Valaris(US:VAL)2023-08-01 16:00Financial Performance - Operating revenues for Q2 2023 were $415.2 million, a slight increase of 0.5% compared to $413.3 million in Q2 2022[19]. - Net loss for Q2 2023 was $27.3 million, compared to a net income of $112.8 million in Q2 2022, representing a significant decline[20]. - The company reported an operating loss of $9.9 million for Q2 2023, an improvement from the operating loss of $15.6 million in Q2 2022[19]. - The company reported a basic loss per share of $0.39 for Q2 2023, compared to earnings per share of $1.49 in Q2 2022[19]. - Revenues for the three months ended June 30, 2023, totaled $415.2 million, with operating income (loss) reported at $(9.9) million[96]. - For the six months ended June 30, 2023, total revenues were $845.3 million, with an operating income (loss) of $(1.4) million[100]. - Revenues for the six months ended June 30, 2023, increased to $845.3 million, up 16% from $731.7 million in the same period of 2022[131]. Cash Flow and Liquidity - Cash and cash equivalents increased to $787.3 million as of June 30, 2023, up from $724.1 million at the end of 2022[23]. - The company generated $122.6 million in net cash from operating activities for the first half of 2023, a turnaround from a cash outflow of $114.0 million in the same period of 2022[24]. - The company expects to fund its short-term liquidity needs from cash and cash equivalents, cash flows from operations, and borrowings under the Credit Agreement, with $375.0 million available for borrowings as of July 26, 2023[172]. - As of June 30, 2023, letters of credit outstanding totaled $100.4 million, with collateral deposits amounting to $16.2 million[89]. Debt and Financing - Long-term debt rose to $681.9 million as of June 30, 2023, compared to $542.4 million at the end of 2022, indicating increased leverage[23]. - The company issued $700.0 million in Second Lien Notes during the first half of 2023, reflecting a strategy to strengthen its capital structure[24]. - The total principal amount of the Second Lien Notes issued was $700.0 million, with net proceeds of $681.4 million after deducting expenses[70]. - The company redeemed its First Lien Notes for an aggregate redemption price of $571.8 million on May 3, 2023, resulting in a loss of $29.2 million recognized in the financial statements[69]. - The company has a senior secured revolving credit facility with commitments allowing borrowings of up to $375.0 million, which can be increased by an additional $200.0 million under certain conditions[76]. - The Company has the option to redeem up to 40.0% of the aggregate principal amount of the Second Lien Notes prior to April 30, 2026, at a redemption price of 108.375% of the principal amount[72]. Shareholder Equity and Repurchase - Valaris shareholders' equity decreased to $1,254.1 million as of June 30, 2023, down from $1,289.9 million at the end of 2022[23]. - The board of directors authorized a share repurchase program, increasing the amount from $100.0 million to $300.0 million in April 2023, with 1.1 million shares repurchased for $65.0 million at an average price of $58.82 during the three and six months ended June 30, 2023[84]. - The total shareholders' equity increased from $1,097.9 million on December 31, 2022, to $1,110.3 million on June 30, 2023[82]. Operational Highlights - The company completed the reactivation of the VALARIS DS-17 drillship, which is expected to commence a contract in the third quarter of 2023[121]. - The total fleet consisted of 51 rigs as of June 30, 2023, with 40 rigs classified as active[137]. - The company owns a total of 51 rigs, including 11 drillships and 35 jackup rigs, while ARO owns an additional 7 rigs[111]. - The company plans to purchase 20 newbuild jackup rigs over an approximate 10-year period, with the first two expected to be delivered in 2023[44]. Revenue Sources and Trends - Consolidated revenues from the U.S. Gulf of Mexico for the three months ended June 30, 2023, were $77.3 million, a decrease from $125.8 million in the same period of 2022[108]. - The geographic concentration of revenues shows that the U.S. Gulf of Mexico contributed $153.3 million for the six months ended June 30, 2023, compared to $176.4 million in the same period of 2022[109]. - ARO's revenues for the three months ended June 30, 2023, were $117.8 million, slightly up from $116.4 million in the same period of 2022[46]. - The company recognized revenues related to Lease Agreements of $16.8 million and $35.6 million for the three and six months ended June 30, 2023, respectively, compared to $14.6 million and $28.8 million for the same periods in 2022, indicating a year-over-year increase of 15% and 23%[50]. Expenses and Cost Management - Total operating expenses decreased to $424.4 million in Q2 2023 from $437.6 million in Q2 2022, a reduction of approximately 3%[19]. - Operating expenses totaled $849.3 million, a 5% increase from $810.2 million in the prior year, driven by a $57.6 million rise in contract drilling expenses[131]. - General and administrative expenses rose by 34% to $50.8 million, primarily due to higher compensation and professional fees[134]. - Contract drilling expenses increased by $92.8 million due to rigs commencing contracts after reactivation[132]. Tax and Regulatory Matters - For the three months ended June 30, 2023, the income tax expense was $18.3 million, while for the six months it was $34.4 million, excluding discrete tax items[86]. - The company received an income tax refund of $45.9 million during the first quarter of 2023 related to the U.S. Coronavirus Aid, Relief, and Economic Security Act[106]. - The Australian tax authorities issued tax assessments totaling approximately A$101.0 million ($67.3 million) for the years 2011 through 2016, with a $17.9 million liability for unrecognized tax benefits as of June 30, 2023[191]. Risks and Challenges - The company is involved in an administrative proceeding in Brazil, facing a claim for approximately BRL 601 million (approximately $127.0 million) related to overbilling to Petrobras[91]. - The company is exposed to foreign currency exchange risk due to revenues and expenses denominated in currencies other than the U.S. dollar[198]. - A hypothetical 1% decrease in LIBOR would reduce interest income by $4.0 million for the year ended December 31, 2023, based on a principal amount of $402.7 million[197].