Borr Drilling (BORR) Q3 2025: Backlog Expands $625M as Mexico and Saudi Activity Rebounds
Borr Drilling’s Q3 marked a pivotal step forward, with 22 new contract commitments adding $625 million to backlog and clear progress on Mexico collections and market diversification. Management is navigating volatile markets by shifting exposure away from high-risk clients, tightening payment terms, and expanding into new geographies like the Gulf of America and Angola. As Saudi and Mexico activity recovers, Borr signals a tightening jack-up rig market, supporting a constructive outlook into 2026 and beyond.
Summary
- Contract Portfolio Diversification: Borr reduced direct Pemex exposure and secured improved payment terms in Mexico.
- Fleet Utilization and Expansion: Near full fleet utilization and new awards in the Gulf of America and Angola strengthen global reach.
- Market Tightening Signal: Saudi rig recalls and resilient jack-up demand point to higher utilization and pricing power ahead.
Performance Analysis
Borr Drilling delivered a strong Q3, with operational execution remaining industry-leading as technical and economic utilization hovered near 98%. Revenue growth was driven by both higher day rates and increased operating days, particularly as several rigs transitioned from suspension to full activity. The company’s adjusted EBITDA margin of 48.9% underscores a disciplined cost structure even as rig operating expenses rose in tandem with higher reimbursable costs. Notably, free cash increased by $135.4 million, aided by improved collections in Mexico and a successful July equity raise.
Working capital was pressured by a $42 million increase in Mexican receivables, but subsequent collections in October and ongoing expected payments in November and December signal progress toward normalization. The company’s liquidity position remains robust with $461.8 million available, supporting both operational flexibility and strategic initiatives. Management guided for full-year adjusted EBITDA of $455 to $470 million, reflecting recent contract terminations due to sanctions but offset by new awards and improved commercial terms.
- Revenue Growth Drivers: Higher day rates and increased rig activity, especially for the RON, THOR, and rigs returning from suspension.
- Cost Structure Discipline: Margins held firm despite higher operating and reimbursable expenses, reflecting operational efficiency.
- Cash Flow Dynamics: Strong cash generation and improved collections, with working capital expected to normalize as payment terms in Mexico tighten.
Overall, Borr’s financials reflect a business transitioning from volatility to stability, with increasing backlog visibility and a more diversified customer base reducing risk.
Executive Commentary
"Our commercial team continues to execute at the highest levels, delivering strategically and timely contracts despite a volatile and dynamic market... These awards strengthen and diversify our customer base and portfolio, underscoring our ability to navigate evolving markets and minimize idle time across the fleet."
Bruno Moran, Chief Executive Officer
"Cash increased by 135.4 million in comparison to the prior quarter... We expect to receive further settlements for our Mexico receivables both in November and December."
Magnus Waller, Chief Financial Officer
Strategic Positioning
1. Mexico: De-Risking and Payment Reform
Borr aggressively reduced direct Pemex exposure from seven to five rigs in Mexico, with only one now directly exposed to Pemex payment risk. New contract structures cap payment terms and shift a larger share of activity to international oil companies (IOCs) and independents. This shift materially reduces working capital needs and future receivables build-up, addressing a long-standing risk for the company.
2. Global Diversification: New Geographies and Customers
The company expanded into the Gulf of America and Angola, securing new campaigns for rigs previously impacted by sanctions or contract terminations. By leveraging its operational base in West Africa and adjacent markets, Borr is minimizing idle time and broadening its customer portfolio, which should help cushion against regional volatility.
3. Market Tightening and Utilization Visibility
With fleet coverage for 2025 at 85% and 2026 at 62% (up 15 points), Borr is entering the next year from a position of strength. The recent recall of rigs by Saudi Aramco and ongoing multi-year tenders in the Middle East are expected to drive higher utilization and day rates. Management sees a real scenario where rigs from outside the region may be required to meet demand, supporting a constructive pricing environment.
4. Operational Platform as Competitive Advantage
Borr’s premium jack-up fleet and customer-centric operating model are key differentiators. The company’s focus on safety, efficiency, and deep regional relationships enables it to win critical contracts and maintain high utilization, even as competitors struggle with older assets or weaker platforms.
5. Capital Allocation and M&A Discipline
Despite improved market sentiment, Borr remains focused on deleveraging and balance sheet strength. Management is open to sector consolidation but will only pursue transactions that preserve fleet quality and support long-term financial stability, avoiding dilution of its premium asset base.
Key Considerations
Q3 was a quarter of active risk management and strategic repositioning, as Borr responded to both market opportunities and operational headwinds.
Key Considerations:
- Payment Risk Mitigation: Improved contract terms in Mexico, with capped payment periods and reduced direct Pemex exposure, lower working capital risk.
- Geographic Expansion: Entry into the Gulf of America and Angola diversifies revenue streams and reduces reliance on any single market.
- Backlog and Coverage: 22 new awards and 85% 2025 fleet coverage provide strong revenue visibility and support further pricing power.
- Operational Flexibility: Ability to quickly redeploy rigs after sanction-induced terminations limits idle time and preserves earnings quality.
- Disciplined Capital Allocation: Commitment to deleveraging and selective M&A ensures long-term resilience over short-term growth.
Risks
Receivables in Mexico remain a risk until the new contract structures fully take effect and government payment reforms are proven durable. Sanction-related contract terminations create near-term revenue gaps, and further geopolitical or regulatory shocks could disrupt fleet deployment. While market tightening supports higher utilization, overcapacity in Southeast Asia and slow newbuild deliveries could pressure day rates if demand falters.
Forward Outlook
For Q4 2025, Borr expects:
- Lower operating days due to contract transitions and sanction-related terminations
- Continued normalization of Mexico receivable collections
For full-year 2025, management maintained adjusted EBITDA guidance of $455 to $470 million.
- 85% fleet coverage for 2025 and 62% for 2026 provide strong visibility
Management emphasized that market tightening in Saudi and Mexico, plus new awards in West Africa and the Gulf of America, support a constructive outlook into 2026. Investors should watch for continued contract wins, further payment normalization in Mexico, and signs of day rate improvement as utilization tightens.
Takeaways
Borr Drilling’s Q3 signals a business moving from risk management to growth positioning, with improved payment structures, new market entries, and a tightening global jack-up market.
- Backlog Expansion: 22 new contract commitments and $625 million in backlog reinforce revenue visibility and support margin stability into 2026.
- Risk Diversification: Reduced Pemex exposure and improved payment terms in Mexico lower working capital risk and support cash flow normalization.
- Market Inflection: Saudi rig recalls and high utilization rates point to a sector moving past recent troughs, with Borr well positioned to benefit from tightening supply-demand dynamics into 2026.
Conclusion
Borr Drilling’s Q3 demonstrates strategic execution on multiple fronts: operational excellence, risk mitigation, and disciplined growth. As the jack-up market tightens and backlog visibility improves, Borr is poised for continued outperformance, provided execution on collections and contract transitions remains strong.
Industry Read-Through
Borr’s results signal a broader inflection in the global jack-up market, with Saudi Arabia and Mexico leading the recovery in demand. Improved contract terms and payment discipline in challenging markets set a new standard for risk management across the sector. The company’s ability to quickly redeploy rigs and secure new awards in emerging geographies highlights the increasing importance of operational flexibility and premium asset quality. For peers, sector consolidation and disciplined capital allocation will be critical as market tightness and day rate momentum return in 2026.