Valaris Ltd. Q4 FY2023 earnings call

• Safety was a top priority, with rigs like VALARIS Norway 72, 110, and 115 reaching three years without recordable incidents, and VALARIS 110 awarded TotalEnergies' and North Oil Company's Global jackup Rig of the Year.
• Successfully reactivated VALARIS DS-8, with five drillship reactivations completed since early 2022, and progress on reactivating DS-7.
• Secured nearly $3 billion in new contract backlog in 2023, with total backlog over $3.9 billion, a 60% increase from 12 months ago.
• Confidence in the offshore drilling market upcycle with increasing demand and constrained supply, and positive outlook for floater and jackup markets, including strong pipeline of opportunities for floaters and tight global jackup market with active utilization near 95%.

In the fourth quarter, Valaris generated adjusted EBITDA of $58 million. Revenue was $484 million, an increase from the prior quarter's $455 million. The floater segment saw new contracts and extensions adding over $1 billion in backlog, with day rates transitioning to leading-edge levels. The jackup segment secured nearly $500 million in new backlog, with active utilization approaching 95% and leading-edge day rates above 150,000 in several regions. Floater revenue is expected to increase in the first quarter 2024 due to contract startups, while jackup revenue is expected to decrease due to idle time for several rigs.

• Full-year 2024 revenue forecast $2.3 billion to $2.4 billion, contract drilling expense $1.65 billion to $1.75 billion, and G&A expense $105 million to $110 million.
• Adjusted EBITDA guidance $500 million to $600 million, including reactivation expense of ~$40 million. At midpoint, 4x higher than 2023 EBITDA.
• First quarter 2024 expected revenues $490 million to $500 million, adjusted EBITDA $30 million to $40 million.
• Full-year 2024 CapEx expected $390 million to $430 million, higher than preliminary guidance due to contract preparation costs and timing.

• Uncertainties in the offshore drilling market, including potential gaps in schedules due to lengthening contract lead times, customer upgrades, and rig repositioning.
• Impact of Saudi Arabia's capacity expansion curtailment on jackup market, though Valaris believes it will have minimal impact on their business.

Q: David Smith asked about bidding reactivation vs active drillships and pace of share repurchases.

A: Anton mentioned prioritizing active fleet utilization and waiting for the right opportunities to reactivate rigs, while Chris stated the Board doubled share repurchase authorization to $600 million for opportunistic repurchases.

Q: Eddie Kim asked about day rate trends and Saudi jackup rig count.

A: Matt discussed market fundamentals supporting higher day rates and Anton noted minimal impact of Saudi changes on Valaris' business.

Q: Fredrik Stene asked about capital return policy and asset decisions.

A: Anton discussed returning free cash flow to shareholders unless better value accretive use exists, and Valaris prioritizes getting ships back to work.

Q: Greg Lewis asked about Total's rig joint venture.

A: Anton mentioned Valaris would consider attractive JV opportunities if value accretive to shareholders.

Q: Kurt Hallead asked about upfront payments and shareholder distributions.

A: Anton discussed continued demand for upfront payments and plans for capital returns including dividends as free cash flow increases