Shelf Drilling Reports First Quarter 2021 Results

Source: 5/11/2021, Location: Middle East

Shelf Drilling, Ltd. (“Shelf Drilling”, OSE: SHLF) announces results for the first quarter of 2021 ending March 31. The results highlights will be presented by audio conference call on May 11, 2021 at 6:00 pm Dubai time / 4:00 pm Oslo time. Dial-in details for the call are included in the press release posted on May 5, 2021 and on page 3 of this release.

David Mullen, Chief Executive Officer, commented: “We delivered good operational and financial performance in the first quarter of 2021 despite the very challenging environment imposed by the COVID-19 pandemic. The recent surge in infections has been particularly harmful in several of the geographies in which we work. The sequential increase in Revenue and EBITDA was primarily due to several rigs that returned to work or started new contracts at the end of 2020 or early 2021 combined with a further reduction in operating expenses.”

Mullen added: “We are observing encouraging signs of an improving jack-up market with the recent recovery and stabilization of the oil price. We have seen a number of recent contract awards and have built a solid pipeline of marketing opportunities. The $310 million issuance in March 2021 of new senior notes due in 2024 improves our balance sheet, simplifies our capital structure and significantly increases our liquidity position and financial flexibility. We remain focused on delivering safe and best-in-class services to our customers and believe Shelf Drilling is well positioned to capitalize on opportunities in our sector.”

First Quarter Highlights
- Q1 2021 Revenues of $129.7 million, a 7% sequential increase compared to Q4 2020.
- Q1 2021 Adjusted EBITDA of $46.5 million, representing an Adjusted EBITDA Margin of 36%.
- Q1 2021 Net Loss of $16.4 million, including $10.1 million in loss on debt extinguishment in relation to our debt refinancing transactions.
- Q1 2021 Capital Expenditures and Deferred Costs totaled $16.6 million.
- The Company’s cash and cash equivalents balance at March 31, 2021 was $287.3 million.
- The Company’s total debt at March 31, 2021 was $1.2 billion.
- $1.3 billion in contract backlog at March 31, 2021 across 27 contracted rigs.
- In January 2021, the Company received a notification from customer on early termination of operations for the High Island VII and Compact Driller to August 2021 from February 2023 and June 2022, respectively.
- In February 2021, the Company completed the sale of the Shelf Drilling Journey for net proceeds of $76.6 million.
- In March 2021, the Company completed a private offering of $310.0 million aggregate principal amount of 8.875% senior secured notes due 2024, to repay and terminate the Company’s revolving credit facility, due April 2023, cash collateralize bank guarantees issued under the revolving credit facility and to redeem and repurchase all of the outstanding 8.75% Senior Secured Notes, due November 15, 2024.
- In March 2021, the Company secured a two-year contract extension until February 2023 for the Trident 16 in direct continuation of its current contract for operations in Egypt.
- In April 2021, the Company received an award for a three-year contract for the J.T. Angel with planned startup of operations in India in Q4 2021.
- In May 2021, the Company received an award for a three-year contract for the Trident XII with planned startup of operations in India in Q4 2021 and secured a ten-year extension for the High Island IX in Saudi Arabia.
- In addition, the Company completed in April 2021 the sale of the Trident 15, Key Hawaii and Galveston Key, which were recorded as assets held for sale as of March 31, 2021.

First Quarter Results
Revenues were $129.7 million in Q1 2021 compared to $121.3 million in Q4 2020. The $8.4 million (6.9%) sequential increase in revenues was primarily due to higher effective utilization. Effective utilization increased to 77% in Q1 2021 from 69% in Q4 2020, primarily due to the startup of one new contract in Thailand, the full quarter of operations of two rigs which started contracts during Q4 2020, the return to operations of one rig each in Saudi Arabia and Nigeria which were previously suspended and completion of extended out of service time for one rig in Saudi Arabia. This was partly offset by the completion of two contracts in Tunisia and Nigeria, and the planned out of service of one rig in Saudi Arabia. The average dayrate increased to $56.3 thousand in Q1 2021 from $55.8 thousand in Q4 2020.

Total operating and maintenance expenses decreased by $4.3 million (5.4%) in Q1 2021 to $74.3 million compared to $78.6 million in Q4 2020. The sequential decrease was primarily due to lower operating costs on rigs which were not operating during Q1 2021 and lower maintenance and shipyard expenses, partly offset by operating costs for the Shelf Drilling Enterprise which started a new contract in Thailand.

General and administrative expenses of $9.6 million in Q1 2021 decreased by $1.5 million as compared to Q4 2020 of $11.1 million. General and administrative expenses in Q1 2021 included lower provision for doubtful accounts of $1.8 million due to the current year collection of aged receivables for which an allowance was recorded in 2020. General and administrative expenses in Q1 2021 and Q4 2020 included $0.9 million and $1.1 million of non-cash share-based compensation expense, respectively.

Adjusted EBITDA for Q1 2021 was $46.5 million compared to $31.8 million for Q4 2020. The Adjusted EBITDA margin of 36% for Q1 2021 increased from 26% in Q4 2020.

Capital expenditures and deferred costs of $16.6 million in Q1 2021 decreased by $12.3 million from $28.9 million in Q4 2020. This included a decrease in rig acquisitions to $1.2 million in Q1 2021 from $10.2 million in Q4 2020 largely related to the completion of the reactivation, upgrade and contract preparation project on the Shelf Drilling Enterprise. Capital expenditures and deferred costs, excluding rig acquisitions, decreased across the fleet to $15.4 million in Q1 2021 from $18.7 million in Q4 2020, primarily due to decreased shipyard activity in Saudi Arabia.

Q1 2021 ending cash and cash equivalents balance of $287.3 million increased by $213.9 million from $73.4 million at the end of Q4 2020. The increase in cash and cash equivalents was due to net cash proceeds of the private offering of $310.0 million 8.875% Senior Secured First Lien Notes, due November 2024 completed in March 2021 and the receipt of the remaining cash proceeds from the sale of the Shelf Drilling Journey, partially offset by the repayment of the $80.0 million 8.75% Senior Secured Notes, due 2024 and the $55.0 million outstanding balance under the Revolving Credit Facility.

The Quarterly Report, which includes the Condensed Consolidated Interim Financial Statements, and a corresponding slide presentation to address the results highlights for Q1 2021 are available on the Company’s website.

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