Offshore drilling services provider Valaris Limited has won a 12-well contract offshore West Africa for the drillship VALARIS DS-7, which will be reactivated for this contract, the company said.
The $364 million contract is expected to begin in the second quarter of 2024 and has an estimated duration of 850 days, Valaris said in a recent news release.
Valaris said the contract “requires minimal customer-specific upgrades to the rig” and does not include the provision of any additional services. The provider of the contract was not disclosed.
“This most recent award represents the seventh contract awarded to one of our high-quality floaters requiring reactivation since mid-2021 and speaks volumes about our demonstrated track record of project execution when reactivating rigs and delivering operational excellence for our customers”, Valaris President and Chief Executive Officer Anton Dibowitz said. “We continue to take a disciplined approach to rig reactivations, and we expect this contract to generate a meaningful return over the initial firm term.”
Valaris also announced an increase in its 2023 share repurchase target from $150 million to $200 million.
“In May, we announced an increase in our share repurchase authorization to $300 million and our intent to repurchase $150 million of shares by year-end 2023. To date, we have repurchased $91 million of shares. As a result of this attractive contract award and our continued commitment to returning capital to shareholders, we are increasing our 2023 share repurchase target from $150 million to $200 million”, Dibowitz said.
Unprofitable Quarter
In a separate release, Valaris reported a net loss of $27 million in the second quarter, compared to a net income of $49 million in the first quarter of 2023. The company’s second-quarter adjusted EBITDA dropped to $15 million from $29 million in the first quarter, primarily due to higher reactivation expense, it said in the release.
Meanwhile, Valaris’ revenue for the quarter fell to $415 million from $430 million in the previous quarter. The decrease was primarily due to fewer operating days for the company’s jackup fleet and lower mobilization and demobilization revenues, partially offset by an increase in the average day rate for both floaters and jackups, the company said.
Valaris reported a boost in Floater revenues to $227 million in the second quarter from $215 million in the first quarter. The increase was primarily due to more operating days and a higher average day rate for VALARIS DS-12, which started a new contract in the second quarter after spending part of the first quarter mobilizing from Mauritania to Angola, according to the release.
For the second quarter, Valaris said its jackup revenues fell to $145 million from $170 million in the previous quarter. The decrease was primarily due to fewer operating days and lower mobilization and demobilization revenues for VALARIS 249, which completed its contract offshore New Zealand late in the first quarter and was mobilizing to its next contract offshore Trinidad during the second quarter, the company said.
In addition, VALARIS 54 was sold following the completion of its contract late in the first quarter and VALARIS 108 was idle for most of the second quarter undergoing contract preparation work for a three-year bareboat charter with ARO Drilling. These were partially offset by more operating days for VALARIS 115 and 247 as both rigs began new contracts, the release said.
“Our outlook for the industry and our business remains very positive, with increasing demand and constrained supply tightening the market. We continue to see increases in contract duration, lead times, and day rates, all of which point towards a strong and sustained upcycle. Our earnings and cash flow should grow meaningfully over the next few years as rigs roll from legacy day rate contracts to higher market rates and reactivated rigs return to work on attractive contracts”, Dibowitz said.
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