Borr Drilling Limited (BORR) Q2 2024 Earnings Call Transcript

Borr Drilling Limited (NYSE:BORR) Q2 2024 Earnings Conference Call August 15, 2024 9:00 AM ET

Company Participants

Patrick Schorn – CEO
Magnus Vaaler – CFO
Bruno Morand – Chief Commercial Officer

Conference Call Participants

James West – Evercore ISI
Fredrik Stene – Clarksons Securities
Truls Olsen – Fearnley Securities
Doug Becker – Capital One

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 our first speaker today, Mr. Patrick Schorn, CEO. Please go ahead.

Patrick Schorn

Good morning and thank you for participating in the Borr Drilling second quarter 2024 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 assigned 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 guarantee 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 us to 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 the recently 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 four years due to its higher day rate and longer contract duration.

As I already mentioned, all our 22 delivered rigs are again contracted, with only 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 rig fleet’s 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 step you through the financial details of the second quarter.

Magnus Vaaler

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 rates for rigs Idun, Thor and the Prospector 5 and $14.5 million impact from the amortization of deferred mob revenue related to the contract termination for 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 three 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 under revenues, and that we earned 5% marginal.

In addition, $3.9 million of the total variance is due to the increase in amortization of 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 RCF facility, 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 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 cost for our newbuilds.

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 newbuild The Vale.

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 newbuild 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

Thanks Magnus.

On the commercial front, we have continued to add accretive contracts to our backlog, including one further fixture with a clean day rate above $200,000 per day. So far this year we’ve secured 14 new commitments, adding nearly 10 rate 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 one-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 100% green electricity provided by a nearby wind farm.

We’re very pleased with our close collaboration with ONE-Dyas and how this continues to add to our portfolio 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 400ft of water and remains well-positioned to secure continued commitments in the region.

During our last quarter’s conference call we announced the company had secured two 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 the first commitment with ENI in Congo. It will commence its mobilization from the UAE in September following the completion of the current contract with Bunduq.

For the second commitment, we will assign our newbuild Vale and expect the work to commence between late Q4 2024 and Q1 2025. And lastly, the Arabia I, which had its contract suspended by Aramco early 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 73%, including firm contracts and priced options.

The new awards received this year at market-leading rates have resulted in an increase of approximately $13,000 per day to the average day rate of our backlog, and the combination of health contract coverage and higher day rates gives us strong revenue visibility in 2025. From a broader market perspective, utilization for modern jackups remained at approximately 95%, not adjusted for Aramco suspensions.

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

On the newbuild front, no orders have been placed for nearly a decade and the shipyard order book stands at 12 rigs, representing only 2% of the total Jacob fleet. This is a remarkably low number, particularly considered the fleet aid statistics mentioned earlier by Patrick. We anticipate that only four of the rigs under construction 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 the 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 world 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 modern jackup fleet and its day rate momentum.

With that, I would like to hand the call back to Patrick.

Patrick Schorn

Thank you, Bruno.

So, in conclusion, there are three 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 to $550 million for the full year 2024. And lastly, the board approved quarterly dividend of share resulting in $100 million annualized dividend payment. Looking at 2025 with reduced CapEx outlay and incremental day rates 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.

Question-and-Answer Session

Operator

[Operator Instructions] And now we’re going to take our first question and it comes to the line of James West from Evercore ISI. Your line is open. Please ask your question.

James West

Hi, good afternoon, guys.

Patrick Schorn

Hi, James.

James West

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 and 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 free cash?

Patrick Schorn

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 two and the final newbuilds in the second half of this year, the cash outflow related to these two 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 surveys for our rigs coming due every five years, and a large portion of our rigs were delivered five years ago in 2019, with our fleet consisting of 24 rigs when all are delivered and SPS carried out every five years, you would expect an average of approximately five years coming up for SPS every year. In 2024, we actually 10 rigs, obviously more cash costs associated, and in ’25 and ’26, we expect only to do two or three per year. So that cost also goes down.

So lastly, from an earnings perspective, and if you look at a simple back of the envelope back 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 three 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, you can talk a little bit about what are some of the considerations that we have there.

Magnus Vaaler

Yes, thanks, Patrick. So we have, as mentioned, the quarterly dividend established already, which the Board has set out at $0.10. Secondly, we’re doing the annual amortization of the bonds of around $125 million per year. There’s also a cash sweep element 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 the preceding year.

So that is also a way of making capital returns. Lastly, we also have the $100 million authorized share buyback program, which we haven’t started utilizing yet. I think it’s a matter of — is 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 shareholders would prefer. So, lastly, up to the Board to decide that we have all the tools necessary to provide a good, balanced return to stakeholders.

James West

That’s right. Very comprehensive. Thanks, guys.

Patrick Schorn

Thank you, James.

Operator

Thank you. Now we’re going to take our next question, and the question comes to the line of Fredrik Stene from Clarksons Securities. Your line is open. Please ask your question.

Fredrik Stene

Hi, 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 this week, and now it’s assigned to this Africa contract, and you financed it with the bond instead of shipyard financing. And then clearly, the next big event here is what’s going to happen with 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 startup? Should we expect rates similar to the leading edge rates you signed already? Anything on that would be very helpful. Thanks.

Patrick Schorn

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, nor necessarily the setup 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 or 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 contract for the Var coming from, but I would like to keep that commercial part a little bit under wraps until we indeed have signed it up. So I’ll have to kind of 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

That’s very helpful, Patrick. And just on the back of that, the jackup market seem, as you — 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 Saudi 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 to make sure that you’re still in that high end of the rate spread?

Patrick Schorn

Yes, I’ll let Bruno talk more about the rate, but I think that two things that impact it 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. 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 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

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 competitive behavior with 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 has been one of those markets.

Outside of that, I think the impact has been quite discreet, 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. If you look at the exposure that we have, and particularly the Var, it’s a series of rigs that are of very unique capabilities. If you look at the sister rig saga operating for Brunei and for Shell in Brunei, the performance of the rig has been remarkable. And those rigs build a reputation for themselves in the industry, so they’re well-sought-after assets. That gives 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. That basically effectively gives us two to three quarters here for the market to absorb. And you oversupply, normalize in a place where you think that will continue to provide robust price and 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 one further fixture break in the $200,000 a day mark. I think that’s a good testament of that.

Fredrik Stene

Thank you. Thank you very much. Final, and sorry for doing like two main questions here. The final one for me, your range, 500 to 550 for the year guidance, you’re 92% covered. And I think a couple of the, quote, the idle periods for the Prospector 1, Gunnlod, Gerd. What’s going to make you end up in the low end and the high end of that range? Thanks.

Patrick Schorn

Yes, I think that at this moment, Fredrik, I don’t think we’re in a position to close that 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. It’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 tighter or anything like that. I think there is 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.

Fredrik Stene

All right, thank you so much. I’ll hand it back. Have a good day.

Operator

Thank you. Now we’re going to take our next question, and it comes to the line of Truls Olsen from Fearnley Securities. Your line is open. Please ask your question.

Truls Olsen

Thank you. Hi, Patrick, Magnus, Bruno. So, switching gears, you won a significant contract in Brazil. Obviously, Brazil is not the biggest jackup 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 risk we should sort of have in mind related to quality project, of bringing the jackup into Brazil? And on operations you have a local partner there as well, I gather, as I understand it.

Patrick Schorn

Yes. So, Truls, 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 for us, it was very clear that because of the volume of future work that we see there, also on the jackup 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 far better than I do. Maybe, Bruno, you can talk a little bit on how we manage our rigs with, or our start of risk in relation to the cooperation that we have there.

Bruno Morand

Yes, for sure. And, Truls, I mean, we are currently forecasting that rig will be on contract in the first quarter 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 during our operation. We have their people currently on board the rig. 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 fair — quite substantial mobilization fee 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 one-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, focused 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 have a rig that is 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 four-year contract with a very high likelihood that we extend way, way beyond that. So we’re very pleased with it.

Patrick Schorn

And I think 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 far faster than what you would do on a more traditional rig. So, very pleased with that. But your comments are fair. It is a market that we are trying to treat with the appropriate respect.

Truls Olsen

Okay, good. Thank you. And, yes, I think that’s it for me. Thank you, guys.

Patrick Schorn

Thank you, Truls Olsen.

Magnus Vaaler

Thank you.

Operator

Thank you. Now we’re going to take our next question. And the next question comes from the line of Doug Becker from Capital One. Your line is open. Please ask a question.

Doug Becker

Thank you. Patrick, you clearly remain constructive on the jackup 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 Schorn

That is a very good question, Doug, and I mean, I honestly don’t have 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 look after the buildup that they did of the big buildup 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 further developed.

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 scope 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 maybe unnecessarily early expenses are curbed 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 comes back.

Now, are there any more small upsets that we could see in the activity? It’s absolutely possible. I think that there’s probably some land upsets as well going on so that we have some curbing 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 two more rigs there. We’re very pleased with the work there, but that’s kind of our direct exposure to that market.

Doug Becker

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 Schorn

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

Bruno Morand

Yes. No, indeed. Undoubtedly, the Mexican market is one that we pay a lot of attention to. We have a large fleet of rigs 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 independents as well that are available in the country.

One thing that is interesting to mention, Doug, is that there are new models, working models being implemented in Mexico as we 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’re not only focused on Pemex, we do see some outstanding work with IOC 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 Suriname, 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 tenders we’re pursuing. There’s definitely a tighter competitive landscape. But as I said, the Thor and the rigs that we have in Asia, they’ve kind of set themselves apart because of the operating capabilities that they have. They deliver these wells substantially faster to the customers, and they’re very well sought after.

So I’ll probably fall shy of kind of listing and naming 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 like the 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 placed where we make the most value of it.

Doug Becker

Thank you very much.

Patrick Schorn

Thank you.

Operator

[Operator Instructions]

Patrick Schorn

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

Magnus Vaaler

I think we have time for one written question. Andreas, please.

Unidentified Analyst

Yep, 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 Schorn

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 latest we heard was probably around companies like ONGC. Are you still looking, into it?

Bruno Morand

Yes. In large, the conversations that we hear about potential shipyard orders are driven by long-term demand. We mentioned that before I think the financial situation and what it would take for you to acquire rig and the long term economics contracts or orders will have to be backed up by a long-term commitment. So naturally, the most buoyant conversations of the likes with the ONGC and so on, so forth.

Structurally, I don’t think things changed. We still hear that figures for a newbuild are 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 improvements 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 day rates are supportive of that type of construction cost. I don’t think we’re quite there yet. I think it’s going to take some time before there are long enough contracts for someone to actually call that.

Patrick Schorn

Yes. And I think that maybe as a last comment around this, 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 effort to make sure that the future of this industry has enough rigs available to capture 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.

Operator

This concludes today’s conference call. Thank you for participating. You may now all disconnect. Have a nice day.