Borr Drilling Limited

Good morning, good afternoon, and thank you for participating in the Board Drilling Fourth Quarter 2023 Earnings Call. I'm Patrick Schorn, and with me here today is Bruno Moran, our Chief Commercial Officer, and Magnus Fahler, our Chief Financial Officer. Next slide. 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. Next slide. Our fourth quarter performance has been strong, and we have closed the year having achieved several major milestones. In the fourth quarter, revenue increased by 15% to $220 million, and our adjusted EBITDA increased to $105 million, which is 20% over previous quarter, resulting in a 48% adjusted EBITDA margin. Full year 2023, adjusted EBITDA reached $350 million. Our backlog has grown and improved significantly in quality during 2023, where we added $728 million to our revenue at an implied average day rate of $161 per day. On the operational front, we have finished the year with excellent technical utilization for the quarter at 98.7%, and a total recordable injury frequency of 0.65. the latter being well below the industry average. Both these numbers reflect the professionalism of our operational team who have activated RICS continuously for the last three years and who have successfully commenced operations in numerous new countries. This performance has also resulted in external recognition that is dear to us. And just to name two, our rig Saga has been awarded by Shell as Global Jacob Rig of the Year. Also, we have received the award for the Best Recordable Incident Rig for our rig Skalt and Board Drilling as a Company from the IADC Southeast Asia chapter. On the right hand side, you see that we maintain operations in four main hubs. namely Mexico, West Africa, the Middle East and Asia. This allows us to benefit from economies of scale while remaining diversified enough to provide a stable activity level. There's been significant focus on the announcement by Saudi Aramco regarding their production targets for 2027. On this, I can only comment from a board drilling perspective and based on some of the discussions we had in Saudi a week ago. First, we have three rigs out of our fleet of 24 rigs working in the kingdom, all three of which are on multi-year contracts. Second, maintaining a production capacity of 12 million barrels per day versus 13 million barrels per day still requires a world leading activity level and an operation second to none in size. Oil just doesn't come out of the ground by itself, not even in Saudi. And as such, large volumes of activity will continue to be required. And in order to remain most relevant to our customer, we continue focusing on the things we can control, which is the relentless pursuit of safety and operational excellence in order to deliver value to our customers. We continue to have a very tight jack-up market. Supply has dried up and can only increase once we start to see new build orders coming in. And even then, the impact will be several years out as it takes multiple years to get units built and into the market. On the demand side, Bruno will share some additional information in a minute, but also demand remains solid for the next two years plus. So based on our view of the business environment and a strong contracted fleet coverage, we maintain our estimate of adjusted EBITDA for the full year 2024 to be between $500 to $550 million. We also announced that the board approved for Q4 as well, a dividend payment of 5 cents per share. Magnus will now step you through the financial details of the fourth quarter.

Thank you, Patrick. So Q4 2023 was a very good quarter financially, with quarter-on-quarter increases in revenues of 15% and adjusted EBITDA increasing by 20%. We continue the sequential increase that we've had now for eight quarters, as you can see in the graphs. And this trend of increases actually goes back even further, reflecting both that we have been putting more rigs to work and an improvement in day rates. The operating revenues for the quarter was 220.6 million, an increase of 29.1 million compared to the third quarter. This is split in an increase of day rate revenues of 24.4 million increase primarily due to two more rigs starting up in the quarter and an increase of bare boat income from our mexico joint ventures of 4.7 million mainly related to higher economic utilization for one rig and the release of an operational cost provision the rig operating and maintenance expenses increased by 12.7 million or 15 percent An increase that follows naturally from the increase in number of rigs increasing by two for the quarter. In addition, we had an increase of amortization of deferred costs of 3.8 million in the quarter. The operating income increase quarter on quarter was 26%. Below the operating income line, the numbers were driven by total financial expenses net of 59.1 million which was impacted largely by one-off expenses of 8.9 million recorded related to our refinancing and repayment of all debts. The income tax expense for the fourth quarter was a credit of 9.3 million, impacted by a 16.5 million release of a valuation allowance on deferred tax assets, as well as a 9.3 million release of an uncertain tax provision. That gives us a net income for the fourth quarter of 28.4 million, an increase of 28.1 million compared to the third quarter, and an adjusted EBITDA for the fourth quarter of 105.9 million, yielding 48% EBITDA margin. Our free cash position at the end of Q4 was 102.5 million. In addition, we had undrawn RCF facility of 150 million. So in total, we have approximately 250 million of available liquidity. The cash in the quarter increased by 8.1 million, and this was affected by cash used in operating activities of 79.6 million. This number includes 99.2 million related to interest paid, and approximately 10 million of income taxes paid. And this includes both cash interest incurred during the quarter and the repayment of capitalized interest on our legacy debt. In addition, the number was impacted by cash costs related to our financing and timing differences of working capital movements. Net cash used in investing activities were 35.5 million, primarily consisting of 34 million used on Jacob additions which is the activation cost for HIL in Arabia 3, and also some CapEx additions over the fleet as such. And 1.3 million used on new build additions. The net cash provided by financing activities was 123.2 million, primarily as a result from the net proceeds of the issuance of the senior secured notes and the net proceeds from our private placement offset by repayment of the debts. Next slide, please. Our 2023 full-year EBITDA came in at 350.5 million, and our 2024 EBITDA guidance remains in the range 500 to 550 million. At the midpoint of this range, this shows an increase of approximately 50 percent from 2023. We're also very pleased to have completed our refinancing of all the company's secured debt in November 2023, and we now have all our debt maturities in 2028 and 2030. The delivery installments for our two remaining new builds in 2024 are largely funded by a commitment of delivery financing by the seller in the size of 130 million per rig. And additionally, we have secured 180 million senior secured facility, which includes 150 million RCF and a 30 million guarantee facility. The refinancing provides a stable foundation for the company going forward with a fixed amortization profile that allows us to delever our debts. In addition, it also provides us the possibility of distributions to shareholders as evidenced by our implementation of a regular quarterly dividend which we now have declared for two consecutive quarters of five cents. With this, I would like to turn the word over to Bruno.

Thanks, Magnus. Now, I'd like to provide a brief update on the jack-up market and our most recent contracting and fleet developments. jack-up utilization levels have continued to increase since our last report. In particular, the market utilization for modern rigs has now exceeded 95% in line with our earlier projections. It is noteworthy that utilization levels have continued to improve while the market absorbed a few additional new-build rigs. Currently, the shipyard order book stands at 15 rigs. One of each has a future contract and two are owned by Board Drilling. The total order book represents less than 4% of the global jacket fleet, a record low level. We highlight again, the shallow water projects on average have some of the lowest breakeven prices and continue to be a viable and attractive alternative for our customers at the current commodity prices. Underlying that, and according to recent data by Reichstadt Energy, global investments in shallow water projects are expected to experience double-digit growth in 2024 compared to last year. These factors support our views that the jack-up drilling sector should continue to benefit from strong utilization and improving economics. Looking forward, we see a market scenario whereby incremental demand should continue to outpace any potential supply growth. From a supply side, based on a study conducted by Fernies Offshore, it is anticipated that only six of the 15 rigs under construction could reasonably be brought into the market in the next 18 to 24 months. On the demand side, we anticipate demand for modern rigs to increase by 20 to 25 rigs in the next 24 months or so. Several of these programs are already in tendering phase, while others are expected to be tender in the coming quarters. In support of our views, data from S&P Global in their latest World Rig Forecast projects that global jack-up demand will increase by 36 units by mid-2025. And based on the recent market trends and customer preferences, we anticipate the lion's share of this incremental demand will be fulfilled by modern rigs. We maintain a constructive view on the Asian, Indian, and Middle-Eastern markets, and let me provide you some data points that support our views. In the Middle East, recent announcements by NOCs indicate the potential for several multi-year, multi-rig programs, particularly in Qatar, Kuwait, and the neutral zone between Saudi and Kuwait, where the large Aldora fuel development is expected to be tender soon and should alone require four additional high-specification jackups. In India, we note ONGC's stated plans of securing six new rigs as part of their fleet renewal strategy, noting that the average age of their current fleet is approximately 40 years old. This requirement is over and above ONGC's open tenders and unfulfilled demand from prior tenders, including the recent HPHD requirement. Similar fleet renewal ambitions have been recently indicated by ADNOC and Sinopec. In Asia, Petronas Activity Outlook indicates incremental demand of two to three rigs in Malaysia within the next 24 months. Similar activity levels are projected to increase in Vietnam and Indonesia. Outside these areas, we see pockets of long-term activity developing in places such Angola, Libya, Americas, and Australia, to name a few. The Demand Outlook coupled our customer discussions support our positive view of the strength, duration, and resilience of the cycle. In 2024 to date, we have received three new commitments, adding a total of $82 million in backlog to the company at an average of $166,000 per day. These commitments include contract extensions for the Norva with BWE in Gabon, contract extension for the Mist with Valiura in Thailand, and a binding letter of award for the Tor with Anandi Schools customer in Southeast Asia. Following these awards, our fleet coverage for 2024 has further increased to 87%. Considering our prospects and based on ongoing discussions with our customers, we remain positive about our ability to secure follow-on work for our rigs rolling off contract during the year with limited white spaces, if any. Our only rigs expected to roll off contract in the first half of the year are the Prospector 1 in the North Sea and the Gunlot in Asia. We're currently in advanced discussions with customers about continued work for these rigs and will provide further details in due course. In relation to our new built units, Vail and VAR, we continue to make progress with the completion of their construction and commissioning and remain on track to have these units delivered around the fourth quarter this year. These units are currently being offered for several opportunities and are attracting considerable interest from our customers. We remain positive about our ability to secure meaningful term work for these units ahead of their delivery. On this note, I'd like to hand the call back to Patrick. Thank you, Bruno.