Borr Drilling Limited Faces Challenges Amidst Third Quarter Results
November 9, 2024, 10:33 pm
Borr Drilling Limited, a key player in the offshore drilling sector, recently released its third-quarter results for 2024. The numbers tell a story of resilience but also of caution. Operating revenues dipped to $241.6 million, a decline of 11% from the previous quarter. This drop reflects the turbulent waters of the oil market, where supply and demand are in a constant dance.
Net income fell sharply to $9.7 million, a staggering 69% decrease. Adjusted EBITDA also took a hit, down 15% to $115.5 million. These figures paint a picture of a company navigating through stormy seas. Yet, amidst the waves, Borr has secured seventeen new contract commitments, translating to 4,129 days of work and a potential revenue of $731 million. This indicates that while the current quarter may have been rocky, the future holds promise.
The company’s CEO highlighted the operational performance, noting a technical utilization rate of 98.7%. This is a silver lining in an otherwise cloudy report. However, the decline in financial results was attributed to one-off items from the previous quarter. These items had temporarily inflated the numbers, creating a false sense of security.
Borr’s fleet is a mix of old and new. The rigs "Skald," "Norve," and "Natt" began new contracts at higher day rates. However, other rigs like "Gunnlod," "Gerd," and "Arabia I" saw fewer operational days. This is a strategic pause, preparing for more lucrative contracts on the horizon. The delivery of the newbuild “Vali” in August and the upcoming “Var” in November signals Borr’s commitment to modernizing its fleet. The new rigs are expected to start operations in early 2025, which could be a game-changer.
Yet, the market is not without its challenges. Concerns about oil supply exceeding demand have made clients hesitant. This caution has led to delays in confirming rig contracts. The shadow of rig suspensions in Saudi Arabia and potential issues in Mexico loom large. These factors create uncertainty in the jack-up market, which could lead to contract delays and gaps in activity.
Borr has adjusted its full-year 2024 adjusted EBITDA guidance to the lower end of the previous range, now expecting between $500 million and $550 million. This adjustment reflects the reality of a market in flux. However, Borr is not without its defenses. With 78% of its rig fleet contracted through 2025 at an average day rate of $148,000, the company is well-positioned to weather the storm. This rate is 10% higher than in 2024, indicating a robust demand for its services.
The global jack-up rig market has its own dynamics. With 30% of rigs over 35 years old, retirements are expected to increase. The lack of new rig orders over the past decade adds to this scenario. Borr operates one of the youngest fleets in the industry, which gives it a competitive edge. As older rigs retire, Borr’s modern fleet will be in high demand.
In a bid to reassure investors, the board has committed to a total shareholder return of $25 million, consistent with previous quarters. A cash distribution of $0.02 per share has been declared, amounting to $4.8 million. Additionally, the company plans to buy back $20 million worth of shares before the end of 2024. This move is designed to bolster investor confidence and signal that Borr is committed to maintaining shareholder value.
The upcoming conference call on November 7, 2024, will provide further insights into the company’s strategy and outlook. Investors and analysts alike will be keen to hear how Borr plans to navigate the choppy waters ahead. The presentation will likely address the concerns raised in the earnings report and outline steps to mitigate risks.
In conclusion, Borr Drilling Limited is at a crossroads. The third-quarter results reveal both challenges and opportunities. While the current financials may not shine, the company’s strategic moves and strong operational metrics suggest a readiness to adapt. The oil market is unpredictable, but Borr’s proactive approach could keep it afloat. As the company prepares for future contracts and new rig operations, the industry will be watching closely. The next few quarters will be crucial in determining whether Borr can turn the tide in its favor.
Net income fell sharply to $9.7 million, a staggering 69% decrease. Adjusted EBITDA also took a hit, down 15% to $115.5 million. These figures paint a picture of a company navigating through stormy seas. Yet, amidst the waves, Borr has secured seventeen new contract commitments, translating to 4,129 days of work and a potential revenue of $731 million. This indicates that while the current quarter may have been rocky, the future holds promise.
The company’s CEO highlighted the operational performance, noting a technical utilization rate of 98.7%. This is a silver lining in an otherwise cloudy report. However, the decline in financial results was attributed to one-off items from the previous quarter. These items had temporarily inflated the numbers, creating a false sense of security.
Borr’s fleet is a mix of old and new. The rigs "Skald," "Norve," and "Natt" began new contracts at higher day rates. However, other rigs like "Gunnlod," "Gerd," and "Arabia I" saw fewer operational days. This is a strategic pause, preparing for more lucrative contracts on the horizon. The delivery of the newbuild “Vali” in August and the upcoming “Var” in November signals Borr’s commitment to modernizing its fleet. The new rigs are expected to start operations in early 2025, which could be a game-changer.
Yet, the market is not without its challenges. Concerns about oil supply exceeding demand have made clients hesitant. This caution has led to delays in confirming rig contracts. The shadow of rig suspensions in Saudi Arabia and potential issues in Mexico loom large. These factors create uncertainty in the jack-up market, which could lead to contract delays and gaps in activity.
Borr has adjusted its full-year 2024 adjusted EBITDA guidance to the lower end of the previous range, now expecting between $500 million and $550 million. This adjustment reflects the reality of a market in flux. However, Borr is not without its defenses. With 78% of its rig fleet contracted through 2025 at an average day rate of $148,000, the company is well-positioned to weather the storm. This rate is 10% higher than in 2024, indicating a robust demand for its services.
The global jack-up rig market has its own dynamics. With 30% of rigs over 35 years old, retirements are expected to increase. The lack of new rig orders over the past decade adds to this scenario. Borr operates one of the youngest fleets in the industry, which gives it a competitive edge. As older rigs retire, Borr’s modern fleet will be in high demand.
In a bid to reassure investors, the board has committed to a total shareholder return of $25 million, consistent with previous quarters. A cash distribution of $0.02 per share has been declared, amounting to $4.8 million. Additionally, the company plans to buy back $20 million worth of shares before the end of 2024. This move is designed to bolster investor confidence and signal that Borr is committed to maintaining shareholder value.
The upcoming conference call on November 7, 2024, will provide further insights into the company’s strategy and outlook. Investors and analysts alike will be keen to hear how Borr plans to navigate the choppy waters ahead. The presentation will likely address the concerns raised in the earnings report and outline steps to mitigate risks.
In conclusion, Borr Drilling Limited is at a crossroads. The third-quarter results reveal both challenges and opportunities. While the current financials may not shine, the company’s strategic moves and strong operational metrics suggest a readiness to adapt. The oil market is unpredictable, but Borr’s proactive approach could keep it afloat. As the company prepares for future contracts and new rig operations, the industry will be watching closely. The next few quarters will be crucial in determining whether Borr can turn the tide in its favor.