while the external fleet was $45 million. EBITDA for own fleet was $80 million, a margin of 55%. The EBITDA for the external fleet was $7 million, a margin of 16%. Less corporate overhead and other adjustments, the group EBITDA was $85 million. The company delivered a net profit of $16 million in Q2 and $30 million for the first half year.
With the Deepsea Atlantic SPS and yard stay now entirely contained in Q3, our next quarter will be slightly impacted by this, albeit offset by the increased day rate the unit is on now. Moving to page 13 and the balance sheet. We see continuing deleveraging with a net debt reduced by $31 million to $544 million during the quarter. The leverage ratio is 1.8. The company has a robust balance sheet with an equity ratio of 63%, based on total assets of approximately $2.2 billion.... The available liquidity is $226 million, including the undrawn RCF of $115 million. As planned and expected, this is reduced from prior quarters as the company repaid the 5-year seller's credit of $53 million to Samsung back in January, and also with the company's SPS CapEx program ongoing.
We are continuing our consistent generation of operating cash. Q1 produced cash flow from operations of $99 million, adjusted for change in working capital. Net interest paid was $24 million, up from last quarter due to payment of half yearly interest on the outstanding bonds. Net tax paid was $3 million. CapEx for the quarter was $30 million, mainly pertaining to Deepsea Nordkapp and Deepsea Atlantic. Net cash flow from financing activities was minus $25 million, including the Q1 dividend payment of $14 million made in Q2. In accordance with our dividend policy, we maintain a dividend payment of $0.06 per share for the quarter, with the last day including rights being twenty-ninth of August, and payment to be made on the nineteenth of September. Our ambition is to increase future dividends.
That remains intact, and we see a strong potential for this, as we are soon starting to move over to higher revenue contracts. With that, I'll pass back to Kjetil, who will summarize the presentation.
Thanks, Frode. Everybody, all in all, another great quarter for our business, with multiple highly important milestones completed. Our business was active and performing at high levels once again, which has created a good EBITDA and revenue. The Atlantic SPS, which was very important for us to get right, was completed successfully and within budgeted time, and we have now secured new contract at industry-leading rates and increased our forward backlog to $2.1 billion, and the outlook for our business and wider market remains strong, meaning we can once again issue a quarterly dividend of $0.06 per share.
As Frode mentioned, our ambition is to increase our further dividend level as our units continue to roll over onto higher day rates, reflecting the cash flow generation going forward, and the capability that we have for generating cash flow in the business. I know I can't—you can't see me laugh now, but I'm smiling when I say this. It is now our ambition to begin increasing dividends in combination with the Q4 results of the company. To summarize, Odfjell Drilling is extremely well pleased for the years ahead, with increasing cash generation and de-leveraging secured. This is an exciting time to be in Odfjell Drilling. With that, I will pass back to you, James.
Thank you very much, Kjetil, for that. And as a reminder, if you'd like to ask any questions, you can do so either via the telephone line controls or via the webcast tools. We'll try to go through as many questions as we can. And, operator, if you could open the Q&A session, that'd be very, very handy. Thank you.
Certainly. Ladies and gentlemen, if you wish to ask a question at this time, please signal by pressing star one on your telephone keypad. And please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. If you wish to cancel your request, please press star two. Again, it is star one to ask a question. And our first question comes from Fredrik Stene from Clarksons Securities. Please go ahead.
Hey, Kjetil and team. Hope you are well. Good report, as always, good results. And very happy to hear you guys talking a bit more about potential increases in your future dividends. And I look forward to seeing what that might be. But that's not my question. I think some of your peers, particularly on the ultra-deepwater side, have talked about potential. Well, one thing is a harsh environment market, but for example, in West Africa, some of your managed rigs are working there, and to some degree, it could be competition with other more benign asset types as well, as long as the price is right. So, what I completely more aware of the physical limitations of bringing benign assets into a harsh environment world.
Do you think there could still be kind of spillover effects on rate to some degree, particularly in the near to medium term, as some of these assets try to get work to fill empty backlog?
Yeah. You might be onto something there. I think we see, especially for some shorter-term work, there, and there are available benign units in that area. You know, we remain confident that the, you know, these big semis, harsh semis, they are the right tool to work in that area, especially for year-round operations. But I won't rule out that and particularly for work in what would be the summer season down there. There might be clients who will use benign units for especially for shorter time work, Fredrik.
Sorry. Okay, super. That's good to hear or confirming what I was thinking. Second, and this might relate more to you, Frode. Now that you are midway in your SPS cycle, could you have said, I think, that or reaffirmed that the SPS costs for the remaining two assets will likely be around $50 million. But are you able to give some color on how you see the CapEx profile for the remainder of the year and also going into 2025? And also is there still CapEx to be paid on the Atlantic? I definitely would assume so, but can we see spillover effect from the Atlantic going into, you know, Q4, for example, in terms of payments?
Yes. Yes, we can. I think, of course, the bulk of the CapEx is typically paid in the same quarter as the SPS is completed. But there's a lot of long lead items, meaning that we will pay a lot of CapEx also upfront. And some sub vendors are not very early with their invoices, meaning that we ` see CapEx payments related to SPS as one to three quarters after the SPS is complete. If you look at Deepsea Nordkapp as an example, SPS completed in December 2023, still around 20% of that CapEx remains unpaid per June 2024.
Okay, that's very helpful. Thank you. I'm not going to ask about M&A this time. I'll go back to the group.
Thank you.
Thank you very much.
As a reminder, to ask a question, please signal by pressing star one. We will pause for just a moment to allow you to signal. And there are currently no further questions in the phone queue, and I'd like to hand the call over to James for any web questions.
Great. Thank you. So thanks for your questions so far. I think some of them have been answered by the response to Fredrik's question there. We've had one question: What areas do you think would drive demand for harsh environment rigs from 2027 and beyond?
Yeah, I can answer that. I think when you're entering 2027, I think you will see still high activity level here in the Norwegian Continental Shelf. However, it will be combined with what we believe an increased activity level in the international part as well. And particularly, we think that when you come to 2027, you will start to see much higher activity in the South Africa Namibian part of or region down there. So we expect it to slowly to be steady more opportunities coming up in 2025.
This will increase, and I think in 2027, we have some exciting projects coming up that will lead to an overall increase in activity level and longer-term contracts, so also.
Thank you very much. We've had a few more questions here on the webcast. I suppose we've had a few questions on M&A again. Further to Fredrik's question, I suppose, what are our ambitions on M&A, and is there any sort of strategy there, I suppose, that we can talk about?
Yeah, I mean, we still follow this closely, and we have looked and we'll continue to look into the opportunities that are out there. We think that there might be a few. You know, however, as you can see from our report today and our outlook statement, you know, we have a very good story and a very good outlook now in offshore drilling, and we won't do anything to sort of mess with this. But we also think that there might be some accretive deals out there, and we've been crystal clear on this all the way. If we're gonna do something, it needs to be accretive for the shareholders in Odfjell. So we have not given up.
We continue to follow every opportunity that's out there, but obviously, I don't have any concrete thing to share here today.
Great. Thank you. We've had one more question on dividends and messaging around that. I suppose the question is, what sort of how do we sort of see our dividend going forward? We spoke about it a bit in the presentation, but maybe you want to reiterate around what we
Yeah
See going there.
I can do that. Yeah, I think everybody, you know, as I said, as we continue to roll over our rigs, we leave this legacy day rates, and we move on to market rates, and we will see day rates averaging way above $400,000 per day. There's gonna be a significant cash generation in the company from 2025 and onwards, and we see a high potential to do a lot on the dividend part going forward. But we also see that now we have a clear opportunity to do something already in Q4, in combination with the Q4 results, and we have an ambition to start increasing dividends then.
And then we see further potential to further increase that as we go in further into 2025, and particularly 2025, 2026 and onwards, we see even further potential. So things are looking really, really, really good on cash flow and potentially increased dividends going forward.
Great. Thank you. I think that's all the questions we've had submitted to us today. Unless there's any more questions on the telephone line, I think we can probably look to close the call. Sergey, would you mind just checking if there's any more questions on the telephone line?
Sure. There are currently no questions in the phone queue. And as a reminder to star one to ask a question, we can pause for just a moment for any last questions. And it looks like we have no further questions. James, over to you.
Great. Thank you. I thank you all for joining again and for your interest in the company. Our next conference call and results will be on the sixth of November. However, as always, if you would like any color on today's results or any further questions, please do just get in touch with us and with me directly. Thank you, Sergey and all the team. You can close the call now.