Transocean (RIG) Q2 2021 Earnings Call Transcript

Transocean (RIG -2.69%)
Q2 2021 Earnings Call
Aug 03, 2021, 9:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Q2 2021 Transocean earnings conference call. Today's conference is being recorded. At this time, I would like to turn the conference over to Lex May, manager of investor relations. Please go ahead.

Lex May -- Manager of Investor Relations

Thank you, Madison. Good morning, and welcome to Transocean's second-quarter 2021 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. Joining me on this morning's call are Jeremy Thigpen, president and chief executive officer; Mark Mey, executive vice president and chief financial officer; Keelan Adamson, executive vice president and chief operations officer; and Roddie Mackenzie, senior vice president of marketing, innovation and industry relations.

During the course of this call, Transocean management may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts. Such statements are based upon the current expectations and certain assumptions and are, therefore, subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact our future results.

Also, please note that the company undertakes no duty to update or revise forward-looking statements. Following Jeremy and Mark's prepared comments, we will conduct a question-and-answer session with our team. [Operator instructions] Thank you very much. I'll now turn the call over to Jeremy.

Jeremy Thigpen -- President and Chief Executive Officer

Thank you, Lex. And welcome to our employees, customers, investors and analysts participating in today's call. As reported in yesterday's earnings release, for the second quarter, Transocean delivered adjusted EBITDA of $255 million on $713 million in adjusted revenue, resulting in an adjusted EBITDA margin of over 36%. We continued to operate at a high level during the second quarter as evidenced by our company's best revenue efficiency of 98%.

In fact, even compared to a very strong first quarter, we still reduced our sequential downtime by over 14%. This reflects the steps we've taken to continuously improve our reliability through our disciplined operational procedures, the extensive collaboration we engage in with our various equipment providers for the maintenance of our assets and the broader use of our proprietary smart equipment analytics system, which enables us to identify anomalies, tailor our actions and ultimately improve our reliability. As such, I would like to extend a sincere thank you to the entire Transocean team for the devotion that you demonstrate each and every day to deliver best-in-class service to our customers. You have shown tremendous strength and resilience throughout this pandemic, and I would like to acknowledge the personal sacrifices that you continue to make each and every day to keep our rigs operating safely, reliably and efficiently to support our customers.

Now taking a look at our fleet. Starting in the Gulf of Mexico, I'm extremely pleased to announce that the Deepwater Conqueror, one of our most capable rigs, was awarded a new contract that will commence in direct continuation of our current campaign. And as compelling evidence of improving market conditions, this most recent fixture includes 1 well priced at $335,000 a day plus two one-well options. This is yet another leading edge fixture in the Gulf of Mexico and our third fixture above $300,000 per day this quarter, which is an important milestone in the offshore recovery and the type of rates that will help us to generate sufficient cash flow to continue delevering the balance sheet.

Continuing with this momentum, Deepwater Asgard was just awarded a 90-day contract with a major operator in the Gulf of Mexico. This contract is expected to begin in the first quarter of 2022 and carries a day rate of $255,000 per day, plus an additional $40,000 per day for MPD, bringing the total day rate to $295,000 per day. These awards and day rates support our view that our customers recognize the value and increasing scarcity of readily available high-specification ultra-deepwater assets. Staying in the Gulf, the Discoverer Inspiration has commenced her reactivation from warm stack status for her nine well P&A campaign that is set to commence in September.

Moving down to Trinidad, the DD3 finished a very successful campaign for Shell, which included banner safety performance with no lost time incidents. We are confident that she will continue to operate at a high level with BHP on our current assignment, which began in June. And as we look forward, we are encouraged to be bidding her into multiple opportunities around the world when she becomes available after her work in Trinidad concludes. Continuing our journey further south to Brazil, I'm pleased to report that Petrobras 10000 was awarded a two-year contract extension by Petrobras and direct continuation of our current contract.

This award adds over $241 million in backlog and boast an average day rate of $330,000 per day, excluding royalties. This contract reinforces our belief that our customers recognize the shortage of readily available high-specification not to mention well-run ultra-deepwater assets. Jumping over to Norway. We were recently notified by our customer MOL Norge that following disappointing results of the reserves found after drilling the first wells in the campaign, they will not be continuing their drilling program.

As such, in accordance with agreed terms, the customer ended the Transocean Barents contract earlier than we anticipated. While the decision by MOL Norge was disappointing, just prior to the notification, we received a new 200-day contract award from Shell for work in Norway at a day rate of $302,000 per day plus bonus. The contract is set to commence in February and adds over $60 million in backlog, once again, demonstrating the confidence that our customers have in both the Barents and the service that we deliver in this challenging operating environment. Staying in Norway during the quarter, the Transocean Norge successfully completed her maiden contract with Equinor and importantly, was awarded a new four-well contract with ConocoPhillips.

The contract is expected to start in March of 2022 and adds $56 million in backlog with the potential for an additional five one-well options. And wrapping up in Norway, the Transocean Spitsbergen had two one-well options exercised by Equinor at a day rate of $290,000 per day and is now expected to remain on contract through September of 2022. This state-of-the-art rig has developed a strong operational reputation and continues to draw customer interest from both NOCs and independents. Again, we remain encouraged by the Norwegian market's resilience and the outlook.

The steady flow of project continues to build as the favorable well economics encourage more investment on the Norwegian Continental Shelf, which bodes well for our large established and respected fleet of high-specification harsh environment assets. Turning now to West Africa. As we noted on last quarter's call, the Deepwater Skyros was awarded Total's rig of the Year, thanks to its superior operational performance. As additional confirmation that our performance is a key differentiator, Total exercised its one-year option on the rig, adding more than $72 million in backlog.

As I will discuss in a moment, activity in this perennially difficult market finally appears to be improving. And finally, looking at the Asia Pacific region, the Deepwater Nautilus had a one-well option exercised by POSCO, which will keep the rig active through November. Additionally, the Nautilus was also awarded a new contract by Mubadala Petroleum that is expected to start in the first quarter of 2022. Rounding out the new contracts in our fleet, the KG2 was awarded a one-well contract in Brunei Shell, which is expected to start in December.

These data points firmly corroborate our belief that we are in the beginning of an up cycle in the offshore drilling industry. As the world continues to rebound from the global pandemic, the need for hydrocarbons is increasing, which in turn dictates that more exploration and production is needed. Looking forward, we are encouraged by the relative stability in oil prices. They've remained well above $60 per barrel since early February and more recently above $70 per barrel.

And as a result of the recent production agreement between OPEC and its allies, we expect this new pricing floor to be highly constructive and attractive for future investment from our customers. As the COVID-19 vaccines are distributed around the world, we expect that global demand for hydrocarbons will continue to recover. However, we are pragmatic, the timing of the global recovery may be a bit more fluid given the COVID variants that are circulating. Yet we've already witnessed as COVID cases diminish, economic activity returns, and so does the need for hydrocarbons.

Most importantly, we believe our customers also share our view. Their confidence in improving oil market fundamentals has resulted in accelerated planning for new or previously sideline projects, many of which are expected to commence later this year or early next year. Taking a closer look around the global market. Starting in the U.S.

Gulf of Mexico, we continue to see an extremely tight market with only one available asset as we enter 2022, and the very real possibility that this market could be entirely sold out of active and marketable rigs by year-end. Several of our recent pictures for our seventh gen assets are now near or above $300,000 a day, reflecting the improving market and the obvious scarcity of active high-specification assets. We expect this trend to continue through 2022 with relatively few assets available in the region. It's worth noting that we are not only responding to more tenders, we are also engaging in far more direct negotiations, particularly with customers operating in the Gulf of Mexico.

In fact, our direct negotiation volume has more than doubled since this time last year, and there are other indications that there will be more projects moving forward. With an urgency not seen in quite some time, independents and IOCs are both requesting information on available assets in this region. As we predicted previously, operators are now increasingly entertaining paid mobilizations and reimbursement of project-specific rig upgrades. This is an important signpost that indicates improving market conditions in key aspects of an up cycle.

The increased level of activity we are seeing in the U.S. Gulf of Mexico is a direct result of higher and more stable oil prices, coupled with the reduction in offshore project costs that have been driven down over the past several years as well as the added pressure that our customers are now facing to generate production with the lowest carbon intensity. To that point, one IOC recently stated their Deepwater Gulf of Mexico production had the lowest carbon intensity production among the entire global portfolio. And to corroborate this increasingly pervasive theme, a third party recently published an article indicating that a barrel of oil in the U.S.

Gulf of Mexico offer the lowest carbon intensity behind only Norway and United Arab Emirates. We firmly believe lower carbon barrels will drive our customers' future investment decisions and feel validated that our strategy to specialize in the highest specification, most efficient assets, focused primarily in Norway and United States was and continues to be the most advantageous. Remaining in the U.S. Gulf of Mexico, we eagerly await the deliveries of our newbuild drillships, the Deepwater Atlas and the Deepwater Titan on order from Sembcorp Marine's Jurong Shipyard, which are expected to commence their maiden projects with Beacon Offshore Energy and Chevron, respectively.

During the quarter, we reached an agreement with the shipyard to defer delivery of these assets as well as the associated shipyard payments. We now expect the Atlas to be delivered in December of this year and the Titan to be delivered in May of next year. Importantly, as part of the arrangement, we have deferred over $450 million in near-term capex. While on the topic of newbuilds, Beacon has extended the FID deadline for its Shenandoah project to August 17.

Based on our almost daily discussions, we believe Beacon is fully committed to the project and is conducting its final procedures in advance of its FID. However, in the unlikely event, a decision is made to not pursue the project, you should know that we have a very favorable arrangement in place with the shipyard to further delay the associated payments for the Atlas. Now turning to Brazil. We see over 18 rig years of work to be awarded for drilling starting in 2022.

With almost all of those expected awards coming from Petrobras, we believe we are well positioned to capitalize on this incremental work. We've established a strong relationship with Petrobras as evidenced by our three drillships currently all on long-term contracts. And it should be noted that all three of our rigs ranked very highly in Petrobras' on top of these performance rankings for offshore contractors. Based on Petrobras' tendering activity and the incremental demand forecasted from the IOCs, we expect the rig count in Brazil to rise steadily over the next couple of years.

We are also optimistic that a handful of successful exploration wells in the pre-salt fields by the IOCs will signal a welcome return of activity in Brazil to levels not seen in several years. Jumping over to Norway. We are excited about the opportunities unfolding as a result of the government's enactment of favorable tax incentives for oil and gas projects sanctioned by December 2022. We anticipate this market will continue to remain in balance as more projects are brought forward to capitalize on the favorable investment incentives.

With much of the Norwegian fleet already contracted, white space for 2022 and beyond is now beginning to be filled, boding well for continued high utilization and strong day rates. As you would expect, we are engaged in conversations for extending or finding new opportunities for the extremely well-respected Cat D rigs, which we acquired in the Songa Offshore transaction. Looking now at the U.K., we are witnessing an uptick in market opportunities and are actively responding to a number of new tenders that have emerged over the past couple of months. Current opportunities could add more than six rig years of work that would start within the next 12 months.

And due to the lack of warm assets in this market, available assets could command increasingly stronger day rates. If this happens, given the prohibitive cost of reactivating a cold-stacked rig, we could find ourselves in an environment in which hot rigs from Norway, perhaps even the Cat Ds are being attracted to this market to perform some of the work anticipated over the next year. Turning now to West Africa. Despite the ever present challenges, our customers are becoming more willing to consider programs in this region.

In fact, we're seeing multiple opportunities emerge for both short- and long-term work. Additionally, we are eagerly awaiting both Total's and Exxon's development awards for multiyear programs in Angola, which would add a minimum of 3.5 rig years of work beginning in 2022. We believe we are well placed to capitalize on one or more of these opportunities, either through direct awards or the removal of lower-priced supply in the region. In the Asia Pacific region, which includes Australia, we see several short- and medium-term opportunities starting in the second half of the year and carrying over into next.

Needless to say, we are encouraged by the continued volume of opportunities this region has generated. In summary, we are growing increasingly optimistic about the tightening markets we are seeing around the world and taking comfort in our approximately $7.3 billion backlog. In fact, we've recently seen floating rig utilization for the Golden Triangle exceed the 80% mark, something we haven't seen since 2015. This has historically been a key inflection point for material improvements in day rate and contract term.

Supported by the ongoing conversations with our customers, we believe we are at the beginning of a sustainable recovery for offshore drilling. Assuming oil prices remain constructive, we believe we will witness a robust offshore market recovery in 2022 and beyond. As many of you know, due to many factors, such as the speculative building or reactivating of assets, undisciplined contract bidding, not to mention the global pandemic, most of our competitors failed, and as a result, entered into financial restructuring. Now that most of our competitors have emerged from restructuring, we believe that the new owners understand and appreciate the value of disciplined bidding, the value of industry consolidation and the value of retiring older and less capable assets.

Before I go on, I feel obligated to say that Transocean is one of the few international offshore drilling companies that has protected the interest of its equity holders. And for that, we are very proud. We continue to lead the industry in sustainable, disciplined bidding practices, industry consolidation and rig retirements. This approach has helped us navigate the worst downturn this industry has ever seen, and we are relieved and excited about the up cycle.

As we think about the recovery, not only will industry consolidation and asset retirements play a role, but rig reactivations will also materially influence the market dynamic. Based on Transocean's fleet of cold-stacked assets, we estimate that the total cash cost of reactivating a cold-stacked asset starts at $60 million and can go upwards of $100 million depending on contract and location-specific items. Transocean maintains that it will not speculatively reactivate a rig and will only do so with a contract that generates a suitable return on investment. This discipline will help us to ensure rig utilization and day rates maintain their upward progression.

Having said that, we recognize that undisciplined speculative reactivations by our peers could slow that momentum we are experiencing. Still, while some of our peers have emerged from restructuring with a relatively clean balance sheet and a much lower interest burden, we do not believe that they have sufficient liquidity or visibility to future liquidity given their limited backlogs to activate more than a couple of assets without more lucrative contracts. As such, we feel confident that Transocean will soon be rewarded with higher day rates and longer-term contracts, which will ultimately enable us to delever and increase value to our shareholders. In conclusion, Transocean remains uniquely and exceptionally well positioned for the offshore market recovery.

We have spent the last several years positioning ourselves as the industry leader by establishing the offshore drilling industry's largest and most profitable backlog, providing us with visibility to future cash flows that enable us to continue to invest in our people and our assets. We have assembled the industry's largest and most technically capable fleet of floating rigs, and our cold-stacked assets provide us the capability to capitalize on the offshore market recovery as assets prepare for reactivation. In fact, using Transocean's proprietary rig-ranking database, all of our cold-stacked ultra-deepwater assets are ranked within the top 100 of benign environment floaters, positioning us well above our peers and making our available assets some of the most sought-after rigs in the market. We are encouraged by both market data points and that we are best positioned to capitalize on the market recovery.

As we prepare for that recovery, we will continue to execute our strategic priorities to further enhance our position as the industry leader and develop value to our shareholders -- deliver value to our shareholders. Thank you. Mark?

Mark Mey -- Executive Vice President and Chief Financial Officer

Thank you, Jeremy, and good day to all. During today's call, I will briefly recap our second quarter results, provide guidance for the third quarter then update you on liquidity forecast through 2022. As Jeremy stated, we delivered another very solid quarter due to the higher level of performance of the entire Transocean team, but particularly our offshore and onshore operations teams. As disclosed in our press release, we generated adjusted EBITDA of $255 million, reflecting robust revenue generation and cost discipline.

Additionally, we further improved our industry-leading EBITDA margin to 36%. Our strong EBITDA results were partially driven by our fleetwide revenue efficiency of 98%, showcasing our operational excellence, yet another quarter of excellent backlog conversion. Furthermore, this enabled us to generate cash flow from operations of approximately $153 million, which is a quarter-over-quarter improvement of $57 million. Additionally, we took several steps during the quarter to materially improve our liquidity.

First, as Jeremy mentioned, we reached an agreement with Sembcorp to defer delivery and payment of both our newbuilds, the Deepwater Atlas and Deepwater Titan. As a result, our liquidity is bolstered by over $450 million. We now expect to take delivery of the Atlas in December of this year and the Titan in May of 2022. For additional details, please refer to our press release on June 7, our accompanying slide deck posted on our website and our SEC filings.

During the quarter, we launched an at-the-market, or ATM, equity issuance program that permits us to sell shares opportunistically up to a value of $400 million. As reflected in our 10-Q, share sales under the program have generated approximately $145 million to date, further improving our liquidity. Considering both the Shipyard agreement and the ATM program, we improved liquidity of almost $600 million during the quarter. Looking closer at operating results.

During the second quarter, we delivered adjusted contract drilling revenues of $713 million. This was above our guidance, primarily due to stronger than forecasted revenue efficiency as well as higher-than-expected activity as a result of an early contract start-up for the Deepwater Asgard, coupled with the shifting of the Mykonos Shipyard project from Q2 to Q3. Associated with this deferral, the rig remain on contract for the entire second quarter. Operating and maintenance expense during -- in the quarter was $434 million.

This is slightly below our guidance, primarily due to the aforementioned Mykonos Shipyard project shifting to the third quarter. Turning to the cash flow and balance sheet. We ended the second quarter with total liquidity of approximately $2.6 billion, including unrestricted cash and cash equivalents of approximately $1 billion, approximately $300 million of restricted cash for debt service and $1.3 billion from our undrawn revolving credit facility. Let me now provide an update on our expectations for our third quarter financial performance.

For the third quarter of 2021, we expect adjusted contract revenue of approximately $670 million. Based upon an average fleet-wise revenue efficiency of 96%, the quarter-over-quarter decrease is mostly attributable to the early conclusion of operations on the Transocean Barents, the Transocean enablers special periodic survey, the Transocean Norge rolling off contract and the Deepwater Mykonos Shipyard which was deferred from the second quarter. These negative impacts were partially offset by a full quarter of activity on the Asgard and Inspiration. We expect third quarter O&M expense to be approximately $427 million.

The quarter-over-quarter decrease is explained by the factors previously mentioned. We expect G&A expense for the third quarter to be approximately $40 million, in line with the second quarter. Net interest expense for the third quarter is forecasted to be approximately $113 million. This includes capitalized interest of approximately $13 million.

Capital expenditures, including capitalized interest, for the third quarter are forecasted to be approximately $90 million. This includes approximately $75 million for our newbuild drillships under construction and $15 million of maintenance capex. Cash taxes are expected to be approximately $11 million for the third quarter. Our liquidity as of December 31, 2022, is estimated to be between $1.5 billion and $1.7 billion.

This estimate includes the recently announced agreement with Sembcorp and the potential securitization of the Deepwater Titan. This liquidity forecast includes an estimated remaining 2021 capex of $630 million and a 2022 capex expectation of $820 million. As always, our guidance excludes any speculative rig reactivations or upgrades. Our focus for the remainder of the year continues to be optimizing cash flow generation through revenue enhancement and cost discipline.

As the market continues to improve, as evidenced by our most recent fixtures, we are very mindful of the reactivation expenses associated with our warm-stacked assets. Furthermore, we will remain disciplined and will not reactivate a cold-stacked asset without a contract or contracts that justify the associated costs. In conclusion, we will continue to take steps to improve our balance sheet and enhance our liquidity as we have already demonstrated. You can expect that we will continue to monitor the capital markets, and when appropriate, execute smart, timely and strategic transactions.

This concludes my prepared comments. I'll now turn the call back over to Lex.

Lex May -- Manager of Investor Relations

Thanks, Mark. Madison, we're now ready to take questions. [Operator instructions]

Questions & Answers:

Operator

[Operator instructions] And we'll go ahead and take our first question from Connor Lynagh with Morgan Stanley. Please go ahead.

Connor Lynagh -- Morgan Stanley -- Analyst

You had a couple of comments in your prepared remarks about the value of consolidation. I'm just curious how you're thinking about that in light of -- you do have obviously some idled assets and obviously you need to continue to delever the balance sheet. So just curious what your appetite and thinking around that dynamic of your businesses?

Jeremy Thigpen -- President and Chief Executive Officer

Thanks for the question. You're right. And we said for probably the last six years or so, the consolidation was necessary to get this piece of the industry healthy again. We've demonstrated that with the acquisition of Songa Offshore, Ocean Rig and, of course, the investment in the Transocean Norge, we think more consolidation needs to take place and will now that some of our competitors have come out of the restructuring process.

Obviously, as Transocean is the market leader, we get to look at everything that might be out there. And of course, we're constantly looking for opportunities that might make sense for us. But as you mentioned, we have quite a few idle assets ourselves, and we can't do anything that will in any way weaken the balance sheet or compromise our liquidity position. So as we look at these, we look through those lenses.

So certainly, value and consolidation, we are actively exploring opportunities, but we have a very narrow focus. And so I think we've been pretty consistent with that direction over the past several quarters and years.

Connor Lynagh -- Morgan Stanley -- Analyst

Thanks. Maybe just a follow-up there. Are there any specific regions or types of assets out there in the world that you think would be better placed in your hands or you see sort of an opportunity to add to your portfolio?

Jeremy Thigpen -- President and Chief Executive Officer

I think we've been pretty consistent with that as well. High-specification ultra-deepwater and harsh environment assets are really our focus. If you look at particular regions, obviously, we have pretty good strongholds in Norway and in the U.S. Gulf of Mexico.

And I think any asset would be better in our hands, but I'm biased.

Connor Lynagh -- Morgan Stanley -- Analyst

All right. Appreciate it. Just one sort of unrelated one really quickly is how you're thinking about the ATM program and how you're planning to use that this year?

Mark Mey -- Executive Vice President and Chief Financial Officer

Yes. Thanks, Connor. As I said in my prepared comments, this is an opportunistic program for us. We have no time line.

We're going to monitor the market. And as the opportunity presents itself, we'll take advantage of this program. As you know, it's capped at $400 million. So it's not a lot of shares that we have.

So we're going to be very careful about using it.

Operator

We'll go ahead and take our next question from Greg Lewis with BTIG. Please go ahead.

Greg Lewis -- BTIG -- Analyst

Yes. Yes. Thank you and good morning everybody. Jeremy, you definitely kind of bounced around the various rig markets.

I guess I'd just like to talk a little bit maybe about West Africa. We saw the extension on the Skyros. It's interesting to me. It seems like at this point, the Gulf of Mexico is really sold out or pushing pricing higher.

It's hard to get a rig in the market. Could you talk a little bit more about West Africa, what we're seeing and what maybe needs to happen so that West Africa is a higher cost basin than Gulf of Mexico? How we could think about the path toward getting the rig level economics to look a little bit more like the Gulf of Mexico than maybe they do today?

Jeremy Thigpen -- President and Chief Executive Officer

Yes. Thanks for the question. And I'll defer to Roddie in just a second, but I think you heard me in my prepared remarks, maybe twice, say, it's a very challenging market, but that opportunities are presenting themselves. Adding to the challenges that have historically been in West Africa, they don't have access to the COVID vaccines either.

And so that makes changing crews and changing personnel in that region extremely difficult, and that's going to create some further challenges and maybe slow the progress that we're seeing right there. But we are seeing some progress, and I'll defer it to Roddie to give a few more specifics on that.

Roddie Mackenzie -- Senior Vice President of Marketing, Innovation and Industry Relations

Yes. So exactly to that point, the availability of vaccines obviously hampers how we can move people, but also just in general, how open to new business those regions are. But yes, so Africa and Asia are kind of like the last ones to see the uptick. The good news is that we're seeing that existing assets are getting rolled over.

There are several interesting tenders out there just now. There's going to be quite a few awards in Angola coming up. We also see that Ghana looks good, and Nigeria is making some legislative changes to make it far easier to invest. So all those things bode well for Africa, but certainly a little bit trickier just now.

The real uptick as you saw is in the Gulf of Mexico. But I think one of the themes we're going to see coming forward is the Golden Triangle, which includes Brazil, uses those ultra-deepwater assets and Brazil is really taken off. I mean the boom is on in Brazil for sure. Tenders are up from Petrobras and the IOCs, but Petrobras, in particular, not only renewing contracts and keeping the active rigs, working long term, but actually increasing their rig count substantially over the next couple of years.

So we're really encouraged about Brazil. Certainly, you've already seen the fixtures that we've made in the Gulf of Mexico have been able to really push rates up, just getting to what's an honest trust for the service we provide. But specifically to West Africa, things are improving. But as you said, it's still at relatively high cost and not quite seeing the boom that we witnessed in Gulf of Mexico and Brazil.

Greg Lewis -- BTIG -- Analyst

OK. Great. And then I'm just kind of curious on your thoughts. Clearly, I think people expect that the floating rig count to move higher over the next one, two years.

A big question that's always out there is what does that order book or rigs under construction or shipyards still look like? You guys have -- or Transocean has their two rigs already their newbuilds addressed fixed. Roddie, had the conversations started between cold-stacked rigs that maybe cost $50 million to $60 million competing against newbuild rigs that are in the shipyards that have never worked? Any kind of dynamic around what customers are thinking about that? Just kind of curious on your views because as we ramp up our rig count, it does still seem like there are a couple of handfuls of rigs under construction that have never drilled a well that maybe want to get into this market and start making a little bit of money.

Roddie Mackenzie -- Senior Vice President of Marketing, Innovation and Industry Relations

Yes. I think you'll see that so obviously, there's a run on active rigs. But in terms of cold-stacked rigs, I mean, it's one thing for a cold-stacked rig to be already proven in operations prior to being stacked, but bringing one out of the shipyard fresh and doing the shakedown stuff introduces perhaps a little bit more risk on that side. So I think what we're seeing is there's really enough work to go around now.

I don't think that was the case a year ago. Certainly, it wasn't during COVID. But now there really isn't any need to justify a loss-making reactivation. However, you choose to account for that or hide those numbers, they are real.

So we really don't see a tremendous number of rigs coming out of the yard to do this. Really think it's going to have to be backed by a contract. So I think you'll see some reactivations where day rates are solid. They are producing good EBITDA numbers, then it makes sense to reactivate.

But we really think the inflection point is not quite there yet We'd have to see your sustained numbers above $300,000 a day across the board before we would see a significant number of rigs coming out of the shipyards. So I think you will see one or two that have good contracts on them. But on the whole, we don't expect to see a lot of reactivated rigs in the next year.

Greg Lewis -- BTIG -- Analyst

OK. Great. Thank you for the time everybody.

Operator

[Operator instructions] We'll go ahead and take our next question from Taylor Zurcher with Tudor, Pickering, Holt.

Taylor Zurcher -- Tudor, Pickering, Holt & Co. -- Analyst

My first one is on the 20,000 psi opportunity set. It sounds like even though the FID day for Shenandoah continues to drift to the right, that Beacon seems to remain pretty committed to proceeding forward with that project. I guess my question is, one of your competitors this morning announced a multiyear contract for the 20,000 psi work in the Gulf of Mexico that, that contract would have aligned pretty well with a potential follow-on opportunity for the Beacon -- or excuse me, for the Atlas after its potential program with Beacon here. And so just curious if you could give us an update on incremental 20,000 psi opportunities out there and, call it, the 2023, 2024 plus type time frame and thoughts on longer-term work for the Atlas following the potential program with Beacon?

Roddie Mackenzie -- Senior Vice President of Marketing, Innovation and Industry Relations

Yes. Sure. So with Beacon, they continue to make really good progress. They've had a couple of milestones this week that we're encouraged by.

So -- but we can't really talk about the details of that under our agreement with them, but we're very optimistic that moves ahead of the time frame that we expect. So that's very positive. And the actual start date for the program is not slipping. So it's just a question of when the pool will trigger on that.

In terms of the North Platte work that was announced, so that happened some time ago, and our availability actually wasn't that good for it. We kind of had an overlap there. And certainly, it would have been interesting to put that work on the back end of it. However, we kind of felt that the rates being discussed at that time weren't exactly where we would see that in that time frame.

Keeping our powder dry and optionality while having the Beacon contract come to fruition, we think is a better strategy to basically drive the return for the substantial investment made in the 20,000 rig. So to your question about follow-on opportunities, there are several actually and some operators have come to us directly and asked if they can book time on the rig. So it's looking pretty good. It's just a question of where we would like to be in terms of earnings on that thing.

Taylor Zurcher -- Tudor, Pickering, Holt & Co. -- Analyst

OK. Good to hear. And my follow-up, just a higher level one on pricing. You've talked for a couple of quarters now, at least on the tightening supply demand fundamentals in the Deepwater GoM market.

And that's clearly evidence of some of the day rates you put out there with the three handle on them recently. I guess my question is, just thinking more broadly, whether it's the Deepwater Golden Triangle or other Deepwater markets around the globe, I mean, it doesn't feel like we're seeing the same sort of pricing momentum outside the GoM as we are seeing inside the GoM. And so I'm just curious if you could help frame for us outside of just ramping demand in the Gulf of Mexico. What's driving this continued improvement in pricing that continues to come at a premium versus other markets? Is it really just a demand pull in the Gulf of Mexico? Or are there other factors at play that are helping to drive some of that pricing momentum?

Thank you.

Jeremy Thigpen -- President and Chief Executive Officer

Yes. No, I think I would actually argue that it's not limited to the Gulf of Mexico. Clearly, the fixture we had in Brazil is very encouraging and also the fixture is getting above $300,000 in Norway. But in general, the Gulf of Mexico requires a relatively high specification compared to other basins like West Africa, for example.

So you have a really good combination there, where the work demands the best equipment and that economy is in kind of a recovery mode. Plus, it happens to be among the lowest breakeven numbers for the operators. So it really makes a lot of sense that when they have a good value proposition there, then they go to the market, they look to consume rigs. And of course, as they consume those higher specification assets, obviously, we're paying very close attention to how many assets are available, and that allows us to move rates accordingly.

Elsewhere in the world, as I've mentioned earlier, Africa and Asia lagging a little bit really because they are feeling significant effects of COVID lasting a lot longer there than they are elsewhere, but we're super encouraged by Latin America, particularly Brazil, showing some really positive signs and not just showing the signs anymore, as we had indicated in previous quarters, but now actually seeing the fixtures. Fixture after fixture coming out of Brazil, plus nine open tenders and expected to book 11 rigs in the second half of the year to add to the 11 rigs we booked in the first half of the year. So that's pretty much record contracting for Petrobras. So very pleased to see that.

Taylor Zurcher -- Tudor, Pickering, Holt & Co. -- Analyst

Great. And if I could sneak one more in. You talked about $50 million to $60 million, I believe if I heard you correct, cash cost to reactivate some of your cold-stacked rigs potentially getting up to $100 million. Could you frame for us where does pricing or contract duration need to be to see those reactivations progress forward at least from a rig standpoint? I asked the question because day rates seem to be pretty healthy right now, and we're probably nearing a point where some of these reactivations are going to make sense, whether for rig or for some of your competitors.

So just curious how you think you guys think about that?

Mark Mey -- Executive Vice President and Chief Financial Officer

So Taylor, this is Mark. I think you have to look at this firstly from the perspective that the numbers that Jeremy gave you, the $60 million to $100 million, that is the all-in costs. That's not just the maintenance costs or the equipment costs. It includes all overhead.

It includes any kind of space of inventory that's required for that rig. So it's a fully inclusive number. As it relates to what day rate works for us, it depends on the duration of the contract. For a three-year contract, you can clearly lower day rate.

But for a six months, nine-month contract, it's very difficult to get a rig reactivated against that. So I think it has to come with some term. And as Roddie mentioned, we are seeing term increase, but not really at the level where you can get consistently three-year contracts. But I would say certainly starting with a three would be a good place.

Taylor Zurcher -- Tudor, Pickering, Holt & Co. -- Analyst

Understood. Thanks for all the answers.

Operator

We'll go ahead and take Our next question from Mike Sabella with Bank of America. Please go ahead.

Mike Sabella -- Bank of America Merrill Lynch -- Analyst

Hey good morning everyone. I was wondering if you could just kind of follow up on that last line of questioning and just think of it. I guess when we think of it in terms of returns instead of day rates, I think it's a little more helpful. I know you all said there's an expectation for a suitable return.

Can you just talk about, I guess, what that means? I mean does that mean that you're reimbursed within this first contract? Or is there some other way we should think about it?

Mark Mey -- Executive Vice President and Chief Financial Officer

Yes. So Mike, clearly, it has to pay for rig activation. So we want to get the entire market we're spending on getting over back to work, back in the term of the contract. And then obviously, we also need to earn a decent return on that.

And we haven't prescribed whether it's going to be 5% or 25%. This needs to be fair. And like I said, depending on the term of the contract, we would make the necessary adjustment to that, but we're not prescribing any kind of fixed return.

Mike Sabella -- Bank of America Merrill Lynch -- Analyst

No, that's perfect. So good to know that you expect to be paid back within the first contract. That's helpful. And then as we think about the liability management activities from here, you've done a pretty good job.

We've seen a lot of activity over the past, I guess, nine months to a year just on this front. Can you talk to us a little bit about some of the things that expect to come next? I know we've got the rest of the ATM program that's been used. Is there anything else out there that we could look to as like -- as guidepost that you all are expecting to accomplish this year or over the next 12 months?

Mark Mey -- Executive Vice President and Chief Financial Officer

So last year, obviously, the dislocation in the markets provided us an opportunity to take advantage of some liability management exercises. As we look forward now over the next, call it, 12 to 18 months, what we do have on our plate is the financing for the Titan once that rig gets delivered. And then clearly, with the revolver maturing in the middle of 2023, where we look to addressing that sometime in the first or second half of next year. But that's all we have in the paper now together with the ATM.

Mike Sabella -- Bank of America Merrill Lynch -- Analyst

Perfect. Just a quick follow-on the ATM. If the markets continue to accept the equity, is there any opportunity for you guys to go above and beyond that? Or we're just not really willing to talk about that at this time?

Mark Mey -- Executive Vice President and Chief Financial Officer

Clearly, we have to go back to our Board for a further approval on that, but we haven't discussed that yet. We want to get this done. And like I said, we have no time frame. We could take the rest of this year or maybe two years to get to the $400 million.

We're going to do it in a disciplined manner at the price we feel is fair for both the company and for our shareholders.

Mike Sabella -- Bank of America Merrill Lynch -- Analyst

Perfect. Thanks everyone.

Operator

All right. We'll go ahead and take our next question from Ian MacPherson with Piper Sandler. Please go ahead.

Ian MacPherson -- Piper Sandler -- Analyst

Good morning. Thank you Jeremy, you mentioned that the U.K. market could be at a deficit. You might even position the Cat D rig there to fill that.

And I wanted to clarify that given the backlog status of those rigs with Equinor, how that would work? Whether it would be a sublet or a reassignment Equinor or how that might fit?

Jeremy Thigpen -- President and Chief Executive Officer

No, no. Good question and probably misstated that a little bit or misinterpret that a little bit. The really the Equinor rig, the Cat D rigs are on contract with Equinor and Equinor is happy with those rigs. We're currently engaged in conversation with Equinor about the options on those rigs.

And the first asset, the first Cat D asset, Equinox. I think the first Cat D is end of 2022. So it would have to be something after that, obviously, before we would consider -- a program starting after that before we consider obviously moving an asset. But just making the comment that the U.K.

market is heating up and if it continues to do so, it could create opportunities for some of the Norwegian assets.

Ian MacPherson -- Piper Sandler -- Analyst

OK. Understood. Thanks. And then I just -- for my follow-up, I wanted to revisit Connor's question from the beginning of the call on your role on continued consolidation, which we all know should continue to happen.

But I don't think it would be unfair to say that most of the deals that the industry has seen in a long time haven't worked to the objectives that they set out with. Songa was clearly an exception. And not that other transactions where you all can see, but they mainly happened throughout a downturn, that sort of overwhelmed the benefits of deals. So do you think that just now that we are at the lip of an upturn that, that in itself propels a better case for you to continue to consolidate? Or does there need to be more attributes of a target that are Songa-like, which, I think, is rare and nonexistent today in order to really temp you to doing more?

Jeremy Thigpen -- President and Chief Executive Officer

Yes. Good question. And to be clear, we are looking at opportunities just because we think it's incumbent upon us to do that and to see what's out there and available. But we've been very clear.

It's only high-specification assets in the harsh environment and ultra-deepwater space, and we can't do anything to compromise the balance sheet or our liquidity position. And so that really narrows the opportunity set, maybe not much of anything. So we're continuing to look out there and kick tires and be creative to the extent we can, but we're not going to jeopardize the balance sheet. We're not going to compromise future liquidity.

Right now, that is of absolute paramount importance to us. But we would encourage consolidation among our peers. All consolidation at this point is good consolidation, improved industry structure and get some more disciplined behavior out there among our competitive peers.

Ian MacPherson -- Piper Sandler -- Analyst

Absolutely. Thanks for the color today. I appreciate it.

Operator

And we'll take our next question from Fredrik Stene with Clarksons Platou Securities. Please go ahead.

Fredrik Stene -- Clarksons Platou Securities -- Analyst

Fredrik here. Thank you for answering all the previous questions because I think most of what I wonder about has been touched already, but I wanted to use this opportunity to ask about your cold-stacked rigs just directly because I think you said maybe it was last quarter that you were at this point, not bidding any cold-stacked rigs. And then we have Valaris, for example, to today coming out with some new contracts on their stack rigs. So I was wondering, are you actively bidding any of them at this point? Have you seen those opportunities that you have talked about in terms of price points, return and lease? Or are you still just leaving them off your marketed table?

Jeremy Thigpen -- President and Chief Executive Officer

Yes. At this point in time, we haven't seen any opportunities out there that present the day rate and the term that would justify a reactivation of one of our assets. So we're being disciplined in that approach and maybe some of our competitors have a different strategy than we have.

Mark Mey -- Executive Vice President and Chief Financial Officer

Yes, I would say that there are a few cases where we're bidding the rigs, but the economics of those bids cover all the things that we mentioned previously, like paying for the full reactivation. So...

Jeremy Thigpen -- President and Chief Executive Officer

It basically means we're not going to win them. Yes, if someone else is deciding to justify a loss on, we're...

Fredrik Stene -- Clarksons Platou Securities -- Analyst

And just a quick follow-up before I jump off here. Have you gotten any pushbacks on those bids? Or are you seeing a broader aversion in the market for operators not been willing to take assets that haven't worked for some time or have been stacked or coming out of yards? I've seen it on a few tenders, maybe particularly out on Southeast Asia, but I was wondering if you've been involved in such kind of restrictions in what you've been bidding for as well?

Jeremy Thigpen -- President and Chief Executive Officer

I don't see any restrictions in what we've been bidding for. But in Southeast Asia, for example, the activity is not yet hot enough to see an influx of rigs, which influx of rigs kind of suggest reactivation. So since you asked about that market specifically, yes, we're not there yet. But as I said before, we really got to get through the restrictions that are currently in place from COVID to see that meaningfully change.

In terms of the operators' willingness to entertain stacked rigs or reactivations, we see that with a kind of a mixed bag. It all depends on things like rig inspections that they may do or their general risk tolerance. But yes, I think you will see some assets come back, but we cannot see a wholesale return of all the cold-stacked assets anytime soon.

Operator

We'll take our next question from Karl Blunden with Goldman Sachs. Please go ahead.

Karl Blunden -- Goldman Sachs -- Analyst

Good morning. Thanks for the time. We've heard about improving day rates in a couple of different regions. I wonder if you could comment on whether you'd expect to see progression toward some longer-term contracts, specifically in Norway? And the reason I ask is there's some tie-in there to liability management options that you have with some of the secured bonds coming due in 2023, for example? So any color on that would be helpful.

Jeremy Thigpen -- President and Chief Executive Officer

Yes. I think in Norway specifically, you have seen some long-term programs be awarded actually some of the prominent developments. Yes, there are a few other shorter-term things in play at the moment, but we're cautiously optimistic that's migrating upwards in terms of contract duration. In fact, we track that closely across all different markets.

And in the space of the past kind of four or five quarters, that's essentially doubling in terms of fixed terms. So yes, expect to see longer awards for sure. I think that's probably going to be driven by Equinor's decisions on budget over the summer, but especially with the tax incentives in play, Norway is looking pretty strong for additional investment over the next couple of years. So yes, we're positive about that and it just remains to be seen how long that goes.

But elsewhere around the world, that's the kind of the big thing that we're seeing now is a lot of things are converting from one in two wells opportunities previously that are actually all of it is multiyear stuff.

Karl Blunden -- Goldman Sachs -- Analyst

That's very helpful. And I guess just more specifically on things like the 2023 Century bonds, when you look at those, perhaps, Mark, do you look at those as a use of liquidity? Or do you see that as something that you could potentially refi if the opportunity provides itself?

Mark Mey -- Executive Vice President and Chief Financial Officer

Yes. So we haven't given too much thought yet, Karl, but clearly, if we can get a two-, three-, four-year contract on any one of those rigs, refi is on the table. So we would certainly hope to be able to do that, but we do have plans in place to deal with us through our liquidity.

Operator

OK. As there are no further questions at this time. Mr. May, I'd like to turn the conference back to you for any additional or closing remarks.

Lex May -- Manager of Investor Relations

Thank you, Madison, 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 third-quarter 2021 results. Have a good day.

Operator

[Operator instructions]

Duration: 57 minutes

Call participants:

Lex May -- Manager of Investor Relations

Jeremy Thigpen -- President and Chief Executive Officer

Mark Mey -- Executive Vice President and Chief Financial Officer

Connor Lynagh -- Morgan Stanley -- Analyst

Greg Lewis -- BTIG -- Analyst

Roddie Mackenzie -- Senior Vice President of Marketing, Innovation and Industry Relations

Taylor Zurcher -- Tudor, Pickering, Holt & Co. -- Analyst

Mike Sabella -- Bank of America Merrill Lynch -- Analyst

Ian MacPherson -- Piper Sandler -- Analyst

Fredrik Stene -- Clarksons Platou Securities -- Analyst

Karl Blunden -- Goldman Sachs -- Analyst

More RIG analysis

All earnings call transcripts