SED Energy Holdings Plc (VTURA) Earnings Call Transcript & Summary

Welcome, everyone, and thank you for joining this joint presentation by Energy Holdings and Ventura Offshore following today's announcement of our proposed combination. My name is Kurt Waldeland, and I'm the CEO of Energy Holdings. I am joined today by Guilherme Coelho, CEO of Ventura Offshore; and Gunnar Eliassen, Chairman of Ventura Offshore. We are very excited about the proposed combination and the opportunities it creates for both companies and our shareholders. I will now hand it over to Gunnar for some opening remarks.

Thank you very much, Kurt, and thank you, everyone, for joining this call. We are equally excited about bringing these 2 companies together, and we think it creates a lot of opportunities for the joint shareholders. Regarding the strategic rationale, we try to remove all the buzzwords, try to remove the typical McKinsey phrases and try to boil it down to simple language. Why are we pursuing this transaction? And it comes down to scale. Point 1, the combined entity, I believe, can pursue growth transactions that Energy Holdings and Ventura Offshore couldn't do on a stand-alone basis. That goes for growth transactions both within existing verticals and also adjacent new verticals. From a Ventura perspective, I view this as a forward-leaning transaction where we're not looking at stepping back, but quite the opposite. We are pursuing this transaction to become part of a larger platform because we think the larger platform enables us to jointly unlock opportunities, again, that we cannot pursue on our own. We've seen that with our own eyes on the Ventura side the last couple of years where we have missed out on interesting opportunities we wanted to pursue with one of the reasons being lack of scale. So I believe by joining forces, we mitigate some of that challenge. I'm also equally excited about the optionality we are creating through this platform. My personal view is that I think the oilfield services is set for a multiyear upswing. Should that be correct, I believe there will be a lot of interesting opportunities within the wider oilfield service space. And with this platform, we have the operational capabilities and the optionality to pursue a vast number of opportunities within oilfield services, including new adjacent verticals. The second point in terms of why this transaction makes sense is synergies. And a lot of you might think, okay, there aren't many operational synergies, and I tend to agree. We might say in Southeast Asia, there are -- there could be some overlapping benefits, but operational synergies, there's limited. However, on the financial side, there's a lot of synergies. Ventura today, our initial bond had a bond in place with annual amortization of $40 million. My firm expectation is that the joint company, Energy Holdings and Ventura Offshore can jointly refinance its balance sheet with non-amortizing debt at lower cost of capital than both companies can do on a stand-alone basis. That itself will free up, everything else being equal, free up $40 million in liquidity. And as per the strategy of the joint company, every single cent of excess liquidity will be paid out as dividend, i.e., removal of amortization will equal a similar increase in dividend payments. And I guess Kurt and Guilherme will touch upon more about the details later in the deck, but there are scenarios, obviously, subject to operational and financial assumptions, but there are scenarios where this company can pay more than NOK 2 per share in dividend on an annual basis, creating healthy yields for our shareholders. The last point is U.S. IPO. U.S. IPO can be pursued because of scale, because of size. And we've included quite explicit language that post closing of this deal, the joint Board will evaluate and potentially conclude that listing in the U.S. is the right move for the combined entity, and we will act in a swift manner should the conclusion be that listing is the right path to go down. And I believe a listing in itself could be helpful on our liquidity, on our pricing and, again, open up opportunities to pursue new and accretive growth opportunities, both within existing verticals and adjacent verticals. So with that, I'm going to hand the word back to Kurt and Guilherme that will walk you through the rest of the presentation.

Thank you, Gunnar. So this combination marks an important milestone for both Energy Holdings and Ventura Offshore. By bringing together our complementary businesses and experienced teams, we are creating a larger and more diversified offshore services platform built around high-quality cash-generating assets. Together, we will have greater capacity to generate cash, distribute capital to our shareholders and pursue further growth. Ventura will operate as the company's third vertical alongside Energy Drilling and SeaBird Exploration. It adds an established deepwater drilling business with an experienced management team and substantial exposure to Brazil while expanding our strong position in Southeast Asia. The combined portfolio has approximately $1.3 billion of firm revenue backlog that gives us a strong foundation for future earnings and shareholder distributions. With a pro forma equity value of more than $1 billion, we also expect to strengthen our position in the debt and equity markets. Our increased scale and diversification will help us secure financing at more attractive terms and pursue a wider range of growth opportunities. Under the letter of intent announced today, Energy Holdings will acquire 100% of Ventura Offshore through an all-share transaction. Ventura shareholders will receive new ordinary shares in Energy Holdings, representing 45% ownership of the combined company. Ventura, as mentioned, will continue as a separate operating vertical with Guilherme and his team remaining in place. The management teams at Energy Holdings, Energy Drilling and SeaBird will also continue as today. The change in ownership following the transaction will be reflected in the Board composition after close with Gunnar to be nominated as Chairman of Energy Holdings. DNB Bank has committed to a $250 million bridge facility to Ventura Offshore as well as an extension of the existing $30 million revolving credit facility to support the refinancing of Ventura's bond and provide financial flexibility through completion of the transaction. Following closing, the combined company intends to refinance and optimize the capital structure as described by Gunnar. We expect completion of the transaction in the first quarter of 2027. This remains subject to a definitive combination agreement, confirmatory due diligence and required shareholder court and regulatory approvals, alongside other conditions. So for those less familiar with Energy Holdings, the company was established in May 2025 through the combination of Energy Drilling and SeaBird Exploration. Since inception, our ambition has been to build a portfolio of high-quality cash-generative businesses and assets within energy services. Today, the portfolio consists of 6 tender drilling rigs operating in Southeast Asia and 2 high-end seismic vessels. All rigs and vessels are currently in operation. As of the second quarter of 2026, we reported a firm revenue backlog of $342 million and a balance sheet being close to net debt free with interest-bearing debt of $18 million. The return of excess cash to shareholders has been a key priority from the start, while also selectively pursuing acquisitions that improve the earnings and distribution capacity per share. The proposed combination with Ventura follows directly from that strategy. Since the establishment of Energy Holdings last year, we have demonstrated that we are committed to our model. Including the proposed second quarter distribution, cumulative shareholder distributions amount to $132.5 million, equivalent to more than 30% of our market cap at inception. Alongside those distributions, we have maintained a disciplined capital allocation strategy, reducing overall debt and strengthening the balance sheet, reaching an industry low net debt-to-EBITDA of 0.1 in the second quarter of this year. The combination of cash returns and discipline in capital allocation is what we will continue to build on. Ventura brings additional contracted earnings and an operating organization that fits naturally into our structure. Applying the same capital allocation approach to a broader asset base should create further opportunities, particularly in financing and capital market access. We believe this makes the model highly scalable. With that, I will hand it over to Guilherme for an introduction to Ventura Offshore.

Thanks, Kurt. Good morning, good afternoon, everyone. So I'm Guilherme Coelho, I'm CEO of Ventura Offshore, and I'd also like to thank you all for joining us today. So for those of you not familiar with Ventura Offshore, let me give you a quick overview of our company. Ventura Offshore has been around for over 50 years, the last 29 of which fully dedicated to deep and ultra-deepwater offshore drilling. We're a proud Brazilian offshore drilling company with Brazilian management and strong roots in the Brazilian offshore market, reflected by our long-term relationship with Petrobras, the largest operator in deep and ultra-deepwater market in the world. That being said, having an international footprint is part of Ventura strategy, and we have successfully operated in West Africa, India and Southeast Asia, where we actually currently operate and are about to operate 2 units, making us the Brazilian drilling contractor with the largest international footprint. I mentioned our fleet, so a few words on our assets. We own and operate 3 deepwater sixth-generation drilling rigs, the Carolina, a drillship currently in Brazil, the SSV Victoria, a semisubmersible also in Brazil; and her sister vessel, the SSV Catarina semisubmersible currently in Indonesia. Those units were built between 2009 and 2012. We also manage and operate 2 seventh-generation dual activity ultra-deepwater drillships for their owner Eldorado Drilling. First is the Atlantic Zonda currently in Brazil and the Deep Value Driller, which we've just taken management of currently in Indonesia. So 3 rigs in Brazil, representing just shy of 10% of the market of rigs contracted by Petrobras in country and 2 units in Indonesia, representing about 30% of a very dynamic and growing ultra-deepwater market in Southeast Asia. So moving on to the next slide, I'll give you an overview of our backlog and contractual status. So this is where our fleet stands in terms of contractual coverage. In the chart, you see the dark blue represents the firm contractual periods, while the lighter blue shades represent the optional periods, either unilateral extension options by the client or mutually agreed extension options. So basically, we have all Ventura Offshore rigs operating in Brazil contracted until 2029 or beyond. Victoria, for instance, has a firm contract until beginning of 2031. And Carolina and Zonda still have options yet to be exercised, which could take contractual term to 2031 for the Zonda and potentially 2033 for the Carolina. Looking at it from a backlog viewpoint, our current firm backlog is just shy of $1 billion, taking us to firm contractual commitments all the way to 2031, while the existing options not yet exercised add another potential over $600 million to the firm backlog number and could potentially take us all the way to 2033. So covering very briefly each rig and starting with the Victoria, she had her operations as per original contract term with Petrobras ended now on August 7, and she was then mobilized to Guanabara Bay here in Rio de Janeiro to undergo planned out-of-service period for SPS, regular maintenance and MPD installation. Project is going according to plan and expected to end around January of 2027 when contract will resume and she will start her 4-year extension with Petrobras in the Buzios field. Carolina, our drillship has just finalized her contract with Petrobras now on September 7, earlier this week. Just yesterday, she entered Guanabara Bay as well, where she's moved close to Victoria for her out-of-service period for SPS, regular maintenance and contract preparation before starting her long-term contract with Petrobras at the Sepia-Atapu field also around January of 2027. Moving on to the Catarina. We are operating on the fourth and last optional well under the existing contract with Eni in Indonesia, and we are expecting one additional well under this contract, which will take the rig operations until year-end. Beyond that, we are engaged in active discussions for future opportunities in the region and remain very optimistic about securing future work for the rig. On the Atlantic Zonda, the first of our managed rigs, she operates for Petrobras on a 4-year duration contract firm until 2029 with 2 additional years remaining to be exercised, which could take her to 2031. And finally, as we have recently announced, we're also managing the Deep Value Driller and signed recently a drilling contract with PETRONAS for one exploratory well offshore Indonesia, which is expected to take about 100 days. We have also offered the rig in another process that could potentially keep the rig busy for longer. Important to clarify that the opportunities that the DVD has been offered to by us, they do predate the Vantage and Eldorado transaction. So with that, I'll pass the word back to Kurt, who will cover how the combined company would look like, which would help illustrate one of the key strategic points for us which you've heard from Gunnar, build muscle, be part of a bigger platform that would allow us to pursue further accretive growth that alone has proven challenging to pursue. So Kurt, back to you.

Thank you, Guilherme. As already described, by bringing these businesses together, we are creating a larger and stronger energy services platform. We are confident that the proposed transaction is a big step towards unlocking the full potential of the 2 companies. The combined company will have 13 owned, leased or managed offshore units across 3 operating verticals: deepwater drilling, tender assist drilling and seismic vessels. We will have a broader international footprint anchored in Brazil and Southeast Asia, with a wider range of contracts and assets contributing to the group's cash flow. The combined company with a combined market capitalization of around $1 billion with long-term contracts provide a substantial foundation for earnings and distributions. This means strong visibility combined with meaningful upside from both improving market fundamentals and financial and capital markets synergies. The combined company will have in-house capabilities across shallow water and deepwater drilling as well as offshore seismic vessels, supported by specialist teams with experience in multiple major offshore markets and a global presence. And as described by Gunnar, this provides us with a unique position to pursue further growth across a wide range of asset classes and geographies. We will be well positioned to act as a consolidator in our current markets while also have the ability to pursue opportunities in new adjacent subsegments of the wider asset-based energy services space. As always, we will remain selective. Every investment needs to justify the capital commitment and offer an attractive contribution to cash generation and distribution capacity and drive shareholder returns. The combined pro forma backlog currently stands at $1.3 billion. And with several contract discussions ongoing, we expect to add meaningfully to this number in the near term. With continued strong operational performance and cash conversion, the backlog provides substantial cash flow visibility and a solid foundation for shareholder distributions over the coming years. Energy Holdings' proven commitment to distribute excess liquidity to shareholders will remain unchanged following the combination. This illustration shows how the combined portfolio translates into cash available for shareholders under different market assumptions. The long-term contracts provide the foundation, while assets with shorter contract coverage create meaningful upside exposure. As illustrated in these scenarios, higher rates across that part of the fleet will, of course, materially increase cash generation and distribution capacity, reaching and exceeding the NOK 2 per share, as Gunnar alluded to. Our priorities for the combined company are clear. We will continue to optimize the balance sheet to capture the financial benefits from greater scale and diversification. Together with continued strong operating performance, this will support our ambition to increase shareholder distributions per share after the successful closing of the transaction. We will continue our work to grow and improve the existing verticals. Following the combination, we will have a platform uniquely positioned to participate in and drive consolidation while also pursuing opportunities in adjacent offshore services markets. As mentioned by Gunnar earlier in the presentation, following closing, the new Board is expected to initiate a process to explore the potential for U.S. dual listing supported by the meaningful increase in market capitalization and investor relevance following the transaction. In summary, this proposed combination is a significant milestone in the continued development of both Energy Holdings and Ventura Offshore. It will combine experienced operating teams, high-quality assets and substantial contracted revenue with a model that has already delivered meaningful cash returns and strong operational and financial performance. With that, I want to thank everyone for taking the time to join us for this presentation, and we look forward to updating you as the transaction progresses towards closing. Thank you.