Future Outlook Amid Delays
Q: Do delays affect your positive outlook for 2025 and beyond?
A: The delays are due to logistics and supply chain issues, not economic decisions, so the overall outlook for 2025 and 2026 remains positive. Once activity starts, we don't see it slowing down, and we remain optimistic about the future.

Margin Improvement Expectations
Q: Can you elaborate on the expected 58% gross margin in Q4 and compare it to previous cycles?
A: We anticipate margins accelerating in the second half of 2024 due to vessels coming out of drydock and returning to contracts, which will naturally increase revenue in Q4. Costs are coming down substantially, and as the vessels return to work, we expect margins to improve significantly. Over time, we see margins potentially reaching 70%.

Day Rate Increases for 2025
Q: Should we expect average day rates to reach around $26,000 by Q2 2025?
A: We believe day rates can increase by $3,500 to $4,500 per year, which is consistent with the past 1.5 years. The momentum is there, and we continue to capitalize on it.

Uses of Free Cash Flow
Q: How will you deploy significant free cash flow over the next 12-18 months?
A: We don't plan to build cash; instead, we'll either invest in value-accretive acquisitions or return money to shareholders. We're not over-leveraged, so reducing debt isn't a priority.

M&A Market Dynamics
Q: With high industry utilization, is the bid-ask spread widening in the M&A market?
A: Yes, but we're focused on deals that add value for shareholders. We're being price disciplined and won't overpay for assets. We continue to be active in the market, but only for transactions that make strategic sense.

Impact of Vessel Mix on Rates
Q: Did the mix of vessels re-contracted affect leading-edge rates this quarter?
A: Yes, we re-contracted a higher number of smaller vessels, which skewed the average rates lower. This was due to some vessels coming off long-term contracts early and the natural variability in our fleet mix. However, larger vessel rates continue to show strong momentum.

Drydock Timing and Utilization
Q: Are higher Q3 drydock days impacting utilization expectations for 2024?
A: The increased drydock days in Q3 are a mix of delays and scheduling shifts from Q2 and Q4. We have around 300 extra drydock days in Q3 than originally anticipated, but this doesn't significantly change our annual expectations.

Contract Length Strategy
Q: Will average contract lengths remain around five months going forward?
A: While this quarter saw shorter average contract lengths due to market conditions, we typically aim for longer terms. Drilling contracts are generally short-term, but we're starting to see slightly longer contracts and remain positive about market opportunities into 2025 and 2026.

Reasons for Project Delays
Q: What are the reasons for delays in project start-ups?
A: Delays are mainly due to logistics, supply chain issues, and project planning inefficiencies. For example, some customers couldn't obtain necessary equipment like drill pipes, leading to 60-90 day project slips. We anticipate these projects to proceed, and we're positive about future activity levels.

Q3 Revenue Expectations
Q: Is Q3 revenue expected to be flat compared to Q2?
A: Yes, we expect Q3 revenue to be roughly flat, with a significant step up in Q4 as delayed projects commence. The shift of project timing doesn't materially affect our annual revenue expectations.

Margin Baseline for 2025
Q: Is the 57-58% margin in Q4 indicative of 2025 expectations?
A: Directionally, yes. As day rates improve and costs decrease with fewer drydock days in 2025 (our lightest year in the cycle), we expect margins to continue growing, similar to what we're projecting for Q4.

Outlook on Rig Activity
Q: What are your expectations for offshore rig activity in the next 12-24 months?
A: We're very positive about rig activity across all regions we operate in for 2025 and 2026. While 2024 saw some shuffling due to planning delays, we foresee a significant uptick in activity as customers have better visibility and are more organized.

Re-contracting Smaller Vessels
Q: How did re-contracting smaller vessels affect leading-edge rates?
A: Re-contracting smaller vessels in the Middle East led to average rates being skewed lower. However, these vessels achieved an average 29% rate increase upon re-contracting, reflecting strong market conditions and our ability to quickly redeploy assets.