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Shelf Drilling’s Mixed Earnings Call: Growth Amid Challenges

Shelf Drilling’s Mixed Earnings Call: Growth Amid Challenges

Shelf Drilling ((NO:SHLF)) has held its Q1 earnings call. Read on for the main highlights of the call.

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The recent earnings call for Shelf Drilling revealed a mixed sentiment among stakeholders. The company celebrated significant achievements such as revenue growth, an improved cash position, and successful contract extensions. However, these positive developments were tempered by challenges including safety incidents, market volatility, contract terminations, and reduced utilization. Adjustments in financial guidance further underscored the difficulties in maintaining previous expectations.

Strong Operating Performance

Shelf Drilling reported a fleet-wide uptime of 99.4% for the quarter, continuing the excellent operating results from 2024. This high level of operational efficiency underscores the company’s commitment to maintaining robust performance across its fleet.

Revenue and EBITDA Growth

The company achieved an adjusted revenue of $243 million for Q1, marking an 8% increase compared to Q4 2024. Additionally, the adjusted EBITDA for the quarter was $96 million, resulting in a healthy margin of 40%, highlighting the company’s strong financial performance.

Cash Position Improvement

Shelf Drilling’s cash position improved significantly, with quarter-end cash standing at $207 million, up $55 million from year-end 2024. This improvement was driven by strong EBITDA generation and reduced capital expenditures.

Successful Contract Extensions

The company secured contract extensions, including a one-year extension with Chevron for the Shelf Drilling Scepter in Nigeria and an additional three months of backlog for the Trident XVI contract with Petrobel in Egypt. These extensions reflect the company’s ability to maintain and grow its business relationships.

High Day Rate Increase

Shelf Drilling experienced an increase in average day rates, rising to $94,000 per day in Q1 from $88,000 per day in Q4. This increase indicates a favorable pricing environment for the company’s services.

Safety Incidents

The company reported a total recordable incident rate of 0.24, with three recordable incidents during the period. While below expectations, these incidents highlight the ongoing challenges in maintaining safety standards.

Contract Termination

Shelf Drilling received an early termination notice for the Shelf Drilling Winners contract in Denmark, which is expected to remain idle for the rest of the year. This termination presents a challenge for the company’s operations in the region.

Market Volatility and Day Rate Pressure

The global jack-up market has been impacted by volatile oil prices during 2025, leading to contract suspensions in Saudi Arabia from 2024. This volatility has created pressure on day rates and overall market conditions.

Reduced EBITDA Guidance

The company revised its financial guidance for the full year 2025, with adjusted EBITDA now estimated to be between $310 million and $360 million, a decrease from the initial guidance. This revision reflects the challenges faced in the current market environment.

Lower Utilization

Shelf Drilling’s effective utilization reduced to 79% in Q1 from 80% in Q4 due to contract completions in India and suspended rigs in Saudi Arabia. This decline in utilization highlights the operational challenges the company is navigating.

Forward-Looking Guidance

During the earnings call, Shelf Drilling provided updated guidance for 2025, reflecting adjustments due to recent market developments. The company expects a fully consolidated adjusted EBITDA between $310 million and $360 million, slightly down from earlier estimates. CapEx and deferred costs guidance have been revised to $85 million to $115 million. Despite current market uncertainties, the company remains confident in the long-term resilience of the offshore drilling sector.

In conclusion, the earnings call for Shelf Drilling presented a balanced view of achievements and challenges. While the company has made significant strides in revenue growth and operational efficiency, it faces ongoing challenges in safety, market volatility, and contract stability. The revised financial guidance reflects these challenges, but the company remains optimistic about the long-term prospects of the offshore drilling industry.

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