Shelf Drilling has announced results for the fourth quarter and full year of 2020 ending December 31.

Fourth Quarter Highlights

• Q4 2020 Revenues of $121.3 million, a 5% sequential decrease compared to Q3 2020.

• Q4 2020 Adjusted EBITDA of $31.8 million, representing an Adjusted EBITDA Margin of 26%.

 • Full Year 2020 Revenue of $585.2 million and Adjusted EBITDA of $200.3 million. Adjusted EBITDA margin was 34%.

 • Q4 2020 Net Loss of $90.4 million. Full Year 2020 Net loss of $274.9 million.

• In Q4 2020, the Company recorded a non-cash impairment charge of $61.1 million on long-lived assets. For full Year 2020, the Company recorded a non-cash impairment charge of $249.2 million on long-lived assets.

• Q4 2020 Capital Expenditures and Deferred Coststotaled $28.9 million, including $10.2 million associated with rig acquisitions. Full Year 2020 Capital Expenditures and Deferred Costs were $154.4 million, including $88.3 million associated with rig acquisitions.

• The Company’s cash and cash equivalents balance at December 31, 2020 was $73.4 million.

• The Company’s total debt at December 31, 2020 was $1.0 billion, including $55.0 million drawn on the Company’s revolving credit facility.

• $1.4 billion in contract backlog at December 31, 2020 across 29 contracted rigs.

• In February 2021, the Company completed the sale of the Shelf Drilling Journey for total proceeds of $77.6 million.

 Fourth Quarter Results

Revenues were $121.3 million in Q4 2020 compared to $127.4 million in Q3 2020. The $6.1 million (4.8%) sequential decrease in revenues was primarily due to lower effective utilization. Effective utilization decreased to 69% in Q4 2020 from 72% in Q3 2020, mostly due to the completion of a contract in UAE, the suspension of one rig in Saudi Arabia Page 2 of 5 and extended out of service time for another rig in Saudi Arabia. This was partly offset by the startup of two new contracts in India and Nigeria. The average day rate decreased to $55.8 thousand in Q4 2020 from $56.6 thousand in Q3 2020.

Total operating and maintenance expenses decreased by $0.4 million (0.5%) in Q4 2020 to $78.6 million compared to $79.0 million in Q3 2020. The sequential decrease was primarily due to lower operating costs on rigs which were suspended or terminated during Q4 2020, partly offset by an increase in maintenance and shipyard expenses for a rig in UAE and contract preparation expenses for a rig that started a new contract in Oman in December 2020.

General and administrative expenses of $11.1 million in Q4 2020 increased by $1.7 million as compared to Q3 2020 of $9.4 million. General and administrative expenses in Q4 2020 and Q3 2020 included $1.1 million of non-cash sharebased compensation expense.

Adjusted EBITDA for Q4 2020 was $31.8 million compared to $39.3 million for Q3 2020. The Adjusted EBITDA margin of 26% for Q4 2020 decreased from 31% in Q3 2020.

The Company performed impairment testing on all rigs in the Company’s fleet at the end of Q4 2020. As a result, a $61.1 million loss on impairment of long-lived assets was recorded in December 2020. Twelve of the Company’s rigs were impaired, of which four rigs are held for sale.

Capital expenditures and deferred costs of $28.9 million in Q4 2020 increased by $2.4 million from $26.5 million in Q3 2020. Capital expenditures and deferred costs, excluding rig acquisitions, increased across the fleet to $18.7 million in Q4 2020 from $16.6 million in Q3 2020, primarily due to increased spending on fleet spares. Rig acquisitions increased to $10.2 million in Q4 2020 from $9.9 million in Q3 2020. Rig acquisitions in Q4 and Q3 2020 were largely related to the continuation of the reactivation, upgrade and contract preparation project on the Shelf Drilling Enterprise, which was completed in early 2021.

Q4 2020 ending cash and cash equivalents balance of $73.4 million increased by $4.2 million from $69.2 million at the end of Q3 2020. The sequential decline in revenues and EBITDA were offset by favorable working capital impacts, including the reduction in cash interest payments during Q4 2020 compared to Q3 2020.

David Mullen, Chief Executive Officer, commented: “In an unprecedented year for the entire industry, I am extremely proud of the results delivered by Shelf Drilling in 2020. Despite the extreme challenges created by the COVID-19 pandemic, we achieved our best ever safety and operating performance across a range of key metrics and generated positive free cash flow in 2020.”

Mullen added: “Our immediate response to the crisis focused on keeping our people safe, maintaining business continuity and preserving cash. These efforts contributed to our very resilient financial performance for 2020, including Adjusted EBITDA of $200 million and a margin of 34%, despite the intense pressures on activity and dayrates. In the fourth quarter, we continued to see the negative revenue impacts of previous contract terminations and suspensions but also the positive cost impacts of proactive measures taken earlier in the year. We opportunistically divested two rigs from our fleet, including the Shelf Drilling Journey, which significantly enhances our liquidity position. With the recent improvement in oil prices, I remain confident that we will be able to contract several of our rigs that roll off in 2021 and I believe we are best positioned to navigate the current market and play an active role in the recovery of the offshore drilling sector.”