Valaris Limited Q1 FY2025 earnings call

• Delivered a strong first quarter with adjusted EBITDA of $181 million and $74 million of adjusted free cash flow, maintaining safe and efficient operations.
• Secured over $1 billion in new contract backlog in the past two months, including a two-year contract for VALARIS DS-10 and extensions for jackups in Saudi Arabia.
• Received the 2024 Best Safety Performance Award for jackup rigs from the IADC North Sea chapter, with rigs achieving safety milestones.
• Focused on fleet management, including moving VALARIS DS-12 to Las Palmas to reduce costs and retiring certain rigs like VALARIS DPS-5, DPS-3, and DPS-6.
• Offshore drilling market outlook: Offshore production remains vital, with high-specification fleet well-positioned to secure contracts, and focus on operational excellence, commercial strategy, and prudent fleet management.

In the first quarter, Valaris delivered strong financial results. Total revenues were $621 million, up from $584 million in the prior quarter. Adjusted EBITDA was $181 million, up from $142 million in the prior quarter. The floater fleet saw increased operating days and higher average daily revenue due to contracts like VALARIS DS-10. The jackup fleet had resilient demand, especially in regions like Australia and Trinidad, with 80% of active jackup fleet operating in key locations. Revenue contribution from floaters and jackups was driven by their respective contract performances.

• Second quarter 2025 revenue expected to be in the range of $570 million to $590 million, down from $621 million in Q1, due to idle time and out-of-service days but partially offset by new contracts. Adjusted EBITDA expected to be $140 million to $160 million.
• Full year 2025 adjusted EBITDA guidance narrowed to $500 million to $560 million from the prior range of $480 million to $580 million. CapEx expected to be $375 million to $415 million. Anticipates $75 million in upfront customer payments to offset contract-specific upgrades.

• Macroeconomic uncertainty, including proposed tariffs and OPEC Plus production cut unwind, introducing uncertainties for the industry.
• Potential downward pressure on day rates in certain benign environment regions due to reduced global jackup utilization.
• Increased competition in the North Sea leading to potential idle time for some rigs.

Q: Regarding 2025 floater opportunities tracking 2026 and 2027 start dates, what percentage require seventh gen drill ships and how operators evaluate pricing for performance difference between 7th and 6th gen A: Anton Dibowitz stated 7th gens have an advantage due to efficiency, especially in long-term development programs. Matt Lyne added hook load and dual BOPs are benefits of 7th gens. Chris Weber mentioned customers choose highest spec for optionality and efficiency. Matt Lyne also said the overwhelming majority of tracked opportunities are drill ship related.

Q: Interest from customers in large contract awards with significant performance bonus elements and balancing risk/reward A: Anton Dibowitz said they're open to performance incentives, which work best in long-term development programs. They can be complicated as bonus may not directly relate to well work, but some customers are interested. Not seen as the norm yet.

Q: Five-year extensions on five jack ups in Saudi, pricing levels and if indicates end of rig suspensions A: Anton Dibowitz couldn't disclose day rates but described them as solid above historic rates. Regarding rig suspensions, said Arrow is an integral partner with Saudi Aramco, with one lease rig rolling in 2027 and others into 2030, but didn't indicate end of suspensions is definite Q: Offshore FIDs and rent price level causing pushback A: Anton Dibowitz said no programs pushed back yet based on tracked opportunities. Stated offshore programs are large resource with compelling economics well below current prices, so no significant pushback seen