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    BORR
    Earnings call· Jun 2026(Q2 FY26)

    Borr Drilling Q2 FY26 earnings call BORR

    Aug 12, 2026 Source

    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

    5

    • 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

    5

    • 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

    5
    CategoryTargetConfidence
    Average active rigs
    approximately 23 active rigs
    high materiality
    High
    Odin rig operating expenses
    $6 million to $9 million
    medium materiality
    Medium
    Fontis JV working capital funding
    approximately $15 million
    medium materiality
    High
    New notes amortization
    $101.75 million per annum
    high materiality
    High
    Capital expenditure
    $60 million to $70 million
    medium materiality
    Medium

    Operational metrics

    43
    Technical utilization
    98.4%
    Q2 FY26

    Fleet-wide technical utilization for the quarter.

    Economic utilization
    96.4%
    Q2 FY26

    Fleet-wide economic utilization for the quarter.

    Adjusted EBITDA
    $43.8 milliondown $44.7 million compared with Q1
    Q2 FY26

    Adjusted EBITDA for the second quarter, showing a sequential decrease.

    Odin operating expenses
    $22.5 millionup $11.1 million quarter-on-quarter
    Q2 FY26

    Operating expenses incurred for Odin rig preparation and regulatory approval activities.

    Rig operating expenses increase from Middle East conflict
    $7.3 millionquarter-on-quarter increase
    Q2 FY26

    Increase in rig operating expenses primarily due to higher insurance and fuel costs related to the Middle East conflict.

    Credit loss
    $10.8 million
    Q2 FY26

    Credit loss recognized related to a former customer in West Africa, resulting in net zero receivables from this customer.

    Total operating revenues
    $232.3 milliondecrease of $14.7 million or 6% compared to Q1
    Q2 FY26

    Total operating revenues for the second quarter.

    Dayrate revenue
    $187.7 million$21.8 million reduction
    Q2 FY26

    Dayrate revenue component of total operating revenues, primarily driven by fewer operating days and lower average dayrates for certain rigs.

    Bareboat charter revenue
    $32.9 million$6.3 million increase
    Q2 FY26

    Bareboat charter revenue component of total operating revenues, increasing due to more operating days.

    Management contract revenue
    $11.7 million
    Q2 FY26

    Management contract revenue component of total operating revenues.

    Total operating expenses
    $232.1 millionincrease of $31.1 million compared to Q1
    Q2 FY26

    Total operating expenses for the second quarter.

    Rig operating and maintenance expenses increase
    $30.4 million
    Q2 FY26

    Largest driver of the overall increase in operating expenses.

    Odin regular rig OpEx
    mid $70,000 per day
    future

    Expected regular operating expenses for the Odin rig once fully operational.

    Fuel costs increase
    $5.1 million
    Q2 FY26

    Increase in fuel costs due to higher fuel prices and rigs transitioning between contracts.

    Insurance costs increase
    $2.2 million
    Q2 FY26

    Increase in insurance costs related to the ongoing conflict in the Middle East.

    Other nonoperating income
    $6 million
    Q2 FY26

    Compensation received to remove certain operating restrictions associated with a prior rig sale.

    Total financial expenses net
    $236.5 millionincrease of $173.8 million compared to Q1
    Q2 FY26

    Total net financial expenses, primarily driven by refinancing activities.

    Loss on debt extinguishment
    $176.3 million
    Q2 FY26

    Loss recognized on the extinguishment of senior secured notes and partial extinguishment of convertible bonds.

    Net loss
    $241.4 millionincrease in loss of $212.4 million compared to Q1
    Q2 FY26

    Net loss for the second quarter.

    Cash and cash equivalents
    $223.6 milliondecrease of $22.4 million from March 31
    as of June 30

    Cash and cash equivalents balance at the end of the quarter.

    Undrawn available borrowings under RCF
    $250 million
    as of June 30

    Amount of undrawn capacity under the revolving credit facility.

    Total liquidity
    $473.6 million
    as of June 30

    Combined cash and undrawn RCF at quarter-end.

    Net cash used in operating activities
    $21.8 million
    Q2 FY26

    Net cash outflow from operating activities, including interest and tax payments.

    Net cash used in investing activities
    $2.3 million
    Q2 FY26

    Net cash outflow from investing activities, primarily for jack-up rig maintenance and capital additions, partially offset by proceeds.

    Net cash provided by financing activities
    $1.8 million
    Q2 FY26

    Net cash inflow from financing activities, resulting from new debt issuances offset by repayments.

    Convertible notes issued
    $300 million
    April 2026

    Issuance of new convertible notes.

    2028 convertible bonds repurchased and cancelled
    $195.2 million
    April 2026

    Repurchase and cancellation of existing convertible bonds using proceeds from new issuance.

    Senior secured notes issued (total)
    $2.035 billion
    June 2026

    Issuance of new senior secured notes in two series.

    Revolving credit facility commitments
    $250 millionincreased
    Q2 FY26

    Commitments for the super senior secured revolving credit facility were increased, with reduced margin and extended maturity.

    Contract commitments YTD
    21
    YTD 2026

    Total contract commitments secured year-to-date, adding significant backlog.

    2026 contract coverage
    73%
    FY26

    Contract coverage for the full year 2026 at a stated average dayrate.

    H2 2026 contract coverage
    70%
    H2 FY26

    Contract coverage for the second half of 2026.

    Modern jack-up market utilization
    90%
    current

    Resilient market utilization for modern jack-ups globally.

    Middle East backlog additions H1 2026
    lowest levels in more than 25 years
    H1 FY26

    Backlog additions in the Middle East during the first half of the year reached historical lows.

    North Sea contracts H1 2026
    more than Middle East
    H1 FY26

    The North Sea saw more contract awards than the Middle East in H1 2026.

    Rig Galar and Gersemi contract extension
    2 years
    into 2030

    Contract extension for two rigs in Mexico.

    Rig Idun contract award 1
    60 days
    July 2026

    First award for the Idun rig in Southeast Asia.

    Rig Idun contract award 2
    30 days
    direct continuation

    Second award for the Idun rig in Southeast Asia.

    Rig Mist contract award
    45 days
    October 2026

    Binding letter award for the Mist rig.

    Rig Gunnlod contract award
    8 months
    commencing this month

    Contract secured for the Gunnlod rig.

    Rig Gerd contract extension
    into March 2027
    March 2027

    Contract extension for the Gerd rig in West Africa.

    Rig Prospector 1 contract extension
    7 months
    into April 2027

    Contract extension for the Prospector 1 rig.

    Capex per rig per year
    $2 million to $2.5 million
    per year

    General guidance for capital expenditure per rig per year.

    Industry KPIs

    5
    MetricValueDetails
    Rpo backlog$541 millionUSD
    Book to bill ratiopositive
    FCF CAPEX leverage$60 million to $70 millionUSD
    M a integration progress$287 millionUSD
    Orders bookings by segment$541 millionUSD

    Orderbook & backlog

    2
    Dayrate equipment backlog$541 millionYTD 2026

    Added from 21 contract commitments

    Contract days backlog4,350 daysYTD 2026

    Added from 21 contract commitments

    Deals & partnerships

    1
    FontisAcquisition 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

    5
    Odin rig deployment delays and cost overrunsQ2 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 costsQ2 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 marketOngoing, 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 customerQ2 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 challengesOngoing

    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

    5

    Q3 Adjusted EBITDA improvement

    Q3 FY26
    Current$43.8 million (Q2 FY26)
    TargetSignificant 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.

    Q&A highlights

    5

    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 read6 chapters

    Detailed Narrative

    01

    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.

    02

    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.

    03

    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.

    04

    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.

    05

    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.

    06

    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.

    AI-generated summary of the company’s earnings call. Not investment advice.