Borr Drilling's $360M Rig Acquisition Amid High Leverage and Macro Uncertainty

What happened

Borr Drilling has agreed to acquire five premium jack-up rigs from Noble Corporation for $360 million, aiming to expand its fleet and geographic footprint. This acquisition comes as the company reports a $1.38 billion backlog and high utilization, but it faces elevated leverage with Net Debt/EBITDA at 4.06x and limited cash of $61.6 million. The EIA projects softer Brent prices into 2026, which could cap dayrate momentum and challenge the profitability of new assets. Financing this deal may strain Borr's balance sheet further, increasing refinancing and covenant risks highlighted in prior filings. Investors should view this move with caution, as it amplifies existing financial vulnerabilities in a cyclical market.

Implication

The acquisition could boost Borr's revenue potential by adding modern rigs, but it likely requires significant financing that may worsen an already leveraged position with $2.0 billion in debt. Higher debt could lead to increased interest expenses and tighter covenant compliance, raising the risk of financial distress. In a declining oil price environment, the new rigs might not achieve expected utilization or dayrates, reducing returns on investment. Additionally, integration costs and operational challenges could pressure near-term cash flows. Overall, while strategically expanding the fleet, this deal introduces heightened financial and market risks that investors must carefully assess.

Thesis delta

The acquisition introduces a growth element but does not fundamentally shift the HOLD thesis, which remains centered on high leverage and macro sensitivity. If financed through debt, it could exacerbate refinancing risks, potentially tilting the thesis toward SELL if covenant pressures intensify. However, successful integration and sustained high utilization might support long-term value, though current evidence suggests increased caution is warranted.