VALARIS (NYSE: VAL) March 2022
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VALARIS (NYSE: VAL) March 2022
Forward-Looking Statements
Statements contained in this investor presentation 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," “likely,” "plan," "project," "could," "may," "might," "should," "will" and similar words and specifically include statements regarding expected financial performance;
expected utilization, day rates, revenues, operating expenses, rig commitments and availability, cash flow, contract status, terms and duration, contract backlog, capital expenditures,
insurance, financing and funding; the effect, impact, potential duration and other implications of the ongoing COVID-19 pandemic; impact of our emergence from bankruptcy; the
offshore drilling market, including supply and demand, customer drilling programs, stacking of rigs, effects of new rigs on the market and effects of declines in commodity prices;
expected work commitments, awards and contracts; effective tax rates; letters of intent; scheduled delivery dates for rigs; performance of our joint venture with Saudi Aramco; the
timing of delivery, mobilization, contract commencement, availability, relocation or other movement of rigs; future rig reactivations; expected divestitures of assets; general market,
business and industry conditions, trends and outlook; future operations; increasing regulatory complexity; the outcome of tax disputes, assessments and settlements; and expense
management. Such statements are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including the
COVID-19 outbreak and global pandemic and the related public health measures implemented by governments worldwide; cancellation, suspension, renegotiation or termination of
drilling contracts and programs, including drilling contracts which grant the customer termination rights if final investment decision (FID) is not received with respect to projects for
which the drilling rig is contracted; potential additional asset impairments; failure to satisfy our debt obligations; our ability to obtain financing and access to financing sources, service
our debt, fund capital expenditures and pursue other business opportunities; adequacy of sources of liquidity for us and our customers; the effects of our emergence from bankruptcy
on the Company's business, relationships, comparability of our financial results and ability to access financing sources; actions by regulatory authorities or other third parties; actions
by our security holders; commodity price fluctuations and volatility, customer demand, new rig supply, downtime and other risks associated with offshore rig operations; severe
weather or hurricanes; changes in worldwide rig supply and demand, competition and technology; consumer preferences for alternative fuels; increased scrutiny of our
Environmental, Social and Governance (“ESG”) practices and reporting responsibilities; changes in customer strategy; future levels of offshore drilling activity; governmental action,
civil unrest and political and economic uncertainties; risks inherent to shipyard rig reactivation, upgrade, repair, maintenance or enhancement; our ability to enter into, and the terms
of, future drilling contracts; suitability of rigs for future contracts; the cancellation of letters of intent or letters of award or 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 update or revise any forward-looking statements, except as required by law.
2
Valaris is well positioned to thrive during this industry upcycle
1. Increasing demand for hydrocarbons and
a lack of investment in supply has created
the foundation for an industry upcycle
2. Valaris is well positioned to thrive due to our
best-in-class fleet, industry-leading
operational platform and strong financial
position
3. Valaris is the compelling value proposition in
the offshore drilling sector
3
Oil and gas will remain a vital energy source ‒ expected to be ~50% of energy mix in 2050
Global Primary Energy Demand Per Fuel (Million TJ)
Share In • Oil and gas production will be required for
2020 2050
650 many years to come ‒ both to meet global
600 energy demand and to help fund the
550 15% 31% transition to renewable sources
500
• Peak oil demand is expected to occur in
450 the late 2020s and peak gas demand in
5% 6%
400 the late 2030s
350 26% 15%
• While renewables will continue to gain
300
market share (mostly at the expense of
250 23% 22% coal) oil and gas are expected to account
200 for nearly 50% of the total energy mix in
150
54% 48% 2050
100
31% 26%
50
1990 95 2000 05 10 15 20 25 30 35 40 45 2050
Oil Natural Gas Coal Nuclear Renewables
Source: McKinsey Energy Insights Global Energy Perspective 2021, December 2020 4
New production from unsanctioned projects will be required to meet demand
Global Oil Supply 2021 – 2030 (Million Barrels Per Day)
105.6
94.5 17.7
3.2
23.5 78.5 6.2
7.5
75.6
More than 9 million barrels per
68.9 day of offshore production from
58.0 unsanctioned projects expected
to be needed by 2030,
representing more than 35% of
current supply
16.9
16.3
13.7
9.3 13.1
6.8
2021 Supply Depletion to 2030 Sanctioned Projects 2030 Starting Offshore Deepwater Offshore Shelf Onshore 2030 Supply
Supply
Offshore Deepwater Offshore Shelf Onshore
Source: Rystad UCube, February 2022 5
Offshore production is less carbon intensive than other forms of oil and gas extraction
Average Scope 1 & 2 Emissions Intensity by Source
KgCO2e/boe
70
Offshore oil and gas
production has among
60
the lowest carbon
emissions per barrel of oil
50
produced of any type of
oil and natural gas
40
production
30
20
10
0
Oil Sands LNG Heavy Oil Shale Gas Acid/Sour Conventional Tight Oil Shale Oil Conventional Deepwater Tight Gas Coalbed
Gas Onshore Shelf Methane
Drilling Production Processing Liquefaction Venting Flaring Methane
Source: “Building the lower carbon transition” Webinar by Wood Mackenzie, January 2021 6
Growing demand and tightening supply have created a constructive oil price environment
Global Liquid Fuels Consumption (Million Barrels Per Day) • Demand for hydrocarbons has rebounded
105
strongly from the impact of COVID-19 and
100 is forecast to exceed 2019 levels by late
95
2022
90 Actual Forecast • E&P companies have generally prioritized
shareholder returns and deleveraging
85
balance sheets over investment in new
80 sources of production, resulting in OECD
1Q17 1Q18 1Q19 1Q20 1Q21 1Q22 1Q23 oil inventories well below the five-year
average
OECD Oil Inventories and Brent Crude Oil Price
Million Barrels Deviation to 5-Year Average
500 0 • OPEC+ curtailed production in response
400 20 to demand destruction from COVID-19,
300 40
200
with production cuts being reversed in a
60
100 measured fashion
80
0
100
-100 • The combination of these factors has
-200 120
-300 140
driven oil prices higher and created a
Jan-07 Jan-09 Jan-11 Jan-13 Jan-15 Jan-17 Jan-19 Jan-21 constructive environment for investment in
OECD Oil Inventories vs. 5-Year Average Brent Crude Oil Price ($/Bbl, Inverted) new projects
7
Source: EIA Short-Term Energy Outlook, February 2022; Fearnley Securities
Offshore upstream capex and new project sanctioning are expected to increase
Offshore Upstream Capex ($B) • Offshore upstream capex is expected to
8%
149 16% 152
increase by 16% in 2022 and a further 8%
145 141
136 in 2023
121
106
90
102 98 88 93 • This growth in offshore spending is
82
74 primarily expected to come from
investments in ultra-deep and deepwater
62
47 47 48 48
32 39 projects
2017 2018 2019 2020 2021E 2022E 2023E
Ultra-Deep & Deepwater Shallow Water
• Offshore project sanctioning is also
expected to increase meaningfully in 2022
Offshore Project Sanctioning (# of FIDs) and 2023, with more final investment
44
decisions (FIDs) expected than any other
38 year since the start of the industry
36 13
34
30 downturn
13
14
15 22
13
• More than two-thirds of offshore FIDs
10
22
11 31
25 anticipated over the next two years are
17 19 5
12 expected to be for new greenfield projects,
6
2017 2018 2019 2020 2021E 2022E 2023E
a positive indicator for longer-term
Greenfield Brownfield
demand
8
Source: Wood Mackenzie; Fearnley SecuritiesDemand for offshore drilling is expected to increase over the next several years
Floater Demand by Wellbore Purpose (Rig Years)
• Floater demand is expected to increase at
200
+7% a compound annual growth rate (CAGR) of
156
150 129
140 146 7% between 2021 and 2026
125 123
116 116 108 111
100 • Floater demand growth is primarily
expected to be driven by development and
50
wildcat (exploration) drilling
0
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 • This is a strong signal of customers'
Wildcat Appraisal Development Infill P&A and Intervention conviction on the economics for deepwater
projects and is positive for longer-term
Jackup Demand by Wellbore Purpose (Rig Years) demand for these rigs
+2%
• Jackup demand is expected to increase at
340 342 344 341 343
350
295 300
321 311 312 a CAGR of 2% between 2021 and 2026
300
250
• The primary driver of jackup demand is
200
150 different than for floaters, with ~50% of all
100 demand from 2022 to 2026 expected to
50
0
come from infill drilling
2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
Wildcat Appraisal Development Infill P&A and Intervention • This makes jackup demand more stable,
with less volatility to changes in the oil 9
Source: Rystad Cube Dashboards as of January 2022 priceCurrent rig fleet will form the basis of supply for the foreseeable future
Some of the rigs that have been stacked for prolonged periods may never return to the active fleet.
Higher day rates likely required to incentivize rig reactivations and delivery of stranded newbuilds.
Benign 1 Harsh 1 Benign 1 Time Stacked – Available and Cold Stacked Rigs
Delivered Rigs Drillships
Semis Jackups Jackups
Drillships Benign Semis
Contracted 71 39 30 326
4 2
5
Available 8 17 6 66 3
1 11
Active Fleet 79 56 36 392 5
4
< 1 Year
Cold Stacked 15 8 - 60 8
5 1-2 Years
2-3 Years
Total Fleet 94 64 36 452 Harsh Jackups Benign Jackups 3-4 Years
4-5 Years
1 > 5 Years
Active Utilization 90% 70% 83% 83% 31
41
Total Utilization 76% 61% 83% 72%
Newbuilds 17 3 6 24 8 37
5 63
Source: IHS Markit Petrodata, February 2022 10
1 Market category field used to categorize rigs as harsh or benign environmentValaris is well positioned to thrive during this industry upcycle
1. Increasing demand for hydrocarbons and a
lack of investment in supply has created the
foundation for an industry upcycle
2. Valaris is well positioned to thrive due to
our best-in-class fleet, industry-leading
operational platform and strong financial
position
3. Valaris is the compelling value proposition in
the offshore drilling sector
11Largest fleet of modern offshore drilling rigs in the industry
11 Drillships1 5 Semisubmersibles
Average age 7 years Average age 10 years
12 Ultra-Harsh & Harsh 23 HD & SD Modern Jackups2 5 SD Legacy Jackups2
Jackups2
Average age 13 years Average age 12 years Average age 41 years
1 Excludes newbuild drillships, VALARIS DS-13 and DS-14, which Valaris has the option to purchase before year-end 2023 12
2 HD = Heavy Duty; SD = Standard Duty. Heavy duty jackups are well-suited for operations in tropical revolving storm areasLargest fleet of high-specification assets
Fleet Quality of Major International Offshore Drillers Floaters Avg. Age1
2
Transocean 39 11
Valaris 31 15 9 1 56
3
Noble / Maersk 20 10
Noble / Maersk 3 24 11 3 1 39 Valaris 2 16 8
Diamond 13 24
Transocean 13 12 7 7 39 Seadrill4 10 9
Q1 Q2 Q3 Q4
Shelf 2 5 9 14 30
Jackups
Borr 25 2 1 28 Valaris2 40 16
Shelf 30 32
4
Seadrill 12 9 1 22
Borr 28 3
3
Noble / Maersk 19 10
Diamond 4 2 4 3 13
4
Seadrill 12 10
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Source: IHS Markit Petrodata as of February 2022; Rystad Energy. Rigs ranked into quartiles using Rystad Rig Score (Q1 = top quartile). Floaters and jackups ranked separately. 13
1 Average age includes delivered rigs only; 2 Excludes two drillships that Valaris has the option to purchase before year-end 2023; Includes seven jackup rigs leased to ARO Drilling
3 Noble fleet shown pro forma for merger with Maersk Drilling; 4 Includes rigs owned by Seadrill LtdIndustry-leading operational platform, strong values and purpose driven culture
SAFETY RELIABILITY EFFICIENCY
• Controlling Process Safety • Maximizing Rig Uptime • Maximizing Productivity of
Risk Performance Well Construction
• Reducing Personal Safety • 98.4% Revenue
Exposure Efficiency1 in 2021
• Minimizing Environmental
Impact
✓ License to Drill Program ✓ Valaris Asset Management ✓ Valaris Intelligence Platform
System (VAMS) (VIP)
✓ Well Control Training Center
✓ Technical Support Center (TSC) ✓ Micro KPIs (such as Tripping,
✓ Safe Systems of Work
Slip-to-Slip Connection)
✓ Operational Assurance & Audit ✓ Valaris Intelligence Platform
(VIP)
Program
✓ BOLD Offshore Supervisor
Training
OPERATIONAL EXCELLENCE
1 Revenue efficiency is day rate revenue earned as a percentage of maximum potential day rate revenue 14Commitment to sustainability and reducing our carbon footprint
Oversight Monitoring
• Valaris operates in the heavily • Emissions monitoring technology and
regulated marine environment with a dashboards being deployed across the
historic focus on sustainability fleet
• Valaris has a dedicated ESG Board • Enables near real-time data of fuel
Committee and internal Sustainability consumption and GHG emissions for
function each engine across the fleet
Progress Solutions
• Engine optimization completed on • Engine optimization by operating at
drillship VALARIS DS-12 – first vessel higher load factor with fewer engines
globally to achieve ABS Enhanced online to lower SOX and CO2 emissions
Electrical System Notation EHS-E
• Deploy Selective Catalytic Reduction
• SCR implemented on four drillships (SCR) system to reduce NOX
and one jackup emissions by up to 90%
15Operations focused on key basins expected to drive a large share of future demand
11
North Sea & Norway
8%
3
3
U.S. GOM & Mexico
6 1
18% 3 Middle East
44%
15%
7% West Africa Southeast Asia
5
% share of expected floater 11%
demand over next five years1
3% 12% 14
% share of expected jackup
demand over next five years 1 Brazil
4%
Drillship 3 2 Australia
21% 1%
Semisubmersible 1 1
1
Jackup
2
20%
1 Demand by country/region represents rig years as a % of total rig years for floaters and jackups, excluding China and Iran, per Rystad Cube Dashboards as of January 2022 16
Note: Rig locations are either current operating/stacking location or future contracted/stacking location. Includes seven jackup rigs owned by Valaris that are leased to ARO Drilling in Saudi Arabia. Excludes
nine jackup rigs owned by ARO Drilling (operating and under construction), two rigs that Valaris manages on behalf of a customer and two drillships that Valaris has the option to purchase by year-end 2023.Large and diversified customer base including major IOCs, NOCs and independents
Number of Customers Served Since Valaris Merger Selection of Customers Served Since Valaris Merger
67
57
39
32
25 23
18
Valaris Noble / Transocean Borr Seadrill Shelf Diamond
1
Maersk
• Valaris has the largest customer base in the offshore
drilling industry, with exposure to many of the largest
holders of offshore oil and gas reserves
• Customers include major international, national and
independent oil and gas companies across the world,
increasing revenue potential and diversifying risk
Source: IHS Markit Petrodata as of February 2022 17
1 Pro forma for Noble and Pacific Drilling merger and Noble and Maersk Drilling merger announced on November 10, 2021~$2.5 billion of contract backlog added since the beginning of 2021 at improving day rates
Floater Backlog ($M) Backlog Additions Since Beginning of 2021 by Customer Type ($M)
350 1,663
11%
1,849 Major
17% IOC
164 53% NOC
2
Independent
Year-End 2020 Additions Consumed February 21, 2022 19%
Avg.
Day 188,000 242,000
Rate1
Jackup Backlog ($M) • Backlog additions primarily driven by new floater contracts,
including four for rigs that are currently being reactivated
484 578 • Average day rate of floater backlog has increased by nearly
738
643 30% since the beginning of 2021 to $242,000
• Contract backlog and average day rates exclude more than
$300M of customer payments for capital upgrades and
2
Year-End 2020 Additions Consumed February 21, 2022 mobilization fees for future contracts
Avg.
Day
Rate1
86,000 86,000
• More than 70% of backlog added since the beginning of 2021
is with majors and large international oil companies
Source: Company filings and analysis; Valaris fleet status report as of February 21, 2022; 18
1 Average day rate within backlog calculated as total contract backlog / total contract days
2 Additions include backlog added by new contract awards and extensions only. Backlog added due to changes in estimated durations of projects are netted off consumptionIndustry-leading cost structure
Operating, Support and G&A Costs per Weighted Active Rig ($M)1
-20% 17.0 16.8
16.3
14.8 14.9
13.6 13.8
13.1
12.5 12.3
11.9 11.9
Valaris 2 Seadrill Noble Diamond Maersk Transocean
Active Floaters 10 8 16 13 9 9 11 11 7 8 29 26
Active Jackups 28 25 11 7 12 10 0 0 12 12 0 0
# of Countries with 15 16 14 10 10 10 5 6 12 13 11 11
Active Rigs
2020 2021
Source: Company filings; IHS Markit Petrodata
1 Contract drilling expense (excluding reimbursable items) and general and administrative expense for each available period divided by weighted average rig count. Active rig weighting determined by cost
complexity for discrete asset types:1.0 for drillships, 1.3 for North Sea/Australia semisubmersibles, 0.9 for benign environment semisubmersibles, 0.9 for jackups active in Norway and 0.5 for all other jackups.
19
Active rigs defined as rigs that are not cold stacked or under construction. Active rigs and countries per IHS Markit Petrodata Current Activity Report. Represents an average of each quarter end in the given
period. 2 Valaris operating costs exclude costs related to two rigs managed on behalf of a customer as they are not included in the active rig count.Strongest balance sheet in the offshore drilling sector
Net Debt1 ($M)
• Valaris is the only major offshore driller
(100) 527 940 1,878 5,758
with a net cash position
7,170 • $550M senior secured notes due 2028
1,916
1,278 1,191
545
(38) ‒ Pari passu debt capacity of $275M
(645) (751) (251)
(1,412)
Valaris Noble / Maersk Shelf Borr Transocean
• Annual cash interest expense of $45M3
Debt Cash
‒ Ability to PIK interest for life of note
‒ 8.25% cash coupon
Net Leverage2 ‒ 10.25% half cash, half paid-in-kind coupon
15.3
‒ 12% paid-in-kind coupon
6.2
4.2 • $645M4 cash balance provides ample
liquidity to fund operations
0.8
n/a
Valaris Noble / Maersk Shelf Transocean Borr • No newbuild capital commitments
1 Debt and cash per most recent quarterly filings; Noble net debt and net leverage shown pro forma for merger with Maersk Drilling announced on November 10, 2021
2 Net leverage calculated using 2022 mean EBITDA estimate per FactSet as of February 18, 2022. Noble 2022 EBITDA adjusted to reflect 75% of the $125 million estimated full run rate synergies from planned
merger with Maersk Drilling;
20
3 Assumes interest paid in cash at 8.25% coupon;
4 Includes restricted cash balance of $36 millionValaris is well positioned to thrive during this industry upcycle
1. Increasing demand for hydrocarbons and a
lack of investment in supply has created the
foundation for an industry upcycle
2. Valaris is well positioned to thrive due to our
best-in-class fleet, industry-leading
operational platform and strong financial
position
3. Valaris is the compelling value
proposition in the offshore drilling sector
21Valaris has a compelling value proposition built on four key elements
1 Active Fleet 3 Leased and Managed Rigs
• Active fleet of 34 rigs generated adjusted operating • Seven rigs owned by Valaris currently leased to ARO
margin (excluding one-time reactivation costs) of $344 Drilling under bareboat charter agreements
million1 in 2021
• Two managed rigs, which Valaris operates on behalf of
• Earnings power from the active fleet expected to a customer
increase meaningfully as we complete three drillship
and one semisubmersible reactivations in 1H 2022 • 2021 operating margin for leased and managed rigs
was $85 million1
2 Stacked Fleet 4 ARO Drilling
• Stacked fleet includes 13 high-quality modern assets, • 50/50 joint venture with Saudi Aramco, the largest
providing operational leverage in an improving market customer for jackups in the world
environment
• 2021 EBITDA was $91 million and ARO had cash of
• Proven ability to win work for preservation stacked $271 million as of December 31, 2021
assets, with four long-term drillship contracts awarded
in 2H 2021 • 20-rig newbuild program provides future growth with
guaranteed contracts at attractive economics
1 Operating margin for active fleet and leased and managed rigs excludes onshore support costs and general and administrative expense 22Earnings power from active fleet expected to increase as reactivated rigs start contracts
Valaris Average Floater Day Rates ($K/day)
Active Fleet Results 2021
400
Expected market rates for
Revenue $1,090M new drillship opportunities
300 292
Operating Margin $252M 209 221
193
200
Reactivation Costs (One-Time) $92M
100
Adjusted Operating Margin $344M
0
2021 2022 2023 2024+
Actual Contract Backlog
2021 Active Fleet Operating
Floaters Jackups
Stats
• Utilization and average day rates for the floater fleet
Active Rigs at Year-End 10 24 expected to improve meaningfully as we complete our
three drillship and one semisubmersible reactivations
Utilization (Including Rigs Being in the first half of the year
61% 82%
Reactivated)1
• Average floater day rates within current contract
Average Day Rate 193,000 95,000 backlog are set to increase year over year, and day
rates for new drillship opportunities starting late 2022
Revenue Efficiency 97% 99% and early 2023 are generally in excess of $300K/day
23
1 The active fleet includes rigs undergoing reactivation projects, for which contracts have yet to commence; at year-end 2021, this included four rigsStacked rigs provide operational leverage in an improving market
Stacked Fleet Overview Asset Value
Build
• Stacked fleet includes 13 high-quality Illustrative Asset Value of Stacked Fleet1
Cost
modern assets1 with a total build cost of
~$4B and significant useful lives remaining Value per Floater (5 Rigs) $100M $200M $300M ~$600M
• Rigs stacked in clusters to minimize Value per Jackup (8 Rigs) $25M $50M $75M ~$150M
holding costs, preserve cash in the near
term and maximize option value on future Total Asset Value $700M $1,400M $2,100M ~$4,000M
cash flows
Recent Contract Awards for Stacked Assets
• Proven ability to win work for preservation
stacked assets, with four long-term Rig Name Customer Location Total Contract Value 3,4
drillship contracts awarded in 2H21 DS-4
Brazil
• Three uncontracted high-specification DS-9
drillships provide operational leverage in Angola
an improving market ~$1.14 billion
DS-11
U.S. GOM
• Additional exposure to drillship market DS-16
from purchase options on two newbuilds2 U.S. GOM
1 Excludes stacked rigs with future contracts and one legacy jackup that is likely to be retired. 2 Valaris has the right, but not the obligation, to take delivery of either or both rigs on or before December 31, 2023.
Purchase price of approx. $119M for DS-13 and $218M for DS-14. 3 Total contract value includes approx. $285 million expected from capital reimbursements and mobilization fees that are excluded from contract
backlog and average day rates. 4 Includes approximately $428 million of backlog attributable to our contract awarded to VALARIS DS-11 for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico 24
expected to commence in mid-2024. In February 2022, the customer decided not to sanction and therefore withdraw from the project. As of the date hereof, the customer has not terminated the contract, but may do
so upon the payment of an early termination fee should the project not receive final investment decision (FID). The project has not received FID. We are in discussions with the customer and its partner on the project
to determine next steps.Leased and managed rigs deliver stable cash flows
Leased Rigs Overview Summary Financial Information
• Valaris leases seven rigs to ARO Drilling through bareboat charter 2021
agreements
Operating Margin $85M
• Rigs are leased under drilling contracts with Saudi Aramco, guaranteeing
high levels of utilization for a portion of the Valaris jackup fleet Utilization ~100%
• Substantially all operating costs are incurred by ARO, meaning the lease Contract Backlog1 $136M
revenue represents nearly 100% margin for Valaris
• Bareboat charter day rate calculated based on a split of projected earnings
over the lease term, subject to adjustment based on performance
Managed Rigs Overview
• Valaris has management contracts for two rigs owned by a customer in the
U.S. Gulf of Mexico
• Valaris receives a day rate for its management services and incurs
operating expenses
1 Contract backlog as of quarterly fleet status report dated February 21, 2022 25Significant earnings potential in a market recovery scenario
Rigs Under
Contract or
Total Rigs Illustrative Annual EBITDA from Valaris Fleet1 20142
with Future
Contract
11 8 Drillship Day Rates $300K $350K $400K ~$500K
5 3 Benign Semisubmersible Day Rates $200K $250K $300K ~$400K
12 11 HD Ultra-Harsh & Harsh Jackup Day Rates3 $100K $125K $150K ~$220K
23 16 Modern HD & SD Jackup Day Rates3 $75K $100K $125K ~$160K
Fleet Utilization 70% 75% 80% 85%
Illustrative Operating Margin4 ~$690M ~$1,250M ~$1,870M ~$3,040M
Total Onshore Costs (2021) ~$200M ~$200M ~$200M ~$200M
Illustrative EBITDA4 ~$490M ~$1,050M ~$1,670M ~$2,840M
1 Calculations based on total number of rigs in each asset category. Excludes standard duty legacy jackups on the basis that most of these rigs will likely be retired upon completion of current contracts.
2 Average earned operating day rate and utilization for global fleet in 2014 per IHS Markit Petrodata 26
3 HD = Heavy Duty; SD = Standard Duty. Heavy duty jackups are well-suited for operations in tropical revolving storm areas.
4 Daily operating cost assumptions are based on current operating costs for the fleet. Assumes full operating cost for 50% of idle periods and preservation stack cost for 50% of idle periods.ARO Drilling joint venture provides strong presence in the largest jackup market in the world
ARO Drilling Overview
• ARO Drilling (“ARO”) is an unconsolidated 50/50 joint venture with
Saudi Aramco, the largest customer for jackups in the world
• ARO owns a fleet of seven jackup rigs operating under contracts Income Statement Highlights
with Saudi Aramco with contract backlog of $1.1B as of February
2021
21, 2022
Revenue $471M
• ARO leases seven jackup rigs from Valaris, each operating under
contracts with Saudi Aramco EBITDA $91M
• ARO scheduled to purchase 20 newbuild jackup rigs over the next
decade, backed by long-term contracts with Saudi Aramco, which Balance Sheet Highlights
are expected to be financed by cash from ARO operations and
Dec 31, 2021
third-party financing non-recourse to Valaris1
Cash $271M
• ARO has a meaningful cash balance of $271M as of December 31,
2021 Shareholder Notes ~$900M
• Valaris has shareholder notes receivable with a principal balance Third-Party Debt Zero
of $443M from ARO
1 ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020 and is actively exploring financing options for the remaining payments due upon delivery. 27Disciplined approach to capital allocation and focus on free cash flow generation
Key Priorities Highlights Objectives
• Win additional backlog • ~$2.5 billion of contract backlog added
for active fleet since the beginning of 2021 at
improving day rates
• Maximize EBITDA
• Reactivate high quality • Long-term contracts awarded to four
stacked rigs for long drillships. The initial contracts in total,
term contracts at and three of the four, are expected to
attractive economics provide a return on reactivation cost in • Drive meaningful free
excess of our cost of capital cash flow as market
recovers
• Continually assess • 18 assets retired since beginning of
fleet for retirement 2020. Rational approach to fleet
candidates management to minimize costs for • Disciplined approach
stacked and legacy rigs to capital allocation,
including returns to
• Maintain industry- • Annualized onshore costs reduced from shareholders
leading cost structure ~$440M to ~$200M since Valaris
merger in April 2019
28Equity trades at a significant discount to major peers and recent market transactions
Equity Performance Since Valaris Listing Recent Market Transactions for Drillships
116%
Rig Name Buyer Seller Price
61%
Crete $245 million
32%
23%
Valaris Noble Transocean Maersk Santorini $230 million 4
1,2,3
Implied Steel Value per Ultra-Deepwater Equivalent Rig ($M)
Cobalt Explorer $180 million
277
159 156
132 • Three recent market transactions for drillships have
averaged ~$220 million – approximately 1.7x the implied
steel value Valaris is currently trading at for similar assets
Transocean Noble Maersk Valaris
Source: FactSet as of March 4, 2022; Fearnley Securities; Company filings
1 Steel values calculated using market value of equity, book value of debt, underfunded pension liabilities, newbuild capital commitments and NPV of reactivation costs, less cash and NPV of backlog
2 Valaris steel value per UDW equivalent rig attributes $443M to ARO Drilling based on the principal value of the shareholder note receivable 29
3 Number of ultra-deepwater equivalent rigs per Fearnley Securities research report dated February 15, 2022
4 Purchase price calculated as 2 x $15M lease payments, plus $200M purchase option priceKey takeaways
Oil and gas expected to be ~50% of energy mix Offshore upstream capex and project
1 in 2050 and offshore production will play an 2 sanctioning expected to increase, driving
important role in meeting oil and gas demand increased demand for offshore drilling rigs
Valaris is well-positioned to benefit due to our Valaris fleet has significant earnings potential,
3 best-in-class fleet, industry-leading operational 4 with operational leverage to the improving
platform and strong financial position floater market
ARO Drilling, joint venture with Saudi Aramco, Despite recent outperformance, Valaris equity
5 provides strong presence in the largest market 6 still trades at a significant discount to major
for jackups in the world peers and recent market transactions
30Appendix
31Increase in utilization over the past five years primarily driven by supply rationalization
Valaris has retired more than 50 rigs since the beginning of the downturn, including 18 since the start of 2020
140 Drillships Supply and Utilization 100% Harsh Jackups Supply and Utilization
60 100%
120 90% 50 90%
100
80% 40 80%
80
70% 30 70%
60
60% 20 60%
40
20 50% 10 50%
0 40% 0 40%
Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022 Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022
Total Contracted Total Supply Total Utilization Total Contracted Total Supply Total Utilization
Benign Semisubmersibles Supply and Utilization Benign Jackups Supply and Utilization
120 100% 600 100%
100 90% 500 90%
80 80% 400 80%
60 70% 300 70%
40 60% 200 60%
20 50% 100 50%
0 40% 0 40%
Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022 Jan 2017 Jan 2018 Jan 2019 Jan 2020 Jan 2021 Jan 2022
Total Contracted Total Supply Total Utilization Total Contracted Total Supply Total Utilization
Source: IHS Markit Petrodata, February 2022; market category field used to categorize rigs as harsh or benign environment 322022 Guidance as of February 22, 20221
Income Statement Guidance 2022E Operating Margin by Value Drivers 2022E
Revenues $1,450-1,550M Active Fleet $325-350M
Contract Drilling Expense2 $1,230-1,280M Reactivation Costs $70-80M
G&A Expense $80-85M Active Fleet Adjusted for One-Time
$400-425M
Reactivation Costs
Adjusted EBITDA3 $165-195M
Leased & Managed $80-85M
Reactivation Costs (One-Time
$70–80M
Expense) $485-510M
Adjusted EBITDAR3 $240-270M Stacked Fleet ~$(40M)
Preservation and Stacking Costs ~$40M Adjusted Operating Margin5 $445-470M
G&A and Support Costs $(200-210)M
Other Guidance 2022E
Adjusted EBITDAR $240-270M
Capital Expenditures $225-250M
Customer Reimbursements4 ~$155M
1 The guidance on this slide speaks only as of February 22, 2022, and we undertake no obligation to update or review any such guidance, except as required by law.
2 Includes $120-125M of onshore support costs
3 Excludes transaction, transformation and restructuring costs. The Company is not able to provide a reconciliation of the Company’s forward-looking Adjusted EBITDA to the most directly comparable
GAAP measure without unreasonable effort because of the inherent difficulty in forecasting and quantifying certain amounts necessary for such a reconciliation, including forward looking tax expense
and other income or expense.
33
4 Upfront payments for capital upgrades and mobilization fees
5 Adjusted operating margin = operating margin, plus reactivation costsContract Backlog as of February 21, 2022
(1) (2)
Contract Backlog
($ millions) 2022 2023 2024+ Total Contract Days (1) (2) 2022 2023 2024+
Drillships (3) $ 348.8 $ 316.3 $ 615.3 $ 1,280.4 Drillships (3) 1,646 1,429 2,025
Semis 157.5 137.9 89.5 384.9 Semis 773 623 392
Floaters $ 506.3 $ 454.2 $ 704.8 $ 1,665.3 Floaters 2,419 2,052 2,417
-
HD - Ultra-Harsh & Harsh $ 260.0 $ 49.7 $ - $ 309.7 HD - Ultra-Harsh & Harsh 2,452 527 -
HD & SD - Modern 157.1 74.5 20.5 252.1 HD & SD - Modern 2,091 894 304
SD - Legacy 52.1 29.1 - 81.2 SD - Legacy 761 411 -
Jackups $ 469.2 $ 153.3 $ 20.5 $ 643.0 Jackups 5,304 1,832 304
Leased Rigs $ 44.7 $ 45.0 $ 44.6 $ 134.3 Leased Rigs 1,746 1,460 1,452
Managed Rigs 1.3 - - 1.3 Managed Rigs 14 - -
Other (4) $ 46.0 $ 45.0 $ 44.6 $ 135.6 Other (4) 1,760 1,460 1,452
Total $ 1,021.5 $ 652.5 $ 769.9 $ 2,443.9 Total 9,483 5,344 4,173
(5)
ARO Drilling 2022 2023 2024+ Total Average Dayrates 2022 2023 2024+
Owned Rigs $ 211.4 $ 246.6 $ 582.9 $ 1,040.9 Drillships (3) $ 212,000 $ 221,000 $ 304,000
Leased Rigs 163.8 148.2 148.2 460.2 Semis 204,000 221,000 228,000
Total $ 375.2 $ 394.8 $ 731.1 $ 1,501.1 Floaters $ 209,000 $ 221,000 $ 292,000
Valaris 50% Share of ARO
Owned Rigs $ 105.7 $ 123.3 $ 291.5 $ 520.5 HD - Ultra-Harsh & Harsh $ 106,000 $ 94,000 $ -
Adjusted Total (6) $ 1,127.2 $ 775.8 $ 1,061.4 $ 2,964.4 HD & SD - Modern 75,000 83,000 68,000
SD - Legacy 68,000 71,000 -
Jackups $ 88,000 $ 84,000 $ 68,000
(1) Contract backlog, contracted days and average day rates as of February 21, 2022. (2) Contract backlog and average day rates exclude certain types of non-recurring revenues such as lump sum
mobilization payments. Contract backlog and contracted days include backlog and days when a rig is under suspension. Contract backlog includes drilling contracts subject to final investment decision (FID)
and drilling contracts which grant the customer termination rights if FID is not received with respect to projects for which the drilling rig is contracted. Average day rates are adjusted to exclude suspension
backlog and days. (3) Approximately $428 million of backlog as of February 21, 2022, is attributable to our contract awarded to VALARIS DS-11 for an eight-well contract for a deepwater project in the U.S.
Gulf of Mexico expected to commence in mid-2024. In February 2022, the customer decided not to sanction and therefore withdraw from the project. As of the date hereof, the customer has not terminated the
contract, but may do so upon the payment of an early termination fee should the project not receive final investment decision (FID). The project has not received FID. We are in discussions with the customer
and its partner on the project to determine next steps. (4) Other represents contract backlog and contracted days related to bareboat charter agreements and management services contracts. (5) ARO Drilling
34
contract backlog as of February 21, 2022. (6) Adjusted total is Valaris consolidated total plus 50% share of ARO owned rigs; HD = Heavy Duty; SD = Standard Duty. Heavy duty jackups are well-suited for
operations in tropical revolving storm areasValaris owns 50% of joint venture with Saudi Aramco, the world’s largest jackup customer
50% 50%
Ownership Ownership
Valaris operates four
jackups offshore Saudi
Arabia outside of ARO
Drilling joint venture ~$440M ~$460M
Shareholder Shareholder
Notes Receivable Notes Receivable
Leased Jackups (7) Owned Jackups (7) Newbuild Jackups (20)
• Day rates set by an agreed pricing mechanism • Rigs contracted for three or five-year terms for • Initial 8-year contracts; day rate based on 6-
• Valaris receives bareboat charter fee based on at least an aggregate of 15 years from JV year EBITDA payback mechanism 1
% of rig-level EBITDA inception • Further 8-year contracts; day rate set by market
• Rigs contribute to ARO Drilling results, of which pricing mechanism and re-priced every 3 years
Valaris recognizes 50% of net income • First two rigs expected to be delivered in 4Q22
and 4Q22/1Q23
• Rigs contribute to ARO Drilling results, of which
Valaris recognizes 50% of net income
1 Down payment on each newbuild rig is no more than 25% before delivery 35Non-GAAP Reconciliations
(In millions) (In millions) (In millions)
Year-Ended Year-Ended Year-Ended
December 31, December 31, December 31,
ACTIVE FLEET 2021 LEASED & MANAGED RIGS 2021 ARO 2021
Operating income (loss) $ (410.5) Operating income (loss) $ 55.6 Net income $ 4.0
Add (subtract): Add (subtract): Add (subtract):
Depreciation and amortization, net 132.6 Depreciation and amortization, net 19.5 Income tax expense 7.9
Loss on impairment 419.2 Loss on impairment - Other expense, net 13.4
Support and other costs 110.6 Support and other costs 10.1 Operating income $ 25.3
Operating margin $ 251.9 Operating margin $ 85.2 Add (subtract):
Add (subtract): Depreciation expense 65.2
Reactivation costs 91.6 EBITDA $ 90.5
Adjusted operating margin $ 343.5
36Boldly First
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