Borr Drilling Ltd Aktie

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q1 2026 Results Presentation Webcast and Conference Call. [Operator Instructions] 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. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for joining Borr Drilling's first quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer. I'd like to remind all participants that certain statements made on this call are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

For further details, please refer to our latest public filings. On today's call, I'll start with a review of the first quarter and key developments since quarter end. Magnus will then cover financial results, after which I'll return to discuss contract activity and our market outlook. Before I begin, I would like to recognize our teams around the world for their continued commitment to safe and reliable operations.

During the quarter, several rigs achieved important safety milestones. The Gerd, Natt and Mist each achieved 7 years LTI-free, while the Saga and the Arabia III reached 6 and 3 years, respectively. The Norve also attained 2 years recordable incident free. These milestones reflect a strong safety culture across the organization, and I would like to thank all of my colleagues for their continued dedication to zero harm operations.

Operationally, we delivered technical utilization of 99.4% and economic utilization of 97% in the first quarter. Revenue for the period was $247 million and adjusted EBITDA of $88.5 million, primarily impacted by the delayed start-up of the Odin $8.4 million credit loss provision.

During the quarter, the Odin completed its mobilization from Mexico where operations had initially been expected to start in February. However, the start-up was [Technical Difficulty] due to disruption during transit, additional contract preparation work and approvals. While these delays are unfortunate, to bring Odin into the U.S. was based on the long-term opportunity outlook in that market.

I remain confident positioned with capabilities available to operators in the U.S. Gulf, and we believe the rig will remain well placed to serve the region. Looking ahead, we expect second quarter results to continue to be affected by the delayed startup of the Odin now anticipated to commence in late June as well as rigs transition.

During the quarter, rising tensions and hostilities in the Middle East created disruptions, but with limited financial impact. Most importantly, all of our personnel remain safe. I would like to thank our teams for their professionalism and flexibility that they have shown through this period. As announced in April, following temporary suspensions, all affected rigs were called back to work.

After resuming operations, the Groa and the Forseti has now completed their contract in Qatar. The Forseti remains on the bareboat charter with the former owner into December 2026. Our contracting strategy remains focused on increasing near-term coverage or balancing dayrates and contract tenor.

Since our last earnings report, we've secured 8 contract commitments, representing more than 1,100 days of firm work. Full year 2026 coverage has increased to 71% at an average day rate of approximately $137,000, while second half 2026 coverage now stands at 65% as compared to 48% in the prior earnings report. We also announced the acquisition of 5 premium jack-up rigs on Paratus for $287 million through a new 50-50 joint venture with our long-standing Mexican well construction partners.

This transaction will expand our fleet from 29 to 34 rigs and further strengthen our position in the Mexican market while adding flexibility to 2 higher specification units with broader redeployment potential. In April, we successfully completed an upsized $300 million convertible senior notes offering due in 2033, using the proceeds to repurchase a significant portion of our 2028 convertible bonds.

This transaction meaningfully extends our maturity profile and strengthen our capital structure ahead of what we expect to be a constructive market environment. Magnus will walk through these in more detail shortly. While the Middle East conflict has created near-term uncertainty, key tenders in the region continue to progress with some modest delays.

More broadly, in our view, recent events have strengthened the long-term outlook for the sector, providing for higher oil prices and a renewed focus on energy security. Shallow water basins continue to represent an attractive resource offering low cost and short-cycle barrels. Due to our customers' planning and budgeting cycles, we expect that improved activities and dayrates will lag the oil price increase by 6 to 12 months.

This dynamic was recently seen in 2022 when the military invasion of Ukraine caused oil prices to spike and a corresponding increase in dayrates occurred several quarters later. Therefore, we're increasingly confident about the company's prospects for '27 and 2028 as we expect disruptions from the conflict in the Middle East to be both substantial and long lasting.

With this backdrop, Borr Drilling's expanded fleet is well placed to support our customer demand and deliver long-term shareholder value as the cycle develops. I'll walk you through our business outlook in more color later in the call, but now I'll hand the call to Magnus to discuss the first quarter financial results.

Thank you, Bruno. I will now go into some details of the financials for the first quarter. Total operating revenues for Q1 were $247 million, a decrease of $12.4 million or 4.8% compared to Q4.

This is mainly explained by a $15.5 million decrease in dayrate revenue, offset by a $3 million increase in bareboat revenue. The decrease in dayrate revenue is driven mainly by $10.4 million lower reimbursable expenses in addition to fewer operating days, combined with lower dayrates for some rigs. The $3 million increase in bareboat charter revenue was due to more rigs earning bareboat revenues after the rig acquisition from Noble.

The total operating expenses were $201 million, up $8.9 million or 4.6% versus Q4. The increase was primarily due to $4.7 million of increased depreciation following the 5 rig acquisition from Noble and $4.6 million higher rig OpEx. The increase in rig OpEx was primarily due to $8.4 million of credit losses provision that we incurred in the quarter, partly offset by lower reimbursable expenses of $7.4 million. In addition to this, financial expenses increased by $6.9 million in the quarter due to the recent seller credit financing incurred in connection with the Noble acquisition -- Noble Rig acquisition and the bond tap late last year.

Overall, for the quarter, we had a net loss of $29 million and adjusted EBITDA of $88.5 million, down $16.7 million quarter-on-quarter. The adjusted EBITDA was highly impacted by the nonoperational matter of $8.4 million credit loss provision taken in the quarter. In addition, as mentioned, the Odin's delayed commencement was also impacting the adjusted EBITDA compared to expectations at the beginning of the year.

In the first quarter, we recognized no revenues but started incurring standard operating expenses for the rig. Now going into Q2, the rig is continuing to undergo contract preparation and regulatory approvals, and we now expect the rig to commence operations in June.

The rig is expected to incur additional contract preparation expenses of approximately $10 million in addition to standard OpEx before commencing its contract. Now moving into cash. Cash at the end of the quarter was $246 million, but total liquidity was $480 million, including undrawn revolving credit facilities of $234 million. Cash and restricted cash decreased by $133.7 million in the quarter, primarily as a result of the following: -- we used $182.9 million in investing activities, consisting primarily of the $175.1 million cash spent to complete the Noble acquisition in January.

In addition, we incurred $7.5 million of CapEx for long-term maintenance expenses or costs. The cash used in investing activities was offset by $48.1 million cash from operating activities. This includes $6 million of interest payments and $6.7 million of taxes. Other financial events in the quarter that is worth highlighting and that we have highlighted is that we completed the 5-rig acquisition from Noble for a total purchase price of $360 million, partly financed by $150 million seller credit.

We also issued $300 million of convertible notes post quarter end. We mainly used the proceeds to repurchase and cancel $195.2 million of our 2028 convertible notes, which extends the maturity profile by 5 years until 2033. The new convertible has a coupon of 3.5% compared to 5% on the 2028 and has an improved conversion price increase to $8 per share. With this, I would like to pass the word back to Bruno.

Thank you, Magnus. Activity on the contracting front has continued to track largely in line with our expectations. Year-to-date 2026, we've secured 13 new commitments, adding approximately $274 million to our backlog. In Americas, ENI extended the Ran's contract in Mexico, keeping the rig firmly committed through September 2026. Additionally, the Sif, one of our recently acquired rigs from Noble has secured a contract offshore Suriname for 1 well.

Drilling is targeted to commence in July and has an estimated duration of 100 days. In West Africa, the Prospector 5 secured work with BW Energy in Gabon. The rig is scheduled to complete operations with ENI in Congo later this month before mobilizing to Gabon in early third quarter following its scheduled SPS. The rig is now firmly committed into Q2 2027 with unpriced options that extend into 2028.

In Europe, the options on the Groa were exercised, keeping the rig utilized through May. As a reminder, the rig was under the BBC to allow the previous owner to complete the ongoing accommodation work with Siemens. The Groa will now demobilize later this month and operations will be handed over from Noble to Borr.

In Asia, the Scout received a 180-day contract with Vestigo in Malaysia and is scheduled to mobilize to the first well location later this month. The Thor also received 2 contract awards in Vietnam and is now committed through the first quarter of 2027. I remain proud of our continuous contracting success, which has a notable presence of repeat customers, demonstrating our strong relationships and ability to deliver safe and efficient operations.

Recent awards have meaningfully increased our 2026 coverage, particularly in the second half. We continue to work on several opportunities and remain optimistic in securing additional contracts in the coming months. Looking at our core markets around the globe. In the Middle East, visible open tender demand has further increased to 17 rigs.

Although the current disruptions may delay activity in near term, we believe its resolution will release pent-up demand that would likely be driven not only by deferred programs returned to the market, but also by the work required to restore shut-in wells and related infrastructure before production can return to pre-conflict levels.

As a result, we see a credible pathway for incremental recovery-related demand once conditions normalize. Outside of the Middle East, we continue to receive positive customer signals across most of our operating regions, supporting our view that additional work is approaching the pipeline. That is consistent with the broader trend we referenced earlier in our remarks and with the historical pattern that offshore activity typically respond with some lag as customers work through planning, budgeting and procurement processes before converting demand into contracted work.

In particular, I would like to highlight developments in Asia and in Mexico. In Asia, we see signs of new requirements in Malaysia and Vietnam. While both countries are showing growth, they remain below past cycle jack-up counts and provide notable upside as the current environment progresses.

Energy security is clearly a priority topic for important countries, and we expect demand to accelerate as global disruptions impact their access to hydrocarbons. We have continued to execute at a high level in this competitive region and remain optimistic we will fuel the majority of our 2026 available days in the near future. Additionally, we see rig demand increasing in China.

While not a location international contractors tend to operate, any notable demand pulling rigs into China has the potential to absorb a considerable amount of supply. As we have discussed in the past, Mexico continues to hold consequential shallow water production capacity, and we see jack-up utilization as a fundamental variable in the formula for PEMEX to reach the stated production targets.

Recent news of stacked rigs returning to work, along with a fresh market inquiry from PEMEX leaves rigs in-country well suited to benefit from developing demand. Looking further ahead, we see our 2027 availability as strategically valuable. It gives us flexibility to participate in what we believe could be a stronger contract environment as demand and dayrates continue to develop. Our approach remains balanced, continue building near-term coverage while preserving exposure to future upside.

With that context, let's turn to the conclusion slide. I'll leave you with a few key takeouts. First, renewed focus on energy security, coupled with improved project economics and elevated oil prices will drive demand for jack-ups.

Second, it's clear that we have near-term uncertainty in the Middle East. That being said, tenders are progressing, and we see an increasing likelihood of pent-up demand forming regionally and beyond. We continue to focus on increasing 2026 coverage and remain strategic in doing so while balancing rate and tenor.

And finally, we have proven our ability to opportunistically grow our fleet as we see a favorable time in the cycle. At this time -- at the same time, we continue to take actions to enhance capital structure to support long-term value shareholder creation.

So in conclusion, taking these points together, the broader message is clear. We are managing through near-term variability while positioning the company for stronger performance as the market improves. With that, I'll now turn the call over to Q&A.

[Operator Instructions]

We will now take the first question from the line of Ben Sommers from BTIG.

So first, it was great to see you guys continue to grow the fleet during the quarter. I guess just kind of curious how we're thinking about expanding the fleet moving forward.

And you mentioned the ongoing focus on energy security and just higher oil prices creating a strong long-term macro environment. So just kind of curious how we think about potential fleet expansion down the road.

Very good, Ben. Thanks for joining. Thanks for the question.

When we think about expansion, I think it's fair to say that we are pretty happy with what we achieved in late Q4 and into Q1 this year. Our fleet is now 34 rigs. I think it's a pretty interesting size as we complete the Paratus acquisition through the year. And we are well represented in every market where we operate in decent scale.

So, I think in line with what we commented before, I think any further expansion from here, I think, is a strategic flexibility that we have and it's not a strategic mandate, let me put it this way. I think for now, we have -- out of the rigs that we acquired, we have a couple of them to put back to work, and that remains our priority in the near term.

We'll continue to monitor the market to see if other opportunities are out there. But I think at this time, our key priority is finding employment opportunities for these rigs before we look into further growth.

Super helpful. And then I appreciate the color on some notable regions. Kind of wanted to ask around West Africa.

Kind of curious anything you guys are seeing there and then potentially the longer-term demand profile in that region once again, especially as you're seeing this ongoing, I guess, prioritization of energy security. Just kind of curious in a region like West Africa, any color on the demand outlook?

Yes, for sure, Ben. We've seen already in the last few years, and I think more pronounced in the last several quarters now that demand in West Africa has tracked positively and it's being largely driven by Angola, Nigeria. I think that, that continues. Oil price is supportive to development of some of those programs.

And in our conversations with customers, even wells that were maybe allocated to be drilled a bit far in the future, a bit further in the future, there is consideration about moving these programs forward. The demand in the region is likely in the near term to attract rigs from outside of the region that should help, particularly regions like Asia that have been more competitive.

And I think this is a very positive development. West Africa supply-demand balance is quite healthy. What we have seen, including our recent fixture is that, that continues to provide opportunity for us to print leading-edge rates. And we see now as the cycle develops, that there are more longer-term opportunities pop in the market. So that's all positively.

It's a market that I think 400-foot capable rigs tend to fare well because of their operational flexibility, and we are largely in control of the capacity of 400-foot capable rigs in the region. So that gives us, I think, a positive outlook in terms of maintaining the fleet contracted as well as pushing prices when we think we have a strategic positioning.

We will now take the next question from the line of Dan Kutz from Morgan Stanley.

So I wanted to ask, I guess, something somewhat similar to the last line of questions, but just from a little bit different angle, and that's that -- so you guys have flagged some incremental demand in certain regions driven by energy security concerns. You flagged Southeast Asia or Asia and you flagged PEMEX in Mexico.

I guess the question is -- Borr clearly has one of the highest spec fleets, if not the highest spec in the shallow water drilling space. And I guess, in a theoretical scenario where there's incremental demand pull outside of the Middle East, how do you think about how your fleet mix is potentially positioned to benefit from that?

I know the Middle East tends to be a relatively high-spec market in terms of the mix of rigs that are working, but some of the other regions that you flagged have a higher mix of high-spec rig demand as well like Asia Pacific and Mexico. But yes, just wondering if you could talk about how the new macro outlook plays into.

Yes. Thanks for joining. Great question. And the way I would frame it is, I think the higher specification of our rigs shouldn't be perceived as a limitation. I think much the opposite. I think our higher specification fleet is actually very well suited for higher specification work, but we are in a position to compete very efficiently and effectively across all kinds of work, right? I think we're selective, but the rigs are capable of delivering successful wells pretty much across all geographies.

So I think that gives us tremendous amount of flexibility. And maybe if I put into context and look at the larger picture, I think last quarter, when we're reporting here in Q2, what did we have ahead of us? We had a modern jack-up fleet that was very resilient, still tracking around 90% utilization, and we had developing demand largely geared towards the Middle East, where we saw about 13 rig requirements in the Middle East alone at that point in time.

Now you fast forward a quarter, what has changed effectively? And I think the answer is other than timing, nothing has changed, at least not negatively. Jack-up utilization for modern rigs still tracking at 90%, meaning there's limited supply available out there. The demand in the Middle East that we counted at that point in time, potentially 13 rigs has now increased to 17 -- and I think the disruptions in large continue to drive incremental demand from what we saw in Q2 across the various geographies.

I think in -- outside of the Middle East, it's clear that energy security is the driver in countries, I think, particularly in Asia that have been exposed to the availability of hydrocarbons, the limited availability of hydrocarbons, we see some of those discussions accelerating. If you look at the Middle East alone, obviously, the timing may be variable.

But ultimately, we are positive that incremental work is going to be needed to bring production capacity back to where we were. I mean, wells, even in the Middle East, they don't work like light switches and you turn them off and turn them back on and they come online when you want, right? And if you keep in mind that about 8% to 10% of the global supply has been basically shut in.

There's certainly a lot of work that is going to be needed in intervention going to this well, getting back into production that should drive a higher demand for rigs or higher intensity for rigs. But I think beyond that, if you look across the globe, SPRs across pretty much every country, every region seems to be tracking at all-time low levels or definitely recent low levels.

So I think on top of that, once the situation normalizes, there will be an urgency to replenish those SPRs that should drive as well a near-term demand that is perhaps higher than what we had coming into the conflict. So I think that the landscape is quite interesting here. The timing remains obviously a bit variable considering this conflict.

So in the context of that, having the highest specification rigs that can actually address demand wherever it comes from, whether it's in West Africa, whether it's in Mexico, whether it's in Asia, I think it positions us very uniquely. Certainly, if we find jobs that by default, require only an exclusively high specification rig, we're even better off. But in any case, I think we're very well positioned.

That's great color and context. And then maybe one on UAE. I guess with UAE announcing exit from OPEC, and we're seeing some big incremental upstream investment and production growth plans coming out of UAE following that decision, Borr is one of the few contract drillers outside of ADNOC Drilling that works in the UAE.

And so I was just wondering if you could talk about the implications of the UAE exit and the potential upside -- activity upside in that market and the implications for Borr given your unique position as a company that does work in the UAE.

For sure. And I think it's obviously the development in the UAE and then leaving OPEC are quite fresh, and we're yet to assess what that means a bit in the longer term. What seems clear to me is that they will continue with their ambition to increase their sustainable production capacity and ramp that up to the 5 million barrels that they've been targeting.

And inevitably, I think that entails more jack-ups being needed, right? Whether it happens through ADNOC drilling, whether they were looking to foreign players to come and help, I think time will tell. But the development is positive. We are currently located there, as you said. So we do have established presence. We do have an operating reputation, and we'll have to watch what happens. I do think that inevitably, a key component to Middle East growth or recovery at the moment lies in the shallow water barrels inevitably.

We will now take the next question from the line of Doug Becker from Capital One.

I want to ask a difficult hypothetical question about Middle East demand. If we just paint a scenario where the conflict continues to drag on, the strait remains closed, but kinetic activity is limited.

How do you see Middle East jack-up demand evolving in this kind of prolonged conflict situation?

Doug, thanks for joining. Yes. So you're right. I think that if you look hypothetically about the strait being remaining closed for a long time, inevitably, you create eventually a situation where less activity is needed in the Gulf to -- because otherwise, you just don't have ability to export that production.

How realistic I think it is at the moment that the world can actually afford the strait being closed for a long time. I think I would have questions about what can be effectively the full duration of that. But the reality is that different than during 2024 kind of Saudi suspensions terminations, the reality is that the Middle East for now is landlocked, right?

If the strait remains closed, the Middle East is landlocked and any activity that results in other regions from that or any requirements that result from there will not be affected by rigs that will be available in the Middle East. So I think that, that creates a bit of a unique dynamic compared to what we saw in the past.

For us, -- we have 4 rigs in the Middle East, which is not necessarily a small exposure, but I think it's very manageable at the moment. So I don't think that -- I think if you see that happening and you're now expecting commodity prices to be tracking way higher because I think that's what you should think about if this strait was to stay close, activity in other places will pick up.

And I do think that what that brings is an upside to economics and everything else that is likely to offset for us, in particular, our relatively small presence in the Middle East, if that makes sense.

No, that definitely makes sense. I wanted to shift to the U.S. Gulf. I know in the past, you kind of mentioned it's a new frontier for Borr.

There might be a bit of a learning curve. I was just hoping to get some more color on the contract prep and regulatory issues that Odin has been seeing and what this might mean for additional rigs moving to the market going forward?

No, very good, Doug. And see, I think it's fair to say that the performance of the Odin and started in the U.S. has been lagging to what we would have expected. Starting raising in new regions always come with a degree of challenge. I think over the last years, we've done that very successfully.

If I look at a lot of the start-ups that we have, cross-regional start-up, cross-country start-up, I think we've maintained a pretty strong track record. Coming to the U.S., I think we found a bit more challenging than we would have anticipated, and it's showing now in the delays, not only in terms of getting the rig ready, but as well as some challenges we had with the weather while we were moving the rig from Mexico to the U.S. that caused about a 40-day delay during that process alone.

Now as I said in the earlier remarks, we didn't bring a rig into the U.S. Gulf hoping to just patch in short-term work. When we look at the U.S., what we saw is a market that was lacking high-specification shallow water capacity. I mean if you think about the U.S. on the onshore side, tremendous amount of progress has been done in shale by using technology, new work practices to streamline the well programs, while offshore space, that market still heavily rely on 1970, 1980s rigs that have limitation in terms of how efficiently and effectively they can drill wells to the new standard.

So the Odin -- coming to country stand alone in that space. It brings tremendous amount of capabilities that are -- related to factory drilling, how we accelerate wells. And we're getting a lot of traction from customers. I was in the U.S. just a couple of weeks back and had a chance to engage with a lot of customers. And the commentary has been quite exciting about how they're looking at that, how they're interested to see the capability there and how that will translate into well efficiencies.

So I think that the outlook is positive. We should be starting soon this work with Cantium. We have follow-on work with Exxon. I do believe there's a very good likelihood that across these 2 customers, there could be more work coming. But a lot of the chatter across the customers that we were able to see in the last couple of weeks in the U.S. So I think that is how we're thinking about.

Now in terms of incremental demand, I think it's possible. At the moment for us, we need to get the house in order, get the Odin operating, and make sure that we have very clear lessons learned from that. So we are ready for a second rig. And at that time, we evaluate what the landscape looks like.

[Operator Instructions]

We will now take the next question from the line of Joshua Jain from Daniel Energy Partners.

Maybe you could just go into a little more discussion on line of sight for the rigs that are idle going back to work. Just given your comments around Mexico and Asia, are those 2 of the markets that you might expect them to go to work in? Maybe just elaborate further.

Thanks for joining, Josh. We have indeed line of sight for quite a few of our rigs. And I mentioned Asia and Mexico, in particular, not so much because those are the only areas where we see potential and line of sight just because those are the areas where we see very clear developments in terms of incremental activity, for example, right?

But our exposure is not only those regions. We have a few rigs that could become available in West Africa, for example. And as I mentioned earlier here in the questions, it is a market where we see the demand steady enough and positive enough to give us line of sight for continued work.

So don't take my comment as Asia and Mexico being the only interesting markets. I think they are the ones that are clearly showing the earlier signs of demand recovery, right? I think that's the way you should think about that, Joshua.

Okay. And then I wanted to go back to M&A. You talked about it earlier. You've been pretty active with respect to acquiring assets over the last 12 months. And you talked earlier in Q&A about incremental transactions not being sort of a mandate. But most of the things announced were in motion pre-war.

Could you just speak to how the M&A environment you think has potentially changed for the industry since the war started? And do you expect to see more consolidation potentially amongst your peers in the current environment?

Yes. And see, you're right. I think the consolidations that we completed or we announced were pre-war. I don't think that looking at the current context that any of the developments in terms of the conflict since that would have changed the outcome of our decisions. I think we're pretty pleased with the assets that we acquired, pretty pleased with the valuation, the structure of the deals that we're able to put together.

And then as I said earlier, I do think that the conflict brings some uncertainity in terms of timing. But looking forward, it's hard to see a scenario where the outcome after the conflict is not actually a stronger demand for our service and for our jack-ups than it was coming into it, right? So I think that's the way I think about it. Now from our side, at least, we're not having a different view to consolidation because of the conflict.

Clearly, as I said earlier, for us, the priority near term is to find employment for those rigs, and that's what we're focusing at the moment. The sector as a whole, I think, can do with more consolidation. I think consolidation is a good thing and it's not a bad thing. And it's in the jack-up space, the consolidation is good not only for the contractors, but I do think that they are positive for the customers as well.

So I don't think that -- I wouldn't think about the conflict having a significant bearing to decisions on M&A, at least not from our side. But I agree that M&A is something that should be looked very serious in the sector because it is still a fairly fragmented market in the jack-ups.

There are no further questions at this time. I would now like to turn the conference back to Mr. Bruno Morand for closing remarks.

Thanks for joining, and thanks for your interest in Borr Drilling. I look forward to speaking to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, everyone, and welcome to the Paratus Energy Investor Call. Please note that this event is being recorded. [Operator Instructions]

I would now like to hand over this call to Robert Jensen. Robert, go ahead.

Good day, everyone. This will be the second call that we have today given that we thought we had just concluded one before realizing it was not live. So apologies to everyone waiting. But welcome to this investor call for Paratus Energy Services Limited relating to today's announced sale of our Jack-up business, Fontis Energy.

I'm the CEO of Paratus, but I also have joining me on the call today, Baton Haxhimehmedi, our CFO. Before we begin today's presentation, I would like to remind all participants that some of the statements on this call may involve forward-looking statements. Forward-looking information involves risks and uncertainties by nature that may cause actual results to differ materially from those projected in such statements. I therefore refer you to our latest public filings.

Today, we are pleased to announce a transformative transaction for Paratus, the sale of our Jack-up business, Fontis Energy. This marks an important milestone in the continued evolution of Paratus, simplifying the company and sharpening our strategic focus. We will walk you through the rationale for the transaction, the key terms and what Paratus will look like going forward.

First, following the completion of this transaction, Paratus will be uniquely positioned as the world's only pure-play PLSV company of scale, operating in a resilient and infrastructure-linked segment of the offshore market. At the same time, we are significantly improving our risk profile by exiting the Jack-up segment, where we have faced exposure to payment irregularities, contract uncertainty and geographic concentration risk.

Second, we have a strong confidence in a credible path to sustaining our current dividend per share over the long term, supported by visible PLSV cash flow and a strengthened balance sheet. Put simply, we expect to maintain our industry-leading yield of approximately 20%. Third, the transaction materially improves our financial position. Pro forma leverage is expected to be reduced to approximately 1.4x, resulting in a significantly more resilient capital structure and a clearly positive outcome for creditors.

And finally, becoming a pure-play PLSV company creates a unique platform from which we can pursue both organic growth and value-accretive expansion opportunities within the subsea space. Overall, this transaction transforms Paratus into a simpler, more focused and financially stronger company.

Before going into each of these points, let me first walk you through the transaction itself. The divestment of Fontis represents a natural next step in the evolution of Paratus. Since acquiring Fontis back in 2022, we have undertaken a comprehensive transformation of the business. This has included separating it from Seadrill, building a stand-alone organization, fully repaying all financial debt and making significant progress on receivables collection.

Over this period, we have overseen the distribution of approximately $760 million of value from Fontis to stakeholders, including both creditors and Paratus as a shareholder. At this stage, we believe that Fontis' assets are better positioned within a larger industrial platform in the Jack-up segment, such as the one Borr and CME can offer with established presence in Mexico and broader international reach.

At the same time, this transaction materially improves Paratus' risk profile by reducing exposure to the already mentioned payment irregularities, potential contract suspensions and recontracting uncertainties in Mexico. We began discussions on this transaction in the third quarter of last year. During the negotiation period, Paratus has extracted $74 million of cash from Fontis, which is important to keep in mind when assessing the overall transaction value.

As announced today, we have agreed a total consideration of $400 million for Fontis, consisting of 3 components: $148 million in cash payable to Paratus at closing, $15 million in deferred consideration linked to the collection of receivables which we expect to be realized at closing given the payment progress already made and $237 million nonrecourse seller's credit. The seller's credit carries a cash interest of 10% in the first year, then stepping up to 12% for the next 6 months and then 14% thereafter.

The duration of the seller's credit is 2.5 years. The strong security package includes, amongst other, a first lien on older rigs and importantly, no dividends are permitted from the secured structure while the seller's credit remains outstanding. The transaction is expected to close in the second half of 2026, subject to customary conditions, including regulatory approvals and Paratus bondholder consent.

While we are not saying goodbye just yet, I would like to take this opportunity to thank the Fontis team and all of its employees for their dedication and hard work, and we wish them continued success under the ownership of Borr and CME.

Let's now turn to the business we are left with, our PLSV platform. All 6 vessels are, as you know, contracted on multiyear Petrobras contracts, providing strong backlog visibility through 2027 and 2028. From a market perspective, demand is expected to remain resilient. Petrobras' 5-year plan continues to support sustained activity levels with pipeline installation remaining a priority. In addition, we are seeing potential incremental demand from international oil companies operating in Brazil. As mentioned in our Q4 results, this demand outlook is further supported by Petrobras already being in the market with a tender for vessels with contract expiries in 2027.

On the supply side, the market remains very tight. There are no newbuilds on order, meaning supply will remain constrained for several years to come. In Brazil, 17 high-spec PLSVs are tied to long-term contracts and 3 vessels are working under other arrangements. Global spare capacity is also very limited. The market is also highly concentrated with most vessels controlled by a small number of players, supporting strong competitive positioning and pricing discipline. Taken together, this creates a highly attractive and resilient operating environment, which is more infrastructure linked than traditional oil services. We believe this platform provides an excellent foundation for further growth, both within PLSVs and in adjacent subsea segments.

Turning to shareholder distributions. Maintaining a stable and sustainable dividend remains a key priority for Paratus. Since our IPO, we have returned significant capital to shareholders through both dividends and share buybacks, demonstrating our commitment to disciplined capital allocation.

Looking forward, the Seagems platform provides strong support for future distributions. At current day rates and utilization levels, the normalized cash flow is already very close to supporting our current quarterly dividend of $0.22 per share. A modest increase in day rates or incremental contribution from new business opportunities would fully support that level. We believe the significant strengthening of our balance sheet caused by the sale of Fontis will allow us to sustain the current dividend level over the medium term, while we actively pursue ways to grow earnings in Seagems. We, therefore, expect to be able to maintain our current quarterly dividend and see a credible and well-supported path to sustaining our industry-leading dividend over the long term.

I will now hand over to Barton to discuss the balance sheet in more detail.

Thank you, Robert. As also Robert highlighted in the introduction, a key benefit of this deal is a significant strengthening of our balance sheet. On a pro forma basis at Q4 '25, our net debt is reduced from approximately $581 million to around $226 million. This corresponds to a meaningful reduction in leverage from approximately 2.2x to around 1.4x EBITDA on a pro forma basis at Q4 again. In other words, meaningful deleveraging and is clearly positive from a creditor perspective in our view.

In addition, the seller's credit provides attractive returns and is supported by strong collateral. It is also important to highlight the reduction in working capital risk here. Through this transaction, we are effectively monetizing the value of the outstanding and due receivables in Mexico, where we have experienced payment irregularities since engaging with our clients. This shifts our balance sheet from something more volatile to something simpler and more predictable. With improved visibility following the announced transaction, we are also now in a better position to address our upcoming '26 maturity, which we expect to manage in the coming months.

Finally, the transaction is considered a material asset sale and the bonds and the company intends to seek consent from bondholders in due course, and we expect a constructive process around this. As we already indicated, we believe this is a materially positive event for the creditors.

With that, I will hand over the word back to Robert. Thank you.

Thank you, Barton. With a simplified structure and strengthened balance sheet, Paratus is now well positioned to pursue disciplined growth. On the organic side, we are actively pursuing tenders for additional PLSV work and adjacent subsea vessel classes, including opportunities such as the previously mentioned decommissioning tender. We are also exploring the potential to charter third-party vessels, allowing us to expand our operational footprint without significant capital investments.

On the M&A side, we are evaluating opportunities to acquire high-quality subsea assets or fleets that can enhance scale and backlog. We are also open to partnerships or strategic combinations with large offshore players seeking to enter the PLSV market. This transaction not only simplifies the company, but also creates a strong platform for future value-accretive growth.

So to summarize the key takeaways, we are improving our risk profile by exiting the Jack-up segment, becoming a fully focused pure-play PLSV company. We are strengthening our balance sheet and reinforcing our ability to sustain attractive shareholder distributions. And at the same time, we are establishing a clear platform for disciplined growth, both organically and through M&A.

With that, let's move over to Q&A.

[Operator Instructions] I would like to hand over this Q&A to Baton. Baton, go ahead.

Thank you. There's a question about whether we're willing to sell our 50% stake in Seagems too?

Look, I think we've had this question before. We're an industrial holding company. We obviously -- with the strategic decision to sell the Jack-up business, we are focused now on expanding and growing our Seagems platform. But ultimately, I think we're in the business of making -- creating shareholder value. So we'll listen to any offers, but the thinking today is that we want to develop that platform.

You're explicitly mentioning a long stop date for the transaction. Does this relate to uncertainty around regulatory approvals in Mexico? That's the first question.

I think we want to be transparent. So I think it was natural to include the long stop date of the transaction. I don't think we have any particular concerns around the antitrust filing in Mexico. That is part of M&A. I think we've seen other Jack-up transactions where I think there were sort of objectively, in my opinion, have been more risk associated with the buyer and the seller. So I don't think we see any sort of additional or increased risk for this being Mexico. There is also potential to -- for extensions to be granted.

There are several question around the '26 maturity, Robert. The closing date is most likely -- seems most likely after the maturity of the '26 bonds. So there are several questions around how we expect to address this maturity?

I think the question around the 2026 has been a recurring theme on all of our recent conference calls. I think we've been quite persistently saying that it really depends on the strategic outcome of the Jack-up business. Now we have obviously announced this transaction. I think we have clear plans on how to deal with that maturity. But as indicated in one of the questions, the closing date is supposed to be in Q3 subject to, obviously, the antitrust filing and bondholder consent.

So I do think that we now have much more clarity on how to deal with them, deal with the '26s. And I think we'll probably be addressing them relatively -- in relatively short order. But I don't think we want to comment much more detail than that on today's call.

There are some questions about how we intend to use the cash proceeds from the transaction, whether -- what we will use it for or whether it is earmarked for a reduction of 29 months?

I think as we said, there are some conditions to closing this transaction. We will reach out to bondholders in due course. I don't think we want to speculate on this call what we will use the proceeds for. But obviously, we know the restrictions we have under our 2029 bonds, and we'll obviously bring that into the table when we discuss consent with bondholders. I think we'll leave it at that.

A question about distributions. Going forward, do you intend to maintain a stable dividend? Or will dividend distribution vary based on quarterly free cash flow generation?

Well, I think, fortunately, the PLSV business provides very stable free cash flow generation. There is not a whole lot of swinging between the quarter-to-quarter given that all the vessels are on multiyear contracts. I think what has been evident from the way we've run this company since the IPO, we are clearly focusing on stable dividends. So -- and based on what we said in our prepared remarks, we believe we have a clear path to a sustainable dividend at sort of similar to the level we have been in the -- ever since the IPO really.

A question about the agreements -- are there any adjustments to the transaction price or cash paid at closing related to cash collected from Pemex prior to closing the deal or earnings in the period, assuming a closing window of up to 6 months?

The transaction is structured as a lockbox mechanism. So we are not entitled to the earnings in the period. The only adjustment on the cash, if you want to call it that, is obviously the deferred payment consideration of up to $15 million. That is depending on collections coming from Pemex.

What is your target level -- debt level post close?

I think we've never had a target debt level in mind for this business. I think that's been part and parcel because of the various businesses we've been involved in. I don't think we're, at this stage, willing to commit to a debt level. What we have said in the prepared remarks and what's obvious from this transaction is that it is a materially deleveraging event for the company. So we will obviously have to address the 2026 and then we will look at our capital structure and think about how our capital structure fits the pure-play concentration around PLSVs. So I think we'll have to get back to that. But I'm not sure we will commit to a debt level at this stage at least.

Question about whether there are any breakup fees associated with the transaction? No, there aren't.

Thank you for your questions. I would like to give the call back to Robert Jensen for any final remarks. Robert, go ahead.

Thank you. I think that was the extent of the questions. We hope to be able to speak to you again when we report our Q1. In the meantime, thank you for your interest. Thank you.

Thank you.

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q4 2025 Results Presentation Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker, Mr. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for participating in Borr Drilling's fourth quarter earnings call. I'm Bruno Morand, and with me here today in Dubai is Magnus Vaaler, our Chief Financial Officer.

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 filings.

For today's call, I'll start with a review of Q4 and highlight key developments since the quarter end. Magnus will then review our quarterly and full year financial results. I'll follow with a deeper look into the commercial execution, and we'll conclude with some comments on the business outlook.

Let's get started. Before going to the results, I would like to take a moment to recognize our teams around the world. During the fourth quarter, several of our rigs achieved noteworthy safety milestones. That includes the rigs, Idun and Grid reaching 6 and 3 years LTI-free, respectively, and the rigs, Gunlord & Grid reaching 1-year incident free.

Additionally, we're proud to highlight that our rig, Arabia III has received an award from Aramco's offshore department for the rig with the best safety score in 2025. These achievements underscore the team's commitment to safety, and I would like to take this opportunity to thank each member of Borr Drilling family for their efforts.

Now on to the results. Our operational performance in the fourth quarter was solid with technical utilization of 98.8% and an economic utilization of 97.8%. Fourth quarter operational revenues totaled $259.4 million. Adjusted EBITDA of $105.4 million came in line with our expectations, bringing full year adjusted EBITDA to $470.1 million at the top end of the guidance range. This performance underscores the resilience of our organization, which navigated several headwinds in 2025 while delivering strong operational and financial execution.

Our fleet contract visibility continues to improve as we reduce remaining open days. Recent awards and extensions have increased 2026 coverage to 80% in the first half and 48% in the second half, including the recently acquired rigs. Since our last quarterly report, we secured new commitments for 7 rigs and expect further coverage gains in the coming months as we progress negotiations on multiple active leads.

We believe the jack-up market bottom is behind us now, and we see fundamentals recovering gradually as demand increases. Most notably, in the Middle East, multiyear tenders are in progress for an estimated 13 rigs. In Mexico, we're seeing better visibility of payments and a more positive operating outlook. These improvements are being supported by financial measures introduced by the government, while at the same time, Pemex announced plans for a 34% year-on-year increase in upstream CapEx and reaffirmed its mandate to raise production.

Overall, modern jack-up market utilization remained steady at approximately 90%. As tenders are awarded and available supply is absorbed, we expect market conditions to firm. Against this backdrop, we're pleased to have expanded our fleet to the accretive acquisition of 5 premium rigs from Noble. These rigs are highly complementary to our existing portfolio and well suit the capacity to pursue near-term opportunities. Integration is in progress and ahead of expectation. Looking ahead, market dynamics are setting the stage for improvements in the second half of 2026 and a recovering day rate and earnings visibility into 2027.

But before I add color to these, I'll hand the call to Magnus to discuss our financial results.

Thank you, Bruno. I will now go into some details of the financials of the fourth quarter. Total operating revenues was $259.4 million, a decrease of $17.7 million or 6.4% from Q3. This is mainly explained by $16 million decrease in day rate revenue, primarily due to rigs transitioning into contracts with lower day rates. The activity level in terms of total number of operating days stayed even over the 2 quarters. A decrease in bareboat charter revenue explains a further $3.1 million decrease, primarily due to the grid's end of contract and its planned transfer to a contract in Angola.

These decreases are offset by $1.4 million increase in O&M revenue. Total operating expenses for the fourth quarter were $192.1 million, an increase of $30.2 million or 7.4% compared to the third quarter. The increase in cost was primarily due to $11.6 million increase in rig operating and maintenance expenses attributable to increase in personnel costs, accelerated amortization of deferred costs for the rig, Hill and reimbursable expenses.

Overall, for the quarter, we recorded a net loss of $1 million and adjusted EBITDA of $105.2 million. Looking at full year 2025, net income was $45 million, and full year adjusted EBITDA came in at $470.1 million, a decrease of 7% compared to 2024. Moving into cash. Cash increased by $151.9 million in comparison to the prior quarter and is primarily driven by the following: $34.8 million cash from operations, which is after $94.7 million of interest payments and $8.8 million of cash taxes paid. We spent $52.1 million in investing activities, consisting of $36 million deposit for the Five-Rig acquisition and $15.9 million additions to jack-up rigs.

And lastly, cash from financing activities was $169.2 million, consisting of $159.3 million net proceeds from the bond issuance, $80.3 million net proceeds from share issuance, net of issuance costs, offset by $70.8 million repayment of debt in the quarter. The company's cash and cash equivalents as of December 31 were $379.7 million. In addition, we have $234 million of undrawn revolving credit facilities, resulting in total liquidity of $613.7 million.

It's worth noting after year-end, we completed the Five-Rig acquisition from Noble and paid $174 million in cash consideration in January. The remaining consideration was settled by way of $150 million seller's credit. We are very pleased with the Five-Rig acquisition and the accompanying capital market transactions we concluded in December. We completed an offering of an additional $165 million of bonds due in 2030 issued at par. In addition, we completed an equity offering raising gross proceeds of $84 million for the same purpose. Both transactions saw very high investor interest and were significantly oversubscribed.

In December, we also made the first steps to return to the Oslo Stock Exchange through a listing on the Euronext Growth. The decision was made after seeing high investor interest from the Norwegian and European investor base in addition to strong following by Norwegian sell-side analysts. We are planning on a full uplisting to the main list on the Oslo Stock Exchange in the first half of 2026.

And I pass the word back to Bruno.

Thank you, Magnus. We have been busy on the contracting front to start the year. Year-to-date 2026, we've secured 5 new commitments, adding approximately $145 million to our backlog. Together with the 2 contracts we secured in December, this marks 7 new commitments since our last quarterly report. I'm pleased to see both short- and long-term commitments in this mix. Feeding idle space in our 2026 schedule remains a key focus, while at the same time, we're mindful about position our fleet to capitalize on improving market conditions from late 2026 and onwards.

I'll now spend time discussing the commitments we secured since the last quarterly report. In Americas, the Ran received a 1-well extension with ENI in Mexico. The well has an anticipated duration of 75 days, keeping the rig on firm contract through March 2026. ENI remains a core customer of ours in Mexico and globally. Ongoing engagements leaves us reassured that we'll have more positive news soon for the Run.

Additionally, the Odin secured a contract for 2 wells plus an optional well with an undisclosed operator in the United States. The campaign is expected to commence in July 2026 with an estimated firm duration of 120 days. As a result, the Odin is now committed into November with options that could keep the rig utilized in the U.S. through mid-2027. Staying in Americas, today, we announced a 2-year contract extension for the new in Mexico, keeping the rig committed into 2028. This extension highlights the strength of our business in Mexico, a market that remains critical to the jack-up industry.

Moving to West Africa, the Natt secured work with ENI, keeping the rig busy through the end of this month. The rig is scheduled to move to Nigeria in early Q2 to commence its 11 months contract with Shell. In Asia, Brunei Shell extended the Saga contract by an additional 5 months. The Saga is now committed into April 2027 with an additional 1-year option remaining available under the contract.

In Thailand, the Idun secured a 75-day extension with PTTEP, extending its commitment into the second quarter of this year. And finally, in Vietnam, we have entered into a contract with Thang Long for the Gunnlod for a 1-well campaign anticipated to commence in May. The well has an estimated duration of 70 days and should place the rig well to find follow-on work in the region. I remain proud of the continued contracting success, which is a testament to our strong customer relationship and ability to deliver reliable and exceptional operational performance day in and day out.

Now looking ahead, as of today, our 2026 fleet coverage stands at 64%. With the inclusion of 5 newly acquired rigs, our coverage for the first half of the year currently sits at 80%. As a comparison, before factoring in these new rigs, this coverage figure would have been approximately 85%. Based on current customer engagements, we're confident that in the coming months, our fleet will continue to secure commitments and bring our contract coverage above 70%. On a full year basis, we see a pathway that allows contracting days in 2026 to modestly exceed the numbers of days achieved in 2025.

In parallel, and as I noted by various industry analysts, tender activity is entering levels not seen since January 2023. According to information from Petrodata, there are approximately 120 rig years on the tender and pretender phase for opportunities commencing within the next 12 months. And based on operator schedules, we anticipate a meaningful amount of these will be awarded by mid-2026. Should this materialize, we believe that several of the awarded rigs will need to undertake lengthy contract preparations, leading to a boost in utilization from this year.

Noting the strength of the tendering pipeline, coupled with current utilization levels, I remain optimistic that the foundation is set for a positive momentum as we progress to 2026. To close, I would like to reiterate key points around our 2025 execution and leave you with some thoughts on the business outlook. At the beginning of last year, we indicated that we were comfortable with consensus for full year adjusted EBITDA that stood at $460 million.

During the year, however, we faced unforeseen headwinds, including temporary contract suspensions and sanction-related contract terminations. We responded by leaning into the Borr Drilling platform, which continues to be our competitive advantage. We filled the white space through close customer relationships, deep market knowledge and our track record of safe and reliable execution. As a result, we delivered full year adjusted EBITDA of $470 million, which was at the top of our final guidance range.

Further, in 2025, we took decisive action and completed successful equity and debt transactions that strengthen our liquidity and position the company to pursue consolidation opportunities. Then in December, we announced the accretive acquisition of 5 premium jack-ups. We act opportunistically and bought these assets at an attractive price at a point in the cycle when demand is improving. We expect the transaction to be immediately accretive to adjusted EBITDA and to reduce our debt per rig.

Looking ahead, we expect market conditions to continue improving through the second half of 2026 with ongoing dynamics supporting a clear recovery in day rates in 2027 and beyond. Our expanded fleet will provide us with scale and operational flexibility, providing Borr Drilling to deliver long-term value to our shareholders.

With that, I'll now turn the call over to Q&A.

[Operator Instructions] And the questions come from the line of Scott Gruber from Citigroup.

I appreciate all the detail this morning and the tendering pipeline boost is certainly encouraging. I'm curious on the outlook for the 2 acquired rigs that are idle, the Sif and the Freyja. Do you have any line of sight to securing contracts on those 2?

Scott, great to have you online, and thanks for the question. Indeed, great question. We are looking at a pipeline of opportunities for both rigs. What is interesting is, as I said in the remarks, I think the capability of these rigs is very well suited for the pipeline of tenders that we referred to. At the moment, we feel quite confident that the Sif will have a contract for it in the coming months that will put the rig back into the operating fleet in relatively short term.

In the case of Freyja, I do think that it may take a bit longer. But as I said, the pipeline in the second half of the year continues to shrink. So I would think about that rig probably going to work sometime in the back end of 2026 or potentially early 2027, depending on the scope it is defined to.

Great. And apologies, I jumped on a minute late, so apologies if I missed this. But just thoughts on how EBITDA shapes up during the year. Consensus is close to $440 million. Just some initial thoughts on the achievability of that level of EBITDA?

Yes, for sure, Scott. I think at this stage, it's still probably a bit too early for us to provide kind of a formal guidance. What I can share, as I said, is that the outlook continues to improve, and the team is working really hard to make sure that we derisk and cover the days in 2026. What I'll share, which is not far from what I mentioned during the last call, the outlook for 2026 right now seems to indicate that we should be able to achieve or we have a pathway to achieve an activity level in contracting days that is modestly higher than 2025.

And when I say that, I'm referring to a 24 rig -- to 2024 rig with the Noble acquired rigs or the recently acquired rigs being an upside to that. So I think that's the simple way to think. I think activity level will track slightly higher than it did in 2024. Now let's see how the rates mature in 2026, particularly in the second half, and that should leave us in a position to provide better guidance in the coming quarters.

And the questions come from the line of Greg Lewis from BTIG.

Bruno, I did have kind of like a question around what you're seeing in the Middle East. I mean, clearly, part of what drove the last -- or the more recent softness in the market was the laying down of rigs and just kind of a slowdown in overall Middle East activity kind of -- like I guess there's been some rumblings about tenders coming to market for -- it seems like some time now. Any sense for when we could actually see some of these talked-about tenders in the Middle East actually, not necessarily have the rigs start working, but when we could start seeing maybe some rigs be contracted around some of that?

Yes. No, and thanks for joining, Greg. Very fair question. When we were talking about some of these tenders in the fourth quarter in our November call, we were looking at that, anticipating them to be out. At the moment, the larger ones that we were expecting, including Aramco and KGL are in progress. And in fact, KGL is in full tender evaluation from what we understand and the Aramco is still in tender submission phase. So this is very actual. This is very real, very tangible.

There are a few more prospects in the region that we've been expecting to come to the tender pipeline, including KGL, which is not yet fully developed, but that should come in the next couple of months, we would think. As I mentioned earlier in the call, the outlook at the moment based on the conversations that we have had with the customers is that they should be planning to award sometime around midyear, maybe some of it earlier, some slightly later. But by midyear, I think that visibility will have formed quite nicely.

So that's why one of the reasons why we feel excited is there's a large volume of work coming from those tenders. And it's probably worth to highlight that, not all of it, but a portion of these requirements not only are large volume, but they require very specific technical capabilities, right? And we feel the fleet that we have, particularly with the recent acquisitions placed as well to evaluate, and we'll see.

They are long-term tenders. For us, it's a very interesting body of work, but it has to make sense from a pure commercial standpoint as well. In any case, once that volume gets absorbed in the market, whether directly awards to us, but see -- or just to the peer group, it will put a lot of tightness in the market, which I think is what everyone is looking forward to.

Okay. Super helpful. And congrats on the Noble -- on those rig acquisitions. Clearly, not transformational for the fleet, but definitely gives you a nice boost. It does look like we are at an inflection point or the cycle is turning. And I guess what I'm kind of curious about is how you think about and is there room where the fleet is today to potentially acquire more rigs? And really, I don't know how deep you want to get into that conversation, but I am kind of curious around that.

I mean it's not capital anymore. I guess they call, Seatrium. They still have some rigs that I guess, they're operating some jack-ups from previous orders from other customers. They have these rigs. Is there any kind of -- when could we see these rigs? I mean, are they being -- do you have any sense for if these rigs are being actively marketed for sale? And yes, I mean, I guess that's kind of it and kind of -- and where we kind of think pricing is now for a premium rig?

Very good, Greg. Let me tackle maybe the question on the Seatrium rigs first. And you said rigs, but I understand that there's one of them that had been operating with Aramco before and was returned to the yard. I think the rest of them are either committed through BBCs or have been sold. I think it's probably fair to assume that the rig gets offered in the Middle Eastern tenders. It was a rig that was with Aramco before and it has specifications and complies with the requirements. So I would expect that rig to eventually be offered in that tender.

From experience, we know that the Singaporeans are not really in the business of selling rigs cheap and they probably see the market responding and they will have expectations. So I'm not sure if they get sold. But I do expect that there will be people looking at those rigs and trying to place them.

Now on the broader M&A picture, the answer that I have for you is probably not very different than what we said in the call in the last quarter. I think we have an operating platform that is very well recognized around the globe, including very well recognized by our customers. And that gives us a chance to look into M&A opportunities and see how we strengthen that platform further.

For us, we continue to think about consolidation very selectively. It's not consolidation and growth for the sake of growth. We would have to look complementary to our fleet. And I think less likely to be looking at individual asset things where we want to see things that could potentially help us continue to transform and consolidate the sector.

Now we said it before with 24 rigs, and I have to emphasize again now with 29. We think we have a very interesting fleet size. We have scale in pretty much every key market around the globe. So growth is something that we look opportunistically, but I don't think it necessarily composes a core to our strategy. I think we have a good operational platform to do so if opportunity comes, but we'll look at that very opportunistically.

We are now going to proceed with our next question. And the questions come from the line of Fredrik Stene from Clarksons Securities.

I wanted to dig a bit deeper into what's going on with the market at the moment. And I think we share -- we have a shared view that it's exciting times. Tenders are up and utilization will likely point upwards as well. And on the back of that, I was hoping you could give a bit more color on how you kind of specifically see rate development trajectory going forward. Because typically, there will be -- I guess, first, you'll see the tenders, then you'll see the awards and then you'll see the day rates. So any color on when you think we'll see this higher activity levels starting to really make an impact on bidding levels across the globe?

Yes. Fair question, Fredrik. And what we have seen over the last -- and we've been very open about it in the last few months is that rates have been walking in most regions a bit sideways, I think in some regions like Asia, maybe a bit downwards a little bit, but it has been fairly contained. For us, the way we think about 2026 at the moment is utilization is obviously in the forefront, particularly for opportunities that we have that are short term in nature that helps us fill the gap, help us derisk the execution during [indiscernible].

Now what does it take for the market to change? You're absolutely right. I think features come first, then rates come second. As we said, a large volume of the work that is in the tender pipeline at the moment is driven by the Middle East. We currently anticipate that these awards will start coming out during the second quarter, midyear, thereabouts. And what is interesting, as I mentioned in the prepared remarks, is that Middle East tenders generally require a fairly lengthy preparation process for the rig.

So it basically means that once we see awards coming through, those rigs are effectively out of the market for a given month and until they actually can be deployed. So I expect that the pricing dynamic starts to progress once those tenders conclude or shortly after those tenders conclude, which would imply that we're looking at Q3 is when we probably have better visibility of those dynamics playing out. That's my best guess. As I said earlier, for 2026, name of the game for us is really derisk the outlook, make sure that the fleet is occupied. I think 2027 is when we turn our focus again very sharply into economics and rates.

That's very clear. And just a follow-up on that. And I guess you kind of partially answered it. But in terms of recontracting your fleet now, while I definitely appreciate that 2026 is a utilization game for you, do you have any kind of strategy around what type of contract length you would kind of go for at the current time? Are you on short contracts to reprice that when the market starts accelerating again?

Or do you still want to have like a base load of longer-term contracts if and when they are available? And like as a side question to that, since the current Middle East tenders are long in nature, and I would assume that you would be interested at least in some of them. Are there any changes to Saudi Aramco contracting terms you think? Obviously, you're referencing suspension ability for the Kingdom as we saw 2 years ago.

Yes. So let me break it down here, Fredrik. To your first part of the question, yes, with a 29-rig fleet, we obviously have to have a mix of short- and long-term contracts. It's obviously important that we have a baseline of backlog. Clearly, as we have regions where day rates push closer to kind of cash cost -- cash operating cost, we don't want to be securing these contracts in long term, and we're looking for opportunities to close gaps as best as we can.

Some other regions that margins are still a bit more stretched and more interesting, we're obviously more flexible in extending the duration of the contract a bit longer. And that depends a lot on the opportunities. There are regions that could be a bit more competitive at times, but certain tenders within that region that have particular requirements that are well suited for the fleet, and we look into how we optimize these things. So there's obviously a quite strong combination of factors playing out at the moment.

Now in terms of the second question on Aramco, yes, the tender is still ongoing. So let's see where we land. It does seem that in the tender documentation, Aramco has made some of the terms a bit more flexible, particularly some of the provisions around termination that were of a concern since the last round of suspension and terminations. And they indicated some flexibility to discuss a few terms, I think mainly on the technical side, maybe not so much on the commercial side, but they do indicate some flexibility to discuss. So let's see how the tender progresses and where we land in that discussion.

We are now going to proceed with our next question. And the question is from the line of Jules [indiscernible] from Stanley Securities.

A couple of questions from me, starting off in Mexico. You collected a bit, call it extra from Pemex or OpEx, if you will. Now you are obviously confident about more, call it, regular payments coming from Pemex or Mexico this year. How should we think about this? And what's the current level of outstanding on your balance sheet?

Thanks for the question. I thought we'll go through the whole call without a question for Magnus. So I'll let him tackle this one.

Thanks, Bruno. So yes, as we said, we have come back to payments from Pemex has picked up over the past quarter, and we actually received around $46 million in total in the fourth quarter. So we estimate we had around $90 million to $100 million outstanding at the end of the quarter. Also in the beginning of January, we received a further $23 million. So that is bringing the outstanding balance further down. So I think this is very positive to see.

We see also peers, other companies reporting the normalization of collections. And the indications we have from Mexico is that it will continue into 2026 and that they're preparing for a new payment plan with the government to tackle '26 invoices. So I think we're positive about the development. I think also, as we noted, I think, our previous contracting update is that the contract extensions for the Galar and Gersemi include improved payment terms with our counterparty. So we are guaranteed to have payments of operating costs within 45 days and no more than 180 days of outstanding bareboat hire. So we are also improving on the terms towards our counterparty.

That's great to hear. And I would expect those terms to be included on the rig under the letter of intent as well.

No. I think the rig that got extended right now continues on the historical contract structure, which is on a payment day basis. However, as Magnus pointed out, we do have encouraging signs that payments will reach a better normalization going forward.

Okay. Okay. Good to hear. What -- on another topic, and obviously, it's boring to talk about day rates, but it ultimately remains important, if you will. I mean, the spread seems to be very high at the moment. Obviously, Asia and Middle East being more competitive than West Africa. Are there other moving parts to think about? I mean, you talked briefly about terms you're discussing or are being discussed with Aramco, if you will, in terms of that tender batch there. How do you see that sort of progressing or moving elsewhere, the T&Is, if you will?

Yes. And I think the dynamics in our contracting is always very fluid. We're always kind of pushing and pulling on terms and conditions of the contract with the customers. So it's normal to the cycle. I would say that today, there's not a huge focus from our customers in trying to renegotiate terms. I think that the terms have been fairly solid in a cycle so far. The discussion has obviously been a lot about rates. And as you pointed out, in some regions, there is a bit more competitive pressure, some other less pressures.

Like if I look at regions like the North Sea, for example, they have very well-established frameworks for contracting. I don't think that we've been spending a huge amount of time revisiting provisions with the customers. Keep in mind that we very frequently are talking about customers that are repeat customers for Borr, and we do have a well-established framework in these contracts. So that takes a little bit of the pressure in negotiating terms, both on our side and the customer side. But inevitably, there's always a commercial push and pull with all these negotiations that mature through the cycles.

Understood. And the final one from me. As we think about those rigs that you currently have not secured any work for, I mean, the one which perhaps stands out a bit more than the other ones is the Var. Should we think about that as probably the last one to find work given that it's been sort of inactive previously or coming from yard, if you will?

Yes. I think it's a fair statement. I think that when I look at the pipeline and the things that we're pursuing at the moment, in near term, I would think or hope that we will have commitments for the Hill and the Sif. They've been operating until recently. We have a pipeline of opportunity for them. So that's the most obvious movement in the near future. I do think that the Var and the Freyja are rigs that will probably come a bit later, probably kind of back end of this year, early next year with some focus on some of the developments in the Middle East that will likely create the catalyst to deploy those rigs. But that's probably a fair way to think about it.

We are now going to take our next question. And the questions come from the line of Joshua Jain from Daniel Energy Partners.

First one, I just wanted to follow up on Scott's question a little bit. As you talked about an asset that is stacked potentially coming back to work, how are you thinking about requirements from a return perspective in an initial contract to get a rig up and running today after it's been stacked? Maybe you could just elaborate on that a little bit.

Yes. Thanks, Joshua. And the answer to your question may vary a little bit from rig to rig. I think in our case, except for the Var, all of the rigs either be working until recently or are rigs that will be rolling off contract. At this stage, we don't expect any meaningful CapEx in putting those rigs to work. The Var would probably require a bit more, probably somewhere close to $5 million, $6 million, somewhere in that ballpark. So for the rigs that require little CapEx, the calculation becomes a bit easier and it's probably less a question of just off-the-gate economics and more balance of the opportunity pipeline.

We certainly don't want to have a rig going back to work to just work for a very short amount of time and then come idle again. It kind of defeats the purpose and it hardly ever generates sufficient economics. So balancing between visibility of a pipeline and rate is obviously significant. But for the fleet that we have at the moment, the CapEx component, or reactivation component is not a big factor because, as I said, these rigs either been operating until recently or rigs that are normally rolling off contract as we go along.

And then I'm going to ask the Venezuela question, I guess, a little bit differently. Any thoughts on what you're seeing and hearing there in the region? And if things are calmer there or quieter? Just given geographic proximity, does that further open up Trinidad, Colombia and Guyana a bit more for the shallow water market? Maybe you could speak to that a little bit.

Yes. And Trinidad has been a fairly busy jack-up market over the years. There's still some opportunities around that. Suriname, there has been a few opportunities in discussion. It's mostly exploration work and some of it is a bit further far in the future. Colombia has had some work in the past and has been quiet. I do think that as things calm down in the region, some of the operators may be a bit more compelled to go. Do I see a near-term large volume of rig requirements in the region? That's probably not the way I would put it.

But I think the moment you start getting a couple of jobs in places like Suriname and Colombia, then it starts to become interesting to see how you can put a scope together that supports a rig. Generally, it's a region that requires rigs with larger capabilities, which is obviously very interesting for our fleet, but I wouldn't think that as a large play.

That concludes the question-and-answer session. I will now hand back to Mr. Bruno Morand for closing remarks.

Thank you. That concludes our call. Appreciate the interest in the company, and I look forward to speaking to you again next quarter.

This concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

Good day and thank you for standing by. Welcome to the Borr Drilling Limited Q3 2025 Results Presentation Webcast and Conference Call.

[Operator Instructions] 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. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for participating in Borr Drilling third quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer.

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 filings.

For today's call, I'll start with a review of Q3 and highlight key developments since quarter end. Magnus will then review our quarterly financial results. I'll follow with a deeper look in the market and our commercial execution, and we'll conclude with your questions.

Let's get started. Our third quarter results were strong, extending the rebound delivery in the second quarter. With 23 of our 24 rigs active, our commercial team continues to execute at the highest levels, delivering strategically and timely contract despite a volatile and dynamic market. Revenue increased by $9.4 million quarter-over-quarter and adjusted EBITDA rose 2% to $135.6 million with a margin of 48.9%, confirming the quality of our earnings. Operational execution continues to be industry-leading with technical utilization of 97.9%, and economic utilization of 97.4% across the fleet.

Subsequent to quarter end, in October, we are pleased to announce 3 contract extensions in Mexico. Mexico remains an important market for Borr Drilling. Notably, collections restarted in September with approximately $19 million received in September and October. These inflows, together with the recent government actions to strengthen Pemex finances are the basis for our confidence in continued normalization of payments. Additionally, in October, newly imposed international sanctions affecting one of our counterparties in Mexico required us to issue termination notices for the old and the new contracts.

Today, we announced new commitments expanding Borr Drilling footprint into the Gulf of America and Angola. These awards strengthen and diversify our customer base and portfolio, underscoring our ability to navigate evolving markets and minimizing idle time across the fleet. We expect fourth quarter 2025 results to reflect fewer operating days due to several rigs transitioning between contracts and the recent impact of sanction-induced contract terminations in Mexico. Despite this, we anticipate full year 2025 adjusted EBITDA in the range of $455 million to $470 million.

In recent quarters, we've experienced a step-up in jack-up demand across several international markets, absorbing available capacity and providing gradual relief to the headwinds from 2024. While near-term volatility may persist, clear signs of demand inflection in Saudi Arabia and Mexico, 2 of the world's largest jack-up markets, together with incremental activity in other areas provide us with confidence that the market is now past the trough. We foresee a tightened market in the near to medium term that should support higher utilization and day rate levels. I'll walk you through that in more color later in the call. But now I'll hand the call to Magnus to discuss third quarter financial results.

Thank you, Bruno. I will now go into some details of the financials of the third quarter. As Bruno mentioned, we continued the good trend seen in the previous quarter and the results quarter-on-quarter improved.

Total operating revenues increased by $9.4 million due to $2.5 million increase in day rate revenue and $6.4 million increase in bareboat charter revenue. The $2.5 million increase in day rate revenue was primarily due to an increase of the number of operating days and day rates for the Ran and Thor, recognition of day rate revenue for the Odin versus previously being recognized as bareboat charter revenue and an increase in reimbursable revenue for the Balder. These increases were offset by a decrease in the number of operating days for the prospective one. The $6.4 million increase in bareboat charter revenue is primarily due to the rigs Galar, Grid, and Gersemi being fully operational in the quarter compared to being on suspension for part of the prior quarter. This increase was offset by the decrease in bareboat charter revenue for the Odin, and the bareboat charter contract was terminated effective June 30 and begun earning day rate revenue in August 2025.

Total rig operating and maintenance expenses increased by $6.3 million, which is primarily as a result of the increase in reimbursable expenses for the Grid. This in total gives us an operating income of $98 million, a $1.5 million increase from the prior quarter. Further, below the operating income line, total financial expenses net increased by $2.2 million, primarily due to foreign exchange loss offset by some higher interest income and lower interest expenses.

Income tax expenses increased by $6.5 million, primarily due to a one-off deferred tax benefit recognized during the prior quarter, with no comparable in the current quarter. As a result of the before mentioned, net income for the quarter was $27.8 million and adjusted EBITDA was $135.6 million, an increase of $2.4 million.

Moving on to cash. Our free cash position at the end of Q3 was $227.8 million. In addition, we have $234 million undrawn under our revolving credit facilities, resulting in total available liquidity of $461.8 million. Cash increased by $135.4 million in comparison to the prior quarter, explained by the following: Net cash provided by operating activities of $72.1 million, which includes $6 million of cash interest payments on our convertible bonds and $13.2 million of income taxes paid. Operating cash flow for the quarter was further impacted by a buildup of working capital, primarily driven by approximately $42 million increase in trade receivables in Mexico and a $13 million increase in trade receivables relating to the rig Vali. However, subsequent to quarter end in October, we received approximately $17 million related to the trade receivables in Mexico and $10 million related to the Vali. We expect to receive further settlements for our Mexico receivables, both in November and December.

Net cash used in investing activities was $33.9 million and is comprised of jack-up additions, primarily as a result of activation costs and contract commencement for the Vali, capital additions for drilling equipment and maintenance costs. Lastly, net cash provided by financing activities was $97.2 million, primarily due to $96.9 million net proceeds for the company's July 2025 equity offering.

With this, I will pass the word back to Bruno.

Thank you, Magnus. Year-to-date, we have secured 22 new commitments, adding $625 million to our backlog. Since our last report, we've continued to secure meaningful awards. First, in Mexico, we secured 3 contract extensions. Galar and Gersemi received 2-year extensions on improved commercials and payment terms. These commitments not only strengthen our 2026 utilization, but they also provide visibility well in 2028. Under the revised structures, operating costs will be reimbursed by the customer on a fixed 45-day payment term, materially reducing our working capital needs. Bareboat charter payment terms will be kept at 180 days. And for the Galar, this cap will progressively improve over time. Additionally, we received a short-term extension for the North and continue in active discussions with our customer in Mexico about a long-term deployment for the rig.

In Mexico, going forward, we will have a total of 5 rigs working from a previous count of 7, with 2 rigs being reassigned to new work elsewhere, as I'll cover shortly. Regarding the 5 remaining rigs in country, 2 are long-term contracted with payment protection provisions, 2 are contracted with IOCs, and only 1 has direct Pemex payment exposure. This is a significant change in our fleet mix in country.

I'm also pleased to report on recent awards in Americas and West Africa, along with several other contracting updates. In the Gulf of America, the Odin received a letter of award for a 6-month campaign with an undisclosed operator. The campaign is expected to commence in January 2026. This will mark our entry into the U.S., and again highlights our team's ability to timely secure work for the rig, following sanction-induced contract termination. In West Africa, the Grid has received a letter of award for a 6-month commitment plus unpriced options with an undisclosed operator in Angola. The campaign is expected to commence in the first quarter.

Leaning on our strong relationships, we have collaborated with our partner in Mexico to reassign wells previously allocated to the Grid to our other rigs in country. This will enable us to conclude operations with the Grid in Mexico in November, and the rig will begin its mobilization to West Africa in December. Also related to the Grid, we have agreed with New Age to reassign the contract we previously allocated to the NAT to the grid, and expect to commence a 1-well campaign with New Age in Congo in January, prior to commencing the work in Angola. Additionally, in West Africa, we are in discussions with ENI regarding their current well sequence for the NAT in Congo. While there are various scenarios in consideration, we now expect the NA to stay busy with ENI in Q4, and potentially into early part of 2026.

I'm also pleased to share that we have agreed with Shell in Nigeria to accelerate the NAS campaign originally scheduled to commence in November 2026, now to April 2026. This significantly reduces potential idle time for the rig and provides Shell the ability to accelerate their well delivery schedule. It is clear to me that Borr Drilling is the preferred partner for shallow water drilling operations. In recent months, we have been trusted with commitments from our customer to deliver critical wells globally. For example, Shell with their highly anticipated HI project offshore Nigeria, ONE-Dyas for the first fully electrified offshore drilling campaign in the Netherlands and CME in Mexico for their Bacab-Lum project, just to name a few.

It is particularly notable that despite the various market headwinds presented in 2024, and early this year, our 2025 fleet coverage has reached 85% at an average day rate of $145,000. This is in line with our earlier targets of achieving 80% to 85% coverage in the year. Our full year 2026 coverage, including price options, now stands at 62%, a 15-point improvement since our last report.

Taking a closer look into 2026, we have 79% coverage in the first half, a solid position to build from as we enter into the year. Based on our current pipeline of opportunities and ongoing negotiations, we expect that utilization levels for the first half of 2026 will continue to increase in the coming months. At the same time, recent developments in Mexico and Saudi give us increased confidence in a tightening jack-up market and a constructive outlook for the second half of the year. This should position us well to gradually fill up the coverage for 2026, while maintaining a disciplined commercial strategy.

On the commodity front, Brent crude has remained volatile, but range bound in the mid-60s. Current price levels have still allowed for meaningful contracting activity this quarter as lower breakeven shallow water projects offer a relatively rapid B2 barrel cycle for our customers. Despite several macro uncertainties, global utilization has remained resilient, in fact, increased quarter-over-quarter with modern rig market utilization at approximately 93%.

In Saudi Arabia, we're encouraged by the market reports confirming that Aramco has issued notices calling back several rigs previously suspended in line with our earlier expectations. As of today, our count is that 7 to 8 rigs have been called back by Aramco, effectively taking the majority of the readily available modern rigs still available from suspensions. The remaining idle rigs are either rumoured to be committed elsewhere or have moved to cold stacked after the suspension last year. The increase of activity levels in Saudi will significantly tighten the supply and demand balance in the region.

Equally positive, as we highlighted in our last call, we continue to see visible incremental demand in the Middle East, particularly Kuwait and the neutral zone with multi-rig, multiyear tenders progressing towards awards. Now coupled with the callbacks from Saudi Aramco, there is a real scenario for rigs from outside of the Middle East to be required to mobilize into the region to meet the forecasted increased demand in late '26 and into 2027.

In Southeast Asia, demand has remained resilient despite various market obstacles. As mentioned on past calls, weakness in the region has been driven by excess supply targeting opportunities following Aramco suspensions. We expect this dynamic to improve in 2026. In West Africa, incremental demand has continued to materialize as expected, and as evidenced by our mobilization of an additional unit to the region. Contract activity has continued to accelerate in the past 12 months, and we see opportunities developing in areas that historically held a much higher jack-up count, particularly in Nigeria and Angola.

Mexico is one of the world's most consequential shallow water markets and remains strategically important for Borr Drilling. Over the past year, industry-wide payment timing challenges and temporary contract suspension at Pemex have affected activity cadence. We responded constructively. We evolved our Mexico contract portfolio, thoughtfully diversifying beyond concentrated Pemex positions into IOCs and independents while continuing to partner with Pemex for terms to support sustainable operations.

Looking into 2026, we see a market where turbulence begin to ease as the year progresses. White space for the global modern jack-up fleet is heavily weighted towards Asia and the Middle East in near term, a phenomenon we see reconciled by demand increases in those regions over the next few quarters.

In closing, I'm pleased to see how Borr Drilling continues to successfully navigate the dynamic market experienced over the last couple of quarters. We secured important contracts for our premium rigs, strengthen our fleet coverage in 2025 and into 2026. We have continued to partner with our customers to optimize our fleet availability or offer them unique operational schedule flexibility. Based on that, we now anticipate 2025 full year adjusted EBITDA to be $450 million to $470 million, aligned with our early expectations and adjusted for the impact of the recent sanction-induced terminations. Demand for modern jack-up rigs remain resilient. The jack-up market has bottomed, and we're seeing clear inflection in rig demand across key regions, including Saudi and Mexico.

Lastly, I want to emphasize the strength of our drilling operating platform. It is built on operational excellence, anchored by a strong focus on safety culture and streamlined operating model that keeps us efficient and predictable. It's relentlessly customer-centric, informed by intimate knowledge of the shallow water market and strengthened by deep-rooted relationships. It is powered by our premium jack-up fleet and our global footprint. This platform is our defining competitive advantage and position us uniquely to benefit from ongoing market inflections.

With that, I'll now turn the call over to Q&A.

[Operator Instructions]

We will now take the first question from the line of Scott Gruber from Citigroup.

It's good to hear, obviously, the new contracts in Mexico for you and good to hear Saudi is calling some rigs back. It seems like the market is improving here. But just curious how you view the next 12 to 24 months in the global jack-up market. Is this momentum going to continue? Are we going to see a genuine inflection in demand in the next year or so, even if crude is range bound? Or do we need some improvement in crude to really drive that inflection?

No. Thanks, Scott. As I mentioned earlier, a lot of the inflection now is basically resulting from the fact that the headwinds experienced earlier, namely Saudi and Pemex are now starting to revert. If you look at activity levels or if you look at utilization levels, at 93%, that number is very healthy. And with the suspension now rolling back, the 93% is a real number. It's not a number that requires adjustment. So we are in a territory that is quite interesting. Obviously, it takes a little bit of time for some of these dynamics to take place. We expect that as particularly the tenders in the Middle East start to conclude, the push for rigs to come back will start to kind of come through and that rebalancing is what eventually helps us in achieving higher utilization and better day rates in general markets.

Now I say beyond the Middle East, we've seen that most markets have been operating at or very close to balance, and that includes, for example, West Africa. And we think that obviously, the ongoing inflection will support faster recovery in markets like that. On the opposite end, as I mentioned in my remarks, markets such as Southeast Asia, for example, where the demand takes a bit longer to materialize, may take a quarter or 2 before we see the real impact of that. But I think the way to think about it is we're going to continue to navigate some volatility in the first half of the year, improving. The potential here for a much stronger second half of the year seems to be solid defined based on this development that we see.

Now we said before, in terms of commodity price, pricing where it is, I believe, is quite healthy for the jack-ups. It is -- jack-ups are very economical barrels for the customers. They are fast barrels to the market. And we think it's actually quite interesting for us to have pricing at that level. So I don't think that pricing movements here are needed to spark additional activity. It's really just the timing that takes for the development in Saudi, the developments in Mexico and some of the ongoing tenders to really come through.

I appreciate that color. And then one of the macro themes we're seeing here is rising demand for natural gas around the globe to help power data centers and just generally rising power demand. How do you think that impacts the jack-up market in the years ahead? And I'm particularly thinking about Southeast Asia. Is there a pull from the gas side that's going to help that market?

No, indeed, Scott. And we've been participating in several very interesting gas projects around the world. And I think in the previous quarters, we named, for instance, the ENI project in Congo, which is a very interesting and large-sized gas development. In Asia, we've been participating in gas projects before. There are a few very interesting projects, particularly in the area of Sarawak, that have been put on hold for now until the situation in Malaysia gets resolved, the political situation in Malaysia gets resolved.

Aramco has, over time, obviously expanded their presence in gas, and I think it's been largely onshore focused. But there have been discussions over the last few quarters about Aramco potentially returning to gas in the offshore space in a more meaningful way. So clearly, what you see is true. We do expect that there will be high interest from our customers to start developing some of these gas projects that are available around the globe.

We will now take the next question from the line of Eddie Kim from Barclays.

Congratulations on the 2 separate 2-year extensions on the Galar and Gersemi in Mexico. Just curious on pricing for those 2 rigs. I don't know if you can share if the day rates on those 2 extensions are similar to what they're earning today, or higher or at a discount? Just any kind of directional commentary there would be great.

Very good. And we haven't disclosed specific numbers for that. But what we shared, they are a notch above from where the rigs are operating at the moment, which that on itself is very interesting. But equally relevant, as I mentioned in the prepared remarks, is the fact that we were able to negotiate improved contract terms and payment terms for those rigs in particular.

What we've seen over in Mexico over the last several quarters has been that collections has been a very relevant topic. So we took marked efforts to ensure that we were adjusting these things in this contract, not only to improve the day rates because that's an important part, but equally important to make sure that those day rates are received in the bank account, and we don't have a growing working capital requirement in the country.

Separately, it's great to hear about the expected activity inflection in Saudi Arabia. Just curious, I mean, 2 years ago, the Saudi Aramco jack-up rig count was as high as almost 90 jack-ups. Today, it's around 55. Just curious, where do you think we get to sometime in 2027? Probably not back up to that 90 level -- but does 70, is that reasonable? Or even that too high? Just curious your estimate of where the jack-up rig count could get to by 2027.

Yes. And Eddie, this is a great question, probably not a very easy one to be precise. I -- from our deck, we think that a number in the high 60s and 70s is very likely. I think a number in the high 70s is possible. The reality is that the big scheme of things, as I mentioned in the prepared remarks, even with this callback that just took place over the last couple of weeks, capacity in the region is actually already very tight, right? So whether that number is low 70s, whether that number is high 70s, I think actually has very little bearing on how the sector is going to respond. Because in any case, any lag up from where we are at the moment is very likely to cause an acceleration in utilization and consequently in economics in the space.

I think a number in the 70s is very reasonable, but I would probably fall shy of trying to predict around for behaviors. We all try and the best. It's definitely not an easy thing. They have a lot of things going on. So that's the way to think it. I think anything they do on top of the callbacks that already took place is more than welcome in the sector and kind of strengthen the space tremendously.

We will now take the next question from the line of Fredrik Stene from Clarksons Securities.

I have 2 questions for you today. And the first one relates to Mexico and the payments there. Clearly, liquidity in general has been a recurring theme given your historical or Mexico exposure, mostly Pemex. Now that you've received some money in October and small sum in September as well, how do you think about potentially -- I think historically, Pemex has paid suppliers mostly. Should we expect any similar payments as you got in October in November and December as well? Do you have any clarity on that kind of taking your receivables down?

Thank you, Fredrik. Obviously, very positive to see that what we have predicted payments starting to flow in the second half of the year actually has happened, and we received $17 million in October. We have -- from what we see in the plans, there are payments to come in, in both November and December as well. And following that, we would also expect things to return more to normal with monthly settlements. Also, that being said -- and Bruno, Bruno also mentioned the improved payment terms that we have in our new contracts, which has actually a cap on the number of days we can have outstanding for operating costs that we pay on our O&M of 45 days. So we expect to get that paid within 45 days, and also a maximum of 180 days outstanding for the bareboat. So that's also going to improve on our collections as we see it since we're not contracting directly with Pemex for these 2 rigs, but between the intermediaries, we have obtained payment terms from them.

For my second question, switching gears a bit. There has been some industry consolidation in the space this year with ADES likely acquiring Shelf if all -- everything is checked. And clearly, there's -- in almost any type of consolidation, there are room for fleet improvements, scrapping and whatnot. But you guys, you have a premium -- a full premium fleet already. And I'm sure there are some other assets out there that could be an interesting fit for you guys. Have you thought any more actively on how Borr could potentially be in any M&A or asset transaction scenario, since you're kind of both in the third quarter and in relation to the equity raise in July seemed a bit more open to that particular theme compared to what you have been earlier?

Thanks, Fredrik. And see, I hope my answer is probably not too much of a repetition from what I've tried to put across in earlier calls. Consolidation is definitely important for the space. It has been welcomed in general. And you're right, whether result of that consolidation or just the state of the market, we have seen together with it some additional retirements, some additional scrapping, some additional repurposing, which is obviously another very important dynamic for the sector. So those things are indeed interesting.

We continue to look -- you're right, as I highlighted in the remarks, we do believe we have a very strong operational platform that can deliver better value for jack-ups than perhaps quite a few of our peers. And that's really what puts us in a position to meaningfully look into how we participate in consolidation if opportunities were to come. But as you said before, and you mentioned that in your question, there are some metrics that are very important for us to consider. And one of those metrics is really the quality of the fleet. We are very proud to have the youngest and the most premium fleet in the water. And obviously, it's important for us to make sure that anything that we're looking to does not come at the expense of diluting the quality of the fleet that we have. Similarly, as we said before, I think a very strong driver for the company at the moment is to make sure that we continuously delever our balance sheet over time. So when we look at any M&A transactions, it has to be something that makes sense from a deleveraging perspective.

So when you put these things together, we continue to see what is out there. I do think that we have a great platform to grow -- we don't have to, and we're going to continue to look at that opportunistically. I do think that the sector can do more consolidation. And if it can be part of it, if it is rational, if it fits our strategy, we're definitely open to see what's out there.

We will now take the next question from the line of Doug Becker from Capital One.

Bruno, you've emphasized the expanding Borr footprint. Curious how you're thinking about balancing portfolio diversification versus having scale in particular markets to manage costs? And maybe putting it differently, do you view growing the fleet in the U.S. Gulf, Angola, Saudi Arabia as strategic priorities?

Thanks, Doug. And see, I think you're right. There's a very interesting balance between not stretching ourselves too wide. But the way I see at the moment, our operation, if you look in the markets where we are present, we are in very large scale in these markets. And generally, our expansion has been in adjacent markets. So obviously, Angola is a new place for us, but we have a very strong operation in West Africa and a very strong knowledge of operation in West Africa that will help us to build that up.

The U.S. is definitely a new frontier. But on the Mexico side, we're present. We understand the operational challenges. We understand how to be successful in that environment. Certainly, there will be some learnings from the U.S., which is new to our portfolio. But certainly, we feel that we are in a good position to manage that. Frankly, I don't -- I wouldn't say at this time that the U.S. is expected to be a large expanding market for us. Getting rig there, I think, is a good achievement for us. It's a new place that we're going. I do see some of the policies in the U.S. potentially supporting more activity. For now, we see a pipeline that is enough to keep Odin busy for quite a while, and that's what we're targeting. If more opportunities come in the back of changing policies, changing incentives for operators in the U.S. to go forward their projects, we'll be ready to look at that. For now, I think it's probably a rig play.

Then just given the increased confidence that the jack-up market is past the trough, any changes to the capital priorities? I know you mentioned deleveraging over time, still a priority. But just given a better market outlook, is there any shifting in how capital might be allocated?

No, not at this time, Doug. I think we maintain the view that deleveraging is a priority for us, and it will be for a while. So we want to make sure that by the amortization that we have in our bonds, by the potential cash sweeps that we have in the bonds, we're positioning ourselves to be in a very favorable position to refinance our debt in 2028. That is on the back of obviously, deleveraging consistently over time. Other priorities, I think we'll leave it for another day. I think it's a bit too early for us to consider. The momentum is positive. That doesn't drive a change in strategy for now.

We will now take the next question from the line of Ben Sommers from BTIG.

I know you touched on it a little bit in the press release, but kind of curious how you're looking at the new build market. I know you guys mentioned that there's some supply chain challenges that you think will kind of push out these new build rigs entering the market. So just kind of curious any color there on what you're seeing.

Yes. No, nothing's changed, Ben. We -- I think quite a few quarters ago, we shared a view that we believe that the order book that is namely there, there may be 1 rig, 2 rigs maximum that would come to the market. That was several quarters ago. None of these rigs have come out. And obviously, the longer they stay in the shipyard, the more complicated it is. A lot of these rigs are very -- were in very early stages of conclusion when they were stopped or abandoned, is not easy. We haven't seen any one of them coming out. I honestly do not expect that to change as things improve.

Awesome. Then I know you touched a little bit on the U.S. Gulf entry, but just curious kind of on Angola, now bringing a rig there, just kind of any outlook or color on that market.

Yes, sure. I mean, it is a new area for us. We have been looking at Angola before and waiting for the right moment and the right opportunity to be in country. As I said earlier, we have a very well-established infrastructure in West Africa. So Angola was a bit of a natural growth opportunity for us. Historically, as I mentioned in the remarks, it is a market that had a quite substantial activity level for jack-ups that has been subdued for quite a few years. It seems that the potential is very large. And that's not limited to Angola.

We see quite a few markets in West Africa that haven't had enough activity for quite a few years now coming back and being able to penetrate Angola now. Having that as an opportunity for our portfolio, I think strengthens our flexibility going forward.

We will now take the next question from the line of Greg Brody from Bank of America.

Just you talked about better collection terms on your new contracts and obviously, collected $19 million in October from Pemex. How should we think about what the opportunity to recapture sort of that -- the receivables is over the next year?

Sorry, your question was on how to capture the receivables from Pemex?

Pemex, that's the main one, yes. Yes.

No. I think what we've seen now is that Pemex has -- and the government of Mexico has put in place several schemes this year, want to refinance their financial liabilities and also their vendor or supplier liabilities with a $12 billion setup. And that's something we've seen they've gone through now in the second half started to repay, and we received $17 million so far in October. We see times of having more payments come in, in November and December and expect a return to normality when it comes to payments in Mexico. So I think it's looking like they are taking the right steps in Pemex and the government in Mexico to become more current on their payables definitely.

Greg, just to highlight what we've kind of mentioned earlier, obviously, we have current receivables that we are -- and we will continue to work hard to collect them. With the new contract terms that we have and the new allocation of the portfolio in Mexico, effectively, then York will continue to have Pemex payment exposure, while the remainder of the fleet in country will now either be working on IOCs or include fixed payment terms that diminishes tremendously our exposure to the Pemex payment friction. So that doesn't resolve the current outstanding receivables, and we continue to work very hard, as Magnus said, to lean on the existing facilities in place, the mechanism the government put in place to accelerate that. But going forward, we expect that very soon the new terms will slow down considerably the accumulation of receivables in Mexico and keeps us far more current.

Then just with the sanctions, you -- obviously, you moved one of the rigs, so that leaves the hill. What are your expectations for how this plays out, in particular with what I think is the sale to Gunnlod of those assets. But what's your expectation for that? And how are you thinking about what you do with the Hill from here as a result?

Yes. It's probably early to say, Greg. What we know is we've worked very diligently. As soon as we became of the sanctions, we did what we were required to do to make sure that we stick to our governance and comply with international requirements. We are currently winding down operations on those rigs. We're expecting both of them to finish around mid-November, the ongoing activities as allowed by the sanctions. And we continue to monitor the situation. It could change if there's a sale potentially. We don't want to speculate. For now, we're doing what we have to do. It's a customer that, over time, I think we deliver great service for them. They seem to be extremely happy with what we've done over time; and provided no sanctions affect our ability to continue working in that field or delivering that program, we definitely will be more than happy to continue to do that. But I don't want to speculate for now. We're sticking to the rules as they apply, and then we'll see if things change as we go along.

Have you seen this uncertainty with sanctions impact the rig market at all? You're probably a little closer to this than me, but how many others have been affected by the suspensions?

Well, I won't comment much about others. I mean, the only thing I think has been in the news recently was a similar impact of advantage on the deepwater market. In the shallow water market, I haven't seen any other announcements. As far as we are concerned, the impact of that has been limited to Mexico. We'll continue to monitor the whole topic of sanction is a very dynamic topic at the moment. For now, that's been the only impact to our business, which we disclosed, which is the loss of revenue. For the Odin, we're very happy to see that the rig has been re-contracted now. For the Hild, we'll continue to see what are the opportunities for the rig, whether it involves returning to the same project once the field is sold or if the field is sold or alternative deployments for the rig within with the region.

Great. And one last one. Just what's your expectation for cost trends on the operating side here relative to this quarter going forward? How should we think about that?

Sorry, Greg, I'm not sure if I got your question. Cost trends on the operating side.

What's your expectations for the direction of your cost up -- or is there opportunities to cut costs? Just wondering how you're thinking about that going forward.

Yes. No. And as we said before, we've been seeing operating costs very steady over time. There are differences in operating costs from region to region, from country to country. But all in all, we have not seen a significant change in operating costs over the last few quarters and neither we have any reason to believe that that's going to be changing going forward. The team continues to be working focusedly on finding savings in our operations, streamlining operations, and that clearly has been more than enough to offset any inflation experienced in the sector. But so far, it has been flat. I have no reason to think that will change going forward.

We will now take the next question from the line of Joshua Jain from Daniel Energy Partners.

Just I really only have one, which is on rig attrition. Maybe do you have a number in mind with respect to how many incremental rigs could leave the market next year or any insights there? Or maybe to put the question differently, could you speak to broadly the capital investment that may be required for a number of operating rigs that are out there today that are older to sort of keep pace with a lot of the newer spec rigs and how that frames market dynamics?

Thanks, Josh. We see that standard rig market or the older vintage rig market has been shrinking over time, and they've been limited to a few markets. The rig count in that side, the active rig count in that side is about 100 rigs at the moment in the water and the average age is above 40 years old. So there's obviously, a lot of potential for attrition. Some of the attrition should happen as a result of lack of contracting opportunities for these rigs. Some of the attrition will happen as a result of just the high CapEx required to maintain these rigs active going forward. Rigs are mechanical equipment and as such, they require capital to stay in good working class. And by the time they are 40 years old and beyond the retirement age, that only gets better -- only gets worse exponentially. So I don't know how many rigs I'll say can get out of the market.

Clearly, there's a potential for a lot of the rigs to go out of the market. We're seeing that trend accelerating, we're seeing rigs now converted to -- or sold for conversion to MOPU, including quite a few of the rigs that came out of Saudi. We'll continue to look obviously for us. We expect owners to act diligently in that and discipline on that. For us, it's a bit of a muted point. Our rigs are all very new with the youngest fleet in the industry. So let's see what happens.

Thank you. That's all the time we have for questions today. I would now like to turn the conference back to Bruno Morand for closing remarks.

Very good. Thanks for participating in today's call, and I look forward to speaking to you guys soon. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Second Quarter 2025 Results Presentation, webcast, and Conference Call. [Operator Instructions] 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. Patrick Schorn, CEO. Please go ahead.

Good morning, and thank you for participating in the Borr Drilling Second Quarter Earnings Call. I'm Patrick Schorn, and with me here today in Dubai are Bruno Morand, our Chief Commercial Officer; and Magnus Vaaler, our Chief Financial Officer.

Next slide, please. 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 filings. Now before we dive into our second quarter results, I'd like to briefly reference the recent press release announcing both our new financing package and the CEO succession plan. We will cover the financing package in detail during our prepared remarks. As it represents a significant step forward in strengthening our capital position and supporting our long-term strategy. I will return to the CEO succession towards the end of the call.

Our second quarter results were strong with technical utilization of 99.6% and an economic utilization of 97.8%. As anticipated, our activity rebounded in the second quarter with 22 out of 24 rigs active. Revenue increased by $51.1 million this quarter and EBITDA rose by $37 million to $133 million, up by 39% versus the first quarter of this year, underscoring the profitability of the revenue stream. Additionally, $106.5 million free cash flow was generated in the first 6 months of the year. During the quarter, we have secured significant new awards, including a multi-rig contract in Asia and a new contract for the Arabia II, which is expected to return to our active fleet in September. These contract awards and commitments improve our contract coverage to 84% at an average day rate of $145,000 for 2025 and 47% coverage at an average day rate of $139,000 for 2026.

Last month, we took a decisive step to strengthen Borr Drilling's longer-term financial position through a comprehensive financing package. This initiative, which included a $102.5 million equity raise and amendments to the size and covenants of our revolving credit facilities effectively increased our liquidity by $200 million and strengthens our balance sheet. We acted proactively to secure financing while market conditions were favorable, reinforcing our ability to execute on our long-term strategy, including disciplined growth and potential industry consolidation. Looking into the third quarter, we see a comparable level of activity as in the second quarter and anticipate a similar performance. As previously indicated in our commentary on 2025 adjusted EBITDA guidance, we are comfortable with the current Bloomberg consensus estimate of approximately $470 million. We are encouraged by the Mexican government's renewed commitment to strengthening Pemex's liquidity and its restated production goal of achieving 1.8 million barrels per day. These actions should also enhance Borr Drilling's liquidity, enabling us to leverage our proven track record of delivering best-in-class wells and uniquely positioning Borr Drilling to capture incremental drilling activity, particularly under private investment projects that are expected to play an increasingly important role in the future of Mexico's oil and gas production. I'll pass the call now to Magnus for the second quarter financial commentary.

Thank you, Patrick. I will now go into some more details around the results for the quarter, which were positively impacted by an increase in activity and the number of rigs working in comparison to the prior quarter. Total operating revenues were $267.7 million for the second quarter, an increase of $51.1 million or 24% compared to the first quarter. Included in this, our day rate revenues increases of $36.3 million, primarily due to an increase in the number of operating days for the Vale and the Tor. Bareboat charter revenues increased by $12.7 million due to the start-up of Arabia I's contract in Brazil and the commencement of the Galar Grid and Gersemi recommencement in Mexico. And lastly, management contract revenue increased by $2.1 million, primarily due to the recommencement of the Galar.

Total operating expenses were $171.2 million for the second quarter, an increase of $14.4 million or 9% compared to the first quarter. This is also due to the Vale and the Tor rig operating expenses increase of around $12.4 million. This in total gives us an operating income of $96.5 million, which is a $36.3 million or 60% increase from the prior quarter. Further below the operating income line, we saw total financial expenses decreasing by $6.3 million, mainly due to a decrease in financing fees related to the Mexico settlements in the first quarter of 2025 with no comparable in the second quarter, in addition to positive FX movements. Income tax expenses decreased by $7.8 million, primarily due to a one-off deferred tax asset recognized during the quarter and decrease in tax expense in Africa. All of the above resulted in a net income of $35.1 million, an increase of $52 million compared to the previous quarter. Adjusted EBITDA was $133.2 million, an increase of $37.1 million or 39%.

Now moving into liquidity. Our free cash position at the end of Q2 was $92.4 million. In addition, we had $150 million undrawn under our revolving credit facility, resulting in total available liquidity of $242.4 million. Cash decreased by $77.8 million in comparison to the prior quarter, explained by the following: Net cash provided by operating activities were $6.3 million. This was highly impacted by $98.3 million in cash interest payments, which we make semiannually on our senior secured bonds. Additionally, $20.8 million of income taxes were paid in the quarter. The cash flow from operating activities in the quarter is impacted by working capital build. However, this is expected due to several reasons.

First of all, we continue to see delays in collections in Mexico. However, due to recent positive developments through financing initiatives by the Mexican government, we expect this to improve in the second part of the year. Additionally, we have experienced increased accrued revenue as a natural result of the start-up of new contracts for the Vale, Ran and Arabia I, where services have been performed but not yet built. In addition, certain rig contract rates increased compared to the previous quarter. Net cash used in investing activities was $13.4 million and is comprised of jack-up additions primarily as a result of long-term maintenance costs and activations. We still expect maintenance CapEx levels for the year around $50 million. And in addition to these $50 million, a large portion of the contract preparation and activation cost for the rig Vale, we were able to capitalize and classify as CapEx as opposed to deferring expenses as we normally do for contract start-up. This is due to the rig being a newbuild commencing its first contract.

Lastly, net cash used in financing activities were $70.7 million, which relates to the semiannual debt repayments on our senior secured notes due in 2028 and 2030. It's also worth adding that year-to-date, our free cash flow generation was $106.5 million. As Patrick summarized, in July, we announced an initiative to significantly strengthen our balance sheet and increase liquidity of approximately $200 million through an equity raise of $102.5 million and increases in revolving credit facilities of $84 million and a reduction in the minimum liquidity covenants. With these transactions, the Q2 pro forma liquidity increases to approximately $425 million, which consists of $192 million of cash and $234 million in available RCF capacity. This strengthened liquidity position provides a solid foundation for pursuing opportunistic transactions and supporting future growth. With this, I will pass the word over to Bruno.

Thank you, Magnus. Year-to-date, Borr Drilling has secured 14 new contract commitments, adding $318 million to our backlog. Several of these new commitments include options with the potential to significantly extend their duration and earnings visibility. Since our last report, we secured high-quality contracts backed by our market-leading operational performance. In Vietnam, we received a multi-rig award from Hong Kong for rig store and gunboat totaling approximately 500 days, including priced options. Both contracts are expected to commence in early Q4 in direct continuation of the rig's existing contracts, clearly demonstrating our ability to eliminate idle time and maximize asset utilization. These awards strengthen our market position in Vietnam, where we see near-term demand growth in Southeast Asia. In the Middle East, the rig Arabia II received a 500 days contract expected to commence in early September, enabling the rig to return to the active fleet. While this tender has been awarded on a competitive basis, the rig's track record of high performance allows us to collaborate with the customer around certain performance incentives, which could result in day rate uplift of up to 10% to 15%.

In Mexico, the run had a 100-day option exercised by ENI, keeping the rig contracted into early '26. As part of this extension, the parties agreed to add another set of options to that contract that if exercised, would result in full year coverage for 2026. And lastly, in June, the Odin received a notice of suspension by Pemex. Following this, we secured a letter of intent from an independent oil company in Mexico for an approximately 75-day program expected to commence in late August. In addition to these awards, we have converted the previously announced LOAs for the [ Scout ] in Thailand and the Norve in West Africa into contracts. As you note in our fleet status report, the award associated with the Norve in West Africa has now been assigned to the Natt, which will enable us to optimize scheduling flexibility and maximize revenue days. On the back of the recent contracts, our 2025 fleet coverage has now reached a robust 84% at an average day rate of 145.

This is in line with our earlier targets of achieving 80% to 85% coverage in the year, and we see potential for further improvements as we have line of sight of additional contracts for the rigs Natt and P1, which we still have open capacity this year. Our 2026 coverage, including price options, now stand at 47%, a 12-point improvement since our last report. Mexico remains a significant and strategically important part of our portfolio, representing circa 20% of our available coverage in 2026. The announcements made by the Mexican government last week provide us with increased confidence in sustained rig demand and contract stability for our rigs in country. I'll cover these in more details in a few minutes.

From a macro perspective, the oil and gas sector continues to contend with a complex global environment recently shaped by regional conflicts, uncertainty over global trade tariffs and OPEC's accelerated rollback of its 2.2 million barrels per day voluntary cuts. Regional conflicts have continued to underwrite the fragility of the global oil and gas supply chains with escalations in the Middle East causing Brent prices to reach highs of $75 in June and revising discussions about the importance of pragmatic government policies as illustrated by the Dutch government's reinstated commitment to develop local gas and New Zealand's reversal of its prior bank on new offshore licenses. Despite this complex environment, Brent crude prices have remained resilient, averaging approximately $68 in Q2, a level that continued to support the development of shallow water projects, which offer some of the lowest breakevens and faster cash flow generation to our customer.

Looking specifically at jack-ups, global utilization has remained generally steady with modern rig market utilization holding above 90%. Day rates have continued to experience downward pressure as the market works to absorb the excess capacity resulting from the Saudi suspensions. While more than half of the modern rig capacity from the suspension has been absorbed, we estimated that less than 10 modern units remain available and competitive in international markets. Positively, visible incremental demand in the Middle East, particularly in Kuwait and the neutral zone, points towards a significant part of this oversupply being absorbed in the near future. While we acknowledge that these projects have experienced delays due to supply chain constraints and complex procurement processes, recent orders of long lead items provide increased confidence that they remain on track to materialize in '26 and '27.

Additionally, we are encouraged by recent data points relating to Aramco EPCI tender awards and nearing awards for an estimated total of $8 billion, surpassing 2024 levels. These awards cover key projects such as Zulu and margin and are understood to include several wellhead platforms. With jack-up activity in Saudi already back to 2019 level, we believe further development of these projects are supportive of long-term incremental demand in the Kingdom. In Southeast Asia and West Africa, demand has continued to track positively. Since the beginning of the year, contracted jack-up counts in these regions has increased by 10 rigs. While the inflow of rigs from the Middle East to both regions has pressured rates in recent opportunities and more marketing in Southeast Asia, supply and demand in these regions is fundamentally balanced for modern units.

In Mexico, we're encouraged by the government's renewed focus on strengthening Pemex's liquidity and its restated goal of achieving 1.8 million barrels per day in production. The government has laid out a clear plan, including a $12 billion debt offering to refinance short-term obligations and another $13 billion facility to provide funding for Pemex's current and future projects. Given our track record of delivering best-in-class wells, Borr is uniquely positioned to capture incremental work, especially on private investment projects, which are projected to contribute to 1/4 of the country's production by 2033. The bottom line is this, stronger liquidity at Pemex is a clear positive for Borr Drilling. As supply and demand continue to rebalance, retirement activity has now resumed as owner of old assets face challenges to find suitable and economic redeployment opportunities. So far this year, according to IHS, 4 units have been retired and several others are being held for sale. We expect the dynamic to accelerate, particularly in the context of ongoing industry consolidation.

In short, while near-term volatility may continue, the long-term fundamentals of the jack-up market remain compelling. Demand for oil and gas to support global energy needs is expected to continue to grow and support investment. Shallow water projects represent a sizable portion of global production, characterized by attractive breakeven prices, short cash flow cycles and relatively low emissions. With an aging global fleet and no new builds in sight, the supply of jack-ups should continue to high, supporting high utilization levels and economics. We are consistently delivering in our commercial strategy, maximizing 2025 backlog and building 2026 coverage while supporting our customers through this dynamic cycle. With that, I'll hand the call back to Patrick.

Thank you, Bruno. Now I'd like to discuss our CEO succession plan. Effective September 1, Bruno Morand will succeed me as Chief Executive Officer. At that time, I will transition to the role of Executive Chairman. This is the culmination of a multiyear succession plan developing in close partnership with our Board of Directors. I'm very pleased that the Board has selected Bruno to lead Borr Drilling into its next chapter. While many of you already know him, let me take a moment to highlight his background. Bruno is a 20-year veteran of the offshore drilling industry with a strong track record in operational management, project execution, marketing and customer relationship development.

Prior to joining Borr Drilling in 2017, he held senior roles with international offshore drilling companies, giving him broad exposure to global markets and operational complexity. Since joining Borr Drilling, he has been deeply involved in managing the relationships with our key clients and strategic partners and has contributed significantly to our operational and commercial progress. His dynamic leadership, customer focus and strategic insight position him to advance our current priorities and unlock new growth. To our shareholders, I want to underscore that this transition is not just about continuity. It's also about accelerating our momentum. Bruno brings a fresh yet experienced perspective that will be invaluable as we navigate evolving market dynamics and pursue new avenues of growth.

Alongside this leadership change, I'm pleased to share updates to our Board composition. Firstly, our Founder and current Chairman, Mr. Tor Olav Troim, will remain on the Board as a Director, ensuring continuity of our founding vision. Mr. Dan Rabin will become our Lead Independent Director, ensuring continuity of objective and independent governance. And Mr. Thiago Mordehachvili, Founder and Chief Investment Officer of Granular Capital and a long-standing shareholder will be joining our Board. Mr. Mordehachvili brings deep financial acumen and a strong shareholder perspective, which will help to further sharpen our focus on long-term value creation. These changes significantly strengthen our Board's capabilities and align with our strategic vision for long-term success.

The combined experience and diverse expertise of this group will support the leadership team in driving innovation, performance and shareholder returns. Now as I reflect on the past 7 years, initially as a director and subsequently as CEO, I'm incredibly proud of what we have built together. During that time, we have assembled a world-class leadership team, expanded our presence in key markets and established Borr Drilling as the leading international jack-up drilling contractor. The strong foundation we stand on today is a direct result of the hard work and dedication of our employees, the continued support of our customers and the confidence of our shareholders, and I sincerely thank each one of them for that. Looking ahead to this next chapter, I'm excited about the path ahead for Borr Drilling, and I'm confident in our ability to deliver on our long-term vision and create value for our shareholders. Thank you. Ladies and gentlemen, we are now ready to go to Q&A.

[Operator Instructions] It's coming from the line of Eddie Kim with Barclays.

Just wanted to get an update on where things stand in Mexico. It's certainly great to see the Mexican government raising debt, so Pemex can hopefully pay their suppliers like yourselves. But from an operational perspective, do you think the worst is sort of behind us in Mexico? You have, I believe, 5 jack-ups drilling for Pemex currently, most of which are coming off contract in the first half of next year. Just curious, what's your confidence level on extensions for these jack-ups? And looking even further ahead, how do you see maybe your Pemex rig count trending from here over the next, let's say, 12 to 18 months?

Very good Eddie. Bruno here. So let me tackle that in small chunks here. But indeed, positive, what we know is the government announced this $13 billion facility, which is clearly earmarked to support vendor payments for projects that are current and future in the Pemex portfolio. And there has been a hint that in 2026, there will be a similar facility that will come to support Pemex in getting back behind the strategy. So that is positive. It's hard to comment more. I think it's going to take a little bit of time for agreements to be put in place. There's obviously banking agreements associated before revenues or revenues start to come through. But there seems to be a very clear pathway for that. So that is very positive, very positive for us. In terms of activity, what we see in Mexico at the moment has been less about Pemex's desire to continue with activity and it's more about their ability to continue to pay vendors and sustainably continue operation. I think with the funding, the desire and the work scope has been there and that the payment should enable now some of that activity to return in quite short near term.

It is indeed positive. I think it does paint a better picture and a clear environment for us in Mexico going forward. We do have ongoing discussions about new contracts for multiyear work on our rigs, and we are quite optimistic and positive that we'll see those coming to a conclusion in very short term. So we'll update you more as we move along, but I think the optimism is certainly there.

Great. Great. My follow-up is just on potential M&A. So you have a lot more dry powder now than you did 3 months ago. You mentioned potentially targeting some opportunistic transactions. Could you expand on that a bit for us? Are you looking to target maybe some larger corporate M&A? I know we had a big merger announcement recently in the sector or more targeting smaller kind of asset purchases? And are you looking to target specific regions? Just curious on your thoughts on the opportunities and what you're looking for.

Yes, Eddie, I think -- I mean, part of the answer is probably already what you said in that with the recent announcements that have been done, any bit of color that we give probably immediately identifies exact direction and candidates of where we're thinking and how we're thinking about it. So given the fact that there have been some moves and some signs of consolidation in the market already, I think it's very difficult to comment in further detail. I think that the key maybe takeaway is that we look forward to see more consolidation in the space. We believe that the time is right for it. And we believe that, that will go hand-in-hand potentially with actions that we will see happening in the deepwater space as well. Out of all of that, I do think that there is going to be some interesting assets that might fall off and that might be interesting for us as well.

As you maybe remember from the Paragon acquisition that we did, when we acquire, we also have no problem provided that the valuation is right that we cut up, in some cases, a significant amount of rigs that are not of the profile any longer that fit with our fleet. So we certainly look as well at parts of the market where we could rationalize further. But I think we'll have to leave it at that as additionally commentary just because, I mean, the space where we operate in is relatively small and some others have made moves already. So I think we'll just have to keep our eye open here in the months to come and see how this space develops further.

Understood. Sounds good. And Patrick, you navigated the company through some very challenging times. So a job well done and wish you the best in your next chapter.

Our next question comes from the line of Doug Becker with Capital One.

Patrick, you mentioned private investment projects are expected to play an increasing role in Mexico. Just wanted some color on the current status of private projects. Historically, it's been able to find -- it's been difficult to find agreements that are suitable for all the parties. So just a little color on what milestone should we be keeping an eye out for that might show a broader acceleration here?

Yes, I'll ask Bruno to give a bit more color on this, Doug.

Very good. No, the private investment is a reality in Mexico at the moment. If you look at our fleet, one of our rigs in Mexico, as we speak, is operating in a field called Bacab-Lum, which is a private investment project. And the way to think about it, these are basically in general fields that are already identified by Pemex and sometimes relatively mature that are then assigned to a private investment group that has a 15-year timeline to develop these fields and get remunerated for the additional production that they can get out of these fields. So it seems to be a quite attractive value proposition. It's one that incentivize performance and at the same time, reduces a bit of the strain on Pemex balance sheet to fund some of these projects.

Equally important is that these projects allow the investment group to actually get paid from production and consequently minimizing as well some of the exposure to the Pemex payment cycle. So that's a quite interesting thing. In terms of scale, the one that we're participating at the moment is the first one in country and started very successfully. In the recent plans from Pemex that were released last week, they have now a target and ambition to see those projects represent about 1/4 of the total country production by 2033 and about 450,000 barrels a day at that point in time. So there's quite a significant growth expected and certainly a type of project that will value or benefit performance-oriented contractors like ourselves.

No, it definitely sounds encouraging. Maybe a quick one for Magnus. It wasn't clear to me, are you currently having conversations around the Pemex accounts receivable being paid? Or is it just that the funding is coming in and obviously, that bodes well.

I think it is the recent signals we have received from Mexico through the announcements they have made and clearly stated they have $13 billion of financing program now to pay their suppliers and vendors for work conducted in 2025, which makes us believe in that the payments will pick up in Mexico because we have seen that they have actually actioned this financing now. Although they have talked about it for a long time, at least now we see the actions.

That's what I was getting at.

One moment for our next question that comes from Fredrik Stene with Clarksons Securities.

Yes, Patrick and Bruno, I guess it's fair to say congrats to you both if you view it as a double promotion here. So looking forward to continuing discussions in the years ahead as well, although in slightly different roles for the 2 of you. With that said, I wanted -- I think Mexico has been well covered already, but just maybe to Magnus before I move to my main question, what's the amount of outstanding receivables that relates to Pemex on your balance sheet at the moment?

Yes. So currently, we have around $60 million, $65 million of outstanding bareboat payments from Mexico, which follows our comment in the first quarter where we received $120 million of cash receivables, which took down our receivable balance by approximately 75% and then adding on the variables that we have burned in the meantime. So that gets you to mid- $60 million.

Okay. No, that's very helpful. Then to -- with Mexico out of the way, I wanted to talk about the market in general and through that focusing a bit on Saudi. I think you said in the prepared remarks that you feel quite comfortable that there is some incremental demand in the Middle East in other countries than Saudi, but at some point, Saudi will also add incrementally to its rig count. There's been some, I think, market reports over the last week that Saudi has contacted, I think, all the 8 rig owners that have supplied offshore rigs for them to inquire about rig availability on suspended rigs. And I just wanted to hear if you have any commentary around that because there's not that much that's needed on the demand side to potentially accelerate rates a bit. So anything else on that front?

Yes. Indeed, Fredrik. And so you've heard the commentaries and they reflect what we've seen as well. I think at an operational level, we have had previous discussions with Aramco about updating them the status of the rigs that operated with them earlier and what it would take to have them back. But I must say that these conversations so far have been very much on an operational level and not in a contractual basis. Obviously, we've said before that we expected Aramco to eventually come back to the market. Aramco is a very strong engineering company. At one point in time, when they designed that they needed another 40 rigs, certainly wasn't by a mistake in a calculation. They know that, that demand is there. And I think that they encountered some issues with timing maybe related to capital constraints in the Kingdom. And when we said before in several occasions that we expected that demand to eventually come back.

It's fair to say that estimating Aramco's actions and time line is far from an easy thing. And I think we're not going to be the ones trying to put a prediction on what happens. But indeed, I think the talks about the status of the rigs as well as the positive new flows on the EPCI side in terms of award starts to give us a bit of a brighter picture for the Kingdom. We are aware of reports talking about Aramco potentially to bring rigs in the first quarter next year. That's not something we have particularly heard from Aramco. We'll have to watch. I think the moment seems to be coming closer and closer to the time that Aramco could be needing rigs. And as you said, I think any movements from Aramco at this stage with an oversupply that is not that significant, will be very welcome and supportive to the market. So we'll have to see what happens in the coming weeks and months.

Yes. That's very good color. Just a bit more broadly on your 2026 coverage, including options, now you're close to 50% at rates that would be higher than where the market is today. As you're working and Mexico is definitely a part of this, of course. But as you're working with your coverage for 2026, how are you prioritizing utilization versus pushing day rates in the environment that you're in at the moment?

Yes. Nothing changed in terms of our strategy, Freddie. We're still looking at optimize the utilization of our assets. We know that a rig idle has a significant impact to our economics, and it's important that we optimize the earnings potential of these rigs and utilization remains king in the current environment. We do have a fair bit of rollovers as we walk into 2026. So irrespective of the improvement sentiment about the market being in an upwards or in the potential starting an upward trend, I think we're well positioned to capture an upside as it comes, but we'll focus at the moment in making sure that we have the best possible utilization for our fleet.

All right. And just one super quick follow-up on some rig specifics. You said that the Natt will now take the place of the Norve for the work starting in late 2026. Norve has options at that point. Should we interpret the rig swap as that there's a high likelihood that those options will be executed? Or is there some other factors to consider?

Well, there is that, Freddie. I think that the work that we've been doing on the Norve has a good potential for the options to be exercised. And we said before that we think quite a few of our options have a potential to be exercised. Now what equally is important as well is that the customer that has that rig contract on the Natt now has indicated a desire to potentially move that work earlier, subject to a few constraints and long lead items. So obviously, having that work moved to the Natt allows us to potentially bring that forward if the customer is able to achieve an accelerated schedule. And that obviously would be very beneficial for the customer in terms of earlier production, but equally very beneficial for us in terms of improving our coverage for the year.

All right. That's very clear. Congrats again, Bruno in particular, on the role -- new role.

Our next question comes from the line of Dan Kutz with Morgan Stanley.

Congrats, Bruno and Patrick. Best of luck in the new roles. So I wanted to ask about a couple of, I guess, a bit more emerging opportunities in the shallow water space or at least areas that historically haven't been thought of as growth areas. The first is on gas activity. So are there any 4 rigs that are doing work in in gas plays currently. And I think, Bruno, you mentioned a couple of positive developments, one of which was the Dutch government looking to develop more local gas and you mentioned New Zealand as well. I'm not sure if that was a gas or oil opportunity or both. But just basically trying to get a sense of any work you're doing now in gas basins and any customer conversations or opportunities you see for gas work moving forward?

Very good. And indeed, we do have a sizable portion of our fleet that has been working gas. I think if you think specifically about larger pockets, we have done a significant amount of work with ENI in Congo that is largely focused on LNG and a very interesting project. We at some point in time, had 3 rigs operating with ENI in that project. And then we do have other projects around the globe that involve gas, including the North Sea, in the Netherlands, specifically, as I mentioned, which has a restated commitment to support the local gas development. We have been working very closely with ONE-Dyas in the North Sea on a very interesting development, one of the largest gas fields to be developed in the North Sea in recent years. While the news flow is positive, the project has faced some challenges on permitting timeline, but we do expect that to be back in a schedule very, very soon. So gas is part of what we do around the globe. Our rigs are very capable and suitable for that. And it is a decent chunk of our portfolio.

Great. That's really helpful. And then next one probably for Bruno as well. It's more on the type of work that the bore fleet or that the shallow water fleet globally more broadly is doing and any kind of trends that you're seeing there. But basically, it's -- as kind of global oil and gas basins mature, you're hearing a lot more service companies talking about mature field work or more greenfield versus brownfield. But yes, I was just wondering if you could share any thoughts on what you're seeing in terms of trends in development versus the kind of more mature focused infill and attention type work.

Yes. Fair. And it's fair to say that a large chunk or the largest -- the lion's share of the work that we do is development work, so basically in discovered and somewhat mature fields. And I think that's going to stay. I think that's one of the beauties of the shallow water market is that a lot of these projects have infrastructure in place. And even if you're doing some near-field developments, we can bring barrels to the pipeline relatively quick. We have seen, though, an increase in uptick in investment for exploration projects in some areas more so than others. So if you think about Asia, we do see now more and more coming to the pipeline in terms of future exploration work in places such as, for example, Malaysia. And equally, in West Africa, it has been a quite significant part of our portfolio, whether it's complete greenfield developments or whether it's near-field new exploration programs as we've seen, for instance, with BWE in West Africa. So we are participating in both.

We do think that in the coming years, more investment in exploration will be required. There has been very subdued investment in exploration in the last couple of years. But we are placed to basically develop work both in exploration and development work.

Our next question comes from Gregg Brody with Bank of America.

Just a few sort of subtle questions as a lot was covered. You alluded to that the Natt has some opportunity to move up some work. But there's -- as the way the contract stands today, there's a decent amount of white space between the conclusion of the current contract. How do you think about the use of that rig and the options there? You mentioned the opportunity to have it go to work early. Curious how much early and are there other opportunities?

Very good. And we are working on a set of opportunities, not one only, but a set of opportunities, Gregg. And we have been working on both projects that could have a commencement this year, optimizing our coverage for this year as well as some projects in the region for the earlier part of 2026. So if we're successful on these and we've been inching closer and closer, that would provide a very nice bridge over to the work that we already have assigned for the rig, but we'll have to see as things materialize in the coming weeks. I feel optimistic that we'll be able to have most of that white space, if not all of it contracted for the rig and a nice utilization for that rig in West Africa.

And one -- you mentioned the exploration uptick. One of your peers alluded to the fact that some of that may be trying to take advantage of short-term availability of rigs to go after some concepts. Do you see those opportunities potentially at lower day rates just to put more rigs to work in the interim? Or do you feel like the day rates are holding up for those opportunities?

Yes. And indeed, I think the theme in the industry has been obviously protecting coverage, and that has led, as I mentioned in the early notes to more aggressive behaviors in different regions more marked than others. If I think about the not specifically that we were talking about in West Africa, it's important to note that in West Africa, what we have experienced over the quarters is that a lot of the customers are extremely focused on getting rigs that are in the region and particularly have a very strong reputation for operational delivery. We oftentimes are looking at programs that are slightly shorter in nature. And I think our customers understand that predictable results, good operational efficiency stacks up higher than costing and the risk that sometimes comes with taking a less known name or maybe a rig outside of the region. So we will continue to balance that. I feel confident that for now, the rate structure that we see in West Africa is pretty well maintained.

Got it. And just turning to Mexico, I know there's a lot of questions asked there. I appreciate that all these -- all the capital raise and the facility they set up and their goals of Mexico are to encourage oil production and growth. What's -- has the government communicated to you directly on sort of timing around paying -- resuming payables or excuse me, receivables, anything like that? Or is this more you looking at the general policy statements and actions?

Yes. No, we have not discussed anything directly with the government. Obviously, keeping in mind that our work in Mexico is not directly through Pemex. It's through a local conglomerate that we have been partners with. And therefore, I wouldn't expect that communication to have come directly to us. What we know is that they have been talking to local banks and institutions to start putting things in place. And the government themselves have indicated that they expect payments to be starting now in Q3. So we have to watch. Obviously, they've been working on a quite comprehensive solution for Mexico. We know that the regulatory and the bureaucratic state of the country sometimes force these things to take a bit more time than what we hoped for. But nonetheless, the indications are positive that the flow of money should be sooner rather than later.

And then just the last one. Obviously, the equity raise has created a lot of optionality for you. I'm curious if you think about that capital raise to potentially address some debt opportunistically. Is that a possibility?

I think we will obviously see how our liquidity will evolve throughout the year, especially with Mexico in mind and no longer day rates going into 2026 and how we fill up our coverage. But it's definitely something that we have as a tool in our capital allocation box and that we will consider. And recently, the debt has been trading below par and it is obviously very attractive for us to look at buying back bonds. After the capital raise in the recent weeks that the bonds are back at par, which we obviously view as positive. I think it's also good for us to have this strength of good liquidity on the balance sheet. It puts us in a position of strength where we can act on other strategic opportunities that might come up. We've been talking about potential acquisitions or M&As. So I think it's just -- we see -- it's invaluable to have a strong position with our balance sheet as we have it today.

And this concludes the Q&A session. I will pass it back to Patrick Schorn for closing remarks.

Thank you, operator. So a few comments in conclusion. We delivered a strong Q2 adjusted EBITDA of $133.2 million and expect a similar activity and performance for the third quarter. In July, we have proactively strengthened the balance sheet and are now well positioned to execute on our long-term strategy. For the full year 2025, we're on track to deliver the consensus estimate of approximately $470 million in adjusted EBITDA. And Bruno Morand will be the CEO effective September 1, and I wish him all the best in doing that. Ladies and gentlemen, thank you very much.

And this concludes our conference. Thank you for participating. You may now disconnect.