Valaris Limited VAL secured a multi-year $300 million contract from Shell plc SHEL for its drillship VALARIS DS-8 for the development of oil and gas resources off the coast of Brazil. Notably, SHEL is an integrated energy major.
The drillship will provide drilling services for Shell’s Orca development. The recent addition of $300-million worth contract to its existing contract backlog of around $2.5 billion year to date reinforces its strong backlog profile. Awards like this not only boosts the company’s confidence but also help predict future cash flow over the coming years, bringing stability to the business model.
Valaris mentioned that this contract reflects both Shell’s confidence in its complex deepwater drilling capability and Shell’s increased interest in new offshore projects in Brazil. Such interests from international oil companies bode well for the future of oil and gas drilling companies.
The leading provider of offshore drilling services mentioned that this contract will span approximately 800 days with an option to extend the work by another year. The contract is scheduled for execution in the first quarter of 2027.
After securing this contract, VAL, with 15 high-spec floaters and 33 jackups, is likely to generate additional cash flows well into 2027 and beyond. Valaris, currently carrying a Zacks Rank #3 (Hold), is not only drawing customers’ interest but also aiming for investors’ attraction. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Since it is involved in offshore drilling services, VAL’s business is highly vulnerable to the volatility of commodity prices. Two other companies from the same space are Helmerich & Payne, Inc., HP and Transocean Ltd. RIG. Both Helmerich & Payne and Transocean Ltd. carry a Zacks Rank of 3.
Helmerich & Payne, headquartered in Tulsa, OK is a premier land drilling service provider.
Transocean like VAL is also a leading offshore drilling service provider.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Transocean Ltd. (RIG): Free Stock Analysis Report Helmerich & Payne, Inc. (HP): Free Stock Analysis Report Valaris Limited (VAL): Free Stock Analysis Report Shell PLC Unsponsored ADR (SHEL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).
Zacks Investment Research
