Borr Drilling Limited (BORR) Earnings

Management highlights

### Safety Performance - Multiple rigs across the fleet achieved multi-year LTI-free safety milestones, including Groa and Gersony at seven years LTI-free, Ram at six years, and Scald at five years LTI-free. - Management emphasized safety as the company's highest core priority, thanking employees, customers, and stakeholders for fostering a strong safety culture. ### Operational Performance - Technical utilization reached 98.4% and economic utilization reached 96.4% for the quarter. - Six rigs completed contract transitions during Q2, and all are now fully operational, with most transitional impacts already completed. - The Olden rig's US Gulf contract entry experienced delays and higher-than-expected preparation costs; regulatory approvals were received in mid-July, and the rig is on track to start its 2-year firm contract, with options extending to 2029. - So far in 2026, the company has secured 21 contract commitments adding 4,350 days of backlog and $541 million in day rate equivalent backlog, achieving a positive book-to-bill ratio for 2026. ### Strategic & Financial Transactions - Completed a comprehensive refinancing of nearly all debt during the quarter, extending debt maturities, reducing financing costs, and strengthening liquidity. The revolving credit facility was upsized to $250 million with maturity extended to 2031. - In July 2026, the company's 50-50 Mexican joint venture acquired five premium jackup rigs from Fontys for a total purchase price of $287 million. As of Q3, three of the five rigs are contracted, with two already operating and the third set to start operations in Q3. ### Market Context by Region - **Global**: Global utilization of modern jackups remains resilient at ~90%, though contracting pace is uneven across regions. Low global oil inventories are expected to drive sustained future drilling demand, with low-cost, short-cycle shallow water drilling well positioned to meet this need. - **Middle East**: The ongoing conflict has delayed tendering and contracting activity, with H1 2026 backlog additions hitting multi-decade lows. However, underlying demand remains substantial, and gradual resumption of operations has begun in Saudi Arabia and the UAE. - **Southeast Asia**: Contract awards have accelerated over the past two quarters, with government policy supporting domestic energy security driving near-term activity; pricing responds quickly to market tightening in the region. - **Americas**: Previously idled rigs have returned to work in Mexico, and Pemex's production targets are expected to drive further jackup demand growth. Multiple IOC procurement processes are ongoing, with awards expected in the coming months. - **North Sea**: Permitting challenges continue to create uncertainty, but the company has secured contract extensions based on strong operational performance. - **West Africa**: Contract activity remains robust, with jackup utilization at levels not seen in over a decade, growing activity from both IOCs and indigenous operators, and increasing exploration interest in Angola.

Guidance

- Q3 2026 is expected to average approximately 23 active rigs, representing a substantial sequential improvement in adjusted EBITDA compared to Q2 2026, with activity levels expected to be similar to the Q1 2026 run rate. - $6 to $9 million in incremental Olden rig preparation costs are expected to be incurred in Q3 2026, after which regular daily OPEX for the rig will settle in the mid-$70,000 per day range. - As of the call, 2026 full-year contract coverage stands at 73% at an average day rate of ~$134,000, with H2 2026 coverage at 70%. Management expects activity levels in Q4 2026 to remain steady relative to Q3 2026. - Management maintains constructive medium/long-term outlook for the jackup market, with demand expected to strengthen meaningfully once uncertainty in the Middle East resolves. Deleveraging remains a core priority, with ~$100 million annual debt amortization structurally built into the new debt facilities.

Segment performance

Board Drilling operates as a single business segment focused on offshore jack-up drilling services. For Q2 2026, total operating revenues were $232.3 million, a 6% decrease of $14.7 million from Q1 2026. Revenue breakdown by type: day rate revenue was $187.7 million (80.8% of total revenue), variable charter revenue was $32.9 million (14.2% of total revenue), and management contract revenue was $11.7 million (5.0% of total revenue). Total operating expenses were $232.1 million, an increase of $31.1 million from Q1. Adjusted EBITDA was $43.8 million, a decrease of $44.7 million from Q1. Net loss for the quarter was $241.4 million, an increase in loss of $212.4 million from Q1, driven primarily by a $176.3 million loss on debt extinguishment from refinancing activities.

Risks & headwinds

- The ongoing conflict in the Middle East has created significant near-term uncertainty, leading to delayed tendering and contracting activity, and increased insurance and fuel costs for the company's global operations. - Higher insurance costs linked to the Middle East conflict are expected to persist until the conflict is resolved. - Delays to the Olden rig's entry into the US Gulf market resulted in higher-than-anticipated preparation costs and delayed revenue generation for the asset. - $10.8 million in credit loss provisions were recorded for a former West African customer, leaving a net zero receivable balance on the balance sheet as of Q2 end. - Short lead times for recent customer awards create operational complexity and execution risk for maintaining steady rig utilization. - If the Middle East conflict does not resolve in the near term, near-term activity visibility remains limited across global markets.

Analyst Q&A

• Q: The analyst asked for a Q3 adjusted EBITDA range given the expected 23 active rigs and reduced startup costs, and asked about line of sight for the two idle rigs from the recent Fontys acquisition in Mexico.

  A: Management declined to provide a specific EBITDA range but confirmed Q3 will see a substantial sequential increase from Q2, with activity levels aligned with the Q1 2026 run rate. For the Fontys rigs, management expects three rigs to be operating in Q3, and sees a pathway to bring a fourth rig online by the end of 2026 or early 2027. If 3-4 of the five rigs operate, the JV will generate attractive cash flow, with more time needed to secure work for the fifth remaining idle rig.

• Q: The analyst asked for the company's outlook for Middle East market recovery after the conflict ends, whether the company could provide active rig counts for Q4 2026 and Q1 2027, and if the Fontys JV requires additional capital beyond the agreed purchase price.

  A: Management confirmed that substantial pre-conflict demand in the Middle East remains in the pipeline, with tenders still ongoing and some even increasing in size, and a Middle East rebound would quickly rebalance the global jackup market. Near-term conflict uncertainty prevents providing specific active rig guidance for quarters beyond Q3, but low global oil inventories will inevitably drive increased drilling demand elsewhere if the conflict drags on. No additional material capital contributions are expected for the JV this year beyond planned working capital, and the JV will be self-funded if 3-4 rigs are operational.

• Q: The analyst asked if growing contracting activity in Southeast Asia is driven by the Middle East conflict and energy security priorities, and whether there is any further balance sheet work or upcoming M&A planned.

  A: Management confirmed that government focus on energy self-sufficiency is driving activity in Southeast Asia, and that the longer the Middle East conflict lingers, the more this urgency grows. The company is optimistic about continued opportunities in the region given its long-standing local partnerships. Management stated that the recent refinancing completed all near-term balance sheet priorities, extending maturities and reducing financing costs, and M&A is not a current strategic priority as the company focuses on operational execution and liquidity preservation during the current period of uncertainty.

• Q: The analyst asked if the company is satisfied with its current geographic footprint, or if material rig repositioning across regions is likely in the near term.

  A: Management stated it is very comfortable with the current global footprint, with strong positions in Mexico, Asia, and West Africa that align with current demand trends. No material global rig repositioning is planned in the near term. The only region where the company may increase focus over time is the Middle East, as existing assets are well suited for the region's projected gas demand once activity resumes, but no immediate changes are planned.