Valaris Ltd 10-K

Item 8. Financial Statements and Supplementary Data MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) or 15d-15(f). Our internal control over financial reporting system is designed to provide reasonable assurance as to the reliability of our financial reporting and the preparation and presentation of consolidated financial statements in accordance with accounting principles generally accepted in the United States, as well as to safeguard assets from unauthorized use or disposition. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, we have conducted an evaluation of the effectiveness of our internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on this evaluation, we have concluded that our internal control over financial reporting is effective as of December 31, 2025 to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. KPMG LLP, the independent registered public accounting firm who audited our consolidated financial statements, has issued an audit report on our internal control over financial reporting. KPMG LLP's audit report on our internal control over financial reporting is included herein. February 20, 2026 76 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Valaris Limited: 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, 2025 and 2024, the related consolidated statements of operations, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2025, 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, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2025, 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, 2025, 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, 2026 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. 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. 77 Income tax positions pertaining to certain tax transactions As discussed in Notes 1 and 10 to the consolidated financial statements, the Company evaluated the income tax effect of certain transactions which often requires local country tax expertise and judgment. This requires the Company to interpret complex tax laws in multiple jurisdictions to assess whether its tax positions have a more than 50 percent likelihood of being sustained with the taxing authorities. We identified the assessment of income tax positions pertaining to certain tax transactions as a critical audit matter. Complex auditor judgment was required to evaluate the Company’s assessment that certain tax positions have a more than 50 percent likelihood of being sustained with the taxing authorities. In addition, specialized skills and knowledge were required to evaluate the Company’s interpretation of tax laws in the applicable jurisdictions. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s income tax process. This included controls related to the interpretation of tax laws applicable to certain transactions and the assessment that tax positions pertaining to those transactions have a more than 50 percent likelihood of being sustained with taxing authorities. We involved tax professionals with specialized skills and knowledge, who assisted 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. /s/ KPMG LLP We have served as the Company’s auditor since 2002. Houston, Texas February 20, 2026 78 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors and Shareholders Valaris Limited: Opinion on Internal Control Over Financial Reporting We have audited Valaris Limited and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2025, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2025, 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, 2025 and 2024, the related consolidated statements of operations, comprehensive income, and cash flows for each of the years in the three-year period ended December 31, 2025, and the related notes (collectively, the consolidated financial statements), and our report dated February 20, 2026 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 79 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ KPMG LLP Houston, Texas February 20, 2026 80 VALARIS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share amounts) Years Ended December 31, 2025 2024 2023 OPERATING REVENUES Revenues (exclusive of reimbursable revenues) $ 2,207.9 $ 2,211.9 $ 1,676.0 Reimbursable revenues 161.1 150.7 108.2 Total operating revenues 2,369.0 2,362.6 1,784.2 OPERATING EXPENSES Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 1,477.1 1,618.5 1,440.4 Reimbursable expenses 152.6 142.4 103.2 Total contract drilling expenses (exclusive of depreciation) 1,629.7 1,760.9 1,543.6 Loss on impairment 27.3 — — Depreciation 146.3 122.1 101.1 General and administrative 97.1 116.3 99.3 Total operating expenses 1,900.4 1,999.3 1,744.0 EQUITY IN EARNINGS (LOSSES) OF ARO 8.4 ( 11.0 ) 13.3 OPERATING INCOME 477.0 352.3 53.5 OTHER INCOME (EXPENSE) Interest income 70.8 86.1 101.4 Interest expense, net ( 98.8 ) ( 84.8 ) ( 68.9 ) Other, net 103.3 16.6 ( 1.8 ) Total other income 75.3 17.9 30.7 INCOME BEFORE INCOME TAXES 552.3 370.2 84.2 PROVISION (BENEFIT) FOR INCOME TAXES Current income tax expense (benefit) 88.3 ( 5.4 ) 3.8 Deferred income tax expense (benefit) ( 515.1 ) 5.8 ( 786.4 ) Total provision (benefit) for income taxes ( 426.8 ) 0.4 ( 782.6 ) NET INCOME 979.1 369.8 866.8 NET (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 3.7 3.6 ( 1.4 ) NET INCOME ATTRIBUTABLE TO VALARIS $ 982.8 $ 373.4 $ 865.4 EARNINGS PER SHARE Basic $ 13.92 $ 5.18 $ 11.68 Diluted $ 13.86 $ 5.12 $ 11.51 WEIGHTED-AVERAGE SHARES OUTSTANDING Basic 70.6 72.1 74.1 Diluted 70.9 72.9 75.2 The accompanying notes are an integral part of these consolidated financial statements. 81 VALARIS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) Years Ended December 31, 2025 2024 2023 NET INCOME $ 979.1 $ 369.8 $ 866.8 OTHER COMPREHENSIVE INCOME, NET Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive income 24.5 10.9 10.8 Foreign currency translation adjustments 2.2 ( 1.9 ) ( 0.3 ) NET OTHER COMPREHENSIVE INCOME 26.7 9.0 10.5 COMPREHENSIVE INCOME 1,005.8 378.8 877.3 COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS 3.7 3.6 ( 1.4 ) COMPREHENSIVE INCOME ATTRIBUTABLE TO VALARIS $ 1,009.5 $ 382.4 $ 875.9 The accompanying notes are an integral part of these consolidated financial statements. 82 VALARIS LIMITED AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in millions, except par value amounts) December 31, ASSETS 2025 2024 CURRENT ASSETS Cash and cash equivalents $ 599.4 $ 368.2 Accounts receivable, net 474.8 571.2 Assets held for sale 6.4 — Other current assets 144.7 139.3 Total current assets 1,225.3 1,078.7 PROPERTY AND EQUIPMENT, AT COST 2,598.3 2,309.4 Less accumulated depreciation 509.5 376.5 Property and equipment, net 2,088.8 1,932.9 LONG-TERM NOTES RECEIVABLE FROM ARO 345.0 296.2 INVESTMENT IN ARO 121.8 113.4 DEFERRED TAX ASSETS 1,364.2 849.5 OTHER ASSETS 159.7 149.1 Total assets $ 5,304.8 $ 4,419.8 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable - trade $ 348.2 $ 328.5 Accrued liabilities and other 343.4 351.0 Total current liabilities 691.6 679.5 LONG-TERM DEBT 1,086.0 1,082.7 DEFERRED TAX LIABILITIES 29.7 30.1 OTHER LIABILITIES 325.8 383.2 Total liabilities 2,133.1 2,175.5 COMMITMENTS AND CONTINGENCIES (Note 11) VALARIS SHAREHOLDERS' EQUITY Common shares, $ 0.01 par value, 700.0 shares authorized, 76.4 and 76.2 shares issued, 69.2 and 71.0 shares outstanding as of December 31, 2025 and 2024 respectively 0.8 0.8 Preference shares, $ 0.01 par value, 150.0 shares authorized, no shares issued as of December 31, 2025 and 2024 — — Stock warrants 16.4 16.4 Additional paid-in capital 1,134.9 1,113.3 Retained earnings 2,381.7 1,398.9 Accumulated other comprehensive income 60.9 34.2 Treasury shares, at cost, 7.2 and 5.2 shares as of December 31, 2025 and 2024, respectively ( 425.1 ) ( 325.1 ) Total Valaris shareholders' equity 3,169.6 2,238.5 NONCONTROLLING INTERESTS 2.1 5.8 Total shareholders' equity 3,171.7 2,244.3 Total liabilities and shareholders' equity $ 5,304.8 $ 4,419.8 The accompanying notes are an integral part of these consolidated financial statements. 83 VALARIS LIMITED AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Years Ended December 31, 2025 2024 2023 OPERATING ACTIVITIES Net income $ 979.1 $ 369.8 $ 866.8 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income tax expense (benefit) ( 515.1 ) 5.8 ( 786.4 ) Depreciation expense 146.3 122.1 101.1 Net (gain) loss on sale of property ( 118.6 ) 0.2 ( 28.6 ) Loss on impairment 27.3 — — Share-based compensation expense 25.2 27.7 27.3 Accretion of discount on the Notes Receivable from ARO ( 24.7 ) ( 40.0 ) ( 28.3 ) Equity in losses (earnings) of ARO ( 8.4 ) 11.0 ( 13.3 ) Loss on extinguishment of debt — — 29.2 Changes in contract liabilities ( 41.0 ) ( 31.7 ) 4.9 Changes in deferred costs 16.1 39.3 ( 26.1 ) Changes in contract assets ( 10.3 ) ( 1.0 ) 0.6 Other 8.0 6.9 5.8 Changes in operating assets and liabilities 78.9 ( 133.2 ) 121.2 Contributions to pension plans and other post-retirement benefits ( 16.6 ) ( 21.5 ) ( 6.7 ) Net cash provided by operating activities 546.2 355.4 267.5 INVESTING ACTIVITIES Additions to property and equipment ( 343.5 ) ( 455.1 ) ( 696.1 ) Proceeds from disposition of assets 137.9 2.8 30.3 Net cash used in investing activities ( 205.6 ) ( 452.3 ) ( 665.8 ) FINANCING ACTIVITIES Payments for share repurchases ( 100.0 ) ( 126.4 ) ( 198.6 ) Payments related to tax withholdings for share-based awards ( 3.6 ) ( 29.9 ) ( 5.4 ) Debt issuance costs — ( 0.8 ) ( 38.6 ) Issuance of 2030 Second Lien Notes — — 1,103.0 Redemption of 2028 First Lien Notes — — ( 571.8 ) Other — ( 1.2 ) ( 3.1 ) Net cash provided by (used in) financing activities ( 103.6 ) ( 158.3 ) 285.5 INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 237.0 ( 255.2 ) ( 112.8 ) CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD 380.5 635.7 748.5 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD $ 617.5 $ 380.5 $ 635.7 The accompanying notes are an integral part of these consolidated financial statements. 84 VALARIS LIMITED AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. 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. Business 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. Our fleet of offshore drilling rigs is among the largest in the world and includes one of the highest specification ultra-deepwater fleets, as well as a leading premium jackup fleet. As of February 20, 2026, we own 46 rigs, including 13 drillships, two semisubmersible rigs, 31 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 America, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific. We provide drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated drilling service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations as well as the economic risk relative to the success of the well. Accounting Policies Principles of Consolidation The accompanying consolidated financial statements include the accounts of Valaris Limited, those of our wholly-owned subsidiaries and entities in which we hold a controlling financial interest. All intercompany accounts and transactions have been eliminated. Investments in operating entities in which we have the ability to exercise significant influence, but where we do not control operating and financial policies, are accounted for using the equity method. Significant influence generally exists if we have an ownership interest representing between 20% and 50% of the voting stock of the investee. We account for our interest in ARO using the equity method of accounting and only recognize our portion of equity in earnings in our consolidated financial statements. ARO is a variable interest entity; however, we are not the primary beneficiary and therefore do not consolidate ARO. Reclassification Certain previously reported amounts have been reclassified to conform to the current year presentation. Pervasiveness of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States ("U.S. GAAP") requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates. 85 Foreign Currency Remeasurement and Translation 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. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. Most transaction gains and losses are included in Other, net, in our Consolidated Statements of Operations. Certain gains and losses from the translation of foreign currency balances of our non-U.S. dollar functional currency subsidiaries are included in Accumulated other comprehensive income on our Consolidated Balance Sheets. Net foreign currency exchange gains and losses were $ 14.3 million of losses, $ 13.8 million of gains and $ 3.5 million of losses, and were included in Other, net, in our Consolidated Statements of Operations for the years ended December 31, 2025, 2024 and 2023, respectively. Cash Equivalents Highly liquid investments with maturities of three months or less at the date of purchase are considered cash equivalents. To mitigate our credit risk, our investments in time deposits have historically been diversified across multiple, high-quality financial institutions. Restricted Cash Our restricted cash primarily consists of collateral on letters of credit. We classify restricted cash balances on the Consolidated Balance Sheets within Other current assets, if the restriction is expected to expire or otherwise be resolved within one year, and in Other assets, if the restriction is expected to expire or otherwise be resolved in more than one year. See " Note 14 - Supplemental Financial Information " for additional information on our restricted cash balances and " Note 11 - Commitments and Contingencies " for more information regarding our letters of credit. Property and Equipment All costs incurred in connection with the acquisition, construction, major enhancement and improvement of assets are capitalized, including allocations of interest incurred during periods that our drilling rigs are under construction or undergoing major enhancements and improvements. Costs incurred to place an asset into service are capitalized, including costs related to the initial mobilization of a newbuild drilling rig. Repair and maintenance costs are charged to contract drilling expenses in the period in which they are incurred. Upon the sale or retirement of assets, the related cost and accumulated depreciation are removed from the balance sheet, and the resulting gain or loss is included in Other, net in our Consolidated Statements of Operations. 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 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 . 86 We evaluate the carrying value of our property and equipment, primarily our drilling rigs, on a quarterly basis to identify events or changes in circumstances ("triggering events") that indicate that the carrying value of such rigs may not be recoverable. For property and equipment used in our operations, recoverability generally is determined by comparing the carrying value of an asset to the expected undiscounted future cash flows of the asset. If the carrying value of an asset is not recoverable, the amount of impairment loss is measured as the difference between the carrying value of the asset and its estimated fair value. Property and equipment classified as held for sale is recorded at the lower of its net book value or fair value less the estimated cost to sell. We recorded pre-tax, non-cash impairment losses related to long-lived assets of $ 27.3 million in the year ended December 31, 2025. See " Note 5 - Property and Equipment " for additional information on our impairment charges. Operating Revenues and Expenses See " Note 2 - Revenue from Contracts with Customers " for information on our accounting policies for revenue recognition and certain operating costs that are deferred and amortized over future periods. Income Taxes We conduct operations and earn income in numerous countries. Current income taxes are recognized for the amount of taxes payable or refundable based on the laws and income tax rates in the taxing jurisdictions in which operations are conducted and income is earned. Deferred tax assets and liabilities are recognized for the anticipated future tax effects of temporary differences between the financial statement basis and the tax basis of our assets and liabilities using the enacted tax rates in effect at year-end. A valuation allowance for deferred tax assets is recorded when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. We do not offset deferred tax assets and deferred tax liabilities attributable to different tax paying jurisdictions. We operate in certain jurisdictions where tax laws relating to the offshore drilling industry are not well developed and change frequently. Furthermore, we may enter into transactions with affiliates or employ other tax planning strategies that generally are subject to complex tax regulations. As a result of the foregoing, the tax liabilities and assets we recognize in our financial statements may differ from the tax positions taken, or expected to be taken, in our tax returns. Our tax positions are evaluated for recognition as unrecognized tax benefits using a more-likely-than-not threshold, and those requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. Interest and penalties relating to income taxes are included in Current income tax expense in our Consolidated Statements of Operations. Our drilling rigs frequently move from one taxing jurisdiction to another based on where they are contracted to perform drilling services. The movement of drilling rigs among taxing jurisdictions may involve a transfer of drilling rig ownership among our subsidiaries through an intercompany rig sale. The pre-tax profit resulting from an intercompany rig sale is eliminated from our consolidated financial statements, and the carrying value of a rig sold in an intercompany transaction remains at 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. The income tax effects resulting from intercompany rig sales are recognized in earnings in the period in which the sale occurs. 87 In some instances, we may determine that certain temporary differences will not result in a taxable or deductible amount in future years, as it is more-likely-than-not we will commence operations and depart from a given taxing jurisdiction without such temporary differences being recovered or settled. Under these circumstances, no future tax consequences are expected and no deferred taxes are recognized in connection with such operations. We evaluate these determinations on a periodic basis and, in the event our expectations relative to future tax consequences change, the applicable deferred taxes are recognized or derecognized. We do not provide deferred taxes on the undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely. Should we make a distribution from these subsidiaries in the form of dividends or otherwise, we may be subject to additional income taxes. See " Note 10 - Income Taxes " for additional information on our income taxes. Share-Based Compensation We sponsor share-based compensation plans that provide equity compensation to our key employees, officers and non-employee directors. Our 2021 Management Incentive Plan (the “MIP”) allows our board of directors to authorize equity-based grants to be settled in cash, shares or a combination of shares and cash. Compensation expense for time-based equity awards to be settled in shares is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). Compensation expense for performance awards is recognized over the requisite service period using the accelerated method and is reduced for forfeited awards in the period in which the forfeitures occur. For our performance awards that cliff vest and require the employee to render service through the vesting date, even though attainment of performance objectives might be earlier, our expense under the accelerated method would be a ratable expense over the vesting period. Equity-settled performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals. The estimated probable outcome of attainment of the specified performance goals is based primarily on relative performance over the requisite performance period. Any subsequent changes in this estimate as it relates to performance objectives are recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs, except in the case of objectives based on a market condition, such as our stock price. 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. See " Note 8 - Share Based Compensation " for additional information on our share-based compensation. Pension and Other Post-retirement Benefit Plans We measure our actuarially determined obligations and related costs for our defined benefit pension and other post-retirement plans, retiree life and medical supplemental plan benefits by applying assumptions, the most significant of which include long-term rate of return on plan assets, discount rates and mortality rates. For the long-term rate of return, we develop our assumptions regarding the expected rate of return on plan assets based on historical experience and projected long-term investment returns, and we weight the assumptions based on each plan's asset allocation. For the discount rate, we base our assumptions on a yield curve approach. Actual results may differ from the assumptions included in these calculations. If actuarial gains or losses exceed 10% of the greater of the plan assets or plan liabilities, we amortize such gains or losses into income over either the period of expected future service of active participants, or over the expected average remaining lifetime of all participants. We recognize gains or losses related to plan curtailments at the date the plan amendment or termination is adopted which may precede the effective date. See " Note 9 - Pension and Other Post-retirement Benefits " for additional information on our defined benefit pension and other post-retirement plans. 88 Fair Value Measurements We measure certain of our assets and liabilities based on a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy assigns the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities ("Level 1") and the lowest priority to unobservable inputs ("Level 3"). Level 2 measurements represent inputs that are observable for similar assets or liabilities, either directly or indirectly, other than quoted prices included within Level 1. See " Note 4 - Fair Value Measurements " for additional information on the fair value measurement of certain of our assets and liabilities. Noncontrolling Interests Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our Consolidated Balance Sheets, and net income attributable to noncontrolling interests is presented separately in our Consolidated Statements of Operations. All income attributable to noncontrolling interest was from continuing operations. Earnings Per Share 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, 2025, 2024 and 2023 (in millions): Years Ended December 31, 2025 2024 2023 Income attributable to our shares $ 982.8 $ 373.4 $ 865.4 Weighted average shares outstanding: Basic 70.6 72.1 74.1 Effect of stock equivalents 0.3 0.8 1.1 Diluted 70.9 72.9 75.2 EARNINGS PER SHARE Basic $ 13.92 $ 5.18 $ 11.68 Diluted $ 13.86 $ 5.12 $ 11.51 Anti-dilutive share awards totaling 217,000 , 160,000 and 147,000 were excluded from the computation of diluted EPS for the years ended December 31, 2025, 2024 and 2023, respectively. We have 5,470,801 warrants outstanding (the "Warrants") as of December 31, 2025 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 above. 89 New Accounting Pronouncements Recently adopted accounting pronouncements Improvements to Income Tax Disclosures - In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures ("Update 2023-09"), which expands income tax disclosure requirements to include additional information related to the rate reconciliation of our effective tax rates to statutory rates as well as additional disaggregation of taxes paid. The amendments in Update 2023-09 also remove disclosures related to certain unrecognized tax benefits and deferred taxes. Update 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied on a prospective basis, with an option to apply the guidance retrospectively. We adopted Update 2023-09 effective for this annual report for the year ended December 31, 2025 on a prospective basis. See " Note 10 - Income Taxes " for expanded disclosures around our income tax information. Measurement of Credit Losses for Accounts Receivable and Contract Assets - In July 2025, the FASB issued ASU No. 2025-05, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses for Accounts Receivable and Contract Assets ("Update 2025-05"), which allows public business entities to elect a practical expedient for current accounts receivables and contract assets to assume that current conditions as of the balance sheet date do not change for the remaining life of the asset. Update 2025-05 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted, and is required to be applied on a prospective basis. We have elected the practical expedient as allowed by Update 2025-05 effective January 1, 2026 and it has not had, nor is it expected to have, a material impact on the recognition or measurement of our credit losses within our condensed consolidated financial statements. 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. With the exception of the updated standards discussed above, there have been no accounting pronouncements issued and not yet effective that have significance, or potential significance, to our consolidated financial statements. 2. 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 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. We also may receive lump-sum fees or similar compensation generally for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well. 90 Our drilling contracts contain a lease component and we have elected to apply the practical expedient provided under Accounting Standards Codification ("ASC") 842 to not separate the lease and non-lease components and apply the revenue recognition guidance in ASU No. 2014-09, " Revenue from Contracts with Customers (Topic 606). " 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. Fixed consideration generally relates to activities such as mobilization, demobilization and capital upgrades of our rigs that are not distinct performance obligations within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and is recognized in the period when the services are performed. The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in ASU No. 2014-09, " Revenue from Contracts with Customers (Topic 606), " and have not disclosed the variable consideration related to our estimated future day rate revenues. The term of our drilling contracts is typically defined by either a specified period of time or the completion of a specified number of wells. The remaining duration of our drilling contracts based on those in place as of December 31, 2025 was between approximately 1 month and 5 years. Day Rate Drilling Revenue Our drilling contracts provide for payment on a day rate basis and include a rate schedule with higher rates for periods when the drilling rig is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The day rate invoiced to the customer is determined based on the varying rates applicable to specific activities performed on an hourly or other time increment basis. Day rate consideration is allocated to the distinct hourly or other time increment to which it relates within the contract term and is generally recognized consistent with the contractual rate invoiced for the services provided during the respective period. Invoices are typically issued to our customers on a monthly basis and payment terms on customer invoices are typically 30 days. Certain of our contracts contain performance incentives whereby we may earn a bonus based on pre-established performance criteria. Such incentives are generally based on our performance over individual monthly time periods or individual wells. Consideration related to a performance bonus is generally recognized in the specific time period to which the performance criteria was attributed. We may receive termination fees if certain drilling contracts are terminated by the customer prior to the end of the contractual term. Such compensation is recognized as revenue when our performance obligation is satisfied, the termination fee can be reasonably measured and collection is probable. Mobilization / Demobilization Revenue In connection with certain contracts, we receive lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. Fees received for the mobilization or demobilization of equipment and personnel are included in Operating revenues. The costs incurred in connection with the mobilization and demobilization of equipment and personnel are included in Contract drilling expenses. Mobilization fees received prior to commencement of drilling operations are recorded as a contract liability and amortized on a straight-line basis over the contract term. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term. In some cases, demobilization fees may be contingent upon the occurrence or non-occurrence of a future event. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term. 91 Capital Upgrade / Contract Preparation Revenue In connection with certain contracts, we receive lump-sum fees or similar compensation generally for requested capital upgrades to our drilling rigs or for other contract preparation work. Fees received for requested capital upgrades and other contract preparation work are recorded as a contract liability and amortized on a straight-line basis over the contract term to Operating revenues. Revenues Related to Reimbursable Expenses We generally receive reimbursements from our customers for purchases of supplies, equipment, personnel services and other services provided at their request. Such reimbursable revenue is variable and subject to uncertainty, as the amounts received and timing thereof are highly dependent on factors outside of our influence. Accordingly, reimbursable revenue is recognized during the period in which the corresponding goods and services are consumed once the uncertainty is resolved, which typically occurs when the related costs are incurred on behalf of a customer. We are generally considered a principal in such transactions and record the associated revenue at the gross amount billed to the customer within Operating revenues. Contract Assets and Liabilities Contract assets represent amounts recognized as revenue but for which the right to invoice the customer is dependent upon our future performance. Once the previously recognized revenue is invoiced, the corresponding contract asset, or a portion thereof, is transferred to accounts receivable. Contract liabilities generally represent fees received for mobilization, capital upgrades or in the case of our 50/50 unconsolidated joint venture with Saudi Aramco, represent the difference between the amounts billed under the bareboat charter arrangements and lease revenues earned. See “ Note 3 – Equity Method Investment in ARO " for additional details regarding our balances with ARO. Contract assets and liabilities are presented net on our Consolidated Balance Sheets on a contract-by-contract basis. Current contract assets and liabilities are included in Other current assets and Accrued liabilities and other, respectively, and noncurrent contract assets and liabilities are included in Other assets and Other liabilities, respectively, on our Consolidated Balance Sheets. The following table summarizes our contract assets and contract liabilities (in millions): December 31, 2025 2024 Current contract assets $ 4.3 $ 1.3 Noncurrent contract assets $ 12.8 $ 5.5 Current contract liabilities (deferred revenue) $ 87.7 $ 87.2 Noncurrent contract liabilities (deferred revenue) $ 63.2 $ 71.4 92 Changes in contract assets and liabilities during the period are as follows (in millions): Contract Assets Contract Liabilities Balance as of December 31, 2023 $ 6.0 $ 153.8 Revenue recognized in advance of right to bill customer 9.6 — Increase due to revenue deferred during the period — 213.8 Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance — ( 104.1 ) Decrease due to amortization of deferred revenue that was added during the period — ( 77.2 ) Decrease due to transfer to receivables and payables during the period ( 8.8 ) ( 27.7 ) Balance as of December 31, 2024 $ 6.8 $ 158.6 Revenue recognized in advance of right to bill customer 11.9 — Increase due to revenue deferred during the period — 107.7 Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance — ( 81.1 ) Decrease due to amortization of deferred revenue that was added during the period — ( 26.1 ) Decrease due to transfer to receivables and payables during the period ( 1.6 ) ( 8.2 ) Balance as of December 31, 2025 $ 17.1 $ 150.9 Deferred Contract Costs Costs incurred for upfront rig mobilizations and certain contract preparations are attributable to our future performance obligation under each respective drilling contract. These costs are deferred and amortized on a straight-line basis over the contract term. Demobilization costs are recognized as incurred upon contract completion. Costs associated with the mobilization of equipment and personnel 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 $ 36.6 million and $ 47.4 million as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025, 2024 and 2023, amortization of such costs totaled $ 39.6 million, $ 108.4 million and $ 92.9 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 $ 7.6 million and $ 12.9 million as of December 31, 2025 and 2024, respectively. During the years ended December 31, 2025, 2024 and 2023, amortization of such costs totaled $ 8.5 million, $ 10.1 million and $ 12.7 million, respectively. 93 Future Amortization of Contract Liabilities and Deferred Costs Our contract liabilities and deferred costs are amortized on a straight-line basis over the contract term or corresponding certification period to Operating revenues and Contract drilling expenses, respectively, with the exception of the contract liabilities related to our bareboat charter arrangements with ARO which would not be contractually payable until the end of the lease term or termination, if sooner. See " Note 3 - Equity Method Investment in ARO " for additional information on ARO and related arrangements. The table below reflects the expected future amortization of our contract liabilities and deferred costs recorded as of December 31, 2025. In the case of our contract liabilities related to our bareboat charter arrangements with ARO, the contract liability is not amortized and as such, the amount is reflected in the table below at the end of the current lease term. (In millions) 2026 2027 2028 2029 & Thereafter Total Amortization of contract liabilities $ 87.7 $ 39.5 $ 8.1 $ 15.6 $ 150.9 Amortization of deferred costs $ 37.7 $ 6.3 $ 0.2 $ — $ 44.2 3. EQUITY METHOD INVESTMENT IN ARO Background 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, 2025, ARO owned nine jackup rigs, had ordered two newbuild jackup rigs 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, 2025, the leased rigs were under long-term 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. The first two newbuild jackups, Kingdom 1 and Kingdom 2, were ordered in January 2020 and commenced operations in the fourth quarter of 2023 and the third quarter of 2024, respectively. ARO ordered the next two newbuild jackups, Kingdom 3 and Kingdom 4, in October 2024 and November 2025, respectively. In connection with these plans, we have a potential obligation to fund ARO for newbuild jackup rigs. See “ Note 11 - Commitments and Contingencies " for additional information. The joint venture partners agreed in the Shareholder Agreement that Saudi Aramco, as a customer, will provide drilling contracts to ARO in connection with the acquisition of the newbuild rigs. The initial contracts provided by Saudi Aramco for each of the newbuild rigs will be for an eight-year term. The day rate for the initial contracts for each newbuild rig is determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism. Summarized Financial Information The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the ARO-owned jackup rigs as well as the rigs leased from us. ARO's contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us. See additional discussion below regarding these related-party transactions. 94 Summarized financial information for ARO is as follows (in millions): Years Ended December 31, 2025 2024 2023 Revenues $ 571.0 $ 512.5 $ 496.6 Operating expenses Contract drilling expenses (exclusive of depreciation) 360.7 367.7 365.9 Loss on impairment (1) — 28.4 — Depreciation 114.9 89.2 65.9 General and administrative 28.8 23.7 22.2 Operating income 66.6 3.5 42.6 Other expense, net 59.5 55.5 31.8 Provision (benefit) for income taxes 15.7 ( 4.8 ) 8.3 Net income (loss) $ ( 8.6 ) $ ( 47.2 ) $ 2.5 (1) In connection with 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. December 31, 2025 2024 Cash and cash equivalents $ 99.3 $ 50.0 Other current assets 148.3 127.7 Non-current assets 1,266.1 1,291.1 Total assets $ 1,513.7 $ 1,468.8 Current liabilities $ 139.0 $ 146.6 Non-current liabilities 1,263.8 1,202.7 Total liabilities $ 1,402.8 $ 1,349.3 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; however, we are not the primary beneficiary and therefore do not consolidate ARO. Judgments regarding our level of influence over ARO included considering key factors such as each partner's ownership interest, representation on the board of managers of ARO and ability to direct activities that most significantly impact ARO's economic performance, including the ability to influence policy-making decisions. Our investment in ARO would be assessed for impairment if there are changes in facts and circumstances that indicate a loss in value may have occurred. If a loss were deemed to have occurred and this loss was determined to be other than temporary, the carrying value of our investment would be written down to fair value and an impairment recorded. 95 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 U.S. GAAP financial statements ("basis differences") at that date. 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 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): Years Ended December 31, 2025 2024 2023 50% interest in ARO net income (loss) $ ( 4.3 ) $ ( 23.6 ) $ 1.3 Amortization of basis differences 12.7 12.6 12.0 Equity in earnings (losses) of ARO $ 8.4 $ ( 11.0 ) $ 13.3 Related-Party Transactions Revenues recognized by us related to the Lease Agreements are included within Revenues (exclusive of reimbursable revenues) and revenues related to certain reimbursable expenses in accordance with the Lease Agreements are recognized within Reimbursable revenues in our Consolidated Statements of Operations and were as follows (in millions): Years Ended December 31, 2025 2024 2023 Revenues (exclusive of reimbursable revenues) from Lease Agreements $ 69.4 $ 52.6 $ 69.2 Reimbursable revenues from Lease Agreements 4.2 — — Total operating revenues from Lease Agreements $ 73.6 $ 52.6 $ 69.2 Our balances related to the ARO lease agreements were as follows (in millions): December 31, 2025 2024 Accounts receivable $ 47.8 $ 16.5 Contract assets (1) $ 2.0 $ — Contract liabilities (1) $ 16.3 $ 14.1 Accounts payable (1) $ 61.8 $ 43.1 (1) 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 assets and 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. In addition, the accounts payable balance includes amounts owed to ARO for certain reimbursable costs. 96 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 Secured Overnight Financing Rate ("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. The principal amount and discount of the Notes Receivable from ARO were as follows (in millions): December 31, 2025 2024 Principal amount (1) $ 400.7 $ 376.6 Discount ( 55.7 ) ( 80.4 ) Carrying value $ 345.0 $ 296.2 (1) The interest on the Notes Receivable from ARO for 2025 and 2024 of approximately $ 24.1 million and $ 24.6 million, respectively, were paid in kind in December 2025 and 2024 by increasing the principal balance of the Notes Receivable from ARO in each respective period. Interest income earned on the Notes Receivable from ARO was as follows (in millions): Years Ended December 31, 2025 2024 2023 Interest income $ 24.1 $ 24.6 $ 30.5 Non-cash amortization (1)(2) 24.7 40.0 28.3 Total interest income on the Notes Receivable from ARO $ 48.8 $ 64.6 $ 58.8 (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. (2) In 2024, we recognized $ 13.9 million of non-cash interest income attributable to a settlement agreement executed in June 2024 whereby $ 50.7 million of accounts payable due to ARO was net settled against a portion of the Notes Receivable from ARO. Maximum Exposure to Loss The following table summarizes the total assets and liabilities as reflected in our Consolidated Balance Sheets as well as our maximum exposure to loss related to ARO (in millions). Our maximum exposure to loss is limited to (1) our equity investment in ARO; (2) the carrying amount of our Notes Receivable from ARO; and (3) other receivables and contract assets from ARO, partially offset by contract liabilities as well as payables to ARO. December 31, 2025 2024 Total assets $ 516.6 $ 426.1 Less: total liabilities 78.1 57.2 Maximum exposure to loss $ 438.5 $ 368.9 97 4. FAIR VALUE MEASUREMENTS The carrying values and estimated fair values of certain of our financial instruments were as follows (in millions): December 31, 2025 December 31, 2024 Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value 2030 Second Lien Notes (1) $ 1,086.0 $ 1,144.9 $ 1,082.7 $ 1,112.7 Notes Receivable from ARO (2)(3) $ 345.0 $ 403.8 $ 296.2 $ 378.3 (1) The estimated fair value of the 2030 Second Lien Notes (as defined in " Note 6 - Debt ") 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 as of December 31, 2025, includes an increase of $ 24.1 million related to paid in kind interest, which was applied to the principal balance on December 31, 2025. 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, 2025 and 2024. 5. PROPERTY AND EQUIPMENT Property and equipment consisted of the following (in millions): December 31, 2025 2024 Drilling rigs and equipment $ 1,958.8 $ 1,660.9 Work-in-progress 590.3 607.6 Other 49.2 40.9 Total property and equipment, at cost $ 2,598.3 $ 2,309.4 While taking into account certain restrictions on the sales of assets under our Indenture dated as of April 19, 2023 (the "Indenture”) and within the Business Combination Agreement (as defined within " Note 15 - Subsequent Events "), as part of our strategy, we may act opportunistically from time to time to sell assets to enhance shareholder value. Additionally, we may consider retiring assets that no longer meet our standards for economic returns. Gains recognized on sales of assets are included in Other, net in the Consolidated Statements of Operations. 98 Assets Held for Sale In the fourth quarter of 2025, we approved a plan to retire VALARIS DPS-1, a semisubmersible rig within our Floaters segment. VALARIS DPS-1 was reclassified from Property and equipment, net to Assets held for sale on our Consolidated Balance Sheets during the fourth quarter of 2025. In connection with the held-for-sale classification of VALARIS DPS-1, we recognized a non-cash loss on impairment of $ 15.8 million during the year ended December 31, 2025, which represents the amount of carrying value that exceeded its estimated fair value less costs to sell. We estimated the fair value using a probability-weighted market approach based on recent transactions involving comparable assets, non-binding independent broker quotes and management assumptions, all of which are considered Level 3 inputs due to the level of estimation involved. Assets Sold Sale of VALARIS 102 and VALARIS 145 In the fourth quarter of 2025, we approved a plan to retire two rigs within our Jackups segment, VALARIS 102 and VALARIS 145 (collectively, the "Retired Jackups"). The Retired Jackups were sold for recycling and permanently removed from service in December 2025 for total cash proceeds of $ 0.5 million. In connection with the sale of the Retired Jackups, we recognized a non-cash loss on impairment of $ 3.7 million, which represents the amount of carrying value that exceeded the disposal group's aggregate fair value less costs to sell. We estimated the fair value using the contractual sales price within the executed sale agreement for the Retired Jackups, which is considered a Level 2 input. Sale of VALARIS 247 During the year ended December 31, 2025, we sold VALARIS 247, a rig within our Jackups segment, and collected cash proceeds of approximately $ 108.0 million. We recognized a pre-tax gain of $ 88.4 million in connection with the sale. Sale of Retired Semis In the first quarter of 2025, we approved a plan to retire three semisubmersible rigs within our Floaters segment, VALARIS DPS-3, VALARIS DPS-5, and VALARIS DPS-6 (collectively, the “Retired Semis”). In April 2025, the Retired Semis were sold for recycling and permanently removed from service for total cash proceeds of $ 10.0 million. In connection with the retirement of the Retired Semis, we recognized a non-cash loss on impairment of $ 7.8 million, which represents the amount of carrying value that exceeded the disposal group's aggregate fair value less costs to sell. We estimated the fair value using a market approach based on the preliminary sale agreement for the Retired Semis, which is considered a Level 3 input due to the level of estimation involved since the sale had not yet been completed at the time of our analysis. Sale of VALARIS 75 In the first quarter of 2025, VALARIS 75, a rig within our Jackups segment which had an immaterial net book value, was sold resulting in a pre-tax gain on sale of $ 23.0 million. Of the proceeds, $ 14.0 million was collected upon closing, $ 5.0 million was collected in January 2026 and the remaining $ 5.0 million is expected to be received on the second anniversary of the closing. 99 Sale of Angola Office Building During the year ended December 31, 2025, we sold an office building in Angola for cash proceeds of $ 5.2 million, resulting in a pre-tax gain of $ 4.0 million. Of the proceeds, approximately $ 2.5 million was collected in 2024 and $ 2.7 million was collected in 2025. Sale of VALARIS 54 During the year ended December 31, 2023, we recognized a pre-tax gain of $ 27.3 million for the sale of VALARIS 54. 6. DEBT 2028 First Lien Notes On April 3, 2023, the Company issued a notice of conditional redemption to the holders of our Senior Secured First Lien Notes due 2028 (the "2028 First Lien Notes") at a redemption price equal to 104.0 % of the aggregate $ 550.0 million principal amount of the 2028 First Lien Notes plus accrued and unpaid interest to, but not including, the redemption date (the “Redemption Price”). On April 19, 2023, in connection with the issuance of our 2030 Second Lien Notes, as discussed below, the Company discharged its obligations under the indenture governing the 2028 First Lien Notes and deposited the Redemption Price with Wilmington Savings Fund Society, as trustee under such indenture. The 2028 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 Consolidated Statements of Operations for the year ended December 31, 2023. 2030 Second Lien Notes On April 19, 2023, the Company and Valaris Finance Company LLC (“Valaris Finance”), a wholly-owned subsidiary, issued and sold $ 700.0 million aggregate principal amount of Second Lien Notes (the "Initial Second Lien Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of 1933, as amended (the “Securities Act”). The Initial Second Lien Notes were issued at par for net proceeds of $ 681.4 million, after deducting the initial purchasers’ discount and offering expenses. A portion of the proceeds were used to fund the redemption of all of the outstanding 2028 First Lien Notes as discussed above. 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. The net proceeds were approximately $ 396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $ 11.4 million. The Initial Second Lien Notes and the Additional Notes (together, the "2030 Second Lien Notes") were issued under the Indenture, and mature on April 30, 2030. The 2030 Second Lien Notes bear an interest rate of 8.375 % per annum with an effective interest rate of 8.76 %. Interest is payable semi-annually in arrears on April 30 and October 30 of each year, beginning on October 30, 2023. The 2030 Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Guarantors and by each of the Company’s future restricted subsidiaries (other than Valaris Finance) that guarantees any debt of the Issuers or any guarantor under certain future debt in an aggregate principal amount in excess of a certain amount. The Second Lien Notes and the related guarantees are secured on a second-priority basis by the Collateral (as defined below). 100 On or after April 30, 2026, the Issuers may, at their option, redeem all or any portion of the 2030 Second Lien Notes, at once or over time, at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, but not including, the redemption date. The following prices are for 2030 Second Lien Notes redeemed during the 12-month period commencing on April 30 of the years set forth below, and are expressed as percentages of principal amount: Redemption Year Price 2026 104.188 % 2027 102.094 % 2028 and thereafter 100.000 % At any time prior to April 30, 2026, the Issuers may, on any one or more occasions, redeem up to 40.0 % of the aggregate principal amount of the 2030 Second Lien Notes issued under the Indenture (including any additional Second Lien Notes issued in the future) with an amount equal to or less than the net cash proceeds of certain equity offerings, at a redemption price equal to 108.375 % of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to but not including, the redemption date. In addition, at any time prior to April 30, 2026, the Issuers may redeem up to 10.0 % of the aggregate principal amount of the 2030 Second Lien Notes during any twelve-month period at a redemption price equal to 103.0 % of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date. At any time prior to April 30, 2026, the Issuers may redeem some or all of the 2030 Second Lien Notes at a price equal to 100.0 % of the principal amount of the 2030 Second Lien Notes redeemed, plus accrued and unpaid interest, if any, to, but not including, the redemption date, plus a “make-whole” premium. Upon the occurrence of certain Change of Control Triggering Event (as defined in the Indenture), the Issuers may be required to make an offer to repurchase all of the 2030 Second Lien Notes then outstanding at a price equal to 101.0 % of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the repurchase date. The Indenture contains covenants that, among other things, restrict the Company’s ability and the ability of certain of its subsidiaries to: (i) incur additional debt and issue certain preferred stock; (ii) incur or create liens; (iii) make certain distributions, investments and other restricted payments; (iv) sell or otherwise dispose of certain assets; (v) engage in certain transactions with affiliates; and (vi) merge, consolidate, amalgamate or sell, transfer, lease or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to important exceptions and qualifications. In addition, many of these covenants will be suspended with respect to the 2030 Second Lien Notes during any time that the 2030 Second Lien Notes have investment grade ratings from at least two rating agencies and no default with respect to the 2030 Second Lien Notes has occurred and is continuing. As of December 31, 2025, we were in compliance in all material respects with our covenants under the Indenture. 2028 Credit Agreement On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “2028 Credit Agreement”). The 2028 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 2028 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 2028 Credit Agreement, and the lenders have a first priority lien on the assets securing the 2028 Credit Agreement. The commitments under the 2028 Credit Agreement became available to be borrowed on April 19, 2023 (the "Availability Date"). 101 The 2028 Credit Agreement and the related guarantees are secured on a first-priority basis, subject to permitted liens, by (a) first preferred ship mortgages over each vessel owned by us and the Guarantors as of the Availability Date, with certain exceptions (the “Collateral Vessels”); (b) first priority assignments of certain insurances and requisition compensation in respect of the Collateral Vessels; (c) first priority pledges of all equity interests in our subsidiaries that own Collateral Vessels and certain subsidiaries that hold equity interests in entities that own vessels (the “Collateral Rig Owners”); (d) first priority assignments of earnings of the Collateral Vessels from the Collateral Rig Owners; (e) any vessels and other assets of ours and the Guarantors that are pledged, at our option, to secure the 2028 Credit Agreement; and (f) all proceeds thereof (the "Collateral"). Amounts borrowed under the 2028 Credit Agreement are subject to an interest rate per annum equal to, at our option, either (a) a base rate determined as the greatest of (i) a prime rate, (ii) the federal funds rate plus 0.5 % and (iii) Term SOFR (as defined in the 2028 Credit Agreement) for a one month interest period plus 1.1 % (such base rate to be subject to a 1 % floor) or (b) Term SOFR plus 0.10 % (subject to a 0 % floor), plus, in each case of clauses (a) and (b) above, an applicable margin ranging from 1.50 % to 3.00 % and 2.50 % to 4.00 %, respectively, based on the credit ratings that are one notch higher than the corporate family ratings provided by Standard & Poor’s Financial Services LLC (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) with respect to Valaris Limited. Additionally, we are required to pay a quarterly commitment fee to the lenders under the 2028 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 2028 Credit Agreement, we are required to pay a letter of credit fee equal to the applicable margin in effect for Term SOFR loans and a fronting fee in an amount to be mutually agreed between us and the issuer of such letter of credit. We are also required to pay customary agency fees in respect of the 2028 Credit Agreement. The 2028 Credit Agreement contains various covenants that limit, among other things, our and our restricted subsidiaries’ ability to: incur indebtedness; grant liens; dispose of certain assets; make certain acquisitions and investments; redeem or prepay other debt or make other restricted payments such as distributions to shareholders; enter into transactions with affiliates; enter into sale-leaseback transactions; and enter into a merger, amalgamation, consolidation or sale of assets. Further, the 2028 Credit Agreement contains financial covenants that require us to maintain (i) a minimum book value of equity to total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount of liquidity. As of December 31, 2025, we were in compliance in all material respects with our covenants under the 2028 Credit Agreement. We had no amounts outstanding under the 2028 Credit Agreement as of December 31, 2025. Interest Expense Interest expense, net totaled $ 98.8 million, $ 84.8 million and $ 68.9 million for the years ended December 31, 2025, 2024 and 2023 which was net of capitalized interest of $ 1.9 million, $ 15.9 million and $ 5.6 million, respectively, for capital projects. Amortization of debt premium and issuance costs was $ 6.6 million, $ 6.6 million and $ 5.0 million for the years ended December 31, 2025, 2024 and 2023, respectively, and is included within Interest expense, net in the Consolidated Statements of Operations. 102 7. SHAREHOLDERS' EQUITY Activity in our various shareholders' equity accounts for the years ended December 31, 2025, 2024 and 2023 were as follows (in millions): Shares Issued Par Value Additional Paid-in Capital Warrants Retained Earnings AOCI Treasury Shares Non-controlling Interest 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 Share-based compensation cost — — 27.3 — — — — Shares issued under share-based compensation plans, net 0.2 — — — — — — — Repurchase of Common Shares — — — — — — ( 200.1 ) — Net changes in pension and other postretirement benefits — — — — — 10.8 — — Shares withheld for taxes on vesting of share-based awards — — ( 5.4 ) — — — — — 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 Net income (loss) — — — — 982.8 — — ( 3.7 ) Share-based compensation cost — — 25.2 — — — — — Shares issued under share-based compensation plans, net 0.2 — — — — — — — Repurchase of Common Shares — — — — — — ( 100.0 ) — Net changes in pension and other postretirement benefits — — — — — 24.5 — — Shares withheld for taxes on vesting of share-based awards — — ( 3.6 ) — — — — — Foreign currency translation adjustments — — — — — 2.2 — — BALANCE, December 31, 2025 76.4 0.8 1,134.9 16.4 2,381.7 60.9 ( 425.1 ) 2.1 (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. subsidiary. 103 Share Repurchase Program 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 repurchases, aggregate cost and the average per share price (in millions, except average per share price): Years Ended December 31, 2025 2024 2023 Shares repurchased 2.0 2.2 3.0 Aggregate cost $ 100.0 $ 125.0 $ 200.0 Average price per share $ 49.78 $ 56.11 $ 66.77 As of December 31, 2025, we had approximately $ 175.0 million available for share repurchases pursuant to the Share Repurchase Program, subject to certain restrictions provided within the Business Combination Agreement (as defined within " Note 15 - Subsequent Events "). 8. SHARE BASED COMPENSATION 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, 2025, there were 6.2 million shares available for issuance under the MIP. Time-Based Share Awards Under the Company's MIP, time-based restricted stock unit awards have been granted to certain employees and senior officers which generally vest ratably over a three-year period from the date of grant. The grant-date fair value per share for these time-based restricted stock awards is equal to the closing price of the Company's stock on the grant date. Non-employee directors receive an annual grant of time-based restricted awards which vest in full on the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant. Non-employee directors are permitted to elect to receive deferred share awards which can be settled and delivered on the six-month anniversary following the termination of the director's service or a specific pre-determined date. Our time-based share awards do not have voting or participating rights as the dividend equivalent provided for in the award agreement is forfeitable (except in certain limited circumstances) and further our debt agreements limit our ability to pay dividends and none have been declared. Compensation expense for share awards is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). Our compensation cost is reduced for forfeited awards in the period in which the forfeitures occur. 104 Compensation expense for our time-based share awards is allocated to Contract drilling expenses (exclusive of depreciation and reimbursable expenses) and General and administrative expenses within our Consolidated Statements 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, 2025 2024 2023 Contract drilling expenses (exclusive of depreciation and reimbursable expenses) $ 9.3 $ 8.8 $ 6.8 General and administrative 8.6 8.7 9.0 17.9 17.5 15.8 Tax benefit ( 0.5 ) ( 1.1 ) ( 1.6 ) Total $ 17.4 $ 16.4 $ 14.2 As of December 31, 2025, there was $ 28.3 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 table summarizes the value of time-based share awards granted and vested: Years Ended December 31, 2025 2024 2023 Weighted-average grant date fair value of share awards granted during the period (per share) $ 43.58 $ 69.89 $ 63.22 Total fair value of share awards vested during the period (in millions) $ 13.4 $ 30.0 $ 25.2 The following table summarizes time-based share awards activity for the year ended December 31, 2025 (shares in thousands): Share Awards Awards Weighted-Average Grant Date Fair Value Share awards as of December 31, 2024 597 $ 60.58 Granted 494 $ 43.58 Vested ( 307 ) $ 56.80 Forfeited ( 3 ) $ 58.00 Share awards as of December 31, 2025 781 $ 51.32 Performance Awards Under the Company's MIP, performance awards may be issued to our senior officers. Performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals. 105 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"). In 2023, incremental awards based on the Strategic Goal Objective were granted. 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, 2024 and 2025 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, subject to approval by the Compensation Committee of the board of directors following the end of each respective performance period. The estimated probable outcome of attainment of the specified performance goals is based primarily on relative performance over the requisite performance period. Any subsequent changes in this estimate as it relates to the Performance-Based Objectives are recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs. Compensation cost for the Market-Based Objectives is recognized as long as the requisite service period is completed and will not be reversed even if the Market-Based Objectives are never satisfied. Compensation expense for performance awards is recognized over the requisite service period using the accelerated method and is reduced for forfeited awards in the period in which the forfeitures occur. The fair value of the 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 in the years ended December 31, 2025, 2024 and 2023: Years Ended December 31, 2025 2024 2023 Expected price volatility 48 % 49 % 60 % Expected dividend yield — — — Risk-free interest rate 3.90 % 4.31 % 4.32 % The expected price volatility assumption is estimated using market data for certain peer companies during periods in which our own trading history is limited. As our trading history increases, it will bear greater weight in determining our expected price volatility assumption. The weighted average grant-date fair values of performance awards granted during the years ended December 31, 2025, 2024 and 2023 were $ 28.92 , $ 63.05 and $ 62.09 , respectively. 106 The following table summarizes the performance award activity for the year ended December 31, 2025 (shares in thousands): Awards (2) Weighted Average Grant Date Fair Value Price (2) Balance as of December 31, 2024 271 $ 61.69 Granted - Market-Based Objectives (1) 236 $ 28.92 Balance as of December 31, 2025 507 $ 46.42 (1) The number of awards granted reflects the shares that would be granted if the target level of performance were to be achieved. The number of shares actually issued after considering forfeitures may range from zero to 472,000 . (2) There were no forfeited or vested shares for the year ended December 31, 2025. During the years ended December 31, 2025, 2024 and 2023, we recognized $ 7.7 million, $ 10.6 million and $ 11.7 million of compensation expense for performance awards, respectively, which was included in General and administrative expenses in our Consolidated Statements of Operations. As of December 31, 2025, there was $ 8.4 million of total estimated unrecognized compensation cost related to performance awards, which has a weighted-average remaining vesting period of 1.6 years. 9. PENSION AND OTHER POST-RETIREMENT BENEFITS We have defined-benefit pension plans and post-retirement health and life insurance plans that provide benefits upon retirement for certain full-time employees. The defined-benefit pension plans include: (1) a pension plan which was amended in 2018 to freeze any future benefit accrual whereby eligible employees no longer receive pay credits in the plan and newly hired employees are not eligible to participate; and (2) supplemental executive retirement plans, which are also frozen, that provided eligible employees an opportunity to defer a portion of their compensation for use after retirement. Additionally, we have frozen retiree life and medical supplemental plans which provide post-retirement health and life insurance benefits. 107 The following table presents the changes in benefit obligations and plan assets for the years ended December 31, 2025 and 2024 and the funded status and weighted-average assumptions used to determine the benefit obligation at the measurement date (dollars in millions): Years Ended December 31, 2025 2024 Pension Benefits Other Benefits Total Pension Benefits Other Benefits Total Projected benefit obligation: BALANCE at the beginning of the period $ 571.3 $ 10.2 $ 581.5 $ 606.5 $ 11.0 $ 617.5 Interest cost 30.5 0.5 31.0 29.3 0.5 29.8 Actuarial loss (gain) 5.3 — 5.3 ( 22.1 ) ( 0.7 ) ( 22.8 ) Benefits paid ( 42.1 ) ( 0.6 ) ( 42.7 ) ( 42.4 ) ( 0.6 ) ( 43.0 ) BALANCE at the end of the period $ 565.0 $ 10.1 $ 575.1 $ 571.3 $ 10.2 $ 581.5 Plan assets Fair value, at the beginning of the period $ 469.9 $ — $ 469.9 $ 471.2 $ — $ 471.2 Actual return 60.1 — 60.1 20.2 — 20.2 Employer contributions 16.0 — 16.0 20.9 — 20.9 Benefits paid ( 42.1 ) — ( 42.1 ) ( 42.4 ) — ( 42.4 ) Fair value, at the end of the period $ 503.9 $ — $ 503.9 $ 469.9 $ — $ 469.9 Net benefit liabilities $ 61.1 $ 10.1 $ 71.2 $ 101.4 $ 10.2 $ 111.6 Amounts recognized in Consolidated Balance Sheet: Accrued liabilities $ ( 2.0 ) $ ( 0.9 ) $ ( 2.9 ) $ ( 4.1 ) $ ( 1.0 ) $ ( 5.1 ) Other liabilities (long-term) ( 59.1 ) ( 9.2 ) ( 68.3 ) ( 97.3 ) ( 9.2 ) ( 106.5 ) Net benefit liabilities $ ( 61.1 ) $ ( 10.1 ) $ ( 71.2 ) $ ( 101.4 ) $ ( 10.2 ) $ ( 111.6 ) Accumulated contributions less than net periodic benefit cost $ ( 114.1 ) $ ( 18.0 ) $ ( 132.1 ) $ ( 129.5 ) $ ( 18.5 ) $ ( 148.0 ) Amounts not yet reflected in net periodic benefit cost: Actuarial gain 53.2 7.9 61.1 28.3 8.3 36.6 Prior service cost ( 0.2 ) — ( 0.2 ) ( 0.2 ) — ( 0.2 ) Total accumulated other comprehensive income $ 53.0 $ 7.9 $ 60.9 $ 28.1 $ 8.3 $ 36.4 Net benefit liabilities $ ( 61.1 ) $ ( 10.1 ) $ ( 71.2 ) $ ( 101.4 ) $ ( 10.2 ) $ ( 111.6 ) Weighted-average assumptions: Discount rate 5.34 % 5.28 % 5.54 % 5.52 % Cash balance interest credit rate 3.72 % N/A 3.26 % N/A The projected benefit obligations for pension benefits in the preceding table reflect the actuarial present value of benefits accrued based on services rendered to date assuming the actual or assumed expected date of separation for retirement. The accumulated benefit obligation is equal to the projected benefit obligation at December 31, 2025 and 2024 as the pension and other post-retirement benefit plans were frozen in prior years. 108 The components of net periodic pension, retiree medical (income) loss and the weighted-average assumptions used to determine such amounts were as follows (dollars in millions): Years Ended December 31, 2025 2024 2023 Interest cost $ 31.0 $ 29.8 $ 31.2 Expected return on plan assets ( 29.4 ) ( 31.6 ) ( 31.4 ) Amortization of net gain ( 0.7 ) ( 0.6 ) ( 0.7 ) Net periodic pension and retiree medical (income) loss (1) $ 0.9 $ ( 2.4 ) $ ( 0.9 ) Discount rate 5.54 % 4.97 % 5.21 % Expected return on assets 6.44 % 6.88 % 7.10 % Cash balance interest credit rate 3.26 % 3.26 % 3.23 % (1) All components of Net periodic pension and retiree medical (income) loss are included in Other, net, in our Consolidated Statements of Operations. We currently expect to contribute approximately $ 19.2 million to our pension plans and to directly pay other post-retirement benefits of approximately $ 0.9 million in 2026. These amounts represent the minimum contributions we are required to make under relevant statutes. We do not expect to make contributions in excess of the minimum required amounts. The pension plans' investment objectives for fund assets are to: achieve a rate of return such that contributions are minimized and future assets are available to fund liabilities, maintain liquidity sufficient to pay benefits when due, diversify among asset classes so that assets earn a reasonable return with an acceptable level of risk and gradually de-risk the plan by increasing the allocation of investments which track the overall liabilities of the plan as the ratio of assets to liabilities improves and economic conditions warrant. The plans employ several active managers with proven long-term records in their specific investment discipline. 109 Target allocations among asset categories as of December 31, 2025, and the fair value of each category of plan assets as of December 31, 2025 and 2024, 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, 2025 2024 Target range (1) Amount Amount Equities: Global equity fund (2) 41 % to 47 % $ 217.3 $ — U.S. equity: U.S. large cap — 93.3 U.S. small/mid cap — 24.6 Global Low Volatility Equity — 34.1 Non-U.S. equity: International all cap — 42.7 International small cap — 18.9 Emerging markets — 34.1 Real estate equities 4 % to 8 % 36.5 36.5 Fixed income: 45 % to 55 % Long-term corporate bonds 160.2 102.8 Long-term government bonds 32.0 — U.S. Treasury STRIPS 52.9 76.7 Cash and equivalents $ 0 - $ 5.0 5.0 6.2 Total $ 503.9 $ 469.9 (1) Our investment policy only sets allocation target ranges for general asset classes and not specific investment types. (2) During 2025, the assets in the various equity asset categories were consolidated into a single Global equity fund. All of our investments, other than cash and cash equivalents, are measured at fair value using the net asset value per share (or its equivalent) practical expedient and therefore are not categorized in the fair value hierarchy. Cash and cash equivalents are considered Level 1 as they were valued at cost, which approximates fair value. Assets in the Global equity fund include a broad range of global equity securities for which the portfolio may be a full replication or a sampling of the Morgan Stanley Capital International All Country World Index and may be held through a commingled or institutional mutual fund. Assets in the U.S. equities category include investments in common and preferred stocks (and equivalents such as American Depository Receipts and convertible bonds) and may be held through separate accounts, commingled funds or an institutional mutual fund. Assets in the global low volatility equities include investments in a broad range of developed market global equity securities and may be held through a commingled or institutional mutual fund. Assets in the international equities category include investments in a broad range of international equity securities, including both developed and emerging markets, and may be held through a commingled or institutional mutual fund. The real estate category includes investments in pooled and commingled funds whose objectives are diversified equity investments in income-producing properties. 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. government, corporate, mortgage- and asset-backed securities and Yankee bonds and should be rated investment grade or above. Investments in this category should have an average investment rating of “A” or better. 110 To develop the expected long-term rate of return on assets assumption, we considered the current level of expected returns on risk-free investments (primarily government bonds), the historical level of the risk premium associated with the plan's other asset classes and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based upon the current asset allocation to develop the expected long-term rate of return on assets assumption for the plan, which increased to 6.62 % at December 31, 2025 from 6.44 % at December 31, 2024. Estimated future annual benefit payments from plan assets are presented below. Such amounts are based on existing benefit formulas and include the effect of future service (in millions): Pension Benefits Other Post-Retirement Benefits Years ending December 31, 2026 $ 41.0 $ 0.9 2027 40.7 0.9 2028 40.4 0.9 2029 40.2 0.8 2030 39.7 0.8 2031 through 2035 189.9 3.6 Savings Plans 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. Employee contributions have been matched up to a maximum of 6 % since the beginning of 2025 and were matched up to a maximum of 5 % in 2024 and 2023. These matching contributions totaled $ 19.2 million, $ 15.6 million and $ 13.2 million for the years ended December 31, 2025, 2024 and 2023, respectively. 10. INCOME TAXES 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. During the fourth quarter of 2025, we adopted Update 2023-09 (see " Note 1 - Description of the Business and Summary of Significant Accounting Policies " for further discussion on Update 2023-09) on a prospective basis. As such, we have updated income tax disclosure presentations as of and for the year ended December 31, 2025 in order to comply with Update 2023-09, but have not retrospectively applied these presentational changes to any of the prior periods presented. This adoption of Update 2023-09 resulted in presentational differences of our income tax disclosures and did not result in a change to the calculations of our income before income taxes, current tax expense, deferred tax expense or effective tax rates for the year ended December 31, 2025. 111 Our income before income taxes and benefit for income taxes for the year ended December 31, 2025 are summarized as follows (in millions): Income (loss) before income taxes: Bermuda $ ( 107.4 ) Foreign U.S. 42.2 Other foreign 617.5 Total foreign 659.7 Total income before income taxes $ 552.3 Provision (benefit) for income taxes: Current tax expense: Bermuda federal $ — Bermuda state — Foreign U.S. 13.7 Other foreign 74.6 Total foreign 88.3 Total current tax expense $ 88.3 Deferred tax benefit: Bermuda federal $ — Bermuda state — Foreign U.S. ( 1.7 ) Other foreign ( 513.4 ) Total foreign ( 515.1 ) Total deferred tax benefit $ ( 515.1 ) Total provision (benefit) for income taxes: Bermuda federal $ — Bermuda state — Foreign U.S. 12.0 Other foreign ( 438.8 ) Total foreign ( 426.8 ) Total benefit for income taxes $ ( 426.8 ) 112 Our income before income taxes and provision for income taxes for the years ended December 31, 2024 and 2023 are summarized as follows (in millions): Years Ended December 31, 2024 2023 Income before income taxes: U.S. $ 49.8 $ 30.7 Non-U.S. 320.4 53.5 $ 370.2 $ 84.2 Current income tax expense (benefit): U.S. $ 11.5 $ ( 30.3 ) Non-U.S. ( 16.9 ) 34.1 ( 5.4 ) 3.8 Deferred income tax expense (benefit): U.S. ( 4.4 ) 1.9 Non-U.S. 10.2 ( 788.3 ) 5.8 ( 786.4 ) Total income tax expense (benefit) $ 0.4 $ ( 782.6 ) Effective Tax Rate 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. In some jurisdictions, tax liabilities are based on gross revenues, statutory deemed profits or other factors, rather than on net income, and our subsidiaries are frequently unable to realize tax benefits when they operate at a loss. Accordingly, during periods of declining profitability, our income tax expense may not decline proportionally with income, which could result in higher effective income tax rates. Furthermore, we will continue to incur income tax expense in periods in which we operate at a loss. Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in profitability levels and changes in tax laws, our annual effective income tax rate may vary substantially from one reporting period to another. 113 As a Bermuda-domiciled company, Valaris Limited is subject to a 15.0 % Bermuda corporate income tax, which became effective on January 1, 2025. In addition, we are subject to other income taxes, including those in the U.S. and in various foreign jurisdictions. Our consolidated effective tax rate reconciliation for the year ended December 31, 2025 is summarized below (in millions, except percentages): Amount % Bermuda federal statutory rate $ 82.8 15.0 % Changes in valuation allowances 16.1 2.9 % Foreign tax effects Angola Withholding taxes 16.5 3.0 % Changes in valuation allowances ( 8.0 ) ( 1.4 ) % Other 8.4 1.5 % Brazil Tax rate differential 11.5 2.1 % Other ( 3.1 ) ( 0.6 ) % British Virgin Islands Tax rate differential 6.3 1.1 % Luxembourg Changes in valuation allowances ( 1,092.2 ) ( 197.8 ) % Prior period tax matters ( 54.8 ) ( 9.9 ) % Cross border income inclusion 9.5 1.7 % State and local tax rate differential 9.2 1.7 % Other 4.8 0.9 % Saudi Arabia Withholding taxes 6.3 1.1 % Other 2.8 0.5 % Switzerland Changes in valuation allowances 383.9 69.5 % Prior period tax matters 156.2 28.3 % Tax rate differential ( 25.2 ) ( 4.6 ) % State and local tax rate differential 13.4 2.4 % Global minimum taxes 5.5 1.0 % Other ( 1.4 ) ( 0.3 ) % Trinidad Tax rate differential 6.6 1.2 % Changes in valuation allowances ( 5.2 ) ( 0.9 ) % Other ( 1.5 ) ( 0.3 ) % United Kingdom Changes in valuation allowances 10.0 1.8 % United States Changes in valuation allowances ( 17.2 ) ( 3.1 ) % Expiration of foreign tax credits 16.3 3.0 % Other 6.6 1.2 % Other foreign jurisdictions (1) 12.8 2.3 % Changes in unrecognized tax benefits ( 3.7 ) ( 0.6 ) % Total $ ( 426.8 ) ( 77.3 ) % (1) Other foreign jurisdictions includes the aggregated remaining foreign jurisdictions for which there were no foreign tax effects reconciling items which exceeded the 5% disclosure threshold. 114 Our consolidated effective tax rate reconciliations for the years ended December 31, 2024 and 2023 are summarized below (in millions, except percentages): Years Ended December 31, 2024 2023 Bermuda statutory income tax rate — % — % Non-Bermuda taxes 25.6 74.0 Valuation allowance ( 2.3 ) ( 953.6 ) Resolution of prior year items ( 23.2 ) ( 49.9 ) Effective income tax rate 0.1 % ( 929.5 ) % Our 2025 consolidated effective income tax rate includes discrete tax expense of $ 153.7 million, primarily attributable to the establishment of a valuation allowance in connection with the retirement of the Retired Semis, partially offset by discrete tax benefit attributable to rig impairments. Our 2024 consolidated effective income tax rate includes discrete tax benefit of $ 85.8 million primarily attributable to changes 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. Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the years ended December 31, 2025, 2024 and 2023 were ( 92.2 )%, 21.8 % and ( 872.3 )%, 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. Deferred Taxes The components of deferred income tax assets and liabilities are summarized as follows (in millions): December 31, 2025 2024 Deferred tax assets : Net operating loss carryforwards $ 3,103.9 $ 3,071.8 Property and equipment 1,397.4 1,555.4 Interest limitation carryforwards 112.9 126.0 Employee benefits, including share-based compensation 28.0 36.6 Foreign tax credits 0.2 16.4 Other 17.9 21.9 Valuation allowance ( 3,292.3 ) ( 3,971.3 ) Total deferred tax assets 1,368.0 856.8 Deferred tax liabilities ( 26.9 ) ( 26.7 ) Net deferred tax asset $ 1,341.1 $ 830.1 The realization of substantially all of our deferred tax assets is dependent upon generating sufficient taxable income during future periods in various jurisdictions in which we operate. We rely on projected taxable income from both current and future drilling contracts for the recognition of deferred tax assets. Realization of certain of our deferred tax assets is not assured. We recognize a valuation allowance for deferred tax assets when it is more-likely-than-not that the benefit from the deferred tax asset will not be realized. The amount of deferred tax assets considered realizable could increase or decrease in the near-term if our estimates of future taxable income change. 115 As of December 31, 2025, we had gross deferred tax assets of $ 3.1 billion relating to $ 13.6 billion of net operating loss ("NOL") carryforwards and $ 112.9 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 $ 8.4 billion that do not expire and $ 5.2 billion that will expire, if not utilized, between 2026 and 2042 . Deferred tax assets for NOL carryforwards as of December 31, 2025 include $ 2.3 billion, $ 614.9 million, $ 75.7 million, $ 58.7 million, $ 27.2 million and $ 21.2 million pertaining to NOL carryforwards in Luxembourg, the U.S., the U.K., Bermuda, Switzerland and Trinidad, respectively. Interest limitation carryforwards generally do not expire. Additionally, as a result of our emergence from bankruptcy, the utilization of certain U.S. deferred tax assets including, but not limited to, NOL carryforwards and interest limitation carryforwards is limited to $ 0.5 million annually. We had a $ 3.3 billion and a $ 4.0 billion valuation allowance as of December 31, 2025 and 2024, 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, 2025, 2024 and 2023, we recognized a deferred tax benefit of $ 523.2 million, $ 8.5 million and $ 802.9 million, respectively, associated with changes in deferred tax asset valuation allowances. The deferred tax benefit in 2025 includes a $ 1.1 billion reduction of our valuation allowance in Luxembourg, which was partially offset by a $ 383.9 million increase to the valuation allowance in Switzerland, driven in part by the establishment of a $ 168.8 million valuation allowance resulting from a change in estimated future taxable income in a certain operating jurisdiction in connection with the retirement of the Retired Semis. The deferred tax benefit in 2023 primarily related to a $ 799.5 million reduction of our valuation allowance. The net reductions to the valuation allowances for 2025 and 2023 were due to changes in the balances 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 these portions of the valuation allowance on deferred tax assets were 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. The timing and amount of future valuation allowance reductions are subject to future levels of contracting and profitability achieved. Unrecognized Tax Benefits Our tax positions are evaluated for recognition using a more-likely-than-not threshold, and those tax positions requiring recognition are measured as the largest amount of tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of December 31, 2025, we had $ 94.8 million of unrecognized tax benefits, of which $ 88.2 million was included in Other liabilities on our Consolidated Balance Sheet, and $ 6.6 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, 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, $ 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. 116 If recognized, $ 88.2 million of the $ 94.8 million unrecognized tax benefits as of December 31, 2025 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, 2025, 2024 and 2023 (in millions) were as follows: Years Ended December 31, 2025 2024 2023 Balance, beginning of period $ 93.5 $ 201.4 $ 217.6 Increases as a result of tax positions taken during prior years 10.2 4.1 88.6 Decreases as a result of tax positions taken during prior years ( 8.6 ) ( 1.4 ) ( 3.4 ) Settlements with taxing authorities ( 7.0 ) ( 103.5 ) ( 41.8 ) Impact of foreign currency exchange rates 6.5 ( 7.9 ) 0.6 Increases as a result of tax positions taken during the current year 1.3 2.7 13.4 Lapse of applicable statutes of limitations ( 1.1 ) ( 1.9 ) ( 73.6 ) Balance, end of period $ 94.8 $ 93.5 $ 201.4 Accrued interest and penalties totaled $ 48.0 million and $ 45.5 million as of December 31, 2025 and 2024, respectively, and were included in Other liabilities on our Consolidated Balance Sheets. We recognized a net expense of $ 1.5 million, and net benefits of $ 8.0 million and $ 35.4 million associated with interest and penalties during the years ended December 31, 2025, 2024 and 2023, 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 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, 2025, 2024 and 2023, resulting in net income tax benefits, inclusive of interest and penalties, of $ 1.4 million, $ 2.7 million and $ 77.3 million, respectively. Absent the commencement of examinations by tax authorities, statutes of limitations applicable to certain of our tax positions will lapse during 2026, but we do not expect these to have a material impact to our unrecognized tax benefits or effective income tax rate. Tax Assessments Malaysia Tax Assessment 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 $ 29.0 million converted at current quarter-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 made payments of approximately $ 8.0 million and $ 18.0 million in 2025 and 2024, respectively, for aggregate total payments of $ 26.0 million as of December 31, 2025. These payments are included within Other assets in the Consolidated Balance Sheets. There are no further payments remaining as of December 31, 2025. We have not recorded a liability for uncertain tax positions as of December 31, 2025, related to this assessment based on a more-likely-than-not threshold. We believe our tax returns are materially correct as filed and will vigorously contest this assessment. 117 Luxembourg Tax Assessment In December 2023, one of the Company’s 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 in 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 2024. Australian Tax Assessment During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$ 101.0 million, 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. In December 2024, we reached a settlement agreement with the Australian tax authorities for A$ 4.0 million (approximately $ 2.0 million at then-current exchange rates). 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 2024. We no longer had a liability for unrecognized tax benefits relating to these assessments as of December 31, 2024. During the first quarter of 2025, we received refunds (including interest) totaling A$ 42.0 million (approximately $ 26.0 million at then-current-period exchange rates). Undistributed Earnings Dividend income received by Valaris Limited from its subsidiaries is exempt from Bermuda taxation. We do not provide deferred taxes on undistributed earnings of certain subsidiaries because our policy and intention is to reinvest such earnings indefinitely. Should we make a distribution from these subsidiaries in the form of dividends or otherwise, we would be subject to additional income taxes. The unrecognized deferred tax liability related to these undistributed earnings was not practicable to estimate as of December 31, 2025. Tax Legislation On July 4, 2025, the U.S. enacted H.R. 1, informally referred to as the One Big Beautiful Bill Act (“OBBBA”). Among other provisions, the OBBBA includes the permanent extension, with modifications, of certain business and international tax provisions originally enacted under the Tax Cuts and Jobs Act of 2017 that were scheduled to sunset at the end of 2025. The OBBBA did not have a material impact on our consolidated financial statements for the year ending December 31, 2025. 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 was 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. 118 11. COMMITMENTS AND CONTINGENCIES ARO Newbuild Funding Obligations In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. The Shareholder Agreement specifies that ARO shall purchase 20 newbuild jackup rigs. The joint venture partners intend for the newbuild jackup rigs to be financed from available cash on hand and from ARO's operations and/or funds available from third-party financing. The first two newbuild jackups, Kingdom 1 and Kingdom 2, were delivered and commenced operations in 2023 and 2024, respectively. In October 2023, ARO entered into a $ 359.0 million term loan to finance the remaining payments due upon delivery of the two rigs 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 %. In 2024, ARO entered into a revolving credit facility which provides for borrowings of up to $ 100.0 million, which was amended in the fourth quarter of 2025 to increase the maximum borrowings to $ 150.0 million. As of December 31, 2025, there were no amounts 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 October 2024 and November 2025, ARO ordered the third and fourth newbuild jackups, Kingdom 3 and Kingdom 4, respectively, for a purchase price of approximately $ 300.0 million each. ARO paid a 25 % down payment upon ordering Kingdom 3 from cash on hand in 2024. ARO made payments of $ 43.8 million related to the 25% down payment for Kingdom 4 from cash on hand as of December 31, 2025, with the remaining down payment balance payable in monthly installments through May 2026. The final payment for each rig will be due upon delivery. 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 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. Letters of Credit In the ordinary course of business with customers and others, we have entered into letters of credit to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit outstanding as of December 31, 2025 totaled $ 35.4 million and are issued under facilities provided by various banks and other financial institutions, but none were issued under the 2028 Credit Agreement. Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirements. As of December 31, 2025, we had collateral deposits in the amount of $ 16.3 million with respect to these agreements. Patent Litigation In December 2022, a subsidiary of Transocean Ltd. commenced an arbitration proceeding against us alleging breach of a license agreement related to certain dual-activity drilling patents. In July 2025, the arbitration tribunal rendered a final decision awarding Transocean Ltd. $ 7.9 million in damages, including interest, and awarded Valaris $ 7.4 million as reimbursement for legal fees incurred in connection with this matter. As a result of this decision, in the second quarter of 2025, we reversed $ 17.1 million of the $ 25.0 million liability previously accrued in 2024, and we recognized a $ 7.4 million receivable for the recovery of legal fees. In the third quarter of 2025, the awarded amounts due to and from Transocean Ltd. were paid and therefore, we have no outstanding balances pertaining to this matter as of December 31, 2025. 119 Brazil Administrative Matter In July 2023, we received notice of an administrative proceeding initiated against us in Brazil. Specifically, the Federal Court of Accounts ("TCU") sought from us, Samsung Heavy Industries (“SHI”) and others, on a joint and several basis, a total of approximately BRL 601.0 million in damages that TCU asserted 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. In May 2024, the Brazilian prosecutor issued an opinion recommending that the TCU close this matter against us. In July 2025, a trial was held and all claims against us were dismissed. Other Matters In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business. Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows. 12. LEASES We have operating leases for office space, facilities, equipment, employee housing and certain rig berthing facilities. For all asset classes, except office space, we account for the lease component and the non-lease component as a single lease component. Short-term leases with a term of one year or less are not recorded in the Consolidated Balance Sheets. Our leases have remaining lease terms of less than one month to six 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): Years Ended December 31, 2025 2024 2023 Long-term operating lease cost $ 41.9 $ 35.4 $ 24.6 Short-term operating lease cost 21.3 17.6 13.2 Variable lease cost (1) 13.8 9.8 11.3 Total operating lease cost $ 77.0 $ 62.8 $ 49.1 (1) Variable lease costs are excluded from the measurement of right-of-use assets and lease liabilities and consist primarily of variable fees related to offshore equipment rentals. 120 Supplemental balance sheet information related to our operating leases is as follows (in millions, except lease term and discount rate): December 31, 2025 2024 Operating lease right-of-use assets $ 69.3 $ 84.5 Current lease liability $ 35.6 $ 28.0 Long-term lease liability 37.3 56.9 Total operating lease liabilities $ 72.9 $ 84.9 Weighted-average remaining lease term (in years) 2.5 3.2 Weighted-average discount rate (1) 7.67 % 7.75 % (1) Represents our estimated incremental borrowing cost on a secured basis for similar terms as the underlying leases. Supplemental cash flow information related to our operating leases is as follows (in millions): Years Ended December 31, 2025 2024 2023 ROU assets obtained in exchange for operating lease liabilities $ 19.4 $ 39.4 $ 80.3 Cash paid for amounts included in the measurement of our operating lease liabilities $ 40.1 $ 34.9 $ 26.2 Maturities of lease liabilities as of December 31, 2025 were as follows (in millions): 2026 $ 39.8 2027 25.4 2028 8.3 2029 3.5 2030 2.7 Thereafter 0.4 Total lease payments $ 80.1 Less imputed interest ( 7.2 ) Total $ 72.9 13. SEGMENT INFORMATION 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. The Floaters segment consists of our drillships and semisubmersible rigs, which can generally drill in water depths up to 12,000 feet and 8,000 feet, respectively. Floaters are generally considered to be more advanced, typically earn higher day rates and require a larger crew complement 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. 121 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 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 expenses, 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. 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 expenses 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. 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. 122 Segment information for the years ended December 31, 2025, 2024 and 2023 are presented below (in millions). Year Ended December 31, 2025 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues: Revenues (exclusive of reimbursable revenues) $ 1,224.1 $ 823.4 $ 571.0 $ 160.4 $ ( 571.0 ) $ 2,207.9 Reimbursable revenues 36.5 89.4 — 35.2 — 161.1 Total operating revenues 1,260.6 912.8 571.0 195.6 ( 571.0 ) 2,369.0 Operating expenses: Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 765.6 486.5 360.7 70.6 ( 206.3 ) 1,477.1 Reimbursable expenses 34.3 83.5 — 34.8 — 152.6 Total contract drilling expenses (exclusive of depreciation) 799.9 570.0 360.7 105.4 ( 206.3 ) 1,629.7 Loss on impairment 23.6 3.7 — — — 27.3 Depreciation 60.5 58.6 114.9 13.2 ( 100.9 ) 146.3 General and administrative — — 28.8 — 68.3 97.1 Equity in earnings of ARO — — — — 8.4 8.4 Operating income $ 376.6 $ 280.5 $ 66.6 $ 77.0 $ ( 323.7 ) $ 477.0 Property and equipment, net $ 1,225.0 $ 630.8 $ 1,236.7 $ 174.2 $ ( 1,177.9 ) $ 2,088.8 Capital expenditures $ 144.7 $ 192.0 $ 95.6 $ — $ ( 88.8 ) $ 343.5 Year Ended December 31, 2024 Floaters Jackups ARO Other Reconciling Items Consolidated Total 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 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 expenses (exclusive of depreciation) 985.2 541.4 367.7 86.8 ( 220.2 ) 1,760.9 Loss on impairment — — 28.4 — ( 28.4 ) — Depreciation 58.1 45.0 89.2 9.5 ( 79.7 ) 122.1 General and administrative — — 23.7 — 92.6 116.3 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 ) $ 455.1 123 Year Ended December 31, 2023 Floaters Jackups ARO Other Reconciling Items Consolidated Total 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 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 expenses (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 Information about Geographic Areas As of December 31, 2025, our Floaters segment consisted of 13 drillships and two semisubmersible rigs. Our Jackups segment consisted of 24 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, 2025, the geographic distribution of our and ARO's drilling rigs was as follows: Floaters Jackups Other Total Valaris ARO Europe 6 11 — 17 — Middle East & Africa 2 7 7 16 9 North & South America 5 3 — 8 — Asia & Pacific Rim 1 3 — 4 — Held for sale (1) 1 — — 1 — Total 15 24 7 46 9 (1) VALARIS DPS-1 was classified as held for sale and warm stacked in Asia Pacific as of December 31, 2025. See " Note 5 - Property and Equipment" for more information regarding VALARIS DPS-1. We provide management services in the U.S. Gulf of America on two rigs owned by a third party not included in the table above. ARO ordered two newbuild jackup rigs Kingdom 3 and Kingdom 4, which are under construction in the Middle East and are not included in table above. 124 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, 2025 2024 Spain (1) $ 627.4 $ 484.8 Brazil 352.2 413.9 United States 268.7 314.3 United Kingdom 262.1 290.4 Angola 234.6 132.6 Other countries (2) 419.5 381.4 Total $ 2,164.5 $ 2,017.4 (1) Long-lived assets located in Spain primarily consist of rigs which were idle or preservation stacked. (2) Other countries includes countries where individually we had long-lived assets representing less than 10% of total long-lived assets. 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. 14. SUPPLEMENTAL FINANCIAL INFORMATION Consolidated Balance Sheet Information Accounts receivable, net, consisted of the following (in millions): December 31, 2025 2024 Trade $ 424.1 $ 502.4 Income tax receivables 49.8 76.2 Other 15.8 9.2 489.7 587.8 Allowance for doubtful accounts ( 14.9 ) ( 16.6 ) $ 474.8 $ 571.2 Other current assets consisted of the following (in millions): December 31, 2025 2024 Prepaid taxes $ 58.2 $ 48.5 Deferred costs 37.7 38.6 Prepaid expenses 13.3 13.0 Other 35.5 39.2 $ 144.7 $ 139.3 125 Accrued liabilities and other consisted of the following (in millions): December 31, 2025 2024 Current contract liabilities (deferred revenues) $ 87.7 $ 87.2 Personnel costs 81.6 89.2 Income and other taxes payable 73.9 57.2 Lease liabilities 35.6 28.0 Accrued claims 21.3 39.5 Accrued interest 15.4 15.3 Other 27.9 34.6 $ 343.4 $ 351.0 Other liabilities consisted of the following (in millions): December 31, 2025 2024 Unrecognized tax benefits (inclusive of interest and penalties) $ 136.2 $ 128.3 Pension and other post-retirement benefits 68.3 106.5 Noncurrent contract liabilities (deferred revenues) 63.2 71.4 Lease liabilities 37.3 56.9 Other 20.8 20.1 $ 325.8 $ 383.2 Consolidated Statements of Operations Information Repair and maintenance expense related to continuing operations was as follows (in millions): Years Ended December 31, 2025 2024 2023 Repair and maintenance expense $ 236.2 $ 239.6 $ 203.3 Other, net, consisted of the following (in millions): Years Ended December 31, 2025 2024 2023 Net gain (loss) on sale of property $ 118.6 $ ( 0.2 ) $ 28.6 Net foreign currency exchange gains (losses) ( 14.3 ) 13.8 ( 3.5 ) Net periodic pension and retiree medical income (loss) ( 0.9 ) 2.4 0.9 Loss on extinguishment of debt — — ( 29.2 ) Other income (expense) ( 0.1 ) 0.6 1.4 $ 103.3 $ 16.6 $ ( 1.8 ) 126 Consolidated Statements of Cash Flows Information The following table provides a reconciliation of the amount of cash and cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same such amounts shown within the Consolidated Statements of Cash Flows (in millions): December 31, 2025 2024 Cash and cash equivalents $ 599.4 $ 368.2 Restricted cash—current (1) 7.0 12.3 Restricted cash—non-current (1) 11.1 — $ 617.5 $ 380.5 (1) Restricted cash consists primarily of collateral on letters of credit of $ 16.3 million and $ 10.8 million as of December 31, 2025 and 2024, respectively. Restricted cash—current is included in Other current assets and restricted cash—non-current is included in Other assets in our Consolidated Balance Sheets. See " Note 11 - Commitments and Contingencies " for more information regarding our letters of credit. Net cash provided by operating activities attributable to the net change in operating assets and liabilities was as follows (in millions): Years Ended December 31, 2025 2024 2023 (Increase) decrease in accounts receivable $ 119.2 $ ( 64.9 ) $ 44.9 (Increase) decrease in other assets 2.6 23.4 ( 6.5 ) Increase (decrease) in liabilities ( 42.9 ) ( 91.7 ) 82.8 $ 78.9 $ ( 133.2 ) $ 121.2 127 Cash paid (received) for income taxes, net, which includes taxes withheld by third parties on our behalf, for the year ended December 31, 2025 was as follows (in millions) (1) : Bermuda federal $ — Foreign Australia (2) ( 23.7 ) Brazil 18.6 United States 16.8 Angola 13.1 Malaysia 8.0 Trinidad 6.9 Saudi Arabia 4.2 Other (3) 17.6 Total foreign 61.5 $ 61.5 (1) During the fourth quarter of 2025, we adopted Update 2023-09 (see " Note 1 - Description of the Business and Summary of Significant Accounting Policies " for further discussion on Update 2023-09) on a prospective basis. As such, we have updated the cash paid for income tax disclosure presentation for the year ended December 31, 2025 in order to comply with the new guidance, but have not retrospectively applied these presentational changes to any of the prior periods presented. (2) During 2025, we received income tax refunds of approximately $ 26.0 million from the Australian tax authorities in connection with a settlement agreement for previously issued tax assessments. Refer to " Note 10 - Income Taxes" for further information regarding this settlement agreement. (3) Other represents the aggregation of jurisdictions which did not individually exceed the 5% disaggregation threshold. Cash paid (refunded) for income taxes, net, which includes withholding taxes withheld by third parties on our behalf, for the years ended December 31, 2024 and 2023 were as follows (in millions): Years Ended December 31, 2024 2023 Income taxes paid (refunded), net (1) (2) $ 55.6 $ ( 8.3 ) (1) 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. (2) We received an income tax refund of $ 45.9 million in 2023 related to the U.S. Coronavirus Aid, Relief, and Economic Security Act. 128 Additional cash flow information was as follows (in millions): Years Ended December 31, 2025 2024 2023 Cash paid for interest Interest paid, net of amounts capitalized $ 90.5 $ 78.3 $ 32.3 Non-cash investing activities Accruals for capital expenditures as of period end (1) $ 52.0 $ 36.2 $ 71.5 (1) Accruals for capital expenditures were excluded from investing activities in our Consolidated Statements of Cash Flows. During the years ended December 31, 2025, 2024 and 2023, the capitalized interest totaled $ 1.9 million, $ 15.9 million and $ 5.6 million, respectively. Concentration of Risk Credit Risk - We are exposed to credit risk relating to our cash and cash equivalents and receivables from customers. Our cash and cash equivalents are primarily held by various well-capitalized and credit-worthy financial institutions. We monitor the credit ratings of these institutions and limit the amount of exposure to any one institution and therefore, do not believe a significant credit risk exists for these balances. We mitigate our credit risk relating to receivables from customers, which consist primarily of major international, government-owned and independent oil and gas companies, by performing ongoing credit evaluations. We also maintain reserves for potential credit losses, which generally have been within our expectations. Customer Concentration - Consolidated revenues with customers that individually contributed 10% or more of revenue in the years ended December 31, 2025, 2024 and 2023 were as follows: Year Ended December 31, 2025 Floaters Jackups Other Total Petróleo Brasileiro S.A. ("Petrobras") 13 % — % — % 13 % BP plc ("BP") 3 % 3 % 6 % 12 % Azule Energy ("Azule") 7 % 3 % — % 10 % Other customers (1) 30 % 33 % 2 % 65 % 53 % 39 % 8 % 100 % Year Ended December 31, 2024 Floaters Jackups Other Total BP 9 % 3 % 5 % 17 % Petrobras 9 % — % — % 9 % Azule 4 % — % — % 4 % Other customers (1) 39 % 29 % 2 % 70 % 61 % 32 % 7 % 100 % 129 Year Ended December 31, 2023 Floaters Jackups Other Total BP — % 5 % 6 % 11 % Petrobras 4 % — % — % 4 % Other customers (1) 49 % 32 % 4 % 85 % 53 % 37 % 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, 2025 Floaters Jackups Other Total Brazil $ 587.3 $ — $ — $ 587.3 United Kingdom — 391.8 — 391.8 Gulf of America 223.3 — 119.1 342.4 Angola 219.5 74.0 — 293.5 Australia 145.9 128.2 — 274.1 Other countries (1) 84.6 318.8 76.5 479.9 $ 1,260.6 $ 912.8 $ 195.6 $ 2,369.0 Year Ended December 31, 2024 Floaters Jackups Other Total Brazil $ 497.9 $ — $ — $ 497.9 United Kingdom — 375.2 — 375.2 Gulf of America 245.4 10.3 111.7 367.4 Australia 172.1 104.3 — 276.4 Angola 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 America $ 220.9 $ 27.2 $ 104.7 $ 352.8 United Kingdom — 267.2 — 267.2 Angola 210.9 — — 210.9 Brazil 195.0 — — 195.0 Australia 157.0 29.9 — 186.9 Other countries (1) 164.9 335.3 71.2 571.4 $ 948.7 $ 659.6 $ 175.9 $ 1,784.2 (1) Other countries includes locations that individually contributed to less than 10% of total revenues. 130 15. SUBSEQUENT EVENTS Pending Business Combination with Transocean On February 9, 2026, we entered into a business combination agreement (the "Business Combination Agreement") with Transocean Ltd., a Swiss corporation ("Transocean"). The Business Combination Agreement provides, among other things, and subject to the satisfaction or waiver of the conditions set forth therein, that Transocean will acquire Valaris in an all-stock transaction valued at approximately $ 5.8 billion (based on the price of Valaris common shares on the last trading day before the public announcement of the transaction). Under the terms of the Business Combination Agreement, holders of Valaris common shares will receive 15.235 shares of Transocean stock for each common share of Valaris. In addition, Warrants that are outstanding as of immediately prior to the transaction closing date will be assumed by Transocean and remain outstanding and be exercisable for the Fundamental Transaction Consideration (as defined in the Valaris Warrant Agreement dated as of April 30, 2021) multiplied by the number of Valaris common shares for which each warrant is exercisable immediately prior to the transaction closing date. 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. Upon completion and on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029, Transocean shareholders would own approximately 53 % of the combined company, with Valaris shareholders owning the remaining 47 %. Completion of the business combination is subject to customary closing conditions, including (i) the receipt of the requisite approvals of the Valaris shareholders and the Transocean shareholders, (ii) the granting of the sanction order on terms consistent with the Business Combination Agreement, (iii) the Transocean shares issued pursuant to the Business Combination Agreement having been approved for listing on the NYSE, (iv) certain regulatory approvals having been obtained or any applicable waiting period having expired or been terminated, (v) no governmental authority within applicable jurisdictions having enacted or issued any law or order preventing or prohibiting the consummation of the business combination and (vi) the absence of a Transocean Material Adverse Effect or a Valaris Material Adverse Effect (as defined within the Business Combination Agreement). Under certain specified circumstances in which the Business Combination Agreement is terminated, we would be required to pay a termination fee equal to $ 173.0 million. 131 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.