OceanPact Serviços Marítimos S.A. (OPCT3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen, and welcome to OceanPact's Fourth Quarter of 2024 Earnings Conference Call. We are also going to talk about the results for the full year of 2024. [Operator Instructions] This conference is being recorded, and the replay will be available at the company's website at ri.oceanpact.com. The slide deck that will be used in the presentation is also available at the company's Investor Relations website as well as the CVM website at www.gov.br/cvm. Before proceeding, we would like to mention that the forward-looking statements that may be made during this conference call relating to the company's business prospects and forecasts are predictions based on the management's current expectations. Such expectations are highly dependent on macroeconomic conditions, market risks and other factors. With us today are Mr. Flavio Andrade, CEO; Mr. Haroldo Solberg, Vice President and the Manager of the Vessels segment; Adriano Ranieri, the Services Manager; and Eduardo de Toledo, CFO and IRO. They will first comment on OceanPact's 4Q '24 performance. And later, they will be available to take questions. I will now turn the conference over to Mr. Andrade.

Thank you. Good morning, everybody. Thank you very much for joining our earnings call today. We are going to talk about the fourth quarter of 2024 today in our conference call. Well, we reached BRL 1.7 billion in revenue and BRL 531 million in EBITDA last year. You have asked a number of questions recently about the RSV bid by Petrobras, and we participated with other players in the industry, of course. And in this bid, there were 6 different types of RSVs with their ROVs configurations with 2 different delivery dates and 32 vessels participated with 106 offers. And out of the 32 vessels, 21 are already part of the RSV fleet that Petrobras uses and other 4 that are in other categories that will potentially be adapted. So this process is not a simple one, as you can imagine. With such great supply and such a big batch, it is going to take a while for Petrobras to negotiate the contracts, and we need to wait and see what is going to happen. We imagine that by June, these contracts will be signed. So I hope that on our OceanPact Day, we will have more clarity on what is going to happen and which vessel is going to be allocated to which region. We should remember that there are other opportunities as well since the market is heated right now. We have opportunities with the construction of new vessels for Petrobras, but also being hired by the engineering companies that are in charge of installation. We also have decommissioning contracts. A number of facilities are being decommissioned in depleted fields. And also, there is a strong global demand for this type of vessel for subsea services. And this market has a lot of supply -- a lot of demand rather and very little supply. Also, services delivered BRL 223 million in EBITDA for the full year of 2024. We are serving Petrobras in Colombia with geophysics services using a vessel that belongs to a local partner, but we are providing the services there. We also have the support base being used by Equinor in Porto do Sul. And we believe we can expand it. We also started a contract that we landed for the decommissioning of Congro. And I believe that we are going to have more opportunities, and I'm going to comment on them towards the end of the presentation. When it comes to oil spill, we are expanding our unmatched leadership position across all segments. In all technologies that we develop, we are the main player in Brazil for oil spill response offshore. Now let me move on to the highlights. I think I touched on pretty much all of them. In 2024, we added BRL 1.1 billion, not in the year, actually, in the fourth quarter of 2024, we added BRL 1.1 billion to our backlog in new contracts. The average daily rate went up to BRL 165,000 per day, a 20% increase year-on-year. Our net revenue came to BRL 459 million, and our EBITDA was BRL 146 million. Now I'll turn it over to Haroldo, and he will comment on the highlights of the vessel segment.

Thank you, Flavio. Good morning, everyone. I'm going to give you the main operational highlights in 4Q '24 and 2024. Let's take a look at the utilization map. We finished the fourth quarter at 82% and the main highlights in this period were, as you can see in blue on the map, we had 2 vessels being docked, Abrolhos and Ilha do Cabo Frio. In pink, you can see two vessels went into maintenance, Ilha de São Sebastião and Macaé. In orange, you can see that three vessels were mobilized Ilha de Santana, Rubi, which already started their contracts with Petrobras and Ilha do Mosqueiro. We advanced in this quarter part of the adjustment for the OTSV that we are going to have in 2024. That led us to a utilization rate that is in line with our guidance. Now let's take a look at the details of our 82% utilization rate in 4Q '24. You can see that the days without any contract account for 2 percentage points. Mobilization accounted for 5 percentage points and docking 4 percentage points. Operational downtime, 7 percentage points, especially due to maintenance services to Ilha de São Sebastião and Macaé, as I mentioned earlier. Now on the right-hand side, you can see that there was a reduction in days utilized in comparison with the previous year, and that was caused to docking and mobilization. The average daily rate continues to grow. That is a highlight, and it went from BRL 137,000 to BRL 165,000 in 4Q '24, a 20% increase. The main factors are the new contracts for PSVs and ORSVs. And also, we had Parcel das Paredes, Parcel dos Meros and Parcel do Badejo with increases in their daily rates. Now let's take a look at the results of the Vessels segment. Our net revenue exceeded 200 -- actually BRL 388 million, an increase of 11%. Our net revenue came to BRL 1.1 billion, a 7% increase year-on-year. And as you can see on the right-hand side, our EBITDA came to BRL 90 million, 10% higher year-on-year. Our EBITDA margin in 4Q '24 came to 30% and we had a margin -- EBITDA margin of 28% in the full year, and our EBITDA came to BRL 308 million. Now let's take a look at our projected 2025 vessel map. This map can, of course, change. This is an intermediary scenario since the RSV negotiations are ongoing with Petrobras. The projected utilization rate is 82%, mainly due to the mobilizations and dockings over the year. We are working with the possibility of four mobilizations since we have a contract signed for Ilha do Mosqueiro and other three mobilizations for contracts that have not been signed yet for three RSVs that are in mobilization that will enter into mobilization. And these new contracts have a potential of generating a significant increase in our daily rates. Now I'll turn it over to Adriano Ranieri to talk about the Services segment.

Good morning. Thank you, Haroldo. In the Services segment, our results skyrocketed in 4Q '24 as expected. And we reached BRL 113 million in revenue in the Subsea and Geoscience segment, a 27% increase, both year-on-year comparing to the 4Q 2023 and also the full year 2023. Our oil spill response services had a 14% drop, and this is a normal variation due to the short contract scenario. And consulting, innovation and logistics came to BRL 28 million in revenue, in line with 4Q '23 on a like-for-like basis. Now let's take a look at the segment on a consolidated basis. We had revenues coming to BRL 169 million and our EBITDA came to BRL 56 million with a 33% margin. Our accumulated EBITDA was BRL 223 million for the full year, a 50% increase year-on-year.

Thank you, Adriano. Good morning, everybody. It is a pleasure to join you this morning. Let me tell you some more about the consolidated numbers for the full company. In 4Q '24, our revenue came to BRL 459 million, a 15% year-on-year on a like-for-like basis. And our EBITDA came to BRL 146 million in the quarter, 20% more year-on-year. Now let's talk about our costs. There was a 10% increase year-on-year coming to BRL 264 million. This growth is significantly lower than the growth in our revenue, which was 15%, as I mentioned earlier. Our G&A expenses reduced. Here, we have the long-term incentives, which are a significant part of the officers, executives compensation and the long-term incentives should also be analyzed, compared to the stock price of the company that causes that fluctuation. Our CapEx came to BRL 110 million in the quarter. In blue -- in light blue, you can see the growth CapEx. In this quarter, this relates to the acquisition of 2 RSVs, 2 ROVs that will equip our RSVs to serve the contracts under negotiation. Now let's take a look at the financial results. We finished 4Q '24 with a cash of BRL 444 million. I would like to highlight the sixth debenture issuance and -- that took place in December 2024. And again, the market received it very well that allowed us to reduce our spreads in this issuance in comparison to the previous ones. It also improved our average maturity. And that shows the perception that the market has about us and about our risks. We had a demand of BRL 88 million in working capital, and that is related to the revenue that we had this quarter. Our net debt came to BRL 1.125 billion, and our net debt over EBITDA rate was 2x. Now I'll turn it back to Flavio.

Thank you. Well, I would like to give you more details about our backlog. We added BRL 1.1 billion to the backlog, and that is mostly related to Ilha do Mosqueiro vessel. This vessel had lost the previous bid that we participated in. Its contract was extended. But in the next bid, we won with a 50% increase in the daily rate in comparison with the bid that we lost. So that shows that we actually made the right decision. Now moving on to the next slide. I forgot to mention the total backlog. It is at BRL 3.7 billion as of December 2024, BRL 3.7 billion. Now on to the next slide. Per usual, I would like to talk about our sustainability and innovation initiatives. The highlight here is the Offshore Support Journal awards. Their conference took place in London, and we were awarded thanks to the OceanPact digital platform, which integrates environmental, meteorological and ocean graphic data with information about the subsea environment in all oil platforms and the vessels transmit their position and that data goes to our platform. This is actually a digital twin of everything that takes place under the sea. And we can also measure the surface currents. We can also simulate oil slick. We can also run models in case there's man in the water, for example. So we created this platform, which really sets us aside from the competition. We already have 10 customers, paying customers using the platform, and that number should continue to grow. This is the standard for simulated events monitored by the environmental agency here in Brazil. This is the only platform that has the ability to provide this kind of monitoring. So we are very happy about it. Now moving on to the closing remarks. When it comes to the market, well, I think that it is still very heated. We have the RSV bid going on. We cannot provide more comments than we already did. And we are developing an unmanned vessel operated remotely. And I believe that we have been talking about this since the IPO, right? We said that at some point, it was going to happen. We didn't know if it would take 5, 10 or 20 years, and it is actually happening before the 5-year mark. We also have the decommissioning movements happening at Petrobras and the independent IOCs. They have been postponed many times, but they are happening right now. We won Boia de Congro. There are other major decommissioning movements happening right now. Now our fleet, as I mentioned when I talked about Ilha do Mosqueiro, we have been relocating the fleet in new contracts with significant increases in their daily rates. And our expectation is that, that is going to happen again with the RSV bid. And we continue with our strategy of being selective when it comes to the contracts, including when we decide not to participate in the construction bid due to a number of factors. I know that, that always causes questions. But if we consider the difficulty that we have with the shipyards and our capital structure, and also when we see that the daily rates have been increasing consistently, all of that makes us cautious when it comes to making this type of decision. With that, I would like to thank you for your attention, and we can begin the Q&A session now.

[Operator Instructions] We have a question from Gustavo Sadka with Bradesco BBI.

The first question is about Haroldo's part of the presentation when he said that the projected map is an intermediary scenario. Can you comment on how many vessels will be part of the bid considering your guidance of 82%? And also what would the utilization rate be if the 7 -- all 7 vessels come under contract with Petrobras? Now the Services segment, I know it is very volatile. It fluctuates across quarters, but it seems to me that your EBITDA grew by 50% year-on-year. So if you can comment on the main drivers, the main changes in the segment that led to that increase? And also, how should we be thinking about the Services segment for 2025? That would be great.

Thank you, Gustavo. Starting with your question about the RSVs and then Haroldo can jump in if necessary. Well, we wanted to create a scenario before we get the result of the bid, right? And in order for us to do that, we created a very possible scenario, very similar to the expected scenario, but we can tell for sure. And even if we did that, it would maybe come in the way of the negotiations in the bid. What we can tell you is that this is a very possible scenario and maybe the names can change, which vessel is going to go into contract. And to address your question about what will happen if the seven vessels that participated in the bid are chosen. And there are two dates, one for -- in December '25 and the other one, October 2026. So I believe that all of them will probably not start working in December 2025. That would actually cause problems in the adjustments and demobilization. That is not a very likely scenario. It is more likely that the vessels will be divided between the two batches and some other vessels will be in other opportunities that I mentioned that wouldn't require adjustments. So we need to strike a balance between the two dates, the type of allocation for each vessel, and that's part of our work, right? We need to choose the right thing and allocate things in the best way possible. Now Haroldo, if you would like to add any comments, please go ahead.

I think you said it very well, Flavio. This is an intermediary scenario, as I called it. And we included the mobilizations that we have forecast for 2025, and there are 6 of them. And the other vessels can be used in other opportunities, for example, extending contracts with Petrobras or being included in the batch that will start in October 2026. We can also participate in other Petrobras bids for services, decommissioning. And we also have the option of allocating those vessels in other clients other than Petrobras. We shouldn't lose sight also of the fact that we had a bid in 2021, '22, '23 and '24. We didn't have any in 2020 because of the pandemic. So there will, for sure, be other RSV bids in which we will participate. So that's the overview for the RSV.

Thank you, Haroldo. Now going back to your question about Services. As I said, it was a very strong year for Services. Subsea was fundamental, and it will continue to be. The other opportunities that we see in subsea oftentimes using RSVs. Today, we have more in line inspection service going on in a project with Petrobras, but we do that for everybody. So the advantage of having a service contract is that you have your structure mobilized, being paid by the main contract, but you can also have other contracts with a structure that is already in place to provide other services, and that should continue to happen in subsea services. And the other services are very important. For example, the logistics services for Equinor, it is now serving other segments within Equinor. We are building new facilities, for example, in an area of 3,000 square meters that they need for a certain period of time, and then it becomes permanent. We also have the preferential right in some areas. So there's a lot of opportunities in the services segment, which helps us in our vessel position. We can continue the contracts for vessels even in periods where we have lower demand for vessels. If the vessels provide services as well, that is great for our position in the market. And that is a lesson that we learned in 2015, '16 and '17 when everyone was shrinking and we were actually growing. I hope I covered all of your questions.

Eric de Mello from Itaú BBA will ask the next question.

Congratulations on the great moment you're going through. I have two questions. The first one is about Meros should have its contract coming to an end in April this year. So I would like to know your expectations about this vessel. You are negotiating, I know. And what should we expect for this vessel over the course of 2025? Now my second question is, we had some advances in contingencies and claims last Friday. What do you think about the evolution of those two claims? Maybe Petrobras will make an in-court deposit about the undisputed amount. But I would like to know your perspectives about the developments that took place last Friday.

Okay. Well, starting with Meros, as you said, it is a chartered vessel. The contracts will end, and we included it on the map that Haroldo presented. And we did it because we have solid indications that we are going to renew its contract. But we have other similar vessels that could replace it if necessary. We don't think it is going to happen, but that negotiation is ongoing, and we cannot give you more color on it. But we do believe that we will be able to negotiate with the client and that the vessel will continue in operation. Now about the contingencies, I'd like to turn it over to Eduardo.

Thank you, Flavio. We have two lawsuits, Turquoise and Coral. They are the most advanced claims. For Turquoise, the decision has become final and unappealable, and the execution phase started, therefore. The execution phase, in this phase, the company will present the amounts and Petrobras will reply, and that is normal in any execution phase, we might need inspections and expert opinions. We need to wait and see how the two parties will advance. As you know, we sold -- we partially sold those claims to a fund. Therefore, all of our movements are done in an agreement between the parties as agreed between us. So we are going to discuss what the best strategy is on a case-by-case basis. So that's what I can tell you about Turquoise. Now Coral, which has a higher amount. Last Friday, as you mentioned, a ruling was handed down by the third tier of jurisdiction and Petrobras appeal was denied, but there is still a possibility of appeal. It can go up to another level of jurisdiction if Petrobras appeals. And then if they don't, we would go into the execution phase. Now about the deposit of undisputed amount, it really depends on the decisions and whether or not we can claim that at some point in the process. We cannot tell you exactly how that is going to develop. It really depends on how things are going to evolve. But again, we have very positive perspectives. Things are moving on well on that front.

[Operator Instructions] We have another question from Henrique Cunha with JPMorgan.

My question is about costs. I believe that it is certain that we are going to have an increase in revenue with the new contracts and better daily rates. But what can we expect in terms of surprises about costs?

Well, we are not foreseeing any surprises. Of course, we have the bargaining agreements, the labor bargaining agreements. In the last negotiation that we had with the workers, the maritime workers, we signed an agreement for 3 years. So for the current year, we are just going to fulfill the agreement. We are going to adjust the wages according to inflation and 1% of actual increase, real gain. But overall, I believe costs have behaved according to inflation and FX. Those are the two main factors. Labor and services that is related -- closely linked to inflation. And of course, we should consider pieces and parts and equipment, and that is more closely linked to FX fluctuation. Those are the main components. And again, the market has been very active, very heated, but the volume of activity is still below what we saw in the previous cycle. We don't have any additional pressures. But of course, how can I put it, the market is reasonably active. We see some movements here and there, but nothing compared to what we saw in about a few years ago, where we had a very strong activity with a number of foreign vessels here in Brazil and the construction movements going on. But of course, the market is stronger than it used to be 3 years ago. But we don't have any concerns about that.

[Operator Instructions] We have a question submitted in writing by [ Thiago Toza ]. What is your expectation for Rochedo de São Paulo and São Pedro vessels? Do you think Petrobras is going to start a new bid? Do you think they are going to renew the contract without any bid? Or do you think they are going to sign a contract with another company?

Thank you, [ Thiago ], for your question. I think Haroldo is going to take your question. Please go ahead.

Thank you, [ Thiago ]. Well, the [ AHTSTOs ], as you can see on the map, São Paulo will end in October. São Pedro in November. And we included on our map the possibility of an extension for another year with Petrobras. And in 2025, we expect to see another bid for the AHTS' to start operations in 2026. That's our expectation for Rochedo de São Paulo and Rochedo de São Pedro. They will start operations in 2026.

[Operator Instructions] Eduardo Tinoco will ask the next question from Tyton Capital.

Congratulations on the great results. Well, I would like to know your perspectives about the curve in daily rates. Where do you think we stand right now in that curve? You said in previous calls that the demand was high and we would see increases in daily rates. And we saw that materializing in the recent bids and the recent contracts. But how much more do you think these daily rates can grow? Or maybe you think that they will stabilize now and we are not going to see such big leaps in prices from now on?

Thank you, Eduardo. That is a very hard question. In the past, we had situations in which when the industry needs equipment and it takes a long time to build, to create those pieces of equipment that can drive prices up significantly. On the other hand, our main client, Petrobras usually offers long contracts. And that is not necessarily the case in other places. The market in other places is more volatile. Here, our market is less volatile and Petrobras has a very well put together plans, very solid. Since they have a huge operation, they need to keep it going. So they put together very strong plans. So there is no shortage of vessels in operation for them. I believe there is still room for increases in daily rates. I do believe that the current daily rates are still not that high in such a way that it would justify constructing, building new vessels. I know you can say that, well, there were so many people in the bid, but I cannot answer this question on behalf of other people. I can tell you what our case is. Even if we have contracts for 10, 12 years and even if we get funding from BNDES, the daily rates would have to grow so much so as to make it interesting for us to increase our fleet and build new vessels. And most builders are acting in the same way we are. They are not building that many vessels. They are building fewer vessels than the vessels that are being decommissioned. And I believe that, therefore, the daily rates will continue this growing trend. And for Petrobras, that trend also exists, but the daily rates are not going to go up so significantly because Petrobras is very well planned, and they are very organized. At the same time, the independent IOCs, the smaller companies are now concerned because they might face shortage of vessels. And therefore, they are trying to get things done, and that is going to cause daily rates to go up because these companies don't want to have no vessels and therefore, default on their obligations. And another component in this scenario is stronger services. One way of saving money is using the vessels for services in things that the vessels can measure easily, for example, in decommissioning and mooring line inspection, it's very easily to measure those things, and you don't have any problems in that type of service. So I believe that there is a trend, an increasing trend for services, and that is going to drive daily rates up, not so steeply, but that is my personal opinion. Eduardo and Haroldo, if you would like to add more color, please go ahead.

No, I agree with you. You said it very well. I think the ORSVs and PSVs daily rates have already increased. And now in 2025, the RSV daily rates will go up and also AHTSs. Since there are a few Petrobras bids, that increase takes a while to materialize.

Now we have a question submitted in writing by an anonymous attendee. What should we expect for 2025 in terms of CapEx? Will there be any significant change in comparison with 2024?

Well, I believe there's a bit of uncertainty just like we have on the forecast for the utilization map. That's a translation of what we believe will happen. But of course, it is all subject to how negotiations develop and also the start date for each contract. We might have some contracts starting this year, some next year. There are many things that are still open. Since the market is very positive right now with plenty of opportunities, CapEx will be directly linked to how attractive the new contracts are. We are going to invest CapEx if we have new attractive contracts. So I think that we have a very solid base for that. We're going to invest if we need to according to the contracts. Now for 2024, '25 and '26, since we have renewals going on, we believe that the CapEx will be high for those years because it is the CapEx level required for preparing the vessels to enter into operations under the new contracts.

We don't have any more questions. So I'd like to turn it over to Eduardo for his closing remarks. Please go ahead.

Thank you, Doris. Thank you, everybody. Per usual, I would like to take this opportunity to talk a little bit about the performance in the current quarter, 1Q '25. We are now going towards the end of February. And well, what I can tell you about 1Q '25 is that -- when it comes to services, the results have been more modest. The main issue here is related to 2 vessels, Ocean Stalwart and Abrolhos. The 2 vessels needed downtime for 2 months. We have 3 months in the quarter, and for 2 months, those vessels were not in operation. And that caused our services results to be more modest in 1Q '25. Our expectation for 1Q '25 is to see results a little bit higher than 3Q '24, which was a quarter in which services delivered more modest results. But starting in 2Q '25, then our expectations are more optimistic. We expect to see stronger results. And for 2Q '25, we believe that the results can exceed the great results that we delivered in 4Q '24. Now over to Flavio for his closing remarks.

Thank you once again very much. I would like to thank the entire team that worked extremely hard in 2024 on the PSV deliveries and the OSRVs with the necessary upgrades, and they will have to work even harder. They have their work cut out for them this year because we have significant mobilizations with significant daily rate increases as well. So we are very excited, energized for this mission. When it comes to innovation, as I said earlier, we have a challenge of started developing -- starting developing the unmanned remotely operated vessel. And after the award and the success that we have had with our customers here in Brazil with the digital platform, we are extremely happy about all of our innovation initiatives. So thank you so much. See you next time. Have a good one.

That concludes OceanPact's conference call for today. Thank you very much for participating. Have a good one. Bye-bye. [Statements in English on this transcript were spoken by an interpreter present on the live call.]