Last Update 10 Dec 25

Fair value Increased 6.52%

BORR: Offshore Contract Momentum And Fleet Expansion Will Support Measured Future Upside

Analysts have raised their price target on Borr Drilling from $3.99 to $4.25, citing an improving offshore contracting backdrop that supports stronger revenue growth, expanding profit margins, and a lower perceived risk profile.

Analyst Commentary

Recent research updates highlight a gradually improving stance on Borr Drilling as contract activity in the offshore market picks up, even as macro risks remain.

Bullish Takeaways

Bullish analysts see the rising price targets as a reflection of improving contract momentum, which supports a re rating of the stock closer to peers on forward earnings and cash flow metrics.
New contract signings across the offshore space are viewed as a sign that demand is firming, improving visibility on day rates and utilization, and underpinning expectations for revenue and EBITDA growth.
The recent upgrade to a Buy stance is framed around an improving risk reward profile, with upside potential driven by operational leverage as rigs roll onto better terms.
Analysts argue that as the contracting environment normalizes, execution on the existing backlog and disciplined capital allocation could accelerate deleveraging and support a higher equity valuation.

Bearish Takeaways

Bearish analysts caution that sustained low crude prices could delay a full inflection in offshore demand, pressuring the pace and pricing of new contracts and limiting near term multiple expansion.
There is concern that even with better sentiment, day rate improvements may be uneven across regions, leaving earnings growth sensitive to timing and mix of contract awards.
Some remain wary of execution risk, noting that any operational disruptions or cost overruns could erode margin gains and weigh on free cash flow, constraining upside to the raised price targets.
Uncertainty around the broader macro cycle and capital spending by operators keeps a ceiling on more aggressive valuation assumptions, prompting a more cautious stance despite recent positive developments.

What's in the News

Completed an $84 million follow-on equity offering of 21 million common shares at $4 per share, issued at a $0.12 discount per share (company transaction filing).
Agreed to acquire five premium jack up rigs from Noble Corporation for $360 million, expanding the fleet from 24 to 29 rigs and reinforcing its position as owner of one of the youngest premium jack up fleets globally (company announcement).
Financing the Noble rig acquisition through a mix of $150 million additional 10.375% Senior Secured Notes due 2030, a $150 million seller's credit due 2032, and an $85 million equity raise, with two rigs placed in the bond's restricted group and three financed on a non recourse basis (company announcement).
Initiated steps to list shares on Euronext Growth Oslo as a first move toward re listing on the Oslo Stock Exchange, reversing a recent consolidation to a sole NYSE listing amid renewed investor interest (company announcement).
Announced plans to pursue further acquisitions, using proceeds from the equity and debt offerings, seller financing, and available cash to fund potential M&A alongside the five rig deal and general corporate purposes (company announcement).

Valuation Changes

Fair Value: Raised modestly from $3.99 to $4.25 per share, reflecting a slightly more constructive outlook on the company’s fundamentals.
Discount Rate: Reduced moderately from 10.98% to 10.15%, indicating a lower perceived risk profile in the updated valuation model.
Revenue Growth: Increased significantly from 0.55% to approximately 1.36%, signaling a stronger expected top line expansion than previously modeled.
Net Profit Margin: Upgraded materially from about 1.91% to roughly 3.75%, pointing to improved profitability assumptions as operating leverage builds.
Future P/E: Compressed meaningfully from roughly 95.9x to 49.7x, suggesting that higher earnings expectations are driving a more attractive forward valuation.

Investor optimism may underestimate risks from oversupply, payment delays, and shifting toward renewables, potentially pressuring future revenues and earnings quality.
High leverage and regulatory changes could divert capital away from growth, increasing costs and threatening margins amid evolving ESG and market dynamics.
Strong energy demand, modern fleet advantages, and strategic financial moves position Borr Drilling for growth, resilience, and diversified long-term revenue opportunities.

Catalysts

About Borr Drilling

Operates as an offshore shallow-water drilling contractor to the oil and gas industry in the United States, the Middle East, South East Asia, Europe, Latin America, and West Africa.What are the underlying business or industry changes driving this perspective?

The current stock price appears to reflect investor expectations that oil demand will remain robust over the long term, supported by ongoing population growth and energy security needs-despite rising global policy and technological momentum towards renewables, which could ultimately reduce future rig utilization and pressure revenues beyond the current contract horizon.
The valuation seems to price in that Borr Drilling's strong recent contract momentum-particularly in Mexico, the Middle East, and Southeast Asia-will translate into persistently high day rates and utilization; this view may underestimate the lingering risks from oversupply in the jack-up market and the increased volume of transitional or short-duration contracts, which could compress both future revenues and margins if the anticipated demand does not fully materialize.
Current overvaluation may reflect the assumption that supportive government actions (such as Mexico's liquidity facilities for Pemex) will reliably resolve payment cycle issues and enable ongoing contract renewals, overlooking the region's past history of delayed payments and political risk-which could create unanticipated working capital constraints, impacting free cash flow and earnings quality.
The equity raise and improved liquidity position are being interpreted as straightforward enablers of opportunistic M&A and growth; however, this capital could be diverted towards debt service or be required to buffer against interest and refinancing risk due to Borr Drilling's high leverage, ultimately diluting the anticipated earnings leverage effect.
Investor sentiment appears to discount the potential for tightening environmental regulations, advent of carbon pricing mechanisms, and sustained capital reallocation into ESG-compliant sectors, all of which could increase Borr Drilling's cost base and impede future contract wins, placing downward pressure on long-term EBITDA and net margins.

Borr Drilling Earnings and Revenue Growth

Borr Drilling Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Borr Drilling's revenue will decrease by 0.7% annually over the next 3 years.
Analysts assume that profit margins will shrink from 5.5% today to 0.3% in 3 years time.
Analysts expect earnings to reach $3.4 million (and earnings per share of $0.06) by about August 2028, down from $54.2 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting $49 million in earnings, and the most bearish expecting $-14 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 309.0x on those 2028 earnings, up from 14.9x today. This future PE is greater than the current PE for the US Energy Services industry at 14.4x.
Analysts expect the number of shares outstanding to decline by 5.95% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 12.32%, as per the Simply Wall St company report.

Borr Drilling Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

The global energy demand, particularly in emerging markets and from shallow water oil and gas projects, is expected to remain strong; Borr Drilling's high fleet utilization and substantial backlog provide a visible revenue stream and potential for continued earnings growth.
Underinvestment in new oil supply, together with accelerated retirement of aging global rig fleets, is limiting supply of modern jack-up rigs, favoring Borr Drilling's young, technologically advanced fleet and supporting higher dayrates and improved net margins.
Long-term government support for energy security (e.g., policy reversals in New Zealand and the Netherlands, and Middle East projects) is bolstering shallow-water project development, increasing Borr's contract opportunities and revenue potential across diversified geographies.
Recent strategic initiatives-such as a strengthened balance sheet through equity raise, increased liquidity facilities, and improved contracting coverage-position the company to weather industry volatility, pursue opportunistic acquisitions, and deleverage, thereby enhancing earnings resiliency.
Increasing participation in private investment projects (especially in Mexico and potentially other regions) reduces Borr's exposure to state payment cycles, provides new growth avenues, and improves earnings visibility, supporting long-term revenue streams and reducing financial risk.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $3.1 for Borr Drilling based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $4.0, and the most bearish reporting a price target of just $2.8.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $1.0 billion, earnings will come to $3.4 million, and it would be trading on a PE ratio of 309.0x, assuming you use a discount rate of 12.3%.
Given the current share price of $2.83, the analyst price target of $3.1 is 8.7% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

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