Valaris books first-quarter loss, looks to emerge from Chapter 11

Offshore drilling contractor Valaris booked a $910 million loss in the first quarter of the year but hopes to re-emerge from bankruptcy sooner rather than later.

Valaris on Wednesday reported a net loss of $910 million for the first quarter of 2021 compared to a net loss of $71 million in the fourth quarter of 2020.

Revenues increased to $307 million in the first quarter of 2021 from $297 million in the fourth quarter of 2020. Excluding reimbursable items, revenues increased to $277 million in the first quarter of 2021 from $250 million in the fourth quarter 2020 primarily due to a negative adjustment in the prior quarter resulting from the modification of our charter agreements with ARO Drilling.

Contract drilling expense declined to $252 million in the first quarter of 2021 from $305 million in the prior quarter. Excluding reimbursable items, contract drilling expense declined to $237 million in the first quarter of 2021 from $274 million in the prior quarter primarily due to fewer operating days across the fleet and lower holding costs for our stacked and marketed assets that are currently without contracts.

First-quarter 2021 results included a non-cash asset impairment charge of $757 million related to two floaters. The depreciation expense of $122 million in the first quarter of 2021 was in line with the prior quarter.

In the floater segment, Valaris saw a decline in average day rates to $198,000 from $206,000 in the prior quarter. On the other hand, utilisation increased by three percentage points to 29 per cent.

As for jack-ups, average day rates increased to $95,000 in the first quarter of 2021 compared to $86,000 in the prior quarter, while the utilisation rate of those rigs increased by five percentage points to 50 per cent.

Worth noting, first quarter 2021 results included a non-cash asset impairment charge of $757 million related to two floaters.

CEO and President of Valaris Tom Burke said: “This month marks two years since the Valaris merger. We successfully integrated the two predecessor companies during this period, then subsequently transformed our Company to improve its service delivery capabilities and cost structure.

“As a result of these efforts, Valaris now has a higher focus on safe and reliable operations with a leaner and more flexible cost structure that is fit for purpose and complements its high-quality modern fleet of rigs and highly skilled workforce.

“We are beginning to see early signs of a recovery in customer demand following the downturn caused by the Covid-19 pandemic, for which we have been reactivating rigs, including most recently one of our high-specification heavy duty harsh environment jack-up rigs in advance of a long-term contract commencing later this year.

“We look forward to soon emerging from Chapter 11 as a strong and stable company ready to take advantage of opportunities as they arise”.