On August 5, Valaris Limited (NYSE:VAL) reported second-quarter results that swung from a first-quarter loss to a real profit, even as the company kept paying extra to operate in a war zone. The headline numbers: $539 million in revenue, $47 million in net income and $97 million in adjusted EBITDA, up from $67 million just three months earlier. Two idle drillships came back online during the quarter, and management says two more are on the way before year-end. Here is what the deepwater driller’s own numbers say about where things stand.
The Fleet Wakes Up
Net income reached $47 million in the second quarter, a sharp reversal from the $18 million loss posted in the first quarter, and adjusted EBITDA climbed to $97 million from $67 million over the same stretch. The improvement traces directly to two drillships, VALARIS DS-12 and DS-10, both returning to paying work on schedule and on budget. Floater segment revenue climbed to $279 million, up from $193 million, as those rigs and a third, DS-17, ramped into new contracts. Two more drillships are set to start new contracts before year-end, which should keep that climb going into 2027.
Valaris is also trimming the fleet rather than just running it. The company sold two long-stacked jackups, VALARIS 104 and 109, for a combined $74 million in cash during June and July, clearing idle assets off the books while adding to the cash pile. On the contracting side, the North Sea jackup fleet picked up more than $160 million in new backlog, adding to what the company calls industry-leading coverage through 2027. Layered on top of all that is the pending combination with Transocean, still on schedule to close during the fourth quarter of 2026, which management expects to bring cost synergies and a broader combined fleet.
The Costs That Won’t Quit
The same Middle East conflicts that Valaris frames as temporary took a bigger bite in the second quarter than the first, cutting adjusted EBITDA by about $30 million compared with $8 million in the prior quarter. Most of that came from a full quarter of war-related insurance premiums on jackups operating in the region, plus lower revenue while VALARIS 250 and 116 sat in shipyards for maintenance rather than earning day rates. Contract drilling expenses rose across both major segments, climbing to $380 million company-wide from $340 million, partly on the back of startup costs tied to the newly working drillships and higher repair bills.
Not every segment moved in the right direction either. Jackup segment revenue fell to $183 million, down from $196 million the previous quarter, as VALARIS 117 finished its contract early and went into the shipyard, and softer day rates hit some North Sea accommodation work. Cash on hand dropped to $541 million from $578 million even as capital spending climbed to $106 million, up from $101 million, and the Transocean deal is still generating its own costs, with $11 million in merger and integration expenses booked in the quarter. Tax expense increased too, to $34 million from $28 million, partly reflecting a shifting mix of income across jurisdictions.
The Skeptics Are Still Around
Hedge fund ownership of Valaris slipped to 49 funds in the most recent quarter from 52 the quarter before, a modest pullback in institutional interest. Short sellers have not backed off either, with short interest sitting at 11.10% of the float, a level that points to a real bear camp positioned against the stock. Shares trade at a forward price-to-earnings ratio of 29.07 as of September 4, pricing in a meaningful earnings recovery from here.
What Comes Next
Valaris heads into the back half of 2026 with more rigs working and a cleaner balance sheet than it had six months ago, and the pending Transocean combination adds a catalyst if it closes as planned in the fourth quarter. Management expects the Middle East cost drag to ease as VALARIS 250 and 116 return to work. Whether that easing shows up in the next set of numbers, alongside continued efficiency from the newly started drillships, will determine if this quarter’s turnaround marks the start of a trend.
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