What changed in this filing

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Item 1. Business

2021-03-02 compared with 2020-02-21 · 188 added, 100 removed, 200 unchanged (59% of the section changed)

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We are a leading provider of offshore contract drilling services to the international oil and gas industry.

Exclusive of two rigs under construction and one rig marked for retirement and classified as held-for-sale, we currently own and operate an offshore drilling rig fleet of 74 rigs, with drilling operations in almost every major offshore market across six continents.

Inclusive of rigs under construction, our fleet includes 16 drillships, eight dynamically positioned semisubmersible rigs, two moored semisubmersible rigs and 50 jackup rigs, nine of which are leased to our 50/50 joint venture with Saudi Aramco.

We operate the world's largest fleet of offshore drilling rigs, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet.

We currently own an offshore drilling rig fleet of 61 rigs, with drilling operations in almost every major offshore market across five continents.

Our rig fleet includes 11 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 45 jackup rigs and a 50% equity interest in Saudi Aramco Rowan Offshore Drilling Company ("ARO"), our 50/50 joint venture with Saudi Aramco, which owns an additional seven rigs.

We operate the world's largest fleet amongst competitive rigs, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet.

Our customers include many of the leading national and international oil companies, in addition to many independent operators.

We are among the most geographically diverse offshore drilling companies, with current operations spanning 24 countries on six continents.

The markets in which we operate include the Gulf of Mexico, Brazil, the Mediterranean, the North Sea, Norway, the Middle East, West Africa, Australia and Southeast Asia.

We are among the most geographically diverse offshore drilling companies, with current operations spanning nine countries on five continents.

The markets in which we operate include the Gulf of Mexico, the North Sea, the Middle East, West Africa, Australia and Southeast Asia.

We provide drilling services on a day rate contract basis.

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Our customers bear substantially all of the costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well.

The decline in oil prices from 2014 highs led to a significant reduction in global demand for offshore drilling services.

Customers significantly reduced their capital spending budgets, including the cancellation or deferral of existing programs, resulting in fewer contracting opportunities for offshore drilling rigs.

Declines in capital spending levels, together with the oversupply of rigs from newbuild deliveries, resulted in significantly reduced day rates and utilization that led to one of the most severe downturns in the industry's history.

More recently, oil prices have increased meaningfully from the decade lows reached during 2016, leading to signs of a gradual recovery in demand for offshore drilling services.

However, macroeconomic and geopolitical headwinds triggered a decline in Brent crude prices in late 2018.

In 2019, oil prices experienced a gradual recovery before falling again in early 2020.

While this market volatility will likely continue over the near-term, we continue to observe improvements in the shallow-water market, particularly with respect to higher-specification rigs, as higher levels of customer demand and rig retirements have led to gradually increasing jackup utilization over the past year.

However, the timing and extent of this improvement is uncertain.

Moreover, global floater utilization has increased as compared to a year ago due to a higher number of contracted rigs and lower global supply resulting from rig retirements.

However, the floater recovery has lagged the jackup recovery as average contract durations remain relatively short-term and pricing improvements to date have been modest.

Despite the recent increase in customer activity, contract awards remain subject to an extremely competitive bidding process, and the corresponding pressure on operating day rates in recent periods has resulted in low margin contracts, particularly for floaters.

Therefore, our results from operations may continue to decline over the near-term as current contracts with above-market rates expire and new contracts are executed at lower rates.

We believe further

improvements in demand coupled with a reduction in rig supply are necessary to improve the commercial landscape for day rates.

Valaris plc is a public limited company incorporated under the laws of England and Wales in 2009.

Our principal executive office is located at 110 Cannon Street, London EC4N6EU, England, United Kingdom, and our telephone number is +44 (0) 20 7659 4660.

Our website is www.valaris.com.

Information contained on our website is not included as part of, or incorporated by reference into, this report.

Rowan Transaction

On October 7, 2018 , we entered into a transaction agreement (the "Transaction Agreement") with Rowan, and on April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan pursuant to the Transaction Agreement (the "Rowan Transaction") and changed our name to Ensco Rowan plc.

On July 30, 2019 , we changed our name to Valaris plc.

Rowan's financial results are included in our consolidated results beginning on the Transaction Date.

As a result of the Rowan Transaction, Rowan shareholders received 2.750 Valaris Class A ordinary shares for each Rowan Class A ordinary share, representing a value of $43.67 per Rowan share based on a closing price of $15.88 per Valaris share on April 10, 2019 , the last trading day before the Transaction Date.

Total consideration delivered in the Rowan Transaction consisted of 88.3 million Valaris shares with an aggregate value of $1.4 billion .

All share and per share data included in this report have been retroactively adjusted to reflect the Reverse Stock Split (as defined herein).

Prior to the Rowan Transaction, Rowan and Saudi Aramco formed a 50/50 joint venture to own, manage and operate drilling rigs offshore Saudi Arabia ("Saudi Aramco Rowan Offshore Drilling Company" or "ARO").

ARO currently owns a fleet of seven jackup rigs, leases another nine jackup rigs from us and has plans to purchase up to 20 newbuild jackup rigs over an approximate 10 year period.

In January 2020, ARO ordered the first two newbuild jackups scheduled for delivery in 2022.

The rigs we lease to ARO are done so through bareboat charter agreements whereby substantially all operating costs are incurred by ARO.

All nine jackup rigs leased to ARO and all seven ARO-owned jackup rigs are under long-term contracts with Saudi Aramco.

For additional information about our ARO joint venture, See Note 4 of our consolidated financial statements included in Item 8 of this annual report.

The Rowan Transaction enhanced the market leadership of the combined company with a fleet of high-specification floaters and jackups and positions us well to meet increasing and evolving customer demand.

The increased scale, diversification and financial strength of the combined company provides us advantages to better serve our customers.

Exclusive of two older jackup rigs marked for retirement, Rowan’s offshore rig fleet at the Transaction Date consisted of four ultra-deepwater drillships and 19 jackup rigs.

Reverse Stock Split

Upon closing of the Rowan Transaction, we effected a consolidation (being a reverse stock split under English law) where every four existing Valaris Class A ordinary shares, each with a nominal value of $0.10 , were consolidated into one Class A ordinary share, each with a nominal value of $0.40 (the "Reverse Stock Split").

Our shares began trading on a reverse stock split-adjusted basis on April 11, 2019.

All share and per share data included in this report have been retroactively adjusted to reflect the Reverse Stock Split.

Following several years of market volatility beginning with oil price declines in 2014, as we entered 2020, we expected that volatility to continue over the near-term with the expectation that long-term oil prices would remain at levels sufficient to support a continued gradual recovery in the demand for offshore drilling services.

We were focused on opportunities to put our rigs to work, manage liquidity, extend our financial runway, and reduce debt as we sought to navigate the extended market downturn and improve our balance sheet.

Recognizing our ability to maintain a sufficient level of liquidity to meet our financial obligations depended upon our future performance, which is subject to general economic conditions, industry cycles and financial, business and other factors affecting our operations, many of which are beyond our control, we had significant financial flexibility within our capital structure to support our liability management efforts.

However, starting in early 2020, the COVID-19 pandemic and the response thereto negatively impacted the macro-economic environment and global economy.

Global oil demand fell sharply at the same time global oil supply increased as a result of certain oil producers competing for market share, leading to a supply glut.

As a consequence, the price of Brent crude oil fell from around $60 per barrel at year-end 2019 to around $20 per barrel in mid-April 2020.

In response to dramatically reduced oil price expectations for the near term, our customers reviewed, and in most cases lowered significantly, their capital expenditure plans in light of revised pricing expectations.

This caused our customers to cancel or shorten the duration of many of our 2020 drilling contracts, cancel future drilling programs and seek pricing and other contract concessions which led to material operating losses and liquidity constraints for us.

While there has been some recent improvement to Brent crude oil prices, to approximately $65 per barrel in February 2021, there is still a significant amount of uncertainty around the sustainability of the improvement in oil prices to support a recovery in demand for offshore drilling services.

Additionally, the full impact that the pandemic and the decline in oil prices will have on our results of operations, financial condition, liquidity and cash flows is uncertain due to numerous factors, including the duration and severity of the outbreak, the effectiveness of the ongoing vaccine rollout, the duration of the oil price and

demand decline, and the extent of disruptions to our operations.

To date, the COVID-19 pandemic has resulted in only limited operational downtime.

Our rigs have had to shut down operations while crews are tested and incremental sanitation protocols are implemented and while crew changes have been restricted as replacement crews are quarantined.

We continue to incur additional personnel, housing and logistics costs in order to mitigate the potential impacts of COVID-19 to our operations.

In limited instances, we have been reimbursed for these costs by our customers.

Our operations and business may be subject to further economic disruptions as a result of the spread of COVID-19 among our workforce, the extension or imposition of further public health measures affecting supply chain and logistics, and the impact of the pandemic on key customers, suppliers, and other counterparties.

There can be no assurance that these, or other issues caused by the COVID-19 pandemic, will not materially affect our ability to operate our rigs in the future.

We expect that these challenges will continue for drilling contractors as customers wait to gain additional clarity on commodity pricing and seek to reduce costs in the near-term by attempting to renegotiate existing contract terms.

We believe the current market and macro-economic conditions will create a challenging contracting environment through 2021 and into 2022 and potentially beyond.

The combined effects of the global COVID-19 pandemic, the significant decline in the demand for oil and the substantial surplus in the supply of oil have resulted in significantly reduced demand and day rates for offshore drilling provided by the Company and increased uncertainty regarding long-term market conditions.

These recent events have had a significant adverse impact on our current and expected liquidity position and financial runway and led to the filing of the Chapter 11 Cases (as defined herein).

While we have and are continuing to pursue a variety of cost-cutting measures such as further reductions in corporate overhead and discretionary expenditures, reductions in capital expenditures and an increased focus on operational efficiencies, we determined that based on our significant level of indebtedness and the circumstances described above that a comprehensive restructuring of our indebtedness was needed to improve our financial position.

As more fully described in “ Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” to our consolidated financial statements included in "Item 8.

Financial Statements and Supplementary Data", the Company will undergo a financial restructuring that is intended to reduce debt levels substantially, support continued operations during the current lower demand environment and provide a robust financial platform to take advantage of market recovery over the long-term.

Chapter 11 Proceedings and Ability to Continue as a Going Concern

On August 19, 2020 (the “Petition Date”), Valaris plc and certain of its direct and indirect subsidiaries (collectively, “the Debtors") filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code (“Bankruptcy Code”) in the Bankruptcy Court for the Southern District of Texas (the “Bankruptcy Court”).

As part of the chapter 11 cases under the caption In re Valaris plc, et al., Case No.

20-34114 (MI) (the “Chapter 11 Cases”), the Debtors were granted “first-day” relief which enabled the Company to continue operating without interruption or disruption to its relationships with its customers and vendors or its high-quality service delivery.

In particular, employee pay and benefits are expected to continue without interruption.

On August 18, 2020, the Debtors entered into the Restructuring Support Agreement (the "Original RSA") with certain senior note holders (collectively, the "Consenting Noteholders").

On February 5, 2021, the Debtors entered into the Amended Restructuring Support Agreement (the “Amended RSA”) with the Consenting Noteholders and certain revolving credit facility lenders (the “Consenting Lenders” and, together with the Consenting Noteholders, the “Consenting Creditors”), which contemplates that the Company will implement the restructuring through the Chapter 11 Cases pursuant to a plan of reorganization and the various related transactions set forth in or contemplated by the Amended RSA.

Holders of approximately 100% of the total commitments outstanding under our revolving credit facility and holders of approximately 72% of the aggregate amount of our Senior Notes outstanding are party to the Amended RSA.

See “ Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” to our consolidated financial statements included in "Item 8.

Financial Statements and Supplementary Data" for additional details regarding the Chapter 11 Cases and related items, the Amended RSA and our ability to continue as a going concern.

Contract Drilling Operations

Prior to the Rowan Transaction, our business consisted of three operating segments:

(1) Floaters, which included our drillships and semisubmersible rigs, (2) Jackups and (3) Other, which consisted of management services on rigs owned by third-parties.

Our Floaters and Jackups were also reportable segments.

As a result of the Rowan Transaction, we concluded that we would maintain the aforementioned segment structure while adding ARO as a reportable segment for the new combined company.

We also concluded that the activities associated with our arrangements with ARO, consisting of our Transition Services Agreement, Rig Lease Agreements and Secondment Agreement, do not constitute reportable segments and are therefore included within Other in our segment disclosures.

See Note 4 for additional information on ARO and related arrangements.

Of our 76 rigs (excluding held-for-sale rigs), 37 are located in the Middle East, Africa and Asia Pacific (including two rigs under construction), 18 are located in North and South America and 21 are located in Europe and the Mediterranean as of December 31, 2019 .

Our business consists of four operating segments:

(1) Floaters, which included our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third-parties and the activities associated with our arrangements with ARO under the Rig Lease Agreements, the Secondment Agreement and the Transition Services Agreement.

Floaters, Jackups and ARO are also reportable segments.

We own and operate 61 rigs, 27 are located in the Middle East, Africa and Asia Pacific, 11 are located in North and South America and 23 are located in Europe as of December 31, 2020.

Our drilling rigs drill and complete oil and natural gas wells.

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• term extension options, exercisable by our customers, upon advance notice to us, at mutually agreed, indexed, fixed rates or current rate at the date of extension,

provisions permitting early termination of the contract (i) if the rig is lost or destroyed, (ii) if operations are suspended for a specified period of time due to various events, including damage or breakdown of major rig equipment, unsatisfactory performance, or "force majeure" events or (iii) at the convenience (without cause) of the customer (in certain cases obligating the customer to pay us an early termination fee providing some level of compensation to us for the remaining term),

• provisions permitting early termination of the contract (1) if the rig is lost or destroyed, (2) if operations are suspended for a specified period of time due to various events, including damage or breakdown of major rig equipment, unsatisfactory performance, or "force majeure" events or (3) at the convenience (without cause) of the customer (in certain cases obligating the customer to pay us an early termination fee providing some level of compensation to us for the remaining term),

• payment of compensation to us is (generally in U.S.

dollars although some contracts require a portion of the compensation to be paid in local currency) on a day rate basis such that we receive a fixed amount for each day that the drilling unit is under contract (lower day rates generally apply for limited periods when operations are suspended due to various events, including during delays that are beyond our reasonable control, during repair of equipment damage or breakdown and during periods of re-drilling damaged portions of the well, and no day rate, or zero rate, generally applies when these limited periods are exceeded until the event is remediated, and during periods to remediate unsatisfactory performance or other specified conditions),

payment by us of the operating expenses of the drilling unit, including crew labor and incidental rig supply and maintenance costs,

mobilization and demobilization requirements of us to move the drilling unit to and from the planned drilling site, and may include reimbursement of a portion of these moving costs by the customer in the form of an up-front payment, additional day rate over the contract term or direct reimbursement, and

dollars although some contracts require a portion of the compensation to be paid in local currency) on a day rate basis such that we receive a fixed amount for each day that the drilling rig is under contract (lower day rates generally apply for limited periods when operations are suspended due to various events, including during delays that are beyond our reasonable control, during repair of equipment damage or breakdown and during periods of re-drilling damaged portions of the well, and no day rate, or zero rate, generally applies when these limited periods are exceeded until the event is remediated, and during periods to remediate unsatisfactory performance or other specified conditions),

• payment by us of the operating expenses of the drilling rig, including crew labor and incidental rig supply and maintenance costs,

• mobilization and demobilization requirements of us to move the drilling rig to and from the planned drilling site, and may include reimbursement of a portion of these moving costs by the customer in the form of an up-front payment, additional day rate over the contract term or direct reimbursement, and

• provisions allowing us to recover certain labor and other operating cost increases, including certain cost increases due to changes in applicable law, from our customers through day rate adjustment or direct reimbursement.

In general, following the downturn in offshore drilling demand commencing in 2014, recent contract awards have been subject to an extremely competitive bidding process.

In general, following the downturn in offshore drilling demand commencing in 2014, contract awards have been subject to an extremely competitive bidding process.

The intense pressure on operating day rates has resulted in lower margin contracts that also contain less favorable contractual and commercial terms, including reduced or no mobilization and/or demobilization fees;

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The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities.

Contract backlog is adjusted for drilling contracts signed or terminated after each respective balance sheet date but prior to filing each of our annual reports on Form 10-K on February 21, 2020 and February 28, 2019 , respectively.

Our backlog excludes ARO's backlog, but includes bareboat charter and related revenue for the jackup rigs leased to ARO.

Contract backlog is adjusted for drilling contracts signed or terminated after each respective balance sheet date but prior to filing each of our annual reports on Form 10-K on March 2, 2021 and February 21, 2020, respectively.

Our backlog excludes ARO's backlog, but includes backlog from our rigs leased to ARO at the contractual rates, which are subject to adjustment by the shareholder agreement.

See " Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8.

Financial Statements and Supplementary Data" for additional information.

The following table summarizes our contract backlog of business as of December 31, 2020 and 2019 (in millions):

Floaters $ 205.7 $ 847.3

Jackups 859.5 1,281.2

Total $ 1,205.3 $ 2,452.8

(1) Other includes the bareboat charter backlog for the nine jackup rigs leased to ARO to fulfill contracts between ARO and Saudi Aramco, in addition to backlog for our managed rig services.

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As of December 31, 2020, our backlog was $1.2 billion as compared to $2.5 billion as of December 31, 2019.

Our floater backlog declined $94.2 million and our jackup backlog increased $210.2 million .

Changes resulted from revenues realized during the period, partially offset by the addition of backlog from the Rowan Transaction, new contract awards and contract extensions.

Our other segment backlog increased $154.4 million due to the addition of backlog from the Rowan Transaction related to the rigs leased to ARO.

Our floater backlog declined $641.6 million and our jackup backlog declined $421.7 million.

Changes resulted from revenues realized during the period, contract terminations and contract suspensions, partially offset by new contract awards and contract extensions.

Our other segment backlog declined $184.2 million due to contract concessions and revenues realized during the period.

The following table summarizes our contract backlog of business as of December 31, 2020 and the periods in which such revenues are expected to be realized (in millions):

Other includes the bareboat charter backlog for the nine jackup rigs leased to ARO to fulfill contracts between ARO and Saudi Aramco, in addition to backlog for our managed rig services.

2021 2022 2023 2024

and Beyond Total

Floaters $ 205.7 $ — $ — $ — $ 205.7

Jackups 548.7 235.8 75.0 — 859.5

130.2 9.9 — — 140.1

Total $ 884.6 $ 245.7 $ 75.0 $ — $ 1,205.3

(1) Includes the bareboat charter backlog for the nine jackup rigs leased to ARO to fulfill contracts between ARO and Saudi Aramco, in addition to backlog for our managed rig services.

Substantially all the operating costs for jackups leased to ARO through the bareboat charter agreements will be borne by ARO.

Our drilling contracts generally contain provisions permitting early termination of the contract (i) if the rig is lost or destroyed or (ii) by the customer if operations are suspended for a specified period of time due to breakdown of major rig equipment, unsatisfactory performance, "force majeure" events beyond the control of either party or other specified conditions.

Our drilling contracts generally contain provisions permitting early termination of the contract if the rig is lost or destroyed or by the customer if operations are suspended for a specified period of time due to breakdown of major rig equipment, unsatisfactory performance, "force majeure" events beyond the control of either party or other specified conditions.

In addition, our drilling contracts generally permit early termination of the contract by the customer for convenience (without cause), exercisable upon advance notice to us, and in some cases without making an early termination payment to us.

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Our insurance program provides coverage, subject to the policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party claims arising from our operations, including third-party claims arising from well-control events, named windstorms, sudden and accidental pollution originating from our rigs, wrongful death and personal injury.

Third-party pollution claims could also arise from damage to adjacent pipelines and from spills of fluids maintained on the drilling unit.

Third-party pollution claims could also arise from damage to adjacent pipelines and from spills of fluids maintained on the drilling rig.

Generally, our program provides liability coverage up to $750.0 million, with a per occurrence deductible of $10.0 million or less.

We retain the risk for liability not indemnified by the customer in excess of our insurance coverage.

Well-control events generally include an unintended flow from the well that cannot be contained by using equipment on site (e.g., a blowout preventer), by increasing the weight of drilling fluid or by diverting the fluids safely into production facilities.

In addition to the third-party coverage described above, for claims relating to a well-control

event, we also have $150.0 million of coverage available to pay costs of controlling and re-drilling of the well and third-party pollution claims.

Our insurance program also provides first party coverage to us for physical damage to, including total loss or constructive total loss of, our rigs, generally excluding damage arising from a named windstorm in the U.S.

Well-control events generally include an unintended release from a well that cannot be contained by using equipment on site (e.g., a blowout preventer), by increasing the weight of drilling fluid or by diverting the fluids safely into production facilities.

In addition to the third-party coverage described above, for claims relating to a

well-control event, we also have $150.0 million of coverage available to pay costs of controlling and re-drilling of the well and third-party pollution claims.

Our insurance program also provides coverage to us for physical damage (including total loss) to our rigs, excluding damage arising from a named windstorm in the U.S.

Gulf of Mexico.

This coverage is based on an agreed amount for each rig and has a per occurrence deductible for losses ranging from $15.0 million to $25.0 million.

Due to the significant premium, high deductible and limited coverage, we decided not to purchase first party windstorm insurance for our rigs in the U.S.

Due to the significant premium, high deductible and limited coverage, we do not purchase windstorm insurance for our rigs in the U.S.

Gulf of Mexico.

Accordingly, we have retained the risk for windstorm damage to our four jackups and eight floaters in the U.S.

Accordingly, we retain the risk for windstorm damage to our jackup and floater rigs in the U.S.

Gulf of Mexico.

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Notwithstanding our negotiation of express limitations in our drilling contracts for losses or damages resulting from our ordinary negligence and any express limitations (albeit usually much higher) for losses or damages in the event of our gross negligence, under the applicable laws that govern certain of our drilling contracts, the courts will not enforce any indemnity for losses and damages that result from our gross negligence or willful misconduct.

As a result, under the laws of such jurisdictions, the indemnification provisions of our drilling contracts that would otherwise limit our liability in the event of our gross negligence or willful misconduct are deemed to be unenforceable as being contrary to public policy, and we are exposed to unlimited liability for losses and damages that result from our gross negligence or willful misconduct, regardless of any express limitation of our liability in the relevant drilling contracts.

and damages that result from our gross negligence or willful misconduct, regardless of any express limitation of our liability in the relevant drilling contracts.

Under the laws of certain jurisdictions, an indemnity from an operator for losses or damages of third parties resulting from our gross negligence is enforceable, but an indemnity for losses or damages of the operator is not enforceable.

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During 2020, our five largest customers accounted for 41% of consolidated revenues.

Total, our only customer who accounts for 10% or more of consolidated revenues, accounted for 16% of consolidated revenues.

BP, our only customer who accounts for 10% or more of consolidated revenues, accounted for 11% of consolidated revenues.

The offshore contract drilling industry is highly competitive.

Drilling contracts are, for the most part, awarded on a competitive bid basis.

Price is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise also are factors.

Price is often the primary factor in determining which contractor is awarded a

contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise also are factors.

There are numerous competitors with significant resources in the offshore contract drilling industry.

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Such statutes and related regulations impose a variety of obligations on us related to the prevention of oil spills, disposal of waste and liability for resulting damages.

For instance, OPA 90 imposes strict and, with limited exceptions, joint and several liability upon each responsible party for oil removal costs as well as a variety of fines, penalties and damages.

For instance, OPA 90 imposes strict and, with limited

exceptions, joint and several liability upon each responsible party for oil removal costs as well as a variety of fines, penalties and damages.

Similar environmental laws apply in our other areas of operation.

Failure to comply with these statutes and regulations may subject us to civil or criminal enforcement action, which may not be covered by contractual indemnification or insurance,

or for which indemnity is prohibited under applicable law, and could have a material adverse effect on our financial position, operating results and cash flows.

Failure to comply with these statutes and regulations may subject us to civil or criminal enforcement action, which may not be covered by contractual indemnification or insurance, or for which indemnity is prohibited under applicable law, and could have a material adverse effect on our financial position, operating results and cash flows.

High-profile and catastrophic events such as the 2010 Macondo well incident have heightened governmental and environmental concerns about the oil and gas industry.

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Gulf of Mexico that have and may further impact our operations.

As a result of Macondo, the Bureau of Safety and Environmental Enforcement ("BSEE") issued a drilling safety rule in 2012 that included requirements for the cementing of wells, well-control barriers, blowout preventers, well-control fluids, well completions, workovers and decommissioning operations.

As a result of the 2010 Macondo well incident, the United States Bureau of Safety and Environmental Enforcement ("BSEE") issued a drilling safety rule in 2012 that included requirements for the cementing of wells, well-control barriers, blowout preventers, well-control fluids, well completions, workovers and decommissioning operations.

BSEE also issued regulations requiring operators to have safety and environmental management systems ("SEMS") prior to conducting operations and requiring operators and contractors to agree on how the contractors will assist the operators in complying with the SEMS.

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If this judicial precedent stands, it may reduce regulatory and civil litigation liability exposures.

In late 2014, the United States Coast Guard ("USCG") proposed new regulations that would impose GPS equipment and positioning requirements for mobile offshore drilling units ("MODUs") and jackup rigs operating in the U.S.

In late 2014, the United States Coast Guard ("USCG") proposed new regulations that would impose GPS equipment and positioning requirements for drilling rigs operating in the U.S.

Gulf of Mexico and issued notices regarding the development of guidelines for cybersecurity measures used in the marine and offshore energy sectors for all vessels and facilities that are subject to the Maritime Transportation Security Act of 2002 ("MTSA"), including our rigs.

The regulations imposing GPS equipment and positioning requirements have not yet been issued.

On July 12, 2017, the USCG announced the availability of and requested comments on draft guidelines for addressing cyber risks at MTSA-regulated facilities.

In March 2020, the USCG issued its “Guidelines for Addressing Cyber Risks at MTSA Regulated Facilities” in order to assist facility owners and operators in complying with the requirements to assess, document, and address computer system or network vulnerabilities.

The MTSA regulations provide general requirements for regulated facility cybersecurity while allowing facility owners and operators the discretion to determine the details of how they will comply.

Facility owners and operators are responsible for assessing and documenting cybersecurity vulnerabilities and ensuring cybersecurity of their facilities under the Coast Guard’s oversight and guidance.

The Company is currently evaluating the new USCG guidelines and the extent to which the BSEE or other regulators will review our ability to address cybersecurity risks at MTSA-regulated facilities.

As the USCG provides further detail on how these guidelines will be implemented, we will address our cybersecurity program to comply with any regulations that are ultimately promulgated.

On July 28, 2016, BSEE adopted a new well-control rule that will be implemented in phases over the next several years (the "2016 Well Control Rule").

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The revisions were targeted to ensure safety and environmental protection while correcting errors in the 2016 rule and reducing unnecessary regulatory burden.

Based on our current assessment of the rules, we do not expect to incur significant costs to comply with the 2016 Well Control Rule or 2019 Well Control Rule.

The continuing and evolving threat of cyber attacks will likely require increased expenditures to strengthen cyber risk management systems for MODUs and onshore facilities.

For example, on May 11, 2017, President Trump issued EO 13800, entitled Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, which is intended to improve the nation's ability to defend against increasing and evolving cyber attacks, and in July 2017 the USCG issued proposed cybersecurity guidelines for port facilities and offshore facilities, including MODUs, that could be impacted by cyber attacks.

We have not incurred significant costs to comply with the 2016 Well Control Rule or 2019 Well Control Rule.

The continuing and evolving threat of cyber attacks will likely require increased expenditures to strengthen cyber risk management systems for drilling rigs and onshore facilities.

For example, on May 11, 2017, an executive

order was issued entitled Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, which is intended to improve the nation's ability to defend against increasing and evolving cyber attacks, and in July 2017 the USCG issued proposed cybersecurity guidelines for port facilities and offshore facilities, including drilling rigs, that could be impacted by cyber attacks.

We cannot currently estimate the future expenditures associated with increased regulatory requirements, which may be material, and we continue to monitor regulatory changes as they occur.

Additionally, climate change is receiving increasing attention from scientists and legislators, and significant focus is being put on companies that are active producers of depleting natural resources.

Globally, there are a number of legislative and regulatory proposals at various levels of government to address the greenhouse gas emissions that contribute to climate change.

Additionally, climate change is receiving increasing attention from scientists and legislators, and significant focus is being put on companies that are active producers of hydrocarbon resources.

Globally, there are a number of legislative and regulatory proposals at various levels of government to address the greenhouse gas emissions that contribute to climate change, such as laws or regulations incentivizing or mandating the use of alternative energy sources such as wind power and solar energy and programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles.

Although it is not possible at this time to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions would impact our business, any such future laws and regulations could require us or our customers to incur increased operating costs.

Any such legislation or regulatory programs

could also increase the cost of consuming oil, and thereby reduce demand for oil, which could reduce our customers’ demand for our services.

Any such legislation or regulatory programs could also increase the cost of consuming oil, and thereby reduce demand for oil, which could reduce our customers’ demand for our services.

Consequently, legislation and regulatory programs to reduce greenhouse gas emissions could have an adverse effect on our financial position, operating results and cash flows.

If new laws are enacted or other government actions are taken that restrict or prohibit offshore drilling in our principal areas of operation or impose additional regulatory (including environmental protection) requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development or production of oil and natural gas, our financial position, operating results and cash flows could be materially adversely affected.

Although the United States had withdrawn from the Paris Agreement in November 2020, the current Presidential Administration officially reentered the United States into the agreement in February 2021.

It is likely that new executive orders, regulatory action, and/or legislation targeting greenhouse gas emissions, or prohibiting, restricting, or delaying oil and gas development activities in certain areas, will be proposed and/or promulgated.

For example, the current Presidential administration has issued multiple executive orders pertaining to environmental regulations and climate change, including the (1) Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis and (2) Executive Order on Tackling the Climate Crisis at Home and Abroad.

The latter executive order announced a moratorium on new oil and gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices, established climate change as a primary foreign policy and national security consideration and affirmed that achieving net-zero greenhouse gas emissions by or before mid-century is a critical priority.

If new laws are enacted or other government actions are taken that restrict or prohibit offshore drilling in our principal areas of operation, impose additional regulatory (including environmental protection) requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development or production of oil and natural gas, or promote other sources of clean energy, our financial position, operating results and cash flows could be materially adversely affected.

See "Item 1A.

33 unchanged sentences

The table below sets forth certain information regarding our executive officers as of February 22, 2021:

President and Chief Executive Officer

Jonathan Baksht

Executive Vice President and Chief Financial Officer

Senior Vice President - Chief Operating Officer

Alan Quintero

Senior Vice President - Business Development

Senior Vice President - General Counsel and Secretary

Name Age Position

Thomas Burke 53 President and Chief Executive Officer

Jonathan Baksht 46 Executive Vice President and Chief Financial Officer

Gilles Luca 49 Senior Vice President - Chief Operating Officer

Alan Quintero 57 Senior Vice President - Business Development

McGuinty 58 Senior Vice President - General Counsel and Secretary

Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years:

3 unchanged sentences

Burke first joined Rowan in December 2009, serving as Chief Executive Officer and President of LeTourneau Technologies until the sale of LeTourneau in June 2011.

From 2006 to 2009, Dr.

From 2006 to 2009, Mr.

Burke was a Division President at Complete Production Services, an oilfield services company, and from 2004 to 2006, served as its Vice President for Corporate Development.

He serves on the executive committee of the International Association of Drilling Contractors.

Burke received his PhD in Engineering from Trinity College at the University of Oxford, a Bachelor of Science in Engineering with Honors from Heriot-Watt University in Scotland, and an MBA from Harvard Business School, where he was awarded a Baker Scholarship.

Jonathan Baksht became Executive Vice President - Chief Financial Officer of Valaris in June 2019.

Jonathan Baksht became Executive Vice President and Chief Financial Officer of Valaris in June 2019.

Previously, he served as the Company's Senior Vice President - Chief Financial Officer since November 2015, and as Vice President - Finance and Vice President - Treasurer before his appointment as Chief Financial Officer.

Prior to joining Valaris, Mr.

Prior to joining Valaris in August 2013, Mr.

Baksht served as a Senior Vice President at Goldman Sachs & Co.

14 unchanged sentences

Prior to joining Valaris, Mr.

McGuinty served as General Counsel and Company Secretary of Abu Dhabi National Energy Company from January 2014 to December 2015.

McGuinty served as General Counsel and Company Secretary of Abu Dhabi

National Energy Company from January 2014 to December 2015.

Previously, Mr.

3 unchanged sentences

McGuinty holds a Bachelor of Laws and Bachelor of Civil Law from McGill University and a Bachelor of Social Sciences from the University of Ottawa.

Excluding contract employees, we employed approximately 5,800 personnel worldwide as of December 31, 2019 .

We employed approximately 4,500 personnel worldwide including contract employees, and approximately 3,400 personnel excluding contract employees, as of December 31, 2020.

The majority of our personnel work on rig crews and are compensated on an hourly basis.

2 unchanged sentences

In addition, the SEC maintains an Internet site at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

These reports also are available in print without charge by contacting our Investor Relations Department at 713-430-4607 as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

These reports also are available in print without charge by contacting our Investor Relations Department as soon as reasonably practicable after we electronically file the information with, or furnish it to, the SEC.

The information contained on our website is not included as part of, or incorporated by reference into, this report.

RISK FACTORS SUMMARY

An investment in our securities involves a high degree of risk.

You should consider carefully all of the risks described below, together with the other information contained in this Form 10-K, before making a decision to invest in our securities.

If any of the following events occur, our business, financial condition and operating results may be materially adversely affected.

In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

Risks Related to Chapter 11 Proceedings

• Operating under the Bankruptcy Court protection for a long period of time may harm our business.

• We may not be able to obtain confirmation of a plan of reorganization.

• We have substantial liquidity needs and may not be able to obtain sufficient liquidity for the duration of the Chapter 11 Cases or to confirm a plan of reorganization or liquidation.

• As a result of the Chapter 11 Cases, our financial results may be volatile and may not reflect historical trends.

• We may be subject to claims that will not be discharged in the Chapter 11 Cases.

• Our actual financial results may vary significantly from the projections filed with the Bankruptcy Court.

• The pursuit of the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of our management, and we may face increased levels of employee attrition.

• Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks.

• In certain instances, a chapter 11 case may be converted to a case under chapter 7 of the Bankruptcy Code.

• Any plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us.

If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.

• We may not be able to achieve our stated goals and continue as a going concern under a plan of reorganization.

• Our ability to use our net operating loss carryforwards ("NOLs") may be limited by changes in ownership due to the Chapter 11 Cases.

Risks Related to Our Business, Operations and Market Conditions

• The COVID-19 pandemic and recent developments in the oil and gas industry could adversely impact our financial condition and results of operations.

• The success of our business largely depends on the level of activity in the oil and gas industry, which can be significantly affected by volatile oil and natural gas prices.

• The offshore contract drilling industry historically has been highly competitive and cyclical, with periods of low demand and excess rig availability that could result in adverse effects on our business.

• Our business will be adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected.

• We have a significant amount of debt.

Our debt levels and debt agreement restrictions may limit our liquidity, our ability to obtain additional financing and our pursuit of other business opportunities.

• Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities.

• We may suffer losses if our customers terminate or seek to renegotiate our contracts, if operations are suspended or interrupted or if a rig becomes a total loss.

• We may incur impairments as a result of future declines in demand for offshore drilling rigs.

• The loss of a significant customer or customer contract could adversely affect us.

• Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future .

• We may not realize the expected benefits of the ARO joint venture, which depends on a single customer for its income and accounts receivable, and our inability to realize such benefits may introduce additional risks to our business.

• We have taken, and continue to take, cost-reduction actions, which may not be successful.

• We may have difficulty obtaining or maintaining insurance in the future on terms we find acceptable and our insurance coverage may not protect us against all of the risks and hazards we face, including those specific to offshore operations.

• The potential for U.S.

Gulf of Mexico hurricane related windstorm damage or liabilities could result in uninsured losses and may cause us to alter our operating procedures during hurricane season.

• Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.

• Geopolitical events and violence could affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance.

• Rig construction, upgrade, enhancement and reactivation projects are subject to risks, including delays and cost overruns, which could have a material adverse effect on our financial position, operating results or cash flows.

• Failure to recruit and retain skilled personnel could adversely affect our business.

• We have historically made significant capital expenditures to maintain our fleet to comply with laws and the applicable regulations and standards of governmental authorities and organizations, or to expand our fleet, and we may be required to make significant capital expenditures to maintain our competitiveness.

• Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility.

• Significant part or equipment shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could increase our operating costs, decrease our revenues and adversely impact our operations.

• Our long-term contracts are subject to the risk of cost increases, which could adversely affect our profitability.

• Our information technology systems, including rig operating systems, are subject to cybersecurity risks and threats.

Risks Related to Our Indebtedness and Ordinary Shares

• Our Class A ordinary shares have been delisted from the NYSE.

• The accounting method for our 2024 Convertible Notes could have a material effect on our reported financial results.

• Transfers of our Class A ordinary shares may be subject to stamp duty or stamp duty reserve tax ("SDRT") in the U.K., which would increase the cost of dealing in our Class A ordinary shares.

• If our Class A ordinary shares are not eligible for continued deposit and clearing within the facilities of DTC, then transactions in our securities may be disrupted.

• We have less flexibility as a U.K.

public limited company with respect to certain aspects of capital management than U.S.

corporations due to increased shareholder approval requirements.

• Our articles of association contain anti-takeover provisions;

however, the Company is not subject to the U.K.'s City Code on Takeovers and Mergers.

• English law requires that we meet certain additional financial requirements before declaring dividends and returning funds to shareholders.

Legal, Regulatory and Tax Risks

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

Foreign Corrupt Practices Act and the U.K.

Bribery Act, could result in fines, criminal penalties, drilling contract terminations and an adverse effect on our business.

• Increasing regulatory complexity could adversely impact the costs associated with our offshore drilling operations and reduce demand.

• Compliance with or breach of environmental laws can be costly and could limit our operations.

• Regulation of greenhouse gases and climate change could have a negative impact on our business.

• The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S.

federal tax purposes.

tax laws and IRS guidance could affect our ability to engage in certain acquisition strategies and certain internal restructurings.

• Governments may pass laws that subject us to additional taxation or may challenge our tax positions.

• Our consolidated effective income tax rate may vary substantially over time.

• Investor enforcement of civil judgments against us may be more difficult.

• Our business could be affected as a result of activist investors.

Risks Related to Our International Operations:

• Our non-U.S.

operations involve additional risks not typically associated with U.S.

• The U.K.'s withdrawal from the E.U.

may have a negative effect on economic conditions, financial markets and our business.

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 1. Business