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What changed in Valaris Ltd's 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Valaris Ltd's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+393 added−388 removedSource: 10-K (2026-02-20) vs 10-K (2025-02-20)

Top changes in Valaris Ltd's 2025 10-K

393 paragraphs added · 388 removed · 277 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

36 edited+18 added−12 removed45 unchanged
Biggest changeRisks Related to Our Business, Operations, Financing Arrangements and Market Conditions • The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production, which can be significantly affected by volatile oil and natural gas prices. • The offshore contract drilling industry is highly competitive and cyclical. • Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future. • Our business will be materially adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected. • Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities. • The loss of a significant customer or customer contract, as well as customer consolidation and changes to customer strategy, could materially adversely affect our business. • Our long-term contracts are subject to the risk of cost increases, which could adversely affect our profitability. • Our network and systems, including rig operating systems and critical data, are subject to cybersecurity risks and technical disruptions. • Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows. • We make significant expenditures to meet customer requirements, maintain our fleet to comply with laws and the applicable regulations and standards of governmental authorities and organizations, or to expand our fleet, and we may be required to make significant expenditures to maintain our competitiveness. • Failure to recruit and retain skilled personnel could adversely affect our business. • Our use of a shared service center creates risks relating to the processing of transactions and recording of financial information. • AI presents risks and challenges that can impact our business. • We may not realize the expected benefits of our ARO joint venture. • Joint venture investments could be adversely affected by our joint venture partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners. • Our business involves operating hazards, and our insurance and indemnities from our customers may not be adequate to cover any potential losses. • Geopolitical events and violence could materially adversely affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance. • Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers. 14 • The impact and effects of public health crises, pandemics and epidemics could have a material adverse effect on our business, financial condition and results of operations. • Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility with regard to the management of our personnel. • Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows. • Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues. • Our ability to pay our operating and capital expenses and make payments due on our debt depends on many factors beyond our control. • The agreements governing our debt, including the Indenture and the Credit Agreement (as each are defined herein), contain various covenants that impose restrictions on us and certain of our subsidiaries. • We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets or other strategic transactions. • The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute the holders of our Common Shares.
Biggest changeRisks Related to Our Business, Operations, Financing Arrangements and Market Conditions • The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production, which can be significantly affected by volatile oil and natural gas prices. • The offshore contract drilling industry is highly competitive and cyclical. • Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future. • Our business will be materially adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected. • Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities. • The loss of a significant customer or customer contract, as well as customer consolidation and changes to customer strategy, could materially adversely affect our business. • Our long-term contracts are subject to the risk of cost increases. • Our network and systems are subject to cybersecurity risks and technical disruptions. • Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns. • We make significant expenditures for a variety of reasons, including to maintain our competitiveness. • Failure to recruit and retain skilled personnel could adversely affect our business. • Our use of a shared service center creates risks relating to the processing of transactions and recording of financial information. • AI presents risks and challenges that can impact our business. • We may not realize the expected benefits of our ARO joint venture, and joint venture investments could be adversely affected by our joint venture partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners. • Our business involves operating hazards, and our insurance and indemnities from our customers may not be adequate to cover any potential losses. • Geopolitical events and violence could materially adversely affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance. 15 • Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers. • Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility with regard to the management of our personnel. • Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect us. • Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues. • Our ability to pay our operating and capital expenses and make payments due on our debt depends on many factors beyond our control. • The agreements governing our debt contain various covenants that impose restrictions on us and certain of our subsidiaries. • We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets, including our drilling rigs, or other strategic transactions. • The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute the holders of our Common Shares.
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.
Under day rate contracts, we provide an integrated drilling service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig.
Internal Revenue Service (“IRS”) may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes. • Governments may pass laws that subject us to additional taxation or may challenge our tax positions. • Our consolidated effective income tax rate may vary substantially over time. • We are subject to litigation that could have a material adverse effect on us. • We are a Bermuda company, and it may be difficult enforcing judgments against us, our directors and officers. • Our bye-laws restrict shareholders from bringing legal action against our officers and directors. • Provisions in our bye-laws could delay or prevent a change in control of our company. • Legislation enacted in Bermuda as to Economic Substance may affect our operations. • Our business could be affected as a result of activist investors.
Internal Revenue Service (“IRS”) may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes. • Governments may pass laws that subject us to additional taxation or may challenge our tax positions. • Our consolidated effective income tax rate may vary substantially over time. • We are subject to litigation that could have a material adverse effect on us. • We are a Bermuda company, and it may be difficult enforcing judgments against us, our directors and officers. • Our bye-laws restrict shareholders from bringing legal action against our officers and directors and provisions in our bye-laws could delay or prevent a change in control of our company. • Legislation enacted in Bermuda as to Economic Substance may affect our business. • Our business could be affected as a result of activist investors.
Our EAP provides access to counselors and other mental health professionals as well as discounts to fitness centers, financial guidance and other benefits in support of our overall commitment to maintain a healthy workforce. 10 Feedback from our employees plays a key role in creating an agile, collaborative and trustworthy culture.
Our EAP provides access to counselors and other mental health professionals as well as discounts to fitness centers, financial guidance and other benefits in support of our overall commitment to maintain a healthy workforce. Feedback from our employees plays a key role in creating an agile, collaborative and trustworthy culture.
Our contracts generally provide that, in the event of any such spill from our rigs, we are also responsible for the related fines and penalties. The above description of our insurance program and the indemnification provisions of our drilling contracts is only a summary as of the date hereof and is general in nature.
Our contracts generally provide that, in the event of any such spill from our rigs, we are also responsible for the related fines and penalties. 9 The above description of our insurance program and the indemnification provisions of our drilling contracts is only a summary as of the date hereof and is general in nature.
Risk Factors - The success of our business depends on the level of activity in offshore oil and natural gas exploration, which can be significantly affected by volatile oil and natural gas prices. ” Our drilling contracts are negotiated with our customers, and most contracts are awarded following competitive bidding.
Risk Factors - The success of our business depends on the level of activity in offshore oil and natural gas exploration, which can be significantly affected by volatile oil and natural gas prices. ” 7 Our drilling contracts are negotiated with our customers, and most contracts are awarded following competitive bidding.
He received an MBA in Finance and Strategy from the Wharton School and a BA in Economics and English Literature from Vanderbilt. Gilles Luca became Senior Vice President and Chief Operating Officer in December 2019. Previously, he served as Senior Vice President, Operations Support. He joined Valaris in 1997. Mr.
He received an MBA in Finance and Strategy from the Wharton School and a BA in Economics and English Literature from Vanderbilt. 13 Gilles Luca became Senior Vice President and Chief Operating Officer in December 2019. Previously, he served as Senior Vice President, Operations Support. He joined Valaris in 1997. Mr.
Legal Proceedings "; and • " Item 7 . Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Effects of Climate Change and Climate Change Regulation. " 8 The International Convention on Oil Pollution Preparedness, Response and Cooperation, the International Convention on Civil Liability for Oil Pollution Damage 1992, the U.K.
Legal Proceedings "; and • " Item 7 . Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Effects of Climate Change and Climate Change Regulation. " The International Convention on Oil Pollution Preparedness, Response and Cooperation, the International Convention on Civil Liability for Oil Pollution Damage 1992, the U.K.
In addition, in 2024, all employees were assigned "Workplace Harassment" training as part of supporting a more inclusive workforce. Certain employees must also complete additional training on topics ranging from trade compliance to human trafficking. Safety Our policies set the expectation that causing no harm is a priority while conducting our operations.
In addition, in 2025, all employees were assigned "Workplace Harassment" training as part of supporting a more inclusive workforce. Certain employees must also complete additional training on topics ranging from trade compliance to human trafficking. Safety Our policies set the expectation that causing no harm is a priority while conducting our operations.
Weber has also served as Chief Financial Officer of Abaco Drilling Technologies from July 2019 to February 2021 and Chief Financial Officer of Haliburton Company from June 2017 to November 2018. Prior to Halliburton, Mr. Weber served as Chief Financial Officer of Parker Drilling Company and held senior finance roles at Valaris predecessor companies.
Weber also served as Chief Financial Officer of Abaco Drilling Technologies from July 2019 to February 2021 and Chief Financial Officer of Halliburton Company from June 2017 to November 2018. Prior to Halliburton, Mr. Weber served as Chief Financial Officer of Parker Drilling Company and held senior finance roles at Valaris predecessor companies.
The information contained on our website is not included as part of, or incorporated by reference into, this report. 13 RISK FACTORS SUMMARY An investment in our securities involves a high degree of risk.
The information contained on our website is not included as part of, or incorporated by reference into, this report. 14 RISK FACTORS SUMMARY An investment in our securities involves a high degree of risk.
Generally, our insurance program provides third-party liability coverage up to $805.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.
Generally, our insurance program provides third-party liability coverage up to $855.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.
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.
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.
The table below sets forth certain information regarding our executive officers as of February 20, 2025: Name Age Position Anton Dibowitz 53 President and Chief Executive Officer Christopher Weber 52 Senior Vice President and Chief Financial Officer Gilles Luca 53 Senior Vice President and Chief Operating Officer Matthew Lyne 50 Senior Vice President and Chief Commercial Officer Davor Vukadin 51 Senior Vice President and General Counsel 11 Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years: Anton Dibowitz became the President and Chief Executive Officer of Valaris in December 2021, following his service as the Company’s interim President and Chief Executive Officer since September 2021.
The table below sets forth certain information regarding our executive officers as of February 20, 2026: Name Age Position Anton Dibowitz 53 President and Chief Executive Officer Christopher Weber 53 Senior Vice President and Chief Financial Officer Gilles Luca 54 Senior Vice President and Chief Operating Officer Matthew Lyne 51 Senior Vice President and Chief Commercial Officer Davor Vukadin 52 Senior Vice President and General Counsel and Secretary Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years: Anton Dibowitz became the President and Chief Executive Officer of Valaris in December 2021, following his service as the Company’s interim President and Chief Executive Officer since September 2021.
Operations Revenues from non-U.S. operations were 84%, 80% and 78% of our total consolidated revenues during the years ended December 31, 2024, 2023 and 2022, respectively. See " Item 1A. Risk Factors - Our non-U.S. operations involve additional risks not typically associated with U.S. operations.
Operations Revenues from non-U.S. operations were 86%, 84% and 80% of our total consolidated revenues during the years ended December 31, 2025, 2024 and 2023, respectively. See " Item 1A. Risk Factors - Our non-U.S. operations involve additional risks not typically associated with U.S. operations.
Our insurance program also provides hull and machinery coverage for physical damage (including total loss) to our rigs, cargo and equipment, excluding damage arising from a named windstorm in the U.S. Gulf of Mexico. We separately purchase a small limit of named windstorm insurance for our floater rigs in the U.S. Gulf of Mexico.
Our insurance program also provides hull and machinery coverage for physical damage (including total loss) to our rigs, cargo and equipment, excluding damage arising from a named windstorm in the Gulf of America. We separately purchase a small limit of named windstorm insurance for our floater rigs in the Gulf of America.
We have a dedicated department focused on sustainability and new energy and also have an employee-led cross-functional working group to identify and evaluate opportunities and promote sustainable business practices.
We also have a dedicated department focused on sustainability and new energy and a cross-functional working group to identify and evaluate opportunities and promote sustainable business practices.
Approximately 338 personnel attended the program in 2024. We provide regular training in health, safety, environmental and emergency response to our employees, as relevant to their roles, and we mandate that our employees complete training related to the Code, covering topics such as anti-corruption, workplace behavior and conflicts of interest.
We provide regular training in health, safety, environmental and emergency response to our employees, as relevant to their roles, and we mandate that our employees complete training related to the Code, covering topics such as anti-corruption, workplace behavior and conflicts of interest.
Backlog Information See " Item 7 . Management's Discussion and Analysis of Financial Condition and Results of Operations " for backlog information. 6 Major Customers We provide our contract drilling services to major international, government-owned and independent oil and gas companies. During the year ended December 31, 2024, our five largest customers accounted for 49% of consolidated revenues.
Backlog Information See " Item 7 . Management's Discussion and Analysis of Financial Condition and Results of Operations " for backlog information. Major Customers We provide our contract drilling services to major international, government-owned and independent oil and gas companies. During the year ended December 31, 2025, our five largest customers accounted for 49% of consolidated revenues. Petróleo Brasileiro S.A.
We also maintain insurance for exposures to personal injuries, damage to or loss of property and certain business risks. 7 We generally indemnify the customer for legal and financial consequences of spills of waste oil, fuels, lubricants, motor oils, pipe dope, paint, solvents, ballast, bilge, garbage, debris, sewage, hazardous waste and other liquids, the discharge of which originates from our rigs or equipment above the surface of the water and in some cases from our subsea equipment.
We generally indemnify the customer for legal and financial consequences of spills of waste oil, fuels, lubricants, motor oils, pipe dope, paint, solvents, ballast, bilge, garbage, debris, sewage, hazardous waste and other liquids, the discharge of which originates from our rigs or equipment above the surface of the water and in some cases from our subsea equipment.
He holds a Bachelor of Arts degree in Economics from The University of Chicago and a law degree from The University of Texas School of Law. 12 Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports that we file with, or furnish to, the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act are available free of charge on our website at www.valaris.com/investors.
Available Information Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports that we file with, or furnish to, the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act are available free of charge on our website at www.valaris.com/investors.
To further support our values of respect and integrity, we have policies prohibiting corruption, bribery (including facilitation payments), money laundering, retaliation and reprisals for raising concerns, including those related to worker rights, working conditions, mistreatment, fraud and misconduct. In addition, we have adopted a policy against modern slavery and human trafficking in our business and our supply chains.
To further support our values of respect and integrity, we have policies prohibiting corruption, bribery (including facilitation payments), money laundering, retaliation and reprisals for raising concerns, including those related to worker rights, working conditions, mistreatment, fraud and misconduct.
BP plc, our only customer who accounts for 10% or more of consolidated revenues, accounted for 17% of consolidated revenues. Competition The offshore contract drilling industry is highly competitive. Drilling contracts are, for the most part, awarded on a competitive bid basis.
("Petrobras"), BP plc ("BP") and Azule Energy ("Azule"), our customers who account for 10% or more of consolidated revenues, accounted for 35% of consolidated revenues. 8 Competition The offshore contract drilling industry is highly competitive. Drilling contracts are, for the most part, awarded on a competitive bid basis.
We seek to control major operational hazards with effective safeguards and to implement our management systems to protect the health and safety of our personnel.
We seek to control major operational hazards with effective safeguards, robust barrier management, and the disciplined implementation of management systems designed to protect the health and safety of our personnel, the environment and our assets.
Our Safe Systems of Work are designed with the aim of completing each job safely and efficiently: ● Work Instruction – Step-by-step description of how to complete specific work activities, including mandatory precautions to be implemented; ● Permit to Work – Formal authorization and control process for the safe execution of potentially hazardous work that may present risk to people, environment or assets; ● Energy Isolation – Formal isolation of all energy sources before performing work on equipment; ● Job Safety Analysis – Identification and control of job hazards before starting work; and ● Stop Work Authority – Empowerment to stop work if a risk to people, environment or assets is perceived to exist.
BarrierPulse TM supports the identification, verification, and monitoring of barriers intended to prevent, detect, or mitigate major accident hazards, enhancing our ability to understand barrier status and health, enhancing our ability to take timely corrective action before a major event occurs. 12 Our Safe Systems of Work are designed with the aim of completing each job safely and efficiently: ● Work Instruction – Step-by-step descriptions of how to complete specific work activities, including mandatory precautions and controls to be implemented; ● Permit to Work – Formal authorization and control process for the safe execution of potentially hazardous work that may present risk to people, the environment or assets; ● Energy Isolation – Formal isolation of all energy sources before performing work on equipment; ● Job Safety Analysis – Identification and control of job-specific hazards before starting work; and ● Stop Work Authority – Empowerment to stop work if a risk to people, the environment or assets is perceived to exist.
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 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 December 31, 2024, we owned 53 rigs, of which 16 are located in the Middle East and Africa, 16 are located in North and South America, 15 are located in Europe, and six are located in Asia and the Pacific Rim. 5 Our drilling rigs drill and complete oil and natural gas wells.
As of December 31, 2025, we owned 46 rigs and excluding our held-for-sale rig, 17 are located in Europe, 16 are located in Middle East and Africa, eight are located in North and South America and four are located in Asia and the Pacific Rim. Our drilling rigs drill and complete oil and natural gas wells.
Sustainability Consistent with our purpose of providing responsible solutions that deliver energy to the world, we are focused on sustainability-related matters. Our board of directors' Safety and Sustainability Committee regularly meets to address sustainability topics and is responsible for overseeing the Company’s policies, programs and practices related to sustainability and the Company’s management of risks in such areas.
Our board of directors' Safety and Sustainability Committee regularly meets to address sustainability topics and is responsible for overseeing the Company’s policies, programs and practices related to sustainability as well as the Company’s management of risks in such areas.
Risks Related to Our International Operations • Our non-U.S. operations involve additional risks not typically associated with U.S. operations. 15 Sustainability Risks • Regulation of GHG and climate change could have a negative impact on our business. • Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services. • Increased scrutiny from stakeholders and others regarding our sustainability practices, initiatives and reporting responsibilities could result in additional costs or risks.
Sustainability Risks • Regulation of GHG, consumer preferences for alternative fuels and electric powered vehicles and climate change could have a negative impact on our business. • Increased scrutiny from stakeholders and others regarding our sustainability practices, initiatives and reporting responsibilities could result in additional costs or risks. 16
In some cases, we are indemnified by our customer for a limited amount of the repair of or replacement cost of our subsea equipment.
In some cases, we are indemnified by our customer for a limited amount of the repair of or replacement cost of our subsea equipment. We also maintain insurance for exposures to personal injuries, damage to or loss of property and certain business risks.
A portion of our employees and contractors working outside of the U.S. are represented under collective bargaining or similar agreements, which are subject to periodic salary negotiation. As of December 31, 2024, women comprised 32% of our onshore employees and 1% of our offshore employees.
The majority of our personnel work on our offshore rigs and are compensated on an hourly basis. A portion of our employees and contractors working outside of the U.S. are represented under collective bargaining or similar agreements, which are subject to periodic salary negotiation.
Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific.
We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of America, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific. We provide drilling services on a day rate contract basis.
As of February 20, 2025, we own 52 rigs, including 13 drillships, four 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.
As of February 20, 2026, we own 46 rigs, including 13 drillships, two semisubmersible rigs, 31 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs. Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators.
Our approach to attracting, developing and retaining a workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement. Purpose and Culture At Valaris, our purpose is to provide responsible solutions that deliver energy to the world.
Human Capital We believe our people are one of the most important elements of our success, and we benefit from a motivated, engaged and diverse workforce. Our approach to attracting, developing and retaining a workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement.
We encourage you to review our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability programs and initiatives.
We encourage you to review our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability programs and initiatives. Nothing on our website, including our Sustainability Report or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or other filings that we make with the SEC.
Employees We had a global workforce of approximately 5,642 persons including contractors, and approximately 4,130 persons excluding contractors, as of December 31, 2024. Our personnel represented 74 nationalities spread across 22 locations. The majority of our personnel work on our offshore installations and are compensated on an hourly basis.
In addition, we have adopted a policy against modern slavery and human trafficking in our business and our supply chains. 11 Employees We had a global workforce of approximately 5,070 persons including contractors, and approximately 3,800 persons excluding contractors, as of December 31, 2025. Our personnel represented 78 nationalities spread across 25 locations.
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We provide drilling services on a day rate contract basis.
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Pending Business Combination with Transocean On February 9, 2026, Valaris and Transocean Ltd. ("Transocean") entered into a business combination agreement (the “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 share.
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Demand for offshore drilling is impacted by fundamental supply and demand dynamics for crude oil. Since late 2022, Brent crude oil prices have been largely trading in a range between $70 and $90 per barrel, with OPEC+ members managing supply in an effort to keep the market in balance.
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The Business Combination will be effected by way of a court-approved scheme of arrangement between Valaris and the holders of the Valaris shares pursuant to section 99 of the Companies Act 1981 of Bermuda, as amended. The Transocean shares are expected to be issued in reliance on the exemption from the registration requirements of the U.S.
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Importantly, longer-dated Brent crude oil prices have remained stable, with the five-year forward price above $65 per barrel, a level at which nearly 90% of undeveloped offshore reserves are expected to be profitable. As a result, we believe the constructive oil price environment is supportive of continued investment in long-cycle offshore projects.
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Securities Act of 1933, as amended, provided by Section 3(a)(10) thereof and pursuant to exemptions from registration under any applicable state securities laws.
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While demand for offshore drilling services has declined modestly since early 2024, global demand for hydrocarbons continues to increase and offshore production, particularly deepwater, is expected to play an important role in providing secure, reliable and affordable energy to meet the world’s growing energy needs. Consequently, our outlook for the offshore drilling business is positive.
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Following the consummation of the Business Combination, Transocean’s existing shareholders and Valaris’ existing shareholders will own approximately 53% and 47%, respectively, of the combined company on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029. See " Par t II .
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Similar environmental laws apply in our other areas of operation.
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Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Introduction - Pending Business Combination with Transocean" for further information . 6 Our Industry The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics and customer capital allocation decisions.
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Failure to comply with these statutes and regulations may subject us to civil or criminal enforcement action, which may not be covered by contractual indemnification or insurance, or for which indemnity is prohibited under applicable law, and could have a material adverse effect on our financial position, operating results and cash flows.
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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 is currently in a period of oversupply, industry fundamentals are generally viewed as constructive over the medium to long term.
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Additionally, climate change is receiving increasing attention from scientists and legislators, and significant focus is being put on companies in the oil and natural gas industry.
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Market participants generally expect the current oil supply imbalance to shift to a structurally tighter market 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.
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Globally, there are a number of legislative and regulatory proposals and executive orders at various levels of government in jurisdictions where we operate to address the GHG emissions that contribute to climate change, such as laws or regulations requiring reporting on GHG emissions, incentivizing or mandating the use of alternative energy sources such as wind power and solar energy, phasing-out of fossil fuel subsidies, reducing GHG emissions, increasing fuel efficiency standards, adopting carbon pricing mechanisms, restricting oil and gas development and programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles.
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Energy Information Administration, indicate that substantial upstream investment is required to offset natural field declines and maintain existing production levels. Against this backdrop, customers continue to emphasize the need for sustained investment in oil and gas to support secure, reliable and affordable energy supply, with increasing focus on offshore developments, particularly in deepwater.
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Although it is not possible at this time to predict how compliance with any such legislation or new regulations would impact our business, any such future laws and regulations could require us to incur increased operating costs or incremental capital expenditures.
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Compared to other sources of supply, deepwater projects typically offer large resource potential, competitive project economics and lower carbon intensity per barrel. Despite near-term commodity price uncertainty, customers are continuing to advance long-cycle offshore developments. Industry participants anticipate increased deepwater project sanctioning over the next five years across greenfield, brownfield and exploration opportunities.
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Any such legislation or regulatory programs could also increase the cost of consuming oil and natural gas, and thereby reduce demand for oil and natural gas, which could reduce our customers’ demand for our services. Consequently, legislation and regulatory programs to reduce GHG emissions could have an adverse effect on our financial position, operating results and cash flows.
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According to Rystad Energy estimates, approximately 70% of this expected activity is associated with projects with breakeven oil prices below $50 per barrel and over 80% is associated with projects with breakeven prices below $60 per barrel.
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We publish our annual sustainability report aligned with the standards of the Task Force on Climate-Related Financial Disclosures (TCFD), in addition to the Sustainability Accounting Standards Board (SASB), with references to other frameworks such as the Global Reporting Initiative (GRI) and the Carbon Disclosure Project (CDP), where relevant, and report scope 1, 2 and 3 GHG emissions.
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Operating results in the offshore drilling industry are directly related to the demand for and the available supply of drilling rigs, each of which affects rig utilization and day rates. While the balance of rig supply and demand can vary somewhat between regions, significant variations between most regions are generally short-term due to rig mobility.
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Nothing on our website, including our Sustainability Report or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or other filings that we make with the SEC. 9 Human Capital We believe our people are one of the most important elements of our success, and we benefit from a motivated, engaged and diverse workforce.
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Similar environmental laws apply in our other areas of operation. 10 Sustainability Consistent with our purpose of providing responsible solutions that deliver energy to the world, we are focused on sustainability-related matters to drive continued shareholder value and meet the demands of our stakeholders.
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Purpose and Culture At Valaris, our purpose is to provide responsible solutions that deliver energy to the world.
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Approximately 1,620 personnel have attended the program since its launch. Also, in 2025, we launched an enhanced leadership development program for senior offshore leaders, which was delivered through targeted workshops during the year to strengthen management effectiveness and decision-making in complex operating environments.
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As part of our focus on preventing high-consequence events, in 2025, we implemented BarrierPulse TM a barrier management and performance monitoring framework that provides structured oversight of safety-critical barriers and escalation reporting for leadership visibility.
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He holds a Bachelor of Arts degree in Economics from The University of Chicago and a law degree from The University of Texas School of Law.
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Risks Related to the Business Combination • Our pending Business Combination may be delayed or not occur at all for a variety of reasons. • Efforts to complete the Business Combination could disrupt our relationships with third parties and employees, divert management's attention, or result in negative publicity or legal proceedings. • The Business Combination Agreement contains provisions that limit our ability to pursue alternatives to the Business Combination. • The Business Combination Agreement restricts our business activities.
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Risks Related to Our International Operations • Our non-U.S. operations involve risks not typically associated with U.S. operations, and we are subject to additional risks associated with the expansion into new geographic markets.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations. 17 Several factors could cause rig downtime or a suspension of operations, many of which are beyond our control, including the early termination, repudiation or renegotiation of contracts, breakdowns of equipment, work stoppages, including labor strikes, shortages of material or skilled labor, surveys or inspections by government and maritime authorities, inability to obtain the requisite permits or approvals, periodic classification surveys, severe weather, strong ocean currents or harsh operating conditions, the occurrence or threat of epidemic or pandemic diseases, and any government response to such occurrence or threat and force majeure events.
Biggest changeSeveral factors could cause rig downtime or a suspension of operations, many of which are beyond our control, including the early termination, repudiation or renegotiation of contracts, breakdowns of equipment, work stoppages, including labor strikes, shortages of material or skilled labor, surveys or inspections by government and maritime authorities, inability to obtain the requisite permits or approvals, periodic classification surveys, severe weather, strong ocean currents or harsh operating conditions, the occurrence or threat of epidemic or pandemic diseases, and any government response to such occurrence or threat and force majeure events. 20 Our customers may seek to terminate , repudiate or renegotiate our drilling contracts for various reasons, including in the event of damage or a total loss of the drilling rig, the suspension or interruption of operations for extended periods due to breakdown of major rig equipment, failure to comply with performance conditions or equipment specifications, the failure of the customer to receive final investment decision (FID) with respect to projects for which the drilling rig was contracted or other reasons and “force majeure” events beyond the control of either party or other specific conditions.
Business – Governmental Regulations and Environmental Matters .” 30 Any new or additional regulatory, legislative, permitting or certification requirements in the U.S. and other areas in which we operate, including laws and regulations that have or may impose increased financial responsibility, oil spill abatement contingency plan capability requirements, or additional operational requirements and certifications, could materially adversely affect our financial position, operating results or cash flows.
Business – Governmental Regulations and Environmental Matters .” Any new or additional regulatory, legislative, permitting or certification requirements in the U.S. and other areas in which we operate, including laws and regulations that have or may impose increased financial responsibility, oil spill abatement contingency plan capability requirements, or additional operational requirements and certifications, could materially adversely affect our financial position, operating results or cash flows.
Insurance premiums could increase and coverage for these kinds of events may be unavailable in the future. Any or all of these effects could materially adversely affect our financial position, operating results or cash flows. 26 Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.
Insurance premiums could increase and coverage for these kinds of events may be unavailable in the future. Any or all of these effects could materially adversely affect our financial position, operating results or cash flows. Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers.
If we cannot maintain service and pricing levels for existing customers or replace such revenues with increased business activities from other customers, our financial position, operating results and cash flows could be materially adversely affected. Our long-term contracts are subject to the risk of cost increases, which could adversely impact our profitability.
If we cannot maintain service and pricing levels for existing customers or replace such revenues with increased business activities from other customers, our financial position, operating results and cash flows could be materially adversely affected. 22 Our long-term contracts are subject to the risk of cost increases, which could adversely impact our profitability.
As a result of increased costs to insurance companies due to regulatory, geopolitical, reputational or other developments, insurance companies that have historically participated in underwriting risks arising out of oil and natural gas operations may discontinue that practice, may reduce the insurance capacity they are willing to deploy or demand significantly higher premiums or deductibles to cover these risks.
As a result of increased costs to insurance companies due to regulatory, geopolitical, reputational or other developments, insurance companies that have historically participated in underwriting risks arising out of oil and natural gas 29 operations may discontinue that practice, may reduce the insurance capacity they are willing to deploy or demand significantly higher premiums or deductibles to cover these risks.
If we are unable to mitigate the negative consequences of any change in law, audit or other matters, this could cause our consolidated income taxes to increase and materially adversely affect our financial position, operating results or cash flows. 32 Our consolidated effective income tax rate may vary substantially over time.
If we are unable to mitigate the negative consequences of any change in law, audit or other matters, this could cause our consolidated income taxes to increase and materially adversely affect our financial position, operating results or cash flows. Our consolidated effective income tax rate may vary substantially over time.
In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable. The law generally 25 considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.
In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable. The law generally considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.
In addition, we may choose to stack idle rigs that are not under contract, which would require us to incur stacking costs for such rigs. Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities.
In addition, we may choose to stack idle rigs that are not under contract, which would require us to incur stacking costs for such rigs. 21 Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities.
Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our customers’ property or information and/or materially adversely affect our financial position, operating results or cash flows. We may not realize the expected benefits of our ARO joint venture.
Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our customers’ property or information and/or materially adversely affect our financial position, operating results or cash flows. 26 We may not realize the expected benefits of our ARO joint venture.
In addition, the Credit Agreement contains financial covenants requiring us to maintain (i) a minimum book value of equity to total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount of liquidity. Any future indebtedness may also require us to comply with similar or other covenants.
In addition, the 2028 Credit Agreement contains financial covenants requiring us to maintain (i) a minimum book value of equity to total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount of liquidity. Any future indebtedness may also require us to comply with similar or other covenants.
Restrictions on GHG emissions, reporting requirements or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services.
Restrictions on GHG emissions, reporting requirements or other related legislative or regulatory enactments could have an indirect effect in industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services.
Lawmakers and regulators in the U.S. and certain jurisdictions where we operate have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and trade systems, restrictive permitting and incentives for renewable energy.
Lawmakers and regulators in the U.S. and certain other jurisdictions where we operate have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap-and-trade systems, restrictive permitting and incentives for renewable energy.
For example, certain market participants use third-party benchmarks or scores to measure a company’s sustainability practices in making investment decisions and customers and suppliers may evaluate our sustainability practices or require that we adopt certain sustainability policies as a condition of awarding contracts.
For example, certain market participants use third-party benchmarks or scores to measure a company’s sustainability practices in making investment decisions and customers and suppliers may evaluate our sustainability practices or require that we adopt or remove certain sustainability policies as a condition of awarding contracts.
We may also incur additional training costs to ensure that new or promoted personnel have the right skills and qualifications. We also are subject to potential legislative or regulatory action that may impact working conditions, paid time off or other conditions of employment.
We may also incur additional training costs to ensure that new or promoted personnel have the right skills and qualifications. 25 We also are subject to potential legislative or regulatory action that may impact working conditions, paid time off or other conditions of employment.
Business – Governmental Regulations and Environmental Matters ” and “ Item 3 . Legal Proceedings – Environmental Matters. ” Sustainability initiatives and high profile and catastrophic environmental events, such as the 2010 Macondo well incident, have led to increased regulation of offshore oil and natural gas drilling.
Business – Governmental Regulations and Environmental Matters ” and “ Item 3 . Legal Proceedings – Environmental Matters. ” 34 Sustainability initiatives and high profile and catastrophic environmental events, such as the 2010 Macondo well incident, have led to increased regulation of offshore oil and natural gas drilling.
Our disclosures on these matters rely on management’s expectations as of the date the statements are first made, as well as standards for measuring progress that are still in development and may change or fail to be realized. These expectations and standards may continue to evolve.
Our disclosures on these matters rely on management’s expectations as of the date when the statements are first made, as well as standards for measuring progress that are still in development and that may change or fail to be realized. These expectations and standards may continue to evolve.
Although we are not currently a party to any such lawsuit, these suits present uncertainty regarding the extent to which companies who are not producing oil or natural gas, but who are engaged to provide services to support production activities, such as offshore drilling companies, face an increased risk of liability stemming from climate-related litigation, which risk would also adversely impact the oil and natural gas industry and impact demand for our services. 33 We are a Bermuda company and it may be difficult to enforce judgments against us or our directors and executive officers.
Although we are not currently a party to any such lawsuit, these suits present uncertainty regarding the extent to which companies who are not producing oil or natural gas, but who are engaged to provide services to support production activities, such as offshore drilling companies, face an increased risk of liability stemming from climate-related litigation, which risk would also adversely impact the oil and natural gas industry and impact demand for our services. 36 We are a Bermuda company and it may be difficult to enforce judgments against us or our directors and executive officers.
The failure of the third party to fulfill its obligations could disrupt our operations. In addition, the use of a shared service environment, including our reliance on a third-party provider, may create risks 22 relating to the processing of transactions and recording of financial information.
The failure of the third party to fulfill its obligations could disrupt our operations. In addition, the use of a shared service environment, including our reliance on a third-party provider, may create risks relating to the processing of transactions and recording of financial information.
Our compliance with the Economic Substance Act 34 may result in additional costs that could have a material adverse effect on our financial position or results of operations. Our business could be affected as a result of activist investors.
Our compliance with the Economic Substance Act may result in additional costs that could have a material adverse effect on our financial position or results of operations. Our business could be affected as a result of activist investors.
As a result, we may be required to take our drilling rigs out of 21 service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.
As a result, we may be required to take our drilling rigs out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.
Failure to recruit and retain skilled personnel could materially adversely affect our business. We require skilled personnel to operate our drilling rigs and to provide technical services and support for our business, and further rig reactivations will require that we hire additional skilled personnel.
Failure to recruit, develop and retain skilled personnel could materially adversely affect our business. We require skilled personnel to operate our drilling rigs and to provide technical services and support for our business, and further rig reactivations will require that we hire additional skilled personnel.
The agreements governing our debt, including the Indenture and the Credit Agreement, contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and to make payments on our debt.
The agreements governing our debt, including the Indenture and the 2028 Credit Agreement, contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and to make payments on our debt.
If we do not generate enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as selling assets; reducing or delaying capital investments; seeking to raise additional capital; or restructuring or refinancing all or a portion of our indebtedness at or before maturity. 28 We cannot be assured that we will be able to accomplish any of these alternatives on terms acceptable to us or at all.
If we do not generate enough cash flow from operations to satisfy our debt obligations, we may have to undertake alternative financing plans, such as selling assets; reducing or delaying capital investments; seeking to raise additional capital; or restructuring or refinancing all or a portion of our indebtedness at or before maturity. 31 We cannot be assured that we will be able to accomplish any of these alternatives on terms acceptable to us or at all.
Governments in some countries are active in regulating and controlling the ownership of oil, natural gas and mineral concessions and companies holding such concessions, the exploration of oil and natural gas and other aspects of the oil and natural gas industry in their countries.
Governments in some countries are active in regulating and controlling the ownership of oil, natural gas and mineral concessions and companies holding such concessions, the exploration of oil and natural gas and other aspects of the oil and natural gas industry 39 in their countries.
In addition to such initiatives, sustainability matters more generally have been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S. and the EU. We publish an annual Sustainability Report, which includes disclosure of our sustainability practices, aspirations, targets and goals.
In addition to such initiatives, sustainability matters have more generally been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S. and the EU. We publish an annual Sustainability Report, which includes disclosures of our sustainability practices, aspirations, targets and goals.
Numerous factors may affect oil and natural gas prices and the level of demand for our services, including: • regional and global economic conditions and changes therein, including recessions, • oil and natural gas supply and demand, which is affected by worldwide economic activity and population growth, • expectations regarding future energy prices, • the desire and ability of OPEC+, its members and other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements, • the availability of capital for oil and natural gas participants, including our customers, and capital allocation decisions by our customers, including the relative economics of offshore development versus alternative prospects, • the level of production by non-OPEC+ countries, • the worldwide military or political environment, including the Russia-Ukraine conflict and the conflicts in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs, such as those imposed, or that may be imposed, by the U.S. beginning in February 2025, and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism, • U.S. and non-U.S. tax policy, including the U.K. windfall tax on oil and gas producers in the British North Sea, • advances in exploration and development technology, including with respect to onshore shale, • costs associated with exploring for, developing, producing and delivering oil and natural gas, • the rate of discovery of new oil and natural gas reserves and the rate of decline of existing oil and gas reserves, • investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit or otherwise address climate change, 16 • laws and government regulations that limit, restrict or prohibit exploration and development of oil and natural gas in various jurisdictions, or materially increase the cost of such exploration and development, • the development and exploitation of alternative fuels or energy sources, resulting in reduced capital spending by our customers on oil and natural gas projects, and increased demand for electric-powered products, including electric-powered vehicles, • disruption to exploration and development activities due to hurricanes and other adverse weather conditions and the risk thereof, • natural disasters or incidents resulting from operating hazards inherent in offshore drilling, such as oil spills, and • the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat.
Numerous factors may affect oil and natural gas prices and the level of demand for our services, including: • regional and global economic conditions and changes therein, including recessions, • oil and natural gas supply and demand, which is affected by worldwide economic activity and population growth, • expectations regarding future energy prices, • the desire and ability of OPEC+, its members and certain other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements, including the ability of OPEC+ to successfully coordinate and enforce production quotas, • the availability of capital for oil and natural gas participants, including our customers, and capital allocation decisions by our customers, including the relative economics of offshore development versus alternative prospects, • the level of production by non-OPEC+ countries, • the worldwide military or political environment, including the Russia-Ukraine conflict and the conflicts in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs, such as those imposed since February 2025, or that may be imposed, by the U.S., and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism, • U.S. and non-U.S. tax policy, including the U.K. windfall tax on oil and gas producers in the British North Sea, • advances in exploration and development technology, including with respect to onshore shale, • costs associated with exploring for, developing, producing and delivering oil and natural gas, • the rate of discovery of new oil and natural gas reserves and the rate of decline of existing oil and gas reserves, • investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit or otherwise address climate change, • laws and government regulations that limit, restrict or prohibit exploration and development of oil and natural gas in various jurisdictions, or materially increase the cost of such exploration and development, • the development and exploitation of alternative fuels or energy sources, resulting in reduced capital spending by our customers on oil and natural gas projects, and increased demand for electric-powered products, including electric-powered vehicles, • disruption to exploration and development activities due to hurricanes and other adverse weather conditions and the risk thereof, 19 • natural disasters or incidents resulting from operating hazards inherent in offshore drilling, such as oil spills, and • the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat.
Under our drilling contracts, liability with respect to personnel and property customarily is allocated so that we and our customers each assume liability 18 for our respective personnel and property.
Under our drilling contracts, liability with respect to personnel and property customarily is allocated so that we and our customers each assume liability for our respective personnel and property.
In addition, it may be difficult or expensive for us to comply with any sustainability-linked contracting policies 38 adopted by customers and suppliers, particularly given the complexity of our supply chain, our reliance on third-party manufacturers, and the potential for jurisdictions in which we operate to enact opposing or incompatible regulations.
In addition, it may be difficult or expensive for us to comply with sustainability-linked contracting policies adopted by customers and suppliers, particularly given the complexity of our supply chain, our reliance on third-party manufacturers, and the potential for jurisdictions in which we operate to enact opposing or incompatible regulations.
Future regulations or court interpretations established in the countries in which we conduct our operations could increase our costs and materially adversely affect our financial position, operating results or cash flows. 27 Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows.
Future regulations or court interpretations established in the countries in which we conduct our operations could increase our costs and materially adversely affect our financial position, operating results or cash flows. 30 Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows.
Gulf of Mexico and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance.
The Gulf of America and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance.
Higher commodity prices may not necessarily translate into increased activity, however, and even during periods of high commodity prices, customers may cancel or curtail their drilling programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons, including their expectations for future oil and natural gas prices, the cost of exploration efforts, extended periods of price volatility, their lack of success in exploration efforts and re-allocating capital expenditures for renewable energy projects.
Higher commodity prices may not necessarily translate into increased activity, however, and even during periods of high commodity prices, customers may cancel or curtail their drilling programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons, including their expectations for future oil and natural gas prices, the cost of exploration efforts, extended periods of price volatility, their lack of success in exploration efforts and re-allocating capital expenditures for alternative fuels, energy sources or renewable energy projects.
Our non-U.S. operations and shipyard rig construction and enhancement projects are subject to political, economic and other uncertainties, including: • terrorist acts, war and civil disturbances, • expropriation, nationalization, deprivation or confiscation of our equipment or our customer’s property, • repudiation or nationalization of contracts, • assaults on property or personnel, • piracy, kidnapping and extortion demands, • significant governmental influence over many aspects of local economies and customers, • unexpected changes in law and regulatory requirements, including changes in interpretation or enforcement of existing laws, • work stoppages, such as labor strikes, • complications associated with repairing and replacing equipment in remote locations, • limitations on insurance coverage, such as war risk coverage, in certain areas, • imposition of trade barriers, • wage and price controls, • import-export quotas, • exchange restrictions, currency fluctuations and changes in monetary policy, • uncertainty or instability resulting from hostilities or other crises in the Middle East, West Africa, Latin America, Southeastern Asia, Eastern Europe or other geographic areas in which we operate, • changes in the manner or rate of taxation, • limitations on our ability to recover amounts due, 35 • increased risk of government and vendor/supplier corruption, • increased local content requirements, • the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat, • changes in political conditions, and • other forms of government regulation and economic conditions that are beyond our control.
Our non-U.S. operations and shipyard rig construction and enhancement projects, as well as our expansion into new geographical markets, are subject to political, economic and other uncertainties, including: • terrorist acts, war and civil disturbances, • expropriation, nationalization, deprivation or confiscation of our equipment or our customer’s property, • repudiation or nationalization of contracts, • assaults on property or personnel, • piracy, kidnapping and extortion demands, • significant governmental influence over many aspects of local economies and customers, • unexpected changes in law and regulatory requirements, including changes in interpretation or enforcement of existing laws, 38 • work stoppages, such as labor strikes, • complications associated with repairing and replacing equipment in remote locations, • limitations on insurance coverage, such as war risk coverage, in certain areas, • imposition of trade barriers, • wage and price controls, • import-export quotas, • exchange restrictions, currency fluctuations and changes in monetary policy, • uncertainty or instability resulting from hostilities or other crises in the Middle East, West Africa, Latin America, Southeastern Asia, Eastern Europe or other geographic areas in which we operate, • changes in the manner or rate of taxation, • limitations on our ability to recover amounts due, • increased risk of government and vendor/supplier corruption, • increased local content requirements, • the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat, • changes in political conditions, and • other forms of government regulation and economic conditions that are beyond our control.
These transactions involve various risks, including among others, (1) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management's attention from day-to-day operations, (3) applicable antitrust laws and other regulations that may limit our ability to acquire targets or require us to divest an acquired business or assets, (4) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening or broadening our business, (5) 29 potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (6) potential adverse impacts on our business and relationships with customers, vendors, contractors, employees or suppliers as a result of proposed or completed transactions and (7) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated.
These transactions involve various risks, including among others, (1) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management's attention from day-to-day operations, (3) applicable antitrust laws and other regulations that may limit our ability to acquire targets or require us to divest an acquired business or assets, (4) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening or broadening our business, (5) potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (6) potential adverse impacts on our business and relationships with customers, vendors, contractors, employees or suppliers as a result of proposed or completed transactions, (7) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated, and (8) potential accounting impairment upon the decision to reclassify assets as held for sale.
As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers are transitioning their businesses to renewable energy projects and away from oil and natural gas exploration and production, which may result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.
As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers may transition their businesses to renewable energy projects and away from oil and natural gas exploration and production, which would result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.
In addition, our bye-laws establish advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders. Legislation enacted in Bermuda as to Economic Substance may affect our operations. The Economic Substance Act came into effect in Bermuda on January 1, 2019.
In addition, our bye-laws establish advance notice provisions for shareholder proposals and nominations for elections to the board of directors to be acted upon at meetings of shareholders. 37 Legislation enacted in Bermuda as to Economic Substance may affect our business. The Economic Substance Act came into effect in Bermuda on January 1, 2019.
We have two main types of insurance coverage: (1) hull and machinery coverage for physical damage to our property and equipment and (2) excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution.
We have two main types of insurance coverage: (1) hull and machinery coverage for physical damage to our property and equipment and (2) P&I with excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution.
Additionally, on May 3, 2021, our board of directors approved and ratified the Valaris Limited 2021 Management Incentive Plan (the “MIP”) and reserved 9.0 million of our Common Shares for issuance under the MIP primarily for employees and directors. As of December 31, 2024, there were 6.9 million shares available for issuance under the MIP.
Additionally, on May 3, 2021, our board of directors approved and ratified the Valaris Limited 2021 Management Incentive Plan (the “MIP”) and reserved 9.0 million of our Common Shares for issuance under the MIP primarily for employees and directors. As of December 31, 2025, there were 6.2 million shares available for issuance under the MIP.
As required by law, we file periodic tax returns that are subject to review and examination by various revenue agencies within the jurisdictions in which we operate. We are subject to tax assessments in various jurisdictions, which we are contesting.
As required by law, we file periodic tax returns that are subject to review and examination by various revenue agencies within the jurisdictions in which we operate.
We have no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of Mexico for our jack-up fleet and only limited coverage for our floater fleet. We also retain the risk for any liability that exceeds our excess liability coverage. Pollution and environmental risks generally are not completely insurable.
We have no hull and machinery insurance coverage for damages caused by named storms in the Gulf of America for our jack-up fleet and only limited coverage for our floater fleet. We also retain the risk for any liability that exceeds our excess liability coverage. Pollution and environmental risks generally are not completely insurable.
Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, collision, piracy, damage from adverse weather and marine life infestations. The U.S.
Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, allision, collision, piracy, damage from adverse weather and marine life infestations.
For example, the Organization for Economic Cooperation and Development (“OECD”), the EU and certain other countries (including countries in which we operate) are committed to enacting substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD’s Pillar Two initiative introduces a 15% global minimum tax applied on a country-by-country basis.
For example, the Organization for Economic Cooperation and Development (“OECD”), the EU and certain other countries (including countries in which we operate) enacted substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD’s Pillar Two initiative introduced a 15% global minimum tax applied on a country-by-country basis.
The Indenture, the Credit Agreement and the related agreements governing our indebtedness contain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to: • incur additional debt and issue preferred stock; • incur or create liens; • redeem and/or prepay certain debt; • pay dividends on our shares or repurchase shares; • make certain investments; • engage in specified sales of assets; • enter into transactions with affiliates; and • engage in consolidation, mergers and acquisitions.
The Indenture, the 2028 Credit Agreement (as each are defined below) and the related agreements governing our indebtedness contain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to: • incur additional debt and issue preferred stock; • incur or create liens; • redeem and/or prepay certain debt; • pay dividends on our shares or repurchase shares; • make certain investments; • engage in specified sales of assets; • enter into transactions with affiliates; and • engage in consolidation, mergers and acquisitions.
We provide our services to major international, government-owned and independent oil and natural gas companies. During 2024, our five largest customers accounted for 49% of consolidated revenues, with our largest customer representing 17% of our consolidated revenues and a significant percentage of our operating cash flows.
We provide our services to major international, government-owned and independent oil and natural gas companies. During 2025, our five largest customers accounted for 49% of consolidated revenues, a significant percentage of our operating cash flows, with our largest customer representing 13% of our consolidated revenues.
In January 2023, the EU enacted the Corporate Sustainability Reporting Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.
In January 2023, the EU enacted the Corporate Sustainability Reporting Directive to require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.
We currently own and operate 10 drilling rigs that are contracted with national oil companies.
We currently own and operate 11 drilling rigs that are contracted with national oil companies.
Any violation of the FCPA, OFAC regulations, the UKBA or other applicable anti-corruption laws by us, our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents could in some cases provide a customer with termination rights and other remedies under the terms of their contracts(s) with us and also result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions and could materially adversely affect our financial condition, operating results or cash flows.
Bribery Act (“UKBA”), other U.S. laws and regulations governing our international operations and similar laws in other countries. 33 Any violation of the FCPA, OFAC regulations, the UKBA or other applicable anti-corruption laws by us, our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents could in some cases provide a customer with termination rights and other remedies under the terms of their contracts(s) with us and also result in substantial fines, sanctions, civil and/or criminal penalties and curtailment of operations in certain jurisdictions and could materially adversely affect our financial condition, operating results or cash flows.
As sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to sustainability monitoring and reporting and complying with sustainability initiatives, especially to the extent these standards are not harmonized or consistent.
As sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to sustainability monitoring, reporting and compliance, especially to the extent these standards are not harmonized or consistent.
As a result of these uncertainties, as well as changes in the administrative practices and precedents of tax authorities or other matters, such as changes in applicable accounting rules, that increase the amounts we have provided for income taxes or deferred tax assets and liabilities in our consolidated financial statements, we cannot provide any assurances as to what our consolidated effective income tax rate will be in future periods.
We are subject to tax assessments in various jurisdictions, which we are contesting. 35 As a result of these uncertainties, as well as changes in the administrative practices and precedents of tax authorities or other matters, such as changes in applicable accounting rules, that increase the amounts we have provided for income taxes or deferred tax assets and liabilities in our consolidated financial statements, we cannot provide any assurances as to what our consolidated effective income tax rate will be in future periods.
ARO may not apply the same controls and policies that we follow to manage our risks, and ARO’s controls and policies may not be as effective. As a result, operational, financial and control issues may arise, which could materially adversely affect our financial position, operating results or cash flows.
ARO may not apply the same controls and policies that we follow to manage our risks, and ARO’s controls and policies may not be as effective. As a result, operational, financial and control issues may arise, including the inability to produce timely and accurate financial statements, which could materially adversely affect our financial position, operating results or cash flows.
We are adversely affected by restrictions on drilling in the areas in which we operate, including policies and guidelines regarding the approval of drilling permits, restrictions on development and production activities, and directives, judicial decisions and regulations that have and may further impact our operations. For example, in August 2024, the U.S.
We are adversely affected by restrictions on drilling in the areas in which we operate, including policies and guidelines regarding the approval of drilling permits, restrictions on development and production activities, and directives, judicial decisions and regulations that have and may further impact our operations.
Any such joint venture would involve various risks, including among others (1) difficulties related to integrating or managing applicable parts of a joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management’s attention from day-to-day operations, (3) failure to realize anticipated benefits, such as cost savings, revenue enhancements or business synergies, (4) the potential for substantial transaction expenses and (5) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time any such transaction is consummated.
Any such joint venture would involve various risks, including among others (1) difficulties related to integrating or managing applicable parts of a joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management’s attention from day-to-day operations, (3) failure to realize anticipated benefits, such as cost savings, revenue enhancements or business synergies, (4) the potential for substantial transaction expenses and (5) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time any such transaction is consummated. 28 Our business involves operating hazards, and our insurance and indemnities from our customers or other parties may not be adequate to cover any potential losses.
Actions we may take to achieve our sustainability initiatives, including the development and implementation of new emissions-reduction technology, may require increased expenditures, which may materially adversely affect our financial position, operating results or cash flows. Item 1B. Unresolved Staff Comments None.
Actions we may take to achieve our sustainability initiatives, including the development and implementation of new emissions-reduction technology, may require increased expenditures, which may materially adversely affect our financial position, operating results or cash flows.
In recent years, we have seen several significant regulatory changes that have affected the way we operate in the U.S. Gulf of Mexico. See “ Item 1 .
In recent years, we have seen several significant regulatory changes that have affected the way we operate in the Gulf of America. See “ Item 1 .
Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future. As of February 18, 2025 and February 15, 2024, our contract backlog was approximately $3.6 billion and $3.9 billion, respectively. This amount reflects the remaining contractual terms multiplied by the applicable contractual day rate.
Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future. As of February 17, 2026 and February 18, 2025, our contract backlog was approximately $4.7 billion and $3.6 billion, respectively. This amount reflects the remaining firm contractual terms multiplied by the applicable contractual day rate.
Any required capital contributions we make could negatively impact our liquidity position and financial condition. In connection with Saudi Arabia’s announcement to limit oil production capacity and Saudi Aramco’s suspension of certain drilling contracts, the VALARIS 143, VALARIS 147 and VALARIS 148 contracts were terminated during the year ended December 31, 2024.
Any required capital contributions we make could negatively impact our liquidity position and financial condition. 27 In connection with Saudi Aramco’s suspension of certain drilling contracts, the VALARIS 143, VALARIS 147 and VALARIS 148 contracts were terminated during the year ended December 31, 2024.
Equipment maintenance expenses fluctuate depending upon the type of activity a drilling rig is performing and the age and condition of the equipment, as well as the impact of supply chain disruptions and inflation on the costs of parts and materials.
Equipment maintenance expenses fluctuate depending upon the type of activity a drilling rig is performing and the age and condition of the equipment, as well as the impact of supply chain disruptions and inflation on the costs of parts and materials. Contract preparation expenses vary based on the scope and length of contract preparation required.
If additional drilling contracts between us and ARO are suspended or terminated in the future and we are unable to secure new contracts with substantially similar terms on a timely basis, our financial position, operating results or cash flows could be materially adversely affected. Five of our rigs leased to ARO have bareboat charter agreements expiring during 2025.
If additional drilling contracts between us and ARO are suspended or terminated in the future and we are unable to secure new contracts with substantially similar terms on a timely basis, our financial position, operating results or cash flows could be materially adversely affected.
Such policies or other laws, regulations, treaties and international agreements related to GHG and climate change may negatively impact the price of oil relative to other energy sources, reduce demand for hydrocarbons, limit drilling in the offshore oil and natural gas industry, or otherwise unfavorably impact our business, our suppliers and our customers, and result in increased compliance costs and additional operating restrictions, all of which could materially adversely affect our financial position, operating results or cash flows. 37 In addition to potential impacts on our business resulting from climate-change legislation or regulations, our business also could be materially adversely affected by climate change-related physical changes, such as changing weather patterns.
Such policies or other laws, regulations, treaties and international agreements related to GHG and climate change may negatively impact the price of oil relative to other energy sources, reduce demand for hydrocarbons, limit drilling in the offshore oil and natural gas industry, or otherwise unfavorably impact our business, our suppliers and our customers, and result in increased compliance costs and additional operating restrictions, all of which could materially adversely affect our financial position, operating results or cash flows.
We may pursue mergers, acquisitions or dispositions of businesses or assets or other strategic transactions that we believe will strengthen, streamline or expand our business.
We may pursue mergers, acquisitions or dispositions of businesses or assets, including our drilling rigs, or other strategic transactions that we believe will strengthen, streamline or expand our business, such as the Business Combination.
Risks Related to Our International Operations Our non-U.S. operations involve additional risks not typically associated with U.S. operations. Revenues from non-U.S. operations were 84%, 80% and 78% of our total consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively.
Risks Related to Our International Operations Our non-U.S. operations involve additional risks not typically associated with U.S. operations, and we are subject to additional risks associated with the expansion into new geographical markets. Revenues from non-U.S. operations were 86%, 84% and 80% of our total consolidated revenues for the years ended December 31, 2025, 2024 and 2023, respectively.
If new laws are enacted, or if government actions are taken or judicial decisions are made that restrict or prohibit offshore drilling in our principal areas of operation or that impose environmental or other requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development, or production of oil and natural gas, our financial position, operating results or cash flows could be materially adversely affected. 31 The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes.
If new laws are enacted, or if government actions are taken or judicial decisions are made that restrict or prohibit offshore drilling in our principal areas of operation or that impose environmental or other requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development, or production of oil and natural gas, our financial position, operating results or cash flows could be materially adversely affected.
While we are negotiating renewals, we may be unsuccessful in negotiating extensions or new contracts for these bareboat charters. As a result of these risks, it may take longer than expected for us to realize the expected returns on our investment in ARO or such returns may ultimately be less than anticipated.
As a result of these risks, it may take longer than expected for us to realize the expected returns on our investment in ARO or such returns may ultimately be less than anticipated.
Our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents may take actions in violation of our policies and procedures designed to promote compliance with the laws of the jurisdictions in which we operate. Any such violation could materially adversely affect our financial position, operating results or cash flows.
Our partners, agents and our and their respective affiliated entities or respective officers, directors, employees and agents may take actions in violation of our policies and procedures designed to promote compliance with the laws of the jurisdictions in which we operate.
The ultimate impact of GHG emissions-related agreements, legislation and measures on our financial performance is highly uncertain because we are unable to predict, in a multitude of jurisdictions, the outcome of political decision-making processes. Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services.
The ultimate impact of GHG emissions-related agreements, legislation and measures on our financial performance is highly uncertain. 41 Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services.
Shipping delays or denials could cause unscheduled operational downtime, reduced day rates during such downtime and contract cancellations. Any failure to comply with applicable legal and regulatory trading obligations also could result in criminal and civil penalties and sanctions, such as fines, imprisonment, exclusion from government contracts, seizure of shipments and loss of import and export privileges.
Any failure to comply with applicable legal and regulatory trading obligations also could result in criminal and civil penalties and sanctions, such as fines, imprisonment, exclusion from government contracts, seizure of shipments and loss of import and export privileges.
Additionally, if we are unable to make any required contributions, our ownership in ARO could be diluted which could hinder our ability to effectively manage ARO and could materially adversely affect our financial position, operating results or cash flows. 24 Joint venture investments could be adversely affected by our joint venture partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners.
Additionally, if we are unable to make any required contributions, our ownership in ARO could be diluted which could hinder our ability to effectively manage ARO and could materially adversely affect our financial position, operating results or cash flows.
Likewise, in December 2023, the EPA adopted a final rule enacting a series of actions targeting methane and other emission reductions in natural gas and oil operations.
For example, in December 2023, the EPA adopted a final rule enacting a series of actions targeting methane and other emission reductions in natural gas and oil operations, though the effective implementation date has been delayed.
We anticipate that these requirements will apply to us as early as 2026 (for fiscal year 2025) for certain of our EU subsidiaries and at the consolidated entity level in 2030 (for fiscal year 2029).
These requirements could apply to us as early as 2028 (for fiscal year 2027) for certain of our EU subsidiaries and at the consolidated entity level in 2029 (for fiscal year 2028).
For example, we have four drillships that are uncontracted. Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions.
For example, as of February 17, 2026, we had three drillships that are preservation stacked. Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions.
Cybersecurity incidents or system failures affecting either us or our third-party service providers can cause disruptions of our ability to conduct our operations, including disruptions of certain systems on our rigs, which could result in injury to people, our or our customers' assets, or the environment, disruptions of our ability to conduct our financial and onshore operating functions, including disruptions in our ability to make or receive payments, loss of intellectual property, proprietary information, customer and vendor data or other sensitive information, corruption or unauthorized release of our or our customer’s data.
We regularly defend against, respond to and mitigate risks from cybersecurity incidents, which to date have not had a material impact on our operations; however, there is no assurance that such impacts will not be material in the future. 23 Cybersecurity incidents or system failures affecting either us or our third-party service providers can cause disruptions of our ability to conduct our operations, including disruptions of certain systems on our rigs, which could result in injury to people, our or our customers' assets, or the environment, disruptions of our ability to conduct our financial and onshore operating functions, including disruptions in our ability to make or receive payments, loss of intellectual property, proprietary information, customer and vendor data or other sensitive information, corruption or unauthorized release of our or our customer’s data.
Additionally, the complex and rapidly evolving landscape around AI may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm.
Additionally, the rapidly evolving global legal landscape around AI, including the EU Artificial Intelligence Act and proposed and enacted U.S. federal and state laws and regulations, may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm.
The loss of this customer, or a substantial decrease in demand by this customer for ARO’s services, would have a material adverse effect on ARO’s business, results of operations and financial condition, which could materially adversely affect our financial position, operating results or cash flows. 23 We have issued a 10-year shareholder notes receivable to ARO (the “Notes Receivable from ARO”), which are governed by the laws of Saudi Arabia.
ARO’s income and accounts receivable are concentrated with Saudi Aramco. The loss of this customer, or a substantial decrease in demand by this customer for ARO’s services, would have a material adverse effect on ARO’s business, results of operations and financial condition, which could materially adversely affect our financial position, operating results or cash flows.
Sustainability Risks Regulation of GHG and climate change could have a negative impact on our business. Governments around the world are increasingly focused on enacting laws and regulations regarding climate change and regulation of GHG that may impact our operations, profitability and competitiveness.
Any such violation could materially adversely affect our financial position, operating results or cash flows. 40 Sustainability Risks Regulation of GHG and climate change could have a negative impact on our business. Governments around the world have recently focused on enacting laws and regulations regarding climate change and regulation of GHG that may impact our operations, profitability and competitiveness.
For example, the 2024 interest owed by ARO on the Notes Receivable from ARO of $24.6 million was paid in kind in December 2024 by increasing the principal balance of the Notes Receivable from ARO. We have a potential obligation to fund ARO for newbuild jackup rigs.
For example, the 2025 interest owed by ARO on the Notes Receivable from ARO of $24.1 million was paid in kind in December 2025 by increasing the principal balance of the Notes Receivable from ARO.
The impact of any such cybersecurity incident or system failure could materially adversely affect our financial position, operating results or cash flows. 20 Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows.
Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows. The costs required to reactivate a stacked rig and return the rig to drilling service are significant.
In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes.
The joint venture partners intend for the newbuild jackup rigs to be financed from ARO's available cash on hand or from operations and/or funds available from third-party financing. In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes.
Entities or groups, including private and nation state actors, have mounted cyberattacks on businesses and other organizations solely to disable or disrupt computer systems, disrupt operations and, in some cases, steal data.
Entities or groups, including private and nation state actors, have mounted cyberattacks on businesses and other organizations solely to disable or disrupt computer systems, disrupt operations and, in some cases, steal data. In addition, the U.S. government has issued public warnings that indicate energy assets and companies might be targeted by nation state threat actors.
Such customer consolidation and strategic transitions could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts.
Some of our customers have consolidated and could continue to consolidate and could use their size and purchasing power to achieve economies of scale and pricing concessions. Such customer consolidation could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts.
During periods of intensified competition, it is more difficult and costly to recruit, train and retain qualified employees, including in foreign countries that require a certain percentage of national employees. The most recent prolonged industry downturn and resulting reductions in offshore personnel wages further reduced the number of qualified personnel available.
Competition for the labor required for drilling operations and construction projects is intense, leading to shortages of qualified personnel in the industry. During periods of intensified competition, it is more difficult and costly to recruit, train and retain qualified employees, including in foreign countries that require a certain percentage of national employees.
In addition, new personnel that we hire may need to undergo training to develop the skills needed to perform their job duties. There can be no assurance that our training programs will be adequate for these purposes, which could expose us to operational hazards and risks.
There can be no assurance that our training programs will be adequate for these purposes, which could expose us to operational hazards and risks.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

8 edited+2 added−2 removed9 unchanged
Biggest changeAt the management level, the SDIT and his team are responsible for leading enterprise-wide information security strategy, policy, standards, architecture and processes, including the assessment and management of material risks from cybersecurity threats. The Company’s SDIT reports to the Chief Financial Officer. The SDIT has extensive cybersecurity knowledge and skills, gained from over 25 years of relevant work experience.
Biggest changeWe have protocols by which certain cybersecurity incidents are escalated within the Company and, where appropriate, reported in a timely manner to the board of directors and Audit Committee. 43 At the management level, the SDIT and his team are responsible for leading enterprise-wide information security strategy, policy, standards, architecture and processes, including the assessment and management of material risks from cybersecurity threats.
Risk Factors,” which should be read in conjunction with the foregoing information. 40
Risk Factors ,” which should be read in conjunction with the foregoing information. 44
The ERM risk register, which includes any identified cybersecurity-related risks, is reviewed by our Executive Management Committee and is reported quarterly to the board of directors, who then reviews the risk register, including any changes in key risks, and provides oversight as appropriate. 39 Oversight : The Audit Committee is responsible for, and actively engaged in, the oversight of our IT and cybersecurity program, including the oversight of risks from cybersecurity threats.
The ERM risk register, which includes any identified cybersecurity-related risks, is reviewed by our Executive Management Committee and is reported quarterly to the board of directors, who then reviews the risk register, including any changes in key risks, and provides oversight as appropriate.
Two of the members of the Audit Committee have obtained a certification or completed coursework in cybersecurity. The Audit Committee, at least quarterly, receives reports from the Company’s Senior Director – Information Technology (“SDIT”) on, among other things, the Company’s cybersecurity incidents, risks, threats and measures, training and organizational readiness.
The Audit Committee, at least quarterly, receives reports from the Company’s Senior Director – Information Technology (“SDIT”) on, among other things, the Company’s cybersecurity incidents, risks, threats and measures, training and organizational readiness. The board of directors is kept apprised of cybersecurity risk matters, including through participation in the quarterly cybersecurity briefings to the Audit Committee that are described above.
In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers. We obtain Systems and Organization Controls ("SOC") 1 and SOC 2 reports, as applicable, from our third-party service providers which assess those entities' controls to cover security, availability, integrity, confidentiality and privacy.
We obtain Systems and Organization Controls ("SOC") 1 and SOC 2 reports, as applicable, from our third-party service providers which assess those entities' controls to cover security, availability, integrity, confidentiality and privacy. Any applicable findings of this third-party assessment are analyzed by the appropriate employees and further action is taken as needed.
Our IT department, along with other key stakeholders, including Internal Audit, determines the need, scope and frequency of these assessments based on the Company's cybersecurity risk evaluation process. Further, pursuant to our CIRP, we may engage third-party support to enable an effective and timely response to a significant cybersecurity incident.
The Company works with external consultants to conduct cybersecurity assessments, which may include evaluations of cloud security, network vulnerabilities and other areas of cyber risk. Our IT department, along with other key stakeholders, including Internal Audit, determines the need, scope and frequency of these assessments based on the Company's cybersecurity risk evaluation process.
The SDIT is informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents in accordance with the CIRP, which may include reports from the IT team. The SDIT also regularly reviews risk management measures implemented by the Company to identify and mitigate cybersecurity risks.
The Company’s SDIT reports to the Chief Financial Officer. The SDIT has extensive cybersecurity knowledge and skills, gained from over 25 years of relevant work experience. The SDIT is informed about and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents in accordance with the CIRP, which may include reports from the IT team.
Third Parties and Assessments : We engage third-party service providers in various capacities to strengthen our cybersecurity posture. The Company works with external consultants to conduct cybersecurity assessments, which may include evaluations of cloud security, network vulnerabilities and other areas of cyber risk.
The SDIT also regularly reviews risk management measures implemented by the Company to identify and mitigate cybersecurity risks. Third Parties and Assessments : We engage third-party service providers in various capacities to strengthen our cybersecurity posture.
Removed
The board of directors is kept apprised of cybersecurity risk matters, including through participation in the quarterly cybersecurity briefings to the Audit Committee that are described above. We have protocols by which certain cybersecurity incidents are escalated within the Company and, where appropriate, reported in a timely manner to the board of directors and Audit Committee.
Added
Oversight : The Audit Committee is responsible for, and actively engaged in, the oversight of our IT and cybersecurity program, including the oversight of risks from cybersecurity threats and risks posed by the use and impacts of artificial intelligence. Two of the members of the Audit Committee have obtained a certification or completed coursework in cybersecurity.
Removed
Any applicable findings of this third-party assessment are analyzed by the appropriate employees and further action is taken as needed.
Added
Further, pursuant to our CIRP, we may engage third-party support to enable an effective and timely response to a significant cybersecurity incident. In addition to assessing our own cybersecurity preparedness, we also consider and evaluate cybersecurity risks associated with use of third-party service providers.

Item 2. Properties

Properties — owned and leased real estate

5 edited+4 added−9 removed1 unchanged
Biggest changeProperties Contract Drilling Fleet The following table provides certain information about the rigs in our drilling fleet as of February 18, 2025: Rig Name Rig Type Year Delivered Design Maximum Water Depth/ Drilling Depth Location Status Floaters VALARIS DS-4 Drillship 2010 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-7 Drillship 2013 Dynamically Positioned 10,000'/40,000' Angola Under contract VALARIS DS-8 Drillship 2015 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-9 Drillship 2015 Dynamically Positioned 12,000'/40,000' Cyprus Under contract VALARIS DS-10 Drillship 2017 Dynamically Positioned 12,000'/40,000' Spain Available VALARIS DS-11 Drillship 2013 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-12 Drillship 2013 Dynamically Positioned 12,000'/40,000' Egypt Under contract VALARIS DS-13 Drillship 2023 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-14 Drillship 2023 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-15 Drillship 2014 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-16 Drillship 2014 Dynamically Positioned 12,000'/40,000' Gulf of Mexico Under contract VALARIS DS-17 Drillship 2014 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-18 Drillship 2015 Dynamically Positioned 12,000'/40,000' Gulf of Mexico Under contract VALARIS DPS-1 Semisubmersible 2012 Dynamically Positioned 10,000'/35,000' Australia Under contract VALARIS DPS-3 Semisubmersible 2010 Dynamically Positioned 8,500'/37,500' Gulf of Mexico Preservation stacked (1)(2) VALARIS DPS-5 Semisubmersible 2012 Dynamically Positioned 8,500'/35,000' Gulf of Mexico Available (2) VALARIS DPS-6 Semisubmersible 2012 Dynamically Positioned 8,500'/35,000' Gulf of Mexico Preservation stacked (1)(2) VALARIS MS-1 Semisubmersible 2011 F&G ExD Millennium, Moored 8,200'/40,000 Australia Under contract Jackups VALARIS 72 Jackup 1981 Hitachi K1025N 225'/25,000' United Kingdom Under contract VALARIS 76 Jackup 2000 MLT Super 116-C 350'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 92 Jackup 1982 MLT 116-C 210'/25,000' United Kingdom Under contract VALARIS 102 Jackup 2002 KFELS MOD V-A 400'/30,000' Gulf of Mexico Preservation stacked (1) VALARIS 104 Jackup 2002 KFELS MOD V-B 400'/30,000' UAE Preservation stacked (1) VALARIS 106 Jackup 2005 KFELS MOD V-B 400'/30,000' Indonesia Under contract VALARIS 107 Jackup 2006 KFELS MOD V-B 400'/30,000' Australia Under contract VALARIS 108 Jackup 2007 KFELS MOD V-B 400'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 109 Jackup 2008 KFELS MOD V-Super B 350'/35,000' Namibia Preservation stacked (1) VALARIS 110 Jackup 2015 KFELS MOD V-B 400'/35,000' Qatar Under contract VALARIS 111 Jackup 2003 KFELS MOD V Enhanced B-Class 400'/36,000' Croatia Preservation stacked (1) VALARIS 115 Jackup 2013 Baker Marine Pacific Class 400 400'/30,000' Brunei Under contract VALARIS 116 Jackup 2008 LT 240- C 375'/35,000' Saudi Arabia Leased to ARO drilling VALARIS 117 Jackup 2009 LT 240- C 350'/35,000' Mexico Under contract VALARIS 118 Jackup 2012 LT 240- C 350'/35,000 Trinidad Under contract VALARIS 120 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract VALARIS 121 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract VALARIS 122 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract 41 Rig Name Rig Type Year Delivered Design Maximum Water Depth/ Drilling Depth Location Status Jackups (Continued) VALARIS 123 Jackup 2019 KFELS Super A 400'/40,000' Netherlands Under contract VALARIS 140 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 141 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 143 Jackup 2010 LT EXL Super 116-E 350'/35,000' UAE Preservation stacked (1) VALARIS 144 Jackup 2010 LT Super 116-E 350'/35,000' Angola Under contract VALARIS 145 Jackup 2010 LT Super 116-E 350'/35,000' Gulf of Mexico Preservation stacked (1) VALARIS 146 Jackup 2011 LT EXL Super 116-E 320'/35,000' Saudi Arabia Leased to ARO drilling VALARIS 147 Jackup 2013 LT Super 116-E 350'/30,000' UAE Preservation stacked (1) VALARIS 148 Jackup 2013 LT Super 116-E 350'/30,000' UAE Preservation stacked (1) VALARIS 247 Jackup 1998 LT Super Gorilla 400'/35,000' Australia Under contract VALARIS 248 Jackup 2000 LT Super Gorilla 400'/35,000' United Kingdom Under contract VALARIS 249 Jackup 2001 LT Super Gorilla 400'/35,000' Trinidad Under contract VALARIS 250 Jackup 2003 LT Super Gorilla XL 550'/35,000' Saudi Arabia Leased to ARO drilling VALARIS Viking Jackup 2010 KEFLS N Class 435'/35,000' United Kingdom Preservation stacked (1) VALARIS Stavanger Jackup 2011 KEFLS N Class 400'/35,000' United Kingdom Under contract VALARIS Norway Jackup 2011 KEFLS N Class 400'/35,000' United Kingdom Under contract (1) Prior to stacking, upfront steps are taken to preserve the rig.
Biggest changeProperties Contract Drilling Fleet The following table provides certain information about the rigs in our drilling fleet as of February 17, 2026: Rig Name Rig Type Year Delivered Design Maximum Water Depth/ Drilling Depth Location Status Floaters VALARIS DS-4 Drillship 2010 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-7 Drillship 2013 Dynamically Positioned 10,000'/40,000' Angola Under contract VALARIS DS-8 Drillship 2015 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-9 Drillship 2015 Dynamically Positioned 12,000'/40,000' Angola Under contract VALARIS DS-10 Drillship 2017 Dynamically Positioned 12,000'/40,000' Spain Future contract VALARIS DS-11 Drillship 2013 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-12 Drillship 2013 Dynamically Positioned 12,000'/40,000' Spain Future contract VALARIS DS-13 Drillship 2023 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-14 Drillship 2023 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-15 Drillship 2014 Dynamically Positioned 12,000'/40,000' Spain Future contract VALARIS DS-16 Drillship 2014 Dynamically Positioned 12,000'/40,000' Gulf of America Under contract VALARIS DS-17 Drillship 2014 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-18 Drillship 2015 Dynamically Positioned 12,000'/40,000' Gulf of America Future contract VALARIS DPS-1 Semisubmersible 2012 Dynamically Positioned 10,000'/35,000' Malaysia Held for sale VALARIS MS-1 Semisubmersible 2011 F&G ExD Millennium, Moored 8,200'/40,000 Malaysia Available Jackups VALARIS 72 Jackup 1981 Hitachi K1025N 225'/25,000' United Kingdom Under contract VALARIS 76 Jackup 2000 MLT Super 116-C 350'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 92 Jackup 1982 MLT 116-C 210'/25,000' United Kingdom Under contract VALARIS 104 Jackup 2002 KFELS MOD V-B 400'/30,000' UAE Preservation stacked (1) VALARIS 106 Jackup 2005 KFELS MOD V-B 400'/30,000' Indonesia Future contract VALARIS 107 Jackup 2006 KFELS MOD V-B 400'/30,000' Australia Under contract VALARIS 108 Jackup 2007 KFELS MOD V-B 400'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 109 Jackup 2008 KFELS MOD V-Super B 350'/35,000' Namibia Preservation stacked (1) VALARIS 110 Jackup 2015 KFELS MOD V-B 400'/35,000' Qatar Under contract VALARIS 111 Jackup 2003 KFELS MOD V Enhanced B-Class 400'/36,000' Croatia Preservation stacked (1) VALARIS 115 Jackup 2013 Baker Marine Pacific Class 400 400'/30,000' Brunei Under contract VALARIS 116 Jackup 2008 LT 240- C 375'/35,000' Saudi Arabia Leased to ARO drilling VALARIS 117 Jackup 2009 LT 240- C 350'/35,000' Mexico Under contract VALARIS 118 Jackup 2012 LT 240- C 350'/35,000 Trinidad Under contract VALARIS 120 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract VALARIS 121 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract VALARIS 122 Jackup 2013 KFELS Super A 400'/40,000' United Kingdom Under contract VALARIS 123 Jackup 2019 KFELS Super A 400'/40,000' Netherlands Under contract VALARIS 140 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 141 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 143 Jackup 2010 LT EXL Super 116-E 350'/35,000' UAE Preservation stacked (1) VALARIS 144 Jackup 2010 LT Super 116-E 350'/35,000' Angola Under contract 45 Rig Name Rig Type Year Delivered Design Maximum Water Depth/ Drilling Depth Location Status Jackups (Continued) VALARIS 146 Jackup 2011 LT EXL Super 116-E 320'/35,000' Saudi Arabia Leased to ARO drilling VALARIS 147 Jackup 2013 LT Super 116-E 350'/30,000' UAE Preservation stacked (1) VALARIS 148 Jackup 2013 LT Super 116-E 350'/30,000' UAE Preservation stacked (1) VALARIS 248 Jackup 2000 LT Super Gorilla 400'/35,000' United Kingdom Under contract VALARIS 249 Jackup 2001 LT Super Gorilla 400'/35,000' Trinidad Under contract VALARIS 250 Jackup 2003 LT Super Gorilla XL 550'/35,000' Saudi Arabia Leased to ARO drilling VALARIS Viking Jackup 2010 KEFLS N Class 435'/35,000' United Kingdom Preservation stacked (1) VALARIS Stavanger Jackup 2011 KEFLS N Class 400'/35,000' United Kingdom Under contract VALARIS Norway Jackup 2011 KEFLS N Class 400'/35,000' United Kingdom Under contract (1) Prior to stacking, upfront steps are taken to preserve the rig.
We lease various office, warehouse and storage facilities worldwide, including our corporate offices in Houston, Texas and other offices and facilities located in various countries in North America, South America, Europe, Africa and the Asia Pacific region. We own offices and other facilities in the U.S. (Louisiana) and Brazil.
We own all rigs in our fleet and we manage the drilling operations for two platform rigs owned by a third-party. We lease various office, warehouse and storage facilities worldwide, including our corporate offices in Houston, Texas and other offices and facilities located in various countries in North America, South America, Europe, Middle East, Africa and the Asia Pacific region.
The intended water depth, well depth and geological conditions are the principal factors that determine the size and type of rig most suitable for a particular drilling project. Floater rigs consist of drillships and semisubmersibles. Drillships are purpose-built maritime vessels outfitted with drilling apparatus.
Our MODUs are marine vessels that function as drilling rigs, equipped to drill offshore wells and, on occasion, install customer’s surface and subsea equipment. The intended water depth, environmental conditions, well depth and geological conditions are the principal factors that determine the size and type of drilling unit most suitable for a particular offshore project.
Drillships are self-propelled and can be positioned over a drill site through the use of computer-controlled propellers or "thruster" dynamic positioning systems. Our drillships are capable of drilling in water depths of up to 12,000 feet and are suitable for deepwater drilling in remote locations because of their superior mobility and large load-carrying capacity.
Floater rigs consist of drillships and semisubmersibles. Drillships are purpose-built maritime vessels outfitted with drilling equipment packages. Drillships are self-propelled and can be positioned over a well location through the use of dynamic positioning systems. Our 13 drillships are capable of drilling in water depths of up to 12,000 feet.
Although drillships are most often used for deepwater drilling and exploratory well drilling, drillships can also be used as a platform to carry out well maintenance or completion work such as casing and tubing installation or subsea tree installations. 42 Semisubmersibles are drilling rigs with pontoons and columns that are partially submerged at the drilling location to provide added stability during drilling operations.
Semisubmersibles are drilling rigs with pontoons and columns that are partially submerged at the drilling location to provide added stability during drilling operations. Semisubmersibles are held in a fixed location over the ocean floor either by mooring systems or through dynamic positioning.
Removed
These steps are designed to reduce time and lower cost to reactivate the rig once returned to the active fleet. (2) In the first quarter of 2025, management approved a plan to retire VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 from the fleet.
Added
These steps are designed to reduce time and lower cost to reactivate the rig once returned to the active fleet. We provide Mobile Offshore Drilling Units (MODUs) and associated services to support our clients' offshore exploration, appraisal, production and carbon capture and storage activities, including drilling new wells, servicing existing wells and eventually abandoning wells.
Removed
The Company expects that these rigs will be removed from the global drilling supply and repurposed for alternative uses or scrapped. The equipment on our drilling rigs includes engines, draw works, derricks, pumps to circulate drilling fluid, well control systems, drill string and related equipment.
Added
Our moored semisubmersible is capable of drilling in water depths of up to 8,000 feet and our dynamically positioned semisubmersible is capable of drilling in water depths of up to 10,000 feet. Jackups are drilling rigs that operate in shallower water depths of 400 feet or less.
Removed
The engines power a top-drive mechanism that turns the drill string and drill bit so that the hole is drilled by grinding subsurface materials, which are then returned to the rig by the drilling fluid.
Added
They are self-elevating MODUs that can be towed to a field location and elevated above the waterline using leg-jacking systems. The cantilever and drilling equipment extends outward from the hull over fixed platforms or open water locations to allow well operations to take place. We currently have 31 jackup rigs in our fleet.
Removed
Semisubmersibles are held in a fixed location over the ocean floor either by being anchored to the sea bottom with mooring chains or dynamically positioned by computer-controlled propellers or "thrusters" similar to that used by our drillships. Moored semisubmersibles are most commonly used for drilling in water depths of 4,499 feet or less.
Added
We own offices and other facilities in the U.S. (Louisiana) and Brazil. 46
Removed
However, VALARIS MS-1, which is a moored semisubmersible, is capable of deepwater drilling in water depths greater than 5,000 feet. Dynamically positioned semisubmersibles generally are outfitted for drilling in deeper water depths and are well-suited for deepwater development and exploratory well drilling.
Removed
Further, we have two hybrid semisubmersibles, VALARIS DPS-3 and VALARIS DPS-5, which leverage both moored and dynamically positioned configurations. This hybrid design provides multi-faceted drilling solutions to customers with both shallow water and deepwater requirements. Jackup rigs stand on the ocean floor with their hull and drilling equipment elevated above the water on connected leg supports.
Removed
Jackups are generally preferred over other rig types in shallow water depths of 400 feet or less, primarily because jackups provide a more stable drilling platform with above water well-control equipment.
Removed
Our jackups are of the independent leg design where each leg can be fixed into the ocean floor at varying depths and equipped with a cantilever that allows the drilling equipment to extend outward from the hull over fixed platforms enabling safer drilling of both exploratory and development wells.
Removed
The jackup hull supports the drilling equipment, jacking system, crew quarters, storage and loading facilities, helicopter landing pad and related equipment and supplies. We own all rigs in our fleet and we manage the drilling operations for two platform rigs owned by a third-party.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

3 edited+0 added−0 removed3 unchanged
Biggest changeA $0.3 million liability related to these matters was included in Accrued liabilities and other on our Consolidated Balance Sheet as of December 31, 2024 included in " Item 8.
Biggest changeA $0.5 million liability related to these matters was included in Accrued liabilities and other on our Consolidated Balance Sheet as of December 31, 2025 included in " Item 8.
See “ Note 11 - Commitments and Contingencies ” to our consolidated financial statements included in “ Item 8 . Financial Statements and Supplementary Data ” for additional information. 43
See “ Note 11 - Commitments and Contingencies ” to our consolidated financial statements included in “ Item 8 . Financial Statements and Supplementary Data ” for additional information.
Item 3. Legal Proceedings Environmental Matters We are currently subject to pending notices of assessment relating to spills of drilling fluids, oil, brine, chemicals, grease or fuel from drilling rigs operating offshore Brazil from 2008 to 2019, pursuant to which the governmental authorities have assessed, or are anticipated to assess, fines.
Item 3. Legal Proceedings Environmental Matters We are currently subject to pending notices of assessment relating to spills of drilling fluids, oil, brine, chemicals, grease or fuel from drilling rigs operating offshore Brazil from 2008 to 2017, pursuant to which the governmental authorities have assessed, or are anticipated to assess, fines.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

8 edited+1 added−0 removed3 unchanged
Biggest changeBermuda Tax We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes.
Biggest changeFurther, in connection with certain provisions within the Business Combination Agreement, we are restricted in our ability to declare dividends until the transaction is completed or the agreement is terminated. Bermuda Tax We have been designated by the Bermuda Monetary Authority as a non-resident for Bermuda exchange control purposes.
For years ended December 31, 2024 and prior, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares.
For years ended December 31, 2024 and prior, there was no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares.
COMPARISON OF CUMULATIVE TOTAL RETURN (1) Among Valaris Limited, the S&P MidCap 400 Index and Industry Index 46 May 3, 2021 Fiscal Years Ended December 31, Relisting 2021 2022 2023 2024 Valaris Limited 100.0 151.9 285.3 289.3 186.7 S&P MidCap 400 100.0 104.6 91.0 105.9 120.7 Industry Index 100.0 96.5 160.7 168.4 155.1 (1) Total return assuming reinvestment of dividends.
COMPARISON OF CUMULATIVE TOTAL RETURN (1) Among Valaris Limited, the S&P MidCap 400 Index and Industry Index 49 May 3, 2021 Fiscal Years Ended December 31, Relisting 2021 2022 2023 2024 2025 Valaris Limited $ 100.0 $ 151.9 $ 285.3 $ 289.3 $ 186.7 $ 212.7 S&P MidCap 400 $ 100.0 $ 104.6 $ 91.0 $ 105.9 $ 120.7 $ 129.7 Industry Index $ 100.0 $ 96.5 $ 160.7 $ 168.4 $ 155.1 $ 167.3 (1) Total return assuming reinvestment of dividends.
Many of our shareholders hold shares electronically, all of which are owned by a nominee of the Depository Trust Company. We had 66 shareholders of record on February 3, 2025. Dividends We have not paid or declared any dividends on our Common Shares. Our Indenture and the Credit Agreement include provisions that limit our ability to pay dividends.
Many of our shareholders hold shares electronically, all of which are owned by a nominee of the Depository Trust Company. We had 63 shareholders of record on February 1, 2026. Dividends We have not paid or declared any dividends on our Common Shares. Our Indenture and the 2028 Credit Agreement include provisions that limit our ability to pay dividends.
The Share Repurchase Program does not have a fixed expiration, may be modified, suspended or discontinued at any time and any repurchases made pursuant to the Share Repurchase Program are subject to compliance with applicable covenants and restrictions under our financing agreements. 45 The following table provides a summary of our repurchases of our equity securities during the quarter ended December 31, 2024: Issuer Purchases of Equity Securities Period Total Number of Securities Purchased Average Price Paid per Security Total Number of Securities Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Securities that May Yet Be Purchased Under Plans or Programs (in millions) October 1 - October 31 424,538 $ 53.10 424,538 $ 277.5 November 1 - November 30 48,174 $ 49.63 48,174 $ 275.1 December 1 - December 31 1,474 $ 45.39 1,474 $ 275.0 Total 474,186 $ 52.72 474,186 $ 275.0 Cumulative Total Shareholder Return The chart below presents a comparison of the cumulative total shareholder return, assuming $100 invested on May 3, 2021 (first trading date after our emergence from bankruptcy) for Valaris Limited, the Standard & Poor's MidCap 400 Index and Dow Jones US Select Oil Equipment & Services Index (the "Industry Index").
The Share Repurchase Program does not have a fixed expiration, may be modified, suspended or discontinued at any time and any repurchases made pursuant to the Share Repurchase Program are subject to compliance with applicable covenants and restrictions under our financing agreements. 48 The following table provides a summary of our repurchases of our equity securities during the quarter ended December 31, 2025 (in millions, except average price per share): Issuer Purchases of Equity Securities Period Total Number of Securities Purchased Average Price Paid per Security Total Number of Securities Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Securities that May Yet Be Purchased Under Plans or Programs October 1 - October 31 0.2 $ 51.61 0.2 $ 190.7 November 1 - November 30 0.1 $ 55.58 0.1 $ 183.3 December 1 - December 31 0.2 $ 51.47 0.2 $ 175.0 Total 0.5 $ 52.68 0.5 $ 175.0 Cumulative Total Shareholder Return The chart below presents a comparison of the cumulative total shareholder return, assuming $100 invested on May 3, 2021 (first trading date after our emergence from bankruptcy) for Valaris Limited, the Standard & Poor's MidCap 400 Index and Dow Jones US Select Oil Equipment & Services Index (the "Industry Index").
" Issuer Repurchases of Equity Securities Our board of directors has authorized a share repurchase program (the "Share Repurchase Program") under which we may purchase up to $600.0 million of our outstanding Common Shares.
" Issuer Repurchases of Equity Securities Our board of directors has authorized a share repurchase program (the "Share Repurchase Program") under which we may purchase up to $600.0 million of our outstanding Common Shares, subject to certain additional restrictions provided within the Business Combination Agreement.
Bermuda enacted the Corporate Income Tax Act 2023 on December 27, 2023 (the “CIT Act”) which stipulates a tax on 15% of the net income of certain Bermuda constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities).
The CIT Act imposes a tax on 15% of the net income of certain Bermuda constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities).
No tax is chargeable under the CIT Act until tax years starting on or after January 1, 2025. Equity Compensation Plans For information on shares issued or to be issued in connection with our equity compensation plans, see "Part III, Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Equity Compensation Plans For information on shares issued or to be issued in connection with our equity compensation plans, see "Part III, Item 12 . Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters.
Added
On December 27, 2023, Bermuda enacted the Corporate Income Tax Act 2023 (the “CIT Act”), which became effective on January 1, 2025.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

119 edited+57 added−68 removed44 unchanged
Biggest changeYear Ended December 31, 2024 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues Revenues (exclusive of reimbursable revenues) (3) $ 1,382.8 $ 686.5 $ 512.5 $ 142.6 $ (512.5) $ 2,211.9 Reimbursable revenues (1) (3) 57.9 68.4 — 24.4 — 150.7 Total operating revenues (3) 1,440.7 754.9 512.5 167.0 (512.5) 2,362.6 Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) (3) 930.3 477.1 367.7 63.6 (220.2) 1,618.5 Reimbursable expenses (1) (3) 54.9 64.3 — 23.2 — 142.4 Total contract drilling (exclusive of depreciation) (3) 985.2 541.4 367.7 86.8 (220.2) 1,760.9 Loss on impairment — — 28.4 — (28.4) — Depreciation 58.1 45.0 89.2 9.5 (79.7) 122.1 General and administrative — — 23.7 — 92.6 116.3 Equity in losses of ARO — — — — (11.0) (11.0) Operating income $ 397.4 $ 168.5 $ 3.5 $ 70.7 $ (287.8) $ 352.3 56 Year Ended December 31, 2023 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues Revenues (exclusive of reimbursable revenues) (1) (3) $ 902.8 $ 620.6 $ 496.6 $ 152.6 $ (496.6) $ 1,676.0 Reimbursable revenues (2) (3) 45.9 39.0 — 23.3 — 108.2 Total operating revenues (3) 948.7 659.6 496.6 175.9 (496.6) 1,784.2 Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) (1) (3) 768.4 480.4 365.9 52.6 (226.9) 1,440.4 Reimbursable expenses (2) (3) 43.6 37.0 — 22.6 — 103.2 Total contract drilling (exclusive of depreciation) (3) 812.0 517.4 365.9 75.2 (226.9) 1,543.6 Depreciation 55.8 40.0 65.9 5.0 (65.6) 101.1 General and administrative — — 22.2 — 77.1 99.3 Equity in earnings of ARO — — — — 13.3 13.3 Operating income $ 80.9 $ 102.2 $ 42.6 $ 95.7 $ (267.9) $ 53.5 (1) For the purposes of our discussion below, we refer to Revenues (exclusive of reimbursable revenues) and Contract drilling expense (exclusive of depreciation and reimbursable expenses) as "Revenues" and "Contract Drilling Expenses", respectively.
Biggest changeYear Ended December 31, 2025 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues: Revenues (exclusive of reimbursable revenues) $ 1,224.1 $ 823.4 $ 571.0 $ 160.4 $ (571.0) $ 2,207.9 Reimbursable revenues 36.5 89.4 — 35.2 — 161.1 Total operating revenues 1,260.6 912.8 571.0 195.6 (571.0) 2,369.0 Operating expenses: Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 765.6 486.5 360.7 70.6 (206.3) 1,477.1 Reimbursable expenses 34.3 83.5 — 34.8 — 152.6 Total contract drilling expenses (exclusive of depreciation) 799.9 570.0 360.7 105.4 (206.3) 1,629.7 Loss on impairment 23.6 3.7 — — — 27.3 Depreciation 60.5 58.6 114.9 13.2 (100.9) 146.3 General and administrative — — 28.8 — 68.3 97.1 Equity in earnings of ARO — — — — 8.4 8.4 Operating income $ 376.6 $ 280.5 $ 66.6 $ 77.0 $ (323.7) $ 477.0 60 Year Ended December 31, 2024 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues: Revenues (exclusive of reimbursable revenues) $ 1,382.8 $ 686.5 $ 512.5 $ 142.6 $ (512.5) $ 2,211.9 Reimbursable revenues 57.9 68.4 — 24.4 — 150.7 Total operating revenues 1,440.7 754.9 512.5 167.0 (512.5) 2,362.6 Operating expenses: Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 930.3 477.1 367.7 63.6 (220.2) 1,618.5 Reimbursable expenses 54.9 64.3 — 23.2 — 142.4 Total contract drilling expenses (exclusive of depreciation) 985.2 541.4 367.7 86.8 (220.2) 1,760.9 Loss on impairment — — 28.4 — (28.4) — Depreciation 58.1 45.0 89.2 9.5 (79.7) 122.1 General and administrative — — 23.7 — 92.6 116.3 Equity in losses of ARO — — — — (11.0) (11.0) Operating income $ 397.4 $ 168.5 $ 3.5 $ 70.7 $ (287.8) $ 352.3 Floaters Floater revenues decreased $158.7 million, or 11%, in 2025 compared to 2024, primarily due to a net decrease of $346.6 million from fewer operating days relative to the prior year, primarily due to certain floaters which completed their contracts since the end of the second quarter of 2024 and have either been warm stacked or retired.
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.
Under day rate contracts, we provide an integrated drilling service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig.
(2) We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows.
We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows.
The use of different estimates, judgments and assumptions in connection with accounting for income taxes, especially those involving the deployment of tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and operating results. We operate in several jurisdictions where tax laws relating to the offshore drilling industry are not well developed.
The use of different estimates, judgments and assumptions in connection with accounting for income taxes, especially those involving the deployment of tax planning strategies, may result in materially different carrying values of income tax assets and liabilities and operating results. 73 We operate in several jurisdictions where tax laws relating to the offshore drilling industry are not well developed.
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.
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.
Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the Credit Agreement, and the lenders have a first priority lien on the assets securing the Credit Agreement. The commitments under the Credit Agreement became available to be borrowed on April 19, 2023.
Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the 2028 Credit Agreement, and the lenders have a first priority lien on the assets securing the 2028 Credit Agreement. The commitments under the 2028 Credit Agreement became available to be borrowed on April 19, 2023.
Floaters, Jackups and ARO are also reportable segments. 55 Our onshore support costs included within Contract Drilling Expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items." Further, general and administrative expense and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items." Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO.
Floaters, Jackups and ARO are also reportable segments. 59 Our onshore support costs included within contract drilling expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items." Further, general and administrative expenses and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items." Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO.
During the third quarter of 2019, we made a A$42.0 million payment (approximately $29.0 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment. In December 2024, we reached a settlement agreement with the Australian tax authorities for A$4.0 million (approximately $2.0 million at current period-end exchange rates).
During the third quarter of 2019, we made a A$42.0 million payment (approximately $29.0 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment. In December 2024, we reached a settlement agreement with the Australian tax authorities for A$4.0 million (approximately $2.0 million at then-current exchange rates).
See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information. Segment information for the years ended December 31, 2024 and 2023 is as follows (in millions).
See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in "Item 8 . Financial Statements and Supplementary Data " for additional information. Segment information for the years ended December 31, 2025 and 2024 is as follows (in millions).
The development and application of such policies requires estimates, judgments and assumptions relative to the nature of, and benefits from, expenditures on our assets. We establish property and equipment accounting policies that are designed to depreciate our assets over their estimated useful lives.
The development and application of such policies require estimates, judgments and assumptions relative to the nature of, and benefits from, expenditures on our assets. We establish property and equipment accounting policies that are designed to depreciate our assets over their estimated useful lives.
Governments have also proposed or implemented new or enhanced disclosure requirements related to climate change matters and GHG emissions that may increase compliance and disclosure costs. In January 2023, the EU enacted the Corporate Sustainability Reporting Directive, which will require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.
Governments have also proposed, implemented or amended new or enhanced disclosure requirements related to climate change matters and GHG emissions that may increase compliance and disclosure costs. In January 2023, the EU enacted the Corporate Sustainability Reporting Directive to require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies.
The discussion of our results of operations and liquidity in this section includes comparisons for the years ended December 31, 2024 and 2023. For a similar discussion, including comparisons for the years ended December 31, 2023 and 2022, see “Part II. Item 7.
The discussion of our results of operations and liquidity in this section includes comparisons for the years ended December 31, 2025 and 2024. For a similar discussion, including comparisons for the years ended December 31, 2024 and 2023, see “Part II. Item 7.
See " Note 6 - Debt " to our consolidated financial statements included in " Item 8 .
See “ Note 6 - Debt " to our consolidated financial statements included in " Item 8 .
As the Notes Receivable from ARO bear interest on the applicable SOFR rate determined at the end of the preceding year, the rate governing our interest income in 2025 has already been determined.
As the Notes Receivable from ARO bear interest on the applicable SOFR rate determined at the end of the preceding year, the rate governing our interest income in 2026 has already been determined.
Beginning with the delivery of the second newbuild, each partner's commitment shall be reduced by the lesser of the actual cost of each newbuild rig or $250.0 million, on a proportionate basis. Following the delivery of Kingdom 2, our commitment to fund the newbuild program has been reduced to $1.1 billion.
Beginning with the delivery of the second newbuild, each partner's commitment is reduced by the lesser of the actual cost of each newbuild rig or $250.0 million, on a proportionate basis. Following the delivery of Kingdom 2, our commitment to fund the newbuild program has been reduced to $1.1 billion.
Using our key assumptions at December 31, 2024, a one-percentage-point decrease in the assumed discount rate would increase our recorded pension and other postretirement benefit liabilities by approximately $53.2 million, while a one-percentage-point decrease (increase) in the expected long-term rate of return on plan assets would increase (decrease) annual net benefits cost by approximately $4.6 million.
Using our key assumptions at December 31, 2025, a one-percentage-point decrease in the assumed discount rate would increase our recorded pension and other postretirement benefit liabilities by approximately $52.4 million, while a one-percentage-point decrease (increase) in the expected long-term rate of return on plan assets would increase (decrease) annual net benefits cost by approximately $4.6 million.
As the interest rates for such borrowings are at variable rates, we are subject to interest rate risk. As of December 31, 2024, we had no outstanding borrowings under the Credit Agreement.
As the interest rates for such borrowings are at variable rates, we are subject to interest rate risk. As of December 31, 2025, we had no outstanding borrowings under the 2028 Credit Agreement.
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 consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
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 consolidated financial statements included in " Item 8 .
Our 2024 consolidated effective income tax rate includes a discrete tax benefit of $85.8 million, primarily attributable to change in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Excluding the impact of the aforementioned discrete tax items, the consolidated effective income tax rate was 21.8% as of December 31, 2024.
Our 2024 consolidated effective income tax rate includes a discrete tax benefit of $85.8 million, primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Excluding the impact of the aforementioned discrete tax items, our consolidated effective income tax rate was 21.8% for the year ended December 31, 2024.
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.
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 capital allocation priorities of ARO. ARO has not made a cash distribution of earnings to its partners since its formation.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our annual report on Form 10-K for the year ended December 31, 2023 , filed with the SEC on February 15, 2024.
Management’s Discussion and Analysis of Financial Condition and Results of Operations ” of our annual report on Form 10-K for the year ended December 31, 2024 , filed with the SEC on February 20, 2025.
Furthermore, the 2024 interest owed by ARO on the Notes Receivable from ARO of $24.6 million was paid in kind in December 2024 by increasing the principal balance of the Notes Receivable from ARO. See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in " Item 8 .
In 2025, interest owed by ARO on the Notes Receivable from ARO of $24.1 million was paid in kind in December 2025 by increasing the principal balance of the Notes Receivable from ARO. See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in " Item 8 .
As of December 31, 2024, we were contingently liable for an aggregate amount of $27.0 million under outstanding letters of credit, which guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions.
As of December 31, 2025, we were contingently liable for an aggregate amount of $35.4 million under outstanding letters of credit, which guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions.
We are exposed to foreign currency exchange risk to the extent the amount of our monetary assets denominated in the foreign currency differs from our obligations in the foreign currency or revenue earned differs from costs incurred in the foreign currency.
We are exposed to foreign currency exchange risk to the extent the amount of our monetary assets denominated in the foreign currency differs from our obligations in the foreign currency or revenue earned differs from costs incurred in the foreign currency. We do not currently hedge our foreign currency risk.
Our critical accounting policies are those related to property and equipment, income taxes and pension and other post-retirement benefits. Property and Equipment As of December 31, 2024, the carrying value of our property and equipment totaled $1.9 billion, which represented 44% of total assets.
Our critical accounting policies are those related to property and equipment, income taxes and pension and other post-retirement benefits. Property and Equipment As of December 31, 2025, the carrying value of our property and equipment totaled $2.1 billion, which represented 39% of total assets.
The expected return for each asset class was then weighted based upon the current asset allocation to develop the expected long-term rate of return on assets assumption for the plan, which decreased to 6.44% at December 31, 2024 from 6.88% at December 31, 2023.
The expected return for each asset class was then weighted based upon the current asset allocation to develop the expected long-term rate of return on assets assumption for the plan, which increased to 6.62% at December 31, 2025 from 6.44% at December 31, 2024.
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. 62 We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses.
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, subject to certain restrictions within the Business Combination Agreement. We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses.
Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirement. As of December 31, 2024, we had collateral deposits in the amount of $10.8 million with respect to these agreements.
Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirement. As of December 31, 2025, we had collateral deposits in the amount of $16.3 million with respect to these agreements.
Key assumptions at December 31, 2024, included (1) a weighted average discount rate of 5.54% to determine pension benefit obligations, (2) a weighted average discount rate of 4.97% to determine net periodic pension cost and (3) an expected long-term rate of return on pension plan assets of 6.88% to determine net periodic pension cost.
Key assumptions at December 31, 2025, included (1) a weighted average discount rate of 5.34% to determine pension benefit obligations, (2) a weighted average discount rate of 5.54% to determine net periodic pension cost and (3) an expected long-term rate of return on pension plan assets of 6.44% to determine net periodic pension cost.
NEW ACCOUNTING PRONOUNCEMENTS See " Note 1 - Description of the Business and Summary of Significant Accounting Policies " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for information on new accounting pronouncements.
Financial Statements and Supplementary Data " for information on our pension and other postretirement benefit plans. 74 NEW ACCOUNTING PRONOUNCEMENTS See " Note 1 - Description of the Business and Summary of Significant Accounting Policies " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for information on new accounting pronouncements.
We are subject to interest rate risk on our fixed-interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates impacting the fair value of the debt. Our Credit Agreement provides for commitments permitting borrowings of up to $375.0 million at December 31, 2024.
Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates impacting the fair value of the debt. Our 2028 Credit Agreement provides for commitments permitting borrowings of up to $375.0 million at December 31, 2025.
Gulf of Mexico on two rigs owned by a third-party not included in the table above. 54 Operating results for our contract drilling services segment are largely dependent on two primary revenue metrics: utilization and day rates.
We provide management services in the Gulf of America on two rigs owned by a third-party that are not included in the table above. 58 Operating results for our contract drilling services segment are largely dependent on two primary revenue metrics: utilization and day rates.
(3) Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues) by the aggregate number of operating days.
(3) Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues), excluding contract termination fees, by the aggregate number of operating days.
Our fleet of 35 jackup rigs represented 38% of the gross cost and 37% of the net carrying amount of our depreciable property and equipment as of December 31, 2024. 69 Income Taxes We conduct operations and earn income in numerous countries and are subject to the laws of numerous tax jurisdictions.
Our fleet of 31 jackup rigs represented 40% of the gross cost and 39% of the net carrying amount of our depreciable property and equipment as of December 31, 2025. Income Taxes We conduct operations and earn income in numerous countries and are subject to the laws of numerous tax jurisdictions.
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.
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.
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.
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. 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.
We are unable to specify with certainty whether we would be required to and in which periods we may be obligated to settle such amounts. In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs.
We are unable to specify with certainty whether we would be required to and in which periods we may be obligated to settle such amounts. 68 In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. The Shareholder Agreement specifies that ARO shall purchase 20 newbuild jackup rigs.
We evaluate the remaining useful lives of our rig components on a periodic basis, considering operating condition, functional capability and market and economic factors. Our fleet of 18 floater rigs represented 59% of the gross cost and 61% of the net carrying amount of our depreciable property and equipment as of December 31, 2024.
We evaluate the remaining useful lives of our rig components on a periodic basis, considering operating condition, functional capability and market and economic factors. Our fleet of 14 floater rigs, excluding our held-for-sale rig, represented 57% of the gross cost and 59% of the net carrying amount of our depreciable property and equipment as of December 31, 2025.
The following table summarizes our other commitments as of December 31, 2024 (in millions): Commitment expiration by period 2025 2026 and 2027 2028 and 2029 Thereafter Total Letters of credit $ 9.8 $ 17.2 $ — $ — $ 27.0 Tax Assessments In February 2024, one of our Malaysian subsidiaries received an unfavorable court decision regarding a tax assessment for the 2012-2017 tax years totaling approximately MYR117.0 million (approximately $26.0 million converted at current period-end exchange rates), including a late payment penalty.
The following table summarizes our other commitments as of December 31, 2025 (in millions): Commitment expiration by period 2026 2027 and 2028 2029 and 2030 Thereafter Total Letters of credit $ 5.1 $ 25.3 $ 5.0 $ — $ 35.4 69 Tax Assessments In February 2024, one of our Malaysian subsidiaries received an unfavorable court decision regarding a tax assessment for the 2012-2017 tax years totaling approximately MYR117.0 million (approximately $29.0 million converted at current quarter-end exchange rates), including a late payment penalty.
We do not currently hedge our foreign currency risk. 68 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. requires us to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the U.S. requires us to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.
For example, the U.S. has initiated the process of withdrawing from the Paris Agreement in January 2025, after previously reentering it in February 2021.
For example, the U.S. initiated the process of withdrawing from the Paris Agreement in January 2025 and completed its withdrawal in January 2026, after previously reentering it in February 2021.
The Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, 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.
Financial Statements and Supplementary Data " for additional information on the 2030 Second Lien Notes. 2028 Credit Agreement The 2028 Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, 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.
A hypothetical 1% decrease to SOFR would decrease interest income for the year ended December 31, 2025 by $3.8 million based on the principal amount outstanding at December 31, 2024 of $376.6 million. Foreign Currency Risk Our functional currency is the U.S. dollar.
A hypothetical 1% decrease to SOFR would decrease interest income for the year ended December 31, 2026 by $4.0 million based on the principal amount outstanding at December 31, 2025 of $400.7 million. Foreign Currency Risk Our functional currency is the U.S. dollar.
LIQUIDITY AND CAPITAL RESOURCES Liquidity 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.").
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 the distribution of earnings from ARO.
The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment: Years Ended December 31, 2024 2023 Rig Utilization - Total Fleet (1) Floaters 61% 58% Jackups 58% 59% Other (2) 100% 100% Total Valaris 67% 66% ARO 80% 93% Rig Utilization - Active Fleet (1) Floaters 83% 75% Jackups 83% 79% Other (2) 100% 100% Total Valaris 87% 83% ARO 80% 93% Average Daily Revenue (3) Floaters $ 345,000 $ 265,000 Jackups 121,000 106,000 Other (2) 38,000 42,000 Total Valaris $ 165,000 $ 130,000 ARO $ 104,000 $ 96,000 (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.
The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment: Years Ended December 31, 2025 2024 Rig Utilization - Total Fleet (1) Floaters 54 % 61 % Jackups 61 % 58 % Other (2) 97 % 100 % Total Valaris 65 % 67 % ARO 86 % 80 % Rig Utilization - Active Fleet (1) Floaters 71 % 83 % Jackups 93 % 83 % Other (2) 97 % 100 % Total Valaris 87 % 87 % ARO 86 % 80 % Average Daily Revenue (3) Floaters $ 386,000 $ 345,000 Jackups 138,000 121,000 Other (2) 51,000 38,000 Total Valaris $ 179,000 $ 165,000 ARO $ 113,000 $ 104,000 (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.
ARO intends for these newly ordered jackup rigs to be financed out of cash on hand or from operations or funds available from third-party financing. 65 In the event ARO has insufficient cash or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program.
In the event ARO has insufficient cash or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program.
As of December 31, 2024, we made payments of approximately $18.0 million, which are included within Other assets in the Consolidated Balance Sheets, and had approximately $8.0 million of remaining payments. We have not recorded a liability for uncertain tax positions as of December 31, 2024 related to this assessment based on a more-likely-than-not threshold.
These payments are included within Other assets in the Consolidated Balance Sheets. There are no further payments remaining as of December 31, 2025. We have not recorded a liability for uncertain tax positions as of December 31, 2025, related to this assessment based on a more-likely-than-not threshold.
See " Note 10 - Income Taxes " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information.
See " Note 10 - Income Taxes " to our consolidated financial statements included in " Item 8 .
In addition, there are several factors that could cause the future level of uncertainty relating to our tax liabilities to increase, including the following: • During recent years, the number of tax jurisdictions in which we conduct operations has increased. • In order to utilize tax planning strategies and conduct operations efficiently, our subsidiaries frequently enter into transactions with affiliates that are generally subject to complex tax regulations and are frequently reviewed and challenged by tax authorities. • We may conduct future operations in certain tax jurisdictions where tax laws are not well developed, and it may be difficult to secure adequate professional guidance. • Tax laws, regulations, agreements, treaties and the administrative practices and precedents of tax authorities change frequently, requiring us to modify existing tax strategies to conform to such changes. 70 Pension and Other Postretirement Benefits Our pension and other postretirement benefit liabilities and costs are based upon actuarial computations that reflect our assumptions about future events, including long-term asset returns, interest rates, mortality rates, annual compensation increases, and other factors.
In addition, there are several factors that could cause the future level of uncertainty relating to our tax liabilities to increase, including the following: • In order to utilize tax planning strategies and conduct operations efficiently, our subsidiaries frequently enter into transactions with affiliates that are generally subject to complex tax regulations and are frequently reviewed and challenged by tax authorities. • We may conduct future operations in certain tax jurisdictions where tax laws are not well developed, and it may be difficult to secure adequate professional guidance. • Tax laws, regulations, agreements, treaties and the administrative practices and precedents of tax authorities change frequently, requiring us to modify existing tax strategies to conform to such changes.
INTRODUCTION Our Business We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. We own the world's largest offshore drilling rig fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet.
INTRODUCTION Our Business We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents.
As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in profitability levels and changes in tax laws, our annual effective income tax rate may vary substantially from one reporting period to another. 60 Effective Tax Rate During the year ended December 31, 2024, we recorded an income tax expense of $0.4 million and had an effective income tax rate of 0.1%.
As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in profitability levels and changes in tax laws, our annual effective income tax rate may vary substantially from one reporting period to another.
See " Note 9 - Pension and Other Post Retirement Benefits " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for information on our pension and other postretirement benefit plans.
See " Note 9 - Pension and Other Post Retirement Benefits " to our consolidated financial statements included in " Item 8 .
See " Note 1 - Description of the Business and Summary of Significant Accounting Policies " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for further information on our functional currency.
See " Note 1 - Description of the Business and Summary of Significant Accounting Policies " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for further information on our functional currency. 63 Provision for Income Taxes Valaris Limited is domiciled and a resident for tax purposes in Bermuda.
Financial Statements and Supplementary Data " for additional information on the Credit Agreement and the 8.375% Second Lien Notes due 2030 (the "Second Lien Notes"). 61 Cash Flows and Capital Expenditures Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, share repurchases, debt repayments, business combinations or asset sales, our primary sources and uses of cash are driven by cash generated from or used in operations and capital expenditures.
Cash Flows and Capital Expenditures Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, share repurchases, debt repayments, business combinations or asset sales, our primary sources and uses of cash are driven by cash generated from or used in operations and capital expenditures.
As of December 31, 2024, our Consolidated Balance Sheet included a $819.4 million net deferred income tax asset, a $44.8 million liability for income taxes currently payable and a $128.3 million liability for unrecognized tax benefits, inclusive of interest and penalties.
As of December 31, 2025, our Consolidated Balance Sheet included a $1,334.5 million net deferred income tax asset, a $59.4 million liability for income taxes currently payable and a $136.2 million liability for unrecognized tax benefits, inclusive of interest and penalties.
We develop and apply property and equipment accounting policies that are designed to appropriately and consistently capitalize those costs incurred to enhance, improve and extend the useful lives of our assets and expense those costs incurred to repair or maintain the existing condition or useful lives of our assets.
This carrying value reflects the application of our property and equipment accounting policies, which incorporate our estimates, judgments and assumptions relative to the capitalized costs, useful lives and salvage values of our rigs. 72 We develop and apply property and equipment accounting policies that are designed to appropriately and consistently capitalize those costs incurred to enhance, improve and extend the useful lives of our assets and expense those costs incurred to repair or maintain the existing condition or useful lives of our assets.
Financial Statements and Supplementary Data " for additional information on these tax assessments. Share Repurchase Program Our board of directors has authorized a share repurchase program under which we may purchase up to $600.0 million of our outstanding common shares.
Share Repurchase Program Our board of directors has authorized a share repurchase program under which we may purchase up to $600.0 million of our outstanding common shares.
Financial Statements and Supplementary Data " for additional information on our investment in ARO and Notes Receivable from ARO. 64 The following table summarizes the maturity schedule of our Notes Receivable from ARO as of December 31, 2024 (in millions): Maturity Date Principal Amount October 2027 $ 213.6 October 2028 163.0 Total $ 376.6 Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2024 and the periods in which such obligations are due (in millions): Payments due by period 2025 2026 and 2027 2028 and 2029 Thereafter Total Principal payments on long-term debt $ — $ — $ — $ 1,100.0 $ 1,100.0 Interest payments on long-term debt 92.1 184.3 184.3 46.0 506.7 Operating leases 32.7 52.2 8.5 3.0 96.4 Total contractual obligations (1) $ 124.8 $ 236.5 $ 192.8 $ 1,149.0 $ 1,703.1 (1) Contractual obligations do not include $128.3 million of unrecognized tax benefits, inclusive of interest and penalties, included within Other liabilities on our Consolidated Balance Sheet as of December 31, 2024.
The following table summarizes the maturity schedule of our Notes Receivable from ARO as of December 31, 2025 (in millions): Maturity Date Principal Amount October 2027 $ 227.3 October 2028 173.4 Total $ 400.7 Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2025 and the periods in which such obligations are due (in millions): Payments due by period 2026 2027 and 2028 2029 and 2030 Thereafter Total Principal payments on long-term debt $ — $ — $ 1,100.0 $ — $ 1,100.0 Interest payments on long-term debt 92.1 184.3 138.2 — 414.6 Operating leases 39.8 33.7 6.2 0.4 80.1 Total contractual obligations (1) $ 131.9 $ 218.0 $ 1,244.4 $ 0.4 $ 1,594.7 (1) Contractual obligations do not include $136.2 million of unrecognized tax benefits, inclusive of interest and penalties, included within Other liabilities on our Consolidated Balance Sheet as of December 31, 2025.
During the year ended December 31, 2023, we recorded an income tax benefit of $782.6 million and had an effective income tax rate of (929.5)%.
Effective Tax Rate During the year ended December 31, 2025, we recorded an income tax benefit of $426.8 million and had an effective income tax rate of (77.3)%.
See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information on ARO and related arrangements.
Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us. See " Note 3 - Equity Method Investment in ARO " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information on ARO and related arrangements.
Backlog Our contract drilling backlog reflects commitments represented by signed drilling contracts and is calculated by multiplying the contracted operating day rate by the contract period. The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities.
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 net cash provided by operating activities and capital expenditures were as follows (in millions): Years Ended December 31, 2024 2023 Net cash provided by operating activities $ 355.4 $ 267.5 Capital expenditures $ (455.1) $ (696.1) During the year ended December 31, 2024, we generated $355.4 million of cash flow from operating activities primarily due to operating income for the year of $352.3 million.
Our net cash provided by operating activities and capital expenditures were as follows (in millions): Years Ended December 31, 2025 2024 Net cash provided by operating activities $ 546.2 $ 355.4 Capital expenditures $ (343.5) $ (455.1) During the year ended December 31, 2025, we generated $546.2 million of cash flow from operating activities primarily due to operating income for the year of $477.0 million, approximately $26.0 million of tax refunds received from the Australian tax authority during the first quarter of 2025 and other changes in working capital.
Investment in ARO and Notes Receivable from ARO 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.
Financial Statements and Supplementary Data " for additional information on the 2028 Credit Agreement. 67 Investment in ARO and Notes Receivable from ARO 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.
Our primary uses of cash were $455.1 million for maintenance and upgrades of our drilling rigs, reactivation costs and costs to mobilize VALARIS DS-13 and VALARIS DS-14 to their stacking location after their delivery. Additionally, we spent $126.4 million under our share repurchase program during the year, which is discussed further below.
Our primary uses of cash were $455.1 million for maintenance and upgrades of our drilling rigs, reactivation costs and costs to mobilize VALARIS DS-13 and VALARIS DS-14 to their stacking location after their delivery.
ARO Revenues increased $15.9 million, or 3%, in 2024 as compared to 2023, primarily due to $80.7 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.
ARO revenues increased $58.5 million, or 11%, in 2025 compared to 2024, primarily due to incremental revenues of $47.5 million from Kingdom 2, which commenced operations in August 2024, and VALARIS 108, which we began leasing to ARO late in the first quarter of 2024.
These increases were partially offset by revenues realized. 49 (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.
This decrease was partially offset by various contract awards and extensions executed, which resulted in incremental aggregate backlog of approximately $590.0 million. (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.
Accordingly, we released approximately $18.0 million of the uncertain tax position liability previously recognized and recognized a corresponding tax benefit in our Consolidated Statements of Operations for these assessments in the fourth quarter of 2024. See " Note 10 - Income Taxes " to our consolidated financial statements included in " Item 8 .
Accordingly, we released approximately $18.0 million of the uncertain tax position liability previously recognized and recognized a corresponding tax benefit in our Consolidated Statements of Operations for these assessments in 2024. We no longer had a liability for unrecognized tax benefits relating to these assessments as of December 31, 2024.
Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of Mexico, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific.
We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of America, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific. We provide drilling services on a day rate contract basis.
The Notes Receivable from ARO, which are governed by the laws of Saudi Arabia, mature during 2027 and 2028. In the event that ARO is unable to repay the Notes Receivable from ARO when they become due, we would require the prior consent of our joint venture partner to enforce ARO’s payment obligations.
Notwithstanding any extension of the maturity, in the event that ARO does not repay the Notes Receivable from ARO when they become due, we would require the prior consent of our joint venture partner to enforce ARO's payment obligations.
The EPA has also adopted rules requiring annual monitoring and reporting of GHG emissions from specified sources in the U.S., including, among others, certain onshore and offshore oil and natural gas production facilities. Although a number of bills related to climate change have been introduced in the U.S.
The EPA has also adopted rules requiring annual monitoring and reporting of GHG emissions from specified sources in the U.S., including, among others, certain onshore and offshore oil and natural gas production facilities, although in 2025, the EPA proposed rules that would rescind the 2009 endangerment finding and, accordingly, rescind regulations promulgated on the basis of that finding.
We anticipate that these requirements will apply to us as early as 2026 (for fiscal year 2025) for certain of our EU subsidiaries and at the consolidated entity level in 2030 (for fiscal year 2029). 67 During 2009, the EPA officially published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to human health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the earth’s atmosphere and other climatic changes.
During 2009, the EPA officially published its findings that emissions of carbon dioxide, methane and other GHGs present an endangerment to human health and the environment because emissions of such gases are, according to the EPA, contributing to the warming of the earth’s atmosphere and other climatic changes.
See “ Note 6 - Debt " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information on the Credit Agreement.
See " Note 5 - Property and Equipment " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for information regarding the rig sales.
Given the moderate decline in utilization in the second half of 2024 for benign environment floaters, we could see further rigs retired from the global fleet. 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.
This decrease is primarily attributable to rig retirements, including 14 benign environment floaters retired in 2025. Further, 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.
The Initial Second Lien Notes and the Additional Notes were issued under the Indenture and form a single series. The Second Lien Notes mature on April 30, 2030 and bear an interest rate of 8.375% per annum. Interest is payable semi-annually in arrears on April 30 and October 30 of each year.
The 2030 Second Lien Notes mature on April 30, 2030 and bear an interest rate of 8.375% per annum. Interest is payable semi-annually in arrears on April 30 and October 30 of each year. See “ Note 6 - Debt " to our consolidated financial statements included in " Item 8 .
The following table summarizes our and 100% of ARO's contract backlog of business as of February 18, 2025 and February 15, 2024 (in millions): February 18, 2025 February 15, 2024 Floaters (1) $ 2,024.0 $ 2,531.7 Jackups (2) 1,313.0 1,167.4 Other (3) 271.5 222.3 Total $ 3,608.5 $ 3,921.4 ARO (4) $ 1,422.9 $ 2,138.1 (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 $570.0 million.
Financial Statements and Supplementary Data" for additional information. 53 The following table summarizes our and 100% of ARO's contract backlog of business as of February 17, 2026 and February 18, 2025 (in millions): February 17, 2026 February 18, 2025 Floaters (1) $ 3,030.8 $ 2,024.0 Jackups (2) 1,125.8 1,313.0 Other (3) 515.7 271.5 Total $ 4,672.3 $ 3,608.5 ARO (4) $ 2,011.3 $ 1,422.9 (1) The increase for Floaters is primarily due to contract awards and extensions executed for various drillships, which resulted in incremental aggregate backlog of approximately $2.1 billion, partially offset by revenues realized.
The increase in Other is primarily due to three-year contract extensions for our managed rigs, which resulted in incremental aggregate backlog of approximately $180.0 million, partially offset by revenues realized and a reduction of backlog of approximately an aggregate $35.0 million attributable to the VALARIS 143, VALARIS 147 and VALARIS 148 contracts, which were terminated during 2024.
The increase in Other is primarily due to five-year contract extensions for five of our 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.
Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. Consistent with this strategy, we sold VALARIS 54 in April 2023 for $28.2 million.
Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that no longer meet our standards for economic returns.
Additionally, in the second quarter of 2024, ARO entered into a revolving credit facility which provides for borrowings of up to $100.0 million. As of December 31, 2024, there was $10.0 million outstanding under this facility. Our Notes Receivable from ARO are subordinated and junior in right of payment to both ARO’s term loan and credit facility.
As of December 31, 2025, there were no amounts outstanding under this facility. Our Notes Receivable from ARO are subordinated and junior in right of payment to both ARO’s term loan and credit facility.
Our cash and cash equivalents as of December 31, 2024 and 2023, were $368.2 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 February 14, 2025.
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 February 13, 2026. See " Note 6 - Debt " to our consolidated financial statements included in " Item 8 .
As of February 20, 2025, we own 52 rigs, including 13 drillships, four 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.
As of February 20, 2026, we own 46 rigs, including 13 drillships, two semisubmersible rigs, 31 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs. Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators.

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