second quarter 2026
Filed Aug 5, 2026Valaris Reports Second Quarter 2026 Results
Total operating revenues, operating income, net income and Adjusted EBITDA increased sequentially, supported by new drillship contract commencements and 98% revenue efficiency, while Middle East conflicts created approximately $30 million of negative Adjusted EBITDA impacts and pressured jackup and other operations.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total operating revenuesGAAP | $539.2 million | 16% | – |
| Revenues (exclusive of reimbursable revenues)GAAP | $502.3 million | 17% | – |
| Reimbursable revenuesGAAP | $36.9 million | 5% | – |
| Contract drilling expenses (exclusive of depreciation and reimbursable expenses)GAAP | $380.4 million | (12)%" | – |
| Reimbursable expensesGAAP | $35.1 million | (6)%" | – |
| Total contract drilling expenses (exclusive of depreciation)GAAP | $415.5 million | (11)%" | – |
| DepreciationGAAP | $44.6 million | (4)%" | – |
| General and administrative expensesGAAP | $27.2 million | (8)%" | – |
| Merger and integration expensesGAAP | $11.4 million | 16% | – |
| Other operating incomeGAAP | $2.8 million | nm | – |
| Total operating expensesGAAP | $498.7 million | (10)%" | – |
| Equity in earnings of AROGAAP | $10.6 million | 56% | – |
| Operating incomeGAAP | $51.1 million | 156% | – |
| Net incomeGAAP | $47.0 million | nm | – |
| Adjusted EBITDAnon-GAAP | $96.5 million | 45% | – |
| Revenue efficiencyother | 98% | – | – |
| Tax expenseGAAP | $34 million | – | – |
| Capital expendituresother | $106 million | – | – |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| FloatersMore operating days for VALARIS DS-17, DS-12 and DS-10 after DS-17 commenced a new contract late in the first quarter and DS-12 and DS-10 commenced new contracts during the second quarter. | $279.0 million | 45% | – |
| JackupsFewer operating days for VALARIS 117 following its contract completion and shipyard work, plus lower average daily revenues from lower day rate accommodation services provided by certain North Sea jackups. | $183.4 million | (6)% | – |
| ARORevenues were in line with the first quarter 2026. | $126.9 million | —% | – |
| OtherThe filing reported lower revenues exclusive of reimbursable items; it cited planned maintenance and contract preparation projects for VALARIS 250 and 116 and higher war-risk insurance costs in discussing the segment's expense increase. | $39.9 million | (4)% | – |
What drove it
- Three drillships recently commenced new contracts, with VALARIS DS-17 commencing late in the first quarter and VALARIS DS-12 and DS-10 commencing during the second quarter.
- Revenue efficiency was 98% during the quarter and year to date.
- The Company added more than $160 million of backlog for the North Sea jackup fleet.
- A gain on the sale of assets was $38 million, compared to a loss of $2 million in the first quarter.
- The pending business combination with Transocean is expected to close in the fourth quarter of 2026.
Concerns
- Ongoing conflicts in the Middle East negatively impacted Adjusted EBITDA by approximately $30 million, compared to $8 million in the first quarter.
- Jackup revenue declined due to VALARIS 117 downtime and lower average daily revenues for certain North Sea accommodation services.
- Jackup expenses increased with planned maintenance, leg repairs and a full quarter of war-related insurance costs.
- Tax expense increased to $34 million from $28 million in the first quarter 2026.
- The Company does not intend to hold future earnings conference calls or provide updates to forward-looking guidance in connection with the pending Transocean combination.
What to watch
- VALARIS 250 recommenced its bareboat charter contract in July.
- VALARIS 116 is expected to recommence its bareboat charter in the third quarter.
- Two additional drillships are set to commence new contracts before year-end.
- Insurance costs for war-related coverage are expected to be lower than those incurred in the first half of the year.
- The expected fourth-quarter 2026 closing of the pending business combination with Transocean.
Balance sheet and cash flow
- Capital expenditures of $106 million compared to $101 million in the first quarter 2026.
- Cash and cash equivalents decreased to $541 million as of June 30, 2026, from $578 million as of March 31, 2026.
- Cash and cash equivalents declined primarily due to capital expenditures, partially offset by cash flow from operations and proceeds from asset sales.
- Sale of long-term stacked jackups VALARIS 104 and 109 in June and July 2026, respectively, for total cash proceeds of $74 million.
Analysis
Valaris delivered sequential improvement in its reported results. Total operating revenues were $539.2 million, while revenues exclusive of reimbursable revenues were $502.3 million. Operating income was $51.1 million and net income was $47.0 million, compared with operating income of $20.0 million and a net loss of $(18.0) million in the first quarter. Adjusted EBITDA increased to $96.5 million from $66.7 million, and revenue efficiency was 98% during both the quarter and year to date.
The primary growth engine was the Floater segment, where revenues exclusive of reimbursable revenues were $279.0 million, up 45% sequentially. The increase reflected more operating days from VALARIS DS-17, DS-12 and DS-10 as those drillships commenced contracts. Floaters' operating income was $94.4 million and Adjusted EBITDA was $111.6 million. This improvement offset lower Jackups revenue, which fell 6% to $183.4 million amid fewer operating days for VALARIS 117 and lower day rate accommodation services from certain North Sea jackups.
Costs rose alongside activity and maintenance requirements. Contract drilling expenses exclusive of depreciation and reimbursable expenses were $380.4 million, compared with $340.4 million in the first quarter, reflecting incremental costs from the drillship startups, planned shipyard work and war-related insurance coverage. The quarter also included approximately $30 million of negative Adjusted EBITDA impacts from Middle East conflicts. The Company expects these adverse impacts to moderate in the second half as VALARIS 250 recommenced its charter in July, VALARIS 116 is expected to recommence in the third quarter, and war-risk insurance costs are expected to decline.
Cash and cash equivalents decreased to $541 million as of June 30, 2026, from $578 million as of March 31, 2026, primarily due to $106 million of capital expenditures, partially offset by operating cash flow and asset-sale proceeds. The fleet was high-graded through sales of VALARIS 104 and 109 for total cash proceeds of $74 million, and the Company added more than $160 million of North Sea jackup backlog. Valaris provided no formal financial guidance and said it does not intend to provide forward-looking guidance updates or hold future earnings calls while the Transocean business combination remains pending.
Management, verbatim
We successfully returned VALARIS DS-12 and DS-10 to work on schedule and on budget during the second quarter. With two additional drillships set to commence new contracts before year-end, these rig startups, together with continued strong operational execution across our fleet, are expected to drive further improvement in our financial performance over the remainder of the year.
Anton Dibowitz, President and Chief Executive Officer
We remain positive on the outlook for offshore drilling. The pipeline of deepwater contract opportunities remains robust, and we expect to see further awards across the industry, supported by favorable market fundamentals and strong customer demand for high-specification assets.
Anton Dibowitz, President and Chief Executive Officer
Not in the filing
stated, not guessed- Prior-year comparisons for reported financial and segment metrics
- GAAP diluted EPS and non-GAAP diluted EPS
- Gross profit and gross margin
- Operating cash flow amount
- Free cash flow
- Debt and net debt
- Share repurchases, dividends and other shareholder capital-return amounts
- Formal forward revenue, gross margin, operating expense or tax-rate guidance
- Prior-outlook guidance for comparison
AlphaAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.