Borr Drilling Limited (NYSE: BORR) Q2 2025 Earnings Call | 05/23/2025

Q1 2025 Financial Performance and Operations

Borr Drilling's Q1 2025 results were largely in line with expectations, reflecting temporary rig suspensions and preparation for new contracts.

• Revenue: Total operating revenue decreased by $46.5 million quarter-over-quarter to $216.6 million.
• Adjusted EBITDA: Stood at $96.1 million, down $40.6 million from the previous quarter.
• Active Rigs: Averaged 16 active rigs out of a 24-rig fleet during the quarter.
• Operational Performance: Maintained robust technical utilization at 98.2% and economic utilization at 96.9% for active rigs.
• Net Loss: Reported a net loss of $16.9 million, a decrease of $43.2 million compared to net income in Q4 2024.
• Liquidity: Improved during the quarter, with $120 million collected from outstanding receivables in Mexico and $10 million in mobilization fees for the Valea. Post-quarter, an additional $35 million in mobilization fees were received. Total available liquidity at the end of Q1 was $320 million, including $150 million undrawn from their RCF facility.
• Dividend: The board decided to suspend the dividend to reinforce the balance sheet and enhance long-term value creation amidst uncertain market conditions.
• EBITDA Guidance: The company is comfortable with the Bloomberg consensus estimate of approximately $460 million Adjusted EBITDA for 2025.

Operational Highlights and Commercial Strategy

Borr Drilling highlighted significant operational improvements and commercial successes.

• Increased Activity: In Q2, three suspended rigs in Mexico (Galar, Grit, Gersimi) resumed operations, and the Valea and Arabia One commenced new contracts. The Thor and Ron also secured new contracts. As of May, the operating rig count increased to 22, laying a foundation for stronger financial performance.
• Safety Recognition: Several rigs received industry and customer safety awards, including the Groa (Qatar Energies HSC Award 2024), Prospector One (IADC North Sea Chapter's 2024 Best Safety Performance Award), and Borr Drilling receiving PTT EEP's CEO Safety Excellence Award for the second consecutive year in Thailand.
• New Contracts: Secured nine new contract commitments, adding $221 million to the backlog at an average day rate of $141,000. Noteworthy contracts include:
  • Scout: Binding LOA from Medco in Thailand for a 170-day program.
  • Tor: 75-day contract with Vietso Petro in Vietnam, allowing an earlier return to work.
  • Galar, Grit, Gersimi: Extended in Mexico by a combined 390 days, offsetting earlier suspension periods.
  • Ron: 140-day contract with E&I in Mexico, commenced in May, with options into Q1 2026.
  • Norva: Letter of award for an 11-month program in West Africa, commencing H2 2026.
  • Gerd: One-year contract with Foxtrot International in Ivory Coast, commencing Q4.
• Fleet Coverage: 2025 fleet coverage stands at 79% at an average day rate of $147,000, expected to rise towards 85% in the coming months. 2026 coverage has increased to 35% (up 12 percentage points).
• Mexico Operations: All Mexican rigs are now active, including one under a private investment contract, contributing to Pemex's production initiatives. The company expects good contract extension opportunities in Mexico due to its proven performance and cost efficiency.

Market Outlook and Strategy

• Jackup Utilization: Modern rig market utilization remains steady at 92%, or just under 90% when adjusted for Aramco suspensions, considered a healthy level.
• Oil Market Volatility: Recent changes in trade policies and OPEC Plus decisions have introduced some uncertainty. However, Shell activity is seen as resilient, primarily related to brownfield projects with attractive economics.
• Rig Supply: The volatility continues to challenge older jackups, with a resumption in rig retirements expected in 2025. Limited new builds are anticipated.
• Global Demand: Remains resilient outside the Middle East, with regions like West Africa, Southeast Asia, and the Americas absorbing excess capacity. Aramco is also showing signs of potentially securing additional long-term jackup capacity.
• Long-Term Fundamentals: Despite near-term volatility, Borr Drilling remains confident in the long-term fundamentals for the jackup market, focusing on maximizing backlog for 2025 and building 2026 coverage.
• Capital Expenditure: Expected to be around $50 million in 2025, equating to approximately $2 million per rig, mainly for maintenance and special periodic surveys. The company is no longer engaged in growth capex following the completion of its newbuild program.
• Contract Termination Clauses: The vast majority of contracts include termination for convenience clauses with payouts equivalent to the expected EBITDA backlog of the remaining term, protecting the company from significant losses if contracts are canceled.

Borr Drilling emphasized its focus on innovation, disciplined execution, and long-term value creation, leveraging its premium rig fleet and strong operational track record to navigate market cycles.