Good day, everyone and welcome to Valaris’ Fourth Quarter 2021 Results Conference Call. As a reminder, this call is being recorded. I would now like to turn the call over to Mr. Tim Richardson, Director of Investor Relations, who will moderate the call. Please go ahead, sir.

Welcome, everyone, to the Valaris fourth quarter 2021 conference call. With me today are President and CEO, Anton Dibowitz; Interim CFO and Vice President Investor Relations and Treasurer, Darin Gibbins; and other members of our executive management team. We issued our press release, which is available on our website at valaris.com. Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations. Please refer to our press release and SEC filings on our website that define forward-looking statements and list risk factors and other events that could impact future results. Also, please note that the company undertakes no duty to update forward-looking statements. During this call, we will refer to GAAP and non-GAAP financial measures. Please see the press release on our website for additional information and required reconciliations. As a reminder, we issued our most recent Fleet Status Report, which provides details on contracts across our rig fleet. An updated investor presentation will be available on our website after the call. Now, I will turn the call over to Anton Dibowitz, President and CEO.

Thanks, Tim. Good morning and afternoon to everyone and thank you for your interest in Valaris. During today’s call, I will start by highlighting some of our major accomplishments in 2021. Next, I will provide some commentary on the current state of the offshore drilling market and discuss how we are managing our fleet and our business to position ourselves for success. Finally, I will provide an update on ARO Drilling, our 50:50 joint venture with Saudi Aramco. After that, I will hand the call over to Darin to discuss our financial results and updated 2022 guidance. 2021 was an important year for Valaris. We re-listed on the New York Stock Exchange with the strongest balance sheets in the offshore drilling sector, providing the company with the best possible platform to thrive as we entered the early stages of an industry up-cycle. In order to succeed in this business, a solid financial foundation needs to be coupled with excellent operational performance and we focus everyday on delivering safe, reliable and efficient operations to our customers. I would like to thank the Valaris team for continuing to deliver the strong performance that our customers have come to expect from us. This performance resulted in us achieving over 98% revenue efficiency over the course of 2021 and improving our personal safety performance by 25% as compared to 2020. This is particularly impressive considering the challenging working conditions faced by our offshore crews and support teams during the ongoing pandemic. Our strong operational performance translated into contracting success during 2021, with Valaris’ total contract backlog increasing to more than $2.4 billion from just over $1 billion at the beginning of 2021. And I congratulate the marketing team and the myriad of folks across the organization, who support them in these efforts on their…

Thanks, Anton and good morning and afternoon to everyone. In my prepared remarks today, I will provide an overview of fourth quarter results, our outlook for the first quarter, and updated guidance for full year 2022. In addition, I will briefly review our financial position and capital structure. I would also like to highlight our fourth quarter results press release, which includes a trailing 5-quarter analysis for the income statement, balance sheet and cash flows as well as various supplemental data. As Anton mentioned earlier, we are currently in a transitional period while we incur one-time reactivation costs to return 3 drillships and 1 semi-submersible to the working fleet. We continue to estimate these reactivations will cost $30 million to $45 million, while future floater reactivations will likely be at the top of or higher than that range depending on when they are reactivated. We also estimate $15 million to $20 million to reactivate preservation stacked jackup. As a reminder, these estimates include all costs to reactivate the rig, but did not include mobilization costs or costs for contract or region-specific upgrades for which we would generally expect to be compensated. Most of these costs are recognized in our income statement, with the remainder recognized as capital expenditures. As we have done previously, we have presented our results on both in EBITDA and EBITDAR basis as we believe that investors should consider reactivation expenses like growth capital expenditures and back out the income statement portion from EBITDA when analyzing our results. Valaris’ compelling value proposition is built on four key components and we believe that the best way to value Valaris is on a sum of the parts basis. We have presented analysis in our press release broken out by these four components. First, the active fleet of 34 rigs,…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Greg Lewis with BTIG. Please go ahead.

Yes. Hi. Thank you and good morning, everybody. I had a few questions. One should be pretty brief, is around OpEx, clearly, we are activating rigs. Valaris isn’t the only company, the downturn has been pretty challenging. Most of the industry over the last couple of years has really done a good job of getting floater OpEx on – daily floater OpEx down pretty low, relative to where – whether we think about a peak level or normalized level. As you think about the cadence of that over the next 12 months, 18 months, 24 months, as we are reactivating rigs and maybe there is a scarcity of crewing how should we think about average OpEx in the medium-term for the fleet?

Yes. No. Good morning, Greg, this is Darin. Appreciate questions. I would say as you referenced, during the downturn, I think most in the industry OpEx level is quite low. We are seeing certain inflationary pressures as activity is ramping up, particularly on the floater side and in certain regions. Now, what I would tell you is, we have baked what we are seeing into our guidance going forward. And I don’t think we are going back to kind of the peak OpEx levels that you saw, back in the 2012-2013 timeframe. It will be lower than that, but we are seeing a bit of inflationary pressure off. It’s kind of the lows that we got to during the downturn.

Let me just add to that. I think Darin has well covered. There are a couple of ways to look at it firstly, on the floater side, the inflationary pressures go a lot with activity. So, it varies on the personnel side by markets where we see activity level. And the way we deal with it is a couple of ways. So, the tendency for shorter term contracts over the last few years allows us to re-price our contracts, and especially in a very constructive floater market that we are seeing today. The increase in in day rates, certainly, more than covers outstrips very much, so what inflationary pressures we are seeing on that side. And then obviously, as the market improves, and we gain more leverage in our contract negotiations and we are in extremely long-term contracts would seek to build contractual protection, or mitigations into those term contracts to challenge that. But yes, inflation certainly is a challenge for us in the market today. And as Darin said, included in our in our guidance is our best estimate of taking that into account at least for the upcoming year.

Great, thanks. And then, tough one on North Platte, as I guess it’s a ship basins to West Africa. It does seem like there is a couple attractive tenders in that market with potential startup dates later this year. Historically, the companies, legacy companies that had been pretty active and fairly strong positioned in West Africa. As you think about the opportunities in West Africa, I guess two questions here. One is, is there any reason why we could see those expected tenders being pushed out into next year?

Based on supply of rigs, I mean we are just going to see – have to see how it goes. Generally, West Africa is a longer tender cycle process, highly regulated. So, the operators, they generally have to plan in advance and will seek to secure the rigs, at least in the timeline that they originally intended. So, it very much depends on what happens with the regulatory process and getting approved from local companies. Some folks may need to re-plan based on availability of rigs, or not being able to get the rig in the timeframe that we want. But there is definitely a lot going on in West Africa, more of the recovery from the depths of the downturn in Angola and Nigeria where activity levels are picking up. But there also have been some interesting finds in West Africa, which is a lot of demand going forward.

Great, thank you very much for the time.

Sure.

[Operator Instructions] The next question comes from Fredrik Stene with Clarksons. Please go ahead.

Hey, guys, Fredrik here and congratulations on the quarter. So, I think you actually covered quite a few of my questions in the prepared remarks, with relation to DS-11 and the cancellation fee, etcetera, because I guess you are not just going to straight up tell us what it is, right?

No, we are not. And I should go back to DS-11, maybe just reiterate a couple of things we have said in the in the upfront. I mean regardless of what happens – just to be clear on a couple of things. So, TotalEnergies has said that they are not going to proceed with the project and are in the process of handing it over to their co-venture partner Equinor. We have not received a termination notice. Should we receive one, we would be well compensated in excess of what we would be reimbursed and what our commitments are under the project. We also haven’t been informed yet of any timing delay, although we will have to see how that rolls out. And Equinor has stated that they intend to proceed with the project. So, we are in constructive, it’s early days, we are in constructive discussions with both of the partners and there is a team working on the transition. And we will just have to see how we are clear about, how we go forward from there. But to your question, and also to the last question, which I didn’t maybe fully address, this is a rig that was planning to go to work after its upgrades in mid-2024, it’s 2.5 years from now. So, DS-11 is an attractive ship, high specification for the market today. And given the time between now and its expected start up and the constructive market we are seeing overall, obviously, we will work with the partners to see what happens on DS-11. But we feel good about the future of the rig, regardless.

That’s actually very good color. Just a quick follow-up on that, is it possible now and I have also seen the comments from Equinor saying that they would like to – they seem to be keen on going forward with the project. Do you need, or is it possible that your contract is just transferred directly from Total to Equinor, or does it in either situation have to be some sort of renegotiation or actual signing new contracts even though the terms might be the same?

Look, we are not going to get into details of the contract, but we have a contract and there is a rise in the contract for the operatorship to be transferred over along with the drilling contract. So, we are just going to have to see how that plays out. But there is definitely an opportunity to find out and right now the contract is in full force and effect.

That’s very helpful. Second question for me, just relates to the general market status, particularly for filters, and I think at least compared to what I believe that the leading areas particularly in the U.S. Gulf of Mexico, faster than what I originally expected. There seems to be maybe some differences between regions, still, but when you are approaching – you are supporting 90% utilization, it’s fair to assume that that is going to even out pretty quickly, as well. So, I was just wondering in terms of what you were seeing and how you are affected, do you think it’s, we have seen very close for one contracts among your competitors recently? Do you think, I am just throwing a number out there? Do you think we could see 500k, or in day rates starting with 500 in 2023? What’s kind of your view on the momentum that we are seeing now? What do you think of about capital at some point?

Look, there has obviously been a huge amount of momentum, especially in the floater market over the last year. If you think about the start of last year, where the contracts were in the high-100s, how far it’s done over the last year is a significant step forward. Each job has a unique set of circumstances time, location, when the customer wants to start up, duration of the contract. So, not every contract is equal, and each has a different scenario with it. But the number of contracts or rigs that are available for late ‘22 and early ‘23, if you are looking for a drillship is extremely limited. So, if customers want to contract in that timeframe, I think there is going to be a price premium associated with that. Where that goes over the next year look, we are just going to – we just kind of have to see how that plays out. But we feel very good about where the market is going. And we feel very good about our position. There are – we have been very successful in re-contracting our stacked ships over the last year. And if you look at the rigs that have not been stacked for an extended period of time where 2 drillships available that means call stack less than 2 years and as we have said previously, we sought to set some base load and get some contracts, rigs have to work which we are working on during the first half of this year. And we are going to be disciplined about adding future capacity back to the market based on letting the markets develop. And that’s what we will seek to do. But we feel quite optimistic and constructive about the markets going forward.

Thanks. Appreciate all the comments. Thank you very much.

[Operator Instructions] There are no further questions at this time. I would like to turn the call back to Tim Richardson.

Thanks, Betsy. Thank you to everyone on the call for your interest in Valaris. We look forward to speaking with you again when we report our first quarter results. Have a good day.

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect.