Prepared remarks
Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q2 2026 Results Presentation Webcast and Conference Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bruno Morand, CEO. Please go ahead.
Good morning, and thank you for participating in Borr Drilling's second quarter earnings call. I'm Bruno Morand, and with me here today is Magnus Vaaler, our Chief Financial Officer. Before we begin, I would like to remind all participants that certain statements made on this call are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. For further details, I refer you to our latest public filings. Before I begin, I'd like to recognize our teams around the world for their commitment to safety and reliable operations. During the quarter, several rigs achieved multiple safety milestones across the fleet. The Groa and Gersemi each reached seven years LTI-free, while the Ran and Skald achieved six and five years LTI-free, respectively. Additionally, the Hild, Galar, Natt, Arabia III and Grid also achieved multiyear LTI-free and recordable-free milestones. I would like to thank our employees for their commitment to safety as well as our customers and stakeholders who partner with us in fostering a culture where safety remains our highest priority. Our operational performance in the second quarter of 2026 resulted in technical utilization of 98.4% and economic utilization of 96.4%. Revenues for the period were negatively affected by the decline in average number of rigs operating in the quarter. Second quarter adjusted EBITDA was $43.8 million, a decline of $44.7 million compared with Q1. The sequential decrease was primarily driven by four factors. First, we incurred additional preparation work and regulatory approval activities for the Odin ahead of its contract in the U.S., with $22.5 million of operating expenses during the quarter, an $11.1 million quarter-on-quarter increase. Second, six rigs were transitioned between contracts during the quarter, leading to reduced revenue. However, this impact is now largely behind us as these rigs have commenced their contracts. Third, the conflict in the Middle East led to higher insurance and fuel costs, contributing a $7.3 million quarter-on-quarter increase in rig operating expenses. The increase in fuel expenses was primarily driven by a higher number of rigs transitioned between contracts during the quarter, a period during which we are generally responsible for fuel costs. And finally, we also recognized $10.8 million of credit loss related to a former customer in West Africa. Following this additional provision, we carry a net zero receivable from this customer on our balance sheet. Looking at the Odin, contract preparations took longer than anticipated with regulatory approvals received in mid-July. In light of the operational constraints resulting from the hurricane season, in collaboration with our customers, we agreed to revise the rig deployment sequence to improve overall operating efficiency. The Odin is currently preparing to mobilize to its first location where it will commence the previously announced two-well firm contract with an undisclosed customer. Upon its completion, the rig is expected to transition directly to Cantium. We are disappointed with the delays for the Odin and the initial start-up requirements were greater than we have typically expected when entering a new market. This resulted in higher costs and delayed revenue. We're taking the learnings from these events very seriously. That being said, our entry into the U.S. Gulf was a strategic decision to provide customers with access to one of the most capable rigs in its class. Discussions with our customers leave us optimistic about the demand for this rig in the region. The Odin's current contract provides firm work into mid-2027 with additional options that could extend this contract well into 2029. The elevated rig transition activity experienced during Q2 is now substantially completed. The rigs Idun, Gunnlod, Skald, Sif, Natt and Prospector 5, which were transitioned into and between contracts during the quarter, are now fully operational. Together with the soon-to-commence Odin contract, we expect Q3 to average approximately 23 active rigs and hence adjusted EBITDA to improve significantly from second quarter. Since the last earnings report, we have secured eight contract commitments, representing over 2,100 days of additional work. This includes new contracts in Asia, West Africa, the North Sea and the Americas. Notably, the Galar and Gersemi in Mexico had their contracts extended by two years each and are contracted into 2030. During the quarter, we also successfully refinanced substantially all of our debt while also upsizing our revolving credit facility. These transactions extended our maturity, reduced financing costs and further strengthened our liquidity runway, which Magnus will discuss next. In July, our 50/50 joint venture with our long-term Mexican well construction partner completed the purchase of five premium jack-ups from Fontis at an attractive valuation and with limited equity commitment. Currently, three of these rigs are contracted with two of them operating and a third expected to commence operation later in the quarter. Our focus now is deploying the remaining rigs and converting the opportunity pipeline into contracted work. I'll hand the call to Magnus to discuss the second quarter financial results.
Thank you, Bruno. I will now go through some details of the financials for the second quarter. Total operating revenues for Q2 were $232.3 million, a decrease of $14.7 million or 6% compared to Q1. The total operating revenues consisted of $187.7 million in dayrate revenue, $32.9 million in bareboat charter revenue and $11.7 million in management contract revenue. The overall decrease was primarily driven by a $21.8 million reduction in dayrate revenue, mainly due to fewer operating days and lower average dayrates for the rigs Idun, Gunnlod and Skald, lower recognition of mobilization and demobilization revenue for the Vali and fewer operating days for Groa. These decreases were partly offset by increased recognition of mobilization and demobilization revenue for the Grid. The decrease in dayrate revenue was partially offset by a $6.3 million increase in bareboat charter revenue due to an increase in operating days. The total operating expenses were $232.1 million, an increase of $31.1 million compared to Q1. The increase was primarily due to a $30.4 million increase in rig operating and maintenance expenses. The largest driver of the overall increase was the Odin, which incurred $22.5 million of costs during the quarter, an increase of $11.1 million compared to Q1. The costs were primarily related to the preparations for its upcoming contract in the U.S. Gulf, including significant repair and maintenance activities. We expect regular rig OpEx once the rig is fully operational to be approximately in the mid $70,000 per day range. However, we anticipate some additional incremental operating expenses also in the third quarter related to the preparations of between $6 million to $9 million. In addition to the Odin, the increase in operating expenses was driven by overall costs associated with a higher number of operating days for the Grid, including amortization of deferred costs, expenses related to the five rigs acquired in January from Noble and an increase in the provision for credit losses. We recognized $10.8 million of credit losses related to a former customer in West Africa, an increase of $4.8 million compared to Q1. Following this additional provision, the receivable from this customer was fully provided for, resulting in a net zero receivable balance as of June 30. The total operating expenses also included a $5.1 million increase in fuel costs due to higher fuel prices and rigs transitioning between contracts and a $2.2 million increase in insurance costs related to the ongoing conflict in the Middle East. Other nonoperating income in Q2 was $6 million related to compensation received to remove certain operating restrictions associated with the sale of a rig in the prior period with no comparable income in Q1. Total financial expenses net were $236.5 million, an increase of $173.8 million compared to Q1, and this increase was primarily related to our refinancing during the quarter as we recognized $176.3 million loss on the extinguishment of the senior secured notes due 2028 and 2030 and the partial extinguishment of our convertible bonds due 2028. The loss on debt extinguishment consisted of $123.7 million in redemption premium payments and $52.6 million from the derecognition of the unamortized portion of deferred finance charges associated with the repaid facilities. Net loss for Q2 was $241.4 million, an increase in loss of $212.4 million compared to Q1. Adjusted EBITDA was $43.8 million, a decrease of $44.7 million compared to Q1. Turning to liquidity, cash and cash equivalents as of June 30 were $223.6 million, a decrease of $22.4 million from March 31. In addition, we had $250 million of undrawn available borrowings under our revolving credit facility, resulting in total liquidity of $473.6 million at the end of the quarter. Net cash used in operating activities for Q2 was $21.8 million. This includes $115.8 million of cash interest payments and $15.1 million of income taxes paid. Net cash used in investing activities was $2.3 million, which related to $8.3 million spent on additions to jack-up rigs, primarily long-term maintenance costs and capital additions, partially offset by the $6 million proceeds received, as noted earlier, in nonoperating income. Net cash provided by financing activities was $1.8 million. This was the result of net debt proceeds from new issuances, offset by the cash used for repayment of the original notes due 2028 and 2030 and the 2028 convertible bonds. Before giving the word back to Bruno, I will also touch on some recent transactions that we have completed. In July, we completed the previously announced Fontis acquisition of five premium jack-up rigs located in Mexico through our 50/50 joint venture with our long-term well construction partner in Mexico. The total purchase price was $287 million and was financed through a $237 million nonrecourse seller credit in the joint venture and $25 million equity contributions from each partner. In addition to this, we expect to fund approximately $15 million of working capital in the third quarter for the acquired rigs through a shareholder loan. Turning to the refinancing activity completed during the quarter, this was a significant step in extending our maturity profile and strengthening our liquidity position. In April, we issued $300 million of 3.5% convertible notes due in 2033 and used part of the proceeds to repurchase and cancel $195.2 million of our 2028 convertible bonds. In June, we completed the issuance of $2.035 billion of senior secured notes in two series: $1.1 billion of 8.75% notes due 2032 and $935 million of 9% notes due in 2034. The new notes amortize at 5% per annum, equating to $101.75 million on a full year basis. Amortization is payable semi-annually and begins July 2027 at a price of 102.5%. The proceeds from the new senior secured notes were primarily used to redeem and purchase the 2028 and 2030 senior secured notes in full. Overall, these transactions extend maturities significantly and reduce our financing costs going forward. In addition, we amended and restated our super senior secured revolving credit facility during the quarter, increasing the commitments to $250 million, reducing the base margin to 3% per annum and extending the maturity to 2031. With that, I will pass the word back to Bruno.
Thank you, Magnus. Today, 24 of our 29 rigs are either contracted or committed. As previously mentioned during the quarter, several rigs were transitioning between contracts or preparing for new contracts. The Gunnlod completed its contract with Hoang Long in April and started work for Thang Long in May. The rig has secured follow-on work with PVEP-NCS through April 2027. The Natt commenced operations with Shell in Nigeria in April. The Prospector 5 completed its contract with Eni Congo in May and began operations with BW Energy in Gabon in July following its SPS. The Skald completed its contract in Thailand in April and started work for Vestigo Petroleum in Malaysia in May following its SPS. The Idun also completed its long-term contract in Thailand in April and commenced operations in Vietnam in July. And lastly, Sif, one of our newly acquired rigs, mobilized to Suriname for PETRONAS in June and commenced operations in July. Overall, this was a demanding quarter across our operations, and I'm proud of how the team has safely executed multiple contract transitions, mobilizations and start-ups. So far this year, we have secured 21 contract commitments, adding approximately 4,350 days and $541 million of dayrate-equivalent backlog. This has resulted in a positive book-to-bill ratio in 2026, both in backlog days and value. Now let me walk you through our new commitments. In Southeast Asia, the Idun received two separate awards: first, a one-well contract in Vietnam, which started in July 2026 with an estimated duration of 60 days; second, a one-well commitment with Hoang Long JOC with an estimated duration of 30 days to commence in direct continuation. Based on the current engagements, we remain positive about the prospects for the rig to continue to work in Vietnam in the near term. The Mist received a binding letter award from Shell Sarawak in Malaysia. The campaign is expected to commence in October 2026 and has an estimated duration of 45 days. Additionally, the Gunnlod secured contracts with PVEP-NCS in Vietnam. The six-well firm campaign is expected to commence this month and has an estimated duration of eight months. The contract also includes two one-well unpriced options that could keep the rig committed until Q3 2027. In West Africa, the Gerd received a one-well extension from Foxtrot in Ivory Coast and is now expected to remain committed until March 2027. In Europe, the Prospector 1 received a two-well contract extension from ONE-Dyas for an estimated duration of approximately seven months, keeping the rig committed into April 2027. The contract includes options that could extend it into Q4 2027. As highlighted earlier, in Mexico, our rigs Galar and Gersemi had their contracts extended into 2030. Moving forward, following recent awards, our 2026 contract coverage is now at 73% at an average dayrate of approximately $134,000 a day, with coverage in the second half of the year at 70%. We're actively pursuing multiple opportunities to add further coverage to our available fleet and have advanced discussions ongoing for multiple rigs for work scopes filling open space both this year and into 2027. Looking across our core markets, we continue to see steady demand for modern jack-ups, although the pace of contracting remains uneven by region. Globally, market utilization for modern jack-ups has remained resilient at approximately 90%. In the Middle East, the prolonged conflict and lack of clarity around its resolution have continued to delay tendering and contracting activity. Positively, across Saudi Arabia and the UAE, where several rigs were suspended at the onset of the conflict, the recent gradual resumption of operations despite lingering uncertainties demonstrates our customers' commitments to their shallow water portfolio. According to third-party data, backlog additions in the region during the first half of the year reached the lowest levels in more than 25 years. For context, the first half of 2026 saw more contracts awarded in the North Sea than in the Middle East, both by count and contract days added. Our broad views remain unchanged. The region still has substantial underlying demand, which was close to materializing prior to the onset of the conflict, and we believe this delayed activity should reenter the market once conditions stabilize. In Southeast Asia, contract awards, both by count and backlog days, have accelerated meaningfully over the last two quarters, reaching the high level seen in late 2023. While a slight overhang in the region continues to apply pricing pressure on short- and long-term opportunities, this is a region where pricing has historically responded quickly to market tightening. Our team has done well filling our near-term open space and strategically positioning rigs for continued deployment. In the Americas, we're encouraged to see previously suspended rigs returning to work for Pemex and absorbing regional supply. Mexican oil production remained below the government stated targets and the recent contract resumptions reinforce our view that jack-up demand should increase further to achieve this target. In addition, multiple IOCs are active in the procurement process where we expect conclusions in the coming months for work commencing late 2026 and 2027. We believe our global relationships with IOCs present in the region, coupled with our strong collaboration with our partners in Mexico, provide a strong position in the region that has capacity to grow with rig demand. In the North Sea, operators continue to address permitting challenges, which drive uncertainty and lack of visibility for new meaningful commitments. Despite these hurdles, on the back of our strong operational performance, we continue to work closely with our customers to meet their drilling requirements as evidenced by our recent Prospector 1 extension. In West Africa, contract activity has remained robust, bringing the contracted jack-up count in the region to levels not achieved for more than a decade. In Nigeria, in particular, we've seen a return of activity from IOCs and a notable influx of demand from indigenous operators. Additionally, in the region, investment activities and interest in Angola shallow water has gained momentum, and we're pleased to be part of one of the recently announced successful step-up exploration wells drilled by Halliburton, Sonangol and their partners. In the big picture, while the ongoing conflict has caused near-term disruption, we remain constructive on the medium- to long-term outlook for the jack-up market once certainty returns to the Middle East, where large tenders remain outstanding. With that context, I would like to close with three key takeaways. First, Q2 adjusted EBITDA was impacted by the delayed start-up of the Odin and elevated number of rigs transitioning contracts. As these rigs resume operation, we expect to average 23 active rigs during Q3, which should support a significant improvement to our Q3 adjusted EBITDA. Second, the Middle East conflict has reduced near-term visibility, delaying tenders and the region's recovery. This uncertainty is also affecting several other markets, though not all, making it difficult to provide a crisp outlook for our near-term activity. What is clear, however, is that the prolonged disruption in the Strait of Hormuz has impacted oil supply and driven global inventories to exceptionally low levels. Rebuilding those inventories even under a moderate demand outlook will require sustained drilling activity. We believe short-cycle, low-cost shallow water barrels, exactly what our modern jack-up fleet is due to access, will be highly relevant in the restocking process. And third, our priorities remain clear: leverage our expanded fleet of premium jack-ups to navigate near-term uncertainty and capture greater earnings and shareholder value as the cycle improves. With that, I'll now turn the call over to Q&A.
Questions and answers
We will now take our first question from the line of Scott Gruber from Citigroup.
I appreciate all the color on the moving pieces in Q2 that created an EBITDA headwind. But Bruno, Q3 does sound better. Is there a way to provide just a range for us in terms of where EBITDA could land based upon having 23 active rigs and seeing the mobilization and start-up costs at least fade, maybe not completely go away, but reduce? Any color on just kind of where things could land even if it's a decently wide range?
Yes, Scott. You're right. I think the Odin now seems to have a clear pathway to see that rig starting work, so that's positive. Consequently, we will see normalization of the costs on that rig. When we look at Q3, obviously the Odin starting contract is a key component of our results for the quarter, and it's something that we are working very focusedly to make sure we put behind us in the very near term. As I mentioned earlier, all going well we are anticipating to average approximately 23 rigs in the quarter, which, if you look in context versus Q1, I think we're talking about a similar ballpark. So I'll come shy of giving you a number for Q3. But with activity levels resuming to that run rate of Q1, I think we will see a quite substantial increase on sequential results in Q3, Scott. That's probably where I would leave that.
That's fine. And then turning to the latest acquisition. So two out of the five rigs are working, the third is contracted. Just any color on — do you have line of sight to putting the other two rigs to work?
No, indeed, Scott. The transaction closed quite recently, so we're just now having a chance to put our hands around it and start driving some of those conversations. As we understand, prior to the completion of the transaction, there were already some ongoing discussions, including with Pemex and Fontis. We are now starting to look at that and trying to see how we move forward. Three rigs should be working during the quarter now, so we have two left. One rig is being stacked, and I think there's a likelihood that rig stays stacked for a bit longer. But based on ongoing market surveys and tenders in Mexico, I do see a pathway to potentially have a fourth rig resuming operations sometime this year or into very early next year. Looking at the transaction, the valuation and our execution strategies, as long as we have three to four of those rigs operating near term, that silo could generate interesting cash and put us in a good position. Beyond that, let's see what happens with the fifth rig that is currently idle. We're looking at all kinds of opportunities for that, but we will need a bit more time. The transaction only closed a couple of weeks ago and we are very active now in defining a pipeline of opportunity for those units.
We will now take the next question from the line of Doug Becker from Capital One.
Bruno, Magnus, really appreciate the transparency you provided on the second quarter. Turning to the third quarter, you're expecting average operating rigs to be up around 8%. Just wanted to get a little more color around the assumptions there. Hurricane season does tend to peak around September, and I want to see the base case. Is it reasonable to think revenue is up just a little bit quarter-over-quarter given that growth in average operating rigs?
Thanks, Doug. The outlook for the 23 average operating rigs is largely based on contracts that we already have in place, so there is a pretty decent amount of certainty in that number. We still have a few rigs that will eventually be moving contracts, so we maintain a high focus on execution of these contract transitions. Regarding the Odin, we changed the operational sequence with the customer to ensure we could maintain the rig utilized during hurricane season. The rig will be in a location where we have approvals to stay year-round, so we don't expect the hurricane season, at least based on current plans, to impact that. We've achieved the regulatory approvals for the rig in July. Since then we've been working on customer-specific preparation work. The rig should have the tugs connected today, and, weather permitting, we expect to push away from the quayside tomorrow. So we're progressing in the right direction. That's what gives us confidence on the 23 rigs in Q3, but we need to maintain our focus on the execution.
Fair enough. And then as we think about O&M costs in the third quarter, any thoughts on fuel and insurance? Is that going to be pretty stable, or is there potential for that to decline a little bit?
Let me provide some color and then Magnus can chip in if required. In Q2 we had a disproportional impact of higher fuel costs, primarily because we had several rigs transitioning contracts. During transitions, we are sometimes responsible for fuel and burn during remobilizations, and daily fuel burn during those processes tends to be high as the rig is fully staffed and preparing to work. That resulted in an overweight impact during Q2. In Q3, because we have fewer rigs transitioning contract and the transitions we do have are nearer field, I expect that will soften the impact of fuel costs. For idle rigs we still incur some fuel burn and the cost reflects higher commodity prices, but compared to Q2 you should expect fuel costs to come down significantly as we move forward. Regarding insurance, the increase has been largely driven by events in the Middle East. It's difficult to say precisely when that will come down. Until there is resolution in the Middle East, we should expect that insurance costs will linger for a while.
We will now take the next question from the line of Fredrik Stene from Clarksons Securities.
I wanted to touch on the outlook for the Middle East. A lot of the key to an accelerated movement in rates and utilization lies in that region. While I'm aware nobody knows when the conflict will end, I'd appreciate your updated view on how you think that market will unwind when it does in terms of tendering and contracting possibilities. And maybe in the context of how you think that unwinding may happen, are you able to share similar average rig activity per quarter numbers for Q4 and Q1 next year based on the visibility that you have at the moment?
Thanks, Fredrik. Your assessment is one we share. If you look at the Middle East alone, even prior to the conflict there was already significant demand in the region. With the conflict, the timing of that demand materializing has become more fluid. Positively, many meaningful tenders we saw in the region are still ongoing and haven't disappeared from the pipeline. In the last couple of weeks we have even seen indications of potential increases in the size of some tenders, including discussions around KJO. Inevitably, the Middle East is an engine of the jack-up sector and a meaningful rebound there can very quickly rebalance things globally and provide an interesting context for us if it happens. Anticipating the timeline is very difficult. What I can share is that customers remain committed to proceeding with tenders. For example, an Aramco tender is still scheduled at the end of this month. Combined with recent resumptions of activity, that provides some optimism that demand will start materializing soon even without a complete resolution. If the conflict does not resolve in the near term, it is hard to believe that more activity will not be needed across other regions. We have been talking to many customers and there is a lot of interest and discussion, but customers are still trying to understand the situation. As we approach year-end and customers go through budgeting and approval processes, more visibility will likely be attained from other regions. As long as the Middle East is constrained, any overhang currently in that region remains there; incremental demand across other regions will then be needed to rebalance markets. Timing remains uncertain and affects our visibility for active rig counts in the coming months. That said, looking beyond the near term, it is difficult to imagine that when inventories are at such low levels more drilling will not be required. I remain optimistic. Shallow water rigs provide low-cost, short-cycle barrels, and in a context where security of supply matters, it is hard to believe we will not play a significant role in the rebalancing.
I appreciate that. Regarding the Fontis acquisition, with now three rigs instead of one contracted, is that enough to fund the joint venture organically going forward, even if you have one stacked rig and a fourth that could face idle time? Or might you have to put more into it than the purchase price itself?
Magnus covered some of these comments earlier. At this stage, beyond the working capital contribution at closing, we don't anticipate further meaningful working capital requirements for the year. As we get to Q4 there are some interest payments due under the vendor facility that we hope the joint venture entity will generate the cash to cover. But you shouldn't expect any significant working capital contributions for the remainder of the year except in the event we see a need to reactivate one of the stacked rigs. When we reviewed the acquisition, our base case was three to four of the rigs operating. We have three right now and ongoing discussions in the region, including with Pemex, give line of sight for a potential fourth rig toward year-end. At that point we feel confident the joint venture will be self-funded.
We will now take our next question from the line of Benjamin Sommers from BTIG.
We seem to have seen strong progress in Vietnam and Malaysia in terms of contracting activity. Bruno, you called out this region as one that tends to respond quickly to market conditions. Would you say this activity has been largely driven by the Middle East conflict and the increased focus on energy security? And any longer-term color on that market?
Thanks, Ben. We were expecting activity levels to remain elevated in Asia. We were surprised by slower activity in Sarawak, Malaysia because of ongoing government disputes in that region, so the agreement with Shell for work in Sarawak is a positive sign that demand there is returning to normality. In Vietnam we have long-standing relationships with local operators that give us an edge in securing work. We see robust demand across Vietnam and the government appears ambitious about increasing activity levels, which gives line of sight to maintain our rigs there into 2027. Asia is important and governments are reacting to improve self-sufficiency in resources; the longer the Middle East conflict persists the more urgency there is to secure domestic supply, which should sustain activity. Many contracts in Asia are short-term, so you have constant churn to keep rigs contracted. We have been successful in this region for many years with well-established partnerships, and I feel optimistic we'll continue to roll rigs through.
Helpful. On the balance sheet improvements and now the Fontis closure, is there anything left to do there balance sheet-wise? How do you plan to manage the balance sheet going forward and potentially look at other bolt-on M&A opportunities?
Balance sheet-wise, we feel pleased with what we achieved so far this year. Maturities have been pushed forward giving us a good runway and we've rationalized financing costs. At the moment M&A is not forefront of our focus. We had some negative executional surprises in Q2, so our priority remains operational execution and resuming stable operations. Coupled with the short-term visibility challenges, we are focused on keeping costs under control to preserve liquidity while navigating uncertainty. I don't see an immediate need for further balance sheet transactions, and M&A will be something we consider over time rather than a near-term priority.
We will now take our next question from the line of Daniel Kutz from Morgan Stanley.
You flagged that despite the Middle East conflict and headwinds, global modern rig utilization at the market level has stayed resilient at 90%. Over the last few years, despite Borr's outsized exposure to Mexico and exposure to the Middle East, Borr's fleet utilization was at least in line and often outperformed market levels. As you look ahead, do you expect your target level of utilization across the fleet to at least keep up with or potentially outperform the market?
Good question, Dan. There's often confusion in metrics between market utilization and our reported coverage. Market utilization typically blends rigs currently working and rigs contracted for future work, while our coverage looks at days under contract where we're earning revenue. That difference can create confusion. Historically we've leveraged our premium fleet and operational execution to deliver better performance than the peer group, and we've done that consistently. Maintaining higher coverage and utilization requires strong contract execution, and our contracting group tends to excel in these periods. We have well-connected teams providing strong line of sight into customer requirements and helping us strategically maneuver opportunities. The 90% market utilization is not unhealthy, and it only takes about a dozen new contracts before pricing power starts to swing back toward contractors. A Middle East recovery would quickly improve the market balance and increase pricing power for contractors. If that doesn't happen near term, incremental demand in other regions will need to materialize. Near term the outlook is uncertain, but medium to long term the sector looks healthy.
As you think about your geographic footprint compared to activity outlook, are you comfortable with the current spread of assets, or could it make economic sense over time to relocate rigs to different markets?
I'm quite comfortable. We've built an interesting global footprint. In Mexico we have strong local partnerships positioning us well to navigate Pemex and IOC demands; the Fontis units will strengthen that further. In Asia we have competent assets matched to customer demand and long-standing partnerships. In West Africa we've secured strong fixtures and we are one of the few players with 400-foot-capable rigs in the region. In the Middle East we currently have four rigs, two working and one under a bareboat charter with Noble. If demand in the Middle East grows as tenders materialize, that could create opportunities for a higher focus in the region; some rigs we acquired from Noble are particularly suitable for gas work in that market. Overall, I'm comfortable with the fleet spread and don't expect material global mobilizations in the near term.
We will now take our final question from the line of Gregg Brody from Bank of America.
Looking at the rest of the year, you mentioned opportunities to add activity to this year's backlog. Realistically, how much activity do you think you could potentially add?
If I look at Q4, which has more exposure in the near term, Q3 seems pretty well settled. For Q4 we have a few rigs with ongoing exposure and for many of the rigs rolling off in Q4 we have active discussions with customers about opportunities for follow-on work. That's a key focus. To name a few, the Norve will soon be finishing a contract in West Africa, the Bestla in the North Sea has a contract with Eni that rolls off toward the end of the year, and we have rigs working with Eni in Mexico. We're progressing well in discussions with current customers and other customers across those regions, which gives a positive outlook that Q4 will stay at a similar activity level to Q3. There is, of course, execution risk, and the team is focused on converting those opportunities.
When you think about contracts in 2027, what lead time should we be thinking about from agreement to the rig going to work?
Some of the uncertainty in the market affects both us and customers. What we've seen in recent months is shorter turnaround times from award to start of work. Customers have been preserving optionality and sometimes waiting until the last minute, which creates complexities. In Asia, for example, we've seen contracts announced where rigs go to work literally a couple of weeks after announcement. So if a rig is about to go idle, it's not necessarily too late; customers often act opportunistically at the last minute.
On the Fontis acquisition, what's the run-rate contribution to the consolidated company from that? And you mentioned a shareholder loan from Borr to the JV for working capital — should we think about any other additional capital contributions to the JV?
The goal is for the JV structure to be self-sufficient. With three rigs operating it should get into that territory where there won't be significant additional funding needs from us. As Bruno touched on, we will fund approximately $15 million into the JV in Q3 as working capital to help operating costs and start-ups for the two rigs starting in Q3. Going forward, the target is to get these contracted and have limited funding needs into the structure.
Can you remind us of the CapEx for the rest of the year for Borr?
General guidance is roughly $2 million to $2.5 million per rig per year in an average year. With 29 rigs, that's typically between $60 million to $70 million. Some years with higher SPS activity there could be more. This year is not a high SPS year, so the $60 million to $70 million range is what we're looking at currently.
Congrats on the refinancings. How do you think about deleveraging today? Have your targets changed given the transactions completed last quarter?
Deleveraging remains a focus for us. Under the new notes we continue to have an amortizing element similar to the previous notes — approximately $100 million per annum in debt repayments under the new notes. That is structurally baked into the bonds going forward.
Thank you. There are no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.