Odfjell Drilling Ltd
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OSE:ODL
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Earnings Call Transcript

Earnings Call Transcript
2020-Q3

from 0
Operator

Good day, and welcome to the Odfjell Drilling Q3 2020 Earnings Call. At this time, I would like to turn the conference over to Mr. Eirik Knudsen, Investor Relations of Odfjell Drilling. Please go ahead, sir.

E
Eirik Knudsen
VP of Corporate Finance & Investor Relations

Thank you, John, and welcome to this investor conference call for Odfjell Drilling, where we will present the third quarter 2020 results.We hope everyone are healthy during these special times. My name is Eirik Knudsen, I'm Head of Investor Relations in Odfjell Drilling. And together with me, I have our CEO, Simen Lieungh; and CFO, Atle Sæbø. As usual, Simen will cover the first part and Atle will thereafter go through the financials before we conclude with a Q&A session at the end.For the sake of good order, we make reference to our disclaimer on Page 2 of the presentation.I will then leave the word to Simen, please go ahead.

S
Simen Lieungh
CEO & President

Thanks. Thank you, Eirik, and welcome all of you. I'll go through the presentation page by page, so I will announce the page so we can follow. So if we can start on the Page #3, just the agenda, we -- I give a short, as usual, flash of the drilling TAT summary, go through the different areas, highlight information that is of interest, go through segment reporting. We also this time have done somewhat more highlights on the green industries because we find that quite interesting these days and important for follow up. And Atle will then go through the financial information. And we, as usual, end the conference with a Q&A session, so please provide questions where you need to highlight.On the Page #4, I think we show this page every time. It's a quick summary with the revenue of $210 million. We have a cash position of $150 million. Our EBITDA is $87 million this quarter, and the leverage ratio, which we find quite interesting now is, as we have told before, we deleveraged the company quite significantly these days, and we're going to do that also over the coming 1.5 year. So now it's 3.4, remember last year, I think it was 3.8. The business area is all the same. The mobile is, of course -- the mobile units are the most exposed one, and that's kind of a fill up approximately 85% of the balance sheet. The well services, I will come into more and say details there. We have rebranded 2 divisions, Technology & Drilling Platform into Energy, and that it has for good reasons, which I will share with you a little later because that has to do with diversification and to meet the expectations we see now coming from client to position ourselves in all business areas for further work, where these initiatives regarding the green shift is quite important.As a key summary, we have, of course, as everybody else, been quite concerned about the COVID situation. And again, so far, I always knock wood, we have no impact on operations so far since the pandemic broke out. As I said, we -- and that has not come for easy. We have really, really struggled and to be disciplined and keep people following the rules from health authorities, travelings to crew change, you name it. It has been a tough battle, and it still is, so that has not yet -- we have no indications either that this will hit operations.Technology & Drilling into Energy, I mentioned we have finally now signed the -- formally the 2 contracts with Equinor's Sverdrup and Breidablikk. And we also have won contracts with Aker BP and Wintershall, which we will show when we come to that page. We have completed now the operations in South Africa with Deepsea Stavanger. It was -- it only ended up in -- with 1 well, but it was very successful this time, too, so the client has got enough data for potentially field development planning. So they didn't need to drill the second well in this case. Remember, we did the first well 1.5 years ago, and that was also a great success. So now they have 2 wells and a lot of data to comply with, so that's how it ended. So Stavanger is now moving back to -- will be moved back to Norway. We'll come more into that.We have also, as we have announced, joined forces with Oceanwind AS, and that has to do with -- first, we are now looking to see over contributions to the Oceanwind concept. And we, I believe, think a little different from many others, so these are to be planned and remains to be seen how that ends. But we have a good progress there.If we move to Page #6, a flash of the operations, the level of uptime. I think we can say that, in general, it's high. We had some technical challenges on Yantai, which is now solved. We -- just remember, we've just managed that rig. It's not our own rig, so it hasn't any impact on any bottom line. But it has some small challenges regarding -- in the technical way, so -- which is now solved, so that uptime is lower. The rest of the fleet is operating very well and in high efficiency and regularity.The overview of the contracts on Page #7 is just showing how we -- how the prognosis or the forecast for these rigs are both with options and with fixed contracts. So if you start on the top there with Deepsea Atlantic. The Atlantic is now, of course, in the alliance with a famous event with Equinor. And we are very sure now that the activity in '21 is covered. And so '22, we start with [indiscernible] Sverdrup and then some options are behind there too. So we can kind of say the backlog for Atlantic is firm until end of '23, early into '24. The Deepsea Stavanger has completed, as I said, down in South Africa, will be demobilized and have done that now recently just a few days ago and will return to Norway, where we expect the rig to be here, let's say, around the shift Jan-Feb next year. A little uncertain how long that will take and so forth, but in that area. We can come back to more about the contract mechanisms there, but we have also signed up a contract with Aker BP. And we expect the rig to go either back-to-back with Aker BP or with some extra wells for maybe a couple of other clients, which we are now discussing. But we certainly expect that the rig will go back-to-back with something.The Aberdeen will go with Wintershall from February next year until the start commence with Breidablikk. Breidablikk is -- has also 9 wells in options. So we expect Breidablikk will last until 2024. The Wintershall job will start in February, so we are preparing the rig now and modify with some technologies regarding to make it according to specifications from Equinor and Wintershall, also with where we implement the same type of solutions, technical solutions that brings the rig up to a level where you reduce emissions with the green technologies on board. Nordkapp has done very well lately, quite high-efficiency and uptime, and we have -- the discussions have started with Aker BP to -- about the next option, which is now starting up from '22 until summer '23. The option date for calling the options is about year-end, early next year, and we expect now that Aker BP has need for the rig, and we have called that option. We'll come back to that.The Yantai, as I said, is working very well with Neptune. Neptune has quite a lot of options there and quite satisfied with the rig also, so we expect that Yantai will work for Neptune until at least out '21 and into '22. So remains to be seen how far into the future Neptune will call this -- will call Yantai for continuation.If we move over to the Energy part, where you see more to show that the backlog there are quite significant. There are a lot of options. The options here are somewhat different from type of module options. These are quite often cold, if not the client goes for more tendering. So we operate now 15 installations here and has -- and the good thing, and Atle will show that a little later, the good thing is now that the Energy area has really improved performance and are delivering fantastic results compared to just for some few years ago. So this backlog is solid, and we have capacity to do more than this, and we are in dialogue with clients to expand that backlog or -- and operations.Well Services on Page #9 is maybe -- what's highlighting, we are -- we have quite high activity. But it's fair to say that Well Services has been that division in the company that has been affected, not directly by kind of being -- have to lay off people or anything. It's just that the activity level has not come to the level we expected because of directly COVID effects. So even though that effect is limited, that has effect on Well Services. In the meantime, we are able to move around equipment, and that is really the trick here because there's a lot of equipment and logistics to handle. And with the COVID restrictions, that goes up and down in certain countries, not really predictable. I think what's fair to say now is that the Continental Europe, as probably you all know, has been hit hard by the second wave of COVID. But Continental Europe is not that significant regarding bottom line. So whilst Norway is picking up gradually, I think the Norwegian market now is significant, that comes close to 50% of the income of Well Services whilst the Continental Europe has been postponed. Nothing has been really canceled, it's just been postponed because of lockdown issues.The good thing is that we have acquired a small company down in Malaysia called AsiaPac, which gives us access to the market in Malaysia. Malaysia is a very significant market, also significant regarding growth within this area. Maybe that country in that region with the highest potential for increasing for in our case revenue and earnings. So for the first time, we will -- we have a quite important contract coming up early next year with the casing drilling, which I have mentioned before. And that is, I will say, the third time we try to do this now, and we have tested equipment more. We have failed 2 times, fair to say, have no impact, but this has now been modified, and the technology is much better. We do the same together with Huisman, and we expect now that this case, after test cases, will be successful. And that's going to be a breakthrough because there are limited competition in that area. And if the casing drilling really get proven, it opens for a lot more activity in that region and also within the Middle East and North Africa. So we are quite excited about that contract and look forward to really to step up there.Beyond that, we have a good grip on the wide drill pipe concept, okay margins there. We see the future now. If and when the COVID situation stabilizes via vaccine or that for any other reason are kind of a less serious, this market will come back again. And this is the feedback we get from all type of clients. We operate in 25 countries now, and we see the same picture that the trend and the demand for these kind of services will increase in the future. So we're quite optimistic about that.So if we turn over to the Page #10, the backlog is now $2.6 billion backlog, and that includes the options, and it's not including anything from Well Services or engineering-type of projects. It's only from platform drilling and module. And this is a solid backlog, and this is actually quite important for us because with the $2.6 billion backlog this is for us to execute now. And I guess that the EBITDA level in that backlog is significant. And a lot of what is not covered directly in the backlog is type of all the -- on the EBITDA side, on the earnings side, all the bonus expectations is not included there regarding EBITDA. So of course, well-executed backlog through high-efficiency as we have done over the last 2 years now. We have a quite interesting EBITDA to earn.Shortly market outlook with -- on Page 11. Of course, this COVID situation is now solved. And of course, still, oil companies hesitate to step up on investments. So within the rig market itself, with the module side or the offshore drilling side, it's a very skeptic picture if you look around in the world. It's -- the harsh environment is type of okay, it's not perfect, but it is very much okay. So the activity level is going to come up, and the supply side is also quite limited. It's not -- it's not too many rigs out there. There's a lot of -- number of rigs, but the number of rigs that is suitable for the expectation from clients are fewer. I talked about the 6-gen high-spec assets, which is very much into key what clients are asking for.The whole segment, the whole offshore industry since 2013-14 is very much under-invested. And I spend a lot of time with clients on Teams, of course, this day, but we talk a lot about what's going to happen. I mean there is a lot of expectations about the green shift and renewables. But the fact of life is that if the global market stabilizes, COVID get controlled, the bounce back of oil need will probably be much higher than anyone expected, really, and that is really where we get information from. That belief continues under-investment level in that market and in a way the time to market from renewables we believe that there will be some years now with increased demand for oil and gas.And this is also what we get from oil companies. It's not just what I'm saying. I'm just referring to all the strategic plans they have and what they look forward into the future. And there's a long list of activity within the harsh environment we know of, which is kind of a takeoff from '22, '23, '24, '25, '26, quite a lot of projects, longer and shorter campaigns, well campaigns along contract. So we see that market is relatively okay, and of course, we are quite optimistic. That's why we're here. And of course, we would like to see that coming. And as we have said before, we also are open for more capacity.Well Services, I mentioned, I did not say anything about the ultra-deep market bring -- sorry, from the module side. That is still quite uncertain. And I think everything will rely on how the restructuring processes are going and what kind of scrapping of assets that's going to happen in the light of that process. I believe and we believe that, that needs to be done significantly to get the market imbalance. And I read and understand that the debt restructuring is significant. We talk about billions and billions of dollars. But in the same process, if the fleet is not reduced, I don't think that market is going to come back for a long, long time. So I do really hope that during this process, those that have to do this, we are not in that situation. We have scrapped Bergen, so that's 20% of the fleet, but there are no demand for that fleet. But I expect that at least 30%, 40% of the fleet should -- or the global fleet should be scrapped to get the business imbalance. Will that happen? I have no clue, but that's my take on it.Well Services, as I mentioned, market is still, I would say, impacted by the COVID. But if and when we get resolution there, we also see a growth. Within the Energy market, there's still low activity within modifications. That probably will come with electrification activities, and I think that will step up, but that market is quite stable. It is not really volatile, but as I showed the backlog earlier, it's a very much stable market, and things are just rolling because platform from drilling supports platform production and is needed to keep up production. And the production is cash flow for clients, and drilling is the demand to get that production going. So we don't see any kind of shutdown or anything in that aspect, so that's a very stable market.I would like to share with you some thoughts about initiatives. We put in some slides there. We're not going to spend too much time on it because this is kind of just to tell you that what has changed over the last, I would say, year is, in a way, these initiatives, these attempts to get the mission down is more and more important. On-field drilling has an ambition, and we said that more than a year ago we have an ambition to go zero-emission drilling. Sounds crazy, but it's absolutely doable, and we certainly believe in that. And I want to say this to you guys because it's -- every time we now get the request for inquiry from clients, especially when you talk vulnerable areas, harsh environment, North Barents Sea, all these potentially environmental vulnerable areas, this is extremely important to comply with. And we have kind of said that, well, we -- there's no room for new build or module rigs today. There's no financial available, there's no contracts available, so they need to be retrofitted. The most efficient rigs need to have a so-called retrofit where you implement technologies to take down emissions.And we are heavily involved in that. In all the contracts we are now bidding for, the whole fleet with all the ones with all the 4 high-spec assets we own, we are changing solutions onboard top-side wise to reduce emissions. And there are several ways to get to this 0, and I'll just share with you some of them. For example, you can have a cable from shore via platform. We are talking about that with Equinor on Sverdrup. And we are in a study now to see if there are excess capacity from the cable to -- from shore to the platforms if the excess capacity to give power to the drilling machine, the Atlantic, we are discussing and looking at solutions to hook up a cable there. It's not difficult to hook up a cable, the point is to what kind of power are available after their production power has been covered.Secondly, you can also do greenfields like, for example, ammonia. That is totally different from diesel available, quite sooner than hydrogen, but both of them are quite -- are high interest. The third one is to take out emissions. We are discussing now solutions where we put on small kind of factories to catch carbon onshore a rig or a platform, but we are looking at the rig solutions. There are certain technologies available soon that you can actually catch the carbon, transport it to shore and regasification and put it into the ground or use it for other purposes like the Northern Light, for example. And the third and [Audio Gap] is not the solution, but combined with all these things we are looking at and all of these elements I'm talking about here are discussed and not too far away from solutions. And we are applying for all type of funds to support this, and so far, we have got close to $300 million support from funds to help us to kind of invest and actualize all these technologies and solutions.We have a target of zero emission on the Page #14. Every time we talk about this, if you go back to, say, #13 -- #12, #13, #14, a type of volume, average volume from a rig like this, we talked about maybe 5.5 million to 6.5 million tonnes of CO2 per well. And if we look at that curve there, what we have done since we have been more disciplined to use the fuel, we have been incentivized by clients to reduce fuel consumption. We have reduced procedures via check procedures to be more, I would say, economic regarding fuel consumption. We have also implemented green solutions like high flywheels and hybrid solutions, which I mentioned, where we have got support from certain funds to do this in addition to funding from our clients. And if we can, in the future, also connect to either onshore power or Oceanwind power, the 0 is within range. And we don't talk about 2030 to do it, we talk maybe already about 2025 to 2026. So it's not that far away. And if we look at all the prospects, especially in the high north, these are requirements to get there, and we are certainly on the ball here. And these are equally important to get to the table as to perform HSE. So just -- that's why I'm saying this.And when we -- I also want to kind of share with you a picture, which I think is quite important on #15 where I want to say that if we're going to reduce carbon emission, there's a lot of discussions in the market, what kind of rig are the most efficient regarding emission and what are the best green rigs and so forth and so forth. The one thing you need to see here, that's the picture here, is that you have to reduce the footprint in 2 axis, both days on the well and emission per day. If we don't only say you have a low well emission per day and you spend 2, 3 times more time on the well than another rig with more efficiency, then you are getting nowhere. So this example here, when you take down the emission of a 2-axis, is very, very important. This is exactly what client knows, and they don't kind of listen to what -- necessarily what I'm saying. They listen to what I'm doing. And we are taking down emission per day, and we are taking down days per well, and that combination brings you closer to Origo, and that means that you are getting into a 0. You will never get 0 days per well, but you might get down to 0 emission per day, and then you are kind of where you should be, so that's just a comment.And as I said, we did -- we have Deepsea Bergen running, and we have tried -- Deepsea Bergen is the only third-generation rig that has worked through the crisis back-to-back until the SPS came up. We did not find it -- we could not justify $35 million in an SPS. If we saw the market for that rig coming, we would have done it, believe me, but there's no request for that kind of rig. And that is a rig that has worked, drilled 300 wells in the North Sea, but there's no demand for that rig anymore. The rigs need to have DP conditions, they need to be heat-compensated, they like to have a dual function and a lot of green technology on board. We, of course, even though we have a DP solution over rigs, we don't use the DP all the time. If the water are shallow enough, we anchor up the rigs. So we only use DP to have flexibility into deepwaters. So the illusion from people saying that we have a deeper, very expensive rig. Of course, the Atlantic has been anchored now for 2 years. And we don't use the DP, only when we move the rig around. And if you move a rig around with no DP, you have to use supply vessels and anchor handlers, and they certainly are not fueled on the air, they are fueled on these and other things. So the same emission is coming there, but from different generators.So this picture is quite important, and this is what we need to prove when we talk to clients and position ourselves for these kind of new jobs going forward. We have to prove that we are doing these things for real, not only talking. So then we'll just a flash.So Atle, you can take the financial information. Thank you.

A
Atle Sæbø
CFO & Executive VP

Thank you, Simen. I will start with taking you through the group summary financials for Q3 2020. Here, you can see that the group operating revenue was $210 million compared to $215 million in third quarter '19. The group EBITDA was $87 million compared to $94 million in the same quarter last year. The decrease in EBITDA is mainly due to the module segment of the Deepsea Bergen was withdrawn from operation. The EBITDA margin in third quarter was 41% compared to 44% in Q3 2019. These were the blended figures of the capital-intensive mobile drilling units segment and the human capital-intensive Energy and Well Services segments.Let's move over to the MODU financial on Page 18. The operating revenue for the MODU segment was $151 million compared to $155 million in Q3 '19. The EBITDA was $67 million (sic) [ $76 million ] compared to $81 million in Q3 '19. The change in EBITDA is due to a decrease in EBITDA for Deepsea Bergen due to the cold lay up and later recycling and Deepsea Aberdeen related to severance payments to U.K. group as the rig has been moved to Norway. Higher EBITDA for Deepsea Atlantic, Deepsea Nordkapp and Deepsea Stavanger partly offsets the reduction. The EBITDA margin for the MODU fleet was 50% compared to 52% in Q3 '19.If we then move over to Page 19, which is the segment reporting for the Energy area. The Energy segment represents Platform Drilling and Technology and related business. Operating revenue was $42 million compared to $38 million in Q3 '19. The EBITDA was $5 million compared to $6 million in Q3 '19. The Energy segment continues to perform positively, and we are delivering a strong EBITDA margin this quarter, particularly driven by high engineering activities also in this quarter.If we then move over to Page 20, which is the segment reporting for Well Services. We can see that the operating revenue was $24 million compared to $29 million in Q3 '19. The EBITDA was $8 million compared to $9 million in Q3 '19. The result is affected by improved activity in Norway, offset by a reduction in some other regions. The implementation of cost-saving measures has further helped to slightly improve the EBITDA margin. The margin was 31% in third quarter this year compared to 30% in the same quarter last year. But of course, as this is a business depending on bringing people and equipment across borders, COVID-19 is a challenge in performing the e-business. If you move over to Page 21, which is the group eliminations, corporate overhead and net financial items. On this slide, we have shown the bridge from some EBIT of the segments to the group consolidated profit before tax by adjusting for eliminations and corporate overhead and net financial items.If we then move over to Page 22, which is the summary statement of financial position, you can see that the group's gross interest-bearing debt was $1.278 billion as of end of September 2020. We had USD 149 million in cash and cash equivalents by end of the third quarter. The equity ratio was at the same time 41%.If we then move over to Page 23, which is the statement of cash flow. Here, you can see that the net cash from operations was $56 million in third quarter this year compared to $27 million in third quarter last year. The investing activities was $23 million in the quarter compared to $39 million in the same quarter last year. We repaid $29 million in bank debt in the third quarter, and the cash position as per end of March -- end of September was $149 million.When we go to Page 24, which is the summary of the Q3 2020. If we start with the mobile drilling units, we can see that we have an attractive harsh environment assets. We have a strong backlog and healthy outlook despite the COVID-19 and the volatility in oil prices is expected by the, of course, a very solid backlog. If we move over to the Energy, we can -- which is the rebranded name of the Platform Drilling & Technology segment, as we used to call it. The segment has a solid operations combined with healthy financial results. We have successfully commenced operations with ConocoPhillips on the Ekofisk era in July this year. If we then look at Well Services, it has continued with its strong activity. Overall, the service market has been affected by less demand and operational challenges due to the COVID-19.If you then take a look at the key financials, we have financial visibility through USD 2.6 billion order backlog. We have an acceptable cash position, and we have a strong balance sheet combined with continued deleveraging.Okay. This concludes our presentation. We will now open for Q&A session. So John, we are now ready for questions.

Operator

[Operator Instructions] We will take our first question from Fredrik Stene.

F
Fredrik Stene
Vice President

Guys, Fredrik here. Congratulations on another quarter with solid operations. My question, or at least the first one, it is a broader one. And I see, you mentioned that you could be looking for potential additional capacity or that you some way would be happy to take on more responsibility in the rig world here. And I was wondering, compared to previous discussions on that, have you -- are you able to give any additional color or any ideas of how will you -- how you would prefer to do that through management agreements, read from yards, if you're able to get a deal or just similar with the Yantai or M&A, if you have any thoughts that you would like to share?

S
Simen Lieungh
CEO & President

Yes, thank you. Difficult to be specific. And I believe you all understand that. But there's not really anything new in that picture. We have said that we would like, if possible, to engage more capacity. That could be done in a different way. I mean we have a nice management position with CIMC and Yantai, and that works very well. That to get to kind of to acquire the rig into our own fleet and take ownership means that we need to agree on certain things, valuation and relative values and blah, blah, blah. We have not been successful so far. It's kind of a complex picture with the Chinese owners to just to agree on the price when the price expectations from some parts of that organization is much higher than what the market expects. We will not do I would say a consolidation if we end up being diluting our own shareholders. That has been a quite important driver. We didn't recap in that aspect, but look that was a different story. It was necessary to get into the positions we are, and in that case, I think we would have done the same over again.But there are type of other opportunities out there, and you all know that there might be some solutions regarding the restructuring processes. I mean Seadrill has their challenges. While a notion is there, it has to be a resolution ones. We see other oil -- drilling companies like, I can mention international ones with assets that could be of interest. So yes, we are looking for type, in a way, quite open actually, to see how can this be done in a value -- in a way that we create values. And with this restructuring processes, that might open new, I would say, opportunities.So without being more specific than that, I can say that we have indicated that we are prepared to do to step up on more capacity because we actually could engage more capacity. And that is not to be cocky, that is just the fact that we are -- we know that we could engage more capacity, but we need to do it in a smart way. That can be done by emerging assets, it could be done by partly M&A, this could be done by management solutions. So the answer is really yes to everything as long as it creates values.

F
Fredrik Stene
Vice President

Okay. That's very helpful. And so to understand you can't be super specific. Just a follow-up on that when it comes to drill and the future here. You're diving into green initiatives. We've seen Maersk do the same. And as you pointed out, I think this is going to be important for your end customers as well as part of their plans for reduced emissions. So how do you think about your initiatives in that respect? Do you think that Odfjell will end up at a single company like it is today? Or do you think that this could be big enough that it would be branched out to something else that you, in a way, split your Energy part and MODU part, but still work closely together. Do you have any thoughts around that?

S
Simen Lieungh
CEO & President

Yes. Yes, we have. I can say that we are looking for, and this is now -- I mean I don't think we have been good enough to explain to the market and to the financial market what we actually are doing, and that's why we are using this opportunity because we have been advised to address these kind of things from a lot of our investors and the financial institutions. So that's why I'm doing it. And this is not kind of just word, these are -- what I'm showing here is really a fact and a significant investment, not necessarily from only us, but we get significant funding to do these things. And I think the good position we have these days, which is at least better than all the other ones. Most of the other ones have struggled with lawyers and advisers to restructure the balance sheet. We have kept the organization intact. We have kept the competency, so we have energy and capacity and capability to entertain these kind of discussions. That is quite significant.You mentioned Maersk, I think they have exactly the same position. They can entertain what is asked for without running around with top management discussing the balance sheet every day. So this is actually quite important because organizations are to be nurtured. They need to be supported to do this kind of thing, and we have the capacity to do this.I think that on your question, what are we doing? Well, the Oceanwind initiative we are seeking for will be mobile offshore turbines, more like a shipowner's thinking that you own and operate these things. And there's a lot of installations out there, also rig operations that is not -- cannot access onshore power or wind mill. In a way, part, if you know what I mean, fixed installations. There are a lot of opportunities to support these kind of operations with mobile wind turbines. That -- if we're successful with the Oceanwind efforts, that is not going to be a part Odfjell Drilling, it's going to be a separate company. We don't kind of mix everything into together. And overall in that company, I'm not sure yet, but it's going to be at least significant in the beginning. But if it grows the way we expect, that's going to be a listed company down the road.Other initiatives like this within Energy -- I mean, MODU, we will try to develop MODU into a stronger position regarding assets. That's our ambition, but not for any price or anything. If it makes sense, we're going to do it. We are quite firm -- just as I said earlier, quite firm. We want to pay dividend in '22, and we are discussing that today. So what we're going to do going forward will not jeopardize the ability to pay dividend in '22. It's about time that some rig owners start to pay dividend or some payback to shareholders, and that hasn't happened for many, many years, and our ambition is to do that. So whatever we do will not jeopardize that position, unless there must be a fantastic opportunity elsewhere that is not able to say no to. I don't think that's going to happen.But anyway, so all the initiatives we are doing will be created in offshore drilling type of smear. We will link. We will address these kind of initiatives where we have some synergies from what we're doing today. So we will not, for example, start to establish, take an example, some processing plants for chemicals, that's not going to happen. We will engage in activities that is related to what we already know. That is, to us, the right green shift. We use the competencies, take, for example, in the marine sector. I will ask, why are you guys looking at Oceanwind? Well, Oceanwind means floaters, means floaters in harsh environment, means that we know exactly and everything about how the sea conditions are in all over the place, in the north, in the south, in the west, east. So we know that.So that is the synergies, but what we don't know we will acquire. So I think that we will kind of be accretive for engaging in these kind of initiatives and see will it be part of the organization, will it be a separate company. Again, we will take a very pragmatic view on that, and of course, seek a lot of advice what to do and how to do it. But we see a lot of interesting prospects. And we cannot engage in everything, but some handful, 2, 3, 4 of them could be of interest, and Oceanwind is one of them, and there's some 2, 3 others that we are looking at.

Operator

We will now take our next question from Lukas Daul of ABG.

L
Lukas Daul
Analyst

Just a quick question on Q3. Can you say how much of your revenue was performance-related bonuses in the quarter?

S
Simen Lieungh
CEO & President

About the same we did last quarter, we -- I don't really remember exactly the number, but there are -- as we said, we are following what we have indicated earlier, the percentage of bonuses. And last time, we were ahead of consensus. And this time, we are almost on consensus, and that is including what we indicated to the market about bonuses. So that's where we are. We have not commented anything about the bonuses from South Africa, but that will end up in the second -- in the Q4, so I cannot give you an exact number here, Lukas. But you can see this is typical the level we are currently getting. When we start for the new kind of contracts with Equinor and with Wintershall, there are different bonus mechanisms, which is potentially much better. But it's easy to say it must be delivered. So let's hope then when we have proven something. I don't like to talk about bonus, but what is -- what we expect, I'd like to say when it's already on the account, we can say how much and you can say these numbers are in line with the last time, and there's a significant number of bonuses in there. I can see the uptime, the efficiency on the rigs are so important. If we get some sort of shutdown like we had some trouble with Yantai, which is now solved, that wouldn't give any bonuses. So it is to be up there and perform, that's what we need to do.

L
Lukas Daul
Analyst

Okay, good. And then you mentioned Stavanger, and I guess, might be a bit surprising, she's leaving South Africa after a successful first well. But the remainder of the frame agreement that you have with Aker BP, can you just sort of say how much in advance that needs to be declared? Thinking about the future for the next few years.

S
Simen Lieungh
CEO & President

Just to say a little bit about Stavanger. So this is kind of a clear, it's not fed forward. Yes, we were -- we got the indication from Total because the first well they did the Christmas 2 years ago was very successful, and they did the same now in a quite quick campaign. It was hell of a weather, it's wintertime now, and it was really, really demanding to get there, but what the wells gave the same results as the first one. So we have 2 wells to discuss now. And Total didn't want to do the third well because they have enough data to plan for, and they have significant data. And we have seen what they have got. So I guess -- and now I'm guessing. I guess what they did was say, do we need another well to know what we already know, and then the third well will be in the same area, so that's why they didn't do it. But the contract says that we are on a rate, full rate, operating rate until end or early March, full February. So even though we have left the campaign now, it was guaranteed a full rate for 180 days, and that lasts when since we commenced the contract, it lasts out February. So we are a full rate out February.Beyond that, we have a significant demob. So we are kind of on rate until we are back in Norway. In theory, we were back in Norway earlier. But if we just follow the contract, we will be paid by Total until 20th of April next year, regardless. That's where we will engage with -- contractually with Aker BP. We are earlier home now. We might be here in the shift Jan-Feb. And that means that if we -- if Aker BP can engage earlier, if somebody else can engage earlier, which we talk to 2 clients about. The rig will commence as soon as we are getting home. So anyway, that we will -- Aker BP will follow-up far into '21, and they have 12 months before operation. They need to call the next campaign 12 months, but the rig is attractive and very efficient. So we believe that -- I have to -- I'm not really concerned that the rig will go idle too long. And if it is idle in Jan, Feb and March, we are still paid. We are paid by the contract already, but it doesn't matter.

L
Lukas Daul
Analyst

Okay. Good. And then just finally, on your comment on Deepsea Bergen, I mean, if you put a sign with a decision on the SPS, you kind of mentioned that there is no demand for that rig in the North Sea. And I was just sort of wondering, is it capability, is it wells becoming that much more demanding? I mean that rig used to be sort of the workhorse. And are you sort of now telling us that the game has changed that much?

S
Simen Lieungh
CEO & President

Yes. That's what I'm saying. It's -- and as I said, I think I said in some calls ago that we worked more with keeping Bergen alive through the crisis than all of the other yellow ones, the other one we had, because it was so much up and downs here. The problem with the concept like Deepsea Bergen is if -- it's an old rig. It has lacked -- has less efficiency. It doesn't have compensations regarding medical weather. It doesn't have a very efficient rig operation, and it certainly doesn't have any DP. And when we talk to the clients, and there might be a demand for that kind of rig, but it will be like we said no to. You can have 2 wells and then mob, demob and wait for a month for another mob, demob, and these mob, demob are extremely expensive. So if you can make a continuous operation on that kind of asset, it's okay. I mean the reason we reduced the EBITDA from '19 to quarter 3 into quarter 4 '20 is approximately $9 million, $10 million EBITDA from Bergen. That's the reason. And -- but then Bergen worked continuously. If Bergen has been on and off, it would have been probably losses.So that -- to kind of engage a continuous operation where clients doesn't give you that operation, you might say yes to a quick one, but then you need to build the next one and the next one thereafter. And if that is suddenly 2 months idle, you will lose a hell lot of money. And it cost you to demob the crew and -- with the crew -- demob the crew. If we look at the mathematics in there, it just doesn't fly. And we could not justify that we could say we will make a continuous operation that demand was not there. Demand might come in '22, '23, but we couldn't justify to spend $35 million on the SPS to wait for that potentially demand on lousy rates. That's our concern, so that was the decision. It was a tough decision for us. The rig was perfect for that purpose. The client has learned to use assets where you can achieve less emission, higher efficiency and licenses learned from each other. And when they see how the sixth-gen high-spec are working from us and competition and compare that to the old ones, they just don't want them. As long as they are available, new assets in the market. So that's the reason really. It's just kind of a fact and what client wants, not what I want, because that doesn't really matter. It's what client wants that matters, and that's what we are following.

Operator

We will now move on to our next question from Christopher Møllerløkken of Carnegie.

C
Christopher Møllerløkken
Research Analyst & Analyst of Oil Services

This is Christopher Møllerløkken in Carnegie. Could you just update us regarding your thinking on the preference shares you have issued?

S
Simen Lieungh
CEO & President

Maybe you can take that, Atle?

A
Atle Sæbø
CFO & Executive VP

Well, we have issues on preference share. The -- we pay some dividend on these shares, and the dividend will start to increase when we come to 2024. So that's part of our total funding as a company at the time being.

Operator

We will now take our next question from Magnus Scherman of Reorg.

M
Magnus Scherman

I have 2 questions. One is in the MODU, just regarding your comments on Seadrill. The -- you mentioned the added capacity you could take on. Are you seeing interest from clients for ultra-deepwater drilling or deepwater? And are you looking at a single rig sort of acquisition potentially or several as part of that?

S
Simen Lieungh
CEO & President

I think to take the automative market. I think that, as I indicated, I can't see any quick step-up in the ultra-deep market, the benign ultra-deep market. Until the supply is reduced, I think that -- I think there will be more activity. I think clearly the international big clients like Total, Shell, Exon, maybe even Chevron, will step-up with more activity. But I don't think -- until the major part of the deepwater owners of assets are taking a step to reduce the capacity and I don't say get disciplined, but kind of bring less supply to the market, that market will be paid for, for a long time. But when and if they do the restructuring and the balance sheet is cleaned up and the depth of these assets are gone, they must be taken out to my -- in my view, not just stored somewhere, which can be reactivated. Again, it must be taken out because then you will just follow-up and get it more painful. So -- and we are not after any deepwater assets. We're not there. We could manage them. We will not own them. We will be disciplined regarding the market segment we are in.So we're not -- I'm not saying we are kind of looking at to -- you missed the Seadrill that what the end game will be there. I have no clue, but we will look more like asset-by-asset or small group of assets by small group of assets instead of having a huge company and be part of a major big company here. I don't -- for us and me, size matters to a certain extent, but not to the very much extent. Today, you have to be specialized and disciplined. And when the market demand is coming up, then size starts to matter again. So far, it doesn't.

M
Magnus Scherman

Okay. So from that, it's more like the mid-order assets you could potentially be looking at?

S
Simen Lieungh
CEO & President

Well, you remember that fleet we have, it's a deepwater harsh environment area. We can -- we have drilled in Angola with 2,000 meters. We have drilled in Tanzania for 2,500 meters with Stavanger and type of Atlantic. So these assets are ultra-deepwater, but they're also harsh environment. So they can work from 80 meters to 10,000 feet, just remember that. So if necessary, for example, when we went out to Africa, we could easily pick up a job in Africa where we did in Angola, lots for BP, we drilled 2,800 meters in Angola with Stavanger.

M
Magnus Scherman

Okay. And just finally on that -- and on Seadrill -- I mean the restructuring is ongoing at the moment, would you be looking to potentially approach them as part of the restructuring or after they have implemented that?

S
Simen Lieungh
CEO & President

I will not comment on that, sorry. It's a very relevant question, indeed. And we -- I cannot comment upon that, sorry.

M
Magnus Scherman

Okay. And then on the green initiatives, you mentioned that some of the new carbon-reducing meshes are now requirement from clients. Are you seeing that all over, like from all of your client base or mostly in Scandinavia?

S
Simen Lieungh
CEO & President

Well, I think you will see it -- I mean, the one we know best in that context is of course, Equinor and Aker BP here. They are -- Equinor is a global player, Aker BP is not. BP is another one with very high ambitions. No, we don't do any semi-operation or rig operation with them, but they have the same thing. Total is in the same ballpark. The future engagement, either its shallow, deepwater, harsh environment, they will require the green shift on board. So we certainly have a clear view that all clients will engage in that kind of solutions. There are some American clients that doesn't have any target on -- regarding emission. I don't think that Exxon has given any targets for their ambitions regarding emission, but the rest of the global majors clearly are doing it.And currently, there's a strong drive in the North Sea, U.K., Norway, North Canada market, so that's where the highest activity is. The day deepwater market takes off, you will see -- I guess you will see the same requirements.

Operator

And we will take our next question from [indiscernible].

U
Unknown Analyst

My question is during the Pareto conference, you mentioned that you were qualifying a new drilling method or the casing work rotated together with the drilling unit. Is this meter qualified? And can you please describe the expected effect on the revenues due to this improved drilling method?

S
Simen Lieungh
CEO & President

This method is not suitable for deep wells and complex offshore wells. It's very much into like shallow water and onshore. The case with the casing drilling is that you actually mount a drill bit at the end of the casing. So we actually -- instead of drill pipe, you put the drill bit directly on the casing. For example, a 7-inch casing, whatever, 13-inch casing, whatever, you set the casing when you drill. This has been done quite a lot regarding just vertical drilling straight down and up again. What we talked about here is directional drilling with casing and setting casing at the same time, not the same length of wells that you can do with the drill pipe, but it's at the same time, significant. These have been -- I mean, Schlumberger has technology, and they have done it. We have tried a couple of times in Romania and in Ethiopia -- sorry, and Egypt, and we have not been successful because of technology of the reamers, which is at the end of the pipe has not -- has actually failed. So now we have tested it again.So yes, this is technology that is proven. This technology, we have a contract with Petrofac now for 1.5 to 2 years in Malaysia. We are discussing with another company called Shell about exactly the same. So if this is successful the next trial, this is going to be a bigger activity in that area because it suits very well into the Malaysian sentiments. And I think that I can say that if we are successful, we will step up with more activity in that region. And you actually do -- instead of drilling with pipe and pulling the pipe out, they put casing back again. You just let the casing at the same time you drill. That is the benefit from this, and that's proven.Regarding the financial outcome of this one, let me answer that next year, when I can say more how that went. We have expectations, but I hate to say expectations that I will share with you when we have done it, okay? But we expect good numbers.

Operator

And it appears we have no further questions over the phone at this time, sir. I'd like to hand the conference back for any additional remarks.

S
Simen Lieungh
CEO & President

Thank you all. I think that's it for us, and have a nice afternoon and evening, and thanks again.

A
Atle Sæbø
CFO & Executive VP

Yes. Thanks for your attention.

Operator

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.