Valaris Limited (VAL) | Investment Case

1. Company Snapshot

1.a. Company Description

Valaris Limited provides offshore contract drilling services to the international oil and gas industry.The company owns an offshore drilling rig fleet of 56 rigs, which include 11 drillships, 4 dynamically positioned semisubmersible rigs, 1 moored semisubmersible rig, and 40 jackup rigs.It serves international, government-owned, and independent oil and gas companies in the Gulf of Mexico, the North Sea, the Middle East, West Africa, Australia, and Southeast Asia.

The company was incorporated in 2009 and is based in Hamilton, Bermuda.

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1.b. Last Insights on VAL

Valaris Limited's recent performance has been driven by strong operational and financial results. The company's Q2 2025 earnings beat estimates, with revenue efficiency of 96% contributing to meaningful EBITDA and free cash flow. Additionally, Valaris secured new contracts, including an award for drillship VALARIS DS-12. Institutional investors, such as Vanguard Personalized Indexing Management LLC, have also shown confidence in the company, increasing their holdings by 13.9%. The company's solid performance and growth prospects have been acknowledged by analysts, although some have downgraded their ratings to Neutral or Sell.

1.c. Company Highlights

Last Price	59.93
Change Percentage	0.55%
Open	60.1
Previous Close	59.6
Market Cap ( Millions)	4254
Volume	1079676
Year High	61.7
Year Low	27.15
M A 50	53.69
M A 200	45.05

FCF Yield	5.87%
Dividend Yield	0.00%
ROE	17.30%
Debt / Equity	44.28%
Net Debt / EBIDTA	48.26%
Price To Book	1.73
Price Earnings Ratio	10.62
Price To FCF	17.03
Price To sales	1.76
EV / EBITDA	5.34

2. Valaris' Strong Q3 Performance and Positive Outlook

Valaris reported a robust third-quarter performance, with total revenues of $596 million and adjusted EBITDA of $163 million, exceeding guidance. The company's earnings per share (EPS) came in at $2.65, significantly higher than the estimated $1. The strong financial performance was driven by the company's high-specification fleet, with all four drillships with near-term availability now contracted for work beginning next year. The company's adjusted free cash flow was $237 million, and they repurchased $75 million of shares during the quarter.

Publication Date: Nov -02

                                    📋 Highlights
                                    Strong Q3 Financial Performance:
                                                Adjusted EBITDA reached $163M, adjusted free cash flow hit $237M, and $75M was spent on share repurchases.
Expanded Contract Backlog:
                                                Secured $2.2B in new backlog, including a $200M boost from new contracts/ extensions and the BP Egypt contract.
Drillship Utilization Outlook:
                                                Global drillship utilization expected to peak at 90% by late 2026, with all 10 active Valaris drillships likely working by year-end.
Q4 Revenue Guidance:
                                                Projected $495–515M in revenues, down from $596M in Q3 due to fewer operational days, but adjusted EBITDA remains strong at $70–90M.
Robust Liquidity Position:
                                                Ended Q3 with $676M in cash, plans $70–90M in Q4 CAPEX, and maintains a $200M minimum cash balance for working capital.

                                

Operational Highlights

Valaris' commercial strategy focuses on securing contracts for its high-specification fleet, with a robust pipeline of deepwater opportunities. The company has secured over $2.2 billion in new backlog this year and continues to engage with customers on future programs. According to Matt Lyne, Senior Vice President and CCO, the company has secured new contracts and extensions, adding nearly $200 million to its contract backlog. The company's fleet status report shows that utilization for the global drillship fleet will improve in the second half of 2026, with seventh-generation drillships expected to exit 2026 with utilization levels around 90%.

Market Outlook

The long-term outlook for the offshore drilling market is constructive, with growing consensus that today's near-term oil supply surplus will give way to a structurally tighter market later in the decade. Valaris expects demand for offshore drilling services to improve across the region in the second half of 2026 and into 2027. The company sees potential for growth in various regions, including Africa, driven by projects in Mozambique, Egypt, and West Africa. The reactivation of suspended rigs in Saudi Arabia is also a positive development for Valaris, adding to the global jack-up market's utilization.

Valuation and Return Metrics

Valaris' current valuation metrics indicate a relatively attractive price. The company's P/E Ratio is 9.94, EV/EBITDA is 5.05, and Free Cash Flow Yield is 6.25%. The ROE is 17.3%, and ROIC is 8.71%. These metrics suggest that the company is generating strong returns on equity and invested capital. Analysts estimate next year's revenue growth at -7.1%, but the company's strong backlog and improving market outlook could potentially lead to a recovery in revenues.

Capital Return and Cash Position

Valaris ended the quarter with $676 million in cash and cash equivalents and expects to receive approximately $70 million in upfront payments from customers this year. The company is committed to returning capital to shareholders and has been opportunistic with share repurchases. Valaris does not see a need to hold excessive cash and currently has $200 million as a minimum cash balance for working capital purposes.

3. NewsRoom

One Fund Just Dumped $13 Million in This Offshore Drilling Stock — Here's What Long-Term Investors Should Know

Nov -27

Source: fool.com

Valaris Limited (NYSE:VAL) Given Consensus Recommendation of “Hold” by Brokerages

Nov -22

Source: defenseworld.net

Third Avenue Management Exits Deutsche Bank AG, Impacting Portfolio by -6.22%

Nov -14

Source: gurufocus.com

Hantz Financial Services Inc. Raises Position in Valaris Limited $VAL

Nov -06

Source: defenseworld.net

Investment Manager Exits Valaris After 30% Stock Drop Amid Offshore Sector Weakness

Nov -05

Source: fool.com

Valaris Limited: Years Of Underperformance Might Finally Be Over

Oct -31

Source: seekingalpha.com

Valaris Limited (VAL) Q3 2025 Earnings Call Transcript

Oct -31

Source: seekingalpha.com

Valaris Limited (VAL) Surpasses Q3 Earnings and Revenue Estimates

Oct -29

Source: zacks.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.80%)

6. Segments

Floaters

Expected Growth: 1.2%

The Floaters segment is expected to grow at a rate higher than the global revenue growth hypothesis due to the increasing demand for deepwater and ultra-deepwater drilling services. The growth is driven by the need for energy companies to explore and produce oil and gas in challenging environments, and Valaris Limited is well-positioned to benefit from this trend.

Jackups

Expected Growth: 0.5%

The Jackups segment is expected to grow at a rate lower than the global revenue growth hypothesis due to the competitive nature of the shallow-water drilling market. The growth is constrained by the availability of Jackup rigs and the ability of energy companies to invest in exploration and production activities.

ARO

Expected Growth: 0.8%

The ARO segment is expected to grow at a rate in line with the global revenue growth hypothesis. The growth is driven by the company's ability to maintain its alumni network and provide support services, which is not directly related to the core drilling business.

Other

Expected Growth: 0.8%

The Other segment is expected to grow at a rate in line with the global revenue growth hypothesis. The growth is driven by the company's ability to generate income from non-core activities, which is not directly related to the core drilling business.

Reconciling Items

Expected Growth: 0.0%

The Reconciling Items segment is not expected to grow as it represents adjustments and eliminations for financial reporting purposes. The segment's revenue is not driven by business activities, but rather by the need to ensure accurate financial reporting.

7. Detailed Products

Drilling Services

Valaris Limited provides drilling services to the oil and gas industry, offering a fleet of drilling rigs and equipment to support exploration and production activities.

Rig Management

Valaris Limited offers rig management services, providing operational and technical support to ensure safe and efficient drilling operations.

Project Management

Valaris Limited provides project management services, overseeing drilling projects from planning to execution, ensuring timely and within-budget delivery.

Well Intervention

Valaris Limited offers well intervention services, providing specialized equipment and expertise to optimize well performance and extend well life.

Engineering and Consulting

Valaris Limited provides engineering and consulting services, offering expertise in drilling and well operations to optimize performance and reduce costs.

8. Valaris Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Valaris Limited operates in a niche market with limited substitutes, but the increasing adoption of renewable energy sources poses a moderate threat.

Bargaining Power Of Customers

Valaris Limited's customers are primarily oil and gas companies, which have limited bargaining power due to their dependence on the company's drilling services.

Bargaining Power Of Suppliers

Valaris Limited relies on a few key suppliers for its drilling equipment and services, giving them moderate bargaining power.

Threat Of New Entrants

The high capital requirements and regulatory barriers to entry in the offshore drilling industry make it difficult for new entrants to challenge Valaris Limited's market position.

Intensity Of Rivalry

The offshore drilling industry is highly competitive, with several established players competing for a limited number of contracts, leading to a high intensity of rivalry.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	36.76%
Debt Cost	3.95%
Equity Weight	63.24%
Equity Cost	9.91%
WACC	7.72%
Leverage	58.13%

11. Quality Control: Valaris Limited passed 1 out of 9 key points

Strong Liquidity

Low Deb

Strong Interest Coverage

Healthy Cash Flow

Operating Inefficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Archrock

A-Score: 5.9/10

Value: 4.2

Growth: 4.6

Quality: 5.2

Yield: 8.0

Momentum: 7.5

Volatility: 6.0

1-Year Total Return ->

NOV

A-Score: 5.0/10

Value: 7.6

Growth: 5.6

Quality: 5.1

Yield: 4.0

Momentum: 3.0

Volatility: 5.0

1-Year Total Return ->

Valaris

A-Score: 4.6/10

Value: 6.2

Growth: 6.9

Quality: 5.9

Yield: 0.0

Momentum: 5.0

Volatility: 3.7

1-Year Total Return ->

Weatherford

A-Score: 4.4/10

Value: 6.1

Growth: 7.4

Quality: 5.9

Yield: 1.0

Momentum: 2.5

Volatility: 3.7

1-Year Total Return ->

Cactus

A-Score: 4.4/10

Value: 5.4

Growth: 4.4

Quality: 8.1

Yield: 2.0

Momentum: 1.5

Volatility: 5.0

1-Year Total Return ->

Tidewater

A-Score: 4.3/10

Value: 6.4

Growth: 7.2

Quality: 7.2

Yield: 0.0

Momentum: 2.5

Volatility: 2.7

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

17.66%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

7.72%

Valaris Limited - BMG9460G1015

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on VAL

1.c. Company Highlights

Lower Yield

Fairly Valued

Average Growth

Earnings Beats

Revenues Beats

Average Quality

Stable Momentum

Earnings Miss

Weak Momentum

Higher Growth

Medium Volatility

2. Valaris' Strong Q3 Performance and Positive Outlook

Operational Highlights

Market Outlook

Valuation and Return Metrics

Capital Return and Cash Position

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (0.80%)

6. Segments

Floaters

Expected Growth: 1.2%

Jackups

Expected Growth: 0.5%

ARO

Expected Growth: 0.8%

Other

Expected Growth: 0.8%

Reconciling Items

Expected Growth: 0.0%

7. Detailed Products

Drilling Services

Rig Management

Project Management

Well Intervention

Engineering and Consulting

8. Valaris Limited's Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: Valaris Limited passed 1 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

59.93$

Current Price

59.93$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA