Valaris Limited

Good day and welcome to the Volaris first quarter 2025 results conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for a conference specialist by pressing the start 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 1 on your touch-tone phone. If you would like to withdraw your question, please press star then 2. Please note that today's event is being recorded. I would now like to turn the conference over to Nick Georges, Vice President, Treasurer, Investor Relations. Please go ahead, sir.

Welcome everyone to the Volaris first quarter 2025 conference call. With me today are President and CEO Anton Divovits, 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 volaris.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 new contract awards. 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'll begin with a review of our performance for the quarter and highlight some of our recent commercial successes. I'll then provide an update on the offshore drilling market before discussing our approach to contracting and prudent fleet management. which are focused on driving long-term value creation for our shareholders. I'll then hand the call over to Matt, who will provide a more detailed perspective on our recently awarded contracts and the broader floater and jack-up markets, along with additional color on our contracting outlook. After that, Chris will walk through our financial results and guidance, and then I'll finish with some closing remarks. To begin, I want to highlight a few key points. First, we delivered another strong quarter to start the year, continuing our track record of providing safe and efficient operations for our customers, and we generated meaningful EBITDA and free cash flow. Second, we are successfully executing our commercial strategy by securing attractive, long-term contracts for our high-specification fleet. Since our last conference call just two months ago, we've added more than a billion dollars in new contract backlog, including work for drill ships offshore West Africa and across all of the major shallow-order markets where our rigs operate. While macroeconomic uncertainty has increased recently, we remain actively engaged with customers for additional contracting opportunities in 2026 and beyond. Third, we continue to expect that offshore production will play a vital role in meeting the world's energy needs and will remain a core component of our customers' portfolios. Given our high-quality fleet and operational performance, we are well-positioned to secure additional contracts that, along with our prudent fleet management, will further support our earnings and cash flow. Starting with operations, we delivered fleet-wide revenue efficiency of 96% during the first quarter, continuing our track record of providing safe and efficient operations for our customers. This excellent operational performance translated into strong financial results, with adjusted EBITDA of $181 million in the first quarter, up from $142 million in the prior quarter, and we generated $74 million of adjusted free cash flow. On the safety front, we were honored to receive the 2024 Best Safety Performance Award for jack-up rigs from the IADC North Sea Chapter, a great recognition of the team's commitment to safe operations. We also had several rigs achieve notable safety milestones, with Valaris 121 reaching two years without a recordable incident, while Valaris 144 and Mad Dog each marked one year recordable free. These achievements are a testament to our people and their dedication, hard work, and commitment to delivering safe and efficient operations for our customers. Delivering safe and efficient operations is our core business. It keeps our people safe, helps to make us the preferred partner for our customers, and drives value creation for our shareholders. Customers award work to contractors with strong track records in these areas, especially those that can deliver complex drilling solutions with high specification assets. Our recent contracting success underscores this dynamic. Since our February conference call, we've secured new contracts and extensions with associated contract backlog of approximately $1 billion. A standout amongst these is the two-year contract for Drill Ship Valeris DS10. This award increased our backlog by approximately $350 million at a strong day rate and reaffirms our customers' preference for an established drilling contractor like Valeris that can provide a high specification rig with advanced technology and reliably deliver a complex offshore program. This contract enhances our strategic position in West Africa, a key deep-water market where we've built a strong reputation, and we continue to see several additional long-term opportunities in the region with startups in the second half of 2026 or 2027. As we've mentioned before, we are focused on bookending the white space for our drill ships with near-term availability. Based on ongoing discussions, we are confident that we will be able to announce further progress on these efforts in the near future. We've also added meaningful backlog across our shallow water fleet, securing recent jack-up contracts in the Middle East, the North Sea, Australia, and Trinidad. With 80% of our active jack-up fleet operating in these four locations, we benefit from scaled positions that allow us to deliver excellent service and build long-term customer relationships. Importantly, we had five jackups chartered to our Arrow Drilling joint venture, with lease terms scheduled to expire this year. All five were recently extended for five-year terms. Arrow is an important partnership for Valeris, and we are pleased to share in its contracting success. For Valeris, this leaves us with one rig offshore Saudi Arabia with availability in 2027, and the remaining six contracted into 2030. From our operational performance to our safety accomplishments and our commercial success, I want to thank the entire Valeris team for their focus on execution and a fantastic start to 2025. Turning now to the broader offshore drilling market. Over the past few weeks, proposed tariffs on international trade and the associated increased costs, as well as the accelerated unwind of production cuts by OPEC+, have introduced new uncertainties for the global economy and our industry. We are staying close to our customers, and while it is early, scheduled programs and ongoing tenders largely appear to be on track. We believe most of the projects our customers are evaluating for near to medium-term commencement are expected to be economic well below current commodity prices. According to Restat, approximately 70% of deep-order programs expected to be sanctioned over the next three years have break-even prices below $50 per barrel equivalent, which compares to a five-year forward price in the mid $60 per barrel range. Offshore production, particularly deepwater, benefits from the combination of large and accessible resource potential, compelling project economics, and comparatively low carbon emissions intensity, factors that make offshore developments attractive relative to other sources of production. While recent events have created uncertainty, they don't change our expectation that offshore production will continue to play a vital role in meeting the world's energy needs and remain an important part of our customers' portfolios. As we navigate this period of heightened uncertainty, we remain focused on three areas within our control. Delivering outstanding operational performance, executing our commercial strategy, and prudently managing our fleet and costs. As I mentioned earlier, the team has executed well operationally to start the year, and we remain laser focused on operating safely and efficiently for our customers. We are well positioned to continue executing our commercial strategy and securing attractive contracts by virtue of our high specification fleet. We expect customers will continue to favor 7th generation drill ships for longer term development programs 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. We believe Valeris has an advantage on these longer-term opportunities since 12 of our 13 drill ships rank amongst the most technically capable assets in the global fleet and can provide these efficiencies, which are especially important to customers given their focus on optimizing costs. In addition, customer demand for shallow water jackups is resilient as the largest customers in this market are national oil companies, which have additional drivers that underpin their needs for ongoing hydrocarbon production, such as funding infrastructure projects and energy security. We have a versatile jackup fleet that is a strong contributor to our financial performance, and we expect to see year-over-year growth in both operating days and average day rates from this segment during 2025. In terms of fleet management, our strategy is centered on maintaining a high-quality, efficient fleet, and we will continue to prudently manage our rigs in response to evolving market conditions. To this end, we are actively managing costs for rigs expected to experience idle time between contracts. We recently moved Velaris DS12 to Las Palmas after the rig completed its contract in March, and we're in the process of reducing the rig's costs as we work to secure its next contract. We have several other floaters completing contracts later this year. We are willing to be patient to find the right programs for these rigs and will quickly reduce costs during extended idle periods to benefit our cash flow. Prudent fleet management also extends to our decisions to retire rigs when their expected economic benefit no longer justifies their associated costs. We previously announced our decision to retire a recently active loader, Valaris DPS-5, as well as Valaris DPS-3 and DPS-6 from our fleet. In April, we sold these rigs for recycling, and they will now be permanently removed from the global drilling fleet. Before handing over to Matt, I'd like to briefly recap a few key points regarding the market and our strategy. While there has been a recent increase in macroeconomic uncertainty, we expect offshore production will continue playing a vital role in meeting global energy demand and remain an important part of our customers' portfolios. At Valeras, we remain laser-focused on both operational excellence and commercial execution, Given our high-quality fleet and operational performance, we believe we're well-positioned to secure additional contracts which, combined with our prudent fleet management, will further support our earnings and cash flow. With that, I'll now hand the call over to Matt.