Scotty Sparks: I’ll just add that I think you’re picking up on the heavy intervention rigs, but you should also think of the North Sea in the light intervention where our rates are substantially higher than rig rates purely because of our efficiencies. Rigs in the North Sea are generally mode and they are probably at about 50% or 60% of the current rates we charter in the North Sea because of the pure efficiencies of not having to put our anchors and other services. So .
David Smith: I appreciate that extra color.
Scotty Sparks: Thank you.
Operator: Thank you. Our next question comes from the line of James Schumm . Please go ahead.
James Schumm: Hey, good morning everybody.
Owen Kratz: Good morning.
James Schumm: Good morning. The midpoint of the Robotics revenue guidance calls for an increase of about 9% or so this year. Can we expect a similar EBIT or EBITDA uplift in 2023?
Erik Staffeldt: I think overall, Jim, I think that our – I think that our – probably our EBIT was off the top of my head, more than likely be flat. I don’t think you – has been to assume a dollar-for-dollar increase there.
James Schumm: Because Erik, that’s because less trenching work. Is that what’s driving that?
Erik Staffeldt: No. We had some – I think there were some, obviously, increased costs that are flowing through our structure as we’ve added more charters. I think there was – we naturally expected it to be a little bit more challenging with a few of the contracts that we were able to execute in 2022 above improvements over our fixed pricing, and so we were able to get excellent margins. And so some of that was a combination of better weather and better execution from our operations. And so as we planned and forecasted our 2023, we assume that area would more than likely be flat. We wouldn’t necessarily expect to see improvements in those areas.
James Schumm: Okay. Understood. Thank you. From an earnings perspective, can we expect a sequential benefit for the Q7000 in 2Q? And if so, can you quantify that? I know there’s a lot of moving pieces with mob and demob and the accounting for that. So I don’t know if you could provide any help there.
Erik Staffeldt: So yes, the Q7000 is going to, in general, have a lot of noise in our quarterly results, here in the first quarter, no revenue, but we still had some costs flow through the P&L, our depreciation of some of our . If you are in the second quarter, we expect it to start working in the May time frame. And then from that standpoint, as we recognize the revenue, we’re going to be recognizing a daily rate plus the amortization of the deferred revenue and deferred cost. And so overall, it’s going to appear with a very high day rate and a very high cost in our daily numbers. Overall, obviously, we expect improvements to the overall Q7000 P&L performance quarter-over-quarter. And we expect to be in a position, obviously, of generating positive cash here as it goes to work.
James Schumm: Okay, thanks a lot. Appreciate it.
Operator: Thank you. Our next question comes from the line of Don Crist . Please go ahead.
Don Crist: Good morning, gentlemen. How are y’all today?
Owen Kratz: Good. Thanks.
Don Crist: I wanted to ask a bigger picture question. We recently saw one of the drilling contractors sign a contract for P&A work. And that at least indicated to me that the market is really tight and should remain tight for many years to come. And I just wanted to ask about when you’re having customer conversations out there, Are they getting a little bit more desperate today on work for 2024 and 2025 and more willing to sign contracts further out. Than we were, call it, nine or 12 months ago today. How are those customer conversations going?
Owen Kratz: I think you’re right. I think the customers are starting to worry about availability. They are looking for longer-term commitments at today’s pricing. Of course, the corollary to that is the contractors are a little worried about giving today’s pricing in an environment where the rates are continuing to move up. Going into this year, we were willing to give rates for two years, but not beyond that because we didn’t know where the market was going. As a result, we’ve got some contracts that are priced below the current market for the next couple of years. So we’re sort of in that same boat. We’re a bit leery about giving contract pricing too far out in this robust market. But you are right, there are a number of producers that are looking for a multiyear commitment on long-term contracts and just long-term priced MSAs.
Don Crist: So does that lend you to do more kind of variable rate or quarterly repricing contracts going forward? Is that what we should see on any new contracts?
Owen Kratz: It takes two forms. One, we can just set higher rates in the contract each, as the years progress or you can pick a rate and tie it to an index. Those are the two main mechanisms.
Don Crist: Okay. I appreciate the color. It looks like there’s several years – several good years coming up. I appreciate the color. Thanks.
Owen Kratz: Congrats.
Operator: Thank you. Our next question comes from the line of Samantha Hoh . Please go ahead.
