Release Date: February 20, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Valaris Ltd (VAL, Financial) achieved a fleetwide revenue efficiency of 96% during the fourth quarter and 97% for the full year, marking the fourth consecutive year of at least 96% revenue efficiency.
- The company demonstrated outstanding safety performance in 2024, receiving safety awards from both the IADC and the Center for Offshore Safety.
- Valaris Ltd (VAL) secured new contracts and extensions with a contract backlog of approximately $120 million for jackups across multiple locations, including the UK, Trinidad, and Australia.
- The company has a robust pipeline of deepwater project approvals expected in 2026 and 2027, which are anticipated to be at their highest level in more than a decade.
- Valaris Ltd (VAL) returned all free cash flow to shareholders through share repurchases during the second half of the year, demonstrating a commitment to shareholder returns.
Negative Points
- Adjusted EBITDA decreased in the fourth quarter to $142 million from $150 million in the prior quarter, primarily due to lower utilization for the floater fleet.
- The company experienced a modest decline in global floater utilization in 2024, which is expected to continue in 2025.
- Valaris Ltd (VAL) plans to retire three semi-submersibles from its fleet due to limited contract opportunities, which could impact future revenue generation.
- The company anticipates that the DS-10 drill ship will likely remain warm stacked through the end of the year, indicating potential underutilization of assets.
- Total revenues for 2025 are expected to decline compared to 2024, primarily due to lower floater utilization as several rigs are expected to have idle time.
Q & A Highlights
Q: Hi, good morning. Just a question on your full year 2025 EBITDA guidance, maybe just taking the midpoint, of that guidance range of $530 million. How much of that would you say is booked today versus an expectation of new awards, you would need to secure, for work later this year to hit that number?
A: Yeah, Eddie, this is Chris. When we look at the midpoint on the revenue, we're about 94% contracted for the year, so the majority of the remaining that 6% is later in the year, but yeah, about 94% contract.
Q: On a recent retirement announcement, we saw of a seventh gen cold stack drill ship by one of your peers. You have three 7G cold stack drill ships in the DS-11, DS-13 and DS-14. Just based on what you're seeing in the market today and the fact that you expect the DS-10 to remain warm stacked through year end. Does this push out your expectation for those rigs, being reactivated, say versus, 6 to 9 months ago?
A: Eddie, this is Anton. Our focus is on putting our active fleets to work. We have a number of rigs rolling next year, but these are all high spec seventh gen assets. Based on the pipeline of activity that we see coming, we see good long-term opportunities for all of those. We are absolutely going to be patient in putting those into the market. There will be a place for them, but this is not a question of putting a number on the calendar when the market is ready.
Q: I think I'd like to ask you, kind of a similar question as asked from your peers, earlier this week, and it has to do with the demand pipeline going forward. What are you giving you confidence that the programs that you're seeing being tended for or the discussions that you're having that will materialize in this perceived timeline?
A: Absolutely, it's a really good question. We look at the same macro models that everybody looks at. We look at what our customers are saying, publicly, look at the CapEx spending plans and how those are developing, and they are continuing to increase, especially as you go into '26 & '27. The status of their planning efforts for those, the posture with which we're engaged in commercial discussions on a number of our rigs, leaves me very confident and comfortable about that demand coming to play.
Q: Do you have any, good intel or insights as to what Aramco is planning to do going forward? Do you think they're in general done with suspensions?
A: I'm not aware of any discussion about additional rig suspensions in Saudi. We did a couple of short-term extensions on rigs that were rolling kind of at the end of last year in order to continue to facilitate discussions on the rigs we have rolling. Advanced discussions is a correct characterization of where we are in our discussions. They are constructive and advanced.
Q: There's been some pretty explicit commentary from your peers about, where pricing sits for, ultra deepwater rigs in particular, as well as sixth gen rigs. Is that how you're seeing the market?
A: We only have one ship in our fleet out of our 13, that is 6G. That's the DS4, and that rig's contracted until fourth quarter of 2027. For us, it's really the 7G market, the rigs that customers prefer for their long-term development programs. The fixtures that you've seen have continued to be in the mid to high 400s for high spec assets, and that's where the market is.
Q: Could you please remind us how to think about, how you think about the operating costs when rigs go idle and maybe the case of getting those costs down if the rig is expected to be warm stacked for several months?
A: For a ship like the 10, we've gotten those costs down to about 60 a day. That's about getting down to minimum effect manning. Previously for the five, we talked about getting down to closer to 50 a day on a semi. These are pretty significant reductions relative to kind of average OpEx on the ship for let's say around 150 a day.
Q: On the two rigs that you mentioned that you're in advanced discussions on, the high spec floaters, can you confirm that those opportunities have 2025 start dates?
A: The opportunities for those more likely will be in the first half of '26. Our focus is securing that attractive long-term contract that's going to get us years and potentially follow-on work for these assets.
Q: ARO drilling recently announced plans to build a new build jackup, the Kingdom 3 in KSA. Do you expect the JV to be able to self-fund that new build or would it require some funding from Val?
A: Those contracts that we're building in IMI are backed by long-term 16 years of contracts. We do not, neither us nor Saudo Aramco intend to need to inject any capital into ARO in order to fund that new build program. The rigs are expected to be funded by cash flow from operations at ARO, plus funding that is readily available in the market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
