Valaris details latest contracts

Source: press release, 26 March 2020

‘VALARIS DS-8’ ultra-deepwater drillship (photo: Valaris plc)

On 19 March 2020, Valaris plc received a termination notice for the drilling contract for VALARIS DS-8. Valaris is in discussions with the customer regarding the notice. The drilling contract represents approximately USD 150 million of the company’s contracted revenue backlog of USD 2.5 billion as of 31 December 2019. The operating day rate for VALARIS DS-8 is approximately USD 620,000 per day. Valaris has loss of hire insurance for USD 602,500 per day after the expiration of a 45-day deductible waiting period through the end of the contract in November 2020. If the contract is terminated, the Valaris will seek to recover losses incurred in accordance with the terms of this insurance policy, which would largely offset the lost backlog noted above. There can be no assurance as to the timing or amount of insurance proceeds paid to the company.

Valaris has also announced that the company continues actively working to recover or replace the blowout preventer (BOP) stack on VALARIS DS-8 following a non-drilling incident earlier this month.

Valaris has received a notice of contract termination from a customer for VALARIS JU-109, which was scheduled to operate offshore Angola until July 2021. As a result of this termination, the rig’s contract is now expected to end in mid-April 2020 and contracted revenue backlog will be reduced by approximately USD 50 million. The Company expects to receive additional notices of contract terminations and requests to renegotiate contract day rates and terms in light of increased market uncertainty.

Since the beginning of March, VALARIS JU-87 was awarded a one-well contract with Cox in the U.S. Gulf of Mexico that commenced in mid-March, with an estimated duration of 30 days that added approximately USD 1 million of contracted revenue backlog. Additionally, a previously announced contract for VALARIS DS-4 with Amni offshore Ghana has been transferred to VALARIS DS-7 and is expected to commence in April 2020, and the previously announced contract for VALARIS JU-144 (EXL II) with Eni offshore Mexico has been transferred to VALARIS JU-102 and is expected to commence in September 2020.

For the period between the Valaris’ fleet status report that was filed on February 13, 2020 and the beginning of March, the Company executed the following new contracts and contract extensions with associated revenue backlog of approximately USD 100 million:

  • VALARIS MS-1 awarded a three-well contract with Santos offshore Australia that is expected to commence in first quarter 2021, with an estimated duration of 155 days.
  • VALARIS 8505 awarded a one-well contract with Lukoil Upstream Mexico that is expected to commence in mid-November, with an estimated duration of 80 days.
  • VALARIS JU-118 (Joe Douglas) awarded a three-well contract with Fieldwood offshore Mexico that commenced in mid-March, with an estimated duration of 425 days.
  • VALARIS JU-144 (EXL II) awarded a two-well contract with Fieldwood offshore Mexico that is expected to commence in April, with an estimated duration of 200 days.