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Item 8. Financial Statements and Supplementary Data

2025-02-20 compared with 2024-02-22 · 454 added, 822 removed, 938 unchanged (58% 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, 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.

We have audited the accompanying consolidated balance sheets of Valaris Limited and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2024, 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, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S.

generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2024, 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 20, 2025 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

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.

Accordingly, the accompanying consolidated financial statements as of December 31, 2023 and 2022 and for the Successor periods have been prepared in conformity with Accounting Standards Codification 852, Reorganization, with the Company’s assets, liabilities, and capital structure having carrying amounts not comparable to prior years.

Basis for Opinion

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

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income tax positions pertaining to certain tax transactions

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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, 2024, 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, 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 .

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, 2024 and 2023, the related consolidated statements of operations, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2025 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

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(in millions, except per share amounts)

Successor Predecessor

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

Years Ended December 31,

2024 2023 2022

OPERATING REVENUES

Revenues (exclusive of reimbursable revenues)

$ 2,211.9 $ 1,676.0 $ 1,497.3

Reimbursable revenues 150.7 108.2 105.2

Total operating revenues

2,362.6 1,784.2 1,602.5

OPERATING EXPENSES

Contract drilling (exclusive of depreciation) 1,543.6 1,383.2 724.1 343.8

Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 1,618.5 1,440.4 1,283.7

Reimbursable expenses 142.4 103.2 99.5

Total contract drilling expenses (exclusive of depreciation)

1,760.9 1,543.6 1,383.2

Loss on impairment — — 34.5

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Total operating expenses 1,999.3 1,744.0 1,589.8

EQUITY IN EARNINGS OF ARO 13.3 24.5 6.1 3.1

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

EQUITY IN EARNINGS (LOSSES) OF ARO ( 11.0 ) 13.3 24.5

OPERATING INCOME 352.3 53.5 37.2

OTHER INCOME (EXPENSE)

Interest income 86.1 101.4 65.5

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

Interest expense, net

( 84.8 ) ( 68.9 ) ( 45.3 )

Reorganization items, net — ( 2.4 ) ( 15.5 ) ( 3,584.6 )

Other, net 16.6 ( 1.8 ) 167.5

Total other income

17.9 30.7 187.7

INCOME (LOSS) BEFORE INCOME TAXES 84.2 224.9 12.8 ( 4,447.6 )

INCOME BEFORE INCOME TAXES 370.2 84.2 224.9

PROVISION (BENEFIT) FOR INCOME TAXES

Current income tax expense 3.8 35.2 57.7 34.4

Current income tax expense (benefit) ( 5.4 ) 3.8 35.2

Deferred income tax expense (benefit) 5.8 ( 786.4 ) 7.9

( 782.6 ) 43.1 36.4 16.2

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

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 )

EARNINGS (LOSS) PER SHARE

Total provision (benefit) for income taxes 0.4 ( 782.6 ) 43.1

NET INCOME 369.8 866.8 181.8

NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 3.6 ( 1.4 ) ( 5.3 )

NET INCOME ATTRIBUTABLE TO VALARIS $ 373.4 $ 865.4 $ 176.5

EARNINGS PER SHARE

Basic $ 5.18 $ 11.68 $ 2.35

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VALARIS LIMITED AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(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

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

OTHER COMPREHENSIVE INCOME (LOSS), NET

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

Years Ended December 31,

2024 2023 2022

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

Other ( 0.3 ) — — —

NET OTHER COMPREHENSIVE INCOME (LOSS) 10.5 23.8 ( 9.1 ) ( 5.5 )

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

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 )

NET INCOME $ 369.8 $ 866.8 $ 181.8

OTHER COMPREHENSIVE INCOME, NET

Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive income 10.9 10.8 23.8

Foreign currency translation adjustments

( 1.9 ) ( 0.3 ) —

NET OTHER COMPREHENSIVE INCOME 9.0 10.5 23.8

COMPREHENSIVE INCOME 378.8 877.3 205.6

COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 3.6 ( 1.4 ) ( 5.3 )

COMPREHENSIVE INCOME ATTRIBUTABLE TO VALARIS $ 382.4 $ 875.9 $ 200.3

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

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(in millions, except par value amounts)

December 31, 2023 December 31, 2022

ASSETS 2024 2023

CURRENT ASSETS

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Total liabilities 2,175.5 2,325.2

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES (Note 11)

VALARIS SHAREHOLDERS' EQUITY

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Accumulated other comprehensive income 34.2 25.2

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

Treasury shares, at cost, 5.2 and 3.0 shares as of December 31, 2024 and 2023, respectively

( 325.1 ) ( 200.1 )

Total Valaris shareholders' equity 2,238.5 1,987.6

NONCONTROLLING INTERESTS 5.8 9.4

Total equity 1,997.0 1,297.9

Total shareholders' equity

2,244.3 1,997.0

Total liabilities and shareholders' equity

$ 4,419.8 $ 4,322.2

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

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(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

Years Ended December 31,

2024 2023 2022

OPERATING ACTIVITIES

Net income (loss) $ 866.8 $ 181.8 $ ( 23.6 ) $ ( 4,463.8 )

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

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

Net income $ 369.8 $ 866.8 $ 181.8

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation expense 122.1 101.1 91.2

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

Accretion of discount on the Notes Receivable from ARO

( 40.0 ) ( 28.3 ) ( 44.9 )

Share-based compensation expense 27.7 27.3 17.4

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

Equity in losses (earnings) of ARO 11.0 ( 13.3 ) ( 24.5 )

Deferred income tax expense (benefit) 5.8 ( 786.4 ) 7.9

Net periodic pension and retiree medical income ( 2.4 ) ( 0.9 ) ( 16.4 )

Net (gain) loss on sale of property 0.2 ( 28.6 ) ( 141.2 )

Loss on extinguishment of debt — 29.2 —

Loss on impairment — — 34.5

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

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

Changes in contract liabilities ( 31.7 ) 4.9 62.4

4.9 62.4 20.8 ( 36.2 )

Changes in deferred costs 39.3 ( 26.1 ) ( 38.8 )

Other 9.3 6.7 8.3

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Contributions to pension plans and other post-retirement benefits ( 21.5 ) ( 6.7 ) ( 4.1 )

Net cash provided by (used in) operating activities 267.5 127.0 ( 26.3 ) ( 39.9 )

Net cash provided by operating activities 355.4 267.5 127.0

INVESTING ACTIVITIES

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Repayment of note receivable from ARO — — 40.0

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

Net cash used in investing activities ( 452.3 ) ( 665.8 ) ( 16.7 )

FINANCING ACTIVITIES

Issuance of Second Lien Notes

1,103.0 — — —

Redemption of First Lien Notes

( 571.8 ) — — —

Payments for share repurchases ( 126.4 ) ( 198.6 ) —

Payments related to tax withholdings for share-based awards

( 29.9 ) ( 5.4 ) ( 2.5 )

Debt issuance costs ( 0.8 ) ( 38.6 ) —

( 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 )

Issuance of Second Lien Notes — 1,103.0 —

Redemption of First Lien Notes — ( 571.8 ) —

Other ( 1.2 ) ( 3.1 ) ( 3.9 )

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CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 635.7 748.5 644.6

748.5 644.6 696.0 325.8

CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 380.5 $ 635.7 $ 748.5

$ 635.7 $ 748.5 $ 644.6 $ 696.0

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

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DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

References to the “Company,” “we,” “us” or “our” in this Annual Report are to Valaris Limited, together with its consolidated subsidiaries.

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

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

We currently own 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.

As of February 20, 2025, we own 52 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 34 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 nine 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 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.

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

We provide drilling services on a day rate contract basis.

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

Chapter 11 Cases

On August 19, 2020 (the “Petition Date”), Valaris plc (“Legacy Valaris” or “Predecessor”) and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under chapter 11 of the United States Bankruptcy Code ("Bankruptcy Code") in the Bankruptcy Court for the Southern District of Texas (the "Bankruptcy Court") The Debtors obtained joint administration of their chapter 11 cases under the caption In re Valaris plc, et al., Case No.

20-34114 (MI) (the “Chapter 11 Cases”).

In connection with the Chapter 11 Cases, on and prior to April 30, 2021 (the "Effective Date"), Legacy Valaris effectuated certain restructuring transactions, pursuant to which the successor company, Valaris, was formed and, through a series of transactions, Legacy Valaris transferred to a subsidiary of Valaris substantially all of the subsidiaries, and other assets, of Legacy Valaris.

References to the financial position and results of operations of the "Successor" or "Successor Company" relate to the financial position and results of operations of the Company after the Effective Date.

References to the financial position and results of operations of the "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Legacy Valaris on and prior to the Effective Date.

References to the “Company,” “we,” “us” or “our” in this Annual Report are to Valaris Limited, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Valaris, together with its consolidated subsidiaries, when referring to periods prior to and including Effective Date.

See “ Note 2 – Chapter 11 Proceedings” for additional details regarding the Chapter 11 Cases.

Fresh Start Accounting

On the Effective Date, the Debtors emerged from the Chapter 11 Cases.

Upon emergence from the Chapter 11 Cases, we qualified for and adopted fresh start accounting.

The application of fresh start accounting resulted in a new basis of accounting, and the Company became a new entity for financial reporting purposes.

Accordingly, our financial statements and notes after the Effective Date are not comparable to our financial statements and notes on and prior to that date.

Furthermore, the consolidated financial statements and notes have been presented with a black line division to delineate the lack of comparability between the Predecessor and Successor.

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

Accounting Policies

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Certain previously reported amounts have been reclassified to conform to the current year presentation.

In addition, the Total operating revenues and Total contract drilling expenses (exclusive of depreciation) line items presented in the Consolidated Statements of Operations, were further disaggregated to separately disclose Reimbursable revenues and Reimbursable expenses, respectively, to align with the updated presentation of our segment tables upon the adoption of ASU No.

2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures ("Update 2023-07") effective January 1, 2024 (see " Note 13 - Segment Information ").

The disaggregation of these line items is presentational only and was retrospectively applied to the years ended December 31, 2023 and 2022.

There were no impacts to the overall Total operating revenues or Total contract drilling expense (exclusive of depreciation) line items.

Pervasiveness of Estimates

The preparation of financial statements in conformity with GAAP requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("GAAP") requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements.

Actual results could differ from those estimates.

Foreign Currency Remeasurement and Translation

Our functional currency is the U.S.

Our functional currency is the United States (the "U.S.") dollar.

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

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

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.

Net foreign currency exchange gains and losses were $ 13.8 million of gains, $ 3.5 million of losses and $ 12.2 million of gains, and were included in Other, net, in our Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, respectively.

Cash Equivalents and Short-Term Investments

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Upon the sale or retirement of assets, the related cost and accumulated depreciation are removed from the balance sheet, and the resulting gain or loss is included in Other, net in our Consolidated Statements of Operations.

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

We have identified the significant components of our drilling rigs and ascribe useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.

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

Drilling rigs and related equipment are depreciated over estimated useful lives ranging from five to 35 years.

Drilling rigs and related equipment are depreciated over estimated useful lives ranging from three to 35 years.

Buildings and improvements are depreciated over estimated useful lives ranging from 10 to 30 years.

Leasehold improvements are depreciated over the lesser of the asset useful life or lease term.

Other equipment, including computer and communications hardware and software, is depreciated over estimated useful lives ranging from two to six years .

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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 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.

In June 2022, a drilling contract awarded to VALARIS DS-11 was terminated prior to commencement.

At that time, we had capitalized certain costs incurred to upgrade the rig pursuant to the requirements of the contract, which upon termination were determined to be impaired.

As a result, we recorded pre-tax, non-cash impairment losses related to long-lived assets of $ 34.5 million in the year ended December 31, 2022.

See " Note 2 - Revenue from Contracts with Customers " for additional information on the contract termination.

Operating Revenues and Expenses

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The movement of drilling rigs among taxing jurisdictions may involve a transfer of drilling rig ownership among our subsidiaries through an intercompany rig sale.

The pre-tax profit resulting from an intercompany rig sale is eliminated from our consolidated financial statements, and the carrying value of a rig sold in an intercompany transaction remains at historical net depreciated cost prior to the transaction.

The pre-tax profit resulting from an intercompany rig sale is eliminated from our consolidated financial statements, and the carrying value of a rig sold in an intercompany transaction remains at the historical net depreciated cost prior to the transaction.

Our consolidated financial statements do not reflect the asset disposition transaction of the selling subsidiary or the asset acquisition transaction of the acquiring subsidiary.

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

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

Certain jurisdictions have enacted new tax laws to align with the recommendations under Pillar Two, while other jurisdictions have proposed or are actively considering changes to existing tax laws based on the new rules.

The impact of the Pillar Two model rules, which have been enacted to date, was not significant to our consolidated financial statements for the year ended December 31, 2024.

There remains uncertainty as to how global legislation relating to Pillar Two will evolve and we will continue to monitor developments related to this initiative and the potential impact on future periods.

See " Note 10 - Income Taxes " for additional information on our income taxes.

Share-Based Compensation

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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.

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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.

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.

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.

See " Note 8 - Share Based Compensation " for additional information on our share-based compensation.

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We recognize gains or losses related to plan curtailments at the date the plan amendment or termination is adopted which may precede the effective date.

See " Note 9 - Pension and Other Post-retirement Benefits " for additional information on our defined benefit pension and other post-retirement plans.

Fair Value Measurements

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All income attributable to noncontrolling interest was from continuing operations.

Cancellation of Predecessor Equity and Issuance of Warrants

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

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

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

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

Earnings Per Share

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

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

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 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, 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 )

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

Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method, which includes the effect of all potentially dilutive stock equivalents, including warrants, restricted stock unit awards and performance stock unit awards.

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, 2024, 2023 and 2022 (in millions):

Years Ended December 31,

2024 2023 2022

Income attributable to our shares $ 373.4 $ 865.4 $ 176.5

Weighted average shares outstanding:

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Diluted 72.9 75.2 75.6

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.

Anti-dilutive share awards totaling 160,000 , 147,000 and 192,000 were excluded from the computation of diluted EPS for the years ended December 31, 2024, 2023 and 2022, respectively.

We have 5,470,950 warrants outstanding (the "Warrants") as of December 31, 2024 which are exercisable for one Common Share per Warrant at an initial exercise price of $ 131.88 per Warrant, in each case as may be adjusted from time to time pursuant to the applicable warrant agreement.

The Warrants expire on April 29, 2028.

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

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

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

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

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

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

These Warrants are anti-dilutive for all periods presented above.

New Accounting Pronouncements

Recently adopted accounting pronouncements

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

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

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

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

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

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

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

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

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("Update 2020-04"), which provides optional expedients and exceptions for applying U.S.

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

The 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 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"), 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.

Improvements to Reportable Segment Disclosures - In November 2023, the FASB issued 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.

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

We adopted Update 2023-07 effective for this annual report for the year ended December 31, 2024 on a retrospective basis.

See " Note 13 - Segment Information " for additional disclosures around our segment information.

Accounting pronouncements to be adopted

Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures - In November 2024, the FASB issued ASU No.

2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses ("Update 2024-03"), which requires companies to disclose additional information for certain relevant expense categories in the Statements of Operations and within the notes to the financial statements.

Update 2024-03 is effective for annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted and can be applied either prospectively to financial statements issued for reporting periods after the effective date, or retrospectively to prior periods which are presented in the financial statements.

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

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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.

While the adoption of Update 2023-09 will result in expansion of our income tax disclosures, we do not expect it to impact the recognition or measurement of income taxes within our consolidated financial statements.

With the exception of the updated standards discussed above, there have been no accounting pronouncements issued and not yet effective that have significance, or potential significance, to our consolidated financial statements.

CHAPTER 11 PROCEEDINGS

Chapter 11 Cases and Emergence from Chapter 11

On the Petition Date, the Debtors filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court.

The Debtors obtained joint administration of the Chapter 11 Cases under the caption In re Valaris plc, et al., Case No.

20-34114 (MI).

On March 3, 2021, the Bankruptcy Court confirmed the Debtors' chapter 11 plan of reorganization.

On the Effective Date, we successfully completed our financial restructuring and together with the Debtors emerged from the Chapter 11 Cases.

Upon emergence from the Chapter 11 Cases, we eliminated $ 7.1 billion of debt and obtained a $ 520.0 million capital injection by issuing the first lien secured notes (the "First Lien Notes").

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

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

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

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

• Appointed six new members to the Company's board of directors to replace all of the directors of Legacy Valaris, other than the director also serving as President and Chief Executive Officer at the Effective Date, who was re-appointed pursuant to the plan of reorganization.

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' 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;

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

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

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

• Senior noteholders, solely with respect to Pride International LLC's 6.875 % senior notes due 2020 and 7.875 % senior notes due 2040, Ensco International 7.20 % Debentures due 2027, and the 4.875 % senior notes due 2022, 4.75 % senior notes due 2024, 7.375 % senior notes due 2025, 5.4 % senior notes due 2042 and 5.85 % senior notes due 2044, received an aggregate cash payment of $ 26.0 million in connection with settlement of certain alleged claims against the Company;

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

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

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

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

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

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

• All equity-based awards of Legacy Valaris that were outstanding were cancelled;

• On the Effective Date, Valaris Limited entered into a registration rights agreement with certain parties who received Common Shares;

• On the Effective Date, Valaris Limited entered into a registration rights agreement with certain parties who received First Lien Notes;

• There were no borrowings outstanding against our debtor-in-possession ("DIP") facility and there were no DIP claims that were not due and payable on, or that otherwise survived, the Effective Date.

The DIP Credit Agreement terminated on the Effective Date.

Management Incentive Plan

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

See " Note 1 0 - Share Based Compensation" for more information on awards granted under the MIP after the Effective date.

Liabilities Subject to Compromise

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.

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, 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

Professional fees $ 2.4 $ 17.2 $ 93.4

Contract items — ( 1.7 ) 3.9

Reorganization items (fees) 2.4 15.5 97.3

Contract items — — 0.5

Backstop premium — — 30.0

Gain on settlement of liabilities subject to compromise — — ( 6,139.0 )

Issuance of Common Shares for

backstop premium — — 29.1

Issuance of Common Shares to the Shipyard — — 5.4

Write-off of unrecognized share-based compensation expense — — 16.0

Impact of newbuild contract amendments — — 350.7

Loss on fresh start adjustments — — 9,194.6

Reorganization items (non-cash) — — 3,487.3

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

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

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

FRESH START ACCOUNTING

Applicability of Fresh Start Accounting

Upon emergence from bankruptcy, we qualified for and applied fresh start accounting, which resulted in the Company becoming a new entity for financial reporting purposes because (1) the holders of the then existing Class A ordinary shares of the Predecessor received less than 50 percent of the Common Shares of the Successor outstanding upon emergence and (2) the reorganization value of the Company’s assets immediately prior to confirmation of the plan of reorganization was less than the total of all post-petition liabilities and allowed claims.

The reorganization value derived from the range of enterprise values associated with the plan of reorganization was allocated to the Company’s identifiable tangible and intangible assets and liabilities based on their fair values (except for deferred income taxes).

The amount of deferred income taxes recorded was determined in accordance with the applicable income tax accounting standard.

The April 30, 2021 fair values of the Company’s assets and liabilities differ materially from their recorded values as reflected on the historical balance sheets.

Reorganization Value

The reorganization value represents the fair value of the Successor's total assets and was derived from the enterprise value associated with the plan of reorganization, which represents the estimated fair value of an entity's long-term debt and equity less unrestricted cash upon emergence from chapter 11.

As set forth in the disclosure statement and approved by the Bankruptcy Court, third-party valuation advisors estimated the enterprise value to be between $ 1,860.0 million and $ 3,145.0 million.

The enterprise value range of the reorganized Debtors was determined primarily by using a discounted cash flow analysis.

The value agreed in the plan of reorganization is indicative of an enterprise value at the low end of this range, or $ 1,860.0 million.

The following table reconciles the enterprise value to the estimated fair value of Successor Common Shares as of the Effective Date (in millions, except per share value):

April 30, 2021

Enterprise Value $ 1,860.0

Cash and cash equivalents 607.6

Fair value of debt ( 544.8 )

Warrants ( 16.4 )

Noncontrolling interest 1.1

Pension and other post-retirement benefits liabilities ( 189.0 )

Adjustments not contemplated in Enterprise Value ( 639.0 )

Fair value of Successor Common Shares $ 1,079.5

Shares issued upon emergence 75.0

Per share value $ 14.39

The following table reconciles the enterprise value to the reorganization value as of the Effective Date (in millions):

April 30, 2021

Enterprise Value $ 1,860.0

Cash and cash equivalents 607.6

Non-interest bearing current liabilities 346.0

Adjustments not contemplated in Enterprise Value ( 218.0 )

Reorganization value of Successor assets $ 2,595.6

Adjustments not contemplated in Enterprise Value represent certain obligations of the Successor that were either not contemplated or contemplated in a different amount in the forecasted cash flows of the enterprise valuation performed by third-party valuation advisors that, had they incorporated those anticipated cash flows into their analysis, the resulting valuation would have been different.

For the reconciliation of Reorganization value of Successor assets, this item includes certain tax balances, contract liabilities, as well as an adjustment for the fair value of pension obligations.

The reconciliation to Successor Common Share value includes these same reconciling items as well as other current and non-current liabilities of the Successor at the emergence.

The enterprise value and corresponding implied equity value are dependent upon achieving the future financial results set forth in the valuation utilizing assumptions regarding future day rates, utilization, operating costs and capital requirements as of the emergence date.

All estimates, assumptions, valuations and financial projections, including the fair value adjustments, the enterprise value and equity value projections, are inherently subject to significant uncertainties and the resolution of contingencies beyond our control.

Accordingly, there is no assurance that the estimates, assumptions, valuations or financial projections will be realized, and actual results could vary materially.

Valuation Process

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

Property, Plant and Equipment

The valuation of the Company’s drilling rigs was estimated by using an income approach 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, reactivation costs and capital requirements.

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

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

Treasury rates and certain risk premiums specific to the Company.

Our remaining property and equipment, including owned real estate and other equipment, was valued using a cost approach, in which the estimated replacement cost of the assets was adjusted for physical depreciation and obsolescence, where applicable, to arrive at estimated fair value.

The estimated fair value of our property and equipment includes an adjustment to reconcile to our reorganization value.

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 a comparable yield with a country-specific risk premium.

Investment in ARO

We estimated the fair value of the equity investment in ARO primarily by applying an income approach, using projected discounted cash flows of the underlying assets, a risk-adjusted discount rate and an estimated effective income tax rate.

Options to Purchase Newbuild Drillships

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

First Lien Notes

The fair value of the First Lien Notes was determined to approximate the par value based on third-party valuation advisors’ analysis of the Company’s collateral coverage, financial metrics, and interest rate for the First Lien Notes relative to market rates of recent placements of a similar term for industry participants with similar credit risk.

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 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.

The fair value of the Warrants was determined using an option pricing model considering the contractual terms of the Warrant issuance.

The key market data assumptions for the option pricing model are the estimated volatility and the risk-free rate.

The volatility assumption was estimated using market data for offshore drilling market participants with consideration for differences in leverage.

The risk-free rate assumption was based on U.S.

Treasury Constant Maturity rates with a comparable term.

Condensed Consolidated Balance Sheet

The adjustments included in the following Condensed Consolidated Balance Sheet reflect the effects of the transactions contemplated by the plan of reorganization and executed by the Company on the Effective Date (reflected in the column “Reorganization Adjustments”), and fair value and other required accounting adjustments resulting from the adoption of fresh start accounting (reflected in the column “Fresh Start Accounting Adjustments”).

The explanatory notes provide additional information with regard to the adjustments recorded.

As of April 30, 2021

Predecessor Reorganization Adjustments Fresh Start Accounting Adjustments Successor

CURRENT ASSETS

Cash and cash equivalents $ 280.2 $ 327.4 (a) $ — $ 607.6

Restricted cash 45.7 42.7 (b) — 88.4

Accounts receivable, net 425.9 — — 425.9

Other current assets 370.1 1.5 (c) ( 281.1 ) (o) 90.5

Total current assets 1,121.9 371.6 ( 281.1 ) 1,212.4

PROPERTY AND EQUIPMENT, NET 10,026.4 ( 417.6 ) (d) ( 8,699.7 ) (p) 909.1

LONG-TERM NOTES RECEIVABLE FROM ARO 442.7 — ( 214.4 ) (q) 228.3

INVESTMENT IN ARO 123.9 — ( 43.4 ) (r) 80.5

OTHER ASSETS 166.4 ( 10.0 ) (e) 8.9 (s) 165.3

$ 11,881.3 $ ( 56.0 ) $ ( 9,229.7 ) $ 2,595.6

LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES

Accounts payable - trade $ 161.5 $ 13.1 (f) $ ( 0.5 ) (t) $ 174.1

Accrued liabilities and other 290.7 ( 12.4 ) (g) ( 61.8 ) (u) 216.5

Total current liabilities 452.2 0.7 ( 62.3 ) 390.6

LONG-TERM DEBT — 544.8 (h) — 544.8

OTHER LIABILITIES 706.2 ( 55.2 ) (i) ( 85.6 ) (v) 565.4

Total liabilities not subject to compromise 1,158.4 490.3 ( 147.9 ) 1,500.8

LIABILITIES SUBJECT TO COMPROMISE 7,313.7 ( 7,313.7 ) (j) — —

COMMITMENTS AND CONTINGENCIES

VALARIS SHAREHOLDERS' EQUITY

Predecessor Class A ordinary shares 82.5 ( 82.5 ) (k) — —

Predecessor Class B ordinary shares 0.1 ( 0.1 ) (k) — —

Successor common shares — 0.8 (l) — 0.8

Successor stock warrants — 16.4 (m) — 16.4

Predecessor additional paid-in capital 8,644.0 ( 8,644.0 ) (k) — —

Successor additional paid-in capital — 1,078.7 (l) — 1,078.7

Retained deficit ( 5,147.4 ) 14,322.6 (n) ( 9,175.2 ) (w) —

Accumulated other comprehensive loss ( 93.4 ) — 93.4 (x) —

Predecessor treasury shares ( 75.5 ) 75.5 (k) — —

Total Valaris shareholders' equity 3,410.3 6,767.4 ( 9,081.8 ) 1,095.9

NONCONTROLLING INTERESTS ( 1.1 ) — — ( 1.1 )

Total equity 3,409.2 6,767.4 ( 9,081.8 ) 1,094.8

$ 11,881.3 $ ( 56.0 ) $ ( 9,229.7 ) $ 2,595.6

Reorganization Adjustments

Represents the reorganization adjustments (in millions):

Receipt of cash for First Lien Notes $ 500.0

Loan proceeds from backstop lenders 20.0

Funds received for liquidation of rabbi trust related to certain employee benefits 17.6

Payments to Predecessor creditors ( 129.9 )

Transfer of funds for payment of certain professional fees to escrow account ( 42.7 )

Payment for certain professional services fees ( 29.0 )

Various other ( 8.6 )

(b) Restricted cash

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.

Reflects certain prepayments incurred upon emergence.

(d) Property and Equipment, net

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

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.

(e) Other assets

Represents the reorganization adjustments (in millions):

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

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

Fair value of options to purchase Newbuild Drillships 13.1

Our supplemental executive retirement plans 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.

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

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

(f) Accounts payable - trade

Reflects the following reorganization adjustments (in millions):

Professional fees incurred upon emergence $ 26.1

Payment of professional fees incurred prior to emergence ( 12.6 )

Payment of certain accounts payable incurred prior to emergence ( 0.4 )

(g) Accrued liabilities and other

Reflects the following reorganization adjustments (in millions):

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

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

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

In accordance with the amended agreement with the Shipyard, our leases were terminated and we 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.

(h) Long-term debt

Reflects the reorganization adjustment to record the issuance of the $ 550.0 million aggregate principal amount of First Lien Notes and debt issuance costs of $ 5.2 million.

(i) Other liabilities

Reflects the following reorganization adjustments (in millions):

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

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

Elimination of lease liabilities associated with Newbuild Drillships ( 0.6 )

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

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

As the amended contract 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.

(j) Liabilities subject to compromise

Reflects the following reorganization adjustments (in millions):

Settlement of liabilities subject to compromise $ 7,313.7

Issuance of common stock to Predecessor creditors ( 721.0 )

Issuance of common stock to backstop parties ( 323.8 )

Payments to Predecessor creditors ( 129.9 )

Gain on settlement of liabilities subject to compromise $ 6,139.0

(k) Predecessor ordinary shares, additional paid-in capital and treasury shares

Represents the cancellation of the Predecessor's ordinary shares of $ 82.6 million, additional paid-in capital of $ 8,644.0 million and treasury stock of $ 75.5 million.

(l) Successor common shares and additional paid-in capital

Represents par value of 75.0 million new Common Shares of $ 0.8 million and capital in excess of par value of $ 1,078.7 million.

(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' equity interests.

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

(n) Retained deficit

Represents the reorganization adjustments to total equity as follows (in millions):

Gain on settlement of liabilities subject to compromise $ ( 6,139.0 )

Issuance of Common Shares for backstop premium 29.1

Issuance of Common Shares to the Shipyard 5.4

Write-off of unrecognized share-based compensation expense 16.0

Professional fees and success fees 35.9

Backstop premium 30.0

Impact of newbuild contract amendments 350.7

Reorganization items, net ( 5,671.9 )

Cancellation of Predecessor common shares ( 82.6 )

Cancellation of Predecessor treasury shares 75.5

Cancellation of Predecessor additional paid in capital ( 7,856.4 )

Cancellation of equity component of Predecessor convertible notes ( 220.0 )

Cancellation of Predecessor cash and equity compensation plans ( 583.6 )

Fair value of Warrants 16.4

$ ( 14,322.6 )

Fresh Start Adjustments

(o) Other current assets

Reflects the fresh start adjustments to record the estimated fair value of other current assets as follows (in millions):

Elimination of materials and supplies $ ( 260.8 )

Elimination of historical deferred contract drilling expenses ( 20.3 )

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

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

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

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

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

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

Costs incurred for mobilization and contract preparation prior to the commencement of drilling services are deferred and subsequently amortized over the term of the related drilling contract.

Additionally, we must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys.

The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods.

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

(p) Property and equipment, net

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

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

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

(q) Notes Receivable from ARO

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

(r) Investment in ARO

Reflects the fresh start adjustment to record the estimated fair value of the equity investment in ARO.

(s) Other assets

Reflects the fresh start adjustments to record the estimated fair value of other assets as follows (in millions):

Deferred tax impacts of certain fresh start adjustments $ 21.1

Fair value of contracts with customers 8.5

Fair value adjustments to right-of-use assets 0.4

Elimination of historical deferred contract drilling expenses ( 16.5 )

Elimination of other deferred costs ( 4.6 )

The fresh start adjustment for deferred income tax assets represents the estimated incremental deferred income taxes, which reflects the tax effect of the differences between the estimated fair value of certain assets and liabilities recorded under fresh start accounting and the carryover tax basis of those assets and liabilities.

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 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 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 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 had no future economic benefit.

(t) Accounts payable - trade

The fresh start adjustment to accounts payable trade reflects the write off of certain deferred amounts related to our operating leases.

This value was eliminated through the remeasurement of our leases as of the emergence date.

(u) Accrued liabilities and other

Reflects the fresh start adjustments to record the estimated fair value of current liabilities as follows (in millions):

Elimination of customer payable balance $ ( 36.8 )

Elimination of historical deferred revenues ( 25.9 )

Fair value of contracts with customers 0.5

Fair value adjustment to lease liabilities 0.4

The fresh start adjustment to eliminate the customer payable balance is related to the change in accounting policy to present the balance on a net basis.

The fresh start adjustment to eliminate historical deferred revenues is primarily related to amounts previously received for the reimbursement for capital upgrades, upfront contract deferral fees and mobilization.

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

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 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.

(v) Other liabilities

Reflects the fresh start adjustments to record the estimated fair value of other liabilities as follows (in millions):

Adjustment to fair value of pension and other post-retirement plan liabilities $ ( 82.7 )

Elimination of historical deferred revenue ( 5.9 )

Deferred tax impacts of certain fresh start adjustments 1.7

Fair value adjustments to lease liabilities 1.1

Fair value adjustments to other liabilities 0.2

The fresh start adjustment to fair value pension and other post-retirement plan liabilities results from the remeasurement of the pension and other post-retirement benefit plans at the emergence date.

The fresh start adjustment to eliminate deferred revenues reflects the noncurrent portion of deferred revenues described in (u) above.

The fresh start adjustment for deferred income tax liabilities represents the estimated incremental deferred taxes, which reflects the tax effect of the differences between the estimated fair value certain assets and liabilities recorded under fresh start accounting and the carryover tax basis of those assets and liabilities.

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

(w) Retained Deficit

Reflects the fresh start adjustments to retained deficit as follows (in millions):

Fair value adjustments to prepaid and other current assets $ ( 281.1 )

Fair value adjustments to property ( 8,699.7 )

Fair value of intangible assets 8.5

Fair value adjustment to investment in ARO ( 43.4 )

Fair value adjustment to note receivable from ARO ( 214.4 )

Fair value adjustments to other assets ( 20.7 )

Fair value adjustments to other current liability 62.8

Fair value of intangible liabilities ( 0.5 )

Fair value adjustment to other liabilities 87.3

Elimination of Predecessor accumulated other comprehensive loss ( 93.4 )

Total fresh start adjustments included in reorganization items, net $ ( 9,194.6 )

Tax impact of fresh start adjustments 19.4

$ ( 9,175.2 )

(x) Accumulated other comprehensive loss

Reflects the fresh start adjustments for the elimination of Predecessor accumulated other comprehensive loss through Reorganization items, net.

REVENUE FROM CONTRACTS WITH CUSTOMERS

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

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

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

" Our drilling service provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods.

" The drilling services provided under each drilling contract is a single performance obligation satisfied over time and is comprised of a series of distinct time increments, or service periods.

Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term.

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Contract Termination - VALARIS DS-11

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.

In June 2022, the customer terminated the contract.

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

In June 2022, a customer terminated a contract for VALARIS DS-11 that was expected to commence in mid-2024.

Mobilization / Demobilization Revenue

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

December 31, 2023 December 31, 2022

Current contract assets $ 1.3 $ 1.5

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Balance as of December 31, 2022

$ 5.3 $ 119.0

Revenue recognized in advance of right to bill customer 8.4 —

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Balance as of December 31, 2023

$ 6.0 $ 153.8

Revenue recognized in advance of right to bill customer 9.6 —

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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.

Costs associated with the mobilization of equipment and personnel unrelated to contracts are expensed as incurred.

Deferred contract costs are included in Other current assets and Other assets on our Consolidated Balance Sheets and totaled $ 47.4 million and $ 85.1 million as of December 31, 2024 and 2023, 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.

During the years ended December 31, 2024, 2023 and 2022, amortization of such costs totaled $ 108.4 million, $ 92.9 million and $ 61.7 million, respectively.

Deferred Certification Costs

We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys.

The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods.

Deferred regulatory certification and compliance costs are included in Other current assets and Other assets on our Consolidated Balance Sheets and totaled $ 12.9 million and $ 14.5 million as of December 31, 2024 and 2023, 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.

During the years ended December 31, 2024, 2023 and 2022, amortization of such costs totaled $ 10.1 million, $ 12.7 million and $ 4.7 million, respectively.

Future Amortization of Contract Liabilities and Deferred Costs

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EQUITY METHOD INVESTMENT IN ARO

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, 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 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.

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

As of December 31, 2024, ARO owned nine jackup rigs, had ordered one newbuild jackup rig and leased seven rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO.

At December 31, 2024, the leased rigs were primarily operating under three-year drilling contracts, or related extensions, with Saudi Aramco.

The nine 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.

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, Kingdom 2, was delivered in the second quarter of 2024 and commenced operations in the third quarter of 2024.

In October 2024, ARO ordered the third newbuild jackup, Kingdom 3 .

ARO is expected to commit to order one additional newbuild jackup 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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Summarized financial information for ARO is as follows (in millions):

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

Years Ended December 31,

2024 2023 2022

Revenues $ 512.5 $ 496.6 $ 459.5

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Contract drilling (exclusive of depreciation) 367.7 365.9 341.8

Loss on impairment (1)

Depreciation 89.2 65.9 63.4

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Other expense, net 55.5 31.8 11.1

Provision for income taxes 8.3 3.8 7.9

Net income $ 2.5 $ 20.7 $ 4.0

December 31, 2023 December 31, 2022

Provision (benefit) for income taxes ( 4.8 ) 8.3 3.8

Net income (loss) $ ( 47.2 ) $ 2.5 $ 20.7

(1) In connection with Saudi Arabia’s announcement to limit oil production capacity and Saudi Aramco's suspension of certain drilling contracts, the VALARIS 143, VALARIS 147 and VALARIS 148 contracts were suspended and subsequently terminated during the year ended December 31, 2024.

Pursuant to the requirements of the contracts, ARO had capitalized certain costs to maintain and upgrade these rigs, which were determined to be impaired due to the contract suspensions and subsequent terminations.

As a result, ARO recorded a pre-tax, non-cash loss on impairment of $ 28.4 million during the year ended December 31, 2024.

See " Item 7 .

Management's Discussion and Analysis of Financial Condition and Results of Operations " for more information about the contract terminations.

Cash and cash equivalents $ 50.0 $ 92.9

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Total liabilities $ 1,349.3 $ 1,192.8

Equity in Earnings of ARO

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

Equity in Earnings (Losses) 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 (loss), adjusted for basis differences as discussed below, which is included in Equity in earnings (losses) 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 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 relative to market 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 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.

Our equity method investment in ARO was recorded at its estimated fair value in fresh start accounting upon emergence from bankruptcy in 2021.

We computed the difference between the fair value of ARO's net assets and the carrying value of those net assets in ARO's GAAP financial statements ("basis differences") at that date.

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

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

A reconciliation of those components is presented below (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

Years Ended December 31,

2024 2023 2022

50% interest in ARO net income (loss) $ ( 23.6 ) $ 1.3 $ 10.4

Amortization of basis differences 12.6 12.0 14.1

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

Equity in earnings (losses) of ARO $ ( 11.0 ) $ 13.3 $ 24.5

Related-Party Transactions

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.

Revenues recognized by us related to the Lease Agreements are included within Operating revenues in our Consolidated Statements of Operations and were as follows (in millions):

Years Ended December 31,

2024 2023 2022

Revenues from Lease Agreements

$ 52.6 $ 69.2 $ 56.7

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

December 31, 2023 December 31, 2022

Amounts receivable (1)

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$ 43.1 $ 57.7

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

(1) Amounts receivable from ARO is included in Accounts receivable, net in our 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.

As a result of the Net Settlement Agreement, as defined below, a portion of our accounts payable to ARO was reduced by $ 50.7 million in June 2024.

During 2017 and 2018, the Company contributed assets to ARO in exchange for a 10-year shareholder note receivable due from ARO (the "Notes Receivable from ARO"), which 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 in fresh start accounting in 2021 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.

Under the Shareholder Agreement, a contract liability is created when amounts that the Company bills in accordance with its Lease Agreements are in excess of lease revenues earned.

These contract liabilities are required to be settled in cash.

In June 2024, the Company and ARO executed a net settlement agreement (the “Net Settlement Agreement”) whereby $ 50.7 million of accounts payable due to ARO, which related to lease revenue adjustments resulting from the actual performance of rigs leased to ARO between 2018 and early 2023, was net settled against a portion of the Notes Receivable from ARO retroactive to January 1, 2024.

As a result of the Net Settlement Agreement, the aggregate principal balance of the Notes Receivable from ARO was reduced by $ 50.7 million and we recognized non-cash interest income of $ 13.9 million related to the discount attributable to the partial settlement in 2024.

Our 2024 interest on the Notes Receivable from ARO of approximately $ 24.6 million was paid in kind in December 2024 by increasing the principal balance of the Notes Receivable from ARO.

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

December 31, 2023 December 31, 2022

Principal amount $ 376.6 $ 402.7

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Carrying value $ 296.2 $ 282.3

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.

Interest income earned on the Notes Receivable from ARO was 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

Years Ended December 31,

2024 2023 2022

Interest income $ 24.6 $ 30.5 $ 11.3

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(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 2024, we recognized non-cash interest income of $ 13.9 million related to the discount attributable to the Net Settlement Agreement.

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.

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

December 31, 2023 December 31, 2022

Total assets $ 426.1 $ 417.1

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$ 1,082.7 $ 1,112.7 $ 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)

Notes Receivable from ARO (2)(3)

$ 296.2 $ 378.3 $ 282.3 $ 423.5

(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.

(1) The estimated fair value of the 8.375 % Senior Secured Second Lien Notes due 2030 (the "Second Lien Notes") was determined using quoted market prices, which are level 1 inputs.

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

(3) The aggregate principal balance of the Notes Receivable from ARO includes a net reduction of $ 26.1 million, which is comprised of a $ 50.7 million decrease resulting from the Net Settlement Agreement with ARO (executed in June 2024) and an increase of $ 24.6 million related to paid in kind interest, which was applied to the principal balance on December 31, 2024.

See " Note 3 - Equity Method Investment in ARO " for additional information.

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, 2024 and 2023.

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

December 31, 2023 December 31, 2022

Drilling rigs and equipment $ 1,660.9 $ 1,312.5

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Other 40.9 39.5

Total property and equipment, at cost

$ 2,309.4 $ 1,889.0

(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

On a quarterly basis, we evaluate the carrying value of our property and equipment to identify events or changes in circumstances ("triggering events") that indicate the carrying value may not be recoverable.

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

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

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

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

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

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

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

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

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

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

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.

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.

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

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

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

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

In the first quarter of 2025, we sold VALARIS 75 resulting in a pre-tax gain on sale of approximately $ 23.0 million in 2025.

Of the proceeds, approximately $ 14.0 million were collected upon closing, with the remaining $ 10.0 million expected to be received in equal installments on the first and second anniversaries of the closing.

The rig had an immaterial net book value as of December 31, 2024.

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

During the year ended December 31, 2022, 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 in 2022 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.

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.

On the April 30, 2021, the Company issued $ 550.0 million aggregated principal amount of Senior Secured First Lien Notes due 2028 (the "First Lien Notes").

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

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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.

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

Second Lien Notes

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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.

On August 21, 2023, the Company and Valaris Finance issued $ 400.0 million aggregate principal amount of 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.

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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.

As of December 31, 2024, we were in compliance in all material respects 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.

The Credit Agreement, which is scheduled to mature on April 3, 2028, provides for commitments permitting borrowings of up to $ 375.0 million (which may be increased, subject to the agreement of lenders to provide such additional commitments and the satisfaction of certain conditions, 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.

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(“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.

Additionally, 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.

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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.

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.

Interest expense totaled $ 84.8 million, $ 68.9 million and $ 45.3 million for the years ended December 31, 2024, 2023 and 2022 which was net of capitalized interest of $ 15.9 million, $ 5.6 million and $ 1.2 million, respectively, for capital projects.

Amortization of debt premium and issuance costs was $ 6.6 million, $ 5.0 million and $ 1.0 million for the years ended December 31, 2024, 2023 and 2022, respectively, and is included within interest expense, net in the Consolidated Statements of Operations.

SHAREHOLDERS' EQUITY

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):

Activity in our various shareholders' equity accounts for the years ended December 31, 2024, 2023 and 2022 were as follows (in millions):

Par Value Additional

Capital Warrants Retained

Earnings (Deficit) AOCI Treasury

Capital Warrants Retained Earnings (Deficit) AOCI Treasury

Shares Non-controlling

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

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

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

Net changes in pension and other postretirement benefits — — — — — 0.1 — —

Share-based compensation cost — — 4.8 — — — — —

Net other comprehensive loss — — — — — ( 5.6 ) — —

Cancellation of Predecessor equity ( 206.1 ) ( 82.6 ) ( 8,644.0 ) — 8,650.8 93.4 75.5 —

Issuance of Successor Common Shares and Warrants 75.0 0.8 1,078.7 16.4 — — — —

BALANCE, April 30, 2021 (Predecessor) 75.0 $ 0.8 $ 1,078.7 $ 16.4 $ — $ — $ — $ ( 1.1 )

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

Adjustment to unrecognized tax benefits

— — — — 11.0 — — —

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

Net changes in pension and other postretirement benefits — — — — — ( 9.1 ) — —

Share-based compensation cost — — 4.3 — — — — —

BALANCE, December 31, 2021 (Successor)

BALANCE, December 31, 2021

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

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

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

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

Net income — — — — 865.4 — — 1.4

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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

As of the Effective Date, the authorized share capital of Valaris Limited is $ 8.5 million divided into 700.0 million Common Shares of a par value of $ 0.01 each and 150.0 million preference shares of a par value of $ 0.01 .

Issuance of Common Shares

On the Effective Date, pursuant to the plan of reorganization, we issued 75.0 million Common Shares.

Cancellation of Predecessor Equity and Issuance of Warrants

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

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

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

Management Incentive Plan

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

See " Note 1 0 - Share Based Compensation" for information on equity awards granted under the MIP subsequent to the Effective Date.

Foreign currency translation adjustments

— — — — — ( 0.3 ) — —

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

Net income (loss) — — — — 373.4 — — ( 3.6 )

Share-based compensation cost — — 27.7 — — — — —

Shares issued under share-based compensation plans, net 0.8 — — — — — — —

Repurchase of Common Shares — — — — — — ( 125.0 ) —

Net changes in pension and other postretirement benefits — — — — — 10.9 — —

Shares withheld for taxes on vesting of share-based awards — — ( 29.9 ) — — — — —

Purchase of noncontrolling ownership interest in a non-U.S.

subsidiary (1)

— — 4.1 — — — — ( 8.4 )

Sale of noncontrolling ownership interest in a non-U.S.

subsidiary (1)

— — ( 8.4 ) — — — — 8.4

Foreign currency translation adjustments

— — — — — ( 1.9 ) — —

BALANCE, December 31, 2024 76.2 $ 0.8 $ 1,113.3 $ 16.4 $ 1,398.9 $ 34.2 $ ( 325.1 ) $ 5.8

(1) In 2024, the Company purchased the 51 % noncontrolling interest related to a certain non-U.S.

subsidiary and concurrently transferred the 51 % noncontrolling interest to new partners.

The net transactions did not result in a change to our ownership or controlling interest in the non-U.S.

Share 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 .

Our board of directors has authorized a share repurchase program (the "Share Repurchase Program") under which we may purchase up to $ 600.0 million of our outstanding Common Shares.

The Share Repurchase Program does not have a fixed expiration, may be modified, suspended or discontinued at any time and any repurchases made pursuant to the Share Repurchase Program are subject to compliance with applicable covenants and restrictions under our financing agreements.

The following table summarizes shares repurchase, aggregate cost (exclusive of fees) and the average per share price (in millions, except average per share price):

Years Ended December 31,

Shares repurchased (1)

Aggregate cost

$ 125.0 $ 200.0

Average price per share

$ 56.11 $ 66.77

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

As of December 31, 2024, we had approximately $ 275.0 million available for share repurchases pursuant to the Share Repurchase Program.

SHARE BASED COMPENSATION

On the Effective Date and pursuant to the plan of reorganization, all of the Predecessor's ordinary shares were cancelled.

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

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

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

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.

Valaris Limited adopted the MIP as of April 30, 2021 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, 2024, there were 6.9 million shares available for issuance under the MIP.

Successor Awards

Time-Based Share Awards

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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.

Non-employee directors received a one-time grant of time-based restricted awards in 2021, which vested ratably over a three-year period from the date of 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.

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

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

Compensation expense for our time-based share awards is allocated to Contract drilling expense and General and administrative expense within our Consolidated Statement of Operations based on the award holder's employment function.

The following table summarizes time-based share award compensation expense and the related income tax benefit recognized (in millions):

Years Ended December 31,

2024 2023 2022

Contract drilling $ 8.8 $ 6.8 $ 3.9

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As of December 31, 2024, there was $ 24.7 million of total estimated unrecognized compensation cost related to time-based share awards, which has a weighted-average remaining vesting period of 1.4 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)

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

Years Ended December 31,

2024 2023 2022

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

$ 69.89 $ 63.22 $ 45.39

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

$ 30.0 $ 25.2 $ 12.8

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

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

The following table summarizes time-based share awards activity for the year ended December 31, 2024 (shares in thousands):

Awards Weighted-Average

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Share awards as of December 31, 2024

(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.

As of December 31, 2023, these awards had a weighted average remaining contractual life of 0.6 years and a total fair value of $ 4.5 million.

Performance Awards

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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");

The performance awards granted in 2021 and 2022 were 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.

These awards were paid in equity during 2024 following a three-year performance period and were subject to attainment of such objectives ranging from 0 % to 150 % of target performance under such objectives.

The performance awards granted in 2023 and 2024 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 three-year performance periods.

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

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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 fair value of the performance awards is 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 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

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 in the years ended December 31, 2024, 2023 and 2022:

Years Ended December 31,

2024 2023 2022

Expected price volatility 49 % 60 % 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 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):

The weighted average grant-date fair value of performance awards granted during the years ended December 31, 2024, 2023 and 2022 was $ 63.05 , $ 62.09 and $ 38.08 , respectively.

The following table summarizes the performance award activity for the year ended December 31, 2024 (shares in thousands):

Weighted Average Grant Date Fair Value Price (2)

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Granted - Market-Based Objectives (1)

Granted - Performance-Based Objectives (1)

Total Granted 127 $ 62.09

Vested - Market-Based Objectives

( 557 ) $ 17.72

Vested - Performance-Based Objectives

( 234 ) $ 38.54

( 791 ) $ 23.88

Forfeited - Performance-Based Objectives

( 5 ) $ 71.63

Balance as of December 31, 2024

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The number of shares actually issued after considering forfeitures may range from zero to 381,000 .

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

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.

During the years ended December 31, 2024, 2023 and 2022, we recognized $ 10.6 million, $ 11.7 million and $ 6.7 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, 2024, there was $ 9.2 million of total estimated unrecognized compensation cost related to performance awards, which has a weighted-average remaining vesting period of 1.8 years.

Predecessor Awards

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 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.

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.

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.

Share Appreciation Rights

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

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

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

Share Option Awards

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

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

PENSION AND OTHER POST-RETIREMENT BENEFITS

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The following table presents the changes in benefit obligations and plan assets for the years ended December 31, 2024 and 2023 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,

Years Ended December 31,

Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total

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Actuarial loss (gain) ( 22.1 ) ( 0.7 ) ( 22.8 ) 6.1 ( 0.4 ) 5.7

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

Benefits paid ( 42.4 ) ( 0.6 ) ( 43.0 ) ( 41.7 ) ( 0.8 ) ( 42.5 )

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Employer contributions 20.9 — 20.9 5.9 — 5.9

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

Benefits paid ( 42.4 ) — ( 42.4 ) ( 41.7 ) — ( 41.7 )

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Amounts not yet reflected in net periodic benefit cost:

Actuarial loss 17.8 7.9 25.7 7.0 7.9 14.9

Actuarial gain 28.3 8.3 36.6 17.8 7.9 25.7

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

Total accumulated other comprehensive income $ 28.1 $ 8.3 $ 36.4 $ 17.6 $ 7.9 $ 25.5

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

Net benefit liabilities $ ( 101.4 ) $ ( 10.2 ) $ ( 111.6 ) $ ( 135.3 ) $ ( 11.0 ) $ ( 146.3 )

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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, 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

The accumulated benefit obligation is equal to the projected benefit obligation at December 31, 2024 and 2023 as the pension and other post-retirement benefit plans were frozen in prior years.

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

Successor Predecessor

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

Years Ended December 31,

2024 2023 2022

Interest cost

2 unchanged sentences

( 31.6 ) ( 31.4 ) ( 38.3 )

Amortization of net (gain) loss

( 0.7 ) ( 0.1 ) — 0.1

Settlement (gain) loss recognized (1)

— ( 0.4 ) 0.4 —

Amortization of net gain ( 0.6 ) ( 0.7 ) ( 0.1 )

Settlement gain recognized (1)

Net periodic pension and retiree medical income (2)

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(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 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.

During the year ended December 31, 2022, the settlement threshold was reached for certain of our pension plans and we recognized a corresponding settlement gain 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 $ 16.2 million to our pension plans and to directly pay other post-retirement benefits of approximately $ 1.0 million in 2025 .

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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, 2023 and 2022, are presented below.

Target allocations among asset categories as of December 31, 2024, and the fair value of each category of plan assets as of December 31, 2024 and 2023, 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):

December 31, 2023 December 31, 2022

Target range (1)

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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.

Additionally, this category includes real estate investment trusts, which are represented in the Dow Jones US Select REIT Index.

Securities in the fixed income categories include U.S.

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Pension Benefits Other Post-Retirement Benefits

Year ended December 31,

Years ended December 31,

2025 $ 43.3 $ 1.0

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Savings Plans

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

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

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

The Limited Retirement Plan allows eligible employees in the United Kingdom (the "U.K.") to make tax-deferred contributions to the plan.

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

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

to make tax-deferred contributions to the plan.

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.

Employee contributions are matched up to a maximum of 5 %.

The following table summarizes the employer matching contributions for each plan (in millions):

Years Ended December 31,

2024 2023 2022

$ 9.2 $ 8.0 $ 4.7

Limited Retirement Plan

Multinational Savings Plan

Total matching contributions

$ 15.6 $ 13.2 $ 8.1

Effective January 1, 2025, the employer contributions increased whereby employee contributions are now matched up to a maximum of 6 %.

We generated profits of $ 49.8 million, $ 30.7 million and $ 39.7 million before income taxes in the U.S.

for the years ended December 31, 2024, 2023 and 2022, respectively.

We generated profits of $ 320.4 million, $ 53.5 million and $ 185.2 million before income taxes in non-U.S.

jurisdictions for the years ended December 31, 2024, 2023 and 2022, respectively.

The components of our provision for income taxes are summarized 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

Years Ended December 31,

2024 2023 2022

Current income tax expense (benefit):

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The components of deferred income tax assets and liabilities are summarized as follows (in millions):

December 31, 2023 December 31, 2022

Deferred tax assets :

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As of December 31, 2024, we had gross deferred tax assets of $ 3.1 billion relating to $ 13.5 billion of net operating loss ("NOL") carryforwards, $ 16.4 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.

foreign tax credits (“FTCs”) and $ 126.0 million of interest limitation carryforwards, primarily related to the U.S., Luxembourg and the U.K., which can be used to reduce our income taxes payable in future years.

NOL carryforwards, which were generated in various jurisdictions worldwide, include $ 13.1 billion that do not expire and $ 0.4 billion that will expire, if not utilized, between 2025 and 2034 .

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 .

Deferred tax assets for NOL carryforwards as of December 31, 2024 include $ 2.2 billion, $ 612.4 million, $ 78.0 million, $ 42.6 million and $ 39.8 million pertaining to NOL carryforwards in Luxembourg, the U.S., the U.K., Bermuda and Switzerland, respectively.

FTCs expire in 2025 .

Interest limitation carryforwards generally do not expire.

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We had a $ 4.0 billion and a $ 4.2 billion valuation allowance as of December 31, 2024 and 2023, 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.

During the years ended December 31, 2024, 2023 and 2022, we recognized a deferred tax benefit of $ 8.5 million, a deferred tax benefit of $ 802.9 million and a deferred tax expense of $ 1.5 million, respectively, associated with changes in deferred tax asset valuation allowances.

The deferred tax benefit in 2023 primarily related to a $ 799.5 million reduction of our valuation allowance due to 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 existed to conclude that this portion of the valuation allowance on deferred tax assets was no longer needed.

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.

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Effective Tax Rate

Valaris Limited is domiciled and resident in Bermuda.

Valaris Limited is domiciled and a resident for tax purposes in Bermuda.

Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries.

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

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

The income of our non-U.K.

subsidiaries was generally not subject to U.K.

Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes.

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

Bermuda (Successor)/ U.K.

(Predecessor) statutory income tax rate

Our consolidated effective income tax rate for the years ended December 31, 2024, 2023 and 2022, respectively, differs from the Bermuda statutory income tax rates as follows:

Years Ended December 31,

2024 2023 2022

Non-Bermuda (Successor) taxes

Bermuda statutory income tax rate

Non-Bermuda taxes

25.6 74.0 22.8

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( 23.2 ) ( 49.9 ) ( 7.0 )

Switzerland Tax Reform — — ( 188.3 ) —

Asset impairments — — — ( 3.2 )

Other — — 2.8

Effective income tax rate 0.1 % ( 929.5 ) % 19.2 %

Our 2024 consolidated effective income tax rate includes discrete tax benefit of $ 85.8 million, primarily attributable to change in liabilities for unrecognized tax benefits associated with tax positions taken in prior years.

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.

Our eight months ended December 31, 2021 (Successor) consolidated effective income tax rate includes $ 14.3 million associated with the impact of various discrete items, including $ 29.7 million income tax expense associated with changes in liabilities for unrecognized tax benefits and resolution of other prior period tax matters, offset by $ 15.4 million of tax benefit related to deferred taxes associated with Switzerland tax reform.

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.

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.

Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the years ended December 31, 2024, 2023 and 2022 were 21.8 %, ( 872.3 )% and 73.6 %, respectively.

The changes in our consolidated effective income tax rate excluding discrete tax items during the three-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions.

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As of December 31, 2024, we had $ 93.5 million of unrecognized tax benefits, of which $ 82.8 million was included in Other liabilities on our Consolidated Balance Sheet, and $ 10.7 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.

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, $ 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.

If recognized, $ 82.8 million of the $ 93.5 million unrecognized tax benefits as of December 31, 2024 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, 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

A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2024, 2023 and 2022 (in millions) were as follows:

Years Ended December 31,

2024 2023 2022

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

Balance, beginning of period $ 201.4 $ 217.6 $ 235.1

Settlements with taxing authorities ( 103.5 ) ( 41.8 ) ( 16.5 )

Impact of foreign currency exchange rates ( 7.9 ) 0.6 ( 9.7 )

Increases as a result of tax positions taken during prior years

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

2.7 13.4 11.2

Impact of foreign currency exchange rates 0.6 ( 9.7 ) ( 10.5 ) ( 17.6 )

Lapse of applicable statutes of limitations ( 1.9 ) ( 73.6 ) ( 4.5 )

Decreases as a result of tax positions taken during prior years

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Accrued interest and penalties totaled $ 45.5 million and $ 52.3 million as of December 31, 2024 and 2023, 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.

We recognized a net benefit of $ 8.0 million, $ 35.4 million and $ 12.5 million associated with interest and penalties during the years ended December 31, 2024, 2023 and 2022, 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 2014 and subsequent years.

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

Statutes of limitations applicable to certain of our tax positions lapsed during the years ended December 31, 2024, 2023 and 2022, resulting in net income tax benefits, inclusive of interest and penalties, of $ 2.7 million, $ 77.3 million and $ 4.5 million, respectively.

Absent the commencement of examinations by tax authorities, statutes of limitations applicable to certain of our tax positions will lapse during 2025 , but we do not expect these to have a material impact to our unrecognized tax benefits or effective income tax rate.

Tax Assessments

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.

In February 2024, one of our Malaysian subsidiaries received an unfavorable court decision regarding a tax assessment for the 2012-2017 tax years totaling approximately MYR 117.0 million (approximately $ 26.0 million converted at current period-end exchange rates), including a late payment penalty.

In July 2024, we received a payment demand from the Malaysian tax authority for the full assessment amount.

In order to further contest the assessment, we agreed to a seven-month payment plan which commenced in August 2024.

As of December 31, 2024, we had made payments of approximately $ 18.0 million, which are included within Other assets in the Consolidated Balance Sheets, and had approximately $ 8.0 million of remaining payments.

We have not recorded a liability for uncertain tax positions as of December 31, 2024 related to this assessment based on a more-likely-than-not threshold.

We believe our tax returns are materially correct as filed and we will vigorously contest this assessment.

In December 2023, one of our Luxembourg subsidiaries received tax assessments for fiscal years 2019, 2020, 2021 and 2023.

In February 2024, the Luxembourg tax authorities rescinded the portion of the assessment relating to 2023, resulting in a revised aggregate tax assessment of approximately € 60.0 million (approximately $ 65.0 million converted at then-current exchange rates).

We recorded a liability for uncertain tax positions for this amount during the fourth quarter of 2023 and contested the validity and amount of the assessments.

In April 2024, we received a favorable decision from the Luxembourg tax authorities stating that the assessments for the 2019-2021 tax years are not enforceable.

As a result, we reversed the uncertain tax position liability for the previously issued assessments and recognized a tax benefit of approximately $ 65.0 million in our Consolidated Statements of Operations for the year ended December 31, 2024.

During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101.0 million (approximately $ 63.0 million converted at current period-end exchange rates) plus interest related to the examination of certain of our tax returns for the years 2011 through 2016.

During the third quarter of 2019, we made a A$ 42.0 million payment (approximately $ 29.0 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment.

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.

Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows.

In December 2024, we reached a settlement agreement with the Australian tax authorities for A$ 4.0 million (approximately $ 2.0 million at current period-end exchange rates).

As a result, we expect to receive a refund of A$ 38.0 million (approximately $ 24.0 million at current period-end exchange rates) in the first half of 2025.

Accordingly, we released approximately $ 18.0 million of the uncertain tax position liability previously recognized and recognized a corresponding tax benefit in our Consolidated Statements of Operations for these assessments in the fourth quarter of 2024.

Undistributed Earnings

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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).

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

Certain jurisdictions have enacted new tax laws to align with the recommendations under Pillar Two while other jurisdictions have proposed or are actively considering changes to existing tax laws based on the new rules.

The impact of the Pillar Two model rules which have been enacted to date was not significant to our consolidated financial statements for the year ended December 31, 2024.

Additionally, Bermuda 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.

Deferred taxes of $ 27.5 million with an offsetting valuation allowance of $ 27.5 million were established as of December 31, 2023, upon enactment.

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.

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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 first newbuild jackup, Kingdom 1, was delivered and commenced operations in 2023, and the second newbuild jackup, Kingdom 2, was delivered and commenced operations in 2024.

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 newbuild 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.

Additionally, in the second quarter of 2024, ARO entered into a revolving credit facility which provides for borrowings of up to $ 100.0 million.

At December 31, 2024, there was $ 10.0 million outstanding under this facility.

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

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.

Beginning with the delivery of the second newbuild, each partner's commitment is reduced by the lesser of the actual cost of each newbuild rig or $ 250.0 million, on a proportionate basis.

Following the delivery of Kingdom 2, our commitment to fund the newbuild program has been reduced to $ 1.1 billion.

In October 2024, ARO ordered the third newbuild jackup, Kingdom 3, for a purchase price of approximately $ 300.0 million, and paid the 25 % down payment from cash on hand.

The final payment will be due upon delivery of the rig.

Letters of Credit

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commenced an arbitration proceeding against us alleging breach of a license agreement related to certain dual-activity drilling patents.

We are unable to estimate our potential exposure, if any, to the proceeding at this time but do not believe that our ultimate liability, if any, resulting from this proceeding will have a material effect on our consolidated financial condition, results of operations or cash flows.

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

We believe this claim is without merit, and we are defending ourselves vigorously against this claim.

In the fourth quarter of 2024, we attempted to reach an agreement that would have resolved the litigation efficiently and resulted in additional commercial concessions.

In accordance with GAAP requirements, we accrued $ 25.0 million in Accrued liabilities and other within our Consolidated Balance Sheet as of December 31, 2024 related to these efforts, however, we were unable to reach an agreement.

The amount of any loss ultimately incurred in relation to this claim may be higher or lower than the amount accrued.

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”).

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 $ 97.0 million at the current year-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.

We are unable to estimate our potential exposure, if any, at this time.

In May 2024, the Brazilian prosecutor issued an opinion recommending that the TCU close this matter against us.

While this matter is still pending, we believe the likelihood of loss is remote.

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.

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.

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

Our leases have remaining lease terms of less than one month to seven 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.

Our right-of-use assets, current lease liabilities, and long-term lease liabilities are included within Other assets, Accrued liabilities and other, and Other liabilities, respectively, in the Consolidated Balance Sheets.

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

Years Ended December 31,

2024 2023 2022

Long-term operating lease cost $ 35.4 $ 24.6 $ 13.4

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Variable lease cost (1)

11.3 1.0 1.0 0.7

Total operating lease cost $ 62.8 $ 49.1 $ 29.6

1 unchanged sentence

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

December 31, 2023 December 31, 2022

Operating lease right-of-use assets $ 84.5 $ 74.6

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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

Years Ended December 31,

2024 2023 2022

ROU assets obtained in exchange for operating lease liabilities

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SEGMENT INFORMATION

Our business consists of four operating segments:

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

Our business consists of four operating segments, which have been determined based on the asset type and specifications and services we provide.

These operating segments are:

Floaters, Jackups, ARO and Other.

These operating segments are Floaters, Jackups, ARO and Other.

The Floaters segment consists of our drillships and semisubmersible rigs, which can generally drill in water depths up to 12,000 feet and 8,500, respectively.

Floaters are generally considered to be more advanced, typically earn higher day rates and require a larger crew compliment to operate.

The Jackups segment consists of our jackup rigs, which generally operate in water depths of 400 feet or less.

As Jackups have a simpler design and operate in shallow waters, they typically earn lower day rates and require a smaller crew to operate.

The ARO segment consists of the full operations of ARO, which operates jackup drilling rigs in Saudi Arabia for Saudi Aramco.

The Other segment consists of management services on rigs owned by third parties and the activities associated with our arrangements with ARO under the Lease Agreements.

Each of the reporting segments earn revenues through drilling contracts, in which we provide a drilling rig and/or drilling services, inclusive of rig crews, on a day rate basis.

Floaters, Jackups and ARO are also reportable segments.

Our onshore support costs included within Contract drilling expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items.” Further, General and administrative expense and Depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items".

We measure segment assets as Property and equipment, net.

Our chief operating decision maker (“CODM”) is the executive management committee, which is comprised of the Chief Executive Officer, Chief Financial Officer, Chief Operating Officer, Chief Commercial Officer, General Counsel & Secretary, Chief Human Resources Officer, Vice President – Strategy and Sustainability and Vice President – Operational Integrity.

The CODM assesses segment performance based on their review of the operating income (loss) of each segment, which measures profitability after deducting normal operating costs.

Components within operating income (loss), such as revenues and contract drilling expense, are used to monitor actual performance against budget and monthly forecasted results for each segment.

Further, the CODM utilizes revenue to derive a segment’s asset utilization, average daily revenue and revenue efficiency.

Using these metrics, the CODM can identify potentially underperforming segments and develop strategies to increase profits or reduce costs, make investment decisions and allocate resources as needed.

The disaggregated segment information, as presented in the tables below, aligns with the segment level information that is regularly provided to the CODM.

The full operating results included below for ARO are not included within our consolidated results and thus deducted under "Reconciling Items" and replaced with our equity in earnings of ARO.

See " Note 3 - Equity Method Investment in ARO " for additional information on ARO and related arrangements.

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)

Floaters Jackups ARO Other Reconciling Items Consolidated Total

Revenues $ 948.7 $ 659.6 $ 496.6 $ 175.9 $ ( 496.6 ) $ 1,784.2

Operating expenses

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

Depreciation 55.8 40.0 65.9 5.0 ( 65.6 ) 101.1

General and administrative — — 22.2 — 77.1 99.3

Equity in earnings of ARO — — — — 13.3 13.3

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

Year Ended December 31, 2022 (Successor)

During the fourth quarter of 2024, we adopted Update 2023-07 (see " Note 1 Description of the Business and Summary of Significant Accounting Policies" for further discussion on Update 2023-07).

In connection with this, we have updated our segment disclosure presentation for the year ended December 31, 2024, to break out Reimbursable revenues and Reimbursable expenses from Revenues and Contract drilling expense, respectively, and have retrospectively applied the changes to the periods ended December 31, 2023 and 2022.

Segment information for the years ended December 31, 2024, 2023 and 2022 are presented below (in millions).

Year Ended December 31, 2024

Floaters Jackups ARO Other Reconciling Items Consolidated Total

Revenues $ 700.5 $ 744.2 $ 459.5 $ 157.8 $ ( 459.5 ) $ 1,602.5

Operating revenues:

Revenues (exclusive of reimbursable revenues)

$ 1,382.8 $ 686.5 $ 512.5 $ 142.6 $ ( 512.5 ) $ 2,211.9

Reimbursable revenues 57.9 68.4 — 24.4 — 150.7

Total operating revenues

1,440.7 754.9 512.5 167.0 ( 512.5 ) 2,362.6

Operating expenses:

Contract drilling (exclusive of depreciation) 646.0 538.9 341.8 76.4 ( 219.9 ) 1,383.2

Contract drilling expenses (exclusive of depreciation and reimbursable expenses)

930.3 477.1 367.7 63.6 ( 220.2 ) 1,618.5

Reimbursable expenses

54.9 64.3 — 23.2 — 142.4

Total contract drilling (exclusive of depreciation)

985.2 541.4 367.7 86.8 ( 220.2 ) 1,760.9

Loss on impairment — — 28.4 — ( 28.4 ) —

1 unchanged sentence

General and administrative — — 23.7 — 92.6 116.3

Equity in earnings of ARO — — — — 24.5 24.5

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

Equity in losses of ARO — — — — ( 11.0 ) ( 11.0 )

Operating income $ 397.4 $ 168.5 $ 3.5 $ 70.7 $ ( 287.8 ) $ 352.3

Property and equipment, net $ 1,174.2 $ 575.3 $ 1,253.1 $ 132.8 $ ( 1,202.5 ) $ 1,932.9

Capital expenditures $ 239.7 $ 213.1 $ 285.0 $ — $ ( 282.7 ) $ 455.1

Eight Months Ended December 31, 2021 (Successor)

Year Ended December 31, 2023

Floaters Jackups ARO Other Reconciling Items Consolidated Total

Revenues $ 254.5 $ 487.1 $ 307.1 $ 93.4 $ ( 307.1 ) $ 835.0

Operating revenues:

Revenues (exclusive of reimbursable revenues)

$ 902.8 $ 620.6 $ 496.6 $ 152.6 $ ( 496.6 ) $ 1,676.0

Reimbursable revenues 45.9 39.0 — 23.3 — 108.2

Total operating revenues

948.7 659.6 496.6 175.9 ( 496.6 ) 1,784.2

Operating expenses:

Contract drilling (exclusive of depreciation) 250.7 365.2 246.2 38.9 ( 176.9 ) 724.1

Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 768.4 480.4 365.9 52.6 ( 226.9 ) 1,440.4

Reimbursable expenses 43.6 37.0 — 22.6 — 103.2

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

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) $ ( 27.2 ) $ 89.9 $ 3.1 $ 51.7 $ ( 124.8 ) $ ( 7.3 )

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

Four Months Ended April 30, 2021 (Predecessor)

Year Ended December 31, 2022

Floaters Jackups ARO Other Reconciling Items Consolidated Total

Revenues $ 115.7 $ 232.4 $ 163.5 $ 49.3 $ ( 163.5 ) $ 397.4

Operating revenues:

Revenues (exclusive of reimbursable revenues)

$ 649.3 $ 713.4 $ 459.5 $ 134.6 $ ( 459.5 ) $ 1,497.3

Reimbursable revenues 51.2 30.8 — 23.2 — 105.2

Total operating revenues

700.5 744.2 459.5 157.8 ( 459.5 ) 1,602.5

Operating expenses:

Contract drilling (exclusive of depreciation) 106.5 175.0 116.1 19.9 ( 73.7 ) 343.8

Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 598.3 509.4 341.8 54.1 ( 219.9 ) 1,283.7

Reimbursable expenses 47.7 29.5 — 22.3 — 99.5

Total 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

7 unchanged sentences

As of December 31, 2024, 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.

Our Jackups segment consisted of 28 jackup rigs which were deployed in various locations and our Other segment consisted of seven jackup rigs which are leased to our 50/50 unconsolidated joint venture with Saudi Aramco.

As of December 31, 2024, the geographic distribution of our and ARO's drilling rigs was as follows:

Floaters Jackups Other Total Valaris ARO

5 unchanged sentences

Gulf of Mexico on two rigs owned by a third party 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.

ARO ordered one newbuild jackup, Kingdom 3, during the fourth quarter of 2024, which is under construction in the Middle East and 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):

Long-lived Assets

December 31, 2023 December 31, 2022

Spain $ 484.8 $ 438.9

Brazil 413.9 374.5

United Kingdom 277.8 185.2

United States 314.3 206.5

United Kingdom 290.4 277.8

Other countries (1)

2 unchanged sentences

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

1 unchanged sentence

Accounts receivable, net, consisted of the following (in millions):

December 31, 2023 December 31, 2022

Trade $ 502.4 $ 375.2

4 unchanged sentences

Other current assets consisted of the following (in millions):

December 31, 2023 December 31, 2022

Deferred costs $ 75.3 $ 59.1

Prepaid taxes

$ 48.5 $ 49.1

Deferred costs 38.6 75.3

Prepaid expenses 13.0 23.6

2 unchanged sentences

Accrued liabilities and other consisted of the following (in millions):

December 31, 2023 December 31, 2022

Current contract liabilities (deferred revenues)

$ 116.2 $ 78.0

Personnel costs

$ 89.2 $ 76.6

Current contract liabilities (deferred revenues)

Income and other taxes payable 57.2 52.9

Lease liabilities 27.2 9.4

Accrued claims 39.5 20.4

Lease liabilities 28.0 27.2

Accrued interest

5 unchanged sentences

Pension and other post-retirement benefits 106.5 141.6

Lease liabilities

Noncurrent contract liabilities (deferred revenues)

Lease liabilities

Other 20.1 19.6

2 unchanged sentences

Repair and maintenance expense related to continuing operations was 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

Years Ended December 31,

2024 2023 2022

Repair and maintenance expense $ 239.6 $ 203.3 $ 175.2

Other, net, consisted of the following (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

Loss on extinguishment of debt

Years Ended December 31,

2024 2023 2022

Net gain on sale of property 28.6 141.2 21.2 6.0

Net foreign currency exchange gains (losses) $ 13.8 $ ( 3.5 ) $ 12.2

Net periodic pension and retiree medical income

Other income 1.4 0.1 0.1 1.1

Net gain (loss) on sale of property ( 0.2 ) 28.6 141.2

Loss on extinguishment of debt

Other income (expense) 0.6 1.4 ( 2.3 )

$ 16.6 $ ( 1.8 ) $ 167.5

2 unchanged sentences

See " Note 11 - Commitments and Contingencies " for more information regarding our letters of credit.

Net cash used in operating activities attributable to the net change in operating assets and liabilities was 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

Net cash provided by (used in) operating activities attributable to the net change in operating assets and liabilities was as follows (in millions):

Years Ended December 31,

2024 2023 2022

(Increase) decrease in accounts receivable $ ( 64.9 ) $ 44.9 $ ( 6.9 )

4 unchanged sentences

Additional cash flow information was 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

Years Ended December 31,

2024 2023 2022

Cash paid for interest and taxes

5 unchanged sentences

(1) Accruals for capital expenditures were excluded from investing activities in our Consolidated Statements of Cash Flows.

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

We received U.S.

income tax refunds totaling $ 35.9 million in 2024 primarily related to an Internal Revenue Service examination of one of our subsidiaries' 2009-2012 tax returns.

We received an income tax refund of $ 45.9 million in 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.

During the years ended December 31, 2024, 2023 and 2022, the capitalized interest totaled $ 15.9 million, $ 5.6 million and $ 1.2 million, respectively.

Concentration of Risk

4 unchanged sentences

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 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

Customer Concentration - Consolidated revenues with customers that individually contributed 10% or more of revenue in the years ended December 31, 2024, 2023 and 2022 were as follows:

Year Ended December 31, 2024

Floaters Jackups Other Total

BP plc ("BP") 9 % 3 % 5 % 17 %

2 unchanged sentences

61 % 32 % 7 % 100 %

Successor Predecessor

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

Floaters Jackups Other Total Floaters Jackups Other Total

BP 2 % 2 % 7 % 11 % 5 % 2 % 7 % 14 %

Year Ended December 31, 2023

Floaters Jackups Other Total

— % 5 % 6 % 11 %

Other customers (1)

1 unchanged sentence

53 % 37 % 10 % 100 %

Year Ended December 31, 2022

Floaters Jackups Other Total

6 % 3 % 6 % 15 %

Other customers (1)

38 % 43 % 4 % 85 %

44 % 46 % 10 % 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, 2023 Year Ended December 31, 2022

Floaters Jackups Other Total Floaters Jackups Other Total

Year Ended December 31, 2024

Floaters Jackups Other Total

$ 497.9 $ — $ — $ 497.9

United Kingdom

— 375.2 — 375.2

Gulf of Mexico 245.4 10.3 111.7 367.4

172.1 104.3 — 276.4

196.7 — — 196.7

Other countries (1)

328.6 265.1 55.3 649.0

$ 1,440.7 $ 754.9 $ 167.0 $ 2,362.6

Year Ended December 31, 2023

Floaters Jackups Other Total

Gulf of Mexico $ 220.9 $ 27.2 $ 104.7 $ 352.8

United Kingdom — 267.2 — 267.2

2 unchanged sentences

157.0 29.9 — 186.9

Saudi Arabia — 41.2 71.2 112.4 — 78.3 58.8 137.1

Mexico 65.9 38.7 — 104.6 13.9 58.1 — 72.0

Norway — 2.4 — 2.4 — 114.6 — 114.6

Other countries (1)

1 unchanged sentence

$ 948.7 $ 659.6 $ 175.9 $ 1,784.2

Successor Predecessor

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

Floaters Jackups Other Total Floaters Jackups Other Total

Year Ended December 31, 2022

Floaters Jackups Other Total

Gulf of Mexico $ 230.9 $ 21.3 $ 99.0 $ 351.2

3 unchanged sentences

78.5 — — 78.5

Saudi Arabia — 55.3 37.0 92.3 — 30.5 23.0 53.5

Mexico 37.0 40.8 — 77.8 21.6 22.7 — 44.3

Norway — 123.9 — 123.9 — 73.3 — 73.3

Other countries (1)

5 unchanged sentences

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