Valaris (VAL) Q2 2024 earnings summary

Executive summary

• Delivered strong safety, operating, and financial performance in Q2 2024, with net income of $151 million, Adjusted EBITDA of $139 million, and revenue efficiency of 99%.

• Achieved seventh consecutive quarter of backlog growth, now exceeding $4.3 billion, driven by new contracts and higher day rates.

• Maintains conviction in a structural upcycle, with robust customer demand for projects commencing in 2025 and 2026.

• Valaris operates the largest and highest-specification offshore drilling fleet, with a global presence and deep customer relationships.

• Significant earnings and cash flow growth are expected over the next few years, with all future free cash flow intended to be returned to shareholders unless more value-accretive opportunities arise.

Financial highlights

• Q2 2024 revenue was $610 million, up 47% year-over-year and 16% sequentially; adjusted EBITDA rose to $139 million from $54 million in Q1.

• Net income attributable to Valaris was $149.6 million, compared to a loss of $29.4 million in Q2 2023, aided by a $65 million discrete tax benefit.

• Adjusted EBITDAR (excluding one-time reactivation costs) was $150 million, up from $84 million in Q1.

• Cash and cash equivalents at quarter-end were $410 million; total liquidity, including a fully available $375 million revolver, was $785 million.

• Q2 operating cash flow was impacted by a working capital build, mainly from higher accounts receivable.

Outlook and guidance

• Q3 2024 revenue expected at $610–$630 million; adjusted EBITDA forecasted at $120–$140 million.

• Full-year 2024 EBITDA guidance lowered to $480–$540 million, with revenue of $2.35–$2.4 billion.

• Free cash flow profile expected to improve in H2 2024, driven by higher utilization, day rates, and lower reactivation spend.

• Backlog as of July 29, 2024 was $4.3 billion, up from $3.9 billion in February, with strong demand for floaters and jackups.

• All future free cash flow intended to be returned to shareholders unless a more value-accretive use arises.