What changed in this filing

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Item 1A. Risk Factors

2022-02-23 compared with 2021-03-01 · 133 added, 131 removed, 368 unchanged (42% of the section changed)

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Our business depends on the level of activity in the offshore oil and gas industry, which is significantly affected by volatile oil and gas prices and other factors.

Our business depends on the level of activity in oil and gas exploration, development and production in offshore areas worldwide.

Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and, to a lesser extent, natural gas prices.

Our business depends on oil and gas exploration, development and production in offshore areas where we are capable of operating.

Demand for our services depends on these activities and related expenditure levels that are directly affected by trends in oil and, to a lesser extent, natural gas prices.

Oil and gas prices are extremely volatile and are affected by numerous factors, including the following:

◾ worldwide demand for oil and gas, including economic activity in the U.S.

and other large energy-consuming markets, which has been significantly impacted by the COVID-19 pandemic and the governmental, company and individual reactions thereto;

◾ the ability of the Organization of the Petroleum Exporting Countries (“OPEC”) to set and maintain production levels, productive spare capacity and pricing;

◾ worldwide demand for oil and gas, including economic activity in the U.S., other large energy-consuming markets and in developing and emerging markets, which has been significantly impacted by the COVID-19 pandemic and the governmental, company and individual reactions thereto;

◾ the ability of the Organization of the Petroleum Exporting Countries (“OPEC”) to set and maintain production levels, productive spare capacity and pricing among its members;

◾ the level of production in non-OPEC countries;

◾ inventory levels, and the cost and availability of storage and transportation of oil, gas and their related products;

◾ the policies, laws and regulations of various governments regarding exploration and development of their oil and gas reserves, the environment and climate change;

◾ the policies, laws and regulations of various governments regarding exploration and development of their oil and gas reserves and environmental matters, including those addressing alternative energy sources and the risks of global climate change;

◾ international sanctions on oil-producing countries, or the lifting of such sanctions;

◾ advances in exploration, development and production technology;

◾ the development, exploitation and market acceptance of alternative energy sources;

◾ the further development of shale technology to exploit oil and gas reserves;

◾ the discovery rate of new oil and gas reserves and the rate of decline of existing oil and gas reserves;

◾ laws and regulations related to environmental matters, including those addressing alternative energy sources and the risks of global climate change;

◾ the development, exploitation and market acceptance of alternative energy sources;

◾ accidents, adverse weather conditions, natural disasters and other similar incidents relating to the oil and gas industry;

◾ the worldwide security and political environment, including uncertainty or instability resulting from an escalation or outbreak of armed hostilities, civil unrest, acts of terrorism, public health threats or other crises.

Demand for our services is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, oil and natural gas companies, including national oil companies.

Demand for our services is particularly sensitive to the level of exploration, development and production activity of, and the corresponding capital spending by, energy companies, including national energy companies.

Prolonged reductions in oil and natural gas prices could depress the immediate levels of exploration, development and production activity.

Perceptions of longer-term lower oil and natural gas prices by oil and gas companies could similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects.

Perceptions of longer-term lower oil and natural gas prices by energy companies, or a perception that the demand for hydrocarbons will significantly decrease in the medium to long term, could similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects and capital reinvestment policies.

Lower levels of activity result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability.

Oil and gas prices and market expectations of potential changes in these prices significantly affect this level of activity.

However, increases in near-term commodity prices do not necessarily translate into increased offshore drilling activity since customers’ expectations of longer-term future commodity prices typically have a greater impact on demand for our rigs.

However, increases in near-term commodity prices do not necessarily translate into increased offshore drilling activity since customers’ expectations of longer-term future commodity prices and expectations regarding future demand for hydrocarbons typically have a greater impact on demand for our rigs.

Consistent with this dynamic, customers may delay or cancel many exploration and development programs, resulting in reduced demand for our services.

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The number of new units delivered without contracts, combined with an increased number of rigs in the global market completing contracts and becoming idle, has increased and may continue to intensify price competition.

In periods of low oil and natural gas price levels, new construction has historically resulted in an oversupply of rigs and has caused a subsequent decline in dayrates and rig utilization rates, sometimes for extended periods of time.

During periods of low oil and natural gas price levels, new construction has resulted in an oversupply of rigs and has caused a subsequent decline in dayrates and rig utilization rates, sometimes for extended periods of time.

In an oversupplied market, we may have limited bargaining power to negotiate on more favorable terms.

Additionally, lower market dayrates and intense price competition may drive customers to seek to renegotiate existing contracts to lower dayrates in exchange for longer contract terms.

Additionally, lower market dayrates and intense price competition may drive customers to seek to renegotiate existing contracts to reduce dayrates in exchange for longer contract terms.

Lower dayrates and rig utilization rates could adversely affect our revenues and profitability.

As of February 12, 2021, we have 16 uncontracted rigs, and these rigs may remain out of service for extended periods of time.

We also have two additional rigs under construction, and while both have secured contracts, one has a contract that is conditional upon a final investment decision of the customer and its partners.

As of February 14, 2022, we have 15 uncontracted rigs, of which five have been out of service for greater than five years, and these rigs may remain out of service for extended periods of time.

If we are unable to obtain drilling contracts for our uncontracted rigs, whether due to a prolonged offshore drilling market downturn, a delayed or muted recovery of such market or otherwise, it may have an adverse effect on our results of operations and cash flows.

We may not be able to renew or obtain new drilling contracts for rigs whose contracts are expiring or obtain drilling contracts for our stacked and idle rigs.

The offshore drilling markets in which we compete experience fluctuations in the demand for drilling services.

Our ability to renew expiring drilling contracts or obtain new drilling contracts depends on the prevailing or expected market conditions at the time of expiration.

As of February 14, 2022, we have 15 stacked or idle rigs.

We also have 11 existing drilling contracts for our rigs that are currently operating, which are scheduled to expire before December 31, 2022.

We may be unable to obtain drilling contracts for our rigs that are currently operating upon the expiration or termination of such contracts, and there may be a gap in the operation of the rigs between the current contracts and subsequent contracts.

When oil and natural gas prices are low or it is expected that such prices will decrease in the future, we may be unable to obtain drilling contracts at attractive dayrates or at all.

We may not be able to obtain new drilling contracts in direct continuation with existing contracts, or depending on prevailing market conditions, we may enter into drilling contracts at dayrates substantially below the existing dayrates or on terms otherwise less favorable compared to existing contract terms, which may have an adverse effect on our financial position, results of operations or cash flows.

Our current backlog of contract drilling revenues may not be fully realized.

At February 14, 2022, our contract backlog was approximately $6.47 billion.

This amount represents the number of days remaining in the firm term of the drilling contract multiplied by the maximum contractual operating dayrate, excluding revenues for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are generally insignificant to our contract drilling revenues.

Our contract backlog includes amounts associated with our contracted newbuild unit that is currently under construction but excludes amounts related to the conditional agreement we have for our second newbuild unit under construction.

This amount represents the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, excluding revenues for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be significant to our contract drilling revenues.

Our contract backlog includes amounts associated with our two contracted newbuild units that are currently under construction.

The contractual operating dayrate may be higher than the actual dayrate we ultimately receive or an alternative contractual dayrate, such as waiting on weather rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances.

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In addition, some of our customers have experienced liquidity issues in the past, including some recently, and these liquidity issues could be experienced again if commodity prices decline for an extended period of time.

Liquidity issues and other market pressures could lead our customers to seek bankruptcy protection or to seek to repudiate, cancel or renegotiate these agreements for various reasons (see “—Our drilling contracts may be terminated due to a number of events, and, during depressed market conditions, our customers may seek

to repudiate or renegotiate their contracts”).

Our inability to realize the full amount of our contract backlog may have a material adverse effect on our consolidated financial position, results of operations or cash flows.

We may not be able to renew or obtain new drilling contracts for rigs whose contracts are expiring or obtain drilling contracts for our stacked and idle rigs or our newbuild with a conditional agreement if the conditions thereof are not satisfied.

The offshore drilling markets in which we compete experience fluctuations in the demand for drilling services.

Our ability to renew expiring drilling contracts or obtain new drilling contracts depends on the prevailing or expected market conditions at the time of expiration.

As of February 12, 2021, we have 16 stacked or idle rigs and one rig under construction that has a drilling contract that is subject to a final investment decision by the customer and its partners.

We also have seven existing drilling contracts for our rigs that are currently operating, which are scheduled to expire before December 31, 2021.

We may be unable to obtain drilling contracts for our rigs that are currently operating upon the expiration or termination of such contracts or obtain a drilling contract for our newbuild unit with a conditional agreement in the event the conditions thereof are not satisfied, and there may be a gap in the operation of the rigs between the current contracts and subsequent contracts.

When oil and natural gas prices are low or it is expected that such prices will decrease in the future, we may be unable to obtain drilling contracts at attractive dayrates or at all.

We may not be able to obtain new drilling contracts in direct continuation with existing contracts or for our newbuild unit with a conditional agreement, or depending on prevailing market conditions, we may enter into drilling contracts at dayrates substantially below the existing dayrates or on terms otherwise less favorable compared to existing contract terms, which may have an adverse effect on our consolidated financial position, results of operations or cash flows.

Liquidity issues and other market pressures could lead our customers to seek bankruptcy protection or to seek to repudiate, cancel or renegotiate these agreements for various reasons (see “— Our drilling contracts may be terminated due to a number of events, and, during depressed market conditions, our customers may seek to repudiate or renegotiate their contracts ”).

Our inability to realize the full amount of our contract backlog may have an adverse effect on our financial position, results of operations or cash flows.

Our drilling contracts may be terminated due to a number of events, and, during depressed market conditions, our customers may seek to repudiate or renegotiate their contracts.

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Our customers’ ability to perform their obligations under their drilling contracts, including their ability to fulfill their indemnity obligations to us, may also be negatively impacted by an economic downturn.

Our customers, which include national oil companies, often have significant bargaining leverage over us.

If our customers cancel some of our contracts, and we are unable to secure new contracts on a timely basis and on substantially similar terms, or if contracts are suspended for an extended period of time or if a number of our contracts are renegotiated on terms that are not as favorable as current terms, it could adversely affect our consolidated financial position, results of operations or cash flows.

During periods of depressed market conditions, such as we are currently experiencing, we are subject to an increased counterparty risk, as our customers may seek to repudiate their contracts, including through claims of non-performance in order to reduce their capital expenditures.

Our customers, which include national energy companies, often have significant bargaining leverage over us.

If our customers cancel some of our contracts, and we are unable to secure new contracts on a timely basis and on substantially similar terms, or if contracts are suspended for an extended period of time or if a number of our contracts are renegotiated on terms that are not as favorable as current terms, it could adversely affect our financial position, results of operations or cash flows.

During periods of depressed market conditions, such as we have recently experienced, we are subject to an increased counterparty risk, as our customers may seek to repudiate their contracts, including through claims of non-performance in order to reduce their capital expenditures.

Our customers may no longer need a drilling rig that is currently under contract or may be able to obtain a comparable drilling rig at a lower dayrate.

We have experienced, and are at continued risk of experiencing, early contract terminations in a weak commodity price environment as operators look to reduce their capital expenditures.

The ability of each of our counterparties to perform its obligations under a contract with us, including indemnity obligations, will depend on a number of factors that are beyond our control and may include, among other things, general economic conditions, the condition of the offshore drilling industry, prevailing prices for oil and natural gas, the overall financial condition of the counterparty, the dayrates received and the level of expenditures necessary to maintain drilling activities.

Should a counterparty fail to honor its obligations under an agreement with us, we could sustain losses, which could have an adverse effect on our business and on our consolidated financial position, results of operations or cash flows.

We must make substantial capital and operating expenditures to maintain our active fleet or to reactivate our stacked or idle fleet, and we may be required to make significant capital expenditures to maintain our competitiveness, to execute our growth plan and to comply with laws and applicable regulations and standards of governmental authorities and organizations.

We have experienced, and are at continued risk of experiencing, early contract terminations when there is a weak commodity price environment.

counterparty, the dayrates received and the level of expenditures necessary to maintain drilling activities.

Should a counterparty fail to honor its obligations under an agreement with us, we could sustain losses, which could have an adverse effect on our business and on our financial position, results of operations or cash flows.

We must make substantial capital and operating expenditures to reactivate our stacked or idle fleet and to maintain our active fleet, and we may be required to make significant capital expenditures to maintain our competitiveness and to comply with laws and applicable regulations and standards of governmental authorities and organizations.

We must make substantial capital and operating expenditures to maintain our active fleet or to reactivate our stacked or idle fleet.

These expenditures could increase as a result of changes in the cost of labor and materials, requirements of customers, the size of our fleet, the cost of replacement parts for existing rigs, the geographic location of the rigs and the length of drilling contracts.

Changes in offshore drilling technology, customer requirements for new or upgraded equipment and competition within our industry may require us to make significant capital expenditures in order to maintain our competitiveness and to execute our growth plan.

Changes in governmental regulations, including environmental requirements, and changes in safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations, may cause our capital expenditures to increase or require us to make additional unforeseen capital expenditures.

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If we raise funds by issuing equity securities or other securities that are convertible into equity securities, existing shareholders may experience dilution.

Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business and on our consolidated financial position, results of operations and cash flows.

Public health threats, such as COVID-19, have had, and may continue to have, significant adverse consequences for general economic, financial and business conditions, as well as for our business and operations.

Public health threats, pandemics and epidemics, such as the outbreak of a novel strain of COVID-19, severe influenza, other coronaviruses and other highly communicable viruses or diseases, have impacted and may continue to impact our operations directly or indirectly, including by disrupting the operations of our business partners, suppliers and customers in ways that adversely impact our operations.

For instance, the outbreak of COVID-19 and its development into a pandemic in March 2020 resulted in various actions by governmental authorities around the world to prevent or reduce the spread of COVID-19, such as imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions.

In addition, companies and individuals seeking to curtail the spread of COVID-19 have taken certain cautionary measures, such as companies around the world requiring employees to work remotely, suspending all non-essential travel worldwide for employees, and discouraging employee attendance at in-person work-related meetings, as well as individuals voluntarily social distancing and self-quarantining.

While many of these restrictions and measures have since been softened or lifted in varying degrees in different locations around the world, and there have been several COVID-19 vaccines recently approved by many governments that are expected to accelerate a recovery from the pandemic, the ultimate success of such vaccines is currently uncertain and resurgences in the spread of COVID-19 and other rapid developments with respect to the virus have prompted and may in the future prompt, the re-imposition of certain restrictions and measures.

These responses have significantly reduced global economic activity, as there has been a dramatic decrease in the number of businesses open for operation and a substantial reduction in the number of people across the world that have been going to work or leaving their house to purchase goods and services.

This has also resulted in airlines dramatically cutting back on flights and has reduced the number of cars on the road.

As a result, there has also been a sharp reduction in the demand for oil and a decline in oil prices.

We have taken similar precautionary measures intended to help minimize the risk to our business, employees, customers, suppliers and the communities in which we operate.

Our operational employees generally are currently still able to work on site and on our rigs.

We have taken comprehensive and global precautionary measures with respect to such operational employees, such as requiring them to verify they have not either experienced any symptoms consistent with COVID-19 or been in close contact with someone showing such symptoms before they are permitted to travel to the work site or rig, quarantining any operational employee on a rig who has shown signs of COVID-19, regardless of whether such employee has been confirmed to be infected, and imposing social distancing requirements in certain areas of the rig, such as in the dining hall and sleeping quarters, and are incurring incremental costs.

We are also actively assessing and planning for various operational contingencies;

however, we cannot guarantee that any actions taken by us, including the precautionary measures noted above, will be effective in preventing either an outbreak of COVID-19 on one or more of our rigs or other adverse effects related to COVID-19.

Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business and on our financial position, results of operations and cash flows.

Public health threats have had, and may continue to have, significant adverse consequences for general economic, financial and business conditions, as well as for our business and operations.

Public health threats, pandemics and epidemics, such as the outbreak of COVID-19, including new variants therof, severe influenza, other coronaviruses and other highly communicable viruses or diseases, have impacted and may continue to impact our operations directly or indirectly, including by disrupting the operations of our business partners, suppliers and customers in ways that adversely impact our operations.

For instance, the outbreak of COVID-19 and its development into a pandemic in March 2020 resulted in various actions by governmental authorities around the world designed to prevent or reduce the spread of COVID-19, such as imposing mandatory closures of all non-essential business facilities, seeking voluntary closures of such facilities and imposing restrictions on, or advisories with respect to, travel, business operations and public gatherings or interactions.

In addition, companies and individuals seeking to curtail the spread of COVID-19 have taken certain cautionary measures, such as certain companies requiring employees to work remotely, suspending or curtailing all non-essential travel for employees, and discouraging employee attendance at in-person work-related meetings, as well as individuals voluntarily social distancing and self-quarantining.

While many of the restrictions and measures initially implemented during 2020 have since been softened or lifted in varying degrees in different locations around the world, and the manufacture and distribution of COVID-19 vaccines during 2021 aided to initiate an economic recovery from the pandemic, the uncertainty regarding new potential virus variants and the success of any these vaccines may in the future adversely affect global economic activity or prompt the re-imposition of certain restrictions and measures.

Increases in COVID-19 cases, such as recently developed as new variants emerged, may result in significantly reduced economic activity, even if not required by governmental authorities, particularly in affected areas, which could result in a sharp reduction in the demand for oil and a decline in oil prices as occurred during 2020.

We continue to experience increased costs and inefficiencies as a result of the comprehensive precautionary measures we continue to take to help minimize the risk of COVID-19 impacts to our business, employees, customers, suppliers and the communities in which we operate, including testing employees for COVID-19 prior to transport offshore to a rig and quarantining any operational employee, where appropriate, who have shown signs of COVID-19, regardless of whether such employee has been confirmed to be infected, and we also have experienced increased costs as a result of increasing our pools of employees that are available to substitute for employees who are not able to travel to a rig.

We cannot guarantee that any precautionary measures will be effective in preventing either an outbreak of COVID-19 on one or more of our rigs or other adverse effects related to COVID-19.

To the extent an outbreak of COVID-19 develops on one or more of our rigs, we may have to temporarily shut down operations of such rig or rigs, which could result in significant downtime or contract termination and have substantial adverse consequences for our business and results of operations.

In addition, most of our non-operational employees are now working remotely, which increases various operational risks.

In addition, most of our non-operational employees continue to work remotely a substantial majority of their time, which increases various operational risks.

For instance, working remotely may increase the risk of security breaches or other cyber incidents or attacks, loss of data, fraud and other disruptions as a consequence of more employees accessing sensitive and critical information from remote locations.

Many governmental authorities across the globe have implemented travel restrictions and mandatory quarantine measures to prevent or reduce the spread of COVID-19, and in complying with such governmental actions, we have experienced, and expect to continue to experience, increased difficulties, delays and costs in moving our personnel in and out of, and to work in, the various jurisdictions in which we operate.

Many governmental authorities across the globe implemented at various times during the COVID-19 pandemic travel restrictions and mandatory quarantine measures to prevent or reduce the spread of COVID-19, and in complying with such governmental actions, we have experienced, and expect to continue to experience, increased difficulties, delays and costs in moving our personnel in and out of, and to work in, the various jurisdictions in which we operate.

We may be unable to pass along these increased costs to our customers.

Additionally, disruptions to or restrictions on the ability of our suppliers, manufacturers and service providers to supply parts, equipment or services in the jurisdictions in which we operate or to progress the construction of our newbuild projects, whether as a result of government actions, labor shortages, the inability to source parts or equipment from affected locations, or other effects related to the COVID-19 outbreak, may have significant adverse consequences on our ability to meet our commitments to customers, including by increasing our operating costs and increasing the risk of rig downtime and could result in contract terminations.

Concerns over the prolonged negative effects of the COVID-19 outbreak on economic and business prospects across the world have also contributed to increased market and oil price volatility and have diminished expectations for the performance of the global economy.

These factors, coupled with the prospect of decreased business and consumer confidence and increased unemployment resulting from the COVID-19 outbreak and the decline in, and steep increase in the volatility of, oil prices, have precipitated an economic downturn and likely a recession.

The current downturn and period of depressed oil prices has had and may continue to have significant adverse consequences

for the financial condition of our customers or suppliers.

Concerns over the prolonged negative effects of the COVID-19 outbreak on economic and business prospects across the world, including as a result of new variants of the virus, have also contributed to oil price volatility and uncertainty regarding the outlook for the global economy.

Such conditions have resulted in, and may continue to result in, reductions to our customers’ drilling and production expenditures and delays or cancellations of projects, thus decreasing demand for our services, and an increased risk that our customers may seek price reductions or more favorable economic terms for our services, terminate our contracts or that we may be required to idle, stack or retire more of our rigs.

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The occurrence of any such events with respect to our customers, contracts or suppliers in certain cases has had, and may continue to have, significant adverse consequences for our business and financial position.

The magnitude and duration of potential social, economic and labor instability resulting from the COVID-19 outbreak, including how quickly national economies can recover once the pandemic subsides, or whether any recovery will ultimately experience a reversal or other setbacks, are uncertain and cannot be estimated at this time as such effects depend on future events that are largely out of our control.

The ultimate extent of the impact of the COVID-19 outbreak on our business and financial position will depend largely on future developments, including the duration, spread or containment of the outbreak, particularly within the geographic locations where we operate, and the related impact on overall economic activity, all of which are highly uncertain at this time.

The magnitude and duration of potential social, economic and labor instability resulting from the COVID-19 outbreak, including the speed at which national economies can recover, or whether any recovery will ultimately experience a reversal or other setbacks, are uncertain and cannot be estimated as such effects depend on future events that are largely out of our control.

The ultimate extent of the impact of COVID-19 and its variants on our business and financial position depend largely on future developments, including the duration, spread or containment of the outbreak, particularly within the geographic locations where we operate, and the related impact on overall economic activity, all of which are highly uncertain.

We are unable to predict the timing or impact of any such restructurings, if completed, on the capital structure and competitive dynamics among offshore drilling companies.

Public and investor sentiment towards climate change, fossil fuels and other esg matters could adversely affect our business, cost of capital and the price of our stock and other securities.

There have been efforts in recent years, based on changing public sentiment concerning fossil fuels, aimed at the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities and other groups, to promote the divestment of shares of energy companies, as well as to pressure lenders and other financial services companies to limit or curtail activities with energy companies.

These efforts have intensified during the COVID-19 pandemic, as seen by the State of New York’s December 2020 announcement that it will be divesting the state’s Common Retirement Fund from fossil fuels.

Changing public sentiment concerning fossil fuels, aimed at the investment community, including investment advisors, sovereign wealth funds, public pension funds, universities and other groups, has prompted efforts to promote the divestment of shares of energy companies, as well as to pressure lenders and other financial services companies to limit or curtail activities with energy companies.

These efforts have recently intensified, as demonstrated by the State of New York’s December 2020 announcement that it will be divesting the state’s Common Retirement Fund from fossil fuels.

If this or similar divestment efforts are successful, our stock price and our ability to access capital markets may be negatively impacted.

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We rely heavily on a relatively small number of customers and the loss of a significant customer or a dispute that leads to the loss of a customer could have an adverse effect on our business.

We engage in offshore drilling services for most of the leading integrated oil companies or their affiliates, as well as for many government-owned or government-controlled oil companies and other independent oil companies.

For the year ended December 31, 2020, our most significant customers were Shell, Equinor and Chevron, accounting for approximately 28 percent, 27 percent and 14 percent, respectively, of our total contract drilling revenues.

As of February 12, 2021, the customers with the most significant aggregate amount of contract backlog were Shell, Equinor and Chevron, representing approximately 53 percent, 23 percent and 13 percent, respectively, of our total contract backlog.

We engage in offshore drilling services for most of the leading integrated energy companies or their affiliates, as well as for many government-owned or government-controlled energy companies and other independent energy companies.

For the year ended December 31, 2021, our most significant customers were Shell and Equinor, representing approximately 31 percent and 30 percent, respectively, of our consolidated operating revenues.

As of February 14, 2022, the customers with the most significant aggregate amount of contract backlog associated with our drilling contracts were Shell, Equinor and Chevron, representing approximately 54 percent, 16 percent and 15 percent, respectively, of our total contract backlog.

The loss of any of these customers or another significant customer, or a decline in payments under any of our drilling contracts, could, at least in the short term, have an adverse effect on our business.

Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues.

Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues and are affected by many factors, including inflation.

Costs for operating a rig are generally fixed or only semi-variable regardless of the dayrate being earned.

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Equipment maintenance costs fluctuate depending upon the type of activity the unit is performing and the age and condition of the equipment, and these costs could increase for short or extended periods as a result of regulatory or customer requirements that raise maintenance standards above historical levels.

The amount of contract

preparation and reactivation costs vary based on the scope and length of the contract preparation or reactivation project, and the recognition of such costs varies depending on the duration of the firm contractual period and other contract terms.

The amount of contract preparation and reactivation costs vary based on the scope and length of the contract preparation or reactivation project, and the recognition of such costs varies depending on the duration of the firm contractual period and other contract terms.

Certain of our drilling contracts are partially payable in local currency.

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Damage to the environment or natural resources could also result from our operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations, or extensive uncontrolled fires.

We may also be subject to property damage, environmental indemnity and other claims by oil and natural gas companies or other third parties.

We may also be subject to property damage, environmental indemnity and other claims by energy companies or other third parties.

Drilling involves certain risks associated with the loss of control of a well, such as blowout, cratering, the cost to regain control of or redrill the well and remediation of associated pollution.

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However, pollution and environmental risks generally are not completely insurable.

If a significant accident or other event occurs that is not fully covered by our insurance or by an enforceable or recoverable indemnity, the occurrence could adversely affect our consolidated financial position, results of operations or cash flows.

If a significant accident or other event occurs that is not fully covered by our insurance or by an enforceable or recoverable indemnity, the occurrence could adversely affect our financial position, results of operations or cash flows.

The amount of our insurance may also be less than the related impact on enterprise value after a loss.

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As a result, we generally retain the risk for any losses in excess of these limits.

We generally do not carry insurance for loss of revenue, and certain other claims may also not be reimbursed by insurance carriers.

We generally do not carry insurance for loss of revenue, and

certain other claims may also not be reimbursed by insurance carriers.

Any such lack of reimbursement may cause us to incur substantial costs.

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Historically, competition for the personnel required for drilling operations has intensified as the number of rigs activated, added to worldwide fleets or under construction increased, leading to shortages of qualified personnel in the industry and creating upward pressure on wages and higher turnover.

We may experience a reduction in the experience level of our personnel as a result of any increased turnover and ongoing staff reduction initiatives, which could lead to higher downtime and

more operating incidents, which in turn could decrease revenues and increase costs.

We may experience a reduction in the experience level of our personnel as a result of any increased turnover and ongoing staff reduction initiatives, which could lead to higher downtime and more operating incidents, which in turn could decrease revenues and increase costs.

If increased competition for qualified personnel were to intensify in the future we may experience increases in costs or limits on operations.

Our labor costs and the operating restrictions under which we operate could increase as a result of collective bargaining negotiations and additional unionization efforts.

Approximately 43 percent of our total workforce, primarily employed in Norway, Brazil and the U.K., are represented by, and some of our contracted labor work is subject to, collective bargaining agreements, substantially all of which are subject to annual salary negotiation.

Approximately 42 percent of our total workforce, working primarily in Norway, Brazil and the U.K., are represented by, and some of our contracted labor work is subject to, collective bargaining agreements, substantially all of which are subject to annual salary negotiation.

Negotiations over annual salary or other labor matters could result in higher personnel or other costs or increased operational restrictions or disruptions.

The outcome of any such negotiation generally affects the market for all offshore employees, not only the union members.

Furthermore, a failure to reach an agreement on certain key issues could result in strikes, lockouts, or other work stoppages.

A failure to reach an agreement on certain key issues could result in strikes, lockouts, or other work stoppages.

Legislation has been introduced in the U.S.

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These shipyard projects are subject to the risks of delay or cost overruns inherent in any such construction project resulting from numerous factors, including the following:

◾ complications arising from pandemics and epidemics, such as the outbreak of a novel strain of COVID-19, severe influenza, other coronaviruses and other highly communicable viruses or diseases and associated government orders in the country where the rigs are being constructed or serviced and elsewhere;

◾ complications arising from pandemics and epidemics, such as COVID-19, severe influenza, other coronaviruses and other highly communicable viruses or diseases, and associated government orders in the country where the rigs are being constructed or serviced and elsewhere;

◾ shipyard availability, failures and difficulties;

◾ shortages of equipment, materials or skilled labor;

◾ failure or delayed deliveries of significant materials or equipment for various reasons, including due to supplier shortages, constraints, disruption or quality issues;

◾ design and engineering problems, including those relating to the commissioning of newly designed equipment;

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◾ disputes with shipyards and suppliers;

◾ failure or delayed deliveries of significant materials or equipment for various reasons, including due to supplier shortages, constraints, disruption or quality issues;

◾ availability of suppliers to recertify equipment for enhanced regulations;

◾ strikes, labor disputes and work stoppages;

◾ customer acceptance delays;

◾ customer delays in providing customer-supplied engineering, approvals or equipment;

◾ customer acceptance delays or delays in providing customer-supplied engineering, approvals or equipment;

◾ adverse weather conditions, including damage caused by such conditions;

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Certain parts and equipment that we use in our operations may be available only from a small number of suppliers, manufacturers or service providers, or in some cases must be sourced through a single supplier, manufacturer or service provider.

A disruption in the deliveries from our suppliers, manufacturers or service providers, capacity constraints, production disruptions, price increases, quality control issues, recalls or other decreased availability of parts and equipment or ancillary services could adversely affect our ability to meet our commitments to customers, adversely impact our operations, increase our operating costs and result in increases in rig downtime and delays in the repair and maintenance of our fleet.

affect our ability to meet our commitments to customers, adversely impact our operations, increase our operating costs and result in increases in rig downtime and delays in the repair and maintenance of our fleet.

As part of our business strategies, We may pursue opportunities to strengthen and broaden our business that include acquisitions of businesses or drilling rigs, mergers or joint ventures or other investments, and such transactions would present various risks and uncertainties.

We may pursue transactions that involve the acquisition of businesses or assets, mergers or joint ventures or other investments that we believe will enable us to further strengthen or broaden our business.

Any such transaction would be evaluated on a case-by-case basis, and the consummation thereof would be dependent upon several factors, including identifying suitable companies, businesses or assets that align with our business strategies, reaching agreement with the potential counterparties on acceptable terms, the receipt of any applicable regulatory and other approvals, and other conditions.

These transactions involve various risks, including among others, (i) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (ii) diversion of management's attention from day-to-day operations, (iii) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening or broadening our business, (iv) potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, and (v) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time of such transaction is consummated.

Failure to effectively and timely address the transition to renewable or other alternative energy sources could adversely affect our business, results of operations and cash flows.

Our long-term success depends on our ability to effectively address the transition to renewable and other alternative energy sources, which may require adapting certain parts or our operations to potentially changing government requirements, customer preferences and to a potentially changing and broader customer base, as well as engaging with existing and potential customers and suppliers to develop or implement solutions designed to reduce or decarbonize oil and gas operations, or to advance renewable and other alternative energy sources.

If the energy transition landscape changes faster than anticipated or in a manner that we do not anticipate, demand for our services could be adversely affected.

Furthermore, if we fail or are perceived to not effectively implement an energy transition strategy, or if investors or financial institutions shift funding away from companies in fossil fuel-related industries, our access to capital or the market for our securities could be negatively impacted.

Our aspirations, goals, commitment targets and initiatives related to sustainability, including emissions reduction, and our public statements and disclosures regarding them, expose us to numerous risks.

We have developed, and will continue to develop and set, goals, targets, and other objectives related to sustainability matters, including our commitment target to reduce our greenhouse gas emissions.

Statements related to these goals, commitment targets and objectives reflect our current intentions and do not constitute a guarantee that they will be achieved.

Our efforts to research, establish, accomplish, and accurately report on these goals, commitment targets, and other objectives expose us to numerous operational, reputational, financial, legal, and other risks.

Our ability to achieve any stated goal, commitment target, or objective, including with respect to emissions intensity reduction, is subject to numerous factors and conditions, some of which are outside of our control.

Our business may face increased scrutiny from investors and other stakeholders related to our sustainability activities, including the goals, commitment targets, and other objectives that we announce, and our methodologies and timelines for pursuing them.

If our sustainability assumptions or practices do not meet investor or other stakeholder expectations and standards, which continue to evolve, our reputation, our ability to attract or retain employees, and our attractiveness as an investment or business partner could be negatively affected.

Similarly, our failure or perceived failure to pursue or fulfill our sustainability-focused goals, targets, and objectives, to comply with ethical, environmental, or other standards, regulations, or expectations, or to satisfy various reporting standards with respect to these matters, within the timelines we announce, or at all, could adversely affect our business or reputation, as well as expose us to government enforcement actions and private litigation.

Risks related to our indebtedness

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At December 31, 2021 and 2020, our total debt was $7.17 billion and $7.81 billion, respectively, of which $2.30 billion and $2.77 billion, respectively, was secured.

We have a bank credit agreement, as amended, that established a $1.3 billion secured revolving credit facility

(the “Secured Credit Facility”), which is currently undrawn, the borrowings under which would be secured.

We have a bank credit agreement, as amended, that established a $1.33 billion secured revolving credit facility (the “Secured Credit Facility”), which is currently undrawn, the borrowings under which would be secured.

This substantial level of debt and other obligations could have significant adverse consequences on our business and future prospects, including the following:

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◾ we may be less able to take advantage of significant business opportunities and to react to changes in market or industry conditions than our less levered competitors.

See “ Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Sources and uses of liquidity .”

Credit rating agencies have rated our debt below investment grade, which could limit our access to capital and have an adverse effect on our business and financial condition.

The ratings assigned to our debt securities by credit agencies (our “Debt Rating”) are below investment grade.

The ratings assigned to our debt securities by certain credit rating agencies (our “Debt Ratings”) are below investment grade.

Our Debt Ratings could have adverse consequences for our business and future prospects and could cause the following:

◾ limitations on our ability to access debt markets, including for the purpose of refinancing our existing debt, replacing or extending our Secured Credit Facility;

◾ limitations on our ability to access debt markets, including for the purpose of refinancing our existing debt and replacing or extending our Secured Credit Facility;

◾ less favorable terms and conditions on any refinancing arrangements, debt issuances or bank credit agreements, some of which could require collateral and restrict, among other things, our ability to pay distributions or repurchase shares;

◾ increases to certain fees under our Secured Credit Facility and interest rates under indentures governing certain of our senior notes, which in the case of the 6.375% senior notes due December 2021, the 3.80% senior notes due October 2022, and the 7.375% senior notes due December 2041, have already reached the maximum rate increase of 2 percent pursuant to the related indenture due to the downgrades of certain rating agencies;

◾ increases to certain fees under our Secured Credit Facility and interest rates under indentures governing certain of our senior notes, which in the case of the 3.80% senior notes due October 2022 and the 7.35% senior notes due December 2041, have reached the maximum rate increase of 2 percent pursuant to the related indentures due to the downgrades of certain credit rating agencies;

◾ reduced willingness of current and prospective customers, suppliers and creditors to transact business with us;

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A slowdown in economic activity could further reduce worldwide demand for energy and extend or worsen the recovery from low oil and natural gas prices.

These potential developments, or market perceptions concerning these and related issues, could affect our consolidated financial position, results of operations or cash flows.

These potential developments, or market perceptions concerning these and related issues, could adversely affect our financial position, results of operations or cash flows.

In addition, turmoil and hostilities in the Middle East, North Africa and other geographic areas and countries present incremental risk.

An extended period of negative outlook for the world economy could further reduce the overall demand for oil and natural gas and for our services.

A further decline in oil and natural gas prices or an extension of the current low oil and natural gas prices could reduce demand for our drilling services and have a material adverse effect on our consolidated financial position, results of operations or cash flows.

A further decline in oil and natural gas prices or an extension of the current low oil and natural gas prices could reduce demand for our drilling services and have an adverse effect on our financial position, results of operations or cash flows.

Risks related to laws, regulations and governmental compliance

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Offshore drilling in certain areas has been curtailed and, in certain cases, prohibited because of environmental or safety concerns.

In addition, compliance with environmental and safety laws, regulations and standards, where applicable, may require us to make significant capital expenditures, such as the installation of costly equipment or implementation of operational changes, and may affect the resale values or useful lives of our rigs.

implementation of operational changes, and may affect the resale values or useful lives of our rigs.

We may also incur additional costs in order to comply with other existing and future regulatory obligations or industry standards, including, but not limited to, costs relating to air emissions, including greenhouse gases, the management of ballast waters, maintenance and inspection, development and implementation of emergency procedures and maintenance of insurance coverage or other financial assurance of our ability to address pollution incidents.

For instance, in the last decade, enhanced governmental safety and environmental requirements applicable to our operations were adopted by U.S.

In the last decade, enhanced governmental safety and environmental requirements applicable to our operations were adopted by U.S.

federal agencies for drilling in the U.S.

Gulf of Mexico have caused, and may in the future cause, operators to have difficulties obtaining drilling permits in the U.S.

Gulf of Mexico that have caused, and may in the future cause, operators to have difficulties obtaining drilling permits in the U.S.

Gulf of Mexico.

In addition, the oil and gas industry has adopted new equipment and operating standards, such as the American Petroleum Institute Standard 53, related to the installation and testing of well control equipment.

In addition, the oil and gas industry has adopted equipment and operating standards, such as the American Petroleum Institute Standard 53, related to the installation and testing of well control equipment.

A failure to comply with applicable laws and regulations may result in administrative and civil penalties, criminal sanctions or the suspension or termination of our operations.

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offshore areas.

Any such effects could have a material adverse effect on our consolidated financial position, results of operations or cash flows.

Any such effects could have an adverse effect on our financial position, results of operations or cash flows.

To the extent new laws are enacted, existing laws are changed or other governmental actions are taken that prohibit or restrict offshore drilling or impose additional environmental protection and safety requirements that result in increased costs to the oil and gas industry, in general, or the offshore drilling industry, in particular, our business or prospects could be materially adversely affected.

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If we fail to timely secure the necessary governmental approvals or permits, our customers may have the right to terminate or seek to renegotiate their drilling contracts to our detriment.

The amendment or modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or development drilling or production of oil and gas and compliance with any such new or amended legislation or regulations could have an adverse effect on our business or on our consolidated financial position, results of operations or cash flows.

The amendment or modification of existing laws and regulations or the adoption of new laws and regulations curtailing or further regulating exploratory or development drilling or production of oil and gas and compliance with any such new or amended legislation or regulations could have an adverse effect on our business or on our financial position, results of operations or cash flows.

As a contract driller with operations in certain offshore areas, we may be liable for damages and costs incurred in connection with oil spills or disposal of wastes related to those operations, and we may also be subject to significant fines and other liabilities in connection with spills.

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These laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time they were performed.

The application of these requirements or the adoption of new requirements or measures could have an adverse effect on our consolidated financial position, results of operations or cash flows.

The application of these requirements or the adoption of new requirements or measures could have an adverse effect on our financial position, results of operations or cash flows.

Regulatory and various other risks, including litigation, associated with greenhouse gases and climate change could have an adverse impact on our business and demand for our services.

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The attention to climate change has led, and we expect it to continue to lead, to additional regulations designed to reduce greenhouse gas emissions domestically and internationally.

Such attention could also result in other adverse impacts for the oil and gas industry, including further restrictions or bans imposed by lawmakers, lawsuits by governments or third-parties seeking recoveries for damages resulting from the combustion of fuels that may contribute to climate change effects, or reduced interest from investors if they elect

in the future to shift some or all of their investments to non-fossil fuel related sectors.

To the extent financial markets view climate change and greenhouse emissions as a financial risk, this could negatively impact our cost of or access to capital.

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Governmental and other entities in various U.S.

states, such as California and New York, have filed lawsuits against coal, gas oil and petroleum companies.

states, such as California and New York, have filed lawsuits against coal, gas oil and

petroleum companies.

These suits allege damages as a result of climate change, and the plaintiffs are seeking unspecified damages and abatement under various tort theories.

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In addition, government action, including initiatives by OPEC, may continue to cause oil or gas price volatility.

In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work by major oil companies and may continue to do so.

In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work by major energy companies and may continue to do so.

The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations.

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If we are not able to obtain visas and work permits for the employees we need to conduct our operations on a timely basis, we might not be able to perform our obligations under our drilling contracts, which could allow our customers to cancel the contracts.

If our customers cancel some of our drilling contracts, and we are unable to secure new drilling contracts on a timely basis and on substantially similar terms, it could have a material adverse effect on our business and on our consolidated financial position, results of operations or cash flows.

If our customers cancel some of our drilling contracts, and we are unable to secure new drilling contracts on a timely basis and on substantially similar terms, it could have a material adverse effect on our business and on our financial position, results of operations or cash flows.

Failure to comply with anti-bribery statutes, such as the U.S.

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We operate in many parts of the world that have experienced corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices.

If we are found to be liable for violations under the FCPA, the Bribery Act or other similar laws, either due to our acts or omissions or due to the acts or omissions of others, including our partners in our various joint ventures and of the current or former officers, directors or employees of any companies we have acquired, we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on our business or our consolidated financial position and results of operations.

If we are found to be liable for violations under the FCPA, the Bribery Act or other similar laws, either due to our acts or omissions or due to the acts or omissions of others, including our partners in our various joint ventures and of the current or former officers, directors or employees of any companies we have acquired, we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on our business or our financial position, results of operations or cash flows.

In addition, investors could negatively view potential violations, inquiries or allegations of misconduct under the FCPA, the Bribery Act or similar laws, which could adversely affect our reputation and the market for our shares.

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We are also subject to a number of significant tax disputes.

We cannot predict the outcome of the investigations and cases involving the Company or our subsidiaries or the potential costs to resolve them.

We cannot predict the outcome of these investigations and cases or the potential costs to resolve them.

Insurance may not be applicable or sufficient in all cases, insurers may not remain solvent and policies may not be located.

Suits against non-asset-owning subsidiaries have and may in the future give rise to alter ego or successor-in-interest claims against us and our asset-owning subsidiaries to the extent a subsidiary is unable to pay a claim or insurance is not available or sufficient to cover the claims.

To the extent that one or more pending or future investigations or litigation matters is not resolved in our favor and is not covered by insurance, which could have an adverse effect on our financial position, results of operations or cash flows.

To the extent that one or more pending or future investigations or litigation matters is not resolved in our favor and is not covered by insurance, which could have a material adverse effect on our financial position, results of operations or cash flows.

We are subject to cybersecurity risks and threats as well as increasing regulation of data privacy and security.

We depend on data and digital technologies to conduct our offshore and onshore operations, to collect payments from customers and to pay vendors and employees.

Our data protection measures and measures taken by our customers and vendors may not prevent unauthorized access of information technology systems.

Our data protection measures and measures taken by our customers and vendors may not prevent unauthorized access of information technology systems, and when such unauthorized access occurs, we, our customers or vendors may not detect the incident in time to prevent harm or damage.

Threats to our information technology systems, and the systems of our customers and vendors, associated with cybersecurity risks and cyber-incidents or attacks continue to grow.

Threats to our systems and our customers’ and vendors’ systems may derive from human error, fraud or malice, social engineering on the part of employees or third parties, or may

result from accidental technological failure.

Such threats may derive from human error, fraud or malice, social engineering on the part of employees or third parties, or may result from accidental technological failure.

In addition, breaches to our systems and systems of our customers and vendors could go unnoticed for some period of time.

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other impairments of our ability to conduct our operations;

loss or ransom of intellectual property, proprietary information or customer and vendor data;

loss or ransom of intellectual property, proprietary information, personal identifiable information or customer and vendor data;

disruption of our customers’ and vendors’ operations;

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A breach may also result in legal claims or proceedings against us by our shareholders, employees, customers, vendors and governmental authorities, both U.S.

If such a cyber-incident were to occur, it could have a material adverse effect on our business or on our consolidated financial position, results of operations or cash flows.

If such a cyber-incident were to occur, it could have a material adverse effect on our business or on our financial position, results of operations or cash flows.

In addition, laws and regulations governing data privacy and the unauthorized disclosure of personal data and confidential information, including the European Union General Data Protection Regulation, the Data Protection Law, as revised, of the Cayman Islands, the General Data Protection Law of Brazil and the California Consumer Privacy Act, pose increasingly complex compliance challenges and potential to elevate our costs.

Any failure by us to comply with these laws and regulations, including as a result of a security or privacy breach, could result in significant penalties, litigation and liabilities for us.

Any failure by us to comply with these laws and regulations, including as a result of a security or privacy

breach, could result in significant penalties, litigation and liabilities for us.

Additionally, if we acquire a company that has violated or is not in compliance with applicable data protection laws, we may incur significant liabilities and penalties as a result.

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We are subject to changes in applicable tax laws, treaties or regulations in the jurisdictions in which we operate and earn income, and such changes could include laws or policies directed toward companies organized in jurisdictions with low tax rates with the intent to increase the tax burden.

Switzerland, for example, enacted tax reform in response to certain guidance from and demands by the EU and the Organization for Economic Co-operation and Development (the “OECD”) effective January 2022.

Similarly, the OECD issued its action plan of tax reform measures that called for member states to take action to prevent base erosion and profit shifting.

The Organization for Economic Co-operation and Development, for example, issued its action plan of tax reform measures that called for member states to take action to prevent base erosion and profit shifting.

Some of these measures impact transfer pricing, requirements to qualify for tax treaty benefits, and the definition of permanent establishments depending on each jurisdiction’s adoption and interpretation of such proposals.

Respective countries have adopted various measures into their own tax laws.

In addition, the EU issued its Anti-Tax Avoidance Directives in 2016 and 2017 that required its member states to adopt specific tax reform measures starting in 2019.

Other tax jurisdictions in which we operate may consider implementing similar legislation.

Any material change to tax laws, treaties, regulations or policies, their interpretation or application, or the adoption of new interpretations of existing laws and rulings, in any of the jurisdictions in which we operate, are incorporated or resident, could result in a higher effective tax rate on our worldwide earnings and such change could have a significant adverse effect on our consolidated financial position, results of operations or cash flows.

Respective countries, including Switzerland, have adopted various measures into their own tax laws.

In addition, the EU has issued Anti-Tax Avoidance Directives and proposed directives that required or require member states to adopt specific tax reform measures, some of which relate to a 15 percent minimum tax.

Other tax jurisdictions in which we operate may consider implementing similar measures.

Any material change to tax laws, treaties, regulations or policies, their interpretation or application, or the adoption of new interpretations of existing laws and rulings, in any of the jurisdictions in which we operate, are incorporated or resident, could result in a higher effective tax rate on our worldwide earnings and such change could have a significant adverse effect on our financial position, results of operations or cash flows.

A loss of a major tax dispute or a successful tax challenge to our operating structure, intercompany pricing policies or the taxable presence of our key subsidiaries in certain countries could result in a higher effective tax rate on our consolidated earnings and increase our cash tax payments.

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corporate income and branch profits taxes on the portion of our earnings effectively connected to such U.S.

business or, if applicable,

attributable to such U.S.

business or, if applicable, attributable to such U.S.

permanent establishment during the period in which this was considered to have occurred.

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We believe that we have not been and will not be a PFIC with respect to any taxable year.

Our income from offshore contract drilling services should be treated as services income for purposes of determining whether we are a PFIC.

Our income from offshore contract drilling services should be treated as services income for purposes of determining whether

we are a PFIC.

Accordingly, we believe that our income from our offshore contract drilling services should not constitute passive income, and the assets that we own and operate in connection with the production of that income should not constitute passive assets.

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Accordingly, shareholders at our annual general meeting in May 2022 may be requested to approve a renewal and an increase in authorized share capital.

Additionally, subject to certain exceptions, Swiss law grants preemptive rights to existing shareholders to subscribe for new issuances of shares.

Subject to certain exceptions, Swiss law also grants preemptive rights to existing shareholders to subscribe for new issuances of shares.

Further, Swiss law does not provide as much flexibility in the various terms that can attach to different classes of shares as the laws of some other jurisdictions.

Swiss law also reserves for shareholder approval certain corporate actions over which a board of directors would have authority in some other jurisdictions.

For example, dividends must be approved by shareholders.

These Swiss law requirements relating to our capital management may limit our flexibility, and situations may arise where greater flexibility would have provided substantial benefits to our shareholders.

Distributions to shareholders in the form of a par value reduction and dividend distributions out of qualifying additional paid-in capital are not currently subject to the 35 percent Swiss federal withholding tax.

However, the Swiss withholding tax rules could also be changed in the future, and any such change may adversely affect us or our shareholders.

Swiss law also reserves for shareholder approval certain corporate actions, such as approval of dividends, over which a board of directors would have authority in some other jurisdictions.

These Swiss law requirements relating to our capital management may limit our flexibility to swiftly implement certain initiatives or strategies, and situations may arise where greater flexibility would have provided substantial benefits to our shareholders.

We are required, from time to time, to evaluate the carrying amount of our investments in affiliates, as presented on our Swiss standalone balance sheet.

If we determine that the carrying amount of any such investment exceeds its fair value, we may conclude that such investment is impaired.

Any recognized loss associated with such a non-cash impairment could result in our net assets no longer covering our statutory share capital and statutory capital reserves.

Under Swiss law, if our net assets cover less than 50 percent of our statutory share capital and statutory capital reserves, the board of directors must convene a general meeting of shareholders and propose measures to remedy such a capital loss.

Appropriate measures depend on the relevant circumstances and the magnitude of the recognized loss and may include seeking shareholder approval for offsetting the aggregate loss, or a portion thereof, with our statutory capital reserves, including qualifying additional paid-in capital otherwise available for distributions to shareholders, or raising new equity.

Depending on the circumstances, we may also need to use qualifying additional paid-in capital available for distributions in order to reduce our accumulated net loss and such use might reduce our ability to make distributions without subjecting our shareholders to Swiss withholding tax.

Distributions to shareholders in the form of a par value reduction and dividend distributions out of qualifying additional paid-in capital are currently not subject to the 35 percent Swiss federal withholding tax.

However, the Swiss withholding tax rules could be changed in the future, and any such change may adversely affect us or our shareholders.

In addition, over the long term, the amount of par value available for us to use for par value reductions or the amount of qualifying additional paid-in capital available for us to pay out as distributions is limited.

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At our 2009 annual general meeting, our shareholders approved the repurchase of up to CHF 3.5 billion of our shares for cancellation under the share repurchase program.

If we repurchase shares, we expect to use an alternative procedure pursuant to which we repurchase shares via a “virtual second trading line” from market players, such as banks and

institutional investors, who are generally entitled to receive a full refund of the Swiss withholding tax.

If we repurchase shares, we expect to use an alternative procedure pursuant to which we repurchase shares via a “virtual second trading line” from market players, such as banks and institutional investors, who are generally entitled to receive a full refund of the Swiss withholding tax.

The use of such “virtual second trading line” with respect to share repurchase programs is subject to the approval of the competent Swiss tax and other authorities.

We may not be able to repurchase as many shares as we would like to repurchase for purposes of capital reduction on the “virtual second trading line” without subjecting the selling shareholders to Swiss withholding taxes.

We are required, from time to time, to evaluate the carrying amount of our investments in affiliates, as presented on our Swiss standalone balance sheet.

If we determine that the carrying amount of any such investment exceeds its fair value, we may conclude that such investment is impaired.

The recognized loss associated with such a non-cash impairment could result in our net assets no longer covering our statutory share capital and statutory capital reserves.

The appropriate measures depend on the relevant circumstances and the magnitude of the recognized loss and may include seeking shareholder approval for offsetting the aggregate loss, or a portion thereof, with our statutory capital reserves, including qualifying additional paid-in capital otherwise available for distributions to shareholders, or raising new equity.

These Swiss law requirements could limit our flexibility to swiftly implement certain initiatives or strategies.

We may not be

able to repurchase as many shares as we would like to repurchase for purposes of capital reduction on the “virtual second trading line” without subjecting the selling shareholders to Swiss withholding taxes.

We are subject to anti-takeover provisions.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1A. Risk Factors