Borr Drilling Limited: Navigating Financial Waters with New Offerings and Preliminary Results
October 28, 2024, 11:57 pm
Borr Drilling Limited is making waves in the offshore drilling sector. The company recently announced a significant offering of additional senior secured notes, alongside preliminary financial results for the third quarter of 2024. These developments are crucial as they highlight Borr's strategic maneuvers in a competitive market.
On October 25, 2024, Borr Drilling Limited, based in Hamilton, Bermuda, revealed its plans to issue additional 10.375% senior secured notes due in 2030. This offering aims to raise approximately $175 million. The notes will mirror the existing $515 million in senior secured notes, ensuring consistency in terms and conditions. The proceeds will primarily fund the acquisition and activation costs for the new rig "Var," set to be delivered on November 15, 2024. This shift from previously secured yard financing to the new notes is a strategic move, as the terms are more favorable.
Borr's decision to issue these notes reflects a proactive approach to financing. The company is not just treading water; it’s looking to expand its fleet and enhance operational capabilities. The settlement of this offering is expected around November 8, 2024, pending customary closing conditions. This financial maneuver is a testament to Borr's commitment to growth and operational efficiency.
In tandem with the notes offering, Borr Drilling also shared preliminary results for the quarter ending September 30, 2024. The company anticipates total operating revenues of approximately $242 million, with an operating income of around $84 million. Adjusted EBITDA is projected at about $116 million. These figures indicate a robust operational performance, although they also reveal a decrease in operating income compared to the previous quarter.
The decline in operating income, approximately $21 million, stems from specific one-off impacts. Notably, a $13 million decrease was linked to the amortization of deferred revenue and costs related to the termination of the "Arabia I" contract. Additionally, a $11 million drop in related party revenue from three rigs in Mexico contributed to this decrease. These factors underscore the volatility inherent in the drilling sector, where contracts can significantly influence financial outcomes.
Despite these challenges, Borr Drilling is optimistic about future performance. The company expects its adjusted EBITDA for the full year 2024 to land at the lower end of its previously disclosed range of $500 million to $550 million. This projection reflects confidence in upcoming contracts and operational improvements.
Looking ahead, Borr anticipates positive impacts on adjusted EBITDA from several key contracts. The company expects an annualized increase of $39 million from higher contracted dayrates for rigs operating in the third quarter. Furthermore, the anticipated startup of four rigs in late 2024 and early 2025 could add an impressive $143 million to adjusted EBITDA. These contracts, including those for "Vale," "Arabia I," "Prospector 1," and "Gunnlod," represent significant growth opportunities.
However, the company must navigate potential pitfalls. The expiration of contracts for rigs like "Thor" and "Ran" could dampen contributions to future earnings. The impact of these expirations was felt in the third quarter, where they accounted for approximately $11 million in EBITDA. This highlights the delicate balance Borr must maintain between securing new contracts and managing existing ones.
Borr Drilling's financial strategy is not without risks. The forward-looking statements included in their announcements serve as a reminder of the uncertainties that lie ahead. Market conditions, contract negotiations, and operational challenges can all influence outcomes. The company has acknowledged these risks, emphasizing the importance of not placing undue reliance on projections.
As Borr Drilling prepares to finalize its financial results for the third quarter, scheduled for release on November 6, 2024, stakeholders will be keenly watching. The preliminary results provide a glimpse into the company's operational health, but the final figures will offer a clearer picture of its financial standing.
In conclusion, Borr Drilling Limited is charting a course through turbulent financial waters. With a strategic offering of senior secured notes and promising preliminary results, the company is positioning itself for growth. The upcoming months will be critical as Borr navigates contract negotiations and operational challenges. Investors and industry watchers alike will be eager to see how this drilling giant adapts and thrives in a competitive landscape. The horizon looks promising, but the journey ahead will require careful navigation.
On October 25, 2024, Borr Drilling Limited, based in Hamilton, Bermuda, revealed its plans to issue additional 10.375% senior secured notes due in 2030. This offering aims to raise approximately $175 million. The notes will mirror the existing $515 million in senior secured notes, ensuring consistency in terms and conditions. The proceeds will primarily fund the acquisition and activation costs for the new rig "Var," set to be delivered on November 15, 2024. This shift from previously secured yard financing to the new notes is a strategic move, as the terms are more favorable.
Borr's decision to issue these notes reflects a proactive approach to financing. The company is not just treading water; it’s looking to expand its fleet and enhance operational capabilities. The settlement of this offering is expected around November 8, 2024, pending customary closing conditions. This financial maneuver is a testament to Borr's commitment to growth and operational efficiency.
In tandem with the notes offering, Borr Drilling also shared preliminary results for the quarter ending September 30, 2024. The company anticipates total operating revenues of approximately $242 million, with an operating income of around $84 million. Adjusted EBITDA is projected at about $116 million. These figures indicate a robust operational performance, although they also reveal a decrease in operating income compared to the previous quarter.
The decline in operating income, approximately $21 million, stems from specific one-off impacts. Notably, a $13 million decrease was linked to the amortization of deferred revenue and costs related to the termination of the "Arabia I" contract. Additionally, a $11 million drop in related party revenue from three rigs in Mexico contributed to this decrease. These factors underscore the volatility inherent in the drilling sector, where contracts can significantly influence financial outcomes.
Despite these challenges, Borr Drilling is optimistic about future performance. The company expects its adjusted EBITDA for the full year 2024 to land at the lower end of its previously disclosed range of $500 million to $550 million. This projection reflects confidence in upcoming contracts and operational improvements.
Looking ahead, Borr anticipates positive impacts on adjusted EBITDA from several key contracts. The company expects an annualized increase of $39 million from higher contracted dayrates for rigs operating in the third quarter. Furthermore, the anticipated startup of four rigs in late 2024 and early 2025 could add an impressive $143 million to adjusted EBITDA. These contracts, including those for "Vale," "Arabia I," "Prospector 1," and "Gunnlod," represent significant growth opportunities.
However, the company must navigate potential pitfalls. The expiration of contracts for rigs like "Thor" and "Ran" could dampen contributions to future earnings. The impact of these expirations was felt in the third quarter, where they accounted for approximately $11 million in EBITDA. This highlights the delicate balance Borr must maintain between securing new contracts and managing existing ones.
Borr Drilling's financial strategy is not without risks. The forward-looking statements included in their announcements serve as a reminder of the uncertainties that lie ahead. Market conditions, contract negotiations, and operational challenges can all influence outcomes. The company has acknowledged these risks, emphasizing the importance of not placing undue reliance on projections.
As Borr Drilling prepares to finalize its financial results for the third quarter, scheduled for release on November 6, 2024, stakeholders will be keenly watching. The preliminary results provide a glimpse into the company's operational health, but the final figures will offer a clearer picture of its financial standing.
In conclusion, Borr Drilling Limited is charting a course through turbulent financial waters. With a strategic offering of senior secured notes and promising preliminary results, the company is positioning itself for growth. The upcoming months will be critical as Borr navigates contract negotiations and operational challenges. Investors and industry watchers alike will be eager to see how this drilling giant adapts and thrives in a competitive landscape. The horizon looks promising, but the journey ahead will require careful navigation.