Borr Drilling Ltd. Q1 FY2025 earnings call

Key Points

• Q1 results were largely as expected with lower activity but robust operations. Adjusted EBITDA was $96.1 million.
• Safety achievements: Groa awarded Qatar Energies HSE award, Prospector 1 got IADC NORC chapter award, Borr Drilling received PTT EPs CEO safety excellence award.
• Q2 ramp-up: 3 suspended rigs in Mexico resumed, Vale and Arabia 1 started contracts, Thor and Ran secured new contracts. Operating rig count increased to 22.
• Liquidity: Improved with $120 million in receivables collected from Mexico and $35 million in mobilization fees post-quarter end.
• Commercial: Secured 9 new contract commitments, 2025 fleet coverage at 79% avg day rate $147,000, 2026 coverage at 35%. Market trends: Jackup utilization steady, shallow water projects resilient, but market volatility exists due to trade policies and OPEC+ decisions.

Total operating revenue for Q1 was $216.6 million, a decrease of $46.5 million quarter over quarter. Adjusted EBITDA was $96.1 million. The company averaged 16 active rigs out of 24 in the fleet. Technical utilization was 99.2% and economic utilization was 97.9% for active rigs.

Guidance

• Not issuing specific adjusted EBITDA guidance for 2025 but comfortable with Bloomberg consensus estimate of approximately $460 million.
• Board suspended dividend to reinforce balance sheet.
• Focus shifting to building 2026 coverage, with 2026 coverage at 35% and aiming for 80-85% in 2025.

Risks

• Market volatility due to trade policies and OPEC+ decisions leading to commodity price uncertainty.
• Potential contract terminations with termination for convenience clauses in contracts, though with payout.
• Uncertainty in customer spending due to macroeconomic factors affecting drilling programs.

Q: Eddie Kim asked about Mexico rig resumption and contract extensions.

A: Patrick Schorn said it's a combination of Pemex's need to boost production and the quality of rigs; contract extensions to be discussed further in the year.

Q: Doug Becker asked about Ran rig option and coverage.

A: Bruno Morand said early days but conversations with the customer are encouraging; coverage is expected to reach 80-85% with active negotiations ongoing.

Q: Fredrik Stene asked about liquidity and cost control.

A: Magnus Vaaler said liquidity is solid with good coverage and receivables, and stacking costs for rigs are manageable, with typical stacking costs in the mid $20,000 per day for warm stacked rigs.

Q: Craig Rosie asked about Saudi market and share buybacks.

A: Bruno Morand discussed Saudi market trends with activity levels back to 2019 levels and signs of potential reversal; Patrick Schorn said share buybacks are on the table as part of optimizing cash use.

Q: Fadir Chamos asked about backlog and CapEx.

A: Bruno Morand said contracts have termination for convenience clauses with payout; Magnus Vaaler mentioned CapEx expected ~$50 million in 2025, equating to around $2 million per rig.