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01/10 21:35
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The company's earnings call highlights strong market fundamentals, with high utilization rates and strategic positioning in Mexico and West Africa. Positive developments include improved payment terms with Pemex, potential growth in Angola, and rising demand for natural gas. While management was vague on some specifics, the overall sentiment is optimistic. With a market cap of $1.63 billion, the stock is likely to see a positive movement of 2% to 8% over the next two weeks due to these favorable conditions and strategic initiatives.
Revenue Revenue increased by $9.4 million quarter-over-quarter due to a $2.5 million increase in day rate revenue and a $6.4 million increase in bareboat charter revenue. The increase in day rate revenue was driven by higher operating days and day rates for specific rigs, while the increase in bareboat charter revenue was due to certain rigs becoming fully operational.
Adjusted EBITDA Adjusted EBITDA rose 2% to $135.6 million with a margin of 48.9%, reflecting the quality of earnings. This was an increase of $2.4 million from the prior quarter.
Operating Income Operating income increased by $1.5 million to $98 million, driven by higher revenues despite an increase in operating and maintenance expenses.
Net Income Net income for the quarter was $27.8 million, reflecting the overall improvement in financial performance.
Cash Position Free cash position at the end of Q3 was $227.8 million, an increase of $135.4 million from the prior quarter. This was driven by $72.1 million net cash provided by operating activities, offset by $33.9 million used in investing activities and $97.2 million provided by financing activities.
Income Tax Expenses Income tax expenses increased by $6.5 million due to a one-off deferred tax benefit recognized in the prior quarter, which was not present in the current quarter.
Operating and Maintenance Expenses Total rig operating and maintenance expenses increased by $6.3 million, primarily due to higher reimbursable expenses for the Grid rig.
Fleet Utilization: 23 out of 24 rigs active, with technical utilization at 97.9% and economic utilization at 97.4%.
Revenue Growth: Revenue increased by $9.4 million quarter-over-quarter, with adjusted EBITDA rising 2% to $135.6 million.
New Commitments: Secured 22 new commitments year-to-date, adding $625 million to backlog.
Mexico Market: Secured 3 contract extensions in Mexico, with improved payment terms and reduced working capital needs. However, sanctions led to termination of some contracts.
Gulf of America and Angola Expansion: Announced new commitments in the Gulf of America and Angola, diversifying customer base and minimizing idle time.
Saudi Arabia and Middle East: Increased jack-up demand with Aramco recalling suspended rigs and new tenders in Kuwait and the neutral zone.
West Africa: Incremental demand materializing, with new contracts in Angola and Nigeria.
Operational Efficiency: Industry-leading operational execution with high utilization rates and streamlined fleet management.
Cash Position: Free cash position at $227.8 million, with total liquidity of $461.8 million.
Mexico Strategy: Diversified contract portfolio beyond Pemex to include IOCs and independents, reducing risk exposure.
Global Market Positioning: Positioned to benefit from tightening jack-up market and demand inflection in key regions like Saudi Arabia and Mexico.
Sanction-induced contract terminations in Mexico: The company had to issue termination notices for contracts in Mexico due to newly imposed international sanctions, leading to fewer operating days and impacting Q4 2025 results.
Payment delays in Mexico: Industry-wide payment timing challenges and temporary contract suspensions at Pemex have affected activity cadence, although some payments have resumed.
Increased operating and maintenance expenses: Total rig operating and maintenance expenses increased by $6.3 million, primarily due to reimbursable expenses for specific rigs.
Foreign exchange losses: Total financial expenses increased by $2.2 million, primarily due to foreign exchange losses.
Income tax increase: Income tax expenses increased by $6.5 million due to the absence of a one-off deferred tax benefit recognized in the prior quarter.
Volatile market conditions: The market remains volatile, with fluctuations in Brent crude prices and uncertainties in global utilization rates.
Dependence on Pemex in Mexico: Despite diversification efforts, the company still has one rig with direct Pemex payment exposure, posing a financial risk.
Transitioning rigs between contracts: Several rigs are transitioning between contracts, leading to fewer operating days and potential idle time.
Economic uncertainties in key markets: Economic uncertainties in regions like Saudi Arabia and Mexico could impact demand and operational stability.
Full Year 2025 Adjusted EBITDA: Anticipated to be in the range of $455 million to $470 million, despite fewer operating days in Q4 due to rig transitions and sanction-induced contract terminations in Mexico.
Market Demand and Utilization: A tightening jack-up market is expected in the near to medium term, with higher utilization and day rate levels supported by demand inflection in Saudi Arabia and Mexico.
Fleet Coverage for 2025 and 2026: 2025 fleet coverage has reached 85% at an average day rate of $145,000. Full year 2026 coverage, including price options, stands at 62%, with 79% coverage in the first half of 2026. Utilization levels for the first half of 2026 are expected to increase.
Regional Market Trends: Incremental demand is visible in Saudi Arabia, Mexico, the Middle East, Southeast Asia, and West Africa. Saudi Aramco has called back several rigs, tightening supply in the region. Southeast Asia's market dynamics are expected to improve in 2026, and West Africa shows accelerating contract activity.
Mexico Operations: The company has diversified its contract portfolio in Mexico, reducing exposure to Pemex and increasing partnerships with IOCs and independents. Market turbulence in Mexico is expected to ease in 2026.
New Contracts and Mobilizations: Recent awards include a 6-month campaign in the Gulf of America starting January 2026 and a 6-month commitment in Angola beginning in Q1 2026. Additional mobilizations and contract extensions are planned in West Africa and Mexico.
Global Jack-Up Fleet: Global modern jack-up fleet utilization is approximately 93%. Demand increases in Asia and the Middle East are expected to reconcile current white space in the fleet over the next few quarters.
The selected topic was not discussed during the call.
The company's earnings call highlights strong market fundamentals, with high utilization rates and strategic positioning in Mexico and West Africa. Positive developments include improved payment terms with Pemex, potential growth in Angola, and rising demand for natural gas. While management was vague on some specifics, the overall sentiment is optimistic. With a market cap of $1.63 billion, the stock is likely to see a positive movement of 2% to 8% over the next two weeks due to these favorable conditions and strategic initiatives.
The earnings call highlights strong financial performance with increased operating income and net income, alongside a robust cash position. The strategic focus on securing contracts and optimizing fleet utilization, coupled with optimism in Mexico and potential M&A opportunities, adds positive sentiment. However, the suspension of dividends and lack of specific M&A details slightly temper enthusiasm. Given the company's small-cap status, the overall sentiment is positive, likely resulting in a stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals a negative sentiment due to a significant decline in operating revenue and EBITDA, a net loss, and the suspension of dividends. Although there is a slight increase in operating rig count and liquidity, the challenges with Pemex and reliance on the Mexican market pose risks. The Q&A section highlights uncertainties and cautious customer behavior, further dampening sentiment. Given the company's market cap, the stock price is likely to react negatively, falling between -2% to -8% over the next two weeks.
The earnings call revealed a decline in revenue and EBITDA, a net loss, and a suspension of dividends due to macroeconomic uncertainties. While there is optimism about future rig operations and potential contract extensions, the Q&A highlighted concerns about market conditions and customer caution. The market cap of $1.63 billion suggests moderate sensitivity to these factors, leading to a likely stock price decline of -2% to -8% over the next two weeks.
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