Borr Drilling Q4 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 20, 2025

There are 8 speakers on the call.

Operator

Good day and thank you for standing by. Welcome to the Board Drilling Limited Q4 twenty twenty four Results Presentation Webcast and Conference Call. At this time, all participants are in listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Operator

I would now like to turn the conference over to your first speaker, Mr. Patrick Shawn, CEO. Please go ahead.

Speaker 1

Good morning, and thank you for participating in the Boar Drilling fourth quarter earnings call. I'm Patrick Schorn and with me here today in Dubai are Bruno Moran, our Chief Commercial Officer and Magnus Fowler, 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.

Speaker 1

I therefore refer you to our latest public filings. This quarter's results were as expected. Operating revenue increased by $21,500,000 over Q3, driven primarily by higher day rates for the net and Prospector One. The termination of the Arabia two contract in Saudi had a $5,000,000 net positive effect due to the accelerated amortization of the mobilization fee. As a result, adjusted EBITDA for the quarter was 136,700,000 Our core operation performed strongly with a technical utilization rate of 98.9% and an economic utilization rate of 97.1%.

Speaker 1

Despite the various headwinds experienced during the year, we were still able to deliver the full year adjusted EBITDA within the original guidance range of $500,000,000 to $550,000,000 which was set back in Q3 twenty twenty three. In the second half of twenty twenty four, softening demand and declining day rates signals potential headwinds for the jackup market heading into 2025. And a weaker market was observed with rig suspensions in Saudi and Mexico. However, this was partially offset by incremental demand in West Africa and Southeast Asia. We anticipate that the market will continue to face uncertainties in 2025.

Speaker 1

However, recent increases in contracting and tendering levels provide some early signs of improving conditions toward the second half of the year as per S and P Petrodata. Despite near term uncertainties, we remain confident in the strong fundamentals of the global jackup rig market. In November 2024, we successfully completed a new build program with the delivery of our final rig VAR, marking the end of our growth capital expenditures as we move into 2025. Additionally, with fewer special periodic surveys scheduled compared to last year, we anticipate a positive impact on cash flow. As a result, our budgeted capital expenditures for 2025 are set to be below $50,000,000 for the year.

Speaker 1

Currently, we have approximately 6,700 contracted rig days in 2025, representing 77% of our total available rig days in the year at an average day rate of 149,000 compared to 136,000 in 2024. The first quarter of twenty twenty five will be negatively impacted by suspensions of three rigs in Mexico, in addition to idle time on Arabia 1 and Vale ahead of the commencement of their respective contracts. We expect to receive approximately $44,000,000 in mobilization payments upon their contract commencements. In addition, liquidity in the first quarter will be positively impacted by the previously announced Mexican payment arrangement of $125,000,000 The Board has decided to declare a cash distribution of $0.02 per share for the fourth quarter of twenty twenty four. In addition, the company has an existing share repurchase authorization, which can be used opportunistically.

Speaker 1

This decision reflects the Board's focus on maintaining a strong balance sheet and taking a prudent approach to cash conservation, ensuring the company remains well positioned to navigate market uncertainties, while maintaining a solid financial foundation for future opportunities. I'll pass the call now to Magnus for the fourth quarter financial commentary.

Speaker 2

Thank you, Patrick. Total operating revenues increased by $21,500,000 primarily due to a $22,700,000 increase in day rate revenue compared to the third quarter. The increase in day rate revenue includes a $5,100,000 net increase related to the Arabia Two comprised of $8,500,000 increase in deferred mobilization revenue, offset by a $3,500,000 decrease in day rate revenue, both as a result of the termination of its contract with Aramco. Rig operating and maintenance expenses were in line with the previous quarter. However, it's worth mentioning that the total cost for the quarter includes a $2,300,000 acceleration of amortization and MOB and compact prep costs related to Arabia Two.

Speaker 2

Depreciation increased by $3,900,000 and led to total operating expenses increasing by SEK 3,800,000.0 compared to the third quarter. Other movements below the operating income line that's worth mentioning are total financial expenses increased by SEK 5,700,000.0, primarily due to interest on the additional SEK 175,000,000 bond issued in November 2024 as well as the SEK 150,000,000 bond tap in August 2024. But were both issued to finance the delivery of our two last newbuilds. The income tax expense decreased by SEK 5,900,000.0 from Q3 and is mainly due to a one off release of evaluation allowance during Q4. Net income for the fourth quarter was $26,300,000 an increase of $16,600,000 resulting in earnings per share of $0.11 Adjusted EBITDA for the fourth quarter was $136,700,000 an increase of 21,200,000 or 18% compared to the third quarter.

Speaker 2

Our free cash position at the end of Q4 was SEK61.6 million. In addition, we had SEK150 million undrawn under our RCF facility, resulting in total available liquidity of SEK211.6 million. Cash decreased by SEK124.1 million in comparison to the prior quarter due to the following. Net cash used in operating activities was SEK14.8 million, which includes SEK 93,400,000.0 of cash interest paid and SEK 15,500,000.0 of income taxes paid. Net cash used in investing activities was SEK 189,900,000.0, which includes the delivery installment for the last newbuild, the VAR, of SEK 159,900,000.0.

Speaker 2

In addition, we spent SEK 11,200,000.0 on activation costs for newbuild rigs and SEK 18,700,000.0 on other maintenance CapEx, primarily special periodic surveys and long term maintenance costs. Net cash from financing activities was SEK 80,600,000.0 and is comprised of AUD 175,000,000 from the issuance of additional senior secured notes to finance the bar. We also paid down AUD 70,800,000.0 of our debt under the regular semiannual amortization of the bonds. Additionally, we used SEK 19,900,000.0 to repurchase the company's shares and SEK 4,700,000.0 for the payment of cash distributions to shareholders. Following quarter end, we announced an agreement with our major Mexican customer to receive payment settlement for approximately SEK 125,000,000 related to our outstanding receivables in February.

Speaker 2

So far, we have collected SEK 105,000,000 of these and the remaining SEK 20,000,000 has been released by Pemex and is expected to be received by us shortly. We are also due to receive SEK 44,000,000 in mobilization payments upon commencement of the contracts for ArabiaONE and Vale in the first half of twenty twenty five. From a liquidity perspective going forward, as Pafik pointed out, we have concluded our growth CapEx program with our final newbuild delivered last year. For 2025, we expect regular maintenance CapEx to be below $50,000,000 With this, I will pass the word over to Bruno.

Speaker 3

Thank you, Magnus. I'll begin with our recent contracts and rig movements before covering global and regional market trends. In 2024, Boar Drilling secured $795,000,000 in backlog at an average rate of $177,000 per day, which we believe is market leading. This achievement is particularly notable given the year's challenges and underscore the quality of our assets and operations that enable us to achieve strong contracting performance. Since our last quarter, we secured new commitments for four of our rigs.

Speaker 3

The Norva has secured a contract with VAALCO for three twenty days commencing in July 25 and extending through April 26. We're pleased to see the rig re contracted by VAALCO following a successful campaign delivered to the customer earlier in 2022. The tour has secured a contract with an undisclosed customer in Southeast Asia and is expected to return to the active fleet by May 25. While this is a short term commitment, we are currently in discussions with other customers in the region for further work that could see the re contracted for a significant portion of the year. The GERD has secured a binding letter of award from undisclosed customer in West Africa for a 100 program starting in June 2025 following a T and I contract.

Speaker 3

Given the strong jackup demand in West Africa, we remain optimistic about securing follow on work for these rigs into 2026. And lastly, Nagroa has had its less available option exercised by Qatar Energy and is now firmly contracted until April 26. Regarding fleet movements, the Vale and Arabia One have completed mobilizations and are undergoing acceptance for long term contracts with Melita and Petrobras. Both rigs are expected to begin operations in March, strengthening our revenue stream and enabling us to collect meaningful mobilization payments as highlighted by Magnus. On a global basis, jackup utilization levels have remained steady since last quarter.

Speaker 3

Modern rig market utilization stands at 93% and just under 90% if adjusted for the net Aramco suspensions. While utilization levels remain relatively flat in the last couple of months, it is positive to note that 12 of the rigs previously under contract suspensions with Aramco have now been re contracted elsewhere, which includes our Arabia One. Looking at regional dynamics, in Southeast Asia, demand is expected to rise slightly with increased activity in Vietnam and Indonesia offsetting reductions in Malaysia due to the Petronas and Petros dispute. As a resolution to dispute nears, demand could increase more substantially in 2026. While we anticipate that this market will remain competitive, our fleet capabilities, performance and well established local alliances positioned well for upcoming contracts, although intermittent idle periods are likely.

Speaker 3

In The Middle East, we're encouraged to see some of the anticipated multi rig, multi eater tenders finally coming to the market. KJO, the joint operated zone between Saudi and Kuwait has launched a four rig, three year tender for work commencing throughout 2026. This tender combined with other requirements from the same customers as we understand could represent an incremental demand of up to six rigs for long term contracts. Similarly, we anticipate another multi rig multi year tender to be launched by KOC in the coming months. These programs combined have a potential to absorb a significant portion of the regional supply overhang resulting from their run cost suspensions.

Speaker 3

In West Africa, strong demand persists with multiple short and long term prospects across the region from Angola to Ivory Coast. We believe our fleet is well positioned to capture the incremental demand, bolstering our backlog for '25 and '26. In Mexico, overall activity levels have been impacted by Pemex temporary suspensions that started in Q4 twenty twenty four. Including our three suspended rigs in January, we estimate that approximately 12 rigs or 45% of Pemex contracted fleet is currently suspended. This reduction in activity has quickly affected the country's production, which has dropped below 1,700,000 barrels per day in December, down over 120,000 barrels per day from September.

Speaker 3

Positively, the government and Pemex continue to reaffirm commitments to stabilize vendor payments and restore production to 1,850,000 barrels per day. We remain optimistic that such commitments will result in a strong rebound during the second half of twenty twenty five and pave the way for long term extensions for our rigs in country. At this time, we anticipate that our P rigs suspended in Mexico will gradually return to work during the second quarter. In 2024, the headwinds resulting from our uncle changing production target and broader market uncertainties resulted in a significant contraction in rig fixtures, particularly in the first half of the year. However, H2 saw a gradual recovery, especially for modern rigs.

Speaker 3

With increasing number of open tenders, we see early signs of strength in contract activity in 2025, primarily for programs commencing the latter part of the year and 2026. While near term volatility is expected to persist, the long term fundamentals of the jackup market remain strong. Entering 2025, we had strong contract coverage at leading rates, providing us with a solid foundation. As opportunities expand, we now turn our focus to reducing idle periods in the year and strengthening our backlog feasibility into 2026. With that, I'd like to turn the call back over to Patrick.

Speaker 1

Thank you, Bruno. So in conclusion, the business we have built is quite resilient. We have dealt with numerous headwinds in 2024 and still delivered the year within the original guidance given to the market. Successful execution in a quite volatile environment. In 2025, we have had a good contract coverage to get us through the year, not only from a coverage perspective, but also considering the quality of the revenue in the backlog.

Speaker 1

We have some open capacity to deal with an opportunity to get the contract coverage further up, which will be our focus going forward. The collections in Mexico have given renewed confidence in Pemex and the Mexican government to put the country's oil and gas industry on a dependable long term trajectory from a collections perspective. Given the decline in the production volumes, it is clear that drilling activity will have to be restarted. Despite these short term headwinds, the global jackup market fundamentals remain strong with 30% of the global fleet over thirty five years old and no new rig orders in the past decade, retirements are expected to tighten supply, creating a favorable market for our premium rigs going forward. With that, we can now move to the Q and A.

Operator

Thank you, sir. We are now going to proceed with our first question. The question comes from the line of Eddie Kim from Barclays. Please ask your question. Your line is open.

Speaker 4

Hi, good morning. Just wanted to ask about leading edge day rates. Could you remind us where leading edge day rates for benign market jackups have been kind of over the past six or twelve months or so? And in your prepared remarks, you highlighted some market uncertainty this year. So in light of that, do you expect to see some day rate pressure kind of industry wide in the jackup market this year before rebounding perhaps in 2026?

Speaker 4

Just your overall thoughts on kind of the day rate trajectory from here would be great.

Speaker 3

Very good. Thanks for the question, Eddie. I'll probably not walk you through region by region because I think our views on lead to end market is part of our commercial strategy. But in in line with what we've discussed earlier, we've seen a few markets that suffered a bit more with the competitive pressure. And I think it's fair to say that Asia has been one of those markets.

Speaker 3

We've seen some of the competitor fixtures coming close or just under $100,000 a day, but leading edge rates staying kind of in a $130,000 1 hundred and 20 thousand dollars 1 hundred and 30 thousand dollars range. Conversely, if you go into markets that suffered less with competitive pressure as in West Africa, We have seen numbers that still hover and often above the kind of 150 range. So we do have a fair spread here. We see now going forward a increasing number of tenders, and I think that alone would help the industry and will help the peer group in reducing a little bit of the competitive pressure. In addition to that, some of the players that have been more aggressively chasing work seem to have achieved now full utilization or pretty close to full utilization, which should take a little bit of the edge as well from this competitive pressure.

Speaker 3

Now I think that the dynamic will remain. Some markets that are a bit more benign will be subject to higher competition and then we'll keep the rates a bit compressed. Other markets where it takes a lot of history, a lot of competency to kind of penetrate will be a bit more insulated. So I don't see for now a scenario where the rates fall off the bottom. I think we have we are in a range that activity level troughing should start to stabilize or potentially go up as the months come by.

Speaker 4

Understood. That's helpful. And then just my follow-up is on Mexico, a lot of good color there. So you have three rigs of Timex that are currently temporarily suspended and two that are contracted through year end. I believe I heard that the three that are temporarily suspended, you expect those rigs to return to work in the second quarter.

Speaker 4

Did I hear that correctly? And I guess what's your confidence level around that? And if that's the case, I mean, it seems like you're fairly confident that your other two jackups that are currently still contracted will continue to work until the end of their contracts later this year. So just, I guess, if you could confirm that for me, that would be great.

Speaker 1

Yes. I think that your the numbers that you have are correct. We do indeed expect these rigs to go back to work in the second quarter. But quite frankly, we don't know exactly when in the quarter that is going to be. That is at the moment a working assumption.

Speaker 1

And the main reason for that is that we have seen that there is a lot of actions that have taken place in Pemex. If you think about the last few months since the new administration is in place, the amount of work that has been done in getting people paid and now a aggressive plan on how activity needs to be restarted, we're still having a very strong commitment on getting production up. I think that based on the production data as we see it and the strong decline that otherwise you would see in Mexico, I would assume that there is going to be a significant focus in getting rigs back to work, particularly the ones that already are contracted. So that is our working assumption. Obviously, the future here will have to tell.

Speaker 1

But those are kind of the guidelines that we have and the reasoning for us to be fairly positive about the business environment there.

Speaker 4

Got it. Great. Thank you very much. I'll turn it back.

Speaker 3

Thank you.

Operator

We are now going to proceed with our next question. The questions come from the line of Doug Becca from Capital One. Please ask your question.

Speaker 3

Thank you. I was maybe hoping you could expand on the latest in Saudi Arabia. Just looking at some industry data, it did seem like one of the suspended rigs actually did return to work with the Ramco, a competitor rig, but just the latest you're seeing in Saudi Arabia. All right. Thanks, Doug.

Speaker 3

And yes, indeed, there was some reports earlier about rig returning to work. I'm not sure if that was a true story. I think that was actually a rig swap done by one of our competitors. The situation in Saudi remains steady state at the moment. Where we see quite a bit of focus on their end is in relation to the offshore gas work.

Speaker 3

Aramco has been quite vocal on the companies, on the countries focus on expanding on the gas side. And that's where some of the conversations are taking place at the moment. In addition to that, Doug, I think interesting to note is in the last couple of months now, there's been an increased talks about Aramco awarding large EPC contracts for projects like Zulu, for Saphania that were originally planned to be put on hold, right? As that progresses, increases our level of confidence that a pipeline start to form in Saudi Aramco. Now the other interesting discussion that we see in country is a recent interest from Aramco talking to service companies about lump sum, turnkey or integrated projects offshore.

Speaker 3

This has been something that they looked in the past, and I think they see that as a good way to improve efficiency and the overall ability of the country to deliver wells. Those conversations seem to be resuming at the moment. I think it's going to take some time. But combined with the EPC awards in the pipeline gives us some hope that as the year progresses, the pipeline from Aramco should start to fuel up. At the moment, I think situation is steady state.

Speaker 3

No, that's encouraging. And then it looks like the Ford did get some incremental work for the second quarter. Just any color you could provide around that? Are there potential extensions related to that or is this more of a one off? Yes.

Speaker 3

No. And we the rig came off contract back end of last year. Obviously, we've been working hard to see it going back to work. Reality is that in Asia, a lot of the programs that we see at the moment, not exclusively, but a lot of the programs we see are short term in nature. So the challenge that we have is obviously to put the rig back to work and string a sequence of programs that will maintain the rig working.

Speaker 3

So that's obviously something that we're working the team is working quite hard to deliver. It is a short term program. We'll see the rig working. We have accepted that commitment on the back of visibility of other programs. So we'll have to work through it.

Speaker 3

I do believe, as I mentioned in my early remarks, that there is a good chance that we could be contracted for the remainder of the year or a large portion of the large portion of the year.

Speaker 2

Got it. Thank you.

Speaker 3

My pleasure.

Operator

We are now going to proceed with our next question. The question comes from the line of Frederic Steen from Clarksons Securities. Please ask your question.

Speaker 5

Hey, Patrick and team. Hope you are well. So I wanted to circle a bit back to Mexico, at least with the discussions that I'm having with my clients. The situation there, even though you've been able to collect a good chunk of the 125,000,000 already, I think getting proper confidence for future payment is still a bit hard and one of the kind of risks that is currently weighing onto the stock. So as a side note, being a bit lower on the dividend, while kind of itself is not necessarily what investors want, I think it was what investors wanted in this case just to make sure that you're prudent with the balance sheets.

Speaker 5

But on the Mexico situation, have they given any signals on how future payment schedules can look at? Or should we expect that from time to time, you have to renegotiate similar kind of receivables deals as has been done now? I guess some sort of regularity or frequency to these payments would be great in terms of visibility. So anything you can share on that front would be super helpful. Thanks.

Speaker 1

Fred, thank you. And I mean, I think it is clear that if it were to be clockwork, yes, it would be easier to run our business. You're absolutely right. I think though that given where we have come from with the business in Mexico, the way it has grown and also the way that we have always been paid, I think we have to give a bit of credit to the management team that is now in place and the government of what they have been able to pull off in what is essentially four months. So I think that tremendous efforts are being made to get suppliers paid.

Speaker 1

It was immediately seen as one of the key priorities, which in the past maybe wasn't as prevalent. But looking at the overall picture, I would say it's a market that has a decent rig rate. It is a market where we have ultimately always been paid. We have a strong setup and a very good local partner to work through ultimately for Pemex. So would I like it to be all more clockwork like?

Speaker 1

Absolutely. Is that realistic? I don't think so. Now there are a few things that are changing the market in Mexico. And I would definitely point towards the increased private investments that we are likely to see going offshore, which therefore means that we are in essence are going to have a different counterparty, a counterparty that is having a different cash flow than let's call it Pemex had in the past.

Speaker 1

So I'm quite encouraged by that. And I think that the mechanism that is set up for that, where the private investor is going to be the direct beneficiary of the commercialization of the oil that they produce and therefore in a position to deal, let's call it differently with their suppliers, I think is a very positive sign. Is that all going to be in place here next month? No, that will take a bit of time, but I can't say that I see far more positive movements in the Mexican business than I would see negative movements.

Speaker 5

That's a good and comprehensive answer, Patrick. Thank you. Just as a follow-up on that, I'm sorry if I missed it, but I had a bit of a choppy line here. Bruno, did you say anything about your thinking around extending the rigs, the five rigs that are currently with Tebex? And how a deal like that could eventually look like?

Speaker 5

And again, ultimately, I guess, it depends on you guys having enough confidence that you'll get paid if you extend that securing those rigs for longer would be a meaningful chunk of your 2026 and beyond coverage fixed already?

Speaker 3

Most definitely, Fred. I mean, Mexico is a key component to our business. It's something that we're looking quite closely. But picking up from where Patrick left, we do see tremendous amount of effort being put by the government to stabilize the situation in Mexico and that includes reinforced commitment to maintain production level. And as you can clearly see from the current amount or from the current levels or the current data, it is dropping.

Speaker 3

So we do anticipate that these reduced activity levels are going to have to be reversed and very soon. And not only that, they will have to do some catch up work to get back to where they were a few months back. So that is kind of where my comment came from in earlier notes that we think that that's going to strengthen activity levels as we kind of move to the second half of the year and I think very likely create a venue for us to extend these rigs further in the future.

Speaker 5

Super. Thank you very much. That's all from me. Have a good day.

Speaker 1

Thank you.

Speaker 2

We are

Operator

now going to proceed with our next question. The question comes from the line of Charles Olsen from Fearnley Securities. Please ask your question.

Speaker 6

Afternoon, guys. A couple of questions from me. Firstly, and Bruno, I think it's probably for you. What's the dialogue like with your clients at the moment? I mean, what's sort of a, call it, depressing points, if you will, in terms of getting things done?

Speaker 6

Or is it just that takes time?

Speaker 3

Yes, fair true. And we normally work with kind of a leading period of four to six months ahead of contracts, right? So obviously, what we see now is obviously a lot of customers or quite a few customers organizing themselves. We're further working 2025 and 2026. We have a variety of constructive discussions with customers at the moment.

Speaker 3

I think it's fair to say that the larger names like the NOCs have a bit more flexibility in their schedules and maybe sometimes a bit more leeway in delaying programs, I think, of that nature. While we see a variety of IOCs in general quite committed to certain schedules, quite committed to using the opportunity where there is capacity in the market to drill. Some of these companies, when coming to the market a year ago or so, had limitations on finding access to the rigs, and and they seem to be keen on coming to the market. Now what I think is quite interesting is that the customers, particularly the customers with programs that are not multiyear in nature, they obviously understand very clearly the importance of having a high performing contractor, right? When you have a smaller campaign, you cannot really afford delays or issues with the program and quite a few of these customers seem to be very keen to engage with us and discuss and understand how they can benefit from the proven performance of our rigs.

Speaker 3

And it's very, very beneficial in that sense. But so that's kind of where we are in terms of the discussion flows. We do see pipeline increasing. It's fair to say that it's obviously focused on the second half of the year because as you said, it takes time for some of these programs to get going. But we do see an increasing number of opportunities now building up in the pipeline.

Speaker 3

I hope I addressed your question. Yes,

Speaker 6

yes. Thanks. I guess and as a follow-up to that, I mean, I guess there's nothing really much moving in terms of the T and Cs on the contract. It's more about I mean, it's not about really the economics of things, it's more about timing of things, general activity level.

Speaker 3

Yes. Obviously, 2024 was a year that we've obviously been very focused on increasing our backlog, elevate the quality of backlog, and I think we've achieved a lot. As we go now into 2025, we don't necessarily shift the focus. I think we have an extremely competent commercial group that does a great job maximizing the commercial value of these negotiations and discussions. Certainly, customers will use leverage that they have at the moment to try to claw back some of the T and Cs in the contract.

Speaker 3

That's part of the natural flow as the cycle progresses. But at the moment, our focus is really making sure that we don't leave idle time on rigs unnecessarily and we increase our backlog visibility to twenty twenty six for sure.

Speaker 6

Thanks. And lastly, I'm sorry if I missed this, but twenty twenty five guidance.

Speaker 1

Yes. No, that is a good point, Charles. And obviously, I would have been quite keen to give you more visibility on that. But I think that the point is that today, visibility is somewhat limited during in part the rig suspensions in Mexico, the lingering impact of the Saudi suspensions. And there is just too wide a range of outcomes currently with many moving pieces.

Speaker 1

The only thing I can tell you is that as soon as there is more clarity in the market, as some of these suspension impacts are resolved and visibility then improves, we will update you at that time. But for right now, the best thing we can do is give you an idea of contract coverage and then give you an idea on the EBITDA when it's really when we're in a position to give you some credible data points. Otherwise, we'd be just making everybody more confused.

Speaker 6

Fair enough. Thank you, guys.

Speaker 5

Thank you.

Operator

We are now going to proceed with our next question. The questions come from the line of Nikhil Bhat from JPMorgan. Please ask your question.

Speaker 7

Hi. Thank you for taking my question. I have two, if you don't mind. For 2025, right now in your fleet status report, you see that there are three available rigs, including your the new build. Can you please update us on the sort of current discussions you're having with clients about these rigs?

Speaker 7

And especially the new build in terms of which sort of region are you looking to contract this out to? And the second question is more about how should we think about your financial policy going forward given that both expect to generate significant free cash flow this year? Would you be looking to prioritize some debt repayment in the near term?

Speaker 3

Very good, Nick. I'll take the first part of the question and I'll hand it over to Magnus for your second part. Thinking about the fleet, you're right, we have three rigs currently available, one in Mexico that recently finished the contract, one in The Middle East that has been suspended by Aramco and subsequently terminated in December and the new build. At the moment, we do have these rigs offered in a variety of tenders around the globe. As I said earlier, generally speaking, we're looking at a lead time for these contracts that are somewhere between four or six months at the short end.

Speaker 3

So it's fair to indicate that the likelihood of these rigs returning to work is definitely towards the second half of the year, right? And regional deployment where they go to work, I think we're considering opportunities available at the moment. We do see we do have one rig in Americas. We do see a set of opportunities for the rig in the region. I don't think we're constrained to that.

Speaker 3

West Africa continues to be a market showing some potential upside and at some point in time could support the inflow of rigs. And the similar thing goes to The Arabia too that just finished contract with Aramco. It's warm and ready. So that rig could be deployed, including for some opportunities that we now see in The Middle East coming up in 2025. In relation to the new build, it's fair to say that I think we were quite optimistic during 2024 to have it working in the early part of '20 '20 '5.

Speaker 3

Obviously, without now having the Arabia 2 as an additional rig available in our toolbox here to deploy near term, that has less of a focus. That rig is in Singapore. We'll continue to market that rig. But I think at the moment, the immediate priority is to see if we can find homes for the run-in The Arabia to maybe I'll turn it off to Magnus for the second part of the question.

Speaker 2

Thanks. So I think for this quarter, the board has continued the dividend of $0.02 but the focus is very much now given the short term uncertainties to build a strengthening balance sheet, conserve cash. And then we'll see during the year and closer to later in the year, what would be most beneficial for the company, whether that is to buy back debt depending on debt levels or whether it is to apply our share buyback program or pay out this dividend. I think it's important also to emphasize again that our bonds, they do already amortized by $135,000,000 per year. So we are already very much focused on the deleveraging of the company as a function of the of how the bonds are structured.

Speaker 2

So I think right about now, the board has thought it was prudent to continue to build the balance sheet and focus on preserving the cash to see what's most beneficial going

Speaker 5

forward. Thank you.

Speaker 7

Thank you.

Speaker 6

So I think

Speaker 1

we have come to our last question, if I understood it correctly.

Operator

Yes, that's right. This concludes the question and answer session. So I'll hand back to you for closing remarks.

Speaker 1

No further closing remarks.

Operator

So this concludes today's conference call. Thank you all for participating. You may now disconnect your lines. Thank you.

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