Ventura Offshore Holding Ltd. (VTURA) Earnings Call Transcript & Summary

Hello, everyone, and welcome to today's Venture Offshore Holding Limited Q2 2026 Report Webinar. My name is Sam, and I will be the operator for today's call. [Operator Instructions] I would now like to hand you over to today's host, Guilherme Coelho from Venture Offshore. So Guilherme, please go ahead.

Thank you. Good morning, good afternoon, and welcome, everyone, to Ventura Offshore's earnings call for the second quarter of 2026. I'm Guilherme Coelho, I'm CEO of Ventura Offshore. I would like to thank you all for joining us today. Here with me today are Marcelo Issa, our CFO; and Olav Amri, our Financial Adviser. On today's call, I'll provide you an overview of our performance and highlights on the second quarter, cover our fleet and contractual status, including contract awards. Then next, Marcelo will provide a financial overview of Q2, and then I'll provide a brief market overview, before wrapping up and opening for questions. On the questions, as mentioned by the operator, please remember they are to be made in writing, use the Q&A icon you can see on your screen on the top part of the screen. We'll read and respond to them. Okay. So this is our disclaimer, which you are familiar with. So starting off, very glad to report our very robust operational performance in the second quarter of this year with an uptime of 98%, in line with the continuous improvement observed since last year. A big thank you to our teams offshore for delivering those great results. Another key highlight for the quarter, in Q2, Ventura Offshore has delivered an adjusted EBITDA of $21.9 million and net income of $20.4 million. Again, this quarter, we maintained our industry-leading cost structure, operating with an average OpEx of $111,700 per day, including ancillary -- sorry, excluding ancillary service for the Catarina, which are fully reimbursed by the customer with a markup margin. We discussed this in our last earnings call, but it was in Q2 that we announced the 4-year contract extension for the Victoria, the 135-day contract extension for the Carolina and a 1-year contract extension for the Atlantic Zonda, with an added backlog in Q2 of over $500 million. With that, our backlog at end of Q2 stood just shy of $1 billion. We've also raised $75 million through a debt issue on our existing bond loan, revised the terms of said bond to postpone amortization payments through April of 2027 and extend the maturity of our RCF to end of this year. With that, we closed the quarter with a free cash position of $105.2 million. On subsequent events, we announced the exercise of the fourth and last option well under the Eni contract for the semisubmersible Victoria, which is the well we are currently drilling. Okay. So last quarter, we talked about the [ Renecom ] negotiations with Petrobras and the follow-on announcements made in April this year about the extensions on the SSV Victoria, DS Carolina and Atlantic Zonda. And as a subsequent event, we announced the exercise by Eni Indonesia of the fourth and last auction well we have in our contract for Catarina. So this chart shows how our contractual coverage looks over the years, both on an aggregate backlog and [ rate ] specific contract duration, with the dark green representing firm backlog and firm contractual period depending on the chart you're looking at, and the light green representing optional periods and potential additional backlog. So as you know and already highlighted in the past, we have all Ventura Offshore rigs operating in Brazil contracted until 2029 or beyond. Victoria, for instance, has a firm contract until the beginning of 2031. The Catarina and Zonda still have options yet to be exercised, which could take contractual term to 2031 for the Zonda and potential 2033 for the Catarina. So a very comfortable position to be in from a revenue stability standpoint. From a backlog viewpoint, our current backlog stood at the end of Q2 just shy of $1 billion, as I've mentioned, taking us to firm contractual commitment all the way to 2033. While the existing auction is not yet exercised, represented by the light green bars, adding another potential $617 million to the backlog number, which will potentially take us all the way to 2033. Covering briefly each rig and starting with Victoria. Her last day of operations as per original contract term with Petrobras was on August 7. And she was mobilized to Guanabara Bay here in Rio de Janeiro to undergo her planned out-of-service years for SPS, regular maintenance and [ NPD ] installation. The project is going according to plan and expected to end around January 27 when contract will resume and she'll start her 4-year extension with Petrobras through 2031. The Carolina is now in final days before end of our current contract with Petrobras. Client equipment is being demobilized as we speak, and the contract is expected to end on September 7, end of next week. We will then bring her to Guanabara Bay as well, close to Victoria, for her out-of-service period for SPS, regular maintenance and contract preparation before starting Sepia Atapu contract also around January of 2027. On that, probably a word or 2 on CapEx guidance estimations given to the market in early April. Both projects are still very early stages. The Carolina project hasn't even officially started yet, so we expect to be in a position to provide you with an updated guidance during our Q3 earnings call when we should have greater visibility of final costs incurred and to be incurred. At this moment, we see some level of fluctuation in our CapEx estimations, which is perfectly normal in projects this size, with a slight tick upwards, but not materially different from the figures shared with you a few months back. Moving on to the Catarina, we announced now in July the exercise of the fourth and last option well by Eni Indonesia. And we are now operating on this well, which should take us into October this year. Good news is that we have since received written confirmation from Eni of their intention to drill 1 additional well under the existing contract, which should keep the rig busy until end of the year. So it's a matter of time to get this additional well papered up and an announcement should be made once and if this amendment is indeed signed. On the Atlantic Zonda, she continues to operate very well for Petrobras and closed Q2 with an over 97.2% of time, and recently celebrated over 1,000 days without any lost time incident, an achievement we're very happy and proud about. The contract is now a 4-year duration after the 1-year extension we had firm until 2029 and 2 additional years remaining to the exercise, which could take her to 2031. The partnership with [indiscernible] remains strong and very positive, so much so that we're happy to inform that we executed a marketing and management services contract with them exactly in line with what we have for the Zonda for the deep value driller drill ship as well. And we believe to be well positioned in some of the tender processes in which we have offered this rig. Of course, the signing of these contracts for the DVD with El Dorado was done prior to the El Dorado [ Vantage ] transaction closing, and the tender processes we are participating with DVD also predate this transaction. Before I hand it over to Marcelo to cover our financials, I just wanted to touch on 2 topics worth spending a minute or 2. Recent rumors about Petrobras looking at reducing the number of rigs next year and the discussions on the Carolina [indiscernible] of last year. Firstly, on the noise around Petrobras looking at rebalancing their rig count in 2027. We've been getting questions about this and so have our competitors. So it's important to clarify that Ventura Offshore has not been approached by Petrobras at any moment to discuss any change in our signed contractual arrangements. No calls, no meetings, nothing of the sort. So we have absolutely no reason not to be comfortable with our rigs starting their contracts early next year as planned. Our rigs will be operating for specific consortiums, Sepia Atapu for Carolina, where Petrobras is partners with TotalEnergies, Shell, Petronas, Qatar Energy, [ Petrogal], and Buzio for Ventura, where Petrobras is partnered with [ CNOC and CNPC ]. And we remain very confident about having both rigs and payroll again early 2027. And finally, a quick comment on the Carolina [ introduction ]. As mentioned in our reports disclosed earlier today, we have now concluded our discussions with Petrobras, and I'm happy to report that the final revenues agreed and settled are exactly in line with what has been approved in 2025. With that, I'll hand over to Marcelo Issa, who will cover our financial highlights for the second quarter of 2026.

Thank you, Guilherme, and thanks to everyone for joining Ventura's earnings call. In Q2, the company generated total adjusted revenue of $59.8 million. This was composed of $55.7 million from the operating activities of our 3 [ owned and trading ] rigs and $4.1 million in management fees. The income statement reports $67.5 million in revenue from drilling services. However, it's important to highlight that this includes $11.7 million from the amortization of nonfavorable contract liabilities, which is a noncash item. The company remains committed to keeping OpEx low. Total OpEx for the quarter was $31.3 million, of which $800,000 is related to ancillary services. Daily OpEx was $111,700 for the quarter, and the average daily OpEx for the year is $109,000, both excluding ancillary services. Adjusted G&A for the quarter was $6.5 million. The income statement reports $4.7 million that was adjusted to exclude a tax reimbursement of $1.8 million. As a result, adjusted EBITDA for the period stands at $21.9 million. Now looking at the balance sheet. Our ending free cash position in Q2 is $105.2 million. The variance from Q1 was mainly due to the 75 [indiscernible] in Q2. There is also $27 million in restricted cash held on behalf of the owners of [indiscernible]. Next slide, please. The decrease in accounts receivable from Q1 to Q2 was mainly driven by a timing effect on [ collections ]. Amounts expected to be received in March were received in early April. Therefore, the accounts receivable balance in Q2 is normalized. CapEx in Q2 was $7 million, of which $3.4 million relates to items for Carolina's new long-term contracts. Regarding the interest-bearing debt, the bond loan was amortized by $10 million and $75 million was raised through for the debt issue during the quarter, bringing the bond balance to $190 million. The [ $9.3 million ] draw under the RCF was fully repaid during the quarter. As a result, gross [indiscernible] Q2 stands at $109 million. Along with the bond debt, we also revised the terms for the bond loan, including the deferral of the remaining [indiscernible] from July 2026 [indiscernible]. In addition, we extended the maturity of our revolving credit facility to end of 2026. These actions improved our near-term liquidity profile and are intended to facilitate the contract preparation in SPS for Carolina and Victoria. This is part of the 2-step refinance approach as an initial focus on addressing near-term funding requirements, followed by a broader refinancing in the fourth quarter. I will now hand it back to Guilherme for some market highlights.

Thanks, Marcelo. So I'll now quickly cover our offshore market outlook. And on that, we're very much aligned with the bullish view shared by our colleagues from the industry. Global offshore field development CapEx is growing this year about 20% versus last year, according to S&P, which has translated among other things into a record high number of rig years contracted this year. That increased number of RFIs coming on the pipeline, more exploration work and ongoing tender processes. All that is pointing to an expectation of [indiscernible] utilization to grow significantly beyond 90% by next year, as shown in this graph by S&P. As far as Brazil goes, our view remains that the rig market has reached stabilization between supply and demand with a rig count around 35 rigs. Petrobras has reduced their rig count in line with our expectations, but most rigs were absorbed by IOCs or employed or about to be employed internationally, as was the case, for instance, with Transocean [indiscernible] BP, in Brazil, [ Valaris ] [indiscernible] Shell in Brazil and Transocean [indiscernible] go into ONGC in India as recently announced. However, the string factor remains the success in the exploratory wells in the Lotus Basin, in the known basis of Campos and Santos which have exploratory work, but more particularly and more importantly, in the equatorial margin. As you're all aware, Petrobras recently announced the confirmation of hydrocarbons in the [ morph ] well offshore Amapa in the equatorial margin, supporting the view that the region may become an important long-term growth frontier. Fifteen exploratory wells are yet to be drilled in the region, and assuming Petrobras is able to [indiscernible] commerciality or commercial viability of that region, we could see the demand for additional rigs rising. Now shifting gears to Southeast Asia, a region of particular interest was to SSV Catarina. This region is clearly becoming the biggest growth market in the ultra-deepwater drilling, with Indonesia and India taking the hottest spot. So not a bad place to have a rig operating. In Indonesia, Mubadala is targeting FID for the [ Tangulo ] gas development. Development drilling is expected to commence next year. We see also other campaigns progressing, Mubadala [indiscernible] demand. CRS is the JV between Eni and Petronas. [indiscernible] tender, Petronas [ Bubakarak Bar ] has [indiscernible] exploration well and impacts [ Mazel ] LNG project, besides Harbor, where the market very recently looking for a floater. But it's fair to say that Indonesia's opportunity remain mostly with [indiscernible] joint venture, [ Seara ], which is advancing a multiyear deepwater drilling campaign across the North Canal and Rapak blocks, supported by a recently announced $6 billion financing facility. These developments will sustain the demand for drilling rigs, and we see that Catarina is very well positioned to continue to play an important role in the development of this important regional hub. As a matter of fact, the rig has been in the region for 7 years now. We're continuously undertaking drilling and recovery activities across multiple [indiscernible] blocks. So we see a positive [indiscernible] engaging further discussions with Eni about future opportunities for the rig in Indonesia and continuing the successful and long-term partnership. In India, we saw this quarter, Q2, starting with the disappointing news of the partial suspension of the ONGC 5 rig tender process, which included the need for 1 DP3 semi. They have progressed for 1 or more drill ships and ended up getting 1 valid offer only, that's Transocean's KG2. But despite the partial suspension of the original tender, the country reinforced since then its upstream growth agenda during the quarter through the approval of the [ Samuther ] Montano offshore exploration project, which carries an approved outlay of approximately $8.8 billion and is designed to accelerate seismic, deepwater and ultra-deepwater drilling. The initiative builds on recent reforms that opened previously restricted offshore areas to exploration. It is intended to reduce hydrocarbons and port dependence. Early activity, including new NGC [indiscernible] drilling contains and ongoing licensing rounds shows that India is becoming an even more relevant source of future [indiscernible] exploration demand and the reviving of the regional tender issued earlier this year is to be expected. In parallel to the NGC tender, Oil India is also currently in the market for 2 drillships. And finally, in Africa, several [indiscernible] to a sharp recovery of that region and rig count expected to rise at least 20%. We have tenders in Namibia, Ivory Coast, Mozambique, Nigeria. And for different companies such as TotalEnergies, C&, I Shell and ExxonMobil. So all these opportunities amount to quite an auspicious scenario for DP3 semis [indiscernible] Catarina. Remaining in Indonesia, where we've been since 2019, being a strong possibility, but relocating to India or Africa where Ventura Offshore has operated in the past also being attractive opportunities being actively pursued for the rig. So that closes our presentation for Q2 2026. And as always, I couldn't close it without thanking our teams offshore and onshore for delivering such great results on both safety and uptime while maintaining our industry-leading cost structure. The recontracting of our rigs, extension with Eni, management services signed for the DVD are all testimony to the great work the offshore teams -- the Ventura Offshore teams delivered. I also want to express my appreciation to our shareholders, partners and customers for their continued trust in Ventura Offshore. With that, I close our presentation, and we will open for questions. [Operator Instructions]

Okay. So starting off first question I have -- Javier just won second place. Okay. Regarding the SSV Catarina. You mentioned 1 more well with Eni into year-end 2026. What is the day rate for this well? And are there any ongoing talks or further work with Eni into 2027? If not, how confident are you in securing a follow-on contract to avoid idle time in Q1 2027? So it is, as I mentioned, it is in the same terms and condition of the current contract, this additional well, okay? So same day rate we currently have. And yes, we are in discussions with Eni. We are optimistic about finding future work with Eni in Indonesia. But as I mentioned just now, we're also looking at opportunities. We expect India to come back online, and we'll also participate in new opportunities in West Africa. Second question from Javier is, following the recent [indiscernible] semi cancellation, is in the competitive ruleout for the Catarina or do you see the negotiation tactic to suppress certain rig demand and day rates? So I think I've addressed this. We believe ONGC is going back to the market again after this announcement of the significant investment of $8.8 billion, and the government directive to reduce their dependence on [indiscernible] import. We believe that there will be further opportunities in India. We have operated in India with the Louisiana. We have [indiscernible] for ONGC in India for Louisiana, so we do have the experience operating there, and we certainly do not rule out India. Third question from Javier is given reports of [indiscernible] actively seeking rigs, would you consider an outright sale of the Catarina if a fair market offer arises? So we're always open to discussions if a good offer comes up [indiscernible] also take a look at it. Okay. The rig is not for sale. That is very clear. We are very confident on opportunities -- future opportunities for work for the rig, but we just -- we don't close the door, okay? I mean we're always open for discussions. But again, this rig is not for sale and we remain confident on future work we'll find for the Catarina. Okay. Next question I had, also from Javier. You have lots of questions, Javier. With El Dorado acquiring Vantage's management capabilities, is there a risk they internalize the Zonda's operations once the termination waiver expires in early 2028? I think this is highly unlikely. The contract with the Zonda is -- I'm sorry, the contract with Petrobras is with Ventura Offshore. And in our discussion with El Dorado and Vantage, the invention of all the companies that will carry on this contract is to see through the end of the Zonda contract of Petrobras in Brazil. Javier. Can you categorically confirm no [indiscernible] no delay request from Petrobras for DS Carolina or SSV Victoria in January 2027? I did mention this in the call, and we have not been approached by Petrobras about any delays on the Carolina or the Victoria. Okay. Next call -- next, [ Marcus Monsen ]. Do you see any specific CapEx requirements for the SSV Catarina assuming continued work in Southeast Asia? So Marcus, that really depends on what this future work will be. The rig went through her SPS in 2023 -- by early 2023. So she, from an SPS standpoint, should be good to go until 2028, right? So that's when we would, in principle, stop the rig for work. unless, of course, there are opportunities that justify stopping rig and no, doing [indiscernible] like earlier, doing contractual upgrades if needed. So the answer to your question is that this is dependent on the next opportunity that materializes. And I just, again, from a regulatory standpoint, the SPS could wait until 2028. Another question from [ Roberto Pastor]. Could you elaborate further on the deep value driller topic? So the deep value driller was a rig owned by the deep value driller company, and it was a variable charter to Saipem. Saipem was operating this rig. And then El Dorado, the same owners of the Zonda, they purchased this rig. They purchased this rig and they -- I mean they looked at us. We operate the Zonda for them very successfully, very safely, to operate this rig for them. So that's basically what we did. We signed contracts. They are pretty much a mirror of what we had for Zonda, also for the deep value driller, to manage -- to market and manage this rig for them, okay? And once we signed those contracts, we started offering those rigs in a few ongoing tender processes. What has happened sense is that El Dorado and Vantage, they merged, right? So our contract is valid for the ongoing tenders. But anything beyond, of course, the merger of those 2 companies, I'm assuming that Vantage will be the one offering the rig, which makes sense. I hope that clarifies the question. Another question here from Javier. You have mentioned potential consolidation growth as one of the reasons for the 2-step refinancing approach. Should we intervene that as preserving balance sheet capacity for potential acquisitions or fleet growth? And separately, how much of up to the $130 million CapEx of current inventories already committed or spent? And are you still comfortable with that cost estimate? So starting from the second part of your question, as I have mentioned, we have -- we are going to be -- we're not going to provide updates this time around. We're seeing, of course, fluctuations. Fluctuations are normal. But we are -- the numbers have not materially changed since what we have informed 2 or 3 months ago, okay? We're going to see the Carolina arrive in Guanabara Bay in about a week's time. And that's when we're going to start to have a better visibility on the needs for the rig, possible saving opportunities, costs that were unforeseen. And therefore, makes the fluctuation, which again is very normal in SPSs of this nature. Back to your first question about potential consolidation and growth as one of the reasons of 2-step financing. That is correct. So that has not changed. I mean the reasons are threefold, basically, okay? One is the opportunity -- potential opportunities for growth. Second is the projects themselves, right? I just mentioned about the CapEx -- potential CapEx fluctuation. So by Q4, we're going to have a significantly better visibility on how much money those projects will cost us. That's why we're going to be providing an update during Q3. And the third one, we're also going to have better visibility on the Catarina going forward. So these are going to be the drivers to determine how much money we're going to be looking for on the step 2 of our refinancing process. Another question here from [ Stefan Dietl]. What are your current estimates for SPS cost for the Catarina? And what kind of contract would be needed to justify the investments? So Stefan, I think I already answered this on the previous question. We do not know how much that is going to be because that's going to be highly dependent or the next contractual requirements that we'll have for the Catarina, okay? So again, we don't plan on spending -- doing an SPS on the Catarina before 2028 unless [indiscernible] any contractual opportunity brings about their specific technical requirements that may or may not comply with and that may or may not require upgrades. And the kind of contract that would justify the investment, an SPS has to be done due to regulatory reasons, right? An SPS is not contract-dependent you had to bring every 5 years. What you do is you move your SPS in pushing -- you bring it further and push it further down the line depending on when the contract starts, to avoid idle time in the middle of a contract, okay? I hope I've answered your question on that. Okay. Another question here. What is the size of the dividend you are thinking about for next year? A question from Sarah [indiscernible]. So Sarah, this is going to be dependent on factors and the refinancing, the visibility on the Catarina future and so on. But our intent is to distribute our free cash flow and [indiscernible], okay? 100% of the free cash flow that we generate starting 2027, our idea is to distribute that as dividend, okay? Questions from [ Fredrik ] from Carsons. Congrats on the solid Q2. Can you talk a bit more in detail around the discussions you are having with Eni for a potential extension of the Catarina? Is this well-based term? And how many months this work might be added if the discussions are successful? If the discussions with Eni are not successful, is there a risk of downtime on the rig towards year-end or into Q1 2027, or do other opportunities we are pursuing also give you protection of back-to-back work? So Fredrik, as you would expect, there's not a whole lot I can disclose in terms of discussions we're having with Eni. What I can say is that we are engaged in discussions because, again, Catarina has been doing a very good job for Eni and have a very important field that they need to develop. They are now looking for 2 drillships. One drillship, I think, is to start this year, the second one in 2028. So there is an opportunity for the Carolina to continue to contribute on the development of their fields. So we are optimistic about something coming up. But again, too early for me to provide you with more detail. Of course, our intention is to get the rig in direct integration. If there is a risk of some idle time, it's really going to depend on the outcome of those discussions, Fredrik. And if there is some idle time, what we could potentially do is just bring forward our SPS so that you can have another 5 years of work without adding to stop [indiscernible] again. But again, too early to give you more details on that. With regards to other opportunities, yes, we are looking at other opportunities. We had the rigs actively participating at least 2 other tenders. So it could be that we see the rig actually going somewhere else. And the idea is always to try and avoid idle time. Okay. Second question from Fredrik is with regards to the refinancing of the balance sheet, the bond structure makes it favorable to [indiscernible] before year-end. On the other hand [indiscernible] more visibility on CapEx and an update on Q3, as you alluded to, and opportunities for the Catarina will be helpful to rightsize the new debt facility. Should I consequently think of the timing [indiscernible] would likely to be second half of fourth quarter or could it come earlier? So Fredrik, I think by mid-Q2 -- sorry, mid-Q4, we were going to have a pretty good visibility even before that, of the CapEx needs for both rates. I think we could potentially see where we'll be in terms of growth opportunities, if there's anything coming down the pipeline or not. And we might have some good visibility on the Catarina. So I do not necessarily see us changing the original plan of having our refinancing around mid-Q4. I think we're going to have sufficient data to give us a good comfort to go after the refinancing with the right numbers as an objective. Okay. Questions from Javier. On the Carolina [ introduction status ], will the Q3 cash inflow be full $12.7 million in dispute? No, no. Absolutely not. The number was not $12.7 million, Javier. This would be considering the rig operating at 100% all the time for 60 days, right, not even in the budget we considered that, okay? So the number we had accrued for the period dispute was $5.3 million. And we will -- and now we expect -- not our expectation, right, what we set up was $4.9 million. These are the numbers that you're going to see in Q3 for the Carolina [indiscernible]. So a question here from [ Roberto Pastor]. How many tenders are you currently working on with the deep value driller and which markets? Currently we're working in a few tenders. I mean we do not comment on the tender processes while they are still occurring, right? But we are looking at more than one, then it goes for the deep value. Okay. Another question from Roberto. On the bond market, several Brazilian and international drillers have refinanced successfully in recent bonds. Some [indiscernible] at meaningfully tighter spreads. How do you assess the current window for Ventura refinancing and the recent issuance activity by [indiscernible] view on timing? So we will refer to the answer to the previous questions. They do not change our view. I think we have a strategically strong story with over $1 billion backlog, contractual visibility '29 all the way up to 2031, that we feel very, very confident about going to the market in Q4. We still think there will be a window open, but I think the fundamentals for Ventura in terms of revenue visibility gives us sufficient comfort to go to the market in a successful refinancing exercise in Q4. And again, with the added benefit of knowing how much CapEx will be needed for the rigs, with the benefit of knowing whether any consolidation/growth opportunities are down the pipeline, and with the benefit of potentially having a better visibility on future work for the Catarina. Two, there was a question here by [ Rafael Cobit]. Sorry to come back on this subject, but just to confirm understanding the margin operations contract for the [indiscernible] before the merger with El Dorado and Vantage. Now given that Vantage has a marketing operations platform, there is a doubt that this will stay with Ventura. So to your first question, that's correct. Marketing and operations contracts for the [indiscernible] were signed with El Dorado before the merger with Vantage, okay. Now for the existing opportunities, the ones we're offering the rig, the rig will stay with Ventura Offshore, we'll operate the rig. Our future opportunities beyond or after the merger of the 2 companies, I can only assume that Vantage will be offering the rig, right? I think that makes sense. So ongoing discussions that predate the merger, Ventura Offshore is offering the rig. For the opportunities after the merger Vantage should offer the rig and operate. Okay. Another question here from Javier. What is a realistic consolidated effective tax rule of thumb we should assume for our 2027 models? Marcelo?