Q3 2025 Valaris Ltd Earnings Call

Speaker #3: Good day , everyone , and welcome to the Velaris third quarter 2020 results conference call . All participants will be in a listen only mode .

Speaker #3: 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 .

Speaker #3: To ask a question , press star and then one on your touchtone phones . To withdraw your questions , you may press star and two .

Speaker #3: Please also note today's event is being recorded . At this time I would like to turn the conference call over to Nick Georgas president , treasurer and investor Relations .

Speaker #3: Please go ahead .

Speaker #4: Welcome everyone to the Volaris Third Quarter 2025 conference call . With me today are president and CEO , Anton Dibowitz Senior Vice President and CFO Chris Webber .

Speaker #4: Senior Vice President and CEO Matt Line and other members of our executive management team . We issued our press release , which is available on our website at Valaris Ltd .

Speaker #4: 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 .

Speaker #4: 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 #4: Also , please note that the company undertakes no duty to update forward looking statements . During this call , we will refer to GAAP and non-GAAP financial measures .

Speaker #4: Please see the press release on our website for additional information and required reconciliations . Last week , we issued our most recent fleet status report , which provides details on our rig fleet , including new contract awards .

Speaker #4: Now , I'll turn the call over to Anton Dibowitz president and CEO . Thanks , Nick , and good morning and afternoon to everyone .

Speaker #4: I'll begin today's call with a summary of our third quarter performance and highlight our recent commercial achievements . I'll then provide an update on the offshore drilling market before discussing how our continued focus on operational excellence , commercial execution , and disciplined cost and fleet management is driving long term value for shareholders either .

Speaker #4: In turn, I'll hand it over to Matt, who will provide additional details on our contracting activity and the broader floater and jackup markets.

Speaker #4: After that , Chris will walk through our financial results and guidance , and I'll finish with a few closing remarks . To begin , I want to highlight a few key points .

Speaker #4: First , I want to thank the entire Volaris team for continuing to deliver safe and efficient operations . The solid operational performance contributed to another strong quarter of financial results , with meaningful EBITDA and free cash flow generation .

Speaker #4: Second , we continue to execute our commercial strategy , having recently secured an attractive contract for Volaris , Ds12 with BP Offshore Egypt .

Speaker #4: With this award , all four of our drillships with near-term availability are now contracted for work beginning next year . Third , despite near-term commodity price uncertainty , demand for offshore drilling services is developing as we expected .

Speaker #4: We continue to see a pipeline of deepwater opportunities for our high specification fleet and we're in advanced customer discussions for our drillships scheduled to complete contracts in the second half of 2026 .

Speaker #4: robust Volaris . Well positioned to deliver long term value for our shareholders . Moving to operations managing our . Delivering safe and efficient operations is always our top priority .

Speaker #4: In summary , we remain focused on delivering outstanding operational performance , executing on our commercial strategy , and prudently costs and fleet by staying disciplined and focused on these priorities .

Speaker #4: It protects our people , strengthens relationships with our customers and serves as the foundation for everything we do . Our teams once again delivered solid operational performance , achieving fleet wide revenue efficiency of 95% in the third quarter .

Speaker #4: This execution helped deliver another quarter of strong financial results , including adjusted EBITDA of $163 million and adjusted free cash flow of $237 million .

Speaker #4: In addition, we repurchased $75 million of shares during the quarter, demonstrating our commitment to returning capital to shareholders. Several rigs reached notable safety milestones during the quarter.

Speaker #4: Volaris Davanger marked an impressive four years recordable free , a remarkable achievement that reflects the crew's commitment to safety and the strength of their leadership .

Speaker #4: In addition , seven other rigs , floaters , Volaris , Ds12 , DDS 18 and DPS one , along with jack ups for Lares 92 , 123 , 247 and 249 each achieved one year .

Speaker #4: Recordable free . Congratulations to all involved on these outstanding results . We were also proud to be recognized by the center for Offshore Safety for the third consecutive year .

Speaker #4: Most recently for our video after Action review initiative . Reflecting both the strength of our safety culture and our commitment to continuous improvement through innovation .

Speaker #4: We continue to execute our commercial strategy . This is supported by our solid operational performance . Since many of our recent contract awards have come from existing customers , reflecting the strength of our relationships and the confidence they place in us to deliver safe and efficient operations .

Speaker #4: A great example is our recent contract for Volaris DDS 12 , which will return to Egypt with BP . Building on our previous campaign that included drilling the successful L .

Speaker #4: King2 and L55 exploration wells earlier this year , Egypt continues to make meaningful progress in attracting investment from IOCs , with several majors awarded offshore acreage in a licensing round earlier this year .

Speaker #4: Volaris has a long and successful history operating offshore Egypt , spanning roughly two decades of drilling programs , including seven years for BP .

Speaker #4: We're excited about this upcoming campaign and the prospect for continued activity offshore Egypt in the years ahead . At the start of the year , we outlined our commercial focus on securing attractive contracts to bookend the whitespace for our drillships with near-term availability , and we have accomplished this objective .

Speaker #4: As these four rigs are now contracted for work beginning next year , this is a fantastic achievement by our commercial team and everyone across the organization who played a role in making it happen .

Speaker #4: Turning now to the broader macro environment in the offshore drilling market , the long term outlook for our industry is becoming increasingly constructive .

Speaker #4: There is a growing consensus that today's near-term oil supply surplus will give way to a structurally tighter market later in the decade . As a result of historic underinvestment and slowing non-OPEC production , growth , our customers continue to emphasize the need for sustained investment in oil and gas , particularly in offshore developments that provide secure , reliable and affordable energy supply .

Speaker #4: The IEA recently highlighted that nearly 90% of global upstream spending is required just to offset natural field declines , underscoring how much investment is needed to simply maintain existing production without continued investment .

Speaker #4: The IEA estimates global oil production would fall by 8% per year on average over the next decade , equivalent to losing more than the annual output of Brazil and Norway each year .

Speaker #4: Over the same timeframe . Demand for offshore drilling continues to unfold as we expected , with customers increasingly looking to offshore projects , particularly Deepwater , which offers large , accessible resource potential , compelling project economics and comparatively lower carbon emissions to meet future energy needs .

Speaker #4: Even with some near-term commodity price uncertainty , customers are moving forward with long cycle offshore developments , and we anticipate meaningful growth in deepwater project sanctioning over the next few years .

Speaker #4: As customers pursue greenfield and brownfield developments , as well as exploration . Importantly , most of these projects are expected to be economically viable , well below current oil prices , according to Rystad , approximately 70% of deepwater spending expected to be sanctioned over the next three years is tied to programs with breakeven prices below $50 per barrel compared to a five year forward price above $65 per barrel .

Speaker #4: This reinforces our expectation that the floater opportunities we've been tracking will continue converting to contracts and based on our ongoing conversations with customers , we anticipate additional awards for Volaris and the broader industry in the coming months .

Speaker #4: We continue to expect that utilization for the global Drillship fleet will trough late this year or early next year before improving in the second half of 2026 .

Speaker #4: As rigs begin new contracts and we anticipate seventh generation Drillships will exit 2026 with utilization levels around 90% . Customers continue to prefer the most technically capable and efficient assets , which aligns well with our high specification Drillship fleet with 12 of our 13 ships being seventh generation units .

Speaker #4: The highest concentration in the industry . Seventh generation Drillships have historically enjoyed a utilization and day rate advantage , and we expect this trend will continue .

Speaker #4: We have strategically positioned our assets with customers and in basins where we see sustained long-term demand, and we believe that this targeted commercial approach will allow us to maintain more consistent utilization time.

Speaker #4: Turning to jack ups , over remains robust with global utilization around 90% , driven primarily by national oil companies focused on energy security and infrastructure development .

Speaker #4: Recently , Saudi Aramco has issued notices calling back several suspended rigs to resume operations next year , which we expect will further support the supply and demand balance of the global Jackup fleet .

Speaker #4: Our versatile Jackup fleet continues to be a significant and reliable driver of earnings , with EBITDA from the segment increasing year over year , driven by more operating days and higher average day rates .

Speaker #4: This reflects our strategic focus on markets where we hold strong positions , such as our market leading position in the North Sea , in Saudi Arabia , through our rigs lease to arrow and in niche markets that require high specification assets like Trinidad and Australia .

Speaker #4: Turning to our broader fleet management strategy , we remain focused on maintaining our high quality and efficient asset base while prudently managing our costs and fleet .

Speaker #4: This includes tightly managing expenses between contracts, selling assets when we can achieve attractive prices, and retiring rigs when their expected future economic benefit no longer justifies their associated costs.

Speaker #4: This focus was recently demonstrated by the highly accretive sale of 27 year old Jakub Valaris . 247 , which we closed during the quarter for $108 million in cash .

Speaker #4: Consistent with our disciplined approach to cost management following completion of their current programs , we plan to mobilize Valaris , Msx1 and DPS one to Malaysia , where we will quickly reduce costs by warm stacking .

Speaker #4: Both rigs while we evaluate future opportunities before handing over to Matt . I'd like to briefly recap a few key points about the market and our strategy .

Speaker #4: Our customers continue to highlight the need for ongoing investment in oil and gas , particularly in offshore developments that offer secure , reliable , and affordable energy supply .

Speaker #4: Demand for offshore drilling is developing as we expected , and customers are increasingly turning to offshore projects to support future energy demand . We're well positioned to continue executing our commercial strategy by securing attractive floater contracts supported by our global scale and high spec fleet .

Speaker #4: We are in advanced discussions with customers regarding opportunities for rigs scheduled to complete contracts in the second half of 2026 , and we will continue to pursue gap fill programs in the first half of next year .

Speaker #4: Against this positive backdrop . We remain focused on three strategic priorities delivering outstanding operational performance , executing our commercial strategy and prudently managing our costs and fleet .

Speaker #4: By staying disciplined and focused on these priorities , Volaris is well positioned to deliver long term value for shareholders . With that , I'll now hand the call over to Matt .

Speaker #4: Thanks , Anton , and good morning and afternoon , everyone . I'll begin with a summary of our recent contract awards before providing updates on the major floater and jackup markets where we operate .

Speaker #4: Since our second quarter call . We've secured new contracts and extensions , adding nearly $200 million to our contract backlog , and we are in advanced customer discussions on several contract opportunities for both Drillships and Jackup that we expect to conclude before year end .

Speaker #4: Starting with Drillships year to date , we've added approximately $1.4 billion of backlog for our Drillship fleet , representing nine years of total contract duration .

Speaker #4: Most recently , we've secured a five well contract for Valaris DS 12 with BP offshore Egypt . The contract is expected to commence in mid second quarter 2026 , with an estimated duration of 350 days and a total contract value of approximately $140 million .

Speaker #4: The contract also includes three option wells , which could extend the program to more than two years in total duration . Turning to jack ups , we have secured more than 500 days of additional work in the North Sea , including contract extensions for the Valaris Norway 121 and 122 , as well as a four month program for the 248 , which helps bridge most of the gap between the SPS and the start of the next program .

Speaker #4: In 2026 . Fleetwide we've added over $2.2 billion in contracted revenue backlog year to date , significantly enhancing our contract coverage for 2026 and beyond .

Speaker #4: And current total backlog stands at $4.5 billion . Turning now to the major floater and jackup regions , where we operate consistent with last quarter , we are tracking more than 30 longer term floater opportunities with planned start dates in 2026 and 2027 , each with durations of a year or more .

Speaker #4: We continue to see programs we are tracking progress through the commercial process with long term contracts . Typically awarded at least nine months before their planned commencement .

Speaker #4: We expect to see further awards both for Valaris and our peers before year end . Offshore Africa , including West Africa , East Africa and the Mediterranean , remains the most active region for future floater demand , representing roughly half of the term opportunities in our pipeline .

Speaker #4: Starting with Egypt . The country is experiencing declining output from mature fields and long views . New offshore exploration and development is key to satisfy growing domestic demand .

Speaker #4: The government has made meaningful progress , attracting IOC investment with several majors awarded offshore blocks in a licensing round earlier this year . And we look forward to continuing our long history of operations offshore Egypt in the years ahead .

We were pleased to have secured these contracts as they provided 5 years of backlog. Solidified, our presence in the region and deepened, our relationship with Oxi who is a major lease holder in the US Gulf.

We expect this Market to remain fairly balanced with demand largely meant by the existing supply of the rigs in the region.

Outside of the Golden Triangle, we are tracking requirements for 7 drill ships offshore in India, Southeast Asia, and Australia, representing more than 10 years of firm demand. This activity could draw additional supply away from the Golden Triangle, as recently occurred with a drill ship mobilizing to Indonesia after completing work offshore West Africa.

Polaris ms1 and dps1 are scheduled to complete contracts offshore Australia. During the fourth quarter, we currently see no new work for these rigs in 2026.

But continue to have discussions about potential opportunities in 2027 and Beyond.

In line with our discipline Fleet Management approach, we plan to mobilize both rigs to Malaysia to be warm stacked. While we evaluate these opportunities

Turning to Jack UPS current Global Marketing. Utilization remains steady at around 90%, we have strong and focused presence in strategic shallow, water markets.

This has helped us to achieve industry-leading contract coverage on our jacket Fleet with nearly 80% of available Days of our active rigs, contracted for 2026 and more than 60% contracted for 2027.

In benign environments, we have open availability in 2026 for Just 2 rigs.

Polaris 106 in Indonesia and velaris 107 in Australia.

We are in advanced customer discussions for both Rigs and expect to secure additional work soon.

In the North Sea recent Awards, have enhanced our contract coverage. We now have availability on Just 2 of our jack-ups in the region during the first half of next year and we are tracking a number of short-term opportunities that line up well with our limited availability during this time.

Looking further ahead, we anticipate demand improves across the region in the second half of 2026 and into 2027.

In the UK, we see a range of opportunities that include gastroent, plug and abandonment. Work new energy and infrastructure projects and we anticipate Supply, will largely meet demand.

We expect activity in the Dutch sector will remain steady keeping 4 rigs busy. And we see opportunities in Denmark for up to 2 rigs during 2026 representing an uptick in activity. Given, no rigs are currently operating there.

In the region over the past few years and we continue to see multiple opportunities, well suited, for our rigs with availability in 2026.

In summary, we are successfully executing our commercial strategy, having secured more than $2.2 billion in new backlog so far this year.

We continue to engage constructively with customers on future programs and our Focus remains on building backlog through attractive, contracts, that will further strengthen our earnings and cash flow.

I'll now hand the call over to Chris who will take you through the financials.

Thanks Matt. And good morning and afternoon everyone.

In my prepared remarks. Today, I'll begin with an overview of our third quarter results. Followed by our outlook for the fourth quarter.

Starting with the third quarter results.

Total revenues were 596 million compared to 615 million in the prior quarter, primarily due to fewer operating days for our floater Fleet as drill ships. Valeris ds15 and D is 18. Completed contracts. Midway through the third quarter without immediate follow-on work.

In addition jack up, Volaris 247 completed its contract in Late July and was sold in August.

These items are partially offset by more operating days for several rigs in the Jacup fleet.

Adjusted ibida was 163 million compared to 201 million in the prior quarter.

The decrease was primarily due to fewer operating days for a floater Fleet and the 2499 benefit. We recognize in the second quarter from a previously disclosed, favorable arbitration outcome.

Third quarter adjusted, ebita exceeded. Our guidance range of 120 to 140 million primarily due to certain contracts running longer than previously anticipated.

Higher revenues from aerolease Rigs and lower support costs.

Third quarter capex totaled $70 million, coming in below guidance due to timing as certain projects have shifted to the fourth quarter.

During the quarter, we generated 198 million of cash flow from operations and received just over a hundred million dollars in net proceeds from the sale of Aeris 247.

After deducting Capital expenditures, this resulted in 237 million of adjusted free. Cash flow.

We were purchased 75 million of shares in the third quarter, at an average price of $9 per share.

We ended the quarter with 676 million of cash and cash, equivalents

Moving. Now to our fourth quarter Outlook, we expect total revenues in the range of 495 to 515 million down from 50096 million in the third quarter.

The anticipated decrease is primarily due to fewer operating days across the fleet.

Within our floater Fleet drill ships, Volaris ds15 and ds18 are currently idle after completing contracts during the third quarter.

In semi submersible's, Volaris dps1 and ms1, are both expected to complete contracts offshore Australia before year end.

For our jacket Fleet. Valera's 247 was sold during the third quarter and Volaris 120. And 248 are expected to have fewer operating days due to a mobilization between jobs for the 120.

And out of service time for the 248 SPS.

We also expect lower revenues from Arrow least rigs as Volaris 116 and 250 begin Shipyard projects.

We expect contract drilling expense of 390 to 405 million, compared to 406 million in the third quarter.

To decrease is primarily due to cost reduction on rigs that have completed contracts without media follow-on work.

Both revenue and contract drilling expense in the fourth quarter are expected to include 25 to 30 million of reimbursable items.

We anticipate GNA expense will be approximately 27 million in line with the prior quarter, as we continue to prudently manage our cost structure.

Fourth quarter, adjusted Eva de is expected to be 70 to 90 million.

Finally, we expect capex of 145 to 165 million, Which is higher than prior quarters, due to certain projects, been shifting from earlier in the year.

Million dollars which is roughly million dollars above the midpoint of guidance. We provided on our second quarter call.

This increase is primarily due to our outperformance in the third quarter as well as an expected improvement. In our fourth quarter Outlook, mostly driven by more operating days for the jacup fleet.

The midpoint of our fourth quarter capex guidance. Implies expected full year capex of approximately 390 million roughly in line with the midpoint of our prior guidance.

as a reminder, we expect to receive a approximately 70 million dollars in upfront, payments from customers this year to reimburse certain contract specific upgrades

This concludes my review of our financial results and guidance, I'll now hand the call back to Anton for some closing remarks.

Thanks Chris. Before we open the line for questions, I'd like to recap a few key points from today's prepared remarks.

First, I want to reiterate my appreciation to the entire Volaris team for continuing to deliver safe and efficient operations, which contributed to another strong quarter of financial results with meaningful ibida and free cash flow generation.

Second, we continue to execute, our commercial strategy. And as a result All 4 of our drill ships with near-term, availability are now contracted for work. Beginning next year,

Third, demand for offshore drilling Services is developing. As we expected, we continue to see a robust pipeline of deep water opportunities for our high specification Fleet. And we're in advanced customer discussions for our drill ships. Scheduled to complete contracts in the second half of 2026.

In summary, we continue to focus on delivering outstanding, operational performance, executing our commercial strategy, and prudently managing our costs, and Fleet by staying disciplined, and focused on these priorities for Larry's. Well, positioned to deliver long-term value for shareholders.

We thank our employees for their focus and dedication and our customers and investors for their continued support that concludes our prepared. Remarks operator, please open the line for questions.

Ladies and gentlemen, we will now begin the question and answer session to ask a question. You may press star and then 1 on your touchtone phones,

if you are using a speaker-phone, we do ask you, please. Pick up your handset before pressing the keys.

To withdraw your questions. You may press star and 2 once again that is star and then 1 task a question we'll pause momentarily to assemble the roster.

In our first question, today comes from Scott Gruber from Citigroup, please. Go ahead with your question.

Yes, good morning.

Morning, Scott morning. So it's good to see the, uh, the purchases. This, this quarter. Um, I'm curious about your, your, your appetite moving forward. Um, looking at consensus, you know, there's an, uh, a forecast for much free cash next year as we transition to better times. We do have 660 million of cash on on the balance sheet. Um, can you can you speak to, you know, an appetite to, to use that cash to to buy back, you know, additional shares. Now, you know, ahead of um, you know, the potential recovery and and late 26 and 27.

This is Chris, you know, 1, you know, we remain committed to returning Capital to shareholders, you know, we executed the 75 million dollars of repurchases in the corner are excited about that. Reflects our confidence in the market and the Outlook. So like we've always said that, you know, um, our ref purchases is aren't necessarily going to be linear, um, not in a straight line and we're going to be opportunistic and that that's what you saw this quarter. Um, you know, as we as we move forward, you know we'll we'll see how the year progresses but flexibility that provides for additional share repurchases. Um but you know

Excited. What we were able to execute this quarter?

What's your level of cash? You know, that you need to run the business? What's the kind of minimum cash balance for working capital purposes?

Yes. I mean from a minimum cash perspective, I would say around million dollars to run the business. Um, and where we hold cash, you know, in excess of that is just really, with regards to kind of, what are we seeing in the market? You know, what's, what what, what's a Paso profile of our business going forward? Um, and then, those sort of things,

At this point.

Um, I I thought this is Anton, I'll, I'll take it. Um, look there, there's always some exploration going on, you know, even in a lot of development programs that we've been drilling historically, uh, customers will will slot in an exploration, uh, well here or there, but, you know, we do see, um, an increase in expiration discussions. Um, and that's based on the necessity, you know, the, the consensus is that, um, we're going to need additional developments in order to meet the world's energy needs as we head towards the end of the decade. And in order to get those developments our customers need to explore. So I think it's a a simple cause and effect, I think it's it's great for the market that there is, um, additional exploration or include increase in Exploration activity, um, expected, um, from the the various prognosticators in the market. Also, from the discussions, we're having with our customers, and I think it portends well for where the Market's going.

That's great. I appreciate your call again, time. I'll turn it back.

Our next question comes from Greg Lewis from btig. Please, go ahead with your question. Yeah. Hi. Thank you and good morning everybody. And thanks for taking my question. Um, Anton, you know, I was hoping you could elaborate maybe a little bit more on on. Scott's question about shareholder returns. Um, you know, we saw the the sale of, the, of the rig, um, that that was obviously a nice profit. Um, cash flow was pretty good. Uh, really good.

Is there any kind of way to to think about, you know, you're going to have opportunities to sell rigs, some of the non-core rigs in the future? Um you know balance she's obviously strong is that kind of a me, should we think about asset sales as a mechanism to drive some of this return of cash to shareholders? Or is it you know, going to be more focused on the operations of CA operations of the business or or maybe a little bit of both.

I look, I start it. It's going to be focused on the operations of of the business. I mean I want to first take a step back and say we we are committed to returning. Um our free cash flow sustained free cash flow to shareholders unless there's clearly a a better or more creative use for it. I think we've demonstrated that, you know, part of cost and discipline, and Fleet Management comes to, when there are opportunities, like we had with the, uh, 247 or 27 year old rake and we can get a, you know, a highly attractive price for it. It makes sense for us to to divest that asset and that obviously increases our financial flexibility. But at its base. Our Capital return needs to be driven by driven by delivering operational cash flow. We're all working through this white space period. So, you know, to, you know, Chris was asked the question before when we understand and and have these Rigs and we fully expect that our, our 10 active ships will be um, all working

Um exiting 26 under contract that will again you know underwrite our our ability and flexibility as far as it comes to Capital return. So you know in summary let me let me take a step back and just summarize you know it needs to be driven by operational, you know, you know delivery of operations and and sustained earnings. And you know, the ability to sell assets when there are attractive opportunities is just opportunistic over and above that.

Okay, great. And then, and then the other question I had was around, uh, you know, some of the recent term deals. You did that, that have that MPD, uh, additional Services kind of curious. It seems like the market, uh, es and flows between, you know, MPD, being built into the price versus MPD being kind of like a menu item in in in the event that it's a menu item. Um, is there any way to kind of knowing that, you know, every well is different? Every customer is different. Is, is there any kind of rough estimate? How we should be thinking about how much of the time maybe if there is MPD as an add-on service? How much of the time should we be thinking about that service being used?

It it's very I I'd love to give you an easy answer, but it is very, very customer dependent. Um, it depends what sort of of of of drilling they're they're doing. So it is you know, contract specific, you know well specific you know is it is it a development? So it it's hard to math, I don't know if you want to

yeah, I think, I think Anton, hit the nail on the head that each each customer is so different, so there's no large rule, but I think you can assume if you're if you're just running General analysis somewhere between 40 to 50% utilization,

Perfect suit or helpful. Thank you very much.

Question. Here, you reiterated your expectation for seventh gen drill ships. Exiting 2026 at utilization around. 90% at the same time we have seen a few data rates below 400,000 a day that the ds12 included in that though, though, I know, uh, that, that Egypt is, is a lower Opex environment for you guys, but, but some some investor concern around, you know? Maybe some more, um, day rate prints below 400,000. Uh, first, do you think those are coming and second? How is that impacting your view on an activity inflection, higher, in the back part of next year? It seems that it isn't, uh, but just wanted to, to get your thoughts, uh, and your confidence level around that

Okay, a few few questions in there. I think this is how I describe it. Um, you know, we believe the market is playing out as we expected. Uh, I think that day rates for high-spec ships have largely dropped in, in the high 300s, um, kind of low to mid 400 range. Um, you know, as an industry, we're walking through a period of white space and then the number of changes that are in progress right now and you'll probably see some additional, um, prints contract Awards in that range as those contracts work through the, the tender process, but we continue to expect that utilization will trough, uh, towards the end of this year, early next year, um, you know, and then uh, Rec

Recovery beyond that exiting as an industry. Um, you know, high-spec ships above as or above 90% at the end of 26 and inevitably, um, day rates follow utilization. But you know, for now I think I think their rates have have cropped as we see it for the cycle in the kind of high 300s low to mid 400 range.

Great, great. Thanks for that. Um, my follow-up is just on, uh, your rigs coming off contract next year. You you have absorbed a lot of, a lot of white space, uh, with your recent contract Awards, but the DS9 and the ds7, um, are off contract mid to late next year, both in Angola. Um, and based on your, I mean, constructive outlook on in, in Angola and, and West African general. Um, it it, it feels like it's likely that those, uh, could get extended without, um, any idle time between contracts, just any thoughts there. And then, and it's definitely. I mean, it's ds15, ds18 have long-term contracts starting, uh, end of next year, but are Idol today. What's the, um, uh, the likelihood that you'll be able to secure some, some some short-term Gap. Uh, for work, for those before long term, contracts commence. Thank you.

Matt, do you want to start on the on the Gap? Fill. And then, I'll come across as how we view the sure. I mean, I, I think, well, first off Angola, um, on the, uh, in goal on the, uh, on the, uh, on the 9 and the 7 as, as I, I mentioned in my prepared remarks, you're seeing a decrease in production. Uh, so I think the government's working closely with the with the ioc's to, uh, to incentivize drilling. So I, I think your read is right that we see uh, positive discussions regarding the future Contracting opportunities for those Rigs and and, uh, and equally they have performed extremely well, which just further benefits the likelihood that they'll, uh, that they'll have strong potential for extensions from a gap, fill perspective. Um you know we've done a great job of of uh bookending the uh the the near-term availability on our assets. And and while there are some short-term opportunities available in the market, probably not enough to fill all the rigs that have white space right now, but we continue to chase work.

That fits, uh, the longer term opportunities that we've secured.

I think I think Matt covered uh covered it. Well um you know our expectation is that high-spec rigs will exit 26. Um you know 90% plus utilization um our team has done a fantastic job of delivering our commercial strategy uh to date and I expect them to continue to do that. No pressure Matt but we expect that. All 10 of our active drill ships, were exit 26 uh on contract and working.

Great. Great to hear. Thank you both. I'll turn it back.

Doug Becker from Capital 1. Please go ahead with your question.

Thank you. Lars is a couple of rigs with Petrel Brass and Brazil. I wanted to get a sense of the focus of recent discussions with them to help reduce costs.

For potential Savings in 2026. So, so while it's early days, in discussions amongst, uh, amongst all of their services. Um, we we've seen these, uh, these discussions materialized before. So, um, I think, uh, I think what's important is recognizing that they want to maintain their production targets. Um, which means they, uh, are likely to maintain, uh, a, a fleet of similar size, uh, over the long term, which is positive for us. And so, while constructive discussions continue, it's, it's too soon to kind of, uh, discuss the specifics around it. I, I, I think Matt's that it really well. We expect Patrol brasses rig Fleet to remain stable. They have clear goals on what their production. And that's going to mean, they need to maintain a significant and the most significant, uh, you know, drill ship Fleet in the world, and the discussions are very early days and very, very constructive. Um, so we'll just have

to see how it plays out across the industry.

Uh definitely sounds encouraging. I've been switching to Saudi Arabia. You mentioned the ramco is issued notices calling back several suspended rigs. It's something. There's also been a recent tender. Uh, do you think Saudi Arabia is a source of incremental, demand incremental work for various next year?

Yeah, I really positive to see uh, Saudi aramco, uh, reactivating and calling back suspended rigs. So I think in, you know, when you look at a, a global utilization of the jacup market hovering around 90%, it just adds further further further benefit to that market. So we see that as a really positive data point on incremental demand there are there are there is potential for that and and with some some idle capacity sitting over in the Middle East we continue to monitor that closely together with our joint venture which operates in Saudi Arabia.

Thank you.

And our next question comes from Josh, Jane from Daniel Energy Partners, please go ahead with your question.

Thanks. Good morning, uh those in in the market generally seem in unison with uh respect to a recovery in deep water in the second half of 26. And I think the recent contract announcements largely support that. Um, maybe you could just talk a bit more about where geographically do you have the most confidence? Um, that rig counts will hold or increase and which regions do you see as having potential risk if we're in uncertain recruitment?

I actually want to give Josh my room. Sure. I mean, I think we touched a few of these in some of the answers already given and the prepared remarks, but I think we largely see South America, Brazil holding flat maintaining their Fleet size, which is also the largest, uh, largest floater market. So that that's a very positive sign. Um, incremental demand in, uh, in Africa. Um, we've mentioned, you know, the, the FID of, uh, of, uh, eni's project in mosm Beek and then, you know, there's some strong signs of, uh, of f Force, majour being lifted for, uh, for, uh, 2 other major ioc's with Exxon and, uh, and um, and total. So some positive work in East Africa. And obviously, announcing some work in Egypt with, uh, with decreasing, uh, decreasing production there, trying to trying to turn that around. Um, is showing some other, uh, some unique opportunities in the med and West Africa. So, um, what we have seen though is, is, is some rig shifting locations, as well with Asia caring and

Number of, uh, number of opportunities without sufficient Supply sitting over there and, and customers really continuing the trend of focusing on higher-spec assets, you could see some migration from from, uh, from the Golden Triangle to service some of the opportunities in Asia.

Okay, thanks and then sorry. Let me just go roughly, how to take a step back from that roughly half of that incremental demand. Big Driver of incremental demand will be Africa and Africa in general. Um, you know, there is about 25% of that, that, that were coming in from Beyond The Golden Triangle and fairly stable in in, uh, in the US Gulf and, uh, and, uh, South America. Yeah.

Great. Thanks. And then I wanted to to provide just a little bit on uh on ramco and Doug hit it with with his last question but um with I guess, what's what's changed a little bit over the last 18 months is I I feel like Saudi is definitely gotten a bit more aggressive with respect to their production goals that they're um talking about hitting over the next, you know.

And ultimately meet their lofty production goals. Thanks.

I think what I would, what, I'd focus on in the uh, the the the recent news out. At people talking about rigs going back to Saudi aramco, Saudi aramco's, desire to bring rigs back into production is the fact that in the global Fleet high-spec, jack up, utilization is 90% above, you know, 90% and above. So the, the the market has held in there. Um, you know, the, the talk is and the near-term kind of mid to high single digits, plus potential for additional tenders be beyond that and every rig that goes back into their Fleet is further supportive of of of the global market. So overall you know the the jack up Market high back, jack up Market is fairly healthy and I think just, you know, to the extent, they choose to bring rigs back in order to meet their production targets is just further support for uh, for a market that's already attractive.

Understood. Thanks, I'll turn it back.

Hey, ladies and gentlemen, at this time, we'll be ending today's question and answer session. I'd like to turn the floor. Back over to Nick George's for any closing remarks.

Thanks Jamie. And thank you to everyone on today's call for your interest in Solaris we look forward to speaking with you. Again when we report our fourth quarter 2025 results have a great rest of your day,

And with that we'll be concluding today's conference call and presentation. We thank you for joining you may now disconnect your lines.