Borr Drilling working to secure liquidity runway until 2022
Borr Drilling, an offshore drilling contractor, is working to secure a liquidity runway until 2022 even in an unlikely low scenario without any further contracts.
In an update on Wednesday, Borr Drilling said that, as a result of the weakened market, it had actively entered into discussions with the shipyards and creditors to create a liquidity runway until 2022.
According to the drilling contractor, the lenders and shipyards recognise the current challenging environment and significant progress has been made based on a proposed arrangement with lenders including shipyards which includes the postponement of certain yard commitments, an adjustment in covenants and reduced amortisation as well as deferring cash interest payments.
These discussions are showing material progress, and the board expects the process to be finalized in the near-term, the company added.
Borr’s management believes that such a solution, if concluded, will give the company a runway for the next two years even in the unlikely scenario where no new contracts are obtained or renewed.
At the end of the first quarter of 2020 and into the second quarter 2020, the company also received certain waivers from its lenders, including a waiver of its minimum free liquidity threshold as well as interest payment deferrals.
Further decrease in number of contracted rigs
In April, the company sold the B152 and Dhabi II rigs for total proceeds of $15.8 million.
On 19 May 2020, Borr signed an agreement to sell the MSS1 semi-submersible rig for recycling for proceeds of $2.2 million.
The book value of the rig was impaired down to its sale value at the end of the first quarter of 2020, and the rig was classified as held for sale. The sale is expected to close in the second quarter of 2020.
Borr noted it continues to be involved in other tender processes which might lead to the sale of some modern assets.
Looking at the total jack-up market, the number of contracted units have decreased from 387 to 371 units in the last 2 months, as a result of the COVID-19 pandemic, and Borr expects this number to reduce further.
“However, as global oil demand is anticipated to rebound in the coming year, we expect that some of the supply reductions and shut-ins will be slower to recover”, The Chairman of Borr’s board, Paal Kibsgaard, commented.
He added: “This could lead to the development of a more constructive oil market over the course of 2021 and a subsequent improvement in offshore drilling”.
It is worth noting that, during the first quarter of 2020, Borr’s operating revenues increased by 12 per cent quarter on quarter to $104.1 million from $92.9 million in 4Q 2019.
The company’s net loss increased to $87 million in 1Q 2020 from $60.3 million in 4Q 2019.