Valaris Limited · NYSE:VAL
Valaris — Debt Investor Presentation (August 2020)
43 slides from Valaris's debt investor presentation, Aug 19, 2020
Slide 1: Business Plan Review
August 17, 2020 Valaris DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS Business Plan Review
Slide 2: Forward-looking statements
Statements contained in this presentation that are not historical facts are forward - looking statements within the meaning of Section 27 A of the Securities Act of 1933 and Section 21 E of the Securities Exchange Act of 1934 . Forward - looking statements include words or phrases such as “anticipat
Slide 3: Valaris Management Team
3 Valaris Management Team Tom Burke President and Chief Executive Officer Jon Baksht Executive Vice President and Chief Financial Officer Gilles Luca Senior Vice President & Chief Operating Officer Alan Quintero Senior Vice President, Business Development Michael McGuinty Senior Vice President, Gene
Slide 4: Agenda
1. Company Overview 2. Market Environment 3. Long - Term Forecast 4. Appendix 3. Long - Term Forecast 4. Appendix Agenda 4 DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS
Slide 5: Company Overview
Company Overview • Valaris created as a platform to consolidate premium industry assets serving a diversified customer base – Fleet of 74 1 rigs offering exposure to multiple attractive asset classes – Deep relationships with leading energy companies – four of the top 2 five NOCs and the top 2 nine
Slide 6: Valaris Has The Largest Fleet of High-Quality Assets
6 Valaris Has The Largest Fleet of High - Quality Assets Source: Rystad. Valaris rig counts include rigs leased to ARO Drilling, and exclude 7 legacy jackups, rigs held for sale or intended for sale , managed drilling operations and rigs owned by ARO Drilling; ; see slide 34 for reconciliation. 1 Ri
Slide 7: Industry's Largest Modern Offshore Drilling Fleet
7 Valaris has the Industry’s Largest Modern Offshore Drilling Fleet Diverse, High - Specification Fleet of 55 Highly Competitive Rigs Capable of Meeting a Broad Spectrum of Customers’ Well Program Requirements Drillships Semisubmersibles Jackups 13 Total 5 Total 37 Total – Average age of 4.9 years –
Slide 8: 50% Joint Venture with Saudi Aramco (ARO Drilling)
8 Valaris owns 50% of Joint Venture with Saudi Aramco, the Largest User of Jackups in the World 50% Ownership 50% Ownership ~$450 Mn Shareholder Notes Receivable ~$450 Mn Shareholder Notes Receivable No Image 1 Down payment on each newbuild rig is no more than 25% before delivery. Illustrative in -
Slide 9: Consistent Operational Results
9 Consistent Operational Results • Achieved high levels of operational effectiveness for the past several years • Focus on optimizing customers’ well delivery through well planning, drilling performance and performance contracts Valaris is Recognized Across Offshore Drilling Industry for Operational
Slide 10: Operations Scale and Scope Versus Other Offshore Drillers
10 Valaris Operations Have More Scale And Scope Than Any Other Offshore Driller, Enabling Valaris To Compete On A Global Basis 16 13 12 11 8 8 8 7 6 6 5 3 3 3 3 12 4 4 5 5 5 7 3 6 3 3 8 9 12 8 4 3 3 1 3 5 3 3 Maersk Drilling Japan Drilling Vantage Drilling Valaris Borr Drilling Transocean COSL Seadr
Slide 11: Backlog Captured Since the Valaris Merger
11 Since The Valaris Merger In April 2019, Valaris Has Captured Significant Backlog Compared To Other Offshore Drillers 27,477 25,573 519 6,310 5,853 5,109 5,038 4,810 407 4,569 4,472 3,777 3,344 3,285 1,361 2,190 6,995 4,302 1,341 31,794 7,701 2,905 10,606 COSL Borr Drilling Egyptian Drilling Fores
Slide 12: Valaris Has Served More Customers Than Any Other Contractor
12 Valaris Has Served More Customers Than Any Other Major International Offshore Drilling Contractor. Valaris Has Depth In Relationships That Positions The Company For Future Floater Work Source: Rystad 1 Customers served from Jan 1, 2015 - Aug 3, 2020; All customers and all rig types. 2 Top expecte
Slide 13: Merger Integration Ahead of Schedule; Cost Transformation Kicked Off
Merger Integration Ahead of Schedule & Synergy Target; Cost Transformation Process Kicked Off in Q1’20 • Merger Integration on Track through Robust Repeatable Process - Projected to deliver more than $210M 3 of combinational synergies by end Q4’20, well in excess of $165M announced target - Complete
Slide 14: Merger Integration Structured in Three Steps
14 Merger Integration Structured in Three Steps Step - 1. Stabilize: No Business Disruptions (month 1) Execute an issue - free day one Minimize disruptions to employees, customers and suppliers Step - 2. Merge: Capture Merger Synergies (months 1 to 18) Deliver $165Mn+ in annual synergies Execute the
Slide 15: Move to a Competitive Onshore Support Model
15 Through the Transformation phase of the merger process Valaris is on track to move to a competitive onshore support model 1 Excludes non - recurring items such as merger transaction costs, activist defence, transformation, restructuring or Forasol costs 2 Does not include Transformation or Foraso
Slide 16: Agenda
1. Company Overview 2. Market Environment 3. Long - Term Forecast 4. Appendix 3. Long - Term Forecast 4. Appendix Agenda 16 DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS
Slide 17: Operators Swiftly Cutting Capex After Commodity Price Drop
17 Source: FactSet as of July 30 , 2020; Evercore ISI Research E&P Budget Barometer April 19, 2020 Given the Drop In Commodity Price, Operators Have Reacted by Swiftly Cutting Capex $10 $20 $30 $40 $50 $60 $70 $80 $90 $100 Actual Forward Curve Brent Crude - $/bbl $- $50 $100 $150 $200 $250 $300 2019
Slide 18: Market Expected to Be Challenging for Next Two-Plus Years
We Expect the Market Will be Challenging for the Next Two - Plus Years • Recent market drop is likely to reduce oil demand in 2020 by 6.7Mbd to 13.0Mbd below 2019 levels, with additional impact beyond 2021 1 . As a result, deepwater capital spend is expected to decline by 30 - 45% in 2020 before ret
Slide 19: Jackup Supply Dynamics
Jackup Supply Dynamics 0 10 20 30 40 50 60 70 80 90 100 0 100 200 300 400 500 600 Aug 2015 Nov 2015 Feb 2016 May 2016 Aug 2016 Nov 2016 Feb 2017 May 2017 Aug 2017 Nov 2017 Feb 2018 May 2018 Aug 2018 Nov 2018 Feb 2019 May 2019 Aug 2019 Nov 2019 Feb 2020 May 2020 Aug 2020 Jackups Total Contracted Tota
Slide 20: Drillship Supply Dynamics
Current Total Supply Illustrative Total Supply Illustrative Marketed Supply Drillship Supply Dynamics 0 10 20 30 40 50 60 70 80 90 100 0 20 40 60 80 100 120 140 Aug 2015 Nov 2015 Feb 2016 May 2016 Aug 2016 Nov 2016 Feb 2017 May 2017 Aug 2017 Nov 2017 Feb 2018 May 2018 Aug 2018 Nov 2018 Feb 2019 May
Slide 21: Benign-Water Semisubmersible Supply Dynamics
Current Total Supply Illustrative Total Supply Illustrative Marketed Supply 35% 28% 7% 14% 18% <10yrs >40yrs 10 - 20yrs 20 - 30yrs 30 - 40yrs CURRENT SUPPLY AGE PROFILE 100% = 68 BENIGN SEMISUBS Benign - Water Semisubmersible Supply Dynamics 2 68 2 7 1 1 63 17 46 Newbuilds in Brazil Other Newbuilds
Slide 22: Agenda
1. Company Overview 2. Market Environment 3. Long - Term Forecast 4. Appendix 4. Appendix Agenda 22 DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS
Slide 23: Key Assumptions
23 Key Assumptions Day Rates & Utilization • Floaters day rates decline in 2021 and remain relatively flat through 2022, with utilization and day rates increasing more meaningfully in the 2023 to 2025 period, leading to rig reactivations in 2025. • Jackup day rates remain relatively flat through 202
Slide 24: Model Output
24 Model Output 1 Other revenue includes $56M of contract termination fees in 2020, along with approx. $130 million of revenue for items such as ARO, mobilizations, personnel, equipment, catering and other reimbursable costs. 2 Stacked costs include annual costs associated with preservation stacked
Slide 25: Unlevered Cash Flow Model Output
2020E 2021E 2022E 2023E 2024E 2025E $M EBITDA 3$ 111$ 92$ 141$ 306$ 560$ Maintenance capex (40) (43) (41) (40) (47) (61) Rig survey and related costs (55) (34) (82) (81) (138) (120) Newbuild Capex (7) (27) (356) - - - Reimbursed capex 7 4 - - - - Cash Taxes (48) (34) (39) (42) (59) (102) Tax refunds
Slide 26: Day Rates & Utilization by Rig Class
26 Day Rates & Utilization by Rig Class DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS Model Outputs & Assumptions – August 12 , 2020 Dayrate ($K) Utilization (%) Dayrate ($K) Utilization (%) Dayrate ($K) Utilization (%) Dayrate ($K) Utilization (%) Dayrate ($K) Utilization (%) Dayrat
Slide 27: Preservation Stacking Assumptions
27 Preservation Stacking Assumptions DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS Model Outputs & Assumptions – August 12 , 2020 2020E 2021E 2022E 2023E 2024E 2025E Dual Activity Drillships 5 8500s 1 1 Other Modern Semis 1 Heavy Duty Ultra-Harsh Environment 1 Heavy Duty Harsh Enviro
Slide 28: Reactivation Cost Assumptions
28 Reactivation Cost Assumptions DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS Model Outputs & Assumptions – August 12, 2020 2020E 2021E 2022E 2023E 2024E 2025E Dual Activity Drillships 3 8500s 2 Other Modern Semis 1 1 Heavy Duty Ultra-Harsh Environment 1 Heavy Duty Harsh Environment
Slide 29: Rig Retirement Assumptions
29 Rig Retirement Assumptions DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS Model Outputs & Assumptions – August 12 , 2020 2020E 2021E 2022E 2023E 2024E 2025E Dual Activity Drillships 8500s 4 Other Modern Semis Heavy Duty Ultra-Harsh Environment Heavy Duty Harsh Environment 1 Heavy D
Slide 30: Preservation Stacking & Retirement
30 Preservation Stacking & Retirement Preservation Stacking Retirement This is a shift in Valaris’ marketing approach from what was done in the past several years, including during the prior sector downturn • Keeping non - working rigs available to pursue short - term work at near break - even leve
Slide 31: Agenda
1. Company Overview 2. Market Environment 3. Long - Term Forecast 4. Appendix Agenda 31 DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS
Slide 32: Considerations for Keeping an Integrated Jackup and Floater Fleet
Considerations for keeping an integrated jackup and floater fleet ▪ Capture significant economies of scale and scope in corporate, technical, and rig - level support to establish market leading cost position ▪ Service premium customers with preference to deal with single provider ▪ Provide diversifi
Slide 33: Illustrative Alternative Structure – Project Wheel
>50 % >50% Valaris Valaris FloaterCo Valaris JackupCo ARO 33 Illustrative Alternative Structure – Project Wheel Valaris Valaris FloaterCo Valaris JackupCo ARO New Regional Partnerships Valaris Valaris FloaterCo Valaris JackupCo ARO Phase 1 Reorganize into hub and spokes model • H igh quality assets
Slide 34: Versatile Modern Fleet in Major Offshore Basins
Valaris has a Versatile Modern Fleet Operating in Most Major Offshore Hydrocarbon Basins 1 3 Drillships (DS - 3, DS - 5 & DS - 6) 4 Semisubs (8500, 8501, 8502 & 8504) 1 Heavy Duty Jackup (JU - 105) 1 Harsh Environment Jackup (JU - 100) 3 Legacy Jackups (JU - 88, JU - 87 & JU - 84) 12 Rigs Sold or In
Slide 35: Recent Fleet Status Updates
35 Recent Fleet Status Updates Contract Additions Contract Terminations Contract Modifications JU - 291 (Stavanger) DS - 7 DS - 10 JU - 102 DS - 9 DS - 15 (Renaissance) JU - 104 DPS - 1 8505 JU - 87 MS - 1 JU - 248 (Gorilla VI) JU - 67 JU - 84 JU - 290 (Viking) JU - 141 JU - 140 JU - 108 JU - 107 JU
Slide 36: Recent Fleet Status Update Details
36 Recent Fleet Status Update Details DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS
Slide 37: Contract Status For Marketed Floaters
37 Contract Status For Marketed Floaters 1 VALARIS DPS-1 VALARIS MS-1 VALARIS 8505 VALARIS DS-8 VALARIS DS-18 VALARIS DS-15 VALARIS DS-12 VALARIS DS-10 Contracted Options 2H 2020 2021 1 Contract status as of July 28, 2020; excludes 2 drillships that are under construction as well as 6 drillships and
Slide 38: Contract Status For Marketed Ultra-Harsh & Harsh Jackups
38 Contract Status For Marketed Heavy Duty Ultra - Harsh & Harsh Environment Jackups 1 VALARIS JU-100 VALARIS JU-123 VALARIS JU-102 VALARIS JU-122 VALARIS JU-120 VALARIS JU-247 VALARIS JU-292 VALARIS JU-250 VALARIS JU-291 VALARIS JU-290 VALARIS JU-248 Contracted Options 2H 2020 2021 Heavy Duty Ultra
Slide 39: Contract Status For Marketed Modern Jackups
39 Contract Status For Marketed Modern Heavy Duty & Standard Duty Jackups 1 VALARIS JU-144 VALARIS JU-140 VALARIS JU-141 VALARIS JU-146 VALARIS JU-143 VALARIS JU-147 VALARIS JU-148 VALARIS JU-76 VALARIS JU-115 VALARIS JU-117 VALARIS JU-107 VALARIS JU-104 VALARIS JU-110 VALARIS JU-118 VALARIS JU-108
Slide 40: Company Capital Structure
Company Capital Structure DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS 40
Slide 41: Company Corporate Structure
Company Corporate Structure DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS 41
Slide 42: Illustrative Intercompany Claims & Recovery Analysis
42 Illustrative Intercompany Claims & Recovery Analysis Assuming the full $850 million intercompany claim by ENSCO Jersey Finance Ltd. against Valaris plc, and assuming all other intercompany balances are valid intercompany claims, under the asset value sensitivities highlighted below the Company’s
Slide 43: Boldly First
Boldly First DRAFT - CONFIDENTIAL - SUBJECT TO FRE 408 AND ITS EQUIVALENTS