Q1 2025 Borr Drilling Ltd Earnings Call
Good day, and thank you for standing by welcome to the poor Trillions in limited Q1, 2025 for subsea 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 this.
Session, you will need to press star one on one on your telephone you will then he an automated message that's washing your hands right.
Speaker Change: As a waste of your question. Please press star one on one again, if you wish to ask a question via the webcast. Please use the Q&A books 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. Parker.
Patrick Schorn CEO. Please go ahead.
Thank you.
Speaker Change: Good morning, and thank you for participating in the board drilling first quarter earnings call and Patrick Schorn and with me here today in London are Bruno Mauro.
Speaker Change: Our chief commercial officer, and Magnus Pfahler, Chief Financial Officer.
Speaker Change: Next slide please.
First covering the required disclaimers 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.
Speaker Change: I, therefore refer you to our latest public filings.
Speaker Change: Next slide please.
Speaker Change: Our first quarter results were largely as expected, reflecting the impact of temporary rig suspensions and preparatory work for upcoming contracts.
Total operating revenue declined by $46 5 million a quarter over quarter, resulting in adjusted EBITDA of $96 1 million for the period.
Speaker Change: During the quarter, we averaged 16 active rigs out of our 20 fleet 24 rig fleet.
Speaker Change: Despite.
The lower activity level operational performance remained robust with technical utilization at 99, 2% and economic utilization at 97, 9% for our active rigs a reflection of the continued strength and efficiency of our operations.
Speaker Change: On the safety front I am pleased to report that several of our rigs received industry and customer recognition for outstanding safety performance, notably the grow was awarded Qatar energies HSE Award for 2024.
Speaker Change: And the prospect of one received the 2024 Best Safety performance Award from the IDC North Sea chapter.
Speaker Change: In Thailand bore drilling received P. T E C.
Speaker Change: CEO Safety Excellence award for the second consecutive year.
Speaker Change: These achievements are a statement to the commitment and professionalism of our crews and I congratulate and thank the entire team for their efforts on safety.
Speaker Change: Looking at the second quarter, we are seeing a meaningful ramp up of activity.
Speaker Change: So we suspended rigs in Mexico have resumed operations, while the Valeant Arabia, one of both commenced their contracts.
Speaker Change: In addition, the sore Enron F secured new contracts starting this quarter as a result, our operating rig count has now increased to 22 laying the foundation for stronger financial performance in the quarters ahead.
Speaker Change: Our liquidity position improved during the quarter supported by the collection of approximately $120 million in outstanding receivables from Mexico, and 10 million in mobilization fees for the volume.
Speaker Change: Following the quarter end, we received an additional $35 million in mobilization fees related to volley Andy Arabia one.
Speaker Change: While we continue to pursue several opportunities in 2025, our commercial efforts are now increasingly focus on 2026.
Speaker Change: Rigs in Mexico represent a significant portion of our available days in 2026 and beyond the combination of increased activity in Q2, and the advancement of private investment projects in Mexico are positive for future rig demand and extensions across our fleet in country.
Speaker Change: In light of uncertain market conditions. The board has decided to suspend the dividend to further reinforce the balance sheet and enhance long term value creation.
Speaker Change: While we are not issuing specific EBITDA adjusted EBITDA guidance for 2025, we are however, confirming to be comfortable with the current Bloomberg consensus estimate of approximately $460 million.
Speaker Change: I'll pass the call now to Magnus for the first quarter financial commentary.
Magnus: Thank you Patrick.
Speaker Change: The results for the first quarter were highly impacted by temporary rig suspension and mobilization of rigs to commence contract, which led to us only having 16, either 24 rigs working on average during the quarter.
Speaker Change: The total operating revenues of $216 6 million, a decrease of $46 5 million compared to the fourth quarter.
Speaker Change: Day rate revenues decreased by $22 6 million, primarily due to a decrease in the number of operating days for Arabia, too wrong, and the Thorpe Park city offset by an increase in operating days for GERD gunlock involving.
Speaker Change: The overall decrease in day rate revenue also includes an $11 5 million decrease in deferred mobilization revenue related to Arabia, two due to the recognition of accelerated amortization of deferred mobilization revenue in the prior quarter linked to its contract termination in Saudi Arabia in Q4.
Speaker Change: Bareboat charter revenue decreased by $17 9 million as a result of the temporary suspension of the rigs go our grid and <unk> in Mexico.
Speaker Change: And it's been effective January eight.
Speaker Change: And management contract revenue decreased by $6 million due to the suspension of the Golar.
Speaker Change: Yes.
Speaker Change: Total operating expenses for Q1 were $156 8 million a decrease of $5 1 million compared to Q4.
Speaker Change: This is primarily due to $4 2 million decrease in rig Opex and one 1 million decrease in G&A.
Speaker Change: The decrease in rig Opex consist of $10 2 million or lower expenses due to the decrease in operating days, partially offset by a $5 2 million increase in costs associated with great great and girth to me as a result of the company assuming their operating expenses and stacking costs during the temporary suspension period.
Speaker Change: Yeah.
Speaker Change: Prior to the temporary suspension and jewelry operations. These costs are borne by the JV.
Speaker Change: Net loss for the first quarter was $16 9 million a decrease of $43 2 million compared to the net income in the fourth quarter and adjusted EBITDA was $96 1 million a decrease of $40 6 million from the previous quarter.
Speaker Change: Now moving into our cash our free cash position at the end of Q1 was $170 million. In addition, we had $150 million undrawn under our senior facility, resulting in total available liquidity of $320 million cash.
Speaker Change: Cash increased by $108 4 million in the quarter and compared to the comparison to the previous quarter.
Speaker Change: Net cash from operating activities was $138 7 million.
Speaker Change: Which included approximately $120 million in settlement of outstanding receivables from customers in Mexico, and 10 million organization fees received for an evolving.
Speaker Change: We paid $6 1 million of cash interest and $16 9 million of cash taxes.
Speaker Change: Net cash used in investing activities was $25 1 million of which $25 million related to cash used on jackup additions, primarily as a result of activation costs for Diwali and long term maintenance costs.
Speaker Change: Net cash used in financing activities was $4 9 million and can be explained mainly by the $4 7 million payments, our cash distributions to shareholders.
Speaker Change: And subsequent to court grant, we received approximately $35 million in mobilization fees following commencement of the contract for the Arabia along undervalued.
Brito: With this I will pass the word onto Brito.
Brito: Thank you Margaret.
Brito: Let me start with our recent commercial highlights before moving on to the market trends here.
Brito: Year to date more drilling has secured nine new contract commitments, adding 221 million to our backlog at an average rate of $141000 per day.
Brito: We're pleased to see the continued execution of our commercial strategy.
Brito: Since our last report, we secured high quality contracts at attractive day rates backed by our strong operational reputation.
Brito: In Asia, the scout receive a binding LOI for Medco in Thailand for 170 day program starting in October following the completion of its current PTT EP contract.
Brito: The tour has been awarded a 75 day contract with yet so petrol in Vietnam, which has begun in late April this allowed the rig to return to work earlier than previously expected and the rig is now contracted into Q3, and we are pursuing actively opportunities for work for the door into 2026.
Brito: In Mexico, there brings galore grit and girth and me have been extended by a combined <unk> of approximately 390 days. These extensions offset the suspension periods experienced early this year and preserve our regional backlog.
Brito: Further the run has been awarded a 140 day contract with Eni in Mexico, which commenced in May.
Brito: The contract includes options that could extend the rig into Q1 'twenty six.
Brito: In West Africa. The normal has received a letter of award for an 11 month program expected to commence in the second half of 'twenty six and finally, the GERD has secured a one year contract with foxtrot internationally in Ivory coast expected to commence in Q4.
Brito: These recent fleet developments combined with the commencement of the contract with the Valley and Arabia. One has increased our operating rig count to 22 in May.
Brito: Our 2025 fleet coverage now stands at 79% and an average day rate of 147000.
Brito: We're actively working with our customers on numerous opportunities and based on advanced stage of negotiations, we expect the coverage to rise towards the 80% to 85% range in the coming months.
Brito: Our 2026 coverage has also grown we're now at 35% an increase of 12 percentage points since our last report.
Brito: In line with the normal tendering cycles for Jackups, we see an increasing number of tenders being launched for working 26, and our teams remain focused on firming up the coverage for the year.
Brito: Additionally, several of our customers have expressed interest in discussing potential extensions to their existing contracts.
Brito: We actively engage with the customers and believe our strong operational track record high quality fleet and incumbent status will support further progress in building our 2026 coverage.
Brito: These include Mexico, where we believe the resumption of work on power three suspend our rigs, including the private investment project should create a favorable environment for potential renewals.
Brito: Looking at the broader market Jackup utilization has remained steady modern break marketed utilization sits at 92% relatively unchanged quarter on quarter.
Brito: Adjusting for the net impact of their uncle suspensions modern utilization still sits just under 90%, which we see as a healthy level.
Brito: Recent change in changing trade policies and OPEC plus decision to unwind production cuts has introduced some uncertainty and price volatility in commodity markets. We're actively monitoring these developments and engaging with our customers to assess how this may affect future activity levels importantly.
Brito: Importantly, we continue to see shallow water project is resilient the.
Brito: The projects are primarily related to brownfields offering attractive economics at the current oil price and faster cash flow cycles to our customers.
Brito: Despite the recent market volatility Jackup tenders and awards have remained largely on track as evidenced by our recent fixtures.
Brito: On the rig supply side as volatility continued to create a challenging environment for older Jackups, we've reduced contracting opportunities as customer preference for modern rigs persist.
Brito: We've seen a resumption in rig retirements in 2025 and expect a strength to continue.
Brito: Conversely, with a limited number of new builds in the pipeline and no immediate prospects with further deliveries, we do not anticipate any future editions in the foreseeable future.
Brito: Meanwhile, global demand outside of Middle East remains resilient, we just like West Africa, Southeast Asia, and Americas are gradually absorbing some of the excess capacity, resulting from Aramco recently adjustments.
Brito: At the same time recent fixtures suggested our uncle may be preparing to secure additional long term jackup capacity and create an optionality.
Brito: Jackup activity levels in Saudi Arabia are in the mid fifties a level consistent with 2019.
Brito: Looking at Mexico recent developments clearly show the link between rig activity and production.
Brito: Since Q4, 24 P. Max partial reduction in drilling activities led to nearly 10% dropping production in this period.
Brito: We're pleased that our three weeks have now resumed operations in May and are again contributing to Mexico goal of restoring production to 185 million barrels per day.
Brito: In short while near term volatility may continue we remain confident in the long term fundamentals for the Jackup market.
Brito: We are consistently delivering our strategy maximizing 2025 backlog in building 2026 coverage, while supporting our customers through these dynamic market.
Unknown Executive: Good day and thank you for standing by.
Unknown Executive: Welcome to the Borr Drilling Ltd Q1 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 answer 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.
Patrick Schorn: With that I'll hand, the call back to Patrick.
Patrick Schorn: Thank you Bruno.
Patrick Schorn: So in conclusion in 2025, we've made solid progress expanding our contract coverage.
Patrick Schorn: Through a series of awards and we now expect to reach 80% to 85% coverage for the full year.
Patrick Schorn: While we're still actively pursuing near term opportunities our commercial focus is now shifting towards 2026.
Patrick Schorn: Our operating rig count has grown to 22 up from 16 in the first quarter, giving us a solid foundation for earnings growth in the quarters ahead.
Unknown Executive: Please be advised that today's conference is being recorded.
Unknown Executive: I would now like to hand the conference over to your first speaker today, Mr. Patrick Schorn, CEO. Please go ahead. Thank you.
Patrick Schorn: In Mexico all of our rigs are currently active including one under a private investment contract supporting Pemex This production initiatives.
Patrick Schorn: Good morning and thank you for participating in the Borr Drilling First Quarter Earnings Call. I'm Patrick Schorn and with me here today in London are Bruno Morand, a Chief Commercial Officer, and Magnus Vaaler, a Chief Financial Officer. Next slide, please.
Patrick Schorn: This return to full operations positions us well for contract renewal discussions with Mexico, representing a meaningful share of our available rig days for 2026 and beyond.
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 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 filing. Next slide, please. Our first quarter results were largely as expected. reflecting the impact of temporary rig suspensions and preparatory work for upcoming contracts. Total operating revenue declined by 46.5 million quarter over quarter resulting in adjusted EBITDA of 96.1 million for the period. During the quarter, we averaged 16 active rigs out of our 24 rig fleets.
Patrick Schorn: And while we continue to navigate some short term uncertainty the business. We've build this resilient the long term fundamentals of the market remains strong and bore with its premium rig fleet is well positioned to capture future growth.
Patrick Schorn: Finally in light of uncertain market conditions. The board has decided not to pay a dividend to reinforce the balance sheet and enhance long term value creation.
Patrick Schorn: And with regards to adjusted EBITDA, we're on track to deliver 2025 consensus of approximately $460 million.
Patrick Schorn: Thank you ladies and gentlemen, we are now ready to go to Q&A.
Patrick Schorn: Thank you.
Patrick Schorn: As a reminder to ask a question you will need to press star one and one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one on one again.
Patrick Schorn: Despite the lower activity level, operational performance remained robust with technical utilization at 99.2% and economic utilization at 97.9% for our active rigs, a reflection of the continued strength and efficiency of our operation. On the safety front, I'm pleased to report that several of our rigs received industry and customer recognition for outstanding safety performance. Notably, the grower was awarded Qatar Energy's HSE Award for 2024. And the Prospector 1 received the 2024 Best Safety Performance Award from the IADC North Sea Chapter. In Thailand, Borr Drilling received PTT EEP's CEO Safety Excellence Award for the second consecutive year.
Patrick Schorn: 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.
Patrick Schorn: If you wish to ask a question via the webcast. Please type it into the question box and click submit.
Patrick Schorn: We will now take the first question.
Eddie Kim: From the line of Eddie Kim from Barclays. Please go ahead.
Eddie Kim: Hi, good morning.
Eddie Kim: I wanted to start off in Mexico, I think many were surprised that you had to be suspended rigs have now resumed operations, especially given the challenges in that market.
Speaker Change: Is this a sign that the Panamax is finally getting their act together or does it speak more to the quality of your rigs specifically in separately you have to have your Pemex jackups coming off contract by year end this year.
Patrick Schorn: These achievements are a statement to the commitment and professionalism of our crews and I congratulate and thank the entire team for their efforts on safety. Looking at the second quarter, we are seeing a meaningful ramp-up of activity. Three suspended rigs in Mexico have resumed operations while the Valley and Arabia One have both commenced their contracts. In addition, Thor and Ron have secured new contracts starting this quarter. As a result, our operating rig count has now increased to 22, laying the foundation for stronger financial performance in the quarters ahead. Our liquidity position improved during the quarter, supported by the collection of approximately 120 million in outstanding receivables from Mexico and 10 million in mobilization fees for the Valley.
Speaker Change: What's the likelihood that you think that those will be extended beyond that period. Thank you.
Speaker Change: Yes. Thank you Andy So I think this is maybe a combination of a few aspects here I think firstly I think theres, a very strong realization in Mexico that with very low or no activity production takes a very strong drop too.
Speaker Change: To that and there is a lot of.
Speaker Change: Work going on to make sure that activity plans are drawn up to make sure that additional production is created going forward, which means putting.
Speaker Change: Putting rigs back to work now clearly where we benefit is on one side on the quality of the rigs, but more importantly, the well construction work that we are involved in in Mexico has over the last few years demonstrated that weekend.
Patrick Schorn: Following the quarter-end, we received an additional 35 million in mobilization fees related to VALI and the Arabia One. While we continue to pursue several opportunities in 2025, our commercial efforts are now increasingly focused on 2026. Our rigs in Mexico represent a significant portion of our available days in 2026 and beyond. The combination of increased activity in Q2 and the advancement of private investment projects in Mexico are positive for future rig demand and extensions across our fleeting country.
Speaker Change: Generate some of the lowest cost barrels.
Speaker Change: Drill very efficient wells and have done this.
Brito: Approximately just short of 100 wells offshore at the moment. So I think that the concept of work I think that we have a fairly long history of performing well in the environment and being very cost efficient and therefore, I think we are benefiting from being some of the let's.
Brito: Say first rigs to go back so I think that that certainly has helped US now as to your question regarding the contract extension.
Patrick Schorn: In light of uncertain market conditions, the board has decided to suspend the dividend to further reinforce the balance sheet and enhance long-term value creation.
Brito: I think that that is something that we will be discussing with.
Patrick Schorn: While we are not issuing specific EBITDA, adjusted EBITDA guidance for 2025, we are, however, confirming to be comfortable with the current Bloomberg consensus estimate of approximately 460 million.
Brito: Our customer and Pemex here over the following months I certainly expect that we have good contract extension opportunities in Mexico. The exact size of that is difficult to estimate at this moment, but I'm sure that we get more clarity in that.
Magnus Vaaler: I'll pass the call now to Magnus for the first quarter financial commentary. Thank you, Patrick. The results for the first quarter were highly impacted by temporary rig suspension and mobilization of rigs to commence contracts, which led to us only having 16 out of our 24 rigs working on average during the quarter. The total operating revenues were $216.6 million, a decrease of $46.5 million compared to 2014. Day rate revenues decreased by 22.6 billion, primarily due to a decrease in the number of operating days for Arabia 2, Iran and the Thor, partially offset by an increase in operating days for GERD, Gunload and Vaaler.
Brito: Towards the.
Brito: Later part of this year.
Brito: Clearly.
Brito: Just on the performance that we've had over the last three years and this contract I would expect that we do reasonably well in that but I'm very happy to kind of keep you up to date as soon as we have more information on that.
Brito: Understood understood. Thank you for that.
Brito: My follow up is just on the.
Brito: Uncertain market conditions, you highlighted that as the reason for suspension of the dividend could you just expand on this a bit more for us.
Brito: <unk> customers in certain regions getting increasingly more cautious about the outlook.
Brito: In your conversations with them and perhaps pushing back drilling programs or does it reflect.
Magnus Vaaler: The overall decrease in day rate revenue also includes an $11.5 million decrease in deferred mobilization revenue related to Arabia 2 due to the recognition of accelerated amortization of deferred mobilization revenue in the prior quarter linked to its contract termination in Saudi Arabia. Bearable Charter Revenue decreased by $17.9 million as a result of the temporary suspension of the rigs Galar, Grid and Gersemi in Mexico, who were suspended effective January 8th. and Management Contractor Revenue decreased by $6 million due to the suspension of the Galar. Total operating expenses for Q1 were 156.8 million, a decrease of 5.1 million compared to Q4.
Brito: More of your expectations for.
Brito: Further oil oil price declines due to OPEC or maybe a combination of book if you could just expand on that comment.
Brito: Yeah, Andy I think it is it's a little bit more a macro situation, where I think that we have all try to get a good understanding of what the latest.
Brito: Macro developments really are going to mean to the market. I mean, we have clearly had a lot of discussions around tariffs and what that might do to global GDP and as a result to oil demand.
Brito: For counter that we are seeing that demand has remained actually quite strong.
Speaker Change: Overall, we see a lot of customers that do relative short contracts. So from that I can see that they are certainly.
Magnus Vaaler: This is primarily due to 4.2 million decrease in rigged OPEX and 1.1 million decrease in GNA. The decrease in rig opex consists of 10.2 million or lower expenses due to the decrease in operating days, partially offset by a 5.2 million increase in costs associated with grid and gursomy as a result of the company assuming their operating expenses and stacking costs during their temporary suspension period. Prior to the temporary suspension and during operations, these calls are borne by the.
Brito: Keeping a little bit their finger.
Brito: Finger on the trigger which I think is understandable as there is just quite a few items on the uncertainty now.
Brito: Now what we also see that when coming to <unk> 26, and beyond there are some larger packages of work I think when we start to see that being tendered and actively negotiated and ultimately being awarded I think we start to all have a much better feel for it. So I think it is purely a question.
Magnus Vaaler: Net loss for the first quarter was 16.9 million, a decrease of 43.2 million compared to the net income in the fourth quarter. And adjusted EBITDA was 96.1 million, a decrease of 40.6 million from the previous quarter.
Brito: <unk> of trying to be cautious, making sure that we.
Brito: Have options on what to do with the cash is obviously dividend is not the only option that we have but also.
Magnus Vaaler: Now moving into our cash. Our free cash position at the end of Q1 was $170 million. In addition, we had $150 million undrawn under our RCS facility, resulting in total available liquidity of $320 cash increased by 108.4 million in the quarter in comparison to the previous quarter. Net cash from operating activities was $138.7 million, which included approximately $120 million in settlements of outstanding receivables from customers in Mexico, and $10 million of mobilization fees received for the Vaalers. We paid 6.1 million of cash interest and 16.9 million of cash taxes. Net cash used in investing activities was $25.1 million, of which $25 million related to cash used on jackup additions, primarily as a result of activation costs for the valley and long-term maintenance.
Brito: Working on.
Brito: The debt is at the moment quite attractive. So I think we want to make sure that we have all options open while remaining cautious for as long as the uncertainty persists.
Brito: Great. Thank you very much I'll turn it back.
Brito: Thank you.
Speaker Change: Thank you we will now take the next question.
Doug Becker: From the line of Doug Becker from capital one. Please go ahead.
Brito: Thank you Patrick your commentary around Mexico sounds encouraging do you have any visibility on the option for the wrong to be exercised and then outside of Mexico. The prospector.
Speaker Change: Yes, I'll turn that to to Bruno and thanks, Doug.
Bruno: We have indeed options there.
Speaker Change: Indeed, Doug it's early days the rig just basically just going to work.
Speaker Change: About a week ago, so we're still monitoring that car.
Magnus Vaaler: Net cash used in financing activities was $4.9 million and can be explained mainly by the $4.7 million payment of cash distribution to shareholders. And subsequent to quarter end, we have received approximately 35 million in mobilization fees following commencement of the contract for the Arabia One and the Vaal.
Speaker Change: Conversations with our customers so far are encouraging but.
Speaker Change: But we do see opportunities outside of that customer as well for the rig in Mexico Theres. Some other work with ILC that could potentially.
Speaker Change: Keep that rig occupied well into 2026, so we will see.
Speaker Change: It definitely.
Speaker Change: It was a good timing to get the rig back to work.
Bruno Morand: With this, I will pass the word on to Bruno. Thank you, Magnus. Let me start with our recent commercial highlights before moving on to the market trend. Here today, Borr Drilling has secured 9 new contract commitments, adding $221 million to our backlog at an average rate of $141,000 per day. We're pleased to see the continued execution of our commercial strategy. Since our last report, we secured high-quality contracts at attractive day rates, backed by our strong operational reputation. In Asia, the scout received a binding LOA from MEDCO in Thailand for a 170-day program starting in October, following the completion of its current P2P contract.
Speaker Change: As we get closer to end of 'twenty five in early 'twenty six.
Speaker Change: We do see an outlook that is more favorable to see that rate continue to work, but I'll probably leave it at that early days. The rig just went to work are pretty happy with that.
Speaker Change: Fair enough.
Speaker Change: Are there are you able to provide any color on which rigs are expected to.
Speaker Change: Increase the contract coverage to 80, 85% are there.
Speaker Change: One or two rigs or is that kind of a risk opportunity to reset.
Speaker Change: Yes, we're looking at.
Speaker Change: The moment about three of our rigs represent in that.
Speaker Change: GAAP at the moment dog and we're encouraged we're quoting that number not out of the team. There. We do have a very active conversations with our customers at the moment, including some non binding LOI that we are working to progress I wouldn't want to share more details at this time, but I'm pretty convinced that in the next couple of weeks, we'll be able to to say something more about it.
Bruno Morand: The TOR has been awarded a 75-day contract with VietSol Petrol in Vietnam, which has begun in late April. These allow the rig to return to work earlier than previously expected. And the rig is now contracted in Q3, and we're pursuing activity opportunities for work for the TOR into 2026. In Mexico, the Rizgalor, Grit, and Garcemi had been extended by a combined term of approximately 390 days. These extensions offset the suspension periods experienced earlier this year and preserve our regional backlog. Further, the run has been awarded a 140-day contract with E&I in Mexico, which commenced in May.
Speaker Change: Sounds good thank you.
Speaker Change: Thanks for joining.
Speaker Change: Thank you we will now take the next question.
Speaker Change: From the line of Frederic <unk> from Clarksons <unk> Securities. Please go ahead.
Speaker Change: Yeah.
Patrick Schorn: Hey, Patrick.
Speaker Change: I hope you're all well.
Speaker Change: So I want to touch a bit upon.
Bruno Morand: The contract includes options that could extend the rig into Q126. In West Africa, the Norwa has received a letter of award for an 11-month program expected to commence in the second half of 2026. And finally, the GERD has secured a one-year contract with Foxtrot International in Ivory Coast expected to commence in Q4. These recent fleet developments, combined with the commencement of the contracts for the Valley and Arabia 1, have increased our operating rig count to 22 in May. Our 2025 fleet coverage now stands at 79% and an average day rate of $147,000. We're actively working with our customers on numerous opportunities, and based on advanced stage of negotiations, we expect the coverage to rise towards the 80 to 85% range in the coming months.
Speaker Change: Liquidity in general.
Speaker Change: Because at least from the discussions that I've had the rig.
Speaker Change: Clients recently.
Speaker Change: Think it's it's very very similar.
Speaker Change: Some of this ties to.
Speaker Change: Mexico Pemex.
Speaker Change: The lack of just payment visibility from from from them.
Speaker Change: It comes to if you know 2026 coverage and beyond.
Speaker Change: Obviously, given the kind of good commentary on that already but I was hoping that you.
Speaker Change: <unk> could potentially provide a bit more.
Speaker Change: Color on how you see your own.
Speaker Change: Liquidity situation going forward.
Speaker Change: By extension of that if you.
Speaker Change: How you feel you're kind of positioned to cold weather.
Speaker Change: So the short to medium term storm and also if you.
Bruno Morand: Our 2026 coverage has also grown. We're now at 35%, an increase of 12 percentage points since our last report. In line with the normal tendering cycles for jackups, we see an increasing number of tenders being launched for working 26, and our teams remain focused on firming up the coverage for the year. Additionally, several of our customers have expressed interest in discussing potential extensions to their existing contracts. We remain actively engaged with the customers and believe our strong operational track record, high quality fleet and incumbent status will support further progress in building our 2026 coverage. This includes Mexico, where we believe the resumption of work on our three suspended rigs, including the private investment project, should create a favorable environment for potential renewals.
Speaker Change: Our ambition to touch Dr. CF are either this year or next year and some of them call. It more adverse scenarios that you might be running within your own sensitivity analysis. Thank you.
Speaker Change: Yeah.
Speaker Change: Well very good I'll ask Magnus to comment on that.
Magnus: Thank you thanks for the question Frederic.
Magnus: We're in a good position going into this year with almost 80% of our days covered.
Magnus: Just below a $150000 per day, so it's a very solid solid day rates.
Magnus: So the fundamentals of our liquidity.
Magnus: Going into the year and also as you see Bruno here is now starting to fill up the the beginning of 2026 also with backlog at.
Bruno Morand: Looking at the broader market, jackup utilization has remained steady. Modern rig market utilization sits at 92% relatively unchanged quarter-on-quarter. Adjusting for the net impact of the Aramco suspensions, modern utilization still sits just under 90% which we see as a healthy level. Recent changes in trade policies and OPEC Plus' decision to unwind production cuts have introduced some uncertainty in price volatility in commodity markets. We're actively monitoring these developments and engaging with our customers to assess how these may affect future activity levels. Importantly, we continue to see shallow water projects as resilient. The projects are primarily related to brownfields, offering attractive economics at the current oil price and faster cash flow cycles to our customers.
Magnus: Rates that are above our cash breakeven.
Magnus: Rates, which are.
Magnus: Derisking I think our liquidity.
Magnus: And the liquidity issues for us.
Magnus: We have received $120 million.
Magnus: Payments from Mexico, So far this year, which is.
Magnus: About one year of receivables or earnings. So that's obviously also very very positive there and it fills up.
Magnus: Our bank account.
Magnus: We do expect that Pemex should go back to regular payments now throughout through 2025.
Magnus: Voice thing seems to be progressing.
Magnus: <unk>.
Magnus: And the signals that we are seeing is that Mexico should come back to their regular payments that they have shown over the past few years to mid last year I would say so all in all I think the base case looks very.
Bruno Morand: Despite the recent market volatility, Jackup tenders and awards have remained largely on track, as evidenced by our recent fixtures. On the rig supply side, this volatility continues to create a challenging environment for older jackups with reduced contracting opportunities as customer preference for modern rigs persists. We've seen a resumption in rig retirement in 2025 and expect this trend to continue. Conversely, with a limited number of new builds in the pipeline and no immediate prospects for further deliveries, we do not anticipate any future additions in the foreseeable future. Meanwhile, global demand outside of Middle East remains resilient.
Magnus: Very solid I do not foresee any reasons for drawing on the Rcs as long as collections come in with the with the forecast.
Magnus: We are currently see.
Magnus: That being said.
Magnus: In scenarios, where.
Magnus: There are delays in payments from our customers or.
Magnus: But we have experienced before from from Mexico.
Magnus: We have the rcs or $150 million, which provides us with additional comfort.
Bruno Morand: Regions like West Africa, Southeast Asia, and Americas are gradually absorbing some of the excess capacity resulting from Aramco's recent adjustment. At the same time, recent fixtures suggest that Aramco may be preparing to secure additional long-term jack-up capacity and create an optionality. Current jackup activity levels in Saudi Arabia are in the mid-50s, a level consistent with 2019. Looking at Mexico, recent developments clearly show the link between rig activity and production. Since Q4'24, PMAX partial reduction in drilling activities led to nearly 10% drop in production in this period. We're pleased that our three rigs have now resumed operations in May and are again contributing to Mexico's goal of restoring production to 1.85 million barrels per day.
Magnus: There are I would also maybe lastly add that.
Magnus: When you saw.
Magnus: The regular payments.
Magnus: Stopped from from Pemex last year, we were also able to find alternative ways of getting paid with its financing are factoring agreements, which released almost 75% of our receivables on the balance sheet from from Pemex.
Magnus: So so I think we have a lot of.
Magnus: Uh huh.
Magnus: Lots of opportunities to also.
Magnus: To monetize long.
Magnus: On the receivables should not the base case.
Magnus: I can go through.
Bruno Morand: In short, while near-term volatility may continue, we remain confident in the long-term fundamentals for the Jacob market. We are consistently delivering our strategy, maximizing 2025 backlog and building 2026 coverage, while supporting our customers through the dynamic market.
Speaker Change: Yes, maybe I can add a few things because of course it starts always proper quality of revenue and I think we have shown that we can generate that in 24, where we ended up with $500 million of adjusted EBITDA, we are indicating a number now at ace.
Patrick Schorn: With that, I'll hand the call back to Patrick. Thank you, Bruno. So in conclusion, in 2025, we've made solid progress expanding our contract coverage. through a series of awards and we now expect to reach 80-85% coverage for the full year.
Magnus: Along the lines of Bloomberg consensus for 25 or $460 million, where you also see that we are still in an environment, where it's very competitive.
Magnus: And where jobs are not easy to find we're able to continue to fill up the coverage for 'twenty five as well up to what we have indicated the 82% to 85%.
Patrick Schorn: While we're still actively pursuing near-term opportunities, our commercial focus is now shifting towards 2026. Our operating rig count has grown to 22, up from 16 in the first quarter, giving us a solid foundation for earnings growth in the quarters ahead. In Mexico, all of our rigs are currently active, including one under a private investment contract supporting Pemex's production initiatives. This return to full operation positions as well for contract renewal discussion. with Mexico representing a meaningful share of our available rig days for 2026 and beyond. And while we continue to navigate some short-term uncertainty, the business we have built is resilient.
Magnus: We have no different intention to do with 26. So you see that we have 35% at a very decent day rates. If you think about what Mexico represents on top of that is about 20%. So you could say that with that you're already starting to talk getting to the 55% to 60% of.
Magnus: Coverage and we intend to continue to fill that throughout the year.
Magnus: And trying to be.
Magnus: Getting the right balance as we get DCA between pricing and utilization and I think as long as we can continue to be very focused on starting off with the right quality of revenue and keeping the cost under control that I think with the efforts on collections. We can do a good job on liquidity is.
Patrick Schorn: The long-term fundamentals of the market remain strong, and Borr with its premium rig fleet is well-positioned to capture future growth.
Magnus: Well at least that's what we've been doing so far and we intend to approach is no different for 'twenty six.
Patrick Schorn: Finally, in light of uncertain market conditions, the board has decided not to pay a dividend to reinforce the balance sheet and enhance long-term value creation. And with regards to Adjusted EBITDA, we're on track to deliver 2025 consensus of approximately 460 million.
Speaker Change: That's very good color. Thank you.
Speaker Change: I think Patrick you've kind of started to touch upon my my my follow up here because as you are.
Speaker Change: Building.
Speaker Change: Either the rest of 2025 and also through 2026.
Speaker Change: Maybe this one goes to Bruno first first part of that would be.
Unknown Executive: Thank you, and ladies and gentlemen, we are now ready to go to Q&A. Thank you. As a reminder, to ask a question, you will need to press star 1 and 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star one on one 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.
Speaker Change: The discussions with your clients are you I guess.
Speaker Change: Still able in confidence.
Speaker Change: You.
Speaker Change: Can secure premium rates.
Speaker Change: Hum.
Speaker Change: Sure.
Speaker Change: Rates without premium above market for your heartbreak capabilities or are you in the current market getting pushback on that or I guess what gives.
Speaker Change: So far it proves that you can but interested to hear.
Speaker Change: How does how is that looking forward and maybe four for Magnus on the cost side also in the context of liquidity here.
Unknown Executive: If you wish to ask a question via the webcast, please type it into the question box and click Submit.
Speaker Change: If you're faced with.
Unknown Executive: We will now take the first question. from the line of Eddie Kim from Barclays, please go ahead. Hi, good morning.
Speaker Change: Idle time on some of these rigs.
Speaker Change: Pertains to our ABL to a market that's matter how quickly are you able to ramp up cost.
Eddie Kim: I wanted to start off in Mexico. I think many were surprised that your three suspended rigs have now resumed operations, especially given the challenges in that market. Is this a sign that PEMEX is finally getting their act together? Or does it speak more to the quality of your rig specifically?
Speaker Change: Down enough.
Speaker Change: If there is open capacity in.
Speaker Change: In between contracts.
Speaker Change: Thanks.
Speaker Change: Alright.
Speaker Change: So in terms of your question and probably difficult to provide a single answer to that and whether we can get a premium on every job going forward I think it depends a lot on the specifics of the projects.
Eddie Kim: And separately, you have two of your PEMEX jackups coming off contract by year end this year. What's the likelihood you think that those will be extended beyond that period? Thank you.
Speaker Change: We're obviously very well aware of the value that we bring to the customers with our high end rigs offline capabilities and features like that and to the tune that we know where we create value for our customers. We think it's fair that we continue to claim a bit of a premium rigs and have been doing so for for a while now that all said.
Patrick Schorn: Yeah, thank you, Eddie. So I think it is maybe a combination of a few aspects here. I think firstly, I think there's a very strong realization in Mexico, that with very low or no activity production takes a very strong drop to that. And there is a lot of work going on to make sure that activity plans are drawn up to make sure that additional production is created going forward, which means putting rigs back to work. Now, clearly, where we benefit is on one side, on the quality of the rigs. But more importantly, the well construction work that we are involved in, in Mexico has over the last few years demonstrated that we can generate some of the lowest cost barrels, drill very efficient wells, and have done this approximately just short of a hundred wells offshore at the moment.
Speaker Change: As we have been repeating for the last couple of quarters at the moment coverage is obviously just as important if not more important than the premium. So we keep an eye when we when we deliver value for the customer because it is project specifics. We certainly are very keen in driving to get there and I think we have continued to do so.
Speaker Change: Maybe a bit more projects that have been more cookie cutter, where we don't necessarily add an immense amount of value for the customer we compete with with the market trend. So we're comfortable with that I think what is important is that the.
Speaker Change: The quality of our fleet still means that a lot of our customers default back to often look at us as kind of the preferred alternative and that should give us a change to fuel up.
Speaker Change: Coverage better than our peers or in a faster pace than our peers and that's really the focus that we have at the moment.
Speaker Change: Okay.
Speaker Change: And then I was your question on <unk>.
Speaker Change: Cost side of things when we have our rigs.
Patrick Schorn: So I think that the concept work, I think that we have a fairly long history of performing well in the environment and being very cost-efficient and therefore I think we are benefiting from being some of the, let's say, first rigs to go back. So I think that that certainly has helped us.
Speaker Change: Stacked.
Speaker Change: We currently have.
Speaker Change: Our rigs warm stacked so they are.
Speaker Change: Relatively.
Speaker Change: Easy to get back to work as you saw from the rigs.
Speaker Change: Spend in Mexico in the wrong.
Speaker Change: We keep.
Patrick Schorn: Now as to your question regarding the contract extension, I think that that is something that we will be discussing with our customer and Pemex here over the following months. I certainly expect that we have good contract extension opportunities in Mexico. The exact size of that is difficult to estimate at this moment, but I'm sure that we get more clarity in that towards the later part of this year and clearly based on the performance that we have had over the last three years in this contract, I would expect that we do reasonably well in that, but I'm very happy to kind of keep you up to date as soon as we have more information on that.
Speaker Change: Keep warm enough.
Speaker Change: It will not be a lot of cost to bring the rigs out and.
Speaker Change: I would say a typical.
Speaker Change: The stacking cost for those rigs are in the mid $20000 per day approximately.
Speaker Change: The exception is.
Speaker Change: Versus the bar, which is a newbuild coming out of the shipyard, where we can actually have a lower LOE.
Magnus: Lower costs, while it's sitting.
Magnus: Hydro.
Magnus: That's more in the area of $15000 per day so.
Magnus: If we look at.
Magnus: Stacking periods of ups.
Magnus: Two more more than one year.
Magnus: Probably go into cold stacking mode.
Magnus: Or would you need to do more.
Magnus: Preservation, but you could also have a lower.
Magnus: Per day cost.
Magnus: While effect, but we're not.
Magnus: I'm going to dose.
Eddie Kim: Understood, understood. Thank you for that.
Magnus: Stages.
Magnus: <unk>.
Patrick Schorn: My follow up is just on the uncertain market conditions you highlighted as the reason for suspension of the dividend. Could you just expand on this a bit more first? Are you seeing customers in certain regions getting increasingly more cautious about the outlook in your conversations with them, and perhaps pushing back drilling programs? Or does it reflect more of your expectations for further oil price declines due to OPEC, or maybe a combination of both? If you could just expand on that. Yeah, Eddie, I think it is. It's a little bit more a macro situation where I think that we have all tried to get a good understanding of what the latest macro developments really are going to mean to the market.
Magnus: No.
Magnus: Very optimistic that we actually will get work for them.
Magnus: Less than one year.
Magnus: Alright. Thank you so much for comprehensive answers.
Magnus: It for me.
Magnus: Thank you.
Magnus: Thank you we will.
Magnus: We'll now take the next question.
Magnus: From the line of Gregg Brody from Bank of America. Please go ahead.
Gregg Brody: Good morning, everybody or good luck.
Magnus: Sure.
Magnus: Just just.
Magnus: Can you talk a little bit about the Saudi market just.
Magnus: As you mentioned.
Magnus: On the long term demand there, but we've been hearing.
Magnus: That's been out in the past about about rigs potentially being dropped could you help us understand what youre seeing and how that may be affecting Saudi merger and just other adjacent markets.
Patrick Schorn: I mean, we have clearly had a lot of discussions around tariffs and what that might do to global GDP and as a result, to oil demand. Counter that, we have seen that demand has remained actually quite strong. Overall, we see a lot of customers that do relative short contracts. So from that, I can see that they are certainly keeping a little bit their finger on the trigger, which I think is understandable as there is just quite a few items on the uncertainty list. Now what we also see is that when coming to 26 and beyond, there are some larger packages of work.
Bruno: Sure Bruno could you take that Saudi question sure.
Speaker Change: And thanks, Greg looking at the Saudi market I mean, we manage that I mentioned in the earlier remarks, we saw over the over the cycle, Saudi going from about 50 rigs through 92 rigs and then following the suspension. We're now back down to levels in the <unk>. So activity level offshore is now back at same levels as 2019.
Magnus: As we understand the land operation in Saudi has seen a significant.
Magnus: Reduction in activity as well.
Magnus: Clearly the kingdom at the moment he sees.
Magnus: Resolving for for cash they seem to think that there is production available at their fingertips and I think optimizing that has been in the forefront now interestingly.
Patrick Schorn: I think when we start to see that being tendered and actively negotiated and ultimately being awarded, I think we start to all have a much better feel for it. So I think it is purely a question of trying to be cautious, making sure that we have options on what to do with the cash is obviously diffident is not the only option that we have, but also working on the debt is at the moment quite attractive. So I think we want to make sure that we have all options open while remaining cautious for as long as the uncertainty persists.
Magnus: In the last couple of quarters. There is a few things that would indicate that we could be at a trough and possibly.
Magnus: Working towards a reversal of one of those indications as being the increase interest from Saudi about lump sum turnkey projects offshore they've been quite successful with that onshore overtime not so much offshore and now they seem to be exploring those opportunities on wanting to discuss these opportunities with the with the service companies and consequently the.
Magnus: The jackup provider, so, let's see how things mature overtime and then equally they've been now securing long term rigs for some of the rigs that is the long term contract with some of the rigs that had been previously suspended in the part of the kingdom, indicating that theyre starting to build some long term capacity or potentially optionality.
Eddie Kim: Great. Thank you very much.
Unknown Executive: I'll turn it back.
Unknown Executive: Thank you.
Magnus: So that's what we see at the moment when Saudi is going to be back in the market. I think we will see certainly we do feel that at our current activity level going back to the same levels of 2019.
Unknown Executive: Patrick, your commentary on Mexico sounds encouraging.
Bruno Morand: Do you have any visibility on the option for the run to be exercised and then outside of Mexico, the prospect? Yeah, I'll turn that to to Bruno. Thanks, Doug. I mean, we, we have indeed options there. Indeed, Doug, it's early days. The rig just basically just gone to work about a week ago, so we're still monitoring that. Conversations with the customers so far are encouraging, but we do see opportunities outside of that customer as well for the rig in Mexico. There's some other work with IOCs that could potentially keep that rig occupied well into 2026.
Magnus: Meaningful reduction in activity are unlikely.
Magnus: And we start to see some signs of that potentially reversing going forward, but we'll see time will tell we'll probably leave it at that.
Magnus: Of course, we try to predict aramco steps in the past and I think people have been proven wrong. So we'll just monitor that going forward.
Magnus: And just I appreciate all the commentary on liquidity and the prudency of.
Magnus: Suspending the base dividend.
Magnus: How should we think about share buybacks as is that a possibility in this environment or is that also off the table.
Bruno Morand: So we'll definitely see. It was a good timing to get the rig back to work. As we get closer to end of 2025 and early 2026, we do see an outlook that is more favorable to see that rig continue to work.
Magnus: Clearly I think that that is something that at a certain moment.
Magnus: Is clearly attractive where equity pricing.
Bruno Morand: But I'll probably leave it at that. Early days, the rig just went to work. We're pretty happy with that.
Magnus: Currently I think that there is a variety of things that we can do I think everything is on the table at the time that we have a good visibility on.
Unknown Executive: Fair enough.
Unknown Executive: Are there, are you able to provide any color and which rigs are expected to increase the contract coverage to 80-85%? Are there, you know, one or two rigs or is it kind of a risked opportunity, you said? Yeah, no, we're looking at the moment about three of our rigs representing that gap at the moment, Doug. And we're encouraged, we're quoting that number not out of the thin air, we do have very active conversations with the customers at the moment, including some non-binding LOIs that we're working to progress.
Magnus: The cash coming out of the business and that would include everything from buybacks from.
Magnus: Retiring debt from straight dividends I think that there is a whole slew of things you can think of.
Magnus: That all will be appropriately evaluated and we looked at what would be the most appropriate at that moment in time.
Unknown Executive: I wouldn't want to share more details at this time, but I'm pretty convinced that in the next couple of weeks, we'll be able to say something more about it. Sounds good. Thank you.
Magnus: But yes, I think that there is nothing that is.
Magnus: Excluded.
Magnus: We will diligently work through it to make sure that we have the cash work in the best interest of the company.
Unknown Executive: Thanks for joining.
Fredrik Stene: We will now take the next question from the line of Fredrik Stene from Clarkson Securities. Please go ahead. Hey Patrick, Bruno and Magnus, I hope you're all well. So I want to touch a bit upon. liquidity in general, because at least from, you know, the discussions that I've had with clients recently, I think it's very, very thematic.
Magnus: Thanks for the time guys.
Magnus: Yeah.
Magnus: Thank you.
Magnus: We will now take the last question.
Magnus: From the line of Sandy Chen from <unk> Partners. Please go ahead.
Magnus: Yeah.
Speaker Change: Yes, hi.
Speaker Change: We can bring for quality quick question about the backlog.
Speaker Change: Oh Wow.
Speaker Change: Got it.
Speaker Change: Causing quite termination parking.
Speaker Change: And the customers the top of the contract are there any penalty payment yeah any color about that would be great.
Fredrik Stene: And you know, some of these ties Mexico, Pemex, and Unknown Executive, Fredrik Stene, Magnus Vaaler, Chris Lee, Bruno Morand, Borr Drilling, Unknown Executive, Fredrik Stene, Magnus Vaaler, Chris Lee, Bruno Morand, Borr Drilling, Unknown could potentially, you know, provide a bit more Chris Lee, Fredrik Stene, Magnus Vaaler, Chris Lee, Bruno Morand, Borr Drilling, Bruno Morand, you know, envision to touch the RCF either this year or next year in some of the, call it more adverse scenarios that you might be running within your own sensitivity analysis. Well, very good. I'll ask Magnus to comment on that. Yeah, thank you.
Speaker Change: Yes, no problem, Saudi and if you look at probably difficult to give you a single answer for for all the contracts Buck.
Speaker Change: Our contracting its vast majority probably close to totality at the moment include.
Speaker Change: <unk> includes a clause clause for termination for convenience it comes with a level of payout that pay out varies from contract to contract, but in general terms, it's equivalent to kind of the EBITDA backlog expectation of that of the remaining term. So if the customer decides to exercise that option, we do recover.
Speaker Change: Profit expectation that we have for the contract and Thats. The general terms for the contract it varies a little bit from contract to contract, but they are fairly fairly similar.
Speaker Change: Okay. Thank you.
Speaker Change: You would say that the bulk of the backlog, it's kind of protected I E.
Speaker Change: It's dropped materially you wouldn't expect customers to cancel contracts and you guys wouldn't get anything.
Magnus Vaaler: Thanks for the question, Fredrik. I think we're in a good position going into this year with almost 80% of our days covered at just below $150,000 per day. So it's a very solid, solid day rate as sort of the fundament of our liquidity going into the year. And also, as you see, Bruno here is now starting to fill up the beginning of 2026 also with backlog at rates that are above our cash break-even rate, which are de-risking, I think, our liquidity. any liquidity issues for us. We have received 120 million payment from Mexico so far this year, which is.
Speaker Change: That is correct yes.
Speaker Change: Yeah.
Speaker Change: Okay and then one quick follow up is around the capex per rig.
Speaker Change: How do you guys think about it and how should we think about it.
Speaker Change: Like cabinets capex per rig per year and can you also need some guidance around that.
Speaker Change: Yeah sure.
Speaker Change: As you know we've now lost finalize our Newbuild program. So there is no further growth capex.
Speaker Change: What we're left with then is.
Speaker Change: Our capex.
Speaker Change: Special periodic surveys long term maintenance.
Speaker Change: We have.
Speaker Change: What are the indicators, we expect around $50 million in 2025 on Capex, which equates to around $2 million.
Magnus Vaaler: about one-year receivables or earnings, so that's obviously also very positive and fills up our bank account. We do expect that Pemex should go back to regular payments now throughout the 2025. North ASIC seems to be progressing as planned, and the signals that we are seeing is that Mexico should come back to their regular payments that they have shown over the past few years up until mid last year, I would say. So all in all, I think the base case looks very... I do not foresee any reasons for drawing on the RCF as long as collections come in with the forecast that we are currently in.
Speaker Change: <unk>.
Speaker Change: Per rig and I think that is.
Speaker Change: A decent number to use going forward for modeling purposes.
Speaker Change: And to the next couple of years as well.
Speaker Change: Yes.
Speaker Change: Alright, thank you.
Speaker Change: Yes.
Speaker Change: From my side.
Speaker Change: Very good. Thank you. Thank you.
Speaker Change: And I think with this we have come to the end of the Q&A session. Thank you very much for your attention.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
Magnus Vaaler: That being said, in scenarios where... There are delays in payment from our customers or that we have experienced before from from Mexico. We have the RCF of 150 million dollars which provides us with additional comfort. there. I would also maybe lastly add that When you saw The regular payments stopped from PEMEX last year. We were also able to find alternative ways of getting paid with this financing or factoring agreement which released almost 75% of our receivables on the balance sheet from PEMEX. So I think we have a lot of... lot of opportunities to also monetize on the receivables should not the base case go through.
Speaker Change: Okay.
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Speaker Change: Yes.
Speaker Change: Okay.
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Speaker Change: Okay.
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Speaker Change: Yes.
Speaker Change: Okay.
Magnus Vaaler: Yeah, maybe I can add a few things because, Fredrik, of course, it starts all with proper quality of revenue. And I think we have shown that we can generate that in 24, where we ended up with 500 million of adjusted EBITDA. We are indicating a number now that is along the lines of Bloomberg consensus for 25 or 460 million, where you also see that we are still in an environment where it's very competitive and where jobs are not easy to find. We're able to continue to fill up the coverage for 25 as well, up to what we have indicated, the 80 to the 85%.
Magnus Vaaler: We have no different intention to do with 26. So you see that we have 35% at a very decent day rate. If you think about what Mexico represents on top of that, it's about 20%. So you could say that with that, you're already starting to talk getting to the 55% to 60% of coverage. And we intend to continue to fill that throughout the year and try to be getting the right balance as we get this year between pricing and utilization. And I think as long as we can continue to be very focused on starting off with the right quality of revenue and keeping the costs under control, then I think with the efforts on collections, we can do a good job on liquidity as well.
Magnus Vaaler: At least that's what we've been doing so far. And we intend to approach it no different for 26.
Fredrik Stene: That's a very good caller. Thank you. And, you know, I think Patrick, you kind of started to touch upon my, my, my follow up here, because of your building will either the rest of 2025 and also through 2026. Maybe this one goes to Bruno first. First part of that would be, you know, the discussions with your clients, are you still able and confident that you can secure, you know, premium rates, or rates with a premium above market for your your high stake capabilities or are you you know in the current market get Pushback on that, you know, I guess what you've signed so far proves that you can, but interested to hear, you know, how does, how's that looking forward?
Fredrik Stene: And maybe for, for, for Magnus on the cost side, also in the context of liquidity here, if you're faced with.
Bruno Morand: idle time on some of these rigs and you know that pertains to to Arabia 2 and more for that matter how you know quickly are you able to ramp costs down and up if if there's open capacity in between All right, Fredrik. So in terms of your question, and it's probably difficult to provide a single answer to that and whether we can get a premium on every job going forward. I think it depends a lot on the specifics of the projects. We're obviously very well aware of the value that we bring to the customers with our high end rigs, offline capabilities and features like that.
Bruno Morand: And to the tune that we know we create value for our customers, we think it's fair that we continue to claim a bit of a premium for those rigs and have been doing so for a while now. That all said, as we've been repeating for the last couple of quarters, at the moment coverage is obviously just as important, if not more important than the premium. So we keep an eye. When we deliver value for the customer because of project specifics, we certainly are very keen and driving to get that and I think we have continued to do so.
Bruno Morand: Maybe a bit more on projects that are cookie cutter where we don't necessarily add an immense amount of value to the customer, we compete with the market trend. So we're comfortable with that. I think what is important is that the quality of our fleet still means that a lot of our customers default back to us and look at us as the preferred alternative. And that should give us a chance to fuel up that coverage better than our peers or in a faster pace than our peers. And that's really the focus that we have at the moment.
Magnus Vaaler: Yeah, that was your question on on cost side of things when we have our rigs, rigs stacked. We currently have... Our rigs are warm stacked so they are relatively easy to get back to work as you saw from the rigs that we have suspended in Mexico and Iran. We keep them warm enough that there will not be a lot of cost to bring the rigs out and I would say a typical stacking cost for those rigs are in the mid $20,000 per day approximately. The exception is the VAR which is a new build coming out of the shipyard where we can actually have a lower cost while it's sitting idle and that's more in the area of $15,000 per day.
Unknown Executive: If we look at for the very optimistic that we actually will get work for them in less than one year. Alright, thank you so much for comprehensive answers. That's it from me. Have a good day. Thank you.
Greg Rossi: We will now take the next question. From the line of Greg Rossi from Bank of America, please go ahead. Morning, everybody, or I guess good afternoon for you. Just, just, um, can you talk a little bit about the Saudi market? Just a you mentioned on the long term demand there, but we've been hearing what's been out in the press about about rates potentially being dropped.
Bruno Morand: Can you help us understand what you're seeing and how that may be affecting the Saudi market and just other adjacent Sure, Bruno, could you take that Saudi question? Sure. And thanks, Greg. Looking at the Saudi market, and I mentioned in the earlier remarks, we saw, obviously, over the cycle, Saudi going from about 50 rigs to 90 rigs. And then following the suspension, we're now back down to levels in the 50s. So activity level offshore is now back at the same level as 2019. As we understand, the land operation in Saudi has seen a significant reduction in activity as well.
Bruno Morand: Clearly, the kingdom at the moment is resolving for cash. They seem to think that there is production available at their fingertip. And I think optimizing that has been in the forefront. Now, interestingly, in the last couple of quarters, there's a few things that would indicate that we could be at a trough and possibly working towards a reverse. So one of those indications has been the increased interest from Saudi about lump sum term key projects offshore. They've been quite successful with that onshore over time. Not so much offshore. And now, they seem to be exploring those opportunities or wanting to discuss these opportunities with the service companies and, consequently, the jackup providers.
Bruno Morand: So let's see how things mature over time. And then, equally, they've been now securing long-term rigs for some of the rigs that long-term contracts for some of the rigs that had been previously suspended in that part of the kingdom, indicating that they're starting to build some long-term capacity or potentially optionality. So that's what we see at the moment. When Saudi is going to be back in the market, I think we will see. Certainly, we do feel that at a current activity level, going back to the same levels as 2019, meaningful reduction activity are unlikely. And we start to see some signs of that potentially reversing going forward.
Bruno Morand: But we'll see. Time will tell.
Bruno Morand: I'll probably leave it at that. I guess we tried to predict Aramco's steps in the past, and I think people have been proven wrong. So we'll just monitor that going forward.
Patrick Schorn: And just I appreciate all the commentary on liquidity and the prudency of Spending The Base Dividend. What what's how should we think about share buybacks is that that's a possibility in this environment or is that is that also? Oh, clearly, I think that is something that at a certain moment is clearly attractive at where equity pricing is currently, I think that there is a variety of things that we can do. I think everything is on the table at the time that we have a good visibility on We will diligently work through it to make sure that we have the cash work in the best interest of the company.
Greg Rossi: Thanks for the time. Thank you.
Unknown Executive: We will now take the last question.
Fredrik Chalmers: From the line of Fredrik Chalmers from Triton Partners, please go ahead. Yes, hi, here is a quick question about the backlog. How does this backlog work? Does it have clauses for termination for convenience? Can the customers just stop the contract? Are there any penalty payments? Yeah, any color about that? Yeah, no problem, Fadi. And if you look at probably difficult to give you a single answer for for all the contracts, but our contracts in its vast majority, probably close to totality at the moment include, if includes a clause, a clause for termination for convenience, it comes with a level of payout.
Bruno Morand: That payout varies from contract to contract. But in general terms, it's equivalent to kind of the EBITDA backlog expectation of that of the remaining term. So if the customer decides to to exercise that option, we do recover the profit expectation that we had for the contract. And that's that's the general terms for the contract. It varies a little bit from contract to contract, but they are fairly, fairly similar. Okay, so just a little check, you'd say that the bulk of the backlog is kind of protected, i.e. even if oil prices drop materially, you wouldn't expect customers just to cancel contracts, and you guys wouldn't That that is correct.
Bruno Morand: Yes.
Magnus Vaaler: Okay, and then one quick follow up is around the CAPEX per rig. Like, how do you guys think about it? And how should we think about I like average capex per week per year. Can you also please give some guidance around that? Yeah, sure. As you know, we've now, last year, finalized our new build program, so there's no further growth, CAPEX. And what we're left with then is maintenance, CAPEX, special periodic surveys, long-term maintenance. We have already indicated we expect around $50 million in 2025 on CAPEX, which equates to around $2 million per rig. And I think that is a decent number to also use going forward for modeling purposes and into the next couple of years.
Fredrik Chalmers: Got it. Thank Yeah, I think I think that is all for my Very good.
Unknown Executive: Thank you, buddy.
Unknown Executive: And I think with this, we have come to the end of the Q&A.
Unknown Executive: Thank you very much for your attention. This concludes today's conference call. Thank you for participating. You may now disconnect.