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Financial report summary
?Risks
- Our business depends on the level of activity in the oil and gas industry. Adverse developments affecting the industry, including a decline in the price of oil or gas, reduced demand for oil and gas products, and increased regulation of drilling and production, have in the past had and may in the future have a material adverse effect on our business, financial condition, and results of operations.
- The offshore contract drilling industry is a highly competitive and cyclical business with intense price competition. If we are unable to compete successfully, our profitability may be materially reduced.
- We have not been, and may continue not to be, able to renew or replace certain expiring contracts, and our customers have sought, and may seek in the future, to terminate, renegotiate, or repudiate our drilling contracts and have had, and may have in the future, financial difficulties that prevent them from meeting their obligations under our drilling contracts.
- Our current backlog of contract drilling revenue may not be ultimately realized.
- A substantial portion of our business is dependent on several of our customers as well as dependent on several geographic areas and the disruption of business with any of these customers or disruption of business within these geographic areas could have a material adverse effect on our financial condition and results of operations.
- Our business may be impacted by numerous operating hazards.
- Unionization efforts, labor interruptions, and labor regulations could have a material adverse effect on our operations.
- A major natural disaster, catastrophic event, acts of war, terrorism, social unrest, pandemic, or other similar event could have a materially adverse effect on our business, financial condition, and results of operations, or have other adverse consequences.
- We face risks associated with our participation in certain joint ventures as well as investments in associates.
- We are exposed to risks relating to operations in international locations, including the mobilization and demobilization of our rigs to and from such locations.
- Operating and maintenance costs of our rigs may be significant and may not correspond to revenue earned.
- Inflation may adversely affect our operating results.
- Operational interruptions, maintenance, or repair work may delay commencement of operations or cause our customers to suspend or reduce payment of dayrates until operation of the respective drilling rig is resumed, which may lead to loss of revenue, payment of liquidated damages, termination, or renegotiation of the drilling contract.
- We may have difficulty obtaining or maintaining insurance in the future and our insurance coverage and contractual indemnity rights may not protect us against all the risks and hazards we face.
- Our failure to adequately protect our sensitive information and operational technology systems and critical data and our service providers’ failure to protect their systems and data could have a material adverse effect on our business, results of operations, and financial condition.
- Upgrades, refurbishment, and repair of rigs are subject to risks, including delays and cost overruns, that could have an adverse impact on our available cash resources and results of operations.
- Failure to attract and retain skilled personnel or an increase in personnel costs could adversely affect our operations.
- Supplier capacity constraints or shortages in parts or equipment, supplier production disruptions, supplier quality, and sourcing issues or price increases could increase our operating costs, decrease our revenues, and adversely impact our operations.
- At certain locations where we operate there is an increased potential for seasonal weather events that could lead to limits or restrictions on our ability to operate, damage to our assets and equipment, liabilities, or claims, operational delays for recovery and repair, liability claims, impacts on customer and vendor contracts, regulatory fines and penalties, and uninsured losses, which could adversely affect our business.
- Failure to effectively and timely respond to the impact of energy rebalancing could adversely affect our business, results of operations, and cash flows.
- We rely on third-party suppliers and subcontractors to provide or complete parts, crew, and equipment, as applicable, for our projects and our operations may be adversely affected by the sub-standard performance or non-performance of those suppliers or third-party subcontractors due to production disruptions, quality and sourcing issues, price increases, or consolidation of suppliers and sub-contractors as well as equipment breakdowns.
- The integration of Maersk Drilling into the combined company may not be as successful as anticipated, may cost more than estimated, and the combined company may not achieve the intended benefits or do so within the intended timeframe.
- Increasing attention and expanding requirements relating to environmental, social, and governance matters compounded by the varied and expansive scope of ESG standards, ESG rating criteria, our sustainability and ESG disclosures, and the perception and expectations of the public, may negatively impact our business and financial results.
- Any violation of anti-bribery or anti-corruption laws, including the Foreign Corrupt Practices Act, the United Kingdom Bribery Act, or similar laws and regulations could result in significant expenses, divert management attention, and otherwise have a negative impact on the company.
- Any failure to comply with the complex laws and regulations governing international trade could adversely affect our operations.
- We are, or in the future could be, subject to litigation that could have an adverse effect on us.
- We may record impairment charges on property and equipment, including rigs and related capital spares.
- A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our subsidiaries in certain countries could result in a higher tax rate on our worldwide earnings, which could result in a material adverse effect on our financial condition and results of operations.
- Our consolidated effective income tax rate may vary substantially from one reporting period to another.
- Fluctuations in exchange rates and nonconvertibility of currencies could result in losses to us.
- Certain shareholders own a significant portion of our outstanding equity securities, and their interests may not always coincide with the interests of other holders of the Ordinary Shares.
- Holders of the Ordinary Shares may not receive dividends on their Ordinary Shares.
- We are a holding company, and we are dependent upon cash flow from subsidiaries, joint ventures, and associates to meet our obligations.
- Future sales or the availability for sale of substantial amounts of the Ordinary Shares or the exercise of warrants issued pursuant to the Plan would have a dilutive effect to shareholders of the Company and the perception that these sales may occur, could adversely affect the trading price of the Ordinary Shares, and could impair our ability to raise capital through future sales of equity securities.
Management Discussion
- Net income for the three months ended March 31, 2024 (the “current quarter”), was $95.5 million, or $0.66 per diluted share, on operating revenues of $637.1 million compared to net income for the three months ended March 31, 2023, of $108.1 million, or $0.74 per diluted share, on operating revenues of $610.1 million.
- Operating results for our contract drilling services segment are dependent on three primary metrics: operating days, dayrates, and operating costs. We also track rig utilization, which is a function of operating days and the number of rigs in our fleet. For more information on operating costs, see “Contract Drilling Services” below.
- (1)We define utilization for a specific period as the total number of days our rigs are operating under contract divided by the product of the total number of our rigs, including cold stacked rigs, and the number of calendar days in such period. Information reflects our policy of reporting on the basis of the number of available rigs in our fleet.