Valaris Strikes $519M Drillship Deal with Petrobras, Eyes Soaring Earnings in Rig Reshuffle – Valaris (NYSE:VAL)

Valaris Ltd, an offshore drilling contractor, has secured a 1,064-day contract for its drillship VALARIS DS-4 from Petrobras, the Brazilian state-owned oil company. The contract, valued at approximately $519 million, includes mobilization fees and additional services.

The award of this contract follows a competitive bidding process, demonstrating Valaris’ ability to successfully compete in the market. The company expects the contract to commence in late Q4 2024, after the completion of the rig’s current contract with Petrobras, which is scheduled to end in September 2024.

Prior to the start of the new contract, the rig will undergo a 90-day period of service downtime to complete customer-required capital upgrades. This downtime is necessary to ensure the rig meets the necessary standards and specifications for the new agreement.

Anton Dibowitz, President and Chief Executive Officer of Valaris, expressed his confidence in the company’s ability to increase earnings and cash flow through the recontracting of rigs at market rates. The VALARIS DS-4 contract exemplifies the operating leverage inherent in Valaris’ business model, as the rig’s day rate is expected to increase from the low $200,000s to the high $400,000s.

This contract announcement comes after Valaris exercised its options to take delivery of two newbuild drillships, VALARIS DS-13 and DS-14, for approximately $337 million. These investments demonstrate Valaris’ commitment to expanding its fleet and capitalizing on opportunities in the offshore drilling market.

As of September 30, 2023, Valaris had cash and equivalents totaling $1.1 billion. This strong financial position provides the company with the flexibility to pursue growth opportunities and navigate the challenges of the offshore drilling industry.

In response to the contract news, Valaris’ shares have seen a 1.41% increase, trading at $69.54. This positive market reaction reflects investors’ confidence in the company’s ability to secure lucrative contracts and generate value for its shareholders.

Overall, the contract award for the VALARIS DS-4 represents a significant milestone for Valaris. It not only demonstrates the company’s competitiveness in the offshore drilling market but also highlights its commitment to delivering high-quality services to its clients. With a strong financial position and a growing fleet, Valaris is well-positioned to capitalize on future opportunities and drive long-term growth in the industry.

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