Valaris Announces Contract Suspension for Jackup VALARIS 143

Rhea-AI Summary

Valaris (VAL) joint venture in Saudi Arabia, ARO Drilling, receives suspension notice from Aramco for rig VALARIS 143 (EXL I) for up to twelve months. ARO in talks with Aramco to finalize suspension details.

Insights

Energy Sector Analyst

Valaris Limited's announcement regarding the suspension notice from Aramco for one of its rigs is a significant event for the company and its stakeholders. The rig in question, VALARIS 143, is part of a larger fleet contracted to ARO Drilling, a joint venture that is important for Valaris' operations in Saudi Arabia. The suspension of a rig, particularly for up to twelve months, can lead to a reduction in revenue for Valaris during the suspension period, affecting the company's bottom line.

From an operational perspective, the suspension might allow Valaris to reduce operational costs associated with the rig in question. However, the loss of revenue might not be fully offset by the reduction in expenses. The right to terminate the drilling contract with Aramco could provide some flexibility for ARO Drilling, but it also introduces uncertainty regarding future revenues from this contract.

The impact on the stock market could be mixed. On one hand, investors may react negatively to the potential loss of revenue. On the other hand, the market may have already priced in such operational risks associated with the energy sector. The long-term effects will depend on how Valaris and ARO Drilling manage this suspension and their ability to secure alternative contracts or renegotiate terms with Aramco.

Financial Analyst

The notice of suspension for VALARIS 143 has immediate financial implications for Valaris Limited. With the rig's contract originally set to end in December 2024, the suspension could potentially affect two fiscal years' worth of earnings. Investors and analysts will be closely monitoring any updates on the effective date of the suspension and the outcome of discussions between ARO and Aramco.

It is critical to assess Valaris' current financial health and diversification of its contract portfolio to withstand such setbacks. If the suspended rig represents a significant portion of Valaris' revenue, this could lead to a reevaluation of the company's earnings forecasts and potentially its credit ratings. The ability to terminate the drilling contract might offer a strategic exit but could also signify a loss of future secured earnings.

Furthermore, the suspension could send ripples through the industry, affecting the valuation of similar companies operating in the region. Peer comparison will reveal if Valaris' situation is an isolated incident or part of a broader industry trend, which could be indicative of underlying market conditions in the oil and gas sector.

HAMILTON, Bermuda--(BUSINESS WIRE)-- Valaris Limited (NYSE: VAL) (“Valaris” or the “Company”) announced today that ARO Drilling (“ARO”), its joint venture in Saudi Arabia, received a notice of suspension from Aramco for one of its 19 contracted rigs, jackup VALARIS 143 (EXL I). The rig’s contract was previously scheduled to end in December 2024. The suspension notice is for a period of up to twelve months and ARO is in discussions with Aramco to determine the effective date of the suspension. During the suspension period, ARO will have the right to terminate the drilling contract with Aramco. Valaris leases VALARIS 143 (EXL I) to ARO under a bareboat charter agreement.

About Valaris Limited

Valaris Limited (NYSE: VAL) is the industry leader in offshore drilling services across all water depths and geographies. Operating a high-quality rig fleet of ultra-deepwater drillships, versatile semisubmersibles and modern shallow-water jackups, Valaris has experience operating in nearly every major offshore basin. Valaris maintains an unwavering commitment to safety, operational excellence, and customer satisfaction, with a focus on technology and innovation. Valaris Limited is a Bermuda exempted company (Bermuda No. 56245). To learn more, visit our website at www.valaris.com.

Cautionary Statements

Statements contained in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "likely," "plan," "project," "could," "may," "might," "should," "will" and similar words and specifically include statements regarding expected financial performance; expected utilization, day rates, revenues, operating expenses, cash flows, contract status, terms and duration, contract backlog, capital expenditures, insurance, financing and funding; the offshore drilling market, including supply and demand, customer drilling programs, stacking of rigs, effects of new rigs on the market and effect of the volatility of commodity prices; expected work commitments, awards, contracts and letters of intent; scheduled delivery dates for rigs; performance of our joint ventures, including our joint venture with Saudi Aramco; timing of the delivery of the Saudi Aramco Rowan Offshore Drilling Company ("ARO") newbuild rigs and the timing of additional ARO newbuild orders; the availability, delivery, mobilization, contract commencement, availability, relocation or other movement of rigs and the timing thereof; rig reactivations; suitability of rigs for future contracts; divestitures of assets; general economic, market, business and industry conditions, including inflation and recessions, trends and outlook; general political conditions, including political tensions, conflicts and war (such as the ongoing conflict in Ukraine); cybersecurity attacks and threats; impacts and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic; future operations; ability to renew expiring contracts or obtain new contracts, including for VALARIS DS-13 and VALARIS DS-14; increasing regulatory complexity; targets, progress, plans and goals related to environmental, social and governance (“ESG”) matters; the outcome of tax disputes; assessments and settlements; and expense management. The forward-looking statements contained in this press release are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including cancellation, suspension, renegotiation or termination of drilling contracts and programs; our ability to obtain financing, service our debt, fund capital expenditures and pursue other business opportunities; adequacy of sources of liquidity for us and our customers; future share repurchases; actions by regulatory authorities, or other third parties; actions by our security holders; internal control risk; commodity price fluctuations and volatility, customer demand, loss of a significant customer or customer contract, downtime and other risks associated with offshore rig operations; adverse weather, including hurricanes; changes in worldwide rig supply, including as a result of reactivations and newbuilds; and demand, competition and technology; supply chain and logistics challenges; consumer preferences for alternative fuels and forecasts or expectations regarding the global energy transition; increased scrutiny of our ESG targets, including our Scope 1 emissions intensity reduction target, initiatives and reporting and our ability to achieve such targets or initiatives; changes in customer strategy; future levels of offshore drilling activity; governmental action, civil unrest and political and economic uncertainties, including recessions, volatility affecting the banking system and financial markets, inflation and adverse changes in the level of international trade activity; terrorism, piracy and military action; risks inherent to shipyard rig reactivation, upgrade, repair, maintenance or enhancement; our ability to enter into, and the terms of, future drilling contracts; suitability of rigs for future contracts; the cancellation of letters of intent or letters of award or any failure to execute definitive contracts following announcements of letters of intent, letters of award or other expected work commitments; the outcome of litigation, legal proceedings, investigations or other claims or contract disputes; governmental regulatory, legislative and permitting requirements affecting drilling operations; our ability to attract and retain skilled personnel on commercially reasonable terms; environmental or other liabilities, risks or losses; compliance with our debt agreements and debt restrictions that may limit our liquidity and flexibility; cybersecurity risks and threats; and changes in foreign currency exchange rates. In addition to the numerous factors described above, you should also carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our most recent annual report on Form 10-K, which is available on the Securities and Exchange Commission's website at www.sec.gov or on the Investor Relations section of our website at www.valaris.com. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to update or revise any forward-looking statements, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240404525052/en/

Investor & Media Contacts:



Nick Georgas

Vice President - Treasurer and Investor Relations

+1-713-979-4632

Tim Richardson

Director - Investor Relations

+1-713-979-4619

Source: Valaris Limited

FAQ

Why did Valaris 's joint venture, ARO Drilling, receive a suspension notice from Aramco?

ARO Drilling received a suspension notice for one of its contracted rigs, VALARIS 143 (EXL I), from Aramco.

What is the duration of the suspension notice received by ARO Drilling from Aramco?

The suspension notice from Aramco to ARO Drilling is for a period of up to twelve months.

What actions can ARO Drilling take during the suspension period?

During the suspension period, ARO Drilling will have the right to terminate the drilling contract with Aramco.

How is Valaris involved in the suspension of rig VALARIS 143 (EXL I)?

Valaris leases VALARIS 143 (EXL I) to ARO Drilling under a bareboat charter agreement.