Good morning, and welcome to PGS Q2 presentation. My name is Bjarte Strandberg, Vice President, Investor Relations and Corporate Communications in PGS. Before we start, I would like to give some practical information. For those on the webcast, you can post questions during the presentation, and we will address them after management's concluding remarks. I would also like to draw your attention to the cautionary statement showing on the screen and available in today's earnings release and presentation. The agenda for today is Rune Olav will give you the Q2 highlights, a financial summary, and the order book. Gottfred Langseth will give you a financial review, followed by Rune Olav's commentary regarding the operational update and the market comments, the guidance, and then we will have the summary and a Q&A at the end.
With that, I give the word to you, Rune Olav.
Thank you, Bjarte. Good morning, everyone. I will start with the highlights from our second quarter results, and start with the contract market. We are seeing improving contract rates and margins, and we saw that continuing into Q2 this year. That is in spite of the fact that we had rough weather at the start of the North Sea season, which impacted our contract rates negatively. Even with that, we are seeing a sequential increase. We're also seeing a strong demand for our vessels, which I will come back to when I show you the very strong leads curve when we get to the normal bids and leads slide. On multi-client, we're seeing sequential revenue increase from Q1 to Q2, and a prefunding level of a strong 127%.
For the first half, the prefunding level is now at 128%. We expect a similar prefunding level for our activities in multi-client in the second half of 2023. Late sales more than doubled from Q1. Obviously, the Q1 late sales were weak, but the late sales in Q2 are more in line with what we expect from a reasonably strong market when you take into considerations that there are no transfer fees or extraordinary events in our late sales in Q2. Fairly good late sales in the quarter. We are also seeing significant interest in our solution for site characterization for offshore wind parks.
We started our first project now in the second quarter, and we have received an award for another contract, which will take this solution and this operation well into the first quarter of 2024. An interesting development, which I will comment further on later in the presentation. We have also today announced that we have secured a $75 million term loan, which will be used to partly repay the existing term loan, and therefore increase our liquidity headroom in the first quarter of 2024. This is done to increase our financial robustness going forward.
The financial summaries, I will be fairly brief, as Gottfred will go more into the detail on the numbers, but produced revenues of $186 million, and an EBITDA of $113 million, EBIT of $23 million, and then net cash flow provided by operating activities at a strong $99 million, which is a strong result, and obviously sequentially up from last year, even though we had weak late sales in the first quarter, which we typically collect in this quarter. This is a strong number for us. Order book development remains at a high level of $341 million. It is slightly down from Q4 and Q1, but this is more variations between the quarters, and it stays at a very high level, which we are satisfied with.
The booked position, we are fully booked in the third quarter. We have booked 17 of the available 21 vessel months in the fourth quarter, so only four quarters left to book for the year. Then we have booked eight vessel months in the first quarter of 2024. We are currently, of course, working on both multi-client projects and contract opportunities to book up the winter season. Ramform Victory, we introduced her to the market in June, as we have said we would. She is currently doing multi-client work in Norway, pre-funded multi-client work in Norway, and she will be steaming to Brazil later in the quarter. When the steam will start depends on when we get more confirmation on when the permit for the work in Brazil will be received by Petrobras.
With that, I give the word to Gottfred for our financials.
Thank you. I will start on the key financial figures. The $186 million produced revenues is a 11% reduction from Q2 last year. This is due to lower late sales. We had okay late sales in the second quarter. In the second quarter last year, we had record high late sales with quite significant transfer fees. That is the reason for the reduction.
We have had strong growth of contract and pre-funding revenues in the quarter. EBITDA of $113, that's in a way, positively impacted by lower cost in the second quarter. Similarly, the EBIT of $23 million. If I move to the operational highlights, we had contract revenues of $70 million in the quarter. We used less active time for a contract than previously, or prior quarters, as you can see from the graph. We had an improving revenue per day and EBIT margin in the second quarter, both compared to Q1 and compared to Q2 last year. The multi-client revenues total $109 million, sequentially doubling of, or more than doubling on the late sales.
As you can see, the graphs illustrate the variabilities, or sequentially up, but compared to the second quarter last year, which was a record quarter, we are down. We have strong commitments for the ongoing pre-funding or multi-client projects, that secured a pre-funding of 127% in this second quarter. We invested $42.9 million. On the vessel utilization, we had 76% active time. We had unseasonably bad weather when we started several acquisition projects in Europe or in Norway. This year, the mobilization time or getting equipment in the water is recorded as part of contract time or multi-client time, respectively, and not as, you know, I call it standby or anything else.
On the number of days basis, the issues on mobilization reduced had a negative impact on productivity in the quarter. This was mostly, I would say, offset by strong production when the surveys got going. We also had relatively significant yard time in the quarter, and that includes a yard stay for Sovereign, which were delayed quite significantly compared to the original plan. Lastly, on the Q2 utilization, the standby time relates to the terminated contract for Ramform Titan, where the vessel was on the way to the survey region at the time of receiving the termination. For the second half, 2023, third quarter and fourth quarter will be quite different on utilization. It will be a significant overweight of multi-client now in the third quarter.
We will have six of our seven 3D vessels on multi-client projects. Whereas in the fourth quarter, this will almost flip completely around, and we will have a significant overweight of vessels working on contracts. Gross cash cost development, this is a positive picture, significant sequential reduction, $125 million gross cash cost in the quarter. Lower project-related costs, this will vary obviously from project to project. We are also moving into now the part of the season, the summer season, where on average, the projects have less support and other project-related cost. We also have a benefit from lower fuel prices in the quarter, and also a period with a very weak krona versus the US dollar, and we have quite a bit of our cost base in Norwegian krona.
We still expect a gross cash cost for the full year to be approximately $550 million, but that amount now includes more wind activity as we will be acquiring wind surveys with Sanco Swift through the end of this year and well into next. Balance sheet, quite quick, $137 million free liquidity or unrestricted cash and cash equivalents. Net interest bearing debt of $592 million. Cash flow, significant improvement of cash flow in the second quarter and in the first half or year to date compared to last year. For example, operating cash flow is more than doubled, both for the quarter and for year to date.
This is primarily due to call it positive or a lower working capital, which is driven by, on average, quite favorable payment profile on ongoing surveys. In addition, it is some related to the phasing of revenues through the quarter, where acquisition revenues are pretty flat through the quarter, where as late sales are typically late in the quarter. The low working capital is despite a lack of resolution and receiving payment relating to a significant 2022 transfer fee event, as we have described in our earnings release.
We separately this morning announced that we had secured commitments for a $75 million new term loan to be used to pay down a little bit over half of the existing term loan, $138 million total, the existing one, with a maturity in March 2024. We do this to further increase our headroom in the financial planning and increase our robustness. The loan fits well with our debt reduction strategy. It can be repaid at par from mid next year, June 2024, quite different from the bond that we have outstanding. It's fair to say that our plan is not to keep this on until its maturity, when circumstances allow, we expect to repay it.
Interest rates are similar to the existing TLB, actually a little bit lower. We will draw this loan now in this third quarter, and simultaneously repay or prepay the existing term loan with the main terms. Plus 7% interest rate, we will issue this at 95% of par. That is, in a way, the cost of enhancing our liquidity profile this way. The loan will start to, unless it is prepaid earlier, start to amortize mid next year, so with 6.25% quarterly from June next year. All of the financial covenants are aligned, not to the existing term loan, but to the relatively new $450 million bonds, that goes for the leverage ratio, minimum liquidity, and these kind of things.
Final maturity of the loan is December 2026. The graphics there show the net impact of maturity profiles when this transaction is completed later this quarter. This is my last slide, and it demonstrates that we are delivering strong cash flow in an improved seismic market. The graphics on the top, similar to last quarter in a way, although the numbers are slightly or quite a bit better, show the cash flow generation for the last 12 months, so mid-year, last year, up to today. We have delivered a cash flow before financing activities, after CapEx and multi-client investments of $279 million.
If we then deduct the interest payments in the last 12 months, the leasing payments for the last 12 months, we remain with a cash flow of $157 after everything is paid, but available for debt reduction and other purposes. As a result, also, our net interest-bearing debt is quite significantly reduced. It's illustrated there at the bottom of the slide, and we have reduced our net debt by close to $300 million over the last 12 months. I will stop there, Rune, and give the word back to you.
Thank you, Gottfred. Move on to the fleet activity. As you can see, the Ramform Tethys is currently operating in Brazil on a very large multi-client survey in the southern part of the Santos area. She will be there more or less for the rest of the year, until a yard stay towards the end of the year. Sanco Swift, as we have said, is equipped with our ultra-high density 3D solution for offshore wind site characterization. She is currently operating in the Irish Sea. We expect to be completed there in a matter of weeks. Then transfer over to the US for the next survey. In the Norwegian part of the North Sea, we have four vessels operating currently.
We have the Ramform Hyperion, the Ramform Victory, and the Ramform Atlas, all doing pre-funded multi-client work. We have Ramform Vanguard, shooting four Ds in the North Sea. Moving south, you see Ramform Titan now mobilizing for a multi-client project in Egypt, as a replacement for the terminated contract in South America. Ramform Sovereign is doing multi-client in Malaysia. As I just mentioned, and which we will all have seen from our announcement, we had a contract termination in Q2, for Ramform Titan. She was steaming towards the survey area when we received the termination.
The termination is due to the client not receiving the necessary permits to do the job. It's not related to the fact that the client didn't want to do the job or anything market-related. I think, in fact, the client is as disappointed as we are. We are entitled to a termination fee which will be part of our revenues now in the second quarter. Then we are also in discussion with the clients on the level of additional reimbursement, because we're also entitled to direct costs we have suffered related to this. It's a positive discussion ongoing.
As I said, the vessel is currently mobilizing in Egypt for a multi-client job. It is good to see that we are able to utilize the Ramform Titan in a hot area. Egypt is one of the world's hot spots, with its gas prone basin, very close to Europe. There is significant client interest for multi-client data and contract data in this area. Since the market is, you know, strengthening, we have a pipeline of multi-client projects, which we were able to take one of these and accelerate it up and place Ramform Titan on currently. It's good that we see that we're able to turn around quickly and utilize her on a meaningful and good multi-client project.
Obviously, we have not yet secured pre-funding as we had to accelerate this, you know, in front of the queue, to put it that way, because of this incident. There is client dialogue currently, and we expect to secure pre-funding for the area going forward. I can also mention that the next project for Ramform Titan is a contract job in Egypt, so this obviously also make a lot of sense from an operational point of view, avoiding steam. All in all, an acceptable and good solution for Titan, given the situation we were put in. Now, I mentioned in my introductory slide that we have seen a significant growth in our sales leads, and you see that on this slide here.
Just to repeat, this, what this slide is, the dark blue line is the dollar value of all the tenders we currently have in-house. Obviously, when we are awarded work, it moves from the dark blue line and into the backlog. The light blue line is the dark blue line, plus the estimated dollar values of all the leads we have in-house. It is a kind of more of a leading indicator than the dark blue line. It is also worth to note that we are seeing an increasing amount of, I'm not sure I could call it hybrid tenders, but it is formalized documentation, where you receive a pack of documents, and you are invited to give a budgetary quote or an interest.
You have to cost the project, you know, in a particular area, with a particular setup, and a particular size. Send that in, either as a firm firm price or as an indicated price, but it is not called a tender. It is called a request for interest or similar budgetary or similar. Some of these, call it hard leads, very quickly flip into a more firm tender. We saw that in, for example, in the second quarter, where we had one of these RFIs, and then we were informed that within a week, we have to convert that into a formal offer. It's almost like it's sitting between, or it should sit between the light blue and the dark blue.
It is also, of course, an indication that some of the work in the light blue are rather secure and will happen and will find its way either into the dark blue line or immediately into the backlog. We are seeing a fairly strong demand for our contract services, and these are not loose leads, is in a way, what I'm trying to explain here. The supply side is still the same, I would say. You know, significantly down and dominated by Shearwater GeoServices and PGS.
We are indicating 17 vessels in today's market versus the 15 we indicated in 2022, because we have brought in the Ramform Victory, and we see Shearwater GeoServices having reactivated another vessel in line with the demand we're both seeing in the market. A good supply side still. Over to new energy. I have talked a few times now about the site characterization for offshore wind parks, where we have entered this market during this quarter, and where we're seeing a lot of interest.
Just to explain a little bit, for those of you not familiar with this, the site characterization market for offshore wind markets is today dominated by typically two 2D surveys and two geotechnical surveys in kind of sequence, one 2D, one geotechnical, 2D, geotechnical, something along those lines. This obviously takes time. What we are trying to do, we are trying to introduce a 3D solution, which is what we have introduced there, which gives you an ultra-high density picture of the first 100 meters of the subsurface. The idea here is to accelerate the knowledge of the subsurface so that the wind park providers can start building earlier, and therefore, you know, massively save investments and these kind of things.
In addition to that, we are trying to replace, you know, the sequential seismic, geotechnical, seismic, geotechnical, by providing a better seismic image. We are receiving considerable client interest for our solution. The first job, as I said, is for BP and partners, or partner, and BW in the Irish Sea. We are due to complete it in a few weeks. We will move over to the US and start on the large survey there. We expect also to buy another set of these ultra-high density streamers, so that we can have two operations for next summer.
We're seeing such massive interest for this, that we believe that we can easily deploy that in the market over the next summer season, then we would have to rig another vessel, obviously, for that. We are currently in a procurement process where we have received offers for a second set, and the CapEx for that is approximately $5 million, and is of course included in our CapEx guidance. As a consequence, we have also exercised the option on the Sanco Swift. We had, you know, an agreement for the Sanco Swift. We have options going forward, so we have exercised a two-year option on the Sanco Swift, and she is currently the vessel we have rigged for wind operations.
She is, of course, also a high-capacity 3D vessel, to the extent that the 3D market continues to where demand continues to increase, we could, of course, bring her into our normal operation and equip another vessel with the wind set instead. This creates operational flexibility for us. Onto guidance. We still guide on gross cash cost of approximately $550 million for the year. The multi-client cash investments are up, and we are now guiding that at approximately $180 million, which of course, also impacts the percentage of active 3D vessel time allocated to contract, which is now expected to be approximately 50% for the full year of 2023. CapEx, we still expect to be approximately $100 million for 2023.
In summary, we are seeing an improving seismic market that is particularly showing itself in improving contract rates and margins, but also in a sequential increase in multi-client revenue. In particular, if you look at the prefunding revenue, it has grown sequentially quarter-over-quarter for many, many quarters now, and we are running with very high prefunding on our projects. Also late sales have picked up to a more normalized level in this quarter. We have, as I have explained, experienced significant progress in our own offshore wind work, and we have secured a new $75 million term loan, where we are proactively managing our near-term debt maturities to increase the financial robustness of the company going forward. With that, I think I will open up for question, board?
Yeah. Thank you, Rune. We have a handful of questions from private investors to start with here. First question: How's the seismic market now compared to what we saw earlier this year?
I mean, it's it is continuing to improve. I think it's the only way to put it. We are seeing increasing demand for for our vessel activities, clearly evidenced by the increasing day rates and margins on contract work, and also on the very high prefunding percentage we are running on our new multi-client project, which is as most people have noted, you know, almost 10% above the guided interval of 80%-120%. Obviously, proving that the market is quite strong and continuing to improve. Also on late sales, it's good to see that that levels are getting back to more normalized levels in a market like this.
Next question is, probably for you, Gottfred. Do you consider to do sale on the leaseback of vessels to increase your liquidity reserve?
Not currently. That is not part of the plan. It's in a way, in the future, that may be a topic, but not for now.
Next one is for you, Rune. It's basically related to your quote in the release. Can you please comment on, "According to our estimates, we can manage this repayment without the or with our liquidity reserve and the cash flow we expect to generate over the next quarters. However, to further increase the liquidity headroom in our financial planning and create financial flexibility, I'm pleased that we have secured this commitment.
Yeah.
His question is whether we expect to repay the loan or refinance the loan?
Yeah, we clearly expect to repay the loan. What that statement is meant to say is that, in our financial, forward financial planning and estimates, we could have managed $138 million Term Loan B in March next year without doing this $75 million loan.
When you're running a company, and in particular in the seismic industry, revenues and cash flow fluctuate from quarter to quarter. It is not a good idea to run the company based on the point estimate of cash flow, which is March 2024. This is to increase our financial flexibility and robustness. It also gives us the opportunity to invest in either, you know, equipment or companies or, you know, make profitable decisions for the company without having to worry about whether it will actually impact the liquidity at one point in time. That's why it increases our financial robustness and flexibility. That is kind of the main point of this $75 million new loan here.
We absolutely expect to repay it from cash flow before its maturity. We have next question here. PGS lost a contract earlier in Q2, and together with delays on the Brazil contract, what consequences does this have for repaying debt in Q4 2024? Is PGS still of the opinion that an equity raise is off the table despite the incidents mentioned?
Yeah, clear, an equity raise is clearly off the table. Not something we're considering at all, and I think, what we've done today, we just commented on the $75 million Term Loan proves that is not in our planning at all.
Mm.
The two incidents you do mention, you know, the delay in Brazil work, and also the contract termination, where we're doing multi-client instead, are good examples of how, you know, our cash flow vary from quarter to quarter. I think in the end, none of these effects will have any negative effect on PGS in the, call it, in a year's time frame or something along those lines, because we are investing in attractive multi-client projects, and one already pre-funded and the other likely to be refunded. It will affect the timing of cash flows, because, you know, you're doing multi-client instead of contract, and in multi-client, we get the revenues somewhat later than in contract.
This is an example of why, it is important to have financial flexibility.
Mm.
that we can make, first of all, take, or manage when these things happen to us, and also make decisions which are profitable for the company in, kind of the short to medium term, without having to worry about cash flow at a point in time.
Yeah. He also wonders, that, cancel contract, is it likely that we will do that at this later stage?
I don't know, to be quite frank, whether the client will be able to get a permit in that area or whether that area is, you know, at least for the time being, off limits. I don't know, is, it was an environmental permit, if I remember correctly. So I don't know, we'll see.
Okay, next question is from Mick Pickup in Barclays. You talk of a multi-client pre-funding at similar pre-funding % in second half as the first half. Does this include the impact of the Titan going on an early multi-client campaign in Egypt without any pre-funding at the moment?
Yes, it does. Yeah.
Another question from Mick Pickup. You also talked of improving rates and how 2Q was hit by downtime. What was the impact, and can you talk to winter pricing levels that you have secured?
Yeah, obviously, the impact is, we went up there, we started to mobilize, on a, on a contract job. You know, a hurricane or similar, size came in, into the Norwegian continental shelf. We had to pick up all the gear again, and we were delayed, two weeks?
A couple of weeks, and there were three projects that were impacted.
Yeah, yeah.
contract-wise.
Not to the same extent.
Yeah, yeah.
The other were multi-client. Obviously, that impacts. You know, we take that as part of contract work, and obviously that impact the rate level for the average. That is kind of to the extent of it. With respect to contract rates for the winter season, I'm gonna be a bit careful, as we haven't sold the entire winter season, and I'm sure our competitors also pay attention to what we say. We do not expect contract rates to go down.
Next question is from John Olaisen in ABG Sundal Collier. You show a jump in sales leads. In which geographical area are these increases? The leads that you are seeing, when is the work indicated to be done?
Yeah. I mean, obviously, it's, it is a fairly large number of leads. Some of the larger ones, there are, you know, some are larger than others, you know. Some of the larger ones are in Namibia and in South Africa, and that is work for this winter season. Some of it even, due to start in, you know, late this year, in the leads, in the leads. I think maybe one of them have been flipped to a tender after we, prepared the graph, but, you know, it's in those sort of things. That's one area. East Africa, is another area with two, at least one very large lead, which we have also, you know, priced up.
There is a fairly large lead also actually in call it the Middle East area, which has also come up as more of a formal request for interest with paperwork and everything. I would say that is probably the some of the main areas for the which explains the jump.
Yeah.
Mm-hmm.
Another question from Olaisen. In Q2, you experienced the weaker economics due to canceled contract and bad weather. In good times, contract terms are usually improving.
Mm-hmm.
Is your current backlog also exposed to short-term contract cancellation and bad weather?
I think, I would say, yes, it is exposed to that, as it has already been, but at the same time, the rates or the, sorry, the terms, in the current backlog, are improving, in this respect, in particular, with this, with respect to the termination, clauses. It's very much, on our agenda, that, if the client, experiences, things or chooses to terminate, a contract, and it is close to, the time where we are gonna, do the work...
Mm-hmm
There should be a larger fee payable. This is something we are currently working on, and it's fairly high on our agenda, I would say.
Mm-hmm.
There is some improvement in our backlog, but this takes a little bit of time.
The next questions comes from Christopher Møllerløkken in SpareBank 1 Markets. Again, he also asked about the regions for the growth in the sales leads, which you have addressed. Next question is, would you use one of your stacked vessel as a potential second vessel into the offshore wind site characterization market, or would you charter in a new vessel?
I think both are options we are looking at. Either using one of the stacked, or using, or chartering, and it depends a little bit, and we haven't really decided yet, and this is very early days, what are the ideal vessel and how, let's say, low can we go on spec, you know, and how cheap can we acquire this? You know, how aggressive can we be on cost? That also drives a little bit, you know, what is the vessel that we would prefer to use. We are considering both stacked vessels and, uh, or vessels available in the market for charter.
Next question come from Steffen Evjen in DNB Markets. Could you provide some color on the competitive landscape within offshore wind site characterization? Considering you're probably running two vessels for this operation the next summer season, could this market potentially consume further market supply of 3D vessels, given the structure for growth?
I mean, this is a market which is dominated by Fugro. They are dominating the 2D, slash geotechnical market for site characterization for offshore wind. I think they have more than 50% of that market.
Mm-hmm.
We are, of course, a new entrance with a new solution to this market. I think it's absolutely reasonable to assume that there will be more vessels acquiring 3D seismic for offshore wind site characterization going forward, and we will probably not be alone. I think there is no reason to expect that. To what extent and how fast this will grow, I think is still very early days, and we have only scratched the surface of what we think we can do with our new solution and to what extent that can actually replace a fairly large amount of work and be both a cost saving and a time saving.
Mm-hmm.
Which also here, time is very much money, with respect to offshore wind as the offshore wind providers pay a lot of money upfront when they get the area. Always, getting into production early is very valuable, and that is some of the things we are planning to do with our solution.
Mm-hmm.
Yes, we expect to have competition. Right now, we think we are the more or less the only provider.
Next question is from Baptiste Lebacq in ODDO BHF. You mentioned you are in negotiations with the client that terminated contract for compensation. Can you give us an indication of the level of these cost or compensation that we expect to get in the second half?
I mean, it is single-digit million dollars type of discussions.
Okay. Yeah, we have a question from a private investor. What are your thoughts regarding dividends in the future?
I think we will repeat what we have said earlier. Our current priority is to repay debt and get down to a debt level where we have removed, you know, the 138 now... you know, 75 and 63 or whatever, you gotta say when we remove that, we're left with the bond. We will then take a look at, okay, what do we do with the distribution of surplus cash flow, which we expect to have? At that stage, we will make a decision on whether to pay dividend, and if so, how much.
Yeah. We have another question related to the new energy business. Can you say something about the CCS markets? Anything new there, now in Q2?
We will do a CCS job now in Q3 in the North Sea. I would say nothing really new in that area. It is developing as developing as I expected, and I think I also told the market last year, where we did a lot of surveys last year. We did four out of the five we saw worldwide last year. This year, we're doing one, and our clients are doing one or two, or something along those lines. This is a flattish market for now. I expect it to remain flattish for a few years before, you know, all of the initiatives that we're seeing all around the world matures to a level where it requires seismic.
We will see a growth in this market, which could be strong. I still believe that is a, what should I say? A few years out, maybe two to three years out, before we're seeing a significant growth in the carbon storage market. The offshore wind is accelerating faster, as it is here today. It is up to us to prove that our solution works and are beneficial for the clients there.
We have another question from Baptiste Lebacq in ODDO BHF regarding new energy as well. You plan to move the Sanco Swift to the U.S. Do you plan to keep the vessel dedicated to the U.S. market, and then introduce the second vessel which will cater for the European market?
That could be the result, but it's not something we're planning for. We are planning to keep the vessel in the Atlantic margin, which will mean, you know, yeah, both sides of the Atlantic. We will not, I think, move her to, for example, Asia Pacific. It's too much of a steam for this. The second vessel, we also expect to be working in the Atlantic margin. There are several planned offshore wind parks in that region, I think we plan to keep both vessels in the Atlantic margin. Of course, it may prove that we get more work in the U.S., then, well, of course, we'll keep her there.
It's not so that we will place one vessel here and one vessel there and only search for work there. Sanco Swift may be back in the North Sea next season for all I know.
Okay. We have a question related to contract pricing. You have, to some degree, addressed it, but for sake of good order, I'll just read it out. Looking at the implied contract pricing in Q1, you had a strong increase year-over-year, and an even stronger increase year-over-year in Q2. Can we expect further price increases in Q3? If that's the case, can you quantify the price increase we expect going forward?
Always say Q3 is, you know, one vessel working on contract, so it's. I haven't really looked, but I'm sure it's on good rates, but it is not, call it a great. Q3 won't be a great proxy for the market. Q4 will be, when we have much more work in contract. What I can say is, obviously, what we have in our backlog, the pricing there is, it's not worse than what we have achieved in the first half, that's for sure. We don't expect any reduction in contract rates going forward into the winter season at all.
reful trying to speculate or give an indication of where we expect to see the contract levels during fourth quarter and first quarter, as we are still selling vessels into that market
Why have late sales been so weak in Q1 and Q2? Looking at the late sales in percentage of total multi-client sales in the two quarters, we have 36% for Q1 and 50% for Q2, while the long-term average is more than 52%.
Yeah.
Basically, what's the reason for the weak late sales in first half?
Yeah, I think your percentages will actually say that, yes, the weakness in the first half is due to the first quarter and not the second quarter. Second quarter, very much in line with what we expected, forecasted, thought, and very much in line with a normalized Q2, if you take out one-offs like transfer fees. Last second quarter in 2022, we had very large transfer fees. Q2 is good. There's nothing. There is no weakness to be had there. If we've had, let's say, two quarters similar to Q2, I think we would all have been quite positive on the say. This is down to Q1. Q1 was weak.
We didn't see a massive catch-up, I guess, in Q2. The second half is weak. I don't have a really good explanation other than that we are experiencing little bit of delays, I guess, in pulling the trigger on the sales. It is taking a little bit longer to kind of get the sale through. Whether I don't know why that is, to be quite frank, but that is what we are seeing. In all our communications with our clients, both, you know, one-to-one and in, you know, smaller group meetings, clients are, and I think unanimously saying that they will increase exploration, which is of course, the relevant part for late sales.
There is nothing in the, call it market intelligence, communication indicating, weak late sales, and I don't think there's anything in Q2 indicating it either. I agree, first half, because of the weak first quarter, is weaker than what we had expected and what you would expect from where the market is.
We have another question from a private investor. There's still speculation from the financial media and various analysts that cash flow will not be sufficient to cover the debt maturities March 2024. One would assume that this is also the reason for the persistent pressure on the share price. What's the likelihood of yet another equity issue?
I think, well, I certainly hope that the pressure you are talking about will be lifted with the $75 million term loan we have announced today. I think you will have to be very negative to think that there is a big risk to our Q1 2024 liquidity now. What can I say? We are not considering an equity issue at all, and I think we've proven that by going out and in earlier than what we needed.
It was actually on our financial planning, we don't, you know, strictly need it, but to increase the financial robustness, take into account that, you know, things may happen also in the third or fourth quarter, in the first quarter that, you know, may displace cash flows, so that that doesn't hurt the company and we are forced into, you know, equities issue discussions. That is absolutely not a topic for us.
Very good. We have a follow-up question from Steffen Evjen in DNB Markets. I know it's early days, but assuming you reactivate one of your stacked 3D vessels for offshore wind work, could you give an indication of potential reactivation CapEx on top of the $5 million in streamers?
What should we say, Gottfred, to reactivate? It depends a little bit. I mean, if we were to take, for example, the Apollo, which is working, you know, as a source vessel.
Mm.
reactivation cost would be marginal. We'd have to stock up with some equipment, but then the $5 million probably is good as proxy as anyone. That would not cost much to use to take the Apollo and equip her with a streamer set or, you know, one of these offshore wind streamer sets. If we were, for example, to reactivate the Ramform Explorer, that would have classing cost attached to it, and some other costs. I would indicate between $5 million and $10 million. Gottfred, any views?
Yeah, then it's closer to what we have seen on Victory.
Yeah, yeah.
for this year, so.
Yeah.
In that probably then the classing will be costly.
Yeah.
Obviously, then we have a vessel that has some capabilities outside wind as well.
Yeah.
But as Rune have said, we haven't taken any decision.
Yeah
On what to do with them. The most cost-effective way of achieving what we want to achieve will obviously be quite important here.
Yeah, very.
We have another question related to late sales. Do you still see Q2 late sales as healthy if you exclude the third demand from Q1?
Yeah, I do.
Very good. We don't have any further questions from the web. We also have an audience in Oslo, are there any questions from the audience in Oslo? Okay, no hands raised among the audience. We could pause for a minute to see if there's any last questions from the people on the web. Doesn't seem to be any further questions, that concludes the presentation. Thank you all for logging in and listening to us and also for coming to Oslo to attend the presentation. We are available if there's any further questions later today. With that, thank you all, have a nice day.
Thank you.