Valaris Limited · NYSE:VAL
Valaris — Investor Presentation (March 2022)
37 slides from Valaris's investor presentation, March 2022
Slide 1: Valaris (NYSE: VAL) March 2022
VALARIS (NYSE: VAL) March 2022
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 is well positioned to thrive during this industry upcycle
Valaris is well positioned to thrive during this industry upcycle 1. Increasing demand for hydrocarbons and a lack of investment in supply has created the foundation for an industry upcycle 2. Valaris is well positioned to thrive due to our best-in-class fleet, industry-leading operational platform
Slide 4: Oil and gas will remain a vital energy source, ~50% of energy mix in 2050
Oil and gas will remain a vital energy source ‒ expected to be ~50% of energy mix in 2050 Global Primary Energy Demand Per Fuel (Million TJ) Share In • Oil and gas production will be required for 2020 2050 650 many years to come ‒ both to meet global 600 energy demand and to help fund the 550 15% 31
Slide 5: New production from unsanctioned projects will be required to meet demand
New production from unsanctioned projects will be required to meet demand Global Oil Supply 2021 – 2030 (Million Barrels Per Day) 105.6 94.5 17.7 3.2 23.5 78.5 6.2 7.5 75.6 More than 9 million barrels per 68.9 day of offshore production from 58.0 unsanctioned projects expected to be needed by 2030,
Slide 6: 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 7: Growing demand and tightening supply have created a constructive oil price environment
Growing demand and tightening supply have created a constructive oil price environment Global Liquid Fuels Consumption (Million Barrels Per Day) • Demand for hydrocarbons has rebounded 105 strongly from the impact of COVID-19 and 100 is forecast to exceed 2019 levels by late 95 2022 90 Actual Foreca
Slide 8: 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) • Offshore upstream capex is expected to 8% 149 16% 152 increase by 16% in 2022 and a further 8% 145 141 136 in 2023 121 106 90 102 98 88 93 • This growth in offshore spending is 82 74 primarily
Slide 9: 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 200 +7% a compound annual growth rate (CAGR) of 156 150 129 140 146 7% between 2021 and 2026 125 123 116 116 108 111 100 • Float
Slide 10: Current rig fleet will form the basis of supply for the foreseeable future
Current rig fleet will form the basis of supply for the foreseeable future Some of the rigs that have been stacked for prolonged periods may never return to the active fleet. Higher day rates likely required to incentivize rig reactivations and delivery of stranded newbuilds. Benign 1 Harsh 1 Benign
Slide 11: Valaris is well positioned to thrive during this industry upcycle
Valaris is well positioned to thrive during this industry upcycle 1. Increasing demand for hydrocarbons and a lack of investment in supply has created the foundation for an industry upcycle 2. Valaris is well positioned to thrive due to our best-in-class fleet, industry-leading operational platform
Slide 12: 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 7 years Average age 10 years 12 Ultra-Harsh & Harsh 23 HD & SD Modern Jackups2 5 SD Legacy Jackups2 Jackups2 Average age 13 years Average age 12 years Average age 41 years 1 Excludes newbuild
Slide 13: Largest fleet of high-specification assets
Largest fleet of high-specification assets Fleet Quality of Major International Offshore Drillers Floaters Avg. Age1 2 Transocean 39 11 Valaris 31 15 9 1 56 3 Noble / Maersk 20 10 Noble / Maersk 3 24 11 3 1 39 Valaris 2 16 8 Diamond 13 24 Transocean 13 12 7 7 39 Seadrill4 10 9 Q1 Q2 Q3 Q4 Shelf 2 5
Slide 14: Industry-leading operational platform, strong values and purpose driven culture
Industry-leading operational platform, strong values and purpose driven culture SAFETY RELIABILITY EFFICIENCY • Controlling Process Safety • Maximizing Rig Uptime • Maximizing Productivity of Risk Performance Well Construction • Reducing Personal Safety • 98.4% Revenue Exposure Efficiency1 in 2021 •
Slide 15: Commitment to sustainability and reducing our carbon footprint
Commitment to sustainability and reducing our carbon footprint Oversight Monitoring • Valaris operates in the heavily • Emissions monitoring technology and regulated marine environment with a dashboards being deployed across the historic focus on sustainability fleet • Valaris has a dedicated ESG Bo
Slide 16: Operations focused on key basins expected to drive a large share of future demand
Operations focused on key basins expected to drive a large share of future demand 11 North Sea & Norway 8% 3 3 U.S. GOM & Mexico 6 1 18% 3 Middle East 44% 15% 7% West Africa Southeast Asia 5 % share of expected floater 11% demand over next five years1 3% 12% 14 % share of expected jackup demand over
Slide 17: 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 67 57 39 32 25 23 18 Valaris Noble / Transocean Borr Seadrill Shelf Diamond 1 Maersk • Valaris has the largest customer b
Slide 18: ~$2.5 billion of contract backlog added since the beginning of 2021
~$2.5 billion of contract backlog added since the beginning of 2021 at improving day rates Floater Backlog ($M) Backlog Additions Since Beginning of 2021 by Customer Type ($M) 350 1,663 11% 1,849 Major 17% IOC 164 53% NOC 2 Independent Year-End 2020 Additions Consumed February 21, 2022 19% Avg. Day
Slide 19: Industry-leading cost structure
Industry-leading cost structure Operating, Support and G&A Costs per Weighted Active Rig ($M)1 -20% 17.0 16.8 16.3 14.8 14.9 13.6 13.8 13.1 12.5 12.3 11.9 11.9 Valaris 2 Seadrill Noble Diamond Maersk Transocean Active Floaters 10 8 16 13 9 9 11 11 7 8 29 26 Active Jackups 28 25 11 7 12 10 0 0 12 12
Slide 20: Strongest balance sheet in the offshore drilling sector
Strongest balance sheet in the offshore drilling sector Net Debt1 ($M) • Valaris is the only major offshore driller (100) 527 940 1,878 5,758 with a net cash position 7,170 • $550M senior secured notes due 2028 1,916 1,278 1,191 545 (38) ‒ Pari passu debt capacity of $275M (645) (751) (251) (1,412)
Slide 21: Valaris is well positioned to thrive during this industry upcycle
Valaris is well positioned to thrive during this industry upcycle 1. Increasing demand for hydrocarbons and a lack of investment in supply has created the foundation for an industry upcycle 2. Valaris is well positioned to thrive due to our best-in-class fleet, industry-leading operational platform
Slide 22: Valaris has a compelling 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 • Active fleet of 34 rigs generated adjusted operating • Seven rigs owned by Valaris currently leased to ARO margin (excluding one-time reactivation costs) of $344 Drilling under bareboat c
Slide 23: Earnings power from active fleet expected to increase as reactivated rigs start contracts
Earnings power from active fleet expected to increase as reactivated rigs start contracts Valaris Average Floater Day Rates ($K/day) Active Fleet Results 2021 400 Expected market rates for Revenue $1,090M new drillship opportunities 300 292 Operating Margin $252M 209 221 193 200 Reactivation Costs (
Slide 24: Stacked rigs provide operational leverage in an improving market
Stacked rigs provide operational leverage in an improving market Stacked Fleet Overview Asset Value Build • Stacked fleet includes 13 high-quality Illustrative Asset Value of Stacked Fleet1 Cost modern assets1 with a total build cost of ~$4B and significant useful lives remaining Value per Floater (
Slide 25: Leased and managed rigs deliver stable cash flows
Leased and managed rigs deliver stable cash flows Leased Rigs Overview Summary Financial Information • Valaris leases seven rigs to ARO Drilling through bareboat charter 2021 agreements Operating Margin $85M • Rigs are leased under drilling contracts with Saudi Aramco, guaranteeing high levels of ut
Slide 26: Significant earnings potential in a market recovery scenario
Significant earnings potential in a market recovery scenario Rigs Under Contract or Total Rigs Illustrative Annual EBITDA from Valaris Fleet1 20142 with Future Contract 11 8 Drillship Day Rates $300K $350K $400K ~$500K 5 3 Benign Semisubmersible Day Rates $200K $250K $300K ~$400K 12 11 HD Ultra-Hars
Slide 27: 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, the largest customer for jackups in the world • ARO owns a fleet of seven jackup rigs operating under
Slide 28: 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 • ~$2.5 billion of contract backlog added for active fleet since the beginning of 2021 at improving day rates • Maximize EBITDA • Reactivate high quality •
Slide 29: Equity trades at a significant discount to major peers and recent market transactions
Equity trades at a significant discount to major peers and recent market transactions Equity Performance Since Valaris Listing Recent Market Transactions for Drillships 116% Rig Name Buyer Seller Price 61% Crete $245 million 32% 23% Valaris Noble Transocean Maersk Santorini $230 million 4 1,2,3 Impl
Slide 30: Key takeaways
Key takeaways Oil and gas expected to be ~50% of energy mix Offshore upstream capex and project 1 in 2050 and offshore production will play an 2 sanctioning expected to increase, driving important role in meeting oil and gas demand increased demand for offshore drilling rigs Valaris is well-position
Slide 31: Appendix
Appendix 31
Slide 32: Increase in utilization over the past five years primarily driven by supply rationalization
Increase in utilization over the past five years primarily driven by supply rationalization Valaris has retired more than 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%
Slide 33: 2022 Guidance as of February 22, 2022
2022 Guidance as of February 22, 20221 Income Statement Guidance 2022E Operating Margin by Value Drivers 2022E Revenues $1,450-1,550M Active Fleet $325-350M Contract Drilling Expense2 $1,230-1,280M Reactivation Costs $70-80M G&A Expense $80-85M Active Fleet Adjusted for One-Time $400-425M Reactivati
Slide 34: Contract Backlog as of February 21, 2022
Contract Backlog as of February 21, 2022 Contract Backlog (1) (2) ($ millions) 2022 2023 2024+ Total Contract Days (1) (2) 2022 2023 2024+ Drillships (3) $ 348.8 $ 316.3 $ 615.3 $ 1,280.4 Drillships (3) 1,646 1,429 2,025 Semis 157.5 137.9 89.5 384.9 Semis 773 623 392 Floaters $ 506.3 $ 454.2 $ 704.8
Slide 35: 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 four jackups offshore Saudi Arabia outside of ARO Drilling joint venture ~$440M ~$460M Shareholder Shareholder Notes Receivable Notes Receivable Leased Jackups (7) Ow
Slide 36: 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 2021 LEASED & MANAGED RIGS 2021 ARO 2021 Operating income (loss) $ (410.5) Operating income (loss) $ 55.6 Net income $ 4.0 Add (subtract): Add (subt
Slide 37: Boldly First
Boldly First