Valaris (NYSE:VAL): Assessing Valuation After Securing Major BP Drilling Contract in Egypt

Valaris (NYSE:VAL) shares are getting fresh attention after the company secured a five-well drilling contract with BP Exploration Delta Limited for its VALARIS DS-12 vessel in Egypt. The project is slated to start in mid-2026. This deal adds meaningful visibility to Valaris’s project pipeline and reflects continued interest in offshore drilling opportunities.

See our latest analysis for Valaris.

While Valaris’s new contract highlights growing optimism for its offshore opportunities, momentum has really picked up in the share price, with a 17% climb over the past week and a 26% year-to-date share price return. However, the one-year total shareholder return is a more modest 11%, and the three-year total shareholder return remains in negative territory. This underscores that while short-term excitement is building, the longer-term track record is still recovering.

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So, after the recent surge in Valaris shares, investors have to ask: is there real value left on the table, or has the market already priced in all of the expected growth from these new contracts?

Most Popular Narrative: 8.8% Overvalued

With Valaris recently closing at $56.68 and the widely followed narrative placing fair value at $52.10, this perspective argues that upside may already be reflected in the current price. Let’s see what’s behind this calculated stance.

The industry is experiencing a tightening supply-demand dynamic for technologically advanced rigs. Seventh-generation drillship utilization is expected to exceed 90% by 2026, and day rates for these rigs are averaging 25% higher than prior generations. This may position Valaris's fleet for higher pricing power, increased margins, and improved fleet utilization.

Read the complete narrative.

What’s the real reason analysts believe the valuation is stretched? One financial driver stands out: future margins and contract rates are set to test new levels, forcing investors to recalculate risk and reward. Uncover the assumptions that create this valuation tension.

Result: Fair Value of $52.10 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, offshore drilling demand may weaken if global energy transition efforts accelerate or if overcapacity returns. This could put pressure on contract rates and margins.

Find out about the key risks to this Valaris narrative.

Another View: What Do Market Ratios Say?

Looking at the price-to-earnings ratio, Valaris trades at 14.7x, which is lower than both the US Energy Services industry average of 16.3x and its peer group average of 18.4x. The fair ratio, calculated at 19.6x, suggests there is room for the market to re-rate higher. Does this create an overlooked value or simply reflect lingering doubts?

See what the numbers say about this price — find out in our valuation breakdown.

Build Your Own Valaris Narrative

If you see the numbers differently or want to dive deeper, you can easily build your own view and narrative in just a few minutes using the following tool: Do it your way.

A great starting point for your Valaris research is our analysis highlighting 3 key rewards and 2 important warning signs that could impact your investment decision.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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