~~ENSCO PLC~~VALARIS LIMITED AND SUBSIDIARIES

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)


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021

NET LOSS	$	(39.8)	$	(907.6)
OTHER COMPREHENSIVE LOSS, NET

Net reclassification adjustment for amounts recognized in net loss as a component of net periodic benefit	—		0.1
Reclassification of net gains on derivative instruments from other comprehensive loss into net loss	—		(5.6)
Other	(0.3)		0.2
NET OTHER COMPREHENSIVE LOSS	(0.3)		(5.3)
COMPREHENSIVE LOSS	(40.1)		(912.9)
COMPREHENSIVE (INCOME) LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	1.2		(2.4)
COMPREHENSIVE LOSS ATTRIBUTABLE TO VALARIS	$	(38.9)	$	(915.3)

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

~~ENSCO PLC~~VALARIS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(In millions, except par value amounts)



	March 31, 2022		December 31, 2021
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	578.2	$	608.7
Restricted cash	30.0		35.9
Accounts receivable, net	439.3		444.2
Other current assets	125.7		117.8
Total current assets	1,173.2		1,206.6
PROPERTY AND EQUIPMENT, AT COST	1,018.8		957.0
Less accumulated depreciation	88.6		66.1
Property and equipment, net	930.2		890.9
LONG-TERM NOTES RECEIVABLE FROM ARO	256.8		249.1
INVESTMENT IN ARO	90.9		86.6
OTHER ASSETS	186.6		176.0
	$	2,637.7	$	2,609.2
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	311.2	$	225.8
Accrued liabilities and other	212.1		196.2


Total current liabilities	523.3		422.0
LONG-TERM DEBT	545.5		545.3
OTHER LIABILITIES	544.8		581.1
Total liabilities	1,613.6		1,548.4

COMMITMENTS AND CONTINGENCIES	0		0
VALARIS SHAREHOLDERS' EQUITY


Common shares, $0.01 par value, 700 shares authorized, 75 shares issued as of March 31, 2022 and December 31, 2021	0.8		0.8
Preference shares, $0.01 par value, 150 shares authorized, 0 shares issued as of March 31, 2022 and December 31, 2021	—		—
Stock warrants	16.4		16.4
Additional paid-in capital	1,086.4		1,083.0

Retained deficit	(71.6)		(33.0)
Accumulated other comprehensive loss	(9.4)		(9.1)

Total Valaris shareholders' equity	1,022.6		1,058.1
NONCONTROLLING INTERESTS	1.5		2.7
Total equity	1,024.1		1,060.8
	$	2,637.7	$	2,609.2

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

VALARIS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021

OPERATING ACTIVITIES
Net loss	$	(39.8)	$	(907.6)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense	22.5		122.1
Accretion of discount on shareholders note	(7.7)		—
Equity in earnings of ARO	(4.3)		(1.9)
Net periodic pension and retiree medical income	(4.0)		(4.0)
Share-based compensation expense	3.4		3.8
Gain on asset disposals	(2.5)		(1.4)
Amortization, net	1.6		(4.6)
Deferred income tax expense (benefit)	(0.6)		0.9
Amortization of debt issuance cost	0.2		—
Loss on impairment	—		756.5




Other	—		5.8
Changes in operating assets and liabilities	32.5		20.9
Contributions to pension plans and other post-retirement benefits	(0.8)		(22.2)
Net cash provided by (used in) operating activities	0.5		(31.7)
INVESTING ACTIVITIES
Additions to property and equipment	(38.5)		(6.0)
Net proceeds from disposition of assets	1.3		3.7




Net cash used in investing activities	(37.2)		(2.3)








FINANCING ACTIVITIES	—		—

Effect of exchange rate changes on cash and cash equivalents and restricted cash	0.3		(0.1)
DECREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	(36.4)		(34.1)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	644.6		325.8
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	608.2	$	291.7

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 PLC~~VALARIS LIMITED AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 -Unaudited Condensed Consolidated Financial Statements

We prepared the accompanying condensed consolidated financial statements of ~~Ensco plc~~Valaris Limited and its subsidiaries ~~(the "Company," "Ensco," "our," "we"~~("Valaris" or ~~"us"~~"Successor") 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~~ ~~condensed consolidated balance sheet~~2021 Condensed Consolidated Balance Sheet data ~~were~~was derived from our ~~2016~~2021 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 and nine-month periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ 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 and nine-month periods~~three months ended ~~September 30, 2017~~March 31, 2022 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, ~~2017~~.2022. 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~~2021.

Summary of Significant Accounting Policies

Please refer to "Note 1. Description of the Business and Summary of Significant Accounting Policies" of our Consolidated Financial Statements from our Form 10-K for the year ended December 31, 2021, filed with the SEC on February ~~28, 2017~~22, 2022, for the discussion of our significant accounting policies. Certain previously reported amounts have been reclassified to conform to the current year presentation.

Emergence from Chapter 11 Bankruptcy and Fresh Start Accounting

As described in "Note 1. Description of the Business and Summary of Significant Accounting Policies", "Note. 2 Chapter 11 Proceedings" and "Note 3. Fresh Start Accounting" from our ~~quarterly reports~~2021 Form 10-K, we filed voluntary petitions for bankruptcy on ~~Form 10-Q filed with the SEC~~August 19, 2020 (the “Petition Date”), and on April ~~27, 2017~~30, 2021 (the "Effective Date") emerged from bankruptcy.

References to the financial position and ~~July 27, 2017.~~

~~Operating Revenues and Expenses~~

~~During the nine-month period ended September 30, 2016, operating revenues included $185.0 million for the lump-sum consideration received in settlement and release~~results of operations of the ~~ENSCO DS-9 customer's ongoing early termination obligations~~"Successor" relate to the financial position and ~~$20.0 million for~~results of operations of Valaris Limited, together with its consolidated subsidiaries, after the ~~lump-sum consideration received in settlement~~Effective Date. References to the financial position and results of operations of the ~~ENSCO 8503 customer's remaining obligations under~~"Predecessor" refer to the ~~contract.~~financial position and results of operations of Valaris plc ("Legacy Valaris"), together with its consolidated subsidiaries, on and prior to the Effective Date. References to the “Company,” “we,” “us” or “our” in this Quarterly Report are to Valaris Limited, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Valaris, together with its consolidated subsidiaries, when referring to periods prior to and including the Effective Date.

On the Effective Date, we qualified for and applied fresh start accounting. The ~~ENSCO DS-9 contract was terminated~~application of fresh start accounting resulted in a new basis of accounting, and we became a new entity for ~~convenience by~~financial reporting purposes. Accordingly, our financial statements and notes after the ~~customer in July 2015, whereby~~Effective Date are not comparable to our ~~customer was obligated~~financial statements and notes on and prior to ~~pay us monthly termination fees for two years under~~that date. The condensed consolidated financial statements and notes have been presented with a black line division to delineate the ~~termination provisions~~lack of comparability between the Predecessor and Successor. Historical financial statements on or before the Effective Date are not a reliable indicator of the ~~contract. The ENSCO 8503 contract was originally scheduled to expire in August 2017.~~Company's financial condition and results of operations for any period after the adoption of fresh start accounting.

New Accounting Pronouncements

Leases - In ~~August 2017,~~July 2021, the Financial Accounting Standards Board ~~(the "FASB"~~("FASB")~~issued Update 2017-12,~~ ~~Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~ ("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~~("ASU") No. 2021-05, “Leases (Topic ~~740): Intra-Entity Transfers of Assets Other Than Inventory~~ (“842); Lessors - Certain Leases with Variable Lease Payments”, (“Update ~~2016-16”~~2021-05”), which requires ~~entities~~a lessor to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. We adopted Update 2016-16 onclassify 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 recognition of a cumulative-effect reduction in retained earnings of $14.1 million on our condensed consolidated balance sheet as of January 1, 2017. Welease with entirely or partially variable payments that do not ~~expect~~depend on an index or rate as an operating lease if another classification (i.e. sales-type or direct financing) would trigger a ~~material impact to our 2017 operating results as a result of the adoption of~~day-one loss. 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~~2021-05 is effective ~~for annual and interim periods~~ for fiscal years beginning after December 15, ~~2017. Subsequent~~2021, with early adoption permitted. We adopted this update January 1, 2022 using a prospective method, with no material impact to ~~the issuance of Update 2014-09,~~our condensed consolidated financial statements.

Accounting pronouncements to be adopted

Reference Rate Reform - In March 2020, the FASB issued ~~several additional Accounting Standards Updates~~ASU No. 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 ~~clarify implementation guidance, provide narrow-scope improvements~~contracts, hedging relationships, and ~~provide additional disclosure guidance.~~other transactions affected by reference rate reform if certain criteria are met. The amendments in Update ~~2014-09 will replace most~~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 ~~revenue recognition guidance~~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 ~~U.S. GAAP~~Update 2020-04 are effective upon issuance and ~~may~~can be ~~adopted using~~applied prospectively through December 31, 2022. Our notes receivable with ARO, from which we generate interest income on a ~~retrospective, modified retrospective or prospective with a cumulative catch-up approach. Due to~~LIBOR-based rate, are impacted by the ~~significant interaction between Update 2014-09 and Accounting Standards Update 2016-02,~~ ~~Leases (Topic 842): Amendments to~~application of this standard. As the ~~FASB Accounting Standards Codification~~ ~~("Update 2016-02"), we expect to adopt Update 2014-09 and Update 2016-02 concurrently with an effective date~~notes bear interest on the LIBOR rate determined at the end of ~~January 1, 2018.~~the preceding year, the rate governing our interest income in 2022 has already been determined. We expect to ~~apply~~be able to modify the ~~modified retrospective approach~~terms of our notes receivable to a comparable interest rate before the applicable LIBOR rate is no longer available and as such, do not expect this standard to have a material impact to our ~~adoption. We are currently evaluating the effect that Update 2014-09 and Update 2016-02 will have on our~~condensed consolidated financial ~~statements and related disclosures.~~statements.

Business Combinations -In ~~February 2016,~~October 2021, the FASB issued ASU No. 2021-08, “Accounting for Contracts Assets and Contract Liabilities from Contracts with Customers” (“Update ~~2016-02, which~~2021-08”). ASU No. 2021-08 requires an entity (acquirer) to recognize ~~lease~~and measure contract assets and ~~lease~~contract liabilities onacquired in a business combination in accordance with Topic 606 and provides practical expedients for acquirers when recognizing and measuring acquired contract assets and contract liabilities from revenue contracts in a business combination. The amendments also apply to contract assets and contract liabilities from other contracts to which the ~~balance sheet~~provisions of Topic 606 apply, such as contract liabilities for the sale of nonfinancial assets within the scope of Subtopic 610-20, Other Income - Gains and Losses from the Derecognition of Nonfinancial Assets. The FASB issued the update to ~~disclose key qualitative and quantitative information about~~improve the ~~entity's leasing arrangements. This update~~accounting for acquired revenue contracts with customers in a business combination. Update 2021-08 is effective for ~~annual and interim periods~~fiscal years beginning after December 15, ~~2018,~~2022, and interim periods within those fiscal years, with early adoption permitted. ~~A modified retrospective approach is required. During~~We will adopt Update 2021-08 in the period required and will apply it to any business combination completed subsequent to the adoption.

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 ~~evaluation~~condensed consolidated financial statements.

Note 2 -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 ~~Update 2016-02,~~a drilling rig and rig crews for which we ~~have concluded~~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 contracts contain a lease component and ~~upon adoption,~~ we ~~will be required~~have elected to ~~separately recognize revenues associated with~~apply the practical expedient provided under Accounting Standards Codification ("ASC") 842 to not separate the lease and non-lease components and apply the revenue recognition guidance in ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)." 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 ~~rigs~~contracts based on those in place as of March 31, 2022 was between approximately 1 month and 3.5 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 ~~provision of contract~~ drilling ~~services. Due~~rig is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The day rate invoiced to the ~~significant interaction between Update 2016-02~~customer is determined based on the varying rates applicable to specific activities performed on an hourly 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 ~~Update 2014-09,~~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 are typically 30 days.

Certain of our contracts contain performance incentives whereby we ~~expect~~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 ~~adopt both updates concurrently with an effective date of January 1, 2018. Adoption will result~~performance bonus is generally recognized in ~~increased disclosure~~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 ~~nature~~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 ~~our leasing arrangements~~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 ~~variability~~cumulative-effect adjustments to demobilization revenues upon changes in our ~~revenue recognition patterns relative~~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 ~~current U.S. GAAP based on the provisions in each of~~ our drilling ~~contracts. With respect to leases whereby we~~rigs or for other contract preparation work. Fees received for requested capital upgrades and other contract preparation work are the lessee, we expect to recognize lease liabilities and offsetting "right of use" assets ranging from approximately $70 million to $90 million. We are currently evaluating the other impacts that Update 2016-02 and Update 2014-09 will have on our consolidated financial statements and related disclosures.

~~Note 2 - Atwood Merger~~

On May 29, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Atwood Oceanics, Inc. (“Atwood”) and Echo Merger Sub, LLC, our wholly-owned subsidiary, and on October 6, 2017 (the "Merger Date"), we completed our acquisition of Atwood pursuant to the Merger Agreement (the “Merger”). 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 recorded at their estimated fair values as of the Merger 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~~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, capital upgrades or in the ~~period in which~~case of our 50/50 joint venture with Saudi Aramco, represent the ~~transaction occurs. We have not finalized~~difference between the ~~fair values of assets acquired~~amounts billed under the bareboat charter arrangements and ~~liabilities assumed; therefore, the fair value estimates set forth below are subject to adjustment during a one year measurement period subsequent~~lease revenues earned up to the ~~Merger Date. The estimated fair values of certain~~respective period end. See “No te 3 – Equity Method Investment in ARO" for additional details regarding our balances with ARO.

Contract assets and liabilities ~~including inventory, long-lived~~are presented net on our Condensed Consolidated Balance Sheets on a contract-by-contract basis. Current contract assets and ~~contingencies require judgments~~liabilities are included in Other current assets and ~~assumptions that increase the likelihood that adjustments may be made to these estimates~~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):



	March 31, 2022		December 31, 2021
Current contract assets	$	3.6	$	0.3
Noncurrent contract assets	$	0.1	$	—
Current contract liabilities (deferred revenue)	$	56.3	$	45.8
Noncurrent contract liabilities (deferred revenue)	$	9.7	$	10.8

Changes in contract assets and liabilities during the ~~measurement~~ period ~~and those adjustments could be material.~~

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


	Contract Assets		Contract Liabilities










Balance as of December 31, 2021	$	0.3	$	56.6
Revenue recognized in advance of right to bill customer	3.4		—
Increase due to cash received	—		22.3
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(12.1)
Decrease due to amortization of deferred revenue added during the period	—		(0.8)

Balance as of March 31, 2022	$	3.7	$	66.0

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 of the Merger, we utilized acquired cash of $445.4 million and cash on hand from the liquidation of short-term investments to repay Atwood's debt and accrued interest of $1.3 billion.~~

⁽²⁾~~Gross contractual amounts receivable totaled $61.8 million as of the Merger 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 to $5.83 between the last trading day prior to the announcement of the Merger and the Merger Date. The estimated gain will be reflected in other, net, in our consolidated statement of operations during the fourth quarter.

~~Merger-Related~~Deferred Contract Costs

~~Merger-related~~Costs incurred for upfront rig mobilizations and certain contract preparations are attributable to our future performance obligation under each respective drilling contract. These costs ~~were~~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 and consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $3.8 million and $8.0 million during the three-month and nine-month periods ended September 30, 2017, respectively. Theseincurred. Deferred contract costs were included in ~~general~~Other current assets and ~~administrative~~Other assets on our Condensed Consolidated Balance Sheets and totaled $37.2 million and $31.4 million as of March 31, 2022 and December 31, 2021, respectively. For the Successor, during the three months ended March 31, 2022, amortization of such costs totaled $11.7 million. For the Predecessor, during the three months ended March 31, 2021, amortization of such costs totaled $5.8 million.

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 $7.6 million and $3.3 million as of March 31, 2022 and December 31, 2021, respectively. For the Successor, during the three months ended March 31, 2022, amortization of such costs totaled $0.3 million. For the Predecessor, during the three months ended March 31, 2021, amortization of such costs totaled $2.6 million.

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, with the exception of the contract liabilities related to our bareboat charter arrangements with ARO which would not be contractually payable until the end of the lease term or termination, if sooner. See "Note 3- Equity Method Investment in ARO" for additional information on ARO and related arrangements. The expected future amortization of our contract liabilities, or in the case of our contract liabilities related to our bareboat charter arrangements with ARO, the amount is reflected at the end of the lease term, and deferred costs recorded as of March 31, 2022 is set forth in the table below (in millions):


	Remaining 2022		2023		2024		2025 and Thereafter		Total
Amortization of contract liabilities	$	54.6	$	5.4	$	3.8	$	2.2	$	66.0
Amortization of deferred costs	$	26.6	$	15.4	$	2.8	$	—	$	44.8

Note 3 -Equity Method Investment in ARO

Background

ARO is a 50/50 unconsolidated joint venture between the Company and Saudi Aramco that owns and operates offshore drilling rigs in Saudi Arabia. As of March 31, 2022, ARO owns 7 jackup rigs, has ordered 2 newbuild jackup rigs, and leases 8 rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO. At March 31, 2022, all of the leased rigs were operating under three-year drilling contracts, or related extensions, with Saudi Aramco. The 7 rigs owned by ARO are currently operating under contracts with Saudi Aramco for an aggregate 15 years provided that the rigs meet the technical and operational requirements of Saudi Aramco.

ARO has plans to purchase 20 newbuild jackup rigs over an approximate 10-year period. In January 2020, ARO ordered the first 2 newbuild jackups, each with a shipyard price of $176.0 million. These newbuild rigs are expected to be delivered in the first or second quarter of 2023 and ARO is expected to place orders for two additional newbuild jackups in 2022. In connection with these plans, we have a potential obligation to fund ARO for newbuild jackup rigs. See "Note 1 1 - Contingencies" for additional information.

The joint venture partners agreed in the shareholders' agreement 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.

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. See additional discussion below regarding these related-party transactions.

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


	Three Months Ended
	March 31, 2022		March 31, 2021
Revenues	$	111.3	$	122.7
Operating expenses
Contract drilling (exclusive of depreciation)	84.2		86.3
Depreciation	16.5		16.1
General and administrative	5.2		3.0
Operating income	5.4		17.3
Other expense, net	3.3		4.5
Provision for income taxes	0.7		4.5
Net income	$	1.4	$	8.3


	March 31, 2022		December 31, 2021
Cash and cash equivalents	$	240.2	$	270.8
Other current assets	179.5		135.0
Non-current assets	775.8		775.8
Total assets	$	1,195.5	$	1,181.6

Current liabilities	$	92.9	$	79.9
Non-current liabilities	957.9		956.7
Total liabilities	$	1,050.8	$	1,036.6

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 (losses) of ARO in our ~~condensed consolidated~~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. Our investment in ARO would be assessed for impairment if there are changes in facts and circumstances that indicate a loss in value may have occurred. If a loss were deemed to have occurred and this loss was determined to be other than temporary, the carrying value of our investment would be written down to fair value and an impairment recorded.

We have an equity method investment in ARO that was recorded at its estimated fair value at both the Effective Date and the date of our combination with our joint venture partner. We computed the difference between the fair value of ARO's net assets and the carrying value of those net assets in ARO's U.S. GAAP financial statements ("basis differences") on each of ~~operations. Upon closing~~these dates. These basis differences primarily related 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 ~~Merger, we incurred additional Merger-related costs of $11.8 million.~~measurement dates.

~~Pro Forma Impact~~Basis differences are amortized over the remaining life of the ~~Merger~~assets or liabilities to which they relate and are recognized as an adjustment to the Equity in earnings (losses) 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):


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
50% interest in ARO net income	$	0.7	$	4.1
Amortization of basis differences	3.6		(2.2)
Equity in earnings of ARO	$	4.3	$	1.9

Related-Party Transactions

Revenues recognized by us related to the Lease Agreements are as follows (in millions):


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Lease revenue	$	14.2	$	16.6

(1) Revenues presented above are included in our Other segment in our segment disclosures. See "Note 12 - Segment Information" for additional information.

Amounts receivable from ARO totaled $11.6 million and $12.1 million as of March 31, 2022 and December 31, 2021, respectively, and are included in Accounts receivable, net, on our Condensed Consolidated Balance Sheets.

We had $13.9 million and $37.1 million of Contract liabilities and Accounts payable, respectively, related to the Lease Agreements as of March 31, 2022. As of December 31, 2021, we had $10.8 million and $38.3 million of Contract liabilities and Accounts payable, respectively, related to the Lease Agreements. The per day bareboat charter amount in the Lease Agreements is subject to adjustment based on actual performance of the respective rig and as such Contract liabilities related to the Lease Agreements are subject to adjustment during the lease term. Upon completion of the lease term, such amount becomes a payable to or a receivable from ARO.

During 2017 and 2018, the Company contributed cash to ARO in exchange for ten-year shareholder notes receivable based on a one-year LIBOR rate, set as of the end of the year prior to the year applicable, plus 2 percent. The notes receivable were adjusted to fair value as of the Effective Date by recording a discount to the principal amount of $442.7 million. The discount is being amortized using the effective interest method to interest income over the remaining terms of the notes.As of March 31, 2022 and December 31, 2021, the carrying amount of the long-term notes receivable from ARO was $256.8 million and $249.1 million, respectively. The agreement entered into by us and Saudi Aramco to create ARO prohibits the sale or transfer of the shareholder note to a third party, except in certain limited circumstances. During the three months ended March 31, 2022 (Successor), interest income totaled $10.5 million of which $7.7 million pertains to non-cash amortization of the discount on the shareholder notes. During the three months ended March 31, 2021 (Predecessor), interest income totaled $2.6 million. As of March 31, 2022, our interest receivable from ARO was $2.9 million, which is included in Accounts receivable, net, on our Condensed Consolidated Balance Sheet. There was no interest receivable from ARO as of December 31, 2021.

Maximum Exposure to Loss

The following ~~unaudited supplemental pro forma results present consolidated information as if~~table summarizes the ~~Merger was completed on January 1, 2016. The pro forma results include, among others, (i) the amortization associated with acquired intangible~~total assets and liabilities ~~(ii) a reduction~~as reflected in ~~depreciation expense for adjustments~~our Condensed Consolidated Balance Sheets as well as our maximum exposure to ~~property~~loss related to ARO (in millions). Our maximum exposure to loss is limited to (1) our equity investment in ARO; (2) the carrying amount of our shareholder notes receivable; and ~~equipment~~(3) other receivables and ~~(iii) a reduction~~contract assets from ARO, partially offset by contract liabilities as well as payables to interest expense resulting from the retirement of Atwood's revolving credit facility and 6.50% senior notes due 2020. The pro forma results do not include any potential synergies or non-recurring charges that may result directly from the Merger.ARO.



	March 31, 2022		December 31, 2021
Total assets	$	362.9	$	348.1
Less: total liabilities	51.0		49.1
Maximum exposure to loss	$	311.9	$	299.0

The Credit Facility also includes a covenant restricting our ability to repay indebtedness maturing after September 2022, which is the final maturity date of our Credit Facility. This covenant is subject to certain exceptions that permit us to manage our balance sheet, including the ability to make repayments of indebtedness (i) of acquired companies within 90 days of the completion of the acquisition or (ii) if, after giving effect to such repayments, available cash is greater than $250 million and there are no amounts outstanding under the Credit Facility.

As of September 30, 2017, we were in compliance in all material respects with our covenants under the Credit Facility. We had no amounts outstanding under the Credit Facility as of September 30, 2017 and December 31, 2016.

Our access to credit and capital markets depends on the credit ratings assigned to our debt. We no longer maintain an investment-grade status. Our current credit ratings, and any additional actual or anticipated downgrades in our credit ratings, could limit our available options when accessing credit and capital markets, or when restructuring or refinancing our debt. In addition, future financings or refinancings may result in higher borrowing costs and require more restrictive terms and covenants, which may further restrict our operations. With a credit rating below investment grade, we have no access to the commercial paper market.

Note 89 -Shareholders' Equity

~~As a~~Activity in our various shareholders' equity accounts for the three months ended March 31, 2022 (Successor) and the three months ended March 31, 2021 (Predecessor) were as follows (in millions, except per share amounts):


	Shares	Par Value		Additional Paid-in Capital		Warrants		Retained Earnings (Deficit)		AOCI		Non-controlling Interest
BALANCE, December 31, 2021 (Successor)	75.0	$	0.8	$	1,083.0	$	16.4	$	(33.0)	$	(9.1)	$	2.7
Net loss	—	—		—		—		(38.6)		—		(1.2)

Share-based compensation cost	—	—		3.4		—		—		—		—
Net other comprehensive loss	—	—		—		—		—		(0.3)		—
BALANCE, March 31, 2022 (Successor)	75.0	$	0.8	$	1,086.4	$	16.4	$	(71.6)	$	(9.4)	$	1.5


	Shares	Par Value		Additional Paid-in Capital		Retained Earnings (Deficit)		AOCI		Treasury Shares		Non-controlling Interest
BALANCE, December 31, 2020 (Predecessor)	206.1	$	82.6	$	8,639.9	$	(4,183.8)	$	(87.9)	$	(76.2)	$	(4.3)
Net loss	—	—		—		(910.0)		—		—		2.4
Shares issued under share-based compensation plans, net	—	—		(0.2)		—		—		0.2		—

Net changes in pension and other postretirement benefits	—	—		—		—		0.1		—		—
Share-based compensation cost	—	—		3.8		—		—		—		—
Net other comprehensive loss	—	—		—		—		(5.4)		—		—
BALANCE, March 31, 2021 (Predecessor)	206.1	$	82.6	$	8,643.5	$	(5,093.8)	$	(93.2)	$	(76.0)	$	(1.9)

Note 10 -Income Taxes

Valaris Limited is domiciled and resident in Bermuda. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation as there is not an income tax regime in Bermuda. Legacy Valaris was domiciled and resident in the U.K. ~~company governed~~The income of our non-U.K. subsidiaries was generally not subject to U.K. taxation.

Income tax rates and taxation systems in ~~part by~~ the ~~Companies Act, we cannot issue new shares (other than~~jurisdictions in ~~limited circumstances) without being authorized by~~which our ~~shareholders. At~~subsidiaries conduct operations vary and our ~~last annual general meeting held~~subsidiaries are frequently subjected to minimum taxation regimes. In some jurisdictions, tax liabilities are based on ~~May 22, 2017, our shareholders authorized the allotment of 101.1 million Class A ordinary shares (or 202.2 million Class A ordinary shares in connection with an offer by way of a rights issue~~gross revenues, statutory deemed profits or other ~~similar issue) for~~factors, rather than on net income, and our subsidiaries are frequently unable to realize tax benefits when they operate at a ~~period up~~loss. Accordingly, during periods of declining profitability, our income tax expense may not decline proportionally with income, which could result in higher effective income tax rates. Furthermore, we will continue to incur income tax expense in periods in which we operate at a loss.

Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the ~~conclusion~~movement of ~~our 2018 annual general meeting (or, if earlier, at~~drilling rigs among taxing jurisdictions will involve the ~~close~~transfer of ~~business on August 22, 2018).~~

~~On October 5, 2017 in conjunction with the approval~~ownership of the ~~Merger,~~drilling rigs among our ~~shareholders authorized an increase in our allotment to reflect our expected enlarged share capital immediately following the completion of the Merger.~~subsidiaries. As a result of frequent changes in the ~~authorization,~~taxing jurisdictions in which our ~~share allotment increased~~drilling rigs are operated and/or owned, changes in profitability levels and changes in tax laws, our annual effective income tax rate may vary substantially from one reporting period to ~~146.1 million Class A ordinary shares (or 292.2 million Class A ordinary shares in connection with an offer by way of a rights issue or other similar issue).~~another.

~~In connection with the Merger on October 6, 2017,~~

Historically, we ~~issued 134.1 million Ensco Class A ordinary shares to Atwood shareholders.~~

~~Note 9 -Income Taxes~~

~~We have historically~~ calculated our provision for income taxes during interim reporting periods by applying the estimated annual effective tax rate for the full fiscal year to pre-tax income or loss, excluding discrete items, for the reporting period. We determined that since small changes in estimated pre-tax income or loss would result in significant changes in ~~our~~the estimated annual effective tax rate, the historical method ~~utilized~~ would not provide a reliable estimate of income taxes for the ~~three-month~~three months ended March 31, 2022 (Successor) and ~~nine-month periods~~three months ended ~~September 30, 2017.~~March 31, 2021 (Predecessor). We used a discrete effective tax rate method to calculate income taxes for the ~~three-month~~three months ended March 31, 2022 (Successor) and ~~nine-month periods ended September 30, 2017.~~March 31, 2021 (Predecessor). We will continue to evaluate income tax estimates under the historical method in subsequent quarters and employ a discrete effective tax rate method if warranted.

Discrete income tax ~~expense~~benefit for the ~~three-month period~~three months ended ~~September 30, 2017~~March 31, 2022 (Successor) was ~~$3.2~~$14.5 million and ~~resulted primarily from a rig sale and resolutions of prior year tax matters. Discrete income tax expense for the nine-month period ended September 30, 2017~~ was $13.0 million and resulted primarily from the Exchange Offers and debt repurchases, rig sales, a restructuring transaction, settlement of a previously disclosed legal contingency, the effective settlement of a liability for unrecognized tax benefits associated with a tax position taken in prior years and other resolutions of prior year tax matters.

Our consolidated effective income tax rate for the three-month and nine-month periods ended September 30, 2016, excluding the impact of discrete tax items, was 6.0% and 21.9%, respectively. Net discrete income tax benefits for the three-month and nine-month periods ended September 30, 2016 of $6.0 million and $1.6 million, respectively, were primarily attributable to ~~the gain on debt extinguishment,~~ changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior ~~years~~years. Discrete income tax expense for the three months ended March 31, 2021 (Predecessor) was $20.3 million and ~~other resolutions of~~was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior ~~year matters. Discrete~~years. Excluding the aforementioned discrete tax items, income tax expense for the ~~nine-month period~~three months ended ~~September 30, 2016 also resulted from restructuring transactions involving certain~~March 31, 2022 (Successor) and the three months ended March 31, 2021 (Predecessor) was $13.8 million and $11.4 million, respectively.

Note 11 -Contingencies

Indonesian Well-Control Event

In July 2019, a well being drilled offshore Indonesia by one of our ~~subsidiaries.~~

~~Note 10 - Contingencies~~

~~Brazil Internal Investigation~~

~~Pride International LLC, formerly Pride International, Inc. (“Pride”),~~jackup rigs experienced a ~~company we acquired in 2011, commenced~~well-control event requiring the cessation of drilling ~~operations in Brazil in 2001.~~activities. In 2008, Pride entered into a drilling services 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, afterFebruary 2020, 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 learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to leadrig resumed operations. Indonesian authorities initiated an investigation into the ~~alleged irregularities. Further, in June~~event and ~~July 2015, we voluntarily~~have contacted the ~~SEC~~customer, us and the U.S. Department of Justice ("DOJ"), respectively, to advise them of this matter and of our Audit Committee’s investigation. Independent counsel, under 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~~other parties involved in drilling 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 Pride to any illegal acts committed by our former marketing consultant who provided services to Pride and Ensco in connectionwell for additional information. We cooperated 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 BrazilianIndonesian 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, which 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 does 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 knowledge 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.

ARO Newbuild Funding Obligations

In connection with our ~~business~~50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. ARO has plans to purchase 20 newbuild jackup rigs over an approximate 10-year period. The joint venture 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. ARO paid a 25% down payment from cash on hand for each of the 2 newbuilds ordered in January 2020 and ~~financial condition. Although our internal investigation~~ is ~~substantially complete, we cannot predict whether any~~actively exploring financing options for remaining payments due upon delivery. 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 ~~allegations will~~capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program. Each partner's commitment shall be ~~made or whether any additional facts relevant to~~reduced by the ~~investigation will be uncovered during~~actual cost of each newbuild rig, as delivered, on a proportionate basis.

Letters of Credit

In the ordinary course of ~~the investigation~~business with customers and ~~what impact those allegations~~others, we have entered into letters of credit to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and ~~additional facts will have on the timing or conclusions~~other obligations in various jurisdictions. Letters of ~~the investigation. Our Audit Committee will examine any such additional allegations~~credit outstanding as of March 31, 2022 (Successor) totaled $33.6 million and ~~additional facts~~are issued under facilities provided by various banks 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~~other financial institutions. Obligations under these letters of ~~Petrobras' claim or the range of our potential exposure, if any. As a result, there can be no assurance as to how this dispute will ultimately be resolved.~~

~~We did~~credit are not ~~recognize revenue for amounts owed to us under the DSA from the beginning of the fourth quarter of 2015 through the Termination Date,~~normally called, as we ~~concluded that collectability~~typically comply with the underlying performance requirement. As 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 proceedingsMarch 31, 2022 (Successor), we had collateral deposits in the ~~U.K. against Petrobras seeking payment~~amount 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 subsequently filed a counterclaim seeking restitution of certain sums paid under the DSA less value received by Petrobras under the DSA. We have also initiated separate arbitration proceedings in the U.K. against SHI for any losses we have incurred in connection$27.1 million with ~~the foregoing. SHI subsequently filed a statement of defense disputing our claim. There can be no assurance as to how these arbitration proceedings will ultimately be resolved.~~

~~Customer Dispute~~

A customer filed a lawsuit in Texas federal court against one of our subsidiaries claiming damages based on allegations that our subsidiary breached and was negligent in the performance of a drilling contract during the period beginning in mid-2011 through May 2012. The customer's court documents alleged damages totaling approximately $40 million.During the second quarter, we settled the lawsuit and agreed to pay the customer $9.8 million, which was recognized in contract drilling expense in our condensed consolidated statements of operations for the nine-month period ended September 30, 2017.

~~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.these agreements.

~~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 orand cash flows.

In the ordinary course of business with customers and others, we have entered into letters of credit and surety bonds to guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Letters of credit and surety bonds outstanding as of September 30, 2017 totaled $83.5 million and were issued under facilities provided by various banks and other financial institutions. Obligations under these letters of credit and surety bonds are not normally called as we typically comply with the underlying performance requirement. As of September 30, 2017, we were not required to make collateral deposits with respect to these agreements.

Note 1112 -Segment Information

Our business consists of ~~three~~4 operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and ~~(3)~~(4) Other, which consists of management services on rigs owned by ~~third-parties. Our~~ ~~two~~third-parties and the activities associated with our arrangements with ARO under the Lease Agreements. Floaters, Jackups and ARO are also reportable segments.

Upon emergence, we ceased allocation of our onshore support costs included within Contract drilling expenses to our operating segments ~~Floaters~~for purposes of measuring segment operating income (loss) and ~~Jackups, provide one service, contract drilling.~~

~~Segment information for~~as such, those costs are included in “Reconciling Items”. We have adjusted the ~~three-month and nine-month periods ended 2017 and 2016 is presented below (in millions)~~historical period to conform with current period presentation.Further, General and administrative expense and ~~depreciation~~Depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items." We measure segment assets as ~~property~~Property and ~~equipment.~~equipment, net.

The full operating results included below for ARO are not included within our consolidated results and thus deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See "Note 3 - Equity Method Investment in ARO" for additional information on ARO and related arrangements.

Segment information for the three months ended March 31, 2022 (Successor) and March 31, 2021 (Predecessor), respectively, are presented below (in millions).

Three Months Ended ~~September 30, 2017~~March 31, 2022 (Successor)


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	99.7	$	180.7	$	111.3	$	38.0	$	(111.3)	$	318.4
Operating expenses
Contract drilling (exclusive of depreciation)	147.6		139.2		84.2		15.5		(55.2)		331.3

Depreciation	12.2		9.1		16.5		0.9		(16.2)		22.5
General and administrative	—		—		5.2		—		13.6		18.8
Equity in earnings of ARO	—		—		—		—		4.3		4.3
Operating income (loss)	$	(60.1)	$	32.4	$	5.4	$	21.6	$	(49.2)	$	(49.9)
Property and equipment, net	$	457.6	$	387.1	$	730.9	$	51.7	$	(697.1)	$	930.2

Floaters Jackups Other Operating Segments Total Reconciling Items Consolidated Total
Revenues $ 291.9
$ 153.1
$ 15.2
$ 460.2
$ —
$ 460.2
Operating expenses
Contract drilling (exclusive of depreciation) 139.1
132.9
13.8
285.8
—
285.8
Depreciation 72.7
31.6
—
104.3
3.9
108.2
General and administrative —
—
—
—
30.4
30.4
Operating income (loss) $ 80.1
$ (11.4 ) $ 1.4
$ 70.1
$ (34.3 ) $ 35.8
Property and equipment, net $ 8,545.5
$ 2,502.4
$ —
$ 11,047.9
$ 48.5
$ 11,096.4

Three Months Ended ~~September 30, 2016~~March 31, 2021 (Predecessor)


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	97.3	$	172.6	$	122.7	$	37.2	$	(122.7)	$	307.1
Operating expenses
Contract drilling (exclusive of depreciation)	85.1		121.3		86.3		15.3		(54.4)		253.6
Loss on impairment	756.5		—		—		—		—		756.5
Depreciation	56.2		52.4		16.1		11.3		(13.9)		122.1
General and administrative	—		—		3.0		—		21.3		24.3

Equity in earnings of ARO	—		—		—		—		1.9		1.9
Operating income (loss)	$	(800.5)	$	(1.1)	$	17.3	$	10.6	$	(73.8)	$	(847.5)
Property and equipment, net	$	5,685.4	$	3,778.9	$	729.2	$	566.3	$	(675.9)	$	10,083.9

Floaters Jackups Other Operating Segments Total Reconciling Items Consolidated Total
Revenues $ 319.3
$ 213.8
$ 15.1
$ 548.2
$ —
$ 548.2
Operating expenses
Contract drilling (exclusive of depreciation) 153.7
133.2
11.2
298.1
—
298.1
Depreciation 72.9
32.1
—
105.0
4.4
109.4
General and administrative —
—
—
—
25.3
25.3
Operating income $ 92.7
$ 48.5
$ 3.9
$ 145.1
$ (29.7 ) $ 115.4
Property and equipment, net $ 8,360.4
$ 2,537.9
$ —
$ 10,898.3
$ 61.4
$ 10,959.7

~~Nine Months Ended September 30, 2017~~

Floaters Jackups Other Operating Segments Total Reconciling Items Consolidated Total
Revenues $ 840.7
$ 503.8
$ 44.3
$ 1,388.8
$ —
$ 1,388.8
Operating expenses
Contract drilling (exclusive of depreciation) 431.1
383.8
40.3
855.2
—
855.2
Depreciation 217.5
95.3
—
312.8
12.5
325.3
General and administrative —
—
—
—
86.9
86.9
Operating income $ 192.1
$ 24.7
$ 4.0
$ 220.8
$ (99.4 ) $ 121.4
Property and equipment, net $ 8,545.5
$ 2,502.4
$ —
$ 11,047.9
$ 48.5
$ 11,096.4

~~Nine Months Ended September 30, 2016~~

Floaters Jackups Other Operating Segments Total Reconciling Items Consolidated Total
Revenues $ 1,468.3
$ 743.0
$ 60.5
$ 2,271.8
$ —
$ 2,271.8
Operating expenses
Contract drilling (exclusive of depreciation) 573.6
390.0
48.4
1,012.0
—
1,012.0
Depreciation 231.0
90.8
—
321.8
13.3
335.1
General and administrative —
—
—
—
76.1
76.1
Operating income $ 663.7
$ 262.2
$ 12.1
$ 938.0
$ (89.4 ) $ 848.6
Property and equipment, net $ 8,360.4
$ 2,537.9
$ —
$ 10,898.3
$ 61.4
$ 10,959.7

Information about Geographic Areas

As of ~~September 30, 2017~~,March 31, 2022, the geographic distribution of our and ARO's drilling rigs ~~by reportable segment~~ was as follows:


	Floaters	Jackups	Other	Total Valaris	ARO
North & South America	6	6	—	12	—
Europe & the Mediterranean	6	12	—	18	—
Middle East & Africa	2	7	8	17	7
Asia & Pacific Rim	2	6	—	8	—


Total	16	31	8	55	7

We provide management services in the U.S. Gulf of Mexico on 2 rigs owned by a third party not included in the table above.

We are a party to contracts whereby we have the option to take delivery of 2 recently constructed drillships that are not included in the table above.

ARO has ordered 2 newbuild jackups which are under construction in the Middle East that are not included in the table above.

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.~~

Note 1213 -Supplemental Financial Information

Condensed Consolidated Balance Sheet Information

Accounts receivable, net, consisted of the following (in millions):



	March 31, 2022		December 31, 2021
Trade	$	288.2	$	296.8
Income tax receivable	150.9		151.1
Other	16.5		12.7
	455.6		460.6
Allowance for doubtful accounts	(16.3)		(16.4)
	$	439.3	$	444.2

September 30,
2017 December 31,
2016
Trade $ 338.6
$ 358.4
Other 31.2
24.5
369.8
382.9
Allowance for doubtful accounts (20.8 ) (21.9 )
$ 349.0
$ 361.0

Other current assets consisted of the following (in millions):


	September 30, 2017		December 31, 2016			March 31, 2022		December 31, 2021
Inventory	$	219.7	$	225.2
Prepaid taxes	35.8		30.7		Prepaid taxes	$	42.8	$	44.4
Deferred costs	31.4		32.4		Deferred costs	31.8		26.9
Prepaid expenses	14.1		7.9		Prepaid expenses	21.4		23.1

Other	17.3		19.8		Other	29.7		23.4
	$	318.3	$	316.0		$	125.7	$	117.8

Other assets ~~net,~~ consisted of the following (in millions):

September 30,
2017 December 31,
2016
Deferred tax assets $ 54.7
$ 69.3
Deferred costs 30.8
35.7
Supplemental executive retirement plan assets 30.0
27.7
Prepaid taxes on intercompany transfers of property —
33.0
Other 9.5
10.2
$ 125.0
$ 175.9



	March 31, 2022		December 31, 2021
Tax receivables	$	65.6	$	64.8
Deferred tax assets	60.8		59.7
Right-of-use assets	22.1		20.5


Other	38.1		31.0
	$	186.6	$	176.0

Accrued liabilities and other consisted of the following (in millions):


	September 30, 2017		December 31, 2016			March 31, 2022		December 31, 2021
Personnel costs	$	95.2	$	124.0	Personnel costs	$	58.2	$	64.6
Deferred revenue	88.0		116.7		Deferred revenue	56.3		45.8
Income and other taxes payable					Income and other taxes payable	48.6		45.7

Accrued interest	70.6		71.7		Accrued interest	18.9		7.6
Taxes	36.9		40.7
Derivative liabilities	1.8		12.7
Lease liabilities					Lease liabilities	9.7		10.0

Other	8.3		10.8		Other	20.4		22.5
	$	300.8	$	376.6		$	212.1	$	196.2

Other liabilities consisted of the following (in millions):



	March 31, 2022		December 31, 2021
Unrecognized tax benefits (inclusive of interest and penalties)	$	285.2	$	320.2
Pension and other post-retirement benefits	199.2		204.0







Other	60.4		56.9
	$	544.8	$	581.1

September 30,
2017 December 31,
2016
Unrecognized tax benefits (inclusive of interest and penalties)
$ 144.2
$ 142.9
Deferred revenue 65.5
120.9
Supplemental executive retirement plan liabilities 31.2
28.9
Personnel costs 14.9
13.5
Other 23.4
16.3
$ 279.2
$ 322.5

Accumulated other comprehensive income (loss) consisted of the following (in millions):



	March 31, 2022		December 31, 2021
Pension and other post-retirement benefits	$	(9.1)	$	(9.1)
Currency translation adjustment	(0.3)		—


	$	(9.4)	$	(9.1)

September 30,
2017 December 31,
2016
Derivative instruments $ 22.4
$ 13.6
Currency translation adjustment 7.8
7.6
Other (1.6 ) (2.2 )
$ 28.6
$ 19.0
Condensed Consolidated Statements of Operations Information

Other, net, consisted of the following (in millions):


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Net foreign currency exchange gains	$	4.7	$	16.6
Net periodic pension income, excluding service cost	4.0		4.0

Net gain on sale of property	2.5		1.4
Other income (expense)	(0.2)		0.5
	$	11.0	$	22.5

Condensed Consolidated Statement of Cash Flows Information

Our restricted cash of $30.0 million and $35.9 million at March 31, 2022 and December 31, 2021, respectively, consists primarily of $27.1 million and $31.1 million of collateral on letters of credit for each respective period. See "Note 11 - Contingencies" for more information regarding our letters of credit.

Concentration of Risk

We are exposed to credit risk relating to our receivables from customers, our cash and cash equivalents ~~our short-term investments~~ and, ~~our use of derivatives in connection with the management of foreign currency exchange rate risk.~~at times, investments. We mitigate our credit risk relating to receivables from customers, which consist primarily of major international, government-owned and independent oil and gas companies, by performing ongoing credit evaluations. We also maintain reserves for potential credit losses, which generally have been within ~~management's~~our expectations. We mitigate our credit risk relating to cash and ~~cash equivalents~~investments by focusing on diversification and quality of instruments. Cash equivalents consist of a portfolio of high-grade instruments. Custody of cash and cash equivalents is maintained at several well-capitalized financial institutions, and we monitor the financial condition of those financial institutions.

We mitigate our credit risk relating to derivative counterparties through a variety of techniques, including transacting with multiple, high-quality financial institutions, thereby limiting our exposure to individual counterparties and by entering into International Swaps and Derivatives Association, Inc. (“ISDA”) Master Agreements, which include provisions for a legally enforceable master netting agreement, with our derivative counterparties. The terms of the ISDA agreements may also include credit support requirements, cross default provisions, termination events or set-off provisions. Legally enforceable master netting agreements reduce credit risk by providing protection in bankruptcy in certain circumstances and generally permitting the closeout and netting of transactions with the same counterparty

~~upon the occurrence of certain events. See "Note 4 - Derivative Instruments" for additional information on our derivatives.~~

Consolidated revenues ~~by customer for the three-month and nine-month periods ended September 30, 2017 and 2016~~with customers that individually contributed 10% or more of revenue were as follows:


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
BP plc ("BP")(1)	16	%	15	%
Shell plc ("Shell")(2)	11	%	9	%
Eni S.p.A ("Eni")(3)	10	%	7	%
Other	63	%	69	%
	100	%	100	%

(1)During the three months ended March 31, 2022 (Successor), 43% of the revenues provided by BP were attributable to our Floaters segment, 13% of the revenues were attributable to our Jackups segment and the remaining were attributable to our managed rigs.

During the three months ended March 31, 2021 (Predecessor), 43% of the revenues provided by BP were attributable to our Floaters segment, 15% of the revenues were attributable to our Jackups segment and the remaining were attributable to our managed rigs.

(2) During the three months ended March 31, 2022 (Successor), 67% of the revenues provided by Shell were attributable to our Floaters segment and 33% of the revenues were attributable to our Jackups segment.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Total⁽¹⁾
24 % 23 % 23 % 16 %
BP ⁽²⁾
15 % 13 % 15 % 12 %
Petrobras⁽¹⁾
11 % 9 % 11 % 11 %
ConocoPhillips⁽³⁾
3 % 2 % 2 % 12 %
Other 47 % 53 % 49 % 49 %
100 % 100 % 100 % 100 %


⁽¹⁾	During the three months ended March 31, 2021 (Predecessor), 62% of the revenues provided by Shell were attributable to our Floaters segment and 38% of the ~~three-month and nine-month periods ended September 30, 2017 and 2016, all~~ revenues were ~~attributable to our Floater segment.~~

⁽²⁾

~~During the three-month periods ended September 30, 2017 and 2016, 78% and 73% of the revenues provided by BP, respectively, were attributable to our Floaters segment and no revenue was~~ attributable to our Jackups segment. During the nine-month periods ended September 30, 2017 and 2016, 78% and 75% of the revenues provided by BP, respectively, were attributable to our Floaters segment and no revenue was attributable to our Jackups 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.

(3) During the three months ended March 31, 2022 (Successor), 58% of the revenues provided by Eni were attributable to our Jackups segment and 42% of the revenues were attributable to our Floaters segment.

During the three months ended March 31, 2021 (Predecessor), 69% of the revenues provided by Eni were attributable to our Floaters segment and 31% of the revenues were attributable to our Jackups segment.

For purposes of our geographic disclosure, we attribute revenues to the geographic location where such revenues are earned. Consolidated revenues ~~by region~~ for locations that individually had 10% or more of revenue are as follows (in millions):


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
United Kingdom(1)	$	65.6	$	56.1
U.S. Gulf of Mexico(2)	50.6		56.8
Saudi Arabia(3)	38.1		41.6
Norway(1)	24.3		54.0
Mexico(4)	22.1		38.2


Other	117.7		60.4
	$	318.4	$	307.1

(1)During the ~~three-month~~three months ended March 31, 2022 (Successor) and ~~nine-month periods~~2021 (Predecessor), revenues earned in the United Kingdom and Norway were attributable to our Jackups segment.

(2)During the three months ended ~~September 30, 2017~~March 31, 2022 (Successor), 41% and ~~2016 were as follows:~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Angola⁽¹⁾
$ 118.9
$ 142.7
$ 356.5
$ 411.3
Egypt⁽²⁾
53.8
50.5
160.4
87.0
Brazil⁽²⁾
51.1
48.6
147.6
251.3
United Kingdom⁽³⁾
49.1
60.5
117.0
204.0
Australia⁽⁴⁾
48.7
44.6
158.6
169.4
U.S. Gulf of Mexico⁽⁵⁾⁽⁶⁾
34.9
33.6
112.2
498.3
Other 103.7
167.7
336.5
650.5
$ 460.2
$ 548.2
$ 1,388.8
$ 2,271.8


⁽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.


⁽²⁾	~~During the three-month and nine-month periods ended September 30, 2017 and 2016, all revenues were attributable to our Floaters segment.~~


⁽³⁾	~~During the three-month and nine-month periods ended September 30, 2017 and 2016, all revenues were attributable to our Jackups 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.

⁽⁵⁾

During the three-month periods ended September 30, 2017 and 2016, 21% and 41% of the revenues earned, respectively, were attributable to our Floaters segment and 35% and 14% of the revenues earned, respectively, were attributable to our Jackups segment. During the nine-month period ended September 30, 2017 and 2016, 24% and 86% of the revenues earned, respectively, were attributable to our Floaters segment and 37% and 5% earned, respectively, were attributable to our Jackups 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.

~~Note 13 -Guarantee of Registered Securities~~

In connection with the Pride acquisition, Ensco plc and Pride entered into a supplemental indenture to the indenture dated July 1, 2004 between Pride and New York Mellon, as indenture trustee, providing for, among other matters, the full and unconditional guarantee by Ensco plc of Pride's 8.5% unsecured senior notes due 2019, 6.875% unsecured senior notes due 2020 and 7.875% unsecured senior notes due 2040, which had an aggregate outstanding principal balance of $1.0 billion as of September 30, 2017. The Ensco plc guarantee provides for the unconditional and irrevocable guarantee13% of the ~~prompt payment, when due,~~revenues earned in U.S. Gulf of ~~any amount owed~~Mexico were attributable to our Floaters segment and Jackups segment respectively. The remaining revenues were attributable to our managed rigs.

During the ~~note holders.~~

~~Ensco plc is also a full and unconditional guarantor~~three months ended March 31, 2021 (Predecessor), 65% of the ~~7.2%~~ ~~debentures due~~ ~~2027~~ ~~issued by ENSCO International Incorporated, a wholly-owned subsidiary~~revenues earned in U.S. Gulf of ~~Ensco plc, during 1997, which had an aggregate outstanding principal balance of~~ ~~$150.0 million~~ ~~as of~~ ~~September 30, 2017~~.

Pride International LLC (formerly Pride International, Inc.) and Ensco International Incorporated are 100% owned subsidiaries of Ensco plc. All guarantees are unsecured obligations of Ensco plc ranking equal in right of payment with all of its existing and future unsecured and unsubordinated indebtedness.

~~The following tables present the unaudited condensed consolidating statements of operations for the three-month and nine-month periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016; the unaudited condensed consolidating statements of comprehensive (loss) income for the~~ ~~three-month and nine-month~~ ~~periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016; the condensed consolidating balance sheets as of~~ ~~September 30, 2017~~ ~~(unaudited) and~~ ~~December 31, 2016~~;Mexico were attributable to our Floaters segment and the ~~unaudited condensed consolidating statements~~remaining revenues were primarily attributable to our managed rigs.

(3)During the three months ended March 31, 2022 (Successor), 62% of ~~cash flows for~~ the ~~nine-month~~ ~~periods~~revenues earned in Saudi Arabia were attributable to our Jackups segment. The remaining revenues were attributable to our Other segment and relates primarily to our rigs leased to ARO.

During the three months ended ~~September 30, 2017~~March 31, 2021 (Predecessor), 57% of the revenues earned in Saudi Arabia were attributable to our Jackups segment. The remaining revenues were attributable to our Other segment and ~~2016, in accordance with Rule 3-10 of Regulation S-X.~~relates primarily to our rigs leased to ARO.

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 )
(4)During the three months ended March 31, 2022 (Successor), 93% of the revenues earned in Mexico were attributable to our Jackups segment and the remaining revenues were attributable to our Floaters segment.

During the three months ended March 31, 2021 (Predecessor), 56% of the revenues earned in Mexico were attributable to our Floaters segment and the remaining revenues were attributable to our Jackups segment.

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Three Months Ended September 30, 2016
(In millions)
(Unaudited)

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total
OPERATING REVENUES $ 6.7
$ 36.1
$ —
$ 581.0
$ (75.6 ) $ 548.2
OPERATING EXPENSES

Contract drilling (exclusive of depreciation) 6.7
36.5
—
330.5
(75.6 ) 298.1
Depreciation —
4.2
—
105.2
—
109.4
General and administrative 9.1
.1
—
16.1
—
25.3
OPERATING (LOSS) INCOME (9.1 )
(4.7 )
—

129.2

—

115.4
OTHER INCOME (EXPENSE), NET 6.9
(32.5 ) (18.9 ) 7.8
5.8
(30.9 )
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (2.2 )
(37.2 )
(18.9 )
137.0

5.8

84.5
INCOME TAX PROVISION —
(3.5 ) (.6 ) .6
—
(3.5 )
DISCONTINUED OPERATIONS, NET —
—
—
(.7 ) —
(.7 )
EQUITY EARNINGS IN AFFILIATES, NET OF TAX 87.5
60.2
23.2
—
(170.9 ) —
NET INCOME 85.3
26.5

4.9

135.7

(165.1 )
87.3
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
(2.0 ) —
(2.0 )
NET INCOME ATTRIBUTABLE TO ENSCO $ 85.3

$ 26.5

$ 4.9

$ 133.7

$ (165.1 )
$ 85.3

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Nine 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 $ 38.5
$ 137.1
$ —
$ 1,477.3
$ (264.1 ) $ 1,388.8
OPERATING EXPENSES
Contract drilling (exclusive of depreciation) 33.7
126.4
—
959.2
(264.1 ) 855.2
Depreciation —
12.5
—
312.8
—
325.3
General and administrative 33.9
9.4
—
43.6
—
86.9
OPERATING (LOSS) INCOME (29.1 ) (11.2 ) —
161.7
—
121.4
OTHER EXPENSE, NET (10.2 ) (86.2 ) (53.0 ) (13.6 ) 11.7
(151.3 )
(LOSS) INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (39.3 ) (97.4 ) (53.0 ) 148.1
11.7
(29.9 )
INCOME TAX PROVISION —
30.5
—
36.3
—
66.8
DISCONTINUED OPERATIONS, NET —
—
—
(.4 ) —
(.4 )
EQUITY (LOSSES) EARNINGS IN AFFILIATES, NET OF TAX (57.3 ) 113.5
69.4
—
(125.6 ) —
NET (LOSS) INCOME (96.6 ) (14.4 ) 16.4
111.4
(113.9 ) (97.1 )
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
.5
—
.5
NET (LOSS) INCOME ATTRIBUTABLE TO ENSCO $ (96.6 ) $ (14.4 ) $ 16.4
$ 111.9
$ (113.9 ) $ (96.6 )

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS
Nine Months Ended September 30, 2016
(In millions)
(Unaudited)

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total
OPERATING REVENUES $ 21.5
$ 108.2
$ —
$ 2,361.7
$ (219.6 ) $ 2,271.8
OPERATING EXPENSES

Contract drilling (exclusive of depreciation) 20.6
108.6
—
1,102.4
(219.6 ) 1,012.0
Depreciation —
12.9
—
322.2
—
335.1
General and administrative 25.8
.2
—
50.1
—
76.1
OPERATING (LOSS) INCOME (24.9 )
(13.5 )
—

887.0

—

848.6
OTHER INCOME (EXPENSE), NET 145.9
(39.2 ) (56.8 ) (1.2 ) 65.7
114.4
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 121.0

(52.7 )
(56.8 )
885.8

65.7

963.0
INCOME TAX PROVISION —
11.9
(.6 ) 93.3
—
104.6
DISCONTINUED OPERATIONS, NET —
—
—
(1.8 ) —
(1.8 )
EQUITY EARNINGS IN AFFILIATES, NET OF TAX 730.2
113.7
87.0
—
(930.9 ) —
NET INCOME 851.2

49.1

30.8

790.7

(865.2 )
856.6
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
(5.4 ) —
(5.4 )
NET INCOME ATTRIBUTABLE TO ENSCO $ 851.2

$ 49.1

$ 30.8

$ 785.3

$ (865.2 )
$ 851.2

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME~~

~~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

NET (LOSS) INCOME $ (25.4 ) $ (14.6 ) $ 5.8
$ 36.3
$ (30.3 ) $ (28.2 )
OTHER COMPREHENSIVE INCOME, NET
Net change in derivative fair value —
1.7
—
—
—
1.7
Reclassification of net income on derivative instruments from other comprehensive income into net (loss) income —
(.1 ) —
—
—
(.1 )
Other —
—
—
.1
—
.1
NET OTHER COMPREHENSIVE INCOME —
1.6

—

.1

—

1.7
COMPREHENSIVE (LOSS) INCOME (25.4 ) (13.0 )
5.8

36.4

(30.3 )
(26.5 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
2.8
—
2.8
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ENSCO $ (25.4 ) $ (13.0 )
$ 5.8

$ 39.2

$ (30.3 )
$ (23.7 )

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME (LOSS)~~

~~Three Months Ended September 30, 2016~~

~~(In millions)~~

~~(Unaudited)~~

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total

NET INCOME $ 85.3
$ 26.5
$ 4.9
$ 135.7
$ (165.1 ) $ 87.3
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value —
—
—
—
—
—
Reclassification of net losses on derivative instruments from other comprehensive income into net income —
2.2
—
—
—
2.2
Other —
—
—
(.5 ) —
(.5 )
NET OTHER COMPREHENSIVE INCOME (LOSS) —

2.2

—

(.5 )
—
1.7
COMPREHENSIVE INCOME 85.3

28.7

4.9

135.2

(165.1 ) 89.0
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
(2.0 ) —
(2.0 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSCO $ 85.3

$ 28.7

$ 4.9

$ 133.2

$ (165.1 )
$ 87.0

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE (LOSS) INCOME~~

~~Nine 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

NET (LOSS) INCOME $ (96.6 ) $ (14.4 ) $ 16.4
$ 111.4
$ (113.9 ) $ (97.1 )
OTHER COMPREHENSIVE INCOME, NET
Net change in derivative fair value —
7.7
—
—
—
7.7
Reclassification of net losses on derivative instruments from other comprehensive income into net (loss) income —
1.1
—
—
—
1.1
Other —
—
—
.8

.8
NET OTHER COMPREHENSIVE INCOME —

8.8

—

.8

—
9.6
COMPREHENSIVE (LOSS) INCOME (96.6 )
(5.6 )
16.4

112.2

(113.9 ) (87.5 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
.5
—
.5
COMPREHENSIVE (LOSS) INCOME ATTRIBUTABLE TO ENSCO $ (96.6 )
$ (5.6 )
$ 16.4

$ 112.7

$ (113.9 )
$ (87.0 )

~~ENSCO PLC AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME~~

~~Nine Months Ended September 30, 2016~~

~~(In millions)~~

~~(Unaudited)~~

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total

NET INCOME $ 851.2
$ 49.1
$ 30.8
$ 790.7
$ (865.2 ) $ 856.6
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net change in derivative fair value —
(.6 ) —
—
—
(.6 )
Reclassification of net losses on derivative instruments from other comprehensive income into net income —
10.1
—
—
—
10.1
Other —
—
—
(.5 ) —
(.5 )
NET OTHER COMPREHENSIVE INCOME (LOSS) —

9.5

—

(.5 )
—

9.0
COMPREHENSIVE INCOME 851.2

58.6

30.8

790.2

(865.2 )
865.6
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS —
—
—
(5.4 ) —
(5.4 )
COMPREHENSIVE INCOME ATTRIBUTABLE TO ENSCO $ 851.2

$ 58.6

$ 30.8

$ 784.8

$ (865.2 )
$ 860.2

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
September 30, 2017
(In millions)
(Unaudited)

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 516.0
$ —
$ 20.5
$ 187.9
$ —
$ 724.4
Short-term investments 1,065.0
—
—
4.8
—
1,069.8
Accounts receivable, net 12.2
.4
(.1 ) 336.5
—
349.0
Accounts receivable from affiliates 410.8
173.6
—
112.2
(696.6 ) —
Other .3
14.8
—
303.2
—
318.3
Total current assets 2,004.3
188.8

20.4

944.6

(696.6 )
2,461.5
PROPERTY AND EQUIPMENT, AT COST 1.8
124.0
—
13,366.8
—
13,492.6
Less accumulated depreciation 1.8
76.3
—
2,318.1
—
2,396.2
Property and equipment, net —
47.7

—

11,048.7

—

11,096.4
DUE FROM AFFILIATES 1,977.8
2,803.9
321.0
4,012.7
(9,115.4 ) —
INVESTMENTS IN AFFILIATES 8,521.4
3,575.8
1,130.7
—
(13,227.9 ) —
OTHER ASSETS, NET —
40.7
—
175.5
(91.2 ) 125.0
$ 12,503.5
$ 6,656.9

$ 1,472.1

$ 16,181.5

$ (23,131.1 )
$ 13,682.9
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 54.6
$ 42.8
$ 13.1
$ 378.2
$ —
$ 488.7
Accounts payable to affiliates 45.0
171.3
10.3
470.0
(696.6 ) $ —
Total current liabilities 99.6
214.1

23.4

848.2

(696.6 )
488.7
DUE TO AFFILIATES 1,396.0
3,666.9
930.4
3,122.1
(9,115.4 ) —
LONG-TERM DEBT 2,840.6
149.2
1,111.1
646.8
—
4,747.7
OTHER LIABILITIES —
10.4
—
360.0
(91.2 ) 279.2
ENSCO SHAREHOLDERS' EQUITY (DEFICIT) 8,167.3
2,616.3
(592.8 ) 11,202.3
(13,227.9 ) 8,165.2
NONCONTROLLING INTERESTS —
—
—
2.1
—
2.1
Total equity (deficit) 8,167.3
2,616.3

(592.8 )
11,204.4

(13,227.9 )
8,167.3
$ 12,503.5
$ 6,656.9

$ 1,472.1

$ 16,181.5

$ (23,131.1 )
$ 13,682.9

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING BALANCE SHEETS
December 31, 2016
(In millions)

Ensco plc ENSCO International Incorporated Pride International LLC Other Non-Guarantor Subsidiaries of Ensco Consolidating Adjustments Total
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 892.6
$ —
$ 19.8
$ 247.3
$ —
$ 1,159.7
Short-term investments 1,165.1
5.5
—
272.0
—
$ 1,442.6
Accounts receivable, net 6.8
—
—
354.2
—
361.0
Accounts receivable from affiliates 486.5
251.2
—
152.2
(889.9 ) —
Other .1
6.8
—
309.1
—
316.0
Total current assets 2,551.1

263.5

19.8

1,334.8

(889.9 )
3,279.3
PROPERTY AND EQUIPMENT, AT COST 1.8
121.0
—
12,869.7
—
12,992.5
Less accumulated depreciation 1.8
63.8
—
2,007.6
—
2,073.2
Property and equipment, net —

57.2

—

10,862.1

—

10,919.3
DUE FROM AFFILIATES 1,512.2
4,513.8
1,978.8
7,234.4
(15,239.2 ) —
INVESTMENTS IN AFFILIATES 8,557.7
3,462.3
1,061.3
—
(13,081.3 ) —
OTHER ASSETS, NET —
81.5
—
181.1
(86.7 ) 175.9
$ 12,621.0

$ 8,378.3

$ 3,059.9

$ 19,612.4

$ (29,297.1 )
$ 14,374.5
LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued liabilities $ 44.1
$ 45.2
$ 28.3
$ 404.9
$ —
$ 522.5
Accounts payable to affiliates 38.8
208.4
5.9
636.8
(889.9 ) —
Current maturities of long-term debt 187.1
—
144.8
—
—
331.9
Total current liabilities 270.0

253.6

179.0

1,041.7

(889.9 )
854.4
DUE TO AFFILIATES 1,375.8
5,367.6
2,040.7
6,455.1
(15,239.2 ) —
LONG-TERM DEBT 2,720.2
149.2
1,449.5
623.7
—
4,942.6
OTHER LIABILITIES —
2.9
—
406.3
(86.7 ) 322.5
ENSCO SHAREHOLDERS' EQUITY (DEFICIT) 8,255.0
2,605.0
(609.3 ) 11,081.2
(13,081.3 ) 8,250.6
NONCONTROLLING INTERESTS —
—
—
4.4
—
4.4
Total equity (deficit) 8,255.0
2,605.0

(609.3 )
11,085.6

(13,081.3 )
8,255.0
$ 12,621.0
$ 8,378.3

$ 3,059.9

$ 19,612.4

$ (29,297.1 )
$ 14,374.5

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine 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 ACTIVITIES

Net cash (used in) provided by operating activities of continuing operations $ (17.3 ) $ (68.4 ) $ (84.9 ) $ 390.2
$ —
$ 219.6
INVESTING ACTIVITIES
Maturities of short-term investments 1,123.1
5.5
—
284.1
—
1,412.7
Purchases of short-term investments (1,023.0 ) —
—
(17.0 ) —
(1,040.0 )
Additions to property and equipment —
—
—
(474.1 ) —
(474.1 )
Purchase of affiliate debt (316.3 ) —
—
—
316.3
—
Other —
—
—
2.6
—
2.6
Net cash used in investing activities of continuing operations (216.2 ) 5.5

—

(204.4 )
316.3

(98.8 )
FINANCING ACTIVITIES

Reduction of long-term borrowings (220.7 ) —
—
—
(316.3 ) (537.0 )
Cash dividends paid (9.4 ) —
—
—
—
(9.4 )
Debt financing costs (5.5 ) —
—
—
—
(5.5 )
Advances from (to) affiliates 95.1
62.9
85.6
(243.6 ) —
—
Other (2.6 ) —
—
(1.9 ) —
(4.5 )
Net cash (used in) provided by financing activities (143.1 ) 62.9

85.6

(245.5 )
(316.3 )
(556.4 )
Net cash used in discontinued operations —
—
—
(.4 ) —

(.4 )
Effect of exchange rate changes on cash and cash equivalents —
—
—
.7
—
.7
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (376.6 ) —

.7

(59.4 )
—

(435.3 )
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 892.6
—
19.8
247.3
—
1,159.7
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 516.0
$ —
$ 20.5
$ 187.9
$ —
$ 724.4

ENSCO PLC AND SUBSIDIARIES
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 2016
(In millions)
(Unaudited)
Ensco plc ENSCO International Incorporated Pride International LLC Other Non-guarantor Subsidiaries of Ensco Consolidating Adjustments Total
OPERATING ACTIVITIES

Net cash provided by (used in) operating activities of continuing operations $ 150.4
$ (23.6 ) $ (95.3 ) $ 963.3
$ —
$ 994.8
INVESTING ACTIVITIES

Maturities of short-term investments 1,582.0
—
—
—
—
1,582.0
Purchases of short-term investments (1,282.0 ) —
—
(422.0 ) —
(1,704.0 )
Additions to property and equipment —
—
—
(255.5 ) —
(255.5 )
Purchase of affiliate debt (237.9 ) —
—
—
237.9
—
Other —
—
—
7.7
—
7.7
Net cash provided by (used in) investing activities of continuing operations 62.1
—
—
(669.8 ) 237.9
(369.8 )
FINANCING ACTIVITIES

Proceeds from equity issuance 585.5
—
—
—
—
585.5
Reduction of long-term borrowings (862.4 ) —
—
237.9
(237.9 ) (862.4 )
Cash dividends paid (8.5 ) —
—
—
—
(8.5 )
Advances from (to) affiliates 156.1
23.6
114.1
(293.8 ) —
—
Other (2.0 ) —
—
(0.3 ) —
(2.3 )
Net cash (used in) provided by financing activities (131.3 ) 23.6
114.1
(56.2 ) (237.9 ) (287.7 )
Net cash provided by discontinued operations —
—
—
7.4
—
7.4
Effect of exchange rate changes on cash and cash equivalents —
—
—
(.6 ) —
(.6 )
NET INCREASE IN CASH AND CASH EQUIVALENTS 81.2
��
18.8
244.1
—
344.1
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 94.0
—
2.0
25.3
—
121.3
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 175.2
$ —
$ 20.8
$ 269.4
$ —
$ 465.4

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements ~~as of~~ ~~September 30, 2017~~and ~~for the~~ ~~three-month and nine-month~~ ~~periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~related notes thereto included ~~elsewhere herein~~in "Item 1. Financial Statements" and with our annual report on Form 10-K for the year ended December 31, ~~2016~~.2021. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our annual report and elsewhere in this quarterly report. See “Forward-Looking Statements.”

EXECUTIVE SUMMARY

Our Business

We are ~~one of the~~a leading ~~providers~~provider of offshore contract drilling services to the international oil and gas industry. On October 6, 2017, we acquired Atwood Oceanics, Inc. ("Atwood") to further strengthen our position as a leader in offshore drilling across a wide range of water depths around the world. Following the acquisition, weWe currently own ~~and operate~~ an offshore drilling rig fleet of 6253 rigs, with drilling operations in ~~most of the strategic markets around the globe. We also have three rigs under construction.~~almost every major offshore market across six continents. Our rig fleet ~~consists of 12~~includes 11 drillships, 11four dynamically positioned semisubmersible rigs, ~~four~~one moored semisubmersible rig, 37 jackup rigs and ~~38 jackup~~a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional seven rigs. ~~Our offshore rig fleet is one of~~Additionally, we have options to purchase two additional recently constructed drillships on or before December 31, 2023. We own the world's largest ~~amongst competitive rigs,~~fleet, including one of the newest ultra-deepwater fleets in the industry and a leading premium jackup fleet.

~~One~~Emergence from Chapter 11 Bankruptcy and Fresh Start Accounting

On August 19, 2020 (the "Petition Date"), Valaris plc (“Legacy Valaris”) and certain of its direct and indirect subsidiaries (collectively, the “Debtors”) filed voluntary petitions for reorganization under chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of Texas (the "Chapter 11 Cases"). In connection with the Chapter 11 Cases and the plan of reorganization, on and prior to April 30, 2021 ("Effective Date"), Legacy Valaris effectuated certain restructuring transactions, pursuant to which Valaris Limited ("Valaris") was formed and, through a series of transactions, Legacy Valaris transferred to a subsidiary of Valaris substantially all of the subsidiaries, and other assets, of Legacy Valaris.

On the Effective Date, we successfully completed our ~~older, less capable rigs is marketed~~financial restructuring and together with the Debtors emerged from the Chapter 11 Cases. On the Effective Date, Legacy Valaris Class A ordinary shares were cancelled and the Valaris common shares (the "Common Shares") were issued. Also, former holders of Legacy Valaris' equity were issued warrants (the "Warrants") to purchase Common Shares.

References to the financial position and results of operations of the "Successor" relate to the financial position and results of operations of Valaris, together with its consolidated subsidiaries, after the Effective Date. References to the financial position and results of operations of the "Predecessor" refer to the financial position and results of operations of Legacy Valaris, together with its consolidated subsidiaries, on and prior to the Effective Date. References to the “Company,” “we,” “us” or “our” in this Quarterly Report are to Valaris, together with its consolidated subsidiaries, when referring to periods following the Effective Date, and to Legacy Valaris, together with its consolidated subsidiaries, when referring to periods prior to and including the Effective Date.

On the Effective Date, we qualified for ~~sale as part~~and applied fresh start accounting. The application of fresh start accounting resulted in a new basis of accounting, and we became a new entity for financial reporting purposes. Accordingly, our ~~fleet high-grading strategy~~financial statements and ~~classified as held-for-sale.~~notes after the Effective Date are not comparable to our financial statements and notes on and prior to that date. The condensed consolidated financial statements and notes have been presented with a black line division to delineate the lack of comparability between the Predecessor and Successor.

Our Industry

~~Oil~~Operating results in the offshore contract drilling industry are highly cyclical and are directly related to the demand for and the available supply of drilling rigs. Low demand and excess supply can independently affect day rates and utilization of drilling rigs. Therefore, adverse changes in either of these factors can result in adverse changes in our industry. While the cost of moving a rig may cause the balance of supply and demand to vary somewhat between regions, significant variations betweenmostregions are generally of a short-term nature due to rig mobility.

In 2020, the combined effects of the global COVID-19 pandemic, the significant decline in the demand for oil and the substantial surplus in the supply of oil resulted in significantly reduced demand and day rates for offshore drilling provided by the Company and increased uncertainty regarding long-term market conditions. These events had a significant adverse impact on our expected liquidity position and financial runway and led to the filing of the Chapter 11 Cases.

In 2021, Brent crude oil prices increased from approximately $50 per barrel at the beginning of the year to nearly $80 per barrel by the end of the year. Increased oil prices were due to, among other factors, rebounding demand for hydrocarbons, a measured approach to production increases by OPEC+ members and a focus on cash flow and returns by major exploration and production companies. The constructive oil price environment led to an improvement in contracting and tendering activity in 2021 as compared to 2020.

In 2022, Brent crude oil prices have ~~rebounded significantly off the 12-year lows experienced during 2016~~increased dramatically and ~~have generally stabilized~~become increasingly volatile, in large part due to Russia’s invasion of Ukraine, which led to sanctions being placed on Russia, including its ability to export crude oil and ~~ranged from around $45 to around $55~~other petroleum products. The anticipated impact on supply drove Brent crude oil prices above $130 per barrel ~~since late last year. We expect~~in early March. As of March 31, 2022, the spot Brent crude price had declined to approximately $108 per barrel. However, volatility remains high.

While the spot market for crude oil is indicative of current market conditions, ~~to remain challenging as current contracts expire~~for larger offshore projects, our customers are more focused on medium-term and ~~new contracts are executed at lower rates. While~~long-term commodity prices when making investment decisions. These forward prices have ~~improved, they~~also reached levels that are constructive for offshore projects.

The full impact that the pandemic and the volatility of oil prices will have ~~not yet improved~~on our results of operations, financial condition, liquidity and cash flows is uncertain due to ~~a level that supports increased rig~~numerous factors, including the duration and severity of the pandemic, the continued effectiveness of the ongoing vaccine rollout, the general resumption of global economic activity along with the injection of substantial government monetary and fiscal stimulus, inflation and the sustainability of the improvements in oil prices and demand ~~sufficient to absorb existing supply and improve pricing power. We believe~~in the ~~current~~face of market ~~dynamics will not change until~~volatility. To date, the COVID-19 pandemic has resulted in limited operational downtime. While we ~~see a further sustained recovery in commodity prices and/or reduction in rig supply.~~

~~While industry conditions remain challenging, customer inquiries~~ have ~~increased~~seen improvement in recent months, ~~particularly with respect~~our rigs have had to ~~shallow-water projects. Despite~~shut down operations while crews are tested, and incremental sanitation protocols are implemented and while crew changes have been restricted as replacement crews are quarantined. We continue to incur additional personnel, housing and logistics costs in order to mitigate the ~~increase in customer activity, recent contract awards~~potential impacts of COVID-19 to our operations. In limited instances, we have ~~generally~~ been reimbursed for ~~short-term work,~~these costs by our customers. Our operations and business may be subject to an extremely competitive bidding process. The significant oversupply of rigs continues to put downward pressure on day rates, resulting in certain cases whereby rates approximate, or are slightly lower than, direct operating expenses.

~~Atwood Merger~~

On May 29, 2017, we entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Atwood and Echo Merger Sub, LLC, our wholly-owned subsidiary, and on October 6, 2017 (the "Merger Date"), we completed our acquisition of Atwood pursuant to the Merger Agreement (the “Merger”).

~~The Merger is expected to strengthen our position~~further economic disruptions 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.

As a result of the ~~Merger, Atwood shareholders received 1.60 Ensco Class A Ordinary shares for each share~~spread of ~~Atwood common stock, representing a value~~COVID-19 among our workforce, the extension or imposition of ~~$9.33 per share~~further public health measures affecting supply chain and logistics, and the impact of ~~Atwood common stock based~~the pandemic on ~~a closing price of $5.83 per Class A ordinary share on October 5, 2017,~~key customers, suppliers, and other counterparties. There can be no assurance that these, or other issues caused by the ~~last trading day before the Merger Date. Total consideration delivered~~COVID-19 pandemic, will not materially affect our ability to operate our rigs in the ~~Merger consisted~~future.

More recently, we have begun to feel the impacts of 134.1 million Class A ordinary shares with an aggregate value of $782.0 million. The estimated fair values assigned to assets acquired net of liabilities assumed exceeded the consideration transferred, resultingglobal inflation, both in ~~an estimated bargain purchase gain of $167.8 million that will be recognized during the fourth quarter.~~

~~Liquidity Position~~

We have historically relied on our cash flow from continuing operations to meet liquidity needs and fund the majority of our cash requirements. We periodically rely on the issuance of debt and/or equity securities to supplement our liquidity needs. Based on our balance sheet, our contractual backlog and $2.0 billion available under our amended revolving credit facility ("Credit Facility"), we expect to fund our short-term and long-term liquidity needs, including contractual obligations and anticipated capital expenditures,increased personnel costs as well as ~~working capital requirements, from cash~~in the prices of goods and ~~cash equivalents, short-term investments, operating cash flows,~~services required to operate our rigs. While we are currently unable to estimate the ultimate impact of rising prices, we do expect that our costs will continue to rise in the near term and ~~if necessary, funds borrowed under~~will impact our revolving credit facility or other future financing arrangements. We remain focused on our liquidity and, throughout the market downturn, have executed several transactions to significantly improve our financial position.

~~Cash and Debt~~

~~As of September 30, 2017, we had $4.7 billion in total debt outstanding, representing approximately 36.8%~~profitability. While certain of our ~~total capitalization. We also had $1.8 billion in cash~~long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations.

The near-term outlook for the offshore drilling industry has improved since the beginning of 2021, as evidenced by improving global utilization and ~~short-term investments~~increasing day rates for offshore drilling rigs, most notably for drillships. However, heightened geopolitical tensions have increased volatility, inflation is increasing costs of operations and ~~$2.25 billion undrawn capacity under our Credit Facility.~~

~~Upon closing~~the global recovery from the COVID-19 pandemic remains uncertain. As a result, there is still uncertainty around the sustainability of the ~~Merger, we utilized acquired cash of $445.4 million and cash on hand from the liquidation of short-term investments to repay Atwood's debt and accrued interest of $1.3 billion, resulting~~improvement in adjusted cash and short-term investments of $926.5 million on a pro forma basis as of September 30, 2017. After adjusting total capital to reflect the $782.0 million equity consideration transferred in the Mergeroil prices and the ~~estimated $167.8 million bargain purchase gain, our total debt outstanding represented approximately 34.2%~~recovery in demand for, and profitability of, ~~our adjusted total capitalization on a pro forma basis as of September 30, 2017.~~offshore drilling services.

Upon closing of the Merger, we amended our Credit Facility to extend the final maturity date by two years. Previously, our Credit Facility had a borrowing capacity of $2.25 billion through September 2019 that declined to $1.13 billion through September 2020. Subsequent to the amendment, our borrowing capacity is $2.0 billion through September 2019 and declines to $1.2 billion through September 2022. The Credit Facility, as amended, requires us to maintain a total debt to total capitalization ratio that is less than or equal to 60%.

In January 2017, through a private-exchange transaction, we repurchased $649.5 million of our outstanding debt with $332.5 million of cash and $332.0 million of newly issued 8.00% senior notes due 2024.

During the nine-month period ended September 30, 2017, we repurchased $194.1 million aggregate principal amount of our outstanding debt for $204.5 million of cash on the open market and recognized an insignificant pre-tax gain, net of discounts, premiums and debt issuance costs.

~~Our next debt maturity is $237.6 million during 2019, followed by $450.9 million and $269.7 million during 2020 and 2021, respectively.~~

Backlog

~~As of September 30, 2017, our~~Our backlog was ~~$3.0~~$2.5 billion ~~as compared to $3.6~~and $2.4 billion as of ~~December 31, 2016. Our backlog declined primarily due to revenues realized during the first nine months of the year, partially offset by new~~May 2, 2022 and February 21, 2022, respectively, as recent contract awards and contract ~~extensions. Adjusted~~extensions were offset by revenues realized. Our backlog excludes ARO's backlog but includes backlog of $140.1 million and $134.3 million, respectively, from our rigs leased to ARO at the contractual rates. Contract rates with ARO are subject to adjustment resulting from the shareholder agreement governing the joint venture. See "Note 3- Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for ~~the Merger on a pro forma basis, our~~additional information.

Approximately $428 million of backlog as of ~~September 30, 2017~~May 2, 2022 is attributable to our contract awarded to VALARIS DS-11 for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico expected to commence in mid-2024. In February 2022, the customer decided not to sanction and therefore withdrew from the project associated with this contract. In March 2022, the contract was ~~$3.2 billion.~~novated to another customer, which was a partner on the project. No material changes to the contract resulted from the novation, including with respect to the termination provisions in the event the project does not receive final investment decision (FID).

ARO backlog was $1.5 billion as of both May 2, 2022 and February 21, 2022, inclusive of backlog on both ARO owned rigs and rigs leased from us, as a recent contract award was offset by revenues realized. As ~~current contracts expire, we~~a 50/50 unconsolidated joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in the equity in earnings of ARO in our Condensed Consolidated Statement of Operations. The earnings from ARO backlog with respect to rigs leased from us will ~~likely experience declines in backlog, which will result in a decline in revenues and operating cash flows over the near-term. Contract backlog includes the impact~~be net of, ~~drilling contracts signed or terminated after each respective balance sheet date but prior~~among other things, payments to ~~filing our annual and quarterly report on February 28, 2017 and October 26, 2017, respectively.~~us under bareboat charters for those rigs.

BUSINESS ENVIRONMENT

Floaters

~~The~~Starting in 2021, the more constructive oil price environment has led to an improvement in contracting and tendering activity. Benign floater ~~contracting environment continues to be challenged by reduced demand, as well as excess newbuild supply. Floater demand has declined significantly~~rig years awarded in ~~recent years due to lower commodity prices which have caused our customers to rationalize capital expenditures, resulting~~2021 were more than double the amount awarded in 2020. This increase in activity is particularly evident for drillships with several multi-year contracts awarded and a meaningful improvement in day rates for this class of assets. As a result, we are currently in the ~~cancellation~~process of reactivating three drillships and ~~delay~~recently completed the reactivation of ~~drilling programs. We expect this trend~~one semisubmersible, each in preparation for long-term contracts expected to ~~continue until we see a further sustained recovery~~commence in ~~commodity prices.~~

~~During~~ the second quarter of 2022.

While we ~~executed contracts for ENSCO DS-4~~expect the improved oil price environment to continue to support deepwater investments, heightened geopolitical tensions, including Russia's invasion of Ukraine, have increased volatility, and ENSCO DS-10 for two-year and one-year terms, respectively. The contracts contain a one-year priced option for ENSCO DS-4 and five one-year priced options for ENSCO DS-10. ENSCO DS-4 began drilling operations offshore Nigeria in August 2017.the global recovery from the COVID-19 pandemic remains uncertain. As a result, there is still uncertainty around the sustainability of the ~~DS-10~~improvement in oil prices and the recovery in demand for offshore drilling services.

Our backlog for our floater segment was $1.7 billion (including approximately $428 million for the VALARIS DS-11 discussed above) as of both May 2, 2022 and February 21, 2022, as recent contract ~~award, we accelerated delivery to September 2017~~awards and ~~made the final milestone payment of $75.0 million, which~~contract extensions were offset by revenues realized.

Utilization for our floaters was ~~previously deferred into 2019. We expect ENSCO DS-10 to commence drilling operations offshore Nigeria~~25% during the first quarter of ~~2018.~~

~~During the third quarter, we executed a six-well contract for ENSCO DS-7, which is expected~~2022 compared to ~~commence in March 2018~~28% in the ~~Mediterranean Sea.~~fourth quarter of 2021 due to special periodic survey work required in the first quarter of 2022. Average day rates were approximately $197,000 during the first quarter of 2022 compared to approximately $189,000 in the fourth quarter of 2021. The ~~contract contains two two-well priced options. Additionally, we executed a one-well extension for ENSCO DS-12 (formerly Atwood Achiever)~~increase in ~~direct continuation~~average day rate is the result of ~~its current contract.~~integrated services provided to certain customers in the first quarter of 2022 as well as lower rates resulting from weather conditions in the fourth quarter of 2021.

~~Currently,~~Globally, there are ~~approximately 45 competitive~~19 newbuild drillships and benign environment semisubmersible rigs reported to be under construction, of which ~~approximately 25~~five are scheduled to be delivered bybefore the end of ~~2018.~~2022. Most newbuild floaters are uncontracted. Several newbuild deliveries have been delayed into future years, and ~~we expect that~~ more uncontracted newbuilds ~~will~~may be delayed or cancelled.

Drilling contractors have retired ~~more than 90~~136 benign environment floaters since the beginning of ~~the downturn. Approximately 30~~2014. Eight benign environment floaters older than 3020 years of age are currently idle, ~~and approximately 25~~four additional benign environment floaters ~~greater~~older than 3020 years ~~old~~ have contracts that will expire ~~by the end of 2018~~within six months without follow-on ~~work.~~work, and there are a further 12 benign environment floaters that have been stacked for more than three years. Operating costs associated with keeping these rigs idle as well as expenditures required to re-certify some of these ~~aging~~ rigs may prove cost prohibitive. Drilling contractors ~~will likely~~may elect to scrap or ~~cold-stack the majority~~cold stack a portion of these rigs.

A sustained constructive oil price environment and improvement in demand for offshore projects are necessary to maintain the improving floater utilization and day rate trajectory.

Jackups

~~Demand~~While the demand for jackups ~~has improved~~declined during 2020 as a result of the combined impacts of the COVID-19 pandemic as well as the oil supply and demand imbalance, the decline was not as significant as it was for floaters. As such, with ~~increased tendering~~recent improvements in oil prices, we are experiencing incremental contracting activity, ~~observed~~but at a pace slower than that for floaters. With much of the anticipated demand for jackups coming from infill drilling of existing fields, we expect that this demand will remain more stable in ~~recent months following historic lows; however, contract terms generally have been short-term~~light of changes in ~~nature~~oil prices.

Our backlog for our jackup segment was $515.2 million and ~~rates remain depressed~~$643.0 million as of May 2, 2022 and February 21, 2022, respectively. The decrease in our backlog was due to revenues realized partially offset by the ~~oversupply~~addition of ~~rigs.~~backlog from new contract awards and contract extensions.

~~During~~

Utilization for our jackups was 63% during the first quarter ~~we executed~~of 2022 compared to 55% in the fourth quarter of 2021 as new jackup contracts commenced or had a ~~four-year contract for ENSCO 92 as well as several short-term contracts and contract extensions for ENSCO 68, ENSCO 75, ENSCO 87, ENSCO 106 and ENSCO 107.~~

~~During~~full quarter of operations in the ~~second~~first quarter we executed three-year contracts for ENSCO 110 and ENSCO 120 and a 400-day contract for ENSCO 102. We also executed short-term contracts and contract extensions for ENSCO 72, ENSCO 107, ENSCO 121 and ENSCO 122. In addition, we sold ENSCO 56, ENSCO 86, ENSCO 90 and ENSCO 99, whichof 2022. Average day rates were ~~previously classified as held-for-sale and recognized an insignificant pre-tax gain.~~

~~Also~~approximately $89,000 during the ~~second~~first quarter ~~we received notices~~ of ~~termination for convenience for~~2022 compared to approximately $90,000 in the ~~ENSCO 104 and ENSCO 71 contracts effective~~fourth quarter of 2021. While operating days increased across the jackup fleet, certain higher specification jackups rolled off contract resulting in ~~May and August 2017, respectively, which were previously expected to end~~an overall decline in ~~January and July 2018, respectively.~~the average day rate.

During the third quarter, we executed a one-year contract extension for ENSCO 67 and short-term contracts and contract extensions for ENSCO 68, ENSCO 72, ENSCO 101 and ENSCO 115 (formerly Atwood Orca). Additionally, we sold ENSCO 52, which was previously classified as held-for-sale, and recognized an insignificant pre-tax gain. In October, we executed a short-term contract for ENSCO 75.

~~Currently,~~Globally, there are ~~approximately 95 competitive~~28 newbuild jackup rigs reported to be under construction, of which ~~approximately 70~~18 are scheduled to be delivered bybefore the end of ~~2018.~~2022. Most newbuild jackups are uncontracted. Over the past year, some jackup orders have been cancelled, and many newbuild jackups have been delayed. We expect that ~~additional rigs may~~scheduled jackup deliveries will continue to be delayed ~~or cancelled given limited contracting opportunities.~~until more rigs are contracted.

Drilling contractors have retired ~~more than 30~~162 jackups since the beginning of the downturn. ~~Approximately 100~~61 jackups older than 30 years ~~of age~~ are ~~idle. Furthermore, approximately 60~~currently idle, 24 jackups that are 30 years ~~of age~~ or older have contracts expiring within the next six months without follow-on work, and there are a further 15 jackups that ~~expire before the end of 2018, and these rigs may be unable to find additional work. Operating costs associated with keeping these rigs idle as well as expenditures~~have been stacked for more than three years. Expenditures required to re-certify some of these ~~aging~~ rigs may prove cost ~~prohibitive. Drilling~~prohibitive and drilling contractors ~~will likely~~may instead elect to scrap or ~~cold-stack some or all of~~cold stack these rigs.

A sustained constructive oil price environment and improvement in demand for offshore projects are necessary to maintain the improving jackup utilization and day rate trajectory, which has been at a slower pace than that of floaters.

Divestitures

Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that are not part of our long-term strategic plan or that no longer meet our standards for economic returns. 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 Indenture dated April 30, 2021 that governs our First Lien Notes (the “Indenture”), 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 lower-specification or non-core rigs. To this end, we continually assess our rig portfolio and actively work with rig brokers to market certain rigs. See “Note 8– Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on restrictions on the sales of assets.

Subsequent to March 31, 2022, we reached an agreement for the sale of VALARIS 113 and VALARIS 114, resulting in an expected pre-tax gain on sale to be recorded in the second quarter of 2022 of approximately $120 million.

RESULTS OF OPERATIONS

Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, as permitted under applicable SEC rules, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter ended March 31, 2022 (the "current quarter") (Successor) to the immediate preceding fiscal quarter ended December 31, 2021 (Successor) (the "preceding quarter"). We also continue to discuss any material changes in our results of operations for the current quarter compared to the corresponding period of the preceding fiscal year (Predecessor) (the "prior year quarter"), as required under the applicable SEC rules.

The following table summarizes our ~~condensed consolidated results~~Condensed Consolidated Results of ~~operations~~Operations for the ~~three-month~~three months ended March 31, 2022 (Successor), three months ended December 31, 2021 (Successor) and ~~nine-month~~ ~~periods~~three months ended ~~September 30, 2017~~ ~~and~~ ~~2016~~March 21, 2021 (Predecessor) (in millions):


	Successor				Predecessor
	Three Months Ended March 31, 2022		Three Months Ended December 31, 2021			Three Months Ended March 31, 2021
Revenues	$	318.4	$	305.5		$	307.1
Operating expenses
Contract drilling (exclusive of depreciation)	331.3		285.5			253.6
Loss on impairment	—		—			756.5
Depreciation	22.5		25.1			122.1
General and administrative	18.8		18.3			24.3
Total operating expenses	372.6		328.9			1,156.5

Equity in earnings (losses) of ARO	4.3		(1.3)			1.9
Operating loss	(49.9)		(24.7)			(847.5)
Other income (expense), net	9.4		21.4			(28.4)
Provision (benefit) for income taxes	(0.7)		(31.0)			31.7
Net income (loss)	(39.8)		27.7			(907.6)
Net (income) loss attributable to noncontrolling interests	1.2		—			(2.4)
Net income (loss) attributable to Valaris	$	(38.6)	$	27.7		$	(910.0)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Revenues $ 460.2
$ 548.2
$ 1,388.8
$ 2,271.8
Operating expenses

Contract drilling (exclusive of depreciation) 285.8
298.1
855.2
1,012.0
Depreciation 108.2
109.4
325.3
335.1
General and administrative 30.4
25.3
86.9
76.1
Operating income 35.8
115.4
121.4
848.6
Other (expense) income, net (40.4 ) (30.9 ) (151.3 ) 114.4
Provision for income taxes 23.4
(3.5 ) 66.8
104.6
(Loss) income from continuing operations (28.0 ) 88.0
(96.7 ) 858.4
Loss from discontinued operations, net (.2 ) (.7 ) (.4 ) (1.8 )
Net (loss) income (28.2 ) 87.3
(97.1 ) 856.6
Net loss (income) attributable to noncontrolling interests 2.8
(2.0 ) .5
(5.4 )
Net (loss) income attributable to Ensco $ (25.4 ) $ 85.3
$ (96.6 ) $ 851.2

Overview

~~Revenues declined~~ ~~$88.0~~

Revenue increased $12.9 million,, or ~~16%~~4%, for the ~~three-month period ended September 30, 2017~~current quarter as compared to the preceding quarter, primarily due to $8.1 million from higher average day rates from certain rigs and $4.7 million from higher customer reimbursable revenues. This increase was partially offset by $3.7 million from fewer operating days from certain rigs.

Revenues increased $11.3 million, or 4%, for the current quarter as compared to the prior year quarter, primarily due to $18.3 million from increased operating days for certain rigs and $11.8 million from higher customer reimbursable revenue. This increase was partially offset by $13.6 million from lower average day rates ~~fewer days under contract across the fleet,~~and $2.4 million due to lower revenues earned under the Lease Agreements resulting from ~~various jackup~~the retirement of two rigs ~~undergoing shipyard projects during~~at the ~~quarter and~~end of 2021 that were leased to ARO for much of the ~~sale of ENSCO 52.~~year.

~~Excluding the impact of ENSCO DS-9 and ENSCO 8503 lump-sum termination payments received during the second quarter of 2016 totaling $205.0 million, revenues declined $678.0~~Contract drilling expense increased $45.8 million, or ~~33%~~16%, for the ~~nine-month period ended September 30, 2017~~current quarter as compared to the preceding quarter, primarily due to a $24.3 million increase in reactivation costs compared to the preceding quarter, an $8.3 million increase in personnel costs and a $6.5 million increase in reimbursable expenses.

Contract drilling expense increased $77.7 million, or 31%, for the current quarter as compared to the prior year ~~period. This decline was~~quarter, primarily due ~~primarily~~ to ~~fewer days under contract across~~a $50.3 million increase in reactivation costs, a $13.8 million increase in reimbursable expenses, a $12.1 million increase in personnel costs and a $6.8 million increase in mobilization costs. These increases were partially offset by $5.8 million of lower costs on idle rigs.

During the ~~fleet, lower average day rates~~prior year quarter, we recorded non-cash losses on impairment totaling $756.5 million, with respect to certain assets in our fleet. See "Note 5 - Property and ~~the contract terminations and ultimate sale of ENSCO 6003 and ENSCO 6004.~~Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

~~Contract drilling~~Depreciation expense ~~declined $12.3~~decreased $99.6 million, or 4%82%, for the ~~three-month period ended September 30, 2017~~current quarter as compared to the prior year quarter, primarily due to the ~~sale~~reduction in values of ~~various jackup rigs~~property and ~~other cost control initiatives that reduced personnel costs.~~equipment from the application of fresh start accounting on the Effective Date.

~~Contract drilling expense declined $156.8~~General and administrative expenses decreased by $5.5 million, or ~~15%~~23%, for the ~~nine-month period ended September 30, 2017~~current quarter as compared to the prior year ~~period~~quarter, primarily due to ~~rig stackings,~~a change in incentive compensation structure following the contract terminations and ultimate sale of ENSCO 6003 and ENSCO 6004, cost control initiatives that reduced personnel costs and the sale of various jackup rigs. This decline was partially offset by contract preparation costs for certain rigs.Effective Date.

~~Depreciation expense~~Other income, net, decreased $12.0 million for the ~~three-month period ended September 30, 2017 was consistent with~~current quarter as compared to the ~~prior year period. Depreciation expense declined $9.8 million, or 3%, for the nine-month period ended September 30, 2017,~~preceding quarter, primarily due to the ~~extension~~decrease in gains on the sale of ~~useful lives for certain contracted rigs.~~assets of $18.5 million partially offset by a $3.9 million decrease in reorganization costs incurred directly related to the Chapter 11 Cases.

~~General and administrative expenses~~Other income, net, increased ~~by $5.1~~$37.8 million ~~or 20%, and $10.8 million, or 14%,~~ for the ~~three-month and nine-month periods ended September 30, 2017, respectively. The increase~~current quarter as compared to the prior year ~~periods was~~quarter, primarily due to ~~transaction~~a $51.2 million reduction in reorganization costs incurred directly related to the ~~Merger.~~

~~Other (expense)~~Chapter 11 Cases and an $8.3 million increase to interest income ~~net, for~~primarily due to the ~~nine-month period ended September 30, 2017 included a pre-tax loss~~amortization of ~~$6.2~~the discount on the note receivable from ARO. This increase is partially offset by an $11.9 million decrease in foreign currency gains as well as an increase in interest expense of $10.2 million. The higher interest expense is related to our First Lien Notes in the ~~January 2017~~first quarter of 2022 whereas in the prior year quarter we had discontinued accruing interest on our outstanding predecessor debt ~~exchange. Other (expense) income, net, for~~after the ~~three-month and nine-month periods ended September 30, 2016 included pre-tax gains on debt extinguishment of $18.2 million and $279.0 million, respectively.~~Petition Date.

A significant number of our drilling contracts are of a long-term nature. Accordingly, an increase or decline in demand for contract drilling services generally affects our operating results and cash flows gradually over future quarters as long-term contracts expire. We expect operating results to decline during 2017 and into 2018 as long-term contracts expire, and our rigs either go uncontracted or we renew contracts at significantly lower rates.

Rig Counts, Utilization and Average Day Rates

The following table summarizes our and ARO's offshore drilling rigs as of March 31, 2022 and December 31, 2021 (Successor) and March 31, 2021 (Predecessor):


	March 31, 2022	December 31, 2021	March 31, 2021
Floaters	16	16	16
Jackups(1)	31	33	36
Other(2)	8	7	9

Total Valaris	55	56	61

ARO(3)	7	7	7

(1)During the second, third and fourth quarters of 2021, we sold VALARIS 101, VALARIS 100 and VALARIS 142, respectively. During the first quarter of 2022, we sold VALARIS 67 and leased VALARIS 140 to ARO.

(2)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ~~reportable segment,~~ARO. All rigs leased to ARO are under three-year contracts with Saudi Aramco. During the fourth quarter of 2021, we sold VALARIS 22 and VALARIS 37, which were previously leased to ARO. During the first quarter of 2022, VALARIS 140 was leased to ARO.

(3)This represents the seven jackup rigs owned by ARO which are operating under long-term contracts with Saudi Aramco.

We provide management services in the U.S. Gulf of Mexico on two rigs owned by a third-party not included in the table above.

We are a party to contracts whereby we have the option to take delivery of two recently constructed drillships that are not included in the table above.

Additionally, ARO has ordered two jackups which are under construction ~~and~~in the Middle East that are not included in the table above. These newbuild rigs ~~held-for-sale as~~are expected to be delivered in the first or second quarter of ~~September 30, 2017~~ ~~and~~ ~~2016~~:2023.

2017 2016
Floaters⁽¹⁾
20 19
Jackups^{(2) (3)}
32 35
Under construction⁽¹⁾⁽³⁾
1 3
Held-for-sale^{(2) (4)}
1 4
Total 54 61


⁽¹⁾	~~During the third quarter of 2017, we accepted delivery of ENSCO DS-10.~~


⁽²⁾	~~During the first quarter of 2017, we classified ENSCO 56, ENSCO 86 and ENSCO 99 as held-for-sale. During the second quarter of 2017, we classified ENSCO 52 as held-for-sale.~~


⁽³⁾	~~During the fourth quarter of 2016, we accepted delivery of ENSCO 141.~~


⁽⁴⁾	During the fourth quarter of 2016, we sold ENSCO 53 and ENSCO 94. During the second quarter of 2017, we sold ENSCO 56, ENSCO 86, ENSCO 90 and ENSCO 99. During the third quarter of 2017, we sold ENSCO 52.

The following table summarizes our and ARO's rig utilization and average day rates by reportable ~~segment~~segment:


	Three Months Ended March 31, 2022			Three Months Ended December 31, 2021			Three Months Ended March 31, 2021
Rig Utilization(1)
Floaters	25		%	28		%	29		%
Jackups	63		%	55		%	50		%
Other (2)	100		%	100		%	100		%
Total Valaris	57		%	54		%	54		%
ARO	91		%	84		%	90		%
Average Day Rates(3)
Floaters	$	197,394		$	188,523		$	198,485
Jackups	88,641			90,053			95,043
Other (2)	39,227			32,538			31,647
Total Valaris	$	89,609		$	89,325		$	88,637
ARO	$	95,867		$	97,251		$	93,199

(1)Rig utilization is derived by dividing the number of days under contract by the number of days in the period. Days under contract equals the total number of days that rigs have earned and recognized day rate revenue, including days associated with early contract terminations, compensated downtime and mobilizations and excluding suspension periods. When revenue is deferred and amortized over a future period, for example, when we receive fees while mobilizing to commence a new contract or while being upgraded in a shipyard, the ~~three-month and nine-month periods ended September 30, 2017 and 2016:~~related days are excluded from days under contract.

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Rig Utilization⁽¹⁾

Floaters 46 % 48 % 45 % 57 %
Jackups 60 % 55 % 63 % 61 %
Total 55 % 53 % 56 % 60 %
Average Day Rates⁽²⁾

Floaters $ 334,218
$ 353,187
$ 336,445
$ 360,073
Jackups 88,272
109,379
87,711
113,378
Total $ 165,623
$ 183,537
$ 159,158
$ 196,640

⁽¹⁾

Rig utilization is derived by dividing the number of days under contract by the number of days in the period. Days under contract equals the total number of days that rigs have earned and recognized day rate revenue, including days associated with early contract terminations, compensated downtime and mobilizations. When revenue is earned but is deferred and amortized over a future period, for example when a rig earns revenue while mobilizing to commence a new contract or while being upgraded in the shipyard, the related days are excluded from days under contract.

For newly-constructed or acquired rigs, the number of days in the period begins upon commencement of drilling operations for rigs with a contract or when the rig becomes available for drilling operations for rigs without a contract.

⁽²⁾

Average day rates are derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable revenues, lump-sum revenues and revenues attributable to amortization of drilling contract intangibles, by the aggregate number of contract days, adjusted to exclude contract days associated with certain mobilizations, demobilizations, shipyard contracts and standby contracts.

(2)Includes our two management services contracts and our rigs leased to ARO under bareboat charter contracts.

(3)Average day rates are derived by dividing contract drilling revenues, adjusted to exclude certain types of non-recurring reimbursable revenues, lump-sum revenues, revenues earned during suspension periods and revenues attributable to amortization of drilling contract intangibles, by the aggregate number of contract days, adjusted to exclude contract days associated with certain suspension periods, mobilizations and demobilizations.

Operating Income by Segment

Our business consists of ~~three~~four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and ~~(3)~~(4) Other, which ~~currently~~ consists of management services on rigs owned by ~~third-parties. Our two~~third-parties and the activities associated with our arrangements with ARO under the Lease Agreements. Floaters, Jackups and ARO are also reportable segments.

Upon emergence, we ceased allocation of our onshore support costs included within contract drilling expenses to our operating segments ~~Floaters~~for purposes of measuring segment operating income (loss) and ~~Jackups, provide one service, contract drilling.~~

~~Segment information is presented below (in millions).~~as such, those costs are included in "Reconciling Items." We have adjusted the historical period to conform with current period presentation.Further, General and administrative expense and ~~depreciation~~Depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and ~~were~~are included in "Reconciling Items."

The full operating results included below for ARO are not included within our consolidated results and thus deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See "Note 3- Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

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

Three Months Ended ~~September 30, 2017~~March 31, 2022 (Successor)


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	99.7	$	180.7	$	111.3	$	38.0	$	(111.3)	$	318.4
Operating expenses
Contract drilling (exclusive of depreciation)	147.6		139.2		84.2		15.5		(55.2)		331.3

Depreciation	12.2		9.1		16.5		0.9		(16.2)		22.5
General and administrative	—		—		5.2		—		13.6		18.8

Equity in earnings of ARO	—		—		—		—		4.3		4.3
Operating income (loss)	$	(60.1)	$	32.4	$	5.4	$	21.6	$	(49.2)	$	(49.9)

Three Months Ended ~~September 30, 2016~~December 31, 2021 (Successor)


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	100.5	$	172.3	$	105.4	$	32.7	$	(105.4)	$	305.5
Operating expenses
Contract drilling (exclusive of depreciation)	113.8		128.0		88.9		15.4		(60.6)		285.5

Depreciation	11.7		12.1		17.7		1.1		(17.5)		25.1
General and administrative	—		—		5.1		—		13.2		18.3

Equity in losses of ARO	—		—		—		—		(1.3)		(1.3)
Operating income (loss)	$	(25.0)	$	32.2	$	(6.3)	$	16.2	$	(41.8)	$	(24.7)

~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2021 (Predecessor)


	Floaters		Jackups		Other		Operating Segments Total		Reconciling Items			Consolidated Total			Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	840.7	$	503.8	$	44.3	$	1,388.8	$	—		$	1,388.8	Revenues	$	97.3	$	172.6	$	122.7	$	37.2	$	(122.7)	$	307.1
Operating expenses														Operating expenses
Contract drilling (exclusive of depreciation)	431.1		383.8		40.3		855.2		—			855.2		Contract drilling (exclusive of depreciation)	85.1		121.3		86.3		15.3		(54.4)		253.6
Loss on impairment														Loss on impairment	756.5		—		—		—		—		756.5
Depreciation	217.5		95.3		—		312.8		12.5			325.3		Depreciation	56.2		52.4		16.1		11.3		(13.9)		122.1
General and administrative	—		—		—		—		86.9			86.9		General and administrative	—		—		3.0		—		21.3		24.3
Operating income	$	192.1	$	24.7	$	4.0	$	220.8	$	(99.4	)	$	121.4

Equity in earnings of ARO														Equity in earnings of ARO	—		—		—		—		1.9		1.9
Operating income (loss)														Operating income (loss)	$	(800.5)	$	(1.1)	$	17.3	$	10.6	$	(73.8)	$	(847.5)

~~Nine Months Ended September 30, 2016~~

Floaters

Floater revenue ~~declined $27.4~~decreased $0.8 million, or 1%, for the current quarter as compared to the preceding quarter, primarily due to $9.3 million from a decline in operating days partially offset by $5.5 million from an increase in customer reimbursable revenue and $2.1 million from higher average day rates.

Floater revenue increased $2.4 million, or 2%, for the current quarter as compared to the prior year quarter, primarily due to $9.1 million from increased customer reimbursable revenue, partially offset by a decrease in certain deferred revenue amortization as well as slightly lower average day rates and fewer operating days.

Floater contract drilling expense increased $33.8 million, or 30%, for the current quarter as compared to the preceding quarter, primarily due to an increase in rig reactivation costs of $26.9 million and higher personnel costs of $5.4 million.

Floater contract drilling expense increased $62.5 million, or 73%, for the current quarter as compared to the prior year quarter, primarily due to an increase of $55.1 million in reactivation costs, a $7.7 million increase in reimbursable costs and a $3.9 million increase in personnel costs, partially offset by $10.5 million of lower costs on idle rigs.

During the prior year quarter, we recorded non-cash losses on impairment totaling $756.5 million, with respect to certain assets in our Floater segment. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

Floater depreciation expense decreased $44.0 million, or 78%, for the current quarter as compared to the prior year quarter, primarily due to the reduction in values of property and equipment from the application of fresh start accounting on the Effective Date.

Jackups

Jackup revenues increased $8.4 million, or 5%, for the current quarter as compared to the preceding quarter, primarily due to $5.9 million from an increase in operating days.

Jackup revenues increased $8.1 million, or 5%, for the current quarter as compared to the prior year quarter, primarily due to $19.9 million from increased operating days and $3.6 million from increased customer reimbursable revenue. This increase was partially offset by a decline of $15.4 million due to lower average day rates.

Jackup contract drilling expense increased $11.2 million, or 9%, for the ~~three-month period ended September 30, 2017~~current quarter as compared to the preceding quarter, primarily due to adjustments of certain accruals in the preceding quarter of $4.8 million as well as an increase of $4.0 million in mobilization costs.

Jackup contract drilling expense increased $17.9 million, or 15%, for the current quarter as compared to the prior year quarter, primarily due to a $7.6 million increase in reimbursable expenses, a $5.7 million increase in scheduled repairs and maintenance and a $5.4 million increase in personnel costs.

Jackup depreciation expense decreased $43.3 million, or 83%, for the current quarter as compared to the prior year quarter, primarily due to the reduction in values of property and equipment from the application of fresh start accounting on the Effective Date.

ARO

The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for both the ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on ARO.

ARO revenue increased $5.9 million, or 6%, for the current quarter as compared to the preceding quarter, primarily due to $6.8 million incremental revenues from more operating days on certain rigs which were undergoing maintenance in the preceding quarter.

ARO revenue decreased $11.4 million, or 9%, for the current quarter as compared to the prior year quarter, primarily due to fewer operating days ~~under~~related to two rigs which operated in the prior year quarter but completed their contracts in 2021.

ARO contract ~~across the fleet and the ENSCO DS-7 contract termination.~~

~~Excluding the impact of ENSCO DS-9 and ENSCO 8503 lump-sum termination payments received during the second quarter of 2016 totaling $205.0 million, revenues declined $422.6~~drilling expense decreased $4.7 million, or ~~33%~~5%, for the ~~nine-month period ended September 30, 2017, respectively,~~current quarter as compared to the ~~prior year period. The decline is primarily~~preceding quarter, due to ~~fewer days under contract across~~a $5.2 million reduction in repairs and maintenance costs as certain rigs were undergoing maintenance projects in the fleet, the contract terminations and ultimate sale of ENSCO 6003 and ENSCO 6004, lower average day rates and the ENSCO DS-7 contract termination. The declines were partially offset by a higher average day rate for ENSCO DS-6 while operating in Egypt.preceding quarter.

~~Floater contract drilling expense~~Other

Other revenues increased $5.3 million, or 16%, for the ~~three-month period ended September 30, 2017 declined $14.6 million, or 9%,~~current quarter as compared to the ~~prior year period~~preceding quarter, primarily due to ~~rig stackings.~~$2.6 million from higher average day rates on certain rigs and $3.2 million of higher revenues earned under the Lease Agreements with ARO. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information.

~~Floater contract drilling~~Other depreciation expense ~~for the nine-month period ended September 30, 2017 declined $142.5~~decreased $10.4 million, or 25%, as compared to the prior year period primarily due to rig stackings, the contract terminations and ultimate sale of ENSCO 6003 and ENSCO 6004 and other cost control initiatives to reduce personnel costs. These declines were partially offset by contract preparation costs for certain rigs.

Floater depreciation expense for the three-month period ended September 30, 2017 was consistent with the prior year period. Floater depreciation expense for the nine-month period ended September 30, 2017 declined $13.5 million, or 6%, as compared to the prior year period due to the extension of useful lives for certain contracted assets.

~~Jackups~~

~~Jackup revenues declined $60.7 million, or 28%, and $239.2 million, or 32%~~92%, for the ~~three-month and nine-month periods ended September 30, 2017, respectively. The decline~~current quarter as compared to ~~the prior year periods was primarily due to lower average day rates, fewer days under contract and various jackup rigs undergoing shipyard projects during the current year periods.~~

~~Jackup contract drilling expense for the three-month period ended September 30, 2017 was consistent with~~ the prior year quarter, primarily due to the ~~sale~~reduction in values of ~~various jackup rigs offset by higher operating costs for rigs that were stacked in~~property and equipment from the ~~prior year period.~~application of fresh start accounting on the Effective Date.

Jackup contract drilling expense for the nine-month period ended September 30, 2017 declined $6.2 million, or 2%, as compared to the prior year period primarily due to the sale of various rigs and cost control initiatives to reduce personnel costs, partially offset by higher repair costs and rig reactivation costs during the period.

Jackup depreciation expense for the three-month period ended September 30, 2017 was consistent with the prior year period. Jackup depreciation expense for the nine-month period ended September 30, 2017 declined $4.5 million, or 5%, as compared to the prior year primarily due to the extension of useful lives for certain contracted assets.

Other Income (Expense)

The following table summarizes other income (expense) ~~for the three-month and nine-month periods ended September 30, 2017 and 2016~~ (in millions):


	Successor				Predecessor
	Three Months Ended March 31, 2022		Three Months Ended December 31, 2021			Three Months Ended March 31, 2021
Interest income	$	10.9	$	11.0		$	2.6

Interest expense	(11.5)		(11.7)			(1.3)


Reorganization items, net	(1.0)		(4.9)			(52.2)
Net foreign currency exchange gains	4.7		3.3			16.6
Net gain on sale of property	2.5		21.0			1.4
Other	3.8		2.7			4.5
	$	9.4	$	21.4		$	(28.4)

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
Interest income $ 7.5
$ 3.8
$ 22.3
$ 8.6
Interest expense, net:

Interest expense (72.6 ) (65.1 ) (221.9 ) (209.0 )
Capitalized interest 24.5
11.7
54.9
36.5
(48.1 ) (53.4 ) (167.0 ) (172.5 )
Other, net .2
18.7
(6.6 ) 278.3
$ (40.4 ) $ (30.9 ) $ (151.3 ) $ 114.4

Interest income increased for the ~~three-month and nine-month periods ended September 30, 2017 increased~~current quarter as compared to the prior year ~~periods as a result~~quarter primarily due to amortization of ~~higher short-term investment balances.~~the discount on our note receivable from ARO recorded in fresh start accounting.

Interest expense increased by $10.2 million for the ~~three-month and nine-month periods ended September 30, 2017 increased~~current quarter as compared to the prior year ~~periods due~~quarter as current quarter interest expense is attributable to our First Lien Notes issued upon the ~~issuance of $849.5 million~~Effective Date and in convertible notes and $332.0 million in exchange notes during 2016 and 2017, respectively, partially offset by the repurchase of $2.0 billion of debt during 2016 and 2017. Interest expense capitalized during the three-month and nine-month periods ended September 30, 2017 increased as compared to the prior year ~~periods due~~quarter we did not accrue interest on our Predecessor outstanding debt subsequent to ~~an increase in~~ the ~~amount~~Chapter 11 Cases.

Reorganization items, net of ~~capital invested in newbuild construction.~~

~~Other expense, net, for~~$4.9 million recognized during the ~~nine-month period ended September 30, 2017 included a pre-tax loss of $6.2 million~~preceding quarter was related to legal and other professional advisory service fees directly related to the ~~January 2017 debt exchange. Other income,~~Chapter 11 Cases.

Reorganization items, net ~~for the three-month~~of $52.2 million recognized during prior year quarter was related to other net losses and ~~nine-month periods ended September 30, 2016 included pre-tax gains on debt extinguishment~~expenses directly related to Chapter 11 Cases, consisting of ~~$18.2~~legal and other professional advisory fees of $47.8 million and ~~$279.0 million, respectively,~~contract items related to ~~debt repurchases.~~the rejection of certain operating leases of $4.4 million.

Our functional currency is the U.S. dollar, and 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.

Net foreign currency exchange ~~losses~~gains of ~~$800,000 and $4.9~~$4.7 million ~~inclusive of offsetting fair value derivatives, were included in other, net,~~ for the ~~three-month and nine-month periods ended September 30, 2017, respectively.~~current quarter primarily included $3.4 million related to euros. Net foreign currency exchange ~~losses~~gains of ~~$600,000 and $2.4~~$3.3 million ~~inclusive of offsetting fair value derivatives, were included in other, net,~~ for the ~~three-month and nine-month periods ended September 30, 2016, respectively.~~

~~Gains from~~preceding quarter primarily included $2.7 million related to euros. Net foreign currency exchange gains of $16.6 million for the ~~change in fair value of our supplemental executive retirement plans (the "SERP") of $1.0~~prior year quarter primarily included $11.8 million and ~~$3.5~~$4.3 million ~~were included in other, net,~~related to Libyan dinars and euros, respectively.

Net gains on the sale of property decreased by $18.5 million for the ~~three-month and nine-month periods ended September 30, 2017, respectively. Gains~~current quarter as compared to the preceding quarter primarily due to a decrease in gains from ~~the change in fair value of our SERP of $1.1 million and $1.6 million were included in other, net, for the three-month and nine-month periods ended September 30, 2016, respectively.~~rigs sold.

Provision for Income Taxes

~~Ensco plc, our parent company,~~Valaris Limited is domiciled and resident in ~~the U.K.~~Bermuda. Our subsidiaries conduct operations and earn income in numerous countries and are subject to the laws of taxing jurisdictions within those countries. The income of our non-Bermuda subsidiaries is not subject to Bermuda taxation as there is not an income tax regime in Bermuda. Legacy Valaris was domiciled and resident in the U.K. The income of our non-U.K. subsidiaries iswas generally not subject to U.K. taxation.

Income tax rates ~~imposed~~and taxation systems in the ~~tax~~ jurisdictions in which our subsidiaries conduct operations vary ~~as does the tax base~~and our subsidiaries are frequently subjected to ~~which the rates are applied.~~minimum taxation regimes. In some ~~cases,~~jurisdictions, tax ~~rates may be applicable to~~liabilities are based on gross revenues, statutory ~~or negotiated~~ deemed profits or other ~~bases utilized under local tax laws,~~factors, rather than on net income, and our subsidiaries are frequently unable to ~~net income.~~realize tax benefits when they operate at a loss. Accordingly, during periods of declining profitability, our income tax expense may not decline proportionally with income, which could result in higher effective income tax rates. Furthermore, we will continue to incur income tax expense in periods in which we operate at a loss.

Our drilling rigs frequently move from one taxing jurisdiction to another to perform contract drilling services. In some instances, the movement of drilling rigs among taxing jurisdictions will involve the transfer of ownership of the drilling rigs among our subsidiaries. As a result of frequent changes in the taxing jurisdictions in which our drilling rigs are operated and/or owned, changes in ~~the overall level of our income~~profitability levels and changes in tax laws, our ~~consolidated~~annual effective income tax rate may vary substantially from one reporting period to another. ~~In periods of declining profitability, our~~

Discrete income tax ~~expense may not decline proportionally~~benefit for the current quarter was $14.5 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with ~~income, which could result~~tax positions taken in ~~higher effective~~prior years. Discrete income tax ~~rates. Further, we may continue~~benefit for the preceding quarter was $29.5 million and was primarily related to ~~incur~~a reduction in liabilities for unrecognized tax benefits associated with tax positions taken in prior years and deferred tax benefits associated with Swiss tax reform. Discrete income ~~tax expense in periods in which we operate at a loss.~~

~~Income~~ tax expense for the ~~three-month and nine-month periods ended September 30, 2017~~prior year quarter was ~~$23.4~~$20.3 million and ~~$66.8~~was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years. Excluding the aforementioned discrete tax items, income tax expense was $13.8 million ~~respectively, as compared to an~~for the current quarter, income tax benefit ~~of $3.5~~was $1.5 million for the preceding quarter and income tax expense ~~of $104.6~~was $11.4 million ~~during~~for the ~~respective~~ prior year ~~periods.~~quarter. The ~~changes~~$15.3 million increase in income tax expense as compared to the preceding quarter was primarily due to the derecognition of valuation allowance against deferred tax assets in the preceding quarter resulting from ~~the prior year periods results from changes~~a change in ~~overall profitability~~estimate of future taxable income and to changes in the ~~mix~~relative components of our ~~profits~~earnings and losses generated in tax jurisdictions with ~~different~~higher effective tax ~~rates.~~rates in the current quarter as compared to the preceding quarter.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity

We ~~have historically relied on~~expect to fund our ~~cash flow from continuing operations to meet~~short-term liquidity needs, including contractual obligations and anticipated capital expenditures as well as working capital requirements, from cash and cash equivalents, proceeds from the sale of assets and cash flows from operations. We expect to fund ~~the majority~~our long-term liquidity needs, including contractual obligations and anticipated capital expenditures from cash and cash equivalents, cash flows from operations, as well as cash to be received from maturity of our ~~cash requirements. We periodically~~long-term notes receivable and from the distribution of earnings from ARO. If necessary, we may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs. ~~A substantial portion of~~However, the Indenture contains covenants that limit our ~~operating cash flow has been invested in the expansion and enhancement of our drilling rig fleet through newbuild construction and upgrade projects and the return of capital~~ability to ~~shareholders through dividend payments. We expect that cash flow generated during 2017 will primarily be used to fund capital expenditures, repurchase debt and repay Atwood's debt.~~incur additional indebtedness.

~~Upon closing of the Merger, we amended our Credit Facility to extend the final maturity date by two years. Previously, our Credit Facility had a borrowing capacity of~~ ~~$2.25 billion~~ ~~through September 2019 that declined to~~ ~~$1.13 billion~~ ~~through September 2020. Subsequent to the amendment, our borrowing capacity is~~ ~~$2.0 billion~~ ~~through September 2019 and declines to~~ ~~$1.2 billion~~ ~~through September 2022. Further, we utilized acquired cash of~~ ~~$445.4 million~~Our Cash and cash ~~on hand from the liquidation~~equivalents as of ~~short-term investments~~March 31, 2022 and December 31, 2021 were $578.2 million and $608.7 million and we have no debt principal payments due until 2028. See "Note 8 - Debt" to ~~repay Atwood's debt and accrued interest of~~ ~~$1.3 billion~~.

~~In January 2017, through a private-exchange transaction, we repurchased~~ ~~$649.5 million~~ of our ~~outstanding debt with~~ ~~$332.5 million~~ ~~of cash and~~ ~~$332.0 million~~ ~~of newly issued~~ ~~8.00%~~ ~~senior notes due 2024.~~

~~During the~~ ~~nine-month~~ ~~period ended~~ ~~September 30, 2017, we repurchased~~ ~~$194.1 million~~ ~~aggregate principal amount of our outstanding debt~~condensed consolidated financial statements included in "Item 1. Financial Statements" for ~~$204.5 million~~ ~~of cash~~additional information on the ~~open market and recognized an insignificant pre-tax gain, net of discounts, premiums and debt issuance costs.~~First Lien Notes.

Our Board of Directors declared a $0.01 per share quarterly cash dividend during the first, second and third quarters. The declaration and amount of future dividends is at the discretion of our Board of Directors. In the future, our Board of Directors may, without advance notice, reduce or suspend our dividend in order to maintain our financial flexibility and best position us for long-term success. When evaluating dividend payment timing and amounts, our Board of Directors considers several factors, including our profitability, liquidity, financial condition, market outlook, reinvestment opportunities, capital requirements and limitations under our Credit Facility.

~~During the~~ ~~nine-month~~ ~~period ended~~ ~~September 30, 2017, our primary sources of cash were net maturities of short-term investments of~~ ~~$372.7 million~~ ~~and~~ ~~$219.6 million~~ ~~generated from operating activities of continuing operations. Our primary uses of cash for the same period were~~ ~~$537.0 million~~ ~~for the repurchase of debt and~~ ~~$474.1 million~~ ~~for the construction, enhancement and other improvement of our drilling rigs.~~

~~During the~~ ~~nine-month~~ ~~period ended~~ ~~September 30, 2016, our primary sources of cash were~~ ~~$1.0 billion~~ ~~generated from operating activities of continuing operations and $585.5 million~~ ~~in proceeds from our equity offering. Our primary uses of cash for the same period were~~ ~~$862.4 million~~ f~~or the repurchase of debt,$255.5 million~~ ~~for the construction, enhancement and other improvement of our drilling rigs and net purchases of short-term investments of~~ ~~$122.0 million~~.

Cash Flow and Capital Expenditures

~~Our~~Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, debt repayments, business combinations or asset sales, our primary sources and uses of cash ~~flow~~are driven by cash generated from ~~operating activities of continuing~~or used in operations and capital ~~expenditures for the~~ ~~nine-month~~ ~~periods ended~~ ~~September 30, 2017~~expenditures. Our net cash provided by or used in operating activities and ~~2016~~capital expenditures were as follows (in millions):

2017 2016
Cash flow from operating activities of continuing operations $ 219.6
$ 994.8
Capital expenditures

New rig construction $ 397.8
$ 155.7
Rig enhancements 25.6
15.6
Minor upgrades and improvements 50.7
84.2
$ 474.1
$ 255.5


	Successor		Predecessor
	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Net cash provided by (used in) operating activities	$	0.5	$	(31.7)




Capital expenditures	38.5		6.0

~~Excluding~~During the ~~impact of ENSCO DS-9 and ENSCO 8503 lump-sum termination payments of~~ ~~$205.0~~three months ended March 31, 2022 (Successor), we generated $0.5 million ~~received during the~~ ~~nine-months ended~~ ~~September 30, 2016, cash flow~~ from operating activities and our primary uses of ~~continuing operations~~ ~~declined$570.2~~cash were $38.5 million~~, or~~ ~~72%~~, for the ~~nine-month~~ ~~period~~enhancement and other improvements of our drilling rigs. During the three months ended ~~September 30, 2017~~ ~~as compared to~~March 31, 2021 (Predecessor), our primary uses of cash were $31.7 million used in operating activities and $6.0 million for the ~~prior year period. The~~ ~~decline~~ ~~primarily resulted from a~~ ~~$785.2 million~~ ~~decline in net cash receipts from contract~~enhancement and other improvements of our drilling ~~services, offset by a~~ ~~$169.7 million~~ ~~decline in net cash payments for contract drilling services, a~~ ~~$13.8 million~~ ~~decline in cash payments for taxes and a~~ ~~$9.1 million~~ ~~decline in cash payments for interest, net of interest income.~~rigs.

During the ~~third quarter, we accepted delivery and made~~three months ended March 31, 2022 (Successor), net cash provided by operating activities was $0.5 million primarily related to higher net collections of customer receivables partially offset by cash outflows from the ~~final milestone~~ payment of ~~$75.0~~certain taxes.

During the three months ended March 31, 2021 (Predecessor), net cash used in operating activities was $31.7 million primarily related to contributions to pension and other post-retirement benefit plans and reorganization costs.

We have construction agreements, as amended, with a Shipyard that provide for, ~~ENSCO DS-10, which was previously deferred into 2019. We currently have one premium jackup rig under construction scheduled for delivery during~~among other things, an option construct whereby the ~~first quarter of 2018. Following~~Company has the Merger, we have two ultra-deepwater drillships under construction, ENSCO DS-13 (formerly Atwood Admiral) and ENSCO DS-14 (formerly Atwood Archer), which are scheduled for delivery in June 2019 and September 2020, respectively, or such earlier date that we electright, but not the obligation, to take delivery ~~with 45 days' notice.~~

~~The following table summarizes the cumulative amount~~ of ~~contractual payments made as of~~ ~~September 30, 2017~~ ~~for our~~either or both VALARIS DS-13 and VALARIS DS-14 rigs under construction on or before December 31, 2023. Under the amended agreements, the purchase prices for the rigs are estimated to be approximately $119.1 million for VALARIS DS-13 and ~~estimated timing~~$218.3 million for VALARIS DS-14, assuming a December 31, 2023 delivery date. Delivery can be requested any time prior to December 31, 2023 with a downward purchase price adjustment based on predetermined terms. If the Company elects not to purchase the rigs, the Company has no further obligations to the shipyard.

We continue to take a disciplined approach to reactivations with our stacked rigs, only returning them to the active fleet when there is visibility into work at attractive economics. In most cases, we expect the initial contract to pay for the reactivation costs and that the rig would have solid prospects for longer-term work. Most of ~~our remaining contractual payments, inclusive of rigs acquired~~this reactivation cost will be operating expenses, recognized in the ~~Merger (in millions):~~income statement, related to de-preservation activities, including reinstalling key pieces of equipment and crewing up the rigs. Capital expenditures during reactivations include rig modifications, equipment overhauls and any customer required capital upgrades. We would generally expect to be compensated for these customer-specific enhancements.

Cumulative Paid⁽¹⁾
Remaining 2017
2018
and
2019

2020
and
2021
Thereafter
Total⁽²⁾
ENSCO 123 $ 63.3
$ 2.2
$ 215.3
$ —
$ —
$ 280.8
ENSCO DS-13⁽³⁾
—
—
—
—
83.9
83.9
ENSCO DS-14⁽³⁾
—
—
15.0
—
165.0
180.0
$ 63.3
$ 2.2
$ 230.3
$ —
$ 248.9
$ 544.7


⁽¹⁾	~~Cumulative paid represents the aggregate amount of contractual payments made from commencement of the construction agreement through~~ ~~September 30, 2017. Contractual payments made by Atwood prior to the Merger for ENSCO DS-13 (formerly Atwood Admiral) and ENSCO DS-14 (formerly Atwood Archer) are excluded.~~


⁽²⁾	Total commitments are based on fixed-price shipyard construction contracts, exclusive of costs associated with commissioning, systems integration testing, project management, holding costs and interest.

⁽³⁾

The remaining milestone payments bear interest at a rate of 4.5% per annum, which accrues during the holding period until delivery. Upon delivery, the remaining milestone payments and accrued interest thereon may be financed through a promissory note with the shipyard for each rig. The promissory notes will bear interest at a rate of 5% per annum with a maturity date of December 31, 2022 and will be secured by a mortgage on each respective rig.

~~The actual timing of these expenditures may vary based on the completion of various construction milestones, which are, to a large extent, beyond our control.~~

Based on our current projections, we expect capital expenditures during ~~2017~~2022 to ~~include approximately~~ ~~$456~~approximate $225 to $250 million ~~for newbuild construction, approximately~~ ~~$57 million~~ for rig enhancement, ~~projects~~reactivation and ~~approximately~~ ~~$73 million~~upgrade projects. We expect that customers will reimburse us for ~~minor upgrades and improvements.~~a significant portion of the 2022 expenditures. Depending on market conditions and future opportunities, we may make additional capital expenditures to upgrade rigs for customer requirements and construct or acquire additional rigs.

Approximately $70 million of our expected capital expenditures for 2022 relate to the reactivation and upgrade of the VALARIS DS-11 for an eight-well contract for a deepwater project in the U.S. Gulf of Mexico expected to commence in mid-2024. The contract requires the rig to be upgraded with 20,000 psi well-control equipment. In February 2022, the customer decided not to sanction and therefore withdrew from the project associated with this contract. In March 2022, the contract was novated to another customer, which was a partner on the project. No material changes to the contract resulted from the novation, including with respect to the termination provisions in the event the project does not receive final investment decision (FID). In the event of termination, the early termination fee and contractual reimbursements from the customer will be more than sufficient to cover expenses and commitments incurred by Valaris on the project.

As we reactivate rigs, we expect spending levels to increase beyond the levels we incurred in 2021, with more spending associated with reactivation of our floater fleet relative to our jackup fleet and for rigs that have been preservation stacked for longer periods of time.

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

Financing and Capital Resources

~~Exchange Offers~~First Lien Notes

~~In January 2017, we completed exchange offers (the "Exchange Offers") to exchange our outstanding~~ ~~8.50%~~ ~~senior notes due 2019,~~ ~~6.875%~~ ~~senior notes due 2020 and~~ ~~4.70%~~ ~~senior notes due 2021 for~~ ~~8.00%~~ ~~senior notes due 2024 and cash. The Exchange Offers resulted in the tender of~~ ~~$649.5~~We have $550 million aggregate principal amount of Senior Secured First Lien Notes due 2028 (the "First Lien Notes") which were issued on the Effective Date pursuant to the Indenture. The First Lien Notes are scheduled to mature on April 30, 2028. See "Note 8 - Debt" to our ~~outstanding~~condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the First Lien Notes.

Investment in ARO and Notes Receivable from ARO

We consider our investment in ARO to be a significant component of our investment portfolio and an integral part of our long-term capital resources. We expect to receive cash from ARO in the future both from the maturity of our long-term notes receivable and from the distribution of earnings from ARO. The long-term notes receivable, which are governed by the laws of Saudi Arabia, mature in 2027 and 2028. In the event that ~~were settled~~ARO is unable to repay these notes when they become due, we would require the prior consent of our joint venture partner to enforce ARO’s payment obligations.

The distribution of earnings to the joint-venture partners is at the discretion of the ARO Board of Managers, consisting of 50/50 membership of managers appointed by Saudi Aramco and ~~exchanged~~managers appointed by us, with approval required by both shareholders. The timing and amount of any cash distributions to the joint-venture partners cannot be predicted with certainty and will be influenced by various factors, including the liquidity position and long-term capital requirements of ARO. ARO has not made a cash distribution of earnings to its partners since its formation. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on our investment in ARO and notes receivable from ARO.

The following table summarizes the maturity schedule of our notes receivable from ARO as ~~follows~~of March 31, 2022 (in millions):

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


Maturity Date	Principal Amount
October 2027	$	265.0
October 2028	177.7

⁽¹⁾ Total	~~As 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.~~

~~During the first quarter, we recognized a net pre-tax loss on the Exchange Offers of~~ ~~$6.2 million, consisting of a loss of~~ ~~$3.5 million~~ ~~that includes the write-off of premiums on tendered debt and~~ ~~$2.7 million~~ ~~of transaction costs.~~

~~Open Market Repurchases~~

~~During the nine-month period ended~~ ~~September 30, 2017~~, we repurchased certain of our outstanding senior notes with cash on hand and recognized an insignificant pre-tax gain, net of discounts, premiums and debt issuance costs. The aggregate repurchases were as follows (in millions):

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

442.7
⁽¹⁾	~~Excludes accrued interest paid to holders of the repurchased senior notes.~~

~~Maturities~~

~~Our next debt maturity is~~ ~~$237.6 million~~ ~~during 2019, followed by~~ ~~$450.9 million~~ ~~and~~ ~~$269.7 million~~ ~~during 2020 and 2021, respectively.~~

~~Debt to Capital~~

~~Our total debt, total capital and total debt to total capital ratios are summarized below (in millions, except percentages):~~

Pro Forma⁽¹⁾
September 30, 2017
September 30,
2017 December 31,
2016
Total debt $ 4,747.7
$ 4,747.7
$ 5,274.5
Total capital ⁽²⁾
$ 13,862.7
$ 12,912.9
$ 13,525.1
Total debt to total capital 34.2 % 36.8 % 39.0 %

⁽¹⁾

~~Pro forma amounts reflect the impact of the Merger as if it occurred on~~ ~~September 30, 2017. Total capital was adjusted to reflect the~~ ~~$782.0~~ ~~million equity consideration transferred and the estimated~~ ~~$167.8 million~~ ~~bargain purchase gain. Upon closing of the Merger, we utilized acquired cash of~~ ~~$445.4 million~~ ~~and cash on hand from the liquidation of short-term investments to repay Atwood's debt and accrued interest of~~ ~~$1.3 billion~~.


⁽²⁾	~~Total capital consists of total debt and Ensco shareholders' equity.~~

~~Revolving Credit Facility~~

~~In October 2017, we amended our Credit Facility to extend the final maturity date by two years. Previously, our Credit Facility had a borrowing capacity of~~ ~~$2.25 billion~~ ~~through September 2019 that declined to~~ ~~$1.13 billion~~ ~~through September 2020. Subsequent to the amendment, our borrowing capacity is~~ ~~$2.0 billion~~ ~~through September 2019 and declines to~~ ~~$1.2 billion~~ through September 2022. The credit agreement governing our revolving credit facility includes an accordion feature allowing us to increase the commitments expiring in September 2022 up to an aggregate amount not to exceed ~~$1.5 billion~~.

Also in October, Moody's downgraded our credit rating from B1 to B2 and Standard & Poor's downgraded our credit rating from BB to B+. The Credit Facility amendment and the rating actions resulted in increases to the interest rates applicable to borrowings. The applicable margin rates are ~~2.50%~~ ~~per annum for Base Rate advances and~~

~~3.50%~~ ~~per annum for LIBOR advances. In addition, our quarterly commitment fee increased as a result of the amendment and rating actions to~~ ~~0.625%~~ ~~per annum on the undrawn portion of the~~ ~~$2.0 billion~~ ~~commitment.~~

~~The Credit Facility requires us to maintain a total debt to total capitalization ratio that is less than or equal to~~ ~~60%~~ and to provide guarantees from certain of our rig-owning subsidiaries sufficient to meet certain guarantee coverage ratios. The Credit Facility also contains customary restrictive covenants, including, among others, prohibitions on creating, incurring or assuming certain debt and liens (subject to customary exceptions, including a permitted lien basket that permits us to raise secured debt up to the lesser of $750 million or 10% of consolidated tangible net worth (as defined in the Credit Facility)); entering into certain merger arrangements; selling, leasing, transferring or otherwise disposing of all or substantially all of our assets; making a material change in the nature of the business; paying or distributing dividends on our ordinary shares (subject to certain exceptions, including the ability to continue paying a quarterly dividend of $0.01 per share); borrowings, if after giving effect to any such borrowings and the application of the proceeds thereof, the aggregate amount of available cash (as defined in the Credit Facility) would exceed $150 million; and entering into certain transactions with affiliates.

~~As of~~ ~~September 30, 2017, we were in compliance in all material respects with our covenants under the Credit Facility. We had no amounts outstanding under the Credit Facility as of~~ ~~September 30, 2017~~ ~~and December 31, 2016.~~

Our access to credit and capital markets depends on the credit ratings assigned to our debt. We no longer maintain an investment-grade status. Our current credit ratings, and any additional actual or anticipated downgrades in our credit ratings, could limit available options when accessing credit and capital markets, or when restructuring or refinancing debt. In addition, future financings or refinancings may result in higher borrowing costs and require more restrictive terms and covenants, which may further restrict our operations. With a credit rating below investment grade, we have no access to the commercial paper market.

~~Other Financing~~

We filed an automatically effective shelf registration statement on Form S-3 with the U.S. Securities and Exchange Commission on January 15, 2015, which provides us the ability to issue debt securities, equity securities, guarantees and/or units of securities in one or more offerings. The registration statement, as amended, expires in January 2018.

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 shares 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.~~

From time to time, we and our affiliates may repurchase our outstanding senior notes in the open market, in privately negotiated transactions, through tender offers, exchange offers or otherwise, or we may redeem senior notes that are able to be redeemed, pursuant to their terms. In connection with any exchange, we may issue equity, issue new debt and/or pay cash consideration. Any future repurchases, exchanges or redemptions will depend on various factors existing at that time. There can be no assurance as to which, if any, of these alternatives (or combinations thereof) we may choose to pursue in the future. There can be no assurance that an active trading market will exist for our outstanding senior notes following any such transactions.

Other Commitments

We have other commitments that we are contractually obligated to fulfill with cash under certain circumstances. As of ~~September 30, 2017,~~March 31, 2022, we were contingently liable for an aggregate amount of ~~$83.5~~$33.6 million under outstanding letters of credit ~~and surety bonds~~ which guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. Obligations under these letters of credit ~~and surety bonds~~ are not normally called, as we typically comply with the underlying performance requirement. As of ~~September 30, 2017,~~March 31, 2022, we ~~were not required to make any~~had collateral deposits in the amount of $27.1 million with respect to these agreements.

~~Liquidity~~

~~Our liquidity position is summarized~~In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. ARO has plans to purchase 20 newbuild jackup rigs over an approximate 10-year period. In January 2020, ARO ordered the first two newbuild jackups, each with a shipyard price of $176.0 million. These newbuild rigs are expected to be delivered in the ~~table below (in millions, except ratios):~~

Pro Forma
September 30, 2017
September 30,
2017 December 31,
2016
Cash and cash equivalents $ 724.4
$ 724.4
$ 1,159.7
Short-term investments $ 202.1
$ 1,069.8
$ 1,442.6
Working capital $ 1,228.3
$ 1,972.8
$ 2,424.9
Current ratio 3.3
5.0
3.8

first or second quarter of 2023 and ARO is expected to place orders for two additional newbuild jackups in 2022. The ~~pro forma amounts reflect~~joint venture partners intend for the ~~impact~~newbuild jackup rigs to be financed out of ~~the Merger as if it occurred on September 30, 2017. Upon closing of the Merger, we utilized acquired~~available cash ~~of $445.4 million and~~from ARO's operations and/or funds available from third-party debt financing. ARO paid a 25% down payment from cash on hand for each of the newbuilds ordered in January 2020 and is actively exploring financing options for remaining payments due upon delivery. 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. Each partner's commitment shall be reduced by the actual cost of each newbuild rig, as delivered, on a proportionate basis. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on ARO.

Tax Assessments

During 2019, the Australian tax authorities issued aggregate tax assessments totaling approximately A$101 million (approximately $75.6 million converted at current period-end exchange rates) plus interest related to the examination of certain of our tax returns for the years 2011 through 2016. During the third quarter of 2019, we made a A$42 million payment (approximately $29 million at then-current exchange rates) to the Australian tax authorities to litigate the assessment. We have an $18.8 million liability for unrecognized tax benefits relating to these assessments as of March 31, 2022. We believe our tax returns are materially correct as filed, and we are vigorously contesting these assessments. Although the outcome of such assessments and related administrative proceedings cannot be predicted with certainty, we do not expect these matters to have a material adverse effect on our financial position, operating results and cash flows.

SUPPLEMENTAL FINANCIAL INFORMATION

Guarantees of Registered Securities

The First Lien Notes issued by Valaris Limited have been fully and unconditionally guaranteed, jointly and severally, on a senior secured basis, by certain of the direct and indirect subsidiaries (the “Guarantors”) of Valaris Limited under the Indenture governing the First Lien Notes (the “Guarantees”). The First Lien Notes and Guarantees are secured by liens on the collateral, including, among other things, subject to certain agreed security principles, (i) first-priority perfected liens on 100% of the equity interests of each restricted subsidiary directly owned by Valaris Limited or any Guarantor and (ii) a first-priority perfected lien on substantially all assets of Valaris Limited and each Guarantor, in each case subject to certain exceptions and limitations (collectively, the “Collateral”). We are providing the following information about the Guarantors and the Collateral in compliance with Rules 13-01 and 13-02 of Regulation S-X.

First Lien Note Guarantees

The Guarantees are joint and several senior secured obligations of each Guarantor and rank equally in right of payment with existing and future senior indebtedness of such Guarantor and effectively senior to such Guarantor’s existing and future indebtedness (i) that is not secured by a lien on the Collateral securing the First Lien Notes, or (ii) that is secured by a lien on the Collateral securing the First Lien Notes ranking junior to the liens securing the First Lien Notes. The Guarantees rank effectively junior to such Guarantor’s existing and future secured indebtedness (i) that is secured by a lien on the Collateral that is senior or prior to the lien securing the First Lien Notes, or (ii) that is secured by liens on assets that are not part of the Collateral, to the extent of the value of such assets. The Guarantees rank equally with such Guarantor’s existing and future indebtedness that is secured by first-priority liens on the Collateral and senior in right of payment to any existing and future subordinated indebtedness of such Guarantor. The Guarantees are structurally subordinated to all existing and future indebtedness and other liabilities of any non-Guarantors, including trade payables (other than indebtedness and liabilities owed to such Guarantor).

Under the Indenture, a Guarantor may be automatically and unconditionally released and relieved of its obligations under its guarantee under certain circumstances, including: (1) in connection with any sale, transfer or other disposition (including by merger, consolidation, distribution, dividend or otherwise) of all or substantially all of the assets of such Guarantor to a person that is not the Company or a restricted subsidiary, if such sale, transfer or other disposition is conducted in accordance with the applicable terms of the Indenture, (2) in connection with any sale, transfer or other disposition (including by merger, consolidation, amalgamation, distribution, dividend or otherwise) of all of the capital stock of any Guarantor, if such sale, transfer or other disposition is conducted in accordance with the applicable terms of the Indenture, (3) upon our exercise of legal defeasance, covenant defeasance or discharge under the Indenture, (4) unless an event of default has occurred and is continuing, upon the dissolution or liquidation of a Guarantor in accordance with the Indenture, and (5) if such Guarantor is properly designated as an unrestricted subsidiary, in each case in accordance with the provisions of the Indenture.

We conduct our operations primarily through our subsidiaries. As a result, our ability to pay principal and interest on the First Lien Notes is dependent on the cash flow generated by our subsidiaries and their ability to make such cash available to us by dividend or otherwise. The Guarantors’ earnings will depend on their financial and operating performance, which will be affected by general economic, industry, financial, competitive, operating, legislative, regulatory and other factors beyond their control. Any payments of dividends, distributions, loans or advances to us by the Guarantors could also be subject to restrictions on dividends under applicable local law in the jurisdictions in which the Guarantors operate. In the event that we do not receive distributions from the ~~liquidation~~Guarantors, or to the extent that the earnings from, or other available assets of, ~~short-term investments~~the Guarantors are insufficient, we may be unable to ~~repay Atwood's~~make payments on the First Lien Notes.

Pledged Securities of Affiliates

Pursuant to the terms of the First Lien Notes collateral documents, the Collateral Agent under the Indenture may pursue remedies, or pursue foreclosure proceedings on the Collateral (including the equity of the Guarantors and other direct subsidiaries of Valaris Limited and the Guarantors), following an event of default under the Indenture. The Collateral Agent’s ability to exercise such remedies is limited by the intercreditor agreement for so long as any priority lien debt is outstanding.

The combined value of the affiliates whose securities are pledged as Collateral constitutes substantially all of the Company’s value, including assets, liabilities and ~~accrued interest~~results of ~~$1.3 billion. Pro forma working capital~~operations. As such, the assets, liabilities and ~~current ratio reflects~~results of operations of the ~~aforementioned,~~combined affiliates whose securities are pledged as Collateral are not materially different than the corresponding amounts presented in the consolidated financial statements of the Company. The value of the pledged equity is subject to fluctuations based on factors that include, among other things, general economic conditions and the ability to realize on the Collateral as part of a going concern and in an orderly fashion to available and willing buyers and outside of distressed circumstances. There is no trading market for the pledged equity interests.

Under the terms of the Indenture and the other documents governing the obligations with respect to the First Lien Notes (the “Notes Documents”), Valaris Limited and the Guarantors will be entitled to the release of the Collateral from the liens securing the First Lien Notes under one or more circumstances, including (1) upon full and final payment of any such obligations; (2) to the extent that proceeds continue to constitute Collateral, in the event that Collateral is sold, transferred, disbursed or otherwise disposed of in accordance with the Notes Documents; (3) upon our exercise of legal defeasance, covenant defeasance or discharge under the Indenture; (4) with respect to vessels, certain specified events permitting release of the mortgage with respect to such vessels under the Indenture; (5) with the consent of the requisite holders under the Indenture; (6) with respect to equity interests in restricted subsidiaries that incur permitted indebtedness, if such equity interests shall secure such other indebtedness and the same is permitted under the terms of the Indenture; and (7) as provided in the intercreditor agreement. The collateral agency agreement also provides for release of the Collateral from the liens securing the Notes under the above described circumstances (but including additional requirements for release in relation to all of the documents governing the indebtedness that is secured by first-priority liens on the Collateral, in addition to ~~other current~~the Indenture). Upon the release of any subsidiary from its guarantee, if any, in accordance with the terms of the Indenture, the lien on any pledged equity interests issued by such Guarantor and on any assets ~~acquired~~of such Guarantor will automatically terminate.

Summarized Financial Information

The summarized financial information below reflects the combined accounts of the Guarantors and ~~current liabilities assumed~~Valaris Limited (collectively, the “Obligors”), for the dates and periods indicated. The financial information is presented on a combined basis and intercompany balances and transactions between entities in the Obligor group have been eliminated.

Summarized Balance Sheet Information:



(in millions)	March 31, 2022		December 31, 2021
ASSETS
Current assets	$	1,094.7	$	1,140.2
Amounts due from non-guarantor subsidiaries, current	693.8		785.8
Amounts due from related party, current	12.0		13.1
Noncurrent assets	1,008.5		989.8
Amounts due from non-guarantor subsidiaries, noncurrent	1,469.7		1,469.7
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities	374.3		308.0
Amounts due to non-guarantor subsidiaries, current	10.9		55.3
Amounts due to related party, current	37.1		38.3
Long-term debt	545.5		545.3
Noncurrent liabilities	444.3		438.5
Amounts due to non-guarantor subsidiaries, noncurrent	1,922.5		1,921.6
Noncontrolling interest	1.4		2.6

Summarized Statement of ~~$175.3 million and $59.3 million, respectively.~~Operations Information:


	Successor		Predecessor
(in millions)	Three Months Ended March 31, 2022		Three Months Ended March 31, 2021
Operating revenues	$	299.9	$	314.7
Operating revenues from related party	14.3		17.8
Operating costs and expenses	349.5		1,148.4
Reorganization expense	(1.0)		(51.6)
Loss from continuing operations before income taxes	(65.0)		(849.2)
Net income (loss) attributable to noncontrolling interest	1.2		(2.4)
Net loss	(63.9)		(851.6)

We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from our cash and cash equivalents, short-term investments, operating cash flows and, if necessary, funds borrowed under our revolving credit facility.

We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures, from our operating cash flows and, if necessary, funds borrowed under our revolving credit facility or other future financing arrangements.

~~We may decide to access debt and/or equity markets to raise additional capital or increase liquidity as necessary.~~

MARKET RISK

Interest Rate Risk

Our outstanding debt at March 31, 2022 consisted of our $550.0 million aggregate principal amount of First Lien Notes. We ~~use derivatives~~are subject to ~~reduce~~interest rate risk on our ~~exposure~~fixed-interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to ~~foreign currency exchange~~changes in market interest rates impacting the fair value of the debt.

Our long-term notes receivable from ARO bear interest based on a one-year LIBOR rate, ~~risk.~~ set as of the end of the year prior to the year applicable, plus two percent. As the notes bear interest on the LIBOR rate determined at the end of the preceding year, the rate governing our interest income in 2022 has already been determined.

A hypothetical 1% decrease to LIBOR would decrease our interest income by approximately $4.4 million based on the principal amount outstanding at March 31, 2022 of $442.7 million.

Foreign Currency Risk

Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues and expenses 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. We maintain a foreign currency exchange rate risk management strategy that utilizes derivatives to reduce our exposure to unanticipated fluctuations in earnings and cash flows caused by changes in foreign currency exchange rates.

~~We utilize cash flow hedges to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure~~are exposed to foreign currency exchange ~~rate~~ risk on future expected contract drilling expenses and capital expenditures denominated in various foreign currencies. We predominantly structure our drilling contracts in U.S. dollars, which significantly reducesto the ~~portion~~extent the amount of our ~~cash flows and~~monetary assets denominated in ~~foreign currencies. As of September 30, 2017, we had cash flow hedges outstanding to exchange an aggregate $164.0 million for various foreign currencies.~~

~~We have net assets and liabilities denominated in numerous foreign currencies and use various strategies to manage our exposure to changes in~~the foreign currency ~~exchange rates. We occasionally enter into derivatives that hedge~~differs from our obligations in the ~~fair value of recognized~~ foreign currency ~~denominated assets~~ or ~~liabilities, thereby reducing exposure to earnings fluctuations caused by changes~~revenue earned differs from costs incurred in the foreign ~~currency exchange rates.~~currency. We do not designate such derivatives as hedging instruments. In these situations, a natural hedging relationship generally exists whereby changes in the fair value of the derivatives offset changes in the fair value of the underlying hedged items. As of September 30, 2017, we held derivatives not designated as hedging instruments to exchange an aggregate $137.1 million for various foreign currencies.

~~If we were to incur a hypothetical 10% adverse change in foreign currency exchange rates, net unrealized losses associated with~~currently hedge our foreign currency ~~denominated assets and liabilities~~risk as ~~of September 30, 2017 would approximate $15.1 million. Approximately $13.7 million of these unrealized losses would be offset by corresponding gains on the derivatives utilized to offset changes~~our unsecured foreign currency credit lines were terminated in the ~~fair value~~second quarter of ~~net assets~~2020 and ~~liabilities denominated in foreign currencies.~~

~~We utilize derivatives and undertake~~our access to other foreign currency ~~exchange rate hedging activities in accordance with our established policies for the management of market risk. We mitigate our~~ credit risk relating to derivative counterparties through a variety of techniques, including transacting with multiple, high-quality financial institutions, thereby limiting our exposure to individual counterparties and by entering into ISDA Master Agreements, which include provisions for a legally enforceable master netting agreement, with our derivative counterparties. The terms of the ISDA agreements may also include credit support requirements, cross default provisions, termination events or set-off provisions. Legally enforceable master netting agreements reduce credit risk by providing protection in bankruptcy in certain circumstances and generally permitting the closeout and netting of transactions with the same counterparty upon the occurrence of certain events.lines is limited.

We do not enter into derivatives for trading or other speculative purposes. We believe that our use of derivatives and related hedging activities reduces our exposure to foreign currency exchange rate risk and does not expose us to material credit risk or any other material market risk. All of our derivatives mature during the next ~~18 months. See Note 4 to our condensed consolidated financial statements for additional information on our derivative instruments.~~

CRITICAL ACCOUNTING POLICIES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our significant accounting policies are included in Note 1 to our audited consolidated financial statements for the year ended December 31, ~~2016~~2021, included in our annual report on Form 10-K filed with the SEC on February ~~28, 2017.~~22, 2022. These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our condensed consolidated financial statements.

We identify our critical accounting policies as those that are the most pervasive and important to the portrayal of our financial position and operating results and that require the most difficult, subjective and/or complex judgments ~~by management~~ regarding estimates in matters that are inherently uncertain. Our critical accounting policies are those related to property and equipment, impairment of ~~long-lived assets~~property and equipment for the Predecessor, income ~~taxes.~~taxes and pension and other post-retirement benefits. For a discussion of the critical accounting policies and estimates that we use in the preparation of our condensed consolidated financial statements, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in Part II of our annual report on Form 10-K for the year ended December 31, ~~2016, in addition to supplemental disclosure regarding impairment of long-lived assets set forth in Item 2 of our quarterly report on Form 10-Q for the quarter ended June 30, 2017.~~2021.

New Accounting Pronouncements

See Note 1 - Unaudited Condensed Consolidated Financial Statements to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information on new accounting pronouncements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Information required under this Item 3. has been incorporated ~~into~~herein from "Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations - Market Risk."

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures – We have established disclosure controls and procedures to ensure that the information required to be disclosed by us in the reports that we file under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and that such information is accumulated and made known to the officers who certify the Company’s financial reports and to other members of senior management and the Board of Directors as appropriate to allow timely decisions regarding required disclosure.

Based on their evaluation as of March 31, 2022, our management, with the ~~end~~participation of ~~the period covered by this quarterly report on Form 10-Q,~~ our ~~Chief Executive Officer~~principal executive officer and ~~Chief Financial Officer~~principal financial officer have concluded that our disclosure controls and procedures as(as defined in ~~Rule 13a-15~~Rules 13a-15(e) and 15d-15(e) under the ~~Securities~~ Exchange ~~Act of 1934,~~Act) are effective.

~~During~~Changes in Internal Controls – There have been no material changes in our internal controls over financial reporting during the fiscal quarter ended ~~September 30, 2017, there were no changes in our internal control over financial reporting~~March 31, 2022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

~~Brazil Internal Investigation~~

Pride International LLC, formerly Pride International, Inc. (“Pride”), a company we acquired in 2011, commenced drilling operations in Brazil in 2001. In 2008, Pride entered into a drilling services 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, after 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 learning of the Petrobras internal audit report, our Audit Committee appointed independent counsel to lead an investigation into the alleged irregularities. Further, in June and July 2015, we voluntarily contacted the SEC and the DOJ, respectively, to advise them of this matter and of our Audit Committee’s investigation. Independent counsel, under 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 Pride 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, which 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 does 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.

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 relation 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 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~~

We did not recognize revenue for amounts owed to us under the DSA from the beginning 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 subsequently filed a counterclaim seeking restitution of certain sums paid under the DSA less value received by Petrobras under the DSA. We have also initiated separate arbitration proceedings in the U.K. against SHI for any losses we have incurred in connection with the foregoing. SHI subsequently filed a statement of defense disputing our claim. There can be no assurance as to how these arbitration proceedings will ultimately be resolved.

~~Pride FCPA Investigation~~

During 2010, Pride 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. At this stage of such inquiries, 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 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 or the effect any such actions may have on our financial position, operating results or cash flows.

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,~~2020, 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~~$0.5 million liability related to these matters was included in ~~accrued~~Accrued liabilities and other on our ~~condensed consolidated balance sheet~~Condensed Consolidated Balance Sheet as of ~~September 30, 2017.~~March 31, 2022 included in "Item 1. Financial Statements."

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 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

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 the other information ~~set forth~~presented 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, as well as “Item 1A. Risk Factors” in Part II of our quarterly report on Form 10-Q for the quarter ended June 30, 2017, each of~~2021, 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 the risks previously disclosed in our annual report on Form 10-K for the year ended December 31, 2016, except as set forth below and in our quarterly report on Form 10-Q for the quarter ended June 30, 2017.

We may not achieve the intended results from the Merger, and we may not be able to successfully integrate our operations with Atwood after the Merger. Failure 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 to a number of uncertainties, including whether the Atwood 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 to the completion of the Merger. In addition, integrating Atwood’s employees and operations will require the time and attention of management, which may negatively impact our business. Events outside of our control, including changes in regulation and laws as well as economic trends, could adversely affect our ability to realize the expected benefits from the Merger.

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

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

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
4.1			Second Supplemental Indenture, dated as of January 12, 2022, among Valaris Limited, Valaris United LLC, and Wilmington Savings Fund, FSB as collateral agent and trustee (incorporated by reference to Exhibit 4.4 to the Registrant’s Annual Report on Form 10-K filed on February 22, 2022, File No. 001-08097).
*10.1			Valaris Non-Executive Severance Plan (as amended and restated on 30 April 2020)
10.2			Amendment to Cash Retention Letter (Gilles Luca) effective as of January 20, 2022 (incorporated by reference to Exhibit 10.45 to the Registrant’s Annual Report filed on Form 10-K on February 22, 2022, File No. 001-08097).
*22.1			List of Guarantor Subsidiaries and Affiliate Securities Pledged as Collateral

~~Exhibit Number~~		~~Exhibit~~
~~2.1~~*31.1			Agreement and Plan of Merger, dated as of May 29, 2017, by and among Ensco plc, Echo Merger Sub LLC and Atwood Oceanics, Inc. (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on May 30, 2017, File No. 1-08097).
~~10.1~~	Commitment Agreement and Fifth Amendment to Fourth Amended and Restated Credit Agreement, dated as of October 3, 2017, among Ensco, Pride International LLC, certain other subsidiaries of Ensco party thereto, Citibank, N.A., as administrative agent, and the lenders party thereto (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on October 6, 2017, File No. 1-08097).
*12.1	~~Computation of ratio of earnings to fixed charges.~~
*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			Inline XBRL Taxonomy Extension Schema Document
*101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document
*101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document
*101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document
*101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document
*104			The cover page of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2022, formatted in Inline XBRL (included with Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

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 Limited


Date:		May 3, 2022	/s/ DARIN GIBBINS
			Darin Gibbins Interim Chief Financial Officer and Vice President, Investor Relations and Treasurer (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



Condensed Consolidated Statements of Operations Three Months Ended March 31, 2022 (Successor) and 202 1 (Predecessor)		5



~~PART I FINANCIAL INFORMATION~~

~~ITEM 1. FINANCIAL STATEMENTS~~

~~Report of Independent Registered Public Accounting Firm~~	3

~~Condensed Consolidated Statements of Operations~~ ~~Three Months Ended September 30, 2017 and 2016~~	4

~~Condensed Consolidated Statements of Operations~~ ~~Nine Months Ended September 30, 2017 and 2016~~	5

Condensed Consolidated Statements of Comprehensive ~~(Loss) Income~~ Loss Three Months Ended ~~September 30, 2017~~March 31, 2022 (Successor) and ~~2016~~2021 (Predecessor)	6



~~Condensed Consolidated Statements of Comprehensive (Loss) Income~~ ~~Nine Months Ended September 30, 2017 and 2016~~		7

Condensed Consolidated Balance Sheets ~~September 30, 2017~~ March 31, 2022 and December 31, ~~2016~~202 1	87

Condensed Consolidated Statements of Cash Flows ~~Nine~~ Three Months Ended ~~September 30, 2017~~March 31, 202 2 (Successor) and ~~2016~~20 21 (Predecess or)		98

Notes to Condensed Consolidated Financial Statements		109

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		4329

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		5948

ITEM 4. CONTROLS AND PROCEDURES		5949

PART II OTHER INFORMATION		50

ITEM 1. LEGAL PROCEEDINGS		6050

ITEM 1A. RISK FACTORS		6350



~~ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS~~		64

ITEM 6. EXHIBITS	6551

SIGNATURES		6652



(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



	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



	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



	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	)



	March 31, 2022		December 31, 2021
Drilling rigs and equipment	$	938.7	$	886.9
Work-in-progress	42.6		35.6
Other	37.5		34.5
	$	1,018.8	$	957.0



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

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


⁽¹⁾	Derivative assets and liabilities with maturity dates equal to or less than twelve months from the respective balance sheet date were included in other current assets and accrued liabilities and other, respectively, on our condensed consolidated balance sheets.



	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



	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⁾	As 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



	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



	September 30, 2017			December 31, 2016
Derivative instruments	$	22.4		$	13.6
Currency translation adjustment	7.8			7.6
Other	(1.6		)	(2.2		)
	$	28.6		$	19.0

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	)



	2017	2016
Floaters⁽¹⁾	20	19
Jackups^{(2) (3)}	32	35
Under construction⁽¹⁾⁽³⁾	1	3
Held-for-sale^{(2) (4)}	1	4
Total	54	61



	2017		2016
Cash flow from operating activities of continuing operations	$	219.6	$	994.8
Capital expenditures
New rig construction	$	397.8	$	155.7
Rig enhancements	25.6		15.6
Minor upgrades and improvements	50.7		84.2
	$	474.1	$	255.5



	Cumulative Paid⁽¹⁾		Remaining 2017		2018 and 2019		2020 and 2021		Thereafter		Total⁽²⁾
ENSCO 123	$	63.3	$	2.2	$	215.3	$	—	$	—	$	280.8
ENSCO DS-13⁽³⁾	—		—		—		—		83.9		83.9
ENSCO DS-14⁽³⁾	—		—		15.0		—		165.0		180.0
	$	63.3	$	2.2	$	230.3	$	—	$	248.9	$	544.7



	Pro Forma⁽¹⁾ September 30, 2017			September 30, 2017			December 31, 2016
Total debt	$	4,747.7		$	4,747.7		$	5,274.5
Total capital ⁽²⁾	$	13,862.7		$	12,912.9		$	13,525.1
Total debt to total capital	34.2		%	36.8		%	39.0		%



	Pro Forma September 30, 2017		September 30, 2017		December 31, 2016
Cash and cash equivalents	$	724.4	$	724.4	$	1,159.7
Short-term investments	$	202.1	$	1,069.8	$	1,442.6
Working capital	$	1,228.3	$	1,972.8	$	2,424.9
Current ratio	3.3		5.0		3.8

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	—