Valaris(US:VAL)2019-10-31 21:04Financial Data and Key Metrics Changes - The company reported adjusted EBITDA of $35 million for Q3 2019, which is approximately $26 million better than the outlook provided in the previous quarter [8][54]. - Revenue for Q3 2019 was $551 million, down from $584 million in the prior quarter [56]. - Contract drilling expense was $488 million, consistent with the prior quarter and $17 million lower than previous guidance [58]. Business Line Data and Key Metrics Changes - In the floater segment, revenue declined to $270 million from $296 million due to fewer operating days for certain rigs [56]. - The jackup segment saw revenue decrease to $218 million from $229 million, primarily due to a four percentage point decline in utilization [57]. - ARO Drilling's operating income was $22 million, down from $27 million in the previous quarter [65]. Market Data and Key Metrics Changes - Global floater fleet utilization increased to 67% from 58% a year ago, driven by increased contracting activity [32]. - Jackup utilization improved to approximately 73% compared to 66% a year ago, with a significant increase in contracted rigs [41]. - The utilization of modern ultra-harsh and harsh environment rigs in the North Sea stands at 98% [43]. Company Strategy and Development Direction - The company is focused on four main priorities: integration and synergy capture, delivering value from ARO Drilling, proactive balance sheet management, and disciplined fleet management [9][49]. - The company aims to deliver significant incremental merger synergies beyond the previously announced target of $165 million [13]. - The strategy includes a disciplined portfolio approach to contracting and managing the fleet, with a focus on cash-generating contracts [20][27]. Management's Comments on Operating Environment and Future Outlook - Management noted concerns over a potential global economic slowdown impacting hydrocarbon demand, which could affect customer activity [30][81]. - The company expects total revenues for Q4 2019 to be approximately $505 million, with fleet utilization declining to about 60% [72]. - Management anticipates that EBITDA will improve year-over-year in 2020, driven by new contracts and cost management efforts [100]. Other Important Information - The company has available liquidity of $1.6 billion, including $130 million in cash and $1.5 billion in undrawn capacity on its revolving credit facility [77]. - An arbitration award for $180 million is pending from a legal matter with Samsung Heavy Industries, with uncertain timing for collection [86][87]. - The company has reached an agreement to delay the delivery of newbuild drillships, which will help manage cash flow [88][89]. Q&A Session Summary Question: Optimism about the floater market - Management noted an increase in customer inquiries and contract lengths, indicating a more favorable market for floaters [110][115]. Question: Liquidity and secured debt markets - Management confirmed liquidity of $1.6 billion is available, but emphasized that relying on the revolver is not a long-term strategy [119][122]. Question: Availability of high-end drillships - Management expressed confidence that options on high-end drillships would likely be exercised, with opportunities in the Mediterranean [128]. Question: Reactivating jackup rigs - Management stated that reactivation of sidelined jackups would depend on favorable economics, focusing on keeping core rigs working [131].