Valaris Limited · NYSE:VAL
Valaris — Investor Presentation (February 2020)
42 slides from Valaris's investor presentation, February 2020
Slide 1: Investor Presentation
Investor Presentation February 2020
Slide 2: Forward-Looking Statements
Forward-Looking Statements Statements contained in this investor presentation that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Forward-looking statements include words
Slide 3: Outline
Outline 1. Company Highlights 2. Market Dynamics 3. Valaris Fleet 4. ARO Drilling 5. Financial Management 6. Operational Highlights, Integration & Synergies 3
Slide 4: Valaris Overview
Valaris Overview (NYSE: VAL) Fleet Financial Operational • Largest and amongst the highest-quality offshore drilling fleets in the world 16 drillships 11 semisubmersibles1 $ • $1.6 billion of liquidity • Presence in nearly all major 52 jackups1 ‒ $0.1 billion of cash and short- offshore markets and
Slide 5: Valaris is Focused on Four Key Priorities
Valaris is Focused on Four Key Priorities in 2019 Fleet Strategy & Contracting Assets Driving Value at ARO Drilling Proactive Financial Management Delivering on Integration & Synergy Capture and Operational Excellence 5
Slide 6: Market Dynamics
Market Dynamics ap
Slide 7: Offshore Project Approvals Expected to Lead to Higher Capital Expenditures
Offshore Project Approvals Expected to Lead to Higher Levels of Capital Expenditures Number of New Major Offshore Project Approvals • With lower project costs 87 91 relative to prior years and 72 increasing cash flows from 54 58 higher commodity prices, the 42 number of final investment 32 decision
Slide 8: The Global Floater Market is Recovering
The Global Floater Market is Recovering Total Utilization1 • Utilization for the global 90% floater fleet has gradually 80% increased since early 2017 70% due to a higher number of rig 60% years awarded for new 50% contracts, leading to an 40% improvement in average spot 2013 2014 2015 2016 2017 201
Slide 9: The Global Jackup Market is Recovering
The Global Jackup Market is Recovering Total Utilization1 • Utilization for the global 90% jackup fleet has also moved 80% higher since early 2017, as 70% a steady increase in rig 60% years awarded for new 50% contracts has led to a more 40% significant improvement in 2013 2014 2015 2016 2017 2018 2
Slide 10: Valaris Fleet
Valaris Fleet 7 tt, ‘ al er. = AVAL ARS
Slide 11: Fleet Overview
Fleet Overview Diverse Fleet Capable of Meeting a Broad Spectrum of Customers’ Well Program Requirements Drillships Semisubmersibles Jackups 16 Total 11 Total 52 Total – Average age of 6 years – 9 modern assets with sixth – 7 heavy duty ultra-harsh & 7 heavy – 11 assets equipped with dual 2.5 genera
Slide 12: Highest-Specification Drillships
Highest-Specification Drillships1 Total Utilization Valaris Asset Value2 ($B) 100% 11 14 Valaris All Other 80% 47 of 123 $5.3 drillships 60% 10 4 worldwide Seadrill Transocean $2.8 4 40% Noble 4 2013 2014 2015 2016 2017 2018 2019 Diamond Gross Asset Replacement Highest-Spec Drillships Other Drillshi
Slide 13: Contract Status & Priorities For Marketed Floaters
Contract Status & Priorities For Marketed Floaters1 2020 2021 Priorities VALARIS DS-10 VALARIS DS-8 VALARIS DS-12 VALARIS DS-15 VALARIS DS-18 Drillships VALARIS DS-16 • Increase contracted backlog on active rigs with VALARIS DS-9 near-term availability; warm stack and reduce VALARIS DS-4 costs to <$
Slide 14: Heavy Duty Ultra-Harsh & Harsh Environment Jackups
Heavy Duty Ultra-Harsh & Harsh Environment Jackups1 Total Utilization Valaris Asset Value3 ($B) 100% 10 2 All Other 13 90% Valaris 80% 3 SDRL 49 of 576 70% 5 jackups Borr worldwide $4.0 60% 11 10 Maersk $1.6 50% Noble 2012 2013 2014 2015 2016 2017 2018 2019 Gross Asset Replacement HD UH & HE Jackups
Slide 15: Contract Status & Priorities For Heavy Duty Jackups
Contract Status & Priorities For Heavy Duty Ultra-Harsh & Harsh Environment Jackups 2020 2021 Priorities VALARIS JU-248 VALARIS JU-250 Heavy Duty Ultra-Harsh VALARIS JU-292 VALARIS JU-290 VALARIS JU-249 VALARIS JU-247 VALARIS JU-291 • Increase contracted backlog on active rigs with VALARIS JU-120 ne
Slide 16: Modern Heavy Duty & Standard Duty Jackups
Modern Heavy Duty & Standard Duty Jackups1 Total Utilization Valaris Asset Value2 ($B) 25 100% Valaris 22 80% 193 Borr 109 of 576 jackups 16 $4.8 All Other worldwide COSL 60% 13 $2.3 8 Seadrill Shelf 40% 2012 2013 2014 2015 2016 2017 2018 2019 Gross Asset Replacement Modern HD & SD Jackups Legacy SD
Slide 17: Contract Status & Priorities For Modern Jackups
Contract Status & Priorities For Marketed Modern Heavy Duty & Standard Duty Jackups1 2020 2021 Priorities VALARIS JU-106 VALARIS JU-116 VALARIS JU-108 Heavy Duty Modern VALARIS JU-109 VALARIS JU-110 • Increase contracted backlog on active rigs VALARIS JU-107 VALARIS JU-115 with near-term availabilit
Slide 18: Valaris Value Proposition: Context for Illustrative EBITDA Scenarios
Valaris Value Proposition Context for Illustrative EBITDA Scenarios Floater Average Utilization and Day Rates By Year (2008 – Current) • Average day rates for 100% modern floaters and jackups H 90% 2013 bottomed during 2018 after 2011 2009 reaching recent highs 80% M 2015 between 2012 and 2014 70% 2
Slide 19: Valaris Value Proposition
Valaris Value Proposition Illustrative Rig-Level $ Million Annual EBITDA Asset Values2 Scenarios1 Replace- Fleet M H Gross ment Highest Specification Drillships3 (11) $422 $1,305 $2,804 $5,304 Heavy Duty Ultra-Harsh & HE Jackups3 (13) 273 569 1,632 4,002 Modern Heavy & Standard Duty Jackups3 (25) 27
Slide 20: ARO Drilling
ARO Drilling 20
Slide 21: ARO Drilling Overview
ARO Drilling Overview 50% 50% Ownership Ownership Valaris operates seven jackups offshore Saudi Arabia outside of ARO ~$450M ~$450M Drilling joint venture Shareholder Shareholder Notes Receivable Notes Receivable Leased Rigs (9) Owned Rigs (7) Newbuild Rigs (20) • Three-year contracts; day rates set
Slide 22: ARO Drilling Financial Considerations
ARO Drilling Financial Considerations 50% 50% Ownership Ownership ~$450M ~$450M Shareholder Shareholder Notes Receivable Notes Receivable Shareholder Notes Cash & Distributions Future Growth • ~$900M with 10-year maturities • ARO Drilling had more than • 20-rig newbuild program over ten $200M of cas
Slide 23: Financial Management
Financial Management 23
Slide 24: Limited Debt Maturities to 2024
Limited Debt Maturities to 2024 $ millions $1,764 $1,401 $850 $1,000 $850 $762 $695 $141 $914 $400 $300 $621 $123 $114 $112 2020 2021 2022 2023 2024 2025 2026 2027 2040 2042 2044 Senior Notes Convertible Senior Notes Revolving Credit Facility Note: All amounts as of September 30, 2019. Represents pr
Slide 25: While Cash Flow Does Not Cover Costs at This Stage of the Cycle
While Cash Flow Does Not Cover Costs at This Stage of the Cycle ... Illustrative Annual Illustrative Rig-Level Annual EBITDA Scenarios3 Cash Uses $3,910 million $1,305 • Cost management is a priority, with shore-based support costs and capex lower in 2020 than illustrative graph below Cash Breakeven
Slide 26: EBITDA is Cyclical and Currently in Process of Troughing
EBITDA is Cyclical and Currently in Process of Troughing Global Fleet Utilization Valaris Pro Forma EBITDA1 ($B) 100% 90% +70 rigs 34 months 80% +82 rigs 28 months +118 rigs +195 rigs $3.9 +53 rigs $3.5 $3.7 70% 22 months 40 months 17 months $3.0 $2.9 $2.0 $1.9 60% $1.7 +103 rigs $1.3 +96 rigs 17 mo
Slide 27: High-Quality Fleet Provides Significant Asset Coverage
High-Quality Fleet Provides Significant Asset Coverage to Raise Capital to Cover Interim Funding Gaps • Largest fleet in the offshore drilling $ billions $25.5 sector; majority of rigs are modern, $23.9 high-specification assets $8.9 • Rig fleet provides meaningful asset $9.1 coverage versus total d
Slide 28: Unsecured Capital Structure Provides Flexibility to Raise Capital
Unsecured Capital Structure Provides Flexibility to Raise Capital Financial Levers Comparison to Peers2 • Liquidity % of % of Total Debt Unsecured % of – Cash & short-term investments Unsecured ($ billion) Non- Secured – Revolving credit facility1 Guaranteed Guaranteed Transocean $9.8 40% 24% 36% •
Slide 29: Operational Highlights, Integration & Synergies
Operational Highlights, Integration & Synergies 29
Slide 30: Operational Excellence
Operational Excellence Consistent Operational Results Industry-Leading Customer Satisfaction Fleet-Wide Operational Effectiveness1 99% 99% 99% 99% 98% 98% 2016 2017 2018 Ensco Rowan • Achieved nearly 100% operational • Won 10 of 17 categories in latest survey2 effectiveness for the past three years
Slide 31: Innovation and Technology
Innovation and Technology Strategy Drilling Process Efficiency • Continuous Tripping Technology™ is a patented • Focused efforts on system that fully automates the pipe tripping process technology, systems and without stopping to make or break connections, processes to differentiate our enabling 3x
Slide 32: Global Reach and Geographic Diversity
Global Reach and Geographic Diversity • Presence in virtually all major offshore regions • Critical mass of highest-specification drillships well positioned to serve major deepwater basins of West Africa, South America and Gulf of Mexico • Versatile semisubmersible fleet capable of meeting a wide ra
Slide 33: Large and Diversified Customer Base
Large and Diversified Customer Base $2.3 Billion Contracted Revenue Backlog1 30% Major 46% Independent National Oil Company 24% 6% 7% Europe 27% Middle East 12% Africa U.S. Gulf & Mexico Asia Pacific 19% 25% Central & South America Note: Includes certain customers that may not currently have backlog
Slide 34: Significant Efficiencies From Merger and Cost Reduction Initiatives
Significant Efficiencies From Merger and Cost Reduction Initiatives Synergies & Cost Savings Progress to Date • $265 million of annual run • More than 80% of integration-related rate synergies and cost savings as activities completed compared to pre-merger levels – Staffing reductions – G&A and othe
Slide 35: Appendix
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Slide 36: Global Rig Fleet
Global Rig Fleet Floaters Jackups • ~30 floaters1 could be Delivered Rigs candidates for retirement Under Contract 124 349 based on age and contract Future Contract 28 39 expirations Idle / Stacked 43 67 Marketed Fleet 195 455 Non-Marketed 40 70 • ~150 jackups1 could be retired Total Fleet 235 525 a
Slide 37: Retirements Expected to Lead to Future Supply Contraction
Retirements Expected to Lead to Future Supply Contraction Illustrative Floater Supply • Further floater retirements 135 floaters retired since 3Q14 expected to offset newbuild 22 -17 -13 deliveries 235 4 -3 228 26 Build in Brazil Other >30yrs idle w/o future – Excluding another 26 floaters that Newb
Slide 38: Summary Corporate Structure
Summary Corporate Structure Before Internal Reorganization After Internal Reorganization G I G I Valaris plc1 Valaris plc1,2 I Rowan G I Ensco Jersey Ensco Jersey Rowan Companies Finance Ltd. Finance Ltd.1 Companies Ltd. Ltd.2 Ensco I I I Ensco International Rowan Rowan International Inc. Companies
Slide 39: EBITDA Reconciliations
EBITDA Reconciliations Twelve Months Ended September 30, 2019 Ensco/ Pro Forma $ Millions Valaris Rowan Valaris Net income (loss) $ (163) $ (144) $ (307) Add (subtract): Income tax expense 102 (49) 52 Interest expense 363 57 421 Other (income) expense (888) (4) (892) Operating loss (586) (140) (726)
Slide 40: EBITDA Reconciliations
EBITDA Reconciliations Financial Year 2009 Financial Year 2010 Pro Forma Pro Forma $ Millions Atwood Ensco Rowan Valaris $ Millions Atwood Ensco Rowan Valaris Net income (loss) $ 251 $ 785 $ 368 $ 1,403 Net income (loss) $ 257 $ 586 $ 280 $ 1,123 Less: Less: (Income) loss from discontinued operation
Slide 41: EBITDA Reconciliations
EBITDA Reconciliations Financial Year 2015 Financial Year 2016 Pro Forma Pro Forma $ Millions Atwood Ensco Rowan Valaris $ Millions Atwood Ensco Rowan Valaris Net income (loss) $ 433 $ (1,586) $ 93 $ (1,060) Net income (loss) $ 265 $ 897 $ 321 $ 1,483 Less: Less: (Income) loss from discontinued oper
Slide 42: Boldly First
Boldly First