Borr Drilling Ltd

OSE:BORR

Earnings Call Analysis

Borr Drilling's Strong Q2, Future Prospects Bright

Borr Drilling posted strong Q2 results, with a 16% increase in total revenue to $271.9 million and a 17% rise in adjusted EBITDA to $136.4 million. Net income surged from $14.4 million in Q1 to $31.7 million. The company announced a $0.10 per share quarterly dividend. Additionally, they completed contracts for all 22 rigs and secured a replacement contract for the Arabia I in Brazil, enhancing future earnings with higher day rates. Looking ahead, Borr remains optimistic with 73% of their capacity contracted for 2025 and anticipates sustained better pricing in the tight market for premium assets.

Strong Quarter Performance and Revenue Growth

Borr Drilling reported robust financial results for the second quarter of 2024, showcasing a total operating revenue of $271.9 million, marking a 16% increase from the prior quarter. This increase was largely driven by improved day rates and increased operating days for its rigs. Notably, day rate revenues alone surged by $24.7 million. The adjusted EBITDA for the quarter also rose by 17%, coming in at $136.4 million, reinforcing the company’s upward trajectory in earnings.

Operational Highlights and Contractual Strength

All 22 of Borr Drilling's completed rigs are currently under contract, a significant achievement in maintaining full utilization. Looking ahead, approximately 73% of the company's capacity is already contracted for 2025, supporting shareholder confidence in the future. The company's technical utilization rate stood at an impressive 99.2%, converting to an economic utilization rate of 98.4%. This level of efficiency positions Borr strongly amidst a tight market for premium assets, as a notable 30% of the global jack-up fleet is over 35 years old, suggesting high potential for increased day rates.

Guidance and Future Projections

Borr anticipates achieving adjusted EBITDA between $500 million and $550 million for the entirety of 2024. With recent contracts being secured at market-leading rates, including a long-term contract for the Arabia I rig in Brazil, the company expects to benefit from increased day rates, projected to rise by around $13,000 per day for the fleet in 2025, resulting in over $100 million in additional revenue. Overall, this guidance illustrates a clear pathway for revenue growth driven by enhanced contract commitments.

Shareholder Returns and Capital Management

In a positive move for shareholders, Borr Drilling's Board approved a quarterly dividend of $0.10 per share for Q2 2024, effectively doubling the dividend paid earlier in the year. This decision indicates a strong commitment towards returning capital to shareholders as Borr navigates a favorable cash flow environment. With $100 million authorized for share buybacks remaining, alongside nearly $200 million in cash reserves, the company is well-positioned to enhance shareholder value through dividends, potential share repurchases, and debt reduction strategies.

Market Position and Competitive Landscape

Borr Drilling has successfully maintained market-leading rates by securing new contracts which add to their substantial backlog. The current market dynamics, especially reflecting on previous suspensions by major players like Saudi Aramco, indicate a slightly competitive yet promising environment for jack-up rigs. The absence of new orders in the past decade has left the shipyard order book remarkably low, representing only 2% of the total fleet. This could lead to elevated demand for Borr’s modern fleet in the coming years, as the company continues to strategically position itself in key markets.

Exploring New Contracts and Expansion Opportunities

Borr Drilling continues to explore broader markets, including valuable contracts in Brazil and Africa. The newly secured long-term projects, coupled with the strategic partnership with local companies, underscore Borr's ability to navigate complex operational terrains successfully. For instance, the four-year contract secured in Brazil holds promising potential for expansion beyond its initial scope. This concentrated drive towards securing high-yield contracts ensures a steady throughput of operations and financial returns.

Earnings Call Transcript 2024-Q2

[Operator]

Good day, and thank you for standing by. Welcome to the Borr Drilling Limited Second Quarter 2024 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. Patrick Schorn, CEO. Please go ahead.

[Patrick Arnold Schorn, executive]

Good morning, and thank you for participating in the Borr Drilling Second Quarter Earnings Call. I'm Patrick Schorn, and with me here today in Dubai is Bruno Morand, our Chief Commercial Officer; and Magnus Vaaler, our Chief Financial Officer.

Next slide, please. First, covering the required disclaimers. I would like to remind all participants that some of the statements will be forward-looking. These matters involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. I therefore, refer you to our latest public filings.

Next slide. I'm pleased with the second quarter results and performance. All 22 delivered rigs are contracted and committed. In addition, one of the newbuild rigs, the Vale has been delivered today, for which we already have a work scope design. And the Var, our final newbuild remains on schedule for delivery in late Q4 2024. On the back of our strong contract portfolio, we generated $253 million in adjusted EBITDA year-to-date, positioning us well to meet our full year 2024 adjusted EBITDA guidance of $500 million to $550 million.

From a cash standpoint, we are well positioned for the future. We have an undrawn $150 million RCF, a $45 million guaranteed facility and nearly $200 million in cash at the end of the quarter. In 2024, we will complete our CapEx program related to the newbuild rigs enable to us further enhance shareholder returns through additional dividends and/or share buybacks with $100 million still available under the current buyback authorization. The Board has approved a quarterly dividend of $0.10 per share for Q2 2024, which was doubled in the first quarter amounting to approximately $100 million in annual dividends.

In terms of contracting, we have continued to secure new contracts at accretive day rates, including recently the announced long-term contract for the Arabia I in Brazil. I'm particularly pleased that following the unexpected suspension in Saudi Arabia, we were successfully in obtaining a replacement contract. It should be advantageous for the coming 4 years due to its higher day rates and longer contract duration. As I already mentioned, all our 22 delivered rigs are again contracted with only a few days left remaining available in 2024.

Looking ahead to 2025, we currently have about 73% of our capacity contracted, which aligns with our expectations for this time of the year. Looking ahead, we foresee a continued tight market for premium assets, leading to sustained better pricing. The global jack-up fleet age profile with now 30% of the rigs being over 35 years old is expected to drive incremental retirements, coupled with the fact that no new rigs have been ordered in the past decade, these conditions create a favorable environment for our company, which operates the youngest fleet of 24 premium rigs in the industry. The second quarter operational performance has been strong with a technical utilization rate of 99.2%, which was converted into a strong economic utilization of 98.4%.

Magnus will now take you through the financial details of the second quarter.

[Magnus Vaaler, executive]

Thank you, Patrick. The financial performance for Q2 was strong and continues the positive trend experienced in the recent quarters with an increase quarter-on-quarter in total revenue of 16% and an increase in adjusted EBITDA of 17%. Q2 total operating revenues were $271.9 million, an increase of $37.9 million when compared to the first quarter. Out of these, $37.9 million, day rate revenues increased by $24.7 million. This related partly to increases in operating days and day rate for rigs Idun, Thor and Prospector 5. And $14.5 million impact from the amortization of deferred revenue related to the contract termination for the Arabia I.

These increases were partly offset by a decrease in operating days for Arabia I. In addition, for the first time, included in the total operating revenues was the recognition of management contract revenue of $11.7 million for 3 of our bareboat rigs in Mexico, for which we also provide rig operational and maintenance support services.

Total operating expenses for the second quarter were $167.6 million, an increase of $18.4 million compared to the first quarter. $11.2 million of the increase relates to the rig operating and maintenance support services we do in Mexico, which I mentioned on the revenues, and that we earned 5% margin on. In addition, $3.9 million of the total variance is due to the increase in amortization of our deferred costs associated with the termination of Arabia I.

Net income for the quarter was $31.7 million, an increase of $17.3 million or more than doubling from Q1. Adjusted EBITDA was $136.4 million, an increase of $19.6 million or 17%. Our free cash position at the end of Q2 was $193.5 million. In addition, we had $150 million undrawn under our RCF facilities resulting in total available liquidity of approximately $344 million.

The total cash in the quarter decreased by $88.5 million. We've taken a closer look at the cash flows, where net cash provided by operating activities was $9.1 million. This includes $91.9 million of cash interest paid on our bonds and $17.2 million of income taxes paid. Net cash used in investing activities was $13.4 million. This includes $6.8 million used on jack-up additions, consisting primarily of costs for special periodic surveys and long-term maintenance, and $6.4 million used on newbuilding additions relating to the activation costs for our renewables.

Net cash in financing activities was $84.2 million. This includes $60.3 million paid on our bond debt amortization and $23.9 million of cash distributions paid to shareholders.

Subsequent to quarter end, we raised $150 million of additional debt under our 2028 senior secured notes to finance the delivery of our new devolving. While the seller's financing was available for this rig due to more favorable pricing and terms under our bonds, we decided to raise additional debt through this $150 million cap. We continue to have sellers financing committed to the last new build to be delivered later this year, but we will explore possibilities when we are approaching delivery.

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

[Bruno Morand, executive]

Thanks, Magnus. On the commercial front, we have continued to add accretive contract to our backlog, including 1 further fixture with a same day rate above $200,000 per day. So far this year, we've secured 14 new commitments, adding nearly 10 rig years and $651 million in backlog at market-leading rates.

Let me provide some highlights of our recent fixtures. Firstly, the Prospector 1 has had a 1 well option exercised by ONE-Dyas. This option should keep the rig contracted into Q2 2025. This additional scope relates to the gas project in the Netherlands, which includes upgrades to the Prospector 1 that will ultimately enable it to operate with a 100% green electricity provided by nearby wind farm. We're very pleased with our close collaboration with ONE-Dyas and how this continues to add to our portfolio of projects focused on reducing the carbon footprint from our operations.

In Southeast Asia, we secured a binding Letter of Award for the Gunnlod for a 210-day program commenced in November this year.

In Africa, the Norve has secured a further extension with BWE that will maintain the rig contracted until February 2025. The rig will then commence its subsequent contract with Marathon Oil in EG. We continue to see interest work prospects across Africa. The Norve is a high-performing unit capable of operating up to 400 feet of water and remains well positioned to secure continued commitment in the region.

During our last quarter's conference call, we announced the company had secured 2 commitments in Africa amounting to 650 days of backlog for which rig assignments were still under review. We're pleased to confirm that the Gerd has been assigned to the first commitment with ENI Congo. It will commence its mobilization from the UAE in September, following the completion of the current contract with [Gunnlod].

For the second commitment, we will assign our new Vale and expect the work to commence between late Q4 2024 and Q1 2025. And lastly, the Arabia I, which had its contract suspended earlier this year, has now secured a new long-term contract in Brazil expected to commence in Q1 2025 and significantly improve the economics.

On the back of these contracts, our fleet is nearly fully contracted for 2024 with limited white spaces, mainly related to Thor in late Q4. For 2025, our contracted coverage has now reached 70%, including firm contracts and price options. The new awards received this year at market-leading rates have resulted an increase of approximately $13,000 per day to the average day of our backlog. And the combination of health contract coverage and higher day rates is a strong revenue visibility in 2025.

From a broader market perspective, utilization for modern jack-ups remains at approximately 95% nonadjusted for Aramco suspensions.

Following a second wave of suspension by Aramco, there have been 22 modern rigs suspended this year, of which 5 have already been re-contracted elsewhere, including our Arabia I. We anticipate that only 12 of the 17 rigs remain suspended will be compared to the international market due to factors such as the technical capabilities and the geographical footprint of their operators.

On the newbuild front, no orders have in place for nearly a decade and the shipyard order book stands at 12 rigs, representing only 2% of the total jack-up fleet. This is a remarkably low number, particularly considered the fleet age statistics mentioned earlier by Patrick. We anticipate that only 4 of the rigs under construct could join the active fleet in the next 12 to 18 months and that includes our newbuild Var.

Looking at the demand side, we reiterate our view that incremental demand in the next 12 to 18 months will be sufficient to offset the supply impact from Aramco suspensions and newbuild deliveries. Based on our in-house outlook, we forecast an incremental demand of 15 to 20 rigs. Comparatively, data from S&P Global in their latest word rig forecast indicates an incremental demand of 25 to 30 rigs in the period, which supports our projection. While some markets may experience near-term competitive pressure, we anticipate this to be punctual and short lived as the market continues to absorb the available capacity.

In summary, we maintain a positive view of the market balance for more than jack-up fleet and its day rate momentum. With that, I'd like to hand the call back to Patrick.

[Patrick Arnold Schorn, executive]

Thank you, Bruno. So in conclusion, there are 3 main messages I would like to leave you with. Firstly, our ability to add backlog at market-leading rates remains intact and is strengthening our future earnings. This is very much related to our truly global footprint and deep client relationships across the globe. Secondly, our adjusted EBITDA guidance is and remains $500 million to $550 million for the full year 2024. And lastly, the Board approved a quarterly dividend of $0.10 per share, resulting in $100 million annualized dividend payment.

Looking at 2025, with reduced CapEx outlay and incremental day rate for the already committed contracts, then there is plenty potential to significantly increase returns to shareholders going forward.

Ladies and gentlemen, I would like to end here our prepared remarks, and we can go to Q&A.

[Operator]

[Operator Instructions] And now we're going to take our first question and it comes from the line of James West from Evercore ISI.

[James West, analyst]

Patrick, you're going from a situation where you guys are using cash for the newbuilds to next year where you're going to have just a huge amount of cash flow and a lot of that will turn into free cash flow. I know you just doubled the dividend. But as you -- in your discussions with the Board are thinking about shareholder returns, where do you think the best returns are? Is it the buyback? Is it the dividend? Is it any debt reduction? I mean how are you guys thinking about the uses of the free cash?

[Patrick Arnold Schorn, executive]

Let me maybe give a bit of an idea of, firstly, how much do we think that this approximately is going to be. And then Magnus can talk a little bit as to the uses of that and where we see the benefit. But if you look at the year-on-year change that we see because 2024 CapEx was impacted by the delivery of the 2 and the final newbuild in the second half of this year.

The cash outflow related to these 2 deliveries, net of the loan financing is approximately $80 million when taking into account the delivery installment and activation costs for these rigs. This will not be occurring again next year, and we will thus have a positive impact on the cash available in 2025. Secondly, 2024 has a higher number of special periodic service for our rigs coming due every 5 years, and the large portion of our rigs were delivered 5 years ago in 2019.

With our fleet constricting of 24 rigs when all are delivered, and SBS carried out everything approximately 5 years, you would expect average of approximately 5 years of coming up for SBS every year. In 2024, we actually did 10 rigs, obviously more cash cost associated. And In '25 and '26, we expect only to do 2 or 3 per year. So that cost also goes down. So lastly, from an earnings perspective, if you look at a simple back of the envelope, based on the numbers that Bruno has shown, then in 2024, the average day rate we have fixed is around $135,000 per day.

And what we have so far in the books for 2025 is $148,000 per day. This increase of around $13,000 per day for the full fleet is totaling to just over $100 million as well. So adding all these 3 factors together just for illustrative purpose, one can expect an increased cash flow year-over-year of over $200 million, which, in turn, obviously, then can be used for capital returns through dividend, share buyback or repayment of debt. And maybe Magnus, can talk a little bit about what are some of the considerations that we have.

[Magnus Vaaler, executive]

Thanks, Patrick. So we have, as mentioned, the quarterly dividend established already, which the Board has set of $0.10. Secondly, we're doing the annual amortization of the bonds of around $125 million. There is also cash elements in the bonds that depending on our leverage ratio, the bondholders can elect to take additional down payments on the bonds starting in 2025, up to 50% of our free cash flow in the preceding year.

So that is also a way of making capital returns. Lastly, we also have $100 million authorized share buyback program, which we haven't started utilizing yet. I think it's a matter, always, obviously up to the Board to decide which one of these we would go for, but it's very good to have all these tools available for us to see what is most beneficial at the time of -- when the cash comes in. Looking at the share price at that time and also to see what the shareholder would prefer. So that's up to the Board to decide, but we have all the tools necessary to provide a good balanced return to stakeholders.

[Operator]

And the question comes from the line of Fredrik Stene from Clarksons Securities.

[Fredrik Stene, analyst]

Patrick and team, hope you're all well. I wanted to touch a bit on the newbuilds. You said that the Vale is going to be delivered in this week and now it's signed to this Africa contract, and you finance it with the bond instead of shipyard financing?

And then clearly, the next big event here is what's going to happen within the Var and you seem relatively confident in my view at least that you'll be able to get something lined up for that rig ahead of its delivery. So for me, it would be very interesting to hear -- any color that you could give on what those potential opportunities look like? What type of geography are we looking at? Will it be a long idle time from delivery until contract start-up? Should we expect rate similar to the leading edge rates you signed already? Anything on that, that then would be very helpful.

[Patrick Arnold Schorn, executive]

Okay, Fredrik. No, I understand. And clearly, it is -- the commercial environment is a very interesting one at this moment. Obviously, after the Saudi suspension, it has changed somewhat. But I think it needs to be very clear that the people that we compete with in general, particularly the ones affected by some of the bigger suspensions in Saudi, don't all have a global footprint, don't all have operating basis in the places where there might be activity coming up, not necessarily the setup up to actually take care of it. And I think that, therefore, you have to think that there is a bit of a bifurcation in markets.

I think that what you see today is that in Asia, the competitive pressures have changed quite a bit due to the Aramco suspensions. But in the rest of the world, there is still quite a bit of expertise required from companies to work in areas as the Americas, Mexico, Africa, these are not open -- as open to everybody.

So -- that is what I would say is where some of our strength comes from and where we are also able to maintain the pricing that we have today. I understand you would like more color where we see the contracts for the Var coming from. But I would like to keep that commercial part a little bit under reps until we indeed have signed it up. So I'll have to speak a little bit in riddles to you there until we have it all covered. But you are correct in stating that we feel that we have sufficient irons in the fire to make sure that we have work lined up by the time that the Var becomes available as well.

[Fredrik Stene, analyst]

That's very helpful, Patrick. And then just back of that. The jack-up market seem as you're kind of using your own words, quite bifurcated currently, and we've seen rates -- in the lack of better words, all over the place after -- so we started to suspend rigs. And on the back of what you said now around the Var, do you think -- and potentially also taking your contract coverage for next year into account, are you comfortable still beating those high levels and comfortable also potentially losing out of some work while doing so and to make sure that you're still in that high end of the rate spreads?

[Patrick Arnold Schorn, executive]

Yes. I'll let Bruno talk more about the rate. But I think there's 2 things that impacted for us and that you've got to keep in mind as well. We don't have much available. So I don't have to bid a whole lot, right? It's not like I have to sell 100 rigs. We have here and there some availability. So that makes the picture quite different. I also think there is different value that we provide, right? And therefore pricing is different, but I'll let Bruno elaborate a little bit more on that, that obviously has more details on it.

[Bruno Morand, executive]

Yes, Fredrik, and Patrick alluded to that a while ago, but the reality is in some markets where barriers of entry are a bit lower, we've seen realistically a stronger competitor behavior of some of our competitors and people that don't necessarily have the same geographical footprint as us will fight more aggressive for opportunities that they can grasp. And I think that's normal, that's expected. I think Asia, particularly is one of those markets. Outside of that, I think the impact has been quite discrete, I would say. So that leaves us in a good position to look for opportunities. I think there's a few things to consider here.

I mean if you look at the exposure that we have and particularly the Var, it's a series of rigs that are very unique capabilities. If you look at the sister rig, Saga [indiscernible] in Brunei, the performance of the rig has been remarkable and those rigs do the reputation for themselves in the industry. So they are well sought after assets that give us certainly a competitive advantage.

Now Patrick mentioned, if you look at our exposure and seeing what we already have in the works, we feel that the open days even in 2025 that we have are predominantly focused on the second half of the year, the basically effectively eases 2 to 3 quarters, year 4 in the market to absorb and you oversupply, you normalize in a place where we think that we'll continue to provide robust pricing power.

So we're confident in the market, I don't see any -- from our rigs and our availability, we don't see any substantial rate pressure on the downside, much the opposite, we think we still see quite a lot of opportunities where we can continue to drive rates upwards. We mentioned in the second quarter, we had 1 further fixture breaking the $200,000 a day mark. I think that's a good [testamental event].

[Fredrik Stene, analyst]

Final -- and sorry if I'm doing like 2 main questions here. The final 1 for me. Your range $500 million to $550 million for the year guidance, you're 92% covered. And I think a couple of, call it, idle periods for the Prospector 1, Gunnlod, Gerd. How -- what's going to make you end up in the low end and the high end of that range?

[Patrick Arnold Schorn, executive]

Yes. I think that at this moment, Fredrik, I don't think we're in a position to close that in any further as you have seen with some of the suspensions in Saudi. These things can happen fast and do change your income profile and you have to deal with it. That's just part of the business that we have.

So I think for right now, we are able to deal with the changes that we see in the business, and we have no concern with regards to keeping the guidance where it is. But I wouldn't want to change the brackets of that make it any title or anything like that. I think there's too many things that still can happen in the year. It is a very volatile business from time to time. So you're right, I mean there shouldn't be too many moving pieces. If everything unfolds as we expect it to be, we'll be delivering within that bracket and -- that is what remains our goal.

[Operator]

Now we're going to take our next question, and it comes from the line of Truls Olsen from Fearnley Securities.

[Truls Olsen, analyst]

So switching gears, you won a significant contract in Brazil. Obviously, Brazil is not the biggest jack-up market. But it has its, call it, challenges or it's a bit cumbersome from an import-acceptance point of view. How should we think about that cost wise? And any way we should sort of have in mind related to, call it, the project or bringing the jack-up into Brazil and on operations, you have a local partner as well like the other or as I understand it, so.

[Patrick Arnold Schorn, executive]

Yes. So Truls, I mean, that's absolutely fair. I think that all operating environments come with their own peculiarities, and Brazil certainly has its share of that as well. And acceptance in Brazil can be complicated. So it's -- for us, it was very clear that because of the volume of future work that we see there also on the jack-up side, it is important enough for us to not ignore it.

And therefore, we have analyzed this very carefully, and it became clear that without a local partner for us, it wouldn't be the right market. So we do have the right partner. And together, I think we put something very attractive together that, I mean Bruno obviously knows that market is far better than I do. Maybe Bruno, you can talk a little bit on how we manage our rigs with or our start-up rigs with -- in relation to the cooperation that we have there.

[Bruno Morand, executive]

Yes, for sure. And Truls, we are currently forecasting the rig will be on contract in the first quarter of 2025. So we do have a quite substantial period now to address those things and prepare for that. We have been working and we continue to work now in very close cooperation with the Brazilian company that will help us in our operation. We have their people currently on board at rigs. So we're doing obviously a very substantial scoping of everything that has to be done.

It's worthwhile to mention that certainly while the Petrobras contract in Brazil comes with challenges, that contract is one that is coupled with a quite substantial mobilization fees so that will help us a long way in preparing and making sure that we're appropriately funded. But we have time, and we're operating with a company that has quite a bit of the local expertise and will give us the volume as well. We do appreciate that it's a complex market and running a 1-rig operation will be probably undersized. Now joining forces with a company with a large experience would help.

That all said, I think one of the interesting features of the Brazil contract is that program is predominantly or almost exclusively I would say focus on P&A and intervention. And from a working perspective, it should be a relatively simple piece of work. And I think it's probably fair to say that we at least oversized potentially for what was needed. That said, I think it was a good fit for Petrobras. It was a good fit for us. It's a 4-year contract with a very high likelihood that will expand beyond that. So we're very pleased with it.

[Patrick Arnold Schorn, executive]

And I think that this is one also where the focus will be heavily on efficiency, using all the capabilities of the rig to make sure that we can P&A that's far better and what you would do on a more traditional rigs. So -- very pleased with that. But your comments are fair, it is a market that we are trying to treat with the appropriate respect.

[Operator]

Now we're going to take our next question. And the next question comes from the line of Doug Becker from Capital One.

[Doug Becker, analyst]

Patrick, you clearly remain constructive in the jack-up market, despite the second wave of suspensions in Saudi Arabia. How do you assess the risk of a third wave of suspensions? And the reason I ask is after the first wave, there were rumblings that a second wave was possible. Is there anything like that this time around?

[Patrick Arnold Schorn, executive]

That is a very good question, Doug. And I mean I honestly don't quite know. I think that if I look back and I mean we've had here at Borr and previously, a lot of interactions with Aramco as well. So this sudden change and the magnitude of it had me quite surprised, and I think with me probably quite a few people.

So I think if you build up that they did of the big build offshore and then basically halving that within a year, I was quite surprised. But I think that some of the fundamentals remain true. I do believe that the better fields with the virgin pressure for Saudi are still offshore, that this is absolutely required in the future to be helped the expansion plans on the various fields still needs to be implemented. So I think it is a bit a shift to the right that work won't disappear.

Now does that mean that they couldn't tighten the belt any further because, I mean, to me, it seems that the work that is being suspended or put a little bit more to the right is work that eventually will get done, but currently, it's only suspended to make sure that the CapEx budget and may be unnecessarily early expenses occurred as much as possible. So I can understand where they are, but I don't know that even for Saudi Arabia, this is something that you could exercise for the long term.

So I do feel that, that work on track. Now are there any more small upset that we could see in the activity. It's absolutely possible. I think that there is probably some land upsets as well going on, so that we have some curbs of CapEx, absolutely possible. I'm not aware of any of it. And I also think at a certain moment, you get to a point where it probably becomes counterproductive and costing more cash to Saudi Aramco than anything else. So I don't want to rule it out because I don't know if there could be further ups or downs. But I think that the industry can deal with that. For us, we have 2 more rigs there. We're very pleased with the work there, but that's our kind of our direct exposure to that market.

[Doug Becker, analyst]

Got it. And then maybe a little more specific to Borr, just -- can you help frame the prospects for the Thor and Ran after they finish contracts later this year? And maybe more to Ran specifically, is it likely to stay in Mexico?

[Patrick Arnold Schorn, executive]

Yes, Bruno, maybe you want to talk a little bit about that on the prospect that we have or maybe a bit on the Mexican market in general.

[Bruno Morand, executive]

Yes. No, indeed, undoubtedly, the Mexican market is one that we pay a lot of attention to. We have a large fleet of rig there. We have a good performance there. That's a good chunk of our business. Activity in Mexico is obviously mainly driven by Pemex, but not only Pemex. There's other as well that are available in the country.

One thing interesting to mention, Doug, is that there are new models, working models being implemented in Mexico as you speak, including certain models where Pemex let other companies basically run the field and run the production, which streamline cash flows. I think that this is in the early stages of being rolled out. That could open a very interesting window of opportunity for our rigs, including the Ran. But as I said, we are not only focused on Pemex, we do see some of them work with IOCs that could give us interesting opportunities.

Now if I think about Americas broadly, it's not all about Mexico, we do see some pockets of activity now appearing in places like Surinam, for example, in Trinidad. So we keep monitoring that quite closely and remain quite confident that the rig will have a continued program.

If I think about the Thor in Asia, there's definitely a lot of tenders open at the moment. It's actually quite buoyant in terms of how many things are open and standard we're pursuing. There's definitely a tighter competitive landscape. But as I said, the Thor and the rig that we have in Asia, they've kind of set themselves apart because of the operating capabilities that they have. They deliver this well to the customers, and they're very well sought after.

So I'll probably fall shy of kind of leasing and, mainly, the prospects, but we see a range of things that could see that rig occupied whether in Vietnam where the rig is going to be soon or within the region as well. Now our rigs are mobile in nature, Doug, we obviously lighter markets where we operate. Southeast Asia has been a very good market to Borr. But if opportunities of better economic results appear elsewhere, we're not afraid as well, we're not shy of moving them around. We've done it over the years, and we'll continue to do to make sure that our fleet is displaced where we make the most value of it.

[Operator]

[Operator Instructions]

[Patrick Arnold Schorn, executive]

We have no more questions on the phone. Magnus, is there any other questions that we have?

[Magnus Vaaler, executive]

I think we have time for 1 written question, [indiscernible], please.

[Unknown Executive]

Yes. The obligatory question about newbuild orders. Have there been any changes in market dynamics that suggest an order could be made? Also, is there any shipyard appetite to take on such an order?

[Patrick Arnold Schorn, executive]

So I think that there is definitely appetite, not in large numbers, but I think that what we hear that shipyards wouldn't mind taking small orders. The problem is that the shipyards are extremely busy, and therefore, nothing can be delivered very quickly. So I think that is a little bit the problem. I think, Bruno, the late -- the latest we heard was probably around company like ONGC still [indiscernible].

[Bruno Morand, executive]

Yes, in large, the conversations that we hear about potential shipyard orders are treated by long-term demand. We mentioned that before, we think the financial situation and what it would take for you to acquire rig in the long-term economics contracts or orders will have to be backed up by long-term commitments. So naturally, the most buoyant conversations with the likes with ONGC and so on so forth. Structurally, I don't think things changed. We still hear that figures for newbuild in the high 200s, probably pushing close or above 300 on a fully delivered basis.

And that obviously would have to come coupled with continued improvement in day rates. So nothing's changed. I think there's still talkings. If that happens, again, I think it's positive for us because then it means that the rigs are supportive of that type of construction costs. I don't think we're quite there yet. I think it's going to take some time before they are long enough contract for someone to actually call that.

[Patrick Arnold Schorn, executive]

Yes. And the thing that maybe as a last comment around is clearly with the fleet getting older and older. And now having, as I mentioned in my remarks, 30% of the rigs being over 35 years old, you can stretch that to a few years here and there, but there has to be a concerted efforts to make sure that the future of this industry has enough rigs available to what the customers need.

So I absolutely believe that we will be building rigs again as an industry. It might take a little bit of time, but this is going to be truly driven by economics and the day rates. So I believe strongly that we will get to that point in the future.

Now with that, and it being the last questions, I would like to thank everybody for participating in our call, and we look forward to talking to all of you again soon. Thank you.