Borr Drilling, Mexico & Russian Sanctions
A Pre Earnings Update: PEMEX Repayments and Discontinued Contracts
Borr had some interesting news drop recently on PEMEX repayments and Russian sanctions impacting two of its vessels’ contracts that I wanted to make note of ahead of the companies Q3 earnings.
Contract Extensions
On October 27th Borr reported that it had extended contracts for vessels Galar and Gersemi by two years with Njord being extended through April of 2026.
The contract extensions carry a value of $213M and imply competitive day rates for what is at best a weak point in the cycle. We suspect this confidence in contracting in Mexico comes from continued confidence that PEMEX will pay its bills.
Importantly, PEMEX owes Borr roughly $100M in back pay from work completed which is equal to 10% of its current market capitalization.
PEMEX Repayments
Petroleos Mexico (PEMEX) has dealt with solvency issues for some time and has not been able to make payments to Borr and other contract drillers in the region. There has been a push for PEMEX to become financially self-sufficient by year end, and for payments to resume.
There was a reasonable amount of speculation whether either of those stated goals would actually unfold and many thought it was all boilerplate. To my surprise, PEMEX repaid Borr $19M worth of the back pay it owed. This is a far cry from the roughly $20-$30M a quarter that nets out to $100M~ of back pay needed to settle its debt to Borr, but it is a step in the right direction.
The company has a lot of uncontracted capacity into 2026/2027, and my initial thought was that once PEMEX began to make payments again, that Borr would be willing to extend contracts which turned out to be roughly correct. Mexico accounts for 30%~ of Borr’s revenues so ensuring they are getting paid from their largest end market before tying up vessels for 2-3 years seemed prudent to us.
Russian Sanctions
On the back of the news that Borr extended contracts in Mexico, we got news that Borr had also ended two contracts with its vessels Odin (ending November 2025) and Hild (March 2026) in Mexico to comply with recent sanctions on Russian crude producers.
It turns out, Lukoil owns assets in Mexico in Area 4 that it bought from bankrupt Field wood Energy dating back to April of 2022 which gave them a 50% stake with the other 50% being owned by Mexico’s GrupoBal’s subsidiary Petrobal.
The depth of the field is between 35-45m with recoverable reserves of 564M with an 80% crude oil cut. The assets are located offshore Tobasco & Campche and is pictured below.
Due to the ownership of these assets by Lukoil, Borr ended its two contracts in the Ichalkil-Pokoch Field and it appears that due to Trump Administration sanctions that Lukoil is positioning to sell its stake in many of its international oil field assets.
“The company said in a statement that it was already talking with potential purchasers. The transactions would be carried out under a sanctions grace period that allows transactions with Lukoil until Nov. 21, and the company said it would seek an extension if necessary to complete the transactions.…The sanctions make it difficult for Lukoil and Rosneft to do business outside of Russia. In addition to barring U.S. businesses from dealing with the two companies, the sanctions carry the threat of secondary sanctions on foreign banks that handle their transactions. That means any bank that wants to maintain contact with the dominant U.S. financial system will think twice about doing business with them.” - Source: US News 10/28/2025 Issue
Fieldwood Energy Project Description
