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What if you could buy $1 of assets for just $0.36, but it’s in a volatile oil cycle, would you take the bet?¹

Then you want to hear about Valaris, one of the world’s largest fleets of offshore oil drillers.

Valaris may not be a forever hold or compounder stock, but it’s a perfect example of an opportunistic value investment.

The stock is estimated to grow from $45 to its fair value of $159 in 1-2 years because of undervalued assets, rising oil demand, and guaranteed revenues.

That value investing opportunity also caught the eyes of billionaire Mohnish Pabrai, who bought $56 million of shares in Q1 2025².

And Mohnish only makes a handful of bets per year, usually in companies trading well below their asset value.

So, what does Valaris do, and why could the stock double or triple in 1-2 years?

Let’s dive into this investment case that saves you 15+ hours on researching the news, investor and analyst reports. So you can judge if it’s a great investment for you.

Yes, Valaris owns one of the largest fleets of offshore oil drilling rigs in the world. But it doesn’t extract or sell oil itself.

Instead, it rents out its 51 drilling rigs to energy giants like Shell, who pay up to $400,000 a day to drill deep beneath the ocean floor in search of oil and gas reserves.

These drilling rigs include ultra-deepwater drillships, semisubmersibles, and jackups that operate in everything from shallow waters to the deepest parts of the ocean.

Once the oil is found, it’s pumped up and refined into fuel for cars, heating for homes, and everyday products like shampoo bottles.

Let’s take a look under the hood.

Valaris has been renting out offshore drilling rigs since 1975. But in 2020, it filed for bankruptcy after oil prices collapsed, and restructured to come with less debt.

Since then, Valaris has quietly rebuilt its financial engine. Revenue is climbing, margins are expanding, and the balance sheet seems more healthy.

Here’s the key breakdown:

What the numbers show:

Valaris is no longer in survival mode, it’s building for the next oil cycle. But the stock price doesn’t yet reflect that shift. That gap might be an opportunity for value investors.

Because here’s what most investors miss:

When Valaris went bankrupt in 2020, it wiped out over $7.1 billion in debt, but kept the drilling rigs.

So investors are basically buying a $8B+ fleet… without paying for the debt that originally financed that fleet.

Or in Mohnish Pabrai’s words: “You get the assets, but you don’t carry the baggage.”

Valaris’ management outlook didn’t change overnight. It climbed out of bankruptcy, one year at a time.

Here’s how management’s tone shifted from “hang on” to “we’ve got this”:

As you can see, the tone didn’t shift overnight. It moved with every rig reactivated, every contract signed, and every earnings beat.

Management confirmed it again: the offshore cycle is strong, and they’ve got the contracts to prove it.

They expect free cash flow to turn positive in 2026, once the big upfront investments in rig reactivations slow down and those rigs start pulling in cash.

It’s like renting out a house, the money goes out first, but once tenants move in, it pays back steadily.

Q1 2025 in numbers

Here’s what the latest quarter looked like:

In other words: rigs are coming back online, contracts are locked in, and the cash engine is warming up.

What that means for investors: By 2026, the heavy investment phase should be behind them. At that point, more cash comes in than it goes out (positive Free Cash Flow).

Valaris operates in a niche but fiercely competitive market: offshore oil drilling.

Here’s a quick look at the companies they go head-to-head with:

What sets Valaris apart?

In a tight rig market, the winners are the ones who can say “yes” when oil companies call to become a customer.

Valaris has more high-quality rigs ready to go than most of its competitors, which means it can pick up more contracts, faster.

And more contracts = more cash flow, especially now that dayrates are climbing.

To know what Valaris could be worth, we need to understand what will drive its profits.

Let’s have a look at why the stock could appreciate in the next 1–3 years. It won’t compound forever, but enough to deliver strong upside for patient investors.

Here are 7 key factors that could increase its profits, driving the stock higher: