Valaris

Introduction

To wrap up the series of offshore drillers analyses we’ve been publishing over the past weeks — including the Guide to the Offshore Drilling industry I and II and the Seadrill analysis — today we release our report on Valaris, one of the industry’s leading companies. (Though “wrap up” is relative, as we are currently reviewing Noble Corp and plan to publish at least one briefing on it sometime this summer.)

Unlike Seadrill, which is a pure player focused solely on drillships, Valaris is more diversified with a fleet of 13 drillships, 2 semisubmersibles, and 33 jackups, making it the largest by size in the industry. It also holds a joint venture with Saudi Arabia (ARO Drilling), leasing out 7 jackups under multiyear contracts.

Like most companies in the sector, Valaris filed for bankruptcy due to the COVID crisis in 2020 but emerged a year later with a nearly clean balance sheet (only carrying a $1.1 billion bond maturing in 2030) and net debt around $630 million. It has taken advantage of the high daily rates from 2022 to 2024 to repurchase shares instead of taking on new debt to order rigs.

They have a modern drillship fleet, with several units on multiyear contracts at attractive rates, plus other units whose contracts expire in 2026, providing upside exposure to the expected price recovery in the coming years. On the jackup side, 13 rigs operate in harsh environments, most under good contracts, and the JV with Saudi Aramco offers some protection against the current weak jackup market.

Today we provide an independent analysis of Valaris, reviewing its fleet contracts and the situation of each driller segment, aiming to understand the potential upside if the anticipated CapEx cycle for O&G majors and IOCs materializes, but also considering the scenario where this cycle is delayed beyond current market consensus.

• Individual analysis of the different assets in their fleet
• The industry situation and outlook
• Financials & capital allocation
• Their valuation (using two different methods)
• Our perspective on Valaris’s situation