Borr Drilling (BORR +2.39%) reported its first-quarter 2025 results on May 21, revealing a $46.5 million sequential decline in revenue to $216.6 million, adjusted EBITDA of $96.1 million, and a net loss of $16.9 million, all primarily due to temporary rig suspensions and contract mobilizations. Liquidity improved to $320 million, and the company increased its active rig count from 16 to 22 as of May, but suspended its dividend in response to heightened market uncertainty.
Rig Reactivation and Market Penetration in Mexico
Three rigs in Mexico where operations had previously been suspended have been brought back into operation, enhancing regional fleet utilization and offsetting earlier downtime. The company’s operational track record in Mexico -- drilling nearly 100 efficient offshore wells -- bolsters its preferred status and leverage in ongoing renewal discussions with Pemex and other customers.
"I think that the concept works, I think that we have a fairly long history of performing well in the environment and being very cost-efficient. And therefore, I think we are benefiting from being some of the, let's say, first rigs to go back. So I think that certainly has helped us."
-- Patrick Schorn, CEO
Reinstating full operations and positioning for contract renewals in Mexico not only secures critical 2026 backlog but also underscores that the company is resilient to regional demand interruptions, which reduces future idle risk and reinforces its strategically significant customer relationships in oil-dependent jurisdictions.
Strategic Focus on Liquidity and Dividend Suspension Amid Macro Uncertainty
The board suspended the dividend to reinforce the balance sheet and support long-term value creation amid uncertain market conditions, following the collection of approximately $120 million in receivables from Mexico and amidst volatile global commodity and trade conditions. The company clarified it retains flexibility across capital allocation tools -- buybacks, debt reduction, or future dividends -- while emphasizing robust coverage, with 79% of fleet days for 2025 contracted at an average day rate of $147,000.
"I think it is purely a question of trying to be cautious, making sure that we have options on what to do with the cash as obviously dividend is not the only option that we have. But also working on the debt is at the moment quite attractive. I think we want to make sure that we have all options open while remaining cautious for as long as the uncertainty persists."
-- Patrick Schorn, CEO
This cautious capital policy, coupled with increased liquidity and sustained high coverage, directly enhances the company’s risk-adjusted flexibility to weather cyclical downturns, mitigate counterparty risk (particularly with Pemex), and opportunistically allocate capital as macro conditions evolve.
Contract Protection Mechanisms and Maintenance Capex Commitment
Customer agreements are structured to include termination-for-convenience clauses paired with compensation provisions, typically securing the anticipated EBITDA margin for any terminated periods. Management has ceased growth capital expenditures, guiding annual maintenance capex of approximately $2 million per rig, or $50 million for the fleet.
"[O]ur contracts in [the] vast majority, probably close to totality at the moment, include a clause for termination for convenience. It comes with a level of payout. That payout varies from contract to contract, but in general terms, it's equivalent to kind of the EBITDA backlog expectation of the remaining term. So if the customer decides to exercise that option, we do recover the profit expectation we had for the contract."
-- Bruno Morand, Chief Commercial Officer
Looking Ahead
Fleet coverage was 79% with average day rates of $147,000 as of May, and later this year, the company expects to achieve 80% to 85% fleet coverage. It also has 35% coverage booked already for 2026. Management did not offer adjusted EBITDA guidance for the year, but did affirm that it was "comfortable" with the analysts' consensus estimate of $460 million reported by Bloomberg. It anticipates annual maintenance capex of $50 million.
