Ensign Energy Services Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 8, 2023

There are 9 speakers on the call.

Operator

Afternoon, ladies and gentlemen, and welcome to the Ensign Energy Services Inc. 1st Quarter 2023 Results Conference Call. At this time, all lines are in listen only mode. Following the presentation, we will conduct a question and answer session. Please press 0 for the operator.

Operator

This call is being recorded on Monday, May 8, 2023. I would now like to turn the conference over to Nicole Romano, Investor Relations. Please go ahead.

Speaker 1

Thank you, Joelle. Good morning, and welcome to Ensign Energy Services' Q1 20 23 Conference Call and Webcast. On our call today, Bob Geddes, President and COO and Mike Gray, Chief We'll then open the call for questions. Our discussion today may include forward looking statements based upon current expectations that involve several business risks and uncertainties. The factors that could cause results to differ materially include, but are not limited to, political, economic and market conditions crude oil and natural gas prices foreign currency fluctuations weather conditions the company's defense of lawsuits, the ability of oil and gas companies to pay accounts receivable balances or other unforeseen conditions which could impact the demand for the services supplied by the company.

Speaker 1

Additionally, our discussion today may refer to non GAAP financial measures such as Please see our Q1 earnings release and SEDAR filings for more information on forward looking statements and the company's use of non GAAP financial measures. With that, I'll pass it on to Bob.

Speaker 2

Thanks, Nicole. Good morning, everyone. I'll just start with a quick summary Before Mike gets into some of the details, so a strong quarter with increasing margins year over year and quarter over quarter as tightness in certain rig type classes continues to support the rate increases that industry realized through the back half of twenty twenty two and into the Q1 of 'twenty three. Every one of our operational areas, U. S, Canada and International delivered significant operating day increases.

Speaker 2

The quarter had a few timing drags for projects that were scheduled to Q1 have been delayed until the Q2. EBITDA margin jumped another 5% and gross margins on our high spec rigs jumped about 15%. Ensign continues to manage its balance sheet spending only $41,000,000 in planned maintenance capital to maintain the high spec fleet in the Q1. The target for CapEx, maintenance and upgrade is still around $157,000,000 for the year and the focus is reducing debt by $600,000,000 over the next 3 years. I'll turn it over to Mike for a detailed summary of the quarter.

Speaker 3

Thanks, Bob. The outlook for oilfield services continues to be constructive despite fluctuating global energy Processionary pressures, inflationary concerns, financial sector stress and the potential for slowing economies continue to weigh on commodity prices over the short term. However, oilfield services activity and revenue rates continue to be steady year over year. Ensign's Q1 2023 results reflect meaningful operational and financial improvements year over year with it being our best Q1 since 20 Operating days were up in the Q1 of 2023 with Canadian operations experiencing a 2% increase, United a 25% increase in international operations showing a 26% increase compared to the Q1 of 2022. The company generated revenue of $484,100,000 in the Q1 of 2023, a 46% increase compared to revenue of $332,700,000 generated in the Q1 of the prior year.

Speaker 3

Adjusted EBITDA for Q1 of 2023 was $127,300,000 an 82% increase from adjusted EBITDA of $70,000,000 in the Q1 of 2022. The 2023 increase in adjusted EBITDA can be primarily attributed to improved industry conditions, increasing both drilling and well servicing activity. Depreciation expense in the 1st 3 months of 2023 was $77,900,000 11% higher than $70,000,000 in the 1st 3 months of 2022. The increase was primarily driven by year over year increase in the United States dollar. G and A expense in the Q1 of 2023 was $3,400,000 higher than the Q1 of 2022.

Speaker 3

G and A expense increased due to support of increased operational activity, annual wage increases Higher foreign exchange rate on the United States dollar translation. On a per operating day, G and A was up about $200 per day year over year. Net capital purchases for the quarter were $49,700,000 The purchases consisted of $8,300,000 in upgrade capital and $41,600,000 in maintenance capital for a total of $49,900,000 offset by sales proceeds of approximately $200,000 Our total debt and net of cash was reduced by $29,100,000 since December 31, 2022. Our debt reduction for 2023 is targeted to be approximately $200,000,000 Our target debt reduction for the period beginning in 2023 to the end of 2025 is expected Approximately $600,000,000 If industry conditions change, this target could be increased or decreased. Regarding the refinancing of the balance sheet, we do not have any additional news to share.

Speaker 3

Our commentary and views are similar to the last quarter discussion. We continue to look at several options that will best serve the company on a go forward basis. Overall, our debt metrics continue to improve substantially. At the year end 2021, our total net debt to EBITDA was 5.98, decreasing to 3.76 in 2022 and as further decreased to 3.18 as of March 31, 2023. We

Speaker 2

So let's walk around the world with an operational update. Most of you in the call are well aware that Ensign operates a high spec fleet of 232 high spec drill rigs and over 90 well servicing rigs, which employ over 4,000 highly trained crews in 8 countries around the world, the U. S, Canada, Kuwait, Bahrain, Oman, Australia, Argentina and Venezuela. Let's start with the U. S, which provides over half of our EBITDA.

Speaker 2

We continue to run 55 to 60 rigs in the U. S. With a strong position in the Permian with 45 rigs active today. With the Haynesville play softening due to gas prices, the sales team has been very active churning rigs over onto new contracts. In most cases where rigs have come off 2022 contracts, we have been able to raise prices to current market prices above of approximately $2,000 a day on the contract turn.

Speaker 2

So the margin run rate for the Q2 will be marginally above the Q1 run rate in the U. S. In some cases, and on more current negotiations, We are more likely to hold rates for a 6 to 12 month term. Our California business unit continues to get frustrated with ongoing challenges with drilling permits in that state. Our U.

Speaker 2

S. Team has plans to pull a few of these rigs over into the Rockies for surface fill projects. These light agile high line capable electric rigs are great for those type of projects. We maintain a 7% market share in the Lower forty 8 and see this stabilizing over the rest of 2023, albeit the negotiations are tougher today than they were 6 months ago. We also see the Permian rig count stable at around 350 drilling rigs active.

Speaker 2

We're also starting to see operators drill more into their Tier 2 acreage, which means that to maintain production, not grow, just maintain production, they will need to drill more wells. We have close 25% of our active U. S. Fleet on an enzyme emissions reduction strategy, which is a combination of highline powered rigs and also natural gas engine rigs with with BESS Systems Battery Energy Storage. With the arbitrage between diesel fuel and gas, The argument becomes more compelling.

Speaker 2

As a result, we'll continue to see expansion in this area, which not only reduces emissions, but provides Ensign a high margin incremental revenue stream. Our U. S. Well Servicing business had one of the slowest starts out of the gate in 2023, purely due to operator project timing, We are back up to 85% utilization today and look to stay strong through the rest of the year with no rate degradation. Our Directional Drilling business, mostly Rockies Centric, continues to deliver with steady work on numerous projects.

Speaker 2

Turning to Canada. Canada had a strong operational quarter, but fell short of expected days as the team pushed rates hard into the Q4, which impacted the Q1 activity. We'd expected to get closer to 65 rigs active in the Q1. The second quarter is already looking much stronger as we 22 of our high margin high spec rigs over breakup and then grow that to 50 into July. Our high spec triples are running well over 70% utilization, which provides continued strong pricing and we're starting to see most of the high spec doubles attract work after breakup with no rate degradation.

Speaker 2

We also signed up 2 of our high spec triples, 1 coming off contract in U. S. Rockies onto 2 take or pay contracts in the mid-30s. That's a base rate. Our Canadian Well Servicing business unit is expected to get back up to 18 rigs active after breakup and a few of those will be 24 operations.

Speaker 2

We still have for sale roughly $30,000,000 to $40,000,000 of redundant real estate in Niski, which when sold will go towards debt reduction. International, as steady as she goes, generating steady predictable free cash flow and long term projects. We just commissioned our 3rd rig in Amman onto a 5 year contract. The other 2 started up later in 2022. All 3 rigs are performing well out of the gate.

Speaker 2

These rigs are all on performance based contracts. Wade and Bahrain, where we have 4 of our largest rigs, continue to execute in the top decile of our contracting peer group in these countries. Australia's Q1 results were frustrated with the delay of 2 large projects that were delayed until the Q2. This affected the Q1 results, but will benefit the Q2 results. In Argentina, we have 2 super spec triples on long term contracts with day rates moving 10% to 15% on their next turn mid year.

Speaker 2

The situation in Venezuela changes daily, but we're expecting that we may have one of our workover rigs and a drilling rig working by the end of the year, but don't hold your breath. On the technology front, our Edge Drilling Solutions product line continues to expand with a lot of the supply chain issues behind us with respect to computer hardware access As a result of the pandemic, we're in the middle of deploying and commissioning another 10 of our EDGI drilling control systems on our high spec rigs. This attracts roughly $1,000 to $1500 a day of incremental high margin technology to the rig. We will have Edge actively engaged on most of our super spec and high expect triples by the Q3. With the obvious arbitrage between diesel and natural gas notwithstanding the obvious emission reductions When using Highline or natural gas power, we are seeing growing demand for our Edge Emissions Reduction strategy.

Speaker 2

The Product offering ranges from the Highline Power Substation, which runs for $2,000 a day to the standalone BESS for about the same rate to the full blown natural gas power system with BESS and EMS Engine Management System for around $5,000 a day. These are all high margin opportunities and they help reduce emissions by as much as 50%. We have about 10% of the North American fleet on one of these strategies and when we include dual fuel applications, we have roughly a quarter of the fleet on an emissions reduction strategy. Our ADS or automated drill system, which delivers consistent slips to slips and automates the routine for the driller Has been fully tested and is now commissioned on 10 rigs in the U. S.

Speaker 2

The ADDS charges out for about $1,000 a day a la carte. So I'll turn it back to the operator for some questions.

Operator

Thank you. Ladies and gentlemen, we will now begin the question and answer Your first question comes from Aaron MacNeil with TD Cowen. Please go ahead.

Speaker 4

Good morning and thanks for taking my questions. Bob, I can appreciate you had no meaningful U. S. Cash exposure, but Several of your larger competitors do and many, I think if not all, have all pointed to The declining rig count throughout Q2. So I guess, do you see your rig count declining at all in Q2?

Speaker 4

And are you All concerned about the knock on effect of heightened competition for rigs in the event of a decrease in activity. And I guess maybe finally what might be your approach to pricing and if that does play out?

Speaker 2

Yes, no fair question Aaron. I mean, we started seeing some impact 3 or 4 months ago. Some of those rigs in those areas are tied up on term contracts With the kind of the Tier 1 contractors maybe having some ETFs, things like that, but We've been able to in the last 2 to 3 months anyway turn over about 20 of our rigs on to Other contracts, so we got ahead of it, turned them up a little bit more. As you know, we had very little gas exposure, But it did provide a defensive situation, which means we weren't able to Raise rates much. We did have some contract turn where from the prior contracts, we were able to move them up a couple of $1,000 a day to more of a leading edge, but I would suggest that the leading edge has probably degraded a little bit and people are looking for Some term as a defensive strategy.

Speaker 2

California is a little bit of a unique situation all by itself. I mentioned we've got At least one rig, one of our electric ADRs, smaller rigs moving over into the Rockies to do some shallow Surface hole projects and who knows when or if California will start to straighten up, But it is steady. I'll say that in California, but we're probably down about 4 or 5 rigs from where we expected to be in the Q1, which had some effect on our Q1 results.

Speaker 4

Understood. Mike, maybe one for you. I realized there was nothing Specific in the disclosures, but on the prior conference call, you did suggest that you're going to kick off a debt refinancing following Q1 results. And Maybe just a bit of an update there. Is that still the case?

Speaker 4

Can you walk us through the potential timeline and maybe what we can expect from you over the coming weeks or months?

Speaker 3

Yes, for sure. No concrete sort of additional information to share. So we will definitely look at Reaching out to the different areas and looking at what's going to be the best approach going forward. So like I said, our debt metrics really have improved Quarter over quarter as well as year over year. So, we think that's going to be a strength going into this type of market.

Speaker 3

But yes, no, we continue to look at a bunch of different options and we'll Slightly options that give the company the best maneuverability going forward.

Speaker 4

Not to pin you down to a specific timeline, Mike, but Mike, do you think I'll be asking the same question on the next conference call or do you think you'll have some

Speaker 3

I can't say for sure. I mean the facility will We'll have to deal with something by at least October. So I would say in the next few months for sure, we'll be moving things along, but I can't Commit to a firm timeline.

Speaker 4

Fair enough. All right. I'll turn it over. Thanks guys. Thanks,

Operator

Aaron. Your next question comes from Keith MacKay with RBC Capital Markets. Please go ahead.

Speaker 5

Hi, good morning and thanks for taking my questions. Just maybe a start out in the international. Bob or Mike, can you kind of just give us A bit more color on the impact of the delays in Australia and then what you think a good run rate Q2 will be given those projects starting up as well as the Almanrig?

Speaker 2

Yes. The Australian projects probably affected Q1 by a couple of $1,000,000 that will push into the Q2. The 3rd Amman rig was it came on stream on as scheduled. So the Q1 results weren't necessarily too impacted by that, although we thought we may have got going a month earlier. We were ready to go, but the operator wasn't.

Speaker 2

So we've got a good steady run rate in the Q2. I'm not sure Mike if you want to expand on what In

Speaker 3

fact that has well, in Oman, you're going to see 1 additional rig for the full quarter, pretty much the full quarter Q2 and then we should see sort of 2 more rigs start up in Australia over the next month or 2. So for a minute, On operating standpoint, I mean, there should be probably 1.5 to 2 kind of net new additional rigs for Q2 of 2023.

Speaker 5

Okay, got it. Thanks for that. And maybe just a little bit on Canada. So operating days didn't really grow much from 2021 to 2022 in or sorry 2022 to 2023 in Q1. You mentioned pushing rates hard in Q4 as part of the reason for that.

Speaker 5

Can you just give us a little bit more Detail on the discussions that you've had then with clients and what that will mean for the second half of the year? Right.

Speaker 2

So the I mean the Q1 is always prefaced by what happens in the October, November bidding cycle before that. And as we started pushing rates and holding rates into the Q1 On certain rig categories, we found some of the competition not as aggressive on pricing And we lost 8 to 10 bids basically, which put us down about 7 or 8 rigs into the Q1. And it's hard to claw that back when you're going into the Q1. So that was a bet that we made. Of course, the other rigs So benefited from our fleet benefited from that hold on rates or a portion depending on the rig category.

Speaker 2

We're down at 22 rigs currently. We've got contracts that will take us to 50 rigs by July. So you'll see us go from about 100 rigs currently to back up to about 125 Here quickly into July. So we're not going to be reducing the number of rigs So we have active when we look at the end of the Q1 as compared to the end of the second quarter, we're back up real quick as compared to some of our peers who may see some degradation. We're seeing some clients I used some other contractors through the winter coming back to us and saying, hey, we went with the lower price for the winter.

Speaker 2

Have you got this rig available after breakup? So They weren't I guess the performance wasn't as expected in the Q1 with some of the other contractors. But Anyway, we'll be back up to 50 again by July here.

Speaker 5

Got it. And just maybe to follow on that, what are you seeing now in the Canadian market, is most of the competition, I know it's always price, but has Price clearly impacted how things went in Q1. Has the conversation shifted at all from Customers looking for the lowest price to, okay, now it's more about operational execution and availability Or are you still finding that whatever work there is, you're losing a similar portion due to price?

Speaker 2

Yes. Well, we're always price sensitive. Obviously, we misread The market in certain rig categories going into the Q1 being aggressive into the Q4 for Q1 pricing. But we're definitely seeing price is always a factor, But operational excellence and performing with less downtime is always the key. We represent less than a third of the operation On a daily basis, so the operator is willing to Take a lower price sometimes, but not always.

Speaker 2

It depends on the performance that he picks up. So it's a combination of both. I would suggest that We've been able to now get our price in the Q2 that we're bidding into the Q4, which created some first quarter frustration. So the market is kind of coming back to us. And here's an example, in the last 10 bids, we've won 8 of the last 10 bids here in the last 2 weeks.

Speaker 5

Okay. Thanks for the color. I'll turn it back.

Operator

Your next question comes from Cole Perera with Stifel. Please go ahead.

Speaker 6

Good morning all. Bob, you talked a little bit about U. S. Drilling margins improving into Q2. A lot of your U.

Speaker 6

S. Peers have talked about their margins sort of flattening out from there. Is that kind of what we should expect with Ensign just given some of the dynamics in the current market?

Speaker 2

Yes, I think that's fair.

Speaker 5

A lot of it has to

Speaker 2

do with contract cadence, there, Cole. So, we're certainly not able to push pricing. In some cases, you're having to throw a few things in to hold the market because you've got a Tier 2 contractor Kind of nipping at your heels there. But yes, generally, I would say that we will see some rate Progression because of the contract turnover from the Q1 and the Q2, but it will probably normalize Through the Q3 and we'll see what happens in the Q4.

Speaker 6

Got it. Thanks. And Can you just add some commentary around what you're seeing in the pricing environment for super spec rigs in Canada just in terms of the Supply and demand fundamentals and how rates are moving as a result?

Speaker 2

Yes. The There's a big bifurcation, of course. The high spec triples are very tight markets still. Those rates are not going down at all on any contract turnovers. We're seeing That go up $3,000 to $5,000 a day in some cases.

Speaker 2

It depends on the number of rigs that are being offered. On the high spec doubles, as I mentioned before, we're starting to see the price that we put out there in 4th quarter that felt some resistance now get traction because operators are going, you know what, we want that kind of rig. On the more conventional rigs, it's a very tough and tight business still.

Speaker 6

Got it. Thanks. And Mike, just on the interest I mean cash interest costs relatively high this quarter. Anything one time in there? Or is that kind of a reasonable run rate for the credit facility and how should we also be thinking about lease payments for 2023?

Speaker 3

For the interest, we've dropped about 100 bps starting in Q2 On our facility, so we saw sort of a fully priced facility in Q1. So we should actually see our interest costs start to trend downwards. So I wouldn't probably use that as a full run rate. I'd probably include probably 100 bps to 150 bps decrease overall for 2023. For lease costs, we expect that to normalize kind of in Q2 and Q3 to historically what we had.

Speaker 3

We had some leased equipment that We had in Q4 and Q1, and then that's going to normalize for the remainder of the year.

Speaker 6

Okay, perfect. Thanks. And just one last quick one. I mean, what are you guys seeing in terms of the impact of Wildfires on your operations so far?

Speaker 2

Yes, yes. It's Having some effect, we've got 3 rigs that have been evacuated, 4 rigs on watch. Of course, all the rigs are in standby without crews. We're monitoring it hour by hour. It is cooling off and there has been some rain.

Speaker 2

So let's knock on wood. The worst is probably behind us. No incidents with respect to personnel. And at this point, no impact on any of our rig assets.

Speaker 7

Got it. Okay. That's all

Speaker 6

for me. Thanks. I'll turn it back.

Speaker 7

Thanks, Paul.

Operator

Your next question comes from Waykar Saeed with ATB Capital Markets. Please go ahead.

Speaker 7

Thank you. Bob, you mentioned that there were 10 bids that you've won the last 2 weeks. Could you maybe talk about what the rates were for these winning bids versus The rates that they realized in the last quarter?

Speaker 2

Yes. They're As I mentioned, they're the same. They haven't gone up or down. On the high spec triples, they went up by about $3,000 a day, But our average run rate for the high spec double and the high spec double Specifically about the same. The conventional rigs have probably stepped down a little bit.

Speaker 7

Okay. And then you mentioned I missed a little bit, you With the point of wildfires, there were 3 rigs that were evacuated. And then there was How many, 1 rig on watch or what did you say?

Speaker 2

Yes, we had 3 rigs evacuated and 4 rigs on watch Where the fire is within 50 kilometers. So there that's kind of a radius that they Depending on the wins, of course, they keep an eye on.

Speaker 7

Any thoughts on how many rigs have been affected, Industry rigs have been affected because of wildfires?

Speaker 2

Good question. If you look at the map of where all the wildfires are, It seems to be where all the industry activity is. That's kind of an interesting situation. But There is, yes, I would say probably half of them.

Speaker 7

Okay.

Speaker 2

The wildfires are spotty all over west and north of Edmonton and north and west of Calgary, More North and West of Drayton Valley, I would say.

Speaker 7

Okay. And then In terms of California outlook, you mentioned a few things, you're moving 1 rig. What's the So you have now what 5 or 6 rigs working in California? What's the number?

Speaker 8

Correct.

Speaker 7

And how do you I know it's California, it's always very difficult to predict where the rig count could go, but Anything changing from a permitting perspective? Are you seeing any progress there or anything that you could add?

Speaker 2

Not really. Just as soon as something changes, it ends up in the appellate court appellate court, I'm sorry, and Everything stops again, right? But yes, It's stop go, stop go, stop go. The well servicing side got hit hard in the Q1 And California didn't come out of the gate as hard as we thought, but we're back up to 85% utilization with our well service rigs. So That part is coming back strong.

Speaker 7

And at the same kind of pricing level as before?

Speaker 2

Oh, yes. Yes. We haven't had to reduce our pricing at all.

Speaker 7

Now in California, it's always been an issue with permitting. Is it Particularly bad now or is it getting worse or is it just like the periodic issues that you see every couple of years?

Speaker 2

Well, the permitting, the operators are building a construct If we can drill the well emissions free, can we accelerate our permit? And that's getting some traction. So All of a sudden, rigs that have high line capability or perhaps our hydrogen Emission free project may get some momentum again. Nicole is on top of that. So we'll see, but it is California.

Speaker 7

Thank you very much, Bob. Appreciate the color.

Speaker 2

Thanks, Makar. All right.

Operator

Your next question comes from Joseph Schachter with Schachter Energy Research. Please go ahead.

Speaker 8

Good morning, Bob and Mike and Nicole. Going a little more on the wildfires, if something happens in the ones that are on watch, how quickly do you need to get the equipment taken Down and moved. And is that something that you guys have plans for that and places where you would move the rigs to? You got those kind of contingency plans?

Speaker 2

Yes. We have an emergency response plan and truckers On standby for our high value loads. The challenge is always access To the rig and forestry will shut down roads and not allow any access into it. That's the situation on 3 of our rigs. Every morning we're able to get a chopper or a small plane in the air along with the operator to kind of Take a look at what's going on in the site.

Speaker 2

It seems that the voice is behind us because it's gotten cooler, A little wind and we've had some rain. So that's the situation. As I mentioned, we haven't had any of our assets It's affected by any degree, a couple of Shacks here or there on the peripheral perimeter, but that's about it.

Speaker 8

In the safety of all the crews and the manpower?

Speaker 2

Correct. Absolutely, 1st and foremost.

Speaker 8

On the number of marketed rigs, you've gone from 247 to 232 down to 15. Are those rigs now ones you've sold or Are they being taken and used parts for other rigs or what's is this a permanent decline of 15 rigs?

Speaker 2

Yes, yes. The it's been an evolution of a move towards upgradable high spec rigs As we work through the market, every year we decommission roughly 5% of the fleet, if you think of a rig having a 20 to 30 year actuarial lifespan. 15 rigs, they get decommissioned, the spare parts get harvested. We generally cut up the masts and subs. So they have they basically have no more further use and they don't end up in the market in a Tier 2 or Tier 3 application that we may compete against somewhere else in the world.

Speaker 2

So they serve their useful life and they just get decommissioned.

Speaker 8

Okay. That's it for me. Thanks very much. Your

Operator

next question comes from Mui Kar Sied with ATB Capital Markets. Please go ahead.

Speaker 7

Yes. Thanks for getting back in the queue. I forgot to ask you, Bob, in terms of the If the rigs are evacuated with because of wildfire, how does the contract work? Do you still get paid For those days when the rig is down or customer can declare force majeure and not pay, how does it work?

Speaker 2

Yes, it's it generally starts off standby without crew. And then it can turn into a position where it's It's a force majeure, but generally the client works with us and it's standby without crew. Of course, the rigs are fully insured, but we're hoping we don't get to that position.

Speaker 7

Sure. Okay. Thank you very much.

Speaker 4

All right.

Operator

There are no further questions at this time. Please proceed.

Speaker 2

Thank you, operator. So just to wrap up, the macro construct for the oil business remains strong for the back half of twenty twenty three for gas. It will be well into 2024 before we see demand for gas wells increasing again. The slip in commodity prices has generally put a pause in activity growth and rate momentum in general, But certain rig type classes still remain very tight and no rate degradation, especially in Canada. Ensign expects to be running around 25 rigs and 50 to 60 well service rigs into the Q3 and remaining part of the year.

Speaker 2

Ensign has seen leading edge price stabilize and we continue to build out Term to help de risk the future and reinforce our debt reduction targets. Ensign has $1,600,000,000 of contracted revenue forward with 60% of the fleet Under contract and over 30% of the active fleet on long term contract of 6 months or greater. The weighted average contract tenure is about 1 year And the average age of the fleet is roughly 11 years old with another 20 years of economic life ahead of it. Ensign is fully committed to the target of quickly delevering and reducing $600,000,000 of debt over the next 3 years. We look forward to our next call in 3 months.

Speaker 2

Thank you.

Operator

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating in

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