Valaris Limited

Good day and welcome to the Valerius fourth quarter 2024 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touchtone phone. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Nick Georges, Vice President, Treasurer, and Investor Relations. Please go ahead.

Welcome everyone to the Volaris fourth quarter 2024 conference call. With me today are President and CEO Anton Dibovitz, Senior Vice President and CFO Chris Weber, Senior Vice President and CCO Matt Line, and other members of our executive management team. We issued our press release which is available on our website at velaris.com. Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations. Please refer to our press release and SEC filings on our website that define forward-looking statements and list risk factors and other events that could impact future results. Also, please note that the company undertakes no duty to update forward-looking statements. During this call, we will refer to GAAP and non-GAAP financial measures. Please see the press release on our website for additional information and required reconciliations. Earlier this week, we issued our most recent fleet status report, which provides details on our rig fleet, including contract awards and fleet management actions. Now, I'll turn the call over to Anton Divovits, President and CEO.

Thanks, Nick, and good morning and afternoon to everyone. During today's call, I will provide an overview of our performance during the quarter, deliver an update on the offshore drilling market, and outline our contracting and fleet management strategy to drive long-term value creation for our shareholders. I will then hand the call over to Matt to discuss the floater and jack-up markets in more detail and provide some additional color on our contracting outlook. After that, Chris will discuss our financial results and guidance before I finish with some closing comments. To begin, I want to highlight a few key points. First, we continue to execute operationally and we finished 2024 with another solid quarter that benefited our financial results. Our contracting outlook for 2026 and beyond is strong for high specification assets and we are focused on securing attractive, long-term contracts for our active fleet. Third, we are willing to be patient to find the right jobs for our rigs. We will actively lower costs and idle rigs until the right job is available and we will not hesitate to remove rigs from our fleet when it makes economic sense to do so. Starting with operations, we delivered fleet-wide revenue efficiency of 96% during the fourth quarter and 97% for the full year. This marks an improvement over last year's results, and 2024 was the fourth consecutive year we have delivered revenue efficiency of at least 96%. We also had outstanding safety performance in 2024, achieving improvements in key safety metrics and receiving safety awards from both the IADC and the Center for Offshore Safety. We were recently recognized by the IADC Brazil Chapter with its 2024 Safety Award, with three rigs, DS4, DS8, and DS17, each completing the year with no recordable incidents, a great achievement attributable to all involved. In addition to our rigs offshore Brazil, Valeris 115, which is working with Shell in Brunei, recently celebrated four years without a recordable incident, another fantastic accomplishment. These results demonstrate our focus on delivering outstanding safety and operating performance, which is essential to building long-standing customer relationships. As always, we are focused on the things that we can control, and I thank every member of the Valeris team around the world for their dedication, hard work, and continued focus on operating safely and efficiently for our customers. Moving to our financial performance, adjusted EBITDA was $142 million in the fourth quarter, down slightly from $150 million in the third quarter. Revenues were toward the upper end of our guidance range due to solid operating performance, and EBITDA was slightly below the midpoint of our guidance range due to higher contract drilling expense resulting from a non-cash accrual for a legal matter. During the fourth quarter, we generated $13 million in free cash flow, in addition to $111 million in the third quarter. And we returned all this free cash flow to shareholders through share repurchases during the second half of the year. Chris will provide more details on our financial results and 2025 guidance a little later. Turning now to the broader offshore drilling market. In terms of fundamentals, global demand for hydrocarbons continues to increase and we expect offshore production, particularly deepwater, to play an increasingly important role in providing secure, reliable and affordable energy to meet the world's growing energy needs. Many of the largest E&P companies have recently announced their CAPEX plans for the coming years, and a number of them are allocating a greater share of budgets towards traditional projects focused on oil and gas production versus new energy sources. This bodes well for offshore project sanctioning, especially deepwater programs, as the size of fields, compelling economics, and lower carbon emissions intensity make these projects attractive relative to other sources of production. We see a robust pipeline of deepwater project approvals in 2026 and 2027, which are expected to be at their highest level in more than a decade, and more than double the project approvals anticipated for 2024 and 2025. This increase in project sanctioning is expected to spur growth in deepwater rig demand through the end of the decade and support the longevity of the upcycle that began in 2021. In the nearer term, offshore capex continues to increase, although the pace of growth slowed in 2024 and this trend is expected to continue in 2025, which has slowed the pace of rig contracting and resulted in a modest decline in global floater utilization in 2024. We continue prudently managing our fleet in response to market conditions, and we will retire or divest rigs when the expected economic benefit for an asset does not justify its costs. Consistent with this approach, we recently announced plans to retire three semi-submersibles from our fleet, including one of our active rigs, the Laris DPS-5, which last worked in the third quarter 2024. We have decided to retire DPS-5 since we do not have visibility into sufficient near-term work that would support keeping the rig warm-stacked. And we are not preservation stacking the rig as we see limited contract opportunities with a duration that would justify the cost of a future reactivation. For the same reason, we have also decided to retire sister rigs DPS-3 and DPS-6, which have been stacked for several years. We expect these rigs will be retired from the global drilling supply and repurposed for alternative uses or scrapped. These actions reduce our costs, benefit our cash flow, and further focus our fleet on high specification assets. Over the past five years, we have significantly high graded our fleet, retiring a total of 12 floaters, more than any other offshore driller. Our go-forward fleet of 15 floaters includes 12 seventh generation drill ships that position us for contracting success. Customers have shown a clear preference for these modern, technically capable assets. with utilization meaningfully higher for seventh-generation drillships than the rest of the global benign environment floater fleet, and day rates for longer-term jobs have remained in the mid-to-high 400,000s. We expect customers will continue to favor these assets for their longer-term developments, as the combination of technical specifications such as dual derricks with high hook load capacity, high capacity thrusters, and two blowout preventers offer efficiencies that are amplified over multi-well programs. The contracting outlook for 2026 and beyond remains strong for these high specification assets. and with such a constructive environment, we are focused on securing attractive, long-term contracts for our active fleet, particularly those opportunities with customers or in basins where we have visibility into several years of future work. We are currently tracking more than 20 floater opportunities with a duration of at least one year, and we expect this number will grow to nearly 30 when Petrobras launches expected new tenders aimed at re-contracting its near-term rollovers. In general, we expect long-term contracts will be awarded approximately 9 to 12 months ahead of their scheduled start dates, so we anticipate that the flow of contract awards will pick up pace around the middle of this year, given expectations for when these programs will begin. Moving to shallow order, average day rates for the key markets where we operate have remained relatively firm. and we continue to secure solid contracts for our rigs working offshore Australia, Trinidad, and in the North Sea that require high-spec or harsh environment units. One recent example is our multi-year contract for Valera Stavanger in the North Sea, which added $75 million of contract backlog and further enhances our contract coverage in the region. In addition, we signed a contract for the 249 offshore Trinidad, a strong market for us where we are achieving premium day rates. Trinidad is the largest oil and gas producer in the Caribbean, and the country is focused on increasing its gas production, which has declined by more than a third from its peak in 2010. The energy sector has played an integral role in the long-term economic growth of the country, and we look forward to playing our part in its future development. I also want to note that we recently sold Valaris 75, a 25-year-old jack-up that had been stacked for five years, which was another step we took to high-grade our fleet. Our jack-ups remain an important contributor to our overall financial performance, and we have grown contract backlog for this segment by more than 75% over the past two years. We have good contract coverage across our jack-up segment in 2025, and we expect to see year-over-year growth in both operating days and average day rates. In summary, we are steadfast in our belief that offshore oil and gas production will play an important role in providing secure, reliable, and affordable energy to the world. and that Valeris is well-positioned to help meet the need and drive long-term value creation for our shareholders by virtue of our high specification fleet and excellent safety and operational track record. Now, I'll hand the call over to Matt.