Company presentation
Pareto Securities' Energy Conference 20 September 2023
Disclaimer
All statements in this presentation other than statements of historical fact are forward-looking statements, which are subject to a number of risks, uncertainties, and assumptions that are difficult to predict and are based upon assumptions as to future events that may not prove accurate. Certain such forward-looking statements can be identified by the use of forward-looking terminology such as "believe", "may", "will", "should", "would be", "expect" or "anticipate" or similar expressions, or the negative thereof, or other variations thereof, or comparable terminology, or by discussions of strategy, plans or intentions. Although we believe that the expectations reflected in such forward -looking statements are reasonable, these forward-looking statements are based on a number of assumptions and forecasts that, by their nature, involve risk and uncertainty. Various factors could cause our actual results to differ materially from those projected in a forward-looking statement or affect the extent to which a particular projection is realized. Should one or more of these risks or uncertainties materialise, or should underlying assumptions prove incorrect, actual results may vary materially from those described in this presentation as anticipated, believed or expected. To the extent this information includes information sourced from third parties, such as concerning the industry in which Prosafe operates, has not prepared such information and assumes no responsibility for it. Prosafe does not intend and does not assume any obligation to update any industry information or forward-looking statements set forth in this presentation to reflect subsequent events or circumstances.
Prosafe at a glance
- Leading owner and operator of high-end accommodation vessels
- Global operations, Brazil and North Sea presence
- 4 modern vessels built for the harshest environments, 3 legacy assets
- Two additional high-end vessels at yard
- Attractive low-cost financing with first major debt maturity end 2025
- Improving market outlook across key North Sea and Brazil markets
World class offshore accommodation and maintenance
- Safe and efficient gangway connection
- Large deck space for storage and workshops
- Accommodation for 450-500 people
Largest operator of high-end accommodation vessels
High-end semi-submersible DP3 vessels
A trusted service provider throughout the offshore asset lifecycle
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Hook-up/
commissioning |
Operation
and maintenance |
Decommissioning |
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| Demand drivers |
✓Oil and gas price
✓E&P spending
✓Discoveries |
✓
Age and number of installations
✓
Nearby discoveries
✓
Geography
✓
Electrification |
✓
Field economics
✓
Regulations |
| Demand triggers |
▪
Project sanctioning
▪
Commissioning of new fields |
▪
Maintenance of installations
▪
Subsea tie-back projects |
▪
Shutdown and removal of
installations |
Expected relevance
2023-2030 |
30% |
60% |
10% |
Accommodation services are late in the E&P cycle
Controlling a significant share of open North Sea capacity
| Contract overview |
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| Safe Boreas |
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| Safe Caledonia |
Available in tightening market
End Mar '27 |
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| Safe Concordia |
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US Gulf |
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Monthly options |
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End Sept '26 |
| Safe Eurus |
Petrobras |
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| Safe Notos |
Petrobras |
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| Safe Zephyrus |
Petrobras |
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| Safe Nova |
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| Safe Vega |
Optional newbuilds at yard |
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| Safe Scandinavia |
TSV –
Cold stacked |
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Jul
2023 |
Oct |
Jan
2024 |
Apr |
Jul |
Oct |
Jan
2025 |
Apr |
Jul |
Oct |
- Seeking sustainable rates in a tightening market
- Safe Boreas the only DP3 vessel available for full UK/NCS 2024 summer seasons
- Safe Caledonia is available for work on the UK sector
- Strong market position in Brazil with three vessels on long-term charters
- Optimistic on the market outlook in both the North Sea and Brazil
Improving Brazil market with in-country units re-contracted at near double day rates and increased durations
Brazil market balance (units)1
- 4 major Petrobras tenders pending award
- Further tenders expected from Petrobras and other operators late 2023 with start-up from late 2024
- Incremental demand likely to favour high-end units
- Potential "sold out" position emerging with additional vessels required from the North Sea or other regions
recent Petrobras Brazil tenders in 20232
Winning bids – |
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Day rates (USDk/d) |
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Duration (years) |
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New |
Old |
Change |
New |
Old |
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| POSH Arcadia |
115 |
60.5 |
+ 90% |
4 |
3 |
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| POSH Xanadu |
115 |
- |
Est. + 90% |
4 |
3 |
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| Aquarius Brazil |
110 |
66 |
+ 69% |
4 |
1.7 |
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| CSS Venus |
117 |
- |
Est. + 90% |
1.6 |
0.5 |
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| Average day rates + 85% |
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Average duration + 67% |
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FPSO growth in Brazil set to drive increased accommodation demand
- Petrobras and other E&P companies increasing investments to drive oil production growth
- Petrobras to install 23 new FPSOs by 2030 (18 are part of Strategic Plan 2023-27), decommission older units
- FPSOs require maintenance after ~2 5 years, new and large units favor high-end accommodation rigs
- At least 2 tenders for high-end vessels expected in 2023 with start-up from 2H'24 onward
High-end serving large FPSOs Mid-range serving older assets Two-tier market
Improving North Sea demand drivers
- Activity returned to the North Sea in 2022 on back of catch-up in maintenance works
- Slow 2023 before ramp up of activity from 2024 and onwards
North Sea activity (# of vessel years) Historical PDO's1) delivered and well-count on the NCS
- Number of PDO's1) delivered is reaching all-time highs after a temporary tax incentive schemes for PDO's delivered before YE'22
- Higher maintenance and tie-back activity in the UK and Norway, particularly from 2024 and 2025 onwards
Tight North Sea market as clients plan significant campaigns for 2025
North Sea capable accommodation rigs (UK+NCS)1
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2023 |
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2024 |
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2025 |
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2026 |
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2027 |
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| Activity |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
Q1 |
Q2 |
Q3 |
Q4 |
| Safe Boreas |
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vessel in region |
Only available DP3 |
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| Safe Caledonia |
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| Safe Zephyrus |
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BRZ |
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Floatel
Endurance |
NCS |
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NCS |
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CAN? |
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NCS |
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Floatel
Superior |
NCS |
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NCS |
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NCS |
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NCS |
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Floatel
Triumph |
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AUS |
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UK? |
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AUS |
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Floatel
Victory |
BRZ |
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GOM |
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UK? |
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| Haven (jack-up) |
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DK |
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NCS |
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NCS |
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Firm |
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Option |
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Actual or potential mobilisation |
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- Safe Boreas only DP3 semi in region available for 2024 summer work, low visibility on demand
- Controlling most of open capacity in 2025 and 2026 adjusted for vessel location/mobilisation
- Operators are planning significant maintenance/tie-in campaigns for 2025 and beyond, discussions ongoing
- Additional long-term work in Brazil for high-end units could reduce available capacity further from H2'24 and 2025
- Upside potential in rates from latest high fixture of USD 190,000 per day
Enterprise value (EV) to replacement cost lowest in offshore space
Accommodation vessels attractively priced compared to other assets1
▪ Lower Average EV / replacement than other assets
Low Prosafe asset valuation relative to replacement cost2
- Accommodation vessels trading at 30% to 45% of historical newbuild cost
- Broker valuations confirm robust asset backing to EV
Indicative earnings potential in an improving market
| USD million |
Current
market * |
Average1
2011-22 |
Average1
2011-16 |
Peak1
2014-15 |
| EBITDA/vessel |
17 |
22 |
35 |
41 |
| # of vessels on long-term charter in Brazil |
2 |
2 |
2 |
2 |
| # remaining fleet2 |
5 |
5 |
5 |
5 |
| EBITDA ex. long term charters |
86 |
110 |
175 |
205 |
| EBITDA Safe Eurus & Safe Notos |
24 |
24 |
24 |
24 |
| Selling, General & Administrative (SG&A)3 |
(17) |
(17) |
(17) |
(17) |
| Illustrative EBITDA |
93 |
117 |
183 |
212 |
| Current NIBD/EBITDA 4 |
3.7x |
2.8x |
1.8x |
1.6x |
* Based on latest observable and relevant fixtures
Historical EBITDA/vessel1 Current fleet EBITDA potential for Prosafe vessels per region
Balance sheet and liquidity
- Low cost financing terms with limited fixed amortisation and low interest rate of SOFR + 2.76%1on main facility
- First major debt maturity end 2025
- Large and supportive shareholders
Current NIBD of USD 345m at historical EBITDA multiples2
*"Current market" is based on latest market observable and relevant fixtures, NIBD as reported per Q2 2023
Key investment highlights
1 Leader in high-end accommodation vessels
2 Significant share of available capacity in a tightening market
Positioned for long-term value creation driven by North Sea and Brazil demand
Transparent financial position with first major debt maturity at end 2025
5
3
4
Access to newbuild capacity at favorable lead time
prosafe.com
Appendix
Leading position in the high-end accommodation segment
Note: 1) Acknow ledgment of Compliance (AoC) required to operate as accommodation vessel in Norw ay; 2) AoCis held by four DP3 semis vessels, one jack-up
18
6
Prosafe has the largest fleet of high-spec assets capable of working in all regions
High-end vessels certified to work on the Norwegian Continental Shelf (NCS)
Zephyrus
| Type |
DP3, AoC1 |
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| Built |
2015 |
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| # beds |
450 |
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| Type |
DP3, AoC1 |
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| Built |
2016 |
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# beds 450 Building cost \$322m
NCS DP3 semis Rest of world DP3 semis DP2 and moored semis
High-end accommodation and maintenance service vessels certified to work in Brazil and UK North Sea
Notos
Type DP3 Built 2019 # beds 500 Building cost \$204m2
Type DP3 Built 2016 # beds 500
Type DP3
Built New build # beds 500
Building cost \$213m2
Building cost \$210m2
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DP2 and moored semis |
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-- |
----------------------------- |
-- |
Dedicated accommodation semis
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Type |
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Built |
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# beds |
| Concordia |
Building cost |
| Type |
POSMOORATA |
| Built |
1982/2004/2012 |
| # beds |
454 |
| Building cost |
\$148m3 |
| Type |
TSV, AoC1 |
| Built |
1984/2016 |
| # beds |
309 (159 on NCS) |
| Building cost |
\$445m4 |
Vega
Accommodation market
Significant tightening of market balance for high end vessels
- Older less competitive vessels were recycled during market downturn in 2016-2020. Deliveries since 2020:
- ‒ 1 new DP3 monohull in 2023
- Limited orderbook, Prosafe controlling the high specification vessels:
- ‒ 2x DP3 semis (Safe Nova and Safe Vega)
Increasing demand (# of vessel years)1
- High activity in 2022
- Slower 2023 market materializing as expected
- Overall increased oil and gas activity reflecting the early phase of a likely new long-term investment cycle
Stable fleet1 Global accommodation vessel utilisation2
- Market utilisation of high specification accommodation vessels increasing to over 70% in 2022
- COVID19 left the market in standstill with utilisation of high-spec DP3 units below 30% and the remaining market bottomed out at approx. 10% utilisation
- Peak total utilisation in 2011-14 period of ~70%
Dayrates are picking up as the market is tightening
0 20,000 40,000 60,000 80,000 100,000 120,000 140,000 160,000 180,000 200,000 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Av. Dayrate Current Brazil opex: USD 50-54k/d Latest datapoint Latest contract
Brazil day rate development (USD/d) North Sea day rate development (USD/d)
Strong development in North Sea demand drivers
- Activity returned to the North Sea during 2022
- ‒ Catch-up in maintenance works, increased regulatory scrutiny of maintenance as well as increased oil and gas activity reflecting the early phase of a likely new longterm investment cycle
- Positive medium- and long-term outlook
- ‒ Slower 2023 materialising before expected ramp up activity from 2024 and onwards
North Sea activity (# of vessel years) Historical PDO's1)delivered and well-count on the NCS
- Number of PDO's1) delivered is reaching all-time highs after a temporary tax incentive schemes for PDO's delivered before YE'22
- ‒ A significant number of PDO's were approved in Q2 2023
- Positive demand outlook
- ‒ Higher maintenance and tie-back activity in the UK and Norway, particularly from 2024 and 2025 onwards
Note: 1) Plan for Development and Operation Source: Prosafe, Pareto Securities Equity Research, Clarksons,, Petrobras, IEA
Increasing flotel demand in Brazil
- High activity level in Brazil continued. Activity increased to the second highest level ever and close to 2015 peak
- Increased activity by large independents (SBM, Equinor, Modec) further driving demand
- New FPSOs in 2016/17 driving demand today
Brazil activity (# of vessel years) Number of Floating Production units in Brazil
- Brazil's oil production has increased steadily for three years and is expected to keep increasing
- Petrobras' most important asset, the Búzios field, will be allocated 7 new FPSOs into operation in order to lift current capacity of 600k bpd1) to target >2m bpd
- FPSOs require maintenance after ~2-5 years
- Expect a minimum of additional 2 high specification tenders to be released in 2023 for operations commencing in 2024
Operations and Financials
Option to take delivery of two newbuilds available at yard
- Prosafe has option to take delivery of the only two DP3 newbuild semis available at yard
- ‒ 500 POB and suited for Petrobras requirements
- ‒ Long-term contracts at higher than prevailing day rates required to justify delivery
- ‒ Ongoing dialogue with the yard on how to facilitate delivery in expected future Petrobras tenders
- Typhoon in late September 2022 caused material damage that must be repaired prior to delivery
- ‒ The yard is in the process of undertaking repairs
Agreed delivery terms with COSCO (under discussion):
- Remaining purchase price for vessels:
- ‒ \$210m (Nova), \$212m (Vega), total \$422m, includes mobilisation costs of ~\$20m each
- Funding at favourable credit terms:
- ‒ Sellers Credit: \$165m (Nova), \$167m (Vega)
- ‒ Cash/equity requirement: \$45m (Nova), \$45m (Vega), total for both vessels of \$90m
Fixed interest rate mechanism
| Average dayrate |
Year 1-2 |
Year 3-5 |
Year 6 to maturity |
< USD
99k |
- |
- |
2 % |
USD 100k -
124k |
- |
2 %-3% |
3 %-5% |
USD 125k -
149k |
- |
3 %-4% |
5 %-8% |
| > USD150k |
- |
4 % |
8 % |
Analytical information
| Item |
2023 (USDm) |
Comment |
| SG&A |
~17-181 |
In a tightening market SG&A is likely to increase somewhat |
| Depreciation |
~30-33 |
Straight line depreciation |
| Interest expense |
~26-30 |
Exposed to rising interest rates |
| Tax |
~2 |
Norwegian deferred tax assets of USD 1.9 bn, local and contract specific taxes |
| Net working capital build |
~10-20 |
Unwind of sales and increasing payables in H1 2023 , followed by sales ramp up and
payables unwind in H2 2023 |
Maintenance / contract specific
capex |
~35-37 |
Capex in 2023 mainly for Eurus, Notos, Concordia, Zephyrus. Increase from Q1
estimate of USD 28 to 30 million mainly tied to Concordia and timing of Eurus SPS
and compliance works moving from 2024 to 2023 |
Prosafe recent firm period fixtures
| Vessel |
Client |
Award date |
Start |
Finish |
# months |
Region |
Positioning |
Work type |
Day rate |
Total Award |
| Safe Zephyrus |
Petrobas |
Des-22 |
May-23 |
Feb-25 |
21 |
Brasil |
DP |
H & M |
\$112 500 |
\$73 125 000 |
| Safe Concordia |
Confidential |
Oct-22 |
Jul/Oct-23 |
Jun/Sep-24 |
11 |
US GoM |
DP |
HUC |
\$93 500 |
\$33 364 900 |
| Safe Eurus |
Petrobras |
Jun-22 |
Mar-23 |
Mar-27 |
48 |
Brasil |
DP |
M & M |
\$86 000 |
\$125 560 000 |
| Safe Boreas |
RepsolSinopec |
Jun-22 |
Sep-22 |
Oct-22 |
1 |
UKCS |
DP |
M & M |
\$139 500 |
\$3 729 500 |
| Safe Notos |
Petrobras |
May-22 |
Oct-22 |
Sep-26 |
48 |
Brasil |
DP |
M & M |
\$75 000 |
\$109 500 000 |
| Safe Concordia |
bp |
Feb-22 |
Mar-22 |
Aug-22 |
5 |
Trinidad |
DP |
HUC |
\$121 500 |
\$19 440 000 |
| Safe Notos |
Petrobras |
Nov-21 |
Nov-21 |
Jul-22 |
8 |
Brasil |
DP |
M & M |
\$67 500 |
\$16 200 000 |
| Safe Caledonia |
TotalEnergies |
Oct-21 |
Mar-22 |
Dec-22 |
9 |
UKCS |
Moored |
M & M |
\$95 000 |
\$26 340 000 |
| Safe Zephyrus |
bp |
Sep-21 |
Jan-22 |
Nov-22 |
10 |
UKCS |
DP |
M & M |
\$115 000 |
\$35 960 000 |
| Safe Boreas |
CNOOC |
Jan-21 |
Apr-21 |
Jul-21 |
3 |
UKCS |
DP |
HUC |
\$75 000 |
\$8 500 000 |
| Safe Concordia |
McDermott |
Dec-20 |
Jul-21 |
Oct-21 |
4 |
Trinidad |
DP |
HUC |
\$84 000 |
\$10 828 000 |
| Safe Notos |
Petrobras |
Nov-20 |
Nov-20 |
Nov-21 |
12 |
Brasil |
DP |
M & M |
\$68 000 |
\$25 363 000 |
| Safe Boreas |
ConocoPhillips |
Oct-20 |
May-22 |
Jul-22 |
3 |
NCS |
DP |
Tie-in |
\$140 000 |
\$13 600 000 |
| Safe Caledonia |
TotalEnergies |
Jul-19 |
Mar-21 |
Aug-21 |
5 |
UKCS |
Moored |
M & M |
\$90 000 |
\$15 580 000 |
| Safe Eurus |
Petrobras |
May-19 |
Nov-19 |
Nov-22 |
36 |
Brasil |
DP |
M & M |
\$73 100 |
\$80 044 500 |
| Safe Zephyrus |
Shell |
Dec-18 |
Feb-21 |
Aug-21 |
4 |
UKCS |
DP |
M & M |
\$138 000 |
\$17 770 000 |
SG&A and Opex increasing driven by inflationary pressure
SG&A1 cost development (USDm) Opex per day (USDk/day)
| UK (DP – |
\$35 – |
| Boreas/Zephyrus) |
45k |
| UK (Moored - |
\$25 – |
| Caledonia) |
30k |
| Brazil*** |
\$50 –
54k (incl. fuel) |
| Norway (DP – |
\$60 – |
| Boreas/Zephyrus) |
65k |
| RoW |
\$35 – |
| (Concordia) |
45k |
| US GoM |
\$45 – |
| (Concordia) |
55k |
| Scandinavia |
\$2.5 – |
| (cold) |
3k |
| Stacking (warm)** |
\$10-20k |
- Adapting cost base and structure to be more flexible
- Reduction in number of active vessels (from 14 to 7)
- Reduced onshore headcount (from ~150 to 60)
- Efficiency improvements
Historic SPS and maintenance capex
- Maintenance capex of ~USD 1-2 million per vessel per year. Higher in Brazil than North Sea and increasing over time
- 5-year SPS cost of USD 5 to 7 million per vessel, excluding life extension works
- SPS usually takes 1-2 months to complete and is targeted to be completed in off hire season in North Sea or between contracts in Brazil
- Reactivation of Safe Scandinavia is estimated to require USD ~20 million. Cost is highly dependent on whether for accommodation, TSV and contract location
SPS and maintenance capex (USDm) 1
SPS Schedule
Outstanding debt
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Two tranches |
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Main tranche |
COSCO Sellers Credit |
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Debt maturity profile |
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| Outstanding debt |
\$343m (250m + 93m Notos) |
\$93m |
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| Pledged vessels |
Boreas, Zephyrus, Caledonia, Concordia,
Scandinavia, Notos |
Eurus |
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| Interest rate |
SOFR + Credit Adjustment Spread* +
2.5%. Unhedged |
0% (increase to 2% from 2026)
50-50 EBITDA split. Minimum \$6m/year, |
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343 |
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COSCO |
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| Amortizations |
Cash sweep above \$67m forecasted
liquidity on 12-month forward basis |
\$7m/year from Q3 2026 |
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Main Tranche |
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| Maturity |
2025 |
~Q3 2028 or when debt reaches ~\$50m |
6 |
6 |
6 |
7 |
7 |
56 |
| PCG |
PSE fully liable |
\$60m |
2023 |
2024 |
2025 |
2026 |
2027 |
2028 |
| Financial Covenant |
2022 cash > \$18 million
2023 cash > \$23 million
2024 cash > \$28 million |
|
Ringfenced
structure
with
annual
upstreaming
to
main
tranche.
Cash
flow
on
COSCO
tranche
coming
from
Safe
Eurus
which
is
contracted
with
Petrobras
to
2027 |
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Cash held in the COSCO tranche shall be
deducted when calculating compliance with
the cash covenant. At 30 June,
approximately USD ~5.1m was held in the
COSCO tranche |
Newbuilds (Nova and Vega) could be
added to the COSCO silo |
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Delivery of newbuilds requires 2/3 approval
of lenders in main tranche |
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Major corporate actions including M&A,
new indebtedness and delivery of new
vessels require 2/3 approval by the lenders |
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- Prosafe SE is a permanent tax resident in Norway. As at end 2022, the company has deferred tax assets of approximately USD 1.7 billion, which can be utilized as tax deduction in the future and is not recognized in the accounts
- The company will from time to time operate in countries where local taxes will apply. These taxes are included in the opex assumptions in this presentation where applicable. In relation to the historical Concordia contract in Trinidad and Tobago, a tax provision of USD 6 million was provided for in the 2022 accounts
- Prosafe and OSM Thome have jointly received a Tax Assessment from the Brazilian Tax Authorities imposing import taxes and customs penalties related to the challenging of the special customs regimes used to import the Safe Concordia for the Modec contract in the period from October 2018 to July 2019. Prosafe presented an administrative defense on 11 August 2023, challenging the view of the Brazilian Tax Authorities. Based on external advice, Prosafe is of the view that the enquiry has no merit, hence it has not made any provisions in the financial statements
We are headquartered in Norway and have offices in the UK, Brazil and Singapore
Head office:
Forusparken 2 N-4031 Stavanger Norway
prosafe.com