Good day, and welcome to the Valaris Second Quarter 2024 Results Conference Call. All participants will be in listen-only mode. Please note, this event is being recorded. I would now like to turn the conference over to Nick Georgas, Vice President Treasurer and Investor Relations. Please go ahead.

Welcome, everyone, to the Valaris second quarter 2024 conference call. With me today are President and CEO, Anton Dibowitz; Senior Vice President and CFO, Chris Weber; Senior Vice President and CCO, Matt Lyne, and other members of our executive management team. We issued our press release, which is available on our website at valaris.com. Any comments we make today about expectations are forward-looking statements and are subject to risks and uncertainties. Many factors could cause actual results to differ materially from our expectations. Please refer to our press release and SEC filings on our website that define forward-looking statements and list risk factors and other events that could impact future results. Also, please note that the company undertakes no duty to update forward-looking statements. During this call, we will refer to GAAP and non-GAAP financial measures. Please see the press release on our website for additional information and required reconciliations. Earlier this week, we issued our most recent Fleet Status Report, which provides details on contracts across our rig fleet. An updated investor presentation will be available on our website after the call. Now, I’ll turn the call over to Anton Dibowitz, President and CEO.

Thanks, Nick, and good morning and afternoon to everyone. During today's call, I will begin with an overview of our performance during the quarter and provide an update on the offshore drilling market. I will then hand the call over to Matt to discuss the floater and jackup markets in more detail and provide some additional insights on recent contract awards as well as our contracting outlook. After that, Chris will discuss our financial results and guidance before I finish with some closing comments. To begin, I want to highlight some key points about our business that we will cover in more detail during this call. First, in the second quarter, we built on a great start to 2024 and would like to congratulate the entire Valaris team on delivering another excellent quarter of safety, operating, and financial performance. Second, we continue to execute our commercial strategy, securing attractive new contracts and building our backlog. This past quarter marks the seventh consecutive increase in our backlog, which now totals more than $4.3 billion. Third, we maintain our conviction in the strength and duration of this upcycle and see strong customer demand for projects that are expected to commence in 2025 and 2026. Turning to operations. Our success continues to be built on the foundation of strong safety and operating performance. In the second quarter, we delivered fleet-wide revenue efficiency of 99% without a lost-time incident, a remarkable achievement by the entire Valaris team. This achievement is even more impressive considering that we had several rigs either starting new contracts or changing operating locations during the quarter, including Valaris DS-7 following its reactivation, DS-17 moving countries to drill a frontier exploration well in Argentina, and the Stavanger and 123 commencing new contracts in the North Sea following out-of-service periods for contract preparation and survey work. In addition, we had several rigs celebrate safety milestones during the quarter, and I would like to congratulate the Valaris 249 team for reaching two years without a recordable incident as well as the Valaris DS-10 and 106 teams for each reaching one year without a recordable incident, well done to everyone involved. We also continued to build on our strong track record of reactivating rigs for contracts that benefit our financial results by returning Valaris DS-7, one of our seventh generation drillships to work on a long-term contract offshore West Africa. The DS-7 reactivation project was delivered on time and began its contract on schedule, marking our sixth drillship reactivation completed since 2022. Successfully reactivating rigs for attractive contracts has played a large part in our earnings growth story, and we still have organic growth capacity to meet increasing customer demand with Valaris DS-11, DS-13, and DS-14, the highest specification drillships in the global fleet that have yet to be reactivated. Moving to our financial performance. Adjusted EBITDA increased to $139 million in the second quarter, up meaningfully from $54 million in the first quarter. Adjusted EBITDA, adding back one-time reactivation costs was $150 million. These results were better than our guidance, primarily due to the team achieving 99% revenue efficiency during the quarter, certain contracts extending longer than previously anticipated, and the timing of costs that are not expected to be recognized in subsequent quarters. Chris will provide further details on our financial results and guidance a little later. Turning now to the broader offshore drilling market. The combination of increasing global demand for hydrocarbons and OPEC+ effectively managing supply has led to relatively stable oil prices so far this year, with spot Brent crude prices largely trading above $80 per barrel. Looking out further, the five-year Brent forward price is around $70 per barrel, a level at which more than 90% of undeveloped offshore reserves are expected to be profitable. As a result, commodity prices remain very supportive for continued investment in long-cycle offshore projects. In addition, leading indicators of offshore rig demand, including global upstream CapEx and project sanctioning, are expected to see strong growth over the next few years, bolstering our view that we are in a structural upcycle. According to Rystad, deepwater upstream CapEx is expected to increase at a compound annual growth rate of 9% over the next three years, which is anticipated to drive further growth in floater demand. Average day rates for drillships have continued to increase compared to six and 12 months ago. Just past the halfway point of this year, we have already seen six fixtures above $500,000 per day compared to just two for all of last year, and these fixtures have spanned the U.S. Gulf of Mexico, Brazil, West Africa, and Asia, demonstrating broad-based growth in customer demand. The strength of the market is further demonstrated by our recently announced multiyear contract for Valaris DS-17, which added nearly $500 million of contract backlog at a leading-edge day rate. This contract includes a standby period where the customer will pay day rates to keep the rig while they wait to commence their new drilling program. This new contract is a testament to the quality of our crews and operations, the capabilities of the rig, and the collaborative nature of our relationship with Equinor, who have invested significantly in innovative safety and automation technology on the DS-17. Our priority remains maximizing the profitability of our fleet by keeping our active rigs highly utilized and securing the best contract economics possible. With this in mind, we are laser-focused on filling as many uncontracted days in 2024 as we can and securing term work commencing in 2025 and beyond that will further support our expected earnings and cash flow growth. Moving to shallow water, the benign environment jackup market remains tight with marketed utilization of 93%. Several rigs from the first round of Saudi Aramco suspensions earlier this year have already made an orderly transition into the international benign environment jackup market, and leading-edge day rates are still above $150,000 per day as evidenced by recent fixtures. The working rig count offshore Saudi Arabia is anticipated to move slightly lower going forward with up to five additional rigs expected to be suspended. In connection with the second round of suspensions, Saudi Aramco recently received notices for Valaris 147 and 148. Discussions are ongoing with Aramco regarding other Valaris-leased rigs where our owned rigs could be subject to the suspensions instead of Valaris 147 and 148, along with the effective date for these suspensions. While we currently estimate the suspensions could adversely impact our full year 2024 EBITDA by up to $10 million, these two contracts represent just $35 million of our $4.3 billion in contract backlog. Taking a step back, the suspension of up to five additional rigs by Saudi Aramco does not change our view of the market as they represent approximately 1% of the global marketed jackup fleet. For harsh environment jackups, the supply/demand balance in the North Sea improved meaningfully in the latter half of 2023. Our rigs are fully contracted for 2024, and we currently have less than one rig year of availability across our nine active rigs in the region in 2025. We see strong customer interest for programs that line up well with this limited availability. Before I finish, I'd like to briefly comment on our capital return objectives. With positive industry fundamentals driving increasing day rates and contract durations, we're in a strong market to be adding contract backlog. As I noted earlier, we continue to make major strides on this front, which supports our earnings and cash flow growth. Looking ahead, we expect to generate meaningful and sustained free cash flow in 2025 and beyond, and we intend to return all future free cash flow to shareholders unless there is a better or more value-accretive use for it. Now, I'll hand the call over to Matt to discuss the floater and jackup markets in more detail and to provide an overview of our recent contracting success and our contracting outlook.

Thanks, Anton, and good morning and afternoon, everyone. Since the beginning of the second quarter, we secured new contracts and extensions with associated contract backlog of approximately $715 million. These awards have increased our total backlog to more than $4.3 billion, a 42% increase compared to a year ago and our seventh consecutive quarter of backlog growth. Importantly, this growing backlog has been secured at higher day rates as seen in the increased average daily revenue within our quarterly results, and the average day rates included within our backlog. This is particularly evident for our drillship fleet. Over the past 12 months, drillship backlog has increased by nearly 50% to more than $2.5 billion. In addition, we have increased the average day rate for our drillships within backlog to $414,000 a day from $338,000 per day. These averages exclude the impact of meaningful upfront payments we have secured on several of our drillship contracts, and we expect the average day rate within our backlog to increase as we roll legacy day rate contracts to market rates. Our recent contract awards include a multiyear contract with Equinor offshore Brazil for drillship Valaris DS-17. We are pleased to have secured a new contract in direct continuation of the rig's current program at a very strong day rate. The customer's willingness to pay a standby rate while they wait to commence their new drilling program is a good indication of market strength as we look ahead to the second half of 2025 and 2026. Moving to shallow water. We have secured eight new contracts or extensions since the beginning of the second quarter, five of which were for rigs in the North Sea. These include a two-year program for Valaris 92 and approximately 300 days of work for Valaris Norway, securing work for both rigs for nearly all of next year and further enhancing our 2025 contract coverage in the region. In addition, we secured a one-year contract for Valaris 249 offshore Trinidad at a day rate in the high $100,000s, representing a 10% increase from our previous contract award in the region. Moving now to an overview of the major markets. Starting with floaters, the contracted benign environment float account reached 127 during the first quarter, its highest point since late 2016 and remains at this level during the second quarter. Marketed utilization of 86% for the benign environment floater fleet is at its highest point in nearly a decade. The strength of the market is evident in the day rates we have seen for recent contracts, particularly for high-specification seventh-generation drillships, which comprise 12 of the 13 drillships in Valaris' fleet. Average day rates for seventh generation drillship contracts have increased from approximately $450,000 in the second half of 2023 to approximately $480,000 in the first half of 2024. As Anton mentioned, we have seen an increasing number of fixtures above $500,000 in recent months. We continue to see a robust pipeline of opportunities for work commencing in the second half of 2025 and 2026. Looking at expected future demand and ongoing tenders, we are tracking approximately 30 floater opportunities with durations of at least one year, and the average firm duration for these opportunities is approximately 2.5 years. With the average lead-times and durations for programs extending, the timing of contract awards can be hard to predict. However, we are confident that we will see a high conversion rate as tenders become contract fixtures. We anticipate that roughly 20 of the 30 long-term opportunities that we are tracking will be awarded within the next 12 months, with several expected before the end of this year. We see the greatest number of opportunities for programs offshore Africa. We are currently tracking more than a dozen opportunities, including long-term tenders for work in several countries, including Nigeria, Angola, and Ghana. Taking Nigeria as an example, Rystad's forecast for deepwater CapEx through the end of the decade has more than doubled compared to their forecast just two years ago. This increased activity is expected to be primarily driven by IOCs, and we anticipate that we may see contract awards for at least one of these ongoing tenders before the end of the year, with a further two expected to follow in early 2025. Offshore Brazil, there are currently 36 floaters contracted, including four rigs that have yet to commence contracts. Petrobras now has three ongoing tenders: Hankador, Sepia, and a recently issued tender for up to four rigs across multiple fields. While most of these awards are likely to go to rigs that are already in country, these work scopes will keep many rigs occupied into 2028 and 2029, showing the longevity of customer demand in Brazil. In the Gulf of Mexico, we see several long-term opportunities on the radar and expect this market to remain fairly balanced with demand largely met by existing supply in the region. Outside of the major floater markets, we see potential for incremental demand from Suriname, which given its proximity to Guyana, could become a strong growth market over the next few years. In Namibia, we anticipate that the significant exploration success over the past couple of years could lead to some long-term development programs commencing later in the decade. Additionally, we have also seen an uptick in demand in Southeast Asia with several operators exploring opportunities that could require incremental rigs in the region. Moving to shallow water, the global jackup market remains in a healthy place. The contracted rig count has increased in Southeast Asia, India, China, and West Africa over the past six months. We have already seen at least six rigs that were suspended in Saudi Arabia earlier this year find work in other regions. We expect that the remaining suspended rigs that elect to seek work outside Saudi Arabia can be absorbed with limited impact on the broader market, and the expected suspensions of up to five additional rigs in Saudi Arabia do not alter our view. In the North Sea, market conditions continue to improve with all 20 active jackups in the U.K., Danish, and Dutch sectors currently contracted. During the first half of 2024, we saw an increase in the number of contracts and total number of rig years awarded compared to the same period last year. In addition, we have seen average day rates for new fixtures in the region increase to approximately $140,000 in the first half of 2024, up from $120,000 in the second half of 2023, with leading-edge day rates continuing to push higher. Customer interest remains strong, particularly for programs commencing in the second half of 2025. We are also encouraged by the increasing number of longer-term new energy and plug and abandonment programs that could result in incremental demand in this region. In terms of our contracting priorities, we continue to have 2024 availability on just two of our 13 active floaters. DPS 5 recently completed its contract with ENI offshore Mexico, and DS-10 will complete its contract with Shell offshore Nigeria in the coming days. We continue to see long-term opportunities for both rigs that are expected to start in the second half of 2025. In the meantime, we are actively pursuing short-term opportunities. At the time of our last call, we were in active customer discussions for opportunities for both rigs expected to start in the third quarter. Subsequently, these programs have either been delayed, seen their work scopes reduced, or been filled by sublets. Currently, the available short-term opportunities for these rigs commence in the fourth quarter. DS-12 is now expected to continue its current program with BP offshore Egypt into early next year, and the rig is well positioned for future opportunities, both offshore Africa and further afield. Given recent contracting and the anticipated exercise of priced options, we now expect that nearly 70% of the 2025 available days for our active floater fleet are spoken for. Aside from the three rigs I just mentioned, the only other floaters with available days in 2025 are DS-8, which is currently working for Chevron in the U.S. Gulf and our two semisubmersibles in Australia. We are already in active discussions regarding follow-on work for these rigs with either the existing customer or other operators with work programs that are expected to commence next year. In addition, we continue to see customer interest in our seventh generation drillships requiring reactivation, Valaris DS-11, DS-13, and DS-14, and we expect that the growing demand will provide increasingly attractive opportunities to put these rigs to work over time. Looking at 2025 for our benign environment jackups, we have availability on the Valaris 117, 118, and 247, and we expect to secure work for these rigs that will keep them busy next year. As Anton noted, discussions regarding recent suspension notices from Saudi Aramco are ongoing. While we do not know the exact form these suspensions will take, we are in discussions with Aramco on extensions for rigs that are due to complete their existing lease terms at the end of 2024 and/or early 2025. In terms of our North Sea jackups, as mentioned earlier, we recently secured additional work for five rigs in the region. With these contracts and options that we expect customers to exercise, we now see less than one year of availability across two of our active rigs during 2025. We entered 2024 with our active North Sea fleet fully sold out for the year ahead. Based on our discussions with customers, we anticipate being in a similar position before the start of 2025. In summary, we continue to focus on building contract backlog by securing attractive contracts at increasing day rates. We remain laser-focused on filling as many uncontracted days in 2024 as we can and securing term work commencing in 2025 and beyond that will further support our expected earnings and cash flow growth. I will now hand the call over to Chris to take you through the financials.

Thanks, Matt, and good morning and afternoon, everyone. In my prepared remarks, I will provide an overview of the second quarter results, our outlook for the third quarter, and our guidance for the full year. Starting with our second quarter results. Revenue was $610 million, up from $525 million in the prior quarter, and adjusted EBITDA was $139 million, up from $54 million in the prior quarter. Adjusted EBITDAR, which adds back reactivation expense, was $150 million, up from $84 million in the prior quarter. Adjusted EBITDA increased meaningfully in the second quarter primarily due to higher utilization and average daily revenue for both the floater and jackup fleets, along with lower contract drilling expense. In the second quarter, floater revenues increased due to a full quarter of operations for Valaris DS-12 and DPS 5, which both commenced contracts during the first quarter, along with DS-7, which commenced operations offshore West Africa in late May, following the successful completion of its reactivation project. Additionally, Valaris DS-15 and DS-16 started new higher day rate contracts in the second quarter, contributing to an increase in average daily revenue. Jackup revenues increased primarily due to higher utilization, including a full quarter of operations for Valaris 107, which commenced a contract offshore Australia during the first quarter. Moreover, Valaris 123 and Stavanger started new contracts in the North Sea during the second quarter, following out of service time in the first quarter while the rigs were undergoing contract preparation survey work. Contract drilling expense decreased in the second quarter, particularly due to lower reactivation expense for DSV as it completed its reactivation project. Additionally, we incurred lower repair and maintenance expenses for the jackup fleet as rigs returned to work following out of service time for contract preparations and survey work in the first quarter. These items were partially offset by increased operating costs for the floater fleet due to higher utilization and costs to stack Valaris DS-13 and DS-14. Our second quarter EBITDA came in better than our guidance, primarily due to three factors: strong operating performance as we achieved 99% revenue efficiency; certain contracts, including DS-10 and DPS 5, running longer than expected; and the timing of certain costs pushing into the second half of the year, mainly the third quarter. This cost timing drove roughly half of the outperformance versus guidance and is primarily attributable to the timing of mobilizations and demobilizations and repair and maintenance spend. Moving to our financial position. We had cash and cash equivalents of $410 million at the end of the quarter. Cash declined by $99 million during the quarter, primarily due to capital expenditures of $110 million, partially offset by cash generated from operations of $12 million. In the second quarter, operating cash flow was negatively impacted by a large build in working capital, primarily due to an increase in accounts receivable driven by higher fleet utilization and the start-up of the DS-7 contract. Our $375 million revolving credit facility remains fully available, providing total liquidity of $785 million at the end of the quarter. Moving now to our third quarter outlook. We expect total revenues in the range of $610 million to $630 million, contract drilling expense of $455 million to $465 million, and G&A expense of approximately $30 million. Adjusted EBITDA is expected to be $120 million to $140 million compared to $139 million in the second quarter. EBITDA is expected to move lower due to the DPS-5 and DS-10 being idle for the rest of the quarter after completing their latest contracts, the impact of costs that have shifted from the second quarter to the third quarter, out of service time and repair costs for jack-up Valaris 249, and the potential impact of Saudi Aramco contract suspensions for Valaris 147 and 148. These items are expected to be partially offset by a full quarter of operations for DSV, the recent commencement of the Valaris 247 contract in Australia following its mobilization from the North Sea, and the DS-15 and DS-16 operating at higher day rates for a full quarter. Regarding the Valaris 249, the rig recently incurred leg damage while moving off location in advance of its next contract. We currently estimate that the rig will be out of service for several weeks to complete the required repairs, and that the total financial impact, inclusive of out-of-service time and repair costs, will range from $5 million to $10 million. For the Valaris 247, I also want to flag that the mobilization revenue and expense associated with its move from the North Sea to Australia will be largely recognized during the third quarter because it will be amortized over the rig's initial 100-day contract, which commenced in mid-July. Total CapEx in the third quarter is expected to be $90 million to $100 million. Maintenance and upgrade CapEx is expected to be approximately $85 million, including spend related to the start of the Valaris 144 upgrade project prior to its long-term contract offshore Angola that is scheduled to commence early next year. Reactivation and associated contract-specific CapEx is expected to be approximately $10 million, primarily related to some trailing costs for DS-7. Turning to our full year outlook. We are lowering our full year EBITDA guidance range to $480 million to $540 million, with revenue in the range of $2.35 billion to $2.4 billion; contract drilling expenses of approximately $1.75 billion; and G&A expenses of approximately $115 million. We have updated the EBITDA guidance range primarily due to the current outlook for the DS-10 and DPS-5 in the second half of the year. As Matt mentioned, the current available opportunities for short-term gap fill work are now starting during the fourth quarter, which reduces our 2024 EBITDA potential. We need to secure work for one or both of the rigs in the fourth quarter to achieve the midpoint of the updated EBITDA range. Our guidance also reflects the expected financial impact of the Valaris 249 leg damage I previously discussed, as well as the potential impact of Saudi Aramco contract suspensions for Valaris 147 and 148, which, as Anton mentioned, could be up to $10 million this year. Full year 2024 capital expenditures are expected to total $450 million to $480 million. This is slightly higher than our prior guidance, primarily due to certain project-related costs being capitalized that were previously expected to be deferred expenses. As a reminder, we expect that approximately $55 million of our full year 2024 CapEx will be reimbursed through upfront customer payments, most of which is expected to be received in the second half of the year. Finally, we expect our free cash flow profile to improve in the second half of the year, driven by higher utilization in day rates and lower spend on reactivations and contract preparations. I want to conclude by stepping back and noting that we've had a great first half of the year. While there are a few discrete items impacting our results in the second half of the year, we are excited about the future, and the outlook for our business remains very strong. Now I'll hand the call back to Anton for some closing remarks.

Thanks, Chris. I want to reiterate some of the key points we covered today. First, I am proud of the strong safety, operating, and financial performance that we delivered through the first half of the year. Congratulations to the entire Valaris team on an excellent six months. Second, we maintain our conviction in the strength and duration of the subcycle and see strong customer demand for projects expected to commence in 2025 and 2026. Finally, we continue to execute on our strategy, securing new contracts at higher day rates that will support our expected earnings and cash flow growth over the next few years. We believe that Valaris is well-positioned to benefit from the strength and duration of this structural upcycle. We thank our employees, customers, and investors for their support. We've now reached the end of our prepared remarks. Operator, please open the line for questions.

We will now begin the question-and-answer session. The first question comes from Greg Lewis with BTIG. Please go ahead.

Yes. Hi. Thank you. Good afternoon, everyone. I was hoping we could talk a little bit about capital allocation and how you're thinking about managing or returning Valaris cash flows to shareholders. If we were to talk six to twelve months ago, I'm sure most of us on this call would have thought, hey, the DS-14, 13, and 11 are going to be reactivated because the market is that strong, and there's going to be CapEx associated with bringing those rigs on. Markets definitely improved, but as we think about the next 12 to 18 months and the rigs that are idle on the sidelines, whether it's Valaris or others, and just that CapEx that we're signing to reactivate those rigs, it's just going to be put on hold for a little while. Does that change the way you think about your capital allocation? Does that provide an opportunity for you to accelerate returning cash to shareholders over the next 12 to 18 months?

Yeah, it's a good question, Greg. Look, we've been very clear about our capital return thoughts and how we were going to demonstrate that to shareholders. We returned capital to shareholders last year. We've spent a significant amount of cash in the first half of the year, getting the 7% to work and are going to generate increasing amounts of cash as we roll legacy contracts onto new contracts. As we go into 2025, a real inflection point for us as a company. I don't think we feel differently about 13 and 14. There's a strong pipeline of opportunities, as we said, coming through in the latter half of 2025 and into 2026. In fact, we operate high specification 12 of our 13 ships or seventh generation, and we can see a call on those assets evolving in the second half of next year and going into 2026. So we still see great opportunities for the 13 and 14 going forward. But we've been very clear on our capital return philosophy when we're generating cash, and we're heading in that direction over the next period, and we're going to return it all to shareholders. We have capacity available under our authorization right now. When we put in place, we said it would not be necessarily linear through the year, and we're going to be opportunistic in it. And we will look with that commitment, and we intend to return cash to shareholders.

Great. Yes, that makes a lot of sense. In one indication of the market tightening for the high-end drillship sector, you successfully contracted the DS-17, where the customer agreed to pay a standby rate to ensure the rig was ready when they needed to start drilling. Could you discuss the dynamics of the DS-17 and how that rig was positioned to earn a favorable standby rate for a couple of quarters while it waits for its next job?

Absolutely. As I just said in my answer to your capital question, we see a strong pipeline in 2025 and going into 2026, a tight market for the high-specification assets. The DS-17 is a very high-specification asset. Equinor is a great customer. We had a great partnership with it. The crews have done an excellent job on the Bakala development with that rig. They partnered with us and invested significant amounts of money into the rig on innovative technology. We have thematic robotic arms on it and a lot of automation on that rig. So they have confidence in the rig to meet their higher development goals. They have confidence in the rig to deliver that development. I think it's a testament to where the market is going, having good customer relationships, and operators recognizing where the market is going to be in the latter half of next year and going into 2026 that for the right asset, they are willing to invest and spend money to secure the assets so that it's available to them. I think that's a great signal of where we see the market going.

Perfect. Thank you very much for the time.

The next question comes from Eddie Kim with Barclays. Please go ahead.

Hi. Good morning. I just wanted to follow up on that DS-7 contract. I mean, as Greg alluded to, the standby rate for 180 days is probably the longest paid standby period we've seen maybe since the 2014 downturn. It does look like it could be a strong read-through for your other reactivated rigs. Would you say operators for your other reactivated floaters have invested maybe a similar amount as Equinor did on the DS-17, or was that investment into the DS-17 something more elevated and a one-off compared to the others?

No. Equinor is a very forward-leaning technology company. A lot of that technology automation desire comes out of the North Sea, Norway, in particular. They invested capital in the rig to implement advanced automation technologies. I think the real reading is the timing of that and when that program is going to start up and where we see robust opportunities coming into the market. Matt referenced in his prepared remarks that there are 30 opportunities, and potentially 20 of those will be awarded in the next 12 months. As we roll forward a year from now, seeing that once the high-spec assets, like the DS-17, are taken up, there is good potential for a call on additional assets. That’s why we feel confident about the 11, 13, and 14. Considering that a reactivation takes about a year, we remain in discussions with those customers regarding those rigs. We are not in a rush, as those assets will increasingly be called on, and we will wait for the right opportunity. We believe these opportunities will become more appealing as time progresses, especially when we line them up against the pipeline of opportunities in late 2025 and early 2026.

Got it. My follow-up is just on the two jackup suspension notices for Valaris 147 and 148. You mentioned that discussions are ongoing regarding whether other Valaris-leased rigs could be suspended instead. Could you give us more insight? I know you have other rigs that are expected to come off contract earlier than the 147 and 148. Is that really the main factor here, or is there something else? Also, just to clarify, I believe I heard you say you expected around five more jackups suspended from Saudi across their fleet, which would bring the total in this second round to around seven suspended jackups. Did I hear that correctly?

Yes. Let me start off. We've just received these notices last week. While the notices were received for the two leased rigs, the 147 and 148, we are in productive, constructive discussions with Aramco. We may consider suspending another leased rig or an Aramco-owned rig. We need to see how these discussions develop, including which rigs may be suspended and the timing, which still needs to be determined. Taking a step back from these specific rigs, yes, we expect five suspensions based on market discussions. For context, these two rigs, if it were those two, represent about $10 million of EBITDA, which is included in the adjustments we've made this year, but this is $35 million of backlog out of $4.3 billion for Valaris. The suspension of five additional rigs by Saudi Aramco does not change our view of the market since they represent about 1% of the global marketed jackup fleet. Currently, we have 93% utilization, and several rigs from the first series of suspensions earlier this year have successfully transitioned into the international market. We see leading-edge day rates in the benign jack-up markets still above $150,000 a day, as evidenced by fixtures from us and others in the market. This is not a fundamental change in the jackup market as we see it, and we feel confident about the jackup market. Those rigs that are competitive in the international market will continue to transition orderly.

Yes. Just to be really clear, we received decisions for two rigs, and the discussions we're having are about which rigs, not if. It's more about which rigs may be suspended.

Understood. Thanks for that color. I'll turn it back.

The next question comes from Kurt Hallead with Benchmark. Please go ahead.

Hey, good morning, everybody. Thanks so much for the color.

Good morning, Kurt.

Hey, Kurt.

I wanted to explore further. You mentioned the market dynamics and the segmentation of the floater market. We've already heard from one of your peers this morning. So I just want to clarify. Considering everything, what do you anticipate the net incremental demand for seventh generation deepwater rates could be through 2026?

Hey, Kurt, Matt here. If you remember from my prepared remarks, we are seeing around 30 opportunities that are longer than a year in duration, and the average of those is about 2.5 years. If you are putting a number on it, you are likely to see about 10 of those 30 provide potential incremental opportunities. Now, that's incremental to the region, and I think your question is breaking it down into seventh generation. Obviously, we know that customers have a preference for seventh generation rigs, and 12 of our 13 drillships are seventh generation rigs. So I think 10 incremental potential, but I wouldn't suggest that all 10 would be filled by sidelined capacity.

What I will say is as we roll forward, we anticipate that over the next 12 months, there will be good opportunities for those high-spec rigs. We're in a fortunate position with 12 of our 13 ships being seventh generation, and we still have seventh generation organic capacity available to grow into a market that we see as highly constructive. All that being said, we will be open to opportunities, and if it makes sense, creates value, and is accretive to shareholders, we will absolutely engage in M&A. There is definitely room for more of it in this business.

All right. Appreciate it. Thank you.

Thank you, Kurt.

The next question comes from David Smith with Pickering Energy Partners. Please go ahead.

Hi. Good morning.

Good morning, Dave.

Congratulations on the solid quarter and the solid jackup contracts in particular, really nice rate off Trinidad. I wanted to ask if this was an agreed-upon rate before April or just a confirmation of the point you've made in the past that some markets will see minimal or no direct competition from the Saudi suspensions.

Yes, it's the latter. The discussion continued until the contract was finalized and announced recently. That data point is known during and after the first round of Saudi suspension. So you're right; it indicates that certain markets and some customers are focused on securing top-end assets for their future developments.

Great. And one follow-up. We've seen lead times for all border rig contracts shrinking versus last year outside of the Gulf of Mexico at least. We can't see your negotiations for contracts, but I wanted to ask if your discussions are also reflecting shrinking lead times compared to last year, so maybe we shouldn't be too nervous about a slower recent pace of contracting and implications for first half 2025 availability?

I'll start with the end of your question. I mean, we are not concerned about the pace of contracting. Contracting in this business is not linear throughout the year. We need to be careful when looking at data; it may be as much a mix question as it is a general trend question. Different geographies have very different contract lead times and execution times depending on whether you are looking at Petrobras in Brazil or West Africa negotiations involving NOCs. So there can be a mix component, a geography component. Overall, we see lead times increasing, especially where we expect to see strong demand; we expect supply and demand dynamics to shift late 2025 and into 2026. All of this encourages us to be constructive about the marketplace.

Really appreciate the color. Thank you.

Thank you.

This concludes our question-and-answer session. I would like to turn the conference back over to Nick Georgas for any closing remarks.

Thanks, Drew, and thank you to everyone on today's call for your interest in Valaris. We look forward to future discussions.

Just one moment. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.