Oslo-listed offshore drilling contractor Borr Drilling is seeing signs of healthy tendering activity in the jack-up rig market and is optimistic about a further increase in utilization levels going into 2018.
According to Borr Drilling’s financial report for the third quarter 2017 on Wednesday, Independent Cantilever (IC) jack-up rig count in our key markets (West Africa, South East Asia and Middle East) has increased by 11%. Supported by strong current tendering activity in these regions, including several multi-year opportunities, the company said it expects the positive trend to continue.
Borr said that customer preference for modern rigs has continued throughout the year with third quarter rig count for IC jack-ups that are less than 10 years old rising by more than 10% since the start of the year. Utilization is at the highest levels experienced since third quarter 2015, Borr noted. For IC jack-ups older than 10 years, the rig count is down by 7% since the beginning of 2017.
Announced attrition of jack-ups remains low with 11 jack-ups being retired in 2017, and a total of 44 removed from service since the start of the downturn. However, of the 150 jack-ups built prior to 2000 that are sitting idle, 91 have been idle for more than two years. The company added it believes that many of these rigs require meaningful capital investment in order to return to the market, and should be considered noncompetitive and are unlikely to be reactivated without a significant improvement in day rates.
We see tendering activity and utilization in our segments continuing to develop positively…
The level of market activity continues to improve for the premium jack-up segment, said the company.
When it comes to its financial performance, Borr posted a loss of $9.6 million for 3Q 2017 and a loss of $26.3 million for nine months to September 30, 2017. There is no comparable period from last year as the company’s inception date was in August 2016. No operating revenues were reported for the third quarter of 2017 while total operating expenses were $24.9 million.
The company has total assets of $1,008.2 million as of September 30, 2017, compared to $158.1 million at the end of December 2016. The increase was primarily driven by cash and cash equivalents from the proceeds from the private placement in March 2017 and the acquisition of ten jack-up drilling rigs from Transocean, and the completed asset acquisition of the two Hercules jack-up drilling rigs.
Looking ahead, the company said: “We see tendering activity and utilization in our segments continuing to develop positively with the assistance of small but directional increases in the underlying commodity price. Tendering in this phase of the market cycle can be time consuming and the visibility of opportunities, whilst improving, is developing from a challenging base. We anticipate additional backlog to be added in coming months based on the tenders we are currently participating in and/or through the projects we are developing with our industrial partners.
“However, Borr intends to be a rational market participant and will remain focused on opportunities that generate positive cash returns after activation investments and preserve upside in what is considered to be an improving environment. Increased free cashflow generation and anticipated growth in capital expenditure budgets across our international client base should lead to improvements in industry activity levels.”
Offshore Energy Today Staff