Borr Drilling Ltd. Q4 FY2024 earnings call

This quarter's results were as expected. Core operation performed strongly with a technical utilization rate of 98.9% and an economic utilization rate of 97.1%. In the second half of 2024, softening demand and declining day rates signaled potential headwinds for the jackup market heading into 2025. However, recent increases in contracting and tendering levels provide some early signs of improving conditions towards the second half of 2025. In November 2024, successfully completed new build program with delivery of final rig VAR. Budgeted capital expenditures for 2025 are set to be below $50 million. Currently, have approximately 6,700 contracted rig days in 2025, representing 77% of total available rig days in the year. Board declared a cash distribution of $0.02 per share for the fourth quarter of 2024. Regional market trends: Southeast Asia demand expected to rise slightly; Middle East some multi-rig, multi-year tenders coming; West Africa strong demand persists; Mexico activity levels impacted by PEMEX temporary suspensions but optimistic for rebound in second half of 2025.

Operating revenue increased by $21.5 million over Q3, driven primarily by higher day rates for the Net and Prospector One. Adjusted EBITDA for the quarter was $136.7 million. Full year adjusted EBITDA was within the original guidance range of $500 to $550 million. Total operating revenues increased by $21.5 million, primarily due to a $22.7 million increase in day rate revenue compared to the third quarter. Adjusted EBITDA for the fourth quarter was $136.7 million, an increase of $21.2 million or 18% compared to the third quarter. Free cash position at the end of Q4 was $61.6 million, with $150 million undrawn under RCF facility, resulting in total available liquidity of $211.6 million.

2025 budgeted capital expenditures set to be below $50 million. Currently, have approximately 6,700 contracted rig days in 2025, representing 77% of total available rig days in the year, at an average day rate of $149,000. First quarter of 2025 will be negatively impacted by suspensions of three rigs in Mexico, but expect to receive approximately $44 million in mobilization payments upon their contract commencements and positively impacted by Mexican payment arrangement of $125 million. 2025 has good contract coverage to get through the year.

2025 market will continue to face uncertainties. Weaker market observed with rig suspensions in Saudi and Mexico. Uncertainty in contract renewals and payments in Mexico. Potential for continued softening demand and declining day rates in jackup market.

Q: Good morning. Just wanted to ask about leading edge day rates. Could you remind us where leading edge day rates for benign market jackups have been kind of over the past six or twelve months or so? And in your prepared remarks, you highlighted some market uncertainty this year. So in light of that, do you expect to see some day rate pressure kind of industry-wide in the jackup market this year before revamping perhaps in 2026? Just your overall thoughts on the day rate trajectory from here.

A: Okay. Very good. Thanks for the question, Eddie. I'll probably not walk you through region by region because I think our views on the net market are part of our commercial strategy. But in line with what we've discussed earlier, we've seen a few markets that suffered a bit more with the competitive pressure, and I think it's fair to say that Asia has been one of those markets. We've seen some of the competitor fixtures coming close or just under $100,000 a day, but leading edge rates staying kind of in a $130,000, $120,000, $130,000 range. Conversely, if you go into markets that suffered less with conventional pressure, such as West Africa, we have seen numbers that still hover and often above the kind of $150,000 range. So we do have a fair spread here. We see now going forward an increasing number of tenders, and I think that alone would help the industry and will help Borr Drilling Limited in reducing a little bit of the competitive pressure. In addition to that, some of the players that have been more aggressively chasing work seem to have achieved now full utilization or very close to full utilization, which should take a little bit of the edge as well from this competitive pressure. Now I think that the dynamic will remain. Some markets that are a bit more benign will be subject to higher competition, and they will keep the rates a bit compressed. Other markets where it takes a lot of history, a lot of competency to kind of penetrate will be a bit more insulated. So I don't see for now a scenario where the rates fall to the bottom. I think we have, you know, we are in a range that activity level troughing should start to stabilize or potentially go up as the months come by.

Q: Understood. Understood. That's helpful. And then just my follow-up is on Mexico. A lot of good color there. So you have three rigs with PEMEX that are currently temporarily suspended and two that are contracted through year-end. I believe I heard that the three that are temporarily suspended, you expect those rigs to return to work in the second quarter? Did I hear that correctly? And, I guess, what's your confidence level around that? And if that's the case, I mean, it seems like你're fairly confident that your other two jackups that are currently still contracted will continue to work until the end of their contracts later this year. So just, I guess, if you could confirm that for me, that'd be great.

A: Yeah. I think that the numbers that you have are correct. We do indeed expect these rigs to go back to work in the second quarter. But quite frankly, we don't know exactly when in the quarter that is going to be. That is at the moment our working assumption. The main reason for that is that we have seen that there is a lot of actions that have taken place in PEMEX. If you think about the last few months, since the new administration is in place, the amount of work that has been done in getting people paid and now an aggressive plan on how activity needs to be restarted. We're still having a very strong commitment on getting production up. I think that based on the production data as we see it, and the strong decline that otherwise you would see in Mexico, I would assume that there is going to be a significant focus in getting rigs back to work, particularly the ones that already are contracted. So that is our working assumption. Obviously, the future here will have to tell, but those are kind of the guidelines that we have and the reasoning for us to be fairly positive about the business environment there.