Transocean Ltd.
Q4 2020 Earnings Call Transcript

Published: 23 Feb 2021

[Operator:]

Good day, and welcome to the Q4 2020 Transocean Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Lexington May, Manager of Investor Relations. Please go ahead, sir.

[Lexington May:]

Thank you, Sarah. Good morning, and welcome to Transocean’s fourth quarter 2020 earnings conference call. A copy of our press release covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted on our website at deepwater.com.

[Jeremy Thigpen:]

Thank you, Lex, and welcome to our employees, customers, investors and analysts participating in today’s call. As we have for the better part of the past year, we continue to work following appropriate protocols to do our part to prevent the spread of COVID-19. And as many of you know, in Texas, we’ve been battling record low temperatures, power and water outages, and are also experiencing intermittent connectivity and communications challenges. Therefore, please forgive us for any deterioration of the call’s audio quality today. As reported in yesterday’s earnings release, for the fourth quarter, Transocean delivered adjusted EBITDA of $210 million on $747 million in adjusted revenue. Importantly, the strong operating performance, which was driven by our experienced, committed and unbelievably resilient teams enabled us to generate $279 million in operating cash flow. Despite a number of challenges that we faced during the past year, including a global pandemic that presented new and unparalleled logistical and physical hurdles, we can continue to deliver best-in-class, safe, reliable and efficient operations for our customers. In fact, we delivered the best overall operational performance for any single year in the history of Transocean. In 2020, we delivered a total recordable incident rate of 0.24, the second lowest in the history of our company. Even more remarkably, we achieved this with no lost time incidents.

[Mark Mey:]

Thank you, Jeremy, and good day to all. During today’s call, I will briefly recap our fourth quarter results and then provide guidance for the first quarter, as well as expectations for the full year 2021. Let’s now provide an update on our liquidity forecast through 2022. Before I begin, please note that we expect to file a Form 10-K later this week, which is a few days later than our typical filing cadence due to delays caused by the significant winter weather events of last week experienced by some of our team members who reside in Texas. As you put it in a press release for the fourth quarter of 2020, we reported net loss attributable to controlling interests of $37 million or $0.06 per diluted share. After adjustments associated with retirement debt and discrete tax items, we reported an adjusted net loss of $209 million or $0.34 per diluted share. Further details are included in our press release. Highlights for fourth quarter include, adjusted EBITDA of $210 million, reflecting good revenue performance and cost control, reflects our fleet wide revenue efficiency exceeded 97%, showcasing our operational excellence another quarter of stellar backlog conversion. Operating cash flow in the period was $277 million, improved from $82 million in the third quarter, largely due to reduced interest expense, improved collections of receivables and lower personnel expenses, including severance expenses. Free cash flow generated in fourth quarter was about $230 million, significant quarter-over-quarter improvement of $215 million. Looking closer at our results, for -- during the fourth quarter, we delivered contract drilling revenues of $747 million, above our guidance due primarily to strong revenue efficiency as mentioned previously, as well as additional operating days for Deepwater Asgard in December. Operating and maintenance expense in the fourth quarter was $465 million. This is above our gardens primarily due to a non-cash provision for slow moving obsolete inventory. The realization of performance bonuses associated with our OEM care agreements and other than expected activity on Deepwater Asgard. Turning to cash flow and balance sheet, we ended the fourth quarter, with total liquidity of approximately $2.7 billion, including unrestricted cash and cash equivalents of approximately $1.1 billion, approximately $300 million of restricted cash for debt service and $1.3 billion from our undrawn revolving credit facility. Furthermore, during the quarter, we opportunistically repurchase approximately $23 million of our debt in the open market and average discount of approximately 11%, resulting in almost $3 million of interest savings to maturity. Let me now provide an update on our expectations for the first quarter and full year financial performance. For the first quarter of 2021, we expect adjusted contract revenue of approximately $680 million based upon average fleet-wide revenue efficiency of 95%. This reflects a level of fleet-wide activity relative to the fourth quarter of 2020 in large part due to the Deepwater Asgard and Leiv Eriksson concluded in respect of drilling campaigns during the quarter coupled with the early termination notice on the Deepwater Nautilus. As Jeremy mentioned, we are currently disputing the validity of this termination notice. Additionally, we’ll be retiring the Leiv Eriksson as we concluded that the rig is limited commercial viability in the future. For the full year, we are anticipating adjusted revenue to be approximately $2.7 trillion. We expect first quarter O&M expense to be approximately $445 million. The quarter-over-quarter decrease attributable to low activity as a result of the previously mentioned rigs rolling off contract. For the full year, we’re anticipating O&M expense to be approximately $1.6 billion. We expect G&A expense for the first quarter to be approximately $40 million and approximately $160 million for the full year. Net interest expense for the first quarter is forecasted to be approximately $110 million. This includes capitalized interest of approximately $12 million. For the full year, we anticipate net interest expense of $400 million, including capitalized interest of approximately $85 million. Capital expenditures, including capitalized interest for the first quarter are forecast to be approximately $115 million. This includes approximately $100 billion for our new build drill ships under construction and $15 million of maintenance CapEx. Cash taxes are expected to be approximately $5 million for the first quarter and approximately $25 million to $30 million for the year. Turning now to our projected liquidity at December 31, 2022, including potential securitization for Deepwater Titan, our end of the year 2022 liquidity is estimated to be between $1.2 billion and $1.4 billion. This liquidity forecast includes an estimated 2021 CapEx of $1.3 billion and 2022 CapEx expectation of $300 million. The 2021 CapEx includes $1.2 billion related to our new builds and $100 billion for maintenance CapEx. As always, our guidance excludes any speculative rig reactivations or upgrades. In conclusion, in addition to safe and efficient operation of our rigs, we’ll continue to focus on optimizing cash flow through revenue enhancement and cost control initiatives. We will also take -- we will also continue to take steps to improve our balance sheet and liquidity. As we demonstrated in 2020 through a series of liability management transactions that included debt refinancing, private and public debt exchanges, debt tenders, open market repurchases of our debt, we improved our overall liquidity through 2025 by approximately $1.7 billion. These transactions also resulted in a total interest expense to maturity savings of approximately $518 million. You should expect us to continue to take steps to deliver our balance sheet and extend our liquidity run rate using all appropriate tools available in the market. In this regard, you will note from our press release yesterday that we have entered into priority exchange transactions that results in the maturity of approximately $253 million of our principal of our 2023 exchangeable bonds been effectively extended into a new priority guaranteed exchangeable bond due December 2025. Subsequent to the press release been issued participation in one of the exchange transactions increased by $40 million, increasing the total principal participation of 2023 exchangeable bonds to approximately $293 million. This will result in aggregate principal amount of approximately $256 million of priority guaranteed exchangeable bonds due December 2025 been issued. After these exchange transactions close, the remaining principal balance on the 2023 exchangeable bonds will be approximately $117 million, reflecting a principal reduction of $693 million since the beginning of 2020. I will now turn it back over to Lex.

[Lexington May:]

Thanks, Mark. Sarah, we’re now ready to take questions. And as a reminder to the participants, please limit yourself to one initial question and one follow-up question.

[Operator:]

All right. And we’ll take the first question from Ian MacPherson with Simmons.

[Ian MacPherson:]

Thanks. Good morning, Jeremy and Mark. Thanks for all the detail.

[Jeremy Thigpen:]

Good morning, Ian.

[Ian MacPherson:]

The main question for me is, it seems like we’re plowing forward with the Deepwater Atlas CapEx program. It’s been a while since we’ve got an update on where we are with contract negotiation. So just I think that cash burn in the absence of contract news is one of the concerns here? So maybe you could update us there on the strategy and any sort of trigger points for full green light or maybe changing course with the CapEx?

[Jeremy Thigpen:]

Yes. Thanks, Ian. I’ll start and then, Mark, if you want to chime in, Roddie as well. Obviously, it’s a big delivery for us and we’re excited to take delivery of one of the -- what will be one of the best assets in the wood 1 or 2. We have been in constant conversation, obviously, with Beacon Offshore and their commitment has been unwavering. Their enthusiasm for the project has been unwavering. We are still awaiting FID, but they seem confident on their side and we talked to them, if not every day, every other day, and so we’re continuing to monitor that situation closely. And then, of course, on the backside of that, we are obviously engaged with discussions on the shipyard as well. And so moving forward, at this point in time, trying to do everything we can to get Beacon to secure FID and then work with the shipyard for timely delivery. And, Mark, I don’t know if you want to add anything to that. You might be muted.

[Mark Mey:]

Oh! Yes. I’m sorry. Yes. Just one thing, Jeremy. Ian, I think, it’s great to say that, if the Beacon FID does not occur, we will certainly engage with a shipyard to discuss options around whether we take the rig or not, whether we delay delivery, as we have in the past several times, and obviously, how we deal with the final payments on that rig as well. So I think it all comes back to what Jeremy indicated the contract discussions with Beacon.

[Ian MacPherson:]

Understood. Thanks for those comments. Regarding the shape of the market heading forward, I think, you made a strong case that you’ve got a positive Nexus coming with supply and demand over the year -- over the next year. So I think it’s been argued also that the recapitalization of all, not all, but maybe the majority of your peers is more of a competitive threat than a benefit. But when you look at how undisciplined the bidding in the market had been before they were recapitalized. It’s hard for me to imagine that the competitive dynamics don’t get better as opposed to worse. But how much do you think that that particular dynamic, the recapitalization of your peers will influence bidding? Do you already see evidence of it now? Do you think that it will manifest itself over the coming quarters?

[Jeremy Thigpen:]

I’ll start and then Roddie you can chime in as well and offer even more color. We’re actually looking forward to all of the restructuring and then seeing what happens afterward. Our sense is that, the new owners with -- which are heavy participants in each of these restructured companies will want to move quickly to conserve cash and find ways to generate cash. And so we actually think that there could be a wave, if you will, of rig retirements, rigs that should have been retired probably years ago, because they do consume cash just to stack them and certainly consume a lot of cash once you go to reactivate them. And their assets that are of lower technical standard and are probably less likely to be activated, reactivated in the near-term. So I think you’ll -- we could see a -- quite a few rigs retired post-restructuring. Also think that we could see quite a bit of consolidation. I mean, you look across the space. There is a lot of cash tied up in G&A for each of the management teams of these companies that are going through restructuring. And so, if you’re a large owner and probably have multiple Board seats on these restructured companies, I think might move quickly to try to consolidate some of them. And so all of that I think brings -- certainly shrinks supply of available rigs, that also brings more discipline we think going forward. So we’re actually more encouraged to see what happens post-restructuring. We don’t see it as a disadvantage. They’re going to want to generate cash and they’re going to want to know what the best market dayrate they can get will be and we’ll certainly set the standard on that. But I think we could get into a much healthier industry structure, which could lead to a much healthier approach to bidding this work. And Roddie, I don’t know if you have…

[Roddie Mackenzie:]

Yes. Yes.

[Jeremy Thigpen:]

… anything you want to add to that?

[Roddie Mackenzie:]

Sure. Yes. I’d add in there, the activity levels that we’re seeing in tendering and, in fact, the bid durations basically doubling now. We see that there’s a real opportunity here that the activity levels could return to the kind of 2016, maybe even 2015 levels. But the big difference now is there’s about 60 less rigs than there was in that timeframe. And if you count the competitive rigs that are not cold stacked and mothballed then, I mean, you may be as much as 100 rigs different than you were in the market dynamics for floaters just four years or five years ago. So, as Jeremy says, the announcements made by several of our competitors that they intend to scrap a lot of these assets, because during the restructuring, they basically have removed the financial shackles on taking those steps plus some consolidation. I think it’s very easy to see significantly fewer number of rigs available in the hands of fewer competitors. So we would imagine that those bondholders are very keen to see a return on their investments eventually.

[Ian MacPherson:]

Yes. All makes sense. Thanks, everyone.

[Jeremy Thigpen:]

Thanks, Ian.

[Operator:]

And the next question is from Connor Lynagh with Morgan Stanley.

[Connor Lynagh:]

Yes. Thanks. I wanted to stay on the attrition theme here. One of the push backs that we hear on some of the retirements that are taking places in large part -- maybe not entirely, but in large part, these are older rigs and maybe been less competitive in the market for a few years now. I’m curious, if we rewind the clock to 2017, 2018, 2019, do you feel that the presence of some of these older rigs was still weighing on day rates or weighing on the bidding environment out there? And I guess just sort of what’s your take on whether or not the loss of some of these lower quality older rigs is going to impact the market?

[Jeremy Thigpen:]

Yes. I’ll take that one, Roddie…

[Roddie Mackenzie:]

I think…

[Jeremy Thigpen:]

Yes.

[Roddie Mackenzie:]

Absolutely. Yes. I think we have to recognize that back in that timeframe, when those rigs were perhaps not long-term stacked at that point, they were being kept somewhat warm, somewhat active obviously the desire to turn that into a contract pretty strong. So when faced with that decision, that’s what a lot of that lack of discipline enters the marketplace. But I think, no, especially in this restructuring, you see some of those assets now being removed from debt covenants and those kind of things. Certainly, moving forward, there’s fewer and fewer ability or desire to keep those rigs warm. So that’s basically what you’re seeing. And now we see like quarter-on-quarter, the number of cold stack rigs is going down because the equivalent number are actually being scrapped. And if we look at scrapping in general, I mean, we’re -- our --by our count, we’re about 160 rigs have been scrapped since the beginning of the downturn in 2014. And if you count the numbers, I mean, it’s approaching half of the fleet and we think it will actually eclipse half of the fleet at some point later this year. So, yes, so scrapping or retiring it -- really is the name of the game.

[Jeremy Thigpen:]

I think…

[Connor Lynagh:]

Okay. And -- I am sorry. Go ahead.

[Jeremy Thigpen:]

I think over the past couple of years, it’s been just -- yes, over the past couple years too, the best assets have been the ones that have secured contracts and I think our customers have seen the efficiencies that can be driven from some of these higher spec newer assets. And at the end of the day, the day rate for them is not as meaningful if they can compress the time of their project and get their project a little more quickly. And so I think they’re starting to see that and won’t accept the lower spec assets going forward.

[Connor Lynagh:]

Yes. Understood. I guess just the other side of that is the cold stack assets and I would think that the longer they set, the higher it cost, it becomes prohibitive, it becomes to reactivate them. But can you help us think through just in your experience for an asset that’s been stacked for a year or two versus some of the assets that are looking to come out maybe 2023, 2024? How different is the cost or put differently, how different is the day rate that you would require to justify the reactivation of some of those assets?

[Jeremy Thigpen:]

I don’t know that we’ve, as an industry experienced this before, you might have stacked one asset for a year or two and then brought it back out. But to see some of these sit now for multiple years, I don’t know that we fully understand what the process is going to be, what the cost is going to be. We obviously as we properly preserved these assets, we put together a list of what we thought it was going to take to reactivate and put together a budget of what we thought it would cost to reactivate. But I think your points well made. I think the long -- this is still sitting in water and electronics and -- in salt water and so you got to think that as more time passes, the more cumbersome the reactivation and probably the more expensive. But candidly, we just don’t know yet. I mean, we’ve -- I think we’ve repeatedly said, depending on the asset and the length of time, it’s been stacked, you might see a reactivation anywhere from $25 million to well over $100 million dollars. And so from our perspective, and hopefully, our competitors’ perspective, we’re not willing to invest that capital into reactivation unless we’re getting rewarded for with the contract that gets us return.

[Mark Mey:]

And Connor, I will tell you…

[Connor Lynagh:]

Yes. With that…

[Mark Mey:]

I will just say…

[Connor Lynagh:]

Okay. Go ahead. Sorry.

[Mark Mey:]

If you look at the balance sheets and liquidity of our peers, they cannot afford to go ahead and spend the, Jeremy said, sort of $25 million. I’m going to start at $50 million to $100 million plus on reactivating assets. It’s just not possible for everybody.

[Jeremy Thigpen:]

Yes. That was -- yes. No. That was my point really was then that once upon a time there was perhaps money in the coffers to do that. But certainly amongst the groups now that would be a very bad use of the remaining capital that our competitors have. So we imagine that that is not something they’re going to want to do.

[Connor Lynagh:]

Makes sense. Thanks. Thanks for all the color.

[Operator:]

All right. The next question is from Taylor Zurcher with Tudor, Pickering & Holt.

[Taylor Zurcher:]

Hey. Good morning and thank you. I wanted to start by asking on the new regulatory environment in the Gulf of Mexico and I realized this question might be a bit premature, but specific to the 20 kpsi opportunity, you said most of that, if not all of that’s going to be in the Gulf of Mexico. So I am just curious if you could help us think about whether some of these regulatory changes might impact your thinking with respect to upgrading your two newbuilds with 20 kpsi capabilities. I’m thinking here, mainly the Atlas, which only has a letter of intent right now. But any thought there would be helpful. Thanks.

[Jeremy Thigpen:]

Yes. I’ll pick up Roddie with that.

[Roddie Mackenzie:]

Yes.

[Jeremy Thigpen:]

Yes. Sure. So, look, on the -- on that side of things, the development plans that are in place for the 20 k prospects for the likes of Anchor and Shenandoah. Those are fields that have been previously sanctioned. They’ve got development plans that have been approved. Now, obviously, as they go through the process of getting the drilling permits, all of the technology is being qualified, so that they are following all the rules that are in the existing leases and all of these leases are current, which basically means that in compliance. So that -- the administration has shown that they are honoring their previous commitments, which means that they are approving drilling permits that are filed in accordance with the rules, and of course, filed under the current license. So, we really don’t see any challenges to that, because the operators are doing exactly what they’re supposed to do. And as we see the Department of Interior Returning authorities to the local Boma offices, we just don’t see that being a particular hurdle. I mean, we’re following all the rules, all of the precautions are taken as they should do. And again, these are just really the permits to allow development of these existing assets. So from that point of view, we really don’t see much risk at all there on the qualifications of the 20 k equipment.

[Taylor Zurcher:]

All right. That’s helpful. Thanks for that. And my follow up is, as relates to the Asgard and Inspiration both of those assets are idle today. In the prepared remarks, it sounded like both of those have some good marketable opportunities within 2021 and it sounded like most of that was in the Gulf of Mexico. So I’m just curious, are those rigs a largely being bid for opportunities in the U.S. Gulf of Mexico and if there’s any way you could provide some guidance or color on whether you think both of those rigs might be back working by, let’s say, year-end 2021, that would be super helpful.

[Roddie Mackenzie:]

Sure. I’ll stick that one up. Yes. So, what we’re seeing in the Gulf of Mexico, it’s very interesting, when we compare it to what we saw as we enter -- exited 2019. So you may or may not recall that supply became a little tight, essentially the all assets available just began to shrink. And we were quite successful in getting the rates from the kind of the 170, 180 level up to kind of mid-2s. So we’re actually seeing the same thing, again. When we put our supply and demand chart together and we go into greater detail, because of the number of rigs that have since been retired or kind of mothballed, permanently cold stacked, the number of available rigs and the number of opportunities we see by the end of 2021 show that there’s actually a couple of rigs short. So that combined with they have the new well control rules and shooting and stuff like that. So there’s some long lead items required on share arms and those kind of things. We’re cautiously optimistic there that the Gulf of Mexico is going to see a pop in demand and we’re already seen it in the tenders. So once a few of these things get booked up, I think, there’s a very good possibility both those rates will be working at the end of the year for sure and we get to take it from there. But it’s looking like a balanced market exiting this year. So that’s a very positive development compared to where we were some six months, nine months ago.

[Taylor Zurcher:]

Awesome. Thanks for the answers.

[Operator:]

All right. The next question is from Fredrik Stene with Clarksons Platou Securities.

[Fredrik Stene:]

Hey, guys. It’s Fredrik here, and first congratulations on the very strong operational quarter. My question…

[Jeremy Thigpen:]

Thank you, Fredrik.

[Fredrik Stene:]

…relates to what you’ve had -- my question mostly relate to what you’ve done on the financial side here, which I also think is impressive, you’ve kind of pulled every lever you have and been able to substantially reduce the particularly the amount of unsecured debt that you have due now in the next few years. So I was wondering we don’t even quote the minimal amounts left now compared to what you have. Do you have any other levers left that you can pull, for example, more senior guarantee capacity or do you think that you would turn your efforts towards, for example, the century bond and the secured bonds instead to try to get even more runway out of this?

[Mark Mey:]

Fredrik, that’s a good question. And look, our philosophy has been for the last several years to try and maintain a liquidity of runway of about five years. So we look out over five years and whether it’s secured, unsecured, guaranteed or convertible bonds, whatever is in that runway, we try and check that as soon as we can and in any way which we can. So last year, we were sitting in February, we had no idea we were going to hit the COVID a month later, which had a dramatic impact on our equity and debt pricing and that provides an opportunity for us to go and do some exchanges. So as we look through the rest of this year, as opportunities arise -- and arise, we will take advantage of that, and continue to keep that runway as clear as possible.

[Fredrik Stene:]

Perfect. And just as a follow up to that, and again, I think, this relates to the -- actually the Equinor bonds, as I call them. At the moment, it seems like the market is definitely pricing in from expectations about a new contract or a contract, or an option exercised or something like that for these rigs and with the new tax scheme in Norway as well, starting to have an effect. Do you have any update on your discussions with Equinor, if you’ve had any about the future of the -- of those rigs from the MCs ?

[Jeremy Thigpen:]

Roddie, do you want to take that.

[Roddie Mackenzie:]

Yes. I will take that one. Absolutely. So, yes, we are in constant dialogue with our customers, of course, Equinor being one of the biggest. But, yes, so we are exploring various different things that we could do with those rigs. They have been highly customized. We’ve recently gone through several really meaningful upgrades on the technology side for those rigs. So Equinor’s invested in these rigs that are actually performing extremely well and actually reaping the benefits of those upgrades. So we remain very optimistic that there will be an active part of the fleet, certainly, because the demand seems to be there from Equinor, but also they are amongst the top performers in the Equinor fleet. So we’re feeling pretty good about that.

[Fredrik Stene:]

Thank you, guys. I’ll get back in the queue.

[Operator:]

All right. The next question is from Mike Sabella with Bank of America.

[Mike Sabella:]

Hey. Good morning, everyone. So I guess one of the things I was hoping to touch on, Jeremy, you mentioned, earlier that the outlook for day rate is improving as we head towards 2022. Could you kind of give us an idea of what improving means, is it kind of $250-ish later this year and into next year or is that still a little too optimistic kind of as we sort of start the recovery?

[Jeremy Thigpen:]

Yes. Well, we -- I quoted in our prepared remarks, I think, it was the -- we have one ultra deepwater drillship that we signed up for $215,000. We had the semi-submersibles in Trinidad, the DD3, that was till 2025 and $250 and so it’s moving in the right direction. And I think what I’d kind of point back to, if you remember the close of 2019, when we were really starting to build some momentum, we signed about five fixtures, which we announced in January of 2020 and all were in that mid-200 range. I think they averaged around 250, maybe a little bit more. And we were seeing more momentum building as we entered the year, and unfortunately, COVID hit and just suck the wind out of our sails. And so I think you could probably see a similar trajectory, where, as Roddie said, there is some enthusiasm and some market out there right now Gulf of Mexico and elsewhere, where we could start to see the marketable supply of rigs get consumed pretty quickly and when that happens, you can push day rates pretty quickly. So, Roddie, I don’t know if you want to add more color to that. But I -- I mean, I think mid-2s to high 2s is not unrealistic if the market can continue hold together.

[Roddie Mackenzie:]

Yes. I think, certainly, that’s the case in 2022. I would concur with that. And certainly, I think this is the point is, we pay really close attention to those supply and demand charts and you see the opportunity there. And to be quite honest, I mean, our customers have spent the past several years tooling the business to be profitable at $40 a barrel or $50 a barrel, in some cases even lower. And with the commodity prices in the 60s and a few folks predicting they’re going to be in the 70s by year end, I think there’s some still very good money to be made by the operators even if we have a modest increase in the day rates associated with a floater. So, yes, certainly, mid-2s to high 2s is very possible in the next 12 months to 18 months.

[Mike Sabella:]

Perfect. Thanks. And then, I’ve been probably beaten what’s going on the Gulf of Mexico to depth at this point. But as we think of kind of Anchor and some of the other long-term contracts that are in place, if it gets bad in the Gulf of Mexico. Are you hearing anything from Chevron that is Anchor expected still be on time relative to the previous schedule that was laid out and the other long-term contracts in the Gulf of Mexico? I mean, is there any concern for any of those rigs, if the administration takes us in a more of their direction than what people are expecting?

[Roddie Mackenzie:]

Yes. I mean, there’s no accounting. Yes. Sorry, go ahead, Jeremy.

[Jeremy Thigpen:]

Yes. Roddie, go ahead.

[Jeremy Thigpen:]

Okay. There -- I means there’s no accounting for an immediate left turn. But, sadly, that’s not the case. I mean, what we’ve seen so far is actually an increased urgency from our customers to get on with it. But I think they -- if they could take the rigs earlier and start earlier, I think, we would -- I think the macro environment is so attractive just now that it’s worth pushing them on, and certainly, we talk to them all the time. But the technical details of where we are but also they get a larger political environment. And certainly the feedback we get from them is that the administration is very keen to see improvements in ESG targets and those kind of things. But they’re not about trying to shutdown the economic engine that the Gulf of Mexico is. So I would just summarize by saying, we have not seen any drawbacks to that yet? If anything, we’ve seen more urgency from the customer. So, we appreciate that, and obviously, we will look to service that as best we possibly can.

[Mike Sabella:]

Perfect. Thanks, everyone.

[Operator:]

All right. And we’ll take our final question from Sean Meakim with JP Morgan.

[Sean Meakim:]

Thank you. Good morning.

[Jeremy Thigpen:]

Good morning.

[Sean Meakim:]

So, as you see better prospects for tenders in ‘22, can you maybe just talk at a high level about how you’ll approach contract duration? So in other words, if supply/demand dynamics get more favorable as you expect, should we expect you to focus on shorter duration work and not lock in rates below where you see the markets headed or maybe would you do a barbell approach where you try to lock in some longer term Anchor contracts and then leave optionality for some others?

[Roddie Mackenzie:]

Yes. I think…

[Jeremy Thigpen:]

Probably all of the above.

[Roddie Mackenzie:]

Right?

[Jeremy Thigpen:]

Yes. I mean, you were, Roddie, if you do the analysis of the fleet status report, you can kind of see that, right? So we have a few that are locked in longer term. We’ll look at the assets specifically on which ones are super competitive or have special powers as you’d like to think of where they have features that perhaps are extremely rare in the industry. So I would say, we do all of the above. We do look to lock in a few. But certainly, we’re not going to take our best assets and tag them up to day rates that don’t create meaningful EBITDA. We will keep those short even if we do have a little bit of idle time in between contracts. That’s going to be worth it for the upside as we begin to see this thing improve. So, yes, a split strategy for sure, but certainly on the better assets we are not keen to tie them up for long periods of time at low rates.

[Roddie Mackenzie:]

No. I agree with a scaling year one up some day rate, year two at a higher day rate, year three at an even higher day rate, we were going to do anything like that?

[Sean Meakim:]

Right. Right. That makes a lot of sense. Maybe one more for, Mark, and just to follow up on how you see your remaining financing options, just in terms of clearing the liquidity runway as you mentioned before, it’s perhaps worth noting your stocks up by max in the last four months, does that change your set of options at all from that perspective?

[Mark Mey:]

I think it enhances our options. Having one more potential tool out there, we could look at equity length, we could look at equity. Our primary driver has been with, as you’ve seen the first exchanges, tenders, open market repurchases. So we’re going to look at all of that and whatever makes the most economic sense for our shareholders, we’re going to go after that.

[Sean Meakim:]

Got it. Very good. Thank you.

[Operator:]

All right. And there are no further questions at this time. Lexington, I’d like to turn the call back to you for any additional or closing remarks.

[Lexington May:]

Thank you, Sarah, and thank you, everyone, for your participation on today’s call. If you have further questions, please feel free to contact me. We look forward to talking with you again when we report our first quarter 2021 results. Have a good day.

[Operator:]

This concludes today’s call. Thank you for your participation. You may now disconnect.