Valaris Limited · NYSE:VAL
Valaris — Q1 2023 Earnings Presentation
36 slides from Valaris's earnings presentation, May 2, 2023
Slide 1: Valaris Investor Presentation May 2023
VALARIS (NYSE: VAL) Investor Presentation May 2023
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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking
Slide 3: Valaris Overview
Valaris Overview "yy VALARIS 3
Slide 4: Valaris is the industry leader in offshore drilling
Valaris is the industry leader in offshore drilling with unmatched scale and financial strength 11 Drillships • ARO Drilling – 50/50 JV with Saudi Aramco Gross Fleet 5 Semisubmersibles asset value • 15 rigs operating & 20-rig newbuild program > $9 billion1 35 Jackups • $403 million shareholder notes
Slide 5: We are focused, value driven and responsible in our decision making
We are focused, value driven and responsible in our decision making To Provide Responsible Solutions Purpose That Deliver Energy to the World Focused Value Driven Responsible Building enduring presence and Exercising financial discipline Advancing our sustainability long-term relationships and drivi
Slide 6: Largest fleet of modern offshore drilling rigs in the industry
Largest fleet of modern offshore drilling rigs in the industry 11 Drillships1 5 Semisubmersibles Average age 8 years Average age 11 years 12 HD Ultra-Harsh & Harsh 21 HD & SD Modern Jackups2 2 SD Legacy Jackups2 Jackups2 Average age 14 years Average age 13 years Average age 41 years 1 Excludes newbu
Slide 7: Largest fleet of high-specification assets
Largest fleet of high-specification assets Fleet Quality of Major International Offshore Drillers Floaters Avg. Age1 2 Transocean 38 12 Valaris 28 16 6 1 51 Noble 19 10 Transocean 12 12 6 8 38 Valaris 2 16 9 3 Seadrill 14 11 Shelf 7 6 16 7 36 Diamond 12 26 Q1 Q2 Q3 Q4 Noble 18 11 2 1 32 Jackups Borr
Slide 8: Strong customer relationships with major IOCs, NOCs and independents
Strong customer relationships with major IOCs, NOCs and independents 1 1 Majors National Oil Companies and Other Select Customers Floaters Jackups Locations Floaters Jackups Locations ✓ ✓ Latin America, Southeast Asia, West Africa ✓ Middle East ✓ ✓ U.S. GOM, West Africa ✓ ✓ Brazil ✓ ✓ Australia, Mex
Slide 9: Focused on key basins expected to drive a large share of future demand
Focused on key basins expected to drive a large share of future demand 11 North Sea & Norway 8% 2 3 U.S. GOM & Mexico 5 1 18% 2 Middle East 46% 12% 1 7% West Africa Southeast Asia 2 % share of expected floater 10% demand over next five years1 4% 10% 12 % share of expected jackup demand over next fiv
Slide 10: Delivering safe, reliable and efficient operations is our primary focus
Delivering safe, reliable and efficient operations is our primary focus Safety Reliability Efficiency Objectives Objectives Objectives • Control Process Safety Risk • Maximize Rig Uptime Performance • Maximize Productivity of Well • Reduce Personal Safety Exposure • 97% Revenue Efficiency in 2022 an
Slide 11: Industry-leading cost structure
Industry-leading cost structure Operating, Support and G&A Costs per Weighted Active Rig ($M)1 -20% 16.8 17.0 16.8 14.8 14.8 14.9 13.3 11.9 11.9 12.2 Valaris 2 Diamond Seadrill Noble Transocean Active Floaters 10 11 11 12 16 9 9 9 29 26 Active Jackups 28 24 0 0 11 5 12 10 0 0 # of Countries with 15
Slide 12: Strong balance sheet provides flexibility regarding capital allocation
Strong balance sheet provides flexibility regarding capital allocation Net Debt1 ($M) (257) (107) 197 412 1,296 1,519 6,356 • Refinancing transaction, executed in April 2023, enhances capital structure 7,347 1,437 1,637 • $1.3 billion3 of liquidity 700 521 673 509 (141) (119) ‒ Provides ability to s
Slide 13: Disciplined fleet management strategy focused on driving long term shareholder value
Disciplined fleet management strategy focused on driving long term shareholder value Optimization Reactivations Divestitures • Priority is to ensure that the active • Only reactivate rigs for opportunities • Rational and economic approach to fleet remains highly utilized that provide meaningful retu
Slide 14: Strong framework in place for advancing our sustainability program
Strong framework in place for advancing our sustainability program Organizational focus on sustainability • Board of Directors has a dedicated Environmental, Social and Governance (ESG) Committee providing oversight and guidance • Sustainability and New Energy function, led by a member of the Execut
Slide 15: Reduce emissions from our own operations and partner with customers
Reduce emissions from our own operations and partner with customers Reduce Emissions from our own Operations • Target to reduce emissions intensity by 10% to 20% by 2030 compared to a 2019 baseline • Four focus areas identified to achieve this target: 1. Energy Efficient Practices 2. Energy-Saving U
Slide 16: Offshore Market Overview
Offshore Market Overview FOCUSED | VALUE DRIVEN | RESPONSIBLE = v = As ea TT ie "qt VALARIS
Slide 17: Commodity supply and demand is constructive for our industry
Commodity supply and demand is constructive for our industry Global Liquid Fuels Consumption (Million Barrels Per Day) Offshore Breakeven Oil Prices for Undeveloped Reserves 105 100% 100 25 100 93% 94% 95% 90% 88% 90 95 Demand for 81% hydrocarbons 20 77% 80 90 Actual Forecast 74% expected to return
Slide 18: Offshore upstream capex and new project sanctioning are expected to increase
Offshore upstream capex and new project sanctioning are expected to increase Offshore Upstream Capex ($B) +11% • Record free cash flows in 2022 for 200 exploration and production companies and 187 156 161 163 attractive project economics are expected to 137 139 91 98 drive increased investment in of
Slide 19: Demand for offshore drilling is expected to increase over the next several years
Demand for offshore drilling is expected to increase over the next several years Floater Demand by Wellbore Purpose (Rig Years) • Floater demand is expected to increase at a 200 +6% compound annual growth rate (CAGR) of 6% 140 149 147 over the next five years 150 134 120 128 124 107 107 112 • Approx
Slide 20: Significant supply rationalization has improved market balance
Significant supply rationalization over the past several years has improved market balance Benign Environment Floater Supply and Utilization Jackup Supply and Utilization 300 100% 550 100% 90% 500 90% 250 450 80% 80% 200 400 70% 70% 350 150 60% 60% 300 100 50% 250 50% 50 40% 200 40% Jan Jan Jan Jan
Slide 21: Active utilization currently >90% for drillships and benign jackups
Active utilization currently >90% for drillships and benign environment jackups 1 1 1 Benign Harsh Benign Time Stacked – Available and Cold Stacked Rigs Delivered Rigs Drillships Semis Jackups Jackups Drillships Benign Semis Contracted 80 40 28 364 1 1 4 5 Available 2 5 12 5 36 2 2 Active Fleet 85 5
Slide 22: Supply dynamics are supportive of a sustained upcycle
Supply dynamics are supportive of a sustained upcycle Floaters Jackups • Benign environment floater supply has declined by 44% • Jackup supply has declined by 9% to 493 from a peak of to 157 from a peak of 281 in late 2014 542 in early 2015 • Only ten competitive1 warm or cold stacked drillships • 3
Slide 23: Day rates have increased meaningfully since late 2020
Day rates have increased meaningfully since late 2020 Average Day Rates for Drillship Fixtures Signed 1 Average Day Rates for Benign Environment Jackup Fixtures Signed 2 +109% +54% 73% $403,000 $109,000 $71,000 $193,000 4Q20 1Q23 4Q20 1Q23 • Average day rates for drillship fixtures signed in 4Q22 •
Slide 24: Value Proposition
Value Proposition FOCUSED || VALUE DEN | RESPONSIBLE ESP eee VN, "y VALARIS
Slide 25: Valaris has a value proposition built on four key elements
Valaris has a compelling value proposition built on four key elements 1 Active Fleet 3 Leased and Managed Rigs • 33 rigs including drillships VALARIS DS-8 and DS-17 that • Eight rigs owned by Valaris currently leased to ARO are currently being reactivated Drilling under bareboat charter agreements,
Slide 26: Stacked rigs and newbuild options provide operating leverage
Stacked rigs and newbuild options provide operating leverage in an improving market Stacked Fleet Overview Asset Value • Stacked fleet includes 11 high-quality modern As Built Illustrative Asset Value of Stacked Fleet assets with a total build cost of ~$3.5B and Cost significant useful lives remaini
Slide 27: Significant earnings potential in a market recovery scenario
Significant earnings potential in a market recovery scenario Rigs Under Contract or Total Rigs Illustrative Annual EBITDAR from Valaris Fleet1 20142 with Future Contract 11 9 Drillship Day Rates $350K $400K $450K ~$500K 5 3 Benign Semisubmersible Day Rates $250K $300K $350K ~$400K 12 9 HD Ultra-Hars
Slide 28: ARO Drilling joint venture provides strong presence in the largest jackup market
ARO Drilling joint venture provides strong presence in the largest jackup market in the world ARO Drilling Overview • ARO Drilling (“ARO”) is an unconsolidated 50/50 joint venture with Saudi Aramco that owns and operates jackup rigs in Saudi Arabia • Strategic partnership with the largest global cus
Slide 29: Equity trades at a discount to largest peers and recent market transactions
Equity trades at a discount to largest peers and recent market transactions 1 Equity Performance Since Valaris Listing Recent Market Transactions for Drillships 148% Rig Name Buyer Shipyard Price 91% 84% 72% Crete $320 million 13% 5 Santorini $305 million Valaris Noble Diamond Transocean Seadrill 2,
Slide 30: Value-driven approach to capital allocation
Value-driven approach to capital allocation • Rigs only reactivated for opportunities that provide meaningful returns on reactivation costs over the initial contract period Disciplined • Two high-specification stacked drillships remaining (VALARIS DS-7 & DS-11) • Attractive purchase options on newbu
Slide 31: Key takeaways
Key takeaways 1 Largest fleet of high-specification rigs with a significant presence in all key offshore basins 2 Strong customer relationships with major IOCs, NOCs and independents 3 Industry leading cost structure and balance sheet 4 Improved rig supply and demand dynamics driving day rates highe
Slide 32: Appendix
Appendix FOCUSED | VALUE DEN | RESPONSIBLE “ES? Fea A "y VALARIS
Slide 33: Contract Backlog as of May 1, 2023
Contract Backlog as of May 1, 2023 Contract Backlog (1) (2) Contract Backlog by ($ millions) 2023 2024 2025+ Total Contracted Days (1) (2) 2023 2024 2025+ Customer Type Drillships $ 483.5 $ 641.8 $ 373.7 $ 1,499.0 Drillships 1,847 1,924 949 Semis 122.5 137.6 10.1 270.2 Semis 545 606 45 Floaters $ 60
Slide 34: Valaris owns 50% of joint venture with Saudi Aramco
Valaris owns 50% of joint venture with Saudi Aramco, the world’s largest jackup customer 50% 50% Ownership Ownership Valaris operates one jackup offshore Saudi Arabia outside of ARO Drilling joint venture1 $403M $419M Shareholder Shareholder Notes Receivable Notes Receivable Leased Jackups (8) Owned
Slide 35: Non-GAAP Reconciliations
Non-GAAP Reconciliations (In millions) (In millions) (In millions) Year-Ended Year-Ended Year-Ended December 31, December 31, December 31, ACTIVE FLEET 2022 LEASED & MANAGED RIGS 2022 ARO 2022 Net income (loss) $ 232.2 Net income (loss) $ 76.8 Net income $ 20.7 Add (subtract): Add (subtract): Add (s
Slide 36: VALARI ae
VALARI ae