Valaris Limited · NYSE:VAL
Valaris — Investor Presentation (November 2021)
43 slides from Valaris's investor presentation, Nov 17, 2021
Slide 1: Valaris
VALARIS (NYSE: VAL) November 2021
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: Post restructuring Valaris is an attractive investment opportunity
Post restructuring Valaris is an attractive investment opportunity Best in class fleet, strongest balance sheet and industry-leading operational backbone Market environment Compelling value proposition Focus on green solutions to reduce carbon footprint 3
Slide 4: Valaris has the largest fleet of modern offshore drilling rigs in the industry
Valaris has the largest fleet of modern offshore drilling rigs in the industry 11 Drillships1 5 Semisubmersibles Average age 7 years Average age 9 years 12 Ultra-Harsh & Harsh 23 HD & SD Modern Jackups2 6 SD Legacy Jackups2 Jackups2 Average age 13 years Average age 12 years Average age 40 years 1 Ex
Slide 5: Valaris has the largest fleet of high-specification assets
Valaris has the largest fleet of high-specification assets Fleet Quality of Major International Offshore Drillers Floaters Avg. Age1 2 Transocean 39 11 Valaris 30 16 10 1 57 Noble 3 20 10 3 Noble 26 11 1 1 39 Valaris 2 16 8 Seadrill Ltd 16 7 Transocean 15 12 4 8 39 Diamond 13 24 4 Seadrill Ltd 13 16
Slide 6: Operational Excellence
Valaris has an industry-leading operational backbone, underpinned by strong values and a purpose driven culture SAFETY RELIABILITY EFFICIENCY • Controlling Process Safety • Maximizing Rig Uptime • Maximizing Productivity of Risk Performance Well Construction • Reducing Personal Safety • 99% Revenue
Slide 7: Valaris' operations have unmatched scale and geographic diversity
Valaris’ operations have unmatched scale and geographic diversity Presence in virtually all major offshore regions 2 1 9 Leading provider of shallow-water jackup services in the Middle East 1 and North Sea, among international drilling contractors 1 6 3 15 Versatile 6 semisubmersible fleet 1 2 capab
Slide 8: Large and diversified customer base including major IOCs, NOCs and independents
Large and diversified customer base including major IOCs, NOCs and independents Number of Customers Served Since Valaris Merger Selection of Customers Served Since Valaris Merger 64 53 36 26 25 22 17 Valaris Noble 1 Transocean Borr Seadrill Shelf Diamond • Valaris has the largest customer base in th
Slide 9: More than $2.1 billion of contract backlog added year to date at improving day rates
More than $2.1 billion of contract backlog added year to date at improving day rates Floater Backlog ($M) YTD Backlog Additions by Customer Type ($M) 267 1,617 12% 1,720 Major 13% IOC 164 55% NOC Independent Year-End 2020 Additions Consumed October 27, 2021 20% Avg. Day 188,000 235,000 Rate1 Jackup
Slide 10: Valaris is winning an outsized share of contracts and rig years awarded in 2021
Valaris is winning an outsized share of contracts and rig years awarded in 2021 Valaris % Wins ‒ Fixtures Valaris % Wins ‒ Rig Years 30% 30% 25.0% 25% 25% 21.3% 21.8% 20% 20% 17.7% 15% 14.0% 15% 11.4% 10% 10% 9.1% 7.4% 5% 5% 0% 0% 1Q21 2Q21 3Q21 4Q21 1Q21 2Q21 3Q21 4Q21 1 2 1 2 Quarterly % Cumulativ
Slide 11: Valaris has the strongest balance sheet in the offshore drilling sector
Valaris has the strongest balance sheet in the offshore drilling sector Net Debt1 ($M) • Valaris is the only major offshore driller (110) 254 601 1,844 5,872 with a net cash position 1,913 7,348 • $550M senior secured notes due 2028 1,488 545 306 (69) ‒ Pari passu debt capacity of $275M (655) (52) (
Slide 12: Valaris has an industry-leading cost structure
Valaris has an industry-leading cost structure Operating, Support and G&A Costs per Weighted Active Rig ($M)1 17.9 17.7 16.4 15.7 15.5 14.4 14.1 13.3 13.7 12.8 12.4 11.8 11.7 11.2 Valaris 2 Diamond Seadrill Noble Transocean Active Floaters 7 7 11 11 17 12 8 9 26 25 Active Jackups 29 24 0 0 10 7 12 8
Slide 13: Post restructuring Valaris is an attractive investment opportunity
Post restructuring Valaris is an attractive investment opportunity Best in class fleet, strongest balance sheet and industry-leading operational backbone Market environment Compelling value proposition Focus on green solutions to reduce carbon footprint 13
Slide 14: Utilization recovery presents opportunity for improvement in financial performance
Utilization recovery presents opportunity for improvement in financial performance Global Fleet Supply and Utilization1 Valaris Pro Forma EBITDA and Global Fleet Utilization1 900 100% 4.0 3.9 90 3.7 3.5 800 90% 3.0 3.0 2.9 80 700 80% Utilization % Utilization % EBITDA $B Rig Count 2.0 600 2.0 1.9 70
Slide 15: Increase in total utilization over the past five years primarily driven by reduction in supply
Increase in total utilization over the past five years primarily driven by reduction in supply Valaris has retired 50 rigs since the beginning of the downturn, including 18 since the start of 2020 140 Drillships Supply and Utilization 100% Harsh Jackups Supply and Utilization 60 100% 120 90% 50 90%
Slide 16: 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 +6% compound annual growth rate (CAGR) of 6% 150 142 between 2021 and 2025 129 124 131 120 120 121 109 111 100 • Floater deman
Slide 17: Post restructuring Valaris is an attractive investment opportunity
Post restructuring Valaris is an attractive investment opportunity Best in class fleet, strongest balance sheet and industry-leading operational backbone Market environment Compelling value proposition Focus on green solutions to reduce carbon footprint 17
Slide 18: Valaris has a compelling value proposition built on four key elements
Valaris has a compelling value proposition built on four key elements 1 Active Fleet1 3 Stacked Fleet1 • Active fleet of 31 rigs is generating positive cash flow • Stacked fleet of 17 high-quality modern assets and two legacy assets with a total build cost of ~$7B, • 2021 operating margin for these
Slide 19: Fleet divided between cash generating active and leased rigs, and stacked assets
Fleet divided between cash generating active and leased rigs, and stacked assets with future option value Rig Numbers by Asset Category ‒ Active, Leased, Stacked and ARO Drilling Rigs 31 3 Drillships1 Semisubmersibles Drillships DS-4, DS-9, DS-11 HD Ultra-Harsh & Harsh Jackups 2 and DS-16 have been
Slide 20: Active fleet expected to generate $345-355M adjusted operating margin in 2021
1 Active fleet expected to generate $345-355M adjusted operating margin in 2021 % of Rigs With Contract – Benign Floaters1 Active Fleet 2021E 100% 100% VAL 90% Revenue $1,090-1,100M 80% 84% 70% 71% Utilization ~75% 69% VAL 60% Operating Margin $260-270M 50% 40% 2012 2013 2014 2015 2016 2017 2018 201
Slide 21: Leased and managed rigs expected to generate $80-85M operating margin in 2021
2 Leased and managed rigs expected to generate $80-85M operating margin in 2021 Leased Rigs Overview Summary Financial Information • Valaris leases seven rigs1 to ARO Drilling through bareboat charter 2021E arrangements Operating Margin $80-85M • Rigs are leased under drilling contracts with Saudi A
Slide 22: Stacked fleet has significant asset value even at current depressed price levels
3 Stacked fleet has significant asset value even at current depressed price levels Stacked Fleet Overview Asset Value and Quality • Stacked fleet of 17 high-quality modern Build Illustrative Asset Value of Stacked Fleet2 assets and two legacy assets, with a total Cost build cost of ~$7B and signific
Slide 23: ARO Drilling joint venture is a cash generative business with significant growth prospects
4 ARO Drilling joint venture is a cash generative business with significant growth prospects ARO Drilling Overview • ARO Drilling (“ARO”) is a 50/50 joint venture with Saudi Aramco, the largest customer for jackups in the world • ARO owns a fleet of seven jackup rigs operating under contracts Income
Slide 24: Valaris fleet has significant earnings potential in a market recovery scenario
Valaris fleet has significant earnings potential in a market recovery scenario Number of Illustrative Annual EBITDA from Valaris Fleet1 20142 Rigs 11 Drillship Day Rates $200K $275K $350K ~$500K 5 Benign Semisubmersible Day Rates $150K $200K $250K ~$400K 12 HD Ultra-Harsh & Harsh Jackup Day Rates3 $
Slide 25: Disciplined approach to capital allocation and focus on free cash flow generation
Disciplined approach to capital allocation and focus on free cash flow generation Key Priorities Highlights Objectives • Win additional backlog • More than $2.1 billion of contract for active fleet backlog added year to date1 at higher day rates • Maximize EBITDA • Reactivate high quality • Long-ter
Slide 26: Valaris equity trades at a significant discount to its major peers
Valaris equity trades at a significant discount to its major peers Implied Steel Value per Ultra-Deepwater Equivalent Rig ($M)1,2,3 272 162 147 105 98 Transocean Maersk Noble Diamond Valaris Source: FactSet as of November 12, 2021, for listed equities; FactSet US OTC settlement pricing as of Novembe
Slide 27: Post restructuring Valaris is an attractive investment opportunity
Post restructuring Valaris is an attractive investment opportunity Best in class fleet, strongest balance sheet and industry-leading operational backbone Market environment Compelling value proposition Focus on green solutions to reduce carbon footprint 27
Slide 28: Offshore production is less carbon intensive than other forms of oil and gas extraction
Offshore production is less carbon intensive than other forms of oil and gas extraction Average Scope 1 & 2 Emissions Intensity by Source KgCO2e/boe 70 Offshore oil and gas production has among 60 the lowest carbon emissions per barrel of oil 50 produced of any type of oil and natural gas 40 product
Slide 29: Valaris has published an ESG position statement reflecting our commitment to ESG goals
Valaris has published an ESG position statement reflecting our commitment to ESG goals • Valaris operates in the heavily regulated marine environment with a historic focus on sustainability • Valaris Board of Directors has a dedicated ESG Committee, which endorsed an ESG Position Statement • ESG Pos
Slide 30: Carbon footprint reduction strategy focused on three main areas
Carbon footprint reduction strategy focused on three main areas Power Plant Optimization Emissions Reduction Hybridization & Shore Power • Optimize fuel efficiency of • Deploy nitrous oxide (NOX) • Electrification to reduce use of existing assets by increasing reduction technologies, e.g. diesel gen
Slide 31: Valaris has implemented several green solutions to date with more planned
Valaris has implemented several green solutions to date with more planned Power Plant & Dynamic Hybridization & Emissions Reduction Positioning Optimization Shore Power Solutions • Engine optimization by operating at • Selective Catalytic Reduction • Power sourced from platform gas higher load facto
Slide 32: Valaris Intelligence Platform allows real-time tracking of GHG emissions and fuel efficiency
Valaris Intelligence Platform (VIP) allows real-time tracking and analytics of GHG emissions and fuel efficiency • Emissions monitoring technology and Power BI dashboards being deployed across the fleet • Enables near real-time data of fuel consumption and GHG emissions for each engine across the fl
Slide 33: Appendix
Appendix 33
Slide 34: Valaris owns 50% of joint venture with Saudi Aramco, the world's largest jackup customer
Valaris owns 50% of joint venture with Saudi Aramco, the world’s largest jackup customer 50% 50% Ownership Ownership Valaris operates five jackups offshore Saudi Arabia outside of ARO Drilling joint venture ~$440M ~$460M Shareholder Shareholder Notes Receivable Notes Receivable Leased Jackups (7) Ow
Slide 35: 2021 Guidance as of November 2, 2021
2021 Guidance as of November 2, 20211 • Adjusted EBITDAR measures the results of Income Statement Guidance 2021E the business adjusted for one-time reactivation costs Adjusted EBITDA2 ~$90M • Reactivation cost estimates for preservation stacked rigs are: Reactivation Costs (One-Time Expense) ~$85M ‒
Slide 36: 2022 Guidance as of November 2, 2021
2022 Guidance as of November 2, 20211 Income Statement Guidance 2022E • Adjusted EBITDAR measures the results of the business adjusted for one-time Revenues $1,300-1,500M reactivation costs Contract Drilling Expense2 $1,100-1,250M • Reactivation cost estimates for preservation G&A Expense $80-90M st
Slide 37: Contract Backlog as of October 27, 2021
Contract Backlog as of October 27, 2021 ($ millions) Contract Backlog (1) (2) 2021 2022 2023 2024+ Total Contract Days (1) (2) 2021 2022 2023 2024+ Drillships $ 46.5 $ 398.6 $ 306.2 $ 587.3 $ 1,338.6 Drillships 239 1,885 1,369 1,917 Semis 18.7 111.8 132.8 14.6 277.9 Semis 126 569 602 65 Floaters $ 6
Slide 38: Valaris has retired more than 50 offshore drilling rigs since the beginning of 2014
Valaris has retired more than 50 offshore drilling rigs since the beginning of 2014 with 18 rigs retired since the beginning of 2020 Benign Floaters1,2 Avg. Age3 Jackups2 Avg. Age3 Transocean 14 20 34 27 Borr 37 35 Includes 3 drillships Includes 9 jackups 36 Valaris 5 18 23 and 6 semisubs 21 Valaris
Slide 39: Global Fleet Summary as of October 2021
Global Fleet Summary as of October 2021 1 All Floaters Benign Floaters Drillships Jackups Delivered Rigs Under Contract 109 90 55 322 Future Contract 27 19 15 27 Idle / Stacked 31 25 7 75 Active Fleet 2 167 134 77 424 Inactive 28 24 16 63 Total Fleet 195 158 93 487 2 Active Utilization 81% 81% 91% 8
Slide 40: Non-GAAP Reconciliations (1 of 3)
Non-GAAP Reconciliations (1 of 3) 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 discontinue
Slide 41: Non-GAAP Reconciliations (2 of 3)
Non-GAAP Reconciliations (2 of 3) Financial Year 2013 Financial Year 2014 Pro Forma Pro Forma $ Millions Atwood Ensco Rowan Valaris $ Millions Atwood Ensco Rowan Valaris Net income (loss) $ 350 $ 1,428 $ 253 $ 2,031 Net income (loss) $ 341 $ (3,889) $ (115) $ (3,663) Less: Less: (Income) loss from d
Slide 42: Non-GAAP Reconciliations (3 of 3)
Non-GAAP Reconciliations (3 of 3) Financial Year 2017 Financial Year 2018 Pro Forma Pro Forma $ Millions Atwood Ensco Rowan Valaris $ Millions Atwood Ensco Rowan Valaris Net income (loss) $ (24) $ (304) $ 73 $ (255) Net income (loss) $ - $ (637) $ (347) $ (984) Less: Less: (Income) loss from discont
Slide 43: Boldly First
Boldly First