Borr Drilling Earnings Call Balances Strength and Risk

Borr Drilling ((BORR)) has held its Q4 earnings call. Read on for the main highlights of the call.

Borr Drilling’s latest earnings call struck a cautiously upbeat tone, blending strong operational execution and liquidity with clear acknowledgment of revenue softness, higher costs, receivables risk in Mexico, and open capacity from 2026. Management framed 2025 as a foundation year, positioning the company to benefit from a tightening jackup market and potential dayrate recovery into 2027.

Fleet Running Near Full Capacity

Borr underlined exceptional fleet performance, reporting Q4 technical utilization of 98.8% and economic utilization of 97.8%. These metrics show rigs are working reliably with minimal downtime, which is critical for preserving margins and supporting cash generation in a period of flattish dayrates.

EBITDA Holds Up Despite Headwinds

Adjusted EBITDA reached about $105.4 million in Q4 and $470.1 million for 2025, landing at the top end of guidance despite lower revenues and higher costs. Management stressed that this resilience demonstrates the earning power of the fleet and validates recent strategic moves, even as full‑year EBITDA declined 7% year on year.

Liquidity Cushion Strengthened

Borr closed the year with $379.7 million in cash and $234.0 million of undrawn revolving credit facilities, for total liquidity of $613.7 million. Cash grew by $151.9 million quarter on quarter, giving the company notable flexibility to handle debt service, capex commitments, and opportunistic investments in a still‑volatile market.

Accretive Five‑Rig Deal Builds Scale

The company completed its purchase of five premium jackups from Noble, paying $174.0 million in cash in January plus a $150.0 million letter of credit for the remaining consideration. Integration is running ahead of expectations, and management highlighted these modern units as adding scale and near‑term capacity to capture future contracting opportunities.

New Contracts Add Backlog Across Regions

Since the last update, Borr has secured seven new commitments, including five deals extending into 2026 that together add roughly $145.0 million to backlog. The wins span Mexico, the U.S., West Africa, Asia, and Vietnam, underscoring the company’s global footprint and incremental improvement in revenue visibility.

Improving 2026 Coverage, But Gaps Remain

For 2026, fleet coverage stands at 64% overall, with a solid 80% in the first half when including the acquired rigs. Management expects coverage to exceed 70% as ongoing negotiations convert, and they anticipate slightly more contracted days in 2026 than in 2025, though the second half remains notably less covered.

Strong Tender Pipeline Supports Recovery Thesis

Management pointed to third‑party data showing about 120 rig‑years in tender or pre‑tender stages for programs starting within 12 months. They expect awards from this pipeline by mid‑2026, which could drive higher utilization and set the stage for a more meaningful dayrate recovery into 2027.

Capital Markets Moves Extend Runway

Borr executed a $165 million bond issue maturing in 2030 and raised roughly $84 million of equity in December, both described as well received. The company also advanced its listing on Euronext Growth and plans a full Oslo uplisting in 2026, moves aimed at broadening investor access and lowering long‑term funding costs.

Safety Performance Recognized

Operationally, safety remained a bright spot, with rigs Idun, Grid, Gunnlod, and Gerd achieving long periods without lost‑time incidents. The Arabia 3 unit earned an offshore safety award from a key customer in 2025, reinforcing Borr’s reputation for safe, reliable operations in demanding environments.

Revenue Softness from Lower Dayrates

Q4 operating revenues were $259.4 million, down $17.7 million or 6.4% versus Q3, largely driven by a $16.0 million drop in dayrate income. The decline was tied to rigs rolling into lower‑priced contracts, highlighting Borr’s sensitivity to rate dynamics and the importance of an eventual pricing upturn.

Operating Costs Move Higher

Total operating expenses climbed to $192.1 million in Q4, an increase of $13.2 million or 7.4% quarter on quarter. The rise was mainly due to higher rig operating and maintenance costs, including personnel expenses, accelerated amortization on the Hild rig, and higher reimbursable items.

Small Net Loss Caps a Softer Year

The quarter closed with a modest net loss of $1.0 million, underscoring that strong utilization alone could not fully offset pricing and cost pressures. For the full year, adjusted EBITDA of $470.1 million marked a 7% decline versus 2024, reflecting the industry’s transition phase after earlier rate strength.

Exposure in Second‑Half 2026

While first‑half 2026 coverage is robust at 80%, second‑half coverage stands at just 48%, leaving meaningful open days. This creates execution risk if expected tenders do not materialize on time or at acceptable rates, especially for the newly acquired units that are still seeking firm work.

Mexican Receivables Still a Watch Point

Borr reported outstanding receivables from Mexico of roughly $90–100 million at quarter‑end, even after collecting about $46 million in Q4 and another $23 million in January. Management said the collection trend is improving but acknowledged continued payment risk, making cash conversion from this region a key area to monitor.

Idle Rigs and Reactivation Capital Needs

Some acquired or idle rigs, including Sif, Freya, and Var, remain without firm contracts, delaying earnings contributions. Reactivating Var alone is expected to require about $56 million of capital expenditure, and the Freya timeline may slip into late 2026 or early 2027, tying returns to the timing of future awards.

Acquisition Cash Outflow and Heavy Interest Load

After the quarter, Borr paid $174.0 million in cash for the Noble rig package, underscoring the capital intensity of its growth strategy. In Q4 it also paid $94.7 million in interest and repaid $70.8 million of debt, with management noting that interest remains a notable drag even as the balance sheet improves.

Dayrate Pressure and Regional Disparities

Dayrates have largely moved sideways, with softer pricing in Asia and intense competition in the Middle East, creating a patchy global picture. The shift of rigs into lower‑dayrate contracts weighed on Q4 revenue and reinforces the importance of a broad‑based rate recovery to unlock full earnings potential.

Forward‑Looking Guidance and Market Outlook

Borr did not issue formal 2026 EBITDA guidance but expects contracted days next year to modestly exceed 2025 and plans to lift coverage above 70% in the near term. Management is leaning on a strong liquidity position, the accretive five‑rig acquisition, and recent bond and equity raises to bridge the gap to anticipated tender awards by mid‑2026 and a potential dayrate upcycle into 2027.

Borr’s earnings call painted a picture of a well‑utilized, well‑funded driller navigating near‑term pricing and cost challenges while positioning for a potentially stronger market ahead. Investors will be watching receivables in Mexico, H2 2026 coverage, and the pace of tender awards as the key swing factors for how quickly today’s solid operational platform can translate into higher earnings and cash flow.