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Saturday, May 28, 2022

What could be the reason behind Borr Drilling Company’s stock plunge

Borr Drilling plunged in the Monday market with a %9.45 change and is now at $1.15 while it had previously climbed up to $1.27 in the last market session. The volume traded in on Monday is equal to 6.87 million which is almost equivalent to the average trade volume of 6.88 million.

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The Analysts are giving the drilling company’s stock a recommendation based rating of Hold. The consensus on the rating is altogether Hold as well. The recommendations of the analyst in detail show that none of the 4 analysts had rated the stock as sell as previously done a month ago causing the consensus to be overweight and neither have they rated it as Buy.

There is no specific news related to the company that could lead to the plunge of the stock specifically. However, it is quite possible that one of the causes can be the absence of news and dying down of hype from previous news. Borr Drilling Limited (NYSE: BORR) saw a rise in the stock 5 days ago on March 4th, as the news of the recent OPEC meeting had decided the increase of the oil price; OPEC and oil-producing countries decided to keep digging and producing oil through April.

Sabotage and supply disruption of global energy supplies

There is a possible speculation that this decrease in stock price may be due to the surge in prices of oil since 7th March, as Houthis attack oil fields in Saudi Arabia. The attack that was done on a petroleum tank farm at one of the largest oil shipping ports of Saudi Aramco facilities through a ballistic missile and drone attack. This attack was claimed by Houthi military spokesman and representative. The oil price of Brent peaked at $71.38 per barrel, highest since Jan. 2020.

The stocks are mixed because surge in oil prices is normally good news for oil and fossil fuel energy companies because it represents higher return on existing inventory of oil. But this is not the sentiment right now as investors and key-sectors believe this surge will only add to the key concern that is bothering the market — runaway inflation.

Runaway inflation could cause an increase in the interest rate and make monetary authorities nervous around their highly-loose monetary policies. This can drive down the investment and growth of companies and ultimately stocks to perform less-effectively. Related to this news, is the fact that yields are rising as bond prices fall, this makes bonds look more attractive as compared to equities.

Company’s fundamentals still have a way to go

The company only 2 weeks ago regained the compliance with NYSE’s Continued Listing Standard which requires a minimum average share price of $1.00. This non-compliance due to below $1 share took place since 07th of September.

Furthermore, in the fourth-quarter reporting, the total operating revenues was $60.2 million while the $46.7 million was the net-loss of the company. The company finally completed an equity offering on 20th January based on certain agreements made with creditors to finalize its announced liquidity improvement plan. This plan was made due to the fact that in third-quarter reporting the company told its investors that it had the lowest number of oil rigs activated since the pandemic -13 rigs were active only out of 23.

The market is mixed about the outcome of the economy-related to inflation and interest rate, and this will cause the stock market to see fluctuations. And until the Borr Drilling pick up their pace by operating full-capacity oil rigs, the company’s stock movement may see some possible stagnation.

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