Borr Drilling (BORR) Q4 2025 Earnings Transcript

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DATE

Thursday, February 19, 2026 at 9 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Bruno Morand
• Chief Financial Officer — Magnus Vaaler

TAKEAWAYS

• Operational Revenue -- $259,400,000, a 6.4% decline from Q3, driven by $16,000,000 lower dayrate revenue as several rigs entered contracts with reduced dayrates.
• Adjusted EBITDA -- $105,400,000 for the quarter, reaching full-year adjusted EBITDA of $470,100,000 at the top end of internal guidance.
• Net Income -- $45,000,000 for the year, despite a $1,000,000 net loss in the fourth quarter.
• Cash and Liquidity -- $379,700,000 in cash at year-end, with $234,000,000 of undrawn revolving credit facility, yielding total year-end liquidity of $613,700,000.
• Operating Expenses -- $192,100,000 in Q4, up $13,200,000 (7.4%) from prior quarter, primarily due to increased personnel and maintenance costs, and amortization of deferred cost for rig Hild.
• Contract Backlog and Fleet Coverage -- Secured new commitments for seven rigs since last report, growing 2026 coverage to 80% for the first half and 48% for the second half, including newly acquired assets.
• Backlog Addition -- Five new commitments added approximately $145,000,000 year-to-date to backlog, alongside two late-2025 contracts.
• Premium Rig Acquisition -- Acquired five premium jackup rigs from Noble (NYSE:NE) in a transaction labeled as "immediately accretive" to adjusted EBITDA and expected to reduce debt per rig; $174,000,000 in cash paid in January and $150,000,000 settled by letter of credit.
• Capital Markets Activity -- Raised $84,000,000 through an equity offering, $165,000,000 in additional bonds due June 2030, and prepared for an Oslo Stock Exchange uplisting via Euronext Growth listing completed in December.
• Utilization -- Technical utilization achieved 98.8% and economic utilization reached 97.8% in the quarter.
• Rig-Specific Developments -- Contracting progress included Njord extension in Mexico (two years, now committed to 2028), Odin campaign in the United States (120 days firm, plus options), and Saga extension with Brunei Shell (through April 2027 with further option available).
• Middle East Market -- Multiyear tenders underway for an estimated 13 rigs and noted ongoing tender and evaluation phases with major regional players including Aramco and KJO.
• Pemex Payments -- CFO Vaaler stated, "we actually received around $46,000,000 in total in the fourth quarter," and a further $23,000,000 in January, reducing outstanding receivables to $90,000,000-$100,000,000 at year-end.
• Outstanding Receivables -- Improved terms in Mexico specified: commitment to pay operating costs within 45 days and keep variable hire outstanding below 180 days under recent contract extensions.
• Rig Reactivation CapEx -- CEO Morand indicated, "The Var would probably require a bit more, probably somewhere close to $56,000,000," distinguishing it from other rigs that need minimal reactivation investment.

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RISKS

• Q4 Net Loss -- Reported net loss of $1,000,000 for the fourth quarter, driven by both revenue decrease and a 7.4% increase in operating expenses.
• Pemex Receivables -- Year-end receivables from Pemex and associated entities remained sizable at $90,000,000-$100,000,000, with dependency on new payment plans for continued normalization.
• Idle Rigs -- Several rigs remain idle with uncertain near-term contract prospects; CEO Morand highlighted Var and Freya as likely to "come a bit later, probably back into this year, early next year" depending on market catalysts.

SUMMARY

Borr Drilling Limited (NYSE:BORR) executed a significant acquisition of five premium rigs from Noble, financed through a mix of equity and bond offerings that were described as "significantly oversubscribed." CEO Morand reported that company tendering activity in the Middle East is at levels "not seen since January 2023," with over 120 rig-years in the tender or pre-tender stage for start dates in the following 12 months. Management confirmed that the recent acquisitions directly bolster the company’s contracted days, with an anticipated pathway to fleet utilization in 2026 "modestly higher" than in 2025. CFO Vaaler detailed a positive trend in receivables from Pemex, with substantial payments received in Q4 and early January, but emphasized that continued improvement hinges on ongoing governmental reforms. Strategic initiatives include an uplisting plan for the Oslo Stock Exchange and increased focus on mixing short-term contracts for market repricing flexibility with long-term commitments in advantageous regions, especially as certain dayrate environments remain challenging.

• CEO Morand stated, "We expect the transaction to be immediately accretive to adjusted EBITDA and to reduce our debt per rig."
• Middle East contracts require specific technical capacity, and management views the "large volume of work coming from those tenders" as a market catalyst for tightening utilization and future rate progression.
• Contracting strategy blends short-term deals to fill 2026 gaps and long-term contracts in markets offering attractive margins, guided by dynamic regional competition and emerging opportunities.
• In Mexico, management improved payment terms in recent extensions—ensuring operating cost payments within 45 days and capping variable hire receivable periods—which may mitigate risk exposure from counterparties.

INDUSTRY GLOSSARY

• Jackup Rig: A mobile, self-elevating drilling platform used in shallow-water oil and gas exploration and production.
• Economic Utilization: The proportion of days a rig earns revenue relative to the total available days in a period, excluding planned downtime and some interruptions.
• Technical Utilization: The percentage of time a rig is mechanically available to perform drilling operations, regardless of contract status.
• Dayrate: The contracted daily payment received for operating a drilling rig, typically excluding variable costs such as performance bonuses or penalties.
• Backlog: The total value of contracted future revenues for confirmed assignments.

Full Conference Call Transcript

Bruno Morand: Good morning, and thank you for participating in Borr Drilling Limited fourth quarter earnings call. I am 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 will 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 will follow with a deeper look into the commercial execution and we will conclude with some comments on the business outlook. Let us 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 six and three years LTI free respectively, and the rigs Gunnlod and Gerd reaching one year incident free. Additionally, we are proud to highlight that our rig Arabia 3 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 the Borr Drilling Limited family for their efforts. Now into 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 $259,400,000. Adjusted EBITDA of $105,400,000 came in line with our expectations, bringing full year adjusted EBITDA to $470,100,000 at the top end of the guidance range. This performance underscores the resilience of our organization navigating 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 seven rigs and expect further coverage gains in the coming months as we progress negotiations on multiple active leads. We believe the jackup 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 are 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 jackup market utilization remained steady at approximately 90%. Standards are awarded, available supply is absorbed, we expect market conditions to firm. Against this backdrop, we are pleased to have expanded our fleet through the accretive acquisition of five premium rigs from Noble. These rigs are highly complementary to our existing portfolio, and well suited with 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 2026, and a recovering day rate and earnings visibility into 2027. But before I add color to this, I will 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 were $259,400,000, a decrease of $17,700,000 or 6.4% from Q3. This is mainly explained by a $16,000,000 decrease in dayrate revenue primarily due to rigs transitioning into contracts with lower dayrates. Activity level in terms of total number of operating days stayed even over the two quarters.

A decrease in variable charter revenue explains a further $3,100,000 decrease primarily due to the Gerd’s end of contract and its planned transfer to a contract in Angola. These decreases are offset by a $1,400,000 increase in O&M revenue. Total operating expenses for the fourth quarter were $192,100,000, an increase of $13,200,000 or 7.4% compared to the third quarter. The increase in cost was primarily due to an $11,600,000 increase in rig operating and maintenance expenses attributable to increases in personnel costs, accelerated amortization of deferred cost for the rig Hild, and reimbursable expenses. Overall, for the quarter, we recorded a net loss of $1,000,000, adjusted EBITDA of $105,200,000.

Looking at full year 2025, net income was $45,000,000, and full year adjusted EBITDA came in at $470,100,000, a decrease of 7% compared to 2024. Moving into cash. Cash increased by $151,900,000 in comparison to the prior quarter, and is primarily driven by the following: $34,800,000 cash from operations, which is after $94,700,000 of interest payments and $8,800,000 of cash taxes paid. We spent $52,100,000 in investing activities consisting of $36,000,000 deposits for the five-rig acquisition and $15,900,000 additions to jackup rigs. Lastly, cash from financing activities was $169,200,000 consisting of SEK 159,300,000 net proceeds from the foundations, $80,300,000 net proceeds from share issuance, net of provisions cost, offset by $70,800,000 repayment of debt in the quarter.

The company’s cash and cash equivalents as of December 31 were $379,700,000. In addition, we have $234,000,000 of undrawn revolving credit facilities resulting in total liquidity of $613,700,000. It is worth noting after year-end, we completed the five-rig acquisition from Noble and paid $174,000,000 in cash consideration in January. The remaining consideration was settled by way of a $150,000,000 letter of 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 $165,000,000 of bonds due June 2030, issued as part. In addition, we completed an equity offering raising gross proceeds of $84,000,000 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 listing on the Euronext Growth. This 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 Oslo Stock Exchange in 2026. I will now turn the call back to Bruno. Thank you, Magnus. We have been busy on the contracting front to start the year. Year-to-date 2026, we secured five new commitments adding approximately $145,000,000 to our backlog.

Together with the two contracts we secured in December, these mark seven new commitments since our last quarterly report. I am pleased to see both short and long-term commitments in this mix. Filling idle space in our 2026 schedule remains a key focus, while at the same time, we are mindful of positioning our fleet to capitalize on improving market conditions from late 2026 and onwards. I will now spend time discussing the commitments we secured since the last quarterly report. In the Americas, the Rán received the one-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 leave us reassured that we will have more positive news soon for the Rán. Additionally, the Odin secured a contract for two 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, Odin is now committed into November, with options that could keep the rig utilized in the United States through mid-2027. Staying in the Americas, today, we announced a two-year contract extension for the Njord 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 jackup industry. Moving to West Africa, the Njord 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-month contract with Shell. In Asia, Brunei Shell extended the Saga contract by an additional five months. The Saga is now committed into April 2027 with an additional one-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 one-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 relationships 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 five newly acquired rigs, our coverage for the first half of the year currently sits at 80%.

As a comparison, before factoring these new rigs, this coverage figure would have been approximately 85%. Based on current customer engagements, we are 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 number of days achieved in 2025. In parallel, and as 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 in the tender and pre-tender phase for opportunities commencing within the next 12 months.

And based on operator schedules, we anticipate that 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, we remain optimistic that the foundation is set for 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 we were comfortable with consensus for full-year adjusted EBITDA that stood at $460,000,000.

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 Limited 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 $470,000,000 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 strengthened our liquidity position and positioned the company to pursue consolidation opportunities. Then in December, we announced the accretive acquisition of five premium jackups.

We acted 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 2026, with ongoing dynamics supporting a clear recovery in dayrates in 2027 and beyond. Our expanded fleet will provide good scale and operational flexibility, positioning Borr Drilling Limited to deliver long-term value to our shareholders. We will now open for questions.

Operator: Thank you. Once again, please press 11 for any question and a follow-up so that everyone is given the opportunity to ask their questions. Please standby while we confirm the Q&A roster. This will take a few moments. Thank you. We are now going to proceed with our first question. The question comes from the line of Scott Gruber from Citigroup. Please ask your question.

Scott Gruber: Yes. Good morning. Appreciate all the detail this morning, and the tendering pipeline boost is certainly encouraging. I am curious on the outlook of the two acquired rigs that are idle, the Sif and the Freya. Do you have any line of sight to securing contracts on those two?

Bruno Morand: Hey, 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 Freya, 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 strengthen, so I would think about that rig probably going to work sometime in 2026, potentially early 2027 depending on the scope it is assigned to.

Scott Gruber: 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 $440,000,000. Just some initial thoughts on the achievability of that level of EBITDA?

Bruno Morand: Yes, for sure, Scott. I think at this stage, still probably a bit too early for us to provide kind of a formal guidance. What I can share, as I say, 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 will 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 am 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 is the simple way to think. Activity level will track slightly higher than it did in 2024. Now let us 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. Okay.

Scott Gruber: I appreciate the color. Thank you. I will turn it back.

Bruno Morand: Thank you, Scott.

Operator: We are now going to proceed with our next question. The question comes from the line of Craig Rosie from BTIG. Please ask your question.

Craig Rosie: Yes. Hey. Thank you, and good afternoon or good morning, and thanks for taking my questions. Bruno, I did have kind of a question around what you are 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. There have been some rumblings about tenders coming to market for some time now. Any sense for when we could actually see some of these talked-about tenders in the Middle East actually, not have the rigs start working, but when we could start seeing maybe some rigs be contracted around some of that?

Bruno Morand: Yes. No. And thanks for joining, Craig. 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 KJO, are in progress. And in fact, KJO is in full tender evaluation from what we understand, and the Aramco tender submission phase. This is very actual. This is very real, very tangible. There are a few more prospects in the region that we have been expecting to come to the tender pipeline, including KJO, 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 our 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 is one of the reasons why we feel excited. There is a large volume of work coming from those tenders, and it is probably worth highlighting that not all of it, but a portion of these requirements not only are large volume, but they require very specific technical capability. Right?

And we feel the fleet that we have, particularly with the recent acquisitions, places us well to evaluate, and we will see. They are long-term tenders. For us, it is a very interesting body of work. But it has to make sense from a commercial standpoint as well. In any case, once that volume gets absorbed in the market, whether directly awarded to us, Borr, 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.

Craig Rosie: Okay. Super helpful. Thanks for that, Bruno. And hey, congrats on 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 am 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 do not know how deep you want to get into that conversation, but I am kind of curious around, I mean, it is not Keppel anymore. It is, I guess, they call it Sembcorp Marine.

You know, they still have some rigs that, you know, I guess they are operating some jackups from previous orders from other customers. They have these rigs. Is there any kind of, when could we see these rigs? Or, I mean, are they being, do you have any sense for if these rigs are being actively marketed for sale? And yeah, I mean, I guess that is kind of it and kind of, you know, where we kind of think pricing is now for a premium rig.

Bruno Morand: Very good, Craig. Let me tackle maybe the question on the Sembcorp rigs first. And when you said rigs, I understand that there is 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 is probably fair to assume that a rig gets offered in the Middle Eastern tenders. If it is a rig that was around 2014, and it has specifications and complies with the requirements, I would expect that rig to eventually be offered in a 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 am 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 the platform further. For us, we continue to think about consolidation very selectively. It is not consolidation and growth for the sake of growth. We would have to look at something complementary to our fleet, and I think less likely to be looking at individual asset things. 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 will look at opportunistically. But I do not think it necessarily composes a core to our strategy. I think we have a good operational platform to do so if the opportunity comes, but we will look at that very opportunistically.

Craig Rosie: Super helpful. Thank you very much.

Operator: We are now going to proceed with our next question. The question comes from the line of Fredrik Stene from Clarkson Securities. Please ask your question.

Fredrik Stene: Hey, Bruno. Magnus. Hope you are well. And as always, thank you for being prepared remarks. I wanted to dig a bit deeper into what is going on with the market at the moment, and I think we have a shared view that it is 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, you know, rate development trajectory going forward. Typically, there will be, I guess, first you will see the tenders, then you will see the awards, and then you will see the dayrates.

So any color on when you think we will see this higher activity level starting to really make an impact on bidding levels across the globe.

Bruno Morand: Yes. Fair question, Fredrik. And what we have seen over the last, and we have 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 help us fill the gaps, help us derisk the execution during the next year. Now what is the date for the market to change? You are absolutely right.

I think fixtures 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 dynamics start to progress once those tenders conclude, or shortly after those tenders conclude, which would imply that we are looking at, you know, Q3 is when we will probably have better visibility of those dynamics playing out. That is my best guess. As I said earlier, for 2026, the 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.

Fredrik Stene: That is very clear. And just to 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 go for at the current time? Are you on short contracts to reprice when the market starts accelerating again, or do you still want to have a base load of longer-term contracts if and when they are available?

And I would 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, we are referencing suspension ability for the Kingdom as we saw two years ago. Thanks.

Bruno Morand: Yes. So let me break it down here, Fredrik. To your first part of the question, with a 29-rig fleet, we obviously have to have a mix of short and long-term contracts. It is obviously important that we have a baseline of backlog. Clearly, as we have regions where dayrates push closer to cash cost or cash operating cost, we do not want to be securing these contracts long term, and we are looking for opportunities to close gaps as best as we can. Some other regions where margins are still a bit more stretched and more interesting, we are obviously more flexible in extending the term 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 have particular requirements that are well suited for the fleet, and we look into how we optimize these things. So there is obviously a quite strong combination of flex factors playing out at the moment. Now in terms of the second question on Aramco, yes. The tender is still ongoing, so let us 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 concern since the last round of suspension 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 did indicate some flexibility to discuss. So let us see how the tender progresses and where we land in that discussion.

Fredrik Stene: Alright. Thank you very much.

Bruno Morand: Have a good day. Thank you, Fredrik.

Operator: We are now going to proceed with our next question. The question is from the line of Charles Olson from DNB Markets. Please ask your question.

Charles Olson: Thank you. Good afternoon, Bruno and Magnus. A couple of questions for 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 regular payments coming from Pemex or Mexico this year. How should we think about this? And what is the current level of outstanding on your balance sheet?

Bruno Morand: True. Thanks for the question. I thought we would go the whole call without a question for Magnus, so I will let him take this one.

Magnus Vaaler: Yes, thanks, Bruno, and Charles. Yes, as we said, we have seen that payments from Pemex have picked up over the past quarter, and we actually received around $46,000,000 in total in the fourth quarter. We estimate we had around $90,000,000 to $100,000,000 outstanding at the end of the quarter. Also, in January, we received a further $23,000,000. So that is bringing the outstanding balance further down. So I think this is very positive to see. We see also peers, the companies reporting normalization of collections. And indications we have from Mexico is that it will continue into 2026 and that they are preparing for a new payment plan with the government to tackle 2026 invoices.

So I think we are positive about the development. I think also, as we noted in our previous contracting update, 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 variable hire. So we are also improving on the terms towards our counterparty. Thanks.

Charles Olson: That is great to hear. And I would expect those terms to be included on the rig and the letter of intent as well?

Bruno Morand: No. No. True. I think the rig that got extended right now continues on the historical contract structure, which is on a pay-when-paid basis. However, as Magnus pointed out, we do have encouraging signs that payments will reach a better normalization going forward.

Charles Olson: Okay. Okay. Thank you. Good to hear. On another topic, and obviously, it is boring to talk about dayrates, but it ultimately remains important, if you will. I mean, the spread seems to be very high at the moment, obviously, Asia, Middle East being more competitive than West Africa. Are there other moving parts to think about? I mean, you talked briefly about terms you are 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?

Bruno Morand: Yes. And I think that the dynamics in our contracting is always very fluid. We are always kind of pushing and pulling on terms and conditions of the contract with the customers. So it is normal through the cycle. I would say that today, there is not a huge focus from our customers in trying to renegotiate terms. I think that the terms have been fairly solid in the 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 pressure. If I look at regions like the North Sea, for example, they have very well-established frameworks for contracting.

I do not think that we have 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 is always a commercial push and pull while the negotiations mature through the cycles.

Charles Olson: Understood. Thank you. And the final one for me. As we think about those rigs that you currently have not secured any work for, 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 has been inactive previously or coming from yard, if you will?

Bruno Morand: Yes. I think it is a fair statement, Charles. The thing when I look at the pipeline and the things that we are pursuing at the moment in near term, I would think or hope that we will have commitments for the Hild and the Sif. They have been operating until recently. We have a pipeline of opportunities for them. That is the most obvious movement in the near future.

I do think that the Var and the Freya are rigs that will probably come a bit later, probably back into this year, early next year, with some focus on some of the developments in the Middle East that will likely create a catalyst to deploy those rigs, but that is probably a fair way to think about it.

Charles Olson: Understood. Good stuff. Thank you, guys. Keep up the good work.

Bruno Morand: Thank you.

Operator: We are now going to take our next question. The question comes from the line of Joshua Jain from Daniel Energy Partners. Please ask your question.

Joshua Jain: Thanks for taking my questions. 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, are you thinking about requirements from a return perspective in an initial contract to get a rig up and running today after it has been stacked? You could just elaborate on that a little bit.

Bruno Morand: Yes. Thanks, Joshua. And the answer to your question may vary a little bit from rig to rig. I am thinking in our case, except for the Var, all of the rigs have either been working until recently or are rigs that would be rolling off contract. At this stage, we do not expect any meaningful CapEx in putting those rigs to work. The Var would probably require a bit more, probably somewhere close to $56,000,000, somewhere in that ballpark. So for the rigs that require little CapEx, the calculation becomes a bit easier. And it is probably less a question of just off-the-gate economics and more a balance of the opportunity pipeline.

We certainly do not want to have a rig going back to work to just work for a 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 feasibility of a pipeline and rate is obviously significant. But for the fleet that we have at the moment, the CapEx component, reactivation component, is not a big factor because, as I said, these rigs have either been operating until recently or are rigs that are normally rolling off contract as we go along.

Joshua Jain: Thanks for that. And then I am going to ask the Venezuela question, I guess, a little bit differently. Any thoughts on what you are 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.

Bruno Morand: Yes. And Trinidad has been a fairly busy jackup market over the years. There are still some opportunities around there. Suriname, there have been a few opportunities in discussion. It is mostly exploration work, and some of it is a bit further 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 is 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 is a region that requires rigs with larger capabilities, which is obviously very interesting for our fleet. I would not think that it is a large play.

Joshua Jain: Understood. Thanks for taking my questions.

Bruno Morand: Thanks, Joshua.

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

Bruno Morand: Thank you. That concludes our call. We appreciate the interest in the company, and I look forward to speaking to you again next quarter.

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

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