Shelf Drilling (SHLF) Q2 2024 earnings summary

Executive summary

• Q2 2024 results were impacted by rig suspensions in Saudi Arabia and delayed contract starts in Norway, leading to lower utilization and revenue, partially offset by cost reductions and improved safety performance (TRIR 0.10, 99.4% uptime).

• CEO transition: Greg O'Brien appointed CEO, David Mullen moved to Executive Chair.

• Major refinancing completed with $315 million in new bonds issued and $237.5 million of notes redeemed.

• Cash and cash equivalents increased to $138.3 million as of June 30, 2024, mainly due to SDNS debt refinancing.

• Pending sale of the Baltic rig for $60 million, expected to close in Q3/Q4 2024.

Financial highlights

• Q2 2024 adjusted revenues were $231 million, down 8% sequentially, with adjusted EBITDA at $71–72 million (31% margin), and net loss attributable to controlling interest of $14.6–15 million.

• Capital expenditures and deferred costs were $38 million in Q2 2024, down from $48.5 million in Q1 2024.

• LTM Adjusted EBITDA was $354.3 million; net leverage ratio for SDL was 3.5x.

• Net interest expense rose to $46 million in Q2, including $10 million in one-time refinancing costs.

• Total contract backlog stood at $2.1 billion as of June 30, 2024.

Outlook and guidance

• Full-year 2024 adjusted EBITDA guidance revised to $290–$335 million; SDNS contribution expected between -$5 million and -$10 million.

• FY 2024 capex and deferred costs expected at $135–$160 million.

• Q3 2024 revenues expected to decline 10–15% sequentially, with improvement in Q4 as two rigs mobilize to West Africa.

• Management maintains a positive long-term outlook for jack-up supply and demand.