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Valaris(VAL) - 2024 Q1 - Earnings Call Transcript
VALValaris(VAL)2024-05-02 23:05
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Financial Data and Key Metrics Changes - In Q1 2024, revenue was 525million,anincreasefrom525 million, an increase from 484 million in the prior quarter, while adjusted EBITDA was 54million,downfrom54 million, down from 58 million in the previous quarter [66] - Adjusted EBITDAR, which adds back reactivation expenses, was 84million,downfrom84 million, down from 96 million in the prior quarter [66] - Cash and cash equivalents at the end of the quarter were 509million,adeclineof509 million, a decline of 127 million primarily due to capital expenditures of 151million[41]BusinessLineDataandKeyMetricsChanges−Thejackuprevenuesdecreasedduetofeweroperatingdaysforseveralrigs,includingValaris107,123,and247[40]−Thefloatermarketsawanincreaseinaveragedayrates,movingfromapproximately151 million [41] Business Line Data and Key Metrics Changes - The jackup revenues decreased due to fewer operating days for several rigs, including Valaris 107, 123, and 247 [40] - The floater market saw an increase in average day rates, moving from approximately 450,000 in the second half of 2023 to approximately 480,000inthefirstfourmonthsof2024[33][66]−Thecontractedbenignenvironmentfloatercountincreasedto127rigsduringQ1,thehighestpointsincelate2016,markinganincreaseof26contractedrigssinceearly2021[32]MarketDataandKeyMetricsChanges−Theglobaljackupmarketremainstightwithmarketedutilizationnearing95480,000 in the first four months of 2024 [33][66] - The contracted benign environment floater count increased to 127 rigs during Q1, the highest point since late 2016, marking an increase of 26 contracted rigs since early 2021 [32] Market Data and Key Metrics Changes - The global jackup market remains tight with marketed utilization nearing 95% and the contracted rig count at its highest level in nearly a decade [26] - In Brazil, Petrobras has 31 contracted floaters, with ongoing tenders that may result in additional rigs needed to meet market demand [34] - The North Sea market has shown improvement, with strong customer interest for programs commencing in the second half of 2025 [36] Company Strategy and Development Direction - The company aims to secure new contracts at higher day rates and consistently build its backlog, which now totals more than 4 billion, marking a 43% increase over the past 12 months [57] - The focus remains on maximizing fleet profitability by keeping active rigs highly utilized and securing the best contract economics possible [23] - The company intends to return all future free cash flow to shareholders unless a better use is identified [20][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the future, citing strong customer demand for work expected to commence in 2025 and 2026, which will support anticipated earnings and cash flow growth [75] - The offshore drilling market is expected to see strong growth through 2026, driven by increased upstream CapEx and offshore FIDs [16] - Management noted that while there may be some near-term rate pressure due to suspended contracts in Saudi Arabia, the overall demand remains strong [84] Other Important Information - The company has reactivated five drillships over the past two years and is focused on delivering successful startups for upcoming contracts [10] - The company expects total capital expenditures for 2024 to be in the range of 420millionto420 million to 460 million, reflecting an increase due to contract preparation costs [46] Q&A Session Summary Question: Can you provide more details on the VALARIS 144 jackup contract? - The contract was signed in March 2024, and the mobilization cost is assumed to be less than $10 million [98] Question: What is the outlook for the jackup market given the suspended rigs in Saudi Arabia? - Management believes there is sufficient demand to absorb the suspended rigs without significant long-term pressure on rates [84][108] Question: What is the likelihood of securing contracts for the DS-11, DS-13, and DS-14 rigs? - Management is actively discussing opportunities for these high-specification assets and is focused on finding the right jobs that provide meaningful returns [123][142]