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Odfjell Technology reported its Q3 2025 financial results, showcasing a steady increase in revenue and improvements in EBITDA margins across its business segments. Despite a year-to-date EBITDA decline of 5% compared to last year, the company maintained a strong presence in Norway and expanded its footprint in the Americas. The stock saw a slight decline of 0.7% following the earnings announcement, reflecting cautious investor sentiment amid global market volatility.
Key Takeaways
- Odfjell Technology's Q3 2025 revenue reached NOK 1.4 billion.
- EBITDA improved to NOK 202 million, with an adjusted figure of NOK 204 million.
- The company is expanding its presence in the Gulf of Mexico through strategic partnerships.
- Restructuring costs amounted to NOK 18 million year-to-date.
- The stock price decreased by 0.7% following the earnings release.
Company Performance
Odfjell Technology demonstrated resilience in Q3 2025, with revenue continuing on an upward trajectory despite a challenging market environment. The company has focused on expanding its product portfolio and exploring new technologies, particularly in the Well Services sector. Its strategic interest in the plug and abandonment market and expansion into the Americas highlight its commitment to growth.
Financial Highlights
- Revenue: NOK 1.4 billion, showing a steady increase over the year.
- EBITDA: NOK 202 million, with an adjusted figure of NOK 204 million.
- Year-to-date EBITDA down 5% compared to the previous year.
- Restructuring costs: NOK 18 million year-to-date.
Outlook & Guidance
Odfjell Technology anticipates continued operational improvements and is preparing for potential market delays in 2026. The company plans to reduce capital expenditures to NOK 200-250 million in 2026, signaling a disciplined approach to growth. Long-term market prospects remain strong, with high tender activity expected globally.
Executive Commentary
CEO Simen Lieungh remarked, "Short term might be some challenges. Long term, we see a very, very strong market," reflecting optimism about future market conditions. CFO Jone Torstensen added, "We will continue to work on growth opportunities with a disciplined approach to secure value for shareholders."
Risks and Challenges
- Potential market softness in 2026 could impact revenue.
- Global political dynamics may contribute to oil market volatility.
- Restructuring costs and potential organizational adjustments pose operational challenges.
- The competitive landscape in the plug and abandonment market requires strategic positioning.
Q&A
During the earnings call, analysts inquired about the company's M&A strategy, particularly in the Well Services sector. Executives also addressed questions about the potential pause in dividends to fund strategic investments and discussed challenges in the Project Engineering market.
Odfjell Technology remains focused on navigating short-term challenges while positioning itself for long-term growth, leveraging its strong market presence and strategic initiatives in key regions.
Full transcript - Odfjell Technology Ltd (OTL) Q3 2025:
Gert Haugland, SVP Finance and Investor Relations, Odfjell Technology: Welcome to Odfjell Technology's Q3 presentation. My name is Gert Haugland. I'm the SVP for Finance and Investor Relations in Odfjell Technology. I'm joined by our CEO, Simen Lieungh, and our CFO, Jone Torstensen. Today's presentation can be found on our website, and I ask you to please take notice of the disclaimer on page two. Simen will start by presenting the key highlights and talk about the market outlook, backlog, and the status of our improvement program. Jone will thereafter go through the financial figures before we conclude with a Q&A session. You can submit your questions through the webcast portal or by using the dial-in numbers. I now hand it over to Simen for the first part.
Simen Lieungh, CEO, Odfjell Technology: Thank you, Gert. Thank you, everybody, for calling in to our Q3 presentation. We'll start with the highlights for the quarter. First of all, we are set for mobilization of the Reelwell PowerPipe string. There have been some delays, unfortunately, not caused by any kind of us, but the rig that we are mobilizing the string on has been delayed on the field because of delays in the drilling program. Somewhat late in November, we are set for mobilization. Everything is ready. We also have good news from Kuwait. We have a contract extension, a very important contract within rail services in the region, which strengthens our backlog and visibility and presence in a very important area in the Middle East. We have talked about M&A.
We are quite active with the pipeline of very interesting bolt-on companies that could expand our capabilities and product portfolio. By also adding that into our market network, we see that some of that could be quite interesting in the future. We have nothing, I would say, accurate or present, or I would say exact to kind of comment upon more details, but absolutely, we have said that in several conferences earlier also that we are active on the M&A side. That will build up our capabilities and product to fulfill what we believe is going to be an interesting portfolio in the future for achieving the strategic goals the company has established. We have talked a lot about our performance improvement program. We started that some time ago. I'll come somewhat more into that later in the presentation.
Again, it's a very important program to adapt to whatever we see around us in the market, to kind of be just ahead of events and be an adept organization into the shape we want to be able to continue to deliver as we do per today. Key financials. We have a revenue of NOK 1.4 billion, somewhat more NOK there. We have an EBITDA of NOK 202 million, 24 adjusted. The good thing there is that we see the underlying operation has been improved since the last quarter and the quarters before that since Q4 last year. This is what we have worked with to kind of improve our performance, the underlying performance. The adjusted part of it is because of restructuring and back to the improvement program we have earlier commented upon. The order backlog is somewhat lower, but still very high.
There has been some wins, but still we are in the NOK 12 billion-NOK 13 billion backlog, which is quite important to have visibility in the future for that. Just to remind you that we count within Operations, which is a very stable backlog. We count also in the options, but we take a very, very conservative intake from rail services for good reasons. We are taking just part of the potential into what we call the firm backlog to be on the safe side by not overreporting backlog before we kind of see it's actually realized. Just a reminder, rail services is very much frame agreements, and activity follows the market activity. That is why we have always taken a quite conservative approach on that part. Dividend has been stable with an 11% direct yield so far in average.
We continue to follow the plans also in Q3, and we find that quite strong for our shareholders. On the market side, we still talk about growth, but I need to kind of share with you that we see also that we need to have quite disciplined operation and have a discipline regarding spending capital. Regarding the market, we probably are quite aware if you read all other companies' view on the market. There has been some volatility. We see our operators, we have quite extensive reach against or talk against our clients, majors. We see that majors are actually being more careful by investments. In the short term, we see some softening in the market. It's not general in the market because there are other markets, which is quite good, but some markets are also, we experience also some softening.
It has to do with the global political games, I call that. OPEC is doing something, the U.S. is doing other things, and creating volatility on the oil price is never good. That is where we see now that the clients are kind of looking for more stability before they go spending what they want to spend, and there might be some delays in that kind of program. That is why we say short-term, some softening. We see a quite strong demand later on, 2027, 2028, 2029, typical where we see demand coming up. The oil demand in the world is stable and growing, but again, short-term could be some challenges. We see quite high tender activity globally where we operate. We operate in 30 countries or more. We see a very active tender market.
We have quite a lot of them, but we are more uncertain about the timing for award. One thing is to win, and another thing is to award, and when they start to execute the contract. Back to the little more uncertainty, 2026. We are not that, I would say, firm on the timing, but the good thing is that these tenders are long-term. They go from late 2026 and onwards. That is why we see quite much more strong market down the road, down in 2027, 2028, 2029. Our position has been we are strong in Norway, and Norway is one of the markets which is very strong regardless of the situation I just described of softening and so forth. Norway has been very stable regarding drilling and production.
Clients, the major clients here in Norway are quite active to secure capacity for increased drilling and production, especially within gas, of course, linked to the position Norway has regarding serving gas to Europe because of the tragic war within Ukraine with Russia. There are very, very heavy activities regarding increasing production, drilling, and so forth in Norway. We are strong in Norway. We have probably a little more than 50% of our activity, revenue, and earnings in Norway, which is stable. Norway is one of the most active and the biggest offshore market, one of the biggest offshore markets in the world. We talk about performance program. I do that always because this is how we always kind of monitor our organization and performance and have measures to act on things where we don't see the expected outcome of our business.
This has to do with, I would say, some sort of continuous improvement program. It's a word that's used quite often, but these improvement programs we are running have important milestones where we act when things happen upwards or things go downwards. We have action plans to kind of quite quickly act on those kinds of fluctuations. We are positioning for P&A opportunities, strategic P&A opportunities. We have used that word, meaning that we are not rushing after that part of the market because to get volume. We know P&A markets are quite often challenged by margin levels, earnings. That market has always been challenging in a way to secure the right level of earnings. The market is coming strong. I guess now the next few years will be much stronger in the U.K., internationally within Brazil, Gulf of Mexico.
We also see things happening in Asia-Pacific and also in Norway. Norway has already several programs where clients must plug and abandon. In Norway, there are kind of both from platforms and from floating installations. Our relation with Odfjell Drilling is strong regarding positioning integrated services for plug-and-abandon activities. I also say we are not in a rush, but we are looking for the right opportunities that can be good references for establishing a sustainable business going forward. Growth and investment focus. We are, of course, focusing on growth, but not for any means. We have established ourselves in the Americas. We see the first areas carefully being picked up in the Gulf of Mexico. We are not going to operate in Mexico, but with the U.S. Gulf with well services, meaning that we will rent out equipment and run these kinds of services.
We have established a strategic partner called OSP, a small company in the Gulf based in Houston. We are working together with them to kind of increase our presence and operations in those areas. Both Gulf of Mexico and Brazil have been quite focused. Even though there are the same signals from clients that there might be some delays in spend, we are not there for the big money yet. We will gradually build up our presence and take quarter by quarter, year by year, to build up a sustainable business and be there for the long run. We are not rushing there to do quick things, not necessarily smart things. We are there for the long run and the strategic presence to build the name and quality services like we have done in other parts of the world. The PowerPipe remains strategically a priority.
We are still looking for clients that are going to take it. We're quite optimistic that down the road, in the long term, that technology will be absolutely top priority for clients, especially in mature fields. This is also a kind of a long horizon on those investments. We have, in our view, a fantastic access to that technology, which is protected, and there's no really competition on that part yet. It remains to kind of be activated, as we earlier talked about. The first offshore thing will come here in Norway, and we also have quite good traction on several opportunities in the Gulf of Mexico, both for advanced drilling and well completion activities. CapEx, we have had a relatively high level of CapEx this year. That will be much more disciplined going forward.
We had to do some investments here to replace equipment, kind of to still be in the game. We do not see that going forward. My CFO, Jone Torstensen, will come more into that somewhat later, how we will, in a way, be more disciplined and be more, not necessarily disciplined, but more selective on what we are going to invest in. M&A is also part of a source that could need capital. As I said, we are certainly active on the M&A side. Those targets we have picked out are interesting, and we hopefully will land some of them. Backlog, I said again, not need to say too much more of that. As I said here within rail services, just to remind again, there is much more potential in the rail services, but we are taking a conservative approach.
Just to remind you, back in the days when Odfjell drilling were integrated before we split the company, we never reported Well Services backlog. We only reported floaters and fixed installations, not within engineering and not within Well Services because there is more uncertainty there. The approach for Well Services is a conservative estimate to be on the right side. That has shown to be quite useful, as we do not kind of overpromise anything, and we deliver hopefully better than we indicate. Order intake is okay. We see, as I say, a lot of activity going forward. There are some interesting tenders that could fill up the backlog. We are not worried about the somewhat drop from NOK 13 billion to NOK 12 billion. It could even drop some more because we still believe that is a quite healthy and quite, I would say, strong backlog.
Of course, we are chasing all opportunities to build a strong backlog that gives us, in a way, predictability for the company in the future. Dividend, we have active shareholder rate and very attractive shareholder return. We get good feedback on that that we actually are stable. We are promising what we are doing. I have said that the balance sheet we have allows us to do so. I always say a but. Our company must also look at future and growth opportunities. If for very good reasons we find to invest more than we kind of have estimated today, we have also indicated that there might be times where you have to pause dividend. We have no plans for that now, but I will say it. You are not kind of shocked if that happens. I have said that in several conferences.
I have answered as good as I can. If we ever post a dividend program for some short period, it is for the good reasons, not for any other reasons, for the good reasons for the company. Performance improvement program. Again, I'm quite impressed, I would say, about how the organization responds to that kind of program because you can exhaust people by this. As long as you kind of do it and motivate for it and see results of it in a positive way, it's actually been taken well care of, and people are understanding the seriousness to be disciplined on capital, disciplined on performance, focus on quality and excellence. That is where we, as a relatively small company, need to be to build our name and presence through efficiency, quality, and predictability. That is what we do.
Already we have laid off significant people without any headlines, no nothing, but just adapting into the market position. We see some upsides. We might even increase the number of employees. We see something that could happen on the other side, means that we might decrease the organization. All these plans are in place. I feel that we are quite prepared for any ups and downs in the marketplace. Again, short term might be some challenges. Long term, we see a very, very strong market. With that, Jone, I think you can take over. Thank you, Simen. I'll start with the group financials. Steady activity level with underlying margin improvement. EBITDA level in Q3 is improved compared to the first two quarters in 2025. EBITDA in Q3 is NOK 202 million compared to NOK 193 million in Q2 and Q1 2025.
Adjusted EBITDA is NOK 204 million, including restructuring cost of NOK 2.4 million. The improvement program, as Simen said, is on track with restructuring cost of NOK 18 million year to date. The improvement seen in the last quarter is expected to extend into Q4 2025. Cash flow was affected by high CapEx and changes in working capital in Q3 2025. We said in the Q2 presentation that we expect an improvement in working capital in Q3 2025. Unfortunately, a large payment that we expected to be received in Q3 was delayed and received the 2nd of October. However, we expect an improvement in cash position, improved working capital, and reduced CapEx in Q4. Some words about the CapEx level for 2026. We expect a reduction in CapEx in 2026 to a more normalized level compared to high CapEx spend in 2025.
However, we are always looking for good business opportunities going forward, which might influence our CapEx level going forward. Well Services, EBITDA margin improved in Q3 2025 compared to Q2 and Q1 2025, driven by improved product mix, increased product sales, and improved cost efficiency. EBITDA margin is 32% in Q3 and 35% if we exclude pass-through charges. High tender activity is ongoing globally with focus on high margin business opportunity. We expect that the CapEx incurred in Q3 and market improvement in some regions outside Norway will lead to a stronger financial performance in Q4 2025. Next is Operations. The activity level is steady and solid in the business area. The margin lift achieved in Q3 was driven by contribution from our performance improvement program and high bonus achievements. EBITDA margin in Q3 2025 is 8.2%, up from 6.9% in Q2 2025.
Operations remain focused on optimizing operation structure, continuously improving efficiency, and optimizing cost level. Both Shell Drilling and Serica U.K. have extended their contract with operations. In addition, as Simen said, operations are continuously working with customers to develop effective solutions within P&A. The next one is project engineering. Q3 was seasonally lower due to vacation period. Main workload related to ODL has been closed out, hydrogen bay modification, and mariner of five years inspection. P&E has been affected by market changes, shifting from fewer major projects to smaller scale projects. P&E is actively working to build up its order backlog with major oil companies and drilling companies. We expect an improvement in EBITDA margin in Q4 2025. This is development in revenue and EBITDA since Q1 2022. I will focus on 2025. And revenue has increased each quarter in 2025.
EBITDA remained stable in Q1 and Q2 2025 and improved in Q3 2025, as we predicted during our investor calls in Q1 and Q2 2025. We expect this trend to continue into Q4 2025. To summarize, still strong order backlog, which is limited and affected by market fluctuations. Still attractive yield with dividend payments of NOK 60 million, equal to direct yield of 11%. As Simen said, very high focus on our performance improvement program, which already has improved our financial performance. I have to say, more to come. We will continue to work on growth opportunities with a disciplined approach to secure value for shareholders. That concludes the presentation, and we now will start on the Q&A session. Thank you. Dear participants, as a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced.
Alternatively, you can submit your questions via the webcast. Please stand by while we compile the Q&A roster. This will take a few moments. Once again, if you would like to ask a question over the phone, please press star 11. Alternatively, you can submit your questions via the webcast. Now we are going to take our first question. It comes from Lucas Dalen of Arctic Securities. Your line is open. Please ask your question. Thank you. Good morning, gentlemen. Simen, just wondering on your comments regarding the terms of weakness or, let's say, reduced visibility. If we were to sort of quantify that in outlook for 2026, I mean, year to date, EBITDA is down 5% year on year. In light of your comments, what's your best estimate at this point in time, 2026?
There's so much noise on it, but I understood because your question was, what do I think about the EBITDA level in 2026 related to the comments of a possible more soft market? Is that right? Yeah, yeah. If you could sort of quantify what you are saying in terms of the market dynamics being maybe a bit softer in the near term, but still relatively strong in the long term. Yeah. As a principle, you know me, and I do not come to give you any guidance on numbers. All I am saying is that we are looking at the market where we see that some of the tenders that have been awarded and some of the activity that has been going to be awarded might slip in time. It is difficult to say exactly how much and if it happens at all.
I'm just saying that talking to clients, talking to competitors, talking to other service companies, we see the same market. We are preparing for that by having this improvement program to compensate for eventually any loss of income or earnings to kind of compensate that picture. You see now that we have improved the underlying operation regarding performance if you focus on EBITDA. I think we are, in a way, continuously kind of seeing that the slow improvement will continue, whilst we also believe that some quarters might be hit by delays or uncertainty, which I know we have on the agenda. I can't comment more upon it, but I'm not concerned about the performance of the company. Don't take me wrong.
I'm just saying that we are heading a market situation where things in some markets might be more volatile than, for example, what we see here back in Norway. Not necessarily a very clear answer, Lucas, but that's the best I can give you. Okay, fair enough. Your comment, obviously, you have said that you are looking opportunistically at possibilities of how to grow the business. Could you sort of specify or at least highlight what kind of product lines or potentially regions would be sort of where you would like to add scale? Yeah, I can say it's more or less 100% within the Well Services business we are running. That part of the company has quite good performance with good margins on some products.
Where we are looking for more to expand the product portfolio is into more advanced downhole equipment used for well completion, could be used for plug abandonment, and other things related to that part of the service sector. We believe that plug abandonment will be a good market in the future. I do not think it is a market today, but I do not think it yields the necessary return that we expect and are looking for as per today. Some might disagree with me, but I think we are at least quite conservative in that respect. What we are looking for to build a broader portfolio is that we would like to add on some special technologies, tools for different operations, especially for more advanced downhole operations.
Same into rentals, same into the business area we have, same into the same type of providing equipment, but also be able to take a broader responsibility for more integrated operations together with other parts of our own business areas, for example, with Operations, including our engineering department and adding on our technologies and solutions within Well Services could be an interesting cocktail for making kind of a different approach to, for example, plug abandonment, well completion, and so forth. We are kind of modeling ourselves. We also look at some strategic alliance type of opportunities. We do not just spend a lot of things on just buying things, but we also want to own and operate some type of equipment, but we do not do that today.
We can also work together with others where we see synergy and, I would say, a good cooperation in that respect, meaning that we can be more taking a bigger responsibility for a bigger operation. That is what we are looking for. The M&A activities are to build up a more broad portfolio of technologies and equipment, whilst also focusing on executing those kinds of programs in a different and more efficient way than we see, for example, many are doing today. That is the thing. Okay, that is a good comment. And then just finally, I mean, your comment regarding potential pausing the dividend. I mean, you have a relatively low leverage. Your dividend is NOK 240 million a year. Is there sort of a kind of dynamic in terms of how big the acquisition needs to be so that you would consider this step?
Or what are your thoughts on that? Because now you have sort of built a decent track record with the dividend, and then pausing it, obviously, would be a bit of a step back. Yeah, I expected that question. That is why I also raised it in the presentation, because it is when we want to pay dividend. The company is in place to pay dividend, our balance sheet is good, but we also are with technology. It is a company quite newborn, to use that word. And we are kind of also looking at how should we be perceived in the future market. Remember that the market, the service market, is changing, and we are changing with it. We have three business areas, and how can we kind of combine those business areas to be one plus one plus one more than three?
We see very, very good opportunities with exactly what I just commented upon, that we can combine things and by doing smart acquisitions, adding up services, we can even improve our capacity of spending and pay dividend. If we did an M&A with some significant investments, it is not necessary for us to exhaust the balance sheet just to pay dividend. We will ask for understanding of that, and people hopefully will understand because it is for the right reasons. It is for the growth and profitable growth. We might not drop dividend. We might reduce dividend over time, but we still have the ambition to, of course, have a strong balance sheet. I will never kind of rush the balance sheet with running debt to a high level. I have been through so much over the last 10 years regarding difficult volatile market and debt situation.
You know what I mean? That is not going to happen. It is going to be extremely disciplined. It will be the board and us that decide what we are going to do. They are very aware of what I am saying here. There are no plans exactly now, but I am just saying that if a great opportunity comes that we feel will stretch the balance sheet for a period, we might pause dividend or at least reduce it. It will always be on the agenda, and we have done that for many, many quarters now. We want to pay dividend, and the board supports dividend, and I know that many of our shareholders support that too. There are also shareholders that do not like us to pay dividend and to do what I am saying here. There is a mixed bag here.
We are prepared to take anything there. I am just saying that we will decide what to do based on the good reasons. The good reasons are for ourselves and our shareholders, our stakeholders. That is called responsibility. Okay. Thank you very much, and have a good weekend, guys. Good. Thanks. Thank you. The speakers are on up for the questions on audio lines. I would now like to hand the conference over to Gert for any written questions. Please go ahead. Okay. We will take a few written questions. We have one regarding operations, and it goes like this. Can we assume the same level of revenue as in Q3 going forward the next quarters? Yeah. I think that operation has delivered a great operation in Q3, high bonus achievements year to date, and very good and efficient operation.
We expect that the financial performance will continue into the next quarter. The margin level seems okay, assuming that we are able to achieve bonus going forward. There is also one question on the underlying profitability for Operations. I guess if we extend on what you just said, you can say the improvements that we have achieved this year, the underlying profitability should be slightly better than it was last year. We also have one question regarding Well Services, which saw improved profitability now in Q3. The question is if this is a sustainable level into 2026. Yeah. I think the Well Services margin level is very affected by the product mix in each quarter. Also, product sales tend to bring it up a little bit. I think we are kind of taking the steps to hopefully improve it going forward.
If 32% will be the level in every quarter ahead, it's difficult to predict just because there are changes quarter to quarter in the product line mix. Yeah. There is a question on normalized CapEx level in 2026, if we can put a number on it. I think it's something we don't want to go into detail on, but we have previously talked about a normalized level being NOK 200 million-NOK 250 million. I think that's probably the best estimate for now. There is one question I think we can hand over to Simen. You have talked a little bit about it already. It's the Q3 weakness in the project engineering. What do we see in the North Sea market short term?
Again, it's a good question, by the way, because there has been a very active market for P&A specialized for what they do regarding upgrades, SPSS, and so forth. That part is over. Back to the market for bigger P&A contracts, the next few months are weaker, for sure. We expect that has to do with, again, if you're those that follow the market, both Equinor, Aker BP, more, others are talking about cost-cutting exercises, delays of investments, and so forth. All those kind of projects will typically be pushed in time. That push in time will hit the ability to win and execute these kind of projects. Unfortunately, we see a weaker market within P&A the next year. Forward, we believe it's going to be more or less back to where it used to be.
But absolutely, there are signals that P&E will meet a more difficult market next year. Not at all back to zero, not at all. As I said again, we are following it. If we win projects, we execute them. If the market goes down, we also reduce costs. It goes hand in hand. That is what I can say there. Dear participants, as a reminder, if you wish to ask a question over the phone, please press star 11 on your telephone keypad. Alternatively, you can submit your questions via the webcast. Dear speakers, we will just give a moment to our participants to press star 11 or just write a question. Gert, there are no further questions on audio lines. Please proceed. We can get that. I think we will conclude the call now. If you have additional questions, please reach out to me. Thank you.
Thank you. This concludes this conference call. Thank you for participating. We'll now all disconnect. Have a nice day.
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