Valaris(US:VAL)2022-11-01 19:25Financial Data and Key Metrics Changes - Adjusted EBITDA increased to $76 million from $29 million in the previous quarter, and adjusted EBITDAR rose to $94 million from $54 million [14][47] - Revenues were $437 million compared to $413 million in the prior quarter, with revenues excluding reimbursable items increasing to $415 million from $385 million [48] - Contract drilling expense decreased to $337 million from $362 million in the prior quarter, with a further decrease in reactivation costs to $18 million from $24 million [50][51] Business Line Data and Key Metrics Changes - Floater revenues increased due to the reactivation of rigs, with VALARIS DS-4 and DS-9 starting contracts early in the third quarter [49] - Jackup revenues increased due to more operating days and higher average day rates, with average day rates for benign environment jackup fixtures signed in the third quarter up nearly $100,000 per day [26][48] Market Data and Key Metrics Changes - Utilization for active drill ships sustained at around 90% for the past 12 months, leading to improvements in day rates, with average day rates for drill ship fixtures around $400,000 per day [20] - Jackup rig years awarded are more than double the previous 12 months, with active utilization for jackups reaching approximately 90% [25][26] Company Strategy and Development Direction - The company aims to maintain a disciplined fleet management strategy, focusing on high utilization of the active fleet and reactivation of stacked rigs for opportunities with meaningful returns [30][32] - The company is strategically positioned in key markets, particularly in Brazil, to benefit from increased demand for floaters [22][24] Management's Comments on Operating Environment and Future Outlook - The management expressed a highly constructive outlook for the offshore drilling market, driven by a lack of investment in new production sources and geopolitical instability [15][16] - Despite macroeconomic uncertainties, the management remains optimistic about increased contracting and tendering activity across both floaters and jackups [43] Other Important Information - The company executed a sales agreement for a 40-year-old jackup for $28.5 million, expected to close in March 2023, which will provide capital for more attractive investment opportunities [36][68] - The company authorized a $100 million share repurchase program to enhance capital allocation flexibility [70] Q&A Session Summary Question: Market dynamics and contract durations - Management noted that while day rates have increased significantly, customers remain cautious about committing to long-term contracts due to past experiences with over-committing [76][78] Question: Supply side and reactivation economics - Management acknowledged attractive economics for reactivating rigs but emphasized the need for discipline in selecting opportunities to avoid cannibalizing the current fleet [82][86] Question: Short-term investments and rig sale - Short-term investments were described as time deposits for yield enhancement, and the rig sale was confirmed as an arm's-length transaction, reflecting the strengthened jackup market [88][89] Question: Norwegian jackup market and relocation strategy - Management indicated a lack of near-term demand in Norway, prompting the relocation of rigs to the UK for better opportunities [91][92] Question: Training facility and employee recruitment - The company is focused on training entry-level employees to prepare them for offshore work, addressing the industry's need for skilled labor [100][103]