~~ENSCO~~

VALARIS PLC

INDEX TO FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, ~~2018~~2019



PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm	3

Condensed Consolidated Statements of Operations Three Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	4

Condensed Consolidated Statements of Operations Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	5

Condensed Consolidated Statements of Comprehensive ~~Loss~~ Income (Loss) Three Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	6

Condensed Consolidated Statements of Comprehensive ~~Loss~~ Income (Loss) Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	7

Condensed Consolidated Balance Sheets June 30, ~~2018~~2019 and December 31, ~~2017~~2018	8

Condensed Consolidated Statements of Cash Flows Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018	9

Notes to Condensed Consolidated Financial Statements	10

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	4654

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	6174

ITEM 4. CONTROLS AND PROCEDURES	6274

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS	6375

ITEM 1A. RISK FACTORS	6676

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	6777

ITEM 6. EXHIBITS	6878

SIGNATURES	6981

FORWARD-LOOKING STATEMENTS

Statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the "Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). Forward-looking statements include words or phrases such as "anticipate," "believe," "estimate," "expect," "intend," "likely," "plan," "project," "could," "may," "might," "should," "will" and similar words and specifically include statements regarding expected financial performance; dividends; expected utilization, day rates, revenues, operating expenses, cash flow, contract terms, contract backlog, capital expenditures, insurance, financing and funding; expected work commitments, awards and contracts; the timing of availability, delivery, mobilization, contract commencement or relocation or other movement of ~~rigs;~~rigs and the timing thereof; future rig construction (including ~~construction~~work in progress and completion thereof), enhancement, upgrade or repair and timing and cost thereof; the suitability of rigs for future contracts; the offshore drilling market, including supply and demand, customer drilling programs, stacking of rigs, effects of new rigs on the market and effects of declines in commodity prices; performance of our joint venture with Saudi Aramco; expected divestitures of assets; general market, business and industry conditions, trends and outlook; future operations; the impact of increasing regulatory complexity; our program to high-grade the rig fleet by investing in new equipment and divesting selected assets and underutilized rigs; expense management; and the likely outcome of litigation, legal proceedings, investigations or insurance or other claims or contract disputes and the timing thereof.

Such statements are subject to numerous risks, uncertainties and assumptions that may cause actual results to vary materially from those indicated, including:

our ability to successfully integrate the business, operations and employees of ~~Atwood Oceanics, Inc.~~Rowan Companies Limited (formerly named Rowan Companies plc) ("~~Atwood"~~Rowan") and the Company to realize synergies and cost savings in connection with ~~our acquisition of Atwood;~~the Rowan Transaction (as defined herein);

changes in future levels of drilling activity and capital expenditures by our customers, whether as a result of global capital markets and liquidity, prices of oil and natural gas or ~~otherwise, which may cause us to idle or stack additional rigs;~~otherwise;

changes in worldwide rig supply and demand, competition or technology, including as a result of delivery of newbuild drilling rigs;

downtime and other risks associated with offshore rig operations, including rig or equipment failure, damage and other unplanned repairs, the limited availability of transport vessels, hazards, self-imposed drilling limitations and other delays due to severe storms and hurricanes and the limited availability or high cost of insurance coverage for certain offshore perils, such as hurricanes in the Gulf of Mexico or associated removal of wreckage or debris;

governmental action, terrorism, piracy, military action and political and economic uncertainties, including uncertainty or instability resulting from civil unrest, political demonstrations, mass strikes, or an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas of the Middle East, North Africa, West Africa or other geographic areas, which may result in expropriation, nationalization, confiscation, deprivation or ~~deprivation~~destruction of our assets, or suspension and/or termination of contracts based on force majeure events or adverse environmental safety events;

risks inherent to shipyard rig construction, repair, modification or upgrades, unexpected delays in equipment delivery, engineering, design or commissioning issues following delivery, or changes in the commencement, completion or service dates;

possible cancellation, suspension, renegotiation or termination (with or without cause) of drilling contracts as a result of general and industry-specific economic conditions, mechanical difficulties, performance or other reasons;

our ability to enter into, and the terms of, future drilling contracts, including contracts for our newbuild units and acquired rigs, for rigs currently idled and for rigs whose contracts are expiring;

any failure to execute definitive contracts following announcements of letters of intent, letters of award or other expected work commitments;

the outcome of litigation, legal proceedings, investigations or other claims or contract disputes, including any inability to collect receivables or resolve significant contractual or day rate disputes, any renegotiation, nullification, cancellation or breach of contracts with customers or other parties and any failure to execute definitive contracts following announcements of letters of intent;

governmental regulatory, legislative and permitting requirements affecting drilling operations, including limitations on drilling locations (such as the Gulf of Mexico during hurricane season);

new and future regulatory, legislative or permitting requirements, future lease sales, changes in laws, rules and regulations that have or may impose increased financial responsibility, additional oil spill abatement contingency plan capability requirements and other governmental actions that may result in claims of force majeure or otherwise adversely affect our existing drilling contracts, operations or financial results;

our ability to attract and retain skilled personnel on commercially reasonable terms, whether due to labor regulations, unionization or otherwise;

environmental or other liabilities, risks, damages or losses, whether related to storms or hurricanes (including wreckage or debris removal), collisions, groundings, blowouts, fires, explosions, other accidents, terrorism or otherwise, for which insurance coverage and contractual indemnities may be insufficient, unenforceable or otherwise unavailable;

our ability to obtain financing, service our indebtedness and pursue other business opportunities may be limited by our debt levels, debt agreement restrictions and the credit ratings assigned to our debt by independent credit rating agencies;

the adequacy of sources of liquidity for us and our customers;

tax matters, including our effective tax rates, tax positions, results of audits, changes in tax laws, treaties and regulations, tax assessments and liabilities for taxes;

our ability to realize the expected benefits of our joint venture with Saudi Aramco, including our ability to fund any required capital contributions;

delays in contract commencement dates or the cancellation of drilling programs by operators;

economic volatility and political, legal and tax uncertainties following the June 23, 2016, vote in the U.K. to exit from the European Union ("Brexit");

the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems, including our rig operating systems;

adverse changes in foreign currency exchange rates, including their effect on the fair value measurement of our derivative instruments; and

potential long-lived asset impairments.

In addition to the numerous risks, uncertainties and assumptions described above, you should also carefully read and consider "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part I and "Item 1A. Risk Factors" in Part II of this report and "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our annual report on Form 10-K for the year ended December 31, ~~2017,~~2018, which is available on the U.S. Securities and Exchange Commission website at www.sec.gov. Each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward looking statements, except as required by law.

PART I - FINANCIAL INFORMATION

Item 1.Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders

~~Ensco~~Valaris plc:

Results of Review of Interim Financial Information

We have reviewed the condensed consolidated balance sheet of ~~Ensco~~Valaris plc and subsidiaries (the ~~Company)~~Company, formerly known as Ensco Rowan plc and Ensco plc) as of June 30, ~~2018,~~2019, the related condensed consolidated statements of operations and comprehensive ~~loss~~income (loss) for the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, the related condensed consolidated statements of cash flows for the six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, and the related notes (collectively, the consolidated interim financial information). Based on our reviews, we are not aware of any material modifications that should be made to the consolidated interim financial information for it to be in conformity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, ~~2017,~~2018, and the related consolidated statements of operations, comprehensive income (loss), and cash flows for the year then ended (not presented herein); and in our report dated February ~~27, 2018,~~28, 2019, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of December 31, ~~2017,~~2018, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived.

Basis for Review Results

This consolidated interim financial information is the responsibility of the Company’s management. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our reviews in accordance with the standards of the PCAOB. A review of consolidated interim financial information consists principally of applying analytical procedures and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with the standards of the PCAOB, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion.

/s/ KPMG LLP

Houston, Texas

~~July 26, 2018~~August 1, 2019

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)


	Three Months Ended June 30,						Three Months Ended June 30,
	2018			2017			2019			2018
OPERATING REVENUES	$	458.5		$	457.5		$	583.9		$	458.5
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	344.3			291.3			500.3			344.3
Loss on impairment							2.5			—
Depreciation	120.7			107.9			157.9			120.7
General and administrative	26.1			30.5			81.2			26.1
	491.1			429.7
OPERATING INCOME (LOSS)	(32.6		)	27.8
Total operating expenses							741.9			491.1
EQUITY IN EARNINGS OF ARO							.6			—
OPERATING LOSS							(157.4		)	(32.6		)
OTHER INCOME (EXPENSE)
Interest income	3.9			7.6			11.9			3.9
Interest expense, net	(75.7		)	(60.3		)	(118.3		)	(75.7		)
Other, net	(13.0		)	(.5		)	703.7			(13.0		)
	(84.8		)	(53.2		)	597.3			(84.8		)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(117.4		)	(25.4		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES							439.9			(117.4		)
PROVISION FOR INCOME TAXES
Current income tax expense	20.1			13.1			21.2			20.1
Deferred income tax expense	4.6			6.2			11.4			4.6
	24.7			19.3			32.6			24.7
LOSS FROM CONTINUING OPERATIONS	(142.1		)	(44.7		)
INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET	(8.0		)	.4
NET LOSS	(150.1		)	(44.3		)
INCOME (LOSS) FROM CONTINUING OPERATIONS							407.3			(142.1		)
LOSS FROM DISCONTINUED OPERATIONS, NET							—			(8.0		)
NET INCOME (LOSS)							407.3			(150.1		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(.9		)	(1.2		)	(1.8		)	(.9		)
NET LOSS ATTRIBUTABLE TO ENSCO	$	(151.0	)	$	(45.5	)
LOSS PER SHARE - BASIC AND DILUTED
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS							$	405.5		$	(151.0	)
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED
Continuing operations	$	(0.33	)	$	(0.15	)	$	2.09		$	(1.31	)
Discontinued operations	(0.02		)	—			—			(0.08		)
	$	(0.35	)	$	(0.15	)	$	2.09		$	(1.39	)

NET LOSS ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED	$	(151.1	)	$	(45.6	)

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	434.1			300.9			188.6			108.5

CASH DIVIDENDS PER SHARE	$	0.01		$	0.01

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

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(In millions, except per share amounts)

(Unaudited)

Six Months Ended
June 30,
2018 2017
OPERATING REVENUES $ 875.5

$ 928.6
OPERATING EXPENSES

Contract drilling (exclusive of depreciation) 669.5

569.4
Depreciation 235.9

217.1
General and administrative 54.0

56.5
959.4

843.0
OPERATING INCOME (LOSS) (83.9 )
85.6
OTHER INCOME (EXPENSE)

Interest income 6.9

14.8
Interest expense, net (141.3 )
(118.9 )
Other, net (21.1 )
(6.8 )
(155.5 )
(110.9 )
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (239.4 )
(25.3 )
PROVISION FOR INCOME TAXES
Current income tax expense 27.2
17.4
Deferred income tax expense 15.9
26.0
43.1

43.4
LOSS FROM CONTINUING OPERATIONS (282.5 )
(68.7 )
LOSS FROM DISCONTINUED OPERATIONS, NET (8.1 )
(.2 )
NET LOSS (290.6 )
(68.9 )
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (.5 )
(2.3 )
NET LOSS ATTRIBUTABLE TO ENSCO $ (291.1 )
$ (71.2 )
LOSS PER SHARE - BASIC AND DILUTED
Continuing operations $ (0.65 )
$ (0.24 )
Discontinued operations (0.02 )
—
$ (0.67 )
$ (0.24 )

NET LOSS ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED $ (291.3 )
$ (71.4 )

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted 433.8

300.7

CASH DIVIDENDS PER SHARE $ 0.02
$ 0.02

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

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~

~~(In millions)~~

~~(Unaudited)~~

Three Months Ended
June 30,
2018 2017
NET LOSS $ (150.1 ) $ (44.3 )
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value (7.6 ) 2.9
Reclassification of net (gains) losses on derivative instruments from other comprehensive income (loss) into net loss (.7 ) .3
Other (.2 ) .2
NET OTHER COMPREHENSIVE INCOME (LOSS) (8.5 ) 3.4

COMPREHENSIVE LOSS (158.6 ) (40.9 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (.9 ) (1.2 )
COMPREHENSIVE LOSS ATTRIBUTABLE TO ENSCO $ (159.5 ) $ (42.1 )

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

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS~~

~~(In millions)~~

~~(Unaudited)~~

Six Months Ended
June 30,
2018 2017
NET LOSS $ (290.6 ) $ (68.9 )
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value (4.9 ) 6.0
Reclassification of net (gains) losses on derivative instruments from other comprehensive income (loss) into net loss (2.9 ) 1.2
Other (.3 ) .7
NET OTHER COMPREHENSIVE INCOME (LOSS) (8.1 ) 7.9

COMPREHENSIVE LOSS (298.7 ) (61.0 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS (.5 ) (2.3 )
COMPREHENSIVE LOSS ATTRIBUTABLE TO ENSCO $ (299.2 ) $ (63.3 )



	Six Months Ended June 30,
	2019			2018
OPERATING REVENUES	$	989.8		$	875.5
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	832.9			669.5
Loss on impairment	2.5			—
Depreciation	282.9			235.9
General and administrative	110.8			54.0
Total operating expenses	1,229.1			959.4
EQUITY IN EARNINGS OF ARO	.6			—
OPERATING LOSS	(238.7		)	(83.9		)
OTHER INCOME (EXPENSE)
Interest income	15.4			6.9
Interest expense, net	(199.3		)	(141.3		)
Other, net	706.0			(21.1		)
	522.1			(155.5		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	283.4			(239.4		)
PROVISION FOR INCOME TAXES
Current income tax expense	46.8			27.2
Deferred income tax expense	17.3			15.9
	64.1			43.1
INCOME (LOSS) FROM CONTINUING OPERATIONS	219.3			(282.5		)
LOSS FROM DISCONTINUED OPERATIONS, NET	—			(8.1		)
NET INCOME (LOSS)	219.3			(290.6		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(4.2		)	(.5		)
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	215.1		$	(291.1	)
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED
Continuing operations	$	1.40		$	(2.61	)
Discontinued operations	—			(0.08		)
	$	1.40		$	(2.69	)
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	148.9			108.5

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

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In ~~millions, except share and par value amounts)~~millions)

(Unaudited)

June 30,
2018 December 31,
2017
(Unaudited)
ASSETS
CURRENT ASSETS
    Cash and cash equivalents $ 485.5

$ 445.4
    Short-term investments 255.0

440.0
    Accounts receivable, net 332.7

345.4
    Other current assets 389.6

381.2
Total current assets 1,462.8

1,612.0
PROPERTY AND EQUIPMENT, AT COST 15,476.5

15,332.1
    Less accumulated depreciation 2,692.6

2,458.4
       Property and equipment, net 12,783.9

12,873.7
OTHER ASSETS 93.9

140.2
$ 14,340.6

$ 14,625.9
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 218.3

$ 432.6
Accrued liabilities and other 331.5

325.9
Total current liabilities 549.8

758.5
LONG-TERM DEBT 4,994.9

4,750.7
OTHER LIABILITIES 362.0

386.7
COMMITMENTS AND CONTINGENCIES

ENSCO SHAREHOLDERS' EQUITY

Class A ordinary shares, U.S. $.10 par value, 460.7 million and 447.1 million shares issued as of June 30, 2018 and December 31, 2017 46.1

44.7
Class B ordinary shares, £1 par value, 50,000 shares authorized and issued as of June 30, 2018 and December 31, 2017 .1

.1
Additional paid-in capital 7,209.5

7,195.0
Retained earnings 1,232.0

1,532.7
Accumulated other comprehensive income 20.5

28.6
Treasury shares, at cost, 23.6 million and 11.1 million shares as of June 30, 2018 and December 31, 2017 (72.0 )
(69.0 )
Total Ensco shareholders' equity 8,436.2

8,732.1
NONCONTROLLING INTERESTS (2.3 )
(2.1 )
Total equity 8,433.9

8,730.0
$ 14,340.6

$ 14,625.9



	Three Months Ended June 30,
	2019			2018
NET INCOME (LOSS)	$	407.3		$	(150.1	)
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value	(1.6		)	(7.6		)
Reclassification of net (gains) losses on derivative instruments from other comprehensive income (loss) into net income (loss)	1.8			(.7		)
Other	—			(.2		)
NET OTHER COMPREHENSIVE INCOME (LOSS)	.2			(8.5		)
COMPREHENSIVE INCOME (LOSS)	407.5			(158.6		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(1.8		)	(.9		)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	405.7		$	(159.5	)

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

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)



	Six Months Ended June 30,
	2019			2018
NET INCOME (LOSS)	$	219.3		$	(290.6	)
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value	(1.6		)	(5.7		)
Reclassification of net (gains) losses on derivative instruments from other comprehensive income (loss) into net income (loss)	3.4			(2.9		)
Other	(.1		)	(.3		)
NET OTHER COMPREHENSIVE INCOME (LOSS)	1.7			(8.9		)
COMPREHENSIVE INCOME (LOSS)	221.0			(299.5		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(4.2		)	(.5		)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	216.8		$	(300.0	)

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

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and par value amounts)



	June 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	959.1		$	275.1
Short-term investments	135.0			329.0
Accounts receivable, net	628.7			344.7
Other current assets	499.7			360.9
Total current assets	2,222.5			1,309.7
PROPERTY AND EQUIPMENT, AT COST	18,472.8			15,517.0
Less accumulated depreciation	3,017.1			2,900.8
Property and equipment, net	15,455.7			12,616.2
LONG-TERM NOTES RECEIVABLE FROM ARO	453.1			—
INVESTMENT IN ARO	139.4			—
OTHER ASSETS	169.4			97.8
	$	18,440.1		$	14,023.7
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	335.2		$	210.5
Accrued liabilities and other	438.3			318.0
Current maturities of long-term debt	1,125.3			—
Total current liabilities	1,898.8			528.5
LONG-TERM DEBT	6,020.1			5,010.4
OTHER LIABILITIES	799.0			396.0
COMMITMENTS AND CONTINGENCIES
VALARIS SHAREHOLDERS' EQUITY
Class A ordinary shares, U.S. $.40 par value, 205.8 million and 115.2 million shares issued as of June 30, 2019 and December 31, 2018	82.4			46.1
Class B ordinary shares, £1 par value, 50,000 shares authorized and issued as of June 30, 2019 and December 31, 2018	.1			.1
Additional paid-in capital	8,608.4			7,225.0
Retained earnings	1,084.8			874.2
Accumulated other comprehensive income	19.9			18.2
Treasury shares, at cost, 8.1 million and 5.9 million shares as of June 30, 2019 and December 31, 2018	(75.0		)	(72.2		)
Total Valaris shareholders' equity	9,720.6			8,091.4
NONCONTROLLING INTERESTS	1.6			(2.6		)
Total equity	9,722.2			8,088.8
	$	18,440.1		$	14,023.7

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

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Six Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2019			2018
OPERATING ACTIVITIES
Net loss	$	(290.6	)	$	(68.9	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities of continuing operations:
Net income (loss)							$	219.3		$	(290.6	)
Adjustments to reconcile net income (loss) to net cash used in operating activities of continuing operations:
Gain on bargain purchase							(712.8		)	(8.3		)
Depreciation expense	235.9			217.1			282.9			235.9
Share-based compensation expense							19.2			14.8
Amortization, net	(24.4		)	(37.0		)	(17.3		)	(24.4		)
Share-based compensation expense	20.6			20.9
Deferred income tax expense							17.3			15.9
Contributions to pension plans							(4.0		)	—
Loss on impairment							2.5			—
Equity in earnings of ARO							(0.6		)	—
Loss on debt extinguishment	19.0			2.6			—			19.0
Deferred income tax expense	15.9			26.0
Gain on bargain purchase	(8.3		)	—
Loss from discontinued operations, net	8.1			0.2			—			8.1
Other	(2.1		)	(12.2		)	4.9			(2.1		)
Changes in operating assets and liabilities	7.9			(18.2		)	(104.8		)	13.7
Net cash provided by (used in) operating activities of continuing operations	(18.0		)	130.5
Net cash used in operating activities of continuing operations							(293.4		)	(18.0		)
INVESTING ACTIVITIES
Rowan cash acquired							931.9			—
Maturities of short-term investments	599.0			897.0			339.0			599.0
Purchases of short-term investments	(414.0		)	(1,134.8		)	(145.0		)	(414.0		)
Additions to property and equipment	(331.9		)	(332.6		)	(134.8		)	(331.9		)
Other	2.9			1.7			4.5			2.9
Net cash used in investing activities of continuing operations	(144.0		)	(568.7		)
Net cash provided by (used in) investing activities of continuing operations							995.6			(144.0		)
FINANCING ACTIVITIES
Debt solicitation fees							(8.7		)	—
Cash dividends paid							(4.5		)	(9.0		)
Proceeds from issuance of senior notes	1,000.0			—			—			1,000.0
Reduction of long-term borrowings	(771.2		)	(537.0		)	—			(771.2		)
Debt issuance costs	(17.0		)	(5.5		)	—			(17.0		)
Cash dividends paid	(9.0		)	(6.2		)
Repurchase of common stock							(4.2		)	(2.0		)
Other	(2.5		)	(3.6		)	(0.5		)	(0.5		)
Net cash provided by (used in) financing activities	200.3			(552.3		)	(17.9		)	200.3
Net cash provided by (used in) discontinued operations	2.5			(0.2		)
Net cash provided by discontinued operations							—			2.5
Effect of exchange rate changes on cash and cash equivalents	(.7		)	.6			(.3		)	(.7		)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	40.1			(990.1		)
INCREASE IN CASH AND CASH EQUIVALENTS							684.0			40.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	445.4			1,159.7			275.1			445.4
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	485.5		$	169.6		$	959.1		$	485.5

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

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 -Unaudited Condensed Consolidated Financial Statements

On April 11, 2019, we completed our combination with Rowan Companies Limited (formerly named Rowan Companies plc) ("Rowan") and effected a four-to-one share consolidation (being a reverse stock split under English law or the "Reverse Stock Split") and changed our name to Ensco Rowan plc. On July 30, 2019, we changed our name to Valaris plc. All share and per-share amounts in these financial statements have been retrospectively adjusted to reflect the Reverse Stock Split.

We prepared the accompanying condensed consolidated financial statements of ~~Ensco~~Valaris plc and subsidiaries (the "Company," ~~"Ensco,~~"Valaris," "our," "we" or "us") in accordance with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, ~~2017~~2018 condensed consolidated balance sheet data ~~were~~was derived from our ~~2017~~2018 audited consolidated financial statements, but dodoes not include all disclosures required by GAAP. The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates.

The financial data for the ~~three-month and six-month periods~~quarters ended June 30, ~~2018~~2019 and ~~2017~~2018 included herein have been subjected to a limited review by KPMG LLP, our independent registered public accounting firm. The accompanying independent registered public accounting firm's review report is not a report within the meaning of Sections 7 and 11 of the Securities Act, and the independent registered public accounting firm's liability under Section 11 does not extend to it.

Results of operations for the ~~three-month and six-month periods~~quarter ended June 30, ~~2018~~2019 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, ~~2018.~~2019. We recommend these condensed consolidated financial statements be read in conjunction with our annual report on Form 10-K for the year ended December 31, ~~2017,~~2018, filed with the SEC on February ~~27, 2018, and our quarterly report on Form 10-Q filed with the SEC on April 26, 2018.~~28, 2019.

New Accounting Pronouncements

~~In February 2018, the Financial Accounting Standards Board (the "FASB") issued Update 2018-02,~~ ~~Income Statement~~Recently adopted accounting standards

Derivatives and Hedging - ~~Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects From Accumulated Other Comprehensive Income~~ ("Update 2018-02"), which allows for a reclassification from accumulated other comprehensive income (AOCI) to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act. This update is effective for fiscal years beginning after December 15, 2018 and interim periods within those fiscal years, with early adoption permitted. We adopted Update 2018-02 effective January 1, 2018. As a result, we reclassified a total of $800,000 in tax effects from AOCI to opening retained earnings.

In August 2017, the FASBissued Update 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities ("Update 2017-12"), which ~~will make~~makes more hedging strategies eligible for hedge ~~accounting. It also~~accounting, amends presentation and disclosure requirements and changes how companies assess ~~effectiveness.~~effectiveness, including the elimination of separate measurement and recognition of ineffectiveness on designated hedging instruments. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We ~~are currently evaluating~~adopted Updated 2017-12 effective January 1, 2019. As a result, beginning on the ~~effect that Update 2017-12~~effective date, we will ~~have~~no longer separately measure and recognize ineffectiveness on our ~~consolidated financial statements~~designated cash flow hedges. Update 2017-02 requires a modified retrospective adoption approach whereby amounts previously recorded to earnings for hedge ineffectiveness on hedging relationships that exist as of the adoption date are recorded as a cumulative effect adjustment to opening retained earnings. As of our adoption date, we had no amounts previously recorded for ineffectiveness for hedging relationships that existed as of our adoption date and ~~related disclosures.~~therefore no cumulative effect adjustment to retained earnings was recorded.

Leases - During 2016, the FASB issued Update 2016-02, Leases (Topic 842)(" ("Update 2016-02"), which requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key qualitative and

quantitative information about the entity's leasing arrangements. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. During our evaluation of Update 2016-02, we concluded that our drilling contracts contain a lease component. In ~~January~~July 2018, the FASB issued ~~a Proposed~~ Accounting Standard Update ~~to provide targeted improvements to Update 2016-02,~~2018-11, Leases (Topic 842), Targeted Improvements, which (1) ~~provides~~provided for a new transition method whereby entities ~~may~~could elect to adopt the Update using a prospective with cumulative catch-up approach (the "effective date method") and (2) ~~provides~~provided lessors with a practical expedient, ~~to not separate non-lease components from the related lease components,~~ by class of underlying ~~asset. On March 28, 2018, the FASB held a meeting~~asset, to ~~approve certain additional amendments to Update 2016-02, including a revision to the practical expedient that would allow a lessor to~~not separate lease and non-lease components and account for the combined ~~lease and non-lease components~~component under Topic 606 ~~(discussed below)~~ when the non-lease component is the predominant element of the combined component. ~~Depending~~The lessor practical expedient is limited to circumstances in which the lease, if accounted for separately, would be classified as an operating lease under Topic 842. We adopted ASU 2016-02, effective January 1, 2019, using the effective date method.

With respect to our drilling contracts, which contain a lease component, we elected to apply the practical expedient to not separate the lease and non-lease components and account for the combined component under Topic 606. With respect to all of our drilling contracts that existed on the adoption date, we concluded that the criteria ~~included in~~to elect the ~~final Update, this~~lessor practical expedient ~~may be available to us.~~had been met. As a result, ofwe will continue to recognize the ~~pending content of the final Update,~~revenue associated with our drilling contracts under Topic 606. Therefore, we ~~are~~do not ~~yet able to determine what, if~~expect any ~~impact our adoption will have on~~change in our revenue recognition patterns ~~and related disclosures.~~ or disclosures as a result of our adoption of Topic 842.

With respect to leases whereby we are the lessee, we ~~expect to recognize lease liabilities and offsetting "right~~elected several practical expedients afforded under Topic 842. We elected the package of ~~use" assets ranging from approximately $60 million to $80 million.~~

~~During 2014, the FASB issued Update 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ("Update 2014-09"), which requires entities to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Update 2014-09 is effective for annual and interim periods for fiscal years beginning after December 15, 2017. We adopted Update 2014-09 effective January 1, 2018, using the modified retrospective approach. Only customer contracts that were not completed as of the effective adoption date were evaluatedpractical expedients permitted under the transition guidance of Topic 842, including the hindsight practical expedient which permits entities to ~~determine if~~use hindsight in determining the lease term and assessing impairment. We also elected the practical expedient to not separate lease components from non-lease components for all asset classes, with the exception of office space. Furthermore, we also elected the practical expedient that permits entities not to apply the recognition requirements for leases with a ~~cumulative catch-up adjustment to retained earnings was warranted. Revenues~~term of 12 months or less. Upon adoption of ASU 2016-02 on January 1, 2019, we recognized ~~in prior years~~lease liabilities and right-of-use assets of $64.6 million and $53.7 million, respectively. See Note 14 for ~~customer contracts that expired prior~~additional information.

Defined Benefit Plans - In August 2018, the FASB issued ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the ~~effective~~Disclosure Requirements for Defined Benefit Plans, which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. We will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2021, with early adoption ~~date continue~~permitted. Adoption is required to be ~~reported under~~applied on a retrospective basis to all periods presented. We are in the ~~previous revenue recognition guidance. Our adoption~~process of ~~Update 2014-09 did not result in a cumulative effect~~evaluating the impact this amendment will have on ~~retained earnings and no adjustments were made to prior periods. While Update 2014-09 requires additional disclosure regarding revenues recognized from customer contracts,~~ our adoption did not have a material impact on the recognition of current or prior period revenues as compared to previous guidance nor do we expect a material impact to our pattern of revenue recognition in future periods. See "Note 2 - Revenue from Contracts with Customers" for additional information.condensed consolidated financial statements.

Note 2 -Revenue from Contracts with Customers

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

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.

Our integrated drilling service provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities such as mobilization, demobilization and capital upgrades of our rigs that are not distinct within the context of our contracts and is recognized on a straight-line basis over the contract term. Variable consideration generally relates to distinct service periods during the contract term and is recognized in the period when the services are performed.

The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in Update 2014-09 and have not disclosed the variable consideration related to our estimated future day rate revenues. The remaining duration of our drilling contracts based on those in place as of June 30, ~~2018~~2019 was between approximately one month and ~~five~~four years.

Day Rate Drilling Revenue

Our drilling contracts provide for payment on a day rate basis and include a rate schedule with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The day rate invoiced to the customer is determined based on the varying rates applicable to specific activities performed on an hourly or other time increment basis. Day rate consideration is allocated to the distinct hourly or other time increment to which it relates within the contract term and is generally recognized consistent with the contractual rate invoiced for the services provided during the respective period. Invoices are typically ~~issued~~billed to our customers on a monthly basis and payment terms on customer invoices typically range ~~from~~ 30 to- 45 days.

Certain of our contracts contain performance incentives whereby we may earn a bonus based on pre-established performance criteria. Such incentives are generally based on our performance over individual monthly or other time periods or individual wells. Consideration related to performance bonus is generally recognized in the specific time period to which the performance criteria was attributed.

We may receive termination fees if certain drilling contracts are terminated by the customer prior to the end of the contractual term. Such compensation is recognized as revenues ~~when~~whereby our performance obligation is satisfied, the termination fee can be reasonably measured and collection is probable.

Mobilization / Demobilization Revenue

In connection with certain contracts, we receive lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. Fees received for the mobilization or demobilization of equipment and personnel are included in operating revenues. The costs incurred in connection with the mobilization and demobilization of equipment and personnel are included in contract drilling expense.

Mobilization fees received prior to commencement of drilling operations are recorded as a contract liability and amortized on a straight-line basis over the contract term. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the contract term. In some cases, demobilization fees may be contingent upon the occurrence or non-occurrence of a future event. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term.

Capital Upgrade / Contract Preparation Revenue

In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. Fees received ~~for requested capital upgrades and other contract preparation work~~ are recorded as a contract liability and amortized on a straight-line basis over the contract term to operating revenues. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Contract Assets and Liabilities

Contract assets represent amounts previously recognized as revenue but for which the right to invoice the customer is dependent upon our future performance. Once the previously recognized revenue is invoiced, the corresponding contract asset, or a portion thereof, is transferred to accounts receivable. Contract liabilities generally represent fees received for mobilization or capital upgrades.

Contract assets and liabilities are presented net on our condensed consolidated balance sheet on a contract-by-contract basis. Current contract assets and liabilities are included in other current assets and accrued liabilities and other, respectively, and noncurrent contract assets and liabilities are included in other assets and other liabilities, respectively, on our condensed consolidated balance sheets.

The following table summarizes our ~~trade receivables,~~ contract assets and contract liabilities (in millions):


	June 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018
Current contract assets	$	4.1	$	3.0	$	12.8	$	4.0
Noncurrent contract assets	$	—	$	2.8
Current contract liabilities (deferred revenue)	$	76.6	$	71.9	$	46.2	$	56.9
Noncurrent contract liabilities (deferred revenue)	$	23.2	$	51.2	$	14.8	$	20.5

Significant changes in contract assets and liabilities during the period are as follows (in millions):


	Contract Assets			Contract Liabilities			Contract Assets			Contract Liabilities
Balance as of December 31, 2017	$	5.8		$	123.1
Balance as of December 31, 2018							$	4.0		$	77.4
Contract assets acquired and liabilities assumed in the Rowan Transaction							8.4			5.3
Revenue recognized in advance of right to bill customer							2.3			—
Increase due to cash received	—			27.6			—			34.3
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—			(43.0		)	—			(40.2		)
Decrease due to amortization of deferred revenue that was added during the period	—			(7.9		)	—			(15.8		)
Decrease due to transfer to receivables during the period	(1.7		)	—			(1.9		)	—
Balance as of June 30, 2018	$	4.1		$	99.8
Balance as of June 30, 2019							$	12.8		$	61.0

Deferred Contract Costs

Costs incurred for upfront rig mobilizations and certain contract ~~preparations~~preparation are attributable to our future performance obligation under each respective drilling contract. Such costs are deferred and amortized on a straight-line basis over the contract term. Demobilization costs are recognized as incurred upon contract completion. Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred. Deferred contract costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled ~~$39.2~~$45.1 million and ~~$40.6~~$23.5 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. During the three-month and six-month periods ended June 30, 2019, amortization of such costs totaled $14.7 million and $21.1 million, respectively. During the three-month and six-month periods ended June 30, 2018, amortization of such costs totaled $9.1 million and $15.9 million, respectively. ~~During the three-month and six-month periods ended June 30, 2017, amortization of such costs totaled $8.2 million and $14.7 million, respectively.~~

Deferred Certification Costs

We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work

and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled ~~$14.2~~$12.1 million and ~~$15.3~~$13.6 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. During the three-month and six-month periods ended June 30, 2019, amortization of such costs totaled $2.8 million and $5.7 million, respectively. During the three-month and six-month periods ended June 30, 2018, amortization of such costs totaled $3.2 million and $6.3 million, respectively. ~~During the three-month and six-month periods ended June 30, 2017, amortization of such costs totaled $2.8 million and $5.9 million, respectively.~~

Expected Future Amortization of Contract Liabilities and Deferred Costs

Our contract liabilities and deferred costs are amortized on a straight-line basis over the contract term or corresponding certification period to operating revenues and contract drilling expense, respectively. Expected future amortization of our contract liabilities and deferred costs recorded as of June 30, ~~2018~~2019 is set forth in the table below (in millions):



	Remaining 2019		2020		2021		2022 and Thereafter		Total
Amortization of contract liabilities	$	39.0	$	11.7	$	7.6	$	2.7	$	61.0
Amortization of deferred costs	$	39.7	$	13.3	$	2.8	$	1.4	$	57.2

Remaining
2018
2019 2020 2021 and Thereafter Total
Amortization of contract liabilities $ 38.9
$ 51.0
$ 6.4
$ 3.5
$ 99.8
Amortization of deferred costs $ 23.4
$ 21.6
$ 6.0
$ 2.4
$ 53.4

Note 3 -~~Acquisition of Atwood~~Rowan Transaction

On October ~~6, 2017~~7, 2018, we entered into a transaction agreement (the ~~"Merger~~"Transaction Agreement") with Rowan. On April 11, 2019 (the "Transaction Date"), we completed our combination with Rowan pursuant to the Transaction Agreement (the "Rowan Transaction"). Rowan's financial results are included in our consolidated results beginning on the Transaction Date.

Prior to the Rowan Transaction, Rowan and Saudi Aramco formed a ~~merger transaction (the "Merger"~~50/50 joint venture to own, manage and operate drilling rigs offshore Saudi Arabia ("Saudi Aramco Rowan Offshore Drilling Company" or "ARO"). ARO currently owns a fleet of seven jackup rigs, leases another nine jackup rigs from us (two of which are expected to commence drilling operations during the third quarter of 2019) and has plans to order up to 20 newbuild jackup rigs over the next 10 years. See Note 4 for additional information on ARO.

The Rowan Transaction is expected to enhance the market leadership of the combined company with ~~Atwood Oceanics, Inc. ("Atwood")~~a fleet of high-specification floaters and ~~Echo Merger Sub, LLC,~~jackups and position us well to meet increasing and evolving customer demand. The increased scale, diversification and financial strength of the combined company will provide us advantages to better serve our ~~wholly-owned subsidiary.~~ customers. Exclusive of two older jackup rigs marked for retirement, Rowan’s offshore rig fleet as of the Transaction Date consisted of four ultra-deepwater drillships and 19 jackup rigs.

Consideration

As a result of the Rowan Transaction, Rowan shareholders received 2.750 Valaris Class A ordinary shares for each Rowan Class A ordinary share, representing a value of $43.67 per Rowan share based on a closing price of $15.88 per Valaris share on April 10, 2019, the last trading day before the Transaction Date. Total consideration delivered in the Rowan Transaction consisted of 88.3 million Valaris shares with an aggregate value of $1.4 billion, inclusive of $2.6 million for the estimated fair value of replacement employee equity awards. Upon closing of the Rowan Transaction, we effected a consolidation (being a reverse stock split under English law) where every four existing Class A ordinary shares, each with a nominal value of $0.10, were consolidated into one Class A ordinary share, each with a nominal value of $0.40. All share and per share data included in this report have been retroactively adjusted to reflect the Reverse Stock Split.

Assets Acquired and Liabilities Assumed

Under U.S. GAAP, Valaris is considered to be the acquirer for accounting purposes. As a result, Rowan's assets acquired and liabilities assumed in the ~~Merger~~Rowan Transaction were recorded at their estimated fair values as of the ~~Merger~~Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. ~~With~~We have not finalized the ~~exception of certain spare parts and equipment and legal and tax exposures, we have substantially completed our~~ fair ~~value assessments~~values of assets acquired and liabilities ~~assumed. While~~assumed; therefore, the fair value estimates set forth below are subject to adjustment during a one-year measurement period subsequent to the Transaction Date. The estimated fair values of certain assets and liabilities including materials and supplies, long-lived assets, contingencies and unrecognized tax benefits require judgments and assumptions that increase the likelihood that adjustments may be ~~recorded~~made to these estimates during ~~the remainder of~~ the measurement period, ~~we do not expect them to~~and those adjustments could be material.

~~Assets Acquired and Liabilities Assumed~~

The provisional amounts ~~and respective measurement period adjustments recorded~~ for assets acquired and liabilities assumed are based on preliminary estimates of their fair values as of the ~~Merger~~Transaction Date and ~~were~~are as follows (in millions):


	Amounts Recognized as of Merger Date			Measurement Period Adjustments ⁽¹⁾			Estimated Fair Value			Estimated Fair Value
Assets:
Cash and cash equivalents⁽²⁾	$	445.4		$	—		$	445.4		$	931.9
Accounts receivable⁽³⁾⁽¹⁾	62.3			(1.6		)	60.7			207.1
Other current assets	118.1			4.7			122.8			101.6
Long-term notes receivable from ARO										454.5
Investment in ARO										138.8
Property and equipment	1,762.0			9.2			1,771.2			2,989.8
Other assets	23.7			(2.9		)	20.8			41.7
Liabilities:
Accounts payable and accrued liabilities	64.9			(2.3		)	62.6			259.4
Current portion of long-term debt										203.2
Long-term debt										1,910.9
Other liabilities	118.7			3.4			122.1			376.3
Net assets acquired	2,227.9			8.3			2,236.2			2,115.6
Less:
Merger consideration	(781.8		)				(781.8		)
Repayment of Atwood debt	(1,305.9		)				(1,305.9		)
Bargain purchase gain	$	140.2					$	148.5
Less: Transaction consideration										(1,402.8		)
Estimated bargain purchase gain										$	712.8

⁽¹⁾

The measurement period adjustments reflect changes in the estimated fair values of certain assets and liabilities, primarily related to inventory, capital equipment and accrued non-income tax liabilities. The measurement period adjustments were recorded to reflect new information obtained about facts and circumstances existingGross contractual amounts receivable totaled $208.3 million as of the Merger Date and did not result from subsequent intervening events. The adjustments recorded resulted in an $8.3 million decline and an $8.3 million increase to bargain purchase gain during the three-month and six-month periods ended June 30, 2018, respectively, and are included in other, net, in our condensed consolidated statements of operations.


⁽²⁾	~~Upon closing of the Merger, we utilized acquired cash of $445.4 million and cash on hand from the liquidation of short-term investments to repay Atwood's debt and accrued interest of $1.3 billion.~~Transaction Date.

⁽³⁾~~Gross contractual amounts receivable totaled $64.7 million as of the Merger Date.~~

Bargain Purchase Gain

The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resulting in a bargain purchase gain primarily due to depressed offshore drilling company valuations. Market capitalizations across the offshore drilling industry have declined significantly since mid-2014 due to the decline in commodity prices and the related imbalance of supply and demand for drilling rigs. The resulting bargain purchase gain was further driven by the decline in our share price from ~~$6.70~~$33.92 to ~~$5.83~~$15.88 between the last trading day prior to the announcement of the ~~Merger~~Rowan Transaction and the ~~Merger~~Transaction Date. The estimated bargain purchase gain of $712.8 million was reflected in other, net, in our condensed consolidated statement of operations for the three-month and six-month periods ended June 30, 2019.

Transaction-Related Costs

Transaction-related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $15.0 million and $17.8 million for the three-month and six-month periods ended June 30, 2019. These costs were included in general and administrative expense in our condensed consolidated statements of operations.

Materials and Supplies

We recorded materials and supplies at an estimated fair value of $83.0 million. Materials and supplies consist of consumable parts and supplies maintained on drilling rigs and in shore-based warehouse locations for use in operations and is generally comprised of items of low per unit cost and high reorder frequency. We estimated the fair value of Rowan's materials and supplies primarily using a market approach.

Equity Method Investment in ARO

The equity method investment in ARO was recorded at its estimated fair value as of the Transaction Date. See Note 4 for addition information on ARO. We estimated the fair value of the equity investment primarily by applying an income approach, using projected discounted cash flows of the underlying assets, a risk-adjusted discount rate and an estimated effective income tax rate.

Property and Equipment

Property and equipment acquired in connection with the Rowan Transaction consisted primarily of drilling rigs and related equipment, including four drillships and 19 jackup rigs (exclusive of two jackups marked for retirement). We recorded property and equipment at its estimated fair value of $3.0 billion. We estimated the fair value of the rigs and equipment by applying an income approach, using projected discounted cash flows, a risk-adjusted discount rate and an estimated effective income tax rate. The estimated remaining useful lives for Rowan's drilling rigs ranged from 16 to 35 years based on original estimated useful lives of 30 to 35 years.

Intangible Assets and Liabilities

We recorded intangible assets ~~totaling$30.1~~and liabilities of $16.2 million and $2.1 million, respectively, representing the estimated fair value of ~~Atwood's~~Rowan's firm ~~drilling~~ contracts in place at the ~~Merger~~Transaction Date with favorable or unfavorable contract terms compared to then-market day rates for comparable drilling rigs. The various factors considered in the determination of these fair values were (1) the contracted day rate for each contract, (2) the remaining term of each contract, (3) the rig class and (4) the market conditions for each respective rig class at the Transaction Date. The intangible assets and liabilities were calculated based on the present value of the difference in cash flows over the remaining contract term as compared to a hypothetical contract with the same remaining term at an estimated then-current market day rate using a risk-adjusted discount rate and an estimated effective income tax rate.

Operating revenues were ~~net of $4.3~~reduced by $1.1 million ~~and $5.8 million of~~for net asset amortization during the ~~three-month and six-month periods ended~~period from the Transaction Date through June 30, ~~2018, respectively.~~2019. The remaining balance of ~~$8.2~~intangible assets and liabilities of $14.9 million and $1.9 million, respectively, was included in other assets and other liabilities, respectively, on our condensed consolidated balance sheet as of June 30, ~~2018. This balance~~2019. These balances will be amortized to operating revenues over the respective remaining ~~drilling~~ contract ~~term~~terms on a straight-line ~~basis totaling $5.6 million and~~basis. As of June 30, 2019, the remaining terms of the underlying contracts is approximately 2.5 years. Amortization of these intangibles is expected to result in a reduction to revenue of $2.6 million, ~~during the remainder of 2018~~$5.1 millionand$5.4 million for 2019, 2020 and ~~full year 2019,~~2021, respectively.

Long-term Debt

We recorded ~~intangible~~Rowan's long-term debt at its estimated fair value as of the Transaction Date, which were based on quoted market prices for Rowan's publicly traded debt as of April 10, 2019.

Deferred Taxes

The Rowan Transaction was executed through the acquisition of Rowan's outstanding ordinary shares and, therefore, the historical tax bases of the acquired assets and assumed liabilities, net operating losses and other tax attributes of Rowan, were assumed as of the Transaction Date. However, adjustments were recorded to recognize deferred tax assets and liabilities for the tax effects of differences between acquisition date fair values and tax bases of assets acquired and liabilities assumed. Additionally, the interaction of our and Rowan's tax attributes that impacted the deferred taxes of the combined entity were also recognized as part of acquisition accounting. As of the Transaction Date, an increase of $10.0 million and a decrease of $98.0 million to Rowan's historical net deferred tax liabilities and deferred tax assets, respectively, was recognized.

Deferred tax assets and liabilities recognized in connection with the Rowan Transaction were measured at rates enacted as of the Transaction Date. Tax rate changes, or any deferred tax adjustments for new tax legislation, following the Transaction Date will be reflected in our operating results in the period in which the change in tax laws or rate is enacted.

Uncertain Tax Positions

Uncertain tax positions assumed in a business combination are measured at the largest amount of the tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of the Transaction Date, Rowan had previously recognized net liabilities for uncertain tax positions totaling $50.4 million. Subsequent to the Transaction Date, we received tax assessments related to certain filing positions taken by Rowan in prior years totaling approximately $159.0 million. We continue to evaluate these and other Rowan filing positions and have recognized additional liabilities of ~~$60.0~~$52.0 million, which reflects the amount of the Rowan filing positions that we have preliminarily concluded we will not more-likely-than-not sustain. Our continuing evaluation of the relevant facts and circumstances surrounding these positions may result in revisions to this estimate, which could be material.

Revenue and Earnings of Rowan

Our condensed consolidated statements of operations for the three-month and six-month periods end June 30, 2019 include revenues of $147.2 million and a net loss of $95.3 million associated with Rowan's operations from the Transaction Date through June 30, 2019.

Unaudited Pro Forma Impact of the Rowan Transaction

The following unaudited supplemental pro forma results present consolidated information as if the Rowan Transaction was completed on January 1, 2018. The pro forma results include, among others, (i) the amortization associated with acquired intangible assets and liabilities (ii) a reduction in depreciation expense for adjustments to property and equipment (iii) the amortization of premiums and discounts recorded on Rowan's debt (iv) removal of the historical amortization of unrealized gains and losses related to Rowan's pension plans and (v) the amortization of basis differences in assets and liabilities of ARO. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the Rowan Transaction.



(in millions, except per share amounts)	Three Months Ended June 30,						Six Months Ended June 30,
	2019⁽¹⁾			2018			2019⁽¹⁾			2018
Revenues	$	599.0		$	699.8		$	1,179.5		$	1,328.0
Net loss	$	(264.9	)	$	(172.6	)	$	(596.4	)	$	(373.5	)
Loss per share - basic and diluted	$	(1.35	)	$	(0.88	)	$	(3.04	)	$	(1.90	)


⁽¹⁾	Pro forma net loss and loss per share were adjusted to exclude an aggregate of $71.5 million and $80.8 million of transaction-related and integration costs incurred for the three-month and six-month periods ended June 30, 2019, respectively, and the estimated $712.8 million bargain purchase gain.

Note 4 -Equity Method Investment in ARO

Background

During 2016, Rowan and Saudi Aramco entered into an agreement to create a 50/50 joint venture (the "Shareholders' Agreement") to own, manage and operate offshore drilling rigs in Saudi Arabia. The new entity, ARO, was formed in May 2017 with each of Rowan and Saudi Aramco contributing $25 million to be used for working capital needs.

In October 2017, Rowan sold rigs Bob Keller, J.P. Bussell and Gilbert Rowe to ARO and Saudi Aramco sold SAR 201 and related assets to ARO in each case for cash. Upon completion of the rig sales, ARO was deemed to have commenced operations. Saudi Aramco subsequently sold another rig, SAR 202, to ARO in December 2017 for cash and in October 2018, Rowan sold two additional jackup rigs, the Scooter Yeargain and the Hank Boswell, to ARO for cash. As a result of these rig sales, ARO owns seven jackup rigs as of June 30, 2019.

During 2017 and 2018, Rowan contributed cash to ARO in exchange for 10-year shareholder notes receivable at a stated interest rate of LIBOR plus two percent. As of June 30, 2019, the carrying amount of the long-term notes receivable from ARO was $453.1 million. The Shareholders’ Agreement prohibits the sale or transfer of the shareholder note to a third party, except in certain limited circumstances.

Rigs purchased by ARO will receive contracts from Saudi Aramco for an aggregate 15 years, renewed and re-priced every three years, provided that the rigs meet the technical and operational requirements of Saudi Aramco. Each of the seven rigs owned by ARO is currently operating under its initial three-year contract.

Additionally, prior to the Rowan Transaction, Rowan entered into agreements with ARO to lease nine rigs to ARO (the "Lease Agreements"). The rigs are leased to ARO through bareboat charter arrangements whereby substantially all operating costs are incurred by ARO. All nine leased rigs are under three-year drilling contracts with Saudi Aramco. As of June 30, 2019, seven of the rigs were operating under their contracts and two rigs, the Bess Brants and Earnest Dees, were undergoing shipyard projects prior to commencing their contracts with Saudi Aramco. The Bess Brants and Earnest Dees are expected to commence drilling operations in August and September 2019, respectively.

Rowan and Saudi Aramco have agreed to take all steps necessary to ensure that ARO purchases at least 20 newbuild jackup rigs ratably over 10 years. The 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. 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 to fund the newbuild program. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, on a proportionate basis. The partners agreed that Saudi Aramco as a customer will provide drilling contracts to ARO in connection with the acquisition of the newbuild rigs. The initial contracts provided by Saudi Aramco for each of the newbuild rigs will be for an eight-year term. The day rate for the initial contracts for each newbuild rig will be determined using a pricing mechanism that targets a defined payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism.

Upon establishment of ARO, Rowan also entered into (1) an agreement to provide certain back-office services for a period of time until ARO develops its own infrastructure (the "Transition Services Agreement"), and (2) an agreement to provide certain Rowan employees through secondment arrangements to assist with various onshore and offshore services for the benefit of ARO (the "Secondment Agreement"). These agreements remain in place subsequent to the Rowan Transaction. Pursuant to these agreements, we or our seconded employees provide various services to ARO, and in return, are provided remuneration for those services. From time to time, we may also sell equipment or supplies to ARO.

The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the seven ARO-owned jackup rigs and the seven rigs leased from us that operated during the period from the Transaction Date through June 30, 2019.

The contract drilling expenses, depreciation and general and administrative expenses presented below are also for the period from the Transaction Date through June 30, 2019. Contract drilling expense is inclusive of the bareboat charter fees for the rigs leased from us. Cost incurred under the Secondment Agreement are included in both contract drilling expense and general and administrative, depending on the function to which the seconded employee's service relates. Substantially all costs incurred under the Transition Services Agreement are included in general and administrative. See additional discussion below regarding these related-party transactions.

We account for our interest in ARO using the equity method of accounting and only recognize our portion of ARO's net income, adjusted for basis differences as discussed below, which is included in equity in earnings of ARO in our condensed consolidated statements of operations. ARO is a variable interest entity; however, we are not the primary beneficiary and therefore do not consolidate ARO. Judgments regarding our level of influence over ARO included considering key factors such as: each partner's ownership interest, representation on the board of managers of ARO and ability to direct activities that most significantly impact ARO's economic performance, including the ability to influence policy-making decisions.

Summarized Financial Information

Summarized financial information for ARO is as follows (in millions):



	April 11 - June 30, 2019
Revenues	$	123.8
Operating expenses
Contract drilling (exclusive of depreciation)	78.9
Depreciation	12.4
General and administrative	5.3
Operating income	27.2
Other expense, net	8.7
Provision for income taxes	1.7
Net income	$	16.8



	June 30, 2019
Current assets	$	434.9
Non-current assets	898.6
Total assets	$	1,333.5

Current liabilities	$	227.4
Non-current liabilities	1,030.6
Total liabilities	$	1,258.0

Equity in Earnings of ARO

As a result of the Rowan Transaction, we recorded our equity method investment in ARO at its estimated fair value on the Transaction Date. Additionally, we computed the difference between the fair value of ARO's net assets and the carrying value of those net assets in ARO's GAAP financial statements ("basis differences"). The basis differences primarily relate to ARO's long-lived assets and the recognition of intangible assets associated with certain of ARO's drilling contracts that were determined to have favorable terms as of the Transaction Date. The basis differences are amortized over the remaining life of the assets or liabilities to which they relate and are recognized as an adjustment to the equity in earnings of ARO in our condensed consolidated statements of operations. The amortization of those basis differences are combined with our 50% interest in ARO's net income. A reconciliation of those components is presented below (in millions):



	April 11 - June 30, 2019
50% interest in ARO net income	$	8.4
Amortization of basis differences	(7.8		)
Equity in earnings of ARO	$	0.6

Related-Party Transactions

Revenues recognized by us related to the Lease Agreements, Transition Services Agreement and Secondment Agreement are as follows (in millions):



	April 11 - June 30, 2019
Lease revenue	$	18.3
Secondment revenue	15.6
Transition Services revenue	5.2
Total revenue from ARO ⁽¹⁾	$	39.1


⁽¹⁾	All of the revenues presented above are included in our Other segment in our segment disclosures. See Note 15 for additional information.

We also have an agreement between us and ARO, pursuant to which ARO will reimburse us for certain capital expenditures related to the shipyard upgrade projects for the Bess Brants and Earnest Dees. As of June 30, 2019, $14.3 million related to reimbursement of these expenditures is included in accounts receivable, net, on our condensed consolidated balance sheet.

Amounts receivable from ARO related to the above items totaled $63.6 million as of June 30, 2019 and are included in accounts receivable, net, on our condensed consolidated balance sheet. Accounts payable to ARO totaled $2.8 million as of June 30, 2019.

During 2017 and 2018, Rowan contributed cash to ARO in exchange for 10-year shareholder notes receivable at a stated interest rate of LIBOR plus two percent. Interest is recognized as interest income in our condensed consolidated statement of operations and totaled $5.1 million for the ~~estimated fair value~~period from the Transaction Date through June 30, 2019. As of ~~unfavorable drillship construction contracts,~~June 30, 2019, we had interest receivable from ARO of $11.5 million, which ~~were determined~~is included in other current assets on our condensed consolidated balance sheet.

The following summarizes the total assets and liabilities as reflected in our condensed consolidated balance sheet as well as our maximum exposure to loss related to ARO (in millions). Generally, our maximum exposure to loss is limited to (1) our equity investment in ARO; (2) the outstanding balance on our shareholder notes receivable; and (3) other receivables for services provided to ARO, partially offset by ~~comparing the firm obligations~~payables for the remaining construction of ENSCO DS-13 and ENSCO DS-14 to the estimated current market rates for the construction of a comparable drilling rig. The liabilities will be amortized over the estimated life of ENSCO DS-13 and ENSCO DS-14 as a reduction of depreciation expense beginning on the date the rig is placed into service.services received.



	June 30, 2019
Total assets	$	667.6
Less: total liabilities	2.8
Maximum exposure to loss	$	664.8

Note 45 -Fair Value Measurements

The following fair value hierarchy table categorizes information regarding our financial assets and liabilities measured at fair value on a recurring basis (in millions):



	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)		Total
As of June 30, 2019
Supplemental executive retirement plan assets	$	26.2	$	—		$	—	$	26.2
Total financial assets	$	26.2	$	—		$	—	$	26.2
Derivatives, net	$	—	$	(4.3	)	$	—	$	(4.3	)
Total financial liabilities	$	—	$	(4.3	)	$	—	$	(4.3	)

As of December 31, 2018
Supplemental executive retirement plan assets	$	27.2	$	—		$	—	$	27.2
Total financial assets	$	27.2	$	—		$	—	$	27.2
Derivatives, net	$	—	$	(10.7	)	$	—	$	(10.7	)
Total financial liabilities	$	—	$	(10.7	)	$	—	$	(10.7	)

Quoted Prices in Active Markets for Identical Assets
(Level 1)

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Total
As of June 30, 2018

Supplemental executive retirement plan assets $ 30.5
$ —
$ —
$ 30.5
Total financial assets $ 30.5
$ —
$ —
$ 30.5
Derivatives, net $ —
$ (6.5 ) $ —
$ (6.5 )
Total financial liabilities $ —
$ (6.5 ) $ —
$ (6.5 )

As of December 31, 2017

Supplemental executive retirement plan assets $ 30.9
$ —
$ —
$ 30.9
Derivatives, net —
6.8
—
6.8
Total financial assets $ 30.9
$ 6.8
$ —
$ 37.7

Supplemental Executive Retirement Plan Assets

Our supplemental executive retirement plans (the "SERP") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets on our condensed consolidated balance sheets. The fair value measurement of assets held in the SERP was based on quoted market prices.

Derivatives

Our derivatives are measured at fair value on a recurring basis using Level 2 inputs. See ~~"Note 5 - Derivative Instruments"~~Note 7 for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurement of our derivatives was based on market prices that are generally observable for similar assets or liabilities at commonly-quoted intervals.

Other Financial Instruments

The carrying values and estimated fair values of our long-term debt instruments were as follows (in millions):



	June 30, 2019				December 31, 2018
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
7.875% Senior notes due 2019⁽²⁾	$	202.0	$	201.9	$	—	$	—
6.875% Senior notes due 2020	126.2		122.4		127.5		121.6
4.70% Senior notes due 2021	113.0		105.8		112.7		101.8
4.875% Senior notes due 2022⁽²⁾	595.0		572.6		—		—
3.00% Exchangeable senior notes due 2024⁽¹⁾	682.8		666.4		666.8		575.5
4.50% Senior notes due 2024	620.1		467.7		619.8		405.2
4.75% Senior notes due 2024⁽²⁾	339.5		304.0		—		—
8.00% Senior notes due 2024	336.5		282.2		337.0		273.7
7.375% Senior notes due 2025⁽²⁾	452.5		388.3		—		—
5.20% Senior notes due 2025	664.8		494.1		664.4		443.9
7.75% Senior notes due 2026	986.1		750.7		985.0		725.5
7.20% Debentures due 2027	149.4		114.8		149.3		109.1
7.875% Senior notes due 2040	374.2		205.9		375.0		223.2
5.40% Senior notes due 2042⁽²⁾	261.9		237.9		—		—
5.75% Senior notes due 2044	973.4		585.9		972.9		566.3
5.85% Senior notes due 2044⁽²⁾	268.0		233.8		—		—
Total debt	$	7,145.4	$	5,734.4	$	5,010.4	$	3,545.8
Less: current maturities	1,125.3		921.2		—		—
Total long-term debt	$	6,020.1	$	4,813.2	$	5,010.4	$	3,545.8

June 30,
2018 December 31,
2017
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
8.50% Senior notes due 2019⁽¹⁾
$ —
$ —
$ 251.4
$ 252.9
6.875% Senior notes due 2020⁽²⁾
128.9
128.3
477.9
473.1
4.70% Senior notes due 2021⁽²⁾
112.6
110.7
267.1
265.3
3.00% Exchangeable senior notes due 2024⁽³⁾
651.1
793.2
635.7
757.1
4.50% Senior notes due 2024 619.5
516.5
619.3
527.1
8.00% Senior notes due 2024 337.4
334.2
337.9
333.8
5.20% Senior notes due 2025 664.0
557.7
663.6
571.4
7.75% Senior notes due 2026 983.9
947.6
—
—
7.20% Debentures due 2027 149.3
136.9
149.3
141.9
7.875% Senior notes due 2040 375.9
270.6
376.7
258.8
5.75% Senior notes due 2044 972.3
709.5
971.8
690.4
Total $ 4,994.9
$ 4,505.2
$ 4,750.7
$ 4,271.8


⁽¹⁾	~~Our senior notes due 2019 were redeemed in full in February 2018. See "Note 7 - Debt" for additional information.~~


⁽²⁾	~~The reduction in carrying value of our seniors notes due 2020 and senior notes due 2021 was attributable to repurchases and redemptions during the first quarter of 2018.~~

⁽³⁾

Our exchangeable senior notes due 2024 (the "2024 Convertible Notes") were issued with a conversion feature. The 2024 Convertible Notes were separated into their liability and equity components on our condensed consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount that will be amortized to interest expense over the life of the instrument. Excluding the unamortized discount, the carrying value of the 2024 Convertible Notes was ~~$835.1~~$837.4 million and ~~$834.0~~$836.3 million as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively.


⁽²⁾	These senior notes were assumed by Valaris as a result of the Rowan Transaction.

The estimated fair values of our senior notes and debentures were determined using quoted market prices, which are level 1 inputs.

The estimated fair values of our cash and cash equivalents, short-term investments, receivables, trade payables and other liabilities approximated their carrying values as of June 30, ~~2018~~2019 and December 31, ~~2017.~~2018. Our short-term investments consisted of time deposits with initial maturities in excess of three months but less than one year as of each respective balance sheet date.

Note 6 -Pension and Other Post-retirement Benefits

Prior to the Rowan Transaction, Rowan established various defined-benefit pension plans and a post-retirement health and life insurance plan that provide benefits upon retirement for certain full-time employees. The defined-benefit-pension plans include: (1) the Rowan Pension Plan; (2) the Rowan SERP; (3) the Norway Onshore Plan; and (4) the Norway Offshore Plan. The Retiree Medical Plan provides post-retirement health and life insurance benefits.

As a result of the Rowan Transaction, we assumed these plans, which were remeasured as of the Transaction Date. Each of the plans has a benefit obligation that exceeds the fair value of plan assets. As of the Transaction Date, the net projected benefit obligations totaled $239.3 million, of which $19.2 million was classified as current. The current and non-current portions of the net benefit obligations are included in accrued liabilities and other liabilities in our condensed consolidated balance sheet, respectively. The most significant of the assumed plans is the Rowan Pension Plan, which had a net projected benefit obligation of $202.1 million. Prior to the Transaction Date, Rowan amended the Rowan Pension Plan to freeze the plan as to any future benefit accruals. As a result, eligible employees no longer receive pay credits in the pension plan and newly hired employees will not be eligible to participate in the pension plan.

The components of net periodic pension cost were as follows (in millions):



	April 11 - June 30, 2019
Service cost ⁽¹⁾	$	0.4
Interest cost ⁽²⁾	6.5
Expected return on plan assets ⁽²⁾	(8.2		)
Net periodic pension cost	$	(1.3	)


⁽¹⁾	Included in contract drilling and general and administrative expense in our condensed consolidated statements of operations.


⁽²⁾	Included in other, net, in our condensed consolidated statements of operations.

From the Transaction Date through June 30, 2019, we contributed $4.0 million to our pension and other post-retirement benefit plans and expect to make additional contributions to such plans totaling approximately $10.7 million for the remainder of 2019, which represent the minimum contributions we are required to make under relevant statutes. We do not expect to make contributions in excess of the minimum required amounts.

Note 57 -Derivative Instruments

Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. We use foreign currency forward contracts to reduce our exposure to various market risks, primarily foreign currency exchange rate risk.

All of our derivatives were recorded on our condensed consolidated balance sheets at fair value. Derivatives subject to legally enforceable master netting agreements were not offset in our condensed consolidated balance sheets. Accounting for the gains and losses resulting from changes in ~~derivative~~the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting. Net liabilities of ~~$6.5~~$4.3 million and ~~net assets~~ of ~~$6.8~~$10.7 million associated with our ~~foreign currency forward contracts~~derivatives were included on our condensed consolidated balance sheets as of June 30, ~~2018~~2019 and December 31, ~~2017,~~2018, respectively. All of our derivative instruments mature during the next 18 months. See "Note 45 - Fair Value Measurements" for additional information on the fair value measurement of our derivatives.

Derivatives recorded at fair value on our condensed consolidated balance sheets consisted of the following (in millions):


	Derivative Assets				Derivative Liabilities				Derivative Assets				Derivative Liabilities
	June 30, 2018		December 31, 2017		June 30, 2018		December 31, 2017		June 30, 2019		December 31, 2018		June 30, 2019		December 31, 2018
Derivatives Designated as Hedging Instruments
Foreign currency forward contracts - current⁽¹⁾	$	.7	$	5.9	$	5.1	$	.2	$	.3	$	.2	$	4.4	$	8.3
Foreign currency forward contracts - non-current⁽²⁾	—		.5		1.1		.1		—		—		.3		.4
	.7		6.4		6.2		.3		$	.3	$	.2	$	4.7	$	8.7

Derivatives Not Designated as Hedging Instruments
Foreign currency forward contracts - current⁽¹⁾	.6		.9		1.6		.2		$	.8	$	.4	$	.7	$	2.6
Total	$	1.3	$	7.3	$	7.8	$	.5	$	1.1	$	.6	$	5.4	$	11.3


⁽¹⁾	Derivative assets and liabilities ~~with~~that have maturity dates equal to or less than twelve months from the respective balance sheet date were included in other current assets and accrued liabilities and other, respectively, on our condensed consolidated balance sheets.


⁽²⁾	Derivative assets and liabilities ~~with~~that have maturity dates greater than twelve months from the respective balance sheet date were included in other assets and other liabilities, respectively, on our condensed consolidated balance sheets.

We utilize cash flow hedges to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure to foreign currency exchange rate risk associated with contract drilling expenses and capital expenditures denominated in various currencies. As of June 30, ~~2018,~~2019, we had cash flow hedges outstanding to exchange an aggregate ~~$212.1~~$177.5 million for various foreign currencies, including ~~$82.5~~$94.1 million for British pounds, ~~$69.2~~$44.4 million for Australian dollars, ~~$24.2~~$18.9 million for euros, ~~$14.9 million for Brazilian reals, $14.5~~$10.4 million for Singapore dollars and ~~$6.8~~$9.7 million for ~~other currencies.~~Brazilian reals.

Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our condensed consolidated statements of operations and comprehensive income (loss) were as follows (in millions):

Three Months Ended June 30, ~~2018~~2019 and ~~2017~~2018


	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Gain (Loss) Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)⁽¹⁾					Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾						Gain (Loss) Recognized in Other Comprehensive Income (Loss) ("OCI") (Effective Portion)						(Gain) Loss Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)⁽¹⁾					Gain (Loss) Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
	2018			2017		2018		2017			2018			2017			2019			2018			2019		2018			2019		2018
Interest rate lock contracts⁽³⁾	$	—		$	—	$	—	$	(.1	)	$	—		$	—
Foreign currency forward contracts⁽⁴⁾	(7.6		)	2.9		.7		(.2		)	(1.0		)	(.5		)	$	(1.6	)	$	(7.6	)	$	1.8	$	(.7	)	$	—	$	(1.0	)
Total	$	(7.6	)	$	2.9	$	.7	$	(.3	)	$	(1.0	)	$	(.5	)	$	(1.6	)	$	(7.6	)	$	1.8	$	(.7	)	$	—	$	(1.0	)

Six Months Ended June 30, ~~2018~~2019 and ~~2017~~2018



	Gain (Loss) Recognized in Other Comprehensive Income (Loss) ("OCI") (Effective Portion)						(Gain) Loss Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)⁽¹⁾					Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
	2019			2018			2019		2018			2019		2018
Interest rate lock contracts⁽³⁾	$	—		$	—		$	.1	$	.1		$	—	$	—
Foreign currency forward contracts⁽⁵⁾	(1.6		)	(5.7		)	3.3		(3.0		)	—		(1.2		)
Total	$	(1.6	)	$	(5.7	)	$	3.4	$	(2.9	)	$	—	$	(1.2	)

Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)
Gain (Loss) Reclassified from AOCI into Income (Effective Portion)⁽¹⁾

Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
2018 2017 2018 2017 2018 2017
Interest rate lock contracts⁽³⁾
$ —
$ —
$ (.1 ) $ (.2 ) $ —
$ —
Foreign currency forward contracts⁽⁵⁾
(4.9 ) 6.0
3.0
(1.0 ) (1.2 ) (.4 )
Total $ (4.9 ) $ 6.0
$ 2.9
$ (1.2 ) $ (1.2 ) $ (.4 )


⁽¹⁾	Changes in the ~~effective portion~~fair value of cash flow hedge ~~fair values~~derivatives are recorded in AOCI. Amounts recorded in AOCI associated with cash flow hedges are subsequently reclassified into contract drilling, depreciation or interest expense as earnings are affected by the underlying hedged forecasted transaction.


⁽²⁾	Gains and losses recognized in income for ineffectiveness and amounts excluded from effectiveness testing were included in other, net, in our condensed consolidated statements of operations. As a result of our adoption of Update 2017-12, which we adopted effective January 1, 2019, ineffectiveness is no longer separately measured and recognized. See additional information in Note 1.


⁽³⁾	Losses on interest rate lock derivatives reclassified from AOCI into income (effective portion) were included in interest expense, net, in our condensed consolidated statements of operations.

⁽⁴⁾

During the ~~three-month period ended June 30, 2018, there~~second quarter of 2019, $2.0 million of losses were ~~$500,000 of gains~~ reclassified from AOCI into contract drilling expense and $200,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the ~~three-month period ended June 30, 2017, $400,000~~prior year quarter, $500,000 of ~~losses~~gains were reclassified from AOCI into contract drilling expense and $200,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.

⁽⁵⁾

During the six-month period ended June 30, 2019, $3.7 million of losses were reclassified from AOCI into contract drilling expense and $400,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the six-month period ended June 30, 2018, $2.6 million of gains were reclassified from AOCI into contract drilling expense and $400,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the six-month period ended June 30, 2017, $1.4 million of losses were reclassified from AOCI into contract drilling expense and $400,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.

We have net assets and liabilities denominated in numerous foreign currencies and use various methods to manage our exposure to foreign currency exchange rate risk. We predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. We occasionally enter into derivatives that hedge the fair value of recognized foreign currency denominated assets or liabilities but do not designate such derivatives as hedging instruments. In these situations, a natural hedging relationship generally exists whereby changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. As of June 30, ~~2018,~~2019, we held derivatives not designated as hedging instruments to exchange an aggregate ~~$153.2~~$104.2 million for various foreign currencies, including ~~$96.8 million for euros, $22.2~~$28.1 million for Australian dollars, ~~$11.6~~$13.8 million for Indonesian rupiahs, ~~$8.4~~$13.4 million for ~~Brazilian reals, $6.5~~Qatari riyals, $8.3 million for British pounds, $7.3 million for Nigerian Naira, $6.8 million for Thai Baht, $6.2 million for Israeli New Shekel, $5.3 million for euros, and ~~$7.7~~$15.0 million for other currencies.

Net losses of ~~$9.3~~$2.2 million and ~~net gains~~ of ~~$5.7~~$9.3 million associated with our derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the three-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, respectively. Net losses of ~~$7.5~~$5.3 million and ~~net gains of $6.2~~$7.5 million associated with our

derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the six-month periods ended June 30, 2019 and 2018, ~~and 2017,~~ respectively. ~~These gains and losses were partially offset by net foreign currency exchange gains and losses during the respective periods.~~

As of June 30, ~~2018,~~2019, the estimated amount of net losses associated with derivative instruments, net of tax, that would be reclassified into earnings during the next twelve months totaled ~~$2.3~~$2.9 million.

Note 8 -Noncontrolling Interests

Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our condensed consolidated balance sheets, and net income attributable to noncontrolling interests is presented separately in our condensed consolidated statements of operations.

Loss from continuing operations attributable to Valaris for the three-month and six-month periods ended June 30, 2019 and 2018 was as follows (in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income (loss) from continuing operations	$	407.3		$	(142.1	)	$	219.3		$	(282.5	)
Income from continuing operations attributable to noncontrolling interests	(1.8		)	(.9		)	(4.2		)	(0.5		)
Income (loss) from continuing operations attributable to Valaris	$	405.5		$	(143.0	)	$	215.1		$	(283.0	)

Note 69 - Earnings Per Share

We compute basic and diluted earnings per share ("EPS") in accordance with the two-class method. Net ~~loss~~income attributable to ~~Ensco~~Valaris used in our computations of basic and diluted EPS is adjusted to exclude net income allocated to non-vested shares granted to our employees and non-employee directors. Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and excludes non-vested shares.

During the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, all income attributable to noncontrolling interests was from continuing operations. The following table is a reconciliation of ~~loss~~income (loss) from continuing operations attributable to ~~Ensco~~Valaris shares used in our basic and diluted EPS computations for the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017~~2018 (in millions):



	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Income (loss) from continuing operations attributable to Valaris	$	405.5		$	(143.0	)	$	215.1		$	(283.0	)
Income from continuing operations allocated to non-vested share awards⁽¹⁾	(12.1		)	(.1		)	(6.3		)	(.2		)
Income (loss) from continuing operations attributable to Valaris shares	$	393.4		$	(143.1	)	$	208.8		$	(283.2	)

Three Months Ended
June 30, Six Months Ended
June 30,
2018 2017 2018 2017
Loss from continuing operations attributable to Ensco $ (143.0 ) $ (45.9 ) $ (283.0 ) $ (71.0 )
Income from continuing operations allocated to non-vested share awards⁽¹⁾
(.1 ) (.1 ) (.2 ) (.2 )
Loss from continuing operations attributable to Ensco shares $ (143.1 ) $ (46.0 ) $ (283.2 ) $ (71.2 )


⁽¹⁾	Losses are not allocated to non-vested share awards. Therefore, in periods in which we were in a net loss position, only dividends attributable to our non-vested share awards are ~~included for the three-month and six-month periods ended June 30, 2018 and 2017.~~included.

Anti-dilutive share awards totaling 400.000 and 300,000 were excluded from the computation of diluted EPS for the three-month and six-month periods ended June 30, 2019, respectively. Anti-dilutive share awards totaling 1.7 million were excluded from the computation of diluted EPS for the three-month and six-month periods ended June 30, 2018. ~~Anti-dilutive share awards totaling 1.3 million were excluded from the computation of diluted EPS for the three-month and six-month periods ended June 30, 2017.~~

We have the option to settle our 2024 Convertible Notes in cash, shares or a combination thereof for the aggregate amount due upon conversion. Our intent is to settle the principal amount of the 2024 Convertible Notes in cash upon conversion. If the conversion value exceeds the principal amount, (i.e., our share price exceeds the exchange price on the date of conversion), we expect to deliver shares equal to the remainder of our conversion obligation in excess of the principal amount.

During each reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. Our average share price did not exceed the exchange price during the three-month or six-month periods ended June 30, ~~2018~~2019 and ~~June 30, 2017.~~2018.

Note 710 -Debt

~~Senior Notes~~Rowan Transaction

~~On January 26, 2018,~~As a result of the Rowan Transaction, we ~~issued $1.0 billion~~assumed the following debt from Rowan: (1) $201.4 million in aggregate principal amount of 7.875% unsecured ~~7.75%~~ senior notes due ~~2026 at par (the "2026 Notes"). Interest on~~2019, (2) $620.8 million in aggregate principal amount of 4.875% unsecured senior notes due 2022, (3) $398.1 million in aggregate principal amount of 4.75% unsecured senior notes due 2024, (4) $500.0 million in aggregate principal amount of 7.375% unsecured senior notes due 2025, (5) $400.0 million in aggregate principal amount of 5.4% unsecured senior notes due 2042 and (6) $400.0 million in aggregate principal amount of 5.85% unsecured senior notes due 2044. Upon closing of the ~~2026 Notes~~Rowan Transaction, we terminated Rowan's outstanding credit facilities.

Effective upon closing of the Rowan Transaction, we amended our credit facility to, among other changes, increase the borrowing capacity. Previously, our borrowing capacity was $2.0 billion through September 2019, $1.3 billion through September 2020 and $1.2 billion through September 2022. Subsequent to the amendment, our borrowing capacity is ~~payable semiannually on February 1~~$2.3 billion through September 2019 and $1.7 billion through September 2022. The credit agreement governing the credit facility includes an accordion feature allowing us to increase future commitments up to an aggregate amount not to exceed $250.0 million.

Revolving Credit Facility

We had no amounts outstanding under our credit facility as of June 30, 2019 and December 31, 2018. On July 29, 2019, we borrowed $125.0 million under our credit facility to partially fund the maturity of our 7.875% senior notes due in August ~~1 of each year commencing August 1, 2018.~~2019.

Tender Offers ~~and Redemption~~

~~Concurrent with the issuance of the 2026 Notes in January 2018,~~On June 25, 2019, we ~~launched~~commenced cash tender offers for up to ~~$985.0~~$600 million aggregate ~~principal amount~~purchase price, exclusive of accrued interest, for certain series of ~~our~~ senior notes issued by us and ~~Pride~~by Ensco International ~~LLC,~~Incorporated and Rowan Companies, Inc., our wholly-owned ~~subsidiary.~~subsidiaries. On July 10, 2019, we announced the early results of the tender offers and also announced that the maximum aggregate purchase price, exclusive of accrued interest, was increased from $600 million to $724.1 million and that the early settlement date would be July 12, 2019. The tender offers expired ~~February 7, 2018,~~on July 23, 2019, and we repurchased ~~$182.6~~$951.8 million of our 8.50% senior notes due 2019, $256.6 million of our 6.875% senior notes due 2020 and $156.2 million of our 4.70% senior notes due 2021. Subsequently, we issued a redemption notice for the remaining outstanding $55.0 millionaggregate principal amount of ~~the 8.50% senior notes due 2019 and repurchased $71.4 million principal amount of our senior notes due 2020.~~notes.

The following table sets forth the total principal amounts repurchased ~~as a result of~~and purchase price paid in the tender offers ~~redemption and repurchase~~ (in millions):

Aggregate Principal Amount Repurchased
Aggregate Repurchase Price⁽¹⁾
8.50% senior notes due 2019 $ 237.6

$ 256.8
6.875% senior notes due 2020 328.0

354.7
4.70% Senior notes due 2021 156.2
159.7
Total $ 721.8
$ 771.2



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price⁽¹⁾
4.50% Senior notes due 2024	$	320.0	$	240.0
5.20% Senior notes due 2025	335.5		250.0
7.20% Senior notes due 2027	37.9		29.9
4.75% Senior notes due 2024	79.5		61.2
7.375% Senior notes due 2025	139.2		109.2
8.00% Senior notes due 2024	39.7		33.8
Total	$	951.8	$	724.1


⁽¹⁾	Excludes accrued interest paid to holders of the repurchased senior notes.

During the ~~first~~third quarter of ~~2018,~~2019, we ~~recognized~~expect to recognize a pre-tax ~~loss~~gain from debt extinguishment of ~~$19.0~~approximately $195.7 million related to the tender offers, net of discounts, premiums ~~debt issuance costs~~ and ~~commissions.~~transaction costs.

Note 11 - Shareholders' Equity

Activity in our various shareholders' equity accounts for the six-month periods ended June 30, 2019 and 2018 were as follows (in millions):



	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			AOCI		Treasury Shares			Non-controlling Interest
BALANCE, December 31, 2018	115.2	$	46.2	$	7,225.0		$	874.2		$	18.2	$	(72.2	)	$	(2.6	)
Net loss	—	—		—			(190.4		)	—		—			2.4
Dividends paid ($0.04 per share)	—	—		—			(4.5		)	—		—			—
Shares issued under share-based compensation plans, net	—	—		(.1		)	—			—		.1			—
Repurchase of shares	—	—		—			—			—		(2.8		)	—
Share-based compensation cost	—	—		5.3			—			—		—			—
Net other comprehensive income	—	—		—			—			1.5		—			—
BALANCE, March 31, 2019	115.2	$	46.2	$	7,230.2		$	679.3		$	19.7	$	(74.9	)	$	(0.2	)
Net income	—	—		—			405.5			—		—			1.8
Equity issuance in connection with the Rowan Transaction	88.0	35.2		1,365.5			—			—		2.1			—
Shares issued under share-based compensation plans, net	2.6	1.1		(1.1		)	—			—		(.8		)	—
Repurchase of shares	—	—		—			—			—		(1.4		)	—
Share-based compensation cost	—	—		13.8			—			—		—			—
Net other comprehensive income	—	—		—			—			.2		—			—
BALANCE, June 30, 2019	205.8	$	82.5	$	8,608.4		$	1,084.8		$	19.9	$	(75.0	)	$	1.6



	Shares	Par Value		Additional Paid-in Capital			Retained Earnings			AOCI			Treasury Shares			Non-controlling Interest
BALANCE, December 31, 2017	111.8	$	44.8	$	7,195.0		$	1,532.7		$	28.6		$	(69.0	)	$	(2.1	)
Net loss	—	—		—			(140.1		)	—			—			(.4		)
Dividends paid ($0.04 per share)	—	—		—			(4.4		)	—			—			—
Cumulative-effect due to ASU 2018-02	—	—		—			(.8		)	.8			—			—
Shares issued under share-based compensation plans, net	—	—		(.1		)	—			—			.1			—
Repurchase of shares	—	—		—			—			—			(1.1		)	—
Share-based compensation cost	—	—		7.5			—			—			—			—
Net other comprehensive loss	—	—		—			—			(.4		)	—			—
BALANCE, March 31, 2018	111.8	$	44.8	$	7,202.4		$	1,387.4		$	29.0		$	(70.0	)	$	(2.5	)
Net loss	—	—		—			(151.0		)	—			—			.9
Dividends paid ($0.04 per share)	—	—		—			(4.4		)	—			—			—
Shares issued under share-based compensation plans, net	3.4	1.4		(.4		)	—			—			(1.4		)	—
Distributions to noncontrolling interests	—	—		—			—			—			—			(.7		)
Repurchase of shares	—	—		—			—			—			(.6		)	—
Share-based compensation cost	—	—		7.5			—			—			—			—
Net other comprehensive loss	—	—		—			—			(8.5		)	—			—
BALANCE, June 30, 2018	115.2	$	46.2	$	7,209.5		$	1,232.0		$	20.5		$	(72.0	)	$	(2.3	)

~~Maturities~~

~~Following~~

In connection with the ~~January 2018 debt offering, repurchases and redemption, our only debt maturities until 2024 are $122.9~~Rowan Transaction on April 11, 2019, we issued 88.3 million ~~during 2020 and $113.5 million during 2021.~~

~~Revolving Credit Facility~~

~~We have a $2.0 billion senior unsecured revolving credit facility ("Credit Facility")~~Class A ordinary shares with a syndicate of banks to be used for general corporate purposes. Our borrowing capacity is $2.0 billion through September 2019 and declines to $1.3 billion through September 2020 and to $1.2 billion through September 2022. The credit agreement governing the Credit Facility includes an accordion feature allowing us to increase the commitments expiring in September 2022 up to an aggregate ~~amount~~value of $1.4 billion. See Note 3 for additional information.

On April 11, 2019, we completed our combination with Rowan and effected a four-to-one share consolidation (being a reverse stock split under English law or the "Reverse Stock Split"). All share and per-share amounts in these financial statements have been retrospectively adjusted to reflect the Reverse Stock Split.

Note 12 -Income Taxes

Valaris plc, our parent company, is domiciled and resident in the U.K. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-U.K. subsidiaries is generally not subject to ~~exceed $1.5 billion.~~U.K. taxation. 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. Therefore, we generally incur income tax expense in periods in which we operate at a loss.

~~Advances under~~Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the ~~Credit Facility bear interest at Base Rate or LIBOR plus an applicable margin rate, depending on~~movement of our ~~credit ratings. We are required to pay a quarterly commitment fee on~~drilling rigs among taxing jurisdictions will involve the ~~undrawn portion~~transfer of ownership of the ~~$2.0 billion commitment, which is also based on~~drilling rigs among our ~~credit rating.~~

In January 2018, Moody's downgraded our senior unsecured bond credit rating from B2 to B3. The rating actions resulted in an increase to the interest rates applicable to our borrowings and the quarterly commitment fee on the undrawn portion of the $2.0 billion commitment. The applicable margin rates are 3.00% per annum for Base Rate advances and 4.00% per annum for LIBOR advances. The quarterly commitment fee is 0.75% per annum on the undrawn portion of the $2.0 billion commitment.

The Credit Facility requires us to maintain a total debt to total capitalization ratio that is less than or equal to 60% and to provide guarantees from certain of our rig-owning subsidiaries sufficient to meet certain guarantee coverage ratios. The Credit Facility also contains customary restrictive covenants, including, among others, prohibitions on creating, incurring or assuming certain debt and liens (subject to customary exceptions, including a permitted lien basket that permits us to raise secured debt up to the lesser of $750 million or 10% of consolidated tangible net worth (as defined in the Credit Facility)); entering into certain merger arrangements; selling, leasing, transferring or otherwise disposing of all or substantially all of our assets; making a material change in the nature of the business; paying or distributing dividends on our ordinary shares (subject to certain exceptions, including the ability to continue paying a quarterly dividend of $0.01 per share); borrowings, if after giving effect to any such borrowings and the application of the proceeds thereof, the aggregate amount of available cash (as defined in the Credit Facility) would exceed $150 million; and entering into certain transactions with affiliates.

The Credit Facility also includes a covenant restricting our ability to repay indebtedness maturing after September 2022, which is the final maturity date of our Credit Facility. This covenant is subject to certain exceptions that permit us to manage our balance sheet, including the ability to make repayments of indebtedness (i) of acquired companies within 90 days of the completion of the acquisition or (ii) if, after giving effect to such repayments, available cash is greater than $250 million and there are no amounts outstanding under the Credit Facility.

As of June 30, 2018, we were in compliance in all material respects with our covenants under the Credit Facility. We had no amounts outstanding under the Credit Facility as of June 30, 2018 and December 31, 2017.

~~Our access to credit and capital markets depends on the credit ratings assigned to our debt.~~subsidiaries. As a result of ~~recent rating actions, we do~~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.

Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes. In some jurisdictions, tax liabilities are based on gross revenues, statutory or negotiated deemed profits or other factors, rather than on net income and our subsidiaries are frequently unable to realize tax benefits when they operate at a loss. Accordingly, during periods of declining profitability, our consolidated income tax expense generally does not maintain an investment-grade status. Our current credit ratings, and any additional actual or anticipated downgrades in our credit ratings, could limit our available options when accessing credit and capital markets, or when restructuring or refinancing our debt. In addition, future financings or refinancings may resultdecline proportionally with consolidated income, which results in higher ~~borrowing costs and require more restrictive terms and covenants,~~effective income tax rates. Furthermore, we generally continue to incur income tax expense in periods in which ~~may further restrict our operations.~~

we operate at a loss on a consolidated basis.

~~Note 8 -Share-based Compensation~~

During the quarter ended June 30, 2018, we granted 4.7 million non-vested share awards to our employees pursuant to our 2018 Long-Term Incentive Plan, which was approved by our shareholders at our annual general meeting in May. Grants of our non-vested share awards generally vest at rates of 20% per year, as determined by a committee or subcommittee of the Board of Directors at the time of grant. The non-vested share awards have dividend rights effective on the date of grant. Compensation expense for awards to be settled in cash is remeasured each quarter with a cumulative adjustment to compensation cost during the period based on changes in our share price. The weighted-average grant date fair value for our non-vested share awards that were granted during the quarter ended June 30, 2018 was $6.58.

~~Note 9 -Income Taxes~~

Historically, we ~~have~~ calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. We determined that since small changes in estimated pre-tax income or loss would result in significant changes in the estimated annual effective tax rate, the historical method would not provide a reliable estimate of income taxes for the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017.~~2018. We used a discrete effective tax rate method to calculate income taxes for the three-month and six-month periods ended June 30, 2019 and 2018. We will continue to evaluate income tax estimates under the historical method in subsequent quarters and employ a discrete effective tax rate method if warranted.

Discrete income tax benefit for the three-month period ended June 30, 2019 was $1.2 million and was primarily attributable to the resolution of prior period tax matters. Discrete income tax benefit for the three-month period ended June 30, 2018 was $2.3 million and was primarily attributable to U.S. tax reform and a restructuring transaction, partially offset by discrete tax expense related to ~~rig sales~~the repurchase and redemption of senior notes and unrecognized tax benefits associated with tax positions taken in prior years. Excluding the aforementioned discrete tax items, income tax expense for the three-month periods ended June 30, 2019 and 2018 was $33.8 million and $27.0 million, respectively. The 6.8 million increase in income tax expense as compared to the prior year quarter was primarily due to income tax associated with Rowan's operations from the Transaction Date.

Discrete income tax benefit for the six-month period ended June 30, 2019 was $0.6 million and was primarily attributable to unrecognized tax benefits associated with tax positions taken in prior years and the resolution of other

prior period tax matters. Discrete income tax benefit for the six-month period ended June 30, 2018 was $11.2 million and was primarily attributable to U.S. tax reform and a restructuring transaction, partially offset by discrete tax expense related to repurchase and redemption of senior notes, the effective settlement of liabilities for unrecognized tax benefits associated with tax positions taken in prior years and rig sales.

~~Discrete income~~ Excluding the aforementioned discrete tax expense for the three-month period ended June 30, 2017 was $2.2 million and was primarily attributable to the debt exchange and repurchases we undertook during the first quarter of 2017 and a settlement of a previously disclosed legal contingency. Discreteitems, income tax expense for the six-month ~~period~~periods ended June 30, ~~2017~~2019 and 2018 was ~~$9.8~~$64.7 million and $54.3 million, respectively. The $10.4 million increase in income tax expense as compared to the prior year period was primarily ~~attributable~~due to ~~the exchange offers and debt repurchases, a restructuring transaction, the effective settlement of a liability for unrecognized~~income tax ~~benefits~~ associated with ~~a tax position taken in prior years~~Rowan's operations from the Transaction Date and ~~a settlement of a previously disclosed legal contingency.~~

~~U.S Tax Reform~~

~~The U.S. Tax Cuts and Jobs Act (“U.S. tax reform”) was enacted on December 22, 2017 and introduced significant changes to U.S. income tax law, including a reduction~~an increase in the ~~statutory income tax rate from 35% to 21% effective January 1, 2018, a one-time transition tax on deemed repatriation of deferred foreign income, a~~U.S. base erosion anti-abuse tax ~~that effectively imposes a minimum~~rate and an increase in the relative components of our earnings generated in tax ~~on certain payments~~jurisdictions with higher tax rates.

Recent Tax Assessments

During the second quarter of 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately $159 million plus interest related to ~~non-U.S. affiliates, new~~tax years 2014, 2015 and ~~revised rules relating to the current taxation~~2016 for several of ~~certain income~~Rowan’s Luxembourg subsidiaries. Although we are vigorously contesting these assessments, we have recorded an estimated liability for uncertain tax positions taken during these years as part of ~~foreign subsidiaries and revised rules associated with limitations on the deduction of interest.~~

~~Due to the timing of the enactment of U.S. tax reform and the complexity involved in applying its provisions, we made reasonable estimates of its effects and recorded such amounts in~~ our consolidated financial statements as of December 31, 2017 on a provisional basis. As we continue to analyze applicable information and data, and interpret any additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and others, we may make adjustments to the provisional amounts throughout the one-year measurement period as provided by Staff Accounting Bulletin No. 118. Ouracquisition accounting for the ~~enactment~~Rowan Transaction, which could change materially as we complete our evaluation of ~~U.S. tax reform will~~the filing positions. See Note 3 for additional information. Although the outcome of such assessments and related administrative proceedings cannot be ~~completed during 2018, and any adjustments we recognize~~predicted with certainty, an unfavorable outcome could ~~be material. The ongoing impact of U.S. tax reform may~~ result in ~~an increase in~~a material adverse effect on our ~~consolidated effective income tax rate in future periods.~~

financial position, operating results and cash flows.

During the ~~three-month and six-month periods ended June 30, 2018, we recognized a~~second quarter of 2019, the Australian tax ~~benefit~~authorities issued aggregate tax assessments totaling approximately $69 million plus interest related to the examination of ~~$7.1 million and $11.7 million, respectively, associated with the one-time transition tax on deemed repatriation of the deferred foreign income~~certain of our tax returns for years 2011 through 2016. We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments. Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows.

Other Matters

In July 2019, we began executing a series of restructuring transactions that we plan to complete in August 2019. In connection with this restructuring, we expect to recognize an approximate $900 million deferred tax asset for a U.S. ~~subsidiaries.~~capital loss, which will be subject to a full valuation allowance because wemore-likely-than-not will be unable to realize a future benefit from such capital loss.

Note 1013 -Contingencies

~~Brazil Internal Investigation~~DSA Dispute

~~Pride International LLC, formerly Pride International, Inc. (“Pride”),~~On January 4, 2016, Petrobras sent a ~~company we acquired in 2011, commenced drilling operations in Brazil in 2001. In 2008, Pride entered into a~~notice to us declaring the drilling services agreement with Petrobras (the "DSA") for ENSCO DS-5, a drillship ordered from Samsung Heavy Industries, a shipyard in South Korea ("SHI")~~. Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, after the acquisition of Pride, Ensco conducted similar compliance reviews.~~

We commenced a compliance review in early 2015 after the release of media reports regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras. While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to the DSA. Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Further, in June and July 2015, we voluntarily contacted the SEC and the U.S. Department of Justice (the "DOJ"), respectively, to advise them of this matter and of our Audit Committee’s investigation. Independent counsel, under the direction of our Audit Committee, has substantially completed its investigation by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the DSA negotiations and the negotiation of the ENSCO DS-5 construction contract with SHI (the "DS-5 Construction Contract").

To date, our Audit Committee has found no credible evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no credible evidence linking Ensco or Pride to any illegal acts committed by our former marketing consultant who provided services to Pride and Ensco in connection with the DSA. We, through independent counsel, have continued to cooperate with the SEC and DOJ, including providing detailed briefings regarding our investigation and findings and responding to inquiries as they arise. We entered into a one-year tolling agreement with the DOJ that expired in December 2016. Our tolling agreement with the SEC expired in June 2018.

Subsequent to initiating our Audit Committee investigation, Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including our former marketing consultant, referenced the alleged irregularities cited in the Petrobras internal audit report. Our former marketing consultant has entered into a plea agreement with the Brazilian authorities. On January 10, 2016, Brazilian authorities filed an indictment against a former Petrobras director. This indictment states that the former Petrobras director received bribes paid out of proceeds from a brokerage agreement entered into for purposes of intermediating a drillship construction contract between SHI and Pride, which we believe to be the DS-5 Construction Contract. The parties to the brokerage agreement were a company affiliated with a person acting on behalf of the former Petrobras director, a company affiliated with our former marketing consultant, and SHI. The indictment alleges that amounts paid by SHI under the brokerage agreement ultimately were used to pay bribes to the former Petrobras director. The

~~indictment does not state that Pride or Ensco or any of their current or former employees were involved in the bribery scheme or had any knowledge of the bribery scheme.~~

On January 4, 2016, we received a notice from Petrobras declaring the DSA void effective immediately. Petrobras’ notice alleges that our former marketing consultant both received and procured improper payments from SHI for employees of Petrobras and that Pride had knowledge of this activity and assisted in the procurement of and/or facilitated these improper payments. We disagree with Petrobras’ allegations. See "DSA Dispute" below for additional information.

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 SHI and Pride in relation to the DSA. The Brazilian authorities requested information regarding our compliance program and the findings of our internal investigations. 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 other 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. If the SEC or DOJ determines that violations of the Foreign Corrupt Practices Act of 1977 (the "FCPA") have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition. Although our internal investigation is substantially complete, we cannot predict whether any additional allegations will be made or whether any additional facts relevant to the investigation will be uncovered during the course of the investigation and what impact those allegations and additional facts will have on the timing or conclusions of the investigation. Our Audit Committee will examine any such additional allegations and additional facts and the circumstances surrounding them.

~~DSA Dispute~~

~~As described above, on January 4, 2016, Petrobras sent a notice to us declaring the DSA~~ void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. ~~We disagree~~The previously disclosed arbitral hearing on liability related to the matter was held in March 2018. Prior to the arbitration tribunal issuing its decision, we and Petrobras agreed in August 2018 to a settlement of all claims relating to the DSA. No payments were made by either party in connection with ~~Petrobras’ declaration that~~ the ~~DSA is void. We believe that~~settlement agreement. The parties agreed to normalize business relations and the settlement agreement provides for our participation in current and future Petrobras ~~repudiated~~tenders on the ~~DSA and has therefore accepted the DSA~~same basis as ~~terminated on April 8, 2016 (the "Termination Date"). At~~all other companies invited to these tenders. No losses were recognized during 2018 with respect to this ~~time, we cannot reasonably determine the validity of Petrobras' claim or the range of our potential exposure, if any. As a result, there can be no assurance~~settlement as ~~to how this dispute will ultimately be resolved.~~

We did not recognize revenue for amounts owed to us under the DSA from the beginning of the fourth quarter of 2015 through the Termination Date, as we concluded that collectability of these amounts was not reasonably assured. Additionally, ourall disputed receivables ~~from~~with Petrobras related to the DSA ~~from prior to the fourth quarter of 2015 are~~were fully reserved in our condensed consolidated balance sheet as of June 30, 2018. In August 2016, we initiated arbitration proceedings in the U.K. against Petrobras seeking payment of all amounts owed to us under the DSA, in addition to any other amounts to which we are entitled, and intend to vigorously pursue our claims. Petrobras subsequently filed a counterclaim seeking restitution of certain sums paid under the DSA less value received by Petrobras under the DSA. The arbitral hearing on liability was held in March 2018, and we are awaiting the tribunal's decision. There can be no assurance as to how this arbitration proceeding will ultimately be resolved.2015.

award provides that SHI is liable to us for ~~$10~~$10.0 million or damages that we can prove. AsWe submitted our claim for damages to the ~~losses suffered~~tribunal, and the arbitral hearing on damages owed to us by SHI took place in the first quarter of 2019.

In May 2019, the arbitration tribunal for the SHI matter awarded us $180.0 million in damages. Further, we are entitled to claim interest on this award and costs incurred in connection with this matter. In June 2019, we and SHI filed separate applications with the English High Court to seek leave to appeal the damages awarded. We are awaiting the English High Court decision as to whether it will ~~depend~~hear the appeal, which decision is expected in ~~part on~~ the ~~outcome~~fourth quarter of 2019. There can be no assurance when we will collect all or any portion of the ~~Petrobras arbitration described above, the amount of~~ damages ~~to be paid by SHI will be determined after the conclusion of the Petrobras arbitration. We are unable to estimate the ultimate outcome of recovery for damages at this time.~~awarded or any related interest or costs.

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.

In the ordinary course of business with customers and others, we have entered into letters of credit to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit outstanding as of June 30, ~~2018~~2019 totaled ~~$125.4~~$135.9 million and are issued under facilities provided by various banks and other financial institutions. Obligations under these letters of credit and surety bonds are not normally called, as we typically comply with the underlying performance requirement. As of June 30, ~~2018,~~2019, we had not been required to make collateral deposits with respect to these agreements.

In July 2019, a well being drilled offshore Indonesia by one of our jackup rigs experienced a well control event requiring the cessation of drilling activities. The operator could seek to terminate the contract under certain circumstances. If this drilling contract were to be terminated for cause, it would result in an approximate $19.0 million decrease in our backlog as of June 30, 2019.

On July 30, 2019, we received notice that a local partner of legacy Ensco plc in the Middle East filed a lawsuit in the U.K. against the Company alleging it induced the breach of a non-compete provision in an agreement between the local partner and a subsidiary of the Company. The lawsuit includes a claim for an unspecified amount of damages in excess of £100 million and other relief. We believe the claim is without merit and intend to vigorously defend against the lawsuit. We do not have sufficient information at this time to provide a reasonable estimate of potential liability, if any. As a result, there can be no assurance as to how this dispute will ultimately be resolved.

Note 14 -Leases

We have operating leases for office space, facilities, equipment, employee housing and certain rig berthing facilities. For all asset classes, except office space, we account for the lease component and the non-lease component as a single lease component. Our leases have remaining lease terms of less than one year to 11 years, some of which include options to extend. Additionally, we sublease certain office space to third parties.

The components of lease expense are as follows (in millions):



	Three Months Ended June 30, 2019			Six Months Ended June 30, 2019
Long-term operating lease cost	$	7.0		$	13.2
Short-term operating lease cost	2.2			5.3
Sublease income	(.4		)	(.7		)
Total operating lease cost	$	8.8		$	17.8

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



	June 30, 2019
Operating lease right-of-use assets⁽¹⁾	$	57.1

Current lease liability⁽¹⁾	$	21.5
Long-term lease liability⁽¹⁾	48.6
Total operating lease liabilities	$	70.1

Weighted-average remaining lease term (in years)	5.4

Weighted-average discount rate ⁽²⁾	8.00		%


⁽¹⁾	The right-of-use assets include $12.2 million assumed in the Rowan Transaction. The current and long-term lease liabilities include $3.9 million and $10.6 million, respectively, assumed in the Rowan Transaction.


⁽²⁾	Represents our estimated incremental borrowing cost on a secured basis for similar terms as the underlying leases.

For the three and six-month periods ended June 30, 2019, cash paid for amounts included in the measurement of our operating lease liabilities was $7.2 million and $14.2 million, respectively. Right-of-use assets and lease liabilities recorded for leases commencing during the quarter ended June 30, 2019 were insignificant.

Maturities of lease liabilities as of June 30, 2019 were as follows (in millions):



Year Ending December 31,	Total
2019 (excluding the six months ended June 30, 2019)	$	15.3
2020	19.5
2021	10.8
2022	9.9
2023	10.2
Thereafter	22.1
Total lease payments	$	87.8
Less imputed interest	(17.7		)
Total	$	70.1

In July 2019, we entered into operating lease agreements for rig berthing facilities. Future payments for these leases are approximately $9.6 million. The leases commence in fiscal year 2019 and have lease terms of one to two years.

Note 1115 -Segment Information

~~Our~~Prior to the Rowan Transaction, our business ~~consists~~consisted of three operating segments: (1) Floaters, which ~~includes~~included our drillships and semisubmersible rigs, (2) Jackups and (3) Other, which ~~consists~~consisted only of our management services provided on rigs owned by third-parties. Our ~~two reportable segments,~~ Floaters and Jackups ~~provide one service, contract drilling.~~segments were also reportable segments.

~~Segment information~~As a result of the Rowan Transaction, we concluded that we would maintain the aforementioned segment structure while adding ARO as a reportable segment for the ~~three-month~~new combined company. We also concluded that the activities associated with our arrangements with ARO, consisting of our Transition Services Agreement, Rig Lease Agreements and ~~six-month periods ended June 30, 2018~~Secondment Agreement, do not constitute reportable segments and ~~2017 is presented below (in millions).~~ are therefore included within Other in the following segment disclosures. Substantially all of the expenses incurred associated with our Transition Services Agreement are included in general and administrative under "Reconciling Items" in the table set forth below.

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 and are included in "Reconciling Items." ~~We measure segment assets as property~~The full operating results included below for ARO (representing only results of operations of ARO from the Transaction Date) are not included within our consolidated results and ~~equipment.~~thus deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See Note 4 for additional information on ARO and related arrangements.

Segment information for the three-month and six-month periods ended June 30, 2019 and 2018 is presented below (in millions):

Three Months Ended June 30, 2019



	Floaters			Jackups			ARO		Other		Reconciling Items			Consolidated Total
Revenues	$	295.6		$	229.2		$	123.8	$	59.1	$	(123.8	)	$	583.9
Operating expenses
Contract drilling (exclusive of depreciation)	249.2			212.2			78.9		38.9		(78.9		)	500.3
Loss on impairment	—			—			—		—		2.5			2.5
Depreciation	98.4			55.5			12.4		—		(8.4		)	157.9
General and administrative	—			—			5.3		—		75.9			81.2
Equity in earnings of ARO	—			—			—		—		0.6			0.6
Operating income (loss)	$	(52.0	)	$	(38.5	)	$	27.2	$	20.2	$	(114.3	)	$	(157.4	)
Property and equipment, net	$	10,364.7		$	5,055.6		$	656.5	$	—	$	(621.1	)	$	15,455.7

Three Months Ended June 30, 2018


	Floaters		Jackups			Other		Operating Segments Total			Reconciling Items			Consolidated Total			Floaters		Jackups			ARO		Other		Reconciling Items			Consolidated Total
Revenues	$	284.9	$	158.7		$	14.9	$	458.5		$	—		$	458.5		$	284.9	$	158.7		$	—	$	14.9	$	—		$	458.5
Operating expenses																													—
Contract drilling (exclusive of depreciation)	203.7		126.8			13.8		344.3			—			344.3			203.7		126.8			—		13.8		—			344.3
Depreciation	80.8		36.5			—		117.3			3.4			120.7			80.8		36.5			—		—		3.4			120.7
General and administrative	—		—			—		—			26.1			26.1			—		—			—		—		26.1			26.1
Operating income (loss)	$	0.4	$	(4.6	)	$	1.1	$	(3.1	)	$	(29.5	)	$	(32.6	)	$	0.4	$	(4.6	)	$	—	$	1.1	$	(29.5	)	$	(32.6	)
Property and equipment, net	$	9,574.9	$	3,167.0		$	—	$	12,741.9		$	42.0		$	12,783.9		$	9,574.9	$	3,167.0		$	—	$	—	$	42.0		$	12,783.9

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by us in the reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of ~~the end of the period covered by this quarterly report on Form 10-Q,~~June 30, 2019, our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer have concluded that our disclosure controls and procedures as(as defined in ~~Rule 13a-15~~Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of ~~1934,~~1934) are effective.

~~During~~Changes in Internal Controls – There have been no changes in our internal controls over financial reporting during the fiscal quarter ended June 30, ~~2018, there were no changes in our internal control over financial reporting~~2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial ~~reporting.~~reporting, except as noted below.

During the quarter ended June 30, 2019, we completed our merger with Rowan (see Note 3 to our condensed consolidated financial statements for more information). We are currently integrating Rowan into our operations and internal control processes and, pursuant to the SEC’s guidance that a recently acquired business may be excluded from the scope of an assessment of internal control over financial reporting in the year of acquisition, the scope of our assessment of the effectiveness of our internal controls over financial reporting at December 31, 2019 will exclude Rowan to the extent not integrated into our control environment.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~Brazil Internal Investigation~~DSA Dispute

~~Pride International LLC, formerly Pride International, Inc.,~~On January 4, 2016, Petrobras sent a ~~company we acquired in 2011, commenced drilling operations in Brazil in 2001. In 2008, Pride entered into a~~notice to us declaring the drilling services agreement with Petrobras (the "DSA") for ENSCO DS-5, a drillship ordered from Samsung Heavy Industries, a shipyard in South Korea ("SHI")~~. Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, after the acquisition of Pride, Ensco conducted similar compliance reviews.~~

We commenced a compliance review in early 2015 after the release of media reports regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras. While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to the DSA. Upon learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Further, in June and July 2015, we voluntarily contacted the SEC and the DOJ, respectively, to advise them of this matter and of our Audit Committee’s investigation. Independent counsel, under the direction of our Audit Committee, has substantially completed its investigation by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the DSA negotiations and the negotiation of the ENSCO DS-5 construction contract with SHI (the "DS-5 Construction Contract").

and Pride in relation to the DSA. The Brazilian authorities requested information regarding our compliance program and the findings of our internal investigations. 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 other 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. If the SEC or DOJ determines that violations of the FCPA have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our business and financial condition. Our customers, business partners and other stakeholders could seek to take actions adverse to our interests. Further, investigating and resolving such allegations is expensive and could consume significant management time and attention. Although our internal investigation is substantially complete, we cannot predict whether any additional allegations will be made or whether any additional facts relevant to the investigation will be uncovered during the course of the investigation and what impact those allegations and additional facts will have on the timing or conclusions of the investigation. Our Audit Committee will examine any such additional allegations and additional facts and the circumstances surrounding them.

~~DSA Dispute~~

~~As described above, on January 4, 2016, Petrobras sent a notice to us declaring the DSA~~, void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. ~~We disagree~~The previously disclosed arbitral hearing on liability related to the matter was held in March 2018. Prior to the arbitration tribunal issuing its decision, we and Petrobras agreed in August 2018 to a settlement of all claims relating to the DSA. No payments were made by either party in connection with ~~Petrobras’ declaration that~~ the ~~DSA is void. We believe that~~settlement agreement. The parties agreed to normalize business relations and the settlement agreement provides for our participation in current and future Petrobras ~~repudiated~~tenders on the ~~DSA and has therefore accepted the DSA~~same basis as ~~terminated on April 8, 2016. At~~all other companies invited to these tenders. No losses were recognized during 2018 with respect to this ~~time, we cannot reasonably determine the validity of Petrobras' claim or the range of our potential exposure, if any. As a result, there can be no assurance~~settlement as ~~to how this dispute will ultimately be resolved.~~

We did not recognize revenue for amounts owed to us under the DSA from the beginning of the fourth quarter of 2015 through the Termination Date as we concluded that collectability of these amounts was not reasonably assured. Additionally, ourall disputed receivables ~~from~~with Petrobras related to the DSA ~~from prior to the fourth quarter of 2015 are~~were fully reserved in 2015. See Item 1 “Legal Proceedings” in our ~~condensed consolidated balance sheet as of~~quarterly report on Form 10-Q for the quarter ended June 30, ~~2018. In August 2016, we initiated arbitration proceedings in the U.K. against Petrobras seeking payment of all amounts owed to us under~~2018 for further information about the DSA in addition to any other amounts to which we are entitled, and intend to vigorously pursue our claims. Petrobras subsequently filed a counterclaim seeking restitution of certain sums paid under the DSA less value received by Petrobras under the DSA. The arbitral hearing on liability was held in March 2018, and we are awaiting the tribunal's decision. There can be no assurance as to how this arbitration proceeding will ultimately be resolved.dispute.

In ~~November~~April 2016, we initiated separate arbitration proceedings in the U.K. against SHI for ~~any~~the losses ~~we incur~~incurred in connection with the foregoing Petrobras ~~arbitration. SHI subsequently filed a statement of defense disputing our claim.~~arbitration and certain other losses relating to the DSA. In January 2018, the arbitration tribunal for the SHI matter issued an award on liability fully in ~~Ensco’s~~our favor. The January 2018 arbitration award provides that SHI is liable to us for ~~$10~~$10.0 million or damages that we can prove. AsWe submitted our claim for damages to the ~~losses suffered~~tribunal, and the arbitral hearing on damages owed to us by SHI took place in the first quarter of 2019.

Pride FCPA Investigation

During 2010, Pride and its subsidiaries resolved their previously disclosed investigations into potential violations of the FCPA with the DOJ and SEC. The settlement with the DOJ included a deferred prosecution agreement (the "DPA") between Pride and the DOJ and a guilty plea by Pride Forasol S.A.S., one of Pride’s subsidiaries, to FCPA-related charges. During 2012, the DOJ moved to (i) dismiss the charges against Pride and end the DPA one year prior to its scheduled expiration; and (ii) terminate the unsupervised probation of Pride Forasol S.A.S. The Court granted the motions.

Pride has received preliminary inquiries from governmental authorities of certain countries referenced in its settlements with the DOJ and SEC. We could face additional fines, sanctions and other penalties from authorities in these and other relevant jurisdictions, including prohibition of our participating in or curtailment of business operations in certain jurisdictions and the seizure of rigs or other assets. At this stage of such inquiries, we are unable to determine what, if any, legal liability may result. Our customers in certain jurisdictions could seek to impose penalties or take other actions adverse to our business. We could also face other third-party claims by directors, officers, employees, affiliates, advisors, attorneys, agents, stockholders, debt holders or other stakeholders. In addition, disclosure of the subject matter of the investigations and settlements could adversely affect our reputation and our ability to obtain new business or retain existing business, to attract and retain employees and to access the capital markets.

We cannot currently predict what, if any, actions may be taken by any other applicable government or other authorities or our customers or other third parties or the effect any such actions may have on our financial position, operating results and cash flows.

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 2017, 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 ~~$180,000~~$150,000 liability related to these matters was included in accrued liabilities and other in our condensed consolidated balance sheet as of June 30, ~~2018.~~2019.

We currently are subject to a pending administrative proceeding initiated during 2009 by a Spanish government authority seeking payment in an aggregate amount of approximately $3.0 million, for an alleged environmental spill originating from ENSCO 5006 while it was operating offshore Spain. Our customer has posted guarantees with the Spanish government to cover potential penalties. Additionally, we expect to be indemnified for any payments resulting from this incident by our customer under the terms of the drilling contract. A criminal investigation of the incident was initiated during 2010 by a prosecutor in Tarragona, Spain, and the administrative proceedings have been suspended pending the outcome of this investigation. In May 2019, we were informed that the criminal investigation has been completed. We dohave not ~~know at this time what,~~received any indication from the Spanish government if ~~any, involvement we may have in this investigation.~~or when the administrative proceedings will resume.

We intend to vigorously defend ourselves in the administrative ~~proceeding and any criminal investigation.~~proceeding. At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability. Although we do not expect final disposition of this matter 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 the proceedings.

Other Matters

Item 1A. Risk Factors

There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report, you should carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our annual report on Form 10-K for the year ended December 31, ~~2017,~~2018, as updated in our subsequent quarterly reports on Form 10-Q, which contains descriptions of significant risks that may cause our actual results of operations in future periods to differ materially from those currently anticipated or expected. There have been no material changes from the risks previously disclosed in our ~~annual report~~ on Form 10-K for the year ended December 31, ~~2017.~~2018 and in our Form 10-Q for the quarter ended March 31, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

The table below provides a summary of our repurchases of equity securities during the quarter ended June 30, ~~2018:~~2019:


													Issuer Purchases of Equity Securities
Period	Total Number of Securities Purchased⁽¹⁾	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 ⁽²⁾		Total Number of Securities Purchased⁽¹⁾	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 ⁽²⁾

April 1 - April 30	1,348	$	4.54	—	$	2,000,000,000	111,702	$	16.11	—	$	500,000,000
May 1 - May 31	9,459	$	5.75	—	$	2,000,000,000	31,589	$	11.54	—	$	500,000,000
June 1 - June 30	89,172	$	6.58	—	$	500,000,000	69,112	$	8.62	—	$	500,000,000
Total	99,979	$	6.47	—			212,403	$	12.99	—


⁽¹⁾	During the quarter ended June 30, ~~2018,~~2019, equity securities were repurchased from employees and non-employee directors by an affiliated employee benefit trust in connection with the settlement of income tax withholding obligations arising from the vesting of share awards. Such securities remain available for re-issuance in connection with employee share awards.

⁽²⁾

Our shareholders approved a new repurchase program at our annual shareholder meeting held in May 2018. Subject to certain provisions under English law, including the requirement of ~~Ensco plc~~Valaris to have sufficient distributable reserves, we may repurchase up to a maximum of $500.0 million in the aggregate from one ~~ore~~or more financial intermediaries under the program, but in no case more than ~~65.0~~16.3 million shares. As of June 30, ~~2018,~~2019, no shares have been repurchased under the program. The program terminates in May 2023. Our prior share repurchase program approved by our shareholders in 2013, under which we could purchase up to a maximum of $2.0 billion in the aggregate, but in no case more than 35.0 million shares, terminated in May 2018.

Item 6. Exhibits



Exhibit Number		Exhibit
~~3.1~~2.1		~~Certificate~~Transaction Agreement, dated as of ~~Incorporation on Change of Name~~October 7, 2018, by and between Ensco plc and Rowan Companies Limited (formerly named Rowan Companies plc) ("Rowan") (incorporated by reference to Exhibit ~~3.1~~2.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on ~~April 1, 2010,~~October 9, 2018, File No. 1-8097).
~~3.2~~2.2		Deed of Amendment No. 1 to the Transaction Agreement, dated as of January 28, 2019, by and between Ensco plc and Rowan (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on January 29, 2019, File No. 1-8097).
2.3		Deed of Amendment No. 2 to the Transaction Agreement, dated as of April 4, 2019, by and between Ensco plc and Rowan (incorporated by reference to Exhibit 2.1 to the Registrant’s Quarterly Report on Form 10-Q filed on May 2, 2019. File No. 1-8097).
3.1		Articles of Association of ~~Ensco plc~~Valaris (incorporated by reference to Annex 2 to the Registrant's Proxy Statement on Form DEF 14A filed on April 5, 2013, as adopted by Special Resolution passed on May 20, 2013, File No. 1-8097).
~~10.1~~4.1		~~Ensco plc 2018 Long-Term Incentive Plan (incorporated~~Indenture for Senior Debt Securities dated as of July 21, 2009, between Rowan Companies, Inc. and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit ~~10.1~~4.1 of Rowan's Current Report on Form 8-K filed on July 21, 2009 (File No. 1-5491).
4.2		First Supplemental Indenture dated as of July 21, 2009, between Rowan Companies, Inc. and U.S. Bank National Association, as trustee, incorporated by reference to ~~the Registrant's~~Exhibit 4.2 of Rowan's Current Report on Form 8-K filed on July 21, 2009 (File No. 1-5491).
4.3		Form of 7.875% Senior Note due 2019, incorporated by reference to Exhibit 4.2 of Rowan's Current Report on Form 8-K filed on July 21, 2009 (File No. 1-5491).
4.4		Third Supplemental Indenture dated as of May 4, 2012, among Rowan Companies, Inc., Rowan and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.4 to Rowan's Current Report on Form 8-K filed on May ~~22, 2018, File~~4, 2012 (File No. ~~1-8097)~~1-5491).
~~10.2~~4.5		~~Form~~Fourth Supplemental Indenture, dated as of ~~Ensco plc 2018 Long-Term Incentive Plan Non-Employee Director Restricted Share Unit Award Agreement~~May 21, 2012, among Rowan Companies, Inc., Rowan and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit ~~10.2~~4.2 to ~~the Registrant's~~Rowan's Current Report on Form 8-K filed on May ~~22, 2018,~~21, 2012, File No. 1-5491).
4.6		Form of 4.875% Senior Note due 2022, incorporated by reference to Exhibit 4.2 to Rowan's Current Report on Form 8-K filed on May 21, 2012 (File No. 1-5491).
4.7		Fifth Supplemental Indenture dated as of December 11, 2012, among Rowan Companies, Inc., Rowan and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed on December 11, 2012 (File No. 1-5491).
4.8		Form of 5.4% Senior Note due 2042, incorporated by reference to Exhibit 4.3 to Rowan's Current Report on Form 8-K filed on December 11, 2012 (File No. 1-5491).
4.9		Sixth Supplemental Indenture dated as of January 15, 2014, among Rowan Companies, Inc., Rowan and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.2 of the Company’s Current Report on Form 8-K filed on January 15, 2014 (File No. 1-5491).
4.10		Form of 4.75% Senior Note due 2024, incorporated by reference to Exhibit 4.2 of Rowan's Current Report on Form 8-K filed on January 15, 2014 (File No. 1-5491).
4.11		Seventh Supplemental Indenture dated as of January 15, 2014, among Rowan Companies, Inc., Rowan and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.3 of the Company’s Current Report on Form 8-K filed on January 15, 2014 (File No. 1-5491).
4.12		Form of 5.85% Senior Note due 2044, incorporated by reference to Exhibit 4.3 of Rowan's Current Report on Form 8-K filed on January 15, 2014 (File No. 1-5491).
4.13		Eighth Supplemental Indenture dated as of December 19, 2016, among Rowan Companies, Inc., Rowan's and U.S. Bank National Association, as trustee, incorporated by reference to Exhibit 4.2 of Rowan's Current Report on Form 8-K filed on December 19, 2016 (File No. 1-5491).
4.14		Form of 7.375% Senior Note due 2025, incorporated by reference to Exhibit 4.2 of Rowan's Current Report on Form 8-K filed on December 19, 2016 (File No. 1-5491).



4.15		Ninth Supplemental Indenture, dated as of June 7, 2019, among Rowan Companies, Inc., Rowan Companies Limited, as guarantor, and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 of the Registrant’s Current Report on Form 8-K filed on June 11, 2019, File No. 1-8097).
*12.110.1		~~Computation~~Rowan Asset Transfer and Contribution Agreement, dated as of ~~ratio~~November 21, 2016, between Rowan Rex Limited and Saudi Aramco Development Company (incorporated by reference to Exhibit 2.1 to Rowan US's Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-5491).
10.2		Amendment No. 1 to Rowan Asset Transfer and Contribution Agreement, dated as of ~~earnings~~October 17, 2017, by and between Saudi Aramco Development Company, Rowan Rex Limited and Saudi Aramco Rowan Offshore Drilling Company (incorporated by reference to ~~fixed charges.~~Exhibit 2.1 of Rowan US’s Current Report on Form 8-K filed on October 19, 2017, File No. 1-5491).
10.3		Shareholders’ Agreement dated 21 November 2016 (G) between Saudi Aramco Development Company and Rowan Rex Limited Relating to the Offshore Drilling Joint Venture (incorporated by reference to Exhibit 10.38 to Rowan US’s Annual Report on Form 10-K for the year ended December 31, 2016, File No. 1-5491).
10.4		Commitment Increase Agreement and Sixth Amendment to Fourth Amended and Restated Credit Agreement, dated as of April 9, 2019, among Ensco plc, Pride International LLC, certain other subsidiaries of Ensco plc party thereto, Citibank, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on April 11, 2019, File No. 1-8097).
10.5		Restoration Plan of Rowan Companies, Inc. (as amended and restated effective January 1, 2013), incorporated by reference to Exhibit 10.7 to Rowan's Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-5491).
10.6		Form of Restricted Share Notice pursuant to the 2009 Rowan Companies, Inc. Incentive Plan, incorporated by reference to Exhibit 10.5 to Rowan's Current Report on Form 8-K filed on May 4, 2012 (File No. 1-5491).
10.7		Form of Non-Employee Director Restricted Share Unit Notice pursuant to 2009 Rowan Companies, Inc. Incentive Plan, incorporated by reference to Exhibit 10.8 of Rowan's Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2012 (File No. 1-5491).
10.8		Forms of Restricted Share Unit Award Notice, Share Appreciation Right Award Notice and Performance Unit Award Notice pursuant to the 2009 Rowan Companies, Inc. Incentive Plan, incorporated by reference to Exhibit 10.1 to Rowan's Current Report on Form 8-K filed on March 8, 2013 (File No. 1-5491).
10.9		Retirement Policy of Rowan, effective March 6, 2013, incorporated by reference to Exhibit 10.2 to Rowan's Current Report on Form 8-K filed on March 8, 2013 (File No. 1-5491).
10.10		Form of Employee Restricted Share Unit Notice pursuant to the 2013 Rowan Companies plc Incentive Plan (effective April 26, 2013), incorporated by reference to Exhibit 10.2 to Rowan's Current Report on Form 8-K filed on April 30, 2013 (File No. 1-5491).
10.11		Form of Share Appreciation Right Notice pursuant to the 2013 Rowan Companies plc Incentive Plan (effective April 26, 2013), incorporated by reference to Exhibit 10.3 to Rowan's Current Report on Form 8-K filed on April 30, 2013 (File No. 1-5491).
10.12		Non-Employee Director Restricted Share Unit Notice pursuant to Annex 1 to the 2013 Rowan Companies plc Incentive Plan (effective April 26, 2013), incorporated by reference to Exhibit 10.5 to Rowan's Current Report on Form 8-K filed on April 30, 2013 (File No. 1-5491).
10.13		Form of Change in Control Agreement entered into with executives on or after April 25, 2014, incorporated by reference to Exhibit 10.31 to Rowan's Annual Report on Form 10-K for the year ended December 31, 2014 (File No. 1-5491).
10.14		Summary of the Company’s Annual Incentive Plan, incorporated by reference to Exhibit 10.34 to Rowan's Annual Report on Form 10-K for the year ended December 31, 2016 (File No. 1-5491).
10.15		Form of Non-Employee Director Restricted Share Award Notice, incorporated by reference to Exhibit 10.1 to Rowan's Current Report on Form 8-K filed on May 2, 2016 (File No. 1-5491).
10.16		Forms of Retention Award Notices, incorporated by reference to Exhibit 10.2 of Rowan's Current Report on Form 8-K filed on February 24, 2017 (File No. 1-5491).



10.17		Form of Share Repurchase Contract and Form of Rule 10b5-1 Repurchase Plan, incorporated by reference to Exhibits II and III, respectively, to Rowan's proxy statement filed on March 31, 2017 (File No. 1-5491).
10.18		Forms of Restricted Share Unit Award Notice and Performance Unit Award Notice, incorporated by reference to Exhibit 10.1 of Rowan's Current Report on Form 8-K file on February 24, 2017 (File No. 1-5491).
10.19		Form of non-Employee Director Non-Deferred Restricted Share Unit Notice, incorporated by reference to Exhibit 10.1 to Rowan's Current Report on Form 8-K file on May 25, 2017 (File No. 1-05491).
10.20		Form of Letter Agreement to Retention Award Agreement, incorporated by reference to Exhibit 10.1 of Rowan's Current Report on Form 8-K filed on January 30, 2018 (File No. 1-5491).
*15.1		Letter regarding unaudited interim financial information.
*31.1		Certification of the Chief Executive Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2		Certification of the Chief Financial Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1		Certification of the Chief Executive Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**32.2		Certification of the Chief Financial Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS		XBRL Instance Document - The instant document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101.SCH		XBRL Taxonomy Extension Schema
*101.CAL		XBRL Taxonomy Extension Calculation Linkbase
*101.DEF		XBRL Taxonomy Extension Definition Linkbase
*101.LAB		XBRL Taxonomy Extension Label Linkbase
*101.PRE		XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		~~Ensco~~Valaris plc


Date:	~~July 26, 2018~~August 1, 2019	/s/ JONATHAN H. BAKSHT
		Jonathan H. Baksht ~~Senior~~Executive Vice President and Chief Financial Officer (principal financial officer)

		/s/ TOMMY E. DARBY
		Tommy E. Darby Vice President and Controller (principal accounting officer)

6981



England and Wales		98-0635229
(State or other jurisdiction of incorporation or organization) ~~6 Chesterfield Gardens~~ ~~London, England~~ ~~(Address of principal executive offices)~~		~~98-0635229~~ (I.R.S. Employer Identification No.)

6 Chesterfield Gardens
London,	England	W1J 5BQ
(Address of principal executive offices)		(Zip Code)



Title of each class	Ticker Symbol(s)	Name of each exchange on which on which registered
Class A ordinary shares, U.S. $0.40 par value	VAL	New York Stock Exchange
4.70% Senior Notes due 2021	VAL21	New York Stock Exchange
4.50% Senior Notes due 2024	VAL24	New York Stock Exchange
8.00% Senior Notes due 2024	VAL24A	New York Stock Exchange
5.20% Senior Notes due 2025	VAL25A	New York Stock Exchange
7.75% Senior Notes due 2026	VAL26	New York Stock Exchange
5.75% Senior Notes due 2044	VAL44	New York Stock Exchange



Large accelerated filer	x☒	Accelerated filer	o☐

Non-Accelerated filer	o ~~(Do not check if a smaller reporting company)~~ ☐	Smaller reporting company	o☐

		Emerging-growth company	o☐



~~(Mark One)~~
x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the quarterly period ended June 30, 2018~~



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



	Remaining 2018		2019		2020		2021 and Thereafter		Total
Amortization of contract liabilities	$	38.9	$	51.0	$	6.4	$	3.5	$	99.8
Amortization of deferred costs	$	23.4	$	21.6	$	6.0	$	2.4	$	53.4



	Gain (Loss) Recognized in Other Comprehensive Income (Loss) (Effective Portion)					Gain (Loss) Reclassified from AOCI into Income (Effective Portion)⁽¹⁾						Loss Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
	2018			2017		2018			2017			2018			2017
Interest rate lock contracts⁽³⁾	$	—		$	—	$	(.1	)	$	(.2	)	$	—		$	—
Foreign currency forward contracts⁽⁵⁾	(4.9		)	6.0		3.0			(1.0		)	(1.2		)	(.4		)
Total	$	(4.9	)	$	6.0	$	2.9		$	(1.2	)	$	(1.2	)	$	(.4	)



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price⁽¹⁾
8.50% senior notes due 2019	$	237.6	$	256.8
6.875% senior notes due 2020	328.0		354.7
4.70% Senior notes due 2021	156.2		159.7
Total	$	721.8	$	771.2


	Floaters	Jackups	Total⁽¹⁾	Floaters	Jackups	Other ⁽¹⁾	Total Valaris	ARO
North & South America	8	4	12	12	9	—	21	—
Europe & Mediterranean	6	11	17	5	17	—	22	—
Middle East & Africa(2)	3	12	15	5	11	9	25	7
Asia & Pacific Rim	5	7	12	4	7	—	11	—
Asia & Pacific Rim (under construction)	2	1	3	2	—	—	2	—
Held-for-sale⁽²⁾	2	1	3
Total	26	36	62	28	44	9	81	7


⁽¹⁾	~~We provide management services on two~~ The rigs ~~owned by third-parties in the U.S. Gulf of Mexico which are not~~ included in the ~~table above.~~"Other" segment represent the nine rigs leased to ARO (two of which are expected to commence drilling operations during the third quarter of 2019). See Note 4 for additional information.


⁽²⁾	~~One floater classified as held-for-sale as~~The number of ~~June 30, 2018 was sold in July 2018.~~Middle East & Africa Jackup drilling rigs excludes one older Rowan jackup rig marked for retirement.



	June 30, 2019			December 31, 2018
Trade	$	568.3		$	301.7
Other	68.9			46.4
	637.2			348.1
Allowance for doubtful accounts	(8.5		)	(3.4		)
	$	628.7		$	344.7



	June 30, 2019		December 31, 2018
Right-of-use assets	$	57.1	$	—
Deferred tax assets	31.4		29.4
Supplemental executive retirement plan assets	26.2		27.2
Deferred costs	19.9		21.5
Intangible assets	14.9		—
Other	19.9		19.7
	$	169.4	$	97.8



	June 30, 2019		December 31, 2018
Accrued interest	$	136.9	$	100.6
Personnel costs	101.2		82.5
Income and other taxes payable	53.7		36.9
Deferred revenue	46.2		56.9
Accrued rig holding costs	26.5		14.3
Lease liabilities	21.5		—
Pension and other post-retirement benefits	19.7		—
Derivative liabilities	5.1		10.9
Other	27.5		15.9
	$	438.3	$	318.0



	June 30, 2019		December 31, 2018
Unrecognized tax benefits (inclusive of interest and penalties)	$	276.2	$	177.0
Pension and other post-retirement benefits	214.4		—
Deferred tax liabilities	106.5		70.7
Intangible liabilities	53.8		53.5
Lease liabilities	48.6		—
Supplemental executive retirement plan liabilities	26.9		28.1
Personnel costs	22.7		25.1
Deferred revenue	14.8		20.5
Deferred rent	—		11.7
Other	35.1		9.4
	$	799.0	$	396.0



	June 30, 2019			December 31, 2018
Derivative instruments	$	14.4		$	12.6
Currency translation adjustment	7.3			7.3
Other	(1.8		)	(1.7		)
	$	19.9		$	18.2


⁽³⁾	managed rigs. During the three-month period ended June 30, 2018, 36% of the revenues earned in the U.S. Gulf of Mexico were attributable to our Floaters segment, 39% were attributable to our Jackups segment and the remaining revenues were attributable to our ~~Other segment.~~ managed rigs.


⁽⁴⁾⁽⁵⁾	During the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, all revenues earned in the United Kingdom were attributable to our Jackups segment.


⁽⁵⁾⁽⁶⁾	During the three-month and six-month periods ended June 30, ~~2018~~2019 and ~~2017,~~2018, all revenues earned in Brazil ~~and Egypt~~ were attributable to our Floaters segment.

VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended June 30, 2019 (In millions) (Unaudited)

	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-Guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING REVENUES	$	19.9		$	36.1		$	—		$	607.9		$	(80.0	)	$	583.9
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	18.3			31.8			—			530.2			(80.0		)	500.3
Loss on impairment	—			—			—			2.5			—			2.5
Depreciation	—			4.0			—			153.9			—			157.9
General and administrative	46.4			.1			—			34.7			—			81.2
Total operating expenses	64.7			35.9			—			721.3			(80.0		)	741.9
EQUITY IN EARNINGS OF ARO	—			—			—			.6			—			.6
OPERATING INCOME (LOSS)	(44.8		)	.2			—			(112.8		)	—			(157.4		)
OTHER INCOME (EXPENSE), NET	694.9			(15.6		)	(20.3		)	(66.0		)	4.3			597.3
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	650.1			(15.4		)	(20.3		)	(178.8		)	4.3			439.9
INCOME TAX PROVISION	—			12.4			—			20.2			—			32.6
EQUITY EARNINGS (LOSSES) IN AFFILIATES, NET OF TAX	(244.6		)	43.2			27.0			—			174.4			—
NET INCOME (LOSS)	405.5			15.4			6.7			(199.0		)	178.7			407.3
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			(1.8		)	—			(1.8		)
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	405.5		$	15.4		$	6.7		$	(200.8	)	$	178.7		$	405.5

ENSCO PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended June 30, 2018 (In millions) (Unaudited)
VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended June 30, 2018 (In millions) (Unaudited)																			VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended June 30, 2018 (In millions) (Unaudited)

	Ensco plc			ENSCO International Incorporated			Pride International LLC			Other Non-Guarantor Subsidiaries of Ensco			Consolidating Adjustments			Total			Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-Guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING REVENUES	$	12.3		$	39.8		$	—		$	484.3		$	(77.9	)	$	458.5		$	12.3		$	39.8		$	—		$	484.3		$	(77.9	)	$	458.5
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	13.0			36.2			—			373.0			(77.9		)	344.3			13.0			36.2			—			373.0			(77.9		)	344.3
Depreciation	—			3.5			—			117.2			—			120.7			—			3.5			—			117.2			—			120.7
General and administrative	10.3			.1			—			15.7			—			26.1			10.3			.1			—			15.7			—			26.1
OPERATING LOSS	(11.0		)	—			—			(21.6		)	—			(32.6		)	(11.0		)	—			—			(21.6		)	—			(32.6		)
OTHER EXPENSE, NET	(5.1		)	(40.5		)	(19.7		)	(23.5		)	4.0			(84.8		)	(5.1		)	(40.5		)	(19.7		)	(23.5		)	4.0			(84.8		)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(16.1		)	(40.5		)	(19.7		)	(45.1		)	4.0			(117.4		)	(16.1		)	(40.5		)	(19.7		)	(45.1		)	4.0			(117.4		)
INCOME TAX PROVISION	—			18.6			—			6.1			—			24.7			—			18.6			—			6.1			—			24.7
DISCONTINUED OPERATIONS, NET	—			—			—			(8.0		)	—			(8.0		)	—			—			—			(8.0		)	—			(8.0		)
EQUITY EARNINGS (LOSSES) IN AFFILIATES, NET OF TAX	(134.9		)	28.7			22.6			—			83.6			—			(134.9		)	28.7			22.6			—			83.6			—
NET LOSS	(151.0		)	(30.4		)	2.9			(59.2		)	87.6			(150.1		)
NET INCOME (LOSS)																			(151.0		)	(30.4		)	2.9			(59.2		)	87.6			(150.1		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			(.9		)	—			(.9		)	—			—			—			(.9		)	—			(.9		)
NET LOSS ATTRIBUTABLE TO ENSCO	$	(151.0	)	$	(30.4	)	$	2.9		$	(60.1	)	$	87.6		$	(151.0	)
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS																			$	(151.0	)	$	(30.4	)	$	2.9		$	(60.1	)	$	87.6		$	(151.0	)



	2018	2017
Floaters^(1)(2)(3)	22	19
Jackups⁽³⁾⁽⁴⁾	34	32
Under construction⁽¹⁾⁽⁵⁾	3	2
Held-for-sale⁽³⁾⁽⁶⁾	3	2
Total	62	55



	2019	2018
Floaters⁽¹⁾	26	22
Jackups^(2)(3)(4)	44	34
Other⁽⁵⁾	9	—
Under construction⁽³⁾	2	3
Held-for-sale^{(4) (6)}	—	3
Total Valaris	81	62

ARO⁽⁷⁾	7	—


⁽¹⁾	During the ~~third~~second quarter of ~~2017,~~2019, we ~~accepted delivery of ENSCO DS-10.~~added Rowan Relentless, Rowan Reliance, Rowan Resolute and Rowan Renaissance from the Rowan Transaction.


⁽³⁾	During the second quarter of 2019, we accepted the delivery of ENSCO 123.


⁽⁴⁾	During the first quarter of ~~2018,~~2019, we classified ENSCO ~~5005, ENSCO 81 and ENSCO 82 as held-for-sale. During the second quarter of 2018, we classified ENSCO 6001 and ENSCO 80~~97 as held-for-sale.


⁽⁴⁾⁽⁵⁾	During the ~~fourth~~second quarter of ~~2017,~~2019, we added ~~ENSCO 111, ENSCO 112, ENSCO 113, ENSCO 114 and ENSCO 115~~nine jackups that are leased to ARO from the ~~Merger.~~Rowan Transaction.


⁽⁵⁾⁽⁶⁾	During the ~~fourth~~third quarter of ~~2017,~~2018, we ~~added~~sold ENSCO ~~DS-13~~5005, ENSCO 6001 and ENSCO ~~DS-14 from~~80. During the ~~Merger, both~~second quarter of ~~which are under construction.~~2019, we sold ENSCO 97 and Gorilla IV.


⁽⁶⁾⁽⁷⁾	~~During~~Represents the ~~third quarter~~seven rigs owned by ARO, our 50% interest in which was obtained as a result of ~~2017, we sold ENSCO 52. During~~ the ~~second quarter of 2018, we sold ENSCO 7500, ENSCO 81 and ENSCO 82.~~Rowan Transaction.


⁽²⁾	Includes our two management services contracts and our nine rigs leased to ARO under bareboat charter contracts (two of which are expected to commence drilling operations during the third quarter of 2019).


	Cumulative Paid⁽¹⁾		Remaining 2018		2019		2020		Total⁽²⁾		Cumulative Paid⁽¹⁾		Remaining 2019		2020		2021		Total⁽²⁾
ENSCO 123	$	275.8	$	2.0	$	7.6	$	—	$	285.4	$	283.6	$	2.0	$	—	$	—	$	285.6
ENSCO DS-13⁽³⁾	—		—		83.9		—		83.9		—		83.9		—		—		83.9
ENSCO DS-14⁽³⁾	15.0		—		—		165.0		180.0		15.0		—		165.0		—		180.0
	$	290.8	$	2.0	$	91.5	$	165.0	$	549.3	$	298.6	$	85.9	$	165.0	$	—	$	549.5


⁽¹⁾	Cumulative paid represents the aggregate amount of contractual payments made from commencement of the construction agreement through June 30, ~~2018.~~2019. Contractual payments made by Atwood prior to the ~~Merger~~Atwood acquisition for ENSCO DS-13 and ENSCO DS-14 are excluded.


⁽²⁾	Total commitments are based on fixed-price shipyard construction contracts, exclusive of costs associated with commissioning, systems integration testing, project management, holding costs and interest.