Valaris DS-14 drillship; Source: Valaris

Two newbuild drillships join Valaris rig fleet

Offshore drilling contractor Valaris Limited has taken delivery of two newbuild drillships from Daewoo Shipbuilding & Marine Engineering (DSME), after exercising the option to buy them.

Valaris DS-14 drillship; Source: Valaris

Valaris had the option to purchase two newbuild drillships, Valaris DS-13 and Valaris DS-14, by the end of the year from a shipyard in South Korea. Back in March 2021, the offshore drilling contractor reached an agreement with DSME to amend the contracts in a bid to delay the delivery of the rigs.

In August 2023, Valaris Limited and its wholly-owned subsidiary, Valaris Finance Company LLC, disclosed a pricing of $400 million upsized private placement of an additional 8.375% senior secured second lien notes due 2030. The net proceeds of the offering were anticipated to be used to finance the purchase of two drillships from DSME.

Both of these drillships are of the DSME 12000 design. The final payments for the Valaris DS-13 and Valaris DS-14 were estimated to be approximately $119 million and $218 million, respectively, assuming a December 31, 2023, delivery.

According to Valaris, these newbuild drillships were acquired for an aggregate purchase price of around $337 million. The Valaris DS-13 and DS-14 will be mobilized from South Korea to Las Palmas, Spain, where the rigs will be stacked until they are contracted for work.

Anton Dibowitz, Valaris’ President and Chief Executive Officer, commented: “We are delighted to add these two rigs, the highest specification drillships remaining at the South Korean shipyards, to our fleet. These additions increase our drillship fleet to 13 rigs, reinforcing its position as one of the most technically capable in the industry.”

Furthermore, the purchase of the rigs is expected to increase the firm’s 4Q 2023 capital expenditures by around $355 million, representing the purchase price for the rigs and costs associated with preparing them for the move from South Korea to Las Palmas. In addition, Valaris anticipates 2024 capital expenditures of about $35 million primarily related to mobilization costs.

Dibowitz added: “Following the successful contracting of six of our stacked drillships since mid-2021, the purchase of Valaris DS-13 and DS-14 increases our operating leverage to the attractive ultra-deepwater floater market.

“Based on our positive market outlook, growing future demand and strong customer interest in these rigs, we believe that the purchase of these high specification drillships at compelling prices will generate attractive returns.”

Valaris revealed a plethora of new contracts and extensions in its fleet status report from November 1, 2023. This entails deals for four floaters and five jack-ups with TotalEnergies, Petrobras, ExxonMobil, Eni, BP, TAQA, and Perenco, enabling the rig owner to carry out operations in Brazil, Angola, Mexico, Trinidad, Indonesia, the Netherlands, and the UK.

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Thanks to the new series of rig deals with an associated contract backlog of about $480 million, excluding lump sum payments such as mobilization fees and capital reimbursements, the company’s total contract backlog rose to $3.2 billion at the end of October 2023.