Q2 2026 Odfjell Drilling Ltd Earnings Call Transcript
Key Points
- Odfjell Drilling Ltd (ODFJF) successfully brought the Deepsea Atlantic back on hire in just 16 days, well within the 3-4 month guidance, demonstrating strong operational resilience.
- The company reported solid Q2 2026 financial results with revenue of $251 million, EBITDA of $162 million, and net profit of $57 million, despite one rig being off hire for much of the quarter.
- Odfjell Drilling Ltd (ODFJF) continued to deleverage, reducing net debt to $863 million and leverage ratio to 1.5x, while maintaining a strong equity ratio of 55%.
- The company added another year of backlog to the Deepsea Nordkapp, securing firm contract backlog of $2.1 billion, with all units now contracted until at least late 2027.
- Management highlighted a strong and tightening market for harsh-environment rigs, with utilization around 90% and expectations for day rates to strengthen, supported by interest from Namibia, Surinam, Canada, and the UK.
- The company maintained its quarterly dividend of $0.25 per share, translating to an annualized yield of 10%, while signaling potential for future increases.
- The Deepsea Atlantic incident resulted in a negative net cash impact of approximately $35 million, including loss of hire and repair costs, with $7 million impacting Q2 and the remainder in subsequent quarters.
- The company recognized an impairment loss of $28 million related to damaged equipment from the incident, which negatively affected EBIT.
- Operating revenue from the owned fleet declined compared to Q1 due to off-hire time on Deepsea Atlantic, impacting overall quarterly performance.
- Insurance proceeds of $82 million remained unpaid as of quarter-end, contributing to a negative working capital change of $35 million in Q2.
- Management decided to keep the dividend flat at $0.25 per share for Q2, citing prudence due to the incident, which may disappoint investors expecting growth.
- The company faces uncertainty in securing new contracts for Deepsea Atlantic and Deepsea Bergen, with potential announcements possible this year but not guaranteed.
My name is James Crothers, and I'm Investor Relations Officer of the company. I'm joined today by our Chief Executive Officer, Kjetil Gjersdal; and our Chief Financial Officer, Orjan Lunde.
Before we begin, your attention is brought to the important information slide of our presentation, which we would encourage participants to read in full. Note that this presentation is only a summary of the core and the more comprehensive quarterly report should be read separately. Both that report and today's presentations are available on our website, www.odfjelldrilling.com.
Today's call will follow the traditional structure with Kjetil taking us through the key highlights before moving on to our operational review. Kjetil will then continue with an overview of the market as of today before handing over to Orjan, who will go through our financial review. Kjetil will then summarize the presentation before we open up our Q&A session for analysts and investors.
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