VAL

Valaris Ltd

$57.73 USD 4.1B market cap February 1, 2026

Valaris Ltd VAL BUFFETT / MUNGER / KLARMAN SUMMARY

1 SNAPSHOT

Price$57.73

Market CapUSD 4.1B

EVUSD 4.9B

Net DebtUSD 0.8B

Shares69.6M

2 BUSINESS

Valaris is the world's largest offshore drilling contractor, operating 49 rigs (15 high-spec floaters including 13 drillships, and 34 jackups) across six continents. The company provides mobile offshore drilling units to oil and gas companies for deepwater and shallow water exploration and production. Revenue is generated through day rate contracts typically ranging from 100 days to multi-year terms, with 7th-generation drillships commanding rates of $400-500K/day.

Revenue: USD 2.36B Organic Growth: 32.4%

3 MOAT NARROW

Scale advantage as largest fleet globally; 92% of drillships are 7th-generation (highest spec); high barriers to entry ($100M+ per rig, 5-year newbuild lead time); operational excellence with 98% revenue efficiency. However, service is ultimately commoditized with contracts re-bid and day rates market-driven.

4 MANAGEMENT

CEO: Anton Dibowitz (since 2019)

Disciplined approach: $300M in share buybacks at ~$57 avg; opportunistic DS-13/DS-14 acquisition for $348M at attractive prices; commitment to return all future FCF to shareholders unless better use. Heavy CapEx years for fleet upgrades and reactivations are necessary but temporarily depress FCF.

5 ECONOMICS

14.9% Op Margin

12.5% ROIC

USD (0.1)B FY24; inflecting positive 2025 FCF

1.16x Debt/EBITDA

6 VALUATION

FCF/ShareUSD 3.50 (2025E normalized)

FCF Yield6.1%

DCF RangeUSD 55 – 65

2025 EBITDA $585M growing to $750M by 2027; 12% WACC reflecting commodity exposure and high beta (1.18); normalized CapEx $200M/year; terminal multiple 8x EBITDA; no terminal growth assumption for cyclical business.

7 MUNGER INVERSION -27.5%

Kill Event	Severity	P()	E[Loss]
Oil price collapse below $50/bbl sustained	-60%	15%	-9.0%
Day rate decline in 2025-26 cycle	-25%	30%	-7.5%
FID delays extend beyond 2026	-20%	35%	-7.0%
Energy transition acceleration	-40%	10%	-4.0%

Tail Risk: Combined scenario of oil collapse + energy transition could cause permanent capital impairment of 70%+. However, deepwater production is lower carbon intensity than alternatives, and 5-year Brent forward of $70/bbl supports continued investment. Backlog provides 2-year buffer.

8 KLARMAN LENS

Downside Case

In the bear case, demand deferrals persist through 2026, day rates compress to $400K for 7th-gen drillships, and utilization falls below 80%. EBITDA would decline to $400-450M and shares could trade at 4x EBITDA ($35-40). Book value of $32 provides floor but would be tested.

Why Market Wrong

Market prices peak-cycle concerns while ignoring: (1) structural demand from Africa/Brazil deepwater development; (2) 68-74% discount to fleet replacement value; (3) three stacked 7th-gen drillships as free optionality; (4) FCF inflection in 2025 enabling shareholder returns.

Why Market Right

The 18x forward P/E may correctly price declining earnings ahead. Pabrai's 43% position reduction in Q3 2025 suggests smart money rotation. Offshore drilling remains commoditized with no true pricing power. Energy transition is a structural headwind regardless of pace.

Catalysts

Day rates sustaining above $500K; DS-11/13/14 reactivation contracts; accelerating offshore FIDs in Africa/Brazil; FCF positive enabling buyback acceleration or special dividend; potential industry consolidation.

9 VERDICT WAIT

B+ T2 Resilient

Strong Buy$40

Buy$45

Sell$90

Valaris is a high-quality offshore driller with the world's largest fleet, positioned in a structural upcycle. However, at $58 the stock offers insufficient margin of safety (0-10%) for a cyclical, capital-intensive business. WAIT for $45-50 entry which would provide 20-25% MOS, then accumulate 2-3% position. Pabrai's reduction warrants monitoring but may reflect sector rotation rather than thesis break.

🧠 ULTRATHINK Deep Philosophical Analysis

VAL - Ultrathink Analysis

The Real Question

What are we actually solving by investing in Valaris? We are making a bet on the persistence of hydrocarbon demand in a world where the energy transition narrative dominates public discourse, while the physical reality demands continued—and growing—offshore oil production.

The real question is not whether Valaris is a good company (it is, by offshore drilling standards). The question is whether we can own a capital-intensive, commoditized, cyclical business and sleep soundly while the world debates whether fossil fuels should exist.

This is fundamentally a contrarian bet against the narrative that fossil fuels are quickly becoming stranded assets. The 5-year Brent forward price at $70/bbl tells us something important: the actual buyers and sellers of oil contracts—not ESG departments or Twitter commentators—believe oil will be demanded and supplied for decades.

Hidden Assumptions

The market prices Valaris as if the following assumptions are true:

Peak cycle assumption: That current day rates (~$500K for 7th-gen drillships) represent a peak, and reversion is imminent. But the industry data suggests otherwise: deepwater project FIDs are accelerating, and the pipeline for 2026-2028 is robust. The "peak" may be the trough of a longer upcycle.
Fungibility assumption: That all drillships are essentially equivalent commodities. In reality, Valaris's 7th-gen fleet (92% of their drillships) commands meaningful premiums because they're more efficient, safer, and capable of complex operations. This is a hidden quality premium the market underweights.
Optionality is worthless: Three stacked 7th-gen drillships (DS-11, DS-13, DS-14)—the highest specification assets in the world—sit idle. At zero carrying cost (they're stacked), they represent call options on the upcycle that the market prices at effectively zero. If day rates rise and contracts materialize, each reactivation adds $100M+ in annual EBITDA.
The bankruptcy stigma persists: Valaris emerged from Chapter 11 in April 2021 with a pristine balance sheet—$7.1 billion in debt eliminated. Yet some institutional investors have policies against holding post-bankruptcy equities, creating artificial selling pressure that rational buyers can exploit.

The Contrarian View

For the bears to be right, several things must be true:

Oil demand must plateau or decline faster than supply: Current forecasts show demand growing through 2030 even in aggressive transition scenarios. Deepwater production is attractive precisely because it has lower decline rates and larger field sizes than onshore alternatives.
Capital discipline must break: The offshore drilling industry was nearly destroyed in 2015-2020 by overcapacity. Survivors learned the lesson. Newbuild orders remain minimal, shipyard capacity is constrained, and lead times are 5+ years. For oversupply to return, every survivor must simultaneously lose discipline.
Customers must stop drilling: The IOCs and NOCs have committed billions to offshore development in Africa, Brazil, Guyana/Suriname, and elsewhere. These are multi-year, multi-billion-dollar FIDs that don't get cancelled because day rates fluctuate. Deferred is not cancelled.
Mohnish Pabrai must be wrong: He accumulated Valaris to nearly 30% of his portfolio, then reduced 43% in Q3 2025. But he didn't exit—he rotated to Transocean, another offshore driller. This is sector conviction, not sector abandonment.

The bear case requires multiple improbable events occurring simultaneously. Possible, but not the base case.

Simplest Thesis

Valaris is the largest and best-positioned offshore driller in a structural upcycle, trading at 5x EBITDA and 68-74% discount to fleet replacement value, with three free options (stacked drillships) the market ignores.

Why This Opportunity Exists

The opportunity exists because of a confluence of rational and irrational factors:

Rational:

Cyclical uncertainty: The exact timing and magnitude of the upcycle is unknowable. Investors demand a discount for uncertainty.
Commodity exposure: Oil price correlation adds beta risk that diversified portfolios seek to minimize.
Capital intensity: Heavy CapEx years distort FCF, making headline numbers look worse than economic reality.

Irrational:

Post-bankruptcy stigma: Some investors can't or won't hold emerged bankruptcies regardless of current financials.
ESG exclusion: Many institutions have blanket bans on "fossil fuel" investments, reducing the buyer pool.
Pabrai signal: His position reduction was widely reported and may have triggered copycat selling.
Energy transition narrative: The zeitgeist says oil is dying. The physical reality says it's not—but narrative drives flows.

The mispricing will correct when:

FCF becomes visibly positive and growing (2025-2026)
Day rates prove durable above $450K
Stacked drillship reactivations demonstrate latent value
ESG orthodoxy moderates (already beginning)

What Would Change My Mind

I would abandon this thesis if:

Day rates collapse below $350K for 12+ consecutive months: This would indicate demand destruction, not deferrals. It would suggest the upcycle thesis is wrong.
Newbuild orders surge: If competitors begin ordering new rigs en masse, the supply discipline that underpins pricing power would be broken. Watch South Korean shipyards carefully.
Oil price falls below $55/bbl for 12+ months: This would impair deepwater project economics and trigger FID cancellations, not just deferrals.
Management pursues dilutive M&A: If Valaris deploys capital into acquisitions at cycle-peak multiples instead of buybacks/dividends, it would signal agency problems.
Major accident with negligence finding: An environmental disaster attributable to Valaris safety failures would impair the brand and invite regulatory scrutiny.

None of these are currently occurring. Monitor monthly.

The Soul of This Business

At its core, Valaris is a toll bridge on humanity's hydrocarbon addiction. As long as the world demands oil and gas, someone must drill for it offshore. Deepwater production will grow because onshore fields are depleting and deepwater has attractive economics at $70 oil.

The competitive position is inevitable in the medium term because:

The fleet cannot be replicated quickly (5+ year lead times)
New entrants face $500M+ capital requirements per rig
The incumbents are disciplined after near-death experiences
7th-gen technology provides real operational advantages

The position is fragile in the long term because:

Energy transition will eventually reduce demand (30+ year timeframe)
Technology could disrupt (autonomous drilling, AI optimization)
Commodity exposure means earnings will always be volatile
No true moat—just scale and quality advantages

The investment insight: This is not a forever stock. It is a 3-5 year special situation—a post-restructured, counter-narrative cyclical play with asymmetric upside. The time to own it is during the upcycle when cash flows are strong and the market underestimates duration. The time to sell is when day rates peak and newbuilds start ordering.

The current moment is neither the ideal entry (insufficient margin of safety at $58) nor the exit (cycle has years to run). Wait for $45-50, accumulate patiently, and ride the wave to $75-90. Then exit before the cycle turns.

This is not about owning a great business. It is about owning the right business at the right price at the right time. Valaris passes two of three tests. Wait for the third.

"The stock market is a device for transferring money from the impatient to the patient." — Warren Buffett

Patience is the strategy. $45-50 is the target. Time is our friend.

Executive Summary

Investment Thesis (3 Sentences)

Valaris is the world's largest offshore drilling contractor with 49 rigs (15 floaters, 34 jackups), emerged from bankruptcy in April 2021 with a clean balance sheet after eliminating $7.1 billion in debt. The company is positioned at the sweet spot of an offshore drilling upcycle with 7th-generation drillship day rates reaching $500,000+ and a $4.7 billion contract backlog providing visibility through 2028-2030. At 5.25x EV/EBITDA and 1.67x book value with 17% ROE, the stock offers compelling value for a capital-intensive cyclical with strong leverage to deepwater spending growth.

Key Metrics Dashboard

Metric	Value	Comment
P/E (TTM)	10.5x	Reasonable for cyclical
EV/EBITDA	5.25x	Discount to fleet replacement value
P/B	1.67x	Modest premium to book
ROE	17.2%	Solid returns
Net Debt/EBITDA	1.16x	Conservative leverage
FCF Yield (2025E)	5%+	Inflecting positive
Backlog	$4.7B	2+ years revenue visibility
Fleet Utilization	87%	Room to improve

Decision and Sizing

Recommendation: WAIT / ACCUMULATE on pullback Target Entry: $45-50 (20-25% below current) Position Size: 2-3% (cyclical nature limits sizing) Catalyst: Continued day rate improvement, fleet reactivations, FCF inflection Timeline: 12-24 months

Phase 0: Opportunity Identification (Klarman Framework)

Why Does This Opportunity Exist?

Post-Bankruptcy Stigma: Valaris emerged from Chapter 11 in April 2021 after eliminating $7.1 billion in debt. Some investors avoid post-bankruptcy equities despite clean balance sheets.
Cyclical Industry Fear: Offshore drilling is highly cyclical; memories of 2015-2020 industry depression linger. Market may underappreciate the structural upcycle underway.
Commodity Price Sensitivity: Oil price volatility creates uncertainty despite 5-year Brent forward at ~$70/bbl supporting offshore economics.
Pabrai Position Reduction: In Q3 2025, Pabrai reduced his Valaris position by 43% while building a Transocean position - suggesting possible sector rotation rather than thesis break.
Saudi Arabia Headwinds: Aramco contract suspensions created uncertainty in the jackup market, though impact on Valaris was minimal (~$10M EBITDA).

Source of Potential Mispricing

The market may be:

Pricing peak-cycle earnings despite structural demand drivers (deepwater FIDs, Africa development)
Undervaluing the fleet at 66-75% discount to $15-19B replacement value
Ignoring 3 stacked 7th-gen drillships (DS-11, DS-13, DS-14) representing upside optionality
Focusing on short-term demand deferrals rather than 2026+ pipeline

Phase 1: Risk Analysis (Inversion Thinking)

Top 10 Ways This Investment Could Fail

#	Risk	P(Event)	Impact	Expected Loss	Mitigation
1	Oil price collapse (<$50 sustained)	15%	-60%	-9.0%	5yr forward at $70; deepwater breakevens improving
2	Day rate decline in 2025-26	30%	-25%	-7.5%	Backlog provides buffer; 70% 2025 floater days contracted
3	Rig oversupply from newbuilds	10%	-30%	-3.0%	Limited newbuild capacity; 5-year lead time
4	Major accident/environmental disaster	5%	-50%	-2.5%	Strong safety record; insurance coverage
5	Aramco further cuts jackup demand	25%	-15%	-3.75%	Only 5% backlog from ARO; diversified globally
6	FID delays extend beyond 2026	35%	-20%	-7.0%	Projects deferred not cancelled; pipeline robust
7	Energy transition accelerates	10%	-40%	-4.0%	Offshore lower carbon intensity than alternatives
8	Management capital misallocation	10%	-20%	-2.0%	Track record solid; share buybacks at reasonable prices
9	Geopolitical disruption (West Africa)	15%	-15%	-2.25%	Fleet diversified across regions
10	Interest rate / refinancing risk	10%	-10%	-1.0%	2028 notes; manageable debt load

Total Expected Downside (Non-Additive): ~15-20%

Inversion Section

How could this investment lose 50%+ permanently?

Sustained oil price below $50/bbl eliminating offshore economics
Rapid energy transition rendering deepwater assets stranded
Industry-wide day rate war if demand fails to materialize

What would make me sell immediately (non-price triggers)?

Major environmental disaster attributable to Valaris negligence
Management pursuing dilutive M&A at cycle peak
Day rates falling below $350,000 for 7th-gen drillships for 12+ months
Debt-to-EBITDA exceeding 3x

3-Sentence Bear Case: Offshore drilling is a commoditized, capital-intensive business with boom-bust cycles. Current day rates of $500,000 represent near-peak levels that will compress as demand deferrals persist and stacked rigs return to market. The 18x forward P/E suggests the market already prices improvement, leaving little upside.

Can I state the bear case better than the bears? Yes. The bears focus on:

Forward P/E of 18x vs trailing 10.5x implies earnings decline priced in
Mohnish Pabrai reducing position 43% in Q3 2025
Day rate stagnation through late 2025 before potential 2026 recovery

Phase 2: Financial Analysis

ROE Decomposition (DuPont)

Component	FY2024	FY2023	Trend
Net Profit Margin	15.8%	1.4%*	Improving
Asset Turnover	0.53x	0.41x	Improving
Financial Leverage	1.97x	2.02x	Stable
ROE	17.2%	~1%*	Strong improvement

*FY2023 excluding tax benefit

Owner Earnings Calculation

FY2024 Owner Earnings:
Net Income:                    $373M
+ D&A:                         $122M
- Maintenance CapEx (~60%):    ($273M)
- Working Capital Change:      ($50M est.)
= Owner Earnings:              ~$172M

Owner Earnings/Share:          $2.36
10x Multiple:                  $23.60 (floor)
15x Multiple:                  $35.40 (fair)

Note: Heavy CapEx years distort; normalized CapEx ~$200M/year
Normalized Owner Earnings:     ~$300M
10x Multiple:                  $41
15x Multiple:                  $61

Valuation Trinity

1. Liquidation Value (Floor)

Tangible Book Value:           $2,239M (BV = TBV, no goodwill)
/ Shares Outstanding:          69.6M
= Book Value per Share:        $32.16

Fleet Replacement Value:       $15-19B (industry estimates)
Current Enterprise Value:      $4.9B
Discount to Replacement:       68-74%

2. DCF Valuation (Conservative)

Assumptions:

2025 EBITDA: $585M (midpoint guidance)
2026 EBITDA: $700M (day rate improvement)
2027-2030 EBITDA: $750M avg (cycle normalization)
Terminal growth: 0% (cyclical, capital-intensive)
WACC: 12% (high beta, commodity exposure)
Maintenance CapEx: $200M/year

DCF Calculation:
Year    EBITDA   CapEx   FCF     PV Factor   PV
2025    $585M    $370M   $215M   0.89        $191M
2026    $700M    $250M   $450M   0.80        $360M
2027    $750M    $200M   $550M   0.71        $391M
2028    $750M    $200M   $550M   0.64        $352M
2029    $750M    $200M   $550M   0.57        $314M
2030    $750M    $200M   $550M   0.51        $281M

PV of FCF (6 years):           $1,889M
Terminal Value (8x EBITDA):    $6,000M
PV of Terminal:                $3,060M
Less: Net Debt:                ($800M)
= Equity Value:                $4,149M
/ Shares:                      69.6M
= DCF Fair Value:              $59.60/share

3. Private Market Value

Recent offshore drilling M&A suggests:

6-8x EBITDA for high-quality fleets
Premium for 7th-gen drillship concentration

Private Market Value:
EBITDA (2025): $585M
Multiple: 7x (conservative)
EV: $4,095M
Less Net Debt: ($800M)
Equity: $3,295M
Per Share: $47

EBITDA (2026E): $700M
Multiple: 7x
EV: $4,900M
Less Net Debt: ($600M)
Equity: $4,300M
Per Share: $62

Valuation Summary

Method	Value/Share	vs Current ($57.73)	MOS
Book Value	$32	+81% premium	N/A
Owner Earnings (10x)	$41	+41% premium	N/A
Owner Earnings (15x)	$61	-5% discount	5%
DCF (Conservative)	$60	-4% discount	4%
Private Market (2025)	$47	+23% premium	N/A
Private Market (2026)	$62	-7% discount	7%

Intrinsic Value Estimate: $55-65/share Current Margin of Safety: 0-10% (insufficient for cyclical)

Phase 3: Moat Analysis

Moat Sources Assessment

Moat Source	Strength	Evidence	Durability
Scale	Moderate	Largest fleet (49 rigs); operational leverage	10+ years
High Barriers to Entry	Strong	$100M+ per rig; 5-year newbuild lead time	15+ years
Switching Costs	Low	Commoditized service; contracts re-bid	N/A
Customer Relationships	Moderate	Long-term contracts with IOCs	5-10 years
Fleet Quality	Strong	92% of drillships are 7th-gen	10+ years

Moat Width: NARROW

The offshore drilling industry is ultimately commoditized - rigs are mobile, contracts are re-bid, and day rates are market-driven. Valaris has competitive advantages from scale and fleet quality but lacks true pricing power or customer lock-in.

Key Moat Metrics:

Market Share: #1 globally by fleet size
Day Rate Premium: 7th-gen drillships command 20%+ premium over older assets
Revenue Efficiency: 98% (Q3 2024) - best-in-class operations
Backlog Duration: ~2 years of revenue visibility

Moat Durability Forces

Threat	Severity	Timeline	Company Response
Newbuild supply	Low	5+ years	Limited shipyard capacity
Technology disruption	Low	10+ years	Incremental improvements only
Energy transition	Moderate	15+ years	Deepwater lower carbon intensity
Competitor consolidation	Moderate	3-5 years	Scale advantage
Customer bargaining power	Moderate	Cyclical	Long-term contracts

10-Year Moat Trajectory: STABLE The moat is narrow but durable. High capital costs and long lead times prevent rapid supply response, while energy transition is a gradual headwind, not imminent threat.

Phase 4: Management & Incentive Analysis

Executive Team

Anton Dibowitz - President & CEO

Tenure: CEO since 2019
Background: Over 20 years in offshore drilling
Compensation: Base + bonus + equity (aligned with shareholders)

Capital Allocation Track Record

Use of FCF (2023-2024)	Amount	Assessment
Fleet maintenance/upgrades	~$500M	Necessary for competitiveness
DS-13/DS-14 acquisition	$348M	Opportunistic at attractive price
Share buybacks	$300M	At ~$57 avg, reasonable timing
Debt service	~$100M	Appropriate deleveraging

Capital Allocation Grade: B+

Positive: Disciplined reactivation; opportunistic acquisitions; buybacks
Concern: Heavy CapEx years reduce FCF visibility

Insider Activity

Insider ownership: 11.6%
No material insider sales noted
Share repurchases signal management confidence

Shareholder Return Commitment

Management explicitly states: "We remain committed to returning all future free cash flow to shareholders unless there is a better or more value-accretive use for it."

Phase 5: Catalyst Analysis

Catalyst	Timeline	Probability	Impact
Day rates sustain above $500K	2025-26	60%	+15%
DS-11/13/14 reactivation contracts	2026-27	50%	+20%
FCF inflection positive	2025	80%	+10%
Offshore FID acceleration	2026+	60%	+15%
Special dividend or buyback acceleration	2026	40%	+10%
Competitor acquisition (takeout)	2-3 years	20%	+30%

No Catalyst Assessment

If day rates stagnate and FIDs continue to be deferred:

Valuation support from backlog ($4.7B) and fleet value
Patient capital required; position size reduced
Downside protected by tangible assets

Phase 6: Decision Synthesis

Expected Return Probability Tree

Scenario	Probability	2-Year Return	Weighted
Bull Case (day rates rise, FIDs accelerate)	25%	+60%	+15%
Base Case (gradual improvement)	45%	+20%	+9%
Bear Case (demand defers, rates flat)	25%	-15%	-3.75%
Disaster (oil collapse, industry depression)	5%	-50%	-2.5%
Expected Return	100%		+17.75%

Position Sizing

Position Size = Base (3%) × (MOS/30%) × (Quality/100) × (1-Risk) × Catalyst

Where:
- Base Allocation: 3% (cyclical industry)
- MOS: 5% / 30% target = 0.17
- Quality Score: 70/100 (narrow moat, cyclical)
- Risk Score: 0.20
- Catalyst Multiplier: 0.85 (moderate catalysts)

Position = 3% × 0.17 × 0.70 × 0.80 × 0.85 = 0.24%

Insufficient MOS for position; WAIT for better entry.

Buy/Sell Price Levels

Level	Price	Rationale
Strong Buy	$40	30%+ below IV; compelling for cyclical
Buy	$45	25% MOS
Accumulate	$50	15% MOS; starter position
Current	$58	~0% MOS
Take Profits	$75	25% above IV
Sell	$90	50% above IV

Explicit Sell Triggers (Non-Price)

Thesis Break: Day rates fall below $400K for 7th-gen drillships for 12+ months
Moat Erosion: Market share loss to competitors; fleet age disadvantage
Management Failure: Dilutive M&A, excessive leverage, or capital misallocation
Industry Structure: Rapid newbuild orders signaling oversupply

Monitoring Metrics

Metric	Current	Threshold	Action if Breached
7G Drillship Day Rate	$500K	<$400K	Review thesis
Net Debt/EBITDA	1.2x	>2.5x	Reduce position
Fleet Utilization	87%	<75%	Review thesis
Backlog	$4.7B	<$3B	Reduce position
Oil Price (5yr forward)	$70	<$55	Review thesis

Final Recommendation

┌─────────────────────────────────────────────────────────────────┐
│                     INVESTMENT RECOMMENDATION                    │
├─────────────────────────────────────────────────────────────────┤
│ Company: Valaris Ltd             Ticker: VAL                    │
│ Current Price: $57.73            Date: February 1, 2026         │
├─────────────────────────────────────────────────────────────────┤
│ VALUATION SUMMARY                                                │
│ ┌─────────────────────────┬─────────────┬─────────────────────┐ │
│ │ Method                  │ Value/Share │ vs Current Price    │ │
│ ├─────────────────────────┼─────────────┼─────────────────────┤ │
│ │ Book Value              │ $32         │ +81% premium        │ │
│ │ Owner Earnings (10x)    │ $41         │ +41% premium        │ │
│ │ Owner Earnings (15x)    │ $61         │ -5% discount        │ │
│ │ DCF (Conservative)      │ $60         │ -4% discount        │ │
│ │ Private Market Value    │ $55         │ +5% premium         │ │
│ └─────────────────────────┴─────────────┴─────────────────────┘ │
│                                                                  │
│ INTRINSIC VALUE ESTIMATE: $55-65                                 │
│ MARGIN OF SAFETY: 0-10% (insufficient for cyclical)              │
├─────────────────────────────────────────────────────────────────┤
│ RECOMMENDATION:  [ ] BUY  [ ] HOLD  [ ] SELL  [X] WAIT          │
├─────────────────────────────────────────────────────────────────┤
│ STRONG BUY PRICE:         $40 (30% below IV)                    │
│ BUY PRICE:                $45 (25% below IV)                    │
│ ACCUMULATE PRICE:         $50 (15% below IV)                    │
│ FAIR VALUE:               $60                                    │
│ TAKE PROFITS PRICE:       $75 (25% above IV)                    │
│ SELL PRICE:               $90 (50% above IV)                    │
├─────────────────────────────────────────────────────────────────┤
│ POSITION SIZE: 0% now; 2-3% at $45-50                           │
│ CATALYST: Day rate improvement + FCF inflection (12-24 mo)      │
│ PRIMARY RISK: Demand deferrals persist; day rates compress       │
│ SELL TRIGGER: Day rates <$400K for 12+ months                   │
└─────────────────────────────────────────────────────────────────┘

Appendix: Sources

Primary Data Sources

AlphaVantage MCP: Financial statements, company overview
AlphaVantage MCP: Earnings call transcripts (Q2-Q4 2024)
SEC EDGAR: 10-K filings reference
Valaris IR: Fleet status reports, investor presentations

Web Research Sources

Key Assumptions

Oil price remains above $60/bbl supporting offshore economics
Offshore FIDs continue at elevated pace through 2028
Limited newbuild supply response (shipyard capacity constraints)
Management continues disciplined capital allocation

Analysis prepared following the Buffett-Munger-Klarman investment framework with inversion thinking, valuation trinity, and explicit sell triggers.