Borr Drilling Ltd (BORR) 2025 Q3 法說會逐字稿

Good day and thank you for standing by. Welcome to the Borr Drilling Ltd Q3 2025 results presentation, webcast, and conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. (Operator Instructions)

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Bruno Morand, CEO. Please go ahead.

Good morning and thank you for participating Borr Drilling 3rd quarter earnings call. I'm Bruno Morand, and with me here today in Bermuda is Magnus Vaaler, our Chief Financial Officer. 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. I therefore refer you to our latest public filings.

For today's call, I'll start with a review of Q3 and highlight key developments since quarter end. Magnus will then review our quarterly financial results. I'll follow with a deeper look in the market and our commercial execution, and we'll conclude your questions. Let's get started.

Our 3rd quarter results were strong, extending the rebound delivery in the second quarter with 23 or 24 rigs active. Our commercial team continues to execute at the highest levels, delivering strategically and timely contracts despite a volatile and dynamic market.

Revenue increased by $9.4 million quarter over quarter and adjusted EBITDA rose 2% to $135.6 million with a margin of 48.9%, confirming the quality of our earnings. Operational execution continues to be industry leading with technical utilization of 97.9% and economic utilization of 97.4% across the fleet.

Subsequent to the quarter end in October, we're pleased to announce 3 contract extensions in Mexico. Mexico remains an important market for Borr Drilling. Notably, collections restarted in September with approximately $19 million received in September and October. These in flows, together with the recent government actions to strengthen PMA finances, are the basis for our confidence in continued normalization of payments.

Additionally, in October, newly imposed international sanctions affecting one of our counterparties in Mexico required us to issue termination notices for the old and the new contracts. Today we announced new commitments expanding Borr Drilling footprints into the Gulf of America and Angola. These awards strengthen and diversify our customer base and portfolio, underscoring our ability to navigate evolving markets.

And minimizing idle time across the fleet. We expect 4th quarter 2025 results to reflect fewer operating days due to several weeks transitioning between contracts and the recent impact of sanction-induced contract terminations in Mexico. Despite this, we anticipate full year 2025 adjusted EBITDA in the range of $455 million to $470 million.

In recent quarters we've experienced a set up in jack-up demand across several international markets, absorbing available capacity and providing gradual relief to the headwinds from 2024. While near-term volatility may persist, clear signs of demand inflection in Saudi Arabia and Mexico, two of the world's largest checkup markets, together with incremental activity in other areas, provide us with confidence that the market is now passage trough.

We foresee a tightening market in the near to medium term that should support higher utilization and day rate levels. I'll walk you through that in more color later in the call, but now I'll hand the call to Magnus to discuss 3rd quarter financial results.

Thank you, Bruno. I will now go into some details of the financials of the third quarter. As Bruno mentioned, we continued the good trends seen in the previous quarter, and the results quarter on quarter improved. Total operating revenues increased by $9.4 million due to $2.5 million increase in day rate revenue and $6.4 million increase in bearable charter revenue.

The $2.5 million increase in day rate revenue was primarily due to an increase in the number of operating days and day rates for Iran and Thor, recognition of day rate revenue for the old in versus previously being recognized as variable charter revenue, and an increase in reimbursable revenue for the ger.

These increases were offset by a decrease in the number of operating days for the prospective one. The $6.4 million increase in bare charter revenue is primarily due to the rigs Galar grid and Gersemi being fully operational in the quarter compared to being on suspension for part of the prior quarter.

This increase was offset by the decrease in bearable charter revenue for the Odin, and this bearable charter contract was terminated effective June 30th and begun earning daily revenue in August 2025. Total rig operating and maintenance expenses increased by $6.3 million, which is primarily as a result of the increase in reimbursable expenses for the ger.

This in total gives us an operating income of $98 million a $1.5 million increase from the prior quarter. Further below the operating income line, total financial expenses net increased by $2.2 million, primarily due to foreign exchange loss, offset by some higher interest income and lower interest expenses.

Income tax expenses increased by $6.5 million primarily due to a one-off deferred tax benefit recognized during the prior quarter with no comparable in the current quarter. As a result of the before mentioned net income for the quarter was $27.8 million and adjusted EBITDA was $135.6 million, an increase of $2.4 million.

Moving on to cash, our free cash position at the end of Q3 was $227.8 million. In addition, we have $234 million undrawn under our revolving credit facilities, resulting in total available liquidity of $461.8 million.

Cash increased by 135.4 million in comparison to the prior quarter, explained by the following. Net cash provided by operating activities of $72.1 million, which includes $6 million of cash interest payments on our convertible bonds and $13.2 million of income taxes paid.

Operating cash flow for the quarter was further impacted by a buildup of working capital, primarily driven by approximately $42 million increase in trade receivables in Mexico and a $13 million increase in trade receivables relating to the Rigg Valley.

However, subsequent to [Corkan] in October, we received approximately $17 million related to the trade receivables in Mexico and $10 million related to the valley. We expect to receive further settlements for our Mexico receivables both in November and December.

Lastly, net cash provided by financing activities was $97.2 million, primarily due to $96.9 million net proceeds for the company's July 2025 equity offering. With this, I would pass the word back to Bruno.

Thank you, Magnus. Year-to-date, we have secured 22 new commitments, adding $625 million to our backlog. Since our last report, we've continued to secure meaningful awards. First, in Mexico, we secured 3 contract extensions. The Galar and Gersemi received 2-year extensions on improved commercials and payment terms. These commitments not only strengthen our 2026 utilization, but they also provide visibility well in 2028.

Under the revised structures, operating costs will be reimbursed by the customer on a fixed 45-day payment term, materially reducing our working capital needs. Bareboat charter payment terms will be kept at 180 days, and for the Galar this cap will progressively improve over time.

Additionally, we received a short-term extension for the New York and continuing active discussions with our customer in Mexico about a long-term deployment for the rig. In Mexico going forward, we will have a total of 5 rigs working from a previous count of 7, with 2 rigs being reassigned to new work elsewhere and I'll cover shortly.

Regarding the 5 remaining rigs in the country, 2 are long-term contracted with payment protection provisions, 2 are contracted with IOCs, and only 1 has direct Pemex payment exposure. This is a significant change in our fleet mix in country. I'm also pleased to report on recent awards in America and West Africa, along with several other contracting updates.

In the Gulf of America, the old man received a letter of award for a six month campaign with an undisclosed operator. The campaign is expected to commence in January 2026.

This will mark our entry into the US and again highlights our team's ability to timely secure work for the rig following sanction-induced contract termination. In West Africa, the grid has received a letter of award for a 6 month commitment plus unpriced options with an undisclosed operator in Angola.

The campaign is expected to commence in the 1st quarter. Leaning on our strong relationships, we have collaborated with our partner in Mexico to reassign wells previously allocated to the grid to our other rigging country. This will enable us to conclude operations with the grid in Mexico in November and the rig will begin its mobilization to West Africa in December.

Also related to the grid, we have agreed with New Age to reassign the contract we previously allocated to the Natt to the grid and expect to commence a one well campaign with New Age in Congo in January prior to commencing the work in Angola.

Additionally, in West Africa, we are in discussions with DNI regarding their current wealth sequence for the Natt in Congo. While there are various and errors in consideration, we now expect EA to stay busy with ENI in Q4 and potentially into the early part of 2026.

I'm also pleased to share that we have agreed with Shell in Nigeria to accelerate the NA campaign originally scheduled to commence in November 2026, now to April 2026. It significantly reduces potential idle time for the rig and provides Shell the ability to accelerate their weld delivery schedule.

It is clear to me that Borr Drilling is the preferred partner for shallow water drilling operations. In recent months, we have been trusted with commitments from our customers to deliver critical wealth globally. For example, Shell with their highly anticipated HI project offshore Nigeria, ONE Diaz for the first fully electrified offshore drilling campaign in the Netherlands, and CME in Mexico for their Baca Bloom project, just to name a few.

It is particularly notable that despite the virus market headwinds presented in 2024 and early this year, our 2025 ft coverage has reached 85% at an average day rate of 145,000. This is in line with our earlier targets of achieving 80% to 85% coverage in a year. Our full year 2026 coverage, including price options, now stands at 62%, a 15 point improvement since our last report.

Taking a closer look into 2026, we had 79% coverage in the first half, a solid position to build from as we enter into the year. Based on our current pipeline of opportunities and ongoing negotiations, we expect that utilization levels for the first half of 2026 will continue to increase in the coming months.

At the same time, recent developments in Mexico and Saudi give us increased confidence in a tightened Jacob market and a constructive outlook for the second half of the year. This should position well to gradually fuel up the coverage for 2026 while maintaining a disciplined commercial strategy.

On a commodity front, Brent crude has remained volatile but ranged bound in the mid-sixties. Current price levels have still allowed for meaningful contracting activities this quarter as Lower Burke and shallow water projects offer a relatively rapid B2 barrel cycle for our customers. Despite several macro uncertainties, global utilization has remained resilient. In fact, increased quarter over quarter with modern rigged market utilization at approximately 93%.

In Saudi Arabia, we're encouraged by the market reports confirming that Aramco has issued notices calling back several weeks previously suspended in line with our earlier expectations. As of today, our account is that 7 to 8 rigs have been called back by Aramco, effectively taking the majority of the readily available modern rigs still available from suspensions.

The remaining idle rigs are either rumored to be committed elsewhere or have moved to cult sac after the suspension of last year. The increase of activity levels in Saudi will significantly tighten the supply and demand balance in the region.

Equally positive, as we highlighted in our last call, we continue to see visible incremental demand in the Middle East, particularly Kuwait and the neutral zone, with multi-rig, multi-year tenders progressing towards awards. Now coupled with the callbacks from Saudi Aramco, there is a real scenario for rigs from outside of the Middle East to be required to mobilize into the region to meet the forecasted increased demand in late 206 and into 2027.

In Southeast Asia, demand has remained resilient, despite various market obstacles. As mentioned on past calls, weakness in the region has been driven by excess supply targeting opportunities following Aramco suspensions. We expect this dynamic to improve in 2026.

In West Africa, incremental demand has continued to materialize as expected and as evidenced by our mobilization of an additional unit to the region. Contract activity has continued to accelerate in the past 12 months, and we see opportunities developing in areas that historically held a much higher jack-up count, particularly Nigeria and Angola.

Mexico is one of the world's most consequential shallow water markets and remains strategically important for Borr Drilling. Over the past year, industry-wide payment timing challenges and temporary contract suspensions at PMA have affected activity cadence.

We responded constructively. We evolved our Mexico contract portfolio, thoughtfully diversifying beyond concentrated Pemex positions into IOCs in independence while continuing to partner with PME where terms support sustainable operations.

Looking into 2026, we see a market where turbulence begins to ease as the year progresses. White space for the global modern jack-up fleet is heavily weighted towards Asia and the Middle East in the near term, a phenomenon we see reconciled by demand increases in those regions over the next few quarters.

In closing, I'm pleased to see how Borr Drilling continues to successfully navigate the dynamic market experience over the last couple of quarters. We've secured important contracts for our premium rigs, strengthened our fleet coverage in 2025 and into 2026.

We have continued to partner with our customers to optimize our fleet availability or offer them unique operational schedule flexibility. Based on that, we now anticipate 2025 fully adjusted EBITDA to be $450 million to $470 million aligned with our early expectations and adjusted for the impacts of recent sanction-induced terminations.

Demand for modern jack-up rigs remained resilient. The jack-up market has bottomed, and we're seeing clear inflection in rig demand across key regions, including Saudi and Mexico. And lastly, I want to emphasize the strength of Borr Drilling operating platform. It is built on operational excellence anchored by a strong focus on safety culture and streamlined operating model that keeps us efficient and predictable.

It's relentlessly customer centric, informed by intimate knowledge of the shallow water market, and strengthened by deep-rooted relationships. It is powered by our premium jack-up fleet and our global footprint. This platform is our defining competitive advantage and positions us uniquely to benefit from ongoing market inflections. With that, I now turn the call over to Q&A.

(Operator Instructions)

Scott Gruber, Citi Group.

Yes, good morning, Bruno and team.

It's good to hear, obviously the new contracts, in Mexico for you, and, good to hear Saudi's, calling from rigs back. It seems like, that the market is, improving here. But just curious how you view the next 12 to 24 months in the global jack-up market, is.

Is this momentum going to continue? Are we going to see a genuine inflection, in demand, in the next year or so, even if crude is range bound, or do we need some improvement in crude to really drive that inflection?

No, thanks, Scott. As I mentioned earlier, a lot of inflection now is basically resulting from the fact that the headwinds experienced earlier, namely, Saudi and TMA are now starting to revert. If you look at Activity levels if you look at utilization levels at 93%, that number is fairly healthy and with the suspensions now rolling back the 93% is a real number, it's not a number that requires adjustment, so we are in a territory that is quite interesting.

Obviously it takes a little bit of time for some of these dynamics to take place. We expect that as particularly the tenders in the Middle East start to conclude. The push for rates to come back will start to kind of come through, and that rebalancing is what eventually helps us in in in achieving higher utilization and better day rates in general markets.

Now beyond the Middle East we've seen that most markets have been operating at or very close to balance, and that includes, for example, West Africa, and we think that obviously the don't go and inflation. Action will support faster recovery in markets like that.

On the opposite end, as I mentioned in my remarks, markets such as Southeast Asia, for example, where the demand takes a bit longer to materialize, may take a quarter or two before we see the real impacts of that, but I think the way to think about it is Going to continue to navigate some volatility in the first half of the year, improving.

The potential here for a much stronger second half of the year seems to be solidifying based on this development that we see now. We said before in terms of commodity price pricing where it is, I believe is quite healthy for the Jacobs.

It is jack-ups are very economical barrels for the customers. They're fast barrels to the market, and we think it's actually quite interesting for us to have pricing at that level. So I don't think that pricing movements here are needed to, spark additional activity. It's really just the time that takes for the developments in Saudi, the developments in Mexico, and some of the ongoing tenders to really come through.

I appreciate that color. And then, one of the macro themes we're seeing here is, rising demand for natural gas around the globe, to help power data centers, and just generally rising, power demand. How do you think that impacts the jack-up market in the years ahead? And I'm particularly thinking about Southeast Asia. Is there, their pull from the gas side, that, that's going to help that market.

No, indeed, Scott, and we've been participating in several very interesting gas projects around the world, and then I think in the previous quarters we've named, for instance, the ENI project in Congo, which is a very interesting and large sized gas development.

In Asia we've been participating in gas projects before. There are a few very interesting projects, particularly in the area of Sarawak, that have been put on hold for now until the situation in Malaysia gets resolved, the political situation in Malaysia gets resolved.

Aramco has over time obviously expanded their presence in gas, and I think it's been largely onshore focused, but there have been discussions over the last few quarters about Aramco potentially returning to gas in the offshore space in a more meaningful way. So clearly what you see is true. We do expect that there will be high interest from our customers to start developing some of these gas projects that are available around the globe.

No, it's interesting. We'll definitely be watching. Thank you.

Thank you.

Eddie Kim, Barclays.

Hi, good morning. Congratulations on the two separate, 2-year extensions on the Galar and Gersemi in Mexico. Just curious, on pricing for those two rigs. I don't know if you can share if, the day rates on those two extensions are similar to what they're earning today or higher or at a discount, just any kind of directional commentary, that would be great.

Very good, and we haven't disclosed specific numbers for that, but what we shared, they are a notch above from where the rigs are operating at the moment, which that in itself is very interesting, but equally relevant, as I mentioned in the prepared remarks is the fact that we were able to negotiate improved contract terms and payment terms for those rigs in particular.

What we've seen over in Mexico over the last. Several quarters have been that collections is been a very relevant topic, so we took marked efforts to ensure that we were adjusting these things in this contract, not only to improve the day rate because that's an important part, but equally important to make sure that those day rates are received in the bank account and we don't have a growing working capital requirement in the country.

Understood. Separately, it's great to hear about, the expected activity inflection in Saudi Arabia. Just curious, I mean, 2 years ago, the Saudi Aramco jack-up recount was as high as almost 90 jack-ups. Today, it's around 55. Just curious, where do you think we get to, sometime in 2027? I probably not back up to that 90% level, but, does 70, is that reasonable or even that too high? Just curious, your estimate of where, their jack-up rate count could get to, by 2027.

Yeah, and Eddie, this is a great question. Probably not a very easy one to be precise. I, from my, from our desk, we think that a number in the high 60s and 70s is very likely. I think a number in the high 70s is possible. The reality is that the big scheme of things, as I mentioned the prepared remarks, even with these callbacks that just took place over the last couple of weeks.

Capacity in the region is actually already very tight, right, so whether that number is low 70s, whether that number is high 70s, I think actually has very little bearing on how the sector is going to respond because in any case. Any leg up from where we are at the moment is very likely to cause an acceleration in utilization and consequently in economics in the space.

I think a number in the 70 is very reasonable, but I would probably fall shy of trying to predict ran. Behaviors we know we all TRY in the past is it's definitely not an easy thing. They have a lot of things going on, so that's the way to think it. I think anything they do on top of the callbacks that already took place is more than welcome in the sector. It's going to strengthen the space tremendously.

Great. Thanks for the call, Bruno. I'll turn it back.

Thank you, Eddie.

Frederick Stene, Clarkson Securities.

Everyone and Magnus, hope you are well. I have two questions for you today, and the first one relates to Mexico and the payments there, clearly liquidity in general has been, a recurring theme, given your historical, or Mexico exposure, mostly Pemex.

Now that you've received some money in, October and small sum in September as well, how do you think about, potentially, I think historically Pemex has paid suppliers monthly.

Should we expect any similar payments that you got in October and November and December as well? Do you have any clarity on that, kind of taking our receivables down in that country?

Yeah, I'll, take that question. Thank you, Frederick. Obviously very positive to see that what we have predicted, payments starting to flow in the second half of the year actually has, happened, and we received $17 million in October. We have, from what we see in the plans, there are payments, to come in both November and December as well. And following that, we would also expect, things to return more to normal with monthly settlements.

Also, that being said, and Bruno also mentioned the improved payment terms that we have in our two new contracts, which has actually a cap on the number of days we can have outstanding for operating costs that we pay on our ONM of 45 days. So we expect to get that paid within 45 days. And also, a maximum of 180 days outstanding for the bare boat.

So that's also going to improve on our collections as we see it, since we're not contracting directly with Pemex for these two rigs, but between the intermediaries, so we have, obtained. It was the payment terms from that.

Yeah, that's very helpful. And for my second question, switching gears a bit, there's been some industry, consolidation, in the, in the space this year with, the aid of, likely acquiring, Shelf with, if, all.

Everything is checked, and clearly there's in almost any type of consolidation there are room for, fleet improvements, scrapping and whatnot, but, you guys, you have a premium, a full premium fleet already, and I'm sure there are some other, assets out there that could be an interesting fit for you guys.

Have you, thought any more, actively on how Boar's role could potentially be in any M&A or asset transaction, scenario since you're.

Kind of both in the 3rd quarter and in relation to the equity race in July, seemed a bit more open to that particular scheme compared to what you have been earlier.

That's right, yeah, and I hope my answer is probably not too much of a repetition from what I've tried to put across in earlier calls. Cons consolidation is definitely, important for the space. It has been welcomed in general, and you're right, whether result of that consolidation or just the state of the market, we have seen. Together with it, some additional retirement, some additional scrapping, some additional repurposing, which is obviously another very important dynamic for the sector. So those things are indeed interesting.

We continue to look, you're right, as I highlighted in the remarks, we do believe we have a very strong operational platform that can deliver better value for Jacobs than perhaps quite a few of our peers, and that's really what puts us in a position to meaningfully looking into how we participate in consolidation if opportunities were to come.

But as you said before, and you mentioned that in your question, there are some metrics that are very important for us to consider, and one of those metrics is really the quality of the fleet. We are very proud to have the youngest and the most premium fleet in the water, and obviously it's important for us to make sure that anything that we look into does not come at the expense of diluting the quality of the fleet that we have.

Similarly, as we said before, I think a very strong driver for the company at the moment is to make sure that we continuously deliver our balance sheet over time. So when we look at any M&A transactions, it has to be something that makes sense from a deleveraging perspective. So when you put these things together, we continue to see what is out there. I do think that we have a great platform to grow.

We don't have to, and we're going to continue to look at that opportunistically. I do think that the sector can do it more consolidation and if we can be part of it, if it is rational, if it fits our strategy, we're definitely open to see what's out there.

All right, thank you so much for the commentary. Have a good day, both of you. That's all for me.

Doug Becker, Capital One.

Thank you. Brill, you've emphasized the expanding boar footprint. Curious how you're thinking about balancing portfolio diversification versus having scale in particular markets to manage costs and maybe putting it differently, do you view growing the fleet in the US Gulf, Angola, Saudi Arabia as strategic priorities?

No thanks, Doug, and then see I think you, you're right, there's a very interesting balance between not stretching yourself too wide, but the way I see at the moment our operation, if you look in the markets where we are present, we are in very large scale in these markets, and generally our expansion has been in adjacent markets. So obviously Angola is a new place for us, but we have a very Strong operation in West Africa and a very strong knowledge of operation in West Africa that will help us to build that up.

The US is definitely a new frontier, but on the Mexico side we're present. We understand the operational challenges. We understand how to be successful in that environment. Certainly there will be some learnings from the US, which is new to our portfolio, but certainly we feel that we are in a good position to manage that. Frankly, I don't, I wouldn't say at this time that the US is expected to be a large expanding market for us.

Getting one rig there, I think, is a good achievement for us. It's a new place that we're going. I do see some of the policies in the US potentially supporting more activity for now. We see a pipeline that is enough to keep the old and busy for. Quite a while and that's what we're targeting. If more opportunities come in the back of changing policies, changing incentives for operators in the US to go forward their projects, we'll be ready to look at that for now I think it's probably a warm replay.

Yeah, makes sense. And then just given the increased confidence that the jack-up market is past the trough, any changes to the capital priorities, I know you mentioned deleveraging over time still a priority, but, just given a better market outlook, is there any shifting in how capital might be allocated?

No, not at this time, Doug. I think we maintain the view that deleveraging is a priority for us and it will be for a while. So we want to make sure that, by the amortizations that we have in our bonds, by the potential cash slips that we have in the bonds, we're positioning ourselves to be very in a very favorable position to refinance our debt in 2028.

That is on the back of obviously deleveraging consistently over time. All the priorities, I think we'll leave it for another day. I think it's a bit too early for us to consider. The momentum is positive. That doesn't drive a change in strategy for now. Got it. Thank you.

Ben Sommers, BTIG.

Hey, good morning and thank you for taking my question. So I know you touched on it a little bit in the, press release, but kind of curious how you're looking at the new build market. I know you guys mentioned that there's some, supply chain challenges that you think will kind of push out, these new build rigs entering the market. So just kind of curious, any color there on what you're seeing.

Yeah, no, nothing's changed, man. We, we've, I think quite a few quarters ago we shared a view that we believe that the order book that is namely there may be one rig, 2 rigs maximum that would come to the market. That was several quarters ago.

None of these rigs have come out, and obviously the longer they stay in the shipyard, the more complicated it is. A lot of these rigs are very were in very early stages of conclusion when they were stopped or abandoned. It is not easy. We haven't seen any one of them coming out. I H1stly do not expect that to change as things improve.

Awesome thank you and then I know you touched a little bit on the US Gulf entry, but just curious kind of on Angola, now bringing a rig there just kind of any outlook or color on that market.

Yeah, sure, I mean, it is a new, newer for us. We have been looking at Angola before and waiting for the right moment, the right opportunity to be in the country. As I said earlier, we have a very well-established infrastructure in West Africa, so Angola was a bit of a natural growth opportunity for us.

Historically, as I mentioned in the remarks, is a market that had a quite substantial activity level for jack-ups that has been subdued for quite a few years. It seems that the potential is very large, and that's not limited to Angola. We see quite a few markets in West Africa that haven't had enough activity for quite a few years now coming back and being able to penetrate Angola now, have that as an opportunity for our portfolio, I think strengthens our flexibility going forward.

Great thank you guys for taking my questions.

Gregg Brody, Bank of America.

Hey guys and thanks for the time here. Just to, you talked about better collection terms and on your new contracts and obviously you collected $19 million in October from Pemex. How should we think about what the opportunity of to recapture working sort of that the receivables is over the next year.

Sorry, your question was on how to capture the receivables from Pemex.

Pemex, and that's the main one, yeah.

Yeah no, so I think what we're seeing now is that Pemex has, and then the government in Mexico has put in place, several schemes, this year, want to refinance their, financial, liabilities and also their vendor or supplier liabilities with a $12 billion set up. And that's something we've seen they've gone through, now in the second half started to repay and we received 17 million so far in October.

We see signs of having more payments come in in November and December and expect a return to normality when it comes to payment in Mexico. So, I think it's looking like they are taking the right steps in Pemex and in the government in Mexico to become more current on their payables, definitely.

And Greg just to highlight what we've kind of mentioned earlier, obviously we have current receivables that we are, and we'll continue to work hard to collect them. With the new contract terms that we have and a new allocation of the portfolio in Mexico, effectively, then you will continue to have Pemex payment exposure while the remainder of the leading country will now either be working with IOCs or include fixed payment terms that diminishes tremendously your exposure to the PME payment friction, so.

That doesn't resolve the current outstanding receivables, and we continue to work very hard, as Magnus says, to lean on the existing facilities in place, the mechanisms the government put in place to accelerate that. But going forward, we expect that very soon the new terms will slow down considerably the accumulation of receivers in Mexico and keeps us far more current.

Got it and then just with the sanctions, you obviously, you moved one of the rigs, so that leaves the hill. What should we, what are your expectations for how this plays out, in particularly with the, what I think is the sale to Gor, of those assets, but what's your expectation for that and how are you thinking about what you do with the held from here as a result?

Yeah, it's probably early to say, Greg. What we know is we've worked very diligently. As soon as we became aware of the sanctions, we did what we were required to do to make sure that we stick to our governance and comply with international requirements. We are currently winding down operations on those rigs. We're expecting both of them to finish around mid-November.

The ongoing activity is allowed by the sanctions, and we continue to monitor the situation. It could change if there's a sale potentially. We don't want to speculate for now. We're doing what we have to do. It's a customer that over time, I think we deliver great service for them.

They seem to be extremely happy with what we've done over time and. Provided no sanctions affect our ability to continue working in that field or delivering that program, we definitely would be more than happy to continue to do that, but I don't want to speculate for now, we're sticking to the rules as they apply and then we'll see if things change as we go along.

And have you seen this uncertainty with sanctions impact the big market at all? And you're probably a little closer to this than me, but how many others have been affected by the suspensions?

Well, I won't comment much about others. I mean, the only thing I think that's been in the news recently was a similar impact of advantage on the deep-water market. In the shallow water market. I haven't seen, any other announcements. As far as we are concerned, the impact of that has been limited to Mexico. We'll continue to monitor the whole topic of sanction is a very dynamic topic at the moment. For now, that's been the only impact to our business which we disclose, which is the loss of revenue.

For the olden, we're very happy to see that the rig has been re-contracted now for the heel, we'll continue to see what are the opportunities for the rig, whether it involves returning to the same project once the field is sold or if the field is sold, or alternative deployments for the rig within and out with the region.

Great. And one last one, just, what's your expectation for cost trends on the operating side here, relative to this quarter going forward? How should we think about that?

Sorry Greg, I don't, I'm not sure if I got your question

Cost trends on the operating side, what's your expectations for the directions of your cost up, or is there opportunities to take cut costs? Just wondering how you're thinking about that going forward.

Yeah, no, and as we said before, we've been seeing operating costs very steady over time. There are differences in operating costs from region to region, from country to country, but all in all we have not seen a significant change. In operating costs over the last few quarters and neither we have any reason to believe that that's going to be changing going forward.

The team continues to be working focused on finding savings in our operations, streamlining operations, and that clearly has been more than enough to offset. Any inflation ex experience in the sector, but so far it has been flat. I have no reason to think that it will change going forward.

I appreciate all the time guys thanks for all the call. Thanks for asking.

Joshua Jayne, Daniel Energy Partners.

Morning. Thanks for taking my questions. Just, I really only have one which is on rig attrition. Maybe, do you have a number in mind with respect to how many incremental rigs could leave the market next year or any insights there or maybe to put the question differently, could you speak to broadly the capital investment that may be required for a number of operating rigs that are out there today that are older to sort of keep pace with a lot of the newer spec rigs and how that frames market dynamics. Thanks.

Thanks Josh. And see we've, we see that the standard rig market or the older vintage rig market has been shrinking over time and they've been limited to a few markets. The rig count on that side, the active recount on that side is about 1,000 rigs at the moment in the water, and the average age is about 40 years old. So there's obviously a lot of potential for attrition.

Some of these attrition should happen as a result of lack of contracting opportunities for these rigs. Some of the attrition will happen as a result of just a high CapEx required to maintain these rigs active going forward. Rigs are mechanical equipment and as such, they require capital to stay in good working class, and by the time they are 40 years old and beyond the retirement age, that only gets better, only gets worse exponentially, so.

I don't know how many rigs I'll say can get out of the market. Clearly there's a potential for a lot of the rigs to go out of the market. We're seeing that trend accelerating. We're seeing rigs now converted to or sold for conversion to MOPU, including quite a few of the rigs that came out of Saudi. We'll continue to look for us; we expect owners to act diligently in that and discipline on that. For us it's a bit of a mooted point. Our rigs are all very new. It's the youngest fleet in the industry, so let's see what happens.

Thanks, I'll turn it back.

Thank you, Josh.

Thank you. That's all the time we have for questions today. I would now like to turn the conference back to Bruno Moran for closing remarks.

Very good. Thanks for participating in today's call and I look forward to speaking to you guys soon.

This concludes today's conference call.

Thank you for participating. You may now disconnect.