Odfjell Drilling Ltd

OSE:ODL

Earnings Call Transcript 2020-Q4

[Operator]

Good day, everyone. Welcome to the Odfjell Drilling Q4 2020 Investor Call. At this time, I would like to turn the conference over to Eirik Knudsen. Please go ahead, sir.

[Eirik Knudsen, VP of Corporate Finance & Investor Relations]

Thank you so much, Nicole, and welcome to this investor conference call for Odfjell Drilling where we will present the fourth quarter and full year results of 2020. We hope that everyone still are safe 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 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.

[Simen Lieungh, CEO & President]

Thank you, Eirik. And again, welcome to this conference. Going through our traditional, we -- I'll go through the headlines regarding the financial numbers, go through the Q4 key summaries. We will do some reporting of the 3 segments. And Atle will then conclude with the financial presentation. And as we said, we'll take the summary and Q&A. So for the practical thing, we have a presentation, probably you have seen it or have it. I'll just announce the pages. So I'll talk through the presentation and give you the page number. So if we flip to the Page #4, where we have the key financials, the results this quarter is okay. We have a revenue of $355 million. We have a cash position of $207 million. High EBITDA due to some extraordinary incomes with the come back to the Total execution in Africa -- South Africa with $175 million -- $171 million and with a leverage ratio down to 2.5. We have, over the last quarter, explained that we have deleveraging the company significantly and easing up the balance sheet. So we have a potential for interesting things in the future. The backlog is $2.3 billion, and we can talk more about that. We see more coming. And we see a market that will be somewhat better in the future now. And we will touch that a little later with the equity ratio now of 45%. So if you go over to the Page #5, some key -- some highlights from the quarter. Of course, we all are affected by the COVID situation, though -- even though we have, in general, limited impact from that. And of course, if you go back a year now, almost a year, everything was very, very uncertain as things have not normalized. But we have some mitigating solutions to compete with and cope with the pandemic. So we have limited impact in operations from COVID, not with so far. But the only area which has been hit hardest in our company is the OWS, well services, where we operate in typical 22, 23 countries, where we are depending on people moving over borders, logistics with equipment has been quite challenging to say it lightly. And of course, that is really one of the areas we have really felt that the different countries have different restrictions and has, of course, hindered the development, even though we have lately been able to bring back the operation and is getting much better. Come back to that with the last point there with the strong operations in especially Norway. We did the South African campaign with Stavanger successfully last year. We had hoped for to drill 2 wells. We did drill 1 well, but we were paid for 2. So the contract and the rig is now back in Norway, waiting for the start-up. But that campaign was successful. We are bringing more backlog from Lundin and Equinor. We have LOIs coming, and we expect to execute those backlogs quite soon. Wintershall, within platform. Drilling Wintershall exercised a 4-year extension option on Brage, which is going to start up now in May. So that went over the quarter. So if I move over to Page 6. Stavanger is now, as I said, back in Norway. We're going to start with Aker BP early April. And after that, we will continue to fill up the backlog with other assets.Atlantic, the same high operation, financial operation close to 100%. Bergen is, the change there is that we see no more Bergen. Bergen has now decided to go to recycling and will be -- has been terminated from the fleet. Aberdeen has recently commenced with a high operation now 100%, will commence with Wintershall. Nordkapp, again high operation. And Yantai, somewhat lower due to an incident we had last year within well controlled. It was handled well, but still, it took down the uptime. On the fleet, we see here that the charter on the -- on Page #7. The yellow dots there are, when we're going to do the next SPS. So we don't have any new SPS coming until '24, '25. For some reason, they all come in the same period, but that's how it is. Atlantic will continue. We are preparing now for just to fill up the gap between now and the Johan Sverdrup Phase 2 and which you see here is a contract for those options. We believe that Atlantic will roll on the Master Frame Agreement continuous optionality with Equinor for the future. Stavanger has been -- after the African campaign, as I said, we have received advice now for more activity into '22. We are, of course, discussing other options and potentially contract with Stavanger. That's a very attractive rig, has shown to be extremely efficient, so as the other DVA concepts. So we are not too concerned about that. So I believe we will, hopefully, not too far into the future, announce that we have even longer predictability of the rig going into the future. With the Deepsea Aberdeen now with the Wintershall, will commence Wintershall for a campaign of drilling in Breidablikk. Breidablikk will be run into '24, with continuous optionality or 9 wells options after that. So that has a good forecast for continuous operation. So we have one option left with Aker BP. We are working with Aker BP to close and to conclude the option. We believe Aker BP will need a rig that we have already, in a way, scope of work identified. And I hope that we can, not too far into the future, now announce that we will have concluded on the last auction for the 4-year contract. Deepsea Yantai is a workhorse. We actually like the rig very well. It has -- even though we had a small -- we had an incident last year, handled okay, has been investigated by the PSA. Conclusions is out there. I think that Neptun is very pleased with the asset. They have also indicated extension of the rig. And I guess that the rig will operate for Neptun quite some time. And whatever happens, we are doing management of that asset, not -- we have not concluded the end game for that asset. Currently, there's no discussions. But we are monitoring the situation. And if the situation is ripe, we might take that rig as a kind of a replacement for Deepsea Bergen. The backlog is typically around $1 billion, and there are options in there. We go over to Page #8, platform drilling within energy sector. This picture is -- all these options there are kind of different from how we see options in the MODU segment. Because these options are quite often obvious to lose. If we do well, if we operate well, these are platforms producing oil and gas day-to-day 24/7 and the drilling operations are associated with that kind of production. So we do well, and we have reason to believe we'll do that. We're going to continue with this kind of a backlog. So I think the good thing here is that platform drilling activity has really proven over the last year from being a marginal business, with even losses some years ago, we are now close to a double-digit margin. So that has really turned around. And with the recent development on Ekofisk, which we also got safety award now, which is quite important for us. This is a good contribution to our operation. Well Services. As I say, we have -- is the same setup. We have had tough times in Central Europe, East Europe, Middle East, just to mention some. That has been better now. We also operate in Central Asia, which has also been quite challenging to move equipment and people around, for example, Turkmenistan, for example, Kuwait, in Asia, Middle East has been challenging. Very unpredictable situation COVID wise. Up and down, closed, opened, closed again. So it's been a challenge to keep the operation running. The good thing is that Norway has really opened up for more activity, and we see that the drilling activity, well activity -- drilling and well activity in Norway, North Sea has been okay over the last period. And that has now given a significant contribution to the activity so that even though we didn't meet exactly all targets last year regarding the earnings and the EBITDA, we are close to meet that anyway. So we're satisfied. We have some very interesting potential businesses down in Malaysia for the time being. We bought a small company called AsiaPac to be present locally, and we are able to buy contracts from Petronas. You have to be local to get that. And so we acquired a small company down there to be -- to get access to that market, which is for locals only, more or less, you have to be local organized. And we also have an interesting, hopefully, a casing drilling operation, which is the first one really with Petrofac in Malaysia. And we expect the casing drilling activity to start the campaign in March, I guess, late March. And if that's successful, there are several other opportunities with other clients in the region. For example, Shell also has a lot of activity regarding potential casing drilling. And if we are able to conclude and get the first campaign now successfully delivered, I think we will open a new market for us. So we cross the fingers, and we have good reason to believe that this is going to be interesting and hopefully, a very positive campaign. Regarding the visibility of the backlog, I think, I said in the beginning, it's $2.3 billion, has been stable over time. Varying between $2.34 billion to $2.67 billion and such. And we are -- we expect to maintain the backlog in that level going forward. And we also see now and when I come in to the market, there are more activities to come, and we will probably get our share there. If you take a look at the market, I think, again, of course, we cannot just avoid talking about the COVID situation. It's challenging. And with the outbreak of the mutant viruses before we get the vaccine systems in place globally, this is creating uncertainty in continuous operations. We have learned a lot how to mitigate that uncertainty, but we are depending on everybody around us doing the same because, as you know, we operate as a rig contractor, we operate with clients, we operate with third parties. Typical 20 contractors on board on a rig during operation and from different companies. And we all depend on what everybody is doing, following the same disciplined way to act. And we have had outbreaks in operations. There hasn't been any impact on the financials. But in both fixed and the floater side, we have had outbreaks of the virus, which has hindered uptime and made things more kind of complicated to execute. We guess that we will have that picture rolling into, hopefully, not too long into the future, but we all hope for efficient working campaign and that things are stabilizing. This will always be something that we have to deal with. And there's no easy answer here. There's too many involved to say that this is something we control alone. We certainly don't do that. We do have a share. Let's take the MODU market. I think to start with, we have -- the reason we have been, I'd say, creating and building backlog, we have been in the forefront of investing into the rigs with the green -- I would say, green technology things to reduce emissions. We have talked about that last time in the last quarter. We have continuously now, since we spoke last time, continued to invest in technologies, prepare for type of green power sources like shore power. We are -- we have identified, I would say, interfaces to bring in ocean offshore wind power, we are looking at type of technologies to use the gravity on board with flywheels and batteries, hybrid solutions. We are working with a look at future when carbon catch packages could be more commercially available. We can -- we have identified interfaces to implement that kind of technology on board. We have looked at different fuel sources like ammonia or in the future, hydrogen. So all these things have been worked with, and we are continuously preparing for that. And that is also one of the reasons we are getting contracts because all the clients we work with put very high in a way, level of specifications on the assets. We have to fulfill those kind of requirements to meet the target of less emissions. Our target has -- we are one of the contractors saying 0 emission. We have a target of reduced emissions compared to 2015, '16 with 40% in '26. That's achievable, 70% within '35. And then in '50, 0, which is the overall target. But the market is absolutely not in balance. In the harsh environment market, when we see now things are coming up, there are more activity within the -- with the PDOs, for example, in Norway, I guess there's something like 35, 40 PDOs for approval with the government or the authorities. So we expect that there will be more activity in '23, '24, '25 and onwards, and we see that. But remember also that with the 30, 40 PDOs coming, there will be potentially also restriction on capacity. So we have seen it before, if there is too much stretch in capacity, things have a tendency to be postponed. Now this is for the harsh environment market. With the Odfjell market with all the capital running now with other companies with a heavy loads on deepwater, utra deepwater assets, there's absolutely a need, as I said last time for significant, I would say, recycling of assets. I indicated 30%, 40% for that fleet some time ago, I guess it's at least in that level, if we ever want to get it in balance. So I think we have the focus on the harsh environment. And just to remind you, harsh environment market, we talk about is Norway, U.K. typical, the Barents Sea, future Russia, Atlantic Canada, South Africa and maybe South oceans down in South Americas and in that kind of region. And it's not a super big market, but demand for assets in that market is not -- they're not asking for the old ones, they ask for the more modern assets with, of course, the green -- obviously, the green technologies on board. So we decided to give Bergen a rest. And if we saw the need for that kind of assets, we, of course, would never have put it to that conclusion. But there's no demand for that asset, at least for the next couple of years. We don't spend time on SPSs in that direction. With the well services side, I think fair to say, we -- when the pandemic might be less severe, and we get more, I would say, conscious with more, I would say, deep population and actives, being vaccine, more stable, more predictable. We see that the demand for these kind of services, as I mentioned, will grow okay. I will not use other words than that. It will be okay, and we expect growth in that area. And with the new, I would say, product lines, we are working with the wide pipe and with the casing drilling and with access to other markets. We certainly are quite optimistic about how these Well Services will develop over the next period. Energy, we still see some volatility within the platform market. And we are, today on a level where we have stabilized the business for acceptable margins, close to 10%. We are able to talk about 8%, 10% margins in this area with an okay cash flow. And with the top of all the assets we operate, we have -- we bring in add-on sales from typical well services and all type of modifications, all type of electrification activity, which we work with will bring more work to the technical side of the engineering and the technical side of the organization. We're also looking for -- with that -- in that energy sector, the support over all our green initiatives regarding what I talked about earlier with type of electrification of assets, bringing type of CCS activity in there, looking at potential link from shore power and hookup and so forth. And of course, all the projects we have done, for example, the modification for Stavanger for operating in Africa has been a significant project for type of energy and technology side. So we see that -- in general, we see a better market for all business areas, even though we have the cloud above us, which is linked to the COVID, and we are depending on that, the global market and the need for energy will be more predictable. And hopefully, the oil price will stabilize more in the level we are now, and that will release a lot of new activity. If the oil price is fluctuating up and down, as we have seen, I think that the market will be more restricted to just go and invest. And remember that the investment in these oil sectors over the last 7, 8 years has never been lower than ever. It is very little invested. So the segment is -- the whole sector is underinvested. And if the trend for -- need for more oil or stabilized oil production is still there in a couple of years' time.Certainly, there will be more activity. And that's what we expect for. I don't believe that we'll go back to the -- somebody called it the good old days, going back to '13, '12 -- '12, '13 with a very high day rates, but we expect that the day rates will continue to go up. There will be a combination of typical phase value of the day rate and incentive schemes, different compensation formats, more linked to the effective ORE performance, like producing wells rather than just look at the day rate. So we see the trend from many more now coming from very few to many more talking about that kind of integrated kind of services with type of service contractor like Halliburton, Schlum or Baker together with the rig owner, together with the client, that is a -- or a cocktail or a combination where things might be somewhat different in the future because the -- I would say, the experiences for that kind of cooperation has been quite good in many areas. And that's shown that, that efficiency and also the safety has been taken care of and efficiency has gone quite significantly up. So with that, I think if you have questions, later -- take it later. Atle, you can go through the financial presentation.

[Atle Sæbø, CFO & Executive VP]

Thank you, Simen. I will start with the group summary financials on Page 13. Here you can see that the group operating revenue was $355 million compared to $221 million in fourth quarter '19. The group EBITDA was $171 million compared to $93 million in the same period the year before. The increase in EBITDA is mainly due to increased EBITDA in the MODU segment and then especially with regard to Deepsea Stavanger South Africa operations, which according to IFRS 15, it gave a good payment in fourth quarter '20. The EBITDA margin in fourth quarter was 48% compared to 42% in the same period in 2019. The full year group EBITDA was $420 million in 2020 compared to $332 million in 2019. These were the blended figures for the capital-intensive MODU drilling units segment and the labor-intensive Energy segment. If we then move on to Page 14 with the segment reporting for the MODU drilling units. The operating revenue for the MODU segment was $292 million compared to $160 million in the fourth quarter 2019. The EBITDA was $161 million compared to $80 million in fourth quarter '19. The change is due to an increase in EBITDA for Deepsea Stavanger of USD 90 million, reflecting completion of the successful project in South Africa. This is partly offset by lower EBITDA from Deepsea Aberdeen and Deepsea Bergen in the fourth quarter 2020. Please note that any cost incurred in Q1 2021 related to utilization from South Africa will be expensed in Q1 2021. The EBITDA margin was 55% compared to 50% in fourth quarter '19. The full year MODU EBITDA was USD 375 million in 2020 compared to USD 291 million in 2019.If we then move to Page 15, take you through the segment reporting for Energy. The operating revenue was $45 million compared to $38 million in the same period in '19. EBITDA was $3 million compared to $6 million in Q3 2019. The reason for the decrease is mainly explained by less start-up compensation in this quarter compared to last year. The full year results ended with a 10% EBITDA margin for this segment with full year energy EBITDA at USD 15 million in 2020 compared to USD 17 million in 2019. If we then move on to Page 16, which will take us through the segment reporting for Well Services, you can see that the operating revenue was $28 million compared to $31 million in the fourth quarter '19. The EBITDA was USD 9 million compared to USD 11 million in fourth quarter '19. The Q4 2020 result is affected by improved activity and product line in Norway, offset by a reduction in other regions and was still affected by the COVD-19 pandemic especially outside the Norwegian Continental Shelf. The EBITDA margin was 32% compared with 37% in the fourth quarter '19. The full year Well Services EBITDA was $32 million in 2020, same as in 2019.If we move on to Page 17, we have shown the bridge from some EBIT of the segments to the group consolidated profit before tax by adjusting before eliminations and corporate overheads and net financial items. The corporate overhead was $5 million in fourth quarter 2020. And as you can see, the net financial items were $20 million in fourth quarter '20 compared to $31 million in fourth quarter '19. If we then move over to Page 18, showing the summary statement of the financial position, I would like to focus on the group's gross interest-bearing debt, which was $1.212 billion at the end of 2020. We had $207 million in cash by the end of the year. And an equity ratio of 45% at the end of 2020. If we then move on to Page 19, it's the statement of cash flow. I would like to focus on that net cash from operation was $157 million in the fourth quarter compared to $76 million in fourth quarter '19. The investing activities was $33 million in the fourth quarter '20. We paid approximately $67 million in bank debt in the fourth quarter and approximately $183 million for the whole year 2020. The cash position as per year-end was $207 million, as mentioned, compared to approximately $170 million by end of 2019.If we then move over to Page 20, which gives you the summary of the fourth quarter 2020. If you then start looking at the MODU drilling units, we continue to build backlog and to be a preferred partner in the harsh environment. We have attractive harsh environment assets and a healthy outlook in the business. Energy. We rebranded the former platform Drilling & Technology to Energy in 2020. It's solid operations combined with healthy financial results. We were awarded 4 additional years on the Brage platform for Wintershall DEA in fourth quarter. Well Services continued strong activity, although the more -- although the service market has been affected by less demand due to COVID-19 in combination with the oil price turbulence we have seen through 2020. If we take a look at the key financials, you can see that we have an earnings visibility through $2.3 billion order backlog. We have a sound cash position. And in my opinion, we have a strong balance sheet, combined with continued deleveraging, as we've been doing for the last few years. So this was what we would like to take you through for the fourth quarter. And as this concludes our presentation, we will open for Q&A session for you.

[Operator]

[Operator Instructions] We'll take our first question from Fredrik Stene from Clarksons Platou Securities.

[Fredrik Stene, Vice President]

Fredrik here. I actually have 2 questions for you today. First one is short and relates to the Stavanger and the Total contract. You recognized all the revenue now, and you're saying that there might be some cost for demob in the first quarter. Are you able to give us a small or kind of a summary of what that could potentially be? And is there a cash -- is there any cash left coming from Total? Your rate or is it really just the cost that you have to take on your own P&L next quarter? That was the first one.

[Simen Lieungh, CEO & President]

Take that, Atle.

[Atle Sæbø, CFO & Executive VP]

Yes. Maybe I could give you a short answer to that one. The unit started the demobilization from South Africa in the beginning of December and ended up in Norway by end of January this year. So the operating cost, the cost of operating the unit in January and before we put the operation for the next contract, most likely in end of March, early April will be expensed in 2021 in the first quarter. I don't have the exact figures, but that will be the operating cost for the unit in this period. And of course, the fuel cost associated for bringing the unit back to Norway. That's the first part of your question.

[Fredrik Stene, Vice President]

Yes. And also, if there's some cash left coming from Total or is that all done at [indiscernible]

[Atle Sæbø, CFO & Executive VP]

Yes. We have received a substantial part of the Total payments in 2020. But of course, the payments are lagging from 30, 45 days. So there is also a payment coming in by end of January, early February. I don't have the exact figures, but there's some $20 million, $30 million in that area.

[Fredrik Stene, Vice President]

Okay. And the second question relates to your debt, and you have some maturities coming up later this year. Do you have any color you can share with us as to how you expect to tackle all that? Have you been in discussions with your current lenders? Do you think it's fair to assume that it can be extended with the similar amortization schedule? Or do you think that you would need to be more creative in a way?

[Atle Sæbø, CFO & Executive VP]

Well, first of all, we have started the talks with our main banks regarding the renewal, which comes up by the end of 2021, I think it's November. And those discussions are based on the fact that we have, first of all, we used the total debt substantially over the last few years. In addition, we have secured a solid backlog, as Simen took you through earlier in the presentation, for the last year or 2. And we have now a very good backlog for the harsh fleet. Based on this, we have started discussion with our main banks regarding a renewal, and this is developing very well at the time being. But we will work as soon as we have finalized the term sheet for the renewal and of course, we are also using this time to increase the flexibility in the loan agreements, giving us flexibility for the future. So I know the banking market is harsh. The rig market in general is not good. But based on backlog and our total debt and cash positions, we are very optimistic to secure that agreement in -- for that medium.

[Operator]

[Operator Instructions] We have a question from Christopher Møllerløkken from Carnegie.

[Christopher Møllerløkken, Research Analyst & Analyst of Oil Services]

Related to the CapEx in the fourth quarter, was that on Deepsea Stavanger and any work on the BOP there? And as the rig is still at yard or case side in Norway, will there be any CapEx booked in first quarter alone? And final question on CapEx. As you mentioned in the call, there is no SPS before 2024. Any fair guideline regarding what we should think about CapEx for full year in 2021 to 2023 per year?

[Atle Sæbø, CFO & Executive VP]

First of all, we have the Well Services, which we do yearly capital investments in new equipment in [indiscernible] of equipment. Of course, this varies with the activity level, but that's part of what we did in fourth quarter, and we continue in '21, '22. But it's in limited amounts compared to what you have seen from the SPS. And of course, like we said, we had some returning from South Africa. We have an upgrade of BOP that will be installed on the unit, and we have some CapEx on the MODU drilling fields every year. It's typically $3 million, $5 million, $8 million or in that area in between SPS. And the cost of an SPS is a totally different level. But we can't give you any exact figures for 2021, but it will be at a limited level compared to 2020, 2019 where we had SPS on several of the units, which, of course, is very expensive.

[Christopher Møllerløkken, Research Analyst & Analyst of Oil Services]

And a bookkeeping question. The depreciation in MODU drilling fell quite a bit in the fourth quarter versus Q3, anything special? Or this is proxy for the level going forward?

[Atle Sæbø, CFO & Executive VP]

We had a small part of this burden that we had to take up to 0. Except for that, the depreciation in the fourth quarter should be representative for the future.

[Operator]

And we have a follow-up question from Fredrik Stene.

[Fredrik Stene, Vice President]

Yes, just one quick question on contracting dynamics. I have seen at Maersk, they have some of the performance incentives being linked not only to efficiency, but also directly to emissions on the CO2 and the NOx side. And I guess, while they're kind of ultimately drilling because if you have -- if you're growing faster, you're also having less emissions. Have you been in kind of similar discussions, where one of the payment elements are actually directly tied to emissions or emissions reductions? [indiscernible]

[Simen Lieungh, CEO & President]

I can answer that. Yes, we have the same type of mechanism. For example, when we implement technologies to reduce earning diesel on board, we have typical -- when we implement type of hybrids, we don't use the generators in that to the extent that we used to do, the savings compared to the old normal are given to us. So when we do investments on these kind of technologies, we are incentivized to use it as much as possible, of course, to reduce usage of diesel, for example, and the savings in that respect is given to us. So the incentive to find better and smarter way to optimize the fuel consumption is straight in the pocket.

[Operator]

And we have a question from Lukas Daul from ABG.

[Lukas Daul, Analyst]

So Simen, I mean, you paint a pretty, I would say, a big picture for the Norwegian market for 2023, '24 maybe even '25. Do you think that's going to sort of spill over into what you're bidding in terms of economics? Or are we sort of range bound at the level where we are right now?

[Simen Lieungh, CEO & President]

It's difficult to say. It's -- I think that I believe we will see an uplift in the day rates compared to where we are now. I think so. But as I said, I think we also have to accept that a lot of the compensation in the Norwegian market, if we talk to about Norwegian market, where there are relatively few players compared to the global market, I think you will see that it will be a mix of face value of the rate and incentive schemes. So I believe we will see over the next 3, 4 years, an increase in day rates. But it's very difficult to see what are the -- where are the -- in a way, limits, the high level limit. I'm not sure. But I guess that we will improve the day rates going forward until '22, '24 -- '23, '24 or '25, I guess. So how much is difficult to estimate, but we will get closer to starting with the 4 on the total basis I get -- I guess. I don't think you will see rates, as I said, jumping up to the time back in '12, '13 anymore, but rates come up, I believe, definitely yes.

[Lukas Daul, Analyst]

Okay. And I'd say that you are sort of repeating that you have more queries for work, but your 4 rigs are pretty much fully booked 2 years forward. So I guess the question is, is the turmoil that the industry is currently undergoing, is this sort of end up with an opportunity where you can get hand on some of the assets and increase your capacity? Meaning, you are able to acquire it at the right price? Or are you just going to sort of stick with 4 rigs and use the cash flow to maybe fund your new energy or the green initiatives that you have been sort of talking about?

[Simen Lieungh, CEO & President]

That's a very interesting question, Lukas. It's -- as you say, there's a lot of activity around us regarding restructuring. And with -- just I'll say, I feel sorry for that because it's really hurt the whole industry. So we hope that it will -- it is completed quite soon. There's a lot of opportunities out there. We have no secret. We have worked with many of them, but nothing has materialized because of -- it just didn't materialize. So if there are coming situations, I think it's too early to talk about that now because there's too much, I would say, internal things that need to be solved, that Chapter 11 are complicated, and it put some sort of -- some lock on top of it that you can't just toggle around the assets in that kind of situation because of the rules in Chapter 11 process. We have some assets we would like to look at. We have -- by the way, we operate 5, not 4. We have Yantai. So that's -- that's the fifth one, which is good workhorse. We put that into the fleet. We don't own it, but we have it there in our brains, it's our rig. But we have the rig [indiscernible] down in Singapore. We see that Seadrill, probably there are many players buying that these days, talk about spin them off. Are all of them very attractive? Definitely not, some of them, yes. The NOL assets, probably going to be part of [indiscernible] , I don't know. There are -- there are not too many to choose between, but there are some. And if the opportunity is right, we are clearly interested to increase the assets. But we don't have to do it. That's the good thing. We don't have to do it. We are doing also other things. But if we have -- if we see some good opportunities coming up out of these processes, we are willing to act, but there must be a willing buyer and willing seller. So I think I answered everything there.

[Lukas Daul, Analyst]

Yes. Well, I guess, it's not easy. But from the processes that sort of didn't end up in an agreement or something. I mean, would you say that the main reason that the other part is still being hanged up in the historical cost of that asset, which obviously require a much higher rate than what we are seeing today or what was sort of the -- what would be the main issue of those things not landing? Because I guess everybody would agree that a fewer bigger players is good for the industry.

[Simen Lieungh, CEO & President]

And I certainly agree on that. It's -- everything has a limit. But when I look at the [indiscernible] market, that one, they need to do something significantly to get things in balance. And within the harsh market, which is, I guess, more limited, I guess it will be healthy with some consolidation, definitely, yes. But I think that -- how to do the consolidation in the future could be done by -- I don't think we will see too many cash deals coming. We -- things on the relative values, it could be shared deals. There could be a lot of mix between companies within different structures with the potential end game associated and so forth.There will be a lot of different models to consolidate on. But it will probably not be about cash, but you might see some other things. And we are clearly interested in finding solutions that can bring us to a better place regarding capacity, but we want the right capacity. We don't want to kind of a brag cheap assets because they're cheap assets. We need to see that the assets are fulfilling our ambition regarding efficiency, regarding climate or environmental issues. And all these kinds of things. It must be for the right reasons. We don't want to grow for the volume. We want to grow for the right business, right?

[Lukas Daul, Analyst]

Guesstimate for when you, let's say, put some meaningful CapEx into your new initiatives in terms of the offshore win, et cetera. How far away are from that?

[Simen Lieungh, CEO & President]

Well, too early to say. We are where we are. I think we need to mature our thinking more to comment on. We are, of course, in the process of doing activity here, but it's absolutely not a forward in so harsh environment offshore win. So I think I need to rest my further answers on that and come back when we have a more specific if and when, I'd say maybe more if we have more to tell, okay?

[Operator]

[Operator Instructions] And it appears we have no further questions. I would like to turn the call back over to our speakers for any concluding remarks.

[Simen Lieungh, CEO & President]

Thank you so much for attending, and thank you for being active on the questions. So thank you for today.

[Atle Sæbø, CFO & Executive VP]

Thanks for your attention, everybody.

[Eirik Knudsen, VP of Corporate Finance & Investor Relations]

Thank you so much.

[Operator]

And once again, ladies and gentlemen, that concludes today's conference. We appreciate your participation today.