Valaris has reported third quarter 2026 results.
President and Chief Executive Officer Anton Dibowitz said, 'I want to thank our employees across the organization for their continued focus on delivering safe, reliable and efficient operations. Their strong execution helped us achieve revenue efficiency of 97% in the third quarter and 98% year to date, contributing to solid financial results.'
Dibowitz added, 'These results are particularly commendable given we have returned four drillships back to work this year following significant idle periods and have been impacted by the ongoing conflicts in the Middle East. Fleet utilization is increasing, and all ten of our active drillships are now on contract, positioning us to generate meaningful earnings and cash flow.'
Dibowitz continued, 'The outlook for our business is increasingly positive. The pipeline of deepwater opportunities remains robust, the opportunities continue to convert to contracts, and day rates are moving higher, driven by favorable market fundamentals and strong customer demand for high-specification drillships.'
Dibowitz concluded, 'Our pending business combination with Transocean has received the required regulatory approvals and is anticipated to close on or about December 1, 2026. We remain confident that the pending transaction will create meaningful value through expected synergies and the enhanced capabilities of the combined company.'
Financial and Operational Highlights
- Total operating revenues of $594 million and net income of $47 million
- Adjusted EBITDA of $151 million, which includes approximately $24 million of negative impacts from the Middle East conflicts
- Revenue efficiency of 97% during the quarter and 98% year to date
- Successful contract startup of drillships VALARIS DS-15 during the quarter, following installation of CML+, and VALARIS DS-18 subsequent to quarter end
- Jackups VALARIS 250 and 116 recommenced long-term bareboat charters with ARO following major shipyard projects completed in the Middle East
- Received the Center for Offshore Safety’s 2026 Safety Leadership Award, marking the fourth consecutive year the Company has received this recognition
- Added approximately $600 million of new contract backlog since reporting second quarter results, increasing total backlog to approximately $4.8 billion
- Further high-graded the fleet through the sale of semisubmersible VALARIS MS-1 for recycling and long-term stacked jackup VALARIS 111 for conversion to a mobile offshore production unit
Third Quarter Review
Net income of $47 million was in line with the second quarter 2026. Adjusted EBITDA of $151 million compared to $97 million in the second quarter 2026.
Revenues exclusive of reimbursable items increased to $556 million from $502 million in the second quarter 2026. The increase was primarily due to more operating days and higher average daily revenues for the floater fleet, as three drillships commenced new contracts during the second and third quarters following idle periods, and another drillship commenced a new contract at a higher day rate in the third quarter. These increases were partially offset by fewer operating days for the jackup fleet.
Contract drilling expenses exclusive of reimbursable items of $380 million were in line with the second quarter 2026. Higher costs for the floater fleet were offset by lower costs for the jackup fleet, including rigs leased to ARO.
General and administrative expenses decreased to $26 million from $27 million in the second quarter 2026.
Merger and integration expenses, which are primarily related to professional fees incurred in connection with the pending business combination with Transocean, increased to $16 million from $11 million in the second quarter 2026.
Other income decreased to $20 million from $30 million in the second quarter 2026, primarily due to lower pre-tax gains recognized on asset sales.
Tax expense increased to $55 million from $34 million in the second quarter 2026. The third quarter tax provision included a $23 million discrete tax expense, which is primarily non-cash and related to rig sales. The second quarter tax provision included a $6 million discrete tax benefit, primarily related to the resolution of prior-period tax matters. Adjusted for these items, tax expense decreased to $32 million from $40 million in the second quarter due to a change in the jurisdictional mix of income.
Capital expenditures increased to $122 million from $106 million in the second quarter 2026.
Cash and cash equivalents decreased to $525 million as of September 30, 2026, from $541 million as of June 30, 2026, primarily due to capital expenditures, partially offset by cash flow from operations and proceeds from asset sales.
Conflicts in the Middle East
The ongoing conflicts in the Middle East negatively impacted Adjusted EBITDA by approximately $24 million compared to $30 million in the second quarter 2026. The adverse impacts began to moderate during the third quarter, primarily due to lower war-risk insurance costs following the negotiation of longer-term insurance policies at lower rates. In addition, VALARIS 250 and 116 recommenced their bareboat charters with ARO in July and September, respectively, following the completion of planned maintenance and contract preparation projects at shipyards in the region.
Third Quarter Segment Review
Floaters
Revenues exclusive of reimbursable items increased to $346 million from $279 million in the second quarter 2026, primarily due to a full quarter of operations for VALARIS DS-10 and DS-12, which commenced new contracts in June and April, respectively, and the commencement of a new contract for VALARIS DS-15 in September following a shipyard project. In addition, VALARIS DS-9 commenced a new contract at a higher day rate in the third quarter.
Contract drilling expenses exclusive of reimbursable items increased to $189 million from $168 million in the second quarter 2026. The increase was primarily due to the reversal of a previously recognized bad debt expense in the second quarter following the collection of long-outstanding customer invoices, as well as higher operating costs associated with drillships that commenced new contracts during the second and third quarters following idle periods.
Jackups
Revenues exclusive of reimbursable items decreased to $171 million from $183 million in the second quarter 2026, primarily due to fewer operating days for VALARIS 249, which was in the shipyard for planned maintenance for most of the third quarter prior to the start of its next contract.
Contract drilling expenses exclusive of reimbursable items decreased to $129 million from $144 million in the second quarter 2026. The decrease was primarily due to lower mobilization costs, largely related to VALARIS 106, which mobilized to the shipyard for leg repairs in the second quarter, lower personnel-related costs associated with rigs that were undergoing planned maintenance and lower war-risk insurance costs. These decreases were partially offset by higher repair and maintenance costs primarily related to VALARIS 249.
ARO Drilling
Revenues increased to $145 million from $127 million in the second quarter 2026, primarily due to more operating days for VALARIS 250 and 116, which recommenced contracts during the third quarter following planned maintenance and contract preparation projects.
Contract drilling expenses increased to $92 million from $72 million in the second quarter, primarily due to non-recurring adjustments that reduced second-quarter expenses in connection with the finalization of ARO’s 2025 financial statements and higher bareboat charter expenses associated with VALARIS 250 and 116 recommencing their contracts.
Other
Revenues exclusive of reimbursable items decreased to $38 million from $40 million in the second quarter 2026, primarily due to compensation from ARO recognized in the second quarter for certain contractual obligations relating to a previously terminated bareboat charter. This was partially offset by higher bareboat charter revenues for VALARIS 250 and 116.
Contract drilling expenses exclusive of reimbursable items decreased to $21 million from $27 million in the second quarter, primarily due to lower repair and maintenance costs and lower war-risk insurance costs for VALARIS 250 and 116.
Source: Valaris
