Analysis VAL
Valaris's rigs recover, but equipment spending tops operating cash by $54 million
Two promised drillship starts are now in place. A $290 million platform-services extension supplied nearly half the new contract value.
Valaris is delivering the drillship restarts it promised in August. More working days and higher daily revenue helped lift its third-quarter operating performance. The offshore driller still spent more on equipment than its operations generated in cash.
The restarts are showing up in results
Management said in August that two more drillships would begin new contracts before year-end. VALARIS DS-15 started in September, and DS-18 started after the quarter ended. All ten active drillships are now under contract.
The third quarter also benefited from a full period of work for DS-10 and DS-12, which started contracts earlier in the year. Revenue rose to $593.6 million from $539.2 million in the second quarter.
Adjusted EBITDA, which removes interest, taxes, depreciation and several deal and accounting items, increased 56% to $150.6 million. It remained below the $163.2 million reported a year earlier.
The cash gap is narrowing
Research by Ticker Byline shows that operating cash flow fell $54.4 million short of capital spending in the third quarter. Cash from operations was $67.2 million, compared with $121.6 million spent on property and equipment.
| Cash flow, USD millions | Q3 2026 | Q2 2026 |
|---|---|---|
| Operating cash flow | 67.2 | 13.1 |
| Capital spending | 121.6 | 105.5 |
| Cash after capital spending, our calculation | -54.4 | -92.4 |
The shortfall narrowed from the previous quarter as operating cash improved. Asset sales provided another $42.3 million, helping support a cash balance of $525.1 million at September 30, down from $541.2 million at June 30.
Reported net income was almost unchanged at $46.7 million. A $23 million tax charge, mostly noncash and related to rig sales, replaced a $6 million tax benefit in the second quarter. Gains on asset sales were also lower.
What the new contracts contain
Valaris added approximately $600 million of contract backlog since August. About $290 million came from a three-year extension of services supporting bp's Mad Dog and Thunder Horse platforms, starting in January 2027.
Total backlog stood at $4.750 billion on November 2, compared with $4.585 billion on August 5. Our comparison puts the net increase at about $165 million. The drillship portion fell to $2.904 billion from $3.016 billion.
The pending combination with Transocean is expected to close around December 1. The Valaris company profile tracks that transaction, the rig restarts and the financial comparisons behind the recovery.