Susquehanna Initiates Neutral Rating on Valaris, Sees EBITDA Growth but Warns of Potential Floater Downtime in 2025

Susquehanna analysts initiated coverage on Valaris (NYSE:VAL) with a Neutral rating and a price target of $62 on the stock.

The analysts highlighted Valaris' position as the largest offshore drilling operator by rig count, spanning deepwater and shallow water markets across six continents. The analysts project strong EBITDA growth over the next few years as Valaris’ floating rigs transition from lower-rate legacy contracts to higher market rates. However, the analysts cautioned that the challenge of perfectly aligning new contracts with expiring ones increases the risk of downtime for floating rigs in 2025.

They forecast a 45% compound annual growth rate (CAGR) in EBITDA between 2024 and 2026, with free cash flow (FCF) improving from negative $64 million in 2024 to $526 million in 2026. Despite acknowledging Valaris' impressive growth potential, the analysts expressed a more conservative outlook than the consensus, citing uncertainty around the contract status of certain floating rigs.