SHELF DRILLING, LTD. PRESS RELEASE SHELF DRILLING REPORTS THIRD QUARTER 2020 RESULTSDubai, UAE ,November 13, 2020 -Shelf Drilling, Ltd. ("Shelf Drilling " and, together with its subsidiaries, the "Company", OSE: SHLF) announces results for the third quarter of 2020 endingSeptember 30 . The results highlights will be presented by audio conference call onNovember 16, 2020 at6:00 pm Dubai time /3:00 pm Oslo time. Dial-in details for the call are included in the press release posted onNovember 3, 2020 and on page 3 of this release.David Mullen , Chief Executive Officer, commented: "The sequential declines in Revenue and EBITDA during the third quarter of 2020 reflect a number of drilling contracts which were suspended, terminated or not extended as a result of the COVID-19 pandemic and the subsequent deterioration in oil price, the effects of which are impacting the entire drilling industry. At the end of the quarter, however, a total of 30 of our rigs remained under contract. The resilient quarterly EBITDA margin of 31% is the result of our sustained operating performance and very aggressive cost saving measures initiated inApril 2020 in response to a challenging market outlook caused by the pandemic. As anticipated, rig demand has further deteriorated with additional pressure on utilization and dayrates due to the on-going market uncertainty. While we expect this situation to persist in the near to medium term, I am also convinced that our proactive steps taken to navigate this pandemic, combined with our best-in-class operating platform and established customer relationships will continue to differentiate us as the international jack-up contractor of choice." Third Quarter Highlights o Q3 2020 Revenues of$127.4 million , a 17.8% sequential decrease compared to Q2 2020. o Q3 2020 Adjusted EBITDA of$39.3 million , representing an Adjusted EBITDA Margin of 31%. o Q3 2020 Net Loss of$7.7 million . o Q3 2020 Capital Expenditures and Deferred Costs totaled$26.5 million , including$9.9 million associated with rig acquisitions. o The Company's cash and cash equivalents balance atSeptember 30, 2020 was$69.2 million . o The Company's total debt atSeptember 30, 2020 was$1.0 billion , including$55.0 million drawn on the Company's revolving credit facility. o$1.4 billion in contract backlog atSeptember 30, 2020 across 30 contracted rigs. o The Company completed the sale of the Trident XIV in Q3 2020 for a$5.5 million gain on sale of assets. o InSeptember 2020 , the Company paid$3.9 million to settle and terminate its obligations under the bareboat charter agreements with China Merchants &Great Wall Ocean Strategy & Technology Fund . o InSeptember 2020 , the Company completed an amendment to the revolving credit facility to provide relief from the total net leverage ratio financial covenant fromJanuary 1, 2021 untilSeptember 29, 2021 . Third Quarter Results Revenues were$127.4 million in Q3 2020 compared to$155.0 million in Q2 2020. The$27.6 million (17.8%) sequential decrease in revenues was primarily due to lower effective utilization. Effective utilization decreased to 72% in Q3 2020 from 84% in Q2 2020, mostly due to the suspension of one rig inSaudi Arabia , the suspension and termination of two rigs inNigeria , the completion of contract and subsequent sale of one rig inNigeria and planned out of service time for one rig inSaudi Arabia . The average day rate decreased to$56.6 thousand in Q3 2020 from$57.8 thousand in Q2 2020 primarily explained by lower pricing where customers renegotiated dayrates as a result of the COVID-19 pandemic and reduction in oil prices. Total operating and maintenance expenses decreased by$3.9 million (4.8%) in Q3 2020 to$79.0 million compared to$82.9 million in Q2 2020. The sequential decrease was primarily due to lower expenses on bareboat charter rigs withChina Merchants and lower operating costs on rigs which were suspended or terminated during Q3 2020. General and administrative expenses were$9.4 million in Q3 2020 compared to$12.1 million in Q2 2020. The$2.7 million decrease was primarily the result of a$2.0 million decrease in bad debt expense in Q3 2020 as well as lower expenses due to cost savings and restructuring measures implemented at the Company's headquarters beginning inApril 2020 . General and administrative expenses in Q3 2020 and Q2 2020 included$1.1 million of non-cash share-based compensation expense. Adjusted EBITDA for Q3 2020 was$39.3 million compared to$61.5 million for Q2 2020. The Adjusted EBITDA margin of 31% for Q3 2020 decreased from 40% in Q2 2020. Capital expenditures and deferred costs were$26.5 million for both Q3 2020 and Q2 2020. Capital expenditures and deferred costs, excluding rig acquisitions, increased across the fleet to$16.6 million in Q3 2020 from$13.2 million in Q2 2020, primarily due to shipyard activity inSaudi Arabia . Rig acquisitions decreased to$9.9 million in Q3 2020 from$13.3 million in Q2 2020. Rig acquisitions in Q3 and Q2 2020 were largely related to the ongoing reactivation of the Shelf Drilling Enterprise, which is expected to be completed by the end of 2020. Q3 2020 ending cash balance of$69.2 million decreased by$23.0 million from$92.2 million at the end of Q2 2020, primarily to fund capital expenditures and working capital needs, including the semi-annual cash interest payment on the 8.25% million Senior Unsecured Notes dueFebruary 2025 . The Quarterly Report, which includes the Condensed Consolidated Interim Financial Statements is available on our website. A corresponding slide presentation to address the results highlights for Q3 2020 is also available on our website. For further queries, please contact:Greg O'Brien , Executive Vice President and Chief Financial OfficerShelf Drilling, Ltd. Tel.: +971 4567 3616 Email: greg.obrien@shelfdrilling.com Dial in Details for the Audio Conference call: Participants will receive conference access information only when they register for the conference via the link below: Online Registration: http://emea.directeventreg.com/registration/8469936 Participants must register for the call using online registration. Upon registering, each participant will be provided with call details and a Registrant ID. Call reminder will also be sent to registered participants via email the day prior to the event. Conference ID number: 8469936 AboutShelf Drilling Shelf Drilling is a leading international shallow water offshore drilling contractor with rig operations acrossMiddle East ,Southeast Asia ,India ,West Africa and the Mediterranean.Shelf Drilling was founded in 2012 and has established itself as a leader within its industry through its fit-for-purpose strategy and close working relationship with industry leading clients. The Company is incorporated under the laws of theCayman Islands with corporate headquarters inDubai, United Arab Emirates . The Company is listed on theOslo Stock Exchange under the ticker "SHLF". Special Note Regarding Forward-Looking Statements Matters discussed in this announcement may constitute forward-looking statements. Forward-looking statements are statements that are not historical facts and may be identified by words such as "believe", "expect", "anticipate", "strategy", "intends", "estimate", "will", "may", "continue", "should" and similar expressions. The forward-looking statements in this release are based upon various assumptions, many of which are based, in turn, upon further assumptions. Although the Company believes that these assumptions were reasonable when made, these assumptions are inherently subject to significant known and unknown risks, uncertainties, contingencies and other important factors which are difficult or impossible to predict and may be beyond its control. Such risks, uncertainties, contingencies and other important factors could cause actual events to differ materially from the expectations expressed or implied in this release by such forward-looking statements. Given these factors, you should not place undue reliance on the forward-looking statements. Additional information aboutShelf Drilling can be found at www.shelfdrilling.com. This information is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act.
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