Borr Drilling's Q4 2024 Earnings: Navigating Market Uncertainties

Borr Drilling Limited, a leading offshore drilling contractor, recently announced its fourth quarter and full-year 2024 results, providing insights into the company's performance and market outlook. The earnings call highlighted both positive and negative aspects, offering a balanced view of Borr Drilling's position in the industry.



Positive Points:
Borr Drilling's operating revenue increased by $21.5 million over Q3, driven by higher day rates, with a strong technical utilization rate of 98.9% and an economic utilization rate of 97.1%. The company successfully completed its new build program, marking the end of growth capital expenditures, and secured $795 million in backlog at an average rate of $177,000 per day. Additionally, a $125 million payment arrangement with a major Mexican customer positively impacted liquidity.



Negative Points:
Softening demand and declining day rates in the second half of 2024 signal potential headwinds for 2025. Suspensions of rigs in Saudi Arabia and Mexico negatively impacted operations, with the first quarter of 2025 expected to be negatively affected by suspensions and idle time. Total financial expenses increased by $5.7 million due to interest on additional bonds issued, and cash decreased by $124.1 million compared to the prior quarter, largely due to investing activities.

Q&A Highlights:
During the earnings call, Borr Drilling's management provided insights into the company's strategies for navigating market uncertainties and capitalizing on opportunities in 2025.

1. Leading edge day rates and tender activity: Bruno Morand, Chief Commercial Officer, explained that leading edge day rates have varied by region, with Asia experiencing competitive pressure and rates around $120,000 to $130,000, while West Africa has seen rates above $150,000. He anticipates increased tender activity will help stabilize or potentially increase rates as the year progresses.
2. Mexico rig suspensions: Patrick Schorn, CEO, confirmed the expectation for the suspended rigs in Mexico to return in the second quarter, although the exact timing is uncertain. He noted positive actions by Pemex and the Mexican government to increase production, which supports this assumption.
3. Saudi Arabia developments: Bruno Morand stated that the situation in Saudi Arabia remains steady, with Aramco focusing on offshore gas work. He mentioned increased discussions about large EPC contracts and integrated projects, which could lead to more opportunities as the year progresses.
4. Mexico rig outlook and payments: Patrick Schorn expressed confidence in the efforts by the Mexican government and Pemex to stabilize payments and production. He highlighted the potential for increased private investments offshore, which could improve payment reliability and create more opportunities.
5. Contracting available rigs in 2025: Bruno Morand indicated that the rigs are being offered in various tenders globally, with expectations for deployment in the second half of the year. He mentioned potential opportunities in the Americas, West Africa, and the Middle East.

In conclusion, Borr Drilling's Q4 2024 earnings call provided a comprehensive overview of the company's performance and market outlook. By staying informed about regional trends, diversifying its portfolio, and optimizing its operations, Borr Drilling can effectively navigate market uncertainties and capitalize on opportunities in 2025.