Breaking Down Borr Drilling Limited (BORR) Financial Health: Key Insights for Investors

You're looking at Borr Drilling Limited (BORR) and seeing a complex picture: a strong operational rebound still battling geopolitical headwinds. Honestly, the third quarter of 2025 was defintely a win, with the company posting total operating revenues of $277.1 million, a 4% jump over Q2, and solidifying its profitability with an Adjusted EBITDA of $135.6 million and a nearly 49% margin. That's a fundamentally healthy operation, running 23 of 24 rigs with technical utilization near 98%. But here's the reality check: management is guiding full-year 2025 Adjusted EBITDA to a range of $455 million to $470 million, acknowledging that the Q4 outlook is softer due to rig transitions and those sticky, sanctions-induced contract terminations in Mexico. The question isn't just about the $625 million in new contract potential secured year-to-date; it's about how the firm navigates that near-term dip while leveraging its high dayrate coverage for 2026. We need to map those risks to clear actions.

Revenue Analysis

You want to know where Borr Drilling Limited (BORR) is making its money, and the short answer is: premium jack-up rigs on dayrate contracts, but the growth story is in the bareboat charters. The company is successfully leveraging its fleet utilization, which stood at a robust 97.4% economic utilization across the active fleet in Q3 2025, to drive revenue growth.

For the third quarter of 2025 (Q3 2025), Borr Drilling Limited reported total operating revenues of $277.1 million, marking a solid 4% increase, or $9.4 million, compared to the second quarter of 2025. This quarter-over-quarter (QoQ) lift is defintely a positive signal, extending the rebound seen earlier in the year. The year-to-date (YTD) 2025 revenue through September 30th stood at $761.4 million.

Primary Revenue Streams and Their Contribution

Borr Drilling Limited operates as a single reportable segment, which is contract drilling services, but its revenue is broken down into three main streams. The clear majority of revenue comes from the core business of renting out their rigs and crew on a daily basis (dayrate revenue), but the bareboat charter model is gaining traction and driving a significant portion of the recent growth.

Here's the quick math on the Q3 2025 revenue mix:

• Dayrate Revenue: $241.0 million (86.9% of total)
• Bareboat Charter Revenue: $26.7 million (9.6% of total)
• Management Contract Revenue: $9.4 million (3.4% of total)

The increase in bareboat charter revenue-up $6.4 million QoQ-was a key driver of the overall 4% quarterly growth, plus dayrate revenue also increased by $2.5 million. This shift shows a strategic move to diversify their commercial model, which is smart given market volatility.

Growth Trends and Market Opportunities

The year-over-year (YoY) trend for the third quarter is strong, with Q3 2025 revenue of $277.1 million up significantly from $241.6 million in Q3 2024, which is a 14.69% quarterly growth. Looking ahead, the company has secured 22 new contract commitments year-to-date in 2025, which represents over 4,820 days of work and $625 million of potential contract revenue.

What this estimate hides is the geographic and contractual diversification. Mexico, for example, remains a critical market, and the company announced three contract extensions there post-quarter end, securing the Galar and Gersemi for two-year firm extensions with improved terms. Also, they are expanding their footprint into the Gulf of America and Angola with new awards for the Odin and Grid rigs, which helps mitigate regional risks. For more on the company's long-term view, you can review the Mission Statement, Vision, & Core Values of Borr Drilling Limited (BORR).

The company's contract coverage for 2026 is already at 62% with an average dayrate of $140,000, which gives them a strong base for future revenue and is a clear indicator of sustained demand for their premium jack-up fleet.

Profitability Metrics

When you look at Borr Drilling Limited (BORR), the headline is strong operational efficiency, but the bottom line (net income) tells a more complex story. For the third quarter of 2025, the company delivered a robust operational performance, translating into a Gross Profit Margin of over 50%, but financial expenses weigh heavily on the final profit.

The core takeaway is that Borr Drilling is excellent at generating revenue from its rigs-its problem is the cost of capital (interest expense), not the cost of operations.

Here's the quick math on Borr Drilling Limited's profitability for the three months ended September 30, 2025, based on total operating revenues of $277.1 million:

• Gross Profit Margin: 53.63%
• Operating Profit Margin (EBIT Margin): 35.37%
• Net Profit Margin: 10.03%

Gross Profit, Operating Profit, and Net Profit Margins

The difference between the Gross Profit Margin and the Operating Profit Margin shows Borr Drilling Limited's impressive control over its core rig operations. Rig operating and maintenance expenses, the primary cost of revenue, were $128.5 million in Q3 2025. This leaves a substantial gross profit of $148.6 million, which is a terrific starting point.

However, the drop from a 35.37% Operating Profit Margin to a 10.03% Net Profit Margin is a clear red flag for investors. This compression is due to massive financial expenses, net, which totaled $58.6 million in Q3 2025. That's nearly a quarter of your entire operating revenue going to service debt and other financial costs. This is defintely the number to watch.

Operational Efficiency and Profitability Trends

Borr Drilling Limited's operational efficiency is arguably best-in-class for the jack-up market. The company achieved a technical utilization rate of 97.9% and an economic utilization rate of 97.4% across its active fleet of 23 out of 24 rigs in Q3 2025. This high utilization rate is the engine driving the strong gross margin. The company's Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for the quarter was $135.6 million, with a robust margin of 48.9%.

Looking at the near-term trend, revenue increased by 4% quarter-over-quarter (Q3 2025 vs. Q2 2025). But, net income actually decreased by 21% from the second quarter's $35.1 million. This is a critical trend: while the business is generating more top-line revenue, the costs below the operating line-especially taxes and financial expenses-are increasing faster, eating into the net profit. You need to understand the drivers of this financial expense rise before making a move. For a deeper look at who is betting on this operational strength, check out Exploring Borr Drilling Limited (BORR) Investor Profile: Who's Buying and Why?

Industry Comparison and Outlook

Comparing Borr Drilling Limited's performance to the broader offshore drilling industry in 2025 shows its operational strength. The global offshore drilling market is projected to be worth $43.78 billion in 2025, with the jack-up segment remaining a significant component. The industry is generally seeing high utilization rates-the global marketed jackup utilization is forecasted to be around 89% in 2025. Borr Drilling Limited's 97.4% economic utilization rate significantly outperforms this industry benchmark, confirming its premium fleet and disciplined execution.

The company anticipates full-year 2025 Adjusted EBITDA to be in the range of $455 million to $470 million. This forecast, despite facing headwinds like contract transitions and sanctions-induced disruptions in Mexico, suggests management is confident in maintaining its high operational efficiency and strong Adjusted EBITDA margin through the end of the year.

Debt vs. Equity Structure

You want to know how Borr Drilling Limited (BORR) is funding its growth, and the short answer is: they are still heavily reliant on debt, but they've taken decisive steps in 2025 to shift the balance toward equity and liquidity. The company's debt-to-equity (D/E) ratio sits at 2.03 as of June 30, 2025, which is a significant figure that tells you they've been aggressive in financing their capital-intensive jack-up rig fleet with borrowed money.

For a capital-intensive sector like offshore drilling, a D/E ratio above 1.0 is common, but Borr Drilling Limited's 2.03 ratio is high, especially when you compare it to the general 'Oil and gas drilling' industry average, which is closer to 0.46. This tells me the company is using more than twice as much debt as equity to finance its assets. It's a classic high-leverage strategy that amplifies returns when the market is good, but it also magnifies the risk when day rates or utilization rates dip.

Here's the quick math on their leverage as of the second quarter of 2025:

The bulk of their debt, $1,933.4 million, is long-term, which is typical for a business with assets-the drilling rigs-that have a long useful life. Their debt stack is primarily composed of senior secured notes, including $1,229.1 million of 10% notes due in 2028 and $643.8 million of 10.375% notes due in 2030, plus an additional $239.4 million in unsecured Convertible Bonds due 2028. That's a lot of interest expense to manage.

To be fair, management has taken clear actions in 2025 to improve the balance sheet and reduce the reliance on debt. In July 2025, the company executed a comprehensive financing package that included a $102.5 million equity offering. This equity raise, plus amendments to their revolving credit facilities, boosted their total liquidity by over $200 million. That's a smart move to strengthen their position while market conditions are defintely favorable.

This move shows a deliberate balancing act: use the recovering market to raise non-debt capital (equity) and improve debt terms. They are also conserving cash by suspending the dividend, a move announced to further reinforce the balance sheet and enhance long-term value creation. The goal is to create a more sustainable capital structure that can withstand the inevitable cyclicality of the energy market. It's a strong signal of prioritizing financial resilience over immediate shareholder payout. If you're interested in who is taking up that new equity, you should be Exploring Borr Drilling Limited (BORR) Investor Profile: Who's Buying and Why?.

• Raise equity to pay down debt.
• Suspend dividends to save cash.
• Negotiate better credit terms.

The key takeaway is that Borr Drilling Limited is actively de-risking its high-leverage model, but the debt load remains substantial. The success of this strategy hinges on their ability to maintain high rig utilization and strong day rates through 2028 and 2030 to service those large note maturities.

Liquidity and Solvency

You need to know if Borr Drilling Limited (BORR) has the cash to cover its short-term bills, and the answer is yes, with a noticeable improvement in liquidity and a massive jump in cash from operations in the third quarter of 2025.

The company's liquidity profile is strong, largely due to excellent operational performance and a successful equity raise. As of September 30, 2025, Borr Drilling held $227.8 million in cash and cash equivalents, which, combined with $234.0 million in undrawn revolving credit facilities, gives them a total available liquidity of $461.8 million. That's a defintely healthy cushion.

Current and Quick Ratios Show Stability

The Current Ratio (Current Assets / Current Liabilities) and Quick Ratio (excluding inventory) are your first look at a company's immediate financial health. A ratio above 1.0 is generally good, meaning current assets cover current liabilities.

Borr Drilling's trailing twelve months (TTM) ratios ending October 2025 demonstrate solid short-term coverage, indicating they can comfortably meet their obligations as they come due.

• TTM Current Ratio (Oct 2025): 1.28x
• TTM Quick Ratio (Oct 2025): 1.13x

While these are slightly lower than the 1.4x and 1.3x seen in late 2023, they are still well above the critical 1.0x mark and show stability in the face of ongoing capital expenditures. This is a good sign of operational efficiency translating to working capital strength.

Working Capital Trends and Cash Flow

Working capital-current assets minus current liabilities-is the engine for day-to-day operations. As of June 30, 2025, Borr Drilling had a positive working capital of approximately $101.2 million ($468.3 million in current assets minus $367.1 million in current liabilities), which is a clear indicator that the company has more than enough liquid assets to cover its near-term liabilities.

The cash flow statement for Q3 2025 tells the real story of the business momentum, showing a significant cash generation surge:

Here's the quick math: the operating cash flow of $72.1 million in Q3 2025 is a powerful indicator of the company's ability to turn revenue into cash, especially when compared to the $6.3 million in the prior quarter. This is the kind of jump you want to see from an operating business.

Liquidity Strengths and Near-Term Actions

The primary liquidity strength is the operational cash flow turnaround and the successful capital raise. The Q3 2025 cash flow from operations of $72.1 million is a huge positive, and the total liquidity of $461.8 million provides ample flexibility for capital expenditures and debt management.

The main potential risk is the reliance on collections from customers, particularly in Mexico. However, the company has seen collections restart, with approximately $19 million received in September and October 2025, which helps mitigate that concern. The focus now shifts to how Borr Drilling uses this cash: maintaining high utilization (which was 97.9% technical utilization in Q3 2025) and securing new contracts to keep the operational cash flow strong.

For a deeper dive into the valuation and strategic positioning, you can read the full analysis here: Breaking Down Borr Drilling Limited (BORR) Financial Health: Key Insights for Investors.

Valuation Analysis

You're looking at Borr Drilling Limited (BORR) and wondering if the market has it right. Based on the key metrics from the 2025 fiscal year, the stock appears to be undervalued on a Price-to-Book (P/B) basis, but its Price-to-Earnings (P/E) ratio is more in line with a growth-oriented company in the cyclical offshore drilling sector. The core takeaway is that the low P/B suggests a significant discount to the company's asset value, which is a common opportunity in oil services right now.

Here's the quick math on the key valuation multiples, using trailing twelve months (TTM) data ending September 2025. The P/E ratio stands at 11.87. For a company still navigating a capital-intensive recovery, this is a reasonable multiple, signaling that investors expect continued earnings growth. But still, the most compelling number is the Price-to-Book (P/B) ratio at just 0.81. When P/B is below 1.0, it suggests the stock is trading for less than the book value of its assets (rigs, equipment, etc.)-a classic sign of potential undervaluation.

The Enterprise Value-to-EBITDA (EV/EBITDA) ratio, which is a better measure for capital-heavy businesses like Borr Drilling Limited because it accounts for debt, sits at 5.77. For context, the company's Enterprise Value is approximately $2.744 Billion, calculated against a TTM EBITDA of $476 Million. This multiple is quite attractive, especially since management reaffirmed comfort with an adjusted EBITDA target of approximately $470 million for the full 2025 fiscal year.

• P/E Ratio (TTM): 11.87
• P/B Ratio: 0.81
• EV/EBITDA (TTM): 5.77

Stock Performance and Analyst Consensus

The stock price trend over the last 12 months through November 2025 shows the market's volatility and uncertainty, defintely. Borr Drilling Limited's stock price has decreased by 14.81% over the past year, despite the strong operational performance and improving EBITDA. The 52-week trading range has been wide, from a low of $1.55 to a high of $4.23. This suggests a lack of conviction from the broader market, even with the company generating significant cash flow.

Analyst consensus is mixed but leans positive. While some analysts have a 'Hold' rating, a larger group of five analysts gives Borr Drilling Limited a consensus rating of Buy. The average 12-month price target is $3.75, which implies a potential upside of approximately 15.74% from the recent trading price of around $3.25. This target reflects the expectation that the market will eventually price in the company's strong operational utilization and debt reduction efforts, which you can read more about in Mission Statement, Vision, & Core Values of Borr Drilling Limited (BORR).

As for shareholder returns, Borr Drilling Limited does pay a dividend, but it is not a primary driver of value here. The company's annual dividend is a modest $0.04 per share, resulting in a low dividend yield of about 1.27%. The payout ratio is also low at 14.29%, which is actually a good thing. It means the company is prioritizing retaining earnings to pay down debt and invest in its high-specification jack-up fleet, rather than paying out a large, potentially unsustainable dividend.

The valuation story is clear: you are buying a company's assets at a discount (low P/B) in a recovering market, and analysts expect the stock to rise as the market recognizes the earnings power (attractive EV/EBITDA and P/E). The next step is to monitor the rig utilization rates and new contract dayrates, as those will be the true catalysts for closing the valuation gap.

Risk Factors

You're looking at Borr Drilling Limited (BORR) because the jack-up market is tightening, but before you jump in, we need to talk about the real risks. The direct takeaway is this: Borr has a premium fleet and strong operational metrics-like a technical utilization of 97.9% in Q3 2025-but its financial structure still carries heavy leverage, and its key market exposure to Mexico introduces significant operational risk.

External and Industry Headwinds

The biggest external risk is the inherent cyclicality of the offshore drilling industry, which is tied directly to global oil and gas capital expenditure. While the company believes the market is past the trough, near-term volatility is defintely a factor. Plus, you're competing against major players like Noble, Transocean, Seadrill, and Valaris, all vying for the same high-specification contracts. This competition can cap dayrates, even as demand grows. Borr's success hinges on sustained demand in key regions like Saudi Arabia and Mexico, but any geopolitical or regulatory shift in those areas could quickly reverse the positive trend.

• Oil price volatility: Directly impacts customer spending on drilling.
• Regulatory changes: New environmental or offshore safety rules increase compliance costs.
• Competitor capacity: Too many rigs chasing too few contracts hurts pricing power.

Operational and Financial Risks

The most immediate and material risks for Borr Drilling Limited center on its balance sheet and its operations in a single, crucial market: Mexico. The company's total principal debt outstanding as of June 30, 2025, was a substantial $2,112.3 million. That's a lot of leverage, and it's why high leverage is cited as a key financial challenge. Here's the quick math on the debt: the largest single tranche, the 2028 Notes, totals $1,249.7 million of principal debt maturing in 2028.

Operationally, the focus is squarely on Mexico. The company experienced contract terminations in Q4 2025 due to sanctions, which will lead to fewer operating days and impact Q4 results. Also, the normalization of collections from the Mexican state oil company, Pemex, remains a key dependency. Borr received approximately $19 million in outstanding collections in September and October 2025, which shows the issue is real, but they are working to fix it.

Mitigation Strategies and Actions

Borr Drilling Limited is taking clear steps to manage these risks. To counter the geopolitical and payment risks in Mexico, they secured three contract extensions for the Galar, Gersemi, and Njord rigs, critically, with improved commercial and payment terms. They are also diversifying their footprint, announcing new commitments in the Gulf of America and Angola. For the financial picture, the company has maintained its full-year 2025 Adjusted EBITDA guidance in the range of $455 million to $470 million, which is a strong cash-flow profile to manage the debt. They ended Q3 2025 with total liquidity of $461.8 million, including $227.8 million in cash. They're building a cushion. You can read more about the company's financial health and strategic positioning in Breaking Down Borr Drilling Limited (BORR) Financial Health: Key Insights for Investors.

What this estimate hides is that the bulk of the debt is still years away, so the immediate challenge is operational execution and cash collection. The company's 2026 contract coverage stands at 62% with an average dayrate of $140,000, which provides a solid revenue floor against market uncertainty.

Growth Opportunities

You're looking for a clear path through the volatility of the offshore drilling market, and the data from Borr Drilling Limited (BORR) for the 2025 fiscal year points to a firming foundation for growth, despite some near-term headwinds. The direct takeaway is that Borr's premium fleet and strategic contract wins are translating into strong financial coverage for 2026, which should support higher dayrates as global jack-up capacity tightens.

The company's full-year 2025 Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is anticipated to land in the range of $455 million to $470 million, a clear sign of operational efficiency and pricing power in a market that is past the trough. This stability, combined with a focused commercial strategy, is the real story here. Honestly, they've been defintely smart about locking in future revenue.

Key Growth Drivers and Strategic Wins

Borr Drilling Limited's growth isn't relying on a single market; it's a global, multi-pronged approach that leverages their core competitive advantage: a young, premium jack-up fleet. With 23 of their 24 rigs active in Q3 2025, their operational execution is robust, boasting a technical utilization of 97.9%. Near-term risks, like payment issues in Mexico and sanctions-induced contract terminations, are being managed through a combination of contract extensions and market diversification.

Here's the quick math on their contracting success: Year-to-date through September 30, 2025, the company was awarded 22 new contract commitments, representing over 4,820 days of work and a potential contract revenue of $625 million. That's a massive injection of future revenue visibility.

• Market Diversification: New commitments were announced for rigs Odin and Grid, expanding their footprint into the Gulf of America and Angola.
• Mexico Extension Success: Post-Q3, three rigs (Galar, Gersemi, and Njord) received contract extensions in Mexico, with the Galar and Gersemi securing two-year firm extensions at improved terms.
• Liquidity Strength: A comprehensive financing package in July 2025, including a $102.5 million equity raise, increased pro forma liquidity to over $425 million, giving them flexibility for disciplined growth or industry consolidation.

Revenue Projections and Dayrate Outlook

The market is tightening, which is the best news for a rig owner like Borr Drilling Limited. Incremental jack-up demand in international markets is absorbing available capacity, and clear signs of demand inflection are appearing in major markets like Saudi Arabia and Mexico. This market dynamic is the engine that drives dayrates higher and ensures high utilization.

Their Q3 2025 total operating revenues were $277.1 million, a 4% increase over the prior quarter, which underscores the profitability of their revenue base. Looking ahead, the focus shifts to 2026 coverage, which is already substantially booked.

What this estimate hides is the potential for dayrates to exceed current averages as the market continues to absorb the limited supply of modern rigs. For a full breakdown of their current financial position, you can read more at Breaking Down Borr Drilling Limited (BORR) Financial Health: Key Insights for Investors.

Competitive Edge in a Tightening Market

Borr Drilling Limited's competitive advantage is simple: they own a fleet of premium jack-up rigs in a sector where the global fleet is aging and newbuild activity is minimal. This structural supply constraint means that as demand rises-which it is, driven by major players in the Middle East and Latin America-Borr is uniquely positioned to benefit. Their operational excellence, with economic utilization at 97.4% in Q3 2025, minimizes idle time and maximizes cash generation. They are a first-call provider for high-specification work. This high utilization and premium fleet status allows them to sustain high asset deployment and maintain pricing power, reducing the cyclical overcapacity risk that has historically plagued the sector.

Next Step: Portfolio Manager: Assess the impact of the 2026 average dayrate of $140,000 against your internal oil price forecasts by Friday.