Arabian Drilling Company (2381) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Madhu Appissa from Al Rajhi Capital. Al Rajhi Capital is proud to host Arabian Drilling's Q1 2025 Earnings Call. Hearty welcome to all the participants who have joined today. From the management we have Mr. Ghassan, the CEO, Mr. Hubert, the CFO. And Mr. Bassem, Director of Investor Relations. We will be having a presentation followed by a Q&A session at the end. Without any further delay, I'll hand over the mic to Mr. Bassem, Director of IR, to start the proceedings. Mr. Bassem, the floor is yours. Please go ahead.

Thank you very much, Madhu, and thank you, Rajhi Capital for hosting our call today. Ladies and gentlemen, good afternoon for participants joining from the United States, good morning. We appreciate you taking the time to join us for the first quarter results of 2025. Today, I'm delighted to be joined by Ghassan Mirdad, our CEO; Hubert Lafeuille, our CFO. We will begin with an overview by Ghassan followed by an in-depth analysis of our financial and operational performance for the quarter by web. After the presentation, we will open the floor for questions and answers. Please note that this presentation includes forward-looking statements. We encourage you to review the disclaimer provided in this document at your leisure for more detail. Now I'll pass the presentation over to Ghassan.

Thank you, Bassem. Good morning, good afternoon, good evening depending where you located. And thank you for participating today in our earnings call. Despite several ongoing economical challenges, we have started with very positive note for this year with the quarterly revenue exceeding guidance shared last quarter. Our EBITDA margins has remained strong, above 40%, and we have achieved a 7.2% increase in net income compared to the previous quarter. As announced recently, we were pleased with the significant 10-year contract extensions with Aramco for 2 of our rigs, which will add significant value to our backlog next quarter. This move not only enhances our stability, but also showcases our resilience in uncertain times. While we anticipate potential challenges, including the risk of rig suspensions, we remain cautiously optimistic and are exploring opportunities to expand our operation beyond Saudi Arabia in both offshore and in land. Now moving to operational indicators. Our performance indicators remains in a healthy range, and I would like to highlight 2 main points on this slide. First we added 1 brand new service vessel to our fleet. As previously announced, the service vessel arrived in Saudi today, to start it's 2-year contract with KGO, enhancing our service capability and contributing an additional SAR 170 million to be our backlog. This strategic addition underlines our commitment to diversify our revenue streams and enhancing our operational capacity. Second, we had a record quarter of rig move, where we have achieved 60 rig moves in Q1, which is an approximately 50% more than normal rig moves per quarter. This notable performance is a testament to our operational excellence, agility and market responsiveness. Now I will pass it to Hubert to go through the backlog and financials in more detail. Hubert?

Thank you, Ghassan. Very good afternoon to everyone on the call. So let me walk you through the next couple of slides. So first, we'll talk about the backlog. So we ended our Q1 backlog position at $9.5 billion with a few additions and deletions that basically are offsetting each other. So the Q-on-Q decrease basically only reflects the revenue that was recognized during the quarter. So to go into a little bit more detail, in terms of backlog addition, we have added in Q1, the backlog associated with the new service vessel, SAR 170 million that we already -- that we have communicated already. We have also added 2 land rig on all LSTK projects, where a 1-year option was exercised with SAR 76 million. And this was offset by day rate temporary discounts and as well as 1 offshore rig whose contract was terminated. So the temporary discount relates to 2 offshore rigs and only applies for 2025 and actually those discount will be offset by the revenue coming from the new service vessel once the vessel starts operating. With respect to the offshore rig contract termination, it relates to a rig that was already suspended since Q3 2024, which is -- which was one of the lease rig. So therefore, there is no revenue loss attached. It's just a backlog correction. Now in Q2 we expect an significant increase in our backlog positions, as mentioned, we have already announced a 10-year extension for 2 land rigs with associated backlog of almost $1.1 billion, so that will be part of Q2. And also, we expect to close several other rig extension resulting in further significant backlog additions, which will be announced in due time. Now moving on to our utilization rates. Our utilization rate is 83.3%, which basically stands for 50 active rig out of a total available fleet of 60, which means that we have 10 rigs that are currently not active. We have 5 suspended rigs and 5 rigs without a contract. And if you look at in terms of land and offshore mix, it's 3 offshore rigs and 7 land rigs. If you look at the progression of the Q-on-Q total available fleet, it increased from 59% to 60%, as you can see on the lower graph, which is plus 1, and the plus 1 is made of 2 unconventional rigs that started early Q1 '25 minus 1 offshore rig that we have removed from the fleet and qualified as held for sale, and this -- for this offshore rig will no longer be part of the available fleet. Now the service vessel that we acquired in Q1 will be added to the fleet once the contract starts expected mid-2025. And therefore, the total fleet will go back by plus 1 unit up to 61 minutes. So again, Arabian Drilling is the largest Saudi drilling contractor by fleet size, the way we stand today, and our backlog remains solid and provide us with clear visibility on future revenues and is a strong indicator of our market position and operation stability. Now let's look into a little bit more detail at our contractual renewal landscape. As of March 2025, we have 19 rigs that are rolling off contract in 2025. And if you recall from the last quarter, this is 5 less rig than prior quarter. In Q4, we had 24 and in Q1, at the end of Q1, we have only 19. And the reason we have decreased by 4 is because we have renewed 2 land rig with a 1-year option that I just mentioned in the previous slides. We had 2 suspended rig that had the contract date rolling into 2026. And then we had 1 land rig, which was working for KGO and that rig ended its contract in Q1 and is now inactive. And this was also mentioned in the last earnings call. So out of the 19 contract that needs to be renewed. And again, bear in mind that this is as of 31st of March, we have 17 land rigs and 2 offshore rigs. So on the 17 land rigs, we have 11 rigs with SLB on the gas LSTK project. Those rigs come with a 1-year option, which is very likely to be exercised shortly. And then we have 6 rigs with Aramco, and those 6 rigs include the 2 rigs that were renewed in Q2. So it's actually -- it was 6 rigs as of 31st of March, but it's not 4. And before other, the extension are being finalized, and we expect to close that shortly. On the offshore rigs, we have 2 rigs rolling off contracts, 1 rig contracted with KGO. And again, we expect to close the extension very soon. And then we have 1 rig contract with Aramco. It's a lease rig that comes with a 1-year option, and it has a back-to-back lease extension option. So that gives us the flexibility to extend or terminate the lease based on the renewal status that rig's contract ends in Q4 of 2025. So basically, in a nutshell, we are confident our proactive contract strategy will secure and expand our engagements, providing stability and continuity in our operations. The next slide is about the financial performance. So again, our financial performance this quarter was robust with an increase in revenue, EBITDA and net income. And this was driven mainly by high rig move activity level with a record number of rig moves done during the quarter, as mentioned by Ghassan. Now despite downward pressure on day rates due to market conditions, particularly in the offshore segment, we were able to maintain healthy margin this quarter with an EBITDA margin of around 42%. Now even though Q1 was a strong result given the ongoing market dynamics, we might not be able to sustain a margin profile above 40% for the remainder of 2025. Our CapEx spend was SAR 290 million, mainly coming from the acquisition of the service vessel that was concluded in Q1. Our net debt increased quarter-on-quarter, mainly related to the additional SAR 300 million drawdown to finance the acquisition of the service vessel. Our operating cash flow, excluding change for working capital has improved by 12.9% compared to the last quarter, showcasing our strong operational and financial management. In the next slide, Bassem will showcase the advantage of being both the land and offshore drilling contractor. Bassem?

Thank you, Hubert. Although we are essentially a land drilling contractor, we have a balanced mix of land and offshore operations. Combined, the could alleviate the risk of an overly concentrated source of revenue. This also aligns with our revenue diversification strategy, which we are delivering on through adding service vessels to our fleet and that grants us more resilient type of revenue. This diversification strategy also extends to drilling for resources other than oil and gas, which we have showcased through our engagement with Aramco to [ drill ] for the other natural resources. This strategy collectively shows the management direction of revenue diversification that we intend to continue delivering on in the future. Now that we have seen these initiatives come to reality. We would like to assure you that our land drilling segment and operations are doing very well, and they are set to boost our growth, especially with the big long-term contracts like the one we have secured with Aramco and announced quite recently...

So if you allow me, just I want to give a bit of a high-level view on the different segments. So let's start with the land segment, and then we'll discuss about the offshore. So first, you can see we have an increase in the land segment that kind of offset the decrease in the -- in the offshore, which is precisely the point that Bassem was doing. So on the land side, basically, there are 2 main elements that explain the Q-on-Q upside. The first one is the high remove activity, as we have discussed. And then the second one is we also have in Q1 the impact of the full deployment of the unconventional rigs, which is basically 3 rigs. We have 1 rig that started in the very late days of December, so that almost did not contribute at all in Q4. And then we have 2 rigs that started in early Q1, 2025. So those 2 elements, the high rig move and the impact of the full deployment of the unconventional explain the uptick on the land segment. Now on the offshore, we have a bit of a different story. And the Q-on-Q variation is impacted by a couple of things. First, there is a temporary discount on the offshore rates that I have mentioned. So we are talking about 2 rigs. We're talking about a period that is limited to 2025 only and with an impact of roughly SAR 20 million per quarter. Then 1 of our offshore rigs went into a planned shipyard in March for the usual recertification cycle. So that rig was out of service for about 2 to 3 weeks and for about 2 weeks in Q1. And that out of service time will also continue in Q2. And then finally, in Q4, we recognized some additional mobilization revenue that was a one-off item that did not repeat in Q1. So if we go to the next slide, which is basically the net income bridging, you can see some of the elements that I've just discussed repeating. So this bridging effectively shows our Q-on-Q net income progression, reflecting an increase of 7%, so what you can see here, the significant margin of the SAR 50 million realized from the higher renew activities has effectively counterbalanced some of the negative impact that we have faced including the impact of the land rig that were suspended in Q4 that we already discussed and the suspension was with an impact affected in Q1. Then we also have the temporary offshore dairy discount that I just mentioned that started in 2025 as well as the out-of-service time for 1 of our offshore rigs that went to shipyards. So collectively, those 3 red boxes on the waterfall amounted to about SAR 40 million. Now other upside include the additional contribution of the [ UC ] rigs, as I just mentioned, as well as others that mainly include land sales proceeds as well as an insurance claim settlement that was recognized this quarter. Furthermore, the water chart -- the waterfall chart also reveals SAR 28 million in mobilization fees that was reported in the previous quarter as an accelerated deferred revenue, which is nonrecurring in nature. So all those factors combined have resulted in a net gain of SAR 5 million quarter-on-quarter, demonstrating our ability to manage finance effectively despite the challenges. The next slide that I want to cover is basically the cash flow bridge, which I think always gives some good insights. So our cash management this quarter has been exemplary, allowing us to meet our debt obligation promptly, while maintaining sufficient liquidities for ongoing business operations. So just to discuss a few big ticket items. On the finance cost, the net finance cost of SAR 92 million includes SAR 78 million for payable to Sukuk holders on the semi-annual coupon payments that was executed in February 2025. Then you can see on the loan proceeds, we have draw down SAR 300 million of additional debt that was utilized to finance the acquisition of the new service vessel, which is reflected in the CapEx spending of SAR 290 million. Then in the quarter, if you look at our debt repayments in the quarter, we have repaid SAR 101 million of debt, of which SAR 84 million relates to bank loans and the remainder are just leases obligations. Then the last thing that I would like to say on this slide, on the net working capital, you can see a negative impact of SAR 303 million. Our cash collection was slower than usual due to the end of the quarter coinciding with the end of the Ramadan and the public holiday, the 8 public holidays. So consequently, a lot of collections that were due in the last week of March were effectively collected in April. So it's just a timing difference with the catch-up that we've seen in terms of cash collection in the subsequent periods. The next slide is just to reiterate our strong balance sheet position. Our balance sheet remains robust, reflecting a strong solvency position with our net debt to trailing 12 months EBITDA at 1.8 multiple and the net debt below 0.5 multiple of equity. So these metrics not only demonstrate our financial health, but also our capability to fund future growth opportunities efficiently, whether through organic investments or strategic acquisitions. And I will hand over the floor to Ghassan, who will walk you through the guidance for the next quarter.

Thank you, Hubert. Considering the ongoing uncertainty in the market, we project a cautious approach for the year. We estimate next quarter revenue to reflect a potential 10% decline compared to Q1 level. This is due to mainly 2 points. 1, the rig move activity that was extremely high with a record of 6 rig moves in the quarter to go back to normal. And the other point, which was mentioned by Hubert, 1 of our offshore rigs that went for a shipyard maintenance started end of Q1 and continued most for Q2 and it's on location as we speak, and it should start generating revenue in the coming days. Now looking at our cost building on the cost structure optimization we began in 2024, we are intensively -- intensifying our cost management efforts and maintaining strict financial discipline, especially given the current uncertainties. Accordingly, we are lowering our CapEx estimate to between SAR 800 million and SAR 900 million for the year compared to a SAR 1 billion level communicated previously. While we expect the remaining of 2025 to be a challenging year, we also believe that 2026 will show activity pickup. We need to be strategically managing the next 3 quarters to position ourselves to benefit from the ramp-up profiling early next year. With this, we end our presentation, and I will now pass it back to Madhu, Al Rajhi Capital to start the Q&A session. Madhu?

Thank you, Mr. Ghassan and Hubert for the presentation. [Operator Instructions] First question is from the line of Ricardo.

If I may, 2 questions. First 1, when you mentioned about the discounts on 2 rigs for 2025, do you think that there could be content further rigs as well? Or it's very limited to those 2 rigs? And then the second question is you've been very successful in those service vessels already have 2 now. Do you see the scope for adding more vessels throughout the year, maybe for 2026?

So on the discounts, to be honest, we -- the 2 that we had, that's what we can see. Will be there any more discounts? To be honest, it's very difficult to see. To be honest. Very, very difficult to know, if there is -- now we see there was some suspensions. So I don't think it will -- the suspension that was done for, I think, around 2 rigs in the offshore I think this will turn down any discounts going in the future. In terms of the barge, I think at the moment, this is what we had kind of committed to our clients when they gave us their intention to award last year. We don't see anybody is coming, but it's something that we keep an eye on [indiscernible] for the barges, because it's a very good business to diversify your operation.

And then to add to what Ghassan said, we don't acquire a vessel and then wait for the contract. We need to have it contracted first or requested from a client so that we can procure it and then attach to our contract. This is how it works. So if you have doubts about spending CapEx and not finding work for it, no, this is definitely not going to happen. But as we've discussed and as we mentioned in this call, we like this kind of revenue, and we are open to any opportunities that may arise in that in [indiscernible].

Next question we take from the line of Leo. Leo, could you come back in the queue, can you check your audio and come back in the queue? Meanwhile, we'll take next question from the line of Ildar.

HSBC. So I have a couple of questions. First 1, you said that you expect, I think, better outlook in 2026. What evidence do you have to kind of to say that to support this conclusion? What are you -- I mean, are we getting any soft commitments from your clients for [ '26 ]?

So it's not commitments, but what we're seeing the rigs we -- I mean, the rigs that was -- there was like, I think, in the market more than a dozen of rigs from the market that was suspended on the land. You can see in the schedule that they will be back Q1 next year. So you can see when the feeling that we have and that is -- it's more of a cost savings for this year, not a drop in activity. It's just kind of saving and all our suspended, not similarly to the offshore, when the offshore was suspended, we know it's not going to come back. But the land is a bit different. It's kind of a temporary suspension that we see with the other contractors that Ghassan has mentioned.

If I can add also to what Ghassan said, let's not forget that the suspension that we are witnessing now and what we have witnessed last year is a process of normalization to what happened back in 2022. So we're getting back to the normal kind of operations. So this is what we hope for. This is what we expect. We are not saying that we have anything [ common in store ] as of now. But this is our vision and what we sense for market dynamics currency.

Understood. And secondly, so I think there was a line in your -- 1 of your slides saying that you advised to exercise caution when forecasting financials for the second half of this year. Does that mean that there are some still downside risks even to the level you expect in second quarter this year. Any particular reasons to that?

What we see as just mentioned, so there is more than a dozen of suspensions that happen in the market in Q1 and Arabian Drilling is not immune, right, from that. So I just want -- it's better to be cautious and cost adherent and make sure that you control your cost. To ensure that even, if we didn't have any expansion, it's very good for us at the end of the day, but it's better to be cautious than not to be.

Yes. I mean if I can just add, I mean, the Q1 was -- we had a good EBITDA profile margin and a good profile margin in Q1 because we had high rig move activities. In Q2, we expect that the rig move will not be the same. And then we will have the out-of-service time for 1 of the rig that is on the planned shipyard and that will take most of the -- actually half of the quarters. So those 2 elements makes us feel that we have a cautious [indiscernible] on Q2. And then there is uncertainties about [ suspensions ]. So this is why we are prudent and cautious giving a bit of a guidance in terms of EBITDA from about maybe going below 40%.

Leo, could you try again?

Can you hear me now?

Yes, We can hear you.

Perfect. I don't know what happened. Sorry about that. Yes. So it's Leo [ Currie ] at UBS, filling in for Anna. So obviously, you talked about the macro uncertainty. Any comments on contracts coming with shelf drilling would be my first question. And second question, I might have missed it in the question before, but any outlook on onshore and offshore day rates this year. Apologies if any of those were repeat.

Okay. I'll ask Hubert and then feel free to add. So on shelf, I think the tendering is still going on. Actually, we've been asked as well to go for more tenders, more than what we had before. So we had, I think, 2 extra countries that we are tendering for together with Shelf and I think, hopefully, there will be good news soon that we can announce open. The -- on the pricing, as mentioned by Hubert, there was discounts on 2 offshore rigs.

Temporary discount.

Yes, temporary. When you say temporary, it's only meant for this year, and it's not -- doesn't extend outside of 2025. On the land, I think it's not the same as offshore. Offshore, why we see this comes in offshore because the offshore went to a peak with the high demand and short supply, the prices were really high. And now it's getting back to equilibrium. Whereas the land, it doesn't have that much of a fluctuation. So we don't see the same discounts on the land. It's either maintaining the same -- most of all, we maintain the same prices. If you have a bit of an increase, it would be just the inflation that you expect.

I just want to say on the 2. So we have announced 2 significant contract extension on the land rigs, 2x, 10-year extension contract. And on those day rates, the increase was relatively good because it's a 10-year contract, so you have to secure it, you have to maintain the price for 10 years. So we've seen an increase in double digits. For all the rest of the extension, we expect it will stay pretty much at par.

Now we have 1 offshore rig that is coming for an extension. We're finalizing the extension because this shrink was signed a long time ago. It was COVID, I believe. It was doing a downturn. So we believe we'll have an upside in that because the prices were a bit -- were a bit lower.

As we wait or wait for our next question in the room, there is one question in the chat box, which I'll read it out for you. This is related to the discount on offshore rigs. And the question is from Rohan. This discount was it applicable to all the offshore operators where all the offshore operators impacted by this? And is it like part of your contract?

So I'm not sure how -- what's happening with the other contractors to be honest.

What we are sure is that Aramco went and ask discount to all the operators, not only the drilling contractor. Everybody working for Aramco got a letter requesting for this exactly right.

All the rig contractors, all the service providers, all of them. Discount purpose...

And this was for the existing rigs, not the ones which came up for renewal?

It was for existing -- I mean, the letter saying at all contractors, existing contracts discounts.

Okay. Okay. Fair enough.

I think we can only assume that everyone had to chip any.

[Operator Instructions] Okay. We have a follow-up from the line of Ildar?

Yes. So my -- another question I had is that is about the supply of new rigs onshore rigs to Saudi Arabia as far as I know, it keeps -- the newbuilds are keep coming in, right? Are you seeing any kind of scrapping of the ones, which you called stock in the marketing? What's happening to the overall fleet given the supply keeps increasing? And then secondly, also, is my understanding correct that generally speaking, the land rigs are usually not being moved between different markets? Let's say, if there's a slowdown in the U.S. due to the lower oil price. It's very unlikely that they could be moved out from the other 2 countries. Is my understanding correct?

Okay. So just on the second question, when you said I kind of agree with you, it's easier to move offshore rigs globally. Land rigs, it's not because sometimes in different countries have different requirements. Having said that, we are looking at some opportunities because we have 5 rigs that are not contracted, and we're looking at different options that we can utilize them somewhere out. But you are right, usually land rigs are not moved from country to country. You're right. But the first part of the question was...

Whether we have new land rigs and what happens to the old rigs? Is there and we remove capacity by selling old rigs?

I mean, today, as I said, I mean, we're seeing a lot of contract received suspensions. There is a lot of old rigs in the land. And I think that's why it was easy for our clients to suspend some of these old rigs. Now how our other contractors will deal with that is I'm not sure, what's their plan. But again, it's a suspension. We see a pickup in 2026. So I don't know, if they're going to scrap it or not at the moment, to be honest. Because it's not -- they're not canceling the contracts, we're just suspending it.

We have a follow-up on the chat box related to the discount. So the question is from [ Ayub ]. So the discount that was provided on 2 rigs, was it mainly to avoid further suspension? Is there any over supply situation?

I mean, we were not told that we were going to suspend the rig. What we did is we are at a time, where you're negotiating power is weak. When the offshore rigs were coming and there was shorter supply, you were in a strong negotiating power. Now you're not -- and so when our clients sends letters to every one negotiation, you try to look at where is your prices are a bit high, and it's very kind of -- very you see a rig that is really kind of high and it kind of stands out from the others, right? So you start thinking, okay, let me just be better to have it in a price range, where it doesn't stand out and we had those 2 rigs that we're really, really standing out in the offshore. So it's -- I mean, I would say it was saying, you do it or you get suspended, they saying, guys, look at your prices. And then we decided that the management team that look these 2 rigs kind of stand out and we prefer that we don't stand out, if anything happens.

Okay. And is it possible to quantify the discount?

Yes, I've mentioned that it's about SAR 20 million per quarter on the top line.

Okay. We have another question from Rohan. Okay. So this is -- I believe, is for the market -- onshore market, land rigs, like how many land rigs are there in [ KSC ] and how many of them are suspended? I believe he's asking total?

I mean, unfortunately, I cannot disclose the number, it's our clients' numbers. But I mean, you're talking -- I mean they are above 200 rigs in Saudi in the land segment. Now how much you're going to spend. This is -- we're not sure, to be honest. We're not sure. But as I mentioned, there was more than a dozen that was suspended in Q1. There was, I think, more in last year. There was more...

I think it was about 30 to 35 suspended last year. Plus another 15 in this year. In Q1, right.

I mean, if you look at the total. If you want to look at the total, it would be...

It would be around that, yes.

We do not have any question at the moment in the room. So let's give participants a couple of minutes. Meanwhile, I wanted to understand what is the cost related to the suspended rigs the 10 rigs that -- which are not active at the moment, how much cost related to these rigs has hitting your income statement? Like in terms of depreciation and the crew cost or most of the crew has been allocated to the...

So no, you're absolutely right, Madhu. So basically, the depreciation is the [indiscernible] cost, right? It's not going away regardless whether the rig is working or not working or suspend. The crew cost is basically typically what we do is we deplete the crew cost from that particular suspended rig. And either the people are being relocated to other rigs, when we had the land rigs being suspended in Q4, we had 3 land rigs sustained in Q4. At the same time, we're starting up the unconventional. So that works very well for us because we could reallocate it some of the crew of the suspended rig to the unconventional. So this is what we've been doing even though -- and some of them on to the offshore. So basically -- yes. So typically, you will -- when you have suspended rigs you will keep a minimum crew you will keep a rig on crew, and you will have half of a crew or 1/3 of the crew that's going to be looking after a number of rigs. If I take the example of the offshore, for instance, for the offshore rigs that we have -- for the offshore rig that we have suspended, we have like -- yes, we have 3 offshore rigs, and we have like 10 people on board looking at 3 different rigs. So costs are minimal.

Okay. But is it possible to know in terms of or quantify the impact, like how much of the cost is related to the suspended rig, which is not contributing in terms of revenues. Like there is no revenue against it, but you have SAR 50 million of cost.

I don't have the number on the top of my head because we need to look at the [ second ] cost suspended -- for the suspended rigs. But what I can say is that from a crew cost, everything which is a variable nature, crew cost and repair and maintenance. I mean, everything -- all those costs are basically brought down to an absolute bare minimum, and you're basically left only with depreciation costs and insurance costs. It depends on the rig by rig because it depends on the -- where the age of the rig, et cetera. So I cannot give you a number on top of my head.

And offshore, if you want to keep it like in our case, [indiscernible] so you just have to run the engines, very, very minimal diesel that you need to keep running just to make sure the engines are running so whenever an opportunity comes. Otherwise, if you cold stock it, getting it back to operation really will cost you a lot of money.

Okay. Okay. I would say maybe that from a cash flow stand, I mean, excluding the depreciation, everything from a cash cost standpoint, you basically -- the cost goes down by 75%, 70% to 75% between fully operating and the stack mode.

Okay. Okay. That is helpful. We have a question in the chat box. Again, this is from Rohan. So the -- was the 1 offshore rig, which is held for sale, is there any impairment loss that you're planning to book?

So this rig is one of the real that was suspended last year. And this rig contrary to the other rigs that were warm-stacked this rig, we decide to close packet. So close pack of course, that means that we shut down the door, we switch off the lights and the rig was left there. And we took back in Q2 of 2024, we already took an impairment on this. So there is no further impairment. And this rig is -- we are in the process of selling the rig, we have -- we are engaged with the prospective buyers, and we hope to be able to conclude the transactions.

Okay. Clear. We have a question in the room. This is on the line of [ Mohammad ], okay, but I just saw that his line got disconnected. Okay. So there is another question on the chat box. This is on unconventional rigs. Any new update on unconventional rigs like can we expect more tenders in 2025? Or given the situation there is a chance that even the unconventional rigs would slow down the market for unconventional rigs?

Okay. So for 2025, we will not expect to see another tendering and [indiscernible] question in terms of -- because this is where the gas is. It appears that whatever is going to be announced is not going to be this year. So -- and then this, of course, as you know, is not our call. This has to come from ramp. So yes, the short answer to your question is no. Nothing is expected this year.

Just to kind of add to the question. At the beginning of the year, it was clear that we were not tender for new rigs. However, we're going to kind of move rigs from one department to the other department. But with the uncertainty that's going on today, what we see is the unconventional will not add any tenders and will not add more rigs this year.

Clear. I think that was our last question. So back to you for any closing remarks.

No. Thank you very much all participants today with us for your engagement, to your questions. As we navigate through the dynamic conditions that we are today, we remain committed in our patient excellence our transparency. And as well, it's a 3-quarter that we need to navigate because we see the uptake in Q1. And we just need to know how can -- we need to see how we can strategically manage our costs and not go into the fire, higher mood where we need to be a bit more strategically how we can manage this cost for us in the next few quarters and then business will go up. So it's just going to go, as Hubert said, it's going to -- before it's going to go down before it goes up again, which is now part of our operation. Now working in Saudi, I think it's a big plus. We're working outside with independent or working with IOCs. It's a totally different world game. So we are in a good position, even though we're going to -- we see some uncertainties, but it's just going to be temporary uncertainties on the line and things will pick up 2026 and travel. Thank you very much, and we look forward to updating you on our next earnings call or seeing you in one of our events.

Thank you, Arabian Drilling's management, and thank you, participants, for joining the call. With this, we end the call. Wish you all a nice evening. Thank you.