Valaris Ltd 10-K

Item 8. Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d-15(f). Our internal control over financial reporting system is designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and presentation of consolidated financial statements in accordance with accounting principles generally accepted in the United States, as well as to safeguard assets from unauthorized use or disposition. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, we have concluded that our internal control over financial reporting is effective as of December 31, 2020 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. KPMG LLP, the independent registered public accounting firm who audited our consolidated financial statements, has issued an audit report on our internal control over financial reporting. KPMG LLP's audit report on our internal control over financial reporting is included herein. March 2, 2021 101 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Valaris plc: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Valaris plc and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, and cash flows for each of the years in the three‑year period ended December 31, 2020 and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2020, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated March 2, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Going Concern The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the consolidated financial statements, the Company's operations and its ability to develop and execute its business plan are subject to a high degree of risk and uncertainty associated with the Chapter 11 voluntary petition, that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 102 Critical Audit Matters The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate. Impairment of property and equipment As discussed in Notes 1 and 7 to the consolidated financial statements, the Company recorded impairment with respect to certain floaters, jackups and spare equipment of $ 3.6 billion for the year ended December 31, 2020. On a quarterly basis, the Company evaluates the carrying value of property and equipment for impairment when events or changes in circumstances indicate that the carrying value of such rigs may not be recoverable. For property and equipment used in operations, recoverability generally is determined by comparing the carrying value of an asset to the expected undiscounted future cash flows of the asset. If the carrying value of an asset is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset and its estimated fair value. To estimate the fair value of property and equipment, the Company utilized an income approach or estimated scrap value. We identified the evaluation of the impairment assessment for certain floaters and jackups as a critical audit matter. A high degree of subjective auditor judgment was required to evaluate certain inputs and assumptions used in the Company's recoverability assessment and determination of fair value using the income approach, specifically assumptions regarding future day rates, forecasted utilization and the discount rate. The assumptions related to future day rates and forecasted utilization were based on unobservable and subjective inputs for which there is limited information. Evaluation of the discount rate involved specialized skills and knowledge. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's property and equipment impairment assessment process. This included controls over the determination of certain inputs and assumptions used in the recoverability assessment and the fair value estimates of floaters and jackups, including future day rates, forecasted utilization, and the discount rate. We evaluated the Company's estimated future day rates and forecasted utilization by comparing them to historical information, considering contract modifications and industry reports on floaters and jackups. We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the Company's discount rate by comparing the Company's discount rate against discount rate ranges that we independently developed using publicly-available market data for comparable entities. Income tax positions pertaining to certain tax transactions As discussed in Notes 1 and 13 to the consolidated financial statements, the Company evaluates the income tax effect of certain transactions which often requires local country tax expertise and judgment. This requires the Company to interpret complex tax laws in multiple jurisdictions to assess whether its tax positions have a more than 50 percent likelihood of being sustained with the taxing authorities. We identified the assessment of income tax positions pertaining to certain tax transactions as a critical audit matter. Complex auditor judgment was required to evaluate the Company's assessment that certain tax positions have a more than 50 percent likelihood of being sustained with the taxing authorities. In addition, specialized skills and knowledge were required to evaluate the Company's interpretation of tax laws in the applicable jurisdictions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company's income tax 103 process. This included controls related to the interpretation of tax laws applicable to certain transactions and the assessment that tax positions pertaining to those transactions have a more than 50 percent likelihood of being sustained with taxing authorities. We involved tax professionals with specialized skills and knowledge, who assisted in evaluating the Company's interpretation of local tax laws and assessment of whether certain tax positions had a greater than 50 percent likelihood of being sustained with taxing authorities. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Houston, Texas March 2, 2021 104 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Valaris plc: Opinion on Internal Control Over Financial Reporting We have audited Valaris plc and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive loss, and cash flows for each of the years in the three-year period ended December 31, 2020, and the related notes (collectively, the consolidated financial statements), and our report dated March 2, 2021 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may 105 become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Houston, Texas March 2, 2021 106 VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) Year Ended December 31, 2020 2019 2018 OPERATING REVENUES $ 1,427.2 $ 2,053.2 $ 1,705.4 OPERATING EXPENSES Contract drilling (exclusive of depreciation) 1,458.6 1,806.0 1,319.4 Loss on impairment 3,646.2 104.0 40.3 Depreciation 540.8 609.7 478.9 General and administrative 214.6 188.9 102.7 Total operating expenses 5,860.2 2,708.6 1,941.3 Other Operating Income 118.1 — — EQUITY IN LOSSES OF ARO ( 7.8 ) ( 12.6 ) — OPERATING LOSS ( 4,322.7 ) ( 668.0 ) ( 235.9 ) OTHER INCOME (EXPENSE) Interest income 19.7 28.1 14.5 Interest expense, net (Unrecognized contractual interest expense for debt subject to compromise was $ 140.7 million for the year ended December 31, 2020) ( 290.6 ) ( 428.3 ) ( 282.7 ) Reorganization items, net ( 527.6 ) — — Other, net 4.2 1,004.4 ( 34.8 ) ( 794.3 ) 604.2 ( 303.0 ) LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES ( 5,117.0 ) ( 63.8 ) ( 538.9 ) PROVISION (BENEFIT) FOR INCOME TAXES Current income tax expense (benefit) ( 153.7 ) 104.5 33.0 Deferred income tax expense (benefit) ( 105.7 ) 23.9 56.6 ( 259.4 ) 128.4 89.6 LOSS FROM CONTINUING OPERATIONS ( 4,857.6 ) ( 192.2 ) ( 628.5 ) LOSS FROM DISCONTINUED OPERATIONS, NET — — ( 8.1 ) NET LOSS ( 4,857.6 ) ( 192.2 ) ( 636.6 ) NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 2.1 ( 5.8 ) ( 3.1 ) NET LOSS ATTRIBUTABLE TO VALARIS $ ( 4,855.5 ) $ ( 198.0 ) $ ( 639.7 ) LOSS PER SHARE - BASIC AND DILUTED Continuing operations $ ( 24.42 ) $ ( 1.14 ) $ ( 5.82 ) Discontinued operations — — ( 0.08 ) $ ( 24.42 ) $ ( 1.14 ) $ ( 5.90 ) WEIGHTED-AVERAGE SHARES OUTSTANDING Basic and Diluted 198.9 173.4 108.5 The accompanying notes are an integral part of these consolidated financial statements. 107 VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (in millions) Year Ended December 31, 2020 2019 2018 NET LOSS $ ( 4,857.6 ) $ ( 192.2 ) $ ( 636.6 ) OTHER COMPREHENSIVE LOSS, NET Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of income tax benefit of $ 5.9 million for the year ended December 31, 2019 ( 76.3 ) ( 21.7 ) — Net change in fair value of derivatives ( 5.4 ) 1.6 ( 9.7 ) Amortization of settlement gain, net of income tax expense of $( 0.1 ) million for the year ended December 31, 2020 ( .2 ) — — Reclassification of net (gains) losses on derivative instruments from other comprehensive loss into net loss ( 11.6 ) 8.3 ( 1.0 ) Other ( .6 ) ( .2 ) ( .5 ) NET OTHER COMPREHENSIVE LOSS ( 94.1 ) ( 12.0 ) ( 11.2 ) COMPREHENSIVE LOSS ( 4,951.7 ) ( 204.2 ) ( 647.8 ) COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 2.1 ( 5.8 ) ( 3.1 ) COMPREHENSIVE LOSS ATTRIBUTABLE TO VALARIS $ ( 4,949.6 ) $ ( 210.0 ) $ ( 650.9 ) The accompanying notes are an integral part of these consolidated financial statements. 108 VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONSOLIDATED BALANCE SHEETS (in millions, except share and par value amounts) December 31, ASSETS 2020 2019 CURRENT ASSETS Cash and cash equivalents $ 325.8 $ 97.2 Accounts receivable, net 449.2 520.7 Other 397.9 446.5 Total current assets 1,172.9 1,064.4 PROPERTY AND EQUIPMENT, AT COST 13,209.3 18,393.8 Less accumulated depreciation 2,248.8 3,296.9 Property and equipment, net 10,960.5 15,096.9 LONG-TERM NOTES RECEIVABLE FROM ARO 442.7 452.9 INVESTMENT IN ARO 120.9 128.7 OTHER ASSETS 176.2 188.3 $ 12,873.2 $ 16,931.2 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 176.4 $ 288.2 Accrued liabilities and other 250.4 417.7 Current maturities of long-term debt — 124.8 Total current liabilities 426.8 830.7 LONG-TERM DEBT — 5,923.5 OTHER LIABILITIES 762.4 867.4 Total liabilities not subject to compromise 1,189.2 7,621.6 LIABILITIES SUBJECT TO COMPROMISE 7,313.7 — COMMITMENTS AND CONTINGENCIES VALARIS SHAREHOLDERS' EQUITY Class A ordinary shares, U.S. $ 0.40 par value, 206.1 and 205.9 million shares issued as of December 31, 2020 and 2019 82.5 82.4 Class B ordinary shares, £ 1 par value, 50,000 shares issued as of December 31, 2020 and 2019 .1 .1 Additional paid-in capital 8,639.9 8,627.8 Retained (deficit) earnings ( 4,183.8 ) 671.7 Accumulated other comprehensive (loss) income ( 87.9 ) 6.2 Treasury shares, at cost, 6.6 million and 7.9 million shares as of December 31, 2020 and 2019 ( 76.2 ) ( 77.3 ) Total Valaris shareholders' equity 4,374.6 9,310.9 NONCONTROLLING INTERESTS ( 4.3 ) ( 1.3 ) Total equity 4,370.3 9,309.6 $ 12,873.2 $ 16,931.2 The accompanying notes are an integral part of these consolidated financial statements. 109 VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION) CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2020 2019 2018 OPERATING ACTIVITIES Net loss $ ( 4,857.6 ) $ ( 192.2 ) $ ( 636.6 ) Adjustments to reconcile net loss to net cash used in operating activities of continuing operations: Loss on impairment 3,646.2 104.0 40.3 Depreciation expense 540.8 609.7 478.9 Non-cash reorganization items, net 436.4 — — Deferred income tax expense (benefit) ( 105.7 ) 23.9 56.6 Debtor in Possession financing fees and payments on Backstop Agreement 40.0 — — Debt discounts and other 36.8 31.5 ( 7.2 ) Share-based compensation expense 21.4 37.3 29.9 Equity in losses of ARO 7.8 12.6 — (Gain on) adjustment to bargain purchase 6.3 ( 637.0 ) ( 1.8 ) Amortization, net 6.2 ( 16.8 ) ( 40.2 ) (Gain) loss on debt extinguishment ( 3.1 ) ( 194.1 ) 19.0 Other 6.9 9.9 26.2 Changes in operating assets and liabilities, net of acquisition ( 22.0 ) ( 52.5 ) ( 20.8 ) Contributions to pension plans and other post-retirement benefits ( 12.1 ) ( 13.2 ) — Net cash used in operating activities ( 251.7 ) ( 276.9 ) ( 55.7 ) INVESTING ACTIVITIES Additions to property and equipment ( 93.8 ) ( 227.0 ) ( 426.7 ) Net proceeds from disposition of assets 51.8 17.7 11.0 Acquisition of Rowan, net of cash acquired — 931.9 — Maturities of short-term investments — 474.0 1,030.0 Purchases of short-term investments — ( 145.0 ) ( 919.0 ) Net cash provided by (used in) investing activities ( 42.0 ) 1,051.6 ( 304.7 ) FINANCING ACTIVITIES Borrowings on credit facility 596.0 215.0 — Debtor in Possession financing fees and payments on Backstop Agreement ( 40.0 ) — — Repayments of credit facility borrowings ( 15.0 ) ( 215.0 ) — Reduction of long-term borrowings ( 9.7 ) ( 928.1 ) ( 771.2 ) Purchase of noncontrolling interests ( 7.2 ) — — Debt solicitation fees — ( 9.5 ) — Cash dividends paid — ( 4.5 ) ( 17.9 ) Proceeds from issuance of senior notes — — 1,000.0 Debt issuance costs — — ( 17.0 ) Other ( 1.9 ) ( 10.2 ) ( 5.7 ) Net cash provided by (used in) financing activities 522.2 ( 952.3 ) 188.2 Net cash provided by discontinued operations — — 2.5 Effect of exchange rate changes on cash and cash equivalents .1 ( .3 ) ( .6 ) INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 228.6 ( 177.9 ) ( 170.3 ) CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 97.2 275.1 445.4 CASH AND CASH EQUIVALENTS, END OF YEAR $ 325.8 $ 97.2 $ 275.1 The accompanying notes are an integral part of these consolidated financial statements. 110 VALARIS PLC AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Business We are a leading provider of offshore contract drilling services to the international oil and gas industry. 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 and 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 nine countries on five continents. The markets in which we operate include the Gulf of Mexico, North Sea, the Middle East, West Africa, Australia and Southeast Asia. We provide drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. 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. Chapter 11 Cases and Restructuring Support Agreement 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"). The Debtors obtained joint administration of their chapter 11 cases under the caption In re Valaris plc, et al., Case No. 20-34114 (MI) (the "Chapter 11 Cases"). 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 holders of approximately 100 % of the total commitments under our revolving credit facility (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. See “ Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional details regarding the Chapter 11 Cases and Amended RSA. Basis of Presentation—U.K. Companies Act 2006 Section 435 Statement The accompanying consolidated financial statements have been prepared in accordance with U.S. GAAP, which the Board of Directors consider to be the most meaningful presentation of our results of operations and financial position. The accompanying consolidated financial statements do not constitute U.K. statutory accounts for the year ended December 31, 2020 and 2019 as required to be prepared under the U.K. Companies Act 2006. The U.K. statutory accounts are prepared in accordance with Financial Reporting Standard 102, the financial reporting standard applicable in the U.K. and Republic of Ireland (“FRS 102”). The auditor has reported on the U.K. 111 statutory accounts for the year ended December 31, 2019; their report was (1) unqualified, (2) for the year ended December 31, 2019 included reference to a matter to which the auditor drew attention by way of emphasis without qualifying their report in respect of a material uncertainty in respect of going concern and (3) did not contain a statement under section 498 (2) or (3) of the U.K. Companies Act 2006. The U.K. statutory accounts for the year ended December 31, 2020 have yet to be finalized and, if required, will be delivered to the U.K. registrar of companies during 2021. Principles of Consolidation The accompanying consolidated financial statements include the accounts of Valaris plc, those of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. All intercompany accounts and transactions have been eliminated. Investments in operating entities in which we have the ability to exercise significant influence, but where we do not control operating and financial policies are accounted for using the equity method. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting stock of the investee. We account for our interest in ARO using the equity method of accounting and only recognize our portion of equity in earnings in our consolidated financial statements. ARO is a variable interest entity; however, we are not the primary beneficiary and therefore do not consolidate ARO. Certain previously reported amounts have been reclassified to conform to the current year presentation. Pervasiveness of Estimates The preparation of financial statements in conformity with U.S. GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates. Foreign Currency Remeasurement and Translation Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues and expenses are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. Most transaction gains and losses, including certain gains and losses on our derivative instruments, are included in other, net, in our consolidated statement of operations. Certain gains and losses from the translation of foreign currency balances of our non-U.S. dollar functional currency subsidiaries are included in accumulated other comprehensive income on our consolidated balance sheet. Net foreign currency exchange losses, inclusive of offsetting fair value derivatives, were $ 11.0 million, $ 7.4 million and $ 17.2 million, and were included in other, net, in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively. Cash Equivalents and Short-Term Investments Highly liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents. Highly liquid investments with maturities of greater than three months but less than one year at the date of purchase are classified as short-term investments. There were no short-term investments as of December 31, 2020 and 2019. Cash flows from purchases and maturities of short-term investments were classified as investing activities in our consolidated statements of cash flows for the years ended December 31, 2019 and 2018. To mitigate our credit risk, our investments in time deposits have historically been diversified across multiple, high-quality financial institutions. Property and Equipment All costs incurred in connection with the acquisition, construction, major enhancement and improvement of 112 assets are capitalized, including allocations of interest incurred during periods that our drilling rigs are under construction or undergoing major enhancements and improvements. Costs incurred to place an asset into service are capitalized, including costs related to the initial mobilization of a newbuild drilling rig. Repair and maintenance costs are charged to contract drilling expense in the period in which they are incurred. Upon the sale or retirement of assets, the related cost and accumulated depreciation are removed from the balance sheet, and the resulting gain or loss is included in contract drilling expense. Our property and equipment is depreciated on a straight-line basis, after allowing for salvage values, over the estimated useful lives of our assets. Drilling rigs and related equipment are depreciated over estimated useful lives ranging from four to 35 years. Buildings and improvements are depreciated over estimated useful lives ranging from seven to 30 years. Other equipment, including computer and communications hardware and software costs, is depreciated over estimated useful lives ranging from three to 6 years. We evaluate the carrying value of our property and equipment, primarily our drilling rigs, on a quarterly basis to identify events or changes in circumstances ("triggering events") that indicate that the carrying value of such rigs may not be recoverable. For property and equipment used in our operations, recoverability generally is determined by comparing the carrying value of an asset to the expected undiscounted future cash flows of the asset. If the carrying value of an asset is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset and its estimated fair value. Property and equipment held-for-sale is recorded at the lower of net book value or fair value less cost to sell. We recorded pre-tax, non-cash impairment losses related to long-lived assets of $ 3.6 billion, $ 104.0 million and $ 40.3 million during 2020, 2019 and 2018, respectively. See " Note 6 - Property and Equipment" for additional information on our impairment charges. Operating Revenues and Expenses See " Note 3 - Revenue from Contracts with Customers" for information on our accounting policies for revenue recognition and certain operating costs that are deferred and amortized over future periods. Derivative Instruments We did not have any open derivative instruments as of December 31, 2020. However, we have historically used derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk. See " Note 9 - Derivative Instruments" for additional information on how and why we used derivatives and the impact of the Chapter 11 Cases. Derivatives are recorded on our consolidated balance sheet at fair value. Derivatives subject to legally enforceable master netting agreements are not offset on our consolidated balance sheet. Accounting for the gains and losses resulting from changes in the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. Derivatives qualify for hedge accounting when they are formally designated as hedges and are effective in reducing the risk exposure that they are designated to hedge. Changes in the fair value of derivatives that are designated as hedges of the variability in expected future cash flows associated with existing recognized assets or liabilities or forecasted transactions ("cash flow hedges") are recorded in accumulated other comprehensive income ("AOCI"). Amounts recorded in AOCI associated with cash flow hedges are subsequently reclassified into contract drilling, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transactions. Gains and losses on a cash flow hedge, or a portion of a cash flow hedge, that no longer qualifies as effective due to an unanticipated change in the forecasted transaction are recognized currently in earnings and included in other, net, in our consolidated statement of operations based on the change in the fair value of the derivative. When a forecasted transaction becomes probable of not occurring, gains and losses on the derivative 113 previously recorded in AOCI are reclassified currently into earnings and included in other, net, in our consolidated statement of operations. Historically, we occasionally would enter into derivatives that hedge the fair value of recognized assets or liabilities but do not designate such derivatives as hedges or the derivatives otherwise do not qualify for hedge accounting. In these situations, a natural hedging relationship generally exists where changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. Changes in the fair value of these derivatives are recognized currently in earnings in other, net, in our consolidated statement of operations. Derivatives with asset fair values are reported in other current assets or other assets, net, on our consolidated balance sheet depending on maturity date. Derivatives with liability fair values are reported in accrued liabilities and other, or other liabilities on our consolidated balance sheet depending on maturity date. Income Taxes We conduct operations and earn income in numerous countries. Current income taxes are recognized for the amount of taxes payable or refundable based on the laws and income tax rates in the taxing jurisdictions in which operations are conducted and income is earned. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities using the enacted tax rates in effect at year-end. A valuation allowance for deferred tax assets is recorded when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. We do not offset deferred tax assets and deferred tax liabilities attributable to different tax paying jurisdictions. We operate in certain jurisdictions where tax laws relating to the offshore drilling industry are not well developed and change frequently. Furthermore, we may enter into transactions with affiliates or employ other tax planning strategies that generally are subject to complex tax regulations. As a result of the foregoing, the tax liabilities and assets we recognize in our financial statements may differ from the tax positions taken, or expected to be taken, in our tax returns. Our tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties relating to income taxes are included in current income tax expense in our consolidated statement of operations. Our drilling rigs frequently move from one taxing jurisdiction to another based on where they are contracted to perform drilling services. The movement of drilling rigs among taxing jurisdictions may involve a transfer of drilling rig ownership among our subsidiaries through an intercompany rig sale. The pre-tax profit resulting from an intercompany rig sale is eliminated from our consolidated financial statements, and the carrying value of a rig sold in an intercompany transaction remains at historical net depreciated cost prior to the transaction. Our consolidated financial statements do not reflect the asset disposition transaction of the selling subsidiary or the asset acquisition transaction of the acquiring subsidiary. The income tax effects resulting from intercompany rig sales are recognized in earnings in the period in which the sale occurs. In some instances, we may determine that certain temporary differences will not result in a taxable or deductible amount in future years, as it is more-likely-than-not we will commence operations and depart from a given taxing jurisdiction without such temporary differences being recovered or settled. Under these circumstances, no future tax consequences are expected and no deferred taxes are recognized in connection with such operations. We evaluate these determinations on a periodic basis and, in the event our expectations relative to future tax consequences change, the applicable deferred taxes are recognized or derecognized. 114 We do not provide deferred taxes on the undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely. Should we make a distribution from these subsidiaries in the form of dividends or otherwise, we may be subject to additional income taxes. Share-Based Compensation We sponsor share-based compensation plans that provide equity compensation to our key employees, officers and non-employee directors. Subject to applicable bankruptcy law, our Long-Term Incentive Plan (the “2018 LTIP”) allows our Board of Directors to authorize share grants to be settled in cash or shares. Compensation expense for share awards to be settled in shares is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). Compensation expense for share awards to be settled in cash is remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in our share price. Any adjustments to the compensation cost recognized in our consolidated statement of operations for awards that are forfeited are recognized in the period in which the forfeitures occur. See " Note 11 - Share Based Compensation" for additional information on our share-based compensation. Pension and Other Post-retirement benefit plans We measure our actuarially determined obligations and related costs for our defined benefit pension and other post-retirement plans, retiree life and medical supplemental plan benefits, by applying assumptions, the most significant of which include long-term rate of return on plan assets, discount rates and mortality rates. For the long-term rate of return, we develop our assumptions regarding the expected rate of return on plan assets based on historical experience and projected long-term investment returns, and we weight the assumptions based on each plan's asset allocation. For the discount rate, we base our assumptions on a yield curve approach. Actual results may differ from the assumptions included in these calculations. If gains or losses exceed 10% of the greater of the plan assets or plan liabilities, we amortize such gains or losses into income over either the period of expected future service of active participants, or over the expected average remaining lifetime of all participants. We recognize gains or losses related to plan curtailments at the date the plan amendment or termination is adopted which may precede the effective date. Fair Value Measurements We measure certain of our assets and liabilities based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). Level 2 measurements represent inputs that are observable for similar assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1. See " Note 6 - Fair Value Measurements" for additional information on the fair value measurement of certain of our assets and liabilities. Noncontrolling Interests Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our consolidated balance sheet, and net income attributable to noncontrolling interests is presented separately in our consolidated statement of operations. For each of the years in the three-year period ended December 31, 2020, all income attributable to noncontrolling interest was from continuing operations. Earnings Per Share We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net loss attributable to Valaris used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares 115 outstanding used in our computation of diluted EPS is calculated using the treasury stock method and includes the effect of all potentially dilutive stock options and excludes non-vested shares. In each of the years in the three-year period ended December 31, 2020, our potentially dilutive instruments were not included in the computation of diluted EPS as the effect of including these shares in the calculation would have been anti-dilutive. The following table is a reconciliation of loss from continuing operations attributable to Valaris shares used in our basic and diluted EPS computations for each of the years in the three-year period ended December 31, 2020 (in millions): 2020 2019 2018 Loss from continuing operations attributable to Valaris $ ( 4,855.5 ) $ ( 198.0 ) $ ( 631.6 ) Income from continuing operations allocated to non-vested share awards (1) — ( .1 ) ( .5 ) Loss from continuing operations attributable to Valaris shares $ ( 4,855.5 ) $ ( 198.1 ) $ ( 632.1 ) (1) Losses are not allocated to non-vested share awards. Due to the net loss position, potentially dilutive share awards are excluded from the computation of diluted EPS. Anti-dilutive share awards totaling 400,000 , 300,000 and 1.5 million for the years ended December 31, 2020, 2019 and 2018, respectively, were excluded from the computation of diluted EPS. Under the terms of our debt agreement, we have the option to settle our 3.00 % exchangeable senior notes due 2024 (the "2024 Convertible Notes") in cash, shares or a combination thereof for the aggregate amount due upon conversion. However, the commencement of the Chapter 11 Cases on August 19, 2020 constituted an event of default under the 2024 Convertible Notes. Any efforts to enforce payment obligations under the 2024 Convertible Notes, including any rights to require the repurchase by the Company of the 2024 Convertible Notes upon the NYSE delisting of the Class A ordinary shares, are automatically stayed as a result of the filing of the Chapter 11 Cases. During each respective reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. Our average share price did not exceed the exchange price during the years ended December 31, 2020, 2019 and 2018. Pursuant to the terms contemplated in the Amended RSA, upon emergence from bankruptcy, our existing Class A ordinary shares will be cancelled. Depending on certain implementation mechanisms in the restructuring related to our Class A ordinary shares and satisfaction of the applicable support requirements set forth in the Amended RSA, the existing Class A ordinary shares may be exchanged for 7-year warrants to purchase up to 7 % of the New Equity (subject to dilution on account of the management incentive plan contemplated by the Amended RSA). The strike price of such warrants, if granted, will be set at a price per share equal to the value at which the senior noteholders would receive a 100 % recovery on their claims, including accrued interest up to the Petition Date. See “ Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional information related to our Amended RSA.” Bankruptcy Accounting The consolidated financial statements included herein have been prepared as if we were a going concern. See “ Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional details regarding the bankruptcy and circumstances raising substantial doubt over our ability to continue as a going concern. As a result, we have segregated liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the Chapter 11 Cases and have classified these items as "Liabilities Subject to Compromise” on our Consolidated Balance Sheets. In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a result of the Chapter 11 Cases subsequent to the Petition Date as “Reorganization Items” in our Consolidated Statements of Operations. 116 We anticipate that we will adopt fresh start accounting upon our emergence from chapter 11, becoming a new entity for financial reporting purposes. As a result, upon emergence, the Company’s assets and liabilities will generally be reported at fair value and will reconcile to the enterprise value confirmed by the Bankruptcy Court. These fair values are expected to differ materially from the amounts reflected on our historical balance sheet. New Accounting Pronouncements Recently adopted accounting pronouncements Credit Losses - In June 2016, the FASB issued ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments ("Update 2016-13"), which requires companies to measure credit losses of financial instruments, including customer accounts receivable, utilizing a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. Subsequent to the issuance of Update 2016-13, the FASB issued several additional Accounting Standard Updates to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. We adopted Update 2016-13 effective January 1, 2020 with no material impact to our financial statements upon adoption as our previously estimated reserves were in line with expected credit losses calculated under Update 2016-13. Defined Benefit Plans - In August 2018, the FASB issued ASU 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ("Update 2018-14"), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. We are required to adopt the amended guidance in annual and interim reports beginning after December 15, 2020, but early adoption is permitted. Adoption is required to be applied on a retrospective basis to all periods presented. We adopted Update 2018-14 effective January 1, 2020 with no material impact on our consolidated financial statements. Financial Disclosures about Guarantors - In March 2020, the U.S. Securities and Exchange Commission issued final rule 33-10762, “Financial Disclosures About Guarantors and Issuers of Guaranteed Securities and Affiliates Whose Securities Collateralize a Registrant’s Securities.” In October 2020, the FASB issued ASU 2020-09 , Amendments to SEC Paragraphs Pursuant to SEC Release No. 33-10762 ("Update 2020-09") , which amends ASC 470, Debt, for this rule . The Rule suspends the requirement to disclose condensed financial information within the financial statements for entities whose debt securities are not listed on a national exchange, and meet the reporting obligation under Section 15(d)(1) of the Exchange Act if, on the first day of any fiscal year other than the fiscal year in which the Securities Act registration statement related to the debt securities becomes effective, there are fewer than 300 record holders of the class of debt securities. The Final Rule is effective on January 4, 2021 with early adoption permitted. We early adopted the Rule effective December 31, 2020 and as we meet the requirements for suspension, we no longer provide condensed consolidated financial information that resulted from the debt obligations of our 100% owned subsidiaries, Pride International LLC and Ensco International Incorporated. Accounting pronouncements to be adopted Income Taxes - In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("Update 2019-12"), which removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to reduce complexity in accounting for income taxes. We are required to adopt the amended guidance in annual and interim periods beginning after December 15, 2020. The various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective basis and prospective basis, depending on the amendment. We are in the process of evaluating the impact this amendment will have on our consolidated financial statements. 117 Reference Rate Reform - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("Update 2020-04"), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. We are in the process of evaluating the impact this amendment will have on our consolidated financial statements. Convertible Instruments - In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” ("Update 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We are in the process of evaluating the impact this amendment may have on our consolidated financial statements. With the exception of the updated standards discussed above, there have been no accounting pronouncements issued and not yet effective that have significance, or potential significance, to our consolidated financial statements. 2. CHAPTER 11 PROCEEDINGS AND ABILITY TO CONTINUE AS A GOING CONCERN Chapter 11 Cases On August 19, 2020, the Debtors filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors obtained joint administration of the Chapter 11 Cases under the caption In re Valaris plc, et al., Case No. 20-34114 (MI). The Debtors continue to operate their businesses and manage their properties as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As part of the Chapter 11 Cases, the Debtors filed with the Bankruptcy Court motions seeking a variety of "first-day" relief, all of which were granted and 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. Restructuring Support Agreement On August 18, 2020, the Debtors entered into the Original RSA with the Consenting Noteholders. On February 5, 2021, the Debtors entered into the Amended RSA with the Consenting Noteholders and the Consenting Lenders. The Amended RSA 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. Below is a summary of the treatment that the stakeholders of the Company would receive under a plan of reorganization pursuant to the terms of the Amended RSA: 118 • Holders of the Company's outstanding senior notes ("Senior Notes") will receive their pro rata share of (i) approximately 39 % of new common stock issued after consummation of the restructuring (the “New Equity”) and (ii) approximately 97.6 % of the subscription rights to participate in the rights offering (the "Rights Offering") through which the Company will offer $ 550 million of new first lien secured notes (the "New Secured Notes"), which includes the Backstop Premium (as defined below); • Holders of the Senior Notes who participate in the Rights Offering will receive their pro rata share of approximately 29.3 % of the New Equity pursuant to the Rights Offering, together with the RCF Lenders (as defined below) who will receive their pro rata share of approximately 0.7 % of the New Equity, and senior noteholders who agreed to backstop the Rights Offering will receive their pro rata share of approximately 2.63 % of the New Equity, together with 0.07 % of the New Equity reserved for RCF Lenders and approximately $ 48.8 million in New Secured Notes reserved for the holders of the Senior Notes and approximately $ 1.2 million in New Secured Notes reserved for the RCF Lenders (the "Backstop Premium"); • Senior noteholders, solely with respect to Pride International LLC's ("Pride") 6.875 % senior notes due 2020 and 7.875 % senior notes due 2040, Ensco International 7.20 % Debentures due 2027, and the Company's 4.875 % senior notes due 2022, 4.75 % senior notes due 2024, 7.375 % senior notes due 2025, 5.4 % senior notes due 2042 and 5.85 % senior notes due 2044, will receive an aggregate cash payment of $ 26 million in connection with settlement of certain alleged claims against the Company; • Lenders under the revolving credit facility (“RCF Lenders”) were provided an option to select between two alternative treatments: (1) the ability to participate on a pro rata basis in up to 14 % of the Rights Offering plus a recovery of up to 30.8 % of the New Equity and up to $ 45 million in cash, or (2) a pro rata recovery of up to 27.8 % of the New Equity and up to $ 116.2 million in cash. Following the results of that election, the two RCF Lenders who chose to participate in the Rights Offering will receive their pro rata share of (1) approximately 5.3 % of the New Equity, (2) approximately 2.4 % of the New Secured Notes (and associated New Equity), (3) approximately $ 7.8 million in cash, and (iv) their pro rata share of the Backstop Premium. The RCF Lenders who entered into the Amended RSA and elected not to participate in the Rights Offering will receive their pro rata share of (1) approximately 23.0 % of the New Equity, and (2) approximately $ 96.1 million in cash; • Holders of general unsecured claims will receive payment in full or reinstatement pursuant to the Bankruptcy Code (excluding claims against the entities party to, or guaranteeing, the new build contracts to be rejected by the Company, which shall receive their liquidation value unless otherwise agreed); • If holders of equity interests vote as a class in support of the restructuring, they will each receive their pro rata share of 7-year warrants to purchase up to 7 % of New Equity (subject to dilution), with a strike price set at a price per share equal to the value at which the senior noteholders would receive a 100 % recovery on their claims including accrued interest up to the Petition Date, as applicable; and • To the extent amounts are borrowed under the DIP Facility (as described below), lenders under the DIP Facility will receive payment in full in cash, unless otherwise agreed, and certain other fees owed to the DIP Facility lenders. The Original RSA provided that for a period of 15 business days after the commencement of the Chapter 11 Cases (the “Joinder Period”), qualified holders of Senior Notes claims, including the Consenting Noteholders, were eligible to become backstop parties (the “Noteholder Backstop Parties”). All Noteholder Backstop Parties were required to join the Original RSA. The expiration of the Joinder Period was extended on September 10, 2020, to September 14, 2020 upon which date we had support for the Original RSA from holders of approximately 72 % of the aggregate amount of our Senior Notes outstanding. 119 The Amended RSA contemplates that holders of claims under the Company’s revolving credit facility also are eligible to become backstop parties (the “Lender Backstop Parties”). The Lender Backstop Parties are required to join the Amended RSA. As of the execution of the Amended RSA, we had support for the transactions contemplated by the Amended RSA from holders of approximately 100 % of the total commitments under our revolving credit facility in addition to the holders of approximately 72 % of the aggregate amount of our outstanding Senior Notes who supported the Original RSA. The Amended RSA contains certain covenants on the part of Valaris and the Consenting Creditors, including commitments by the Consenting Creditors to vote in favor of a plan of reorganization and commitments of Valaris and the Consenting Creditors to negotiate in good faith to finalize the documents and agreements governing the restructuring. The Amended RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones and certain breaches by the parties under the Amended RSA. Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Chapter 11 Cases. Notwithstanding the general applicability of the automatic stay described above, governmental authorities may determine to continue actions brought under their regulatory powers. Although Valaris intends to pursue the restructuring in accordance with the terms set forth in the Amended RSA, there can be no assurance that Valaris will be successful in completing a restructuring or any other similar transaction on the terms set forth in the Amended RSA, on different terms or at all. Among other things, the Amended RSA includes an outside date milestone requiring the Company’s emergence from chapter 11 by no later than June 15, 2021 (subject to a potential 60-day extension pursuant to the terms of the Amended RSA). Debtor in Possession Facility On August 11, 2020, prior to the commencement of the Chapter 11 Cases, certain of the Company’s existing noteholders (or their affiliates or designees) provided the Company with a commitment for a senior secured superpriority debtor-in-possession term loan credit facility in an aggregate principal amount of up to $ 500.0 million (the “DIP Facility”). On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into a senior secured superpriority debtor-in-possession term loan credit agreement (the “DIP Credit Agreement”), by and among the Company and certain wholly owned subsidiaries of the Company, as borrowers, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and security trustee, in an aggregate amount not to exceed $ 500.0 million. Borrowings on the DIP Facility will be used to finance, among other things, the ongoing general corporate needs of the Debtors during the course of the Chapter 11 Cases and to pay certain fees, costs and expenses associated with the Debtors’ Chapter 11 Cases. The maturity date of the DIP Credit Agreement is the earliest of (1) August 17, 2021, (2) acceleration of the loans under the DIP Facility and termination of the lenders' commitments under the DIP Facility, (3) the substantial consummation of any plan filed in the Chapter 11 Cases that is confirmed pursuant to an order entered by the Bankruptcy Court and (4) the consummation of a sale of all or substantially all of the assets of the Company and the other Debtors under section 363 of the Bankruptcy Code. Loans under the DIP Credit Agreement accrue interest at a rate of 8.00 % per annum, if paid in kind, and at a rate of 7.00 % per annum, if paid in cash. The DIP Credit Agreement contains a requirement that the Company and any other borrowers provide every four weeks, a rolling 13 week budget to be approved by the required lenders (the “Approved Budget”). The Company and any other borrower that becomes party to the DIP Credit Agreement may not vary from the Approved Budget by more than 15 % of the forecasted amounts in any forecast period. The Approved Budget is, subject to certain exceptions and is tested at certain times in accordance with the DIP Credit Agreement in order to measure variances between the actual total cash disbursements (excluding professional fees and certain other items consistent with the initial Approved Budget) and the disbursements budgeted for the applicable period. 120 The DIP Credit Agreement contains events of default customary to debtor-in-possession financings, including events related to the Chapter 11 Cases, the occurrence of which could result in the acceleration of the Debtors’ obligation to repay the outstanding indebtedness under the DIP Credit Agreement. The Debtors’ obligations under the DIP Credit Agreement are secured by a security interest in, and lien on, substantially all present and after acquired property (subject to certain exceptions) of the Debtors and are guaranteed by certain of the Company’s subsidiaries, including other Debtors. The DIP Credit Agreement also contains customary covenants that limit the ability of the Company and its subsidiaries to, among other things, (1) incur additional indebtedness and permit liens to exist on their assets, (2) pay dividends or make certain other restricted payments, (3) sell assets and (4) make certain investments. These covenants are subject to exceptions and qualifications as set forth in the DIP Credit Agreement. As of December 31, 2020, we were in compliance with our covenants under the DIP Credit Agreement. Additionally, as of December 31, 2020 , we had no borrowings outstanding against our DIP Facility. Backstop Commitment Agreement On August 18, 2020, the Company entered into a Backstop Commitment Agreement (the “Initial BCA”) with the Backstop Parties. Pursuant to the Initial BCA, each of the Backstop Parties will purchase its pro-rata portion (based on an adjusted claims value) of (1) $ 187.5 million of the New Secured Notes held back for purchase by the Backstop Parties (the "Holdback Notes"), (2) all of the New Secured Notes offered to Backstop Parties as part of the $ 312.5 million New Secured Notes offered to all claim holders (the “General Rights Offering”) and (3) New Secured Notes not purchased by non-Backstop Parties in the General Rights Offering. The Initial BCA was amended on September 10, 2020, January 22, 2021 and February 5, 2021 (as so amended, the “Amended BCA”). Pursuant to the Amended BCA, certain holders of claims related to the revolving credit facility will be entitled to, among other things 2.427 % of the Holdback Notes and the New Secured Notes (together with certain stapled participation equity) offered in the General Rights Offering, as well as a portion of the equity premium payable to all Backstop Parties consisting of 2.7 % of New Valaris Equity and backstop premium payable in $ 50.0 million in New Secured Notes. In each instance, 30 % of the new shares issued and outstanding immediately after the effective date of the plan of reorganization (subject to dilution by the new warrants and the management incentive plan) will be allocated proportionally to purchasers of the New Secured Notes for no addition al consideration. Additionally, in exchange for providing the Backstop Commitments, the Company has agreed to pay the Backstop Parties a backstop premium in an aggregate amount equal to $ 50.0 million payable in New Secured Notes on the effective date of a plan of reorganization, in addition to 2.7 % of New Valaris Equity. Furth er, the Debtors paid a commitment fee of $ 20.0 million, in cash prior to the Petition Date, which shall be loaned back to the reorganized company upon emergence. Therefore, upon emergence the Debtors will receive $ 520 million in cash in exchange for a $ 550 million note, which includes the backstop premium. The Amended BCA will be terminable by the Company and/or the requisite Backstop Parties upon certain customary events specified therein, including, among others, (i) the termination of the Amended RSA, (ii) the mutual written consent of the Company and the requisite Backstop Parties by written notice to the other such Party(ies) or (iii) either the Company or the requisite Backstop Parties if the effective date of the plan of reorganization has not occurred on or prior to the date that is ten months after the execution date of the Initial BCA (subject to certain extensions as set forth in the Initial BCA). NYSE Delisting of our Common Stock As a result of the Chapter 11 Cases and in accordance with Section 802.01D of the NYSE Listed Company Manual, on August 19, 2020, we were notified by NYSE of its determination to indefinitely suspend trading of the Company’s Class A ordinary shares and to commence proceedings to delist the Company’s Class A ordinary shares from the NYSE. Our Class A ordinary shares were delisted from the NYSE effective September 14, 2020. 121 Effective August 19, 2020, the Company’s Class A ordinary shares commenced trading on the OTC Pink Open Market under the symbol “VALPQ.” Going Concern The consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business. For the duration of the Chapter 11 Cases, our operations and our ability to develop and execute our business plan are subject to a high degree of risk and uncertainty associated with the Chapter 11 Cases. The outcome of the Chapter 11 Cases is dependent upon factors that are outside of our control, including actions of the Bankruptcy Court and our creditors. There can be no assurance that we will confirm and consummate a plan of reorganization as contemplated by the Amended RSA or complete another plan of reorganization with respect to the Chapter 11 Cases and as such, there is substantial doubt about our ability to continue as a going concern. Further, we have concluded that management’s plans do not alleviate the substantial doubt about our ability to continue as a going concern brought about by the significant risks and uncertainties related to our liquidity and Chapter 11 Cases for a period of one year after the date that the financial statements are issued. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. These adjustments could be material. Pre-petition Charges We have reported the backstop commitment fee and legal and other professional advisor fees incurred in relation to the Chapter 11 Cases, but prior to the Petition Date, as General and administrative expenses in our Consolidated Statement of Operations for the year ended December 31, 2020 in the amount of $ 64.7 million. Reorganization Items Expenditures, gains and losses that are realized or incurred by the Debtors as of or subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are reported as Reorganization items, net in our Consolidated Statement of Operations for the year ended December 31, 2020. These costs include legal and other professional advisory service fees pertaining to the Chapter 11 Cases, all adjustments made to the carrying amount of certain pre-petition liabilities reflecting claims expected to be allowed by the Bankruptcy Court, contract items related to rejecting and amending certain operating leases ("Contract items") and DIP Facility fees. 122 The following table provides information about reorganization items incurred during the year ended December 31, 2020 , as of or subsequent to the Petition Date (in millions): Year Ended December 31, 2020 Write-off of unamortized debt discounts, premiums and issuance costs $ 447.9 Contract items ( 11.5 ) Reorganization items (non-cash) 436.4 DIP Facility fees 20.0 Professional fees 66.8 Contract items 4.4 Reorganization items (fees) 91.2 Total reorganization items, net $ 527.6 Reorganization items (fees) unpaid $ 61.2 Reorganization items (fees) paid $ 30.0 123 Liabilities Subject to Compromise The Debtors' pre-petition unsecured senior notes and related unpaid accrued interest as of the Petition Date have been classified as Liabilities Subject to Compromise on our Consolidated Balance Sheets. The liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court. Liabilities subject to compromise at December 31, 2020 consist of the following (in millions): December 31, 2020 6.875 % Senior notes due 2020 $ 122.9 4.70 % Senior notes due 2021 100.7 4.875 % Senior notes due 2022 620.8 3.00 % Exchangeable senior notes due 2024 849.5 4.50 % Senior notes due 2024 303.4 4.75 % Senior notes due 2024 318.6 8.00 % Senior notes due 2024 292.3 5.20 % Senior notes due 2025 333.7 7.375 % Senior notes due 2025 360.8 7.75 % Senior notes due 2026 1,000.0 7.20 % Debentures due 2027 112.1 7.875 % Senior notes due 2040 300.0 5.40 % Senior notes due 2042 400.0 5.75 % Senior notes due 2044 1,000.5 5.85 % Senior notes due 2044 400.0 Amounts drawn under revolving credit facility 581.0 Accrued Interest on Senior Notes, Exchangeable Senior Notes, Debentures and Revolving Credit Facility 203.5 Rig holding costs (1) 13.9 Total liabilities subject to compromise $ 7,313.7 (1) Represents the holding costs incurred to maintain VALARIS DS-13 and VALARIS DS-14 in the shipyard until the delivery date. The principal balance on our unsecured senior notes and the amount of outstanding borrowings on our revolving credit facility have been reclassified from Debt to Liabilities Subject to Compromise on our Consolidated Balance Sheet as of December 31, 2020 . Accrued interest on our unsecured senior notes and revolving credit facility was also reclassified from Other Current Liabilities to Liabilities Subject to Compromise on our Consolidated Balance Sheet as of December 31, 2020 . The contractual interest expense on our unsecured senior notes and revolving credit facility is in excess of recorded interest expense by $ 140.7 million for the year ended December 31, 2020 . This excess contractual interest is not included as interest expense on the Consolidated Statements of Operations for the year ended December 31, 2020, as the Company has discontinued accruing interest on the unsecured senior notes and revolving credit facility subsequent to the Petition Date. We discontinued making interest payments on our unsecured senior notes beginning in June 2020. See " Note 8 – Debt” for additional information on interest payments. 124 Debtor Financial Statements Consolidated financial statements of the Debtors are set forth below. These financial statements exclude the financial statements of the non-debtor subsidiaries. Transactions and balances of receivables and payables between the Debtors have been eliminated in consolidation. Amounts payable to or receivable from the non-Debtor subsidiaries are reported in the unaudited condensed consolidated balance sheet of the Debtors. VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES (DEBTOR-IN-POSSESSION) CONDENSED COMBINED STATEMENTS OF OPERATIONS (In millions) Year Ended December 31, 2020 OPERATING REVENUES Operating revenues $ 1,185.1 Operating revenues from non-debtor subsidiaries 169.8 Total operating revenues 1,354.9 OPERATING EXPENSES Contract drilling (exclusive of depreciation) 1,203.0 Loss on impairment 3,643.9 Depreciation 507.5 General and administrative 213.6 Operating expenses for non-debtor subsidiaries 169.1 Total operating expenses 5,737.1 OTHER OPERATING INCOME 118.1 EQUITY IN LOSSES OF ARO ( 7.8 ) OPERATING LOSS ( 4,271.9 ) OTHER INCOME (EXPENSE) Interest income 19.7 Interest income for non-debtor subsidiaries 285.7 Interest expense, net ( 290.8 ) Interest Expense for non-debtor subsidiaries ( 310.9 ) Reorganization items, net ( 527.6 ) Other, net ( 6.7 ) ( 830.6 ) LOSS BEFORE INCOME TAXES ( 5,102.5 ) EQUITY IN EARNINGS OF SUBSIDIARIES 11.4 PROVISION (BENEFIT) FOR INCOME TAXES ( 277.5 ) NET LOSS $ ( 4,813.6 ) 125 VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES (DEBTOR-IN-POSSESSION) CONDENSED COMBINED BALANCE SHEET (In millions) December 31, 2020 ASSETS CURRENT ASSETS Cash and cash equivalents $ 228.9 Accounts receivable, net 382.5 Accounts receivable from non-debtor subsidiaries 2,812.0 Other current assets 377.4 Total current assets 3,800.8 PROPERTY AND EQUIPMENT, AT COST 12,256.1 Less accumulated depreciation 1,973.8 Property and equipment, net 10,282.3 LONG-TERM NOTES RECEIVABLE FROM ARO 442.7 LONG-TERM NOTES RECEIVABLE FROM NON-DEBTOR SUBSIDIARIES 2,205.3 INVESTMENT IN ARO 120.9 INVESTMENTS IN NON-DEBTOR SUBSIDIARIES 585.9 OTHER ASSETS 158.2 $ 17,596.1 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 149.4 Accrued liabilities and other 196.2 Total current liabilities 345.6 LONG-TERM NOTES PAYABLE TO NON-DEBTOR SUBSIDIARIES 2,548.6 OTHER LIABILITIES 602.3 Total liabilities not subject to compromise 3,496.5 Liabilities subject to compromise 7,313.7 Total debtors' equity 6,785.9 Total liabilities and debtors' equity $ 17,596.1 126 VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES (DEBTOR-IN-POSSESSION) CONDENSED COMBINED STATEMENT OF CASH FLOWS (In millions) Year Ended December 31, 2020 OPERATING ACTIVITIES Net loss $ ( 4,813.6 ) Adjustments to reconcile net loss to net cash used in operating activities: Loss on impairment 3,643.9 Depreciation expense 507.5 Non cash reorganization items, net 436.4 Deferred income tax benefit ( 107.5 ) Debtor in Possession financing fees and payments on Backstop Agreement 40.0 Debt discounts and other 36.8 Share-based compensation expense 21.4 Equity in earnings of non-debtor subsidiaries ( 11.4 ) Equity in losses of ARO 7.8 (Gain on) adjustment to bargain purchase 6.3 Amortization, net 6.2 Gain on extinguishment of debt ( 3.1 ) Other 17.5 Changes in operating assets and liabilities ( 44.5 ) Changes in advances (to)/from non-debtor subsidiaries ( 74.0 ) Net cash used in operating activities ( 330.3 ) INVESTING ACTIVITIES Additions to property and equipment ( 93.8 ) Net proceeds from disposition of assets 51.8 Net cash used in investing activities ( 42.0 ) FINANCING ACTIVITIES Borrowings on credit facility 596.0 Debtor in Possession financing fees and payments on Backstop Agreement ( 40.0 ) Repayments of credit facility borrowings ( 15.0 ) Reduction of long-term borrowings ( 9.7 ) Other ( 1.8 ) Net cash provided by financing activities 529.5 Effect of exchange rate changes on cash and cash equivalents — INCREASE IN CASH AND CASH EQUIVALENTS 157.2 CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 71.7 CASH AND CASH EQUIVALENTS, END OF PERIOD $ 228.9 127 3. REVENUE FROM CONTRACTS WITH CUSTOMERS Our drilling contracts with customers provide a drilling rig and drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. 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. Our drilling service provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities such as mobilization, demobilization and capital upgrades of our rigs that are not distinct performance obligations within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and is recognized in the period when the services are performed. The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and have not disclosed the variable consideration related to our estimated future day rate revenues. The remaining duration of our drilling contracts based on those in place as of December 31, 2020 was between approximately one month and two years . Day Rate Drilling Revenue Our drilling contracts provide for payment on a day rate basis and include a rate schedule with higher rates for periods when the drilling rig is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The day rate invoiced to the customer is determined based on the varying rates applicable to specific activities performed on an hourly basis or other time increment basis. Day rate consideration is allocated to the distinct hourly or other time increment to which it relates within the contract term and is generally recognized consistent with the contractual rate invoiced for the services provided during the respective period. Invoices are typically issued to our customers on a monthly basis and payment terms on customer invoices typically range from 30 to 45 days. Certain of our contracts contain performance incentives whereby we may earn a bonus based on pre-established performance criteria. Such incentives are generally based on our performance over individual monthly time periods or individual wells. Consideration related to performance bonus is generally recognized in the specific time period to which the performance criteria was attributed. We may receive termination fees if certain drilling contracts are terminated by the customer prior to the end of the contractual term. Such compensation is recognized as revenue when our performance obligation is satisfied, the termination fee can be reasonably measured and collection is probable. Mobilization / Demobilization Revenue In connection with certain contracts, we receive lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. Fees received for the mobilization or demobilization of equipment and personnel are included in operating revenues. The costs incurred in connection with the mobilization and demobilization of equipment and personnel are included in contract drilling expense. 128 Mobilization fees received prior to commencement of drilling operations are recorded as a contract liability and amortized on a straight-line basis over the contract term. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term. In some cases, demobilization fees may be contingent upon the occurrence or non-occurrence of a future event. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term. Capital Upgrade / Contract Preparation Revenue In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. Fees received for requested capital upgrades and other contract preparation work are recorded as a contract liability and amortized on a straight-line basis over the contract term to operating revenues. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset. Contract Assets and Liabilities Contract assets represent amounts recognized as revenue but for which the right to invoice the customer is dependent upon our future performance. Once the previously recognized revenue is invoiced, the corresponding contract asset, or a portion thereof, is transferred to accounts receivable. Contract liabilities generally represent fees received for mobilization or capital upgrades. Contract assets and liabilities are presented net on our consolidated balance sheet on a contract-by-contract basis. Current contract assets and liabilities are included in other current assets and accrued liabilities and other, respectively, and noncurrent contract assets and liabilities are included in other assets and other liabilities, respectively, on our consolidated balance sheets. As of December 31, 2020, we have an ARO contract liability representing the difference between the amount billed under the Lease Agreements and lease revenues earned to date. See “Note 5 – Equity Method Investment in ARO" for additional details regarding our balances with ARO. The following table summarizes our contract assets and contract liabilities (in millions): December 31, 2020 December 31, 2019 Current contract assets $ 1.4 $ 3.5 Noncurrent contract assets $ .4 $ — Current contract liabilities (deferred revenue) $ 57.6 $ 30.0 Noncurrent contract liabilities (deferred revenue) $ 14.3 $ 9.7 129 Changes in contract assets and liabilities during the period are as follows (in millions): Contract Assets Contract Liabilities Balance as of January 1, 2020 $ 3.5 $ 39.7 Revenue recognized in advance of right to bill customer 3.1 — Increase due to cash received — 81.5 Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance — ( 24.6 ) Decrease due to amortization of deferred revenue that was added during the period — ( 24.7 ) Decrease due to transfer to receivables during the period ( 4.8 ) — Balance as of December 31, 2020 $ 1.8 $ 71.9 Deferred Contract Costs Costs incurred for upfront rig mobilizations and certain contract preparations are attributable to our future performance obligation under each respective drilling contract. These costs are deferred and amortized on a straight-line basis over the contract term. Demobilization costs are recognized as incurred upon contract completion. Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred. Deferred contract costs were included in other current assets and other assets on our consolidated balance sheets and totaled $ 13.8 million and $ 19.7 million as of December 31, 2020 and 2019, respectively. Amortization of these costs totaled $ 42.1 million, $ 42.1 million and $ 34.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. Deferred Certification Costs We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in other current assets and other assets on our consolidated balance sheets and totaled $ 8.4 million and $ 10.8 million as of December 31, 2020 and 2019, respectively. Amortization of these costs totaled $ 8.9 million, $ 10.3 million and $ 12.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Future Amortization of Contract Liabilities and Deferred Costs Our contract liabilities and deferred costs are amortized on a straight-line basis over the contract term or corresponding certification period to operating revenues and contract drilling expense, respectively, with the exception of the contract liabilities related to our Lease Agreements with ARO which would not be contractually payable until the end of the lease term or termination, if sooner. Expected future amortization of our contract liabilities and deferred costs recorded as of December 31, 2020 is set forth in the table below (in millions): 2021 2022 2023 2024 & Thereafter Total Amortization of contract liabilities $ 57.6 $ 14.3 $ — $ — $ 71.9 Amortization of deferred costs $ 17.4 $ 4.3 $ .5 $ — $ 22.2 130 4. ROWAN TRANSACTION On April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan pursuant to the Transaction Agreement (the "Rowan Transaction"). Assets acquired and liabilities assumed in the Rowan Transaction were recorded at their estimated fair values as of the Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. As of March 31, 2020, we completed our fair value assessments of assets acquired and liabilities assumed. Consideration As a result of the Rowan Transaction, Rowan shareholders received 2.75 Valaris Class A Ordinary shares for each share of 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, inclusive of $ 2.6 million for the estimated fair value of replacement employee equity awards. Upon closing of the Rowan Transaction, we effected a consolidation (being a reverse stock split under English law) where every four existing 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"). All share and per share data included in this report have been retroactively adjusted to reflect the Reverse Stock Split. Assets and Liabilities Acquired Valaris is considered to be the acquirer for accounting purposes. As a result, Rowan's assets and liabilities acquired in the Rowan Transaction were recorded at their estimated fair values as of the Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. 131 The provisional amounts recorded for assets and liabilities acquired were based on preliminary estimates of their fair values as of the Transaction Date and Measurement Period Adjustments were recorded throughout the measurement period as provisional amounts were finalized and are as follows (in millions): Amounts Recognized as of Transaction Date Measurement Period Adjustments (1) Estimated Fair Value Assets: Cash and cash equivalents $ 931.9 $ — $ 931.9 Accounts receivable (2) 207.1 ( 6.9 ) 200.2 Other current assets 101.6 ( 2.6 ) 99.0 Long-term notes receivable from ARO 454.5 — 454.5 Investment in ARO 138.8 2.5 141.3 Property and equipment 2,989.8 ( 26.0 ) 2,963.8 Other assets 41.7 1.1 42.8 Liabilities: Accounts payable and accrued liabilities 259.4 15.7 275.1 Current portion of long-term debt 203.2 — 203.2 Long-term debt 1,910.9 — 1,910.9 Other liabilities 376.3 34.5 410.8 Net assets acquired 2,115.6 ( 82.1 ) 2,033.5 Less: Merger consideration ( 1,402.8 ) — ( 1,402.8 ) Bargain purchase gain $ 712.8 $ ( 82.1 ) $ 630.7 (1) The measurement period adjustments reflect changes in the estimated fair values of certain assets and liabilities, primarily related to long-lived assets, deferred income taxes and uncertain tax positions. The measurement period adjustments were recorded to reflect new information obtained about facts and circumstances existing as of the Transaction Date and did not result from subsequent intervening events. The adjustments recorded resulted in a $ 6.3 million and $ 75.8 million decline to bargain purchase gain during the first quarter of 2020 and for the year ended December 31, 2019. The bargain purchase gain adjustments are included in other, net, in our consolidated statements of operations for the year ended December 31, 2020 and 2019, respectively. (2) Gross contractual amounts receivable totaled $ 208.3 million as of the Transaction Date. Bargain Purchase Gain The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resulting in a bargain purchase gain primarily driven by the decline in our share price from $ 33.92 to $ 15.88 between the last trading day prior to the announcement of the Rowan Transaction and the Transaction Date. Materials and Supplies We recorded materials and supplies at an estimated fair value of $ 83.0 million. Materials and supplies consist of consumable parts and supplies maintained on drilling rigs and in shore-based warehouse locations for use in operations and are generally comprised of items of low per unit cost and high reorder frequency. We estimated the fair value of Rowan's materials and supplies primarily using a market approach. 132 Equity Method Investment in ARO The equity method investment in ARO was recorded at its estimated fair value as of the Transaction Date. See " Note 5 - Equity Method Investment in ARO" for additional information on ARO. We estimated the fair value of the equity investment primarily by applying an income approach, using projected discounted cash flows of the underlying assets, a risk-adjusted discount rate and an estimated effective income tax rate. Property and Equipment Property and equipment acquired in connection with the Rowan Transaction consisted primarily of drilling rigs and related equipment, including four drillships and 19 jackup rigs (exclusive of two jackups marked for retirement). We recorded property and equipment acquired at its estimated fair value of $ 3.0 billion. We estimated the fair value of the rigs and equipment by applying an income approach, using projected discounted cash flows, a risk-adjusted discount rate and an estimated effective income tax rate. The estimated remaining useful lives for Rowan's drilling rigs, which ranged from 16 to 35 years based on original estimated useful lives of 30 to 35 years. Intangible Assets and Liabilities We recorded intangible assets and liabilities of $ 16.2 million and $ 2.1 million, respectively, representing the estimated fair value of Rowan's firm contracts in place at the Transaction Date with favorable or unfavorable contract terms compared to then-market day rates for comparable drilling rigs. As a result of a price concession negotiated following the onset of the COVID-19 pandemic, on one of our bare boat charter agreements for a rig leased to our 50/50 joint venture with Saudi Aramco ("ARO"), we recognized a $ 5.7 million impairment to the related contract intangible during the second quarter of 2020. The impairment is included in loss on impairment in our consolidated statements of operations for the year ended December 31, 2020. Amortization of the intangible assets and liabilities resulted in a net reduction in operating revenues of $ 2.8 million and $ 3.6 million for the years ended December 31, 2020 and 2019, respectively. The remaining balances of intangible assets and liabilities of $ 2.4 million and $ 0.4 million, respectively, are included in other assets and other liabilities, respectively, on our consolidated balance sheet of December 31, 2020. These balances will be amortized to operating revenues over the respective remaining contract terms on a straight-line basis. As of December 31, 2020, the remaining terms of the underlying contracts is approximately 1.0 year. Amortization of these intangibles is expected to result in a reduction to revenue of $ 2.0 million in 2021. Pension and Other Post-retirement benefit plans We remeasured the fair value of plan assets and benefit obligations for the pension and other-post retirement benefit plans assumed as of April 11, 2019. We used a measurement date of April 11, 2019 for determining net periodic benefit costs. Long-term Debt We recorded Rowan's long-term debt at its estimated fair value as of the Transaction Date, which was based on quoted market prices as of April 10, 2019. Deferred Taxes The Rowan Transaction was executed through the acquisition of Rowan's outstanding ordinary shares and, therefore, the historical tax bases of the acquired assets and liabilities, net operating losses and other tax attributes of Rowan, were acquired as of the Transaction Date. However, adjustments were recorded to recognize deferred tax assets and liabilities for the tax effects of differences between acquisition date fair values and tax bases of assets acquired and liabilities assumed. Additionally, the interaction of our and Rowan's tax attributes that impacted the 133 deferred taxes of the combined entity were also recognized as part of acquisition accounting. As of the Transaction Date, a decrease of $ 99.0 million to Rowan's historical net deferred tax assets was recognized. Deferred tax assets and liabilities recognized in connection with the Rowan Transaction were measured at rates enacted as of the Transaction Date. Tax rate changes, or any deferred tax adjustments for new tax legislation, following the Transaction Date will be reflected in our operating results in the period in which the change in tax laws or rate is enacted. Uncertain Tax Positions Uncertain tax positions assumed in a business combination are measured at the largest amount of the tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of the Transaction Date, Rowan had previously recognized net liabilities for uncertain tax positions totaling $ 50.4 million. The Luxembourg tax authorities issued aggregate tax assessments totaling approximately € 142.0 million (approximately $ 173.5 million converted using the current period-end exchange rate) related to tax years 2014, 2015 and 2016 for several of Rowan's Luxembourg subsidiaries. As a result of our review and analysis of facts and circumstances that existed at the Transaction Date, we recognized liabilities related to the Luxembourg tax assessments totaling € 93.0 million (approximately $ 113.6 million converted using the current period-end exchange rates). See " Note 13 - Income Taxes" for further information on this matter. Transaction-related costs Transaction-related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $ 18.0 million for the year ended December 31, 2019. These costs were included in general and administrative expense in our consolidated statement of operations. Revenues and Losses of Rowan The amount of revenues and net losses of Rowan that are included from the Transaction Date to December 31, 2019 in the Company's Consolidated Statement of Operations for the Year ended December 31, 2019 were $ 448.0 million and $ 122.7 million, respectively. 134 Unaudited Pro Forma Impact of the Rowan Transaction The following unaudited supplemental pro forma results present consolidated information as if the Rowan Transaction was completed on January 1, 2019. The pro forma results include, among others, (1) the amortization associated with acquired intangible assets and liabilities, (2) a reduction in depreciation expense for adjustments to property and equipment, (3) the amortization of premiums and discounts recorded on Rowan's debt, (iv) removal of the historical amortization of unrealized gains and losses related to Rowan's pension plans and (v) the amortization of basis differences in assets and liabilities of ARO. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the Rowan Transaction. (unaudited) (in millions, except per share amounts) Twelve Months Ended December 31, 2019 (1) Revenues $ 2,240.5 Net loss $ ( 997.8 ) Earnings per share - basic and diluted $ ( 3.82 ) (1) Pro forma net loss and loss per share were adjusted to exclude an aggregate $ 108.1 million of transaction related and integration costs during the year ended December 31, 2019. Additionally, pro forma net loss and loss per share exclude the measurement period adjustments and estimated gain on bargain purchase of $ 637.0 million recognized during the year ended December 31, 2019. 5. EQUITY METHOD INVESTMENT IN ARO Background ARO, a company that owns and operates offshore drilling rigs in Saudi Arabia, was formed and commenced operations in 2017 pursuant to the terms of an agreement entered into by Rowan and Saudi Aramco to create a 50/50 joint venture ("Shareholder Agreement"). Pursuant to the Rowan Transaction, Valaris acquired Rowan's interest in ARO making Valaris a 50% partner. ARO owns seven jackup rigs, has ordered two newbuild jackup rigs and leases nine rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO. As of December 31, 2020, all nine of the leased rigs were operating under three-year drilling contracts with Saudi Aramco. The seven rigs owned by ARO, previously purchased from Rowan and Saudi Aramco, are currently operating under contracts with Saudi Aramco for an aggregate 15 years provided that the rigs meet the technical and operational requirements of Saudi Aramco. The Lease Agreements with ARO originally provided for a fixed per day bareboat charter amount over the term of the lease, calculated based on a split of projected earnings over the lease term. However, in December 2020, the Shareholder Agreement was amended ("December Amendment") such that the per day bareboat charter amount in the associated lease agreements is subject to adjustment based on actual performance of the respective rig and that a cash payment based on actual results will be due at the end of the lease term or, if sooner, termination. The Company, as lessor, accounts for these arrangements as operating leases. The December Amendment resulted in a modification of the leases and as a result we began accounting for lease revenue using the variable rate as opposed to a fixed rental amount. Our results of operations for the year ended December 31, 2020 reflect the impact of the lease modification on our rental revenues to reflect results through that period. Valaris and Saudi Aramco have agreed to take all steps necessary to ensure that ARO purchases 20 newbuild jackup rigs ratably over an approximate 10 -year period. In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $ 176 million, for delivery scheduled in 2022. The joint venture partners intend for the newbuild jackup rigs to be financed out of available cash from ARO's operations and/or funds available from third-party debt financing. In the event ARO has insufficient cash from operations or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to 135 ARO, up to a maximum aggregate contribution of $ 1.25 billion from each partner to fund the newbuild program. The Company's capital contributions to ARO pursuant to this requirement may require approval of the Bankruptcy Court during the Chapter 11 Cases. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, on a proportionate basis. The joint venture partners agreed that Saudi Aramco, as a customer, will provide drilling contracts to ARO in connection with the acquisition of the newbuild rigs. The initial contracts provided by Saudi Aramco for each of the newbuild rigs will be for an eight-year term. The day rate for the initial contracts for each newbuild rig will be determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism. Upon establishment of ARO, Rowan entered into (1) an agreement to provide certain back-office services for a period of time until ARO develops its own infrastructure (the "Transition Services Agreement"), and (2) an agreement to provide certain Rowan employees through secondment arrangements to assist with various onshore and offshore services for the benefit of ARO (the "Secondment Agreement"). These agreements remained in place subsequent to the Rowan Transaction. Pursuant to these agreements, we or our seconded employees provide various services to ARO, and in return, ARO provides remuneration for those services. From time to time, we may also sell equipment or supplies to ARO. During the quarter ended June 30, 2020, almost all remaining employees seconded to ARO became employees of ARO. Additionally, our services to ARO under the Transition Services Agreement were completed as of December 31, 2020. Summarized Financial Information The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the seven ARO-owned jackup rigs as well as the rigs leased from us. Contract drilling expense is inclusive of the bareboat charter fees for the rigs leased from us. Cost incurred under the Secondment Agreement are included in contract drilling expense and general and administrative, depending on the function to which the seconded employee's service related. Substantially all costs incurred under the Transition Services Agreement are included in general and administrative. See additional discussion below regarding these related-party transactions. Summarized financial information for ARO is as follows (in millions): Year Ended December 31, 2020 April 11, 2019 - December 31, 2019 Revenues $ 549.4 $ 410.5 Operating expenses Contract drilling (exclusive of depreciation) 388.2 280.2 Depreciation 54.8 40.3 General and administrative 24.2 27.1 Operating income 82.2 62.9 Other expense, net 26.7 28.6 Provision for income taxes 14.2 9.7 Net income $ 41.3 $ 24.6 136 December 31, 2020 December 31, 2019 Current assets $ 358.6 $ 407.2 Non-current assets 804.0 874.8 Total assets $ 1,162.6 $ 1,282.0 Current liabilities $ 70.8 $ 183.2 Non-current liabilities 950.8 1,015.5 Total liabilities $ 1,021.6 $ 1,198.7 Equity in Earnings of ARO We account for our interest in ARO using the equity method of accounting and only recognize our portion of ARO's net income, adjusted for basis differences as discussed below, which is included in equity in earnings of ARO in our consolidated statements of operations. ARO is a variable interest entity; however, we are not the primary beneficiary and therefore do not consolidate ARO. Judgments regarding our level of influence over ARO included considering key factors such as each partner's ownership interest, representation on the board of managers of ARO and ability to direct activities that most significantly impact ARO's economic performance, including the ability to influence policy-making decisions. Our investment in ARO would be assessed for impairment if there are changes in facts and circumstances that indicate a loss in value may have occurred. If a loss were deemed to have occurred and this loss was determined to be other than temporary, the carrying value of our investment would be written down to fair value and an impairment recorded. As a result of the Rowan Transaction, we recorded our equity method investment in ARO at its estimated fair value on the Transaction Date. Additionally, we computed the difference between the fair value of ARO's net assets and the carrying value of those net assets in ARO's U.S. GAAP financial statements ("basis differences"). The basis differences primarily relate to ARO's long-lived assets and the recognition of intangible assets associated with certain of ARO's drilling contracts that were determined to have favorable terms as of the Transaction Date. The basis differences are amortized over the remaining life of the assets or liabilities to which they relate and are recognized as an adjustment to the equity in earnings of ARO in our consolidated statements of operations. The amortization of those basis differences are combined with our 50 % interest in ARO's net income. A reconciliation of those components is presented below (in millions): Year Ended December 31, 2020 April 11, 2019 - December 31, 2019 50% interest in ARO net income $ 20.7 $ 12.3 Amortization of basis differences ( 28.5 ) ( 24.9 ) Equity in earnings (losses) of ARO $ ( 7.8 ) $ ( 12.6 ) 137 Related-Party Transactions Revenues recognized by us related to the Lease Agreements, Transition Services Agreement and Secondment Agreement are as follows (in millions): Year Ended December 31, 2020 April 11, 2019 - December 31, 2019 Lease revenue $ 52.2 $ 58.2 Secondment revenue 21.6 49.9 Transition Services revenue 1.3 17.3 Total revenue from ARO (1) $ 75.1 $ 125.4 (1) All of the revenues presented above are included in our Other segment in our segment disclosures. See " Note 16 - Segment Information" for additional information. Amounts receivable from ARO related to the items above totaled $ 21.6 million and $ 21.8 million as of December 31, 2020 and 2019, respectively, and are included in accounts receivable, net, on our consolidated balance sheets. Additionally, as of December 31, 2019, we had a receivable from ARO of $ 14.2 million related to an agreement between us and ARO, pursuant to which ARO would reimburse us for certain capital expenditures related to the shipyard upgrade projects for the VALARIS JU-147 and VALARIS JU-148. This amount was collected in the first quarter of 2020. Accounts payable to ARO totaled $ 0.7 million as of December 31, 2019. There were no Accounts payable to ARO as of December 31, 2020. We had $ 30.9 million in Contract Liabilities related to our lease agreements with ARO as of December 31, 2020. During 2017 and 2018, Rowan contributed cash to ARO in exchange for 10-year shareholder notes receivable at a stated interest rate of LIBOR plus two percent. As of December 31, 2020 and 2019, the carrying amount of the long-term notes receivable from ARO was $ 442.7 million and $ 452.9 million, respectively. The Shareholders’ Agreement prohibits the sale or transfer of the shareholder note to a third party, except in certain limited circumstances. The notes receivable may be reduced by future Company obligations to the joint venture. During the year ended December 31, 2020, we recorded $ 10.2 million of employee benefit obligations against our long-term notes receivable from ARO. Interest is recognized as interest income in our consolidated statement of operations and totaled $ 18.3 million for the year ended December 31, 2020 and $ 16.8 million for the period from April 11, 2019 through December 31, 2019. Interest amounts due were collected prior to the end of the year and we had no interest receivable from ARO as of December 31, 2020 or 2019. Maximum Exposure to Loss The following summarizes the total assets and liabilities as reflected in our consolidated balance sheets as well as our maximum exposure to loss related to ARO (in millions). Our maximum exposure to loss is limited to (1) our equity investment in ARO; (2) the outstanding balance on our shareholder notes receivable; and (3) other receivables and contract assets related to services provided to ARO, partially offset by contract liabilities as well as payables for services received. Contract liabilities related to our Lease Agreements are subject to adjustment during the lease term. The per day bareboat charter amount in the lease agreements is subject to adjustment pursuant to the December Amendment based on actual performance of the respective rig. December 31, 2020 December 31, 2019 Total assets $ 585.2 $ 623.5 Less: total liabilities 30.9 .7 Maximum exposure to loss $ 554.3 $ 622.8 138 6. FAIR VALUE MEASUREMENTS The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis (in millions): Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Total As of December 31, 2020 Supplemental executive retirement plan assets $ 22.6 $ — $ — $ 22.6 Total financial assets $ 22.6 $ — $ — $ 22.6 As of December 31, 2019 Supplemental executive retirement plan assets $ 26.0 $ — $ — $ 26.0 Derivatives, net — 5.4 — 5.4 Total financial assets $ 26.0 $ 5.4 $ — $ 31.4 Supplemental Executive Retirement Plan Assets Our Valaris supplemental executive retirement plans (the "SERPs") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. The SERPs were frozen to the entry of new participants in November 2019 and to future compensation deferrals as of January 1, 2020. Assets held in a rabbi trust maintained for the SERP are marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our consolidated balance sheets as of December 31, 2020 and 2019. The fair value measurements of assets held in the SERP were based on quoted market prices. Net unrealized gains of $ 3.2 million and $ 5.0 million and losses of $ 700,000 from marketable securities held in our SERP were included in other, net, in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively. Derivatives As of December 31, 2020, we had no derivative contracts outstanding See " Note 9 - Derivative Instruments" for additional information on the impact of the Chapter 11 Cases to our derivatives. Our derivatives were measured at fair value on a recurring basis using Level 2 inputs as of December 31, 2019. See " Note 9 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurements of our derivatives were based on market prices that are generally observable for similar assets or liabilities at commonly quoted intervals. 139 Other Financial Instruments The carrying values and estimated fair values of our debt instruments were as follows (in millions): Subject to Compromise (1) December 31, 2020 December 31, 2019 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value 6.875 % Senior notes due 2020 $ 122.9 $ 8.6 $ 124.8 $ 117.3 4.70 % Senior notes due 2021 100.7 4.5 113.2 95.5 4.875 % Senior notes due 2022 620.8 32.9 599.2 460.5 3.00 % Exchangeable senior notes due 2024 (2) 849.5 76.5 699.0 607.4 4.50 % Senior notes due 2024 303.4 13.7 302.0 167.2 4.75 % Senior notes due 2024 318.6 18.8 276.5 201.4 8.00 % Senior notes due 2024 292.3 12.9 295.7 181.7 5.20 % Senior notes due 2025 333.7 12.7 331.7 186.7 7.375 % Senior notes due 2025 360.8 20.9 329.2 218.6 7.75 % Senior notes due 2026 1,000.0 44.0 987.1 575.1 7.20 % Debentures due 2027 112.1 5.7 111.7 70.0 7.875 % Senior notes due 2040 300.0 21.0 373.3 153.5 5.40 % Senior notes due 2042 400.0 23.6 262.8 194.4 5.75 % Senior notes due 2044 1,000.5 38.0 973.3 450.0 5.85 % Senior notes due 2044 400.0 26.0 268.8 194.8 Amounts borrowed under revolving credit facility (3) 581.0 581.0 — — Total debt $ 7,096.3 $ 940.8 $ 6,048.3 $ 3,874.1 Less : Liabilities Subject to Compromise 7,096.3 940.8 — — Less: current maturities — — 124.8 — Total long-term debt $ — $ — $ 5,923.5 $ 3,874.1 (1) The commencement of the Chapter 11 Cases on August 19, 2020, constituted an event of default under our Senior Notes and revolving credit facility. Any efforts to enforce payment obligations under the Senior Notes and revolving credit facility, including any rights to require the repurchase by the Company of the 2024 Convertible Notes (as defined below) upon the NYSE delisting of the Class A ordinary shares, are automatically stayed as a result of the filing of the Chapter 11 Cases. The carrying amounts above represent the aggregate principal amount of Senior Notes outstanding as well as outstanding borrowings under our revolving credit facility as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. We discontinued accruing interest on our indebtedness following the Petition Date and all accrued interest as of the Petition Date is classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. Additionally, we incurred a net non-cash charge of $ 447.9 million to write off any unamortized debt discounts, premiums and issuance costs, including the amounts related to the 2024 Convertible Notes discussed below, which is included in Reorganization Items, net on our Consolidated Statement of Operations for the year ended December 31, 2020. See " Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern" for additional information. (2) Our 2024 Convertible Notes are exchangeable into cash, our Class A ordinary shares or a combination thereof. The 2024 Convertible Notes were separated, at issuance, into their liability and equity components on our Consolidated Balance Sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount and the discount was being amortized to interest expense over the life of the instrument. As discussed above, the carrying amount at December 31, 2020 represents the aggregate 140 principal amount of these notes as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. We discontinued accruing interest on these notes as of the Petition Date. Additionally, we incurred a net non-cash charge of $ 128.8 million to write off $ 119.5 million of unamortized debt discount and $ 9.3 million of unamortized debt issuance costs related to these notes, which is included in Reorganization Items, net on our Consolidated Statement of Operations for the year ended December 31, 2020. The equity component is $ 220.0 million at December 31, 2020 and remains in Additional Paid-Capital. (3) In addition to the amount borrowed above, we had $ 27.0 million in undrawn letters of credit issued under the revolving credit facility. While the revolving credit facility has not been terminated, no further borrowings are permitted. As discussed above, the carrying amount at December 31, 2020 represents the outstanding borrowings as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. We discontinued accruing interest on the revolving credit facility as of the Petition Date and wrote off any unamortized debt issuance costs. The estimated fair values of our senior notes and debentures were determined using quoted market prices, which are level 1 inputs. The estimated fair values of our cash and cash equivalents, accounts receivable, notes receivable, trade payables and other liabilities approximated their carrying values as of December 31, 2020 and 2019. 7. PROPERTY AND EQUIPMENT Property and equipment as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Drilling rigs and equipment $ 12,584.4 $ 17,714.0 Work-in-progress 446.1 473.6 Other 178.8 206.2 $ 13,209.3 $ 18,393.8 Drilling rigs and equipment as of December 31, 2020 decreased by $ 5.1 billion, or 29 %, as compared to the prior period primarily due to impairments and sales of certain assets in our fleet. Work-in-progress as of December 31, 2020 and 2019 primarily consisted of approximately $ 418 million related to the construction of ultra-deepwater drillships VALARIS DS-13 and VALARIS DS-14. Impairment of Long-Lived Assets During the year ended December 31, 2020, 2019 and 2018, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters, jackups and spare equipment of $ 3.6 billion, $ 98.4 million and $ 40.3 million which is included in loss on impairment in our Consolidated Statements of Operations. Assets held-for-use On a quarterly basis, we evaluate the carrying value of our property and equipment to identify events or changes in circumstances ("triggering events") that indicate the carrying value may not be recoverable. For rigs whose carrying values were determined not to be recoverable, we recorded an impairment for the difference between their fair values and carrying values. During the first quarter of 2020, the COVID-19 global pandemic and the response thereto negatively impacted the macro-economic environment and global economy. Global oil demand fell sharply at the same time 141 global oil supply increased as a result of certain oil producers competing for market share which lead to a supply glut. As a consequence, Brent crude oil fell from around $ 60 per barrel at year-end 2019 to around $ 20 per barrel as of mid-April 2020. These adverse changes and impacts to our customer's capital expenditure plans in the first quarter resulted in further deterioration in our forecasted day rates and utilization for the remainder of 2020 and beyond. As a result, we concluded that a triggering event had occurred and we performed a fleet-wide recoverability test. We determined that our estimated undiscounted cash flows were not sufficient to recover the carrying values of certain rigs and concluded such were impaired as of March 31, 2020. Based on the asset impairment analysis performed as of March 31, 2020, we recorded a pre-tax, non-cash loss on impairment in the first quarter with respect to certain floaters, jackups and spare equipment totaling $ 2.8 billion. We measured the fair value of these assets to be $ 72.3 million at the time of impairment by applying either an income approach, using projected discounted cash flows or estimated scrap value. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including, in the case of an income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied an income approach, forecasted day rates and utilization took into account then current market conditions and our anticipated business outlook at that time, both of which had been impacted by the adverse changes in the business environment observed during the first quarter. During the second quarter of 2020, given the anticipated sustained market impacts arising from the decline in oil price and demand late in the first quarter, we revised our long-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment and we performed a fleet-wide recoverability test. As a result, we recorded a pre-tax, non-cash impairment with respect to two floaters and spare equipment totaling $ 817.3 million. We measured the fair value of these assets to be $ 69.0 million at the time of impairment by applying an income approach or estimated scrap value. These valuations were based on unobservable inputs that require significant judgments for which there is limited information including, in the case of the income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. During 2019, together with the Rowan Transaction, and as a result of the evaluation of the strategy of the combined fleet, we determined that a triggering event occurred resulting in the performance of a fleet-wide recoverability test. We determined that estimated undiscounted cash flows were sufficient to cover the rigs carrying values and concluded that no impairments were necessary. During 2018, we recognized a pre-tax, non-cash loss on impairment of $ 40.3 million related to one older non-core jack up rig. We concluded that a triggering event occurred due to the expiration of a legacy higher day rate contract resulting in the performance of a recoverability test. We determined that the estimated undiscounted cash flows over the remaining useful life of the rig were not sufficient to recover the rigs carrying value and concluded the rig was impaired as of December 31, 2018 . We estimated the fair values of these rigs by applying an income approach, using projected discounted cash flows. These valuations were based on unobservable inputs that required significant judgments for which there was limited information, including assumptions regarding future day rates, utilization, operating costs and capital requirements. Forecasted day rates and utilization took into account market conditions and our anticipated business outlook. Assets held-for-sale Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. We continue to focus on our fleet management strategy in light of the composition of our rig fleet. While taking into account certain restrictions on the sales of assets under our DIP Credit Agreement, as part of our strategy, we may act opportunistically from time to time to monetize assets to enhance stakeholder value and improve our liquidity profile, in addition to reducing holding costs by selling or disposing of older, lower-specification or non-core rigs. To this end, we continually assess our rig portfolio and actively work with our rig broker to market certain rigs. 142 On a quarterly basis, we assess whether any rig meets the criteria established for held-for-sale classification on our balance sheet. All rigs classified as held-for-sale are recorded at fair value, less costs to sell. We measure the fair value of our assets held-for-sale by applying a market approach based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants or a negotiated sales price. We reassess the fair value of our held-for-sale assets on a quarterly basis and adjust the carrying value, as necessary. During the second quarter of 2020, we classified the following rigs as held-for-sale: VALARIS 8500, VALARIS 8501, VALARIS 8502, VALARIS DS-3, VALARIS DS-5, VALARIS DS-6 and VALARIS JU-105. The carrying value of these rigs was reduced to fair value, less costs to sell, based on their estimated sales price, and we recorded a pre-tax, non-cash loss on impairment totaling $ 15.0 million. These rigs were subsequently sold during the third quarter of 2020. During the third quarter of 2020, we classified VALARIS 8504, VALARIS JU-84 and VALARIS JU-88 as held-for-sale. The fair value, less costs to sell, based on each rig's estimated sales price, was in excess of the respective carrying value. As a result, we concluded that there was no impairment of these rigs. These rigs were sold during the fourth quarter of 2020. During the fourth quarter of 2020, we classified our Australia office building as held-for-sale. The fair value, less cost to sale, of this asset was determined to be in excess of the carrying value and we concluded that there was no impairment for the asset. Our Australia office building had a remaining aggregate carrying value of $ 2.3 million and is included in other assets, net, on our Consolidated Balance Sheet as of December 31, 2020. During the third quarter of 2019, we decided to retire VALARIS 5006 and classified the rig as held-for-sale. We recognized a pre-tax, non-cash loss on impairment of $ 88.2 million, which represented the difference between the carrying value of the rig and related assets and their estimated fair value, less costs to sell. We subsequently sold the rig during the fourth quarter of 2019. During the fourth quarter of 2019, we classified VALARIS 6002, VALARIS JU-68 and VALARIS JU-70 as held-for-sale. We recognized a pre-tax impairment charge of $ 10.2 million for the VALARIS JU-70. VALARIS 6002 and VALARIS JU-68 were subsequently sold in the first quarter of 2020 and VALARIS JU-70 was sold in the second quarter of 2020. 143 8. DEBT The carrying value of our debt as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 (1) 2019 6.875 % Senior notes due 2020 $ 122.9 $ 124.8 4.70 % Senior notes due 2021 100.7 113.2 4.875 % Senior notes due 2022 (2) 620.8 599.2 3.00 % Exchangeable senior notes due 2024 849.5 699.0 4.50 % Senior notes due 2024 303.4 302.0 4.75 % Senior notes due 2024 (2) 318.6 276.5 8.00 % Senior notes due 2024 292.3 295.7 5.20 % Senior notes due 2025 333.7 331.7 7.375 % Senior notes due 2025 (2) 360.8 329.2 7.75 % Senior notes due 2026 1,000.0 987.1 7.20 % Debentures due 2027 112.1 111.7 7.875 % Senior notes due 2040 300.0 373.3 5.40 % Senior notes due 2042 (2) 400.0 262.8 5.75 % Senior notes due 2044 1,000.5 973.3 5.85 % Senior notes due 2044 (2) 400.0 268.8 Amounts drawn under the revolving credit facility (3) 581.0 — Total debt $ 7,096.3 $ 6,048.3 Less: Liabilities Subject to Compromise 7,096.3 — Less: current maturities — 124.8 Total long-term debt $ — $ 5,923.5 (1) The carrying amounts above represent the aggregate principal amount of Senior Notes outstanding as well as outstanding borrowings under our revolving credit facility as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. We discontinued accruing interest on our indebtedness following the Petition Date and all accrued interest as of the Petition Date is classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. Additionally, we incurred a net non-cash charge of $ 447.9 million to write off any unamortized debt discounts, premiums and issuance costs, including the amounts related to the 2024 Convertible Notes discussed below, which is included in Reorganization Items, net on our Consolidated Statement of Operations for the year ended December 31, 2020. See below and " Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern" for additional information. (2) These senior notes were acquired in the Rowan Transaction. (3) In addition to the amount borrowed above, we had $ 27.0 million in undrawn letters of credit issued under the revolving credit facility. The commencement of the Chapter 11 Cases constituted an event of default under our pre-petition indebtedness. Any efforts to enforce payment obligations under our Debt Instruments and other obligations of the Debtors are automatically stayed as a result of the filing of the Chapter 11 Cases and the holders' rights of enforcement in respect of the Debt Instruments are subject to the applicable provisions of the Bankruptcy Code. See “ Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional details regarding the Chapter 11 Cases. 144 On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into the DIP Credit Agreement, by and among the Company and certain wholly owned subsidiaries of the Company, as borrowers, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and security trustee, in an aggregate amount not to exceed $ 500.0 million that will be used to finance, among other things, the ongoing general corporate needs of the Debtors during the course of the Chapter 11 Cases and to pay certain fees, costs and expenses associated with the Chapter 11 Cases. For additional information related to the terms, covenants and restrictions under the DIP Credit Agreement, please See “ Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern”. As of December 31, 2020, we had no borrowings outstanding against our DIP Facility. The commencement of the Chapter 11 Cases resulted in an event of default under each series of our Senior Notes and all obligations thereunder were accelerated. However, any efforts to enforce payment obligations related to the acceleration of our debt have been automatically stayed as a result of the filing of the Chapter 11 Cases. Pursuant to the plan of reorganization contemplated by the Amended RSA, each series of our Senior Notes will be cancelled and the holders thereunder will receive the treatment as set forth in the plan of reorganization. Accordingly, the $ 6.5 billion in aggregate principal amount under the Senior Notes are Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. Senior Notes As a result of the Rowan Transaction, we acquired the following senior notes issued by Rowan Companies, LLC (formerly Rowan Companies, Inc.) ("RCI") and guaranteed by Rowan: (1) $ 201.4 million in aggregate principal amount of 7.875 % unsecured senior notes due 2019, which have been repaid in full, (2) $ 620.8 million in aggregate principal amount of 4.875 % 2022 Notes (the "4.875% 2022 Notes"), (3) $ 398.1 million in aggregate principal amount of 4.75 % 2024 Notes (the "4.75% 2024 Notes"), (4) $ 500.0 million in aggregate principal amount of 7.375 % 2025 Notes (the "7.375% 2025 Notes"), (5) $ 400.0 million in aggregate principal amount of 2042 Notes (the "2042 Notes"), and (6) $ 400.0 million in aggregate principal amount of 5.85 % 2044 Notes (the "5.85% 2044 Notes"). On February 3, 2020, Rowan and RCI transferred substantially all their assets on a consolidated basis to Valaris plc, Valaris plc became the obligor on the notes and Rowan and RCI were relieved of their obligations under the notes and the related indenture. On January 26, 2018, we issued $ 1.0 billion aggregate principal amount of unsecured 7.75 % senior notes due 2026 (the "2026 Notes") at par, net of $ 16.5 million in debt issuance costs. Interest on the 2026 Notes is payable semiannually on February 1 and August 1 of each year. During 2017, we exchanged $ 332.0 million aggregate principal amount of unsecured 8.00 % senior notes due 2024 (the “8 % 2024 Notes”) for certain amounts of our outstanding senior notes due 2019, 2020 and 2021. Interest on the 8% 2024 Notes is payable semiannually on January 31 and July 31 of each year. During 2015, we issued $ 700.0 million aggregate principal amount of unsecured 5.20 % senior notes due 2025 (the “2025 Notes”) at a discount of $ 2.6 million and $ 400.0 million aggregate principal amount of unsecured 5.75 % senior notes due 2044 (the “New 2044 Notes”) at a discount of $ 18.7 million in a public offering. Interest on the 2025 Notes is payable semiannually on March 15 and September 15 of each year. Interest on the New 2044 Notes is payable semiannually on April 1 and October 1 of each year. During 2014, we issued $ 625.0 million aggregate principal amount of unsecured 4.50 % senior notes due 2024 (the "2024 Notes") at a discount of $ 0.9 million and $ 625.0 million aggregate principal amount of unsecured 5.75 % senior notes due 2044 (the "Existing 2044 Notes") at a discount of $ 2.8 million. Interest on the 2024 Notes and the Existing 2044 Notes is payable semiannually on April 1 and October 1 of each year. The Existing 2044 Notes together with the New 2044 Notes, the "2044 Notes", are treated as a single series of debt securities under the indenture governing the notes. 145 During 2011, we issued $ 1.5 billion aggregate principal amount of unsecured 4.70 % senior notes due 2021 (the “2021 Notes”) at a discount of $ 29.6 million in a public offering. Interest on the 2021 Notes is payable semiannually on March 15 and September 15 of each year. Upon consummation of our acquisition of Pride International LLC ("Pride") during 2011, we assumed outstanding debt comprised of $ 900.0 million aggregate principal amount of unsecured 6.875 % senior notes due 2020 , $ 300.0 million aggregate principal amount of unsecured 7.875 % senior notes due 2040 (collectively, the "Pride Notes"), and $ 500.0 million aggregate principal amount of unsecured 8.5 % senior notes due 2019 (collectively, with the Pride Notes, the "Acquired Notes"). Valaris plc has fully and unconditionally guaranteed the performance of all Pride obligations with respect to the Acquired Notes. Certain of these senior notes allow us to redeem these senior notes, either in whole in part, subject to the payment of certain “make whole” premiums. However, due to the commencement of the Chapter 11 Cases we do not expect to make any such redemptions. The indentures governing these senior notes contain customary events of default, including failure to pay principal or interest on such notes when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions. Debentures Due 2027 During 1997, Ensco International Incorporated issued $ 150.0 million of unsecured 7.20 % Debentures due 2027 (the "Debentures"). Interest on the Debentures is payable semiannually on May 15 and November 15 of each year. We may redeem the Debentures, in whole or in part, at any time prior to maturity, at a price equal to 100 % of their principal amount, plus accrued and unpaid interest and a "make-whole" premium. During 2009, Valaris plc entered into a supplemental indenture to unconditionally guarantee the principal and interest payments on the Debentures. The Debentures and the indenture pursuant to which the Debentures were issued also contain customary events of default, including failure to pay principal or interest on the Debentures when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions. 2024 Convertible Notes In December 2016, Ensco Jersey Finance Limited, a wholly-owned subsidiary of Valaris plc, issued $ 849.5 million aggregate principal amount of 3.00 % convertible senior notes due 2024 (the "2024 Convertible Notes") in a private offering. The 2024 Convertible Notes are fully and unconditionally guaranteed, on a senior, unsecured basis, by Valaris plc. Under the terms of our debt agreement, we have the option to settle our 2024 Convertible Notes in cash, shares or a combination thereof for the aggregate amount due upon conversion. However, the commencement of the Chapter 11 Cases on August 19, 2020, constituted an event of default under the 2024 Convertible Notes. Any efforts to enforce payment obligations under the 2024 Convertible Notes, including any rights to require the repurchase by the Company of the 2024 Convertible Notes upon the NYSE delisting of the Class A ordinary shares, are automatically stayed as a result of the filing of the Chapter 11 Cases. During each respective reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. See " Note 1 - Description of the Business and Summary of Significant Accounting Policies" for additional information regarding the impact to our EPS. 146 Interest on the 2024 Convertible Notes is payable semiannually on January 31 and July 31 of each year. The 2024 Convertible Notes will mature on January 31, 2024, unless exchanged, redeemed or repurchased in accordance with their terms prior to such date. Holders may exchange their 2024 Convertible Notes at their option any time prior to July 31, 2023 only under certain circumstances set forth in the indenture governing the 2024 Convertible Notes. On or after July 31, 2023, holders may exchange their 2024 Convertible Notes at any time. The exchange rate is 17.8336 shares per $1,000 principal amount of notes, representing an exchange price of $ 56.08 per share, and is subject to adjustment upon certain events. The 2024 Convertible Notes may not be redeemed by us except in the event of certain tax law changes. The 2024 Convertible Notes were separated, at issuance, into their liability and equity components on our consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount and the discount was being amortized to interest expense over the life of the instrument. The carrying amount of the liability component was initially calculated by measuring the estimated fair value of a similar liability that did not include an associated conversion feature. The carrying amount of the equity component representing the conversion feature was initially determined by deducting the fair value of the liability component from the principal amount of the 2024 Convertible Notes. The difference between the carrying amount of the liability and the principal amount has been amortized to interest expense over the term of the 2024 Convertible Notes, together with the coupon interest, resulting in an effective interest rate of approximately 8.00 % per annum. As discussed above, the carrying amount of the 2024 Convertible Notes at December 31, 2020 represents the aggregate principal amount of these notes as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. The equity component is $ 220.0 million at December 31, 2020 and remains in Additional Paid-Capital. The equity component is not remeasured if we continue to meet certain conditions for equity classification. The costs related to the issuance of the 2024 Convertible Notes were initially allocated to the liability and equity components based on their relative fair values. Issuance costs attributable to the liability component were amortized to interest expense over the term of the notes and the issuance costs attributable to the equity component were recorded to additional paid-in capital on our consolidated balance sheet. During the year ended December 31, 2020, 2019 and 2018, we recognized $ 16.1 million, $ 25.5 million, and $ 25.5 million, respectively, associated with coupon interest. Amortization of debt discount and issuance costs were $ 21.4 million, $ 32.5 million and $ 31.0 million for the years ended December 31, 2020, 2019 and 2018, respectively. We discontinued accruing interest on these notes as of the Petition Date. Additionally, we incurred a net non-cash charge of $ 128.8 million to write off $ 119.5 million of unamortized debt discount and $ 9.3 million of unamortized debt issuance costs related to these notes, which is included in Reorganization Items, net on our Consolidated Statement of Operations the year ended December 31, 2020. As of December 31, 2020 and 2019, the 2024 Convertible Notes consist of the following (in millions): Liability component: 2020 2019 Principal $ 849.5 $ 849.5 Less: Unamortized debt discount and issuance costs — ( 150.5 ) Net carrying amount (1) $ 849.5 $ 699.0 Equity component, net $ 220.0 $ 220.0 (1) The carrying amount at December 31, 2020 represents the aggregate principal amount of these notes as of the Petition Date and are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. The indenture governing the 2024 Convertible Notes contains customary events of default, including failure to pay principal or interest on such notes when due, among others. The indenture also contains certain restrictions, including, among others, restrictions on our ability and the ability of our subsidiaries to create or incur secured 147 indebtedness, enter into certain sale/leaseback transactions and enter into certain merger or consolidation transactions. The 2021 Notes, 4.875 % 2022 Notes, 4.75 % 2024 Notes, 8.00 % 2024 Notes, 2024 Notes, 2025 Notes, 7.375 % 2025 Notes, 2026 Notes, 2042 Notes, 5.85 % 2044 Notes, Existing 2044 Notes, the Pride Notes, the Debentures and 2024 Convertible Notes" together are the "Senior Notes". The commencement of the Chapter 11 Cases on August 19, 2020, constituted an event of default under our Senior Notes. Tender Offers and Open Market Repurchases In early March 2020, we repurchased $ 12.8 million of our outstanding 4.70 % senior notes due 2021 on the open market for an aggregate purchase price of $ 9.7 million, excluding accrued interest, with cash on hand. As a result of the transaction, we recognized a pre-tax gain of $ 3.1 million, net of discounts in other, net, in the consolidated statements of operations. On June 25, 2019, we commenced cash tender offers for certain series of senior notes issued by us and Ensco International Incorporated and RCI, our wholly-owned subsidiaries. The tender offers expired on July 23, 2019, and we repurchased $ 951.8 million of our outstanding senior notes for an aggregate purchase price of $ 724.1 million. As a result of the transaction, we recognized a pre-tax gain from debt extinguishment of $ 194.1 million, net of discounts, premiums and debt issuance costs in other, net, in the consolidated statement of operations. Concurrent with the issuance of the 2026 Notes in January 2018, we launched cash tender offers for up to $ 985.0 million aggregate principal amount of certain series of senior notes issued by us and Pride, our wholly-owned subsidiary, and as a result we repurchased $ 595.4 million of our senior notes. Subsequently, we issued a redemption notice for the remaining principal amount of the $ 55.0 million principal amount of the 8.5 % senior notes due 2019 and repurchased $ 71.4 million principal amount of our senior notes due 2020. As a result of these transactions, we recognized a pre-tax loss from debt extinguishment of $ 19.0 million, net of discounts, premiums, debt issuance costs and commissions in other, net, in the consolidated statement of operations. 148 Our tender offers and open market repurchases during the three-year period ended December 31, 2020 are summarized in the following table (in millions): Aggregate Principal Amount Repurchased Aggregate Repurchase Price (1) Year Ended December 31, 2020 4.70 % Senior notes due 2021 $ 12.8 $ 9.7 Year Ended December 31, 2019 4.50 % Senior notes due 2024 $ 320.0 $ 240.0 4.75 % Senior notes due 2024 79.5 61.2 8.00 % Senior notes due 2024 39.7 33.8 5.20 % Senior notes due 2025 335.5 250.0 7.375 % Senior notes due 2025 139.2 109.2 7.20 % Senior notes due 2027 37.9 29.9 $ 951.8 $ 724.1 Year Ended December 31, 2018 8.50 % Senior notes due 2019 $ 237.6 $ 256.8 6.875 % Senior notes due 2020 328.0 354.7 4.70 % Senior notes due 2021 156.2 159.7 $ 721.8 $ 771.2 (1) Excludes accrued interest paid to holders of the repurchased senior notes. Revolving Credit Facility and DIP Facility Effective upon closing of the Rowan Transaction, our revolving credit facility was $ 1.6 billion. As previously disclosed, prior to the commencement of the Chapter 11 Cases, we entered into a series of waiver agreements (the “Waivers”) between the dates of June 1, 2020 and August 3, 2020 in respect of the revolving credit facility. The Waivers did not address any event of default resulting under the revolving credit facility attributed to the filing of Chapter 11 Cases. Consequently, the principal and interest under our revolving credit facility became immediately due and payable upon filing of such Chapter 11 Cases, which constituted an event of default under the revolving credit facility. However, the ability of the lenders under the revolving credit facility to exercise remedies in respect of the revolving credit facility was stayed upon commencement of the Chapter 11 Cases. While the revolving credit facility has not been terminated, notwithstanding the $ 1.6 billion borrowing capacity under the revolving credit facility, no further borrowings under the revolving credit facility are permitted. As of December 31, 2020 , we had $ 581.0 million of borrowings outstanding under our revolving credit facility and $ 27.0 million of undrawn letters of cred it. The outstanding borrowings as well as accrued interest as of the Petition Date are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. See " Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern" for more information related to our Chapter 11 Cases to effect a comprehensive restructuring of our indebtedness. On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into the DIP Credit Agreement in an aggregate amount not to exceed $ 500.0 million. Borrowings on the DIP Facility will be used to finance, among other things, the ongoing general corporate needs of the Debtors during the course of the Chapter 11 Cases and to pay certain fees, costs and expenses associated with the Debtors’ Chapter 11 Cases. 149 We expect cash on hand and the DIP Facility will provide sufficient liquidity for us during the pendency of the Chapter 11 Cases based on current projections of cash flows. Should we experience material variations from our projected cash flows, this could result in us having insufficient liquidity from the DIP Facility and in turn could have a material adverse impact on our financial position, operating results or cash flows. See " Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern" for a more detailed description of our DIP Facility. Maturities The original principal amounts issued under our senior notes have subsequently changed as a result of our tenders, repurchases, exchanges, redemptions and new debt issuances such that the balance outstanding at December 31, 2020 were as follows (in millions): Subject to Compromise (2) Senior Notes (2) Original Principal 2016 Tenders, Repurchases and Equity Exchange 2017 Exchange Offers and Repurchases 2018 Tender Offers, Redemption and Debt Issuance 2019 Tender Offers and Acquired Debt 2020 Open Market Repurchase Remaining Principal 6.875 % Senior Notes due 2020 $ 900.0 $ ( 219.2 ) $ ( 229.9 ) $ ( 328.0 ) $ — $ — $ 122.9 4.70 % Senior Notes due 2021 1,500.0 ( 817.0 ) ( 413.3 ) ( 156.2 ) — ( 12.8 ) 100.7 4.875 % Senior notes due 2022 (1) — — — — 620.8 — 620.8 3.00 % Exchangeable senior notes due 2024 849.5 — — — — — 849.5 4.50 % Senior notes due 2024 625.0 ( 1.6 ) — — ( 320.0 ) — 303.4 4.75 % Senior notes due 2024 (1) — — — — 318.6 — 318.6 8.00 % Senior Notes due 2024 — — 332.0 — ( 39.7 ) — 292.3 5.20 % Senior Notes due 2025 700.0 ( 30.8 ) — — ( 335.5 ) — 333.7 7.375 % Senior Notes due 2025 (1) — — — — 360.8 — 360.8 7.75 % Senior Notes due 2026 — — — 1,000.0 — — 1,000.0 7.20 % Debentures due 2027 150.0 — — — ( 37.9 ) — 112.1 7.875 % Senior notes due 2040 300.0 — — — — — 300.0 5.40 % Senior notes due 2042 (1) — — — — 400.0 — 400.0 5.75 % Senior notes due 2044 1,025.0 ( 24.5 ) — — — — 1,000.5 5.85 % Senior notes due 2044 (1) — — — — 400.0 — 400.0 Total $ 6,049.5 $ ( 1,093.1 ) $ ( 311.2 ) $ 515.8 $ 1,367.1 $ ( 12.8 ) $ 6,515.3 (1) These senior notes were acquired in the Rowan Transaction. (2) The $ 6.5 billion aggregate principal amount of Senior Notes outstanding as well as associated $201.9 million in accrued interest as of the Petition Date are classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020. The maturity dates represent the maturity dates per the debt agreements; however, we are in default on these senior notes and are currently in chapter 11 proceedings. See "Senior Notes" above and " Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional information for additional details regarding Chapter 11 Cases. 150 Interest Expense Interest expense totaled $ 290.6 million, $ 428.3 million and $ 282.7 million for the years ended December 31, 2020, 2019 and 2018, respectively, which was net of capitalized interest of $ 1.3 million, $ 20.9 million and $ 62.6 million associated with newbuild rig construction and other capital projects. The contractual interest expense on our unsecured senior notes and revolving credit facility is in excess of recorded interest expense by $ 140.7 million for the year ended December 31, 2020 . This excess contractual interest is not included as interest expense on the Consolidated Statements of Operations for the year ended December 31, 2020, as the Company has discontinued accruing interest on the unsecured senior notes and revolving credit facility subsequent to the Petition Date. We discontinued making interest payments on our unsecured senior notes beginning in June 2020. 9. DERIVATIVE INSTRUMENTS Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. We previously used derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk. The commencement of the Chapter 11 Cases constituted a termination event with respect to the Company’s derivative instruments, which permits the counterparties of our derivative instruments to terminate their outstanding contracts. The exercise of these termination rights are not stayed under the Bankruptcy Code. During September 2020, the counterparties to the Company’s derivative instruments elected to terminate their outstanding derivatives with us for an aggregate settlement of $ 3.6 million which was recorded as a gain in contract drilling expense in our Consolidated Statement of Operations for the year ended December 31, 2020 related to this termination. All derivatives were recorded on our consolidated balance sheets at fair value. Derivatives subject to legally enforceable master netting agreements were not offset on our consolidated balance sheets. Accounting for the gains and losses resulting from changes in the fair value of derivatives depended on the use of the derivative and whether it qualified for hedge accounting. See " Note 1 - Description of the Business and Summary of Significant Accounting Policies" for additional information on our accounting policy for derivatives. As of December 31, 2019, our consolidated balance sheets included net foreign currency derivative assets of $ 5.4 million. See "Note 6 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives. 151 Derivatives recorded at fair value on our consolidated balance sheet as of December 31, 2019, consisted of the following (in millions): Derivative Assets Derivative Liabilities 2019 2019 Derivatives Designated as Hedging Instruments Foreign currency forward contracts - current (1) $ 4.2 $ .7 Foreign currency forward contracts - non-current (2) .8 — 5.0 .7 Derivatives not Designated as Hedging Instruments Foreign currency forward contracts - current (1) 1.3 .2 Total $ 6.3 $ .9 (1) Derivative assets and liabilities that have maturity dates equal to or less than 12 months from the respective balance sheet date were included in other current assets and accrued liabilities and other, respectively, on our consolidated balance sheet. (2) Derivative assets and liabilities that have maturity dates greater than 12 months from the respective balance sheet date were included in other assets and other liabilities, respectively, on our consolidated balance sheet. We have historically utilized cash flow hedges to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure to foreign currency exchange rate risk associated with contract drilling expenses and capital expenditures denominated in various currencies. Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our consolidated statements of operations and comprehensive loss for each of the years in the three-year period ended December 31, 2020 were as follows (in millions): Gain (Loss) Recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion) (Gain) Loss Reclassified from AOCI into Income (Effective Portion) (1) Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing) (2) 2020 2019 2018 2020 2019 2018 2020 2019 2018 Interest rate lock contracts (3) $ — $ — $ — $ — $ 1.9 $ .2 $ — $ — $ — Foreign currency forward contracts (4) ( 5.4 ) 1.6 ( 9.7 ) ( 11.6 ) 6.4 ( 1.2 ) — — ( 1.9 ) Total $ ( 5.4 ) $ 1.6 $ ( 9.7 ) $ ( 11.6 ) $ 8.3 $ ( 1.0 ) $ — $ — $ ( 1.9 ) (1) Changes in the fair value of cash flow hedges are recorded in AOCI. Amounts recorded in AOCI associated with cash flow hedges are subsequently reclassified into contract drilling, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transaction. (2) Gains and losses recognized in income for amounts excluded from effectiveness testing were included in other, net, in our consolidated statements of operations. As a result of our adoption of Update 2017-12 on January 1, 2019, ineffectiveness is no longer separately measured and recognized. (3) Losses on interest rate lock derivatives reclassified from AOCI into income were included in interest expense, net, in our consolidated statements of operations. 152 (4) During the year ended December 31, 2020, $ 2.0 million of losses were reclassified from AOCI into contract drilling expense and $ 13.6 million of gains were reclassified from AOCI into depreciation expense in our consolidated statement of operations. During the year ended December 31, 2019, $ 7.3 million of losses were reclassified from AOCI into contract drilling expense and $ 0.9 million of gains were reclassified from AOCI into depreciation expense in our consolidated statement of operations. During the year ended December 31, 2018, $ 400,000 of gains were reclassified from AOCI into contract drilling expense and $ 800,000 of gains were reclassified from AOCI into depreciation expense in our consolidated statement of operations. We have net assets and liabilities denominated in numerous foreign currencies and use various methods to manage our exposure to foreign currency exchange rate risk. We predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. Historically, we have occasionally entered into derivatives that hedged the fair value of recognized foreign currency denominated assets or liabilities but did not designate such derivatives as hedging instruments. In these situations, a natural hedging relationship generally existed whereby changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. As of December 31, 2020, we did not have open derivative contracts to hedge against this risk. Net losses of $ 0.2 million, $ 6.4 million and $ 11.8 million associated with our derivatives not designated as hedging instruments were included in other, net, in our consolidated statements of operations for the years ended December 31, 2020, 2019 and 2018, respectively. 153 10. SHAREHOLDERS' EQUITY Activity in our various shareholders' equity accounts for each of the years in the three-year period ended December 31, 2020 was as follows (in millions, except per share amounts): Shares Par Value Additional Paid-in Capital Retained Earnings AOCI Treasury Shares Non-controlling Interest BALANCE, December 31, 2017 111.8 $ 44.8 $ 7,195.0 $ 1,532.7 $ 28.6 $ ( 69.0 ) $ ( 2.1 ) Net loss — — — ( 639.7 ) — — 3.1 Dividends paid ($ 0.16 per share) — — — ( 18.0 ) — — — Cumulative-effect reduction from adoption of ASU 2018-02 — — — ( .8 ) .8 — — Distributions to noncontrolling interests — — — — — — ( 3.6 ) Shares issued under share-based compensation plans, net 3.4 1.4 ( .6 ) — — ( 1.3 ) — Repurchase of shares — — — — — ( 1.9 ) — Share-based compensation cost — — 30.6 — — — — Net other comprehensive loss — — — — ( 11.2 ) — — BALANCE, December 31, 2018 115.2 46.2 7,225.0 874.2 18.2 ( 72.2 ) ( 2.6 ) Net loss — — — ( 198.0 ) — — 5.8 Dividends paid ($ 0.04 per share) — — — ( 4.5 ) — — — Equity issuance in connection with the Rowan Transaction 88.0 35.2 1,367.5 — — .1 — Shares issued under share-based compensation plans, net 2.7 1.1 ( 1.3 ) — — ( .7 ) — Distributions to noncontrolling interests — — — — — — ( 4.5 ) Repurchase of shares — — — — — ( 4.5 ) — Equity issuance cost — — ( .6 ) — — — — Share-based compensation cost — — 37.2 — — — — Net changes in pension and other postretirement benefits — — — — ( 21.7 ) — — Net other comprehensive income — — — — 9.7 — — BALANCE, December 31, 2019 205.9 82.5 8,627.8 671.7 6.2 ( 77.3 ) ( 1.3 ) Net loss — — — ( 4,855.5 ) — — ( 2.1 ) Shares issued under share-based compensation plans, net .2 .1 ( 1.9 ) — — 2.0 — Repurchase of shares — — — — — ( .9 ) — Share-based compensation cost — — 21.2 — — — — Net changes in pension and other postretirement benefits — — — — ( 76.5 ) — — Purchase of noncontrolling interests — — ( 7.2 ) — — — — Distributions to noncontrolling interests — — — — — — ( .9 ) Net other comprehensive loss — — — — ( 17.6 ) — — BALANCE, December 31, 2020 206.1 $ 82.6 $ 8,639.9 $ ( 4,183.8 ) $ ( 87.9 ) $ ( 76.2 ) $ ( 4.3 ) In connection with the Rowan Transaction on April 11, 2019, we issued 88.3 million Class A ordinary shares with an aggregate value of $ 1.4 billion. See " Note 4 - Rowan Transaction" for additional information. 154 As a U.K. public limited company subject to the U.K. Companies Act 2006, we cannot issue new shares (other than in limited circumstances) without being authorized by our shareholders. At our 2020 annual general meeting held on June 15, 2020, our shareholders authorized the allotment of shares up to an aggregate nominal amount of $ 26,431,699 (or up to an aggregate nominal amount equal to $ 52,863,399 in connection with an offer by way of a rights issue or other similar pre-emptive issue), representing approximately 33.3 % and 66.6 % respectively of the issued share capital (excluding treasury shares) of Valaris plc as of 20 April 2020. Under English law, we are only able to declare dividends and return funds to our shareholders out of the accumulated distributable reserves on our statutory balance sheet. The declaration and amount of future dividends is at the discretion of our Board of Directors and will depend on our profitability, liquidity, financial condition, market outlook, reinvestment opportunities, capital requirements and other factors and restrictions our Board of Directors deems relevant. There can be no assurance that we will pay a dividend in the future. Our shareholders approved a repurchase program at our annual shareholder meeting held in May 2018. Subject to certain provisions under English law, including the requirement for Valaris plc to have sufficient distributable reserves and for the Board to conclude that a repurchase is in the best interest of Valaris plc taking into account the interests of relevant stakeholders, we may repurchase shares up to a maximum of $ 500.0 million in the aggregate from one or more financial intermediaries under the program, but in no case more than 16.3 million shares. The program terminates in May 2023. As of December 31, 2020, there had been no share repurchases under the repurchase program. Our DIP Facility only permits the repurchase of shares of our common stock in certain circumstances and the repurchase of shares would likely require approval of the bankruptcy court. We do not currently expect to make repurchases under the program whilst Valaris plc remains subject to chapter 11 bankruptcy proceedings. 11. SHARE BASED COMPENSATION In May 2018, our shareholders approved the 2018 Long-Term Incentive Plan (the "2018 LTIP") effective January 1, 2018, to provide for the issuance of non-vested share awards, share option awards and performance awards (collectively "awards"). The 2018 LTIP is similar to and replaces the Company's previously adopted 2012 Long-Term Incentive Plan (the “2012 LTIP”). No further awards will be granted under the 2012 LTIP. Under the 2018 LTIP, 10.5 million shares were reserved for issuance as awards to officers, non-employee directors and key employees who are in a position to contribute materially to our growth, development and long-term success. In April 2020, the 2018 LTIP was amended to increase the number of shares authorized for issuance by 8.2 million. As of December 31, 2020, there were 12.2 million shares available for issuance as awards under the 2018 LTIP. Awards may be satisfied by newly issued shares, including shares held by a subsidiary or affiliated entity, or by delivery of shares held in an affiliated employee benefit trust at the Company's discretion. Grants under the 2018 LTIP are subject to applicable bankruptcy law and settlement of vested share awards and cash-settled awards (each as defined below) held by insiders has been delayed until the Company’s emergence from chapter 11, at which point, such awards are expected to be cancelled unless the insider elects to have their award treated in accordance with the terms of the chapter 11 plan. In connection with the Rowan Transaction, we assumed the Amended and Restated 2013 Rowan Companies plc Incentive Plan (the "Rowan LTIP") and the non-vested share unit awards, options and share appreciation rights outstanding thereunder. As of December 31, 2020, there were 2.6 million shares remaining available for future issuance as awards under the Rowan LTIP which may be granted to employees and other service providers who were not employed or engaged with Valaris prior to the Rowan Transaction. In connection with the Atwood Merger, we assumed Atwood’s Amended and Restated 2007 Long-Term Incentive Plan (the “Atwood LTIP”, and together with the 2018 LTIP and the Rowan LTIP, the "LTIP Plans") and the options outstanding thereunder. As of December 31, 2020, there were approximately 200,000 shares remaining available for future issuance as awards under the Atwood LTIP, which may be granted to employees and other service providers who were not employed or engaged with Valaris prior to the Atwood Merger. 155 Non-Vested Share Awards, Cash-Settled Awards and Non-employee Director Deferred Awards Grants of share awards and share units (collectively "share awards") and share units to be settled in cash ("cash-settled awards"), generally vest at rates of 20 % or 33 % per year, as determined by a committee of the Board of Directors at the time of grant. Additionally, non-employee directors may annually elect to receive deferred share awards. Deferred share awards vest at the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant but are not settled until the director terminates service from the Board. Deferred share awards are settled in cash, shares or a combination thereof at the discretion of the Compensation Committee. During 2020, 66,000 cash-settled awards were granted while 1.1 million share unit awards were granted to our employees and non-employee directors pursuant to the LTIP Plans. The 2020 share awards issued to certain executive officers were subsequently forfeited in conjunction with the chapter 11 proceedings. Our non-vested share awards have voting and dividend rights effective on the date of grant, and our non-vested share units have dividend rights effective on the date of grant. Compensation expense for share awards is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). Compensation expense for cash-settled awards is remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in our share price. Our compensation cost is reduced for forfeited awards in the period in which the forfeitures occur. The following table summarizes share award and cash-settled award compensation expense recognized during each of the years in the three-year period ended December 31, 2020 (in millions): 2020 2019 2018 Contract drilling $ 10.7 $ 22.1 $ 18.9 General and administrative 9.2 17.4 14.5 19.9 39.5 33.4 Tax benefit ( 1.8 ) ( 2.5 ) ( 2.8 ) Total $ 18.1 $ 37.0 $ 30.6 The following table summarizes the value of share awards and cash-settled awards granted and vested during each of the years in the three-year period ended December 31, 2020: Share Awards Cash-Settled Awards 2020 2019 2018 2020 2019 2018 Weighted-average grant-date fair value of share awards granted (per share) $ 3.07 $ 11.50 $ 24.62 $ 0.75 $ — $ 21.35 Total fair value of share awards vested during the period (in millions) $ 3.26 $ 17.70 $ 7.50 $ 0.22 $ 3.50 $ 9.90 156 The following table summarizes share awards and cash-settled awards activity for the year ended December 31, 2020 (shares in thousands): Share Awards Cash-settled Awards Awards Weighted-Average Grant-Date Fair Value Awards Weighted-Average Grant-Date Fair Value Share awards and cash-settled awards as of December 31, 2019 6,433 $ 19.89 697 $ 46.28 Granted 1,118 3.07 66 0.75 Vested ( 2,473 ) 16.55 ( 342 ) 29.59 Forfeited ( 2,096 ) 8.15 ( 110 ) 28.01 Share awards and cash-settled awards as of December 31, 2020 2,982 $ 16.40 311 $ 22.74 As of December 31, 2020, there was $ 30.4 million of total unrecognized compensation cost related to share awards, which has a weighted-average remaining vesting period of 1.4 years. Share Appreciation Rights Share Appreciation Rights ("SARs") granted to employees generally become exercisable in 33 % increments over a three-year period and, to the extent not exercised, expire on the tenth anniversary of the date of grant. The exercise price of SARs granted under the Rowan LTIP equals the excess of the market value of the underlying shares on the date of exercise over the market value of the shares on date of grant multiplied by the number of shares covered by the SAR. The Company has accounted for SARs as equity awards. As of December 31, 2020, SARs granted to purchase 426,049 shares with a weighted-average exercise price of $ 53.23 were outstanding under the Rowan LTIP. No SARs have been granted since 2013 under the Rowan LTIP, and there was no unrecognized compensation cost related to SARs as of December 31, 2020. Share Option Awards Share option awards ("options") granted to employees generally become exercisable in 25 % increments over a four-year period or 33 % increments over a three-year period or 100% after a four-year period and, to the extent not exercised, expire on either the seventh or tenth anniversary of the date of grant. The exercise price of options granted under the 2018 LTIP equals the market value of the underlying shares on the date of grant. As of December 31, 2020, options granted to purchase 318,377 shares with a weighted-average exercise price of $ 44.94 were outstanding under the Company LTIPs. Excluding options assumed under the Atwood LTIP and Rowan LTIP, no options have been granted since 2011, and there was no unrecognized compensation cost related to options as of December 31, 2020. Performance Awards Under the Company LTIPs, performance awards may be issued to our senior executive officers. The 2019 performance awards are subject to achievement of specified performance goals based on both relative and absolute total shareholder return ("TSR"), while the 2018 performance awards are subject to achievement of specified performance goals based on relative TSR and relative return on capital employed ("ROCE") as compared to a specified peer group. The 2020 performance awards were forfeited in exchange for cash-based retention awards. The performance goals are determined by a committee of the Board of Directors. Awards are payable in cash upon attainment of relative performance goals. 157 Performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals. Our performance awards granted during 2018 and 2019 are classified as liability awards, all with compensation expense recognized over the requisite service period. The estimated probable outcome of attainment of the specified performance goals is based primarily on relative performance over the requisite performance period. Any subsequent changes in this estimate are recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs. The aggregate grant-date fair value of performance awards granted during 2019 and 2018 was $ 6.7 million. The 2020 performance awards were subsequently forfeited in conjunction with the Chapter 11 Cases. The aggregate fair value of performance awards vested during 2020, 2019 and 2018 totaled $ 5.2 million, $ 2.2 million and $ 0.7 million, respectively. During the years ended December 31, 2020, 2019 and 2018, we recognized $ 1.0 million, $ 3.2 million and $ 8.2 million of compensation expense for performance awards, respectively, which was included in general and administrative expense in our consolidated statements of operations. Savings Plans We have savings plans, (the Ensco Savings Plan, the Ensco Multinational Savings Plan, the Ensco Limited Retirement Plan and the frozen RDIS International Savings Plan), which cover eligible employees as defined within each plan. During 2020, the plan assets of the legacy Rowan savings plans (the Rowan Companies, Inc. Savings & Investment Plan and the Rowan Drilling UK Pension Scheme) were transferred to the Ensco Savings Plan and the Ensco Limited Retirement Plan, respectively. The Ensco Savings Plan includes a 401(k) savings plan feature, which allows eligible employees to make tax-deferred contributions to the plans. The Ensco Limited Retirement Plan allows eligible employees to make tax-deferred contributions to the plan. Contributions made to the Ensco Multinational Savings Plan may or may not qualify for tax deferral based on each plan participant's local tax requirements. Historically, we made matching cash contributions to the plans. The legacy Ensco plans previously matched 100 % of the amount contributed by the employee up to a maximum of 5 % of eligible salary, where the legacy Rowan plans also provided up to a 5% match of eligible salary; however, depending on the plan and the tier, the match percentage could vary. Matching contributions totaled $ 8.8 million, $ 18.7 million and $ 14.4 million for the years ended December 31, 2020, 2019 and 2018, respectively. Effective August 1, 2020, in light of the current economic environment, we suspended employer matching contributions for the Ensco Savings Plan and the Ensco Multinational Savings Plan. In addition, effective December 1, 2020, the matching contributions in the Ensco Limited Retirement Plan were reduced. Employer contributions may be reinstated in future periods at the discretion of the Board of Directors. As of January 1, 2019, the plans were modified such that all previous, current and future employer contributions become 100% vested. 12. PENSION AND OTHER POST- RETIREMENT BENEFITS Prior to the Rowan Transaction, Rowan established various defined-benefit pension plans and a post-retirement health and life insurance plan that provide benefits upon retirement for certain full-time employees. The defined-benefit pension plans include: (1) the Rowan Pension Plan; (2) Restoration Plan of Rowan Companies, Inc. (the “Rowan SERP”); (3) the Norway Onshore Plan; and (4) the Norway Offshore Plan. The Retiree Life & Medical Supplemental Plan of Rowan Companies, Inc. (the “Retiree Medical Plan”) provides post-retirement health and life insurance benefits. On November 27, 2017, Rowan purchased annuities to cover post-65 retiree medical benefits for current retirees as of the purchase date. The annuity purchase settled post-65 medical benefits (i.e., Health Reimbursement Account, or “HRA”, amounts) for affected participants, with the insurer taking responsibility for all benefit payments on and after January 1, 2019. 158 As a result of the Rowan Transaction, we assumed these plans and obligations, which were remeasured as of the Transaction Date. Each of the plans has a benefit obligation that exceeds the fair value of plan assets. As of the Transaction Date, the net projected benefit obligations totaled $ 239.3 million, of which $ 19.2 million was classified as current. The current and non-current portions of the net benefit obligations are included in accrued liabilities and other liabilities in our consolidated balance sheet, respectively. The most significant of the assumed plans is the Rowan Pension Plan, which had a net projected benefit obligation of $ 202.1 million. Prior to the Transaction Date, Rowan amended the Rowan Pension Plan to freeze the plan as to any future benefit accruals. As a result, eligible employees no longer receive pay credits in the pension plan and newly hired employees are not eligible to participate in the pension plan. 159 The following table presents the changes in benefit obligations and plan assets for the year ended December 31, 2020 and 2019 and the funded status and weighted-average assumptions used to determine the benefit obligation at year end (dollars in millions): 2020 2019 Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total Projected benefit obligation: Balance, January 1 and April 11 $ 832.4 $ 16.1 $ 848.5 $ 800.1 $ 15.9 $ 816.0 Interest cost 24.9 0.5 25.4 21.3 0.4 21.7 Service cost 0.1 — 0.1 1.5 — 1.5 Actuarial loss (gain) 97.8 ( 0.1 ) 97.7 43.8 0.2 44.0 Plan settlements ( 6.6 ) — ( 6.6 ) — — — Plan curtailments ( 3.3 ) — ( 3.3 ) — — — Benefits paid ( 58.6 ) ( 0.6 ) ( 59.2 ) ( 34.1 ) ( 0.4 ) ( 34.5 ) Foreign currency adjustments — — — ( 0.2 ) — ( 0.2 ) Balance, December 31 $ 886.7 $ 15.9 $ 902.6 $ 832.4 $ 16.1 $ 848.5 Plan assets Fair value, January 1 and April 11 $ 598.9 $ — $ 598.9 $ 576.8 $ — $ 576.8 Actual return 57.9 — 57.9 43.6 — 43.6 Employer contributions 11.5 — 11.5 12.8 — 12.8 Plan settlements ( 6.6 ) — ( 6.6 ) — — — Benefits paid ( 58.6 ) — ( 58.6 ) ( 34.1 ) — ( 34.1 ) Foreign currency adjustments — — — ( 0.2 ) — ( 0.2 ) Fair value, December 31 $ 603.1 $ — $ 603.1 $ 598.9 — $ 598.9 Net benefit liabilities $ 283.6 $ 15.9 $ 299.5 $ 233.5 $ 16.1 $ 249.6 Amounts recognized in consolidated balance sheet: Accrued liabilities $ ( 1.5 ) $ ( 1.4 ) $ ( 2.9 ) $ ( 1.4 ) $ ( 1.5 ) $ ( 2.9 ) Other liabilities (long-term) ( 282.1 ) ( 14.5 ) ( 296.6 ) ( 232.1 ) ( 14.6 ) ( 246.7 ) Net benefit liabilities $ ( 283.6 ) $ ( 15.9 ) $ ( 299.5 ) $ ( 233.5 ) $ ( 16.1 ) $ ( 249.6 ) Accumulated contributions in excess of (less than) net periodic benefit cost $ ( 179.6 ) $ ( 15.8 ) $ ( 195.4 ) $ ( 206.2 ) $ ( 15.9 ) $ ( 222.1 ) Amounts not yet reflected in net periodic benefit cost: Actuarial loss $ ( 104.0 ) $ ( 0.1 ) $ ( 104.1 ) $ ( 27.3 ) $ ( 0.2 ) $ ( 27.5 ) Total accumulated other comprehensive loss ( 104.0 ) ( 0.1 ) ( 104.1 ) ( 27.3 ) ( 0.2 ) ( 27.5 ) Net benefit liabilities $ ( 283.6 ) $ ( 15.9 ) $ ( 299.5 ) $ ( 233.5 ) $ ( 16.1 ) $ ( 249.6 ) Weighted-average assumptions: Discount rate 2.30 % 2.19 % 3.16 % 3.06 % Cash balance interest credit rate 2.94 % N/A 3.29 % N/A Rate of compensation increase N/A N/A N/A N/A 160 The unfunded obligation increased by $ 49.9 million. In addition to the expected year-to-year changes, the increase was primarily attributable to a decline in the discount rate and the impact of updated census data. This was partially offset by higher than expected return on plan assets and employer contributions of $ 11.5 million. The projected benefit obligations for pension benefits in the preceding table reflect the actuarial present value of benefits accrued based on services rendered to date and include the estimated effect of future salary increases. The accumulated benefit obligations, which are presented below for all plans in the aggregate at December 31, 2020 and 2019, are based on services rendered to date, but exclude the effect of future salary increases (in millions): 2020 2019 Accumulated benefit obligation $ 902.6 $ 844.3 The components of net periodic pension, retiree medical cost and the weighted-average assumptions used to determine net periodic pension and retiree medical cost were as follows (dollars in millions): Year Ended December 31, 2020 April 11, 2019 - December 31, 2019 Service cost (1) $ .1 $ 1.5 Interest cost (2) 25.4 21.3 Expected return on plan assets (2) ( 36.5 ) ( 27.1 ) Curtailment gain recognized (2) ( 3.3 ) — Settlement gain recognized (2) ( .3 ) — Net periodic pension and retiree medical cost (income) $ ( 14.6 ) $ ( 4.3 ) Discount rate 3.16 % 3.82 % Expected return on assets 6.48 % 6.70 % Cash balance interest credit rate 3.29 % 3.29 % (1) Included in contract drilling and general and administrative expense in our consolidated statements of operations. (2) Included in other, net, in our consolidated statements of operations. The pension plans' investment objectives for fund assets are: to achieve over the life of the plans a return equal to the plans' expected investment return or the inflation rate plus 3%, whichever is greater, to invest assets in a manner such that contributions are minimized and future assets are available to fund liabilities, to maintain liquidity sufficient to pay benefits when due, and to diversify among asset classes so that assets earn a reasonable return with an acceptable level of risk. The plans employ several active managers with proven long-term records in their specific investment discipline. 161 Target allocations among asset categories and the fair value of each category of plan assets as of December 31, 2020 and 2019, classified by level within the fair value hierarchy are presented below. The plans will reallocate assets in accordance with the allocation targets, after giving consideration to the expected level of cash required to pay current benefits and plan expenses (dollars in millions): Target range Total Quoted prices in active markets for identical assets (Level 1) Significant observable inputs (Level 2) Significant unobservable inputs (Level 3) December 31, 2020 Equities: 53 % to 69 % U.S. large cap 22 % to 28 % $ 151.9 $ — $ 151.9 $ — U.S. small cap 4 % to 10 % 48.1 — 48.1 — International all cap 21 % to 29 % 158.5 — 158.5 — International small cap 2 % to 8 % 37.0 — 37.0 — Real estate equities 0 % to 13 % 53.5 — 53.5 — Fixed income: 25 % to 35 % Aggregate 9 % to 19 % 74.3 — 74.3 — Core plus 9 % to 19 % 75.8 75.8 — — Cash and equivalents 0 % to 10 % 4.0 4.0 — — Group annuity contracts — — — — Total $ 603.1 $ 79.8 $ 523.3 $ — December 31, 2019 Equities: 53 % to 69 % U.S. large cap 22 % to 28 % $ 148.9 $ — $ 148.9 $ — U.S. small cap 4 % to 10 % 41.1 — 41.1 — International all cap 21 % to 29 % 152.4 — 152.4 — International small cap 2 % to 8 % 34.7 — 34.7 — Real estate equities 0 % to 13 % 54.9 — 54.9 — Fixed income: 25 % to 35 % Aggregate 9 % to 19 % 76.7 — 76.7 — Core plus 9 % to 19 % 77.6 77.6 — — Cash and equivalents 0 % to 10 % 6.5 6.5 — — Group annuity contracts 6.1 — 6.1 — Total $ 598.9 $ 84.1 $ 514.8 $ — Assets in the U.S. equities category include investments in common and preferred stocks (and equivalents such as American Depository Receipts and convertible bonds) and may be held through separate accounts, commingled funds or an institutional mutual fund. Assets in the international equities category include investments in a broad range of international equity securities, including both developed and emerging markets, and may be held through a commingled or institutional mutual fund. The real estate category includes investments in pooled and commingled funds whose objectives are diversified equity investments in income-producing properties. Each real estate fund is intended to provide broad exposure to the real estate market by property type, geographic location and size and may invest internationally. Securities in both the aggregate and core plus fixed income categories include U.S. government, corporate, mortgage- and asset-backed securities and Yankee bonds, and both categories target an average credit rating of “A” or better at all times. Individual securities in the aggregate fixed income category must be investment grade or above at the time of purchase, whereas securities in the core plus category may have a rating 162 of “B” or above. Additionally, the core plus category may invest in non-U.S. securities. Assets in the aggregate and core plus fixed income categories are held primarily through a commingled fund and an institutional mutual fund, respectively. Group annuity contracts are invested in a combination of equity, real estate, bond and other investments in connection with a pension plan in Norway. The following is a description of the valuation methodologies used for the pension plan assets as of December 31, 2020: • Fair values of all U.S. equity securities, the international all cap equity securities and aggregate fixed income securities categorized as Level 2 were held in commingled funds which were valued daily based on a net asset value. • Fair value of international small cap equity securities categorized as Level 2 were held in a limited partnership fund which was valued monthly based on a net asset value. • The real estate equities categorized as Level 2 were held in two accounts (a commingled fund and a limited partnership). The assets in the commingled fund were valued monthly based on a net asset value and the assets in the limited partnership were valued quarterly based on a net asset value. • Cash and equivalents categorized as Level 1 were valued at cost, which approximates fair value. • Fair value of mutual fund investments in core plus fixed income securities categorized as Level 1 were based on quoted market prices which represent the net asset value of shares held. To develop the expected long-term rate of return on assets assumption, we considered the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the plans’ other asset classes and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based upon the current asset allocation to develop the expected long-term rate of return on assets assumption for the plans, which was 6.03 % at December 31, 2020 and 6.48 % at December 31, 2019. We currently expect to contribute approximately $ 39.8 million to our pension plans in 2021 and to directly pay other post-retirement benefits of approximately $ 1.4 million. Estimated future annual benefit payments from plan assets are presented below. Such amounts are based on existing benefit formulas and include the effect of future service (in millions): Pension Benefits Other Post-Retirement Benefits Year ended December 31, 2021 $ 44.5 $ 1.4 2022 44.2 1.3 2023 43.8 1.3 2024 43.4 1.2 2025 43.0 1.2 2026 through 2030 208.0 4.6 163 13. INCOME TAXES We generated losses of $ 51.0 million, profits of $ 39.0 million and losses of $ 115.1 million from continuing operations before income taxes in the U.S. and losses of $ 5.1 billion, $ 102.8 million and $ 423.8 million from continuing operations before income taxes in non-U.S. jurisdictions for the years ended December 31, 2020, 2019 and 2018, respectively. The following table summarizes components of our provision for income taxes from continuing operations for each of the years in the three-year period ended December 31, 2020 (in millions): 2020 2019 2018 Current income tax expense (benefit): U.S. $ ( 135.3 ) $ 31.3 $ ( 19.9 ) Non-U.S. ( 18.4 ) 73.2 52.9 ( 153.7 ) 104.5 33.0 Deferred income tax expense (benefit): U.S. ( 92.9 ) 19.7 52.9 Non-U.S. ( 12.8 ) 4.2 3.7 ( 105.7 ) 23.9 56.6 Total income tax expense (benefit) $ ( 259.4 ) $ 128.4 $ 89.6 U.S. Tax Reform and CARES Act The U.S. Tax Cuts and Jobs Act ("U.S. tax reform") was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law, effective January 1, 2018. Due to the timing of the enactment of U.S. tax reform and the complexity involved in applying its provisions, t he U.S. Treasury Department continued finalizing rules associated with U.S. tax reform during 2018 and 2019. During 2019, we recognized a tax expense of $ 13.8 million associated with final rules issued related to U.S. tax reform. During 2018, we recognized a tax benefit of $ 11.7 million associated with the one-time transition tax on deemed repatriation of the deferred foreign income of our U.S. subsidiaries. The U.S. Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted on March 27, 2020 and introduced various corporate tax relief measures into law. Among other things, the CARES Act allows net operating losses ("NOLs") generated in 2018, 2019 and 2020 to be carried back to each of the five preceding years. During 2020, we recognized a tax benefit of $ 122.1 million associated with the carryback of NOLs to recover taxes paid in prior years. 164 Deferred Taxes The following table summarizes significant components of deferred income tax assets and liabilities as of December 31, 2020 and 2019 (in millions): 2020 2019 Deferred tax assets : Net operating loss carryforwards $ 2,272.2 $ 1,546.7 Interest limitation carryforwards 221.2 41.5 Foreign tax credits 171.2 142.9 Premiums on long-term debt 115.7 — Employee benefits, including share-based compensation 81.6 73.9 Deferred revenue 1.3 .1 Net capital loss carryforwards — 998.0 Other 5.5 11.6 Total deferred tax assets 2,868.7 2,814.7 Valuation allowance ( 2,787.7 ) ( 2,588.7 ) Net deferred tax assets 81.0 226.0 Deferred tax liabilities : Property and equipment ( 40.9 ) ( 156.0 ) Net discounts on long-term debt — ( 49.5 ) Deferred U.S. tax on foreign income — ( 36.7 ) Other ( 11.2 ) ( 23.7 ) Total deferred tax liabilities ( 52.1 ) ( 265.9 ) Net deferred tax asset (liability) $ 28.9 $ ( 39.9 ) The realization of substantially all of our deferred tax assets is dependent upon generating sufficient taxable income during future periods in various jurisdictions in which we operate. Realization of certain of our deferred tax assets is not assured. We recognize a valuation allowance for deferred tax assets when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near-term if our estimates of future taxable income change. As of December 31, 2020, we had deferred tax assets of $ 2.3 billion relating to $ 9.7 billion of NOL carryforwards, $ 171.2 million for U.S. foreign tax credits (“FTCs”), and $ 221.2 million for U.S. and U.K. interest limitation carryforwards, which can be used to reduce our income taxes payable in future years. NOL carryforwards, which were generated in various jurisdictions worldwide, include $ 9.5 billion that do not expire and $ 223.0 million that will expire, if not utilized, between 2021 and 2040 . Deferred tax assets for NOL carryforwards at December 31, 2020 includes $ 1.4 billion and $ 687.3 million pertaining to NOL carryforwards in Luxembourg and the United States, respectively. The U.S. FTCs expire between 2021 and 2028 . Interest limitation carryforwards do not expire. Due to the uncertainty of realization, we have a $ 2.7 billion valuation allowance on deferred tax assets relating to NOL carryforwards, U.S. FTCs and interest limitation carryforwards. During 2019, we completed various restructuring transactions that generated substantial U.S. capital gains and losses. On October 8, 2020, we concluded a pre-filing agreement with the U.S. Internal Revenue Service involving the amount and characterization of a $ 5.6 billion loss incurred in connection with one of the restructuring transactions completed in 2019. As a result of this agreement, a $ 998.0 million deferred tax asset was recharacterized from a capital loss carryforward to a NOL carryforward in October 2020. 165 Effective Tax Rate Valaris plc, our parent company, is domiciled and resident in the U.K. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-U.K. subsidiaries is generally not subject to U.K. taxation. Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in profitability levels and changes in tax laws, our annual effective income tax rate may vary substantially from one reporting period to another. In periods of declining profitability, our income tax expense may not decline proportionally with income, which could result in higher effective income tax rates. Further, we will continue to incur income tax expense in periods in which we operate at a loss. Our consolidated effective income tax rate on continuing operations for each of the years in the three-year period ended December 31, 2020, differs from the U.K. statutory income tax rate as follows: 2020 2019 2018 U.K. statutory income tax rate 19.0 % 19.0 % 19.0 % Asset impairments ( 12.5 ) ( 31.0 ) ( 1.4 ) Non-U.K. taxes ( 2.8 ) ( 280.9 ) ( 18.0 ) U.S. tax reform and U.S. CARES Act 2.4 ( 21.6 ) 2.2 Valuation allowance ( 1.5 ) ( 145.1 ) ( 16.9 ) Restructuring transactions 1.3 7.9 1.7 Bargain purchase gain — 189.7 ( .2 ) Debt repurchases — 48.7 ( 1.6 ) Other ( .8 ) 12.0 ( 1.4 ) Effective income tax rate 5.1 % ( 201.3 ) % ( 16.6 ) % Our 2020 consolidated effective income tax rate includes a $ 322.4 million tax benefit associated with the impact of various discrete tax items, including restructuring transactions, impairments of rigs and other assets, implementation of the U.S. CARES Act, changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, rig sales, reorganization items and the resolution of other prior period tax matters. Our 2019 consolidated effective income tax rate includes $ 2.3 million associated with the impact of various discrete tax items, including $ 28.3 million of tax expense associated with final rules related to U.S. tax reform, gains on repurchase of debt and settlement proceeds, partially offset by $ 26.0 million of tax benefit related to restructuring transactions, changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years and other resolutions of prior year tax matters and rig sales. Our 2018 consolidated effective income tax includes the impact of various discrete tax items, including $ 46.0 million of tax benefit associated with the utilization of foreign tax credits subject to a valuation allowance, the transition tax on deemed repatriation of the deferred foreign income of our U.S. subsidiaries and a restructuring transaction, partially offset by $ 21.0 million of tax expense related to recovery of certain costs associated with an ongoing legal matter, repurchase and redemption of senior notes, unrecognized tax benefits associated with tax positions taken in prior years and rig sales. 166 Excluding the impact of the aforementioned discrete tax items, our consolidated effective income tax rates for the years ended December 31, 2020, 2019 and 2018 were ( 7.6 )%, ( 14.6 )% and ( 24.8 )%. The changes in our consolidated effective income tax rate, excluding discrete tax items, during the three-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions. As discussed in " Note 8 - Debt", on February 3, 2020, Rowan and RCI transferred substantially all their assets and liabilities to Valaris plc and Valaris plc became the obligor on the 4.875 % 2022 Notes, 2042 Notes, 7.375 % 2025 Notes, 4.75 % 2024 Notes and 5.85 % 2044 Notes. We recognized a tax benefit of $ 66.0 million during the year ended December 31, 2020 in connection with this transaction. Unrecognized Tax Benefits Our tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest amount of tax benefit that is greater than 50 % likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of December 31, 2020, we had $ 237.7 million of unrecognized tax benefits, of which $ 213.0 million was included in other liabilities on our consolidated balance sheet, $ 20.7 million, which is associated with a tax position taken in tax years with NOL carryforwards, was presented as a reduction of deferred tax assets and $ 4.0 million was presented as a reduction of long-term income tax receivable. As of December 31, 2019, we had $ 296.7 million of unrecognized tax benefits, of which $ 264.2 million was included in other liabilities on our consolidated balance sheet and the remaining $ 32.5 million, which is associated with a tax position taken in tax years with NOL carryforwards, was presented as a reduction of deferred tax assets. If recognized, $ 206.2 million of the $ 237.7 million unrecognized tax benefits as of December 31, 2020 would impact our consolidated effective income tax rate. A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2020 and 2019 is as follows (in millions): 2020 2019 Balance, beginning of year $ 296.7 $ 143.0 Decreases in unrecognized tax benefits as a result of tax positions taken during prior years ( 89.3 ) ( 2.4 ) Increase in unrecognized tax benefits as a result of tax positions taken during prior years 22.4 1.1 Lapse of applicable statutes of limitations ( 13.2 ) ( 4.4 ) Increases in unrecognized tax benefits as a result of tax positions taken during the current year 12.8 17.8 Impact of foreign currency exchange rates 9.0 ( .3 ) Settlements with taxing authorities ( .7 ) ( 8.0 ) Increases in unrecognized tax benefits as a result of the Rowan Transaction — 149.9 Balance, end of year $ 237.7 $ 296.7 Several of our rigs are owned by subsidiaries in Switzerland that are subject to a special finance taxation regime under Swiss income tax rules. Swiss federal and cantonal governments have enacted tax legislation (“Swiss tax reform”) effective January 1, 2020. Under Swiss tax reform, the finance taxation regime has been abolished but our Swiss subsidiaries will remain subject to the finance taxation regime through December 31, 2021 and transition to deriving income tax based on net income beginning January 1, 2022. There are various uncertainties relating to the application of Swiss tax reform to finance taxation regime taxpayers, the most prominent of which is the 167 determination of the Swiss tax basis of property and equipment. Based on all information currently available, we do not expect to recognize significant deferred tax assets or liabilities in connection with Swiss tax reform. As the Swiss tax authorities further clarify the application of Swiss tax reform to finance taxation regime taxpayers, we may recognize deferred tax adjustments and they may have a material effect on our consolidated financial statements. Accrued interest and penalties totaled $ 73.1 million and $ 58.9 million as of December 31, 2020 and 2019, respectively, and were included in other liabilities on our consolidated balance sheets. We recognized a net expense of $ 13.8 million, $ 5.7 million and $ 1.9 million associated with interest and penalties during the years ended December 31, 2020, 2019, and 2018 respectively. Interest and penalties are included in current income tax expense in our consolidated statements of operations. Three of our subsidiaries file U.S. tax returns and the tax returns of one or more of these subsidiaries is under exam for years 2009 to 2012 and for 2014 and subsequent years. None of these examinations are expected to have an impact on the Company's consolidated results of operations and cash flows. Tax years as early as 2005 remain subject to examination in the other major tax jurisdictions in which we operated. Statutes of limitations applicable to certain of our tax positions lapsed during 2020, 2019 and 2018, resulting in net income tax benefits, inclusive of interest and penalties, of $ 4.3 million, $ 5.3 million and $ 5.3 million, respectively. Absent the commencement of examinations by tax authorities, statutes of limitations applicable to certain of our tax positions will lapse during 2021. Therefore, it is reasonably possible that our unrecognized tax benefits will decline during the next 12 months by $ 2.3 million, inclusive of $ 1.0 million of accrued interest and penalties, all of which would impact our consolidated effective income tax rate if recognized. Recent Tax Assessments During 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately € 142.0 million (approximately $ 173.5 million converted using the current period-end exchange rates) related to tax years 2014, 2015 and 2016 for several of Rowan's Luxembourg subsidiaries. We recorded € 93.0 million (approximately $ 113.6 million converted using the current period-end exchange rates) in purchase accounting related to these assessments. During the first quarter of 2020, in connection with the administrative appeals process, the tax authority withdrew assessments of € 142.0 million (approximately $ 173.5 million converted using the current period-end exchange rates), accepting the associated tax returns as previously filed. Accordingly, we de-recognized previously accrued liabilities for uncertain tax positions and net wealth taxes of € 79.0 million (approximately $ 96.5 million converted using the current period-end exchange rates) and € 2.0 million (approximately $ 2.4 million converted using the current period-end exchange rates), respectively. The de-recognition of amounts related to these assessments was recognized as a tax benefit during the first quarter of 2020 and is included in changes in operating assets and liabilities on the consolidated statement of cash flows for the year-ended December 31, 2020. During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101 million (approximately $ 77.7 million converted at current period-end exchange rates) plus interest related to the examination of certain of our tax returns for the years 2011 through 2016. During the third quarter of 2019, we made a A$ 42 million payment (approximately $ 29 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment. We have a $ 17.9 million liability for unrecognized tax benefits relating to these assessments as of December 31, 2020. We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments. Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows. 168 Undistributed Earnings Dividend income received by Valaris plc from its subsidiaries is exempt from U.K. taxation. We do not provide deferred taxes on undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely. As of December 31, 2020, the aggregate undistributed earnings of the subsidiaries for which we maintain a policy and intention to reinvest earnings indefinitely totaled $ 268.0 million. Should we make a distribution from these subsidiaries in the form of dividends or otherwise, we would be subject to additional income taxes. The unrecognized deferred tax liability related to these undistributed earnings was not practicable to estimate as of December 31, 2020. 14. COMMITMENTS AND CONTINGENCIES Capital Commitments The following table summarizes the timing of our remaining current contractual commitments for VALARIS DS-13 and VALARIS DS-14, which were under construction as of December 31, 2020 (in millions): 2021 2022 Thereafter Total (1) VALARIS DS-13 $ 83.9 $ — $ — $ 83.9 VALARIS DS-14 — 165.0 — 165.0 $ 83.9 $ 165.0 $ — $ 248.9 (1) Total commitments are based on fixed-price shipyard construction contracts, exclusive of our internal costs associated with project management, commissioning and systems integration testing. Total commitments also exclude holding costs and interest. As of December 31, 2020, the contractual delivery dates for the VALARIS DS-13 and VALARIS DS-14 were September 30, 2021 and June 30, 2022, respectively. The remaining milestone payments for VALARIS DS-13 and VALARIS DS-14 are included in the table above in the period in which they were contractually owed. The Amended RSA provides that on or before the effective date of the reorganization, the construction contracts for these rigs shall be rejected under Section 365 of the Bankruptcy Code, unless otherwise agreed between the shipyard and the Company with the consent of required Consenting Noteholders. If rejected, it is contemplated that we would have to pay an amount equal to the liquidation recovery, which is the amount the contract counterparty would be entitled to receive or retain if the applicable Company entity was liquidated under chapter 7 of the Bankruptcy Code. Prior to December 31, 2020, a Stipulation was filed with the Bankruptcy Court which included an Assumption Term Sheet stating amended terms of these construction agreements. Following further negotiations, we entered into amended agreements with the shipyard on February 26, 2021 that become effective upon our emergence from bankruptcy. The amendments provide for, among other things, an option construct whereby the Company has the right, but not the obligation, to take delivery of either or both rigs on or before December 31, 2023. Under the amended agreements, the purchase price for the rigs are estimated to be approximately $ 119.1 million for the VALARIS DS-13 and $ 218.3 million for the VALARIS DS-14, assuming a December 31, 2023 delivery date. Delivery can be requested any time prior to December 31, 2023 with a downward purchase price adjustment based on predetermined terms. If the Company elects not to purchase the rigs, the Company has no further obligations to the shipyard. The amended agreements remove any Company guarantee. Angola Non-Drilling Event In March 2020, VALARIS DS-8 experienced a non-drilling incident while operating offshore Angola, resulting in the blowout preventer (BOP) stack being disconnected from the riser while the rig was moving between well locations. The BOP stack, which we later recovered, dropped to the seabed floor, clear of any subsea 169 structures. No injuries, environmental pollution or third-party damage resulted from the BOP stack being disconnected. As a result of the incident, the operator terminated the contract. The termination resulted in a decline in our contracted revenue backlog of approximately $ 150 million. We carried loss of hire insurance covering $ 602,500 per day, after a 45-day deductible waiting period, through the end of the contract in November 2020. The waiting period expired on April 22, 2020. We received loss of hire insurance recoveries of $ 118.1 million, which represents the total amount owed to us under the applicable insurance policy. The recovery was recognized and recorded in Other Operating Income on our Consolidated Statements of Operations in the year ended December 31, 2020. Indonesian Well-Control Event In July 2019, a well being drilled offshore Indonesia by one of our jackup rigs experienced a well-control event requiring the cessation of drilling activities. In February 2020, the rig resumed operations. Indonesian authorities initiated an investigation into the event and have contacted the customer, us and other parties involved in drilling the well for additional information. We are cooperating with the Indonesian authorities. We cannot predict the scope or ultimate outcome of this investigation. If the Indonesian authorities determine that we violated local laws in connection with this matter, we could be subject to penalties including environmental or other liabilities, which may have a material adverse impact on us. Middle East Dispute On July 30, 2019, we received notice that a local partner of legacy Ensco plc in the Middle East filed a lawsuit in the U.K. against the Company alleging it induced the breach of a non-compete provision in an agreement between the local partner and a subsidiary of the Company. The lawsuit included a claim for an unspecified amount of damages in excess of £ 100 million and other relief. We reached an agreement to settle this matter and to acquire the local partner's interest in the subsidiary for an aggregate amount of $ 27.5 million, which was paid in April 2020. Of this amount, we concluded that $ 20.3 million was attributable to the settlement of the dispute and was recognized as a loss included in other, net, in our consolidated statement of operations for the year ended December 31, 2019. The remaining amount is attributable to the acquisition of the local partner's interest in the subsidiary and was recognized in 2020 as an adjustment to Additional paid-in-capital and is included on our Consolidated Balance Sheet as of December 31, 2020. ARO Funding Obligations Valaris and Saudi Aramco have agreed to take all steps necessary to ensure that ARO purchases 20 newbuild jackup rigs ratably over an approximate 10 -year period. In January 2020, ARO ordered the first two newbuild jackups for delivery scheduled in 2022. The partners intend for the newbuild jackup rigs to be financed out of available cash from ARO's operations and/or funds available from third-party debt financing. ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020. In the event ARO has insufficient cash from operations or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $ 1.25 billion from each partner to fund the newbuild program. The Company's capital contributions to ARO pursuant to this requirement may require approval of the Bankruptcy Court during the Chapter 11 Cases. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, on a proportionate basis. The partners agreed that Saudi Aramco, as a customer, will provide drilling contracts to ARO in connection with the acquisition of the newbuild rigs. The initial contracts for each newbuild rig will be determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism. 170 Other Matters In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows. In the ordinary course of business with customers and others, we have entered into letters of credit to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit outstanding as of December 31, 2020 totaled $ 115.1 million and are issued under facilities provided by various banks and other financial institutions. Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirement. As of December 31, 2020, we had insignificant collateral deposits with respect to these agreements. 15. LEASES We have operating leases for office space, facilities, equipment, employee housing and certain rig berthing facilities. For all asset classes, except office space, we account for the lease component and the non-lease component as a single lease component. Our leases have remaining lease terms of less than one year to 10 years, some of which include options to extend. We evaluate the carrying value of our right-of-use assets on a periodic basis to identify events or changes in circumstances, such as lease abandonment, that indicate that the carrying value of such right-of-use assets may be impaired. During the year ended December 31, 2019, we recorded lease impairments of $ 5.6 million related to the impairment of the right-of-use assets associated with an office space and a leased yard facility that were abandoned due to the consolidation of certain corporate offices and leased facilities. On October 28, 2020, the Bankruptcy Court approved the rejection of certain unexpired office leases and related subleases. The various lease rejections were effective as of September 30, 2020 and October 31, 2020. During the fourth quarter, we recorded an estimated allowed claim of $ 4.4 million and recognized an expense in Reorganization items, net on our Consolidated Statement of Operations for the Year ended December 31, 2020. The estimated claim has not yet been settled or paid as of December 31, 2020. Also, in connection with the office lease rejections, as of the Bankruptcy Court approved effective dates above, we reduced our right-of-use asset by a total of $ 10.5 million and lease liability by a total of $ 20.4 million and recognized a net gain in Reorganization items of $ 9.8 million which includes the write off of associated leasehold improvements. Additionally, in connection with the lease rejections, we amended the terms of the lease for our corporate headquarters in Houston, Texas. The amendment reduced the associated right-of-use asset by $ 6.4 million and lease liability by $ 10.4 million and we recognized a net gain in Reorganization items of $ 1.7 million which includes the write-off of associated leasehold improvements. The components of lease expense during the years ended December 31, 2020 and 2019 are as follows (in millions): 2020 2019 Long-term operating lease cost $ 23.3 $ 29.5 Short-term operating lease cost 19.2 12.2 Sublease income ( 2.3 ) ( 2.4 ) Total operating lease cost $ 40.2 $ 39.3 171 We are obligated under leases for certain of our offices and equipment. Rental expense relating to operating leases was $ 40.1 million during the year ended December 31, 2018. Supplemental balance sheet information related to our operating leases is as follows (in millions, except lease term and discount rate) as of December 31, 2020 and 2019: 2020 2019 Operating lease right-of-use assets $ 35.8 $ 58.1 Current lease liability $ 15.7 $ 21.1 Long-term lease liability 21.6 51.8 Total operating lease liabilities $ 37.3 $ 72.9 Weighted-average remaining lease term (in years) 4.3 5.1 Weighted-average discount rate (1) 8.24 % 8.23 % (1) Represents our estimated incremental borrowing cost on a secured basis for similar terms as the underlying leases. For the years ended December 31, 2020 and 2019, cash paid for amounts included in the measurement of our operating lease liabilities were $ 23.5 million and $ 29.9 million, respectively. Maturities of lease liabilities as of December 31, 2020 were as follows (in millions): 2021 $ 17.8 2022 12.0 2023 3.0 2024 2.2 2025 2.0 Thereafter 9.0 Total lease payments $ 46.0 Less imputed interest 8.7 Total $ 37.3 16. SEGMENT INFORMATION Our business consists of four operating segments: (1) Floaters, which includes 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. General and administrative expense and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items." Substantially all of the expenses incurred associated with our Transition Services Agreement are included in general and administrative under "Reconciling Items" in the table set forth below. We measure segment assets as property and equipment. 172 The full operating results included below for ARO (representing only results of ARO from the closing date of the Rowan Transaction) are not included within our consolidated results and thus deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See " Note 5 - Equity Method Investment in ARO" for additional information on ARO and related arrangements. Segment information for each of the years in the three-year period ended December 31, 2020 is presented below (in millions). Year Ended December 31, 2020 Floaters Jackups ARO Other Reconciling Items Consolidated Total Revenues $ 505.8 $ 765.3 $ 549.4 $ 156.1 $ ( 549.4 ) $ 1,427.2 Operating expenses Contract drilling (exclusive of depreciation) 633.9 733.3 388.2 91.4 ( 388.2 ) 1,458.6 Loss on impairment 3,386.2 254.3 — 5.7 — 3,646.2 Depreciation 262.8 217.2 54.8 44.8 ( 38.8 ) 540.8 General and administrative — — 24.2 — 190.4 214.6 Other operating income 118.1 — — — — 118.1 Equity in losses of ARO — — — — ( 7.8 ) ( 7.8 ) Operating income (loss) $ ( 3,659.0 ) $ ( 439.5 ) $ 82.2 $ 14.2 $ ( 320.6 ) $ ( 4,322.7 ) Property and equipment, net $ 6,413.4 $ 3,912.6 $ 736.2 $ 577.9 $ ( 679.6 ) $ 10,960.5 Capital expenditures $ 25.1 $ 58.9 $ 136.1 $ — $ ( 126.3 ) $ 93.8 Year Ended December 31, 2019 Floaters Jackups ARO Other Reconciling Items Consolidated Total Revenues $ 1,014.4 $ 834.6 $ 410.5 $ 204.2 $ ( 410.5 ) $ 2,053.2 Operating expenses Contract drilling (exclusive of depreciation) 898.6 788.9 280.2 118.5 ( 280.2 ) 1,806.0 Loss on impairment 88.2 10.2 — — 5.6 104.0 Depreciation 362.3 203.3 40.3 25.5 ( 21.7 ) 609.7 General and administrative — — 27.1 — 161.8 188.9 Equity in losses of ARO — — — — ( 12.6 ) ( 12.6 ) Operating income (loss) $ ( 334.7 ) $ ( 167.8 ) $ 62.9 $ 60.2 $ ( 288.6 ) $ ( 668.0 ) Property and equipment, net $ 10,073.1 $ 4,322.7 $ 650.7 $ 620.9 $ ( 570.5 ) $ 15,096.9 Capital expenditures $ 31.4 $ 184.6 $ 27.5 $ — $ ( 16.5 ) $ 227.0 173 Year Ended December 31, 2018 Floaters Jackups ARO Other Reconciling Items Consolidated Total Revenues $ 1,013.5 $ 630.9 $ — $ 61.0 $ — $ 1,705.4 Operating expenses Contract drilling (exclusive of depreciation) 737.4 526.5 — 55.5 — 1,319.4 Loss on impairment — 40.3 — — — 40.3 Depreciation 311.8 153.3 — — 13.8 478.9 General and administrative — — — — 102.7 102.7 Operating income (loss) $ ( 35.7 ) $ ( 89.2 ) $ — $ 5.5 $ ( 116.5 ) $ ( 235.9 ) Property and equipment, net $ 9,465.6 $ 3,114.1 $ — $ — $ 36.5 $ 12,616.2 Capital expenditures $ 105.5 $ 317.7 $ — $ — $ 3.5 $ 426.7 Information about Geographic Areas As of December 31, 2020, our Floaters segment consisted of 11 drillships, four dynamically positioned semisubmersible rigs and one moored semisubmersible rig deployed in various locations. Our Jackups segment consisted of 36 jackup rigs which were deployed in various locations and our Other segment consisted of nine jackup rigs which are leased to our 50/50 joint venture with Saudi Aramco. As of December 31, 2020, the geographic distribution of our and ARO's drilling rigs was as follows: Floaters Jackups Other Total Valaris ARO North & South America 5 6 — 11 — Europe & the Mediterranean 7 16 — 23 — Middle East & Africa 2 8 9 19 7 Asia & Pacific Rim 2 6 — 8 — Total 16 36 9 61 7 We provide management services on two rigs owned by third-parties not included in the table above. We are a party to contracts for the construction of two drillships in South Korea, VALARIS DS-13 and VALARIS DS-14, that are not included in the table above. ARO has ordered two newbuild jackups which are under construction in the Middle East that are not included in the table above. For purposes of our long-lived asset geographic disclosure, we attribute assets to the geographic location of the drilling rig or operating lease, in the case of our right- of-use assets, as of the end of the applicable year. For new construction projects, assets are attributed to the location of future operation if known or to the location of construction if the ultimate location of operation is undetermined. 174 Information by country for those countries that account for more than 10% of our long-lived assets as well as the United Kingdom, our country of domicile, was as follows (in millions): Long-lived Assets 2020 2019 2018 United Kingdom $ 2,584.0 $ 1,210.5 $ 1,185.2 Spain 2,122.6 3,012.4 2,306.6 United States 1,811.9 2,972.4 2,270.0 Saudi Arabia 1,183.7 1,259.3 668.6 Nigeria 766.2 788.4 1,368.2 Other countries (1) 2,527.9 5,912.0 4,817.6 Total $ 10,996.3 $ 15,155.0 $ 12,616.2 (1) Other countries includes countries where individually we had long-lived assets representing less than 10% of total long-lived assets 17. SUPPLEMENTAL FINANCIAL INFORMATION Consolidated Balance Sheet Information Accounts receivable, net, as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Trade $ 260.1 $ 466.4 Income tax receivables 190.6 39.3 Other 14.7 21.0 465.4 526.7 Allowance for doubtful accounts ( 16.2 ) ( 6.0 ) $ 449.2 $ 520.7 Other current assets as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Materials and supplies $ 279.4 $ 340.1 Prepaid expenses 43.4 13.5 Prepaid taxes 32.9 36.2 Deferred costs 17.4 23.3 Other 24.8 33.4 $ 397.9 $ 446.5 175 Other assets as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Tax receivables $ 66.8 $ 36.3 Deferred tax assets 21.9 26.6 Right-of-use assets 35.8 58.1 Supplemental executive retirement plan assets 22.6 26.0 Intangible assets 2.4 11.9 Other 26.7 29.4 $ 176.2 $ 188.3 Accrued liabilities and other as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Personnel costs $ 95.6 $ 134.4 Deferred revenue 57.6 30.0 Income and other taxes payable 50.8 61.2 Lease liabilities 15.7 21.1 Accrued interest — 115.2 Settlement of legal dispute — 20.3 Other 30.7 35.5 $ 250.4 $ 417.7 Other liabilities as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Pension and other post-retirement benefits $ 296.6 $ 246.7 Unrecognized tax benefits (inclusive of interest and penalties) 286.1 323.1 Intangible liabilities 50.4 52.1 Supplemental executive retirement plan liabilities 22.9 26.7 Lease liabilities 21.6 51.8 Deferred revenue 14.3 9.7 Deferred tax liabilities 13.7 99.0 Personnel costs 11.8 24.5 Other 45.0 33.8 $ 762.4 $ 867.4 Accumulated other comprehensive income (loss) as of December 31, 2020 and 2019 consisted of the following (in millions): 2020 2019 Pension and other post-retirement benefits $ ( 98.2 ) $ ( 21.7 ) Currency translation adjustment 6.5 7.1 Derivative instruments 5.6 22.6 Other ( 1.8 ) ( 1.8 ) $ ( 87.9 ) $ 6.2 176 Consolidated Statement of Operations Information Repair and maintenance expense related to continuing operations for each of the years in the three-year period ended December 31, 2020 was as follows (in millions): 2020 2019 2018 Repair and maintenance expense $ 200.4 $ 303.7 $ 198.4 Other, net, for each of the years in the three-year period ended December 31, 2020 consisted of the following (in millions): 2020 2019 2018 Net periodic pension (cost) income, excluding service cost $ 14.6 $ 5.8 $ — Currency transaction adjustments ( 11.0 ) ( 7.4 ) ( 17.2 ) Gain on bargain purchase and measurement period adjustments ( 6.3 ) 637.0 1.8 Gain (loss) on extinguishment of debt 3.1 194.1 ( 19.0 ) SHI settlement — 200.0 — Settlement of legal dispute — ( 20.3 ) — Other income (expense) 3.8 ( 4.8 ) ( .4 ) $ 4.2 $ 1,004.4 $ ( 34.8 ) Consolidated Statement of Cash Flows Information Net cash used in operating activities of continuing operations attributable to the net change in operating assets and liabilities for each of the years in the three-year period ended December 31, 2020 was as follows (in millions): 2020 2019 2018 (Increase) decrease in accounts receivable $ 53.3 $ 29.5 $ ( 6.2 ) Increase in other assets ( 63.8 ) ( 56.6 ) ( 17.3 ) Increase (decrease) in liabilities ( 11.5 ) ( 25.4 ) 2.7 $ ( 22.0 ) $ ( 52.5 ) $ ( 20.8 ) During 2020, our business contracted due to decline in oil prices and impact of the COVID-19 pandemic, resulting in negative cash flows from operating assets and liabilities. During 2019, we experienced moderate improvements in fleet utilization coupled with the Rowan Transaction that resulted in negative cash flows from changes in operating assets and liabilities. During 2018, our business contracted at a more moderate pace, resulting in modest negative cash flows from the net change in operating assets and liabilities. Cash paid for interest and income taxes for each of the years in the three-year period ended December 31, 2020 was as follows (in millions): 2020 2019 2018 Interest, net of amounts capitalized $ 190.0 $ 410.0 $ 232.6 Income taxes 78.9 107.6 58.4 Capitalized interest totaled $ 1.3 million, $ 20.9 million and $ 62.6 million during the years ended December 31, 2020, 2019 and 2018, respectively. Capital expenditure accruals totaling $ 5.4 million, $ 16.3 million and $ 27.8 million for the years ended December 31, 2020, 2019 and 2018, respectively, were excluded from investing activities in our consolidated statements of cash flows. 177 For information related to cash paid for Reorganization Items, see "Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern". Amortization, net, includes amortization of deferred mobilization revenues and costs, deferred capital upgrade revenues, intangible amortization and other amortization. Other includes non-cash impress inventory expense, bad debt expense, pension and other postretirement benefits income/expense, gain/loss on asset disposals and other items. Concentration of Risk We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents, investments and previously our use of derivatives in connection with the management of foreign currency exchange rate risk. We mitigate our credit risk relating to receivables from customers, which consist primarily of major international, government-owned and independent oil and gas companies, by performing ongoing credit evaluations. We also maintain reserves for potential credit losses, which generally have been within our expectations. We mitigate our credit risk relating to cash and investments by focusing on diversification and quality of instruments. We mitigated our credit risk relating to counterparties of our previous derivatives through a variety of techniques, including transacting with multiple, high-quality financial institutions, thereby limiting our exposure to individual counterparties and by entering into International Swaps and Derivatives Association, Inc. ("ISDA") Master Agreements, which included provisions for a legally enforceable master netting agreement, with our derivative counterparties. The terms of the ISDA agreements may also have included credit support requirements, cross default provisions, termination events or set-off provisions. Legally enforceable master netting agreements reduce credit risk by providing protection in bankruptcy in certain circumstances and generally permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events. See " Note 9 - Derivative Instruments" for additional information on our derivative activity and the impact of the Chapter 11 Cases. Consolidated revenues by customer for the years ended December 31, 2020, 2019 and 2018 were as follows: 2020 2019 2018 BP (1) 11 % 9 % 7 % Saudi Aramco (2) 9 % 7 % 11 % Total (3) 8 % 16 % 15 % Other 72 % 68 % 67 % 100 % 100 % 100 % (1) For the year ended December 31, 2020, 30 % of the revenues provided by BP were attributable to our Floaters segment, 19 % were attributable to our Jackups segment, and 51 % of the revenues were attributable to our managed rigs. For the year ended December 31, 2019, 41 % of the revenues provided by BP were attributable to our Jackups segment, 16 % of the revenues were attributable to our Floaters segment and 43 % of the revenues were attributable to our managed rigs. For the year ended December 31, 2018, 27 % of the revenues provided by BP were attributable to our Floaters segment, 20 % of the revenues were attributable to our Jackups segment, and 53 % of the revenues were attributable to our managed rigs. (2) For the years ended December 31, 2020, 2019 and 2018, all Saudi Aramco revenues were attributable to the Jackup segment. 178 (3) For the years ended December 31, 2020 and 2019, 71 % and 93 % of the revenues provided by Total were attributable to the Floaters segment and the remainder was attributable to the Jackup segment. During the year ended December 31, 2018, all the revenues provided by Total were attributable to the Floater segment. For purposes of our geographic disclosure, we attribute revenues to the geographic location where such revenues are earned. Consolidated revenues by region, including the United Kingdom, our country of domicile, for the years ended December 31, 2020, 2019 and 2018 were as follows (in millions): 2020 2019 2018 U.S. Gulf of Mexico (1) $ 241.4 $ 301.0 $ 214.7 United Kingdom (2) 211.3 213.1 192.6 Saudi Arabia (3) 200.8 313.4 182.2 Norway (2) 188.5 39.2 — Australia (4) 117.9 204.2 283.9 Angola (5) 86.3 284.0 285.7 Other 381.0 698.3 546.3 $ 1,427.2 $ 2,053.2 $ 1,705.4 (1) For the years ended December 31, 2020, 2019 and 2018, 55 %, 46 % and 30 % of the revenues earned in the U.S. Gulf of Mexico, respectively, were attributable to our Floaters segment, 11 %, 28 % and 42 % of the revenues were attributable to our Jackups segment, respectively, and the remaining revenues were attributable to our managed rigs, respectively. (2) For the years ended December 31, 2020, 2019 and 2018, all revenues earned in the United Kingdom and Norway were attributable to our Jackups segment. (3) For the years ended December 31, 2020 and 2019, 63 % and 65 % of the revenues earned in Saudi Arabia, were attributable to our Jackups segment. The remaining revenues were attributable to our Other segment and related to our rigs leased to ARO and certain revenues related to our Secondment Agreement and Transition Services Agreement. For the year ended December 31, 2018, all revenues earned were attributable to our Jackup segment. (4) For the years ended December 31, 2020, 2019 and 2018, 91 %, 90 % and 92 % of the revenues earned in Australia, respectively, were attributable to our Floaters segment and the remaining revenues were attributable to our Jackups segment. (5) For the years ended December 31, 2020, 2019 and 2018, 84 %, 87 % and 86 % of the revenues earned in Angola, respectively, were attributable to our Floaters segment and the remaining revenues were attributable to our Jackups segment. 179 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.