Good morning, and welcome to this presentation of the fourth quarter and full year of 2021 for Reach Subsea ASA. My name is Jostein Alendal, and I'm the CEO of the company, and with me is CFO Birgitte Wendelbo Johansen, and she will go through the financials and results a bit later. Our report was released earlier this morning together with the material for this presentation. I hope you all had the time to read it. It is a very good report. It has been a hectic quarter with not only high operation activity but also some M&A activity and for sure progress on our Reach Remote project, both technically and financially. We come back to the news in a bit.
The nice thing with this webcasting of our quarterly presentations is that it gives you the opportunity to submit questions through the webcast player, and please do so, and we will answer as best as we can in the Q&A session after the presentation. But before we dive into the numbers and details of this specific quarter and last year as a whole and also our current financial position, I will just give a quick insight into what we do. That is for any new followers on the web, and this might be a repetition for some, but bear with me for some minutes. It also backs some of my points in the end of the presentation. We go directly to slide number three.
Reach Subsea is a subsea service company for all and any type of offshore and subsea assets through their whole life cycle. We could also say that any and all asset owner is a potential client, and our expertise lays in the planning of complete offshore operations, choosing the right tools for the job, and sometimes invent some new ones. Today we are 130 employees, and Reach is an experienced subsea company with more and more complex subsea work and operations worldwide. Whether it is an oil platform, offshore wind farm, subsea template, pipeline, or power cable, they all require the same subsea services in various forms from planning and engineering to installation phase and documentation of as built and installed. Further, throughout the long operational phase with regular inspection and scheduled and unscheduled maintenance and repair and all the way through to decommissioning and removal.
We have a strong focus on the inspection and survey side, in short, collecting data subsea, make a digital twin, and provide the client with accurate reports. Maintenance and repair also plays a big part of our daily work scopes, and subsea is a harsh environment and has a tendency to tear down installations a bit quicker than we like. Who is buying our services? I have tried to illustrate on slide number four. We have worked for most of the major international energy companies and have in addition long-term frame agreements with, for example, Wintershall, Shell, and Equinor, both for their oil and gas installations but also offshore wind farms.
Our services, equipment, methods, and procedures are developed for the oil and gas sector, and it's known to have the highest standards of safety and efficiency, which gives us a huge advantage as we broaden our services to the other sectors. The oil and gas sector is expected to remain stable for many years to come, as the requirement for regular inspections, maintenance, and repair will be there until decommissioning. Offshore wind is set to see enormous growth in the coming years. We have all seen the global plans, and no need to go into details there. In short, there is just a mountain of work coming, and we are already finding a good portion of work in that segment. Offshore cables is another growth area.
Enormous numbers of cables will be installed in the years to come as the world electrifies, and also there will we be an important partner for survey, installation, and maintenance. Finally, fish farming is moving further offshore to deeper waters, yet another type of offshore installation, and at least subsea mining will come in the future with really exciting subsea work. It is also important to mention the increasing ocean awareness around the globe. It's about time, I would say. It is good that ocean environmental surveillance will be more and more important, and business-wise, we can also serve this market with our future unmanned low-carbon technology and efficiency. If you move over to slide number five, the world map illustrates where this has brought us over the years.
Even though we are headquartered in Haugesund and our home market is the North Sea, we have managed to export our services and know-how globally. You might think that Norwegian oil service is too expensive, but we do win on overall efficiency and technology. We now have branches in the U.K., U.S., and Trinidad, and over the years, we have had numerous exciting projects, just to mention a few, maintenance work for BP in Trinidad, work outside Australia, and the short version. Let us now go into the results of this fourth quarter, but we let Birgitte take us through the good numbers. I will shortly comment on the operational highlights, utilization, and vessel fleet.
Starting with highlights for the quarter on slide number six. I'm very pleased with yet a quarter with strong operational performance with zero incidents, showing that our high focus on safety and environmental impact is paying off in turn. This is what also gives us the good results. It cannot be repeated too often, safety at sea is our priority number one, and we do not compromise on that. As I said, some M&A activity in the quarter, I will come back to that, to the purchase of OCTIO later. We see activity in the renewable segment at 31% of project days in the quarter and 45% for the year as a whole is good, and it's, as I said, expected to rise in the coming years.
Also late in the quarter, we were awarded a contract in the U.S. Gulf for the Olympic Artemis, which represent a backlog of approximately 230 vessel days in the first half of this year. Talking about backlog, the overall offshore market, even though showing good signs of improvement, has also last year been what we call short-term, meaning short time from order to execution. This has been the case for the last five, six years, maybe seven, so we are very drilled in that type of market you can say. However, we now see that the tide is turning, and we expect the market conditions to significantly improve going into this year and onwards, and it's paving the way for good organic growth for us.
Also in the quarter we extend the charter agreement with Olympic Subsea for three of their vessels for this year, which I will come back to on the fleet slide. I will also come back to the two subsequent events, of course. There's good news coming there. The utilization of our resources has been very good in the quarter and also for the year, which brings me over to slide number seven with just some quick comments on the utilization. We are releasing our operational figures on a monthly basis where you can follow our performance more closely. ROV days sold at 77% in a fourth quarter is very high and very good, and the overall ROV utilization for the year is at acceptable.
The vessel utilization for the year is at 92%, so despite some idle days also in the fourth quarter, the overall vessel utilization is extremely good. Comparing to the overall selling year by year, we see a good trend with steadily more sold ROV and vessel days. Our capacity for this year should definitely make it possible to maintain this good trend. This leads me into the fleet on this slide number eight. Our fleet last year and also for this year is shown here. A short comment on the , where we have two work-class ROVs on board. The vessel itself has not gone through our P&L last year. This will be the same for this year until the vessel is delivered to a new owner.
We might continue to stay on board or seek other opportunities for the two ROVs in 2023, but that will be decided when we are closer to the end of this year. Since we are very market-oriented, we might also expand the fleet this year, but of course, given the right specifications and economics. Although we are moving marine operations by robotics, we still need manned vessels in the years to come, and sustainability is high on our agenda, and we work continuously with the vessel owners to reduce fuel consumption and CO2 emissions by firstly improving operational efficiency and secondly long-term changes of the energy sources of the vessels. Our sustainability report lines up our zero-emission targets and progress.
Hopefully, this gave you a quick picture of where we are today and operational at this moment, and I will come back to the latest events and our way forward after Birgitte has gone through the good numbers for the fourth quarter and also last year and also where we are financially at this same moment. Birgitte?
Thanks, Jostein. Good morning, everyone. Just a reminder before I start, should you have any questions to our presentation, you can submit those on the webcast while we speak. We're proud to present yet again another one of our best fourth quarterly and annual results in the company's history, driven by high utilization as well as a couple of one-off effects from the purchase of OCTIO and deferred tax. Fourth quarter revenue was just below NOK 200 million compared to NOK 130 million the same period last year. Looking at the full year 2021, revenue is NOK 687 million, well above the NOK 628 million last year.
Compared to 2020, the main drivers are a higher number of vessel days based on utilization and a few complex profitable projects, resulting in a better operational result and an EBIT of NOK 79 million compared to NOK 51 million last year. For the fourth quarter isolated, we delivered an EBIT of NOK 26 million, an improvement from NOK 15 million last year. Total comprehensive income for Q4 was NOK 23 million compared to NOK 14 million for last year, and total comprehensive income for 2021 ended at NOK 94 million compared to NOK 44 million in 2020. Two major one-off effects explain part of the improvement. The purchase of OCTIO has a net effect of about NOK 10 million, and in addition, we have a positive tax effect on our P&L of about NOK 20 million.
Based on assessment of the probability of future use of unutilized tax losses and based on strong financial results the past two years and a positive business outlook, the tax losses have been capitalized. However, an impairment is still some NOK 20 million. Our activity within the non-oil and gas segment varies over the quarters as we prioritize utilization of our vessels. In the fourth quarter, our revenue was strongly driven by some projects in the oil and gas market, resulting in only 26% of the turnover representing renewables and other. Please note, however, that the other income related to the OCTIO purchases is excluded from the percentage figure. If we look at the same figures for the whole year, renewables and other revenue is 30% compared to 25% last year.
We have an ESG target of increasing the level of project days, which is a number related to activity more than turnover, to 50%, and the 2021 level ended at 45%. 50% is ambitious, in particular with the renewed strength in the oil and gas sector, but we still aim to achieve this target, the coming 12 months. Next. As Jostein showed earlier, our sold ROV days and utilization are at similar levels, somewhat higher than last year and well above previous years. While utilization is one key driver for profitability and something you can follow through our monthly operating statistics, the quality of our project execution and the pricing of our projects are other key profitability drivers. Our EBITDA per sold ROV day is a good measure to capture the effects of all these drivers.
As you can see from the graph, we had an average of NOK 43 thousand per ROV day in 2021, which is well above the NOK 35 thousand achieved for the same period last year. Even though the ROV utilization went somewhat down compared to last year, project margins and strong execution is what drives the profit improvement this year, also partly driven by the effect of the OCTIO purchase. EBITDA per sold ROV day ex the turnover effect from the OCTIO transaction is NOK 38 thousand, so still well above the NOK 35 thousand from last year. Good project execution has another important side effect, which is also illustrated in our results this year.
When the quality of our services are perceived as high by our clients, as evidenced by our high post-project client satisfaction scores, they tend to give us more work on our tenders where the price is not the main award criteria. Next slide please. As we have presented to the market, we have quite substantial growth plans for the Reach Remote. We have a strong balance sheet, and we have delivered to our shareholders with paying dividend according to our policy. With the cash and working capital position well above NOK 200 million and limited financial debt, we have a good foundation for the coming opportunities. Our news release this morning about this new strategic partner fits well into our growth plans and will further strengthen our financial position.
It's an important signal to the market that Reach intends to both grow and fulfill our dividend policy in parallel. Based on this annual result, the board proposed a dividend of NOK 0.18 per share, which is above the NOK 0.50 that was paid out last year. Next slide, please. We're among the first listed companies to report quarterly on sustainability targets and can soon present our third full year report. We have ESG targets, as you can see within environment, being a responsible employer in all parts of the world, and always doing business in a responsible way. We started our full sustainability reporting to the market in 2019, partly based on the United Nations sustainability goals and also the GRI standards, which we have adjusted to fit our business model.
The sustainability report from last year includes a full description on our targets and also beyond and how we work to achieve those. They are quite ambitious, but we are proud to deliver fully on 13 out of 15 targets, with the last two to be completed in 2022/2023. Our full sustainability report for 2021 will be launched together with the annual report early April and will include our 2022 targets for ESG. The next slide. To sum it up, another strong quarter with quarterly and annual results, the best in our history, mainly driven by successful projects. We have a solid financial position with liquidity and equity ratios that puts us in a position to invest and grow. We deliver on our dividend policy, and we are ready for new investments with little financial debt.
Our HSEQ record is flawless, and our clients are more than satisfied. All in all, Reach is well positioned financially to face the market and growth opportunities that we believe lie ahead, and that Jostein will tell more about on the next slides.
Thank you, Birgitte. It's good to have a solid financial department. I will try to illustrate our way forward to the unmanned offshore operations. I'm starting with OCTIO on slide number 16. Just in short, they were established in 2006 and has 30 employees located in Bergen. Their service lines are shown on the slide, but I will not go into details. In short, OCTIO's technology are real-time passive seismic modeling and survey-based seafloor gravity measuring. In other words, monitoring of the reservoir over time and improve the management of the field. This complement or replace conventional 4D seismic at a fraction of the price and delivery time, and customers can reduce the frequency of or completely remove the need for conventional 4D seismic surveys.
Best of all, this passive methodology offers an alternative with impact on marine life. It has been used by over the years on Oseberg, Aasta Hansteen, Troll, and Midgard fields with enormous savings for the field partners. The relationship with Equinor will also continue into the future, where OCTIO holds a multi-year frame contract for the North Sea fields. We see the same long-standing relationship also with Norske Shell, where OCTIO last week were awarded a new multi-year contract on the Aasta Hansteen field. In addition, the technology has demonstrated success in monitoring injection reservoirs and has been utilized on the two CO2 storage projects in Norway on the Sleipner and Snøhvit fields. We are talking proven technology here, which brings me over to slide number 17 to look at the strong strategic fit with the Reach.
An instant synergy with OCTIO as a part of Reach is that we have done operations together for some years and can immediately offer complete offshore installations and monitoring services worldwide. That said, we are already actively targeting Brazil and Australia as markets with great opportunities. Combined, we offer a high value proposition to oil and gas companies, and the savings compared to traditional seismic are enormous over a reservoir lifetime. In addition, OCTIO adds a strategic pillar in our strengthening of the survey and inspection data processing capabilities, not only for our current operations, but they will also make a really good foundation for further expansion to handle big data flows. Also, for the near future is the carbon capture and storage segment. If CO2 shall be stored in huge scale in numerous fields, we then have the monitoring solution, silent and environmental friendly.
Subsea mining just have to be mentioned again with OCTIO's high-skilled scientific team and technology combined with our operational experience. I believe we are in the best position to identify and map the mineral fields the most efficient of all. But best of all, there is a perfect fit to the unmanned robotic future, which brings me over to slide number 18. As some of you know, Reach Subsea has worked with this for the past two years, and we have named it Reach Remote. The project is carried out in cooperation with well-known industrial partners like Kongsberg Maritime and Massterly. This is definitely the future unmanned vessels alone or together with manned vessels working on the all oceans.
There are endless numbers of subsea operations that could and should be done with the remotely operated vessel with the OCTIO operations as a very, very good example. Our slogan says it all, "Go green with marine robotics." The effect on CapEx, OpEx and CO2 emissions are pretty drastic, with more than 90% reduction in CO2 emissions compared to a manned vessel. Of course, no personal risk with the offshore operations, and not at least a significant reduction in the cost of subsea operations. We expect to see a boom in the market of collecting data subsea as the total cost is becoming more and more affordable. Where do we stand on the Reach Remote project today? The next two slides will sum up with some good news.
As I said at the start, it has been a hectic winter, but we have done some mitigating actions to get our supply chain up to 100%. We have now secured an order for vital components and subsystems for 2023 delivery, and are also finalizing the selection of yard for fabrication. I feel, based on the shortlist, that it will be in Norway, and we are proceeding according to latest timeframe. Worth mentioning here is that Massterly, our bridge and navigator is on track with their operational center in Horten and are already in operation with the Yara Birkeland and further on with the ASKO vessels later this year. They will be well up and running for our USVs next year. We are also on track with our Reach Remote operational center in Haugesund.
Most important of all, progress on the financial side, which brings me to slide number 20. Getting in a strategic partner has been very important for us and it's good to have this in place. It strengthened the case and make way for big scale thinking. We will of course come back to you with more details as soon as we can. This leads me to our final slide, number 22. Here is my point I mentioned earlier. Our 10-plus years of spotless operational execution combined with our global customer network we have today gives us a really short time to market with new technology. Like the Reach Remote USVs if they have been available today, some 50% of our work here could have been done with these unmanned USVs.
A short way to market is the key word here. Subsea operations by robotics have been done for decades, and going full marine operation by robotics gives a huge potential. The future market will be endless, and we will continue to stay in the forefront in technology and have a clear ambition of being the very top worldwide when it comes to unmanned operations. The first two units are just the start of this journey. Our robust financial position today and with this strategic partner let us now confidently take this bet on the long term and further create value for all our stakeholders. Going forward, we will invest wisely and earn money on the way with the operations we have today.
Also in the short term, you will see that on one hand we will grow further organic in a rising offshore market. At present we are recruiting more dedicated personnel both in Norway, U.K., and the U.S., and basically continue to build the company brick by brick and expand to other geographical areas. On the other hand, we will continue looking at M&A opportunities that will add value to our business and not only fit our expertise and operations today, but also fit our robotic future. All in all, we are in a very good position today to take the next step for tomorrow. This concludes our presentation and we can now go over to the Q&A session. If you have control of the questions, Birgitte?
Yes. We have a few questions that have been sent in, still possibility to send in a few more questions, if the viewers have any. Firstly, there's a question about the OCTIO contract, and maybe you can comment on, Jostein. The recently announced OCTIO contract, could you give some details on the yearly value of the contract?
I think it varies year by year. It depends on the length of the operation. It's not calculated yet, but historically it has been around NOK 15 million-NOK 20 million yearly. Yeah.
Yep. There was also a question when we expect OCTIO to break even. Maybe you could answer that as well.
Yeah, my expectation is that we are on breakeven fairly soon, this spring. We also have plans for OCTIO that will expand their sort of services and portfolio. They will be positive fairly quickly.
Yep. There's a question regarding how come order backlog is down versus Q4 2020? I can answer to that. The order backlog at this time of the year varies quite a lot. Sometimes it's a little bit low, sometimes it's higher. What's most important is that the tender volume is high and as we have said in our quarterly report, we are quite confident that the 2022 season will give us a strong market and opportunities. There's another one. Why increase dividend when you have investment needs for the Reach Remote and at the same time are providing cheap stocks to a potential partner? We cannot comment on the stock price. That's for someone else to do consideration.
We believe that if you want to attract the best investors and strategic partners, we have a dividend policy, we need to deliver on that. That's something that we intend to do also in the future. It's quite important when we have stated a policy or the board has stated a policy that we intend to deliver on that. That's to be consistent to the market. Please note that our liquidity position makes it possible for us to deliver at the same time as we grow. There's a question, can you provide the key milestone dates for the Reach Remote number one?
I don't know, Jostein, if you want to say anything more about that? We can't say anything more at this stage?
I will need to find the building contract, and then I know the exact date of delivery next summer. We will for sure announce that when we announce the con-
With the current liquidity position and the potential equity injection, are you fully equity funded for Reach Remote 1 and 2? I can answer a yes to that. Most likely, there is a need for, of course, bank financing for part of the financing. On the equity side, this brings us to the place we want to be ready for the financing of Reach Remote 1 and 2. There's another one. What's the expected CapEx for the Reach Remote unit? It's around NOK 400 million. Important to say that includes the soft funding from, you know, Innovation Norway, SkatteFUNN, EU, and so on.
That brings the CapEx for Reach a little bit lower than that. How will the current wave of project sanctioning on NCS impact Reach Subsea? How much scope is addressable for Reach? It's worth mentioning that that figure includes some investment. There's an upfront investment and testing that would benefit the next couple of units. I don't know if you have anything to say about that, Jostein.
No, I didn't get.
The current wave of project sanctioning on the Norwegian Continental Shelf.
Yeah. There will be an increase if it is the oil and gas market, yes, of course. There are a lot of projects coming in the next three years, so that will take a lot of resources from the offshore fleet, of course.
And.
This is where we are also targeting.
What's expected lease cash outflow 32? I guess if you take a look at the vessel charters we have, you will get a flavor of what the lease cash outflow will be. When it comes to the financial debt, I don't think that's the question. The question is probably related to the vessel IFRS 16 lease cash outflow, and that can be found if you look at the vessel charter parties that is described in the notes. What do you generally consider a normalized EBIT margin for Reach? We have decided not to guide on EBIT margins. Sorry about that. You now have some history to look upon. I think that's all we can say about that. There's a new question.
When will you disclose the name of the new large investor in the company? That's been finally approved in both parties, both in Reach and in our new strategic partners board of directors. Another one. How many USVs do you think you can build, including the warrant financing? Well, it's difficult to say that without saying the number of warrants, which we haven't disclosed yet. I think we'll have to keep that question open for now. What kind of debt financing is it possible to get on the Reach Remote units? Well, it's not a very simple question or answer to that question. It will probably be split in bank financing, traditional bank for the units, and the ROVs could be leasing financed as our other ROVs.
We're yet to close the bank financing for the first two units. That's all the questions I received in the chat.
Yeah. I think we are.
Plus.
over time as well.
Plus.
We are over time as well.
Yep
Thanks.
Good time for this.
Thanks for watching, and we will be back the next quarter. Thank you all.
Bye.