BORR-NS: Update (BUY, TP 60[54])

Borr Drilling today announced the LOI to purchase Transocean’s 15 jackups in addition to a USD 800m equity offering. The accretive nature of these corporate events leads us to raise our target price to NOK 60 (from 54).

As we highlighted in our initiation a mere week ago, the company was linked to Transocean‘s fleet of jackups. A Letter of Intent has now been signed and the total consideration is said to be USD 1.35bn. With limited information available, we estimate the payment to consist of USD 221m in cash in addition to BORR’s assumption of USD 1,129m in remaining capex tied to the five newbuildings.

The purchase price is in-line with our fair value for the acquired fleet on a generic basis, and it adds operational know-how and significantly increases leverage at a opportune time in the cycle. The USD 800m equity offering at USD 3.5/sh (NOK ~29.75) is highly accretive comparative to our previous NAV of NOK 19.21. Additionally, we raise our fair value on two jackups currently in BORR’s fleet as asset prices seems to be firming faster than expected. In summary, we estimate a new NAV of USD 3.6/sh (NOK 30.5) and set our target price to NOK 60/sh (from 54) based on forward NAV and earnings.

Company specifics:

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Market fundamentals:

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 Disclaimer: The publisher currently owns shares in the company
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