Valaris posts $406 million profit in first quarter after merger

Offshore drilling contractor Valaris, formerly known as EnscoRowan, booked a large profit in the second quarter of the year and its first following the completion of a merger between Ensco and Rowan helped by the addition of revenues from Rowan legacy rigs, partly offset by the sale of two Ensco rigs. 

Drilling contractors Ensco and Rowan completed their merger last April, creating the world’s largest offshore drilling company by fleet size. The newly-formed company EnscoRowan then in early July decided to change its name to Valaris.

Valaris on Wednesday reported net income attributable to the company of $406 million for second quarter 2019 compared to a net loss of $151 million a year ago. Adjusted EBITDA was $59 million in second quarter 2019 compared to $81 million in the year-ago period.

The company’s revenues were $584 million in the second quarter 2019 compared to $459 million a year ago primarily due to the addition of $147 million of revenue from legacy Rowan rigs, partially offset by the sale of Ensco 6001 and Ensco 80, which operated in the year-ago period.

Looking at segments, floater revenues increased to $296 million in second quarter 2019 from $285 million a year ago primarily due to the addition of $35 million of revenue from legacy Rowan rigs, partially offset by the sale of Ensco 6001, which operated in the year-ago period. Average day rates declined to $218,000 from $238,000 in second quarter 2018, while utilization of 53% was unchanged from a year ago.

Jack-up revenues increased to $229 million in second quarter 2019 from $159 million a year ago primarily due to the addition of $73 million of revenue from legacy Rowan rigs, partially offset by the sale of Ensco 80, which operated in the year-ago period. Average day rates were $78,000, consistent with the prior-year period, while utilization increased by three percentage points to 69%.

Contract drilling expense increased to $500 million in second quarter 2019 from $344 million a year ago primarily due to $133 million of costs associated with legacy Rowan rigs and $12 million of integration-related transaction costs.

Valaris to deliver $165M in combinational synergies

Chief Executive Officer and President, Tom Burke, said, “Following the closing of our merger in April, our focus has been on executing our detailed integration plan to deliver at least $165 million of combinational synergies. We have made significant progress thus far, completing more than 50% of all integration-related activities and achieving approximately $80 million of annual run rate expense synergies by the end of the second quarter.

“We also recently changed the name of the company to Valaris to help accelerate cultural alignment as part of our broader organizational transition as a larger, more diverse company. Most importantly, we delivered strong operational and safety performance to customers with operational utilization of 98% for second quarter 2019 and a total recordable incident rate through the first half of 2019 that was nearly 20% better than the industry average.

Burke concluded, “The recovery for the offshore drilling industry continues to steadily progress, albeit at a slower pace than we expected when we began the year. This is due to a more gradual improvement in the global floater market where, despite higher spot utilization, we anticipate limited further pricing improvement in the near-term due to a number of rigs completing contracts and recontracting opportunities with relatively short durations.

“By contrast, we have observed broad-based modest improvements in the jack-up market as evidenced by our recent contracting success for harsh- and benign-environment assets across a wide range of geographies. As we look ahead, our focus will remain on winning new work for our active, highest-specification rigs so that we can bridge these assets to better market conditions.”

Offshore Energy Today Staff

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