Shelf Drilling Reports Second Quarter 2021 Results

Source: 8/12/2021, Location: Middle East

Shelf Drilling, Ltd. has announced results for the second quarter of 2021 ending June 30. The results highlights will be presented by audio conference call on August 12, 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 July 29, 2021 and on page 3 of this release.

David Mullen, Chief Executive Officer, commented: “The series of steps taken since the beginning of the COVID-19 pandemic has ensured continuity of operations and improvement in our liquidity position. The recovery of oil prices since late 2020 is translating into improved demand for jack-up drilling services. In total, we have secured 13 new contracts or extensions on existing contracts adding 21 rig years of backlog thus far in 2021. We also continued our selective asset divestiture efforts to increase financial flexibility and reduce cost outlay for certain non-working rigs.”

Mullen added: “As we anticipated, EBITDA declined sequentially during the second quarter of 2021 following the completion of certain contracts in India and the Middle East. We also commenced projects to bring two rigs suspended in 2020 back into operation in the third quarter of 2021 and prepare four rigs for new contracts scheduled to commence in late 2021 or early 2022. With a stronger commodity price environment and our backlog position, we are very well positioned heading into 2022.”

Second Quarter Highlights

• Q2 2021 Revenues of $130.5 million, a 0.6% sequential increase compared to Q1 2021.

• Q2 2021 Adjusted EBITDA of $34.4 million, representing an Adjusted EBITDA Margin of 26%.

• Q2 2021 Net Loss of $22.6 million.

• Q2 2021 Capital Expenditures and Deferred Costs totaled $26.5 million.

• The Company’s cash and cash equivalents balance at June 30, 2021 was $285.6 million.

• The Company’s total debt at June 30, 2021 was $1.2 billion.

• Contract backlog of $1.6 billion at June 30, 2021 across 28 contracted rigs.

• In June 2021, the Company secured a one-year contract for the Shelf Drilling Tenacious in Angola with planned start-up of operations in January 2022. In June 2021, the Company secured a short-term contract for the Shelf Drilling Mentor in Congo also with planned start-up of operations in January 2022. Both rigs are expected to be mobilized to West Africa during the fourth quarter of 2021.

• In June 2021, the Company secured a contract for the Baltic for operations in Nigeria, which commenced in late June 2021 with an expected duration of approximately one year.

• In July 2021, the Company executed an agreement to sell the High Island VII for $4.2 million for non-drilling purposes.

Second Quarter Results

Revenues were $130.5 million in Q2 2021 compared to $129.7 million in Q1 2021. The $0.8 million (0.6%) sequential increase in revenues was primarily due to an increase in average earned dayrate, mainly due to increased activity for higher dayrate generating rigs. This increase was partially offset by a decrease in effective utilization to 71% in Q2 2021 from 77% in Q1 2021, primarily due to the completion of contracts for three rigs in India and one rig in Oman.

Total operating and maintenance expenses increased by $7.4 million (10%) in Q2 2021 to $81.7 million compared to $74.3 million in Q1 2021. The sequential increase was primarily due to higher maintenance and shipyard expenses for three rigs that are preparing for new contracts (India and Angola) and two rigs that were being prepared to return from suspension of operations (Italy and Saudi), partially offset by a reduction in expenses on idle rigs.

General and administrative expenses of $14.6 million in Q2 2021 increased by $5.0 million as compared to Q1 2021 of $9.6 million. General and administrative expenses in Q2 2021 included a $2.5 million provision for doubtful accounts compared to a $1.8 million reversal of provision recorded in Q1 2021. General and administrative expenses in Q2 2021 and Q1 2021 included $1.1 million and $0.9 million of non-cash share-based compensation expense, respectively.

Adjusted EBITDA for Q2 2021 was $34.4 million compared to $46.5 million for Q1 2021. The Adjusted EBITDA margin of 26% for Q2 2021 decreased from 36% in Q1 2021.

Capital expenditures and deferred costs of $26.5 million in Q2 2021 increased by $9.9 million from $16.6 million in Q1 2021. This increase was primarily due to increased shipyard activity in India and Saudi Arabia and the initial contract preparation work on the Shelf Drilling Tenacious.

Q2 2021 ending cash and cash equivalents balance of $285.6 million decreased by $1.7 million from $287.3 million at the end of Q1 2021.

The Quarterly Report, which includes the Condensed Consolidated Interim Financial Statements, and a corresponding slide presentation to address the results highlights for Q2 2021 are available on the Company’s website.

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