管理層發言
Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q1 2026 Results Presentation Webcast and Conference Call. Operator provided instructions. 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 joining Borr Drilling's first quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer. I'd 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, please refer to our latest public filings. On today's call, I'll start with a review of the first quarter and key developments since quarter end. Magnus will then cover financial results, after which I'll return to discuss contract activity and our market outlook. Before I begin, I would like to recognize our teams around the world for their continued commitment to safe and reliable operations. During the quarter, several rigs achieved important safety milestones.
The Gerd, Natt and Mist each achieved seven years LTI-free, while the Saga and the Arabia III reached six and three years, respectively. The Norve also attained two years recordable-incident-free. These milestones reflect a strong safety culture across the organization, and I would like to thank all of my colleagues for their continued dedication to zero harm operations. Operationally, we delivered technical utilization of 99.4% and economic utilization of 97% in the first quarter. Revenue for the period was $247 million and adjusted EBITDA was $88.5 million, primarily impacted by the delayed start-up of the Odin and an $8.4 million credit loss provision. During the quarter, the Odin completed its mobilization from Mexico where operations had initially been expected to start in February. However, the start-up was delayed due to disruptions during transit, additional contract preparation work and approvals.
While these delays are unfortunate, bringing Odin into the U.S. was based on the long-term opportunity outlook in that market. I remain confident in our positioning and capabilities available to operators in the U.S. Gulf, and we believe the rig will remain well placed to serve the region. Looking ahead, we expect second quarter results to continue to be affected by the delayed startup of the Odin now anticipated to commence in late June as well as rigs transitioning. During the quarter, rising tensions and hostilities in the Middle East created disruptions, but with limited financial impact. Most importantly, all of our personnel remain safe. I would like to thank our teams for their professionalism and flexibility that they have shown through this period. As announced in April, following temporary suspensions, all affected rigs were called back to work. After resuming operations, the Groa and the Forseti have now completed their contracts in Qatar.
The Forseti remains on the bareboat charter with the former owner into December 2026. Our contracting strategy remains focused on increasing near-term coverage or balancing dayrates and contract tenor. Since our last earnings report, we've secured eight contract commitments, representing more than 1,100 days of firm work. Full year 2026 coverage has increased to 71% at an average day rate of approximately $137,000, while second half 2026 coverage now stands at 65% as compared to 48% in the prior earnings report. We also announced the acquisition of five premium jack-up rigs from Paratus for $287 million through a new 50-50 joint venture with our long-standing Mexican well construction partners. This transaction will expand our fleet from 29 to 34 rigs and further strengthen our position in the Mexican market while adding flexibility to two higher specification units with broader redeployment potential.
In April, we successfully completed an upsized $300 million convertible senior notes offering due in 2033, using the proceeds to repurchase a significant portion of our 2028 convertible bonds. This transaction meaningfully extends our maturity profile and strengthens our capital structure ahead of what we expect to be a constructive market environment. Magnus will walk through these in more detail shortly. While the Middle East conflict has created near-term uncertainty, key tenders in the region continue to progress with some modest delays. More broadly, in our view, recent events have strengthened the long-term outlook for the sector, providing for higher oil prices and a renewed focus on energy security. Shallow water basins continue to represent an attractive resource offering low cost and short-cycle barrels. Due to our customers' planning and budgeting cycles, we expect that improved activity and dayrates will lag the oil price increase by six to twelve months.
This dynamic was recently seen in 2022 when the military invasion of Ukraine caused oil prices to spike and a corresponding increase in dayrates occurred several quarters later. Therefore, we're increasingly confident about the company's prospects for 2027 and 2028 as we expect disruptions from the conflict in the Middle East to be both substantial and long lasting. With this backdrop, Borr Drilling's expanded fleet is well placed to support our customer demand and deliver long-term shareholder value as the cycle develops. I'll walk you through our business outlook in more color later in the call, but now I'll hand the call to Magnus to discuss the first quarter financial results.
Thank you, Bruno. I will now go into some details of the financials for the first quarter. Total operating revenues for Q1 were $247 million, a decrease of $12.4 million or 4.8% compared to Q4. This is mainly explained by a $15.5 million decrease in dayrate revenue, offset by a $3 million increase in bareboat revenue. The decrease in dayrate revenue is driven mainly by $10.4 million lower reimbursable expenses in addition to fewer operating days, combined with lower dayrates for some rigs. The $3 million increase in bareboat charter revenue was due to more rigs earning bareboat revenues after the rig acquisition from Noble. The total operating expenses were $201 million, up $8.9 million or 4.6% versus Q4. The increase was primarily due to $4.7 million of increased depreciation following the five-rig acquisition from Noble and $4.6 million higher rig OpEx. The increase in rig OpEx was primarily due to an $8.4 million credit loss provision that we incurred in the quarter, partly offset by lower reimbursable expenses of $7.4 million.
In addition to this, financial expenses increased by $6.9 million in the quarter due to the recent seller credit financing incurred in connection with the Noble rig acquisition and the bond tap late last year. Overall, for the quarter, we had a net loss of $29 million and adjusted EBITDA of $88.5 million, down $16.7 million quarter-on-quarter. The adjusted EBITDA was highly impacted by the nonoperational matter of the $8.4 million credit loss provision taken in the quarter. In addition, as mentioned, the Odin's delayed commencement was also impacting the adjusted EBITDA compared to expectations at the beginning of the year. In the first quarter, we recognized no revenues but started incurring standard operating expenses for the rig. Now going into Q2, the rig is continuing to undergo contract preparation and regulatory approvals, and we now expect the rig to commence operations in June. The rig is expected to incur additional contract preparation expenses of approximately $10 million in addition to standard OpEx before commencing its contract.
Now moving into cash. Cash at the end of the quarter was $246 million, but total liquidity was $480 million, including undrawn revolving credit facilities of $234 million. Cash and restricted cash decreased by $133.7 million in the quarter, primarily as a result of the following: we used $182.9 million in investing activities, consisting primarily of the $175.1 million cash spent to complete the Noble acquisition in January. In addition, we incurred $7.5 million of CapEx for long-term maintenance expenses or costs. The cash used in investing activities was offset by $48.1 million cash from operating activities. This includes $6 million of interest payments and $6.7 million of taxes. Other financial events in the quarter that are worth highlighting and that we have highlighted is that we completed the five-rig acquisition from Noble for a total purchase price of $360 million, partly financed by $150 million seller credit.
We also issued $300 million of convertible notes post quarter end. We mainly used the proceeds to repurchase and cancel $195.2 million of our 2028 convertible notes, which extends the maturity profile by five years until 2033. The new convertible has a coupon of 3.5% compared to 5% on the 2028 and has an improved conversion price increased to $8 per share. With this, I would like to pass the word back to Bruno.
Thank you, Magnus. Activity on the contracting front has continued to track largely in line with our expectations. Year-to-date 2026, we've secured 13 new commitments, adding approximately $274 million to our backlog. In the Americas, ENI extended the Ran's contract in Mexico, keeping the rig firmly committed through September 2026. Additionally, the Sif, one of our recently acquired rigs from Noble, has secured a contract offshore Suriname for one well. Drilling is targeted to commence in July and has an estimated duration of 100 days. In West Africa, the Prospector 5 secured work with BW Energy in Gabon. The rig is scheduled to complete operations with ENI in Congo later this month before mobilizing to Gabon in early third quarter following its scheduled SPS. The rig is now firmly committed into Q2 2027 with unpriced options that extend into 2028. In Europe, the options on the Groa were exercised, keeping the rig utilized through May.
As a reminder, the rig was under the bareboat charter to allow the previous owner to complete the ongoing accommodation work with Siemens. The Groa will now demobilize later this month and operations will be handed over from Noble to Borr. In Asia, the Scout received a 180-day contract with Vestigo in Malaysia and is scheduled to mobilize to the first well location later this month. The Thor also received two contract awards in Vietnam and is now committed through the first quarter of 2027. I remain proud of our continuous contracting success, which has a notable presence of repeat customers, demonstrating our strong relationships and ability to deliver safe and efficient operations. Recent awards have meaningfully increased our 2026 coverage, particularly in the second half. We continue to work on several opportunities and remain optimistic in securing additional contracts in the coming months.
Looking at our core markets around the globe: in the Middle East, visible open tender demand has further increased to 17 rigs. Although the current disruptions may delay activity in the near term, we believe its resolution will release pent-up demand that would likely be driven not only by deferred programs returned to the market, but also by the work required to restore shut-in wells and related infrastructure before production can return to pre-conflict levels. As a result, we see a credible pathway for incremental recovery-related demand once conditions normalize. Outside of the Middle East, we continue to receive positive customer signals across most of our operating regions, supporting our view that additional work is approaching the pipeline. That is consistent with the broader trend we referenced earlier in our remarks and with the historical pattern that offshore activity typically responds with some lag as customers work through planning, budgeting and procurement processes before converting demand into contracted work.
In particular, I would like to highlight developments in Asia and in Mexico. In Asia, we see signs of new requirements in Malaysia and Vietnam. While both countries are showing growth, they remain below past cycle jack-up counts and provide notable upside as the current environment progresses. Energy security is clearly a priority topic for important countries, and we expect demand to accelerate as global disruptions impact their access to hydrocarbons. We have continued to execute at a high level in this competitive region and remain optimistic we will fuel the majority of our 2026 available days in the near future. Additionally, we see rig demand increasing in China. While not a location international contractors tend to operate, any notable demand pulling rigs into China has the potential to absorb a considerable amount of supply. As we have discussed in the past, Mexico continues to hold consequential shallow water production capacity, and we see jack-up utilization as a fundamental variable in the formula for PEMEX to reach the stated production targets.
Recent news of stacked rigs returning to work, along with a fresh market inquiry from PEMEX, leaves rigs in-country well suited to benefit from developing demand. Looking further ahead, we see our 2027 availability as strategically valuable. It gives us flexibility to participate in what we believe could be a stronger contract environment as demand and dayrates continue to develop. Our approach remains balanced: continue building near-term coverage while preserving exposure to future upside. With that context, I'll turn to the conclusion. I'll leave you with a few key takeaways. First, renewed focus on energy security, coupled with improved project economics and elevated oil prices will drive demand for jack-ups. Second, it's clear that we have near-term uncertainty in the Middle East. That being said, tenders are progressing, and we see an increasing likelihood of pent-up demand forming regionally and beyond.
We continue to focus on increasing 2026 coverage and remain strategic in doing so while balancing rate and tenor. And finally, we have proven our ability to opportunistically grow our fleet as we see a favorable time in the cycle. At the same time, we continue to take actions to enhance capital structure to support long-term shareholder value creation. So in conclusion, taking these points together, the broader message is clear. We are managing through near-term variability while positioning the company for stronger performance as the market improves. With that, I'll now turn the call over to Q&A.
分析師問答
Operator provided instructions. We will now take the first question from the line of Ben Sommers from BTIG.
So first, it was great to see you guys continue to grow the fleet during the quarter. I guess just kind of curious how we're thinking about expanding the fleet moving forward. And you mentioned the ongoing focus on energy security and just higher oil prices creating a strong long-term macro environment. So just kind of curious how we think about potential fleet expansion down the road.
Very good, Ben. Thanks for joining. Thanks for the question. When we think about expansion, I think it's fair to say that we are pretty happy with what we achieved in late Q4 and into Q1 this year. Our fleet is now 34 rigs. I think it's a pretty interesting size as we complete the Paratus acquisition through the year. And we are well represented in every market where we operate in decent scale. So, I think in line with what we commented before, I think any further expansion from here is a strategic flexibility that we have and it's not a strategic mandate, let me put it this way. I think for now, out of the rigs that we acquired, we have a couple of them to put back to work, and that remains our priority in the near term. We'll continue to monitor the market to see if other opportunities are out there. But I think at this time, our key priority is finding employment opportunities for these rigs before we look into further growth.
Super helpful. And then I appreciate the color on some notable regions. Kind of wanted to ask around West Africa. Kind of curious anything you guys are seeing there and then potentially the longer-term demand profile in that region once again, especially as you're seeing this ongoing prioritization of energy security. Just kind of curious in a region like West Africa, any color on the demand outlook?
Yes, for sure, Ben. We've seen already in the last few years, and I think more pronounced in the last several quarters now, that demand in West Africa has tracked positively and it's being largely driven by Angola and Nigeria. I think that continues. Oil price is supportive to development of some of those programs. And in our conversations with customers, even wells that were maybe allocated to be drilled further in the future are being considered to be moved forward. The demand in the region is likely in the near term to attract rigs from outside of the region that should help, particularly regions like Asia that have been more competitive. And I think this is a very positive development. West Africa supply-demand balance is quite healthy. What we have seen, including our recent fixture, is that that continues to provide opportunity for us to print leading-edge rates. And we see now as the cycle develops that there are more longer-term opportunities popping up in the market. So that's all positive. It's a market where I think 400-foot capable rigs tend to fare well because of their operational flexibility, and we are largely in control of the capacity of 400-foot capable rigs in the region. So that gives us, I think, a positive outlook in terms of maintaining the fleet contracted as well as pushing prices when we think we have a strategic positioning.
We will now take the next question from the line of Dan Kutz from Morgan Stanley.
So I wanted to ask, I guess, something somewhat similar to the last line of questions, but just from a little bit different angle, and that's that you guys have flagged some incremental demand in certain regions driven by energy security concerns. You flagged Southeast Asia or Asia and you flagged PEMEX in Mexico. I guess the question is Borr clearly has one of the highest-spec fleets, if not the highest-spec in the shallow water drilling space. And I guess, in a theoretical scenario where there's incremental demand pull outside of the Middle East, how do you think about how your fleet mix is potentially positioned to benefit from that? I know the Middle East tends to be a relatively high-spec market in terms of the mix of rigs that are working, but some of the other regions that you flagged have a higher mix of high-spec rig demand as well like Asia Pacific and Mexico. But yes, just wondering if you could talk about how the new macro outlook plays into.
Yes. Thanks for joining. Great question. And the way I would frame it is, I think the higher specification of our rigs shouldn't be perceived as a limitation. I think much the opposite. I think our higher specification fleet is actually very well suited for higher specification work, but we are in a position to compete very efficiently and effectively across all kinds of work. I think we're selective, but the rigs are capable of delivering successful wells pretty much across all geographies. So I think that gives us a tremendous amount of flexibility. Maybe if I put it into context and look at the larger picture, last quarter when we were reporting here in Q2, we had a modern jack-up fleet that was very resilient, still tracking around 90% utilization, and we had developing demand largely geared towards the Middle East, where we saw about 13 rig requirements in the Middle East alone at that point in time.
Now you fast forward a quarter, what has changed effectively? And I think the answer is, other than timing, nothing has changed, at least not negatively. Jack-up utilization for modern rigs is still tracking at 90%, meaning there's limited supply available out there. The demand in the Middle East that we counted at that point in time, potentially 13 rigs, has now increased to 17 — and I think the disruptions continue to drive incremental demand across the various geographies. Outside of the Middle East, it's clear that energy security is the driver in countries, particularly in Asia, that have been exposed to limited availability of hydrocarbons; we see some of those discussions accelerating. If you look at the Middle East alone, obviously, the timing may be variable. But ultimately, we are positive that incremental work is going to be needed to bring production capacity back to where we were.
Wells don't behave like light switches; you turn them off, and they don't come online instantly when you want. If you keep in mind that about eight to ten percent of the global supply has been basically shut in, there's certainly a lot of work that is going to be needed in intervention and getting wells back into production that should drive higher demand for rigs or higher intensity for rigs. Beyond that, if you look across the globe, strategic petroleum reserves across pretty much every country seem to be at recent low levels. So I think on top of that, once the situation normalizes there will be an urgency to replenish those reserves that should drive near-term demand that is perhaps higher than what we had coming into the conflict. So I think that the landscape is quite interesting here. The timing remains obviously variable considering this conflict. So in that context, having high specification rigs that can actually address demand wherever it comes from — whether it's in West Africa, whether it's in Mexico, whether it's in Asia — positions us very uniquely. Certainly, if we find jobs that by default require exclusively high specification rigs, we're even better off. But in any case, I think we're very well positioned.
That's great color and context. And then maybe one on UAE. I guess with UAE announcing exit from OPEC, and we're seeing some big incremental upstream investment and production growth plans coming out of UAE following that decision, Borr is one of the few contract drillers outside of ADNOC Drilling that works in the UAE. And so I was just wondering if you could talk about the implications of the UAE exit and the potential activity upside in that market and the implications for Borr given your unique position as a company that does work in the UAE.
For sure. The developments in the UAE and their decision to leave OPEC are quite recent, and we're yet to fully assess what that means in the longer term. What seems clear to me is that they will continue with their ambition to increase their sustainable production capacity and ramp that up to the five million barrels that they've been targeting. Inevitably, that entails more jack-ups being needed. Whether it happens through ADNOC Drilling or whether they look to foreign players to come and help, time will tell. The development is positive. We are currently operating there, as you said. So we do have an established presence and an operating reputation, and we'll watch what happens. I do think that inevitably a key component to Middle East growth or recovery at the moment lies in shallow water barrels.
We will now take the next question from the line of Doug Becker from Capital One.
I want to ask a difficult hypothetical question about Middle East demand. If we just paint a scenario where the conflict continues to drag on, the strait remains closed, but kinetic activity is limited. How do you see Middle East jack-up demand evolving in this kind of prolonged conflict situation?
Doug, thanks for joining. Yes. If you look hypothetically at the strait remaining closed for a long time, inevitably you create a situation where less activity is needed in the Gulf because you don't have the ability to export that production. How realistic that is for the world to afford the strait being closed for a long time is questionable. But the reality is that if the strait remains closed, the Middle East is effectively landlocked and any requirements that result from there will not be met by rigs that would be tied up in the Middle East. That creates a unique dynamic compared to what we saw in the past. For us, we have four rigs in the Middle East, which is not an insignificant exposure, but I think it's very manageable at the moment. I don't think a prolonged closure should be seen only as a downside for companies like ours. If you see prices track much higher because of supply constraints, activity in other places will pick up. I do think that brings upside to economics and could offset our relatively small presence in the Middle East.
No, that definitely makes sense. I wanted to shift to the U.S. Gulf. I know in the past, you kind of mentioned it's a new frontier for Borr. There might be a bit of a learning curve. I was just hoping to get some more color on the contract prep and regulatory issues that Odin has been seeing and what this might mean for additional rigs moving to the market going forward?
Very good, Doug. I think it's fair to say that the Odin's start-up in the U.S. has lagged what we would have expected. Starting rigs in new regions always comes with a degree of challenge. Over the last years we've done that successfully in several markets, but coming to the U.S. we found it a bit more challenging than anticipated. We experienced delays not only in getting the rig ready but also due to weather while moving the rig from Mexico to the U.S., which caused about a 40-day delay during that process alone. We didn't bring a rig into the U.S. Gulf hoping to just patch in short-term work. When we look at the U.S., the market was lacking high-specification shallow water capacity. Onshore has seen tremendous progress through technology and new work practices, while offshore still relies heavily on older rigs with limitations. The Odin brings capabilities related to factory drilling and accelerating wells.
We're getting a lot of traction from customers. I was in the U.S. a couple of weeks back and engaged with many customers; the commentary has been encouraging about interest in these capabilities and the potential well efficiencies. We should be starting work soon with Cantium, and we have follow-on potential with Exxon. I believe there's a good likelihood that across these customers there could be more work coming. For now, our priority is to get the Odin operating, capture lessons learned, and be ready for a potential second rig. At that time, we will evaluate the landscape for additional expansion.
We will now take the next question from the line of Joshua Jain from Daniel Energy Partners.
Maybe you could just go into a little more discussion on line of sight for the rigs that are idle going back to work. Just given your comments around Mexico and Asia, are those two of the markets that you might expect them to go to work in? Maybe just elaborate further.
Thanks for joining, Josh. We do have line of sight for quite a few of our rigs. I mentioned Asia and Mexico in particular not because those are the only areas where we see potential, but because those are the areas where we see very clear developments in terms of incremental activity. Our exposure is not only to those regions; we have a few rigs that could become available in West Africa, for example. As I mentioned earlier, that is a market where we see steady and positive demand that gives us line of sight for continued work. So don't take my comment as Asia and Mexico being the only interesting markets. They are the ones clearly showing earlier signs of demand recovery.
Okay. And then I wanted to go back to M&A. You talked about it earlier. You've been pretty active with respect to acquiring assets over the last 12 months. And you talked earlier in Q&A about incremental transactions not being sort of a mandate. But most of the things announced were in motion pre-war. Could you just speak to how the M&A environment you think has potentially changed for the industry since the war started? And do you expect to see more consolidation potentially amongst your peers in the current environment?
Yes. You're right that the consolidations we completed or announced were pre-war. I don't think the conflict has materially changed the outcome of our decisions. We're pleased with the assets acquired, the valuation and the structure of the deals. I do think the conflict brings some timing uncertainty, but looking forward it's hard to see a scenario where the outcome after the conflict is not a stronger demand for our services and for jack-ups than before. From our side, the priority near term is to find employment for those rigs, and that's what we're focusing on. The sector as a whole can benefit from more consolidation. Consolidation is not a bad thing; it can be positive for contractors and customers alike. I wouldn't say the conflict has significantly altered our view on M&A, but M&A remains an important consideration given the fragmented nature of the jack-up market.
There are no further questions at this time. I would now like to turn the conference back to Mr. Bruno Morand for closing remarks.
Thanks for joining, and thanks for your interest in Borr Drilling. I look forward to speaking to you next quarter.
This concludes today's conference call. Thank you for participating. You may now disconnect.