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this is all the money i have after working full time in highschool at wendy's (literally) and all four years of college as a lab tech saving and investing as much as possible. I believe I’ll make a of minimum 2x off this investment.
valaris (val) is the largest offshore drilling contractor by fleet size, operating 53 rigs, including 18 floaters (13 drillships and 5 semisubmersibles) and 35 jackups. the company provides contract drilling services to major oil companies such as exxonmobil, chevron, bp, shell, petrobras, and equinor. following a downturn in the offshore drilling industry and a 2020 bankruptcy restructuring, valaris emerged with no long-term debt, a modernized fleet, and an improving financial position, allowing it to capitalize on the offshore drilling recovery.
offshore drilling fundamentals are improving as the supply of rigs has tightened significantly. a decade ago, the global offshore fleet consisted of approximately 300 vessels, but that number has now dropped to around 150, with only 120-130 of them actively operational. meanwhile, demand for offshore drilling has rebounded, leading to a sharp increase in day rates, which are the prices oil companies pay to lease a drilling rig per day. since 2022, drillship day rates have doubled from around $250k per day to $500k per day. during the last cycle, they peaked at $800k per day, and current market conditions suggest they could reach $900k per day. offshore drilling has also become more cost-competitive, with breakeven prices of around $40 per barrel, compared to $60 per barrel for most u.s. shale projects.
valaris has one of the strongest financial positions in the industry. unlike competitors such as transocean, which is burdened with over $6.5 billion in debt, valaris has zero long-term debt, giving it a major advantage in capital allocation and flexibility. despite its strong position, the company remains deeply undervalued. with an enterprise value of approximately $5.1 billion compared to an estimated $30 billion replacement cost for its fleet, valaris is currently trading at just 16 cents on the dollar relative to its assets. management has been actively repurchasing shares, reducing the share count by around 5% since 2021, and the company maintains a buyback yield of approximately 5%, further enhancing shareholder value.
valuation metrics further support the investment case. based on projected fcf, valaris is trading at a p/fcf of about 10x for 2025 and 4x for 2026. ev/ebitda ratio stands at around 5x for 2025 and is expected to drop to 3x in 2026, whereas industry peers typically trade at 8-10x. net asset value analysis suggests a target enterprise value of around $27 billion, implying a potential 7x upside from current levels.
if drillship day rates continue their upward trajectory and approach $900k per day, applying a peak-cycle nav multiple of 1.5x would imply an enterprise value of approximately $27 billion, which translates to a share price of around $500, representing a 10x return from current levels. in a more conservative scenario where day rates stabilize between $600k and $700k per day, a 1.25x nav multiple would still yield an enterprise value of $18 billion to $22 billion, implying a share price in the range of $250 to $350, or a 5-7x return. even in a bearish case where day rates hold at $500k per day, applying a 1.0x nav multiple would still result in an enterprise value of $14 billion to $18 billion, meaning the stock could reach $150 to $200 per share, offering a 2-3x return from current levels.
there are risks to consider, such as oil price volatility, which could affect offshore drilling demand. however, offshore projects now have lower breakevens than shale, making them more resilient to price fluctuations. execution risk is another factor, as management must continue optimizing capital allocation and fleet utilization. additionally, the market may take time to recognize the disconnect between valaris’s asset value and its current share price.
despite these risks, valaris presents one of the most compelling deep-value opportunities in the market. it is trading well below its asset value while benefiting from rising day rates, improving financials, and aggressive share buybacks. in a conservative scenario, the stock has 2-3x upside, while in a more bullish offshore drilling cycle, it could rise 5-10x from current levels. with strong industry tailwinds and a clean balance sheet, valaris offers an asymmetric risk-reward opportunity that is rare in today’s market.
i believe offshore drilling is the best investment opportunity over the next couple years and im all in.