Borr Drilling(US:BORR)2023-08-17 18:23Financial Data and Key Metrics Changes - In Q2 2023, the company reported revenues of $187.5 million, an increase of $15.5 million or 9% compared to Q1 2023 [14] - Adjusted EBITDA for Q2 was $84 million, reflecting an increase of $11.6 million or 16% from Q1, resulting in an adjusted EBITDA margin of 45% [31][15] - Rig operating and maintenance expenses rose to $89.5 million, an increase of $4 million from Q1, primarily due to prior insurance proceeds affecting Q1 expenses [6] Business Line Data and Key Metrics Changes - The company secured seven new contracts and letters of award (LOAs) year-to-date, totaling an estimated duration of 1,771 days or $289 million in contract value, with an average day rate of approximately $163,000 [11] - The current contract revenue backlog stands at 34.1 rig years for a total of $1.64 billion, equating to an equivalent rate of $132,000 per day [18] Market Data and Key Metrics Changes - Jack-up rig utilization levels have increased, with modern rig utilization currently at 93.9%, a level not seen since 2014 [36] - The company noted an increase in average contract duration and a higher number of tenders and awards, indicating a strong demand for jack-up rigs [8] Company Strategy and Development Direction - The company is focused on building a quality backlog and has a positive outlook on the jack-up rig market, anticipating a multi-year upcycle in the shallow water offshore drilling industry [20] - The company is in discussions to expedite the delivery of two rigs, aiming to capitalize on current market opportunities [33][53] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the jack-up rig market, highlighting a strong demand visibility and tightness in the market that supports increasing rates [37] - The company aims to refinance its debt and return cash to investors, with dividends expected to be considered in 2024 if refinancing is successful [79] Other Important Information - The company has a contract coverage for 2024 of 70%, including firm contracts and priced options, with an average equivalent day rate of approximately $123,000 [13] - The company is actively marketing its rigs in regions experiencing lower day rate levels, such as the North Sea, while maintaining a focus on operational excellence [32][39] Q&A Session Summary Question: What is the company's strategy regarding refinancing and potential dividends? - Management indicated that refinancing debt is a key priority and that they are encouraged by recent refinancing trends in the industry, with dividends expected to be considered in 2024 if refinancing is successful [79] Question: How does the company view the West Africa market? - Management maintains a constructive view on West Africa, noting increasing requirements and exploration programs, although the market is smaller compared to the Middle East [64] Question: What is the company's approach to securing long-term contracts in a rising day rate market? - The company has demonstrated discipline in securing contracts, ensuring they can benefit from increasing market rates while being cautious about committing too much capacity too early [56][58]