Earnings call transcript: Dolphin Drilling Q2 2025 sees revenue surge

Dolphin Drilling, with a market capitalization of $21.76 million, reported a significant improvement in its financial performance for the second quarter of 2025, driven by a notable increase in revenue. The company achieved total revenues of $93 million, marking a strong recovery from the previous year, continuing its impressive revenue growth trend of 57.1% over the last twelve months. Despite facing a net loss due to a $19.2 million tax appeal cost, Dolphin Drilling’s stock saw a 3.8% increase, reflecting investor optimism about its strategic positioning and market prospects. According to InvestingPro analysis, the stock’s RSI suggests it’s currently in oversold territory, potentially presenting an interesting opportunity for value investors.

Key Takeaways

• Dolphin Drilling’s Q2 2025 revenue reached $93 million, a substantial increase from the previous year.
• The company reported a net loss, impacted by a $19.2 million tax appeal cost.
• Stock price rose by 3.8%, indicating positive market sentiment.
• Strong operational performance with rigs achieving efficiencies above 90%.
• Strategic focus on cost reduction and market expansion.

Company Performance

Dolphin Drilling demonstrated a robust turnaround in its financial performance for Q2 2025. The company’s revenue of $93 million represents a significant improvement compared to the same period last year. This positive trend is supported by high operational efficiencies, with two rigs generating $35 million and additional services contributing $8.2 million. The company’s focus on cost reduction and efficiency has been a key driver of its improved performance.

Financial Highlights

• Revenue: $93 million, a notable increase from the previous year.
• H1 EBITDA: $10.4 million, compared to a loss of $23.2 million in H1 2024.
• Net loss: Impacted by a $19.2 million tax appeal cost.
• Cash position: $21.8 million, including $4 million in restricted cash.
• Net debt: $59.7 million.

Outlook & Guidance

Dolphin Drilling remains optimistic about its future prospects, with a strategic focus on cost improvement and market expansion. The company has completed a group refinancing, raising $29 million in new equity. It continues to actively market its Borgland rig and explore potential contract extensions for existing rigs. The constrained market for moored semisubmersible rigs presents opportunities for Dolphin Drilling to capitalize on its strategic positioning.

Executive Commentary

John Oliver Bryce, CEO of Dolphin Drilling, emphasized the company’s strong market position, stating, "Dolphin Drilling is very well positioned for the market going forward." He also highlighted the company’s focus on cost improvement and strategic refinancing efforts, saying, "We have refinanced the company in terms of debt and equity."

Risks and Challenges

• The constrained market for moored semisubmersible rigs could limit growth opportunities.
• The impact of macroeconomic pressures and potential market saturation.
• Ongoing costs associated with the HMRC tax appeal.
• The need for continued operational efficiency to maintain competitive advantage.

Dolphin Drilling’s Q2 2025 earnings call highlights a strong recovery and strategic focus on market opportunities. The company’s improved financial performance and positive market sentiment suggest a promising outlook, despite the challenges it faces. With a beta of -0.5, the stock has shown counter-cyclical characteristics, potentially offering portfolio diversification benefits. For detailed analysis and comprehensive insights, including Fair Value estimates and growth projections, investors can access the full company research report on InvestingPro, which is part of their coverage of over 1,400 US equities.

Full transcript - Dolphin Drilling AS (DDRIL) Q2 2025:

Conference Operator: Thank you for standing by. Welcome to the Dolphin Drilling Q2 Report 2025 Listen Only Webcast and Conference Call. For any questions, please reach out to ENGOLF. All questions will be answered and published in our IR section within our company’s website from early next week. Please be advised that today’s conference is being recorded.

I would now like to hand the conference over to your first speaker today, John Oliver Bryce, CEO. Please go ahead, sir.

John Oliver Bryce, CEO, Dolphin Drilling: Thank you for that introduction. My name is John Oliver Bryce, and I’m the CEO of Dolphin Drilling. And I’m here today with Dolphin’s CFO, King of Gillistad. During this call, we’ll present Dolphin’s H1 twenty twenty five results and also our Q2 information. So if you’re following this call with our PowerPoint presentation, we’re on Slide one, and we’ll take you to Slide two now, which is our very important disclaimer.

So we ask that you kindly read this before moving forward. On to Slide three, and talk very quickly about the agenda for today’s earnings call. So Section one, we’ll talk about key financials and the main milestone events. Section two, we will talk about Dolphin’s rig fleet. Section three, we’ll touch on the market that we operate in.

And Section four, we’ll do a summary of the earnings call. So moving on to highlights and material events. If you’re looking at Slide four. For the 2025, there have been material improvements in the company performance compared to the same period in the previous year. And also, there’s been some significant structural changes to the company.

So a lot going on within the 2025. So what were these changes and material events? Well, there were some financial ones, some contractual ones, some leadership ones, some performance ones. So let me just work through those very quickly. Financially, the company has moved from a loss making position to being back in the black with an H1 EBITDA of $10,400,000 compared to a negative $23,200,000 in same period in 2024.

Contractually, the company has had two of its three units continuously employed with major operators. This was the same as the previous year, but the difference being is in 2025, our two customers are both blue chip customers paying on time. That was not the case last year with our issues with general hydrocarbons. So contractually, two on contract, both paying, so in a good position there. In terms of leaderships, some significant changes.

New CEO appointed, that was myself, John Oliver Bryce. I stepped into the position, in mid Q1, having previously worked with Dolphin for a year as Chief Strategy Officer and previous to that thirty year career in the drilling, including being previously CEO of Obuoka Drilling and GM Odfjell Drilling UK. So that was my CV, and that was my entry into as CEO earlier this year. New CFO also, Ingolf Gelstad, who’d been with the company for about six years before. He’d been in the Investor Relations side of Dolphin Drilling, but stepped up around about the same time as I did.

So it’s a new CEO and a new CFO and also a new Chairman with Roni Bjarnadall becoming Chair around about the same time. Structurally, there have also been significant changes during H1 twenty twenty five with new major investors backing Dolphin, the largest of which being Svellen Capital holding circa 50% of the company. Prior to that, the company undertook a financial restructure where changes to its existing debt was agreed, new debt was raised and new equity was also raised. This funding solution was required to give the company sufficient liquidity to address the challenges of a significant historic AP situation and also a significant planned 2025 CapEx requirement. Despite challenging capital market conditions, the refinance was successfully completed as planned, although it should be acknowledged that a new additional funding requirement, a circa $20,000,000 liability from a legacy tax court case, materialized towards the very end of the refi process.

Due to time constraints, this additional tax funding need could not be incorporated into the refi, and so it will have to be funded separately. Performance wise, the company focused on safe and efficient operations, generating both continued revenue and positive customer feedback. The company also focused on cost saving and operational uptime in order to maximize contractual financial efficiency. So in summary then, H1 has seen a lot of changes, and the company is now at the beginning of what I would call a turnaround situation. Okay.

On to the numbers, and let me hand over to Ingo for Slide five.

Ingolf Gelstad, CFO, Dolphin Drilling: Many thanks, John. We released our half year 2025 financial report earlier today, and here is a brief overview of the preliminary financial results, rig up time and main events in the period as well as developments post quarter end. I refer you to the published detailed financial report for additional information. In the first half, we recorded total revenues of $93,000,000 a massive improvement from same period last year. And noteworthy, we had two drilling rigs generating earnings for the period, which is the first time since we got public listed.

EBITDA, as was mentioned, was $10,400,000 below internal targets as both of the working rigs have periods of reduced earnings, especially for Blackfoot in January and May and for PBLJ with periods of waiting on weather in January and planned rig moves in April and May. The net loss for the period was largely affected by the outcome of HMRC tax appeal, where the company in late June received a decision by the Supreme Court. A cost of $19,200,000 included interest was booked in the period. We ended the quarter with a cash position of $21,800,000 which includes $4,000,000 in restricted cash supporting an ongoing drilling contract. Total interest bearing debt include the first lien loan on PBLJ of $60,000,000 plus an upsized loan tranche of $6,500,000 and the former shareholder loan of $15,000,000 resulting in net debt of $59,700,000 Post quarter end, we received a decision by the Federal High Courts in Lagos to enforce the results of the earlier informed $105,000,000 arbitration award case in Nigeria.

Since then, the former client, General Hydrocarbons Limited, they have appealed, but a hearing not yet scheduled. As such, recovery prospects highly uncertain at this point. Then later in July, we closed a group refinancing, including new bond loan, a repaying of a shareholder loan and raising equity. But we will talk more about this later in the presentation. Looking specifically at the Q2 results.

The two rigs generated $35,000,000 on an earning efficiency of 93% for PBLJ and 92% for Blackford. The Blackford contract include other services, which generated $8200000.0.2600000.0 dollars in accounting entries for the already paid mobilization fee and finally, 700,000.0 in sale of unused equipment. On operating expenses, we are in line with budget for PBLJ despite increased repair and maintenance costs. On Blackford, the overall cost continued to stay above satisfactory levels due to, among others, increased rental requirements associated with the contract, repair and maintenance and third party personnel costs related to the well move for this multi exploration well campaign. We continue to make a small loss on the boats hired as part of the overall contract with Oil India.

On the G and A costs, we have seen increased in the second quarter as we worked out the group refinancing plan. Our ambition is to reduce overhead costs and become more efficient with our capital resources, meaning as we head into the fourth quarter, we should see results. The net financials include two extra items last quarter: booking of interest costs related to tax claim of $5,700,000 and an unrealized FX loss of $2,600,000 After we booked the tax claim in June, this had a major effect on the quarterly net income, which ended up at a loss of $26,000,000 For the next quarter, please note that PBLJ started its SPS in late July. And as a result, Blackford will be the sole source of revenue for the company for most of this period. Then over to the balance sheet.

The company concluded the quarter with a total cash balance of $21,800,000 unrestricted cash position, staying way above our minimum financial covenant levels as per our loan agreements. Other than change in cash, adjusting for higher accrued revenues due to Blackfoot and which is part of the other current assets, there are limited changes in current assets during the last six months. The booked asset values for the rigs is depreciated as normal with the exception that a $2,100,000 CapEx spend on Borglen is impaired. On the group’s debt liabilities, we have continued carrying a large amount of accounts payable on the balance sheet, and a larger part of it being overdue as we worked on the refinancing throughout the quarter and into the third quarter. At one point above $20,000,000 overdue.

The profile of accounts payable has changed since year end twenty twenty four, at that time, which included reactivation efforts for Borgland Dolphin and cost to commence contracts in India. Since access to new funding in late July, the total dollar amount of overdue invoices have since come down, and we continue to make improvements on this front. As of this report, we can inform that since the refinancing date, over $15,000,000 has been paid into the vendor base. The major change in the second quarter represent booking of the tax claim to HMRC in The UK of nineteen point two million dollars in other current liabilities. As announced, the company paid in August £2,000,000 to HMRC as part down payment for the tax claim.

We have agreed to pause the negotiations for a period following this payment. The current portion of debt have post quarter end been refinanced, leaving no debt installments until October 2025 and from thereon, 1,000,000 per month until April 2026. This was part of the group refinancing. Now over to the cash walk. As mentioned earlier, earnings from PBLJ has been a key contributor to the group’s operating profit.

Within each specific rig cash flows, as shown on the graph, the numbers include $2,800,000 in CapEx for PBLJ, dollars 600,000.0 for Blackford and $2,100,000 for Boglam, which are remaining payments related to last year’s contract preparation work that was thereafter cut short. For Blackford, we have room for improvements as both revenue generation and cost levels have not been satisfactory during the period. Borglen, we have kept the rig in good conditions and actively marketed. Average cost for the period has been $28,000 per day. Our G and A cost includes several one offs, specifically professional fees related to the refinancing and the before mentioned legal and tax claims.

There are several factors contributing to the working capital outflow. First, the payment cycle for our contract in India that commenced late last year is two months versus one month for our long term contract in The UK. Second, the earlier heavy increase in accruals related to Blackfoot startup in 2024 has since been reduced. Additional charges in India, a tax receivable buildup to $1,700,000 related to paying reverse charges on goods and services. Fourth, costs related to refinancing was held on the balance sheet.

And lastly, we have had an inventory build for PBLJ as we are prepared for the class renewal. Some of that inventory build in PBLJ will move into CapEx through the project as utilized. Guiding for the coming period, as we are way into the third quarter already, new funding from the refinancing has hit our accounts in late July, but the heavy investment on PBLJ, together with limited revenues during the scheduled plus renewal, will likely result in negative cash flow for that rig. Group refinancing. The company successfully closed a group refinancing in late July twenty twenty five.

Several elements needed to sort it out during this process. We raised new equity, repaid a loan that originally was due later this year and which had encumbrances attached to it, and we raised new secured debt. Moreover, we managed to defer scheduled debt installments for a period of twelve months starting from April 2025. As a final piece, we agreed with our existing lender to upsize the PBLJ loan facility for us to prioritize renewing the five year special period survey on the ARIC. As we show on the slide, we have refinanced debt falling due this year and replaced with new longer dated debt maturities expiring in second half twenty twenty seven.

We raised new equity of $29,000,000 and is pleased to see our main shareholders heavily supporting this transaction. As part of this equity raise, we launched, as promised, a subsequent offering earlier this week. With that, I’ll return the word to John that will take us through the remaining part of this presentation.

John Oliver Bryce, CEO, Dolphin Drilling: Okay. Thank you, Ingolf. So that concludes the numbers and details. So on to Slide 10, and let’s have a look at the rig fleet in a bit more detail. So moving on to Slide 11.

We can see from this slide that the company owns and operates a fleet of three moored semisubmersible drilling rigs. These units are conventional drilling rigs, but they are also very suited for P and A activity. These units can operate globally, and are also rated for harsh environment. And from the three you see there, the PBLJ is an Aker H4 designed semi sub, and that’s suitable for mid water. The Borgland is an Aker H3 designed semisub with a significant upgraded topside, and that’s suitable for midwater.

And finally, the Blackford is an Aker H3 designed semisubmersible, also with a very significantly upgraded topside, But this one is suitable for deepwater. So those are the three, units that we have in our fleet. If we move on to Slide 12, we can have a snapshot then of the operational status of these units. And from this slide, we can see that two of the units are currently on contract, delivering safe and efficient operations, with the PBLJ in the North Sea and the Blackbird in the Indian Ocean. And FYI, the PBLJ is actually, as we speak, in the very final stages of its SPS special periodic survey in Norway.

And when it comes out, it will return to full operations. But for the last forty ish days, it’s been undertaking its SPS. The third unit is warm stacked, and it’s located in the Astecan shipyard in Las Palas. Interestingly, with this unit, it commenced its SPS back in late twenty twenty four. But those rig activities were paused when the rig’s client chose to terminate an agreed contract before it had even started paying off in a significant ETF as a consequence.

As of today, the unit has a relatively minor scope remaining to complete its SPS and is being marketed worldwide. In terms of the operating costs for these units, they’re varying quite substantially, but there are good reasons for that. The Blackford, the one that’s operating in the Indian Ocean, has an OpEx of circa $155,000 per day, but that does include a lot of rig services. The PBLJ OpEx running at around about $88,000 a day, and the Borgland is about $26,000 a day whilst it’s in port. So that is the status of Dolphin’s rig fleet.

If we move on to the next slide, which is Slide 13, we can have a look at the contract status. So looking at the big picture, Dolphin Drilling has $250,000,000 of firm contract backlog and just over $400,000,000 options. The PBLJ rig has a three year firm contract ahead of it with Harbor Energy here in The UK and a potential to extend by two more years with built in options, a very good place to be. The Blackford is currently working for Oil India, and it’s scheduled to finish sometime in H1 depending on the operational activity. There is also a one well option built into that.

And after that point, it is released into the market and a very interesting market in India, which we hope to remain in. And in terms of the Borgland unit, which is warm stacked in port in Las Palmas, this is being actively marketed for work globally, and there is very keen customer interest in this unit. So it’s a contract status of the three units. Let’s go on to the next section of the earnings call, and we’ll touch on the market. So moving on then to Slide 15.

So looking at the supply side, we see that globally, there is a very small pool of moored semisubmersible units. And in fact, there’s only five now working in The U. K. And this is a result of the mass scrapping, which followed on from the downturn, which kicked off in 2014. And to give you some context, if you just use that example at the top of the page there, top of Slide 15, when you see that there’s only five in The UK, you go back to 2015, ten years ago, just after the downturn started kicking off, there were 25 semisubmersibles working in the same basin, all of them employed, as well as 25 jackups.

So it’s all about the supply side, and it’s a very, very constricted market. So a good place to be if you have operating assets. So that’s the supply side globally and in The U. K. Okay.

Looking at the supply side now, and you can see on Slide 16, what we’re looking at here is the moored semisubmersible rig addressable market globally. And here’s some data from both Arctic and Rystad. And what this tells you is that there is global activity and there is global tendering. But most importantly, what it tells you is there’s a steady increase in rig demand. And this demand is for two things.

It’s for conventional drilling because operators are still drilling for hydrocarbons. It’s also for an increasing amount of P and A, plug and abandonment or decommissioning of wells. So a gentle increase within the visible demand. But if you combine that with the very constricted supply side in the previous slide, Slide 15, then what is apparent is that the industry is heading for an imbalance in terms of supply and demand for more semisubmersibles. So very interesting market to be part of.

So Slide 16. All right. Let’s have a look at let’s move on Slide 17 then. So let’s just summarize this earnings call. So the main points being, we have rigs on contract, and we are very well placed for follow on work in an increasingly tightening market.

We have refinanced the company in terms of debt and equity. So we have liquidity, although we do have some challenges that we’ve touched on. We have an extremely high focus on cost improvement, whether that be SG and A or whether it be operating costs. Similarly, we have a very, very high focus on operational performance. And you add those two things together.

It’s about financial efficiency of our existing contracts. So in summary, Dolphin Drilling, moored semisubmersibles, very large improvement compared to the same period last year, a lot of structural changes in the company compared to the same period last year in terms of its funding, its management, its investors and its Board. And so Dolphin Drilling, very well positioned for the market going forward. So what we’re going to do in terms of IR questions, we invite you to e mail us questions you may have on this presentation or anything in general, and we will reply to them. And what we will also do is we will publish them on our website next to this presentation.

So thank you again for listening to the H1 Dulphur Drilling earnings call.

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