What are the assumptions behind the 23 average operating rigs for Q3, especially concerning hurricane season impact on Odin? And what is the outlook for fuel and insurance costs in Q3?

The 23-rig outlook is based on existing contracts. Odin's operational sequence was revised to avoid hurricane season impact, and it's expected to mobilize soon. Fuel costs are anticipated to decrease significantly in Q3 due to fewer rig transitions, which disproportionately increased Q2 costs. Insurance costs are expected to linger due to the ongoing Middle East conflict. “In relation to the Odin, we changed the operational sequence, as I mentioned in the early remarks, we changed the operational sequence of the customers to make sure that we could maintain the rig utilized during hurricane season. So the rig will be in a location that -- where we have approvals to stay basically year-round.”

How do you foresee the Middle East market unwinding when the conflict ends, in terms of tendering and contracting? Also, is the Fontis JV now self-sufficient, or will it require more capital contributions?

The Middle East remains the engine of the jack-up sector, with significant demand still in the pipeline. Tenders are ongoing, and some indications suggest increased tender sizes. While timing is uncertain, management believes demand will materialize. The Fontis JV is expected to be self-funded with 3-4 rigs operating, with no significant further working capital contributions anticipated beyond the initial Q3 funding, unless for reactivation of stacked rigs. “Inevitably, the Middle East is the engine of the jack-up sector and a meaningful rebound in the Middle East can very quickly rebalance things around the globe, and that will provide a very interesting context for us if it happens.”

Has the strong contracting activity in Asia been driven by the Middle East conflict and energy security? What is the balance sheet strategy moving forward, and are there plans for M&A?

Activity in Asia, particularly Vietnam and Malaysia, is robust, partly driven by energy security concerns. Borr has strong partnerships and expects to maintain rigs in the region. The balance sheet is in a strong position post-refinancing, with maturities extended and financing costs rationalized. M&A is not a strategic priority currently, with focus on operational execution and cost control amidst near-term uncertainty. “I do think, as I mentioned earlier in a prior question that the longer the conflict lingers, the more that urgency in kind of securing our own supply becomes -- kind of comes to the forefront. And I expect that, that will continue to drive activity levels.”

BORR

Borr Drilling (BORR) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Energy· Aug 12, 2026

Source: earnings call transcript

Executive summary

Borr Drilling Q2 FY26 — Operational Headwinds Offset by Strong Refinancing and Contract Wins

Borr Drilling faced significant operational headwinds in Q2 FY26, primarily from delays in the Odin rig's deployment and elevated rig transition activity, which impacted adjusted EBITDA. Despite these challenges, the company executed a comprehensive debt refinancing, strengthening its liquidity and extending maturities. New contract commitments, particularly in Southeast Asia and Mexico, underscore continued demand, and management expects a significant improvement in Q3 adjusted EBITDA as transitioned rigs become fully operational.

Highlights

Secured 21 contract commitments year-to-date, adding approximately 4,350 days and $541 million of dayrate equipment backlog.
Successfully refinanced substantially all debt, extending maturities and upsizing the RCF to $250 million with a lower base margin of 3%.
Achieved strong operational performance with technical utilization of 98.4% and economic utilization of 96.4%.
Fontis JV acquisition of 5 premium jack-ups completed at an attractive valuation, with 3 rigs contracted and expected to be operational in Q3 FY26.
Rig Galar and Gersemi contracts extended by 2 years each in Mexico, now contracted into 2030.

Concerns

Adjusted EBITDA declined by $44.7 million quarter-on-quarter to $43.8 million due to Odin delays, rig transitions, and increased costs.
Incurred $22.5 million in operating expenses for Odin preparations, an $11.1 million quarter-on-quarter increase.
Middle East conflict led to a $7.3 million quarter-on-quarter increase in rig operating expenses due to higher insurance and fuel costs.
Recognized a $10.8 million credit loss related to a former customer in West Africa.
Net loss for Q2 was $241.4 million, an increase in loss of $212.4 million compared to Q1, primarily due to a $176.3 million loss on debt extinguishment.

Guidance & targets

Category	Target	Timeline	Confidence
Average active rigs	approximately 23 active rigs high materiality	Q3 · FY26	High
Odin rig operating expenses	$6 million to $9 million medium materiality	Q3 · FY26	Medium
Fontis JV working capital funding	approximately $15 million medium materiality	Q3 · FY26	High
New notes amortization	$101.75 million per annum high materiality	Full Year	High
Capital expenditure	$60 million to $70 million medium materiality	Full Year	Medium

Orderbook & backlog

Dayrate equipment backlog $541 million YTD 2026

Added from 21 contract commitments

Contract days backlog 4,350 days YTD 2026

Added from 21 contract commitments

Deals & partnerships

Fontis Acquisition of 5 premium jack-up rigs through a 50/50 joint venture with a long-term Mexican well construction partner. $287 million

The acquisition was completed in July. Currently, 3 of the 5 rigs are contracted, with 2 operating and a third expected to commence operations later in Q3. Focus is on deploying remaining rigs and converting opportunity pipeline.

Risks & headwinds

Odin rig deployment delays and cost overruns Q2 FY26 and Q3 FY26

$22.5 million in operating expenses incurred in Q2, an $11.1 million QoQ increase; additional $6 million to $9 million expected in Q3.

Mitigation:Revised rig deployment sequence to improve operating efficiency, regulatory approvals received, rig preparing to mobilize for contract into mid-2027 with options into 2029.

Elevated rig transition activity impacting revenue and costs Q2 FY26

Reduced revenue in Q2; $5.1 million increase in fuel costs due to higher number of rigs transitioning.

Mitigation:Activity substantially completed; rigs are now fully operational, expected to average 23 active rigs in Q3, leading to significant EBITDA improvement.

Middle East conflict impact on operations and market Ongoing, Q2 FY26 impact

$7.3 million QoQ increase in rig operating expenses (insurance and fuel); backlog additions in H1 2026 lowest in >25 years.

Mitigation:Monitoring situation; broad views remain unchanged on substantial underlying demand; delayed activity expected to re-enter market once conditions stabilize; gradual resumption of operations in Saudi and UAE.

Credit loss from former customer Q2 FY26

$10.8 million recognized credit loss.

Mitigation:Receivable from this customer was fully provided for, resulting in a net zero receivable balance.

North Sea permitting challenges Ongoing

Drives uncertainty and lack of visibility for new meaningful commitments.

Mitigation:Working closely with customers to meet drilling requirements, as evidenced by recent contract extensions (e.g., Prospector 1).

What to watch in Q3 FY26

Q3 Adjusted EBITDA improvement

Q3 FY26

Current $43.8 million (Q2 FY26)

Target Significant improvement

Why it matters

Verifies the impact of reduced operational headwinds and increased active rigs on profitability.

Together, with the soon-to-commence Odin contract, we expect Q3 to average approximately 23 active rigs and hence, adjusted EBITDA to improve significantly from second quarter.

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Q&A highlights

Can you provide a range for Q3 EBITDA given the expected increase in active rigs and fading start-up costs? Also, what is the line of sight for deploying the remaining two Fontis JV rigs?

Management expects a substantial increase in Q3 EBITDA, with average active rigs similar to Q1 levels (around 23). For the Fontis JV, three rigs are expected to be working in Q3, with potential for a fourth by year-end or early next year based on ongoing tenders in Mexico. One rig might remain stacked longer, but the goal is for the JV to be self-funding with 3-4 rigs operating.

“When we looked at the case, the business case to acquire that entity or that business, we were looking to maybe 3 to 4 of those rigs being operating. We have 3 right now, as I said earlier, some of the ongoing discussions in the region, including discussions with Pemex give us line of sight for the fourth rig as we kind of get closer to the end of the year.”

asked by Scott Gruber · answered by Bruno Morand

2 min read 6 chapters

Detailed narrative

Operational Performance and Safety Milestones

Borr Drilling reported strong operational performance in Q2 FY26, achieving 98.4% technical utilization and 96.4% economic utilization. The company also highlighted several safety milestones, with rigs like Groa and Gersemi reaching 7 years LTI-free, and Ran and Skald achieving 6 and 5 years LTI-free, respectively. This commitment to safety is a core focus across the global fleet.

Odin Rig Deployment and U.S. Gulf Entry

The Odin rig experienced delays in its U.S. Gulf deployment due to longer-than-anticipated contract preparations and regulatory approvals, which were received in mid-July. This resulted in higher costs and delayed revenue recognition. However, the rig is now preparing to mobilize for its first contract, which extends into mid-2027 with options into 2029, and management remains optimistic about demand in the region.

Rig Transition Activity and Q3 Outlook

Q2 FY26 saw elevated rig transition activity, with six rigs moving between contracts, contributing to reduced revenue and higher fuel costs. This activity is largely complete, and with the Odin commencing operations, Borr expects to average approximately 23 active rigs in Q3 FY26, leading to a significant sequential improvement in adjusted EBITDA.

Debt Refinancing and Liquidity Enhancement

Borr Drilling successfully refinanced substantially all of its debt during the quarter. This included issuing $300 million of 3.5% convertible notes due 2033 and $2.035 billion of senior secured notes across two series, extending maturities to 2032 and 2034. The company also increased its revolving credit facility to $250 million, enhancing its liquidity position to $473.6 million at quarter-end.

Fontis JV Acquisition and Mexican Market

In July, Borr's 50/50 joint venture in Mexico completed the acquisition of five premium jack-ups from Fontis for $287 million. Three of these rigs are already contracted, with two operating and a third expected to commence operations in Q3. The company sees strong potential in the Mexican market, driven by Pemex's production targets and IOC procurement processes, reinforcing its strategic position in the region.

Global Market Dynamics and Regional Performance

Globally, modern jack-up market utilization remains resilient at approximately 90%. While the Middle East conflict has delayed tendering, other regions like Southeast Asia and West Africa have seen robust contracting activity. Borr is actively pursuing opportunities to fill open space, leveraging its broad market presence and strong customer relationships to navigate regional disparities in demand and pricing.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.