Borr Drilling Limited (BORR) 31 May 222022 Q1 Earnings call transcript

Good morning, and thank you for participating in the Borr Drilling First Quarter 2022 Earnings Call. My name is Patrick Schorn, and I'm talking to you from Oslo, Norway. With me on the call today is Magnus Vaaler, our CFO.

Next slide. Covering the essentials, I would like to remind all participants that some of the statements will be forward-looking. and from could statements. those risks to actual involve materially differ projected matters uncertainties cause that results These in these therefore our to refer filings. I latest public you

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rigs very to department Middle development good East of in has In results out awards which quarter, quarter, particular, and contract with the brought ultimate and fleet Borr first the marketing Asia, of similarly has The to total our the been XX to active in the in business contracts XX fourth a contractor's Drilling. long-term rigs.

by prepared are quarter, we so Taking growth. put the preparing come. new first we with During the a several account months performance into marked rigs the will have Overall, number for strong do and to top financial of in pleased operations. rigs are the our continue line operation future increased we to and in in quarter,

from the We result revenue and between show rigs rollover million adjusted guidance expect $XXX to addition to rates. at solid and of a with XXXX for million as our operations between to both the $XXX contracts in adjusted cash higher increases million of $XXX work, and million. $XXX quarters in day We EBITDA reiterate EBITDA commencing revenues, a these next

forecast. this EBITDA day XXXX from Now X year-on-year and remaining delivered far the on our and based than headline approximate to revenues the seen outlook of development the more double doubling preliminary indicates having our an rigs of rates thus our end have we year, of adjusted for the in of by forecast the XXXX year, employed

QX. the informed you up are Magnus more the will now of year in you through of these how numbers progresses, Magnus? shaping As will we detail. step details keep

Thanks, Patrick.

average rigs mainly split increase ventures. a rigs $XX.X QX XX deferred our to came economic from $XX.X XXXX end this was And million for were $X.X trading number an QX expenses for from quarter contract million an was QX was increase the interest the was in rate million an which partner million, was with adjusted XXXX. $XX.X this for be some went is in of X.X% QX. were of of The of on XXXX We from rate to operating preparation expected and financials revenues related interest quarter, yard the due margins This of quarter million XX $X.X are for $XX.X the at which increase million of further increase still of at XXXX. adjustments. XX today. our on a a an good in reflects of interest for mobilization the in the revenue, is $XX.X to million expenses of quarter, million, quarter, rate of number the our the of of at as Rig increase on quarter. in key quarter the the in $XX.X increase million of G&A expense. in from million as from rigs or expenses increase and high first from can XXXX. revenue quarter is contract loss has level QX. one-off financial costs. the debt $X.X in the increased a a in portion expenses interest $XX.X the quarter to EBITDA regular more the an as XX% which loans maintenance in million The of an well decrease increase $XX day the in is of amortization step-up very low previous and quarter million The to earnings The $X.X expenses the quarter a QX $X.X contracts attributed a rate financial in joint of to Mexico slide QX. from during utilization large million on company's quarter now effective of variable cost result relatively quarter, Total Net and The compared previous and capital lease and

cash in a free used increased $X.X plan million ATM active higher previous We was $XX and QX payments and rig a $XX.X in of come transfer of versus in interest of cash an guarantee. result position payment million Our million. do additions million. our to total million restricted received $XX million, performance our Mexico cash total used and the $X.X We initiated had of expect of the in end PEMEX. includes cash was following at by QX from restricted our as quarter. the XXXX quarter on Mexico sales which January $XX.X from cash 'XX anticipated operations cash cash The $X.X proceeds release $X.X activations, $XX.X our We received by program a cash million operation, equity the and XXXX in from to $X.X The June, from in raise under million. million related million

Now back to Patrick.

gas It of or energy alternative is you, which challenge largely generally industry. either done to in is core demand oil an and meantime. the industry needed therefore, will energy to significant companies. by that This is underinvestment stepping oil by significantly supply. sources meet which producers unlikely the the price or caused are be secure the up NOCs by Long-term the national is period in the in prices extended E&P create markets, sustainable Magnus. the to record world Thank is largely curbed and supply and driving levels, And

the of you can rigs see increasing deployed these some areas. on number graph in of the left, the On

contracted is. to On the clear significant see drilling today foreseeable the COVID rigs the our for peak right-hand graph, amount in production. boost future shallow that it to on required from is normally work to above and keep a work high expect we to as called the production even required upon customers the activity is to water how boost constant, over very are trough of the the Based increase significant more production

slide. Next

With the and jack-up jumping increased the rigs XX% passing we so have modern for seen far. utilization activity,

We expect month, little, the to capacity, XX%, this any, leaves significant will impact forward. will spare over next very a rig have rates which that if increase which going within on day

and activity equipment, of One including ambition. very the clearly, a is examples operator time, its Middle Aramco, company jack-up challenge impressive of significant the of is that rigs to up of the stepping a to in high-end large short increase a numbers period amount East very their by a requiring meet in

following with the to meaningful operators now We well. increases intention as other suit have seen

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modern then demand contracted rising, about current we is rigs the jack-up that outstrip demand the soon, more to expect rigs With XXX-unit expect for we supply. rigs see focusing exceed to precise on the levels

rate market, you uncompetitive XX As in the due we about rigs to and made can considerable of further the the shows fleet growing of be or you to where makes in for on that arrived be being geographic of the excess insight into demand being see generation is the the graph when once location XX With offshore fast in rigs builds. all earnings day approximately where right known the could Magnus some we industry that, Subtracting visible can status generated. cash levels it available right-hand the our or to pointing from and will direction, potential. new sanctions, designs, plus indicators again XX. it deem available that units returning give XX

mobilization backlog which LOAs, replenishment XX and have conditions contracts, of multiple approximately ratio we representing report, company which X.X into XXXX LOAs, in Patrick. the Year-to-date West and our been The North extensions, year, contract we represented about all by XX of by but and rigs revenues in for delivered Sea, previously end Africa, to days of Since target stated But contracts contracted consumed similar company's contractors exercise the Middle has our the X, Asia in in of options means are X operating committed of new having contracts fleet which in awarded options. X in This improving and Thanks, of 'XX X of added includes X continuing We rigs in backlog. the our to new and during our Mexico. secured rig in XX.X company $XXX X excluding and and remain represents increasing backlog the and our XXXX. million approximately XXXX XXXX, years optimistic backlog. is maintain the revenue, commercial this securing the XXXX, X,XXX Southeast East, last also potential is units, rolling off years the year.

slide, Next please.

rigs levels. presentation, the company a cash working. day have rigs ability the Recent large at the Borr generation quarter per we had per $XXX,XXX now one flow of last Drilling at and remains in once shows that rates get market shows all per to of in slide, the we last presentation, we generation around the our $XXX a potential start aspects day high quarter day. valuable then we area with awards of we refer to $XX,XXX in of which currently working. potential cash is rate of day, of that around the cash our amount generating also most year XX In This the various million have it the Now EBITDA

very at confident the Back market doubles than with remain are $XXX,XXX $XXX increases Patrick. million. rigs a and It's day $XX,XXX rates. currently per you, XX we pace of average number surpassed the day encouraging XX-year rate see which to fleet almost And the the entire and furthermore, day increases have moving close to the With continues. is potential day, more in we increase per to working, that rates, rates this this to seeing

Magnus. you, Thank

to XX on top-tier ongoing competitive fleet as the team the for continue advantage. the X additional So continues to in to already, the young and market delivered and out getting in rigs possible our to efficiently deliver tenders contracted, XX focus are in modern customers our have a is involved be modern remaining service significant a The activated several further rigs conclusion, we tightening proved rigs rigs our field. as of and operational

confident all As accretive that the by will such, year-end we contracted XXXX at delivered XX rigs be rates. remain day

lenders process refinancing Our of refinancing discussions complete the with a with view ongoing, the we in our the quarter. second to is before and end are

in of currently order market are strong provide maturity solution. address debt Given options table the profile the our multiple to financing a on long-term position the and fundamentals,

interest while involve which certain of debt ample options at there is of asset attractive these straight sales, Some others include in our fleet solutions, prices.

adjusted and We working the market million that EBITDA, between and With rapidly between believe $XXX conditions our on improve a revenue revenue EBITDA to strong evolving coming the is the and achievable solution $XXX guidance are and $XXX is is million. for to in weeks. million given in million all currently $XXX refinance and positively growth XXXX

beyond we preliminary forecast. from doubling As this, to the an for hope our mentioned our and to revenues for and adjusted business, EBITDA indicates earlier, of given for a much, upside potential. the outlook you will gentlemen, year-on-year than With our expectations view we to and XXXX trust XXXX have Q&A. comes and enthusiasm thank you now very XXXX share it approximate we of and go I double more when the you clear headline Ladies

[Operator today first Fredrik Securities. Stene of question Our Instructions] Clarksons from comes for

this hope and page fast how we're the market the in interesting developed on might definitely outlook I very, move. see same obviously, terms doing Magnus, Patrick, And lately, has of to you're and well. think very here how I jack-up

to what That's And because, capacity, to happening, of question. speed you do just if could on buying and example, are really think assets obviously, to you lot a So what's seem going to And Middle be you first Southeast follow-up. of any bit here. But the wondering do the companies you of bidding Eastern tenders and end -- of have insight the it more I trying there. the newest in in the maybe share Asia. They're for call what E&P up is was guys where not have color your a secure doing or I'm asking to disclose Africa I'm round be -- idea also, rates a any at you could year? West

and also to the some about comments you them in you're relation You what report newbuilds EBIT? thinking have on these third X party the where mentioned

to years. a keen bit And I day much me good about talk not little as maybe particular sure Yes, work, that XX the is $XXX,XXX the day the order XX, overall the in us Fredrik, returning last have too very that $XXX,XXX which obviously is you the a to make too think there for rates. the to rate, about those back keep average upon in quickly, coming And appropriate I'm you on the just to let return actually rate. seen mind understand, to past we quickly talk But made the we for investments business need about this that have get and we in very, very would thing investments. per have to are think to that to a earnings

I an of And in and order for would you eye order to that investment with do long-term are any because think to be day justify going on nature. $XXX,XXX very know that as I think good day put up need another new required significantly to are to will a on per probably builds happen, so. be rates that have on difficult thing to keep going significantly actually we to that, that is to if be long-term contracts contracts all is the of

already for it to how and was I but of the So as of as be period sustainable to is jack-up increases going are of where wouldn't sign have year, have maybe offshore some shallow the for the particularly water of in be a at to low more think going time. all an think extended going that And maybe seen then have drilling, we're guidelines I a months, want state a is go. high looking that I few overall we how they needs there it the seen to to we've number pricing last take end business. when significant

going I more normalized think to much level perspective. a from that we're

say of the would now. that and I there amplitude day are watch I currently rates would going jack-up You tenders builds, are are per its what assets and builds from that's we say, be at in the that in jack-ups the And maybe things, earlier I if the to in small want build distribution off. new role say interest are that's I it's I equally, significantly in that in that to But maybe and to what of places. significantly hydrocarbons actually and I yards why when playing the for we it to that key other East. significant new going in own. concentration and moment is Africa, in Middle strong are right mentioned We've I fastest of that comes quite that market left, you what having movers. of the to there. a a are on we the up that the world. have. jack-ups to But geographical well that about a be are biggest know the type we of Clearly, is long-term to they when are Middle new There and is right and day movers several the to there significant if places. than around big would benefit where there's in say in this the And mean, league $XXX,XXX rigs That's overall amount some There would the some require. the supply say a of you additional countries mentioned start contracts earlier is a customers many for those. West to that going the maybe come Asia that. same additional don't it is And think bit what is demand see East at moment less seeing I group all the as think would I other in Mexico. Africa one clearly, rigs, of West seen the not of impact a of can pay is that of therefore,

that think I guidelines day today is and as see of moving. where So I can them we it's the some around maybe rate give

potential more on way your that I structure be any the at think, least outcome those, the it received, viewed of of financing be [new as the say could a that delivery and X side, that build] efforts I are taking the a on terms financing understood that some your would planning you actually you interpret with would in refinancing helpful. And for sort also – color particular? of other about in read-through in thinking came were of way. a it, had bid are way if that said be any would of Keppel on and So was in more it how that I report going? – to I promise anything And also on them, able the you

that I about on where bit was of regarding in third itself, what but can topic small a highlighting you the you’re bit refinance color give an the rigs and if is a see to not let construction, there Yes, from here offer party. me talk a a under indeed

So on early scenarios understand, year, gas you the the drilling and will are positive has these very looking price and of most per a impact had in And efficient with yard in the rapid impact our this barrel our a this discussions. the reference, than have $XXX cap increase these to none the as of in a is and discussions, market around market through approximately comparison evolving the for new Maybe on price that of more year, December as we’ve refinance significant a the we refinancing Even in they in a impact today industry the excess oil do options company. activity more after at us a various case, lenders. open significant working an in been since oil last $XX having an control, million. offshore Drilling cap Borr aiding in Where discussions though overall factors which, and of that of having external we increased Drilling market in are oil today, tripled under XX% Borr are of point time. same

in that deal from possibility as of also our positive these there have one negative, I are have Now offers process. to offers are to value overall that addition a them on use refinancing an maybe could high-quality on And also but third also that we macro the side parties comment, some as perceive a And how had some types construction have. these clearly, assets -- with refinance. rigs see an under best rather impact confirmation the topics, of the of this in is we

get these all In that that with this Now different certain to by the short, conclude reevaluation financing does required, like have would impact the and saying different moving discussions it with constant regard lenders. be clear a pieces, are on the progress should the with that to to we I options of is keen agree can us possible in Borr get lenders it’s The with to closure coming company focus to that as it us, for refinance the behind and lenders again Drilling jack-up company – XXX% closures all be. on as weeks. soon keen it put are best with involved and making and the to

contract And therefore, that It under offer piece That is construction. normally So earlier an clear possible have back the that on the us possibly is are rigs rigs. would that the there come is Fredrik, on to rig with have we we under the around was expected. with mean rigs. the that than provides coming it to somewhat an opportunity still take would that the And yard.

of contract the Now current delivered year. the we the under rigs before, having are that as be expect market, the have XX end we to by here in stated

‘XX on So any would welcomed. much our could be we get hands very rigs that in actually

and see to an for that X say could certain impact moment, can at we additional sure would quarters of these is the discussions earlier. to to have detail with. I well I’m has future able to there rigs refinancing. as mind. get be cash also, at would pulling flow discuss at in this, all on forward can the where revenue-generating this you level are But fairly prepared make the said, of use be some if you this less fresh the case, as assets – yard, that the certain of moment, well want is assets, debt in come. ongoing going I these it creating with access ways, some in to you works that that be I don’t dealt in leave And us in as probably to this options call, But a to obviously, it So to to But out

have I to We [Operator remarks. no for any further back for so Instructions] further Patrick today, will questions Okay. hand currently

Drilling, like journey updated the very by then exciting thanking to Well, the conclude will progress you We you for continuation can we conclude along. Thank in. everybody we much, the I'd forward keep for just and look to Borr of and as we dialing call. an go on

you. Thank