Fresh start for Valaris with new contracts and three stacked rigs returning to work

Offshore drilling contractor Valaris is seeing early signs of recovery in rig demand evidenced by new contracts for its fleet of drillships, semi-submersible rigs, and jack-ups, which will result in three rigs coming back from the stacked to operational mode.

Valaris said in its 2Q 2021 report on Tuesday that, in the three months following its emergence from Chapter 11, it had won more than 20 new contracts or extensions with an associated contract backlog totalling over $1.3 billion.

Valaris emerged from its Chapter 11 bankruptcy at the end of April 2021. This means that, upon emergence, Valaris applied a fresh start accounting, which resulted in Valaris becoming a new reporting entity. Results for the quarter are presented separately for the predecessor period from 1 April 2021 through 30 April 2021 and the successor period from 1 May through 30 June 2021.

Revenues were $203 million and $90 million for the Successor and Predecessor periods, respectively. Combined revenues declined to $293 million in the second quarter of 2021 from $307 million in the first quarter.

President and Chief Executive Officer, Tom Burke, said: “During the three months since emergence, our customers awarded Valaris more than 20 new contracts or extensions with associated contract backlog totalling over $1.3 billion”.

Burke concluded, “We are beginning to see early signs of a recovery in customer demand following the downturn caused by the Covid-19 pandemic, evidenced by our contracting activity over the past few months. As a result, Valaris is well-positioned to benefit from the opportunities we see in the market today. We will continue to focus on winning work for our active fleet and returning some of our high-quality stacked rigs to work as suitable opportunities arise”.

As revealed by Burke, the rig owner secured about 20 new contracts and extensions since its Chapter 11 emergence. Some of these have been disclosed previously, but others have not. Those not disclosed during the period were reported on in Valaris’ fleet status report on Tuesday.

In the report, Valaris said that the 2013-built drillship Valaris DS-11 has been awarded an eight-well contract with TotalEnergies in the U.S. Gulf of Mexico. The contract has an expected duration of three-and-a-half years. It is expected to start in July 2024 and end in December 2027.

The rig is currently stacked in Spain. The contract contains early termination provisions should the project not receive a final investment decision (FID) from the customer.

Valaris has also secured a new deal for another drillship stacked in Spain, the Valaris DS-16 (Resolute). The rig has won a two-year contract with Occidental in the U.S. Gulf of Mexico from May 2022 to April 2024.

Furthermore, the 2017-built drillship Valaris DS-10 has won two contracts in Nigeria, one with TotalEnergies and the other with Shell. 

TotalEnergies has awarded a one-well contract to the drillship with an estimated duration of 92 days from July 2021 to October 2021. On the other hand, Shell awarded a six-month contract from March 2022 to September 2022. 

The Valaris DPS-1 awarded a 420-day contract with Woodside offshore Australia, which is expected to start upon completion of the previous campaign.

Namely, the DPS-1 was in July 2021 awarded a 16-well contract with Woodside offshore Australia. The contract is expected to begin late in the first quarter or early in the second quarter of 2022 with an estimated duration of 300 days. 

The rig is currently warm stacked in Malaysia. Following these two contract awards from Woodside, the rig will work for the Australian energy giant starting from March 2022 until January 2023 and from then until March 2024. The contract starting in January 2023 is subject to a final investment decision (FID) by the customer. 

Also in Australia, the Valaris MS-1 semi-sub has been awarded a one-month contract with Santos from April 2022 to May 2022. The rig has been under contract with Santos since May 2021 until October this year. After that, this latest one-month contract will follow, which is then followed by another stretch of the contract until July 2023. 

In the jack-up segment, the Valaris JU-108 rig has had its contract with Saudi Aramco extended by one year from November 2021 to November 2022. In addition, the contract with Saudi Aramco for the JU-141 has been extended by 180 days from August 2021 to February 2022.

The Valaris JU-290 (Viking) or Valaris JU-291 (Stavanger) have been awarded a three-well contract with Repsol for operations offshore Norway. The contract is expected to start in mid-2022 with an estimated duration of 167 days. 

The contract with Repsol can be performed by either of these two rigs. The first rig is under contract with Lundin until October 2021 and after that with Spirit Energy from November until December 2021. The contract with Repsol is planned to start in May 2022 and last until October 2022. 

The second rig, the JU-291, has been working for Equinor in Norway since October 2019. The contract is expected to be completed in March 2022.

Valaris has also secured extensions for its bareboat charter agreement with ARO Drilling, a joint venture between Saudi Aramco and Valaris, for two rigs. 

The charter for the Valaris JU-146 (EXL IV) has been extended by 95 days from September 2021 to December 2021 while the charter for the Valaris JU-143 (EXL I) has been extended by 60 days from November 2021 to December 2021.

ARO Drilling’s contracts with Saudi Aramco for both of these rigs have been extended for the same period. 

Two jack-ups owned by ARO Drilling – ARO 3003 (Scooter Yeargain) and ARO 3004 (Hank Boswell) – have both seen their contracts with Saudi Aramco extended by 90 days from October 2021 to December 2021.