Valaris Limited Reports Strong Fourth Quarter 2025 Results, Strengthening Position Ahead of Transocean Merger
Valaris Limited, a global leader in offshore drilling services, announced its financial and operational results for the fourth quarter of 2025, capping a year of sustained operational excellence, commercial success, and strategic positioning for the future. The company, which operates a diversified and technologically advanced fleet of ultra-deepwater drillships, semisubmersibles, and jackups, highlighted continued revenue efficiency, robust contract backlog growth, and shareholder value creation, reinforcing its leadership in the offshore drilling industry.
Executive Leadership Commentary
Anton Dibowitz, President and Chief Executive Officer of Valaris, expressed satisfaction with the company’s performance in the fourth quarter, noting that it reflected strong execution across its fleet and services. Dibowitz stated, “Our fourth quarter results capped another year of strong execution by the Valaris team. We delivered revenue efficiency of 98% for the quarter and 96% for full year 2025, marking our fifth consecutive year of revenue efficiency at or above 96%. This consistent performance underscores the dedication and expertise of our employees, whose focus on operational excellence continues to be recognized by our customers and is a core driver of our overall results.”
Dibowitz further emphasized the company’s success in securing long-term contracts and expanding its backlog. “Our strong operating performance translates directly into significant contracting success,” he explained. “Since our last quarterly report, we secured nearly $900 million of additional backlog, further strengthening our robust contract coverage across 2026 and 2027. We recently announced contract awards for VALARIS DS-7 and DS-9, and we expect all ten of our active drillships to be working as we enter 2027, achieving a key objective for the company.”
On strategic developments, Dibowitz highlighted the pending all-stock transaction with Transocean Ltd. that promises to deliver meaningful value to Valaris shareholders. “Earlier this month, we announced an all-stock transaction with Transocean that will provide synergies, operational benefits, and the opportunity for shareholders to participate in the upside potential of the combined company. We believe the offshore drilling market outlook remains positive, with customers emphasizing the need for continued upstream investment to ensure a secure, reliable, and affordable energy supply,” he concluded.
Financial Highlights
For the fourth quarter of 2025, Valaris reported total operating revenues of $537 million, with an impressive revenue efficiency of 98%. Net income for the quarter reached $717 million, which included a significant tax benefit of $680 million resulting from changes in deferred tax asset valuation allowances in certain jurisdictions, as well as discrete tax benefits primarily related to rig impairments. Adjusted EBITDA for the quarter was $97 million, reflecting solid operational performance across the company’s fleet despite fluctuations in activity levels.
The company’s contract backlog continued to expand, with nearly $900 million of new contracts secured since the third quarter of 2025. This backlog includes commitments for drillships VALARIS DS-7, DS-8, and DS-9, bringing the total contract backlog to approximately $4.7 billion, demonstrating the company’s strong commercial execution and market presence.
Valaris also continued its fleet optimization efforts during the quarter, including the sale of jackups VALARIS 102 and 145 for recycling and classifying the semisubmersible VALARIS DPS-1 as held for sale with the intent to recycle. In addition, the company repurchased $25 million of shares during the fourth quarter and a total of $100 million over the year, further returning value to shareholders.
Detailed Segment Performance
Valaris operates across multiple segments, including floaters, jackups, ARO drilling, and other operations, all of which contributed to the overall results.
Floaters: Revenues exclusive of reimbursable items decreased to $255 million from $293 million in the third quarter of 2025, primarily due to the completion of contracts by drillships VALARIS DS-15 and DS-18, as well as semisubmersibles VALARIS MS-1 and DPS-1. Contract drilling expenses for the segment increased to $198 million from $188 million, reflecting higher repair costs associated with planned maintenance projects, increased accruals related to certain claims, and higher mobilization costs for rigs being redeployed.
Jackups: The jackup segment experienced a slight decrease in revenue to $209 million from $217 million in the previous quarter, primarily due to the sale of VALARIS 247. Contract drilling expenses decreased slightly to $121 million from $125 million, reflecting reduced operational costs associated with the sold rig. Notably, the VALARIS 115 was awarded Shell’s 2025 Jackup Rig of the Year, highlighting the company’s commitment to operational excellence and safety standards.
ARO Drilling: Revenues in the ARO segment decreased to $140 million from $157 million, largely due to planned shipyard projects that took VALARIS 116 and VALARIS 250 temporarily out of service. Contract drilling expenses also declined to $87 million from $92 million, reflecting lower bareboat charter costs.
Other Operations: Revenues for other operations decreased to $38 million from $46 million, primarily due to lower bareboat charter revenues for rigs leased to ARO, which experienced out-of-service periods for maintenance. Contract drilling expenses increased to $21 million from $16 million, primarily driven by costs related to shipyard projects.
Quarterly Financial Metrics
Net income for the quarter was substantially higher at $717 million, compared to $187 million in Q3 2025, largely due to the $680 million tax benefit. Adjusted EBITDA decreased to $97 million from $163 million, reflecting the seasonal and project-related fluctuations in operational activity. Total operating revenues declined 10% sequentially to $537 million, while capital expenditures increased to $106 million, driven by shipyard projects, maintenance, and fleet upgrades. Cash and cash equivalents decreased from $663 million to $599 million as a result of capex and share repurchases, partially offset by operational cash flows.
Tax and Accounting Highlights
The fourth-quarter results were heavily influenced by tax benefits totaling $680 million, compared to a tax expense of $29 million in the previous quarter. The benefit included $691 million from changes in deferred tax asset valuation allowances in certain jurisdictions and $7 million of discrete tax benefits primarily attributable to rig impairments. Adjusted for these items, tax expense for the quarter was $18 million, a decline from $29 million in Q3, underscoring the company’s strong tax management and financial strategy.
Outlook and 2026 Guidance
Looking ahead, Valaris provided financial guidance for fiscal year 2026, anticipating total operating revenues of $2.125 to $2.205 billion and adjusted EBITDA of $485 to $565 million, excluding costs related to the pending Transocean merger. Capital expenditures are projected between $425 and $475 million, with approximately $260 million allocated to maintenance, fleet upgrades, and special periodic surveys, and the remainder focused on contract-specific upgrades, including Managed Pressure Drilling (MPD) systems for three drillships and enhancements for jackups VALARIS 116 and 250. Upfront payments from customers for contract-specific upgrades are expected to total approximately $110 million.
Chris Weber, Senior Vice President and Chief Financial Officer, noted, “We expect financial results to improve meaningfully across 2026 as currently idle drillships return to work. Two drillships are scheduled to return in the second quarter, one in the third quarter, and another in the fourth quarter. With our strong commercial execution, approximately 97% of full-year 2026 revenue at the midpoint of our guidance is secured by firm contracts, demonstrating the company’s ability to convert backlog into predictable cash flows.”
Strategic Initiatives and Transocean Merger
Valaris’ strategic initiatives during 2025 strengthened both its operational footprint and financial profile. The company prioritized fleet optimization, divesting non-core assets, upgrading rigs with advanced technologies, and securing high-value long-term contracts. These efforts position Valaris to capitalize on favorable market conditions in offshore drilling, particularly as global energy demand remains resilient.
The recently announced all-stock merger with Transocean Ltd. represents a transformative development for Valaris. The transaction is expected to create a combined offshore drilling leader with enhanced scale, technological capabilities, and operational synergies. Management emphasized that the merger is expected to deliver meaningful shareholder value while ensuring continuity of operations and customer service excellence.
Corporate Commitment and Industry Position
Valaris continues to maintain a high standard of safety, operational excellence, and customer satisfaction across its fleet. Operating in nearly every major offshore basin worldwide, the company leverages technological innovation and industry expertise to deliver efficient and reliable drilling solutions. Its high-quality fleet, combined with disciplined operational and financial management, positions Valaris to achieve sustainable growth and remain competitive in the evolving offshore drilling market.
