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. Our fleet of offshore drilling rigs is among the largest in the world and includes one of the highest specification ultra-deepwater fleets, as well as a leading premium jackup fleet. As of August 6, 2026, we own 43 rigs, including 13 drillships, one semisubmersible rig, 29 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. Our fleet of offshore drilling rigs is among the largest in the world and includes one of the highest specification ultra-deepwater fleets, as well as a leading premium jackup fleet. As of November 3, 2026, we own 41 rigs, including 13 drillships and 28 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

On February 9, 2026, Valaris and Transocean Ltd. ("Transocean"), entered into a Business Combination Agreement under which Transocean will acquire all of the issued and outstanding common shares of Valaris in exchange for shares of Transocean at an exchange ratio of 15.235 Transocean shares for each Valaris common share (the "Business Combination"). Upon completion and on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029, Transocean shareholders would own approximately 53% of the combined company, with Valaris shareholders owning the remaining 47%. The completion of the Business Combination is subject to customary closing conditions, including shareholder and regulatory approvals.

Current wording

On February 9, 2026, Valaris and Transocean Ltd. ("Transocean"), entered into a Business Combination Agreement under which Transocean will acquire all of the issued and outstanding common shares of Valaris in exchange for shares of Transocean at an exchange ratio of 15.235 Transocean shares for each Valaris common share (the "Business Combination"). Upon completion and on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029, Transocean shareholders would own approximately 53% of the combined company, with Valaris shareholders owning the remaining 47%. The completion of the Business Combination is subject to customary closing conditions, including shareholder approvals. All required regulatory approvals have been obtained and applicable regulatory waiting periods are expected to expire or terminate.

Previous wording

The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics, geopolitical factors and customer capital allocation decisions. Periods of oil oversupply generally place downward pressure on commodity prices, while periods of undersupply can result in higher and more volatile oil prices, influencing investment decisions across the upstream sector. While the oil market began the year in a period of oversupply, the on-going conflicts in the Middle East have reduced supply and increased uncertainty and volatility in global energy markets. The conflicts have also reinforced the strategic importance of energy security and market participants generally expect the global oil and gas market to tighten over the next few years, driven by past underinvestment in upstream development and slowing production growth from non-OPEC sources. Industry studies, including those published by the International Energy Agency and the U.S. Energy Information Administration, indicate that substantial upstream investment is required to offset natural field declines and maintain existing production levels.

Current wording

The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics, geopolitical factors and customer capital allocation decisions. Periods of oil oversupply generally place downward pressure on commodity prices, while periods of undersupply can result in higher and more volatile oil prices, influencing investment decisions across the upstream sector. While the oil market began the year in a period of oversupply, the ongoing conflicts in the Middle East have reduced supply and increased uncertainty and volatility in global energy markets. The conflicts have also reinforced the strategic importance of energy security and market participants generally expect the global oil and gas market to tighten over the next few years, driven by past underinvestment in upstream development and slowing production growth from non-OPEC sources. Industry studies, including those published by the International Energy Agency and the U.S. Energy Information Administration, indicate that substantial upstream investment is required to offset natural field declines and maintain existing production levels.

Previous wording

Inflationary pressures impact our cost base, 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.

Current wording

Inflationary pressures impact our cost base, 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 thehigher oil prices and 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 operations and assets located in the Middle East have recently been subject to elevated geopolitical risk due to ongoing conflicts and military activity in the region. As a result, our operating income was negatively impacted by approximately $30.0 million and $38.0 million for the three and six months ended June 30, 2026, respectively, primarily associated with incremental costs to maintain insurance coverage for war-related risks for jackups that we operate in the region (approximately $11.0 million and $19.0 million for the three and six months ended June 30, 2026, respectively) and incremental costs and lower revenues associated with project delays for VALARIS 250 and VALARIS 116 (approximately $14.0 million for both the three and six months ended June 30, 2026), which were undergoing planned maintenance and contract preparation projects in shipyards located in the region during the first half of 2026. Based on information currently available, we expect these adverse impacts to moderate in the second half of 2026 as VALARIS 250 recommenced its bareboat charter contract in July and VALARIS 116 is expected to recommence its bareboat charter in the third quarter. In addition, insurance costs to maintain war-related coverage are expected to be lower than those incurred in the first half of the year primarily due to the sale of VALARIS 104 and lower premiums from securing longer term coverage.

Current wording

Our operations and assets located in the Middle East have been subject to elevated geopolitical risk due to ongoing conflicts and military activity in the region. As a result, our operating income was negatively impacted by approximately $24.0 million and $62.0 million for the three and nine months ended September 30, 2026, respectively. These impacts primarily reflected incremental costs and lower revenues associated with project delays for VALARIS 250 and VALARIS 116 (approximately $15.0 million and $29.0 million for the three and nine months ended September 30, 2026, respectively), which were undergoing planned maintenance and contract preparation projects in shipyards located in the region beginning in late 2025, and incremental costs to maintain insurance coverage for war-related risks for jackups that we operate in the region (approximately $7.0 million and $26.0 million for the three and nine months ended September 30, 2026, respectively). The adverse impacts began to moderate during the third quarter of 2026 as VALARIS 250 and VALARIS 116 recommenced their bareboat charter contracts in July and September, respectively.

Previous wording

The geopolitical environment in the Middle East remains volatile, and if the ongoing conflicts persist or escalate, including an expansion of hostilities, the negative impact on our operating income could be significantly higher than amounts incurred to date and could also adversely affect the operating performance of ARO. An escalation of conflict could result in additional military actions, economic sanctions or other governmental measures, including disruptions to regional ports or further restrictions on maritime traffic through key waterways such as the Strait of Hormuz. Continued disruptions or closures affecting the Strait of Hormuz, through which a substantial portion of the region’s maritime traffic and energy‑related logistics transit, could materially affect our ability, and that of ARO, to mobilize assets, transport personnel and supplies, or perform drilling and related services in a timely and cost‑effective manner.

Current wording

The geopolitical environment in the Middle East remains volatile, and if the ongoing conflicts persist or escalate, including a further expansion of hostilities, the negative impact on our operating income could be significantly higher than amounts incurred to date and could also adversely affect the operating performance of ARO. A further escalation of conflict could result in additional military actions, economic sanctions or other governmental measures, including attacks on energy infrastructure and disruptions to regional ports or further restrictions on maritime traffic through key waterways such as the Strait of Hormuz. Continued disruptions or closures affecting ports or key waterways, through which a substantial portion of the region’s maritime traffic and energy‑related logistics transit, could materially affect our ability, and that of ARO, to mobilize assets, transport personnel and supplies, or perform drilling and related services in a timely and cost‑effective manner.

Previous wording

(1)The decrease for Floaters is primarily due to revenues realized, partially offset by a contract extension for VALARIS DS-4, which resulted in incremental aggregate backlog of approximately $426.0 million.

Current wording

(1)The decrease for Floaters is primarily due to revenues realized, partially offset by a contract extension for VALARIS DS-4, a two-well contract for VALARIS DS-18 and a one-well contract extension for VALARIS DS-12, which resulted in incremental aggregate backlog of approximately $545.0 million.

Previous wording

(2)The increase for Jackups is primarily due to a 41-well contract for VALARIS 248, with an estimated duration of approximately three years, and a two-year contract extension for VALARIS 115, which resulted in incremental aggregate backlog of approximately $140.0 million and $78.0 million, respectively, partially offset by revenues realized.

Current wording

(2)The increase for Jackups is primarily due to various contract awards and extensions executed, which resulted in incremental aggregate backlog of approximately $445.0 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.

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 primarily relates to the execution of three-year service contracts for both of our managed rigs, which resulted in incremental aggregate backlog of approximately $290.0 million.

Previous wording

Within the floater segment, utilization for the global marketed drillship fleet was approximately 88% as of June 30, 2026 and included 11 drillships across the industry which were not working at quarter-end due to gaps between contracts. Market conditions are expected to improve as these rigs commence new contracts during 2026 or in early 2027, including two Valaris drillships that are scheduled to return to work this year following idle periods between contracts. Some customers continue to favor more technically capable and efficient assets, particularly to support complex deepwater developments. Seventh-generation drillships may be preferred and have achieved higher utilization and stronger day rates relative to older assets, a trend that is expected to continue. We believe we are well positioned with 12 of 13 of our drillships being seventh-generation units, although we continue to face competition from other types of floaters, including those of older generations.

Current wording

Within the floater segment, utilization for the global marketed drillship fleet was approximately 90% as of September 30, 2026 and included 10 drillships across the industry that were not working at quarter-end due to gaps between contracts. Market conditions are expected to continue to improve as these rigs commence new contracts with nine of these 10 rigs scheduled to return to work during 2026 or in early 2027, including VALARIS DS-18. Some customers continue to favor more technically capable and efficient assets, particularly to support complex deepwater developments. Seventh-generation drillships may be preferred and have achieved higher utilization and stronger day rates relative to older assets, a trend that is expected to continue. We believe we are well positioned with 12 of 13 of our drillships being seventh-generation units, although we continue to face competition from other types of floaters, including those of older generations.

Previous wording

Utilization for benign environment semisubmersibles, such as the remaining semisubmersible in our active fleet, continues to be lower than for drillships. In response to this environment, we retired three benign environment semisubmersibles in 2025 and sold VALARIS DPS-1 for recycling in April 2026.

Current wording

Utilization for benign environment semisubmersibles continues to be lower than for drillships. In response to these market conditions, we retired three benign environment semisubmersibles in 2025 and sold VALARIS DPS-1 and VALARIS MS-1 for recycling in April and September 2026, respectively. As a result, we no longer have any semisubmersible rigs in our floater fleet.

Previous wording

From a supply perspective, rig attrition over the past decade has resulted in a reduced global floater fleet to meet customer demand. The supply of benign environment floaters, such as those in our fleet, has decreased by more than 45% from a peak of approximately 280 rigs in 2014 to 150 rigs as of June 30, 2026. This decrease is primarily attributable to rig retirements, including 15 benign environment floaters retired since the beginning of 2025. Further, given the expected high construction cost and lack of shipyard capacity, we do not believe that current market conditions are supportive of floater newbuild construction.

Current wording

From a supply perspective, rig attrition over the past decade has resulted in a reduced global floater fleet to meet customer demand. The supply of benign environment floaters, such as those in our fleet, has decreased by more than 45% from a peak of approximately 280 rigs in 2014 to 148 rigs as of September 30, 2026. This decrease is primarily attributable to rig retirements, including 17 benign environment floaters retired since the beginning of 2025. Further, given the expected high construction cost and lack of shipyard capacity, we do not believe that current market conditions are supportive of floater newbuild construction.

Previous wording

Global jackup utilization remained solid at approximately 88% as of June 30, 2026, driven primarily by demand from national oil companies focused on energy security and infrastructure development. For example, seven previously suspended jackups have resumed operations with Saudi Aramco so far this year, with two additional rigs expected to recommence operations during the remainder of 2026. In addition, there are other ongoing multi-rig tenders in the Middle East, which should further support the supply and demand balance of the global jackup fleet. Meanwhile, ongoing conflicts in the Middle East have disrupted offshore operations in certain parts of the region, and although activity has largely resumed, uncertainty remains regarding when operating conditions will fully normalize, which may impact the timing of work programs associated with these tenders.

Current wording

Global jackup utilization remained solid at approximately 90% as of September 30, 2026, driven primarily by demand from national oil companies focused on energy security and infrastructure development. However, ongoing conflicts in the Middle East have disrupted offshore operations in certain parts of the region and uncertainty remains regarding when operating conditions will fully normalize, which may impact the timing of future work programs in the region.

Previous wording

From a supply perspective, as of June 30, 2026, there were 490 jackups in the global fleet, with 28% 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.

Current wording

From a supply perspective, as of September 30, 2026, there were 489 jackups in the global fleet, with 28% 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.

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 June 30, 2026 (the "current quarter") to the immediately preceding fiscal quarter ended March 31, 2026 (the "preceding quarter"). We also discuss any material changes in our results of operations for the six months ended June 30, 2026 (the "current year period") 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 September 30, 2026 (the "current quarter") to the immediately preceding fiscal quarter ended June 30, 2026 (the "preceding quarter"). We also discuss any material changes in our results of operations for the nine months ended September 30, 2026 (the "current year period") compared to the corresponding period of the preceding fiscal year (the "prior year period"), as required under the applicable SEC rules.

Previous wording

Revenues increased in the current quarter compared to the preceding quarter, partially driven by incremental revenues of $84.4 million from VALARIS DS-17, VALARIS DS-12 and VALARIS DS-10, all of which commenced new contracts since late in the first quarter of 2026. For the remaining fleet, we had a net decrease of $4.6 million from fewer operating days compared to the preceding quarter, largely attributable to downtime for repairs, scheduled maintenance and contract upgrades for certain rigs during the current quarter.

Current wording

Revenues increased in the current quarter compared to the preceding quarter, partially driven by incremental revenues of $52.3 million for VALARIS DS-10 and VALARIS DS-15, which completed shipyard projects and commenced new contracts in June and September, respectively. For the remaining fleet, we had a $14.7 million increase in average daily revenues, primarily driven by VALARIS DS-9, which commenced a new contract at a higher day rate in the current quarter, partially offset by a $11.1 million net decrease from fewer operating days relative to the preceding quarter, largely attributable to downtime for repairs and scheduled maintenance for various rigs in the current quarter, including VALARIS 249 which was in the shipyard for scheduled maintenance ahead of its next contract.

Previous wording

Merger and integration expenses were $11.4 million for the current quarter and primarily related to professional fees incurred in connection with the pending Business Combination.

Current wording

Merger and integration expenses increased in the current quarter compared to the preceding quarter, primarily due to higher professional fees incurred in connection with the pending Business Combination.

Previous wording

Equity in earnings of ARO increased compared to the preceding quarter, primarily due to the recognition of $14.3 million in additional income, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 20, 2026 (our "Annual Report"). See "Note 3 -Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO.

Current wording

Equity in earnings (losses) of ARO decreased compared to the preceding quarter, primarily due to the non-recurring recognition of $14.3 million in additional income in the preceding quarter, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 20, 2026 (our "Annual Report"). See "Note 3 -Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO.

Previous wording

The consolidated effective tax rate, excluding the impact of discrete tax items, for the current quarter and preceding quarter was 19.8% and 25.4%, respectively. Discrete tax items during the current quarter were primarily related to the resolution of prior period matters. Discrete tax items during the preceding quarter were primarily related to the resolution of prior period matters, partially offset by changes in liabilities for unrecognized tax benefits with tax positions taken in prior years.

Current wording

The consolidated effective tax rates, excluding the impact of discrete tax items, for the current quarter and preceding quarter were 20.1% and 19.8%, respectively. Discrete tax items during the current quarter were primarily related to rig sales, partially offset by the resolution of prior period tax matters. Discrete tax items during the preceding quarter were primarily related to the resolution of prior period tax matters.

Previous wording

The following table summarizes our Condensed Consolidated Results of Operations for the six months ended June 30, 2026 and 2025 (in millions, except percentages):

Current wording

The following table summarizes our Condensed Consolidated Results of Operations for the nine months ended September 30, 2026 and 2025 (in millions, except percentages):

Previous wording

Revenues decreased compared to the prior year period, partially driven by lower operating revenues of $81.0 million for VALARIS 247 and VALARIS DPS-1, which completed their contracts and were sold since the end of the prior year period. For the remaining fleet, we had a net decrease of $181.4 million from fewer operating days, largely attributable to certain floaters which were either preparing for contracts or warm stacked between contracts during the current year period. These decreases were partially offset by a net increase of $37.3 million from higher average daily revenues as a result of various rigs working under higher day rate contracts compared to the prior year period.

Current wording

Revenues decreased compared to the prior year period, partially driven by lower operating revenues of $163.9 million for VALARIS 247, VALARIS DPS-1 and VALARIS MS-1, which completed their contracts in the second half of 2025 and were subsequently sold in August 2025, April 2026 and September 2026, respectively. For the remaining fleet, we had a net decrease of $116.7 million from fewer operating days, primarily attributable to certain floaters which were either preparing for contracts or warm stacked between contracts during the current year period. These decreases were partially offset by a net increase of $59.1 million from higher average daily revenues as a result of various rigs working under higher day rate contracts compared to the prior year period.

Previous wording

Contract drilling expense decreased primarily due to lower operating costs of $54.3 million for rigs which have been sold and $19.9 million of lower personnel-related costs for the remaining fleet, largely driven by rigs which were warm stacked or preparing for contracts during the current year period. These decreases were partially offset by higher repair and maintenance costs of $36.4 million, primarily attributable to various rigs which were undergoing scheduled maintenance and upgrade projects and/or repairs, and a $18.0 million increase in insurance expenses to maintain coverage for war-related risks for certain rigs within our Jackups and Other fleets which are located in the Middle East. There was also a net $5.4 million increase attributable to non-recurring items comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020.

Current wording

Contract drilling expense remained relatively flat compared to the prior year period, primarily due to higher repair and maintenance costs of $67.3 million, largely attributable to various rigs which were undergoing scheduled maintenance and upgrade projects and/or repairs in the current year period, and a $23.0 million increase in insurance expenses primarily to maintain coverage for war-related risks for certain rigs within our Jackups and Other fleets which are located in the Middle East. Further contributing to the increase were $7.3 million from higher onshore support costs incurred in the current year period, partially driven by higher compensation costs related to our long-term incentive plans, and $3.8 million from higher amortization of mobilization costs as a result of various rigs mobilizing and commencing new contracts since the end of the prior year period. There was also a net $5.4 million increase attributable to non-recurring items, comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020. These increases were partially offset by lower operating costs of $103.8 million for rigs which have been sold.

Previous wording

General and administrative expense increased primarily due to $3.8 million of higher professional fees and $3.4 million of higher compensation costs related to our long-term incentive plans compared to the prior year period.

Current wording

General and administrative expense increased primarily due to $5.2 million of higher compensation costs related to our long-term incentive plans and $1.3 million of higher professional fees compared to the prior year period.

Previous wording

Merger and integration expenses were $25.0 million for the six months ended June 30, 2026 and primarily related to professional fees incurred in connection with the pending Business Combination.

Current wording

Merger and integration expenses were $40.5 million for the nine months ended September 30, 2026 primarily due to professional fees incurred in connection with the pending Business Combination.

Previous wording

Other operating (income) loss includes non-cash losses on impairments and related gains on remeasurements of our assets which are classified as held for sale. In connection with retirement and sale of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (collectively, the "Retired Semis") in 2025, we recognized a non-cash loss on impairment of $7.8 million during the prior year period. During the first quarter of 2026, we reassessed the fair value less costs to sell for VALARIS DPS-1 by utilizing a preliminary sales agreement and recognized a gain on remeasurement of $2.8 million. VALARIS DPS-1 was sold in April 2026 and no additional gain or loss was recognized upon completion of the sale. See "Note 5 -Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis and VALARIS DPS-1.

Current wording

Other operating loss, net, includes non-cash losses on impairments and related gains on remeasurements of our assets which are classified as held for sale. During the current year period, we recognized a net $0.2 million other operating loss relating to the sales of VALARIS MS-1 and VALARIS DPS-1. In connection with retirement and sale of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (collectively, the "Retired Semis") in 2025, we recognized a non-cash loss on impairment of $7.8 million during the prior year period. See "Note 5 -Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis, VALARIS DPS-1 and VALARIS MS-1.

Previous wording

Equity in earnings of ARO increased compared to the prior year period, primarily due to the recognition of $14.3 million additional income, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our Annual Report. See "Note 3 -Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO.

Current wording

Equity in earnings of ARO increased compared to the prior year period, primarily due to the recognition of $14.3 million of additional income, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our Annual Report. See "Note 3 -Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO.

Previous wording

The consolidated effective tax rate, excluding the impact of discrete tax items, for the six months ended June 30, 2026 and prior year period was 21.7% and 15.2%, respectively. Discrete tax items during the six months ended June 30, 2026 were primarily related to the resolution of prior period matters. Discrete tax items during the prior year period were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis.

Current wording

The consolidated effective tax rates, excluding the impact of discrete tax items, for the nine months ended September 30, 2026 and prior year period were 21.1% and 14.8%, respectively. Discrete tax items during the nine months ended September 30, 2026 were primarily related to rig sales, partially offset by the resolution of prior period tax matters. Discrete tax items during the prior year period were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis.

Previous wording

(1)During the second quarter of 2026, we sold VALARIS DPS-1 for recycling.

Current wording

(1)During the second and third quarter of 2026, we sold VALARIS DPS-1 and VALARIS MS-1, respectively, for recycling.

Previous wording

(2)During the second quarter of 2026, we sold VALARIS 104. During the second half of 2025, we sold VALARIS 247, VALARIS 102 and VALARIS 145.

Current wording

(2)During the second and third quarter of 2026, we sold VALARIS 104 and VALARIS 109, respectively. During the fourth quarter of 2025, we sold VALARIS 102 and VALARIS 145.

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.

Current wording

(4)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.

Previous wording

(4)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 and Kingdom 4, which are newbuild jackups that are under construction in the Middle East.

Current wording

(5)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco. This table does not include four ARO newbuild jackups — two that are under construction in the Middle East and two that were ordered in August 2026.

Previous wording

(5)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.

Current wording

(6)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

(6)During the fourth quarter of 2025, we classified VALARIS DPS-1 as held for sale, removing it from the active fleet. The rig was sold in the second quarter of 2026.

Current wording

(7)During the fourth quarter of 2025, we classified VALARIS DPS-1 as held for sale, removing it from the active fleet. The rig was sold in the second quarter of 2026. During the third quarter of 2026, we sold VALARIS MS-1.

Previous wording

ARO contract drilling expense decreased $3.5 million, or 5%, for the current quarter compared to the preceding quarter primarily due to an aggregate $15.4 million of adjustments recorded by ARO in connection with the current quarter finalization of its 2025 financial statements. This decrease was partially offset by a $7.1 million increase in repair and maintenance costs for rigs which were in the shipyard for scheduled projects and a $4.7 million increase in personnel-related costs.

Current wording

ARO contract drilling expense increased $20.1 million, or 28%, for the current quarter compared to the preceding quarter primarily due to an aggregate $15.4 million of non-recurring adjustments which reduced expense in the preceding quarter that were recorded by ARO in connection with the finalization of its 2025 financial statements during the preceding quarter and $6.2 million of increased bareboat charter expenses for VALARIS 250 and VALARIS 116 during the current quarter.

Previous wording

Segment information for the six months ended June 30, 2026 and 2025 is as follows (in millions):

Current wording

Segment information for the nine months ended September 30, 2026 and 2025 is as follows (in millions):

Previous wording

Floater revenues decreased $204.1 million, or 30%, during the six months ended June 30, 2026 compared to the prior year period, partially driven by lower operating revenues of $36.3 million for VALARIS DPS-1, which completed its contract and was sold for recycling since the end of the prior year period. For the remaining fleet, we had a net decrease of $188.3 million from fewer operating days, largely attributable to various rigs which were either preparing for contracts or warm stacked between contracts during the current year period, partially offset by an increase of $20.4 million from higher average daily revenues for various drillships which were operating under higher day rate contracts relative to the prior year period.

Current wording

Floater revenues decreased $151.1 million, or 16%, during the nine months ended September 30, 2026 compared to the prior year period, partially driven by lower operating revenues of $112.3 million for VALARIS DPS-1 and VALARIS MS-1, which completed their contracts and were sold for recycling since the end of the prior year period. For the remaining fleet, we had a net decrease of $76.6 million from fewer operating days, largely attributable to various rigs which were either preparing for contracts or warm stacked between contracts during the current year period, partially offset by a net increase of $45.6 million from higher average daily revenues for various drillships which were operating under higher day rate contracts relative to the prior year period.

Previous wording

Floater contract drilling expense decreased $61.8 million, or 16%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to lower operating costs of $36.5 million for rigs which have been sold since the prior year period. For the remaining fleet, there was a $33.6 million decrease from lower personnel-related costs, largely driven by rigs that were warm-stacked or preparing for contracts during the current year period. These decreases were partially offset by a $17.7 million increase in repair and maintenance costs, primarily attributable to VALARIS DS-10 and VALARIS DS-17, which were undergoing scheduled maintenance and upgrade projects during the current year period. Further contributing to the offsetting increase was a net $5.4 million increase attributable to non-recurring items, comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with the execution of a favorable settlement resulting in the collection of outstanding customer invoices from 2020.

Current wording

Floater contract drilling expense decreased $60.7 million, or 11%, during the nine months ended September 30, 2026 compared to the prior year period, primarily due to lower operating costs of $81.3 million for rigs which have been sold since the prior year period. For the remaining fleet, there were lower personnel-related costs of $11.1 million, largely driven by rigs that were warm-stacked or preparing for contracts during the current year period, and lower amortized mobilization costs of $4.0 million. These decreases were partially offset by a $32.1 million increase in repair and maintenance costs, primarily attributable to rigs which were undergoing scheduled maintenance and upgrade projects during the current year period. Further contributing to the offsetting increase was a net $5.4 million increase attributable to non-recurring items, comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with the execution of a favorable settlement resulting in the collection of outstanding customer invoices from 2020.

Previous wording

Other operating (income) loss includes a non-cash loss on impairment of $7.8 million in the prior year period in connection with the retirement of the Retired Semis and a gain on remeasurement of $2.8 million in the six months ended June 30, 2026 related to VALARIS DPS-1, which was previously classified as held for sale and was subsequently sold in April 2026 for recycling. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis and VALARIS DPS-1.

Current wording

Other operating loss, net, for the current year period is comprised of a non-cash loss on impairment of $3.0 million related to the retirement and sale of VALARIS MS-1 for recycling in September 2026 and a gain on remeasurement of VALARIS DPS-1 (which was classified as held for sale during the first quarter of 2026) of $2.8 million during the first quarter of 2026. For the prior year period, other operating loss includes a $7.8 million non-cash loss on impairment recognized in connection with retirement and sale of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (collectively, the "Retired Semis") in 2025. See "Note 5 -Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis, VALARIS DPS-1 and VALARIS MS-1.

Previous wording

Jackup revenues decreased $18.7 million, or 5%, during the six months ended June 30, 2026 compared to the prior year period, largely driven by lower operating revenues of $44.7 million for VALARIS 247, which completed its contract and was sold during the third quarter of 2025. This decrease was partially offset by a net increase of $23.1 million from more operating days for the remaining jackup fleet, largely attributable to VALARIS 144, which was mobilizing to Angola in the prior year period ahead of commencing its current contract in April 2025.

Current wording

Jackup revenues decreased $64.2 million, or 10%, during the nine months ended September 30, 2026 compared to the prior year period, largely driven by lower operating revenues of $51.6 million for VALARIS 247, which completed its contract and was sold during the third quarter of 2025. For the remaining fleet, we had a net decrease of $13.7 million from average daily revenues, primarily due to certain jackups in the North Sea providing lower day rate accommodation services during the current year period.

Previous wording

Jackup contract drilling expense increased $31.7 million, or 13%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to $13.8 million of incremental insurance expenses to maintain coverage for war-related risks for certain rigs which are located in the Middle East, a $12.9 million increase in personnel-related costs, partially driven by incremental operating days for VALARIS 144 and wage increases in certain regions, and a $11.1 million increase in mobilization costs, largely driven by rigs which mobilized for new contracts during the current year period. Further contributing to the increase were higher repair and maintenance costs of $9.3 million, largely attributable to scheduled maintenance for VALARIS 117 and unplanned leg repairs for VALARIS 106 during the current year period. These increases were partially offset by lower operating costs of $17.8 million for VALARIS 247.

Current wording

Jackup contract drilling expense increased $36.1 million, or 10%, during the nine months ended September 30, 2026 compared to the prior year period, primarily due to $22.6 million of higher repair and maintenance costs, largely attributable to scheduled maintenance for VALARIS 117 and VALARIS 249 and unplanned leg repairs for VALARIS 106, and $19.0 million of incremental insurance expenses to maintain coverage for war-related risks for certain rigs which are located in the Middle East. Further contributing to the increase were $9.6 million of higher mobilization costs, primarily due to the mobilization of VALARIS 106 to the shipyard and higher amortized mobilization costs for other rigs during the current year period, and $8.3 million of higher personnel-related costs, partially driven by wage increases in certain regions. These increases were partially offset by lower operating costs of $22.5 million for VALARIS 247.