Compounding Research

Valaris $VAL might be an undervalued oil stock you've never heard of. It won’t 10x. But it could 3x in the next 2 years. I spent three weeks digging into the company. Here’s what stood out:

Ever bought a stock because it was going up… only to panic-sell when it dropped? That’s what happens when you invest without a Margin of Safety. In this post, I break down the concept in clear, simple language with and real-world examples. compoundingresearch.com/p/margin-of-sa…

My deep dive on $VAL thecompoundmemo.com/p/valaris-45-t…

@Senthil14530258 Exactly. But you also need to know what's under the hood (solid financials). I researched the company for three weeks and found this: x.com/thecompoundmem…

Valaris - $VAL Heavily Shorted Stock showing some strength at the base of the rising channel.Will make a good swing buy above 43 . Above 43 it will test 51 for a gain of 20% . Valaris Limited provides offshore contract drilling services. The Company owns, operates, and manages rig fleets and provides drilling services. Valaris serves customers worldwide.

@rewiid1234 Exactly. That solid balance sheet made me want to research the company for a few weeks. Let me know what you think: x.com/thecompoundmem…

Valaris looks interesting here—trading around $39, well below recent highs, with a strong offshore fleet and solid balance sheet. Cash flow is solid, buybacks are ongoing, and there’s upside if day rates inflect. Feels cheap versus asset value. Worth a nibble for patient investor

@EliteFinPT Great summary. One thing that stood out when I dug into $VAL: Their fleet could be worth ~$8.8B vs. a ~$3.2B market cap. Massive revaluation setup if dayrates stick. I broke it down here if you’re curious x.com/thecompoundmem…

🔎 Why is Mohnish Pabrai Buying Offshore Drillers in 2025? Mohnish Pabrai, a deep value investor known for concentrating in high-conviction plays, recently disclosed major positions in Valaris ( $VAL) and Noble Corp. ( $NE) — two of the few remaining pure-play offshore drilling contractors. At first glance, this may seem like a commodity bet — but it’s much more strategic. Over the past decade, global oil & gas capex has remained structurally depressed. Offshore drilling — once the crown jewel of upstream growth — was decimated post-2014. Companies stopped building rigs. Many assets were scrapped. And yet, the world still consumes ~100 million barrels per day. Now, the tide is turning. - Rigs are scarce, with utilization for high-spec floaters pushing 90%+ - Dayrates are quietly surging, with recent contracts exceeding $450–500K/day - No new rigs are being built, as replacement capex remains prohibitively expensive - Majors are reactivating long-lead offshore projects, driven by reserve replacement needs and geopolitical risk This sets the stage for an asymmetric opportunity. Pabrai is betting that as offshore demand returns — with no supply response — companies like $VAL and $NE, with modern fleets and clean balance sheets post-restructuring, will have pricing power not seen in over a decade. It’s not just a value play. It’s a scarcity play. The setup is classic @MohnishPabrai : ✅ Capital discipline ✅ Optionality ✅ Deep cyclical undervaluation ✅ Mispricing due to backward-looking market narratives If oil remains above $75, offshore must return. And when it does, these drillers control the bottleneck.

6. The big picture Valaris won’t 10x, but it doesn’t need to. With solid fundamentals, a 3x in 2 years could be realistic. Want more deep dives on undervalued stocks like this? Follow @thecompoundmemo for more & read the full memo: thecompoundmemo.com/p/valaris-45-t…

5. What could go wrong? Valaris operates in a cyclical industry. When oil prices drop, day rates crash. And its $8.7B fleet? It’s only worth what the market wants to pay for it. Plus: faster renewable energy (wind and solar), taxes, or war can kill offshore demand fast.

4. Valaris is trading at a ~24% discount The market valued it at $45/share. But based on earnings and P/E multiple, it’s fair value is closer to $56/share. If growth holds, it could reach $159/share in the 2.5 years. That’s 3x upside. But what’s the catch?

3. Locked-in revenue Valaris already signed $4.2 billion in customer contracts. Its rigs are booked well into 2026 and 2027. This isn’t future potential, it’s already locked in.

Valaris $VAL might be an undervalued oil stock you've never heard of. It won’t 10x. But it could 3x in the next 2 years. I spent three weeks digging into the company. Here’s what stood out:

2. Valaris isn’t just charging more, it’s working more Contracted days are exploding: from just 2,247 in 2020 → to 11,906 in 2027. That’s a 5x jump on utilization. Higher pricing + more volume = more revenue/profit/cash flow

1. Day rates are rising Valaris rents out offshore drilling rigs to oil companies for a daily rate. In 2020, rates were~$200K/day. Now, they’re up to ~500K/day, just like in the 2014 oil cycle peak. That shift could supercharge earnings over the next 2 years.