BORR - Valaris: Buy Despite Near-Term Jackup Market Headwinds

2024-04-02 16:09:53 ET

Summary

• Leading offshore driller Valaris Limited reported better-than-expected Q4 2023 results with profitability well ahead of management's guidance and consensus expectations.
• On the conference call, management reiterated expectations for Adjusted EBITDA to increase to a range of $500-$550 million this year, up from a paltry $141 million in 2023.
• However, material capital expenditure requirements are likely to result in very limited free cash flow generation.
• Management expects very limited impact from Saudi Arabia's decision to no longer pursue an increase in maximum oil production capacity.
• With floater dayrates holding up well and impact from recent developments at Saudi Aramco likely to be limited, I continue to expect 2025 being a year of major earnings inflection for Valaris and the industry as a whole. Consequently, I am reiterating my "Buy" rating on the shares with an unchanged price target of $90.

Note:

Valaris Limited ( VAL ) has been covered by me previously, so investors should view this as an update to my earlier articles on the company.

A few weeks ago, leading offshore driller Valaris Limited or "Valaris" reported better-than-expected Q4 2023 results:

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