Valaris has reported third quarter 2024 results.
President and Chief Executive Officer Anton Dibowitz said, 'We delivered strong operating performance and financial results in the third quarter, including solid free cash flow generation. Our fleetwide revenue efficiency of 98% included a full quarter of operations for VALARIS DS-7 following its contract startup in the second quarter. Building on our track record of safe, reliable and efficient operations, we are proud to be recognized for the second consecutive year by the Center for Offshore Safety with its Safety Leadership Award for the development of our Restricted Zone Analysis tool.'
Dibowitz added, 'We maintain our conviction in the strength and duration of this upcycle and believe Valaris is well positioned to drive long-term value creation. While we have seen some customer demand deferred, the outlook for 2026 and beyond remains robust. We continue to focus on securing attractive, long-term work for our available rig fleet to support our earnings and cash flow growth.'
Dibowitz concluded, 'As expected, our free cash flow profile improved relative to the first half of the year, and we repurchased $100 million of shares during the third quarter. We remain committed to returning all future free cash flow to shareholders unless there is a better or more value accretive use for it.'
Financial and Operational Highlights
- Net income of $63 million and Adjusted EBITDA of $150 million;
- Revenue efficiency of 98%;
- Generated $193 million of cash from operating activities and $111 million of free cash flow;
- Repurchased $100 million of shares;
- Recognized by the Center for Offshore Safety with its 2024 Safety Leadership Award for development of the Restricted Zone Analysis tool;
- Full quarter of operations for drillship VALARIS DS-7 following completion of its reactivation and contract startup in the second quarter; and
- Three-year contract extension for jackup VALARIS 118 awarded in October, adding $168 million of contract backlog.
Third Quarter Review
Net income decreased to $63 million from $151 million in the second quarter 2024. Net income included tax expense of $24 million compared to a tax benefit of $30 million in the second quarter. Adjusted EBITDA increased to $150 million from $139 million in the second quarter primarily due to a full quarter of operations for VALARIS DS-7 following its contract startup and higher average daily revenue for the floater fleet. These items were partially offset by lower utilization for VALARIS DPS-5 and DS-10 as well as out of service time and repair costs for VALARIS 249 due to leg repairs.
Revenues increased to $643 million from $610 million in the second quarter 2024. Excluding reimbursable items, revenues increased to $598 million from $573 million in the second quarter primarily due to an increase in operating days and amortized mobilization revenue associated with VALARIS 247, a full quarter of operations for VALARIS DS-7 and higher average daily revenue for the floater fleet. These items were partially offset by lower utilization for VALARIS DPS-5 and DS-10 as well as out of service time for VALARIS 249.
Contract drilling expense increased to $462 million from $439 million in the second quarter 2024. Excluding reimbursable items, contract drilling expense increased to $423 million from $407 million in the second quarter primarily due to an increase in amortized mobilization expense associated with VALARIS 247 and higher costs associated with a full quarter of operations for VALARIS DS-7. This was partially offset by lower reactivation expense and lower personnel costs for VALARIS DS-17 associated with a change in operating location.
Depreciation expense increased to $32 million from $30 million in the second quarter 2024 primarily due to new assets placed in service for certain rigs following reactivation projects and capital upgrades. General and administrative expense decreased to $31 million from $33 million in the second quarter 2024 primarily due to lower professional fees.
Other expense was $8 million compared to other income of $12 million in the second quarter 2024 primarily due to a decrease in interest income and foreign currency exchange losses compared to gains in the second quarter.
Tax expense was $24 million compared to tax benefit of $30 million in the second quarter 2024. The third quarter tax provision included an immaterial discrete tax expense and the second quarter tax provision included $64 million of discrete tax benefit, which were primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Adjusted for discrete tax items, tax expense decreased to $24 million from $34 million in the second quarter.
Capital expenditures of $82 million decreased from $110 million in the second quarter 2024 primarily due to lower maintenance and upgrade capital expenditures.
Cash and cash equivalents and restricted cash decreased to $392 million as of September 30, 2024, from $410 million as of June 30, 2024. The decrease was primarily due to share repurchases and capital expenditures, partially offset by cash flow from operations.
Third Quarter Segment Review
Floaters
Floater revenues increased to $389 million from $384 million in the second quarter 2024. Excluding reimbursable items, revenues increased to $373 million from $370 million in the second quarter. The increase was primarily due to more operating days for VALARIS DS-7, which commenced a contract in the second quarter, and higher average daily revenue for the floater fleet mostly due to VALARIS DS-16, which started a new higher day rate contract late in the second quarter. This was partially offset by fewer operating days for VALARIS DPS-5 and DS-10, which completed their contracts in the third quarter.
Contract drilling expense decreased to $248 million from $257 million in the second quarter 2024. Excluding reimbursable items, contract drilling expense decreased to $235 million from $245 million in the second quarter. The decrease was primarily due to lower reactivation expense as VALARIS DS-7 returned to work in the second quarter and lower personnel expense for VALARIS DS-17 associated with a change in operating location. This was partially offset by higher costs associated with a full quarter of operations for VALARIS DS-7.
Jackups
Jackup revenues increased to $214 million from $186 million in the second quarter 2024. Excluding reimbursable items, revenues increased to $193 million from $167 million in the second quarter primarily due to operating days and amortized mobilization revenue associated with VALARIS 247, which commenced a contract offshore Australia in July following its mobilization from the UK. This was partially offset by out of service time for leg repairs on VALARIS 249.
Contract drilling expense increased to $157 million from $123 million in the second quarter 2024. Excluding reimbursable items, contract drilling expense increased to $137 million from $108 million in the second quarter primarily due to an increase in amortized mobilization expense associated with VALARIS 247 and repair costs for VALARIS 249.
ARO Drilling
Revenues decreased to $114 million from $124 million in the second quarter 2024 primarily due to the contract termination for VALARIS 143 in the second quarter and contract suspensions for VALARIS 147 and 148 during the third quarter. Subsequently, ARO elected to terminate these suspended contracts in October. Contract drilling expense of $94 million was in line with the second quarter.
Other
Revenues of $40 million were in line with the second quarter 2024. Contract drilling expense increased to $22 million from $20 million in the second quarter.
Source: Valaris
