Good day, and welcome to the Valaris Limited Fourth Quarter 2024 Results Conference Call. All participants will be in a listen-only mode. You may press star then one on your touch-tone phone. Please note this event is being recorded. I would now like to turn the conference over to Nick Georgas, Vice President Treasurer and Investor Relations. Please go ahead.

Welcome everyone to the Valaris Limited fourth quarter 2024 conference call. With me today are President and CEO, Anton Dibowitz, Senior Vice President and CFO Chris Weber, Senior Vice President and CCO, Matt Lyne, 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. Earlier this week, we issued our most recent fleet status report, which provides details on our rig fleet, including contract awards and fleet management. I will now turn the call over to Anton Dibowitz, President and CEO.

Thanks, Nick, and good morning and afternoon to everyone. During today's call, I will provide an overview of our performance during the quarter, deliver an update on the offshore drilling market, and outline our contracting and fleet management strategy to drive long-term value creation for our shareholders. I will then hand the call over to Matt to discuss the floater and jackup markets in more detail and provide some additional color on our contracting outlook. After that, Chris will discuss our financial results and guidance, before I finish with some closing comments. To begin, I want to highlight a few key points. First, we continue to execute operationally; we finished 2024 with another solid quarter that benefited our financial results. Second, the contracting outlook for 2026 and beyond is strong for high specification assets, and we are focused on securing attractive long-term contracts for our active fleet. Third, we are willing to be patient to find the right jobs for our rigs. We will actively lower costs and idle rigs until the right job is available, and we will not hesitate to remove rigs from our fleet when it makes economic sense to do so. Starting with operations, we delivered fleet-wide revenue efficiency of 96% during the fourth quarter, and 97% for the full year. This marks an improvement over last year's results. And 2024 was the fourth consecutive year we have delivered revenue efficiency of at least 96%. We also had outstanding safety performance in 2024, achieving improvements in key safety metrics and receiving safety awards from both the IADC and the Center for Offshore Safety. We were recently recognized by the IADC Brazil chapter with this 2024 safety award with three rigs, DS-4, DS-8, and DS-17, each completing the year with no recordable incidents. A great achievement attributable…

Thanks, Anton, and good morning and afternoon, everyone. I am going to provide commentary on the major floater and jackup regions where we operate and finish with an update on our outlook for rigs that have available days in 2025. Before I do this, I wanted to start by highlighting recent awards. Since our third quarter earnings call, we've secured new contracts and extensions with associated contract backlog of approximately $120 million for jackups across multiple locations, including the UK, Trinidad, and Australia. These awards included a multiyear contract for the Stavanger in the North Sea, which will keep the rig busy into 2027. And additional backlog for the 247 and 249 offshore Australia and Trinidad, respectively, at day rates in the mid to high one hundred thousands. In terms of the major floater and jackup regions in which we operate, consistent with prior quarters, we continue to see the greatest number of floater opportunities for programs offshore Africa where we are tracking more than ten long-term opportunities with commencement dates starting from late 2025 to 2027, including work offshore Nigeria, Egypt, Ivory Coast, and Mozambique. Nigeria is expected to increase its deepwater rig count from one at present to three by late 2026 or early 2027. There are three multiyear programs with IOCs currently being tendered. And we expect to see a contract award for one of these tenders soon, with the other two following later this year. The outlook for activity offshore Egypt has also picked up, as recent exploration success on projects drilled by Valaris Limited drillships and an improved investment climate for exploration and production activities is expected to lead to future opportunities with major IOCs. As we look out a few years, we also expect to see increased activity in promising frontier plays including longer-term…

Thanks, Matt, and good morning and afternoon, everyone. In my prepared remarks, I will begin with an overview of the fourth quarter results, and then walk you through our outlook for the first quarter of 2025 as well as full-year guidance for 2025. Starting with our fourth quarter results. Total revenues were $584 million, down from $643 million in the prior quarter, and adjusted EBITDA was $142 million, down from $150 million in the prior quarter. Adjusted EBITDA decreased in the fourth quarter primarily due to lower utilization for the floater fleet related to out-of-service time for Valaris DS-15 and DS-17, to meet regulatory requirements in Brazil, and for DS-4 to complete an upgrade project prior to the start of this contract. As well as idle time for DS-10 and DPS-5 which came off contract in the third quarter. These items were partially offset by more operating days for the jackup fleet, primarily due to Valaris 249 returning to work after completing leg repairs, a full quarter of operations for 247 after mobilizing for part of the third quarter, and a full quarter of operations for the 122 following completion of its survey. Our fourth quarter EBITDA was slightly below the midpoint of our guidance range primarily due to higher than expected contract drilling expense, which was negatively impacted by a $16 million non-cash accrual associated with the legal matter. Fourth quarter CapEx was $112 million, which was below the midpoint of our guidance range as roughly $15 million of CapEx shifted into 2025. We ended the quarter with cash and cash equivalents of $381 million and a revolving credit facility remains fully available, which together provides us with total liquidity of approximately $750 million. During the quarter, we generated $125 million of cash flow from operations, which was partially…

Thanks, Chris. I want to reiterate some of the key points we covered today before we open the line for questions. First, we continue to execute operationally, and we finished 2024 with another solid quarter that benefited our financial results. Second, the contracting outlook for 2026 and beyond is strong for high specification assets, and we are focused on securing attractive, long-term contracts for our active fleet. We are willing to be patient to find the right jobs for our rigs, actively lowering costs and idling rigs until the right job is available, and removing rigs from our fleet when it makes economic sense to do so. In closing, we are steadfast in our belief that offshore oil and gas production will play an important role in providing secure, reliable, and affordable energy to the world. And that Valaris Limited is well-positioned to help meet that need and drive long-term value creation for our shareholders by virtue of our high specification fleet and excellent safety and operational track record. I thank our employees, customers, and investors for their support. We've now reached the end of our prepared remarks. Operator, please open the line for questions.

We will now begin the question and answer session. Our first question comes from Eddie Kim with Barclays. Please go ahead.

Hi, good morning. Just a question on your full-year 2025 EBITDA guidance. Maybe just taking the midpoint of that guidance range of $530 million. How much of that would you say is booked today versus an expectation of new awards you would need to secure for work later this year to hit that number? Just trying to get a sense of how much of that guidance you have in hand at the moment versus the expectation of more contracting between now and year-end.

Yeah, Eddie, this is Chris. When we look at the midpoint, again, on the revenue, we're about 94% contracted for the year. So the majority of the remaining 6% is later in the year, but, yeah, about 94% contracted.

Okay. Got it. And that was tied to the midpoint of that range?

Midpoint. Yeah.

Okay. Understood. And then just my follow-up is on a recent retirement announcement we saw of a seventh-gen cold spec drillship by one of your peers. You have three, seven-g cold stacked drillships in the DS-11, 13, and 14. Just based on what you're seeing in the market today and the fact that you expect the DS-10 to remain warm stacked through year-end, does this push out your expectation for those rigs being reactivated say, versus, six to nine months ago? Or maybe put another way, what would you say is the likelihood that one of those three cold stacked drillships is working by year-end 2027? Just curious.

Hey, Eddie. Look, clearly, our focus is on putting our active fleet to work. You know, we have a number of rigs rolling next year. But these are all high spec seventh-gen assets. And based on the pipeline of activity that we see coming, we see good long-term opportunities for all of those. You know, the 11, the 13, and the 14 are the highest spec seventh-gen assets sitting on the sideline. Two BOPs, high thrust capacity, but we are absolutely going to be patient in putting those into the market. There will be a place for them. But this is not a question of putting a number on the calendar. When the market is ready for those assets to come back, the market will be ready for those assets to come back. There is a lot of drilling, you know, demand continues to increase offshore production is going to play a huge part in that going forward, but we are in no rush to put those assets back to work in the near term.

Got it. Understood. That's very helpful. Thanks for that color. I'll turn it back.

Thanks. And the next question comes from Fredrik Stene with Clarkson Securities. Please go ahead.

Anton and team, hope you're well. I think I'd like to ask you, you know, kind of a similar question as I asked from your peers earlier this week, and it has to do with the demand pipeline going forward. I think, you know, clearly, there seems to be concern with that for 2025, there's not really that much work left to be contracted, and the market's, you know, I think has to a large degree kind of acknowledged that equity prices already. But there seems to be quite a lot of optimism around 2026 and what's happening beyond. But unfortunately, in this industry, there has always been kind of a tendency for things to slip to the right and slip to the right and slip to the right. So what are giving you confidence that the program that you're seeing being tendered for or discussions that you're having will materialize in this perceived timeline?

Absolutely. It's a really, really good question. Obviously, we look at the same, you know, macro models that everybody looks at. We look at what our customers are saying, you know, publicly, look at the CapEx spending plans and how they are developing, and they are continuing to increase, especially as you go into 2026 and 2027. But what I will say is, you know, one of the things I do as a CEO is I spend time with our customers. You know, I visit them in their offices, you know, I go offshore with them, and I've visited with most of our major customers in the back half of last year. What I can tell you is the programs that they have on the books, you know, the way they're talking about them, the way they're planning for them, they are looking for partners who can deliver those programs for them. They have long-term development needs that need to be delivered. The status of their planning efforts for those, the posh discussions on a number of our rigs leaves me very confident and comfortable about that demand coming to play. Yes, things move to the right. And they move to the left, and there are a lot of macro and supply chain and other reasons why programs move around. But based on direct discussions that we're having with our customers about programs that they have on the books right now, we feel really good about that pipeline of demand coming in 2026 and 2027.

That's very good to hear. And then I'm not sure if you can even call it a follow-up, but let's turn quickly to jackups. You said that you had five jackups, I think, in advanced discussions for extensions with Aramco. Obviously, you know, through your position with ARO, which is also jointly owned by Aramco, I recall it, you know, partially a bit of a special position given the development there last year. But do you have any, you know, good intel or insights as to what Aramco is planning to do going forward? Do you think they're in general done with suspensions? Do you think they will recontract most of the rigs that are rolling off right now or do you think they can even, you know, actually add to their rig count again as we walk through 2025? Any color on that front would be super helpful. Thanks.

A couple of points. First, in general, I'm not aware of any discussion about additional rig suspensions in Saudi. Beyond that, I really can't talk about, you know, anybody else's fleet. What I can tell you is we've seen we did a couple of short-term extensions on rigs that were rolling kind of at the end of last year in order to, you know, continue to facilitate discussions on the rigs we have rolling. Advanced discussions is a correct characterization of where we are in our discussions. They are constructive and advanced. And, you know, if we need, you know, additional short-term extensions to conclude those discussions, I'd expect we'll get those as well. But feel good about the discussion and us being able to roll those rigs in Saudi and continue, you know, continue our relationship in providing ARO with rigs in order to fulfill their needs in the kingdom.

Alright. That's super. Thank you very much, and have a good day.

Thanks. The next question comes from Kurt Hallead with Benchmark. Please go ahead.

Hey, good morning, everybody.

Morning, Kurt.

Okay. Based on what your peers have said so far, and what you've said here today, it does look like there is some building momentum on some contract activity after a little bit of a lull. So that's always good to hear. So I guess the question I would have then is, you know, there's been some pretty explicit commentary from your peers about, you know, where pricing sits for, you know, ultra-deepwater rigs in particular. As well as sixth-gen rigs. Sounds like you guys are willing to, you know, be patient as you said and stack rigs if you can't get the price that you think is worthy? So just want to see if you can confirm the ranges. I think we've heard somewhere between mid to high fours for ultra-deepwater rigs and somewhere in the mid threes for sixth-gen. Is that how you're seeing the market?

Look, I'll say this. I mean, we only have, I'll say, fortunate to only have one ship in our fleet out of our thirteen. That is sixth-gen. That's the DS-4. And that rate's contracted until, what, fourth quarter of 2027. So for us, it's really the seventh-gen market. The rigs that customers that we talk to prefer for their long-term development programs. I think, you know, if you've seen there haven't been a lot of fixtures recently, but the fixtures that you've seen continued to be in the mid to high four hundreds for high spec assets and that's where the market is. And you're absolutely right. If, you know, I will on we've tried to clearly articulate our strategy is that we focus on delivering operation for customers because that's what gets us more work. We have a super high spec fleet. We're going to minimize costs on those rigs while they're not working, and we're going to find the right long-term opportunities for that high spec fleet to put it to work. And I think you have that exactly right.

Okay. Great. And then, so Chris, just to make sure there's no misinterpretations, you referenced that the midpoint of your revenue guide is 94% contracted. I would have to assume that basically translates to the EBITDA line as well. But again, don't want to be anything.

I think that's a fair way to look at it.

Alright. Great. I'll keep it there, guys. Thanks.

Thanks, and the next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Hey, good morning and thank you for the detailed discussion on the outlook for your rig availability this year. Just given the potential for extended downtime on some floaters, could you please remind us how to think about, you know, how you think about the operating costs when rigs go idle and maybe that's the case of getting those costs down if the rig is expected to be warm stacked for several months, and if there's much variance depending on location or if it's a semi versus a drillship.

Yeah. We talked about this on the last quarter. So recall when we were talking about the ten and the five. But for a ship, like, right now for the ten, you know, we've gotten those costs down to about $60 a day. You know, that's about, you know, getting down to, you know, minimum safe manning. Obviously, you're not going to be spending as much on maintenance because you're not running the equipment. Ideally, you want to get keysides so you're not burning fuel. So those are the actions you take, you know, previously for the five. You know, we had talked about getting down to closer to $50 a day on a semi. But, you know, these are pretty significant reductions relative to kind of average OpEx on the ship for, let's say, of around $150 a day. So, you know, those are the actions that we take to get those costs to those levels.

And the transitioning from going from, you know, $150 when it's working to $60 when it's warm stacked, it's about roughly...

Yeah. We look at a three-month ramp down, and then, you know, on the backside, when you're ramping back up, about a three-month ramp up.

Perfect. Appreciate it. Circle back for the night. Another question.

And the next question comes from Arun Jayaram with JPMorgan. Please go ahead.

On the two rigs that you mentioned that you're in advanced discussions on, the high spec floaters. Can you confirm that those opportunities have 2025 start dates?

Hi there. The opportunities for those more likely will be in the first half of 2026.

Okay. Got it. Got it. Well, so I clarified. And this is Anton, this is let me jump in there. I mean, I think you've heard ours and even our competitors' calls, I mean, there are there's not a lot of 2025 start-up work, very few and far between. Our focus, as we said, is securing that attractive long-term contract that's going to get us, you know, years and potentially follow-on work for these assets. So that's where we focus first. So when we talk about the advanced association, once we have that work secured, then there's always an option to say, okay. Can we add something on the front end of that? It's some short-term work that leads into that. Chris was just talking about, you know, the ramp-up and ramp-down of costs from warm stack to operating mode. What you don't want to be doing is chasing short-term work and then, you know, ramping a rig up and ramping a rig down. So if you know when you're when you book-ended that start for that long-term develop program, then you have an opportunity to go out in the market and say, okay. Is this something we can get, you know, attractive that'll lead up to that to add to that program? I think that's how we think about it, you know, generally on a kind of contracting and commercial basis.

Great. Makes a ton of strategic sense. Maybe shifting gears, ARO Drilling, you know, recently announced plans to build a new build jackup, the Kingdom Three in KSA. And I was wondering if you could give us some shed some light on if you expect the JV to be able to self-fund that new build, or would it require some funding from Valaris Limited?

Absolutely. You know, those contracts that we're building in IMI are backed by long-term sixteen years of contract. We do not, neither us nor Saudi Aramco, intend to need to inject any capital into ARO in order to fund that new build program. There were attractive programs being built at IMI as part of Vision 2030, and we expect those programs, those rigs to be funded by cash flow from operations at ARO plus funding that is readily available in the market for a new build that is backed by a sixteen years of contract backlog, first eight, which is, you know, six-year EBITDA payback over an eight-year contract based on the construction cost. So highly attractive contracts and imminently financeable model.

Yeah. So if you look at what happened on the Kingdom Three and Kingdom One and Kingdom Two is the down payment was paid out of cash from ARO, and then the delivery payment was financed. So largely financed. So, yeah. So as Anton said, I mean, the contract structure, these are highly financeable contracts. And, you know, do not anticipate additional capital needs from Aramco or Valaris Limited to fund anything.

Crystal clear. Thanks a lot, gents.

And the next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Hey. Thanks for letting me back in. Just bigger picture, you know, there's been the ongoing theme of projects getting pushed back. Pushed to the right, but, you know, a lot of these tend to be the larger, I mean, multi-well development programs, especially greenfield projects. I'm curious what you've seen on discussions for the smaller tie-back programs, the exploration programs. Are those getting pushed back also? Is there an emphasis on exploration or is this more of a timing issue where, you know, operator schedules just overlapped and happen to ebb and flow together?

That's a good question. I don't I wouldn't say that those are being pushed back anymore or less. It's kind of, let's say, the gap fill. You know, the focus from a lot of our customers, they do have a good portion of capital discipline, right? They're focused on the big programs first. And, you know, those smaller tiebacks is kind of is what's left, you know, do they have the capacity to do it? Do they have the budget to do it in the current year? How does that fit into their program? So I think it's kind of a second-order decision on their part after they've made the allocation of capital to the large-scale projects that they have.

Alright. Very much appreciated.

This concludes our question and answer session. I would like to turn the conference back over to Nick Georgas for any closing remarks.

Thanks, Dave, and thank you to everyone on the call for your interest in Valaris Limited. We look forward to speaking with you again when we report our first quarter 2025 results. Have a great rest of your day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.