That said, I wouldn’t say that in other parts of the world, the contracts are short term in Asia. We see in Asia, for example, where our customers coming out with tenders for two year plus contracts. We’ve seen a few recent vendors across West Africa and EMEA as well for a multiyear contract. So we see clearly that contract duration is increasing. We mentioned in an earlier conference call as well that one of the trends that we have seen, particularly across the NOCs is that they seem to be moving from project hiring to portfolio hiring. So instead of looking for rigs to deliver a particular project, they’re looking for rigs that add capacity to the portfolio and giving some flexibility on deployment and that causes the general contract duration to go longer.
So I think it is true that the Middle East was the first one to come in a meaningful way in terms of duration. But I do see all of other regions following kind of same footsteps considering the tightening market and the rig availability.
Truls Olsen: And then Patrick and Magnus, over to you guys. On the — and switching gears over to the bond. On the excess cash flow sweep, when that comes into play in 2025, my understanding is that the bondholders can elect to utilize that function or not? And if they don’t direct to us that the cash is essentially free to use by the company for other means, including dividends. Is that a correct understanding?
Patrick Schorn: Yes, Truls, that’s correct. The cash sweep mechanism of the bond starts on the basis of the 2024 results. So then in 2025 when the annual report is out, it’s purely in the election of the bondholders to say yes or no to that. And it’s also obviously then based on the free cash flow that we were generating the year before. We are allowed to use the money for what we want, obviously, but there are dividend restrictions in the bond, which relates to the regular 50% of net income, which is very common. And then in addition, you have certain baskets, which is currently — there was a starting basket of $75 million, which you could pay out plus the $50 million that was raised in equity, also added to that 75 million basket. So starting up from now, we have 125 million and then it grows with the net income that we generate in the company.
Operator: [Operator Instructions] Dear speakers, there are no further questions on the phone. I would now like to hand the call over for any written questions.
Unidentified Company Representative: We have another one here. How will the two newbuilds be financed?
Patrick Schorn: I can answer that. So the two newbuilds we have are scheduled to be delivered in August and November next year. We brought them forward by one year, because of the outlook in the market and we see a good potential to put these rigs to work. The delivery installment per rig is 160 million. We have financing committed on those newbuilds from the seller or the yard of 130 million each, which we also show in the graph that we had in our presentation. Very low amortizing in the two first years, only 15 million per year. So the remaining 30 million, which is cash to be paid at delivery, we expect to be able to — or we will handle from our cash from operation.
Unidentified Company Representative: And then another one. With the refinancing complete, will Borr looks to increase the size of their fleet via M&A?
Patrick Schorn: Clearly, it is always a possibility. Our position in that is that we have a very unique fleet of 24 fairly uniform modern jack-ups, which all are of a very similar vintage and are the youngest fleet in the industry. So for us to combine anything with that, we would want to make sure that we can appropriately combine that with our operating philosophy and that it is something that fits the fleet. So it could be that here and there a rig might be available that would fit our aspirations or we could generate additional value from. On the other side, we are also very clear on the fact that with 24 rigs is that all we were to have we can run a very proper business and have a great cash generating capability. So I think the view that we currently have is maybe best described as, we’ll clearly grow some if there is value we can generate but we don’t have to grow.
So for the right opportunity, we will evaluate. And otherwise, we’ll continue to work with the assets that we have. And that is, as you well know, a very specific fleet. So I’ll probably leave it at that.
Unidentified Company Representative: Thanks, Patrick. I have another one here. Are you seeing a bit of a pause in jack-up dayrates? And what will be the impetus for rates to step up again into the 170s and beyond?
Bruno Morand: Let me tackle that. I think the answer is no. We’ve seen obviously significant recovery in the last few quarters and consistent fixtures now for our fleet and being in 150 and even into the 170 territory. So obviously, a meaningful increase. We see that on the back of that, our customers have been rejoin their portfolio, trying to bring things forward, readjusting their strategy to cope with the market. As I mentioned in my remarks, we do see a significant increased potential activity for the second half of 2024 to 2025. Some of this, probably a smaller parts deal, is out for tender, and we expect a significant amount of new tenders to keep the market in the coming weeks and months. We think that albeit soon as that is the case and visibility to confirm in a way of tenders, that should support further increase in market rates.
So I am confident that as we progress into 2024, the rate levels will continue to improve. I don’t think we have stopped. Worth mentioning that we are in a supply constrained market. At the moment, we’re still at rate levels that are far below previous peak and certainly still far below price parity with newbuilds. So that should provide us in the market, in general, a good opportunity to reconsider prices and pushing higher as activity levels increase.
Unidentified Company Representative: Thanks, Bruno. I think with that, we’ll turn the word back to Patrick.
Patrick Schorn: All right. Thank you very much, and thank you all for the interest in Borr Drilling. We look forward to update you on further progress in the quarters to come, and we will talk at that time. Thank you very much.
Operator: That does conclude our conference for today. Thank you for participating. You may now all disconnect. Have a nice day.
