~~ENSCO~~VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED ~~BALANCE SHEETS~~STATEMENTS OF COMPREHENSIVE LOSS

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

millions)

September 30,
2017 December 31,
2016
(Unaudited)
ASSETS
CURRENT ASSETS
    Cash and cash equivalents $ 724.4
$ 1,159.7
    Short-term investments 1,069.8
1,442.6
    Accounts receivable, net 349.0
361.0
    Other 318.3
316.0
Total current assets 2,461.5
3,279.3
PROPERTY AND EQUIPMENT, AT COST 13,492.6
12,992.5
    Less accumulated depreciation 2,396.2
2,073.2
       Property and equipment, net 11,096.4
10,919.3
OTHER ASSETS, NET 125.0
175.9
$ 13,682.9
$ 14,374.5
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 187.9
$ 145.9
Accrued liabilities and other 300.8
376.6
Current maturities of long-term debt —
331.9
Total current liabilities 488.7
854.4
LONG-TERM DEBT 4,747.7
4,942.6
OTHER LIABILITIES 279.2
322.5
COMMITMENTS AND CONTINGENCIES

ENSCO SHAREHOLDERS' EQUITY

Class A ordinary shares, U.S. $.10 par value, 314.9 million and 310.3 million shares issued as of September 30, 2017 and December 31, 2016 31.5
31.0
Class B ordinary shares, £1 par value, 50,000 shares authorized and issued as of September 30, 2017 and December 31, 2016 .1
.1
Additional paid-in capital 6,429.8
6,402.2
Retained earnings 1,744.2
1,864.1
Accumulated other comprehensive income 28.6
19.0
Treasury shares, at cost, 11.0 million and 7.3 million shares as of September 30, 2017 and December 31, 2016 (69.0 ) (65.8 )
Total Ensco shareholders' equity 8,165.2
8,250.6
NONCONTROLLING INTERESTS 2.1
4.4
Total equity 8,167.3
8,255.0
$ 13,682.9
$ 14,374.5
(Unaudited)


	Three Months Ended September 30,
	2020		2019
NET LOSS	$	(672.0)	$	(197.5)
OTHER COMPREHENSIVE INCOME (LOSS), NET

Net change in derivative fair value	2.7		(5.7)
Reclassification of net (gains) losses on derivative instruments from other comprehensive loss into net loss	(.5)		4.9
Other	(.1)		(.2)
NET OTHER COMPREHENSIVE INCOME (LOSS)	2.1		(1.0)
COMPREHENSIVE LOSS	(669.9)		(198.5)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	1.1		.4
COMPREHENSIVE LOSS ATTRIBUTABLE TO VALARIS	$	(668.8)	$	(198.1)

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

~~ENSCO~~VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~COMPREHENSIVE INCOME (LOSS)

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
NET INCOME (LOSS)	$	(4,788.5)	$	21.8
OTHER COMPREHENSIVE INCOME (LOSS), NET

Net change in derivative fair value	(5.4)		(7.3)
Reclassification of net (gains) losses on derivative instruments from other comprehensive income (loss) into net income (loss)	(11.5)		8.3
Other	(.5)		(.3)
NET OTHER COMPREHENSIVE INCOME (LOSS)	(17.4)		.7
COMPREHENSIVE INCOME (LOSS)	(4,805.9)		22.5
COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	3.9		(3.8)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	(4,802.0)	$	18.7

Nine Months Ended
September 30,
2017 2016
OPERATING ACTIVITIES

Net (loss) income $ (97.1 ) $ 856.6
Adjustments to reconcile net (loss) income to net cash provided by operating activities of continuing operations:
Depreciation expense 325.3
335.1
Deferred income tax expense 34.5
23.6
Share-based compensation expense 31.3
28.7
Amortization of intangibles and other, net (8.7 ) (16.2 )
Loss (gain) on debt extinguishment 2.6
(279.0 )
Other (.3 ) (2.9 )
Changes in operating assets and liabilities (68.0 ) 48.9
Net cash provided by operating activities of continuing operations 219.6
994.8

INVESTING ACTIVITIES
Maturities of short-term investments 1,412.7
1,582.0
Purchases of short-term investments (1,040.0 ) (1,704.0 )
Additions to property and equipment (474.1 ) (255.5 )
Other 2.6
7.7
Net cash used in investing activities of continuing operations (98.8 ) (369.8 )

FINANCING ACTIVITIES
Reduction of long-term borrowings (537.0 ) (862.4 )
Cash dividends paid (9.4 ) (8.5 )
Debt issuance costs (5.5 ) —
Proceeds from equity issuance —
585.5
Other (4.5 ) (2.3 )
Net cash used in financing activities (556.4 ) (287.7 )

Net cash (used in) provided by discontinued operations (.4 ) 7.4
Effect of exchange rate changes on cash and cash equivalents .7
(.6 )
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (435.3 ) 344.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,159.7
121.3
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 724.4
$ 465.4

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

~~ENSCO~~

VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except share and par value amounts)


	September 30, 2020		December 31, 2019
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	180.4	$	97.2
Accounts receivable, net	429.7		520.7
Other current assets	454.7		446.5
Total current assets	1,064.8		1,064.4
PROPERTY AND EQUIPMENT, AT COST	13,215.5		18,393.8
Less accumulated depreciation	2,133.1		3,296.9
Property and equipment, net	11,082.4		15,096.9
LONG-TERM NOTES RECEIVABLE FROM ARO	442.7		452.9
INVESTMENT IN ARO	121.1		128.7
OTHER ASSETS	200.2		188.3
	$	12,911.2	$	16,931.2
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	180.7	$	288.2
Accrued liabilities and other	207.3		417.7

Current maturities of long-term debt	0		124.8
Total current liabilities	388.0		830.7
LONG-TERM DEBT	0		5,923.5
OTHER LIABILITIES	696.9		867.4
Total liabilities not subject to compromise	1,084.9		7,621.6
LIABILITIES SUBJECT TO COMPROMISE	7,313.7		0
COMMITMENTS AND CONTINGENCIES
VALARIS SHAREHOLDERS' EQUITY
Class A ordinary shares, U.S. $0.40 par value, 206.1 million and 205.9 million shares issued as of September 30, 2020 and December 31, 2019	82.5		82.4
Class B ordinary shares, £1 par value, 50,000 shares issued as of September 30, 2020 and December 31, 2019	.1		.1
Additional paid-in capital	8,636.5		8,627.8
Retained (deficit) earnings	(4,112.9)		671.7
Accumulated other comprehensive (loss) income	(11.2)		6.2
Treasury shares, at cost, 6.7 million and 7.9 million shares as of September 30, 2020 and December 31, 2019	(76.3)		(77.3)
Total Valaris shareholders' equity	4,518.7		9,310.9
NONCONTROLLING INTERESTS	(6.1)		(1.3)
Total equity	4,512.6		9,309.6
	$	12,911.2	$	16,931.2

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

VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2020		2019
OPERATING ACTIVITIES
Net income (loss)	$	(4,788.5)	$	21.8
Adjustments to reconcile net income (loss) to net cash used in operating activities:
Debtor in Possession financing fees and payments on Backstop Agreement	43.8		0
Loss on impairment	3,646.2		90.7
Non cash reorganization items, net	447.9		0
Depreciation expense	418.4		445.9
Deferred income tax benefit	(103.6)		(3.8)
Debt discounts and other	36.8		18.1
Share-based compensation expense	17.8		28.7
Amortization, net	14.4		(18.1)
Equity in earnings of ARO	7.6		3.1
(Gain on) adjustment to bargain purchase	6.3		(659.8)
Gain on extinguishment of debt	(3.1)		(194.1)
Other	2.4		(4.7)
Changes in operating assets and liabilities	(131.8)		(147.3)
Contributions to pension plans and other post-retirement benefits	(11.0)		(8.0)
Net cash used in operating activities	(396.4)		(427.5)
INVESTING ACTIVITIES
Additions to property and equipment	(82.9)		(174.2)
Net proceeds from disposition of assets	44.2		4.9
Maturities of short-term investments	0		474.0
Rowan cash acquired	0		931.9
Purchases of short-term investments	0		(145.0)

Net cash provided by (used in) investing activities	(38.7)		1,091.6
FINANCING ACTIVITIES

Borrowings on credit facility	596.0		175.0
Debtor in possession financing fees and payments on Backstop Agreement	(43.8)		0
Repayments of credit facility borrowings	(15.0)		(34.4)
Reduction of long-term borrowings	(9.7)		(928.1)
Purchase of noncontrolling interests	(7.2)		0
Debt solicitation fees	0		(9.4)
Cash dividends paid	0		(4.5)
Other	(1.9)		(7.7)
Net cash provided by (used in) financing activities	518.4		(809.1)
Effect of exchange rate changes on cash and cash equivalents	(.1)		(.6)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	83.2		(145.6)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	97.2		275.1
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	180.4	$	129.5

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

VALARIS PLC AND SUBSIDIARIES (DEBTOR-IN-POSSESSION)

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 -Unaudited Condensed Consolidated Financial Statements

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

We prepared the accompanying condensed consolidated financial statements of ~~Ensco~~Valaris plc and subsidiaries (the "Company," ~~"Ensco,~~"Valaris," "our," "we" or "us") in accordance with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, ~~2016~~2019 condensed consolidated balance sheet data ~~were~~was derived from our ~~2016~~2019 audited consolidated financial statements but dodoes not include all disclosures required by GAAP. The preparation of our condensed consolidated financial statements requires us to make certain estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the related revenues and expenses and disclosures of gain and loss contingencies as of the date of the financial statements. Actual results could differ from those estimates.

The financial data for the ~~three-month~~three and ~~nine-month periods~~nine months ended September 30, ~~2017~~2020 and ~~2016~~2019 included herein have been subjected to a limited review by KPMG LLP, our independent registered public accounting firm. The accompanying independent registered public accounting firm's review report is not a report within the meaning of Sections 7 and 11 of the Securities Act, and the independent registered public accounting firm's liability under Section 11 does not extend to it.

Results of operations for the ~~three-month~~three and ~~nine-month periods~~nine months ended September 30, ~~2017~~2020 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, ~~2017~~.2020. We recommend these condensed consolidated financial statements be read in conjunction with our annual report on Form 10-K for the year ended December 31, ~~2016~~2019, filed with the SEC on February ~~28, 2017~~21, 2020.

Chapter 11 Cases and ~~our quarterly reports on Form 10-Q~~Restructuring Support Agreement

On August 19, 2020 (the "Petition Date"), Valaris plc and certain of its direct and indirect subsidiaries (collectively, the "Debtors"), filed ~~with~~voluntary petitions for reorganization under Chapter 11 of the ~~SEC on April 27, 2017 and July 27, 2017.~~

~~Operating Revenues and Expenses~~

~~During~~United States Bankruptcy Code ("Bankruptcy Code") in the ~~nine-month period ended September 30, 2016, operating revenues included $185.0 million~~Bankruptcy Court for the ~~lump-sum consideration received~~Southern District of Texas (the "Bankruptcy Court"). The Debtors obtained joint administration of their Chapter 11 cases under the caption In re Valaris plc, et al., Case No. 20-34114 (MI)(the "Chapter 11 Cases"). On August 18, 2020, the Debtors entered into the Restructuring Support Agreement ("RSA") with certain senior note holders (collectively, the "Consenting Noteholders").

The RSA contemplates that the Company will implement the restructuring through the Chapter 11 Cases pursuant to a plan of reorganization and the various related transactions set forth in ~~settlement~~or contemplated by the RSA and ~~release~~the related Restructuring Term Sheet. See“Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional details regarding the Chapter 11 Cases and RSA.

Bankruptcy Accounting

The condensed consolidated financial statements included herein have been prepared as if we were a going concern. See “Note 2 – Chapter 11 Proceedings and Ability to Continue as a Going Concern” for additional details regarding the bankruptcy and circumstances raising substantial doubt over our ability to continue as a going concern. As a result, we have segregated liabilities and obligations whose treatment and satisfaction are dependent on the outcome of the ~~ENSCO DS-9 customer's ongoing early termination obligations~~Chapter 11 proceedings and ~~$20.0 million for the lump-sum consideration received in settlement~~have classified these items as "Liabilities Subject to Compromise” on our Condensed Consolidated Balance Sheets. In addition, we have classified all income, expenses, gains or losses that were incurred or realized as a result of the ~~ENSCO 8503 customer's remaining obligations under the contract. The ENSCO DS-9 contract was terminated for convenience by the customer~~Chapter 11 proceedings since filing as “Reorganization Items” in ~~July 2015, whereby~~ our ~~customer was obligated to pay us monthly termination fees for two years under the termination provisions~~Condensed Consolidated Statements of ~~the contract. The ENSCO 8503 contract was originally scheduled to expire in August 2017.~~Operations.

New Accounting Pronouncements

Recently adopted accounting standards

Credit Losses - In ~~August 2017,~~June 2016, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB")issued ~~Update 2017-12,~~ ~~Derivatives and Hedging~~ASU 2016-13, Financial Instruments - Credit Losses (Topic ~~815)~~326): ~~Targeted Improvements to Accounting for Hedging Activities~~ Measurement of Credit Losses on Financial Instruments ("Update 2017-12"), which will make more hedging strategies eligible for hedge accounting. It also amends presentation and disclosure requirements and changes how companies assess effectiveness. This update is effective for annual and interim periods beginning after December 15, 2018, with early adoption permitted. We are currently evaluating the effect that Update 2017-12 will have on our consolidated financial statements and related disclosures.

~~In October 2016, the FASB issued Accounting Standards Update 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory~~ ~~(“Update 2016-16”~~2016-13"), which requires ~~entities~~companies to ~~recognize the income tax consequences~~measure credit losses of ~~an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences~~financial instruments, including customer accounts receivable, utilizing a methodology that reflects expected credit losses and amortizing them into future periods. We adopted Update 2016-16 on a modified retrospective basis effective January 1, 2017. As a result of modified retrospective application, we reduced prepaid taxes on intercompany transfers of property and related deferred tax liabilities resulting in the recognitionrequires consideration of a ~~cumulative-effect reduction in retained earnings~~broader range of ~~$14.1 million on our condensed consolidated balance sheet as of January 1, 2017. We do not expect a material impact~~reasonable and supportable information to ~~our 2017 operating results as a result of the adoption of Update 2016-16.~~

~~In March 2016, the FASB issued Accounting Standards Update 2016-09,~~ ~~Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting~~ ("Update 2016-09"), which simplifies several aspects of accounting for share-based payment transactions including the income tax consequences, classification of awards as either equity or liabilities and classification on the statement of cash flows. We adopted Update 2016-09 effective January 1, 2017. Our adoption of Update 2016-09 did not result in any cumulative effect on retained earnings and no adjustments have been made to prior periods. The new standard will cause volatility in our effective tax rates primarily due to the new requirement to recognize additional tax benefits or expenses in earnings related to the vesting or settlement of employee share-based awards, rather than in additional paid-in capital, during the period in which they occur. Furthermore, forfeitures are now recorded as they occur as opposed to estimating an allowance for future forfeitures.

~~During 2014, the FASB issued Accounting Standards Update 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~ ("Update 2014-09"), which requires an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. Update 2014-09 is effective for annual and interim periods for fiscal years beginning after December 15, 2017.inform credit loss estimates. Subsequent to the issuance of Update ~~2014-09,~~2016-13, the FASB issued several additional Accounting ~~Standards~~Standard Updates to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. We adopted Update ~~2014-09 will replace most existing revenue recognition guidance~~2016-13 effective January 1, 2020 with no material impact to our financial statements upon adoption as our previously estimated reserves were in ~~U.S. GAAP and may~~line with expected credit losses calculated under Update 2016-13.

Accounting pronouncements to be adopted ~~using a retrospective, modified retrospective or prospective with a cumulative catch-up approach. Due to the significant interaction between Update 2014-09 and Accounting Standards Update 2016-02,~~ ~~Leases (Topic 842): Amendments to the FASB Accounting Standards Codification~~ ("Update 2016-02"), we expect to adopt Update 2014-09 and Update 2016-02 concurrently with an effective date of January 1, 2018. We expect to apply the modified retrospective approach to our adoption. We are currently evaluating the effect that Update 2014-09 and Update 2016-02 will have on our consolidated financial statements and related disclosures.

Income Taxes - In ~~February 2016,~~December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes ("Update ~~2016-02,~~2019-12"), which ~~requires an entity~~removes certain exceptions for investments, intraperiod allocations and interim tax calculations and adds guidance to ~~recognize lease assets and lease liabilities on~~reduce complexity in accounting for income taxes. We will be required to adopt the ~~balance sheet and to disclose key qualitative and quantitative information about the entity's leasing arrangements. This update is effective for~~amended guidance in annual and interim periods beginning after December 15, ~~2018,~~2020, with early adoption permitted. AThe various amendments in Update 2019-12 are applied on a retrospective basis, modified retrospective ~~approach is required. During our evaluation of Update 2016-02, we have concluded that our drilling contracts contain a lease component,~~basis and upon adoption, we will be required to separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. Due to the significant interaction between Update 2016-02 and Update 2014-09, we expect to adopt both updates concurrently with an effective date of January 1, 2018. Adoption will result in increased disclosure of the nature of our leasing arrangements and may result in variability in our revenue recognition patterns relative to current U.S. GAAP basedprospective basis, depending on the provisions in each of our drilling contracts. With respect to leases whereby we are the lessee, we expect to recognize lease liabilities and offsetting "right of use" assets ranging from approximately $70 million to $90 million.amendment. We are ~~currently~~in the process of evaluating the ~~other impacts that Update 2016-02 and Update 2014-09~~impact this amendment will have on our consolidated financial statements.

Defined Benefit Plans - In August 2018, the FASB issued ASU No. 2018-14, Compensation – Retirement Benefits – Defined Benefit Plans – General (Subtopic 715-20): Disclosure Framework – Changes to the Disclosure Requirements for Defined Benefit Plans ("Update 2018-14"), which modifies the disclosure requirements for employers that sponsor defined benefit pension or other post-retirement plans. We will be required to adopt the amended guidance in annual and interim reports beginning January 1, 2021, with early adoption permitted. Adoption is required to be applied on a retrospective basis to all periods presented. We will adopt the new standard effective January 1, 2021 and do not expect the adoption of Update 2018-14 to have a material impact on our consolidated financial statements.

Reference Rate Reform - In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting ("Update 2020-04"), which provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has

elected certain optional expedients and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. We are in the process of evaluating the impact this amendment will have on our consolidated financial statements.

Convertible Instruments - In August 2020, the FASB issued ASU 2020-06, “Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (Subtopic 815 – 40)” ("Update 2020-06”). ASU 2020-06 simplifies the accounting for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in an entity’s own equity. The ASU is part of the FASB’s simplification initiative, which aims to reduce unnecessary complexity in U.S. GAAP. The ASU’s amendments are effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years, with early adoption permitted no earlier than fiscal years beginning after December 15, 2020. We are in the process of evaluating the impact this amendment may have on our consolidated financial statements.

With the exception of the updated standards discussed above, there have been no accounting pronouncements issued and not yet effective that have significance, or potential significance, to our consolidated financial statements.

Note 2 -Chapter 11 Proceedings and Ability to Continue as a Going Concern

Chapter 11 Cases

On August 19, 2020 the "Debtors", filed voluntary petitions for reorganization under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court. The Debtors obtained joint administration of the Chapter 11 cases under the caption In re Valaris plc, et al., Case No. 20-34114 (MI).

The Debtors continue to operate their businesses and manage their properties as "debtors-in-possession" under the jurisdiction of the Bankruptcy Court and in accordance with applicable provisions of the Bankruptcy Code and orders of the Bankruptcy Court. As part of the Chapter 11 Cases, the Debtors filed with the Bankruptcy Court motions seeking a variety of "first-day" relief, all of which were granted and will enable the Company to continue operating without interruption or disruption to its relationships with its customers and vendors or its high-quality service delivery. In particular, employee pay and benefits are expected to continue without interruption.

Restructuring Support Agreement

On August 18, 2020, the Debtors entered into the RSA with the Consenting Noteholders. The RSA contemplates that the Company will implement the restructuring through the Chapter 11 Cases pursuant to a plan of reorganization and the various related transactions set forth in or contemplated by the RSA and its restructuring term sheet (the "Restructuring Term Sheet"). Below is a summary of the treatment that the stakeholders of the Company would receive under a plan of reorganization pursuant to the terms of the RSA and Restructuring Term Sheet:

•Holders of the Company's outstanding senior notes ("Senior Notes") will receive their pro rata share of (i) 34.8% of new common stock issued after consummation of the restructuring (the “New Equity”) and (ii) subscription rights to participate in the rights offering (the "Rights Offering") through which the Company will offer $500.0 million of new first lien secured notes (the "New Secured Notes");

•Holders of the Senior Notes ("Senior Noteholders") who participate in the Rights Offering will receive their pro ratashare of 30.0% of the New Equity, and Senior Noteholders who agreed to backstop the Rights Offering will receive their pro rata share of 2.7% of the New Equity;

•Senior Noteholders, solely with respect to Pride International LLC's ("Pride") 6.875% senior notes due 2020 and 7.875% senior notes due 2040 and the Company's 4.875% senior notes due 2022, 4.75% senior notes due 2024, 7.375% senior notes due 2025, 5.4% senior notes due 2042 and 5.85% senior notes due 2044, will receive an aggregate cash payment of $25 million in connection with settlement of certain alleged claims against the Company;

•Lenders under the revolving credit facility will receive their pro rata share of 32.5% of New Equity;

•Holders of general unsecured claims will receive payment in full or reinstatement pursuant to the Bankruptcy Code (excluding claims against the entities party to, or guaranteeing, the new build contracts to be rejected by the Company, which shall receive their liquidation value unless otherwise agreed);

•If holders of equity interests vote as a class in support of the restructuring, they will each receive their pro rata share of (i) up to 0.01% of the New Equity and (ii) 7-year warrants to purchase up to 7% of New Equity (subject to dilution), with a strike price set at a price per share equal to the value at which the Senior Noteholders would receive a 100% recovery on their claims including accrued interest up to the Petition Date, as applicable; and

•Lenders under the DIP Facility (as described below) will receive payment in full in cash, unless otherwise agreed.

The RSA provided that for a period of 15 business days after the commencement of the Chapter 11 Cases (the “Joinder Period”), qualified holders of Senior Notes claims, including the Consenting Noteholders, were eligible to become backstop parties (the “Backstop Parties”). All Backstop Parties are required to join the RSA. The RSA was amended on September 10, 2020, which extended the expiration of the of the Joinder Period to September 14, 2020 upon which date we gained support for the RSA from approximately 72% of the Company's noteholders.

The RSA contains certain covenants on the part of Valaris and the Consenting Noteholders, including commitments by the Consenting Noteholders to vote in favor of a plan of reorganization and commitments of Valaris and the Consenting Noteholders to negotiate in good faith to finalize the documents and agreements governing the restructuring. The RSA also provides for certain conditions to the obligations of the parties and for termination upon the occurrence of certain events, including without limitation, the failure to achieve certain milestones and certain breaches by the parties under the RSA.

Subject to certain exceptions, under the Bankruptcy Code, the filing of the Chapter 11 Cases automatically enjoined, or stayed, the continuation of most judicial or administrative proceedings or filing of other actions against the Debtors or their property to recover, collect or secure a claim arising prior to the date of the Chapter 11 Cases. Notwithstanding the general applicability of the automatic stay described above, governmental authorities may determine to continue actions brought under their regulatory powers.

Although Valaris intends to pursue the restructuring in accordance with the terms set forth in the RSA, there can be no assurance that Valaris will be successful in completing a restructuring or any other similar transaction on the terms set forth in the RSA, on different terms or at all. Among other things, the RSA includes an outside date milestone requiring the Company’s emergence from Chapter 11 by no later than June 15, 2021 (subject to a potential 60-day extension pursuant to the terms of the RSA).

Debtor in Possession Facility

On August 11, 2020, prior to the commencement of the Chapter 11 Cases, certain of the Company’s existing noteholders (or their affiliates or designees) provided the Company with a commitment for a senior secured superpriority debtor-in-possession term loan credit facility in an aggregate principal amount of up to $500.0 million (the “DIP Facility”). On September 25, 2020, following approval by the Bankruptcy Court, the Debtors entered into a senior secured superpriority debtor-in-possession term loan credit agreement (the “DIP Credit Agreement”), by

and among the Company, as Lead Borrower, and certain wholly owned subsidiaries of the Company, as borrowers, the lenders party thereto and Wilmington Savings Fund Society, FSB, as administrative agent and security trustee, in an aggregate amount not to exceed $500.0 million. Borrowings on the DIP Facility will be used to finance, among other things, the ongoing general corporate needs of the Debtors during the course of the Chapter 11 Cases and to pay certain fees, costs and expenses associated with the Debtors’ Chapter 11 Cases.

The maturity date of the DIP Credit Agreement is the earliest of (1) August 17, 2021, (2) acceleration of the loans under the DIP Facility and termination of the Lenders commitments under the DIP Facility, (3) the substantial consummation of any plan filed in the Chapter 11 Cases that is confirmed pursuant to an order entered by the Bankruptcy Court and (4) the consummation of a sale of all or substantially all of the assets of the Lead Borrower and the other Debtors under section 363 of the Bankruptcy Code. Loans under the DIP Credit Agreement accrue interest at a rate of 8.00% per annum, if paid in kind, and at a rate of 7.00% per annum, if paid in cash.

The DIP Credit Agreement contains a requirement that the Lead Borrower and any other borrowers provide every four weeks, a rolling 13 week budget to be approved by the required lenders (the “Approved Budget”). The Lead Borrower and any other borrower that becomes party to the DIP Credit Agreement may not vary from the Approved Budget by more than 15% of the forecasted amounts in any forecast period. The Approved Budget is, subject to certain exceptions and is tested at certain times in accordance with the DIP Credit Agreement in order to measure variances between the actual total cash disbursements (excluding professional fees and certain other items consistent with the initial Approved Budget) and the disbursements budgeted for the applicable period.

The DIP Credit Agreement contains events of default customary to debtor-in-possession financings, including events related to the Chapter 11 Cases, the occurrence of which could result in the acceleration of the Debtors’ obligation to repay the outstanding indebtedness under the DIP Credit Agreement. The Debtors’ obligations under the DIP Credit Agreement are secured by a security interest in, and lien on, substantially all present and after acquired property (subject to certain exceptions) of the Debtors and are guaranteed by certain of the Company’s subsidiaries.

The DIP Credit Agreement also contains customary covenants that limit the ability of the Company and its subsidiaries to, among other things, (1) incur additional indebtedness and permit liens to exist on their assets, (2) pay dividends or make certain other restricted payments, (3) sell assets and (4) make certain investments. These covenants are subject to exceptions and qualifications as set forth in the DIP Credit Agreement.

As of September 30, 2020, we had 0 borrowings outstanding against our DIP Facility.

Backstop Agreement

On August 18, 2020, the Company entered into a Backstop Commitment Agreement (the “BCA”) with the Backstop Parties. Pursuant to the BCA, each of the Backstop Parties will purchase its pro-rata portion (based on an adjusted claims value) of (i) $187.5 million of the New Secured Notes held back for purchase by the Backstop Parties, (ii) all of the New Secured Notes offered to Backstop Parties as part of the $312.5 million New Secured Notes offered to all claim holders (the “General Rights Offering”) and (iii) New Secured Notes not purchased by non-Backstop Parties in the General Rights Offering.

In each instance, 30% of the new shares issued and outstanding immediately after the effective date of the plan of reorganization (subject to dilution by the new warrants and the management incentive plan) will be allocated proportionally to purchasers of the New Secured Notes for no additional consideration. Additionally, in exchange for providing the Backstop Commitments, the Company has agreed to pay the Backstop Parties, subject to approval by the Bankruptcy Court, a backstop premium in an aggregate amount equal to $50.0 million payable in New Secured Notes on the effective date of a plan of reorganization. Further, the Debtors paid a commitment fee of $20.0 million, in cash prior to the Petition Date, which shall be loaned back to the reorganized company upon emergence. Therefore, upon emergence the Debtors will receive $520 million in cash in exchange for a $550 million note, which includes the backstop premium.

The BCA will be terminable by the Company and/or the requisite Backstop Parties upon certain customary events specified therein, including, among others, (i) the termination of the RSA, (ii) the mutual written consent of the Company and the requisite Backstop Parties by written notice to the other such Party(ies) or (iii) either the Company or the requisite Backstop Parties if the effective date of the plan of reorganization has not occurred on or prior to the date that is ten months after the execution date of the BCA (subject to certain extensions as set forth in the BCA).

NYSE Delisting of our Common Stock

As a result of the Chapter 11 Cases and in accordance with Section 802.01D of the NYSE Listed Company Manual, on August 19, 2020, we were notified by the New York Stock Exchange (“NYSE”) of its determination to indefinitely suspend trading of the Company’s Class A ordinary shares and to commence proceedings to delist the Company’s Class A ordinary shares from the NYSE. Our Class A ordinary shares were delisted from the NYSE effective September 14, 2020.

Effective August 19, 2020, the Company’s Class A ordinary shares commenced trading on the OTC Pink Open Market under the symbol “VALPQ.”

Going Concern

The condensed consolidated financial statements have been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and satisfaction of liabilities and commitments in the normal course of business.

For the duration of the Chapter 11 Cases, our operations and our ability to develop and execute our business plan are subject to a high degree of risk and uncertainty associated with the Chapter 11 Cases. The outcome of the Chapter 11 Cases is dependent upon factors that are outside of our control, including actions of the Bankruptcy Court and our creditors. There can be no assurance that we will confirm and consummate a plan of reorganization as contemplated by the RSA or complete another plan of reorganization with respect to the Chapter 11 Cases. As a result, we have concluded that management’s plans do not alleviate the substantial doubt about our ability to continue as a going concern brought about by the significant risks and uncertainties related to our liquidity and Chapter 11 Cases for a period of one year after the date that the financial statements are issued.

The condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty. These adjustments could be material.

Pre-petition Charges

We have reported the backstop commitment fee and legal and other professional advisor fees incurred in relation to the Chapter 11 Cases, but prior to the Petition Date, as General and administrative expenses in our unaudited Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2020 in the amount of $42.6 million and $64.7 million, respectively.

Reorganization Items

Expenditures, gains and losses that are realized or incurred by the Debtors as of or subsequent to the Petition Date and as a direct result of the Chapter 11 Cases are reported as Reorganization items, net in our unaudited Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020. These costs include legal and other professional advisory service fees pertaining to the Chapter 11 Cases, all adjustments made to the carrying amount of certain pre-petition liabilities reflecting claims expected to be allowed by the Bankruptcy Court and DIP Facility fees.

The following table provides information about reorganization items incurred during the three and nine months ended September 30, 2020, as of or subsequent to the Petition Date (in millions):


	Three and Nine Months Ended September 30, 2020
Write-off of unamortized debt discounts, premiums and issuance costs	$	447.9

Reorganization items (non-cash)	447.9


DIP facility fees	23.8
Professional fees	25.8
Reorganization Items (Fees)	49.6
Total reorganization items, net	$	497.5

Reorganization items (fees) unpaid	$	25.8
Reorganization items (fees) paid	$	23.8

Liabilities Subject to Compromise

The Debtors' pre-petition unsecured senior notes and related ~~disclosures.~~unpaid accrued interest as of the Petition Date have been classified as Liabilities Subject to Compromise on our Condensed Consolidated Balance Sheets. The liabilities are reported at the amounts expected to be allowed as claims by the Bankruptcy Court. Liabilities subject to compromise at September 30, 2020 consist of the following (in millions):


	September 30, 2020
6.875% Senior notes due 2020	$	122.9
4.70% Senior notes due 2021	100.7
4.875% Senior notes due 2022	620.8
3.00% Exchangeable senior notes due 2024	849.5
4.50% Senior notes due 2024	303.4
4.75% Senior notes due 2024	318.6
8.00% Senior notes due 2024	292.3
5.20% Senior notes due 2025	333.7
7.375% Senior notes due 2025	360.8
7.75% Senior notes due 2026	1,000.0
7.20% Debentures due 2027	112.1
7.875% Senior notes due 2040	300.0
5.40% Senior notes due 2042	400.0
5.75% Senior notes due 2044	1,000.5
5.85% Senior notes due 2044	400.0
Amounts drawn under revolving credit facility	581.0
Accrued Interest on Senior Notes, Exchangeable Senior Notes, Debentures and Revolving Credit Facility	203.5
Rig holding costs(1)	13.9
Total liabilities subject to compromise	$	7,313.7

(1) Represents the holding costs incurred to maintain VALARIS DS-13 and VALARIS DS-14 in the shipyard until the delivery date.

The principal balance on our unsecured senior notes and the amount of outstanding borrowings on our revolving credit facility have been reclassified from Debt to Liabilities Subject to Compromise as of September 30, 2020. Accrued interest on our unsecured senior notes and revolving credit facility was also reclassified from Other Current Liabilities to Liabilities Subject to Compromise on our Condensed Consolidated Balance Sheet as of September 30, 2020.

The contractual interest expense on our unsecured senior notes and revolving credit facility is in excess of recorded interest expense by $45.9 million for the three and nine months ended September 30, 2020. This excess contractual interest is not included as interest expense on the Condensed Consolidated Statements of Operations for the three and nine months ended September 30, 2020, because the Company has discontinued accruing interest on the unsecured senior notes and revolving credit facility subsequent to the Petition Date. We discontinued making interest payments on our unsecured senior notes beginning in June 2020. See "Note 211 – Debt” for additional information on interest payments.

Debtor Financial Statements

Unaudited condensed consolidated financial statements of the Debtors are set forth below. These financial statements exclude the financial statements of the non-debtor subsidiaries. Transactions and balances of receivables and payables between the Debtors have been eliminated in consolidation. Amounts payable to or receivable from the non-Debtor subsidiaries are reported in the unaudited condensed consolidated balance sheet of the Debtors.

VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED STATEMENTS OF OPERATIONS

(Unaudited)

(In millions)


	Three Months Ended September 30,		Nine Months Ended September 30,
	2020		2020
OPERATING REVENUES
Operating revenues	$	236.0	$	944.6
Operating revenues from non-debtor subsidiaries	26.3		113.6
Total operating revenues	262.3		1,058.2
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	264.2		948.9
Loss on impairment	0		3,643.9
Depreciation	114.2		393.4
General and administrative	72.9		187.2
Operating expenses for non-debtor subsidiaries	16.0		81.4
Total operating expenses	467.3		5,254.8
OTHER OPERATING INCOME	118.1		118.1
EQUITY IN EARNINGS OF ARO	3.9		(7.6)
OPERATING LOSS	(83.0)		(4,086.1)
OTHER INCOME (EXPENSE)
Interest income	4.7		15.2
Interest income for non-debtor subsidiaries	65.2		193.5
Interest expense, net	(59.8)		(289.2)
Interest Expense for non-debtor subsidiaries	(73.1)		(210.5)
Reorganization items, net	(497.5)		(497.5)
Other, net	4.5		12.5
	(556.0)		(776.0)
LOSS BEFORE INCOME TAXES	(639.0)		(4,862.1)
EQUITY IN EARNINGS OF SUBSIDIARIES	9.2		27.5



PROVISION (BENEFIT) FOR INCOME TAXES	17.3		(159.4)
NET LOSS	(647.1)		(4,675.2)

VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED BALANCE SHEET

(Unaudited)

(In millions)


	September 30, 2020
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	80.9
Accounts receivable, net	376.1
Accounts receivable from non-debtor subsidiaries	2,930.6
Other current assets	427.4
Total current assets	3,815.0
PROPERTY AND EQUIPMENT, AT COST	12,262.4
Less accumulated depreciation	1,866.4
Property and equipment, net	10,396.0
LONG-TERM NOTES RECEIVABLE FROM ARO	442.7
LONG-TERM NOTES RECEIVABLE FROM NON-DEBTOR SUBSIDIARIES	2,103.0
INVESTMENT IN ARO	121.1
INVESTMENTS IN NON-DEBTOR SUBSIDIARIES	654.9
OTHER ASSETS	175.3
	$	17,708.0
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	149.3
Accrued liabilities and other	162.1
Short term notes payable to non-debtors	145.9


Total current liabilities	457.3

LONG-TERM NOTES PAYABLE TO NON-DEBTOR SUBSIDIARIES	2,402.7
OTHER LIABILITIES	536.6
Total liabilities not subject to compromise	3,396.6
Liabilities subject to compromise	7,313.7
Total debtors' equity	6,997.7
Total liabilities and debtors' equity	$	17,708.0

VALARIS PLC AND CERTAIN SUBSIDIARIES PARTY TO THE BANKRUPTCY CASES

(DEBTOR-IN-POSSESSION)

CONDENSED COMBINED STATEMENT OF CASH FLOWS

(Unaudited)

(In millions)


	Nine Months Ended September 30,
	2020
OPERATING ACTIVITIES
Net loss	$	(4,675.2)
Adjustments to reconcile net loss to net cash used in operating activities:
Non cash reorganization items, net	447.9
Loss on impairment	3,643.9
Depreciation expense	393.4
Equity in earnings of non-debtor subsidiaries	(27.5)
Gain on extinguishment of debt	(3.1)

Debtor in Possession financing fees and payments on Backstop Agreement	43.8
Amortization, net	14.4
Equity in earnings of ARO	7.6
(Gain on) adjustment to bargain purchase	6.3
Other	(57.7)
Changes in operating assets and liabilities	(151.1)

Changes in advances (to)/from non-debtor subsidiaries	(120.3)
Net cash used in operating activities	(477.6)
INVESTING ACTIVITIES
Additions to property and equipment	(82.9)
Net proceeds from disposition of assets	44.2




Net cash used in investing activities	(38.7)
FINANCING ACTIVITIES
Borrowings on credit facility	596.0
Repayments of credit facility borrowings	(15.0)
Debtor in Possession financing fees and payments on Backstop Agreement	(43.8)
Reduction of long-term borrowings	(9.7)

Other	(1.9)
Net cash provided by financing activities	525.6
Effect of exchange rate changes on cash and cash equivalents	(.1)
INCREASE IN CASH AND CASH EQUIVALENTS	9.2
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	71.7
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	80.9

Note 3 - ~~Atwood Merger~~Revenue from Contracts with Customers

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

We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well.

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

The amount estimated for variable consideration is only recognized as revenue to the extent that it is probable that a significant reversal will not occur during the contract term. We have applied the optional exemption afforded in ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606), and have not disclosed the variable consideration related to our estimated future day rate revenues. The remaining duration of our drilling contracts based on those in place as of September 30, 2020 was between approximately one month and two years.

Day Rate Drilling Revenue

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

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

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

Mobilization / Demobilization Revenue

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

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

Capital Upgrade / Contract Preparation Revenue

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

Contract Assets and Liabilities

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

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

The following table summarizes our contract assets and contract liabilities (in millions):


	September 30, 2020		December 31, 2019
Current contract assets	$	7.0	$	3.5
Noncurrent contract assets	$	.1	$	0
Current contract liabilities (deferred revenue)	$	38.9	$	30.0
Noncurrent contract liabilities (deferred revenue)	$	7.1	$	9.7

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


	Contract Assets		Contract Liabilities
Balance as of December 31, 2019	$	3.5	$	39.7
Revenue recognized in advance of right to bill customer	8.3		—
Increase due to cash received	—		40.0
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(21.6)
Decrease due to amortization of deferred revenue that was added during the period	—		(12.1)
Decrease due to transfer to receivables during the period	(4.7)		—
Balance as of September 30, 2020	$	7.1	$	46.0

Deferred Contract Costs

Costs incurred for upfront rig mobilizations and certain contract preparations are attributable to our future performance obligation under each respective drilling contract. These costs are deferred and amortized on a straight-line basis over the contract term. Demobilization costs are recognized as incurred upon contract completion. Costs associated with the mobilization of equipment and personnel to more promising market areas without contracts are expensed as incurred. Deferred contract costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled $18.0 million and $19.7 million as of September 30, 2020 and December 31, 2019, respectively. During the three and nine months ended September 30, 2020, amortization of these costs totaled $7.0 million and $35.9 million, respectively. During the three and nine months ended September 30, 2019, amortization of these costs totaled $12.6 million and $33.7 million, respectively.

Deferred Certification Costs

We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in other current assets and other assets on our condensed consolidated balance sheets and totaled $8.8 million and $10.8 million as of September 30, 2020 and December 31, 2019, respectively. During the three and nine months ended September 30, 2020, amortization of such costs totaled $1.5 million and $7.2 million, respectively. During the three and nine months ended September 30, 2019, amortization of such costs totaled $2.5 million and $8.1 million, respectively.

Future Amortization of Contract Liabilities and Deferred Costs

Our contract liabilities and deferred costs are amortized on a straight-line basis over the contract term or corresponding certification period to operating revenues and contract drilling expense, respectively. Expected future amortization of our contract liabilities and deferred costs recorded as of September 30, 2020 is set forth in the table below (in millions):


	Remaining 2020		2021		2022		2023 and Thereafter		Total
Amortization of contract liabilities	$	15.1	$	26.8	$	4.1	$	0	$	46.0
Amortization of deferred costs	$	7.8	$	15.2	$	3.3	$	.5	$	26.8

Note 4 -Rowan Transaction

On ~~May 29, 2017, we entered into an Agreement and Plan of Merger~~April 11, 2019 (the ~~“Merger Agreement”) with Atwood Oceanics, Inc. (“Atwood”) and Echo Merger Sub, LLC, our wholly-owned subsidiary, and on October 6, 2017 (the "Merger~~"Transaction Date"), we completed our ~~acquisition of Atwood~~combination with Rowan pursuant to the ~~Merger~~Transaction Agreement (the ~~“Merger”~~"Rowan Transaction"). ~~Atwood’s financial results will be included in our consolidated results beginning on the Merger Date.~~

The Merger is expected to strengthen our position as the leader in offshore drilling across a wide range of water depths around the world. The Merger significantly enhances the capabilities of our rig fleet and improves our ability to meet future customer demand with the highest-specification assets.

~~Consideration~~

As a result of the Merger, Atwood shareholders received 1.60 Ensco Class A Ordinary shares for each share of Atwood common stock, representing a value of $9.33 per share of Atwood common stock based on a closing price of $5.83 per Class A ordinary share on October 5, 2017, the last trading day before the Merger Date. Total consideration delivered in the Merger consisted of 134.1 million Class A ordinary shares with an aggregate value of $782.0 million.

~~Assets Acquired and Liabilities Assumed~~

Assets acquired and liabilities assumed in the ~~Merger will be~~Rowan Transaction were recorded at their estimated fair values as of the ~~Merger~~Transaction Date under the acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. ~~We have not finalized the~~As of March 31, 2020, we completed our fair ~~values~~value assessments of assets acquired and liabilities ~~assumed; therefore, the fair value estimates set forth below are subject to adjustment during a one year measurement period subsequent to the Merger Date. The estimated fair values of certain assets~~assumed.

Assets Acquired and liabilities including inventory, long-lived assets and contingencies require judgments and assumptions that increase the likelihood that adjustments may be made to these estimates during the measurement period, and those adjustments could be material.Liabilities Assumed

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


	Amounts Recognized as of Transaction Date		Measurement Period Adjustments (1)		Estimated Fair Value
Assets:
Cash and cash equivalents	$	931.9	$	0	$	931.9
Accounts receivable (2)	207.1		(6.9)		200.2
Other current assets	101.6		(2.6)		99.0
Long-term notes receivable from ARO	454.5		0		454.5
Investment in ARO	138.8		2.5		141.3
Property and equipment	2,989.8		(26.0)		2,963.8
Other assets	41.7		1.1		42.8
Liabilities:
Accounts payable and accrued liabilities	259.4		15.7		275.1
Current portion of long-term debt	203.2		0		203.2
Long-term debt	1,910.9		0		1,910.9
Other liabilities	376.3		34.5		410.8
Net assets acquired	2,115.6		(82.1)		2,033.5
Less: Merger consideration	(1,402.8)		0		(1,402.8)
Estimated bargain purchase gain	$	712.8	$	(82.1)	$	630.7

Estimated Fair Value
Assets:
Cash and cash equivalents⁽¹⁾
$ 445.4
Accounts receivable⁽²⁾
59.4
Other current assets 115.9
Property and equipment 1,776.1
Other assets 26.0
Liabilities:
Debt⁽¹⁾
1,305.9
Other liabilities 167.1
Net assets acquired 949.8
Less: merger consideration (782.0 )
Bargain purchase gain $ 167.8

⁽¹⁾~~Upon closing~~The measurement period adjustments reflect changes in the estimated fair values of certain assets and liabilities, primarily related to long-lived assets, deferred income taxes and uncertain tax positions. The measurement period adjustments were recorded to reflect new information obtained about facts and circumstances existing as of the ~~Merger, we utilized acquired cash~~Transaction Date and did not result from subsequent intervening events. The adjustments recorded resulted in a $6.3 million decline to bargain purchase gain during the first quarter of ~~$445.4 million~~2020 and ~~cash on hand from~~are included in other, net, in our condensed consolidated statements of operations for the ~~liquidation of short-term investments to repay Atwood's debt and accrued interest of $1.3 billion.~~nine months endedSeptember 30, 2020.

⁽²⁾Gross contractual amounts receivable totaled ~~$61.8~~$208.3 million as of the ~~Merger~~Transaction Date.

Bargain Purchase Gain

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

Intangible Assets and Liabilities

We recorded intangible assets and liabilities of $16.2 million and $2.1 million, respectively, representing the estimated fair value of Rowan's firm contracts in place at the Transaction Date with favorable or unfavorable contract terms compared to then-market day rates for comparable drilling rigs.

As a result of a price concession negotiated following the onset of the COVID-19 pandemic, on one of our bare boat charter agreements for a rig leased to our 50/50 joint venture with Saudi Aramco ("ARO"), we recognized a $5.7 million impairment to the related contract intangible during the second quarter of 2020. The ~~estimated gain~~impairment was included in loss on impairment in our condensed consolidated statements of operations for the nine months ended September 30, 2020.

Amortization of the intangible assets and liabilities resulted in a net reduction of operating revenues of $0.5 million and $2.4 million for the three and nine months ended September 30, 2020. The remaining balance of intangible assets and liabilities of $3.1 million and $0.7 million, respectively, was included in other assets and other liabilities, respectively, on our condensed consolidated balance sheet as of September 30, 2020. These balances will be ~~reflected~~amortized to operating revenues over the respective remaining contract terms on a straight-line basis. As of September 30, 2020, the remaining term of the underlying contracts is approximately 1.3 years. Amortization of these intangibles is expected to result in ~~other,~~a reduction to revenue of $0.4 millionand$2.0 million for the remainder of 2020 and 2021, respectively.

Uncertain Tax Positions

Uncertain tax positions assumed in a business combination are measured at the largest amount of the tax benefit that is greater than 50% likely of being realized upon effective settlement with a taxing authority that has full knowledge of all relevant information. As of the Transaction Date, Rowan had previously recognized net inliabilities for uncertain tax positions totaling $50.4 million.

During 2019, the Luxembourg tax authorities issued aggregate tax assessments totaling approximately €142.0 million (approximately $166.5 million converted using the current period-end exchange rate) related to tax years 2014, 2015 and 2016 for several of Rowan's Luxembourg subsidiaries. As a result of our ~~consolidated statement~~review and analysis of ~~operations during~~facts and circumstances that existed at the ~~fourth quarter.~~Transaction Date, we recognized liabilities related to the Luxembourg tax assessments totaling €93.0 million (approximately $109.0 million converted using the current period-end exchange rates). See "Note 13 - Income Taxes" for further information on this matter.

~~Merger-Related Costs~~Transaction-related costs

~~Merger-related~~Transaction-related costs were expensed as incurred and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling ~~$3.8~~$0.2 million and ~~$8.0~~$18.0 million ~~during~~for the ~~three-month~~three and ~~nine-month periods~~nine months ended September 30, ~~2017, respectively.~~2019. These costs were included in general and administrative expense in our condensed consolidated statement of operations.

Revenue and Earnings of Rowan

Our condensed consolidated statements of ~~operations. Upon closing~~operations for the three and nine months endedSeptember 30, 2019 include revenues of $138.9 million and $286.2 million, respectively, and net losses of $31.2 million and $95.1 million, respectively, associated with Rowan's operations from the ~~Merger, we incurred additional Merger-related costs of $11.8 million.~~Transaction Date through September 30, 2019.

Unaudited Pro Forma Impact of the ~~Merger~~Rowan Transaction

The following unaudited supplemental pro forma results present consolidated information as if the ~~Merger~~Rowan Transaction was completed on January 1, ~~2016.~~2019. The pro forma results include, among others, (i) the amortization

associated with acquired intangible assets and liabilities, (ii) a reduction in depreciation expense for adjustments to property and equipment, (iii) the amortization of premiums and ~~(iii) a reduction~~discounts recorded on Rowan's debt, (iv) removal of the historical amortization of unrealized gains and losses related to ~~interest expense resulting from~~Rowan's pension plans and (v) the ~~retirement~~amortization of ~~Atwood's revolving credit facility~~basis differences in assets and ~~6.50% senior notes due 2020.~~liabilities of ARO. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the ~~Merger.~~Rowan Transaction.


(in millions, except per share amounts)	Three Months Ended September 30, 2019		Nine Months Ended September 30, 2019
Revenues	$	552.0	$	1,729.5
Net loss	$	(136.0)	$	(788.2)
Loss per share - basic and diluted	$	(0.48)	$	(4.02)

(1) Pro forma net loss and loss per share were adjusted to exclude an aggregate $16.0 million and $85.4 million of transaction-related and integration costs incurred during the three and nine months ended September 30, 2019, respectively. Additionally, pro forma net loss and loss per share exclude the measurement period adjustments and estimated gain on bargain purchase of $53.0 million and $659.8 million recognized during the three and nine months ended September 30, 2019, respectively.

Note 5 -Equity Method Investment in ARO

Background

ARO, a company that owns and operates offshore drilling rigs in Saudi Arabia, was formed and commenced operations in 2017 pursuant to the terms of an agreement entered into by Rowan and Saudi Aramco to create a 50/50 joint venture ("Shareholder Agreement"). Pursuant to the Rowan Transaction, Valaris acquired Rowan's interest in ARO making Valaris a 50% partner. ARO owns 7 jackup rigs and leases 9 rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO. As of September 30, 2020, all 9 of the leased rigs were operating under three-year drilling contracts with Saudi Aramco. The seven rigs owned by ARO, previously purchased from Rowan and Saudi Aramco, are currently operating under contracts with Saudi Aramco for an aggregate 15 years, renewed and re-priced every three years, provided that the rigs meet the technical and operational requirements of Saudi Aramco.

Valaris and Saudi Aramco have agreed to take all steps necessary to ensure that ARO purchases at least 20 newbuild jackup rigs ratably over an approximate 10-year period. In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $176 million, for delivery scheduled in 2022. The partners intend for the newbuild jackup rigs to be financed out of available cash from ARO's operations and/or funds available from third-party debt financing. In the event ARO has insufficient cash from operations or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program. The Company's capital contributions to ARO pursuant to this requirement may require approval of the Bankruptcy Court during the Chapter 11 Cases. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, on a proportionate basis. The partners agreed that Saudi Aramco, as a customer, will provide drilling contracts to ARO in connection with the acquisition of the newbuild rigs. The initial contracts provided by Saudi Aramco for each of the newbuild rigs will be for an eight-year term. The day rate for the initial contracts for each newbuild rig will be determined using a pricing mechanism that targets a six-year payback period for construction costs on an EBITDA basis. The initial eight-year contracts will be followed by a minimum of another eight years of term, re-priced in three-year intervals based on a market pricing mechanism.

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

(in millions, except per share amounts) Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues

$ 561.2
$ 732.2
$ 1,769.8
$ 2,960.8
Net income

(14.3 ) 136.0
(24.0 ) 1,196.9
Earnings per share - basic and diluted

(0.03 ) 0.31
(0.06 ) 2.95
also sell equipment or supplies to ARO. During the quarter ended June 30, 2020, almost all remaining employees seconded to ARO became employees of ARO.

Summarized Financial Information

The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the 7 ARO-owned jackup rigs as well as the rigs leased from us.

Contract drilling expense is inclusive of the bareboat charter fees for the rigs leased from us. Cost incurred under the Secondment Agreement are included in contract drilling expense and general and administrative, depending on the function to which the seconded employee's service related. Substantially all costs incurred under the Transition Services Agreement are included in general and administrative. See additional discussion below regarding these related-party transactions.

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


	Three Months Ended September 30,				Nine Months Ended September 30,		April 11 - September 30,
	2020		2019		2020		2019
Revenues	$	145.6	$	138.4	$	431.9	$	262.2
Operating expenses
Contract drilling (exclusive of depreciation)	99.0		92.7		319.8		171.7
Depreciation	14.8		14.6		41.1		26.9
General and administrative	5.8		8.8		21.2		13.9
Operating income	26.0		22.3		49.8		49.7
Other expense, net	6.7		9.9		20.0		18.8
Provision (Benefit) for income taxes	(6.1)		2.2		(5.4)		3.8
Net income	$	25.4	$	10.2	$	35.2	$	27.1


	September 30, 2020		December 31, 2019
Current assets	$	391.9	$	407.2
Non-current assets	898.2		874.8
Total assets	$	1,290.1	$	1,282.0

Current liabilities	$	230.8	$	183.2
Non-current liabilities	940.8		1,015.5
Total liabilities	$	1,171.6	$	1,198.7

Equity in Earnings of ARO

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

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


	Three Months Ended September 30,				Nine Months Ended September 30,		April 11 - September 30,
	2020		2019		2020		2019
50% interest in ARO net income	$	12.7	$	5.1	$	17.6	13.6
Amortization of basis differences	(8.8)		(8.8)		(25.2)		(16.7)
Equity in earnings (losses) of ARO	$	3.9	$	(3.7)	$	(7.6)	$	(3.1)

Related-Party Transactions

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


	Three Months Ended September 30,				Nine Months Ended September 30,		April 11 - September 30,
	2020		2019		2020		2019
Lease revenue	$	21.0	$	19.9	$	62.4	$	37.0
Secondment revenue	.8		17.9		20.8		33.5
Transition Services revenue	.2		5.0		2.2		10.2
Total revenue from ARO (1)	$	22.0	$	42.8	$	85.4	$	80.7

(1) All of the revenues presented above are included in our Other segment in our segment disclosures. See "Note 1 5- Segment Information" for additional information.

Amounts receivable from ARO related to the items above totaled $13.7 million and $21.8 million as of September 30, 2020 and December 31, 2019, respectively, and are included in accounts receivable, net, on our condensed consolidated balance sheets.

Additionally, as of December 31, 2019, we had a receivable from ARO of $14.2 million related to an agreement between us and ARO, pursuant to which ARO would reimburse us for certain capital expenditures related to the shipyard upgrade projects for the VALARIS JU-147 and VALARIS JU-148. Such amount was received in the first quarter of 2020.

We had no amounts payable to ARO as of September 30, 2020 and $0.7 million as of December 31, 2019.

During 2017 and 2018, Rowan contributed cash to ARO in exchange for 10-year shareholder notes receivable at a stated interest rate of LIBOR plus two percent. As of September 30, 2020 and December 31, 2019, the carrying amount of the long-term notes receivable from ARO was $442.7 million and $452.9 million, respectively. The Shareholders’ Agreement prohibits the sale or transfer of the shareholder note to a third party, except in certain limited circumstances. The notes receivable may be reduced by future Company obligations to the joint venture. During the nine months ended September 30, 2020, we recorded $10.2 million of employee benefit obligations against our long-term notes receivable from ARO. Interest is recognized as interest income in our condensed consolidated statement of operations and totaled $4.5 million and $13.7 million for the three and nine

months ended September 30, 2020, respectively, $5.8 million and $10.9 million for the three months ended September 30, 2019 and for the period from April 11 through September 30, 2019, respectively. As of September 30, 2020, our interest receivable from ARO was $13.7 million, which is included in Accounts receivables, net on our condensed consolidated balance sheet. There was no interest receivable from ARO as of December 31, 2019.

Maximum Exposure to Loss

The following summarizes the total assets and liabilities as reflected in our condensed consolidated balance sheet as well as our maximum exposure to loss related to ARO (in millions). Our maximum exposure to loss is limited to (1) our equity investment in ARO, (2) the outstanding balance on our shareholder notes receivable, and (3) other receivables and contract assets related to services provided to ARO, partially offset by payables for services received.


	September 30, 2020		December 31, 2019
Total assets	$	597.8	$	623.5
Less: total liabilities	0		.7
Maximum exposure to loss	$	597.8	$	622.8

Note 36 -Fair Value Measurements

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


	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
As of September 30, 2020
Supplemental executive retirement plan assets	$	21.9	$	0	$	0	$	21.9
Total financial assets	21.9		0		0		21.9


As of December 31, 2019
Supplemental executive retirement plan assets	$	26.0	$	0	$	0	$	26.0
Derivatives, net	0		5.4		0		5.4
Total financial assets	$	26.0	$	5.4	$	0	$	31.4

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

Significant Other Observable Inputs
(Level 2)

Significant Unobservable Inputs
(Level 3)
Total
As of September 30, 2017

Supplemental executive retirement plan assets $ 30.0
$ —
$ —
$ 30.0
Derivatives, net —
6.0
—
6.0
Total financial assets $ 30.0
$ 6.0
$ —
$ 36.0

As of December 31, 2016

Supplemental executive retirement plan assets $ 27.7
$ —
$ —
$ 27.7
Total financial assets $ 27.7
$ —
$ —
$ 27.7
Derivatives, net $ —
$ (8.8 ) $ —
$ (8.8 )
Total financial liabilities $ —
$ (8.8 ) $ —
$ (8.8 )

Supplemental Executive Retirement Plan Assets

Our Valaris supplemental executive retirement plans (the "SERP") are non-qualified plans that ~~provide~~provided eligible employees an opportunity to defer a portion of their compensation for use after retirement. The SERPs were frozen to the entry of new participants in November 2019 and to future compensation deferrals as of January 1, 2020. Assets held in a rabbi trust maintained for the SERP ~~were~~are marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our ~~condensed~~ consolidated balance ~~sheets.~~sheets as of September 30, 2020 and December 31, 2019. The fair value ~~measurement~~measurements of assets held in the SERP ~~was~~were based on quoted market prices.

Derivatives

As of September 30, 2020, we had no derivative contracts outstanding See "Note 9 - Derivative Instruments" for additional information on the Chapter 11 Cases impact to our derivatives. Our derivatives were measured at fair value on a recurring basis using Level 2 inputs. See ~~"Note 4~~"Note 9 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value ~~measurement~~measurements of our prior derivatives ~~was~~were based on market prices that are generally observable for similar assets or liabilities at ~~commonly-quoted~~commonly quoted intervals.

Other Financial Instruments

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


	Subject to Compromise (1)
	September 30, 2020				December 31, 2019
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
6.875% Senior notes due 2020	$	122.9	$	8.7	$	124.8	$	117.3
4.70% Senior notes due 2021	100.7		4.6		113.2		95.5
4.875% Senior notes due 2022	620.8		37.2		599.2		460.5
3.00% Exchangeable senior notes due 2024(2)	849.5		110.4		699.0		607.4
4.50% Senior notes due 2024	303.4		13.1		302.0		167.2
4.75% Senior notes due 2024	318.6		19.5		276.5		201.4
8.00% Senior notes due 2024	292.3		14.0		295.7		181.7
5.20% Senior notes due 2025	333.7		15.4		331.7		186.7
7.375% Senior notes due 2025	360.8		29.8		329.2		218.6
7.75% Senior notes due 2026	1,000.0		49.4		987.1		575.1
7.20% Debentures due 2027	112.1		12.9		111.7		70.0
7.875% Senior notes due 2040	300.0		17.3		373.3		153.5
5.40% Senior notes due 2042	400.0		32.0		262.8		194.4
5.75% Senior notes due 2044	1,000.5		53.0		973.3		450.0
5.85% Senior notes due 2044	400.0		25.1		268.8		194.8
Amounts borrowed under revolving credit facility(3)	581.0		581.0		0		0
Total debt	$	7,096.3	$	1,023.4	$	6,048.3	$	3,874.1

(1) The Commencement of the Chapter 11 Cases on August 19, 2020, constituted an event of default under our Senior Notes and revolving credit facility. Any efforts to enforce payment obligations under the Senior Notes and revolving credit facility, including any rights to require the repurchase by the Company of the 2024 Convertible Notes (as defined below) upon the NYSE delisting of the Class A ordinary shares, are automatically stayed as a result of the filing of the Chapter 11 Cases. The carrying amounts above represent the aggregate principal amount of Senior Notes outstanding as well as outstanding borrowings under our revolving credit facility as of the Petition Date and are classified as Liabilities Subject to Compromise in our Condensed Consolidated Balance Sheet as of September 30, 2020. We discontinued accruing interest on our indebtedness following the Petition Date and all accrued interest as of the Petition Date is classified as Liabilities Subject to Compromise in our Condensed Consolidated Balance Sheet as of September 30, 2020. Additionally, we incurred a net non-cash charge of $447.9 million to write off any unamortized debt discounts, premiums and issuance costs, including the amounts related to the 2024 Convertible Notes discussed below, which is included in Reorganization Items, net on our Condensed Consolidated Statement

September 30,
2017 December 31,
2016
Carrying Value Estimated Fair Value Carrying Value Estimated Fair Value
8.50% Senior notes due 2019 $ 253.7
$ 252.3
$ 480.2
$ 485.0
6.875% Senior notes due 2020 480.3
465.2
735.9
727.5
4.70% Senior notes due 2021 266.9
264.6
674.4
658.9
3.00% Exchangeable senior notes due 2024⁽¹⁾
628.2
726.8
604.3
874.7
4.50% Senior notes due 2024 619.1
520.2
618.6
536.0
8.00% Senior notes due 2024 338.2
330.2
—
—
5.20% Senior notes due 2025 663.4
564.0
662.8
582.3
7.20% Debentures due 2027 149.2
139.2
149.2
138.7
7.875% Senior notes due 2040 377.1
256.6
378.3
270.6
5.75% Senior notes due 2044 971.6
731.9
970.8
728.0
Total $ 4,747.7
$ 4,251.0
$ 5,274.5
$ 5,001.7
of Operations for the three and nine months ended September 30, 2020. See "Note 2 - Chapter 11 Proceedings and Ability to Continue as a Going Concern" for additional information.

⁽¹⁾

Our exchangeable senior notes due 2024 (the "2024 Convertible Notes") were issued with a conversion feature. The 2024 Convertible Notes were separated into their liability and equity components on our condensed consolidated balance sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount that will be amortized to interest expense over the life of the instrument. Excluding the unamortized discount, the carrying amount of the 2024 Convertible Notes was $833.5 million and $830.1 million as of September 30, 2017 and December 31, 2016, respectively.

(2) Our 2024 Convertible Notes are exchangeable into cash, our Class A ordinary shares or a combination thereof. The 2024 Convertible Notes were separated, at issuance, into their liability and equity components on our Condensed Consolidated Balance Sheet. The equity component was initially recorded to additional paid-in capital and as a debt discount and the discount was being amortized to interest expense over the life of the instrument. As discussed above, the carrying amount at September 30, 2020 represents the aggregate principal amount of these notes as of the Petition Date and are classified as Liabilities Subject to Compromise in our Condensed Consolidated Balance Sheet as of September 30, 2020. We discontinued accruing interest on these notes as of the Petition Date. Additionally, we incurred a net non-cash charge of $128.8 million to write off $119.5 million of unamortized debt discount and $9.3 million of unamortized debt issuance costs related to these notes, which is included in Reorganization Items, net on our Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2020. The equity component is $220.0 million at September 30, 2020 and remains in Additional Paid-Capital.

(3) In addition to the amount borrowed above, we had $41.2 million in undrawn letters of credit issued under the revolving credit facility.

While the revolving credit facility has not been terminated, no further borrowings are permitted. As discussed above, the carrying amount at September 30, 2020 represents the outstanding borrowings as of the Petition Date and are classified as Liabilities Subject to Compromise in our Condensed Consolidated Balance Sheet as of September 30, 2020. We discontinued accruing interest on the revolving credit facility as of the Petition Date and wrote off any unamortized debt issuance costs.

The estimated fair values of our senior notes and debentures were determined using quoted market prices. The decline in the carrying value of long-term debt instruments from December 31, 2016 to September 30, 2017 is primarily due to the January 2017 debt exchange and debt repurchases as discussed in "Note 7 - Debt."

prices, which are level 1 inputs. The estimated fair values of our cash and cash equivalents, ~~short-term investments, receivables,~~accounts receivable, notes receivable, trade payables and other liabilities approximated their carrying values as of September 30, ~~2017~~2020 and December 31, ~~2016. Our short-term investments~~2019.

Note 7 -Property and Equipment

Property and equipment as of September 30, 2020 and December 31, 2019 consisted of the following (in millions):


	September 30, 2020		December 31, 2019
Drilling rigs and equipment	$	12,552.2	$	17,714.0
Work-in-progress	473.3		473.6
Other	190.0		206.2
	$	13,215.5	$	18,393.8

Impairment of Long-Lived Assets

During the first and second quarters of 2020, we recorded an aggregate pre-tax, non-cash impairment with respect to certain floaters, jackups and spare equipment of $3.6 billion which is included in loss on impairment in our Condensed Consolidated Statement of Operations.

During the third quarter of 2019, we decided to retire VALARIS 5006, and classified the rig as held-for-sale. We recognized a pre-tax, non-cash impairment charge of $88.2 million, which represents the difference between the carrying value of the rig and related assets and their estimated fair values, less selling costs.

Assets held-for-use

On a quarterly basis, we evaluate the carrying value of our property and equipment to identify events or changes in circumstances ("triggering events") that indicate the carrying value may not be recoverable.

During the second quarter of 2020, given the anticipated sustained market impacts arising from the decline in oil price and demand late in the first quarter, we revised our long-term operating assumptions which resulted in a triggering event for purposes of evaluating impairment and we performed a fleet-wide recoverability test. As a result, we recorded a pre-tax, non-cash impairment with respect to 2 floaters and spare equipment totaling $817.3 million. We measured the fair value of these assets to be $69.0 million at the time ~~deposits~~of impairment by applying an income approach or estimated scrap value. These valuations were based on unobservable inputs that require significant judgments for which there is limited information including, in the case of the income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements.

During the first quarter of 2020, the COVID-19 global pandemic and the response thereto negatively impacted the macro-economic environment and global economy. Global oil demand fell sharply at the same time global oil supply increased as a result of certain oil producers competing for market share which lead to a supply glut. As a consequence, Brent crude oil fell from around $60 per barrel at year-end 2019 to around $20 per barrel as of mid-April 2020. These adverse changes and impacts to our customer's capital expenditure plans in the first quarter resulted in further deterioration in our forecasted day rates and utilization for the remainder of 2020 and beyond. As a result, we concluded that a triggering event had occurred and we performed a fleet-wide recoverability test. We determined that our estimated undiscounted cash flows were not sufficient to recover the carrying values of certain rigs and concluded such were impaired as of March 31, 2020.

Based on the asset impairment analysis performed as of March 31, 2020, we recorded a pre-tax, non-cash loss on impairment in the first quarter with ~~initial maturities~~respect to certain floaters, jackups and spare equipment totaling $2.8 billion. We measured the fair value of these assets to be $72.3 million at the time of impairment by applying either an income approach, using projected discounted cash flows or estimated scrap value. These valuations were based on unobservable inputs that require significant judgments for which there is limited information, including, in the case of an income approach, assumptions regarding future day rates, utilization, operating costs and capital requirements. In instances where we applied an income approach, forecasted day rates and utilization took into account then current market conditions and our anticipated business outlook at that time, both of which had been impacted by the adverse changes in the business environment observed during the first quarter.

Assets held-for-sale

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. We continue to focus on our fleet management strategy in light of the composition of our rig fleet. While taking into account certain restrictions on the sales of assets under our DIP Credit Agreement, as part of our strategy, we may act opportunistically from time to time to monetize assets to enhance stakeholder value and improve our liquidity profile, in addition to reducing holding costs by selling or disposing of older, lower-specification or non-core rigs. To this end, we continually assess our rig portfolio and actively work with our rig broker to market certain rigs.

On a quarterly basis, we assess whether any rig meets the criteria established for held-for-sale classification on our balance sheet. All rigs classified as held-for-sale are recorded at fair value, less costs to sell. We measure the fair value of our assets held-for-sale by applying a market approach based on unobservable third-party estimated prices that would be received in exchange for the assets in an orderly transaction between market participants or a negotiated sales price. We reassess the fair value of our held-for-sale assets on a quarterly basis and adjust the carrying value, as necessary.

During the second quarter of 2020, we classified the following rigs as held-for-sale: VALARIS 8500, VALARIS 8501, VALARIS 8502, VALARIS DS-3, VALARIS DS-5, VALARIS DS-6 and VALARIS JU-105. The carrying value of these rigs was reduced to fair value, less costs to sell, based on their estimated sales price and we recorded a pre-tax, non-cash loss on impairment totaling $15.0 million, which was included in loss on impairment in our condensed consolidated statement of operations for the nine months ended September 30, 2020. These rigs were subsequently sold during the third quarter.

During the third quarter of 2020, we began marketing VALARIS 8504, VALARIS JU-84 and VALARIS JU-88 for sale. We concluded that these rigs met the held-for-sale criteria during the third quarter of 2020 and the fair value, less costs to sell, based on each rig's estimated sales price, was in excess of ~~three months but less than one year~~the respective carrying value. As a result, we concluded that 0 impairment of these rigs had occurred as of ~~each respective balance sheet date.~~September 30, 2020. In October 2020, we completed the sale of VALARIS JU-84 and VALARIS JU-88.

Our 3 held-for-sale rigs had a remaining aggregate carrying value of $4.6 million and are included in other assets, net, on our Condensed Consolidated Balance Sheet as of September 30, 2020.

Note 8 -Pension and Other Post-retirement Benefits

We have defined-benefit pension plans and a retiree medical plan that provides post-retirement health and life insurance benefits.

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


	Three Months Ended September 30,				Nine Months Ended September 30,		April 11 - September 30,
	2020		2019		2020		2019
Service cost (1)	$	.7	$	.5	$	2.0	$	1.0
Interest cost (2)	6.6		7.7		19.5		13.9
Expected return on plan assets (2)	(9.6)		(9.4)		(28.6)		(17.6)
Net periodic pension and retiree medical cost (income)	$	(2.3)	$	(1.2)	$	(7.1)	$	(2.7)

(1)Included in contract drilling and general and administrative expense in our Condensed Consolidated Statements of Operations.

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

During the nine months ended September 30, 2020, we contributed $11.0 million to our pension and other post-retirement benefit plans. The U. S. Cares Act provides relief for pension payments allowing for deferral of approximately $21.0 million of anticipated payments to January 1, 2021. These amounts represent the minimum contributions we are required to make under relevant statutes. We do not expect to make contributions in excess of the minimum required amounts.

Note 49 -Derivative Instruments

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

The commencement of the Chapter 11 Cases constituted a termination event with respect to the Company’s derivative instruments, which permits the counterparties of our derivative instruments to terminate their outstanding contracts. The exercise of these termination rights are not stayed under the Bankruptcy Code. During September 2020, the counterparties to the Company’s derivative instruments elected to terminate their outstanding derivatives with us for an aggregate settlement of $3.6 million which was recorded as a gain in contract drilling expense in our Condensed Consolidated Statement of Operations for the three and nine months ended September 30, 2020 related to this termination.

All derivatives were recorded on our condensed consolidated balance sheets at fair value. Derivatives subject to legally enforceable master netting agreements were not offset inon our ~~condensed consolidated balance sheets.~~Condensed Consolidated Balance Sheets. Accounting for the gains and losses resulting from changes in ~~derivative~~the fair value ~~depends~~of derivatives depended on the use of the derivative and whether it ~~qualifies~~qualified for hedge accounting. ~~Net~~ ~~assets~~As of ~~$6.0 million and net liabilities~~ of ~~$8.8 million associated with our foreign currency forward contracts were included on~~December 31, 2019, our condensed consolidated balance sheets asincluded net foreign currency derivative assets of ~~September 30, 2017~~ ~~and~~ ~~December 31, 2016, respectively. All of our derivatives mature during the next~~ ~~18 months~~.$5.4 million. See ~~"Note 3~~ "Note 6- Fair Value Measurements" for additional information on the fair value measurement of our derivatives.

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


	Derivative Assets				Derivative Liabilities					Derivative Assets		Derivative Liabilities
	September 30, 2017		December 31, 2016		September 30, 2017		December 31, 2016			December 31, 2019		December 31, 2019
Derivatives Designated as Hedging Instruments									Derivatives Designated as Hedging Instruments
Foreign currency forward contracts - current⁽¹⁾	$	6.4	$	4.1	$	.7	$	11.4	Foreign currency forward contracts - current(1)	$	4.2	$	.7
Foreign currency forward contracts - non-current⁽²⁾	.7		.2		.1		.8		Foreign currency forward contracts - non-current(2)	.8		0
	7.1		4.3		.8		12.2			$	5.0	$	.7

Derivatives Not Designated as Hedging Instruments
Derivatives not Designated as Hedging Instruments									Derivatives not Designated as Hedging Instruments
Foreign currency forward contracts - current⁽¹⁾	.8		.4		1.1		1.3		Foreign currency forward contracts - current(1)	$	1.3	$	.2
	.8		.4		1.1		1.3
Total	$	7.9	$	4.7	$	1.9	$	13.5	Total	$	6.3	$	.9

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~Brazil Internal Investigation~~UMB Bank Lawsuit

~~Pride International LLC, formerly Pride International, Inc.~~On March 19, 2020, UMB Bank, National Association (“~~Pride”~~UMB”), the purported indenture trustee for four series of Valaris notes, filed a ~~company we acquired~~lawsuit in ~~2011, commenced drilling operations~~Harris County District Court in ~~Brazil~~Houston, Texas. The lawsuit was filed against Valaris plc, two legacy Rowan entities, two legacy Ensco entities and the individual directors of the two legacy Rowan entities. The complaint alleges, among other things, breach of fiduciary duty, aiding and abetting breach of fiduciary duty and fraudulent transfer in ~~2001.~~connection with certain intercompany transactions occurring after completion of the Rowan merger and the Rowan entities’ guarantee of Valaris’ revolving credit facility. In ~~2008, Pride~~addition to an unspecified amount of damages, the lawsuit seeks to void and undo all historical transfers of cash or other assets from legacy Rowan entities to Valaris and its other subsidiaries and the internal reorganization transaction. On August 18, 2020, Valaris and certain of its affiliates entered into ~~a drilling services~~the RSA, including the noteholders that directed UMB to file the lawsuit. Under the RSA, the lawsuit is stayed by agreement with Petrobras (the "DSA") for ENSCO DS-5, a drillship ordered from Samsung Heavy Industries, a shipyard in South Korea ("SHI"). Beginning in 2006, Pride conducted periodic compliance reviews of its business with Petrobras, and, afterthroughout the ~~acquisition of Pride, Ensco conducted similar compliance reviews.~~

We commenced a compliance review in early 2015 after media reports were released regarding ongoing investigations of various kickback and bribery schemes in Brazil involving Petrobras. While conducting our compliance review, we became aware of an internal audit report by Petrobras alleging irregularities in relation to the DSA. Upon learningpendency of the ~~Petrobras internal audit report, our Audit Committee appointed independent counsel~~bankruptcy proceeding unless the RSA terminates at which point each party reserves its rights to ~~lead an investigation into~~argue whether the ~~alleged irregularities. Further,~~case should proceed while in ~~June and July 2015, we voluntarily contacted~~bankruptcy. If the ~~SEC~~Bankruptcy Court confirms a plan based on the transactions set forth in the RSA, the lawsuit will be dismissed with prejudice. On August 24, 2020, the parties filed a joint notice staying the case. If the RSA terminates and the ~~DOJ, respectively,~~case in fact proceeds, we are unable to ~~advise them~~predict the outcome of this matter ~~and of our Audit Committee’s investigation. Independent counsel, under~~or estimate the direction of our Audit Committee, has substantially completed its investigation by reviewing and analyzing available documents and correspondence and interviewing current and former employees involved in the DSA negotiations and the negotiation of the ENSCO DS-5 construction contract with SHI (the "DS-5 Construction Contract").

To date, our Audit Committee has found no credible evidence that Pride or Ensco or any of their current or former employees were aware of or involved in any wrongdoing, and our Audit Committee has found no credible evidence linking Ensco or Prideextent to which we may be exposed to any illegal acts committed by our former marketing consultant who provided services to Pride and Ensco in connection with the DSA. Independent counsel has continued to provide the SEC and DOJ with updates throughout the investigation, including detailed briefings regarding its investigation and findings. We entered into a one-year tolling agreement with the DOJ that expired in December 2016. We extended our tolling agreement with the SEC for 12 months until March 2018.

Subsequent to initiating our Audit Committee investigation, Brazilian court documents connected to the prosecution of former Petrobras directors and employees as well as certain other third parties, including our former marketing consultant, referenced the alleged irregularities cited in the Petrobras internal audit report. Our former marketing consultant has entered into a plea agreement with the Brazilian authorities. On January 10, 2016, Brazilian authorities filed an indictment against a former Petrobras director. This indictment states that the former Petrobras director received bribes paid out of proceeds from a brokerage agreement entered into for purposes of intermediating a drillship construction contract between SHI and Pride, whichresulting liability. Although we believe to be the DS-5 Construction Contract. The parties to the brokerage agreement were a company affiliated with a person acting on behalf of the former Petrobras director, a company affiliated with our former marketing consultant, and SHI. The indictment alleges that amounts paid by SHI under the brokerage agreement ultimately were used to pay bribes to the former Petrobras director. The indictment doesdo not ~~state that Pride or Ensco or any of their current or former employees were involved in the bribery scheme or had any knowledge of the bribery scheme.~~

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

In August 2017, one of our Brazilian subsidiaries was contacted by the Office of the Attorney General for the Brazilian state of Paraná in connection with a criminal investigation procedure initiated against agents of both SHI and Pride in relationmatter to the DSA. The Brazilian authorities requested information regarding our compliance program and the findings of our internal investigations. We are cooperating with the Office of the Attorney General and have provided documents in response to their request. We cannot predict the scope or ultimate outcome of this procedure or whether any other governmental authority will open an investigation into Pride’s involvement in this matter, or if a proceeding were opened, the scope or ultimate outcome of any such investigation. If the SEC or DOJ determines that violations of the FCPA have occurred, or if any governmental authority determines that we have violated applicable anti-bribery laws, they could seek civil and criminal sanctions, including monetary penalties, against us, as well as changes to our business practices and compliance programs, any of which could have a material adverse effect on our ~~business~~financial position, operating results and financial condition. Our customers, business partners and other stakeholders could seek to take actions adverse to our interests. Further, investigating and resolving such allegations is expensive and could consume significant management time and attention. Although our internal investigation is substantially complete, we cannot predict whether any additional allegations will be made or whether any additional facts relevant to the investigation will be uncovered during the course of the investigation and what impact those allegations and additional facts will have on the timing or conclusions of the investigation. Our Audit Committee will examine any such additional allegations and additional facts and the circumstances surrounding them.

~~DSA Dispute~~

As described above, on January 4, 2016, Petrobras sent a notice to us declaring the DSA void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. We disagree with Petrobras’ declaration that the DSA is void. We believe that Petrobras repudiated the DSA and have therefore accepted the DSA as terminated on April 8, 2016 (the "Termination Date"). At this time, we cannot reasonably determine the validity of Petrobras' claim or the range of our potential exposure, if any. As a result,cash flows, there can be no assurance as to ~~how this dispute will ultimately be resolved.~~

~~We did not recognize revenue for amounts owed to us under~~ the ~~DSA from the beginning~~ultimate outcome of the fourth quarter of 2015 through the Termination Date as we concluded that collectability of these amounts was not reasonably assured. Additionally, our receivables from Petrobras related to the DSA from prior to the fourth quarter of 2015 are fully reserved in our condensed consolidated balance sheet as of September 30, 2017. We have initiated arbitration proceedings in the U.K. against Petrobras seeking payment of all amounts owed to us under the DSA, in addition to any other amounts to which we are entitled, and intend to vigorously pursue our claims. Petrobras subsequentlyproceedings.

Shareholder Class Action

On August 20, 2019, plaintiff Xiaoyuan Zhang, a purported Valaris shareholder, filed a ~~counterclaim seeking restitution~~class action lawsuit on behalf of Valaris shareholders against Valaris plc and certain ~~sums paid under~~of our executive officers, alleging violations of federal securities laws. The complaint cites general statements in press releases and SEC filings and alleges that the ~~DSA less value received by Petrobras under~~defendants made false or misleading statements or failed to disclose material information regarding the ~~DSA. We have also initiated separate arbitration proceedings~~performance of our ultra-deepwater segment, among other things.

The complaint asserts claims on behalf of a class of investors who purchased Valaris plc shares between April 11, 2019 and July 31, 2019. The court appointed a lead plaintiff and lead counsel. The case has now been stayed in light of the ~~U.K. against SHI for any losses we have incurred in connection~~Valaris plc bankruptcy filing, with the ~~foregoing. SHI subsequently filed a statement of defense disputing our claim. There can be no assurance as~~exception that lead plaintiff may continue efforts to ~~how these arbitration proceedings will ultimately be resolved.~~

~~Pride FCPA Investigation~~

~~During 2010, Pride~~serve certain defendants and its subsidiaries resolved their previously disclosed investigations into potential violations of the U.S. Foreign Corrupt Practices Act of 1977 (the "FCPA") with the DOJ and SEC. The settlement with the DOJ included a deferred prosecution agreement (the "DPA") between Pride and the DOJ and a guilty plea by Pride Forasol S.A.S., one of Pride’s subsidiaries, to FCPA-related charges. During 2012, the DOJ moved to (i) dismiss the charges against Pride and end the DPA one year prior to its scheduled expiration; and (ii) terminate the unsupervised probation of Pride Forasol S.A.S. The Court granted the motions.

Pride has received preliminary inquiries from governmental authorities of certain countries referenced in its settlements with the DOJ and SEC. We could face additional fines, sanctions and other penalties from authorities in these and other relevant jurisdictions, including prohibition of our participating in or curtailment of business operations in certain jurisdictions and the seizure of rigs or other assets.may file an amended complaint. At this ~~stage of such inquiries,~~time, we are unable to determine what, if any, legal liability may result. Our customers in certain jurisdictions could seek to impose penalties or take other actions adverse to our business. We could also face other third-party claims by directors, officers, employees,

~~affiliates, advisors, attorneys, agents, stockholders, debt holders or other stakeholders. In addition, disclosure~~predict the outcome of the subject matter of the investigations and settlements could adversely affect our reputation and our ability to obtain new business or retain existing business, to attract and retain employees and to access the capital markets.

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

Environmental Matters

We are currently subject to pending notices of assessment relating to spills of drilling fluids, oil, brine, chemicals, grease or fuel from drilling rigs operating offshore Brazil from 2008 to ~~2016,~~2017, pursuant to which the governmental authorities have assessed, or are anticipated to assess, fines. We have contested these notices and appealed certain adverse decisions and are awaiting decisions in these cases. Although we do not expect final disposition of these assessments to have a material adverse effect on our financial position, operating results orand cash flows, there can be no assurance as to the ultimate outcome of these assessments. A ~~$200,000~~$444,000 liability related to these matters was included in accrued liabilities and other on our condensed consolidated balance sheet as of September 30, ~~2017.~~2020.

We currently are subject to a pending administrative proceeding initiated during 2009 by a Spanish government authority seeking payment in an aggregate amount of approximately $3 million, for an alleged environmental spill originating from ENSCO 5006 while it was operating offshore Spain. Our customer has posted guarantees with the Spanish government to cover potential penalties. Additionally, we expect to be indemnified for any payments resulting from this incident by our customer under the terms of the drilling contract. A criminal investigation of the incident was initiated during 2010 by a prosecutor in Tarragona, Spain, and the administrative proceedings have been suspended pending the outcome of this investigation. We do not know at this time what, if any, involvement we may have in this investigation.

We intend to vigorously defend ourselves in the administrative proceeding and any criminal investigation. At this time, we are unable to predict the outcome of these matters or estimate the extent to which we may be exposed to any resulting liability. Although we do not expect final disposition of this matter to have a material adverse effect on our financial position, operating results or cash flows, there can be no assurance as to the ultimate outcome of the proceedings.

~~Atwood Merger~~

~~On June 23, 2017, a putative class action captioned~~ ~~Bernard Stern v. Atwood Oceanics, Inc., et al~~, was filed in the U.S. District Court for the Southern District of Texas against Atwood, Atwood’s directors, Ensco and Merger Sub. The Stern complaint generally alleges that Atwood and the Atwood directors disseminated a false or misleading registration statement on Form S-4 (the “Registration Statement”) on June 16, 2017, which omitted material information regarding the proposed Merger, in violation of Section 14(a) of the Exchange Act. Specifically, the Stern complaint alleges that Atwood and the Atwood directors omitted material information regarding the parties’ financial projections, the analysis performed by Atwood’s financial advisor, Goldman Sachs & Co. LLC (“Goldman Sachs”), in support of its fairness opinion, the timing and nature of communications regarding post-transaction employment of Atwood's directors and officers, potential conflicts of interest of Goldman Sachs, and whether there were further discussions with another potential acquirer of Atwood following the May 30, 2017 announcement of the Merger. The Stern complaint further alleges that the Atwood directors, Ensco and Merger Sub are liable for these violations as “control persons” of Atwood under Section 20(a) of the Exchange Act. With respect to Ensco, the Stern complaint alleges that Ensco had direct supervisory control over the composition of the Registration Statement. The Stern complaint seeks injunctive relief, including to enjoin the Merger, rescissory damages, and an award of attorneys’ fees in addition to other relief.

~~On June 27, 2017, June 29, 2017 and June 30, 2017, additional putative class actions captioned~~ ~~Joseph Composto v. Atwood Oceanics, Inc., et al, Booth Family Trust v. Atwood Oceanics, Inc., et al~~ ~~and~~ ~~Mary Carter v. Atwood Oceanics, Inc.~~, ~~et al,~~ respectively, were filed in the U.S. District Court for the Southern District of Texas against Atwood and Atwood’s directors. These actions allege violations of Sections 14(a) and 20(a) of the Exchange Act by Atwood and Atwood’s directors similar to those alleged in the Stern complaint; however, neither Ensco plc nor Merger Sub is named as a defendant in these actions. On October 2, 2017, the actions were consolidated and the Stern matter was designated as the lead case. The plaintiffs subsequently voluntarily dismissed the actions.

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.

Item 1A.Risk Factors

There are numerous factors that affect our business and results of operations, many of which are beyond our control. In addition to information set forth in this quarterly report, you should carefully read and consider "Item 1A. Risk Factors" in Part I and "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in Part II of our annual report on Form 10-K for the year ended December 31, ~~2016,~~2019, as ~~well as “Item 1A. Risk Factors”~~updated in Item 1A of Part II of our ~~quarterly report~~Quarterly Reports on Form 10-Q for the ~~quarter~~quarterly periods ended March 31, 2020 and June 30, ~~2017, each of~~2020, which contains descriptions of significant risks that ~~might~~may cause our actual results of operations in future periods to differ materially from those currently anticipated or expected. ~~There have been no material changes from~~

We are subject to the risks ~~previously disclosed~~and uncertainties associated with the Chapter 11 Cases.

On August 19, 2020, the Debtors filed the Chapter 11 Cases in the United States Bankruptcy Court for the Southern District of Texas. For the duration of the Chapter 11 Cases, our operations and our ability to develop and execute the business plan, as well as our continuation as a going concern, are subject to risks and uncertainties associated with bankruptcy. These risks include the following:

•our ability to execute, confirm and consummate a plan of reorganization as contemplated by the RSA with respect to the Chapter 11 Cases;

•the high costs of bankruptcy proceedings and related fees;

•our ability to obtain sufficient financing to allow us to emerge from bankruptcy and execute our business plan post-emergence;

•our ability to maintain our relationships with our suppliers, service providers, customers, employees and other third parties;

•our ability to maintain contracts that are critical to our operations;

•our ability to execute our business plan in the current depressed commodity price environment;

•our ability to attract, motivate and retain key employees;

•the ability of third parties to seek and obtain court approval to terminate contracts and other agreements with us;

•the ability of third parties to seek and obtain court approval to convert the Chapter 11 Cases to a chapter 7 proceeding; and

•the actions and decisions of our creditors and other third parties who have interests in the Chapter 11 Cases that may be inconsistent with our plans.

Delays in the Chapter 11 Cases increase the risks of us being unable to reorganize our business and emerge from bankruptcy and increase our costs associated with the bankruptcy process.

These risks and uncertainties could affect our business and operations in various ways. For example, negative events or publicity associated with the Chapter 11 Cases could adversely affect our relationships with customers, suppliers, service providers, employees and other third parties, which in turn could adversely affect our operations and financial condition. Also, pursuant to the Bankruptcy Code, we need the prior approval of the Bankruptcy Court for transactions outside the ordinary course of business, which may limit our ability to respond timely to certain events or take advantage of certain opportunities. We also need Bankruptcy Court confirmation of a plan of reorganization as contemplated by the RSA. Because of the risks and uncertainties associated with the Chapter 11 Cases, we cannot accurately predict or quantify the ultimate impact that events that occur during the Chapter 11 Cases will have on our business, financial condition, results of operations and cash flows.

Even if a plan of reorganization is consummated, we will continue to face a number of risks, including our ability to reduce expenses, implement any strategic initiatives and generally maintain favorable relationships with and secure the confidence of our counterparties. Accordingly, we cannot guarantee that the proposed financial restructuring will achieve our stated goals nor can we give any assurance of our ability to continue as a going concern.

Operating under the Bankruptcy Court protection for a long period of time may harm our business.

A long period of operations under the Bankruptcy Court protection could have a material adverse effect on our business, financial condition, results of operations and liquidity. A prolonged period of operating under Bankruptcy Court protection may also make it more difficult to retain management and other key personnel necessary to the success and growth of our business. In addition, the longer the Chapter 11 Cases continue, the more likely it is that our customers and suppliers will lose confidence in our ~~annual report on Form 10-K~~ability to reorganize our business successfully and will seek to establish alternative commercial relationships. So long as the Chapter 11 Cases continue, we will be required to incur substantial costs for professional fees and other expenses associated with the administration of the Chapter 11 Cases.

Furthermore, we cannot predict the ultimate amount of all settlement terms for the ~~year ended December 31, 2016, except as set forth below~~liabilities that will be subject to a plan of reorganization. Even once a plan of reorganization is approved and inimplemented, our ~~quarterly report on Form 10-Q for~~operating results may be adversely affected by the ~~quarter ended June 30, 2017.~~possible reluctance of prospective lenders and other counterparties to do business with a company that recently emerged from Chapter 11 bankruptcy.

We may not ~~achieve~~be able to obtain confirmation of a plan of reorganization.

To emerge successfully from Bankruptcy Court protection as a viable entity, we must meet certain statutory requirements with respect to adequacy of disclosure with respect to a Chapter 11 plan of reorganization, solicit and obtain the ~~intended~~requisite acceptances of such a reorganization plan and fulfill other statutory conditions for confirmation of such a plan. However, even if a plan of reorganization as contemplated by the RSA meets other requirements under the Bankruptcy Code, certain parties in interest may file objections to the plan in an effort to persuade the Bankruptcy Court that we have not satisfied the confirmation requirements under section 1129 of the Bankruptcy Code. Lenders under our revolving credit facility have already objected to our entry into the DIP Facility and it is possible that they will also object to a proposed plan of reorganization. Even if no objections are filed and the requisite acceptances of our plan are received from creditors entitled to vote on the plan, the Bankruptcy Court, which can exercise substantial discretion, may not confirm the plan of reorganization. The precise requirements and evidentiary showing for confirming a plan, notwithstanding its rejection by one or more impaired classes of claims or equity interests, depends upon a number of factors including, without limitation, the status and seniority of the claims or equity interests in the rejecting class (i.e., secured claims or unsecured claims, subordinated or senior claims).

If a plan of reorganization is not confirmed by the Bankruptcy Court, it is unclear whether we would be able to reorganize our business and what, if anything, holders of claims against us would ultimately receive with respect to their claims.

We have substantial liquidity needs and may not be able to obtain sufficient liquidity for the duration of the Chapter 11 Cases or to confirm a plan of reorganization or liquidation.

Although we have lowered our capital budget and reduced the scale of our operations significantly, our business remains capital intensive. In addition to the cash requirements necessary to fund ongoing operations, we have incurred, and expect to continue to incur, significant professional fees and other costs in connection with the Chapter 11 Cases. As of September 30, 2020, our total available liquidity was $680.4 million, which included $180.4 million of cash on hand and $500.0 million available under our DIP Facility. We expect to continue using cash on hand that will further reduce this liquidity. With the Bankruptcy Court’s authorization to use cash collateral under the DIP Credit Agreement, we believe that we will have sufficient liquidity, including cash on hand and funds generated from ongoing operations, to fund anticipated cash requirements through the Chapter 11 Cases. As such, we expect to pay vendor obligations on a go-forward basis according to the terms of our current contracts and consistent with applicable court orders, if any, approving such payments. However, there can be no assurance that our current liquidity will be sufficient to allow us to satisfy our obligations related to the Chapter 11 Cases or to pursue confirmation of a plan of reorganization. We can provide no assurance that we will be able to secure additional interim financing or exit financing sufficient to meet our liquidity needs or, if sufficient funds are available, offered to us on acceptable terms.

As a result of the Chapter 11 Cases, our financial results may be volatile and may not reflect historical trends.

During the Chapter 11 Cases, we expect our financial results to continue to be volatile as restructuring activities and expenses, contract terminations and rejections and claims assessments significantly impact our financial results. As a result, our historical financial performance is likely not indicative of financial performance after the date of the bankruptcy filing. In addition, if we emerge from Chapter 11, the amounts reported in subsequent periods may materially change relative to historical results, including due to revisions to our operating plans pursuant to a plan of reorganization. We also may be required to adopt fresh start accounting, in which case our assets and liabilities will be recorded at fair value as of the fresh start reporting date, which may differ materially from the ~~Merger,~~recorded values of assets and liabilities prior to seeking bankruptcy protection. Our financial results after the application of fresh start accounting also may be different from historical trends.

We may be subject to claims that will not be discharged in the Chapter 11 Cases, which could have a material adverse effect on our financial condition and results of operations.

The Bankruptcy Code provides that the confirmation of a plan of reorganization may discharge a debtor from substantially all debts arising prior to the Petition Date. Although the Company intends to pay pre-petition trade claims in full, with few exceptions, all claims that arose before the Petition Date (i) are subject to compromise and/or treatment under a plan of reorganization and/or (ii) could be discharged in accordance with the terms of a plan of reorganization. Any claims not ultimately discharged through a plan of reorganization could be asserted against the reorganized entities and may have an adverse effect on their financial condition and results of operations on a post-reorganization basis.

The pursuit of the Chapter 11 Cases has consumed and will continue to consume a substantial portion of the time and attention of our management, which may have an adverse effect on our business and results of operations, and we may face increased levels of employee attrition.

While the Chapter 11 Cases continue, our management will be required to spend a significant amount of time and effort focusing on the Chapter 11 Cases instead of focusing exclusively on our business operations. This diversion of attention may materially adversely affect the conduct of our business, and, as a result, our financial condition and results of operations, particularly if the Chapter 11 Cases are protracted.

During the duration of the Chapter 11 Cases, our employees will face considerable distraction and uncertainty and we may experience increased levels of employee attrition. A loss of key personnel or material erosion of employee morale could have a material adverse effect on our ability to meet customer expectations, thereby adversely affecting our business and results of operations. The failure to retain or attract members of our management team and other key personnel could impair our ability to execute our strategy and implement operational initiatives, thereby having a material adverse effect on our financial condition and results of operations.

Trading in our securities during the pendency of the Chapter 11 Cases is highly speculative and poses substantial risks. It is impossible to predict at this time whether our Class A ordinary shares will be cancelled or if holders of such ordinary shares will receive any distribution with respect to, or be able to recover any portion of, their investments.

A significant amount of our indebtedness is senior to the Class A ordinary shares in our capital structure. It is unclear at this stage of the Chapter 11 Cases if any plan of reorganization would allow for distributions with respect to our Class A ordinary shares and other outstanding equity interests. It is possible that these equity interests may be cancelled and extinguished upon the approval of the Bankruptcy Court and the holders thereof would not be entitled to receive, and would not receive or retain, any property or interest in property on account of such equity interests. In the event of a cancellation of these equity interests, amounts invested by such holders in our outstanding equity securities will not be recoverable. Consequently, our currently outstanding Class A ordinary shares would have no value. Trading prices for our Class A ordinary shares are very volatile and may bear little or no relationship to the actual recovery, if any, by the holders of such securities in the Chapter 11 Cases. Accordingly, we urge that extreme caution be exercised with respect to existing and future investments in our equity securities and any of our other securities.

Our Class A ordinary shares have been delisted from the New York Stock Exchange (“NYSE”).

Effective September 14, 2020, our Class A ordinary shares were delisted from the NYSE. Since that time, the shares have been quoted on the OTC Pink Open Market under the symbol “VALPQ.” We can provide no assurance that our ordinary shares will continue to trade on this market, whether broker-dealers will continue to provide public quotes of our ordinary shares on this market, whether the trading volume of our ordinary shares will be sufficient to provide for an efficient trading market or whether quotes for our ordinary shares will continue on this market in the future. These recent developments could result in significantly lower trading volumes and reduced liquidity for investors seeking to buy or sell shares of our ordinary shares.

In certain instances, a Chapter 11 case may be converted to a case under chapter 7 of the Bankruptcy Code.

Upon a showing of cause, the Bankruptcy Court may convert the Chapter 11 Cases to cases under chapter 7 of the Bankruptcy Code. In such event, a chapter 7 trustee would be appointed or elected to liquidate our assets and the assets of our subsidiaries for distribution in accordance with the priorities established by the Bankruptcy Code. We believe that liquidation under chapter 7 would result in significantly smaller distributions being made to our creditors than those provided for in a plan of reorganization because of (i) the likelihood that the assets would have to be sold or otherwise disposed of in a distressed fashion over a short period of time rather than in a controlled manner and as a going concern, (ii) additional administrative expenses involved in the appointment of a chapter 7 trustee, and (iii) additional expenses and claims, some of which would be entitled to priority, that would be generated during the liquidation and from the rejection of leases and other executory contracts in connection with a cessation of operations.

Any plan of reorganization that we may implement will be based in large part upon assumptions and analyses developed by us. If these assumptions and analyses prove to be incorrect, our plan may be unsuccessful in its execution.

Any plan of reorganization that we may implement could affect both our capital structure and the ownership, structure and operation of our businesses and will reflect assumptions and analyses based on our experience and perception of historical trends, current conditions and expected future developments, as well as other factors that we consider appropriate under the circumstances. In addition, any plan of reorganization will rely upon financial projections, including with respect to revenues, capital expenditures, debt service and cash flow. Financial forecasts are necessarily speculative, and it is likely that one or more of the assumptions and estimates that are the basis of these financial forecasts will not be accurate. Whether actual future results and developments will be consistent with our expectations and assumptions depends on a number of factors, including but not limited to (i) our ability to substantially change our capital structure, (ii) our ability to obtain adequate liquidity and financing sources, (iii) our ability to maintain customers’ confidence in our viability as a continuing entity and to attract and retain sufficient business from them, (iv) our ability to retain key employees and (v) the overall strength and stability of general economic conditions of the financial and oil and gas industries, both in the U.S. and in global markets. The failure of any of these factors could materially adversely affect the successful reorganization of our businesses. Consequently, there can be no assurance that the results or developments contemplated by any plan of reorganization we may implement will occur or, even if they do occur, that they will have the anticipated effects on us and our subsidiaries or our businesses or operations. The failure of any such results or developments to materialize as anticipated could materially adversely affect the successful execution of any plan of reorganization.

Even if a plan of reorganization is consummated, we may not be able to ~~successfully integrate~~achieve our ~~operations with Atwood after the Merger. Failure~~stated goals and continue as a going concern.

Even if a plan of reorganization is consummated, we will continue to ~~successfully integrate Atwood may adversely affect our future results, and consequently, the value of our shares.~~

We consummated the Merger with the expectation that it would result in various benefits, including, among others, the expansion of our asset base and creation of synergies. We closed the Merger on October 6, 2016, however, achieving the anticipated benefits of the Merger is subject toface a number of ~~uncertainties,~~risks, including ~~whether the Atwood~~further deterioration in commodity prices or other changes in economic conditions, changes in our industry, changes in market demand and increasing expenses. Accordingly, we cannot guarantee that a plan of reorganization will achieve our stated goals.

Furthermore, even if our debts are reduced or discharged through such plan, we may need to raise additional funds through public or private debt or equity financing or other various means to fund our business ~~can be integrated in an efficient and effective manner.~~

While we have successfully merged companies into our operations in the past, the integration process could take longer than anticipated and could result in the loss of valuable employees, the disruption of our ongoing business, processes and systems or inconsistencies in standards, controls, procedures, practices, policies and compensation arrangements, any of which could adversely affect our ability to achieve the anticipated benefits of the Merger. Our combined operations could be adversely affected by issues attributable to Atwood’s historical operations that arose or are based on events or actions that occurred prior toafter the completion of the ~~Merger. In addition, integrating Atwood’s employees~~Chapter 11 Cases. Our access to additional financing is, and ~~operations~~for the foreseeable future will ~~require the time and attention of management, which~~likely continue to be, extremely limited, if it is available at all. Therefore, adequate funds may ~~negatively impact our business. Events outside of our control, including changes in regulation and laws~~not be available when needed or may not be available on favorable terms, if they are available at all.

Our ability to continue as ~~well as economic trends, could adversely affect~~a going concern is dependent upon our ability to ~~realize~~raise additional capital. As a result, we cannot give any assurance of our ability to continue as a going concern, even if a Chapter 11 plan of reorganization is confirmed.

Our ability to use our net operating loss carryforwards (“NOLs”) may be limited by changes in ownership due to the ~~expected benefits from~~Chapter 11 Cases.

As of December 31, 2019, we had deferred tax assets of $142.9 million for U.S. foreign tax credits (“FTCs”), $1.5 billion related to $6.4 billion of net operating loss (“NOL”) carryforwards and $41.5 million for U.S. interest limitation carryforwards, which can be used to reduce our income taxes payable in future years. The FTCs expire between 2022 and 2029. NOL carryforwards, which were generated in various jurisdictions worldwide, include $5.6 billion that do not expire and $773.0 million that will expire, if not utilized, between 2020 and 2037. Deferred tax assets for NOL carryforwards at December 31, 2019 include $1.3 billion acquired in the ~~Merger.~~Rowan Transaction, substantially all of which pertains to NOL in Luxembourg. U.S. interest limitation carryforwards do not expire. Due to the uncertainty of realization, we have a $1.5 billion valuation allowance on FTC, NOL carryforwards and U.S. interest limitation carryforwards.

Under the provisions of the Internal Revenue Code (“IRC”), changes in our ownership, in certain circumstances, will limit the amount of U.S. federal NOLs that can be utilized annually in the future to offset taxable income. In particular, Section 382 of the IRC imposes limitations on a company’s ability to use NOLs upon certain changes in such ownership. Calculations pursuant to Section 382 of the IRC can be very complicated and no assurance can be given that upon further analysis, our ability to take advantage of our NOLs may be limited to a greater extent than we currently anticipate. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to utilize our NOLs fully. We may experience ownership changes in the future as a result of subsequent shifts in our stock ownership that we cannot predict or control that could result in further limitations being placed on our ability to utilize our federal NOLs.

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

The following table ~~below~~ provides a summary of our repurchases of equity securities during the quarter ended September 30, ~~2017~~:2020:


Issuer Purchases of Equity Securities
Period	Total Number of Securities Repurchased(1)	Average Price Paid per Security		Total Number of Securities Repurchased as Part of Publicly Announced Plans or Programs (2)	Approximate Dollar Value of Securities that May Yet Be Repurchased Under Plans or Programs

July 1 - July 31	37,210	$	0.71	—	$	500,000,000
August 1 - August 31	11,645	$	0.31	—	$	500,000,000
September 1 - September 30	—	$	—	—	$	500,000,000
Total	48,855	$	0.61	—

(1)During the three months ended September 30, 2020, equity securities were repurchased from employees and non-employee directors by an affiliated employee benefit trust in connection with the settlement of income tax withholding obligations arising from the vesting of share awards. Such securities remain available for re-issuance in connection with employee share awards.

(2)Our shareholders approved a repurchase program at our annual shareholder meeting held in May 2018. Subject to certain provisions under English law, including the requirement of Valaris plc to have sufficient distributable reserves, we may repurchase up to a maximum of $500.0 million in the aggregate from one or more financial intermediaries under the program, but in no case more than 16.3 million shares. The program terminates in May 2023. As of September 30, 2020, there had been no share repurchases under the repurchase program. Our DIP Credit Agreement prohibits the repurchase of shares for cash, except in certain limited circumstances.

Item 3. Defaults Upon Senior Securities

See "Part I, Item 1. Notes to Condensed Consolidated Financial Statements" – "Note 2, Chapter 11 Proceedings and Ability to Continue as a Going Concern" and "Note 11, Debt", which are incorporated in this item by reference.

Issuer Purchases of Equity Securities

Period
Total Number of Securities Purchased⁽¹⁾
Average Price Paid per Security
Total Number of Securities Purchased as Part of Publicly Announced Plans or Programs⁽²⁾
Approximate Dollar Value of Securities that May Yet Be Purchased Under Plans or Programs

July 1 - July 31 1,701
$ 4.69
—
$ 2,000,000
August 1 - August 31 2,491
$ 5.25
—
$ 2,000,000
September 1 - September 30 3,136
$ 4.53
—
$ 2,000,000
Total 7,328
$ 4.81
—


⁽¹⁾	~~During the quarter ended~~ ~~September 30, 2017~~, equity securities were repurchased from employees and non-employee directors by an affiliated employee benefit trust in connection with the settlement of income tax withholding obligations arising from the vesting of share awards. Such securities remain available for re-issuance in connection with employee share awards.

⁽²⁾

During 2013, our shareholders approved a new share repurchase program. Subject to certain provisions under English law, including the requirement of Ensco plc to have sufficient distributable reserves, we may repurchase up to a maximum of $2.0 billion in the aggregate under the program, but in no case more than 35.0 million shares. As of ~~September 30, 2017, no shares have been repurchased under the program.The program terminates in May 2018.~~

Item 6. Exhibits



Exhibit Number						Exhibit
~~2.1~~4.1						~~Agreement~~Interim Order (I) Approving Notification and ~~Plan~~Hearing Procedures for Certain Transfers of ~~Merger, dated as~~and Declarations of ~~May 29, 2017, by~~Worthlessness with Respect to Common Stock, and ~~among Ensco plc, Echo Merger Sub LLC and Atwood Oceanics, Inc.~~(II) Granting Related Relief Docket No. 110 (incorporated by reference to Exhibit ~~2.1~~4.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on ~~May 30, 2017,~~August 25, 2020, File No. ~~1-08097)~~1-8097).
~~10.1~~*4.2						~~Commitment~~Eleventh Supplemental Indenture, dated as of September 10, 2020, among Valaris plc, U.S. Bank National Association, as trustee and prior trustee, and UMB Bank, National Association, as successor trustee.
*10.1						Forbearance Agreement, dated as of July 15, 2020, among certain beneficial holders or investment managers or advisors for such beneficial holders of our outstanding senior notes.
*10.2						Second Amended and ~~Fifth Amendment~~Restated Waiver to Fourth Amended and Restated Credit Agreement, dated as of ~~October~~July 15, 2020.
*10.3						Third Amended and Restated Waiver to Fourth Amended and Restated Credit Agreement, dated as of August 3, ~~2017, among Ensco, Pride International LLC, certain other subsidiaries~~2020.
10.4						Restructuring Support Agreement, dated as of ~~Ensco party thereto, Citibank, N.A., as administrative agent, and the lenders party thereto~~August 18, 2020 (incorporated by reference to Exhibit 10.1 to the ~~Registrant's~~Registrant’s Current Report on Form 8-K filed on ~~October 6, 2017,~~August 19, 2020, File No. ~~1-08097)~~1-8097).
*12.1†10.5						~~Computation~~Backstop Commitment Agreement, dated as of ~~ratio of earnings~~August 18, 2020, by and among the Company and the commitment parties named therein (incorporated by reference to ~~fixed charges.~~Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed on August 19, 2020, File No. 1-8097).
*15.110.6						Amendment to Restructuring Support Agreement and Backstop Commitment Agreement, dated as of September 10, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 11, 2020, File No. 1-8097).
10.7						First Amendment to Cooperation and Support Agreement, dated as of August 28, 2020, by and among Valaris plc and Luminus Management, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on August 28, 2020, File No. 1-8097).
†10.8						Senior Secured Superpriority Debtor-in-Possession Credit Agreement, dated as of September 25, 2020, by and among Valaris plc, the subsidiary guarantors party thereto, the lenders party thereto and Wilmington Savings Fund Society, FSB (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on September 28, 2020, File No. 1-8097).
*15.1						Letter regarding unaudited interim financial information.
*31.1						Certification of the Chief Executive Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
*31.2						Certification of the Chief Financial Officer of Registrant Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
**32.1						Certification of the Chief Executive Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
**32.2						Certification of the Chief Financial Officer of Registrant Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
*101.INS						XBRL Instance Document - The instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
*101.SCH						XBRL Taxonomy Extension Schema
*101.CAL						XBRL Taxonomy Extension Calculation Linkbase
*101.DEF						XBRL Taxonomy Extension Definition Linkbase
*101.LAB						XBRL Taxonomy Extension Label Linkbase
*101.PRE						XBRL Taxonomy Extension Presentation Linkbase

* Filed herewith.

** Furnished herewith.

† Certain schedules and similar attachments have been omitted pursuant to Item 601(a)(5) of Regulation S-K and will be provided to the SEC upon request.

SIGNATURES

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


			Valaris plc


Date:		October 29, 2020	/s/ JONATHAN H. BAKSHT
			Jonathan H. Baksht Executive Vice President and Chief Financial Officer (principal financial officer)

			~~Ensco plc~~/s/ COLLEEN W. GRABLE


~~Date:~~	~~October 26, 2017~~	~~/s/ JONATHAN H. BAKSHT~~
		~~Jonathan H. Baksht~~ ~~Senior Vice President and~~ ~~Chief Financial Officer~~ ~~(principal financial officer)~~

		~~/s/ TOMMY E. DARBY~~
		~~Tommy E. Darby~~ Colleen W. Grable Controller (principal accounting officer)



PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Report of Independent Registered Public Accounting Firm			34

Condensed Consolidated Statements of Operations Three Months Ended September 30, ~~2017~~2020 and ~~2016~~2019			45

Condensed Consolidated Statements of Operations Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019			56

Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~ Loss Three Months Ended September 30, ~~2017~~2020 and ~~2016~~2019			67

Condensed Consolidated Statements of Comprehensive Income (Loss) ~~Income~~ Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019			78

Condensed Consolidated Balance Sheets September30, ~~2017~~2020 and December 31, ~~2016~~2019			89

Condensed Consolidated Statements of Cash Flows Nine Months Ended September 30, ~~2017~~2020 and ~~2016~~2019			910

Notes to Condensed Consolidated Financial Statements			1011

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			4363

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			5986

ITEM 4. CONTROLS AND PROCEDURES			5986

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS			6088

ITEM 1A. RISK FACTORS			6389

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			6494

ITEM 3. DEFAULTS UPON SENIOR SECURITIES			94

ITEM 6. EXHIBITS			6595

SIGNATURES			6697



	Three Months Ended September 30,
	2017			2016
OPERATING REVENUES	$	460.2		$	548.2
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	285.8			298.1
Depreciation	108.2			109.4
General and administrative	30.4			25.3
	424.4			432.8
OPERATING INCOME	35.8			115.4
OTHER INCOME (EXPENSE)
Interest income	7.5			3.8
Interest expense, net	(48.1		)	(53.4		)
Other, net	.2			18.7
	(40.4		)	(30.9		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(4.6		)	84.5
PROVISION FOR INCOME TAXES
Current income tax expense (benefit)	14.9			(5.7		)
Deferred income tax expense	8.5			2.2
	23.4			(3.5		)
(LOSS) INCOME FROM CONTINUING OPERATIONS	(28.0		)	88.0
LOSS FROM DISCONTINUED OPERATIONS, NET	(.2		)	(.7		)
NET (LOSS) INCOME	(28.2		)	87.3
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	2.8			(2.0		)
NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO	$	(25.4	)	$	85.3
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED
Continuing operations	$	(0.08	)	$	0.28
Discontinued operations	—			—
	$	(0.08	)	$	0.28

NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED	$	(25.5	)	$	83.5

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	301.2			298.6

CASH DIVIDENDS PER SHARE	$	0.01		$	0.01


	Three Months Ended September 30,
	2020		2019
OPERATING REVENUES	$	285.3	$	551.3
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	307.2		496.5
Loss on impairment	0		88.2
Depreciation	122.4		163.0
General and administrative	72.1		36.1

Total operating expenses	501.7		783.8
OTHER OPERATING INCOME	118.1		0
EQUITY IN EARNINGS (LOSSES) OF ARO	3.9		(3.7)
OPERATING LOSS	(94.4)		(236.2)
OTHER INCOME (EXPENSE)
Interest income	4.7		6.7
Interest expense, net (Unrecognized contractual interest expense for debt subject to compromise was $45.9 million for the three months ended September 30, 2020)	(59.8)		(113.9)
Reorganization items, net	(497.5)		0
Other, net	(3.1)		147.4
	(555.7)		40.2
LOSS BEFORE INCOME TAXES	(650.1)		(196.0)
PROVISION FOR INCOME TAXES
Current income tax expense	16.4		22.6
Deferred income tax expense (benefit)	5.5		(21.1)
	21.9		1.5
NET LOSS	(672.0)		(197.5)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	1.1		.4
NET LOSS ATTRIBUTABLE TO VALARIS	$	(670.9)	$	(197.1)
LOSS PER SHARE - BASIC AND DILUTED	$	(3.36)	$	(1.00)
WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	199.4		197.6



	Nine Months Ended September 30,
	2017			2016
OPERATING REVENUES	$	1,388.8		$	2,271.8
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	855.2			1,012.0
Depreciation	325.3			335.1
General and administrative	86.9			76.1
	1,267.4			1,423.2
OPERATING INCOME	121.4			848.6
OTHER INCOME (EXPENSE)
Interest income	22.3			8.6
Interest expense, net	(167.0		)	(172.5		)
Other, net	(6.6		)	278.3
	(151.3		)	114.4
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(29.9		)	963.0
PROVISION FOR INCOME TAXES
Current income tax expense	32.3			81.0
Deferred income tax expense	34.5			23.6
	66.8			104.6
(LOSS) INCOME FROM CONTINUING OPERATIONS	(96.7		)	858.4
LOSS FROM DISCONTINUED OPERATIONS, NET	(.4		)	(1.8		)
NET (LOSS) INCOME	(97.1		)	856.6
NET LOSS (INCOME) ATTRIBUTABLE TO NONCONTROLLING INTERESTS	.5			(5.4		)
NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO	$	(96.6	)	$	851.2
(LOSS) EARNINGS PER SHARE - BASIC AND DILUTED
Continuing operations	$	(0.32	)	$	3.07
Discontinued operations	—			—
	$	(0.32	)	$	3.07

NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO SHARES - BASIC AND DILUTED	$	(96.9	)	$	836.1

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	300.9			272.0

CASH DIVIDENDS PER SHARE	$	0.03		$	0.03



	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
(Loss) income from continuing operations attributable to Ensco	$	(25.2	)	$	86.0		$	(96.2	)	$	853.0
Income from continuing operations allocated to non-vested share awards⁽¹⁾	(.1		)	(1.8		)	(.3		)	(15.1		)
(Loss) income from continuing operations attributable to Ensco shares	$	(25.3	)	$	84.2		$	(96.5	)	$	837.9



~~(Mark One)~~
x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 ~~For the quarterly period ended September 30, 2017~~



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



	Estimated Fair Value
Assets:
Cash and cash equivalents⁽¹⁾	$	445.4
Accounts receivable⁽²⁾	59.4
Other current assets	115.9
Property and equipment	1,776.1
Other assets	26.0
Liabilities:
Debt⁽¹⁾	1,305.9
Other liabilities	167.1
Net assets acquired	949.8
Less: merger consideration	(782.0		)
Bargain purchase gain	$	167.8


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


	Gain (Loss) Recognized in Other Comprehensive Loss ("OCI") on Derivatives (Effective Portion)				(Gain) Loss Reclassified from ("AOCI") into Income (Effective Portion)(1)
	2020		2019		2020		2019
Interest rate lock contracts(2)	$	—	$	—	$	—	$	1.7
Foreign currency forward contracts(3)	$	2.7	$	(5.7)	$	(.5)	$	3.2
Total	$	2.7	$	(5.7)	$	(.5)	$	4.9



	Gain (Loss) Recognized in Other Comprehensive (Loss) Income (Effective Portion)				(Loss) Gain Reclassified from Accumulated Other Comprehensive Income ("AOCI") into Income (Effective Portion)⁽¹⁾						Gain Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
	2017		2016		2017			2016			2017		2016
Interest rate lock contracts⁽³⁾	$	—	$	—	$	(.1	)	$	(.1	)	$	—	$	—
Foreign currency forward contracts⁽⁴⁾	1.7		—		.2			(2.1		)	.3		.2
Total	$	1.7	$	—	$	.1		$	(2.2	)	$	.3	$	.2


	Loss Recognized in Other Comprehensive Loss ("OCI") on Derivatives (Effective Portion)				(Gain) Loss Reclassified from ("AOCI") into Income (Effective Portion)(1)
	2020		2019		2020		2019
Interest rate lock contracts(2)	$	0	$	0	$	0	$	1.8
Foreign currency forward contracts(4)	(5.4)		(7.3)		(11.5)		6.5
Total	$	(5.4)	$	(7.3)	$	(11.5)	$	8.3



	Gain (Loss) Recognized in Other Comprehensive (Loss) Income (Effective Portion)					Loss Reclassified from AOCI into Income (Effective Portion)⁽¹⁾						(Loss) Gain Recognized in Income on Derivatives (Ineffective Portion and Amount Excluded from Effectiveness Testing)⁽²⁾
	2017		2016			2017			2016			2017			2016
Interest rate lock contracts⁽³⁾	$	—	$	—		$	(.3	)	$	(.2	)	$	—		$	—
Foreign currency forward contracts⁽⁵⁾	7.7		(.6		)	(.8		)	(9.9		)	(.1		)	2.1
Total	$	7.7	$	(.6	)	$	(1.1	)	$	(10.1	)	$	(.1	)	$	2.1


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


⁽²⁾	~~Gains and losses recognized in income for ineffectiveness and amounts excluded from effectiveness testing were included in other, net, in our condensed consolidated statements of operations.~~


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


⁽¹⁾	Losses are not allocated to non-vested share awards. Therefore, only dividends attributable to our non-vested share awards are included in the three-month and nine-month periods ended September 30, 2017.



	Aggregate Principal Amount Repurchased		8.00% Senior notes due 2024 Consideration		Cash Consideration⁽¹⁾		Total Consideration
8.50% Senior notes due 2019	$	145.8	$	81.6	$	81.7	$	163.3
6.875% Senior notes due 2020	129.8		69.3		69.4		138.7
4.70% Senior notes due 2021	373.9		181.1		181.4		362.5
Total	$	649.5	$	332.0	$	332.5	$	664.5


⁽¹⁾	As7-year warrants to purchase up to 7% of December 31, 2016, the aggregate amount of principal repurchased with cash of $332.5 million, along with associated premiums, was classified as current maturities of long-term debt on our condensed consolidated balance sheet.



	Aggregate Principal Amount Repurchased		Aggregate Repurchase Price⁽¹⁾
8.50% Senior notes due 2019	$	54.6	$	60.1
6.875% Senior notes due 2020	100.1		105.1
4.70% Senior notes due 2021	39.4		39.3
Total	$	194.1	$	204.5


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


	Shares	Par Value		Additional Paid-in Capital		Retained Earnings (Deficit)		AOCI		Treasury Shares		Non-controlling Interest
BALANCE, December 31, 2019	205.9	$	82.5	$	8,627.8	$	671.7	$	6.2	$	(77.3)	$	(1.3)
Net loss	—	—		—		(3,006.3)		—		—		(1.4)
Shares issued under share-based compensation plans, net	—	—		(.7)		—		—		.9		—
Repurchase of shares	—	—		—		—		—		(.9)		—
Share-based compensation cost	—	—		7.8		—		—		—		—
Net other comprehensive loss	—	—		—		—		(13.4)		—		—
BALANCE, March 31, 2020	205.9	$	82.5	$	8,634.9	$	(2,334.6)	$	(7.2)	$	(77.3)	$	(2.7)
Net loss	—	—		—		(1,107.4)		—		—		(1.4)
Shares issued under share-based compensation plans, net	.2	.1		(.7)		—		—		.6		—
Repurchase of shares	—	—		—		—		—		(.1)		—
Share-based compensation cost	—	—		5.7		—		—		—		—
Net other comprehensive loss	—	—		—		—		(6.1)		—		—
Distributions to noncontrolling interests	—	—		—		—		—		—		(.9)
BALANCE, June 30, 2020	206.1	$	82.6	$	8,639.9	$	(3,442.0)	$	(13.3)	$	(76.8)	$	(5.0)
Net loss	—	—		—		(670.9)		—		—		(1.1)
Shares issued under share-based compensation plans, net	—	—		(.5)		—		—		.5		—

Purchase of noncontrolling interests	—	—		(7.2)		—		—		—		—
Share-based compensation cost	—	—		4.3		—		—		—		—
Net other comprehensive income	—	—		—		—		2.1		—		—
BALANCE, September 30, 2020	206.1	$	82.6	$	8,636.5	$	(4,112.9)	$	(11.2)	$	(76.3)	$	(6.1)


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	57.1	$	186.8	$	145.6	$	41.4	$	(145.6)	$	285.3
Operating expenses
Contract drilling (exclusive of depreciation)	128.5		160.2		99.0		18.5		(99.0)		307.2
Loss on impairment	0		0		0		0		0		0
Depreciation	55.8		52.9		14.8		11.3		(12.4)		122.4
General and administrative	0		0		5.8		0		66.3		72.1
Other operating income	118.1		0		0		0		0		118.1
Equity in earnings of ARO	0		0		0		0		3.9		3.9
Operating income (loss)	$	(9.1)	$	(26.3)	$	26.0	$	11.6	$	(96.6)	$	(94.4)
Property and equipment, net	$	6,465.9	$	3,961.0	$	736.3	$	655.5	$	(736.3)	$	11,082.4



	Floaters	Jackups	Total⁽¹⁾
North & South America	8	6	14
Europe & Mediterranean	4	10	14
Middle East & Africa	3	11	14
Asia & Pacific Rim	5	5	10
Asia & Pacific Rim (under construction)	—	1	1
Held-for-sale	1	—	1
Total	21	33	54


⁽¹⁾	~~We provide management services on two rigs owned by third-parties not included in the table above.~~


	September 30, 2020		December 31, 2019
Trade	$	383.3	$	466.4
Other	55.9		60.3
	439.2		526.7
Allowance for doubtful accounts	(9.5)		(6.0)
	$	429.7	$	520.7


	September 30, 2020		December 31, 2019
Pension and other post-retirement benefits	$	(21.7)	$	(21.7)
Currency translation adjustment	6.6		7.1
Derivative instruments	5.7		22.6
Other	(1.8)		(1.8)
	$	(11.2)	$	6.2


⁽¹⁾	~~During the three-month and nine-month periods ended September 30, 2017 and 2016, all revenues were attributable to our Floater segment.~~


⁽³⁾	During the nine-month period ended September 30, 2016, excluding the impact of the lump-sum termination payment of $185.0 million for ENSCO DS-9, revenues from ConocoPhillips represented 3% of our consolidated revenues.


⁽¹⁾	During the three-month periods ended September 30, 2017 and 2016, 85% and 87% of the revenues earned in Angola, respectively, were attributable to our Floaters segment. During the nine-month periods ended September 30, 2017 and 2016, 86% and 87% of the revenues earned in Angola, respectively, were attributable to our Floaters segment.


⁽⁴⁾	During the three-month and nine-month periods ended September 30, 2017, 92% and 83% of the revenues earned in Australia were attributable to our Floaters segment. For the three-month and nine-month periods ended September 30, 2016, all revenues were attributable to our Floaters segment.


⁽⁶⁾	Revenue recognized during the nine-month period ended September 30, 2016 related to the U.S. Gulf of Mexico included termination fees totaling $205.0 million as discussed in "Note 1 - Unaudited Condensed Consolidated Financial Statements." ENSCO DS-9 termination revenues were attributed to the U.S. Gulf of Mexico as the related drilling contract was intended for operations in that region.

ENSCO PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Three Months Ended September 30, 2017 (In millions) (Unaudited)

	Ensco plc			ENSCO International Incorporated			Pride International LLC			Other Non-Guarantor Subsidiaries of Ensco			Consolidating Adjustments			Total
OPERATING REVENUES	$	13.0		$	47.2		$	—		$	490.1		$	(90.1	)	$	460.2
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	11.3			43.0			—			321.6			(90.1		)	285.8
Depreciation	—			4.0			—			104.2			—			108.2
General and administrative	10.3			5.1			—			15.0			—			30.4
OPERATING (LOSS) INCOME	(8.6		)	(4.9		)	—			49.3			—			35.8
OTHER INCOME (EXPENSE), NET	3.4			(28.0		)	(17.4		)	(1.0		)	2.6			(40.4		)
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(5.2		)	(32.9		)	(17.4		)	48.3			2.6			(4.6		)
INCOME TAX PROVISION	—			11.6			—			11.8			—			23.4
DISCONTINUED OPERATIONS, NET	—			—			—			(.2		)	—			(.2		)
EQUITY (LOSSES) EARNINGS IN AFFILIATES, NET OF TAX	(20.2		)	29.9			23.2			—			(32.9		)	—
NET (LOSS) INCOME	(25.4		)	(14.6		)	5.8			36.3			(30.3		)	(28.2		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			2.8			—			2.8
NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO	$	(25.4	)	$	(14.6	)	$	5.8		$	39.1		$	(30.3	)	$	(25.4	)


VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 2020 (In millions) (Unaudited)
	Valaris plc		ENSCO International Incorporated		Pride International LLC		Other Non-guarantor Subsidiaries of Valaris		Consolidating Adjustments		Total
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities	$	(323.9)	$	133.3	$	(44.2)	$	(161.6)	$	0	$	(396.4)
INVESTING ACTIVITIES
Additions to property and equipment	0		0		0		(82.9)		0		(82.9)
Proceeds from disposition of assets	0		0		0		44.2		0		44.2
Net cash used in investing activities	0		0		0		(38.7)		0		(38.7)
FINANCING ACTIVITIES
Debtor in possession financing fees and payments on Backstop Agreement	(43.8)		0		0		0		0		(43.8)
Borrowings on credit facility	343.9		0		0		252.1		0		596.0
Advances from (to) affiliates	89.9		(133.3)		44.2		(0.8)		0		0
Repayments of credit facility borrowings	(15.0)		0		0		0		0		(15.0)
Reduction of long -term borrowings	(9.7)		0		0		0		0		(9.7)
Other	0		0		0		(9.1)		0		(9.1)
Net cash provided by (used in) financing activities	365.3		(133.3)		44.2		242.2		0		518.4
Effect of exchange rate changes on cash and cash equivalents	0		0		0		(.1)				(.1)
NET INCREASE IN CASH AND CASH EQUIVALENTS	41.4		0		0		41.8		0		83.2
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD	21.5		0		0		75.7		0		97.2
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	62.9	$	0	$	0	$	117.5	$	0	$	180.4


Rig	Date of Sale	Segment

VALARIS JU-68	January 2020	Jackups
VALARIS 6002	January 2020	Floaters
VALARIS 5004	April 2020	Floaters
VALARIS JU-71	June 2020	Jackups
VALARIS JU-70	June 2020	Jackups
VALARIS 8500	July 2020	Floaters
VALARIS 8501	July 2020	Floaters
VALARIS 8502	July 2020	Floaters
VALARIS DS-3	July 2020	Floaters
VALARIS DS-5	July 2020	Floaters
VALARIS DS-6	August 2020	Floaters
VALARIS JU-87	August 2020	Jackups
VALARIS JU-105	September 2020	Jackups