VAL · Valaris
Conviction · Low · more likely to lag the S&P 500 over the next three months
Wrong if: a daily close above $94.69
Note written ·
Price against the kill line
11.1% clear of its kill line on the 13 November 2026 close.
How to read this
This note expects the shares to lag the market, so its kill line sits above the price: a close above the red mark would prove the view wrong. Prices run from low on the left to high on the right. The dot is where the stock closed on 13 November 2026, left of the mark while it is below the line; a dot right of the mark has closed through it.
The scale is stretched near the line, so close calls are easy to see. More than 8% from the line, the stock reads well clear, with a hollow dot to show the figure is off the drawn scale.
The kill line is the research note's own test. The portfolio sells on business facts, not on a price. How the portfolio decides
Three months against the kill line
Daily closes, to . Red: the kill line, a daily close above $94.69, on record since 11 November 2026. The shares are down 3.4% since the close; the S&P 500 is down 2.1% over the same sessions. Figures in the note can cover a different window.
Kill line
A daily close above $94.69, the 2 November 2026 close before the third-quarter results, which would show the shares leading the S&P 500; Transocean raising its preliminary 2027 contract drilling revenue guide above $4.0 billion would also prove the call wrong.
Research onlyNot in the portfolio.
Catalyst
Key figures from the filings · Energy
Quarter to 30 September 2026, filed 3 November 2026; valuation at the 13 November 2026 close
- Revenue, latest quarter ($M)
- 594
- Revenue, change on a year (%)
- −0.4
- Gross margin (%)
- 29.7
- Operating margin (%)
- 13.7
- Free cash flow, four quarters ($M)
- −207
- Net cash, cash less debt ($M)
- −563
- Price to earnings (×)
- 7.3
- Enterprise value to sales (×)
- 3.0
All filed numbers
What Valaris reports to the SEC in its quarterly and annual filings. Each group states its period and filing date once; a figure dated otherwise says so. Built from the filings known on .
| Quarter to | Revenue ($M) | On a year (%) | Gross margin (%) | Operating margin (%) |
|---|---|---|---|---|
| first filed | 594 | −0.4 | 29.7 | 13.7 |
| first filed | 539 | −12.4 | 22.9 | 9.5 |
| first filed | 465 | −25.0 | 19.8 | 4.3 |
| first filed | 537 | −8.0 | 23.1 | 7.3 |
| first filed | 596 | −7.4 | 31.9 | 21.9 |
| first filed | 615 | +0.8 | 35.7 | 26.7 |
| Pre-tax income ($M) | 101 |
| Net income ($M) four quarters: 798 | 46.1 |
| Diluted shares, change on a year (%) against the quarter to 30 September 2025 | −1.0 |
| Operating cash flow ($M) | 228 |
| Capital spending ($M) | 434 |
| Free cash flow ($M) | −207 |
| Cash and short-term investments ($M) | 525 |
| Debt ($M) non-current long-term debt | 1,089 |
| Net cash, cash less debt ($M) | −563 |
| Deferred revenue ($M) +52.0% on a year | 208 |
| Backlog, orders not yet delivered ($M) +52.0% on a year | 208 |
| Receivables ($M) | 538 |
| Inventory ($M) | Not reported |
| Shareholders' equity ($M) | 3,271 |
| Market value ($M) | 5,843 |
| Enterprise value, market value plus net debt ($M) | 6,406 |
| Enterprise value to sales (×) | 3.0 |
| Enterprise value to operating income (×) | 33.4 |
| Price to earnings (×) | 7.3 |
| Price to book value (×) | 1.8 |
| Free-cash-flow yield (%) | −3.5 |
Short interest (FINRA, settled 15 October 2026, published 26 October 2026): 7.6% of shares outstanding sold short, 5.9 days of average trading to cover, −6.8% since the previous report.
| Window | Bought | Sold |
|---|---|---|
| 90 daysfrom | $0 | $0 |
| 12 monthsfrom | $0 | $0 |
The thesis
Valaris shares are more likely to lag the S&P 500 than to lead it. They now trade as Transocean stock at a fixed 15.235 Transocean shares each, and Transocean's 2 November 2026 results showed lower revenue and a flat outlook for 2027. The 24 November 2026 shareholder votes, the 26 November 2026 Bermuda court hearing and Transocean's next contract awards settle the case.
The rating is Low because the drivers of the next three months sit with Transocean and oil, and both weakened after the results. Transocean reported third-quarter contract drilling revenue of $937 million, down from $966 million in the second quarter and $1,028 million a year earlier (8-K, 2 November 2026). Its preliminary 2027 guide of $3,850–4,000 million brackets its 2026 guide of $3,900–3,950 million. Trefis reported on 6 November 2026 that Transocean shares fell 18.1% in the three sessions after the report, against a 2.5% fall in the S&P 500.
Valaris's own quarter was better than its headline. Revenue of $593.6 million beat the $573.7 million estimate, while earnings of $0.66 a share missed the $1.13 estimate (Benzinga, 2 November 2026). One-off costs explain most of the miss. They matter little now, because Valaris shareholders receive Transocean shares at completion, which the companies expect on or about 1 December 2026.
The price already reflects the deal terms and the post-results reset. The 11 November 2026 close of $80.69 sits 29.3% below the 52-week intraday high of $114.12 set on 18 May 2026.
Bullish and bearish views on Valaris Limited
The bull case on Valaris Limited (VAL), in brief: operating earnings rose sharply. The bear case: earnings missed by a wide margin.
Bull case
- Operating earnings rose sharply. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $150.6 million in the third quarter, up from $96.5 million in the second, on revenue of $593.6 million against $539.2 million (8-K, 2 November 2026).
- Backlog grew during the deal. Contract backlog was $4,750.1 million on 2 November 2026 after about $600 million of new contracts since the second-quarter report. All ten active drillships are now on contract (8-K, 2 November 2026).
- Middle East losses are easing. Conflict-related costs cut adjusted EBITDA by about $24 million in the third quarter, down from $30 million in the second, mainly on lower war-risk insurance costs (8-K, 2 November 2026).
- The merger partner has filled 2027. Transocean reported about $8.0 billion of backlog on 2 November 2026, after about $2.0 billion of new fixtures at a weighted average day rate of about $423,000. Its chief executive put 2027 contract coverage at about 95% (8-K, 2 November 2026).
- The deal path is clear. All regulatory approvals are in hand, and both companies target closing on or about 1 December 2026 (Valaris and Transocean 8-Ks, 2 November 2026). Transocean names $200 million of identified annual cost savings from the combination.
- One analyst lifted the target after results. Susquehanna kept a Neutral rating and raised its price target to $91 on 4 November 2026 (Benzinga).
Bear case
- Earnings missed by a wide margin. Earnings per share of $0.66 missed the $1.13 estimate (Benzinga, 2 November 2026). The company cites a $23 million discrete tax charge, $16 million of merger costs, a $3 million impairment and lower gains on asset sales (8-K, 2 November 2026).
- Transocean's revenue is shrinking. Third-quarter contract drilling revenue fell to $937 million from $1,028 million a year earlier, and fourth-quarter guidance is $915–965 million (Transocean 8-K, 2 November 2026).
- The 2027 outlook shows no growth. Transocean's preliminary 2027 contract drilling revenue guide of $3,850–4,000 million sits around its $3,900–3,950 million 2026 range (8-K, 2 November 2026).
- The sector sold off after results. Trefis reported on 6 November 2026 that Transocean fell 5.3% in the first session after the report while Valaris fell 5.0% and Noble 3.3%. Commentary tied the group's moves to oil prices.
- Cash fell as rigs were reactivated. Valaris held $525 million of cash on 30 September 2026, down from $541 million on 30 June 2026, against $1,088.5 million of long-term debt (8-K, 2 November 2026).
Price setup
Valaris closed at $80.69 on 11 November 2026. That is below the 50-day moving average of $86.00 and the 200-day moving average of $87.23. The shares are down 5.2% over three months from the $85.13 close of 13 August 2026.
The low point after the results was the $77.32 close on 5 November 2026, after $82.77 on 4 November 2026. Closes since then have held between $78.55 and $80.69. A return above both moving averages would show the post-results fall reversing. The 52-week closing low is $49.03 on 18 December 2025.
The SEC filings since the results are a 10-Q on 3 November 2026 and two 8-Ks on 2 November 2026, with no Form 4 insider transactions. Valaris holds no earnings calls and gives no guidance until the deal closes.
Catalysts ahead
- 24 November 2026: Valaris court meeting and Transocean extraordinary general meeting. Both shareholder bases must approve the combination; Transocean's share-issuance vote is a condition of closing, and the court hearing proceeds only if both votes pass.
- 26 November 2026: Bermuda Supreme Court sanction hearing. The sanction order is the last legal step before the scheme of arrangement takes effect and Valaris shares convert into Transocean shares.
- ~1 December 2026 (est.): Expected completion of the Transocean combination. Valaris shares convert into Transocean shares and are delisted; from then on the exposure is Transocean stock, its 2027 revenue outlook and the $200 million cost-savings target.
What would change the view
A daily close above $94.69, the 2 November 2026 close before the third-quarter results, which would show the shares leading the S&P 500; Transocean raising its preliminary 2027 contract drilling revenue guide above $4.0 billion would also prove the call wrong.
What it trades with
With a fixed exchange ratio, Valaris moves almost one-for-one with Transocean (RIG). After completion the Valaris listing ends and the exposure is Transocean stock. Both trade closely with other offshore drillers such as Noble and Seadrill, and with Brent crude. Trefis noted on 6 November 2026 that traders treat the group as a higher-beta stand-in for crude, so a falling oil price would hit Valaris through Transocean even if the deal closes on schedule.
The evidence, claim by claim (8)
- Q3 2026 revenue $593.6 million, net income $46.7 million, diluted EPS $0.66, adjusted EBITDA $150.6 million (Q2: $96.5 million), revenue efficiency 97%. Valaris Q3 2026 results, 8-K exhibit 99.1 · as of
- Contract backlog $4,750.1 million after about $600 million of new contracts since the Q2 report; all ten active drillships on contract. Valaris Q3 2026 results, 8-K exhibit 99.1 · as of
- Q3 EPS included a $23 million discrete tax expense, $16 million of merger and integration costs and a $3 million impairment; Middle East conflicts cut adjusted EBITDA by about $24 million (Q2: $30 million). Valaris Q3 2026 results, 8-K exhibit 99.1 · as of
- Q3 EPS of $0.66 missed the $1.13 estimate; revenue of $593.6 million beat the $573.7 million estimate. Benzinga · as of
- Transocean Q3 contract drilling revenue $937 million (Q2: $966 million; Q3 2025: $1,028 million); backlog about $8.0 billion after about $2.0 billion of new fixtures. Transocean Q3 2026 results, 8-K exhibit 99.1 · as of
- Transocean guides Q4 2026 contract drilling revenue to $915-965 million, full-year 2026 to $3,900-3,950 million and preliminary 2027 to $3,850-4,000 million. Transocean Q3 2026 results, 8-K exhibit 99.1 · as of
- Susquehanna kept a Neutral rating on Valaris and raised its price target to $91. Benzinga analyst ratings · as of
- Each Valaris share converts into 15.235 Transocean shares; Valaris holders will own about 47% of the combined company, fully diluted. Valaris/Transocean DEFM14A joint proxy statement · as of
Sources
- Valaris Ltd - Form 8-K - FY2026 · sec.gov ·
- Transocean Ltd. - Form 8-K - FY2026 · sec.gov ·
- Should Transocean Stock's Drop After Earnings Worry You? · trefis.com ·
- Transocean and Valaris merger secures all regulatory approvals ahead of December 1 closing · bairdmaritime.com
- Transocean and Valaris Set November Dates to Finalize Business Combination · panabee.com
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