Valaris Limited · NYSE:VAL
Valaris — Barclays CEO Energy-Power Conference 2019
41 slides from Valaris's conference presentation, Sep 4, 2019
Slide 1: Barclays CEO Energy-Power Conference September 2019
Barclays CEO Energy- Power Conference September 2019
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. Integration, Synergies & Operational Highlights 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 $ 12 semisubmersibles • $2.7 billion of liquidity • Presence in nearly all major 54 jackups ‒ $0.4 billion of cash and short- offshore markets and on
Slide 5: Valaris is Focused on Four Key Priorities in 2019
Valaris is Focused on Four Key Priorities in 2019 Fleet Strategy & Contracting Assets Driving Value at ARO Drilling Proactive Financial Management Delivering on Integration & Synergy Capture and Operational Excellence 5
Slide 6: Market Dynamics
_ Market Dynamics yo
Slide 7: Offshore Project Approvals Expected to Lead to Higher Capital Expenditures
Offshore Project Approvals Expected to Lead to Higher Levels of Capital Expenditures Number of New Major Offshore Project Approvals • With lower project costs 91 88 relative to prior years and 81 74 increasing cash flows from 58 higher commodity prices, the 50 42 40 number of final investment decisi
Slide 8: The Global Floater Market is Recovering
The Global Floater Market is Recovering Total Utilization1 90% • Utilization for the global 80% floater fleet has gradually 70% increased since early 2017 60% due to a higher number of 50% rig years awarded for new 40% contracts, leading to slight 2013 2014 2015 2016 2017 2018 2019 improvement in av
Slide 9: The Global Jackup Market is Recovering
The Global Jackup Market is Recovering Total Utilization1 90% • Utilization for the global 80% jackup fleet has also moved 70% higher since early 2017, as 60% a steady increase in rig 50% years awarded for new 40% contracts has led to a 2013 2014 2015 2016 2017 2018 2019 modest improvement in averag
Slide 10: Valaris Fleet
Valaris Fleet : y Wlyul be ~ = Ss 7 ie a et = 3 Bi! nye &.
Slide 11: Fleet Overview
Fleet Overview Diverse Fleet Capable of Meeting a Broad Spectrum of Customers’ Well Program Requirements Drillships Semisubmersibles Jackups 16 Total 12 Total 54 Total – Average age of 6 years – 9 modern assets with sixth – 7 heavy duty ultra-harsh & 7 heavy – 11 assets equipped with dual 2.5 genera
Slide 12: Highest-Specification Drillships
Highest-Specification Drillships1 Total Utilization Valaris Asset Value2 ($B) 100% 11 12 Valaris All Other 80% 47 of 127 $5.3 4 drillships Seadrill 60% worldwide 12 $3.3 4 Transocean Noble 4 40% Diamond 2013 2014 2015 2016 2017 2018 2019 Gross Asset Replacement Value Value Day Rates for New Contract
Slide 13: Contract Status & Priorities For Marketed Floaters
Contract Status & Priorities For Marketed Floaters1 2H19 2020 2021 Priorities VALARIS DS-8 VALARIS DS-9 VALARIS DS-10 VALARIS DS-16 • Increase contracted backlog on active rigs with VALARIS DS-18 near-term availability VALARIS DS-7 Drillships VALARIS DS-12 VALARIS DS-15 VALARIS DS-17 • Warm stack an
Slide 14: Heavy Duty Ultra-Harsh & Harsh Environment Jackups
Heavy Duty Ultra-Harsh & Harsh Environment Jackups1 Total Utilization Valaris Asset Value3 ($B) 100% 13 Valaris 2 33 75 All Other 11 of 583 80% Maersk jackups worldwide $4.0 10 Noble $1.8 3 5 60% COSL Borr 2012 2013 2014 2015 2016 2017 2018 2019 Gross Asset Replacement Value Value Day Rates for New
Slide 15: Contract Status & Priorities For Heavy Duty Ultra-Harsh & Harsh Jackups
Contract Status & Priorities For Heavy Duty Ultra-Harsh & Harsh Environment Jackups 2H19 2020 2021 Priorities VALARIS JU-250 VALARIS JU-247 Harsh - VALARIS JU-290 VALARIS JU-292 VALARIS JU-291 Heavy Duty Ultra Heavy VALARIS JU-249 VALARIS JU-248 • Increase contracted backlog on active rigs with VALA
Slide 16: Modern Heavy Duty & Standard Duty Jackups
Modern Heavy Duty & Standard Duty Jackups1 Valaris Asset Value2 ($B) Total Utilization 25 100% Valaris 21 80% 174 Borr 95 of 583 jackups 12 $4.8 All Other worldwide Seadrill 60% 12 $2.7 COSL 9 Aban 40% Gross Asset Replacement 2012 2013 2014 2015 2016 2018 2019 2017 Value Value Day Rates for New Cont
Slide 17: Contract Status & Priorities For Modern Heavy Duty & Standard Duty Jackups
Contract Status & Priorities For Marketed Modern Heavy Duty & Standard Duty Jackups1 2H19 2020 2021 Priorities VALARIS JU-106 VALARIS JU-116 VALARIS JU-108 VALARIS JU-109 VALARIS JU-110 • Increase contracted backlog on active rigs VALARIS JU-117 VALARIS JU-115 with near-term availability Heavy Duty
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 2013 bottomed during 2018 after 90% 2011 2009 reaching recent highs 80% M 2015 between 2012 and 2014 YTD 7
Slide 19: Valaris Value Proposition: Illustrative Rig-Level EBITDA and Asset Values
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 $3,300 $5,304 Heavy Duty Ultra-Harsh & HE Jackups3 (13) 273 569 1,755 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 eight 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 $695 $621 $914 $400 $300 $201 $123 $114 $112 2019 2020 2021 2022 2023 2024 2025 2026 2027 2040 2042 2044 Unsecured Senior Notes Convertible Notes Note: All amounts as of June 30, 2019 pro forma for tender offers completed in J
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 $3,993 million $1,305 • Other non-recurring uses: ‒ Newbuild capex ~$300M $569 Cash Breakeven Scenario Utilization Day Rate ‒ Debt maturities HS Drillship
Slide 26: EBITDA is Cyclical and Currently in Process of Troughing
EBITDA is Cyclical and Currently in Process of Troughing Global Fleet Utilization Valaris Pro Forma EBITDA1 ($B) 100% 90% +70 rigs 34 months 80% +82 rigs 28 months +118 rigs +195 rigs $3.9 +53 rigs $3.7 70% 22 months 40 months $3.5 17 months $3.0 $2.9 $2.0 $1.9 60% $1.7 +103 rigs +81 rigs $1.3 17 mo
Slide 27: High-Quality Fleet Provides Significant Asset Coverage to Raise Capital
High-Quality Fleet Provides Significant Asset Coverage to Raise Capital to Cover Interim Funding Gaps • Largest fleet in the offshore drilling $ billions $25.9 sector; majority of rigs are modern, $24.4 high-specification assets $9.3 • Rig fleet provides meaningful asset $9.8 coverage versus total d
Slide 28: Unsecured Capital Structure Provides Flexibility to Raise Capital
Unsecured Capital Structure Provides Flexibility to Raise Capital Financial Levers Comparison to Peers3 % of • Liquidity % of Total Debt Unsecured % of – Cash & short-term investments Unsecured ($ billion) Non- Secured 1 Guaranteed – Revolving credit facility Guaranteed • Issuance of securities Tran
Slide 29: Integration, Synergies & Operational Highlights
Integration, Synergies & Operational Highlights 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 & Technology Strategy
Innovation & 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 fa
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: Valaris Rebranding
Valaris Rebranding • Establish capabilities as a larger, more global offshore driller ‒ Technologically-advanced, highly capable fleet of deep- and shallow- Strategic water rigs Positioning ‒ Largest global footprint ‒ Focus on operational efficiency and excellence ‒ Decades of expertise and knowled
Slide 34: Merger Integration and Synergies
Merger Integration and Synergies Targeted Synergies Progress to Date • $165 million of run rate annual • More than 50% of integration- expense synergies related activities completed – G&A and other support costs – 65% of planned staffing reductions – Regional office consolidation – Houston and Aberd
Slide 35: Appendix
Appendix 35
Slide 36: Global Rig Fleet
Global Rig Fleet 1 Floaters Jackups • ~35 floaters could be Delivered Rigs candidates for retirement based Under Contract 128 338 on age and contract expirations Future Contract 29 39 Idle / Stacked 38 68 • ~150 jackups1 could be retired Marketed Fleet 195 445 as expiring contracts and Non-Marketed
Slide 37: Retirements Expected to Lead to Future Supply Contraction
Retirements Expected to Lead to Future Supply Contraction Illustrative Floater Supply • Further floater retirements 129 floaters retired since 3Q14 expected to offset newbuild 23 -17 -11 deliveries 240 5 -7 >30yrs idle 233 Other 27 w/o future >30yrs Build in Brazil Newbuilds – Excluding another 27 f
Slide 38: EBITDA Reconciliations Twelve Months Ended June 30, 2019
EBITDA Reconciliations Twelve Months Ended June 30, 2019 Ensco/ Pro Forma $ Millions Valaris Rowan Valaris Net income (loss) $ (127) $ (288) $ (414) Add (subtract): Income tax expense 111 (46) 65 Interest expense 341 89 429 Other (income) expense (715) (8) (724) Operating loss (391) (253) (644) Add
Slide 39: EBITDA Reconciliations Financial Year 2009 and 2010
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 40: EBITDA Reconciliations Financial Year 2015 and 2016
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 41: Boldly First
Boldly First