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Borr Drilling - More Cracks To The Story After Another Disappointing Quarter

Mar. 02, 2020 8:44 AM ETBorr Drilling Limited (BORR)SDRL, SLB, VAL7 Comments
Henrik Alex profile picture
Henrik Alex


  • Company reports disappointing Q4 results with both revenues and EBITDA down sequentially. Free cash flow remained negative.
  • Mexican integrated well service joint venture encountered severe problems, company in negotiations to reduce its stake.
  • Management now looking to sell some of the company's modern assets to address ongoing liquidity challenges.
  • Story is showing more cracks virtually each quarter with a seemingly ever increasing number of executional missteps in addition to ill-advised speculative bets on competitors.
  • The stock could still offer substantial upside from current levels as management guided for positive operating income and substantially improved cash flow in 2020. That said, given management's abysmal track record, investors should take these projections with a grain of salt.


I have covered Borr Drilling (NYSE:NYSE:BORR) previously, so investors should view this as an update to my earlier article on the company.

Borr Drilling remains a newcomer in the offshore drilling industry, established by former Seadrill (SDRL) executive Tor Olav Trøim to take advantage of the major industry downturn that started in the second half of 2014.

Since its foundation, the company has acquired a host of assets from other industry players as well as a mini-armada of stranded newbuild rigs from some of the world's leading shipyards.

Photo: High-specification jack-up rig "Norve" - Source: Company Website

Currently, Borr Drilling owns 24 premium jack-up rigs, four standard jack-up rigs, and one vintage semi-submersible rig. In addition, the company has contracts for delivery of six newbuild premium jack-up rigs over the next couple of quarters.

Source: Q4 Earnings Report

The Company currently has 16 rigs in operation: four in the North Sea, two in the Middle East, five in West Africa, three in South East Asia and two in Mexico.

In its early stages, the company solely relied on equity funding but has started to take on substantial amounts of debt over the past couple of quarters.

As of the end of Q4, Borr Drilling had amassed more than $1.7 billion in debt but does not face any maturities until June 2022. Remaining capex commitments for newbuilds amount to $707 million of which $620 million has been financed already. In 2020, the company will have to raise another $53 million in conjunction with the scheduled delivery of the premium jackup rig "Tivar".

That said, the slower-than-expected industry recovery and two ill-advised, speculative bets on securities of industry peers required the company to approach lenders for covenant relief as well as shipyard Keppel FELS for additional seller financing and

This article was written by

Henrik Alex profile picture
I am mostly a trader engaging in both long and short bets intraday and occasionally over the short- to medium term. My historical focus has been mostly on tech stocks but over the past couple of years I have also started broad coverage of the offshore drilling and supply industry as well as the shipping industry in general (tankers, containers, drybulk). In addition, I am having a close eye on the still nascent fuel cell industry.I am located in Germany and have worked quite some time as an auditor for PricewaterhouseCoopers before becoming a daytrader almost 20 years ago. During this time, I managed to successfully maneuver the burst of the dotcom bubble and the aftermath of the world trade center attacks as well as the subprime crisis.Despite not being a native speaker, I always try to deliver high quality research to followers and the entire Seeking Alpha community.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

JLTSR profile picture
05 Mar. 2020
This puppy had fleas from day one! Looks like Mexico/Pemex//“OPEX” is a major portion of BD’s Waterloo and all is not OK in the CORRAL...
This whole situation stinks. Stock has bent selling off like mad since it had a big climb at the end of the year. A Norwegian fund has been dumping shares (aka somebody knew something) of this Norway-based OSD. Others have been shorting the hell out of it. This all reaks badly. I had heard Mexican oil company PEMEX was doing very poorly; corruption, etc. So if they’re the ones Borr would be trying to get money from, good luck. Another failed OSD attempt by me. I sold at market open on Friday, which was 1.93. Lost like 80%.
rodolfoavalos1 profile picture
All these Oil & Gas Services companies are just delaying and fighting the inevitable..
I cant see the article of hornbeck drilling. Whats up with it? Did we get wiped out =(
Henrik Alex profile picture
Not yet, but could be very likely now:


I sold my shares at a loss this morning.
02 Mar. 2020
Not surprising that Kibsgaard is associated with another oilfield services disaster. His LSTK projects in the Middle East were supposed to be “accretive” to SLB and they cost the company millions of dollars. Looks like he tried it again in Mexico with BD and is getting the same result.....
Q4 was a flat out disaster - just as the company which best can be described in three words: an utter joke. Management has cheered and lured investors with the "above-market" contracts with Pemex for a long time, and the rigs barely started drilling until it turned out to be a catastrophe. So much for their innovative integrated offering...

Even with Oro Negro proceeds, mark-to-market gains on Valaris and (very) favorable working capital movements in the quarter, they burned 18 million. Adjusting for these one-offs, the underlying free cash flow was negative by 75(!!) million.

With these one-offs disappearing and even reversing in the first half of this year, they should run out of liquidity in a few months. I bet they will fail to sell any of their rigs to ADNOC as well. My bet is that John Fredriksen once again will do his outmost to destroy Troim and attract ADNOC with idle Seadril jack-ups.

This company might very well go bankrupt this year. I will be surprised if they can attract new equity even at an offering price close to zero. Too much debt and miserable management.
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