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What changed in Valaris Ltd's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Valaris Ltd's 2023 and 2024 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 2024 report.

+350 added−346 removedSource: 10-K (2025-02-20) vs 10-K (2024-02-22)

Top changes in Valaris Ltd's 2024 10-K

350 paragraphs added · 346 removed · 250 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

40 edited+3 added−15 removed50 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 shared service center may not create the operational efficiencies that we expect and may create risks relating to the processing of transactions and recording of financial information. • We may not realize the expected benefits of our ARO joint venture. • Joint venture investments could be adversely affected by our joint venture partners’ 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. • 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. 14 • 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, 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. • Our actual financial results after emergence from bankruptcy may not be comparable to our projections filed with the Bankruptcy Court in the course of the Chapter 11 Cases. • The exercise of all or any number of outstanding warrants or the issuance of stock-based awards may dilute the holders of our Common Shares.
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.
Price is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise also are factors. Non-U.S.
Price is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise are also factors. Non-U.S.
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. • As a Bermuda company, 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. • 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.
The terms of our drilling contracts vary, but generally contain the following commercial terms: • contract duration or term for a specific period of time or a period necessary to drill one or more wells, • term extension options, exercisable by our customers, upon advance notice to us, at mutually agreed, indexed, fixed rates or current rate at the date of extension, • provisions permitting early termination of the contract, which may include (1) if the rig is lost or destroyed, (2) if operations are suspended for a specified period of time due to various events, including damage or breakdown of major rig equipment, unsatisfactory performance, or "force majeure" events, (3) failure of the customer to receive final investment decision (FID) approval with respect to projects for which the drilling rig was contracted or (4) at the convenience (without cause) of the customer, exercisable upon advance notice to us, and in certain cases without making an early termination payment to us, • payment of compensation to us is (generally in U.S. dollars although some contracts require a portion of the compensation to be paid in local currency) on a day rate basis such that we receive a fixed amount for each day that the drilling rig is under contract (lower day rates generally apply for periods when operations are suspended due to various events, including during delays that are beyond our reasonable control, during repair of equipment damage or breakdown and during periods of re-drilling damaged portions of the well, and no day rate, or zero rate, generally applies when these limited periods are exceeded until the event is remediated, and during periods to remediate unsatisfactory performance or other specified conditions), • payment by us of the operating expenses of the drilling rig, including crew labor and incidental rig supply and maintenance costs, • mobilization and demobilization requirements of us to move the drilling rig to and from the planned drilling site, and may include reimbursement of all or a portion of these moving costs by the customer in the form of an up-front payment, additional day rate over the contract term or direct reimbursement, and • provisions allowing us to recover certain labor and other operating cost increases from our customers through day rate adjustment or direct reimbursement for certain cost increases due to changes in applicable law or rising operational expenses.
The terms of our drilling contracts vary, but generally contain the following commercial terms: • contract duration or term for a specific period of time or a period necessary to drill one or more wells, • term extension options, exercisable by our customers, upon advance notice to us, at mutually agreed, indexed, fixed rates or current rate at the date of extension, • provisions permitting early termination of the contract, which may include (1) if the rig is lost or destroyed, (2) if operations are suspended for a specified period of time due to various events, including damage or breakdown of major rig equipment, unsatisfactory performance, "force majeure" events or breach of contract, (3) failure of the customer to receive final investment decision (FID) approval with respect to projects for which the drilling rig was contracted or (4) at the convenience (without cause) of the customer, exercisable upon advance notice to us, and in certain cases without making an early termination payment to us, • payment of compensation to us is (generally in U.S. dollars, although some contracts require a portion of the compensation to be paid in local currency) on a day rate basis such that we receive a fixed amount for each day that the drilling rig is under contract (lower day rates generally apply for periods when operations are suspended due to various events, including during delays that are beyond our reasonable control, during repair of equipment damage or breakdown and during periods of re-drilling damaged portions of the well, and no day rate, or zero rate, generally applies when these limited periods are exceeded until the event is remediated, and during periods to remediate unsatisfactory performance or other specified conditions), • payment by us of the operating expenses of the drilling rig, including crew labor and incidental rig supply and maintenance costs, • mobilization and demobilization requirements of us to move the drilling rig to and from the planned drilling site, and may include reimbursement of all or a portion of these moving costs by the customer in the form of an up-front payment, additional day rate over the contract term or direct reimbursement, and • provisions allowing us to recover certain labor and other operating cost increases from our customers through day rate adjustment or direct reimbursement for certain cost increases due to changes in applicable law or rising operational expenses.
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 Middle East, Africa and Asia Pacific.
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.
Lyne has over 20 years of offshore drilling experience in various international locations. Mr. Lyne has a Bachelor of Science degree in Engineering from Montana Technological University. 12 Davor Vukadin was appointed Senior Vice President, General Counsel and Secretary in May 2022. Before being named to his current position, Mr.
Lyne has over 20 years of offshore drilling experience in various international locations. Mr. Lyne has a Bachelor of Science degree in Engineering from Montana Technological University. Davor Vukadin was appointed Senior Vice President, General Counsel and Secretary in May 2022. Before being named to his current position, Mr.
Such indemnities typically include costs for clean-up and removal of pollution and third-party damages. 7 Our drilling contracts customarily provide that each party is responsible for injuries or death to their respective personnel and loss or damage to their respective property (including the personnel and property of each parties’ contractors and subcontractors) regardless of the cause of the loss or damage.
Such indemnities typically include costs for clean-up and removal of pollution and third-party damages. Our drilling contracts customarily provide that each party is responsible for injuries or death to their respective personnel and loss or damage to their respective property (including the personnel and property of each parties’ contractors and subcontractors) regardless of the cause of the loss or damage.
Our contracts generally provide that, in the event of any such spill from our rigs, we are 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. 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 approach to attracting, developing, and retaining a diverse workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement. Purpose and Culture At Valaris, our purpose is to provide responsible solutions that deliver energy to the world.
Our 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.
Luca also served Ensco as Senior Vice President - Western Hemisphere, Vice President - Business Development and Strategic Planning, Vice President - Brazil Business Unit and General Manager - Europe and Africa. Before joining Ensco as an Operations Engineer in The Netherlands, Mr. Luca was employed by Foramer Drilling and Schlumberger with assignments in France and Venezuela.
Luca also served Valaris as Senior Vice President - Western Hemisphere, Vice President - Business Development and Strategic Planning, Vice President - Brazil Business Unit and General Manager - Europe and Africa. Before joining Valaris as an Operations Engineer in The Netherlands, Mr. Luca was employed by Foramer Drilling and Schlumberger with assignments in France and Venezuela.
We currently carry limited insurance for loss of hire for several of our rigs. Our customers typically indemnify us for most well-control events.
We carry limited insurance for loss of hire for several of our rigs. Our customers typically indemnify us for most well-control events.
He received an MBA in Finance and Strategy from the Wharton School and a BA in Economics and English Literature from Vanderbilt. Gilles Luca became Senior Vice President and Chief Operating Officer in December 2019. Previously, he served as Senior Vice President, Operations Support. He joined Ensco in 1997. Mr.
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.
We incorporate by reference herein the disclosures on governmental regulations, including environmental matters, contained in the following sections of this Annual Report on Form 10-K: • "Item 1A. Risk Factors – Regulatory, Legal and Tax Risks"; • "Item 1A. Risk Factors – Sustainability Risks"; • "Item 3. Legal Proceedings"; and • "Item 7.
We incorporate by reference herein the disclosures on governmental regulations, including environmental matters, contained in the following sections of this Annual Report on Form 10-K: • " Item 1A . Risk Factors – Regulatory, Legal and Tax Risks "; • " Item 1A . Risk Factors – Sustainability Risks "; • " Item 3 .
BP plc, our only customer who accounts for 10% or more of consolidated revenues, accounted for 11% of consolidated revenues. Competition The offshore contract drilling industry is highly competitive. Drilling contracts are, for the most part, awarded on a competitive bid basis.
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.
See “ Item 1A . 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. ” Our drilling contracts are negotiated with our customers, and most contracts are awarded following competitive bidding.
Contract Drilling Operations Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third parties and the activities associated with our lease arrangements with ARO.
Contract Drilling Operations Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third parties and the activities associated with our lease arrangements with ARO. Floaters, Jackups and ARO are also reportable segments.
Additional information on insurance and indemnification matters and related risks is discussed in “Item 1A. Risk Factors,” which should be read in conjunction with the foregoing information.
Additional information on insurance and indemnification matters and related risks is discussed in “ Item 1A . Risk Factors ,” which should be read in conjunction with the foregoing information.
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, 2023, our five largest customers accounted for 40% of consolidated revenues.
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.
The table below sets forth certain information regarding our executive officers as of February 22, 2024: Name Age Position Anton Dibowitz 52 President and Chief Executive Officer Christopher Weber 51 Senior Vice President and Chief Financial Officer Gilles Luca 52 Senior Vice President and Chief Operating Officer Matthew Lyne 49 Senior Vice President and Chief Commercial Officer Davor Vukadin 50 Senior Vice President and General Counsel Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years: Anton Dibowitz became the President and Chief Executive Officer of Valaris in December 2021, following his service as the Company’s interim President and Chief Executive Officer since September 2021.
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.
A portion of our employees and contractors working outside of the U.S. are represented under collective bargaining or similar agreements, which are subject to periodic salary negotiation. As of December 31, 2023, women comprised 30% of our onshore employees and 1% of our offshore employees.
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.
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. " 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.
Weber has also served as Chief Financial Officer of Abaco Drilling Technologies from July 2019 to February 2021 and Chief Financial Officer of Haliburton Company from June 2017 to November 2018. Prior to Halliburton, Mr. Weber served as Chief Financial Officer of Parker Drilling Company, and held senior finance roles at Valaris predecessor companies, Ensco plc and Pride International, Inc.
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.
Our insurance program provides coverage that is customary for our industry. Generally, our insurance program provides third-party liability coverage up to $805.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.
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.
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.
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.
Employees We had a global workforce of approximately 5,985 persons including contractors, and approximately 4,261 persons excluding contractors, as of December 31, 2023. Our personnel represented 74 nationalities spread across 23 locations. The majority of our personnel work on our offshore installations and are compensated on an hourly basis.
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.
Sustainability Risks • Regulation of GHGs and climate change could have a negative impact on our business. • Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services. • Increased scrutiny from stakeholders and others regarding our sustainability practices, initiatives and reporting responsibilities could result in additional costs or risks. 15
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.
Our drilling rigs drill and complete oil and natural gas wells. From time to time, our drilling rigs may be utilized as accommodation units or for other ancillary services such as well workovers and interventions, plug and abandonment and decommissioning work and carbon capture and sequestration projects. Demand for our drilling services is based upon many factors beyond our control.
From time to time, our drilling rigs may be utilized as accommodation units or for other ancillary services such as well workovers and interventions, plug and abandonment and decommissioning work and carbon capture and sequestration projects. Demand for our drilling services is based upon many factors beyond our control. See “ Item 1A .
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. Consequently, our outlook for the offshore drilling business is positive.
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.
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 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.
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.
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.
For further discussion of sustainability-related risks and considerations see “Risk Factors” in Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.
For further discussion of sustainability-related risks and considerations see “ Risk Factors ” in Item 1A and “ Management’s Discussion and Analysis of Financial Condition and Results of Operations ” in Item 7 of this Annual Report on Form 10-K.
We currently own 53 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 35 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional eight rigs.
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.
We encourage you to review our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability and human capital targets, including our GHG emissions intensity reduction target, programs and initiatives.
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.
While contracting and tendering activity has increased, contract awards remain subject to a highly competitive bidding process, which could result in contracts that contain unfavorable contractual and commercial terms, such as certain limitations on our ability to be indemnified from operator and third-party damages caused by our fault, resulting in increases in the nature and amounts of liability allocated to us.
Contract awards generally remain subject to a highly competitive bidding process, which could result in contracts that contain unfavorable contractual and commercial terms, such as certain limitations on our ability to be indemnified from operator and third-party damages caused by our negligence, gross negligence or willful misconduct, resulting in increases in the nature and amounts of liability allocated to us, which we endeavor to limit through a financial cap.
Risk Factors - Our non-U.S. operations involve additional risks not associated with U.S. operations." Insurance and Indemnification Matters Our insurance program provides coverage, subject to the policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party liability claims arising from our operations.
" Insurance and Indemnification Matters Our insurance program provides coverage, subject to the policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party liability claims arising from our operations. Our insurance program provides coverage that is customary for our industry.
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.
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 addition, in 2023, all employees were assigned unconscious bias training as part of supporting a more inclusive workforce. Certain employees must also complete additional training on topics ranging from trade compliance to human trafficking.
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.
Operations Revenues from non-U.S. operations were 80%, 78%, 87% and 81% of our total consolidated revenues during the years ended December 31, 2023 and 2022, eight months ended December 31, 2021 (Successor), and four months ended April 30, 2021 (Predecessor), respectively. See " Item 1A.
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.
Floaters, Jackups and ARO are also reportable segments. 5 We own and operate 53 rigs, of which 16 are located in the Middle East and Africa, 16 are located in North and South America, 16 are located in Europe, and five are located in Asia and the Pacific Rim as of December 31, 2023.
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 mentioned above, the Valaris Basic Training Program demonstrates our dedication to a safety-first work culture, and the ways in which we implement our Safe Systems of Work into our work. 11 Executive Officers Officers generally serve for a one-year term or until successors are elected and qualified to serve.
Information about our Executive Officers Officers generally serve for a one-year term or until successors are elected and qualified to serve.
Removed
Demand for offshore drilling services continues to improve as evidenced by increasing global utilization and day rates for offshore drilling rigs. In recent years, oil prices have experienced significant volatility as a result of the global COVID-19 pandemic, production disputes among major oil producing countries and various other factors.
Added
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.
Removed
This volatility meaningfully impacted both the supply of, and demand for, offshore rigs.
Added
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.
Removed
Since 2021, oil prices have become relatively more stable due to, among other factors, rebounding demand for hydrocarbons, a measured approach to production increases by OPEC+ members, reduction in supply due to Russia’s invasion of Ukraine and the subsequent sanctions placed on Russia, and a focus on cash flow and returns by major exploration and production companies.
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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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In 2023, prices have remained at levels that are supportive of offshore exploration and development activity. The more constructive oil price environment has led to an improvement in contracting and tendering activity for our industry.
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Approximately 492 personnel attended the program in 2023. We implemented an onshore leadership program in 2023, which included eight separate onshore leadership sessions, which was delivered to 157 personnel.
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We created the Valaris Basic Training Program to familiarize new rig workers to the offshore environment and to build experience in our key safety practices, such as our Safe Systems of Work (as described below). The training program utilizes a jackup rig in the Gulf of Mexico as a training center for hands-on offshore experience.
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In 2023, 482 personnel completed the training program. The American Petroleum Institute’s Center for Offshore Safety recognized the Valaris Basic Training Center with the 2023 Safety Leadership Award. Safety Our policies set the expectation that causing no harm is a priority while conducting our operations.
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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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Emergence from Financial Restructuring On August 19, 2020 (the “Petition Date”), Valaris plc (“Legacy Valaris” or “Predecessor”) and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court under the caption In re Valaris plc, et al., Case No. 20-34114 (MI) (the “Chapter 11 Cases”).
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On March 3, 2021, the Bankruptcy Court confirmed the Debtors' chapter 11 plan of reorganization. On April 30, 2021 (the "Effective Date"), we successfully completed our financial restructuring and together with the Debtors emerged from the Chapter 11 Cases.
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Upon emergence from the Chapter 11 Cases, we eliminated $7.1 billion of debt and obtained a $520 million capital injection by issuing the first lien secured notes (the "First Lien Notes"). See “ Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the First Lien Notes.
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On the Effective Date, the Legacy Valaris Class A ordinary shares were cancelled and common shares of Valaris with a nominal value of $0.01 per share (the “Common Shares”) were issued. Also, former holders of Legacy Valaris' equity were issued warrants (the "Warrants") to purchase Common Shares.
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See “ Note 9 - Shareholders' Equity" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the issuance of the Common Shares and Warrants. See “ Note 2 – Chapter 11 Proceedings” and " Note 3 - Fresh Start Accounting" to our consolidated financial statements included in "Item 8.
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Financial Statements and Supplementary Data" for additional details regarding the reorganization, Chapter 11 Cases and related items.
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Risks Related to Our International Operations • Our non-U.S. operations involve additional risks not typically associated with U.S. operations.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

68 edited+33 added−15 removed196 unchanged
Biggest changeNumerous 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, • U.S. and non-U.S. tax policy, including the U.K. windfall tax on oil and gas producers in the British North Sea, • advances in exploration and development technology, including with respect to onshore shale, • costs associated with exploring for, developing, producing and delivering oil and natural gas, • the rate of discovery of new oil and natural gas reserves and the rate of decline of existing oil and gas reserves, • investors reducing, or ceasing to provide, funding to the oil and natural gas industry in response to initiatives to limit climate change, • laws and government regulations that limit, restrict or prohibit exploration and development of oil and natural gas in various jurisdictions, or materially increase the cost of such exploration and development, • the development and exploitation of alternative fuels or energy sources, resulting in reduced capital spending by our customers on oil and natural gas projects, and increased demand for electric-powered products, including electric-powered vehicles, • disruption to exploration and development activities due to hurricanes and other adverse weather conditions and the risk thereof, • natural disasters or incidents resulting from operating hazards inherent in offshore drilling, such as oil spills, • the worldwide military or political environment, including the invasion of Ukraine by Russia and the conflict in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism, and 16 • the occurrence or threat of epidemic or pandemic diseases and any government response to such occurrence or threat.
Biggest changeNumerous 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.
Laws and regulations governing cybersecurity and data privacy and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges and potential costs, and any failure to comply with these data cybersecurity and privacy requirements or other applicable laws and regulations in this area could result in significant regulatory or other penalties and legal liability.
Laws and regulations governing cybersecurity and data privacy and the unauthorized disclosure of confidential or protected information pose increasingly complex compliance challenges and potential costs, and any failure to comply with these cybersecurity and data privacy requirements or other applicable laws and regulations in this area could result in significant regulatory or other penalties and legal liability.
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, 34 • 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.
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.
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.
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.
We can provide no assurance that we will have access to adequate or economical sources of capital to fund the return of stacked rigs to drilling service. 20 During periods of increased rig reactivation, upgrade and enhancement projects, shipyards and third-party equipment vendors may be under significant resource constraints to meet delivery obligations.
We can provide no assurance that we will have access to adequate or economical sources of capital to fund the return of stacked rigs to drilling service. During periods of increased rig reactivation, upgrade and enhancement projects, shipyards and third-party equipment vendors may be under significant resource constraints to meet delivery obligations.
If we raise funds by issuing equity securities, existing shareholders may experience dilution, and if we raise funds by issuing additional debt securities, 21 we may have to pledge additional assets as collateral. Our failure to obtain the funds for necessary future capital expenditures could materially adversely affect our business and on our financial position, operating results or cash flows.
If we raise funds by issuing equity securities, existing shareholders may experience dilution, and if we raise funds by issuing additional debt securities, we may have to pledge additional assets as collateral. Our failure to obtain the funds for necessary future capital expenditures could materially adversely affect our business and on our financial position, operating results or cash flows.
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. 36 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. 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.
Further, we may incur significant costs and consume significant internal resources in our efforts to detect, investigate and resolve actual or alleged violations. 29 Increasing regulatory complexity could adversely impact the costs associated with our offshore drilling operations and reduce demand for our services.
Further, we may incur significant costs and consume significant internal resources in our efforts to detect, investigate and resolve actual or alleged violations. Increasing regulatory complexity could adversely impact the costs associated with our offshore drilling operations and reduce demand for our services.
Even so, our failure or inability to meet these targets, goals or evolving stakeholder expectations for sustainability practices and reporting and even the perception of such failure or inability may potentially harm our reputation and impact employee retention, customer relationships and access to capital, among other matters.
Even so, our failure or inability to meet these aspirations, targets, goals or evolving stakeholder expectations for sustainability practices and reporting and even the perception of such failure or inability may potentially harm our reputation and impact employee retention, customer relationships and access to capital, among other matters.
However, we regularly are required to assume a limited amount of liability for pollution damage caused by our negligence, which 18 liability generally has caps for ordinary negligence, with much higher caps or unlimited liability where the damage is caused by our gross negligence or willful misconduct.
However, we regularly are required to assume a limited amount of liability for pollution damage caused by our negligence, which liability generally has caps for ordinary negligence, with much higher caps or unlimited liability where the damage is caused by our gross negligence or willful misconduct.
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. ” 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.
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. 32 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. 33 We are a Bermuda company and it may be difficult to enforce judgments against us or our directors and executive officers.
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.
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.
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. 27 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. 28 We cannot be assured that we will be able to accomplish any of these alternatives on terms acceptable to us or at all.
As required by law, we file periodic tax returns that are subject to review and examination by various revenue agencies within the jurisdictions in which we operate. We are currently subject to tax assessments in various jurisdictions, which we are contesting.
As 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.
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. 25 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. 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.
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. 23 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. 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.
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.
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.
In addition, it may be difficult or expensive for us to comply with any sustainability-linked contracting policies adopted by customers and suppliers, 37 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 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.
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.
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.
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. 31 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. 32 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 24 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 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.
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. 26 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. 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.
Restrictions on GHG emissions or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services.
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.
Our compliance with the Economic Substance Act 33 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 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.
If new laws are enacted, or if government actions are taken that restrict or prohibit offshore drilling in our principal areas of operation or that impose environmental or other requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development, or production of oil and natural gas, our financial position, operating results or cash flows could be materially adversely affected. 30 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. 31 The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes.
Governments also may impose express or de facto economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. 35 The laws and regulations concerning import activity, export recordkeeping and reporting, export control and economic sanctions are complex and frequently changing.
Governments also may impose express or de facto economic sanctions or tariffs against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. 36 The laws and regulations concerning import activity, export recordkeeping and reporting, export control, economic sanctions and tariffs are complex and frequently changing.
The failure of the third-party to fulfill its obligations could disrupt our operations. In addition, the move to a shared service environment, including our reliance on a third-party provider, may create risks relating to the processing of transactions and recording of financial information.
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.
As part of this program, we are outsourcing, and will continue to outsource, certain accounting, payroll, human resources, supply chain and IT functions to a third-party service provider. The party that we utilize for these services may not be able to handle the volume of activity or perform the quality of service necessary to support our operations.
As part of this program, we outsource certain accounting, payroll, human resources, supply chain and IT functions to a third-party service provider. The party that we utilize for these services may not be able to handle the volume of activity or perform the quality of service necessary to support our operations.
From time to time, legislative and regulatory proposals have been introduced that would materially limit or prohibit offshore drilling in certain areas, or that would increase the liabilities or costs associated with offshore drilling.
From time to time, legislative and regulatory proposals have been introduced, and legal proceedings have been initiated, that would materially limit or prohibit offshore drilling in certain areas, or that would increase the liabilities or costs associated with offshore drilling.
We may also incur additional training costs to ensure that new or promoted personnel have the right skills and qualifications. We also are subject to potential legislative or regulatory action that may impact working conditions, paid time off or other conditions of employment, including mandated vaccination programs.
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.
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) 28 potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, and (6) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated.
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.
We currently own and operate 13 drilling rigs that are contracted with national oil companies.
We currently own and operate 10 drilling rigs that are contracted with national oil companies.
We may be unable to renew our expiring contracts, including contracts expiring due to a failure by the customer to exercise option periods, or obtain new contracts for the Newbuild Drillships or the drilling rigs under contracts that have expired or have been terminated.
We may be unable to renew our expiring contracts, including contracts expiring due to a failure by the customer to exercise option periods, or obtain new contracts for any of our uncontracted drilling rigs or the drilling rigs under contracts that have expired or have been terminated.
By electing to set and share publicly our corporate sustainability standards, our business may face increased scrutiny related to sustainability activities and be unable to satisfy all stakeholders. For example, some stakeholders and regulators have expressed or pursued opposing views, legislation, and investment expectations with respect to sustainability.
By electing to set and share publicly our corporate sustainability standards, our business may face increased scrutiny related to sustainability activities and be unable to satisfy all stakeholders. For example, an increasing number of stakeholders, regulators and lawmakers have expressed or pursued opposing views, legislation and investment expectations with respect to sustainability.
The impact of these potential new rules as well as any other changes in domestic and international tax rules and regulations could have a material effect on our effective tax rate. In addition, our tax positions are subject to audit by U.K., U.S. and other foreign tax authorities.
These evolving rules, as well as any other changes in domestic and international tax rules and regulations, could have a material effect on our effective tax rate. In addition, our tax positions are subject to audit by U.K., U.S. and other foreign tax authorities.
Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future. As of February 15, 2024 and February 21, 2023, our contract backlog was approximately $3.9 billion and $2.5 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 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.
We provide our services to major international, government-owned and independent oil and natural gas companies. During 2023, our five largest customers accounted for 40% of consolidated revenues, with our largest customer representing 11% 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 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.
On the Effective Date, we issued 75.0 million Common Shares and 5.6 million warrants to purchase 5.6 million Common Shares at an exercise price of $131.88 per share, exercisable for a seven-year period commencing on the Effective Date.
On April 30, 2021, we issued 75.0 million Common Shares and 5.6 million warrants to purchase 5.6 million Common Shares at an exercise price of $131.88 per share, exercisable for a seven-year period commencing on that date.
As demand for our services and the number of active drilling rigs has increased, competition for the labor required for drilling operations and construction projects has intensified, leading to shortages of qualified personnel in the industry.
As demand for our services and the number of active drilling rigs increases, competition for the labor required for drilling operations and construction projects intensifies, leading to shortages of qualified personnel in the industry.
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. 38
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.
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.
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.
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 and regulations that have and may further impact our operations.
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.
Our industry is highly competitive, and our contracts are traditionally awarded on a competitive bid basis. Pricing, safety records and competency are key factors in determining which qualified contractor is awarded a contract. Rig availability, location and technical capabilities also can be significant factors in the determination.
Our industry is highly competitive, and our contracts are traditionally awarded on a competitive bid basis. Pricing, safety records and competency are key factors in determining which qualified contractor is awarded a contract. Rig availability, location, condition and technical capabilities, as well as operating efficiency, operating integrity, industry standing and customer relations, can also be significant factors in the determination.
We could experience a lapse in the operation of internal controls due to turnover, lack of legacy knowledge, inappropriate training and use of a third-party provider, which could result in significant deficiencies or material weaknesses in our internal control over financial reporting and materially adversely affect our financial position, operating results or cash flows. 22 We may not realize the expected benefits of our ARO joint venture.
We could experience a lapse in the operation of internal controls due to turnover, lack of legacy knowledge and inappropriate training associated with the use of a third-party provider, which could result in significant deficiencies or material weaknesses in our internal control over financial reporting and materially adversely affect our financial position, operating results or cash flows.
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.
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.
Such tax authorities may, and do from time to time, disagree with our interpretations or assessments of the effects of tax laws, treaties or regulations or their applicability to our corporate structure or certain transactions we have undertaken. We currently are subject to tax assessments in various jurisdictions, which we are contesting.
Such tax authorities may, and do from time to time, disagree with our interpretations or assessments of the effects of tax laws, treaties or regulations or their applicability to our corporate structure or certain transactions we have undertaken.
Risks Related to Our International Operations Our non-U.S. operations involve additional risks not typically associated with U.S. operations. Revenues from non-U.S. operations were 80%, 78%, 87% and 81% of our total consolidated revenues for the years ended December 31, 2023 and 2022, and eight months ended December 31, 2021 (Successor) and for four months ended April 30, 2021 (Predecessor), respectively.
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.
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.
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.
For example, the ongoing conflicts, and the continuation of, or any increase in the severity of, the conflicts in Ukraine and the Middle East, has led and may continue to lead to an increase in the volatility of global oil and natural gas prices.
For example, the ongoing Russia-Ukraine conflict and the conflicts in the Middle East have led and may continue to lead to an increase in the volatility of global oil and natural gas prices, including as a result of any further increase in the severity of any such conflict.
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.
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.
In addition, our Notes Receivable from ARO are subordinated and junior in right of payment to ARO’s term loan described below, and as such, we may not be repaid the interest or principal amounts of the Notes Receivable from ARO. We have a potential obligation to fund ARO for newbuild jackup rigs.
In addition, our Notes Receivable from ARO are subordinated and junior in right of payment to ARO’s term loan described below, and as such, we may not be repaid the interest or principal amounts of the Notes Receivable from ARO. Further, we may not receive cash interest from ARO for an extended period of time, or at all.
For example, the Organization for Economic Cooperation and Development (“OECD”), the European Union, 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.
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.
Regardless of the specific nature of a cybersecurity incident, we could experience material operational impact, financial loss, legal liability, regulatory violations or reputational harm. Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows.
The 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.
Additionally, numerous large cities globally and several countries have adopted programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles and placed restrictions on non-public transportation.
Laws or regulations incentivizing or mandating the use of alternative energy sources such as wind power and solar energy have also been enacted in certain jurisdictions. Additionally, numerous large cities globally and several countries have adopted programs to mandate or incentivize the conversion from internal combustion engine powered vehicles to electric-powered vehicles and placed restrictions on non-public transportation.
The joint venture partners intend for the newbuild jackup rigs to be financed out of ARO's available cash on hand or from operations and/or funds available from third-party financing. In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes.
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.
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. 17 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.
The contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations. 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.
Our network and systems, including rig operating systems and critical data, are subject to cybersecurity risk and technical disruptions.
Contract preparation expenses vary based on the scope and length of contract preparation required. 19 Our network and systems, including rig operating systems and critical data, are subject to cybersecurity risk and technical disruptions.
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. Laws or regulations incentivizing or mandating the use of alternative energy sources such as wind power and solar energy have also been enacted in certain jurisdictions.
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.
The risks associated with the failure of our systems and cyber incidents and attacks on our systems could include disruptions of certain systems on our rigs; other impairments of our ability to conduct our operations, including disruptions in our ability to make or receive payments and financial and onshore operating functions, loss of intellectual property, proprietary information, customer and vendor data or other sensitive information; corruption or unauthorized release of our or our customer’s critical data; disruption of our or our customers’ operations; and increased costs to prevent, respond to or mitigate cybersecurity events.
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.
Our shared service center may not create the operational efficiencies that we expect and may create risks relating to the processing of transactions and recording of financial information, which could materially adversely affect our financial condition, operating results or cash flows.
Our use of a shared service center creates risks relating to the processing of transactions and recording of financial information, which could materially adversely affect our financial condition, operating results or cash flows. We have implemented a shared service center program pursuant to which we have outsourced certain finance, human resources, supply chain and IT functions.
As a result of a cybersecurity incident, we could suffer interruptions in our ability to manage our operations, which may materially adversely affect our business and financial results. In addition, we may incur large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, or to protect against similar future events.
In addition, we may incur large expenditures to investigate or remediate, to recover data, to repair or replace networks or information systems, or to protect against similar future events.
In December 2023, we took delivery of VALARIS DS-13 and VALARIS DS-14 (the "Newbuild Drillships") for an aggregate purchase price of approximately $337.0 million, which are currently uncontracted. Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions.
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.
The first rig, Kingdom 1, was delivered in the fourth quarter of 2023 and the second is expected to be delivered in the first half of 2024. ARO is expected to commit to orders for two additional newbuild jackups in the near term . There can be no assurance that the new jackup rigs will begin operations as anticipated.
The first rig, Kingdom 1, was delivered in the fourth quarter of 2023 and the second rig, Kingdom 2, was delivered in the second quarter of 2024. In October 2024, ARO ordered the third newbuild jackup, Kingdom 3, ARO is expected to commit to order one additional newbuild jackup in the near term .
Beginning with the delivery of the second newbuild, each partner's commitment shall be reduced by the lesser of the actual cost of each newbuild rig, or $250.0 million, on a proportionate basis. Any required capital contributions we make could negatively impact our liquidity position and financial condition.
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.
Disruption to our operations and damage to our reputation could materially adversely affect our financial position, operating results or cash flows. There can also be no assurance that our efforts, or the efforts of our partners and vendors, to invest in the protection of information technology infrastructure and data will prevent or identify incidents in our systems.
Disruption to our operations and damage to our reputation could materially adversely affect our financial position, operating results or cash flows. While we have a cybersecurity program to assess, identify and manage risks from cybersecurity threats, there is no guarantee such efforts will be successful in preventing or detecting any given threat.
Some of these systems are managed or provided by third-party service providers, including cloud platform or cloud software providers. 19 Cybersecurity incidents, including unauthorized access, social engineering (including phishing), malware (including ransomware), distributed denial-of-service attacks, identity compromise and technical disruptions could materially impact our IT and operational technology systems, including critical systems and infrastructure, and our data, as well as impact our third-party service providers on whom we rely.
Some of these systems are managed or provided by third-party service providers, including cloud platform or cloud software providers. These systems are subject to growing risks associated with cybersecurity incidents and technical disruptions.
For example, the SEC has proposed a mandatory climate change reporting framework that, if implemented, is likely to materially increase the amount of time, monitoring, diligence, and reporting costs related to these matters. In 2023, the current U.S. administration continued initiatives targeting the reduction of methane emissions, including a focus on the energy sector.
For example, the SEC has adopted a final rule implementing a mandatory climate change reporting framework; however, such framework is subject to an indefinite stay pending litigation over the rules. Should this rule become effective it would materially increase the amount of time, monitoring, diligence and reporting costs related to these matters.
Removed
The contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations.
Added
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.
Removed
Our business operations could be materially impacted by an incident or interruption of systems we rely on that originates from, or compromises, third‐party networks or devices, including those of our third‐party service providers.
Added
Some of our customers have also deferred the timing of their offshore projects as a result of a focus on capital discipline, including the deployment of additional cash to share repurchase and dividend programs, the limited availability of production equipment and protracted regulatory approvals.
Removed
Any such incident or attack could result in injury to people, loss of control of, or damage to, our, or our customer’s, assets, downtime, and loss of revenue or harm to the environment.
Added
These risks include, but may not be limited to, human error, power outages, computer, telecommunication and satellite failures, natural disasters, fraud or malice, social engineering or phishing attacks, viruses or malware, and other cyberattacks, such as denial-of-service or ransomware attacks.
Removed
Any such incident or attack could also compromise our networks or our customers’ and vendors’ networks and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in significant fines, civil and/or criminal claims or proceedings.
Added
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.
Removed
While we have a cybersecurity program and incident response plan in place to prepare for, detect, respond to, mitigate and recover from the impact of these attacks, cyber-attacks may leverage previously unknown vulnerabilities, sophisticated new techniques and emerging technologies and, there can be no assurance that our response will be successful or effectively address the incident on a timely basis.
Added
In addition, the U.S. government has issued public warnings that indicate energy assets and companies engaging in significant transactions, such as acquisitions, might be specific targets of cybersecurity threats. Geopolitical tensions or conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East, may further heighten the risk of cybersecurity threats.
Removed
We have implemented a shared service center program pursuant to which we have outsourced certain finance, human resources, supply chain and IT functions. We have and will continue to align the design and operation of our financial control environment as part of our shared service center program.
Added
The cybersecurity threat landscape is rapidly evolving, and threat actors may leverage previously unknown vulnerabilities to perpetrate attacks, as well as sophisticated anti-forensics techniques to evade detection.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

12 edited+1 added−1 removed6 unchanged
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. 40 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.
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.
Item 1C. Cybersecurity We have a cybersecurity program to assess, identify, and manage risks from cybersecurity threats. The Company’s cybersecurity program includes administrative, technical, and physical safeguards that address our information systems, including our IT and operational technology environments. The program is designed to ensure the confidentiality, security, integrity, and availability of those systems and the information residing therein.
Item 1C. Cybersecurity We have a cybersecurity program designed to assess, identify and manage risks from cybersecurity threats. The Company’s cybersecurity program includes administrative, technical and physical safeguards that address our information systems, including our IT and operational technology environments. The program is designed to ensure the confidentiality, security, integrity and availability of those systems and the information residing therein.
We have adopted a Cybersecurity Incident Response Policy (the “CIRP”), which provides a framework and guidance for investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate.
We have adopted a Cybersecurity Incident Response Policy (the “CIRP”), which provides a framework and procedures for investigating, containing, documenting and mitigating incidents, including reporting findings and keeping senior management and other key stakeholders informed and involved as appropriate.
Risk Factors,” which should be read in conjunction with the foregoing information. 41
Risk Factors,” which should be read in conjunction with the foregoing information. 40
Additionally, all of the Company’s employees undertake an annual cybersecurity training program on how to identify characteristics of various cybersecurity threats, which is augmented by additional training and communications on IT and cybersecurity matters throughout the year.
Additionally, all of the Company’s employees are required to undertake an annual cybersecurity training program on how to identify characteristics of various cybersecurity threats and ways to report such threats, which is augmented by additional training and communications on IT and cybersecurity matters throughout the year.
Our policies, procedures, and processes are aligned with our technical tools, which include continuous security monitoring and alerting, an AI-based tool to facilitate cybersecurity incident identification and remediation, and other technologies, to ensure the security of our systems and information.
Our policies, procedures and processes are aligned with our technical tools, which include security monitoring and alerting, cybersecurity incident identification and remediation, and other technologies to ensure the security of our systems and information.
Periodically during the year, the Company’s IT department leads simulations of cybersecurity incidents with employees to test the organization’s ability to respond to a variety of cybersecurity-related scenarios.
Periodically during the year, the Company’s IT department leads simulations of cybersecurity incidents with employees, including annual tabletop exercises for offshore employees, to test the organization’s ability to respond to a variety of cybersecurity-related scenarios.
The ERM risk register, which includes any identified cybersecurity-related risks, is reviewed by our Executive Management Committee and is reported quarterly to the board of directors, who then reviews the identified risks, mitigation plans and monitoring reports and provides oversight as appropriate.
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.
Internal Audit, along with other internal stakeholders, including IT, determine the Company’s need for cybersecurity assessments in conjunction with an annual cybersecurity risk assessment process. Further, pursuant to our CIRP, we have engaged third-party support under a retainer agreement to enable an effective and timely response to a significant cybersecurity incident.
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 Audit Committee, at least quarterly, receives reports from the Company’s Senior Director – Information Technology (“SDIT”) on, among other things, the Company’s cybersecurity incidents, risks and measures, training and organizational readiness. The board of directors is kept apprised of cybersecurity risk matters, including through participation in the quarterly cybersecurity briefings to the Audit Committee that are described above.
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 Company’s SDIT reports to the Chief Financial Officer. The SDIT has extensive cybersecurity knowledge and skills, gained from over 25 years of relevant work experience. The SDIT is informed about and monitors the prevention, detection, mitigation, and remediation of cybersecurity incidents in accordance with the CIRP and policies and procedures, which may include reports from the IT team.
The SDIT 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 SDIT also regularly reviews risk management measures implemented by the Company to identify and mitigate cybersecurity risks. Third Parties and Assessments : We engage third-party service providers in various capacities to enhance our internal cybersecurity capabilities. The Company engages consultants to assist with cybersecurity assessments, including with respect to cloud security and network vulnerability testing.
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.
Removed
Oversight : The Audit Committee is responsible for, and actively engaged in, the oversight of our IT and cybersecurity program, including the oversight of risks from cybersecurity threats. All members of the Audit Committee have prior work experience relating to cybersecurity or have obtained a certification or degree in cybersecurity.
Added
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.

Item 2. Properties

Properties — owned and leased real estate

4 edited+2 added−1 removed9 unchanged
Biggest changeProperties Contract Drilling Fleet The following table provides certain information about the rigs in our drilling fleet as of February 15, 2024: 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' Spain Under reactivation (2) 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' Nigeria Under contract VALARIS DS-11 Drillship 2013 Dynamically Positioned 12,000'/40,000' Spain Preservation stacked (1) VALARIS DS-12 Drillship 2013 Dynamically Positioned 12,000'/40,000' Egypt Under contract VALARIS DS-13 Drillship 2023 Dynamically Positioned 12,000'/40,000' Mobilizing (3) Mobilizing (3) VALARIS DS-14 Drillship 2023 Dynamically Positioned 12,000'/40,000' Mobilizing (3) Mobilizing (3) VALARIS DS-15 Drillship 2014 Dynamically Positioned 12,000'/40,000' Brazil Under contract VALARIS DS-16 Drillship 2014 Dynamically Positioned 12,000'/40,000' Gulf of Mexico Under contract VALARIS DS-17 Drillship 2014 Dynamically Positioned 12,000'/40,000' Brazil 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) VALARIS DPS-5 Semisubmersible 2012 Dynamically Positioned 8,500'/35,000' Mexico Under contract VALARIS DPS-6 Semisubmersible 2012 Dynamically Positioned 8,500'/35,000' Gulf of Mexico Preservation stacked (1) VALARIS MS-1 Semisubmersible 2011 F&G ExD Millennium, Moored 8,200'/40,000 Australia Under contract Jackups VALARIS 72 Jackup 1981 Hitachi K1025N 225'/25,000' United Kingdom Under contract VALARIS 75 Jackup 1999 MLT Super 116-C 400'/30,000' Gulf of Mexico Preservation stacked (1) VALARIS 76 Jackup 2000 MLT Super 116-C 350'/30,000' Saudi Arabia Preparing for lease contract (4) 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 Preparing for lease contract (4) VALARIS 109 Jackup 2008 KFELS MOD V-Super B 350'/35,000' Namibia Preservation stacked (1) VALARIS 110 Jackup 2015 KFELS MOD V-B 400'/35,000' Qatar Under contract VALARIS 111 Jackup 2003 KFELS MOD V Enhanced B-Class 400'/36,000' Croatia Preservation stacked (1) VALARIS 115 Jackup 2013 Baker Marine Pacific Class 400 400'/30,000' Brunei Under contract VALARIS 116 Jackup 2008 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 42 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' United Kingdom Preparing for contract VALARIS 140 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 141 Jackup 2016 LT Super 116E 340'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 143 Jackup 2010 LT EXL Super 116-E 350'/35,000' Saudi Arabia Leased to ARO drilling VALARIS 144 Jackup 2010 LT Super 116-E 350'/35,000' Gulf of Mexico Under contract VALARIS 145 Jackup 2010 LT Super 116-E 350'/35,000' Gulf of Mexico Preservation stacked (1) VALARIS 146 Jackup 2011 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' Saudi Arabia Leased to ARO drilling VALARIS 148 Jackup 2013 LT Super 116-E 350'/30,000' Saudi Arabia Leased to ARO drilling VALARIS 247 Jackup 1998 LT Super Gorilla 400'/35,000' United Kingdom Preparing for 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 Preparing for contract VALARIS Norway Jackup 2011 KEFLS N Class 400'/35,000' United Kingdom Under contract (1) Prior to stacking, upfront steps are taken to preserve the rig.
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.
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. 43 Semisubmersibles are drilling rigs with pontoons and columns that are partially submerged at the drilling location to provide added stability during drilling operations.
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.
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 United States (Louisiana), Angola and Brazil.
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.
The equipment on our drilling rigs includes engines, draw works, derricks, pumps to circulate drilling fluid, well control systems, drill string and related equipment. The engines power a top-drive mechanism that turns the drill string and drill bit so that the hole is drilled by grinding subsurface materials, which are then returned to the rig by the drilling fluid.
The 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.
Removed
These steps are designed to reduce time and lower cost to reactivate the rig once returned to the active fleet. (2) Rig is being reactivated for a firm contract. (3) Rigs are mobilizing from South Korea to Las Palmas, Spain, where they will be stacked. (4) Rigs are under-going contract preparations for lease contracts with ARO drilling.
Added
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
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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFinancial Statements." Other Matters In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business.
Biggest changeFinancial Statements and Supplementary Data ." Other Matters In addition to the foregoing, we are named defendants or parties in certain other lawsuits, claims or proceedings incidental to our business and are involved from time to time as parties to governmental investigations or proceedings, including matters related to taxation, arising in the ordinary course of business.
Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows. 44
Although the outcome of such lawsuits or other proceedings cannot be predicted with certainty and the amount of any liability that could arise with respect to such lawsuits or other proceedings cannot be predicted accurately, we do not expect these matters to have a material adverse effect on our financial position, operating results or cash flows.
A $0.4 million liability related to these matters was included in Accrued liabilities and other on our Consolidated Balance Sheet as of December 31, 2023 included in "Item 8.
A $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.
Added
See “ Note 11 - Commitments and Contingencies ” to our consolidated financial statements included in “ Item 8 . Financial Statements and Supplementary Data ” for additional information. 43

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe share repurchase program does not have a fixed expiration, may be modified, suspended or discontinued at any time and is subject to compliance with applicable covenants and restrictions under our financing agreements. 46 The following table provides a summary of our repurchases of our equity securities during the quarter ended December 31, 2023 (in millions, except average price per share): Issuer Purchases of Equity Securities Period Total Number of Securities Purchased Average Price Paid per Security Total Number of Securities Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Securities that May Yet Be Purchased Under Plans or Programs October 1 - October 31 0.3 $ 70.08 0.3 $ 132.5 November 1 - November 30 0.2 $ 68.07 0.2 $ 115.8 December 1 - December 31 0.2 $ 67.08 0.2 $ 100.0 Total 0.7 $ 68.43 0.7 $ 100.0 Cumulative Total Shareholder Return The chart below presents a comparison of the cumulative total shareholder return, assuming $100 invested on May 3, 2021 (first trading date after our emergence from the Chapter 11 Cases) for Valaris Limited, the Standard & Poor's MidCap 400 Index and Dow Jones US Select Oil Equipment & Services Index (the "Industry Index").
Biggest changeThe 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").
This designation allows us to engage in transactions in currencies other than the Bermudian dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermudian dollars) in and out of Bermuda or to pay dividends to United States residents who are holders of our Common Shares.
This designation allows us to engage in transactions in currencies other than the Bermudian dollar, and there are no restrictions on our ability to transfer funds (other than funds denominated in Bermudian dollars) in and out of Bermuda or to pay dividends to U.S. residents who are holders of our Common Shares.
Many of our shareholders hold shares electronically, all of which are owned by a nominee of the Depository Trust Company. We had 67 shareholders of record on February 1, 2024. 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 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.
COMPARISON OF CUMULATIVE TOTAL RETURN (1) Among Valaris Limited, the S&P MidCap 400 Index and Industry Index 47 May 3, 2021 Fiscal Year Ended December 31, Relisting 2021 2022 2023 Valaris Limited 100.0 151.9 285.3 289.3 S&P MidCap 400 100.0 104.6 91.0 105.9 Industry Index 100.0 96.5 160.7 168.4 (1) Total return assuming reinvestment of dividends.
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.
Assumes $100 invested on May 3, 2021, which represents the first trading date after our emergence from the Chapter 11 Cases.
Assumes $100 invested on May 3, 2021, which represents the first trading date after our emergence from bankruptcy.
Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information On April 30, 2021, pursuant to the plan of reorganization, the Company issued an aggregate of approximately 75.0 million Common Shares and 5.6 million Warrants and has listed the Common Shares and the Warrants on the NYSE under the symbols “VAL” and “VAL WS”, respectively.
Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Market Information On April 30, 2021, the Company issued an aggregate of approximately 75.0 million Common Shares and Warrants are traded on the NYSE under the symbols “VAL” and “VAL WS”, respectively.
At the present time, there is no Bermuda income or profits tax, withholding tax, capital gains tax, capital transfer tax, estate duty or inheritance tax payable by us or by our shareholders in respect of our shares.
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.
Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters." Issuer Repurchases of Equity Securities In 2022, our board of directors authorized a share repurchase program under which we may purchase up to $100.0 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.
Equity Compensation Plans For information on shares issued or to be issued in connection with our equity compensation plans, see "Part III, Item 12 .
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.
Removed
In April 2023, the board of directors authorized an increase of this amount to $300.0 million and in February 2024, they authorized a further increase to $600.0 million.
Added
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).

Item 7. Management's Discussion & Analysis

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

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Biggest changeYear Ended December 31, 2023 Floaters Jackups ARO Other Reconciling Items Consolidated Total Revenues $ 948.7 $ 659.6 $ 496.6 $ 175.9 $ (496.6) $ 1,784.2 Operating expenses Contract drilling (exclusive of depreciation) 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 Year Ended December 31, 2022 Floaters Jackups ARO Other Reconciling Items Consolidated Total Revenues $ 700.5 $ 744.2 $ 459.5 $ 157.8 $ (459.5) $ 1,602.5 Operating expenses Contract drilling (exclusive of depreciation) 646.0 538.9 341.8 76.4 (219.9) 1,383.2 Loss on impairment 34.5 — — — — 34.5 Depreciation 50.0 36.1 63.4 4.6 (62.9) 91.2 General and administrative — — 18.7 — 62.2 80.9 Equity in earnings of ARO — — — — 24.5 24.5 Operating income (loss) $ (30.0) $ 169.2 $ 35.6 $ 76.8 $ (214.4) $ 37.2 55 Floaters Floater revenue increased $248.2 million, or 35%, in 2023 as compared to 2022, primarily due to $210.3 million from increased operating days primarily attributable to rigs that have commenced contracts following reactivation or returned to work upon completion of special periodic surveys and $96.7 million from higher average daily revenue earned primarily due to VALARIS DS-12 and VALARIS DPS-5 working under higher day rate contracts in 2023 as compared to the prior year.
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.
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 Middle East, Africa and Asia Pacific.
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.
See “ Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Second Lien Notes. Senior Secured Revolving Credit Agreement On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”).
See “ Note 6 - Debt " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information on the Second Lien Notes. Senior Secured Revolving Credit Agreement On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”).
ARO The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for the ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us.
ARO The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for both the ARO-owned jackup rigs and the rigs leased from us. Contract Drilling Expenses are inclusive of the bareboat charter fees for the rigs leased from us.
See “ Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the First Lien Notes.
See “ Note 6 - Debt " to our consolidated financial statements included in " Item 8 . Financial Statements and Supplementary Data " for additional information on the First Lien Notes.
A portion of the proceeds were used to fund the redemption of all of the outstanding First Lien Notes as discussed above. 61 Additionally, on August 21, 2023, the Issuers issued $400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act.
A portion of the proceeds were used to fund the redemption of all of the outstanding First Lien Notes as discussed above. 63 Additionally, on August 21, 2023, the Issuers issued $400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act.
It is uncertain whether any of these initiatives will be implemented and what the impact of such initiatives would have on our financial condition, operating results and cash flows. MARKET RISK Interest Rate Risk Our outstanding debt at December 31, 2023 consisted of our $1.1 billion aggregate principal amount of Second Lien Notes.
It is uncertain whether any of these initiatives will be implemented and what the impact of such initiatives would have on our financial condition, operating results and cash flows. MARKET RISK Interest Rate Risk Our outstanding debt at December 31, 2024 consisted of our $1.1 billion aggregate principal amount of Second Lien Notes.
The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See " Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information.
The 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.
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, 2023.
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.
BUSINESS ENVIRONMENT Floaters In recent years, the more constructive oil price environment has led to an improvement in contracting and tendering activity for floaters.
BUSINESS ENVIRONMENT Floaters In recent years, the more constructive oil price environment led to an improvement in contracting and tendering activity for floaters.
Depending on market conditions, contracting activity and future opportunities, we may reactivate additional rigs or make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs. 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. 62 We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses.
The changes in our consolidated effective income tax rate excluding discrete tax items during the three-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions.
The changes in our consolidated effective income tax rate excluding discrete tax items during the two-year period result primarily from changes in the relative components of our earnings from the various taxing jurisdictions in which our drilling rigs are operated and/or owned and differences in tax rates in such taxing jurisdictions.
As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in equity in earnings of ARO in our Consolidated Statement of Operations.
As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in equity in earnings of ARO in our Consolidated Statements of Operations.
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 2024 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 2025 has already been determined.
See " Note 1 1 - 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 . Financial Statements and Supplementary Data " for information on our pension and other postretirement benefit plans.
In an effort to reduce GHG emissions, governments have implemented or considered legislative and regulatory mechanisms to institute carbon pricing mechanisms, such as the European Union’s Emission Trading System, and to impose technical requirements to reduce carbon emissions.
In an effort to reduce GHG emissions, governments have implemented or considered legislative and regulatory mechanisms to institute carbon pricing mechanisms, such as the EU’s Emission Trading System, and to impose technical requirements to reduce carbon emissions.
Further, in November 2021, the United States and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
In November 2021, the U.S. and other countries entered into the Glasgow Climate Pact, which includes a range of measures designed to address climate change, including but not limited to the phase-out of fossil fuel subsidies, reducing methane emissions 30% by 2030, and cooperating toward the advancement of the development of clean energy.
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 6.88% at December 31, 2023 from 7.10% at December 31, 2022.
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.
As of December 31, 2023, we were contingently liable for an aggregate amount of $128.8 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, 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.
The tax benefit in 2023 includes a $799.5 million deferred tax benefit recognized in the fourth quarter of 2023 to reduce our valuation allowance due to the determination that sufficient positive evidence now exists to conclude that a portion of the allowance is no longer needed.
The tax benefit in 2023 includes a $799.5 million deferred tax benefit recognized in the fourth quarter of 2023 to reduce our valuation allowance due to the determination that sufficient positive evidence existed to conclude that a portion of the allowance was no longer needed.
Using our key assumptions at December 31, 2023, a one-percentage-point decrease in the assumed discount rate would increase our recorded pension and other postretirement benefit liabilities by approximately $60.1 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 $4.4 million.
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.
We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture, dated as of April 19, 2023 (the "Indenture"), and the Credit Agreement contain covenants that limit our ability to incur additional indebtedness.
We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. However, the Indenture governing our Second Lien Notes, as defined below, dated as of April 19, 2023 (the "Indenture"), and the Credit Agreement contain covenants that limit our ability to incur additional indebtedness.
Effective December 2023, the Notes Receivable from ARO bear interest based on the one-year term SOFR rate, set as of the end of the year prior to the year applicable, plus 2.10%.
Our Notes Receivable from ARO bear interest based on the one-year term SOFR rate, set as of the end of the year prior to the year applicable, plus 2.10%.
We do not currently hedge our foreign currency risk. 66 CRITICAL ACCOUNTING POLICIES AND ESTIMATES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the amounts reported in our consolidated financial statements and accompanying notes.
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.
Our cash and cash equivalents as of December 31, 2023 and 2022, were $620.5 million and $724.1 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 16, 2024.
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.
The following table summarizes our other commitments as of December 31, 2023 (in millions): Commitment expiration by period 2024 2025 and 2026 2027 and 2028 Thereafter Total Letters of credit $ 116.8 $ — $ 12.0 $ — $ 128.8 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 MYR 117.0 (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, 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.
While the number of jackups has decreased less than floaters on a relative basis, 33% of the current jackup fleet is more than 30 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or length of time stacked.
While the number of jackups has decreased less than floaters, 28% of the current jackup fleet is more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or length of time stacked.
Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirement. As of December 31, 2023, we had collateral deposits in the amount of $12.6 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, 2024, we had collateral deposits in the amount of $10.8 million with respect to these agreements.
The Additional Notes were issued at 100.75% of par, plus accrued interest from April 19, 2023, for net proceeds of approximately $396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $11.4 million. We used a portion of the proceeds to finance the purchase of the Newbuild Drillships as described above.
The Additional Notes were issued at 100.75% of par, plus accrued interest from April 19, 2023, for net proceeds of approximately $396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $11.4 million. We used a portion of the proceeds to finance the purchase of VALARIS DS-13 and VALARIS DS-14.
Key assumptions at December 31, 2023, included (1) a weighted average discount rate of 4.97% to determine pension benefit obligations, (2) a weighted average discount rate of 5.21% to determine net periodic pension cost and (3) an expected long-term rate of return on pension plan assets of 7.10% to determine net periodic pension cost.
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.
The prior period has been adjusted to conform with the current period presentation. 54 Operating Income by Segment Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third parties and the activities associated with our arrangements with ARO under the bareboat charter arrangements (the "Lease Agreements").
Operating Income by Segment Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third parties and the activities associated with our arrangements with ARO under the bareboat charter arrangements (the "Lease Agreements").
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, 2022 , filed with the SEC on February 21, 2023.
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.
Upon emergence, we elected to change our accounting policies and have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.
We have identified the significant components of our drilling rigs and ascribed useful lives based on the expected time until the next required overhaul or the end of the expected economic lives of the components.
Our primary uses of cash were $337.0 million for the purchase of the Newbuild Drillships and $359.1 million for maintenance and upgrades of our drilling rigs, including reactivations.
Our primary uses of cash were $337.0 million for the purchase of VALARIS DS-13 and DS-14 and $359.1 million for maintenance and upgrades of our drilling rigs, including reactivations.
A hypothetical 1% decrease to SOFR would decrease interest income for the year ended December 31, 2024 by $4.0 million based on the principal amount outstanding at December 31, 2023 of $402.7 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, 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.
These benefits were partially offset by a $88.6 million increase in unrecognized tax benefit liabilities for tax positions taken during prior years, including $66.0 million recognized in the fourth quarter of 2023 related to tax assessments received from the Luxembourg tax authorities. See " Note 12 - Income Taxes" to our consolidated financial statements included in "Item 8.
These benefits were partially offset by a $88.6 million increase in unrecognized tax benefit liabilities for tax positions taken during prior years, including $66.0 million recognized in the fourth quarter of 2023 related to tax assessments received from the Luxembourg tax authorities.
See " Note 1 - Description of the Business and Summary of Significant Accounting Policies" and " Note 3 - Fresh Start Accounting" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for more information.
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.
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. 68 • 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.
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 connection with our sustainability-related efforts, during 2023, we spent approximately $7.0 million and expect spend during 2024 to be comparable. Our sustainability initiatives will continue to require, among other actions, investment in systems and equipment and coordination with our customers.
In connection with our sustainability-related efforts, during 2024, we spent approximately $9.0 million. Our sustainability initiatives will continue to require, among other actions, investment in systems and equipment and cooperation with our customers.
Financial Statements and Supplementary Data" for additional information. 58 Our 2023 consolidated effective income tax rate includes discrete tax benefit of $42.0 million primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years including unrecognized tax benefits described above.
Our 2023 consolidated effective income tax rate includes a discrete tax benefit of $42.0 million primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, including unrecognized tax benefits described below.
The discussion of our results of operations and liquidity in this section includes comparisons for the years ended December 31, 2023 and 2022 (Successor). For a similar discussion, including comparisons for the year ended December 31, 2022, eight months ended December 31, 2021 (Successor), and the four months ended April 30, 2021 (Predecessor), 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, 2024 and 2023. For a similar discussion, including comparisons for the years ended December 31, 2023 and 2022, see “Part II. Item 7.
See " Note 8 - Debt" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on the Credit Agreement and 8.375% Second Lien Notes due 2030 (the "Second Lien Notes").
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.
We currently own 53 rigs, including 13 drillships, four dynamically positioned semisubmersible rigs, one moored semisubmersible rig, 35 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional eight rigs.
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.
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.
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 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.
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.
Our other primary sources and uses of cash during 2023 resulted from the First Lien Note redemption, the corresponding Second Lien Notes issuance and our share repurchase program, which are each further discussed below.
Other primary sources and uses of cash during 2023 resulted from the First Lien Notes redemption, the corresponding Second Lien Notes issuance and our share repurchase program, which are each further discussed below, combined with the sale of VALARIS 54 for net proceeds of $30.3 million.
Financial Statements and Supplementary Data" for additional information on our investment in ARO and Notes Receivable from ARO. 62 The following table summarizes the maturity schedule of our Notes Receivable from ARO as of December 31, 2023 (in millions): Maturity Date Principal Amount October 2027 $ 225.0 October 2028 177.7 Total $ 402.7 Contractual Obligations The following table summarizes our significant contractual obligations as of December 31, 2023 and the periods in which such obligations are due (in millions): Payments due by period 2024 2025 and 2026 2027 and 2028 Thereafter Total Principal payments on long-term debt $ — $ — $ — $ 1,100.0 $ 1,100.0 Interest payments on long-term debt 92.1 184.3 184.3 138.1 598.8 Operating leases 32.4 39.6 12.4 3.7 88.1 Total contractual obligations (1) $ 124.5 $ 223.9 $ 196.7 $ 1,241.8 $ 1,786.9 (1) Contractual obligations do not include $224.0 million of unrecognized tax benefits, inclusive of interest and penalties, included on our Consolidated Balance Sheet as of December 31, 2023.
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.
Divestitures 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 five jackup rigs during the two-year period ended December 31, 2023.
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.
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.
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%.
See " Note 12 - Income Taxes" to our consolidated financial statements included in "Item 8. Financial Statements and Supplementary Data" for additional information on these tax assessments. 64 Share Repurchase Program In 2022, our board of directors authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding Common Shares.
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.
This rig is not included in the table above. 53 The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment: Year Ended December 31, 2023 2022 Rig Utilization - Total Fleet (1) Floaters 58% 45% Jackups 59% 66% Other (2) 100% 100% Total Valaris 66% 66% ARO 93% 92% Rig Utilization - Active Fleet (1) Floaters 75% 67% Jackups 79% 86% Other (2) 100% 100% Total Valaris 83% 85% ARO 93% 92% Average Daily Revenue (3) Floaters $ 265,000 $ 229,000 Jackups 106,000 100,000 Other (2) 42,000 39,000 Total Valaris $ 130,000 $ 109,000 ARO $ 96,000 $ 94,000 (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, 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.
As of December 31, 2023, our Consolidated Balance Sheet included a $825.2 million net deferred income tax asset, a $36.6 million liability for income taxes currently payable and a $224.0 million liability for unrecognized tax benefits, inclusive of interest and penalties.
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.
Financial Statements and Supplementary Data" for additional information on ARO. 63 Other Commitments We have other commitments that we are contractually obligated to fulfill with cash under certain circumstances.
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. Other Commitments We have other commitments that we are contractually obligated to fulfill with cash under certain circumstances.
Cash Flows and Capital Expenditures Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, 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.
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.
Our significant accounting policies are included in " 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". These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our consolidated financial statements.
Our significant accounting policies are included in " 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.
Excluding the impact of the aforementioned discrete tax items, our consolidated effective income rates for the years ended December 31, 2023 and 2022 were (872.3)% and 73.6%, respectively.
Excluding the impact of the aforementioned discrete tax items, our consolidated effective income tax rate was (872.3)% for the year ended December 31, 2023.
Consequently, our outlook for the offshore drilling business is positive. 49 Inflationary pressures remain elevated and have resulted in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects.
Inflationary pressures have continued, resulting in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects.
The number of contracted jackups has increased to 409 at December 31, 2023 from a low of 341 in early 2021, contributing to a 16% increase in global utilization, from 78% to 94%, for the industry's active fleet over the same period, which has led to a meaningful increase in day rates for jackups.
The number of contracted jackups increased to a peak of 412 in March 2024 from a low of 341 in early 2021, contributing to an increase in global utilization, from 78% to 94%, for the industry's marketed fleet over the same period, leading to a meaningful increase in day rates for jackups.
Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes.
Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation. Income tax rates and taxation systems in the jurisdictions in which our subsidiaries conduct operations vary and our subsidiaries are frequently subjected to minimum taxation regimes.
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. The Notes Receivable from ARO, which are governed by the laws of Saudi Arabia, mature during 2027 and 2028.
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 details regarding the bankruptcy, our emergence and fresh start accounting. Our Industry Operating results in the offshore contract drilling industry are highly cyclical and are directly related to the demand for and the available supply of drilling rigs. Low demand and excess supply can independently affect day rates and utilization of drilling rigs.
Our Industry Operating results in the offshore contract drilling industry are highly cyclical and are directly related to the demand for and the available supply of drilling rigs. Low demand and excess supply can independently affect day rates and utilization of drilling rigs. Therefore, adverse changes in either of these factors can result in adverse changes in our industry.
See " Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8.
See " Note 6 - Debt " to our consolidated financial statements included in " Item 8 .
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".
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.
Based on our current projections, we expect capital expenditures during 2024 to approximate $390.0 million to $430.0 million primarily relating to maintenance and upgrade projects, including rig reactivation and associated contract-specific capital expenditures. We expect to receive upfront payments from our customers of approximately $55.0 million relating to these projects.
Based on our current projections, we expect capital expenditures during 2025 to approximate $350.0 million to $390.0 million, primarily relating to maintenance and upgrade projects, including contract-specific capital expenditures.
During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$101.0 million (approximately $69.0 million converted at current period-end exchange rates) plus interest related to the examination of certain of our tax returns for the years 2011 through 2016.
As a result, we reversed the uncertain tax position liability for the previously issued assessments and recognized a tax benefit of approximately $65.0 million in our Consolidated Statements of Operations for the year ended December 31, 2024. 66 During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$101.0 million (approximately $63.0 million converted at current period-end exchange rates) plus interest related to the examination of certain of our tax returns for the years 2011 through 2016.
As the interest rates for such borrowings are at variable rates, we are subject to interest rate risk. However, as of December 31, 2023, we had no outstanding borrowings under the Credit Agreement. Our Notes Receivable from ARO historically accrued interest based on a one-year LIBOR rate.
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.
Other Income (Expense), Net The following table summarizes other income (expense), net, (in millions): Year Ended December 31, 2023 2022 Interest income $ 101.4 $ 65.5 Interest expense, net (68.9) (45.3) Loss on debt extinguishment (29.2) — Net gain on sale of property 28.6 141.2 Net foreign currency exchange gains (losses) (3.5) 12.2 Net periodic pension and retiree medical income 0.9 16.4 Other, net 1.4 (2.3) $ 30.7 $ 187.7 Interest income increased by $35.9 million, or 55%, in 2023 as compared to 2022, primarily due to an increase of $33.3 million of interest income on cash equivalents due to a higher average balance during 2023 and a $19.2 million increase on interest income earned on our Notes Receivable from ARO attributable to higher interest rates in 2023, partially offset by non-cash interest income of $14.8 million recognized in the prior year on the partial principal repayment of our Notes Receivable from ARO in September 2022.
Other Income (Expense), Net The following table summarizes other income (expense), net, (in millions): Years Ended December 31, 2024 2023 Interest income $ 86.1 $ 101.4 Interest expense, net (84.8) (68.9) Net foreign currency exchange gains (losses) 13.8 (3.5) Net periodic pension and retiree medical income 2.4 0.9 Net gain (loss) on sale of property (0.2) 28.6 Loss on extinguishment of debt — (29.2) Other, net 0.6 1.4 $ 17.9 $ 30.7 59 Interest income decreased by $15.3 million, or 15%, in 2024 as compared to 2023, primarily due to a $21.2 million decrease in interest income on cash equivalents due to a lower average balance in 2024 and a $5.9 million decrease in interest income earned on our outstanding 10-year shareholder notes receivable due from ARO (the "Notes Receivable from ARO"), which was driven by lower outstanding principal balances as a result of a partial net settlement agreement executed in the second quarter of 2024 (the "Net Settlement Agreement") and lower interest rates relative to the prior year period.
It is expected that new executive orders, regulatory action, and/or legislation targeting GHG emissions, or prohibiting, restricting, or delaying oil and gas development activities in certain areas, will be proposed and/or promulgated.
New regulatory action and/or legislation targeting GHG emissions, or prohibiting, restricting, or delaying oil and gas development activities in certain areas, may be proposed and/or promulgated at the state or local level of the U.S.
See " Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8.
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.
Therefore, adverse changes in either of these factors can result in adverse changes in our industry. While the cost of moving a rig may cause the balance of supply and demand to vary somewhat between regions, significant variations between most regions are generally of a short-term nature due to rig mobility.
While the cost of moving a rig may cause the balance of supply and demand to vary somewhat between regions, significant variations between most regions are generally of a short-term nature due to rig mobility. Demand for offshore drilling is impacted by fundamental supply and demand dynamics for crude oil.
Effective Tax Rate During the years ended December 31, 2023 and 2022, we recorded an income tax benefit of $782.6 million and an income tax expense of $43.1 million, respectively. Our consolidated effective income tax rates during the same periods were (929.5)% and 19.2%, respectively.
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)%.
The number of contracted benign environment floaters has increased to 123 at December 31, 2023 from a low of 101 in early 2021, contributing to a 12% increase in global utilization, from 73% to 85%, for the industry's active fleet over the same period.
The number of contracted benign environment floaters increased to a peak of 128 in April 2024 from a low of 101 in early 2021, contributing to an increase in global utilization, from 73% to 86%, for the industry's marketed fleet over the same period, which resulted in a meaningful increase in day rates.
Also, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of newbuild construction for the foreseeable future. 51 Jackups Contracting and tendering activity for jackups has improved in recent years as a result of the more constructive oil price environment and we have seen a corresponding increase in utilization.
Jackups Contracting and tendering activity for jackups has improved in recent years as a result of the more constructive oil price environment, and we have seen a corresponding increase in utilization.
(2) During the second quarter of 2023, we sold VALARIS 54. (3) This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under contracts with Saudi Aramco.
Separately, during 2024 the contracts with ARO for VALARIS 143, VALARIS 147 and VALARIS 148 were terminated and the rigs have been preservation stacked . (2) This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco.
The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities. Our backlog excludes ARO's backlog, but includes backlog from our rigs leased to ARO at the contractual rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture.
Our backlog excludes ARO's backlog but includes backlog from our rigs leased to ARO at the contractual lease rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture (the "Shareholder Agreement").
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. See " Note 5 - Equity Method Investment in ARO" to our consolidated financial statements included in "Item 8.
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.
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. We have an $18.8 million liability for uncertain tax positions relating to these assessments as of December 31, 2023.
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).
Our net cash provided by or used in operating activities and capital expenditures were as follows (in millions): Year Ended December 31, 2023 2022 Net cash provided by operating activities $ 267.5 $ 127.0 Capital expenditures $ (696.1) $ (207.0) During the year ended December 31, 2023, we generated $267.5 million from operating activities related primarily to higher margins, the collection of $45.9 million for certain tax receivables and other changes in working capital.
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.
These two contracts resulted in incremental aggregate backlog of approximately $924.0 million, which was partially offset by revenues realized. 50 The following table summarizes our and 100% of ARO's contract backlog of business as of February 15, 2024 and the periods in which revenues are expected to be realized (in millions): 2024 2025 2026 and beyond Total Floaters $ 1,072.7 $ 830.8 $ 628.2 $ 2,531.7 Jackups 548.2 352.6 266.6 1,167.4 Other 100.1 55.8 66.4 222.3 Total $ 1,721.0 $ 1,239.2 $ 961.2 $ 3,921.4 ARO $ 603.3 $ 536.9 $ 997.9 $ 2,138.1 The amount of actual revenues earned and the actual periods during which revenues are earned will be different from amounts disclosed in our backlog calculations due to a lack of predictability of various factors, including unscheduled repairs, maintenance requirements, weather delays, contract terminations or renegotiations and other factors.
The following table summarizes our and 100% of ARO's contract backlog as of February 18, 2025 and the periods in which revenues are expected to be realized (in millions): 2025 2026 2027 and beyond Total Floaters $ 946.2 $ 687.7 $ 390.1 $ 2,024.0 Jackups 617.2 408.6 287.2 1,313.0 Other 92.7 114.1 64.7 271.5 Total $ 1,656.1 $ 1,210.4 $ 742.0 $ 3,608.5 ARO $ 369.4 $ 283.2 $ 770.3 $ 1,422.9 The amount of actual revenues earned and the actual periods during which revenues are earned will be different from amounts disclosed in our backlog calculations due to a lack of predictability of various factors, including unscheduled repairs, maintenance requirements, weather delays, contract terminations or renegotiations and other factors.
Interest expense, net increased by $23.6 million, or 52%, in 2023 as compared to 2022, primarily due to a higher principal debt balance in 2023. We recognized a $29.2 million loss from the extinguishment of the First Lien Notes in 2023.
Net gains on the sale of property decreased by $28.8 million in 2024 as compared to 2023, primarily due to the sale of VALARIS 54 in 2023. We recognized a $29.2 million loss from the extinguishment of the First Lien Notes in 2023.

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