Evercore ISI has raised its rating on shares of Borr Drilling (NYSE: BORR), shifting from In Line to Outperform and establishing a price target of $9.00.
The upgrade reflects the firm's confidence in the drilling company's future revenue and cash flow, as well as the broader offshore market's positive outlook.
The rationale behind the upgrade is grounded in the anticipation of a sustained offshore upcycle, bolstered by strong fundamental industry conditions.
These include a prolonged period of underinvestment in the sector and a heightened emphasis on energy security and reliability.
Despite the recent fluctuations in oil prices influenced by increased production from OPEC+, potential resumption of output in Libya, and dampened demand from China, Evercore ISI maintains an optimistic view.
The firm believes that the growing global demand for oil and gas, along with new production capabilities emerging over the decade, will fuel further demand for offshore drilling activities.
Borr Drilling, recognized as a leading international drilling contractor, operates a fleet of 24 modern jack-up rigs, which includes two newly built vessels.
The company's fleet stands out in the industry due to its youth and high specifications, with an average age of seven years for its jack-up rigs. This positions Borr Drilling favorably to command premium day rates in key markets, according to the analyst's assessment.
The analyst's comments underscore the positive stance on the offshore drilling sector's prospects, supported by robust fundamentals and the anticipation of a long-term upcycle.
Borr Drilling's modern and technically advanced fleet is seen as well-equipped to take advantage of the expected increase in offshore activity.
InvestingPro Insights
Evercore ISI's upbeat assessment of Borr Drilling aligns with several key metrics and insights from InvestingPro. With a market capitalization of $1.36 billion, Borr Drilling's financial health is underpinned by a substantial revenue growth of 49.03% over the last twelve months as of Q2 2024, indicating a strong upward trajectory in the company's earnings potential. The company's P/E ratio stands at 18.21, which, when coupled with a PEG ratio of just 0.1, suggests that Borr Drilling's earnings growth may not be fully reflected in its current share price.
InvestingPro Tips also shed light on the company's operational aspects. Borr Drilling operates with a significant debt burden, yet its liquid assets exceed short-term obligations, providing some financial flexibility. Analysts anticipate sales growth in the current year, reinforcing Evercore ISI's positive outlook. On the flip side, the stock's recent performance has been volatile, with the price having declined by over 16% in the past month, and it is currently trading near its 52-week low. Despite this, analysts predict the company will be profitable this year, and it has been profitable over the last twelve months.
For investors seeking a deeper dive into Borr Drilling's performance and future prospects, additional InvestingPro Tips are available, offering comprehensive analysis and actionable insights. Discover more expert evaluations and detailed company metrics by visiting InvestingPro for Borr Drilling at https://www.investing.com/pro/BORR.
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