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LONDON,– Valaris plc (NYSE: VAL) (“Valaris” or the “Company”) announced today that the Company continues actively working to recover or replace the blowout preventer (BOP) stack on VALARIS DS-8 following a non-drilling incident earlier this month. On March 19, 2020, the Company received a termination notice for the drilling contract for VALARIS DS-8. The Company is in discussions with the customer regarding the notice. The drilling contract represents approximately $150 million of the Company’s contracted revenue backlog of $2.5 billion as of December 31, 2019. The operating day rate for VALARIS DS-8 is approximately $620,000 per day. The Company has loss of hire insurance for $602,500 per day after the expiration of a 45-day deductible waiting period through the end of the contract in November 2020. If the contract is terminated, the Company will seek to recover losses incurred in accordance with the terms of this insurance policy, which would largely offset the lost backlog noted above. There can be no assurance as to the timing or amount of insurance proceeds paid to the Company.
The Company has received a notice of contract termination from a customer for VALARIS JU-109, which was scheduled to operate offshore Angola until July 2021. As a result of this termination, the rig’s contract is now expected to end in mid-April 2020 and contracted revenue backlog will be reduced by approximately $50 million. The Company expects to receive additional notices of contract terminations and requests to renegotiate contract day rates and terms in light of increased market uncertainty.
Since the beginning of March, VALARIS JU-87 was awarded a one-well contract with Cox in the U.S. Gulf of Mexico that commenced in mid-March, with an estimated duration of 30 days that added approximately $1 million of contracted revenue backlog. Additionally, a previously announced contract for VALARIS DS-4 with Amni offshore Ghana has been transferred to VALARIS DS-7 and is expected to commence in April 2020, and the previously announced contract for VALARIS JU-144 (EXL II) with ENI offshore Mexico has been transferred to VALARIS JU-102 and is expected to commence in September 2020.
For the period between the Company’s fleet status report that was filed on February 13, 2020 and the beginning of March, the Company executed the following new contracts and contract extensions with associated revenue backlog of approximately $100 million:
In addition, the Company is withdrawing its first quarter and full year 2020 financial guidance that was provided on its February 21, 2020 conference call.
About Valaris plc
Valaris plc (NYSE: VAL) is the industry leader in offshore drilling services across all water depths and geographies. Operating a high-quality rig fleet of ultra-deepwater drillships, versatile semisubmersibles and modern shallow-water jackups, Valaris has experience operating in nearly every major offshore basin. With an unwavering commitment to safety and operational excellence, and a focus on technology and innovation, Valaris was rated first in total customer satisfaction in the latest independent survey by EnergyPoint Research – the ninth consecutive year that the Company has earned this distinction. Valaris plc is an English limited company (England No. 7023598) with its corporate headquarters located at 110 Cannon Street, London EC4N 6EU.
Statements contained in this press release that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include words or phrases such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “could,” “may,” “might,” “should,” “will” and similar words and specifically include statements involving expected financial performance; backlog; rig commitments and contracts; contract duration, status, terms and other contract commitments; contract cancellations; and general market, business and industry conditions, trends and outlook. The forward-looking statements contained in this press release are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including actions by regulatory authorities, rating agencies or other third parties; actions by our security holders; costs and difficulties related to the integration of Ensco and Rowan and the related impact on our financial results and performance; our ability to repay debt and the timing thereof; availability and terms of any financing; commodity price fluctuations, customer demand, new rig supply, downtime and other risks associated with offshore rig operations, relocations, severe weather or hurricanes; changes in worldwide rig supply and demand, competition and technology; future levels of offshore drilling activity; governmental action, civil unrest and political and economic uncertainties; terrorism, piracy and military action; risks inherent to shipyard rig construction, repair, maintenance or enhancement; possible cancellation, suspension or termination of drilling contracts as a result of mechanical difficulties, performance, customer finances, the decline or the perceived risk of a further decline in oil and/or natural gas prices, or other reasons, including terminations for convenience (without cause); our ability to enter into, and the terms of, future drilling contracts; any failure to execute definitive contracts following announcements of letters of intent, letters of award or other expected work commitments; the outcome of litigation, legal proceedings, investigations or other claims or contract disputes; governmental regulatory, legislative and permitting requirements affecting drilling operations; our ability to attract and retain skilled personnel on commercially reasonable terms; environmental or other liabilities, risks or losses; debt restrictions that may limit our liquidity and flexibility; and cybersecurity risks and threats. In addition to the numerous factors described above, you should also carefully read and consider “Item 1A. Risk Factors” in Part I and “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II of our most recent annual report on Form 10-K, as updated in our subsequent quarterly reports on Form 10-Q, which are available on the SEC’s website at www.sec.gov or on the Investor Relations section of our website at www.valaris.com. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements, except as required by law.