Borr Drilling Limited (BORR) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call presents a mixed picture: strong liquidity and cash position, stable EBITDA, and positive market trends in Saudi Arabia and Mexico. However, the lack of clear guidance, net loss in Q4, and potential delays in rig deployment temper the outlook. The Q&A reveals cautious management communication and uncertainties in achieving EBITDA targets. Given the market cap of $1.63 billion, the stock is likely to experience limited volatility, resulting in a neutral short-term price movement.
Key Financial Performance
Operational revenues (Q4 2025) $259.4 million, a decrease of $17.7 million or 6.4% from Q3. The decrease was mainly due to a $16 million reduction in day rate revenue caused by rigs transitioning into contracts with lower day rates, and a $3.1 million decrease in bareboat charter revenue due to the Grid's end of contract and planned transfer to Angola. This was partially offset by a $1.4 million increase in O&M revenue.
Adjusted EBITDA (Q4 2025) $105.4 million, in line with expectations. Full year adjusted EBITDA was $470.1 million, a decrease of 7% compared to 2024. The decrease was attributed to unforeseen headwinds, including temporary contract suspensions and sanction-related contract terminations.
Net loss (Q4 2025) $1 million. No specific reasons for the net loss were provided in the transcript.
Net income (Full year 2025) $45 million. No specific reasons for the net income were provided in the transcript.
Cash and cash equivalents (as of December 31, 2025) $379.7 million, an increase of $151.9 million from the prior quarter. The increase was driven by $34.8 million cash from operations (after $94.7 million interest payments and $8.8 million cash taxes paid), $52.1 million spent on investing activities (including $36 million deposit for the Five-Rig acquisition and $15.9 million additions to jack-up rigs), and $169.2 million from financing activities (including $159.3 million net proceeds from bond issuance and $80.3 million net proceeds from share issuance, offset by $70.8 million debt repayment).
Liquidity (as of December 31, 2025) $613.7 million, including $379.7 million in cash and cash equivalents and $234 million in undrawn revolving credit facilities.
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Operating Highlights
Five premium jack-up rigs acquisition: Acquired from Noble, these rigs are complementary to the existing portfolio and are expected to pursue near-term opportunities. Integration is ahead of expectations.
Middle East market: Multiyear tenders are in progress for an estimated 13 rigs, indicating a recovering demand.
Mexico market: Improved payment visibility and a positive operating outlook supported by government financial measures and Pemex's 34% year-on-year increase in upstream CapEx.
Safety milestones: Rigs Idun and Grid achieved 6 and 3 years LTI-free, respectively. Arabia III received an award for the best safety score in 2025 from Aramco.
Fleet contract visibility: 2026 coverage increased to 80% in the first half and 48% in the second half due to new commitments for 7 rigs.
Oslo Stock Exchange listing: Initial steps taken to return to the Oslo Stock Exchange through Euronext Growth listing, with plans for a full uplisting in the first half of 2026.
Capital market transactions: Completed equity and debt transactions, including $165 million bond issuance and $84 million equity offering, to support the acquisition of 5 rigs.
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Risk or Challenges
Decreased Operating Revenues: Total operating revenues decreased by $17.7 million (6.4%) from Q3, primarily due to rigs transitioning into contracts with lower day rates and a decrease in bareboat charter revenue.
Increased Operating Expenses: Operating expenses increased by $30.2 million (7.4%) compared to Q3, driven by higher personnel costs, accelerated amortization of deferred costs, and reimbursable expenses.
Net Loss in Q4: The company recorded a net loss of $1 million in Q4, reflecting challenges in maintaining profitability.
Debt and Financing Risks: The company issued $165 million in bonds and raised $84 million in equity, but also repaid $70.8 million in debt. This highlights reliance on external financing and potential risks associated with debt management.
Integration of Acquired Rigs: The acquisition of 5 premium rigs from Noble requires integration, which could pose operational and financial challenges if not managed effectively.
Market Dependency and Contract Risks: The company is heavily reliant on securing contracts to fill idle space in its fleet. Any delays or failures in securing contracts could impact revenue and utilization rates.
Geopolitical and Regional Risks: Operations in regions like Mexico and West Africa are subject to geopolitical and regulatory uncertainties, which could disrupt operations or financial performance.
Economic Uncertainty: The company faces risks from broader economic conditions, including fluctuating demand for jack-up rigs and potential delays in tender awards.
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Guidance & Outlook
Fleet Contract Visibility: Fleet contract visibility for 2026 has improved, with 80% coverage in the first half and 48% in the second half, including newly acquired rigs. The company expects further coverage gains in the coming months.
Market Recovery and Demand: The jack-up market bottom is believed to be behind, with fundamentals recovering gradually as demand increases. Multiyear tenders are in progress for an estimated 13 rigs in the Middle East. In Mexico, there is better visibility of payments and a more positive operating outlook, supported by Pemex's plans for a 34% year-on-year increase in upstream CapEx and a mandate to raise production.
Acquisition of Premium Rigs: The company has expanded its fleet with the acquisition of 5 premium rigs from Noble, which are expected to be immediately accretive to adjusted EBITDA and reduce debt per rig. Integration is ahead of expectations.
Future Market Dynamics: Market dynamics are expected to improve in the second half of 2026, with recovering day rates and earnings visibility into 2027.
Contracting Success: Year-to-date 2026, the company has secured 5 new commitments, adding approximately $145 million to its backlog. The company aims to fill idle space in its 2026 schedule and capitalize on improving market conditions from late 2026 onwards.
Tender Activity: Tender activity is at levels not seen since January 2023, with approximately 120 rig years in the tender and pretender phase for opportunities commencing within the next 12 months. A meaningful amount of these tenders is expected to be awarded by mid-2026, boosting utilization.
2026 Fleet Coverage: As of now, 2026 fleet coverage stands at 64%, with 80% coverage in the first half of the year. The company is confident in securing commitments to bring contract coverage above 70% in the coming months.
Long-Term Outlook: The company expects market conditions to improve through the second half of 2026, with a clear recovery in day rates in 2027 and beyond. The expanded fleet will provide scale and operational flexibility to deliver long-term value to shareholders.
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Shareholder Return Plan
The selected topic was not discussed during the call.
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Key Q&A
Q:What is the outlook for the two acquired idle rigs, Sif and Freyja?
A:The Sif is expected to secure a contract in the coming months and return to the operating fleet in the short term. The Freyja may take longer, with potential work starting in late 2026 or early 2027, depending on the scope.
Q:What are the thoughts on achieving the consensus EBITDA of $440 million for the year?
A:Management stated it is too early to provide formal guidance but noted that activity levels in 2026 are expected to be modestly higher than in 2025. They will provide better guidance in the coming quarters.
Q:What is the status of tenders in the Middle East, and when can rigs be contracted?
A:Tenders, including those from Aramco and KGL, are in progress. KGL is in full tender evaluation, and Aramco is in the tender submission phase. Awards are expected around midyear, with rigs requiring preparation time before deployment. This could tighten the market and impact pricing dynamics by Q3.
Q:Is there room for further fleet acquisitions, and what is the status of Seatrium rigs?
A:Management is open to opportunistic growth but does not see it as a core strategy. Seatrium has one rig that may be offered in Middle Eastern tenders. Singaporeans are unlikely to sell rigs cheaply, and the market will dictate pricing.
Q:What is the trajectory for rate development globally?
A:Rates have been stable or slightly declining in some regions like Asia. Middle East tenders are expected to conclude by midyear, with pricing dynamics improving by Q3. For 2026, the focus is on utilization, while 2027 will emphasize rates and economics.
Q:What is the strategy for recontracting the fleet, and are there changes in Saudi Aramco's contracting terms?
A:The strategy involves a mix of short- and long-term contracts, depending on regional dynamics. Aramco has made some terms more flexible, particularly around termination provisions, but the tender is still ongoing.
Q:What is the status of payments from Pemex in Mexico?
A:Payments have improved, with $46 million received in Q4 and $23 million in January. Outstanding balance is now around $90-$100 million. Contract extensions include improved payment terms, ensuring operating costs are paid within 45 days.
Q:What is the outlook for rigs without secured work, particularly the Var?
A:The Hill and Sif are expected to secure commitments soon. The Var and Freyja may find work later, likely in late 2026 or early 2027, with focus on Middle East developments.
Q:What are the requirements for reactivating stacked rigs?
A:Most rigs require minimal CapEx for reactivation, except the Var, which may need $5-$6 million. Management aims to avoid short-term contracts that leave rigs idle again.
Q:What is the outlook for shallow water markets in regions like Trinidad, Colombia, and Guyana?
A:Trinidad remains active, while Suriname and Colombia have some opportunities, mostly exploration-focused. The region requires rigs with larger capabilities, but no large-scale demand is expected in the near term.
Q:Review of Unclear Management Responses
A:Management avoided providing a direct answer on the achievability of the $440 million EBITDA consensus, stating it was too early for formal guidance. They also used vague language regarding the potential for further fleet acquisitions, emphasizing opportunistic growth without clear specifics.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Angola decrease
Arabia III
Aramco department
Borr Drilling
Drilling family
Drilling today
Dubai Chief
East tender
Euronext decision
Exchange listing
Exchange word
Five Rig
Grid incident
Grid year
Gunlord Grid
III award
Idun Grid
Magnus result
Noble
Oslo Stock
Rig acquisition
Stock Exchange
bond
consideration
credit
expectation
improvement
investor interest
issuance
offering
outlook
proceeds
progress
rig safety
transaction
BORR Transcript
Borr Drilling Limited (BORR) Q1 2026 Earnings Call Transcript
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Borr Drilling Limited (BORR) Q4 2025 Earnings Call Transcript
Unknown2-19
The earnings call presents a mixed picture: strong liquidity and cash position, stable EBITDA, and positive market trends in Saudi Arabia and Mexico. However, the lack of clear guidance, net loss in Q4, and potential delays in rig deployment temper the outlook. The Q&A reveals cautious management communication and uncertainties in achieving EBITDA targets. Given the market cap of $1.63 billion, the stock is likely to experience limited volatility, resulting in a neutral short-term price movement.
Borr Drilling Limited (BORR) Q3 2025 Earnings Call Transcript
Positive11-6
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.
Borr Drilling Limited (BORR) Q2 2025 Earnings Call Transcript
Positive8-14
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.
BORR Report
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