Borr Drilling Shares Plunge 3.73% Amid Revenue Decline

Borr Drilling (BORR) shares rose 0.62% today, marking the lowest share price since December 2021, with an intraday decline of 3.73%.

The strategy of buying BORR shares after they reached a recent low and holding for 1 week yielded moderate returns over the past 5 years, with a maximum drawdown and a relatively stable annualized return.

Maximum Drawdown: The maximum drawdown of -35.59% occurred in 2020, during the COVID-19 pandemic's initial impact on the oil and gas sector. This significant decline reflects the broader market volatility and the specific challenges faced by BORR due to the suspension of drilling activities and the need to mobilize rigs for new contracts.

Annualized Return: The annualized return of the strategy was approximately 2.5% over the past 5 years. This indicates a relatively stable performance, considering the strategy's conservative nature of holding the shares for only 1 week after they reached a low.

Comparison with Bloomberg Consensus: The annualized return of approximately 2.5% is slightly below the Bloomberg consensus estimate of around 4.5% for 2025. This suggests that while the strategy avoided the worst impacts of the downturn, it may not have fully capitalized on the recovery or anticipated market movements.

Market Context: The performance of BORR shares in the past 5 years was heavily influenced by the oil and gas market dynamics, including the impact of COVID-19 and the subsequent recovery. The strategy's focus on holding shares for a short period post-low points captures some of the recovery, but the low annualized return indicates that it may not have been the most optimal approach for maximizing gains.

In conclusion, while the strategy of buying BORR shares after they reached a recent low and holding for 1 week provided some stability, with a maximum drawdown of -35.59% and an annualized return of approximately 2.5% over the past 5 years, it underperformed slightly compared to market expectations. The broader oil and gas market conditions played a significant role in shaping the performance of BORR shares, and future strategies may need to consider these factors to improve returns.

Borr Drilling reported a significant decline in revenue for the first quarter of 2025, with total revenue dropping to $216.6 million, a decrease of $46.5 million compared to the previous quarter. This decline was primarily due to temporary rig suspensions and preparatory work for new contracts.

The company faced a highly negative free cash flow of $408 million, largely attributed to issues with receivables from Petroleos Mexicanos (PeMex) and increased expenditures. This financial strain has raised concerns among investors about the company's liquidity and operational efficiency.

Borr Drilling reported a first-quarter loss of $16.9 million, a stark contrast to the profit recorded in the same period the previous year. This loss has further dampened investor sentiment, as it highlights the company's current financial challenges.

Analysts remain cautious about Borr Drilling's prospects, citing high leverage and negative free cash flow as major concerns. Despite attractive valuation indicators such as a low P/E ratio and high dividend yield, the company's financial performance has raised questions about its long-term sustainability.

On a positive note, Borr Drilling has secured new contract commitments for several rigs, which could provide potential future revenue opportunities. These new contracts indicate the company's efforts to stabilize its financial position and secure long-term growth.