Earnings call transcript: Borr Drilling beats Q3 2025 expectations

Borr Drilling Ltd. reported its third-quarter 2025 earnings, surpassing Wall Street expectations with an EPS of $0.10, a 34.41% surprise over the forecasted $0.0744. Revenue also exceeded projections, reaching $277.1 million against a forecast of $261.54 million. Following the announcement, Borr Drilling's stock rose 3.47% to $3.07 in pre-market trading, reflecting investor optimism. According to InvestingPro data, the company has been profitable over the last twelve months with a diluted EPS of $0.26, suggesting sustained positive performance beyond this quarter's results.

Key Takeaways

• Borr Drilling's Q3 2025 EPS and revenue exceeded forecasts, with significant positive surprises.
• The company expanded its market presence in the U.S. Gulf of Mexico and Angola.
• High fleet utilization rates and strong operational performance were reported.
• Stock price increased by 3.47% following the earnings release.
• Future guidance indicates potential challenges, with forecasts of EPS losses in upcoming quarters.

Company Performance

Borr Drilling demonstrated robust performance in Q3 2025, continuing its positive trajectory with a notable earnings and revenue beat. The company capitalized on its strong operational platform, achieving high utilization rates and expanding its market presence in key regions. This performance is in line with industry trends, as the demand for jack-up rigs shows signs of recovery.

Financial Highlights

• Revenue: $277.1 million, up by $9.4 million quarter-over-quarter.
• Earnings per share: $0.10, surpassing the forecast by 34.41%.
• Adjusted EBITDA: $135.6 million, a 2% increase from the previous quarter.
• Net Income: $27.8 million.
• Free Cash Position: $227.8 million.

Earnings vs. Forecast

Borr Drilling's Q3 2025 results exceeded expectations, with an EPS of $0.10 compared to the forecast of $0.0744, marking a 34.41% surprise. Revenue also outperformed, reaching $277.1 million against a forecast of $261.54 million, a 5.95% surprise. This strong performance reflects the company's effective operational strategies and market expansion efforts.

Market Reaction

Following the earnings announcement, Borr Drilling's stock rose by 3.47% to $3.07. This increase reflects positive investor sentiment driven by the company's robust quarterly performance and strategic market expansions. The stock's current price is within its 52-week range, suggesting stable investor confidence in the company's future prospects.

Outlook & Guidance

Borr Drilling anticipates market tightening in the near to medium term, with expectations of improved utilization and day rates. The company remains focused on deleveraging and is optimistic about potential market recovery in the second half of 2026. However, the future guidance indicates potential challenges, with forecasts of EPS losses in upcoming quarters.

Executive Commentary

CEO Bruno Morand stated, "The jack-up market has bottomed, and we're seeing a clear inflection in rig demand across key regions." He emphasized the company's strong operational platform, noting, "We have a very strong operational platform that can deliver better value for jack-ups." Morand also highlighted the importance of deleveraging, saying, "Deleveraging is a priority for us, and it will be for a while."

Risks and Challenges

• Volatile Brent crude prices could impact the oil sector and Borr Drilling's operations.
• Geopolitical risks in regions of operation may pose challenges.
• Long-term EPS forecasts indicate potential losses, raising concerns about future profitability.
• Market saturation and competition could affect future growth prospects.
• Economic uncertainties and regulatory changes in key markets may impact operations.

Q&A

During the earnings call, analysts inquired about the resumption of payment collections in Mexico and the potential expansion of Saudi Aramco's rig count. Discussions also covered market consolidation opportunities and the impact of sanctions on operations. These points underscore the company's focus on strategic growth and operational resilience.

Full transcript - Borr Drilling Ltd (BORR) Q3 2025:

Conference Operator: Thank you for standing by. Welcome to the Borr Drilling Q3 2025 Results Presentation Webcast and Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press Star 1 and 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press Star 1 and 1 again. If you wish to ask a question via the webcast, please use the Q&A box available on the webcast link at any time during the conference. 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.

Bruno Morand, CEO, Borr Drilling: Good morning, and thank you for participating in Borr Drilling Third Quarter Earnings Call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer. First, covering the required disclaimers, I would like to remind all participants that some of the statements will be forward-looking. These matters involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. I therefore refer you to our latest public filings. For today's call, I'll start with a review of Q3 and highlight key developments since quarter-end. Magnus will then review our quarterly financial results. I'll follow with a deeper look in the market and our commercial execution, and we'll conclude with your questions. Let's get started. Our third-quarter results were strong, extending the rebound delivery in the second quarter.

With 23 of our 24 rigs active, our commercial team continues to execute at the highest levels, delivering strategically and timely contracts despite a volatile and dynamic market. Revenue increased by $9.4 million quarter over quarter, and adjusted EBITDA rose 2% to $135.6 million with a margin of 48.9%, confirming the quality of our earnings. Operational execution continues to be industry-leading with technical utilization of 97.9% and economic utilization of 97.4% across the fleet. Subsequent to quarter-end in October, we're pleased to announce three contract extensions in Mexico. Mexico remains an important market for Borr Drilling. Notably, collections restarted in September, with approximately $19 million received in September and October. These inflows, together with the recent government actions to strengthen Pemex finances, are the basis for our confidence in continued normalization of payments.

Additionally, in October, newly imposed international sanctions affecting one of our counterparties in Mexico required us to issue termination notices for the older and the new contracts. Today, we announced new commitments expanding Borr Drilling's footprint into the Gulf of Mexico and Angola. These awards strengthen and diversify our customer base and portfolio, underscoring our ability to navigate evolving markets and minimize idle time across the fleet. We expect fourth quarter 2025 results to reflect fewer operating days due to several rigs transitioning between contracts and the recent impact of sanction-induced contract terminations in Mexico. Despite these, we anticipate full year 2025 adjusted EBITDA in the range of $455 million-$470 million. In recent quarters, we've experienced a step-up in jack-up demand across several international markets, absorbing available capacity and providing gradual relief to the headwinds from 2024.

While near-term volatility may persist, clear signs of demand inflection in Saudi Arabia and Mexico, two of the world's largest jack-up markets, together with incremental activity in other areas, provide us with confidence that the market is now best at draws. We foresee a tightening market in the near to medium term that should support higher utilization and day-rate levels. I'll walk you through that in more color later in the call, but now I'll hand the call to Magnus to discuss third-quarter financial results.

Magnus Vaaler, Chief Financial Officer, Borr Drilling: Thank you, Bruno. I will now go into some details of the financials of the third quarter. As Bruno mentioned, we continued the good trend seen in the previous quarter, and the results quarter on quarter improved. Total operating revenues increased by $9.4 million due to a $2.5 million increase in day-rate revenue and a $6.4 million increase in variable charter revenue. The $2.5 million increase in day-rate revenue was primarily due to an increase of the number of operating days and day rates for the Gersemi and Gunnlod, recognition of day-rate revenue for the Vali versus previously being recognized as variable charter revenue, and an increase in reimbursable revenue for the Gersemi. These increases were offset by a decrease in the number of operating days for the Prospector One.

The $6.4 million increase in variable charter revenue is primarily due to the rigs Gersemi, Grid, and Gunnlod being fully operational in the quarter compared to being on suspension for part of the prior quarter. This increase was offset by the decrease in variable charter revenue for the Vali, as its variable charter contract was terminated effective June 30 and began earning day-rate revenue in August 2025. Total rig operating and maintenance expenses increased by $6.3 million, which is primarily as a result of the increase in reimbursable expenses for the Gersemi. This in total gives us an operating income of $98 million, a $1.5 million increase from the prior quarter. Further, below the operating income line, total financial expenses net increased by $2.2 million, primarily due to foreign exchange loss, offset by some higher interest income and lower interest expenses.

Income tax expenses increased by $6.5 million, primarily due to a one-off deferred tax benefit recognized during the prior quarter, with no comparable in the current quarter. As a result of the before-mentioned, net income for the quarter was $27.8 million, and adjusted EBITDA was $135.6 million, an increase of $2.4 million. Moving on to cash, our free cash position at the end of Q3 was $227.8 million. In addition, we had $234 million undrawn under our revolving credit facilities, resulting in total available liquidity of $461.8 million. Cash increased by $135.4 million in comparison to the prior quarter, explained by the following. Net cash provided by operating activities was $72.1 million, which includes $6 million of cash interest payments on our convertible bonds and $13.2 million of income taxes paid.

Operating cash flow for the quarter was further impacted by a build-up of working capital, primarily driven by an approximately $42 million increase in trade receivables in Mexico and a $13 million increase in trade receivables relating to the rig Vali. However, subsequent to quarter-end in October, we received approximately $17 million related to the trade receivables in Mexico and $10 million related to the Vali. We expect to receive further settlements for our Mexico receivables both in November and December. Net cash used in investing activities was $33.9 million and is comprised of jack-up addition, primarily as a result of activation costs and contract commencement for the Vali. Capital additions for drilling equipment and maintenance costs. Lastly, net cash provided by financing activities was $97.2 million, primarily due to $96.9 million net proceeds for the company's July 2025 equity offering.

With this, I would pass the word back to Bruno.

Bruno Morand, CEO, Borr Drilling: Thank you, Magnus. Year to date, we have secured 22 new commitments, adding $625 million to our backlog. Since our last report, we've continued to secure meaningful awards. First, in Mexico, we secured three contract extensions. The Gersemi and Gunnlod received two-year extensions on improved commercials and payment terms. These commitments not only strengthen our 2026 utilization, but they also provide visibility well into 2028. Under the revised structures, operating costs will be reimbursed by the customer on a fixed 45-day payment term, materially reducing our working capital needs. Variable charter payment terms will be capped at 180 days, and for the Gersemi, this cap will progressively improve over time. Additionally, we received a short-term extension for the Vali and continue in active discussions with our customer in Mexico about a long-term deployment for the rig.

In Mexico going forward, we will have a total of five rigs working from a previous count of seven, with two rigs being reassigned to New Age elsewhere, as I'll cover shortly. Regarding the five remaining rigs in country, two are long-term contracted with payment protection provisions, two are contracted with IOCs, and only one has direct Pemex payment exposure. This is a significant change in our fleet mix in country. I'm also pleased to report on recent awards in the Americas and West Africa, along with several other contracting updates. In the Gulf of Mexico, the Gersemi received a letter of award for a six-month campaign with an undisclosed operator. The campaign is expected to commence in January 2026. This will mark our entry into the U.S. and again highlights our team's ability to timely secure work for the rig following sanction-induced contract termination.

In West Africa, the GRIB has received a letter of award for a six-month commitment plus unpriced options with an undisclosed operator in Angola. The campaign is expected to commence in the first quarter. Leaning on our strong relationships, we have collaborated with our partner in Mexico to reassign wells previously allocated to the GRIB to our other rigs in country. These will enable us to conclude operations with the GRIB in Mexico in November, and the rig will begin its mobilization to West Africa in December. Also related to the GRIB, we have agreed with New Age to reassign the contract we previously allocated to the NAT to the GRIB and expect to commence a one-well campaign with New Age in Congo in January prior to commencing the work in Angola.

Additionally, in West Africa, we are in discussions with Eni regarding the recurring well sequence for the NAT in Congo. While there are various scenarios in consideration, we now expect the NAT to stay busy with Eni in Q4 and potentially into early part of 2026. I'm also pleased to share that we have agreed with Shell in Nigeria to accelerate the NAT campaign originally scheduled to commence in November 2026, now to April 2026. This significantly reduces potential idle time for the rig and provides Shell the ability to accelerate their well delivery schedule. It is clear to me that Borr Drilling is the preferred partner for Shell water drilling operations. In recent months, we have been trusted with commitments from our customer to deliver critical wells globally.

For example, Shell with their highly anticipated HI project offshore Nigeria, ONE-Dyas for the first fully electrified offshore drilling campaign in the Netherlands, and CME in Mexico for their Baca Bloom project, just to name a few. It is particularly notable that despite the various market headwinds presented in 2024 and early this year, our 2025 fleet coverage has reached 85% at an average day rate of $145,000. This is in line with our earlier targets of achieving 80-85% coverage in a year. Our full year 2026 coverage, including price options, now stands at 62%, a 15-point improvement since our last report. Taking a closer look into 2026, we have 79% coverage in the first half, a solid position to build from as we enter into the year.

Based on our current pipeline of opportunities and ongoing negotiations, we expect that utilization levels for the first half of 2026 will continue to increase in the coming months. At the same time, recent developments in Mexico and Saudi give us increased confidence in a tightened jack-up market and a constructive outlook for the second half of the year. This should position us well to gradually fuel up the coverage for 2026 while maintaining a disciplined commercial strategy. On the commodity front, Brent crude has remained volatile but rangebound in the mid-$60s. Current price levels have still allowed for meaningful contracting activities this quarter, as lower break-even shale water projects offer a relatively rapid B2B cycle for our customers. Despite several macro uncertainties, global utilization has remained resilient. In fact, increased quarter over quarter with modern rig market utilization at approximately 93%.

In Saudi Arabia, we're encouraged by the market reports confirming that Aramco has issued notices calling back several rigs previously suspended in line with our earlier expectations. As of today, our count is that seven to eight rigs have been called back by Aramco, effectively taking the majority of the readily available modern rigs still available from suspensions. The remaining idle rigs are either rumored to be committed elsewhere or have moved to cold stack after the suspensions last year. The increase of activity levels in Saudi will significantly tighten the supply and demand balance in the region. Equally positive, as we highlighted in our last call, we continue to see visible incremental demand in the Middle East, particularly Kuwait and the Neutral Zone, with multi-rig, multi-year tenders progressing towards awards.

Now, coupled with the callbacks from a Saudi Aramco, there is a real scenario for rigs from outside of the Middle East to be required to mobilize into the region to meet the forecasted increased demand in late 2026 and into 2027. In Southeast Asia, demand has remained resilient despite various market obstacles. As mentioned on past calls, weakness in the region has been driven by excess supply targeting opportunities following Aramco suspensions. We expect this dynamic to improve in 2026. In West Africa, incremental demand has continued to materialize as expected, and as evidenced by our mobilization of an additional unit into the region. Contract activity has continued to accelerate in the past 12 months, and we see opportunities developing in areas that historically held a much higher jack-up count, particularly Nigeria and Angola.

Mexico is one of the world's most consequential shallow water markets and remains strategically important for Borr Drilling. Over the past year, industry-wide payment timing challenges and temporary contract suspensions at Pemex have affected activity cadence. We responded constructively. We evolved our Mexico contract portfolio, thoughtfully diversifying beyond concentrated Pemex positions into IOCs and independents, while continuing to partner with Pemex where terms support sustainable operations. Looking into 2026, we see a market where turbulence begins to ease as the year progresses. White space for the global modern jack-up fleet is heavily weighted towards Asia and the Middle East in the near term, a phenomenon we see reconciled via demand increases in those regions over the next few quarters. In closing, I'm pleased to see how Borr Drilling continues to successfully navigate the dynamic market experience over the last couple of quarters.

We've secured important contracts for our premium rigs, strengthened our fleet coverage in 2025 and into 2026. We have continued to partner with our customers to optimize our fleet availability or offer them unique operational schedule flexibility. Based on that, we now anticipate 2025 full-year adjusted EBITDA to be $450 million-$470 million, aligned with our early expectations and adjusted for the impacts of recent sanction-induced terminations. Demand for modern jack-up rigs remains resilient. The jack-up market has bottomed, and we're seeing clear inflection in rig demand across key regions, including Saudi Arabia and Mexico. Lastly, I want to emphasize the strength of Borr Drilling operating platform. It is built on operational excellence, anchored by a strong focus on safety culture and a streamlined operating model that keeps us efficient and predictable. It's relentlessly customer-centric, informed by intimate knowledge of the shallow water market and strengthened by deep-rooted relationships.

It is powered by our premium jack-up fleet and our global footprint. This platform is our defining competitive advantage and positions us uniquely to benefit from ongoing market inflections. With that, I'll now turn the call over to Q&A.

Conference Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. We kindly ask participants to limit themselves to one question and one follow-up per person. We will now take the first question. From the line of Scott Gruber from Citigroup. Please go ahead.

Yes, good morning, Bruno and team.

Magnus Vaaler, Chief Financial Officer, Borr Drilling: Good morning, Scott.

It's good to hear, obviously, of the new contracts in Mexico for you, and good to hear Saudi's calling some rigs back. It seems like the market is improving here. Just curious how you view the next 12 to 24 months in the global jack-up market. Is this momentum going to continue? Are we going to see a genuine inflection in demand in the next year or so, even if crude is range-bound, or do we need some improvement in crude to really drive that inflection?

Bruno Morand, CEO, Borr Drilling: No, thanks, Scott. As I mentioned earlier, a lot of the inflection now is basically resulting from the fact that the headwinds experienced earlier, namely Saudi and Pemex, are now starting to revert. If you look at activity levels or if you look at utilization levels at 93%, that number is fairly healthy. With the suspensions now rolling back, the 93% is a real number. It is not a number that requires adjustment. We are in a territory that is quite interesting. Obviously, it takes a little bit of time for some of these dynamics to take place. We expect that as particularly the tenders in the Middle East start to conclude, the push for rigs to come back will start to kind of come through, and that rebalancing is what eventually helps us in achieving higher utilization and better day rates in general markets. Now.

I'll say beyond the Middle East, we've seen that most markets have been operating at or very close to balance, and that includes, for example, West Africa. We think that obviously the ongoing inflection will support faster recovery in markets like that. On the opposite end, as I mentioned in my remarks, markets such as Southeast Asia, for example, where the demand takes a bit longer to materialize, may take a quarter or two before we see the real impacts of that. I think the way to think about it is we're going to continue to navigate some volatility in the first half of the year, improving. The potential here for a much stronger second half of the year seems to be solidifying based on this development that we see.

Now, we said before, in terms of commodity pricing, where it is, I believe, is quite healthy for the jack-ups. Jack-ups are very economical barrels for the customers. They're fast barrels to the market, and we think it's actually quite interesting for us to have pricing at that level. I don't think that pricing movements here are needed to spark additional activity. It's really just the time that it takes for the developments in Saudi, the developments in Mexico, and some of the ongoing tenders to really come through.

I appreciate that color. One of the macro themes we're seeing here is rising demand for natural gas around the globe to help power data centers and just generally rising power demand. How do you think that impacts the jack-up market in the years ahead? I'm particularly thinking about Southeast Asia. Is there a pull from the gas side that's going to help that market?

No, indeed, Scott. We have been participating in several very interesting gas projects around the world. I think in the previous quarters, we named, for instance, the Eni project in Congo, which is a very interesting and large-sized gas development. In Asia, we have been participating in gas projects before. There are a few very interesting projects, particularly in the area of Sarawak, that have been put on hold for now until the situation in Malaysia gets resolved, the political situation in Malaysia gets resolved. Aramco has, over time, obviously expanded their presence in gas, and I think it has been largely onshore-focused. There have been discussions over the last few quarters about Aramco potentially returning to gas in the offshore space in a more meaningful way. Clearly, what you see is true. We do expect that there will be.

High interest from our customers to start developing some of these gas projects that are available around the globe.

That's interesting. We'll definitely be watching. Thank you.

Thank you, Scott.

Conference Operator: Thank you. We will now take the next question from the line of Eddie Kim from Barclays. Please go ahead.

Hi, good morning. Congratulations on the two separate two-year extensions on the Gersemi and Galar in Mexico. Just curious on pricing for those two rigs. I don't know if you can share if the day rates on those two extensions are similar to what they're earning today or higher or at a discount. Just any kind of directional commentary there would be great.

Bruno Morand, CEO, Borr Drilling: Very good, Eddie. We haven't disclosed specific numbers for that, but what we shared, they are a notch above from where the rigs are operating at the moment, which that on itself is very interesting. Equally relevant, as I mentioned in the prepared remarks, is the fact that we were able to negotiate improved contract terms and payment terms for those rigs in particular. What we've seen over in Mexico over the last several quarters has been that collections is being a very relevant topic. We took marked efforts to ensure that we were adjusting these things in this contract, not only to improve the day rate, because that's an important part, but equally important to make sure that those day rates are received in the bank account and we don't have a growing working capital requirement in the country.

Understood. Understood. Separately, it's great to hear about the expected activity inflection in Saudi Arabia. Just curious, I mean, two years ago, the Saudi Aramco jack-up rig count was as high as almost 90 jack-ups. Today, it's around 55. Just curious, where do you think we get to sometime in 2027? Probably not back up to that 90 level, but does 70, is that reasonable or is even that too high? Just curious your estimate of where their jack-up rig count could get to by 2027.

Yeah. Eddie, this is a great question. Probably not a very easy one to be precise. From our desk, we think that a number in the high 60s and 70s is very likely. I think a number in the high 70s is possible. The reality is, in the big scheme of things, as I mentioned in the prepared remarks, even with these callbacks that just took place over the last couple of weeks, capacity in the region is actually already very tight. Whether that number is low 70s, whether that number is high 70s, I think actually has very little bearing on how the sector is going to respond, because in any case, any leg up from where we are at the moment is very likely to cause an acceleration in utilization and consequently in economics in the space.

I think a number in the 70s is very reasonable, but I would probably fall shy of trying to predict Aramco behaviors. We all try in the past. It's definitely not an easy thing. They have a lot of things going on. So that's the way to think it. I think anything they do on top of the callbacks that already took place is more than welcome in the sector and is going to strengthen the space tremendously.

Great. Thanks for the color, Bruno. I'll turn it back.

Thank you, Eddie.

Conference Operator: Thank you. We will now take the next question from the line of Frederick Stan from Clarksons Securities. Please go ahead.

Hey, Bruno and Magnus. Hope you are well. I have two questions for you today. The first one relates to Mexico and the payments there. Clearly, liquidity in general has been a recurring theme given your historical Mexico exposure, mostly Pemex. Now that you've received some money in October and small sums in September as well, how do you think about potentially, I think historically Pemex has paid suppliers monthly. Should we expect any similar payments as you got in October and November and December as well? Do you have any clarity on that, kind of taking our receivables down in that country?

Magnus Vaaler, Chief Financial Officer, Borr Drilling: Yeah. I'll take that question. Thank you, Frederick. Obviously, very positive to see that what we have predicted, the payments starting to flow in the second half of the year, actually has happened. And we received $17 million in October. We have, from what we see in the plans, there are payments to come in both November and December as well. Following that, we would also expect things to return more to normal with monthly settlements. Also, that being said, and Bruno also mentioned the improved payment terms that we have in our two new contracts, which has actually a cap on the number of days we can have outstanding for operating costs that we pay under our O&M of 45 days. We expect to get that paid within 45 days. Also, a maximum of 180 days outstanding for the bareboat.

That's also going to improve on our collections that we see. Since we're not contracting directly with Pemex for these two rigs, but between the intermediaries, we have obtained those payment terms from them.

Yeah, that's very helpful. For my second question, switching gears a bit. There has been some industry consolidation in the space this year with Ades likely acquiring Shelf if everything is checked. Clearly, in almost any type of consolidation, there is room for fleet improvements, scrapping, and whatnot. You guys have a premium, fully premium fleet already, and I'm sure there are some other assets out there that could be an interesting fit for you guys. Have you thought any more actively on how Borr's role could potentially be in any M&A or asset transaction scenario since you kind of both in the third quarter and in relation to the equity raise in July seemed a bit more open to that particular theme compared to what you have been earlier?

Bruno Morand, CEO, Borr Drilling: Thanks, Frederick. Yeah. I hope my answer is probably not too much of a repetition from what I've tried to put across in earlier calls. Consolidation is definitely important for the space. It has been welcomed in general. You're right. Whether resulting from that consolidation or just the state of the market, we have seen, together with it, some additional retirement, some additional scrapping, some additional repurposing, which is obviously another very important dynamic for the sector. Those things are indeed interesting. We continue to look, you're right, as I highlighted in your remarks, we do believe we have a very strong operational platform that can deliver better value for jack-ups than perhaps quite a few of our peers. That's really what puts us in a position to meaningfully look into how we participate in consolidation if opportunities were to come.

As you said before, and you mentioned that in your question, there are some metrics that are very important for us to consider. One of those metrics is really the quality of the fleet. We are very proud to have the youngest and the most premium fleet in the water. Obviously, it's important for us to make sure that anything that we look into does not come at the expense of diluting the quality of the fleet that we have. Similarly, as we said before, a very strong driver for the company at the moment is to make sure that we continuously deliver our balance sheet over time. When we look at any M&A transactions, it has to be something that makes sense from a deleveraging perspective. When you put these things together, we continue to see what is out there.

I do think that we have a great platform to grow. We do not have to. We are going to continue to look at that opportunistically. I do think that the sector can do with more consolidation. If we can be part of it, if it is rational, if it fits our strategy, we are definitely open to see what is out there.

All right. Thank you so much for the commentary. Have a good day, both of you. That's all for me.

Thanks, Frederick.

Conference Operator: Thank you. We will now take the next question from the line of Doug Becker from Capital One. Please go ahead.

Thank you. Bruno, you've emphasized the expanding Borr footprint. Curious how you're thinking about balancing portfolio diversification versus having scale in particular markets to manage costs. Maybe putting it differently, do you view growing the fleet in the U.S. Gulf, Angola, Saudi Arabia as strategic priorities?

Bruno Morand, CEO, Borr Drilling: No, thanks, Doug. I think you're right. There's a very interesting balance between not stretching yourself too wide. The way I see at the moment our operation, if you look in the markets where we are present, we are in very large scale in these markets. Generally, our expansion has been in adjacent markets. Obviously, Angola is a new place for us, but we have a very strong operation in West Africa and a very strong knowledge of operation in West Africa that will help us to build that up. The U.S. is definitely a new frontier, but on the Mexico side, we're present. We understand the operational challenges. We understand how to be successful in that environment.

Certainly, there will be some learnings from the U.S., which is new to our portfolio, but certainly, we feel that we are in a good position to manage that. Frankly, I wouldn't say at this time that the U.S. is expected to be a large expanding market for us. Getting one rig there, I think, is a good achievement for us. It's a new place that we're going. I do see some of the policies in the U.S. potentially supporting more activity. For now, we see a pipeline that is enough to keep the old and busy for quite a while, and that's what we're targeting. If more opportunities come in the back of changing policies, changing incentives for operators in the U.S. to go forward with their projects, we'll be ready to look at that. For now, I think it is probably a one-replay.

Makes sense. Just given the increased confidence that the jack-up market has passed the trough, any changes to the capital priorities? I know you mentioned deleveraging over time is still a priority, but just given a better market outlook, is there any shifting in how capital might be allocated?

No, not at this time, Doug. I think we maintain the view that deleveraging is a priority for us, and it will be for a while. We want to make sure that by the amortizations that we have in our bonds, by the potential cash sweeps that we have in the bonds, we're positioning ourselves to be in a very favorable position to refinance our debt in 2028. That is on the back of obviously deleveraging consistently over time. Other priorities, I think, we'll leave it for another day. I think it's a bit too early for us to consider. The momentum is positive. That doesn't drive a changing strategy for now.

Got it. Thank you.

Conference Operator: Thank you. We will now take the next question from the line of Ben Summers from BTIG. Please go ahead.

Hey, good morning, and thank you for taking my question. I know you touched on it a little bit in the press release, but kind of curious how you're looking at the new build market. I know you guys mentioned that there are some supply chain challenges that you think will kind of push out these new build rigs entering the market. Just kind of curious any color there on what you're seeing.

Bruno Morand, CEO, Borr Drilling: Yeah. No, nothing's changed, Ben. I think quite a few quarters ago, we shared a view that we believe that the order book that is namely there, there may be one rig, two rigs maximum that would come to the market. That was several quarters ago. None of these rigs have come out. Obviously, the longer they stay in the shipyard, the more complicated it is. A lot of these rigs were in very early stages of conclusion when they were stopped or abandoned. It's not easy. We haven't seen any one of them coming out. I honestly do not expect that to change as things improve.

Awesome. Thank you. I know you touched a little bit on the U.S. Gulf entry, but just curious kind of on Angola, now bringing a rig there, just kind of any outlook or color on that market.

Yeah, sure. I mean, it is a new area for us. We have been looking at Angola before and waiting for the right moment, the right opportunity to be in country. As I said earlier, we have a very well-established infrastructure in West Africa. Angola was a bit of a natural growth opportunity for us. Historically, as I mentioned in the remarks, it's a market that had a quite substantial activity level for jack-ups that has been subdued for quite a few years. It seems that the potential is very large. That's not limited to Angola. We see quite a few markets in West Africa that haven't had enough activity for quite a few years now coming back. Being able to penetrate Angola now, have that as an opportunity for our portfolio, I think, strengthens our flexibility going forward.

Great. Thank you guys for taking my questions.

Thank you, Ben.

Conference Operator: Thank you. We will now take the next question from the line of Greg Broady from Bank of America. Please go ahead.

Hey, guys. Thanks for the time here. You talked about better collection terms on your new contracts and obviously collected $19 million in October from Pemex. How should we think about what the opportunity to recapture working sort of those receivables is over the next year?

Magnus Vaaler, Chief Financial Officer, Borr Drilling: It's a very great question on how to capture the receivables from Pemex.

Pemex, and that's the main one, yeah.

Yeah. No, so I think what we've seen now is that Pemex has, and then the government in Mexico has put in place several schemes this year, want to refinance their financial liabilities and also their vendor or supplier liabilities with a $12 billion setup. And that's something we've seen. They've gone through now in the second half, started to repay, and we received $17 million so far in October. We see signs of having more payments come in November and December and expect a return to normality when it comes to payments in Mexico. I think it's looking like they are taking the right steps in Pemex and in the government in Mexico to become more current on their payables, definitely.

Bruno Morand, CEO, Borr Drilling: Greg, just to highlight what we've kind of mentioned earlier, obviously, we have current receivables that we are, and we are continuing to work hard to collect them. With the new contract terms that we have and the new allocation of the portfolio in Mexico, effectively, the New York will continue to have Pemex payment exposure. The remainder of the fleet in country will now either be working with IOCs or include fixed payment terms that diminishes tremendously our exposure to the Pemex payment friction. That doesn't resolve the current outstanding receivables, and we continue to work very hard, as Magnus says, to lean on the existing facilities in place, the mechanisms that government put in place to accelerate that. Going forward, we expect that very soon the new terms will slow down considerably the accumulation of receivables in Mexico and keeps us far more current.

Got it. And then just with the sanctions, obviously, you moved one of the rigs, so that leaves the HILD. What are your expectations for how this plays out, particularly with what I think is the sale to Gunnlod of those assets? But what's your expectation for that, and how are you thinking about what you do with the HILD from here as a result?

Yeah. It's probably early to say, Greg. What we know is we've worked very diligently. As soon as we became aware of the sanctions, we did what we were required to do to make sure that we stick to our governance and comply with international requirements. We are currently winding down operations on those rigs. We're expecting both of them to finish around mid-November, the ongoing activities as allowed by the sanctions. We continue to monitor the situation. It could change if there's a sale, potentially. We don't want to speculate. For now, we're doing what we have to do. It's a customer that, over time, I think we deliver great service for them. They seem to be extremely happy with what we've done over time.

Provided no sanctions affect our ability to continue working in that field or delivering that program, we definitely would be more than happy to continue to do that. I do not want to speculate. For now, we are sticking to the rules as they apply, and then we will see if things change as we go along.

Have you seen this uncertainty with sanctions impact the rig market at all? You're probably a little closer to this than me, but how many others have been affected by the suspensions?

I won't comment much about others. I mean, the only thing I think has been in the news recently was a similar impact of Vantage on the deep water market. In the shallow water market, I haven't seen any other announcements. As far as we are concerned, the impact of that has been limited to Mexico. We'll continue to monitor. The whole topic of sanction is a very dynamic topic at the moment. For now, that's been the only impact to our business, which we disclose, which is the loss of revenue. For the old one, we're very happy to see that the rig has been recontracted now.

For the HILD, we'll continue to see what are the opportunities for the rig, whether it involves returning to the same project once the field is sold or if the field is sold, or alternative deployments for the rig within and out with the region.

Great. And one last one. Just what's your expectation for cost trends on the operating side here relative to this quarter going forward? How should we think about that?

Sorry, Greg. I'm not sure if I got your question.

Cost trends on the operating side. What's your expectations for the directions of your cost up? Or is there opportunities to cut costs? Just wondering how you're thinking about that going forward.

Yeah. No, and as we said before, we've been seeing operating costs very steady over time. There are differences in operating costs from region to region, from country to country. All in all, we have not seen a significant change in operating costs over the last few quarters. Neither do we have any reasons to believe that that's going to be changing going forward. The team continues to be working focused on finding savings in our operations, streamlining operations, and that clearly has been more than enough to offset any inflations experienced in the sector. So far, it has been flat. I have no reasons to think that it will change going forward.

I appreciate all the time, guys. Thanks for all the call.

Thanks, Greg.

Magnus Vaaler, Chief Financial Officer, Borr Drilling: Thank you.

Conference Operator: We will now take the next question from the line of Joshua Jain from Daniel Energy Partners. Please go ahead.

Good morning. Thanks for taking my questions. I really only have one, which is on rig attrition. Maybe do you have a number in mind with respect to how many incremental rigs could leave the market next year or any insights there? Or maybe to put the question differently, could you speak to broadly the capital investment that may be required for a number of operating rigs that are out there today that are older to sort of keep pace with a lot of the newer spec rigs and how that frames market dynamics? Thanks.

Bruno Morand, CEO, Borr Drilling: Thanks, Josh. We see that the standard rig market or the older vintage rig market has been shrinking over time, and they've been limited to a few markets. The rig count on that side, the active rig count on that side, is about 100 rigs at the moment in the water, and the average age is above 40 years old. There is obviously a lot of potential for attrition. Some of this attrition should happen as a result of lack of contracting opportunities for these rigs. Some of the attrition will happen as a result of just the high CapEx required to maintain these rigs active going forward. Rigs are mechanical equipment, and as such, they require capital to stay in good working class. By the time they are 40 years old and beyond the retirement age, that only gets worse exponentially.

I don't know how many rigs I'll say can get out of the market. Clearly, there's a potential for a lot of the rigs to go out of the market. We're seeing that trend accelerating. We're seeing rigs now converted to or sold for conversion to more pool, including quite a few of the rigs that came out of Saudi. We'll continue to look. Obviously, for us, we expect owners to act diligently in that and discipline on that. For us, it's a bit of a muted point. Our rigs are all very new. It's the youngest fleet in the industry. Let's see what happens.

Thanks. I'll turn it back.

Thanks, Josh.

Conference Operator: Thank you. That's all the time we have for questions today. I would now like to turn the conference back to Bruno Morand for closing remarks.

Bruno Morand, CEO, Borr Drilling: Very good. Thanks for participating in today's call, and I look forward to speaking to you guys soon.

Conference Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

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