Borr Drilling: The Redheaded Stepchild Of Offshore Oil Services

Why 2025 Is An Inflection Point For Borr Drilling & Its Shareholders

Summary

• Borr Drilling is trading at roughly 40% of replacement cost, an estimate that could prove to be conservative in my opinion.

• The company is taking delivery of the final new build this week, giving them a fleet of 24 high-spec jackups with an average age of 7 years.

• Day rates for Borr’s fleet continue to grind higher, and current fleet contracting rates for 2025 are roughly 10% higher than 2024.

• Borr has shifted its capital returns to more buybacks with the recent Q3 report, but is sticking with the $25M per quarter amount.

• There are several reasons the company could meaningfully increase capital returns in 2025.

• Recent insider buying from the Chairman of the Board.

• I lay out some of the risks to consider with Borr and jackups in general.

• Borr is one of the many attractive opportunities in offshore oil services right now, but it is arguably the most compelling common stock in the sector.

---

Outside of Sable Offshore SOC 0.00%↑, one of the holdings I have been getting a bunch of questions on lately is Borr Drilling BORR 0.00%↑. They recently reported Q3 earnings and shares are sitting below $4.00 as I write this. The share price has has basically been cut by a third since the end of August, which isn’t that surprising given that the whole offshore oil services space has been taken out to the woodshed. If you look at the valuation and the capital returns that will likely increase in 2025 and beyond, I think Borr is arguably the most compelling risk/reward setup of anything in the offshore oil services sector.

I remember coming across a tweet earlier this year saying that Borr was a 2025 story. I thought the market would see the progress that the company has made and realize where things are going, but it looks like he was right. I recently came across this letter from Granular Capital from September on the company, and it’s worth a read, especially if you are starting from scratch on Borr. The company is set to take delivery of the last new build (the Var) this week, giving them a fully operational fleet of 24 high-spec jackups. Borr’s fleet of high-spec jackups with an average age of 7 years sticks out like a sore thumb when you compare it to the global fleet of jackups, 30% of which are over 35 years old, with 21% over 39 years old.

Back Of The Napkin (Valuation) Math