Valaris Ltd

Previous wording

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. We currently own 53 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 35 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.

Current wording

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet. As of May 1, 2025, we own 49 rigs, including 13 drillships, one dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 34 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.

Previous wording

Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demands. In addition, demand for offshore drilling services has improved as evidenced by increased global utilization and day rates for offshore drilling rigs. Consequently, our outlook for the offshore drilling business is positive.

Current wording

Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demand. While demand for offshore drilling services has declined since early 2024, offshore production, particularly deepwater, is expected to play an important role in providing secure, reliable and affordable energy to meet the world’s energy needs.

Previous wording

Inflationary pressures remain elevated and have resulted in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. We expect that our costs will continue to rise in the near term and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations. Despite the inflationary trends, we continue to see recovery in our industry.

Current wording

Inflationary pressures have continued, resulting in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. Additionally, the weakening of the U.S. dollar against foreign currencies may increase costs in certain foreign jurisdictions in which we operate. We expect that our costs will continue to rise in the near term, particularly given the potential impact of increased tariffs on global trade, and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations.

Previous wording

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

Current wording

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

Previous wording

The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in equity in earnings of ARO in our Condensed Consolidated Statement of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

Current wording

The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in Equity in earnings of ARO in our Condensed Consolidated Statements of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 3 -Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

Previous wording

The following table summarizes our and ARO's contract backlog of business as of October 30, 2024 and February 15, 2024 (in millions):

Current wording

The following table summarizes our and 100% of ARO's contract backlog of business as of April 30, 2025 and February 18, 2025 (in millions):

Previous wording

(1)The decrease for Floaters is primarily due to revenues realized, partially offset by a multi-year contract award for VALARIS DS-17 offshore Brazil and two six-month contract extensions for VALARIS DS-9 offshore Angola, which resulted in incremental aggregate backlog of approximately $560.0 million.

Current wording

(1)The increase for Floaters is primarily due to a two-year contract award for VALARIS DS-10 offshore West Africa and a six-month contract extension for VALARIS DS-9 offshore Angola, which resulted in incremental aggregate backlog of approximately $391.0 million, partially offset by revenues realized.

Previous wording

(3)Other includes the backlog for our managed rig services and the bareboat charter backlog for the jackup rigs leased to ARO in order for ARO to fulfill certain of its drilling contracts with Saudi Aramco. The increase in Other is due to three-year contract extensions for our managed rigs, which resulted in incremental aggregate backlog of approximately $245.0 million, partially offset by revenues realized and a reduction of backlog of approximately $35.0 million attributable to the VALARIS 143 contract, which was terminated effective May 2024, and the VALARIS 147 and VALARIS 148 contracts which were terminated effective October 2024.

Current wording

(3)Other includes the backlog for our managed rig services and the bareboat charter backlog for the jackup rigs leased to ARO in order for ARO to fulfill certain of its drilling contracts with Saudi Aramco. The increase in Other is primarily due to five-year contract extensions for leased rigs VALARIS 116, VALARIS 140, VALARIS 141, VALARIS 146 and VALARIS 250, which resulted in incremental aggregate backlog of approximately $407.0 million, partially offset by revenues realized.

Previous wording

From a supply perspective, as of September 30, 2024, the number of benign environment floaters including stacked rigs declined by 41% to 166 from a peak of 281 in late 2014. Across the stacked drillship fleet and newbuild drillships remaining at South Korean shipyards, we believe there are only nine uncontracted drillships remaining that are likely reactivation candidates over the next few years, including VALARIS DS-11, VALARIS DS-13 and VALARIS DS-14. We anticipate that future floater demand growth will further reduce available drillship capacity. Also, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of floater newbuild construction for the foreseeable future.

Current wording

From a supply perspective, as of March 31, 2025, there were 159 benign environment floaters in the global fleet. Since the beginning of 2025, there have been six benign environment floaters retired, including three Valaris rigs, and we could see further rigs removed from the global floater fleet in response to the recent decline in global utilization. Also, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of floater newbuild construction for the foreseeable future.

Previous wording

In early 2024, Saudi Arabia announced that they plan to maintain maximum sustainable capacity at 12 million barrels per day. Since this announcement, Saudi Aramco has sent contract suspension notices to several offshore drillers to suspend its contracts, which included notice to ARO with respect to its drilling contracts for VALARIS 143, VALARIS 147 and VALARIS 148, for a total of 27 rigs, which represents 6% of the marketed jackup fleet. To date, eight of the 27 suspended rigs have been contracted in other regions. We believe that approximately half of these remaining suspended rigs are likely to be competitive in other higher-specification, benign environment regions and expect there to be sufficient incremental demand in these regions to absorb them in an orderly manner.

Current wording

Global jackup utilization and day rates increased for several years but started to moderate following Saudi Arabia's announcement in early 2024 that they plan to maintain maximum sustainable capacity at 12 million barrels per day. Since this announcement, Saudi Aramco has suspended contracts for 33 rigs, which represents 8% of the marketed jackup fleet, including VALARIS 143, VALARIS 147 and VALARIS 148. To date, 15 of the 33 suspended rigs have been contracted in other regions and one rig has been retired from the offshore drilling fleet. We believe that less than half of the remaining suspended rigs are likely to be competitive in other higher-specification, benign environment regions.

Previous wording

From a supply perspective, as of September 30, 2024, the number of jackups declined by 7% to 502 from a peak of 542 in early 2015. While the number of jackups has decreased less than floaters, 28% of the current jackup fleet is more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs. We believe there are only 13 newbuild jackups remaining at shipyards, of which nine are at Chinese shipyards, some of which are expected to be used locally in China.

Current wording

From a supply perspective, as of March 31, 2025, there were 502 jackups in the global fleet, with 29% of the current jackup fleet being more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or the length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs. We believe there are only 11 newbuild jackups remaining at shipyards, of which eight are at Chinese shipyards, some of which are expected to be used locally in China.

Previous wording

Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, as permitted under applicable SEC rules, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter ended September 30, 2024 (the "current quarter") to the immediately preceding fiscal quarter ended June 30, 2024 (the "preceding quarter"). We also continue to discuss any material changes in our results of operations for the nine months ended September 30, 2024 compared to the corresponding period of the preceding fiscal year (the "prior year period"), as required under the applicable SEC rules.

Current wording

Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, as permitted under applicable SEC rules, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter ended March 31, 2025 (the "current quarter") to the immediately preceding fiscal quarter ended December 31, 2024 (the "preceding quarter"). We also discuss any material changes in our results of operations for the three months ended March 31, 2025 compared to the corresponding period of the preceding fiscal year (the "prior year period"), as required under the applicable SEC rules.

Previous wording

Discrete income tax benefit for the nine months ended September 30, 2024 was $70.0 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, including the reversal of a liability associated with tax assessments received from the Luxembourg tax authorities in the second quarter of 2024 (see "Note 10 - Income Taxes" to our consolidated financial statements included in "Item 1. Financial Statements" for information on this matter), and the resolution of other prior period tax matters. Discrete income tax benefit for the prior year period was $39.5 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years and the resolution of other prior period tax matters. Excluding the aforementioned discrete tax items, income tax expense for the nine months ended September 30, 2024 and 2023 was $77.2 million and $47.1 million, respectively.

Current wording

The consolidated effective tax rate, excluding the impact of discrete tax items for the current quarter, was 15.1%. Discrete tax items for the current quarter were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis. See "Note 10 - Income Taxes" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information. Discrete income tax benefit for the preceding quarter was $15.8 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Excluding the aforementioned discrete tax items, income tax expense was $9.0 million for the preceding quarter.

Previous wording

The following table summarizes our Condensed Consolidated Results of Operations for the nine months ended September 30, 2024 and 2023 (in millions, except percentages):

Current wording

The following table summarizes our Condensed Consolidated Results of Operations for the three months ended March 31, 2025 and 2024 (in millions, except percentages):

Previous wording

Depreciation expense increased primarily due to new assets placed in service for certain rigs that underwent reactivation projects and capital upgrades.

Current wording

Depreciation expense increased primarily due to new assets placed in service since the prior year period, including those related to rigs that underwent reactivation projects and capital upgrades.

Previous wording

Discrete income tax expense for the current quarter was $0.5 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, partially offset by the resolution of prior period tax matters. Discrete income tax benefit for the preceding quarter was $63.9 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, including the reversal of a liability associated with tax assessments received from the Luxembourg tax authorities (see "Note 10 - Income Taxes" to our consolidated financial statements included in "Item 1. Financial Statements" for information on this matter), and the resolution of other prior period tax matters. Excluding the aforementioned discrete tax items, income tax expense was $23.8 million for the current quarter and $33.9 million for the preceding quarter.

Current wording

The consolidated effective tax rate, excluding the impact of discrete tax items for the current quarter, was 15.1%. Discrete tax items for the current quarter were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis. See "Note 10 - Income Taxes" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information. Discrete income tax benefit for the prior year period was $6.6 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, partially offset by the resolution of prior period tax matters. Excluding the aforementioned discrete tax items, income tax expense for the prior year period was $19.5 million.

Previous wording

(3)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco. During the first and second quarters of 2024, we leased VALARIS 108 and VALARIS 76, respectively, to ARO. During the second quarter of 2024, the VALARIS 143 contract with ARO was terminated and the rig is now preservation stacked.

Current wording

(2)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco. Since the first quarter of 2024, we leased VALARIS 76 to ARO and the lease contracts with ARO for VALARIS 143, VALARIS 147 and VALARIS 148 were terminated.

Previous wording

(4)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco, including Kingdom 1 and Kingdom 2, which were delivered in the fourth quarter of 2023 and second quarter of 2024, respectively.

Current wording

(3)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco. This table does not include Kingdom 3, a newbuild jackup that is under construction in the Middle East.

Previous wording

(5)Active fleet represents rigs that are not preservation stacked and includes rigs that are in the process of being reactivated.

Current wording

(4)Active fleet represents rigs that are not preservation stacked or classified as held for sale and includes rigs that are in the process of being reactivated.

Previous wording

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

Current wording

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

Previous wording

(3)Average daily revenue is derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable revenues, revenues earned during suspension periods, revenues attributable to amortization of drilling contract intangibles and lump-sum revenues and amortization thereof, by the aggregate number of operating days.

Current wording

(3)Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues), excluding contract termination fees, by the aggregate number of operating days.

Previous wording

Segment information for the current quarter and preceding quarter is as follows (in millions):

Current wording

Segment information for the current quarter, preceding quarter and prior year period is as follows (in millions):

Previous wording

Floater revenue remained relatively flat for the current quarter as compared to the preceding quarter, primarily due to the offsetting impacts of higher average daily revenue of $9.6 million and fewer operating days of $6.7 million. The increase in average daily revenue related primarily to certain rigs working under higher day rate contracts in the current quarter as compared to the preceding quarter, partially offset by a decrease of $4.3 million for mobilization revenue. The decrease in operating days was primarily due to the completion of contracts for VALARIS DPS-5 and VALARIS DS-10 during the quarter, partially offset by more operating days for VALARIS DS-7, which commenced a contract in late May after its reactivation.

Current wording

ARO revenue remained relatively flat for the current quarter as compared to the preceding quarter.

Previous wording

Other revenue remained flat in the current quarter as compared to the preceding quarter, primarily due to a $3.3 million increase in customer reimbursable revenue, which was largely offset by a $1.3 million decrease in revenue earned from lease agreements with ARO.

Current wording

Other revenue increased $3.4 million, or 10%, for the current quarter as compared to the preceding quarter, primarily due to a $3.8 million increase in revenue earned from lease agreements with ARO.

Previous wording

ARO revenue increased $13.3 million, or 4%, for the nine months ended September 30, 2024 compared to the prior year period, primarily due to $51.6 million of incremental revenue from Kingdom 1 and Kingdom 2, which commenced operations in November 2023 and August 2024, respectively, and VALARIS 108, which we began leasing to ARO during the first quarter of 2024. This increase was partially offset by a decrease of $21.5 million related to the contract termination for VALARIS 143 in May 2024 and contract suspensions for VALARIS 147 and VALARIS 148 in August 2024, as well as a decrease of $13.9 million from unplanned downtime in the nine months ended September 30, 2024.

Current wording

ARO revenue decreased $3.6 million, or 3%, for the current quarter compared to the prior year period, primarily driven by a decrease of $24.0 million related to the contract terminations for VALARIS 143, VALARIS 147 and VALARIS 148 in 2024. This decrease was partially offset by $21.8 million of incremental revenue from Kingdom 2, which commenced operations in August 2024, and VALARIS 108, which we began leasing to ARO during the first quarter of 2024.

Previous wording

ARO depreciation expense increased $13.4 million, or 29%, for the nine months ended September 30, 2024 compared to the prior year period, primarily due to the additions of Kingdom 1 and Kingdom 2 to the fleet.

Current wording

ARO depreciation expense increased $10.5 million, or 55%, for the current quarter compared to the prior year period, primarily due to the additions of Kingdom 1 and Kingdom 2 to the fleet.

Previous wording

ARO contract drilling expense remained relatively flat for the current quarter as compared to the preceding quarter, primarily due to lower bareboat charter lease expense, inclusive of certain adjustments, of $3.2 million as a result of the contract termination for VALARIS 143 in the preceding quarter and the suspensions for VALARIS 147 and VALARIS 148 in the current quarter, which was largely offset by higher personnel-related costs of $1.3 million and increased repairs and maintenance costs of $1.0 million in the current quarter.

Current wording

Other contract drilling expense remained flat for the current quarter compared to the prior year period.

Previous wording

Net foreign currency exchange losses increased $6.0 million from a net gain of $2.5 million in the preceding quarter to a net loss of $3.5 million in the current quarter, primarily driven by unfavorable exchange rate movements in Brazilian reals, euros, British pounds and Mexican pesos.

Current wording

Net foreign currency exchange losses were $5.2 million in the current quarter compared to $9.4 million gains in the preceding quarter, primarily driven by unfavorable exchange rate movements in Brazilian reals and euros.

Previous wording

Interest expense increased $15.5 million, or 33%, for the nine months ended September 30, 2024 compared to the prior year period, primarily due to higher interest expense of $25.7 million related to a higher principal debt balance in the nine months ended September 30, 2024. This increase was partially offset by higher capitalized interest of $10.2 million, primarily due to VALARIS DS-13 and VALARIS DS-14, which were delivered at the end of 2023.

Current wording

Interest expense increased $6.6 million, or 37%, for the current quarter compared to the prior year period, primarily due to lower capitalized interest for VALARIS DS-13 and VALARIS DS-14, which were delivered at the end of 2023 and mobilized to the shipyard in the prior year period.

Previous wording

We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from cash and cash equivalents and cash flows from operations. Additionally, we have liquidity available under our senior secured revolving credit agreement, which matures in 2028 (the "Credit Agreement"). We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures, from cash and cash equivalents, cash flows from operations, as well as cash to be received from maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO. We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture governing our Second Lien Notes, as defined below, dated as of April 19, 2023, (the "Indenture"), and the Credit Agreement contain covenants that limit our ability to incur additional indebtedness.

Current wording

We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from cash and cash equivalents and cash flows from operations. Additionally, we have liquidity available under our senior secured revolving credit agreement, which matures in 2028 (the "2028 Credit Agreement"). We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures, from cash and cash equivalents, cash flows from operations, as well as cash to be received from maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO. We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture governing our 2030 Second Lien Notes, as defined below, dated as of April 19, 2023, (the "Indenture"), and the 2028 Credit Agreement contain covenants that limit our ability to incur additional indebtedness.

Previous wording

Our cash and cash equivalents as of September 30, 2024 and December 31, 2023 were $379.3 million and $620.5 million, respectively. We have no debt principal payments due until 2030 and had $375.0 million available for borrowing, including up to $150.0 million for the issuance of letters of credit, under the Credit Agreement as of October 25, 2024. See below and "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the Credit Agreement and the 8.375% Second Lien Notes due 2030 (the "Second Lien Notes").

Current wording

Our cash and cash equivalents as of March 31, 2025 and December 31, 2024 were $441.4 million and $368.2 million, respectively. We have no debt principal payments due until 2030 and had $375.0 million available for borrowing, including up to $150.0 million for the issuance of letters of credit, under the 2028 Credit Agreement as of April 25, 2025. See below and "Note 8 -Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2028 Credit Agreement and the 8.375% Second Lien Notes due 2030.

Previous wording

On April 19, 2023, and August 21, 2023, the Company and Valaris Finance Company LLC ("Valaris Finance," together, the "Issuers") issued and sold $700.0 million and $400.0 million in aggregate principal amount of Secured Second Lien Notes, respectively (collectively referred to as the "Second Lien Notes"). The Second Lien Notes mature on April 30, 2030 and bear an interest rate of 8.375% per annum. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the Second Lien Notes.

Current wording

On April 19, 2023, and August 21, 2023, the Company and Valaris Finance Company LLC ("Valaris Finance") issued and sold $700.0 million and $400.0 million in aggregate principal amount of Secured Second Lien Notes, respectively (collectively referred to as the "2030 Second Lien Notes"). The 2030 Second Lien Notes mature on April 30, 2030 and bear an interest rate of 8.375% per annum. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2030 Second Lien Notes.

Previous wording

On April 3, 2023, the Company entered into the Credit Agreement, which provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the agreement of lenders to provide such additional commitments and the satisfaction of certain conditions, by an additional $200.0 million pursuant to the terms of the Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. Valaris Finance and certain other subsidiaries guarantee our obligations under the Credit Agreement, and the lenders have a first priority lien on the assets securing the Credit Agreement. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the Credit Agreement.

Current wording

On April 3, 2023, the Company entered into the 2028 Credit Agreement, which provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the agreement of lenders to provide such additional commitments and the satisfaction of certain conditions, by an additional $200.0 million pursuant to the terms of the 2028 Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2028 Credit Agreement.

Previous wording

During the nine months ended September 30, 2023, we generated $170.8 million of cash flow from operating activities primarily due to operating income for the period, the collection of $45.9 million for certain tax receivables and other changes in working capital. Our primary uses of cash were $233.1 million for the maintenance and upgrades of our drilling rigs, including reactivations.

Current wording

During the three months ended March 31, 2025, we generated $155.9 million of cash flow from operating activities primarily due to operating income for the period of $143.0 million and approximately$26.0 millionof tax refunds received from the Australian tax authority during the first quarter of 2025, partially offset by other changes in working capital. An additional source of cash was $14.0 million of cash proceeds related to the sale of VALARIS 75. Our primary uses of cash were $100.2 million for maintenance and upgrades of our drilling rigs.

Previous wording

During the nine months ended September 30, 2024, we generated $230.8 million of cash flow from operating activities primarily due to operating income for the period of $233.1 million and U.S. income tax refunds totaling $35.9 million received during the third quarter of 2024, partially offset by changes in working capital. Our primary uses of cash were $343.4 million for maintenance and upgrades of our drilling rigs, reactivation costs and costs to mobilize the recently delivered VALARIS DS-13 and VALARIS DS-14 to their stacking location.

Current wording

During the three months ended March 31, 2024, we generated $26.3 million of cash flow from operating activities primarily due to operating income for the quarter of $29.3 million and other changes in working capital. Our primary uses of cash were $151.3 million for maintenance and upgrades of our drilling rigs, including reactivation costs and costs to mobilize VALARIS DS-13 and VALARIS DS-14 to their stacking location.

Previous wording

We continue to take a disciplined approach to reactivations of our stacked rigs, only reactivating them to the active fleet for opportunities that provide meaningful returns. Generally, most of the reactivation cost will be operating expenses, recognized in the income statement, related to de-preservation activities, including reinstalling key pieces of equipment and crew costs. Capital expenditures during reactivations include rig modifications, equipment overhauls and any customer required capital upgrades. Reactivation costs incurred for the recently delivered VALARIS DS-13 and VALARIS DS-14 would be capitalized as such activities would be required to prepare the rigs for their intended use. We would generally expect to be compensated for any customer-specific enhancements.

Current wording

We completed our most recent rig reactivation project in the first half of 2024. Generally, most of the reactivation costs are operating expenses, recognized in the income statement, related to de-preservation activities, including reinstalling key pieces of equipment and crew costs. Capital expenditures during reactivations include rig modifications, equipment overhauls and any customer required capital upgrades. We are generally compensated for any customer-specific enhancements.

Previous wording

Based on our current projections, we expect capital expenditures during 2024 to approximate $465.0 million to $475.0 million primarily relating to maintenance and upgrade projects, including rig reactivation and associated contract-specific capital expenditures. We expect to receive aggregate upfront payments from our customers of approximately $55.0 million related to these projects. Depending on market conditions, contracting activity and future opportunities, we may reactivate additional rigs or make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs.

Current wording

Based on our current projections, we expect capital expenditures during 2025 to approximate $375.0 million to $415.0 million primarily relating to maintenance and upgrade projects, including contract-specific capital expenditures. Depending on market conditions, contracting activity and future opportunities, we may make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs.

Previous wording

We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses. The timing, size or success of any acquisition efforts and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with cash on hand and proceeds from debt and/or equity issuances and may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, restrictions to incur additional debt in the Indenture and the Credit Agreement, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

Current wording

We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses. The timing, size or success of any acquisition efforts and the associated potential capital commitments are unpredictable and uncertain. We may seek to fund all or part of any such efforts with cash on hand and proceeds from debt and/or equity issuances and may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, restrictions to incur additional debt in the Indenture and the 2028 Credit Agreement, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders.

Previous wording

We consider our investment in ARO to be a significant component of our investment portfolio and an integral part of our long-term capital resources. We expect to receive cash from ARO in the future both from the maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO.

Current wording

We expect to receive cash from ARO in the future both from the maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO.

Previous wording

The distribution of earnings to the joint-venture partners is at the discretion of the ARO board of managers, consisting of 50/50 membership of managers appointed by Saudi Aramco and managers appointed by us, with approval required by both shareholders. The timing and amount of any cash distributions to the joint venture partners cannot be predicted with certainty and will be influenced by various factors, including the liquidity position and long-term capital requirements of ARO. ARO has not made a cash distribution of earnings to its partners since its formation.

Current wording

The distribution of earnings to the joint-venture partners is at the discretion of the ARO board of managers, consisting of 50/50 membership of managers appointed by Saudi Aramco and managers appointed by us, with approval required by both shareholders. The timing and amount of any cash distributions to the joint venture partners cannot be predicted with certainty and will be influenced by various factors, including the liquidity position and long-term capital requirements of ARO. ARO has not made a cash distribution of earnings to its partners since its formation. ARO had cash and cash equivalents of $37.6 million as of March 31, 2025.