Core Viewpoint - Valaris Limited has secured a multi-year contract with Shell for offshore drilling services in Brazil, indicating strong demand for deepwater drilling solutions in the region [1][2]. Group 1: Contract Details - The contract awarded to Valaris involves the drillship VALARIS DS-8, expected to commence in Q1 2027, with an estimated duration of approximately 800 days and a total contract value of around $300 million [1]. - The contract includes options that could extend the total duration by approximately one year [1]. Group 2: Company Performance and Strategy - Valaris has successfully secured over $2.5 billion in backlog year-to-date, which supports future earnings and cash flow [2]. - The company emphasizes its commitment to safety, operational excellence, and customer satisfaction, focusing on technology and innovation in offshore drilling services [3]. Group 3: Industry Context - The contract reflects the growing interest from International Oil Companies (IOCs) in offshore developments in Brazil, highlighting the potential for future growth in the offshore drilling market [2]. - Valaris is recognized as an industry leader in offshore drilling services, operating a diverse fleet capable of handling various water depths and geographies [3].

Group 1: Fund Performance - Night Watch Investment Management reported a 4.28% net appreciation in its fund LP for Q3 2025, with a year-to-date performance of 25.88% [1] - The portfolio continued to perform strongly during the quarter, coinciding with a robust market recovery [1] Group 2: Valaris Limited (NYSE:VAL) Overview - Valaris Limited, an offshore contract drilling services provider, achieved a one-month return of 7.04% and a 52-week gain of 34.01%, closing at $59.93 per share with a market capitalization of $4.268 billion on December 5, 2025 [2] - Valaris Limited was held by 60 hedge fund portfolios at the end of Q3 2025, an increase from 57 in the previous quarter [4] Group 3: Investment Strategy and Outlook - Night Watch Investment Management has fully exited its energy positions, including Valaris Limited, due to a pause in offshore spending that began in 2024, with expectations for a resumption not occurring until 2027 at the earliest [3] - The company noted a modest loss of 2.67% on its positions in Valaris, Noble Energy, and TDW, marking energy as the only significant detractor from performance since inception [3] - While acknowledging Valaris Limited's potential, the company believes that certain AI stocks present greater upside potential and lower downside risk [4]

Core Thesis - Valaris Limited (VAL) is positioned as a strong investment opportunity due to its recovery from bankruptcy, lean cost structure, and favorable market conditions in offshore drilling, with a potential stock price exceeding $250 per share within five years [5][6]. Company Overview - Valaris is the world's second-largest offshore drilling contractor, operating 48 high-spec rigs globally, including 13 drillships, 2 semisubmersibles, and 26 jackups, with 7 additional jackups leased to ARO Drilling [2]. - The company provides full-service offshore drilling solutions for major clients such as ExxonMobil, Chevron, BP, Petrobras, and Saudi Aramco, focusing on leasing rigs to enhance operational flexibility [3]. Financial Position - Valaris emerged from Chapter 11 bankruptcy in 2021 with a deleveraged balance sheet and a lean cost structure, positioning itself well for the upcoming offshore drilling upcycle [4]. - The Q3 results indicated short-term softness but reinforced a positive long-term outlook, supported by increasing contract backlogs and strong customer demand [5]. Market Dynamics - The offshore drilling recovery is gaining momentum as global exploration and production budgets expand, tightening rig availability in deepwater basins [4]. - Modern, high-spec rigs command premium day rates, which enhances operating leverage as utilization rates increase [4]. Investment Potential - Valaris offers a leveraged play on a multi-year offshore recovery, with minimal debt and disciplined capital allocation, indicating significant embedded earnings power [5]. - The stock has appreciated approximately 23.47% since a previous bullish thesis, reflecting the strengthening offshore cycle [6].

Core Insights - Findell Capital Management has completely exited its position in Valaris Limited, selling 300,000 shares for an estimated $12.6 million, as disclosed in a quarterly Form 13-F filing [2][6][8] Company Overview - Valaris Limited is a leading provider of offshore drilling services with a market capitalization of $4 billion and revenue of $2.4 billion over the trailing twelve months (TTM) [4][5] - The company reported a net income of $399 million (TTM) and generated $596 million in revenue for the latest quarter, reflecting strong operational performance [4][7][8] Stock Performance - As of the latest market close, Valaris shares were priced at $55.94, representing a 22% increase over the past year, significantly outperforming the S&P 500's 13% gain during the same period [3][8] - The stock has increased approximately 90% since its lows in April [8] Operational Highlights - Valaris has demonstrated operational efficiency, with a reported adjusted EBITDA of $163 million and a net income of $187 million for the latest quarter, up from $114 million in the previous quarter [7][8] - The company has secured contracts for all four of its active drillships with near-term availability, indicating strong demand in the offshore drilling market [8] Investment Strategy - The exit by Findell Capital suggests a strategic shift towards small- and mid-cap growth opportunities, moving away from asset-heavy businesses like offshore drilling [6][8]

Group 1 - Institutional backing is crucial for stock performance, with large purchases by big money managers positively impacting share prices [1] - The IBD Screen Of The Day identified 29 stocks that mutual funds are currently buying, highlighting ASML Holding and Valaris as notable mentions [1] - Valaris received a Relative Strength Rating upgrade, indicating improved technical performance [2][4] Group 2 - Valaris stock rating has increased following a surge in earnings and share price [4] - ASML stock is nearing highs due to strong orders and a positive outlook for 2026 [4] - Taiwan Semiconductor Manufacturing Company (TSMC) is leading the chipmaking sector, contributing to a list of hot tech stocks [4]

Core Insights - Valaris Limited (VAL) is highlighted as an exciting investment opportunity in the energy sector, despite the analyst typically focusing on technology sectors like SaaS and cloud businesses [1]. Company Overview - Valaris Limited operates in the energy sector, which is not the primary focus of the analyst but has garnered attention due to its potential [1]. Analyst Background - The analyst has over a decade of experience in financial markets, primarily in hedge funds, and maintains rigorous standards for investment [1].

Financial Data and Key Metrics Changes - Total revenues for the third quarter were $596 million, down from $615 million in the prior quarter, primarily due to fewer operating days for the floater fleet [29] - Adjusted EBITDA was $163 million compared to $201 million in the prior quarter, with the decrease attributed to fewer operating days and a non-recurring benefit recognized in the previous quarter [30] - Adjusted free cash flow for the quarter was $237 million, with cash flow from operations amounting to $198 million [30] Business Line Data and Key Metrics Changes - The jackup segment saw increased EBITDA year over year, driven by more operating days and higher average day rates [13] - The drillship fleet added approximately $1.4 billion of backlog year to date, representing nine years of total contract duration [16] - The total backlog now stands at $4.5 billion, significantly enhancing contract coverage for 2026 and beyond [17] Market Data and Key Metrics Changes - Global utilization for the jackup fleet remains around 90%, driven by national oil companies focused on energy security [12] - The offshore drilling market is expected to see a recovery in utilization rates, with seventh-generation drillships anticipated to exit 2026 with utilization levels around 90% [11] - Demand for offshore drilling services is developing, particularly in deepwater projects, with a robust pipeline of opportunities expected [10] Company Strategy and Development Direction - The company remains focused on operational excellence, commercial execution, and disciplined cost management to drive long-term value for shareholders [4] - A strategic focus on securing attractive contracts has resulted in all four drillships with near-term availability being contracted for work beginning next year [9] - The company is in advanced discussions for additional contracts, particularly for rigs scheduled to complete contracts in the second half of 2026 [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term outlook for the offshore drilling industry, citing a need for sustained investment in oil and gas [10] - The company anticipates meaningful growth in deepwater project sanctioning over the next few years as customers pursue exploration and development [11] - Management highlighted the importance of ongoing investment to offset natural field declines, with the IEA estimating a potential 8% annual decline in global oil production without continued investment [10] Other Important Information - The company repurchased $75 million of shares during the quarter, reflecting its commitment to returning capital to shareholders [5] - The sale of the 27-year-old jackup Valaris 247 for $108 million was noted as part of the company's disciplined approach to cost management [14] - The company expects to receive approximately $70 million in upfront payments from customers this year for contract-specific upgrades [33] Q&A Session Summary Question: Share repurchase strategy and cash utilization - Management confirmed a commitment to returning capital to shareholders and indicated that repurchases would be opportunistic based on market conditions [40][42] Question: Exploration activity and customer discussions - Management noted an increase in exploration discussions, driven by the necessity to meet future energy needs, which is seen as positive for the market [46] Question: Future asset sales and shareholder returns - Management emphasized that operational cash flow will drive capital returns, with asset sales being opportunistic to enhance financial flexibility [48][50] Question: Day rates and market outlook - Management believes day rates for high-spec ships have troughed in the high $300,000s to low $400,000 range, with expectations for recovery in utilization and day rates [58][59] Question: Rig contracts and market dynamics - Management expressed confidence in securing extensions for rigs in Angola and highlighted ongoing discussions for gap-fill work for idle rigs [60][61]

Financial Performance - Total operating revenues for Q3 2025 were $595.7 million, a decrease of 7.4% from $643.1 million in Q3 2024[16] - Net income attributable to Valaris for the nine months ended September 30, 2025, was $265.3 million, compared to $239.7 million for the same period in 2024, reflecting an increase of 10.5%[16] - Operating income for Q3 2025 was $130.5 million, up 37.5% from $94.9 million in Q3 2024[16] - Basic earnings per share for Q3 2025 were $2.66, compared to $0.89 in Q3 2024, reflecting a significant increase of 199.1%[16] - Comprehensive income attributable to Valaris for Q3 2025 was $189.1 million, compared to $64.7 million in Q3 2024, marking an increase of 192.5%[17] - For the nine months ended September 30, 2025, total operating revenues were $1,831.6 million, compared to $1,778.2 million for the same period in 2024, representing a growth of 3%[94] - The company reported a net loss of $37.9 million for the nine months ended September 30, 2025[69] - The company reported a net income of $188.1 million for the quarter ended June 30, 2025[69] Cash and Liquidity - Cash and cash equivalents increased to $662.7 million as of September 30, 2025, compared to $368.2 million at the end of 2024, representing an increase of 79.9%[20] - The company reported a net cash provided by operating activities of $474.0 million for the nine months ended September 30, 2025, compared to $230.8 million for the same period in 2024, an increase of 105.5%[21] - The company has $375.0 million available for borrowing under the 2028 Credit Agreement, which matures in 2028[173] - ARO had cash and cash equivalents of $116.0 million as of September 30, 2025, and has not made any cash distributions of earnings to its partners since its formation[182] Assets and Liabilities - Total assets rose to $4,638.0 million as of September 30, 2025, compared to $4,419.8 million at the end of 2024, indicating a growth of 4.9%[20] - Total liabilities stood at $2,187.4 million as of September 30, 2025, slightly up from $2,175.5 million at the end of 2024[20] - Shareholders' equity increased to $1,664.2 million as of September 30, 2025, from $1,398.9 million at the end of 2024[69] - The allowance for doubtful accounts was $16.0 million as of September 30, 2025, slightly down from $16.6 million at the end of 2024, indicating stable credit risk management[97] Capital Expenditures and Investments - Capital expenditures for Q3 2025 totaled $69.8 million, compared to $81.9 million in Q3 2024, indicating a reduction in investment spending[92][93] - The company expects capital expenditures in 2025 to approximate $380.0 million to $400.0 million, primarily for maintenance and upgrades[179] - The total property and equipment at cost increased to $2,507.7 million as of September 30, 2025, from $2,309.4 million as of December 31, 2024[50] Contractual Obligations and Backlog - The total contract backlog as of October 23, 2025, is $4,450.3 million, up from $3,608.5 million on February 18, 2025, representing an increase of approximately 23.3%[110] - The backlog for floaters increased to $2,625.1 million, primarily due to multi-year contracts executed, contributing an incremental backlog of approximately $1.4 billion[110] - ARO's backlog increased to $2,164.6 million, up from $1,422.9 million, primarily due to five-year contract extensions for leased rigs[110] Tax and Regulatory Matters - The consolidated effective tax rate for the three months ended September 30, 2025, was 14.1%, while for the nine months it was 14.8%[75] - The company recognized a deferred tax expense of $168.8 million in Q1 2025 due to a valuation allowance on deferred tax assets[74] - The Luxembourg tax assessments resulted in a revised aggregate tax assessment of approximately $65.0 million, which was contested and led to a tax benefit of the same amount in Q2 2024[77] - The Malaysian subsidiary faced a tax assessment totaling approximately $28.0 million, with all payments under a seven-month payment plan completed as of September 30, 2025[78] - The Australian tax assessments totaled approximately A$101.0 million, with a settlement reached in December 2024 resulting in a tax benefit of approximately $18.0 million[79] Joint Ventures and Partnerships - ARO, a 50/50 joint venture, owned nine jackup rigs and had ordered one newbuild jackup rig as of September 30, 2025, with plans to purchase 20 newbuild jackup rigs over approximately 10 years[41][42] - The equity method investment in ARO is recorded at fair value, with basis differences primarily related to long-lived assets and favorable drilling contract terms[44] - The company has a potential obligation to fund ARO for newbuild jackup rigs, with a maximum aggregate contribution of $1.25 billion from each partner[82] Sales and Other Income - The company recognized a pre-tax gain of $88.4 million from the sale of VALARIS 247, which generated cash proceeds of approximately $108.0 million[51] - The total cash proceeds from the sale of three retired semisubmersible rigs were $10.0 million, with an impairment loss of $7.8 million recognized[52][53] - Other income increased significantly to $78.3 million, driven by pre-tax gains from asset sales totaling $115.4 million[130] Market and Operational Insights - The global marketed jackup fleet utilization was 91% as of September 30, 2025, down from 94% in early 2024[114] - The five-year forward price of Brent crude oil remains above $65 per barrel, which is expected to make over 80% of undeveloped offshore reserves profitable[104] - Rig utilization for the total fleet was 67% as of September 30, 2025, compared to 66% in the same period of 2024[136] Shareholder Actions - The company has authorized a share repurchase program of up to $600.0 million for its outstanding Common Shares[71] - As of September 30, 2025, the company repurchased 1.5 million shares at an aggregate cost of $75.0 million, with an average price per share of $48.88[72]

Investor Presentation O c t o b e r 2 0 2 5 Forward-Looking Statements Statements contained in this investor presentation 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," "outlook," "plan," "project," "could," "may," "might," "s ...

Core Viewpoint - Valaris Limited reported quarterly earnings of $2.65 per share, significantly exceeding the Zacks Consensus Estimate of $1 per share, marking an earnings surprise of +165.00% compared to $0.88 per share a year ago [1][2] Financial Performance - The company achieved revenues of $595.7 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 4.56%, although this represents a decline from year-ago revenues of $643.1 million [2] - Over the last four quarters, Valaris has exceeded consensus EPS estimates three times and topped consensus revenue estimates four times [2] Stock Performance - Valaris shares have increased approximately 27.7% since the beginning of the year, outperforming the S&P 500's gain of 17.2% [3] Future Outlook - The company's earnings outlook will be crucial for assessing future stock performance, with current consensus EPS estimates at $0.33 for the coming quarter and $2.41 for the current fiscal year [7] - The Zacks Rank for Valaris is currently 5 (Strong Sell), indicating expectations of underperformance in the near future due to unfavorable estimate revisions prior to the earnings release [6] Industry Context - The Oil and Gas - Drilling industry, to which Valaris belongs, is currently ranked in the bottom 7% of over 250 Zacks industries, suggesting potential challenges ahead [8] - Another company in the same industry, Helmerich & Payne, is expected to report a significant year-over-year earnings decline of -65.8% in its upcoming results [9]