Borr Drilling Limited (BORR) Cash Flow Statement

The relationship between net income and operating cash flow is inconsistent. In 2025Q1, OCF/NI was -8.21 due to a large working capital inflow, while 2025Q4 showed -34.80, reflecting a small net loss but positive OCF. The 2026Q1 negative ratio is driven by a net loss despite positive OCF, implying that depreciation and amortization (D&A) of $42.5M are providing a cash buffer. However, the persistent gap between net income and OCF suggests that reported earnings are not a reliable indicator of cash generation, and investors should focus on cash flow metrics.

The FCF trajectory is erratic, with positive quarters in 2025Q1 and 2025Q3, but significant negative quarters in 2024Q4 and 2026Q1. The 2026Q1 FCF of -$134.8M is primarily due to a $182.9M capex outlay, which appears to be a strategic investment in fleet expansion or upgrades. This pattern suggests that Borr is in a capital-intensive phase, and FCF is not yet stable. The comparison to net income shows that FCF is often lower, indicating that earnings are not translating into free cash flow due to heavy reinvestment.

The capex-to-revenue ratio has been highly volatile, with peaks in 2024Q3 (77.6%) and 2026Q1 (74.0%), and troughs in 2025Q2 (5.0%). This pattern indicates that Borr is making lumpy, significant capital expenditures, possibly for reactivating stacked rigs or enhancing its premium fleet. The elevated capex in 2026Q1, combined with a negative FCF, suggests that the company is prioritizing long-term fleet quality over short-term cash returns. Investors should monitor whether these investments generate the expected dayrate improvements.

The working capital line is a major driver of operating cash flow variability. In 2025Q1, a $104.6M positive change boosted OCF to $138.7M, while in 2023Q4, a -$120.3M change dragged OCF to -$82.0M. This suggests that Borr's cash flow is highly sensitive to the timing of receivables and payables, which is common in project-based drilling contracts. The 2026Q1 positive $19.9M change is modest, but the overall pattern indicates that working capital management is not yet stable, and investors should expect continued volatility.

Capital deployment has been conservative, with no dividends paid in 2026Q1 and only small buybacks in 2025Q2 and 2025Q1. The company paid dividends of $23.9M in 2024Q2 and Q3, but these were suspended in 2025. This suggests that management is retaining cash to service debt and fund capex, which is consistent with a high-leverage profile. The lack of shareholder returns may be a deliberate strategy to strengthen the balance sheet, but it also indicates that investors are not being compensated with cash distributions.

The cumulative OCF of $293.1M versus net income of $129.5M implies that non-cash charges like D&A (totaling ~$354M) are boosting cash flow relative to earnings. However, this divergence is not uniform; in 2026Q1, net income was negative while OCF was positive, highlighting the impact of D&A. The cumulative gap suggests that Borr's cash flow is healthier than its earnings, but the heavy capex and working capital swings mean that free cash flow is not consistently positive. Investors should focus on the sustainability of OCF, which appears to be supported by D&A but may be challenged by future capex needs.