Odfjell Drilling Ltd

OSE:ODL

Earnings Call Transcript 2019-Q4

[Operator]

Good day. And welcome to the Odfjell Drilling Q4 2019 Investor Call. At this time I would like to turn the conference over to Simen Lieungh, CEO. Please go ahead.

[Simen Lieungh, CEO & President]

Thank you, and welcome, everybody, to this conference call. Together with me I have our CFO, Atle Sæbø; and Investor Relations Officer, Eirik Knudsen. I will take the first part. Atle will cover the financial details before we, as usual, open the floor for questions at the end.Today we will go through the highlights and material events, as normal. We will touch into the segment reporting. I will also share with you the view we have on the market. Atle will go then into the financial information details. I will take the summary and take it from there.On Slide #3 on the presentation you have a short flash of the company's status. Key financials, $221 million revenue. We have a cash position of $170 million. We have EBITDA for the quarter for $93 million. We have a leverage ratio debt on EBITDA for 3.8, less than 4. [indiscernible] back to that. We have an equity position ratio of 40%. A $2.3 billion backlog. So that's excluding the backlog in rental services and technology engineering. So there in reality it's a higher backlog.The company, again just to remind you, it's an integrated drilling company with mobile units that are clearly the most exposed one and that's what they're known for. Sixth-generation high spec, very efficient harsh environment units, 5 of them. And we also operate the management one week from Deepsea Yantai, which is currently under operations with Neptune.Well Services, the same. We have a couple of new product lines. In the end I'll come back to that.Platform drilling, we operate [indiscernible] installations in the U.K. and Norway. And within technology we have -- we are building up back now the technology basis we had earlier. We see a lot more activity in that sector going forward, [indiscernible].On Slide #4 we have listed our strategic focus and what -- how we will fit the financial priorities forward. We have clearly been focusing the last years to be preferred harsh environment driller. I think we have achieved that position clearly. We have worked very hard over the last years to participate in the green shift. I'll come back to that. This is a more and more important element in the HSE picture at [ ESLG ]. So I think we will share with you how we think there and what kind of position we expect to achieve by pushing that quite hard based on also the requirement from authorities and our client base.We will focus to be a strong service provider naturally. We will always focus to do backlog. I think that has been the success we had over the last years during the crisis. We are focused on the backlog and build, the focus on cost reduction backlog build up, which has given us the position we have today.And we have had all the time had a quite strong improvement for the learning. Cost discipline and effectiveness has been the key. The financial priorities is, as we have said little earlier, that's coming from a period some years ago with an overview of too high debt level, we are building that down. The gearing leverage is coming down and we are certain will get quite significant over the next few years.We earlier also indicated that we will build more capacity and more, more, more activity, if we find the right -- the right case. So but we only do that by adding value. So underlying that especially in this market, we will not take [indiscernible]. This is far too much exposed in that direction. So by building value-adding growth is what we are looking for. And if you find a case, we will acquire that case. And last but not least, we have now seen that going forward we will have a secure spendable dividend capacity. And we see that [indiscernible] of the future that we will be able to do that. But to do that -- we haven't done that for quite some time.On Page #5. Some very quick key summaries in the year. Aker BP has exercised the first option on Nordkapp, Deepsea Nordkapp. [Indiscernible] number. We had 2-year contract with 2 options. The good thing is that contract, there is a floor. There is a floor rate of 325. So the goal is, what happens, we will always be a paid 325 at the minimum. And this option will bring us into the mid-21. And with that work scope we see going forward with Deepsea Nordkapp we also expect that the option of the form -- option of the -- option number 2 will also be secured.Equinor yesterday confirmed more work for Deepsea Atlantic, two more wells. So that brings us in the Master Frame Agreement, [indiscernible] brings us the full scope of this year. And you might also know that there's some very interesting bids that we are working with currently for Deepsea and other rigs [indiscernible] rigs.Quite interesting that we are finally back to Ekofisk platform drilling. ConocoPhillips awarded us 5-year platform drilling contract. The last time we were there was in 2009/'10. The good thing, now we have already secured our Well Services on Ekofisk with ConocoPhillips. By winning this contract for drilling operations, we are able to integrate both Well Services and drilling activity and by that provide much more efficient deliveries to ConocoPhillips. We really look forward to kick that off, we'll start in July this year. And we have high expectations that we will find better and smarter way to work and safer to work and be more -- much more efficient.Good thing. Now finally we can say we believe we have been through the difficult downturn in Well Services. Well Service is coming back now with strong performance. And by all the improvement programs we have done there, and restructuring programs we have done there by changing management, by bringing more and more energy back into the organization globally we find that there's more activity or even more work and we're building a stronger backlog. And the margins are gradually picking up again. So we have high expectations for the company going forward.So if we now go to the Page #8. There are more details that can be read in the presentation. If there are more that you want to -- me to address, ask questions at the end. On 8 we see that we still are -- have very high efficiency in the whole fleet in module. There has been some more waiting over the situations in the North Sea areas. They are of course actually related to the very, very tough weather that have been this year.And last -- end last year and January, February so far has been tremendously challenging. But the fleet we have is robust. Of course Deepsea Bergen, the third-generation rig is more vulnerable to these very rough conditions. But the sixth-gen fleet we have, have done excellent and operating in a very, very efficient way and delivered the wells to the client in an impressive manner.On Page #9, which shows that we have good visibility for the whole fleet, except for Deepsea Bergen. Deepsea Bergen is now operating for MOL. We expect Bergen to end that operation in April this year, early April. What will happen after that, we have a range of bids that we work with. If we look back since '14, '15 years, we have been able to keep Bergen warm and back-to-back operations to hold the crisis year-by-year and they should no -- there shouldn't be any problem to continue to do that. Even though there are of course limitations in the picture, which I can reveal here that we have an SPS coming up in October, late September, October this year.And in the current market for these kind of rigs to do the SPS we need to see strong visibility going forward. So I will say that we will try to bring the rigs to the SPS, but that is very depending on the market that we keep try to get contracts.If we get the right level of contracts, we will certainly try to bring the rig forward which for -- in our view is a very, very good third generation rig, which also is not that expensive to operate.Deepsea Yantai has also been awarded more options. And currently we operate, we find the rig very efficient. It's not the rig we have built either, but it's a sixth gen more light version. It's not heavy dual functions or like Deepsea Stavanger or the other DVA, but the rig shows to be quite -- we're quite impressive about that. The capacity we have with that rig is also heat protected, meaning that it can operate in harsh environment on a more stable basis compared to others with no heat compensation as an example.Little talk about the green shift. On page #10 we have tried to illustrate that. And clearly that's -- we have [indiscernible] find better and smarter way to implement technology to reduce our emission during drilling. We have an addition to say, that we in some time we will have zero-emission drilling. Sounds quite ambitious, but it's very realistic. So it's not any dream. And there has been step on that -- in that direction.If you go a little back in the old days, all days meaning only 4, 5 years ago. Then we actually did not care too much about the fuel consumption because that was paid by the client and we operated the generator and the [ DP ] and everything that we kind of didn't really care. It's not necessarily, literally, it wasn't too high an agenda.Clients and ourselves had agreed on compensation formats where we estimate volume on the -- try to optimize fuel consumption and like diesel for example. And commit us to certain levels, and the client will pay the dollar per barrel gallon, but we are responsible for the volume. So by optimizing that we will keep the earnings if we go under that estimate. And we agreed that with the clients.So by only doing that over the last years we have actually reduced the fuel consumption by 20%, 25%, being more focused on it, and that's kind of a very, very [indiscernible].Further, by working with new technologies, there is some technologies that are called flywheel. So -- and we have some hybrid solutions we work with. We have -- we get a lot of funding from government like Demo2000 and NOx funds. More than NOK 250 million total. And that's a lot of money that we can use to invest in these kind of technologies.Clients haven't been too eager until now to support that kind of funding. So -- but going forward, with [indiscernible] take for example what Equinor is presenting, their ambition is to be zero in 2050, and within 2030 down 40%. It's, everybody that wants to compete in this market needs to take that quite serious. So HSE is important, but the environmental footprint is also very much more important, going to be much stronger driver in the future.We are looking also at -- by retrofit into these kind of new technologies, which is, as I commented, is very readily available in the market. But the key here is how you actually utilize that technology. And the key of these assets are energy optimization and logistical board. So these two things are in synchronization, it's creating efficiency and less emissions.If we in the future are able to connect on-shore power to the semi-submersibles, which is also very relevant when we look into the future. Norwegian has [indiscernible] and we see more and more [indiscernible]and if we are able to access that source because actually with 22 years [indiscernible] during drilling times, which is some years ago was totally unrealistic, today it's very, very realistic.The key here is to work close with the clients, find the technology, optimize that technology and use it in the right version. Even in our annual report we will expand on that quite more in detail what we are doing regarding the green shift, and be more detailed about what we are going to achieve the targets we have put forward.If we just [indiscernible] page #11. [indiscernible] show there is that we have long-term contracts. These options are quite often realized. So platform drilling is important activity for us. It actually creates a lot of activity for service and engineering technology. So the platforms are literally [indiscernible] retail. And with addition to also to reduce emissions on fixing installation from the client base, we can also participate in upgrades and electrification of the technology onboard these installations, which is a high potential growth scope for our technical division which today counts little less than 200 people, which was down to 70 after the crisis but we have seen more and more activity and we are coming up again.With Well Services it's the same type of business, more activities, more scope. And I want to highlight two areas where we have expecations that we will, I would say expand the business into new product lines. We have worked for the last two years with what we call casing drilling, and we have exclusive agreement with Huisman in Holland and we have tested that concept several times. We had some failures. New technology always fails in the beginning. But recently we have seen that we have built in more robust technology. And we hope at least that will take off, especially onshore drilling but also actually in offshore drilling going forward.Now that -- these technologies have been on the market for some time, has not been really -- has not really traded spots. But if we make robust-enough solutions we can also build vertical and horizontal. And I think that the client has showed more interest to try to accept that kind of technology because it saves a lot of time and lot of energy and lot of, I would say, time to deliver [indiscernible].Another important product is drill pipe. And the drill pipe, I mentioned, you know, we are installing automated drilling on all the rigs we have, in the 6th gen rigs. And the drill pipe plays nicely with what we call [indiscernible] system. And to have online information, actually information in drilling from the well connected to the [indiscernible] you need a wide drill pipe. And the wide drill pipe is a smart pipe in the way to accept much more details, much more frequency. So have much more online information from this element down in the well. And we have an agreement with NOV now to provide the drill pipe into the market. So NOV will produce the product, we do the management and rentals and maintenance of that product which is a nice combination which we already [indiscernible].If I go further into that earnings visibilities we have, as I said, a strong backlog, which excludes the Well Services and engineering technology.$2.3 billion, nice. We have maintained that type of backlog [indiscernible] extremely important to build that backlog because it actually creates the grounds for refinancing. [indiscernible] refinancing last year because we have visibility in the backlog. So the bank support the financing. And it's very, very difficult market. It was actually more difficult last year than it was back in 2016. But we successfully secured that refinancing. Atle will come back to that little later. But we have shared that with you earlier. But that -- this is really the basis for building a robust baseline and be able to do what we have promised as I said earlier.On Page 14, just to show you, we have just from sources [indiscernible] have done an analysis of all the [indiscernible] company. If you look at the free cash flow in the beginning, we have strong free cash flow currently, which is quite important and 26%, and you see the rest of the peers is not in that position. What does this do? This creates flexibility to meet our goal, also to say that we will be a sustainable dividend provider in this -- in the future. It also creates flexibility to build down the debt ratio and we expect really that our debt -- the gearing will be less than 3 -- the debt platform EBITDA will be less than 3 already in '21. We pay approximately [ 200-plus dollars ] every year on debt and we also create with the backlog which is a nice rate. We're also building up the earnings, which creates flexibility, free cash flow and capacity for dividends. And I think that debt in this market is okay to keep as low as possible because they're extremely difficult sources to get money back into this segment and it's not going to get easier.And I -- we also have that feeling, when we speak to investors and banks, they will also differentiate the clients that has -- in a way, those that that work hard for that green shift with technology, the solutions to provide lower emissions compared to those that doesn't do that. Those that do this will get easier access to financing, which is also providing quite interesting potential for eventually in the future.Another comment I have is that, when I go into the market outlook, on Page 15, it's interesting to observe that in the market we are there are very, very few newbuilds. There will be some coming out of [ Marico ], but beyond that is nothing. And if you look at the market today, to provide newbuilds today, there is no reason to believe that it will happen in the coming future. So doing newbuilds today with the investment of $500 million to $600 million-plus you need at least 5, 6 years contract, you need a day rate of quite north of 400. There is not really prospect today, efficacy, and anybody else can see that that will happen. So the supply situation regarding reaching into the market is quite stable. You've got to go down really because it's going to be a lot more [indiscernible] we believe of old assets and [indiscernible] today a much more focus on new assets with that efficiency and [indiscernible] and all the new technology that's linked to the green shift and automatic [indiscernible].So we don't believe that there will be a lot of newbuilds coming. But we believe that the market, if you take the harsh environment first, there is a lot of activity coming that will bring more exploration contract, more development projects coming. And the visibility we have is that we're probably going to be quite okay in the future to stay that way because the market is coming up. 2020 is slow also in the U.K., but we see '21, '22 and onwards is quite much more dense regarding potential projects and the clients are quite keen now to replace reserves to produce more oil and gas because the visibility regarding the discussions we have, which is -- which in our opinion has gone some while, there will be a need for oil and gas in the future and for some decades really and there's going to be more need as we see today if it doesn't happen anything very extraordinary in the market, which could happen, but we can't see that really today.So the harsh environment market comprising the U.K. and Norway, that [indiscernible] in future Russia and the North [indiscernible] Atlanta Canada and South Africa is -- has great potential. But I also find interesting, when I speak to my colleagues in other companies [indiscernible] high exposure on the deep, ultra-deepwater market, it's interesting to see that now they are within the gold triangle, we see more activity with Gulf of Mexico, Brazil area and West Africa. And the prospects are coming up, the rates are improving, the cost registered in that segment also has driven down cost and OpEx which is now very competitive regarding, for example, shale oil.So with these trends continuing, we believe that also the deeperwater market in a couple of years’ time will also pick up significantly, which is a good trend for all of us. Jack-up market is also stronger, there are very few jack-up left in -- at the yards, distressed assets. There're very few of them left, and the utilization is coming quite harder. So offshore oil and gas will be more attractive in the future -- in competition with renewables and of course shale oil.And in that picture if you look at all the analysis from the big majors like BP, Exxon, Shell, Equinor, the need for that will -- are quite substantial. And the oil companies will also need to increase investment to replace the fall in production. Although when that will be kicked off is difficult to say. But we believe in a year or 2 there will be a step-up in the investments, which will substantiate the new contract that we are working with as we speak.So with that picture I think that Atle might bring us through the financial details. Is that okay?

[Atle Sæbø, CFO & Executive VP]

Thank you, Simen. I'm pleased to take you through the fourth quarter financial statement. I will, on Page 17, start with the group summary. The group operating revenue was $221 million, compared to $168 million in the fourth quarter of 2018. The group EBITDA was $93 million compared to $68 million in same quarter '18. An increase in both revenue and EBITDA is mainly due to higher activity in the mobile drilling units segement. The EBITDA margin was 42% compared to 40% in the same quarter in 2018.These were the blended figures of the capital-intensive mobile drilling business unit segment and the labor-intensive platform drilling and technology.We will look into each of these segments. I'm going to Page 18, which is the mobile drilling units segment. Operating revenue for the mobile drilling unit segment was $160 million, compared to $119 million in the same quarter '18. EBITDA was $80 million compared to $60 million in '18. The change in EBITDA is mainly due to the operation of Deepsea Nordkapp which commenced operation in second quarter '19 and improved EBITDA for Deepsea Atlantic and Deepsea Stavanger compared to previous year.We have further received performance bonus of approximately $3 million in fourth quarter 2019. EBITDA margin was 50%, same level as fourth quarter 2018.If you move on to Page 19, to drilling and technology segment. We can see that operating revenue was $38 million compared to $37 million in '18 same quarter. EBITDA was $6 million compared to $5 million in the same quarter '18. The drilling and technology segment continues its positive development and delivers close to 15% EBITDA margin this quarter and a cumulative 12% EBITDA margin for the full year of 2019. The figures are partly due to some one-off items realized in fourth 2019.If we then move on to Page 20, we have the figures for Well Services. The operating revenue was $31 million compared to $25 million in the same quarter '18. EBITDA was $11 million compared to $6 million in fourth quarter '18. Well Services has continued to develop positively in this quarter compared to comparable quarter in 2018 and also last quarter. As mentioned earlier, there are signs of increase in activity, which in the longer run will lead to the price increase. Also the nature of long-term frame agreements makes the bottom line improvements so much slower. The EBITDA margin in fourth quarter '19 was 36% compared to 22% in the same quarter 2018.If you then move over to Page 21. We have included group eliminations and reconciliations for your information. This is, I think, the overhead cost, et cetera. So we won't go in any details of the page.We go on to Page 22, which is the summary statement of financial position. And here you can see that the group's gross interest bearing debt was $1.390 billion net of capitalized financing fees at end of December 2019. We had $170 million in cash and cash equivalence by the end of the year. And in addition, we have $25 million in undrawn credit facility which will be drawn in one branch during this quarter. The equity ratio as per end of '19 was 40%.Then we move over to Page 23, that's the summary statement of cash flow. The net cash from operations was $76 million compared to $97 million in fourth quarter 2018. We can put a note that in 2019 invested $426 million which is mainly related to Deepsea Nordkapp. In addition to cash position of $170 million at the end of December, as mentioned, we also have an undrawn bank facility of $25 million which takes our total liquidity position to close to $100 million at year-end '19.We then move over to Page 24 which the summary of fourth quarter 2019. If you start with the mobile drilling units, we had some very attractive harsh environment assets, it's a strong backlog and it's a healthy market outlook in that market. We believe the supply will remain tight due to limited investment appetite in the market at the time being. If you are going with drilling and technology, we have continued the strong financial performance supported by a strong backlog.Well Services. Well, turning point has passed. The recent increased activity out there is an increasing tender activity which will lead to high utilization and also higher prices for our services.If you go to the key financials, we have an earnings visibility to $2.3 billion order backlog. We have a sound cash position in combination with undrawn bank facility. And we have a strong balance sheet combined with continued deleveraging. We have no short-term refinancing requirements coming up this year. And we have go to the end of '21 before we have the next financing up for renewal.So this was really the -- our presentation. And we would like to open up for questions, if you have any. So please come on.

[Operator]

[Operation Instructions]. We can take our first question from Lillian Starke of Morgan Stanley.

[Lillian Starke, Research Associate]

I have 2 questions. The first one is related to the ambitions that you have on becoming net zero on drilling. And I was just wondering, given the timeframe that Equinor has set for themselves, are you aligning these clients as well as together with clients like Equinor? Or more or less what's the timeframe that you expect for these things to materialize?And then, the second question I had was on the Deepsea Bergen. More or less what's sort of the timing where you think you will be in a position to make a decision whether you proceed with the SPS or not? Is there a specific point in the year where you think there is a deadline for that decision to be made?

[Simen Lieungh, CEO & President]

Well, thank you, two relevant questions. Thank you. Regarding, the CO emission target, we have -- we know the ambitions from, for example, Equinor here. We have also put our own ambition targets which is somewhat more aggressive because we see in a way that zero emission will be achieved the day we can connect one of the rigs into stable onshore power. We are investing quite heavily on the rig supported by the fund. So we don't expose our own balance sheet to get funding from our clients. [Indiscernible] the funding from the funds like Demo2000 and the NOx fund.So a lot of these technologies are currently being implemented. And if you take '21, '22, '23, if we are able in, let's say, '24, '25 to actually, to connect one of the rigs into the onshore power base or some from onshore wind or whatever, you can get up there. The day we get that cable accessible, I can plug that into the rig to combine with, as I said, the flywheels, the hybrid solution, the batteries, the control system to operate in a more intelligent regarding all the needs to do, all the power needs during the drilling camping or drilling program. We think we can achieve when we said zero emission is probably [indiscernible] reductions from the current level. And we -- that is really a 0 more or less.So our ambition is to campaign by campaign during drilling to achieve 0 let's say within 5 years horizon which is not what I'll think about some time ago. But with the current solutions, the current actions, the current trends from all the client, that's possible. But they need to do kind of be -- you have to be in line with your clients in that to get that access into your assets because this means that you actually are building your logistical supply chain around that technology. That is the key. We will go more into that and we will report progress of these elements going forward. We will report successes and we will also report if it doesn't make it. We are already quite transparent here. So we don't have to green wash anything because we're quite transparent to say this is what we want to do, and we hope that we will do it and we will show how we will get it. If we don't get it, we will say that too. But then we have -- we will try. So that was the answer on number 1.Regarding Bergen, yes, that's a tricky one because it is -- you have to, through the SPS you have to prepare a lot. So I guess that this deadline, if you look at that part to do the full SPS, if you're going to do the full SPS you can count the number. I am open to say that typical $25 million, $30 million is typical SPS in these kids of rigs. However, we tried to extend the rig by only 1 year. Instead of doing the full 5 year here we are in the process now to see we are able to kind of do very limited investments, let's say, between $5 million and $7 million to do the most necessary things and then extend the lifetime of the rig 1 more year. That's possible. And if that happens that we see -- that we are able to build up enough backlog campaign step by step, well by well, we will bring the risk into '21. And in '21 and onwards we have a totally different view of that market. So our intention is really, if possible, to get the rig through the difficult time, extend the rig by 1 year, invest $5 million, $6 million, $7 million and then hope for a longer life after that because if you have done that we can also do the rest of this hopefully.If we get 2 to -- 2, 3 years type of visibility in that context Bergen will deliver perfect in the next 5 years. But if not, the decision will be financial, and we will do the stacking and potentially sell the rig or scrap it. These are the things we are discussing. The first deadline will be probably June, July, August this year, okay?

[Operator]

[Operator instructions] We will take our next question from Magnus Olsvik of Kepler.

[Magnus Olsvik, Equity Research Analyst]

Congratulations with the still solid results. You talked a lot about leverage in this presentation, Simen. And like you mentioned, debt should be as low as possible. But I guess you don't have to be debt free. So my question is really do you have a target leverage ratio that you aim for? So when you kind of reached that level you are comfortable then in returning excess cash to shareholders?

[Simen Lieungh, CEO & President]

I'll start with this after. Atle, you can add on after that.I said it's not possible. We will -- we are not going to build up a lot of cash [indiscernible] that cash. What I'm saying here is that we would like to have in that -- in this quite uncertain period, the next 2, 3 years, at least 1 or 2 years, it's uncertainty all over the place financially and everything.So we would like to bring the leverage ratio down to 2 point something, that's a nice area. Then you are robust enough to do refinancing. You have the backlog in place. And we are to have a relatively comfortable cash position. The point I'm saying is that we have, we will build capacity to do dividend, sustainable dividend. We're not going to pay dividend one year and stop the year after. We would like to have a sustainable dividend capacity going forward, so we can be predictable regarding that capacity. And we believe, not necessarily everybody agree to this, but we believe that if we are able to pay dividend back, we would be even more attractive in the future. So Atle, you might add on these things little more detailed.

[Atle Sæbø, CFO & Executive VP]

Yes. We are now at a leverage a little bit [indiscernible] and we are quite comfortable with that situation. Especially when you take this in regards to the backlog, we have a good utilization for this year and next year and into '22. And that combination is quite strong. Having a backlog between 3 and 4 is quite okay. Then we would be in a security financial flexibility for the periods to come. And one of those flexibilities is of course to start paying a dividend in the period. And when we do that, we would be in a position where we can do that on a steady basis. So that's our goal, financial goals for the years to come.

[Simen Lieungh, CEO & President]

And when do [indiscernible] that balance sheet will be much more stronger, so we can use the balance sheet also to do -- if you find attractive investments, we can do this on the balance sheet, there is capacity there. That's also the target. Absolutely.

[Magnus Olsvik, Equity Research Analyst]

Good. Great thought. Thanks. And just a follow-up on another topic, if I may. You mentioned Well Services, which is now improving. And I understand the margins could also improve in 2020, but more on a strategic level, do you see how in the future Well Services as a part of -- natural part of what we're drilling and in the future, or you're kind of targeting some strategic change [indiscernible] for sale of that business?

[Simen Lieungh, CEO & President]

Well, we -- good question. Thank you. The answer is yes to everything. We are -- we certainly are very happy that we can say that the company is back in business in, literally. We have good visibility going forward. We also see Well Services as a very strategic element in Odfjell Drilling today. What's going to happen in the future? We are in the process this year and maybe into next year that we'll see how could that be developed further, how could that be consolidated. I mean, we are looking at all elements to create value. So -- but the most important thing for us has been to stabilize the company, stabilize the business, and by that be attractive. There's a lot of interesting elements out there that could be attractive to do something. But currently I will not say this or that specifically, but we are quite open to develop the service side further because we see that as a quite interesting area, which is not really valued in our share price today. And that's just the fact. When we speak to investors they don't really value that at all. It's all about you. So yes, in the future, when we see more substantial obviously results in that area, we will do something.

[Operator]

We will now take our next question from [ Renard Salour or Anaconda ].

[Unknown Analyst]

I would like to ask you 2 questions on the debt side view. Given your assets, which are very much in demand and your free cash flow yield, will it make sense to issue some secured bonds? I'm not sure you could have a lower rate but [indiscernible] debt financing.And secondly, about share buybacks or majority shareholder, given the miserable treatment that the stock market is inflicting to you, wouldn't it make sense given the profile to go private?

[Simen Lieungh, CEO & President]

Atle, you can take the debt side. I'll take the other.

[Atle Sæbø, CFO & Executive VP]

Yes, I can start with them. Of course, we are following the bond market, and that could be an option for us. So far we are trusting on [ Ben Carson ] for our fleet. And here we are looking at what is the cost of money. That's an important issue here. And what give us the best financial flexibility.So we are of course following the bond market. That is an option for the future, that we are looking into, and maybe we'd enter it at the right time. But as the time being we have found the bank market to be at the lowest cost of money, and the best flexibility for our ownership. So that's where we are at the moment. We are evaluating this. And we'll come back if or when we will do any changes in this picture.

[Simen Lieungh, CEO & President]

Regarding the share buyback and the treatment to get into in the stock market. I think that we have no plans to go -- to take the company private currently. We used to be a private company up to 2013. And then we listed the company for certain reasons. Today we have a 60% share, main shareholder in the -- from the family who used to own the company 100%. So yes, it's a dilemma. It's little frustrating that we are kind of dragged into this situation. The market is it's very, very difficult. But to start to do a privatization now, we don't find that right. I think we should do have some -- we have been through those processes of some -- maybe some part of the company in future could be taken private. But we believe that looking forward into the crystal ball, we believe the market will get better. We believe the need for these services will come back.We also believe that the financial investors will also be more attracted to the company. At the day we start to pay dividend, we get more visibility on that, to get return on your investment today. And if you look at this market over the last 3, 4 years, there hasn't been any return to anybody. So of course it has less appetite on the shares [indiscernible] talk about all the change into the green shift stuff. It's not the most popular segment currently. But I think gravity works this time too and I've seen that before, that the day we start to payback and return comes up, investment will come back and the share price will improve. The point is to build that strength and be on top of the process, that's the key.What we do in the future regarding taking things private or do buyback our shares, that -- I will not comment upon that. I think we -- as you heard, we are quite open to everything. So the day we find things attractive we will probably be pushing that direction. I can't be more specific than that. I'm sorry.

[Operator]

[Operator Instructions]. We have no questions at this time.

[Simen Lieungh, CEO & President]

Thank you. Thank you, everybody.

[Atle Sæbø, CFO & Executive VP]

Okay. Thank you all for the attention.

[Simen Lieungh, CEO & President]

Thank you. Bye.

[Operator]

This concludes today's call. Thank you for your participation. You may now disconnect.