Q2 2024 Valaris Ltd Earnings Call

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Unknown Executive: Good day and welcome to the Valaris second quarter 2024 results conference call. All participants will be in listen-only mode. Should you need assistance, please signal conference specialists by pressing the star key followed by zero.

Operator: Good day, and welcome to the Valaris second quarter 2024 results conference call. All participants will be in listen only mode.

Operator: 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 1 on your touchtone phone.

Speaker Change: Good day and welcome to the Valaris Second 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.

Unknown Executive: 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.

Nick Georgas: To ask a question, you may press star then 1 on your touchtone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Nick Georgas, Vice President, Treasurer, and Investor Relations. Please go ahead.

Operator: To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Nick Georgas, Vice President, Treasurer, and Investor Relations. Please go ahead.

Nick Georgas: I would now like to turn the conference over to Nick Georgas, Vice President, Treasurer, and Investor Relations. Please go ahead.

Anton Dibowitz: Welcome everyone to the Valaris second quarter 2024 conference call. With me today are President and CEO Anton Dibowitz, Senior Vice President and CFO Chris Weber, Senior Vice President and CCO Matline, and other members of our Executive Management team. We issued our press release, which is available on our website at Valaris.com.

Nick Georgas: Welcome everyone to the Valaris second quarter 2024 conference. With me today are President & CEO Anton Dibowitz, Senior Vice President & CFO Chris Weber, Senior Vice President & CCO Matt Lyne, and other members of our Executive Management Team. We issued our press release, which is available on our website at Valaris.com. Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainty. Many factors could cause actual results to differ materially from our expectations.

Nick Georgas: Welcome everyone to the Valaris second quarter 2024 conference call. With me today are President and CEO Anton Dibowitz, Senior Vice President and CFO Chris Weber, Senior Vice President and CCO Matt Lyne, and other members of our executive management team.

Speaker Change: We issued our press release which is available on our website at Valaris.com

Unknown Executive: Any comments we make today about expectations are for 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 for 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 for looking statements.

Speaker Change: 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.

Nick Georgas: 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.

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.

Speaker Change: Also, please note that the company undertakes no duty to update forward-looking statements.

Unknown Executive: During this call, we will refer to gap and non-gap financial measures. Please see the press release on our website for additional information and required reconciliation.

Nick Georgas: 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 reconciliation. Earlier this week, we issued our most recent fleet status report, which provides details on contracts across our rigged fleet. An updated investor presentation will be available on our website after the call. Now, I'll turn the call over to Anton Dibowitz, President and CEO. Thanks, Nick, and good morning and afternoon to everyone.

Speaker Change: 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.

Unknown Executive: Earlier this week, we issued our most recent fleet status report, which provides details on contracts across our rig fleet, and an updated investor presentation will be available on our website after the call.

Speaker Change: Earlier this week, we issued our most recent fleet status report, which provides details on contracts across our rigged fleet. An updated investor presentation will be available on our website after the call.

Anton Dibowitz: Now I'll turn the call over to Anton Dibowitz, President and CEO. Thanks, Neck, and good morning and afternoon to everyone. During today's call, I will begin with an overview of our performance during the quarter and provide an update on the offshore drilling market. 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 recent contract awards as well as our contracting outlook.

Speaker Change: Now, I'll turn the call over to Anton Dibowitz, President and CEO.

Anton Dibowitz: During today's call, I will begin with an overview of our performance during the quarter and provide an update on the offshore drilling market. I will then hand the call over to Matt to discuss the floater and jackup markets in more detail and provide some additional color on recent contract awards as well as our contracting outlook. After that, Chris will discuss our financial results and guidance before I finish with some closing comments.

Anton Dibowitz: During today's call, I will begin with an overview of our performance during the quarter and provide an update on the offshore drilling market.

Anton Dibowitz: After that, Chris will discuss our financial results and guidance before I finish with some closing comments. To begin, I want to highlight some key points about our business that we will cover in more detail during this call. First, in the second quarter, we built on our great start to 2024 and would like to congratulate the entire Valarist team on delivering another excellent quarter of safety, operating, and financial performance. Second, we continue to execute our commercial strategy, securing attractive new contracts and building our backlog. This past quarter marks the seventh consecutive increase in our backlog, which now totals more than $4.3 billion.

Anton Dibowitz: To begin, I want to highlight some key points about our business that we will cover in more detail during this call. First, in the second quarter, we built on our great start to 2024 and would like to congratulate the entire Valaris team on delivering another excellent quarter of safety, operating, and financial performance. Second, we continue to execute our commercial strategy, securing attractive new contracts and building our backlog. This past quarter marks the seventh consecutive increase in our backlog, which now totals more than $4.3 billion.

Anton Dibowitz: Third, we maintain our conviction in the strength and duration of this upcycle and see strong customer demand for projects that are expected to commence in 2025 and 2026. Turning to operations, our success continues to be built on the foundation of strong safety and operating performance. In the second quarter, we delivered fleet-wide revenue efficiency of 99% without a lost-time incident. A great achievement by the entire Valaris team.

Anton Dibowitz: First, in the second quarter we built on our great start to 2024 and would like to congratulate the entire Valaris team on delivering another excellent quarter of safety, operating, and financial performance.

Anton Dibowitz: This achievement is even more impressive considering that we had several rigs either starting new contracts or changing operating locations during the quarter, including Valaris DS-7 following its reactivation, DS-17 moving countries to drill a frontier exploration well in Argentina, and Stavanger and 123 commencing new contracts in the North Sea following out-of-service periods for contract preparation and survey work. In addition, we had several rigs celebrate safety milestones during the quarter, and I would like to congratulate the Valaris 249 team for reaching two years without a recordable incident, as well as the Valaris DS10 and 106 teams for each reaching one year without a recordable incident. Well done to everyone involved.

Anton Dibowitz: We also continue to build on our strong track record of reactivating rigs for contracts that benefit our financial results by returning Valaris DS7, one of our 7th-generation drill ships, to work on a long-term contract offshore West Africa. The DS7 reactivation project was delivered on time and began its contract on schedule, marking our sixth drill ship reactivation completed since 2022. successfully reactivating rigs for attractive contracts has played a large part in our earnings growth story, and we still have organic growth capacity to meet increasing customer demand with Valaris DS11, DS13, and DS14, the highest specification drill ships in the global fleet that have yet to be reactivated. Moving to our financial performance, Adjusted EBITDA increased to $139 million in the second quarter, up meaningfully from $54 Adjusted EBITDA, adding back one-time reactivation costs, was $150 million.

Anton Dibowitz: Third, we maintain our conviction in the strength and duration of this upcycle, and see strong customer demand for projects that are expected to commence in 2025 and 2026. Our success continues to be built on the foundation of strong safety and operating performance. In the second quarter, we delivered fleetwide revenue efficiency of 99% without a lost time incident, a great achievement by the entire Valaris team. This achievement is even more impressive considering that we had several rigs either starting new contracts or changing operating locations during the quarter, including Valaris DS7 following its reactivation, DS17 moving countries to draw a frontier exploration well in Argentina, and the Stavanger and 123 commencing new contracts in the North Sea following out of service periods for contract preparation and survey work.

Anton Dibowitz: Turning to operations, our success continues to be built on the foundation of strong safety and operating performance.

Anton Dibowitz: In the second quarter, we delivered fleet-wide revenue efficiency of 99% without a lost time incident. A great achievement by the entire Valera's team.

Anton Dibowitz: including Valaris DS-7 following its reactivation, DS-17 moving countries to drill a frontier exploration well in Argentina, and the Stavanger and 123 commencing new contracts in the North Sea following out-of-service periods for contract preparation and survey work.

Anton Dibowitz: In addition, we had several rigs celebrate safety milestones during the quarter, and I would like to congratulate the Valaris 249 team for reaching two years without a recordable incident, as well as the Valaris DS10 and one of six teams for each reaching one year without a recordable incident. Well done to everyone involved. We also continued to build on our strong track record of reactivating rigs for contracts that benefit our financial results by returning Valaris DS7, one of our seventh generation drill ships, to work on a long-term contract of Shore West Africa. The DS7 reactivation project was delivered on time and began its contract on schedule, marking our sixth drill ship reactivation completed since 2022.

Anton Dibowitz: In addition, we had several rigs celebrate safety milestones during the quarter, and I would like to congratulate the Valaris 249 team for reaching two years without a recordable incident.

Anton Dibowitz: The DS7 reactivation project was delivered on time and began its contract on schedule, marking our 6th drill ship reactivation completed since 2022.

Anton Dibowitz: Successfully reactivating rigs for a tract of contracts has played a large part in our earnings growth story, and we still have organic growth capacity to meet increase in customer demand with Valaris DS11, DS13, and DS14, the highest specification drill ships in the global fleet that have yet to be reactivated. Moving to our financial performance, adjusted EBDI increased to $139 million in the second quarter, up meaningfully from $54 million in the first quarter. Adjusted EBDIR, adding back one-time reactivation costs, was $150 million. These results were better than our guidance, primarily due to the team achieving 99% revenue efficiency during the quarter, certain contracts extending longer than previously anticipated, and the timing of costs that are not expected to be recognized in subsequent quarters.

Speaker Change: Successfully reactivating rigs for attractive contracts has played a large part in our earnings growth story, and we still have organic growth capacity to meet increasing customer demand with Valaris DS11, DS13, and DS14, the highest specification drill ships in the global fleet that have yet to be reactivated.

Anton Dibowitz: Chris will provide further details in our financial results and guidance a little later. Turning now to the broader offshore drilling market, the combination of increasing global demand for hydrocarbons and OPEC Plus effectively managing supply has led to relatively stable oil prices so far this year, with spot Brent's crude prices largely trading above $80 per barrel. Looking at further, the five year Brent forward prices around $70 per barrel, a level at which more than 90% of undeveloped offshore reserves are expected to be profitable. As a result, commodity prices remain very supportive for continued investment in long cycle offshore projects.

Anton Dibowitz: Looking out further, the five-year Brent crude price is around $70 per barrel, a level at which more than 90% of undeveloped offshore reserves are expected to be profitable. According to ReStat, deepwater upstream CAPEX is expected to increase at a compound annual growth rate of 9% over the next three years, which is anticipated to drive further growth in floater demand. Just past the halfway point of this year, we have already seen six fixtures above $500,000 per day, compared to just two for all of last year.

Anton Dibowitz: In addition, leading indicators of offshore rig demand, including global upstream capex and project sanctioning, are expected to see strong growth over the next few years, bolstering our view that we are in a structural upcycle. According to ReStad, deepwater upstream capex is expected to increase at a compound annual growth rate of 9% over the next three years, which is anticipated to drive further growth in floated demand. Average day rates for drill ships have continued to increase compared to six and 12 months ago. Just past the halfway point of this year, we have already seen six fixtures above $500,000 per day, compared to just two for all of last year.

Speaker Change: In addition, leading indicators of offshore rig demand, including global upstream CAPEX and project sanctioning, are expected to see strong growth over the next few years, bolstering our view that we are in a structural upcycle.

Anton Dibowitz: And these fixtures have spanned the US Gulf of Mexico, Brazil, West Africa, and Asia, evidence of the broad-based growth in customer demand. The strength of the market is further demonstrated by a recently announced multi-year contract for Valaris DS-17, which added nearly $500 million of contract backlog at a leading-edge day rate. This contract includes a standby period where the customer will pay day rates to keep the rig while they wait to commence their new drilling program. This new contract is a testament to the quality of our crews and operations, the capabilities of the rig, and the collaborative nature of our relationship with Ecuador, who have made meaningful investments in innovative, safety, and automation technology on the GS-17.

Anton Dibowitz: The strength of the market is further demonstrated by a recently announced multi-year contract for Valaris DS17, which added nearly $500 million of contract backlog at a leading-edge day rate. With this in mind, we are laser focused on filling as many uncontracted days in 2024 as we can and securing term work commencing in 2025 and beyond that will further support our expected earnings and cash flow growth. Moving to shallow water, the benign environment jackup market remains tight, with marketed utilization of 93%.

Anton Dibowitz: Our priority remains maximizing the profitability of our fleet by keeping our active rigs highly utilized and securing the best contract economics possible. With this in mind, we are laser-focused on filling as many uncontracted days in 2024 as we can and securing term work commencing in 2025 and beyond that will further support our expected earnings and cash flow growth. Moving to shallow water, the benign environment jack-up market remains tight, with marketed utilization of 93 percent. Several rigs from the first round of Saudi Aramco suspensions earlier this year have already made an orderly transition into the international benign environment jack-up market, and leading-edge day rates are still north of $150,000 per day, as evidenced by recent fixtures.

Speaker Change: Our priority remains maximizing the profitability of our fleet by keeping our active rigs highly utilized and securing the best contract economics possible.

Speaker Change: Moving to shallow water, the benign environment jackup market remains tight with marketed utilization of 93%.

Anton Dibowitz: Several rigs from the first round of Saudi Aramco suspensions earlier this year have already made an orderly transition into the international benign environment jack-up market, and leavingage day rates are still north of $150,000 per day, as evidenced by recent fixtures. In connection with the second round of suspensions, Arrow recently received notices from Stadia-Ramco to suspend the drilling contracts for Valaris 147 and 148.

Anton Dibowitz: The working rig count of Shosadi Arabia is anticipated to move slightly lower going forward, with up to five additional rigs expected to be suspended. In connection with the second round of suspensions, Arrow recently received notices from Shosadi Aramco to suspend the drilling contracts for Valaris 147 and 148. Discussions are ongoing with Aramco where there are other Valaris least rigs, or Arrow own rigs could be subject to the suspensions instead of Valaris 147 and 148, along with the effective date for the suspensions. While we currently estimate the suspensions could adversely impact our full year 2024 EBITDA by up to $10 million, these two contracts represent just $35 million of our $4.3 billion in contract backlog.

Anton Dibowitz: Taking a step back, the suspension of up to five additional rigs by Saudi Aramco does not change our view of the market, as they represent approximately 1% of the global market for Harsh Environment Jackups. The supply-demand balance in the North Sea improved meaningfully in the latter half of 2023. Our rigs are fully contracted for 2024, and we currently have less than one rig year of availability across our nine active rigs in the region in 2025. With positive industry fundamentals driving increasing day rates and contract durations, we're in a strong market to be adding contract backlog.

Anton Dibowitz: Taking a step back, the suspension of up to 5 additional rigs by Saudi Aramco does not change our view of the market, as they represent approximately 1% of the global market for Jakob Fleet. For harsh environment jackups, the supply-demand balance in the North Sea improved meaningfully in the latter half of 2023. Our rigs are fully contracted for 2024, and we currently have less than one rig year of availability across our nine active rigs in the region for 2025. We see strong customer interest for programs that line up well with this limited availability.

Speaker Change: For harsh environment jackups, the supply-demand balance in the North Sea improved meaningfully in the latter half of 2023. Our rigs are fully contracted for 2024, and we currently have less than one rig year of availability across our nine active rigs in the region in 2025.

Speaker Change: We see strong customer interest for programs that line up well with this limited availability.

Anton Dibowitz: Before I finish, I'd like to briefly comment on our capital return objectives. Looking ahead, we expect to generate meaningful and sustained free cash flow in 2025 and beyond, and we intend to return all future free cash flow to shareholders unless there is a better or more value-accretive use for it. Now I'll hand the call over to Matt to discuss the floater and jackup markets in more detail and to provide an overview of our recent contracting success and our contracting outcome, which is $338,000 per day.

Speaker Change: Before I finish, I'd like to briefly comment on our capital return objectives.

Anton Dibowitz: As I noted earlier, we continue to make major strides on this front, which supports our earnings and cash flow growth.

Anton Dibowitz: Looking ahead, we expect to generate meaningful and sustained free cash flow in 2025 and beyond, and we intend to return all future free cash flow to shareholders unless there is a better or more value-accretive use.

Matthew Lyne: Now, I'll hand the call over to Matt to discuss the floater and jack-up markets in more detail and to provide an overview of our recent contracting success and our contracting outlook. Thanks, Anton, and good morning and afternoon, everyone. Since the beginning of the second quarter, we secured new contracts and extensions with associated contract backlog of approximately $715 million. These awards have increased our total backlog to more than $4.3 billion, a 42% increase compared to a year ago, and our seventh consecutive quarter of backlog growth. Importantly, this growing backlog has been secured at higher day rates, as seen in the increased average daily revenue within our quarterly results and the average day rates included within our backlog.

Speaker Change: Now, I'll hand the call over to Matt to discuss the floater and jackup markets in more detail and to provide an overview of our recent contracting success and our contracting outlook.

Matthew Lyne: This is particularly evident for our drill ship fleet. Over the past 12 months, drill ship backlog has increased by nearly 50% to more than $2.5 billion. In addition, we have increased the average day rate for our drill ships within backlog to $414,000 a day from $338,000 per day. These averages exclude the impact of meaningful upfront payments. We have secured on several of our drill ship contracts, and we expect the average day rate within our backlog to increase as we roll legacy day rate contracts to market rates. Our recent contract awards include a multi-year contract with Equinor Offshore Brazil for drill ship Valaris DS-17.

Anton Dibowitz: These averages exclude the impact of meaningful upfront payments we have secured on several of our drillship contracts, and we expect the average day rate within our backlog to increase as we roll legacy day rate contracts to market rates. Our recent contract awards include a multi-year contract with Equinor Offshore Brazil for drillship Valaris DS17.

Matthew Lyne: We are pleased to have secured a new contract in direct continuation of the rig's current program at a very strong day rate. The customer's willingness to pay a standby rate while they wait to commence their new drilling program is a good indication of market strength as we look ahead to the second half of 2025 and 2026. Moving to shallow water, we have secured eight new contracts or extensions since the beginning of the second quarter, five of which were for rigs in the North Sea. These include a two-year program for Valaris 92 and approximately 300 days of work for Valaris Norway, securing work for both rigs for nearly all of next year and further enhancing our 2025 contract coverage in the region.

Matt Lyne: We are pleased to have secured a new contract in direct continuation of the rig's current program at a very strong day rate. The customer's willingness to pay a standby rate while they wait to commence their new drilling program is a good indication of market strength as we look ahead to the second half of 2025 and 2026. The strength of the market is evident in the day rates we have seen for recent contracts, particularly for high-specification 7th generation drillships, which comprise 12 of the 13 drillships in Valaris' fleet.

Matthew Lyne: In addition, we secured a one-year contract for Valaris 249 offshore Trinidad at a day rate in the high 100,000s, representing a 10% increase from our previous contract award in the region.

Speaker Change: representing a 10% increase from our previous contract award in the region.

Matthew Lyne: Moving now to an overview of the major markets, starting with floaters. The contracted benign environment floater count reached 127 during the first quarter. It's highest point since late 2016 and remained at this level during the second quarter. Marketing utilization of 86% for the benign environment floater fleet is at its highest point in nearly a decade. The strength of the market is evident in the day rates we have seen for recent contracts, particularly for high specification 7th generation drill ships, which comprise 12 of the 13 drill ships in Valaris's fleet. Average day rates for 7th generation drill ship contracts have increased from approximately $450,000 in the second half of 2023 to approximately $480,000 in the first half of 2024.

Speaker Change: Marketed utilization of 86% for the Benign Environment floater fleet is at its highest point in nearly a decade.

Matt Lyne: Average day rates for 7th generation drillship contracts have increased from approximately $450,000 in the second half of 2023 to approximately $480,000 in the first half of 2024. We have seen an increasing number of fixtures above $500,000 in recent months. This increased activity is expected to be primarily driven by IOCs, although most of these awards are likely to go to rigs that are already in country.

Speaker Change: Average day rates for 7th generation drillship contracts have increased from approximately $450,000 in the second half of 2023 to approximately $480,000 in the first half of 2024, and as Anton mentioned,

Matthew Lyne: And as Anton mentioned, we have seen an increasing number of fixtures above $500,000 in recent months. We continue to see a robust pipeline of opportunities for work commencing in the second half of 2025 and 2026. Looking at expected future demand and ongoing tenders, we are tracking approximately 30 floater opportunities with durations of at least one year, and the average firm duration for these opportunities is approximately 2.5 years. With the average lead times and durations for programs extending, the timing of contract awards can be hard to predict. However, we are confident that we will see a high conversion rate as tenders become contract fixtures, and we anticipate that roughly 20 of the 30 long-term opportunities that we are tracking will be awarded within the next 12 months, with several expected before the end of this year.

Speaker Change: We have seen an increasing number of fixtures above $500,000 in recent months.

Anton Dibowitz: Looking at expected future demand and ongoing tenders, we are tracking approximately 30 floater opportunities with durations of at least one year, and the average firm duration for these opportunities is approximately 2.5 years.

Speaker Change: With the average lead times and durations for programs extending, the timing of contract awards can be hard to predict.

Speaker Change: However, we are confident that we will see a high conversion rate as tenders become contract fixtures.

Matthew Lyne: We see the greatest number of opportunities for programs offshore Africa. We are currently tracking more than a dozen opportunities, including long-term tenders for work in several countries, including Nigeria, Angola, and Ghana. Taking Nigeria as an example, Ristad's forecast for deep water capex through the end of the decade has more than doubled as compared to their forecast just two years ago. This increased activity is expected to be primarily driven by IOCs, and we anticipate that we may see contract awards for at least one of these ongoing tenders before the end of the year, with a further to expected to follow in early 2025.

Speaker Change: We see the greatest number of opportunities for programs offshore Africa. We are currently tracking more than a dozen opportunities, including long-term tenders for work in several countries, including Nigeria, Angola and Ghana.

Matthew Lyne: Offshore Brazil, there are currently 36 floaters contracted, including four rigs that have yet to commence contracts. Petrobras now has three ongoing tenders: Honkador, Sepia, and a recently issued tender for up to four rigs across multiple fields, while most of these awards are likely to go to rigs that are already in country. These work scopes will keep many rigs occupied into 2028 and 2029, showing the longevity of customer demand in Brazil. In addition, there is still potential for incremental demand through a combination of Petrobras and IOC programs. In the Gulf of Mexico, we see several long-term opportunities on the radar and expect this market to remain fairly balanced, with demand largely met by existing supply in the region.

Speaker Change: Offshore Brazil, there are currently 36 floaters contracted, including 4 rigs that have yet to commence contracts.

Speaker Change: Petrobras now has three ongoing tenders, Honkador, Sepia, and a recently issued tender for up to four rigs across multiple fields. While most of these awards are likely to go to rigs that are already in country,

Matthew Lyne: Outside of the major floater markets, we see potential for incremental demand from CERNAM, which, given its proximity to Guyana, could become a strong growth market over the next few years. In Namibia, we anticipate that the significant exploration success over the past couple of years could lead to some long-term development programs commencing later in the decade. And we have also seen an uptick in demand in Southeast Asia, with several operators looking at opportunities that could require incremental rigs in the region.

Speaker Change: Outside of the major floater markets, we see potential for incremental demand from Suriname, which given its proximity to Guyana, could become a strong growth market over the next few years.

Matt Lyne: In Namibia, we anticipate that the significant exploration success over the past couple of years could lead to some long-term development programs commencing later in the decade, and we have already seen at least six rigs that were suspended in Saudi Arabia earlier this year find work in other regions. Customer interest remains strong, particularly for programs commencing in the second half of 2025. We are also encouraged by the increasing number of longer-term new energy and plug-in abatement programs.

Matthew Lyne: Moving to shallow water, the global jack-up market remains in a healthy place. The contracted rig count has increased in Southeast Asia, India, China, and West Africa over the past six months. And we have already seen at least six rigs that were suspended in Saudi Arabia earlier this year find work in other regions. We expect that the remaining suspended rigs that elect to seek work outside Saudi Arabia can be absorbed with limited impact on the broader market. And the expected suspensions of up to five additional rigs in Saudi Arabia does not alter our view. In the North Sea, market conditions continue to improve with all 20 active jackups in the UK, Danish, and Dutch sectors currently contracted.

Speaker Change: and the expected suspensions of up to five additional rigs in Saudi Arabia does not alter our view.

Speaker Change: in the North Sea.

Matthew Lyne: During the first half of 2024, we saw an increase in the number of contracts and total number of rig years awarded as compared to the same period last year. In addition, we have seen average day rates for new fixtures in the region increased to approximately $140,000 in the first half of 2024, from $120,000 in the second half of 2023, with leading edge day rates continuing to push higher. Customer interest remains strong, particularly for programs commencing in the second half of 2025. We are also encouraged by the increasing number of longer term, new energy and plug and abandonment programs that could result in incremental demand in this region.

Speaker Change: During the first half of 2024, we saw an increase in the number of contracts and total number of rig years awarded as compared to the same period last year.

Speaker Change: from $120,000 in the second half of 2023, with leading edge day rates continuing to push higher.

Matthew Lyne: In terms of our contracting priorities, we continue to have 2024 availability on just two of our 13 active floaters. DPS 5 recently completed its contract with ENI offshore Mexico, and DS10 will complete its contract with Shell offshore Nigeria in the coming days. We continue to see long term opportunities for both rigs that are expected to start in the second half of 2025, and in the meantime, we are actively pursuing short term opportunities. At the time of our last call, we were in active customer discussions for opportunities for both rigs that were expected to start in the third quarter.

Matt Lyne: We continue to have 2024 availability on just two of our 13 active floaters. Additionally, we continue to see long-term opportunities for both rigs that are expected to start in the second half of 2025. And, in the meantime, we are actively pursuing short-term opportunities. We remain laser focused on filling as many uncontracted days in 2024 as we can and securing term work commencing in 2025 and beyond that will further support our expected earnings and cash flow growth.

Speaker Change: We continue to see long-term opportunities for both rigs that are expected to start in the second half of 2025. And in the meantime, we are actively pursuing short-term opportunities.

Speaker Change: At the time of our last call, we were in active customer discussions for opportunities for both rigs that were expected to start in the third quarter. Subsequently, these programs have either been delayed, seen their work scopes reduced, or been filled by sublats.

Matthew Lyne: Subsequently, these programs have either been delayed, seen their workscopes reduced, or been filled by sublets. Currently, the available short-term opportunities for these rigs commence in the fourth quarter. DS12 is now expected to continue its current program with BP offshore Egypt into early next year, and the rig is well positioned for future opportunities both offshore Africa and further afield. Given recent contracting and the expected exercise of priced options, we now anticipate that nearly 70% of 2025 available days for our active floater fleet are spoken. Riggs, with either the existing customer or other operators with work programs that are expected to commence next year.

Speaker Change: Aside from the three rigs I just mentioned.

Speaker Change: We are already in active discussions regarding follow-on work for these rigs with either the existing customer or other operators with work programs that are expected to commence next year.

Matthew Lyne: In addition, we continue to see customer interest in our seventh-generation drill ships requiring reactivation, Valaris DS11, DS13, and DS14. And we expect that the growing demand will provide increasingly attractive opportunities to put these rigs to work overtime, looking at 2025 for our benign environment jackups. We have availability on the Valaris 117, 118, and 247. And we expect to secure work for these rigs that will keep them busy next year.

Speaker Change: In addition, we continue to see customer interest in our 7th generation drillships requiring reactivation, Valaris DS-11, DS-13 and DS-14.

Speaker Change: and we expect that the growing demand will provide increasingly attractive opportunities to put these rigs to work over time. Looking at 2025, for our benign environment jackups, we have availability on the Valaris 117, 118 and 247.

Speaker Change: and we expect to secure work for these rigs that will keep them busy next year. As Anton noted, discussions regarding recent suspension notices from Saudi Aramco are ongoing.

Matthew Lyne: As Anton noted, discussions regarding recent suspension notices from Saudi Aramco are ongoing. While we do not know the exact form these suspensions will take, we are in discussions with a Ramco on extensions for rigs that are due to complete their existing lease terms at the end of 2024, or early part of 2025. In terms of our North Sea jackups, as mentioned earlier, we recently secured additional work for five rigs in the region. With these contracts and options that we expect customers to exercise, we now see less than one year of availability across two of our active rigs during 2025.

Anton Dibowitz: Well, we do not know the exact form these suspensions will take.

Anton Dibowitz: We are in discussions with Aramco on extensions for rigs that are due to complete their existing lease terms at the end of 2024 or early part of 2025. In terms of our North Sea jackups, as mentioned earlier, we recently secured additional work for five rigs in the region.

Anton Dibowitz: With these contracts and options that we expect customers to exercise, we now see less than one year of availability across two of our active rigs during 2025.

Matthew Lyne: We entered 2024 with our active North Sea fleet fully sold out for the year ahead. And based on our discussions with customers, we anticipate being in a similar position before the start of 2025.

Anton Dibowitz: We entered 2024 with our active North Sea Fleet fully sold out for the year ahead. And based on our discussions with customers, we anticipate being in a similar position before the start of 2025.

Matthew Lyne: In summary, we continue to focus on building contract backlog by securing attractive contracts at increasing day rates. We remain laser focused on filling as many uncontracted days in 2024 as we can, and securing term work commencing in 2025 and beyond that will further support our expected earnings and cashflow growth.

Christopher Weber: I will now hand the call over to Chris to take you through the financials. Thanks, Matt, and good morning and afternoon, everyone. In my prepared remarks, I will provide an overview of the second quarter results or outlook for the third quarter and our guidance for the full year. Starting with our second quarter results, revenue was $610 million, up from $525 million in the prior quarter, and an adjusted EBITDA was $139 million, up from $54 million in the prior quarter. Adjusted EBITDA, which adds back reactivation expense, was $150 million, up from $84 million in the prior quarter.

Matt Lyne: I will now hand the call over to Chris to take you through the financials. In my prepared remarks, I will provide an overview of the second quarter results, our outlook for the third quarter, and our guidance for the full year. In addition, Valaris DS-15 and DS-16 started new, higher day rate contracts in the second quarter, which contributed to an increase in average daily revenue.

Chris Weber: Out of service time and repair costs for Jackup Valaris 249, and the recent commencement of the Valaris 247 contract in Australia following its mobilization from the North Sea. For Valaris 247, I also want to flag that the mobilization, revenue, and expense associated with its move from the North Sea to Australia will be largely recognized during the third quarter because they will be amortized over the rig's initial 100-day contract, which commenced in mid-July. Total CapEx in the third quarter is expected to be between $90 and $100 million.

Speaker Change: In my prepared remarks, I will provide an overview of the second quarter results, our outlook for the third quarter, and our guidance for the full year.

Anton Dibowitz: Starting with our second quarter results. Revenue was $610 million, up from $525 million in the prior quarter, and adjusted EBITDA was $139 million, up from $54 million in the prior quarter.

Anton Dibowitz: Adjusted EBITDAR, which adds back reactivation expense, was $150 million, up from $84 million in the prior quarter.

Christopher Weber: Adjusted EBITDA increased meaningfully in the second quarter, primarily due to higher utilization and average daily revenue for both the floater and jackup fleets, along with lower contract drilling expense. In the second quarter, floater revenues increased due to a full quarter of operations for Valera's DS-12 and DPS-5, which both commenced contracts during the first quarter, along with DS-7, which commenced operations offshore West Africa in late May following the successful completion of its reactivation project. In addition, Valaris DS-15 and DS-16 started new, higher-day rate contracts in the second quarter, which contributed to an increase in average daily revenue.

Anton Dibowitz: Adjusted EBITDA increased meaningfully in the second quarter primarily due to higher utilization and average daily revenue for both the floater and jackup fleets along with lower contract drilling expense.

Anton Dibowitz: In the second quarter, floater revenues increased due to a full quarter of operations for Valeris DS-12 and DPS-5, which both commenced contracts during the first quarter.

Anton Dibowitz: along with DS7, which commenced operations offshore West Africa in late May following the successful completion of its reactivation project.

Anton Dibowitz: Jackup revenues increased primarily due to higher utilization, including a full quarter of operations for Valeris 107, which commenced a contract offshore Australia during the first quarter.

Anton Dibowitz: In addition, Valaris 123 and Stavanger started new contracts in the North Sea during the second quarter, following out-of-service time in the first quarter while the rigs were undergoing contract preparation and survey work.

Christopher Weber: Following out of service time in the first quarter, while the rigs were undergoing contract preparation and survey work. Contract drilling expense decreased in the second quarter, primarily due to lower reactivation expense for DS-7 as it completed its reactivation project. In addition, we incurred lower repair maintenance expense for the jacket fleet as rigs returned to work following out of service time for contract preparations and survey work in the first quarter. These items were partially offset by increased operating costs for the floater fleet due to higher utilization and costs to stack Valaris DS-13 and DS-14. Our second quarter EBITDAQ came in better than our guidance, primarily due to three factors.

Anton Dibowitz: Our second quarter EBITDA came in better than our guidance primarily due to three factors.

Christopher Weber: Strong operating performance as we achieved 99% revenue efficiency. Certain contracts, including DS-10 and DPS-5, running longer than expected, and the timing of certain costs pushing into the second half of the year, primarily the third quarter. This cost timing drove roughly half of the outperformance versus guidance, and is primarily attributable to the timing of mobilizations and demobilizations and repair and maintenance spend. Moving to our financial position, we had cash and cash equivalents of $410 million at the end of the quarter. Cash declined by $99 million during the quarter, primarily due to capital expenditures of $110 million, partially offset by cash generated from operations of $12 million.

Anton Dibowitz: Strong operating performance as we achieve 99% revenue efficiency.

Anton Dibowitz: certain contracts, including DS-10 and DPS-5, running longer than expected

Anton Dibowitz: and the timing of certain costs pushing into the second half of the year, primarily the third quarter.

Anton Dibowitz: This cost timing drove roughly half of the outperformance versus guidance, and is primarily attributable to the timing of mobilizations and demobilizations and repair and maintenance spend.

Christopher Weber: In the second quarter, operating cash was negatively impacted by a large build in working capital, primarily due to an increase in counts receivable driven by higher fleet utilization and the startup of the DS-7 contract. Our $375 million revolving credit facility remains fully available, providing total liquidity of $785 million at the end of the quarter.

Anton Dibowitz: Our $375 million revolving credit facility remains fully available, providing total liquidity of $785 million at the end of the quarter.

Christopher Weber: Moving now to our third quarter outlook, we expect total revenues in the range of $610 to $630 million. Contract drilling expense of $455 to $465 million, and GNA expense of approximately $30 million. Adjusted EBITDA is expected to be $120 to $140 million compared to $139 million in the second quarter. EBITDA is expected to move lower due to the DPS-5 and DS-10 both being idle for the rest of the quarter after completing their latest contracts, the impact of costs that have shifted from the second quarter to the third quarter, out of service time and repair costs for jack-up Valaris-249, and the potential impact of Saudi-Aramco contract suspensions for Valaris-147 and 148.

Anton Dibowitz: EBITDA is expected to move lower due to the DPS 5 and DS 10 both being idle for the rest of the quarter after completing their latest contracts.

Anton Dibowitz: The impact of costs that have shifted from the second quarter to the third quarter.

Anton Dibowitz: Out of service time and repair costs for Jackup Valaris 249 And the potential impact of Saudi Aramco contract suspensions for Valaris 147 and 148

Christopher Weber: These items are expected to be partially offset by a full quarter of operations for DS7, the recent commencement of the Valaris 247 contract in Australia following its mobilization from the North Sea, and the DS15 and DS16 operating at higher day rates for a full quarter. We currently estimate that the rig will be out of service for several weeks to complete the required repairs and that the total financial impact, inclusive of out of service time and repair costs, will range from $5 to $10 million. For the Valaris 247, I also want to flag that the mobilization revenue and expense associated with its move from the North Sea to Australia will be largely recognized during the third quarter because it will be amortized over the rig's initial 100-day contract, which commenced in mid July.

Anton Dibowitz: The recent commencement of the Valaris 247 contract in Australia following its mobilization from the North Sea. And the DS-15 and DS-16 operating at higher day rates for a full quarter.

Anton Dibowitz: Regarding the Valaris 249, the rig recently incurred leg damage while moving off location in advance of its next contract.

Anton Dibowitz: We currently estimate that the rig will be out of service for several weeks to complete the required repairs and that the total financial impact, inclusive of out-of-service time and repair costs, will range from $5 to $10 million.

Anton Dibowitz: For the Valeris 247, I also want to flag that the mobilization, revenue, and expense associated with its move from the North Sea to Australia will be largely recognized during the third quarter, because it will be amortized over the rig's initial 100-day contract, which commenced in mid-July.

Christopher Weber: Total catbacks in the third quarter is expected to be $90 to $100 million. Maintenance and upgrade catbacks is expected to be approximately $85 million, including spend related to the start of the Valaris 144 upgrade project prior to its long-term contract offshore Angola that is scheduled to commence early next year. Reactivation and associated contract-specific catbacks is expected to be approximately $10 million, primarily related to some trailing costs for DS7.

Anton Dibowitz: Total CapEx in the third quarter is expected to be 90 to 100 million dollars.

Chris Weber: Maintenance and upgrade capex is expected to be approximately $85 million, including spend related to the start of the Valaris 144 upgrade project prior to its long-term contract offshore in Gola that is scheduled to commence early next year. We have updated the EBIDTA guidance range primarily due to the current outlook for the DS-10 and DPS-5 in the second half of the year. As Matt mentioned, the current available opportunities for short-term gap-fill work are now starting during the fourth quarter, and this reduces our 2024 EBITDA potential.

Anton Dibowitz: Maintenance and upgrade capex is expected to be approximately $85 million, including spend related to the start of the Valaris 144 upgrade project prior to its long-term contract offshore in Gola that is scheduled to commence early next year.

Anton Dibowitz: Reactivation and associated contract-specific CAPEX is expected to be approximately $10 million, primarily related to some trailing costs for DS-7.

Christopher Weber: Turning to our full-year outlook, we are lowering our full-year EBITDA guidance range to $480 to $540 million, with revenue in the range of $2.35 to $2.4 billion, contract drilling expense of approximately $1.75 billion, and GNA expense of approximately $115 million. We have updated the EBITDA guidance range primarily due to the current outlook for the DS10 and DPS5 in the second half of the year. As Matt mentioned, the current available opportunities for short-term gap to the work are now starting during the fourth quarter, and this reduces our 2024 EBITDA potential. We need to secure work for one or both of the rigs in the fourth quarter to achieve the midpoint of the updated EBITDA range.

Anton Dibowitz: turning to our full-year outlook.

Anton Dibowitz: We are lowering our full year EBITDA guidance range to $480 to $540 million.

Anton Dibowitz: With revenue in the range of $2.35 to $2.4 billion, contract drilling expense of approximately $1.75 billion, and G&A expense of approximately $115 million.

Anton Dibowitz: We have updated the EBITDA guidance range primarily due to the current outlook for the DS-10 and DPS-5 in the second half of the year. As Matt mentioned, the current available opportunities for short-term gap-till work are now starting during the fourth quarter, and this reduces our 2024 EBITDA potential.

Speaker Change: We need to secure work for one or both of the rigs in the fourth quarter to achieve the midpoint of the updated EBITDA range.

Christopher Weber: Our guidance also reflects the expected financial impact of the Valaris 249 leg damage I previously discussed, as well as the potential impact of Saudi Aramco contract suspensions for Valaris 147 and 148, which, as Anton mentioned, could be up to $10 million this year. Full-year 2024 capital expenditures are expected to total $450 to $480 million. This is slightly higher than our prior guidance, primarily due to certain project-related costs being capitalized that were previously expected to be deferred expense. As a reminder, we expect that approximately $55 million of our full-year 2024 CAPEX will be reimbursed through upfront customer payments, most of which is expected to be received in the second half of the year.

Chris Weber: Our guidance also reflects the expected financial impact of the Valaris 249 leg damage I previously discussed. First, I am proud of the strong safety, operating, and financial performance that we delivered through the first half of the year. Congratulations to the entire Valaris team on an excellent six months. We've now reached the end of our prepared remarks.

Anton Dibowitz: Our guidance also reflects the expected financial impact of the Valeris 249 leg damage I previously discussed.

Anton Dibowitz: as well as the potential impact of Saudi Aramco contract suspensions for Valeris 147 and 148 which, as Anton mentioned, could be up to 10 million dollars this year.

Anton Dibowitz: Full year 2024 capital expenditures are expected to total 450 to 480 million dollars.

Anton Dibowitz: This is slightly higher than our prior guidance, primarily due to certain project-related costs being capitalized that were previously expected to be deferred expense.

Speaker Change: As a reminder, we expect that approximately $55 million of our full year 2024 CapEx will be reimbursed through upfront customer payments, most of which is expected to be received in the second half of the year.

Christopher Weber: Finally, we expect our free cash flow profile to improve in the second half of the year, driven by higher utilization and day rates, and lower spend on reactivations and contract preparations.

Anton Dibowitz: Finally, we expect our free cash flow profile to improve in the second half of the year, driven by higher utilization and day rates, and lower spend on reactivations and contract preparations.

Christopher Weber: I want to conclude by stepping back and noting that we've had a great first half of the year, and while there are a few discrete items that are impacting a result from the second half of the year, we are excited about the future and the outlook for our business remains very strong. That we delivered through the first half of the year. Congratulations to the entire Valaris team on an excellent six months. Second, we maintain our conviction in the strength and duration of this upcycle and see strong customer demand for projects that are expected to commence in 2025 and 2026.

Anton Dibowitz: I want to conclude by stepping back and noting that we've had a great first half of the year. And while there are a few discreet items that are impacting our results in the second half of the year, we are excited about the future and the outlook for our business remains very strong.

Anton Dibowitz: And now I'll hand the call back to Anton for some closing remarks.

Anton Dibowitz: Thanks, Chris. I want to reiterate some of the key points we covered today. First, I am proud of the strong safety, operating, and financial performance that we delivered through the first half of the year. Congratulations to the entire Valeris team on an excellent six months.

Anton Dibowitz: Second, we maintain our conviction in the strength and duration of this upcycle and see strong customer demand for projects that are expected to commence in 2025 and 2026.

Christopher Weber: And finally, we continue to execute on our strategy, securing new contracts at higher day rates that will support our expected earnings and cashflow growth over the next few years. We believe that Valaris is well positioned to benefit from the strength and duration of this structural upcycle, and we thank our employees, customers, and investors for their support.

Anton Dibowitz: And finally, we continue to execute on our strategy, securing new contracts at higher day rates that will support our expected earnings and cash flow growth over the next few years.

Anton Dibowitz: We believe that Folaris is well-positioned to benefit from the strength and duration of this structural upcycle, and we thank our employees, customers, and investors for their support.

Unknown Executive: We've now reached the end of our prepared remarks.

Operator: Operator, please open the line for questions. At this time, we will pause momentarily to assemble our roster. I was kind of hoping we could talk a little bit about, you know, capital allocation and how you're thinking about, you know, managing or returning Valaris. We have capacity available under our authorization right now. When we put it in place, we said it would not necessarily be linear through the year, and we're going to be opportunistic with it.

Unknown Executive: Operator, please open the line for questions. We will now begin the question and answer session. To ask a question, you may press star, then one on your touch-tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. To withdraw your question, please press star, then two.

Speaker Change: We've now reached the end of our prepared remarks. Operator, please open the line for questions.

Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone.

Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.

Unknown Executive: At this time, we will pause momentarily to assemble our roster.

Gregory Lewis: The first question comes from Greg Lewis with BTIG. Please go ahead. Yes, I thank you, and good morning and good afternoon, everybody.

Anton Dibowitz: The first question comes from Greg Lewis with BTIG. Please go ahead.

Greg Lewis: Yes, hi, thank you, and good morning and good afternoon, everybody. You know, Anton, I was kind of hoping we could talk a little bit about, you know, capital allocation and how you're thinking about

Gregory Lewis: I was kind of hoping we could talk a little bit about capital allocation and how you're thinking about managing or returning Valaris cash flows to shareholders. If we were to talk six, 12 months ago, I'm sure most of us on this call would have thought, hey, the DS 14, 13, 11 are going to be reactivated because the market is that strong. And there's going to be CAPEX associated with bringing those rigs on. The market's definitely improved, but as at least as we think about, you know, the next 12 to 18 months, you know, and the rigs that are idle on the sidelines, whether it's Valaris or others.

Speaker Change: you know, managing or returning the layers.

Speaker Change: Cash flows to shareholders and that you know if we were to talk six twelve months ago I'm sure you know most of us on this call would have thought

Speaker Change: Hey, the DS14, 13, 11 are going to be reactivated because the market is that strong and there's going to be CapEx associated with bringing those rigs on. Markets definitely improved, but as I, as at least as we think about, you know, the next 12 to 18 months.

Anton Dibowitz: and the rigs that are idle on the sidelines, whether it's Volaris's or others.

Gregory Lewis: And just that CAPEX that we're assigning to reactivate those rigs is just going to be put on hold for a little while. Does that kind of change the way you think about, you know, your capital allocation, and maybe does that provide an opportunity for you to accelerate returning cash to shareholders over the next 12 to 18 months?

Speaker Change: and just that capex that we're assigning to reactivate those rigs, you know, is just going to be put on hold for a little while. Does that kind of change the way you think about...

Anton Dibowitz: Yeah, that's a good question. Great. Look, we've been very clear about our capital return thoughts and how we're going to demonstrate that to shareholders. We returned capital to shareholders last year. You know, we've spent a significant amount of cash in the first half of the year, getting the seven to work.

Anton Dibowitz: Yeah, that's a good question. Greg, look, we've been very clear about our capital return

Anton Dibowitz: And I'm going to generate increasing amounts of cash as we roll legacy contracts onto new contracts, and as we go into 25, you know, a real, a real inflection point for us as a company. I don't think we feel differently about 13 and the 14. There's a strong pipeline of opportunities, as we said, you know, coming through in a lot of half of 25 and into 26. In fact, we, you know, as we see it now, we operate, you know, high specification, you know, 12 of our 13 ships of seven Jen, and we can see a call on those on those assets evolving in the second half of next year and going into 26.

Speaker Change: and as we go into 2025.

Anton Dibowitz: [inaudible]

Speaker Change: You know, as we see it now, we operate, you know, high specification, you know, 12 of our 13 ships are 7th gen, and we can see a call on those assets evolving in the second half of next year and going into 26. So we still see great opportunities for the 13 and 14 going forward.

Anton Dibowitz: So we still see great opportunities for the 13 and 14 going forward.

Anton Dibowitz: But we've been very clear on our capital return philosophy when we're generating cash, and we're heading into heading in that direction over the, you know, over the next period that we're going to return it all to shareholders. We have capacity available under our authorization right now. When we put in place, we said it would not be necessarily linear through the year. We're going to be opportunistic in it, and we will live with that commitment, and we intend to return cash to shareholders. Cappadoon.

Anton Dibowitz: But we've been very clear on our capital return philosophy when we're generating cash and we're heading in that direction over the next period, that we're going to return it all to shareholders.

Speaker Change: We have capacity available under our authorization right now. When we put it in place, we said it would not be necessarily linear through the year. We're going to be opportunistic in it.

Operator: And we will live with that commitment, and we intend to return cash to shareholders. And my follow-up is just on the two jack-up suspension notices on Valaris 147 and 148. You mentioned you're having discussions on whether maybe other Valaris leased rigs could be suspended instead. Could you maybe give us some more insight here? I know you have some other rigs that are expected to come off contract earlier than the 147 and 148. But is that really the main factor here, or is there something else?

Anton Dibowitz: and we will live with that commitment and we intend to return cash to shareholders.

Gregory Lewis: Great. Yeah, no, that makes a lot of sense.

Speaker Change: Okay, great. Yeah, no, that makes a lot of sense.

Gregory Lewis: And then just, you know, just in one of those signs that the market is tightening for the, you know, the high end drill ship market, you were able to, you know, contract at DS 17 where, you know, the company, you know, the customer was willing to pay, you know, a standby rate just so that they could have that rig ready when they needed to start drilling there. You know, could you talk a little bit about that? The dynamics of the DS 17 and how that rig was positioned to really, you know, get paid a pretty attractive standby rate, you know, for a couple quarters as it waits for its next job.

Speaker Change: you know, just in one of those signs that the market is tightening for the, you know, the high end drill ship market.

Speaker Change: You know, you were able to, you know, contract the DS-17 where, you know, the company, you know, the customer was willing to pay.

Anton Dibowitz: you know, a standby rate just so that they could have that rig ready when they needed to start drilling there.

Speaker Change: You know, could you talk a little bit about the dynamics of the DS-17 and how that rig was positioned to really...

Anton Dibowitz: you know, get paid a pretty attractive standby rate.

Anton Dibowitz: Absolutely. You know, as I just stated in my, in my, in my answer to your capital question, we see a strong pipeline in 25 and going into 26 tight market for the high specification assets. The DS 17 is a very high specification asset. Equinoids are, you know, a great customer. We had a great partnership with it. The crews have done a great job on the Baccalaul development with that rig. They've partnered with us and invested significant amounts of money into the rig on innovative technology. We have the, you know, the Atom RTX robotic arms on it.

Anton Dibowitz: for a couple quarters as it waits for its next job.

Speaker Change: Absolutely. As I just said in my answer to your capital question, we see a strong pipeline in 2025 and going into 2026. Tight market for the high specification assets. The DS-17 is a very high specification asset.

Speaker Change: Equinor is a great customer, we had a great partnership with it, the crews have done a great job on the Bacalao development with that rig.

Anton Dibowitz: They've partnered with us and invested significant amounts of money into the rig on innovative technology. We have the Atom RTX robotic arms on it, a lot of automation on that rig. So they have confidence in the rig to do their goods going to the higher developments. They have confidence in the rig to deliver that development, and I think it's a testament to where the market is going, having good customer relationships.

Anton Dibowitz: A lot of automation on that rig. So, you know, they're, they have confidence in the rig to do, to do their goods going to the higher development. They have confidence in the rig to deliver that development.

Anton Dibowitz: And I think it's a testament to where the market is going, having good customer relationships and operators recognizing where the market's going to be in the latter half of next year and going into 26 that for the right asset that they're willing to invest and spend money to secure. The assets so that it's available to them. And I think that's one of, you know, it's a great signal of where we see the market going. Perfect.

Anton Dibowitz: and operators recognizing where the market's going to be in the latter half of next year and going into 26, that for the right asset that they're willing to...

Anton Dibowitz: to invest and spend money to secure the assets so that it's available to them. And I think that's one of, you know, it's a great signal of where we see the market going.

Gregory Lewis: So, thank you very much for the time. Yeah, always.

Anton Dibowitz: Perfect. So thank you very much for the time. Yeah, always.

Eddie Kim: The next question comes from Eddie Kim with Barclays. Please go ahead. Hi, good morning. I just wanted to follow up on that DS 17 contract. Yeah, I mean, as Greg alluded to, I mean, there's a standby rate for 180 days. That's probably the longest paid standby period we've seen, maybe since the 2014 downturn. It does look like it could be a strong read-through for your other reactivated rigs.

Anton Dibowitz: The next question comes from Eddie Kim with Barclays.

Eddie Kim: Please go ahead.

Eddie Kim: Hi, good morning. I just wanted to follow up on that DS-17 contract.

Speaker Change: As Greg alluded to, the standby rate for 180 days, that's probably the longest paid standby period we've seen maybe since the 2014 downturn.

Anton Dibowitz: Bye.

Speaker Change: It does look like it could be a strong read-through for your other reactivated rigs. Would you say operators for your other reactivated floaters have invested maybe a similar amount as Equinor did on the DS-17?

Eddie Kim: Would you say operators for your other reactivated floaters have invested maybe a similar amount as Ecuador did on the DS 17, or was that Ecuador investment into the DS 17 probably more elevated and kind of more of a one off than the others. I mean, Ecuador is a very forward-leaning technology company. A lot of that technology automation desire for automation technology comes out of the North Sea, Norway in particular. So, you know, they invested capital in the rig to, as I mentioned, the Marty X's and some other automation. I think as much reading into is the timing of that.

Speaker Change: Or was that Ecuador investment into the DS-17 probably more elevated and kind of more of a one-off than the others?

Speaker Change: No, I mean, Equinor is a very forward-leaning technology company. A lot of that technology, automation, desire for automation technology comes out of the North Sea, Norway in particular.

Speaker Change: So, you know, they invested capital in the rig to, as I mentioned, the Atom RTXs and some other automation. I think as much as I'd read into is the timing of that and when that program is going to be starting up and where we see.

Anton Dibowitz: And when that program is going to be starting up and where we see the strong pipeline of opportunities that are coming to the market. I think Matt referenced in his prepared remarks 30 opportunities and potentially 20 of those being awarded in the next 12 months. And, you know, as we roll forward a year from now, seeing that once the high spec assets like the 17, the, you know, the seventh gen drill ships are taken up, there is a good potential for a call on additional assets. And that's why we feel really good about the 11, the 13, and the 14 when you consider that a reactivation takes about a year to do that, that, you know, for that period where we are sitting now to, you know, from now towards the end of next year and heading into the first quarter of next year.

Anton Dibowitz: the strong pipeline of opportunities that are coming to the market. I think Matt referenced in his prepared remarks 30 opportunities.

Matt Lyne: and potentially 20 of those being awarded in the next 12 months.

Speaker Change: you know.

Anton Dibowitz: as we roll forward a year from now seeing that.

Speaker Change: Once the high-spec assets like the 17, you know, the 7th Gen drill ships are taken up, there is a good potential for a call on additional assets.

Speaker Change: And that's why we feel really good about the 11, the 13, and the 14 when you consider that a reactivation takes about a year to do. That, you know, for that period where we are sitting now to, you know, from now towards the end of next year and heading into the first quarter of next year, we continue to have discussions with customers on those rigs. Those customers have been, you know, have been ongoing, but we're not in a rush.

Anton Dibowitz: We continue to have to have discussions with customers on those rigs; those customers have been, you know, have been ongoing, but we're not in a rush.

Anton Dibowitz: You know, those assets are increasingly going to be called on, and we will wait for the right opportunity. As we see if those opportunities get more attractive as time goes by, when we line it up against the, you know, the pipeline of opportunities in late 25 and heading into 26.

Speaker Change: You know, those assets are increasingly going to be called on and we will wait for the right opportunity. And as we see it, those opportunities get more attractive as time goes by when we line it up against the, you know, the pipeline of opportunities in late 25 and heading into 26.

Eddie Kim: at it. And my follow-up is just on the two jack-up suspension notices on the Valaris 147 and 148. You mentioned having discussions on whether maybe other Valaris least rigs could be could be suspended instead. Could you maybe give us some more insight here? I know you have some other rigs that are expected to come off contract earlier than the 147 or 148. Is that really the main factor here? Is there something else? And it's definitely just a clarify. I believe I heard you say you expected around five more jackups suspended from Saudi across their fleet, which would bring the total, you know, this I guess second round to around seven suspended jackups.

Speaker Change: Got it.

Speaker Change: My follow-up is just on the two jack-up suspension notices on the Valeris 147 and 148.

Operator: You mentioned you're having discussions on whether maybe other Valeris lease rigs could be suspended instead. Could you maybe give us some more insight here? I know you have some other rigs that are expected to come off contract earlier than the 147 and 140. Is that really the main factor here or is there something else?

Unknown Executive: Just to clarify, I believe I heard you say you expected around five more jack-ups suspended from Saudi Arabia across their fleet, which would bring the total of this, I guess, second round to around seven suspended jack-ups. Did I hear that correctly? Hey, I just wanted to maybe dig, dig a little bit further, you referenced the market dynamics, it went through the segmentation of the floater market. You know, we kind of heard from one of your peers already this morning. So I just want to try to calibrate it.

Speaker Change: And definitely, just to clarify, I believe I heard you say you expected around five more jackups suspended from Saudi across their fleet, which would bring the total of this, I guess, second round to around seven suspended jackups. Did I hear that correctly?

Eddie Kim: Did I, did I hear that correctly?

Anton Dibowitz: Yeah, so, so let me start off, you know, Arrow our JV just received these notices in the last week. So we're going to like late breaking news. So while the notices were received for two least rates, the 147 and the 148, we're in discussions with Arrow and with the Ramco. You know, we may, and they're, you know, these are productive, constructive discussions. You know, we may look at at instead suspending another least rig or an arrow own rig. So which can have to see how those discussions, you know, develop, you know, so which rigs may be suspended and the timing of those still needs to be determined.

Speaker Change: Yeah, so let me start off, you know, Arrow, our JAB, just received these notices in the last week, so we've got like late-breaking news. So while the notices were received for two lease rigs, the 147 and the 148, we're in discussions with Arrow and with Aramco. We may, and these are productive, constructive discussions, we may look at instead suspending another lease rig or an Arrow-owned rig. So we're just going to have to see how those discussions develop.

Speaker Change: So, which rigs may be suspended and the timing of those still needs to be determined.

Anton Dibowitz: You know, taking a step back from these specific rigs, you said yes, five weeks, spec five means, you know, based on what we understand from discussions in the market. But in context, you know, those two rigs, if it was those two rigs, the 147 and 148 is about $10 million of EBITDA, which is part of, you know, the adjustments we've made going through the year. But for context, this is $35 million of backlog out of $4.3 billion for the letters. So I think we need to take that number in context, and those five rigs, you know, that are purported to be suspended is about 1% of global marketed jackups in a market where we have 93% utilization right now.

Speaker Change: You know, taking a step back from these specific rigs, you said, yes, five, we expect five, I mean, you know, based on what we understand from discussions in the market.

Speaker Change: But in context, you know, those two rates, if it was those two rates, the 147, the 148 is about $10 million of EBITDA, which is is part of, you know, the adjustments we've made going through the year. But.

Speaker Change: For context, this is $35 million of backlog out of $4.3 billion.

Speaker Change: for Volaris.

Speaker Change: So, I think we need to take that number in context, and those five rigs, you know, that are purported to be suspended is about 1% of global marketed.

Unknown Executive: [inaudible]

Anton Dibowitz: You know, from the first series of suspensions, the 22 earlier this year, a number of those rigs have made a very orderly transition into the international market. And we see leading edge day rates in the benign jackup markets still north of $150,000 a day, you know, as we've seen fixtures from us and others in the market. So, you know, this is, this is not a fundamental change in the jackup market as we see it, and we feel good about the jackup market and these rigs like the others. Those that are competitive into into in the international market, not all of those rigs are competitive in the international market, will continue to make an orderly transition.

Speaker Change: in a market where we have 93% utilization right now.

Speaker Change: You know, from the first series of suspensions, the 22 earlier this year, a number of those rigs have made a very orderly transition into the international market.

Speaker Change: And we see leading-edge day rates in the benign jack-up markets still north of $150,000 a day, you know, as we've seen fixtures from us and others in the market. So, you know, this is not a fundamental change in the jack-up market as we see it, and we feel good about the jack-up market and these rigs like the others. Those that are competitive in the international market, and not all of those rigs are competitive in the international market, will continue to make an orderly transition.

Eddie Kim: Yeah, but just to be really clear, Arrow got essentially those sort of two rigs, and the discussions we're having about are which rigs, not if it's more rigs, just which rigs. Yeah, thanks.

Speaker Change: But just to be really clear, Aero got decisions for two rigs, and the discussions we're having about are which rigs, not if there's more rigs, just which rigs.

Eddie Kim: Got it.

Eddie Kim: Thank you for that call.

Unknown Executive: I'll turn it back.

Collar: Yeah, thanks. Got it. Understood. Thanks for that, Collar. I'll turn it back.

Kurt Hallead: The next question comes from Kurt Paul, lead with Paul, let, excuse me, with benchmark. Please go ahead. Hey, good morning, everybody. Thanks so much for the color. I just wanted to maybe dig a little bit further. You referenced, went through the market dynamics, went through the segmentation of the floater market. You know, we kind of heard from one of your peers already this morning. So I just wanted to try to calibrate.

Unknown Executive: The next question comes from Kurt Holled with Benchmark. Please go ahead.

Speaker Change: Hey, good morning everybody. Thanks so much for the color.

Kurt: Morning Kurt.

Speaker Change: Thank you.

Unknown Executive: The segmentation of the floater market, we kind of heard from one of your peers already this morning, so I just wanted to try to calibrate.

Kurt Hallead: So when you take everything in aggregate that you expect to see, let's say through 2026, what do you think the net incremental 7G deep water rate demand could be? So I think from what we're talking about, if you remember from my prepared remarks, you're talking about the some on 30 opportunities we're seeing that are longer than a year in duration, but across the 30 have an average of two and a half years. You know, I think if you're putting a number on it, you're likely to see about 10 of those 30 provide potential incremental opportunities.

Unknown Executive: So when you take everything in aggregate that you expect to see, let's say through 2026, what do you think the net incremental 7G Deepwater Rake Demand could be? But what I will say to that is, you know, as we roll forward, as I said, we roll forward 12 months, you know, 25 going into 26, a potential call on sideline capacity or an expectation for a call to sideline capacity. The reason why we feel good about it is when you look at sideline capacity, the 11, 13, and the 14 are the highest spec rigs in that sideline capacity.

Unknown Executive: So when you take everything in aggregate that you expect to see, let's say through 2026, what do you think the net incremental 7G deepwater rate demand could be?

Unknown Executive: Ciao.

Unknown Executive: Hey Kurt, Matt here. So I think we're talking about, if you remember from my prepared remarks, you're talking about the somewhat 30 opportunities we're seeing that are longer than a year in duration, but across the 30 have an average of two and a half years.

Speaker Change: You know, I think if you're putting a number on it, you're likely to see about 10.

Unknown Executive: of those 30.

Matthew Lyne: Now that's incremental to the region. And I think you're a question, you know, it's breaking it down into 7th gen. Obviously, we know that customers have a preference for 7th gen rates, and 12 of our 13 drill ships are 7th gen rates. So I think, you know, 10 incremental potential, but I wouldn't suggest that all 10 would be filled by sideline capacity. But what I will say to that is, you know, as we roll forward, as I say, we roll forward 12 months, you know, 25 going into 26th, a potential colon sideline capacity, one expectation for call the sideline capacity.

Unknown Executive: provide potential incremental opportunities. Now that's incremental to the region.

Speaker Change: And I think your question, you know, breaking it down into 7th Gen, obviously we know that customers have a preference for 7th Gen rigs, and 12 of our 13 drillships are 7th Gen rigs.

Unknown Executive: So, I think, you know, ten incremental potential, but I wouldn't suggest that all ten would be filled by sideline capacity.

Unknown Executive: But what I will say to that is, you know, as we roll forward, as I said, we roll forward 12 months, you know, 25 going into 26, a potential call on sideline capacity or an expectation for a call of sideline capacity. The reason why we feel good about it is when you look at sideline capacity, the 11, 13, and the 14 are the highest spec rigs in that sideline capacity.

Matthew Lyne: The reason why we feel good about is when you look at sideline capacity, the 11th, 13th, and the 14 are the highest spec rates in that sideline capacity. So, there, there, you know, we expect that to be good opportunities for those rates going forward.

Chris Weber: So there, you know, we expect that to be good opportunities for those rigs going forward. How are you targeting or what is your target in terms of free cash flow conversion on expected EBITDA going forward? Yeah, we don't have a specific target from a conversion perspective.

Chris Weber: So we expect that to be good opportunities for those rigs going forward.

Kurt Hallead: Okay, that's great.

Christopher Weber: And then the follow up I have then is when you guys are obviously having a very shareholder-friendly capital allocation program, right? How are you targeting or what is your target in terms of free cash flow conversion on expected EBITDA going forward? Yeah, we don't have a specific target from a conversion perspective, but you know, what I can say is, you know, we remain committed to returning capital to shareholders. You know, as Anton mentioned, we've got significant capacity into the existing authorization. We intend to use that; you know, it's not going to be linear. You know, we're going to be opportunistic.

Speaker Change: Okay, that's great. And then the follow-up I have then is, you know, when you guys are obviously having a very shareholder friendly capital allocation program, right?

Speaker Change: How are you targeting or what is your target in terms of free cash flow conversion on expected EBITDA going forward?

Chris Weber: Yeah, we don't have a specific target from a conversion perspective, but...

Chris Weber: But, you know, what I can say is, you know, we remain committed to returning capital to shareholders. You know, as Anton mentioned, we've got significant capacity under the existing authorization, and we intend to use that. It's not going to be linear, you know; we're going to be opportunistic. But as I mentioned on the call, you know, we expect the free cash flow profile of the business to improve in the second half of the year.

Chris Weber: What I can say is we remain committed to returning capital to shareholders.

Chris Weber: You know, as Anton mentioned, we've got significant capacity under the existing authorization. We intend to use that.

Christopher Weber: But you know, as I mentioned on the call, you know, we expect the free cash flow profile of the business to improve in the second half of the year and looking ahead to 2025 and beyond that, that's really part of the transition to where we start generating meaningful and sustained free cash flow. And like Anton mentioned, we intend to return it all to shareholders unless there's a better or more value-creative use for it.

Chris Weber: It's not going to be linear, we're going to be opportunistic.

Chris Weber: And looking ahead to 2025 and beyond, that's really part of the transition to where we start generating meaningful and sustained free cash flow. And like Anton mentioned, we intend to return it all to shareholders unless there's a better, more value-creative use for it.

Chris Weber: But as I mentioned on the call, we expect the free cash flow profile of the business to improve in the second half of the year.

Chris Weber: Looking ahead to 2025 and beyond, that's really part of the transition to where we start generating meaningful and sustained free cash flow. And like Anton mentioned, we intend to return it all to shareholders unless there's a better or more valued creative use for it.

Kurt Hallead: Okay, great. And then if I just say this rapid with this, you know, if would you general comment here, right?

Chris Weber: Okay, great. And then if I just may just wrap it with this, you know,

Kurt Hallead: Nothing specific, but do you expect there to be another round of M&A within the offshore drilling space before the end of the year? No, I'm going to ask two questions. Not only is there going to be more before the end of the year, timing and contracting and timing in M&A is both very hard, you know, hard to predict with certainty. I think there is definitely room for additional M&A in this business. You know, looking at it from a Valaris perspective, you know, some of this M&A has occurred in the business because people didn't have high spec capacity and needed to go and buy that capacity through M&A.

Speaker Change: General comment here, right, nothing specific, but do you expect there to be another round of M&A within the offshore drilling space before the end of the year?

Speaker Change: I've got to ask two questions. Not only is there going to be more before the end of the year, look, timing in contracting and timing in M&A is both very hard to predict with certainty. I think there is definitely room for additional M&A in this business.

Anton Dibowitz: You know,

Speaker Change: Looking at it from a Volaris perspective, you know, some of this M&A has occurred in the business because people didn't have high spec capacity and needed to go and buy that capacity through M&A. We're in a very fortunate position having 12 or 13 of our ships being 7th Gen and still having 7th Gen organic available capacity to be able to grow into a market that we see as highly, highly constructive.

Anton Dibowitz: We're in a very fortunate position having 12 or 13 of our ships being seventh gen and still having seventh gen organic available capacity to be able to grow into a market that we see as highly, highly constructive.

Anton Dibowitz: That being said, you know, where we're very pro M&A, we will look at opportunities, and if it is make sense, creates value, and is accretive to shareholders, we will absolutely engage in it, and I think there's definitely room for more of it in this business.

Anton Dibowitz: That being said, you know, we're very pro-M&A, we will look at opportunities, and if it makes sense, creates value, and is accretive to shareholders, we will absolutely engage in it, and I think there's definitely room for more of it in this business.

Kurt Hallead: All right, appreciate it.

Unknown Executive: All right, I'll appreciate it. Thank you. Thank you. Hey, good morning. Good morning.

Kurt Hallead: Thank you. Thank you, Max.

Speaker Change: All right, I appreciate it. Thank you. Thank you.

David Smith: The next question comes from David Smith with Pickering Energy Partners. Please go ahead. Hey, good morning. Good morning, David. So congratulations on the solid quarter and the solid jack up contracts and in particular, a really nice rate off of Trinidad.

Speaker Change: The next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Speaker Change: Hey, good morning. Morning.

Speaker Change: So, congratulations on the solid quarter and the solid JACOB contracts, and in particular really nice rate off of Trinidad.

David Smith: And I just wanted to ask if this was an agreed-upon rate before April or just, you know, confirmation of the point you made in the past that some markets will see, you know, minimal or no direct competition from the Saudi suspensions. Yeah, it's the latter. I mean, that discussion continued to up until the point where the contract was finalized and announced recently. So this data point is known during this and after the first round of Saudi suspensions. So you're right; it's indicative that certain markets, and certainly certain customers, are focused on securing the top-end assets for their future development.

Speaker Change: And I just wanted to ask if this was an agreed-upon rate before April, or just a confirmation of the point you've made in the past, that some markets will see minimal or no direct competition from the Saturday suspensions.

Speaker Change: Yeah, it's the latter. I mean, that discussion continued up until the point where the contract was finalized and announced recently. So that data point is known.

Speaker Change: during and after the first round of Saudi suspensions. So you're right, it's indicative that certain markets and certainly certain customers are focused on securing the top-end assets for their future developments.

David Smith: Great, thank you.

Unknown Executive: Great, thank you. And one follow-up question, you know, we've seen lead times for ultra deepwater rig contracts shrinking versus last year, outside of the Gulf of Mexico, at least, we can't see your negotiations, just your contracts, but wanted to ask if your discussions are also reflecting shrinking lead times compared to last year. So, maybe we shouldn't be too nervous about a slower recent phase of contracting and its implications for first half 25 availability.

David Smith: And one follow-up, we've seen lead times for all to the quarter rate contracts, you know, Trincan versus last year, outside of the Gulf of Mexico at least. You know, we can't see your negotiations just to contracts, but wanted to ask if your discussion, you know, or also reflect on Trincan lead times compared to last year. So maybe we shouldn't be too nervous about a near-slow release of pace of contracting and implications for first half 25 availability. I'll start with the end of your question. I mean, we are not concerned about the pace of contracting. Contracting in this business is not linear through the year.

Unknown Executive: Great, thank you, and one follow-up.

Unknown Executive: You know, we've seen lead times for LTV Porter rig contracts, you know, shrink in versus last year, outside of the Gulf of Mexico at least.

Unknown Executive: You know, we can't see your negotiations, just your contracts, but wanted to ask if your discussions, you know, are also reflecting shrinking lead times compared to last year or so. So maybe we shouldn't be too nervous about a, you know, slower recent pace of contracting and implications for first half 25 availability.

Speaker Change: I'll start with the end of your question. I mean, we are not concerned about the pace of contracting. Contracting in this business is not linear through the year. And and I think we need to be careful when we look at data. It may be as much a mix.

Matthew Lyne: And I think we need to be careful when we look at data, maybe as much a mix question as it is, you know, a general train question. Different geographies are very different contract lead times and contract execution times, you know, whether you're in kind of formal Petrobras or, you know, West Africa negotiations where there may be analyses involved versus, you know, a number of more direct negotiations. So there can be a mixed component to geography component. You know, overall, we see, you know, lead times increasing, especially when you look at where we expect the man to be, supply to man to be, you know, late 25 and into 26.

Speaker Change: question as it is, you know, a general trend question.

Speaker Change: Different geographies, a very different contract lead times.

Speaker Change: and and contract execution times, you know, whether you're in kind of formal Petrobras or, you know, West Africa negotiations where there may be NRCs involved versus, you know, a number of more direct negotiations. So there can be a mixed component, a geography component. You know, overall we see, you know, lead times increasing, especially when you look at where we expect demand to be, supply demand to be, you know, late 25 and into 26.

Matthew Lyne: So we see, you know, some of these lead times stretching out, and as much of that, as much as that, we see contracturations continuing to extend. And of course, you know, we see day rates continuing to grind higher with, you know, six fixtures. So, you know, just to have to halfway through the year, about $500,000 a day versus Sony only two last year. So all of those components, you know, lead us to be quite, quite constructive on where that market is going.

Speaker Change: So, we see, you know, some of these lead times stretching out, and as much of that, as much as that, we see contract durations continuing to extend, and of course, you know, we see day rates continuing to grind higher with, you know, six.

Speaker Change: So, you know, just after halfway through the year, about $500,000 a day versus only two last year. So all of those components, you know, lead us to be quite constructive on where that market is going.

David Smith: We really appreciate the color. Thank you. Thanks.

Unknown Executive: This concludes our question and answer session.

Speaker Change: We really appreciate the call here. Thank you.

Unknown Executive: Thanks.

Nick Georgas: I would like to turn the conference back over to Nick Georgas for any closing remarks. Thanks, Drew, and thank you to everyone on today's call for your interest in Valaris. We look forward to seeing you.

Unknown Executive: This concludes our question and answer session. I would like to turn the conference back over to Nick Georgas for any closing remarks.

Unknown Executive: Thanks, Drew, and thank you to everyone on today's call for your interest in Volaris.

Unknown Executive: Just one moment.

Unknown Executive: The conference has now concluded. Thank you for attending today's presentation.

Speaker Change: Just one moment. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.

Unknown Executive: You may now disconnect. Thank you.