Borr Drilling (NYSE:BORR) has recently released its fourth-quarter results and provided fleet status report, giving investors a chance to take a look at how the company performed in the challenging market environment. Without further ado, let's look at the report and the latest contract news.
In the fourth quarter, Borr generated $60.2 million of revenue and a net loss of $46.7 million, or $0.22 per share. The company used $38.4 million of cash in operating activities but managed to offset this loss by $16.9 million asset sale proceeds and $31.4 million of proceeds from share issuance. As a result, Borr's cash position improved from $12.5 million at the end of the third quarter to $19.2 million at the end of the fourth quarter.
Borr has subsequently raised gross proceeds of $46 million in an equity offering which was a part of the liquidity improvement plan. The company sold 54.1 million shares at a price of $0.85 per share.
In 2020 and early 2021, Borr made a number of deals which helped it to push debt maturities into 2023 and beyond, as well as re-schedule the remaining rig deliveries (5 newbuild jack-ups) for 2023. While the company has no near-term liquidity problems after another equity raise, the significant negative operating cash flow in the fourth quarter is a concern.
Interestingly, Borr stated: "Even though we received broad support for the liquidity improvement plan, concluded in January, we are convinced that some opportunities remain to further improve our capital structure and liquidity in 2021". Borr stated that it wanted to improve cash distributions from its joint-venture operations in Mexico, but the above-mentioned statement is still concerning for investors who have lived through three rounds of dilution in less than a year.
The company's fleet status report contained several developments:
- The letter of award for jack-up Idun turned into a contract. The rig will work from March 2021 to January 2022 in Malaysia.
- Jack-up Prospector 1 received a letter of intent from an undisclosed operator. The rig may work from April 2021 to November 2021 in the North Sea.
- Jack-up Skald got a letter of award from PTTEP. The rig is expected to work in Thailand from June 2021 to June 2024. Bassoe Offshore estimates that the dayrate is $70,000.
- Jack-ups Grid, Gersemi and Galar received letters of intent from Pemex. The rigs are expected to work in Mexico until the end of this year.
Source: Borr's fleet status report
Not surprisingly, Borr still has many rigs without jobs, and its primary task is to increase the utilization of its rigs. The recent developments in the oil market suggest that the contracting situation in the shallow water market should improve. Borr noted: "Borr Drilling's current visibility in tender and direct negotiations stands at 19. This is up significantly from the levels seen during 2020 and is approaching the late 2019 levels". The shallow water market is typically the first offshore drilling market segment to recover when the price of oil moves up as it involves cheaper and shorter projects compared to the ultra-deepwater market.
Borr Drilling shares have recently lost momentum and pulled back despite rising oil prices. In my opinion, the constant dilution (and fears of another round of "liquidity management") put pressure on the stock. Perhaps, the market is worried that Borr may use the stock price upside to further improve its liquidity position. Anyway, Borr Drilling clearly needs additional contracts in order to push the operating cash flow into the positive territory. It remains to be seen whether the current upside in the oil market will bring many contracts as this move is caused by strong production cuts rather than by strong demand for oil, but Borr's prospects have certainly improved compared to the previous quarter.