Offshore drilling company Valaris Limited (NYSE: VAL) has announced strong first quarter results for 2023, with new contracts and extensions announced worth approximately $820 million.
Among the new contracts is a three-year offshore drilling project in Brazil, which will involve reactivating the VALARIS DS-8 drillship.
CEO Anton Dibowitz expressed optimism for the company’s outlook. “We continue to be highly constructive on the outlook for the industry and our business, with increasing demand and constrained supply continuing to tighten the market,” he said.
Due to the strong outlook and to demonstrate its commitment to returning capital to shareholders, Valaris’ Board of Directors has increased the share repurchase authorization to $300 million, with plans to repurchase $150 million of shares by year-end.
Including the new contracts and extensions, Valaris’ contract backlog now stands at $2.8 billion.
The company also completed a refinancing transaction in April 2023, which included a $375 million revolving credit facility, boosting its liquidity by nearly $500 million. Valaris said this move aims to enhance the company’s capital allocation flexibility and its ability to return capital to shareholders.
First quarter revenues amounted to $430 million, down only slightly from the fourth quarter of 2022 primarily due to lower utilization for the harsh environment jackup fleet, which was partially offset by a higher average day rate for Valaris’ floater fleet.
Contract drilling expense increased to $377 million from $353 million in last year’s fourth quarter. The company said this was primarily due to increased repair and maintenance costs associated with special periodic surveys and higher reactivation costs. The company’s total liquidity, including cash and cash equivalents and restricted cash, increased to $844 million as of March 31, 2023.
Valaris’ floaters segment saw revenues rise to $215 million, from $211 million in the fourth quarter 2022. The increase was primarily due to higher day rates for VALARIS DPS-5 and DS-12, which commenced new contracts during the first quarter. The decline was partially offset by lower utilization, primarily related to VALARIS DS-12, which mobilized from Mauritania to Angola during the first quarter, prior to commencing operations for another customer.
Meanwhile, jackup revenues dipped to $170 million due to lower utilization for the harsh environment jackup fleet. ARO Drilling (Saudi Aramco Rowan Offshore Drilling Company), the joint venture between Saudi Aramco and Valaris, saw revenues increase to $124 million, primarily attributed to higher average day rates for VALARIS 147 and 148 rigs.
Overall, Valaris’ first quarter 2023 net income was $49 million compared to $31 million in the fourth quarter of 2022. Adjusted EBITDA decreased to $24 million from $54 million in the fourth quarter.
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