Q2 2024 Borr Drilling Ltd Earnings Call
Okay.
Operator: Good day and thank you for standing by.
Speaker Change: Good day and thank you for standing by welcome to the ball Trading Ltd. Second quarter 2024 results presentation webcast and conference call. At this time, all participants are in listen only mode.
Operator: Welcome to the Borr Drilling Limited second quarter 2024 results presentation webcast and conference call. At this time all participants are in listen-only mode.
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Speaker Change: After the speaker's presentation, there will be the question and answer session.
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Patrick Schorn: I would now like to hand the conference over to our first speaker today, Mr. Patrick Schorn, CEO. Please go ahead. Good morning, and thank you for participating in the Borr Drilling second quarter 2024 earnings call.
Speaker Change: I would now like to hand, the conference over to your first speaker today, Mr. Patrick Shouldnt feel please go ahead.
Speaker Change: Good morning, and thank you for participating in the board Drilling's second quarter 2024 earnings call.
Patrick Schorn: I'm Patrick Schorn, and with me here today in Dubai is Bruno Morand, our Chief Commercial Officer, and Magnus Vaaler, our Chief Financial Officer.
Speaker Change: And Patrick Schorn, and with me here today in Dubai, as Bruno Mora, Chief Commercial officer.
Speaker Change: S Filer, our chief Financial Officer.
Patrick Schorn: Likely.
Speaker Change: Next slide please.
Patrick Schorn: First, covering the required disclaimers. I would like to remind all participants that some of the statements will be forward-looking. These matters involve risk and uncertainties that could cause actual results to differ materially from those projected in these statements.
Speaker Change: First covering the required disclaimer I would like to remind all participants that some of the statements will be forward looking.
Speaker Change: These matters involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements.
Patrick Schorn: I therefore refer you to our latest public filings. Next slide. I'm pleased with the second quarter results and performance. All 22 delivered rigs are contracted and committed. In addition, one of the new build rigs, the Vaali, has been delivered today for which we already have a work scope assigned. And the VAR, our final new build, remains on schedule for delivery in late Q4 2025. On the back of our strong contract portfolio, we generated 253 million in adjusted EBITDA year-to-day. positioning as well to meet our full year 2024 adjusted EBITDA guidance of 500 to 550 million.
Speaker Change: Therefore, we refer you to our latest public filings.
Speaker Change: Thanks, a lot.
Speaker Change: I'm pleased with our second quarter results and performance or 'twenty, two delivered rigs are contracted and committed.
Speaker Change: In addition, one of the Newbuild rigs Diwali has been delivered to today.
Speaker Change: For which we already have the work scope aside.
Speaker Change: And before our final Newbuild remains on schedule for delivery in late Q4 2024.
Speaker Change: On the back of our strong contract portfolio, we generated $253 million and adjusted EBITDA year to date.
Speaker Change: Turning as well to meet our full year 2024, adjusted EBITDA guidance of $500 million to $560 million.
Patrick Schorn: From a cash standpoint, we are well positioned for the future. We have an undrown 150 million RCF, a 45 million guarantee facility and nearly 200 million in cash at the end of the quarter. In 2024, we will complete our CAPEX program related to the new build rigs, enable us to further enhance shareholder returns through additional dividends and or share buybacks, with 100 million still available under the current buyback authorization. The board has approved a quarterly dividend of 10 cents per share for Q2 2024, which was doubled in the first quarter. amounting to approximately $100 million in annual dividends.
Speaker Change: From a cash standpoint, we are well positioned for the future. We have an undrawn 160 million Ics, a 45 million guarantee facility and nearly $200 million in cash at the end of the quarter.
Speaker Change: In 2024, we will complete our Capex program related to the new build rates enable us to further enhance shareholder returns through additional dividends or share buybacks with a 100 million still available under the current buyback authorization.
Speaker Change: The board has approved a quarterly dividend of 10 cents per share for Q2, 2024, which was double in the first quarter.
Speaker Change: Amounting to approximately $100 million in annual dividends.
Patrick Schorn: In terms of contracting, we have continued to secure new contracts at accretive day rates, including the recently announced long-term contract for the Arabia One in Brazil. I am particularly pleased that following the unexpected suspension in Saudi Arabia, we were successfully in obtaining a replacement contract. It should be advantageous for the coming four years due to its higher day rate and longer contract duration. As I already mentioned, all are 22 delivered rigs. are again contracted with only a few days left remaining available in 2024. Looking ahead to 2025, we currently have about 73% of our capacity contracted.
Speaker Change: In terms of contracting we have continued to secure new contracts at accretive day rates.
Speaker Change: Including the recently announced long term contract for the Arabia, one in Brazil.
Speaker Change: I'm, particularly pleased that following the unexpected suspension in Saudi Arabia, we were successfully obtaining a replacement contract at <unk>.
Speaker Change: Should be advantageous for the coming four years due to its higher day rate and longer contract duration.
Speaker Change: As I already mentioned, all our 'twenty two delivered rigs.
Speaker Change: Our again contracted with only few days left remaining available in 2024.
Speaker Change: Looking ahead to 2025, we currently have about 73%.
Speaker Change: Our capacity contracted.
Patrick Schorn: which aligns with our expectations for this time of the year. Looking ahead, we foresee a continued tight market for premium assets. leading to sustained better price. The Global Jackup Fleet's age profile with now 30%. of the RICs being over 35 years old is expected to drive incremental retirement. Coupled with the fact that no new rigs have been ordered in the past decade, these conditions create a favourable environment for our company, which operates the youngest fleet of 24 premium rigs in the industry. The second quarter operational performance has been strong, with a technical utilization rate of 99.2%.
Speaker Change: Which aligns with our expectations for this time of the year.
Speaker Change: Looking ahead, we foresee a continued tight market for premium assets, leading to sustained better pricing.
Speaker Change: The global Jackup fleet age profile with now 30%.
Speaker Change: Of the rigs being over 35 years old is expected to drive incremental retirements.
Speaker Change: Coupled with the fact that no new rigs have been ordered in the past decade. These conditions create a favorable environment for our company, which operates the youngest fleet of 24 premium rigs in the industry.
Speaker Change: The second quarter operational performance has been strong with a technical utilization rate of 99, 2%.
Patrick Schorn: which was converted into a strong economic utilisation of 98.4.
Speaker Change: Which was converted into a strong economic utilization of $98 four.
Magnus Vaaler: Magnus will now step you through the financial details of the second quarter. Thank you, Patrick. The financial performance for Q2 was strong and continues the positive trend experienced in the recent quarters with an increase quarter on quarter in total revenue of 16% and an increase in adjusted EBITDA of 17%. Q2 total operating revenues were $271.9 million, an increase of $37.9 million compared to the first quarter. Out of these $37.9 million, day rate revenues increased by $24.7 million. This is related partly to increases in operating days and day rates for the rigs Iden, Thor and the Prospector V and 14.5 million impact from the amortization of deferred MOB revenue related to the contract termination for the Arabia These increases were partly offset by a decrease in operating days for Arabia.
Speaker Change: Magnus will now step you through the financial details of the second quarter.
Magnus: Thank you Patrick.
Magnus: The financial performance for Q2 was strong and continues the positive trend experienced in the recent quarters with an increase quarter on quarter and total revenue of 16% and an increase in adjusted EBITDA was 17%.
Magnus: Q2, total operating revenues were $271 9 million, an increase of $37 9 million compared to the first quarter.
Magnus: After these $37 9 million de rate revenues increased by $24 7 million.
Magnus: This related primarily to increases in operating days and day rates for rigs Iden tour and the prospect of five and $14 5 million impact from the amortization of deferred revenue related to the contract termination toward Arabia.
Magnus: These increases were partially offset by a decrease in operating days further ABL.
Magnus Vaaler: In addition, for the first time, included in the total operating revenues was the recognition of management contract revenue of $11.7 million for three-hour bare-boat rigs in Mexico, for which we also provide rig operational and maintenance. Total operating expenses for the second quarter were 167.6 million, an increase of 18.4 million compared to the first quarter. 11.2 million of the increase relates to the rig operating and maintenance support services we do in Mexico, which I mentioned under revenues, and that we earned 5% marginal. In addition, 3.9 million of the total variance is due to the increase in amortization of deferred costs associated with the termination of rent.
Magnus: In addition for the first time included in the total operating revenues was the recognition of management contract revenue of $11 7 million for three are bareboat rigs in Mexico for which we also provide rig operational and maintenance and support services.
Magnus: Total operating expenses for the second quarter were 100.
Magnus: $67 6 million, an increase of $18 4 million compared to the first quarter.
Magnus: $11 2 million of the increase relates to the rig operating and maintenance support services, we do in Mexico, which I mentioned on the revenues that we earned 5% marginal.
Magnus: In addition, $3 9 million of the total variance is due to the increase in amortization of deferred costs associated with the termination number as well.
Magnus Vaaler: Net income for the quarter was $31.7 million, an increase of $17.3 million, or more than doubling from Q3. Adjusted EBITDA was $136.4 million, an increase of $19.6 million or $17.5 million. Our free cash position at the end of Q2 was $193.5 million. In addition, we had 150 million undrawn under our RCF facility, resulting in total available liquidity of approximately 344 million. The total cash in the quarter decreased by 88.5 million.
Magnus: Net income for the quarter was $31 7 million, an increase of $17 3 million or more than doubling from Q.
Magnus: Adjusted EBITDA was $136 4 million, an increase of $19 6 million or 17%.
Magnus: Our free cash position at the end of Q2 was $193 5 million and.
Magnus: In addition, we had $150 million undrawn under our Rcs facility.
Magnus: Resulting in total available liquidity of approximately 344 million.
Magnus: The total cash in the quarter decreased by $88 $5 million were taken a closer look at the cash flows.
Magnus Vaaler: We've taken a closer look at the cash flows. where net cash provided by operating activities was 9.1 million. This includes 91.9 million of cash interest paid on our bonds and 17.2 million of income tax. Net cash used in investing activities was 13.4 million. This includes 6.8 million used on jackup additions consisting primarily of costs for special periodic surveys and long-term maintenance, and 6.4 million used on new building additions relating to the activation cost for our new Net cash in financing activities was 84.2 million. This includes 60.3 million paid on our bond debt amortization and 23.9 million of cash distributions paid to shareholders.
Magnus: Net cash provided by operating activities was $9 1 million.
Magnus: This includes $91 9 million cash interest paid on our bonds and $17 2 million of income taxes paid.
Magnus: Net cash used in investing activities was $13 4 million. This includes $6 8 million on Jackup additions, consisting primarily of costs for special periodic surveys and long term maintenance and $6 4 million used on new building additions relating to the activation costs for our new builds.
Magnus: Net cash in financing activities was 80.
Magnus: $4 2 million.
Magnus: This includes $60 3 million paid on our bond debt amortization and $23 9 million of cash distributions paid to shareholders.
Magnus Vaaler: Subsequent to quarter-end, we raised 150 million of additional debt under our 2028 Senior Secured Notes to finance the delivery of our new build, the Vaali. While the seller's financing was available for this rig due to more favourable pricing and terms under our bones, we decided to raise additional debt through this 150 million tap. We continue to have sellers financing committed to the last new build to be delivered later this year, but we will explore possibilities when we are approaching.
Magnus: Subsequent to quarter end, we raised $150 million of additional debt under our 2028 senior secured notes to finance the delivery of our Newbuild developing.
Magnus: While the seller financing was available for this rig due to more favorable pricing and terms under our bonds, we decided to raise additional debt.
Magnus: $150 million.
Magnus: We continue to have sellers financing committed to the last new build to be delivered later this year, but we will explore possibilities.
Bruno Morand: With this, I will pass the word over to Bruno. Thanks, Magnus. On the commercial front, we have continued to add a creative contract to our backlog, including one further fixture with a clean day rate above $200,000 per day. So far this year, we've secured 14 new commitments, adding nearly 10 redears and 651 million in backlog at market leading rates. Let me provide some highlights of our recent fixtures. Firstly, the Prospector One has had a one-wheel option exercised by OEDI. This option should keep the rig contracted into Q2 2025. His additional scope relates to the JENS project in the Netherlands, which includes upgrades to the Prospector 1 that will ultimately enable it to operate with 100% green electricity provided by a nearby wind farm.
Magnus: <unk> delivery.
Magnus: With this I will pass the word I want to Bruno.
Bruno Mora: Thanks Margaret.
Bruno Mora: On the commercial front, we have continued to add accretive contract to our backlog, including one further fixture with a clean day rate above $200000 per day.
Bruno Mora: So far this year with secured 40, new commitments added nearly 10 rig years $651 million in backlog at market leading rates.
Bruno Mora: Let me provide some highlights of our recent fixtures.
Bruno Mora: Firstly, the prospector one has had a one well option exercised by only Ddos is.
Bruno Mora: This option should keep the rig contracted into Q2 2025.
Bruno Mora: These additional scope relates to the <unk> project in the Netherlands, which includes upgrades to the prospector one that will ultimately enable it to operate with a 100% green electricity provided by nearby in Florida.
Bruno Morand: We're very pleased with our close collaboration with ONDF and how this continues to add to our portfolio projects focused on reducing the carbon footprint from our operation.
Speaker Change: We're very pleased with our close collaboration with Owen ideas and how this continues to add to our portfolio of projects focus on reducing our carbon footprint from our operations.
Bruno Morand: In Southeast Asia, we secured a binding letter of award for the gun lot for a 210-day program commencing November this year. In Africa, the Norva has secured a further extension with BWE that will maintain the rig contracted until February 2025. The Rego then commenced its subsequent contract with Marathon Oil in Egypt. We continue to see interest work prospects across Africa. The Norva is a high performing unit capable of operating up to 400 feet of water and remains well positioned to secure continued commitments in the region.
Speaker Change: In Southeast Asia, we secured a binding letter of award for the gun laws for 210 day program commencing November this year.
Speaker Change: In Africa, the Nova has secured a further extension with VW that will maintain the rig contracted until February 2025.
Speaker Change: Greg will then commence its subsequent contract with marathon oil in EG.
We continue to see interest work prospects across Africa, and Norway is a high performing unit capable of operating up to 400 feet of water and remains well positioned to secure continued commitments in the region.
Bruno Morand: During our last quarter's conference call, we announced the company had secured two commitments in Africa, amounting to 660 days of backlog, for which rig assignments were still under review. We're pleased to confirm that the GERD has been assigned the first commitment with E&I in Congo. It will commence its mobilization from the EUAE in September, following the completion of the current contract with GUNDU. For the second commitment, we will assign our new Vali and expect the work to commence between late Q4 2024 and Q1 2025.
Speaker Change: During our last quarter's conference call, we announced the comprehensive Q2 commitments in Africa amounted to 660 days of backlog for each rig assignments, we're still under review with.
Speaker Change: We're pleased to confirm that the <unk> the first commitment with Eni in Congo.
Speaker Change: It will commence its mobilization from the UAE in September following the completion of the current contract with <unk>.
Speaker Change: For the second commitment last night, our new value and expect to work to commence between late Q4, 2024, and Q1 2020 funds.
Bruno Morand: And lastly, the Arabia One, which had its contract suspended by Rampo Air this year, has now secured a new long-term contract in Brazil, expected to commence in Q1 2025, a significantly improved economy. On the back of these contracts, our fleet is nearly fully contracted for 2024 with limited white spaces, mainly related to the tour in late Q4. For 2025, our contracted coverage has now reached 73%, including firm contracts and price options. The new awards received this year at market-leading rates have resulted in an increase of approximately $13,000 per day to the average day rate of our backlog.
Speaker Change: And lately the Arabia, one which had its contract suspended by rough where each year has now secured a new long term contract in Brazil expected to commence in Q1 2025 are significantly improved economics.
Speaker Change: On the back of these contracts are fleet is nearly fully contracted for 2024 with limited white spaces, mainly related tour in late Q4.
Speaker Change: For 2025, our contract coverage and have now reached 70%, including firm contracts and priced options.
Speaker Change: The New awards received this year at market, leading rates have resulted in increase of approximately $13000 per day to the average day rate of our backlog and the combination of help contract coverage and higher day rates is a strong revenue visibility in 2020 filings.
Bruno Morand: And the combination of health, contract coverage, and higher day rates gives us strong revenue visibility in 2025.
Bruno Morand: From a broader market perspective, utilization for modern jackups remains at approximately 95% not adjusted for aeronical suspension. Following a second wave of suspensions by Aramco, there have been 22 modern rigs suspended this year, of which 5 have already been recontracted elsewhere, including our Arabia 1. We anticipate that only 12 of the 17 rigs remaining suspended will be competitive international market due to factors such as the technical capabilities and the geographical footprint of their operators.
Speaker Change: From a broader market perspective utilization for modern Jackups remained at approximately 95% non adjusted for Aramco suspensions.
Speaker Change: Following the second wave of suspensions by Ronco, the heavy 'twenty two modern rigs suspended this year of which five have already been re contracted elsewhere, including our radio one.
Speaker Change: We anticipate that only 12 of the $17 17 rigs remains suspended will be competitive international market due to factors such as the technical capabilities and the geographical footprint of their operators.
Bruno Morand: On the new built front, no orders have been placed for nearly a decade, and the shipyard order book stands at 12 rates, representing only 2% of the total jacket fleet. This is a remarkably low number, particularly considering the fleet age statistics mentioned earlier by Patrick. We anticipate that only four of the rigs under construction could join the active fleet in the next 12 to 18 months, and that includes our new Butte bar.
Speaker Change: On the Newbuild front no orders are in place for nearly a decade and the shipyard order book stands at 12 rigs representing only 2% of the total Jack up fleet.
Speaker Change: It is a remarkably low number, particularly consider the fleet age statistics mentioned earlier by Patrick.
Speaker Change: We anticipate that only four of the rigs under construction could join the active fleet in the next 12 to 18 months and that includes our new beautiful.
Bruno Morand: Looking at the demand side, we reiterate our view that incremental demand in the next 12 to 18 months will be sufficient to offset the supply impact from aeronical suspensions and UV delivery. Based on our in-house outlook, we forecast an incremental demand of 15 to 20 rigs. Comparatively, data from S&P Global in their latest world rate forecast indicates an incremental demand of 25 to 30 reads in the period, which supports our projection. While some markets may experience near-term competitive pressure, we anticipate this to be punctual and short-lived as the market continues to absorb the available capacity.
Speaker Change: Looking at the demand side, we reiterate our view that incremental demand in the next 12 to 18 months will be sufficient to offset the supply impact from the rainbow suspensions and new deliveries.
Speaker Change: Based on our Ehealth outlook, we forecast an incremental demand of 15% to 20 rigs.
Speaker Change: Comparatively data from S&P global in their latest worldwide forecast indicate an incremental demand of 25% to 30 rigs in the period, which supports our projection.
Speaker Change: While some markets may experience near term competitive pressure, we anticipate it to be onshore and shortly as the market continues to absorb the available capacity.
Bruno Morand: In summary, we maintain a positive view of the market balance for Modern Jackup Fleet and its daily rate momentum.
Speaker Change: In summary, we maintain our positive view of the market balance for modern Jackup fleet and its the right momentum.
Bruno Morand: With that, I'd like to hand the call back. Thank you, Bruno.
Speaker Change: With that I would like to hand, the call back to Patrick.
Patrick Schorn: Thank you Bruno.
Patrick Schorn: So in conclusion, there are three main messages I would like to leave you with. Firstly, Our ability to add backlog at market leading rates remains intact and is strengthening our future earnings. This is very much related to our truly global footprint and deep client relationships across the globe.
Patrick Schorn: So in conclusion, there are three main messages I would like to leave you with.
Patrick Schorn: Firstly.
Patrick Schorn: Our ability to add backlog at market, leading rates remains intact and is strengthening our future earnings.
Speaker Change: This is very much related to a truly global footprint and deep client relationships across the globe.
Patrick Schorn: Secondly, Our adjusted epitaph guidance is. and remains $500 to $550 million for the full year 2024. and lastly, The board approved quarterly dividend of 10 cents per share, resulting in a hundred million dollars annualized dividend pay.
Speaker Change: Secondly.
Andrew: Our adjusted EBITDA guidance is Andrew.
Andrew: And remains $500 million to $550 million.
Andrew: For the full year 2024.
Andrew: And lastly.
Speaker Change: The board approved a quarterly dividend of <unk> 10 per share, resulting in a $100 million annualized dividend payments.
Patrick Schorn: Looking at 2025. with reduced capex outlay and incremental day rates for the already committed contract. then there is plenty potential to significantly increase returns to shareholders going forward.
Speaker Change: Looking at 2025.
Speaker Change: With reduced Capex outlay, and incremental day rates for the already committed contracts.
Speaker Change: There is plenty of potential to significantly increase returns to shareholders going forward.
Patrick Schorn: Ladies and gentlemen, I would like to end here our prepared remarks and we can go to Q&A.
Speaker Change: Ladies and gentlemen, I would like to end here are prepared remarks, and we can go to Q&A.
Operator: Thank you so much, dear participants. As a reminder, if you wish to ask a question, please press star 11 on your telephone keypad and wait for a name to be announced. To withdraw a question, please press star 11 again. Please kindly ask one question and possibly a follow up question at a time to leave room for other participants. If you do have any further questions, you can please rejoin the queue. If you wish to ask a question via the webcast, please type it in the question box and click submit. Please kindly submit your questions in a timely manner so that we will have the opportunity to view beforehand.
Speaker Change: Thank you so much Dr participants as a reminder, if you wish to ask a question. Please press star one one on your telephone keypad and wait for your name to be announced to withdraw. Your question. Please press star. One again. Please ask one question and possibly a follow up question at this time to leave room for other participants if you do have any further.
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Operator: And now we're going to take our first question.
Speaker Change: And now we're going to take our first question.
James West: And it comes from the line of James West from Evercore ISI. Your line is open, please ask your question. Hey, good afternoon, guys. Thanks again.
Speaker Change: And it comes from the line of James West from Evercore ISI. Your line is open. Please ask your question.
James West: Hey, good afternoon guys.
James West: Bye.
James West: Patrick, you're going from a situation where you guys are using cash for the new builds to next year, where you're going to have just a huge amount of cash flow. And a lot of that will turn into free cash flow. I know you just doubled the dividend.
James West: Hi, James.
James West: Patrick.
Speaker Change: Going from a situation, where you guys are using cash for the new builds to next year, where you're going to have just.
Speaker Change: Excuse me out of cash flow and a lot of that alternative to free cash flow I know you just doubled the dividend, but as you in your discussions with the board are thinking about shareholder returns, where do you think the best returns or is it the buyback dividend is it.
Patrick Schorn: But as you and your discussions with the board are thinking about shareholder returns, where do you think the best returns are? Is it the buyback is dividend? Is it any debt reduction? I mean, how are you guys thinking about the uses of free cash?
Speaker Change: Any debt reduction I mean, how are you guys thinking about the uses of that free cash.
Patrick Schorn: Alright, let me maybe give a bit of an idea of firstly, how much do we think that this approximately is going to be, and then Magnus can talk a little bit as to the uses of that and where we see the benefits. But if you look at the year on year change that we see, because 2024 CompEx was impacted by the delivery of the two and the final new bills in the second half of this year, the cash outflow related to these two deliveries net of the loan finance. is approximately $80 million when taking into account the delivery installment and activation cost for the equipment.
Speaker Change: Alright, let me.
Speaker Change: Maybe give a bit of an idea of firstly, how much do we think that there is approximately is going to be and then Magnus can talk a little bit as to the use of that and where we see the benefit.
Magnus: If you look at the year on year change that we see.
Speaker Change: Because 2020 for Capex was impacted by the delivery of the two under final new builds in the second half of this year the cash outflow related to these two deliveries net of the loan financing.
Magnus: Is approximately $80 million when taken into account the delivery installment and activation costs for these rigs.
Patrick Schorn: This will not be occurring again next year, and we will thus have a positive impact on the cash available in 2025. Secondly, 2024 has a higher number of Special Periodic Surveys for our rigs, coming due every five years, and a large portion of our rigs were delivered five years ago in 2019. with our fleet consisting of 24 rigs when all are delivered and SPS carried out every five years, you would expect an average of approximately five years coming up for SPS every year. In 2024, we actually 10 rigs, obviously, more cash costs associated. And in 25 and 26, we expect only to do two or three per year.
Magnus: We will not be occurring again next year, and we will thus have a positive impact.
On the cash available in 2025.
Magnus: Secondly, 2024 has a higher number of special periodic survey score are rates coming due every five years and the large portion of our rates were delivered five years ago in 2019.
Magnus: With our good luck to consisting of 24 rates when all are delivered.
Magnus: Carried out every five years you would expect.
Average of approximately five years coming up for SBS every year in.
Speaker Change: In 2024, we actually 10 rigs, obviously more cash cost associated and in 25 to 26, we expect only to do towards CPU. So debt cost also goes down. So lastly from an earnings perspective, and if you look at a simple back of the envelope back based on the numbers that rune.
Patrick Schorn: So that cost also goes down. So lastly, from an earnings perspective, and if you look at a simple back of the envelope, back based on the numbers that Bruno has shown, then in 2024, the average day rate we have fixed is around $135,000 per day. And what we have so far in the books for 2025 is $148,000. This increase of around $13,000 per day for the full fleet. is totaling to just over 100 million as well. So adding all these three factors together just for illustrative purpose. One can expect an increased cash flow year over year of over $200 million, which in turn, obviously, then can be used for capital returns through dividend share buyback or repayment of that.
Speaker Change: As shown.
Speaker Change: Then in 2024, the average day rate we are facing is around 135000 bullish per day and what we have so far in the books for 2025 is a $148000 per day. This increase of around $13000 per day for the full fleet.
Speaker Change: Totally to just over 100 million as well so adding all these three factors together just for illustrative purposes.
Speaker Change: One can expect an increased cash flow year over year of over $200 million, which in turn obviously then can be used for.
Speaker Change: Capital returns through.
Speaker Change: Dividends share buyback or repayment of debt.
Magnus Vaaler: And maybe, Magnus, you can talk a little bit about what are some of the considerations that we have. Yes, thanks, Patrick. So we have, as mentioned, the quarterly dividend established already, which the board has set up of 10 cents. Secondly, we're doing the annual amortization of the bonds of around $125 million per year. There is also a cash sweep element in the bonds that depending on our leverage ratio, the bondholders can elect to take additional down payment on the bonds starting in 2025, up to 50% of our free cash flow the preceding year. So that is also a way of making capital returns.
Speaker Change: Maybe Max Magnus you could talk a little bit about what are some of the considerations that we have.
Max Magnus: Yes, Thanks Patrick.
Max Magnus: As mentioned in the quarterly dividend established already which.
The board: The board us.
Setup.
The board: <unk>.
Speaker Change: Secondly, we're doing the annual amortization of the bonds.
$25 million per year.
Speaker Change: There is also a cash sweep element in the bonds.
Speaker Change: Depending on our leverage ratio.
Speaker Change: The bond holders can elect.
Speaker Change: To take.
Speaker Change: Additional down payments on the bone starting in 2025 up to 50% of our free cash flow in the preceding year. So that is also a way of making capital returns lastly, we also have a 100 million.
Magnus Vaaler: Lastly, we also have the 100 million authorized share buyback program, which we haven't started utilizing yet.
Speaker Change: <unk> share buyback program, which we haven't started euthanizing yet I think it's a macro is obviously up to the board to decide which which one of these three but.
Magnus Vaaler: I think it's a matter of, it's obviously up to the board to decide which one of these we would go for. But it's very good to have all these tools available for us to see what is what is most. beneficial at the time of when the cash comes in. Looking at the share price at that time and also to see what the shareholders would prefer. So lastly, up to the board to decide, but we have all the tools necessary to provide a good balanced return to stakeholders.
But go far but it's very good to have all these.
Speaker Change: Tools available for us to see what this was.
Speaker Change: Most.
Speaker Change: Yes.
Speaker Change: <unk> at the time.
Speaker Change: And when the cash comes in.
Speaker Change: Looking at the share price at that time and also to see.
Speaker Change: If the shareholders with Richard So naturally update after the mark to the side, what we have all the tools necessary.
Speaker Change: To provide a good balanced.
Speaker Change: Returned to stakeholders.
James West: That's right. Very comprehensive.
James West: Thanks, guys.
Speaker Change: That's great very comprehensive thanks, guys.
Operator: Thank you, James. Now we're going to take our next question.
Jamie: Thank you Jamie.
Speaker Change: Now we will go and take our next question.
Fredrik Stene: And the question comes to the line of Fredrik Stene from Clarkson Securities. Your line is open, please ask your question. Hey, Patrick and team, hope you're all well. I wanted to touch a bit on the new builds. You said that the Valis is going to be delivered and this week and now it's signed to this Africa contract and you've financed it with Bonded Telephone. Sheepyard Financing. And then clearly the next big event here is what's going to happen with the VAR. And you seem relatively confident, in my view at least, that you'll be able Get something lined up for that rig ahead of its delivery.
Speaker Change: Okay.
Speaker Change: And the question comes from the line of Frederic <unk> from Clarksons Securities. Your line is open. Please ask your question.
Frederic: Hey, Pat.
Frederic: Eric and team hope you're all well.
Frederic: Yes.
Frederic: Wanted to touch a bit on the Newbuild.
Speaker Change: You said that.
Speaker Change: The volume is going to be the labor then this weekend.
Speaker Change: Fine too.
Speaker Change: Is that break a contract and you can finance it.
Speaker Change: With the bond that setup.
Shipyard financing and then Glenn.
Speaker Change: Really the next big event here is what's going to happen with the with the var.
Speaker Change: You see them relatively confident in my view at least that youll be able to.
Speaker Change: Get something lined up for that rig ahead of its delivery.
Fredrik Stene: So, so for me, it would be very interesting to hear, you know, any color that you could give on what those potential opportunities look like. What type of geography are we looking at? Will it be a long idle time from delivery until contract startup? Should we expect rates similar to the leading edge rates? find already anything on that that would be very helpful.
Speaker Change: So for me it would be very interesting to hear.
Speaker Change: Any color that you could give on what those potential opportunities look like.
Speaker Change: Type of geography are we looking at will it be along idle time and delivery until contract startup should.
Should we expect rate similar to the leading edge rates you signed already anything on that would be very helpful. Thanks.
Patrick Schorn: Okay, Fredrik. No, I understand. And clearly, it is the commercial environment is It's a very interesting one at this moment. Obviously, after the Saudi suspension, it has changed somewhat, but I think it needs to be very clear that... The people that we compete with in general.
Frederic: Okay Frederic.
Speaker Change: I understand and clearly it is.
Frederic: The commercial environment is.
Speaker Change: It's a very interesting one at this moment, obviously after the Saudi suspension it has changed somewhat but I think.
Speaker Change: Needs to be very clear.
Speaker Change: The people that we compete with in general.
Bruno Morand: Andreas Lie, Unknown Executive, Fredrik Stene, Magnus Vaaler, Chris Lee, Bruno Morand, Michael Hello everyone and welcome back to another episode of The World of Drilling, I'm your host Bruno Morand and today I'm going to talk to you about how to set up to actually take care of it and I think that therefore you have to think that there is a bit of a bifurcation in markets. I think that what you see today is that in Asia the competitive pressures work in areas as the Americas, Mexico, Africa, these are not as open to everybody so That is what I would say is where some of our strength comes from and where we are also able to maintain the pricing that we have today.
Speaker Change: Particularly the ones affected by some of the bigger suspensions, Saudi don't all have a global footprint don't all have.
Speaker Change: Operating basis in the places, where there might be activity coming up nor necessarily.
Speaker Change: The set up to actually take care of it and I think therefore, you have to think that there is a bit of a bifurcation in markets. I think that's what you see today is that in Asia, the competitive pressures have changed quite a bit due to the aramco suspensions, but in the rest of the world.
Speaker Change: Is still quite a bit of expertise required from companies to work in areas.
Speaker Change: America, Mexico Africa. These are not open open to everybody. So.
Speaker Change: That is what I would say is where some of our strength comes from and where we are also able to maintain the pricing that we have today.
Patrick Schorn: I understand you would like more color where we see the contract for the VAR coming from, but I would like to keep that commercial part a little bit under wraps until we indeed have signed it up. So I'll have to speak a little bit in riddles to you there until we have it all covered, but you are correct in stating that we feel that we have sufficient irons in the fire to make sure that we have work lined up by the time that the VAR becomes available.
Speaker Change: I understand you would like more color, where we see the contract sort of are coming from.
Speaker Change: I would like to keep that commercial parts a little bit.
Speaker Change: Under wraps until we indeed have signed it up.
Speaker Change: So I'll ask.
Speaker Change: Speak a little bit in rentals to you there until we have it all covered but you are correct in stating that we feel that we have sufficient irons in the fire to make sure that we have work lined up by the time that the <unk> becomes available as well.
Fredrik Stene: That was very helpful, Patrick, and just on the back of that.
Speaker Change: Alright, that's very helpful. Patrick just on the back of that.
Fredrik Stene: The Jekyll market theme, as you kind of using your own words, quite bifurcated currently, and we've seen rates, in the lack of better words, all over the place after. started to suspend rigs.
Patrick Schorn: The Jackup market theme as you kind of using your own words quite bifurcate them currently and we have seen.
Patrick Schorn: Right.
Better words, all over the place officer soybean.
Speaker Change: Dr to suspend rigs and on the back of what you said now around the bar do you think of alternative you're also taking your contract coverage for next year into account are you comfortable.
Patrick Schorn: And on the back of what you said now around the VAR, do you think... and potentially also taking your contract coverage for next year into account. Are you comfortable still beating those high levels and comfortable also potentially losing out on some work while doing so? to make sure that you're still in that high end of the rate spread.
Speaker Change: Still beating those high levels.
Speaker Change: Uncomfortable. So question are you seeing also some work.
Speaker Change: While while doing so.
Speaker Change: To make sure that you're still in that high end of.
Patrick Schorn: Yeah, I'll let Bruno talk more about the race. But I think there's two things that impacted for us and that you got to keep in mind as well. We don't have much available. So I don't have to bid a whole lot, right? It's not like I have to sell.
Speaker Change: Great spreads.
Speaker Change: Yes, I'll, let Bruno talk more about the rate, but I think there's two things that impact for us.
Bruno Mora: Got to keep in mind as well, we don't have much available. So I don't have a bit of hull right. It's not like I have to sell.
Bruno Morand: Andreas Lie, Unknown Executive, Fredrik Stene, Magnus Vaaler, Chris Lee, Bruno Morand, Michael Pricing is different, but I'll let Bruno elaborate a little bit more on that, that obviously has more detail.
Bruno Mora: 100 rates, we have here and some availability so that makes the picture quite different.
Bruno Mora: Also think there is different value that we provide right.
Bruno Mora: And therefore.
Bruno Mora: Pricing is different but I'll, let bruno elaborate a little bit more on that obviously has more details on that.
Bruno Morand: Yeah, Fredrik, and Patrick alluded to that a while ago. But the reality is, in some markets where barriers of entry are a bit lower, we've seen realistically a stronger competitive behavior, some of our competitors, and people that don't necessarily have the same geographical footprint as us will fight more aggressive for opportunities that they can grasp. And I think that's normal, that's expected.
Bruno Mora: Yes, Fredric and Patrick alluded to that a while ago.
Bruno Mora: But the reality is in some markets where <unk>.
Speaker Change: Barriers of entry are a bit lower we've seen realistically a stronger competitor behavior some of our competitors.
Speaker Change: People that don't necessarily have the same geographical footprint is thus.
Speaker Change: We will fight more aggressive for opportunities that they can grasp and I think that's normal that's expected I think Asia, particularly one.
Bruno Morand: I think Asia, particularly, has been one of those markets. Outside of that, I think the impact has been quite discreet, I would say.
Speaker Change: One of those markets outside of that I think the impact is.
Bruno Morand: So that leaves us in a good position to look for opportunities. I think there's a few things to consider here. I mean, if you look at the exposure that we have, and particularly the VAR, it's a series of rigs that are very unique capabilities. If you look at the sister rig, Saga, operating for Shell in Brunei, the performance of the rig has been remarkable, and those rigs build a reputation for themselves in the industry. So they're well sought after assets that gives us certainly a competitive advantage. Now, Patrick mentioned, if you look at our exposure and seeing what we already have in the works, we feel that the open days, even in 2025, that we have are predominantly focused on the second half of the year.
Speaker Change: White discreet I would say so that leaves us in a good position to look for opportunities I think theres a few things to consider here is if you look at the exposure that we have and particularly the bar is a series of rate that are very unique capabilities. If you look at the <unk> saga operating for Brunei shell in Brunei.
Patrick Schorn: So the rig has been remarkable and those rigs dealer reputation for themselves in the industry. So they're well sought after assets that eases up certainly a competitive advantage now Patrick mentioned, if you look at our exposure and seeing what we already have in the works we feel that the open days even in 2025 that we have are predominantly focused on AR.
Bruno Morand: That basically effectively gives us, you know, two to three quarters a year for the market to absorb. And you oversupply and normalize in a place where you think that will continue to provide robust price and power. So we're confident in the market. I don't see any, from our rigs and our availability, we don't see any substantial rate pressure on the downside, much the opposite. We think we still see quite a lot of opportunities where we can continue to drive rates upwards. We mentioned in the second quarter, we had one further fixture breaking the $200,000 a day mark.
Patrick Schorn: Second half of the year.
Patrick Schorn: That basically affected the eases.
Speaker Change: Two to three quarters of the year for the market to absorb any oversupply and normalizing.
In a place where you think that will continue to provide robust pricing power. So we're confident in the market I don't see.
Speaker Change: Any from our rigs and our availability, we don't see any substantial rate pressure on the downside much. The opposite we think we still see a lot of opportunities where we can continue to drive rates upwards. We mentioned in the second quarter. We had one further fixture breaking the $200000 a day Mark I think thats a good estimate of that.
Bruno Morand: I think that's a good testament of that.
Fredrik Stene: You know, thank you. Thank you very much.
Speaker Change: Thank you. Thank you very much final I'm, sorry, if I'm doing my two main questions here a final one from me.
Fredrik Stene: Final and I'm sorry for doing like two main questions here. The final one for me. Your range 500 to 550 for the air guidance, you're 92% covered. And I think a couple of the... quote, idle periods for the prospect of one good load yard. you end up in the low end and the high end of that range.
Speaker Change: Your range 500 to 550 for the year guidance, you are 92% covered and I think a couple of them.
Speaker Change: Called the idle periods for the prospector, one gundog GERD.
Speaker Change: How what's going to.
Speaker Change: You end up in the low and the high end of that range.
Patrick Schorn: Yeah, I think that at this moment, Fredrik, I don't think we're in a position to close that in any further. As you have seen with some of the suspensions in Saudi, these things can happen fast and do change your income profile and you have to deal with it. That's just part of the business that we have. So I think for right now we are able to deal with the changes that we see in the business. Uh, and we have no concerns with regards to keeping the guidance where it is. Um, but I wouldn't want to change the, uh, brackets of that.
Speaker Change: Yes, I think that at this moment Fredrik I don't think were in a position to close that in any further.
Speaker Change: <unk> seen with some of the suspensions in Saudi these things can happen fast.
Speaker Change: You do change your income profile and you have to deal with it. That's just part of the business that we have so I think for right now we are able to deal with the.
Speaker Change: Changes that we see in the business.
Speaker Change: And we have no concern with regards to keeping the guidance where it is.
Speaker Change: But I wouldn't want to change.
Fredrik Stene: Make it any tighter or anything like that. I think there is, there's too many things that still can happen in the year. It is a very, uh, volatile business from time to time. So you're right. I mean, there shouldn't be too many moving pieces. If everything unfolds, as we expect it to be, we'll be delivering within that bracket and That is what remains our goal. All right. Thank you so much.
Speaker Change: Brackets of that make it any tighter or anything like that I think there is as too many things that still can happen in the year. It is a very.
Volatile business from time to time. So you are right I mean, there shouldn't be too many moving pieces, if everything unfolds as we expect it to be we will be delivering within that bracket.
Speaker Change: That is what remains our goal.
Operator: I'll hand it back. Have a good day.
Speaker Change: Alright, thank you so much.
Speaker Change: Have a good day.
Truls Olsen: Thank you. Now we're going to take our next question, and it comes to the line of Truls Olsen from Firmly Securities.
Speaker Change: Thank you.
And have a good takeaway next question and it comes from the line of Charles <unk> from <unk> Securities. Your line is open. Please ask your question.
Truls Olsen: If your line is open, please ask your question. Thank you. Hi, Patrick, Magnus, Bruno. So switching gears, you won a significant contract in Brazil. Obviously, Brazil is not the biggest jackup market. But it has its call it. challenges or it's a bit cumbersome from an import acceptance point of view.
Speaker Change: Thank you Hi, Patrick Good morning News Bruno.
Charles: So switching gears you won a significant contract in Brazil, I visited Brazil is the biggest jackup market.
Speaker Change: But it has its call it <unk>.
Charles: <unk> is a bit cumbersome from an import acceptance point of view, how how should we think about that.
Patrick Schorn: How should you think about that cost wise and any of it we should sort of have in mind related to quality project of bringing the jackup in into Brazil and on operations you have a local partner as well I gather or as I understand it so. Yeah, so Truls, I mean, that's absolutely fair. I think that all operating environments come with their own peculiarities, and Brazil certainly has its share of that as well. And acceptance in Brazil can be complicated. So it's, for us, it was very clear that because of the volume of future work that we see there, also on the jackup side, it is important enough for us to not ignore it.
Speaker Change: <unk> and <unk>.
Speaker Change: Any risks.
Speaker Change: So we are having mind related to call it the project or bringing the back up in <unk>.
Speaker Change: Brazil in operations Youll have a part local partners. There is one large either or as I understand it.
Speaker Change: Yes, so Charles I mean, that's.
Charles: Absolutely fair I think that all operating environments come with their own peculiarities and.
Speaker Change: Brazil, certainly has its share of that as well.
And acceptance.
Speaker Change: In Brazil can be complicated for.
For us it was very clear that because of the volume will future work that we see there also on the Jackup side. It is important enough for us to not ignore it and therefore, we have.
Bruno Morand: And therefore, we have analysed this very carefully. And it became clear that without a local partner, for us, it wouldn't be the right market. So we do have the right partner. And together, I think we put something very attractive together. That I mean, Bruno obviously knows that market far better than I do.
Speaker Change: Analyze this very carefully and it became clear that without a local partner for us it wouldn't be the right market. So we do have the right partner and together I think we put something.
Speaker Change: Very attractive together.
Grunow: That I mean, grunow, obviously knows that markets far better than I do it maybe you can talk a little bit on on how we manage our risks.
Bruno Morand: Maybe Bruno, you can talk a little bit on how we manage our risk with or our startup risk with in relation to the cooperation that we have there. Yeah, for sure. And Truls, I mean, we are currently forecasting the rig will be on contract in the first quarter 2025. So we do have a quite substantial period now to address those things and prepare for that. We have been working and we continue to work now in very close cooperation with the Brazilian company that will help us during the operation. We have their people currently on board the rig.
Grunow: Startup risk.
Speaker Change: In relation to the.
Grunow: So the cooperation that we have.
Grunow: Yes for sure and Charles.
Speaker Change: We are currently forecasting the rig will be on contract in the first quarter 2025. So we do have a quite substantial period also address dosing and prepare for that we have been working and we continue to work now with very close operation with a Brazilian company that will help us during operation we have their people currently on boarder rigs. So we're doing obviously a very.
Bruno Morand: So we're doing obviously a very substantial scoping of everything that has to be done. It's worth a while to mention that certainly while the Petrobras contract and Brazil comes with challenges, that contract is one that is coupled with a fair or quite substantial mobilization fee. So that will help us long ways in preparing and making sure that we're appropriately funded. But we have time and we're operating with a company that has quite a bit of the local expertise and will give us the volume as well. We do appreciate that it's a complex market and running a one rig operation will be probably undersized.
Speaker Change: Substantial scoping of everything that has to be done it's worthwhile to mention that certainly well the Petrobras contract in Brazil comes with challenges that contract is one that east coupled with a.
Speaker Change: Quite substantial mobilization fee, so that will help us long ways in preparing and making sure that we're appropriately funded but we have time and we're operating with a company that has quite a bit of the local expertise and will give us the volume as well we do appreciate that it's a complex market and running a one rig operation will be probably under <unk>.
Bruno Morand: Now joining forces with a company with a large experience would help. That also said, I think one of the interesting features of the Brazil contract is that program is predominantly or almost exclusively, I would say, focused on P&A and intervention. And from a working perspective, it should be a relatively simple piece of work. And I think it's probably fair to say that we have a rig that is oversized potentially for what was needed. That said, I think it was a good fit for Petrobras. It was a good fit for us. It's a four year contract with a very high likelihood that we extend way, way beyond that.
Speaker Change: Right now.
Speaker Change: Now joining forces with a company with a large experience would help that all said I think one of the interesting features of that Brazil contracted that program is predominantly almost exclusively I would say focus on G&A and intervention and from a working perspective.
Speaker Change: It should be a relatively simple piece of work and I think it's probably fair to say that we have a refreeze oversized potentially for what was needed that said I think it was a good fit for FERC Petrobras It was a good fit for us.
Speaker Change: It's a four year contract with a very high likelihood that will extend way.
Bruno Morand: So we're very pleased. And I think this is one also where the focus will be heavily on efficiency, using all the capabilities of the rig to make sure that we can pionate it far faster than what you would do on a more traditional rig. So I'm very pleased with that. But your comments are fair. It is a market that we are trying Treat with the appropriate respect.
Speaker Change: Way beyond that so we're very pleased with it.
Speaker Change: And I think that this is one also to focus will be heavily on efficiency using all the capabilities of the race to make sure that we get.
Speaker Change: Thats far faster than what you would do on a more traditional ratio.
Speaker Change: Very pleased with that but your comments are fair.
Speaker Change: It is a market that we are trying to.
Speaker Change: Treat with the appropriate respect.
Truls Olsen: Thank you, and yeah, I think that's it for me. Thank you guys.
Speaker Change: Okay.
Speaker Change: Thank you and then yes, I think thats. It for me. Thank you guys.
Operator: Thank you.
Speaker Change: Thank you Charles Thank you.
Speaker Change: Thank you.
Doug Becker: Now we're going to take the next question.
Speaker Change: Okay.
Speaker Change: Now we will go and take the next question.
Doug Becker: And the next question comes from the line of Doug Becker from Capital One. Your line is open. Please ask your question. Thank you. Patrick, you clearly remain constructive on the jackup market. Despite the second wave of suspensions in Saudi Arabia, how do you assess the risk of a third wave of suspensions? And the reason I ask is after the first wave, there were rumblings that a second wave was possible. Is there anything like that?
Speaker Change: And the next question comes from the line of Doug Becker from capital. One your line is open. Please ask your question.
Doug Becker: Thank you Patrick you clearly remain constructive on the Jackup market. Despite the second wave of suspensions in Saudi Arabia.
Doug Becker: Or do you assess the risk of a third wave of suspensions.
Reason I ask is after the first wave to rumblings about a second wave was possible is there anything like that this time around.
Patrick Schorn: Yeah, that is a very good question, Doug. And I mean, I honestly don't quite know. I think that if I look back, and I mean, we've had here at Borr and previously a lot of interactions with Aramco as well. So this sudden change and the magnitude of it had me quite surprised. And I think with me, probably quite a few people. So I think if you look after the buildup that they did of the big buildup offshore and then basically halving that within a year, I was quite surprised. But I think that some of the fundamentals remain true.
Doug Becker: That is a very good question Doug.
Speaker Change: I honestly don't.
Speaker Change: Slide no I think that if I look back and I mean.
Pat: Pat here.
Speaker Change: Here at <unk> and previously.
Speaker Change: A lot of interactions with Aramco as well. So this is sudden change and the magnitude of it had me quite surprised and I think with me probably quite a few people. So I think if you look at the buildup that they did of the.
Speaker Change: Big build offshore and then basically half of that within a year I was quite surprised but the thing that some of the defense. The fundamentals remain true I do believe that the better fields with the Virgin pressure for Saudi I still offshore.
Patrick Schorn: I do believe that the better fields with the virgin pressure for Saudi are still offshore. That this is absolutely required in the future to be further developed. The expansion plans on the various fields still need to be implemented. So I think it is a bit of a shift to the right that work scope won't disappear. Now, does that mean that they couldn't tighten the belt any further? Because I mean, to me, it seems that the work that is being suspended or put a little bit more to the right is. is work that eventually will get done, but currently it's only suspended to make sure that the COPEX budget and maybe unnecessarily early at Berkeley, EU.
That this is absolutely required in the future to be further developed.
Speaker Change: The expansion plans on the various fields still needs to be implemented.
Speaker Change: So I think it is a bit of a shift to the right that work scope won't disappear now does that mean that they couldnt tie.
Speaker Change: <unk> tightened the belt any further because I mean to me it seems that the work that is being suspended or put a little bit more to derive.
Speaker Change: This is work that eventually will get done but currently it's only suspended to make sure that the capex budget and maybe unnecessarily early.
Speaker Change: Expenses are accrued as much as possible. So I can understand where they are but I don't know that even for Saudi Arabia. This is something that you could exercise for the long term. So I do feel that that work comes back now are there any more.
Patrick Schorn: small upsets that we could see in the activity. It's absolutely possible. I think that there's probably some land upsets as well going on. So that we have some curbing of capex. Absolutely possible. I'm not aware of any of it. And I also think at a certain moment, you get to a point where it probably becomes counterproductive. hosting more cash to Saudi Aramco than anything else. So I don't want to rule it out because I don't know if there could be further ups or downs. But I think that The industry can deal with that. For us, we have two more rigs there.
Speaker Change: Small upset that we could see in the activity it's absolutely possible.
Speaker Change: I think that there is probably some land upset as well going on so that we have some kirby.
Speaker Change: Capex, absolutely possible I'm not aware of any of it and I also think at a certain moment you get to a point, where it probably becomes counterproductive.
Speaker Change: Costing more cash to Saudi aramco than anything else. So I don't want to rule it out because I don't know if there could be further ups or downs, but I think that.
The industry can can deal with that.
Doug Becker: We're very pleased with the work there. But that's our kind of our direct exposure to that market. Got it.
Speaker Change #100: For us we have two more rigs there we're very pleased with the word there, but thats kind of our direct exposure to that market.
Bruno Morand: And then maybe a little more specific to Borr, just can you help frame the prospects for the Thor and Ron after they finish contracts later this year? And maybe more to the Ron specifically, is it likely to stay in Mexico? Yeah, Bruno, maybe you want to you want to talk a little bit about that on the prospect that we have for Iran, maybe a bit on the Mexican market in general. Yeah, no, indeed. Undoubtedly the Mexican market is one that we've paid a lot of attention to. We have a large fleet of rigs there, we have a good performance there, that's a good chunk of our business.
Speaker Change #100: Got it and then maybe a little more specific to board just.
Speaker Change #101: Can you help frame the prospects for the store and Ron.
After they finished contracts later this year and maybe more to the <unk> specifically is it likely to stay in Mexico.
Speaker Change #102: Yes, maybe you want to you want to talk a little bit about that on the <unk>.
We have four around the menu.
Mexican market in general.
Speaker Change #102: Yeah.
Speaker Change #102: <unk>.
Speaker Change #102: Undoubtedly the Mexico market is one that we pay a lot of attention to we have a large fleet of rigs there we have it.
Speaker Change #102: Good performance there is a good chunk of our business.
Bruno Morand: Activity in Mexico is obviously mainly driven by PMAX, but not only PMAX, there's other independents as well that are available in the country. One thing that it's interesting to mention, Doug, is that there are new models, working models being implemented in Mexico as you speak, including certain models where PMAX let other companies basically run the field and run the production, which streamline cash flows. I think that this is in the early stages of being rolled out, that could open a very interesting window of opportunity for our rigs, including the run. But as I said, we're not only focused on PMAX, we do see some outstanding work with IOCs that could give us interesting opportunities.
Speaker Change #103: Activity in Mexico, obviously, mainly driven by Pemex, but not only <unk>. There is other independents as well that are available in the country.
Speaker Change #103: One thing that is interesting to mention.
Speaker Change #104: Is that yes.
Speaker Change #104: There are new models working models be implemented in Mexico, as you speak including certain models, where Pemex, let other companies basically run the field and run the production.
Speaker Change #104: At which streamline cash flows.
Speaker Change #104: I think that this is in the early stages of being rolled out that could open a very interesting window of opportunity for our rates, including the run.
Speaker Change #104: But as I said, we're not only focused on teammates we do see some outstanding work with IOC that could give us interesting opportunities.
Bruno Morand: Now if I think about Americas broadly, it's not all about Mexico, we do see some pockets of activity now appearing in places like Suriname, for example, in Trinidad, so we keep monitoring that quite closely and remain quite confident that the rig will have a continued program. If I think about the TOR in Asia, there's definitely a lot of tenders open at the moment. It's actually quite buoyant in terms of how many things are open and tenders we're pursuing. There's definitely a tighter competitive landscape. But as I said, the TOR and the risk that we have in Asia, they've kind of set themselves apart because of the operating capabilities that they have.
Speaker Change #105: About a merrick is broadly.
Speaker Change #105: It's not all about Mexico, we do see some pockets of activity now appearing in places like <unk> for example in Trinidad So we keep monitoring that quite closely and remain quite confident that the rig will have a continued program.
Speaker Change #105: If I think about the tour in Asia.
Speaker Change #105: A lot of tenders open at the moment.
Speaker Change #105: It's actually quite buoyant in terms of how many things are open and standard we're pursuing there definitely are either competitive landscape, but as I said the tour and the rigs that we have in Asia, they've kind of set themselves apart because of the operating capabilities that they have they deliver these wells substantially expenses with the customers and they're very well soft aspects. So.
Bruno Morand: They deliver these wells substantially faster to the customers and they're very well sought after. So I'll probably fall shy of kind of listing a name in the prospects, but we see a range of things that could see that rig occupied, whether in Vietnam where the rig is going to be soon or within the region as well. Now, our rigs are mobile in nature, though. We obviously like the markets where we operate. Southeast Asia has been a very good market to bore, but if opportunities of better economic results appear elsewhere, we're not afraid as well. We're not shy of moving them around.
Speaker Change #105: I will probably fall shy of kind of lithium mainly the prospects, but we see a range of things that could see that rig occupied.
Speaker Change #105: Whether in Vietnam, where the rig moves he is going to be sued or within the region as well.
Speaker Change #105: Now our read their mobile in nature, Doug, we obviously like the markets, where we operate southeast Asia has been a very good market to bore but if opportunities.
Speaker Change #106: Better economic results, our peer elsewhere, we're not afraid as well, we're not shy off of moving them around it we've done it over the years and will continue to do to make sure that our fleece displays where we make the most value of it.
Bruno Morand: We've done it over the years and we'll continue to do to make sure that our fleet is placed where we make the most value of it.
Doug Becker: Thank you very much. Thank you.
Doug Becker: Thank you very much.
Speaker Change #107: Thank you.
Operator: Dear participants, as a reminder, if you wish to ask a question over the phone, please press star 11 on your telephone keypad. Once again, if you wish to ask a question, please press star one, one.
Speaker Change #107: Yes.
Speaker Change #108: Yeah participants as a reminder, if you wish to ask a question. Please press star one one on the telephone keypad.
Speaker Change #108: Once again, if you wish to ask a question. Please press star one one.
Operator: We have no more questions on the phone line. Magnus, is there any other questions that we have?
Speaker Change #108: We have no more questions on the phone line Magnus is there any other questions that we have.
Operator: I think we have time for one written question, Andreas, please. Yep. The obligatory question about new build orders, have there been any changes in market dynamics that suggest an order could be made? Also, is there any shipyard appetite to take on such? So I think that there is definitely appetite, not in large numbers, but I think that what we hear is that shipyards wouldn't mind taking small orders. The problem is that the shipyards are extremely busy and therefore nothing can be delivered very quickly. So I think that is a little bit the problem. I think Bruno, the latest we heard was probably around companies like ONGC still looking, isn't it?
Andreas: Congrats on for one second question Andreas.
Andreas: Yes.
Andreas: The obligatory question about Newbuild orders.
Andreas: There have been any changes in market dynamics that suggest an order could be made.
Speaker Change #110: Also is there any shipyard appetite to take on such an order.
Speaker Change #111: So I think that there is definitely appetite not in large numbers, but I think that what we gave you that shipyards woodlands.
Speaker Change #111: Might take a small orders the problem is that the shipyards are extremely busy and therefore nothing can be delivered very quickly. So I think that is a little bit the problem.
Bruno Mora: I think Bruno the lines the latest we earn to us probably around company like <unk> Lumpiness, yes.
Bruno Morand: Yeah, in large, the conversations that we hear about potential shipyard orders are driven by long-term demand. We mentioned that before, I think the financial situation and what it would take for you to acquire a rig and the long-term economic. Contracts or orders will have to be backed up by long-term commitments. So naturally the most buoyant conversations are the likes with ONGC and so on and so forth. Structurally, I don't think things changed. We still hear that figures for a new build are in the high 200s, probably pushing close or above 300 on a fully delivered basis.
Speaker Change #112: And in large the conversations that we hear about potential CPR orders are trees and by long term demand. We mentioned it before we think the financial situation and what it would take for you to acquire rig and the long term economics.
Speaker Change #112: Contracts or orders, we will have to be backed up by long term commitments. So naturally the most conversations that aligns with <unk> and so forth.
Speaker Change #112: Structurally I don't think things changed we still hear that figures for new build are in the high two hundreds probably pushing close or above 300 on a fully delivered basis and.
Bruno Morand: And that obviously would have to come coupled with continuing improvement in day rate. So nothing's changed. I think there's still talking. If that happens, again, I think it's positive for us because then it means that day rates are supportable, that type of construction cost. I don't think we're quite there yet.
Speaker Change #112: That obviously would have to come coupled with.
Speaker Change #112: Continued improvement in day rates, so nothing's changed.
Speaker Change #113: <unk> I think they're seeing talking's, if that happens again I think it's positive for us because that means that day rates are supportive of that type of construction costs I don't think we're quite there yet.
Bruno Morand: We're- I think it's going to take some time before there's a long enough contract for someone to actually call them.
Speaker Change #113: I think it's going to take some time before they're long enough contracts, where someone to actually call that.
Patrick Schorn: Yeah, and I think that maybe as a last comment around this, clearly with the fleet getting older and older, and now having, as I mentioned in my remarks, 30% of the rigs being over 35 years old, you can stretch that to a few years here and there, but there has to be a concerted effort to make sure that the future of this industry has enough rigs available to what the customers need. So I absolutely believe that we will be building rigs again as an industry. It might take a little bit of time, but this is going to be purely driven by economics and the day rates.
Speaker Change #114: Yeah, and the thing that maybe as a last comment around this clearly with the fleet getting older and older and now having as I mentioned in my remarks, 30% of the rigs being over 35 years old.
Speaker Change #113: You can stretch that too.
Few years here.
Speaker Change #113: But there has to be a concerted efforts to make sure that the future of this industry is enough rigs available to the customer what the customer's needs. So I absolutely believe that we will be building rigs again as an industry. It might take a little bit of time, but this is going to be acuity driven by economics and the day rates.
Patrick Schorn: So I believe strongly that we will get to that point in the future.
Speaker Change #113: So I believe.
Speaker Change #113: I believe strongly that we will get to that point.
Operator: Now with that and it being the last questions, I would like to thank everybody for participating in our call and we look forward to talking to all of you again soon. Thank you.
Speaker Change #113: In the future.
Speaker Change #115: Now with that and it being the last questions I would like to thank everybody for participating in our call and we look forward to talking to all of you again soon.
Speaker Change #115: Thank you.
Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect.
Speaker Change #116: This concludes today's conference call. Thank you for participating you may now all disconnect have a nice day.
Operator: Have a nice.
Speaker Change #116: Okay.
Speaker Change #116: [music].
Speaker Change #116: Okay.
Speaker Change #116: [music].
Speaker Change #116: Okay.
Speaker Change #116: Yes.
Speaker Change #116: Yes.
Speaker Change #116: [music].
Speaker Change #116: Hum.
Speaker Change #116: [music].