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01/10 21:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call highlights strong financial performance with increased operating income and net income, alongside a robust cash position. The strategic focus on securing contracts and optimizing fleet utilization, coupled with optimism in Mexico and potential M&A opportunities, adds positive sentiment. However, the suspension of dividends and lack of specific M&A details slightly temper enthusiasm. Given the company's small-cap status, the overall sentiment is positive, likely resulting in a stock price increase of 2% to 8% over the next two weeks.
Technical Utilization 99.6%, indicating strong operational performance.
Economic Utilization 97.8%, reflecting high efficiency in operations.
Revenue $267.7 million for Q2 2025, an increase of $51.1 million or 24% compared to Q1 2025. The increase was driven by higher day rate revenues ($36.3 million), bareboat charter revenues ($12.7 million), and management contract revenue ($2.1 million).
EBITDA $133.2 million, an increase of $37.1 million or 39% compared to Q1 2025, highlighting improved profitability.
Operating Income $96.5 million, a $36.3 million or 60% increase from Q1 2025, due to higher revenues and controlled expenses.
Net Income $35.1 million, an increase of $52 million compared to Q1 2025, driven by higher operating income, reduced financial expenses, and lower income tax expenses.
Free Cash Flow $106.5 million generated in the first 6 months of 2025, showcasing strong cash generation.
Free Cash Position $92.4 million at the end of Q2 2025, with total available liquidity of $242.4 million, including $150 million undrawn under the revolving credit facility.
Operating Expenses $171.2 million for Q2 2025, an increase of $14.4 million or 9% compared to Q1 2025, primarily due to higher rig operating expenses.
Financial Expenses Decreased by $6.3 million in Q2 2025, mainly due to lower financing fees and positive FX movements.
Income Tax Expenses Decreased by $7.8 million in Q2 2025, due to a one-off deferred tax asset and lower tax expenses in Africa.
New contracts and awards: Secured significant new awards, including a multi-rig contract in Asia and a new contract for the Arabia II rig, expected to return to the active fleet in September. These contracts improve contract coverage to 84% for 2025 at an average day rate of $145,000 and 47% for 2026 at $139,000.
Fleet utilization: Achieved technical utilization of 99.6% and economic utilization of 97.8% in Q2 2025.
Geographic expansion: Strengthened market position in Vietnam with multi-rig awards and expanded operations in the Middle East with a 500-day contract for Arabia II. Enhanced presence in Mexico with new contracts and options.
Market dynamics: Observed steady global jack-up rig utilization above 90%, with demand growth in Southeast Asia and West Africa. Anticipated incremental demand in the Middle East and Mexico due to government initiatives and private investment projects.
Financial performance: Revenue increased by $51.1 million (24%) to $267.7 million in Q2 2025. EBITDA rose by $37 million to $133 million, a 39% increase. Net income reached $35.1 million, up by $52 million from the prior quarter.
Liquidity improvement: Secured a $102.5 million equity raise and amendments to revolving credit facilities, increasing liquidity by $200 million. Pro forma liquidity now stands at $425 million.
CEO succession plan: Announced that Bruno Morand will succeed Patrick Schorn as CEO effective September 1, 2025. Patrick Schorn will transition to Executive Chairman.
Board composition: Updated Board with new members, including Dan Rabin as Lead Independent Director and Thiago Mordehachvili as a Director, to enhance governance and strategic focus.
Delays in collections in Mexico: The company continues to experience delays in collections in Mexico, impacting cash flow. While recent positive developments through financing initiatives by the Mexican government are expected to improve this situation, it remains a challenge.
Day rate pressure due to market oversupply: Day rates for jack-up rigs are under pressure as the market works to absorb excess capacity, particularly following Saudi suspensions. This could impact revenue generation in the near term.
Supply chain constraints and project delays: Supply chain constraints and complex procurement processes have caused delays in projects, particularly in the Middle East. This could affect the company's ability to capitalize on incremental demand in the region.
Pemex-related risks in Mexico: The company's operations in Mexico are heavily reliant on Pemex, which has faced liquidity challenges. Although the Mexican government has announced measures to strengthen Pemex's financial position, the dependency on a single entity poses a risk.
Volatility in global oil and gas markets: Regional conflicts, uncertainty over global trade tariffs, and OPEC's production cuts contribute to a volatile environment for the oil and gas sector, potentially impacting demand for the company's services.
Aging fleet and maintenance costs: The company faces ongoing costs related to the maintenance and activation of its aging fleet, which could strain financial resources if not managed effectively.
Debt obligations and interest payments: The company has significant debt obligations, including semiannual interest payments on senior secured bonds, which impact cash flow and liquidity.
Revenue and EBITDA Guidance: The company anticipates a comparable level of activity in Q3 2025 as in Q2 2025, with a similar performance. The company is comfortable with the Bloomberg consensus estimate of approximately $470 million for 2025 adjusted EBITDA.
Mexico Market Outlook: The Mexican government's renewed commitment to strengthening Pemex's liquidity and its production goal of achieving 1.8 million barrels per day are expected to enhance Borr Drilling's liquidity. The company is well-positioned to capture incremental drilling activity, particularly under private investment projects, which are projected to contribute to 25% of Mexico's production by 2033.
Contract Coverage and Day Rates: For 2025, the company has achieved 84% fleet coverage at an average day rate of $145,000. For 2026, coverage stands at 47% with an average day rate of $139,000. The company sees potential for further improvements in coverage for both years.
Market Trends and Demand: Global jack-up rig utilization remains above 90% for modern rigs. Incremental demand in the Middle East, particularly in Kuwait and the neutral zone, is expected to absorb excess capacity by 2026-2027. Southeast Asia and West Africa show positive demand trends, with balanced supply and demand for modern units.
Pemex and Private Investment Projects: The Mexican government has announced a $12 billion debt offering and a $13 billion facility to support Pemex's projects. Borr Drilling is uniquely positioned to benefit from these developments, particularly in private investment projects.
Long-Term Market Fundamentals: The company expects long-term fundamentals for the jack-up market to remain strong, driven by demand for shallow water projects with attractive breakeven prices and short cash flow cycles. The aging global fleet and lack of new builds are expected to support high utilization levels and favorable economics.
The selected topic was not discussed during the call.
The company's earnings call highlights strong market fundamentals, with high utilization rates and strategic positioning in Mexico and West Africa. Positive developments include improved payment terms with Pemex, potential growth in Angola, and rising demand for natural gas. While management was vague on some specifics, the overall sentiment is optimistic. With a market cap of $1.63 billion, the stock is likely to see a positive movement of 2% to 8% over the next two weeks due to these favorable conditions and strategic initiatives.
The earnings call highlights strong financial performance with increased operating income and net income, alongside a robust cash position. The strategic focus on securing contracts and optimizing fleet utilization, coupled with optimism in Mexico and potential M&A opportunities, adds positive sentiment. However, the suspension of dividends and lack of specific M&A details slightly temper enthusiasm. Given the company's small-cap status, the overall sentiment is positive, likely resulting in a stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals a negative sentiment due to a significant decline in operating revenue and EBITDA, a net loss, and the suspension of dividends. Although there is a slight increase in operating rig count and liquidity, the challenges with Pemex and reliance on the Mexican market pose risks. The Q&A section highlights uncertainties and cautious customer behavior, further dampening sentiment. Given the company's market cap, the stock price is likely to react negatively, falling between -2% to -8% over the next two weeks.
The earnings call revealed a decline in revenue and EBITDA, a net loss, and a suspension of dividends due to macroeconomic uncertainties. While there is optimism about future rig operations and potential contract extensions, the Q&A highlighted concerns about market conditions and customer caution. The market cap of $1.63 billion suggests moderate sensitivity to these factors, leading to a likely stock price decline of -2% to -8% over the next two weeks.
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