Borr Drilling Ltd. Form 6-K Summary
Business Context and Reporting Period
This report covers the unaudited interim financial results for Borr Drilling Limited for the nine months ended September 30, 2024. Borr is an offshore shallow-water drilling contractor specializing in premium jack-up rigs. As of September 30, 2024, the company operated 23 premium jack-up rigs and had agreed to purchase one additional rig under construction. The company is currently in the process of delisting from the Oslo Stock Exchange (OSE), with the final trading day scheduled for December 30, 2024.
Key Financial Metrics
| Metric ($ millions) | 9 Months Ended Sep 30, 2024 | 9 Months Ended Sep 30, 2023 |
|---|---|---|
| Total Operating Revenues | 747.5 | 551.0 |
| Operating Income | 273.2 | 169.7 |
| Net Income / (Loss) | 55.8 | (6.3) |
| Adjusted EBITDA | 368.7 | 256.3 |
| Cash and Cash Equivalents | 185.7 | 102.5 |
| Total Debt Outstanding (Principal) | 2,072.1 | 1,690.0 |
| Net Cash Provided by Operating Activities | 81.4 | 28.7 |
Liquidity: As of September 30, 2024, the company held $185.7 million in cash and cash equivalents. The company maintains a Super Senior Revolving Credit Facility of $195.0 million.
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased by 36% ($196.5 million) to $747.5 million. This was driven by a $166.2 million increase in dayrate revenue (due to higher rig count and average dayrates) and a $65.3 million increase in bareboat charter revenue from new fixed agreements.
- Profitability: Net income turned from a loss of $6.3 million in 2023 to a profit of $55.8 million in 2024. Operating income rose 61% to $273.2 million.
- Expense Increases: Rig operating and maintenance expenses increased by 31% ($81.6 million) due to a higher number of operating rigs and new management contracts. Total financial expenses increased by 21% ($30.0 million) primarily due to higher interest expense from increased debt principal.
- Equity Method Investments: Income from equity method investments decreased by 82% to $1.3 million, largely due to a $10.6 million increase in net foreign exchange losses.
Guidance, Outlook, and Risks
Recent Developments and Outlook:
- Delisting: The company has been approved to delist from the Oslo Stock Exchange, with trading to cease on December 30, 2024.
- Debt Issuance: In October 2024, the company priced an offering of $175.0 million in additional 10.375% Senior Secured Notes due 2030. In March and August 2024, it issued $350.0 million in additional 10% Senior Secured Notes due 2028.
- Operational Updates: The company accepted delivery of the newbuild rig "Vali" in August 2024. The contract for rig "Arabia I" was terminated in June 2024 following a suspension in Saudi Arabia, with a new contract secured in Brazil expected to commence in 2025.
- Dividends: The company declared a cash distribution of $0.02 per share on November 6, 2024, expected to be paid in mid-December 2024.
Risks and Contingencies:
- Liquidity and Debt: Risks include the ability to meet liquidity requirements and comply with covenants under the Super Senior Revolving Credit Facility and senior secured notes due in 2028 and 2030.
- Market Conditions: Forward-looking statements are subject to risks regarding industry conditions, tendering activity, customer demand, and potential suspension of operations.
- Geopolitical and Climate: Risks include military actions in Ukraine and the Middle East, as well as climate change legislation impacting demand for oil and gas.
Key Facts for Investor Verification
- Debt Load: Verify the impact of the increased debt principal ($2.07 billion) on future interest coverage ratios and covenant compliance, particularly with the new 2028 and 2030 notes.
- Delisting Impact: Confirm the implications of the Oslo Stock Exchange delisting on liquidity, trading volume, and shareholder base.
- Contract Backlog: Review the specific terms and duration of the new bareboat charter agreements and the Brazil contract for "Arabia I" to assess revenue visibility.
- Capital Expenditures: Monitor the remaining $159.9 million delivery installment commitment for the "Var" newbuild rig scheduled for November 2024.
- Related Party Transactions: Note the shift in revenue recognition from related party revenue to bareboat charter revenue following the restructuring of the Mexico joint venture operations.