Paragon Offshore plc (NYSE:PGN) Q2 2015 Earnings Conference Call - Final Transcript
Aug 13, 2015 • 09:00 am ET
Welcome to the Paragon Offshore Second Quarter 2015 Earnings Call. My name is John, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. Please note this conference is being recorded. And I would now turn the call over to Lee Ahlstrom.
Thank you, John, and good morning and welcome to Paragon Offshore's second quarter 2015 earnings call. A copy of our earnings press release with supporting schedules is posted to our website, www.paragonoffshore.com under our Investor Relations page. For those of you who would like the release in PDF format, we've posted that and following the call, we'll post a couple of slides that reconcile some of the non-GAAP metrics we may discuss on the call today, to GAAP, as well as a summary of our guidance.
(Forward-Looking Cautionary Statements)
And now, I would like to turn the call over to Randy Stilley, Paragon's President and Chief Executive Officer. Randy?
Thank you, Lee, and good morning. With me today are Steve Manz, our CFO; and Andrew Tietz, Senior VP of Marketing and Contracts. As usual, I'll provide some opening remarks, Steve will follow with some comments on the quarter and provide some guidance; and we'll conclude with Andrew, who will provide some commentary on the offshore drilling market. We will close with Q&A.
Last night, we reported results that were well ahead of expectations. Operationally, we continue to perform well with unpaid downtime of less than 2%. Costs were below the low end of our guidance, thanks to our focused cost control efforts, and as Steve will discuss further, we've been successful in some internal restructuring that provided a significant tax benefit in the second quarter, and we expect it will continue for some time. There is no doubt that we are in the midst of one of the most challenging macro and industry environments we've experienced in many years. There is enough data available to illustrate this uncomfortable reality, and we are not going to rehash that information on the call.
The fact is that while we believe lower capital spending, reduced activity levels, natural decline rates, and increased global oil demand will lift commodity prices at some point. Oil prices are likely to remain challenged for some time to come. Even when prices begin to recover, the offshore drilling space faces an oversupply of both floater and jackup assets that could depress utilization and day rates for several years.
The question for Paragon is what can we do to navigate these turbulent waters and emerge stronger on the other side. Last quarter, I outlined five near term priorities for Paragon. First, I said that we needed to reduce our operating cost and capital expenditures to preserve contract drilling margins and liquidity. We've done so bringing OpEx below our most recent guidance. We are also updating our guidance today to reduce full-year CapEx spending to below $200 million for 2015. To be sure,