Seadrill Restricted (NYSE:SDRL) This fall 2022 Outcomes Convention Name April 5, 2023 9:00 AM ET
Firm Individuals
David Warwick – IR
Simon Johnson – President and CEO
Grant Creed – EVP and CFO
Leif Nelson – EVP and Chief Working and Expertise Officer
Samir Ali – EVP and Chief Industrial Officer
Convention Name Individuals
Greg Lewis – BTIG
Fredrik Stene – Clarksons Securities
Hamed Khorsand – BWS Monetary
Matt Polyak – Hummingbird Capital
David Warwick
Hey, everybody, and welcome to Seadrill’s This fall 2022 earnings name and webcast. My identify is David Warwick, and I am the Director of Investor Relations for the corporate. I would like to begin by introducing you to the Seadrill crew on as we speak’s convention name. Simon Johnson, President and Chief Government Officer; Grant Creed, EVP and Chief Monetary Officer; Leif Nelson, EVP and Chief Working and Expertise Officer; and Samir Ali, EVP and Chief Industrial Officer.
I’ll shortly hand you over to Simon who will take you thru an summary of the This fall highlights in addition to contact on a few of our company and industrial success over the quarter. Grant will then take you thru our monetary efficiency over the quarter and 2022 efficiency in opposition to our beforehand set steerage earlier than handing again to Simon for some closing remarks, summarizing our technique and outlook. Following the formal presentation, we’ll be inviting questions from industry- and sell-side analysts.
To take part within the Q&A session, we ask that you just be a part of the session by way of the convention name line. For these of you that aren’t tuning in by way of the webcast hyperlink, it is possible for you to to entry a duplicate of this presentation by way of the Investor Relations part of the Seadrill web site. This convention name is being recorded, and a webcast replay of the decision shall be made obtainable on our web site shortly after.
Earlier than we begin, I want to notify you of the disclaimer assertion made on Slide 2. Merely put, we shall be referring to forward-looking statements associated to the enterprise and firm that aren’t historic details. Such statements and assumptions are primarily based upon present expectations and are subsequently topic to sure dangers and uncertainties. There are various components which may trigger precise efficiency and outcomes to vary materially. For additional data, please take the time after the decision to learn this disclaimer and discuss with the This fall earnings report launched earlier this morning.
On that notice, I’ll hand you over to Simon.
Simon Johnson
Welcome, everybody. Thanks for becoming a member of our digital presentation discussing our This fall 2022 outcomes.
On the outset, I would wish to briefly make clear that, as outlined in our press launch from February 28 in reference to filings made for our acquisition of Aquadrill, we selected to postpone this earnings launch as a essential step in closing that transaction in essentially the most expeditious method. Due to this fact, with our Q1 2023 reporting scheduled for simply over a month’s time, we have shortened as we speak’s ready remarks.
Now, for just a few topline figures for the quarter. Full yr EBITDA for 2022 was $265 million which is on the prime of the guided vary. Fourth quarter revenues and EBITDA had been decrease than earlier quarters, however this was anticipated and in keeping with expectations in relation to working exercise. In October, we closed our sale of seven jackups positioned within the Kingdom of Saudi Arabia, which allowed us to extend our liquidity and considerably deleverage our steadiness sheet. Because the transaction closed, we have paid down nearly $600 million in debt underneath our second lien facility. Grant will present some extra coloration on these matters in his ready remarks.
Throughout the quarter, not solely did we closed our sale of the Saudi jackups, however we additionally signed an accretive settlement to accumulate Aquadrill enterprise with which we’re very acquainted given our widespread historical past. And as you’ll have seen, simply days in the past, we closed this transaction. The administration crew and I want to thank the workers of each firms for his or her efforts and contributions in closing the deal. The flexibility to transact rapidly and effectively is turning into an indicator of the Seadrill model. We’re very excited concerning the prospects this acquisition presents in as we speak’s level rig market.
Turning to our energetic fleet together with the previous Aquadrill items, we now have 14 deepwater and harsh surroundings floaters in operation with the West Capella anticipated to start its operations offshore Jap Africa imminently, taking the full in operation to 15. Among the many working items are the West Jupiter and West Tellus which have commenced operations with Petrobras in Brazil in December and January respectively. Moreover, we’ve got three benign-environment jackups working on bareboat constitution to our Gulfdrill three way partnership and a variety of different items that we handle on behalf of different house owners. As a reminder, the previous Aquadrill items aren’t presently managed by Seadrill, however our intention is to take management of those items at an applicable time primarily based on discussions with the present managers in addition to the purchasers using the providers of those rigs.
Lastly, in the course of the ultimate quarter of 2022, we delivered good operational efficiency with excessive technical utilization throughout the fleet. Our technical utilization was recorded at 95%, whereas financial utilization stood at 91%.
Shifting onto the following slide, essentially the most notable occasion of latest months was our acquisition of Aquadrill, which we closed just some days in the past, as I beforehand talked about. Because of this, we have added 4 drillships, one harsh surroundings semi-sub, and three tender help items to our fleet. With the sale of the seven jackups deployed within the Kingdom of Saudi and the addition of Aquadrill belongings, our fleet has develop into extra uncovered to the engaging ultra-deepwater and harsh surroundings rig segments. The Aquadrill do present Seadrill with extra capability within the ultra-deep water rig market specifically, the place we proceed to be inspired by prevailing traits in day charges.
Importantly, this capability is on the water and doesn’t require pricey and prolonged rig reactivations. Our quick focus is on seamlessly integrating Aquadrill into our enterprise, and we consider that we’re uniquely positioned to take action given the shared historical past of Seadrill. We’re very eager to maneuver rapidly with the mixing so as to notice the numerous synergies arising from the transaction. And the administration crew firmly consider that the acquisition cements Seadrill as an industry-leading offshore driller with essential scale. And it enhances our free money movement outlook, and we anticipate it to ship significant worth to our shareholders via time.
Now referring to market situations on Slide 5. 2022 was an inflection level for the offshore drilling {industry}, and we proceed to see constructive developments proper throughout the oil and fuel sector. The basics for offshore drilling stay favorable regardless of turbulent situations in broader monetary market provide. The worldwide power disaster skilled via 2022 has delivered to mild the years of underinvestment in new and continued provides of power.
[EMPs] have benefited from excessive power costs for a while now and chosen principally to return the earnings to shareholders. Nonetheless, we are actually seeing an rising development of their strategy to capital allocation. A number of of the big IOCs have indicated expansionary budgets for offshore drilling actions with greenfield exercise being a distinguished beneficiary. Moreover, we’re seeing a transparent choice in direction of high-end trendy gear which performs effectively into the fingers of Seadrill’s growing fleet.
Robust demand is especially evident in Seadrill’s key geographies specifically Brazil and West Africa, the place utilization fee is being pushed to excessive ranges. Whereas demand is a key driver, we consider that the dearth of accessible provide of rigs, a operate of fleet rationalization over the past decade, to be a essential part of the market’s continued constructive momentum and trajectory via 2023 and past.
The outlook for the benign ultra-deep water section stays constructive with marketed utilization standing round 95% for drillships. Gross sales of this section, as illustrated by vanguard day charges, persistently within the $400,000 to $450,000 per day vary. We now have two items within the harsh floater section. A number of items have already left the essential Norwegian market, and we see the demand-supply steadiness tightening additional in coming months, bettering outcomes for rig house owners.
With our expanded rig portfolio, we’re effectively positioned to capitalize on new alternatives. We’re excited concerning the market within the coming years and intend to reposition Seadrill relative to its friends with a extra constant and concentrated fleet profile.
I will now hand over to Grant to speak you thru the This fall monetary ends in extra element. Over to you, Grant.
Grant Creed
Thanks, Simon, and welcome once more to all of you becoming a member of us as we speak.
We’re delighted to report full yr EBITDA for 2022 of $265 million which is on the prime finish of the guided vary. Full yr income of $1.1 billion and CapEx of $289 million had been additionally inside the guided ranges. Fourth quarter EBITDA of $41 million was in keeping with expectations and former steerage however decrease than the earlier quarter, primarily pushed by idle time for the West Tellus, which accomplished upgrades for its upcoming long-term marketing campaign with Petrobras that commenced in early January 2023.
Fewer rig working days for the West Hercules, which concluded its operations in Canada and subsequently demobilized to Norway. We didn’t profit from a full quarter of working outcomes from the Saudi jackups following completion of the sale of that enterprise in October. And I’ve a basic remark in respect of P&L geography. Outcomes associated to the Saudi jackup enterprise up till October 18 are introduced as discontinued operations on the face of the revenue assertion.
From my ultimate remark relating to the P&L, we anticipate EBITDA to considerably enhance once more within the first quarter of this yr as we profit from a full quarter of operations in respect of all 4 drillships on contract in Brazil.
Now onto the steadiness sheet. We had $480 million of unrestricted money readily available on the quarter finish, comparatively excessive as a result of proceeds obtained on sale of the Saudi jackup enterprise. Different belongings decreased by $89 million largely attributable to a mixture of collections from among the previous JV in respect of administration charges receivable, amortization of favorable contracts, and receipt of demobilization revenues in respect of the West Hercules.
Lengthy-term liabilities decreased, each primarily in relation to debt prepayments, which I will clarify in additional element shortly. This was partially offset by mobilization income and in relation to Jupiter, Carina, and Saturn, which is recorded on the steadiness sheet and acknowledged as revenue within the P&L over the contract time period.
And eventually, belongings and liabilities associated to the Saudi enterprise had been categorized as held on the market on the Q3 steadiness sheet. These had been now not on the steadiness sheet after the sale closed in October.
Taking a look at our debt profile in a bit extra element. You may see that we have been very proactive managing it following the sale of the Saudi enterprise. Because the finish of Q3, we have decreased our debt stack by nearly $600 million. First, we made a compulsory prepayment of $192 million in October on the closing of the sale, which was adopted by a voluntary prepayment of $250 million in November.
Publish interval, we made two additional voluntary prepayments of $110 million and $40 million in February and March respectively. All advised, these prepayments have decreased the comparatively costly second lien debt by roughly 83% from $713 million to $117 million. With no change to the primary lien facility or convertible bond, our complete debt stood at $342 million as of April.
Lastly, on the financials, we is not going to be offering full yr 2023 steerage at this time limit. Our precedence is offering consolidated monetary steerage that features the Aquadrill enterprise, and we intend to subject this within the close to future.
With that, I will now hand again to Simon earlier than we open the road for the Q&A.
Simon Johnson
Thanks, Grant. We’ve, in fact, spoken about lots of the occasions on this slide beforehand. So I will not contact on all of them individually.
Now that we have concluded 2022 outcomes, I would wish to reiterate how proud I’m of our group. It was a particularly energetic yr that started with our profitable emergence from Chapter 11 and ended with the announcement of our Aquadrill flight returning house. We have demonstrated that we’re decisive and nimble via the execution of a number of strategic initiatives whereas on the similar time delivering operationally for our purchasers.
And on the subject of operations, I would be remiss if I did not commend our workforce each onshore and offshore for getting our 4 seventh technology drillships operational in Brazil after massive and time-consuming capital initiatives. We began this yr in comparable style with the Aquadrill closing simply days in the past and the divestment of our stake in and Paratus Vitality again in February. We’re making Seadrill a less complicated, extra streamlined firm, rising our focus on the markets in rig segments the place we are able to notice essentially the most worth for our shareholders.
Trying forward, refinancing excellent debt shall be a near-term focus, and we’ll proceed to observe the marketplace for accretive development alternatives and/or divestment of non-core belongings the place engaging costs may be realized. We’ll proceed to be an energetic participant in our {industry} and, as ever, we intend to maximise worth for our shareholders with operational excellence and security on the forefront of our enterprise.
With that, we conclude our presentation. Operator, I will hand you again to open up the strains for Q&A, please.
Query-and-Reply Session
Operator
Thanks. [Operator Instructions] Greg Lewis, BTIG.
Greg Lewis
Sure, thanks and good afternoon, all people, and thanks for taking my query.
Simon, I consider you touched on it briefly in your ready remarks, nevertheless it looks as if over the past couple of weeks, there was some constructive momentum within the North Sea whether or not it was the UK asserting they are going to have a look at the windfall tax or it appears to be like like a rig or two has moved out of the Norwegian market to exterior the North Sea. Simply sort of curious in your ideas, the way you’re desirous about that market realizing publish the Aquadrill acquisition. Do you have got one other harsh climate rig, and actually simply are you able to present slightly bit extra coloration on the way you’re desirous about that market possibly within the again finish of this yr? And actually the way you’re desirous about it subsequent yr?
Simon Johnson
Sure, you wager, Greg. I am pleased to speak to that. So, sure, I imply, clearly Aquadrill delivers one other harsh surroundings rig into our fleet within the type of the Aquarius. We’ve been saying for a while that we’re involved about being a sub-desirable scale in that market section. So that offers us — clearly we’re getting nearer to essential mass, which is an effective factor.
And its empty capability in the mean time too in as a lot because the rig will not be at present working for anybody. In order we see the shift of sure of the items from the NCS to southern latitudes, we see that as marking an essential shift available in the market steadiness within the NCS actually, however I feel extra usually within the Western European rig markets. We expect that the general public coverage that has been expanded by the UK authorities in relation to our sector has not been useful within the close to time period. I feel that there is extra smart concepts which are being delivered to the fore now. However I do not suppose they are going to make as essential a contribution to the availability demand steadiness within the close to time period because the motion of a few of these items to different international locations like Australia, Canada, Namibia, I feel, that is essentially the most type of highly effective near-term affect or catalyst on the event of that market from what has been slightly little bit of a stale and type of depressed outlook.
That is quickly altering to at least one the place there is a a lot more healthy steadiness between demand and obtainable provide. So we predict we’re favorably uncovered. We do need to go on reactivation for the Aquarius to deliver it again to work. Our view is that that reactivation will should be funded by the shopper. So we’re setting the edge fairly excessive when it comes to placing that rig again right into a market that makes the attributes of that rig. And as I say, we’ll be strictly observing monetary prudence in how we strategy these alternatives.
Greg Lewis
Okay, nice. After which realizing, once more, it has been every week, so that you most likely have not even began realizing synergies from the Aquadrill acquisition, however with that transaction closed, how are you desirous about positioning the corporate round potential further alternatives for rig development, whether or not that is on the extra conventional M&A facet or it appears to be like like there are nonetheless possibly one or two stranded newbuilds on the shipyards and possibly a pair extra that I am not desirous about the proper means, and/or is there potential for Seadrill to doubtlessly handle possibly a few of these rigs which are at present trying to come out of these shipyards?
Simon Johnson
Sure. Effectively, what I might say is we have most likely taken a extra wide-ranging strategy to how we’d type of generate profits via the enterprise, rig administration as being a function of what we have accomplished prior to now. It is not the core of what we do. However actually, we’d be thinking about collaborating in rig administration alternatives for these new builds, I feel, critically if there is a path to possession of the belongings. I feel because the stranded asset stock begins getting depleted, clearly there’s increasingly individuals chasing fewer and fewer obtainable items.
So I feel, as you concentrate on the availability stock usually, it is getting very, very tight now. So I feel whereas we have been principally targeted on buying steadiness sheets up till now, I feel that we’d have an open thoughts to buying a stranded asset so long as we’ve got a fairly excessive stage of confidence of our means to contract that unit. So I type of answered your questions in reverse there, Greg.
However I feel additionally, moreover on prime of that, clearly the Aquadrill acquisition simply provides us much more choices for our prospects and much more type of near-term capability as effectively. So the market is getting to actually attention-grabbing part in the mean time, and we’re tremendous happy with how issues are growing for us within the house usually.
Greg Lewis
Sure, 100% we agree. I did have one different query on [indiscernible] Grant, I imply, you talked about the step-up that we’ll see in Q1. I do not understand how granular you wish to be however is there any sort of steerage you can provide us possibly on a proportion foundation or how simply so there possibly is not any confusion. What number of incremental [ramp space] do you suppose we’ll see roughly in Q1 versus This fall?
Grant Creed
Greg, I am reluctant to offer you something type of agency in that respect. I feel what I can say now could be, as I discussed within the ready remarks, the Brazil rigs are on contract. So [starting] to go now run their fashions. It is not extraordinarily as fairly a easy enterprise than you already know what rigs are on contract. I feel usually the market has a good suggestion of the day charges on every of the rigs. So I feel you can get fairly shut.
Greg Lewis
Okay, nice. Thanks very a lot for the time.
Simon Johnson
Thanks for the questions, Greg.
Operator
Fredrik Stene, Clarksons Securities.
Fredrik Stene
Hey, Simon and crew, congratulations on the transaction in the beginning. And that goes to you, Steven, as effectively for those who’re listening in right here. I feel it is nice to see consolidation.
My query — or I’ve a number of questions, however I will attempt to preserve it quick right here. I suppose, you stated briefly that, within the close to time period, you could possibly have a look at your capital construction and notably on the again of you lowering the second lien piece, I suppose, sort of grouping that possibly into easier construction would make sense. So are you ready at this level to share, not essentially specifics, however at the least an thought of the way you suppose that might seem like, and in case you have any ideally suited leverage stage that you’d have a look at as effectively.
Simon Johnson
Sure. So I will begin off by saying that our present debt not solely is it is dearer than we wish it to be, and suppose the place the market is as we speak, but additionally comprises unhelpful complicated covenants that we want to take away. So I feel a refinancing of some kind does make sense. And we have been doing our work to evaluation what are the professionals and cons of the choices we see in entrance of us.
We’ve Norwegian bond, US bond, direct lenders. I am unable to I am going into particulars now the place we’re touchdown and what the leverage metrics are. I feel we additionally have a look at use of proceeds as effectively and what that could be. However I am reluctant at this stage, Fredrik, to offer you any extra particulars on that.
Fredrik Stene
Sure. No, that is very comprehensible. I feel on this transaction or potential strategic transactions, you touched upon that with Greg already. However simply on the broader markets, on condition that we’re now seeing the stranded belongings being taken into market, and I feel fairly just a few of them or nearly all of them have quickly to be house owners or firms which are trying actively to take out the remainder. After which you have got a few of your friends which are nonetheless — along with your self which are nonetheless caught with its stacked belongings, which I feel at the least a few of them are eager to place again into work.
So if you put that every one collectively, how do you suppose the day fee mechanics will sort of work out within the quick time period versus the long run? Do you suppose we’ll want some type of plateau as we sort of churn via these belongings or — after which speed up a bit extra or do you suppose you’ll have constructive directional momentum additionally via ’23, ’24 no matter these stacked belongings coming again into play.
Grant Creed
I feel within the close to time period, Fredrik, our expectation is that you could be see one thing of a plateau within the charges, however that is principally a operate of market participant conduct. I do not suppose it is essentially reflective of underlying fundamentals. We’re firmly of the view that the availability demand steadiness is what it’s and that, at some stage, will simply drive conduct ahead no matter what individuals could select to do with particular person market fixtures and so forth. So I feel there’s some potential for slight enhance within the unfold and the flattening of fee improvement right here within the subsequent couple of months.
However I feel as we get into the capital budgeting season within the subsequent quarter and we begin to see that tightening of provide when it comes to the items which are stranded within the shipyards disappearing, then I feel you are going to find yourself with two camps there that may be those that have a sure capability that they can not get to work as a result of they’re going through lengthy and costly reactivations, after which there are going to be these with rigs on the water. And so I feel for these with rigs on the water are going to be the pacesetters when it comes to fee improvement.
And people need to deliver items again to work that can face frankly an arbitrage. And that arbitrage will each work for them and in opposition to them, however principally in opposition to them when it comes to fee construction. So, sure, look, I feel there’s a variety of our friends that have gotten lots of rigs to reactivate. We’re not in that place fortunately.
We’ve just about absolutely contracted with one or two swing belongings that we are able to deliver again to the market if we get the proper industrial phrases. We’re not going to do this on a speculative foundation. So I feel we’re assured within the improvement of market, and we predict that can overcome any near-term headwinds.
Fredrik Stene
That is very useful. And simply as a follow-up to that, have you ever seen in your personal discussions with purchasers sort of versus the place, for instance, the place you had been six months in the past. How have the opposite T&Cs of the contract buildings modified along with simply day charges going a bit up?
Simon Johnson
Effectively, I feel it’s important to ask so as to be served. So what I might say is I do not know in the event that they’ve began providing massively totally different phrases. I feel the obvious factor that we have seen is an understanding that they should be way more versatile on consumption home windows and issues of that nature, and that they need to plan additional and additional forward. In as far as the contractual Ts and Cs are involved, I imply actually that requires grownup conduct on the a part of the individuals working the market.
And positively for us, our considerations with issues like provide chain inflation and the potential for country-specific adjustments in working prices, we’re very targeted on defending margins. We’re very targeted on defending in opposition to adjustments in battle and forex controls and issues of that nature. However it’s important to positively ask the client to handle these sorts of points.
And that is slightly bit that we hope will separate us from another gamers. We’re not dropping sight of the contractual asks. We’re trying to broaden on that a part of the industrial discount. It is via time that has confirmed to be much more essential than a direct that exists for a second in time.
Fredrik Stene
All proper. Thanks a lot for all of your feedback. And, once more, congratulations on finishing the acquisition.
Simon Johnson
Thanks very a lot, Fredrik. Have an amazing day.
Operator
Hamed Khorsand, BWS Monetary.
Hamed Khorsand
Hello. So the primary query I had was, is there any plan or any technique behind among the belongings you have gained from Aquadrill? And for those who’re trying to monetize them in any means, does it match the bigger profile what you will note Seadrill as within the subsequent three years?
Simon Johnson
Sure, Hamed. Completely. Fleet compositions and energetic dialogue inside the administration group from the Board in the mean time. In order you rightly level out, we’re buying a variety of rigs via Aquadrill that are not type of what I contemplate to be core belongings within the type of the three tender help rigs. By way of time lately right here, we have decreased our publicity to the jackup house as effectively.
We nonetheless have three items which are leased to undergo JV and on contract for the following couple of years with staggered expiration dates. And we’ve got a stacked unit as effectively. So I feel more and more, as we go ahead, you’ll be able to see a shift in our focus to items which are mainly targeted on the ultra-deepwater and the cruel surroundings house. However we’re in no rush additionally to promote these belongings which have come to us both via acquisition or have been part of our authentic fleet.
We’re solely going to divest if the phrases are engaging to us frankly. So we’ll be alternatives there, each to sort of clear up the fleet that we have to make for extra constant, good metric profile. However then we’re additionally alternatives for growth as effectively. So we’ll proceed to go searching for belongings that may be obtainable on a one-off foundation or the place they could make sense in our fleet and never in any individual else’s.
We’ve lots of energetic discussions throughout the house there. So, sure, we’re trying to have a extra, let’s say, a much less wide-ranging profile throughout the fleet going ahead. However it would take a while to attain that and fixed surveillance and monetary self-discipline on how we transact round reaching that consequence.
Hamed Khorsand
Okay. And my different query was relating to these synergies that you have highlighted prior to now. How briskly may that develop as the largest portion of these synergies coming from you shifting away from the administration contracts that Aquadrill has?
Grant Creed
Sure, that is proper. Look, I feel — So we have talked about $70 million yearly. The overwhelming majority of that’s in relation to the MSAs. Aquadrill, as I feel nearly everybody is aware of, has solely a small group of staff with small workplace house. So the G&A synergies are roughly $10 million or so of that $70 million. After which the remainder is MSA associated.
These MSAs base case is that they proceed with the present managers till the present contracts expire, after which we’ll take over. And people are usually inside the subsequent yr and in some circumstances barely greater than a yr. However by within the subsequent two years’ time that shall be absolutely realized.
Hamed Khorsand
Okay. Thanks.
Operator
[Operator Instructions] Matt Polyak, Hummingbird Capital.
Matt Polyak
Hey, good afternoon, guys. Thanks a lot for taking the time. Simply needed to sort of go down the linear logic path right here. Should you would not thoughts, clearly, a few of your friends have come to the debt market and looks as if there is a window open right here. Might you simply discuss concerning the places and takes of shareholder returns versus allocating capital to doubtlessly stranded belongings and weigh that in opposition to type of the perceived secondary danger that there’s publish deal shut right here?
Simon Johnson
Sure. Okay. I can begin off, Matt, after which possibly Grant let some coloration.
Look, I feel the important thing factor to grasp is that we’re absolutely contracted at current, and we do not have lots of [eyeing] on the sidelines that’s going to massively distract us from delivering working days. So actually what we’re attempting to do is, for those who take the view as we do that there is not going to be any new constructing within the sector for the foreseeable future, in some unspecified time in the future it is sensible to — for those who can receive entry to them or on some sort of elective or dedicated or stage foundation, at some stage, it is sensible to have a look at these new belongings.
And I feel the best way that the market has developed within the final 12 months, trying ahead the following 12 months, I feel that there is a case to say that there isn’t any room for slightly bit extra aggressive conduct for those who’re on the absolutely contracted finish of the spectrum, which we clearly are when it comes to not having an excessive amount of residual stack capability ready to return again to work. In order that’s how we sort of give it some thought is on what may look slightly bit sporty as we speak, within the very close to future trying backwards may seem like it was a way more attention-grabbing strategy. Does that reply your query, Matt?
Matt Polyak
I suppose I used to be actually sort of asking concerning the places and takes of using capital to spend on stranded belongings versus shareholder returns and ideas round buybacks or dividends and whether or not or not there’s room for each since you guys clearly alluded to shareholder returns as effectively fairly closely.
Simon Johnson
Sure. Effectively, look, we predict there’s room for each. I feel the casing understands we’re not going to develop capital round on a wholesale foundation, we’ll be trying on a selective opportunistic foundation the place we predict there’s good worth. In as far as it pertains to capital return, I feel we have communicated fairly loudly that that’s going to be a necessary a part of our proposition to the market, however we actually have to get this Aquadrill integration out of the best way first. And you will see us promulgating some agency positions on what we’d do there along with the Board as we get in direction of the tip of this yr. We’re not ready to do this simply now.
Matt Polyak
Obtained it. Thanks.