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Item 1A. Risk Factors

2026-02-20 compared with 2025-02-20 · 108 added, 108 removed, 473 unchanged (31% of the section changed)

Risks Related to the Business Combination

Our pending Business Combination may be delayed or not occur at all for a variety of reasons, some of which are outside of the parties’ control, and if these conditions are not satisfied, the Business Combination Agreement may be terminated and the Business Combination may not be completed.

On February 9, 2026, Valaris and Transocean (Valaris and Transocean, collectively, the “Parties” and each, a “Party”), entered into a business combination agreement (the “Business Combination Agreement”), providing for the combination of the two Parties (the “Business Combination”).

Pursuant to the Business Combination Agreement, and on the terms and subject to the conditions thereof, Transocean will acquire all of the issued and outstanding common shares of Valaris in exchange for shares of Transocean at an exchange ratio of 15.235 Transocean shares for each Valaris share.

The Business Combination will be effected by way of a court-approved scheme of arrangement between Valaris and the holders of the Valaris shares pursuant to section 99 of the Companies Act 1981 of Bermuda, as amended.

Following the consummation of the Business Combination, Transocean’s existing shareholders and Valaris’ existing shareholders will own approximately 53% and 47%, respectively, of the combined company on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029.

Completion of the Business Combination is subject to customary closing conditions, including (1) the receipt of the requisite approvals of the Valaris shareholders and the Transocean shareholders, (2) the granting of the sanction order on terms consistent with the Business Combination Agreement, (3) the Transocean shares issued pursuant to the Business Combination Agreement having been approved for listing on the NYSE, (4) certain regulatory approvals having been obtained or any applicable waiting period having expired or been terminated, (5) no governmental authority within applicable jurisdictions having enacted or issued any law or order preventing or prohibiting the consummation of the Business Combination and (6) the absence of a Transocean Material Adverse Effect or a Valaris Material Adverse Effect (as each are defined in the Business Combination Agreement).

Therefore, the Business Combination Agreement may not be completed or may not be completed as timely as expected.

In addition, the Business Combination Agreement also contains certain customary termination rights in favor of each Party, including for the failure to receive the requisite approvals of the Valaris shareholders and Transocean shareholders.

A Party may terminate the Business Combination Agreement, prior to the receipt of the requisite approval of the other Party’s shareholders, if the other Party shall have made an Adverse Recommendation Change (as defined in the Business Combination Agreement).

Either Valaris or Transocean may terminate the Business Combination Agreement if the effective time shall not have occurred on or prior to February 9, 2027 (as such date may be extended in accordance with the terms of the Business Combination Agreement).

Failure to complete the Business Combination could adversely affect our business and the market price of our common shares in a number of ways, including:

• The market price of our common shares may decline to the extent that the current market price reflects an assumption that the Business Combination will be consummated;

• If the Business Combination Agreement is terminated under certain circumstances specified in the Business Combination Agreement, we would be required to pay a termination fee of approximately $173.0 million to Transocean, and in other specified circumstances where the Business Combination Agreement is terminated following the failure to obtain the requisite shareholder approval and the above referenced termination fee is not otherwise payable, if Valaris shareholders failed to approve the transactions contemplated by the Business Combination Agreement, Valaris will be required to reimburse Transocean’s transaction expenses up to $58 million;

• We have incurred, and will continue to incur, significant expenses for professional services in connection with the Business Combination Agreement for which we will have received little or no benefit if the Business Combination Agreement is not consummated;

• A failed Business Combination Agreement may result in negative publicity and/or give a negative impression of us in the investment community, with our customers and our other stakeholders.

Efforts to complete the Business Combination could disrupt our relationships with third parties and employees, divert management’s attention, or result in negative publicity or legal proceedings, any of which could negatively impact our operating results and ongoing business.

We have expended, and continue to expend, significant management time and resources in an effort to complete the Business Combination, which may have a negative impact on our ongoing business and operations.

Uncertainty regarding the outcome of the Business Combination and our future could disrupt our business relationships with our existing and potential customers, suppliers and other business partners, who may attempt to negotiate changes in existing business relationships or consider entering into business relationships with parties other than us, or terminate or amend contracts.

Uncertainty regarding the outcome of the Business Combination could also adversely affect our ability to recruit and retain key personnel and other employees.

The pendency of the Business Combination may also result in negative publicity and a negative impression of us in the financial markets, and may lead to litigation against us and our directors and officers.

Such litigation could be distracting to management and, may, in the future, require us to incur significant costs.

Such litigation could result in the Business Combination being delayed and/or enjoined by a court of competent jurisdiction, which could prevent the Business Combination from becoming effective.

The occurrence of any of these events individually or in combination could have a material and adverse effect on our business, financial condition and results of operations.

The Business Combination Agreement contains provisions that limit our ability to pursue alternatives to the Business Combination which could discourage a potential competing acquiror from making an alternative transaction proposal.

The Business Combination Agreement contains provisions that subject Valaris to certain restrictions on its ability to solicit an alternative acquisition proposal from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative acquisition proposals, subject to customary exceptions.

Each Party is required to call a meeting of its shareholders to obtain the required approval of such Party’s shareholders described above and, subject to certain exceptions, to recommend that their respective shareholders approve such proposals.

Neither Party has the ability to terminate to accept a Superior Proposal (as defined in the Business Combination Agreement).

Additionally, if the Business Combination Agreement is terminated and we determine to seek another business combination, we may not be able to negotiate a transaction with another party on terms comparable to, or better than, the terms of the Business Combination.

While the Business Combination Agreement is in effect, we are subject to restrictions on our business activities.

The Business Combination Agreement generally requires us to operate our business in the ordinary course consistent with past practices.

It also imposes customary interim operating covenants that restrict us from taking specified actions, subject to certain exceptions, until the Business Combination is completed or until the Business Combination Agreement is terminated, including, but not limited to, our ability to amend our organizational documents;

declare dividends or repurchase shares;

encumber assets;

make acquisitions or dispositions;

incur or guarantee indebtedness;

enter into, or amend, any material contract.

Risks Related to Our Business, Operations, Financing Arrangements and Market Conditions

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• expectations regarding future energy prices,

• the desire and ability of OPEC+, its members and other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements,

• the desire and ability of OPEC+, its members and certain other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements, including the ability of OPEC+ to successfully coordinate and enforce production quotas,

• the availability of capital for oil and natural gas participants, including our customers, and capital allocation decisions by our customers, including the relative economics of offshore development versus alternative prospects,

• the level of production by non-OPEC+ countries,

beginning in February 2025, and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism,

• the worldwide military or political environment, including the Russia-Ukraine conflict and the conflicts in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs, such as those imposed since February 2025, or that may be imposed, by the U.S., and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism,

tax policy, including the U.K.

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• the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat.

Higher commodity prices may not necessarily translate into increased activity, however, and even during periods of high commodity prices, customers may cancel or curtail their drilling programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons, including their expectations for future oil and natural gas prices, the cost of exploration efforts, extended periods of price volatility, their lack of success in exploration efforts and re-allocating capital expenditures for renewable energy projects.

These factors could cause our revenues and profits to decline and limit our future growth prospects.

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As of February 17, 2026 and February 18, 2025, our contract backlog was approximately $4.7 billion and $3.6 billion, respectively.

This amount reflects the remaining contractual terms multiplied by the applicable contractual day rate.

This amount reflects the remaining firm contractual terms multiplied by the applicable contractual day rate.

The contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations.

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Our ability to renew expiring contracts or obtain new contracts and the terms of any such contracts will depend on market conditions.

For example, we have four drillships that are uncontracted.

For example, as of February 17, 2026, we had three drillships that are preservation stacked.

Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions.

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Our drilling contracts provide for varying levels of indemnification and allocation of liabilities between our customers and us with respect to loss or damage to property and injury or death to persons arising from the drilling operations we perform.

Under our drilling contracts, liability with respect to personnel and property customarily is allocated so that we and our customers each assume liability

for our respective personnel and property.

Under our drilling contracts, liability with respect to personnel and property customarily is allocated so that we and our customers each assume liability for our respective personnel and property.

Our customers have historically assumed most of the responsibility for, and indemnified us from loss, damage or other liability resulting from, pollution or contamination, including clean-up and removal, and third-party damages arising from operations under the contract when the source of the pollution originates from the well or reservoir, including those resulting from blowouts or cratering of the well.

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We provide our services to major international, government-owned and independent oil and natural gas companies.

During 2024, our five largest customers accounted for 49% of consolidated revenues, with our largest customer representing 17 % of our consolidated revenues and a significant percentage of our operating cash flows.

During 2025, our five largest customers accounted for 49% of consolidated revenues, a significant percentage of our operating cash flows, with our largest customer representing 13% of our consolidated revenues.

Our financial position, operating results or cash flows may be materially adversely affected if any of our higher day rate contracts were terminated or renegotiated on less favorable terms or if a major customer terminates its contracts with us, fails to renew its existing contracts with us, requires renegotiation of our contracts or declines to award new contracts to us.

Some of our customers have consolidated and could continue to consolidate and could use their size and purchasing power to achieve economies of scale and pricing concessions.

In addition, certain of our customers are increasingly focusing their business strategy on renewable energy projects and away from oil and natural gas exploration and production.

Such customer consolidation and strategic transitions could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts.

Such customer consolidation could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts.

Some of our customers have also deferred the timing of their offshore projects as a result of a focus on capital discipline, including the deployment of additional cash to share repurchase and dividend programs, the limited availability of production equipment and protracted regulatory approvals.

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In addition, the U.S.

government has issued public warnings that indicate energy assets and companies engaging in significant transactions, such as acquisitions, might be specific targets of cybersecurity threats.

Geopolitical tensions or conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East, may further heighten the risk of cybersecurity threats.

government has issued public warnings that indicate energy assets and companies might be targeted by nation state threat actors.

Geopolitical tensions may increase the risk of cybersecurity threats.

Laws and regulations governing cybersecurity and data privacy and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges and potential costs, and any failure to comply with these cybersecurity and data privacy requirements or other applicable laws and regulations in this area could result in significant regulatory or other penalties and legal liability.

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During periods of increased rig reactivation, upgrade and enhancement projects, shipyards and third-party equipment vendors may be under significant resource constraints to meet delivery obligations.

Such constraints may lead to substantial delivery and commissioning delays, equipment failures and/or quality deficiencies.

Such constraints may lead to substantial delivery and commissioning delays, equipment failures increased costs and/or quality deficiencies.

Furthermore, drilling rigs may face start-up or other operational complications following completion of upgrades or maintenance.

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In addition, commitments made by us, or our customers, to reduce emissions, or decarbonize, may require us to upgrade or retrofit our drilling rigs with additional equipment, less carbon intensive equipment or instrumentation.

As a result, we may be required to take our drilling rigs out of

service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.

As a result, we may be required to take our drilling rigs out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.

In the future, market conditions may not justify these expenditures or enable us to operate our drilling rigs profitably during the remainder of their economic useful lives.

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Our failure to obtain the funds for necessary future capital expenditures could materially adversely affect our business and on our financial position, operating results or cash flows.

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

Failure to recruit, develop and retain skilled personnel could materially adversely affect our business.

We require skilled personnel to operate our drilling rigs and to provide technical services and support for our business, and further rig reactivations will require that we hire additional skilled personnel.

As demand for our services and the number of active drilling rigs increases, competition for the labor required for drilling operations and construction projects intensifies, leading to shortages of qualified personnel in the industry.

Competition for the labor required for drilling operations and construction projects is intense, leading to shortages of qualified personnel in the industry.

During periods of intensified competition, it is more difficult and costly to recruit, train and retain qualified employees, including in foreign countries that require a certain percentage of national employees.

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Hiring qualified and experienced personnel with the specialized skills and qualifications required to operate an offshore drilling rig is difficult due to the competitive labor market and lack of experience.

In the current environment where competition for labor is intense, we may be required to increase existing levels of compensation to stay competitive in retaining a skilled workforce.

In periods of intense competition for labor, we may be required to increase existing levels of compensation and benefits to attract and retain a skilled workforce.

In addition, new personnel that we hire may need to undergo training to develop the skills needed to perform their job duties.

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The failure of the third party to fulfill its obligations could disrupt our operations.

In addition, the use of a shared service environment, including our reliance on a third-party provider, may create risks

relating to the processing of transactions and recording of financial information.

In addition, the use of a shared service environment, including our reliance on a third-party provider, may create risks relating to the processing of transactions and recording of financial information.

We could experience a lapse in the operation of internal controls due to turnover, lack of legacy knowledge and inappropriate training associated with the use of a third-party provider, which could result in significant deficiencies or material weaknesses in our internal control over financial reporting and materially adversely affect our financial position, operating results or cash flows.

AI presents risks and challenges that can impact our business.

AI presents risks and challenges that could impact our business, including breaches of privacy or security incidents related to the use of AI.

We are integrating AI tools into our systems, and our third-party service providers as well as our competitors may also develop or use such tools.

AI may become more important to our operations or to our future growth over time.

There can be no assurance that we will realize the desired or anticipated benefits, or any benefits, and we may not properly implement such technology.

AI presents operational, legal and reputational risks that could impact our business, including breaches of privacy or security incidents related to the use of AI.

As we integrate, AI tools into our operations and business functions, there is no assurance that we will realize the anticipated benefits or properly implement such technology.

Our third-party service providers may also incorporate AI into their services without disclosing such use to us or fail to disclose risks presented by their use of AI.

There is a risk that AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could result in operational disruptions and harm our business, customers or reputation.

In addition, we, or our AI service providers, may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection, compliance, and transparency, among others, which could inhibit our or our service providers’ ability to maintain an adequate level of functionality or service.

Our service providers may also incorporate AI into their services without disclosing such use to us, or fail to disclose risks presented by their use of AI.

There is a risk that AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could harm our business, customers or reputation.

Our competitors or other third parties may incorporate AI in their business operations more quickly or more successfully than we do, which may negatively impact our ability to compete effectively.

Additionally, the complex and rapidly evolving landscape around AI may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm.

New laws and regulations are being adopted in various jurisdictions globally, including in Australia, the European Union (the "EU") and the U.S., and existing laws and regulations may be interpreted in ways that would affect our business operations and the way in which we use AI.

Our internal governance, policies, procedures, and controls relating to the development, integration, and use of AI, including by third-party service providers, may be insufficient or may not operate as intended, particularly as AI technologies and regulatory expectations continue to evolve.

Additionally, the rapidly evolving global legal landscape around AI, including the EU Artificial Intelligence Act and proposed and enacted U.S.

federal and state laws and regulations, may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm.

Existing laws and regulations may be interpreted in ways that would affect our business operations and the ways in which we use AI.

Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our customers’ property or information and/or materially adversely affect our financial position, operating results or cash flows.

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ARO may not apply the same controls and policies that we follow to manage our risks, and ARO’s controls and policies may not be as effective.

As a result, operational, financial and control issues may arise, which could materially adversely affect our financial position, operating results or cash flows.

As a result, operational, financial and control issues may arise, including the inability to produce timely and accurate financial statements, which could materially adversely affect our financial position, operating results or cash flows.

Additionally, in order to establish or preserve our relationship with our joint venture partner we may agree to risks and contributions of resources that are proportionately greater than the returns we could receive, which could reduce our income and return on our investment in ARO compared to what we may traditionally require in other areas of our business.

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For example, the 2025 interest owed by ARO on the Notes Receivable from ARO of $24.1 million was paid in kind in December 2025 by increasing the principal balance of the Notes Receivable from ARO.

We expect to agree to extend the maturity of the Notes Receivable from ARO to facilitate its capital allocation priorities, in particular its newbuild jackup rig program.

Notwithstanding any extension of the maturity, in the event that ARO does not repay the Notes Receivable from ARO when they become due, we would require the prior consent of our joint venture partner to enforce ARO's payment obligations.

We have a potential obligation to fund ARO for newbuild jackup rigs.

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

The s hareholder agreement governing the joint venture (the "Shareholder Agreement") specifies that ARO shall purchase 20 newbuild jackup rigs.

The first two newbuild jackups were ordered in January 2020.

The first rig, Kingdom 1, was delivered in the fourth quarter of 2023 and the second rig, Kingdom 2, was delivered in the second 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 October 2024 and November 2025, ARO ordered the third newbuild jackup, Kingdom 3, and the fourth newbuild jackup, Kingdom 4, respectively.

There can be no assurance that the new jackup rigs will begin operations as anticipated.

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

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

In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes.

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Any required capital contributions we make could negatively impact our liquidity position and financial condition.

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 terminated during the year ended December 31, 2024.

In connection with Saudi Aramco’s suspension of certain drilling contracts, the VALARIS 143, VALARIS 147 and VALARIS 148 contracts were terminated during the year ended December 31, 2024.

Upon termination of these contracts, the bareboat charter agreements between us and ARO were also terminated and the rigs were returned to us and stacked.

If additional drilling contracts between us and ARO are suspended or terminated in the future and we are unable to secure new contracts with substantially similar terms on a timely basis, our financial position, operating results or cash flows could be materially adversely affected.

Five of our rigs leased to ARO have bareboat charter agreements expiring during 2025.

While we are negotiating renewals, we may be unsuccessful in negotiating extensions or new contracts for these bareboat charters.

As a result of these risks, it may take longer than expected for us to realize the expected returns on our investment in ARO or such returns may ultimately be less than anticipated.

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Any such joint venture would involve various risks, including among others (1) difficulties related to integrating or managing applicable parts of a joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management’s attention from day-to-day operations, (3) failure to realize anticipated benefits, such as cost savings, revenue enhancements or business synergies, (4) the potential for substantial transaction expenses and (5) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time any such transaction is consummated.

Our business involves operating hazards, and our insurance and indemnities from our customers may not be adequate to cover any potential losses.

Our business involves operating hazards, and our insurance and indemnities from our customers or other parties may not be adequate to cover any potential losses.

The drilling of oil and natural gas wells involves numerous operating hazards, such as blowouts, reservoir damage, loss of production, loss of well control, uncontrolled formation pressures, lost or stuck drill strings, equipment failures and mechanical breakdowns, punch throughs, craterings, industrial accidents, fires, explosions, oil spills and pollution.

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These hazards can cause personal injury or loss of life, severe damage to, or destruction of, property and equipment, pollution or environmental damage, which could lead to claims by employees, contractors or third parties and suspension of operations and contract terminations.

Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, collision, piracy, damage from adverse weather and marine life infestations.

Gulf of Mexico and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance.

Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, allision, collision, piracy, damage from adverse weather and marine life infestations.

The Gulf of America and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance.

The occurrence of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury to or death of rig personnel.

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In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable.

The law generally

considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.

The law generally considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.

Our insurance policies and drilling contracts contain rights to indemnity that may not adequately cover our losses, and we do not have insurance coverage or rights to indemnity for all risks.

We have two main types of insurance coverage:

(1) hull and machinery coverage for physical damage to our property and equipment and (2) excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution.

We have no hull and machinery insurance coverage for damages caused by named storms in the U.S.

Gulf of Mexico for our jack-up fleet and only limited coverage for our floater fleet.

(1) hull and machinery coverage for physical damage to our property and equipment and (2) P&I with excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution.

We have no hull and machinery insurance coverage for damages caused by named storms in the Gulf of America for our jack-up fleet and only limited coverage for our floater fleet.

We also retain the risk for any liability that exceeds our excess liability coverage.

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Uninsured exposures may include radiation hazards, loss of hire and losses relating to terrorist acts or strikes and some cyber events.

As a result of increased costs to insurance companies due to regulatory, geopolitical, reputational or other developments, insurance companies that have historically participated in underwriting risks arising out of oil and natural gas operations may discontinue that practice, may reduce the insurance capacity they are willing to deploy or demand significantly higher premiums or deductibles to cover these risks.

operations may discontinue that practice, may reduce the insurance capacity they are willing to deploy or demand significantly higher premiums or deductibles to cover these risks.

Additionally, a significant number of high cost climate-related insurance claims or natural catastrophes such as hurricanes, floods or windstorms may result in withdrawal of insurance capacity and increasing premiums to oil and natural gas industry companies.

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We can provide no assurance that the increased risk exposure will not have an adverse impact on our future operations or that we will not increase the number of drilling rigs contracted to national oil companies with commensurate additional contractual risks.

The impact and effects of public health crises, pandemics and epidemics could have a material adverse effect on our business, financial condition and results of operations.

Public health crises, pandemics and epidemics and fear of such events may adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our services.

Other effects of such public health crises, pandemics and epidemics may include significant volatility and disruption of the global financial markets;

continued volatility of crude oil prices and related uncertainties around OPEC+ production;

disruption of our operations, including suspension of drilling activities;

impact to costs;

loss of workers;

labor shortages;

supply chain disruptions or equipment shortages;

logistics constraints;

customer demand for our services and industry demand generally;

capital spending by oil and natural gas companies;

our liquidity;

the price of our securities and trading markets with respect thereto;

our ability to access capital markets;

asset impairments and other accounting changes;

certain of our customers experiencing bankruptcy or otherwise becoming unable to pay vendors, including us;

and employee impacts from illness, travel restrictions, including border closures and other community response measures.

Such public health crises, pandemics and epidemics are continuously evolving and the extent to which our business operations and financial results may be affected depends on various factors beyond our control, such as the duration, severity and sustained geographic resurgence of public health crises, pandemics and epidemics;

the impact and effectiveness of governmental actions to contain and treat such outbreaks, including government policies and restrictions;

vaccine hesitancy, vaccine mandates, and voluntary or mandatory quarantines;

and the global response surrounding such uncertainties.

Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility with regard to the management of our personnel.

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The agreements governing our debt, including the Indenture and the 2028 Credit Agreement, contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and to make payments on our debt.

The Indenture, the Credit Agreement and the related agreements governing our indebtedness contain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

The Indenture, the 2028 Credit Agreement (as each are defined below) and the related agreements governing our indebtedness contain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

• incur additional debt and issue preferred stock;

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Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations.

In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.

This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.

We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets or other strategic transactions.

We may pursue mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will strengthen, streamline or expand our business.

In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing, which could materially adversely affect our financial condition, operating results or cash flows and could cause us to become bankrupt or insolvent.

We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets, including our drilling rigs, or other strategic transactions.

We may pursue mergers, acquisitions or dispositions of businesses or assets, including our drilling rigs, or other strategic transactions that we believe will strengthen, streamline or expand our business, such as the Business Combination.

Each such transaction would be dependent upon several factors, including identifying suitable companies, businesses or assets that align with our business strategies, reaching agreement with the potential counterparties on acceptable terms, the receipt of any applicable regulatory and other approvals, and other conditions.

potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (6) potential adverse impacts on our business and relationships with customers, vendors, contractors, employees or suppliers as a result of proposed or completed transactions and (7) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated.

These transactions involve various risks, including among others, (1) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management's attention from day-to-day operations, (3) applicable antitrust laws and other regulations that may limit our ability to acquire targets or require us to divest an acquired business or assets, (4) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening or broadening our business, (5) potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (6) potential adverse impacts on our business and relationships with customers, vendors, contractors, employees or suppliers as a result of proposed or completed transactions, (7) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated, and (8) potential accounting impairment upon the decision to reclassify assets as held for sale.

In connection with the retirements of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (three semisubmersible rigs within the Floaters segment) and VALARIS 102 and VALARIS 145 (two rigs within the Jackups segment), and the classification of VALARIS DPS-1 (a semisubmersible rig within the Floaters segment) as held for sale during 2025, we recognized non-cash losses on impairment of $27.3 million for the year ended December 31, 2025.

See " Note 5 - Property and Equipment " to our consolidated financial statements included in " Item 8 .

Financial Statements and Supplementary Data " for information regarding the retirements of these assets.

The exercise of all or any number of outstanding warrants or the issuance or settlement of stock-based awards may dilute the holders of our Common Shares.

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It is also possible that legislative and regulatory activity could materially adversely affect our financial position, operating results or cash flows by limiting drilling opportunities.

In recent years, we have seen several significant regulatory changes that have affected the way we operate in the U.S.

Gulf of Mexico.

In recent years, we have seen several significant regulatory changes that have affected the way we operate in the Gulf of America.

See “ Item 1 .

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We are adversely affected by restrictions on drilling in the areas in which we operate, including policies and guidelines regarding the approval of drilling permits, restrictions on development and production activities, and directives, judicial decisions and regulations that have and may further impact our operations.

For example, in August 2024, the U.S.

District Court of Maryland held that the 2020 biological opinion issued by the U.S.

National Marine Fisheries Services (the "NMFS"), which assessed the collective impact of certain federal actions in the U.S.

Gulf of Mexico on threatened and endangered species, violated the Endangered Species Act and the Administrative Procedures Act.

The Court ordered the biological opinion vacated effective December 20, 2024 and extended until May 21, 2025, which the NMFS previously indicated provides sufficient time to prepare and issue a new biological opinion.

If the biological opinion is vacated, offshore oil and gas activities in the U.S.

Gulf of Mexico could be halted on May 21, 2025 unless a legal, regulatory or legislative solution is reached before that date.

From time to time, legislative and regulatory proposals have been introduced, and legal proceedings have been initiated, that would materially limit or prohibit offshore drilling in certain areas, or that would increase the liabilities or costs associated with offshore drilling.

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There is increasing uncertainty with respect to tax laws, regulations and treaties, and the interpretation and enforcement thereof that may affect our business.

For example, the Organization for Economic Cooperation and Development (“OECD”), the EU and certain other countries (including countries in which we operate) are committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed.

In particular, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis.

For example, the Organization for Economic Cooperation and Development (“OECD”), the EU and certain other countries (including countries in which we operate) enacted substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed.

In particular, the OECD’s Pillar Two initiative introduced a 15% global minimum tax applied on a country-by-country basis.

Many jurisdictions have already enacted legislation in line with Pillar Two, and the OECD continues to issue additional guidance.

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In addition, our bye-laws establish advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders.

Legislation enacted in Bermuda as to Economic Substance may affect our operations.

Legislation enacted in Bermuda as to Economic Substance may affect our business.

The Economic Substance Act came into effect in Bermuda on January 1, 2019.

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To the extent we or any of our Bermuda subsidiaries carry on any relevant activities for the purposes of the Economic Substance Act, we or such subsidiaries will be required to comply with such economic substance requirements.

Our compliance with the Economic Substance Act

may result in additional costs that could have a material adverse effect on our financial position or results of operations.

Our compliance with the Economic Substance Act may result in additional costs that could have a material adverse effect on our financial position or results of operations.

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

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

operations, and we are subject to additional risks associated with the expansion into new geographical markets.

Revenues from non-U.S.

operations were 86%, 84% and 80% of our total consolidated revenues for the years ended December 31, 2025, 2024 and 2023, respectively.

operations and shipyard rig construction and enhancement projects are subject to political, economic and other uncertainties, including:

operations and shipyard rig construction and enhancement projects, as well as our expansion into new geographical markets, are subject to political, economic and other uncertainties, including:

• terrorist acts, war and civil disturbances,

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Any adverse rulings or changes in enforcement practices that materially impact our ability to operate in these jurisdictions could cause delays in contract commencement dates, unscheduled operational downtime, reduced or zero day rates or the termination or cancellation of contracts.

Governments in some countries are active in regulating and controlling the ownership of oil, natural gas and mineral concessions and companies holding such concessions, the exploration of oil and natural gas and other aspects of the oil and natural gas industry in their countries.

in their countries.

In some areas of the world, government activity has materially adversely affected the amount of exploration and development work performed by major international oil companies and may continue to do so.

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Regulation of GHG and climate change could have a negative impact on our business.

Governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of GHG that may impact our operations, profitability and competitiveness.

Restrictions on GHG emissions, reporting requirements or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services.

Governments around the world have recently focused on enacting laws and regulations regarding climate change and regulation of GHG that may impact our operations, profitability and competitiveness.

Restrictions on GHG emissions, reporting requirements or other related legislative or regulatory enactments could have an indirect effect in industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services.

Lawmakers and regulators in the U.S.

and certain jurisdictions where we operate have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting and incentives for renewable energy.

For example, the SEC has adopted a final rule implementing a mandatory climate change reporting framework;

however, such framework is subject to an indefinite stay pending litigation over the rules.

Should this rule become effective it would materially increase the amount of time, monitoring, diligence and reporting costs related to these matters.

Likewise, in December 2023, the EPA adopted a final rule enacting a series of actions targeting methane and other emission reductions in natural gas and oil operations.

and certain other jurisdictions where we operate have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap-and-trade systems, restrictive permitting and incentives for renewable energy.

For example, in December 2023, the EPA adopted a final rule enacting a series of actions targeting methane and other emission reductions in natural gas and oil operations, though the effective implementation date has been delayed.

Global efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues and impose reductions of hydrocarbon-based fuels, including plans developed in connection with the Paris climate conference in December 2015, the Katowice climate conference in December 2018 and the UN Climate Change Conferences since 2021.

In January 2023, the EU enacted the Corporate Sustainability Reporting Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.

We anticipate that these requirements will apply to us as early as 2026 (for fiscal year 2025) for certain of our EU subsidiaries and at the consolidated entity level in 2030 (for fiscal year 2029).

In January 2023, the EU enacted the Corporate Sustainability Reporting Directive to require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.

In 2025, the EU delayed the reporting timeline for many in-scope companies and, in December 2025, continued to progress on amendments that would limit the number of companies obligated to report under the law.

These requirements could apply to us as early as 2028 (for fiscal year 2027) for certain of our EU subsidiaries and at the consolidated entity level in 2029 (for fiscal year 2028).

As a result of varying rules adopted by jurisdictions in which we operate, we are increasingly subject to an overlapping patchwork of laws and regulations, including disclosure requirements, which may increase the costs of compliance and the risk of violations.

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Should we be targeted by any such litigation or investigations, we may incur liability, which could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors.

The ultimate impact of GHG emissions-related agreements, legislation and measures on our financial performance is highly uncertain because we are unable to predict, in a multitude of jurisdictions, the outcome of political decision-making processes.

The ultimate impact of GHG emissions-related agreements, legislation and measures on our financial performance is highly uncertain.

Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services.

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This evolving transition of the global energy system from fossil-based systems of energy production and consumption to more renewable energy sources, commonly referred to as the energy transition, could have a material adverse impact on our results of operations, financial position and cash flows.

As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers are transitioning their businesses to renewable energy projects and away from oil and natural gas exploration and production, which may result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.

As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers may transition their businesses to renewable energy projects and away from oil and natural gas exploration and production, which would result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.

Increased scrutiny from stakeholders and others regarding climate change, as well as our sustainability practices, initiatives and reporting responsibilities, could result in additional costs or risks.

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Such initiatives could ultimately interfere with our access to capital, business activities and operations.

In addition to such initiatives, sustainability matters more generally have been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S.

We publish an annual Sustainability Report, which includes disclosure of our sustainability practices, aspirations, targets and goals.

Our disclosures on these matters rely on management’s expectations as of the date the statements are first made, as well as standards for measuring progress that are still in development and may change or fail to be realized.

In addition to such initiatives, sustainability matters have more generally been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S.

We publish an annual Sustainability Report, which includes disclosures of our sustainability practices, aspirations, targets and goals.

Our disclosures on these matters rely on management’s expectations as of the date when the statements are first made, as well as standards for measuring progress that are still in development and that may change or fail to be realized.

These expectations and standards may continue to evolve.

Even so, our failure or inability to meet these aspirations, targets, goals or evolving stakeholder expectations for sustainability practices and reporting and even the perception of such failure or inability may potentially harm our reputation and impact employee retention, customer relationships and access to capital, among other matters.

For example, certain market participants use third-party benchmarks or scores to measure a company’s sustainability practices in making investment decisions and customers and suppliers may evaluate our sustainability practices or require that we adopt certain sustainability policies as a condition of awarding contracts.

For example, certain market participants use third-party benchmarks or scores to measure a company’s sustainability practices in making investment decisions and customers and suppliers may evaluate our sustainability practices or require that we adopt or remove certain sustainability policies as a condition of awarding contracts.

By electing to set and share publicly our corporate sustainability standards, our business may face increased scrutiny related to sustainability activities and be unable to satisfy all stakeholders.

For example, an increasing number of stakeholders, regulators and lawmakers have expressed or pursued opposing views, legislation and investment expectations with respect to sustainability.

As sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to sustainability monitoring and reporting and complying with sustainability initiatives, especially to the extent these standards are not harmonized or consistent.

In addition, it may be difficult or expensive for us to comply with any sustainability-linked contracting policies

adopted by customers and suppliers, particularly given the complexity of our supply chain, our reliance on third-party manufacturers, and the potential for jurisdictions in which we operate to enact opposing or incompatible regulations.

As sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to sustainability monitoring, reporting and compliance, especially to the extent these standards are not harmonized or consistent.

In addition, it may be difficult or expensive for us to comply with sustainability-linked contracting policies adopted by customers and suppliers, particularly given the complexity of our supply chain, our reliance on third-party manufacturers, and the potential for jurisdictions in which we operate to enact opposing or incompatible regulations.

Actions we may take to achieve our sustainability initiatives, including the development and implementation of new emissions-reduction technology, may require increased expenditures, which may materially adversely affect our financial position, operating results or cash flows.

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 1A. Risk Factors