Good morning, and thank you for participating in Board Drilling's second quarter earnings call. I'm Bruno Moran, and with me here today is Magnus Valar, our Chief Financial Officer. Before we begin, I'd like to remind all participants that certain statements made on this call are forward-looking and involve risks and uncertainties that could cause actual results to differ materially from those projected in these statements. For further details, I'd please refer you to our latest public findings. Before I begin, I'd like to recognize our teams around the world for their commitment to safety and reliable operations. During the quarter, several rigs achieved notable safety milestones across the fleet. The Groa and Gersony each reached 7 years LTI-free, while the Ram and Scald achieved 6 and 5 years LTI-free, respectively. Additionally, RIGS-HILD, GALAR, NAT, Arabia T and GRID also achieve multi-year LTI and recordable free milestones. I would like to thank our employees for their commitment to safety as well as our customers and stakeholders who partner with us in fostering a culture where safety remains our highest priority. Our operational performance in the second quarter of 2026 resulted in technical utilization of 98.4% and economic utilization of 96.4%. Revenues for the period were negatively affected by the decline in average number of rigs operating in the quarter. Second quarter adjusted EBITDA was $43.8 million, a decline of $44.7 compared with Q1. The sequential decrease was primarily driven by four factors. First, we incurred additional preparation work and regulatory approval activities for the olden ahead of its contract in the U.S., with a $22.5 million of operating expenses during a quarter and $11.1 million quarter-on-quarter increase. Second, six RIGs were transitioning between contracts during a quarter, leading to reduced revenue. However, this impact is now largely behind us as these RIGs have commenced their contracts. Third, the conflict in the Middle East led to higher insurance and fuel costs, contributing to a 7.3 million quarter-on-quarter increase in rig operating expenses. The increase in fuel expenses was primarily driven by a higher number of rigs transition between contracts during the quarter, a period during which we are generally responsible for fuel costs. And finally, we also recognized 10.8 million of credit loss related to a former customer in West Africa. Followed with additional provision, we carry net zero receivables from this customer in our balance sheet. Looking at the ODEN, contract preparations took longer than anticipated with regulatory approvals received in mid-July. In light of the operational constraints resulting from the hurricane season, in collaboration with our customers, we agreed to revise the risk deployment sequence to improve overall operating efficiency. The ODEN is currently preparing to mobilize to its first location where it will commence the previously announced 2L firm contract with an undisclosed customer. Upon its completion, the rig will expect to transition directly to Cantium. We are disappointed with the delays for the olden, and the initial startup requirements were greater than what we would have typically expected when entering a new market. These resulted in higher costs and delays in revenue. We are taking the learnings from these events very seriously. That being said, our entry into U.S. Gulf was a strategic decision to provide customers with access to one of the most capable rigs in its class. Discussions with our customers leaves us optimistic about the demand for this rig in the region. The Olden's current contract provides firm work into mid-2027 with additional options that could extend its contract well into 2029. The elevated rig transition activity experienced during Q2 is now substantially completed. The rigs item, GunLot, SCAL, SIS, NAP, and Prospector 5, which were transitioned into and between contracts during the quarter, are now fully operational. Together with a soon-to-commence holding contract, we expect Q3 to average approximately 23 active rigs and hence adjusted EBITDA to improve significantly from second quarter. Since the last earnings report, we have secured eight contract commitments, representing over 2,100 days of additional work. This includes new contracts in Asia, West Africa, North Sea, and Americas. Notably, the Riggs-Galoran Gerson in Mexico had their contract extended by two years each and are contracted into 2030. During the quarter, we also successfully refinanced substantially all of our debt while also upsizing our RCS. These transactions extend our maturity, reduce financing costs, and further strengthen our liquidity runway, which Magus will discuss next. In July, our 50-50 joint venture with our long-term Mexican Well Construction Partner completed the purchase of five premium jackups from Fontys and an attractive valuation and with limited equity commitment. Currently, three of these rigs are contracted, with two of them operating and a third expected commence operation later in the quarter. Our focus now is deploying the remainder rigs and converting the opportunity pipeline into contracted work. I'll walk you to the market in more color later in the call but now I'll hand the call to Magnus to discuss the second quarter financial results. Thank you Bruno.
I will now go through some details of the financials for the second quarter. Total operating revenues for Q2 were 232.3 million, a decrease of 14.7 million or 6% compared to Q1. The total operating revenues consisted of 187.7 million in day rate revenue, 32.9 million in bearable charter revenue, and 11.7 million in management contract revenue. The overall decrease was primarily driven by 21.8 million reduction in day rate revenue, mainly due to fewer operating days and lower average day rates for the rigs Aiden, Gunload, and Scald, lower recognition of mobilization and demobilization revenue for the valley and fewer operating days for the grower these decreases were partly offset by increased recognition of mobilization and demobilization revenue for the grid the decrease in day rate revenue was partially offset by a 6.3 million increase in variable charter revenue due to an increase an increase in operating days the total operating expenses were 232.1 million an increase of 31.1 million compared to q1 the increase was primarily due to 30.4 million increase in rig operating and maintenance expenses the largest driver of the overall increase was the odin which incurred 22.5 million of costs during the quarter an increase of 11.1 million compared to q1 The costs were primarily related to the preparations for its upcoming contract in the U.S. Gulf, including significant repair and maintenance activities. We expect regular rig OPEX, once the rig is fully operational, to be approximately in the mid $70,000 per day range. However, we anticipate some additional incremental operating expenses also in the third quarter related to the preparations of between $6 million to $9 million. In addition to the ODIN, the increase in operating expenses was driven by overall costs associated with a higher number of operating days for the grid, including amortization of deferred costs, expenses related to the five rings acquired in January from Noble, and an increase in the provision for credit losses. We recognize 10.8 million of credit losses related to a former customer in West Africa, an increase of 4.8 million compared to Q1. Following this additional provision the receivable from this customer was fully provided for resulting in a net zero receivable balance as of June 30th. The total operating expenses also included 5.1 million increase in fuel costs due to higher fuel prices and risk transitioning between contracts and a 2.2 million increase in insurance costs related to the ongoing conflict in the Middle East. Moving to other non-operating income in Q2 was 6 million related to compensation received to remove certain operating restrictions associated with the sale of a rig in a prior period with no comparable income in Q1. Total financial expenses net were 236.5 million, an increase of 173.8 million compared to Q1, and this increase was primarily related to our refinancing during the quarter as we recognized 176.3 million loss on the extinguishment of the senior secure notes due 2028 and 2030 and the partial extinguishment of our convertible bonds due 2028. The loss on debt extinguishment consisted of 123.7 million in redemption premium payments and 52.6 million from the derecognition of the unamortized portion of deferred finance charges associated with the repaid facilities. Net loss for Q2 was $241.4 million, an increase in loss of $212.4 million compared to Q1. And adjusted EBITDA was $43.8 billion, a decrease of $44.7 million compared to Q1. Turning to liquidity, cash and cash equivalents as of June 30th were $223.6 million, a decrease of $22.4 million from March 31st. In addition, we had $250 million of undrawn available borrowings under our evolving credit facility, resulting in total liquidity of $473.6 million at the end of the quarter. Net cash used in operating activities for Q2 was $21.8 million. This includes $115.8 million of cash interest payments and $15.1 million of income taxes paid. net cash used in investing activities was 2.3 million which related to 8.3 million spent on additions to jackup rigs primarily long-term maintenance costs and capital additions partially offset by the 6 million proceeds received as noted earlier in non-operating income net cash provided by financing activities was 1.8 million this was the result of net debt proceeds from new issuances offset by the cash used for repayment of the original notes due to 2028 and 2030 and the 2028 convertible bonds. Before giving the word back to Bruno, I will also touch on some recent transactions that we have completed. In July, we completed the previously announced Fontys acquisition of five premium jackup rigs located in Mexico through our 50-50 joint venture with our long-term well-construction partner in Mexico. The total purchase price was $287 million and was financed through a $237 million non-recourse seller credit in the joint venture and $25 million equity contributions from each partner. In addition to this, we expect to fund approximately $15 million of working capital in the third quarter for the acquired rigs through a shareholder loan. Turning to the next page and the refinancing activity completed during the quarter. This was a significant step in extending our maturity profile and strengthening our liquidity position. In April, we issued 300 million of 3.5% convertible notes due in 2033 and used part of the proceeds to repurchase and cancel 195.2 million of our 2028 convertible bonds. In June, we completed the issuance of 2.035 billion of senior secured notes in two series. 1.1 billion of eight and three quarter percent and notes due 2032 and 935 million of nine percent notes due in 30 2034. the new notes amortized at five percent per annum equating to 101.75 million on a full year basis amortization is payable semi-annually and beginning july 2027 at the price of 102.5 percent the proceeds from the new senior secured notes were primarily used to redeem and purchase the 2028 and 2030 senior secured notes in full overall these transactions extend maturity significantly and reduce our financing costs going forward in addition we amended and restated our super senior secure revolving credit facility during the quarter increasing the commitments to 250 million, reducing the base margin to keep 3% per annum, and extending the maturity to 2031. Now with this, I will pass the word back to Bruno.
Thank you, Magnus. Today, 24 or 29 rigs are either contracted or committed. As previously mentioned, during a quarter, several rigs were transitioning between contracts or preparing for new campaigns. the gun lot completed its contract with honlong in april and started work for tanlong in may the rig has seen secure follow-on work with pvp ncs through april 2027 the nat commenced operations with shell in nigeria in april the prospector five completed its contract with dni congo in may and began operations with vw energy in gabon in july following its SPS. The Scout completed his contract in Thailand in April and started work for Vestigo Petroleum in Malaysia in May following its SPS. The IDEM also completed its long-term contract in Thailand in April and commenced operations in Vietnam in July. The last assist, one of our newly acquired rigs, mobilized to Suriname for Petronas in June and commenced operations in July. Overall this was a demanding quarter across our operation and i'm proud of how the team has safely executed multiple contract transitions mobilizations and startups so far this year we have secured 21 contract commitments adding approximately 4 350 days and 541 million of day rate equations backlog this has resulted in a positive book to view ratio in 2026 both in backlog days and value now let me walk you through our new commitments. In Southeast Asia, the item received two separate awards. First, a one-world contract in Vietnam which started in July 26 with an estimate duration of 60 days. Second, a one-world commitment with Hong Long JOC with an estimated duration of 30 days to commence in direct continuation. Based on the current engagements, we remain positive around the prospects for the RIG to continue to work in Vietnam in a near term. The MIST received a binding letter award from Shell Star Walk in Malaysia. The campaign is expected to commence in October 2026 and has an estimated duration of 45 days. Additionally, the gun lot secured contracts with PVEP-NCS in Vietnam. The six-well firm campaign is expected to commence this month and has an estimated duration of eight months. The contract also includes 2-1-well unpriced options that could keep the RIG committed into QTD 2027. In West Africa, the GERD received a 1-well extension from Foxtrot in Ivory Coast and is now expected to remain committed until March 2027. In Europe, the Prospector 1 received a 2-well contract extension from O&E Diaz for an estimated duration of approximately 7 months, keeping the RIG committed into April 2027. the contract include options that could extend it until q3 2027 q4 2027 and as highlighted earlier in mexico our rig galore and gersemi had their contract extended into 2030. moving forward following recent awards our 2026 contract coverage is now 73 percent at an average day rate of approximately 134 000 a day with coverage in the second half of the year at 70 percent we're actively pursuing multiple opportunities to add further coverage to our available fleet and have advanced discussions ongoing for multiple rates for work scopes feeding open space both this year and into 2027. looking across our core markets we continue to see steady demand for modern jackups although the pace of contracting remains uneven by region globally market utilization for modern jack-ups has remained resilient at approximately 90%. In the Middle East, the prolonged conflict and lack of clarity around its resolution have continued to delay tendering and contracting activity. Positively, across Saudi and the UAE, where several rigs were suspended at the onset of the conflict, the recent gradual resumption of operations, despite lingering uncertainties, demonstrate our customer commitments to their shallow water portfolio. According to data from S&P Global, backlog additions in the region during the first half of the year reached the lowest levels in more than 25 years. For context, the first half of 2026 saw more contracts awarded in the North Sea than in the Middle East, both by count and contract days added. Our broad views remain unchanged. The region still has substantial underlying demand, which was close to materializing prior to the onset of the conflict. and we believe this delayed activity should re-enter the market once conditions stabilize. In Southeast Asia, contract awards, both by count and backlog days, have accelerated meaningfully over the last two quarters, reaching the high-level seen in late 2023. While a slight overhang in a region continues to apply pricing pressure on short- and long-term opportunities, this is a region where pricing historically responded quickly to market tightening. Our team has done well filling our near-term open space, and strategic positioning rigs for continued deployment in americas we're encouraged to see previously rig suspended returning to work for pmex and absorbing regional supply mexican oil production remained below the government stated targets and the recent contract resumptions reinforced our views that jack-up demand should increase further to achieve this target in addition multiple iocs are active in the procurement process where we expect conclusions in the coming months for work commencing late 2026 and 2027. We believe our global relationship with IOC is present in the region, coupled with our strong collaboration with our partners in Mexico, provides a strong position in the region that has capacity to grow its rigged demand. In the North Sea, we have discussed in the past, operators continue to address permitting challenges, which drives uncertainty and lack of visibility for new meaningful commitments. Despite these hurdles, on the back of our strong operational performance, we continue to work closely with our customers to meet their drilling requirements, as evidenced by our recent Prospector 1 extension. In West Africa, contract activity has remained robust, bringing the contract jack-up count in the region to levels less achieved more than a decade ago. In Nigeria, in particular, we've seen a return of activity from IOCs and a notable influx of demand from indigenous operators additionally in the region investment activities and interest in angola shallow water has gained momentum and we're pleased to be part of one of the recently announced successful step out exploration wells truly by halliburton son angol and their partners in the big picture while the ongoing conflict has caused near-term disruption we remain constructive on the medium to long-term outlook for the jackup market once certainty returns to Middle East, where large standards remain outstanding. With that context, I would like to close with three key takeaways. First, Q2 adjusted EBITDA was impacted by the delayed startup of the olden and elevated number of rigs transitioning contracts. As these rigs resume operation, we expect to average 23 active rigs during Q3, which should support a significant improvement to our Q3 adjusted EBITDA. Second, the Middle East conflict has reduced near-term visibility, delaying tenders, and the region's recovery underway. This uncertainty is also affecting several other markets, though not all, making it difficult to provide a crisp outlook for our near-term activity. What is clear, however, is that the prolonged disruption in this rate of Hormuz has impacted oil supply and driven global inventories to exceptionally low levels rebuilding those inventories even under moderate demand outlook will require sustained drilling activity we believe short cycle low cost shallow water barrels exactly what our modern jackup fleet is built to access will be significantly relevant in restocking process and third our priorities remain clear leverage our expanded fleet of premium jackups to navigate near-term uncertainty and capture greater earnings and shareholder value as the cycle improves With that, I'll now turn the call over to Q&A.
Operator
Thank you. To ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To answer your question, please press star 1 and 1 again. We kindly ask participants to limit themselves to one question and one follow-up.
We will now take our first question. from the line of code Gruber from Citigroup please go ahead yes good morning I appreciate all the color on the the moving pieces and two key that created a an EBITDA headwind but Bruno three key does sound better you know is there a way to provide you know just a range for us you know in terms of where EBITDA could land you know based upon having 23 active rigs and and seeing the mobilization and startup costs at least fade, maybe not completely go away, but reduce. I mean, come on, I'm just kind of where things could land, even if it's a decently wide range.
Yeah, no, for sure, Scott. And listen, you're right. I think that Alden, we now seem to have a clear pathway to see that rig start and work. So that's positive, and consequently, we will see normalization of the cost on that rig. When we look at Q3, obviously the old starting contract is a key component of our results for the quarter, and it is something that we are working very focusedly to make sure we put behind us in a very near term. As I mentioned in the earlier remarks, all going well. We are anticipating to average approximately 23 rigs in a quarter, which if you look in context versus Q1, I think we're talking about similar ballparks. So I'll come shy of giving you a number for Q3, but with activity levels kind of resuming to that run rate of Q1, I think we will see a quite substantial increase on sequential results in Q3, Scott. That's probably where I would leave that.
That's fine. And then turning to the latest acquisition, so two out of the five regions are working. The third is contracted. Do you have line of sight to putting the other two rigs to work?
No, indeed, Scott. And see, the transaction closed quite recently, so we're just now having a chance to put our hands around it and start kind of driving some of those conversations. As we understand, prior to the completion of the transaction, there were already some ongoing discussions, including with Pemex and Fontys. We are now kind of starting to look at that and trying to see how we move forward. So the rigs should be working during the quarter now, so we have two left. One rig has been stacked, and I think that there's a likelihood that rig stays stacked for a bit longer. But based on ongoing market surveys and tenders in Mexico, I do see that there's a best way to potentially have a fourth rig resuming operations sometime this year, maybe into very early next year. And I think looking at the transaction, looking at valuation and our execution strategy, as long as we have three to four of those rigs operating near term, I think that silo is generating an interest and could be generating interest in cash and give us a good position. Beyond that, let's see what happens to the fifth rig that is currently idle. I think we're looking at all kinds of opportunities for that. But we will need a bit more time. The transaction only closed a couple of weeks ago. We are very actively now looking to define a pipeline of opportunity for those units.
I appreciate the card thank you well thank you we will now take the next question from the line of Doug Becker from capital one please go ahead thank you Bruno Magnus really appreciate the transparency provided on the second quarter so just echoing Scott's comments turning to the third quarter you're expecting operating rigs, average operating rigs, to be up around 8%. Just wanted to get a little more color around the assumptions there. Hurricane season does tend to peak around September. And I wanted to just see the base case. And is it reasonable to think revenues up just a little bit, quarter over quarter, given that growth in average operating rigs?
Thanks, Doug. Thanks for joining. I'm not sure if I fully caught your question. I think you referred to hurricane season is your question specific on the outlook for the olden ultimately the assumptions behind the 23 average operating rigs and just one of the key variables there is the odin uh in hurricane season yeah no um so so the outlook for the 23 is largely based on contract that we already have in place so i think that there is a pretty decent amount of certainty in terms of that. Obviously, we still have a few rigs that would eventually be moving contracts, so we maintain a high focus on the execution of these contract transitions. In relation to the olden, we changed the operational sequence, as I mentioned in the early remarks. We changed the operational sequence of season, so the rig will be in a location where we have approvals to stay basically year-round, so we don't expect the hurricane season, at least the face body right now to impact that um and our focus is really putting the rig to work we've achieved the regulatory approvals for the rig in july uh we have things working on customer specific preparation work um the rig as we speak right now should have the thugs connected today and hopefully all weather permitting we should be pushing away from the key side tomorrow so we're progressing in the right direction with these things obviously the um so that's what even as their confidence on these 23 rigs in q3 but certainly we need to focus we need to maintain our focus on the execution yeah fair enough and then as we think about o m costs in the third quarter uh just any uh thoughts on fuel and insurance uh is that going to be pretty stable or is there maybe potential for that to decline a little bit yeah so let me provide a bit of color and then Magnus can kind of cheap in as required. But in terms of fuel, I believe that in Q2 we had a bit of a disproportional impact of the higher fuel cost, primarily due to the fact that we had several weeks transition in contract. Generally speaking, during these contract transitions, we've at times become accountable or responsible to provide fuel cost. And the burn during those processes, the daily burn of fuel during those process of rig mobilization tends to be pretty high as the rig is kind of fully staffed and preparing to work. So that has resulted in an overweight impact during Q2. As we go into Q3, because we have less rigs transitioning contracts, and even the contract transitions that we have in Q3 are kind of near-fueled transitions, I expect that that will soften a little bit the impact of the fuel cost. Yes, for the rig that we have idle, we still have a fuel burn that we see obviously an increase due to the higher commodity price. But I think comparable to Q2, I think that you should expect that number to come down pretty, pretty significantly as we move forward. In relation to insurance, it's been largely driven by the impact of the events in the Middle East. So it's kind of difficult to precise when we'll see that coming down.
Obviously, the insurance companies and us are monitoring the situation in the Middle East until the resolution for the conflict is ahead of us um i think we should expect that that cost will linger a bit longer got it thank you thanks doug thank you we will now take the next question from the line of frederick then from clarkson securities please go ahead hey bruno magnus thank you for taking my question um I wanted to touch a bit more on the outlook maybe for like three, the third quarter has been discussed in detail already, but I think maybe based on your commentary on the second, I was already in the report and also my own assessment, you know, a lot of the key to an accelerated movement in rates and utilization lies in the Middle East. So while I'm aware that nobody knows when the conflict will end, I would be very happy to kind of hear your updated view on how you think that market will unwind when it does in terms of tendering and contracting possibilities, etc. And maybe in the context of how you think that unwinding may happen, And are we able to share similar average rig activity per quarter numbers for the fourth and the first quarter next year based on the visibility that you have at the moment?
No, thanks for joining, Fredrik. And I think your assessment is something that we share. Indeed, if you look at the Middle East alone and even prior to the conflict, there was already a significant demand in the region. with the conflict, the timing of the demand materializing has become a bit more fluid. But positively, all the tenders, the meaningful tenders that we saw in the region are still ongoing. They haven't disappeared from the pipeline. And I think as a matter of fact, we have seen even as recent as the last couple of weeks, some indications of potential increase in size of some of the tenders, including the KGO discussions, for example. Inevitably, the Middle East is the engine of the jackup sector and a meaningful rebound in the Middle East can very quickly rebalance things around the globe and that would provide a very interesting context for us if it happens. Indeed, anticipating the timeline of that is very difficult in the current environment. What I can share is that in discussions with our customers, it does look like they remain committed to go through with the customers, with the tenders. Aramco tender is still due at the end of this month. And if nothing else, I think combined with the ongoing resumption of activity that we've seen over the last couple of weeks, I think that it provides a bit of an opportunistic or optimistic outlook that some of that demand is going to start materializing rather soon when there's a bad wait for the conflict resolution. Now, if you were to take a view of the conflict not getting resolved in the near term, Frederick, I think we've all been talking, I'm not going to pretend here to be the oracle of the broad commodity environment, but it's hard to believe that more activity is not going to be needed across other regions. We have been talking to a lot of customers. I think there's a lot of interest, there's a lot of discussion. I think just as us, they are still puzzled by the situation and the development in the Middle East and how to think about it. That said, I do think as we approach the year end and these customers start working through their budgeting processes, their approval processes, some more visibility will be attained from other regions. As long as the Middle East is closed and the straight is kind of out of bounds, obviously whatever overhang may exist currently in that region stays within the region. and then and then very quickly you're only dealing with kind of any particular access that you're having in the other region so that's kind of how we think about it timing as i said in my earlier remarks i think it's still something that we're trying to we're monitoring trying to understand what happens i think in the near term that impacts our visibility of the outlook and our ability to provide a more precise view on active recount in the coming months now i think as you look a bit beyond that, it's difficult to imagine that in a world where reserves are at such a low level that more drilling is not going to be required. And as I said before, and I really remain optimistic about it, shallow water grids provide low-cost barrels, short-cycle barrels. At moments where security of commodity or access to the commodity is key, it's hard to believe that we will not have a big part in helping the world through these All right, really appreciate that, Bruno, comprehensive comments.
Just a quick one. I know that Fontes was touched upon in the first question, I believe, with now three rigs instead of, I think, one, which many databases reports have in contract. so very good to see that but is that now enough to you know fund this joint venture organically going forward even if you have one stacked rig and a fourth rig that could get the contract but might also face idle time or do you think there's a chance that he would have to kind of put more into it than the purchase price itself thanks yeah i think magnus covered some of that some of those comments early on frederick at this stage as we stand uh further
than the working capital contributions that we had um upon closing we don't anticipate um any further meaningful um working capital requirements to the year i think as we get to uh q4 there's some interest payments due under the vendor facility that obviously um we hope that that that entity will generate the cash to provide but I think that you shouldn't think about any significant working capital contributions into that silo for the remainder of the year except in the event that we have line of sight to further work for one of the stack rigs and we need to do reactivation. When we looked at the case, the business case to acquire that entity or that business we were looking to maybe three to four of those rigs been operating we have three right now as i said earlier some of the ongoing discussions in the region including discussions with pemex could give a line of sight for the fourth rig as we kind of get closer to the end of the year and and i think at that point in time we feel pretty confident that that silo be self-funded all right Thank you very much.
That's it for me. So I'll leave it at that. Have a good day. Thanks. Thank you.
Operator
Thank you. We will now take our next question from the line of Ben Summers from US Bancorp BTIG. Please go ahead.
Hi, yeah. Thank you for taking my question. So I wanted to ask on Asia. It seems like we've seen some strong progress in Vietnam and Malaysia in terms of contracting activity.
So, you know, Bruno, you called out this region as one that, you know, tends to respond quickly to market conditions would you say this activity has been largely driven by you know the middle east conflict and the increased focus on energy security and then just kind of any you know longer term color on that market thank you thanks ben no indeed um we we were expecting um activity levels to remain fairly elevated in asia um as i mentioned in calls in an area that we were surprised or maybe disappointed with was Sarawak in Malaysia because of some of the ongoing government disputes in that region. We've now entered into an agreement with Shell for work in Sarawak so that gives us a bit of a positive indication that maybe the demand there is kind of returning to a normality so that's quite encouraging. In Vietnam specifically we have a long-standing relationship with a local operator in Vietnam that continues to give us a bit of an edge in securing work for the rig. We see pretty robust demand across Vietnam, and the government seems to have been quite ambitious increasing activity levels. So that should give us line of sight to maintain our rigs in that country kind of extended into 2027. Indeed, Asia is a net important region. You can see that the government has been trying to react and respond to make sure they have a bit more self-sufficiency in terms of resources. I do think, as I mentioned earlier in a prior question, that the longer the conflict lingers, the more that urgency in kind of securing their own supply kind of comes to the forefront, and I expect that that will continue to drive activity levels. I'm fairly encouraged. I think it's a region where a lot of the contracts are short-term in nature, so you have this constant grind, if you would, in kind of maintaining the risk contracted. But we've been very successful in that region for many years. We have very well-established partnerships with local players as well as customers. And I feel quite optimistic that we'll continue to roll those rigs through.
Super helpful. And then a lot of progress on the balance sheet improvements. And now with Font is closed.
I just kind of wanted to ask if there's anything kind of left to do there balance sheet-wise and just kind of thinking about how we plan to manage the balance sheet moving forward and potentially looking at other bolt-on M&A opportunities. yeah and then i think i think balance sheet wise we we feel pretty happy what we achieved so far these years um i think not only maturities have been pushed forward and give us a good runway i think we managed to rationalize financing calls so i think we've we've done we've done well we achieved what we wanted to to achieve um i you know you said it before i think at the moment M&A is not really in the forefront of our focus here you know obviously we had some negative executional surprises in the King Q2 so our focus remains very very heavily in kind of resuming kind of operational focus and operational execution so that's obviously quite important for us together with that and then I mentioned obviously the lack of visibility in our we're kind of more uncertain visibility in short term so we're looking to how we kind of keep our cost under control to preserve liquidity while we navigate these periods of uncertainty. But I don't see a need, immediate need, or a near-term need for any kind of balance sheet transactions. And certainly, as I said, M&A is things that obviously we look over time, but it's not in the forefront of our strategic priorities.
Super helpful. Thank you guys for taking my questions. Thanks, Ben.
Operator
Thank you. We will now take the next question. From the line of Dunn, Coach from Morgan Stanley, please go ahead.
Hey, thank you. I wanted to ask, as you kind of think about the medium and longer term, you guys flagged that despite the Middle East conflict and ongoing activity headwinds there, that global modern regularization at the market level has stayed resilient at 90%. And then if you look back over the last three or four years or so, you know, despite for having outside exposure to Mexico, which was a substantial headwind and also being exposed to the Middle East where you had the Saudi suspensions and then, you know, more recently the Middle East conflict. But still, BORS fleet utilization was at least in line and frequently outperforming market-level utilization. So I guess the question is, you know, if you look ahead, do you think you expect your target to get back to a level of utilization across the fleet that at least keeps up with or potentially outperforms the market? Thanks.
Oh, very, very good, Dan. And just for context, I think there's often a bit of a confusion in metrics. I think when we talk about market utilization levels, that is what we call contracted market utilization levels. So it kind of blends a mixture of rigs that are currently working at any given time, as well as rigs that are contracted for future work. So when we then report our coverage and we're looking at how much of our days are committed during the year, that's really days that are under contract, days that we're earning revenue. So there's generally a bit of a disconnect between these two metrics that sometimes create a bit of a confusion. I think in the overall, when we look at our coverage and what we've been executing for the last couple of years, we have consistently leveraged our premium fleet and our kind of operational execution to deliver better than a peer group. And I think we have consistently done that. Obviously, in the current environment, maintaining these higher coverage levels and utilization levels comes out of the tremendous focus on the contract execution. And we've done it several times. I think this is not the first time that we see moments uncertain in a period. And our contracting group generally excels during those periods. I think we have very competent guys, very well connected with the customers that enable us to kind of have very strong line of sight and visibility of what's happening and strategically maneuver through the opportunities available in the market. So that's kind of where things are. 90% market utilization of where we have been, I don't think is an unhealthy number. As we said before, it only takes probably about a dozen of new contracts before you start pushing into a place where pricing power returns in favor of the contractors. That all said, we discussed before, I think Middle East recovery would very quickly help us to improve that market balance and bring a bit more pricing power in favor of the contractors. I think if that doesn't happen in near term because of the uncertainty here in the Middle East, inevitably, incremental demand across other regions will have to start materializing as we move forward and bring us into a better place. It's difficult to provide a very precise answer. I think, as I said before, near term, I think the outlook is a bit uncertain because of all of these events happening. Medium, long term, I think if you look a bit past that, I do think that the outlook for the sector is quite healthy. Great.
That's really helpful and appreciate the clarification that the 90% number that's kind of contracted plus committed divided by marketed, specifically contracted divided by marketed. So understood there, and that's a lot more in line with our understanding. Then just maybe quickly, as you think about your current geographic footprint, where your assets are located, and you compare that to your activity outlook at the market level, do you feel pretty good about your kind of current geographic footprint? or do you think that over time it could make economic sense for BOR and for customers to potentially relocate rigs to different markets? Just how you're thinking about your geographic footprint today versus your activity outlook would be great.
Yeah, I am. I'm quite comfortable, Dan. I think we've built a very interesting global footprint over the years. I mentioned earlier, I think Mexico is a market where we have very strong partnerships locally with positions quite well to navigate the demands of Pemex and the IOCs across the region. So we're pretty happy. I think the acquisition of the Fontys units recently will continue to strengthen that in a context where I do think that Pemex activity level will continue to rise as kind of marked by the recent resumptions. Asia, indeed, I think we have very specific assets, very competent assets for the demands of our customers in that region. We've navigated that region and that demand outlook for that region quite well over the years. We feel definitely quite pleased. In West Africa, we continue to secure very interesting fixtures, leveraging on the fact that we are one of the very few players in the region with a capacity of 400-foot capable rig, kind of larger size raised in that region so happy with that obviously when we look at the middle east at the moment we have four rigs in that region two of them working once they wanted a bbc with with noble we'll have to see i think with the demand outlook to grow in that region as kind of these standards continue to materialize it could create an opportunity for us to have a higher focus in that region i think some of the rigs that we acquire from noble are very competent for particularly the gas work outlook demand that needs in that region. So we'll have to think about it. I think the Middle East is probably one of the areas where we have to look over time depending on how these standards materialize. But beyond that, I'm quite comfortable how the fleet is spreaded out. I think we've done tremendously well and worked really hard over the years to have the right assets in the right place. So I don't think we should be looking to any kind of material, meaningful, Greek mobilization around the world in your turn.
Great. All really helpful. Thank you very much. I'll turn it back.
Operator
Thank you. We will now take our final question from the line of Greg Brody from Bank of America. Please go ahead.
Good afternoon, guys, and from a good morning over here. Just as we've looked at the rest of this year, you mentioned that there's an opportunity to maybe add some activity to this year's backlog. But realistically, how much activity do you think you could potentially add?
Yeah, thanks for the question, Greg. If I look at Q4, where we have a bit more of our exposure in near term, I think QT seems to be pretty well settled right now. When we look at Q4, we have a few rigs that have still ongoing exposure in Q4. For all of the rigs that we have working and rolling off contracts in Q4, we have ongoing discussions and we were speaking to customers about opportunities for those rigs. So that's a really focus, you know, just to name a few. We have the Norva that will soon be finishing contract in West Africa. We have the Vestla in the North Sea that has a contract with ENI that will be finishing or rolling off towards the end of the year. So, you know, we have one of the rigs with ENI in Mexico, the RON. So we've been progressing quite well in the discussions we have with our customers, either the current customers or the customers in many of those regions. And that's what gives us a bit of a positive outlook that we will have Q4 that kind of stays with a steady state activity level what we have in Q3. Now, there's obviously risk in execution of those contracts. The team continues to be extremely focused on bringing those contracts home, and that's kind of how we're tackling that.
And just when you think about Contractment 27, what's the lead time we should be thinking about today as to how long from an agreement to having the ring go to work? Is there a way to think about that?
Yeah, I think some of the uncertainty that we mentioned already in the call certainly affect us but acknowledge that it does affect the customers and what we've seen in recent months is that the turnaround time or the lead time that the customers have been looking into these awards has been quite short things that people are trying to preserve a bit of optionality wait until the last minute which obviously creates some complexities but we have seen quite a few and if I look at Asia for example we have seen quite a few contracts where where contracts are announced and the rigs actually go to work literally just a couple of weeks after that, right? So the customers have been keeping a quite short leash on those announcements, which obviously creates a lot of complexities for us, but at the same time, I think kind of provides a bit of a visibility that if a rig is soon to get idle, it doesn't necessarily mean that it's too late. I think there's opportunities that the customers are trying to tackle at the last minute and and act opportunistically to navigate that.
And then just shifting to the Fontys acquisition, can you just remind us how we should be thinking about what's the run rate contribution to the consolidated company from that? And I think you mentioned there was a shareholder loan from Boar to Fontys for working capital. Should we think about any other additional capital contributions to Fontys?
Thanks Greg. As you mentioned, I think the goal here is obviously that this structure is self-sufficient and will operate by itself. Now when we have three rigs operating, it should get into that territory that there shouldn't be a lot of funding needed from us. But as you touched on and I mentioned previously in the call, we have approximately 15 million that we will fund into the jv in q3 as working capital now initially to to help on operating costs and also startups for for the two rigs that are starting up now in q3 but obviously going forward uh the target there is to to get these contracted and have limited uh funding needs uh into this structure Got it.
Can you just remind us of the capex for the rest of the year at BOR?
So the general guidance there we have said in the past is around two to two and a half million dollars per rig per year I would say in an average year. So with 29 rigs it's typically between 60 to 70 million.
Some years with higher SPSs there should be.
There could be more This year is not the year with high SPS, and so that would be the area we're looking at currently.
And then just last one for you. Congrats on all the refinancings during the quarter. Obviously, your liquidity position is very strong now. How do you think about deleveraging today, and have your targets at all changed?
Just a refresher for us, just as you completed so many transactions for refinancing last quarter yeah true so deleveraging is obviously still the focus for us we are in the new notes we continue to have an amortizing element like we had in the previous notes so approximately 100 million dollars per annum is debt repayments under the the new note so that is definitely on the agenda and it's structurally baked into to the bonds going forward as well all right thank you for the time guys
