Good afternoon, everybody, and welcome to the Odfjell Drilling Q1 2025 results presentation. My name is James Crothers, and I'm the Investor Relations Officer at the company. As ever, 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 this presentation is only a summary of the quarter, and the more comprehensive quarterly report should be read separately. Both that report and today's presentations are available on our website, www.odfjelldrilling.com. Our call today will begin with a brief summary of the quarter, with Jess taking us through some of the key highlights. We'll then move on to discussing our operations during Q1, 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 a 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. Today's results are another great quarter for our business, so I will not delay any more, and I'll hand over to our CEO, Kjetil, who will take us through some of the key highlights.
Thank you, James, and a very good afternoon to everybody. As the title says, this has been a very good start to the year. Another record achieved for our company. For the first time since the spinoff of Odfjell Technology, we achieved an EBITDA of $100 million from revenue of $204 million. We are constantly breaking financial records at the moment, and as our fleets move over to even higher day rates, I think we will continue to do that. As we continue to break records, we have once again increased our dividend, this time to $0.16 per share, up from $0.125 per share last quarter. Looking ahead, we are confident that we remain well placed to continue to increase shareholder distributions, particularly as our SPS cycle is about to complete.
On our SPSs, as some of you may have noticed from our social media channels, we now have three SPSs down and just one more to go. Post-period, we completed the Deepsea Stavanger SPS on budget and ahead of schedule, with only a net off-hire time of just nine days. More on that and the Deepsea Nordkapp maintenance later in the presentation. During the period, we also agreed a new contract for the Deepsea Atlantic, which added nearly 12 months of firm backlog at what we would say are definitely leading-edge day rates. This has contributed to our forward backlog now sitting at $1.8 billion for our four-owned units. Finally, our balance sheets and liquidity remain strong, with further deleveraging happening during the quarter, taking us to a leverage ratio of 1.4 and an equity ratio of 64%. We are going to move on to our operations.
As per previous quarters, the Deepsea Aberdeen, the Deepsea Atlantic, and the Deepsea Stavanger were all working with Equinor. The Atlantic was working on various exploration projects, while the Aberdeen remained on the Breidablikk field. The Stavanger, in addition to conventional activities, completed two carbon storage wells for the Smeaheia project offshore of Norway. Finally, for our own fleet, the Deepsea Nordkapp was working with Aker BP during the quarter in Norway. In our external fleet, the Deepsea Onyx was also in Norway, working with ConocoPhillips, while the Deepsea Mira was operating offshore Namibia for TotalEnergies. The Deepsea Bollsta was mobilizing for much of the period, and post-period, that rig has now received its AOC approval for operations in Norway. It is now in transit to the field to start this contract with OMV. Finally, the Hercules was in yard in Norway for the entire quarter.
We are going to look at another update on our SPS and maintenance programs. As many of you have been aware, we now have three SPSs down and just one to go. This follows the completion of the Stavanger 15-year SPS and upgrade project, which we completed in early Q2 of this year. This was completed on time and actually ahead of schedule, resulting in just nine days of net off-hire time. I think it is fair to say that this is quite an exceptional result. Completing the project in such a short time is really valuable to us and ahead of our expectations, actually, particularly given the complexity of the SPS, which included dry docking and significant upgrades. Needless to say, I am super proud of the teams that were involved in this. Following the SPS, Deepsea Stavanger has now commenced its five-year contract with Aker BP.
With the Stavanger SPS now complete, we just have the Deepsea Aberdeen SPS left. We are well prepared for this project and looking forward to completing this one to the same standard as our previous projects. Once Aberdeen is done, there will not be any new SPS projects until December 2028. In addition to our SPS programs, we also were able to complete planned maintenance on the Deepsea Nordkapp during Q1, which resulted in six days of off-hire time. This maintenance included upgrades across the vessel, as well as replacements of two of its thrusters. In addition to this, we have also successfully completed the AOC on Bollsta, partly while it was in transit between Namibia and Norway. I would like to comment that the entire AOC was done in a very timely manner, and what we like is to think in line with Odfjell Drilling standards.
Overall, an extremely busy period operationally for our team, not just drilling, but also delivering on our SPS projects. We move to the contract backlog and to what is ahead of us. Our contract backlog now currently sits at $1.8 billion, following the award of the 12-month contract on the Atlantic, which, as I commented earlier, secured at leading-edge day rates. This is a fantastic data point for our sector, and I think it emphasizes the interest in securing Odfjell Drilling units. The day rates secured on Atlantic continue the trend of our rates climbing every quarter between now and the beginning of 2027, which is emphasized particularly on the next slide, which we can move on to now. On this slide, we displayed the yearly distribution of backlog, as well as quarterly average day rates for our own fleet on the yellow line.
You can really see the continued growth we have secured. Year-on-year revenue is set to climb, while our average OPEX per rig is anticipated to only marginally increase. I think it's also worth reminding stakeholders that on top of these day rates comes a historic average of at least $30,000 per day per rig in bonuses and add-on sales. Of course, at the same time, we will not have the Capex that we have experienced in 2024 and 2025 associated with the SPS projects. Our near-term growth is very well secured. As you can see, Q1 represents only the start of increasing day rates ahead of us. All right, moving on to the market and how our look is at the market outlook.
I think, you know, while the macroeconomic landscape has been, I guess you can say, kind of changeable since our Q4 call, our outlook remains positive, particularly in Norway, where lower oil price breakevens have maintained good demand for work in 2027. Specifically in Norway, we see an ambitious client base who are looking to address their production declines. If our clients are to reach their goals in the coming years, this is going to require a lot of drilling. The outcome of this is that we experience specific and direct interest in securing our units. In addition, there are tenders outstanding in the market, and we maintain our view that the demand is expected to increase in the coming years, particularly from 2026 and onwards. As we previously communicated, internationally, we do not see a strong market as we do in Norway.
There are a few shorter-term contracts potentially available in 2025, but we also expect longer-term contracts to increase as new projects mature into development in the coming years. On the supply side, we still expect supply to likely reduce with some retirement of vessels in our sector. We do not see new builds happening at all. There are a few stranded or incomplete vessels in our sector also, which we do not believe is likely to create any meaningful competition in the near to medium term. Ultimately, with the first availability in our own fleet in 2027, we see very good interest from clients seeking to secure tier one assets in this period. With that, I will now pass on to Frode to go through our financial review.
Thank you so much, Kjetil. As always, I will begin with a quick summary of the income statement. Operating revenue in Q1 2025 was $204 million compared to $194 million in Q1 2024. Operating revenue from the own fleet was $163 million, while the external fleet was $40 million. We are continuing to see the effects of higher day rates in Q1, with an EBITDA for our own fleet of $95 million, with a margin of 58%, while the EBITDA for the external fleet was $7 million, with a margin of 18%. Less corporate overhead and other adjustments, the group EBITDA was $100 million. The company delivered a net profit of $31 million in Q1. Next up is the balance sheet on page 14. Net debt is reduced by $29 million to $475 million during the quarter, with a leverage ratio of 1.4.
Equity ratio is 64%, based on total assets of approximately $2.2 billion. The available liquidity is $241 million per end March, including undrawn RCF of $139 million. Details of the cash flow for Q1 follow on the next slide. In Q1, we generated $104 million in cash from operations. Net interest paid was $6 million and tax $4 million. Capex for the quarter was $27 million. Net cash flow from financing activities was minus $53 million, whereof $8 million in scheduled amortization, and the main part being net repayment of $45 million on the RCF during the period. Dividends paid in Q1 were $30 million related to Q4 results. As indicated last quarter, we are continuing our upward dividend trajectory, with dividend for Q1 declared at $0.16 per share, totaling $38.4 million for the quarter. This corresponds to an annualized yield of 11% based on yesterday's close.
The shares will trade ex-dividends from June 3, and payment will be made around June 12. We see a strong potential for continued increase in quarterly shareholder distributions going forward, given our solid financial position and our increasing free cash flow generation stemming from higher locked-in day rates, reduced CapEx payments, and reduced debt repayments. Before I hand back to Kjetil for the summary, I want to share with everyone that this will be my final earnings call as CFO. As earlier announced, after more than three years, I'm stepping down to a more specialized role, leaving the CFO reins to Ørjan Lunde, with a change formally taking place on June 1. I will remain with the company in a key financial leadership position and will work closely with Ørjan going forward. I'm confident the transition will be seamless.
The company is in an excellent position with strong fundamentals and a very positive outlook. It's been a pleasure serving as CFO, and I'm proud of what we have delivered together as a team. Stepping into a role with somewhat reduced responsibility is a welcomed change for me just now, and it's a completely undramatic one. Thank you to our investors, analysts, and everyone else on the call. I look forward to continuing to engage with you all in my new role and appreciate your continued support for the company. With that, I'll pass back to Kjetil, who will summarize the quarter.
Okay, before I start my summary, I also want to take the opportunity to thank Frode for the excellent job he has done as our CFO. I'm also very pleased that Frode will continue with our company in a key role and help to grow the company even further. An absolute super guy. Thank you, Frode, for the job that you've done. Q1 summary. Q1 has been another rock-solid quarter for Odfjell Drilling, delivered by the strong operational performance of the Odfjell Drilling team. We have achieved a record EBITDA. We have increased our dividend once again and have both the capacity and the ambition to further increase as we move on. Our SPS projects have gone extremely well, with just one more left to do. Our CapEx drawings are set to end in Q2, resulting in more flexibility for the shareholder distributions.
Our balance sheet continues to strengthen. To summarize, Q1 was an excellent quarter for our business, both operationally and financially. Yet we are confident that we can do even better. As a final comment, tomorrow is May 17th, which is Norway's Constitution Day. I hope you all have a fantastic celebration, those of you in Norway that are here. Thank you all for listening into this call. I hand over to James.
Thank you, Kjetil. As a reminder, if you'd like to ask a question, you can do so either via the telephone line controls or via the webcast tools. We will try and get through as many of the questions as we can. If we don't have time to get through them, I'll try and follow up with the people asking the questions directly. I guess at that point, we can open the Q&A session. Our operator, Sergey, could you open the telephone lines?
Sure, James. If you wish to ask a question over the phone, please signal by pressing star one. Please make sure the mute function on your phone is switched off to allow your signal to reach our equipment. Again, it is star one to ask a question. We will pause for a moment to allow you to signal. It appears there are currently no questions over the phone. James, over to you for any webcast questions.
That's great. Thank you very much. I think we can maybe start with the question up at the top here. Is the Stavanger SPS a good proxy for the Aberdeen SPS?
Yeah, I think what was special about the Stavanger SPS was that it included a lot of client upgrades, which was sort of also compensated with day rate during that period. I think sort of if you look at estimated time, I think we've said two to four weeks of off-hire for Aberdeen. That is something that we're going to stick with for now.
Great. Okay, thank you. As the financial situation has improved for the company, would the company consider warm start rigs with contractors' M&A opportunities? We have a few questions, I suppose, on M&A opportunities. I guess we could sort of talk more generally about how we see that and what we're looking for in terms of M&A.
Yeah, sure. No, and I'm going to be constantly boring in my answers here. We are definitely looking at potential candidates for that. However, it's all about asset quality. It's about asset price, and it's about contract backlog. It needs to fit our profile. We're not going to do anything to ruin the dividend story going forward. That is the challenges that we are facing. It's not easy, but as I said before, it's not impossible either. We continue to evaluate that continuously.
Great. Okay. Again, we have a few questions, I suppose, on the status of Hercules and Mira. Currently, they're out of contracts. Could you update on the prospects for the Hercules and Mira? Could we see those returned to Hercules, obviously in Norway, but they're not out of contract in Norway? Do you think you could see Hercules and Mira working in Norway, or where do you sort of see them finally work?
We are a bit cautious. This is not our rig. I would say for specific sort of requests of those rigs, I suggest those questions are turned to the owners. I would say that there are opportunities for both rigs, both in Norway and internationally, and they continue to be marketed. I think there are opportunities for both those rigs going forward.
Great. Okay. Again, maybe a bit of a follow-up on M&A and maybe a quick answer, but does the management consider rig age when it's considering M&A opportunities? Is that something that factors into our considerations?
Yeah, I think our profile is to operate modern sixth-generation tier one high-capacity rigs. That is something that we will continue to support, that profile. We're looking for candidates that sort of fit that. There can be somewhat deviations, but specifically on age, I think if you're looking at that category, there is a specter of age there, but we consider all of that specter. Yeah.
Great. Yeah. Could you please elaborate how unpriced options work? Is this to be considered as highly probable backlog, but on market price at the time of exercise? Or how do those sort of how do those work, and how do we see them, I suppose?
Yeah. Unpriced options, we have that for some of our rigs. That works the way that both parties shall sit down 15 months ahead of, at the latest, 15 months ahead of estimated contract end to hopefully agree on a day rate. This needs to be mutually agreed. Into those discussions, both parties will take with them the view on the market, latest data point, but also asset quality and performance of the asset, and to hopefully agree on a day rate. If the parties do, for some reason, do not agree, then we can agree to split up, and we are free to market the rig elsewhere.
Great. Okay. Could you elaborate a bit on customer discussions? They're maintaining budgets, but also commenting on capital flexibility. Do you think that our customers are expecting supply chain deflation when oil prices are lower? How do we sort of see that?
I think Norway sort of stands out a bit from what we see internationally, where there is, of course, giving available supply towards the demand that the sector sees. There has been a pressure internationally on day rates. In Norway, we have a more balanced situation where the market is pretty much in balance. Also, we have, I would say, a fairly high activity level going forward, with clients also having ambitious plans. We experience high demand for our units from several clients. I think that sort of strengthens our view that we will sort of maintain a fairly high rate level going forward. Although I would say we're probably not looking at an increase in day rates at the moment, but more of a flattening out situation compared to earlier.
Great. On financing, is there a level of leverage management would consider too low? Is there a point where the company would basically stop net deleveraging?
Yeah, I think we have communicated in the past that we want to see a leverage ratio below two. Likely, in the longer term, we would like to stay above one. As I've said before, it's all a function of how the market looks, how strong the contract backlog is, etc. The better the contract backlog and the better the outlook, the higher leverage we are willing to take on. It's all a function of that. It's a bit difficult to guide specifically on.
Yeah. Okay. Thank you, everyone, so much for your questions. We'll try and get through a few more before we have to sort of close the call. When do you expect to win the next contracts, or how far in advance are contracts typically won?
Oh, there's no straight answer to that, but I think we are typically looking at at least a year, maybe a year and a half in advance. Specifically, how close are we? We are in specific discussions. I think it could happen. It would definitely happen during 2025. It could even be sooner rather than later. That's as specific as I'm going to be. Definitely in 2025, I think we will land something. Yeah.
Great. Okay. I think we will just take one more question, given the time of day. At the Q3 call, there were comments made about the Falkland Islands contracts. Could we put some color on that marketing opportunity? What type of rig would be required in conditions in the Falkland Islands?
Yeah. That project is still very much alive. The operator there is continuing to mature in that project and to get, I would say, all the pieces in place to move forward. They're not there yet. That project will for sure require a harsh environment rig, semi-rig. Hence, that's where our interest in the project is. Yeah, very much still alive, but no final decisions been taken yet. I don't have a clear timeline either, as this is sort of out of our hands and fully up to the client.
Great. I think we've slightly run out of time. There are a few more questions which have come through. I really appreciate it. I'll start to email you all my responses to those very quickly after this call. For now, I think we'll close the call. Again, thank you all for joining and for your interest in the company. Our next conference call will be in August for our Q2 results. As ever, if you need any more color, please just email me or get in touch. I think at that point, Sergey and the operators of the call, you can close the call. Thank you very much.