Valaris has reported first quarter 2023 results.
President and Chief Executive Officer Anton Dibowitz said, 'In the first quarter, we achieved strong revenue efficiency of 99% and won new contracts and extensions with associated contract backlog of approx. $820 million, including a three-year contract offshore Brazil for which we will reactivate drillship VALARIS DS-8.'
Dibowitz added, 'On our fourth quarter conference call we outlined a goal to enhance our capital structure, and we achieved this objective through our recently completed refinancing transaction, including the addition of a revolving credit facility. The refinancing increased our liquidity by almost $500 million, enhancing our capital allocation flexibility including our ability to return capital to shareholders.'
Dibowitz concluded, 'We continue to be highly constructive on the outlook for the industry and our business, with increasing demand and constrained supply continuing to tighten the market. As a result of our strong business outlook and commitment to returning capital to shareholders, the Valaris Board of Directors has increased our share repurchase authorization to $300 million, and we intend to repurchase $150 million of shares by the end of the year. As we look ahead, we will continue executing our focused, value driven and responsible strategy to deliver value to all stakeholders.'
Financial and Operational Highlights
- Generated Net Income of $49 million, Adjusted EBITDA of $24 million and Adjusted EBITDAR of $51 million;
- Delivered revenue efficiency of 99%;
- Awarded new contracts and extensions with associated contract backlog of approximately $820 million, increasing total contract backlog to $2.8 billion;
- Enhanced capital structure and liquidity through a refinancing in April 2023, including the addition of a $375 million revolving credit facility;
- Valaris Board of Directors authorized an increase in the Company's share repurchase program to $300 million in April 2023; and
- Published 2022 Sustainability Report in April 2023, in which we announced a Scope 1 carbon emissions intensity reduction target by 2030.
First Quarter Review
Net income was $49 million compared to $31 million in the fourth quarter 2022. Adjusted EBITDA decreased to $24 million from $54 million in the fourth quarter primarily due to increased repair and maintenance costs associated with special periodic surveys. Adjusted EBITDAR decreased to $51 million from $75 million in the fourth quarter for the same reason described above.
Revenues decreased to $430 million from $434 million in the fourth quarter 2022. Excluding reimbursable items, revenues decreased to $408 million from $413 million in the fourth quarter. The decrease was primarily due to lower utilization for the harsh environment jackup fleet, partially offset by a higher average day rate for the floater fleet.
Contract drilling expense increased to $377 million from $353 million in the fourth quarter 2022. Excluding reimbursable items, contract drilling expense increased to $356 million from $333 million in the fourth quarter primarily due to increased repair and maintenance costs associated with special periodic surveys and higher reactivation costs, which increased to $26 million from $21 million.
Depreciation expense decreased to $23 million from $24 million in the fourth quarter 2022. General and administrative expense of $24 million was in line with the fourth quarter 2022.
Other income was $13 million compared to other expense of less than $1 million in the fourth quarter 2022. This was primarily due to foreign currency exchange gains compared to losses in the fourth quarter and an increase in interest income due to a higher interest rate on the ARO shareholder notes receivable as well as an increase in interest from short-term deposits.
Tax benefit was $28 million compared to tax expense of $10 million in the fourth quarter 2022. The first quarter tax provision included $44 million of discrete tax benefit primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. The fourth quarter tax provision included $3 million of discrete tax benefit attributable to the resolution of prior period tax matters. Adjusted for discrete items, tax expense increased to $16 million from $13 million in the fourth quarter.
Total liquidity, which includes cash and cash equivalents and restricted cash, increased to $844 million as of March 31, 2023, from $749 million as of December 31, 2022. The increase was primarily due to cash flow generated from operations, including changes in working capital, of which $46 million was a refund payment from the IRS related to the CARES Act. These were partially offset by capital expenditures.
Capital expenditures increased to $56 million from $54 million in the fourth quarter 2022.
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Source: Valaris
