Borr Drilling Limited

Good afternoon, and thank you for participating in the Board Drilling Second Quarter 2023 Earnings Call. I'm Patrick Shoren, talking to you from Oslo, and here with me today is Magnus Fahler, our Chief Financial Officer, and Bruno Morin, our Chief Commercial Officer. Next slide, please. First, covering the required disclaimers. I would like to remind all participants that some of the statements will be forward-looking. These matters involve risk and uncertainties that could cause actual results to matter, to differ materially from those projected in these statements. I therefore refer you to our latest public filings. Next slide. In the second quarter of 2023, we recorded another strong result with an increase in revenue of 9% to 187.5 million. and an increase in adjusted EBITDA of 16% to 84 million on a flat active rig count. This brings our adjusted EBITDA margin for the quarter to 45%. We continue to see the market for Jacob drilling rigs developing strongly, and year to date, we have added seven new contracts and LOAs for a total estimated duration of 1,771 days or $289 million in contract value, which gives an average day rate of approximately $163,000 per day, continuing the building of an increasingly strong backlog. In July 2023, we had previously exercised options on the GERD, which was active in West Africa canceled. This rig was placed back on the market and we were immediately able to secure new work in the Middle East at more favorable economics. The change of contract for this rig will lead to some idle time before it commences its new contract in December 2023, which will impact our results in the second half of this year. However, at the same time, it will also improve our position in 2024 and beyond for the GERD. We've also secured a short-term extension to the contract for a rig Prospector 1 operating in the North Sea, a region that is experiencing lower day rate levels than the rest of the world. With the overall market continuing to strengthen, particularly in other regions, we are positive that this extension will provide a bridge towards favorable long-term commitments elsewhere. Based on these developments, our full year adjusted EBITDA for 2023 is now estimated to be between 330 to 360 million. And we expect our financial performance in the third quarter of 2023 to be similar to the second quarter, which we expect will be followed by an increase in the fourth quarter, when for the first time, all of the company's 22 delivered rigs will be in operation. Supported by our confidence in the Jackup rig market, we are in active discussions with Citrium, formerly Keppel, for an expedited delivery of our rigs Vale and Var to August and November 2024, respectfully, as we see significant opportunity to increase earnings with having these last two top-tier rigs available. Following the recent contract awards, our fleet's contract coverage for 2024 stands at 70%, including firm contracts and priced option with an average equivalent day rate of approximately $123,000. Considering this firm contract coverage and the projected day rates for the uncontracted days, we have narrowed the estimated range of adjusted EBITDA for full year 2024 to be between $500 to $550 million. Magnus will now step you through the financial details of the second quarter.

Thanks, Patrick. Q2 2023 revenues were $187.5 million in the quarter, an increase of $15.5 million or 9% to the first quarter of the year. The increase in day rate revenues were 13.4 million, and the increase in bare boat income from Mexico joint ventures was 2.1 million. The increase in revenues was a result of higher day rates and higher efficiency for our JV rigs, as the number of contracted rigs were the same quarter on quarter, 20. The rig operating and maintenance expenses for Q2 were 89.5 million, an increase of 4 million from Q1. and this was mainly due to insurance proceeds which was booked in Q1 and thereby reducing the operating expenses in that quarter. The general and admin expenses decreased by 2.1 million because Q1 included a 1.3 million national insurance expense recorded on employee stock options due to increase in the company's share price. The total financial expenses net were 49.6 million for the quarter an increase of 9.1 million, mainly as a result of 4.8 million increase in foreign exchange losses, 1.6 million increase in interest expense, and 0.7 million decrease in interest income. This gave an interest income before income taxes of 14.2 million and a net income for the company in the quarter of 0.8 million. Our adjusted EBITDA was 84 million, an increase of 11.6 million, or 16% compared to Q1. Our free cash position at the end of Q2 2023 was 83.8 million. Our cash movements in the quarter were mainly driven by 2.4 million cash from operations, which included 67.1 million cash interest paid. and 7.9 million of income taxes paid. We also spent 25.7 million on asset activation costs and drilling equipment, mainly for our rigs, The Hill and Arabia 3, which are starting up their contracts in the third quarter. We received 9.8 million proceeds from return on previous shareholder funding to our Mexico JVs, and we used 161.4 million in financing activities which comprise of 151.2 million repayments for all convertible bonds, 35.2 million debt principal repayments, and a drawdown of 25 million in debt from the upsides of the D&D loan facility. With this, I would like to turn the word over to Bruno.

Thanks, Magnus. I'll now briefly cover some aspects relating to the markets where we operate. check-up utilization levels have continued to increase year-to-date. In particular, the market utilization for modern rigs currently stands at 93.9%, an increase of 1 percentage point since our last report and a level not seen since 2014. Amidst this tight rig market, we note an increased sense of urgency from our customers in securing rig capacity. This is evidenced by two primary trends. the increase in average contract duration, and second, a higher number of tenders and awards targeting programs with commencement one year ahead or more. As a result of these trends, we note that the two- and three-year forward contract coverage of the Jacob fleet has already returned to peak levels experienced in the prior cycle. Further, in recent months, there has been an increasing number of reports of tenders and negotiations concluding unsuccessfully due to no or limited number of offers received. Additionally, we are experiencing an increased number of direct negotiations as customers attempt to fast-track re-contracting. We believe that the combination of strong demand visibility and this near and long-term tightness in the market will continue to provide support to increasing rates. Moving to the next slide, board drilling continues to build quality backlog. Our current contract revenue backlog stands at 34.1 rig years for a total of $1.64 billion. This equates to an equivalent rate of $132,000 per day, which we believe to be industry leading for jackups. Let me provide some more details of fixtures and general fleet developments since our last report. First, the MIST has received a contract from Valiura for 244 days program in Thailand that will maintain the rig contracted into the second half of next year. This award is a result of the strong operational performance delivered by the MIST and its crew, leveraging its unique features and offline capabilities. The TOR has been awarded a binding LOA for a 151-day program in Southeast Asia. This contract is expected to commence in December 23 when the rig will conclude its current commitment with CPOC. These awards for the missed in the tour will maintain these units contracted until mid-24. Based on the visible prospects, we project the Southeast Asian jackup market will be undersupplied at that time, which should put us in a strong position to recontract these units at favorable rates. The GERD has been awarded a binding LOA for a 270-day program in the Middle East, expected to commence in December 23. The Prospector 1, receive a short-term extension from its current customers in the North Sea, including some options that are subject to mutual consent. As Patrick mentioned earlier, the North Sea continues to experience softer demand and day rate levels. Hence, we continue to actively market the Prospector 1 for opportunities around the globe. All of our 22 delivered rigs are contracted or have future commitments. With the projected contract commencements for the Arabia 3 and the Hilt in Q3, and the GERD in Q4, we anticipate having all our delivered rigs active by year-end. Moving to the next slide. Since the beginning of 2022, we have continued to experience marked increases to our EBITDA numbers as a result of higher operating rig count and boosted by improved day rates. With recent awards we have secured, our contract coverage, including price options, stands at 70% for 2024 and 45% for 2025. Based on the demand outlook and active discussions we're having our customers, we maintain an optimistic view that our available days in 2024 and beyond will be contracted at rates similar or superior to our recently announced fixtures. On that note, I'd like to turn the call back over to Patrick.