Solstad Offshore (Oslo:SOFF) Q3 2026 Earnings Call

0:00 Good morning everyone and welcome to Solstad Offshore's third quarter 2026 presentation. The presentation will be held by Kjetil Ramstad, CFO, and myself, Lars Peder Solstad, CEO. There will be a Q&A session after the presentation, so please send in your questions in the chat. Overall, we are pleased with the continued solid performance of the company during the quarter. But let me take you through the main developments we have had during the quarter and year to date. A quick look at the disclaimer before we move on to the company highlights. And the third quarter was another quarter with solid operational and overall performance for Solstad Offshore. We had a total adjusted EBITDA of 41 million US dollars compared with 29 million in the same quarter last year.

1:05 Operational EBITDA was 17, slightly below the 19 we had last year. But at the same time, our joint ventures and associated companies contributed with $24 million in this quarter compared with $10 million last year. In September, we completed the sale of the Norman Tonjor, where we had an ownership of 56%. This generated an accounting gain of about 24 million dollars and making a significant contribution to our cash position. After the quarter end, we declared the US dollar 125 million purchase option for the Norman Maximus with delivery scheduled for October 27th.

2:01 Our intention is to finance the purchase price through external debt financing. and also important, the previous letter of intent that we have announced for Norman Maximus has now been replaced by a firm 26-month contract with Saipem, giving the firm commitment well into second quarter 2029 and with additional 11 months of options thereafter. and finally we are distributing a dividend of 0.3 USD per share this quarter corresponding to approximately 25 million USD.

2:49 So overall we continue to combine solid operations with strategic investments and attractive shareholder distributions. So Kjetil, can you take us through the details on the numbers?

3:04 Yeah, I will do that. So let's have a look at the financial and operational summary. The fleet utilization was 92% in the third quarter of 26, compared with 97% in last year. Year-to-date utilization has been 85% compared with 97% last year. The main reason for the lower utilization year-to-date was the late startup of a long-term contract with Petrobras for the Norman Topacio and idle time for Norman Tonjer in the first quarter.

3:52 Operating income was $125 million in the quarter, up from $73 million same quarter last year. Year to date operating income was $316 million compared to $220 million last year. 12 quarter includes 24 million accounting gain on 100% basis from the sale of Normantonier. Underlying income has also increased year on year driven by higher number of Solstad maritime vessels operating through Solstad Offshore's Brazil setup.

4:42 However, this has a limited impact on the operational adjusted EBITDA, which was 17 million in the quarter, compared to 19 million in third quarter of last year. Also mentioned the $5 million reduction compared to the second quarter this year. That is mainly because of a legacy disputed charter hire of $5 million that was recognized in the previous quarter. Year-to-date adjusted EBITDA has been $116 million compared with $91 million last year, would be increased driven by improved share of results from joint ventures and associated companies.

5:36 Net result was $63 million in the quarter compared with $26 million last year. Year to date net result was 130 million, up from 88 million last year. Book equity at the end of the quarter was 528 million. Corresponding to an equity ratio of 47% compared with 375 million or 44% same quarter last year. The adjusted net interest bearing debt, excluding the present value of the Norman Maximus purchase option, was in a cash positive position of $39 million at quarter end, compared with a net debt of $57 million last year.

6:45 Kjetil Ramstad, Per Stange, Tor Johan Tveit, Olaug Hoines Hillesland while retaining liquidity for the upcoming vessel maintenance and expenditures and corresponding off-hire periods. Then if we go to the next slide on the depth overview for Solstad Offshore. The company has a $70 million term loan facility unchanged from second quarter.

7:31 It was drawn in November 24, an ASA 5 year amortization profile, matured in November 27. Solstad Brazil term loan is of approximately 40 million, at the quarter end. This is for the financing of four Brazilian built vessels through BNDES. Maximus lease liability of 144 million consisting of 30 million of remaining bare boat lease through October 27 and then 140 million representing the present value of the declared 125 million dollar purchase option. The other liabilities of 227 million dollars, the majority 223, relates to Solstad Maritime Vessels operating through Solstad Offshore Brazil Setup.

8:34 These lease agreements are supported by contracts with Brazilian end clients and the remaining 4 million relates to ROV and property leases. Net Interest Bearing Debt was 332 million at the quarter end. Adjusted for leases related to Solstad Maritime Vessels and excluding the present value of the Norman Maximus Purchase Option, the Adjusted Net Interest Bearing Debt was in a positive cash position of 39 million. Total Interest Bearing Debt and Lease Liability decreased from 505 million at the end of second quarter to 483 million dollars at the end of third quarter, mainly reflecting the lower lease commitments.

9:23 So with that, we will have a look at the dividend in Solstad Offshore for the third quarter. And the company will distribute a cash dividend for the third quarter of US dollar 0.3 per share. Olaug Hoines Hillesland Olaug Hoines Hillesland Olaug Hoines Hillesland Olaug Hoines Hillesland Olaug Hoines Hillesland Key dates for the third quarter dividend. Last day record date 9th of November 26th and then distribution date on or about 20th of November 26th.

10:31 Thanks Kjetil, and let's have a closer look at the investments that Solstad Offshore has in associated companies and joint ventures. And they all represent 3 million dollars. Omega Subsea continues to develop positively. The company currently owns 20 ROVs with another 10 scheduled for delivery 27 and onwards. And over the last 12 months, the company generated approximately $100 million in revenues and about $32 million in EBITDA.

11:22 We have also our two 50-50 joint ventures with SPM Offshore, where Norman Stoller, our vessel that operate or continue to operate on her contract with SPM. while the new build scheduled for delivery in the first half of 2029 will upon delivery start on a 14-year contract with options for another 11 years thereafter. and combined our joint ventures and associated companies contributed with about 24 million dollars to the result this quarter compared with 10 million dollars in third quarter last year.

12:10 So these investments provide a combination of earnings, cash distribution and long-term strategic value for Solstad offshore. Turning briefly to the market and the overall demand picture within offshore energy remains positive. Brazil continues to be predominantly a long-term contract market for the anchor handlers, although the vessels with spot exposures are achieving decent utilization.

12:59 We have three anchor handlers in this region, and all of them are on long-term contracts. Norman Turquesa, which is one of them, will do her dry docking in the end of the fourth quarter and also into the first quarter ahead of her new four-year contract with Petrobras. The CSV market remains active and project-oriented, but also with some longer-term opportunities.

13:46 We continue to see a high fleet utilization, but there will also be some more vessels entering the market the coming year and a half or so, with quite a few new buildings being delivered. For our fleet, we will see both the Norman Maximus and the Norman Superior doing their 10-year classing in first half of 27. Norman Maximus will continue her Saipem contract thereafter, while the next job for Norman Superior has not been firmed up yet. We have several prospects we are working on, but nothing is firm at this moment.

14:47 Geographically, Also Suriname, Guyana included in the areas where we see a lot of activity. At the moment we also pay special attention to the Black Sea area. where there is a security situation and one of our vessels is operating in this area at the moment. And as mentioned for Solstad Offshore, Brazil remains particularly important and our local established organization and the vessels operating through our Brazilian structure give us a strong footprint in this market.

15:59 Having a look at the backlog, the backlog provides good earnings visibility for us the coming years. We have the firm backlog for Solstad Offshore for the owned vessels was around 400 million dollars at quarter end and in addition around 560 million of backlog is related to the Solstad maritime vessels operating through our Brazilian structure. For our own fleet, 95% of the days are already firm for fourth quarter.

16:45 And looking into the 27, 85% of available days are already firm, providing a high degree of earning disability. Norman Maximus is reflected with its planned class renewal in first quarter, followed by the new contract already mentioned. So the combination of backlog for our own vessels and the sort of maritime vessels operating in Brazil provide us with substantial visibility into the coming years.

17:32 So, Kjetil, can you say a few words about the guidance?

17:35 Yeah, I can do that. So, the financial guidance for the remainder of the year, the operation of adjusted EBITDA guidance remain... Unchanged at 60-70 million dollars, where we have already 51 million that has been generated year-to-date. And the guidance assumes that Norman Maximus remains on contract to the year-end before commencing its 10-year class renewal. The guidance also excludes the share of results from joint ventures and associated companies.

18:26 And as mentioned, for the third quarter, we will distribute a cash dividend of USD 0.3 per share, totaling approximately USD 25 million. USD 0.12 per share, or approximately USD 10 million, is considered as an extraordinary dividend following the sale of Norman Tonjer. And with this, I give the world back to you to summarize, Lars Peder.

19:01 Thank you. And to summarize, this was another solid quarter for Solstad Offshore. We delivered a total adjusted EBITDA of 41 million dollars, supported by a strong contribution from our joint ventures and associated companies. The sale of Norman Tonjar further strengthened our cash position and enabled us to return part of the proceeds directly to shareholders. We have also taken an important strategic step by declaring the purchase option on the Norman Maximus while also securing employment for the vessel into second quarter of 2029 plus options thereafter.

19:56 Our contract coverage provides a good earning visibility with 85% of the available days for a vessel or already firm for 27. And finally, our strong financial position allows us to distribute approximately $25 million to the shareholders for the quarter. Solstad Offshore is financially robust, maintaining the capacity both to invest and to return capital to shareholders. So with that, I conclude the presentation and we move

20:44 We have quite some questions incoming. So let's start with, given the large influence A lot of new builds that is coming into the market over the next years. Are you worried that some of the uncommitted vessels that we have in Solstad offshore, like Nordman, Perger and others, will struggle to find new commitment and are there prospects in the tender pipeline?

21:28 There are definitely opportunities in the market, both project-wise and also as I said earlier, We have a few leads that we're working on at the moment and are quite optimistic to secure some of those opportunities. I think what we have seen so far is that the supply side of this business is fairly... All the processes we have been involved with, we have seen that both bidding and pictures have been done on good levels.

22:30 Thank you, and in a continuation of this, what is the future for Norman Caldeuca when this vessel eventually comes to an end of the current contract?

22:49 We still have more than a year left of this contract in position. The vessel also is We have a good position in the market in Brazil, so we will be able to secure workforce For the vessel, either with present client or with someone else when that vessel comes available in more than a year from now. I'm not concerned about that.

23:29 Thank you. And then over to Norman Maximus. As you mentioned in the presentation, this vessel is going to be dry docked soon. Dividends distribution in the area of what we are looking at now going forward and what is the company's perspective on this?

23:59 Well, it will always be an ambition for us to distribute dividends on We are increasing again this quarter. We have a very solid cash position. We have a solid contract coverage. But we also have some, about half the fleet is going into class renewals in first half of 27. So it's about combining the solid cash or the dividend level, but also making sure that we are preserving cash also for the upcoming maintenance activities. So it's a balance there.

25:04 Over to the new build with SPM. Is there a need for the company to contribute more equity into the project?

25:25 Well, there is a during the I would say the The equity contribution that we are going to contribute with in total is going to be fairly limited from source to offshore, reflecting the structure of the deal we have with the yard, but also reflecting the long-term commitment we have. and the strong partner we have. So it's going to be fairly limited equity contribution.

26:09 Thank you. And then we are at the last question. You mentioned that the purchase option of Norman Maximus was declared and also you mentioned that We plan to finance that through external debt. Can you elaborate a little bit more

26:32 on this? Would it be a bank loan or would it be... Of course, the purchase option in itself was kind of a no-brainer. The vessel is well in the money. We have a contract in place. The replacement value of this vessel is several times higher than the purchase option price. So that is a no brainer in itself. We also see that the interest from lenders are on a high level, so we are confident that we can finance the full amount with external debt and bank debt will be the natural for us to do.

27:30 Thank you. That concludes the Q&A for today.

27:36 Okay, so thank you very much to everyone who listened in and we wish you all a nice day ahead. Thank you very much.