Borr Drilling ((BORR)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The earnings call for Borr Drilling presented a mixed sentiment, highlighting both positive achievements and challenges. The company reported increased revenue and strong utilization rates, reflecting significant progress in contracting and completion of new builds. However, these advancements were offset by concerns over market uncertainties and rising expenses, painting a cautious outlook for the future.
Increased Operating Revenue and EBITDA
Borr Drilling reported a notable increase in operating revenue by $21.5 million over the third quarter of 2024. The company’s adjusted EBITDA for the fourth quarter reached $136.7 million, marking an 18% increase compared to the previous quarter. This growth indicates strong operational performance and effective cost management.
High Utilization Rates
The company achieved impressive utilization rates, with a technical utilization rate of 98.9% and an economic utilization rate of 97.1%. These figures reflect Borr Drilling’s efficient operations and ability to leverage its assets effectively in a competitive market.
Successful Completion of New Build Program
In November 2024, Borr Drilling successfully completed its new build program with the delivery of the final rig, VAR. This milestone marks the end of the company’s growth capital expenditures and positions Borr Drilling to focus on maximizing returns from its existing assets.
Strong Contracting Performance
The company secured an impressive $795 million in backlog at an average rate of $177,000 per day in 2024. This strong contracting performance underscores Borr Drilling’s ability to capture market opportunities and maintain a robust pipeline of future work.
Positive Cash Flow Impact Expected
Looking ahead, Borr Drilling anticipates a positive cash flow impact due to fewer special periodic surveys scheduled for 2025 and budgeted capital expenditures set below $50 million. This strategic financial planning is expected to enhance the company’s liquidity position.
Market Uncertainties and Headwinds
Despite the positive achievements, Borr Drilling faces market uncertainties, with softening demand and declining day rates in the latter half of 2024. These factors signal potential headwinds for the jackup market as the company moves into 2025.
Rig Suspensions in Saudi Arabia and Mexico
The company experienced rig suspensions in Saudi Arabia and Mexico, reflecting a weaker market environment. These suspensions are expected to impact the first quarter of 2025, posing additional challenges for Borr Drilling.
Increased Financial Expenses
Borr Drilling reported an increase of $5.7 million in total financial expenses, primarily due to interest on additional debt issued in 2024. This rise in expenses could affect the company’s profitability if not managed carefully.
Cash Decrease
The company saw a decrease in cash by $124.1 million compared to the prior quarter, attributed to net cash used in investing activities. This decrease highlights the importance of strategic financial management to maintain liquidity.
Forward-Looking Guidance
Borr Drilling provided detailed guidance for 2025, projecting approximately 6,700 contracted rig days, representing 77% of total available rig days, with an average day rate of $149,000. Capital expenditures are expected to remain below $50 million, supported by a $125 million Mexican payment arrangement and anticipated mobilization payments of $44 million. The board also declared a cash distribution of $0.02 per share for Q4 2024, emphasizing a strong balance sheet amidst market uncertainties.
In conclusion, Borr Drilling’s earnings call revealed a company navigating through both achievements and challenges. While increased revenues and strong utilization rates highlight operational success, market uncertainties and rising expenses pose challenges ahead. The company’s strategic focus on managing expenditures and maintaining liquidity will be crucial as it moves into 2025.
