Valaris (VAL) Q4 2023 earnings summary

Executive summary

• 51-rig fleet of modern offshore assets, with scale in key basins and established relationships with major IOC, NOC and independent customers.

• Q4 contract awards and extensions added more than $1.4B of backlog; total backlog exceeded $3.9B as of February 15, 2024, nearly 60% above a year earlier.

• Supportive offshore supply and demand, rig repricing and successful reactivations underpin expectations for significant earnings and cash flow growth over the next few years.

Financial highlights

• Q4 revenue was $483.8M versus $455.1M in Q3; excluding reimbursable items, revenue was $452.8M versus $427.2M.

• Q4 net income was $828.5M versus $17.0M in Q3, including a $790.2M tax benefit; basic and diluted EPS were $11.47 and $11.30.

• Adjusted EBITDA rose to $57.5M from $40.0M in Q3; Adjusted EBITDAR was $96.0M versus $90.9M.

• Q4 capital expenditures were $463M, including $337M for delivery of newbuild drillships VALARIS DS-13 and DS-14.

Outlook and guidance

• Seven floaters are expected to recontract at meaningfully higher market rates by year-end 2025; most active floaters remain on legacy rates in the low-to-mid $200Ks versus leading-edge rates in the mid-to-high $400Ks.

• DS-7 was expected to start a West Africa contract in Q2 2024; DS-8 and DS-17 started Brazil contracts at day rates in the mid-$400Ks.

• Stacked 7th-generation drillships DS-11, DS-13 and DS-14 will be reactivated only after attractive contracts are secured.

• Illustrative fleet scenarios show annual free cash flow of $460M–$1.65B at 70%–80% utilization and specified day-rate assumptions; these scenarios are not guidance.