Valaris(US:VAL)2024-02-22 18:05Financial Data and Key Metrics Changes - Revenue for the fourth quarter was $484 million, an increase from $455 million in the prior quarter, while adjusted EBITDA rose to $58 million from $40 million [139] - Adjusted EBITDAR, which adds back reactivation expenses, was $96 million, up from $91 million in the previous quarter [139] - The company maintained its full-year adjusted EBITDA guidance of $500 million to $600 million for 2024, which is approximately four times higher than 2023 EBITDA [140] Business Line Data and Key Metrics Changes - The company secured approximately $1.5 billion in new contract backlog since the beginning of the fourth quarter, increasing total backlog to over $3.9 billion, a nearly 60% increase year-over-year [33] - The contracted jackup count is at its highest level in almost nine years, with active utilization for jackups approaching 95% [35][137] - The company expects revenues from floaters to increase due to contract startups for VALARIS DS-8 and DS-12, while jackup revenues are anticipated to decrease due to idle time for several rigs [63] Market Data and Key Metrics Changes - The floater market is showing positive development, with a contracted benign environment floater count reaching 123, the highest since late 2016, and utilization for active sixth and seventh generation drillships at 93% [56] - The global jackup market is extremely tight, with active utilization nearing 95% and the total rig count at its highest level in nearly nine years [137] - Offshore upstream CapEx is expected to increase by 10% in 2024, with a compound annual growth rate of 6% over the next three years [29] Company Strategy and Development Direction - The company remains confident in the strength and duration of the current upcycle, focusing on maximizing fleet profitability by keeping active rigs highly utilized and securing the best contract economics [30][100] - The company is committed to returning capital to shareholders, having repurchased $200 million of shares in 2023 and increasing the share repurchase authorization from $300 million to $600 million [101][73] - The company is pursuing opportunities for long-term contracts while remaining opportunistic with its assets, particularly in light of increasing demand and constrained supply [19][30] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the market, noting that commodity prices support continued investment in long-cycle offshore projects, with a five-year Brent forward price around $70 per barrel [51] - The company anticipates significant earnings and cash flow growth over the next few years as rigs are repriced to market day rates and reactivated rigs return to work [54][144] - Management acknowledged potential gaps in schedules across the industry during 2024 due to lengthening contract lead times and the need for rig repositioning [52] Other Important Information - The company generated cash flow from operations of $97 million in the fourth quarter, with capital expenditures totaling $463 million, primarily related to the purchase of newbuild drillships VALARIS DS-13 and DS-14 [92] - The company expects maintenance and upgrade CapEx to be approximately $290 million, with about $55 million being reimbursable [67] Q&A Session Summary Question: What is the outlook for Saudi's jackup rig count? - Management believes that the recent announcement from Saudi Arabia will have minimal impact on their business, as the Kingdom remains committed to its ARO joint venture and the newbuild program [80][81] Question: How does the company view the trend in day rates? - Management indicated that leading-edge day rates are expected to continue moving higher over time, supported by tightening market fundamentals [143] Question: What is the company's strategy regarding shareholder returns? - The company intends to return all future free cash flow to shareholders unless there is a better or more value-accretive use for it, with a focus on opportunistic share repurchases [141][126]