Shelf Drilling Reports Third Quarter 2024 Results

13 Nov 2024 18:20 CET

PRESS RELEASE

SHELF DRILLING REPORTS THIRD QUARTER 2024 RESULTS

Dubai, UAE, November 13, 2024 – Shelf Drilling, Ltd. (“Shelf Drilling”, “SDL”
and, together with its subsidiaries, the “Company”, OSE: SHLF) announces results
for the third quarter of 2024 ended September 30. The results highlights will be
presented by audio conference call on November 14, 2024 at 6:00 pm Dubai time /
3:00 pm Oslo time. Dial-in details for the call are included in the press
release posted on November 6, 2024 and on page 3 of this release.

Greg O’Brien, Chief Executive Officer, commented: “During the third quarter of
2024, our Adjusted EBITDA increased to $114 million, primarily due to the
acceleration of mobilization revenue for two suspended rigs in Saudi Arabia. As
anticipated, we were impacted by a lower level of utilization with a few rigs
preparing for new contracts.”

O’Brien added: “Since the end of the second quarter, we have achieved several
important milestones. We secured firm contract awards totaling $558 million
across West Africa, Southeast Asia and the North Sea, which included a
multi-year contract which commenced in late October 2024 for one rig redeployed
from Saudi Arabia to West Africa, where we see additional attractive
opportunities for our rigs. We received regulatory approval for the Shelf
Drilling Barsk to return to operations and commence its long-term contract in
Norway as well as closed the sale of the Baltic. Lastly, in October, we
successfully completed the acquisition of Shelf Drilling North Sea, which
simplifies our capital structure, improves our cash flow profile and
significantly enhances our fleet composition on a fully consolidated basis.
While the rig suspensions in Saudi Arabia have created some short-term
challenges and uncertainty, we are confident that our strong customer
relationships, proven operating track record and leading position in key markets
will allow us to capitalize on the right long-term opportunities in our sector."

Third Quarter Highlights and Subsequent Events
• Q3 2024 adjusted revenues of $264.7 million, including $45.2 million for the
acceleration of mobilization revenue on two suspended rigs in Saudi Arabia
related to future years.
• Q3 2024 adjusted EBITDA of $114.2 million, representing an adjusted EBITDA
margin of 43%, including $(4.9) million adjusted EBITDA from Shelf Drilling
(North Sea), Ltd. ("SDNS") and $119.1 million from the rest of the business.
• Q3 2024 net income attributable to controlling interest of $67.5 million.
• Q3 2024 capital expenditures and deferred costs totaled $34.9 million,
including $9.2 million at SDNS.
• The Company’s cash and cash equivalents balance at September 30, 2024 was
$220.1 million, including $26.6 million at SDNS.
• In September 2024, the Company sold the Baltic rig for total net proceeds of
$56.5 million.
• In September 2024, the Company secured a contract for the Shelf Drilling
Mentor covering 10 wells and an estimated duration of 450 days in direct
continuation of its current contract in Nigeria.
• In October 2024, the Company obtained the regulatory approvals for the Shelf
Drilling Barsk rig in Norway, and the contract is expected to commence in
November 2024.
• In October 2024, the Company acquired the remaining 40% shares in SDNS by
issuing 42.0 million shares of SDL stock and cash of $30.1 million to previous
SDNS shareholders. SDNS has become a wholly owned subsidiary of SDL upon
completion of the transaction. Total SDL issued and outstanding common shares at
the completion of transaction are 255.7 million.
• In October 2024, a $50.0 million settlement and release agreement was signed
with the insurance underwriters declaring the Trident VIII rig a total loss.
• Subsequent to September 30, 2024, the Company secured the following new
contract awards and extensions:
– Three-year contract, with a two-year option for the Shelf Drilling Achiever
which commenced in late October 2024.
– Two-year contract extension, with a one-year option for the Adriatic I rig
expected to commence in February 2025.
– Two-year contract extensions commencing in H2 2025 in Thailand for the Shelf
Drilling Chaophraya and the Shelf Drilling Krathong, in direct continuation of
their current contracts.
• Financial guidance for the full year 2024 revised; details are included in the
"2024 Financial Guidance Revised" section of the Q3 2024 results highlights
presentation on our website.

Third Quarter Results

Adjusted revenues were $264.7 million in Q3 2024 compared to $230.8 million in
Q2 2024. The $33.9 million (15%) sequential increase in adjusted revenues was
driven by the acceleration of mobilization revenue on two rigs for which
operations were suspended in Saudi Arabia, partially offset by lower effective
utilization.

Effective utilization decreased to 77% in Q3 2024 from 80% in Q2 2024, primarily
due to the suspension of five rigs in Saudi Arabia, planned maintenance and
shipyard for one rig in Saudi Arabia and the sale of one rig in September 2024
previously operating in West Africa. This was partially offset by the
commencement of a new contract for one rig in Vietnam in August 2024. Average
earned dayrate marginally decreased to $81.8 thousand in Q3 2024 from $82.0
thousand in Q2 2024.

Total operating and maintenance expenses decreased by $9.2 million (6%) in Q3
2024 to $132.6 million compared to $141.8 million in Q2 2024. The sequential
decrease was primarily due to lower operating costs for four suspended rigs in
Saudi Arabia, two rigs in West Africa, one that suffered structural leg damage
and one that was sold in September 2024, and lower shipyard costs for one rig in
Vietnam that commenced operations in Q3 2024. This was partially offset by
higher mobilization costs for one rig which commenced a new contract in West
Africa in late October 2024.

General and administrative expenses increased by $0.4 million in Q3 2024 to
$16.6 million as compared to $16.2 million in Q2 2024. The sequential increase
was primarily due to a net increase in provision for credit losses and certain
one-time costs related to the SDNS merger transaction, partially offset by a
decrease in compensation and benefit expenses.

Adjusted EBITDA for Q3 2024 was $114.2 million compared to $71.5 million for Q2
2024. The adjusted EBITDA margin of 43% for Q3 2024 increased as compared to 31%
in Q2 2024. The significant increase in Adjusted EBITDA resulted primarily from
the acceleration of mobilization revenues on two suspended rigs in Saudi Arabia.

Capital expenditures and deferred costs of $34.9 million in Q3 2024 decreased by
$3.1 million from $38.0 million in Q2 2024. This sequential decrease was
primarily due to lower contract preparation expenditures for one rig in Vietnam
which commenced a new contract in Q3 2024 and one rig in Norway expected to
commence a new contract in November 2024 and lower spending on fleet spares.
This was partially offset by higher contract preparation expenditures for one
rig in West Africa and one rig in the United Kingdom that commenced new
contracts in September 2024, higher spending for one rig in West Africa expected
to start operations in December 2024 and planned maintenance and shipyard costs
for one rig in Saudi Arabia.

Q3 2024 ending cash and cash equivalents balance was $220.1 million. The
increase of $81.8 million from $138.3 million at the end of Q2 2024 was
primarily due to the receipt of net proceeds of $56.5 million for the sale of
the Baltic rig and lower debt service payments in Q3 2024.

The Form 10-Q Equivalent, which includes the Condensed Consolidated Financial
Statements, and a corresponding slide presentation to address the results
highlights for Q3 2024 are available on the Company’s website.

For further queries, please contact:
Douglas Stewart, Executive Vice President and Chief Financial Officer
Shelf Drilling, Ltd.
Tel.: +971 4567 3400
Email : douglas.stewart@shelfdrilling.com

Dial in Details for the Audio Conference call
Participants will receive conference access information only when they register
for the conference via the link below:

Online Registration:
https://register.vevent.com/register/BI961f529ea43e41478b5d97987731c270
Participants must register for the call using online registration. Upon
registering, each participant will be provided with call details.

About Shelf Drilling
Shelf Drilling is a leading international shallow water offshore drilling
contractor with rig operations across Middle East, Southeast Asia, India, West
Africa, Mediterranean and North Sea. Shelf Drilling was founded in 2012 and has
established itself as a leader within its industry through its fit-for-purpose
strategy and close working relationship with industry leading clients. The
Company is incorporated under the laws of the Cayman Islands with corporate
headquarters in Dubai, United Arab Emirates. The Company is listed on the Oslo
Stock Exchange under the ticker “SHLF”.

Special Note Regarding Forward-Looking Statements
Matters discussed in this announcement may constitute forward-looking
statements. Forward-looking statements are statements that are not historical
facts and may be identified by words such as "believe", "expect", "anticipate",
“strategy”, "intends", "estimate", "will", "may", "continue", "should" and
similar expressions. The forward-looking statements in this release are based
upon various assumptions, many of which are based, in turn, upon further
assumptions. Although the Company believes that these assumptions were
reasonable when made, these assumptions are inherently subject to significant
known and unknown risks, uncertainties, contingencies and other important
factors which are difficult or impossible to predict and may be beyond its
control. Such risks, uncertainties, contingencies and other important factors
could cause actual events to differ materially from the expectations expressed
or implied in this release by such forward-looking statements. Given these
factors, users of this information should not place undue reliance on the
forward-looking statements.

Additional information about Shelf Drilling can be found at
www.shelfdrilling.com.

This information is subject to the disclosure requirements pursuant to section
5-12 of the Norwegian Securities Trading Act.

More information:
Access the news on Oslo Bors NewsWeb site

632119_Press Release_Shelf Drilling Reports Third Quarter 2024 Results.pdf
632119_Shelf Drilling Q3 2024 Results Highlights_vF.pdf
632119_Shelf Drilling Ltd. September 30, 2024 Quarterly Report.pdf