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Wednesday, November 30, 2022

Q Stock Valaris PLC (OTCMKTS: VALPQ) Hits the OTCBB with a Bang

Valaris PLC (OTCMKTS: VALPQ) is making a dynamic move up the charts since hitting the pink sheets after being listed from the NYSE. Q stocks have a long history of making notoriously explosive moves once on the pinks and so far Valaris has been no exception since hitting the exchange priced under a dime.

Valaris has been struggling in recent months and missed a $58.5 million in interest payments on a total of $2.1 billion in bonds. The stock has a huge short position many of which are covering at current levels as the Company continues its restructuring efforts.

Valaris PLC (OTCMKTS: VALPQ) is a leading provider of offshore contract drilling services to the international oil and gas industry. Exclusive of two rigs under construction and one rig marked for retirement and classified as held-for-sale, Valaris currently owns and operates an offshore drilling rig fleet of 74 rigs, with drilling operations in almost every major offshore market across six continents. Inclusive of rigs under construction, its fleet includes 16 drillships, eight dynamically positioned semisubmersible rigs, two moored semisubmersible rigs and 50 jackup rigs, nine of which are leased to its  50/50 joint venture with Saudi Aramco. Valaris operates the world’s largest fleet of offshore drilling rigs, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet.

Valaris customers include many of the leading national and international oil companies, in addition to many independent operators. The Company is among the most geographically diverse offshore drilling companies, with current operations spanning 24 countries on six continents. The markets in which it  operates include the Gulf of Mexico, Brazil, the Mediterranean, the North Sea, Norway, the Middle East, West Africa, Australia and Southeast Asia. Valaris provides drilling services on a day rate contract basis. Under day rate contracts, the Comnpany  provides an integrated service that includes the provision of a drilling rig and rig crews for which it receives a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig.

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VALPQ

The decline in oil prices from 2014 highs led to a significant reduction in global demand for offshore drilling services. Customers significantly reduced their capital spending budgets, including the cancellation or deferral of existing programs, resulting in fewer contracting opportunities for offshore drilling rigs. Declines in capital spending levels, together with the oversupply of rigs from newbuild deliveries, resulted in significantly reduced day rates and utilization that led to one of the most severe downturns in the industry’s history. More recently, oil prices have increased meaningfully from the decade lows reached during 2016, leading to signs of a gradual recovery in demand for offshore drilling services. However, macroeconomic and geopolitical headwinds triggered a decline in Brent crude prices in late 2018. In 2019, oil prices experienced a gradual recovery before falling again in early 2020.

Valaris filed for bankruptcy earlier this month in the U.S. with a proposed $6.5 billion debt-for-equity swap. Valaris said the restructuring agreement it has struck with about half of its bondholders will help it eliminate nearly all of its liabilities. This came after Valaris missed $58.5 million in interest payments on a total of $2.1 billion in bonds. It also said there is “substantial uncertainty” over whether it will meet a $79.2 million interest payment in mid-August, along with $122.9 million outstanding principal on a tranche of bonds due around then.

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VALPQ is an exciting story developing in small caps; Q stocks have a long history of making notoriously explosive moves once on the pinks and so far Valaris has been no exception since hitting the exchange priced under a dime. Valaris has been struggling in recent months and missed a $58.5 million in interest payments on a total of $2.1 billion in bonds. The stock has a huge short position many of which are covering at current levels as the Company continues its restructuring efforts. Valaris operates the world’s largest fleet of offshore drilling rigs, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. Valaris currently owns and operates an offshore drilling rig fleet of 74 rigs, with drilling operations in almost every major offshore market across six continents. Inclusive of rigs under construction, its fleet includes 16 drillships, eight dynamically positioned semisubmersible rigs, two moored semisubmersible rigs and 50 jackup rigs, nine of which are leased to its 50/50 joint venture with Saudi Aramco. We will be updating on VALPQ when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with VALPQ.

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Disclosure: we hold no position in VALPQ either long or short and we have not been compensated for this article.

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