Business Context and Reporting Period
Company: Borr Drilling Ltd (NYSE: BORR)
Filing Type: Form 20-F (Annual Report)
Reporting Period: Fiscal year ended December 31, 2024
Business Overview: Borr Drilling is an international offshore shallow-water drilling contractor specializing in premium jack-up rigs. As of December 31, 2024, the company owned 24 premium jack-up rigs. The company completed its delisting from the Oslo Stock Exchange on December 30, 2024, maintaining a sole listing on the New York Stock Exchange.
Key Financial Metrics
| Metric | 2024 | 2023 |
|---|---|---|
| Total Operating Revenues | $1,010.6 million | $771.6 million |
| Operating Income | $374.2 million | $250.4 million |
| Net Income | $82.1 million | $22.1 million |
| Adjusted EBITDA | $505.4 million | $367.8 million |
| Net Cash from Operating Activities | $77.3 million | ($50.7 million) |
| Total Debt (Principal) | $2,179.6 million | $1,690.0 million |
| Cash and Cash Equivalents | $61.6 million | $102.5 million |
| Contract Backlog (Excl. JVs) | $1,382.8 million | $1,206.5 million |
Note: Adjusted EBITDA definition was updated in 2024 to exclude amortization of deferred mobilization and contract preparation costs to align with industry peers.
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased by $239.0 million (31%) driven by a $206.2 million increase in dayrate revenue. This was primarily due to higher average dayrates ($123.0 million) and an increase in the number of rigs in operation ($76.0 million).
- Revenue Mix Shift: The company restructured its Mexico operations. Bareboat charter revenue increased by $90.8 million and management contract revenue by $36.6 million, offset by a $94.6 million decrease in related party revenue as five rigs were moved from related party bareboat charters to external fixed-rate bareboat charters.
- Profitability: Operating income rose to $374.2 million from $250.4 million. Net income increased to $82.1 million from $22.1 million, aided by a release of valuation allowances on deferred tax assets.
- Debt Expansion: Total debt principal increased significantly to $2,179.6 million due to the issuance of additional Senior Secured Notes in 2024 ($350.0 million total) to fund newbuild deliveries and operations.
- Operational Efficiency: Technical Utilization improved to 98.9% (from 98.3%) and Economic Utilization was 97.7% (from 97.9%).
Guidance, Outlook, and Risks
Management Commentary and Outlook
- Market Conditions: Management remains optimistic about the offshore drilling market despite near-term headwinds from contract suspensions by major customers (Saudi Aramco and Pemex). Global competitive jack-up rig utilization is reported at approximately 91% (as of Feb 2025).
- Capital Expenditures: Estimated capital expenditures for the next 12 months are approximately $50 million, primarily for rig activations and upcoming contracts.
- Liquidity: Management believes cash flow from operations, cash on hand, and available credit facilities will meet obligations for the next 12 months. The company has a $195 million Super Senior Credit Facility ($150 million RCF undrawn).
Risks and Contingencies
- Debt Maturities: Significant debt maturities are scheduled for 2028 and 2030. The company expects to refinance these obligations prior to maturity. Failure to refinance could lead to enforcement by creditors.
- Customer Concentration: The top five customers accounted for 55% of 2024 revenue. Loss of a major customer could have a significant adverse effect.
- Geopolitical and Market Volatility: Risks include oil price volatility, geopolitical tensions (Ukraine, Middle East), and potential contract suspensions or terminations by customers.
- Joint Venture Exposure: The company holds a 51% interest in Mexican JVs (Perfomex/Perfomex II). Delays in payments from the ultimate customer (Pemex) could require the company to fund working capital shortfalls.
- Taxation: Bermuda enacted a 15% Corporate Income Tax Act effective January 1, 2025. The company expects to be in scope of this tax starting in 2026.
Investor Verification Checklist
- Debt Refinancing Strategy: Verify the company's specific plans and market conditions for refinancing the ~$1.94 billion in Senior Secured Notes maturing in 2028 and 2030.
- Mexico Receivables: Monitor the collection status of the ~$125 million receivable settlement agreement entered into in January 2025 with the major Mexican customer.
- Contract Backlog Realization: Assess the risk of contract suspensions or terminations impacting the $1.38 billion backlog, particularly given recent suspensions by Saudi Aramco and Pemex.
- Dividend Sustainability: Review the impact of high interest expenses ($211.7 million) and debt service obligations on the ability to maintain quarterly cash distributions.
- Utilization Rates: Track Technical and Economic utilization rates to ensure they remain above 95% to support the high fixed-cost structure.