Release Date: July 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- High fleet utilization rate of 85%, despite planned maintenance and mobilizations.
- Adjusted EBITDA for Solstad Offshore ASA reached NOK362 million, indicating strong financial performance.
- Successful refinancing with a NOK750 million share issue and new loan facility, providing a solid financial foundation.
- Significant increase in backlog with several new contracts, ensuring future revenue streams.
- Initiation of quarterly dividend payments from Solstad Maritime, marking a new milestone for the company.
Negative Points
- Planned maintenance and mobilizations negatively impacted fleet utilization for the quarter.
- High net interest-bearing debt of NOK5.3 billion, though adjusted to NOK2.4 billion.
- Equity ratio remains relatively low at 21%, indicating potential financial vulnerability.
- Utilization for Solstad Maritime was lower at 82%, affected by dry docks and vessel relocations.
- Some vessels are still on short-term contracts, which may lead to revenue volatility.
Q & A Highlights
Q: Frontier has been working around six months outside Italy now. What is the contract and status length? Is there a longer project?
A: Yeah, that is one of our subsea vessels and are working on a project where we are also providing ROVs and a lot of other services, and the duration of that contract is until to the end of this year. So that is the status for that vessel. - Lars Solstad, CEO
Q: What are your thoughts on newly ordered newbuilds in the CSV segment? With around 300 CSVs in the world, there should be 10 to 15 newbuilds a year just to keep up with the existing fleet. We are still far away from these numbers?
A: It's quite natural that in a market we are in now and we see going forward, there will be some newbuilds and there are a handful or a bit more under construction right now. I don't see that as a threat to the market balance. And also, keep in mind that the maturity of the vessels under construction are also quite small with 150-ton cranes. So yeah, it's quite natural, but nothing that worries me. - Lars Solstad, CEO
Q: Is there any news on the collaboration with Remota? Will we see something put to work to Solstad here soon?
A: Remota is a very exciting joint venture we have with DeepOcean and Ãstensjø, and we are -- we have -- Remota is about remote operations of ROVs. It's about also remote operation of other services on board the vessels, and it's about an unmanned ROV vessel that is under construction. The progress of the company is going quite well. We are using it in Solstad. Others are doing the same, and we see that as a very interesting and promising initiative that has been started in Remota. - Lars Solstad, CEO
Q: You have several of your key subsea vessels on short-term contracts project work, Sentinel, Navigator, Frontier, etc. Do you expect a bit more long-term work on such vessels or will they continue to work in the project market as you see it as of now?
A: I think there will be a combination. What we see is that all those vessels mentioned are vessels that we have -- that we are also providing a lot of additional services on including our own ROVs. We see that they are in demand in the project market where we typically are involved from 6 to 12 months, but we also expect interest in signing up for longer terms. So we have a portfolio approach to this and we'll probably have a mix of longer-term and more project-related work on the mentioned vessels. - Lars Solstad, CEO
Q: You have been very successful in securing anchor handling work outside the spot market. Can you please discuss what the strategy is for the anchor handling fleet going forward?
A: The anchor handling fleet is -- generally speaking, we have a long-term market in Brazil and we have a long-term market in Australia for the vessels. And then, we have four, five vessels trading out of the North Sea, which is our project fleet. We would like to do more projects, and we are already doing quite a lot of it. We are targeting more projects and more have the North Sea spot market as a fallback. We will approach more long-term work, but we will be very active in the project market also going forward. - Lars Solstad, CEO
Q: You have secured quite some backlog of orders last quarter. On the margin side, can we assume the same percent margin on EBITDA on the NOK9 billion plus NOK5 billion backlog going forward? Or do we expect to see that improve?
A: I think the contracts we have secured this year are at very healthy margins, and we will target more firm backlog, of course. My expectation is that the margins will continue to improve. Of course, it will always depend on the duration of the contract and such, but in general and on average, we expect improved margins going forward. - Lars Solstad, CEO
Q: What are your thoughts on the financial outlook for Solstad Offshore and Solstad Maritime for the rest of the year?
A: For Solstad Offshore, we had an adjusted EBITDA in the first half of the year of about NOK600 million. We expect this figure to be around NOK0.9 billion to NOK1.1 billion for the full year. For Solstad Maritime, we've had an adjusted EBITDA in the first half of the year of nearly NOK1.5 billion. We expect this figure to be around NOK3.3 billion to NOK3.5 billion for the full year, which is in line with previous guidance. - Lars Solstad, CEO
Q: Can you provide more details on the recent contracts signed in South America, particularly with Petrobras?
A: Petrobras is one of the largest, if not the largest charter of high-end offshore vessels in the world. Solstad has a strong local presence and compliance with local content requirements in Brazil. The three contracts we announced in June strengthen our position further. We will relocate one of our anchor handlers from the North Sea to Brazil in 2025, securing a profitable backlog to 2028 and beyond. The rate levels for these contracts will double their gross day rate compared to previous contracts, contributing nicely to our EBITDA in the coming years. - Lars Solstad, CEO
Q: How is Solstad Offshore adapting its fleet for renewable energy activities?
A: Vessels originally built for oil and gas are also very relevant for renewable energy activities. A significant portion of Solstad's earnings comes from non-oil and gas activity. For example, the CSV Normand Pacific has been on contract to the world's largest cable contractor, Prysmian, since 2016. This quarter, we signed a new contract with Prysmian for the CSV Normand Ocean with commencement in 2027 and for five years thereafter. Both vessels are now on term contracts well into the next decade on good commercial terms, providing strong and predictable EBITDA from renewable energy activities. - Lars Solstad, CEO
Q: Can you elaborate on the financial performance and outlook for Solstad Maritime?
A: Utilization for Solstad Maritime for the quarter was at 82%, affected by several dry docks and vessel relocations. Operating income for the second half was NOK1.5 billion, and year-to-date
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
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