Earnings call transcript: Constellation Oil Services Q2 2025 sees stable revenues

Constellation Oil Services reported its Q2 2025 earnings with operating revenues of $139 million, a decrease of $5 million year-over-year. Despite challenges, the company maintained strong operational performance, with a notable EBITDA margin of 40%. The stock price saw a modest increase of 0.25%, following an impressive 10.3% gain over the past week according to InvestingPro data. Currently trading at $9.56, analysis suggests the stock may be overvalued relative to its fundamentals.

Key Takeaways

• Operating revenues reached $139 million, down $5 million YoY.
• EBITDA margin stood at a robust 40%.
• Stock price rose by 0.25% following the earnings report.
• Fleet uptime remained high at 94% year-to-date.
• Contract backlog was stable at $2 billion.

Company Performance

Constellation Oil Services demonstrated resilience in Q2 2025, despite a slight decline in operating revenues compared to the previous year. The company’s ability to maintain a high EBITDA margin and reduce its net leverage ratio from 2.1x to 2.0x underscores its effective financial management. The Brazilian offshore market continues to be a stronghold for the company, with significant opportunities in upcoming tenders.

Financial Highlights

• Operating Revenues: $139 million (↓ $5 million YoY)
• Adjusted EBITDA: $99 million
• EBITDA Margin: 40%
• Net Leverage: 2.0x (down from 2.1x in Q1)
• Operating Cash Flow (H1 2025): $110 million (↑ $19 million YoY)
• Gross Debt: $644 million
• Cash and Equivalents: $24 million

Outlook & Guidance

Constellation Oil Services maintained its 2025 guidance, anticipating significant profitability improvements by 2026. The company is exploring refinancing options for its bonds and expects a potential rating upgrade by 2026. Additionally, the company is preparing for potential dividend distributions by the end of 2026.

Executive Commentary

"We have delivered strong financial and operational results, securing more than $2 billion in backlog," said Rodrigo Ribeiro, CEO. Daniel Harshman, CFO, emphasized the importance of successful contract transitions for meeting 2025 guidance and preparing for a turnaround in 2026. Ribeiro also highlighted Brazil’s strategic importance, stating, "Brazil continues to be the great place to be for the drilling business."

Risks and Challenges

• Operational Challenges: Maintaining high fleet uptime and managing contract transitions.
• Market Volatility: Fluctuations in oil prices could impact revenue.
• Debt Levels: Managing gross debt of $644 million while exploring refinancing options.
• Competitive Pressures: Navigating competitive dynamics in the Brazilian offshore market.
• Regulatory Changes: Potential impacts from changes in Brazilian energy policies.

Constellation Oil Services remains a key player in the Brazilian offshore drilling market, leveraging its strong relationships with major operators like Petrobras, Exxon, and Chevron. The company’s focus on technological advancements and strategic positioning for upcoming tenders positions it well for future growth.

Full transcript - Constellation Oil Services Holding SA (COSH) Q2 2025:

Conference Moderator: Good morning, ladies and gentlemen, and welcome to the Audio Conference Call for the Second Quarter twenty twenty five Results for Constellation Oil Services. Thank you for standing by. All participants are in listen only mode. Please refer to the forward looking statement sessions in the company’s earnings release for the matters that will be discussed in this conference call. They reflect Constellation’s current views and assumptions with respect to future events, which are subject to risks and uncertainties.

The Q and A session will be held at the end of the presentation, and questions can be made by the attendees by clicking on the Q and A icon in the bottom center of the screen. Now I would like to turn the conference over to Mr. Rodrigo Ribeiro, Constellation’s CEO. Please go ahead, sir.

Rodrigo Ribeiro, CEO, Constellation Oil Services: Thank you, and good morning to everyone. Welcome, and thank you for joining the call today. With me are Mr. Daniel Harshman, our CFO and Thiago Shimelfeni, our chief commercial and innovation officer. Our second quarter two thousand twenty five financial statements, earnings presentation, press release, and the updated fleet summary report are available on our IR website.

In my prepared remarks, I will cover the market landscape and the outlook for our business. After that, Daniel will review our financial results in in more detail. From our early days in a complex offshore market to becoming Brazil’s leading offshore drilling contractor, our journey has been guided by resilience, discipline, excellence. We have delivered strong financial and operational results, securing more than $2,000,000,000 in backlog. This reflects our operational strength, track records, and the trust from our clients.

In the 2025, we achieved $99,000,000 in adjusted EBITDA, confirming that we remain on track to deliver our full year guidance. Then we will provide more details about that shortly. The outlook for Brazil’s offshore drilling industry remains positive. In the recent a and p fifth concession rounds, the Brazilian petroleum regulator awarded 34 offshore blocks. Notably, Petrobras and Exxon won 10 blocks in the equatorial margin, Chevron and CNPC one nine, Shell added blocks in in Santos Basin, and Karum expanded near Neon and Bauna with Petrobras and Petrogal winning three in Pelotas, a new frontier in Brazil exploratory landscape.

These awards confirm continued activity from the top tier operators. Their presence adds stability, predictability, and long term visibility to the sector. Next, a and p license round is scheduled for October. We’ll offer seven new offshore blocks. We expect a strong interest reinforcing, Brazil’s position as a global energy hub for years ahead.

Looking further, these new fields to be explored will develop into projects later this decade, creating a multibillion dollar pipeline of demand for rigs, FPSOs, and subsea equipment, well into the 2,000 thirties. In addition, Petrobras reaffirmed in its, latest quarter earnings call that it it is fully committed to execute its 2025 CapEx plan. Their commitment to upstream investments continue to drive production growth, offsetting lower oil prices. Overall, we see a stable scenario in Brazil. Clients are advancing with their new projects, and our fleet is well positioned to capture opportunities by delivering efficient and reliable solutions.

With that, let’s now turn to the latest developments across our fleet. On Gold Star, we are making good progress in securing backlog for next year. We see solid opportunity to extend the current contract with Petrobras. Giving its proven performance and competitive profile, we see a compelling case of continued engagement. On Lone Star, which is currently operating to Petrobras and will transition to Bravo in Asia at the end of the year for one year contract, we are currently in advanced discussions with an independent company that shall result in additional contract coverage beyond 02/1926.

With this potential contracts and with the AlphaStar firmly contracted at a great day rate with Petrobras until 02/1928, we are optimistic that our three semisubmersibles will remain with the strong utilization, showcasing the demand these assets continue to generate. This level of interest reinforce our belief in their continued relevance and long term value. About ATONKY Star, we are currently in active discussions with independent players to secure backlog for the rig for multiple years. The rig is in excellent condition and ready for short lead time projects. As we described in prior earnings calls and presentations, we remain optimistic and see the commissioning as a growing opportunity in Brazil for Petrobras and independent operate.

Looking ahead, Brazil’s decommissioning market is set to grow driven by aging infrastructure and Petrobras divestments. With many wells to be plugged over the next decades, we see significant opportunities for PMA campaigns. LagunaStar concluded its Petrobras contract in July and is now undergoing its scheduled SPS and upgrades in Guanabara Bay. It is expected to start its new contract next month at a day rate in the mid four four hundreds, becoming a strong EBITDA contributor. Regarding the remaining honored fleet, contract schedules and programs remain as planned as anticipated in our previous calls.

Moving to our third party rigs, title action and Admarine five eleven are about to commence their contracts after upgrades and mobilization. This expansion has increased our workforce by over 200 employees and got us, close to 2,000 employees mark, demonstrating our ability to scale safely and efficiently. We continue to lead in contact coverage with a full fleet commitment in recent years and expect further positive development soon. Now talking about new tenders, the Buzios one was held in late July in a reverse auction format. As you may know, the process called for one or more high spec DP floater starting on q four two thousand twenty six to q one two thousand twenty seven, which matches the Bravastar availability window.

While we can’t comment on any awards yet, we are encouraged by how things are progressing and remain optimistic about securing work for this rig. It is also worth highlighting a key milestone for Bravestar. With the expiration of the relevant patent, this was the first tender that the rig was eligible to be offered as a full dual activity unit. This upgrade allows it to capture the full commercial value of current Petrobras tenders. Based on the latest tender, day rates for full dual activity rigs can exceed those of single direct units by 22%, unlocking meaningful upside.

Also, Petrobras recently launched the tender for Merrill Fields. This process calls for a single high specification DP floater for an up to four year contract similarly to Buzios tender commencing in q one two thousand twenty seven. This tender, shortly after the tender for Buzios fields, integrates Petrobras commitment to carry on its, upstream development program on the pre salt. Beyond Petrobras, the market shows good momentum with projects, such as Shell Gato do Mato as as well as recent discoveries such as BP major discovery in the Boomerang block, its largest in over twenty five years, reinforcing Brazil’s strategic role in the global oil and gas. As already mentioned, we are also closely exploring other opportunities with independent companies offering efficient solution that meets their needs.

By the way, let me share some good news related to innovation and our records with customers. Through an amendment in the Bravestar contract with Petrobras, new technology was installed onboard of the vessel to enable exploration drilling in 280 meter of water depth. The innovative use of real time simulations, additional twin, and environmental sensors ensured accurate forecast and efficient responses. The experience proved the feasibility of the safety of such operations, consolidating on the strategic advantage, and expanding opportunities for new developments and well interventions besides, keeping our fleet in the state of the art in terms of the equipment and operational capacity. It also added the financial benefit for Constellation.

After having drilled the deepest offshore well in Brazil and the fastest well in the pre salt, the Bravestar now holds the record for the well drilled in the shallowest water depth on the full DP mode. These results reflect our firm commitment to safety, innovation, and sustainability. Through strategic partnerships and advanced technologies, we have expanded capabilities and delivered consistent high quality performance across our fleets. These achievements are testimony to the dedication and expertise of our offshore and onshore teams. In summary, industry fundamentals, remains strong with continued opportunities for new contracts.

Recent tenders met expectations with no negative surprise. We remain focused on executing our strategy, growing EBITDA, reducing leverage, and preparing for dividend distribution. With that, I now hand the call over to Daniel to review our q two two thousand twenty five financial results. Daniel, please.

Daniel Harshman, CFO, Constellation Oil Services: Thank you, Rodrigo, and good morning to all participants. I’ll now walk you through Constellation financial results for the quarter ended in 06/30/2025. Our fleet maintained solid uptime of 94% year to date. In Q2, uptime was 92%. Operating revenues for the quarter totaled $139,000,000 a year over year decrease of $5,000,000 $4,000,000 of this reduction came from the depreciation of the Brazilian real, which weakened 9% from the average of $5.21 in Q2 twenty twenty four to $5.67 in Q2 twenty twenty five.

The remaining $1,000,000 downside was mainly driven by the efficiency of the fleet. Our contract backlog remained flat at $2,000,000,000 compared to Q2 twenty twenty four, this represents an 80% increase or roughly $900,000,000 With our entire fleet already committed for 2025, we are focused on ongoing and upcoming tenders, also on bilateral discussions with our clients aiming to secure additional backlog for future years. Contract drilling expenses were $76,000,000 in Q2, down $14,000,000 year over year. The key drivers were operational materials were down $9,000,000 mainly due to the deferral of certain purchases to later in the year, a timing effect expected to reverse. Payroll was down $4,000,000 of which $3,000,000 came from the depreciation of the Brazilian real and $1,000,000 from the exit of Alinde Star in 2024.

Maintenance costs increased by $2,000,000 partially offset by FX or a net impact of just $1,000,000 Other costs were down $2,000,000 as prior year expenses included non repeating costs for the decommissioning and recycling of Volinde stock. General and administrative expenses were $10,000,000 in the quarter, up $2,000,000 year over year, mainly from one off costs related to our Euromax listing. Other operating income remained stable year over year. Adjusted EBITDA was $55,000,000 just $2,000,000 below Q2 twenty twenty four. Our EBITDA margin held steady at 40%, showing resilience despite some operational challenges.

Operating costs, which include contract drilling expenses and depreciation decreased by $10,000,000 year over year. Drilling costs fell $14,000,000 partially offset by a $4,000,000 increase in depreciation linked to higher CapEx investments in contract transitions. As a result, gross profit improved to $8,000,000 Net financial expenses totaled $8,000,000 in the quarter, a sharp 47% reduction compared to $15,000,000 in Q2 twenty twenty four. The improvement was driven by a $5,000,000 positive result from hedge contracts and $2,000,000 in interest income from short term investments. This reflects the benefit of our decision earlier this year to hedge BRL denominated cost through December 2025.

The program has proven effective, protecting our margins and supporting our assumptions in our 2025 financial plan. On taxes, Q2 twenty twenty four benefits from $4,000,000 reversal. By contracts, Q2 twenty twenty five recorded $4,000,000 in tax expense, mainly from positive taxable income at our Brazilian service subsidiary. This $8,000,000 swing explain why Constellation closed the quarter at breakeven net income compared to a $1,000,000 loss last year. Now turning to cash flow.

Operating cash flow in the first half twenty twenty five was $110,000,000 up $19,000,000 from last year. About $16,000,000 of this related to progress collections committed to pre operational cost of the managed fleet, which is expected to be disbursed later this year. We also received a $24,000,000 mobilization fee for AlphaStar in Q2. CapEx totaled $64,000,000 in the first half. Approximately $31,000,000 of the CapEx relates to AlphaStar new Petrobras contract.

Roughly $17,000,000 corresponds to long lead items for the Laguna Astar upcoming contract. The balance was for regular maintenance overhauls and SPS across the fleet. Moving to cash used in the financing activities, we paid our first semi annual bond coupon of $30,000,000 in May, down from $45,000,000 last year under the old debt structure. Overall, cash and equivalent increased by $26,000,000 year to date, including FX effect and short term investment pro form a cash rose $18,000,000 reaching $2.00 $4,000,000 at the quarter end. Gross debt was stable at $644,000,000 as of 06/30/2025.

With higher cash, net debt fell $20,000,000 since December 2024 to $440,000,000 Last twelve months adjusted EBITDA was $220,000,000 unchanged from last quarter. As a result, net leverage declined slightly from 2.1 times in Q1 to two times at Q2 twenty twenty five. Overall, we closed another solid quarter marked by disciplined execution and resilient performance. I want to reaffirm our optimism to delivering on our 2025 guidance we shared last quarter. Now, I’ll provide some updates related to subsequent events.

On July 7, we completed an eighteen:one reverse stock split aimed at improving share liquidity and attracting institutional investors. On July 31, we engaged DNB as our liquidity provider, supporting more efficient and stable trading of our shares in the Euronext. We believe these actions will not only promote greater transparency and confidence among investors, but also contribute to fair pricing dynamics. Ultimately, this reinforces our commitment to improving market access, broadening our reach within the investment community and supporting the long term growth of our shareholder base. As Rodrigo mentioned, our contract transitions are underway.

Laguna Astar started in late July and we expect higher spend in the second half linked to Amaralina Astar and OneStar transitions. We also anticipate some increase in operational materials and maintenance costs as deferred interventions are carried out. With that said, our twenty twenty five guidance remains unchanged. Execution of these transitions on time and within budget is critical as they are foundation for stronger financial performance within 2026. With most of our fleet committed to recently priced contracts, we expect significant improvement in profitability and cash flow for the next year.

To conclude, successful execution of contract transitions this year is essential for meeting 2025 guidance and preparing for the turnaround in 2026. With improved contract coverage and stronger cash generation, we expect to deliver much better results and and unlock real value and distributions to our shareholders. Just before closing, let me also provide an update on the commercial dispute related to the legacy Sachi Brasil matter. We continue to make progress with Petrobras under the proposed mediation process and the dialogue remains constructive. With that said, the pace and timing of the mediation are not within our control and we recognize it will take time before there is full clarity.

Importantly, the relationship with Petrobras has not been affected in any way. We continue to be paid on time, we are invited to tenders and we maintain a strong partnership on no ongoing contracts. Based on advice from our external legal counsel, we continue to view the likelihood of any material liability as remote. We remain confident that the mediation can drive to a neutral offset among the parties, while preserving our long term strategic business relationship with Petrobras. That concludes my remarks.

And I’ll now turn the call back to the operator for the Q and A session.

Conference Moderator: Our first question now will come from Federich’s team, Clarkson Security. The question are the first question, can you elaborate more on the opportunities for the Gold Star and the Atlantic Star? Should we expect any major downtime in 02/1926? The second question from Fredrik, there are three, is do you think Bravastar is in a good position to win a contract in the Buzos tender? When do you expect Petrobras will award the contracts relating to the tender?

And the third and final question from Fredrik’s team is, do you have any new information around the Sete Brasil related mediation with Petrobras?

Rodrigo Ribeiro, CEO, Constellation Oil Services: Hi, Frederic. Thank you very much for your questions. I will do my best here to make sure I cover everything you ask. But I I want to start with the general statement that will address part of the questions here, which is I’m really glad with the level of activities that I see coming to our commercial department led by Tiago here in this season. I think it’s it’s really in line with what we expected.

If you remember, last year in the second half of the year, we are very busy as well and where the moment when we manage to reprice most of our contracts, which are guiding our transitions right now. And I’m pretty sure that today, being in a in a better position as we are in in terms of contact coverage. We also will benefit from this wave of possibilities here in Brazil and making sure that we we’ll continue to build our backlog and also to minimize any possibility of white space. So let me take here your your first point, and I will start with Goldstar. So as you know, Gold is currently under the contract with Petrobras that we’ll finalize by the end of this year.

And and the the the the are going smoothly, but we are we are currently engaged in in promising discussions with operators in in in general for opportunities that can start in 02/1926. But most importantly, given the Petrobras interest in retaining the rig throughout that period, we are still holding the option in the in in the contract where it can be extended on the on the mutual agreement with with Petrobras for one more year. And and therefore, we we really remain optimistic that Goldstar will be achieving full utilization from 2026 to 02/1927. So that’s what we we can share now. The negotiations are getting more and more mature, and we were track with the Petrobras with a significant scope of work, more focus in on p and a for for Petrobras.

The current contract is is running and will be concluded by the end of this year with a possibility to to continue in the beginning of next year as well for a couple of months. Beyond that, we are currently engaged in promising discussions with potential clients, some some of them independent operators to secure additional backlog for for this rig that would give us multiple years of operations with the with the rig. Of course, Atlansky is fully prepared for continuation. The rig will be the only moored rig available in Brazil, but more importantly, she is in a excellent condition to continue operating in a in a in a direct continuation if if needed. So we we are really working with those clients to make sure we have the best possible capturing the the the opportunities to fill up the gaps and make sure we will reduce the white space for this rig as well in in 02/2026.

I think it’s also fair to mention the the commissioning market in Brazil is really expected to grow and grow significantly. The the the some of the offshore infrastructure in Brazil are getting old and and and and and old every day. Petrobras previous divestments to other players as well, and and the Petrobras ongoing air force to to hit their old fields is open up opportunities for for a rig like like Atlantic. And so we have visibility for several wells to be the commissioning in the in the coming decades in in in Brazil. Only Petrobras alone announced the other day more than 400 wells in their in their pipeline to be abandoned, and and this is exactly the place that we want to position Atlantis Star.

So now I think your next question is related to BravaSTAR and and and the Buzu standard. As you know, we we still cannot comment the results in Buzu standard, but it’s a very promising process when where Petrobras is is looking to secure a couple of rigs. In in in our view, three or four rigs will be hired in in this process. And and the mobilization window, the contract will be starting in q four two thousand twenty six and q one two thousand twenty seven. And this is matching exactly the the availability of BravoStar minimizing the the time between contracts.

In addition to that, Frederick, Bravastar is in a in a continued work for Petrobras, which is a benefit for us in terms of CapEx investment because what we need to do in terms of adequacy is just to bridge the gap between the previous spec or the previous contract and and the current one. So we really see Braava very competitive for this tender. I I also must highlight to you that another benefit we have in in this process is because Bravo is now being able to be offered to the client as a full duo Derek Rigg, and this is bringing a premium in in the day rate of about 22% certainly unlocking meaningful upside for us and and and increasing our level of competitiveness in in in this process. So, yeah, yes, we are very optimistic that we can we will we’ll be in a in a great position to participate of this process and hopefully, in the end of the process, be able to to announce one additional contract. I mentioned in the beginning, very positive for our company as well to see that we start working on the contract coverage for 02/1929.

Right? That’s what this new contract for BravoStar would give to us. And it’s it’s a it’s a simple indication of how solid it is, our business plan. When we look for our deliverables and and contract repricing and transitions that we are doing now, it’s it’s really the position that we wanted to be and and certainly give us even better possibilities to benefit from the current pictures, explore all the new possibilities, and and as I mentioned, mitigating the the the so called white white space for for the fleets. So I think the last question is regarding to set in Brazil.

I believe as you have heard on the Daniel’s prepared remarks, he made a quite comprehensive explanation about set to Brazil. I have not many new things to add. The relationship with Petrobras remains very constructive. There is no impact whatsoever in the day to day operations. This is, I mean, old and and complex legal issue with the legacy project involving such Brazil and Petrobras dating back over ten years as as as you know.

So but our but our mediation is is progressing as we planned and and expect. The mediator is appointed, and and he or she has accepted the role as a mediator. All the the paperwork in the process, which is due diligence, conflict of interest verification. All this is is over now. So the proceeding is is started.

We we we we don’t control the timing. But, again, the the the inclination, the attitude, and and the collaboration is there for us to have a conclusion of this process without any impact for for our company, and and that’s what we envision. And and as per our lawyers assessment, probability of any impact in terms of liabilities is is still very remote. So I think with that, I I just cover the questions here. Thank you.

Conference Moderator: Thank you. The next question comes from Aaron, buy side analyst from IVO Capital. The question is many thanks for the conference and congratulations on the good results. Could you please remind us what would lead to a rating upgrade based on your discussion with rating agencies?

Daniel Harshman, CFO, Constellation Oil Services: Marine, thank you very much for the question. So I’ll try to pretty much explain what we’ve heard from some of the agencies on what they expect, and then I’ll try to cover on our internal expectation as well regarding timing on that. But the agency is pretty much focused on trying to understand what would be the mid cycle leverage and trying to get a sustainable leverage even in the mid cycle one and below three times. Always as well, they are trying to understand EBITDA levels. And what we understand is that for an upgrade or consideration for upgrade is keeping above 35 sustainability in EBITDA margin and as well, mainly healthy liquidity.

So from what you can see in our financials, we believe we are already sustainable from EBITDA levels even before repricing all the contracts and getting to all the transitions. We are keeping a pretty adequate liquidity And as well, we are getting to this net leverage below three times that we see in the year pretty much guidance. So I think we are ticking all these boxes and we should be able to expect that in the upcoming reviews, we will be eligible for getting an upgrade. Now trying to determine what sustainability really means for them, if it’s really for a couple of quarters, for three, four quarters, is what is the big question mark here. And I would say that this is more expected than I would probably say a 2026 upgrade is what I would personally expect.

And if it comes throughout the end of this year and the year reviews on annual reviews, maybe it would be an upside for us. But I do expect this to happen at least within the next year.

Conference Moderator: Thank you. There’s a following up question from Merritt. The question is, could you share more details on the upcoming dividend policy of the company?

Daniel Harshman, CFO, Constellation Oil Services: Sure. To follow-up, and I think this, we’ve been keeping, as well consistent with what we’ve had since the time that we did all the road shows and discussions in the last year. Our framework is quite clear, which our Board has approved the framework in which our capital allocation is quite disciplined in which we are investing CapEx pretty much in our fleet and to maintain and to serve our fleet. And then all the remaining cash that we will be generating from this new contract that we expect to start a significant generation once we have all the transitions done starting in 2026 will be to be distributed to our shareholders. So that’s the top priority is deleveraging the balance sheet in a very organic way with the transition of the contracts and increasing our EBITDA levels and cash flow.

And once we get to the covenants that we have on the distribution baskets, which is 1.25 net leverage, which we believe going to be in between Q3, Q4 next year, we will then start to have distributions. And we expect to have significant distributions starting by the end of the next year.

Conference Moderator: Thank you. The next question comes from Juliana Hosche, a journalist from RED. The question is, is Bravestar already operating with 22% premium on day rate? Or is that a projection for the potential new contract in the Buzios tender?

Rodrigo Ribeiro, CEO, Constellation Oil Services: Hi, Giuliano. Thank you for for your question. It’s Rodrigo here. Yeah. No.

No. Actually, this will be the first time where BravaSta will be enjoying the full potential of its specification after the patent expiry expiring in in in Brazil. So as you might know, Petrobras, they have three different categories for the high spec rigs. One is for the rigs with the single derricks. The other one is with for for the rigs with some sort of offline activities and and and dual derricks.

And and the third one, which is the highest level of category, is the one with the full duo and and and full offline capabilities. And that’s exactly what we have with Bravestar, and this will be the first time this rig will be competing, enjoying this possibility and and this 22% premium. So this is a potential projection for a future contract. You’re right. Thank you.

Conference Moderator: Ladies and gentlemen, remember so that if you want to ask a question, questions can be made by clicking on the Q and A icon at the bottom center of the screen. The next question comes from Matt Merin once again. And the question is, could you think about a refinancing of the bonds in the 2026 once you have done the contract transition and after a potential rating upgrade?

Daniel Harshman, CFO, Constellation Oil Services: Marine, thanks for this follow-up question. And I think this is a really good thought that we have in mind, right? So and to confirm, yes, we have this optionality. It’s just too early to pretty much give you a specific on the strategy that we would have if we were to refinance in the next year. But if you consider that our ongoing bonds, we have two year of the make whole payment that will be pretty much maturing within November the next year.

This could be a really good possibility for us in order to just refinance the balance sheet and to get a better covenant package and as well pretty much to improve within the rating if we have and as well to be getting a better coupon. So this is a possibility, certainly something that we consider. But we will expect that this will be something to be discussed more and more as we get closer to the date of this two year anniversary for the make whole payment, which is again in November the next year.

Conference Moderator: Thank you. The next question comes from Chandon, Investor, CCSD. The question is, can you comment on whether you see liquidity improving in the shares?

Daniel Harshman, CFO, Constellation Oil Services: Thank you for the question, Shandan. I think on the liquidity of the shares is something that we do not control, right? So it’s important to start by that. But we are seeing and we are getting a stronger hope that this is improving. And I think what make us to believe this will continue improving and will be a continuous improvement from here are really based in some of the actions that we have taken and some of the learnings that we are seeing that investors are getting.

I think the actions we summarized quite well during the call, and I’ll just try to emphasize it again here. I think, one, we are engaging very actively, with research analysts. So we are trying to continue improving and to continue having really good relationship with the analysts that cover the sector in order to get more exposure and more knowledge within the investors. And with that to have more potential buyers and potential in the sidelines for our shares. We also have done the eighteen:one reverse stock split, which we believe is one of the items that some of the institutional investors were expecting in order to avoid with some fluctuations that our stock when converting to U.

S. Dollars becomes to be a penny stock, right? So within the new pricing range that we have, the shares now are trading in a much more, I would say, healthier environment on this that makes as well more institutional investors to be looking at that. So all of this together and as well with more knowledge in the investor base, we are seeing that there are more potential buyers in the sidelines from what we hear and what we feel, more calls that we are getting with our IR team that we are attending and receiving intake, requests for calls and more knowledge on the company. And we shall expect that this is now a matter of as well finding within the right pricing range to be getting more sellers to their stock, right?

So which is as well something that we expect to be more fluid than we expect that within the recent recovery that we’ve seen of the overall sector, the industry and our peers to be trading at a healthier volume from now on. So that’s pretty much what we expect. But again, it’s something that is very hard to predict and pretty much controlled by the market, hard for the company to influence.

Conference Moderator: Okay. There’s a follow-up question, which is, are there any other restrictions to you paying dividends other than the leverage metric?

Daniel Harshman, CFO, Constellation Oil Services: Has a lot of details in there, and I will not be able to remember all of them. But I can confirm and I can tell you that we paid a lot of attention into this specific covenant during the time of the issuance of the bonds and discussions within the banks and the legal advisers that we had in order to be very clear that once we were to get to the 1.25% net leverage that we would be paying the dividend. So that’s the top priority for the company. And we are pretty confident that even within all the different restrictions that we may have in the restricted payment basket that we will be eligible and we are considering that once we get to below one and a quarter, we’ll be able to start paying the dividends.

Conference Moderator: Okay. Thank you. Moving on to another question from Chandan. It’s thank you for the call and congratulations on the results. And the question is, what are your thoughts on potential M and A opportunities for the company going forward?

Rodrigo Ribeiro, CEO, Constellation Oil Services: Hi. Thank you. Thank you for the question. I think in in general, it’s what we keep saying that this is a topic that is live. We always evaluate and consider opportunities together with our special committee.

Anytime that we see an opportunity arising, we’ll consider it. We will assess it, especially now that the new capital structure of the of the company and and the market leading, I would say, is scale in in this region. It’s certainly position consolidation in a in a in a very good position for for this. But also, it’s it’s fair to mention that by everything that we demonstrate today, our position as as a standalone in the company is is is very comfortable, and we also believe that as the leading market here, we’ll be in a in a great position to add value to to our shareholders as well. So Brazil continue to be the great place to to to to to be for for drilling business, but we never deny the the the synergies opportunities that consolidation could be for this type of market here.

So this is something that we always diligently assessing and observing. But in the end of the day, as we always say, any potential transaction must be value accretive to our shareholders. So in general, that is that, Daniel, I mean, feel free if you have anything to to add.

Daniel Harshman, CFO, Constellation Oil Services: No. Rodrigo, I think you addressed it very well. And obviously, not much that we can share within thoughts on what we have discussions with the special committee. But I think just to emphasize on what you said, after we’ve done all the recapitalization and within our new balance sheet, this is one of the things that we put as a priority for the company as well. Right?

So to be able to be controlling our destiny and to be able as well to be a potential consolidator in the market. So we will continue assessing those possibilities and we will share more details in case we have anything to be shared in the future. But for the time being, this is just part of our strategy.

Conference Moderator: Okay. The next question is, do you see international competition increasing in Brazilian tenders coming from Chandon Investors CCSD?

Thiago Shimelfeni, Chief Commercial and Innovation Officer, Constellation Oil Services: Hi, Chandon. This is Thiago here. Thanks for your question. And, well, we see stability in Brazil related to the competitors. Brazil is a market with the presence of mostly all the international drillers.

So I I wouldn’t say there is increased international competition right now. But we see the presence of all the contenders on in the ongoing tenders, and we believe we will continue with this stability provided that rigs get replaced as per the strategy of Petrobras with some incremental potential coming from other companies, which are also exploring opportunities in Brazil.

Conference Moderator: This concludes today’s question and answer session. I would like to invite Mr. Rodrigo Ribeiro to proceed with the closing statements. Please go ahead, sir.

Rodrigo Ribeiro, CEO, Constellation Oil Services: I just want to conclude here by saying that we are fully committed to achieve and deliver this year objectives. So this is continued to be our main priority here, taking care of our operations in a daily basis. But in this quarter, specifically, we will have three good priorities to focus, which is the continue to our contract backlog, as I mentioned before, maintaining the high operational uptime and of course ensuring timely and effective contract transitions for the rigs that we have, especially right now Laguna and Tidal action that are going through the acceptance process and being prepared for the final acceptance in the first wells of the new contracts. So if you want to continue to be in touch, we have two good opportunities to see us again and have new opportunities to interact. The upcoming events on Pareto Annual Energy Conference in Oslo in the September and also the JPMorgan Emerging Markets opportunities in London to a good next opportunity to interact with us.

It will be a pleasure to meet you all there. So thank you very much for your interest and your participation and especially your support in Constellation. And I wish you a great day. Thank you.

Conference Moderator: This concludes Constellation’s Oil Service audio conference for today. Thank you very much for your participation, and have a good day.

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