~~Insurance and Indemnification Matters~~

Our insurance program provides coverage, subject to the policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party liability claims arising from our operations. Our insurance program provides coverage that is customary for our industry. Generally, our insurance program provides third-party liability coverage up to $750.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.

Well-control events generally include an unintended release from a well that cannot be contained by using equipment on site, such as a blowout preventer, by increasing the weight of drilling fluid or by diverting the fluids safely into production facilities. Our customers typically indemnify us for most well-control events.

Our insurance program also provides hull and machinery coverage to us for physical damage (including total loss) to our rigs, cargo and equipment, excluding damage arising from a named windstorm in the U.S. Gulf of Mexico. We separately purchase a small limit of named windstorm insurance for our floater rigs in the U.S. Gulf of Mexico. We do not currently carry insurance for loss of hire. Any such lack of reimbursement from the loss of day rate revenues may cause us to incur substantial costs.

Our drilling contracts customarily provide that each party is responsible for injuries or death to their respective personnel and loss or damage to their respective property (including the personnel and property of each parties’ contractors and subcontractors) regardless of the cause of the loss or damage. However, in certain drilling contracts our customer’s responsibility for damage to its property and the property of its other contractors contains an exception to the extent the loss or damage is due to our negligence, which exception is usually subject to negotiated caps on a per occurrence basis, although in some cases we assume responsibility for all damages due to our negligence. In addition, our drilling contracts typically provide for our customers to indemnify us, generally based on replacement cost minus some level of depreciation, for loss or damage to our down-hole equipment, and in some cases for a limited amount of the repair of or replacement cost of our subsea equipment, unless the damage is caused by our negligence, normal wear and tear or defects in our equipment. We also maintain insurance for exposures to personal injuries, damage to or loss of property and certain business risks.

Subject to the exceptions noted below, our customers typically assume most of the responsibility for and indemnify us from any loss, damage or other liability resulting from pollution or contamination arising from operations, including as a result of blowouts, cratering and seepage, when the source of the pollution originates from the well or reservoir, including costs for clean-up and removal of pollution and third-party damages. In most drilling contracts, we assume liability for third-party damages resulting from such pollution and contamination caused by our negligence, usually subject to negotiated caps on a per occurrence or per event basis. In addition, in substantially all of our contracts, the customer assumes responsibility and indemnifies us for loss or damage to the reservoir, for loss of hydrocarbons escaping from the reservoir and for the costs of bringing the well under control. Further, subject to the exceptions noted below, most of our contracts provide that the customer assumes responsibility and indemnifies us for loss or damage to the well, except when the loss or damage to the well is due to our negligence, in which case most of our contracts provide that the customer's sole remedy is to require us to redrill the lost or damaged portion of the well at a substantially reduced rate and, in some cases, pay for some of the costs to repair the well.

Most of our drilling contracts incorporate a broad exclusion that limits the operator's indemnity for damages and losses resulting from our gross negligence and willful misconduct and for fines and penalties and punitive damages levied or assessed directly against us. In most of these cases, we are still able to negotiate a liability cap (although these caps are significantly higher than the caps we are able to negotiate for ordinary negligence) on our exposure for losses or damages resulting from our gross negligence. In certain cases, the broad exclusion only applies to losses or damages resulting from the gross negligence of our senior supervisory personnel. However, in some cases we have contractually assumed significantly increased exposure or unlimited exposure for losses and damages due to the gross negligence of some or all our personnel, and in most cases, we are not able to contractually limit our exposure for our willful misconduct.

Notwithstanding our negotiation of express limitations in our drilling contracts for losses or damages resulting from our ordinary negligence and any express limitations (albeit usually much higher) for losses or damages in the event of our gross negligence, under the applicable laws that govern certain of our drilling contracts, the courts will not enforce any indemnity for losses and damages that result from our gross negligence or willful misconduct. As a result, under the laws of such jurisdictions, the indemnification provisions of our drilling contracts that would otherwise limit our liability in the event of our gross negligence or willful misconduct are deemed to be unenforceable as being contrary to public policy. Accordingly, in such jurisdictions we are exposed to unlimited liability for losses and damages that result from our gross negligence or willful misconduct, regardless of any express limitation of our liability in the relevant drilling contracts. Under the laws of certain jurisdictions, an indemnity from an operator for losses or damages of third-parties resulting from our gross negligence is enforceable, but an indemnity for losses or damages of the operator is not enforceable. In such cases, the contractual indemnity obligation of the operator to us would be enforceable with respect to third-party claims for losses of damages, such as may arise in pollution claims, but the contractual indemnity obligation of the operator to us with respect to injury or death to the operator's personnel and the operator’s damages to the well, to the reservoir and for the costs of well control would not be enforceable. Furthermore, although there is a lack of precedential authority for these types of claims in countries where the civil law is applied, in those situations where a fault based codified civil law system is applicable to our drilling contracts, as opposed to the common law system, the courts generally will not enforce a contractual indemnity clause that totally indemnifies us from losses or damages due to our gross negligence but may enforce the contractual indemnity over and above a cap on our liability for gross negligence, assuming the cap requires us to accept a significant amount of liability.

Similar to gross negligence, regardless of any express limitations in a drilling contract regarding our liability for fines and penalties and punitive damages, the laws of most jurisdictions will not enforce an indemnity that indemnifies a party for a fine or penalty that is levied or punitive damages arising from willful misconduct that are assessed directly against such party on the ground that it is against public policy to indemnify a party from a fine, loss, penalty or punitive damages, especially where the purpose of such levy or assessment is to deter the behavior that resulted in the fine, loss or penalty or punish such party for the behavior that warranted the assessment of punitive damages.

The above description of our insurance program and the indemnification provisions of our drilling contracts is only a summary as of the date hereof and is general in nature. In addition, our drilling contracts are individually negotiated, and the degree of indemnification we receive from operators against the liabilities discussed above can vary from contract to contract based on market conditions and customer requirements existing when the contract was negotiated and the interpretation and enforcement of applicable law when the claim is adjudicated. Notwithstanding a contractual indemnity from a customer, there can be no assurance that our customers will be financially able to indemnify us or will otherwise honor a contractual indemnity obligation that is enforceable under applicable law. Our insurance program and the terms of our drilling contracts may change in the future.

In certain cases, vendors who provide equipment or services to us limit their pollution liability to a specific monetary cap, and we assume the liability above that cap. Typically, in the case of original equipment manufacturers, the cap is a negotiated amount based on mutual agreement of the parties considering the risk profiles and thresholds of each party. However, for smaller vendors, the liability is usually limited to the value, or double the value, of the contract for the purchase of such equipment or services.

We generally indemnify the customer for legal and financial consequences of spills of waste oil, fuels, lubricants, motor oils, pipe dope, paint, solvents, ballast, bilge, garbage, debris, sewage, hazardous waste and other liquids, the discharge of which originates from our rigs or equipment above the surface of the water and in some cases from our subsea equipment. Our contracts generally provide that, in the event of any such spill from our rigs, we are responsible for fines and penalties.

Major Customers

We provide our contract drilling services to major international, government-owned and independent oil and gas companies. During the year ended December 31, ~~2022,~~2023, our five largest customers accounted for ~~43%~~40% of consolidated revenues. BP plc, our only customer who accounts for 10% or more of consolidated revenues, accounted for ~~15%~~11% of consolidated revenues.

Competition

The offshore contract drilling industry is highly competitive. Drilling contracts are, for the most part, awarded on a competitive bid basis. Price is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise also are factors.

~~Human Capital~~Non-U.S. Operations

~~We believe our people are one of the most important elements~~Revenues from non-U.S. operations were 80%, 78%, 87% and 81% of our ~~success,~~total consolidated revenues during the years ended December 31, 2023 and ~~we benefit from a motivated, engaged,~~2022, eight months ended December 31, 2021 (Successor), and diverse workforce. Our approach to attracting, developing, and retaining a diverse workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement.

~~Purpose and Culture~~

~~At Valaris, our purpose is to provide responsible solutions that deliver energy to the world. Our values are designed to guide us in support of our purpose:~~four months ended April 30, 2021 (Predecessor), respectively.

•See "~~Integrity~~Item 1A. ~~– Doing~~Risk Factors - Our non-U.S. operations involve additional risks not associated with U.S. operations."

Insurance and Indemnification Matters

Our insurance program provides coverage, subject to the ~~right thing; whether~~policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party liability claims arising from our operations. Our insurance program provides coverage that is customary for our industry. Generally, our insurance program provides third-party liability coverage up to $805.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.

Our insurance program also provides hull and machinery coverage for physical damage (including total loss) to our rigs, cargo and equipment, excluding damage arising from a named windstorm in the U.S. Gulf of Mexico. We separately purchase a small limit of named windstorm insurance for our floater rigs in the U.S. Gulf of Mexico. We currently carry limited insurance for loss of hire for several of our rigs.

Our customers typically indemnify us for most well-control events. Well-control events generally include an unintended release from a well that cannot be contained by using equipment on site, such as a blowout preventer, by increasing the weight of drilling fluid or ~~not anyone is watching;~~by diverting the fluids safely into production facilities. Subject to the exceptions noted below, our customers typically assume most of the responsibility for and indemnify us from any loss, damage or other liability resulting from pollution or contamination arising from operations. Such pollution or contamination may be as a result of blowouts, cratering and seepage, when the source of the pollution originates from the well or reservoir. Such indemnities typically include costs for clean-up and removal of pollution and third-party damages.

•~~Safety~~ ~~– Causing no harm is always a priority;~~

•~~Excellence~~ ~~– Delivering value to our customers while consistently raising the bar on performance;~~

•~~Respect~~ ~~– Treating others the way we would like to be treated;~~

•~~Ingenuity~~ ~~– Solving problems creatively; and~~

•~~Stewardship~~ ~~– Safeguarding where we work for the next generation~~

Our Ethics and Compliance Policy and our Code of Conduct (the “Code”) form the foundation of our compliance and ethics program, which provides guidance on how to uphold our values. We have translated the Code into nine different languages, making it widely accessible to our employees across the globe. We maintain an Ethics Hotline that is available to all employees, either online or by phone, to confidentially seek guidance or raise a concern.

The Code is reviewed on a periodic basis and approved by our board of directors. To further support our values of respect and integrity, we have policies prohibiting corruption, bribery (including facilitation payments), money laundering, retaliation, and reprisals for raising concerns, including those related to worker rights, working conditions, mistreatment, fraud, and misconduct. In addition, we have adopted a policy against modern slavery and human trafficking in our business and our supply chains.

~~Employees~~

We employed approximately 5,450 personnel worldwide including contract employees, and approximately 3,933 personnel excluding contract employees, as of December 31, 2022. Our employees represented 71 nationalities spread across 26 locations. The majority of our personnel work on our offshore installations and are compensated on an hourly basis. A portion of our employees and contractors working outside of the U.S. are represented by collective bargaining or similar agreements, which are subject to periodic salary negotiation. As of December 31, 2022, women comprised 29% of our onshore employees and 1% of our offshore employees.

~~Employee Wellbeing and Engagement~~

We believe that one of the best ways to serve our customers is through creating a healthy, safe and engaging working and learning environment, where our employees are confident and comfortable to put their best work forward. We seek to promote a healthy environment by prioritizing the mental and physical health and needs of our employees while recognizing them for their achievements and accomplishments. For example, in most countries where we work, we offer an employee assistance program (“EAP”) to employees and their families. Our EAP provides access to counselors and other mental health professionals as well as discounts to fitness centers, financial guidance and other benefits in support of our overall commitment to maintain a healthy workforce.

Feedback from our employees plays a key role in creating an agile, collaborative and trustworthy culture. We use surveys to measure employee engagement as well as our ability to align and execute around a common vision and foster innovation and creativity. These surveys help our leaders analyze the impact of company practices and culture on performance and have created a roadmap for improvement.

~~Training and Competency~~

We are focused on developing talent and leadership among both our onshore and offshore employees. In 2021, we launched the Building Organizational Leadership (BOLD) training program. This program is designed to engage, support and provide leadership tools for our offshore supervisors, helping them assess and develop their team’s understanding and use of our safety processes and policies. Approximately 650 personnel attended the program in 2022.

~~In addition to the BOLD offshore program, we designed and piloted an onshore leadership program in 2022 which we expect to implement for our senior onshore leaders commencing in 2023.~~

We provide regular training in health, safety, environmental and emergency response to our employees, as relevant to their roles, and we mandate that our employees complete training related to the Code, covering topics such as anti-corruption, workplace behavior and conflicts of interest. In addition, in 2022, all employees were assigned human trafficking prevention training, including procedures for reporting concerns. Certain employees must also complete training on topics ranging from trade compliance to antitrust matters.

~~Safety~~

Our policies set the expectation that causing no harm is a priority while conducting our operations. We seek to control major operational hazards with effective safeguards and to implement our management systems to protect the health and safety of our personnel.

117

Our ~~Safe Systems of Work are designed with the aim of completing~~drilling contracts customarily provide that each ~~job safely and efficiently:~~

•~~Work Instruction~~ ~~– Step-by-step description of how to complete specific work activities, including mandatory precautions to be implemented;~~

•~~Permit to Work~~ ~~– Formal authorization and control process for the safe execution of potentially hazardous work that may present risk to people, environment or assets;~~

•~~Energy Isolation~~ ~~– Formal isolation of all energy sources before performing work on equipment;~~

•~~Job Safety Analysis~~ ~~– Identification and control of job hazards before starting work; and~~

•~~Stop Work Authority~~ ~~– Empowerment to stop work if a risk to people, environment or assets is perceived to exist.~~

~~Sustainability~~

Consistent with our purpose of providing responsible solutions that deliver energy to the world, we have increased our focus on sustainability-related matters. Our board of directors' ESG Committee, formed in 2021, regularly meets to address sustainability topics andparty is responsible for ~~overseeing~~injuries or death to their respective personnel and loss or damage to their respective property (including the ~~Company’s policies, programs~~personnel and ~~practices related~~property of each parties’ contractors and subcontractors) regardless of the cause of the loss or damage. However, exceptions may exist as it relates to ~~ESG responsibilities~~damages due to our negligence. In addition, our drilling contracts typically provide for our customers to indemnify us, generally based on replacement cost minus some level of depreciation, for loss or damage to our down-hole equipment. In some cases, we are indemnified by our customer for a limited amount of the repair of or replacement cost of our subsea equipment. We also maintain insurance for exposures to personal injuries, damage to or loss of property and ~~the Company’s management of risks in such areas. In 2022, we created a new~~certain business function and management position focused on sustainability and new energy opportunities and have an employee-led cross-functional working group to identify and evaluate opportunities and promote sustainable business practices.risks.

We ~~publish an annual sustainability report aligned with Sustainability Accounting Standards Board (SASB) standards~~generally indemnify the customer for legal and ~~report scope 1, 2~~financial consequences of spills of waste oil, fuels, lubricants, motor oils, pipe dope, paint, solvents, ballast, bilge, garbage, debris, sewage, hazardous waste and ~~3 greenhouse gas (GHG) emissions. We also utilize technology~~other liquids, the discharge of which originates from our rigs or equipment above the surface of the water and in some cases from our subsea equipment. Our contracts generally provide that, ~~enables us to monitor fuel consumption~~in the event of any such spill from our rigs, we are responsible for the related fines and GHG emissions across our rig fleet. For further discussion of ESG risks and considerations see “Risk Factors” in Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.penalties.

~~We encourage you~~The above description of our insurance program and the indemnification provisions of our drilling contracts is only a summary as of the date hereof and is general in nature. In addition, our drilling contracts are individually negotiated, and the degree of indemnification we receive from operators against the liabilities discussed above can vary from contract to ~~review~~contract based on market conditions and customer requirements existing when the contract was negotiated and the interpretation and enforcement of applicable law when the claim is adjudicated. Our insurance program and the terms of our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability and human capital programs and initiatives. Nothing on our website, including our Sustainability Report or sections thereof, shall be deemed incorporated by reference into this report or other filings that we make withdrilling contracts may change in the ~~SEC.~~future.

Additional information on insurance and indemnification matters and related risks is discussed in “Item 1A. Risk Factors,” which should be read in conjunction with the foregoing information.

Governmental Regulation and Environmental Matters

Our operations are affected by laws, regulations and political initiatives that relate to the oil and natural gas industry, including laws and regulations that have or may impose increased oil-spill related and financial responsibility requirements. Laws and regulations curtailing exploration and development drilling for oil and natural gas will directly affect us for economic, environmental, safety or other policy reasons. It is also possible that these laws, regulations and political initiatives could adversely affect our operations in the future by significantly increasing our operating costs or restricting areas open for drilling activity. ~~See "Item 1A. Risk Factors - Increasing regulatory complexity could adversely impact our offshore drilling operations and reduce demand."~~

~~Our operations are subject to laws and~~We incorporate by reference herein the disclosures on governmental regulations, ~~controlling~~including environmental matters, contained in the ~~discharge~~following sections of ~~materials into the environment, pollution, contamination and hazardous waste disposal or otherwise relating to the protection of the environment. These laws and regulations may, among other things:~~this Annual Report on Form 10-K:

•~~require the acquisition~~"Item 1A. Risk Factors – Regulatory, Legal and Tax Risks";

•"Item 1A. Risk Factors – Sustainability Risks";

•"Item 3. Legal Proceedings"; and

•"Item 7. Management's Discussion and Analysis of ~~various permits before drilling commences;~~Financial Condition and Results of Operations – Liquidity and Capital Resources – Effects of Climate Change and Climate Change Regulation.

•~~require notice to stakeholders of proposed and ongoing operations;~~

•~~require the installation of expensive pollution control equipment;~~

•~~restrict the types, quantities and concentration of various substances that can be released into the environment in connection with drilling; and~~

•~~restrict the production rate of oil and natural gas below the rate that would otherwise be possible.~~

Failure to comply with environmental laws and regulations applicable to our operations could impose significant liability on us for damages, clean-up costs, fines and penalties in the event of oil spills or similar discharges of pollutants or contaminants into the environment or improper disposal of hazardous waste generated in the course of our operations, which may not be indemnifiable or covered by insurance and could have a material adverse effect on our financial position, operating results and cash flows. To date, such laws and regulations have not had a material adverse effect on our operating results. However, the legislative, judicial and regulatory response to any environmental incident could substantially increase our customers' liabilities in respect of oil spills and also could increase our liabilities. In addition to potential increased liabilities, such legislative, judicial or regulatory action could impose increased financial, insurance or other requirements that may adversely impact our operating results.

Additionally, environmental laws and regulations are revised frequently, and any changes, including changes in implementation or interpretation of existing laws/regulations, that result in more stringent and costly waste handling, disposal and cleanup requirements for our industry could have a significant impact on our operating costs.

The International Convention on Oil Pollution Preparedness, Response and Cooperation, the International Convention on Civil Liability for Oil Pollution Damage 1992, the U.K. Merchant Shipping Act 1995, Marpol 73/78 (the International Convention for the Prevention of Pollution from Ships), the U.K. Merchant Shipping (Oil Pollution Preparedness, Response and Co-operation Convention) Regulations 1998, as amended, the Oil Pollution Act of 1990 ("OPA 90"), as amended, the Clean Water Act and other U.S. federal statutes applicable to us and our operations, as well as similar statutes in Texas, Louisiana, other coastal states and other non-U.S. jurisdictions, address oil spill prevention, reporting and control and have significantly expanded potential liability, fine and penalty exposure across many segments of the oil and natural gas industry. Such statutes and related regulations impose a variety of obligations on us related to the prevention of oil spills, disposal of waste and liability for resulting damages. For instance, OPA 90 imposes strict and, with limited exceptions, joint and several liability upon each responsible party for oil removal costs as well as a variety of fines, penalties and damages. Similar environmental laws apply in our other areas of operation. Failure to comply with these statutes and regulations may subject us to civil or criminal enforcement action, which may not be covered by contractual indemnification or insurance, or for which indemnity is prohibited under applicable law, and could have a material adverse effect on our financial position, operating results and cash flows.

High-profile and catastrophic events such as the 2010 Macondo well incident have heightened governmental and environmental concerns about the oil and gas industry. From time to time, legislative proposals have been introduced that would materially limit or prohibit offshore drilling in certain areas. We are adversely affected by restrictions on drilling in certain areas of the U.S. Gulf of Mexico and elsewhere, including the adoption of additional safety requirements and policies regarding the approval of drilling permits and restrictions on development and production activities in the U.S. Gulf of Mexico that have and may further impact our operations.

On July 28, 2016, the Bureau of Safety and Environmental Enforcement ("BSEE") adopted the 2016 Well Control Rule. This rule included more stringent design requirements for well-control equipment used in offshore drilling operations. Subsequently, on May 2, 2019, BSEE issued the 2019 Well Control Rule, the revised well control and blowout preventer rule governing the Outer Continental Shelf (OCS) activities. The rule revised existing regulations impacting offshore oil and gas drilling, completions, workovers and decommissioning activities. We have not incurred significant costs to comply with the 2016 Well Control Rule or 2019 Well Control Rule.

The continuing and evolving threat of cyber attacks will likely require increased expenditures to strengthen cyber risk management systems for drilling rigs and onshore facilities. For example, on May 11, 2017, an executive order was issued entitled Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure, which is intended to improve the nation's ability to defend against increasing and evolving cyber attacks, and in March 2020 the United States Coast Guard issued cybersecurity guidelines for port facilities and offshore facilities, including drilling rigs, that could be impacted by cyber attacks. We cannot currently estimate the future expenditures associated with increased regulatory requirements, which may be material, and we continue to monitor regulatory changes as they occur.

Additionally, climate change is receiving increasing attention from scientists and legislators, and significant focus is being put on companies ~~that are active producers of hydrocarbon resources.~~in the oil and natural gas industry. Globally, there are a number of legislative and regulatory proposals and executive orders at various levels of government in jurisdictions where we operate to address the ~~greenhouse gas~~GHG emissions that contribute to climate change, such as laws or regulations requiring reporting on GHG emissions, incentivizing or mandating the use of alternative energy sources such as wind power and solar energy, phasing-out of fossil fuel subsidies, reducing GHG emissions, increasing fuel efficiency standards, adopting carbon pricing mechanisms, restricting oil and gas development and programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles.

Although it is not possible at this time to predict how compliance with any such legislation or new regulations ~~that may be adopted to address greenhouse gas emissions~~ would impact our business, any such future laws and regulations could require us ~~or our customers~~ to incur increased operating costs or incremental capital expenditures. Any such legislation or regulatory programs could also increase the cost of consuming oil and natural gas, and thereby reduce demand for oil and natural gas, which could reduce our customers’ demand for our services. Consequently, legislation and regulatory programs to reduce ~~greenhouse gas~~GHG emissions could have an adverse effect on our financial position, operating results and cash flows.

~~The United States reentered~~Sustainability

Consistent with our purpose of providing responsible solutions that deliver energy to the ~~Paris Agreement in February 2021. Further, in November 2021, the United States~~world, we are focused on sustainability-related matters. Our board of directors' Safety and ~~other countries entered into the Glasgow Climate Pact, which includes a range of measures designed~~Sustainability Committee regularly meets to address ~~climate change, including but not limited~~sustainability topics and is responsible for overseeing the Company’s policies, programs and practices related to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy. It is expected that new executive orders, regulatory action, and/or legislation targeting greenhouse gas emissions, or prohibiting, restricting, or delaying oil and gas development activities in certain areas, will be proposed and/or promulgated. For example, multiple executive orders pertaining to environmental regulations and climate change have recently been issued, including the (1) Executive Order on Protecting Public Healthsustainability and the ~~Environment~~Company’s management of risks in such areas. We have a dedicated department focused on sustainability and ~~Restoring Science to Tackle the Climate Crisis ("EO 13990")~~new energy and ~~(2) Executive Order on Tackling the Climate Crisis at Home and Abroad ("EO 14008"). EO 13990 established~~also have an ~~interagency~~employee-led cross-functional working group to ~~recommend methods for agencies to incorporate the “social cost of carbon” into regulatory analyses~~identify and ~~directed the United States Environmental Protection Agency (the "EPA") to review various environmental regulations for consistency with the policies~~evaluate opportunities and goals set forth in EO 13990. EO 14008 announced a moratorium on new oil and gas leasing on federal lands and offshore waters pending completion of a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices, established climate change as a primary foreign policy and national security consideration and affirmed that achieving net-zero greenhouse gas emissions by or before mid-century is a critical priority. Ongoing legal challenges have slowed or halted the implementation of some of these directives, making it difficult to predict the full timing and extent to which federal agencies will implement them. The full impact of these federal actions, or any other future restrictions or prohibitions, remains unclear, but if such policies are implemented permanently (in part or in whole), these actions could have a material and negative financial impact on ourpromote sustainable business ~~by reducing the areas in which we could operate.~~practices.

We publish our annual sustainability report aligned with the standards of the Task Force on Climate-Related Financial Disclosures (TCFD), in addition to the Sustainability Accounting Standards Board (SASB), with references to other frameworks such as the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP), where relevant, and report scope 1, 2 and 3 GHG emissions. For further discussion of sustainability-related risks and considerations see “Risk Factors” in Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

We encourage you to review our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability and human capital targets, including our GHG emissions intensity reduction target, programs and initiatives. Nothing on our website, including our Sustainability Report or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or other filings that we make with the SEC.

If new laws are enacted or other government actions are taken that restrict or prohibit offshore drilling in our principal areas of operation, impose additional regulatory (including environmental protection) requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development or production of oil and natural gas, or promote other sources of clean energy, our financial position, operating results and cash flows could be materially adversely affected. See "Item 1A. Risk Factors - Compliance with or breach of environmental laws could be costly and limit our operations."

Human Capital

~~Non-U.S. Operations~~We believe our people are one of the most important elements of our success, and we benefit from a motivated, engaged, and diverse workforce. Our approach to attracting, developing, and retaining a diverse workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement.

~~Revenues from non-U.S. operations were 78%, 87%, 81%~~Purpose and 83% of our total consolidated revenues during the year ended December 31, 2022 (Successor), the eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and the year ended December 31, 2020 (Predecessor), respectively.Culture

~~See "Item 1A. Risk Factors -~~At Valaris, our purpose is to provide responsible solutions that deliver energy to the world. Our ~~non-U.S. operations involve additional risks not associated with U.S. operations."~~values are designed to guide us in support of our purpose:

•Integrity – Doing the right thing; whether or not anyone is watching;

•Safety – Causing no harm is always a priority;

•Excellence – Delivering value to our customers while consistently raising the bar on performance;

•Respect – Treating others the way we would like to be treated;

•Ingenuity – Solving problems creatively; and

•Stewardship – Safeguarding where we work for the next generation.

Employees

We had a global workforce of approximately 5,985 persons including contractors, and approximately 4,261 persons excluding contractors, as of December 31, 2023. Our personnel represented 74 nationalities spread across 23 locations. The majority of our personnel work on our offshore installations and are compensated on an hourly basis. A portion of our employees and contractors working outside of the U.S. are represented under collective bargaining or similar agreements, which are subject to periodic salary negotiation. As of December 31, 2023, women comprised 30% of our onshore employees and 1% of our offshore employees.

Employee Wellbeing and Engagement

We believe that one of the best ways to serve our customers is through creating a healthy, safe and engaging working and learning environment, where our employees are confident and comfortable to put their best work forward. We seek to promote a healthy environment by prioritizing the mental and physical health and other needs of our employees while recognizing them for their achievements and accomplishments. For example, in most countries where we work, we offer an employee assistance program (“EAP”) to employees and their families. Our EAP provides access to counselors and other mental health professionals as well as discounts to fitness centers, financial guidance and other benefits in support of our overall commitment to maintain a healthy workforce.

Training and Retention

We provide regular training in health, safety, environmental and emergency response to our employees, as relevant to their roles, and we mandate that our employees complete training related to the Code, covering topics such as anti-corruption, workplace behavior and conflicts of interest. In addition, in 2023, all employees were assigned unconscious bias training as part of supporting a more inclusive workforce. Certain employees must also complete additional training on topics ranging from trade compliance to human trafficking.

We created the Valaris Basic Training Program to familiarize new rig workers to the offshore environment and to build experience in our key safety practices, such as our Safe Systems of Work (as described below). The training program utilizes a jackup rig in the Gulf of Mexico as a training center for hands-on offshore experience. In 2023, 482 personnel completed the training program. The American Petroleum Institute’s Center for Offshore Safety recognized the Valaris Basic Training Center with the 2023 Safety Leadership Award.

Safety

Our Safe Systems of Work are designed with the aim of completing each job safely and efficiently:

•Work Instruction – Step-by-step description of how to complete specific work activities, including mandatory precautions to be implemented;

•Permit to Work – Formal authorization and control process for the safe execution of potentially hazardous work that may present risk to people, environment or assets;

•Energy Isolation – Formal isolation of all energy sources before performing work on equipment;

•Job Safety Analysis – Identification and control of job hazards before starting work; and

•Stop Work Authority – Empowerment to stop work if a risk to people, environment or assets is perceived to exist.

As mentioned above, the Valaris Basic Training Program demonstrates our dedication to a safety-first work culture, and the ways in which we implement our Safe Systems of Work into our work.

Executive Officers

Officers generally serve for a one-year term or until successors are elected and qualified to serve. The table below sets forth certain information regarding our executive officers as of February ~~21, 2023:~~22, 2024:

Name

Age

Position

Anton Dibowitz

5152

President and Chief Executive Officer

Christopher Weber

5051

Senior Vice President and Chief Financial Officer

Gilles Luca

5152

Senior Vice President and Chief Operating Officer

Matthew Lyne

4849

Senior Vice President and Chief Commercial Officer

Davor Vukadin

4950

Senior Vice President and General Counsel

Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years:

Anton Dibowitz became the President and Chief Executive Officer of Valaris in December 2021, following his service as the Company’s interim President and Chief Executive Officer since September 2021. Mr. Dibowitz joined the Valaris board of directors in July 2021. Prior to joining the Valaris board of directors, he served as an advisor of Seadrill Ltd., a global offshore drilling contractor, from November 2020 until March 2021. He served as Chief Executive Officer of Seadrill Ltd. from July 2017 until October 2020. Prior to this Mr. Dibowitz served as Executive Vice President of Seadrill Management since June 2016, and as Chief Commercial Officer since January 2013. He has over 20 years of drilling industry experience. Prior to joining Seadrill, Mr. Dibowitz held various positions within tax, process reengineering and marketing at Transocean Ltd. and Ernst & Young LLP. He is a Certified Public Accountant and a graduate of the University of Texas at Austin where he received a Bachelor's degree in Business Administration and Master's degrees in Professional Accounting (MPA) and Business Administration (MBA).

Christopher Weber became the Senior Vice President and Chief Financial Officer of Valaris in August 2022. Previously, he served as Chief Financial Officer of LUFKIN Industries, a leading global provider of rod lift optimization solutions, products, technologies and services to the oil and gas industry, from February 2021 to July 2022. Mr. Weber has also served as Chief Financial Officer of Abaco Drilling Technologies from July 2019 to February 2021 and Chief Financial Officer of Haliburton Company from June 2017 to November 2018. Prior to Halliburton, Mr. Weber served as Chief Financial Officer of Parker Drilling Company, and held senior finance roles at Valaris predecessor companies, Ensco plc and Pride International, Inc. He received an MBA in Finance and Strategy from the Wharton School and a BA in Economics and English Literature from Vanderbilt.

Gilles Luca became Senior Vice President and Chief Operating Officer in December 2019. Previously, he served as Senior Vice President, Operations Support. He joined Ensco in 1997. Mr. Luca also served Ensco as Senior Vice President - Western Hemisphere, Vice President - Business Development and Strategic Planning, Vice President - Brazil Business Unit and General Manager - Europe and Africa. Before joining Ensco as an Operations Engineer in The Netherlands, Mr. Luca was employed by Foramer Drilling and Schlumberger with assignments in France and Venezuela. He holds a ~~Master~~Master's Degree in Petroleum Engineering from the French Petroleum Institute and a Bachelor in Civil Engineering.

Matthew Lyne became the Senior Vice President and Chief Commercial Officer of Valaris in September 2022. Previously, he served as Executive Vice President, Chief Commercial and Strategy Officer of Seadrill Limited from May 2021 to September 2022. Seadrill Limited filed for bankruptcy in February 2021. Prior to this role, he held a number of senior marketing and commercial roles at Seadrill Limited for more than 10 years. He also served in a number of senior operational and functional roles with Transocean Ltd. prior to joining Seadrill Limited. Mr. Lyne has over 20 years of offshore drilling experience in various international locations. Mr. Lyne has a Bachelor of Science degree in Engineering from Montana Technological University.

Davor Vukadin was appointed Senior Vice President, General Counsel and Secretary in May 2022. Before being named to his current position, Mr. Vukadin served as Associate General Counsel and Secretary from June 2021 to May 2022. Previously, he served as Associate General Counsel and Assistant Secretary from November 2018 to June 2021. He joined Valaris as Senior Counsel in 2014. Prior to joining Valaris, Mr. Vukadin practiced corporate and securities law with the law firm of Norton Rose Fulbright for thirteen years. He holds a Bachelor of Arts degree in Economics from The University of Chicago and a law degree from The University of Texas School of Law.

Emergence from Financial Restructuring

On August 19, 2020 (the “Petition Date”), Valaris plc (“Legacy Valaris” or “Predecessor”) and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court under the caption In re Valaris plc, et al., Case No. 20-34114 (MI) (the “Chapter 11 Cases”). On March 3, 2021, the Bankruptcy Court confirmed the Debtors' chapter 11 plan of reorganization.

On April 30, 2021 (the "Effective Date"), we successfully completed our financial restructuring and together with the Debtors emerged from the Chapter 11 Cases. Upon emergence from the Chapter 11 Cases, we eliminated $7.1 billion of debt and obtained a $520 million capital injection by issuing the first lien secured notes (the "First Lien Notes"). See “Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the First Lien Notes. On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and common shares of Valaris with a nominal value of $0.01 per share (the “Common Shares”) were issued. Also, former holders of Legacy Valaris' equity were issued warrants (the "Warrants") to purchase Common Shares. See “Note 9 - Shareholders' Equity" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the issuance of the Common Shares and Warrants.

See“Note 2 – Chapter 11 Proceedings” and "Note 3 - Fresh Start Accounting" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional details regarding the reorganization, Chapter 11 Cases and related items.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports that we file with, or furnish to, the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act are available free of charge on our website at www.valaris.com/investors. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The information contained on our website is not included as part of, or incorporated by reference into, this report.

1613

RISK FACTORS SUMMARY

An investment in our securities involves a high degree of risk. You should consider carefully all of the risks described below, together with the other information contained in this Form 10-K, before making a decision to invest in our securities. If any of the following events occur, our business, financial condition and operating results may be materially adversely affected. In that event, the trading price of our securities could decline, and you could lose all or part of your investment.

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

•The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production, which can be significantly affected by volatile oil and natural gas prices.

•The offshore contract drilling industry is highly competitive and cyclical.

•Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future.

•Our business will be materially adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected.

•Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities.

•The loss of a significant customer or customer contract, as well as customer consolidation and changes to customer strategy, could materially adversely affect our business.

•Our long-term contracts are subject to the risk of cost increases, which could adversely affect our profitability.

•Our ~~information technology~~network and systems, including rig operating systems and critical data, are subject to cybersecurity ~~risks.~~risks and technical disruptions.

•Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows.

•We make significant expenditures to meet customer requirements, maintain our fleet to comply with laws and the applicable regulations and standards of governmental authorities and organizations, or to expand our fleet, and we may be required to make significant expenditures to maintain our competitiveness.

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

•Our shared service center may not create the operational efficiencies that we expect and may create risks relating to the processing of transactions and recording of financial information.

•We may not realize the expected benefits of our ARO joint venture.

•Joint venture investments could be adversely affected by our joint venture ~~partners'~~partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners.

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

•Geopolitical events and violence could materially adversely affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance.

•Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.

•The impact and effects of public health crises, pandemics and epidemics, such as the COVID-19 pandemic, could have a material adverse effect on our business, financial condition and results of operations.

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

•Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows.

•Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues.

•Our ability to pay our operating and capital expenses and make payments due on our debt depends on many factors beyond our control.

•The agreements governing our debt, including the Indenture ~~(as defined below) governing~~and the ~~First Lien Notes contains provisions~~Credit Agreement, contain various covenants that ~~could limit~~impose restrictions on us and certain of our ~~business activities.~~subsidiaries.

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

•Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the Bankruptcy Court in the course of the Chapter 11 Cases.

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

Regulatory, Legal and Tax Risks

•Failure to comply with anti-corruption and anti-bribery statutes ~~such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010,~~ could result in fines, criminal penalties and drilling contract ~~terminations and materially adversely affect our financial position, operating results or cash flows.~~terminations.

•Increasing regulatory complexity could adversely impact our ~~offshore drilling~~ operations and reduce demand.

•Compliance with or breach of environmental laws ~~could~~can be costly and limit our operations.

•The U.S. Internal Revenue Service ~~("IRS"~~(“IRS”) may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes.

•~~U.S. tax laws and IRS guidance could affect our ability to engage in certain transactions.~~

•Governments may pass laws that subject us to additional taxation or may challenge our tax positions.

•Our consolidated effective income tax rate may vary substantially over time.

•We are subject to litigation that could have a material adverse effect on us.

•~~The rights of our shareholders are governed under~~As a Bermuda ~~law, and as a result, holders of our Common Shares~~company, it may ~~have difficulty~~be difficult enforcing ~~civil~~ judgments against ~~us.~~us, our directors and officers.

•Our bye-laws restrict shareholders from bringing legal action against our officers and directors.

•Provisions in our bye-laws could delay or prevent a change in control of our company.

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

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

Risks Related to Our International Operations

•Our non-U.S. operations involve additional risks not typically associated with U.S. operations.

~~ESG~~

Sustainability Risks

•Regulation of ~~greenhouse gases~~GHGs and climate change could have a negative impact on our business.

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

•Increased scrutiny from stakeholders and others regarding our ~~ESG~~sustainability practices, initiatives and reporting responsibilities could result in additional costs or risks.

Item 1A. Risk Factors

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

The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production, which can be significantly affected by volatile oil and natural gas prices.

The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production. Oil and natural gas prices, and market expectations of these prices, significantly affect the level of drilling activity. Historically, when operator capital spending declines, utilization and day rates also decline. The sharp decline in oil and natural gas prices resulting from the COVID-19 pandemic and the activities of OPEC+ caused a significant decline in both drilling activity and prices for our services in fiscal year 2020. While market conditions have improved, we have not experienced a multi-year period of higher sustained oil and natural gas prices. The lack of a sustained and stable recovery, price reductions or volatility in oil and natural gas prices may cause our customers to lower levels of capital spending or reduce their overall level of activity, in which case demand for our services may decline and revenues may be materially adversely affected through lower rig utilization and/or lower day rates.

Numerous factors may affect oil and natural gas prices and the level of demand for our services, including:

•regional and global economic conditions and changes therein, including recessions,

•oil and natural gas supply and demand, which is affected by worldwide economic activity and population growth,

•expectations regarding future energy prices,

•the desire and ability of ~~the Organization of Petroleum Exporting Countries ("OPEC")~~OPEC+, its members and other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements,

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

•the level of production by non-OPEC countries,

•U.S. and non-U.S. tax policy, including the U.K. windfall tax on oil and gas producers in the British North Sea,

•advances in exploration and development technology, including with respect to onshore shale,

•costs associated with exploring for, developing, producing and delivering oil and natural gas,

•the rate of discovery of new oil and natural gas reserves and the rate of decline of existing oil and gas reserves,

•investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit climate change,

•laws and government regulations that limit, restrict or prohibit exploration and development of oil and natural gas in various jurisdictions, or materially increase the cost of such exploration and development,

•the development and exploitation of alternative fuels or energy sources, resulting in reduced capital spending by our customers on oil and natural gas projects, and increased demand for electric-powered products, including electric-powered vehicles,

•disruption to exploration and development activities due to hurricanes and other adverse weather conditions and the risk thereof,

•natural disasters or incidents resulting from operating hazards inherent in offshore drilling, such as oil spills,

•the worldwide military or political environment, including the invasion of Ukraine by Russia and the conflict in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism, and

•~~COVID-19 and related public health measures implemented by governments worldwide and~~ the occurrence or threat of ~~other~~ epidemic or pandemic diseases ~~including variants of COVID-19,~~ and any government response to such occurrence or threat.

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

These factors could cause our revenues and profits to decline and limit our future growth prospects. Any significant decline in day rates or utilization of our drilling rigs could materially adversely affect our financial position, operating results and cash flows. In addition, these risks could increase instability in the financial and insurance markets and make it more difficult for us to access capital and obtain insurance coverage that we consider adequate or are otherwise required by our contracts.

The offshore contract drilling industry is highly competitive and cyclical.

Our industry is highly competitive, and our contracts are traditionally awarded on a competitive bid basis. Pricing, safety records and competency are key factors in determining which qualified contractor is awarded a contract. Rig availability, location and technical capabilities also can be significant factors in the determination. If we are not able to compete successfully, our revenues and profitability may decline.

Demand for offshore contract drilling services is highly cyclical, which is primarily driven by the demand for drilling rigs and the available supply of drilling rigs. Demand for drilling rigs is driven by the levels of offshore exploration and development conducted by oil and natural gas companies, which is beyond our control and may fluctuate substantially from year-to-year and from region-to-region.

Prolonged periods of reduced demand or excess rig supply have required us, and may in the future require us, to idle, sell or scrap rigs and enter into low day rate contracts or contracts with unfavorable terms. There can be no assurance that the current demand for drilling rigs will increase in the future or that any short-term improvement to market conditions will be sustained. Any ~~further~~ decline in demand for drilling rigs or oversupply of drilling rigs could materially adversely affect our financial position, operating results or cash flows.

Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future.

As of February 15, 2024 and February 21, 2023, ~~and 2022,~~ our contract backlog was approximately ~~$2.5~~$3.9 billion and ~~$2.4~~$2.5 billion, respectively. This amount reflects the remaining contractual terms multiplied by the applicable contractual day rate. The contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations.

Several factors could cause rig downtime or a suspension of operations, many of which are beyond our control, including the early termination, repudiation or renegotiation of contracts, breakdowns of equipment, work stoppages, including labor strikes, shortages of material or skilled labor, surveys or inspections by government and maritime authorities, inability to obtain the requisite permits or approvals, periodic classification surveys, severe weather, strong ocean currents or harsh operating conditions, the occurrence or threat of epidemic or pandemic diseases, ~~such as COVID-19,~~ and any government response to such occurrence or threat and force majeure events.

Our customers may seek to terminate, repudiate or renegotiate our drilling contracts for various reasons, including in the event of damage or a total loss of the drilling rig, the suspension or interruption of operations for extended periods due to breakdown of major rig equipment, failure to comply with performance conditions or equipment specifications, the failure of the customer to receive final investment decision (FID) with respect to projects for which the drilling rig was contracted or other reasons and ~~"force majeure"~~“force majeure” events beyond the control of either party or other specific conditions. Generally, our drilling contracts permit early termination of the contract by the customer for convenience (without cause), exercisable upon advance notice to us, and in certain cases without making an early termination payment to us. In cases where customers are required to make an early termination payment, such payments would provide some level of compensation to us for the lost revenue from the contract but in many cases would not fully compensate us for all of the lost revenue. There can be no assurances that our customers will be able to or willing to fulfill their contractual commitments to us.

A decline in oil and natural gas prices and any resulting downward pressure on utilization may cause some customers to consider early termination of select contracts despite having to pay onerous early termination fees in certain cases. Customers may request to renegotiate the terms of existing contracts, or they may request early termination or seek to repudiate contracts. In addition, financially distressed customers may seek to negotiate reduced termination fees as part of a restructuring package. Furthermore, as contracts expire, we may be unable to secure new contracts for our drilling rigs. Therefore, revenues recorded in future periods could differ materially from our current backlog. Our inability to realize the full amount of our contract backlog or to secure a new contract with substantially similar terms on a timely basis could materially adversely affect our financial position, operating results or cash flows.

Our business will be materially adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected.

Our ability to renew expiring contracts or obtain new contracts and the terms of any such contracts will depend on market conditions. In December 2023, we took delivery of VALARIS DS-13 and VALARIS DS-14 (the "Newbuild Drillships") for an aggregate purchase price of approximately $337.0 million, which are currently uncontracted. Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions. We may be unable to renew our expiring contracts, including contracts expiring due to a failure by the customer to exercise option periods, or obtain new contracts for the Newbuild Drillships or the drilling rigs under contracts that have expired or have been ~~terminated, and~~terminated. In addition, the day rates under any new contracts or any renegotiated contracts may be substantially below the existing day rates, which could materially adversely affect our financial position, operating results or cash flows. If customers do not exercise option periods under contracts that we currently expect to be exercised, we may face increased idle time associated with the related ~~rig,~~rigs, as we may have difficulty securing additional work to cover the option ~~period.~~periods. In addition, we may choose to stack idle rigs that are not under contract, which would require us to incur stacking costs for such rigs.

Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities.

Some of our customers may be subject to liquidity risk that could lead them to seek to repudiate, cancel or renegotiate our drilling contracts or fail to fulfill their commitments to us under those contracts. These risks are heightened in periods of depressed market conditions. Our drilling contracts provide for varying levels of indemnification and allocation of liabilities between our customers and us with respect to loss or damage to property and injury or death to persons arising from the drilling operations we perform. Under our drilling contracts, liability with respect to personnel and property customarily is allocated so that we and our customers each assume liability for our respective personnel and property. Our customers have historically assumed most of the responsibility for, and indemnified us from loss, damage or other liability resulting from, pollution or contamination, including ~~clean-~~

upclean-up and removal, and third-party damages arising from operations under the contract when the source of the pollution originates from the well or reservoir, including those resulting from blowouts or cratering of the well. However, we regularly are required to assume a limited amount of liability for pollution damage caused by our negligence, which

liability generally has caps for ordinary negligence, with much higher caps or unlimited liability where the damage is caused by our gross negligence or willful misconduct. Notwithstanding a contractual indemnity from a customer, there can be no assurance that our customers will be financially able to fulfill their indemnification obligations to us for such losses. In addition, under the laws of certain jurisdictions, such indemnities under certain circumstances are not enforceable if the cause of the damage was our gross negligence or willful misconduct. This could result in us having to assume liabilities in excess of those agreed in our contracts due to customer balance sheet or liquidity issues or applicable law.

The loss of a significant customer or customer contract, as well as customer consolidation and changes to customer strategy, could materially adversely affect our business.

We provide our services to major international, government-owned and independent oil and natural gas companies. During ~~2022,~~2023, our five largest customers accounted for ~~43%~~40% of consolidated revenues, with our largest customer representing ~~15%~~11% of our consolidated revenues and a significant percentage of our operating cash flows. Our financial position, operating results or cash flows may be materially adversely affected if any of our higher day rate contracts were terminated or renegotiated on less favorable terms or if a major customer terminates its contracts with us, fails to renew its existing contracts with us, requires renegotiation of our contracts or declines to award new contracts to us.

Some of our customers have consolidated and could continue to consolidate and could use their size and purchasing power to achieve economies of scale and pricing concessions. In addition, certain of our customers are increasingly focusing their business strategy on renewable energy projects and away from oil and natural gas exploration and production. Such customer consolidation and strategic transitions could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts. If we cannot maintain service and pricing levels for existing customers or replace such revenues with increased business activities from other customers, our financial position, operating results and cash flows could be materially adversely affected.

Our long-term contracts are subject to the risk of cost increases, which could adversely impact our profitability.

In general, our costs increase as the demand for contract drilling services and skilled labor increase, which may materially adversely affect our financial position, operating results or cash flows. Our long-term contracts are subject to inflationary factors such as increases in skilled labor costs, material costs and overhead costs. While some of our contracts include cost escalation provisions that allow changes to our day rate based on stipulated cost increases or decreases, the timing and amount earned from these day rate adjustments may differ from our actual increase in costs and many contracts do not allow for such day rate adjustments. During times of reduced demand, reductions in costs may not be immediate as portions of the crew may be required to prepare our rigs for stacking, after which time the crew members are assigned to active rigs or dismissed. Moreover, as our rigs are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. In general, labor costs increase primarily due to higher salary levels in a particular geographic location and inflation. Equipment maintenance expenses fluctuate depending upon the type of activity a drilling rig is performing and the age and condition of the equipment, as well as the impact of supply chain disruptions and inflation on the costs of parts and materials. Contract preparation expenses vary based on the scope and length of contract preparation required.

Our ~~information technology~~network and systems, including rig operating systems and critical data, are subject to cybersecurity ~~risks.~~risk and technical disruptions.

~~We depend~~Our business depends on technologies, systems and networks, including both operational technology and information technology (“IT”), to conduct our offshore operations and help run our financial and onshore operations functions, including the collection of payments from customers, payments to vendors and employees and storage of company records. ~~Our information~~Some of these systems are managed or provided by third-party service providers, including cloud platform or cloud software providers.

Cybersecurity incidents, including unauthorized access, social engineering (including phishing), malware (including ransomware), distributed denial-of-service attacks, identity compromise and technical disruptions could materially impact our IT and operational technology systems, including critical systems and infrastructure, ~~may fail or be subject to flaws that could adversely~~and our data, as well as impact our ~~business. In addition, despite our security measures,~~third-party service providers on whom we ~~could be vulnerable to attacks by third-parties or breaches due to employee error, malfeasance or other disruptions.~~rely. The risks associated with the failure of our ~~computer~~ systems and cyber incidents and attacks on our ~~information technology~~ systems could include disruptions of certain systems on our rigs; other impairments of our ability to conduct our operations, including disruptions in our ability to make or receive payments and financial and onshore operating functions, loss of intellectual property, proprietary information, customer and vendor data or other sensitive information; corruption or unauthorized release of our or our customer’s critical data; disruption of our or our ~~customers'~~customers’ operations; and increased costs to prevent, respond to or mitigate cybersecurity events. Our business operations could be materially impacted by an incident or interruption of systems we rely on that originates from, or compromises, third‐party networks or devices, including those of our third‐party service providers. Any such ~~breach~~incident or attack could result in injury to people, loss of control of, or damage to, our, or our ~~customer's,~~customer’s, assets, downtime, and loss of revenue or harm to the environment. Any such ~~breach~~incident or attack could also compromise our networks or our ~~customers'~~customers’ and ~~vendors'~~vendors’ networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in significant fines, civil and/or criminal claims or proceedings.

Laws and regulations governing cybersecurity and data privacy and the unauthorized disclosure of confidential or protected information ~~including the European Union General Data Protection Regulation,~~ pose increasingly complex compliance challenges and potential costs, and any failure to comply with these data cybersecurity and privacy requirements or other applicable laws and regulations in this area could result in significant regulatory or other penalties and legal liability. Disruption to our operations and damage to our reputation could materially adversely affect our financial position, operating results or cash flows.

There can also be no assurance that our efforts, or the efforts of our partners and vendors, to invest in the protection of information technology infrastructure and data will prevent or identify ~~breaches~~incidents in our systems. While we have a cybersecurity program and incident response plan in place to prepare for, detect, respond to, mitigate and recover from the impact of these attacks, cyber-attacks may leverage previously unknown vulnerabilities, sophisticated new techniques and emerging technologies and, there can be no assurance that our response will be successful or effectively address the incident on a timely basis. As a result of a cybersecurity incident, we could suffer interruptions in our ability to manage our operations, which may materially adversely affect our business and financial results. In addition, we may incur large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, or to protect against similar future events. Regardless of the specific nature of a cybersecurity incident, we could experience material operational impact, financial loss, legal liability, regulatory violations or reputational harm.

Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows.

The costs required to reactivate a stacked rig and return the rig to drilling service are significant. Depending on the length of time that a rig has been stacked, we may incur significant costs to restore the rig to drilling capability, which may also include capital expenditures due to, among other things, technological obsolescence or an equipment overhaul of the rig. Stacked drilling rigs require expenditures to return these rigs to drilling service. In the future, market conditions may not justify these types of expenditures or enable us to operate our rigs profitably during the remainder of their economic lives. In addition, we may not recover the expenditures incurred to reactivate rigs through the associated drilling contract or otherwise. We can provide no assurance that we will have access to adequate or economical sources of capital to fund the return of stacked rigs to drilling service.

During periods of increased rig reactivation, upgrade and enhancement projects, shipyards and third-party equipment vendors may be under significant resource constraints to meet delivery obligations. Such constraints may lead to substantial delivery and commissioning delays, equipment failures and/or quality deficiencies. Furthermore, drilling rigs may face start-up or other operational complications following completion of upgrades or maintenance. Other unexpected difficulties, including equipment failures, design or engineering problems, could result in significant downtime at reduced or zero day rates or the cancellation or termination of drilling contracts.

Rig reactivation, upgrade, life extension and repair projects are subject to the risks of delay or cost overruns, including the following: failure of third-party equipment to meet quality and/or performance standards, delays in equipment deliveries or shipyard construction, shortages of materials or skilled labor, disruptions occurring as the result of pandemics and/or epidemics and related public health measures implemented by governments worldwide, damage to shipyard facilities, including damage resulting from fire, explosion, flooding, severe weather, terrorism, war or other armed hostilities, unforeseen design or engineering problems, including those relating to the commissioning of newly designed equipment, unanticipated actual or purported change orders, strikes, labor disputes or work stoppages, financial or operating difficulties of equipment vendors or the shipyard while enhancing, upgrading, improving or repairing a rig or rigs, unanticipated cost increases, foreign currency exchange rate fluctuations impacting overall cost, inability to obtain the requisite permits or approvals, client acceptance delays, disputes with shipyards and suppliers, latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions, claims of force majeure events, and additional risks inherent to shipyard projects in a non-U.S. location. These risks could result in the cancellation or termination of drilling contracts for which the drilling rig was contracted or reduce the likelihood that such drilling rigs will receive a drilling contract if not already contracted.

We make significant expenditures to meet customer requirements, maintain our fleet to comply with laws and the applicable regulations and standards of governmental authorities and organizations, or to expand our fleet, and we may be required to make significant expenditures to maintain our competitiveness.

We make substantial expenditures to maintain our fleet. These expenditures could increase as a result of changes in offshore drilling technology, the cost of labor and materials, customer requirements, fleet size, the cost of replacement parts for existing drilling rigs, the geographic location of the drilling rigs, length of drilling contracts, governmental regulations, maritime regulations and technical standards relating to safety, security or the environment, and industry standards.

Changes in offshore drilling technology, customer requirements for new or upgraded equipment, and competition within our industry may require us to make significant capital expenditures. In addition, changes in governmental regulations relating to decarbonization, environmental, emissions, safety or equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations, may require us to make additional unforeseen capital expenditures. In addition, commitments made by us, or our customers, to reduce emissions, or decarbonize, may require us to upgrade or retrofit our drilling rigs with additional equipment, less carbon intensive equipment or instrumentation. As a result, we may be required to take our drilling rigs out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment. In the future, market conditions may not justify these expenditures or enable us to operate our drilling rigs profitably during the remainder of their economic useful lives.

Additionally, in order to expand our fleet, we may require additional capital in the future. If we are unable to fund capital requirements with cash flows from operations or proceeds from sales of non-core assets, we may be required to either incur additional borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets may be limited by our financial condition at the time, by restrictive covenants in our debt agreements, bye-laws and regulations and by adverse market conditions resulting from, among others, general economic conditions, contingencies and uncertainties that are beyond our control. Similarly, when lenders and institutional investors reduce, and in some cases cease to provide, funding to industry borrowers, the liquidity and financial condition of us and our customers can be adversely impacted. If we raise funds by issuing equity securities, existing shareholders may experience dilution, and if we raise funds by issuing additional debt securities,

we may have to pledge additional assets as collateral. Our failure to obtain the funds for necessary future capital expenditures could materially adversely affect our business and on our financial position, operating results or cash flows.

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

We require skilled personnel to operate our drilling rigs and to provide technical services and support for our business, and ~~our~~further rig ~~reactivation program~~reactivations will require that we hire additional skilled personnel. As demand for our services and the number of active drilling rigs has increased, competition for the labor required for drilling operations and construction projects has intensified, ~~potentially~~ leading to shortages of qualified personnel in the industry. During ~~such~~ periods of intensified competition, it is more difficult and costly to recruit, train and retain qualified employees, including in foreign countries that require a certain percentage of national employees. ~~We may also face a loss of workers and labor shortages as a result of requirements and enforcement of COVID-19 regulations in jurisdictions where we operate.~~ The most recent prolonged industry downturn and resulting reductions in offshore personnel wages further reduced the number of qualified personnel available. Hiring qualified and experienced personnel with the specialized skills and qualifications required to operate an offshore drilling rig is difficult due to the competitive labor market and lack of experience. In anthe current environment where competition for labor is intense, we may be required to increase existing levels of compensation to stay competitive in retaining a skilled workforce.

In addition, new personnel that we hire may need to undergo training to develop the skills needed to perform their job duties. There can be no assurance that our training programs will be adequate for these purposes, which could expose us to operational hazards and risks. We may also incur additional training costs to ensure that new or promoted personnel have the right skills and qualifications.

We also are subject to potential legislative or regulatory action that may impact working conditions, paid time off or other conditions of employment, including mandated vaccination programs. These conditions could further increase our costs or limit our ability to fully staff and operate our drilling rigs.

The increases in employment costs cause an increase in operating expenses, with a resulting reduction in net income, and our ability to fully staff and operate our drilling rigs may be negatively affected.

Our shared service center may not create the operational efficiencies that we expect and may create risks relating to the processing of transactions and recording of financial information, which could materially adversely affect our financial condition, operating results or cash flows.

We have implemented a shared service center program pursuant to which we have outsourced certain finance, human resources, supply chain and IT functions. We have and will continue to align the design and operation of our financial control environment as part of our shared service center program. As part of this program, we are outsourcing, and will continue to outsource, certain accounting, payroll, human resources, supply chain and IT functions to a third-party service provider. The party that we utilize for these services may not be able to handle the volume of activity or perform the quality of service necessary to support our operations. The failure of the third-party to fulfill its obligations could disrupt our operations. In addition, the move to a shared service environment, including our reliance on a third-party provider, may create risks relating to the processing of transactions and recording of financial information. We could experience a lapse in the operation of internal controls due to turnover, lack of legacy knowledge, inappropriate training and use of a third-party provider, which could result in significant deficiencies or material weaknesses in our internal control over financial reporting and materially adversely affect our financial position, operating results or cash flows.

We may not realize the expected benefits of our ARO joint venture.

ARO, our 50/50 unconsolidated ARO joint venture and a provider of offshore drilling services, faces many of the same risks as we face. Operating through ARO, in which we have a shared interest, may result in our having less control over many decisions made with respect to projects, operations, safety, utilization, internal controls and other operating and financial matters. ARO may not apply the same controls and policies that we follow to manage our risks, and ARO’s controls and policies may not be as effective. As a result, operational, financial and control issues may arise, which could materially adversely affect our financial position, operating results or cash flows. Additionally, in order to establish or preserve our relationship with our joint venture partner we may agree to risks

and contributions of resources that are proportionately greater than the returns we could receive, which could reduce our income and return on our investment in ARO compared to what we may traditionally require in other areas of our business.

ARO’s income and accounts receivable are concentrated with Saudi Aramco. The loss of this customer, or a substantial decrease in demand by this customer for ARO’s services, would have a material adverse effect on ARO’s business, results of operations and financial condition, which could materially adversely affect our financial position, operating results or cash flows.

We have issued a 10-year shareholder notes receivable to ARO (the ~~"Notes~~“Notes Receivable from ~~ARO"~~ARO”), which are governed by the laws of Saudi Arabia. In the event of a dispute with ARO over the repayment of the Notes Receivable from ARO, our ability to enforce the payment obligations of ARO or to exercise other remedies are subject to several significant limitations, including that our ability to accelerate outstanding amounts under the Notes Receivable from ARO is subject to the consent of Saudi Aramco and that the Notes Receivable from ARO are governed by the laws of Saudi Arabia, and we are limited to the remedies available under Saudi law. In addition, our Notes Receivable from ARO are subordinated and junior in right of payment to ARO’s term loan described below, and as such, we may not be repaid the interest or principal amounts of the Notes Receivable from ARO.

We have a potential obligation to fund ARO for newbuild jackup rigs. The shareholder agreement governing the joint venture (the "Shareholder Agreement") specifies that ARO ~~has plans to~~shall purchase 20 newbuild jackup rigs over an approximate 10-year period. ~~In January 2020, ARO ordered the~~The first two newbuild ~~jackups. While~~jackups were ordered in January 2020. The first rig, Kingdom 1, was delivered in the ~~shipyard contract contemplated that these newbuild rigs would~~fourth quarter of 2023 and the second is expected to be delivered in ~~2022,~~ the ~~delivery~~first half of ~~the rigs has been delayed into 2023.~~2024. ARO is expected to ~~place~~commit to orders for two additional newbuild jackups in the near ~~term.~~ term. There can be no assurance that the new jackup rigs will begin operations as anticipated.

The joint venture partners intend for the newbuild jackup rigs to be financed out of ARO's available cash on hand or from operations and/or funds available from third-party financing. In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes. Further, in the event ARO has insufficient cash ~~from operations~~ or is unable to obtain third-party financing, weeach partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion ~~under~~from each partner to fund the ~~ARO shareholders’ agreement.~~newbuild program. Beginning with the delivery of the second newbuild, each partner's commitment shall be reduced by the lesser of the actual cost of each newbuild rig, or $250.0 million, on a proportionate basis. Any required capital contributions we make could negatively impact our liquidity position and financial condition.

As a result of these risks, it may take longer than expected for us to realize the expected returns on our investment in ARO or such returns may ultimately be less than anticipated. Additionally, if we are unable to make any required contributions, our ownership in ARO could be diluted which could hinder our ability to effectively manage ARO and could materially adversely affect our financial position, operating results or cash flows.

Joint venture investments could be adversely affected by our joint venture partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners.

We have made investments in joint ventures other than ARO. Such investments are subject to the risk that the other shareholders of the joint venture, who may have different business or investment strategies than us or with whom we may have a disagreement or dispute, may have the ability to block business, financial, or management decisions (such as the decision to distribute dividends or appoint members of management), which may be crucial to the success of our investment in the joint venture, or could otherwise implement initiatives which may be contrary to our interests. Our partners may be unable, or unwilling, to fulfil their obligations under the relevant agreements regarding such joint ventures (for example by non-contributing working capital or other resources), or may experience financial, operational, or other difficulties that may adversely impact our investment in a particular joint venture. In addition, our partners may lack sufficient controls and procedures which could expose us to risk. If any of the foregoing were to occur, such occurrence could materially adversely affect our financial position, operating results or cash flows.

We may pursue other joint ventures that we believe will enable us to further expand or enhance our business. Any such joint venture would be evaluated on a case-by-case basis, and its consummation would depend upon numerous factors, including identifying suitable opportunities that align with our business strategy, reaching agreement with the potential counterparty on acceptable terms, the receipt of any applicable regulatory and other approvals, and other conditions. Any such joint venture would involve various risks, including among others (1) difficulties related to integrating or managing applicable parts of a joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management’s attention from day-to-day operations, (3) failure to realize anticipated benefits, such as cost savings, revenue enhancements or business synergies, (4) the potential for substantial transaction expenses and (5) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time any such transaction is consummated.

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

The drilling of oil and natural gas wells involves numerous operating hazards, such as blowouts, reservoir damage, loss of production, loss of well control, uncontrolled formation pressures, lost or stuck drill strings, equipment failures and mechanical breakdowns, punch throughs, craterings, industrial accidents, fires, explosions, oil spills and pollution. Contract drilling requires the use of heavy equipment and exposure to hazardous conditions, which may subject us to liability claims by employees, customers and other parties or prosecution by governmental authorities. These hazards can cause personal injury or loss of life, severe damage to, or destruction of, property and equipment, pollution or environmental damage, which could lead to claims by employees, contractors or third parties and suspension of operations and contract terminations. Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, collision, piracy, damage from adverse weather and marine life infestations. The U.S. Gulf of Mexico and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance. The occurrence of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury to or death of rig personnel. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services or personnel shortages. Damage to the environment could also result from our operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations or fires. We may also be subject to property damage, environmental indemnity and other claims by third parties. Drilling involves certain risks associated with the loss of control of a well, such as blowout, cratering, the cost to regain control of or redrill the well and remediation of associated pollution. Our customers may be unable or unwilling to indemnify us against such risks. In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable. The law generally

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

Our insurance policies and drilling contracts contain rights to indemnity that may not adequately cover our losses, and we do not have insurance coverage or rights to indemnity for all risks. We have two main types of insurance coverage: (1) hull and machinery coverage for physical damage to our property and equipment and (2) excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution. We have no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of Mexico for our jack-up fleet and only limited coverage for our floater fleet. We also retain the risk for any liability that exceeds our excess liability coverage. Pollution and environmental risks generally are not completely insurable.

If a significant accident or other event occurs that is not fully covered by our insurance or by an enforceable or recoverable indemnity, the occurrence could materially adversely affect our financial position, operating results or cash flows. The amount of our insurance may also be less than the related impact on enterprise value after a loss. Our insurance coverage will not in all situations provide sufficient funds to protect us from all liabilities that could result from our drilling operations. Our coverage includes annual aggregate policy limits. As a result, we generally retain the risk for any losses in excess of these limits. We currently ~~do not~~only carry limited insurance for loss of ~~revenue,~~hire for several of our rigs, and certain other claims may also not be reimbursed, in part or full, by insurance carriers. Any such lack of reimbursement may cause us to incur substantial costs. In addition, we could decide to retain more risk in the future, resulting in higher risk of losses, which could be material. Moreover, we may not be able to maintain adequate insurance in the future at rates that we consider reasonable or be able to obtain insurance against certain risks. Furthermore, our insurance carriers may assert that our insurance policies do not provide coverage for our losses. Our insurance policies also have exclusions of coverage for some losses. Uninsured exposures may include radiation hazards, loss of hire and losses relating to terrorist acts or strikes and some cyber events. As a result of increased costs to insurance companies due to regulatory, geopolitical, reputational or other developments, insurance companies that have historically participated in underwriting risks arising out of oil and natural gas operations may discontinue that practice, may reduce the insurance capacity they are willing to deploy or demand significantly higher premiums or deductibles to cover these risks. Additionally, a significant number of high cost climate-related insurance claims or natural catastrophes such as hurricanes, floods or windstorms may result in withdrawal of insurance capacity and increasing premiums to oil and natural gas industry companies.

Geopolitical events and violence could materially adversely affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance.

Geopolitical events have resulted in military actions, terrorist, pirate and other armed attacks, civil unrest, political demonstrations, mass strikes and government responses to such events. Military action by the U.S. or other nations could escalate, and acts of terrorism, piracy, kidnapping, extortion, acts of war, violence, civil war or general disorder may initiate or continue. Such acts could be directed against us or our assets. Such developments have caused instability in the world’s financial and insurance markets in the past. In addition, these developments could lead to increased volatility in prices for oil and natural gas and could materially adversely affect the markets for our services, particularly to the extent that such events take place in regions with significant oil and natural gas reserves, refining facilities or transportation infrastructure. For example, the ongoing ~~conflict,~~conflicts, and the continuation of, or any increase in the severity of, the ~~conflict between Russia~~conflicts in Ukraine and ~~Ukraine,~~the Middle East, has led and may continue to lead to an increase in the volatility of global oil and natural gas prices. Insurance premiums could increase and coverage for these kinds of events may be unavailable in the future. Any or all of these effects could materially adversely affect our financial position, operating results or cash flows.

Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.

We currently own and operate 13 drilling rigs that are contracted with national oil companies. The terms of these contracts are often non-negotiable and may expose us to greater commercial, political and operational risks than we assume in other contracts, such as exposure to materially greater environmental liability, personal injury and other claims for damages (including consequential damages), or, in certain cases, the risk of early termination of the contract for convenience (without cause), exercisable upon advance notice to us, contractually or by governmental action, without making an early termination payment to us. We can provide no assurance that the increased risk exposure will not have an adverse impact on our future operations or that we will not increase the number of drilling rigs contracted to national oil companies with commensurate additional contractual risks.

The impact and effects of public health crises, pandemics and epidemics ~~such as the COVID-19 pandemic,~~ could have a material adverse effect on our business, financial condition and results of operations.

Public health crises, pandemics and epidemics ~~such as the COVID-19 pandemic,~~ and fear of such events ~~have adversely impacted and~~ may ~~continue to~~ adversely impact our operations, the operations of our customers and the global economy, including the worldwide demand for oil and natural gas and the level of demand for our services. Other effects of such public health crises, pandemics and epidemics ~~including the COVID-19 pandemic, have included and~~ may ~~continue to~~ include significant volatility and disruption of the global financial markets; continued volatility of crude oil prices and related uncertainties around OPEC+ production; disruption of our operations, including suspension of drilling activities; impact to costs; loss of workers; labor shortages; supply chain disruptions or equipment shortages; logistics constraints; customer demand for our services and industry demand generally; capital spending by oil and natural gas companies; our liquidity; the price of our securities and trading markets with respect thereto; our ability to access capital markets; asset impairments and other accounting changes; certain of our customers experiencing bankruptcy or otherwise becoming unable to pay vendors, including us; and employee impacts from illness, travel restrictions, including border closures and other community response measures. Such public health crises, pandemics and epidemics are continuously evolving and the extent to which our business operations and financial results ~~continue to~~may be affected depends on various factors beyond our control, such as the duration, severity and sustained geographic resurgence of ~~the COVID-19 virus; the emergence, severity~~public health crises, pandemics and ~~spread of new variants of the COVID-19 virus;~~epidemics; the impact and effectiveness of governmental actions to contain and treat such outbreaks, including government policies and restrictions; vaccine hesitancy, vaccine mandates, and voluntary or mandatory quarantines; and the global response surrounding such uncertainties.

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

Outside of the U.S., we are often subject to collective bargaining agreements that require periodic salary negotiations, which usually result in higher personnel expenses and other benefits. Efforts have been made from time to time to unionize other portions of our workforce. In addition, we have been subjected to strikes or work stoppages and other labor disruptions in certain countries. Additional unionization efforts, new collective bargaining agreements or work stoppages could materially increase our costs, reduce our profitability or limit our flexibility.

Certain legal obligations require us to contribute certain amounts to retirement funds or other benefit plans and restrict our ability to dismiss employees. Future regulations or court interpretations established in the countries in which we conduct our operations could increase our costs and materially adversely affect our financial position, operating results or cash flows.

Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows.

Our reliance on third-party suppliers, manufacturers and service providers to secure equipment, parts, components and sub-systems used in our operations exposes us to potential volatility in the quality, prices and availability of such items. Certain high-specification parts and equipment that we use in our operations may be available only from a small number of suppliers, manufacturers or service providers, or in some cases must be sourced through a single supplier, manufacturer or service provider. Industry consolidation has reduced and may continue to reduce the number of available suppliers, and our suppliers have been and may continue to be impacted by supply chain and logistics disruptions that began during the COVID-19 pandemic. A disruption in the deliveries from such third-party suppliers, manufacturers or service providers, capacity constraints, production disruptions, price increases, including those related to inflation and supply chain disruption, quality control issues, recalls or other decreased availability of parts and equipment could adversely affect our ability to meet our commitments to customers by making it cost prohibitive to do so, thus adversely impacting our operations and revenues and/or our operating costs. Delays in the delivery of critical drilling equipment could cause delays in the expected timing of rig

reactivation, enhancement or upgrade projects, unscheduled operational downtime, our drilling rigs to be unavailable within the commencement window established by the operator in the contract and subject us to potential termination of the contract for such late delivery of the drilling rig.

Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues.

Our operating and maintenance costs will not necessarily be proportional to changes in our operating revenues. Operating costs are affected by many factors, including inflation, while maintenance costs depend on, among other factors, market conditions for drilling services as well as unplanned downtime events or idle periods between contracts. Costs for operating a rig are therefore generally not correlated to the day rate being earned. As our rigs are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. Equipment maintenance costs fluctuate depending upon the age and condition of the equipment, and these costs could increase for short or extended periods as a result of new regulatory or customer requirements. Any of the foregoing could impact our liquidity or may cause us to miss our financial guidance for a given period, which could adversely impact the market price for our Common Shares. In addition, certain of our drilling contracts are partially payable in local currency. The amounts, if any, of local currency received under these drilling contracts may exceed our local currency needs to pay local operating and maintenance costs, leading to an accumulation of excess local currency balances, which, in certain instances, may be subject to either restrictions or other difficulties in converting to U.S. dollars, our functional currency, or to other currencies of the locations where we operate. Excess amounts of local currency may also expose us to the risk of currency exchange losses.

Our ability to pay our operating and capital expenses and make payments due on our debt depends on many factors beyond our control.

Our ability to pay our operating and capital expenses and make payments due on our debt depends on our future performance, which will be affected by financial, business, economic, legislative and other factors, many of which are beyond our control. Our business may not generate sufficient cash flow from operations in the future, which could result in our being unable to fund liquidity needs or repay indebtedness. A range of economic, business and industry factors will affect our financial performance, and many of these factors, such as the condition of our industry, the global economy and initiatives of our competitors, are beyond our control. If we do not generate enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as selling assets; reducing or delaying capital investments; seeking to raise additional capital; or restructuring or refinancing all or a portion of our indebtedness at or before maturity.

We cannot be assured that we will be able to accomplish any of these alternatives on terms acceptable to us or at all. In addition, the terms of existing or future debt agreements may restrict us from adopting any of these alternatives. The failure to generate sufficient cash flow or to achieve any of these alternatives could materially adversely affect our ability to fund liquidity needs or pay amounts due under our debt.

The ~~indenture dated April 30, 2021 (the "Indenture")~~agreements governing our debt, including the ~~First Lien Notes contains provisions~~Indenture and the Credit Agreement, contain various covenants that ~~restrict~~impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and ~~financing activities and could limit~~to make payments on our ~~business activities.~~debt.

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

•incur additional debt and issue preferred stock;

•incur or create liens;

•redeem and/or prepay certain debt;

•pay dividends on our shares or repurchase shares;

•make certain investments;

•engage in specified sales of assets;

•enter into transactions with affiliates; and

•engage in consolidation, mergers and acquisitions.

In addition, the Credit Agreement contains financial covenants requiring 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. Any future indebtedness may also require us to comply with similar or other covenants. These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other business opportunities.

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the ~~Indenture~~maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing. This could have serious consequences to our financial condition and results of operations and could cause us to become bankrupt or insolvent.

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

We may pursue mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will strengthen, streamline or expand our business. Each such transaction would be dependent upon several factors, including identifying suitable companies, businesses or assets that align with our business strategies, reaching agreement with the potential counterparties on acceptable terms, the receipt of any applicable regulatory and other approvals, and other conditions. These transactions involve various risks, including among others, (1) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management's attention from day-to-day operations, (3) applicable antitrust laws and other regulations that may limit our ability to ~~among other things, incur certain types of additional indebtedness~~acquire targets or ~~issue certain types of preferred shares; sell~~require us to divest an acquired business or ~~convey certain assets; make loans~~assets, (4) failure to realize anticipated benefits, such as cost savings, revenue enhancements or ~~investments in others; enter into mergers; engage in transactions with affiliates; make certain payments; incur additional liens; and pay dividends~~strengthening or ~~repurchase Common Shares.~~

~~These restrictive covenants restrict the manner in which we conduct~~broadening our business, and we may be unable to engage in favorable business activities, take advantage of business opportunities or finance future operations or capital needs. A failure to comply with these restrictive covenants, as well as the other covenants under the First Lien Notes, would result in an event of default, which, if not cured or waived, would cause some or all of our indebtedness to become immediately due and payable and could materially adversely affect our financial position, operating results or cash flows.(5)

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potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, and (6) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated.

Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the Bankruptcy Court in the course of the Chapter 11 Cases.

In connection with the disclosure statement we filed with the Bankruptcy Court and the hearing to consider confirmation of the plan of reorganization, we prepared projected financial information to demonstrate to the Bankruptcy Court the feasibility of the plan of reorganization and our ability to continue operations upon our emergence from the Chapter 11 Cases. Those projections were prepared solely for the purpose of the Chapter 11 Cases and have not been and will not be updated and should not be relied upon by investors. At the time they were prepared, the projections reflected numerous assumptions concerning our anticipated future performance with respect to then prevailing and anticipated market and economic conditions that were and remain beyond our control and that may not materialize. We have not updated the projections prepared solely for the purpose of our Chapter 11 Cases or the assumptions on which they were based after our emergence. Projections are inherently subject to substantial and numerous uncertainties and to a wide variety of significant business, economic and competitive risks, and the assumptions underlying the projections or valuation estimates may prove to be wrong in material respects. Actual results may vary significantly from those contemplated by the projections. As a result, investors should not rely on these projections.

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

On the Effective Date, we issued 75.0 million Common Shares and 5.6 million warrants to purchase 5.6 million Common Shares at an exercise price of $131.88 per share, exercisable for a seven-year period commencing on ~~that date.~~the Effective Date. Additionally, on May 3, 2021, our board of directors approved and ratified the Valaris Limited 2021 Management Incentive Plan (the “MIP”) and reserved 9.0 million of our Common Shares for issuance under the MIP primarily for employees and directors. The grant and ~~vesting~~settlement of equity awards in the future, any exercise of the warrants into Common Shares and any sale of Common Shares underlying outstanding warrants ~~would~~will have a dilutive effect to the holdings of our existing shareholders and could have a material adverse effect on the market for our Common Shares, including the price that an investor could obtain for their Common Shares.

Regulatory, Legal and Tax Risks

Failure to comply with anti-corruption and anti-bribery statutes, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act 2010, could result in fines, criminal penalties, drilling contract terminations and materially adversely affect our financial position, operating results or cash flows.

We operate in a number of countries throughout the world, including countries known to have a reputation for corruption and are subject to the U.S. Foreign Corrupt Practices Act of 1977 (“FCPA”), the U.S. Treasury ~~Department's~~Department’s Office of Foreign Assets Control ~~("OFAC"~~(“OFAC”) regulations, the U.K. Bribery Act ~~("UKBA"~~(“UKBA”), other U.S. laws and regulations governing our international operations and similar laws in other countries.

In August 2017, one of our Brazilian subsidiaries was contacted by the Office of the Attorney General for the Brazilian state of Paraná in connection with a criminal investigation procedure initiated against agents of both Samsung Heavy Industries, a shipyard in South Korea (“SHI”), and Pride International LLC ("Pride") in relation to the drilling services agreement with Petrobras for the DS-5 (the "DSA"). The Brazilian authorities requested information regarding our compliance program and the findings of our internal investigations relating to the DSA. We cooperated with the Office of the Attorney General and provided documents in response to its request. We cannot predict the scope or ultimate outcome of this procedure or whether any Brazilian governmental authority will open an investigation into Pride’s involvement in this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation.

Any violation of the FCPA, OFAC regulations, the UKBA or other applicable anti-corruption laws by us, our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents could in some cases provide a customer with termination rights and other remedies under the terms of their contracts(s) with us and also result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions and could materially adversely affect our financial condition, operating results or cash flows. Further, we may incur significant costs and consume significant internal resources in our efforts to detect, investigate and resolve actual or alleged violations.

Increasing regulatory complexity could adversely impact the costs associated with our offshore drilling operations and reduce ~~demand.~~demand for our services.

The offshore contract drilling industry is dependent on demand for services from the oil and natural gas industry. Accordingly, we will be directly affected by the approval and adoption of laws and regulations limiting or curtailing exploration and development drilling for oil and natural gas for economic, environmental, safety and other policy reasons. Furthermore, we may be required to make significant capital expenditures or incur substantial additional costs to comply with new governmental laws and regulations. It is also possible that legislative and regulatory activity could materially adversely affect our financial position, operating results or cash flows by limiting drilling opportunities. In recent years, we have seen several significant regulatory changes that have affected the way we operate in the U.S. Gulf of Mexico. See~~See~~ “Item 1.1. Business – Governmental Regulations and Environmental Matters.”

Any new or additional regulatory, legislative, permitting or certification requirements in the U.S., and other areas in which we operate, including laws and regulations that have or may impose increased financial responsibility, oil spill abatement contingency plan capability requirements, or additional operational requirements and certifications, could materially adversely affect our financial position, operating results or cash flows.

We anticipate that government regulation in other countries where we operate may follow the U.S. in regard to enhanced safety and environmental regulation, which could also result in governments imposing sanctions on contractors when operators fail to comply with regulations that impact drilling operations. Even if not a requirement in these countries, most international operating companies, and many others, are voluntarily complying with some or all of the U.S. inspections and safety and environmental guidelines when operating outside the U.S. Such additional governmental regulation and voluntary compliance by operators could increase the cost of our operations and expose us to greater liability.

Compliance with or breach of environmental laws can be costly and could limit our operations.

Our operations are subject to laws and regulations controlling the discharge of materials into the environment, pollution, contamination and hazardous waste disposal or otherwise relating to the protection of the environment. Environmental laws and regulations specifically applicable to our business activities could impose significant liability on us for damages, clean-up costs, fines and penalties in the event of oil spills or similar discharges of pollutants or contaminants into the environment or improper disposal of hazardous waste generated in the course of our operations. To date, such laws and regulations have not had a material adverse effect on our operating results, and we have not experienced an accident that has exposed us to material liability arising out of or relating to discharges of pollutants into the environment. However, the legislative, judicial and regulatory response to a well incident could substantially increase our and our ~~customers'~~customers’ liabilities. In addition to potential increased liabilities, such legislative, judicial or regulatory action could impose increased financial, insurance or other requirements that may adversely impact the entire offshore drilling industry. See~~See~~ “Item 1.1. Business – Governmental Regulations and Environmental Matters” and “Item 3. Legal Proceedings – Environmental Matters.”

~~ESG~~Sustainability initiatives and high profile and catastrophic environmental events, ~~including~~such as the 2010 Macondo well incident, have led to increased ~~the~~ regulation of offshore oil and natural gas drilling. We are adversely affected by restrictions on drilling in ~~certain~~the areas in which we operate, including policies and guidelines regarding the approval of drilling permits, restrictions on development and production activities, and directives and regulations that have and may further

impact our operations. From time to time, legislative and regulatory proposals have been introduced that would materially limit or prohibit offshore drilling in certain areas, or that would increase the liabilities or costs associated with offshore drilling. If new laws are enacted, or if government actions are taken that restrict or prohibit offshore drilling in our principal areas of operation or that impose environmental or other requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development, or production of oil and natural gas, our financial position, operating results or cash flows could be materially adversely affected.

The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes.

Although Valaris Limited is incorporated in Bermuda (and thus would generally be considered a “foreign” corporation (or non-U.S. tax resident)), the ~~U.S. Internal Revenue Service (“IRS”)~~IRS could assert that we should be treated as a U.S. corporation (and U.S. tax resident) pursuant to the rules under Section 7874 of the Internal Revenue Code. While we do not believe we are a U.S. corporation pursuant to these rules, the rules are complex and the determination is subject to factual uncertainties. If the IRS successfully challenged our status as a foreign corporation, significant adverse tax consequences would result for us and for certain of our shareholders.

~~U.S. tax laws and IRS guidance could affect our ability to engage in certain acquisition strategies and certain internal restructurings.~~

Even if we were to be considered a foreign corporation for U.S. federal income tax purposes, Section 7874 of the Internal Revenue Code and U.S. Treasury Regulations promulgated thereunder, including temporary Treasury Regulations, may materially adversely affect our ability to engage in certain future acquisitions of U.S. businesses in exchange for our equity, which may affect the tax efficiencies that otherwise might be achieved in such potential future transactions.

Governments may pass laws that subject us to additional taxation or may challenge our tax positions.

There is increasing uncertainty with respect to tax laws, regulations and treaties, and the interpretation and enforcement thereof that may affect our business. ~~The~~For example, the Organization for Economic Cooperation and Development (“OECD”) ~~has issued its final reports on base erosion~~, the European Union, and ~~profit shifting, which generally focus on situations where profits are earned~~certain other countries (including countries in ~~low-tax jurisdictions, or payments are made between affiliates from jurisdictions with high tax rates to jurisdictions with lower tax rates. Certain countries within~~ which we ~~operate have recently enacted~~operate) are committed to enacting substantial changes to ~~their~~numerous long-standing tax ~~laws~~principles impacting how large multinational enterprises are taxed. In particular, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis and for which many jurisdictions committed to an effective enactment date starting January 1, 2024, though not all jurisdictions were expected to meet this target deadline. The impact of these potential new rules as well as any other changes in ~~response to the OECD recommendations or otherwise~~domestic and ~~these~~international tax rules and ~~other countries may enact changes to their tax laws or practices in the future (prospectively or retroactively), which may~~regulations could have a material ~~adverse~~ effect on our ~~financial position, operating results or cash flows. On December 12, 2022 the European Union member states agreed to implement the OECD’s Pillar 2 global corporate minimum~~effective tax rate of 15% on companies with revenues of at least $790 million, which would go into effect in 2024. Other countries including the United Kingdom, Switzerland, Canada, Australia and South Korea are also actively considering changes to their tax laws to adopt certain parts of the OECD’s proposals. U.S. federal income tax reform legislation enacted in late 2017 introduced significant changes to U.S. income tax law, including a reduction in the statutory income tax rate from 35% to 21%, a one-time transition tax on deemed repatriation of deferred foreign income, a base erosion anti-abuse tax that effectively imposes a minimum tax on certain payments to non-U.S. affiliates, new and revised rules relating to the current taxation of certain income of foreign subsidiaries and revised rules associated with limitations on the deduction of interest.rate.

In addition, our tax positions are subject to audit by U.K., U.S. and other foreign tax authorities. Such tax authorities may, and do from time to time, disagree with our interpretations or assessments of the effects of tax laws, treaties or regulations or their applicability to our corporate structure or certain transactions we have undertaken. We currently are subject to tax assessments in various jurisdictions, which we are contesting. Even if we are successful in maintaining our tax positions, we may incur significant expenses in defending our positions and contesting claims asserted by tax authorities. If we are unsuccessful in defending our tax positions, the resulting assessments or rulings could significantly impact our consolidated income taxes in past or future periods.

As required by law, we file periodic tax returns that are subject to review and examination by various revenue agencies within the jurisdictions in which we operate. We are currently subject to tax assessments in various jurisdictions, which we are contesting.

As a result of these uncertainties, as well as changes in the administrative practices and precedents of tax authorities or other matters, ~~(such~~such as changes in applicable accounting ~~rules)~~rules, that increase the amounts we have provided for income taxes or deferred tax assets and liabilities in our consolidated financial statements, we cannot provide any assurances as to what our consolidated effective income tax rate will be in future periods. If we are unable to mitigate the negative consequences of any change in law, audit or other matters, this could cause our consolidated income taxes to increase and materially adversely affect our financial position, operating results or cash flows.

Our consolidated effective income tax rate may vary substantially over time.

We cannot provide any assurances as to what our future consolidated effective income tax rate will be because of, among other matters, uncertainty regarding the nature and extent of our business activities in any particular jurisdiction in the future and the tax laws of such jurisdictions, as well as potential changes in U.K., U.S. and other foreign tax laws, regulations or treaties or the interpretation or enforcement thereof, changes in the administrative practices and precedents of tax authorities or other matters (such as changes in applicable accounting rules) that increase the amounts we have provided for income taxes or deferred tax assets and liabilities in our consolidated financial statements. In addition, as a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in the overall level of our income and changes in tax laws, our consolidated effective income tax rate may vary substantially from one reporting period to another. In periods of declining profitability, our income tax expense may not decline proportionately with income. Further, we may continue to incur income tax expense in periods in which we operate at a loss. Income tax rates imposed in the tax jurisdictions in which our subsidiaries conduct operations vary, as does the tax base to which the rates are applied. In some cases, tax rates may be applicable to gross revenues, statutory or negotiated deemed profits or other bases utilized under local tax laws, rather than to net income. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our ~~subsidiaries.~~subsidiaries, which may result in the imposition of transaction taxes, which could be material. If we are unable to mitigate the negative consequences of any change in law, audit, business activity or other matters, this could cause our consolidated effective income tax rate to increase and materially adversely affect our financial position, operating results or cash flows.

We are subject to litigation that could have a material adverse effect on us.

We are, from time to time, involved in various litigation matters. These matters may include, among other things, contract disputes, personal injury claims, toxic tort claims, environmental claims or proceedings, employment matters, issues related to employee or representative conduct, governmental claims for taxes or duties, and other litigation that arises in the ordinary course of our business. Although we intend to defend or pursue such matters vigorously, we cannot predict with certainty the outcome or effect of any claim or other litigation matter, and there can be no assurance as to the ultimate outcome of any litigation. Litigation could materially adversely affect our financial position, operating results or cash flows because of potential negative outcomes, legal fees, the allocation of management’s time and attention, and other factors.

We could also face increased climate-related litigation with respect to our operations both in the U.S. and around the world. Governmental and other entities in various states, such as California and New York, have filed lawsuits against coal, oil and natural gas companies. These suits allege damages as a result of climate change, and the plaintiffs are seeking unspecified damages and abatement under various ~~tort~~legal theories. Similar lawsuits may be filed in other jurisdictions both in the U.S. and globally. ~~Though~~Although we are not currently a party to any such lawsuit, these suits present uncertainty regarding the extent to which companies who are not producing oil or natural gas, but who are engaged to provide services to support production activities, such as offshore ~~drillers,~~drilling companies, face an increased risk

of liability stemming from ~~climate change,~~climate-related litigation, which risk would also adversely impact the oil and natural gas industry and impact demand for our services.

We are a Bermuda company and it may be difficult to enforce judgments against us or our directors and executive officers.

We are a Bermuda exempted company. As a result, the rights of holders of our Common Shares are governed by Bermuda law and our memorandum of association and bye-laws. The rights of shareholders under Bermuda law may differ from the rights of shareholders of companies incorporated in other jurisdictions. Some of our directors and officers are not residents of the U.S., and a substantial portion of our assets are located outside the U.S. As a result, it may be difficult for investors to effect service of process on those persons in the U.S. or to enforce in the U.S. judgments obtained in U.S. courts against us or those persons based on the civil liability provisions of the U.S. securities laws. It is doubtful whether courts in Bermuda will enforce judgments obtained in other jurisdictions, including the U.S., against us or our directors or officers under the securities laws of those jurisdictions or entertain actions in Bermuda against us or our directors or officers under the securities laws of other jurisdictions.

Our bye-laws restrict shareholders from bringing legal action against our officers and directors.

Our bye-laws contain a broad waiver by our shareholders of any claim or right of action, both individually and on our behalf, against any of our officers or directors. The waiver applies to any action taken by an officer or director, or the failure of an officer or director to take any action, in the performance of his or her duties, except with respect to any matter involving any fraud or dishonesty on the part of the officer or director. This waiver limits the right of shareholders to assert claims against our officers and directors unless the act or failure to act involves fraud or dishonesty.

Provisions in our bye-laws could delay or prevent a change in control of our company, which could materially adversely affect the price of our Common Shares.

~~The existence~~Some of ~~some~~the provisions in our bye-laws could delay or prevent a change in control of our company that a shareholder may consider favorable, which could materially adversely affect the price of our Common Shares. Certain provisions of our bye-laws could make it more difficult for a ~~third-party~~third party to acquire control of our company, even if the change of control would be beneficial to our shareholders. These provisions include:

•authority of our board of directors to determine its size;

•the ability of our board of directors to issue preferred shares without shareholder approval;

•limitations on the removal of directors; and

•limitations on the ability of our shareholders to act by written consent in lieu of a meeting.

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

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

The Economic Substance Act came into effect in Bermuda on January 1, 2019. This ~~new~~ law requires a registered entity other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda that carries as a business any one or more of the “relevant activities” must comply with economic substance requirements. The Economic Substance Act may require in-scope Bermuda entities, which are engaged in such “relevant activities,” to be directed and managed in Bermuda, have an adequate level of qualified employees in Bermuda, incur an adequate level of annual expenditure in Bermuda, maintain physical offices and premises in Bermuda or perform core income-generating activities in Bermuda. The list of “relevant activities” includes carrying on any one or more of: banking, insurance, fund management, financing and leasing, headquarters, shipping, distribution and service center, intellectual property and holding entities. The Economic Substance Act

could affect the manner in which we operate our business. To the extent we or any of our Bermuda subsidiaries carry on any relevant activities for the purposes of the Economic Substance Act, we or such subsidiaries will be required to comply with such economic substance requirements. Our compliance with the Economic Substance Act

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

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

Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as actions related to ~~ESG~~sustainability matters, financial restructuring, increased borrowing, dividends, share repurchases or sales of assets or even the entire company. Responding to proxy contests and other actions by such activist investors or others ~~in the future~~ could be costly and time-consuming, disrupt our operations and divert the attention of our board of directors and senior management from the pursuit of our business strategies, which could materially adversely affect our financial position, operating results or cash flows. Additionally, perceived uncertainties as to our future direction as a result of investor activism or changes to the composition of the board of directors may lead to the perception of a change in the direction of our business, instability or lack of continuity, which may be exploited by our competitors, cause concern to our current or potential customers, and make it more difficult to attract and retain qualified personnel. If customers choose to delay, defer or reduce transactions with us or transact with our competitors instead of us because of any such issues, then our financial position, operating results or cash flows could be materially adversely affected. In addition, the trading price of our shares could experience periods of increased volatility as a result of investor activism.

Risks Related to Our International Operations

Our non-U.S. operations involve additional risks not typically associated with U.S. operations.

Revenues from non-U.S. operations were 80%, 78%, 87%, and 81% ~~and 83%~~ of our total consolidated revenues for the ~~year~~years ended December 31, 2023 and 2022, ~~(Successor), during~~and eight months ended December 31, 2021 (Successor), and for four months ended April 30, 2021 ~~(Predecessor) and year ended December 31, 2020~~ (Predecessor), respectively. Our non-U.S. operations and shipyard rig construction and enhancement projects are subject to political, economic and other uncertainties, including:

•terrorist acts, war and civil disturbances,

•expropriation, nationalization, deprivation or confiscation of our equipment or our ~~customer's~~customer’s property,

•repudiation or nationalization of contracts,

•assaults on property or personnel,

•piracy, kidnapping and extortion demands,

•significant governmental influence over many aspects of local economies and customers,

•unexpected changes in law and regulatory requirements, including changes in interpretation or enforcement of existing laws,

•work stoppages, ~~often due to~~such as labor strikes, ~~over which we have little or no control,~~

•complications associated with repairing and replacing equipment in remote locations,

•limitations on insurance coverage, such as war risk coverage, in certain areas,

•imposition of trade barriers,

•wage and price controls,

•import-export quotas,

•exchange restrictions, currency fluctuations and changes in monetary policy,

•uncertainty or instability resulting from hostilities or other crises in the Middle East, West Africa, Latin America, Southeastern Asia, Eastern Europe or other geographic areas in which we operate,

•changes in the manner or rate of taxation,

•limitations on our ability to recover amounts due,

•increased risk of government and vendor/supplier corruption,

•increased local content requirements,

•the occurrence or threat of epidemic or pandemic diseases ~~(including the COVID-19 pandemic)~~ and any government response to such occurrence or threat,

•changes in political conditions, and

•other forms of government regulation and economic conditions that are beyond our control.

We historically have maintained insurance coverage and obtained contractual indemnities that protect us from some, but not all, of the risks associated with our non-U.S. operations such as nationalization, deprivation, expropriation, confiscation, political and war risks. However, there can be no assurance that any particular type of contractual or insurance protection will be available in the future or that we will be able to purchase our desired level of insurance coverage at commercially feasible rates. Moreover, we may initiate a self-insurance program through one or more captive insurance subsidiaries. In circumstances where we have insurance protection for some or all of the risks associated with non-U.S. operations, such insurance may be subject to cancellation on short notice, and it is unlikely that we would be able to remove our rig or rigs from the affected area within the notice period. Accordingly, a significant event for which we are uninsured, underinsured or self-insured, or for which we have not received an enforceable contractual indemnity from a customer, could materially adversely affect our financial position, operating results or cash flows.

We are subject to various tax laws and regulations in substantially all countries in which we operate or have a legal presence. Actions by tax authorities that impact our business structures and operating strategies, such as changes to tax treaties, laws and regulations, or the interpretation or repeal of any of the foregoing or changes in the administrative practices and precedents of tax authorities, adverse rulings in connection with audits or otherwise, or other challenges may have a material impact on our tax expense.

Our non-U.S. operations are also subject to various laws and regulations in the countries in which we operate, including laws and regulations relating to the operation of drilling rigs and the requirements for equipment. We may be required to make significant capital expenditures to operate in such countries, which may not be reimbursed by our customers. Governments in some countries are active in regulating and controlling the ownership of oil, natural gas and mineral concessions and companies holding such concessions, the exploration of oil and natural gas and other aspects of the oil and natural gas industry in their countries. In some areas of the world, government activity has materially adversely affected the amount of exploration and development work performed by major international oil companies and may continue to do so. Moreover, certain countries accord preferential treatment to local contractors or joint ventures or impose specific quotas for local goods and services, which can increase our operational costs and place us at a competitive disadvantage. There can be no assurance that such laws and regulations or activities will not materially adversely affect our financial position, operating results or cash flows.

The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations. Our import activities are governed by specific customs laws and regulations in each of the countries where we operate. Moreover, many countries, including the U.S., control the export and re-export of certain goods, services and technology and impose related export recordkeeping and reporting obligations. Governments also may impose express or de facto economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities.

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The laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and ~~constantly~~frequently changing. These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting our operations. Shipments can be delayed and denied export or entry for a variety of reasons, some of which are outside our control and some of which may result from failure to comply with existing legal and regulatory regimes. Shipping delays or denials could cause unscheduled operational downtime, reduced day rates during such downtime and contract cancellations. Any failure to comply with applicable legal and regulatory trading obligations also could result in criminal and civil penalties and sanctions, such as fines, imprisonment, exclusion from government contracts, seizure of shipments and loss of import and export privileges.

Our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents may take actions in violation of our policies and procedures designed to promote compliance with the laws of the jurisdictions in which we operate. Any such violation could materially adversely affect our financial position, operating results or cash flows.

~~ESG~~Sustainability Risks

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

Governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of ~~greenhouse gases.~~GHG that may impact our operations, profitability and competitiveness. Restrictions on GHG emissions or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services. Lawmakers and regulators in the U.S. and ~~the~~certain jurisdictions where we operate have proposed or enacted regulations requiring reporting of ~~greenhouse gas~~GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting, and incentives for renewable energy. For example, the SEC has proposed a mandatory climate change reporting framework that, if implemented, is likely to materially increase the amount of time, monitoring, diligence, and reporting costs related to these matters. In ~~2022,~~2023, the current U.S. administration ~~also announced~~continued initiatives targeting the reduction of methane emissions, including a focus on the energy ~~sector, updates to~~sector. In December 2023, the ~~U.S. Methane Emissions Reduction Action Plan, and proposed updates to~~ EPA ~~standards to cut~~adopted a final rule enacting a series of actions targeting methane and ~~air pollutants from the oil and~~other emission reductions in natural gas ~~industry.~~and oil operations. Global efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues and impose reductions of hydrocarbon-based fuels, including plans developed in connection with the Paris climate conference in December 2015, the Katowice climate conference in December 2018 and the UN Climate Change Conferences ~~in 2021 and 2022, and initiatives such as~~since 2021. In January 2023, the EU enacted the Corporate Sustainability Reporting ~~Directive.~~Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.

Laws or regulations incentivizing or mandating the use of alternative energy sources such as wind power and solar energy have also been enacted in certain jurisdictions. Additionally, numerous large cities globally and several countries have adopted programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles and placed restrictions on non-public transportation. Such policies or other laws, regulations, treaties and international agreements related to ~~greenhouse gases~~GHG and climate change may negatively impact the price of oil relative to other energy sources, reduce demand for hydrocarbons, limit drilling in the offshore oil and natural gas industry, or otherwise unfavorably impact our business, our suppliers and our customers, and result in increased compliance costs and additional operating restrictions, all of which could materially adversely affect our financial position, operating results or cash flows.

In addition to potential impacts on our business resulting from climate-change legislation or regulations, our business also could be materially adversely affected by climate-change related physical changes, ~~or changes in~~such as changing weather patterns. An increase in severe weather patterns could result in ~~damages~~damage to or loss of our drilling rigs, impact our ability to conduct our operations and/or result in a disruption of our customers’ operations. Finally, increasing attention to the risks of climate change has resulted in an increased possibility of lawsuits or investigations brought by public and private entities against oil and natural gas companies in connection with their ~~greenhouse gas~~GHG emissions. Should we be targeted by any such litigation or investigations, we may incur liability, which could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors. The ultimate impact of ~~greenhouse gas~~GHG emissions-related agreements, legislation and measures

on our ~~company’s~~ financial performance is highly uncertain because we are unable to predict, ~~with certainty, for~~in a multitude of ~~individual~~ jurisdictions, the outcome of political decision-making ~~processes and the variables and trade-offs that inevitably occur in connection with such~~ processes.

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

The increasing penetration of renewable energy into the energy supply mix, the increased production of electric-powered vehicles and improvements in energy storage, as well as changes in consumer preferences, including increased consumer demand for alternative fuels, energy sources and electric-powered vehicles may materially adversely affect the demand for oil and natural gas and our drilling services. This evolving transition of the global energy system from fossil-based systems of energy production and consumption to more renewable energy sources, commonly referred to as the energy transition, could have a material adverse impact on our results of operations, financial position and cash flows. As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers are transitioning their businesses to renewable energy projects and away from oil and natural gas exploration and production, which may result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.

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

In recent years the investment community, including investment advisors and certain sovereign wealth, pension and endowment funds, has promoted the divestment of fossil fuel equities and pressured lenders to cease or limit funding to companies engaged in the extraction of fossil fuel reserves. Such initiatives ~~aimed at limiting climate change and decarbonization~~ could ultimately interfere with our access to capital, business activities and ~~operations and our access to capital.~~operations.

In addition to such initiatives, ~~ESG~~sustainability matters more generally have been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S. and the EU. We publish an annual Sustainability Report, which includes disclosure of our ~~ESG~~sustainability practices, aspirations, targets and goals. Our disclosures on these matters rely on ~~management's~~management’s expectations as of the date the statements are first made, as well as standards for measuring progress that are still in ~~development.~~development and may change or fail to be realized. These expectations and standards may continue to evolve. Even so, our failure or inability to meet these targets, goals or evolving stakeholder expectations for ~~ESG~~sustainability practices and reporting and even the perception of such failure or inability may potentially harm our reputation and impact employee retention, customer relationships and access to capital, among other matters. For example, certain market participants use third-party benchmarks or scores to measure a company’s ~~ESG~~sustainability practices in making investment decisions and customers and suppliers may evaluate our ~~ESG~~sustainability practices or require that we adopt certain ~~ESG~~sustainability policies as a condition of awarding contracts. By electing to set and share publicly our corporate ~~ESG~~sustainability standards, our business may ~~also~~ face increased scrutiny related to ~~ESG activities.~~sustainability activities and be unable to satisfy all stakeholders. For example, some stakeholders and regulators have expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability. As ~~ESG~~sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to ~~ESG~~sustainability monitoring and reporting and complying with ~~ESG initiatives.~~sustainability initiatives, especially to the extent these standards are not harmonized or consistent. In addition, it may be difficult or expensive for us to comply with any ~~ESG-linked~~sustainability-linked contracting policies adopted by customers and suppliers,

particularly given the complexity of our supply chain, ~~and~~ our reliance on third-party ~~manufacturers. As described~~manufacturers, and the potential for jurisdictions in ~~Part I, Item 1. "Business - Sustainability,"~~which we ~~have increased our focus on sustainability-related matters.~~operate to enact opposing or incompatible regulations. Actions we may take to achieve our sustainability initiatives, including the development and implementation of new emissions-reduction technology, may require increased expenditures, which may materially adversely affect our financial position, operating results or cash flows.

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Item 1B. Unresolved Staff Comments

None.

Item 1C.Cybersecurity

We have a cybersecurity program to assess, identify, and manage risks from cybersecurity threats. The Company’s cybersecurity program includes administrative, technical, and physical safeguards that address our information systems, including our IT and operational technology environments. The program is designed to ensure the confidentiality, security, integrity, and availability of those systems and the information residing therein.

Strategy and Risk Management:

Our cybersecurity strategy leverages administrative safeguards that include policies, procedures, and processes to assess, identify, and manage risks from cybersecurity threats. We have adopted a Cybersecurity Incident Response Policy (the “CIRP”), which provides a framework and guidance for investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate.

Additionally, all of the Company’s employees undertake an annual cybersecurity training program on how to identify characteristics of various cybersecurity threats, which is augmented by additional training and communications on IT and cybersecurity matters throughout the year. Periodically during the year, the Company’s IT department leads simulations of cybersecurity incidents with employees to test the organization’s ability to respond to a variety of cybersecurity-related scenarios.

Our policies, procedures, and processes are aligned with our technical tools, which include continuous security monitoring and alerting, an AI-based tool to facilitate cybersecurity incident identification and remediation, and other technologies, to ensure the security of our systems and information. We also have implemented certain physical safeguards, such as restricted access to areas containing critical IT and operational technology equipment, to mitigate risks to our physical environment.

Cybersecurity is integrated into our enterprise risk management ("ERM") process. Cybersecurity-related risks are included in our ERM risk register, which are reviewed by internal stakeholders who designate the relative level of severity of identified risks. The ERM risk register, which includes any identified cybersecurity-related risks, is reviewed by our Executive Management Committee and is reported quarterly to the board of directors, who then reviews the identified risks, mitigation plans and monitoring reports and provides oversight as appropriate.

Oversight:

The Audit Committee is responsible for, and actively engaged in, the oversight of our IT and cybersecurity program, including the oversight of risks from cybersecurity threats. All members of the Audit Committee have prior work experience relating to cybersecurity or have obtained a certification or degree in cybersecurity. The Audit Committee, at least quarterly, receives reports from the Company’s Senior Director – Information Technology (“SDIT”) on, among other things, the Company’s cybersecurity incidents, risks and measures, training and organizational readiness. The board of directors is kept apprised of cybersecurity risk matters, including through participation in the quarterly cybersecurity briefings to the Audit Committee that are described above. We have protocols by which certain cybersecurity incidents are escalated within the Company and, where appropriate, reported in a timely manner to the board of directors and Audit Committee.

At the management level, the SDIT and his team are responsible for leading enterprise-wide information security strategy, policy, standards, architecture and processes, including the assessment and management of material risks from cybersecurity threats. The Company’s SDIT reports to the Chief Financial Officer. The SDIT has extensive cybersecurity knowledge and skills, gained from over 25 years of relevant work experience. The SDIT is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents in accordance with the CIRP and policies and procedures, which may include reports from the IT team. The SDIT also regularly reviews risk management measures implemented by the Company to identify and mitigate cybersecurity risks.

Third Parties and Assessments:

We engage third-party service providers in various capacities to enhance our internal cybersecurity capabilities. The Company engages consultants to assist with cybersecurity assessments, including with respect to cloud security and network vulnerability testing. Internal Audit, along with other internal stakeholders, including IT, determine the Company’s need for cybersecurity assessments in conjunction with an annual cybersecurity risk assessment process.

Further, pursuant to our CIRP, we have engaged third-party support under a retainer agreement to enable an effective and timely response to a significant cybersecurity incident.

In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers. We obtain Systems and Organization Controls ("SOC") 1 and SOC 2 reports, as applicable, from our third-party service providers which assess those entities' controls to cover security, availability, integrity, confidentiality and privacy. Any applicable findings of this third-party assessment are analyzed by the appropriate employees and further action is taken as needed.

Impact of Cybersecurity Risks and Threats:

While we have not experienced any material cybersecurity threats or incidents as of the date of this Annual Report on Form 10-K, there can be no guarantee that we will not be the subject of future successful attacks, threats or incidents. Additional information on cybersecurity risks we face is discussed in “Item 1A. Risk Factors,” which should be read in conjunction with the foregoing information.

Item 2. Properties

Contract Drilling Fleet

The following table provides certain information about the rigs in our drilling fleet as of February ~~21, 2023:~~15, 2024:

Rig Name

Rig Type

Year Delivered

Year Built/
Rebuilt

Design

Maximum
Water Depth/
Drilling Depth

Location

Status

Floaters

VALARIS DS-4

Drillship

2010

Dynamically Positioned

12,000'/40,000'

Brazil

Under contract

VALARIS DS-7

Drillship

2013

Dynamically Positioned

10,000'/40,000'

Spain

~~Preservation stacked~~Under reactivation~~(1)~~(2)

VALARIS DS-8

Drillship

2015

Dynamically Positioned

12,000'/40,000'

Brazil

~~Spain~~Under contract

~~Preservation stacked(1)~~

VALARIS DS-9

Drillship

2015

Dynamically Positioned

12,000'/40,000'

Angola

Under contract

VALARIS DS-10

Drillship

2017

~~2015~~

Dynamically Positioned

12,000'/40,000'

Nigeria

Under contract

VALARIS DS-11

Drillship

2013

Dynamically Positioned

12,000'/40,000'

Spain

Preservation stacked(1)

VALARIS DS-12

Drillship

2013

Dynamically Positioned

12,000'/40,000'

~~Angola~~Egypt

Under contract

VALARIS DS-13

Drillship

2023

~~Under construction(2)~~

Dynamically Positioned

12,000'/40,000'

~~South Korea~~Mobilizing(3)

~~Option~~Mobilizing~~(2)~~(3)

VALARIS DS-14

Drillship

2023

~~Under construction(2)~~

Dynamically Positioned

12,000'/40,000'

~~South Korea~~Mobilizing(3)

~~Option~~Mobilizing~~(2)~~(3)

VALARIS DS-15

Drillship

2014

Dynamically Positioned

12,000'/40,000'

Brazil

Under contract

VALARIS DS-16

Drillship

2014

Dynamically Positioned

12,000'/40,000'

Gulf of Mexico

Under contract

VALARIS DS-17

Drillship

2014

Dynamically Positioned

12,000'/40,000'

Brazil

~~Spain~~

Under ~~reactivation~~contract~~(3)~~

VALARIS DS-18

Drillship

2015

Dynamically Positioned

12,000'/40,000'

Gulf of Mexico

Under contract

VALARIS DPS-1

Semisubmersible

2012

Dynamically Positioned

10,000'/35,000'

Australia

Under contract

VALARIS DPS-3

Semisubmersible

2010

Dynamically Positioned

8,500'/37,500'

Gulf of Mexico

Preservation stacked(1)

VALARIS DPS-5

Semisubmersible

2012

Dynamically Positioned

8,500'/35,000'

Mexico

Under contract

VALARIS DPS-6

Semisubmersible

2012

Dynamically Positioned

8,500'/35,000'

Gulf of Mexico

Preservation stacked(1)

VALARIS MS-1

Semisubmersible

2011

F&G ExD Millennium, Moored

8,200'/40,000

Australia

Under contract

Jackups

~~VALARIS 54~~

~~Jackup~~

~~1982/2004~~

~~F&G L-780 MOD II-C~~

~~300'/25,000'~~

~~Saudi Arabia~~

~~Under contract~~

VALARIS 72

Jackup

1981

~~1981/2011~~

Hitachi K1025N

225'/25,000'

United Kingdom

Under contract

VALARIS 75

Jackup

1999

MLT Super 116-C

400'/30,000'

Gulf of Mexico

Preservation stacked(1)

VALARIS 76

Jackup

2000

MLT Super 116-C

350'/30,000'

Saudi Arabia

~~Under~~Preparing for lease contract(4)

VALARIS 92

Jackup

1982

~~1982/2003~~

MLT 116-C

210'/25,000'

United Kingdom

Under contract

VALARIS 102

Jackup

2002

KFELS MOD V-A

400'/30,000'

Gulf of Mexico

Preservation stacked(1)

VALARIS 104

Jackup

2002

~~2002/2011~~

KFELS MOD V-B

400'/30,000'

UAE

Preservation stacked(1)

VALARIS 106

Jackup

2005

KFELS MOD V-B

400'/30,000'

Indonesia

Under contract

VALARIS 107

Jackup

2006

KFELS MOD V-B

400'/30,000'

Australia

Under contract

VALARIS 108

Jackup

2007

~~2007/2009~~

KFELS MOD V-B

400'/30,000'

Saudi Arabia

~~Under~~Preparing for lease contract(4)

VALARIS 109

Jackup

2008

KFELS MOD V-Super B

350'/35,000'

Namibia

Preservation stacked(1)

VALARIS 110

Jackup

2015

KFELS MOD V-B

400'/35,000'

Qatar

Under contract

VALARIS 111

Jackup

2003

KFELS MOD V Enhanced B-Class

400'/36,000'

Croatia

Preservation stacked(1)

VALARIS 115

Jackup

2013

Baker Marine Pacific Class 400

400'/30,000'

Brunei

Under contract

VALARIS 116

Jackup

2008

~~2008/2018~~

LT 240- C

375'/35,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 117

Jackup

2009

LT 240- C

350'/35,000'

Mexico

Under contract

VALARIS 118

Jackup

2012

LT 240- C

350'/35,000

Trinidad

Under contract

VALARIS 120

Jackup

2013

KFELS Super A

400'/40,000'

United Kingdom

Under contract

VALARIS 121

Jackup

2013

KFELS Super A

400'/40,000'

United Kingdom

Under contract

VALARIS 122

Jackup

2013

KFELS Super A

400'/40,000'

United Kingdom

Under contract

4142

Rig Name

Rig Type

Year Delivered

Year Built/
Rebuilt

Design

Maximum
Water Depth/
Drilling Depth

Location

Status

Jackups
(Continued)

VALARIS 123

Jackup

2019

~~2016~~

KFELS Super A

400'/40,000'

United Kingdom

~~Netherlands~~

~~Under~~Preparing for contract

VALARIS 140

Jackup

2016

LT Super 116E

340'/30,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 141

Jackup

2016

LT Super 116E

340'/30,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 143

Jackup

2010

~~2010/2018~~

LT EXL Super 116-E

350'/35,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 144

Jackup

2010

LT Super 116-E

350'/35,000'

Gulf of Mexico

Under contract

VALARIS 145

Jackup

2010

LT Super 116-E

350'/35,000'

Gulf of Mexico

Preservation stacked(1)

VALARIS 146

Jackup

2011

~~2011/2018~~

LT EXL Super 116-E

320'/35,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 147

Jackup

2013

~~2012/2019~~

LT Super 116-E

350'/30,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 148

Jackup

2013

~~2013/2019~~

LT Super 116-E

350'/30,000'

Saudi Arabia

Leased to ARO drilling

VALARIS 247

Jackup

1998

LT Super Gorilla

400'/35,000'

United Kingdom

~~Under~~Preparing for contract

VALARIS 248

Jackup

2000

~~2001/2014~~

LT Super Gorilla

400'/35,000'

United Kingdom

Under contract

VALARIS 249

Jackup

2001

LT Super Gorilla

400'/35,000'

~~New Zealand~~Trinidad

Under contract

VALARIS 250

Jackup

2003

LT Super Gorilla XL

550'/35,000'

Saudi Arabia

Leased to ARO drilling

VALARIS Viking

Jackup

2010

~~2011~~

KEFLS N Class

435'/35,000'

United Kingdom

Preservation stacked(1)

VALARIS Stavanger

Jackup

2011

KEFLS N Class

400'/35,000'

United Kingdom

~~Available~~Preparing for contract

VALARIS Norway

Jackup

2011

KEFLS N Class

400'/35,000'

United Kingdom

Under contract

(1)Prior to stacking, upfront steps are taken to preserve the rig. This may include a quayside power source to dehumidify key equipment and/or provide electric current to the hull to prevent corrosion. Also, certain equipment may be removed from the rig for storage in a temperature-controlled environment. While stacked, large equipment that remains on the rig is periodically inspected and maintained by Valaris personnel. These steps are designed to reduce time and lower cost to reactivate the rig ~~when market conditions improve.~~once returned to the active fleet.

(2)~~We have construction agreements with~~Rig is being reactivated for a shipyard that provide for, among other things, an option construct whereby the Company has the right, but not the obligation, to take delivery of either or both VALARIS DS-13 AND VALARIS DS-14 rigs which were recently constructed, on or before December 31, 2023. Under the amended agreements, the purchase prices for the rigs are estimated to be $119.1 million for the VALARIS DS-13 and $218.3 million for the VALARIS DS-14, assuming a December 31, 2023 delivery date. Delivery can be requested any time prior to December 31, 2023 with a downward purchase price adjustment based on predetermined terms. If the Company elects not to purchase the rigs, the Company has no further obligations to the shipyard.firm contract.

(3)~~Rig being reactivated~~Rigs are mobilizing from South Korea to Las Palmas, Spain, where they will be stacked.

(4)Rigs are under-going contract preparations for ~~a firm contract.~~lease contracts with ARO drilling.

The equipment on our drilling rigs includes engines, draw works, derricks, pumps to circulate drilling fluid, well control systems, drill string and related equipment. The engines power a top-drive mechanism that turns the drill string and drill bit so that the hole is drilled by grinding subsurface materials, which are then returned to the rig by the drilling fluid. The intended water depth, well depth and geological conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling project.

Floater rigs consist of drillships and semisubmersibles. Drillships are purpose-built maritime vessels outfitted with drilling apparatus. Drillships are self-propelled and can be positioned over a drill site through the use of computer-controlled propellers or "thruster" dynamic positioning systems. Our drillships are capable of drilling in water depths of up to 12,000 feet and are suitable for deepwater drilling in remote locations because of their

superior mobility and large load-carrying capacity. Although drillships are most often used for deepwater drilling and exploratory well drilling, drillships can also be used as a platform to carry out well maintenance or completion work such as casing and tubing installation or subsea tree installations.

Semisubmersibles are drilling rigs with pontoons and columns that are partially submerged at the drilling location to provide added stability during drilling operations. Semisubmersibles are held in a fixed location over the ocean floor either by being anchored to the sea bottom with mooring chains or dynamically positioned by computer-controlled propellers or "thrusters" similar to that used by our drillships. Moored semisubmersibles are most commonly used for drilling in water depths of 4,499 feet or less. However, VALARIS MS-1, which is a moored semisubmersible, is capable of deepwater drilling in water depths greater than 5,000 feet. Dynamically positioned semisubmersibles generally are outfitted for drilling in deeper water depths and are well-suited for deepwater development and exploratory well drilling. Further, we have two hybrid semisubmersibles, VALARIS DPS-3 and VALARIS DPS-5, which leverage both moored and dynamically positioned configurations. This hybrid design provides multi-faceted drilling solutions to customers with both shallow water and deepwater requirements.

Jackup rigs stand on the ocean floor with their hull and drilling equipment elevated above the water on connected leg supports. Jackups are generally preferred over other rig types in shallow water depths of 400 feet or less, primarily because jackups provide a more stable drilling platform with above water well-control equipment. Our jackups are of the independent leg design where each leg can be fixed into the ocean floor at varying depths and equipped with a cantilever that allows the drilling equipment to extend outward from the hull over fixed platforms enabling safer drilling of both exploratory and development wells. The jackup hull supports the drilling equipment, jacking system, crew quarters, storage and loading facilities, helicopter landing pad and related equipment and supplies.

We own all rigs in our fleet and we manage the drilling operations for two platform rigs owned by a third-party.

We lease various office, ~~space~~warehouse and storage facilities worldwide, including our corporate offices in Houston, Texas and other offices and facilities located in various countries in North America, South America, Europe, Africa and the United States (Houston and Louisiana), United Kingdom (London and Aberdeen), Australia, Indonesia, Mexico, Brazil, Nigeria, Netherlands, United Arab Emirates (Dubai and Abu Dhabi), Saudi Arabia, Thailand, Norway, New Zealand and Trinidad.Asia Pacific region. We own offices and other facilities in United States (Louisiana), Angola and Brazil.

Item 3. Legal Proceedings

Environmental Matters

We are currently subject to pending notices of assessment relating to spills of drilling fluids, oil, brine, chemicals, grease or fuel from drilling rigs operating offshore Brazil from 2008 to 2019, pursuant to which the governmental authorities have assessed, or are anticipated to assess, fines. We have contested these notices and appealed certain adverse decisions and are awaiting decisions in these cases. Although we do not expect final disposition of these assessments to have a material adverse effect on our financial position, operating results and cash flows, there can be no assurance as to the ultimate outcome of these assessments. A ~~$0.5~~$0.4 million liability related to these matters was included in Accrued liabilities and other on our Consolidated Balance Sheet as of December 31, ~~2022 (Successor)~~2023 included in "Item 8. Financial Statements."

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 or cash flows.

Item 4. Mine Safety Disclosures

Not applicable.

4445

PART II


Item 5.			Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities

Market Information

~~Predecessor~~

As a result of the Chapter 11 Cases, the Class A ordinary shares of Legacy Valaris were delisted from the New York Stock Exchange ("NYSE") effective September 14, 2020. On the Effective Date, the Class A ordinary shares were cancelled.

~~Successor~~

On April 30, 2021, pursuant to the ~~Plan,~~plan of reorganization, the Company issued an aggregate of approximately 75.0 million Common Shares and 5.6 million Warrants and has listed the Common Shares and the Warrants on the NYSE under the symbols “VAL” and “VAL WS”, respectively.

Many of our shareholders hold shares electronically, all of which are owned by a nominee of the Depository Trust Company. We had ~~102~~67 shareholders of record on February 1, ~~2023.~~2024.

Dividends

~~For the Successor, we~~We have not paid or declared any dividends on our Common Shares. Our Indenture ~~includes~~and the Credit Agreement include provisions that limit our ability to pay dividends. ~~The Predecessor had not paid or declared dividends since 2019.~~

Bermuda Tax

We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes. This designation allows us to engage in transactions in currencies other than the Bermudian dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermudian dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our Common Shares.

At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares. We have obtained an assurance from the Minister of Finance of Bermuda under the Exempted Undertakings Tax Protection Act 1966 that, in the event that any legislation is enacted in Bermuda imposing any tax computed on profits or income, or computed on any capital asset, gain or appreciation or any tax in the nature of estate duty or inheritance tax, such tax shall not, until March 31, 2035, be applicable to us or to any of our operations or to our shares, debentures or other obligations except insofar as such tax applies to persons ordinarily resident in Bermuda or is payable by us in respect of real property owned or leased by us in Bermuda.

Equity Compensation Plans

For information on shares issued or to be issued in connection with our equity compensation plans, see "Part III, Item ~~12.~~12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters."

Issuer Repurchases of Equity Securities

In ~~September~~ 2022, our board of directors authorized a share repurchase program under which we may purchase up to ~~$100~~$100.0 million of our outstanding Common Shares. In April 2023, the board of directors authorized an increase of this amount to $300.0 million and in February 2024, they authorized a further increase to $600.0 million. The share repurchase program does not have a fixed expiration, ~~and~~ may be modified, suspended or discontinued at any ~~time. As~~time and is subject to compliance with applicable covenants and restrictions under our financing agreements.

The following table provides a summary of our repurchases of our equity securities during the quarter ended December 31, ~~2022 (Successor), there have been no share repurchases under this repurchase program.~~2023 (in millions, except average price per share):


Issuer Purchases of Equity Securities
Period	Total Number of Securities Purchased	Average Price Paid per Security		Total Number of Securities Purchased as Part of Publicly Announced Plans or Programs	Approximate Dollar Value of Securities that May Yet Be Purchased Under Plans or Programs







October 1 - October 31	0.3	$	70.08	0.3	$	132.5
November 1 - November 30	0.2	$	68.07	0.2	$	115.8
December 1 - December 31	0.2	$	67.08	0.2	$	100.0
Total	0.7	$	68.43	0.7	$	100.0

Cumulative Total Shareholder Return

The chart below presents a comparison of the cumulative total shareholder return, assuming $100 invested on May 3, 2021 (first trading date after our emergence from the Chapter 11 Cases) for Valaris Limited, the Standard & Poor's MidCap 400 Index and Dow Jones US Select Oil Equipment & Services ~~Index.~~Index (the "Industry Index").

COMPARISON OF CUMULATIVE TOTAL RETURN(1)

Among Valaris Limited, the S&P MidCap 400 Index and ~~Dow Jones US Select Oil Equipment & Services~~Industry Index

May 3, 2021 December 31, 2021 December 31, 2022
Valaris Limited 100.0 151.9 285.3
S&P MidCap 400 100.0 104.6 91.0
Dow Jones US Select Oil Equipment & Services Index 100.0 96.5 160.7
Cumulative Total Shareholder Return2.jpg

Cumulative Total Shareholder Return2.jpg


	May 3, 2021	Fiscal Year Ended December 31,
	Relisting	2021	2022	2023

Valaris Limited	100.0	151.9	285.3	289.3
S&P MidCap 400	100.0	104.6	91.0	105.9
Industry Index	100.0	96.5	160.7	168.4

(1) Total return assuming reinvestment of dividends. Assumes $100 invested on May 3, 2021, which represents the first trading date after our emergence from the Chapter 11 Cases.

Item 6. Reserved

Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following information should be read in conjunction with ~~"Item 1A.~~"Item 1A. Risk Factors" and our consolidated financial statements and the notes thereto in ~~"Item 8.~~"Item 8. Financial Statements and Supplementary Data" of this report.

The discussion of our results of operations and liquidity in this section includes comparisons for the ~~year~~years ended December 31, 2023 and 2022 (Successor)~~, the eight months ended December 31, 2021 (Successor) and for the four months ended April 30, 2021 (Predecessor)~~. For a similar discussion, including comparisons for the year ended December 31, 2022, eight months ended December 31, 2021 (Successor), and the four months ended April 30, 2021 ~~(Predecessor) and the year ended December 31, 2020~~ (Predecessor), see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, ~~2021~~2022, filed with the SEC on February ~~22, 2022.~~21, 2023.

INTRODUCTION

Our 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. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. We currently own 5253 rigs, including 1113 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 3635 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional ~~seven~~eight rigs. ~~We also have options to purchase two recently constructed drillships on or before December 31, 2023.~~

Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with ~~current operations spanning six continents.~~global operations. The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Middle East, Africa and Asia Pacific.

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

Chapter 11 Proceedings, Emergence from Chapter 11 and Fresh Start Accounting

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

In connection with the Chapter 11 Cases and the plan of reorganization, on and prior to the Effective Date, Legacy Valaris effectuated certain restructuring transactions, pursuant to which Valaris was formed and, through a series of transactions, Legacy Valaris transferred to a subsidiary of Valaris substantially all of the subsidiaries, and other assets, of Legacy Valaris.

On ~~the Effective Date,~~April 30, 2021 (the "Effective Date"), we successfully completed our financial restructuring and together with the Debtors emerged from the Chapter 11 Cases. Upon emergence from the Chapter 11 Cases, we eliminated $7.1 billion of debt and obtained a ~~$520~~$520.0 million capital injection by issuing the First Lien Notes. See “Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional

information on the First Lien Notes. On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and the Common Shares were issued. Also, former holders of Legacy Valaris' equity were issued Warrants to purchase Common Shares. See “Note 109 - Shareholders' Equity" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the issuance of the Common Shares and Warrants.

References to the financial position and results of operations of the "Successor" or "Successor Company" relate to the financial position and results of operations of the Company after the Effective Date. References to the financial position and results of operations of the "Predecessor" or "Predecessor Company" refer to the financial position and results of operations of Legacy Valaris on and prior to the Effective Date. References to the “Company,” “we,” “us” or “our” in this Annual Report are to Valaris Limited, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Valaris, together with its consolidated subsidiaries, when referring to periods prior to and including the Effective Date.

Upon emergence from the Chapter 11 Cases, we qualified for and adopted fresh start accounting. The application of fresh start accounting resulted in a new basis of accounting, and the Company became a new entity for financial reporting purposes. Accordingly, our financial statements and notes after the Effective Date are not comparable to our financial statements and notes on and prior to that date.

See “Note 2 – Chapter 11 Proceedings” and "Note 3 - Fresh Start Accounting" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional details regarding the bankruptcy, our emergence and fresh start accounting.

Our Industry

Operating results in the offshore contract drilling industry are highly cyclical and are directly related to the demand for and the available supply of drilling rigs. Low demand and excess supply can independently affect day rates and utilization of drilling rigs. Therefore, adverse changes in either of these factors can result in adverse changes in our industry. While the cost of moving a rig may cause the balance of supply and demand to vary somewhat between regions, significant variations between most regions are generally of a short-term nature due to rig mobility.

~~Over the last several~~In recent years, oil ~~price~~prices have experienced significant volatility ~~resulting from~~as a result of the global COVID-19 pandemic, production disputes among major oil producing countries and various other ~~factors, significantly~~factors. This volatility meaningfully impacted ~~our business. In 2020, the combined effects of the COVID-19 pandemic, the significant decline in the demand for oil and the substantial surplus in~~both the supply of, ~~oil resulted in significantly reduced~~and demand ~~and day rates~~ for, offshore drilling services provided by the Company and increased uncertainty regarding long-term market conditions. These events had a significant adverse impact on our liquidity position and financial runway and led to the filing of the Chapter 11 Cases.

~~During~~rigs. Since 2021, ~~and 2022,~~ oil prices ~~increased~~have become relatively more stable due to, among other factors, rebounding demand for hydrocarbons, a measured approach to production increases by OPEC+ members, reduction in supply due to Russia’s invasion of Ukraine and the subsequent sanctions placed on Russia, and a focus on cash flow and returns by major exploration and production companies. In 2023, prices have remained at levels that are supportive of offshore exploration and development activity. The more constructive oil price environment has led to an improvement in contracting and tendering ~~activity.~~activity for our industry.

~~We are experiencing~~Rig attrition in the ~~impacts~~industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demands. In addition, demand for offshore drilling services continues to improve as evidenced by increasing global ~~inflation, both~~utilization and day rates for offshore drilling rigs. Consequently, our outlook for the offshore drilling business is positive.

Inflationary pressures remain elevated and have resulted in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. ~~While we are currently unable to estimate the ultimate impact of rising prices, we do~~We expect that our costs will continue to rise in the near term and ~~will impact our profitability. Although~~although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations. ~~See "Item 1A.~~ ~~Risk Factors - Our long-term contracts are subject~~Despite the inflationary trends and macroeconomic uncertainty, we continue to ~~the risk of cost increases, which could adversely impact our profitability."~~

The outlook for the offshore drilling industry has improved since the beginning of 2021, as evidenced by increasing global utilization and day rates for offshore drilling rigs, most notably for drillships. However, the combination of global inflation and a tightening of monetary policy has led to increasing concerns of a global economic recession that may have a negative impact on demand for hydrocarbons. As a result, there is still uncertainty around the sustainability of the improvement in oil prices and thesee recovery in ~~demand for, and profitability of, offshore drilling services.~~our industry.

Backlog

Our contract drilling backlog reflects commitments, represented by signed drilling contracts, and is calculated by multiplying the contracted operating day rate by the contract period. The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities. Our backlog excludes ARO's backlog, but includes backlog from our rigs leased to ARO at the contractual rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture.

The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in ~~the~~ equity in earnings of ARO in our Consolidated Statement of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

The following table summarizes our and 100% of ARO's contract backlog of business as of February 15, 2024 and February 21, 2023 ~~and 2022~~ (in millions):

February 21, 2023 February 21, 2022
Floaters (1)
$ 1,376.9 $ 1,665.3
Jackups 742.3 643.0
Other(2)
344.0 135.6
Total $ 2,463.2 $ 2,443.9
ARO $ 1,731.8 $ 1,501.1


	February 15, 2024		February 21, 2023
Floaters (1)	$	2,531.7	$	1,376.9
Jackups (2)	1,167.4		742.3
Other (3)	222.3		344.0
Total	$	3,921.4	$	2,463.2
ARO (4)	$	2,138.1	$	1,731.8

(1)~~Our backlog as of February 21, 2022 included approximately $428 million attributable~~The increase in Floaters is primarily due to ~~a contract awarded to~~long-term contracts for VALARIS ~~DS-11 for an eight-well deepwater project~~DS-4 and VALARIS DS-8 offshore Brazil, VALARIS DS-7 offshore West Africa, VALARIS DS-16 in the U.S. Gulf of Mexico ~~that was expected to commence~~and a 250-day contract extension for VALARIS DS-15 offshore Brazil, which resulted in ~~mid-2024. In June 2022, the customer terminated the contract. As a result~~incremental aggregate backlog of ~~the contract termination, we received an early termination fee of $51.0 million which is included in~~approximately $1.7 billion. These increases were partially offset by revenues on our Consolidated Statements of Operations for the year ended December 31, 2022 (Successor). As of the date of the termination, we had incurred costs to upgrade the rig pursuant to the requirements of the contract. Costs incurred for capital upgrades specific to the customer requirements were considered to be impaired and as such, we recorded a pre-tax, non-cash loss on impairment in the second quarter of 2022 of $34.5 million. Additional costs were recorded for penalties and other costs incurred upon cancellation of equipment ordered. See "~~Note~~ 4 ~~- Revenue from Contracts with Customers" and "Note~~ 7 ~~- Property and Equipment" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.~~realized.

(2)The increase in Jackups is primarily due to contract awards and extensions for VALARIS 120, VALARIS 72, VALARIS 92, VALARIS 121, VALARIS 107, VALARIS 118, VALARIS 249 and VALARIS Stavanger which resulted in incremental aggregate backlog of approximately $620.0 million. These increases were partially offset by revenues realized.

(3)Other includes the bareboat charter backlog for the jackup rigs leased to ARO to fulfill contracts between ARO and Saudi Aramco in addition to backlog for our managed rig services. Substantially all the operating costs for jackups leased to ARO through the bareboat charter agreements will be borne by ARO.

(4)The increase in ARO backlog is primarily due to an eight-year contract for each of the two newbuild rigs, the first of which was delivered in October 2023 and the second is expected to be delivered in the first half of 2024. These two contracts resulted in incremental aggregate backlog of approximately $924.0 million, which was partially offset by revenues realized.

The increase in our backlog of $19.3 million is primarily due to recent contract awards and contract extensions, partially offset by the termination of the VALARIS DS-11 contract and revenues realized. As revenues are realized and if we experience customer contract cancellations, we may experience declines in backlog, which would result in a decline in revenues and operating cash flows.

The increase in ARO's backlog of $230.7 million is primarily due to contract awards and extensions, including contract awards for VALARIS 76 and 108, which are expected to be leased to ARO following completion of their existing contracts, partially offset by revenues realized.

The following table summarizes our and 100% of ARO's contract backlog of business as of February ~~21, 2023~~15, 2024 and the periods in which revenues are expected to be realized (in millions):


		2023		2024		2025 and beyond		Total
		2024
		2024
		2024								2025	2026 and beyond	Total
Floaters	Floaters	$	753.6	$	562.2	$	61.1	$	1,376.9
Jackups	Jackups	428.0		195.2		119.1		742.3
Other	Other	141.9		112.8		89.3		344.0
Total	Total	$	1,323.5	$	870.2	$	269.5	$	2,463.2
ARO	ARO	$	470.5	$	598.8	$	662.5	$	1,731.8

The amount of actual revenues earned and the actual periods during which revenues are earned will be different from amounts disclosed in our backlog calculations due to a lack of predictability of various factors, including unscheduled repairs, maintenance requirements, weather delays, contract terminations or renegotiations and other factors.

Our drilling contracts generally contain provisions permitting early termination of the contract if the rig is lost or destroyed or by the customer if operations are suspended for a specified period of time due to breakdown of major rig equipment, unsatisfactory performance, "force majeure" events beyond the control of either party or other specified conditions. In addition, our drilling contracts generally permit early termination of the contract by the customer for convenience (without cause), exercisable upon advance notice to us, and in certain cases without making an early termination payment to us. There can be no assurances that our customers will be able to or willing to fulfill their contractual commitments to us.

BUSINESS ENVIRONMENT

Floaters

~~Starting in 2021,~~In recent years, the more constructive oil price environment has led to an improvement in contracting and tendering activity for floaters. The number of contracted benign environment floaters has increased to ~~115~~123 at December 31, 2023 from a low of 101 in early 2021, contributing to a ~~10%~~12% increase in global utilization, from 73% to ~~83%~~85%, for the industry's active fleet over the same period. This increase in activity is particularly evident for ~~drillships.~~6th and 7th generation drillships, such as those included in our floater fleet. Utilization for the global active 6th and 7th generation drillship fleet is currently at 92% and has, ~~been sustained at above 85%~~on average, exceeded 90% for more than twelve months, resulting in a meaningful improvement in day rates for this class of assets.

In 2022, we completed the reactivation of three stacked drillships and one stacked semisubmersible which have commenced long-term contracts. In 2023, we completed the reactivation of another two previously stacked drillships, VALARIS DS-8 and VALARIS DS-17, for contracts which commenced in the second half of 2023 for work offshore Brazil, and we ~~were awarded an additional~~are currently reactivating another stacked drillship VALARIS DS-7, for a long-term contract ~~for one of our stacked drillships that is~~offshore West Africa expected to commence in ~~mid-2023.~~mid-2024.

~~Our backlog for our floater segment was $1.4 billion and $1.7 billion~~From a supply perspective, as of February 21, 2023 and 2022, respectively. The decrease in our backlog was due to the termination of the VALARIS DS-11 contract, which represented approximately $428 million of backlog, and revenues realized, partially offset by contract awards and contract extensions.

Utilization for our floaters was 45% during the year ended December 31, 2022, compared to 29% during the year ended December 31, 2021. Average day rates were approximately $213,000 during the year ended December 31, 2022, compared to $193,000 during the year ended December 31, 2021. The increase in average day rate and utilization is primarily due to the four reactivated floaters commencing contracts during 2022.

As of December 31, ~~2022,~~2023, the number of benign environment ~~floater supply~~floaters including stacked rigs declined by ~~43%~~42% to ~~159~~164 from a peak of 281 in late 2014. ~~Globally, there were 17~~Across the stacked drillship fleet and newbuild drillships and benign environment semisubmersible rigs reported to be under construction that could increase global supply, of which 13 were scheduled to be delivered before the end of 2023. Most newbuild floaters were uncontracted. Further, with regard to supply,remaining at South Korean shipyards, we believe there ~~were 28 benign environment floaters~~are only ten uncontracted drillships remaining that are ~~either older than 20~~likely reactivation candidates over the next few years, including VALARIS DS-11 and the Newbuild Drillships. We anticipate that continued floater demand growth will further reduce available drillship capacity. Also, given the expected high construction cost and lack of ~~age and currently idle or have been stacked~~shipyard capacity, we do not believe that market conditions are supportive of newbuild construction for more than three years. There were two additional benign environment floaters older than 20 years that have contracts expiring in six months without follow-on work. Operating costs associated with keeping these rigs idle as well as expenditures required to re-certify or reactivate some of these aging rigs may prove cost prohibitive. Drilling contractors may elect to scrap or cold stack a portion of these rigs.the foreseeable future.

A sustained constructive oil price environment and continued demand for offshore projects or further rationalization of drilling rig supply are necessary to maintain current floater utilization and day rates.

Jackups

Contracting and tendering activity for jackups ~~began to improve during 2021~~has improved in recent years as a result of the more constructive oil price ~~environment. Further,~~environment and we have seen a ~~notable~~corresponding increase in ~~jackup activity in 2022, primarily driven by demand from the Middle East.~~utilization. The number of contracted jackups has increased to ~~394~~409 at December 31, 2023 from a low of 341 in early 2021, contributing to a ~~13%~~16% increase in global utilization, from 78% to ~~91%~~94%, for the industry's active fleet over the same ~~period.~~period, which has led to a meaningful increase in day rates for jackups. In early 2024, Saudi Arabia announced that they plan to maintain maximum sustainable capacity at 12 million barrels per day rather than pursuing their previously stated aim of increasing capacity to 13 million barrels per day. At this early stage, we are unable to predict what, if any, impact this announcement will have on the jackup market or the operations of ARO.

~~Our backlog for our jackup segment was $742.3 million and $643.0 million~~From a supply perspective, as ~~of February 21, 2023 and 2022, respectively. The increase in our backlog was due to contract awards and contract extensions, partially offset by revenues realized.~~

Utilization for our jackups was 66% during the year ended December 31, 2022, compared to 54% during the year ended December 31, 2021. The increase in utilization is primarily due to the sale of stacked jackups in 2022 and late 2021. Average day rates were approximately $94,000 during the year ended December 31, 2022, compared to approximately $95,000 during the year ended December 31, 2021.

As of December 31, ~~2022, jackup supply~~2023, the number of jackups declined by 9%8% to ~~493~~498 from a peak of 542 in early 2015. ~~Globally, there were 20 newbuild~~While the number of jackups has decreased less than floaters on a relative basis, 33% of the current jackup ~~rigs reported to be under construction~~fleet is more than 30 years of age with limited useful lives remaining. Further, we believe that ~~could increase global supply,~~some of ~~which 15 were scheduled to be delivered before~~ the ~~end of 2023. Most newbuild jackups were uncontracted. Further, with regard to supply, there were 79~~ jackups that are ~~either older than 30 years and~~ currently idle are not competitive, either due to their age or ~~have been stacked for more than three years. There were a further 17 jackups that are 30 years or older and have contracts expiring within the next six months without follow-on work.~~length of time stacked. Expenditures required to ~~re-certify or reactivate~~recertify some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap ~~or cold stack~~a portion of these rigs. Excluding ARO's newbuild program, there are only 17 newbuild jackups remaining at shipyards, of which 12 are at Chinese shipyards, many of which are expected to be used for the local supply in China.

~~A sustained constructive oil price environment and continued demand for offshore projects or further rationalization of drilling rig supply are necessary to maintain jackup utilization and day rates.~~

RESULTS OF OPERATIONS

The following table summarizes our Consolidated Results of Operations for the year ended December 31, 2023 and 2022 (Successor), eight months ended December 31, 2021 (Successor), four months ended April 30, 2021 (Predecessor) and the combined Successor and Predecessor results for the year ended December 31, 2021 (Non-GAAP) (in ~~millions)~~millions, except percentages):

Successor Predecessor Combined (Non-GAAP)(1)
Year Ended December 31, 2022 Eight Months Ended December 31, 2021 Four Months Ended April 30, 2021 Year Ended December 31, 2021
Revenues $ 1,602.5 $ 835.0 $ 397.4 $ 1,232.4
Operating expenses
Contract drilling (exclusive of depreciation) 1,383.2 724.1 343.8 1,067.9
Loss on impairment 34.5 — 756.5 756.5
Depreciation 91.2 66.1 159.6 225.7
General and administrative 80.9 58.2 30.7 88.9
Total operating expenses 1,589.8 848.4 1,290.6 2,139.0
Equity in earnings of ARO 24.5 6.1 3.1 9.2
Operating income (loss) 37.2 (7.3) (890.1) (897.4)
Other income (expense), net 187.7 20.1 (3,557.5) (3,537.4)
Provision for income taxes 43.1 36.4 16.2 52.6
Net income (loss) 181.8 (23.6) (4,463.8) (4,487.4)
Net income attributable to noncontrolling interests (5.3) (3.8) (3.2) (7.0)
Net income (loss) attributable to Valaris $ 176.5 $ (27.4) $ (4,467.0) $ (4,494.4)

~~(1)~~ We believe that the discussion of our results of operations for the eight months ended December 31, 2021 (Successor) combined with the four months ended April 30, 2021 (Predecessor) provides a more meaningful comparison to the year ended December 31, 2022 (Successor) and is more useful in understanding operational trends. These combined results do not comply with accounting principles generally accepted in the United States of America ("GAAP") and have not been prepared as pro forma results under applicable SEC rules.


	Year Ended December 31,				Change		% Change
	2023		2022
Revenues	$	1,784.2	$	1,602.5	$	181.7	11	%
Operating expenses
Contract drilling (exclusive of depreciation)	1,543.6		1,383.2		160.4		12	%
Loss on impairment	—		34.5		(34.5)		(100)	%
Depreciation	101.1		91.2		9.9		11	%
General and administrative	99.3		80.9		18.4		23	%
Total operating expenses	1,744.0		1,589.8		154.2		10	%

Equity in earnings of ARO	13.3		24.5		(11.2)		(46)	%
Operating income	53.5		37.2		16.3		44	%
Other income, net	30.7		187.7		(157.0)		(84)	%
Provision (benefit) for income taxes	(782.6)		43.1		(825.7)		nm


Net income	866.8		181.8		685.0		377	%
Net income attributable to noncontrolling interests	(1.4)		(5.3)		3.9		(74)	%
Net income attributable to Valaris	$	865.4	$	176.5	$	688.9	390	%

Overview

Revenues increased ~~$370.1 million, or 30.0%, for the year ended December 31, 2022 (Successor) as~~in 2023, compared to ~~the combined Successor and Predecessor prior year period,~~2022, primarily due to ~~$227.8~~an increase in average daily revenue earned of $177.6 million ~~resulting~~primarily attributable to certain rigs that commenced new contracts during 2023 at a higher average daily revenue, $47.7 million from ~~more~~an increase in operating days ~~in 2022,~~primarily attributable to floaters that have commenced contracts following reactivation and $12.5 million of higher revenues earned from lease agreements with ARO primarily from higher lease rates for certain rigs. These increases were partially offset by a $51.0 million fee recognized for the early termination of the VALARIS DS-11 contract in 2022, a $47.2 million increase in amortization of deferred mobilization and capital upgrade revenue, $19.3 million from higher customer reimbursable revenue, and $18.2 million from higher average day rates on certain rigs.2022.

Contract drilling expense increased $315.3 million, or 29.5%, for the year ended December 31, 2022 (Successor) as compared to the combined Successor and Predecessor prior year period, primarily due to a $213.2 million increase attributable to rigs that have returned to work upon completion of reactivation projects or after being idle in the prior year period, a $36.8 million increase in the costs for certain claims, a $32.4 million increase in reactivation costs, and a $20.5 million increase in reimbursable costs.

Contract drilling expense increased in 2023, compared to 2022, primarily due to $123.0 million attributable to rigs that have commenced contracts following reactivation, a $43.1 million increase in repair costs for certain rigs and a $36.2 million increase in reactivation costs. These increases were partially offset by a $35.9 million decrease in the costs for certain claims and a $16.1 million decrease in operating costs for VALARIS 140 and VALARIS 141, which we started leasing to ARO at the end of the first quarter and the third quarter of 2022, respectively.

During 2022, ~~(Successor),~~ we recorded non-cash losses on impairment totaling $34.5 million with respect to customer-specific capital upgrades for VALARIS DS-11 made pursuant to the terms of the drilling contract that was terminated during the second quarter of 2022. ~~During the four months ended April 30, 2021 (Predecessor), we recorded non-cash losses on impairment totaling $756.5 million, with respect to certain assets in our fleet.~~ See "Note 7 - Property and Equipment" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Depreciation expense ~~declined $134.5 million, or 59.6%, for the year ended December 31, 2022 (Successor) as~~increased in 2023, compared to ~~the combined Successor~~2022, primarily due to new assets placed in service for certain rigs that underwent reactivation projects and ~~Predecessor prior year period, primarily as a result of the reduction in values of property and equipment from the application of fresh start accounting on the Effective Date.~~capital upgrades.

General and administrative expenses ~~declined by $8.0 million or 9.0%, for the year ended December 31, 2022 (Successor) as compared to the combined Successor and Predecessor prior year period~~increased primarily due to ~~a change in~~higher compensation related to our long-term incentive ~~compensation structure following the Effective Date.~~plans and higher professional fees.

Other income, ~~(expense),~~ net, ~~changed from an expense of $3.5 billion~~decreased in ~~the combined Successor and Predecessor prior year period~~2023, compared to ~~income of $187.7~~2022, primarily due to a $112.6 million for the year ended December 31, 2022 (Successor). In the prior year, we recorded $3.6 billion of reorganization costs incurred directly related to the Chapter 11 Cases. In 2022, we recognized a pre-taxlower gain on ~~sale of property of $141.2 million primarily from~~ the sale of ~~VALARIS 113, VALARIS 114, VALARIS 36~~assets, a $23.6 million increase in interest expense, a $15.7 million decrease in foreign currency gains, and ~~VALARIS 67 as well as additional proceeds received~~a $15.5 million decrease in ~~2022 from two rigs sold~~net periodic pension and retiree medical income. The decrease is further attributable to a $29.2 million loss on the extinguishment of our First Lien Notes recognized in ~~prior years as~~2023. These decreases were partially offset by a ~~result of post-sale conditions of those sale agreements. We also recognized non-cash~~$35.9 million increase in interest income of $14.8 million for the adjustment to the discount resulting from the partial early repayment on our Notes Receivable from ARO and $8.9 million of interest income in 2022 on investments during the period.income.

Rig Counts, Utilization and Average ~~Day Rates~~Daily Revenue

The following table summarizes our and ARO's offshore drilling rigs as of December 31, ~~2022~~2023 and ~~2021:~~2022:

2022 2021
Floaters 16 16
Jackups(1)
28 33
Other(2)
8 7
Total Valaris 52 56
ARO(3)
7 7


	2023	2022
Floaters (1)	18	16
Jackups(2)	27	28
Other(3)	8	8

Total Valaris	53	52
ARO(4)	8	7

(1)During the ~~first~~fourth quarter of ~~2022,~~2023, we ~~sold VALARIS 67 and leased VALARIS 140 to ARO.~~ took delivery of the Newbuild Drillships.

(2)During the second quarter of ~~2022,~~2023, we sold VALARIS ~~113 and VALARIS 114. During the third quarter of 2022, we leased VALARIS 141 to ARO.~~54.

~~(2)~~(3)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under contracts with Saudi Aramco. During the first quarter of 2022, VALARIS 140 was leased to ARO. During the second quarter of 2022, we sold VALARIS 36, which was previously leased to ARO. During the third quarter of 2022, VALARIS 141 was leased to ARO.

~~(3)~~(4)This represents the ~~seven~~eight jackup rigs owned by ARO which are operating under long-term contracts with Saudi ~~Aramco.~~Aramco, including Kingdom 1, a jackup rig which was delivered in the fourth quarter of 2023.

We provide management services in the U.S. Gulf of Mexico on two rigs owned by a third-party not included in the table above.

We are a party to contracts whereby we have the option to take delivery of two recently constructed drillships that are not included in the table above. See "Note 14 - Commitments and Contingencies" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Additionally, ARO has ordered ~~two jackups~~a newbuild jackup which ~~are~~is under construction in the Middle East ~~that are~~and expected to be delivered in the first half of 2024. This rig is not included in the table above.

The following table summarizes our and ARO's rig utilization and average ~~day rates~~daily revenue by reportable segment:


		Year Ended December 31,
		Year Ended December 31,
		Year Ended December 31,
		2022		2021				2023		2022
Rig Utilization(1)
Rig Utilization - Total Fleet (1)						Rig Utilization - Total Fleet (1)
Floaters	Floaters	45%		29%		Floaters		58%		45%
Jackups	Jackups	66%		54%		Jackups		59%		66%
Other(2)	Other(2)	100%		100%		Other(2)		100%		100%
Total Valaris	Total Valaris	66%		55%		Total Valaris		66%		66%
ARO	ARO	92%		87%		ARO		93%		92%
Average Day Rates(3)

Rig Utilization - Active Fleet (1)
Rig Utilization - Active Fleet (1)
Rig Utilization - Active Fleet (1)
Floaters
Floaters
Floaters	Floaters	$	212,869	$	192,984		75%		67%
Jackups	Jackups	93,795		95,304		Jackups		79%		86%
Other(2)	Other(2)	37,952		31,301		Other(2)		100%		100%
Total Valaris	Total Valaris	$	102,308	$	88,847	Total Valaris		83%		85%
ARO	ARO	$	93,690	$	73,799	ARO		93%		92%

Average Daily Revenue (3)
Average Daily Revenue (3)
Average Daily Revenue (3)
Floaters
Jackups
Other(2)
Total Valaris
ARO

(1)Rig utilization isfor the total fleet and active fleet are derived by dividing the ~~number of~~operating days ~~under contract~~ by the number of days in the ~~period. Days under contract~~period for the total fleet and active fleet, respectively. Active fleet represents rigs that are not preservation stacked and includes rigs that are in the process of being reactivated. Operating days equals the total number of days that rigs have earned and recognized day rate revenue, including days associated with early contract terminations, compensated downtime and mobilizations and excluding suspension periods. When revenue is deferred and amortized over a future period, for example, when we receive fees while mobilizing to commence a new contract or while being upgraded in a shipyard, the related days are excluded from ~~days under contract.~~operating days.

(2)Includes our two management services contracts and our rigs leased to ARO under bareboat charter contracts.

(3)Average ~~day rates are~~daily revenue is derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable ~~revenues, lump-sum~~ revenues, revenues earned during suspension periods and revenues attributable to amortization of drilling contract intangibles, by the aggregate number of ~~contract days,~~operating days. Beginning in 2023, we began presenting average daily revenue instead of the previously reported average day rate metric, which further excluded lump-sum revenues and amortization thereof. Average daily revenue is a more comprehensive measurement of our revenue-earning performance and more closely aligns with the calculation methodology used by our closest offshore drilling peers. The prior period has been adjusted to ~~exclude contract days associated~~conform with ~~certain suspension periods, mobilizations and demobilizations.~~the current period presentation.

Operating Income by Segment

Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by ~~third-parties~~third parties and the activities associated with our arrangements with ARO under the bareboat charter arrangements (the "Lease Agreements"). Floaters, Jackups and ARO are also reportable segments.

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

~~The~~Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below ~~for ARO~~ are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO.

Segment information for the year ended December 31, ~~2022 (Successor), the eight months ended December 31, 2021 (Successor), the four months ended April 30, 2021 (Predecessor)~~2023 and ~~the combined Successor and Predecessor results for the year ended December 31, 2021 (Non-GAAP)~~2022 is as follows (in millions).

Year Ended December 31, ~~2022 (Successor)~~2023


		Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
	Floaters													Floaters	Jackups	ARO	Other	Reconciling Items	Consolidated Total
Revenues	Revenues	$	700.5	$	744.2	$	459.5	$	157.8	$	(459.5)	$	1,602.5
Operating expenses	Operating expenses
Contract drilling (exclusive of depreciation)	Contract drilling (exclusive of depreciation)	646.0		538.9		341.8		76.4		(219.9)		1,383.2
Loss on impairment		34.5		—		—		—		—		34.5
Contract drilling (exclusive of depreciation)
Contract drilling (exclusive of depreciation)

Depreciation
Depreciation
Depreciation	Depreciation	50.0		36.1		63.4		4.6		(62.9)		91.2
General and administrative	General and administrative	—		—		18.7		—		62.2		80.9

Equity in earnings of ARO	Equity in earnings of ARO	—		—		—		—		24.5		24.5
Operating income (loss)		$	(30.0)	$	169.2	$	35.6	$	76.8	$	(214.4)	$	37.2
Equity in earnings of ARO
Equity in earnings of ARO
Operating income

~~Eight Months~~Year Ended December 31, ~~2021 (Successor)~~2022


		Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
	Floaters													Floaters	Jackups	ARO	Other	Reconciling Items	Consolidated Total
Revenues	Revenues	$	254.5	$	487.1	$	307.1	$	93.4	$	(307.1)	$	835.0
Operating expenses	Operating expenses
Contract drilling (exclusive of depreciation)	Contract drilling (exclusive of depreciation)	250.7		365.2		246.2		38.9		(176.9)		724.1

Contract drilling (exclusive of depreciation)
Contract drilling (exclusive of depreciation)
Loss on impairment
Depreciation	Depreciation	31.0		32.0		44.2		2.8		(43.9)		66.1
General and administrative	General and administrative	—		—		13.6		—		44.6		58.2

Equity in earnings of ARO	Equity in earnings of ARO	—		—		—		—		6.1		6.1
Equity in earnings of ARO
Equity in earnings of ARO
Operating income (loss)	Operating income (loss)	$	(27.2)	$	89.9	$	3.1	$	51.7	$	(124.8)	$	(7.3)

~~Four Months Ended April 30, 2021 (Predecessor)~~

Floaters Jackups ARO Other Reconciling Items Consolidated Total
Revenues $ 115.7 $ 232.4 $ 163.5 $ 49.3 $ (163.5) $ 397.4
Operating expenses
  Contract drilling
  (exclusive of depreciation) 106.5 175.0 116.1 19.9 (73.7) 343.8
  Loss on impairment 756.5 — — — — 756.5
  Depreciation 72.1 69.7 21.0 14.8 (18.0) 159.6
  General and administrative — — 4.2 — 26.5 30.7
Equity in earnings of ARO — — — — 3.1 3.1
Operating income (loss) $ (819.4) $ (12.3) $ 22.2 $ 14.6 $ (95.2) $ (890.1)

~~Combined Year Ended December 31, 2021 (Non-GAAP)~~

Floaters Jackups ARO Other Reconciling Items Consolidated Total
Revenues $ 370.2 $ 719.5 $ 470.6 $ 142.7 $ (470.6) $ 1,232.4
Operating expenses
  Contract drilling
  (exclusive of depreciation) 357.2 540.2 362.3 58.8 (250.6) 1,067.9
  Loss on impairment 756.5 — — — — 756.5
  Depreciation 103.1 101.7 65.2 17.6 (61.9) 225.7
  General and administrative — — 17.8 — 71.1 88.9
Equity in earnings of ARO — — — — 9.2 9.2
Operating income (loss) $ (846.6) $ 77.6 $ 25.3 $ 66.3 $ (220.0) $ (897.4)

Floaters

Floater revenue increased ~~$330.3~~$248.2 million, or ~~89%~~35%, ~~for the year ended December 31,~~in 2023 as compared to 2022, ~~(Successor)~~primarily due to $210.3 million from increased operating days primarily attributable to rigs that have commenced contracts following reactivation or returned to work upon completion of special periodic surveys and $96.7 million from higher average daily revenue earned primarily due to VALARIS DS-12 and VALARIS DPS-5 working under higher day rate contracts in 2023 as compared to the ~~combined Successor and Predecessor~~ prior ~~year period primarily due to $200.2~~year. These increases were partially offset by $51.0 million ~~resulting from more operating days~~of revenue recognized in 2022 attributable to a ~~$51.0 million~~termination fee ~~recognized~~ for ~~the early termination of~~ the VALARIS DS-11 contract in 2022, $29.4 million from increased average day rates on certain rigs, $24.5 million from higher customer reimbursable revenue, and a $20.1 million increase in amortization of deferred mobilization and capital upgrade revenue.contract.

Floater contract drilling expense increased ~~$288.8~~$166.0 million, or ~~81%~~26%, ~~for the year ended December 31, 2022 (Successor)~~in 2023 as compared to ~~the combined Successor and Predecessor prior year period~~2022, primarily due to ~~increases of $134.4~~$167.8 million attributable to rigs that have returned to work upon completion of reactivation projects ~~or after being idle in the prior year period, $82.4~~and an $36.2 million increase in reactivation ~~costs, $30.6~~costs. These increases were partially offset by a $28.4 million decrease in ~~the~~ costs for certain ~~claims, $24.7 million in reimbursable costs, and $13.1 million in repair cost for certain rigs.~~claims.

During 2022, ~~(Successor),~~ we recorded non-cash losses on impairment totaling $34.5 million, with respect to customer-specific capital upgrades for VALARIS DS-11 made pursuant to the terms of the drilling contract that was terminated during the second quarter of 2022. ~~During the four months ended April 30, 2021 (Predecessor), we recorded a non-cash loss on impairment totaling $756.5 million with respect to certain assets in our Floater segment.~~

See "Note 7 -Property and Equipment" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.

Floater depreciation expense ~~declined $53.1~~increased $5.8 million, or ~~52%~~12%, ~~for the year ended December 31, 2022 (Successor),~~in 2023 as compared to ~~the combined Successor~~2022, primarily due to new assets placed in service for certain rigs that underwent reactivation projects and ~~Predecessor prior year period, primarily as a result of the reduction in values of property and equipment from the application of fresh start accounting on the Effective Date.~~capital upgrades.

Jackups

Jackup revenues ~~increased $24.7~~declined $84.6 million, or 3%11%, ~~for the year ended December 31, 2022 (Successor)~~in 2023 as compared to ~~the combined Successor and Predecessor prior year period,~~2022, primarily due to ~~increases~~$162.6 million from decreased operating days primarily due to rigs that completed contracts in the North Sea during the first half of ~~$29.8 million~~2023 due to lower activity in ~~amortization~~the region, certain rigs that were mobilizing or idle between contracts during 2023, and the sale of ~~deferred mobilization and capital upgrade revenue and $27.6 million resulting from more operating days~~VALARIS 54 which operated in 2022. These ~~increases~~decreases were partially offset by a ~~decrease of $25.5~~$75.2 million ~~from~~increase due to higher average ~~day rates on certain rigs and a decrease of $10.0 million from lower customer reimbursable revenue.~~daily revenue earned.

Jackup contract drilling expense ~~remained consistent, declining only $1.3~~declined $21.5 million, ~~for the year ended December 31, 2022 (Successor)~~or 4%, in 2023 as compared to ~~the combined Successor and Predecessor prior year period~~2022, primarily due to $49.2 million of lower costs for rigs that were idle or between contracts in 2023, and a ~~$49.6~~$16.1 million decrease in ~~reactivation~~operating costs ~~a $15.5 million decrease due to rigs~~for VALARIS 140 and VALARIS 141, which ~~were leased~~we started leasing to ARO ~~and a $10.5 million decrease due to rigs which~~in 2022. These decreases were ~~sold, being~~partially offset by a ~~$78.8~~$42.1 million increase in repair costs ~~attributable to rigs that have returned to work after being idle~~ in ~~the prior year period.~~2023 primarily associated with maintenance performed during special periodic surveys.

Jackup depreciation expense ~~declined $65.6~~increased $3.9 million, or ~~65%~~11%, ~~for the year ended December 31, 2022 (Successor)~~in 2023 as compared to 2022, due to new assets placed in service for certain rigs that underwent capital upgrades, partially offset by VALARIS 54, which was sold in the ~~combined Successor and Predecessor prior year period primarily as a result~~second quarter of ~~the reduction in values of property and equipment from the application of fresh start accounting on the Effective Date.~~2023.

ARO

ARO currently owns a fleet of seven jackup rigs, leases another eight jackup rigs from us and has plans to purchase 20 newbuild jackup rigs over an approximate 10-year period. In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $176.0 million. While the shipyard contract contemplated delivery of these newbuild rigs in 2022, the delivery of these rigs has been delayed into 2023. ARO is expected to place orders for two additional newbuild jackups in the near term. The joint venture partners intend for the newbuild jackup rigs to be financed out of available cash from ARO's operations and/or funds available from third-party debt financing. ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020 and is actively exploring financing options for the remaining payments due upon delivery. In the event ARO has insufficient cash from operations or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, as delivered on a proportionate basis.

The ~~joint venture partners agreed in the Shareholder Agreement that Saudi Aramco, as a customer, will provide~~operating revenues of ARO reflect revenues earned under drilling contracts ~~to ARO in connection~~ with ~~the acquisition of the newbuild rigs. The initial contracts provided by~~ Saudi Aramco for ~~each~~ the newbuild rigs will be for an eight-year term. The day rate for the initial contracts for each newbuild rig will be determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism. As of December 31, 2022, we leased eight rigs to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. All the jackup rigs leased to ARO are operating under three-year contracts, or related extensions, with Saudi Aramco. All seven ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are ~~currently operating under long-term contracts with Saudi Aramco.~~inclusive of the bareboat charter fees for the rigs leased from us. See "Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on ARO and related arrangements.

5756

The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for the seven ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us.

Revenue ~~for the year ended December 31, 2022 decreased $11.1~~increased $37.1 million, or 2%8%, in 2023 as compared to ~~the prior year~~2022, primarily due to a ~~$51.0 million decrease from three rigs which operated in the prior year period completing their contracts in 2021 or 2022. This decrease was partially offset by a $32.5~~$29.2 million increase from VALARIS 140 and VALARIS 141, which were leased to ARO ~~and commenced drilling operations during~~starting in 2022, and from Kingdom 1, a ~~$6.7~~newbuild jackup rig, which commenced operations in the fourth quarter of 2023. Furthermore, there was a $24.3 million increase from higher average daily revenue earned by certain rigs. These increases were partially offset by $9.0 million decrease due to ~~lower temporary suspension or planned maintenance days~~VALARIS 36 which operated in the prior year until the rig was sold in May 2022 and $7.8 million for certain rigs undergoing maintenance projects in ~~2022 as compared to the prior year period.~~2023.

Contract drilling expense ~~for the year ended December 31, 2022, decreased $20.5~~increased $24.1 million, or 6%7%, in 2023 as compared to ~~the prior year~~2022, primarily due to ~~a decrease in bareboat charter lease expense~~$13.8 million of ~~$12.9~~incremental operating costs related to VALARIS 140, VALARIS 141 and Kingdom 1, $8.7 million ~~primarily as a result of fewer rigs leased~~ from ~~us during 2022, a $5.0 million decrease in~~higher personnel cost and a ~~$4.4~~$4.8 million increase in repair and maintenance costs. These increases were partially offset by $7.5 million decrease from VALARIS 36, which operated in ~~repairs and maintenance cost for certain rigs.~~prior year until it was sold in May 2022.

Other

Other revenues increased ~~$15.1~~$18.1 million, or 11%, ~~for the year ended December 31, 2022 (Successor)~~in 2023 as compared to ~~the combined Successor and Predecessor prior year period,~~2022, primarily due to ~~an increase~~$12.5 million of ~~$14.3~~higher revenues earned from lease agreements with ARO attributable to higher average daily revenue on certain leased rigs and $5.7 million from higher average ~~day rates on certain rigs.~~

~~Other contract drilling expenses increased $17.6 million, or 30%,~~daily revenue earned for the year ended December 31, 2022 (Successor) as compared to the combined Successor and Predecessor prior year period, primarily due to a $8.6 million increase in costs for certain claims, a $4.9 million increase in personnel costs and a $4.4 million increase in reimbursable costs.

Depreciation expense declined $13.0 million, or 74%, for the year ended December 31, 2022 (Successor) as compared to the combined Successor and Predecessor prior year period primarily due to the reduction in the values of property and equipment from the application of fresh start accounting on the Effective Date.our management services contracts.

Other Income (Expense), Net

The following table summarizes other income (expense), net, (in millions):


		Successor				Predecessor		Combined (Non-GAAP)
		Year Ended December 31, 2022		Eight Months Ended December 31, 2021		Four Months Ended April 30, 2021		Year Ended December 31, 2021
Net gain on sale of property		$	141.2	$	21.2	$	6.0	$	27.2
	Year Ended December 31,										Year Ended December 31,
	2023									2023		2022
Interest income	Interest income	65.5		28.5		3.6		32.1

Interest expense, net	Interest expense, net	(45.3)		(31.0)		(2.4)		(33.4)
Net foreign currency exchange gains		12.2		8.1		13.4		21.5
Reorganization items, net		(2.4)		(15.5)		(3,584.6)		(3,600.1)

Interest expense, net

Interest expense, net
Loss on debt extinguishment
Net gain on sale of property
Net foreign currency exchange gains (losses)

Net periodic pension and retiree medical income
Net periodic pension and retiree medical income
Net periodic pension and retiree medical income
Other, net	Other, net	16.5		8.8		6.5		15.3
		$	187.7	$	20.1	$	(3,557.5)	$	(3,537.4)



TABLE OF CONTENTS

PART I	ITEM 1.	BUSINESS	5
	ITEM 1A.	RISK FACTORS	1714
	ITEM 1B.	UNRESOLVED STAFF COMMENTS	39
	ITEM 1C.	CYBERSECURITY	40
	ITEM 2.	PROPERTIES	4142
	ITEM 3.	LEGAL PROCEEDINGS	4344
	ITEM 4.	MINE SAFETY DISCLOSURES	4445


PART II	ITEM 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	4546

	ITEM 6	RESERVED	4748
	ITEM 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4748
	ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	7469
	ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	7570
	ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	~~152~~139
	ITEM 9A.	CONTROLS AND PROCEDURES	~~152~~139
	ITEM 9B.	OTHER INFORMATION	~~152~~139
	ITEM 9C.	DISCLOSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS	139


PART III	ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	~~153~~140
	ITEM 11.	EXECUTIVE COMPENSATION	~~153~~140
	ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS	~~154~~141
	ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	~~154~~141
	ITEM 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	~~154~~141


PART IV	ITEM 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	~~155~~142
	ITEM 16.	FORM 10-K SUMMARY	~~159~~146
		SIGNATURES	~~160~~147


		Successor				Predecessor
		Year Ended December 31,
		Year Ended December 31, 2022		Eight Months Ended December 31, 2021		Four Months Ended April 30, 2021
Net cash provided by (used in) operating activities		$	127.5	$	(26.2)	$	(39.8)
		Year Ended December 31,

		Year Ended December 31,
		2023
		2023
		2023
Net cash provided by operating activities
Net cash provided by operating activities
Net cash provided by operating activities

Capital expenditures	Capital expenditures	$	(207.0)	$	(50.2)	$	(8.7)

Capital expenditures

Capital expenditures


Maturity Date	Principal ~~amount~~Amount
October 2027	$	225.0
October 2028	177.7
Total	$	402.7


		Payments due by period										Payments due by period
		2023		2024 and 2025		2026 and 2027		Thereafter		Total
	2024												2024	2025 and 2026	2027 and 2028	Thereafter	Total
Principal payments on long-term debt	Principal payments on long-term debt	$	—	$	—	$	—	$	550.0	$	550.0
Interest payments on long-term debt(1)		45.4		90.7		90.7		22.7		249.5
Interest payments on long-term debt
Operating leases	Operating leases	10.7		6.2		4.8		6.1		27.8
Total contractual obligations(2)		$	56.1	$	96.9	$	95.5	$	578.8	$	827.3
Total contractual obligations(1)


	Commitment expiration by period
	2023		2024 and 2025		2026 and 2027		Thereafter		Total
Letters of credit	$	116.7	$	14.1	$	10.6	$	—	$	141.4


UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549


☑			ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to


Valaris Limited
(Exact name of registrant as specified in its charter)



	May 3, 2021	December 31, 2021	December 31, 2022
Valaris Limited	100.0	151.9	285.3
S&P MidCap 400	100.0	104.6	91.0
Dow Jones US Select Oil Equipment & Services Index	100.0	96.5	160.7


	February 21, 2023		February 21, 2022
Floaters (1)	$	1,376.9	$	1,665.3
Jackups	742.3		643.0
Other(2)	344.0		135.6
Total	$	2,463.2	$	2,443.9
ARO	$	1,731.8	$	1,501.1


	Successor				Predecessor		Combined (Non-GAAP)(1)
	Year Ended December 31, 2022		Eight Months Ended December 31, 2021		Four Months Ended April 30, 2021		Year Ended December 31, 2021
Revenues	$	1,602.5	$	835.0	$	397.4	$	1,232.4
Operating expenses
Contract drilling (exclusive of depreciation)	1,383.2		724.1		343.8		1,067.9
Loss on impairment	34.5		—		756.5		756.5
Depreciation	91.2		66.1		159.6		225.7
General and administrative	80.9		58.2		30.7		88.9
Total operating expenses	1,589.8		848.4		1,290.6		2,139.0

Equity in earnings of ARO	24.5		6.1		3.1		9.2
Operating income (loss)	37.2		(7.3)		(890.1)		(897.4)
Other income (expense), net	187.7		20.1		(3,557.5)		(3,537.4)
Provision for income taxes	43.1		36.4		16.2		52.6


Net income (loss)	181.8		(23.6)		(4,463.8)		(4,487.4)
Net income attributable to noncontrolling interests	(5.3)		(3.8)		(3.2)		(7.0)
Net income (loss) attributable to Valaris	$	176.5	$	(27.4)	$	(4,467.0)	$	(4,494.4)


Rig	Date of Sale	Segment(1)	Net Proceeds		Net Book Value		Pre-tax Gain

Year Ended December 31, 2022 (Successor)
VALARIS 36	May 2022	Jackups	$	8.8	$	0.3	$	8.5
VALARIS 113	April 2022	Jackups	62.0		2.0		60.0
VALARIS 114	April 2022	Jackups	62.0		2.0		60.0
VALARIS 67	March 2022	Jackups	5.0		3.0		2.0
			$	137.8	$	7.3	$	130.5

Eight Months Ended December 31, 2021 (Successor)
VALARIS 37	November 2021	Jackups	$	4.2	$	0.3	$	3.9
VALARIS 22	October 2021	Jackups	4.0		0.3		3.7
VALARIS 142	October 2021	Jackups	15.0		2.0		13.0
VALARIS 100	August 2021	Jackups	1.1		1.0		0.1
			$	24.3	$	3.6	$	20.7

Four Months Ended April 30, 2021 (Predecessor)
VALARIS 101	April 2021	Jackups	$	26.4	$	21.1	$	5.3





















			$	26.4	$	21.1	$	5.3


(in millions)	December 31, 2022		December 31, 2021
ASSETS
Current assets	$	1,288.3	$	1,157.3
Amounts due from non-guarantor subsidiaries, current	625.5		729.7
Amounts due from related party, current	13.5		13.1
Noncurrent assets	1,061.1		1,019.0
Amounts due from non-guarantor subsidiaries, noncurrent	896.7		1,469.7
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities	416.7		335.9
Amounts due to non-guarantor subsidiaries, current	8.2		55.3
Amounts due to related party, current	43.2		38.3
Long-term debt	542.4		545.3
Noncurrent liabilities	431.2		436.4
Amounts due to non-guarantor subsidiaries, noncurrent	1,767.8		1,921.6
Noncontrolling interest	8.0		2.7


		December 31, 2022		December 31, 2021		December 31, 2023	December 31, 2022
ASSETS	ASSETS
CURRENT ASSETS	CURRENT ASSETS
CURRENT ASSETS
CURRENT ASSETS
Cash and cash equivalents	Cash and cash equivalents	$	724.1	$	608.7
Restricted cash	Restricted cash	24.4		35.9

Accounts receivable, net
Accounts receivable, net
Accounts receivable, net	Accounts receivable, net	449.1		444.2
Other current assets	Other current assets	148.6		117.8
Total current assets	Total current assets	1,346.2		1,206.6
PROPERTY AND EQUIPMENT, AT COST	PROPERTY AND EQUIPMENT, AT COST	1,134.5		957.0
Less accumulated depreciation	Less accumulated depreciation	157.3		66.1
Property and equipment, net	Property and equipment, net	977.2		890.9
LONG-TERM NOTES RECEIVABLE FROM ARO	LONG-TERM NOTES RECEIVABLE FROM ARO	254.0		249.1
INVESTMENT IN ARO	INVESTMENT IN ARO	111.1		86.6
DEFERRED TAX ASSETS
OTHER ASSETS	OTHER ASSETS	171.8		169.9
		$	2,860.3	$	2,603.1
LIABILITIES AND SHAREHOLDERS' EQUITY	LIABILITIES AND SHAREHOLDERS' EQUITY					LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES	CURRENT LIABILITIES					CURRENT LIABILITIES
Accounts payable - trade	Accounts payable - trade	$	256.5	$	225.8
Accrued liabilities and other	Accrued liabilities and other	247.9		196.2

Total current liabilities	Total current liabilities	504.4		422.0
Total current liabilities
Total current liabilities
LONG-TERM DEBT	LONG-TERM DEBT	542.4		545.3
DEFERRED TAX LIABILITIES
OTHER LIABILITIES	OTHER LIABILITIES	515.6		558.4
Total liabilities	Total liabilities	1,562.4		1,525.7

COMMITMENTS AND CONTINGENCIES	COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
COMMITMENTS AND CONTINGENCIES
VALARIS SHAREHOLDERS' EQUITY	VALARIS SHAREHOLDERS' EQUITY					VALARIS SHAREHOLDERS' EQUITY

Common shares, $0.01 par value, 700.0 shares authorized, 75.2 and 75.0 shares issued as of December 31, 2022 and 2021, respectively		0.8		0.8
Preference shares, $0.01 par value, 150.0 shares authorized, no shares issued as of December 31, 2022 and 2021		—		—
Common shares, $0.01 par value, 700.0 shares authorized, 75.4 and 75.2 shares issued, 72.4 and 75.2 shares outstanding as of December 31, 2023 and 2022, respectively

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

Common shares, $0.01 par value, 700.0 shares authorized, 75.4 and 75.2 shares issued, 72.4 and 75.2 shares outstanding as of December 31, 2023 and 2022, respectively
Preference shares, $0.01 par value, 150.0 shares authorized, no shares issued as of December 31, 2023 and 2022
Stock warrants	Stock warrants	16.4		16.4
Additional paid-in capital	Additional paid-in capital	1,097.9		1,083.0
Retained earnings (deficit)		160.1		(16.4)
Accumulated other comprehensive income (loss)		14.7		(9.1)

Retained earnings
Accumulated other comprehensive income
Treasury shares, at cost, 3.0 million shares as of December 31, 2023
Total Valaris shareholders' equity	Total Valaris shareholders' equity	1,289.9		1,074.7
NONCONTROLLING INTERESTS	NONCONTROLLING INTERESTS	8.0		2.7
Total equity	Total equity	1,297.9		1,077.4
		$	2,860.3	$	2,603.1


	Successor						Predecessor
	Year Ended December 31, 2023		Year Ended December 31, 2022		Eight Months Ended December 31, 2021		Four Months Ended April 30, 2021
OPERATING REVENUES	$	1,784.2	$	1,602.5	$	835.0	$	397.4
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	1,543.6		1,383.2		724.1		343.8
Loss on impairment	—		34.5		—		756.5
Depreciation	101.1		91.2		66.1		159.6
General and administrative	99.3		80.9		58.2		30.7
Total operating expenses	1,744.0		1,589.8		848.4		1,290.6

EQUITY IN EARNINGS OF ARO	13.3		24.5		6.1		3.1
OPERATING INCOME (LOSS)	53.5		37.2		(7.3)		(890.1)
OTHER INCOME (EXPENSE)
Interest income	101.4		65.5		28.5		3.6
Interest expense, net (Unrecognized contractual interest expense for debt subject to compromise was $132.9 million for the four months ended April 30, 2021)	(68.9)		(45.3)		(31.0)		(2.4)
Reorganization items, net	—		(2.4)		(15.5)		(3,584.6)
Other, net	(1.8)		169.9		38.1		25.9
	30.7		187.7		20.1		(3,557.5)
INCOME (LOSS) BEFORE INCOME TAXES	84.2		224.9		12.8		(4,447.6)
PROVISION (BENEFIT) FOR INCOME TAXES
Current income tax expense	3.8		35.2		57.7		34.4
Deferred income tax expense (benefit)	(786.4)		7.9		(21.3)		(18.2)
	(782.6)		43.1		36.4		16.2
NET INCOME (LOSS)	866.8		181.8		(23.6)		(4,463.8)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(1.4)		(5.3)		(3.8)		(3.2)
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	865.4	$	176.5	$	(27.4)	$	(4,467.0)
EARNINGS (LOSS) PER SHARE
Basic	$	11.68	$	2.35	$	(0.37)	$	(22.38)
Diluted	$	11.51	$	2.33	$	(0.37)	$	(22.38)
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic	74.1		75.1		75.0		199.6
Diluted	75.2		75.6		75.0		199.6


~~6.875% Senior notes due 2020~~	$	~~122.9~~
~~4.70% Senior notes due 2021~~	~~100.7~~
~~4.875% Senior notes due 2022~~	~~620.8~~
~~3.00% Exchangeable senior notes due 2024~~	~~849.5~~
~~4.50% Senior notes due 2024~~	~~303.4~~
~~4.75% Senior notes due 2024~~	~~318.6~~
~~8.00% Senior notes due 2024~~	~~292.3~~
~~5.20% Senior notes due 2025~~	~~333.7~~
~~7.375% Senior notes due 2025~~	~~360.8~~
~~7.75% Senior notes due 2026~~	~~1,000.0~~
~~7.20% Debentures due 2027~~	~~112.1~~
~~7.875% Senior notes due 2040~~	~~300.0~~
~~5.40% Senior notes due 2042~~	~~400.0~~
~~5.75% Senior notes due 2044~~	~~1,000.5~~
~~5.85% Senior notes due 2044~~	~~400.0~~
~~Amounts drawn under the Revolving Credit Facility~~	~~581.0~~
~~Accrued Interest on Senior Notes and Revolving Credit Facility~~	~~203.5~~
~~Rig holding costs(1)~~	~~13.9~~
~~Total liabilities subject to compromise~~	$	~~7,313.7~~


	~~April 30, 2021~~
~~Enterprise Value~~	$	~~1,860.0~~
~~Plus: Cash and cash equivalents~~	~~607.6~~
~~Less: Fair value of debt~~	~~(544.8)~~
~~Less: Warrants~~	~~(16.4)~~
~~Less: Noncontrolling interest~~	~~1.1~~
~~Less: Pension and other post-retirement benefits liabilities~~	~~(189.0)~~
~~Less: Adjustments not contemplated in Enterprise Value~~	~~(639.0)~~
~~Fair value of Successor Common Shares~~	$	~~1,079.5~~
~~Shares issued upon emergence~~	~~75.0~~
~~Per share value~~	$	~~14.39~~


Maturity Date	Principal Amount
October 2027	$	225.0
October 2028	177.7
Total	$	402.7


	April 30, 2021
Enterprise Value	$	1,860.0
Plus: Cash and cash equivalents	607.6
Less: Fair value of debt	(544.8)
Less: Warrants	(16.4)
Less: Noncontrolling interest	1.1
Less: Pension and other post-retirement benefits liabilities	(189.0)
Less: Adjustments not contemplated in Enterprise Value	(639.0)
Fair value of Successor Common Shares	$	1,079.5
Shares issued upon emergence	75.0
Per share value	$	14.39


	As of April 30, 2021
	Predecessor		Reorganization Adjustments			Fresh Start Accounting Adjustments			Successor

ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	280.2	$	327.4	(a)	$	—		$	607.6
Restricted cash	45.7		42.7		(b)	—			88.4
Accounts receivable, net	425.9		—			—			425.9
Other current assets	370.1		1.5		(c)	(281.1)		(o)	90.5
Total current assets	1,121.9		371.6			(281.1)			1,212.4
PROPERTY AND EQUIPMENT, NET	10,026.4		(417.6)		(d)	(8,699.7)		(p)	909.1
LONG-TERM NOTES RECEIVABLE FROM ARO	442.7		—			(214.4)		(q)	228.3
INVESTMENT IN ARO	123.9		—			(43.4)		(r)	80.5
OTHER ASSETS	166.4		(10.0)		(e)	8.9		(s)	165.3
	$	11,881.3	$	(56.0)		$	(9,229.7)		$	2,595.6
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	161.5	$	13.1	(f)	$	(0.5)	(t)	$	174.1
Accrued liabilities and other	290.7		(12.4)		(g)	(61.8)		(u)	216.5
Total current liabilities	452.2		0.7			(62.3)			390.6
LONG-TERM DEBT	—		544.8		(h)	—			544.8
OTHER LIABILITIES	706.2		(55.2)		(i)	(85.6)		(v)	565.4
Total liabilities not subject to compromise	1,158.4		490.3			(147.9)			1,500.8
LIABILITIES SUBJECT TO COMPROMISE	7,313.7		(7,313.7)		(j)	—			—
COMMITMENTS AND CONTINGENCIES
VALARIS SHAREHOLDERS' EQUITY
Predecessor Class A ordinary shares	82.5		(82.5)		(k)	—			—
Predecessor Class B ordinary shares	0.1		(0.1)		(k)	—			—
Successor common shares	—		0.8		(l)	—			0.8
Successor stock warrants	—		16.4		(m)	—			16.4
Predecessor additional paid-in capital	8,644.0		(8,644.0)		(k)	—			—
Successor additional paid-in capital	—		1,078.7		(l)	—			1,078.7
Retained deficit	(5,147.4)		14,322.6		(n)	(9,175.2)		(w)	—
Accumulated other comprehensive loss	(93.4)		—			93.4		(x)	—
Predecessor treasury shares	(75.5)		75.5		(k)	—			—
Total Valaris shareholders' equity	3,410.3		6,767.4			(9,081.8)			1,095.9
NONCONTROLLING INTERESTS	(1.1)		—			—			(1.1)
Total equity	3,409.2		6,767.4			(9,081.8)			1,094.8
	$	11,881.3	$	(56.0)		$	(9,229.7)		$	2,595.6


Receipt of cash for First Lien Notes	$	500.0
Loan proceeds from backstop lenders	20.0
Funds received for liquidation of rabbi trust related to certain employee benefits	17.6
Payments to Predecessor creditors	(129.9)
Transfer of funds for payment of certain professional fees to escrow account	(42.7)
Payment for certain professional services fees	(29.0)
Various other	(8.6)
	$	327.4


Liquidation of rabbi trust related to certain employee benefits	$	(17.6)
Elimination of right-of-use asset associated with Newbuild Drillships	(5.5)
Fair value of options to purchase Newbuild Drillships	13.1
	$	(10.0)


Professional fees incurred upon emergence	$	26.1
Payment of professional fees incurred prior to emergence	(12.6)
Payment of certain accounts payable incurred prior to emergence	(0.4)
	$	13.1


Elimination of lease liabilities associated with Newbuild Drillships	$	(5.0)
Elimination of accrued post-petition holding costs associated with Newbuild Drillships	(4.1)
Payment of certain accrued liabilities incurred prior to emergence	(3.3)
	$	(12.4)


Elimination of construction contract intangible liabilities associated with Newbuild Drillships	$	(49.9)
Elimination of accrued post-petition holding costs associated with Newbuild Drillships	(4.7)
Elimination of lease liabilities associated with Newbuild Drillships	(0.6)
	$	(55.2)


Settlement of liabilities subject to compromise	$	7,313.7
Issuance of common stock to Predecessor creditors	(721.0)
Issuance of common stock to backstop parties	(323.8)
Payments to Predecessor creditors	(129.9)
Gain on settlement of liabilities subject to compromise	$	6,139.0


Gain on settlement of liabilities subject to compromise	$	(6,139.0)
Issuance of Common Shares for backstop premium	29.1
Issuance of Common Shares to the Shipyard	5.4
Write-off of unrecognized share-based compensation expense	16.0
Professional fees and success fees	35.9
Backstop premium	30.0
Impact of newbuild contract amendments	350.7
Reorganization items, net	(5,671.9)
Cancellation of Predecessor common shares	(82.6)
Cancellation of Predecessor treasury shares	75.5
Cancellation of Predecessor additional paid in capital	(7,856.4)
Cancellation of equity component of Predecessor convertible notes	(220.0)
Cancellation of Predecessor cash and equity compensation plans	(583.6)
Fair value of Warrants	16.4
	$	(14,322.6)


Elimination of materials and supplies	$	(260.8)
Elimination of historical deferred contract drilling expenses	(20.3)
	$	(281.1)


Deferred tax impacts of certain fresh start adjustments	$	21.1
Fair value of contracts with customers	8.5
Fair value adjustments to right-of-use assets	0.4
Elimination of historical deferred contract drilling expenses	(16.5)
Elimination of other deferred costs	(4.6)
	$	8.9


Elimination of customer payable balance	$	(36.8)
Elimination of historical deferred revenues	(25.9)
Fair value of contracts with customers	0.5
Fair value adjustment to lease liabilities	0.4
	$	(61.8)


Adjustment to fair value of pension and other post-retirement plan liabilities	$	(82.7)
Elimination of historical deferred revenue	(5.9)
Deferred tax impacts of certain fresh start adjustments	1.7
Fair value adjustments to lease liabilities	1.1
Fair value adjustments to other liabilities	0.2
	$	(85.6)


Fair value adjustments to prepaid and other current assets	$	(281.1)
Fair value adjustments to property	(8,699.7)
Fair value of intangible assets	8.5
Fair value adjustment to investment in ARO	(43.4)
Fair value adjustment to note receivable from ARO	(214.4)
Fair value adjustments to other assets	(20.7)
Fair value adjustments to other current liability	62.8
Fair value of intangible liabilities	(0.5)
Fair value adjustment to other liabilities	87.3
Elimination of Predecessor accumulated other comprehensive loss	(93.4)
Total fresh start adjustments included in reorganization items, net	$	(9,194.6)
Tax impact of fresh start adjustments	19.4
	$	(9,175.2)


	Contract Assets		Contract Liabilities
Balance as of December 31, 2020 (Predecessor)	$	1.8	$	71.9
Revenue recognized in advance of right to bill customer	2.3		—
Increase due to cash received	—		10.2
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(14.8)

Decrease due to transfer to receivables during the period	(1.6)		—
Fresh start accounting revaluation	(0.3)		(31.6)
Balance as of April 30, 2021 (Predecessor)	2.2		35.7
Balance as of May 1, 2021 (Successor)	2.2		35.7
Revenue recognized in advance of right to bill customer	2.5		—
Increase due to cash received	—		80.1

Decrease due to amortization of deferred revenue that was added during the period	—		(21.5)
Decrease due to transfer to receivables and payables during the period	(4.4)		(37.7)
Balance as of December 31, 2021 (Successor)	0.3		56.6
Balance as of January 1, 2022 (Successor)	0.3		56.6
Revenue recognized in advance of right to bill customer	9.2		—
Increase due to cash received	—		156.7
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(41.1)
Decrease due to amortization of deferred revenue added during the period	—		(47.1)
Decrease due to transfer to receivables and payables during the period	(4.2)		(6.1)

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


	Contract Assets		Contract Liabilities
Balance as of December 31, 2021	$	0.3	$	56.6
Revenue recognized in advance of right to bill customer	9.2		—
Increase due to revenue deferred during the period	—		156.7
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(41.1)
Decrease due to amortization of deferred revenue that was added during the period	—		(47.1)
Decrease due to transfer to receivables and payables during the period	(4.2)		(6.1)

Balance as of December 31, 2022	5.3		119.0

Revenue recognized in advance of right to bill customer	8.4		—
Increase due to revenue deferred during the period	—		162.9
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(73.1)
Decrease due to amortization of deferred revenue that was added during the period	—		(46.5)
Decrease due to transfer to receivables and payables during the period	(7.7)		(8.5)
Balance as of December 31, 2023	$	6.0	$	153.8