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Item 8. Financial Statements and Supplementary Data

2024-02-22 compared with 2023-02-21 · 488 added, 648 removed, 1272 unchanged (47% of the section changed)

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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, 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).

We have audited the accompanying consolidated balance sheets of Valaris Limited and subsidiaries (the Company) as of December 31, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the years in the two-year period ended December 31, 2023 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 (Predecessor period), 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, 2023 and 2022, and the results of its operations and its cash flows for Successor and Predecessor periods, in conformity with U.S.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

New Basis of Presentation

Basis of Presentation

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.

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

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.

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.

Income tax positions pertaining to certain tax transactions

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.

As discussed in Notes 1 and 12 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.

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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.

Realizability of certain deferred tax assets

As discussed in Notes 1 and 12 to the consolidated financial statements, the Company recognizes a valuation allowance for deferred tax assets if, based on the weight of all available evidence, it is more-likely-than-not that the benefit from the deferred tax asset will not be realized.

The realization of deferred tax assets is dependent upon generating sufficient taxable income during future periods in the jurisdictions it operates.

As of December 31, 2023, the Company had recorded a valuation allowance of $4.2 billion on deferred tax assets.

During the year ended December 31, 2023, the Company released $799.5 million of the valuation allowance recognized related to deferred tax assets.

We identified the evaluation of the realizability of certain deferred tax assets as a critical audit matter.

A high degree of subjective auditor judgment was required due to (1) the significant judgment made by the Company in assessing the ability to realize the deferred tax assets and whether a valuation allowance was necessary considering the availability of forecasted income and (2) the subjective nature of the sources of possible future income used in the Company's assessment and the key assumptions used in the estimation of such future income, specifically forecasted revenue, contract drilling expenses and shore-based expenses.

The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company's process to assess the realizability of certain deferred tax assets, including controls over the key assumptions used in the determination of forecasted income.

We evaluated available positive and negative evidence used in the Company's assessment of whether certain deferred tax assets were more like than not to be realized in the future.

We evaluated the reasonableness of the revenue, contract drilling expenses and shore-based expenses assumptions used in determining forecasted income for consistency with historical amounts, economic trends and industry data.

We involved tax professionals with specialized skills and knowledge, who assisted in the application of tax laws in the performance of these procedures.

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

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In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2023, 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, 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 .

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, 2023 and 2022, the related consolidated statements of operations, comprehensive income (loss), and cash flows for each of the years in the two-year period ended December 31, 2023 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 (Predecessor period), and the related notes (collectively, the consolidated financial statements), and our report dated February 22, 2024 expressed an unqualified opinion on those consolidated financial statements .

Basis for Opinion

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Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

OPERATING REVENUES $ 1,784.2 $ 1,602.5 $ 835.0 $ 397.4

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Total operating expenses 1,744.0 1,589.8 848.4 1,290.6

OTHER OPERATING INCOME — — — 118.1

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

EQUITY IN EARNINGS OF ARO 13.3 24.5 6.1 3.1

OPERATING INCOME (LOSS) 53.5 37.2 ( 7.3 ) ( 890.1 )

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Interest income 101.4 65.5 28.5 3.6

Interest expense, net (Unrecognized contractual interest expense for debt subject to compromise was $ 132.9 million and $ 140.7 million for the four months ended April 30, 2021 and the year ended December 31, 2020, respectively)

Interest expense, net (Unrecognized contractual interest expense for debt subject to compromise was $ 132.9 million for the four months ended April 30, 2021)

( 68.9 ) ( 45.3 ) ( 31.0 ) ( 2.4 )

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PROVISION (BENEFIT) FOR INCOME TAXES

Current income tax expense (benefit) 35.2 57.7 34.4 ( 153.7 )

Current income tax expense 3.8 35.2 57.7 34.4

Deferred income tax expense (benefit) ( 786.4 ) 7.9 ( 21.3 ) ( 18.2 )

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NET INCOME (LOSS) 866.8 181.8 ( 23.6 ) ( 4,463.8 )

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

NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 1.4 ) ( 5.3 ) ( 3.8 ) ( 3.2 )

NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS $ 865.4 $ 176.5 $ ( 27.4 ) $ ( 4,467.0 )

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Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

NET INCOME (LOSS) $ 866.8 $ 181.8 $ ( 23.6 ) $ ( 4,463.8 )

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10.8 23.8 ( 9.1 ) 0.1

Net change in fair value of derivatives — — — ( 5.4 )

Amortization of settlement gain, net of income tax expense of $ 0.1 million for the year ended December 31, 2020

— — — ( 0.2 )

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

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COMPREHENSIVE INCOME (LOSS) 877.3 205.6 ( 32.7 ) ( 4,469.3 )

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

COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS ( 1.4 ) ( 5.3 ) ( 3.8 ) ( 3.2 )

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS $ 875.9 $ 200.3 $ ( 36.5 ) $ ( 4,472.5 )

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INVESTMENT IN ARO 124.4 111.1

DEFERRED TAX ASSETS 855.1 55.1

OTHER ASSETS 154.4 116.7

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LONG-TERM DEBT 1,079.3 542.4

DEFERRED TAX LIABILITIES 29.9 16.1

OTHER LIABILITIES 471.7 499.5

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VALARIS SHAREHOLDERS' EQUITY

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

Common shares, $ 0.01 par value, 700.0 shares authorized, 75.4 and 75.2 shares issued, 72.4 and 75.2 shares outstanding as of December 31, 2023 and 2022, respectively

Preference shares, $ 0.01 par value, 150.0 shares authorized, no shares issued as of December 31, 2023 and 2022

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Additional paid-in capital 1,119.8 1,097.9

Retained earnings (deficit) 160.1 ( 16.4 )

Accumulated other comprehensive income (loss) 14.7 ( 9.1 )

Retained earnings 1,025.5 160.1

Accumulated other comprehensive income 25.2 14.7

Treasury shares, at cost, 3.0 million shares as of December 31, 2023

Total Valaris shareholders' equity 1,987.6 1,289.9

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Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

OPERATING ACTIVITIES

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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 )

Deferred income tax expense (benefit) ( 786.4 ) 7.9 ( 21.3 ) ( 18.2 )

Depreciation expense 101.1 91.2 66.1 159.6

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

Loss on extinguishment of debt 29.2 — — —

Net gain on sale of property ( 28.6 ) ( 141.2 ) ( 21.2 ) ( 6.0 )

Accretion of discount on notes receivable from ARO

( 28.3 ) ( 44.9 ) ( 20.8 ) —

Share-based compensation expense 27.3 17.4 4.3 4.8

Equity in earnings of ARO ( 13.3 ) ( 24.5 ) ( 6.1 ) ( 3.1 )

Net periodic pension and retiree medical income ( 0.9 ) ( 16.4 ) ( 8.7 ) ( 5.4 )

Amortization, net ( 9.0 ) 2.3 ( 4.8 ) 6.2

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

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

Loss on impairment — 34.5 — 756.5

Non-cash reorganization items, net — — — 3,487.3

Changes in deferred costs ( 26.1 ) ( 38.8 ) ( 34.7 ) 22.2

Changes in contract liabilities

4.9 62.4 20.8 ( 36.2 )

Other 6.7 8.3 1.6 7.8

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INVESTING ACTIVITIES

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

Maturities of short-term investments 220.0 — — —

Additions to property and equipment ( 696.1 ) ( 207.0 ) ( 50.2 ) ( 8.7 )

Net proceeds from disposition of assets 30.3 150.3 25.1 30.1

Repayments of note receivable from ARO 40.0 — — —

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

Maturities of short-term investments — 220.0 — —

Repayment of note receivable from ARO

Net cash provided by (used in) investing activities ( 665.8 ) ( 16.7 ) ( 25.1 ) 21.4

FINANCING ACTIVITIES

Consent solicitation fees ( 3.9 ) — — —

Issuance of Second Lien Notes

1,103.0 — — —

Redemption of First Lien Notes

( 571.8 ) — — —

Payments for share repurchases

( 198.6 ) — — —

Debt issuance costs

( 38.6 ) — — ( 1.4 )

Payments for tax withholdings for share-based awards ( 5.4 ) ( 2.5 ) — —

Consent solicitation fees — ( 3.9 ) — —

Issuance of First Lien Notes

Payments to Predecessor creditors — — — ( 129.9 )

Borrowings on credit facility — — — 596.0

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

Repayments of credit facility borrowings — — — ( 15.0 )

Reduction of long-term borrowings — — — ( 9.7 )

Purchase of noncontrolling interest — — — ( 7.2 )

Other ( 3.1 ) — — —

Net cash provided by (used in) financing activities 285.5 ( 6.4 ) — 388.7

Effect of exchange rate changes on cash and cash equivalents ( 0.5 ) ( 0.1 ) ( 0.1 ) 0.1

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH ( 112.8 ) 103.9 ( 51.4 ) 370.2

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD

748.5 644.6 696.0 325.8

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD

$ 635.7 $ 748.5 $ 644.6 $ 696.0

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

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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.

We currently own 53 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 35 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 eight rigs.

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.

We are among the most geographically diverse offshore drilling companies with global operations.

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

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

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

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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

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dollars based on a combination of both current and historical exchange rates.

Most transaction gains and losses, including certain gains and losses on our prior derivative instruments, are included in Other, net, in our Consolidated Statements of Operations.

Most transaction gains and losses are included in Other, net, in our Consolidated Statements of Operations.

Certain gains and losses from the translation of foreign currency balances of our non-U.S.

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

Net foreign currency exchange 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).

Net foreign currency exchange loss was $ 3.5 million, and 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 years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively.

Cash Equivalents and Short-Term Investments

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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, 2022 (Successor) and December 31, 2021 (Successor).

There were no short-term investments as of December 31, 2023 and 2022.

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.

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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 $ 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.

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

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

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See " Note 4 - Revenue from Contracts with Customers" for information on our accounting policies for revenue recognition and certain operating costs that are deferred and amortized over future periods.

Derivative Instruments

We did not have any open derivative instruments as of December 31, 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.

See " Note 9 - Derivative Instruments" for additional information on how and why we used derivatives and the impact of the Chapter 11 Cases.

Derivatives are recorded on our Consolidated Balance Sheet at fair value.

Derivatives subject to legally enforceable master netting agreements are not offset on our Consolidated Balance Sheet.

Accounting for the gains and losses resulting from changes in the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting.

Derivatives qualify for hedge accounting when they are formally designated as hedges and are effective in reducing the risk exposure that they are designated to hedge.

Changes in the fair value of derivatives that are designated as hedges of the variability in expected future cash flows associated with existing recognized assets or liabilities or forecasted transactions ("cash flow hedges") are recorded in accumulated other comprehensive income ("AOCI").

Amounts recorded in AOCI associated with cash flow hedges are subsequently reclassified into contract drilling, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transactions.

Gains and losses on a cash flow hedge, or a portion of a cash flow hedge, that no longer qualifies as effective due to an unanticipated change in the forecasted transaction are recognized currently in earnings and included in Other, net, in our Consolidated Statements of Operations based on the change in the fair value of the derivative.

When a forecasted transaction becomes probable of not occurring, gains and losses on the derivative previously recorded in AOCI are reclassified currently into earnings and included in Other, net, in our Consolidated Statements of Operations.

Historically, we would enter into derivatives that hedge the fair value of recognized assets or liabilities but do not designate such derivatives as hedges or the derivatives otherwise do not qualify for hedge accounting.

In these situations, a natural hedging relationship generally exists where changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items.

Changes in the fair value of these derivatives are recognized currently in earnings in other, net, in our Consolidated Statements of Operations.

Derivatives with asset fair values are reported in other current assets or other assets, net, on our Consolidated Balance Sheet depending on maturity date.

Derivatives with liability fair values are reported in accrued liabilities and other, or other liabilities on our Consolidated Balance Sheet depending on maturity date.

We conduct operations and earn income in numerous countries.

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As a result of the foregoing, the tax liabilities and assets we recognize in our financial statements may differ from the tax positions taken, or expected to be taken, in our tax returns.

Our tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information.

Our tax positions are evaluated for recognition as unrecognized tax benefits using a more-likely-than-not threshold, and those requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information.

Interest and penalties relating to income taxes are included in Current income tax expense in our Consolidated Statements of Operations.

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We sponsor share-based compensation plans that provide equity compensation to our key employees, officers and non-employee directors.

Our Management Incentive Plan (the “MIP”) allows our board of directors to authorize share grants to be settled in cash, shares or a combination of shares and cash.

Compensation expense for time-based share awards to be settled in shares is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period).

Our 2021 Management Incentive Plan (the “MIP”) allows our board of directors to authorize equity-based grants to be settled in cash, shares or a combination of shares and cash.

Compensation expense for time-based equity awards to be settled in shares is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period).

Compensation expense for 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.

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.

the vesting period.

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.

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Compensation cost for awards based on a market performance objective is recognized as long as the requisite service period is completed and will not be reversed even if the market-based objective is never satisfied.

Compensation expense for share awards to be settled in cash are recognized as liabilities and remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in our share price.

Any adjustments to the compensation cost recognized in our Consolidated Statements of Operations for awards that are forfeited are recognized in the period in which the forfeitures occur.

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subsidiaries.

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.

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.

All income attributable to noncontrolling interest was from continuing operations.

Cancellation of Predecessor Equity and Issuance of Warrants

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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 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):

The following table is a reconciliation of the weighted-average shares used in our basic and diluted EPS computations for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) (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

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Income (loss) attributable to our shares $ 865.4 $ 176.5 $ ( 27.4 ) $ ( 4,467.0 )

Weighted average shares outstanding:

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Diluted 75.2 75.6 75.0 199.6

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.

Anti-dilutive share awards totaling 147,000 and 192,000 were excluded from the computation of diluted EPS for the year ended December 31, 2023 and 2022 (Successor), respectively.

Due to the net loss position, anti-dilutive shares totaling 600,000 and 300,000 , for the eight months ended December 31, 2021 (Successor) and the four months ended April 30, 2021 (Predecessor), respectively, were excluded from the computation of diluted EPS.

We have 5,470,950 Warrants outstanding as of December 31, 2023 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.

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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 year ended December 31, 2020 (Predecessor).

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

New Accounting Pronouncements

Recently adopted accounting pronouncements

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.

sales-type or direct financing) would trigger a day-one loss.

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

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.

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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.

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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.

The provisions in Update 2020-04 were effective upon issuance and could be applied prospectively to contract modifications made 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.

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"), has generated interest income on a LIBOR-based rate since inception of the note.

In 2023, we amended the terms of the Notes Receivable from ARO whereby beginning in 2024, interest income is calculated on a Secured Overnight Financing Rate ("SOFR") based rate.

The application of Update 2020-04 and ASU No.

2022-06 on this contract modification and the change in reference rates did not have a material impact on our consolidated financial statements.

Accounting pronouncements to be adopted

Improvements to Reportable Segment Disclosures - In November 2023, the FASB issued ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("Update 2023-07"), which expands reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses.

The amendments in Update 2023-07 require that a public entity disclose, on an annual and interim basis, significant segment expenses that are regularly provided to an entity's chief operating decision maker ("CODM"), a description of other segment items by reportable segment, and any additional measures of a segment's profit or loss used by the CODM when deciding how to allocate resources.

Annual disclosures are required for fiscal years beginning after December 15, 2023 and interim disclosures are required for periods within fiscal years beginning after December 15, 2024.

Retrospective application is required for all prior periods presented, and early adoption is permitted.

We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

Improvements to Income Tax Disclosures - In December 2023, the FASB issued ASU No.

2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures ("Update 2023-09"), which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates as well as additional disaggregation of taxes paid.

The amendments in Update 2023-09 also remove disclosures related to certain unrecognized tax benefits and deferred taxes.

Update 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments are required to be applied on a prospective basis, with an option to apply the guidance retrospectively.

We are currently assessing the impact of the requirements on our consolidated financial statements and disclosures.

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.

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All but one of the seven directors became directors as of the Effective Date and one became a director on July 1, 2021.

• Obligations under Legacy Valaris's outstanding senior notes (the "Senior Notes") were cancelled and the related indentures were cancelled, except to the limited extent expressly set forth in the plan of reorganization and the holders thereunder received the treatment as set forth in the plan of reorganization;

• Obligations under Legacy Valaris' outstanding senior notes (the "Senior Notes") were cancelled and the related indentures were cancelled, except to the limited extent expressly set forth in the plan of reorganization and the holders thereunder received the treatment as set forth in the plan of reorganization;

• 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;

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Liabilities Subject to Compromise

The Debtors' pre-petition Senior Notes and related unpaid accrued interest as of the Petition Date were classified as Liabilities Subject to Compromise on our Consolidated Balance Sheets as of December 31, 2020 (Predecessor).

The liabilities were reported at the amounts that were expected to be allowed as claims by the Bankruptcy Court.

Liabilities subject to compromise at December 31, 2020 (Predecessor) consisted of the following (in millions):

6.875 % Senior notes due 2020

4.70 % Senior notes due 2021

4.875 % Senior notes due 2022

3.00 % Exchangeable senior notes due 2024

4.50 % Senior notes due 2024

4.75 % Senior notes due 2024

8.00 % Senior notes due 2024

5.20 % Senior notes due 2025

7.375 % Senior notes due 2025

7.75 % Senior notes due 2026

7.20 % Debentures due 2027

7.875 % Senior notes due 2040

5.40 % Senior notes due 2042

5.75 % Senior notes due 2044

5.85 % Senior notes due 2044

Amounts drawn under the Revolving Credit Facility 581.0

Accrued Interest on Senior Notes and Revolving Credit Facility 203.5

Rig holding costs (1)

Total liabilities subject to compromise $ 7,313.7

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

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.

Prior to the Effective Date, liabilities subject to compromise were comprised primarily of the aggregate balance of our pre-petition Senior Notes of $ 6.5 billion, amounts drawn under the Revolving Credit Facility as of the Petition Date of $ 581.0 million and the corresponding unpaid accrued interest as of the Petition Date of $ 203.5 million.

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 for the four months ended April 30, 2021 (Predecessor).

This excess contractual interest was not included as interest expense on our Consolidated Statements of Operations as we had discontinued accruing interest on the Predecessor's Senior Notes and Revolving Credit Facility subsequent to the Petition Date.

The Predecessor discontinued making interest payments on the Senior Notes beginning in June 2020.

Pre-petition Charges

We have reported the backstop commitment fee and legal and other professional advisor fees incurred in relation to the Chapter 11 Cases, but prior to the Petition Date, as General and administrative expenses in our Consolidated Statements of Operations for the year ended December 31, 2020 (Predecessor) in the amount of $ 64.7 million.

Reorganization Items

Expenditures, gains and losses that are realized or incurred by the Debtors as of or subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are reported as Reorganization items, net in our Consolidated 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.

Additionally, Reorganization items, net for the year ended December 31, 2020 (Predecessor) included all adjustments made to the carrying amount of certain pre-petition liabilities reflecting claims that were expected to be allowed by the Bankruptcy Court and DIP facility fees.

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, eight months ended December 31, 2021 (Successor) and four months ended April 30, 2021 (Predecessor).

These costs include legal and other professional advisory service fees pertaining to the Chapter 11 Cases and the effects of the emergence from bankruptcy, including the application of fresh start accounting.

The components of reorganization items, net were 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

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

Professional fees $ 2.4 $ 17.2 $ 93.4

DIP facility fees — — — 20.0

Contract items — ( 1.7 ) 3.9

Reorganization items (fees) 2.4 15.5 97.3

Write-off of unamortized debt

discounts, premiums and issuance

costs — — — 447.9

Contract items — — 0.5

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Our pension and other postretirement benefit liabilities and costs are based upon actuarial computations that reflect our assumptions about future events, including long-term asset returns, interest rates, annual compensation increases, mortality rates and other factors.

Upon emergence, our pension and other post retirement plans were remeasured as of the Effective Date.

Upon emergence, our pension and other postretirement plans were remeasured as of the Effective Date.

Key assumptions at the Effective Date included (1) a weighted average discount rate of 2.81 % to determine pension benefit obligations and (2) an expected long-term rate of return on pension plan assets of 6.03 % to determine net periodic pension cost.

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(b) Restricted cash

Reflects the reorganization adjustment to record the transfer of cash for payment of certain professional fees to restricted cash, which will be held in escrow until billings from professionals have been received and reconciled at which time the funds in the account will be released.

Reflects the reorganization adjustment to record the transfer of cash for payment of certain professional fees to restricted cash, which were held in escrow until billings from professionals were received and reconciled at which time the funds in the account were released.

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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.

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

As a result of the option to take delivery, we removed the historical work-in-process balances from the balance sheet.

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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.

The SERP was frozen to the entry of new participants in November 2019 and to future compensation deferrals as of January 1, 2020.

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

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

The plans were frozen to the entry of new participants in 2019 and to future compensation deferrals as of January 1, 2020.

Upon emergence, assets previously held in a rabbi trust maintained for the plan were liquidated and the plan 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 Newbuild Drillships.

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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 Newbuild Drillships.

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

In accordance with the amended agreement with the Shipyard, our leases were terminated and we eliminated the historical lease liability associated with the berthing locations of Newbuild Drillships.

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

Additionally, reorganization adjustments to accrued liabilities and other includes an amount primarily related to payment of professional fees incurred prior to emergence.

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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.

As the amended contract was structured as an option whereby we had the right, not the obligation to take delivery of the rigs, there was 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.

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(m) Successor stock warrants

On the Effective Date and pursuant to the plan of reorganization, Valaris Limited issued an aggregate of 5.6 million Warrants exercisable for up to an aggregate of 5.6 million Common Shares to former holders of Legacy Valaris's equity interests.

The fair value of the Warrants as of the Effective Date was $ 16.4 million.

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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.

These deferred costs have no future economic benefit and are eliminated from the fresh start financial statements.

These deferred costs had no future economic benefit and were eliminated from the fresh start financial statements.

(p) Property and equipment, net

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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

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The fresh start adjustment to record the estimated fair value of contracts with customers represents the intangible assets recognized for firm customer contracts in place at the Effective Date that have favorable contract terms as compared to current market day rates for comparable drilling rigs.

The various factors considered in the adjustment are (1) the contracted day rate for each contract, (2) the remaining term of each contract, (3) the rig class and (4) the market conditions for each respective rig class at the emergence date.

The various factors considered in the adjustment were (1) the contracted day rate for each contract, (2) the remaining term of each contract, (3) the rig class and (4) the market conditions for each respective rig class at the emergence date.

The intangible assets are computed based on the present value of the difference in cash inflows over the remaining contract term as compared to a hypothetical contract with the same remaining term at an estimated current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.

This balance will be amortized to operating revenues over the respective remaining contract terms on a straight-line basis.

This balance was amortized to operating revenues over the respective remaining contract terms on a straight-line basis.

The fresh start adjustment to right-of-use assets reflects the remeasuring of our operating leases as of the emergence date.

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.

Certain operating leases had unfavorable terms as of the emergence date, and as a result the right-of-use asset for such leases did 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 a 2019 transaction.

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

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

(t) Accounts payable - trade

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Such amounts are deferred and subsequently amortized over the term of the related drilling contract.

The deferred revenue does not represent any future performance obligations and is therefore eliminated as a fresh start accounting adjustment.

The deferred revenue did not represent any future performance obligations and was therefore eliminated as a fresh start accounting adjustment.

The fresh start adjustment to record the estimated fair value of contracts with customers reflects the intangible liabilities recognized for firm customer contracts in place at the Effective Date that have unfavorable contract terms as compared to current market day rates for comparable drilling rigs.

The intangible liabilities are computed based on the present value of the difference in cash inflows over the remaining contract term as compared to a hypothetical contract with the same remaining term at an estimated current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.

This balance will be amortized to operating revenues over the respective remaining contract terms on a straight-line basis.

The various factors considered in the adjustment and computation of the intangible liabilities are described in (s) above.

This balance was amortized to operating revenues over the respective remaining contract terms on a straight-line basis.

The fresh start adjustment to lease liabilities reflects the remeasuring of our operating leases as of the Effective Date.

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REVENUE FROM CONTRACTS WITH CUSTOMERS

Our drilling contracts with customers provide a drilling rig and drilling services on a day rate contract basis.

Under day rate contracts, we provide an integrated service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig.

Under our drilling contracts with customers, we provide a drilling rig and drilling services, including rig crews, on a day rate basis.

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 generally for the mobilization, demobilization and capital upgrades of our rigs.

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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, 2022 (Successor) was between approximately 1 month and 5 years.

The remaining duration of our drilling contracts based on those in place as of December 31, 2023 was between approximately 1 month and 5 years.

Day Rate Drilling Revenue

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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.

In 2021, a contract was awarded to VALARIS DS-11 for a project in the U.S.

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

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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

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Contract Assets Contract Liabilities

Balance as of December 31, 2020 (Predecessor) $ 1.8 $ 71.9

Balance as of December 31, 2021

Revenue recognized in advance of right to bill customer 9.2 —

Increase due to cash received — 10.2

Increase due to revenue deferred during the period — 156.7

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

Decrease due to transfer to receivables during the period ( 1.6 ) —

Fresh start accounting revaluation ( 0.3 ) ( 31.6 )

Balance as of April 30, 2021 (Predecessor) 2.2 35.7

Balance as of May 1, 2021 (Successor) 2.2 35.7

Revenue recognized in advance of right to bill customer 2.5 —

Increase due to cash received — 80.1

Decrease due to amortization of deferred revenue that was 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, 2021 (Successor) 0.3 56.6

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

Balance as of December 31, 2022

Revenue recognized in advance of right to bill customer 8.4 —

Increase due to cash received — 156.7

Increase due to revenue deferred during the period — 162.9

Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance — ( 73.1 )

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

Decrease due to amortization of deferred revenue that was added during the period — ( 46.5 )

Decrease due to transfer to receivables and payables during the period ( 7.7 ) ( 8.5 )

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

Balance as of December 31, 2023

$ 6.0 $ 153.8

Deferred Contract Costs

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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 $ 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.

Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred.

Deferred contract costs are included in Other current assets and Other assets on our Consolidated Balance Sheets and totaled $ 85.1 million and $ 57.3 million as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor), amortization of such costs totaled $ 92.9 million, $ 61.7 million and $ 22.0 million, respectively.

During the four months ended April 30, 2021 (Predecessor), amortization of such costs totaled $ 7.6 million.

Deferred Certification Costs

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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.

Deferred regulatory certification and compliance costs are included in Other current assets and Other assets on our Consolidated Balance Sheets and totaled $ 14.5 million and $ 16.2 million as of December 31, 2023 and 2022, respectively.

During the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor), amortization of such costs totaled $ 12.7 million, $ 4.7 million and $ 0.7 million, respectively.

During the four months ended April 30, 2021 (Predecessor), amortization of these costs totaled $ 3.1 million.

Future Amortization of Contract Liabilities and Deferred Costs

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

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

The table below reflects the expected future amortization of our contract liabilities and deferred costs recorded as of December 31, 2023.

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.

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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.

As of December 31, 2023, ARO owned eight jackup rigs, had ordered one newbuild jackup rigs and leased eight rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO.

At December 31, 2023, 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 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) 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.

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.

The eight rigs owned by ARO are currently operating under contracts with Saudi Aramco, each with a minimum aggregate contract term of 15 years, provided that the rigs meet the technical and operational requirements of Saudi Aramco.

The shareholder agreement governing the joint venture (the "Shareholder Agreement") specifies that ARO shall purchase 20 newbuild jackup rigs over an approximate 10-year period.

The first two newbuild jackups were ordered in January 2020, the first of which, Kingdom 1, was delivered and commenced operations in the fourth quarter of 2023, and the second is expected to be delivered in the first half of 2024.

ARO is expected to commit to 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.

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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 day rate for the initial contracts for each newbuild rig is determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis.

The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism.

Upon establishment of ARO, 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.

Summarized Financial Information

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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.

See additional discussion below regarding these related-party transactions.

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Equity in Earnings of ARO

We account for our interest in ARO using the equity method of accounting and only recognize our portion of ARO's net income, adjusted for basis differences as discussed below, which is included in Equity in earnings (losses) of ARO in our Consolidated Statements of Operations.

We account for our interest in ARO using the equity method of accounting and only recognize our portion of ARO's net income, adjusted for basis differences as discussed below, which is included in Equity in earnings of ARO in our Consolidated Statements of Operations.

ARO is a variable interest entity;

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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 at both the Effective Date and the date of our 2019 transaction where we acquired the subsidiary that held the joint venture interest.

We have an equity method investment in ARO that was recorded at its estimated fair value at both the Effective Date and also on 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 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.

Basis differences are amortized over the remaining life of the assets or liabilities to which they relate and are recognized as an adjustment to the Equity in earnings of ARO in our Consolidated Statements of Operations.

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

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Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

50% interest in ARO net income (loss) $ 1.3 $ 10.4 $ ( 4.0 ) $ 6.0

Amortization of basis differences 12.0 14.1 10.1 ( 2.9 )

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

Equity in earnings of ARO $ 13.3 $ 24.5 $ 6.1 $ 3.1

Related-Party Transactions

Revenues recognized by us related to the Lease Agreements and Secondment Agreement are 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

Lease revenue $ 56.7 $ 35.4 $ 21.7 $ 52.2

Secondment revenue 2.0 1.5 1.1 21.6

Total revenue from ARO (1)

During the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor) and four months ended April 30, 2021 (Predecessor), revenues recognized by us related to the Lease Agreements were $ 69.2 million, $ 56.7 million, $ 35.4 million and $ 21.7 million, respectively.

Our balances related to the Lease Agreements were as follows (in millions):

December 31, 2023 December 31, 2022

Amounts receivable (1)

$ 10.2 $ 12.0

(1) All of the revenues presented above are included in our Other segment in our segment disclosures.

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

Amounts receivable from ARO related to the 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, 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.

Contract liabilities (2)

$ 15.9 $ 16.7

Accounts payable (2)

$ 57.7 $ 43.2

(1) Amounts receivable from ARO is included in Accounts receivable, net in our Condensed Consolidated Balance Sheets.

(2) The per day bareboat charter amount in the Lease Agreements is subject to adjustment based on actual performance of the respective rig and therefore, the corresponding contract liabilities are subject to adjustment during the lease term.

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

During 2017 and 2018, the Company contributed assets to ARO in exchange for the 10-year Notes Receivable from ARO, and as amended in December 2023, bear interest based on a one-year term SOFR, set as of the end of the year prior to the year applicable, plus 2.10 %.

The Notes Receivable from ARO were adjusted to the estimated fair value as of the Effective Date and the resulting discount to the principal amount is being amortized using the effective interest method to interest income over the remaining terms of the notes.

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

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We collected our 2023 and 2022 interest on the Notes Receivable from ARO from ARO in cash prior to December 31, 2023 and 2022, respectively, and as such, there was no interest receivable for the Notes Receivable from ARO as of December 31, 2023 and 2022.

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Interest income $ 30.5 $ 11.3 $ 7.0 $ 3.5

Non-cash amortization (1)

28.3 44.9 20.8 —

Total interest income on the Notes Receivable from ARO

$ 58.8 $ 56.2 $ 27.8 $ 3.5

(1) Represents the amortization of the discount on the Notes Receivable from ARO using the effective interest method to interest income over the term of the notes.

In 2022, we recognized non-cash interest income of $ 14.8 million attributable to a $ 40.0 million early principal repayment of the Notes Receivable from ARO received in September 2022.

Maximum Exposure to Loss

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Value Estimated

Second Lien Notes (1)

$ 1,079.3 $ 1,126.1 $ — $ —

First Lien Notes (1)

— — 542.4 545.9

Long-term debt $ 1,079.3 $ 1,126.1 $ 542.4 $ 545.9

Long-term notes receivable from ARO (2)

$ 282.3 $ 423.5 $ 254.0 $ 336.7

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

(1) The estimated fair value of the 8.375 % Senior Secured Second Lien Notes due 2030 (the "Second Lien Notes") and Senior Secured First Lien Notes due 2028 (the "First Lien Notes"), which were discharged in full on April 3, 2023, were 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).

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, 2023 and 2022.

PROPERTY AND EQUIPMENT

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$ 1,889.0 $ 1,134.5

(1) Work-in-progress as of December 31, 2023 includes the Newbuild Drillships, which were purchased for approximately $ 337.0 million, and a $ 13.1 million asset representing the fair value of the corresponding purchase option and embedded put option which was reclassified from Other assets upon purchase of the rigs.

In December 2023, when the Company exercised its options to purchase the Newbuild Drillships, the corresponding put options expired and the Shipyard retained the Common shares issued to them in the plan of reorganization.

See " Note 3 - Fresh Start Accounting" for additional information about these options.

Assets held-for-use

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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.

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

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

These adverse changes and impacts to our customer's capital expenditure plans in the first quarter resulted in further deterioration in our forecasted day rates and utilization for the remainder of 2020 and beyond.

As a result, we concluded that a triggering event had occurred, and we performed a fleet-wide recoverability test.

We determined that our estimated undiscounted cash flows were not sufficient to recover the carrying values of certain rigs and concluded they were impaired as of March 31, 2020.

Based on the asset impairment analysis performed as of March 31, 2020, we recorded a pre-tax, non-cash loss on impairment in the first quarter with respect to certain floaters, jackups and spare equipment totaling $ 2.8 billion.

We measured the fair value of these assets to be $ 72.3 million at the time of impairment by applying either an income approach, using projected discounted cash flows, or estimated 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 then current market conditions and our anticipated business outlook at that time, both of which had been impacted by the adverse changes in the business environment observed during the first quarter of 2020.

During the second quarter of 2020, given the anticipated sustained market impacts arising from the decline in oil price and demand late in the first quarter, we revised our long-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment and we performed a fleet-wide recoverability test.

As a result, we recorded a pre-tax, non-cash impairment with respect to two floaters and spare equipment totaling $ 817.3 million.

We measured the fair value of these assets to be $ 69.0 million at the time of impairment by applying an income approach or estimated scrap value.

These valuations were based on unobservable inputs that require significant judgments for which there is limited information including, in the case of the income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements.

Assets held-for-sale and Assets sold

Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns.

We continue to focus on our fleet management strategy in light of the composition of our rig fleet.

While taking into account certain restrictions on the sales of assets under our 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.

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).

While taking into account certain restrictions on the sales of assets under our Indenture dated as of April 19, 2023 (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.

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

During the year ended December 31, 2023 (Successor), we recognized a pre-tax gain of $ 27.3 million for the sale of VALARIS 54.

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.

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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 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.

The fair value, less costs to sell, based on each rig's estimated sales price, was in excess of the respective carrying value.

As a result, we concluded that there was no impairment of these rigs.

These rigs were sold during the fourth quarter of 2020 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.

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.

See “ Note 2 – Chapter 11 Proceedings” for additional information.

The First Lien Notes were issued pursuant to the Indenture, among Valaris Limited, certain direct and indirect subsidiaries of Valaris Limited as guarantors, and Wilmington Savings Fund Society, FSB, as collateral agent and trustee (in such capacities, the “Collateral Agent”).

The First Lien Notes are guaranteed, jointly and severally, on a senior basis, by certain of the direct and indirect subsidiaries of the Company.

The First Lien Notes and such guarantees are secured by first-priority perfected liens on 100 % of the equity interests of each restricted subsidiary directly owned by the Company or any guarantor and a first-priority perfected lien on substantially all assets of the Company and each guarantor of the First Lien Notes, in each case subject to certain exceptions and limitations.

The following is a brief description of the material provisions of the Indenture and the First Lien Notes.

The First Lien Notes are scheduled to mature on April 30, 2028.

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

First Lien Notes

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

The First Lien Notes were scheduled to mature on April 30, 2028 and accrued interest, at our option, at a rate of:

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

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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.

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 % 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:

(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.

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

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.

In August 2022, the Company completed a consent solicitation pursuant to which the Company amended the indenture that governed the First Lien Notes 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 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.

Predecessor Senior Notes

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

Predecessor Revolving Credit Facility

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

However, the ability of the lenders to exercise remedies in respect of the Revolving Credit Facility was stayed upon commencement of the Chapter 11 Cases.

Accordingly, the $ 581.0 million of outstanding borrowing as well as 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, the Revolving Credit Facility was cancelled and the holders thereunder received the treatment as set forth in the plan of reorganization.

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.

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

On April 3, 2023, the Company issued a notice of conditional redemption to the holders of the First Lien Notes at a redemption price equal to 104.0 % of the aggregate $ 550.0 million principal amount of the First Lien Notes plus accrued and unpaid interest to, but not including, the redemption date (the “Redemption Price”).

On April 19, 2023, in connection with the issuance of our Second Lien Notes, as discussed below, the Company discharged its obligations under the indenture governing the First Lien Notes and deposited the Redemption Price with Wilmington Savings Fund Society, as trustee under such indenture.

The First Lien Notes were redeemed on May 3, 2023 for an aggregate redemption price of $ 571.8 million (excluding accrued and unpaid interest) with a portion of the net proceeds from the issuance of the Initial Second Lien Notes, as discussed below.

We accounted for the redemption as an extinguishment of debt and recognized a corresponding loss of $ 29.2 million, which is included in our Condensed Consolidated Statements of Operations for the year ended December 31, 2023.

Second Lien Notes

On April 19, 2023, the Company and Valaris Finance Company LLC (“Valaris Finance”), a wholly-owned subsidiary, issued and sold $ 700.0 million aggregate principal amount of Second Lien Notes (the "Initial Second Lien Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”).

The Initial Second Lien Notes were issued at par for net proceeds of $ 681.4 million, after deducting the initial purchasers’ discount and offering expenses.

A portion of the proceeds were used to fund the redemption of all of the outstanding First Lien Notes as discussed above.

On August 21, 2023, the Company and Valaris Finance issued $ 400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act.

The Additional Notes were issued at 100.75 % of par, plus accrued interest from April 19, 2023.

The net proceeds were approximately $ 396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $ 11.4 million.

The Initial Second Lien Notes and the Additional Notes (together, the "Second Lien Notes") were issued under the Indenture, and mature on April 30, 2030.

The Second Lien Notes bear an interest rate of 8.375 % per annum with an effective interest rate of 8.76 %.

Interest is payable semi-annually in arrears on April 30 and October 30 of each year, beginning on October 30, 2023.

The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Guarantors and by each of the Company’s future restricted subsidiaries (other than Valaris Finance) that guarantees any debt of the Issuers or any guarantor under certain future debt in an aggregate principal amount in excess of a certain amount.

The Second Lien Notes and the related guarantees are secured on a second-priority basis by the Collateral (as defined below).

On or after April 30, 2026, the Issuers may, at their option, redeem all or any portion of the Second Lien Notes, at once or over time, at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

The following prices are for Second Lien Notes redeemed during the 12-month period commencing on April 30 of the years set forth below, and are expressed as percentages of principal amount:

Redemption Year Price

2026 104.188 %

2027 102.094 %

2028 and thereafter 100.000 %

At any time prior to April 30, 2026, the Issuers may, on any one or more occasions, redeem up to 40.0 % of the aggregate principal amount of the Second Lien Notes issued under the Indenture (including any additional Second Lien Notes issued in the future) with an amount equal to or less than the net cash proceeds of certain equity offerings, at a redemption price equal to 108.375 % of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to but not including, the redemption date.

In addition, at any time prior to April 30, 2026, the Issuers may redeem up to 10.0 % of the aggregate principal amount of the Second Lien Notes during any twelve-month period at a redemption price equal to 103.0 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

At any time prior to April 30, 2026, the Issuers may redeem some or all of the Second Lien Notes at a price equal to 100.0 % of the principal amount of the Second Lien Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium.

Upon the occurrence of certain Change of Control Triggering Event (as defined in the Indenture), the Issuers may be required to make an offer to repurchase all of the Second Lien Notes then outstanding at a price equal to 101.0 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

The Indenture contains covenants that, among other things, restrict the Company’s ability and the ability of certain of its subsidiaries to:

(i) incur additional debt and issue certain preferred stock;

(ii) incur or create liens;

(iii) make certain distributions, investments and other restricted payments;

(iv) sell or otherwise dispose of certain assets;

(v) engage in certain transactions with affiliates;

and (vi) merge, consolidate, amalgamate or sell, transfer, lease or otherwise dispose of all or substantially all of the Company’s assets.

These covenants are subject to important exceptions and qualifications.

In addition, many of these covenants will be suspended with respect to the Second Lien Notes during any time that the Second Lien Notes have investment grade ratings from at least two rating agencies and no default with respect to the Second Lien Notes has occurred and is continuing.

As of December 31, 2023, we were in compliance with our covenants under the Indenture.

Senior Secured Revolving Credit Facility

On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”).

The Credit Agreement provides for commitments permitting borrowings of up to $ 375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, by an additional $ 200.0 million pursuant to the terms of the Credit Agreement) and includes a $ 150.0 million sublimit for the issuance of letters of credit.

Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the Credit Agreement, and the lenders have a first priority lien on the assets securing the Credit Agreement.

The commitments under the Credit Agreement became available to be borrowed on April 19, 2023 (the "Availability Date").

The Credit Agreement and the related guarantees are secured on a first-priority basis, subject to permitted liens, by (a) first preferred ship mortgages over each vessel owned by us and the Guarantors as of the Availability Date, with certain exceptions (the “Collateral Vessels”);

(b) first priority assignments of certain insurances and requisition compensation in respect of the Collateral Vessels;

(c) first priority pledges of all equity interests in our subsidiaries that own Collateral Vessels and certain subsidiaries that hold equity interests in entities that own vessels (the “Collateral Rig Owners”);

(d) first priority assignments of earnings of the Collateral Vessels from the Collateral Rig Owners;

(e) any vessels and other assets of ours and the Guarantors that are pledged, at our option, to secure the Credit Agreement;

and (f) all proceeds thereof (the "Collateral").

Amounts borrowed under the Credit Agreement are subject to an interest rate per annum equal to, at our option, either (a) a base rate determined as the greatest of (i) a prime rate, (ii) the federal funds rate plus 0.5 % and (iii) Term SOFR (as defined in the Credit Agreement) for a one month interest period plus 1.1 % (such base rate to be subject to a 1 % floor) or (b) Term SOFR plus 0.10 % (subject to a 0 % floor), plus, in each case of clauses (a) and (b) above, an applicable margin ranging from 1.50 % to 3.00 % and 2.50 % to 4.00 %, respectively, based on the credit ratings that are one notch higher than the corporate family ratings provided by Standard & Poor’s Financial Services LLC (“S&P”) and Moody’s Investors Service, Inc.

(“Moody’s”) with respect to Valaris Limited.

In addition to paying interest on outstanding borrowings under the Credit Agreement, we are required to pay a quarterly commitment fee to the lenders under the Credit Agreement with respect to the average daily unutilized commitments thereunder at a rate ranging from 0.375 % to 0.75 % depending on the credit ratings that are one notch higher than the corporate family ratings provided by S&P and Moody’s with respect to Valaris Limited.

With respect to each letter of credit issued pursuant to the Credit Agreement, we are required to pay a letter of credit fee equal to the applicable margin in effect for Term SOFR loans and a fronting fee in an amount to be mutually agreed between us and the issuer of such letter of credit.

We are also required to pay customary agency fees in respect of the Credit Agreement.

The Credit Agreement contains various covenants that limit, among other things, our and our restricted subsidiaries’ ability to:

incur indebtedness;

dispose of certain assets;

make certain acquisitions and investments;

redeem or prepay other debt or make other restricted payments such as distributions to shareholders;

enter into transactions with affiliates;

enter into sale-leaseback transactions;

and enter into a merger, amalgamation, consolidation or sale of assets.

Further, the Credit Agreement contains financial covenants that require us to maintain (i) a minimum book value of equity to total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount of liquidity.

As of December 31, 2023, we were in compliance in all material respects with our covenants under the Credit Agreement.

We had no amounts outstanding under the Credit Agreement as of December 31, 2023.

Interest Expense

Interest expense totaled $ 68.9 million for the year ended December 31, 2023 (Successor) which was net of capitalized interest of $ 5.6 million for capital projects.

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 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.

This excess contractual interest was not included as interest expense on our Consolidated Statements of Operations, as the Company discontinued accruing interest on the unsecured senior notes and Revolving Credit Facility subsequent to the Petition Date.

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

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

Our functional currency is the U.S.

As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S.

however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S.

These transactions are remeasured in U.S.

dollars based on a combination of both current and historical exchange rates.

We previously used derivatives to reduce our exposure to various market risks, primarily foreign currency exchange rate risk.

The commencement of the Chapter 11 Cases constituted a termination event with respect to the Company’s derivative instruments, which permitted the counterparties of our derivative instruments to terminate their outstanding contracts.

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).

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):

Foreign Currency Forward Contracts

Successor Predecessor

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 )

(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.

Amortization of debt premium and issuance costs was $ 5.0 million, $ 1.0 million and $ 0.5 million for the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor), respectively.

SHAREHOLDERS' EQUITY

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

Activity in our various shareholders' equity accounts for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) were as follows (in millions):

Par Value Additional

Capital Warrants Retained

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

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

Net changes in pension and other postretirement benefits — — — — — ( 76.5 ) — —

Purchase of noncontrolling interests — — ( 7.2 ) — — — — —

Distributions to noncontrolling interests — — — — — — — ( 0.9 )

Shares issued under share-based compensation plans, net 0.2 0.1 ( 1.9 ) — — — 2.0 —

Repurchase of shares — — — — — — ( 0.9 ) —

Share-based compensation cost — — 21.2 — — — — —

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

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

Net income (loss) — — — — ( 4,467.0 ) — — 3.2

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Adjustment to unrecognized tax benefits

— — — — 11.0 — — —

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

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BALANCE, December 31, 2021 (Successor)

75.0 $ 0.8 $ 1,083.0 $ 16.4 $ ( 16.4 ) $ ( 9.1 ) $ — $ 2.7

Net income — — — — 176.5 — — 5.3

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

Net income — — — — 865.4 — — 1.4

Share-based compensation cost — — 27.3 — — — — —

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

Repurchase of Common Shares — — — — — — ( 200.1 ) —

Net changes in pension and other postretirement benefits — — — — — 10.8 — —

Shares withheld for taxes on vesting of share-based awards — — ( 5.4 ) — — — — —

Net other comprehensive loss — — — — — ( 0.3 ) — —

BALANCE, December 31, 2023 (Successor) 75.4 $ 0.8 $ 1,119.8 $ 16.4 $ 1,025.5 $ 25.2 $ ( 200.1 ) $ 9.4

Valaris Limited Share Capital

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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.

In 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.

In April 2023, the board of directors authorized an increase of this amount to $ 300.0 million and in February 2024, they authorized a further increase to $ 600.0 million.

The share repurchase program does not have a fixed expiration, may be modified, suspended or discontinued at any time and is subject to compliance with applicable covenants and restrictions under our financing agreements.

During the year ended December 31, 2023, we repurchased 3.0 million shares at an aggregate cost of $ 200.0 million, exclusive of fees, at an average price of $ 66.77 .

There were no share repurchases during the year ended December 31, 2022.

SHARE BASED COMPENSATION

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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

As of December 31, 2023, there were 6.8 million shares available for issuance under the MIP.

Successor Awards

Under the Company's MIP, time-based restricted stock unit awards were granted to certain employees and senior officers which vest ratably over a three-year period from the date of grant.

The grant-date fair value per share for these time-based restricted stock awards was equal to the closing price of the Company's stock on the grant date.

For senior officers, delivery of the shares underlying vested restricted stock awards is deferred until the third anniversary of the date of grant.

Time-Based Share Awards

Under the Company's MIP, time-based restricted stock unit awards have been granted to certain employees and senior officers which generally vest ratably over a three-year period from the date of grant.

The grant-date fair value per share for these time-based restricted stock awards is equal to the closing price of the Company's stock on the grant date.

For senior officers, delivery of the shares underlying certain vested restricted stock unit awards is deferred until the third anniversary of the date of grant.

Non-employee directors received a one-time grant of time-based restricted awards upon our emergence from the Chapter 11 Cases which vest ratably over a three-year period from the date of grant.

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.

Additionally, non-employee directors receive 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 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.

Our time-based 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.

Compensation expense for share awards is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period).

Our compensation cost is reduced for forfeited awards in the period in which the forfeitures occur.

Predecessor Awards

The Predecessor granted share awards and share units (collectively "share awards") and share units to be settled in cash ("cash-settled awards"), which generally vested at a rate of 33 % per year, as determined by the compensation committee of Legacy Valaris' board of directors at the time of grant.

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 of directors.

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

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).

Compensation expense for cash-settled awards was remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in the Legacy Valaris share price.

Compensation cost was also reduced for forfeited awards in the period in which the forfeitures occurred.

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):

Successor Predecessor

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

The following table summarizes Successor time-based share award compensation expense recognized (in millions):

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021

Contract drilling $ 6.8 $ 3.9 $ 1.6

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Tax benefit ( 1.6 ) ( 0.9 ) ( 0.2 )

$ 9.8 $ 3.4 $ 4.3 $ 18.1

As of December 31, 2022, there was $ 22.0 million of total estimated unrecognized compensation cost related to Successor share awards, which has a weighted-average remaining vesting period of 1.4 years.

The following tables summarizes the value of share awards and cash-settled awards granted and vested:

Successor Predecessor

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)

$ 45.39 $ 26.07 $ — $ 3.07

Total fair value of share awards vested during the period (in millions) (2)

$ 12.8 $ — $ — $ 3.3

Cash-Settled Awards

Total $ 14.2 $ 9.8 $ 3.4

As of December 31, 2023, there was $ 23.2 million of total estimated unrecognized compensation cost related to time-based share awards, which has a weighted-average remaining vesting period of 1.3 years.

The following tables summarizes the value of Successor time-based share awards granted and vested:

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021

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

2 unchanged sentences

$ 25.2 $ 12.8 $ —

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

(1) 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):

The following table summarizes time-based share awards activity for the year ended December 31, 2023 (Successor) (shares in thousands):

Awards Weighted-Average

Share awards as of December 31, 2021 (Successor)

Share awards as of December 31, 2022

Granted 295 $ 63.22

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Forfeited ( 32 ) $ 36.68

Share awards as of December 31, 2022 (Successor)

Share awards as of December 31, 2023

(1) The vested share awards include 65,882 awards with a weighted average grant date fair value of $ 35.40 per share, for which delivery of the shares is deferred until the third anniversary of the date of grant.

1 unchanged sentence

Performance Awards

Successor Awards

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");

(b) relative return on capital employed ("ROCE") as compared to a specified peer group, all as defined in the award agreements (the "ROCE Objective"), and (c) specified strategic goals as established by a committee of the board of directors (the "Strategic Goal Objective" and together with the ROCE Objective, the "Performance-Based Objectives").

Awards are payable in equity following a three-year performance period and subject to attainment of relative Market-Based Objectives and Performance-Based Objectives ranging from 0 % to 150 % of target performance under such objectives.

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

The performance awards granted in 2021 and 2022 are 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 "Share Price Objective");

(b) relative return on capital employed ("ROCE") as compared to a specified peer group, all as defined in the award agreements (the "ROCE Objective"), and (c) specified strategic goals as established by the Compensation Committee of the board of directors (the "Strategic Goal Objective" and together with the ROCE Objective, the "Performance-Based Objectives").

These awards are payable in equity following a three-year performance period and subject to attainment of such objectives ranging from 0 % to 150 % of target performance under such objectives.

The performance awards granted in 2023 include awards which are subject to the achievement of goals based on our absolute total shareholder return and our total shareholder return relative to a specified peer group (the "TSR Objectives" and together with the Share Price Objective, the "Market-Based Objectives").

These awards are payable in equity at a range from 0 % to 200 % of target performance following a three-year performance period.

Also, in 2023, incremental awards based on the Strategic Goal Objective were granted.

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

2 unchanged sentences

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 fair value of the performance awards granted during the years ended December 31, 2023 and 2022, 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 year ended December 31, 2022 (Successor) and eight months ended December 31, 2021 (Successor):

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

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 years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor):

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021

Expected price volatility 60 % 61 % 61 %

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

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 weighted average grant-date fair value of performance awards granted during the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor) was $ 62.09 , $ 38.08 and $ 15.93 , respectively.

The following table summarizes the performance award activity for the year ended December 31, 2023 (Successor) (shares in thousands):

Weighted Average Grant Date Fair Value Price (2)

Balance as of December 31, 2021 (Successor)

Balance as of December 31, 2022

Granted - Market-Based Objectives (1)

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Total Granted 127 $ 62.09

Balance as of December 31, 2022 (Successor)

Balance as of December 31, 2023

(1) The number of awards granted reflects the shares that would be granted if the target level of performance were to be achieved.

1 unchanged sentence

(2) There were no forfeited or vested shares for the year ended December 31, 2023 (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.

During the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor), we recognized of $ 11.7 million, $ 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, 2023, there was $ 10.1 million of total estimated unrecognized compensation cost related to performance awards, which has a weighted-average remaining vesting period of 1.2 years.

Predecessor Awards

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").

The 2020 performance awards were forfeited in exchange for cash-based incentive and retention awards.

The performance goals were determined by a committee of the board of directors and the awards were payable in cash upon attainment of relative performance goals.

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

Performance awards granted during 2019 were classified as liability awards, all with compensation expense recognized over the requisite service period.

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

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 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.

While this award was not cancelled in accordance with the plan of reorganization, it has no value.

Time-Based Share Awards and Cash-Settled Awards

The Predecessor granted share awards and share units (collectively "share awards") and share units to be settled in cash ("cash-settled awards"), which generally vested at a rate of 33 % per year.

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

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

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).

Compensation expense for cash-settled awards was remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in the Legacy Valaris share price.

Compensation cost was also reduced for forfeited awards in the period in which the forfeitures occurred.

During the four months ended April 30, 2021 (Predecessor) we recognized $ 4.8 million of compensation expense for these awards, of which $ 2.4 million was included in Contract drilling expense and $ 2.4 million was included in General and administrative expense in our Consolidated Statements of Operations.

Share Appreciation Rights

Predecessor Awards

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

2 unchanged sentences

Share Option Awards

Predecessor Awards

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

3 unchanged sentences

The defined-benefit pension plans include:

(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.

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 and began accounting for this plan as a defined benefit plan.

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

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

and (2) supplemental executive retirement plans, which are also frozen, that provided eligible employees an opportunity to defer a portion of their compensation for use after retirement.

Additionally, we have frozen retiree life and medical supplemental plans which provide post-retirement health and life insurance benefits.

The following table presents the changes in benefit obligations and plan assets for the years ended December 31, 2023 and 2022 and the funded status and weighted-average assumptions used to determine the benefit obligation at the measurement date (dollars in millions):

Year Ended December 31,

Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total

Projected benefit obligation:

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

Plan amendments — — — 0.2 — 0.2 — — —

Benefits paid ( 41.7 ) ( 0.8 ) ( 42.5 ) ( 46.0 ) ( 0.6 ) ( 46.6 )

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

BALANCE at the end of the period $ 606.5 $ 11.0 $ 617.5 $ 611.5 $ 11.6 $ 623.1

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Amounts not yet reflected in net periodic benefit cost:

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

Actuarial loss 17.8 7.9 25.7 7.0 7.9 14.9

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 ) $ — $ — $ —

Total accumulated other comprehensive income

$ 17.6 $ 7.9 $ 25.5 $ 6.8 $ 7.9 $ 14.7

Net benefit liabilities $ ( 135.3 ) $ ( 11.0 ) $ ( 146.3 ) $ ( 153.0 ) $ ( 11.6 ) $ ( 164.6 )

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Discount rate 4.97 % 5.00 % 5.21 % 5.30 %

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

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.

Cash balance interest credit rate 3.26 % N/A 3.23 % N/A

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 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):

The accumulated benefit obligation, which is presented below for all plans in the aggregate at December 31, 2023 and 2022, is based on services rendered to date, but exclude the effect of future salary increases (in millions):

Accumulated benefit obligation $ 617.5 $ 623.1

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Successor Predecessor

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)

$ — $ — — 0.1

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Interest cost

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( 31.4 ) ( 38.3 ) ( 24.7 ) ( 12.1 )

Curtailment gain recognized (2)

Amortization of net (gain) loss

( 0.7 ) ( 0.1 ) — 0.1

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— ( 0.4 ) 0.4 —

Amortization of net (gain) loss (2)

( 0.1 ) — 0.1 —

Net periodic pension and retiree medical income (2)

$ ( 0.9 ) $ ( 16.4 ) $ ( 8.7 ) $ ( 5.4 )

Discount rate 5.21 % 2.73 % 2.84 % 2.30 %

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Cash balance interest credit rate 3.23 % 3.05 % 2.94 % 2.94 %

(1) Included in Contract drilling and General and administrative expense in our Consolidated Statements of Operations.

(2) Included in Other, net, in our Consolidated Statements of Operations.

(1) 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.

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

During the year ended December 31, 2022 and eight months ended December 31, 2021 (Successor), the settlement threshold was reached for certain of our pension plans and we recognized a corresponding settlement (gain) loss in our Consolidated Statements of Operations.

(2) All components of Net periodic pension and retiree medical income are included in Other, net, in our Consolidated Statements of Operations.

The American Rescue Plan Act of 2021, which was passed in March 2021, provided funding relief for U.S.

qualified pension plans which lowered our pension contribution requirements for the years ended December 31, 2023 and 2022.

We currently expect to contribute approximately $ 23.7 million to our pension plans and to directly pay other post-retirement benefits of approximately $ 1.2 million in 2024.

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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, 2022 and 2021 (Successor), 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, 2023 and 2022, 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, 2022 (1)

December 31, 2023 December 31, 2022

Target range (1)

23.9 % to 33.9 %

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Global Low Volatility Equity 3.4 % to 13.4 %

38.0 — 38.0 —

19.7 % to 29.7 %

International all cap 51.3 50.7

50.7 — 50.7 —

International small cap 23.1 22.4

22.4 — 22.4 —

Emerging markets 39.3 39.7

Real estate equities

49.0 — 49.0 —

Real estate equities 3 % to 13 %

Fixed income:

Long-term corp bonds 45.3 — 45.3 —

Long-term corporate bonds

Treasury STRIPS 93.0 83.7

1 unchanged sentence

Total $ 471.2 $ 458.5

December 31, 2021

large cap 22 % to 28 %

$ 173.7 $ — $ 173.7 $ —

44.7 — 44.7 —

International all cap

159.1 — 159.1 —

International small cap

41.7 — 41.7 —

Real estate equities

63.5 — 63.5 —

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 %

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.

(1) Our investment policy only sets allocation target ranges for general asset classes and not specific investment types.

All of our investments, other than cash and cash equivalents, are measured at fair value using the net asset value per share (or its equivalent) practical expedient and therefore are not categorized in the fair value hierarchy.

Cash and cash equivalents are considered Level 1 as they were valued at cost, which approximates fair value.

Assets in the U.S.

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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.

2 unchanged sentences

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, 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.

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 7.10 % at December 31, 2022 (Successor) from 6.26 % at December 31, 2021 (Successor).

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 decreased to 6.88 % at December 31, 2023 from 7.10 % at December 31, 2022.

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

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to make tax-deferred contributions to the plan.

Historically, we made matching cash contributions to the plans.

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.

Except for the period August 1, 2020, to December 31, 2021 where employer contributions were temporarily suspended in light of the then current economic environment, we generally make matching cash contributions to the plans.

These matching 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, and increased effective January 1, 2023 whereby employee contributions are now matched up to a maximum of 5 %.

These matching contributions totaled $ 8.0 million and $ 4.7 million for the years ended December 31, 2023 and 2022 (Successor), respectively.

We generated profits of $ 30.7 million $ 39.7 million, $ 253.4 million and $ 373.1 million before income taxes in the U.S.

for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively.

We generated profits of $ 53.5 million and $ 185.2 million, and losses of $ 240.6 million and $ 4.8 billion before income taxes in non-U.S.

jurisdictions for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively.

The components of our provision for income taxes are summarized 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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Current income tax expense (benefit):

7 unchanged sentences

Total income tax expense (benefit) $ ( 782.6 ) $ 43.1 $ 36.4 $ 16.2

Coronavirus Aid, Relief, and Economic Security Act (the "CARES Act") was enacted on March 27, 2020 and introduced various corporate tax relief measures into law.

Among other things, the CARES Act allows net operating losses ("NOLs") generated in 2019 and 2020 to be carried back to each of the five preceding years.

During 2020, we recognized a tax benefit of $ 122.1 million associated with the carryback of NOLs to recover taxes paid in prior years.

Deferred Taxes

9 unchanged sentences

Other 14.4 20.1

Total deferred tax assets 4,808.9 3,915.9

Valuation allowance ( 4,192.4 ) ( 4,720.3 )

Net deferred tax assets 88.6 86.9

Total deferred tax assets 881.7 88.6

Deferred tax liabilities ( 26.8 ) ( 19.4 )

Property and equipment — —

Other ( 19.4 ) ( 14.5 )

Total deferred tax liabilities ( 19.4 ) ( 14.5 )

Net deferred tax asset $ 854.9 $ 69.2

The realization of substantially all of our deferred tax assets is dependent upon generating sufficient taxable income during future periods in various jurisdictions in which we operate.

We rely on projected taxable income from both current and future drilling contracts for the recognition of deferred tax assets.

Realization of certain of our deferred tax assets is not assured.

1 unchanged sentence

The amount of deferred tax assets considered realizable could increase or decrease in the near-term if our estimates of future taxable income change.

As of December 31, 2022 (Successor), we had gross deferred tax assets of $ 3.0 billion relating to $ 12.9 billion of NOL carryforwards, $ 60.7 million of U.S.

foreign tax credits (“FTCs”), and $ 193.4 million of U.S.

and Luxembourg interest limitation carryforwards, which can be used to reduce our income taxes payable in future years.

As of December 31, 2023, we had gross deferred tax assets of $ 3.3 billion relating to $ 14.2 billion of net operating loss ("NOL") carryforwards, $ 44.7 million of U.S.

foreign tax credits (“FTCs”), and $ 123.4 million of U.S., Luxembourg and U.K.

interest limitation carryforwards, which can be used to reduce our income taxes payable in future years.

NOL carryforwards, which were generated in various jurisdictions worldwide, include $ 13.2 billion that do not expire and $ 1.0 billion that will expire, if not utilized, between 2024 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.

Deferred tax assets for NOL carryforwards as of December 31, 2023 include $ 2.4 billion, $ 607.5 million, $ 88.6 million, and $ 78.0 million pertaining to NOL carryforwards in Luxembourg, the United States, Switzerland, and the U.K., respectively.

FTCs expire between 2024 and 2026 .

2 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 $ 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 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.

We had a $ 4.2 billion and a $ 4.7 billion valuation allowance as of December 31, 2023 and 2022, respectively, 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 prior to expiration and/or of the character necessary to use the benefit of the deferred tax assets.

During the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor), we recognized a deferred tax benefit of $ 802.9 million, a deferred tax expense of $ 1.5 million and a deferred tax benefit of $ 9.8 million, respectively, associated with changes in deferred tax asset valuation allowances.

The deferred tax benefit in 2023 primarily relates to a $ 799.5 million reduction of our valuation allowance recognized in the fourth quarter of 2023 due changes in the balance of relevant positive and negative evidence considered when assessing the realization of our deferred tax assets in certain operating jurisdictions.

After considering the balance of evidence, which included historical financial results, projected earnings, contract backlog, day rates and market outlook, we determined that sufficient positive evidence exists to conclude that this portion of the valuation allowance on deferred tax assets is no longer needed.

This reduction in our valuation allowance was partially offset by a net increase of $ 275.0 million in 2023, primarily relating to deferred tax asset activity during the year attributable to NOLs and future deductible temporary differences for which we are not more than likely not to realize.

We intend to continue maintaining a valuation allowance on a substantial portion of our deferred tax assets until there is sufficient evidence to support a reversal of such allowances.

The timing and amount of future valuation allowance reductions are subject to future levels of contracting and profitability achieved.

Effective Tax Rate

1 unchanged sentence

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.

The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation.

Legacy Valaris was domiciled and resident in the U.K.

8 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 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.

Our consolidated effective income tax rate for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively, differs from the Bermuda and U.K.

statutory income tax rates as follows:

Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Bermuda (Successor)/ U.K.

1 unchanged sentence

— % — % — % 19.0 %

Asset impairments — — ( 3.2 ) ( 12.5 )

Non-Bermuda (Successor) taxes

74.0 22.8 376.0 —

(Predecessor) taxes

— — 1.0 ( 2.8 )

Valuation allowance ( 953.6 ) 0.6 ( 119.5 ) ( 1.8 )

Resolution of prior year items

1 unchanged sentence

Switzerland Tax Reform — — ( 188.3 ) —

Valuation allowance 0.6 ( 119.5 ) ( 1.8 ) ( 1.5 )

tax reform and U.S.

CARES Act — — — 2.4

Contract termination 2.8 — — —

Asset impairments — — — ( 3.2 )

Other — 2.8 — ( 14.0 )

Effective income tax rate ( 929.5 ) % 19.2 % 284.4 % ( 0.4 ) %

Our 2023 consolidated effective income tax rate includes discrete tax benefit of $ 42.0 million primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years.

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.

1 unchanged sentence

Our four months ended April 30, 2021 (Predecessor) consolidated effective income tax rate included $ 2.2 million associated with the impact of various discrete items, including $ 21.5 million of income tax expense associated with changes in liabilities for unrecognized tax benefits and resolution of other prior period tax matters, offset by $ 19.3 million of tax benefit related to fresh start accounting adjustments.

Our 2020 consolidated effective income tax rate includes a $ 322.4 million tax benefit associated with the impact of various discrete tax items, including restructuring transactions, impairments of rigs and other assets, implementation of the U.S.

CARES Act, changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, rig sales, reorganization items and the resolution of other prior period tax matters.

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.

Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) were ( 872.3 )%, 73.6 %, 213.9 % and ( 12.9 )%, 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.

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.

Unrecognized Tax Benefits

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, 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 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:

As of December 31, 2023, we had $ 201.4 million of unrecognized tax benefits, of which $ 171.7 million was included in Other liabilities on our Consolidated Balance Sheet, and $ 29.7 million, which is associated with tax positions taken in tax years with NOL carryforwards, was presented as a reduction of deferred tax assets.

As of December 31, 2022, 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.

If recognized, $ 171.2 million of the $ 201.4 million unrecognized tax benefits as of December 31, 2023 would impact our consolidated effective income tax rate.

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) (in millions) were as follows:

Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Balance, beginning of period $ 217.6 $ 235.1 $ 235.4 $ 237.7

Increase as a result of tax positions taken during prior years

88.6 3.0 34.6 2.9

Lapse of applicable statutes of limitations ( 73.6 ) ( 4.5 ) ( 20.2 ) ( 0.2 )

Settlements with taxing authorities ( 41.8 ) ( 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

Increases as a result of tax positions taken during the current year

13.4 11.2 6.9 12.6

Impact of foreign currency exchange rates 0.6 ( 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 ) —

Decreases as a result of tax positions taken during prior years

( 3.4 ) ( 1.0 ) ( 4.5 ) —

Balance, end of period $ 201.4 $ 217.6 $ 235.1 $ 235.4

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.

Accrued interest and penalties totaled $ 52.3 million and $ 87.8 million as of December 31, 2023 and 2022, respectively, and were included in Other liabilities on our Consolidated Balance Sheets.

We recognized a net benefit of $ 35.4 million and $ 12.5 million, and net expense of $ 20.3 million and $ 13.5 million associated with interest and penalties during the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively.

Interest and penalties are included in Current income tax expense in our Consolidated Statements of Operations.

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.

tax returns and the tax returns of one or more of these subsidiaries is under exam for years 2014 and subsequent years.

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 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.

Therefore, it is reasonably possible that our unrecognized tax benefits will decline during the next 12 months by $ 50.0 million, inclusive of $ 11.4 million of accrued interest and penalties, all of which would impact our consolidated effective income tax rate if recognized.

Statutes of limitations applicable to certain of our tax positions lapsed during the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), resulting in net income tax benefits, inclusive of interest and penalties, of $ 77.3 million, $ 4.5 million, $ 17.9 million and $ 0.2 million, respectively.

Absent the commencement of examinations by tax authorities, statutes of limitations applicable to certain of our tax positions will lapse during 2024, but we do not expect these to have a material impact to our unrecognized tax benefits or effective income tax rate.

Tax Assessments

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 (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.

In December 2023, one of our Luxembourg subsidiaries received tax assessments for fiscal years 2019, 2020, 2021 and 2023 and a demand of payment from the Luxembourg tax authorities for an aggregate of approximately € 115.0 million (approximately $ 127.0 million converted at current period-end exchange rates), including interest.

In February 2024, we subsequently received notice from the Luxembourg tax authorities reducing the amount attributable to the 2023 payment demand by approximately € 55.0 million resulting in a revised aggregate tax demand of approximately € 60.0 million.

We have recorded a liability for uncertain tax positions of approximately € 60.0 million (approximately $ 66.0 million converted at current period-end exchange rates) in the fourth quarter of 2023 related to the assessments for the 2019-2021 tax years.

We are vigorously contesting these assessments, including the validity and amount;

however, the outcome of such challenges and related administrative proceedings and appeals cannot be predicted with certainty.

An unfavorable outcome could result in a material impact on our financial position, operating results and cash flows.

During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101.0 million (approximately $ 69.0 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$ 42.0 million payment (approximately $ 29.0 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment.

We have a $ 17.8 million liability for unrecognized tax benefits relating to these assessments as of December 31, 2022 (Successor).

We have an $ 18.8 million liability for uncertain tax positions relating to these assessments as of December 31, 2023.

We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments.

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We do not provide deferred taxes on undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely.

As of December 31, 2022 (Successor), the aggregate undistributed earnings of the subsidiaries for which we maintain a policy and intention to reinvest earnings indefinitely totaled $ 289.5 million.

As of December 31, 2023, the aggregate undistributed earnings of the subsidiaries for which we maintain a policy and intention to reinvest earnings indefinitely totaled $ 298.2 million.

Should we make a distribution from these subsidiaries in the form of dividends or otherwise, we would be subject to additional income taxes.

The unrecognized deferred tax liability related to these undistributed earnings was not practicable to estimate as of December 31, 2022 (Successor).

The unrecognized deferred tax liability related to these undistributed earnings was not practicable to estimate as of December 31, 2023.

Tax Legislation

The Organization for Economic Co-operation and Development has issued Pillar Two model rules introducing a new global minimum tax of 15% applied on a country-by-country basis intended to be effective on January 1, 2024.

Numerous jurisdictions are actively considering changes to existing tax laws or have proposed or enacted new laws to align with the recommendations and guidelines under Pillar Two.

There remains uncertainty as to the final Pillar Two model rules and we will continue to monitor global legislative action related to this initiative.

Additionally, Bermuda recently enacted the Corporate Income Tax Act 2023 on December 27, 2023 (the “CIT Act”) which stipulates a tax on 15% of the net income of certain Bermuda constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities).

No tax is chargeable under the CIT Act until tax years starting on or after January 1, 2025.

While we are still closely monitoring developments of these rules and evaluating the potential impact on future periods, we do not expect they will have a significant impact on our financial results in the near term.

COMMITMENTS AND CONTINGENCIES

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.

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.

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 two 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, as delivered, on a proportionate basis.

The Shareholder Agreement specifies that ARO shall purchase 20 newbuild jackup rigs over an approximate 10-year period.

The joint venture partners intend for the newbuild jackup rigs to be financed out of available cash on hand and from ARO's operations and/or funds available from third-party financing.

In January 2020, ARO paid 25 % of the purchase price from cash on hand for each of the two newbuilds, and in October 2023, entered into a $ 359.0 million term loan to finance the remaining payments due upon delivery and for general corporate purposes.

The term loan matures in eight years following the related drawdown under the term loan and requires equal quarterly amortization payments during the term, with a 50 % balloon payment due at maturity.

The term loan bears interest based on the three-month SOFR plus a margin ranging from 1.25 % to 1.4 %.

Our Notes Receivable from ARO are subordinated and junior in right of payment to ARO’s term loan.

In the event ARO has insufficient cash 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.

Beginning with the delivery of the second newbuild, each partner's commitment shall be reduced by the lesser of the actual cost of each newbuild rig or $ 250.0 million, 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.

Letters of credit outstanding as of December 31, 2022 (Successor) totaled $ 141.4 million and are issued under facilities provided by various banks and other financial institutions.

Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirement.

As of December 31, 2022 (Successor), we had collateral deposits in the amount of $ 20.7 million with respect to these agreements.

Letters of credit outstanding as of December 31, 2023 totaled $ 128.8 million and are issued under facilities provided by various banks and other financial institutions, but none were issued under the Credit Agreement.

Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirements.

As of December 31, 2023, we had collateral deposits in the amount of $ 12.6 million with respect to these agreements.

Patent Litigation

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We do not believe that we have breached the license agreement and intend to defend ourselves vigorously against this claim.

Brazil Administrative Proceeding

In July 2023, we received notice of an administrative proceeding initiated against us in Brazil.

Specifically, the Federal Court of Accounts ("TCU") is seeking from us, Samsung Heavy Industries (“SHI”) and others, on a joint and several basis, a total of approximately BRL 601.0 million (approximately $ 124.0 million at the current quarter-end exchange rates) in damages that TCU asserts arose from the overbilling to Petrobras in 2015 in relation to the drilling services agreement with Petrobras for VALARIS DS-5 (the “DSA”).

As fully disclosed in our prior periodic reports, the DSA was previously the subject of (1) investigations by the SEC and the U.S Department of Justice, each of which closed their investigation of us in 2018 without any enforcement action, (2) an arbitration proceeding against SHI in which we prevailed resulting in SHI making a $ 200.0 million cash payment to us in December 2019, and (3) a settlement with Petrobras normalizing our business relations in August 2018.

We plan to vigorously defend ourselves against the allegations made by the TCU.

Because these proceedings are in their initial stages, we are unable to estimate our potential exposure, if any, at this time.

Other Matters

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For all asset classes, except office space, we account for the lease component and the non-lease component as a single lease component.

Our leases have remaining lease terms of less than one year to nine years , some of which include options to extend.

We evaluate the carrying value of our right-of-use assets on a periodic basis to identify events or changes in circumstances, such as lease abandonment, that indicate that the carrying value of such right-of-use assets may be impaired.

Short-term leases with a term of one year or less are not recorded on the Consolidated Balance Sheet.

Our leases have remaining lease terms of less than one month to eight years , some of which include options to extend.

The lease term used for calculating our right-of-use assets and lease liabilities is determined by considering the non-cancelable lease term, as well as any extension options that we are reasonably certain to exercise.

We evaluate the carrying value of our right-of-use assets on a periodic basis to identify events or changes in circumstances, such as lease abandonment, which indicate that the carrying value of such right-of-use assets may be impaired.

The components of lease expense are 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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Long-term operating lease cost $ 24.6 $ 13.4 $ 12.9 $ 9.1

Short-term operating lease cost 13.2 15.2 14.3 6.3

Sublease income ( 0.4 ) ( 0.3 ) ( 0.1 ) ( 2.3 )

Variable lease cost (1)

11.3 1.0 1.0 0.7

Total operating lease cost $ 49.1 $ 29.6 $ 28.2 $ 16.1

(1) Variable lease costs are excluded from the measurement of right-of-use assets and lease liabilities and consist primarily of variable fees related to offshore equipment rentals.

Supplemental balance sheet information related to our operating leases is as follows (in millions, except lease term and discount rate):

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(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 (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):

Supplemental cash flow information related to our operating leases is as follows (in millions):

Successor Predecessor

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

ROU assets obtained in exchange for operating lease liabilities

$ 80.3 $ 14.7 $ 0.9 $ 5.5

Cash paid for amounts included in the measurement of our operating lease liabilities

$ 26.2 $ 14.0 $ 11.7 $ 7.1

Maturities of lease liabilities as of December 31, 2023 were as follows (in millions):

Thereafter 3.7

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Less imputed interest ( 12.0 )

On October 28, 2020, the Bankruptcy Court approved the rejection of certain unexpired office leases and related subleases.

The various lease rejections were effective as of September 30, 2020 and October 31, 2020.

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

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

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).

Segment information for the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) are presented below (in millions).

Year Ended December 31, 2023 (Successor)

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Contract drilling (exclusive of depreciation) 812.0 517.4 365.9 75.2 ( 226.9 ) 1,543.6

Loss on impairment 34.5 — — — — 34.5

Depreciation 55.8 40.0 65.9 5.0 ( 65.6 ) 101.1

1 unchanged sentence

Equity in earnings of ARO — — — — 13.3 13.3

Operating income (loss) $ ( 30.0 ) $ 169.2 $ 35.6 $ 76.8 $ ( 214.4 ) $ 37.2

Operating income $ 80.9 $ 102.2 $ 42.6 $ 95.7 $ ( 267.9 ) $ 53.5

Property and equipment, net $ 1,035.5 $ 480.8 $ 1,036.6 $ 52.1 $ ( 971.2 ) $ 1,633.8

Capital expenditures $ 562.0 $ 132.3 $ 300.8 $ — $ ( 299.0 ) $ 696.1

Eight Months Ended December 31, 2021 (Successor)

Year Ended December 31, 2022 (Successor)

Floaters Jackups ARO Other Reconciling Items Consolidated Total

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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

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Capital expenditures $ 152.9 $ 53.5 $ 103.7 $ — $ ( 103.1 ) $ 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 )

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Information about Geographic Areas

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.

As of December 31, 2023, our Floaters segment consisted of 13 drillships, four dynamically positioned semisubmersible rigs and one moored semisubmersible rig deployed in various locations.

Our Jackups segment consisted of 27 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:

As of December 31, 2023, the geographic distribution of our and ARO's drilling rigs was as follows:

Floaters Jackups Other Total Valaris ARO

North & South America 7 6 — 13 —

Europe & the Mediterranean 4 12 — 16 —

Middle East & Africa 3 5 8 16 8

North & South America 9 7 — 16 —

Asia & Pacific Rim 2 3 — 5 —

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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 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.

ARO has ordered one newbuild jackup which is under construction in the Middle East and expected to be delivered in first half of 2024.

This rig is not included in the table above.

Information by country for those countries that account for more than 10% of our long-lived assets, was as follows (in millions):

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December 31, 2023 December 31, 2022

United Kingdom $ 185.2 $ 142.4

United States 166.3 152.1

Spain $ 438.9 $ 117.7

Brazil 374.5 102.0

United Kingdom 277.8 185.2

United States 206.5 166.3

Other countries (1)

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(1) Other countries includes countries where individually we had long-lived assets representing less than 10% of total long-lived assets.

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 purposes of our geographic disclosures above, 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.

Any rigs in transit as of the end of the year are included in the location to which they are mobilizing.

SUPPLEMENTAL FINANCIAL INFORMATION

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December 31, 2023 December 31, 2022

Deferred revenue $ 78.0 $ 45.8

Current contract liabilities (deferred revenues)

$ 116.2 $ 78.0

Personnel costs 76.6 55.8

Income and other taxes payable 52.9 41.4

Accrued claims 27.2 17.3

Lease liabilities 27.2 9.4

Accrued claims 20.4 27.2

Accrued interest 15.4 7.6

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Pension and other post-retirement benefits 141.6 159.8

Lease liabilities

Noncurrent contract liabilities (deferred revenues)

Other 19.6 9.9

3 unchanged sentences

Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Repair and maintenance expense $ 203.3 $ 175.2 $ 76.3 $ 48.4

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Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Loss on extinguishment of debt

$ ( 29.2 ) $ — $ — $ —

Net gain on sale of property 28.6 141.2 21.2 6.0

Net periodic pension income, excluding service cost 16.4 8.7 5.4 14.6

Net foreign currency exchange gains (losses) ( 3.5 ) 12.2 8.1 13.4

Gain on bargain purchase and measurement period adjustments — — — ( 6.3 )

Gain on extinguishment of debt — — — 3.1

Net periodic pension and retiree medical income 0.9 16.4 8.7 5.4

Other income 1.4 0.1 0.1 1.1

1 unchanged sentence

Consolidated Statements of Cash Flows Information

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.

Our restricted cash consists primarily of $ 12.6 million and $ 24.4 million of collateral on letters of credit as of December 31, 2023 and 2022, respectively.

See " Note 1 3 - Commitments and Contingencies" for more information regarding our letters of credit.

1 unchanged sentence

Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

(Increase) decrease in accounts receivable $ 44.9 $ ( 6.9 ) $ ( 18.3 ) $ 23.2

(Increase) decrease in other assets

( 5.9 ) 0.5 9.0 15.7

Increase (decrease) in liabilities 82.8 ( 0.2 ) 29.3 38.2

2 unchanged sentences

Successor Predecessor

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

Year Ended December 31, 2023 Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021

Cash paid for interest and taxes

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(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).

We received an income tax refund of $ 45.9 million during the first quarter of 2023 related to the U.S.

Coronavirus Aid, Relief, and Economic Security Act.

Capitalized interest totaled $ 5.6 million and $ 1.2 million during the year ended December 31, 2023 and 2022 (Successor), respectively.

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 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.

Other adjustments to reconcile net loss to net cash used in operating activities includes provisions for inventory reserves, bad debt expense, and other items.

Concentration of Risk

Credit Risk - We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents and short-term investments.

Credit Risk - We are exposed to credit risk relating to our cash and cash equivalents and receivables from customers.

Our cash and cash equivalents are primarily held by various well-capitalized and credit-worthy financial institutions.

We monitor the credit ratings of these institutions and limit the amount of exposure to any one institution and therefore, do not believe a significant credit risk exists for these balances.

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.

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

Customer Concentration - Consolidated revenues with customers that individually contributed 10% or more of revenue in the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor) were as follows:

Year Ended December 31, 2023 Year Ended December 31, 2022

Floaters Jackups Other Total Floaters Jackups Other Total

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53 % 37 % 10 % 100 % 44 % 46 % 10 % 100 %

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

Successor Predecessor

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

Floaters Jackups Other Total Floaters Jackups Other Total

3 unchanged sentences

31 % 58 % 11 % 100 % 29 % 59 % 12 % 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

Year Ended December 31, 2023 Year Ended December 31, 2022

Floaters Jackups Other Total Floaters Jackups Other Total

1 unchanged sentence

United Kingdom — 267.2 — 267.2 — 264.5 — 264.5

210.9 — — 210.9 78.5 — — 78.5

195.0 — — 195.0 111.5 — — 111.5

157.0 29.9 — 186.9 113.0 30.0 — 143.0

Saudi Arabia — 41.2 71.2 112.4 — 78.3 58.8 137.1

Norway — 114.6 — 114.6 — 123.9 — 123.9

Mexico 65.9 38.7 — 104.6 13.9 58.1 — 72.0

Norway — 2.4 — 2.4 — 114.6 — 114.6

Other countries

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$ 948.7 $ 659.6 $ 175.9 $ 1,784.2 $ 700.5 $ 744.2 $ 157.8 $ 1,602.5

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

Successor Predecessor

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

Floaters Jackups Other Total Floaters Jackups Other Total

1 unchanged sentence

United Kingdom — 185.2 — 185.2 — 75.7 — 75.7

19.4 — — 19.4 20.5 — — 20.5

38.6 — — 38.6 — — — —

46.2 29.3 — 75.5 0.8 0.2 — 1.0

Saudi Arabia — 55.3 37.0 92.3 — 30.5 23.0 53.5

Norway — 73.3 — 73.3 — 188.5 — 188.5

Mexico 37.0 40.8 — 77.8 21.6 22.7 — 44.3

Norway — 123.9 — 123.9 — 73.3 — 73.3

Other countries

2 unchanged sentences

(1) Other countries includes locations that individually contributed to less than 10% of total revenues.

RELATED PARTIES

See " Note 5 - Equity Method Investment in ARO" for information in our equity method investment in ARO and associated related party transactions.

Joseph Goldschmid is a director of the Company and an employee of 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.

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