Tight jack-up supply fuels Borr Drilling’s hopes of new prospects for its rig fleet

Offshore drilling contractor Borr Drilling has recorded strong financial and operational performance during the first quarter of 2023 with a sequential boost in revenue. The growing demand on the oil and gas scene is expected to bring more opportunities for the rig owner’s fleet along with higher day rates and utilisation levels.  

Borr Drilling revealed within its preliminary unaudited results for the three months that ended on 31 March 2023 that its total operating revenues in 1Q 2023 were $172 million. This is an increase of $23.4 million or 16 per cent compared to the fourth quarter of 2022. The company’s income before taxes of $7.9 million in 1Q 2023 represents an increase of $26.4 million compared to $18.5 million in the fourth quarter of 2022.

Borr Drilling’s adjusted EBITDA of $72.4 million in 1Q 2023 is an increase of $17.3 million or 31 per cent compared to the fourth quarter of 2022. The company’s total contract revenue backlog as of 31 March 2023 was $1.64 billion, which is a more than three-time increase compared to 31 March 2022, including rigs in the Mexican JV on a 100 per cent basis.

Patrick Schorn, CEO of Borr Drilling, commented: “The first quarter of 2023 continued the positive trend experienced over the last several quarters, with an increase of revenue of 16 per cent quarter on quarter, and a further increase in Adjusted EBITDA of 31 per cent to $72.4 million. 1Q 2023 is also the first quarter where we generated positive income before income taxes.

“We reaffirm our previously communicated guidance of adjusted EBITDA of $360-$400 million for 2023, and while we expect a similar performance in the second quarter of 2023 to the first quarter of 2023, we expect further increases in the third and fourth quarters of 2023, as our two remaining stacked rigs are being activated and will commence their respective contracts in the Middle East and Mexico.”

Furthermore, the firm’s net loss of $7.4 million in 1Q 2023 is a decrease in loss of $13.9 million compared to the fourth quarter of 2022. The rig owner’s cash and cash equivalents were $90.3 million at the end of the first quarter of 2023.

In addition, the firm raised $400 million of gross proceeds in 1Q 2023 through the issuance of $250 million unsecured convertible bonds due in 2028 and $150 million senior secured bonds due in 2026, primarily used to refinance the existing $350 million convertible bonds due in May 2023.

Moreover, Borr Drilling increased the $150 million DNB loan facility by $25 million in April 2023 and entered into a facility with DNB to provide guarantees and letters of credit of up to $25 million.

The rig owner has been awarded eight new contracts, extensions, exercised options, and letters of awards in 2023, representing 1,797 days and $253 million of potential revenue, of which 1,075 days and $177 million relate to four new contracts and LOAs awarded this year. This includes a binding LOA, not previously announced, for the Ran jack-up rig, which secured another job in February 2023 with Fieldwood Energy, adding to the rig’s backlog in Mexico.

“The first quarter has evidenced our continued ability to add backlog at market-leading rates, confirming the tight supply of jack-up drilling rigs in the market. At the same time, we see positive prospects for continuing work for our rigs that are finishing their contracts at the end of this year, both with current customers, as well as in new geographies with new clients,” added Schorn.

The company’s most recent contract award was disclosed in April 2023 for its Hild premium jack-up rig, which won work in Latin America. The contract covers a firm term of 725 days and is expected to start in 3Q 2023, following the conclusion of the rig’s ongoing activation.

“We expect the improving market, coupled with the positive prospect of access to the debt market at attractive rates, will enable a global refinancing of the company, and ultimately accommodate dividend distributions to shareholders,” concluded Schorn.

Borr Drilling’s expectations for further growth in the offshore drilling market are shared by its peers, including Shelf Drilling, Diamond Offshore, Noble, Transocean, Valaris, Seadrill, Vantage Drilling, and Dolphin Drilling.