New Discovery in Cyprus

Valaris Demand Implications + Cyprus Development Capex Growth

As we have argued for some time, when investing in a business such as Valaris the thesis is not predicated on a spot oil price, but rather on offshore capital expenditure itself. Companies like Exxon, Total, Chevron, and the like do not make multi-billion-dollar investments in offshore development projects based on a spot oil price. As time goes on and test wells are drilled this will entail more money spent on offshore capex to do development drilling, as well as the efforts associated with building out the formation at scale over a 2–3-year period. All of this to say more dollars spent to explore and bring on new supply are directly correlated to Valaris bottom line and while there is certainly more of those dollars in times of high oil pricing, that is not what drives the economic picture for Valaris through the cycle.

For those who are new to the offshore services space, it is worth noting that the vessels Valaris owns drill for both Oil and Natural Gas. I bring this up because most of the time when I mention Valaris and offshore drilling the first thing that comes to mind is oil production. Though oil economics are typically more lucrative for producers, natural gas exploration is an increasingly important industry so much so that in 2024 Valaris entered into a “Gas-only” project offshore Brazil on an 852-day charter.

Pegasus-1 Discovery