What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-21 compared with 2022-02-22 · 575 added, 924 removed, 1345 unchanged (53% of the section changed)

6 unchanged sentences

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 Interim 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).

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, 2022 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.

6 unchanged sentences

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Valaris Limited and subsidiaries (the Company) as of December 31, 2021 (Successor) and 2020 (Predecessor), the related consolidated statements of operations, comprehensive loss, and cash flows for the periods from May 1, 2021 to December 31, 2021 (Successor period) and from January 1, 2021 to April 30, 2021 and for each of the years in the two-year period ended December 31, 2020 (Predecessor periods), 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, 2021 (Successor) and 2020(Predecessor), and the results of its operations and its cash flows for the Successor and Predecessor periods, in conformity with U.S.

We have audited the accompanying consolidated balance sheets of Valaris Limited and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), and cash flows for the year ended December 31, 2022 and for the period from May 1, 2021 to December 31, 2021 (Successor periods) and for the period from January 1, 2021 to April 30, 2021, and the year ended December 31, 2020 (Predecessor periods), 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, 2022 and 2021, and the results of its operations and its cash flows for Successor and Predecessor periods, in conformity with U.S.

generally accepted accounting principles.

2 unchanged sentences

As discussed in Note 1 to the consolidated financial statements, on March 3, 2021, the Bankruptcy Court for the Southern District of Texas entered an order confirming the Company’s plan for reorganization under Chapter 11, which became effective on April 30, 2021.

Accordingly, the accompanying consolidated financial statements as of December 31, 2021 and for the Successor period have been prepared in conformity with Accounting Standards Codification 852, Reorganization, with the Company's assets, liabilities, and capital structure having carrying amounts not comparable with prior periods.

Accordingly, the accompanying consolidated financial statements as of December 31, 2022 and 2021 and for the Successor periods have been prepared in conformity with Accounting Standards Codification 852, Reorganization, with the Company’s assets, liabilities, and capital structure having carrying amounts not comparable to prior years.

Basis for Opinion

9 unchanged sentences

We believe that our audits provide a reasonable basis for our opinion.

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.

Valuation of drilling rigs upon emergence from bankruptcy

As disclosed in Note 3 to the consolidated financial statements, on April 30, 2021, the Company satisfied all conditions to effect its Plan of Reorganization and emerged from Chapter 11 bankruptcy.

In connection with its emergence and in accordance with ASC 852, the Company qualified for and applied fresh start accounting.

The Company involved third-party valuation advisors to assist with the valuation process of certain assets valued in fresh start.

The Company's principal assets are its property and equipment, which is primarily comprised of the drilling rigs.

As part of fresh start accounting, management recorded property, plant and equipment of $909.1 million, a portion of which related to the drilling rigs.

The valuation of the Company's drilling rigs was estimated using an income approach or estimated sales price.

We identified the valuation of the Company's drilling rigs upon emergence from bankruptcy as a critical audit matter.

A higher degree of subjective auditor judgment was required to evaluate the methodology used in the application of the adjustment to reconcile the fair value of the drilling rigs to the reorganization value and certain assumptions used in the Company's determination of fair value of its drilling rigs using the income approach.

Specifically, future day rates and utilization associated with rig stacking assumptions were based on unobservable inputs for which there was limited information.

In addition, the audit effort involved the use of professionals with 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 emergence date valuation process.

This included controls related to management's valuation methodology and the application of fresh start accounting, including application of the adjustment to reconcile the fair value of the drilling rigs to the reorganization value, and controls related to the development of the future day rates and utilization associated with rig stacking assumptions used in the valuation of the drilling rigs.

We evaluated the reasonableness of the future day rates used in the income approach by comparing them to contractual agreements with consideration of the current industry environment and economic trends, including third-party forecasted oil prices and demand curves.

We evaluated the reasonableness of the utilization associated with rig stacking assumptions by comparing the timing of scheduled rig reactivations to third-party demand and supply forecasts.

We involved valuation professionals with specialized skills and knowledge who assisted in evaluating the accuracy of management's model in applying the methodology used in the application of the adjustment to reconcile the valuation of the drilling rigs to the reorganization value.

We also involved professionals with specialized skills and knowledge who assisted in evaluating the appropriateness of the methodology used in the application of the adjustment to reconcile the valuation of the drilling rigs to the reorganization value.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relates 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 a critical audit matter 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 a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income tax positions pertaining to certain tax transactions

As discussed in Note 1 and 14 to the consolidated financial statements, the Company evaluates the income tax effect of certain transactions which often requires local country tax expertise and judgment.

As discussed in Note 1 and 13 to the consolidated financial statements, the Company evaluated 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.

5 unchanged sentences

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 tax positions had a greater than 50 percent likelihood of being sustained with taxing authorities.

We involved tax professionals with specialized skills and knowledge, who assisted on evaluating the Company’s interpretation of local tax laws and assessment of whether tax positions had a greater than 50 percent likelihood of being sustained with taxing authorities.

We have served as the Company’s auditor since 2002.

7 unchanged sentences

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022, 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, 2021 (Successor) and 2020 (Predecessor), the related consolidated statements of operations, comprehensive loss, and cash flows for the periods from May 1, 2021 to December 31, 2021 (Successor period) and from January 1, 2021 to April 30, 2021 and for each of the years in the two-year period ended December 31, 2020 (Predecessor periods), and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2022 expressed an unqualified opinion on those consolidated financial statements.

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, 2022 and 2021, the related consolidated statements of operations, comprehensive income (loss), and cash flows for the year ended December 31, 2022 and for the period from May 1, 2021 to December 31, 2021 (Successor periods) and for the period from January 1, 2021 to April 30, 2021, and the year ended December 21, 2020 (Predecessor periods), and the related notes (collectively, the consolidated financial statements), and our report dated February 21, 2023 expressed an unqualified opinion on those consolidated financial statements .

Basis for Opinion

21 unchanged sentences

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

OPERATING REVENUES $ 1,602.5 $ 835.0 $ 397.4 $ 1,427.2

7 unchanged sentences

EQUITY IN EARNINGS (LOSSES) OF ARO 24.5 6.1 3.1 ( 7.8 )

OPERATING LOSS ( 11.9 ) ( 890.1 ) ( 4,334.5 ) ( 669.8 )

OPERATING INCOME (LOSS) 37.2 ( 7.3 ) ( 890.1 ) ( 4,334.5 )

OTHER INCOME (EXPENSE)

10 unchanged sentences

43.1 36.4 16.2 ( 259.4 )

NET LOSS ( 29.2 ) ( 4,463.8 ) ( 4,857.6 ) ( 192.2 )

NET INCOME (LOSS) 181.8 ( 23.6 ) ( 4,463.8 ) ( 4,857.6 )

NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 5.3 ) ( 3.8 ) ( 3.2 ) 2.1

NET LOSS ATTRIBUTABLE TO VALARIS $ ( 33.0 ) $ ( 4,467.0 ) $ ( 4,855.5 ) $ ( 198.0 )

LOSS PER SHARE - BASIC AND DILUTED $ ( 0.44 ) $ ( 22.38 ) $ ( 24.42 ) $ ( 1.14 )

NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS $ 176.5 $ ( 27.4 ) $ ( 4,467.0 ) $ ( 4,855.5 )

EARNINGS (LOSS) PER SHARE

Basic $ 2.35 $ ( 0.37 ) $ ( 22.38 ) $ ( 24.42 )

Diluted $ 2.33 $ ( 0.37 ) $ ( 22.38 ) $ ( 24.42 )

WEIGHTED-AVERAGE SHARES OUTSTANDING

Basic and Diluted 75.0 199.6 198.9 173.4

Basic 75.1 75.0 199.6 198.9

Diluted 75.6 75.0 199.6 198.9

The accompanying notes are an integral part of these consolidated financial statements.

VALARIS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

NET LOSS $ ( 29.2 ) $ ( 4,463.8 ) $ ( 4,857.6 ) $ ( 192.2 )

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.

No income tax benefit was recognized during the eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor), and year ended December 31, 2020 (Predecessor).

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

NET INCOME (LOSS) $ 181.8 $ ( 23.6 ) $ ( 4,463.8 ) $ ( 4,857.6 )

OTHER COMPREHENSIVE INCOME (LOSS), NET

Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive income (loss).

23.8 ( 9.1 ) 0.1 ( 76.3 )

2 unchanged sentences

— — — ( 0.2 )

Reclassification of net (gains) losses on derivative instruments from other comprehensive loss into net loss — ( 5.6 ) ( 11.6 ) 8.3

Reclassification of net gains on derivative instruments from other comprehensive loss into net loss — — ( 5.6 ) ( 11.6 )

Other — — — ( 0.6 )

NET OTHER COMPREHENSIVE LOSS ( 9.1 ) ( 5.5 ) ( 94.1 ) ( 12.0 )

COMPREHENSIVE LOSS ( 38.3 ) ( 4,469.3 ) ( 4,951.7 ) ( 204.2 )

NET OTHER COMPREHENSIVE INCOME (LOSS) 23.8 ( 9.1 ) ( 5.5 ) ( 94.1 )

COMPREHENSIVE INCOME (LOSS) 205.6 ( 32.7 ) ( 4,469.3 ) ( 4,951.7 )

COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 5.3 ) ( 3.8 ) ( 3.2 ) 2.1

COMPREHENSIVE LOSS ATTRIBUTABLE TO VALARIS $ ( 42.1 ) $ ( 4,472.5 ) $ ( 4,949.6 ) $ ( 210.0 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS $ 200.3 $ ( 36.5 ) $ ( 4,472.5 ) $ ( 4,949.6 )

The accompanying notes are an integral part of these consolidated financial statements.

1 unchanged sentence

CONSOLIDATED BALANCE SHEETS

(in millions, except share and par value amounts)

Successor Predecessor

(in millions, except par value amounts)

December 31, 2022 December 31, 2021

19 unchanged sentences

OTHER LIABILITIES 515.6 558.4

Total liabilities not subject to compromise 1,548.4 1,189.2

LIABILITIES SUBJECT TO COMPROMISE — 7,313.7

Total liabilities 1,562.4 1,525.7

COMMITMENTS AND CONTINGENCIES

VALARIS SHAREHOLDERS' EQUITY

Predecessor Class A ordinary shares, U.S.

$ 0.40 par value, 206.1 million shares issued as of December 31, 2020

Predecessor Class B ordinary shares, £ 1 par value, 50,000 shares issued as of December 31, 2020

Successor common shares, $ 0.01 par value, 700 million shares authorized, 75 million shares issued as of December 31, 2021

Successor preference shares, $ 0.01 par value, 150 million shares authorized, no shares issued as of December 31, 2021

Successor stock warrants 16.4 —

Common shares, $ 0.01 par value, 700.0 shares authorized, 75.2 and 75.0 shares issued as of December 31, 2022 and 2021, respectively

Preference shares, $ 0.01 par value, 150.0 shares authorized, no shares issued as of December 31, 2022 and 2021

Stock warrants 16.4 16.4

Additional paid-in capital 1,097.9 1,083.0

Retained deficit ( 33.0 ) ( 4,183.8 )

Accumulated other comprehensive loss ( 9.1 ) ( 87.9 )

Predecessor Treasury shares, at cost, 6.6 million shares as of December 31, 2020

Retained earnings (deficit) 160.1 ( 16.4 )

Accumulated other comprehensive income (loss) 14.7 ( 9.1 )

Total Valaris shareholders' equity 1,289.9 1,074.7

7 unchanged sentences

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

OPERATING ACTIVITIES

Net loss $ ( 29.2 ) $ ( 4,463.8 ) $ ( 4,857.6 ) $ ( 192.2 )

Adjustments to reconcile net loss to net cash used in operating activities:

Depreciation expense 66.1 159.6 540.8 609.7

Deferred income tax expense (benefit) ( 21.3 ) ( 18.2 ) ( 105.7 ) 23.9

Net income (loss) $ 181.8 $ ( 23.6 ) $ ( 4,463.8 ) $ ( 4,857.6 )

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Gain on asset disposals ( 141.2 ) ( 21.2 ) ( 6.0 ) ( 11.8 )

Accretion of discount on shareholders note ( 20.8 ) — — —

Net periodic pension and retiree medical income ( 8.7 ) ( 5.4 ) ( 14.6 ) ( 4.3 )

Depreciation expense 91.2 66.1 159.6 540.8

Accretion of discount on notes receivable ( 44.9 ) ( 20.8 ) — —

Loss on impairment 34.5 — 756.5 3,646.2

Equity in losses (earnings) of ARO ( 24.5 ) ( 6.1 ) ( 3.1 ) 7.8

Share-based compensation expense 17.4 4.3 4.8 21.4

Net periodic pension and retiree medical income ( 16.4 ) ( 8.7 ) ( 5.4 ) ( 14.6 )

Amortization, net ( 9.0 ) 2.3 ( 4.8 ) 6.2

Debt discounts and other 0.5 — 36.8 31.5

Loss on Impairment — 756.5 3,646.2 104.0

Deferred income tax expense (benefit) 7.9 ( 21.3 ) ( 18.2 ) ( 105.7 )

Amortization of debt issuance cost 1.0 0.5 — 36.8

Adjustment to gain on bargain purchase — — — 6.3

Gain on debt extinguishment — — ( 3.1 ) ( 194.1 )

Debtor in possession financing fees and payments on Backstop Commitment Agreement — — — 40.0

1 unchanged sentence

Other ( 1.6 ) 0.3 7.3 30.2

Changes in operating assets and liabilities, net of acquisition 10.3 68.5 ( 22.0 ) ( 52.5 )

Changes in operating assets and liabilities 35.4 4.7 68.5 ( 22.0 )

Contributions to pension plans and other post-retirement benefits ( 4.1 ) ( 2.7 ) ( 22.5 ) ( 12.1 )

Net cash used in operating activities ( 26.2 ) ( 39.8 ) ( 251.7 ) ( 276.9 )

Net cash provided by (used in) operating activities 127.5 ( 26.2 ) ( 39.8 ) ( 251.7 )

INVESTING ACTIVITIES

Purchases of short-term investments ( 220.0 ) — — —

Maturities of short-term investments 220.0 — — —

Additions to property and equipment ( 207.0 ) ( 50.2 ) ( 8.7 ) ( 93.8 )

Net proceeds from disposition of assets 150.3 25.1 30.1 51.8

Rowan cash acquired — — — 931.9

Maturities of short-term investments — — — 474.0

Purchases of short-term investments — — — ( 145.0 )

Repayments of note receivable from ARO 40.0 — — —

Net cash provided by (used in) investing activities ( 16.7 ) ( 25.1 ) 21.4 ( 42.0 )

FINANCING ACTIVITIES

Consent solicitation fees ( 3.9 ) — — —

Payments for tax withholdings for share-based awards ( 2.5 ) — — —

Issuance of first lien notes — — 520.0 —

5 unchanged sentences

Purchase of noncontrolling interest — — — ( 7.2 )

Debt solicitation fees — — — ( 9.5 )

Cash dividends paid — — — ( 4.5 )

Other — — ( 1.4 ) ( 1.9 )

2 unchanged sentences

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 103.9 ( 51.4 ) 370.2 228.6

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF YEAR 696.0 325.8 97.2 275.1

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF YEAR $ 644.6 $ 696.0 $ 325.8 $ 97.2

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 644.6 696.0 325.8 97.2

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 748.5 $ 644.6 $ 696.0 $ 325.8

The accompanying notes are an integral part of these consolidated financial statements.

2 unchanged sentences

DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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 56 rigs, with drilling operations in almost every major offshore market across six continents.

Our rig fleet includes 11 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 40 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 14 countries.

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

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents.

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

We currently own 52 rigs, including 11 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 36 jackup rigs and a 50% equity interest in Saudi Aramco Rowan Offshore Drilling Company ("ARO"), our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional seven rigs.

We also have options to purchase two recently constructed drillships on or before December 31, 2023.

Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators.

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

The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Middle East, Africa and Asia Pacific.

We provide drilling services on a day rate contract basis.

17 unchanged sentences

See “ Note 2 – Chapter 11 Proceedings” and “ Note 3 - Fresh Start Accounting” for additional details regarding the Chapter 11 Cases and fresh start accounting.

Changes in Accounting Policies

Upon emergence from bankruptcy, we elected to change our accounting policies related to property and equipment as well as materials and supplies.

Prior to emergence from bankruptcy, we recorded our drilling rigs as a single asset with a useful life ascribed by the expected useful life of that asset.

Upon emergence, we have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.

Historically, we recognized materials and supplies on the balance sheet when purchased and subsequently expensed items when consumed.

Following emergence, materials and supplies will be expensed as a period cost when received.

Additionally, a customer arrangement provides that we take title to their materials and supplies for the duration of the contract and return or pay cash for them at the termination of the contract.

Together with our policy change on materials and supplies, we elected to record these assets and the obligation to our customer on a net basis as opposed to a gross basis.

Basis of Presentation

The Company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP").

The accompanying financial statements have been updated to reflect the correction of immaterial errors identified in the accounting for income and other taxes in periods prior to 2022.

We determined that our provision for income taxes should have been $ 10.7 million lower in prior periods as a result of the misapplication of accounting literature as well as the use of incorrect interest rates on late payments related to unrecognized tax benefits for a specific jurisdiction.

Also, $ 6.1 million of deferred tax assets should have been reduced with a corresponding reduction in our liability for unrecognized tax benefits as of December 31, 2021.

Further, our contract drilling expense should have been $ 4.6 million lower in the eight months ended December 31, 2021 due to the expiration of the statute of limitations on a non-income tax related matter.

Finally, we determined that certain loss carryback provisions of $ 1.3 million should have reduced our provision for income taxes for the year ended December 31, 2020.

To correct these errors, we reduced Other assets and Other liabilities by $ 6.1 million and $ 22.7 million, respectively, as of December 31, 2021, and Contract drilling expense and Provision for income taxes by $ 4.6 million and $ 1.0 million, respectively, for the eight months ended December 31, 2021.

A further adjustment of $ 11.0 million was recorded to reduce Retained deficit for the eight months ended December 31, 2021 to adjust for the cumulative effect of the errors to the Predecessor.

Accounting Policies

7 unchanged sentences

however, we are not the primary beneficiary and therefore do not consolidate ARO.

Reclassification

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.

The preparation of financial statements in conformity with 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.

8 unchanged sentences

dollar functional currency subsidiaries are included in Accumulated other comprehensive income on our Consolidated Balance Sheet.

Net foreign currency exchange gains were $ 8.1 million and $ 13.4 million, and were included in Other, net, in our Consolidated Statements of Operations for the eight months ended December 31, 2021 (Successor) and four months ended April 30, 2021 (Predecessor), respectively.

Net foreign currency exchange losses, inclusive of offsetting fair value derivatives were $ 11.0 million and $ 7.4 million, and were included in Other, net, in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor) and 2019 (Predecessor), respectively.

Net foreign currency exchange gains were $ 12.2 million, $ 8.1 million and $ 13.4 million, and were included in Other, net, in our Consolidated Statements of Operations for the year ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor) and four months ended April 30, 2021 (Predecessor), respectively.

Net foreign currency exchange losses, inclusive of offsetting fair value derivatives were $ 11.0 million, and were included in Other, net, in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor).

Cash Equivalents and Short-Term Investments

1 unchanged sentence

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, 2021 (Successor) and 2020 (Predecessor).

There were no short-term investments as of December 31, 2022 (Successor) and December 31, 2021 (Successor).

Cash flows from purchases and maturities of short-term investments were classified as investing activities in our Consolidated Statements of Cash Flows for the year ended December 31, 2022.

5 unchanged sentences

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 Other, net in our Consolidated Statements of Operations.

See "Changes in Accounting Policies" above for a discussion of the change in our accounting policy for property and equipment upon emergence from bankruptcy.

Upon emergence, we elected to change our accounting policies and have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.

Our property and equipment is depreciated on a straight-line basis, after allowing for salvage values, over the estimated useful lives of our assets.

4 unchanged sentences

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.

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 $ 756.5 million, $ 3.6 billion and $ 104.0 million, in the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), respectively.

We recorded pre-tax, non-cash impairment losses related to long-lived assets of $ 34.5 million, $ 756.5 million and $ 3.6 billion, in the year ended December 31, 2022 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.

See " Note 7 - Property and Equipment" for additional information on our impairment charges.

2 unchanged sentences

Derivative Instruments

We did not have any open derivative instruments as of December 31, 2021 (Successor) or 2020 (Predecessor).

We did not have any open derivative instruments as of December 31, 2022 (Successor) or 2021 (Successor).

However, we have historically used derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk.

39 unchanged sentences

For our performance awards that cliff vest and require the employee to render service through the vesting date, even though attainment of performance objectives might be earlier, our expense under the accelerated method would be a ratable expense over the vesting period.

Equity settled performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals.

Equity settled

performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals.

The estimated probable outcome of attainment of the specified performance goals is based primarily on relative performance over the requisite performance period.

19 unchanged sentences

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 Statements of Operations.

For the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), all income attributable to noncontrolling interest was from continuing operations.

Noncontrolling interests are classified as equity on our Consolidated Balance Sheet, and net (income) loss attributable to noncontrolling interests is presented separately in our Consolidated Statements of Operations.

For the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), all (income) loss attributable to noncontrolling interest was from continuing operations.

Cancellation of Predecessor Equity and Issuance of Warrants

On the Effective Date and pursuant to the plan of reorganization, the Legacy Valaris Class A ordinary shares were cancelled and all agreements, instruments and other documents evidencing, relating or otherwise connected with any of Legacy Valaris' equity interests outstanding prior to the Effective Date, including all equity-based awards, were also cancelled.

Also, in accordance with the plan of reorganization, the Company issued 5.6 million warrants (the "Warrants") to the former holders of Legacy Valaris' equity to purchase common shares of Valaris Limited with a nominal value of $ 0.01 per share (the "Common Shares").

The Warrants are exercisable for one Common Share per Warrant at an initial exercise price of $ 131.88 per Warrant, in each case as may be adjusted from time to time pursuant to the applicable warrant agreement.

The Warrants are exercisable for a period of seven years and will expire on April 29, 2028.

Earnings Per Share

Basic income (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period.

Basic earnings (loss) per share is computed by dividing net income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period.

Basic and diluted earnings per share ("EPS") for the Predecessor was calculated in accordance with the two-class method.

Predecessor net loss attributable to Legacy Valaris used in our computations of basic and diluted EPS was adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors.

Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and for the Successor includes the effect of all potentially dilutive warrants, restricted stock unit awards and performance stock unit awards and for the Predecessor includes the effect of all potentially dilutive stock options and excludes non-vested shares.

In the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), 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 our shares, or Legacy Valaris shares in the case of the Predecessor periods, used in our basic and diluted EPS computations (in millions).

Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and for the Successor includes the effect of all potentially dilutive stock equivalents, including warrants, restricted stock unit awards and performance stock unit awards and for the Predecessor included the effect of all potentially dilutive stock options and excluded non-vested shares.

The following table is a reconciliation of the weighted-average shares used in our basic and diluted EPS computations for the year ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor) (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Loss from continuing operations attributable to Valaris $ ( 33.0 ) $ ( 4,467.0 ) $ ( 4,855.5 ) $ ( 198.0 )

Income from continuing operations allocated to non-vested share awards (1)

— — — ( 0.1 )

Loss from continuing operations attributable to Valaris shares $ ( 33.0 ) $ ( 4,467.0 ) $ ( 4,855.5 ) $ ( 198.1 )

(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 600,000 , 300,000 , 400,000 and 300,000 for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), respectively, were excluded from the computation of diluted EPS.

The Predecessor previously had the 2024 Convertible Notes (as defined and more fully described in Note 9 "Debt") for which we had the option to settle in cash, shares or a combination thereof for the aggregate amount due upon conversion.

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Income (loss) from continuing operations attributable to our shares $ 176.5 $ ( 27.4 ) $ ( 4,467.0 ) $ ( 4,855.5 )

Weighted average shares outstanding:

Basic 75.1 75.0 199.6 198.9

Effect of stock equivalents 0.5 — — —

Diluted 75.6 75.0 199.6 198.9

Anti-dilutive share awards totaling 192,000 were excluded from the computation of diluted EPS for the year ended December 31, 2022 (Successor).

Due to the net loss position during the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), 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.

Anti-dilutive shares totaling 600,000 , 300,000 and 400,000 , for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively, were excluded from the computation of diluted EPS.

We have 5,470,970 Warrants outstanding as of December 31, 2022 (Successor) which are exercisable for one Common Share per Warrant at an initial exercise price of $ 131.88 per Warrant.

The exercise of these Warrants into Common Shares would have a dilutive effect to the holdings of Valaris Limited's existing shareholders.

These Warrants are anti-dilutive for all periods presented for the Successor.

The Predecessor previously had convertible senior notes due 2024 (the "2024 Convertible Notes") for which we had the option to settle in cash, shares or a combination thereof for the aggregate amount due upon conversion.

On the Effective Date, pursuant to the plan of reorganization, all outstanding obligations under the 2024 Convertible Notes were cancelled and the holders thereunder received the treatment as set forth in the plan of reorganization.

However, if the Legacy Valaris average share price had exceeded the exchange price during a respective predecessor reporting period, an assumed number of shares required to settle the conversion obligation in excess of the principal amount would have been included in our denominator for the computation of diluted EPS using the treasury stock method.

The Legacy Valaris average share price did not exceed the exchange price during the four months ended April 30, 2021 (Predecessor) or the years ended December 31, 2020 (Predecessor) or 2019 (Predecessor).

Cancellation of Predecessor Equity and Issuance of Warrants

On the Effective Date and pursuant to the plan of reorganization, the Legacy Valaris Class A ordinary shares were cancelled.

In accordance with the plan of reorganization, all agreements, instruments and other documents evidencing, relating or otherwise connected with any of Legacy Valaris' equity interests outstanding prior to the Effective Date, including all equity-based awards, were cancelled.

On the Effective Date and pursuant to the plan of reorganization, the Company issued 5,645,161 Warrants to the former holders of the Company's equity interests outstanding prior to the Effective Date.

The Warrants are exercisable for a period of seven years and will expire on April 29, 2028.

The exercise of these Warrants into Common Shares would have a dilutive effect to the holdings of Valaris Limited's existing shareholders.

The Legacy Valaris average share price did not exceed the exchange price during the four months ended April 30, 2021 (Predecessor) or the year ended December 31, 2020 (Predecessor).

New Accounting Pronouncements

Recently adopted accounting pronouncements

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 were 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 adopted Update 2019-12 effective January 1, 2021 with no material impact to our financial statements upon adoption.

Accounting pronouncements to be adopted

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.

Our notes receivable with ARO, from which we generate interest income on a LIBOR-based rate, are impacted by the application of this standard.

As the notes bear interest on the LIBOR rate determined at the end of the preceding year, the rate governing our interest income in 2022 has already been determined.

We expect to be able to modify the terms of our notes receivable to a comparable interest rate before the applicable LIBOR rate is no longer available and as such, do not expect this standard to have a material impact to our consolidated financial statements.

Leases - In July 2021, the FASB issued ASU 2021-05, “Leases (Topic 842);

Leases - In July 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No.

2021-05, “Leases (Topic 842);

Lessors - Certain Leases with Variable Lease Payments, ” ( “ Update 2021-05”) which requires a lessor to classify a lease with entirely or partially variable payments that do not depend on an index or rate as an operating lease if another classification (i.e.

1 unchanged sentence

Update 2021-05 is effective for fiscal years beginning after December 15, 2021, with early adoption permitted.

We are in the process of evaluating the impact this amendment will have on our consolidated financial statements.

Business Combinations - In October 2021, the FASB issued ASU 2021-08, “Accounting for Contracts Assets and Contract Liabilities from Contracts with Customers ” ( “ Update 2021-08”).

ASU 2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 and provides practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination.

We adopted this update effective January 1, 2022 using a prospective method, with no material impact to our consolidated financial statements.

Business Combinations - In October 2021, the FASB issued ASU No.

2021-08, “Accounting for Contract Assets and Contract Liabilities from Contracts with Customers ” ( “ Update 2021-08”).

2021-08 requires an entity (acquirer) to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606 and provides practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination.

The amendments also apply to contract assets and contract liabilities from other contracts to which the provisions of Topic 606 apply, such as contract liabilities for the sale of nonfinancial assets within the scope of Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets .

The FASB issued the update to improve the accounting for acquired revenue contracts with customers in a business combination.

The ASU’s amendments are effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

We will adopt Update 2021-08 in the period required and will apply it to any business combination completed subsequent to the adoption.

Update 2021-08 is effective for fiscal years beginning after December 15, 2022, and interim periods within those fiscal years, with early adoption permitted.

We adopted Update 2021-08 effective January 1, 2023 with no material impact to our financial statements upon adoption.

Accounting pronouncements to be adopted

Reference Rate Reform - In March 2020, the FASB issued ASU No.

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 U.S.

GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met.

The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022.

In December 2022, the FASB issued ASU No.

2022-06, Reference Rate Reform (Topic 848):

Deferral of the Sunset

Date of Topic 848, to extend the temporary accounting rules under Topic 848 from December 31, 2022, to December 31, 2024.

Our long-term notes receivable from ARO (the "Notes Receivable from ARO"), from which we generate interest income on a LIBOR-based rate, are impacted by the application of this standard.

As the Notes Receivable from ARO bear interest on the LIBOR rate determined at the end of the preceding year, the rate governing our interest income in 2023 has already been determined.

We expect to be able to modify the terms of our Notes Receivable from ARO to a comparable interest rate before the applicable LIBOR rate is no longer available and as such, do not expect this standard to have a material impact to 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.

8 unchanged sentences

See “ Note 8 - Debt" for additional information on the First Lien Notes.

On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and common shares of Valaris with a nominal value of $ 0.01 per share (the “Common Shares”) were issued.

Also, former holders of Legacy Valaris' equity were issued warrants (the "Warrants") to purchase Common Shares.

On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and the Common Shares were issued.

Also, former holders of Legacy Valaris' equity were issued Warrants to purchase Common Shares.

Below is a summary of the terms of the plan of reorganization:

3 unchanged sentences

• The Legacy Valaris revolving credit facility (the "Revolving Credit Facility") was terminated and the holders thereunder received the treatment as set forth in the plan of reorganization;

• Holders of the Senior Notes received their pro rata share of (1) 38.48 %, or 28,859,900 , of Common Shares and (2) approximately 97.6 % of the subscription rights to participate in the rights offering (the "Rights Offering") through which the Company offered $ 550 million of the First Lien Notes, which includes the backstop premium;

• Holders of the Senior Notes who participated in the Rights Offering received their pro rata share of approximately 29.3 %, or 21,975,000 , of Common Shares, and senior noteholders who agreed to backstop the Rights Offering received their pro rata share of approximately 2.63 %, or 1,975,500 of Common Shares and approximately $ 48.8 million in First Lien Notes as a backstop premium;

• Certain Revolving Credit Facility lenders ("RCF Lenders") who participated in the Rights Offering received their pro rata share of approximately 0.7 %, or 525,000 Common Shares, RCF Lenders who agreed to backstop the Rights Offering received their pro rata share of 0.07 %, or 49,500 of Common Shares and approximately $ 1.2 million in First Lien Notes as a backstop premium;

• Holders of the Senior Notes received their pro rata share of (1) 38.48 %, or 28.9 million, of Common Shares and (2) approximately 97.6 % of the subscription rights to participate in the rights offering (the "Rights Offering") through which the Company offered $ 550.0 million of the First Lien Notes, which includes the backstop premium;

• Holders of the Senior Notes who participated in the Rights Offering received their pro rata share of approximately 29.3 %, or 22.0 million, of Common Shares, and senior noteholders who agreed to backstop the Rights Offering received their pro rata share of approximately 2.63 %, or 2.0 million of Common Shares and approximately $ 48.8 million in First Lien Notes as a backstop premium;

• Certain Revolving Credit Facility lenders ("RCF Lenders") who participated in the Rights Offering received their pro rata share of approximately 0.7 %, or 0.5 million Common Shares, RCF Lenders who agreed to backstop the Rights Offering received their pro rata share of 0.07 %, or 49,500 of Common Shares and approximately $ 1.2 million in First Lien Notes as a backstop premium;

• Senior noteholders, solely with respect to Pride International LLC's 6.875 % senior notes due 2020 and 7.875 % senior notes due 2040, Ensco International 7.20 % Debentures due 2027, and the 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, received an aggregate cash payment of $ 26.0 million in connection with settlement of certain alleged claims against the Company;

• The two RCF Lenders who chose to participate in the Rights Offering received their pro rata share of (1) 5.3 %, or 4,005,000 of Common Shares (2) approximately 2.427 % of the First Lien Notes (and associated Common Shares), (3) $ 7.8 million in cash, and (4) their pro rata share of the backstop premium.

The RCF Lenders who entered into the amended restructuring support agreement and elected not to participate in the Rights Offering received their pro rata share of (1) 22.980 %, or 17,235,000 of Common Shares and (2) $ 96.1 million in cash;

• The two RCF Lenders who chose to participate in the Rights Offering received their pro rata share of (1) 5.3 %, or 4.0 million Common Shares (2) approximately 2.427 % of the First Lien Notes (and associated Common Shares), (3) $ 7.8 million in cash, and (4) their pro rata share of the backstop premium.

The RCF Lenders who entered into the amended restructuring support agreement and elected not to participate in the Rights Offering received their pro rata share of (1) 22.980 %, or 17.2 million of Common Shares and (2) $ 96.1 million in cash;

• Holders of general unsecured claims are entitled to receive payment in full within ninety days after the later of (a) the Effective Date and (b) the date such claim comes due;

• 375,000 Common Shares were issued and $ 5.0 million was paid to Daewoo Shipbuilding & Marine Engineering Co., Ltd (the "Shipyard");

• Legacy Valaris Class A ordinary shares were cancelled and holders received 5,645,161 in Warrants exercisable for one Common Share per Warrant at initial exercise price of $ 131.88 per Warrant, in each case as may be adjusted from time to time pursuant to the applicable warrant agreement.

• 0.4 million Common Shares were issued and $ 5.0 million was paid to Daewoo Shipbuilding & Marine Engineering Co., Ltd (the "Shipyard");

• Legacy Valaris Class A ordinary shares were cancelled and holders received 5.6 million in Warrants exercisable for one Common Share per Warrant at initial exercise price of $ 131.88 per Warrant, in each case as may be adjusted from time to time pursuant to the applicable warrant agreement.

The Warrants are exercisable for a period of seven years and will expire on April 29, 2028;

5 unchanged sentences

Management Incentive Plan

In accordance with the plan of reorganization, Valaris Limited adopted the 2021 Management Incentive Plan (the “MIP”) as of the Effective Date and authorized and reserved 8,960,573 Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP, which may be in the form of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and cash awards or any combination thereof.

In accordance with the plan of reorganization, Valaris Limited adopted the 2021 Management Incentive Plan (the “MIP”) as of the Effective Date and authorized and reserved 9.0 million Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP, which may be in the form of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and cash awards or any combination thereof.

See " Note 11 - Share Based Compensation" for more information on awards granted under the MIP after the Effective date.

23 unchanged sentences

(1) Represents the holding costs incurred to maintain VALARIS DS-13 and VALARIS DS-14 in the shipyard.

All series of our senior notes, the 7.20 % Debentures due 2027 and 2024 Convertible Notes together are referred to as the "Senior Notes".

The contractual interest expense on the outstanding Senior Notes and the Revolving Credit Facility was in excess of recorded interest expense by $ 132.9 million and $ 140.7 million for the four months ended April 30, 2021 (Predecessor) and for the year ended December 31, 2020 (Predecessor), respectively.

4 unchanged sentences

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 Statements of Operations for the eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor).

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 Statements of Operations for the year ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor).

These costs include legal and other professional advisory service fees pertaining to the Chapter 11 Cases, contract items related to rejecting and amending certain operating leases ("Contract items") and the effects of the emergence from bankruptcy, including the application of fresh start accounting.

2 unchanged sentences

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

DIP facility fees $ — $ — $ 20.0

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Professional fees $ 2.4 $ 17.2 $ 93.4 $ 66.8

DIP facility fees — — — 20.0

Contract items — ( 1.7 ) 3.9 4.4

14 unchanged sentences

Total reorganization items, net $ 2.4 $ 15.5 $ 3,584.6 $ 527.6

Reorganization items (fees) unpaid $ 0.8 $ 38.3 $ 61.2

Reorganization items (fees) paid $ 2.4 $ 14.7 $ 59.0 $ 30.0

Reorganization items (fees) unpaid $ — $ 0.8 $ 38.3 $ 61.2

FRESH START ACCOUNTING

35 unchanged sentences

Valuation Process

The fair values of the Company's principal assets and liabilities including property, plant and equipment as well as our 50% equity interest in ARO and our notes receivable from ARO, options to purchase Newbuild Rigs, the First Lien Notes, pensions and Warrants were estimated with the assistance of third-party valuation advisors.

The fair values of the Company's principal assets and liabilities including property, plant and equipment as well as our 50% equity interest in ARO and our Notes Receivable from ARO, options to purchase VALARIS DS-13 and VALARIS DS-14 (the "Newbuild Drillships"), the First Lien Notes, pensions and Warrants were estimated with the assistance of third-party valuation advisors.

Property, Plant and Equipment

2 unchanged sentences

In developing these assumptions, forecasted day rates and utilization took into account current market conditions and our anticipated business outlook.

The cash flows were discounted at our weighted average cost of capital ("WACC"), which was derived from a blend of our after-tax cost of debt and our cost of equity, and computed using public share price information for similar offshore drilling market participants, certain U.S.

The cash flows were discounted at our weighted average cost of capital, which was derived from a blend of our after-tax cost of debt and our cost of equity, and computed using public share price information for similar offshore drilling market participants, certain U.S.

Treasury rates and certain risk premiums specific to the Company.

2 unchanged sentences

Notes Receivable from ARO

The fair value of the long-term notes receivable from ARO was estimated using an income approach to value the forecasted cash flows attributed to the note receivable using a discount rate based on a comparable yield with a country-specific risk premium.

The fair value of the Notes Receivable from ARO was estimated using an income approach to value the forecasted cash flows attributed to the Notes Receivable from ARO using a discount rate based on a comparable yield with a country-specific risk premium.

Investment in ARO

We estimated the fair value of the equity investment in ARO 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.

Options to Purchase Newbuild Rigs

The fair value of the options to purchase Newbuild Rigs was estimated using an option pricing model utilizing the estimated fair value of a newbuild rig, estimated purchase price upon exercise of the options, the holding period, equity volatility and the risk-free rate.

Options to Purchase Newbuild Drillships

The fair value of the options to purchase Newbuild Drillships was estimated using an option pricing model utilizing the estimated fair value of a newbuild rig, estimated purchase price upon exercise of the options, the holding period, equity volatility and the risk-free rate.

First Lien Notes

62 unchanged sentences

(d) Property and Equipment, net

Reflects the reorganization adjustment to remove $ 417.6 million of work-in-process related to the Newbuild Rigs.

Reflects the reorganization adjustment to remove $ 417.6 million of work-in-process related to the Newbuild Drillships.

These values have been removed from property and equipment, net, based on the terms of the amended agreements with the Shipyard.

3 unchanged sentences

Liquidation of rabbi trust related to certain employee benefits $ ( 17.6 )

Elimination of right-of-use asset associated with Newbuild Rigs ( 5.5 )

Fair value of options to purchase Newbuild Rigs 13.1

Elimination of right-of-use asset associated with Newbuild Drillships ( 5.5 )

Fair value of options to purchase Newbuild Drillships 13.1

Our supplemental executive retirement plans (the "SERP") are non-qualified plans that provided eligible employees an opportunity to defer a portion of their compensation for use after retirement.

1 unchanged sentence

Upon emergence, assets previously held in a rabbi trust maintained for the SERP were liquidated and the SERP was amended.

In accordance with the amended agreement with the Shipyard, our leases were terminated and we have eliminated the historical right-of-use asset associated with the berthing locations of VALARIS DS-13 and VALARIS DS-14.

Additionally, upon effectiveness of the plan of reorganization, the amended agreement with the Shipyard provides the Company with the option to purchase the Newbuild Rigs.

The reorganization adjustments include an asset that reflects the fair value of the option to purchase the Newbuild Rigs and embedded feature related to the ability, under the amended agreements with the Shipyard, for the equity issued pursuant to this arrangement to be put to the Company for $ 8.0 million of consideration for each rig, should we choose to take delivery.

Additionally, upon effectiveness of the plan of reorganization, the amended agreement with the Shipyard provides the Company with the option to purchase the Newbuild Drillships.

The reorganization adjustments include an asset that reflects the fair value of the option to purchase the Newbuild Drillships and embedded feature related to the ability, under the amended agreements with the Shipyard, for the equity issued pursuant to this arrangement to be put to the Company for $ 8.0 million of consideration for each rig, should we choose to take delivery.

(f) Accounts payable - trade

5 unchanged sentences

Reflects the following reorganization adjustments (in millions):

Elimination of lease liabilities associated with Newbuild Rigs $ ( 5.0 )

Elimination of accrued post-petition holding costs associated with Newbuild Rigs ( 4.1 )

Elimination of lease liabilities associated with Newbuild Drillships $ ( 5.0 )

Elimination of accrued post-petition holding costs associated with Newbuild Drillships ( 4.1 )

Payment of certain accrued liabilities incurred prior to emergence ( 3.3 )

In accordance with the amended agreement with the Shipyard, our leases were terminated and we have eliminated the historical lease liability associated with the berthing locations of VALARIS DS-13 and VALARIS DS-14.

Accrued post-petition holding costs have also been eliminated as a result of the amendments made effective upon emergence.

4 unchanged sentences

Reflects the following reorganization adjustments (in millions):

Elimination of construction contract intangible liabilities associated with Newbuild Rigs $ ( 49.9 )

Elimination of accrued post-petition holding costs associated with Newbuild Rigs ( 4.7 )

Elimination of lease liabilities associated with Newbuild Rigs ( 0.6 )

The reorganization adjustments to other liabilities primarily relate to the elimination of construction contract intangible liabilities associated with the Newbuild Rigs.

Elimination of construction contract intangible liabilities associated with Newbuild Drillships $ ( 49.9 )

Elimination of accrued post-petition holding costs associated with Newbuild Drillships ( 4.7 )

Elimination of lease liabilities associated with Newbuild Drillships ( 0.6 )

The reorganization adjustments to other liabilities primarily relate to the elimination of construction contract intangible liabilities associated with the Newbuild Drillships.

These construction contract intangible liabilities were recorded in purchase accounting for the original contracting entity.

As the amended contract is structured as an option whereby we have the right, not the obligation to take delivery of the rigs, there is no longer an intangible liability associated with the contracts.

We have eliminated the historical lease liability associated with the berthing locations of VALARIS DS-13 and VALARIS DS-14 and accrued post-petition holding costs as described in (g) above.

As the amended contract is

structured as an option whereby we have the right, not the obligation to take delivery of the rigs, there is no longer an intangible liability associated with the contracts.

We have eliminated the historical lease liability associated with the berthing locations of Newbuild Drillships and accrued post-petition holding costs as described in (g) above.

(j) Liabilities subject to compromise

35 unchanged sentences

Primarily reflects the fresh start adjustment to eliminate the historical balance for materials and supplies as the result of a change in accounting policies upon emergence.

Historically, we recognized materials and supplies on the balance sheet when purchased and subsequently expensed items when consumed.

Upon emergence from bankruptcy, we elected to change our accounting policies related to materials and supplies whereby materials and supplies will be expensed as a period cost when received.

Additionally, a customer arrangement provides that we take title to their materials and supplies for the duration of the contract and return or pay cash for them at the termination of the contract.

Together with our policy change on materials and supplies, we elected to record these assets and the obligation to our customer on a net basis as opposed to a gross basis.

The fresh start adjustment for the elimination of historical deferred contract drilling expenses primarily relates to deferred mobilization costs, deferred contract preparation costs and deferred certification costs.

5 unchanged sentences

Reflects the fresh start adjustments to historical amounts to record the estimated fair value of property and equipment.

(q) Long-term notes receivable from ARO

Reflects the fresh start adjustment to record the estimated fair value of the long-term notes receivable from ARO.

The fair value of the long-term notes receivable from ARO was estimated using an income approach to value the forecasted cash flows attributed to the note receivable using a discount rate based on comparable yield with a country-specific risk premium.

Furthermore, upon emergence from bankruptcy, we elected to change our accounting policies and have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.

Prior to emergence, we recorded our drilling rigs as a single asset with a useful life ascribed by the expected useful life of that asset.

(q) Notes Receivable from ARO

Reflects the fresh start adjustment to record the estimated fair value of the Notes Receivable from ARO.

The fair value of the Notes Receivable from ARO was estimated using an income approach to value the forecasted cash flows attributed to the Notes Receivable from ARO using a discount rate based on comparable yield with a country-specific risk premium.

(r) Investment in ARO

14 unchanged sentences

Certain operating leases had unfavorable terms as of the emergence date, and as a result the right-of-use asset for such leases does not equal the lease liability upon emergence.

The fresh start adjustment to eliminate historical deferred contract drilling expenses reflects the noncurrent portion of historical deferred contract drilling expenses described in (o) above as well as the elimination of customer contract intangibles previously recorded in purchase accounting for the Rowan Transaction.

The fresh start adjustments to eliminate other deferred costs reflect non-operational deferred costs that have no future economic benefit.

48 unchanged sentences

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.

We also may receive lump-sum fees or similar compensation generally 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 contracts contain a lease component and we have elected to apply the practical expedient provided under ASC 842 to not separate the lease and non-lease components and apply the revenue recognition guidance in ASU No.

Our drilling contracts contain a lease component and we have elected to apply the practical expedient provided under Accounting Standards Codification ("ASC") 842 to not separate the lease and non-lease components and apply the revenue recognition guidance in ASU No.

2014-09, " Revenue from Contracts with Customers (Topic 606).

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.

" 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.

4 unchanged sentences

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, 2021 was between approximately 1 month and 3.5 years.

The remaining duration of our drilling contracts based on those in place as of December 31, 2022 (Successor) was between approximately 1 month and 5 years.

Day Rate Drilling Revenue

8 unchanged sentences

Such compensation is recognized as revenue when our performance obligation is satisfied, the termination fee can be reasonably measured and collection is probable.

Contract Termination - VALARIS DS-11

In July 2021, a contract was awarded to VALARIS DS-11 for an eight-well deepwater project in the U.S.

Gulf of Mexico that was expected to commence in mid-2024.

In June 2022, the customer terminated the contract.

As a result of the contract termination, we received an early termination fee of $ 51.0 million which is included in revenues on our Consolidated Statements of Operations for the year ended December 31, 2022 (Successor).

As of the date of the termination, we had incurred costs to upgrade the rig pursuant to the requirements of the contract.

Costs incurred for capital upgrades specific to the customer requirements were considered to be impaired and as such, we recorded a pre-tax, non-cash loss on impairment in the second quarter of 2022 of $ 34.5 million See " Note 7 - Property and Equipment" for additional information on the impairment.

Additional costs were recorded for penalties and other costs incurred upon cancellation of equipment ordered.

Mobilization / Demobilization Revenue

7 unchanged sentences

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.

In connection with certain contracts, we receive lump-sum fees or similar compensation generally 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.

Revenues Related to Reimbursable Expenses

We generally receive reimbursements from our customers for purchases of supplies, equipment, personnel services and other services provided at their request.

Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof are highly dependent on factors outside of our influence.

Accordingly, reimbursable revenue is recognized during the period in which the corresponding goods and services are consumed once the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer.

We are generally considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer within Operating revenues.

Contract Assets and Liabilities

1 unchanged sentence

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, capital upgrades or in the case of our 50/50 joint venture with Saudi Aramco, represent the difference between the amounts billed under the bareboat charter arrangements and lease revenues earned up to the respective period end.

See “ No te 6 – Equity Method Investment in ARO" for additional details regarding our balances with ARO.

Contract liabilities generally represent fees received for mobilization, capital upgrades or in the case of our 50/50 unconsolidated joint venture with Saudi Aramco, represent the difference between the amounts billed under the bareboat charter arrangements and lease revenues earned.

See “ Note 5 – Equity Method Investment in ARO" for additional details regarding our balances with ARO.

Contract assets and liabilities are presented net on our Consolidated Balance Sheets on a contract-by-contract basis.

1 unchanged sentence

The following table summarizes our contract assets and contract liabilities (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

18 unchanged sentences

Balance as of December 31, 2021 (Successor) 0.3 56.6

Balance as of January 1, 2022 (Successor) 0.3 56.6

Revenue recognized in advance of right to bill customer 9.2 —

Increase due to cash received — 156.7

Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance — ( 41.1 )

Decrease due to amortization of deferred revenue added during the period — ( 47.1 )

Decrease due to transfer to receivables and payables during the period ( 4.2 ) ( 6.1 )

Balance as of December 31, 2022 (Successor) $ 5.3 $ 119.0

Deferred Contract Costs

2 unchanged sentences

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 $ 31.4 million and $ 13.8 million as of December 31, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.

For the Successor, during the eight months ended December 31, 2021, amortization of such costs totaled $ 22.0 million.

For the Predecessor, during the four months ended April 30, 2021, the year ended December 31, 2020 and the year ended December 31, 2019, amortization of such costs totaled $ 7.6 million, $ 42.1 million and $ 42.1 million respectively.

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 $ 57.3 million and $ 31.4 million as of December 31, 2022 and 2021 (Successor), respectively.

For the Successor, during the year ended December 31, 2022 and the eight months ended December 31, 2021, amortization of such costs totaled $ 61.7 million and $ 22.0 million, respectively.

For the Predecessor, during the four months ended April 30, 2021 and the year ended December 31, 2020, amortization of such costs totaled $ 7.6 million and $ 42.1 million, respectively.

Deferred Certification Costs

1 unchanged sentence

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 $ 3.3 million and $ 8.4 million as of December 31, 2021 (Successor) and December 31, 2020 (Predecessor), respectively.

For the Successor, during the eight months ended December 31, 2021, amortization of such costs totaled $ 0.7 million.

For the Predecessor, during the four months ended April 30, 2021, the year ended December 31, 2020 and the year ended December 31, 2019, amortization of these costs totaled $ 3.1 million, $ 8.9 million and $ 10.3 million respectively.

Deferred regulatory certification and compliance costs were included in Other current assets and Other assets on our Consolidated Balance Sheets and totaled $ 16.2 million and $ 3.3 million as of December 31, 2022 and 2021 (Successor), respectively.

For the Successor, during the year ended December 31, 2022 and the eight months ended December 31, 2021, amortization of such costs totaled $ 4.7 million and $ 0.7 million, respectively.

For the Predecessor, during the four months ended April 30, 2021 and the year ended December 31, 2020, amortization of these costs totaled $ 3.1 million and $ 8.9 million, respectively.

Future Amortization of Contract Liabilities and Deferred Costs

1 unchanged sentence

See " Note 5 - Equity Method Investment in ARO" for additional information on ARO and related arrangements.

For the Successor, expected future amortization of our contract liabilities, or in the case of our contract liabilities related to our bareboat charter arrangements with ARO, the amount is reflected at the end of the lease term, and deferred costs recorded as of December 31, 2021 is set forth in the table below (in millions):

The table below reflects the expected future amortization of our contract liabilities and deferred costs recorded as of December 31, 2022 (Successor).

In the case of our contract liabilities related to our bareboat charter arrangements with ARO, the contract liability is not amortized and as such, the amount is reflected in the table below at the end of the current lease term.

(In millions)

2023 2024 2025 2026 & Thereafter Total

1 unchanged sentence

Amortization of deferred costs $ 59.1 $ 13.7 $ 0.4 $ 0.3 $ 73.5

ROWAN TRANSACTION

On April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan Companies Limited (formerly Rowan Companies plc) ("Rowan") pursuant to the Transaction Agreement (the "Rowan Transaction").

We were considered to be the acquirer for accounting purposes.

As a result, Rowan's 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.

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.

Consideration

As a result of the Rowan Transaction, Rowan shareholders received 2.75 Legacy 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 Legacy 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 Legacy 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 Legacy Valaris share and per share data included in this report have been retroactively adjusted to reflect the Reverse Stock Split.

Bargain Purchase Gain (Predecessor)

The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resulting in a bargain purchase gain at the Transaction date of $ 712.8 million primarily driven by the decline in our Legacy Valaris 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.

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 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 adjustments recorded resulted in a $ 75.8 million decline to the bargain purchase gain during 2019, resulting in a net bargain purchase gain of $ 637.0 million included in Other, net, in our Consolidated Statements of Operations for the year ended December 31, 2019 (Predecessor).

Additionally, adjustments resulted in a $ 6.3 million decline to the bargain purchase gain during the first quarter of 2020, which is included in Other, net, in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor).

Transaction-related costs (Predecessor)

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 (Predecessor).

These costs were included in General and administrative expense in our Consolidated Statements 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 Statements of Operations for the Year ended December 31, 2019 (Predecessor) were $ 448.0 million and $ 122.7 million, respectively.

Unaudited Pro Forma Impact of the Rowan Transaction (Predecessor)

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.

(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 incurred 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 (Predecessor).

EQUITY METHOD INVESTMENT IN ARO

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.

As of December 31, 2021, ARO owns seven jackup rigs, has ordered two newbuild jackup rigs and leases seven rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO.

At December 31, 2021, all of the leased rigs were operating under three-year drilling contracts, or related extensions, 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.

ARO is a 50/50 unconsolidated joint venture between the Company and Saudi Aramco that owns and operates offshore drilling rigs in Saudi Arabia.

As of December 31, 2022, ARO owns seven jackup rigs, has ordered two newbuild jackup rigs and leases eight rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO.

At December 31, 2022, the leased rigs were operating under three-year drilling contracts, or related extensions, with Saudi Aramco.

The seven rigs owned by ARO are currently operating under contracts with Saudi Aramco, each with an aggregate contract term of 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.

However, in December 2020,

the shareholder agreement governing the joint venture (the "Shareholder Agreement") was amended (the "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 (Predecessor) reflect the impact of the lease modification on our rental revenues to reflect cumulative results through that period.

In connection with our 50/50 joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs.

Our results of operations for the year ended December 31, 2020 (Predecessor) include the impact of the lease modification on our rental revenues to reflect cumulative results through that period.

ARO has plans to purchase 20 newbuild jackup rigs over an approximate 10 -year period.

In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $ 176.0 million.

The first rig is expected to be delivered in the fourth quarter of 2022 and the second rig is expected either late in the fourth quarter of 2022 or in the first quarter of 2023.

ARO is expected to place orders for two additional newbuild jackups 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.

ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020 and is actively exploring financing options for remaining payments due upon delivery.

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.

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.

While the shipyard contract contemplated delivery of these newbuild rigs in 2022, the delivery of these rigs has been delayed into 2023.

ARO is expected to place orders for two additional newbuild jackups in the near term.

In connection with these plans, we have a potential obligation to fund ARO for newbuild jackup rigs.

See “ Note 14 Commitments and Contingencies" for additional information.

The joint venture partners agreed in the Shareholder Agreement 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.

1 unchanged sentence

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.

Upon establishment of ARO, we entered into an agreement to provide certain employees through secondment arrangements to assist with various onshore and offshore services for the benefit of ARO (the "Secondment Agreement").

Pursuant to this agreement, 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.

During the quarter ended June 30, 2020, almost all remaining employees seconded to ARO became employees of ARO.

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.

The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the 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, 2021 Year Ended December 31, 2020 April 11, 2019 - December 31, 2019

Year Ended December 31, 2022 Year Ended December 31, 2021 Year Ended December 31, 2020

Revenues $ 459.5 $ 470.6 $ 549.4

22 unchanged sentences

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.

We have an equity method investment in ARO that was recorded at its estimated fair value as of the Transaction Date.

We have an equity method investment in ARO that was recorded at its estimated fair value at both the Effective Date and the date of our 2019 transaction where we acquired the subsidiary that held the joint venture interest.

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") on that date.

These 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.

Additionally, in fresh start accounting, we have recorded our investment in ARO at its estimated fair value as of the Effective Date.

Basis differences on that date primarily related to ARO's long-lived assets.

GAAP financial statements ("basis differences") on each of these dates.

These basis differences primarily related 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 measurement dates.

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 (losses) 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.

The amortization of those basis differences is combined with our 50 % interest in ARO's net income.

A reconciliation of those components is presented below (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 April 11, 2019 - December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

50% interest in ARO net income (loss) $ 10.4 $ ( 4.0 ) $ 6.0 $ 20.7

2 unchanged sentences

Related-Party Transactions

Revenues recognized by us related to the Lease Agreements, Transition Services Agreement and Secondment Agreement are as follows (in millions):

Revenues recognized by us related to the Lease Agreements and Secondment Agreement are as follows (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 April 11, 2019 - December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Lease revenue $ 56.7 $ 35.4 $ 21.7 $ 52.2

Secondment revenue 2.0 1.5 1.1 21.6

Transition Services revenue — — 1.3 17.3

Total revenue from ARO (1)

2 unchanged sentences

See " Note 16 - Segment Information" for additional information.

Amounts receivable from ARO related to the items above totaled $ 12.1 million and $ 21.6 million as of December 31, 2021 (Successor) and December 31, 2020 (Predecessor), respectively, and are included in Accounts receivable, net, on our Consolidated Balance Sheets.

We had $ 10.8 million and $ 38.3 million of contract liabilities and Accounts payable, respectively, related to the Lease Agreements as of December 31, 2021 (Successor).

As of December 31, 2020 (Predecessor), we had $ 30.9 million of contract liabilities related to the Lease Agreements and no Accounts payable to ARO.

Amounts receivable from ARO related to the Lease Agreements totaled $ 12.0 million and $ 12.1 million as of December 31, 2022 and 2021, respectively, and are included in Accounts receivable, net, on our Consolidated Balance Sheets.

We had $ 16.7 million and $ 43.2 million of Contract liabilities and Accounts payable, respectively, related to the Lease Agreements as of December 31, 2022.

As of December 31, 2021, we had $ 10.8 million and $ 38.3 million of Contract liabilities and Accounts payable, respectively, related to the Lease Agreements.

The per day bareboat charter amount in the Lease Agreements is subject to adjustment based on actual performance of the respective rig and as such contract liabilities related to the Lease Agreements are subject to adjustment during the lease term.

Upon completion of the lease term, such amount becomes a payable to or a receivable from ARO.

During 2017 and 2018, Rowan contributed cash to ARO in exchange for 10-year shareholder notes receivable based on a one-year LIBOR rate, set as of the end of the year prior to the year applicable, plus two percent.

As of December 31, 2021 (Successor) and December 31, 2020 (Predecessor) the carrying amount of the long-term notes receivable from ARO was $ 249.1 million and $ 442.7 million respectively.

The notes receivable were adjusted to fair value as of the Effective Date.

The discount to the principal amount of $ 442.7 million is being amortized using the effective interest method to interest income over the remaining terms of the notes.

The Shareholders’ Agreement prohibits the sale or transfer of the shareholder note to a third-party, except in certain limited circumstances.

During the year ended December 31, 2020 (Predecessor), 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 Statements of Operations.

During the eight months ended December 31, 2021 (Successor), interest totaled $ 27.8 million of which $ 20.8 million pertains to non-cash amortization of discount on the shareholder notes.

During the four months ended April 30, 2021 (Predecessor), interest totaled $ 3.5 million.

Interest totaled $ 18.3 million for the year ended December 31, 2020 (Predecessor) and $ 16.8 million for the period from April 11, 2019 - December 31, 2019 (Predecessor).

Interest amounts due were collected prior to the end of the year and we had no interest receivable from ARO as of December 31, 2021 (Successor) and December 31, 2020 (Predecessor).

During 2017 and 2018, the Company contributed cash to ARO in exchange for the 10-year Notes Receivable from ARO based on a one-year LIBOR rate, set as of the end of the year prior to the year applicable, plus two percent.

The Shareholder Agreement prohibits the sale or transfer of the Notes Receivable from ARO to a third party, except in certain limited circumstances.

The principal amount and discount of the Notes Receivable from ARO were as follows (in millions):

December 31, 2022 December 31, 2021

Principal amount $ 402.7 $ 442.7

Discount ( 148.7 ) ( 193.6 )

Carrying value $ 254.0 $ 249.1

We collected our 2022 and 2021 interest on the Notes Receivable from ARO from ARO in cash prior to December 31, 2022 and 2021, respectively, and as such, there was no interest receivable for the Notes Receivable from ARO as of December 31, 2022 and 2021.

In September 2022, the Company received a principal payment of $ 40.0 million from ARO representing a partial early repayment of the Notes Receivable from ARO.

In connection with this repayment, we recognized non-cash interest income of $ 14.8 million in the third quarter of 2022 for the discount attributable to this repayment.

Non-cash interest income from the Notes Receivable from ARO is included in Interest income in our Consolidated Statement of Operations.

Interest income earned on the Notes Receivable from ARO was as follows (in millions):

Successor Predecessor

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Interest income $ 11.3 $ 7.0 $ 3.5 $ 18.3

Non-cash amortization 44.9 20.8 — —

Total interest income on the Notes Receivable from ARO

$ 56.2 $ 27.8 $ 3.5 $ 18.3

Maximum Exposure to Loss

1 unchanged sentence

Our maximum exposure to loss is limited to (1) our equity investment in ARO;

(2) the carrying amount of our shareholder notes receivable;

(2) the carrying amount of our Notes Receivable from ARO;

and (3) other receivables and contract assets from ARO, partially offset by contract liabilities as well as payables to ARO.

Successor Predecessor

December 31, 2022 December 31, 2021

3 unchanged sentences

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

Identical Assets

(Level 1) Significant

(Level 2) Significant

(Level 3) Total

As of December 31, 2020

(Predecessor)

Supplemental executive retirement plan assets

$ 22.6 $ — $ — $ 22.6

Total financial assets $ 22.6 $ — $ — $ 22.6

Supplemental Executive Retirement Plan Assets

Our supplemental executive retirement plans (the "SERP") are non-qualified plans that provided eligible employees an opportunity to defer a portion of their compensation for use after retirement.

The SERP was 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 were 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 Sheet as of December 31, 2020 (Predecessor).

The fair value measurements of assets held in the SERP were based on quoted market prices.

Pursuant to the plan of reorganization, the assets held in the rabbi trust maintained for the SERP were liquidated upon the Effective Date and used to satisfy the claims of creditors.

Effective July 1, 2021, we amended the SERP to provide for quarterly credits of an interest equivalent based upon the rate of interest paid on ten-year United States treasury notes in November of the immediately preceding calendar year and the participant plan balances as of the first day of such quarter.

Net unrealized gains of $ 1.2 million, $ 3.2 million and $ 5.0 million from marketable securities held in our SERP were included in Other, net, in our Consolidated Statements of Operations for the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), respectively.

Other Financial Instruments

The carrying values and estimated fair values of our debt instruments were as follows (in millions):

Successor Predecessor

The carrying values and estimated fair values of certain of our financial instruments were as follows (in millions):

December 31, 2022 December 31, 2021

1 unchanged sentence

Value Carrying

Secured first lien notes due 2028 $ 545.3 $ 575.7 $ — $ —

6.875 % Senior notes due 2020

— — 122.9 8.6

4.70 % Senior notes due 2021

— — 100.7 4.5

4.875 % Senior notes due 2022

— — 620.8 32.9

3.00 % Exchangeable senior notes due 2024 (2)

— — 849.5 76.5

4.50 % Senior notes due 2024

— — 303.4 13.7

4.75 % Senior notes due 2024

— — 318.6 18.8

8.00 % Senior notes due 2024

— — 292.3 12.9

5.20 % Senior notes due 2025

— — 333.7 12.7

7.375 % Senior notes due 2025

— — 360.8 20.9

7.75 % Senior notes due 2026

— — 1,000.0 44.0

7.20 % Debentures due 2027

— — 112.1 5.7

7.875 % Senior notes due 2040

— — 300.0 21.0

5.40 % Senior notes due 2042

— — 400.0 23.6

5.75 % Senior notes due 2044

— — 1,000.5 38.0

5.85 % Senior notes due 2044

— — 400.0 26.0

Amounts borrowed under Revolving Credit Facility (3)

Value Estimated

First Lien Notes (1)

$ 542.4 $ 545.9 $ 545.3 $ 575.7

Total debt $ 545.3 $ 575.7 $ 7,096.3 $ 940.8

Liabilities Subject to Compromise (4)

Long-term notes receivable from ARO (2)

$ 254.0 $ 336.7 $ 249.1 $ 266.7

Total long-term debt $ 545.3 $ 575.7 $ — $ —

(1) The carrying amount of debt instruments at December 31, 2020 represents the Predecessor's 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.

(2) For the Predecessor, the 3% exchangeable senior notes due 2024 (the "2024 Convertible Notes") were 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.

The carrying amount at December 31, 2020 represented the aggregate principal amount of these notes as of the Petition Date and was classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020.

The Predecessor discontinued accruing interest on these notes as of the Petition Date.

The equity component was $ 220.0 million and was classified as Additional Paid-in Capital as of December 31, 2020.

On the Effective Date, in accordance with the plan of reorganization, all outstanding obligations under the 2024 Convertible Notes were cancelled and the equity component was written off to retained earnings.

(3) In addition to the amount borrowed above, the Predecessor had $ 27.0 million in undrawn letters of credit issued under the Revolving Credit Facility as of December 31, 2020 .

On the Effective Date, in accordance with the plan of reorganization, all undrawn letters of credit issued under the Revolving Credit Facility were collateralized pursuant to the terms of the Revolving Credit Facility.

(4) As discussed in “ Note 2 - Chapter 11 Proceedings” and “ Note 3 - Fresh Start Accounting,” since the Petition Date and through the Effective Date, the Company operated as a debtor-in-possession under the jurisdiction of the Bankruptcy Court and in accordance with the provisions of the Bankruptcy Code.

Accordingly, all of our long-term debt obligations were presented as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020 (Predecessor).

All unamortized debt discounts, premiums or issuance costs related to our long-term debt obligations were written off to reorganization items as of the Petition Date in 2020.

Additionally, we discontinued accruing interest on our indebtedness as of the Petition Date.

The estimated fair values of the Successor's First Lien Notes and the Predecessor's Senior Notes were determined using quoted market prices, which are level 1 inputs.

As of December 31, 2021 (Successor), the estimated fair value of our long-term notes receivable from ARO was $ 266.7 million and was estimated by using an income approach to value the forecasted cash flows attributed to the notes receivable using a discount rate based on comparable yield with a country-specific risk premium.

The estimated fair values of our cash and cash equivalents, restricted cash, accounts receivable and trade payables approximated their carrying values as of December 31, 2021 (Successor) and December 31, 2020 (Predecessor).

(1) The estimated fair value of the First Lien Notes was determined using quoted market prices, which are level 1 inputs.

(2) The estimated fair value of our Notes Receivable from ARO was estimated using an income approach to value the forecasted cash flows attributed to the Notes Receivable from ARO using a discount rate based on a comparable yield with a country-specific risk premium, which are considered to be level 2 inputs.

The estimated fair values of our cash and cash equivalents, restricted cash, accounts receivable and trade payables approximated their carrying values as of December 31, 2022 and 2021 (Successor).

PROPERTY AND EQUIPMENT

Property and equipment consisted of the following (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

3 unchanged sentences

$ 1,134.5 $ 957.0

Concurrent with our emergence from bankruptcy, we adopted fresh start accounting and adjusted the carrying value of our property and equipment to estimated fair value which included an adjustment to reconcile to our reorganization value.

See " Note 3 - Fresh Start Accounting" for more information.

Work-in-progress as of December 31, 2020 (Predecessor) 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 four months ended April 30, 2021, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters of $ 756.5 million.

During the year ended December 31, 2020 and the year ended December 31, 2019, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters, jackups and spare equipment of $ 3.6 billion and $ 98.4 million, respectively.

These pre-tax non-cash impairments are included in Loss on impairment in our Consolidated Statements of Operations.

Assets held-for-use

1 unchanged sentence

For rigs whose carrying values are determined not to be recoverable, we record an impairment for the difference between their fair values and carrying values.

In June 2022, the drilling contract previously awarded to VALARIS DS-11 was terminated.

As of the date of termination, we had incurred costs to upgrade the rig pursuant to the requirements of the contract.

Costs incurred related to these capital upgrades were included in work-in-progress and upon termination were determined to be impaired.

We recorded a pre-tax, non-cash loss on impairment in the second quarter of 2022 of $ 34.5 million.

See " Note 4 - Revenue from Contracts with Customers" for additional information regarding the termination.

During the first quarter of 2021, as a result of challenging market conditions for certain of our floaters, we revised our near-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment.

We determined that the estimated undiscounted cash flows were not sufficient to recover the carrying values for certain rigs and concluded they were impaired as of March 31, 2021.

Based on the asset impairment analysis performed as of March 31, 2021, we recorded a pre-tax, non-cash loss on impairment in the first quarter for certain floaters totaling $ 756.5 million.

Based on the asset impairment analysis performed as of March 31, 2021, we recorded a pre-tax, non-cash loss on impairment in the first quarter of 2021 for certain floaters totaling $ 756.5 million, inclusive of $ 5.6 million of gains reclassified from accumulated other comprehensive income into loss on impairment associated with related cash flow hedges.

We measured the fair value of these assets to be $ 26.0 million at the time of impairment by applying either an income approach, using projected discounted cash flows, or estimated sales price.

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 current market conditions and our anticipated business outlook.

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.

During the first quarter of 2020, the COVID-19 global pandemic and the response thereto negatively impacted the macro-economic environment and global economy.

12 unchanged sentences

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.

Assets held-for-sale and Assets sold

1 unchanged sentence

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 Indenture dated April 30, 2021 (the “Indenture”), 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 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.

See “ Note 9 – Debt" for additional details on restrictions on the sales of assets.

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.

While taking into account certain restrictions on the sales of assets under our Indenture dated April 30, 2021 that governs our First Lien Notes (the “Indenture”), 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 lower-specification or non-core rigs.

To this end, we continually assess our rig portfolio and actively work with rig brokers to market certain rigs.

See “ Note 8 – Debt" for additional information on restrictions on the sales of assets.

On a quarterly basis, we assess whether any long-lived assets meet the criteria established for held-for-sale classification on our balance sheet.

Assets 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.

In accordance with our business strategy described above, we sold VALARIS 22, VALARIS 37, VALARIS 100 and VALARIS 142, resulting in a pre-tax gain of $ 20.7 million during the eight months ending December 31, 2021 (Successor).

Any gains recognized on sales of assets are included in Other, net on the Consolidated Statements of Operations.

No assets were classified as held-for-sale on our Consolidated Balance Sheet as of December 31, 2022 (Successor) and December 31, 2021 (Successor).

During the year ended December 31, 2022 (Successor), we recognized an aggregate pre-tax gain of $ 130.5 million for the sales of VALARIS 113, VALARIS 114, VALARIS 36 and VALARIS 67.

Additionally, we recognized pre-tax gains of $ 3.2 million and $ 7.0 million related to additional proceeds received for our 2021 sale of VALARIS 100 and 2020 sale of VALARIS 68, respectively, resulting from post-sale conditions of those sale agreements.

In September 2022, we reached an agreement to sell VALARIS 54 to a third party, the closing of which is subject to customary closing conditions, after completion of its current contract in March 2023.

We expect to recognize a pre-tax gain on the sale of approximately $ 28 million during the first half of 2023.

During the eight months ended December 31, 2021, we sold VALARIS 22, VALARIS 37, VALARIS 100 and VALARIS 142, resulting in a pre-tax gain of $ 20.7 million.

In April 2021, we sold VALARIS 101 resulting in a pre-tax gain of $ 5.3 million.

In March 2021, we sold our Australia office building resulting in an insignificant pre-tax gain.

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 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.

The carrying value of certain 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 for an aggregate pre-tax gain of $ 8.6 million.

During the third quarter of 2020, we classified VALARIS 8504, VALARIS 84 and VALARIS 88 as held-for-sale.

1 unchanged sentence

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 current assets, on our Consolidated Balance Sheet as of December 31, 2020.

The office was subsequently sold in the first quarter of 2021 and we recognized an immaterial pre-tax gain during the four months ended April 30, 2021 (Predecessor).

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 68 and VALARIS 70 as held-for-sale.

With the exception of VALARIS 70, we determined that the fair value, less costs to sell, based on each rig's estimated sales price, was in excess of the respective carrying value.

Therefore, we concluded that there was no impairment for VALARIS 6002 and VALARIS 68.

For VALARIS 70, we recognized a pre-tax impairment charge of $ 10.2 million.

VALARIS 6002 and VALARIS 68 were subsequently sold in the first quarter of 2020 and VALARIS 70 was sold in the second quarter of 2020.

VALARIS 101 was sold and resulted in a gain of $ 5.3 million during the four months ended April 30, 2021 (Predecessor).

The carrying value of our debt as of December 31, 2021 (Successor) and 2020 (Predecessor) consisted of the following (in millions):

Successor Predecessor

2021 2020 (1)

Secured first lien notes due 2028 $ 545.3 $ —

6.875 % Senior notes due 2020

4.70 % Senior notes due 2021

4.875 % Senior notes due 2022 (2)

3.00 % Exchangeable senior notes due 2024

4.50 % Senior notes due 2024

4.75 % Senior notes due 2024 (2)

8.00 % Senior notes due 2024

5.20 % Senior notes due 2025

7.375 % Senior notes due 2025 (2)

7.75 % Senior notes due 2026

7.20 % Debentures due 2027

7.875 % Senior notes due 2040

5.40 % Senior notes due 2042 (2)

5.75 % Senior notes due 2044

5.85 % Senior notes due 2044 (2)

Amounts drawn under the Revolving Credit Facility (3)

Total debt $ 545.3 $ 7,096.3

Liabilities Subject to Compromise — 7,096.3

current maturities — —

Total long-term debt $ 545.3 $ —

(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 (Predecessor).

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 (Predecessor).

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 Statements of Operations for the year ended December 31,

2020 (Predecessor).

On the Effective Date, in accordance with the plan of reorganization, all outstanding obligations under the Predecessor's Senior Notes, including the 2024 Convertible Notes, and the Revolving Credit Facility were cancelled and the holders thereunder received their pro rata share of certain Common Shares issued on the Effective Date.

See below and " Note 2 - Chapter 11 Proceedings" 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.

On the Effective Date, in accordance with the plan of reorganization and Backstop Commitment Agreement, dated August 18, 2020 (as amended, the "BCA"), the Company consummated the rights offering of the First Lien Notes and associated shares in an aggregate principal amount of $ 550.0 million.

These rigs were sold during the fourth quarter of 2020 for an aggregate pre-tax gain of $ 2.7 million.

First Lien Notes Indenture

On the Effective Date, in accordance with the plan of reorganization and Backstop Commitment Agreement, dated August 18, 2020 (as amended, the "BCA"), the Company consummated the rights offering of the First Lien Notes and associated Common Shares in an aggregate principal amount of $ 550.0 million.

In accordance with the BCA, certain holders of senior notes claims and certain holders of claims under the Revolving Credit Facility who provided backstop commitments received the backstop premium in an aggregate amount equal to $ 50.0 million in First Lien Notes and 2.7 % of the Common Shares on the Effective Date.

T he Debtors paid a commitment fee of $ 20.0 million, in cash prior to the Petition Date, which was loaned back to the reorganized company upon emergence.

The Debtors paid a commitment fee of $ 20.0 million, in cash prior to the Petition Date, which was loaned back to the reorganized company upon emergence.

Therefore, upon emergence the Debtors received $ 520.0 million in cash in exchange for a $ 550.0 million note, which includes the backstop premium.

6 unchanged sentences

Interest on the First Lien Notes accrues, at our option, at a rate of:

(i) 8.25 % per annum, payable in cash;

(ii) 10.25 % per annum, with 50 % of such interest to be payable in cash and 50 % of such interest to be paid in kind;

or (iii) 12 % per annum, with the entirety of such interest to be paid in kind.

(1) 8.25 % per annum, payable in cash;

(2) 10.25 % per annum, with 50 % of such interest to be payable in cash and 50 % of such interest to be paid in kind;

or (3) 12 % per annum, with the entirety of such interest to be paid in kind.

Interest is due semi-annually in arrears on May 1 and November 1 of each year and shall be computed on the basis of a 360-day year of twelve 30-day months.

The first cash interest payment was made on November 1, 2021.

At any time prior to April 30, 2023, the Company may redeem up to 35 % of the aggregate principal amount of the First Lien Notes at a redemption price of 104 % up to the net cash proceeds received by the Company from equity offerings provided that at least 65 % of the aggregate principal amount of the First Lien Notes remains outstanding and provided that the redemption occurs within 120 days after such equity offering of the Company.

At any time prior to April 30, 2023, the Company may redeem the First Lien Notes at a redemption price of 104 % plus a “make-whole” premium.

On or after April 30, 2023, the Company may redeem all or part of the First Lien Notes at fixed redemption prices (expressed as percentages of the principal amount), plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

The Company may also redeem the First Lien Notes, in whole or in part, at any time and from time to time on or after April 30, 2026 at a redemption price equal to 100 % of the principal amount plus accrued and unpaid interest, if any, to, but excluding, the applicable redemption date.

At any time prior to April 30, 2023, the Company may redeem the First Lien Notes at a redemption price of 104 % of the principal amount plus a “make-whole” premium.

On or after April 30, 2023, the Company may redeem all or part of the First Lien Notes at fixed redemption prices (which are expressed as percentages of the principal amount) beginning at 104 % on April 30, 2023 and declining each 12-month period thereafter to 100 % on and after April 30, 2026, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

Notwithstanding the foregoing, if a Change of Control (as defined in the Indenture, with certain exclusions as provided therein) occurs, the Company will be required to make an offer to repurchase all or any part of each note holder’s notes at a purchase price equal to 101 % of the aggregate principal amount of First Lien Notes repurchased, plus accrued and unpaid interest to, but excluding, the applicable date.

The Indenture contains covenants that limit, among other things, the Company’s ability and the ability of the guarantors and other restricted subsidiaries, to:

(i) incur, assume or guarantee additional indebtedness;

(ii) pay dividends or distributions on equity interests or redeem or repurchase equity interests;

(iii) make investments;

(iv) repay or redeem junior debt;

(v) transfer or sell assets;

(vi) enter into sale and lease back transactions;

(vii) create, incur or assume liens;

and (viii) enter into transactions with certain affiliates.

(1) incur, assume or guarantee additional indebtedness;

(2) pay dividends or distributions on equity interests or redeem or repurchase equity interests;

(3) make investments;

(4) repay or redeem junior debt;

(5) transfer or sell assets;

(6) enter into sale and lease back transactions;

(7) create, incur or assume liens;

and (8) enter into transactions with certain affiliates.

These covenants are subject to a number of important limitations and exceptions.

As of December 31, 2022 (Successor), we were in compliance with our covenants under the Indenture.

The Indenture also provides for certain customary events of default, including, among other things, nonpayment of principal or interest, breach of covenants, failure to pay final judgments in excess of a specified threshold, failure of a guarantee to remain in effect, failure of a collateral document to create an effective security interest in collateral, with a fair market value in excess of a specified threshold, bankruptcy and insolvency events, cross payment default and cross acceleration, which could permit the principal, premium, if any, interest and other monetary obligations on all the then outstanding First Lien Notes to be declared due and payable immediately.

The Company incurred $ 5.2 million in issuance costs in association with the First Lien Notes that are being amortized into interest expense over the expected life of the notes using the effective interest method.

The Company incurred $ 5.2 million in issuance costs in 2021 associated with the First Lien Notes.

Also, in August 2022, the Company completed a consent solicitation pursuant to which the Company amended the Indenture to (1) implement a consolidated net income builder basket for restricted payments, increase the general basket for restricted payments from $ 100.0 million to $ 175.0 million and make other incremental changes to the Company’s restricted payments capacity and (2) increase the general basket for investments from the greater of $ 100.0 million and 4.0 % of total assets to the greater of $ 175.0 million and 6.5 % of total assets.

The Company incurred $ 3.9 million of costs in connection with the consent solicitation, comprised of a consent fee paid to consenting holders and professional fees.

These costs along with the issuance costs incurred in 2021 are being amortized into interest expense over the expected term of the First Lien Notes using the effective interest method.

Predecessor Debtor in Possession Financing

On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into the Debtor-in-Possession ("DIP") 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 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.

On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into the Debtor-in-Possession ("DIP") 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 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.

As of the Effective Date, there were no borrowings outstanding against our DIP facility and there were no DIP claims payable subsequent to, or that otherwise survived, the Effective Date.

The DIP Credit Agreement terminated on the Effective Date.

As of December 31, 2020 (Predecessor), we had no borrowings outstanding against our DIP Facility.

Predecessor Senior Notes

The commencement of the Chapter 11 Cases was considered an event of default under each series of our senior notes and all obligations thereunder were accelerated.

The commencement of the Chapter 11 Cases was considered an event of default under our Senior Notes and all obligations thereunder were accelerated.

However, any efforts to enforce payment obligations related to the acceleration of our debt were automatically stayed as a result of the filing of the Chapter 11 Cases.

Accordingly, the $ 6.5 billion in aggregate principal amount outstanding under the Senior Notes as well as $ 201.9 million in associated accrued interest as of the Petition Date were classified as Liabilities Subject to Compromise in our Consolidated Balance Sheets as of December 31, 2020 (Predecessor).

On the Effective Date, pursuant to the plan of reorganization, each series of our senior notes were cancelled and the holders thereunder received the treatment as set forth in the plan of reorganization.

The below paragraphs in this section contain further details about the inception or purchase of each of the Predecessor Senior Notes that were cancelled.

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 were repaid at maturity in August 2019, (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 was 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 was 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 was payable semiannually on March 15 and September 15 of each year.

Interest on the New 2044 Notes was 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 was payable semiannually on April 1 and October 1 of each year.

The Existing 2044 Notes together with the New 2044 Notes, the "2044 Notes", were treated as a single series of debt securities under the indenture governing the notes.

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 was 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 fully and unconditionally guaranteed the performance of all Pride obligations with respect to the Acquired Notes.

Certain of these senior notes allowed us to redeem these senior notes, either in whole in part, subject to the payment of certain “make whole” premiums.

The indentures governing these senior notes contained customary events of default, including failure to pay principal or interest on such notes when due, among others.

The indenture also contained 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.

Predecessor 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 was 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 contained customary events of default, including failure to pay principal or interest on the Debentures when due, among others.

Predecessor 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 the agreement, we had 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, were automatically stayed as a result of the filing of the Chapter 11 Cases.

Accordingly, the aggregate principal amount of 2024 Convertible Notes outstanding as well as associated accrued interest as of the Petition Date were classified as Liabilities Subject to Compromise in our Consolidated Balance Sheet as of December 31, 2020 (Predecessor).

On the Effective Date, pursuant to the plan of reorganization, all outstanding obligations under the 2024 Convertible Notes, were cancelled and the holders thereunder received the treatment as set forth in the plan of reorganization.

If our average share price had exceeded the exchange price during a respective Predecessor reporting period, an assumed number of shares required to settle the conversion obligation in excess of the principal amount would have been 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.

Interest on the 2024 Convertible Notes was 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 was 17.8336 shares per $1,000 principal amount of notes, representing an exchange price of $ 56.08 per share, and was 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.

The carrying amount of the 2024 Convertible Notes at December 31, 2020 (Predecessor) represented 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 (Predecessor).

The equity component was $ 220.0 million at December 31, 2020 (Predecessor) and remained in Additional paid-in capital.

The equity component was not remeasured if we continued 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 years ended December 31, 2020 and 2019 (Predecessor), we recognized $ 16.1 million and $ 25.5 million, respectively, associated with coupon interest.

Amortization of debt discount and issuance costs were $ 21.4 million and $ 32.5 million for the years ended December 31, 2020 and 2019 (Predecessor), 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 Statements of Operations the year ended December 31, 2020 (Predecessor).

The indenture governing the 2024 Convertible Notes contained customary events of default, including failure to pay principal or interest on such notes when due, among others.

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".

Tender Offers and Open Market Repurchases (Predecessor)

In early March 2020, we repurchased $ 12.8 million of the 2021 Notes outstanding 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 our senior notes.

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 Statements of Operations.

Our tender offers and open market repurchases 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

Year Ended December 31, 2019

4.50 % Senior notes due 2024

$ 320.0 $ 240.0

4.75 % Senior notes due 2024

8.00 % Senior notes due 2024

5.20 % Senior notes due 2025

7.375 % Senior notes due 2025

7.20 % Senior notes due 2027

$ 951.8 $ 724.1

(1) Excludes accrued interest paid to holders of the repurchased senior notes.

On the Effective Date, pursuant to the plan of reorganization, our Senior Notes were cancelled and the holders thereunder received the treatment as set forth in the plan of reorganization.

Predecessor Revolving Credit Facility

Effective upon closing of the Rowan Transaction, our revolving credit facility was $ 1.6 billion.

The commencement of the Chapter 11 Cases resulted in an event of default under our Revolving Credit Facility.

3 unchanged sentences

Prior to the Effective Date, pursuant to the plan of reorganization, all undrawn letters of credit issued under the Revolving Credit Facility were collateralized pursuant to the terms of the Revolving Credit Facility.

Predecessor Tender Offers and Open Market Repurchases

In March 2020, we repurchased $ 12.8 million of our outstanding 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.

Interest Expense

Interest expense totaled $ 45.3 million for the year ended December 31, 2022 (Successor) which was net of capitalized interest of $ 1.2 million for capital projects.

Interest expense totaled $ 31.0 million and $ 2.4 million for the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor), respectively.

Interest expense totaled $ 290.6 million and $ 428.3 million for the years ended December 31, 2020 and 2019 ( Predecessor), respectively, which was net of capitalized interest of $ 1.3 million and $ 20.9 million associated with newbuild rig construction and other capital projects.

Interest expense totaled $ 290.6 million for the year ended December 31, 2020 (Predecessor) which was net of capitalized interest of $ 1.3 million associated with newbuild rig construction and other capital projects.

1 unchanged sentence

We discontinued making interest payments on our unsecured senior notes beginning in June 2020.

Amortization of debt discount and issuance costs was $ 1.0 million, $ 0.5 million and $ 36.8 million for year ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor) and the year ended December 31, 2020 (Predecessor), respectively.

Additionally, we incurred an aggregate net non-cash charge of $ 447.9 million for the year ended December 31, 2020 (Predecessor) to write off unamortized debt discounts, premiums and issuance costs associated with our Senior Notes and Revolving Credit Facility, which is included in Reorganization items, net on our Consolidated Statements of Operations.

DERIVATIVE INSTRUMENTS

7 unchanged sentences

The exercise of these termination rights are not stayed under the Bankruptcy Code and the counterparties elected to terminate their outstanding derivatives with us in September 2020 for an aggregate settlement of $ 3.6 million which was recorded as a gain in Contract drilling expense in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor).

As a result, we no longer had derivative assets or liabilities on our Consolidated Balance Sheet as of December 31, 2020 (Predecessor).

During the four months ended April 30, 2021 (Predecessor) and eight months ended December 31, 2021 (Successor), we did not enter into derivative contracts;

therefore, we do not have derivative assets or liabilities on our Consolidated Balance Sheet as of December 31, 2021(Successor).

Historically we have 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.

During the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor), we did not enter into derivative contracts;

therefore, we do not have derivative assets or liabilities on our Consolidated Balance Sheets as of December 31, 2022 (Successor) or December 31, 2021 (Successor).

Historically, we 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 were as follows (in millions):

Gain (Loss) Recognized in Other Comprehensive

Income ("OCI")

on Derivatives

(Effective Portion)

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Foreign Currency Forward Contracts

Total $ — $ — $ ( 5.4 ) $ 1.6

(Gain) Loss Reclassified from

AOCI into Income

(Effective Portion) (1)

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Interest rate lock contracts (2)

$ — $ — $ — $ 1.9

Foreign currency forward contracts (3)

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Loss recognized in Other Comprehensive Income ("OCI") on Derivatives (Effective Portion) $ — $ — $ ( 5.4 )

Gain reclassified from AOCI into income (Effective Portion) (1)

$ — $ ( 5.6 ) $ ( 11.6 )

Total $ — $ ( 5.6 ) $ ( 11.6 ) $ 8.3

(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 expense, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transaction.

(2) Losses on interest rate lock derivatives reclassified from AOCI into income were included in Interest expense, net, in our Consolidated Statements of Operations.

(1) During the four months ended April 30, 2021 (Predecessor), $ 5.6 million of gains were reclassified from AOCI into Loss on impairment in our Consolidated Statements of Operations in connection with the impairment of certain rigs.

During the year ended December 31, 2020 (Predecessor), $ 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 Statements of Operations.

During the year ended December 31, 2019 (Predecessor), $ 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 Statements 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, 2021 (Successor) and December 31, 2020 (Predecessor) we did not have open derivative contracts to hedge against this risk.

Net losses of $ 0.2 million and $ 6.4 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 and 2019 (Predecessor), respectively.

SHAREHOLDERS' EQUITY

Activity in our various shareholders' equity accounts for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the years ended December 31, 2020 (Predecessor) and 2019 (Predecessor) were as follows (in millions, except per share amounts):

Activity in our various shareholders' equity accounts for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor) were as follows (in millions):

Shares Par Value Additional

3 unchanged sentences

BALANCE, December 31, 2019 (Predecessor) 205.9 $ 82.5 $ 8,627.8 $ — $ 671.7 $ 6.2 $ ( 77.3 ) $ ( 1.3 )

Net income (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 — — — 0.1 —

Net changes in pension and other postretirement benefits — — — — — ( 21.7 ) — —

Distributions to noncontrolling interests — — — — — — — ( 4.5 )

Equity issuance cost — — ( 0.6 ) — — — — —

Shares issued under share-based compensation plans, net 2.7 1.1 ( 1.3 ) — — — ( 0.7 ) —

Repurchase of shares — — — — — — ( 4.5 ) —

Share-based compensation cost — — 37.2 — — — — —

Net other comprehensive income — — — — — 9.7 — —

BALANCE, December 31, 2019 (Predecessor) 205.9 82.5 8,627.8 — 671.7 6.2 ( 77.3 ) ( 1.3 )

Net loss — — — — ( 4,855.5 ) — — ( 2.1 )

6 unchanged sentences

Net other comprehensive loss — — — — — ( 17.6 ) — —

Shares Par Value Additional

Capital Warrants Retained

Earnings (Deficit) AOCI Treasury

Shares Non-controlling

BALANCE, December 31, 2020 (Predecessor) 206.1 82.6 8,639.9 — ( 4,183.8 ) ( 87.9 ) ( 76.2 ) ( 4.3 )

8 unchanged sentences

BALANCE, May 1, 2021 (Successor) 75.0 0.8 1,078.7 16.4 — — — ( 1.1 )

Adjustment to unrecognized tax benefits — — — — 11.0 — — —

Net income (loss) — — — — ( 27.4 ) — — 3.8

2 unchanged sentences

BALANCE, December 31, 2021 (Successor) 75.0 0.8 1,083.0 16.4 ( 16.4 ) ( 9.1 ) — 2.7

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 5 - Rowan Transaction" for additional information.

Net income — — — — 176.5 — — 5.3

Share-based compensation cost — — 17.4 — — — — —

Shares issued under share-based compensation plans, net 0.2 — — — — — — —

Net changes in pension and other postretirement benefits — — — — — 23.8 — —

Shares withheld for taxes on vesting of share-based awards — — ( 2.5 ) — — — — —

BALANCE, December 31, 2022 (Successor) 75.2 $ 0.8 $ 1,097.9 $ 16.4 $ 160.1 $ 14.7 $ — $ 8.0

Valaris Limited Share Capital

3 unchanged sentences

Cancellation of Predecessor Equity and Issuance of Warrants

On the Effective Date and pursuant to the plan of reorganization, the Legacy Valaris Class A ordinary shares were cancelled and the Company issued 5,645,161 Warrants to the former holders of the Company's equity interests outstanding prior to the Effective Date.

On the Effective Date and pursuant to the plan of reorganization, the Legacy Valaris Class A ordinary shares were cancelled and the Company issued 5.6 million Warrants to the former holders of the Company's equity interests outstanding prior to the Effective Date.

2 unchanged sentences

Management Incentive Plan

In accordance with the plan of reorganization, Valaris Limited adopted the MIP as of the Effective Date and authorized and reserved 8,960,573 Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP, which may be in the form of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and cash awards or any combination thereof.

In accordance with the plan of reorganization, Valaris Limited adopted the MIP as of the Effective Date and authorized and reserved 9.0 million Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP.

See " Note 1 1 - Share Based Compensation" for information on equity awards granted under the MIP subsequent to the Effective Date.

Share Repurchase Program

In September 2022, our board of directors authorized a share repurchase program under which we may purchase up to $ 100.0 million of our outstanding Common Shares.

The share repurchase program does not have a fixed expiration, and may be modified, suspended or discontinued at any time.

As of December 31, 2022 (Successor), there have been no share repurchases under this repurchase program.

SHARE BASED COMPENSATION

1 unchanged sentence

Therefore, any Predecessor remaining long-term incentive plans were cancelled, including Legacy Valaris's 2018 Long-Term Incentive Plan (the "2018 LTIP") as well as plans assumed in the Rowan Transaction ("Rowan LTIP") and in connection with the Atwood Merger (the “Atwood LTIP”, and together with the 2018 LTIP and the Rowan LTIP, the "Legacy LTIPs").

Therefore, any Predecessor remaining long-term incentive plans were cancelled.

See " Note 2 - Chapter 11 Proceedings" for additional information.

As of December 31, 2021, there were 7,493,135 shares available for issuance under the MIP.

Valaris Limited adopted the MIP as of the Effective Date and authorized and reserved 9.0 million Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP, which may be in the form of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and cash awards or any combination thereof.

As of December 31, 2022 (Successor), there were 7.1 million shares available for issuance under the MIP.

Non-Vested Share Awards, Cash-Settled Awards and Non-employee Director Awards

5 unchanged sentences

Additionally, non-employee directors received an annual grant of time-based restricted awards which vest in full on the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant.

Non-employee directors are permitted to elect to receive deferred share awards which can be settled and delivered at the vesting date, six-month anniversary following the termination of the director's service or a specific pre-determined date.

During the eight months ended December 31, 2021 (Successor), 1.1 million share unit awards were granted to our employees and non-employee directors pursuant to the MIP.

No cash-settled awards were granted during this period under the MIP.

Non-employee directors are permitted to elect to receive deferred share awards which can be settled and delivered on the six-month anniversary following the termination of the director's service or a specific pre-determined date.

Our non-vested share awards do not have voting or participating rights as the dividend equivalent provided for in the award agreement is forfeitable (except in certain limited circumstances) and further our debt agreements limit our ability to pay dividends and none have been declared.

4 unchanged sentences

Additionally, non-employee directors were permitted to elect to receive deferred share awards.

Deferred share awards vested at the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant but were not to be settled until the director terminated service from the Board.

Deferred share awards were to be settled in cash, shares or a combination thereof at the discretion of the compensation committee.

During the four months ended April 30, 2021 (Predecessor), no share unit awards or cash-settled awards were granted.

Predecessor's non-vested share awards had voting and dividend rights effective on the date of grant, and the non-vested share units had dividend rights effective on the date of grant.

The Predecessor's non-vested share awards had voting and dividend rights effective on the date of grant, and the non-vested share units had dividend rights effective on the date of grant.

Compensation expense for share awards was 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).

2 unchanged sentences

As discussed above, in accordance with the plan of reorganization, the unvested awards of employees, senior executive officers and non-employee directors remaining on the Effective Date were cancelled for no consideration.

The following table summarizes share award and cash-settled award compensation expense recognized

(in millions):

The following table summarizes share award and cash-settled award compensation expense recognized (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Contract drilling $ 3.9 $ 1.6 $ 2.4 $ 10.7

6 unchanged sentences

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Weighted-average grant date fair value of share awards granted (per share) (1)

2 unchanged sentences

$ 12.8 $ — $ — $ 3.3

(1) During the four months ended April 30, 2021 (Predecessor), no share unit awards were granted.

(2) No share awards vested during the eight months ended December 31, 2021 (Successor).

Cash-Settled Awards

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Weighted-average grant date fair value of share awards granted (per share) (3)

2 unchanged sentences

$ — $ — $ — $ 0.2

(1) During the eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and year ended December 31, 2019 (Predecessor) no cash-settled awards were granted.

(2) During the eight months ended December 31, 2021 (Successor), no cash-settled awards were vested.

The following table summarizes share awards and cash-settled awards activity for the four months ended April 30, 2021 (Predecessor) and eight months ended December 31, 2021 (Successor) (shares in thousands):

Share Awards Cash-settled Awards

(1) During the four months ended April 30, 2021 (Predecessor), no share awards were granted.

(2) No share awards vested during the eight months ended December 31, 2021 (Successor).

During the four months ended April 30, 2021 (Predecessor), we had an immaterial vesting of share awards.

(3) During the years ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor) and four months ended April 30, 2021 (Predecessor), no cash-settled awards were granted.

(4) During the years ended December 31, 2022 (Successor) and eight months ended December 31, 2021 (Successor), no cash-settled awards vested.

During the four months ended April 30, 2021 (Predecessor), we had an immaterial vesting of cash-settled awards.

The following table summarizes share awards activity for the year ended December 31, 2022 (Successor) (shares in thousands):

Awards Weighted-Average

Fair Value Awards Weighted-Average

Share awards and cash-settled awards as of

December 31, 2020 (Predecessor)

2,982 $ 16.40 311 $ 22.74

Vested ( 195 ) 16.93 ( 25 ) 11.35

Forfeited ( 295 ) 32.98 ( 5 ) 29.18

Cancelled ( 2,492 ) 14.25 ( 281 ) 23.65

Share awards and cash-settled awards as of

April 30, 2021 (Predecessor)

Share awards and cash-settled awards as of

May 1, 2021 (Successor)

Share awards as of December 31, 2021 (Successor)

Granted 331 45.39

Forfeited ( 192 ) 25.02 — —

Share awards and cash-settled awards as of

December 31, 2021 (Successor)

( 284 ) 26.40

Forfeited ( 44 ) 25.02

Share awards as of December 31, 2022 (Successor)

(1) The vested share awards include 48,770 awards with a weighted average grant date fair value of $ 30.36 per share, for which delivery of the shares is deferred until the third anniversary of the date of grant.

As of December 31, 2022, these awards had a weighted average remaining contractual life of 1.6 years and a total fair value of $ 3.3 million.

Performance Awards

Successor Awards

Under the Company's MIP, performance awards may be issued to our senior executive officers.

Under the Company's MIP, performance awards may be issued to our senior officers.

The performance awards are allocated based on three performance goals and subject to achievement of those performance goals based on (a) designated share price hurdles whereby our closing stock price must equal or exceed certain market price targets for ninety consecutive trading days (the "Market-Based Objectives");

6 unchanged sentences

Compensation expense for performance awards is recognized over the requisite service period using the accelerated method and is reduced for forfeited awards in the period in which the forfeitures occur.

The fair value of the 2021 performance awards granted during the eight months ended December 31, 2021 (Successor) are measured on the date of grant.

The fair value of the performance awards granted during the year ended December 31, 2022 (Successor) and eight months ended December 31, 2021 (Successor) are measured on the date of grant.

The grant-date fair value per unit for the portion of the performance awards related to Performance-Based Objectives was equal to the closing price of the Company's stock on the grant date.

The portion of these awards that were based on the Company's achievement of Market-based Objectives were valued at the date of grant using a Monte Carlo simulation with the following weighted average assumptions for the grants made over the eight months ended December 31, 2021:

Year Ended December 31, 2022 Eight Months Ended December 31, 2021

Expected price volatility 61 % 61 %

3 unchanged sentences

As our trading history increases, it will bear greater weight in determining our expected price volatility assumption.

The following table summarizes the performance award activity for the eight months ended December 31, 2021 (Successor) (shares in thousands):

Awards Weighted Average Grant Date Fair Value Price

Balance as of May 1, 2021 (Successor)

The weighted average grant-date fair value of performance awards granted during the year ended December 31, 2022 (Successor) and the eight months ended December 31, 2021 (Successor) was $ 38.08 and $ 15.93 , respectively.

The following table summarizes the performance award activity for the year ended December 31, 2022 (Successor) (shares in thousands):

Weighted Average Grant Date Fair Value Price (2)

Balance as of December 31, 2021 (Successor)

Granted - Market-Based Objectives (1)

1 unchanged sentence

Total Granted 158 38.08

Forfeited - Market-Based Objectives ( 527 ) 11.04

Forfeited - Performance-Based Objectives ( 176 ) 25.02

Total Forfeited ( 703 ) 14.54

Balance as of December 31, 2022 (Successor)

1 unchanged sentence

The number of shares actually issued after considering forfeitures may range from zero to 236,817 .

During the eight months ended December 31, 2021 (Successor), we recognized of $ 0.7 million of compensation expense for performance awards, which was included in General and administrative expense in our Consolidated Statements of Operations.

As of December 31, 2021, there was $ 13.0 million of total estimated unrecognized compensation cost related to share awards, which has a weighted-average remaining vesting period of 2.6 years.

(2) There were no forfeited or vested shares for the year ended December 31, 2022 (Successor).

During the year ended December 31, 2022 (Successor) and eight months ended December 31, 2021 (Successor), we recognized of $ 6.7 million and $ 0.7 million of compensation expense for performance awards, respectively, which was included in General and administrative expense in our Consolidated Statements of Operations.

As of December 31, 2022 (Successor), there was $ 14.0 million of total estimated unrecognized compensation cost related to share awards, which has a weighted-average remaining vesting period of 1.6 years.

Predecessor Awards

Under the 2018 LTIP, performance awards were permitted to be issued to senior executive officers.

Under the Predecessor incentive plans, performance awards were permitted to be issued to senior officers.

The 2019 performance awards were subject to achievement of specified performance goals based on both relative and absolute total shareholder return ("TSR").

5 unchanged sentences

Any subsequent changes in this estimate were recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurred.

The aggregate grant-date fair value of performance awards granted during 2019 was $ 6.7 million.

Subsequent to issuance, the 2020 performance awards were forfeited.

The aggregate fair value of performance awards vested during 2020 and 2019 (Predecessor) totaled $ 5.2 million and $ 2.2 million, respectively.

During the years ended December 31, 2020 and 2019 (Predecessor) we recognized $ 1.0 million and $ 3.2 million of compensation expense for performance awards, respectively, which was included in General and administrative expense in our Consolidated Statements of Operations.

The aggregate fair value of performance awards vested during 2020 (Predecessor) totaled $ 5.2 million.

During the year ended December 31, 2020 (Predecessor), we recognized $ 1.0 million of compensation expense for performance awards which was included in General and administrative expense in our Consolidated Statements of Operations.

No compensation expense was recognized in connection with these awards during the four months ended April 30, 2021 (Predecessor) or the eight months ended December 31, 2021 (Successor) as per the terms of these awards, no amount could be or can be earned due to the TSR provisions of the award.

2 unchanged sentences

Predecessor Awards

Share Appreciation Rights ("SARs") granted to employees generally became exercisable in 33 % increments over a three-year period and, to the extent not exercised, expired 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 Predecessor had accounted for SARs as equity awards.

No SARs had been granted since 2013 under the Rowan LTIP.

As of December 31, 2020, SARs granted to purchase 426,049 shares were outstanding under the Rowan LTIP.

During the four months ended April 30, 2021 (Predecessor), 106,408 of SARs expired unexercised, and as discussed above, in accordance with the plan of reorganization, the remaining outstanding SARs were cancelled.

Share Appreciation Rights ("SARs") granted to employees under our Predecessor incentive plans were accounted for as equity awards.

As of April 30, 2021, there were 319,641 SARs outstanding, all of which were fully vested.

In accordance with the plan of reorganization, these remaining outstanding SARs were cancelled.

Share Option Awards

Predecessor Awards

Share option awards granted to employees generally became 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, expired on either the seventh or tenth anniversary of the date of grant.

The exercise price of options granted under the 2018 LTIP equaled the market value of the underlying shares on the date of grant.

Excluding options assumed under the Atwood LTIP and Rowan LTIP, no options have been granted since 2011.

As of December 31, 2020, options granted to purchase 318,377 shares were outstanding under the Legacy LTIPs.

As discussed above, in accordance with the plan of reorganization, these outstanding options were cancelled.

As of April 30, 2021, there were fully vested options outstanding to purchase 313,377 shares under our Predecessor incentive plans.

In accordance with the plan of reorganization, these outstanding options were cancelled.

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.

We have defined-benefit pension plans and post-retirement health and life insurance plans 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.

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.

The most significant of the assumed plans is the Rowan Pension Plan.

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.

(1) a pension plan which was amended in 2018 to freeze any future benefit accrual whereby eligible employees no longer receive pay credits in the plan and newly hired employees are not eligible to participate (the “Pension Plan”);

(2) a legacy supplemental executive retirement plan which was also frozen in 2018 (the “Legacy SERP”);

and (3) a supplemental executive retirement plan which prior to July 1, 2021, was not designated as a defined benefit plan (the “SERP”).

Additionally, we have frozen retiree life and medical supplemental plans (the “Retiree Medical Plans”) which provide post-retirement health and life insurance benefits.

The SERP is a non-qualified plan that provided eligible employees an opportunity to defer a portion of their compensation for use after retirement.

The SERP was 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 were marketable securities which, pursuant to the plan of reorganization, were liquidated upon the Effective Date and used to satisfy the claims of creditors.

Net unrealized gains of $ 1.2 million and $ 3.2 million from marketable securities held in our SERP were included in Other, net, in our Consolidated Statements of Operations for the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.

The following table presents the changes in benefit obligations and plan assets for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor) and the funded status and weighted-average assumptions used to determine the benefit obligation at the measurement date (dollars in millions):

The following table presents the changes in benefit obligations and plan assets for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor) and the funded status and weighted-average assumptions used to determine the benefit obligation at the measurement date (dollars in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total

2 unchanged sentences

Interest cost 22.0 0.4 22.4 15.3 0.3 15.6 6.5 0.1 6.6

Service cost — — — — — — .1 — 0.1

Actuarial loss (gain) ( 191.0 ) ( 3.8 ) ( 194.8 ) 20.6 ( 4.2 ) 16.4 ( 55.0 ) ( 1.0 ) ( 56.0 )

Plan settlements ( 1.4 ) — ( 1.4 ) ( 25.9 ) — ( 25.9 ) — — —

Plan curtailments — — — — — — ( 3.3 ) — ( 3.3 )

Plan amendments — — — 0.2 — 0.2 — — —

Benefits paid ( 46.0 ) ( 0.6 ) ( 46.6 ) ( 25.7 ) ( 0.3 ) ( 26.0 ) ( 12.1 ) ( 0.2 ) ( 12.3 )

Net transfer in/(out) (including the effect of any business combinations/divestitures) 17.3 5.0 22.3 — — — — — —

Net transfer in (including the effect of any business combinations/divestitures) — — — 17.3 5.0 22.3 — — —

BALANCE at the end of the period $ 611.5 $ 11.6 $ 623.1 $ 827.9 $ 15.6 $ 843.5 $ 826.1 $ 14.8 $ 840.9

10 unchanged sentences

Net benefit liabilities $ ( 153.0 ) $ ( 11.6 ) $ ( 164.6 ) $ ( 193.3 ) $ ( 15.6 ) $ ( 208.9 ) $ ( 174.1 ) $ ( 14.8 ) $ ( 188.9 )

Accumulated contributions in excess of (less than) net periodic benefit cost $ ( 180.0 ) $ ( 19.8 ) $ ( 199.8 ) $ ( 174.1 ) $ ( 14.8 ) $ ( 188.9 ) $ ( 179.6 ) $ ( 15.8 ) $ ( 195.4 )

Accumulated contributions less than net periodic benefit cost $ ( 159.8 ) $ ( 19.5 ) $ ( 179.3 ) $ ( 180.0 ) $ ( 19.8 ) $ ( 199.8 ) $ ( 174.1 ) $ ( 14.8 ) $ ( 188.9 )

Amounts not yet reflected in net periodic benefit cost:

Actuarial gain (loss) 7.0 7.9 14.9 ( 13.1 ) 4.2 ( 8.9 ) — $ — —

Prior service credit (cost) ( 0.2 ) — ( 0.2 ) — — — — — —

Prior service cost ( 0.2 ) — ( 0.2 ) ( 0.2 ) — ( 0.2 ) — — —

Total accumulated other comprehensive income (loss) $ 6.8 $ 7.9 $ 14.7 $ ( 13.3 ) $ 4.2 $ ( 9.1 ) $ — $ — $ —

3 unchanged sentences

Cash balance interest credit rate 3.23 % N/A 3.05 % N/A 2.94 % N/A

The unfunded obligation increased by $ 20.0 million as of December 31, 2021 when compared to the unfunded obligation as of April 30, 2021.

The increase was primarily attributable to the unfunded obligation under the SERP, having a balance of $ 16.2 million at December 31, 2021, which was transferred in as of July 1, 2021.

Additionally, a decline in the discount rate and the impact of updated census data contributed to the increase in the unfunded obligation in the amount of $ 9.2 million and $ 13.2 million, respectively.

This was partially offset by higher than expected return on plan assets of $ 7.1 million, and employer contributions of $ 2.4 million during the eight months ended December 31, 2021.

The unfunded obligation decreased by $ 110.6 million as of April 30, 2021 when compared to the unfunded obligation as of December 31, 2020.

The decrease was primarily attributable to the remeasurement of the pension and other post-retirement benefit plans at the Effective Date in fresh start accounting of $ 82.7 million due to an increase in the discount rate and higher than expected return on plan assets of approximately$ 56 million and $ 26 million, respectively.

See " Note 3 - Fresh Start Accounting" for more information on the remeasurement of the pension and other post-retirement benefit plans.

Additionally, employer contributions of $ 22.5 million made during the four months ended April 30, 2021 (Predecessor) drove a further decline in the unfunded obligation.

The unfunded obligation decreased by $ 44.3 million as of December 31, 2022 (Successor) when compared to the unfunded obligation as of December 31, 2021 (Successor).

The decrease was primarily attributable to $ 170.1 million from an increase in the discount rate and $ 29.3 million from change in the lump sum conversion assumptions.

This decrease was partially offset by lower than expected return on plan assets of $ 132.2 million and $ 22.4 million due to increase in interest cost.

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 assuming the actual or assumed expected date of separation for retirement.

The accumulated benefit obligations, which are presented below for all plans in the aggregate at December 31, 2021 and 2020, are based on services rendered to date, but exclude the effect of future salary increases (in millions):

Successor Predecessor

The accumulated benefit obligation, which is presented below for all plans in the aggregate at December 31, 2022 and 2021 (Successor), is based on services rendered to date, but exclude the effect of future salary increases (in millions):

Accumulated benefit obligation $ 623.1 $ 843.5

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):

The components of net periodic pension, retiree medical income and the weighted-average assumptions used to determine net periodic pension and retiree medical income were as follows (dollars in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 April 11, 2019 - December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Service cost (1)

8 unchanged sentences

( 0.4 ) 0.4 — ( 0.3 )

Amortization of net loss (2)

Net periodic pension and retiree medical cost (income) $ ( 8.7 ) $ ( 5.4 ) $ ( 14.6 ) $ ( 4.3 )

Amortization of net (gain) loss (2)

( 0.1 ) — 0.1 —

Net periodic pension and retiree medical income $ ( 16.4 ) $ ( 8.7 ) $ ( 5.4 ) $ ( 14.6 )

Discount rate 2.73 % 2.84 % 2.30 % 3.16 %

4 unchanged sentences

Settlement accounting is necessary when actual lump sums paid during a fiscal year exceed the sum of the service cost and interest cost for the year.

The settlement threshold was reached for the Rowan Pension Plan and we recognized a settlement charge of $ 0.4 million in our Consolidated Statements of Operations during the eight months ended December 31, 2021 (Successor).

During the year ended December 31, 2022 (Successor), eight months ended December 31, 2021 (Successor) and the year ended December 31, 2020 (Predecessor), the settlement threshold was reached for certain of our pension plans and we recognized a settlement credit of $ 0.4 million, a charge of $ 0.4 million and a credit of $ 0.3 million, respectively, in our Consolidated Statements of Operations.

In March 2021, the American Rescue Plan Act of 2021 ("ARPA-21") was passed.

ARPA-21 provides funding relief for U.S.

qualified pension plans which should lower pension contribution requirements over the next few years.

As a result, we did not make contributions to certain plans in 2021.

However, we currently expect to contribute approximately $ 3.8 million to our pension plans and to directly pay other post-retirement benefits of approximately $ 1.2 million in 2022.

qualified pension plans which has lowered pension contribution requirements and should continue to lower them over the next few years, relative to the pre-ARPA-21 contribution requirements.

We currently expect to contribute approximately $ 7.4 million to our pension plans and to directly pay other post-retirement benefits of approximately $ 1.2 million in 2023.

These amounts represent the minimum contributions we are required to make under relevant statutes.

We do not expect to make contributions in excess of the minimum required amounts.

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 pension plans' investment objectives for fund assets are to:

achieve a rate of return such that contributions are minimized and future assets are available to fund liabilities, maintain liquidity sufficient to pay benefits when due, diversify among asset classes so that assets earn a reasonable return with an acceptable level of risk and gradually de-risk the plan by increasing the allocation of investments which track the overall liabilities of the plan as the ratio of assets to liabilities improves and economic conditions warrant.

The plans employ several active managers with proven long-term records in their specific investment discipline.

Target allocations among asset categories and the fair value of each category of plan assets as of December 31, 2021 and 2020, classified by level within the fair value hierarchy are presented below.

Target allocations among asset categories and the fair value of each category of plan assets as of December 31, 2022 and 2021 (Successor), 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, 2021 (Successor)

large cap 22 % to 28 %

$ 173.7 $ — $ 173.7 $ —

small cap 4 % to 10 %

December 31, 2022 (1)

23.9 % to 33.9 %

large cap $ 99.4 $ — $ 99.4 $ —

small/mid cap 25.4 — 25.4 —

Global Low Volatility Equity 3.4 % to 13.4 %

38.0 — 38.0 —

19.7 % to 29.7 %

International all cap

2 unchanged sentences

22.4 — 22.4 —

Emerging markets 39.7 — 39.7 —

Real estate equities

1 unchanged sentence

Fixed income:

Aggregate 9 % to 19 %

73.1 — 73.1 —

Core plus 9 % to 19 %

74.3 74.3 — —

Cash and equivalents 0 % to 10 %

Group annuity contracts — — — —

Long-term corp bonds 45.3 — 45.3 —

Treasury STRIPS 83.7 — 83.7 —

Cash and equivalents $ 0 - $ 5.0

Total $ 458.5 $ 4.9 $ 453.6 $ —

December 31, 2020 (Predecessor)

December 31, 2021

large cap 22 % to 28 %

13 unchanged sentences

Cash and equivalents 0 % to 10 %

Group annuity contracts — — — —

Total $ 634.6 $ 78.8 $ 555.8 $ —

(1) During the year ended December 31, 2022, our investment policy was updated whereby the allocation target ranges are set for general asset classes and not specific investment types.

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 global low volatility equities include investments in a broad range of developed market global equity securities and may be held through a commingled or 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.

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 of “B” or above.

Additionally, the core plus category may invest in non-U.S.

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, 2021:

Securities in the fixed income categories include U.S.

government, corporate, mortgage- and asset-backed securities and Yankee bonds and should be rated investment grade or above.

Investments in this category should have an average investment rating of “A” or better.

The following is a description of the valuation methodologies used for the pension plan assets as of December 31, 2022 (Successor):

• 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.

equity securities, global low volatility equity securities, all non-U.S.

equity securities and fixed income securities categorized as Level 2 were held in commingled funds which were valued daily based on a net asset value.

• The real estate equities categorized as Level 2 were held in three accounts (a comingled real estate investment trust ("REIT") fund, a comingled U.S.

core real estate fund and a limited partnership).

The assets in the REIT fund were valued daily based on a net asset value and the assets in the both the U.S.

core real estate fund and 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 plan's 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 plan, which increased to 6.26 % at December 31, 2021 (Successor) from 6.03 % at December 31, 2020 (Predecessor).

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 plan, which increased to 7.10 % at December 31, 2022 (Successor) from 6.26 % at December 31, 2021 (Successor).

Estimated future annual benefit payments from plan assets are presented below.

9 unchanged sentences

Savings Plans

We have savings plans, (the Ensco Savings Plan, the Valaris Multinational Savings Plan, the Valaris 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 Valaris 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 Valaris Limited Retirement Plan allows eligible employees to make tax-deferred contributions to the plan.

Contributions made to the Valaris Multinational Savings Plan may or may not qualify for tax deferral based on each plan participant's local tax requirements.

We have savings plans, (the "Savings Plan", the "Multinational Savings Plan", the "Limited Retirement Plan"), which cover eligible employees as defined within each plan.

The Savings Plan includes a 401(k) savings plan feature, which allows eligible employees to make tax-deferred contributions to the plans.

Contributions made to the Multinational Savings Plan may or may not qualify for tax deferral based on each plan participant's local tax requirements.

The Limited Retirement Plan allows eligible employees in the U.K.

to make tax-deferred contributions to the plan.

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 and $ 18.7 million for the years ended December 31, 2020 and 2019 (Predecessor), respectively.

Effective August 1, 2020, in light of the then current economic environment, we suspended employer matching contributions for the Ensco Savings Plan and the Valaris Multinational Savings Plan.

In addition, effective December 1, 2020, the matching contributions in the Valaris Limited Retirement Plan were reduced.

Employer contributions were reinstated effective January 1, 2022 whereby 100 % of the amount contributed by the employee is matched up to a maximum of 4% of eligible salary.

We generated profits of $ 253.4 million and $ 373.1 million, losses of $ 51.0 million and profits of $ 39.0 million before income taxes in the U.S.

for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the years ended December 31, 2020 and 2019 (Predecessor), respectively.

We generated losses of $ 245.2 million, $ 4.8 billion, $ 5.1 billion and $ 102.8 million before income taxes in non-U.S.

jurisdictions for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the years ended December 31, 2020 and 2019 (Predecessor), respectively.

The savings plans previously matched 100 % of the amount contributed by the employee generally up to a maximum of 5 % of eligible salary.

contributions totaled $ 8.8 million for the year ended December 31, 2020 (Predecessor).

Effective August 1, 2020, in light of the then current economic environment, we suspended employer matching contributions for the Savings Plan and the Multinational Savings Plan.

In addition, effective December 1, 2020, the matching contributions in the Limited Retirement Plan were reduced.

Employer contributions were reinstated effective January 1, 2022 whereby 100 % of the amount contributed by the employee was matched up to a maximum of 4 % of eligible salary.

These matching contributions totaled $ 4.7 million for the year ended December 31, 2022 (Successor).

The employer contributions increased effective January 1, 2023 whereby employee contributions are now matched up to a maximum of 5 %.

We generated profits of $ 39.7 million, $ 253.4 million and $ 373.1 million and losses of $ 51.0 million before income taxes in the U.S.

for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.

We generated profits of $ 185.2 million and losses of $ 240.6 million, $ 4.8 billion and $ 5.1 billion before income taxes in non-U.S.

jurisdictions for the year ended December 31 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.

The components of our provision for income taxes are summarized as follows (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Current income tax expense (benefit):

7 unchanged sentences

Total income tax expense (benefit) $ 43.1 $ 36.4 $ 16.2 $ ( 259.4 )

Tax Reform and CARES Act

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.

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.

3 unchanged sentences

The components of deferred income tax assets and liabilities are summarized as follows (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

2 unchanged sentences

Property and equipment 1,454.8 1,361.6

Foreign tax credits 105.7 171.2

Interest limitation carryforwards 193.4 74.8

Foreign tax credits 60.7 105.7

Employee benefits, including share-based compensation 43.1 51.2

16 unchanged sentences

and Luxembourg 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 $ 9.1 billion that do not expire and $ 807.5 million that will expire, if not utilized, between 2022 and 2040 .

NOL carryforwards, which were generated in various jurisdictions worldwide, include $ 11.8 billion that do not expire and $ 1.1 billion that will expire, if not utilized, between 2023 and 2040 .

Deferred tax assets for NOL carryforwards as of December 31, 2022 (Successor) include $ 2.1 billion, $ 605.7 million, $ 79.2 million, and $ 56.1 million pertaining to NOL carryforwards in Luxembourg, the United States, Switzerland, and the U.K., respectively.

3 unchanged sentences

deferred tax assets including, but not limited to, NOL carryforwards, FTCs, and interest limitation carryforwards is limited to $ 0.5 million annually.

We have recognized a $ 3.8 billion valuation allowance as of December 31, 2021 on deferred tax assets relating to those assets for which we are not more likely than not to realize due to the inability to generate sufficient taxable income in the period and/or of the character necessary to use the benefit of the deferred tax assets.

Certain components of deferred tax assets and liabilities as of December 31, 2021 (Successor) have changed significantly from December 31, 2020 (Predecessor) due to the impacts of fresh start accounting, Switzerland tax reform, and other tax attribute reductions resulting from restructurings due to and in connection with the emergence from bankruptcy.

During the eight months ended December 31, 2021, we recognized a $9.8 million deferred tax benefit associated with changes in deferred tax asset valuation allowances.

We have recognized a $ 4.7 billion valuation allowance as of December 31, 2022 (Successor) on deferred tax assets relating to those assets for which we are not more likely than not to realize due to the inability to generate sufficient taxable income in the period and/or of the character necessary to use the benefit of the deferred tax assets.

During the year ended December 31, 2022 (Successor) and the eight months ended December 31, 2021 (Successor), we recognized $ 1.5 million deferred tax expense and $ 9.8 million deferred tax benefit associated with changes in deferred tax asset valuation allowances.

Given current industry conditions and recent historical losses, we do not project reliable future income other than from existing drilling contracts and other known sources of future income.

If industry conditions improve, which is generally evidenced by increased contract backlog and increased contract day rates, we may rely on projected taxable income from future drilling contracts for the recognition of deferred tax assets.

If industry conditions continue to improve, which is generally evidenced by increased contract backlog and increased contract day rates, we may rely on projected taxable income from future drilling contracts for the recognition of deferred tax assets.

Effective Tax Rate

Valaris Limited, the Successor Company and our parent company, is domiciled and resident in Bermuda.

Valaris Limited is domiciled and resident in Bermuda.

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-Bermuda subsidiaries is not subject to Bermuda taxation as there is not an income tax regime in Bermuda.

Valaris plc, the Predecessor Company and our former parent company, was domiciled and resident in the U.K.

Legacy Valaris was domiciled and resident in the U.K.

The income of our non-U.K.

7 unchanged sentences

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.

Our consolidated effective income tax rate for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the year ended December 31, 2020 (Predecessor) and the year ended December 31, 2019 (Predecessor), respectively, differs from the Bermuda and U.K.

Our consolidated effective income tax rate for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively, differs from the Bermuda and U.K.

statutory income tax rates as follows:

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Bermuda (Successor)/ U.K.

3 unchanged sentences

Non-Bermuda (Successor) taxes

22.8 376.0 — —

(Predecessor) taxes

6 unchanged sentences

CARES Act — — — 2.4

Bargain purchase gain — — — 189.7

Debt repurchases — — — 48.7

Contract termination 2.8 — — —

Other — — ( 15.0 ) ( 1.3 )

Effective income tax rate 19.2 % 284.4 % ( 0.4 ) % 5.1 %

Our 2022 consolidated effective income tax rate includes $ 10.3 million associated with the impact of various discrete items, including $ 17.2 million income tax benefit associated with changes in liabilities for unrecognized tax benefits and resolution of other prior period tax matters, offset primarily by tax expense attributable to income associated with a contract termination.

Our eight months ended December 31, 2021 (Successor) consolidated effective income tax rate includes $ 14.3 million associated with the impact of various discrete items, including $ 29.7 million income tax expense associated with changes in liabilities for unrecognized tax benefits and resolution of other prior period tax matters, offset by $ 15.4 million of tax benefit related to deferred taxes associated with Switzerland tax reform.

2 unchanged sentences

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.

Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor) were 387.7% and (12.9)%, respectively.

Excluding the impact of the aforementioned discrete tax items, our consolidated effective income tax rates for the years ended December 31, 2020 and 2019 (Predecessor) were ( 7.6 )% and ( 14.6 )%, respectively.

Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor) were 73.6 %, 213.9 %, ( 12.9 )% and ( 7.6 )%, respectively.

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 9 - 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.

On February 3, 2020, as a result of a 2019 acquisition, the Predecessor became the obligor on 4.875 % Senior notes due 2022, 5.40 % Senior notes due 2042, 7.375 % Senior notes due 2025, 4.75 % Senior notes due 2024 and 5.85 % Senior notes due 2044.

We recognized a tax benefit of $ 66.0 million during the year ended December 31, 2020 in connection with this transaction.

2 unchanged sentences

As of December 31, 2022 (Successor), we had $ 217.6 million of unrecognized tax benefits, of which $ 187.2 million was included in Other liabilities on our Consolidated Balance Sheet, $ 30.2 million, which is associated with tax positions taken in tax years with NOL carryforwards, was presented as a reduction of deferred tax assets and $ 0.2 million was presented as a reduction of long-term income tax receivable.

As of December 31, 2020 (Predecessor), 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 tax positions 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, 2021 (Successor), we had $ 235.1 million of unrecognized tax benefits, of which $ 202.9 million was included in Other liabilities on our Consolidated Balance Sheet, $ 31.2 million, which is associated with tax positions taken in tax years with NOL carryforwards, was presented as a reduction of deferred tax assets and $ 1.0 million was presented as a reduction of long-term income tax receivable.

If recognized, $ 183.9 million of the $ 217.6 million unrecognized tax benefits as of December 31, 2022 (Successor) would impact our consolidated effective income tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively (in millions):

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor), respectively (in millions) follows:

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Balance, beginning of period $ 235.1 $ 235.4 $ 237.7

Increase in unrecognized tax benefits as a result of tax positions taken during prior years 33.8 2.9 22.4

Lapse of applicable statutes of limitations ( 20.2 ) ( 0.2 ) ( 13.2 )

Impact of foreign currency exchange rates ( 10.5 ) ( 17.6 ) 9.0

Increases in unrecognized tax benefits as a result of tax positions taken during the current year 6.9 12.6 12.8

Settlements with taxing authorities ( 16.5 ) ( 6.6 ) —

Increases in unrecognized tax benefits as a result of tax positions taken during the current year 11.2 6.9 12.6

Impact of foreign currency exchange rates ( 9.7 ) ( 10.5 ) ( 17.6 )

Lapse of applicable statutes of limitations ( 4.5 ) ( 20.2 ) ( 0.2 )

Increase in unrecognized tax benefits as a result of tax positions taken during prior years 3.0 34.6 2.9

Decreases in unrecognized tax benefits as a result of tax positions taken during prior years ( 1.0 ) ( 4.5 ) —

Balance, end of period $ 217.6 $ 235.1 $ 235.4

Accrued interest and penalties totaled $ 108.0 million and $ 73.1 million as of December 31, 2021 (Successor) and 2020 (Predecessor), respectively, and were included in Other liabilities on our Consolidated Balance Sheets.

We recognized a net expense of $ 21.3 million, $ 13.5 million, $ 13.8 million and $ 5.7 million associated with interest and penalties during the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the years ended December 31, 2020 and 2019 (Predecessor), respectively.

Accrued interest and penalties totaled $ 87.8 million and $ 100.5 million as of December 31, 2022 (Successor) and 2021 (Successor), respectively, and were included in Other liabilities on our Consolidated Balance Sheets.

We recognized a net benefit of $ 12.5 million, and net expense of $ 20.3 million, $ 13.5 million and $ 13.8 million associated with interest and penalties during the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.

Interest and penalties are included in Current income tax expense in our Consolidated Statements of Operations.

Three of our subsidiaries file U.S.

Three of our subsidiaries file or previously filed 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.

None of these examinations are expected to have a significant 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 the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the years ended December 31, 2020 and 2019 (Predecessor), resulting in net income tax benefits, inclusive of interest and penalties, of $ 17.9 million, $ 0.2 million, $ 4.3 million and $ 5.3 million, respectively.

Statutes of limitations applicable to certain of our tax positions lapsed during the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), resulting in net income tax benefits, inclusive of interest and penalties, of $ 4.5 million, $ 17.9 million, $ 0.2 million and $ 4.3 million, respectively.

Absent the commencement of examinations by tax authorities, statutes of limitations applicable to certain of our tax positions will lapse during 2023.

1 unchanged sentence

Tax Assessments

During 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately € 142.0 million (approximately $ 161.5 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 a liability for uncertain tax positions of € 93.0 million (approximately $ 105.7 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 $ 161.5 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 $ 89.8 million converted using the current period-end exchange rates) and € 2.0 million (approximately $ 2.3 million converted using the current period-end exchange rates), respectively.

During 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately € 142.0 million (approximately $ 161.5 million converted at then-current exchange rates) related to tax years 2014, 2015 and 2016 for several of Rowan's Luxembourg subsidiaries.

We recorded a liability for uncertain tax positions of € 93.0 million (approximately $ 105.7 million converted at then-current 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 $ 161.5 million converted at then-current 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 $ 89.8 million converted at then-current exchange rates) and € 2.0 million (approximately $ 2.3 million converted at then-current exchange rates), respectively.

The de-recognition of amounts related to these assessments was recognized as a tax benefit during the three-month period ended March 31, 2020 and is included in Changes in operating assets and liabilities on the Consolidated Statements of Cash Flows for the year ended December 31, 2020 (Predecessor).

On December 31, 2021, we de-recognized the remaining liability for uncertain tax position balance of € 14.0 million (approximately $ 15.9 million converted using the current period-end exchange rates) upon the lapse of the applicable statute of limitations.

During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101 million (approximately $ 73.4 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.

On December 31, 2021 (Successor), we de-recognized the remaining liability for uncertain tax position balance of € 14.0 million (approximately $ 15.9 million converted at then-current exchange rates) upon the lapse of the applicable statute of limitations.

During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101 million (approximately $ 68.8 million converted at the current period-end exchange rate) 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 $ 29.0 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment.

We have an $ 18.0 million liability for unrecognized tax benefits relating to these assessments as of December 31, 2021 (Successor).

We have a $ 17.8 million liability for unrecognized tax benefits relating to these assessments as of December 31, 2022 (Successor).

We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments.

7 unchanged sentences

COMMITMENTS AND CONTINGENCIES

Prior to our chapter 11 filing, we had contractual commitments for the construction of VALARIS DS-13 and VALARIS DS-14.

On February 26, 2021, we entered into amended agreements with the shipyard that became 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.

Newbuild Options

We have construction agreements, as amended, with a shipyard that 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 Newbuild Drillships, on or before December 31, 2023.

Under the amended agreements, the purchase prices for the rigs are estimated to be $ 119.1 million for VALARIS DS-13 and $ 218.3 million for 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 removed any parent company guarantee.

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 cooperated 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.

ARO Funding Obligations

In connection with our 50/50 joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs.

ARO Newbuild Funding Obligations

In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs.

ARO has plans to purchase 20 newbuild jackup rigs over an approximate 10 -year period.

In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $ 176.0 million.

The first rig is expected to be delivered in the fourth quarter of 2022 and the second rig is expected either late in the fourth quarter of 2022 or in the first quarter of 2023.

ARO is expected to place orders for two additional newbuild jackups 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.

ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020 and is actively exploring financing options for remaining payments due upon delivery.

ARO paid a 25 % down payment from cash on hand for each of the two newbuilds ordered in January 2020 and is actively exploring financing options for remaining payments due upon delivery.

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.

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.

Each partner's commitment shall be reduced by the actual cost of each newbuild rig, as delivered, on a proportionate basis.

Letters of Credit

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.

2 unchanged sentences

As of December 31, 2022 (Successor), we had collateral deposits in the amount of $ 20.7 million with respect to these agreements.

Patent Litigation

In December 2022, a subsidiary of Transocean Ltd.

commenced an arbitration proceeding against us alleging breach of a license agreement related to certain dual-activity drilling patents.

We are unable to estimate our potential exposure, if any, to the proceeding at this time but do not believe that our ultimate liability, if any, resulting from this proceeding will have a material effect on our consolidated financial condition, results of operations or cash flows.

We do not believe that we have breached the license agreement and intend to defend ourselves vigorously against this claim.

Other Matters

We have operating leases for office space, facilities, equipment, employee housing and certain rig berthing facilities.

4 unchanged sentences

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Long-term operating lease cost $ 13.4 $ 12.9 $ 9.1 $ 23.3

3 unchanged sentences

Supplemental balance sheet information related to our operating leases is as follows (in millions, except lease term and discount rate):

Successor Predecessor

December 31, 2022 December 31, 2021

7 unchanged sentences

(1) Represents our estimated incremental borrowing cost on a secured basis for similar terms as the underlying leases.

For the year ended December 31, 2022 (Successor), cash paid for amounts included in the measurement of our operating lease liabilities was $ 14.0 million.

During the eight months ended December 31, 2021 (Successor) and during the four months ended April 30, 2021 (Predecessor), cash paid for amounts included in the measurement of our operating lease liabilities were $ 11.7 million and $ 7.1 million, respectively.

For the years ended December 31, 2020 and 2019 (Predecessor), cash paid for amounts included in the measurement of our operating lease liabilities were $ 23.5 million and $ 29.9 million, respectively.

For the years ended December 31, 2020 (Predecessor), cash paid for amounts included in the measurement of our operating lease liabilities was $ 23.5 million.

Maturities of lease liabilities as of December 31, 2022 (Successor) were as follows (in millions):

4 unchanged sentences

The various lease rejections were effective as of September 30, 2020 and October 31, 2020.

We recorded an estimated allowed claim of $ 4.4 million and recognized an expense in Reorganization items, net on our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor).

Also, during the year ended December 31, 2020 (Predecessor), in connection with the office lease rejections, 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, during the year ended December 31, 2020 (Predecessor), 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 during the year ended December 31, 2020 (Predecessor).

During the year ended December 31, 2019 (Predecessor), 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.

We recorded an estimated allowed claim of $ 4.4 million and recognized an expense in Reorganization items, net in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor).

Also, during the year ended December 31, 2020 (Predecessor), in connection with office lease rejections and a related amendment to the terms of the lease for our corporate headquarters in Houston, Texas, we recognized net gains in Reorganization items of $ 9.8 million and $ 1.7 million, respectively, which included the write-offs of associated leasehold improvements.

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 Lease Agreements, the Secondment Agreement and the Transition Services Agreement.

Floaters, Jackups and ARO are also reportable segments.

Upon emergence, we ceased allocation of our onshore support costs included within Contract drilling expenses to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items”.

We have adjusted the historical periods to conform with current period presentation .

Further, 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.

Our onshore support costs included within Contract drilling expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items.” Further, 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".

We measure segment assets as Property and equipment, net.

1 unchanged sentence

See " Note 5 - Equity Method Investment in ARO" for additional information on ARO and related arrangements.

Segment information for the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor), the years ended December 31, 2020 and 2019 (Predecessor), respectively are presented below (in millions).

Eight Months Ended December 31, 2021 (Successor)

Segment information for the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively are presented below (in millions).

Year Ended December 31, 2022 (Successor)

Floaters Jackups ARO Other Reconciling Items Consolidated Total

2 unchanged sentences

Contract drilling (exclusive of depreciation) 646.0 538.9 341.8 76.4 ( 219.9 ) 1,383.2

Loss on impairment 34.5 — — — — 34.5

Depreciation 50.0 36.1 63.4 4.6 ( 62.9 ) 91.2

4 unchanged sentences

Capital expenditures $ 152.9 $ 53.5 $ 24.6 $ — $ ( 24.0 ) $ 207.0

Four Months Ended April 30, 2021 (Predecessor)

Eight Months Ended December 31, 2021 (Successor)

Floaters Jackups ARO Other Reconciling Items Consolidated Total

2 unchanged sentences

Contract drilling (exclusive of depreciation) 250.7 365.2 246.2 38.9 ( 176.9 ) 724.1

Loss on impairment 756.5 — — — — 756.5

Depreciation 31.0 32.0 44.2 2.8 ( 43.9 ) 66.1

4 unchanged sentences

Capital expenditures $ 26.0 $ 23.7 $ 41.8 $ — $ ( 41.3 ) $ 50.2

Year Ended December 31, 2020 (Predecessor)

Four Months Ended April 30, 2021 (Predecessor)

Floaters Jackups ARO Other Reconciling Items Consolidated Total

5 unchanged sentences

General and administrative — — 4.2 — 26.5 30.7

Other operating income 118.1 — — — — 118.1

Equity in losses of ARO — — — — ( 7.8 ) ( 7.8 )

Equity in earnings of ARO — — — — 3.1 3.1

Operating income (loss) $ ( 819.4 ) $ ( 12.3 ) $ 22.2 $ 14.6 $ ( 95.2 ) $ ( 890.1 )

9 unchanged sentences

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 )

4 unchanged sentences

As of December 31, 2022 (Successor), 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 33 jackup rigs which were deployed in various locations and our Other segment consisted of seven jackup rigs which are leased to our 50/50 joint venture with Saudi Aramco.

Our Jackups segment consisted of 28 jackup rigs which were deployed in various locations and our Other segment consisted of eight jackup rigs which are leased to our 50/50 unconsolidated joint venture with Saudi Aramco.

As of December 31, 2022 (Successor), the geographic distribution of our and ARO's drilling rigs was as follows:

7 unchanged sentences

Gulf of Mexico on two rigs owned by a third party not included in the table above.

We are a party to contracts whereby we have the option to take delivery of two drillships, VALARIS DS-13 and VALARIS DS-14, that are not included in the table above.

We are a party to contracts whereby we have the option to take delivery of two recently constructed drillships 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.

Information by country for those countries that account for more than 10% of our long-lived assets, was as follows (in millions):

Long-lived Assets

Successor Predecessor

December 31, 2021 December 31, 2020 December 31, 2019

December 31, 2022 December 31, 2021

United Kingdom $ 185.2 $ 142.4

United States 166.3 152.1

Spain 117.7 145.8

United Kingdom 142.4 2,584.0 1,210.5

Saudi Arabia 75.2 1,183.7 1,259.3

Brazil 102.0 57.6

Other countries (1)

395.9 3,294.1 6,700.4

Total $ 998.2 $ 911.4

(1) Other countries includes countries where individually we had long-lived assets representing less than 10% of total long-lived assets

SUPPLEMENTAL FINANCIAL INFORMATION

1 unchanged sentence

Accounts receivable, net, consisted of the following (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

5 unchanged sentences

Other current assets consisted of the following (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

Prepaid taxes $ 44.4 $ 32.9

Deferred costs $ 59.1 $ 26.9

Prepaid taxes 44.6 44.4

Prepaid expenses 17.5 23.1

Materials and supplies — 279.4

Other 27.4 23.4

$ 148.6 $ 117.8

Other assets consisted of the following (in millions):

Successor Predecessor

December 31, 2021 December 31, 2020

Tax receivables $ 64.8 $ 66.8

Deferred tax assets 59.7 21.9

Right-of-use assets 20.5 35.8

Supplemental executive retirement plan assets — 22.6

Other 31.0 29.1

$ 176.0 $ 176.2

Accrued liabilities and other consisted of the following (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

Deferred revenue $ 78.0 $ 45.8

Personnel costs 55.8 47.3

Income and other taxes payable 41.4 45.7

Deferred revenue 45.8 57.6

Accrued claims 27.2 17.3

Lease liabilities 9.4 10.0

3 unchanged sentences

Other liabilities consisted of the following (in millions):

Successor Predecessor

December 31, 2022 December 31, 2021

1 unchanged sentence

Pension and other post-retirement benefits 159.8 204.0

Intangible liabilities — 50.4

Customer payable — 35.5

Other 80.8 51.0

$ 515.6 $ 558.4

Accumulated other comprehensive income (loss) consisted of the following (in millions):

Successor Predecessor

December 31, 2021 December 31, 2020

Pension and other post-retirement benefits $ ( 9.1 ) $ ( 98.2 )

Currency translation adjustment — 6.5

Derivative instruments — 5.6

Other — ( 1.8 )

$ ( 9.1 ) $ ( 87.9 )

Consolidated Statements of Operations Information

1 unchanged sentence

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Repair and maintenance expense $ 175.2 $ 76.3 $ 48.4 $ 200.4

1 unchanged sentence

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Net gain on sale of property $ 141.2 $ 21.2 $ 6.0 $ 11.8

Net periodic pension income, excluding service cost 16.4 8.7 5.4 14.6

Currency transaction adjustments 8.1 13.4 ( 11.0 ) ( 7.4 )

Net foreign currency exchange gains (losses) 12.2 8.1 13.4 ( 11.0 )

Gain on bargain purchase and measurement period adjustments — — — ( 6.3 )

Gain on extinguishment of debt — — — 3.1

SHI settlement — — — 200.0

Settlement of legal dispute — — — ( 20.3 )

Other income (expense) 0.1 1.1 3.8 ( 4.8 )

Other income 0.1 0.1 1.1 3.8

$ 169.9 $ 38.1 $ 25.9 $ 16.0

Consolidated Statements of Cash Flows Information

Our restricted cash of $ 35.9 million at December 31, 2021 (Successor) consists primarily of $ 31.1 million of collateral on letters of credit.

Our restricted cash of $ 24.4 million, $ 35.9 million and $ 11.4 million at December 31, 2022 (Successor), December 31, 2021 (Successor) and December 31, 2020 (Predecessor), respectively, consists primarily of $ 20.7 million, $ 31.1 million and $ 5.8 million of collateral on letters of credit for each respective period.

See " Note 14 - Commitments and Contingencies" for more information regarding our letters of credit.

1 unchanged sentence

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

(Increase) decrease in accounts receivable $ ( 6.9 ) $ ( 18.3 ) $ 23.2 $ 53.3

2 unchanged sentences

$ 35.4 $ 4.7 $ 68.5 $ ( 22.0 )

Cash paid for interest and income taxes was as follows (in millions):

Additional cash flow information was as follows (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

Interest, net of amounts capitalized $ 22.8 $ — $ 190.0 $ 410.0

Income taxes 29.1 12.8 78.9 107.6

Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020

Cash paid for interest and taxes

Interest paid, net of amounts capitalized $ 44.2 $ 22.8 $ — $ 190.0

Income taxes paid (refunded), net $ 5.6 $ 23.5 $ ( 16.9 ) $ 48.5

Non-cash investing activities

Accruals for capital expenditures as of period end (1)

$ 22.1 $ 9.3 $ 6.5 $ 5.4

(1) Accruals for capital expenditures were excluded from investing activities in our Consolidated Statements of Cash Flows.

Capitalized interest totaled $ 1.2 million during the year ended December 31, 2022 (Successor).

During the eight months ended December 31, 2021 (Successor) and during the four months ended April 30, 2021 (Predecessor), there was no capitalized interest.

Capitalized interest totaled $ 1.3 million and $ 20.9 million during the years ended December 31, 2020 and 2019 (Predecessor), respectively.

Accruals for capital expenditures totaling $ 9.3 million and $ 6.5 million as of December 31, 2021 (Successor) and April 30, 2021 (Predecessor), respectively, were excluded from Investing activities in our Consolidated Statements of Cash Flows.

Additionally, accruals for capital expenditures totaling $ 5.4 million and $ 16.3 million as of December 31, 2020 and 2019 (Predecessor), respectively, were excluded from Investing activities in our Consolidated Statements of Cash Flows.

Capitalized interest totaled $ 1.3 million during the year ended December 31, 2020 (Predecessor).

Amortization, net, includes amortization of deferred mobilization revenues and costs, deferred capital upgrade revenues, intangible amortization and other amortization.

1 unchanged sentence

Concentration of Risk

We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents, and at times, investments.

Previously, our use of derivatives in connection with the management of foreign currency exchange rate risk also subjected us to credit risk.

Credit Risk - We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents and short-term investments.

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 10 - Derivative Instruments" for additional information on our previous derivative activity.

Consolidated revenues by customer were as follows:

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

11 % 14 % 11 % 9 %

Customer Concentration - Consolidated revenues with customers that individually contributed 10% or more of revenue were as follows:

Year Ended December 31, 2022 Eight Months Ended December 31, 2021

Floaters Jackups Other Total Floaters Jackups Other Total

BP plc ("BP") 6 % 3 % 6 % 15 % 2 % 2 % 7 % 11 %

Other customers (1)

38 % 43 % 4 % 85 % 29 % 56 % 4 % 89 %

Other 80 % 86 % 81 % 75 %

44 % 46 % 10 % 100 % 31 % 58 % 11 % 100 %

(1) During the eight months ended December 31, 2021(Successor), 21 % of the revenues provided by BP were attributable to our Floaters segment, 20 % of the revenues provided by BP were attributable to our Jackups segment and the remaining were attributable to our managed rigs.

During the four months ended April 30, 2021 (Predecessor), 37 % of the revenues provided by BP were attributable to our Floaters segment, 17 % of the revenues provided by BP were attributable to our Jackups segment and the remaining were attributable to our managed rigs.

For the year ended December 31, 2020 (Predecessor), 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 (Predecessor), 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.

(2) During the eight months ended December 31, 2021 (Successor), all of the revenues provided by Total were attributable to the Floaters segment.

For the years ended December 31, 2020 and 2019 (Predecessor), 71 % and 93 % of the revenues provided by Total were attributable to the Floaters segment and the remainder was attributable to the Jackup segment.

For purposes of our geographic disclosure, we attribute revenues to the geographic location where such revenues are earned.

Consolidated revenues by region were as follows (in millions):

Successor Predecessor

Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2020 Year Ended December 31, 2019

United Kingdom (1)

Four Months Ended April 30, 2021 Year Ended December 31, 2020

Floaters Jackups Other Total Floaters Jackups Other Total

BP 5 % 2 % 7 % 14 % 3 % 2 % 6 % 11 %

Other customers (1)

24 % 57 % 5 % 86 % 32 % 52 % 5 % 89 %

29 % 59 % 12 % 100 % 35 % 54 % 11 % 100 %

(1) Other customers includes customers that individually contributed to less than 10% of our total revenues.

Geographic Concentration - For purposes of our geographic disclosure, we attribute revenues to the geographic location where such revenues are earned.

Consolidated revenues for locations that individually had 10% or more of revenue were as follows (in millions):

Year Ended December 31, 2022 Eight Months Ended December 31, 2021

Floaters Jackups Other Total Floaters Jackups Other Total

Gulf of Mexico $ 230.9 $ 21.3 $ 99.0 $ 351.2 $ 52.8 $ 0.7 $ 56.4 $ 109.9

109.9 74.4 241.4 301.0

United Kingdom — 264.5 — 264.5 — 185.2 — 185.2

Saudi Arabia — 78.3 58.7 137.0 — 55.3 37.0 92.3

Norway — 114.6 — 114.6 — 123.9 — 123.9

Mexico 13.9 58.1 — 72.0 37.0 40.8 — 77.8

Other countries (1)

455.7 207.5 — 663.2 164.8 81.1 — 245.9

$ 700.5 $ 744.3 $ 157.7 $ 1,602.5 $ 254.6 $ 487.0 $ 93.4 $ 835.0

Four Months Ended April 30, 2021 Year Ended December 31, 2020

Floaters Jackups Other Total Floaters Jackups Other Total

Gulf of Mexico $ 47.9 $ 0.2 $ 26.3 $ 74.4 $ 133.4 $ 27.0 $ 81.0 $ 241.4

United Kingdom — 75.7 — 75.7 — 211.3 — 211.3

Saudi Arabia — 30.5 23.1 53.6 — 126.9 73.9 200.8

Norway — 73.3 — 73.3 — 188.5 — 188.5

Mexico 21.6 22.7 — 44.3 60.9 51.2 — 112.1

Other countries (1)

46.1 30.0 — 76.1 311.5 160.4 1.2 473.1

Other 226.5 55.6 386.8 829.5

$ 115.6 $ 232.4 $ 49.4 $ 397.4 $ 505.8 $ 765.3 $ 156.1 $ 1,427.2

(1) During the eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and for the years ended December 31, 2020 and 2019 (Predecessor) all revenues earned in the United Kingdom and Norway were attributable to our Jackups segment.

(2) During the eight months ended December 31, 2021 (Successor), 48 % and 1 % of the revenues earned in the U.S.

Gulf of Mexico, were attributable to our Floaters segment and Jackups segment, respectively.

The remaining revenues were attributable to our managed rigs.

During the four months ended April 30, 2021 (Predecessor), 64 % of the revenues earned in the U.S.

Gulf of Mexico, were attributable to our Floaters segment.

The remaining revenues were attributable to our managed rigs.

For the years ended December 31, 2020 and 2019 (Predecessor), 55 % and 46 % of the revenues earned in the U.S.

Gulf of Mexico, respectively, were attributable to our Floaters segment, 11 % and 28 % of the revenues were attributable to our Jackups segment, for the respective periods, and the remaining revenues were attributable to our managed rigs.

(3) During the eight months ended December 31, 2021(Successor) and four months ended April 30, 2021 (Predecessor), 60 % and 57 % of the revenues earned in Saudi Arabia, respectively were attributable to our Jackups segment.

The remaining revenues were attributable to our Other segment and relates to our rigs leased to ARO and certain revenues related to our Secondment Agreement.

For the years ended December 31, 2020 and 2019 (Predecessor), 63 % and 65 % of the revenues earned in Saudi Arabia, respectively, 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.

(4) During the eight months ended December 31, 2021 (Successor), 52 % of the revenues earned in Mexico were attributable to our Jackups segment and the remaining revenues were attributable to our Floaters segment.

During the four months ended April 30, 2021 (Predecessor), 51 % of the revenues earned in Mexico were attributable to our Jackups segment and the remaining revenues were attributable to our Floaters segment.

For the year ended December 31, 2020 (Predecessor), 54 % of the revenues earned in Mexico were attributable to our Floaters segment and the remaining revenues were attributable to our Jackups segment.

For the year ended December 31, 2019 (Predecessor), all revenues earned in Mexico were attributable to our Floaters segment.

(5) During the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor), all the revenues earned in Angola were attributable to our Floaters Segment.

For the years ended December 31, 2020 and 2019 (Predecessor), 84 % and 87 % of the revenues earned in Angola, respectively, were attributable to our Floaters segment and the remaining revenues were attributable to our Jackups segment.

(1) Other countries includes locations that individually contributed to less than 10% of total revenues.

RELATED PARTIES

1 unchanged sentence

Joseph Goldschmid is a director of the Company and an employee of T.

Rowe Price as of December 29, 2021 when his employer, Oakhill Advisors, was acquired by T.

Rowe Price effective December 29, 2021 when his employer, Oak Hill Advisors, was acquired by T.

Rowe Price provides administrative services for the Company's 401(k) Plan.

As the employer matching contributions to the Company's 401(k) Plan were suspended during the Successor Period and the administrative fees are borne by the participants of the plan, no amounts were included in the Company's expenses during the eight months ended December 31, 2021 or payables as of December 31, 2021.

Deepak Munganahalli is a director of the Company and is also the cofounder and a current employee of Joulon.

The Company regularly does business with several subsidiaries and affiliates of Joulon, which provide goods and services to the Company, including asset management services, structural engineering services, rig repair services, engineering services and high pressure equipment, inspection services, riser related services (including storage, inspection, preservation and repair), and rig stacking and maintenance arrangements.

We incurred expense of $ 8.8 million during the eight months ended December 31, 2021 related to these goods and services and have a payable to them of $ 2.5 million as of December 31, 2021.

During the year ended December 31, 2022 (Successor) we incurred expense of $ 4.7 million and had no payable as of December 31, 2022 (Successor) related to the employer matching contributions to the Company's 401(k) Plan made in 2022.

As the employer matching contributions to the Company's 401(k) Plan were suspended during the eight months ended December 31, 2021 (Successor) and the administrative fees are borne by the participants of the plan, no amounts were included in the Company's expenses during the eight months ended December 31, 2021 (Successor) or payables as of December 31, 2021 (Successor).

Deepak Munganahalli is a director of the Successor Company and was an employee of Joulon until September 2022.

The Company regularly does business with several subsidiaries and affiliates of Joulon, which provide goods and services to the Company, including asset management services, structural engineering services, rig repair services, high pressure equipment, inspection services, riser related services (including storage, inspection, preservation and repair), and rig stacking and maintenance arrangements.

We incurred expense of $ 15.4 million and $ 8.8 million during the year ended December 31, 2022 (Successor) and the eight months ended December 31, 2021 (Successor), respectively, related to these goods and services and had $ 0.5 million and $ 2.5 million of payables to them as of December 31, 2022 and 2021 (Successor), respectively.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

1 unchanged sentence

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

What changed 10-K

Item 8. Financial Statements and Supplementary Data