Valaris Limited Price & Performance (VAL)

We issued our press release, which is available on our website valaris.com. Any comments we make today about expectations are forward looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations. Please refer to our press release and SEC filings on our website that define forward looking statements and list risk factors and other events that could impact future results. Also please note that the company undertakes no duty to update forward looking statements.

During this call, we will refer to GAAP and non GAAP financial measures. Please see the press release on our website for additional information and required reconciliations. Earlier this week, we issued our most recent fleet status report, [indiscernible] which provides details on our rig fleet, including contract awards and fleet management actions. Now I'll turn the call over to Anton Dibovitz, President and CEO.

Thanks, Nick, and good morning and afternoon to everyone. During today's call, I will provide an overview of our performance during the quarter, deliver an update on the offshore drilling market. And outline our contracting and fleet management strategy to drive long term value creation for our shareholders. Will then hand the call over to Matt to discuss the floater and jackup markets in more detail. Provide some additional color on our contracting outlook. After that, Chris will discuss our financial results and guidance. Before I finish with some closing comments. To begin, I want to highlight a few key points. First, we continue to execute operation our financial results. Second, contracting outlook for 2026 and beyond is strong. For high specification assets. And we are focused on securing attractive long term contracts Third, we are willing to be patient to find the right jobs for our rigs. We will actively lower costs and idle rigs until the right job is available. And we will not hesitate to remove rigs from our fleet when it makes economic sense to do so. Starting with operations, we delivered fleet wide revenue efficient [indiscernible] and 97% for the full year. This marks an improvement over last year's results, and 2024 was the fourth consecutive year we have delivered revenue We also had outstanding safety performance in 2024, achieving improvements in key safety metrics and receiving safety awards from both IADC and the Center for Offshore Safety.

Were recently recognized by the IADC Brazil chapter its 2024 safety award with three rigs DS4, DS8 and DS17, each completing the year with no recordable incidents. A great achievement attributable to all involved. In addition to our rigs offshore Brazil, Polaris 115, which is working with Shell in Brunei, recently celebrated four years with ultra recordable in [indiscernible] These results demonstrate our focus on delivering outstanding safe and operating performance which is essential to building long standing customer relationships. As always, we are focused on the things that we can control, [indiscernible] every member of the Valaris team around the world for their dedication hard work and continued focus on operating safely and efficient for our customers. Moving to our financial performance. Adjusted EBITDA was $142,000,000 in the fourth quarter, down slightly from $150,000,000 in the third quarter. Revenues which were at the upper end of our guidance range due to solid operating performance. And EBITDA was slightly below the midpoint of our guidance range due to higher contract drilling expense resulting from a non cash accrual for a legal matter. During the fourth quarter, we generated $13,000,000 in free cash flow, in addition to $111,000,000 in third quarter.

And we returned all this free cash flow to shareholders through share repurchases during the second half of the year. [indiscernible] Chris will provide more details on our financial results and 2025 guidance a little later. Turning now to the broader offshore drilling market. In terms of fundamentals, we global demand for hydrocarbons continues to increase and we expect offshore production particularly deepwater, to play an increasingly important role in providing [indiscernible] reliable and affordable energy to meet the world's growing energy needs. Many of the largest E and P companies have recently announced their CapEx plan for the coming years and a number of them are allocating a greater share of budgets towards traditional projects focused on oil and gas production. Versus new energy sources. This bodes well for offshore project sanctioning, especially deepwater programs as the size of fields, compelling economics, and lower carbon emissions intensity make these projects attractive relative to other sources of production. We see a robust pipeline of deepwater project approvals in 2026 and 2027, which are expected to be at their highest level in more than a decade. And more than double the project approvals anticipated for 2024 and 2025 This increase in project sanctioning is expected to spur growth in deepwater rig demand through the end of the decade, support the longevity of the up cycle that began in 2021.

In the nearer term, offshore CapEx continues to increase, although the pace of growth slowed in 2024 and this trend is expected to continue in 2025. Which has slowed the pace of rig contracting and resulted in a modest decline in global floater utilization in 2024. We continue prudently managing our fleet in response to market [indiscernible] And we will retire or divest rigs when the expected economic benefit for an asset does not justify its costs. Consistent with this approach, we recently announced plans to retire three semi submersibles from our fleet. Including one of our active rigs, [indiscernible] last worked in the third quarter twenty twenty four.

We have decided to retire DPS5 since we do not have visibility into sufficient near term work that would support keeping the rig warm stacked.

And we are not preservation stacking the rig as we see limited contract opportunities with a duration that would justify the cost of a future reactivation. For the same reason, we have also decided to retire Sister Rex DPS three which have been stacked for several years. We expect these rigs will be retired from the global drilling supply and repurposed for alternative uses scrapped. These actions reduce our costs, benefit our cash flow and further focus our fleet on high specification assets. Over the past five years, we have significantly high graded our fleet retiring a total of 12 floaters, more than any other offshore driller. Our go forward fleet of 15 floaters includes twelve seventh generation drillships that position us for contracting success. Customers have shown a clear preference for these modern technically capable assets with utilization meaningfully higher for seventh generation drillships than the rest the global benign environment floater fleet and day rates for longer term jobs have remained in the mid to high 400,000. We expect customers will continue to favor these as the combination of technical specifications such as Jull Derricks with high hook load capacity high capacity thrusters, and two blowout preventors offer efficiencies that are amplified over multi well programs.

The contracting outlook for 2026 and beyond remains strong, these high specification assets. And with such a constructive environment, we are focused on securing attractive long term contracts for our active fleet. Particularly those opportunities with customers or in basins where we have visibility into several years of future work. We are currently tracking more than 20 floater opportunities with duration of at least one year. And we expect this number will grow to nearly 30 when Petrobras launches expected new tenders aimed at re contracting its near term role In general, we expect long term contracts will be awarded approximately nine to twelve months ahead of their scheduled start dates. So we anticipate that the flow of contract awards will pick up pace around the middle of this year, given expectations for when these programs will begin. Moving to shallow water, average day rates for key markets where we operate have remained relatively firm, and we continue to secure solid contracts for our rigs working offshore Australia, Trinidad and in the North Sea that require high spec or harsh environment units. One recent example is our multiyear contract for Valeris D'Aanger in the North Sea, which added $75,000,000 of contract backlog and further enhances our contract coverage in the region.

In addition, we signed a contract for the $2.49 a strong market for us where we are achieving premium dayrates. Trinidad is the largest oil and gas producer in The Caribbean and the country is focused on increasing its gas production which has declined by more than a third from its peak in 2010. The energy sector has played an integral role in the long term economic growth of the country, and we look forward to playing our part in its future development. I also want to note that we recently sold Valeris 75, a twenty five year old jackup that had been stocked for five years. Which was another step we took to high grade our fleet. Our jackups remain an important contributor to our overall financial performance, and we have grown contract backlog for this segment by more than 75% over the past two years. We have good contract coverage across our jackup segment in 2025, and we expect to see year over year growth in both operating days and average day rates. In summary, we are steadfast in our belief that oil and gas production will play an important role in providing secure, reliable and affordable energy to the world.

And that Polaris is well positioned to help meet the need and drive long term value creation for our shareholders by virtue of a high specification fleet and excellent safety and operational track record. Now I hand the call over to Matt. Thanks, Anton, and good morning and afternoon, everyone. Going to provide commentary on the major floater and jackup regions where we operate. And finish with an update on our outlook for rigs that have available days in 2025. Before I do this, I wanted to start by highlighting recent contract [indiscernible] Since our third quarter earnings call, we've secured new contracts and extensions with associated contract backlog of approximately $120,000,000 for jackups across multiple locations including The UK, Trinidad and Australia.

These awards included a multi year contract for the Stavanger in the North Sea, which will keep the rig busy into 2027. And additional backlog for the two forty seven and two forty nine offshore Australia and Trinidad respectively.

At day rates in the mid to high 100,000 In terms of the major floater and jackup regions in which we operate, consistent with prior quarters, we continue to see the greatest number of floater opportunities for programs offshore Africa where we are tracking more than 10 long term opportunities with commencement dates starting from late twenty twenty five to 2027. Including work offshore Nigeria, Egypt, Ivory Coast Mozambique, Nigeria is expected to increase its deepwater rig count from one At present, to three by late twenty twenty six or early twenty twenty seven.

There are three multiyear programs with IOCs currently being tendered. And we expect to see a contract award for one of these tenders soon with the other two following later this year. The outlook for activity offshore Egypt has also picked up. As recent exploration success on projects drilled by Volaris drillships and an improved investment climate for exploration and production activities is expected to lead to future opportunities with major IOCs. As we look out a few years, we also expect to see increased activity in promising frontier plays including longer term developments offshore Mozambique and Namibia. Polaris has a long and successful track record of operations offshore Africa and we anticipate that growth in development activity around the continent will be the main driver of incremental floater demand over the next few years.

Offshore Brazil, Petrobras has recently awarded six long term contracts across its CEPIA program and its call for tender. And these programs will keep many rigs occupied into 2028 and 2029. Demonstrating the longevity of customer demand [indiscernible] Based on recent commentary, anticipate that Petrobras' rig count will remain stable for the foreseeable future and we expect to see further tenders issued this year to re contract rig capacity due to complete their existing programs in 2025 and 2026. We expect Brazil to continue to be the largest market for benign environment floaters. With potential for incremental demand from IOC programs such as shells, Gato Damato project which is expected to reach FID Moving to The U. S. Gulf, we expect this market to remain fairly balanced. With demand largely met by existing supply in the region. As compared to other regions, contracting The U. S. Gulf is predominantly done through direct negotiations as opposed So while there is less visibility to the outside world on customer demand here, we continue to see high levels of customer interest for high specification drillships. Outside of the Golden Triangle, there are new programs offshore Malaysia and Indonesia that will require drillships to satisfy this demand.

In terms of the jackup market, certain benign environment regions became increasingly competitive in 2024 as rigs left Saudi. Although most of these displaced units have now secured work in other regions. Key markets where we operate such as Australia, Trinidad and the North Sea have been insulated from this. And we've continued to secure contracts solid dayrates in these regions. In the North Sea, market conditions remain balanced. And we are still tracking around 10 opportunities for work with IOCs or independent operators that are expected to start before mid-twenty twenty six. These are mostly new energy projects and plug in abandonment campaigns as well as a few oil and gas programs that are well suited for our rigs in the region. The expected firm duration of these opportunities is more than one point five years on average, which is a good sign for the continued health of this market. I'm now going to provide an update on our outlook for rigs with available days in 2025. Starting with our floaters. We have four drillships with uncontracted time this year. Polaris DS-ten, which is currently warm stacked DS-twelve, which is expected to complete its current program offshore Egypt in March and DS-fifteen and DS-eighteen, which are contracted into the third quarter in Brazil and The U. S. Gulf respectively.

Each of these drillships are high specification seventh generation assets that we believe are well positioned for long term development programs. Are in advanced discussions for two of these rigs, and we are discussing opportunities commencing in 2026 and 2027 with several customers for the other two units.

That said, given the limited number of programs commencing in 2025, and the competitive nature of any work starting in the next twelve months, we anticipate that DS-ten will likely remain warm stacks through the end of the year. And the other three drillships are expected to have idle time after completing their current programs. Are focused on securing attractive long term contracts for these high spec assets. And we are willing to be patient to find the right programs for the rigs. Moving to our two semi submersibles offshore Australia, we see relatively muted demand in the country over the next eighteen months. MS1 is due to finish its current contract in the second quarter. We are in continued discussions for work commencing in the second half of twenty twenty five. Would suit a moored rig like MS1. Our other floater in Australia DPS-one could work into the third or fourth quarter of this year depending on whether the customer exercises its option. After that, opportunities we see today for a dynamically positioned rig like DPS-one are expected to start in the second half of twenty twenty six. And in the meantime, DPS-one is expected to be warm stacked.

As Anton mentioned, we have good contract coverage across our jackups in 2025. We have just two jackups operating in benign environments outside The Middle East with meaningful availability during the year. Volaris two forty seven in Australia and the 106 Indonesia, we have good visibility into additional work for these rigs either through new programs or the expected exercise of options. In The Middle East, we are in advanced discussions with Aramco regarding extensions for five rigs that are due to their existing lease terms this year. Lastly, we have limited availability across our active fleet of nine rigs in the North Sea, most of which is in the fourth quarter and related to Vallaris one hundred and twenty two one hundred and twenty three and two forty eight. And these rigs remain well positioned for additional work in the region. In short, we continue to see a positive contracting environment and our focus on building backlog by securing attractive long term work for our active fleet and where available filling gaps in schedules with shorter term jobs that can provide a meaningful bridge to these longer term programs. I will now hand the call over to Valaris, to take you through the financials.

Thanks, Matt, and good morning and afternoon, everyone.

My prepared remarks, I will begin with an overview of the fourth quarter results, and then walk you through our outlook for the first quarter twenty twenty five as well as full year guidance for 2025.

Starting with our fourth quarter results.

Total revenues were $584,000,000 down from $643,000,000 in the prior quarter. And adjusted EBITDA was $142,000,000 down from $150,000,000 in the prior quarter. Adjusted EBITDA decreased in the fourth quarter primarily due to lower utilization for the floater fleet related to out of service time for Valera's DS-fifteen and DS-seventeen to meet regulatory requirements in Brazil and for DS4 to complete an upgrade project prior to the start of contract as well as idle time for DS-ten and DPS-five which came off contract in the third quarter. These items were partially offset by more operating days for the jackup fleet primarily due to Valeris two forty nine returning to work after completing leg repairs, a full quarter of operations for two forty seven after mobilizing for part of the third quarter and a full quarter of operations for the 122 following completion of its survey. Our fourth quarter EBITDA was slightly below the midpoint of our guidance primarily due to higher than expected contract drilling expense which was negatively impacted by a $16,000,000 non cash accrual associated with the legal matter. Fourth quarter CapEx was $112,000,000 was below the midpoint of our guidance range as roughly $15,000,000 of Cap shifted into 2025.

We ended the quarter with cash and cash equivalents of $381,000,000 and a revolving credit facility remains fully available which together provides us with total liquidity of approximately $750,000,000 During the quarter, we generated $125,000,000 of cash flow from operations, This was partially offset by capital expenditures providing $13,000,000 of free Cash flow repurchased $25,000,000 of shares in the fourth quarter at an average price of $53 per share. In total, repurchased $125,000,000 of shares during 2024 following $200,000,000 of share repurchases in 2023. Moving now to our first quarter twenty twenty five outlook. We expect total revenues in the range of $580,000,000 to $600,000,000 compared to $584,000,000 in the fourth quarter.

Revenues for the first quarter are expected to be flat to slightly higher as more operating days for Valaris DS4 are largely offset by fewer operating days for DS12. Anticipate contract drilling expense of $400,000,000 to $415,000,000 compared to $415,000,000 in the fourth quarter. Contract drilling expense is expected to be slightly lower to flat on a sequential quarter basis as the fourth quarter accrual I mentioned earlier is largely offset by higher expenses on DS4 as we were capitalizing costs during its shipyard upgrade project last quarter. Our revenue and contract drilling expense are both expected to include approximately $35,000,000 of reimbursable items which is in line with the fourth quarter. We anticipate G and A expense of approximately $27,000,000 which is flat with the fourth quarter. Adjusted EBITDA is expected to be $145,000,000 to $165,000,000 compared to $142,000,000 in the fourth quarter. Total CapEx in the first quarter is expected to be $125,000,000 to $35,000,000 includes spend related to the Valeris 144 upgrade project prior to its long term contract offshore Angola, some carryover from the fourth quarter primarily related to the DS4 upgrade project and CapEx for Valeris one hundred and six and two forty eight associated with the start of their twenty year surveys later this quarter.

I'm now going to provide financial guidance for full year 2025. We currently forecast total revenues of $2,150,000,000 to $2,250,000,000 and contract drilling expense of $1,500,000,000 to $1,600,000,000 Within these revenue and contract drilling expense ranges is approximately $100,000,000 of expected reimbursable items. G and A expense is expected to be approximately $115,000,000 Taken together, our adjusted EBITDA for 2025 is expected to be $480,000,000 to $580,000,000 Total revenues are expected decline compared to 2024 primarily due to lower floater utilization as several rigs are expected to have idle time after completing contracts this year or last as Matt discussed earlier. Lower floater utilization is expected to be partially offset by more operating days and higher average day rates for the jackup fleet primarily driven by Valeris one hundred and forty four one hundred and seven and several rigs in our North Sea fleet, A higher average day rate and increased utilization for DSO Four, which commenced a new contract in December, and a full year of operations for DS7. Moving to contract drilling expense, we anticipate that these expenses decline year on year as we actively lower costs for rigs that are expected to have idle time during the year.

Contract drilling expense will also be lower as we have no planned reactivation expense this year as compared to $45,000,000 last year.

Turning to CapEx, full year 2025 capital expenditures are expected to range from $350,000,000 to $390,000,000 Approximately $225,000,000 of this CapEx is for maintenance and upgrade work. Including spend associated with twenty year special periodic surveys for VALERIS one hundred and six and two forty eight. The remaining CapEx relates to contract specific upgrades, primarily for the Valeris 144 DS-seventeen, DS-four and potential CapEx for certain rigs leased to Arrow.

It also includes approximately $15,000,000 of carryover from 2024. Would note that we expect these contract specific upgrades will be partially offset upfront payments from customers of approximately $75,000,000 in 2025 meaning that the net cash impact of capital expenditures are expected to be $275,000,000 to $315,000,000 during 2025. In addition, we anticipate cash interest of taxes to be approximately 15% of EBITDA this year. This concludes my review of financial results and guidance. I'll now hand the call back to Anton for some closing remarks.

Thanks, Chris. I want to reiterate some of key points we covered today before we open the line for questions. First, we continue to execute operationally and we finished 2024 with another solid quarter that benefited our financial results. Second, the contracting outlook for 2026 and beyond is strong. For high specification assets and we are focused on securing attractive long term contracts for our active fleet. That's the answer.

We are willing to be patients to actively lowering costs and idling rigs until the right job is available. And removing rigs from our fleet when it makes economic sense to do so. In closing, we are steadfast in our belief that offshore oil and gas production will play an important role in providing secure, reliable and affordable energy to the world.

And that Polaris is well positioned to help meet that need and drive long term value creation for our shareholders by virtue of a high specification fleet and and excellent safety and operational track record. We thank our employees, customers and investors for their support. [indiscernible] please open the line for questions.

We will now begin the question and answer session. Our first question comes from Eddie Kim with Barclays. Please go ahead. Hi, good morning.

Just a question on your full year 2025 EBITDA guidance. Maybe just taking the midpoint of that guidance range of $530,000,000 How much of that would you say is booked today versus an expectation of new awards you would need to secure for work later this year to hit that number. Just trying to get a sense of how much of that guidance you have in hand at the moment versus the expectation of more contracting between now and year end? Yes, Eddie, this is Chris. When we look at the midpoint on the revenue, we're about 94% contracted for the year. So majority of the remaining that 6% is later in the year, but about 94% contracted. Okay, got it.

And that was tied to the midpoint of that range?

Midpoint, yes. Okay, understood. And then just my follow-up is on a A recent retirement announcement we saw of a seventh gen Cool Stack drill ship by one of your peers. You have three seven gs cold stacked drillships in the DS-eleven, thirteen and fourteen. Just based on what you're seeing in the market today and the fact that you expect the DS-ten to remain warm stacked through year end, Does this push out your expectation for those rigs being reactivated say versus six to nine months ago or maybe put another way, what would you say is the likelihood one of those three Culp deck drillships is working by year end 2027. Let's say. Just curious. Eddie, this is Anton. Look, clearly, our focus is on putting our active fleet to work. We have a number of rigs rolling next year. But these are all high spec seventh gen assets and based on the pipeline of activity that we see coming, we see good long term opportunities for all of those. The 11 to 13 and the 14 are the highest spec seventh gen assets sitting on the sideline. Two BOPs, high thrust the capacity, but we are absolutely going to be patient in putting those into the market.

There will be a place for them. But this is not a question of putting a number on the calendar. When the market is ready for those assets to come back, the market will be ready for those assets to come back.

There is a lot of drilling, demand continues to increase offshore production is going to play a huge part in that going forward. But we are in no rush to put those assets back to work in the near term. Got it. Understood. That's very helpful. Thanks for that color. I'll turn it back. Thanks. And the next question comes from Frederic Steiner, with Clarkson Securities. Please go ahead. Hey, Anton and team, hope you're well. [indiscernible] Think I'd like to ask you kind of a similar question as I was on your peers earlier this week and it has to do with The demand pipeline going forward. I think clearly, it seems to be consensus that for 2025, there's not really that much work left to be contracted and the market I think has to a large degree kind of acknowledge that equity prices already. But there seems to be quite a lot of optimism around 2026 and what's happening beyond But unfortunately, in this industry, there is always been kind of a tendency for things to to slip to the right and slip to the right and slip to the right. So what are giving you confidence that the programs that you're seeing being intended for or discussions that you're having will materialize in this perceived [indiscernible] Absolutely.

It's a really, really good question. Obviously, we look at the same macro models that everybody looks at. We look at what our customers are saying publicly, look at the CapEx spending plans and how those are developing and they are continuing to increase.

Especially as you go into 2026 and 2027. But what I will say is, when of the things I do as a CEO is I spend time with our customers. I visit them in their offices. I go shore with them and I've visited with most of our major customers. In the back half of last year. What I can tell you is the programs that they have on the books, the way they're talking about them, the way they're planning for them, they are looking for partners who can deliver those programs for them. They have long term development needs that need to be delivered. The status of their planning efforts for those the posture with which we're engaged in commercial to discussions on a number of our rigs leaves me [indiscernible] confident and comfortable about that demand coming to play. Yes, things move to the right. And they move to the left and there are a lot of macro and supply chain and other reasons why programs move around. But based on direct discussions that we're having with our customers about the programs that they have on the books right now, we feel really good about that pipeline of demand coming in 2026 and 2027.

That's very good to hear.

And then guess turning not sure if you can even call it a follow-up, but let's turn quickly to to Jackups. You said that you had five Jackups, I think, in advanced discussions for extensions with Aramco.

Obviously, through your position with Arrow, which is also jointly owned by Aramco, I recall it partially a bit of a special position given that the development there last year.

But do you have any good intel or insights as to what Aramco is is planning to do going forward? Do you think they're in general done with suspensions? Do you think there will recontract most of the rigs that are rolling off right now, reducing pick and even actually add to the rig count again as we walk through 02/1935? Any color on that front would be super helpful. Thanks. A couple of points. First, in general, I'm not aware of any discussion about additional rig suspensions in Saudi. Beyond that, I really can't talk about anybody else's fleet. What I can tell you is we've seen we did a couple of short term extensions on rigs that we're rolling kind of at the end of last year in order to continue to facilitate the discussions on the rigs we have rolling. Advanced discussions is correct characterization of where we are in our discussions. They are constructive and advanced. And if we need additional short term extensions to conclude those discussions, I'd expect we'll get those as well. But feel good about the discussion and us being able to roll those rigs in Saudi and continue continue our relationship in providing ARO with rigs in order to fulfill their needs in the kingdom.

All right. That's super Thanks. The next question comes from Kurt Hallead with Benchmark. Please go ahead. Hey, good morning, everybody. Based on what your peers have said so far, and what you've said here today, it does look like there is some building momentum on some contract activity after a little bit of a lull. So that's always good to hear. So I guess the question I would have then is there's been some pretty explicit commentary from your peers about where pricing sits for ultra deepwater rigs in particular. As well as sixth gen rigs. Sounds like you guys are willing to be patient as you said and stack rigs if you can't get the price that [indiscernible] worthy? So this want to see if you can confirm the ranges. I think we've heard somewhere between mid to high 4s for somewhere in the mid-3s for sixth gen, is that how you're seeing the market? Look, I'll say this. I mean, we only have I'll say fortunate to only have one ship in our fleet out of our 13 that is six gs. That's the DS4 and that rig is contracted until what fourth quarter of twenty twenty seven.

So for us, it's really the seven gs market.

The rigs that customers that we talk to prefer for their long term development programs. I think if you've seen there haven't been a lot of fixtures recently, but fixtures that you've seen have continued to be in the mid to high-400s for high spec assets and that's where the market is. And you're absolutely right. I will on we've tried to clearly articulate our strategy is that we focus on delivering operation for our customers because that's what gets us more work. We have a super high spec fleet We're going to minimize costs on those rigs while they're not working and we're going to find the right long term opportunities for that high spec fleet to put it to work. And I think you have that exactly right.

Okay, great. And then so Chris, just to make sure there's no misinterpretations, you referenced that the midpoint of your revenue guide is 94% contracted. I would have to assume that basically translates to the EBITDA line as well, but again don't want to be misinterpreting anything.

That's fair. [indiscernible] And the next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Hey, good morning and thank you for the detailed discussion on the outlook for your your rig availability this year Just given the potential for extended downtime on some floaters, could you please remind us how to think about how you think about the operating costs when rigs go idle and maybe the pace of getting those costs down if the rig is expected to be warm stacked for several months, and if there's much variance depending on location or if it's a semi versus a real ship.

Yes. We talked about this on the last quarter some recall when we were talking about the 10 and the five, but for a ship, like right now for the 10, we've gotten those costs down to about 60 a day. That's about getting down to minimum safe manning. Obviously, you're not going to be spending as much on maintenance because you're not running the equipment. Ideally, you want to get keyside, so you're not burning fuel. So those are the actions you take. Previously for the five we had talked about getting down to closer to 50 a day on a semi but these are pretty significant reductions relative to kind of average OpEx on the ship for let's say of around 150 a day. So So, but those are the actions that we take to get those costs to those levels.

And the transition in from going from 150 when it's working to to 60, when it's warm stacked. It's about roughly Yes.

If you look at a three month ramp down and then on the backside when you're ramping back up about a three month ramp up circle back for the The next question comes from Arun with JPMorgan. Please go ahead.

Yes, good morning. On the two rigs that you mentioned that you're in, the high spec floaters Can you confirm that those opportunities have 2025 start dates?

Hi there. The opportunities for those more likely will be in the first half of twenty twenty six. Okay, got it.

Got it. Okay.

Got it. Sorry, clarify. Anton, this is let me jump in there. I mean, I think you've heard ours and even our competitors calls, I mean, there are there's not a lot of '25 start up work, very few and far between. Our focus, as we said, is securing that attractive long term contract that's going to get us years and potentially follow on work for these assets. So that's where we focus first. So when we talk about the advanced discussions, once we have that work secured, then there's always an option to say, okay, can we add something on the front end of that? It's some short term work that leads into that. Chris was just talking about the ramp up and ramp down of costs from warm stack to operating mode. What you don't want to be doing is chasing short term work and then ramping a rig up and ramping a rig down. So if you know when you're when you book ended that start for that long term development program, then you have an opportunity to go out in the market and say, okay, is this something we can get attractive that will lead up to that to add to that program?

I think that's how we think about it generally on a contract and commercial basis.

Great. Makes a ton of strategic sense. Maybe shifting gears, ARO Drilling recently announced plans to build a new build jack up the Kingdom three in KSA.

And I was wondering if you could give us some shed some light on if you expect the JV to be able to self fund that new build or would it require some funding from Val? [indiscernible] that we're building in IMI are backed by long term sixteen years of contract. We do not, neither our nor Saudi Aramco intend to need to inject any cap capital into ARO in order to fund that new build program. There are attractive programs being built at IMI, at as part of Vision 2,030 and we expect those programs, those rigs to be funded by cash flow from operations at Arrow plus funding that is readily available in the market. For a new build that is backed by a sixteen years of contract backlog, the first eight, which is six year EBITDA payback over an AGO contract based on its construction costs. So highly attractive contracts and imminently financeable in Yes. So if you look at what happened on the Kingdom 3 and Kingdom 1 and Kingdom 2 is the down payment was paid out of cash from ARO and then the kind of delivery payment was finance.

So largely financed. So yes, as Anton said, I mean, the contract structure, these are highly financeable contracts. And do not anticipate additional capital needs from Aramco or Valeris to Crystal clear. Thanks a lot gents.

And the next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Hey, thanks for letting me back in. Just bigger picture, there's been the ongoing theme of projects getting pushed back [indiscernible] a lot of these tend to be larger multi well development programs, especially greenfield projects. I'm curious what you've seen on discussions for the smaller tieback programs, exploration programs. Are those getting pushed back also Is there the emphasis on exploration Or is this more of a timing issue where operator schedules just overlapped and happened to ebb and flow together.

That's a good question. I don't I wouldn't say that those are being pushed back anymore or less. It's kind of say the GAAP bill, the focus from a lot of our customers, they do have a good portion of capital discipline, right? They're focused on the big programs first. And those smaller tiebacks is kind of is what's left. Do they have capacity to do it? Do they have the budget to do it in the current year? How does that fit into their program? So I think it's kind of a a second order decision on their part after they've made the allocation of capital to the large scale projects that they have.

This concludes our question and answer session. I would like to turn the conference back over to Nick Georges for any closing remarks.

Thanks, Dave, and thank you to everyone on the call for your interest in Velaris.

Look forward to speaking with you again when we report our first quarter twenty twenty five results. Have a great rest of your day.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.