Borr Drilling(BORR) - 2025 Q1 - Quarterly Report

Management Discussion and Analysis of Financial Condition and Results of Operation This section provides an overview of Borr Drilling's business, recent operational and financial performance, liquidity, and capital resources for the first quarter of 2025 Overview Borr Drilling is an offshore shallow-water drilling contractor that owns, contracts, and operates a fleet of jack-up rigs for the oil and gas industry, with 24 premium jack-up rigs as of March 31, 2025 - The company's primary business is the ownership, contracting, and operation of jack-up rigs for shallow-water operations (up to 400 feet)[18] - As of March 31, 2025, Borr Drilling's fleet comprised 24 premium jack-up rigs[18] Recent Developments In the first quarter of 2025, the company executed several key operational and corporate actions, including commencing a new contract for the 'Vali' rig, receiving notice to re-mobilize three previously suspended rigs in Mexico, and cancelling a significant number of treasury shares - In March 2025, the company cancelled 19,680,391 treasury shares related to a share lending agreement[19] - The 'Vali' rig commenced its first contract in March 2025 after being delivered in August 2024[20] - In April 2025, the company received notice to re-mobilize the rigs 'Galar', 'Grid', and 'Gersemi', which had been on temporary suspension in Mexico[20] Operating and Financial Review For the first quarter of 2025, Borr Drilling reported a net loss of $16.9 million, a significant downturn from a net income of $14.4 million in the same period of 2024, driven by a 7% decrease in total operating revenues and a 5% increase in total operating expenses, with Adjusted EBITDA also decreasing by 18% to $96.1 million Selected Financial Information (Q1 2025 vs Q1 2024) | In $ millions | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total operating revenues | 216.6 | 234.0 | (17.4) | (7)% | | Operating income | 60.2 | 85.0 | (24.8) | (29)% | | (Loss) / income from equity method investments | (1.8) | 5.4 | (7.2) | (133)% | | Total financial expenses, net | (62.7) | (57.8) | (4.9) | 8% | | Net (loss) / income | (16.9) | 14.4 | (31.3) | (217)% | - Total operating revenues decreased by $17.4 million, mainly due to a $24.4 million drop in related party revenue and a $3.7 million decrease in bareboat charter revenue, as three rigs were on temporary suspension, partially offset by a $6.8 million increase in management contract revenue and a $3.9 million rise in dayrate revenue[24][25][26] - Rig operating and maintenance expenses rose by $5.8 million, partly because expenses for certain rigs previously recognized in equity method investments are now recognized directly by the company following contract restructuring and suspensions[28] Adjusted EBITDA Reconciliation (Q1 2025 vs Q1 2024) | In $ millions | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net (loss) / income | (16.9) | 14.4 | (31.3) | (217)% | | Depreciation of non-current assets | 35.9 | 31.8 | 4.1 | 13% | | Loss / (Income) from equity method investments | 1.8 | (5.4) | 7.2 | (133)% | | Total financial expenses, net | 62.7 | 57.8 | 4.9 | 8% | | Income tax expense | 12.6 | 18.2 | (5.6) | (31)% | | Adjusted EBITDA | 96.1 | 116.8 | (20.7) | (18)% | Liquidity and Capital Resources As of March 31, 2025, the company held $170.0 million in cash and cash equivalents, with total principal debt at $2,179.6 million, while net cash from operating activities substantially increased to $138.7 million primarily due to working capital movements including large cash settlements from Mexico operations, and the company continued its cash distributions to shareholders - As of March 31, 2025, the company had $170.0 million in cash and cash equivalents and total principal debt outstanding of $2,179.6 million[36][38] Cash Flow Summary (Q1 2025 vs Q1 2024) | In $ millions | 2025 | 2024 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | 138.7 | 23.9 | 114.8 | 480% | | Net cash used in investing activities | (25.1) | (18.7) | (6.4) | 34% | | Net cash (used in) / provided by financing activities | (4.9) | 175.2 | (180.1) | (103)% | | Net increase in cash and cash equivalents | 108.7 | 180.4 | (71.7) | (40)% | - The significant increase in net cash from operating activities was primarily due to working capital movements, including approximately $117 million in cash settlements from Mexico operations[42] Recent Cash Distributions | Date of Cash Distribution Declaration | Date of Payment to Shareholder | Cash Distribution per Share ($) | | :--- | :--- | :--- | | February 19, 2025 | March 19, 2025 | $0.02 | Non-GAAP Financial Measures The company utilizes Adjusted EBITDA, a non-GAAP financial measure, to enhance comparability of its underlying business performance, defined as net income adjusted for depreciation, income/loss from equity method investments, net financial expenses, and income tax expense Definition of Adjusted EBITDA | Non-GAAP Measure | Closest Equivalent to GAAP Measure | Definition | | :--- | :--- | :--- | | Adjusted EBITDA | Net (loss) / income | Net (loss) / income adjusted for: depreciation of non-current assets; (loss) / income from equity method investments; total financial expenses, net; and income tax expense. | - Management believes Adjusted EBITDA improves period-to-period comparability and is representative of underlying performance, though it has limitations such as not reflecting cash requirements for capital expenditures, debt service, or taxes[45][47] Unaudited Condensed Consolidated Financial Statements This section presents the company's unaudited financial statements, including statements of operations, balance sheets, cash flows, and detailed notes for the first quarter of 2025 Unaudited Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, the company reported total operating revenues of $216.6 million and a net loss of $16.9 million, a significant shift from the same period in 2024, which saw revenues of $234.0 million and a net income of $14.4 million, resulting in a basic and diluted loss per share of $0.07 for Q1 2025 Condensed Consolidated Statements of Operations (Q1 2025 vs Q1 2024) | In $ millions | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Total operating revenues | 216.6 | 234.0 | | Operating income | 60.2 | 85.0 | | Total financial expenses, net | (62.7) | (57.8) | | (Loss) / income before income taxes | (4.3) | 32.6 | | Income tax expense | (12.6) | (18.2) | | Net (loss) / income | (16.9) | 14.4 | | Basic (loss) / income per share | (0.07) | 0.06 | | Diluted (loss) / income per share | (0.07) | 0.06 | Unaudited Condensed Consolidated Balance Sheets As of March 31, 2025, Borr Drilling's balance sheet showed total assets of $3,402.2 million and total liabilities of $2,427.3 million, resulting in total equity of $974.9 million, with cash and cash equivalents increasing significantly to $170.0 million from $61.6 million at year-end 2024, while total debt remained relatively stable Condensed Consolidated Balance Sheet Highlights | In $ millions | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | ASSETS | | | | Cash and cash equivalents | 170.0 | 61.6 | | Total current assets | 516.9 | 516.6 | | Jack-up drilling rigs, net | 2,806.5 | 2,823.2 | | Total assets | 3,402.2 | 3,419.6 | | LIABILITIES AND EQUITY | | | | Total current liabilities | 412.4 | 409.6 | | Long-term debt | 1,996.6 | 1,992.5 | | Total liabilities | 2,427.3 | 2,426.3 | | Total equity | 974.9 | 993.3 | | Total liabilities and equity | 3,402.2 | 3,419.6 | Unaudited Condensed Consolidated Statements of Cash Flows In Q1 2025, the company generated a robust $138.7 million in cash from operating activities, a sharp increase from $23.9 million in Q1 2024, with cash used in investing activities at $25.1 million and cash used in financing activities at $4.9 million, resulting in a net increase in cash and cash equivalents of $108.7 million, bringing the total to $171.2 million at the end of the period Condensed Consolidated Statements of Cash Flows (Q1 2025 vs Q1 2024) | In $ millions | Three months ended March 31, 2025 | Three months ended March 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | 138.7 | 23.9 | | Net cash used in investing activities | (25.1) | (18.7) | | Net cash (used in) / provided by financing activities | (4.9) | 175.2 | | Net increase in cash, cash equivalents and restricted cash | 108.7 | 180.4 | | Cash, cash equivalents and restricted cash at the end of the period | 171.2 | 283.0 | Notes to the Unaudited Condensed Consolidated Financial Statements The notes provide detailed explanations of the accounting policies and financial figures presented, including the company operating as a single segment, a geographic revenue breakdown, specifics on debt instruments and maturities, related party transactions with the Mexico JV, and changes to share capital, including a significant cancellation of treasury shares - Note 4: The company operates as a single reportable segment, with major customers in Q1 2025 including ENI S.p.A (23% of operating revenues) and PTT Exploration and Production (14%)[69][71] - Note 6: The company's Mexico operations were restructured, with bareboat charters with the Perfomex JV terminated and replaced with new agreements with an external party effective January and April 2024, and three rigs under these new agreements temporarily suspended in January 2025, with notice to re-mobilize received in April 2025[82][85] - Note 9: Bermuda enacted a 15% Corporate Income Tax effective January 1, 2025, with the company expecting to be in scope in 2026 but not anticipating a material short-term impact[90][95] - Note 17: Total principal debt outstanding as of March 31, 2025, was $2,179.6 million, and the company was in compliance with all debt covenants[115][119] - Note 21: In Q1 2025, the company cancelled 19,680,391 treasury shares following its delisting from the Oslo Stock Exchange and subsequent amendments to its Share Lending Agreement[131][133]