Borr Drilling : 1st Quarter 2021 Results

Borr Drilling Limited Announces Trading Update Including Key Financial Information For First Quarter 2021

Hamilton, Bermuda, May 31, 2021: Borr Drilling Limited ("Borr", "Borr Drilling" or the "Company") announces preliminary unaudited results for the three months ended March 31, 2021.

Highlights

• Total operating revenues of $48.4 million, net loss of $58.1 million and Adjusted EBITDA1 of $(10.6) million for the first quarter of 2021.
• Total operating revenues includes a reduction of related party revenues of $9.2 million recorded in the first quarter of 2021 relating to prior periods, following an amendment of our Mexican JV agreements regulating the treatment of standby rates charged for our rigs operating in the JVs. Without this reduction for prior periods, the Adjusted EBITDA would have been $(1.4) million for the quarter.
• On January 22, 2021, we completed an equity offering raising total proceeds of $46 million.
• In January, the Company finalized the terms and executed agreements with certain of our creditors for the previously announced liquidity improvement plan.
• The Company and its Drilling JVs has been awarded 17 new contracts, extensions, exercised options and LOAs/ LOIs since the start of 2021 to the date of this report, representing 5,352 days of potential backlog and $458 million in potential revenue.

CEO, Patrick Schorn commented:

"We are encouraged by the signs of a recovering shallow water rig market so far in 2021. The number of Borr operating rigs stood at 13 at the end of the first quarter, up by five units from trough levels experienced in 2020. Tendering and contracting activity remain strong. Since the beginning of this year, Borr has secured new contracts and confirmed optional periods with a total revenue potential of approximately $162 million, excluding unexercised option periods. Additionally, the Company and its Drilling JVs have secured LOIs and LOAs, that once converted into contracts will add a total revenue potential of approximately $296 million. We are optimistic about the market opportunities going forward, and expect to see several of our currently warm stacked rigs coming back into operation at accretive rates.

Part of our liquidity improvement plan outlined in our Q4 2020 report has been to pursue initiatives to improve cash distributions from our JV operations in Mexico. Year to date, Borr has received $15 million in cash from its JVs which is a considerable improvement compared to previous periods. The IWS JVs have added roughly 125,000 BOPD to Pemex's production and we continue to receive very positive feedback from the customer regarding service quality and performance. In addition, we are pleased to announce that according to the latest activity plans in the IWS JVs, we expect that our five rigs in the country will continue providing services for the project until the end of 2022."

• For a definition of Adjusted EBITDA and why we use this measure, see page 4 of this report.

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Management Discussion and Analysis

Consolidated Statements of Operations (Financial Performance & Operating Results)

The Management Discussion and Analysis below compares the results of the first quarter of 2021 to the results of the fourth quarter of 2020.

In $ million	Q1 - 2021	Q4 - 2020
Total operating revenues	48.4	60.2
(Loss) / gain on disposals	(0.1)	5.9
Rig operating and maintenance expenses	(48.7)	(53.9)
Depreciation of non-current assets	(28.4)	(29.1)
General and administrative expenses	(11.7)	(8.5)
Total operating expenses	(88.8)	(91.5)
Operating loss	(40.5)	(25.4)
Income / (loss) from equity method investments	12.2	(7.1)
Total financial expenses	(27.5)	(23.4)
Loss before income taxes	(55.8)	(55.9)
Income tax expense	(2.3)	(3.2)
Net loss	(58.1)	(59.1)

Three months ended March 31, 2021 compared to the three months ended December 31, 2020

Total operating revenues were $48.4 million for the first quarter of 2021 compared to $60.2 million for the fourth quarter of 2020. The operating activity level between the quarters has been stable, however total operating revenues include a reduction of related party revenues of $9.2 million for periods prior to the first quarter of 2021 due to an amendment of our Mexican JV agreements regulating the treatment of standby rates charged for the rigs operating in the JVs. Without this adjustment for prior periods, the Adjusted EBITDA would have been $(1.4) million for the quarter.

Revenue was positively impacted by "Prospector 5" commencing its contract during the fourth quarter of 2020 and having a full quarter of operations in the first quarter of 2021, offset by "Frigg" and "B152" (pass through revenue) ending their contracts in the fourth quarter of 2020

Rig operating and maintenance expenses, including reactivation and stacking costs, were $48.7 million for the first quarter of 2021 compared to $53.9 million for the fourth quarter of 2020. The decrease of $5.2 million is partly explained by a decrease in amortization of mobilization costs to $3.5 million in the first quarter of 2021, from $7.8 million in the fourth quarter of 2020, offset by higher reimbursable expenses of $3.7 million in the first quarter of 2021 compared to $2.1 million in the fourth quarter of 2020.

General and administrative expenses were $11.7 million for the first quarter of 2021, an increase of $3.2 million compared to the fourth quarter of 2020, as a result of increased legal costs due to amendments in our credit agreements in January 2021 and other corporate costs.

Income from Equity method investments relating to our Mexican JVs were $12.2 million for the first quarter 2021 compared to a loss of $7.1 million loss in the fourth quarter 2021.

Income tax expense was $2.3 million in the first quarter 2021, a reduction of $0.9 million from the fourth quarter of 2020. The majority of the income tax expense in the first quarter of 2021 is attributable to withholding tax on bareboat charters in Malaysia and Mexico and the customer withholding 5% tax in Nigeria.

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Set forth below is a reconciliation of Net Loss to Earnings Before Interest, Tax and Depreciation ("Adjusted EBITDA")

(in US$ millions)	Q1 - 2021	Q4 2020
Net loss	(58.1)	(59.1)
Depreciation of non-current assets	28.4	29.1
(Income) from equity method investments	(12.2)	7.1
Financial expense	27.5	23.4
Income tax expense	2.3	3.2
Amortization of mobilization costs	3.5	7.8
Amortization of mobilization revenue	(2.0)	(2.5)
Adjusted EBITDA2	(10.6)	9.0

Consolidated Balance Sheet

As of March 31, 2021 compared to year end 2020.

Total assets were $3,169.5 million as of March 31, 2021 compared to $3,171.1 million as of December 31, 2020. The decrease of $1.6 million is primarily a result of reduction in held for sale rigs of $4.5 million as the sale of Balder was completed in February 2021 and fleet depreciation of $28.4 million, offset by an increase in cash balances of $29.8 million. The cash balance was $49.0 million as at March 31, 2021.

Total liabilities as of March 31, 2021 were $2,145.3 million, an increase of $11.0 million compared to December 31, 2020. This increase is mainly attributable to an increase in long-term accrued interest of $12.6 million, a result of the execution of agreements which included deferral of interest as part of the liquidity improvement plan in January 2021.

Total equity as of March 31, 2021 was $1,024.2 million compared to $1,036.8 million as of December 31, 2020. The reduction of $12.6 million is largely attributable to the net loss of $58.1 million for the first quarter 2021, offset by increases in share capital and additional paid-in capital of approximately $44.8 million following our equity offering in January 2021.

Mexican Joint Ventures Operational Results on a 100% basis (Borr Drilling owns 49%)

In $ million	Q1 - 2021	Q4 - 2020	2020
Mexico Joint Venture EBITDA	Drilling	IWS	Drilling	IWS	Drilling		IWS
Net income (loss)	(1.9)	30.4	5.1	(19.7)	12.0		7.3
Total financial (income) expenses	0.6	(3.9)	(0.1)	0.6	(1.2)		7.9
Income tax expense	4.3	2.9	(4.0)	12.1	1.8		23.6
Amortization of mobilization costs	5.9	0.4	13.5	0.7	29.7		2.7
Amortization of mobilization revenue	(0.8)	-	(1.0)	-	(3.7)		-
Adjusted EBITDA	8.1	29.8	13.5	(6.3)	38.6		41.5

Our "Drilling" joint ventures results reflects stable operations throughout the first quarter of 2021, but continue to be impacted by COVID-19 related costs and inefficiencies. Included within the financials in the table above, showing first quarter of 2021 results for "Drilling", are $1.0 million of net costs related to charges from Borr entities, representing bareboat charter fees, staffing and management expenses. The reason for the reduction from the fourth quarter of

• Note - The Company uses certain financial information calculated on a basis other than in accordance with accounting principles generally accepted in the United States (US GAAP) including Adjusted EBITDA. Adjusted EBITDA as used above represents our periodic net loss adjusted for: depreciation and impairment of non- current assets, (income)/loss from equity method investments, total financial (income) expense net, income tax expense, amortization of deferred mobilization costs and revenue. Adjusted EBITDA is included here by the Company because the Company believes that the measure provides useful information regarding the Company's operational performance.

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2020 is an amendment to the JV agreement which has reduced standby rates for the Drilling segment since commencement of the contracts.

As of March 31, 2021, Borr Drilling had $30.3 million outstanding receivables from its related parties Joint Ventures in Mexico, representing bareboat charter and prepaid expenses. Borr Drilling received approximately $9 million cash from the Drilling JVs in the first quarter of 2021, and approximately $7.5 million after quarter end. This was a combination of payment of receivables and repayment of funding provided. The JVs have collected approximately $180 million from Pemex year to date in 2021.

Risks and uncertainties

Borr is exposed to a number of risk factors related to the Company's finances, operations and the general industry in which the Company operates. The COVID-19 pandemic and associated effects during 2020 have increased the natural risks that we face generally.

Since March 2020, national and local travel restrictions and lockdowns in various regions following the pandemic outbreak caused disruptions to our operations and the pandemic imposed a risk to the health of our personnel. Our rigs and shore based operations were impacted by reduced personnel, border closures, and many employees were working from home or forced to stay home by local regulations. Further escalations of the current pandemic outbreaks and other public health crisis or natural disasters could occur in the future and could impact Borr's operations, including our Joint Ventures in Mexico. In addition, we have previously reported contract loss and suspensions, as well as reduced marketing opportunities while our customers react to circumstances. As a result, we remain subject to risks relating to the pandemic and we will continue to monitor our operations and respond to circumstances as they arise.

In addition, while we have improved our liquidity through the equity raise in January 2021 and additional equity raises in 2020, and we have extended debt maturities and has deferred interest payments, we continue to face liquidity and other risks aas described in our 2020 Annual Report.

Fleet, Operations and Contracts

As of the date of this report, the Company owns 23 modern jack-up rigs, out of which 12 rigs are currently active: two in West Africa, two in the North-Sea, three in South East Asia and five in Mexico. Additionally, we have one rig committed for start up in June 2021. Five rigs are under construction at Keppel FELS, scheduled for delivery during 2023, after which the fleet will consist of 28 modern rigs all built after 2010.

Year to date 2021, the Company has executed seven new contracts and had three options exercised, for a total potential revenue of approximately $162 million, excluding unexercised optional period. In addition, we have entered into seven letters of intent (LOIs) and letters of award (LOAs) that, once converted into contracts, will add total additional potential revenue of approximately $296 million, including contracts through the Company's participation in its Drilling JVs.

Between firm contracts, exercised options, LOIs and LOAs, the Company have added over 5,352 days, or 14.7 years, of potential backlog YTD at an average day rate of approximately $85,600, including contracts through its Drililng JVs. During the same period, our operating rigs have consumed approximately 5.4 years of backlog. Our backlog replenishment ratio YTD stands at a multiple of 2.7x, meaning that we are adding almost 3 times as many days to backlog compared to backlog consumed during the same period.

In March 2021, the "Idun" commenced its contract with Vestigo in Malaysia for ten firm wells with an estimated duration of 315 days. Subsequently, seven of the ten wells have been novated to Petronas.

In April 2021, the "Norve" commenced its contract with BWE in Gabon for two firm wells plus one optional well, which has been exercised by the customer. Under this contract with BWE, the "Norve" is expected to remain contracted until October 2021. In May 2021, the Company obtained an LOI from an undisclosed customer for a program of 120 days'

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firm plus 210 days of options commencing in December 2021. Based on these additional contracts, the Company anticipates that the "Norve" will remain contracted until April 2022 and Q4 2022 if all options are exercised.

In May 2021, the Company converted the previously announced LOA into a three-year firm contract with PTTEP in Thailand for the "Skald" which is expected to commence in June 2021.

In May 2021, the "Prospector 1" finished its contract with ONE-Dyas in the North Sea and has since commenced a contract with Neptune in the Netherlands for four firm wells plus three optional wells. The Company has secured an additional contract for the unit with Tulip Oil in the Netherlands for two firm wells plus one optional well, which has been exercised by the customer. Based on these existing firm contracts, we anticipate that the "Prospector 1" will remain contracted until around March 2022 and into Q1 2023 if all options are exercised.

In May 2021, the Company secured an LOA for the "Saga" relating to the optional wells under its current contract with PTTEP/JX Nippon. This LOA includes the novation of such options to an undisclosed operator in Malaysia. Upon conversion into a contract, the "Saga" is expected to remain contracted until August 2022.

In Mexico based on the latest IWS JV activity schedule, all five Borr rigs operating in Mexico are now anticipated to continue operating for the IWS JVs through 2022.

The rig "Gunnlod" has had eight of ten optional wells exercised PTTEP, which is expected to keep the rig operating up to September 2021. The contract can be extended by four further optional wells, which would keep the rig active for the remainder of 2021.

In May 2021, the rig "Natt" was awarded a contract with Oriental in Nigeria with an estimated duration of 120 days plus an option. This contract has commenced during the same month.

For more details on our rig contracting, see our Fleet Status report issued at the same date of this report

The technical utilization for the fleet was 99.5% in first quarter of 2021. The economical utilization was 88.7% for the first quarter of 2021, negatively impacted by idle time for three rigs waiting between wells in Mexico.

Corporate Development, Liquidity and Financing

Our cash position increased by $29.8 million in the quarter to a closing balance of $49.0 million as of March 31, 2021. The positive drivers were new equity of net $44.8 million and proceeds from sale of fixed assets of $1.4 million. This was offset by cash used in operations, payments for contract preparation, mobilisation and activations of rigs of approximately $6.9 million, in addition to interest payments of $9.5 million. Included in our cash position is also cash payments received from the Mexican JV's of approximately $9.0 million. Furthermore, cash used in operations is impacted by movements in working capital, in particular due the to start-up of two rigs in the quarter ("Idun" and "Norve"), which have immediate impact on the cost side, while the revenue is collected in accordance with normal contractual payment terms.

In January 2021, the Company completed the liquidity improvement plan it started in the autumn of 2020. Following the amendments, the Company has no debt maturities until 2023, and has deferred the majority of interest payments to the yards until March and May 2023. More details of the financing amendments can be found in the notes to the Company's 2020 Annual Report.

On January 22, 2021 the Company successfully completed an equity offering at a subscription price of $0.85 per Offer Share, raising gross proceeds of $46.0 million.

Market

Global competitive jack-up rig utilization stood at 82% at the end of March 2021, an increase of one percentage point quarter-on-quarter. The utilization for the modern jack-up fleet (rigs built after year 2000) has increased by three percentage points from December 31, 2020 to 84% at the end of the first quarter of 2021.

At the end of March 2021, a total of 345 jack-up rigs were contracted, up from 340 rigs as of December 31, 2020. For modern rigs, contracted rig count stood at 248 versus 97 standard jack-ups, representing 72% of the contracted fleet.

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