Valaris PLC (VAL), a frontrunner in offshore drilling companies, reported a strong monetary efficiency in its Third Quarter 2024 Earnings Name, underscoring a robust market presence and future development potential. CEO Anton Dibowitz and CFO Chris Weber shared that the corporate generated $111 million in free money circulation and achieved an adjusted EBITDA of $150 million, a rise from the earlier quarter. Valaris additionally introduced the repurchase of $100 million of shares, reflecting its dedication to shareholder returns. The corporate secured new contracts totaling roughly $257 million, indicating a steady offshore drilling market, regardless of some delays in buyer demand.

Key Takeaways

• Valaris generated $111 million in free money circulation and reported an adjusted EBITDA of $150 million.
• The corporate repurchased $100 million of shares, sustaining a excessive income effectivity throughout its fleet.
• New contracts price round $257 million have been secured, together with vital offers with BP (NYSE:) and extensions for current rigs.
• The worldwide jack-up market reveals stability, with a 93% utilization fee and agency day charges.
• Lengthy-term demand is anticipated in numerous areas, with a robust pipeline of alternatives and energetic discussions for rig contracts.

Firm Outlook

• Valaris anticipates offering full-year 2025 steering within the fourth quarter as market visibility improves.
• The corporate expects to conclude ongoing tenders and convert roughly 30 long-term floater alternatives into contracts.
• Strong backlog and energetic discussions point out a robust market place, with potential for as much as 4 further rigs wanted in Nigeria by the top of 2026.

Bearish Highlights

• Buyer demand has been deferred into 2026, primarily resulting from gear availability and regulatory delays.
• Third-quarter income projections are between $570 million and $590 million resulting from lowered utilization.
• Heat-stacked rigs are being managed to reduce idle prices, with operational bills geared toward roughly $60,000 per day.

Bullish Highlights

• The offshore drilling market stays strong, particularly in deepwater, supported by main investments from TotalEnergies (EPA:) and Exxon (NYSE:).
• Valaris is specializing in securing long-term contracts and is optimistic in regards to the market circumstances for 2026 and past.
• The corporate’s technique consists of prioritizing excessive utilization of the energetic fleet and managing prices prudently throughout market lulls.

Misses

• The corporate has prolonged the activation timeline for high-spec rigs sidelined, such because the DS-11, DS-13, and DS-14, resulting from market headwinds.

Q&A Highlights

• Day charges have been steady within the excessive 400s, with fluctuations anticipated primarily based on market circumstances and asset high quality.
• Delays in manufacturing gear, notably FPSOs, have contributed to the deferral of buyer demand.
• Valaris just isn’t actively pursuing M&A to scale its fleet, focusing as an alternative on value-accretive investments.
• The corporate is contemplating rig upgrades throughout downtime to reinforce effectivity and scale back emissions.
• Dibowitz emphasised that 90% of offshore initiatives stay worthwhile at a $70 per barrel oil value, with manufacturing prices starting from $20 to $40, making giant developments economically compelling.

Valaris’ sturdy efficiency within the third quarter of 2024 and its strategic strategy to fleet administration and shareholder returns paint a constructive image for the corporate’s future. With a steady market, strong financials, and a dedication to strategic development, Valaris is positioned to capitalize on the anticipated demand within the offshore drilling sector.

InvestingPro Insights

Valaris PLC’s (VAL) sturdy monetary efficiency in Q3 2024 is additional supported by key metrics from InvestingPro. The corporate’s income development of 30.45% during the last twelve months as of Q3 2024 aligns with the strong market circumstances described within the earnings name. This development is much more spectacular when wanting on the quarterly income development of 41.31% in Q3 2024, indicating accelerating momentum.

The corporate’s profitability is especially noteworthy, with an adjusted P/E ratio of three.6, considerably decrease than many trade friends. This low P/E ratio means that Valaris could also be undervalued relative to its earnings potential, which may very well be engaging for worth traders contemplating the corporate’s constructive outlook and powerful market place in offshore drilling.

InvestingPro Suggestions spotlight further strengths:

1. Valaris boasts a excessive return on belongings at 27.23%, indicating environment friendly use of its belongings to generate income. This aligns with administration’s give attention to excessive utilization of the energetic fleet and prudent price administration.

2. The corporate’s EBITDA development of 210.57% during the last twelve months as of Q3 2024 is outstanding, reflecting the sturdy operational efficiency talked about within the earnings name.

These insights from InvestingPro complement the corporate’s narrative of strong monetary efficiency and strategic positioning within the offshore drilling market. Traders looking for a deeper understanding of Valaris’ monetary well being and market place can entry further ideas and metrics by means of InvestingPro, which gives a complete of 14 ideas for VAL.

Full transcript – Valspar Corp (VAL) Q3 2024:

Operator: Good day, and welcome to the Valaris Third Quarter 2024 Outcomes Convention Name. All contributors can be in listen-only mode. [Operator Instructions] Please be aware, this occasion is being recorded. I might now like to show the convention over to Nick Georgas, Vice President Treasurer and Investor Relations. Please go forward.

Nick Georgas: Welcome, everybody, to the Valaris third quarter 2024 convention name. With me right now are President and CEO, Anton Dibowitz; Senior Vice President and CFO, Chris Weber; Senior Vice President and CCO, Matt Lyne and different members of our government administration staff. We issued our press launch, which is accessible on our web site at valaris.com. Any feedback we make right now about expectations are forward-looking statements and are topic to dangers and uncertainties. Many components might trigger precise outcomes to vary materially from our expectations. Please consult with our press launch and SEC filings on our web site that outline forward-looking statements and record danger components and different occasions that might affect future outcomes. Additionally, please be aware that the corporate undertakes no obligation to replace forward-looking statements. Throughout this name, we are going to consult with GAAP and non-GAAP monetary measures. Please see the press launch on our web site for added data and required reconciliations. Earlier this week, we issued our most up-to-date Fleet Standing Report, which supplies particulars on contracts throughout our rig fleet. An up to date investor presentation can be obtainable on our web site after the decision. Now, I’ll flip the decision over to Anton Dibowitz, President and CEO.

Anton Dibowitz: Thanks, Nick and good morning and afternoon to everybody. Throughout right now’s name, I’ll start with an summary of our efficiency throughout the quarter and supply an replace on the offshore drilling market. I’ll then hand the decision over to Matt to focus on our current contract awards, talk about the floater and jackup markets in additional element and supply some further coloration on our contracting outlook. After that, Chris will talk about our monetary outcomes and steering earlier than I end with some closing feedback. To start, I wish to spotlight a number of key factors. First, we delivered wonderful working efficiency and monetary leads to the third quarter, which helped us generate $111 million of free money circulation throughout the interval. Second, we keep our conviction within the energy and period of this up cycle, and we imagine Valaris is properly positioned to drive long-term worth creation. Whereas now we have seen some buyer demand deferred, the pipeline of future alternatives in 2026 and past stays strong. We’re targeted on securing engaging long-term contracts and prudently managing our fleet to assist our earnings and money circulation development. Third, as anticipated, our free money circulation profile improved relative to the primary half of the yr, and we repurchased $100 million of shares throughout the third quarter. We stay dedicated to returning all future free money circulation to shareholders until there’s a higher or extra value-accretive use for it. Turning to operations. We delivered one other nice quarter of working efficiency with fleet-wide income effectivity of 98%. Attaining sustained excessive ranges of operational efficiency has been an space of emphasis throughout the group this yr, and I am happy that that is our third consecutive quarter of no less than 97% income effectivity. These outcomes exhibit the complete firm’s give attention to this key goal since delivering protected, dependable and environment friendly operations is significant in constructing longstanding buyer relationships. I might wish to thank the superb women and men offshore and all these onshore, who assist them, for his or her efforts in serving to us to attain such excellent efficiency this yr. I might significantly wish to congratulate the crews of VALARIS DS-7 for attaining 100% income effectivity throughout the third quarter. This can be a incredible accomplishment for a rig that started its contract late within the second quarter following the reactivation, and demonstrates the group’s potential to ship complicated capital initiatives and supply distinctive working efficiency for our clients from day one. On the security entrance, we’re proud to be acknowledged for the second yr in a row by the Heart for Offshore Security with its Security Management Award for the event of our restricted zone evaluation software. This progressive visible planning software identifies protected, restricted and no-go zones for actions like pipe dealing with, stress testing and complicated lifts. By serving to to make sure that solely licensed personnel entry high-risk areas, this software considerably reduces publicity to hazardous zones, enhancing the security of our offshore operations. As well as, we had a number of rigs have fun security milestones throughout the quarter. VALARIS Stavanger reached three years and not using a recordable incident and DS-8, DS-9, DS-17, 122 and Thunder Horse all achieved one-year recordable free, a superb accomplishment by every of those groups. Shifting to our monetary efficiency. Adjusted EBITDA elevated to $150 million within the third quarter, up from $139 million within the second quarter. This was higher than our steering, primarily as a result of staff attaining sturdy working efficiency throughout the quarter. This sturdy working efficiency additionally contributed to strong free money circulation era, and we repurchased $100 million of shares throughout the third quarter. Chris will present additional particulars of our monetary outcomes and steering somewhat later. Turning now to the broader offshore drilling market. By way of market fundamentals, world demand for hydrocarbons continues to extend and offshore manufacturing, significantly deepwater, is anticipated to play an more and more essential position in offering safe and inexpensive vitality to satisfy the world’s rising vitality wants. Deepwater manufacturing is engaging to clients as a result of dimension of deepwater fields, compelling program economics and the decrease carbon emissions depth relative to different sources of manufacturing. Whereas spot costs declined throughout the third quarter and have proven elevated volatility of late, longer dated Brent crude costs have remained comparatively steady. The five-year Brent ahead value is round $70 per barrel, a stage at which greater than 90% of undeveloped offshore reserves are anticipated to be worthwhile. In consequence, commodity costs stay very supportive of continued funding in long-cycle offshore initiatives. The commodity pricing atmosphere and the demand drivers for deepwater particularly, have supplied a robust mission pipeline. That mentioned, this yr, now we have seen a year-over-year decline within the tempo of contracting and a significant quantity of buyer demand being deferred into 2026. The first drivers of those deferrals are availability of manufacturing gear, delayed FPSOs, protracted regulatory approvals and clients’ capital self-discipline. Whereas these components have created some headwinds for subsequent yr, it is very important be aware that initiatives are being delayed versus being canceled, demonstrating our clients’ dedication to deepwater manufacturing as a key part of their manufacturing portfolios. Our conviction within the energy of the market is bolstered by current developments, together with main FIDs similar to TotalEnergies $10.5 billion GranMorgu improvement, offshore Suriname and Exxon’s reported $10 billion funding in a deepwater mission offshore Nigeria. As well as, now we have seen additional development of tender processes for a number of long-term packages for work offshore Brazil, West Africa, and Southeast Asia. And now we have additionally seen continued energy in day charges, significantly for high-specification drillships. Common day fee for seventh era drillships have continued to extend year-to-date, averaging roughly $500,000 within the third quarter. The truth that common day charges stay sturdy regardless of a current modest decline in marketed utilization demonstrates that clients see this relative softness as short-term, and they’re keen to pay strong charges to safe the very best belongings for his or her initiatives. From a floater fleet administration perspective, our first precedence is securing engaging long-term contracts for our belongings, and we see a strong pipeline of alternatives for our high-spec floater fleet in 2026 and past. We’re additionally targeted on securing properly packages that may present a significant bridge to this longer-term work. On the identical time, prudent administration of our energetic fleet and working prices can be a precedence. If a rig is anticipated to have a significant hole between contracts, we are going to heat stack it to decrease day by day working price as we’re at present doing on DPS-5 and DS-10 till we safe its subsequent contract. Shifting to shallow water. The worldwide jack-up market stays wholesome with contracted rig counts, utilization and day charges all comparatively steady. Marketed utilization for the worldwide jackup fleet is at present 93% and common day charges for the important thing markets the place we function have remained agency. Within the North Sea, day charges are within the mid-100,000 and in area of interest markets the place now we have a robust presence similar to Australia and Trinidad, day charges are within the mid to excessive $100,000s. Trying extra broadly on the jack-up market, of the 27 rigs suspended in Saudi Arabia earlier this yr, eight of those rigs have already been re-contracted elsewhere and is anticipated to be scrapped. Of the remaining rigs, we anticipate that lower than half are aggressive internationally. We talked about on our final convention name that Valaris jack-ups 147 and 148, which have been leased to Arrow had obtained contract suspension notices from Aramco (TADAWUL:). Along with Arrow, we elected to terminate these contracts and the rigs at the moment are stacked within the UAE alongside VALARIS-143. We intend to maintain these rigs preservation stacked till we see sufficiently engaging alternatives that warrant making the required funding to deliver them again into our energetic fleet. We have now 5 rigs leased to Arrow which can be resulting from full their current contracts on the finish of 2024 or in 2025, and we’re in energetic discussions with Aramco about extending these rigs. Within the North Sea, market circumstances stay balanced with all 20 energetic jack-ups within the U.Okay., Danish, and Dutch sectors at present contracted and simply three rigs stacked within the area. Regardless of some lengthy anticipated adjustments to the vitality income levy within the U.Okay., which have been confirmed yesterday within the new U.Okay. price range, we see continued buyer curiosity within the area, together with multiyear alternatives which can be anticipated to start out in late 2025 or early 2026. We have now good contract protection by means of 2025 for our North Sea rigs and see buyer demand that strains up properly with our restricted availability subsequent yr. Now, I am going to hand the decision over to Matt to focus on our current contract awards, talk about the floater and jackup markets in additional element and supply some further coloration on our contracting outlook.

Matt Lyne: Thanks Anton and good morning and afternoon, everybody. I wished to start by stating that our staff is targeted on constructing contract backlog by securing engaging contracts at strong day charges. And we see a number of alternatives in late 2025 and a robust pipeline of initiatives commencing in 2026 and past that can additional assist Valaris’ anticipated earnings and money circulation development. Since our second quarter earnings name, we have secured new contracts and extensions with related contract backlog of roughly $257 million. These awards have been primarily for our jackup fleet, together with a 3-year contract for Valaris 118 with BP offshore Trinidad at a strong day fee. This contract strengthens our place on this engaging area of interest market, the place we at present have 2 jackups with long-term work at day charges within the mid to excessive 100s. As well as, we secured a 300-day extension for Valaris 117 offshore Mexico and added backlog to the 247 offshore Australia. Amongst our floaters, a buyer not too long ago exercised a 6-month priced choice for the Valaris DS-9 ph and we’re both in energetic discussions or collaborating in ongoing tenders for a number of of our rigs. Whereas these discussions and tenders can take time, we anticipate that these can be concluded between now and our subsequent earnings convention name and we stay up for offering updates sooner or later. Shifting on to the alternatives we see available in the market. The pipeline for work commencing primarily in 2026 stays sturdy. We have now not too long ago seen some packages awarded and some different new alternatives come up. And consequently, we’re nonetheless monitoring roughly 30 long-term floater alternatives that we anticipate will flip into contracts. In line with earlier quarters, we proceed to see the best variety of alternatives for packages offshore Africa. We’re at present monitoring roughly a dozen long-term alternatives, which might result in incremental demand requiring as much as 4 further rigs within the area by the top of 2026. These alternatives embrace a number of multiyear packages with IOCs offshore Nigeria which have anticipated begin dates in 2026. We anticipate that we may even see contract awards for no less than one in all these ongoing tenders earlier than the top of the yr, with an additional 2 anticipated to observe in early 2025. We additionally see long-term demand in a number of different international locations offshore Africa, together with Egypt, Ghana and Mozambique. In Namibia, we anticipate the numerous exploration success over the previous couple of years will result in long-term improvement packages commencing later within the decade. Offshore Brazil, Petrobras not too long ago awarded 2 long-term contracts for its [indiscernible] program. Petrobras has an additional 2 tenders in course of for as much as an extra 7 rigs for which we anticipate to see contract awards confirmed within the coming months. These packages will preserve many rigs occupied into 2028 and 2029, demonstrating the longevity of buyer demand in Brazil. This constructive long-term outlook is additional supported by stories that Petrobras’ new 5-year plan might see an 8% improve in CapEx and a higher give attention to sustaining oil and fuel manufacturing. As well as, Brazil’s Nationwide Petroleum Company not too long ago introduced plans so as to add 3 new pre-salt areas to its 2025 bidding rounds, additional reinforcing the nation’s give attention to exploring and creating its prolific pre-salt assets. In abstract, we anticipate Brazil to proceed to be the most important marketplace for benign atmosphere floaters with potential for incremental demand by means of a mix of Petrobras and IOC packages. Shifting to the Gulf of Mexico. We anticipate this market to stay pretty balanced with demand largely met by current provide within the area. Whereas we don’t anticipate the Gulf of Mexico to be a significant driver of incremental demand, current contracting exercise within the basin has been constructive. With the variety of drillship fixtures, rig years awarded and day charges all larger by means of the primary 9 months of 2024 in comparison with the identical interval final yr. Outdoors of the main floater markets, we see incremental demand from Suriname supported by Complete Power’s current FID, which is anticipated to require two floaters for multiyear packages beginning in 2026. We have now additionally seen an uptick in demand in Southeast Asia, with a number of operators taking a look at alternatives that might require incremental rigs within the area with one long-term program anticipated to be awarded earlier than the year-end. As Anton famous, the worldwide jackup market stays wholesome. Within the main benign atmosphere areas, now we have seen Southeast Asia, China and India all including rigs up to now this yr, offset by a decline within the contracted rig depend within the Center East, primarily pushed by the lower in Saudi Arabia. Within the North Sea, market circumstances stay balanced, and we’re at present monitoring round 10 alternatives for work with IOCs or unbiased operators which can be anticipated to start out in late 2025 or early 2026. These are largely new vitality initiatives and plug and abandonment campaigns, in addition to a number of oil and fuel packages which can be well-suited for our rigs within the area. The anticipated agency period of those alternatives is greater than 1.5 years on common, which is an effective signal for the continued well being of this market. I am now going to assessment our outlook for rigs with 2025 availability, beginning with our floaters. The Valaris DS-10 completed its contract in early August after greater than six years of steady work offshore Nigeria. The rig had wonderful operational efficiency for its buyer throughout this time, and we really feel very constructive about its prospects for future work that’s anticipated to begin in late 2025 or early 2026. The DS-12 and DS-18 are each anticipated to finish their present contracts in 2025, with DS-12 anticipated to proceed its present program with BP offshore Egypt into February and the DS-18 contracted to Chevron (NYSE:) within the Gulf of Mexico till August. We’re pursuing alternatives for each rigs that might begin in 2025 and 2026. Additionally, within the Gulf of Mexico, DPS-5 accomplished its contract with ENI (BIT:) in July and is at present idle. We’re in energetic discussions concerning alternatives for the rig within the Gulf of Mexico and different areas. We’re targeted on constructing a significant work program for the rig subsequent yr that generates strong EBITDA and money circulation. But when we’re unable to take action, we are going to take into account eradicating the rig from our energetic fleet. In Australia, MS-1 is because of end its present contract within the second quarter, and we’re in energetic discussions for work commencing within the second half of 2025 that will swimsuit a moored rig just like the MS-1. Our different floater in Australia, DPS-1, might work into the third or fourth quarter of subsequent yr, relying on whether or not the shopper workouts its choice. After that, alternatives we see right now for a dynamically positioned rig just like the DPS-1 in nation are anticipated to start out in mid-2026. By way of our jackup fleet, now we have solely two jack-ups working within the benign atmosphere areas outdoors the Center East with significant availability in 2025, Valaris 247 in Australia and Valaris 106 in Indonesia. We have now good visibility into further work for these rigs both by means of new packages or the anticipated train of choices. Within the Center East, we’re in ongoing discussions with Aramco concerning extensions for 5 rigs which can be resulting from full their current lease phrases on the finish of 2024 or in 2025. Lastly, now we have sturdy contract protection in 2025 for our North Sea jackups with lower than one yr of availability throughout our 9-rig energetic fleet. Except for some short-term gaps as rigs transition between contracts or full deliberate out-of-service durations, we anticipate our energetic North Sea fleet to be absolutely offered out in 2025. In abstract, we proceed to give attention to constructing contract backlog and capitalizing on the strong pipeline of alternatives that can assist our anticipated earnings and money circulation development. I’ll now hand the decision over to Chris to take you thru the financials.

Chris Weber: Thanks, Matt, and good morning and afternoon, everybody. In my ready remarks, I am going to start with an summary of the third quarter outcomes after which stroll by means of our outlook for the fourth quarter. Beginning with our third quarter outcomes. Income was $643 million, up from $610 million within the prior quarter, and adjusted EBITDA was $150 million, up from $139 million within the prior quarter. Adjusted EBITDA elevated within the third quarter, primarily resulting from a full quarter of operations for VALARIS DS-7 following its contract start-up late within the second quarter and better common day by day income for the floater fleet, primarily associated to DS-16, which began a brand new larger day fee contract late within the second quarter. This stuff have been partially offset by decrease utilization for DPS-5 and DS-10, which accomplished contracts throughout the third quarter and out of service time and restore prices for the 249 resulting from leg repairs. Our third quarter EBITDA got here in higher than our steering, primarily resulting from our sturdy working efficiency. Third quarter CapEx got here in at $82 million, which is barely decrease than our steering resulting from timing as some spend shifted from the third quarter to the fourth quarter. We ended the quarter with money and money equivalents of $392 million and our $375 million revolving credit score facility stays absolutely obtainable, offering complete liquidity of $767 million. Through the quarter, we generated $193 million of money circulation from operations, which benefited from a partial unwind of the working capital construct within the prior quarter. This was partially offset by capital expenditures, offering $111 million of free money circulation. We repurchased $100 million of shares within the third quarter at a mean value of $57 per share. In complete, now we have repurchased $300 million of shares since we began our program final yr, and we nonetheless have $300 million of remaining capability underneath our share repurchase authorization. Shifting now to our fourth quarter outlook. We anticipate complete revenues within the vary of $570 million to $590 million, down from $643 million within the third quarter. Revenues are anticipated to lower primarily resulting from decrease utilization for the floater fleet, largely resulting from DS-10 and DPS-5 which can be anticipated to be idle within the fourth quarter, DS-15 finishing its brief contract with BP and reverting to its legacy contract with TotalEnergies, which is at a decrease day fee, and decrease amortized income for VALARIS 247 as mobilization income and expense related to its transfer from the North Sea to Australia was largely acknowledged within the third quarter. We anticipate contract drilling expense of $400 million to $410 million, down from $462 million within the third quarter. It’s anticipated to lower primarily resulting from decrease amortized mobilization expense related to the 247, as I simply talked about, decrease expense for DS-4 as its prices are being capitalized throughout its shipyard improve mission previous to the beginning of its subsequent contract with Petrobras later within the fourth quarter and decrease prices for the DS-10 and DPS-5 as we transition the rigs to heat stack mode. We anticipate G&A expense of roughly $30 million in comparison with $31 million within the third quarter. Adjusted EBITDA is anticipated to be $135 million to $155 million in comparison with $150 million within the third quarter. This supplies an anticipated full yr 2024 EBITDA of roughly $490 million on the midpoint of our fourth quarter steering vary. That is on the decrease finish of our prior steering as we now not anticipate DS-10 nor DPS-5 to work for the rest of the yr. Complete CapEx within the fourth quarter is anticipated to be $120 million to $130 million. That is larger than CapEx within the third quarter resulting from spend associated to the improve initiatives for Valaris DS-4 and 144 previous to their long-term contracts offshore Brazil and Angola, respectively, in addition to the CapEx spend that I beforehand talked about shifting from the third quarter to the fourth quarter. Waiting for 2025, we plan to offer full yr 2025 steering on our fourth quarter earnings name after we anticipate to have higher visibility on the outlook for rigs which can be finishing contracts subsequent yr. I am going to now hand the decision again to Anton for some closing remarks.

Anton Dibowitz: Thanks, Chris. I wish to reiterate a few of the key factors we lined right now. First, because of the excellent execution of the complete Valaris staff, we delivered one other good quarter with sturdy working efficiency and monetary outcomes, together with strong free money circulation era. Second, whereas now we have seen some buyer demand deferred, the pipeline of future alternatives in 2026 and past stays strong. We’re targeted on securing engaging long-term contracts and prudently managing our fleet to assist our earnings and money circulation development. Third, as anticipated, our free money circulation profile improved relative to the primary half of the yr, and we repurchased $100 million of shares throughout the third quarter. We stay dedicated to returning all future free money circulation to shareholders until there’s a higher or extra value-accretive use for it. In abstract, we imagine that Valaris is properly positioned to profit from the energy and period of the structural up cycle and ship long-term worth to our shareholders. We thank our staff, clients and traders for his or her assist. We have now reached the top of our ready remarks. Operator, please open the road for questions.

Operator: Thanks. We’ll now start the question-and-answer session. [Operator Instructions] Our first query comes from Eddie Kim from Barclays. Please go forward.

Eddie Kim: Yeah. Good morning. And thanks for all that market coloration. Yeah, simply in gentle of the white area for subsequent yr and a few deferred demand, I simply wished to ask about your expectations on the trajectory of day charges. We have been in type of the excessive 400s for a while now. However for subsequent yr, I imply, ought to we anticipate some stress for modern day charges to float decrease, perhaps into the mid-400s kind of vary earlier than ramping up once more in 2026. Simply curious the way you’re excited about the day fee development over the subsequent 12 to 18 months?

Anton Dibowitz: Hello, Andy, it is a good query. Let me begin off after which perhaps Matt can add some coloration if he needs. Look, I feel it is gratifying to see that day charges have continued to extend type of quarter-over-quarter by means of the yr. I feel we will see some selection in day charges as we go ahead to subsequent yr, particularly with some whitespace. What we see is that clients are keen to pay strong day charges within the ranges you are speaking about, mid- to excessive 400s and into the 500s as we have seen and as we have not too long ago contracted, for instance, within the 2017 for high-specification belongings in the suitable market. So I feel it may be somewhat bit depending on the standard of the asset that is being contracted, the markets being contracted into, however we may even see some selection, particularly after — as folks chase type of bridge work or shorter-term packages to bridge to longer-term work. However we predict the outlook for day charges is strong.

Eddie Kim: Acquired it. Nice to listen to. And simply my follow-up is on the commentary round seeing some buyer demand deferred. Is that this each on deepwater and shallow water work? Or was that extra of a deepwater remark? And individually, you highlighted the provision of manufacturing gear and delayed FPSOs as a few of the explanation why we’re seeing these delays. Any further coloration you’ll be able to present on perhaps when the bottlenecks within the shipyards for FPSOs is anticipated to raise? I suppose the priority is that if these bottlenecks last more than anticipated, then it is potential that whitespace might lengthen past subsequent yr as properly. So, simply any coloration on that will be nice.

Chris Weber: Particularly reasonable query. I might say it is extra a deepwater phenomenon, these type of giant long-term developments. The yards are actually, actually busy. FPSOs are taking longer to come back out of the yard and there have been some delays. And I feel our clients are prudently managing their enterprise and tying when the wells are drilled to when the manufacturing gear and the FPSOs are prepared to supply that. However as with a whole lot of issues within the provide chain, they turn into extra — even when supply occasions, for instance, of apparatus begin being prolonged and are sustained, it is about being extra ready and aligning with the lifelike time line for manufacturing gear to be developed. So we see it extra as a transitory problem than an ongoing problem as a result of anticipating that an FPSO will take a yr or two longer as a result of the yards are taking longer to construct them and so they’re busy, finally, that offer chain will get stabilized as we noticed type of in our enterprise with supply of oilfield gear.

Eddie Kim: Proper. Okay. Nice. Thanks for the colour and I am going to flip it again.

Anton Dibowitz: Certain. Completely.

Operator: The following query comes from David Smith from Pickering Power Companions. Please go forward.

David Smith: Hey, good morning and thanks for taking my questions.

Anton Dibowitz: Good morning, Dave.

Chris Weber: Good morning, Dave.

David Smith: Concerning the rigs which were heat stacked, might you share some coloration in your potential to scale back the price of that idle interval, type of the timing and magnitude and the way we should always take into consideration any catch-up prices as soon as that rig secures work?

Chris Weber: Certain, completely. Look, I can — I feel I give it some thought this manner. So what are we going to do after we heat stack a rig? So one can be lowering manning, so right down to class required minimal manning to run the rig. There’d be some upkeep and initiatives. And if potential, you’d deliver the rig quayside so you’ll be able to scale back gas prices. Now that is not at all times potential, however the place that’s potential. So I feel you’ll be able to suppose it when it comes to over a time frame, perhaps about 90 days getting prices right down to the type of $60,000 vary and an analogous ramp-up. What meaning for bringing the rig again to work, only a few of those packages, you do not contract a deepwater rig after which go to work subsequent week. So that you definitely have sufficient time primarily based on the way in which the contracting cycle works to ramp these rigs up for nearly any alternative that is obtainable. What your price to place that again, one can be ramping up the crews after which additionally catching up on a few of the upkeep as you decrease your spend throughout the heat stack interval. And that is largely depending on how lengthy the rig can be heat stacked. However I take into consideration that when it comes to type of the $5 million to $10 million quantity for an inexpensive heat stack interval.

Matt Lyne: Sure. And I might add, for a ship, we’re taking a look at about $60,000 a day for OpEx in heat stack mode. Like Anton mentioned, it takes about 3 months to ramp right down to that. So for instance, on the DS-10, we anticipate to be exiting the yr at that run fee stage. DPS-5 is about $50,000 a day and once more anticipate to be type of hitting that run fee stage by the top of the yr.

David Smith: Recognize that coloration. And follow-up is I feel you touched on it with commentary for the DPS-5, however might you please discuss your course of for evaluating whether or not or to not preservation stack a rig and the way that related standards may range by asset class if it does?

Anton Dibowitz: Okay. Sure, good query. Very broadly, after we take into consideration — when you concentrate on preservation stacking versus chilly stacking, there’s a price to protect gear within the mid-single-digit tens of millions after which an extended, extra protracted interval to deliver it out of chilly stack in case you — out of preservation stack. In order that’s not one thing that you simply essentially wish to do in case you see a pipeline to future alternative, which we do see a robust — I talked a couple of strong pipeline of alternatives, particularly as we head into 2026. So type of the breakeven on preservation stacking an asset, you might want to not have line of sight to alternatives across the 2-year mark. So given what we see available in the market, we predict it is smart to heat stack these rigs, be prudent in money administration and capital administration till we will see, which we will see the long-term accretive alternatives that these rigs could have. What you do not wish to do is to maintain a rig at full working price, chasing short-term intermittent work with full working price in between. On the DPS-5 versus the ships, which usually have barely longer-term contracts, that rig operates in a market the place the contracts are by nature, usually shorter time period. So our view on that’s we will put an EBITDA constructive cash-generating program collectively for it in 2025 and have line of sight to that, we are going to completely preserve it heat stacked and search that work. However simply by nature, I used to be speaking about earlier than, chasing short-term work with excessive working prices in between. If we do not imagine that’s potential, that is likely to be a candidate for preservation stacking. However that is going to depend upon type of the road of sight to alternatives over the subsequent few months.

David Smith: Recognize all the colour. Thanks. That’s it for me.

Operator: The following query comes from Fredrik Stene from Clarksons Securities. Please go forward.

Fredrik Stene: Hello Anton and staff. I hope you properly and thanks for taking my query. So I wished to — there’s been some press round a sure potential merger between a few of your friends during the last couple of weeks. So I used to be simply questioning in case you have been in a position to touch upon Valaris place within the M&A world at present. In case you see alternatives, if you wish to be a part of something, are you continue to completely satisfied being a blended participant? Something that may level to the way you see consolidation and the way in which ahead?

Anton Dibowitz: Completely, thanks for the query. Look, we nonetheless imagine that there’s room on this marketplace for further consolidation within the offshore drilling area basically. A few of the M&A that we have seen so far has been drilling contractors trying to high-grade their fleet or chase further high-spec capability as a way to achieve a scaled fleet. We have already got the size that we must be aggressive on this enterprise with the most important fleet on water. And we’re in a really lucky place. 12 of our 13 ships are seventh gen, the belongings which can be most popular by clients. So we really feel excellent about our fleet place. That being mentioned, we are going to take a look at alternatives for M&A. If it is accretive and worth inventive for our shareholders, we’ll completely have interaction in it. However we’re definitely not ready, the place we have to — we’re compelled to pursue M&A to both high-grade our fleet or to achieve the size that you might want to be a participant on this market.

Fredrik Stene: That is very useful. And I suppose that type of brings me to the second a part of it. Because you emerged from Chapter 11 some years again now, you’ve got reactivated fairly a number of belongings, and there are nonetheless some extra high-quality belongings on the sideline, the DS-11, 13 and 14. However given the utilization dip that the market is at present going through and that you’ve got already mentioned the nice and cozy stacking of the DS-10 for instance. Can you give us some up to date pondering on the way you view these belongings which can be already on the sideline? And I suppose what I am essentially the most all for is, name it, an up to date time line for the potential activation of the DS-11, 13 and 14, but in addition if the truth that you now heat stacking a few of the floaters and jack-ups for that matter, will speed up any scrapping or retiring of the much less succesful belongings which can be additionally already on the sideline?

Anton Dibowitz: Certain. You are completely proper. I did not — one of many issues I missed on answering your earlier query was now we have natural development constructed into our fleet with the 11, 13 and 14, the three highest spec seventh gen 2 BOP belongings sitting on the time line — sitting on the sidelines. We purchased these belongings, the 13 and 14 at very engaging costs. And given the pipeline of alternatives that we see 2026, 2027 and on, we proceed to imagine that these can be accretive purchases for our shareholders that there can be a spot for these rigs available in the market. You are completely proper. We have now some headwinds coming and a few white area for subsequent yr. And our precedence is, first, holding our energetic fleet extremely utilized. Do not suppose I can reply the query so far as timing to deliver 11, 13 and 14 again to market. They are going to come again to market when the suitable alternatives are there to deliver these again to market. I feel that is the — did I reply your query?

Fredrik Stene: I suppose it is tough to precisely pinpoint this. However I used to be — I suppose, is it truthful to imagine that they are going to now come barely later than beforehand anticipated since you’re prioritizing your struggle?

Anton Dibowitz: Completely. Completely. Our first precedence is holding the energetic fleet extremely utilized. Heat stacking is prudent money administration and fleet administration within the interim, however we will deliver these rigs again on a comparatively accelerated time-frame, type of 90 days versus a reactivation from preservation stack, which is round a yr. And there can be a chance to place 11, 13 and 14. However I feel it’s truthful to say it is on a barely delayed time line for what we’d have anticipated type of six or 9 months in the past. Sorry, I did not reply to the opposite a part of your query. I feel this can be a chance, and I am talking for the market basically total to probably see some much less succesful belongings come out of the market as a result of it will not make sense to preservation stack or preserve decrease spec sixth-generation belongings stacked for a protracted timeline. So, I feel we may even see, relying on how the subsequent yr or so develops, we may even see some further capability popping out of the market from an total market perspective.

Fredrik Stene: Tremendous. That’s very useful. Anton, thanks for answering. Have day.

Anton Dibowitz: Completely. Thanks to your questions.

Operator: The following query comes from Kurt Hallead from Benchmark. Please go forward.

Kurt Hallead: Hey, good morning all people.

Anton Dibowitz: Morning Kurt.

Kurt Hallead: All the time admire the colours and the insights. So, I am type of curious, Anton, as you’ve got indicated, proper, somewhat little bit of a lull right here that we’re going by means of. So, is it — how would you concentrate on the precedence or the technique with respect to those idle belongings, proper? There was some commentary from one in all your opponents on an earlier name a couple of very strong pipeline as I feel you have additionally indicated put up 2025. So, are you extra all for getting these belongings again into the market? Are you keen to type of sit tight for somewhat bit and let different folks take somewhat little bit of a decrease fee and you will get a greater fee perhaps late in 2025 into early 2026. So, type of curious on the way you guys are strategizing?

Anton Dibowitz: No, I feel the general market feedback are proper. From a market fundamentals perspective, we be ok with the pipeline of alternatives particularly into 2026 and past. One of many causes you want scale on this enterprise is to have the ability to handle your fleet as a portfolio. And given the alternatives, have prudent fleet administration throughout the interim interval the place there may be some headwinds, decrease prices, decrease working prices, heat stack rigs, take folks off them, handle the upkeep spend and look forward to the suitable alternative. Our view on it’s we’re wanting on the proper long-term alternatives for our belongings to assist our earnings and money circulation development over the subsequent few years. If we will discover bridge packages, significant bridge packages to these, we are going to put the rigs to work. That is what we’re going to do. What we’re not going to do is be spending full working prices chasing properly, low-value, not accretive alternatives that on the finish of the day, while you add up the durations that you simply’re at full working price plus what you are working would not make sense for the enterprise and for our shareholders. So we’re keen to place rigs on the sidelines at heat stack for the suitable long-term alternative with a bridge to that. And if these alternatives aren’t there, then we are going to handle the prices accordingly. And we will do this now we have a scaled fleet, and now we have numerous rigs on long-term contracts.

Kurt Hallead: Okay. I admire that. So perhaps one follow-up for you then. Once more, given how the inventory has been buying and selling over the previous yr, you’d suppose that day charges are about to be minimize in half and utilization goes into the tank. However once more, it looks as if all indications that your buyer base has a excessive diploma of consolation or conviction in what their economics are for these packages. So I am type of curious as to what you guys can educate us that we do not know or that the market would not know that you simply guys do this and your clients know that perhaps it could shed some gentle on the prospects right here, proper? As a result of, once more, it seems to be just like the inventory is buying and selling just like the cycle is over.

Anton Dibowitz: I agree, markets are fickle, however I feel what we take a look at is that world demand for hydrocarbons continues to extend. Offshore manufacturing and particularly, deepwater is ready to be a strong and rising a part of that primarily based on compelling economics of those packages, the necessity for the demand for safe and inexpensive vitality. And our clients want to search out new reserves as a way to change depletion. So we really feel actually good in regards to the energy and period of the cycle. And our job is to handle into and thru this up cycle. So I do not wish to speculate on why the inventory strikes forwards and backwards, however I are likely to agree with you. We be ok with the long run, and we are going to handle to a market that’s pushed by macro fundamentals that we see as strong for our enterprise.

Kurt Hallead: Okay. Recognize it. Thanks.

Anton Dibowitz: Thanks.

Operator: The following query comes from Geoff Jain [ph] from Daniel Power Companions. Please go forward.

Unidentified Analyst: Thanks. Good morning. Anton, simply to observe up on that time somewhat bit. I feel in your opening remarks, you talked a couple of $70 a barrel oil value and famous that 90% of offshore initiatives are nonetheless worthwhile at this stage. And I wished to dig in a bit there. That was for all of offshore, appropriate, not simply deepwater. After which perhaps any further coloration on the worth of which deepwater initiatives particularly which can be being contemplated wouldn’t transfer ahead? I do know it may range by area and operator, however perhaps just a few insights there can be useful.

Anton Dibowitz: No, completely. I imply that quantity is for all offshore. I feel in case you go take a look at our investor deck, now we have a slide in there about the place — at every value stage the place the manufacturing prices are. I might say essentially the most vital — the band the place essentially the most vital quantity of that manufacturing is properly away from $70 a barrel within the $20, $30, $40 vary. And a whole lot of these giant developments that our clients are chasing are in that vary, the $20, $30. So there may be loads of clear area past the place present even spot and long-term Brent is that justifies. The economics for these packages are compelling. They’re compelling at that value stage.

Unidentified Analyst: After which perhaps simply to handle type of — you talked about heat stacking rigs somewhat bit. And I simply wished to follow-up on that. On a capital gear name this quarter, it was famous that some drillers who probably had some pockets of utilization softness is likely to be benefiting from some rig upgrades whereas rigs might not be working over the course of 2025. Might you converse to that in any respect? So type of along with probably progressive stacking a rig, given your confidence within the cycle in 2026 and past, different issues it’s possible you’ll be trying to do to sure rigs as a few of these initiatives have been pushed to the suitable can be useful. Thanks.

Anton Dibowitz: Sure, completely. I imply I feel as you ramp down, you look to reduce your price and decrease your money spend. You could have a couple of 90-day ramp-up interval as a way to get the rig again to work. And you’d take that chance to perhaps do some stuff in order that you do not have to cease the rig later down the road to place arduous piping on, for instance, for an MPD system, so that you’re able to function in MPD mode. We’re pursuing the EHSE improve in order that we will run on much less engines and decrease the emissions of the rig. So you’re taking the chance whilst you’re engaged on a rig and ramping as much as do prudent issues that can serve you as you get again to work. I feel that may be a truthful assumption and one thing that we give attention to. MPD and EHSE upgrades can be two that come to thoughts.

Unidentified Analyst: Okay. Thanks very a lot. I’ll flip it again.

Anton Dibowitz: Okay.

Operator: This concludes our question-and-answer session. I want to flip the convention again over to Nick Georgas for any closing remarks.

Nick Georgas: Thanks, Jason, and thanks once more to everybody on the decision to your curiosity in Valaris. We stay up for talking with you once more after we report our fourth quarter 2024 outcomes. Have a fantastic remainder of your day.

Operator: The convention has now concluded. Thanks for attending right now’s presentation. You could now disconnect.

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