Valaris Announces Multi-Year Contract Award for Drillship VALARIS DS-4

Rhea-AI Summary

Valaris Limited (VAL) has been awarded a 1,064-day contract for drillship VALARIS DS-4 with Petrobras offshore Brazil, with a total contract value of approximately $519 million. The contract is expected to commence late in the fourth quarter of 2024, following completion of the rig’s current contract with Petrobras, and the rig is expected to be out of service for approximately 90 days for customer-required upgrades. President and CEO Anton Dibowitz expressed delight in securing further work with Petrobras, anticipating increased earnings and cash flow as rigs are recontracted at market rates.

Insights

Market Research Analyst

The contract awarded to Valaris by Petrobras represents a significant commitment in the offshore drilling sector, indicating a robust demand for deepwater drilling services, particularly in the Brazilian market. The substantial increase in the day rate for the VALARIS DS-4 drillship from the low $200,000s to the high $400,000s underscores a tightening market where supply of advanced drilling units meets a growing demand. This scenario suggests a positive outlook for service providers like Valaris, which could translate into an improved revenue stream and stronger financial performance over the duration of the contract.

Investors may view this contract as a bullish signal for Valaris' stock, considering the contract's length and value. It is also indicative of the company's competitive positioning in winning bids against other service providers. The anticipated growth in the offshore Brazil market, as mentioned by Valaris' CEO, could provide further opportunities for the company and its peers, potentially leading to a reevaluation of sector valuations.

Financial Analyst

The announcement of a $519 million contract for Valaris with Petrobras is a substantial financial event for the company. The contract's duration and value contribute to Valaris' backlog, providing revenue visibility and financial stability over the next several years. The effective doubling of the day rate for the VALARIS DS-4 drillship is particularly noteworthy, as it reflects the company's ability to capitalize on favorable market conditions and negotiate higher rates, which could lead to improved margins.

From a financial perspective, the 90-day out-of-service period for upgrades is a capital expenditure that investors should monitor. However, these upgrades could be viewed as an investment in the rig's future operational efficiency and safety, potentially reducing longer-term maintenance costs and downtime. The timing of the contract commencement in late 2024 allows for financial forecasting and strategic planning, which is critical for both the company and its investors.

Energy Sector Analyst

The extended contract for Valaris with Petrobras for the VALARIS DS-4 drillship is a strong indicator of the strategic importance of the Buzios field in Brazil's pre-salt basin, one of the most prolific offshore oil regions in the world. The focus on this region by a state-controlled entity like Petrobras highlights the ongoing investment in offshore exploration and production despite the global energy transition.

For the energy sector, this contract reflects a continued reliance on traditional fossil fuel sources and the need for high-specification drilling units to exploit deepwater reserves. The capital upgrades required for the VALARIS DS-4 suggest technological advancements and compliance with stringent safety and environmental regulations. These factors are critical for energy companies to maintain their social license to operate and align with global ESG (Environmental, Social and Governance) standards.

HAMILTON, Bermuda--(BUSINESS WIRE)-- Valaris Limited (NYSE: VAL) (“Valaris” or the “Company”) announced today that it has been awarded a 1,064-day contract for drillship VALARIS DS-4 with Petrobras offshore Brazil following a competitive bidding process. Based on the firm contract term, the total contract value is approximately $519 million, inclusive of mobilization fees and additional services.

The contract is anticipated to commence late in the fourth quarter 2024, following completion of the rig’s current contract with Petrobras, which is expected to finish in September 2024. Upon completion of its current contract, the rig is expected to be out of service for approximately 90 days to complete customer-required capital upgrades prior to commencement of the new contract.

President and Chief Executive Officer Anton Dibowitz said, “We are delighted to have secured further work for drillship VALARIS DS-4 with Petrobras for their upcoming Buzios program and we look forward to continuing to partner with Petrobras on their programs offshore Brazil, a market where we expect to see continued growth over the next several years. We have previously stated that we expect Valaris’ earnings and cash flow to increase meaningfully as rigs are recontracted at market rates. This contract award for VALARIS DS-4 is a great example of how we are executing on the operating leverage inherent in our business, with the rig repricing from a day rate in the low $200,000s to an effective day rate in the high $400,000s.”

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/20240102137254/en/

Investor & Media Contacts:

Darin Gibbins

Vice President - Investor Relations and Treasurer

+1-713-979-4623

Tim Richardson

Director - Investor Relations

+1-713-979-4619

Source: Valaris Limited

FAQ

What is the contract awarded to Valaris Limited for?

Valaris Limited has been awarded a 1,064-day contract for drillship VALARIS DS-4 with Petrobras offshore Brazil, with a total contract value of approximately $519 million.

When is the contract expected to commence?

The contract is anticipated to commence late in the fourth quarter of 2024, following completion of the rig’s current contract with Petrobras.

What is the expected duration of the contract?

The contract awarded to Valaris Limited is for a duration of 1,064 days.

Who expressed delight in securing further work with Petrobras?

President and CEO Anton Dibowitz expressed delight in securing further work with Petrobras.

What is the anticipated impact on Valaris' earnings and cash flow?

The company anticipates increased earnings and cash flow as rigs are recontracted at market rates.