Valaris(US:VAL)2025-07-31 15:02Financial Data and Key Metrics Changes - Total revenues for the second quarter were $615 million, a slight decrease from $621 million in the prior quarter, primarily due to the completion of a contract for Valaris DS-12 without follow-on work [28] - Adjusted EBITDA increased to $201 million from $181 million in the prior quarter, driven by a favorable arbitration outcome that provided a total benefit of $24 million [29] - Adjusted free cash flow for the quarter was $63 million, with cash and cash equivalents at $516 million, contributing to total liquidity of nearly $900 million [30][32] Business Line Data and Key Metrics Changes - The company added over $1 billion in new contract backlog, increasing total backlog to approximately $4.7 billion, the highest in a decade [5][34] - For floaters, $860 million was added to the backlog, while jackups contributed $145 million [16] - The jackup fleet maintained robust contract coverage, with over 70% of available days contracted for 2026 and 60% for 2027 [11] Market Data and Key Metrics Changes - Global marketed utilization for jackups ended the second quarter at 90%, driven by national oil companies prioritizing energy security [24] - The offshore drilling market is expected to see meaningful growth in deepwater project sanctioning in 2026 and 2027, with over 75% of deepwater spending expected to be sanctioned at breakeven prices below $50 per barrel [10][9] - The company is tracking more than 30 floater opportunities with planned start dates in 2026 or 2027, indicating a healthy pipeline for future contracts [10][18] Company Strategy and Development Direction - The company is focused on delivering operational performance, executing a commercial strategy, and maintaining disciplined cost and fleet management to drive long-term value for shareholders [4][12] - The strategy includes securing long-term contracts for high-specification assets and exploring short-term gap-fill opportunities as they arise [14][40] - The company plans to actively manage its fleet in response to market conditions, including retiring rigs when their economic benefit no longer justifies associated costs [14][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the offshore drilling market, noting that customers are prioritizing long-cycle offshore projects and that the demand for deepwater production remains strong [9][10] - The company anticipates additional contract awards across the industry in the coming months, supported by a healthy pipeline of opportunities [10][18] - Management highlighted a positive shift in customer sentiment, with increased confidence in contracting rigs and moving forward with developments [82] Other Important Information - The company completed the sale for recycling of three semisubmersibles, reflecting a proactive approach to fleet management [14] - The company expects total CapEx for the third quarter to be between $100 million and $110 million, including ongoing fleet maintenance and contract-specific upgrades [31][32] Q&A Session Summary Question: Can you provide more details on the shorter-term contracts for the drillships? - Management indicated that the average duration for shorter-term contracts varies and that they are well-positioned to service these opportunities with their high-spec fleet [38][39] Question: How many of the 30 planned floater opportunities have been pushed back? - Management clarified that while some opportunities have shifted, the pipeline remains robust with new work replenishing the opportunities [50][51] Question: What is the outlook for day rates on upcoming contracts? - Management expects day rates to remain stable in the low $400s for upcoming contracts, with potential for increases as utilization improves [58][62] Question: What are the expectations for Petrobras' rig count and tendering schedule? - Management expressed optimism about Petrobras maintaining a stable rig count and indicated that multiple tenders are expected, which could lead to increased contracting opportunities [70][73] Question: What is the company's approach to returning capital to shareholders? - Management remains committed to returning capital to shareholders and indicated that strong operational performance and upcoming rig sales will enhance flexibility for capital returns [88][89]