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VL

Valaris Ltd (VAL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 topline and profitability beat: Revenue $595.7M vs S&P Global consensus $564.6M*, Diluted EPS $2.65 vs $0.90*, and Adjusted EBITDA $163.2M vs $131.8M*; revenue efficiency 95% .
  • Sequential moderation but above guidance: Adjusted EBITDA of $163M exceeded the $120–$140M guidance due to longer-than-expected contracts, higher bareboat revenues, and lower support costs .
  • Commercial execution: Contracted VALARIS DS-12 with bp offshore Egypt; all four drillships with near‑term availability now booked for next year; total backlog $4.45B as of Oct 23, 2025 .
  • Capital returns and liquidity: Repurchased $75M of shares in Q3; cash and equivalents $662.7M at quarter-end (cash and cash equivalents $662.7M; cash and restricted combined $675.5M) .
  • Near-term outlook: Q4 guidance implies lower activity (Revenue $495–$515M; Adj. EBITDA $70–$90M) on fewer floater days and shipyard/out-of-service items; full‑year Adj. EBITDA now implied ~$625M, roughly $40M above the prior midpoint from Q2 call .

What Went Well and What Went Wrong

  • What Went Well

    • “Our teams once again delivered solid operational performance, achieving fleet-wide revenue efficiency of 95%... including adjusted EBITDA of $163 million and adjusted free cash flow of $237 million” .
    • “With this award [DS‑12], all four of our drillships with near term availability are now contracted for work beginning next year” .
    • Backlog support into 2026+: “Fleet-wide, we've added over $2.2 billion in contracted revenue backlog year to date… current total backlog stands at $4.5 billion” .

  • What Went Wrong

    • Sequential downtick from fewer floater days: “Revenues… decreased… primarily due to VALARIS DS-15 and DS-18 completing contracts mid‑third quarter… Adjusted EBITDA of $163 million compared to $201 million in the second quarter” .
    • Q4 guide down on lower activity: Revenue $495–$515M; Adj. EBITDA $70–$90M; two semis to finish programs and be warm‑stacked; DS‑15/DS‑18 idle pending long-term starts in late 2026 .
    • Dayrate sentiment: Management acknowledged dayrates for high‑spec drillships have “largely troughed” in the high‑$300Ks to low/mid‑$400Ks range, implying limited near‑term pricing upside until utilization rises into 2026 .

Financial Results

Quarterly actuals (oldest → newest)

MetricQ1 2025Q2 2025Q3 2025
Total Operating Revenues ($M)$620.7 $615.2 $595.7
Diluted EPS ($)-$0.53 $1.61 $2.65
Net Income ($M)-$39.2 $114.2 $187.3
Adjusted EBITDA ($M)$181.3 $200.7 $163.2
Revenue Efficiency (%)96% 96% 95%

Q3 2025 results vs S&P Global consensus

MetricActualConsensusNotes
Revenue ($M)$595.7 $564.6*Beat
Diluted EPS ($)$2.65 $0.90*Beat
Adjusted EBITDA ($M)$163.2 $131.8*Beat
Revenue – # of est.—8*
EPS – # of est.—4*
Values marked with * retrieved from S&P Global.

Segment revenues and profitability (ex‑reimbursables; oldest → newest)

SegmentQ1 2025 Revenue ex‑Reimb ($M)Q2 2025Q3 2025Q1 2025 Adj. EBITDA ($M)Q2 2025Q3 2025
Floaters$356.0 $319.7 $293.0 $152.6 $143.9 $105.8
Jackups$185.9 $212.0 $216.7 $70.5 $89.4 $93.4
Other (Leased & Managed)$35.9 $40.6 $45.9 $19.9 $23.4 $29.7
ARO Drilling (100% JV metrics; eliminated in consolidation)$134.7 $139.9 $156.8 $42.8 $36.9 $59.7

KPIs (oldest → newest)

KPIQ1 2025Q2 2025Q3 2025
Avg Daily Revenue – Drillships ($/day)$418,000 $410,000 $425,000
Avg Daily Revenue – Jackups Total ($/day)$128,000 $142,000 $141,000
Revenue Efficiency – Total96% 96% 95%
Utilization – Total Fleet64% 68% 67%
Contract Backlog – Valaris Total ($M)$4,237.6 (as of Apr 30) $4,714.4 (as of Jul 24) $4,450.3 (as of Oct 23)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q4 2025n/a$495–$515 New
Contract Drilling Expense ($M)Q4 2025n/a$390–$405 New
Reimbursables (incl. in rev/expense) ($M)Q4 2025n/a$25–$30 (both rev & expense) New
G&A Expense ($M)Q4 2025n/a≈$27 New
Adjusted EBITDA ($M)Q4 2025n/a$70–$90 New
CapEx ($M)Q4 2025n/a$145–$165 New
Adjusted EBITDA ($M)FY 2025Prior midpoint increased by ≈$40M ≈$625 Raised vs prior midpoint
CapEx ($M)FY 2025≈$390 prior midpoint ≈$390 Maintained
Upfront customer reimbursements ($M)FY 2025n/a≈$70 New detail

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 2025)Previous Mentions (Q2 2025)Current Period (Q3 2025)Trend
Deepwater utilization/dayratesFocus on securing long‑term floater work; DS‑10 award; rising floater activity DS‑15/16/18 awards; backlog ~$4.7B; pipeline converting Drillship dayrates “largely troughed” high‑$300Ks to low/mid‑$400Ks; expect 7G utilization ≈90% exiting 2026 Near‑term trough; improving into 2026
Commercial wins/backlog+~$1.0B backlog since Feb; broad jackup success +>$1.0B backlog since April; now ~$4.7B total DS‑12 with bp (Egypt); YTD +$2.2B backlog; total ~$4.5B Strong YTD; slight q/q backlog dip
Saudi/ARO jackup marketARO steady; fleet actions ongoing ARO revenue growth on higher dayrates; extensions Aramco calling back suspended rigs; supportive for global jackups; ARO KPIs up q/q Improving demand signal
Brazil/PetrobrasBrazil presence expanding Petrobras stable rig count expected Petrobras cost discussions early but constructive; stable fleet anticipated Stable activity; cost focus
Capital returns——$75M buyback; min cash to run business ≈$200M More active, opportunistic
Exploration appetite——Noted increase in exploration discussions tied to future supply needs Building interest

Management Commentary

  • “We continue to execute our commercial strategy, having recently secured an attractive contract for Valaris DS-12 with BP Offshore Egypt. With this award, all four of our drillships with near term availability are now contracted for work beginning next year.” — Anton Dibowitz, CEO
  • “Third quarter adjusted EBITDA exceeded our guidance range of $120 to $140 million primarily due to certain contracts running longer than previously anticipated, higher revenues from bareboat leased rigs, and lower support costs.” — Chris Weber, CFO
  • “We believe the market is playing out as we expected… day rates for high spec ships have largely troughed in the high $300,000s, kind of low to mid $400,000 range… we anticipate seventh‑generation drillships will exit 2026 with utilization levels around 90%.” — Anton Dibowitz, CEO

Q&A Highlights

  • Capital returns and liquidity: Repurchased $75M in Q3; buybacks to remain opportunistic; minimum cash to run the business ≈$200M .
  • Exploration cycle: Increased exploration discussions as customers seek to underwrite future developments amid supply concerns .
  • Dayrates and utilization: High‑spec drillship dayrates have “largely troughed” high‑$300Ks to low/mid‑$400Ks; utilization to trough late 2025/early 2026 then improve; dayrates follow utilization .
  • Petrobras: Early, constructive cost‑reduction discussions; expect Petrobras rig fleet to remain stable to meet production targets .
  • Saudi Arabia: Aramco calling back suspended rigs; positive signal for jackup demand; potential incremental work for Valaris/ARO .

Estimates Context

  • Q3 beats vs S&P Global consensus: Revenue $595.7M vs $564.6M*; Diluted EPS $2.65 vs $0.90*; Adjusted EBITDA $163.2M vs $131.8M* .
  • Consensus detail: 8 revenue estimates, 4 EPS estimates for Q3*; Valaris also beat Q1 and Q2 revenue and EPS consensus* (see table above) .
    Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Strong Q3 execution with broad beats on revenue, EPS, and Adj. EBITDA against S&P Global consensus; performance benefitted from longer contracts, higher bareboat contributions, and cost control .
  • Near‑term softness is transitory: Q4 guide down on fewer floater days and shipyard/out‑of‑service timing, but FY Adj. EBITDA implied ~$625M, ~+$40M vs the Q2 midpoint .
  • Commercial momentum intact: DS‑12 award with bp and YTD ~$2.2B backlog adds underpin 2026 utilization; all near‑term availability for four drillships filled .
  • Macro setup constructive: Management expects high‑spec drillship utilization ≈90% exiting 2026; dayrates have likely troughed and should improve with utilization .
  • Capital returns accelerating: $75M buyback in Q3; company targets sustained FCF returns to shareholders while keeping a ~$200M minimum cash buffer .
  • Jackup market supported by Aramco call‑backs and ARO strength; ARO revenue/efficiency/utilization improved q/q .
  • Watch catalysts: Additional floater awards (Africa/Mediterranean), gap‑fill opportunities for idle drillships ahead of long‑term starts, and any updates from Petrobras cost discussions .

Citations:

  • Q3 press release and tables
  • Q3 call transcript (prepared remarks, guidance, Q&A)
  • Q2 press release and tables
  • Q1 press release and tables

Values marked with * retrieved from S&P Global.