Operator
welcome to the paratus energy q2 2026 earnings call there will be a question and answer session after the presentation and you can submit your questions via the form at the bottom of the player at any time during the presentation i will now hand over to your host thank you elba good day everyone and welcome to this second quarter and half year 2026 results the presentation for Parautis Energy Services Limited.
My name is Baton Hajime-Med and I'm the interim CEO and CFO of Parautis. Before we begin today's presentation I would like to remind all participants that some of the statements on this call may involve forward-looking statements. Forward-looking information involves risks and uncertainties by nature that may cause actual results to differ materially from those projected in such statements i therefore refer you to the to our latest public filings the second quarter of 26 and the period since have been eventual for paratus on july 29th we successfully completed strategic sale of fontes drillings operations and jack-up fleet for total consideration 400 million dollars at completion paratus received approximately 163 million in cash and a 237 million of seller credit with a term of two and a half years structured with interest rate step up from 10 percent up to 14 percent separately we received the 20 million dollars as reimbursement for of interim funding we provided to support fontis operations between signing of the spa and completion of the transaction for information per artist cash following completion increased to over 300 million dollars we are currently evaluating the available returns for the use of proceeds and will provide a further update once a decision has been made by the company as announced earlier during the quarter we also completed the replacement of 200 the placement of 250 million dollars of a five-year senior secured bonds with a coupon rate of 8.125% and fully redeemed the 226 notes during the quarter in June. As I will return to later, at CGMS the team achieved an important milestone related to our fleet life extension strategy. CGMS has received approval to extend the dry docking regime to up to 20 years for its five 550 tons PLSVs, removing one SPS or dry docking over each life each vessel's life from this we expect lower lifetime copex and higher earnings potential as the vessel stay on higher through periods when they would otherwise have been in dry docking turn to the operational financial performance for the quarter at high level the plsv fleet recorded technical utilization 93 which was down from approximately 98 in the last quarter this was due to some downtime driving driven by maintenance and operational incidents involving Esmeralda and Jade PLGs. The related work on this has been completed and the financial impact has reflected was reflected in our previously announced guidance which we provided in relation to the in connection with the Q1 release. We reported Q2 revenues of 71 million dollars and adjusted EBITDA of 42 million dollars compared with 75 and 46 million dollars respectively in Q1. We closed Q2 quarter with $148 million in combined segment cash, while net debt was $282 million per forma for the Fontys transaction. Finally, the board has declared a dividend of 22 cents per share for Q2 in line with every quarterly dividend since our IPO in 2024. Including the dividend that we announced today, we will have returned approximately $350 million dollars to shareholders since we started the cash distribution and buybacks two years ago. Now let's move over to the quarterly performance of the joint venture, the CGEMS. As usual, please note that the figures referred to here are on a 100% basis unless otherwise stayed by me. CGEMS delivered another quarter of solid financial performance. Revenue was $142 million dollars and EBITDA was 87 million dollars representing an EBITDA margin of 64 percent. The quarter-over-quarter decline in earnings mainly reflects maintenance activities and break-in incidents as mentioned earlier in the introduction. Compared with Q2 last year we see a revenue growth of about 14 percent from 125 million dollars last year to 142 million dollars this quarter. This was mainly driven by higher day rates and other new petrobras contracts and fewer of higher days compared to the same quarter last year when the PLSVs underwent acceptance testing in connection with new contracts. During Q2, the JV distributed $60 million to its two shareholders, of which half of it is two paratus, compared with $83 million in Q1. At quarter end, backlogs stood at approximately $1.1 billion compared to approximately $1.2 billion dollars at the end of q1 complex was about six million dollars during the quarter and 12 million dollars during the during the half year 26. as already publicly publicly available early in 26 petrobras launched a PLSV tenor which includes five lots with different technical specifications and four-year contract durations cgm submitted bids for for the jade and a third party vessel to which Siegent has secured exclusive access to in the event of a contract reward. Negotiations are ongoing and we will provide an update when there is something concrete to report to the market. As mentioned in the introduction, the JV achieved an important milestone related to our fleet lifetime extension strategy. Siegent secured approval for the extended dry docking program for up to 20 years for five of its six PLSVs. Consequently, each of these five vessels is expected to have one less dry docking during the lifetime than what than what would have been required normally reducing future capital expenditures and subject to the vessels being contract for the relevant period in the projection period allowing for higher revenue generation during the time the vessels otherwise would have been dry docked as has been discussed in the past and for practical illustration such a dry docking can typically involve approximately 10 million dollars in capex per vessel and in about 30 to 40 days during which that vessel per vessel during which that vessel will be in unavailable for revenue regeneration psm continues to seek similar approval for the esmeral law under the brazilian flag as well now let's go through the half first half year of 26 financial results compared to the same pair last year paratus reported net income from continuing operations after tax of 28 million dollars during the first half year 26 compared to three million dollars same period in 2025. key drivers were as follows revenues were 146 million up 23 percent compared to last year mainly driven by higher day rates under the new petrobus contracts and fewer of higher days as a prior prior prior period included acceptance testing in connection with the new Petrobras contracts ABTI was 87 million dollars up from 69 million dollars on back of higher revenues partly offset by higher operating cost as 2025 reflected reimbursement of an insurance claim for Esmeralda and other changes in accounting provisions financial items and other expenses were 35 million dollars compared with 47 million dollars in the same period last year the reduction mainly reflects the absence of the upfront fee related to the FONTIS monetization agreement, which was signed and done in Q1 2025, and the ARTS-related losses reported last year. We reported it based on the equity method. Free cash flow in first half year 26 was $35 million compared with a negative $1 million last year, same period, supported by materially stronger cash flow from CIGENS. Overall the first half year 26 showed a significant improvement in financial performance compared with the same period last year mainly driven by stronger operations and higher day rates. Now let's take a look at the main cash flows here during the quarter. At Paratus we closed the quarter with a cash balance of 122 million dollars compared to 130 million dollars at the end of Q1. The main cash flow movements during the quarter were cash flow used in continuing operation of about 3 million dollars compared to 4 in Q1. We received the cash distribution from CGEMS of 30 million dollars compared to 41 in Q1 and we pay net interest paid net interest of about 26 million dollars compared with 4 million dollars q1 this comprise the quarterly interest payment on the 26 notes and the semi semi-annual interest payment on the 29 bonds the net cash inflow of 47 million dollars from new bond issues as i mentioned before after redemption of 26 notes net of any fees and a three million dollars in financing fees related to the con to the phone to sale and finally consistent with the prior quarters we paid 36 million dollars in dividends to our shareholders after these movements as i explained here we ended the quarter with 122 million dollars in car in proratus in proratus at closing of the fountain transaction in july we received 183 million dollars in cash received from the buyers as you can see here pro forma for the fountain sale total cash was 305 million dollars if including the prorata share of the season's cash combined segment cash on a performance basis would have been approximately 331 million dollars so so overall priorities continues to have a strong liquidity position supported by stable distribution from cgms and the completion from the of the fontis transaction of the quarter next please now over to our capital structure and the impact of the fontis transaction as you can see here at At the end of Q2, the reported net debt was 661 million dollars, which is before the completion of the Fontys transaction. However, pro forma for the Fontys sale net debt was reduced to 282 million dollars, which reflects the 400 million dollars transaction concentration. As a result, pro forma leverage was reduced from 2.7 times to around 1.6 times EBITDA. as mentioned earlier at transaction completion we received 163 million dollars in cash and 237 million dollars of two and a half years seller credit the seller credit bears interest at 10 during the first 12 months 12 during months 13 to 18 and 14 thereafter separately not reflecting the pro forma capitalization and graph here we received another 20 million dollars as reimbursement of interim funding provided for fontis operations as disclosed before under our bond agreements the fontis proceeds may either be used to repay debt meaning the 29 bonds or held in escrow for up to 12 months while the company evaluates potential reinvestment opportunities we are currently evaluating and will provide a further update once a decision has been made to this and with that i think we can open up for the q a thank you ladies and gentlemen we are now ready to take your questions just as a reminder you can submit your questions by the form at the bottom of the player we'll now take some time so you can register your question uh there's a there's a question around the petrobras uh tender not uh not a surprise of course uh whether we can um talk more about the shade since it is expect since it will roll off the contract in september or in august 27. um is for artists expecting an extension let's take that first um yeah i mean our current expectations that the doesn't expect that an extension with petrobras is the most likely solution or what will happen um potentially bringing the existing contract through the through january 28 when it's when the mobilization date is based on the tender but again more broadly the fleets i mean historical technical uptime has over approximately 90 percent 98 demonstrates our ability to operate the vessels effectively and to deploy them on work both with and outside Petrobras. The other question is about earnings potential on the third-party vessel. What I can say in general now is that discussions are ongoing and negotiations are ongoing with Petrobras. However, this remains an active commercial process, as you may appreciate, and due to its sensitivity to commercial sensitivity, we're not in a position to comment any earnings potential yet or any economics or expected outcome out of this before we actually get to any concrete stage with an award or not. Since the start of date of the current PLZ tenders in 28 are expecting to see another petrobus tender for the other five PLSVs the yeah I mean the remainder of the fleet of the other fleet of the other PLSVs rolls off contract from mid 28 one of them rolls off in September 28 onyx based on what I can say is based on historical practice petrobras typically tenders one to two years ahead of the required start date so we therefore expect another potentially larger tender addressing those 2028 requirements hopefully and possibly during 2027. If you look at the history, MS EGIMS has secured contracts in every major contracting cycle since 2011. Of course pricing and you know contracted terms can vary between cycles but the fleet utilization has been historically remained strong and we yeah as we have said before we continue to see to view the market industry market outlook as promising um yeah how we're thinking about the use of proceeds from the fontis transaction as we are reporting our q1 report and and as i just talked about under our bond agreements the proceeds may either be used to repay debt or it can be held in escrow for up to 12 months while we while the company evaluates spontaneous reinvestment opportunities so it's provide kind of it provides a good optionality but as i said in the in the call here in the report we are currently evaluating our available options and will provide a further update once a decision has been made by the company um how much do you expect in dividends from cgems 26 we provided a financial guidance in q1 um for revenue but they on copex we haven't really guided on the uh distributions from cgems um however one i think one what i can say is one should expect no almost not much different from the from last year um yeah i've seen this question before what is your expectation day rates from the petrobras standard i i cannot really discuss that it is an ongoing this ongoing um negotiation with petrobras i will not discuss it in this conference call there's a question about the operational incidents involving esmeralda and jade as we have reported in our quarter report impact and so on and more details i don't think there's more to say than what we have disclosed in the report the esmeralda incidents involved an lti which required a short stop of operations while completing like i mean needed procedures while the jade experienced and equipment well needed some equipment repair um you know safety is is very strict and it's first priority and for the smallest incidents operations are are uh are paused or shut until they are resolved and in alignment of course with petrobras uh in addition as we also said in the report uh as per the contracts we have also had we have some maintenance cap and we have some scheduled maintenance that we have performed during the um during the quarter so i would say the um yeah the bt is more like um um you you should respect higher more closer to the to the financial guidance so we have reiterated the financial guidance anyway so uh so the impact of these two incidents since uh of the utilization was already factored into our q1 communicated financial guidance yeah there's not so many questions but i mean there's another question about jade uh and and how uh it will be kept uh on on work until until the the potential new contract and if there's some other regions in brazil i mean what i can say is that it's it's um we're very comfortable that uh that and also history shows that we have uh always been able to find uh to deploy this uh this plsvs if you look at since 2011 we our average utilization has been about 98 percent during that those years um so yeah i mean our ability to operate the vessels effectively and to deploy them on work has been very efficient both with and outside of petrobras if needed but our the base case is that that will be extended by Petrobras until mobilization for the potential new contract. When is the negotiation round for this tender expected to get completed with Petrobras? I hope to report to you something in the near future, but as we are, as discussions are negotiations are ongoing and again this is an active commercial process and it's sensitive i'm not in a position to comment on any specific negotiations or timing as you asked or potential outcomes at this stage but we will report to the market whenever we have any concrete to report then i i think with that there were no further questions with that i will wrap up today's call thank you all for joining thank you for the questions and thank you for your continued interest in parotis we look forward to speaking with you again in q3 thank you
