Seadrill Limited (SDRL) 2026 Q3 法說會逐字稿

Hello everyone. Welcome and thank you for joining us to the CDRL third quarter 2026 earnings call. ( Operators Instructions )

I will now hand the conference over to Kevin Smith, Vice President of Corporate Finance and Investor Relations. Please go ahead.

Hello and welcome to CDRL's third quarter 2026 earnings call. I'm Kevin Smith, Vice President of Corporate Finance and Investor Relations, and I'm joined today by Samira Lee, President and Chief Executive Officer, Grant Creed, Executive Vice President and Chief Financial Officer, and Jacob Taylor, Vice President, Commercial.

Our call will include forward-looking statements that involve risks and uncertainty. Actual results may differ materially. No one should assume these forward-looking statements remain valid later in the quarter or year and we assume no obligation to update them except as required by securities laws.

Our filings with the U.S. Securities and Exchange Commission provide a more detailed discussion of our forward-looking statements and the risk factors affecting our business.

During the call, we will also reference non-GAAP measures. Our earnings release, furnished to the SEC and available on our website, includes reconciliations with the nearest corresponding GAAP measures.

Our use of the term EBITDA on today's call corresponds with the term adjusted EBITDA as defined in our earnings release.

I'll now turn the call over to Samir.

Thanks Kevin.

Welcome everyone.

Thank you for joining us.

I'll begin with our third quarter highlights and progress against our core priorities, then turn to the market outlook.

Jacob will cover our recent contracting success before Grant reviews our financial results and updated full year 2026 guidance.

The third quarter demonstrated strong execution against our core priorities, delivering safe, reliable operations, generating free cash flow, and capturing the upside ahead of us.

Starting with our first priority, safe and reliable operations.

We delivered another solid operational quarter, achieving 95% economic utilization and EBITDA of $121 million.

Revenue and EBITDA again exceeded expectations, leading us to raise full-year guidance for the third consecutive quarter.

Our customers value safe, efficient, and reliable execution.

Consistent delivery strengthens our customer relationships and supports our long-term backlog visibility, as demonstrated by recent contract awards.

In Angola, the Sonongol Libongos secured an extension of approximately three years, keeping the rig contracted into 2030.

With an average technical uptime of greater than 98% since 2019, this extension underscores the value of CDRL's operational and technical expertise.

In Malaysia, the client's exercise of options will keep the West Capella working in direct continuation through February 2028, building on the rig's strong operating history in the region.

And in the US Gulf, the Savan, Louisiana was awarded a 60-day contract with LOG.

When the rig commences this contract later this year, all three of our rigs in the region will be working for LOG. We are pleased to expand on what has already been a highly successful. Long-term partnership built on performance.

Safety remains fundamental to everything we do.

We are encouraged by our progress, but we recognize that sustained improvement requires continuous focus, disciplined execution, and unwavering commitment across the organization.

Moving to our second priority, free cash flow generation.

On our prior call, we said we were on track to generate meaningful free cash flow in the second-half of 2026.

This quarter, we delivered on that expectation, generating $179 million in free cash flow and demonstrating our ability to convert backlog into cash.

We also continued returning capital to shareholders.

Opportunistically repurchasing $22 million of shares during the quarter and bringing total repurchases for the year to $42 million.

And to our third priority, capturing the upside.

Since our August call, we have added approximately $800 million of total contract value through new awards in Indonesia and the US Gulf, together with extensions in Malaysia and Angola.

Our drill ship fleet is fully contracted. Or preparing for upcoming contracts, with more than 85% of available days already booked for 2027. This strong contract coverage gives us clear visibility into the earnings growth and substantial free cash flow generation we expect next year.

The West Corino Award in Indonesia marks an important milestone in our commercial strategy, specifically, repricing of three legacy day rate contracts to current market levels.

The West Telus and West Jupiter successfully commenced operations in Brazil at substantially higher rates earlier this year, and the West Carina will follow in 2027.

Turning to the market outlook, the tender pipeline remains healthy.

Several multi-year contracts are expected to be awarded over the coming months, which would drive drill-trip utilization higher next year.

The longer-term outlook is equally compelling.

After a decade of underinvestment, oil companies are refocusing on their core businesses and placing greater emphasis on production growth.

At the same time, peak oil demand expectations have shifted further into the future, while US shale production is expected to plateau.

In its 2026 global outlook, Exxon estimates an underlying natural production decline rate of approximately 15% annually.

Reflecting the growing contribution of faster declining unconventional resources.

Without new investment, it is projected global oil supply would fall approximately 80 million barrels per day short of demand within 10 years.

With the reserves declining and the hydrocarbon cycle extending, operators are renewing their focus on frontier exploration.

Recent discoveries. Planned exploration wells, and license awards across multiple regions provide tangible evidence of that shift.

In Brazil, Petrobras announced three discoveries in the Fos de Amazonas Basin.

The basin has attracted significant interest because it shares geological similarities with those that have yielded major discoveries in neighboring Suriname and Guyana and offshore West Africa.

Operator demand was evident in Brazil's 2025 bid round. When 19 of the 34 awarded blocks were in the Fos del Amazonas, with Chevron and Exxon securing acreage.

Staying in Brazil, BP recently reported another discovery in the Santos basin, adjacent to its Boomerangue discovery.

In West Africa, exploration momentum continues to build.

Chevron is planning a multi-well exploration program across the region.

In Ghana, Chevron. And Shell have been awarded new acreage, and in Cote d'Ivoire, Petrobrasa secured licenses for eight offshore exploration blocks.

On the Norwegian Continental Shelf, Equinor, Aker BP, and Voron Energy announced a strategic exploration alliance, targeting some of the largest remaining opportunities in the region.

Energy security adds another important dimension to this outlook.

Governments and operators are increasingly focused on diversifying supply, reinforcing the case for investment across a broad range of producing regions.

In India, for example, ONGC said it plans to invest $10.5 billion in deepwater over the next five years and drill 87 deepwater wells by March 2031.

The company also plans to expand underground strategic crude storage.

As India seeks to strengthen its energy security.

While the Middle East conflict may initially favor short-cycle production and investment, large-scale deepwater development will support the ability to deliver the volumes needed to address the emerging supply shortfall and replenish reserves.

Collectively.

These trends reinforce our confidence in the outlook for deepwater demand and strengthen our conviction that CDRL is well positioned to capture the upside ahead.

With that, I'll hand it to Jacob.

Thank you, Samir, and good morning, good afternoon, everyone. I'll provide a summary of our recent contracting activity, a regional overview, and the contracting outlook for our fleet.

Since our last call, we have signed contracts with a total value of approximately $800 million. Our commercial approach remains disciplined.

Prioritize work in direct continuation, secure attractive margins with swift payback, and retain exposure to improving market conditions across the portfolio.

In Southeast Asia, the awards for both the West Carina and West Capella demonstrate demand in a region of growing importance.

Looking ahead, based on ongoing tenders and customer discussions, Indonesia alone could absorb more than three drill ships by 2028.

The West Karina will fill one of those requirements, beginning a two and a half year firm assignment in the first half of 2027, in options that could extend the program by a further two and a half years.

The contract also includes an $85 million mobilization fee, front loading a sizable share of the contract's value at the start of the program.

This is a clear example of our commercial strategy in action, prioritizing total contract value and cash generation over headline day rate alone.

In Malaysia, exercised options have added approximately eight months of work for the West Capella, extending its current program into February 2028.

Half of that additional term comes from unpriced options, now exercised at a day rate in the mid-400s, excluding additional services.

The West Capella is the only drill ship currently working in the country with availability in 2028, and with several unpriced options remaining, the rig is well placed to capture the upside of demand in Malaysia.

In Angola, the current customer exercised three years of priced options on the Sonongol Labongos, extending operations in direct continuation into 2030.

Sea Drill is the largest drill ship operator in Angola through our strategic joint venture with Sonongol.

Of the five drill ships currently working in the country, two have availability in 2027, including a competitor's rig and the sea drill-owned West Gemini.

As shown on our latest fleet status report, the current well-based contract will see the West Gemini working through January 2027, and we continue to market the rig in Angola and more broadly across West Africa and Asia.

In the US Gulf, the Savannah Louisiana has secured contracts with Cosmos and Log. Providing work in direct continuation from November through January 2027.

The rig's versatility is attracting a growing customer base, with capabilities spanning shallow and deepwater operations, from well intervention to traditional drilling.

We continue to market the rig for shorter-term opportunities, but visibility into 2027 remains limited, and we continue to anticipate near-term gaps in the schedule.

Elsewhere in the US Gulf, the West Neptune and West Vela are contracted into late 2027 and mid-2028 respectively, providing coverage through a period we identified early as having a softer outlook. We currently estimate that the region is oversupplied by a few drill ships.

Growing demand, predominantly in West Africa and Asia, is expected to continue drawing some excess capacity out of the Gulf in 2027. If that occurs, it would improve the regional supply-demand balance and support further day rate progression. In Brazil, only the Westa Riga currently has clear availability in late 2027.

Between April of 2026 and January 2027, five drill ships will have left the Petrobras fleet, three of which will have departed the region altogether.

In addition to Petrobras's decision to release approximately one-fifth of its drill ship fleet, they are not expected to award the next wave of drill ship contracts until the first half of next year.

We believe the West Origa is well positioned for regional and international opportunities in the beginning of 2028.

Overall, Deepwater continues to experience strong demand, led by West Africa and Asia.

Recent contracting activity supports our long-held view of a sustained increase in demand for drill ships.

We have made significant progress in filling our 2027 availability, and available drill ship days have decreased from 30% to under 15% since our last call.

Our strategy is to maximize the economic value of each contract, not simply the headline day rate, but with a focus on improved financial returns and most importantly, free cash flow.

With that, I'll hand over to Grant.

Thank you, Jacob.

I'll now discuss our third quarter 2026 financial results and provide an update on our outlook for the balance of the year.

In the third quarter, we reported EBITDA of $121 million and generated $179 million of free cash flow.

Turning to the income statement. Total operating revenues were $428 million, with the $21 million quarter-on-quarter decrease primarily driven by fewer operating days, partially offset by another quarterly increase in the average day rate earned.

In Brazil, the West Telus contributed a full quarter of revenue following the mid-June commencement of its new contract at a substantially higher rate.

These benefits were offset by fewer operating days in the West Carina, which recently mobilized to Asia in preparation of its upcoming contracts, and time between contracts in the Savan, Louisiana, West Elara, and West Valla.

Those three rigs have all since resumed operations.

Management contract revenues were $66 million in line with the prior quarter.

These revenues include the daily fee CDRL earns for management, operational, and technical support to Sonodril, together with revenue from additional services that can vary from quarter to quarter.

Reimbursable revenues increase by $5 million to $24 million, offset by a corresponding increase in reimbursable expenses.

Third quarter total operating expenses were $384 million, up $7 million from the prior quarter, resulting in EBITDA of $121 million. EBITDA margin, excluding reimbursables, was 30%. In addition to the overarching priorities Samir mentioned earlier, last quarter we also highlighted our focus on three financial priorities to enhance long-term shareholder value.

Those are generating free cash flow, disciplined capital deployment, and finally, maintaining a robust balance sheet.

In the third quarter, we have made meaningful progress delivering on each of those priorities.

We have been clear that we anticipated an inflection in our ability to generate free cash flow in the second-half of this year.

In the third quarter, we generated $179 million of free cash flow. And our cash balance increased to $506 million.

In addition to the structural benefits of recent contracting activity, the cash position also benefited from the collection of the $41 million Westhalis mobilization fee and a working capital release.

We maintained our disciplined approach to capital deployment, opportunistically repurchasing $22 million of shares in the third quarter.

Our balance sheet remains robust, with net leverage of 0.6 times at quarter end.

Gross principal debt was $750 million, with maturities extending through 2034 following the June refinancing.

And now, turning to our outlook for the remainder of the year.

We are raising guidance for our operating revenues, which is now $1.56 billion to $1.58 billion, and that excludes $90 million of reimbursable revenues.

We are also raising the EBITDA range to $440 million to $460 million.

Our updated guidance ranges primarily reflect the timing of repair and maintenance expenses, including contract preparation for the West Carina. And the range of outcomes for fleet-wide economic utilization.

Our EBITDA guidance includes a non-cash net expense of $33 million related to the amortization of mobilization costs and revenues, of which $24 million has been recognized through the end of the third quarter.

The midpoint of our full-year guidance for capital expenditure and long-term maintenance remains unchanged and we have narrowed the range to $210 million to $230 million.

To close, we generated significant free cash flow this quarter, continued to exercise capital discipline, and maintained a robust balance sheet.

These remain our financial priorities as we look ahead.

And with that, I'll hand back to Samir for his closing remarks.

Thanks, Grant.

To close, our third-quarter performance demonstrates continued progress across our core priorities.

We are executing consistently, converting our backlog in substantial free cash flow and returning capital to shareholders, while strengthening our earnings visibility for 2027 and beyond.

With a tightening supply-demand balance and growing investment required to sustain global energy supply, we believe CDRL is well-positioned to convert these opportunities into sustained value. With that, I'll hand the call over for questions.

( Operators Instructions )

Your first question comes from the line of Keith Beckman with Pickering Energy Partners.

Please go ahead. Your line is now open.

Hey, good morning. Thanks for taking my question.

I just wanted to get your thoughts on maybe how you're thinking about the U.S. Gulf longer-term. It seems next year, right, we have several rigs that seem to be leaving and probably a little bit oversupplied, but maybe how are you thinking about it longer-term into 2028 and beyond and if you think that's kind of the new normal next year or if you think there's a return to activity?

Look, so I'd say for the U.S. Gulf, we're still optimistic and we still think it's a great market to be in. We saw it kind of coming early that there needed to be a rebalancing. You're seeing some rigs leave the market. But I think importantly, procedural, what we ended up doing was we contracted through most of next year. So for us, contract through '27 and be ready for 2028, but I'll let Jacob add anything else he wants.

Yeah, the only thing I would say, and we mentioned this in our opening remarks, is that we do expect some rigs to be leaving the region. And there is a possibility for maybe one to two more to be leaving as well.

And with that rebalance, if that does materialize, we expect things to be tight in '28 and based on some dialogues we're having ongoing with customers that they see that on the horizon as well and I think they're already starting to look at their long-term plans to mitigate that.

Awesome, that's very helpful.

I guess kind of a follow-up to that, digging a little deeper is, I mean, obviously, you guys are very well contracted for 2027 for the most part.

Trying to get a sense on how you're seeing opportunities maybe even further out. I know you guys mentioned Brazil awards potentially in '28, which I would think would be positive for the Origa as well as the Neptune as well. And what kind of following up on that first question being potentially more positive in 2028, maybe just how you're thinking about those two and any of the other rigs rolling off early '28 as well?

Look, I think the Auriga is quite well placed in 2028 for potential work in Brazil. As Jacob said in his prepared remarks, we see some tendering coming for that market early next year, most likely.

For the Neptune, look, it's driven by performance. She's worked for the same client since effectively delivery.

But it's not given. We don't take that for granted. We have to deliver every day. And as long as we continue to deliver on the Neptune, we think that there is a strong possibility she stays where she is. But there are other opportunities in the US Gulf and other markets as well for her.

Perfect. I really appreciate it. I'll turn it back.

Your next question comes from the line of Eddie Kim with Barclays. Please go ahead. Your line is now open.

So we've seen kind of leading-edge day rates industry-wide, now firmly in the mid-400s. We've seen a couple of data points in the high 400s now. So just curious if that progression of day rates has increased faster than you would have expected at the beginning of the year or if that pace is sort of kind of in line with your expectations. And looking ahead, if you expect.

Momentum to continue from here through next year.

Eddie, this is Mayor. Yeah, I'd say, look, did we expect it? Yes, but I would also say we at Cedrill Lease, when we look at contracts, we look at total contract value, right? So it's not just day rate for us, it is mobilization fees, it is ancillary services, it's the whole thing that goes into it and we look at total contract value and does it generate free cash flow.

So, yes, we are seeing day rates are tracking the way I think we expected them to, but I think for us, keep coming back to it is total contract value for us and does that contract generate free cash flow?

That makes sense and evident in the West Telus mobilization lump sum payment you received, so that's good to see.

Just my follow-up is.

Comment you mentioned in prepared remarks, you said you expected several multi-year contracts to be awarded over the next few months, which I assume to be coming from the IOCs. One of your peers earlier this week indicated that IOCs in general are still very capital disciplined and seem to be contracting rigs for their specific programs only and may be less likely to lock into longer two or three-year contracts at this stage. So just wanted to get your thoughts on the IOCs and how you expect contracting from this group to play out over the next six to 12 months?

Sure. They're still being very disciplined, right? Commodity price has helped, but at the end of the day, they're still budgeting very low numbers relative to where the spot market is today, and we are seeing absolute discipline from the IOCs. They are contracting for discrete opportunities when they know they have a long-term development program. They will contract for multi-years, but it is a discrete opportunity and they're tagging saying, Look, we have need for a rig for X number of years, so we will contract for X number of years, but they've got more. In their pockets right now, which is great for us. And we think that enhances '28 and '29 for us as an industry.

But I would say discipline is still the name of the game here.

Right.

Thank you. I'll turn it back.

Your next question comes from the line of Scott Grouper with Citi.

Please go ahead.

Yes, good morning.

I kind of want to follow on Eddie's question.

Because contracting leverage has definitely swung back to you and peers as evidenced by day rates inflating.

And yes, operators, particularly the majors, are remaining quote-unquote disciplined. But I wonder if there's an ability for you to push for term, and would you push for greater term.

As the market continues to tighten, we can obviously see day rates trending toward the $500,000 mark again.

But I wonder if you think you have an ability to push for term and whether operators would be kind of more willing to sign up for longer-term deals that extend beyond specific programs at that mid-400s rate rather than going to $500,000. So maybe you can just kind of talk through that dynamic for us.

Absolutely. So I think it's a balancing act. For us, we like having a smooth slope in terms of our contract roll-off profile. So some term is always good, but we don't want to also term out every single rig we have. We want some torque to the near term as well. So it is a balancing act that we go through every day of making sure we have enough term in the system to keep the lights on, if you will. And then we also want some spot exposure as well, but I'll let Jacob kind of add to that.

Yeah, I think the only thing I would say is that as we look out into '28 and '29, the greenfield values that have been approved so far are going to be the highest we've seen in over a decade. And so we anticipate that the demand is coming and it's going to be healthy for the market and this may drive rates up higher and some of those operators may take the opportunity to go ahead and trade off rate for more term. And depending on the availability. Of assets in our portfolio, as Samir said, we kind of want to have a smooth fall-off in our fleet status.

We would consider taking advantage of that opportunity.

I appreciate that color.

And then do you have an early read on CapEx for next year? I think there's a bit of spend on the Carina, but anything else to be aware of?

And then obviously the. The outlook for improved free cash flow in '27, '28 looks very strong. So just thoughts on continuing to lean into the buybacks or any other use of cash we should be aware of?

Yes, Scott, on the CapEx, of course, we're not guiding to next year at this point in time. But I can say that if you look across our fleet.

The typical run rate long-term maintenance on the rigs would be same as it has been this year. And then the next variable that sort of drives the peaks and troughs in CapEx is SBS schedule. And there's not a great deal of that spend next year. I'd say probably similar level to this year is a good indicator.

And then, yes, you're right on free cash flow, we've been pointing to the inflection of free cash flow from the middle of this year, which you see is evident in our third quarter results, which we see continuing and improving as the Carina starts her contract and we collect the attractive mobilization fee on that contract.

And the buybacks one, we just, we continuously assess where we're at and we're going to be opportunistic and we talk about being disciplined with our capital.

And yeah, there's not anything I can say definitively, but you can look at the past and what we've done and I will continue to assess that going forward. But Samir, please add anything.

The only thing I'd add on capital allocation is look, historically we've been disciplined, we've been opportunistic. Don't expect that to change, right? For us, we are very focused on deploying our capital in a wise way. And I know that sounds obvious, but we really do take that to heart around here.

I got it. I appreciate the call.

Thank you.

Your next question comes from the line of Frederick Steen with Clarkson Securities.

Please go ahead.

Hey, Samir and team.

Very happy to see that working capital is working with you rather than against you, strong free cash flow numbers this quarter.

My question or two specific questions really on a couple of rigs.

First, on the Corina, it was mentioned in prepared remarks that the mobilization fear is $85 million, which is obviously a significant amount.

But I was wondering, are you able to give some color on the cost associated with the mobilization? Because I guess the high mobilization fear there is reduced, but to me. What I really care about is like the cash equivalent day rate. So if there is not a one-to-one relationship with that mob fee, obviously the earnings and cash flow from this contract would be higher in a way, if you get what I'm saying.

Look, we're not prepared to give kind of the cost involved, but I can tell you that there's a significant amount of margin in that $85 million mobilization fee, right? The CapEx is minimal, the contract required CapEx is minimal, so it's really moving a rig from Namibia to Southeast Asia is the bulk of the cost.

Yeah, Frederick, I would just add that, strategically for us, we wanted to get cash in the door and capture that as early as possible for that opportunity. If we're going to be moving the rig from one side of the world to the other, it's got to be quite commercially attractive for us to pull it out of the strategic location like we have in Brazil.

So to be able to capture the inflow of cash early on in that opportunity was really important for us.

All right.

Thank you. Just a quick one for that follow-up.

Can you tell us anything about the timing on the receipt of that mob fee? And if I missed it, I'm sorry, but it would be helpful to kind of get an idea.

We have not said previously the direction I can tell you it's close to contract commencement or shortly thereafter.

Yeah.

All right, that's very helpful.

To be frank, we would invoice it at contract commencement.

Yeah, that's very helpful. And the second rig I wanted to touch on, with Gemini, you've got some nice extensions on the joint venture in Africa, and then you have the Gemini that's now extended well-based into early next year.

Even when that rig is negotiated for an extension, how should we think about.

The economics of the management revenue line potentially changing, is that something you would earn more on if the rate on that one would kind of move to something that's more closer to the current market or should we expect similar economics also during an extension?

Frederick, I think for now. Well, I mean, look, I think your theory is correct that as day rates improve across all three rigs, so the average day rate across all three rigs in the JV to the extent that improves would allow the JV to generate more cash flow, which in turn would be returned to the shareholders via a bareboat charter payment, a lease payment. And so we could increase the lease payment. I think for now, at least we.

We are anticipating or forecasting it to remain unchanged, but it's something we continue to evaluate going forward. And once the JV starts generating this cash and has it in the bank and we feel confident in we can then take a decision to increase it. But for now, I think we're just we're thinking about it as same as it has been throughout this year.

Thank you very much. And congratulations on racing guidance three times this year. I don't think there are too many areas that have been able to do that. But that's all it.

Sorry, that's all from me.

Thank you very much.

Your next question comes from the line of Greg Lewis with BTIG.

Yeah, I thank you and good afternoon and thanks for taking my questions.

Sorry if this was already covered, but we're kind of curious.

All signs point to the harsh environment Norwegian semi-market really tightening.

We've seen durations move higher, competitors are talking about pricing going higher.

I believe there's a couple new builds.

Environment, new builds that were kind of stranded that maybe are now being toyed with in terms of finishing those and bringing those back to market.

I guess under that backdrop, is there any way that we should be thinking about either the Aquarius or the Phoenix? Or I mean, it seems like it's kind of now or never for those rigs. Just kind of curious how you're thinking about that and if there's any dialogue potentially about reactivating one of those rigs?

So look, we're actively marketing both of those assets and yes, we think there is a path to bring them back.

I think for us, there is a large reactivation fee, and our view is, look, it needs to be funded somewhere, and our approach is let the client fund it, right, and their cost of capital is lower than ours.

We can reactivate it, but then it's just going to cost them more, right, because we have a higher cost of capital. So for us, if they're willing to fund the reactivation, we're absolutely there to bring those rigs back. And look, they're both stacked in Norway.

So they are ready to be brought back to market, we just need to find the right client and the right contract.

And so as seeing pricing now, it is, I guess you call it high fours, is there any kind of framework and hey, this to your point.

This needs to be a multi-year deal to reactivate it. But is there kind of like a kind of like a, I don't know, a low, however kind of like mark is it, hey, multi-year deal at 500K, the economics start to work, or is this something where we'd need something even higher than that?

Look, I think you can take lower than that if you get a big upfront, right? I mean, back to that total contract value, if we get a big mobilization fee, we can have a lower rate, or we could have a higher rate of smaller mobilization fee. For us, it comes down to contract value. If we can justify to the board, look, we can generate free cash flow off the reactivation, we would look at it.

Okay. And then my other question is around Angola.

It seems like, I guess Sonegal kind of was, got involved in drilling their own wells. And I know they've done it in the past, but like it does seem like there's opportunities in Angola maybe for incremental rigs. I mean, how do you balance that? And if there were an opportunity to move, because I believe part of the JV allows sea drill.

The ability or even that you're almost incentivized to add another rig to that JV.

I guess maybe, is that something that is still on the table? And two, as you kind of see opportunities for the fleet developing, is that something we potentially could even see over the next couple of years?

Yeah, look, I think we would love to put a fourth rig into the JV if there's the right opportunity.

And we are seeing demand across West Africa and into East Africa. So for us, we like the JV position, we would happily put a fourth rig into the JV, just we need to find the right program to justify putting another rig into it.

And I think just to add to that is that the JV is not just.

Tied to Angola.

We could add a forthright to the JV if we brought another rig into West Africa as well, and that's something that we are exploring.

Okay, super helpful.

Thank you for that.

Your next question comes from Doug Becker with Capital One Securities.

Please go ahead.

Thank you.

Samir, I really appreciate Segal's focus on total contract value.

I thought it was interesting that you highlighted ancillary service as part of that equation. And I've generally thought of those as lower margin offerings. So curious, is the potential to improve pricing and margins on ancillary services so they become a more meaningful part of the value of a contract?

Not really, to be H1st. But in certain circumstances, we're able to price them a little better. In more established markets, it's harder to drive a lot of extra cash out of ancillary services. But when you get into more remote locations, it becomes a bit easier to add some margin onto them because there's just not a plethora of people available to provide that service. So it depends on the market. But yes, there are places where we can add it, but I wouldn't say it's becoming ubiquitous.

Got it.

And then, Grant, maybe a little housekeeping. The annual guidance implies higher costs in the fourth quarter.

Just want to get a little more color in the drivers behind that and just any trends to look for in 2027?

Yeah, it's primarily repairs and maintenance and typically our repairs and maintenance do spike in the fourth quarter.

The way we end up, we get the budget approved and then place the orders and the work often ends up getting done in the fourth quarter and that's what we anticipate to occur here in this fourth quarter, so that's across the fleet. I would also highlight the Carina, which is of course currently.

Off contract preparing for its new long-term contract with ENI in Indonesia and so taking the opportunity whilst it's off contract to do, let's say, more routine repairs and maintenance now so that we don't have the burden to do that maintenance whilst we're on contract. So there would be an incremental step on Carina plus some slightly higher across the fleet relative to the first three quarters.

Got it.

Thank you.

Your next question comes from the line of Hamad Khosand with BWS Financial.

Please go ahead.

Good morning.

Just wanted to see, given the amount of rigs that are on contract in '27, are there any.

Days that they could be offline, or is it pretty safe to assume that they're just going to generate revenue throughout '27?

We take the normal operational, sometimes things happen. But look, for the most part, we don't have any big planned out of service times. Karina is obviously preparing for her contract. But beyond that, if I look across the fleet, there's not a lot of planned beyond that right now.

Is there any contract opportunity for Gemini in 27 or is everything pushed out until late 27 or early 28?

Look, we're looking at opportunities kind of across '27. Some of them start later into '27, some start earlier into '27. I think the key for us is we remain very optimistic on the Gemini. It's one of our rigs that we think has performed incredibly well, and she's placed in the right market, right? A market that continues to absorb rigs. So we are quite confident that we'll find work for that rig.

Okay.

Thank you.

Your next question comes from Josh Jain with Daniel Energy Partners. Please go ahead.

Thanks for taking my question. I just had one thing that I wanted to follow-up on. Could you elaborate a bit more on the ONGC tender? It's just been, I guess, a little bit on again, off again, and it was alluded to in the comments. Maybe you could just talk about anything that's changed over the last six to nine months confidence.

There and just how that frames the difference in the outlook maybe today than you were facing six to nine months ago for deepwater?

Yes, also for ONGC did you mention ONGC in India, correct.

Correct.

So for that opportunity, I mean, there recently was an award, they seem to have accelerated it quite quickly based off of how they've historically run those processes and secured an asset from outside the region in parallel.

You've had Oil India also in the market for an asset.

We have chosen to kind of deliberately for the moment exclude ourselves from pursuit of those opportunities, just given that one, we haven't really had the availability of assets. And then two, we would need to see some kind of changes in the contractual in order to make that more attractive for us, given that. We felt that it would just there were interesting or prospects and alternatives elsewhere for the rigs at that time.

We do anticipate that, ONGC is going to continue to follow through on this objective of increasing their domestic capacity of drill ships.

They do they do kind of have a geopolitical agenda of increasing exploration and development. And I think that this was just the first piece.

Of many. I think that they could increase actually probably one to two drill ships into '27, '28.

We do understand that they're currently in the market engaging with brokers on the possibility of even looking at buying a drill ship.

So yes, we're keeping a close eye on it, but for the opportunities that were recently in the market, we chose not to participate in those.

This concludes our question-and-answer session.

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