Earnings call transcript: Paratus Energy Services Q2 2025 sees stock rise

Paratus Energy Services Ltd reported its Q2 2025 financial results, showing strong growth in revenue and net income. The company’s stock experienced a 3.96% increase, closing at $4.26. According to InvestingPro analysis, the company appears slightly undervalued, with a "GREAT" overall financial health score of 3.04 out of 5. The company’s positive performance indicators and strategic initiatives have bolstered investor confidence, supported by management’s aggressive share buyback program.

Key Takeaways

• Revenue increased to $107 million, up from $103 million in Q1.
• Net income rose to $5.6 million, compared to $3.2 million in the previous quarter.
• Stock price rose by 3.96%, reflecting positive market sentiment.
• Strong contract backlog and operational efficiency highlighted.
• Dividend declared at $0.22 per share.

Company Performance

Paratus Energy Services demonstrated robust performance in Q2 2025, with revenues climbing to $107 million, a notable increase from the $103 million recorded in Q1. The net income also showed significant growth, reaching $5.6 million, up from $3.2 million in the previous quarter, contributing to a return on equity of 12%. The company has maintained a strong presence in the Brazilian PLSV market, with contracts secured until 2027-2028, supporting its competitive position. Analyst consensus remains strongly bullish, with a 1.33 recommendation score (where 1 is Strong Buy).

Financial Highlights

• Revenue: $107 million, up from $103 million in Q1 2025.
• Adjusted EBITDA: $57 million, slightly down from $58 million in Q1 2025.
• Net Income: $5.6 million, compared to $3.2 million in Q1 2025.
• Dividend: $0.22 per share.
• Share Buybacks: $5 million, approximately 4% of total share capital.

Market Reaction

Paratus Energy’s stock price increased by 3.96%, closing at $41.44. This rise reflects investor optimism driven by the company’s strong financial performance and strategic initiatives. The stock price movement is significant given its 52-week range, with a high of $58.6 and a low of $30.6.

Outlook & Guidance

The company expects its 2025 EBITDA to reach the top end of its guided range, indicating a positive outlook. With last twelve months EBITDA of $130.2 million and EPS forecast of $0.50 for 2025, InvestingPro analysis suggests continued profitability. Paratus is exploring strategic options for its Fontes segment and is closely monitoring 2026 debt maturity options. Potential asset disposals are being considered to support debt management of $694.8 million.

Access the complete Pro Research Report, available for 1,400+ top stocks, to dive deeper into Paratus Energy’s financial health and growth prospects.

Executive Commentary

CEO Robert Jensen highlighted the company’s strategic positioning, stating, "With strong visibility, a solid balance sheet, and results tracking toward the top end of our guided range, we believe we are well-positioned to continue to deliver sustainable value creation for our shareholders." He also noted improvements in the credit market, which could benefit the company’s financial strategies.

Risks and Challenges

• Potential downward pressure on jackup market day rates.
• Managing net debt of $631 million.
• Navigating potential industry consolidation in the jackup segment.
• Ensuring continued operational efficiency amidst market fluctuations.
• Addressing geopolitical and economic uncertainties in key markets.

Q&A

During the Q&A session, analysts inquired about the modest payment received from a Mexican client and ongoing discussions regarding the Titania rig contract. The company expressed a positive outlook on the Mexican government’s support for the energy sector and emphasized its commitment to evaluating strategic initiatives in the jackup market.

Full transcript - Paratus Energy Services Ltd (PLSV) Q2 2025:

Call Moderator: Welcome to the Paratus Energy Q2 twenty twenty five Earnings Call. There will be a question and answer session after the presentation. I will now hand over the call to your host.

Robert Jensen, CEO, Paratus Energy Services Limited: Good day, everyone. Welcome to the Second Quarter twenty twenty five Results Presentation for Peritas Energy Services Limited. My name is Robert Jensen, and I am the CEO of Peritas. Joining me on the call today is Batan Hajime Mehdi, our CFO. Before we begin today’s presentation, I would like to remind all participants that some of the statements on this call may involve forward looking statements.

Forward looking information involves risks and uncertainties by nature that may cause actual results to differ materially from those projected in such statements. I therefore refer you to our latest public filings. The 2025 was a solid one for Paratus, supported by high technical utilization across the fleet, solid cost control and steady joint venture cash flows. Our operating entities recorded a technical utilization of 98% for the quarter. Revenues were $107,000,000 compared with $103,000,000 in the first quarter, as new contracts at Sea Gems at higher day rates more than offset the lower contribution from Fantas due to Titania being idle.

Adjusted EBITDA was $57,000,000 versus $58,000,000 in Q1, reflecting onetime costs at Fantas related to the demobilization of Titania. Net income for the quarter was $5,600,000 up from $3,200,000 in Q1. In line with our policy of targeting stable cash distribution to shareholders, the Board of Directors has declared a dividend of $0.22 per share for Q2. This is consistent with every quarterly distribution since our IPO last year. During the second quarter, we completed approximately 5,000,000 in share buybacks.

The company now owns around $6,800,000 of its own shares, representing approximately 4% of total share capital. As a reminder, we have approximately $75,000,000 remaining capacity under the $100,000,000 share repurchase authorization. With today’s announced dividend, we will have returned over $200,000,000 to our shareholders since we started our distribution a year ago, equivalent to roughly 30% of the company’s current market capitalization. This underscores our commitment to a shareholder friendly capital return policy. We ended Q2 with a cash balance of $93,000,000 and net debt of $631,000,000 The quarter on quarter increase in net debt primarily reflects working capital buildup in Mexico.

Receivables in Mexico increased to $232,000,000 from $185,000,000 in the prior quarter as no payments were received during Q2. However, after quarter end, Fontes received its first payment from the client since our monetization agreement in Q1. Importantly, in August, the Mexican government also announced a comprehensive support plan for our client, including approximately 25,000,000,000 in guaranteed funding earmarked in part for supplier debt settlements. We view this as an important step to stabilize the client’s financial position, improve payment practices and support its production target of 1,800,000 barrels per day. Now let’s move over to the quarterly review for each of our two operating segments.

We continue with our joint venture, Seagems. Please note that all numbers referred to on this slide are on 100% basis, of which we own 50%. CGM had another strong quarter with revenues of $125,000,000 compared to $112,000,000 in the first quarter. The sequential increase was primarily driven by higher average day rates from the new contracts on four vessels, partly offset by some off hire days related to acceptance testing on these vessels. EBITDA for the quarter was $81,000,000 up from $65,000,000 in the first quarter, benefiting from strong revenues, reimbursement of an insurance claim for Esmeralda and certain favorable charges in accounting provisions.

Operating expenses came in at $31,000,000 down from $36,000,000 in Q1, while G and A was steady at $7,000,000 compared to $6,000,000 in the previous quarter. Technical utilization for the quarter was a solid 97.8% versus 98.4% in Q1. The average contractual day rate increased significantly to 255,000 per day from 212,000 in the first quarter, again, reflecting the start of new contracts across four vessels. The On X completed its acceptance testing with Petrobras earlier this month, marking the final vessel to transition over to the new Petrobras contracts. Consequently, the average day rate for CGMs will continue to trend higher in the second half of the year.

The contractual backlog for CGM stood at 1,600,000,000.0 at the end of the quarter. During the 2025, CGMs distributed 66,000,000 in cash to its shareholders, of which Parrotas received 33,000,000. Consistent with what was what we flagged on the Q1 call, distributions are expected to be sequentially higher in the second half of the year given the JV’s cash flow profile and the timing of capital expenditures. Following quarter end, Peritus have received a total of $45,000,000 in distributions for July and August. Finally, subsequent to the second quarter, CGM secured $60,000,000 in additional CapEx financing from local Brazilian banks.

Amortization is scheduled to start in 2026 and will run over three years. Moving over to Fontes Energy. Our drilling business reported Q2 revenues of $44,000,000 and an adjusted EBITDA of $18,000,000 compared to $47,000,000 and $27,000,000 in the first quarter. The decline was mainly driven by the Titania remaining idle during the quarter and costs related to her demobilization. Operating expenses were $26,000,000 compared to $18,000,000 in Q1, again, mostly reflective of tugboat and fuel expenses associated with the Titania’s move.

It’s also worth noting that Q1 OpEx was positively impacted by one offs and lower than normal. G and A for the quarter was $400,000 down from $1,000,000 in the previous quarter. Technical utilization remained strong at 99.2% compared with 99.7% in Q1. The average day rate declined to $116,000 per day from $125,000 per day in the previous quarter as all rigs operated a full quarter at the contractual flow rates. Fontes’ backlog at the end of the second quarter stood at $98,000,000 down from $139,000,000 at the end of Q1.

The receivable balance as mentioned earlier increased to $232,000,000 at quarter end from $185,000,000 in Q1 as no payments were received during the quarter. However, also mentioned before, subsequent to Q2, Fontes received a modest payment from its client, the first since our receivable monetization transaction in Q1. As always, we remain actively engaged with the client to expedite the collection of outstanding receivables and expect to recover the full amount as has been the case in the past. As mentioned earlier, we are encouraged by the recent support plan by the Mexican government. And while it probably will take some time to implement, it will hopefully provide support to both payments and future demand.

Looking at the fleet, with the exception of Titania, all the rigs are currently working and contracted into 2026. The Titania has been successfully reimported to Mexico and is kept readily available for new opportunities. We expect active contract discussions to take place in the second half of this year, supported by rising activity in Mexico. In our view, if the client is to achieve its stated production target of 1,800,000 barrels per day, all units in the country will likely be needed. Against that backdrop, we remain confident in the demand outlook for all of our assets and we’ll continue to evaluate opportunities for Titania both within and outside of Mexico.

While pursuing new contracts remains a core focus for Fontes, we’re also evaluating strategic opportunities for our jackup assets with a focus on creating long term value to our shareholders. And with that, I will leave the word over to Batam to walk you through the financial details.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: Thank you, Robert. Okay. Now let’s start with the more detailed review of our Q2 results compared to Q1 twenty twenty five. Net income after tax came in at $5,600,000 this quarter compared to $3,200,000 in Q1. As shown in the top right growth on this slide, the main drivers were as follows: A 4,000,000 revenue increase compared to q one from $103,000,000 in q one to $107,000,000 in q two.

This was mainly due to the higher day rates from our PLNZ in Brazil, partly offset by no revenues revenue generated from Titania as described by Robert earlier. The Fontus revenue was also impacted by lower day rates as rigs operated at flow rates and the planned survey on Intrepid. These effects were partly offset by the absence of rig suspensions versus Q1. We had an OpEx increase of $5,000,000 mainly driven by costs associated with the titanium relocation, partly offset by lower costs at CGMs, mainly due to insurance claim reimbursement at Esmeralda and other items. It is also worth noting that Q1 OpEx in Fontes was positively impacted by certain one off items.

We recognized an allowance for expected credit losses, as you can see on the graph ECL of $4,000,000 reflecting the increase in receivables in Mexico at the year at sorry, at quarter end at Q2, in line with accounting methodology. This is compared to a reversal in Q1 driven by the SEK $2.00 9,000,000 monetization agreement. Please note that this is only an accounting treatment as we remain confident in our ability to recover the full amount owed by the client. Net financial expenses decreased significantly from 37,000,000 in Q1 to $21,000,000 in Q2. This was mainly because Q1 included fees related to the Mexico monetization agreement and a significant net loss, which was recognized based on our ownership in in Orta, which was driven by the refi by the refinancing in q one that triggered an accounting loss.

And finally, we reported slightly higher tax expense driven by changes in the tax accruals and provisions Mexico. So overall, compared to q one, the q two report shows a modest improvement in net income with strong contribution from CGMs and lower financial expenses offsetting the impact of the net losses from Fontes. Now stepping back on and looking at the 2025 results compared to the same period in 2024. During first half of this year, we report a net income after tax of approximately $9,000,000 compared to $44,000,000 last year. As shown in the lower right graph here, the main drivers for the for the decline in profits were as as follows.

Decline in revenues of $23,000,000 due to Fontis. Recall that last year’s Fontis revenues included about $50,000,000 of previously unrecognized revenues that that the Fontis team managed to build and settle with the client. In addition, Titanic contributed to no revenues in Q2, as mentioned earlier, and average deliveries across the fleet were lower compared to last year. This was partly offset by strong revenue growth in CGMs, where revenues were up $40,000,000 or 13% as vessels commenced on new Petrobras contracts at higher day rates. Operating costs improved by $11,000,000 year on year, reflecting lower personnel and other costs at Fantas, insurance claims refunds and other favorable onetime adjustments.

Also recall that the 2024 OpEx figures included transaction costs related to our IPO and refinancing of the bonds. Other operating income of $5,000,000 as as you can see here, relates to an insurance refund claim that that we recognized at Fontes. Lastly, we had 24,000,000 higher financial expenses compared to last year and 3,000,000 higher tax expense compared to last year as well, largely largely for the same reasons I mentioned in the quarter on quarter comparison. To summarize, while the net income this year is lower compared to last year, the decline mainly reflects onetime revenue effects at Fontis in 2024 and higher financial expense of this year, partly offset by strong CGM’s performance and solid cost control in general. Moving on to Page six.

Let me walk you through the main drivers of our cash flow this quarter. At Paratus consolidated level, we closed the quarter with a cash balance of $70,000,000 which was down to $156,000,000 at the end of Q1 twenty twenty five. The main factors behind this movement were as follows: working capital buildup in Mexico as we had no collection from our client during the quarter, which explains the operating cash here. Dollars 4,000,000 spent on CapEx related to Fontes, which was broadly aligned with Q1. Cash distribution from Cesiums of $60,000,000 and a first time dividend that we received from Archer of $1,300,000 We paid net interest of $28,000,000 this quarter, which reflects the semiannual coupon on our 29 bonds.

And finally, shareholder distribution of $41,000,000 in Q2 that we paid, including a 5,000,000 approximately 5,000,000 of share buybacks. After these movements, we ended the quarter with $70,000,000 in cash at the pro rata’s level. But on the top of that, our pro rata share of cash in CGM’s joint venture was $23,000,000, bringing the group cash position to 93,000,000 at the end of q two. So despite the temporary buildup of receivables in Mexico, our liquidity position remains solid, supported by strong operational performance and significant cash sorry, distribution from CGMs and solid cost control in general. Now moving on to our capital structure and selected balance sheet items.

As just mentioned, we closed the quarter with a cash with a group cash balance of $93,000,000 and a net debt of $631,000,000 resulting in a net leverage ratio of 2.6 times EBITDA. That is slightly up from Q1, mainly reflecting an increase in receivables in Mexico. As Robert mentioned earlier, Fontes received a modest payment from its client in August, and we also note positive signals from the announced Mexican government’s financial support plan for our client in early August. We remain actively engaged with the client to collect outstanding receivables. But based on past experience, we continue to plan on the basis that delays may persist in the near to medium term.

With respect to the debts mature to next year, the 2026 notes, so we continue to more our options. We’ve had constructive discussions about funding at the operating entity levels. And at the same time, we also note the market the credit market improvements to pursue something at the Paratus Topco level. We believe we still have a good time to assess along the best and long term option for the company. And we will, of course, we will communicate the plan for this well in advance of the maturity in July year.

Finally, following in q two following q two, the CGM’s joint venture secured an additional $60,000,000 of of capital expenditure financing, locally at favorable terms. The facility will amortize amortize over three years starting in 2026 as we show here in the graph. With that, I will hand the word back to Robert. Thank you.

Robert Jensen, CEO, Paratus Energy Services Limited: Thank you, Wattam. Before we hand over to Q and A, we wanted to reiterate the overall financial guidance issued earlier this year. However, based on the results delivered in the first half, we are happy to report that we now expect 2025 EBITDA to come in at or near the top end of the guided range. So as we head into the third quarter, 10 of our 11 assets are contracted into next year and beyond, giving us approximately $1,000,000,000 of backlog to Paratus. With strong visibility, a solid balance sheet and results tracking toward the top end of our guided range, we believe we are well positioned to continue to deliver sustainable value creation for our shareholders.

With that, I think we can open up for Q and A.

Call Moderator: Ladies and gentlemen, we will now take your questions. Just as a reminder, you can submit your questions by using the button on the bottom of the player.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: So there’s a question about the ferry protest. Like, you plan to cancel the fair repurchase? If not, why?

Robert Jensen, CEO, Paratus Energy Services Limited: So I think we haven’t concluded on those discussions yet. Ultimately, it’s up to the board to decide whether we cancel or hold these shares as treasury shares. As you know, we still have more capacity under the share repurchase authorization. And also under Bermuda law, we are not obligated to cancel the shares. But I think it’s a discussion that the Board will certainly have in due course.

So we’ll probably revert back with more information on that at a later stage.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: How large was the modest payment received in August?

Robert Jensen, CEO, Paratus Energy Services Limited: Good question. Look, I don’t think we’re going to set a precedence of disclosing all payments from the client in Mexico. We’ve indicated that it was a modest payment. So I think we’ll leave it at that. Ultimately, we think it’s positive to see, that we are getting payments, and certainly, we hope to see larger and more regular collections going forward.

But if it had been material, it would have been announced as a under a materiality clause.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: There’s a question on how we plan to address the 2026 debt maturities.

Robert Jensen, CEO, Paratus Energy Services Limited: Yeah. Look, Barton also touched upon this and is prepared to mark. We continue to monitor all our options. Clearly, the credit market is showing improvements relative to where it was at the start of the year. At the same time, I think we need to make sure that if we push the button, we don’t sacrifice our flexibility to pursue other corporate actions or developments.

We believe we have plenty of time, to assess the best long term options. We’ve had encouraging discussions about funding at operating level, but at the same time, given the credit market, it seems to be good demand if we were to pursue something at the Topco. I think you should also remember that we do have a substantial AR balance, which we expect to unwind over time together with potential asset disposals that could pave way for the 26s to be redeemed rather than refinanced. But ultimately, I think we will decide what is the best course of for the company. And we do think we have a good toolbox with dealing with this maturity.

And as I said, there’s probably still some time left and we’ll make sure to communicate our plans, well in advance.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: There are several questions regarding the Mexico contracting status, also with regards to Titania as well.

Robert Jensen, CEO, Paratus Energy Services Limited: So I think everyone’s seen the positive developments in Mexico over the last several months, both financially with respect to the client, but also more of the rigs returning to work. I think there’s no quick fix, with respect to to sort of sorting everything out, so we do need to allow it some time, but we’re certainly seeing, delta positive news coming from, from Mexico. As we said, if the client is to reach 1,800,000 barrels of production, we do think there is a need for all the rigs. We expect to have more concrete news on this later in the year. There’s obviously always an ongoing discussion with the client about potential future work.

We are encouraged to to to have these discussions with with the client, but, we’re not at the stage right now where we can share much much more than than the fact that we hope to have something more concrete, towards the end of this year.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: Regarding Lithuania, Robert, are there ongoing conversations with other clients besides Pemex as an alternative in Mexico taking the jackup outside of Mexico? Is that a possibility?

Robert Jensen, CEO, Paratus Energy Services Limited: So I I think on the last conference call, we we alluded to this. We we said we have bid the Titania outside of Mexico, and we continue to have discussion with potential clients about work for the rig. At the same time, it’s quite clear that in the last several months, we’ve seen downward pressure on dayrates globally, and we’re obviously also seeing that. So when bidding the rig, we need to bear in mind that the rig is located in Mexico, transporting her to a different jurisdiction will come at a cost. So when we look at the rig, we have a certain return in mind when we look at what she should be earning and what she potentially could be returning in terms of cash if she remains in Mexico.

So I think all opportunities are on the table, but we’re certainly going to evaluate sending a rig to a different jurisdiction against what we think we are able to to get on the rig, where she is presently. Not ruling out any any outside work, but I I think we, we’re certainly confident in the ability for that rig to, to remain in, the country where she is right now.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: There’s a question about the market in is it the jackup market? Broadly speaking, can you talk about how folks see how we see the trend of day rates into 2026 for the industry?

Robert Jensen, CEO, Paratus Energy Services Limited: Well, just a second ago, we said that there were some had been some downward trajectory on on rates. So I I think that’s been quite clear to everyone. We’re obviously working at our floor rates in in Mexico right now. There are some, I would say some positive developments. I mean, day rates have seen downward trajectory, sure, but utilization for modern rigs remain steady around 90%.

More than half of the suspended rigs in Saudi have found new work. We’re seeing some incremental demand coming from The Middle East and West Africa and Southeast Asia have continued to be fairly active or holding up from a demand perspective. So I think day rates, we’re not gonna speculate on on where they’re headed. I I think we’ve seen them come down. But I think we’re we’re comfortable with the with the market and our ability to to compete for work and particularly in in Mexico.

As I mentioned, there’s probably a disadvantage for the Titania, moving into a different region. That is an advantage for us in Mexico, which is a fairly insulated market. At least over time, Mexico have proven to be a fairly resilient market where day rates may not have seen the peaks and the troughs that you tend to see elsewhere. So I think we’re comfortable with the demand and particularly given the strong support that we’ve seen from Mexican state in recent time.

Call Moderator: Ladies and gentlemen, just as a reminder, you can submit your questions through the button at the bottom of the player.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: A question about the PLSVs. Possible delays in Petrobras new FPSOs expected could translate into at least a temporary PLSV idleness in the Brazilian market. Do you see that was the question. Do you see this as a possibility given Petrobras obstacles with the new FPSOs?

Robert Jensen, CEO, Paratus Energy Services Limited: Well, I I think we when you look at the the the schedule of of FPSOs coming in and and you look at that compared to the number of PLCs, I think at least based on what we see, Petrobras, I mean, the PLSV market is sold out. They were not able to get as many vessels in as they expected, during the most recent tender. We’re seeing a strong demand for our vessels and I don’t see any slip up in in FPSO deliveries, at least not over the near term to to impact us. And ultimately, our vessels are on on contract until 2728. So there is no blinking sort of our employment to FPSO.

So I think we’re very well covered with the backlog that we have in Brazil right now. Think ultimately, least from our point of view, we see a long term market that is very tight on the PLSV market. And I would not be surprised if if you start to see the talks about new contracts potentially being awarded from late late next year or into to ’27. I mean, just looking at the the the rollover schedule for not just our vessels, but the industry in general, and history at least, you typically tend to see some activity around recontracting, some nine six to nine months ahead of that. So, yeah, I don’t think we experience any or or see any softness in that market.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: There’s a question that if we can provide some more color on the jackup strategic initiatives in Mexico.

Robert Jensen, CEO, Paratus Energy Services Limited: Well, I I think we’ve been saying this from from the time of going public that that we would like to develop Fontes as the structure today is is probably subscale, and and we’re very concentrated in one jurisdiction. And while we’re very comfortable in that jurisdiction and been there for more than a decade and sort of with evidence can show that we’ve been able to extract all the cash that we’re entitled to, And I think we remain positive to more consolidation in the industry and believe there is room for more transactions similar to what we’ve seen already this summer. I think for our part, we would like to remain involved in the space, but we don’t necessarily need to have full control of of the company, for it to be part of Paratus. So ultimately, we’re an industrial holding company. So we will always look at ways to create value to our stakeholders.

That could include both m and a and or selling assets. But, let’s see how the next quarters develop. I think we’re certainly open for some ways of, using our Fontes, ownership into, something more strategic.

Batan Hajime Mehdi, CFO, Paratus Energy Services Limited: There’s a question to confirm how much of the outstanding accounts receivable in q two is related to Pemex. We have only one client in in Mexico, so the total balance is related to that client.

Robert Jensen, CEO, Paratus Energy Services Limited: There seems to be no further questions. So I think we’ll, take the opportunity to, thank all the participants and looking forward to speaking to you in a quarter. Thank you. Thank you.

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