Good afternoon, everyone. This is Iyad Ghulam on behalf of SNB Capital. I would like to welcome you to a conference call with Arabian Drilling Management regarding the full-year 2024 earning results of the company. We have on the call today Mr. Ghassan Mirdad, the CEO, Mr. Hubert Lafeuille, the CFO, and Mr. Bassem ElShawy, Director of Investor Relations and Communications. We will first listen to the management feedback. Following this, we'll open the floor to questions. Now I'll hand over to Mr. Hubert, the CFO, for his commentary.
[Foreign language] , and very good afternoon, ladies and gentlemen. Welcome to the earnings call of Arabian Drilling for Q4 and full-year 2024. As mentioned, with me around the table is Ghassan Mirdad, CEO, and we have a newcomer as well. I'm very pleased to introduce Bassem ElShawy, who recently joined the team as Investor Relations and Communications Director. This is Bassem's first earnings call with us, and I know he's very excited to be here. Bassem?
Thank you very much, Hubert. I'm delighted to be part of the Arabian Drilling team and excited to be with you today. As you all know, this presentation is bound by a forward-looking statement disclaimer, which is stated here. You may refer to this at your own place later on, and this presentation will be uploaded to the Arabian Drilling's Investor Relations website shortly after we conclude. For now, I will hand over to Ghassan, who will give you an overview about the 2024 results. Over to you, Ghassan.
Thank you, Hubert, for the introduction, and welcome to the team, Bassem. [Foreign language] , and welcome to everyone on the call. We have had a solid year demonstrating the business resilience, delivering on revenue guidance and record EBITDA. This period has positively highlighted our adaptability and the flexibility of our business model as we have grown revenue, maintained margins, increased EBITDA, generated much more cash, and have a healthy backlog. An excellent achievement in what has been a year of change and some uncertainty. Operationally, we successfully deployed 13 new unconventional rigs, which will generate approximately SAR 800 million this year.
Furthermore, financially, I want to highlight that 2024 net income was primarily impacted by non-cash item depreciation as a consequence of high investments , which will deliver returns in the future, and the impact which we announced in Q4 of the two non-cash items' net income would have been approximately two-thirds higher. We have made a first but important step in enhancing our geographical and international reach through signing the alliance with Shelf Drilling. This is a win-win collaboration with Arabian Drilling, being able to deploy its high-specification rigs internationally and Shelf Drilling being able to extend in their existing market and to access new ones that require such equipment. Immediately, we are tendering internationally and are currently marketing the three suspended rigs. Now, let us go over the results in more detail and highlight what we are most proud of in 2024.
First, we have achieved a record high revenue and EBITDA since Arabian Drilling inception. We also have deployed all our 13 unconventional rigs, with the last of the 13 rigs starting during early February 2025. With this last fleet expansion, we have become the largest drilling contractor in Saudi by fleet size, with a total fleet of 61 rigs as of today. We managed our debt prudently and kept our leverage ratio well below two times despite heavy CapEx, thanks to our robust cash management. Our performance has enabled us to continue to pay dividends. For H2 2024, we are paying a dividend of SAR 1.35 per share, making a total dividend of SAR 240 million for the 2024 period. This is equivalent to 75% of our net income.
Finally, amongst all drilling contractors and service providers working for Saudi Aramco, we are recognized and won the excellent award for the best Saudization. This showcases our commitment to developing local talent. Now, let me outline high-level financials, which Hubert will cover in more detail. As mentioned, we have demonstrated strong and resilient performance in 2024, successfully delivering on revenue guidance with a 4.1% increase to reach SAR 3.6 billion and a record EBITDA of SAR 1.5 billion, which marks a 41.7% margin. We are very satisfied that we have been able to maintain our EBITDA margin profile despite the impact of the offshore suspension and the startup cost of the unconventional land rigs. Our adjusted net income of SAR 426 million excludes a one-time non-cash asset impairment of SAR 105 million recognized in Q2. Our operating cash flow of SAR 1.7 billion has significantly increased by close to 30% year-on-year.
Finally, we remain moderately leveraged with a net debt-to-EBITDA ratio of 1.6, which allows room for future growth. Let's now move into our operational performance. As mentioned, all 13 unconventional rigs were deployed by year-end. Two rigs actually started drilling in Q1 2025 due to the timing of Aramco's acceptance procedures. The final of the 13 unconventional rigs started during early February 2025. Our utilization rate of 83% reflects 49 active rigs out of 59 as of December 2024. Bassem will cover this in more detail. All the remaining KPIs, such as total recordable injury, rig efficiency index, and rig move efficiency, are solid and consistent with our operational execution capabilities. With that, I will now pass it to Bassem, who will give you an update on our contracts and backlog. Bassem?
Thank you, Ghassan. Our backlog remains robust at SAR 10.3 billion, thanks to all the rigs expiring in 2024 being successfully renewed in time. Over the past five years, our backlog has shown significant growth, achieving a compound annual growth rate of 33%. The year-end backlog for 2024 aligns with our third-quarter levels, as we managed to largely counterbalance expirations in the fourth quarter by securing contract extensions. Turning to rig utilization, as of December 31, 2024, we operated a fleet of 59 rigs with 49 active rigs. Entering the first quarter of 2025, our fleet expanded to 61 rigs, counting two unconventional rigs that started early this quarter. To give you more granularity, currently, our fleet includes 10 inactive rigs, six land rigs with three suspended in the last quarter and three uncontracted, and four offshore rigs with three suspended and one being prepared for sale.
Now, let's talk about contract renewal. In 2024, all contracts that expired were extended in the fourth quarter, resulting in a total of 17 rig years, as previously reported. Looking ahead, we have a total of 24 rig contracts expiring in 2025. I will walk you through the details of these. Land rigs, we have 21 land rigs with expiring contracts in 2025. Thirteen of these land rigs are engaged in LSTK, which is Lump Sum Turnkey Projects with SLB and Baker, each including options of one to two years. The remaining rigs, primarily gas rigs working with Aramco, are currently under extension negotiations. Given our strong track record in the gas drilling and our history of successful renewals, we're quite confident that all of these rigs will secure renewals. For offshore rigs, there are three offshore rigs with contracts expiring in 2025. One is contracted with KJO.
Negotiations are actively ongoing, and it is important to know that we are the only drilling contractor working for KJO at the moment. Two rigs contracted with Aramco. One rig is currently inactive but is actively being marketed, and the other is operational under a lease contract set to conclude in Q4 with a one-year extension option available. With this, I conclude the rig and contract renewal segment and passing back over to Hubert.
Thank you, Bassem. Let's cover the financial review. What I would like to do to start this financial review is maybe put a little bit of things into perspective, and let's take a bit of a step back to have a five-year historical review on our financials. I am referring to the graph, which is on the left-hand side of the slide. You can see in the last five years, we have had a considerable growth in the revenue with a 9% CAGR since 2020. As you can see as well, our EBITDA has been consistently between low to mid 40 percentage points throughout the cycle. This was even during the challenging time that we have seen over the period, one of which was the COVID in 2020, 2021, and now with the suspension.
Now, on the right-hand side, you have the split between the offshore and the land, and here we're plotting the five-year revenue as well as the gross profit, the adjusted gross profit as a percentage of the revenue. If you look at the offshore segment revenue first, which is the upper graph, you see that the revenue is stable year-on-year from roughly SAR 1.5 billion- SAR 1.5 billion with a very, very small increase. The reason why the revenue is stable is because in the second half of 2023, we have added three offshore jack-ups, and in the second half of 2024, we have had the impact of the suspension. Those two events kind of offset, cancel each other, which explains why the revenue remained flat.
On the adjusted gross profit percentage, we have dropped a couple of points, about three percentage points year-on-year, which is mostly coming from the additional depreciation of the three jack-ups that were added in the second half of 2023, and then we have had the full-year impact of this depreciation in 2024. Now, looking at the land segment, which is the below graph, you see that on the revenue side, we have a gross year-on-year of 6.6%, which is about SAR 132 million, and this is coming from the additional unconventional rig that started contributing in 2024 for about SAR 230 million, but that was partially offset by the lower rig activities as well because on the land segment, we have six land rigs that are idle at the end of 2024 versus only two that were idle at the end of 2023.
On the gross profits, we have lost about 4-5 percentage points year-on-year, of which 3 percentage points are attributable to the additional depreciation cost of the unconventional rigs, and 2 percentage points are attributable to the startup of the same unconventional rigs, which was in the range of about SAR 40 million-SAR 45 million. Now, this year is about focused execution and resilient growth. As a whole, on the revenue side, as mentioned by Ghassan, we have grown up by 4%, 4.1%. In the same time, and to put things into perspective, I mean, the rig count, the Aramco rig count has actually shrunk by something like 15% from a peak of 319 rig counts to 273. The 4% growth in the revenue has to be put in parallel with the drop of 15% of Aramco rig counts.
Again, as I said, the UC unconventional rig revenue was about SAR 230 million as the rig gradually started from 2024, with a total of 11 rigs contributing in 2024, by year-end 2024. Our EBITDA, we have a slight increase of 2% despite offshore suspension and the startup cost that I mentioned about the unconventional rig deployments, and we're quite happy that we've been able to maintain the EBITDA profile margin, and this was one of the contributions as well was a number of very innovative and numerous and fruitful cost optimization initiatives that we've been chasing throughout the organization and for which we are seeing the results this year. Now, excluding the startup cost of the unconventional rigs, which is about SAR 43 million, normalized EBITDA would be at the same level as of 2023.
On the adjusted net income, as mentioned by Ghassan, this includes SAR 105 million for one-time impairments of asset that we recognize in Q2, and the rest of the decrease is mainly explained by the higher depreciation on expanded asset bases. I talked about the three jack-ups that came in by mid of 2023, and then, of course, the 11 unconventional that we started in 2024, as well as higher finance expenses associated with the fleet expansion. Now, on the CapEx, you can see on the bottom graph, on the bottom left graph, that the CapEx this year was SAR 1.9 billion. Out of the SAR 1.9 billion, we had SAR 1.35 billion, which is exclusively related to the unconventional rigs, and the total estimate at completion of the program is about SAR 2 billion, and we are very close to nearing the program.
We have also sustaining CapEx of SAR 341 million, which corresponds to roughly SAR 7 million per rig per year as a sustaining CapEx, and the rest is just discretionary projects, one rig upgrade that we did, and a few other things that we have done on the facility and well-controlled equipment. Our net debt has increased by 39% to SAR 2.4 billion compared to last year, and this increase mainly reflects the use of the cash to finance the unconventional rigs. The good news is that there was no need to draw additional debt in 2024, thanks to efficient cash management and some of the payments that also shifted from 2024 into 2025.
Now, lastly, the operating cash flow has seen a significant increase of about SAR 400 million between year-end 2023 and year-end 2024, and this is mainly due to a much improved working capital compared to where we stood last year. The next slide is about the bridging of the net income, and I want to explain this because I think it's important that the main point of this slide is about understanding why we lose SAR 300 million year-on-year on the net income. If you look at the bridge and if you look at the first five components of the bridge from left to right, I mean, you see that they kind of pretty much offset each other.
We have the impact of the suspension that was basically offset by the revenue contribution of the unconventional, and a lot of savings, reduced OpEx and cost-saving initiatives, and lower tax, and a lot of other things that we have been able to mitigate. That kind of canceled each other, right? If you look at the last three items after the dotted line, you can see that these are where the contribution came from and what Ghassan related to. We have additional depreciation, which is, again, the result of expanded asset bases. We have the impairments, SAR 105 million that we discussed, those two being non-cash, and then we have additional SAR 95 million of interest payments, which is the result of a higher gross nominal debt value because we drew SAR 500 million in Q4 2023.
In 2023 as well, we had the portion of the interest that were capitalized, and that did not repeat in 2024. Also in 2024, as we were using the cash, we had lower excess cash balance available for investment in short-term deposits. Those three items, which collectively amount to SAR 353 million, are basically the reason why we dropped SAR 300 million on the net income year-on-year. The next slide is about the bridging, the cash flow bridging, and I think that here the main statement that I would like to make is that if you look at the CapEx, we said CapEx SAR 1.9 billion this year. If you look at in the last few years, we have witnessed intensive CapEx cycle with a spending of around SAR 1.8-SAR 1.9 billion annually.
Just to put that into perspective, the CapEx that we've spent in the last few years, which is this amount of SAR 1.8 million, SAR 1.9 million, represents roughly three times the CapEx that we would normally spend on a steady-state business without any CapEx growth, right? This kind of gives the idea of the significant headroom that we have on improving our cash flow as we normalize our CapEx spending. One thing as well that I would like to mention on the loan and lease, SAR 167 million is broken down between SAR 100 million of debt repayment and SAR 67 million of lease repayment for the two lease rigs. As I mentioned before, we've been able not to draw the debts or not to draw any debts in 2024, and actually, as you can see on the graph, we closed the cash positions with a total of SAR 582 million cash.
Now, moving on to the next slides, I think this is highlighting what Ghassan referred before, which is the fact that we've been able to maintain a leverage ratio well below two multiples despite the intense CapEx cycle. This highlights our financial strengths and really gives us headroom. The good thing as well is that we have some sizable and attractive financing facilities that are lined up to execute CapEx growth opportunities. Just a couple of things on this slide. The gross debt, again, remains unchanged. It's about SAR 3 billion, which is made up of the SAR 2 billion, and we have two bank loans of SAR 500 million each. We ended the cash position with SAR 582 million, mainly due to the improved working capital. The leverage ratio, again, we have seen a slight decrease compared to Q3.
You can see from 1.67 to 1.62, and that's due to higher cash balance and improved working capital. As I said before, on the financing, we have today available and undrawn SAR 1.25 billion of facilities, which we will be looking to use for further CapEx growth opportunities. With that, it concludes my financing section, and I will hand it over to Ghassan to discuss about the 2025 strategic priorities. Ghassan?
Thank you, Hubert. These are our priorities in 2025. First, focusing on the safety of our employees remains a top priority, and we are leveraging AI, artificial intelligence, to accelerate learning and practices. Second, is to increase our utilization rate by putting back to work the suspended rigs. Third, Saudi Arabia is focusing on gas drilling. We are having a leading position and a clear competitive advantage. Maintaining this leadership is of our focus.
Finally, we believe our alliance with Shelf Drilling will give us easy access to international expansions. Our last slide is about the guidance. As you have seen in our earnings release published yesterday, we are changing from annual to quarterly guidance because of the ongoing uncertainty. Today, we have 10 rigs that are not working. The revenue for this year will be largely influenced by the restart time of most of these rigs. Therefore, it is sensible that for 2025, we will give guidance on a quarterly basis. For Q1 2025 revenue, we expect to maintain the same level compared to Q4 2024, with a 5% upside potential. Our guidance reflects a cautious outlook in an unpredictable but evolving market environment. With this, I conclude the presentation, and I will pass it to Iyad to start the question and answer session.
Thank you, Ghassan. Ladies and gentlemen, we will now start the Q&A session. If you wish to ask a question, please raise your hand or type in the Q&A box. Okay, the first question comes from the line of Ricardo Rezende from Morgan Stanley. Ricardo, please go ahead.
Thanks for taking the question. I guess follow-ups on something that Ghassan mentioned on his remarks.
Sorry, Ricardo, sorry, we cannot hear you. The line is very, very bad.
Ricardo?
Hello, sorry. Just follow-up on two things that Ghassan said during his remarks. The first one.
Sorry, Ricardo. Sorry, Ricardo, it's not working. We really have an issue with the line. Maybe you need to log off and log in again.
Okay, we will move to the next question from Ildar Khaziev . Ildar, please go ahead.
Just to comment on the three suspended land rigs, how much of the backlog did they have at the time of suspension, and do you expect something like this to happen, any signs of this happening again to the existing fleet? Thank you.
The three rigs offshore?
No, the land rigs, the three land rigs in Q4.
Yeah. The three land rigs, if you look at the suspension, there are two different suspensions. What we had in the offshore was imminent, that's not going to come back. However, the land, they're temporary suspended. When I say temporary, I mean, it can be from one quarter, three months, to maybe six months. This is not clear when, but I mean, we can see already discussion saying when can we start one of the three. This is where it does not make it very clear for us how long it's going to take.
I think there was a question on the backlog, so I will answer that if you do not mind. We take the view that the backlog remained unchanged because basically what happened is that the terms of the suspension allow for the suspension period to be added back to the estimated end of the contract. There are no backlog destructions. Basically, it is just a shifting in the timing of when you recognize your revenue. We are quite comfortable with this position because if you look at what happened during COVID, it is exactly the same thing. I mean, we got a lot of rigs suspended during COVID, and then all those rigs, the suspension period was added to the tail end of the contract. We take the view that it does not change the backlog.
Understood. Thank you. Secondly, could you give us some outlook or guidance for the CapEx this year, if possible?
Yeah. For the CapEx this year, we believe that we're going to be spending probably 50% of what we spent in 2024. Half of what we spent, around SAR 901 million, roughly.
Thank you. If I may, my last question. Have there been any startup costs one-offs in the land rig business in Q4?
We had a little bit of startup costs, not that much, though. Most of the startup costs were incurred in the unconventional. Again, just to make sure everyone understands, the startup cost is basically the cost of the crew that was recruited ahead of the rig coming so that the crew is trained and formed and coached, and then the rig is ready to go, then we have a fully operational and functional crew. That startup cost throughout 2024 was about SAR 43 million as a whole. I guess in Q4, it must have been, because most of the rigs were started in Q4, it must have been a couple of millions.
The only two rigs that kind of shifted to this year, I mean, we were at location ready. It was just the timing to get the process procedure. That took a bit longer than. You have a crew, but no revenue generation.
Yeah.
Thank you very much.
The next question is coming from the line of Jarryd Thomas . Jarryd, please go ahead.
Suspended onshore? Can you just confirm?
Yes.
Sorry, we missed the beginning. Can you repeat, please?
I just want to confirm. How many rigs are suspended onshore?
At this point in time, three.
Three. Okay. Then.
Yes.
Okay. Okay, that's fine. Just on the alliance with Shelf Drilling, is that a second-half story in terms of redeploying the three suspended rigs, or is it like the next three months or so? What's the timing on those?
When we had the alliance, we've seen a tremendous number of tenders. I mean, today, off the top of my head, there's like 12 tenders going on as we speak. I think the three rigs are not enough to. This gives us really being upbeat at saying, "Look, this is very good for us." If you can comfortably say, "If I win a tender today, most probably it's going to take six months to start." Now, some tenders might start earlier, some might be later on, and all it depends on the client being ready to start drilling. A rule of thumb, you can say six months.
Okay, clear. Just one more question. The unconventional tenders this year, do you see anything on the cards? I've seen reports that there might only be tenders next year, but what's your view on that?
We see that there was desire to increase in the unconventional. However, it was not for new rigs coming from out of the country, whereas more move some of the rigs that are from working in oil to go to gas, which actually we have some of our rigs that are actually working in oil, but it's a gas rig. It can drill in gas, which is good for us, or moving from conventional to unconventional. This is, I mean, what's the vibes today in the market? That more of movement of rigs rather than increasing rigs.
Okay, clear. Thank you.
The next question is from Giuseppe Villari from Morgan Stanley. Please go ahead.
Three questions. Sorry if they've been answered already because we had some technical issues, and I hope that now the line is working better. First question is about onshore. When do you expect new tenders in Saudi? What about the Kuwaiti market? Regarding offshore, if you get a contract in the short term, when would the revenue contribution start?
Okay. I mean, the voice is not that clear, but I think we can get the questions. If I did not answer, please let me know if I did not answer. The first question was on tendering in Saudi or online. In Saudi, I do not see, I mean, with the current things that are happening, we see, as I said, moving rigs from department to department, from oil to gas, rather than increasing more rigs in Saudi. On the other hand, we see tenders that are happening in Kuwait, and we are planning to participate on as we speak. On the offshore, as I mentioned, rule of thumb to move the rig to Asia or West Africa, it will take time. That is why I say a rule of thumb is six months. There are tenders that can be earlier, and it all depends which tender we are going to win.
Okay, thank you.
Did I answer your question?
I think he did.
Okay.
Okay, we have one question in the Q&A box from Rabeh Moussa. He's double-checking on the rig counts. He's saying that the total rig count is now at 61, and 10 are currently idle. Is that correct?
Yes.
Yes, that's correct.
It is 61 as of today. I mean.
Yeah, as of today.
Okay. Okay, we have the next question comes from the line of Reem. Reem, if you can say your full name and your company name.
From the Energy Intelligence Group. I had two questions. One of them is, I think you partly answered it, but I would like to expand a little bit on that. You mentioned that the outlook for Saudi Aramco rig count this year is not going to be any addition, rather than moving from oil rigs to gas rigs, if I understand properly. Is there going to be any plan overall? Talking about tenders in Kuwait, would that be for offshore since now Kuwait is expanding offshore? Which markets are you expanding? Are you targeting with your alliance with Shelf? Thank you.
Okay. The first question was, are we expecting a drop on the rig? This is the uncertainty today. This is actually one of the things, how fast we can deploy the rigs and if there is anything. I mean, today, we cannot comment because we really are not sure. Last year, we knew about the suspension and we shared this in our earnings call, but now it is not clear, to be honest, in the Saudi market. In Kuwait, the tenders today are onshore and mainly actually LSTK. It is going through service providers. I would like to highlight one thing, that two years ago, we highlighted that we were qualified for land. Just as of last week, we got the confirmation that we are qualified for offshore as well in Kuwait with KOC. There will be tenders. There are no tenders yet on the offshore.
However, there were plans to be a tender in mid-year, but we think this will be shifted to later in the year or early next year for the offshore. To answer your question, all of the tenders are in Kuwait for onshore land.
T here was a further question on the market targeted with the alliance with Shelf Drilling.
Yeah. Today, we have Southeast Asia and as well West Africa.
Okay. There's a follow-up question from Ildar Khaziev . Eldar, please go ahead.
Again, yeah, just to follow up on the CapEx guidance, how much of it is maintenance for this year? I believe a part of this CapEx is spillover of the investments in conventional, right, from 2024. How much was that as well? This is my first question. Secondly, just on the suspension of the land rigs in Q4, for how long on average have they operated and generated revenue? When did it happen exactly in the quarter? Thank you.
On the suspension for the land rigs, the suspension happened between late October and early November. It is three rigs, and those rigs have been here for a long time. Actually, one of the rigs actually got a.
Got an extension.
Got an extension.
For 10 years.
One of the rigs that got suspended is the same rig that got a 10-year extension, and we announced in Q4.
This tells you that the suspension is extremely temporary, and they want the rig. I think mainly it is OpEx management, I think, more than anything.
To respond to your CapEx, you had a question on the CapEx. The CapEx was SAR 1.9 billion this year, of which SAR 1.35 billion was exclusively the unconventional. For what we call the sustaining CapEx, which is just your major maintenance and your recertification and life enhancements of your equipment, it is about SAR 340 million.
If it's about $900 million in 2024, 3,400 would be for maintenance. What are you going to spend 600 million for then?
We have a couple of upgrade facilities that we're looking at, and we have a couple of discretionary upgrade rigs as well that we're looking at.
Thank you. Understood. Thank you so much.
We have another follow-up question from Jarryd Thomas. Jared, please go ahead.
Yes. Hello. I just want to confirm. Would you guys be in the market to buy offshore rigs from other contractors, or are you leaving that to some competitors that have been doing that?
Yeah. I mean, I don't see in today's market acquiring offshore rigs. However, if we see that the tender, the winning rate, if we win for the three and still there is demand, there is an easy way of bareboat chartering more offshore rigs and winning more work. This is the way I see it for Arabian Drilling.
Okay. And then, of course, the 24 rigs that are up for renewal this year, I mean, that's quite important. Is it a guarantee that all 24 get contract extensions, or is there an 80% probability, 90%, just some color on it?
Okay. As mentioned by Bassem as well, most of the rigs, be it with SLB, LSTK, and Aramco, most of it are gas. The whole country is focused on gas these days. Even I was mentioning moving from oil to gas as well. The rigs that are not in gas, for example, LSTK Baker, they have a commitment to deliver to Aramco a certain number of wells, which they cannot complete within this year. That is why the contract has an extension in addition to the guaranteed tenor. They have an extra, I think, a year or two years they have, I think.
Yeah, some of the contracts have a one-year extension. Others have a two-year extension. All those LSTK contracts have extensions.
Yeah. The non-LSTK, the other ones, which is with Aramco or KJO, we already have started since the start of the year the negotiation of the extension. That is why we are a bit confident that things are going to be extended. All of them will be extended.
These are primarily gas rigs as well.
Yes.
Because of our leading position in the gas drilling business and because of, if you look at our historical ability to renew the contract, we're quite confident that the contract will be renewed.
Okay.
Clear. Thank you. The next question is from the line of Abdullah Hakami. Abdullah, please go ahead.
Me?
Yes.
Yes. Yes. Please go ahead.
[Foreign language]
[Foreign language]
I have one question on the offshore segment. The number of offshore rigs, are they back to the level to the—looking at the market as a whole, is the number of rigs back to the pre-growth levels in Saudi Arabia? I guess what I'm trying to kind of understand is, is the market stable now, or Aramco is still revisiting its rig portfolio, and we could see some new announcements going forward?
T hey are a bit higher than the pre-COVID time. I don't know why. I don't know why.
It's about five rigs.
Five rigs are higher than the pre-COVID time.
It's about five rigs.
If I may comment on that, yes, there might be some more rigs still compared to the previous level. Are these going to be suspended or not? This is not a question that we can answer. For all we know, as we know right now, these rigs are still operational. They might never be suspended, or they might all be suspended. We do not know. This is not something that we can answer. From what we are seeing right now, things are looking stable for the moment. We are taking this cautious approach to the year as we proceed.
No, that's clear. I just wanted to understand where we are versus pre-COVID. Thank you very much.
Thank you.
Okay. We have a few questions in the Q&A box. The first is from Abdullah Tabrizi. He's just double-checking. Other than sustaining CapEx of SAR 7 million per rig, how much do you spend usually on rig upgrades and recertification CapEx annually per rig?
The 7 million include the recertification. The upgrade of the rig really depends on what is the rig, to what stages we want to upgrade it. There is not a—it really depends on the level of the upgrade that you want to do. There is not a fit-all answer. I mean, Ghassan, you want to—
No, I mean, the upgrade is not a common thing that happens. The recertification, that is a periodical thing that happens, and it's part of the SAR 7 million. In today, we're not seeing that much of upgrade.
We also do recertification of spare equipment because we have a pool of spare equipment, spare BOPs, spare choke manifold, etc. This is—we also do the recertification of this pool equipment. The cost does not fall onto the rig because the equipment is in the pool. That is also part of the CapEx that we have.
Okay. The next question is from Rohan Ahmed. He's saying Aramco is starting to look at rare earth metals like lithium in the kingdom. Is there any drilling scope there for you?
First of all, I want to thank you very much for this question because this—I do not want to sound bragging, but when Aramco wanted to go to the geothermal, they selected Arabian Drilling to go to the geothermal. Now they are going to lithium, and they selected Arabian Drilling again. We actually, as we speak, are mobilizing. I wanted it to be a Q1, but you brought the question. We are part of—thank you very much for asking the question. It just tells you the confidence of our client and our rigs and our high-specification rigs, the competence of our crew, the results that we get selected for these new markets that are diversifying our portfolio from drilling oil and gas, going to geothermal, going to lithium. These things all add to our portfolio, actually. Thank you for asking that question.
The next question is from Rabeh Moussa. To confirm, the CapEx guidance for this year will be similar—I think he's missing—so he's saying that the CapEx for this year will be similar to last year. I think you already answered that.
Yeah. Just to clarify, so the CapEx for this year is supposed to be half of what we spend in 2024, right?
Okay. Okay. That was the last question. Oh, we have one more. From Brennan Eatough from Riyad Capital, is there any type of cost that will be needed to pay in order for Arabian Drilling rigs to switch from oil to gas or from gas to drilling for lithium?
Switching from oil to gas, is that your question?
Yeah. Yeah. That's the question. What's the cost?
In our case, most of our rigs are gas. Some of the rigs that are drilling for oil, they're actually gas. During the COVID times, we had to make sure they worked, so we put them in the oil. It would be minimal cost to upgrade them to gas.
Okay. Another question from Ibrahim Atiyah from Ashmore: Can you please explain to us where the improvement in offshore revenue and gross profit is coming from during Q4 versus Q3?
The revenue is Q4 to Q3?
Yes.
I mean, the revenue is mostly flat, right? I mean, we only have a 2% improvement. It mostly relates to NPT, just not.
It's relating to two things. NPT, and I think once we had the rigs suspended, the crew did not stay. We deployed the crew, the unconventional. So that was a reduction of compensation line as well.
Correct. There was nothing has changed. I mean, from the rig activity level between Q3 and Q4, nothing has changed operationally.
Okay. Just to—there's a question here in the Q&A box which is asking about the number of suspended rigs and total rigs and new rigs. Basically, now all the new rigs related to the unconventional have been deployed, correct?
Yes. Generating revenue, yes.
Yes. Correct.
Okay. We have 10 suspended rigs, 6 in the onshore, and 4 in the offshore.
Yes.
Yes. Not all the rigs are suspended. Some of the rigs do not have a contract. We have six suspended rigs, three land and three offshore. We have four rigs that do not have a contract. They are uncontracted. Technically, they are not suspended. This is three land and one offshore. The number of suspended rigs is only six: three land, three offshore.
Okay. I think that was the last question. Any final remarks, Ghassan?
Yeah. Thank you very much for hosting us today from SNB. Thanks for all the attendants for attending our call today. 2025, as you can see, we're going with guidance quarterly because of the uncertainty. However, we are very, very excited. With the number of tenders that we see on the offshore, this gives us a bit of comfort that we need more rigs for offshore. Hopefully, we can deploy. The challenge is when the rig will start. Once we get awarded, is when the timing to start the rig. That is why I say a bit 2025 is challenging. With this, I thank you all very much, and we look forward to connecting with you on the next call.
Thank you so much. SNB Capital would like to thank Arabian Drilling Management for taking the time to conduct this call. We would like also to thank all participants for attending. We wish you a pleasant day. Thank you.