Welcome to Odfjell Technology's Q2 presentation. My name is Gert Haugland. I'm the SVP for Finance and Investor Relations in Odfjell Technology. I'm joined by our CEO, Simen Lieungh, and our CFO, Jone Torstensen. You'll find the presentation on our website, and I ask you to take notice of the disclaimer on page two. Simen will present the key highlights of the quarter and the market outlook. Jone will thereafter cover the financial figures before we conclude with a Q&A session. You can submit your questions through the webcast portal or by using the dial-in numbers. I now hand it over to Simen for the first part.
Thank you, and good morning, everybody. Thank you for calling in to our second quarter reporting. I'll go through the highlights of the quarter, some overall key financials, take a look into the market and give some comments how we have seen that developing since last time. Give a flash through the different business areas, the three of them, and Jone will take the financial information and, of course, the summary. And as Gert said, questions are welcomed at the end of the presentation. So highlights and key financials. We have another quarter with good growth within both revenue and EBITDA since the quarter last year. Cash position has been improved significantly since last year, with NOK 618 million today and Q4 compared to NOK 411 million.
Gearing are stable, with around one, with the net debt on the EBITDA. And we see also that our backlog has been stable over the period. We are burning backlog, but we also fill, fill up at the behind. So it's stable about 11+ billion NOK. And the EBITDA we estimate in the backlog is 2.333 times over net interest-bearing debt. The market are continued to be strong. We see an upturn, continuous upturn in the cycle. We have a lot of contract wins, small though, but many, and that's equally okay, all over the world. We see our operations are strong, with no major issues, no significant HSE incidents.
We operate now in close to 30 countries, and we have not, knock wood, any, any significant or any incidents that are in the serious arena. We are also preparing operations in new countries. We are working, I'll come back to that. We are working with the bases now within offshore Africa, West Africa. We work with Canada. We are looking at also markets in the U.S. and at South America. We still have, we have announced, and Jone will announce that more, we have paid NOK 50 billion in dividend, and we'll come back to that. We continue to meet our plans to pay another NOK 50 billion over the next half year. Market, we see that, as I said, that. In general, we work with technology.
We are, of course, focused mostly on the oil and gas sector, and we operate now in 30 countries. We work onshore, we work offshore, midwater, deepwater, harsh environment. We have activities with well services all over the place. We see stable and maybe an upturn in the oil price, which is stimulated by the energy needs and all the kind of trends in the marketplace, which we together with our clients, estimates to last for some years. We can't say exactly how long it will last, but we talk about a number of years ahead of us, that this will be a strong market.
This is also proven by the comments from the different companies close to offshore drilling and how they say and how they talk about the market. We are, of course, aligned with that because we serve exactly the same market. We see, and a good key KPI for us is, of course, the number of rigs active, and we see quite a lot of step up within the Middle East, Asia-Pacific, and also within offshore deepwater markets. And behind all this, to kind of substantiate why we say this, is that we see a number of tenders coming. There are a lot of rumors about new developments coming, and there are a lot of add-on sales from existing contracts.
Clients tend to keep our performance over the deliveries and extend the activities we are already engaged in. So that's a trend that kind of has continued and been stronger over the last period, and we expect that to continue into the future. Within well services, which is clearly the most international arena, we have, I'll go more into the business areas later. We see clearly a step up. We see potential to, within Odfjell Technology, to combine type of services into more what you call integrated solutions, which is actually a preference from our clients. They can kind of meet less contract you know interfaces, and we can handle more of their total delivery.
So the trend is that we are able to combine solutions to the benefit of ourselves, of course, and our clients. I mentioned the positive outlook. I mean, Norway has been strong for many, many years, and we have a very strong position in Norway. During the downturn since 2014, 2015, and Norway has kind of been quite active during those periods, while other markets totally collapsed in that period. So our position there is strong, and we hope to maintain and somewhat increase it, but the potential outlook, we now see the growth potential within well services is clearly on the international arena. Middle East, we have a strong hub in Dubai. We are working with Africa, and we see also continental Europe, East, West, is also increasing the market.
I mentioned also, of course, over or on the other side of the Atlantic, into Canada and the Americas. Within operations, same, it's a very predictable outlook. We are looking for new markets or new activity type of things. We are active in the Asia-Pacific's area and the Middle East for potential Jack-Up management activities. They are ramping up significant numbers of Jack-Up s in those areas, and not all the owners has management for their operations, and we are clearly focusing to position ourselves into that part of the world business or value chain, like we have done with Linus here in Norway for ConocoPhillips. SFL is the owner.
Again, operations, we are combining solutions on the platforms with well services type of thing, with new solutions to be more to create more integrated solutions, again, to the benefit of ourselves and the client, to have less contractual interfaces. We also position operations for new business opportunities within plug abandonment, especially, and we are also engaged in geothermal drilling. But mainly, the main part of the backlog in the future, we see more markets or more tenders coming up, and come more back to that little later, that the number of platforms we want to operate, we hope to increase the number in that respect. Within project engineering, we see the same. We, as I said last time, I think, we are building the company.
We are employing more people. We have a large volume planned for special periodic surveys on drilling rigs in this year, next year, and 2025. Special Periodic Survey s is a quite extensive type of operation, and we are specialized for that, so we serve our own fleet and the fleet we manage, plus also support other rig owners in that respect. We also see our engineering department coming back to that, which is our enabler for other also new things. We support offshore wind. We have our own company called Offshore Ocean Wind. Engineering company there are significantly involved in that development, which is now moving forward. And we're also looking at potential solutions in the future technology developments within hydrogen production.
If we go to the business areas highlights, to go a little more into the details there, with well services first, 3.6 billion backlog, NOK. We have NOK 4.5 billion in cost price and equipment pool. So even though we are- we do have assets, but we still consider ourselves as asset light. These are thousands of bits and pieces which we pull into the well, in different ways and colors, and supporting clients and other service providers like the big three, SLB, Halliburton and Baker. We see growth, as I said. We are establishing now a basis within Africa, West Africa. We are focusing strongly on Namibia, where we do have, from offshore drilling side three, rigs there, somewhat later.
Namibia is a potentially very strong market to expand. We also see that further north, there are activities where we support with the well services, so we're establishing our presence more permanent in that part of the world. Also we see the same trend in Canada, and we're also evaluating now the Gulf of Mexico and possibly also Brazil, when the Deepwater market are expanding. We have been in Brazil before. We currently have no operations there, but we see the possibility of actually piggyback on people we know very well, company we know very well, which also need our services. So that could be somewhat in the future that we can actually look at. We are focusing on margins. I mean, margin is the key here, key margin, cash flow.
We'll come more back to that when Jone talking. But this on the well services side, we do have establishing in new countries. There will be some cost associated, one-off of course, but to move equipment, to establish bases, need to be in and local content and be more permanent, take some more costs. So the margins has been quite stable. We have increased the revenue, but we also have some cost that says, that indicates that our margin has been not down, but stable. That's for us, okay. We also look at growth, both organic within well services. We are quite engaged now in M&A activity. We are not there today to buy companies or do merger with companies bigger than ourselves. I say that clearly.
We have identified a number of technology spots we want to have. We have identified candidates that we feel that for us feel that fit for purpose technologies and know-how. So our growth within Well Services will be both organic and via M&A activities. When we find the right candidate, we will do it. Historically, we have done that before. Before the crisis in 2014, we actually our Well Intervention activity was acquired by a company with technologies and tools, and we bought the IPs and the tools. So the Intervention activity in Well Services is quite recent that we actually acquired those two companies that has built that part of the product portfolio.
So it's not unknown to us to do this, and we do have capacity and capability now in the company being separated from the rest to have creative solutions to integrate new actors, if we find them right and if we find the conditions, the commercial conditions, right. Operations, NOK 7 billion backlog, quite stable. Operating now 16 platforms, 1 Jack-Up management. As I said, this is a very stable business, long contracts, lots of options. We recently exercised 1 another year with Equinor and Marine in the U.K.
So the thing here is that we see now the business coming up, we see a lot of type of potential tenders, especially in 2024, is coming up, and our ambition is, of course, to increase the number of platforms we operate. These platforms and these activities are literally spoken platforms for add-on sales, like well services and engineering upgrades, and so forth. So it actually engaged the whole Odfjell Technology company when we do operate these areas. As I said also, we like the thought of actually spinning up and developing more Jack-Up management activities. That's good business for us, it's good business for the client. And we have a hub in Dubai, Middle East, and so we operate the Middle East market.
We also have licenses into Saudi Arabia, which one of the few Western companies having that. We also engage the Asia-Pacific from Middle East operations. We have an office or a base in Malaysia, operating for Thailand and Indonesia, specifically, but we also support our operations in the Middle East region, North Africa, and Middle East, or Asia-Pacific from Dubai. We recently has reorganized ourselves to strengthen our presence in that area. Within project engineering, close to NOK 500 million backlog, we have a utilization of our people. These are engineers operating in projects, contracts, and so forth. And 90% utilization is actually very okay.
Shouldn't be much higher because then you are actually pushing maybe a little too hard. From our own experience, from engineering activities, if you are around 90% utilization, you are at the high end, actually, regarding utilization. We have a good activity. As I said, we are very much engaged in type of upgrades, SPSs. They are, of course, during the summer, we are working a lot of yard stays and we have done SPSs. We are involved in upgrade projects for our clients. And during summer, summertime, normally, there are less activity unless it's a very kind of a stressed project, and this summer has been so much lower, which I felt is very good.
We have had a terrible, I would say, terrible in quotes, activity level, supporting the mobilization of Mira, Bollsta, and Hercules. So we said, "Thank you for that," and our people to take very earned rest during the summer, and that has also somewhat small impact on the activity level. We're not worried about that. We are also opening, expanding our office in Manila. We have somewhat, I think, 120-130 people in Manila today, supporting our global business services with the, with accounting, HR, you know, IT, and so forth, supply chain.
So we are also expanding that now, with the 30-40 engineers doing technical services for project engineering department, and, with all disciplines, and we expect that part of the company to open and, and be engaged later this year, end this year. I like to say December, January. Then we can now also put the activities in that part of the region, which is high value. It's a much lower cost, but it creates a lot of value, and, and, and we are, we are looking for more capacity, and we cannot just, rely on employing people from, from Western Europe. That doesn't work. There's a heavy competition there, and the salaries are going higher.
But to expand in a more in that region where we know the region very well, we know the capacity and capability very well. So I look forward to also to use that part of the chain to blend our costs when we bid for services to our clients. So this is the view for the business. I hope that was showing that we are in a move. We are optimistic about the future. We have good KPIs, so you can go a little further on the financial sum up.
Thank you, Simen. Starting on page 10, financial performance. The revenue growth of 10% compared with previous quarter, and 37% compared to Q2 2022, due to a strong market, improved contract portfolio, and a very good operational performance. EBITDA improved by 10% compared to previous quarter, and 25% compared to same quarter last year. The EBITDA margin slightly reduced to higher cost, as Simen said, driven by mobilization and preparation for new project and regions, and also change in the segment mix. Net profit of NOK 79 million in Q2, versus NOK 43 million in Q1, and versus NOK 7 million in Q2 2022. Year-to-date, net profit of NOK 123 million, versus NOK 100 million, same period last year. The cash balance improved by 3% compared to Q1, even with dividend payments of NOK 50 million.
Cash generation from operation increased from NOK 86 million in Q2, Q1, to NOK 197 million in Q2. And finally, leverage ratio and FFO stable in line with Q1. Going into the business area and starting with well services, it's a revenue growth continue with 12% improvement compared to previous quarter, and 33% improvement compared to Q2 2022, and the growth is mainly driven by Western Europe and Norway. EBITDA up 9% compared to previous quarter, and 28% compared to Q2 2022. Stable EBITDA margin the last twelve months. Operation revenue up 9% compared to Q1, and 25% up compared to Q2 2022. Improvement in revenue mainly due to higher bonus earnings and high activity for rig inspection services.
EBITDA improved by 51% compared to Q1, and 2% compared to the same quarter last year, and bonus earnings improvement is the main positive contributor compared to Q1. Then finally, project engineering. Revenue improved 17% compared to Q1, and 140% compared to the same quarter last year. Increase in revenue came mainly from U.K.-based project, with the Norway activity remaining strong due to very high activity in the yard, the activities on Deepsea Mira, Hercules, in addition to modification work on Heidrun B. EBITDA of NOK 26 million in Q2, is NOK 2 million lower than in Q1, due to lump sum projects recognized in Q1, and more normalized utilization of personnel in Q2. Let me go to the summary. Still solid growth, and the milestone has been broken by delivering EBITDA above, in which NOK 200 million Norwegian kroner for the first time.
As Simen said, growth plan established. We are targeting margin expansion through new business improvement program. Strong cash position, solid debt structure, and leverage level. Dividend distribution of NOK 50 million, paid first of June, and payment of additional NOK 25 million, approved by board of directors, with payment in September. Intention to pay further NOK 25 million in December after Q3 reporting, according to our dividend program plan. That's it. Let me go to Q&A.
Yeah.
Thank you. Ladies and gentlemen, if you wish to ask a question over the phone, please signal by pressing star one on your telephone keypad. 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 over the phone. It says there are currently no questions in the phone queue. As a reminder, to ask a question, please signal by pressing star one. We will pause for just another moment to allow you to signal. As there are no questions at the phone at this time, I'd like to hand the call over to Gert for any webcast questions. Gert, over to you.
Yes, we have received a question from Jørgen Andreas Lande. He's saying, "We have historically had stronger second half profitability development versus first half. What are our views and comments on 2023 in this context?" Simen?
Yeah, we have that's a fact, really. But, as I said, we are not there into any kind of guiding. But, but I guess that history will repeat also here. We normally see that happening, and that because the first quarter is quite often influenced by some trouble weather conditions and so forth. Tougher winter climate here in the north. And, but yes, I believe we will at least we will deliver over the year, I'm sure.
Okay. We have another question, which is: Can you share any insight on the split between greenfield and brownfield in the demand coming from well services?
Well, I honestly am not sure about that split. You know, green and brown, meaning here that you actually operate if you do. For example, if you do type of plug abandonment, clearly a brownfield activity when you close down existing wells and this kind of thing. But, but I cannot say the split there. We are looking at the drilling activity market, even though we do production or exploration. It's, I don't have that split. Have you, like, got any idea?
No, I think for us, it's a bit difficult to estimate.
Yeah.
We can actually note that question because it's, and if it waits another time, we can actually have some unit. I don't have that.
Yeah
U nfortunately.
And then I think the other question here is, is the trend of continued margin improvements evident in the new backlog? I guess that would mean, you know, do we see better margins in the new contracts that we are winning?.
Jone?
Yeah, I guess, hope so, and guess so, that the market is strong. We are well-positioned to do it. We are now building program, we build order backlog. So we expect, and we'll work very hard to improve the margin in the new order backlog.
It's priced with expectations. When we took these jobs with the expectation of some growth in the market, so we are pricing in type of expected escalation on,
Yes
S ome type of salaries and things like that. So we try to mitigate the backlog by protecting us against inflation and increased costs.
Yeah, I think a follow-up to that is there is a question about that the backlog has been kind of flat over the last nine months, and should we read anything from this, which kind of contrasts the very positive market outlook?
I can try to say that. It's there are. We in Well Services, we have something like, we have a number of clients, and we have been filling up a lot of activity with smaller extensions and so forth within the market. The backlog, if you look at the backlog itself within the major part of the backlog is actually linked to drilling operations. And there has not been any significant wins there. We are equally occupied by building the backlog on Well Services, because clearly the margins in that part of the business is much higher than within the drilling activity. The drilling activity, the operations are mostly linked to Norway and the U.K.
And I mentioned also that we are active down in the Middle East and with the Asia-Pacific. So, when we see tenders coming up late this year and next year, as I said in the presentation, and when we win, and if we now win a big drilling contract, you will see a big step up in the backlog. But at the same time, it's equally important to look at the international well services market, where we are picking up a lot of activities within the top 10 clients we have. Not yet any big contracts, like filling up billions, no, but there are a number of activities that we are kind of just filling back with well services.
Maintaining and increasing that backlog is quite much more important, looking at the margin level for the whole company. Both are important, of course, but I'm not any way concerned about the backlog being flat, as long as I see all the activities that we ramp up, and how we kind of view the future and all the tenders and the requests for operations we are getting, that number is increasing significantly, and that will materialize down the road, I'm sure. But look at when you look at the backlog for the company, look at the backlog for the different business areas. Well, that counts regarding the margin for the whole company. Just a hint there. Yep.
Yeah, I think we will conclude the Q&A session here. I thank everyone for joining the call, and please contact me if you have any further questions or need information. The details can be found on the website or in the presentation. Thank you.
Thank you.