LONDON, Oct. 30, 2019 /PRNewswire/ -- Valaris plc
(NYSE: VAL) ("Valaris" or the "Company") today reported a net loss
attributable to the Company of $197
million, or $1.00 per share,
for third quarter 2019 compared to net income of $406 million, or $2.09 per share, in second quarter 2019. The
Company reported adjusted EBITDA of $35
million in third quarter 2019 compared to $59 million in second quarter 2019, and an
adjusted loss of $1.27 per share in
third quarter 2019 versus an adjusted loss of $1.32 per share in the prior quarter.
Chief Executive Officer and President Tom Burke said, "Since closing our merger six
months ago, we have focused a considerable amount of attention on
executing our detailed integration plan, including our commitment
to deliver annual synergies of $165
million from the combination. I am pleased to report that
integration is going extremely well and annual run rate synergies
were ahead of schedule having reached approximately $115 million by the end of the third quarter. In
addition to these synergies, we are evaluating further initiatives
that would increase efficiencies and benefit operating cash flow in
the future."
Burke concluded, "Over the past three months, we have added
approximately $415 million to our
contracted revenue backlog, reflecting the success of our team's
efforts to win work for our rig fleet despite challenging market
conditions. These contract awards and extensions also demonstrate
the recent increase in customer activity for future offshore
projects, particularly for deepwater work beginning in mid-2020 and
beyond. We believe that our fleet of highest-specification
drillships, versatile semisubmersibles and modern jackups provides
us with the capabilities to meet a variety of customers' offshore
drilling requirements, and positions us well for additional
opportunities to add backlog."
Third Quarter Results
Revenues declined to $551 million
in third quarter 2019 from $584
million in the prior quarter primarily due to lower
utilization in the Floaters and Jackups segments as 12 rigs
completed contracts, which was partially offset by six rigs
commencing new contracts. The average day rate for the fleet
declined to $106,000 from
$110,000 in the prior quarter mostly
due to lower average day rates in the Floaters segment.
Contract drilling expense declined to $497 million in third quarter 2019 from
$500 million in the prior quarter due
to $8 million of merger transaction
costs in third quarter 2019 compared to $12
million in the second quarter. Adjusted for merger
transaction costs noted above, contract drilling expense of
$488 million was unchanged on a
sequential quarter basis as lower contract preparation costs were
offset by an $11 million
quarter-over-quarter increase in mobilization costs primarily due
to moving VALARIS JU-292 and VALARIS JU-117 in advance of each rig
beginning a new contract.
Third quarter 2019 results included a non-cash asset impairment
charge of $88 million related to
VALARIS 5006, which has been classified as held-for-sale and is
expected to be retired from the global drilling fleet. Second
quarter 2019 results included a $3
million lease impairment charge.
Depreciation expense increased to $163
million in third quarter 2019 from $158 million in the second quarter due to a full
quarter of depreciation for the legacy Rowan rigs and the addition
of VALARIS JU-123 to the active fleet during the third quarter.
General and administrative expense declined to $36 million from $81
million in the prior quarter mostly due to $8 million of merger transaction costs in third
quarter 2019 compared to $48 million
in the second quarter. Adjusted for merger transaction costs noted
above, general and administrative expense declined by $5 million primarily due to lower personnel costs
resulting from merger synergies.
Other income was $40 million in
third quarter 2019 compared to $597
million in the second quarter. The sequential quarter
comparison was influenced by a $194
million gain in third quarter 2019 resulting from the
repurchase of $952 million aggregate
principal amount of senior notes. Additionally, there was a
$53 million loss in third quarter
2019 from an adjustment to bargain purchase gain related to the
merger compared to a $713 million
bargain purchase gain in the second quarter. The adjustment to
bargain purchase gain reflects changes in the estimated fair values
of certain assets and liabilities, primarily related to long-lived
assets, deferred income taxes and uncertain tax positions. Interest
expense in third quarter 2019 was $114
million, net of $6 million of
interest that was capitalized, compared to interest expense of
$118 million in second quarter 2019,
net of $8 million of interest that
was capitalized. This sequential quarter decline was due to
interest savings from the debt repurchase noted above, partially
offset by lower capitalized interest due to VALARIS JU-123 joining
the active fleet.
Tax expense declined to $2 million
in third quarter 2019 from $33
million in the prior quarter. The third quarter 2019 tax
provision included $18 million of
discrete tax benefit mostly due to the impairment charge noted
above, compared to $1 million of
discrete tax benefit in second quarter 2019.
Segment Highlights
Floaters
Floater revenues declined to $270
million in third quarter 2019 from $296 million in the prior quarter. The sequential
quarter decline was primarily due to VALARIS 8504, VALARIS DS-4 and
VALARIS DPS-1 completing contracts during the third quarter,
partially offset by a full quarter of operations for VALARIS DS-9,
VALARIS DS-7 and VALARIS DS-15. Average day rates declined to
$215,000 from $218,000 in the second quarter and utilization
declined by five percentage points to 48%. Adjusted for
uncontracted rigs and planned downtime, operational utilization was
94% compared to 98% in the prior quarter.
Contract drilling expense increased to $250 million from $249
million in second quarter 2019 primarily due to a full
quarter of operations for three drillships that began contracts in
the prior-quarter period, which was partially offset by reduced
costs for rigs that recently completed contracts as noted
above.
Jackups
Jackup revenues declined to $218
million in third quarter 2019 from $229 million in the prior quarter primarily due
to fewer rig operating days as several rigs experienced idle
periods between contracts including VALARIS JU-290, VALARIS JU-292
and VALARIS JU-107. This was partially offset by VALARIS JU-123
commencing its maiden contract as well as new contracts starting
for VALARIS JU-100 and VALARIS JU-117 in the third quarter. Average
day rates were $78,000, consistent
with the prior quarter, while utilization declined by four
percentage points to 65%. Adjusted for uncontracted rigs and
planned downtime, operational utilization was 99%, equal to the
second quarter.
Contract drilling expense increased to $214 million in third quarter 2019 from
$212 million in the second quarter
due to mobilization costs noted above that were partially offset by
lower contract preparation costs.
ARO Drilling
ARO Drilling is a non-consolidated joint venture between Valaris
and Saudi Aramco to own, manage and operate drilling rigs. Revenues
increased to $138 million in third
quarter 2019 from $124 million in the
prior quarter and contract drilling expense increased to
$93 million from $79 million. These sequential quarter increases
were mostly due to ARO Drilling's financial results for the second
quarter reflecting operations only from the merger closing date on
April 11, 2019. Valaris accounts for
its 50% interest in ARO Drilling using the equity method of
accounting and only recognizes its portion of ARO Drilling's net
income, which is included in equity earnings of ARO Drilling in our
condensed consolidated statements of operations. Valaris recognized
a loss of $3.7 million in third
quarter 2019 compared to earnings of $0.6
million in second quarter 2019 due to the effect of
acquisition accounting and the resulting amortization of basis
differences that arose from the fair value adjustment of our
investment in ARO Drilling. Excluding the effect of this non-cash
amortization, Valaris' share of ARO Drilling's net income included
in equity earnings of ARO Drilling was $5.1
million and $8.4 million in
third quarter and second quarter 2019, respectively.
Other
Other is composed of ARO Drilling reimbursable and leased revenue
as well as revenue from managed drilling rigs. Revenues increased
to $64 million from $59 million in the prior quarter mostly due to a
full quarter of remibursable and leased revenue from ARO Drilling
following the completion of the merger during the second quarter.
Third quarter 2019 revenues included $23
million of ARO Drilling reimbursables, $20 million of ARO Drilling leased revenue and
$21 million for managed rigs.
Contract drilling expense declined to $33
million from $39 million in
second quarter 2019 primarily due to contract preparation costs in
the second quarter for two rigs prior to commencing contracts with
ARO Drilling.
|
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|
|
|
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(in millions of
$, except %)
|
Floaters
|
|
Jackups
|
|
ARO
Drilling
|
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Other
|
|
Reconciling
Items
|
|
Consolidated
Total
|
Q3
|
Q2
|
|
|
Q3
|
Q2
|
|
|
Q3
|
Q2
|
|
|
Q3
|
Q2
|
|
|
Q3
|
Q2
|
|
Q3
|
Q2
|
|
|
2019
|
2019
|
Chg
|
|
2019
|
2019
|
Chg
|
|
2019
|
2019
|
Chg
|
|
2019
|
2019
|
Chg
|
|
2019
|
2019
|
|
2019
|
2019
|
Chg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
269.8
|
295.6
|
(9)
|
%
|
|
217.8
|
229.2
|
(5)
|
%
|
|
138.4
|
123.8
|
12
|
%
|
|
63.7
|
59.1
|
8
|
%
|
|
(138.4)
|
(123.8)
|
|
551.3
|
583.9
|
(6)
|
%
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
drilling
|
250.3
|
249.2
|
0.4
|
%
|
|
213.5
|
212.2
|
1
|
%
|
|
92.7
|
78.9
|
17
|
%
|
|
32.7
|
38.9
|
(16)
|
%
|
|
(92.7)
|
(78.9)
|
|
496.5
|
500.3
|
(1)
|
%
|
|
Impairment
|
88.2
|
—
|
—
|
%
|
|
—
|
—
|
—
|
%
|
|
—
|
—
|
—
|
%
|
|
—
|
—
|
—
|
%
|
|
—
|
2.5
|
|
88.2
|
2.5
|
nm
|
|
Depreciation
|
98.1
|
98.4
|
(0.3)
|
%
|
|
59.0
|
55.5
|
6
|
%
|
|
14.6
|
12.4
|
18
|
%
|
|
—
|
—
|
—
|
%
|
|
(8.7)
|
(8.4)
|
|
163.0
|
157.9
|
3
|
%
|
|
General and
admin.
|
—
|
—
|
—
|
%
|
|
—
|
—
|
—
|
%
|
|
8.8
|
5.3
|
66
|
%
|
|
—
|
—
|
—
|
%
|
|
27.3
|
75.9
|
|
36.1
|
81.2
|
(56)
|
%
|
|
Equity in earnings of
ARO
|
—
|
—
|
—
|
%
|
|
—
|
—
|
—
|
%
|
|
—
|
—
|
—
|
|
—
|
—
|
—
|
%
|
|
(3.7)
|
0.6
|
|
(3.7)
|
0.6
|
—
|
%
|
Operating income
(loss)
|
(166.8)
|
(52.0)
|
221
|
%
|
|
(54.7)
|
(38.5)
|
42.1
|
%
|
|
22.3
|
27.2
|
(18)
|
%
|
|
31.0
|
20.2
|
53
|
%
|
|
(68.0)
|
(114.3)
|
|
(236.2)
|
(157.4)
|
50
|
%
|
Financial Position — September 30,
2019
- $2.3 billion of contracted
revenue backlog excluding bonus opportunities
- $1.6 billion of liquidity
-
- $0.1 billion of cash
- $1.5 billion available revolving
credit facility
- $6.7 billion of total
debt(1)
- $9.5 billion of Valaris
shareholders' equity
(1) Reflects principal value of debt outstanding and
balance drawn on revolving credit facility
Valaris will conduct a conference call to discuss third quarter
2019 results at 9:00 a.m. CDT
(10:00 a.m. EDT and 2:00 p.m. London) on Thursday,
October 31, 2019. The call will be webcast live at
www.valaris.com. Alternatively, callers may dial 1-855-239-3215
within the United States or
+1-412-542-4130 from outside the U.S. Please ask for the Valaris
conference call. It is recommended that participants call
approximately 10 minutes ahead of the scheduled start time.
A webcast replay and transcript of the call will be available at
www.valaris.com. A replay will also be available through
December 1, 2019 by dialing
1-877-344-7529 within the United
States or +1-412-317-0088 from outside the U.S. (conference
ID 10135944).
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 6 Chesterfield Gardens, London W1J 5BQ. To learn more, visit our
website at www.valaris.com.
Forward-Looking Statements
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; effective tax rates, day rates and backlog;
estimated rig availability; rig commitments and contracts; contract
duration, status, terms and other contract commitments; letters of
intent; scheduled delivery dates for rigs; the timing of delivery,
mobilization, contract commencement, relocation or other movement
of rigs; our intent to sell or scrap rigs; and general market,
business and industry conditions, trends and outlook. In addition,
statements included in this press release regarding the anticipated
benefits, opportunities, synergies and effects of the merger
between Ensco and Rowan are forward-looking statements. 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.
Investor & Media
Contacts:
|
Nick
Georgas
|
|
Senior Director -
Investor Relations and Communications
|
|
713-430-4607
|
|
|
|
Tim
Richardson
|
|
Manager - Investor
Relations
|
|
713-430-4490
|
VALARIS PLC AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
|
(In millions,
except per share amounts)
|
(Unaudited)
|
|
|
|
Three Months
Ended
|
|
|
September 30,
2019
|
|
June 30,
2019
|
|
|
|
|
|
|
|
|
|
OPERATING
REVENUES
|
$
|
551.3
|
|
$
|
583.9
|
|
|
|
|
OPERATING
EXPENSES
|
|
|
|
Contract drilling
(exclusive of depreciation)
|
496.5
|
|
500.3
|
Loss on
impairment
|
88.2
|
|
2.5
|
Depreciation
|
163.0
|
|
157.9
|
General and
administrative
|
36.1
|
|
81.2
|
Total operating
expenses
|
783.8
|
|
741.9
|
EQUITY IN EARNINGS OF
ARO DRILLING
|
(3.7)
|
|
0.6
|
OPERATING
LOSS
|
(236.2)
|
|
(157.4)
|
|
|
|
|
OTHER INCOME
(EXPENSE)
|
|
|
|
Interest
income
|
6.7
|
|
11.9
|
Interest expense,
net
|
(113.9)
|
|
(118.3)
|
Other, net
|
147.4
|
|
703.7
|
|
40.2
|
|
597.3
|
|
|
|
|
INCOME (LOSS) BEFORE
INCOME TAXES
|
(196.0)
|
|
439.9
|
|
|
|
|
PROVISION FOR INCOME
TAXES
|
1.5
|
|
32.6
|
|
|
|
|
NET INCOME
(LOSS)
|
(197.5)
|
|
407.3
|
|
|
|
|
NET (INCOME) LOSS
ATTRIBUTABLE TO NONCONTROLLING INTERESTS
|
0.4
|
|
(1.8)
|
|
|
|
|
NET INCOME (LOSS)
ATTRIBUTABLE TO VALARIS
|
$
|
(197.1)
|
|
$
|
405.5
|
LOSS PER SHARE -
BASIC AND DILUTED
|
$
|
(1.00)
|
|
$
|
2.09
|
WEIGHTED-AVERAGE
SHARES OUTSTANDING - BASIC AND DILUTED
|
197.6
|
|
188.6
|
VALARIS PLC AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
|
(In
millions)
|
|
|
September
30,
|
|
December
31,
|
|
2019
|
|
2018
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
CURRENT
ASSETS
|
|
|
|
Cash and cash
equivalents
|
$
|
129.5
|
|
$
|
275.1
|
Short-term
investments
|
—
|
|
329.0
|
Accounts receivable,
net
|
567.0
|
|
344.7
|
Other current
assets
|
487.5
|
|
360.9
|
Total current
assets
|
1,184.0
|
|
1,309.7
|
|
|
|
|
PROPERTY AND
EQUIPMENT, NET
|
15,250.7
|
|
12,616.2
|
|
|
|
|
LONG-TERM NOTES
RECEIVABLE FROM ARO DRILLING
|
452.9
|
|
—
|
|
|
|
|
INVESTMENT IN ARO
DRILLING
|
138.2
|
|
—
|
|
|
|
|
OTHER
ASSETS
|
204.8
|
|
97.8
|
|
$
|
17,230.6
|
|
$
|
14,023.7
|
|
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
|
|
|
Current maturities of
long-term debt
|
$
|
125.5
|
|
$
|
—
|
Current
liabilities
|
734.1
|
|
528.5
|
TOTAL CURRENT
LIABILITIES
|
859.6
|
|
528.5
|
|
|
|
|
LONG-TERM
DEBT
|
6,042.3
|
|
5,010.4
|
|
|
|
|
OTHER
LIABILITIES
|
798.2
|
|
396.0
|
|
|
|
|
TOTAL
EQUITY
|
9,530.5
|
|
8,088.8
|
|
$
|
17,230.6
|
|
$
|
14,023.7
|
VALARIS PLC AND
SUBSIDIARIES
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In
millions)
|
(unaudited)
|
|
|
Nine Months
Ended
|
|
September
30,
|
|
2019
|
|
2018
|
|
|
|
|
OPERATING
ACTIVITIES
|
|
|
|
Net income
(loss)
|
$
|
21.8
|
|
$
|
(433.5)
|
Adjustments to
reconcile net income (loss) to net cash used in operating
activities of continuing operations:
|
|
|
|
Gain on bargain
purchase
|
(659.8)
|
|
(1.8)
|
Depreciation
expense
|
445.9
|
|
356.5
|
(Gain) loss on debt
extinguishment
|
(194.1)
|
|
19.0
|
Loss on
impairment
|
90.7
|
|
—
|
Share-based
compensation expense
|
28.7
|
|
21.6
|
Amortization,
net
|
(18.1)
|
|
(30.7)
|
Deferred income tax
expense (benefit)
|
(3.8)
|
|
44.9
|
Contributions to
pension plans
|
(8.0)
|
|
—
|
Equity in earnings of
ARO Drilling
|
3.1
|
|
—
|
Loss from
discontinued operations, net
|
—
|
|
8.1
|
Other
|
13.4
|
|
(5.3)
|
Changes in operating
assets and liabilities
|
(147.3)
|
|
(61.0)
|
Net cash used in
operating activities of continuing operations
|
(427.5)
|
|
(82.2)
|
INVESTING
ACTIVITIES
|
|
|
|
Rowan cash
acquired
|
931.9
|
|
—
|
Maturities of
short-term investments
|
474.0
|
|
675.0
|
Additions to property
and equipment
|
(174.2)
|
|
(378.7)
|
Purchases of
short-term investments
|
(145.0)
|
|
(669.0)
|
Other
|
4.9
|
|
10.0
|
Net cash provided by
(used in) investing activities of continuing operations
|
1,091.6
|
|
(362.7)
|
FINANCING
ACTIVITIES
|
|
|
|
Reduction of
long-term borrowings
|
(928.1)
|
|
(771.2)
|
Borrowings on credit
facility
|
175.0
|
|
—
|
Repayments of credit
facility borrowings
|
(34.4)
|
|
—
|
Debt solicitation
fees
|
(9.4)
|
|
—
|
Cash dividends
paid
|
(4.5)
|
|
(13.4)
|
Proceeds from
issuance of senior notes
|
—
|
|
1,000.0
|
Debt issuance
costs
|
—
|
|
(17.0)
|
Other
|
(7.7)
|
|
(4.7)
|
Net cash provided by
(used in) financing activities
|
(809.1)
|
|
193.7
|
Net cash provided by
discontinued operations
|
—
|
|
2.5
|
Effect of exchange
rate changes on cash and cash equivalents
|
(.6)
|
|
(.7)
|
DECREASE IN CASH AND
CASH EQUIVALENTS
|
(145.6)
|
|
(249.4)
|
CASH AND CASH
EQUIVALENTS, BEGINNING OF PERIOD
|
275.1
|
|
445.4
|
CASH AND CASH
EQUIVALENTS, END OF PERIOD
|
$
|
129.5
|
|
$
|
196.0
|
VALARIS PLC AND
SUBSIDIARIES
|
OPERATING
STATISTICS
|
(Unaudited)
|
|
|
|
Third
Quarter
|
|
Second
Quarter
|
|
|
2019
|
|
2018
|
|
2019
|
|
|
|
|
|
|
|
Rig
Utilization(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floaters
|
|
48
|
%
|
|
46
|
%
|
|
53
|
%
|
Jackups
|
|
65
|
%
|
|
66
|
%
|
|
69
|
%
|
Other(2)
|
|
100
|
%
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
Total
|
|
64
|
%
|
|
59
|
%
|
|
67
|
%
|
|
|
|
|
|
|
|
ARO
Drilling
|
|
89
|
%
|
|
—
|
|
97
|
%
|
|
|
|
|
|
|
|
Average Day
Rates(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Floaters
|
|
$
|
215,157
|
|
$
|
239,196
|
|
$
|
218,339
|
Jackups
|
|
77,888
|
|
79,921
|
|
78,229
|
Other(2)
|
|
47,553
|
|
80,458
|
|
50,347
|
|
|
|
|
|
|
|
Total
|
|
$
|
106,157
|
|
$
|
132,348
|
|
$
|
110,063
|
|
|
|
|
|
|
|
ARO
Drilling
|
|
$
|
109,862
|
|
$
|
—
|
|
$
|
112,906
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Rig utilization is
derived by dividing the number of days under contract by the number
of days in the period. Days under contract equals the total number
of days that rigs have earned and recognized day rate revenue,
including days associated with early contract terminations,
compensated downtime and mobilizations. When revenue is earned but
is deferred and amortized over a future period, for example when a
rig earns revenue while mobilizing to commence a new contract or
while being upgraded in a shipyard, the related days are excluded
from days under contract.
For newly-constructed or acquired rigs, the number of days in the
period begins upon commencement of drilling operations for rigs
with a contract or when the rig becomes available for drilling
operations for rigs without a
contract.
|
|
|
(2)
|
Includes our two
management services contracts and our nine rigs leased to ARO
Drilling under bareboat charter contracts (one of which commenced
drilling operations during the fourth quarter of 2019).
|
|
|
(3)
|
Average day rates are
derived by dividing contract drilling revenues, adjusted to exclude
certain types of non-recurring reimbursable revenues, lump-sum
revenues and revenues attributable to amortization of drilling
contract intangibles, by the aggregate number of contract days,
adjusted to exclude contract days associated with certain
mobilizations, demobilizations, shipyard contracts and standby
contracts.
|
ARO
DRILLING
|
CONDENSED BALANCE
SHEET INFORMATION
|
(In
millions)
|
(Unaudited)
|
|
|
September 30,
2019
|
Current
assets
|
$
|
452.8
|
Non-current
assets
|
887.1
|
Total
assets
|
$
|
1,339.9
|
|
|
Current
liabilities
|
$
|
232.4
|
Non-current
liabilities
|
1,021.7
|
Total
liabilities
|
$
|
1,254.1
|
Non-GAAP Financial Measures (Unaudited)
To supplement Valaris condensed consolidated financial
statements presented on a GAAP basis, this press release provides
investors with adjusted loss per share and adjusted EBITDA, which
are non-GAAP measures.
We believe that adjusted loss per share provides meaningful
supplemental information regarding the company's performance by
excluding certain charges that may not be indicative of Valaris
ongoing operating results. This allows investors and others to
better compare financial results across accounting periods and to
those of peer companies, and to better understand the long-term
performance of our business.
Valaris defines "Adjusted EBITDA" as net income (loss) before
income (loss) from discontinued operations, other income (expense),
income tax expense (benefit), interest expense, depreciation,
amortization, loss on impairment, equity in earnings of ARO
Drilling, (gain) loss on asset disposals, transaction costs and
significant non-recurring items. Adjusted EBITDA is a non-GAAP
measure that our management uses to facilitate period-to-period
comparisons of our core operating performance and to evaluate our
long-term financial performance against that of our peers. We
believe that this measure is useful to investors and analysts in
allowing for greater transparency of our core operating performance
and makes it easier to compare our results with those of other
companies within our industry. Adjusted EBITDA should not be
considered (a) in isolation of, or as a substitute for, net income
(loss), (b) as an indication of cash flows from operating
activities or (c) as a measure of liquidity. Adjusted EBITDA may
not be comparable to other similarly titled measures reported by
other companies.
Non-GAAP financial measures should be considered as a supplement
to, and not as a substitute for, or superior to, financial measures
prepared in accordance with GAAP.
Adjusted Loss Per Share
The table below reconciles earnings (loss) per share, as
calculated in accordance with GAAP, to adjusted loss per share for
the quarters ended September 30, 2019 and June 30,
2019. Adjusted loss per share excludes the gain on debt
repurchases, impairment expense, bargain purchase adjustment
(gain), discrete tax items, transaction costs related to the
Valaris merger and debt solicitation fees. Immediately
following the completion of the Valaris merger, every four existing
Class A ordinary shares were consolidated into one Class A ordinary
share (the "Reverse Stock Split"). All per share data below has
been retroactively adjusted to reflect the Reverse Stock Split.
EARNINGS (LOSS)
PER SHARE RECONCILIATION:
|
Three Months
Ended
|
|
|
|
September 30,
2019
|
|
June 30,
2019
|
|
|
Net Income
(Loss)
attributable to
Valaris shares(1)
|
|
Earnings
(loss) per
share
|
|
Net Income
(Loss)
attributable
to Valaris
shares(1)
|
|
Earnings
(Loss) per
share
|
|
GAAP
|
$
|
(197.1)
|
|
$
|
(1.00)
|
|
$
|
393.4
|
|
$
|
2.09
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
Gain on debt
repurchases
|
(194.1)
|
|
(0.98)
|
|
—
|
|
—
|
|
Impairment
expense
|
88.2
|
|
0.45
|
|
2.5
|
|
0.01
|
|
Bargain purchase
adjustment (gain) (2)
|
53.0
|
|
0.27
|
|
(712.8)
|
|
(3.78)
|
|
Discrete tax
items
|
(18.4)
|
|
(0.09)
|
|
(1.2)
|
|
(0.01)
|
|
Transaction
costs
|
16.0
|
|
0.08
|
|
60.1
|
|
0.32
|
|
Debt solicitation
fees
|
—
|
|
—
|
|
8.9
|
|
0.05
|
|
Adjusted
|
$
|
(252.4)
|
|
$
|
(1.27)
|
|
$
|
(249.1)
|
|
$
|
(1.32)
|
|
|
|
(1)
|
Net income (loss)
attributable to Valaris shares is adjusted for net income allocated
to participating securities under the two-class method of $12.1
million for the three-month period ended June 30, 2019. No
income was allocated to participating securities under the
two-class method for the three-month period ended
September 30, 2019. Net income (loss) attributable to Valaris
shares excludes (income) loss attributable to noncontrolling
interest of $0.4 million and $(1.8) million for the
three-month periods ended September 30, 2019 and
June 30, 2019, respectively.
|
|
|
(2)
|
The bargain purchase
adjustment recognized during third quarter 2019 is comprised of
measurement period adjustments related to purchase accounting for
the Valaris merger.
|
Reconciliation of Net Income (loss) to Adjusted
EBITDA
A reconciliation of net Income (loss) as reported to
adjusted EBITDA for the quarters ended September 30, 2019 and
June 30, 2019 is included in the tables below (in
millions):
|
Three Months
Ended
|
|
September 30,
2019
|
|
June 30,
2019
|
|
|
|
|
Net income
(loss)
|
$
|
(197.5)
|
|
$
|
407.3
|
Add
(subtract):
|
|
|
|
Income tax
expense
|
1.5
|
|
32.6
|
Interest
expense
|
113.9
|
|
118.3
|
Other (income)
expense
|
(154.1)
|
|
(715.6)
|
Operating
loss
|
(236.2)
|
|
(157.4)
|
Add
(subtract):
|
|
|
|
Depreciation
expense
|
163.0
|
|
157.9
|
Amortization, net
(1)
|
(0.8)
|
|
(2.8)
|
Loss on
impairment
|
88.2
|
|
2.5
|
Equity in earnings of
ARO Drilling
|
3.7
|
|
(0.6)
|
(Gain) loss on asset
disposals
|
1.2
|
|
(0.7)
|
Transaction
costs
|
16.0
|
|
60.1
|
Adjusted
EBITDA
|
$
|
35.1
|
|
$
|
59.0
|
|
|
(1)
|
Amortization,
net, includes amortization during the indicated period for deferred
mobilization revenues and costs, deferred capital upgrade revenues,
deferred certification costs, intangible amortization and other
amortization.
|
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SOURCE Valaris plc