Evercore ISI reaffirms $9 PT on Borr Drilling shares amid improved visibility By Investing.com

On Friday, Evercore ISI maintained its “In Line” rating and a $9.00 price target for Borr Drilling (NYSE:BORR). The firm recognized Borr Drilling’s enhanced revenue and cash flow prospects, citing the company’s solid contract coverage and leading market dayrates as key factors. Borr Drilling’s rig utilization rates have benefited from a supply-constrained jack-up market and increasing demand.

According to Evercore ISI, Borr Drilling has secured full contract coverage for the year 2024 and has a substantial portion of its 2025 operations contracted, with some available slots for its rigs Thor, Ran, Gunnlod, and Norve. The firm anticipates that these rigs transitioning to higher dayrates, which have recently surpassed $200,000 per day, along with the introduction of two new builds, will drive growth and returns as the market progresses.

The year 2025 is projected to be a turning point for Borr Drilling, as the company is expected to see a significant reduction in capital expenditures for new builds and special periodic surveys, with ten rigs completing surveys in 2024.

This is anticipated to lead to strong cash generation starting in 2025. Notably, Borr Drilling has increased its dividend to $0.10 per share in the second quarter of 2024, amounting to an estimated $100 million annually, and has a $100 million share buyback authorization in place.

Evercore ISI emphasized the combination of Borr Drilling’s improved revenue visibility and reduced spending requirements, along with the sustained offshore upcycle, as factors that could speed up debt reduction and enhance cash returns to shareholders. The firm’s continued “In Line” rating reflects its view of the company’s stock performance relative to the sector.

In other recent news, Borr Drilling Limited has made significant financial strides, including pricing its $150 million senior secured notes offering with a 10% interest rate and a 2028 maturity date. The proceeds from this sale are primarily intended to cover the acquisition and activation costs of the new build rig “Vali”. The company also reported robust Q1 results, demonstrating high technical and economic utilization rates and an increased adjusted EBITDA margin.

In addition to this, Borr Drilling raised its quarterly dividend, reflecting confidence in its financial health and prospects. The company has a revenue backlog of $318 million and plans to expand its fleet with two new builds by the end of the year. Despite facing challenges such as an oversupply of rigs and the suspension of one of its 20 rigs in Saudi Arabia, Borr Drilling remains optimistic.

The company is actively considering acquisitions and expects continued high demand for rigs in regions such as West Africa, Southeast Asia, and India.

InvestingPro Insights

Borr Drilling (NYSE:BORR) is navigating a dynamic market landscape with strategic agility, as evidenced by its recent financial and operational milestones. According to InvestingPro data, Borr Drilling boasts a market capitalization of $1.63 billion, reflecting the scale of its operations in the offshore drilling sector. The company’s commitment to capital discipline and operational efficiency is underscored by its revenue growth of 49.03% over the last twelve months as of Q2 2024, a testament to its robust business model in a competitive industry.

Borr Drilling’s financial health is further highlighted by its Price/Earnings (P/E) ratio of 22.05, which, when adjusted for the last twelve months as of Q2 2024, stands at 22.0. This metric, combined with a PEG ratio of 0.12 for the same period, indicates that the company is trading at a low P/E ratio relative to near-term earnings growth. This could be a signal to investors that Borr Drilling’s stock may be undervalued given its growth prospects. Additionally, with a Price/Book ratio of 1.63, the company’s stock price is closely aligned with its book value, potentially offering a margin of safety for investors.

InvestingPro Tips further enrich the narrative, revealing that despite operating with a significant debt burden, Borr Drilling’s liquid assets exceed its short-term obligations, offering some financial flexibility. Furthermore, analysts predict the company will be profitable this year, which aligns with Evercore ISI’s positive outlook on the company’s revenue and cash flow prospects. Borr Drilling’s stock price movements have been quite volatile, but the company has delivered a strong return over the last three months, with a 15.28% total price return, showcasing its resilience in the face of market fluctuations.

For investors seeking deeper insights, InvestingPro offers additional tips on Borr Drilling, which can be found at InvestingPro’s dedicated Borr Drilling page. With a total of 11 tips listed, these insights provide a comprehensive understanding of the company’s financial position and market potential, aiding investors in making informed decisions.

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