Valaris Ltd
For the period ended Dec 31, 2024. Filed Feb 20, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 20, 2025
VAL$79.77+3.2%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0000314808-24-000014
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-20.
0000314808-25-000028
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 183 previous paragraphs and 177 current paragraphs.
80 unchanged; 59 reworded; 35 added; 42 removed; 2 previous and 3 current paragraphs rearranged.
Tables are not compared: 13 previous and 13 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (35)
Current report
Demand for offshore drilling is impacted by fundamental supply and demand dynamics for crude oil. Since late 2022, Brent crude oil prices have been largely trading in a range between $70 and $90 per barrel, with OPEC+ members managing supply in an effort to keep the market in balance. Importantly, longer-dated Brent crude oil prices have remained stable, with the five-year forward price above $65 per barrel, a level at which nearly 90% of undeveloped offshore reserves are expected to be profitable. As a result, we believe the constructive oil price environment is supportive of continued investment in long-cycle offshore projects.
Current report
(1)The decrease for Floaters is primarily due to revenues realized, partially offset by a multi-year contract award for VALARIS DS-17 offshore Brazil and two six-month contract extensions for VALARIS DS-9 offshore Angola, which resulted in incremental aggregate backlog of approximately $570.0 million.
Current report
(2)The increase for Jackups is primarily due to various contract awards and extensions executed for incremental aggregate backlog of approximately $690.0 million, including a three-year contract extension for VALARIS 118, which resulted in incremental aggregate backlog of approximately $168.0 million, and a multi-year contract award for VALARIS 144, which resulted in incremental aggregate backlog of approximately $144.0 million. These increases were partially offset by revenues realized.
Current report
(3)Other includes the backlog for our managed rig services and the bareboat charter backlog for the jackup rigs leased to ARO in order for ARO to fulfill certain of its drilling contracts with Saudi Aramco. The increase in Other is primarily due to three-year contract extensions for our managed rigs, which resulted in incremental aggregate backlog of approximately $180.0 million, partially offset by revenues realized and a reduction of backlog of approximately an aggregate $35.0 million attributable to the VALARIS 143, VALARIS 147 and VALARIS 148 contracts, which were terminated during 2024.
Current report
(4)The decrease in ARO backlog is due to revenues realized and a reduction of backlog of approximately $125.0 million attributable to the termination of the VALARIS 143, VALARIS 147 and VALARIS 148 contracts.
Current report
In recent years, the more constructive oil price environment led to an improvement in contracting and tendering activity for floaters. The number of contracted benign environment floaters increased to a peak of 128 in April 2024 from a low of 101 in early 2021, contributing to an increase in global utilization, from 73% to 86%, for the industry's marketed fleet over the same period, which resulted in a meaningful increase in day rates. During 2024, some customer demand for 2024 and 2025 was deferred to future periods, which slowed the pace of contracting compared to the previous three years. As a consequence, we have seen a modest decline in the number of contracted benign environment floaters to 123 at December 31, 2024, representing 83% utilization of the global marketed fleet, which has tempered day rates in the near term. However, there is a strong pipeline of opportunities for benign environment floaters, particularly for high specification drillships, with anticipated contract commencements in 2026 and beyond.
Current report
In early 2024, Saudi Arabia announced that they plan to maintain maximum sustainable capacity at 12 million barrels per day. Since this announcement, Saudi Aramco has sent contract suspension notices to several offshore drillers to suspend contracts, totaling 33 rigs, which represents 8% of the marketed jackup fleet. This included notice to ARO with respect to its drilling contracts for VALARIS 143, VALARIS 147 and VALARIS 148. To date, 11 of the 33 suspended rigs have been contracted in other regions and one rig has been retired from the offshore drilling fleet. We believe that less than half of the remaining suspended rigs are likely to be competitive in other higher-specification, benign environment regions. Adjusting for the rigs under suspension that are awaiting to resume their contracts with Saudi Aramco, utilization for the global marketed jackup fleet was 88% at December 31, 2024. The decrease in global utilization from earlier in 2024 is putting some downward pressure on day rates in certain benign environment regions.
Current report
NM - Not meaningful
Current report
(1)For the purposes of our discussion below, we refer to Revenues (exclusive of reimbursable revenues) and Contract drilling expense (exclusive of depreciation and reimbursable expenses) as "Revenues" and "Contract Drilling Expenses", respectively.
Current report
(2)We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows.
Current report
(3)Certain previously reported line items presented in the Consolidated Statements of Operations (Total operating revenues and Total contract drilling expenses (exclusive of depreciation)) were further disaggregated to separately disclose Reimbursable revenues and Reimbursable expenses, respectively, to align with the updated presentation of our segment tables upon the adoption of ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The disaggregation of these line items is presentational only and was retrospectively applied to the year ended December 31, 2023. There were no impacts to the overall Total operating revenues or Total contract drilling expense (exclusive of depreciation) line items. See "Note 13 -Segment Information" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Current report
Revenues increased in 2024, compared to 2023, primarily due to $401.7 million of incremental revenue earned for VALARIS DS-17, VALARIS DS-8 and VALARIS DS-7, which have commenced new contracts since mid-2023 following reactivations. For the remaining fleet, there was a net increase of $165.8 million from higher average daily revenue, primarily due to certain rigs working under higher day rate contracts as compared to the prior year, which was partially offset by a $30.9 million net decrease attributable to fewer operating days in the current year.
Current report
Contract Drilling Expenses increased in 2024, compared to 2023, primarily due to incremental costs of $73.2 million incurred for VALARIS DS-17, VALARIS DS-7 and VALARIS DS-8 and $25.0 million of expense recognized in 2024 related to an accrual for a legal matter. We also incurred an aggregate $16.3 million in incremental costs related to the stacking of VALARIS DS-13 and VALARIS DS-14, which were delivered in December 2023 and stacked in early 2024, and three jackups, which were stacked during 2024 upon termination of their leases with ARO. For the remaining fleet, we had an increase in personnel-related costs of $32.7 million, partially driven by wage increases in certain regions and higher incentive compensation costs.
Current report
The following table summarizes the total and active offshore drilling rigs for Valaris and ARO as of December 31, 2024 and 2023:
Current report
(1)During 2024, we leased VALARIS 108 and VALARIS 76 to ARO. Separately, during 2024 the contracts with ARO for VALARIS 143, VALARIS 147 and VALARIS 148 were terminated and the rigs have been preservation stacked.
Current report
(1)For the purposes of our discussion below, we refer to Revenues (exclusive of reimbursable revenues) and Contract drilling expense (exclusive of depreciation and reimbursable expenses) as "Revenues" and "Contract Drilling Expenses", respectively.
Current report
(2)We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows.
Current report
(3)Certain previously reported line items presented in the Consolidated Statements of Operations (Total operating revenues and Total contract drilling expenses (exclusive of depreciation)) were further disaggregated to separately disclose Reimbursable revenues and Reimbursable expenses, respectively, to align with the updated presentation of our segment tables upon the adoption of ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures. The disaggregation of these line items was presentational only and was retrospectively applied to the year ended December 31, 2023. There were no impacts to the overall Total operating revenues or Total contract drilling expense (exclusive of depreciation) line items. See "Note 13 -Segment Information" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Current report
Floater Revenues increased $480.0 million, or 53%, in 2024 as compared to 2023, primarily due to incremental revenue of $401.7 million from VALARIS DS-17, VALARIS DS-8 and VALARIS DS-7, which have commenced new contracts since mid-2023 following reactivations. For the remaining floater fleet, there was a net increase of $113.5 million from higher average daily revenue, primarily due to certain floaters working under higher day rate contracts in the current period as compared to the prior year. These increases were partially offset by a $34.8 million decrease attributable to fewer operating days in the current year, largely driven by VALARIS DPS-5 and VALARIS DS-10, which completed their contracts in the third quarter of 2024.
Current report
Floater Contract Drilling Expenses increased $161.9 million, or 21%, in 2024 as compared to 2023, primarily due to incremental costs of $73.2 million incurred for VALARIS DS-17, VALARIS DS-8 and VALARIS DS-7 in 2024 and $25.0 million of expense recognized in 2024 related to an accrual for a legal matter. For the remaining fleet, there were increases of $34.7 million in personnel-related costs, partially driven by wage increases in certain regions and incentive compensation costs, $18.6 million from higher repair and maintenance costs, primarily due to planned maintenance during the current year, and $10.8 million incurred related to the stacking of VALARIS DS-13 and VALARIS DS-14 during 2024.
Current report
Jackup Revenues increased $65.9 million, or 11%, in 2024 as compared to 2023, primarily due to a net increase of $56.0 million from higher average daily revenue, largely driven by certain rigs working under contracts with higher day rates than the prior year, and incremental operating days in 2024 of $9.2 million.
Current report
Jackup Contract Drilling Expenses decreased $3.3 million, or 1%, in 2024 as compared to 2023, primarily due to a $15.4 million decrease in repairs and maintenance costs, largely attributable to maintenance activities performed for certain rigs during special periodic surveys in the prior year period, and a net decrease in personnel-related costs of $4.0 million, partially driven lower costs as a result of leasing VALARIS 76 and VALARIS 108 to ARO during the first half of 2024. These decreases were partially offset by increased mobilization costs of $10.9 million, primarily driven by the amortization of mobilization costs related to VALARIS 247, which mobilized from the U.K. to Australia for a new contract in 2024, and $5.5 million in incremental costs related to the stacking of VALARIS 143, VALARIS 147, and VALARIS 148 after the termination of their leases with ARO.
Current report
ARO Revenues increased $15.9 million, or 3%, in 2024 as compared to 2023, primarily due to $80.7 million of incremental revenue from Kingdom 1 and Kingdom 2, which commenced operations in November 2023 and August 2024, respectively, and VALARIS 108, which we began leasing to ARO during the first quarter of 2024. This increase was partially offset by decreases of $44.3 million related to the contract terminations for VALARIS 143, VALARIS 147 and VALARIS 148 during the current year and $17.6 million related to certain rigs which were undergoing maintenance projects or had unplanned downtime in the current year.
Current report
ARO Contract Drilling Expenses remained relatively flat, with an increase of $1.8 million in 2024 as compared to 2023, primarily due to $16.8 million of incremental operating costs related to the operation of Kingdom 1, Kingdom 2 and VALARIS 108 in the current year and higher personnel-related costs of $2.2 million for the remainder of the fleet. These increases were largely offset by $16.9 million of lower bareboat charter lease expense, inclusive of certain adjustments, primarily driven by the terminations of the VALARIS 143, VALARIS 147 and VALARIS 148 contracts and corresponding bareboat charter leases during 2024.
Current report
ARO depreciation expense increased $23.3 million, or 35%, in 2024 as compared to 2023, primarily due to the additions of Kingdom 1 and Kingdom 2 to the fleet.
Current report
Other Revenues decreased $10.0 million, or 7%, in 2024 as compared to 2023, primarily due to a $16.6 million decrease in revenue from lease agreements with ARO, primarily driven by contract terminations for VALARIS 143, VALARIS 147 and VALARIS 148 during 2024. This decrease was partially offset by a $6.3 million increase in average daily revenues earned by our two managed rigs as a result of contract extensions executed in the first half of 2024 at higher rates.
Current report
Other Contract Drilling Expenses increased $11.0 million, or 21%, in 2024 as compared to 2023, primarily due to higher repairs and maintenance costs of $6.8 million related to special periodic survey related projects on the leased rigs and higher personnel-related costs for our managed rigs of $2.1 million.
Current report
Interest income decreased by $15.3 million, or 15%, in 2024 as compared to 2023, primarily due to a $21.2 million decrease in interest income on cash equivalents due to a lower average balance in 2024 and a $5.9 million decrease in interest income earned on our outstanding 10-year shareholder notes receivable due from ARO (the "Notes Receivable from ARO"), which was driven by lower outstanding principal balances as a result of a partial net settlement agreement executed in the second quarter of 2024 (the "Net Settlement Agreement") and lower interest rates relative to the prior year period. These decreases were partially offset by an increase from the recognition of non-cash interest income of $13.9 million for an adjustment to the discount on our outstanding Notes Receivable from ARO, which resulted from the Net Settlement Agreement. See "Note 3 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for information on this matter.
Current report
Net foreign currency exchange gains increased $17.3 million in 2024 as compared to 2023, primarily driven by favorable exchange rate movements in the euros, Brazilian reals, Mexican pesos, Angolan kwanza and Australian dollars, partially offset by unfavorable exchange rate movements in the Nigerian naira and Egyptian pounds. See "Note 1 -Description of the Business and Summary of Significant Accounting Policies" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for further information on our functional currency.
Current report
During the year ended December 31, 2024, we recorded an income tax expense of $0.4 million and had an effective income tax rate of 0.1%. Our 2024 consolidated effective income tax rate includes a discrete tax benefit of $85.8 million, primarily attributable to change in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Excluding the impact of the aforementioned discrete tax items, the consolidated effective income tax rate was 21.8% as of December 31, 2024.
Current report
During the year ended December 31, 2024, we generated $355.4 million of cash flow from operating activities primarily due to operating income for the year of $352.3 million. Our primary uses of cash were $455.1 million for maintenance and upgrades of our drilling rigs, reactivation costs and costs to mobilize VALARIS DS-13 and VALARIS DS-14 to their stacking location after their delivery. Additionally, we spent $126.4 million under our share repurchase program during the year, which is discussed further below.
Current report
First Lien Notes
Current report
In October 2024, ARO ordered the third newbuild jackup, Kingdom 3, for a purchase price of approximately $300.0 million, and paid the 25% down payment from cash on hand. The final payment will be due upon delivery of the rig. ARO is expected to commit to order one additional newbuild jackup in the near term. ARO intends for these newly ordered jackup rigs to be financed out of cash on hand or from operations or funds available from third-party financing.
Current report
Our board of directors has authorized a share repurchase program under which we may purchase up to $600.0 million of our outstanding common shares. The following table summarizes shares repurchase, aggregate cost (exclusive of fees) and the average per share price (in millions, except average per share price):
Current report
As of December 31, 2024, we had approximately $275.0 million available for share repurchases pursuant to the Share Repurchase Program.
Removed paragraphs (42)
Previous report
Chapter 11 Proceedings, Emergence from Chapter 11 and Fresh Start Accounting
Previous report
On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.
Previous report
On April 30, 2021 (the "Effective Date"), we successfully completed our financial restructuring and together with the Debtors emerged from the Chapter 11 Cases. Upon emergence from the Chapter 11 Cases, we eliminated $7.1 billion of debt and obtained a $520.0 million capital injection by issuing the First Lien Notes. See “Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the First Lien Notes. On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and the Common Shares were issued. Also, former holders of Legacy Valaris' equity were issued Warrants to purchase Common Shares. See “Note 9 - Shareholders' Equity" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the issuance of the Common Shares and Warrants.
Previous report
References to the financial position and results of operations of the "Successor" or "Successor Company" relate to the financial position and results of operations of the Company after the Effective Date. References to the financial position and results of operations of the "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Legacy Valaris on and prior to the Effective Date. References to the “Company,” “we,” “us” or “our” in this Annual Report are to Valaris Limited, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Valaris, together with its consolidated subsidiaries, when referring to periods prior to and including the Effective Date.
Previous report
Upon emergence from the Chapter 11 Cases, we qualified for and adopted fresh start accounting. The application of fresh start accounting resulted in a new basis of accounting, and the Company became a new entity for financial reporting purposes. Accordingly, our financial statements and notes after the Effective Date are not comparable to our financial statements and notes on and prior to that date.
Previous report
See “Note 2 – Chapter 11 Proceedings” and "Note 3 - Fresh Start Accounting" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional details regarding the bankruptcy, our emergence and fresh start accounting.
Previous report
In recent years, oil prices have experienced significant volatility as a result of the global COVID-19 pandemic, production disputes among major oil producing countries and various other factors. This volatility meaningfully impacted both the supply of, and demand for, offshore rigs. Since 2021, oil prices have become relatively more stable due to, among other factors, rebounding demand for hydrocarbons, a measured approach to production increases by OPEC+ members, reduction in supply due to Russia’s invasion of Ukraine and the subsequent sanctions placed on Russia, and a focus on cash flow and returns by major exploration and production companies. In 2023, prices have remained at levels that are supportive of offshore exploration and development activity. The more constructive oil price environment has led to an improvement in contracting and tendering activity for our industry.
Previous report
(1)The increase in Floaters is primarily due to long-term contracts for VALARIS DS-4 and VALARIS DS-8 offshore Brazil, VALARIS DS-7 offshore West Africa, VALARIS DS-16 in the U.S. Gulf of Mexico and a 250-day contract extension for VALARIS DS-15 offshore Brazil, which resulted in incremental aggregate backlog of approximately $1.7 billion. These increases were partially offset by revenues realized.
Previous report
(2)The increase in Jackups is primarily due to contract awards and extensions for VALARIS 120, VALARIS 72, VALARIS 92, VALARIS 121, VALARIS 107, VALARIS 118, VALARIS 249 and VALARIS Stavanger which resulted in incremental aggregate backlog of approximately $620.0 million. These increases were partially offset by revenues realized.
Previous report
(3)Other includes the bareboat charter backlog for the jackup rigs leased to ARO to fulfill contracts between ARO and Saudi Aramco in addition to backlog for our managed rig services. Substantially all the operating costs for jackups leased to ARO through the bareboat charter agreements will be borne by ARO.
Previous report
(4)The increase in ARO backlog is primarily due to an eight-year contract for each of the two newbuild rigs, the first of which was delivered in October 2023 and the second is expected to be delivered in the first half of 2024. These two contracts resulted in incremental aggregate backlog of approximately $924.0 million, which was partially offset by revenues realized.
Previous report
In recent years, the more constructive oil price environment has led to an improvement in contracting and tendering activity for floaters. The number of contracted benign environment floaters has increased to 123 at December 31, 2023 from a low of 101 in early 2021, contributing to a 12% increase in global utilization, from 73% to 85%, for the industry's active fleet over the same period. This increase in activity is particularly evident for 6th and 7th generation drillships, such as those included in our floater fleet. Utilization for the global active 6th and 7th generation drillship fleet is currently at 92% and has, on average, exceeded 90% for more than twelve months, resulting in a meaningful improvement in day rates for this class of assets.
Previous report
In 2022, we completed the reactivation of three stacked drillships and one stacked semisubmersible which have commenced long-term contracts. In 2023, we completed the reactivation of another two previously stacked drillships, VALARIS DS-8 and VALARIS DS-17, for contracts which commenced in the second half of 2023 for work offshore Brazil, and we are currently reactivating another stacked drillship VALARIS DS-7, for a long-term contract offshore West Africa expected to commence in mid-2024.
Previous report
Revenues increased in 2023, compared to 2022, primarily due to an increase in average daily revenue earned of $177.6 million primarily attributable to certain rigs that commenced new contracts during 2023 at a higher average daily revenue, $47.7 million from an increase in operating days primarily attributable to floaters that have commenced contracts following reactivation and $12.5 million of higher revenues earned from lease agreements with ARO primarily from higher lease rates for certain rigs. These increases were partially offset by a $51.0 million fee recognized for the early termination of the VALARIS DS-11 contract in 2022.
Previous report
Contract drilling expense increased in 2023, compared to 2022, primarily due to $123.0 million attributable to rigs that have commenced contracts following reactivation, a $43.1 million increase in repair costs for certain rigs and a $36.2 million increase in reactivation costs. These increases were partially offset by a $35.9 million decrease in the costs for certain claims and a $16.1 million decrease in operating costs for VALARIS 140 and VALARIS 141, which we started leasing to ARO at the end of the first quarter and the third quarter of 2022, respectively.
Previous report
The following table summarizes our and ARO's offshore drilling rigs as of December 31, 2023 and 2022:
Previous report
(1)During the fourth quarter of 2023, we took delivery of the Newbuild Drillships.
Previous report
Additionally, ARO has ordered a newbuild jackup which is under construction in the Middle East and expected to be delivered in the first half of 2024. This rig is not included in the table above.
Previous report
Year Ended December 31, 2023
Previous report
Year Ended December 31, 2022
Previous report
Floater revenue increased $248.2 million, or 35%, in 2023 as compared to 2022, primarily due to $210.3 million from increased operating days primarily attributable to rigs that have commenced contracts following reactivation or returned to work upon completion of special periodic surveys and $96.7 million from higher average daily revenue earned primarily due to VALARIS DS-12 and VALARIS DPS-5 working under higher day rate contracts in 2023 as compared to the prior year. These increases were partially offset by $51.0 million of revenue recognized in 2022 attributable to a termination fee for the VALARIS DS-11 contract.
Previous report
Floater contract drilling expense increased $166.0 million, or 26%, in 2023 as compared to 2022, primarily due to $167.8 million attributable to rigs that have returned to work upon completion of reactivation projects and an $36.2 million increase in reactivation costs. These increases were partially offset by a $28.4 million decrease in costs for certain claims.
Previous report
During 2022, we recorded non-cash losses on impairment totaling $34.5 million, with respect to customer-specific capital upgrades for VALARIS DS-11 made pursuant to the terms of the drilling contract that was terminated during the second quarter of 2022. See "Note 7 -Property and Equipment" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Previous report
Floater depreciation expense increased $5.8 million, or 12%, in 2023 as compared to 2022, primarily due to new assets placed in service for certain rigs that underwent reactivation projects and capital upgrades.
Previous report
Jackup revenues declined $84.6 million, or 11%, in 2023 as compared to 2022, primarily due to $162.6 million from decreased operating days primarily due to rigs that completed contracts in the North Sea during the first half of 2023 due to lower activity in the region, certain rigs that were mobilizing or idle between contracts during 2023, and the sale of VALARIS 54 which operated in 2022. These decreases were partially offset by a $75.2 million increase due to higher average daily revenue earned.
Previous report
Jackup contract drilling expense declined $21.5 million, or 4%, in 2023 as compared to 2022, primarily due to $49.2 million of lower costs for rigs that were idle or between contracts in 2023, and a $16.1 million decrease in operating costs for VALARIS 140 and VALARIS 141, which we started leasing to ARO in 2022. These decreases were partially offset by a $42.1 million increase in repair costs in 2023 primarily associated with maintenance performed during special periodic surveys.
Previous report
Jackup depreciation expense increased $3.9 million, or 11%, in 2023 as compared to 2022, due to new assets placed in service for certain rigs that underwent capital upgrades, partially offset by VALARIS 54, which was sold in the second quarter of 2023.
Previous report
Revenue increased $37.1 million, or 8%, in 2023 as compared to 2022, primarily due to a $29.2 million increase from VALARIS 140 and VALARIS 141, which were leased to ARO starting in 2022, and from Kingdom 1, a newbuild jackup rig, which commenced operations in the fourth quarter of 2023. Furthermore, there was a $24.3 million increase from higher average daily revenue earned by certain rigs. These increases were partially offset by $9.0 million decrease due to VALARIS 36 which operated in the prior year until the rig was sold in May 2022 and $7.8 million for certain rigs undergoing maintenance projects in 2023.
Previous report
Contract drilling expense increased $24.1 million, or 7%, in 2023 as compared to 2022, primarily due to $13.8 million of incremental operating costs related to VALARIS 140, VALARIS 141 and Kingdom 1, $8.7 million from higher personnel cost and a $4.8 million increase in repair and maintenance costs. These increases were partially offset by $7.5 million decrease from VALARIS 36, which operated in prior year until it was sold in May 2022.
Previous report
Other revenues increased $18.1 million, or 11%, in 2023 as compared to 2022, primarily due to $12.5 million of higher revenues earned from lease agreements with ARO attributable to higher average daily revenue on certain leased rigs and $5.7 million from higher average daily revenue earned for our management services contracts.
Previous report
Interest income increased by $35.9 million, or 55%, in 2023 as compared to 2022, primarily due to an increase of $33.3 million of interest income on cash equivalents due to a higher average balance during 2023 and a $19.2 million increase on interest income earned on our Notes Receivable from ARO attributable to higher interest rates in 2023, partially offset by non-cash interest income of $14.8 million recognized in the prior year on the partial principal repayment of our Notes Receivable from ARO in September 2022.
Previous report
Our functional currency is the U.S. dollar, and we predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. However, we have net assets and liabilities denominated in numerous foreign currencies and a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates.
Previous report
Net foreign currency exchange losses of $3.5 million for 2023 primarily included losses of $3.0 million, $2.4 million and $1.6 million related to euros, Brazilian reals and Angolan kwanza, respectively, partially offset by a gain of $3.9 million from Nigerian naira. Net foreign currency exchange gains of $12.2 million for 2022 primarily included $7.2 million, $1.9 million and $1.7 million related to euros, Egyptian pounds and Norwegian kroner, respectively.
Previous report
Net periodic pension and retiree medical income decreased by $15.5 million in 2023 as compared to 2022, primarily due to higher interest cost and lower expected return on plan assets attributed to an increase in discount rate.
Previous report
Our 2022 consolidated effective income tax rate includes $10.3 million associated with the impact of various discrete items, including a $17.2 million income tax benefit associated with changes in liabilities for unrecognized tax benefits and resolution of other prior period tax matters, offset primarily by tax expense attributable to income associated with a contract termination.
Previous report
Divestitures
Previous report
We sold the following rigs during the years ended December 31, 2023 and 2022 (in millions):
Previous report
(1)Classification denotes the location of the operating results and gain on sale for each rig in our Consolidated Statements of Operations.
Previous report
During the year ended December 31, 2022, our other primary sources of cash were proceeds of $150.3 million for the disposition of assets and $40.0 million from the partial early repayment of the Notes Receivable from ARO. For the same period, our cash provided by operating activities of $127.0 million related primarily to improving margins and the collection of $54.8 million for certain tax receivables.
Previous report
The costs of future reactivations may increase relative to our initial reactivation projects due to rising costs of labor and materials, the depletion of spares from our initial reactivation projects and as the rigs we reactivate have been preservation stacked for longer periods of time. Future reactivations could be subject to further increases in the cost of labor and materials and could take longer due to increased lead times for parts and supplies.
Showing the first 40 of 42 passages. Open the source sections for the rest.
Reworded paragraphs (59)
Previous wording
The discussion of our results of operations and liquidity in this section includes comparisons for the years ended December 31, 2023 and 2022 (Successor). For a similar discussion, including comparisons for the year ended December 31, 2022, eight months ended December 31, 2021 (Successor), and the four months ended April 30, 2021 (Predecessor), see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2022, filed with the SEC on February 21, 2023.
Current wording
The discussion of our results of operations and liquidity in this section includes comparisons for the years ended December 31, 2024 and 2023. For a similar discussion, including comparisons for the years ended December 31, 2023 and 2022, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 15, 2024.
Previous wording
We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. We currently own 53 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 35 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional eight rigs.
Current wording
We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. As of February 20, 2025, we own 52 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 34 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.
Previous wording
Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Middle East, Africa and Asia Pacific.
Current wording
Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific.
Previous wording
Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demands. In addition, demand for offshore drilling services continues to improve as evidenced by increasing global utilization and day rates for offshore drilling rigs. Consequently, our outlook for the offshore drilling business is positive.
Current wording
Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demands. While demand for offshore drilling services has declined modestly since early 2024, global demand for hydrocarbons continues to increase and offshore production, particularly deepwater, is expected to play an important role in providing secure, reliable and affordable energy to meet the world’s growing energy needs. Consequently, our outlook for the offshore drilling business is positive.
Previous wording
Inflationary pressures remain elevated and have resulted in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. We expect that our costs will continue to rise in the near term and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations. Despite the inflationary trends and macroeconomic uncertainty, we continue to see recovery in our industry.
Current wording
Inflationary pressures have continued, resulting in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. We expect that our costs will continue to rise in the near term and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations.
Previous wording
Our contract drilling backlog reflects commitments, represented by signed drilling contracts, and is calculated by multiplying the contracted operating day rate by the contract period. The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities. Our backlog excludes ARO's backlog, but includes backlog from our rigs leased to ARO at the contractual rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture.
Current wording
Our contract drilling backlog reflects commitments represented by signed drilling contracts and is calculated by multiplying the contracted operating day rate by the contract period. The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities. Our backlog excludes ARO's backlog but includes backlog from our rigs leased to ARO at the contractual lease rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture (the "Shareholder Agreement").
Previous wording
The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in equity in earnings of ARO in our Consolidated Statement of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Current wording
The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in equity in earnings of ARO in our Consolidated Statements of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 3 -Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Previous wording
The following table summarizes our and 100% of ARO's contract backlog of business as of February 15, 2024 and the periods in which revenues are expected to be realized (in millions):
Current wording
The following table summarizes our and 100% of ARO's contract backlog as of February 18, 2025 and the periods in which revenues are expected to be realized (in millions):
Previous wording
From a supply perspective, as of December 31, 2023, the number of benign environment floaters including stacked rigs declined by 42% to 164 from a peak of 281 in late 2014. Across the stacked drillship fleet and newbuild drillships remaining at South Korean shipyards, we believe there are only ten uncontracted drillships remaining that are likely reactivation candidates over the next few years, including VALARIS DS-11 and the Newbuild Drillships. We anticipate that continued floater demand growth will further reduce available drillship capacity. Also, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of newbuild construction for the foreseeable future.
Current wording
From a supply perspective, as of December 31, 2024, the number of benign environment floaters including stacked rigs declined by 41% to 166 from a peak of 281 in late 2014. Given the moderate decline in utilization in the second half of 2024 for benign environment floaters, we could see further rigs retired from the global fleet. Also, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of floater newbuild construction for the foreseeable future.
Previous wording
Contracting and tendering activity for jackups has improved in recent years as a result of the more constructive oil price environment and we have seen a corresponding increase in utilization. The number of contracted jackups has increased to 409 at December 31, 2023 from a low of 341 in early 2021, contributing to a 16% increase in global utilization, from 78% to 94%, for the industry's active fleet over the same period, which has led to a meaningful increase in day rates for jackups. In early 2024, Saudi Arabia announced that they plan to maintain maximum sustainable capacity at 12 million barrels per day rather than pursuing their previously stated aim of increasing capacity to 13 million barrels per day. At this early stage, we are unable to predict what, if any, impact this announcement will have on the jackup market or the operations of ARO.
Current wording
Contracting and tendering activity for jackups has improved in recent years as a result of the more constructive oil price environment, and we have seen a corresponding increase in utilization. The number of contracted jackups increased to a peak of 412 in March 2024 from a low of 341 in early 2021, contributing to an increase in global utilization, from 78% to 94%, for the industry's marketed fleet over the same period, leading to a meaningful increase in day rates for jackups.
Previous wording
From a supply perspective, as of December 31, 2023, the number of jackups declined by 8% to 498 from a peak of 542 in early 2015. While the number of jackups has decreased less than floaters on a relative basis, 33% of the current jackup fleet is more than 30 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or length of time stacked. Expenditures required to recertify some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap a portion of these rigs. Excluding ARO's newbuild program, there are only 17 newbuild jackups remaining at shipyards, of which 12 are at Chinese shipyards, many of which are expected to be used for the local supply in China.
Current wording
From a supply perspective, as of December 31, 2024, the number of jackups declined by 7% to 503 from a peak of 542 in early 2015. While the number of jackups has decreased less than floaters, 28% of the current jackup fleet is more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs. We believe there are only 11 newbuild jackups remaining at shipyards, of which eight are at Chinese shipyards, some of which are expected to be used locally in China.
Previous wording
The following table summarizes our Consolidated Results of Operations for the year ended December 31, 2023 and 2022 (in millions, except percentages):
Current wording
The following table summarizes our Consolidated Results of Operations for the years ended December 31, 2024 and 2023 (in millions, except percentages):
Previous wording
General and administrative expenses increased primarily due to higher compensation related to our long-term incentive plans and higher professional fees.
Current wording
General and administrative expenses increased in 2024 compared to 2023, primarily due to higher professional fees and higher compensation related to our long-term incentive plans.
Previous wording
Other income, net, decreased in 2023, compared to 2022, primarily due to a $112.6 million lower gain on the sale of assets, a $23.6 million increase in interest expense, a $15.7 million decrease in foreign currency gains, and a $15.5 million decrease in net periodic pension and retiree medical income. The decrease is further attributable to a $29.2 million loss on the extinguishment of our First Lien Notes recognized in 2023. These decreases were partially offset by a $35.9 million increase in interest income.
Current wording
Other income, net, decreased in 2024, compared to 2023, primarily due to a $27.3 million gain on the sale of VALARIS 54 recognized in the prior year, a $15.9 million increase in interest expense, net, and a $15.3 million decrease in interest income. These decreases were partially offset by a $29.2 million loss from the extinguishment of the Senior Secured First Lien Notes due 2028 (the "First Lien Notes") recognized in 2023 (see "Note 6 -Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information) and a $17.3 million increase related to net foreign currency gains relative to the prior year, largely driven by favorable exchange rate movements in certain currencies.
Previous wording
(3)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under contracts with Saudi Aramco.
Current wording
(2)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco. During 2024, we leased VALARIS 108 and VALARIS 76 to ARO. Separately, the contracts with ARO for VALARIS 143, VALARIS 147 and VALARIS 148 were terminated.
Previous wording
(4)This represents the eight jackup rigs owned by ARO which are operating under long-term contracts with Saudi Aramco, including Kingdom 1, a jackup rig which was delivered in the fourth quarter of 2023.
Current wording
(3)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco, including Kingdom 2, which was delivered in the second quarter of 2024. This table does not include Kingdom 3, a newbuild jackup ordered by ARO in October 2024, as the rig is under construction.
Previous wording
The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment:
Current wording
Operating results for our contract drilling services segment are largely dependent on two primary revenue metrics: utilization and day rates. The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment:
Previous wording
(3)Average daily revenue is derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable revenues, revenues earned during suspension periods and revenues attributable to amortization of drilling contract intangibles, by the aggregate number of operating days. Beginning in 2023, we began presenting average daily revenue instead of the previously reported average day rate metric, which further excluded lump-sum revenues and amortization thereof. Average daily revenue is a more comprehensive measurement of our revenue-earning performance and more closely aligns with the calculation methodology used by our closest offshore drilling peers. The prior period has been adjusted to conform with the current period presentation.
Current wording
(3)Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues) by the aggregate number of operating days.
Previous wording
Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO.
Current wording
Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See "Note 3 -Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Previous wording
Segment information for the year ended December 31, 2023 and 2022 is as follows (in millions).
Current wording
Segment information for the years ended December 31, 2024 and 2023 is as follows (in millions).
Previous wording
The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for the ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us. See "Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on ARO and related arrangements.
Current wording
The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for both the ARO-owned jackup rigs and the rigs leased from us. Contract Drilling Expenses are inclusive of the bareboat charter fees for the rigs leased from us. See "Note 3 -Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on ARO and related arrangements.
Previous wording
During 2022, we recorded non-cash losses on impairment totaling $34.5 million with respect to customer-specific capital upgrades for VALARIS DS-11 made pursuant to the terms of the drilling contract that was terminated during the second quarter of 2022. See "Note 7 - Property and Equipment" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Current wording
During the year ended December 31, 2024, ARO recorded non-cash losses on impairment totaling $28.4 million with respect to the contract terminations for VALARIS 143, VALARIS 147 and VALARIS 148. See "Note 3 -Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for information regarding the impairment.
Previous wording
Interest expense, net increased by $23.6 million, or 52%, in 2023 as compared to 2022, primarily due to a higher principal debt balance in 2023.
Current wording
Interest expense, net increased by $15.9 million, or 23%, in 2024 as compared to 2023, primarily due to higher interest expense of $26.1 million related to a higher principal debt balance through 2024. This increase was partially offset by higher capitalized interest of $10.2 million, primarily due to VALARIS DS-13 and VALARIS DS-14, which were delivered at the end of 2023, and certain rigs that underwent capital projects in 2024.
Previous wording
Net gains on the sale of property decreased by $112.6 million in 2023 as compared to 2022, primarily due $140.7 million of gains recognized in 2022 on the sales of VALARIS 113, VALARIS 114, VALARIS 36 and VALARIS 67 and additional proceeds received for two rigs sold in prior years as a result of post-sale conditions of those sale agreements. This decrease was partially offset by a $27.3 million pre-tax gain on sale of VALARIS 54 recognized in 2023.
Current wording
Net gains on the sale of property decreased by $28.8 million in 2024 as compared to 2023, primarily due to the sale of VALARIS 54 in 2023.
Previous wording
We recognized a $29.2 million loss from the extinguishment of the First Lien Notes in 2023.
Current wording
We recognized a $29.2 million loss from the extinguishment of the First Lien Notes in 2023. See "Note 6 -Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for information on this matter.
Previous wording
Valaris Limited is domiciled and resident in Bermuda. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation. Legacy Valaris was domiciled and resident in the U.K. The income of our non-U.K. subsidiaries was generally not subject to U.K. taxation.
Current wording
Valaris Limited is domiciled and a resident for tax purposes in Bermuda. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation.
Previous wording
Our 2023 consolidated effective income tax rate includes discrete tax benefit of $42.0 million primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years including unrecognized tax benefits described above.
Current wording
During the year ended December 31, 2023, we recorded an income tax benefit of $782.6 million and had an effective income tax rate of (929.5)%. Our 2023 consolidated effective income tax rate includes a discrete tax benefit of $42.0 million primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, including unrecognized tax benefits described below. Excluding the impact of the aforementioned discrete tax items, our consolidated effective income tax rate was (872.3)% for the year ended December 31, 2023.
Previous wording
During the years ended December 31, 2023 and 2022, we recorded an income tax benefit of $782.6 million and an income tax expense of $43.1 million, respectively. Our consolidated effective income tax rates during the same periods were (929.5)% and 19.2%, respectively. The tax benefit in 2023 includes a $799.5 million deferred tax benefit recognized in the fourth quarter of 2023 to reduce our valuation allowance due to the determination that sufficient positive evidence now exists to conclude that a portion of the allowance is no longer needed. During 2023, we also recognized tax benefits for the reduction of unrecognized tax benefit liabilities related to the lapse of statutes of limitations applicable to certain of our tax positions of $73.6 million and settlements reached with taxing authorities of $41.8 million. These benefits were partially offset by a $88.6 million increase in unrecognized tax benefit liabilities for tax positions taken during prior years, including $66.0 million recognized in the fourth quarter of 2023 related to tax assessments received from the Luxembourg tax authorities. See "Note 12 - Income Taxes" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Current wording
The tax benefit in 2023 includes a $799.5 million deferred tax benefit recognized in the fourth quarter of 2023 to reduce our valuation allowance due to the determination that sufficient positive evidence existed to conclude that a portion of the allowance was no longer needed. During 2023, we also recognized tax benefits for the reduction of unrecognized tax benefit liabilities related to the lapse of statutes of limitations applicable to certain of our tax positions of $73.6 million and settlements reached with taxing authorities of $41.8 million. These benefits were partially offset by a $88.6 million increase in unrecognized tax benefit liabilities for tax positions taken during prior years, including $66.0 million recognized in the fourth quarter of 2023 related to tax assessments received from the Luxembourg tax authorities. See "Note 10 -Income Taxes" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
Previous wording
Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the years ended December 31, 2023 and 2022 were (872.3)% and 73.6%, respectively. The changes in our consolidated effective income tax rate excluding discrete tax items during the three-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions.
Current wording
The changes in our consolidated effective income tax rate excluding discrete tax items during the two-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions.
Previous wording
We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from cash and cash equivalents, cash flows from operations and borrowings under the Credit Agreement. We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures from cash and cash equivalents, cash flows from operations as well as cash to be received from maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO. We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture, dated as of April 19, 2023 (the "Indenture"), and the Credit Agreement contain covenants that limit our ability to incur additional indebtedness.
Current wording
We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from cash and cash equivalents and cash flows from operations. Additionally, we have liquidity available under our senior secured revolving credit agreement, which matures in 2028 (the "Credit Agreement."). We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures, from cash and cash equivalents, cash flows from operations, as well as cash to be received from maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO. We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture governing our Second Lien Notes, as defined below, dated as of April 19, 2023 (the "Indenture"), and the Credit Agreement contain covenants that limit our ability to incur additional indebtedness.
Previous wording
Our cash and cash equivalents as of December 31, 2023 and 2022, were $620.5 million and $724.1 million, respectively. We have no debt principal payments due until 2030 and had $375.0 million available for borrowing, including up to $150.0 million for the issuance of letters of credit, under the Credit Agreement as of February 16, 2024. See "Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Credit Agreement and 8.375% Second Lien Notes due 2030 (the "Second Lien Notes").
Current wording
Our cash and cash equivalents as of December 31, 2024 and 2023, were $368.2 million and $620.5 million, respectively. We have no debt principal payments due until 2030 and had $375.0 million available for borrowing, including up to $150.0 million for the issuance of letters of credit, under the Credit Agreement as of February 14, 2025. See "Note 6 -Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Credit Agreement and the 8.375% Second Lien Notes due 2030 (the "Second Lien Notes").
Previous wording
Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, debt repayments, business combinations or asset sales, our primary sources and uses of cash are driven by cash generated from or used in operations and capital expenditures. Our net cash provided by or used in operating activities and capital expenditures were as follows (in millions):
Current wording
Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, share repurchases, debt repayments, business combinations or asset sales, our primary sources and uses of cash are driven by cash generated from or used in operations and capital expenditures. Our net cash provided by operating activities and capital expenditures were as follows (in millions):
Previous wording
During the year ended December 31, 2023, we generated $267.5 million from operating activities related primarily to higher margins, the collection of $45.9 million for certain tax receivables and other changes in working capital. Our primary uses of cash were $337.0 million for the purchase of the Newbuild Drillships and $359.1 million for maintenance and upgrades of our drilling rigs, including reactivations. Our other primary sources and uses of cash during 2023 resulted from the First Lien Note redemption, the corresponding Second Lien Notes issuance and our share repurchase program, which are each further discussed below.
Current wording
During the year ended December 31, 2023, we generated $267.5 million of cash flow from operating activities, primarily due to operating income for the year of $53.5 million, the collection of $45.9 million for certain tax refunds and other changes in working capital. Our primary uses of cash were $337.0 million for the purchase of VALARIS DS-13 and DS-14 and $359.1 million for maintenance and upgrades of our drilling rigs, including reactivations. Other primary sources and uses of cash during 2023 resulted from the First Lien Notes redemption, the corresponding Second Lien Notes issuance and our share repurchase program, which are each further discussed below, combined with the sale of VALARIS 54 for net proceeds of $30.3 million.
Previous wording
We continue to take a disciplined approach to reactivations with our stacked rigs, including the Newbuild Drillships, only reactivating them for opportunities that provide meaningful returns. Generally, most of the reactivation cost will be operating expenses, recognized in the income statement, related to de-preservation activities, including reinstalling key pieces of equipment and crew costs. Capital expenditures during reactivations include rig modifications, equipment overhauls and any customer required capital upgrades. Reactivation costs incurred for the Newbuild Drillships would be capitalized as such activities would be required to prepare the rigs for their intended use. We would generally expect to be compensated for any customer-specific enhancements.
Current wording
We continue to take a disciplined approach to reactivations of our stacked rigs, only reactivating them to the active fleet for opportunities that provide meaningful returns. Generally, most of the reactivation cost are operating expenses, recognized in the income statement, related to de-preservation activities, including reinstalling key pieces of equipment and crew costs. Capital expenditures during reactivations include rig modifications, equipment overhauls and any customer required capital upgrades. Reactivation costs incurred for VALARIS DS-13 and VALARIS DS-14 would be capitalized as such activities would be required to prepare the rigs for their intended use. We would generally expect to be compensated for any customer-specific enhancements.
Previous wording
Based on our current projections, we expect capital expenditures during 2024 to approximate $390.0 million to $430.0 million primarily relating to maintenance and upgrade projects, including rig reactivation and associated contract-specific capital expenditures. We expect to receive upfront payments from our customers of approximately $55.0 million relating to these projects. Depending on market conditions, contracting activity and future opportunities, we may reactivate additional rigs or make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs.
Current wording
Based on our current projections, we expect capital expenditures during 2025 to approximate $350.0 million to $390.0 million, primarily relating to maintenance and upgrade projects, including contract-specific capital expenditures. Depending on market conditions, contracting activity and future opportunities, we may make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs.
Previous wording
(2)During the second quarter of 2023, we sold VALARIS 54.
Current wording
Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. Consistent with this strategy, we sold VALARIS 54 in April 2023 for $28.2 million. At the time of sale, the rig had a net book value of $0.9 million and we recognized a pre-tax gain on sale of $27.3 million within the Jackups segment during the second quarter of 2023. Further, in the first quarter of 2025, we sold VALARIS 75 resulting in a pre-tax gain on sale of approximately $23.0 million in 2025. Of the proceeds, approximately $14.0 million were collected upon closing, with the remaining $10.0 million expected to be received in equal installments on the first and second anniversaries of the closing. The rig had an immaterial net book value as of December 31, 2024.
Previous wording
In connection with our sustainability-related efforts, during 2023, we spent approximately $7.0 million and expect spend during 2024 to be comparable. Our sustainability initiatives will continue to require, among other actions, investment in systems and equipment and coordination with our customers.
Current wording
In connection with our sustainability-related efforts, during 2024, we spent approximately $9.0 million. Our sustainability initiatives will continue to require, among other actions, investment in systems and equipment and cooperation with our customers.
Previous wording
Additionally, on August 21, 2023, the Issuers issued $400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act. The Additional Notes were issued at 100.75% of par, plus accrued interest from April 19, 2023, for net proceeds of approximately $396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $11.4 million. We used a portion of the proceeds to finance the purchase of the Newbuild Drillships as described above.
Current wording
Additionally, on August 21, 2023, the Issuers issued $400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act. The Additional Notes were issued at 100.75% of par, plus accrued interest from April 19, 2023, for net proceeds of approximately $396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $11.4 million. We used a portion of the proceeds to finance the purchase of VALARIS DS-13 and VALARIS DS-14.
Previous wording
On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”). The Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, by an additional $200.0 million pursuant to the terms of the Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the Credit Agreement, and the lenders have a first priority lien on the assets securing the Credit Agreement. The commitments under the Credit Agreement became available to be borrowed on April 19, 2023. See “Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Credit Agreement.
Current wording
On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”). The Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, by an additional $200.0 million pursuant to the terms of the Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the Credit Agreement, and the lenders have a first priority lien on the assets securing the Credit Agreement. The commitments under the Credit Agreement became available to be borrowed on April 19, 2023.
Previous wording
We consider our investment in ARO to be a significant component of our investment portfolio and an integral part of our long-term capital resources. We expect to receive cash from ARO in the future both from the maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO.
Current wording
We expect to receive cash from ARO in the future both from the maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO.
Showing the first 40 of 59 pairs. Open the source sections for the rest.
Rearranged current paragraphs (3)
Current report — wording carried from elsewhere
(4)Active fleet represents rigs that are not preservation stacked and includes rigs that are in the process of being reactivated.
Current report — wording carried from elsewhere
See “Note 6 -Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Credit Agreement.
Current report — wording carried from elsewhere
In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. The Shareholder Agreement specifies that ARO shall purchase 20 newbuild jackup rigs over an approximate 10-year period. The joint venture partners intend for the newbuild jackup rigs to be financed out of available cash on hand and from ARO's operations and/or funds available from third-party financing. The first newbuild jackup, Kingdom 1, was delivered and commenced operations in the fourth quarter of 2023, and the second newbuild jackup, Kingdom 2, was delivered in the second quarter of 2024 and commenced operations in the third quarter of 2024.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. Consistent with this strategy, we sold five jackup rigs during the two-year period ended December 31, 2023.
Previous report — wording carried elsewhere
Upon emergence, we elected to change our accounting policies and have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.