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, 2023. Borr is an offshore shallow-water drilling contractor specializing in premium jack-up rigs. As of September 30, 2023, the company operated 22 premium jack-up rigs and had agreements to purchase two additional rigs under construction.
Key Financial Metrics
| Metric (Nine Months Ended Sep 30, 2023) | Value (USD Millions) |
|---|---|
| Total Operating Revenues | 551.0 |
| Operating Income | 169.7 |
| Net Loss | (6.3) |
| Adjusted EBITDA | 244.6 |
| Net Cash Provided by Operating Activities | 28.7 |
| Cash and Cash Equivalents (Sep 30, 2023) | 94.4 |
| Total Debt Principal Outstanding (Sep 30, 2023) | 1,597.6 |
Material Changes vs. Prior Period
- Revenue Growth: Total operating revenues increased 87% to $551.0 million from $295.2 million in the prior year, driven by higher dayrate revenue ($215.7 million increase) due to more rigs in operation, increased operating days, and higher average dayrates.
- Profitability Improvement: The company reported a net loss of $6.3 million, a significant improvement from the $271.5 million net loss in the same period of 2022. This turnaround was primarily due to revenue growth and the absence of the $131.7 million impairment charge recorded in 2022.
- Operating Expenses: Rig operating and maintenance expenses rose 44% to $260.8 million, reflecting increased fleet activity. General and administrative expenses increased 33% to $34.3 million.
- Financial Expenses: Total financial expenses, net, increased 11% to $140.1 million, largely due to interest on new convertible and secured bonds issued in early 2023.
Guidance, Outlook, and Recent Developments
Global Refinancing (Subsequent Events): In November 2023, Borr executed a major refinancing to address liquidity and debt maturity concerns. This included:
- Senior Secured Notes: Issuance of $1.54 billion in aggregate principal amount of senior secured notes ($1.025 billion due 2028 at 10% coupon; $515 million due 2030 at 10.375% coupon).
- Revolving Credit Facility: Establishment of a new $180 million super senior revolving credit facility (including a $30 million guarantee facility).
- Debt Repayment: Proceeds were used to repay all outstanding secured borrowings, including the DNB Facility, Hayfin Facility, and delivery financing arrangements.
- Equity Raise: A private placement of shares in October 2023 raised approximately $50 million.
Going Concern: Management stated that the refinancing and equity raise have resolved previous substantial doubts regarding the company's ability to continue as a going concern. The financial statements are prepared on a going concern basis.
Risks: Key risks include industry conditions, tendering activity, customer payment delays (specifically regarding joint ventures), liquidity requirements, and compliance with debt covenants (leverage ratios, liquidity ratios).
Investor Verification Checklist
- Debt Covenant Compliance: Verify the company's ability to meet the new financial covenants under the $1.54 billion Notes and the $180 million Revolving Credit Facility, specifically the Consolidated Total Leverage Ratio and minimum liquidity requirements.
- Joint Venture Receivables: Monitor the collection of receivables from related party joint ventures (Perfomex and Perfomex II), which totaled $90.3 million as of September 30, 2023, and the associated risk of payment delays.
- Capital Expenditures: Confirm the funding status and delivery timelines for the two newbuild rigs under construction, with remaining delivery installments of approximately $319.8 million.
- Interest Rate Exposure: Assess the impact of the new debt structure, which carries coupons of 10% and 10.375%, on future cash flows and net income.
- Share Dilution: Review the impact of the recent equity offerings and the share lending agreement (25 million shares available for hedging) on shareholder dilution.