Shelf Drilling (SHLF) Q4 2023 earnings summary

Executive summary

• FY 2023 Adjusted EBITDA was $311.5 million, in line with guidance; Q4 Adjusted EBITDA was $88.0 million, down from $114.8 million in Q3.

• Year-end backlog was $2.34 billion across 35 contracted rigs, with a weighted average dayrate of $83.4 thousand.

• FY 2024 Adjusted EBITDA guidance is $375–420 million, supported by contract starts and repricing opportunities.

• Safety performance was the strongest in operating history, and major out-of-service projects were completed in aggregate on time and on budget.

Financial highlights

• Q4 consolidated revenue was $242.0 million versus $268.4 million in Q3; Adjusted Revenues were $238.8 million versus $264.2 million.

• Q4 operating income was $52.0 million versus $78.8 million in Q3; net loss was $21.2 million, including a $27.7 million debt-extinguishment loss.

• Q4 Adjusted EBITDA was $88.0 million versus $114.8 million in Q3; margin declined to 37% from 43%. FY 2023 Adjusted Revenues were $893.8 million.

• FY 2023 capital expenditures and deferred costs were $225.8 million, including $11.5 million at SDNS.

• Q4 capital expenditures and deferred costs were $47.6 million versus $34.8 million in Q3; year-end cash and cash equivalents were $98.2 million.

Outlook and guidance

• FY 2024 Adjusted EBITDA guidance is $375–420 million, including an estimated $25–30 million contribution from SDNS.

• Q1 2024 Adjusted EBITDA is expected to be ~$(15) million while two rigs prepare for new contracts; Q1 Adjusted Revenues are expected to be directionally in line with Q4 2023.

• FY 2024 capital expenditures and deferred costs are guided at $145–170 million, including $40–45 million for SDNS.

• Planned work includes Saudi equipment recertification and major out-of-service projects in India; two Indian projects depend on awards in an ongoing tender.

• Management expects demand outside Saudi Arabia to sustain strong jack-up activity despite possible Saudi activity reductions; uncontracted days are targeted in 2024 and 2025.