Borr Drilling Ltd Stock

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q2 2026 Results Presentation Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Mr. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for participating in Borr Drilling's second quarter earnings call. I'm Bruno Morand, and with me here today is Magnus Vaaler, our Chief Financial Officer.

Before we begin, I would like to remind all participants that certain statements made on this call are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. For further details, I please refer you to our latest public filings.

Before I begin, I'd like to recognize our teams around the world for their commitment to safety and reliable operations. During the quarter, several rigs achieved multiple safety milestones across the fleet. The Groa and Gersemi each reached 7 years LTI-free, while the Ran and Skald achieved 6 and 5 years LTI-free, respectively. Additionally, rig Hild, Galar, Natt, Arabia III and Grid also achieved multiyear LTI and recordable free milestones. I would like to thank our employees for their commitment to safety as well as our customers and stakeholders who partner with us in fostering a culture where safety remains our highest priority.

Our operational performance in the second quarter of 2026 resulted in technical utilization of 98.4% and economic utilization of 96.4%. Revenues for the period were negatively affected by the decline in average number of rigs operating in the quarter. Second quarter adjusted EBITDA was $43.8 million, a decline of $44.7 million compared with Q1. The sequential decrease was primarily driven by 4 factors. First, we incurred additional preparation work and regulatory approval activities for the Odin ahead of its contract in the U.S. with a $22.5 million of operating expenses during the quarter, an $11.1 million quarter-on-quarter increase.

Second, 6 rigs were transitioned between contracts during the quarter, leading to reduced revenue. However, this impact is now largely behind us as these rigs have commenced their contracts. Third, the conflict in the Middle East led to higher insurance and fuel costs, contributing a $7.3 million quarter-on-quarter increase in rig operating expenses. The increase in fuel expenses was primarily driven by a higher number of rigs transitioned between contracts during the quarter, a period during which we are generally responsible for fuel costs. And finally, we also recognized $10.8 million of credit loss related to a former customer in West Africa. Following this additional provision, we carry net zero receivables from this customer in our balance sheet.

Looking at the Odin, contract preparations took longer than anticipated with regulatory approvals received in mid-July. In light of the operational constraints resulting from the hurricane season, in collaboration with our customers, we agreed to revise the rig deployment sequence to improve overall operating efficiency. The Odin is currently preparing to mobilize its first location where it will commence the previously announced two-well firm contract with an undisclosed customer. Upon its completion, the rig will expect to transition directly to Cantium.

We are disappointed with the delays for the Odin and the initial start-up requirements were greater than we have typically expected when entering a new market. This results in higher costs and delay in revenue. We're taking the learnings from these events very seriously. That being said, our entry into U.S. Gulf was a strategic decision to provide customers with access to one of the most capable rigs in its class. Discussions with our customers leaves us optimistic about the demand for this rig in the region. The Odin's current contract provides firm work into mid-2027 with additional options that could extend this contract well into 2029.

The elevated rig transition activity experienced during Q2 is now substantially completed. The rigs Idun, Gunnlod, Skald, Sif, Natt and Prospector 5, which were transitioned into and between contracts during the quarter are now fully operational. Together, with the soon-to-commence Odin contract, we expect Q3 to average approximately 23 active rigs and hence, adjusted EBITDA to improve significantly from second quarter. Since the last earnings report, we have secured 8 contract commitments, representing over 2,100 days of additional work. This includes new contracts in Asia, West Africa, North Sea and Americas. Notably, the rig Galar and Gersemi in Mexico had their contract extended by 2 years each and are contracted into 2030.

During the quarter, we also successfully refinanced substantially all of our debt while also upsizing our RCF. These transactions extended our maturity, reduced financing costs and further strength our liquidity runway, which Magnus will discuss next. In July, our 50/50 joint venture with our long-term Mexican well construction partner completed the purchase of 5 premium jack-ups from Fontis at an attractive valuation and with limited equity commitment. Currently, 3 of these rigs are contracted with 2 of them operating and a third expected to commence operation later in the quarter. Our focus now is deploying the remaining rigs and converting the opportunity pipeline into contracted work.

I'll walk you through the market in more color later in the call, but now I'll hand the call to Magnus to discuss the second quarter financial results.

Thank you, Bruno. I will now go through some details of the financials for the second quarter. Total operating revenues for Q2 were $232.3 million, a decrease of $14.7 million or 6% compared to Q1. The total operating revenues consisted of $187.7 million in dayrate revenue, $32.9 million in bareboat charter revenue and $11.7 million in management contract revenue. The overall decrease was primarily driven by $21.8 million reduction in dayrate revenue, mainly due to fewer operating days and lower average dayrates for the rigs Idun, Gunnlod and Skald, lower recognition of mobilization and demobilization revenue for the Vali and fewer operating days for Groa. These decreases were partly offset by increased recognition of mobilization and demobilization revenue for the Grid.

The decrease in dayrate revenue was partially offset by a $6.3 million increase in bareboat charter revenue due to an increase in operating days. The total operating expenses were $232.1 million, an increase of $31.1 million compared to Q1. The increase was primarily due to $30.4 million increase in rig operating and maintenance expenses. The largest driver of the overall increase was the Odin, which incurred $22.5 million of costs during the quarter, an increase of $11.1 million compared to Q1. The costs were primarily related to the preparations for its upcoming contract in the U.S. Gulf, including significant repair and maintenance activities.

We expect regular rig OpEx once the rig is fully operational to be approximately in the mid $70,000 per day range. However, we anticipate some additional incremental operating expenses also in the third quarter related to the preparations of between $6 million to $9 million. In addition to the Odin, the increase in operating expenses were driven by overall costs associated with a higher number of operating days for the Grid, including amortization of deferred costs, expenses related to the 5 rigs acquired in January from Noble and an increase in the provision for credit losses.

We recognized $10.8 million of credit losses related to a former customer in West Africa, an increase of $4.8 million compared to Q1. Following this additional provision, the receivable from this customer was fully provided for, resulting in a net zero receivable balance as of June 30. The total operating expenses also included a $5.1 million increase in fuel costs due to higher fuel prices and rigs transitioning between contracts and a $2.2 million increase in insurance costs related to the ongoing conflict in the Middle East.

Moving to other nonoperating income in Q2 was $6 million related to compensation received to remove certain operating restrictions associated with the sale of a rig in the prior period with no comparable income in Q1. Total financial expenses net were $236.5 million, an increase of $173.8 million compared to Q1, and this increase was primarily related to our refinancing during the quarter as we recognized $176.3 million loss on the extinguishment of the senior secured notes due 2028 and 2030 and the partial extinguishment of our convertible bonds due 2028.

The loss on debt extinguishment consisted of $123.7 million in redemption premium payments and $52.6 million from the derecognition of the unamortized portion of deferred finance charges associated with the repaid facilities. Net loss for Q2 was $241.4 million, an increase in loss of $212.4 million compared to Q1. And adjusted EBITDA was $43.8 million, a decrease of $44.7 million compared to Q1.

Turning to liquidity. Cash and cash equivalents as of June 30 were $223.6 million, a decrease of $22.4 million from March 31. In addition, we had $250 million of undrawn available borrowings under our revolving credit facility, resulting in total liquidity of $473.6 million at the end of the quarter. Net cash used in operating activities for Q2 was $21.8 million. This includes $115.8 million of cash interest payments and $15.1 million of income taxes paid.

Net cash used in investing activities was $2.3 million, which related to $8.3 million spent on additions to jack-up rigs, primarily long-term maintenance costs and capital additions, partially offset by the $6 million proceeds received, as noted earlier, in nonoperating income. Net cash provided by financing activities was $1.8 million. This was the result of net debt proceeds from new issuances, offset by the cash used for repayment of the original notes due 2028 and 2030 and the 2028 convertible bonds.

Before giving the word back to Bruno, I will also touch on some recent transactions that we have completed. In July, we completed the previously announced Fontis Acquisition of 5 premium jack-up rigs located in Mexico through our 50/50 joint venture with our long-term well construction partner in Mexico. The total purchase price was $287 million and was financed through a $237 million nonrecourse seller credit in the joint venture and $25 million equity contributions from each partner. In addition to this, we expect to fund approximately $15 million of working capital in the third quarter for the acquired rigs through a shareholder loan.

Turning to the next page and the refinancing activity completed during the quarter. This was a significant step in extending our maturity profile and strengthening our liquidity position. In April, we issued $300 million of 3.5% convertible notes due in 2033 and used part of the proceeds to repurchase and cancel $195.2 million of our 2028 convertible bonds. In June, we completed the issuance of $2.035 billion of senior secured notes in 2 series, $1.1 billion of 8.75% in notes due 2032 and $935 million of 9% notes due in 2034.

The new notes amortized at 5% per annum, equating to $101.75 million on a full year basis. Amortization is payable semi-annually and beginning July 2027 at a price of 102.5%. The proceeds from the new senior secured notes were primarily used to redeem and purchase the 2028 and 2030 senior secured notes in full. Overall, these transactions extend maturities significantly and reduce our financing costs going forward. In addition, we amended and restated our super senior secured revolving credit facility during the quarter, increasing the commitments to $250 million, reducing the base margin to 3% per annum and extending the maturity to 2031.

Now with this, I will pass the word back to Bruno.

Thank you, Magnus. Today, 24 of our 29 rigs are either contracted or committed. As previously mentioned during the quarter, several rigs were transitioning between contracts or preparing for new contracts. The Gunnlod completed its contract with Hoang Long in April and started work for Thang Long in May. The rig has seen secured follow-on work with PVEP-NCS through April 2027.

The Natt commenced operations with Shell in Nigeria in April. The Prospector 5 completed its contract with ENI Congo in May and began operations with BW Energy in Gabon in July following its SPS. The Skald completed its contract in Thailand in April and started work for Vestigo Petroleum in Malaysia in May following its SPS. The Idun also completed its long-term contract in Thailand in April and commenced operations in Vietnam in July.

And lastly Sif, one of our newly acquired rigs mobilized to Suriname for PETRONAS in June and commenced operations in July. Overall, this was a demanding quarter across our operation, and I'm proud of how the team has safely executed multiple contract transitions, mobilizations and start-ups. So far this year, we have secured 21 contract commitments, adding approximately 4,350 days and $541 million of dayrate equipment backlog. This has resulted in a positive book-to-bill ratio in 2026, both in backlog days and value.

Now let me walk you through our new commitments. In Southeast Asia, the Idun received 2 separate awards. First, a one-well contract in Vietnam, which started in July '26 with an estimated duration of 60 days. Second, a one-well commitment with Hong Long JOC with an estimated duration of 30 days to commence in direct continuation. Based on the current engagements, we remain positive around the prospects for the rig to continue to work in Vietnam in the near term.

The Mist received a binding letter award from Shell Sarawak in Malaysia. The campaign is expected to commence in October 2026 and has an estimated duration of 45 days. Additionally, the Gunnlod secured contracts with PVEP-NCS in Vietnam. The six-well firm campaign is expected to commence this month and has an estimated duration of 8 months. The contract also includes two one-well unpriced options that could keep the rig committed until Q3 2027.

In West Africa, the Gerd received a one-well extension from Foxtrot in Ivory Coast and is now expected to remain committed until March 2027. In Europe, the Prospector 1 received a two-well contract extension from ONE-Dyas for an estimated duration of approximately 7 months, keeping the rig committed into April 2027. The contract includes options that could extend it until Q3 2027 -- Q4 2027. And as highlighted earlier, in Mexico, our rig Galar and Gersemi had their contract extended into 2030.

Moving forward, following recent awards, our 2026 contract coverage is now at 73% at an average dayrate of approximately $134,000 a day, with coverage in the second half of the year at 70%. We're actively pursuing multiple opportunities to add further coverage to our available fleet and have advanced discussions ongoing for multiple rigs for work scopes feeding open space both this year and into 2027.

Looking across our core markets, we continue to see steady demand for modern jack-ups, although the pace of contracting remains uneven by region. Globally, market utilization for modern jack-ups has remained resilient at approximately 90%. In the Middle East, the prolonged conflict and lack of clarity around its resolution have continued to delay tendering and contracting activity. Positively, across Saudi and the UAE, where several rigs were suspended at the onset of the conflict, the recent gradual resumption of operations despite lingering uncertainties demonstrate our customer commitments to their shallow water portfolio.

According to data from S&P Global, backlog additions in the region during the first half of the year reached the lowest levels in more than 25 years. For context, the first half of 2026 saw more contracts awarded in the North Sea than in the Middle East, both by count and contract days added. Our broad views remain unchanged. The region still has substantial underlying demand, which was close to materializing prior to the onset of the conflict, and we believe this delayed activity should reenter the market once conditions stabilize.

In Southeast Asia, contract awards, both by count and backlog days have accelerated meaningfully over the last 2 quarters, reaching the high level seen in late 2023. While a slight overhang in the region continues to apply pricing pressure on short- and long-term opportunities, this is a region where pricing has historically responded quickly to market tightening. Our team has done well filling our near-term open space and strategically positioning rigs for continued deployment.

In Americas, we're encouraged to see previously rigs suspended returning to work for Pemex and absorbing regional supply. Mexican oil production remained below the government stated targets and the recent contract resumptions reinforce our view that jack-up demand should increase further to achieve this target. In addition, multiple IOCs are active in the procurement process where we expect conclusion in the coming months for work commencing late 2026 and 2027. We believe our global relationship with IOCs present in the region, coupled with our strong collaboration with our partners in Mexico, provides a strong position in the region that has capacity to grow with rig demand.

In the North Sea, we have discussed in the past, operators continue to address permitting challenges, which drive uncertainty and lack of visibility for new meaningful commitments. Despite these hurdles on the back of our strong operational performance, we continue to work closely with our customers to meet their drilling requirements as evidenced by our recent Prospector 1 extension.

In West Africa, contract activity has remained robust, bringing the contract jack-up count in the region to levels less achieved more than a decade ago. In Nigeria, in particular, we've seen a return of activity from IOCs and a notable influx of demand from indigenous operators. Additionally, in the region, investment activities and interest in Angola shallow water has gained momentum, and we're pleased to be part of one of the recently announced successful step-up exploration wells drilled by Halliburton, Sonangol and their partners. In the big picture, while the ongoing conflict has caused near-term disruption, we remain constructive on the medium- to long-term outlook for the jack-up market once certainty returns to the Middle East, where large tenders remain outstanding.

With that context, I would like to close with 3 key takeaways. First, Q2 adjusted EBITDA was impacted by the delayed start-up of the Odin and elevated number of rigs transitioning contracts. As these rigs resume operation, we expect to average 23 active rigs during Q3, which should support a significant improvement to our Q3 adjusted EBITDA.

Second, the Middle East conflict has reduced near-term visibility, delaying tenders and the region's recovery underway. This uncertainty is also affecting several other markets, though not all, making it difficult to provide a crisp outlook for our near-term activity. What is clear, however, is that the prolonged disruption in the Strait of Hormuz has impacted oil supply and driven global inventories to exceptionally low levels. Rebuilding those inventories even under moderate demand outlook will require sustained drilling activity. We believe short cycle, low-cost shallow water barrels, exactly what our modern jack-up fleet is due to access will be significantly irrelevant in restocking process.

And third, our priorities remain clear, leverage our expanded fleet of premium jack-ups to navigate near-term uncertainty and capture greater earnings and shareholder value as the cycle improves.

With that, I'll now turn the call over to Q&A.

[Operator Instructions] We will now take our first question from the line of Scott Gruber from Citigroup.

I appreciate all the color on the moving pieces in 2Q that created an EBITDA headwind. But Bruno, 3Q does sound better. Is there a way to provide just a range for us in terms of where EBITDA could land based upon having 23 active rigs and seeing the mobilization and start-up costs at least fade, maybe not completely go away, but reduce? Any color on just kind of where things could land even if it's a decently wide range?

Yes. No, for sure, Scott. And listen, you're right. I think Odin, we now seem to have a clear pathway to see that rig starting work. So that's positive. And then consequently, we will see normalization of the cost on that rig. When we look at Q3, obviously, the Odin starting contract is a key component of our results for the quarter, and it's something that we are working very focusedly to make sure we put behind us in the very near term.

As I mentioned in the earlier remarks, all going well. We are anticipating to average approximately 23 rigs in the quarter, which if you look in context versus Q1, I think we're talking about similar ballpark. So I'll come shy of giving you a number for Q3. But with activity levels kind of resuming to that run rate of Q1, I think we will see a quite substantial increase on sequential results in Q3, Scott. That's probably where I would leave that.

That's fine. And then turning to the latest acquisition. So 2 out of the 5 rigs are working, the third is contracted. Just any color on -- do you have line of sight to putting the other 2 rigs to work?

No, indeed, Scott. And see, the transaction closed quite recently. So we're just now having a chance to put our hands around it and start kind of driving some of those conversations. As we understand prior to the completion of the transaction, there were already some ongoing discussions, including with Pemex and Fontis. We are now kind of starting to look at that and trying to see how we move forward. Three rigs should be working during the quarter now. So we have 2 left. One rig is being stacked, and I think that there's a likelihood that rig stays stacked for a bit longer. But based on ongoing market surveys and tenders in Mexico, I do see that there's a pathway to potentially have a fourth rig resuming operations sometime this year, maybe into very early next year.

And I think looking at the transaction, looking at valuation and our execution strategies, I think as long as we have 3 to 4 of those rigs operating near term, I think that silo is generating interesting -- could be generating interesting cash and give us in a good position. Beyond that, let's see what happens to the fifth rig that is currently idle. I think we're looking at all kinds of opportunities for that. But we will need a bit more time. The transaction only closed a couple of weeks ago. We are very active in now looking to define a pipeline of opportunity for those units.

We will now take the next question from the line of Doug Becker from Capital One.

Bruno, Magnus, really appreciate the transparency you provided on the second quarter. So just echoing Scott's comments. Turning to the third quarter, you're expecting operating rigs -- average operating rigs to be up around 8%. Just wanted to get a little more color around the assumptions there. Hurricane season does tend to peak around September. And I want just to see the base case. And is it reasonable to think revenue is up just a little bit quarter-over-quarter given that growth in average operating rigs?

Thanks, Doug. Thanks for joining. I'm not sure if I fully caught your question. I think you referred to hurricane season. Is your question specific on the outlook for the Odin?

Ultimately, the assumptions behind the 23 average operating rigs. And just one of the key variables there is the Odin and hurricane season.

Yes. No. So the outlook for the 23 is largely based on contracts that we already have in place. So I think that there is a pretty decent amount of certainty in terms of that. Obviously, we still have a few rigs that would eventually be moving contracts. So we maintained a high focus on the execution of these contract transitions. In relation to the Odin, we changed the operational sequence, as I mentioned in the early remarks, we changed the operational sequence of the customers to make sure that we could maintain the rig utilized during hurricane season. So the rig will be in a location that -- where we have approvals to stay basically year-round. So we don't expect the hurricane season, at least to this value right now to impact that.

And our focus is really putting that rig to work. We've achieved the regulatory approvals for the rig in July. We have been since working on customer-specific preparation work. The rig as we speak right now, should have the tugs connected today. And hopefully, all weather permitting, we should be pushing away from the quayside tomorrow. So we're progressing in the right direction with these things. Obviously, the -- so that's what is giving us the confidence on these 23 rigs in Q3. But certainly, we need to focus -- we need to maintain our focus on the execution.

Fair enough. And then as we think about O&M costs in the third quarter, just any thoughts on fuel and insurance? Is that going to be pretty stable? Or is there maybe potential for that to decline a little bit?

Yes. So let me provide a bit of color and then Magnus can kind of chip in as required. But in terms of fuel, I believe that in Q2, we had a bit of a disproportional impact of the higher fuel costs, primarily due to the fact that we had several rigs transitioning contract, Doug. Generally speaking, during these contract transitions, we've at times become accountable or responsible to provide fuel cost and the burn during those process and the daily burn of fuel during those process of remobilization tends to be pretty high as the rig is kind of fully staffed and preparing to work. So that has resulted in a, say, overweight impact during Q2.

As we go into Q3 because we have less rigs transitioning contract and even the contract transitions that we had in Q3 are kind of near field transitions. I expect that, that will soften a little bit the impact of the fuel cost. Yes, for the rigs that we have idle, we still have a fuel burn that we see obviously an increase due to the higher commodity price. But I think comparable to Q2, I think that you should expect that number to come down pretty significantly as we move forward.

In relation to insurance, it's been largely driven by the impact of the events in the Middle East. So it's kind of difficult to precise when we'll see that coming down. Obviously, the insurance companies and us are monitoring the situation in the Middle East. Until the resolution for the conflict is ahead of us, I think we should expect that, that cost will linger a bit longer.

We will now take the next question from the line of Fredrik Stene from Clarksons Securities.

I wanted to touch a bit more on the outlook maybe for [ Q3. ] The third quarter has been discussed in detail already. But I think maybe based on your commentary on the second -- sorry, in the report and also my own assessment, a lot of the key to an accelerated movement in rates and utilization lies in the Middle East. So while I'm aware that nobody knows when the conflict will end, I would be very happy to kind of hear your updated view on how you think that market will unwind when it does in terms of tendering and contracting possibilities, et cetera.

And maybe in the context of how you think that unwinding may happen, are you able to share similar rig average rig activity per quarter numbers for the fourth and the first quarter next year based on the visibility that you have at the moment?

Thanks for joining, Fredrik. And I think your assessment is something that we share. Indeed, if you look at the Middle East alone and even prior to the conflict, there was already a significant demand in the region. With the conflict, the timing of that demand materializing has become a bit more fluid. But positively, all the tenders, the meaningful tenders that we saw in the region are still ongoing. They haven't disappeared from the pipeline. And I think as a matter of fact, we have seen even as recent as the last couple of weeks, some indications of potential increase in size of some of the tenders, including the KJO discussions, for example.

Inevitably, the Middle East is the engine of the jack-up sector and a meaningful rebound in the Middle East can very quickly rebalance things around the globe, and that will provide a very interesting context for us if it happens. Indeed, anticipating the timeline of that is very difficult in current environment. What I can share is that in discussions with our customers, it does look like they remain committed to go through with the customer -- with the tenders. Aramco tender is still due at the end of this month. And if nothing else, I think combined with the ongoing resumption of activity that we've seen over the last couple of weeks, I think that it provides a bit of an opportunistic or optimistic outlook that some of that demand is going to start materializing rather soon when there's a bad wait for the complete resolution.

Now if you were to take a view of the conflict not getting resolved in the near term, Fredrik, and we've all been talking, I'm not going to pretend here to be the oracle of the broad commodity environment, but it's hard to believe that more activity is not going to be needed across other regions. We have been talking to a lot of customers. I think there's a lot of interest. There's a lot of discussion. I think just as us, they are still puzzled by the situation and the development in the Middle East and how to think about it.

That said, I do think as we approach the year-end and these customers start working through their budgeting processes, their approval processes, some more visibility will be attained from other regions. As long as the Middle East is closed and the Strait is kind of out of bounds, obviously, whatever overhang may exist currently in that region stays within the region. And then very quickly, you're only dealing with kind of any particular excess that you have in the other regions. So that's not how we think about it. Timing, as I said in my earlier remarks, I think it's still something that we're trying to -- we're monitoring and trying to understand what happens. I think in the near term, that impacts our visibility of the outlook and our ability to provide a more precise view on active rig count in the coming months.

Now I think as you look a bit beyond that, it's difficult to imagine that in a world where reserves are at such a low level that more drilling is not going to be required. And as I said before, and I really remain optimistic about it. Shallow water rigs provide low-cost barrels, short-cycle barrels at moments where security of commodity or access to the commodity is key, it's hard to believe that we will not have a big part in helping the world through this rebalancing.

All right. Really appreciate that, Bruno. Comprehensive comments. Just a quick one. I know that Fontis was touched upon in the first question, I believe, with now 3 rigs instead of 1, I think, which many database reports having contracts. So very good to see that. But is that now enough to fund this joint venture organically going forward, even if you have one stacked rig and a fourth rig that could get the contract, but might also face idle time? Or do you think there's a chance that you would have to kind of put more into it than the purchase price itself?

Yes. No, I think Magnus covered some of those comments early on, Fredrik. At this stage, as we stand further than the working capital contributions that we had upon closing, we don't anticipate any further meaningful working capital requirements for the year. I think as we get to Q4, there's some interest payments due under the vendor facility that obviously we hope that entity will generate the cash to provide. But I think that you shouldn't think about any significant working capital contributions into that silo for the remainder of the year, except in the event that we have line of sight to further work for one of the stacked rigs that we need to do reactivation.

When we looked at the case, the business case to acquire that entity or that business, we were looking to maybe 3 to 4 of those rigs being operating. We have 3 right now, as I said earlier, some of the ongoing discussions in the region, including discussions with Pemex give us line of sight for the fourth rig as we kind of get closer to the end of the year. And I think at that point in time, we feel pretty confident that, that silo will be self-funded.

We will now take our next question from the line of Ben Sommers from [ U.S. Bancorp ] BTIG.

So I wanted to ask on Asia. It seems like we've seen some strong progress in Vietnam and Malaysia in terms of contracting activity. So Bruno, you called out this region as one that tends to respond quickly to market conditions. Would you say this activity has been largely driven by the Middle East conflict and the increased focus on energy security? And then just kind of any longer-term color on that market.

Thanks, Ben. No, indeed, we were expecting activity levels to remain fairly elevated in Asia. As I mentioned in earlier calls, I think an area that we were surprised or maybe disappointed with was Sarawak in Malaysia because of some of the ongoing government disputes in that region. We've now entered into an agreement with Shell for work in Sarawak. So that gives us bit of a positive indication that maybe the demand there is kind of returning to a normality. So that's quite encouraging.

In Vietnam, specifically, we have a long-standing relationship with a local operator in Vietnam that continues to give us a bit of an edge in securing work for the rig. We see pretty robust demand across Vietnam and the government seems have been quite ambitious increase in activity levels. So that should give us line of sight to maintain our rigs in that country kind of extended into 2027.

Indeed, Asia is a net important region. We can see that the government have been trying to react and respond to make sure they have a bit more self-sufficient in terms of resources. I do think, as I mentioned earlier in a prior question that the longer the conflict lingers, the more that urgency in kind of securing our own supply becomes -- kind of comes to the forefront. And I expect that, that will continue to drive activity levels.

I'm fairly encouraged. I think it's a region where a lot of the contracts are short term in nature. So you have this constant grind, if you would, in kind of maintaining the rigs contracted. But we've been very successful in that region for many years. We have very well-established partnerships with local players as well as customers. And I feel quite optimistic that we'll continue to roll those rigs through.

Super helpful. And then a lot of progress on the balance sheet improvements. And now with Fontis' closure. I just kind of wanted to ask if there's anything kind of left to do there balance sheet-wise and just kind of thinking about how we plan to manage the balance sheet moving forward and potentially looking at other bolt-on M&A opportunities.

Yes. Ben, I think balance sheet-wise, we feel pretty happy with what we achieved so far this year. I think not only maturities have been pushed forward and give us a good runway, I think we managed to rationalize financing costs. So I think we've done well. We achieved what we wanted to achieve. We said it before, I think at the moment, M&A is not really in the forefront of our focus here. Obviously, we had some negative executional surprises in Q2. So our focus remains very, very heavily in kind of resuming kind of the operational focus and operational execution. So that's obviously quite important for us together with that.

And then I mentioned obviously the lack of visibility in our -- kind of the more uncertain visibility in short term. So we're looking to how we kind of keep our costs under control to preserve liquidity while we navigate these periods of uncertainty. But I don't see an immediate need or a near-term need for any kind of balance sheet transactions. And certainly, as I said, M&A is things that obviously we look over time, but it's not in the forefront of our strategic priorities.

We will now take the next question from the line of Dan Kutz from Morgan Stanley.

So I wanted to ask, as you kind of think about the medium to longer term, you guys flagged that despite the Middle East conflict and ongoing activity headwinds there that global modern rig utilization at the market level has stayed resilient at 90%. And then if you look back over the last 3 or 4 years or so, despite Borr having outsized exposure to Mexico, which was a substantial headwind and also being exposed to the Middle East where you had the Saudi suspensions and then more recently, the Middle East conflict, still Borr's fleet utilization was at least in line and frequently outperforming market level utilization. So I guess the question is, as you look ahead, do you think -- do you [ expect or is your ] target level of utilization across the fleet that at least keeps up with or potentially outperforms the market.

Very good, Dan. And just for context, I think there's often a bit of a confusion in metrics. I think when we talk about market utilization levels, that is what we call contracted market utilization levels. So it kind of blends a mixture of rigs that are currently working at any given time as well as rigs that are contracted for future work. So when we then report our coverage and we're looking into how much of our days are committed during the year, that's really days that are under contract, days that we're earning revenue. So there's generally a bit of a disconnect between these 2 metrics that sometimes create a bit of a confusion.

I think overall, when we look at our coverage and what we've been executing for the last couple of years, we have consistently leveraged our premium fleet and our kind of operational execution to deliver better than the peer group. And I think we have consistently done that. Obviously, in the current environment, maintaining these higher coverage levels and utilization levels comes out of the tremendous focus on the contract execution. And we've done it several times. I think this is not the first time that we see moments uncertain in the period. And our contracting group generally excels during those periods. I think we have very confident guys very well connected with the customers that enable us to kind of have very strong line of sight and visibility of what's happening and strategically maneuver through the opportunities available in the market.

So that's kind of where things are. 90% market utilization of where we have been, I don't think it's an unhealthy number. As we said before, it only takes probably about a dozen of new contracts before you start pushing into a place where pricing power returns in favor of the contractors. That all said, we discussed before, I think Middle East recovery would very quickly help us to improve that market balance and bring a bit more pricing power in favor of the contractors. I think if that doesn't happen in the near term because of the uncertainty in the Middle East, inevitably, incremental demand across other regions will have to start materializing as we move forward and bring them to a better place. It's difficult to provide a very precise answer. I think, as I said before, near term, I think the outlook is a bit uncertain because of all of these events happening. Medium, long term, I think if you look at the bad debt, I do think that the outlook for the sector is quite healthy.

Great. That's really helpful. And I appreciate the clarification that the 90% number that's kind of contracted plus committed divided by marketed fleets, not specifically contracted divided by marketed. So understood there, and that's a lot more in line with our understanding. Then just maybe quickly, as you think about your current geographic footprint, where your assets are located and you compare that to your activity outlook at the market level, do you feel pretty good about your kind of current geographic footprint? Or do you think that over time, it could make economic sense for Borr and for customers to potentially relocate rigs to different markets? Just how you're thinking about your geographic footprint today versus your activity outlook would be great.

Yes. No, I am. I'm quite comfortable. I think we've built a very interesting global footprint over the years. I mentioned earlier, I think Mexico is a market where we have very strong partnerships locally, who position us quite well to navigate the demands of Pemex and the IOCs across the region. So we're pretty happy. I think the acquisition of the Fontis units recently will continue to strengthen that in a context where I do think that Pemex activity level will continue to rise as kind of marked by the recent resumptions.

Asia, indeed, I think we have very specific assets, very competent assets for the demands of our customers in that region. We've navigated that region and that demand outlook for that region quite well over the years. We feel definitely quite pleased. In West Africa, we've continued to secure very interesting fixtures, leveraging on the fact that we are one of the very few players in the region with a capacity of 400-foot capable rig, kind of larger sized rigs in that region. So happy with that.

Obviously, when we look at the Middle East, at the moment, we have 4 rigs in that region, 2 of them working, 1 still under a BBC with Noble. We'll have to see. I think with the demand outlook to grow in that region as kind of these tenders continue to materialize, it could create an opportunity for us to have a higher focus in that region. I think some of the rigs that we acquired from Noble are very competent for particularly the gas work outlook demand that needs in that region. So we have to think about. I think the Middle East is probably one of the areas where we have to look over time depending on how these tenders materialize.

But beyond that, I'm quite comfortable how the fleet is spread out. I think we've done tremendously well and worked really hard over the years to have the right assets in the right place. So I don't think we should be looking to any kind of material meaningful rig mobilization around the world in near term.

We will now take our final question from the line of Gregg Brody from Bank of America.

Just as we looked at the rest of this year, you mentioned that there was an opportunity to maybe add some activity to this year's backlog. But how -- realistically, how much activity do you think you could potentially add?

Yes. Thanks for the question, Gregg. If I look at Q4, where we have a bit more of our exposure in the near term, I think Q3 seems to be pretty well settled right now. When you look at Q4, we had few rigs that have still ongoing exposure in Q4. For all of the rigs that we have working and rolling off contract in Q4, we have ongoing discussions, and we were speaking to customers about opportunities for those rigs. So -- and that's a really focus, just to name a few. We have the Norve that will soon be finishing contract in West Africa. We have the Bestla in the North Sea that has a contract with ENI that will be finishing or rolling off towards the end of the year.

So we have one of the rigs with ENI in Mexico to run. So we've been progressing quite well in the discussions we have with our customers, either the current customers or customers in many of those regions. That's what gives us a bit of a positive outlook that we will have Q4 that kind of stays a bit of steady-state activity level what we have in Q3. Now there's obviously risk in execution of those contracts. The team continues to be extremely focused on bringing those contracts home, and that's kind of how we're tackling that.

And just when you think about contract in '27, do you think the -- what's the lead time we should be thinking about today as to how long from an agreement to having the rig go to work? Is there a way to think about that?

Yes. And Gregg, I think some of the uncertainty that we mentioned earlier in the call certainly affect us, but I acknowledge that it does affect the customers. And what we've seen in recent months is that the turnaround time or the lead time that the customers have been looking into these awards has been quite short. I think that people are trying to preserve a bit of optionality, wait until the last minute, which obviously creates some complexities. But we have seen quite a few. And if I look at Asia, for example, we have seen quite a few contracts where contracts are announced and the rigs actually go to work literally just a couple of weeks after that, right?

So the customers have been keeping a quite short leash on those announcements, which obviously creates a lot of complexities for us. But at the same time, I think kind of provides a bit of a visibility that if a rig is soon to get idle, it doesn't necessarily mean that it's too late. I think there's opportunities that the customers are trying to tackle at the last minute and act opportunistically to navigate that.

Got it. And then just shifting to the Fontis Acquisition. Can you just remind us how we should be thinking about what's the run rate contribution to the consolidated company from that? And I think you mentioned there was -- you had -- there was a shareholder loan from Borr to Fontis for working capital. Should we think about any other additional capital contributions to Fontis?

Thanks, Gregg. Yes, as you mentioned, I think -- I mean, the goal here is obviously that this structure is self-sufficient and will operate by itself. Now when we have 3 rigs operating, it should get into that territory that there shouldn't be a lot of fundings needed from us. But as [ Bruno ] touched on and I mentioned previously in the call, we have approximately $15 million that we will fund into the JV in Q3 as working capital now initially to help on operating costs and also start-ups for the 2 rigs that are starting up now in Q3. But obviously, going forward, the target here is to get these contracted and have limited funding needs into this structure.

Got it. Can you just remind us of the CapEx for the rest of the year at Borr?

So the general guidance there we have said in the past is around $2 million to $2.5 million per rig per year, I would say, in an average year. So with 29 rigs, it's typically between $60 million to $70 million, some years with higher SPSs, there should be -- there could be more, this year is not the year with high SPS. So that would be the area we're looking at currently.

And then just last one for you. Congrats on all the refinancings during the quarter. Obviously, your liquidity position is very strong now. How do you think about deleveraging today? And have your targets at all changed? Just a refresher for us just as you've completed so many transactions for refinancing last quarter.

Yes, true. So deleveraging is obviously still a focus for us. We are in the new notes, we continue to have an amortizing element like we had in the previous notes. So approximately $100 million per annum is debt repayments under the new notes. So that is definitely on the agenda and is structurally baked into the bonds going forward as well.

Thank you. There are no further questions at this time. This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q1 2026 Results Presentation Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for joining Borr Drilling's first quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer. I'd like to remind all participants that certain statements made on this call are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements.

For further details, please refer to our latest public filings. On today's call, I'll start with a review of the first quarter and key developments since quarter end. Magnus will then cover financial results, after which I'll return to discuss contract activity and our market outlook. Before I begin, I would like to recognize our teams around the world for their continued commitment to safe and reliable operations.

During the quarter, several rigs achieved important safety milestones. The Gerd, Natt and Mist each achieved 7 years LTI-free, while the Saga and the Arabia III reached 6 and 3 years, respectively. The Norve also attained 2 years recordable incident free. These milestones reflect a strong safety culture across the organization, and I would like to thank all of my colleagues for their continued dedication to zero harm operations.

Operationally, we delivered technical utilization of 99.4% and economic utilization of 97% in the first quarter. Revenue for the period was $247 million and adjusted EBITDA of $88.5 million, primarily impacted by the delayed start-up of the Odin $8.4 million credit loss provision.

During the quarter, the Odin completed its mobilization from Mexico where operations had initially been expected to start in February. However, the start-up was [Technical Difficulty] due to disruption during transit, additional contract preparation work and approvals. While these delays are unfortunate, to bring Odin into the U.S. was based on the long-term opportunity outlook in that market.

I remain confident positioned with capabilities available to operators in the U.S. Gulf, and we believe the rig will remain well placed to serve the region. Looking ahead, we expect second quarter results to continue to be affected by the delayed startup of the Odin now anticipated to commence in late June as well as rigs transition.

During the quarter, rising tensions and hostilities in the Middle East created disruptions, but with limited financial impact. Most importantly, all of our personnel remain safe. I would like to thank our teams for their professionalism and flexibility that they have shown through this period. As announced in April, following temporary suspensions, all affected rigs were called back to work.

After resuming operations, the Groa and the Forseti has now completed their contract in Qatar. The Forseti remains on the bareboat charter with the former owner into December 2026. Our contracting strategy remains focused on increasing near-term coverage or balancing dayrates and contract tenor.

Since our last earnings report, we've secured 8 contract commitments, representing more than 1,100 days of firm work. Full year 2026 coverage has increased to 71% at an average day rate of approximately $137,000, while second half 2026 coverage now stands at 65% as compared to 48% in the prior earnings report. We also announced the acquisition of 5 premium jack-up rigs on Paratus for $287 million through a new 50-50 joint venture with our long-standing Mexican well construction partners.

This transaction will expand our fleet from 29 to 34 rigs and further strengthen our position in the Mexican market while adding flexibility to 2 higher specification units with broader redeployment potential. In April, we successfully completed an upsized $300 million convertible senior notes offering due in 2033, using the proceeds to repurchase a significant portion of our 2028 convertible bonds.

This transaction meaningfully extends our maturity profile and strengthen our capital structure ahead of what we expect to be a constructive market environment. Magnus will walk through these in more detail shortly. While the Middle East conflict has created near-term uncertainty, key tenders in the region continue to progress with some modest delays.

More broadly, in our view, recent events have strengthened the long-term outlook for the sector, providing for higher oil prices and a renewed focus on energy security. Shallow water basins continue to represent an attractive resource offering low cost and short-cycle barrels. Due to our customers' planning and budgeting cycles, we expect that improved activities and dayrates will lag the oil price increase by 6 to 12 months.

This dynamic was recently seen in 2022 when the military invasion of Ukraine caused oil prices to spike and a corresponding increase in dayrates occurred several quarters later. Therefore, we're increasingly confident about the company's prospects for '27 and 2028 as we expect disruptions from the conflict in the Middle East to be both substantial and long lasting.

With this backdrop, Borr Drilling's expanded fleet is well placed to support our customer demand and deliver long-term shareholder value as the cycle develops. I'll walk you through our business outlook in more color later in the call, but now I'll hand the call to Magnus to discuss the first quarter financial results.

Thank you, Bruno. I will now go into some details of the financials for the first quarter. Total operating revenues for Q1 were $247 million, a decrease of $12.4 million or 4.8% compared to Q4.

This is mainly explained by a $15.5 million decrease in dayrate revenue, offset by a $3 million increase in bareboat revenue. The decrease in dayrate revenue is driven mainly by $10.4 million lower reimbursable expenses in addition to fewer operating days, combined with lower dayrates for some rigs. The $3 million increase in bareboat charter revenue was due to more rigs earning bareboat revenues after the rig acquisition from Noble.

The total operating expenses were $201 million, up $8.9 million or 4.6% versus Q4. The increase was primarily due to $4.7 million of increased depreciation following the 5 rig acquisition from Noble and $4.6 million higher rig OpEx. The increase in rig OpEx was primarily due to $8.4 million of credit losses provision that we incurred in the quarter, partly offset by lower reimbursable expenses of $7.4 million. In addition to this, financial expenses increased by $6.9 million in the quarter due to the recent seller credit financing incurred in connection with the Noble acquisition -- Noble Rig acquisition and the bond tap late last year.

Overall, for the quarter, we had a net loss of $29 million and adjusted EBITDA of $88.5 million, down $16.7 million quarter-on-quarter. The adjusted EBITDA was highly impacted by the nonoperational matter of $8.4 million credit loss provision taken in the quarter. In addition, as mentioned, the Odin's delayed commencement was also impacting the adjusted EBITDA compared to expectations at the beginning of the year.

In the first quarter, we recognized no revenues but started incurring standard operating expenses for the rig. Now going into Q2, the rig is continuing to undergo contract preparation and regulatory approvals, and we now expect the rig to commence operations in June.

The rig is expected to incur additional contract preparation expenses of approximately $10 million in addition to standard OpEx before commencing its contract. Now moving into cash. Cash at the end of the quarter was $246 million, but total liquidity was $480 million, including undrawn revolving credit facilities of $234 million. Cash and restricted cash decreased by $133.7 million in the quarter, primarily as a result of the following: -- we used $182.9 million in investing activities, consisting primarily of the $175.1 million cash spent to complete the Noble acquisition in January.

In addition, we incurred $7.5 million of CapEx for long-term maintenance expenses or costs. The cash used in investing activities was offset by $48.1 million cash from operating activities. This includes $6 million of interest payments and $6.7 million of taxes. Other financial events in the quarter that is worth highlighting and that we have highlighted is that we completed the 5-rig acquisition from Noble for a total purchase price of $360 million, partly financed by $150 million seller credit.

We also issued $300 million of convertible notes post quarter end. We mainly used the proceeds to repurchase and cancel $195.2 million of our 2028 convertible notes, which extends the maturity profile by 5 years until 2033. The new convertible has a coupon of 3.5% compared to 5% on the 2028 and has an improved conversion price increase to $8 per share. With this, I would like to pass the word back to Bruno.

Thank you, Magnus. Activity on the contracting front has continued to track largely in line with our expectations. Year-to-date 2026, we've secured 13 new commitments, adding approximately $274 million to our backlog. In Americas, ENI extended the Ran's contract in Mexico, keeping the rig firmly committed through September 2026. Additionally, the Sif, one of our recently acquired rigs from Noble has secured a contract offshore Suriname for 1 well.

Drilling is targeted to commence in July and has an estimated duration of 100 days. In West Africa, the Prospector 5 secured work with BW Energy in Gabon. The rig is scheduled to complete operations with ENI in Congo later this month before mobilizing to Gabon in early third quarter following its scheduled SPS. The rig is now firmly committed into Q2 2027 with unpriced options that extend into 2028.

In Europe, the options on the Groa were exercised, keeping the rig utilized through May. As a reminder, the rig was under the BBC to allow the previous owner to complete the ongoing accommodation work with Siemens. The Groa will now demobilize later this month and operations will be handed over from Noble to Borr.

In Asia, the Scout received a 180-day contract with Vestigo in Malaysia and is scheduled to mobilize to the first well location later this month. The Thor also received 2 contract awards in Vietnam and is now committed through the first quarter of 2027. I remain proud of our continuous contracting success, which has a notable presence of repeat customers, demonstrating our strong relationships and ability to deliver safe and efficient operations.

Recent awards have meaningfully increased our 2026 coverage, particularly in the second half. We continue to work on several opportunities and remain optimistic in securing additional contracts in the coming months. Looking at our core markets around the globe. In the Middle East, visible open tender demand has further increased to 17 rigs.

Although the current disruptions may delay activity in near term, we believe its resolution will release pent-up demand that would likely be driven not only by deferred programs returned to the market, but also by the work required to restore shut-in wells and related infrastructure before production can return to pre-conflict levels.

As a result, we see a credible pathway for incremental recovery-related demand once conditions normalize. Outside of the Middle East, we continue to receive positive customer signals across most of our operating regions, supporting our view that additional work is approaching the pipeline. That is consistent with the broader trend we referenced earlier in our remarks and with the historical pattern that offshore activity typically respond with some lag as customers work through planning, budgeting and procurement processes before converting demand into contracted work.

In particular, I would like to highlight developments in Asia and in Mexico. In Asia, we see signs of new requirements in Malaysia and Vietnam. While both countries are showing growth, they remain below past cycle jack-up counts and provide notable upside as the current environment progresses.

Energy security is clearly a priority topic for important countries, and we expect demand to accelerate as global disruptions impact their access to hydrocarbons. We have continued to execute at a high level in this competitive region and remain optimistic we will fuel the majority of our 2026 available days in the near future. Additionally, we see rig demand increasing in China.

While not a location international contractors tend to operate, any notable demand pulling rigs into China has the potential to absorb a considerable amount of supply. As we have discussed in the past, Mexico continues to hold consequential shallow water production capacity, and we see jack-up utilization as a fundamental variable in the formula for PEMEX to reach the stated production targets.

Recent news of stacked rigs returning to work, along with a fresh market inquiry from PEMEX leaves rigs in-country well suited to benefit from developing demand. Looking further ahead, we see our 2027 availability as strategically valuable. It gives us flexibility to participate in what we believe could be a stronger contract environment as demand and dayrates continue to develop. Our approach remains balanced, continue building near-term coverage while preserving exposure to future upside.

With that context, let's turn to the conclusion slide. I'll leave you with a few key takeouts. First, renewed focus on energy security, coupled with improved project economics and elevated oil prices will drive demand for jack-ups.

Second, it's clear that we have near-term uncertainty in the Middle East. That being said, tenders are progressing, and we see an increasing likelihood of pent-up demand forming regionally and beyond. We continue to focus on increasing 2026 coverage and remain strategic in doing so while balancing rate and tenor.

And finally, we have proven our ability to opportunistically grow our fleet as we see a favorable time in the cycle. At this time -- at the same time, we continue to take actions to enhance capital structure to support long-term value shareholder creation.

So in conclusion, taking these points together, the broader message is clear. We are managing through near-term variability while positioning the company for stronger performance as the market improves. With that, I'll now turn the call over to Q&A.

[Operator Instructions]

We will now take the first question from the line of Ben Sommers from BTIG.

So first, it was great to see you guys continue to grow the fleet during the quarter. I guess just kind of curious how we're thinking about expanding the fleet moving forward.

And you mentioned the ongoing focus on energy security and just higher oil prices creating a strong long-term macro environment. So just kind of curious how we think about potential fleet expansion down the road.

Very good, Ben. Thanks for joining. Thanks for the question.

When we think about expansion, I think it's fair to say that we are pretty happy with what we achieved in late Q4 and into Q1 this year. Our fleet is now 34 rigs. I think it's a pretty interesting size as we complete the Paratus acquisition through the year. And we are well represented in every market where we operate in decent scale.

So, I think in line with what we commented before, I think any further expansion from here, I think, is a strategic flexibility that we have and it's not a strategic mandate, let me put it this way. I think for now, we have -- out of the rigs that we acquired, we have a couple of them to put back to work, and that remains our priority in the near term.

We'll continue to monitor the market to see if other opportunities are out there. But I think at this time, our key priority is finding employment opportunities for these rigs before we look into further growth.

Super helpful. And then I appreciate the color on some notable regions. Kind of wanted to ask around West Africa.

Kind of curious anything you guys are seeing there and then potentially the longer-term demand profile in that region once again, especially as you're seeing this ongoing, I guess, prioritization of energy security. Just kind of curious in a region like West Africa, any color on the demand outlook?

Yes, for sure, Ben. We've seen already in the last few years, and I think more pronounced in the last several quarters now that demand in West Africa has tracked positively and it's being largely driven by Angola, Nigeria. I think that, that continues. Oil price is supportive to development of some of those programs.

And in our conversations with customers, even wells that were maybe allocated to be drilled a bit far in the future, a bit further in the future, there is consideration about moving these programs forward. The demand in the region is likely in the near term to attract rigs from outside of the region that should help, particularly regions like Asia that have been more competitive.

And I think this is a very positive development. West Africa supply-demand balance is quite healthy. What we have seen, including our recent fixture is that, that continues to provide opportunity for us to print leading-edge rates. And we see now as the cycle develops, that there are more longer-term opportunities pop in the market. So that's all positively.

It's a market that I think 400-foot capable rigs tend to fare well because of their operational flexibility, and we are largely in control of the capacity of 400-foot capable rigs in the region. So that gives us, I think, a positive outlook in terms of maintaining the fleet contracted as well as pushing prices when we think we have a strategic positioning.

We will now take the next question from the line of Dan Kutz from Morgan Stanley.

So I wanted to ask, I guess, something somewhat similar to the last line of questions, but just from a little bit different angle, and that's that -- so you guys have flagged some incremental demand in certain regions driven by energy security concerns. You flagged Southeast Asia or Asia and you flagged PEMEX in Mexico.

I guess the question is -- Borr clearly has one of the highest spec fleets, if not the highest spec in the shallow water drilling space. And I guess, in a theoretical scenario where there's incremental demand pull outside of the Middle East, how do you think about how your fleet mix is potentially positioned to benefit from that?

I know the Middle East tends to be a relatively high-spec market in terms of the mix of rigs that are working, but some of the other regions that you flagged have a higher mix of high-spec rig demand as well like Asia Pacific and Mexico. But yes, just wondering if you could talk about how the new macro outlook plays into.

Yes. Thanks for joining. Great question. And the way I would frame it is, I think the higher specification of our rigs shouldn't be perceived as a limitation. I think much the opposite. I think our higher specification fleet is actually very well suited for higher specification work, but we are in a position to compete very efficiently and effectively across all kinds of work, right? I think we're selective, but the rigs are capable of delivering successful wells pretty much across all geographies.

So I think that gives us tremendous amount of flexibility. And maybe if I put into context and look at the larger picture, I think last quarter, when we're reporting here in Q2, what did we have ahead of us? We had a modern jack-up fleet that was very resilient, still tracking around 90% utilization, and we had developing demand largely geared towards the Middle East, where we saw about 13 rig requirements in the Middle East alone at that point in time.

Now you fast forward a quarter, what has changed effectively? And I think the answer is other than timing, nothing has changed, at least not negatively. Jack-up utilization for modern rigs still tracking at 90%, meaning there's limited supply available out there. The demand in the Middle East that we counted at that point in time, potentially 13 rigs has now increased to 17 -- and I think the disruptions in large continue to drive incremental demand from what we saw in Q2 across the various geographies.

I think in -- outside of the Middle East, it's clear that energy security is the driver in countries, I think, particularly in Asia that have been exposed to the availability of hydrocarbons, the limited availability of hydrocarbons, we see some of those discussions accelerating. If you look at the Middle East alone, obviously, the timing may be variable.

But ultimately, we are positive that incremental work is going to be needed to bring production capacity back to where we were. I mean, wells, even in the Middle East, they don't work like light switches and you turn them off and turn them back on and they come online when you want, right? And if you keep in mind that about 8% to 10% of the global supply has been basically shut in.

There's certainly a lot of work that is going to be needed in intervention going to this well, getting back into production that should drive a higher demand for rigs or higher intensity for rigs. But I think beyond that, if you look across the globe, SPRs across pretty much every country, every region seems to be tracking at all-time low levels or definitely recent low levels.

So I think on top of that, once the situation normalizes, there will be an urgency to replenish those SPRs that should drive as well a near-term demand that is perhaps higher than what we had coming into the conflict. So I think that the landscape is quite interesting here. The timing remains obviously a bit variable considering this conflict.

So in the context of that, having the highest specification rigs that can actually address demand wherever it comes from, whether it's in West Africa, whether it's in Mexico, whether it's in Asia, I think it positions us very uniquely. Certainly, if we find jobs that by default, require only an exclusively high specification rig, we're even better off. But in any case, I think we're very well positioned.

That's great color and context. And then maybe one on UAE. I guess with UAE announcing exit from OPEC, and we're seeing some big incremental upstream investment and production growth plans coming out of UAE following that decision, Borr is one of the few contract drillers outside of ADNOC Drilling that works in the UAE.

And so I was just wondering if you could talk about the implications of the UAE exit and the potential upside -- activity upside in that market and the implications for Borr given your unique position as a company that does work in the UAE.

For sure. And I think it's obviously the development in the UAE and then leaving OPEC are quite fresh, and we're yet to assess what that means a bit in the longer term. What seems clear to me is that they will continue with their ambition to increase their sustainable production capacity and ramp that up to the 5 million barrels that they've been targeting.

And inevitably, I think that entails more jack-ups being needed, right? Whether it happens through ADNOC drilling, whether they were looking to foreign players to come and help, I think time will tell. But the development is positive. We are currently located there, as you said. So we do have established presence. We do have an operating reputation, and we'll have to watch what happens. I do think that inevitably, a key component to Middle East growth or recovery at the moment lies in the shallow water barrels inevitably.

We will now take the next question from the line of Doug Becker from Capital One.

I want to ask a difficult hypothetical question about Middle East demand. If we just paint a scenario where the conflict continues to drag on, the strait remains closed, but kinetic activity is limited.

How do you see Middle East jack-up demand evolving in this kind of prolonged conflict situation?

Doug, thanks for joining. Yes. So you're right. I think that if you look hypothetically about the strait being remaining closed for a long time, inevitably, you create eventually a situation where less activity is needed in the Gulf to -- because otherwise, you just don't have ability to export that production.

How realistic I think it is at the moment that the world can actually afford the strait being closed for a long time. I think I would have questions about what can be effectively the full duration of that. But the reality is that different than during 2024 kind of Saudi suspensions terminations, the reality is that the Middle East for now is landlocked, right?

If the strait remains closed, the Middle East is landlocked and any activity that results in other regions from that or any requirements that result from there will not be affected by rigs that will be available in the Middle East. So I think that, that creates a bit of a unique dynamic compared to what we saw in the past.

For us, -- we have 4 rigs in the Middle East, which is not necessarily a small exposure, but I think it's very manageable at the moment. So I don't think that -- I think if you see that happening and you're now expecting commodity prices to be tracking way higher because I think that's what you should think about if this strait was to stay close, activity in other places will pick up.

And I do think that what that brings is an upside to economics and everything else that is likely to offset for us, in particular, our relatively small presence in the Middle East, if that makes sense.

No, that definitely makes sense. I wanted to shift to the U.S. Gulf. I know in the past, you kind of mentioned it's a new frontier for Borr.

There might be a bit of a learning curve. I was just hoping to get some more color on the contract prep and regulatory issues that Odin has been seeing and what this might mean for additional rigs moving to the market going forward?

No, very good, Doug. And see, I think it's fair to say that the performance of the Odin and started in the U.S. has been lagging to what we would have expected. Starting raising in new regions always come with a degree of challenge. I think over the last years, we've done that very successfully.

If I look at a lot of the start-ups that we have, cross-regional start-up, cross-country start-up, I think we've maintained a pretty strong track record. Coming to the U.S., I think we found a bit more challenging than we would have anticipated, and it's showing now in the delays, not only in terms of getting the rig ready, but as well as some challenges we had with the weather while we were moving the rig from Mexico to the U.S. that caused about a 40-day delay during that process alone.

Now as I said in the earlier remarks, we didn't bring a rig into the U.S. Gulf hoping to just patch in short-term work. When we look at the U.S., what we saw is a market that was lacking high-specification shallow water capacity. I mean if you think about the U.S. on the onshore side, tremendous amount of progress has been done in shale by using technology, new work practices to streamline the well programs, while offshore space, that market still heavily rely on 1970, 1980s rigs that have limitation in terms of how efficiently and effectively they can drill wells to the new standard.

So the Odin -- coming to country stand alone in that space. It brings tremendous amount of capabilities that are -- related to factory drilling, how we accelerate wells. And we're getting a lot of traction from customers. I was in the U.S. just a couple of weeks back and had a chance to engage with a lot of customers. And the commentary has been quite exciting about how they're looking at that, how they're interested to see the capability there and how that will translate into well efficiencies.

So I think that the outlook is positive. We should be starting soon this work with Cantium. We have follow-on work with Exxon. I do believe there's a very good likelihood that across these 2 customers, there could be more work coming. But a lot of the chatter across the customers that we were able to see in the last couple of weeks in the U.S. So I think that is how we're thinking about.

Now in terms of incremental demand, I think it's possible. At the moment for us, we need to get the house in order, get the Odin operating, and make sure that we have very clear lessons learned from that. So we are ready for a second rig. And at that time, we evaluate what the landscape looks like.

[Operator Instructions]

We will now take the next question from the line of Joshua Jain from Daniel Energy Partners.

Maybe you could just go into a little more discussion on line of sight for the rigs that are idle going back to work. Just given your comments around Mexico and Asia, are those 2 of the markets that you might expect them to go to work in? Maybe just elaborate further.

Thanks for joining, Josh. We have indeed line of sight for quite a few of our rigs. And I mentioned Asia and Mexico, in particular, not so much because those are the only areas where we see potential and line of sight just because those are the areas where we see very clear developments in terms of incremental activity, for example, right?

But our exposure is not only those regions. We have a few rigs that could become available in West Africa, for example. And as I mentioned earlier here in the questions, it is a market where we see the demand steady enough and positive enough to give us line of sight for continued work.

So don't take my comment as Asia and Mexico being the only interesting markets. I think they are the ones that are clearly showing the earlier signs of demand recovery, right? I think that's the way you should think about that, Joshua.

Okay. And then I wanted to go back to M&A. You talked about it earlier. You've been pretty active with respect to acquiring assets over the last 12 months. And you talked earlier in Q&A about incremental transactions not being sort of a mandate. But most of the things announced were in motion pre-war.

Could you just speak to how the M&A environment you think has potentially changed for the industry since the war started? And do you expect to see more consolidation potentially amongst your peers in the current environment?

Yes. And see, you're right. I think the consolidations that we completed or we announced were pre-war. I don't think that looking at the current context that any of the developments in terms of the conflict since that would have changed the outcome of our decisions. I think we're pretty pleased with the assets that we acquired, pretty pleased with the valuation, the structure of the deals that we're able to put together.

And then as I said earlier, I do think that the conflict brings some uncertainity in terms of timing. But looking forward, it's hard to see a scenario where the outcome after the conflict is not actually a stronger demand for our service and for our jack-ups than it was coming into it, right? So I think that's the way I think about it. Now from our side, at least, we're not having a different view to consolidation because of the conflict.

Clearly, as I said earlier, for us, the priority near term is to find employment for those rigs, and that's what we're focusing at the moment. The sector as a whole, I think, can do with more consolidation. I think consolidation is a good thing and it's not a bad thing. And it's in the jack-up space, the consolidation is good not only for the contractors, but I do think that they are positive for the customers as well.

So I don't think that -- I wouldn't think about the conflict having a significant bearing to decisions on M&A, at least not from our side. But I agree that M&A is something that should be looked very serious in the sector because it is still a fairly fragmented market in the jack-ups.

There are no further questions at this time. I would now like to turn the conference back to Mr. Bruno Morand for closing remarks.

Thanks for joining, and thanks for your interest in Borr Drilling. I look forward to speaking to you next quarter.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Good day, everyone, and welcome to the Paratus Energy Investor Call. Please note that this event is being recorded. [Operator Instructions]

I would now like to hand over this call to Robert Jensen. Robert, go ahead.

Good day, everyone. This will be the second call that we have today given that we thought we had just concluded one before realizing it was not live. So apologies to everyone waiting. But welcome to this investor call for Paratus Energy Services Limited relating to today's announced sale of our Jack-up business, Fontis Energy.

I'm the CEO of Paratus, but I also have joining me on the call today, Baton Haxhimehmedi, our CFO. Before we begin today's presentation, I would like to remind all participants that some of the statements on this call may involve forward-looking statements. Forward-looking information involves risks and uncertainties by nature that may cause actual results to differ materially from those projected in such statements. I therefore refer you to our latest public filings.

Today, we are pleased to announce a transformative transaction for Paratus, the sale of our Jack-up business, Fontis Energy. This marks an important milestone in the continued evolution of Paratus, simplifying the company and sharpening our strategic focus. We will walk you through the rationale for the transaction, the key terms and what Paratus will look like going forward.

First, following the completion of this transaction, Paratus will be uniquely positioned as the world's only pure-play PLSV company of scale, operating in a resilient and infrastructure-linked segment of the offshore market. At the same time, we are significantly improving our risk profile by exiting the Jack-up segment, where we have faced exposure to payment irregularities, contract uncertainty and geographic concentration risk.

Second, we have a strong confidence in a credible path to sustaining our current dividend per share over the long term, supported by visible PLSV cash flow and a strengthened balance sheet. Put simply, we expect to maintain our industry-leading yield of approximately 20%. Third, the transaction materially improves our financial position. Pro forma leverage is expected to be reduced to approximately 1.4x, resulting in a significantly more resilient capital structure and a clearly positive outcome for creditors.

And finally, becoming a pure-play PLSV company creates a unique platform from which we can pursue both organic growth and value-accretive expansion opportunities within the subsea space. Overall, this transaction transforms Paratus into a simpler, more focused and financially stronger company.

Before going into each of these points, let me first walk you through the transaction itself. The divestment of Fontis represents a natural next step in the evolution of Paratus. Since acquiring Fontis back in 2022, we have undertaken a comprehensive transformation of the business. This has included separating it from Seadrill, building a stand-alone organization, fully repaying all financial debt and making significant progress on receivables collection.

Over this period, we have overseen the distribution of approximately $760 million of value from Fontis to stakeholders, including both creditors and Paratus as a shareholder. At this stage, we believe that Fontis' assets are better positioned within a larger industrial platform in the Jack-up segment, such as the one Borr and CME can offer with established presence in Mexico and broader international reach.

At the same time, this transaction materially improves Paratus' risk profile by reducing exposure to the already mentioned payment irregularities, potential contract suspensions and recontracting uncertainties in Mexico. We began discussions on this transaction in the third quarter of last year. During the negotiation period, Paratus has extracted $74 million of cash from Fontis, which is important to keep in mind when assessing the overall transaction value.

As announced today, we have agreed a total consideration of $400 million for Fontis, consisting of 3 components: $148 million in cash payable to Paratus at closing, $15 million in deferred consideration linked to the collection of receivables which we expect to be realized at closing given the payment progress already made and $237 million nonrecourse seller's credit. The seller's credit carries a cash interest of 10% in the first year, then stepping up to 12% for the next 6 months and then 14% thereafter.

The duration of the seller's credit is 2.5 years. The strong security package includes, amongst other, a first lien on older rigs and importantly, no dividends are permitted from the secured structure while the seller's credit remains outstanding. The transaction is expected to close in the second half of 2026, subject to customary conditions, including regulatory approvals and Paratus bondholder consent.

While we are not saying goodbye just yet, I would like to take this opportunity to thank the Fontis team and all of its employees for their dedication and hard work, and we wish them continued success under the ownership of Borr and CME.

Let's now turn to the business we are left with, our PLSV platform. All 6 vessels are, as you know, contracted on multiyear Petrobras contracts, providing strong backlog visibility through 2027 and 2028. From a market perspective, demand is expected to remain resilient. Petrobras' 5-year plan continues to support sustained activity levels with pipeline installation remaining a priority. In addition, we are seeing potential incremental demand from international oil companies operating in Brazil. As mentioned in our Q4 results, this demand outlook is further supported by Petrobras already being in the market with a tender for vessels with contract expiries in 2027.

On the supply side, the market remains very tight. There are no newbuilds on order, meaning supply will remain constrained for several years to come. In Brazil, 17 high-spec PLSVs are tied to long-term contracts and 3 vessels are working under other arrangements. Global spare capacity is also very limited. The market is also highly concentrated with most vessels controlled by a small number of players, supporting strong competitive positioning and pricing discipline. Taken together, this creates a highly attractive and resilient operating environment, which is more infrastructure linked than traditional oil services. We believe this platform provides an excellent foundation for further growth, both within PLSVs and in adjacent subsea segments.

Turning to shareholder distributions. Maintaining a stable and sustainable dividend remains a key priority for Paratus. Since our IPO, we have returned significant capital to shareholders through both dividends and share buybacks, demonstrating our commitment to disciplined capital allocation.

Looking forward, the Seagems platform provides strong support for future distributions. At current day rates and utilization levels, the normalized cash flow is already very close to supporting our current quarterly dividend of $0.22 per share. A modest increase in day rates or incremental contribution from new business opportunities would fully support that level. We believe the significant strengthening of our balance sheet caused by the sale of Fontis will allow us to sustain the current dividend level over the medium term, while we actively pursue ways to grow earnings in Seagems. We, therefore, expect to be able to maintain our current quarterly dividend and see a credible and well-supported path to sustaining our industry-leading dividend over the long term.

I will now hand over to Barton to discuss the balance sheet in more detail.

Thank you, Robert. As also Robert highlighted in the introduction, a key benefit of this deal is a significant strengthening of our balance sheet. On a pro forma basis at Q4 '25, our net debt is reduced from approximately $581 million to around $226 million. This corresponds to a meaningful reduction in leverage from approximately 2.2x to around 1.4x EBITDA on a pro forma basis at Q4 again. In other words, meaningful deleveraging and is clearly positive from a creditor perspective in our view.

In addition, the seller's credit provides attractive returns and is supported by strong collateral. It is also important to highlight the reduction in working capital risk here. Through this transaction, we are effectively monetizing the value of the outstanding and due receivables in Mexico, where we have experienced payment irregularities since engaging with our clients. This shifts our balance sheet from something more volatile to something simpler and more predictable. With improved visibility following the announced transaction, we are also now in a better position to address our upcoming '26 maturity, which we expect to manage in the coming months.

Finally, the transaction is considered a material asset sale and the bonds and the company intends to seek consent from bondholders in due course, and we expect a constructive process around this. As we already indicated, we believe this is a materially positive event for the creditors.

With that, I will hand over the word back to Robert. Thank you.

Thank you, Barton. With a simplified structure and strengthened balance sheet, Paratus is now well positioned to pursue disciplined growth. On the organic side, we are actively pursuing tenders for additional PLSV work and adjacent subsea vessel classes, including opportunities such as the previously mentioned decommissioning tender. We are also exploring the potential to charter third-party vessels, allowing us to expand our operational footprint without significant capital investments.

On the M&A side, we are evaluating opportunities to acquire high-quality subsea assets or fleets that can enhance scale and backlog. We are also open to partnerships or strategic combinations with large offshore players seeking to enter the PLSV market. This transaction not only simplifies the company, but also creates a strong platform for future value-accretive growth.

So to summarize the key takeaways, we are improving our risk profile by exiting the Jack-up segment, becoming a fully focused pure-play PLSV company. We are strengthening our balance sheet and reinforcing our ability to sustain attractive shareholder distributions. And at the same time, we are establishing a clear platform for disciplined growth, both organically and through M&A.

With that, let's move over to Q&A.

[Operator Instructions] I would like to hand over this Q&A to Baton. Baton, go ahead.

Thank you. There's a question about whether we're willing to sell our 50% stake in Seagems too?

Look, I think we've had this question before. We're an industrial holding company. We obviously -- with the strategic decision to sell the Jack-up business, we are focused now on expanding and growing our Seagems platform. But ultimately, I think we're in the business of making -- creating shareholder value. So we'll listen to any offers, but the thinking today is that we want to develop that platform.

You're explicitly mentioning a long stop date for the transaction. Does this relate to uncertainty around regulatory approvals in Mexico? That's the first question.

I think we want to be transparent. So I think it was natural to include the long stop date of the transaction. I don't think we have any particular concerns around the antitrust filing in Mexico. That is part of M&A. I think we've seen other Jack-up transactions where I think there were sort of objectively, in my opinion, have been more risk associated with the buyer and the seller. So I don't think we see any sort of additional or increased risk for this being Mexico. There is also potential to -- for extensions to be granted.

There are several question around the '26 maturity, Robert. The closing date is most likely -- seems most likely after the maturity of the '26 bonds. So there are several questions around how we expect to address this maturity?

I think the question around the 2026 has been a recurring theme on all of our recent conference calls. I think we've been quite persistently saying that it really depends on the strategic outcome of the Jack-up business. Now we have obviously announced this transaction. I think we have clear plans on how to deal with that maturity. But as indicated in one of the questions, the closing date is supposed to be in Q3 subject to, obviously, the antitrust filing and bondholder consent.

So I do think that we now have much more clarity on how to deal with them, deal with the '26s. And I think we'll probably be addressing them relatively -- in relatively short order. But I don't think we want to comment much more detail than that on today's call.

There are some questions about how we intend to use the cash proceeds from the transaction, whether -- what we will use it for or whether it is earmarked for a reduction of 29 months?

I think as we said, there are some conditions to closing this transaction. We will reach out to bondholders in due course. I don't think we want to speculate on this call what we will use the proceeds for. But obviously, we know the restrictions we have under our 2029 bonds, and we'll obviously bring that into the table when we discuss consent with bondholders. I think we'll leave it at that.

A question about distributions. Going forward, do you intend to maintain a stable dividend? Or will dividend distribution vary based on quarterly free cash flow generation?

Well, I think, fortunately, the PLSV business provides very stable free cash flow generation. There is not a whole lot of swinging between the quarter-to-quarter given that all the vessels are on multiyear contracts. I think what has been evident from the way we've run this company since the IPO, we are clearly focusing on stable dividends. So -- and based on what we said in our prepared remarks, we believe we have a clear path to a sustainable dividend at sort of similar to the level we have been in the -- ever since the IPO really.

A question about the agreements -- are there any adjustments to the transaction price or cash paid at closing related to cash collected from Pemex prior to closing the deal or earnings in the period, assuming a closing window of up to 6 months?

The transaction is structured as a lockbox mechanism. So we are not entitled to the earnings in the period. The only adjustment on the cash, if you want to call it that, is obviously the deferred payment consideration of up to $15 million. That is depending on collections coming from Pemex.

What is your target level -- debt level post close?

I think we've never had a target debt level in mind for this business. I think that's been part and parcel because of the various businesses we've been involved in. I don't think we're, at this stage, willing to commit to a debt level. What we have said in the prepared remarks and what's obvious from this transaction is that it is a materially deleveraging event for the company. So we will obviously have to address the 2026 and then we will look at our capital structure and think about how our capital structure fits the pure-play concentration around PLSVs. So I think we'll have to get back to that. But I'm not sure we will commit to a debt level at this stage at least.

Question about whether there are any breakup fees associated with the transaction? No, there aren't.

Thank you for your questions. I would like to give the call back to Robert Jensen for any final remarks. Robert, go ahead.

Thank you. I think that was the extent of the questions. We hope to be able to speak to you again when we report our Q1. In the meantime, thank you for your interest. Thank you.

Thank you.

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Q4 2025 Results Presentation Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker, Mr. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for participating in Borr Drilling's fourth quarter earnings call. I'm 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'll 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'll follow with a deeper look into the commercial execution, and we'll conclude with some comments on the business outlook.

Let's 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 6 and 3 years LTI-free, respectively, and the rigs, Gunlord & Grid reaching 1-year incident free.

Additionally, we're proud to highlight that our rig, Arabia III 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 Borr Drilling family for their efforts.

Now on to 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 $259.4 million. Adjusted EBITDA of $105.4 million came in line with our expectations, bringing full year adjusted EBITDA to $470.1 million at the top end of the guidance range. This performance underscores the resilience of our organization, which navigated 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 7 rigs and expect further coverage gains in the coming months as we progress negotiations on multiple active leads.

We believe the jack-up 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're 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 jack-up market utilization remained steady at approximately 90%. As tenders are awarded and available supply is absorbed, we expect market conditions to firm. Against this backdrop, we're pleased to have expanded our fleet to the accretive acquisition of 5 premium rigs from Noble. These rigs are highly complementary to our existing portfolio and well suit 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 the second half of 2026 and a recovering day rate and earnings visibility into 2027.

But before I add color to these, I'll 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 was $259.4 million, a decrease of $17.7 million or 6.4% from Q3. This is mainly explained by $16 million decrease in day rate revenue, primarily due to rigs transitioning into contracts with lower day rates. The activity level in terms of total number of operating days stayed even over the 2 quarters. A decrease in bareboat charter revenue explains a further $3.1 million decrease, primarily due to the grid's end of contract and its planned transfer to a contract in Angola.

These decreases are offset by $1.4 million increase in O&M revenue. Total operating expenses for the fourth quarter were $192.1 million, an increase of $30.2 million or 7.4% compared to the third quarter. The increase in cost was primarily due to $11.6 million increase in rig operating and maintenance expenses attributable to increase in personnel costs, accelerated amortization of deferred costs for the rig, Hill and reimbursable expenses.

Overall, for the quarter, we recorded a net loss of $1 million and adjusted EBITDA of $105.2 million. Looking at full year 2025, net income was $45 million, and full year adjusted EBITDA came in at $470.1 million, a decrease of 7% compared to 2024. Moving into cash. Cash increased by $151.9 million in comparison to the prior quarter and is primarily driven by the following: $34.8 million cash from operations, which is after $94.7 million of interest payments and $8.8 million of cash taxes paid. We spent $52.1 million in investing activities, consisting of $36 million deposit for the Five-Rig acquisition and $15.9 million additions to jack-up rigs.

And lastly, cash from financing activities was $169.2 million, consisting of $159.3 million net proceeds from the bond issuance, $80.3 million net proceeds from share issuance, net of issuance costs, offset by $70.8 million repayment of debt in the quarter. The company's cash and cash equivalents as of December 31 were $379.7 million. In addition, we have $234 million of undrawn revolving credit facilities, resulting in total liquidity of $613.7 million.

It's worth noting after year-end, we completed the Five-Rig acquisition from Noble and paid $174 million in cash consideration in January. The remaining consideration was settled by way of $150 million seller's 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 million of bonds due in 2030 issued at par. In addition, we completed an equity offering raising gross proceeds of $84 million 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 a listing on the Euronext Growth. The 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 the Oslo Stock Exchange in the first half of 2026.

And I pass the word back to Bruno.

Thank you, Magnus. We have been busy on the contracting front to start the year. Year-to-date 2026, we've secured 5 new commitments, adding approximately $145 million to our backlog. Together with the 2 contracts we secured in December, this marks 7 new commitments since our last quarterly report. I'm pleased to see both short- and long-term commitments in this mix. Feeding idle space in our 2026 schedule remains a key focus, while at the same time, we're mindful about position our fleet to capitalize on improving market conditions from late 2026 and onwards.

I'll now spend time discussing the commitments we secured since the last quarterly report. In Americas, the Ran received a 1-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 leaves us reassured that we'll have more positive news soon for the Run.

Additionally, the Odin secured a contract for 2 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, the Odin is now committed into November with options that could keep the rig utilized in the U.S. through mid-2027. Staying in Americas, today, we announced a 2-year contract extension for the new 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 jack-up industry.

Moving to West Africa, the Natt 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 months contract with Shell. In Asia, Brunei Shell extended the Saga contract by an additional 5 months. The Saga is now committed into April 2027 with an additional 1-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 1-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 relationship 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 5 newly acquired rigs, our coverage for the first half of the year currently sits at 80%. As a comparison, before factoring in these new rigs, this coverage figure would have been approximately 85%. Based on current customer engagements, we're 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 numbers of days achieved in 2025.

In parallel, and as I 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 on the tender and pretender phase for opportunities commencing within the next 12 months. And based on operator schedules, we anticipate 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, I remain optimistic that the foundation is set for a 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 that we were comfortable with consensus for full year adjusted EBITDA that stood at $460 million.

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 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 million, 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 strengthen our liquidity and position the company to pursue consolidation opportunities. Then in December, we announced the accretive acquisition of 5 premium jack-ups. We act 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 the second half of 2026 with ongoing dynamics supporting a clear recovery in day rates in 2027 and beyond. Our expanded fleet will provide us with scale and operational flexibility, providing Borr Drilling to deliver long-term value to our shareholders.

With that, I'll now turn the call over to Q&A.

[Operator Instructions] And the questions come from the line of Scott Gruber from Citigroup.

I appreciate all the detail this morning and the tendering pipeline boost is certainly encouraging. I'm curious on the outlook for the 2 acquired rigs that are idle, the Sif and the Freyja. Do you have any line of sight to securing contracts on those 2?

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 Freyja, 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 shrink. So I would think about that rig probably going to work sometime in the back end of 2026 or potentially early 2027, depending on the scope it is defined to.

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 million. Just some initial thoughts on the achievability of that level of EBITDA?

Yes, for sure, Scott. I think at this stage, it's still probably a bit too early for us to provide kind of a formal guidance. What I can share, as I said, 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'll 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'm 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's the simple way to think. I think activity level will track slightly higher than it did in 2024. Now let's 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.

And the questions come from the line of Greg Lewis from BTIG.

Bruno, I did have kind of like a question around what you're 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 kind of -- like I guess there's been some rumblings about tenders coming to market for -- it seems like some time now. Any sense for when we could actually see some of these talked-about tenders in the Middle East actually, not necessarily have the rigs start working, but when we could start seeing maybe some rigs be contracted around some of that?

Yes. No, and thanks for joining, Greg. 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 KGL are in progress. And in fact, KGL is in full tender evaluation from what we understand and the Aramco is still in tender submission phase. So this is very actual. This is very real, very tangible.

There are a few more prospects in the region that we've been expecting to come to the tender pipeline, including KGL, 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 the 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's why one of the reasons why we feel excited is there's a large volume of work coming from those tenders. And it's probably worth to highlight that, not all of it, but a portion of these requirements not only are large volume, but they require very specific technical capabilities, right? And we feel the fleet that we have, particularly with the recent acquisitions placed as well to evaluate, and we'll see.

They are long-term tenders. For us, it's a very interesting body of work, but it has to make sense from a pure commercial standpoint as well. In any case, once that volume gets absorbed in the market, whether directly awards to us, but see -- 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.

Okay. Super helpful. And congrats on the 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'm 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 don't know how deep you want to get into that conversation, but I am kind of curious around that.

I mean it's not capital anymore. I guess they call, Seatrium. They still have some rigs that I guess, they're operating some jack-ups from previous orders from other customers. They have these rigs. Is there any kind of -- when could we see these rigs? I mean, are they being -- do you have any sense for if these rigs are being actively marketed for sale? And yes, I mean, I guess that's kind of it and kind of -- and where we kind of think pricing is now for a premium rig?

Very good, Greg. Let me tackle maybe the question on the Seatrium rigs first. And you said rigs, but I understand that there's 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's probably fair to assume that the rig gets offered in the Middle Eastern tenders. It was a rig that was with Aramco before and it has specifications and complies with the requirements. So I would expect that rig to eventually be offered in that 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'm 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 that platform further.

For us, we continue to think about consolidation very selectively. It's not consolidation and growth for the sake of growth. We would have to look complementary to our fleet. And I think less likely to be looking at individual asset things where 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 look opportunistically, but I don't think it necessarily composes a core to our strategy. I think we have a good operational platform to do so if opportunity comes, but we'll look at that very opportunistically.

We are now going to proceed with our next question. And the questions come from the line of Fredrik Stene from Clarksons Securities.

I wanted to dig a bit deeper into what's going on with the market at the moment. And I think we share -- we have a shared view that it's 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 rate development trajectory going forward. Because typically, there will be -- I guess, first, you'll see the tenders, then you'll see the awards and then you'll see the day rates. So any color on when you think we'll see this higher activity levels starting to really make an impact on bidding levels across the globe?

Yes. Fair question, Fredrik. And what we have seen over the last -- and we've 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 helps us fill the gap, help us derisk the execution during [indiscernible].

Now what does it take for the market to change? You're absolutely right. I think features 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 dynamic starts to progress once those tenders conclude or shortly after those tenders conclude, which would imply that we're looking at Q3 is when we probably have better visibility of those dynamics playing out. That's my best guess. As I said earlier, for 2026, 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.

That's very clear. And just a 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 kind of go for at the current time? Are you on short contracts to reprice that when the market starts accelerating again?

Or do you still want to have like a base load of longer-term contracts if and when they are available? And 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, you're referencing suspension ability for the Kingdom as we saw 2 years ago.

Yes. So let me break it down here, Fredrik. To your first part of the question, yes, with a 29-rig fleet, we obviously have to have a mix of short- and long-term contracts. It's obviously important that we have a baseline of backlog. Clearly, as we have regions where day rates push closer to kind of cash cost -- cash operating cost, we don't want to be securing these contracts in long term, and we're looking for opportunities to close gaps as best as we can.

Some other regions that margins are still a bit more stretched and more interesting, we're obviously more flexible in extending the duration 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 that have particular requirements that are well suited for the fleet, and we look into how we optimize these things. So there's obviously a quite strong combination of factors playing out at the moment.

Now in terms of the second question on Aramco, yes, the tender is still ongoing. So let's 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 a concern since the last round of suspension and 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 do indicate some flexibility to discuss. So let's see how the tender progresses and where we land in that discussion.

We are now going to proceed with our next question. And the question is from the line of Jules [indiscernible] from Stanley Securities.

A couple of questions from 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, call it, regular payments coming from Pemex or Mexico this year. How should we think about this? And what's the current level of outstanding on your balance sheet?

Thanks for the question. I thought we'll go through the whole call without a question for Magnus. So I'll let him tackle this one.

Thanks, Bruno. So yes, as we said, we have come back to payments from Pemex has picked up over the past quarter, and we actually received around $46 million in total in the fourth quarter. So we estimate we had around $90 million to $100 million outstanding at the end of the quarter. Also in the beginning of January, we received a further $23 million. So that is bringing the outstanding balance further down. So I think this is very positive to see.

We see also peers, other companies reporting the normalization of collections. And the indications we have from Mexico is that it will continue into 2026 and that they're preparing for a new payment plan with the government to tackle '26 invoices. So I think we're positive about the development. I think also, as we noted, I think, our previous contracting update is that 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 bareboat hire. So we are also improving on the terms towards our counterparty.

That's great to hear. And I would expect those terms to be included on the rig under the letter of intent as well.

No. I think the rig that got extended right now continues on the historical contract structure, which is on a payment day basis. However, as Magnus pointed out, we do have encouraging signs that payments will reach a better normalization going forward.

Okay. Okay. Good to hear. What -- on another topic, and obviously, it's boring to talk about day rates, but it ultimately remains important, if you will. I mean, the spread seems to be very high at the moment. Obviously, Asia and Middle East being more competitive than West Africa. Are there other moving parts to think about? I mean, you talked briefly about terms you're 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, the T&Is, if you will?

Yes. And I think the dynamics in our contracting is always very fluid. We're always kind of pushing and pulling on terms and conditions of the contract with the customers. So it's normal to the cycle. I would say that today, there's not a huge focus from our customers in trying to renegotiate terms. I think that the terms have been fairly solid in a 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 pressures.

Like if I look at regions like the North Sea, for example, they have very well-established frameworks for contracting. I don't think that we've 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's always a commercial push and pull with all these negotiations that mature through the cycles.

Understood. And the final one from me. As we think about those rigs that you currently have not secured any work for, I mean, 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's been sort of inactive previously or coming from yard, if you will?

Yes. I think it's a fair statement. I think that when I look at the pipeline and the things that we're pursuing at the moment, in near term, I would think or hope that we will have commitments for the Hill and the Sif. They've been operating until recently. We have a pipeline of opportunity for them. So that's the most obvious movement in the near future. I do think that the Var and the Freyja are rigs that will probably come a bit later, probably kind of back end of this year, early next year with some focus on some of the developments in the Middle East that will likely create the catalyst to deploy those rigs. But that's probably a fair way to think about it.

We are now going to take our next question. And the questions come from the line of Joshua Jain from Daniel Energy Partners.

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, how are you thinking about requirements from a return perspective in an initial contract to get a rig up and running today after it's been stacked? Maybe you could just elaborate on that a little bit.

Yes. Thanks, Joshua. And the answer to your question may vary a little bit from rig to rig. I think in our case, except for the Var, all of the rigs either be working until recently or are rigs that will be rolling off contract. At this stage, we don't expect any meaningful CapEx in putting those rigs to work. The Var would probably require a bit more, probably somewhere close to $5 million, $6 million, somewhere in that ballpark. So for the rigs that require little CapEx, the calculation becomes a bit easier and it's probably less a question of just off-the-gate economics and more balance of the opportunity pipeline.

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

And then I'm going to ask the Venezuela question, I guess, a little bit differently. Any thoughts on what you're 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.

Yes. And Trinidad has been a fairly busy jack-up market over the years. There's still some opportunities around that. Suriname, there has been a few opportunities in discussion. It's mostly exploration work and some of it is a bit further far 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's 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's a region that requires rigs with larger capabilities, which is obviously very interesting for our fleet, but I wouldn't think that as a large play.

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

Thank you. That concludes our call. Appreciate the interest in the company, and I look forward to speaking to you again next quarter.

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

Good day and thank you for standing by. Welcome to the Borr Drilling Limited Q3 2025 Results Presentation Webcast and Conference Call.

[Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bruno Morand, CEO. Please go ahead.

Good morning, and thank you for participating in Borr Drilling third quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda 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'll start with a review of Q3 and highlight key developments since quarter end. Magnus will then review our quarterly financial results. I'll follow with a deeper look in the market and our commercial execution, and we'll conclude with your questions.

Let's get started. Our third quarter results were strong, extending the rebound delivery in the second quarter. With 23 of our 24 rigs active, our commercial team continues to execute at the highest levels, delivering strategically and timely contract despite a volatile and dynamic market. Revenue increased by $9.4 million quarter-over-quarter and adjusted EBITDA rose 2% to $135.6 million with a margin of 48.9%, confirming the quality of our earnings. Operational execution continues to be industry-leading with technical utilization of 97.9%, and economic utilization of 97.4% across the fleet.

Subsequent to quarter end, in October, we are pleased to announce 3 contract extensions in Mexico. Mexico remains an important market for Borr Drilling. Notably, collections restarted in September with approximately $19 million received in September and October. These inflows, together with the recent government actions to strengthen Pemex finances are the basis for our confidence in continued normalization of payments. Additionally, in October, newly imposed international sanctions affecting one of our counterparties in Mexico required us to issue termination notices for the old and the new contracts.

Today, we announced new commitments expanding Borr Drilling footprint into the Gulf of America and Angola. These awards strengthen and diversify our customer base and portfolio, underscoring our ability to navigate evolving markets and minimizing idle time across the fleet. We expect fourth quarter 2025 results to reflect fewer operating days due to several rigs transitioning between contracts and the recent impact of sanction-induced contract terminations in Mexico. Despite this, we anticipate full year 2025 adjusted EBITDA in the range of $455 million to $470 million.

In recent quarters, we've experienced a step-up in jack-up demand across several international markets, absorbing available capacity and providing gradual relief to the headwinds from 2024. While near-term volatility may persist, clear signs of demand inflection in Saudi Arabia and Mexico, 2 of the world's largest jack-up markets, together with incremental activity in other areas provide us with confidence that the market is now past the trough. We foresee a tightened market in the near to medium term that should support higher utilization and day rate levels. I'll walk you through that in more color later in the call. But now I'll hand the call to Magnus to discuss third quarter financial results.

Thank you, Bruno. I will now go into some details of the financials of the third quarter. As Bruno mentioned, we continued the good trend seen in the previous quarter and the results quarter-on-quarter improved.

Total operating revenues increased by $9.4 million due to $2.5 million increase in day rate revenue and $6.4 million increase in bareboat charter revenue. The $2.5 million increase in day rate revenue was primarily due to an increase of the number of operating days and day rates for the Ran and Thor, recognition of day rate revenue for the Odin versus previously being recognized as bareboat charter revenue and an increase in reimbursable revenue for the Balder. These increases were offset by a decrease in the number of operating days for the prospective one. The $6.4 million increase in bareboat charter revenue is primarily due to the rigs Galar, Grid, and Gersemi being fully operational in the quarter compared to being on suspension for part of the prior quarter. This increase was offset by the decrease in bareboat charter revenue for the Odin, and the bareboat charter contract was terminated effective June 30 and begun earning day rate revenue in August 2025.

Total rig operating and maintenance expenses increased by $6.3 million, which is primarily as a result of the increase in reimbursable expenses for the Grid. This in total gives us an operating income of $98 million, a $1.5 million increase from the prior quarter. Further, below the operating income line, total financial expenses net increased by $2.2 million, primarily due to foreign exchange loss offset by some higher interest income and lower interest expenses.

Income tax expenses increased by $6.5 million, primarily due to a one-off deferred tax benefit recognized during the prior quarter, with no comparable in the current quarter. As a result of the before mentioned, net income for the quarter was $27.8 million and adjusted EBITDA was $135.6 million, an increase of $2.4 million.

Moving on to cash. Our free cash position at the end of Q3 was $227.8 million. In addition, we have $234 million undrawn under our revolving credit facilities, resulting in total available liquidity of $461.8 million. Cash increased by $135.4 million in comparison to the prior quarter, explained by the following: Net cash provided by operating activities of $72.1 million, which includes $6 million of cash interest payments on our convertible bonds and $13.2 million of income taxes paid. Operating cash flow for the quarter was further impacted by a buildup of working capital, primarily driven by approximately $42 million increase in trade receivables in Mexico and a $13 million increase in trade receivables relating to the rig Vali. However, subsequent to quarter end in October, we received approximately $17 million related to the trade receivables in Mexico and $10 million related to the Vali. We expect to receive further settlements for our Mexico receivables, both in November and December.

Net cash used in investing activities was $33.9 million and is comprised of jack-up additions, primarily as a result of activation costs and contract commencement for the Vali, capital additions for drilling equipment and maintenance costs. Lastly, net cash provided by financing activities was $97.2 million, primarily due to $96.9 million net proceeds for the company's July 2025 equity offering.

With this, I will pass the word back to Bruno.

Thank you, Magnus. Year-to-date, we have secured 22 new commitments, adding $625 million to our backlog. Since our last report, we've continued to secure meaningful awards. First, in Mexico, we secured 3 contract extensions. Galar and Gersemi received 2-year extensions on improved commercials and payment terms. These commitments not only strengthen our 2026 utilization, but they also provide visibility well in 2028. Under the revised structures, operating costs will be reimbursed by the customer on a fixed 45-day payment term, materially reducing our working capital needs. Bareboat charter payment terms will be kept at 180 days. And for the Galar, this cap will progressively improve over time. Additionally, we received a short-term extension for the North and continue in active discussions with our customer in Mexico about a long-term deployment for the rig.

In Mexico, going forward, we will have a total of 5 rigs working from a previous count of 7, with 2 rigs being reassigned to new work elsewhere, as I'll cover shortly. Regarding the 5 remaining rigs in country, 2 are long-term contracted with payment protection provisions, 2 are contracted with IOCs, and only 1 has direct Pemex payment exposure. This is a significant change in our fleet mix in country.

I'm also pleased to report on recent awards in Americas and West Africa, along with several other contracting updates. In the Gulf of America, the Odin received a letter of award for a 6-month campaign with an undisclosed operator. The campaign is expected to commence in January 2026. This will mark our entry into the U.S., and again highlights our team's ability to timely secure work for the rig, following sanction-induced contract termination. In West Africa, the Grid has received a letter of award for a 6-month commitment plus unpriced options with an undisclosed operator in Angola. The campaign is expected to commence in the first quarter.

Leaning on our strong relationships, we have collaborated with our partner in Mexico to reassign wells previously allocated to the Grid to our other rigs in country. This will enable us to conclude operations with the Grid in Mexico in November, and the rig will begin its mobilization to West Africa in December. Also related to the Grid, we have agreed with New Age to reassign the contract we previously allocated to the NAT to the grid, and expect to commence a 1-well campaign with New Age in Congo in January, prior to commencing the work in Angola. Additionally, in West Africa, we are in discussions with ENI regarding their current well sequence for the NAT in Congo. While there are various scenarios in consideration, we now expect the NA to stay busy with ENI in Q4, and potentially into early part of 2026.

I'm also pleased to share that we have agreed with Shell in Nigeria to accelerate the NAS campaign originally scheduled to commence in November 2026, now to April 2026. This significantly reduces potential idle time for the rig and provides Shell the ability to accelerate their well delivery schedule. It is clear to me that Borr Drilling is the preferred partner for shallow water drilling operations. In recent months, we have been trusted with commitments from our customer to deliver critical wells globally. For example, Shell with their highly anticipated HI project offshore Nigeria, ONE-Dyas for the first fully electrified offshore drilling campaign in the Netherlands and CME in Mexico for their Bacab-Lum project, just to name a few.

It is particularly notable that despite the various market headwinds presented in 2024, and early this year, our 2025 fleet coverage has reached 85% at an average day rate of $145,000. This is in line with our earlier targets of achieving 80% to 85% coverage in the year. Our full year 2026 coverage, including price options, now stands at 62%, a 15-point improvement since our last report.

Taking a closer look into 2026, we have 79% coverage in the first half, a solid position to build from as we enter into the year. Based on our current pipeline of opportunities and ongoing negotiations, we expect that utilization levels for the first half of 2026 will continue to increase in the coming months. At the same time, recent developments in Mexico and Saudi give us increased confidence in a tightening jack-up market and a constructive outlook for the second half of the year. This should position us well to gradually fill up the coverage for 2026, while maintaining a disciplined commercial strategy.

On the commodity front, Brent crude has remained volatile, but range bound in the mid-60s. Current price levels have still allowed for meaningful contracting activity this quarter as lower breakeven shallow water projects offer a relatively rapid B2 barrel cycle for our customers. Despite several macro uncertainties, global utilization has remained resilient, in fact, increased quarter-over-quarter with modern rig market utilization at approximately 93%.

In Saudi Arabia, we're encouraged by the market reports confirming that Aramco has issued notices calling back several rigs previously suspended in line with our earlier expectations. As of today, our count is that 7 to 8 rigs have been called back by Aramco, effectively taking the majority of the readily available modern rigs still available from suspensions. The remaining idle rigs are either rumoured to be committed elsewhere or have moved to cold stacked after the suspension last year. The increase of activity levels in Saudi will significantly tighten the supply and demand balance in the region.

Equally positive, as we highlighted in our last call, we continue to see visible incremental demand in the Middle East, particularly Kuwait and the neutral zone with multi-rig, multiyear tenders progressing towards awards. Now coupled with the callbacks from Saudi Aramco, there is a real scenario for rigs from outside of the Middle East to be required to mobilize into the region to meet the forecasted increased demand in late '26 and into 2027.

In Southeast Asia, demand has remained resilient despite various market obstacles. As mentioned on past calls, weakness in the region has been driven by excess supply targeting opportunities following Aramco suspensions. We expect this dynamic to improve in 2026. In West Africa, incremental demand has continued to materialize as expected, and as evidenced by our mobilization of an additional unit to the region. Contract activity has continued to accelerate in the past 12 months, and we see opportunities developing in areas that historically held a much higher jack-up count, particularly in Nigeria and Angola.

Mexico is one of the world's most consequential shallow water markets and remains strategically important for Borr Drilling. Over the past year, industry-wide payment timing challenges and temporary contract suspension at Pemex have affected activity cadence. We responded constructively. We evolved our Mexico contract portfolio, thoughtfully diversifying beyond concentrated Pemex positions into IOCs and independents while continuing to partner with Pemex for terms to support sustainable operations.

Looking into 2026, we see a market where turbulence begin to ease as the year progresses. White space for the global modern jack-up fleet is heavily weighted towards Asia and the Middle East in near term, a phenomenon we see reconciled by demand increases in those regions over the next few quarters.

In closing, I'm pleased to see how Borr Drilling continues to successfully navigate the dynamic market experienced over the last couple of quarters. We secured important contracts for our premium rigs, strengthen our fleet coverage in 2025 and into 2026. We have continued to partner with our customers to optimize our fleet availability or offer them unique operational schedule flexibility. Based on that, we now anticipate 2025 full year adjusted EBITDA to be $450 million to $470 million, aligned with our early expectations and adjusted for the impact of the recent sanction-induced terminations. Demand for modern jack-up rigs remain resilient. The jack-up market has bottomed, and we're seeing clear inflection in rig demand across key regions, including Saudi and Mexico.

Lastly, I want to emphasize the strength of our drilling operating platform. It is built on operational excellence, anchored by a strong focus on safety culture and streamlined operating model that keeps us efficient and predictable. It's relentlessly customer-centric, informed by intimate knowledge of the shallow water market and strengthened by deep-rooted relationships. It is powered by our premium jack-up fleet and our global footprint. This platform is our defining competitive advantage and position us uniquely to benefit from ongoing market inflections.

With that, I'll now turn the call over to Q&A.

[Operator Instructions]

We will now take the first question from the line of Scott Gruber from Citigroup.

It's good to hear, obviously, the new contracts in Mexico for you and good to hear Saudi is calling some rigs back. It seems like the market is improving here. But just curious how you view the next 12 to 24 months in the global jack-up market. Is this momentum going to continue? Are we going to see a genuine inflection in demand in the next year or so, even if crude is range bound? Or do we need some improvement in crude to really drive that inflection?

No. Thanks, Scott. As I mentioned earlier, a lot of the inflection now is basically resulting from the fact that the headwinds experienced earlier, namely Saudi and Pemex are now starting to revert. If you look at activity levels or if you look at utilization levels, at 93%, that number is very healthy. And with the suspension now rolling back, the 93% is a real number. It's not a number that requires adjustment. So we are in a territory that is quite interesting. Obviously, it takes a little bit of time for some of these dynamics to take place. We expect that as particularly the tenders in the Middle East start to conclude, the push for rigs to come back will start to kind of come through and that rebalancing is what eventually helps us in achieving higher utilization and better day rates in general markets.

Now I say beyond the Middle East, we've seen that most markets have been operating at or very close to balance, and that includes, for example, West Africa. And we think that obviously, the ongoing inflection will support faster recovery in markets like that. On the opposite end, as I mentioned in my remarks, markets such as Southeast Asia, for example, where the demand takes a bit longer to materialize, may take a quarter or 2 before we see the real impact of that. But I think the way to think about it is we're going to continue to navigate some volatility in the first half of the year, improving. The potential here for a much stronger second half of the year seems to be solid defined based on this development that we see.

Now we said before, in terms of commodity price, pricing where it is, I believe, is quite healthy for the jack-ups. It is -- jack-ups are very economical barrels for the customers. They are fast barrels to the market. And we think it's actually quite interesting for us to have pricing at that level. So I don't think that pricing movements here are needed to spark additional activity. It's really just the timing that takes for the development in Saudi, the developments in Mexico and some of the ongoing tenders to really come through.

I appreciate that color. And then one of the macro themes we're seeing here is rising demand for natural gas around the globe to help power data centers and just generally rising power demand. How do you think that impacts the jack-up market in the years ahead? And I'm particularly thinking about Southeast Asia. Is there a pull from the gas side that's going to help that market?

No, indeed, Scott. And we've been participating in several very interesting gas projects around the world. And I think in the previous quarters, we named, for instance, the ENI project in Congo, which is a very interesting and large-sized gas development. In Asia, we've been participating in gas projects before. There are a few very interesting projects, particularly in the area of Sarawak, that have been put on hold for now until the situation in Malaysia gets resolved, the political situation in Malaysia gets resolved.

Aramco has, over time, obviously expanded their presence in gas, and I think it's been largely onshore focused. But there have been discussions over the last few quarters about Aramco potentially returning to gas in the offshore space in a more meaningful way. So clearly, what you see is true. We do expect that there will be high interest from our customers to start developing some of these gas projects that are available around the globe.

We will now take the next question from the line of Eddie Kim from Barclays.

Congratulations on the 2 separate 2-year extensions on the Galar and Gersemi in Mexico. Just curious on pricing for those 2 rigs. I don't know if you can share if the day rates on those 2 extensions are similar to what they're earning today, or higher or at a discount? Just any kind of directional commentary there would be great.

Very good. And we haven't disclosed specific numbers for that. But what we shared, they are a notch above from where the rigs are operating at the moment, which that on itself is very interesting. But equally relevant, as I mentioned in the prepared remarks, is the fact that we were able to negotiate improved contract terms and payment terms for those rigs in particular.

What we've seen over in Mexico over the last several quarters has been that collections has been a very relevant topic. So we took marked efforts to ensure that we were adjusting these things in this contract, not only to improve the day rates because that's an important part, but equally important to make sure that those day rates are received in the bank account, and we don't have a growing working capital requirement in the country.

Separately, it's great to hear about the expected activity inflection in Saudi Arabia. Just curious, I mean, 2 years ago, the Saudi Aramco jack-up rig count was as high as almost 90 jack-ups. Today, it's around 55. Just curious, where do you think we get to sometime in 2027? Probably not back up to that 90 level -- but does 70, is that reasonable? Or even that too high? Just curious your estimate of where the jack-up rig count could get to by 2027.

Yes. And Eddie, this is a great question, probably not a very easy one to be precise. I -- from our deck, we think that a number in the high 60s and 70s is very likely. I think a number in the high 70s is possible. The reality is that the big scheme of things, as I mentioned in the prepared remarks, even with this callback that just took place over the last couple of weeks, capacity in the region is actually already very tight, right? So whether that number is low 70s, whether that number is high 70s, I think actually has very little bearing on how the sector is going to respond. Because in any case, any lag up from where we are at the moment is very likely to cause an acceleration in utilization and consequently in economics in the space.

I think a number in the 70s is very reasonable, but I would probably fall shy of trying to predict around for behaviors. We all try and the best. It's definitely not an easy thing. They have a lot of things going on. So that's the way to think it. I think anything they do on top of the callbacks that already took place is more than welcome in the sector and kind of strengthen the space tremendously.

We will now take the next question from the line of Fredrik Stene from Clarksons Securities.

I have 2 questions for you today. And the first one relates to Mexico and the payments there. Clearly, liquidity in general has been a recurring theme given your historical or Mexico exposure, mostly Pemex. Now that you've received some money in October and small sum in September as well, how do you think about potentially -- I think historically, Pemex has paid suppliers mostly. Should we expect any similar payments as you got in October in November and December as well? Do you have any clarity on that kind of taking your receivables down?

Thank you, Fredrik. Obviously, very positive to see that what we have predicted payments starting to flow in the second half of the year actually has happened, and we received $17 million in October. We have -- from what we see in the plans, there are payments to come in, in both November and December as well. And following that, we would also expect things to return more to normal with monthly settlements. Also, that being said -- and Bruno, Bruno also mentioned the improved payment terms that we have in our new contracts, which has actually a cap on the number of days we can have outstanding for operating costs that we pay on our O&M of 45 days. So we expect to get that paid within 45 days, and also a maximum of 180 days outstanding for the bareboat. So that's also going to improve on our collections as we see it since we're not contracting directly with Pemex for these 2 rigs, but between the intermediaries, we have obtained payment terms from them.

For my second question, switching gears a bit. There has been some industry consolidation in the space this year with ADES likely acquiring Shelf if all -- everything is checked. And clearly, there's -- in almost any type of consolidation, there are room for fleet improvements, scrapping and whatnot. But you guys, you have a premium -- a full premium fleet already. And I'm sure there are some other assets out there that could be an interesting fit for you guys. Have you thought any more actively on how Borr could potentially be in any M&A or asset transaction scenario, since you're kind of both in the third quarter and in relation to the equity raise in July seemed a bit more open to that particular theme compared to what you have been earlier?

Thanks, Fredrik. And see, I hope my answer is probably not too much of a repetition from what I've tried to put across in earlier calls. Consolidation is definitely important for the space. It has been welcomed in general. And you're right, whether result of that consolidation or just the state of the market, we have seen together with it some additional retirements, some additional scrapping, some additional repurposing, which is obviously another very important dynamic for the sector. So those things are indeed interesting.

We continue to look -- you're right, as I highlighted in the remarks, we do believe we have a very strong operational platform that can deliver better value for jack-ups than perhaps quite a few of our peers. And that's really what puts us in a position to meaningfully look into how we participate in consolidation if opportunities were to come. But as you said before, and you mentioned that in your question, there are some metrics that are very important for us to consider. And one of those metrics is really the quality of the fleet. We are very proud to have the youngest and the most premium fleet in the water. And obviously, it's important for us to make sure that anything that we're looking to does not come at the expense of diluting the quality of the fleet that we have. Similarly, as we said before, I think a very strong driver for the company at the moment is to make sure that we continuously delever our balance sheet over time. So when we look at any M&A transactions, it has to be something that makes sense from a deleveraging perspective.

So when you put these things together, we continue to see what is out there. I do think that we have a great platform to grow -- we don't have to, and we're going to continue to look at that opportunistically. I do think that the sector can do more consolidation. And if it can be part of it, if it is rational, if it fits our strategy, we're definitely open to see what's out there.

We will now take the next question from the line of Doug Becker from Capital One.

Bruno, you've emphasized the expanding Borr footprint. Curious how you're thinking about balancing portfolio diversification versus having scale in particular markets to manage costs? And maybe putting it differently, do you view growing the fleet in the U.S. Gulf, Angola, Saudi Arabia as strategic priorities?

Thanks, Doug. And see, I think you're right. There's a very interesting balance between not stretching ourselves too wide. But the way I see at the moment, our operation, if you look in the markets where we are present, we are in very large scale in these markets. And generally, our expansion has been in adjacent markets. So obviously, Angola is a new place for us, but we have a very strong operation in West Africa and a very strong knowledge of operation in West Africa that will help us to build that up.

The U.S. is definitely a new frontier. But on the Mexico side, we're present. We understand the operational challenges. We understand how to be successful in that environment. Certainly, there will be some learnings from the U.S., which is new to our portfolio. But certainly, we feel that we are in a good position to manage that. Frankly, I don't -- I wouldn't say at this time that the U.S. is expected to be a large expanding market for us. Getting rig there, I think, is a good achievement for us. It's a new place that we're going. I do see some of the policies in the U.S. potentially supporting more activity. For now, we see a pipeline that is enough to keep Odin busy for quite a while, and that's what we're targeting. If more opportunities come in the back of changing policies, changing incentives for operators in the U.S. to go forward their projects, we'll be ready to look at that. For now, I think it's probably a rig play.

Then just given the increased confidence that the jack-up market is past the trough, any changes to the capital priorities? I know you mentioned deleveraging over time, still a priority. But just given a better market outlook, is there any shifting in how capital might be allocated?

No, not at this time, Doug. I think we maintain the view that deleveraging is a priority for us, and it will be for a while. So we want to make sure that by the amortization that we have in our bonds, by the potential cash sweeps that we have in the bonds, we're positioning ourselves to be in a very favorable position to refinance our debt in 2028. That is on the back of obviously, deleveraging consistently over time. Other priorities, I think we'll leave it for another day. I think it's a bit too early for us to consider. The momentum is positive. That doesn't drive a change in strategy for now.

We will now take the next question from the line of Ben Sommers from BTIG.

I know you touched on it a little bit in the press release, but kind of curious how you're looking at the new build market. I know you guys mentioned that there's some supply chain challenges that you think will kind of push out these new build rigs entering the market. So just kind of curious any color there on what you're seeing.

Yes. No, nothing's changed, Ben. We -- I think quite a few quarters ago, we shared a view that we believe that the order book that is namely there, there may be 1 rig, 2 rigs maximum that would come to the market. That was several quarters ago. None of these rigs have come out. And obviously, the longer they stay in the shipyard, the more complicated it is. A lot of these rigs are very -- were in very early stages of conclusion when they were stopped or abandoned, is not easy. We haven't seen any one of them coming out. I honestly do not expect that to change as things improve.

Awesome. Then I know you touched a little bit on the U.S. Gulf entry, but just curious kind of on Angola, now bringing a rig there, just kind of any outlook or color on that market.

Yes, sure. I mean, it is a new area for us. We have been looking at Angola before and waiting for the right moment and the right opportunity to be in country. As I said earlier, we have a very well-established infrastructure in West Africa. So Angola was a bit of a natural growth opportunity for us. Historically, as I mentioned in the remarks, it is a market that had a quite substantial activity level for jack-ups that has been subdued for quite a few years. It seems that the potential is very large. And that's not limited to Angola.

We see quite a few markets in West Africa that haven't had enough activity for quite a few years now coming back and being able to penetrate Angola now. Having that as an opportunity for our portfolio, I think strengthens our flexibility going forward.

We will now take the next question from the line of Greg Brody from Bank of America.

Just you talked about better collection terms on your new contracts and obviously, collected $19 million in October from Pemex. How should we think about what the opportunity to recapture sort of that -- the receivables is over the next year?

Sorry, your question was on how to capture the receivables from Pemex?

Pemex, that's the main one, yes. Yes.

No. I think what we've seen now is that Pemex has -- and the government of Mexico has put in place several schemes this year, want to refinance their financial liabilities and also their vendor or supplier liabilities with a $12 billion setup. And that's something we've seen they've gone through now in the second half started to repay, and we received $17 million so far in October. We see times of having more payments come in, in November and December and expect a return to normality when it comes to payments in Mexico. So I think it's looking like they are taking the right steps in Pemex and the government in Mexico to become more current on their payables definitely.

Greg, just to highlight what we've kind of mentioned earlier, obviously, we have current receivables that we are -- and we will continue to work hard to collect them. With the new contract terms that we have and the new allocation of the portfolio in Mexico, effectively, then York will continue to have Pemex payment exposure, while the remainder of the fleet in country will now either be working on IOCs or include fixed payment terms that diminishes tremendously our exposure to the Pemex payment friction. So that doesn't resolve the current outstanding receivables, and we continue to work very hard, as Magnus said, to lean on the existing facilities in place, the mechanism the government put in place to accelerate that. But going forward, we expect that very soon the new terms will slow down considerably the accumulation of receivables in Mexico and keeps us far more current.

Then just with the sanctions, you -- obviously, you moved one of the rigs, so that leaves the hill. What are your expectations for how this plays out, in particular with what I think is the sale to Gunnlod of those assets. But what's your expectation for that? And how are you thinking about what you do with the Hill from here as a result?

Yes. It's probably early to say, Greg. What we know is we've worked very diligently. As soon as we became of the sanctions, we did what we were required to do to make sure that we stick to our governance and comply with international requirements. We are currently winding down operations on those rigs. We're expecting both of them to finish around mid-November, the ongoing activities as allowed by the sanctions. And we continue to monitor the situation. It could change if there's a sale potentially. We don't want to speculate. For now, we're doing what we have to do. It's a customer that, over time, I think we deliver great service for them. They seem to be extremely happy with what we've done over time; and provided no sanctions affect our ability to continue working in that field or delivering that program, we definitely will be more than happy to continue to do that. But I don't want to speculate for now. We're sticking to the rules as they apply, and then we'll see if things change as we go along.

Have you seen this uncertainty with sanctions impact the rig market at all? You're probably a little closer to this than me, but how many others have been affected by the suspensions?

Well, I won't comment much about others. I mean, the only thing I think has been in the news recently was a similar impact of advantage on the deepwater market. In the shallow water market, I haven't seen any other announcements. As far as we are concerned, the impact of that has been limited to Mexico. We'll continue to monitor the whole topic of sanction is a very dynamic topic at the moment. For now, that's been the only impact to our business, which we disclosed, which is the loss of revenue. For the Odin, we're very happy to see that the rig has been re-contracted now. For the Hild, we'll continue to see what are the opportunities for the rig, whether it involves returning to the same project once the field is sold or if the field is sold or alternative deployments for the rig within with the region.

Great. And one last one. Just what's your expectation for cost trends on the operating side here relative to this quarter going forward? How should we think about that?

Sorry, Greg, I'm not sure if I got your question. Cost trends on the operating side.

What's your expectations for the direction of your cost up -- or is there opportunities to cut costs? Just wondering how you're thinking about that going forward.

Yes. No. And as we said before, we've been seeing operating costs very steady over time. There are differences in operating costs from region to region, from country to country. But all in all, we have not seen a significant change in operating costs over the last few quarters and neither we have any reason to believe that that's going to be changing going forward. The team continues to be working focusedly on finding savings in our operations, streamlining operations, and that clearly has been more than enough to offset any inflation experienced in the sector. But so far, it has been flat. I have no reason to think that will change going forward.

We will now take the next question from the line of Joshua Jain from Daniel Energy Partners.

Just I really only have one, which is on rig attrition. Maybe do you have a number in mind with respect to how many incremental rigs could leave the market next year or any insights there? Or maybe to put the question differently, could you speak to broadly the capital investment that may be required for a number of operating rigs that are out there today that are older to sort of keep pace with a lot of the newer spec rigs and how that frames market dynamics?

Thanks, Josh. We see that standard rig market or the older vintage rig market has been shrinking over time, and they've been limited to a few markets. The rig count in that side, the active rig count in that side is about 100 rigs at the moment in the water and the average age is above 40 years old. So there's obviously, a lot of potential for attrition. Some of the attrition should happen as a result of lack of contracting opportunities for these rigs. Some of the attrition will happen as a result of just the high CapEx required to maintain these rigs active going forward. Rigs are mechanical equipment and as such, they require capital to stay in good working class. And by the time they are 40 years old and beyond the retirement age, that only gets better -- only gets worse exponentially. So I don't know how many rigs I'll say can get out of the market.

Clearly, there's a potential for a lot of the rigs to go out of the market. We're seeing that trend accelerating, we're seeing rigs now converted to -- or sold for conversion to MOPU, including quite a few of the rigs that came out of Saudi. We'll continue to look obviously for us. We expect owners to act diligently in that and discipline on that. For us, it's a bit of a muted point. Our rigs are all very new with the youngest fleet in the industry. So let's see what happens.

Thank you. That's all the time we have for questions today. I would now like to turn the conference back to Bruno Morand for closing remarks.

Very good. Thanks for participating in today's call, and I look forward to speaking to you guys soon. This concludes today's conference call. Thank you for participating. You may now disconnect.