Q4 2024 Valaris Ltd Earnings Call
Speaker Change: This is a production of the Center for Contemporary Art in the U.S. Center for Contemporary Art in the U.S.
Speaker Change: Good day and welcome to the Valeris fourth quarter 2024 results conference call.
Speaker Change: All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your touch-tone phone.
To withdraw your question, please press star then 2.
Speaker Change: 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. Welcome, everyone, to the Volaris Fourth Quarter 2024 Conference.
Speaker Change: 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 Bolarus.com
Speaker Change: Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainties.
Speaker Change: Many factors could cause actual results to differ materially from our expectations.
Speaker Change: 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.
Speaker Change: During this call, we will refer to GAAP and non-GAAP financial measures.
Speaker Change: Please see the press release on our website for additional information and required reconciliations.
Speaker Change: Earlier this week, we issued our most recent fleet status report, which provides details on our rigged fleet, including contract awards and fleet management actions.
Speaker Change: 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 today's call, I will provide an overview of our performance during the quarter.
Speaker Change: Deliver an update on the offshore drilling market and outline our contracting and fleet management strategy to drive long-term value creation for our shareholders.
Speaker Change: 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 our contracting outlook. After that, Chris will discuss our financial results and guidance before I finish with some closing comments.
To begin, I want to highlight a few key points.
Speaker Change: First, we continue to execute operationally, and we finish 2024 with another solid quarter that benefited our financial results.
Speaker Change: Second, the contracting outlook for 2026 and beyond is strong for high specification assets and we are focused on securing attractive, long-term contracts for our active fleet.
Speaker Change: Third, we are willing to be patient to find the right jobs for our rigs. We will actively lower costs and idle rigs until the right job is available, and we will not hesitate to remove rigs from our fleet when it makes economic sense to do so.
Speaker Change: Starting with operations, we delivered fleetwide revenue efficiency of 96% during the fourth quarter and 97% for the full year.
Speaker Change: This marks an improvement over last year's results, and 2024 was the fourth consecutive year we have delivered revenue efficiency of at least 96%.
Speaker Change: We also had outstanding safety performance in 2024, achieving improvements in key safety metrics and receiving safety awards from both the IADC and the Center for Official Safety. We were recently recognized by the IADC Brazil chapter with his 2024 safety award with three rigs, DS4, DS8 and DS17, each completing the year with no recordable incidents, a great achievement attributable to all involved.
Speaker Change: In addition to our rigs offshore Brazil, Valeris 115, which is working with Shell in Brunei, recently celebrated four years without a recordable incident, another fantastic accomplishment.
Speaker Change: These results demonstrate our focus on delivering outstanding safety and operating performance, which is essential to building long-standing customer relationships.
Speaker Change: As always, we are focused on the things that we can control, and I thank every member of the Valeris team around the world for their dedication, hard work, and continued focus on operating safely and efficiently for our customers.
Speaker Change: Moving to our financial performance. Adjusted EBITDA was $142 million in the fourth quarter, down slightly from $150 million in the third quarter.
Speaker Change: Revenues were toward the upper end of our guidance range due to solid operating performance and EBITDA was slightly below the midpoint of our guidance range due to higher contract drilling expense resulting from a non-cash accrual for a legal matter. During the fourth quarter we generated 13 million dollars in free cash flow in addition to 111 million dollars in the third quarter and we returned all this free cash flow to shareholders through share repurchases during the second half of the year.
Speaker Change: Chris will provide more details on our financial results and 2025 guidance a little later.
Turning now to the broader offshore drilling market.
Speaker Change: In terms of fundamentals, global demand for hydrocarbons continues to increase and we expect offshore production, particularly deepwater, to play an increasingly important role in providing secure, reliable, and affordable energy to meet the world's growing energy needs.
Speaker Change: Many of the largest E&P companies have recently announced their CapEx plans for the coming years, and a number of them are allocating a greater share of budgets towards traditional projects focused on oil and gas production versus new energy sources.
Speaker Change: This bodes well for offshore project sanctioning, especially deepwater programs, as the size of fields, compelling economics, and lower carbon emissions intensity make these projects attractive relative to other sources of production.
Speaker Change: We see a robust pipeline of Deepwater project approvals in 2026 and 2027, which are expected to be at their highest level in more than a decade, and more than double the project approvals anticipated for 2024 and 2025.
Speaker Change: This increase in project sanctioning is expected to spur growth in deepwater rig demand through the end of the decade and support the longevity of the upcycle that began in 2021.
Speaker Change: In the nearer term, offshore capex continues to increase, although the pace of growth slowed in 2024 and this trend is expected to continue in 2025, which has slowed the pace of rig contracting and resulted in a modest decline in global floater utilization in 2024.
Speaker Change: We continue prudently managing our fleet in response to market conditions, and we will retire or divest rigs when the expected economic benefit for an asset does not justify its costs.
Speaker Change: Consistent with this approach, we recently announced plans to retire three semi-submersibles from our fleet, including one of our active rigs, the Laris DPS-5, which last worked in the third quarter of 2024.
Speaker Change: We have decided to retire DPS-5 since we do not have visibility into sufficient near-term work that would support keeping the rig warm stacked.
and Jim Eaton.
Speaker Change: Our go-forward fleet of 15 floaters includes 12 7th generation drillships that position us for contracting success. Customers have shown a clear preference for these modern, technically capable assets, with utilization meaningfully higher for 7th generation drillships than the rest of the global benign environment floater fleet, and day rates for longer-term jobs have remained in the mid-to-high 400,000s. We expect customers will continue to favor these assets.
Speaker Change: for their longer-term developments, as the combination of technical specifications, such as dual derricks with high hook load capacity, high-capacity thrusters, and two blowout preventers, offer efficiencies that are amplified over multi-well programs.
Speaker Change: The contracting outlook for 2026 and beyond remains strong for these high-specification assets. And with such a constructive environment, we are focused on securing attractive, long-term contracts for our active fleet.
Speaker Change: particularly those opportunities with customers or in basins where we have visibility into several years of future work.
Speaker Change: We are currently tracking more than 20 floater opportunities with a duration of at least one year. And we expect this number will grow to nearly 30 when Petrobras launches expected new tenders aimed at recontracting its near-term rollovers.
Speaker Change: In general, we expect long-term contracts will be awarded approximately 9 to 12 months ahead of their scheduled start dates, so we anticipate that the flow of contract awards will pick up pace around the middle of this year, given expectations for when these programs will begin.
Speaker Change: Moving to shallow water, average day rates for the key markets where we operate have remained relatively firm, and we continue to secure solid contracts for our rigs working offshore Australia, Trinidad, and in the North Sea that require high spec or harsh environment units.
Speaker Change: One recent example is our multi-year contract for Valera Stavanger in the North Sea, which added $75 million of contract backlog and further enhances our contract coverage in the region.
Speaker Change: In addition, we signed a contract for the 249 offshore Trinidad, a strong market for us where we are achieving premium day rates.
Speaker Change: Trinidad is the largest oil and gas producer in the Caribbean and the country is focused on increasing its gas production which has declined by more than a third from its peak in 2010.
Speaker Change: The energy sector has played an integral role in the long-term economic growth of the country, and we look forward to playing our part in its future development.
Speaker Change: I also want to note that we recently sold Valaris 75, a 25-year-old jackup that had been stocked for five years, which was another step we took to high-grade our fleet.
Speaker Change: Our jackups remain an important contributor to our overall financial performance, and we have grown contract backlog for this segment by more than 75% over the past two years.
Speaker Change: We have good contract coverage across our jack-up segment in 2025, and we expect to see year-over-year growth in both operating days and average day rates.
Speaker Change: In summary, we are steadfast in our belief that offshore oil and gas production will play an important role in providing secure, reliable, and affordable energy to the world.
Matt Lyne: and that Valeris is well positioned to help meet the need and drive long-term value creation for our shareholders by virtue of a high specification fleet and excellent safety and operational track record. Now, I'll hand the call over to Matt.
Thanks, Anton, and good morning and afternoon, everyone.
Matt Lyne: I'm going to provide commentary on the major floater and jackup regions where we operate, and finish with an update on our outlook for rigs that have available days in 2025.
Matt Lyne: Before I do this, I wanted to start by highlighting recent contract awards.
Matt Lyne: Since our third quarter earnings call, we've secured new contracts and extensions with associated contract backlog of approximately $120 million for jackups across multiple locations, including the UK, Trinidad, and Australia.
Matt Lyne: These awards included a multi-year contract for the Stavanger in the North Sea.
Matt Lyne: which will keep the rig busy into 2027 and additional backlog for the 247 and 249 offshore Australia and Trinidad respectively at day rates in the mid to high 100,000s.
Matt Lyne: in terms of the major floater and jackup regions in which we operate.
Matt Lyne: where we are tracking more than 10 long-term opportunities with commencement dates starting from late 2025 to 2027, including work offshore Nigeria, Egypt, Ivory Coast and Mozambique.
Matt Lyne: Nigeria is expected to increase its deepwater rig count from one at present to three by late 2026 or early 2027.
Matt Lyne: There are three multi-year programs with IOCs currently being tendered and we expect to see a contract award for one of these tenders soon, with the other two following later this year. The outlook for activity offshore Egypt has also picked up.
Matt Lyne: as recent exploration success on projects drilled by Velaris Drill Ships and an improved investment climate for exploration and production activities is expected to lead to future opportunities with major IOCs.
Matt Lyne: As we look out a few years, we also expect to see increased activity in promising frontier plays, including longer-term developments offshore Mozambique and Namibia.
Matt Lyne: Volaris has a long and successful track record of operations offshore Africa and we anticipate that growth in development activity around the continent will be the main driver of incremental floater demand over the next few years.
Matt Lyne: Offshore Brazil, Petrobras has recently awarded six long-term contracts across its CEPIA program and its call for tender.
Matt Lyne: And these programs will keep many rigs occupied into 2028 and 2029, demonstrating the longevity of customer demand in Brazil.
Based on recent commentary, we anticipate that Petrobras' rig count
Matt Lyne: will remain stable for the foreseeable future and we expect to see further tenders issued this year to recontract rig capacity due to complete their existing programs in 2025 and 2026.
Matt Lyne: We expect Brazil to continue to be the largest market for benign environment floaters, with potential for incremental demand from IOC programs such as Shell's Gato D'Amato project, which is expected to reach FID later this year.
Matt Lyne: Moving to the U.S. Gulf, we expect this market to remain fairly balanced, with demand largely met by existing supply in the region.
Matt Lyne: As compared to other regions, contracting the U.S. Gulf is predominantly done through direct negotiations as opposed to public tenders.
Matt Lyne: So while there is less visibility to the outside world on customer demand here, we continue to see high levels of customer interest for high-specification drillships.
Matt Lyne: Outside of the Golden Triangle, there are new programs offshore Malaysia and Indonesia that will require drill ships to satisfy this demand.
Matt Lyne: In terms of the Jacob market, certain benign environment regions became increasingly competitive in 2024 as Riggs left Saudi, although most of these displaced units have now secured work in other regions.
Matt Lyne: Key markets where we operate, such as Australia, Trinidad and the North Sea, have been insulated from this, and we've continued to secure contracts at solid day rates in these regions.
Matt Lyne: In the North Sea, market conditions remain balanced, and we are still tracking around 10 opportunities for work with IOCs or independent operators that are expected to start before mid-2026.
Matt Lyne: These are mostly new energy projects and plug-in abandonment campaigns, as well as a few oil and gas programs that are well suited for our rigs in the region.
Matt Lyne: The expected firm duration of these opportunities is more than 1.5 years, on average, which is a good sign for the continued health of this market.
Matt Lyne: I'm now going to provide an update on our outlook for rigs with available days in 2025 starting with our floaters.
Matt Lyne: We have four drillships with uncontracted time this year. Velaris DS-10, which is currently warm-stacked. DS-12, which is expected to complete its current program offshore Egypt in March.
Matt Lyne: and DS-15 and DS-18 which are contracted into the third quarter in Brazil and the U.S. Gulf respectively.
Matt Lyne: Each of these drill ships are high-specification, seventh-generation assets that we believe are well-positioned for long-term development programs.
Matt Lyne: We are in advanced discussions for two of these rigs, and we are discussing opportunities commencing in 2026 and 2027 with several customers for the other two units.
Matt Lyne: That said, given the limited number of programs commencing in 2025, and the competitive nature of any work starting in the next 12 months, we anticipate that DS10 will likely remain warm stacks through the end of the year.
Matt Lyne: and the other three drillships are expected to have idle time after completing their current programs. We are focused on securing attractive long-term contracts for these high-spec assets.
Matt Lyne: and we are willing to be patient to find the right programs for the rigs.
Matt Lyne: Moving to our two semi-submersibles offshore Australia, we see relatively muted demand in the country over the next 18 months. MS1 is due to finish its current contract in the second quarter.
Matt Lyne: And we are in continued discussions for work commencing in the second half of 2025 that would suit a moored rig like MS-1.
Matt Lyne: Our other floater in Australia, DPS-1, could work into the third or fourth quarter of this year depending on whether the customer exercises its option. After that, opportunities we see today for a dynamically positioned rig like DPS-1 are expected to start in the second half of 2026.
Matt Lyne: And in the meantime, DPS-1 is expected to be warm stacked.
Matt Lyne: As Anton mentioned, we have good contract coverage across our jackups in 2025.
We have just two jackups operating in benign environments.
outside the Middle East with meaningful availability during the year.
Matt Lyne: Velaris 247 in Australia and the 106 in Indonesia. We have good visibility into additional work for these rigs, either through new programs or the expected exercise of options.
Matt Lyne: In the Middle East, we are in advanced discussions with Aramco regarding extensions for five rigs that are due to complete their existing lease terms this year. Lastly,
Matt Lyne: We have limited availability across our active fleet of nine rigs in the North Sea, most of which is in the fourth quarter and related to Velaris 122, 123, and 248. And these rigs remain well positioned for additional work in the region.
Matt Lyne: In short, we continue to see a positive contracting environment and are focused on building backlog by securing attractive, long-term work for our active fleet.
Matt Lyne: and, where available, filling gaps in schedules with shorter-term jobs that can provide a meaningful bridge to these longer-term programs.
Chris Weber: I will now hand the call over to Chris to take you through the financials.
Chris Weber: Thanks Matt and good morning and afternoon everyone. In my prepared remarks I will begin with an overview of the fourth quarter results and then walk you through our outlook for the first quarter 2025 as well as full year guidance for 2025.
starting with our fourth quarter results.
Chris Weber: Total revenues were $584 million, down from $643 million in the prior quarter. And adjusted EBITDA was $142 million, down from $150 million in the prior quarter.
adjusted EBITDA decreased in the fourth quarter
Chris Weber: primarily due to lower utilization for the floater fleet related to
Chris Weber: out of service time for Valeris DS-15 and DS-17 to meet regulatory requirements in Brazil and for DS-4 to complete an upgrade project prior to the start of its contract.
Chris Weber: as well as idle time for DS-10 and DPS-5 which came off contract in the third quarter.
Chris Weber: These items were partially offset by more operating days for the jacket fleet, primarily due to Valeris 249 returning to work after completing leg repairs.
Chris Weber: A full quarter of operations for 247 after mobilizing for part of the third quarter And a full quarter of operations for the 122 following completion of its survey
Chris Weber: Our fourth quarter EBITDA was slightly below the midpoint of our guidance range, primarily due to higher-than-expected contract drilling expense, which was negatively impacted by a $16 million non-cash accrual associated with the legal matter.
Chris Weber: Fourth quarter CapEx was $112 million, which was below the midpoint of our guidance range as roughly $15 million of CapEx shifted into 2025.
Chris Weber: We ended the quarter with cash and cash equivalents of $381 million and a revolving credit facility remains fully available, which together provides us with total liquidity of approximately $750 million.
Chris Weber: During the quarter, we generated $125 million of cash flow from operations. This was partially offset by capital expenditures, providing $13 million of free cash flow.
Chris Weber: We repurchased $25 million of shares in the fourth quarter at an average price of $53 per share. In total, we repurchased $125 million of shares during 2024, following $200 million of share repurchases in 2023.
Moving now to our first quarter 2025 outlook.
Chris Weber: We expect total revenues in the range of 580 to 600 million dollars compared to 584 million dollars in the fourth quarter.
Chris Weber: Revenues for the first quarter are expected to be flat to slightly higher as more operating days for Valeris DS4 are largely offset by fewer operating days for DS12.
Chris Weber: We anticipate contract drilling expense of $400 to $415 million compared to $415 million in the fourth quarter.
Chris Weber: Contract drilling expenses expect to be slightly lower to flat on a sequential quarter basis as the fourth quarter accrual I mentioned earlier is largely offset by higher expenses on DS4 as we were capitalizing costs during its shipyard upgrade project last quarter.
Thank you.
Chris Weber: Our revenue and contract drilling expense are both expected to include approximately $35 million of reimbursable items, which is in line with the fourth quarter.
Chris Weber: We anticipate G&A expense of approximately $27 million, which is flat with the fourth quarter. Adjusted EBITDA is expected to be $145 to $165 million, compared to $142 million in the fourth quarter.
Chris Weber: Total Cap-Ex in the first quarter is expected to be $125 to $135 million.
Chris Weber: This includes spend related to the Valeris 144 upgrade project prior to its long-term contract offshore in Gola.
Chris Weber: Some carryover from the fourth quarter primarily related to the DS4 upgrade project And CAPEX for Valeris 106 and 248 associated with the start of their 20-year surveys later this quarter
Speaker Change: I'm now going to provide financial guidance for full year 2025.
Speaker Change: We currently forecast total revenues of $2.15 to $2.25 billion dollars and contract drilling expense of $1.5 to $1.6 billion dollars.
Speaker Change: Within these revenue and contract drilling expense ranges is approximately a hundred million dollars of expected reimbursable items.
G&A expense is expected to be approximately $115 million.
Speaker Change: Taken together, our adjusted EBITDA for 2025 is expected to be $480 to $580 million.
Speaker Change: Total revenues are expected to decline compared to 2024, primarily due to lower floater utilization, as several rigs are expected to have idle time after completing contracts this year or last, as Matt discussed earlier.
Speaker Change: Lower floater utilization is expected to be partially offset by more operating days and higher average day rates for the jackup fleet, primarily driven by Valeris 144, 107, and several rigs in our North Sea Fleet.
Speaker Change: A higher average day rate and increased utilization for DS-IV, which commenced a new contract in December, and a full year of operations for DS-VII.
Speaker Change: Moving to contract drilling expense, we anticipate that these expenses decline year on year as we actively lower costs for rigs that are expected to have idle time during the year.
Speaker Change: Contract drilling expense will also be lower as we have no planned reactivation expense this year as compared to 45 million dollars last year.
Speaker Change: Turning to CapEx, full year 2025 capital expenditures are expected to range from $350 to $390 million.
Speaker Change: Approximately $225 million of this capex is for maintenance and upgrade work, including spend associated with 20-year special periodic surveys for Valeris 106 and 248.
Speaker Change: The remaining CapEx relates to contract-specific upgrades, primarily for the Valeris 144, DS17, DS4, and potential CapEx for certain rigs leased to Arrow.
It also includes approximately $15 million of carryover from 2024.
Speaker Change: I would note that we expect these contract-specific upgrades will be partially offset by upfront payments from customers of approximately $75 million in 2025.
Speaker Change: Meaning that the net cash impact of capital expenditures are expected to be $275 to $315 million during 2025.
Speaker Change: In addition, we anticipate cash interest of approximately $92 million and we expect our cash taxes to be approximately 15% of EBITDA this year.
Speaker Change: This concludes my review of financial results and guidance. I'll now 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 before we open the line for questions. First, we continue to execute operationally, and we finished 2024 with another solid quarter that benefited our financial results.
Anton Dibowitz: Second, the contracting outlook for 2026 and beyond is strong for high specification assets, and we are focused on securing attractive, long-term contracts for our active fleet.
Anton Dibowitz: That's the answer. We are willing to be patient to find the right jobs for our rigs.
Anton Dibowitz: actively lowering costs and idling rigs until the right job is available and removing rigs from our fleet when it makes economic sense to do so.
Anton Dibowitz: In closing, we are steadfast in our belief that offshore oil and gas production will play an important role in providing secure, reliable, and affordable energy to the world, and that Volaris is well-positioned to help meet that need and drive long-term value creation for our shareholders.
Anton Dibowitz: by virtue of a high specification fleet and excellent safety and operational track record.
We thank our employees, customers, and investors for their support.
Anton Dibowitz: We've now reached the end of our prepared remarks. Operator, please open the line for questions.
Thank you for joining us.
Speaker Change: We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star and then 2.
Speaker Change: Our first question comes from Eddie Kim with Barclays. Please go ahead.
Eddie Kim: Hi, good morning. Just a question on your full year 2025 EBITDA guidance, maybe just taking the midpoint.
Eddie Kim: of that guidance range of $530 million. How much of that would you say is booked today versus an expectation of new awards you would need to secure for work later this year to hit that number?
Eddie Kim: trying to get a sense of how much of that guidance you have in hand at the moment versus the expectation of more contracting between now and year-end.
Eddie Kim: Yeah, Eddie, this is Chris. When we look at the midpoint on the revenue, we're about 94% contracted for the year, so majority of the remaining, that 6% is later in the year, but yeah, about 94% contracted.
Speaker Change: Okay, got it. And that would tie to that, the bid point of that range?
Midpoint, yeah.
Okay, understood. And then just my follow-up is on a...
Speaker Change: A recent retirement announcement we saw of a 7th Gen Cold Stack Drill Ship by one of your peers.
Speaker Change: You have three 7G cold stack drillships in the DS11, 13, and 14. Just based on what you're seeing in the market today and the fact that...
Speaker Change: you expect the DS-10 to remain warm stack through year-end. Does this push out your expectation for those rigs being reactivated say versus you know six to nine months ago or maybe put another way what what would you say is the likelihood that
Speaker Change: One of those three cold stack drill ships is working by year-end 2027, let's say.
Eddie, this is Anton.
Look, clearly our focus is on putting our active fleet
to work.
Speaker Change: You know, we have a number of rigs rolling next year, but these are all high-spec, seventh-gen assets, and based on the pipeline of activity that we see coming, we see good long-term opportunities for all of those.
Speaker Change: You know, the 11, the 13, and the 14 are the highest spec 7th Gen assets sitting on the sidelines.
Speaker Change: absolutely going to be patient in putting those into the market.
Speaker Change: There will be a place for them, but this is not a question of putting a number on a calendar. When the market is ready for those assets to come back, the market will be ready for those assets to come back. There is a lot of drilling, demand continues to increase, offshore production is going to play a huge part in that going forward. But we are in no rush to put those assets back to work in the near term.
Speaker Change: Got it. I understood. That's very helpful. Thanks for that, Collar. I'll turn it back.
Thanks.
And the next question comes from Frederick.
Steina with Clarkson Securities. Please go ahead.
and team hope you're well.
Speaker Change: I think I'd like to ask you, you know, kind of a similar question as I asked one of your peers earlier this week, and it has to do with the demand pipeline going forward. I think, you know, clearly there seems to be consensus that for 2025 there's not really that much...
Speaker Change: work left to be contracted and the market, you know, I think has to a large degree kind of acknowledged that through
Speaker Change: equity prices already, but there seems to be quite a lot of optimism around 2026 and what's happening beyond. But unfortunately in this industry there's always been kind of a tendency for things to slip to the right and slip to the right and slip to the right.
Speaker Change: So what are giving you confidence that the programs that you're seeing being tended for or the discussions that you're having will materialize in this?
perceived timeline.
Thank you.
all right
Speaker Change: Absolutely. It's a really, really good question. Obviously, we look at the same macro models that everybody looks at. We look at what our customers are saying publicly, look at the CapEx spending plans and how those are developing, and they are continuing to increase.
Speaker Change: especially as you're going to 26 and 27. But what I will say is, you know, one of the things I do as a CEO is I spend time with our customers. You know, I visit them in their offices, you know, I go ashore with them, and I've visited with most of our major customers in the back half of last year.
Speaker Change: And what I can tell you is the programs that they have on the books.
Speaker Change: You know, the way they're talking about them, the way they're planning for them, they are looking for partners who can deliver those programs for them. They have long-term development needs that need to be delivered.
Speaker Change: The status of their planning efforts for those, the posture with which we're engaged in commercial discussions on a number of our rigs, leaves me very
Speaker Change: confident and comfortable about that demand coming to play. Yes, things move to the right and they move to the left. And there are a lot of macro and.
Speaker Change: supply chain and other reasons why programs move around. But based on direct discussions that we're having with our customers about the programs that they have on the books right now, we feel really good about that pipeline of demand coming in 26 and 27.
That's very good to hear.
Thank you.
Speaker Change: I'm not sure if you can even call it a follow-up, but let's turn quickly to Jacobs. You said that...
Speaker Change: You had five jackets, I think, in advance discussions for extensions with Aramco. Obviously, you know, through your position with Arrow, which is also jointly owned by Aramco,
Speaker Change: I would call it, you know, partially a bit of a special position given that the
Speaker Change: Do you have any good intel or insights as to what is going on?
Water and Co is
Speaker Change: It's planning to do going forward. Do you think they're, in general, done with suspensions? Do you think they will recontract most of the rigs that are rolling off right now? Or do you think they can even, you know, actually add to the rig count again as we walk through 2025? Any caller on that front would be super helpful. Thanks.
discussions. They are constructive and advanced.
Speaker Change: And, you know, if we need, you know, additional short-term extensions to conclude those discussions, I'd expect we'll get those as well. But feel good about the discussion and us being able to roll those rigs in Saudi and continue, you know, continue our relationship in providing Arrow with rigs in order to fulfill their needs in the kingdom.
Speaker Change: All right, that's super. Thank you very much and have a good day.
Thanks.
Speaker Change: And the next question comes from Kurt Halid with Benchmark. Please go ahead.
Hey, good morning, everybody.
Morning, Kurt.
Speaker Change: Based on what your peers have said so far, and what you've said here today, it does look like there is some building momentum on
Speaker Change: some contract activity after a little bit of a lull, so that's always good to hear. So, I guess the question I would have then is, you know, there's been some pretty explicit commentary from your peers about, you know, where pricing sits.
Speaker Change: for Ultra Deepwater rigs in particular, as well as 6th Gen rigs. Sounds like you guys are willing to be patient, as you said, and stack rigs if you can't get the price that you think is...
Speaker Change: worthy. So just want to see if you can confirm the ranges. I think we've heard somewhere between mid to high fours for ultra deepwater rigs and somewhere in the mid threes for six gen. Is that how you're seeing the market?
Look, I'll say this. I mean, we only have.
Speaker Change: I'll say fortunate to only have one ship in our fleet out of our 13, that is 6G, that's the DS4, and that rig's contracted until, what, fourth quarter of 2027.
Speaker Change: So for us, it's really the 7G market, the rigs that customers that we talk to prefer for their long-term development programs.
Speaker Change: I think, you know, if you've seen, there haven't been a lot of fixtures recently, but the fixtures that you've seen have continued to be in the mid to high 400s for high spec assets, and that's where the market is.
Speaker Change: and and you're absolutely right if you know I will on we've tried to clearly articulate our strategy is that we focus on delivering operationally for our customers because that's what gets us more work we have a super high spec fleet
Speaker Change: We're going to minimize costs on those rigs while they're not working and we're going to find the right long-term opportunities for that high spec fleet to put it to work. I think you have that exactly right.
Speaker Change: Okay, great. And then, so Chris, just to make sure there's no misinterpretations, you referenced that the midpoint of your revenue guide is 94% contracted. I would have to assume that.
Speaker Change: basically translates to the EBITDA line as well but again don't want to be misinterpreting anything.
Speaker Change: I think that's fair, a fair way to look at it.
All right, great. I'll keep it there, guys. Thanks.
Speaker Change: and the next question comes from David Smith with Pickering Energy Partners please go ahead
David Smith: Hey, good morning and thank you for the detailed discussion on the outlook for your rig availability this year.
David Smith: Just given the potential for extended downtime on some floaters, could you please remind us how to think about...
Speaker Change: How do you think about the operating costs when rigs go idle, and maybe the case of getting those costs down if the rig is expected to be warm-staffed for several months, and if there's much variance depending on location or if it's a semi versus a drill ship.
Thank you.
Speaker Change: Yeah, we talked about this on the last quarter, so recall when we were talking about the ten and the five, but for a ship, like right now for the ten, we've gotten those costs down to about 60 a day. That's about getting down to minimum safe manning, obviously you're not going to be spending as much on maintenance because you're not running the equipment.
Speaker Change: key side so you're not burning fuel. Um, so those are the actions you take, you know, previously for the five. Um, you know, we had talked about getting down to closer to 50 a day on a semi. Um, but these are pretty significant reductions relative toe.
Speaker Change: and the average op-ex on the ship for, let's say, around $150 a day. So, you know, but those are the actions that we take to get those costs to those levels.
Speaker Change: and the transition in from going from 150 when it's working to 60 when it's warm stack. We're looking at about a three month ramp down and then you know on the back side when you're ramping back up about a three month ramp up.
Thank you very much. Bye.
Perfect. Appreciate it. I'll circle back for another question.
Thank you very much. We appreciate it.
Thank you.
Speaker Change: And the next question comes from Arun J. Ram with J.P. Morgan. Please go ahead.
Speaker Change: Yeah, good morning. On the two rigs that you mentioned that you're in advanced discussions on, the high-spec floaters, can you confirm that those opportunities have 2025 start dates?
Thank you.
Speaker Change: Hi there. The opportunities for those more likely will be in the first half of 26.
Okay.
Okay, got it.
Got it, okay
Speaker Change: Let me let me jump in there. I mean, I think
Speaker Change: If you've heard out and even even our competitors calls, I mean, there are there's not a lot of 25 startup work, very few and far between our focus, as we said, is securing that that attractive long term contract that's going to get us, you know, years and potentially follow on work for these assets. So that's where we focus first. So when we talk about the advanced assertions, once we have that work secured, then there's always an option to say, OK, can we add something on on the front end of that is some short
Speaker Change: you know attractive that will lead up to that to add to that program and I think that's how we think about it you know generally on a on a kind of contracting and commercial basis.
and Darin Gibbins. Thank you. Thank you.
Great, makes it makes a ton of strategic sense.
maybe Shifting Gears.
Speaker Change: Arrow Drilling recently announced plans to build a new build, Jackup, the Kingdom 3.
Speaker Change: I was wondering if you could shed some light on if you expect
the JV to be able to self-fund that.
new build or would it require some funding from Val?
Speaker Change: Absolutely. You know, those contracts that we're building in IMI are backed by long-term, 16 years of contract.
Speaker Change: We do not, neither us nor Saudi Aramco, intend to need to inject any capital into Arrow in order to fund that new bill program. There are attractive programs being built at IMI as part of Vision 2030 and we expect
Speaker Change: Those programs, those rigs to be funded by cash flow from operations at Arrow plus funding that is, you know, readily available in the market.
for a new bill that is backed by a...
Sixteen years of contract backlog, the first eight, which is...
You know.
Speaker Change: Six-year EBITDA payback over an eight-year contract based on its construction cost so highly attractive contracts
Speaker Change: and imminently financial in the market. Yeah, so if you look at what happened on the Kingdom 3 and Kingdom 1 and Kingdom 2, is the down payment was paid out of cash from Arrow and then the...
Anton Dibowitz: kind of delivery payment was financed. So, largely financed. So, yeah, so as Anton said, I mean, the contract structure, these are highly financeable contracts.
Anton Dibowitz: and, you know, do not anticipate additional capital needs from Aramco or or Valeris to fund anything.
Crystal clear. Thanks a lot, gents.
Speaker Change: And the next question comes from David Smith with Pickering Energy Partners. Please go ahead.
Thank you.
Hey, thanks for letting me back in.
Speaker Change: Just a bigger picture, there's been the ongoing theme of projects getting pushed back to stay right, but a lot of these tend to be the
Speaker Change: larger multi-well development programs, especially greenfield projects. I'm curious what you've seen on discussions for the smaller tieback programs, the exploration programs. Are those getting pushed back also? Is there a de-emphasis on exploration?
Speaker Change: or is this more of a timing issue where, you know, operator schedules just overlapped and happen to ebb and flow together?
Speaker Change: That's a good question. I wouldn't say that those are being pushed back any more or less.
Speaker Change: Let's say the gap bill, you know the the focus from a lot of our customers They do have a good portion of capital discipline, right? They're focused on the big programs, you know first
Speaker Change: and you know those those smaller tiebacks is kind of is is what's left you know do they have the capacity to do it do you have the budget to do it in the current year how does that fit into their into their program so I think it's kind of a
Speaker Change: a second order decision on their part after they've made the allocation of capital to the large-scale projects that they have.
I very much appreciate it.
Thank you.
Thank you. Thank you. Thank you.
Speaker Change: This concludes our question and answer session. I would like to turn the conference back over to Nick Georgias for any closing remarks.
Nick Georgias: Thanks, Dave, and thank you to everyone on the call for your interest in Volaris. We look forward to speaking with you again when we report our first quarter 2025 results. Have a great rest of your day.
Speaker Change: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.
and many more. Thank you. Thank you.
and many more. Thank you. Thank you.