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# BORR (Borr Drilling) - the asset story is real, the balance sheet is the whole trade
\*\*Position disclosure: 50,000 shares ar $4.27. Not financial advice. Every number below is from Borr's SEC filings (6-K, 11 Aug 2026) or its own press releases - links at the bottom so you can check me.\*\*
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\## TL;DR
Borr Drilling owns 29 modern jack-up rigs (34 including a JV) in a segment where the global fleet is shrinking and almost nothing new is being ordered. Q2 2026 looked catastrophic - a $241m net loss - but \*\*73% of that was a refinancing charge, not operations\*\*. Utilization was 98.4%.
The bull case is not "cheap on book value." It isn't cheap on book value. The bull case is that \*\*$2.3bn of fixed net debt sits under a fleet that re-rates with dayrates\*\*, so a modest improvement in rig economics is amplified several times into the equity. That's also precisely why it can go to zero.
This is a leveraged call option on the shallow-water cycle. Size it like one.
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\## 1. What actually happened in Q2 2026
https://preview.redd.it/q0g6pvh02kph1.png?width=1980&format=png&auto=webp&s=af458fdd5654f7723c9a35c8dd0f471b32aaebe9
Revenue has fallen five quarters straight, $277m → $232m. Adjusted EBITDA fell from $136m to $44m. Margin went from 49% to 19%. That is not nothing, and any DD that skips past it is selling you something.
But look at \*why\* Q2 specifically collapsed:
https://preview.redd.it/u115yvh02kph1.png?width=1980&format=png&auto=webp&s=d5b9b54b5d5a894bd03c46c4d33e25491a1185f3
Management names four drivers, all disclosed:
\- \*\*Odin\*\*: $22.5m of opex in the quarter with \*\*zero revenue\*\* - a US Gulf newbuild entry that hit regulatory delays until mid-July. That's an $11.1m QoQ swing.
\- \*\*Six rigs transitioning between contracts\*\* simultaneously — Idun, Gunnlod, Skald, Sif, Natt, Prospector 5. All now operational.
\- \*\*$10.8m credit loss\*\* on a former West African customer. Receivable is now fully provided for — zero net balance remaining.
\- \*\*$7.3m\*\* higher fuel and insurance from Middle East disruption.
Technical utilization: \*\*98.4%\*\*. Economic utilization: \*\*96.4%\*\*. The rigs worked. This was a cost-and-timing quarter, not a demand quarter.
Management guides \~23 active rigs in Q3 and Adjusted EBITDA to "improve significantly." That's the near-term thing to verify in November.
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\## 2. The $241m loss, honestly
https://preview.redd.it/fuz9zvh02kph1.png?width=1980&format=png&auto=webp&s=0ce2890ebc5bb439fe71829a28d8f8c2b9ae593a
I've seen this written up as "a non-cash accounting charge."
The $176.3m breaks down as:
\- \*\*$123.7m in cash redemption premiums\*\* — real money paid to retire the 2028/2030 notes early
\- \*\*$52.6m non-cash\*\* write-off of unamortised fees and discounts
So Borr paid $124m cash for the privilege of refinancing. What it bought:
\- Maturities pushed from 2028/2030 → \*\*2032/2034\*\*
\- RCF upsized to $250m, margin cut
\- Total liquidity $473.6m
That's a genuinely good trade for a levered company — it removes refinancing-cliff risk, which is what kills companies like this. But call it what it is: an expensive, mostly-cash deleveraging of \*timing risk\*, not a free accounting artifact.
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\## 3. The asset argument — and where it breaks
This is the part most BORR write-ups get wrong, so here's the full picture:
https://preview.redd.it/w3hqgvh02kph1.png?width=1980&format=png&auto=webp&s=6bdacc3694ded6f6ff1a3d1fa41604dcc1ef4b64
\*\*On the bull side:\*\* a new premium jack-up costs roughly $300m and takes years. Borr's entire 29-rig fleet was built after 2008. At today's EV of \~$3.7bn you're paying \~$128m per rig — well under half replacement cost. Dayrates would need to roughly double for a newbuild to pencil, which is exactly why nobody is ordering them.
\*\*On the bear side, and you need to sit with this:\*\* Borr carries those rigs at \*\*$3,036.5m, or \~$105m each\*\*. Recent actual transactions cleared \*below\* that — Noble's five rigs at $72m each, Fontis's five at $57m each (older designs, but still). \*\*Comparable jack-ups are changing hands below Borr's carrying value.\*\* That's impairment risk, not hidden value.
\*\*And on book value specifically:\*\* total equity is \*\*$961.6m\*\* on 308.5m shares = \*\*$3.12/share book value\*\*. At \~$4.60 the stock trades at \*\*\~1.5x book\*\*. It is \*not\* a below-book deep-value play. Anyone telling you otherwise hasn't opened the balance sheet.
The replacement-cost gap is real. But it only closes if dayrates rise. It is a \*cyclical\* argument, not an \*accounting\* one.
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\## 4. Why the leverage is the entire thesis
https://preview.redd.it/spelpvh02kph1.png?width=1980&format=png&auto=webp&s=26b8e66c91f950b1c752c0358e57776561f00ba0
Net debt is \*\*$2,305.6m\*\* and fixed. 308.5m shares. So:
| Fleet value/rig | Implied equity/share |
| $60m | wiped out |
| $105m (carrying value) | \~$1.95 |
| $128m (today) | \~$4.56 |
| $200m | \~$11.33 |
| $300m (newbuild parity) | \~$20.73 |
That asymmetry is the trade. It's also the risk, and the downside bar is not decoration — at $60m/rig the equity is gone. Anyone pitching the 4x upside without showing you the left side of that chart is pitching, not analysing.
\*\*Cash math you should run yourself:\*\*
\- New notes: $1,100m at 8.75% + $935m at 9.00% + $300m converts at 3.50% → roughly \*\*$200m+/yr cash interest\*\*
\- TTM Adjusted EBITDA: \*\*$373m\*\*
\- Q2 operating cash flow was \*\*negative $21.8m\*\* (included $115.8m of interest payments)
\- \*\*From July 2027, the notes amortise at 5%/yr of principal at 102.5%\*\* — another \~$104m/yr
Interest plus amortisation plus maintenance capex plus tax eats most of current EBITDA. \*\*This company needs the cycle to turn. It does not comfortably self-fund a flat one.\*\*
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\## 5. The supply story
\- A third of the global jack-up fleet is 30+ years old and aging out.
\- Newbuild economics don't work at current dayrates, so ordering has effectively stopped.
\- Marketed utilization: \*\*87.4% global, 90.1% modern fleet\*\* (91.7% currently) as of 30 June — and that global figure \*fell\* 0.5pp QoQ.
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\## 6. Demand — what the company actually says
Be careful here. The bull thesis is that shallow-water Middle East / Southeast Asia demand explodes as onshore depletes and energy security dominates. Directionally reasonable. But Borr's own CEO in the Q2 release said the Middle East conflict has \*\*"reduced near-term visibility, delaying tenders, contract start dates, and the region's recovery,"\*\* and that it is \*\*"difficult to provide a crisp outlook."\*\*
What he \*does\* argue: Hormuz disruption has driven global inventories to exceptionally low levels, and rebuilding them requires sustained drilling. Management says it expects activity and dayrates to \*\*lag oil price by 6–12 months\*\*, and is "increasingly confident" about \*\*2027 and 2028\*\*.
So the honest framing is: \*\*demand is deferred, not denied — and the company is pointing at 2027/28, not H2 2026.\*\* If you're buying this, you're buying an 18-month-out story with real financing costs in between.
What's actually contracted right now:
\- 2026 coverage \*\*73%\*\* at \~\*\*$134,000/day\*\*, H2 coverage 70%
\- Dayrate Equivalent Backlog \*\*$1.13bn\*\*
\- 21 contract commitments YTD, \~4,350 days, $541m of backlog added
\- 24 of 29 rigs contracted or committed
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\## 7. Insider behaviour
https://preview.redd.it/oa5osuh02kph1.png?width=2464&format=png&auto=webp&s=4fe0d0b2e10429d8e4d36837e363998c83956195
Board member \*\*Jeffrey Currie\*\* — ex-Goldman Sachs global head of commodities research for 15 years, now Chief Strategy Officer of Energy Pathways at Carlyle — has bought in the open market twice this year (SEC Form 4, code "P", not option exercises):
\- \*\*24 Mar 2026:\*\* 250,000 shares @ $5.31 (\~$1.33m)
\- \*\*13 Aug 2026:\*\* 125,000 shares @ $4.01 (\~$502k) — \*\*the day after the Q2 selloff\*\*
He now holds 479,423 shares. Note two things: he has \*never sold\*, and he is also an insider talking his own book. Treat it as a signal, not a thesis.
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\## 8. The bear case, stated properly
1. \*\*Altman Z-Score of 0.37.\*\* That is deep in the distress range. Leverage is not theoretical.
2. \*\*Rigs carried above recent transaction comps\*\* → impairment risk.
3. \*\*Amortisation starts July 2027.\*\* \~$104m/yr on top of \~$200m interest. The clock is running.
4. \*\*Negative operating cash flow in Q2.\*\* One quarter, heavily distorted by a $115.8m interest payment — but it happened.
5. \*\*Trades at \~1.5x book, not below it.\*\* Not a balance-sheet bargain.
6. \*\*Management's own outlook is cautious\*\*, and marketed utilization ticked \*down\* last quarter.
7. \*\*\~8.6% short interest\*\* and analyst targets ranging $3.00–$6.80 — a very wide spread means nobody is confident.
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\## 9. What I think this actually is
Not a deep-value compounder. Not a fortress balance sheet. A \*\*high-conviction, high-variance cyclical option\*\* on shallow-water dayrates recovering in 2027–28, where:
\- The asset scarcity argument is real and structural
\- The leverage turns modest fleet re-rating into large equity moves, both directions
\- The financing runway has been extended to 2032/34, which buys time — the single most important thing a levered cyclical can own
\- But the company needs the cycle, and management is pointing at 2027, not now
\*\*The catalyst to watch is Q3 results (18 Nov 2026).\*\* Management promised EBITDA would "improve significantly." If \~23 active rigs shows up and EBITDA snaps back toward $90–110m, the Q2 print was noise. If it doesn't, the thesis needs rebuilding.
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\## Sources (check everything)
\- Borr Drilling Q2 2026 results, 6-K filed 11 Aug 2026 — [sec.gov](http://sec.gov), 0001715497
\- Borr Drilling Q1 2026 / Q4 2025 / Q1 2025 earnings releases
\- Form 4 filings, Jeffrey Currie, 24 Mar 2026 and 13 Aug 2026
\- Fontis acquisition 6-K, 23 Mar 2026 (announced) and 29 Jul 2026 (completed)
\- Noble five-rig acquisition, disclosed in Q1 2026 6-K
\- Petrodata by S&P Global utilization figures, as cited in Borr's Q2 report
\*Positions: 50000 shares at $4.27. I've tried to state the bear case as strongly as the bull case. If you find an error, say so and I'll correct it.\*