Borr Drilling: No long-term rig deals at breakeven rates

Offshore drilling company Borr Drilling, which “has taken the jack-up rig hoarding to a new level,” after several recent acquisitions, is now in talks to find work for some of its drilling units.

Norve Jack-up rig; Image by Borr Drilling

In its quarterly report on Thursday, Borr Drilling said the company owned 15 premium (delivered in 2001 and after) jack-up drilling rigs and eight standard jack-up drilling rigs (built before 2001), and one semi-submersible. Furthermore, the group will take delivery of 14 rigs from yard from the second quarter 2018 until the fourth quarter 2020.

“When all rigs are delivered the fleet will consist of 37 rigs, whereof 29 are premium, whereof 27 are built after 2011.” Borr said.

While having a sizeable fleet, Borr Drilling had only nine contracted rigs at the end of the first quarter 2018, several of which came as a result of the acquisition of Paragon Offshore, completed during the quarter.

The company has now started discussions with oil companies to find work for some of its rigs.

According to the driller, prospects for new rig charter deals are on upward trend as tendering activity and discussions with customers are increasing across all regions. Marketed utilization for the global jack-up fleet currently stands at 74%, three percentage points higher than at the start of the year, Borr said.

Borr has noted the recent contracting activity in the jack-up market has moved the contracted rig count to 335 units, “the highest level experienced in two years”. This is especially the case in the Middle East and the North Sea, which have, Borr says, seen high activity with oil companies adding incremental rigs.

Long-term yes, but for a certain price

 

Several multi-rig tenders for the long-term duration in various countries in the Middle East have either already been concluded or are expected to conclude in the near future, the driller says.

Borr is currently in discussions with several majors for multi-rig, multi-year employment. However, the company has said that it will not dive into long-term deals and thus lock its rigs at dayrate level close to operating cash breakeven levels.

“As stated before the Board are however not likely to enter in long-term contracts unless they give a significant contribution to capital,” Borr said.

“Borr will be a rational market participant focusing on opportunities that generate positive cash returns after re-activation, mobilisation and operating costs. However, we observe that several of our major competitors now are low on, or out of short-term available capacity.

“Together with the strengthening of the oil price, this is likely to lead to improving dayrate levels. Such a trend can already be seen in the North-Sea market. Management anticipates to enter into several more rig contracts in 2018, but shareholders should not expect significant uptick in contracting until 2019,” Borr said.

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