Valaris(US:VAL)2021-11-02 21:37Financial Data and Key Metrics Changes - Adjusted EBITDA for Q3 2021 was $30 million, up from $17 million in the combined prior quarter, while adjusted EBITDAR increased to $49 million from $41 million [63] - Revenues for Q3 2021 reached $327 million compared to $293 million in the combined prior quarter, with revenues excluding reimbursable items increasing to $293 million from $261 million [63][64] - Contract drilling expense for Q3 2021 was $274 million, up from $254 million in the combined prior quarter [65] Business Line Data and Key Metrics Changes - The average day rate within the floater backlog increased by 25% year-to-date to $235,000 per day, with approximately 75% of the backlog added year-to-date coming from major and large international oil companies [28] - Valaris secured long-term contracts for four of its seven preservation stacked drillships, enhancing earnings visibility with 8 of 11 drillships currently or future contracted [23][27] Market Data and Key Metrics Changes - Spot Brent crude prices have recovered strongly in 2021, with two-year forward Brent crude prices currently around $70 per barrel, which is viewed as constructive for offshore project demand [13][14] - Demand for floaters is expected to increase at a compound annual growth rate of approximately 6% between 2021 and 2025, driven by exploration and development drilling [14] Company Strategy and Development Direction - The company focuses on maximizing earnings and driving meaningful free cash flow as the market recovers, with a disciplined approach to fleet management and contracting [48][49] - Valaris views ARO Drilling as an important strategic asset, with plans to build 20 jackups over the next decade, backed by long-term contracts with Saudi Aramco [36][39] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery in the offshore drilling market, citing increased contract awards and backlog, particularly for the floater fleet [51] - The company anticipates total revenues for Q4 2021 to be in the range of $310 million to $320 million, with a sequential decline primarily driven by the jackup fleet [74] Other Important Information - The company has a strong balance sheet with cash and cash equivalents of $621 million as of September 30, 2021, and only one tranche of debt due in 2028 [94][95] - Valaris has retired 18 rigs since the beginning of last year, representing more than 50% of its fleet since the downturn began [25] Q&A Session Summary Question: Recent reactivations and rate levels - Management highlighted that reactivation costs need to be justified and reimbursed by customers, with the average stacked period for their rigs being less than two years, making reactivations easier [104][105] Question: Future of ARO fleet - Management indicated that ARO is in discussions for lease extensions and expects the fleet to grow as Saudi Aramco increases its rig requirements [112][114] Question: Upgrades needed for idle rigs - It was noted that rigs entering Saudi Arabia typically require significant CapEx upgrades to meet Saudi Aramco's high operational standards [118]