~~ENSCO PLC~~VALARIS LIMITED AND SUBSIDIARIES

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

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

millions)

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

ENSCO SHAREHOLDERS' EQUITY

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
NET INCOME	$	17.0	$	77.7	$	38.3	$	150.7
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net reclassification adjustment for amounts recognized in net income as a component of net periodic pension benefit	(0.1)		—		(0.3)		(0.1)


Other	0.1		0.1		(0.2)		0.1
NET OTHER COMPREHENSIVE INCOME (LOSS)	—		0.1		(0.5)		—
COMPREHENSIVE INCOME	17.0		77.8		37.8		150.7
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	(4.1)		(3.4)		(8.1)		(3.4)
COMPREHENSIVE INCOME ATTRIBUTABLE TO VALARIS	$	12.9	$	74.4	$	29.7	$	147.3

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

~~ENSCO PLC~~VALARIS LIMITED AND SUBSIDIARIES

CONDENSED CONSOLIDATED ~~STATEMENTS OF CASH FLOWS~~BALANCE SHEETS

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

~~(Unaudited)~~


	September 30, 2023		December 31, 2022
	(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	1,041.1	$	724.1
Restricted cash	16.2		24.4

Accounts receivable, net	492.4		449.1
Other current assets	178.7		148.6
Total current assets	1,728.4		1,346.2
PROPERTY AND EQUIPMENT, AT COST	1,388.0		1,134.5
Less accumulated depreciation	228.1		157.3
Property and equipment, net	1,159.9		977.2
LONG-TERM NOTES RECEIVABLE FROM ARO	275.2		254.0
INVESTMENT IN ARO	116.1		111.1
OTHER ASSETS	205.3		171.8
	$	3,484.9	$	2,860.3
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable - trade	$	376.4	$	256.5
Accrued liabilities and other	346.6		247.9
Total current liabilities	723.0		504.4
LONG-TERM DEBT	1,079.4		542.4
OTHER LIABILITIES	482.5		515.6
Total liabilities	2,284.9		1,562.4
COMMITMENTS AND CONTINGENCIES
VALARIS SHAREHOLDERS' EQUITY
Common shares, $0.01 par value, 700.0 shares authorized, 75.4 and 75.2 shares issued, 73.1 and 75.2 shares outstanding as of September 30, 2023 and December 31, 2022, respectively	0.8		0.8
Preference shares, $0.01 par value, 150.0 shares authorized, no shares issued as of September 30, 2023 and December 31, 2022	—		—
Stock warrants	16.4		16.4
Additional paid-in capital	1,112.2		1,097.9
Retained earnings	190.3		160.1
Accumulated other comprehensive income	14.2		14.7
Treasury shares, at cost, 2.3 shares as of September 30, 2023	(150.0)		—
Total Valaris shareholders' equity	1,183.9		1,289.9
NONCONTROLLING INTERESTS	16.1		8.0
Total equity	1,200.0		1,297.9
	$	3,484.9	$	2,860.3

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

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In millions)

(Unaudited)


	Nine Months Ended September 30,
	2023		2022
OPERATING ACTIVITIES
Net income	$	38.3	$	150.7
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation expense	73.6		67.4
Amortization	—		6.1
Loss on extinguishment of debt	29.2		—
Gain on asset disposals	(27.9)		(137.7)

Accretion of discount on the Notes Receivable from ARO	(21.2)		(37.8)
Share-based compensation expense	19.5		11.5
Equity in earnings of ARO	(5.0)		(15.9)
Deferred income tax expense	2.3		7.1
Net periodic pension and retiree medical income	(0.3)		(12.1)
Loss on impairment	—		34.5



Other	5.5		1.8
Changes in contract liabilities	(3.9)		58.9
Changes in deferred costs	(29.3)		(47.7)
Changes in other operating assets and liabilities	90.0		(114.5)

Net cash provided by (used in) operating activities	170.8		(27.7)
INVESTING ACTIVITIES
Additions to property and equipment	(233.1)		(153.1)
Net proceeds from disposition of assets	29.2		146.8


Purchases of short-term investments	—		(220.0)
Repayments of note receivable from ARO	—		40.0
Net cash used in investing activities	(203.9)		(186.3)
FINANCING ACTIVITIES

Issuance of Second Lien Notes	1,103.0		—
Redemption of First Lien Notes	(571.8)		—
Payments for share repurchases	(147.4)		—
Debt issuance costs	(36.7)		—
Payments related to tax withholdings for share-based awards	(5.2)		(2.5)
Consent solicitation fees	—		(3.9)

Net cash provided by (used in) financing activities	341.9		(6.4)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH	308.8		(220.4)
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, BEGINNING OF PERIOD	748.5		644.6
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, END OF PERIOD	$	1,057.3	$	424.2

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

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,~~"Valaris," "our," "we" or "us") in accordance with accounting principles generally accepted in the United States of America ("GAAP"), pursuant to the rules and regulations of the Securities and Exchange Commission (the "SEC") included in the instructions to Form 10-Q and Article 10 of Regulation S-X. The financial information included in this report is unaudited but, in our opinion, includes all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of our financial position, results of operations and cash flows for the interim periods presented. The December 31, ~~2016~~ ~~condensed consolidated balance sheet~~2022 Condensed Consolidated Balance Sheet data ~~were~~was derived from our ~~2016~~2022 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~~three and ~~nine-month periods~~nine months ended September 30, ~~2017~~2023 are not necessarily indicative of the results of operations that will be realized for the year ending December 31, ~~2017~~.2023, or for any future period. 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~~2022, filed with the SEC on February ~~28, 2017~~21, 2023 (our "Annual Report").

Summary of Significant Accounting Policies

Please refer to "Note 1. Description of the Business and Summary of Significant Accounting Policies" of our ~~quarterly reports on Form 10-Q filed with the SEC on April 27, 2017 and July 27, 2017.~~

~~Operating Revenues and Expenses~~

~~During the nine-month period ended September 30, 2016, operating revenues included $185.0 million~~Consolidated Financial Statements from our Annual Report for the ~~lump-sum consideration received in settlement and release~~discussion of our significant accounting policies. Certain previously reported amounts have been reclassified to conform to the ENSCO DS-9 customer's ongoing early termination obligations and $20.0 million for the lump-sum consideration received in settlement of the ENSCO 8503 customer's remaining obligations under the contract. The ENSCO DS-9 contract was terminated for convenience by the customer in July 2015, whereby our customer was obligated to pay us monthly termination fees for two years under the termination provisions of the contract. The ENSCO 8503 contract was originally scheduled to expire in August 2017.current year presentation.

New Accounting Pronouncements

~~In August 2017, the Financial Accounting Standards Board (the "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.Recently adopted accounting pronouncements

Business Combinations - In October ~~2016,~~2021, the FASB issued ASU No. 2021-08, “Accounting ~~Standards Update 2016-16,~~ ~~Income Taxes (Topic 740): Intra-Entity Transfers of~~for Contract Assets ~~Other Than Inventory~~ (“Update 2016-16”), which requires entities 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 on a modified retrospective basis effective January 1, 2017. As a result of modified retrospective application, we reduced prepaid taxes on intercompany transfers of property and related deferred tax liabilities resulting in the recognition of a cumulative-effect reduction in retained earnings of $14.1 million on our condensed consolidated balance sheet as of January 1, 2017. We do not expect a material impact to our 2017 operating results as a result of the adoption of Update 2016-16.

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

~~During 2014, the FASB issued Accounting Standards Update 2014-09,~~ ~~Revenue~~Contract Liabilities from Contracts with Customers ~~(Topic 606)~~ ” ("“Update ~~2014-09"~~2021-08”)~~, which~~. ASU No. 2021-08 requires an entity (acquirer) to recognize ~~the amount of~~and measure contract assets and contract liabilities acquired 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 ~~it expects to be entitled~~the provisions of Topic 606 apply, such as contract liabilities for the ~~transfer~~sale of ~~promised goods or services~~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 ~~customers.~~improve the accounting for acquired revenue contracts with customers in a business combination. Update ~~2014-09~~2021-08 is effective ~~for annual and interim periods~~ for fiscal years beginning after December 15, 2017. Subsequent to the issuance of Update 2014-09, the FASB issued several additional Accounting Standards Updates to clarify implementation guidance, provide narrow-scope improvements and provide additional disclosure guidance. Update 2014-09 will replace most existing revenue recognition guidance in U.S. GAAP and may be adopted using a retrospective, modified retrospective or prospective with a cumulative catch-up approach. Due to the significant interaction between Update 2014-09 and Accounting Standards Update 2016-02, ~~Leases (Topic 842): Amendments to the FASB Accounting Standards Codification~~ ("Update 2016-02"), we expect to adopt Update 2014-09 and Update 2016-02 concurrently with an effective date of January 1, 2018. We expect to apply the modified retrospective approach to our adoption. We are currently evaluating the effect that Update 2014-09 and Update 2016-02 will have on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued Update 2016-02, which requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key qualitative and quantitative information about the entity's leasing arrangements. This update is effective for annual2022, and interim periods ~~beginning after December 15, 2018,~~within those fiscal years, with early adoption permitted. ~~A modified retrospective approach~~We adopted Update 2021-08 effective January 1, 2023 with no material impact to our condensed consolidated financial statements upon adoption.

Accounting pronouncements to be adopted

Reference Rate Reform - In March 2020, the FASB issued 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 U.S. GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in Update 2020-04 apply only to contracts, hedging relationships and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The expedients and exceptions provided by the amendments do not apply to contract modifications made and hedging relationships entered into or evaluated after December 31, 2022, except for hedging relationships existing as of December 31, 2022, for which an entity has elected certain optional expedients and that are retained through the end of the hedging relationship. The provisions in Update 2020-04 are effective upon issuance and can be applied prospectively through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, to extend the temporary accounting rules under Topic 848 from December 31, 2022, to December 31, 2024. Our long-term notes receivable from ARO, from which we generate interest income on a LIBOR-based rate (the "Notes Receivable from ARO"), are impacted by the application of this standard. As the Notes Receivable from ARO bear interest on the LIBOR rate determined at the end of the preceding year, the rate governing our interest income in 2023 has already been determined. We expect to be able to modify the terms of our Notes Receivable from ARO to a comparable interest rate before the applicable LIBOR rate is ~~required. During~~no longer available and as such, do not expect this standard to have a material impact to our ~~evaluation~~condensed consolidated financial statements.

With the exception of ~~Update 2016-02,~~the updated standards discussed above, there have been no accounting pronouncements issued and not yet effective that have significance, or potential significance, to our 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 ~~have concluded~~provide a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation generally for the mobilization, demobilization, and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations, as well as the economic risk relative to the success of the well.

Our drilling service provided under each drilling contract is a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. Total revenue is determined for each individual drilling contract by estimating both fixed and variable consideration expected to be earned over the contract term. Fixed consideration generally relates to activities such as mobilization, demobilization and capital upgrades of our rigsthat 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 remaining duration of our drilling contracts contain a lease component, and upon adoption, we will be required to separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. Due to the significant interaction between Update 2016-02 and Update 2014-09, we expect to adopt both updates concurrently with an effective date of January 1, 2018. Adoption will result in increased disclosure of the nature of our leasing arrangements and may result in variability in our revenue recognition patterns relative to current U.S. GAAP based on those in place as of September 30, 2023 was between approximately 1 month and 5 years.

Contract Termination - VALARIS DS-11

In 2021, a contract was awarded to VALARIS DS-11 for a project in the ~~provisions in each~~U.S. Gulf of our drilling contracts. With respect to leases whereby we are the lessee, we expect to recognize lease liabilities and offsetting "right of use" assets ranging from approximately $70 million to $90 million. We are currently evaluating the other impactsMexico 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~~was expected to ~~strengthen our position as~~commence in mid-2024. In June 2022, the ~~leader in offshore drilling across a wide range of water depths around~~customer terminated 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~~

contract. As a result of the ~~Merger, Atwood shareholders~~contract termination, we received ~~1.60 Ensco Class A Ordinary shares~~an early termination fee of $51.0 million which is included in revenues on our Condensed Consolidated Statements of Operations for ~~each share of Atwood common stock, representing~~the nine months ended September 30, 2022.

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 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 deliveredportion thereof, is transferred to accounts receivable.

Contract liabilities generally represent fees received for mobilization, capital upgrades or in the ~~Merger consisted~~case of ~~134.1 million Class A ordinary shares~~our 50/50 unconsolidated joint venture with ~~an aggregate value of $782.0 million.~~

~~Assets Acquired and Liabilities Assumed~~

~~Assets acquired and liabilities assumed in~~Saudi Aramco, represent the ~~Merger will be recorded at their estimated fair values as of~~difference between the ~~Merger Date~~amounts billed under the ~~acquisition method of accounting. When the fair value of the net assets acquired exceeds the consideration transferred~~bareboat charter arrangements and lease revenues earned. See “Note 3 – Equity Method Investment in an acquisition, the difference is recorded as a bargain purchase gain in the period in which the transaction occurs. We have not finalized the fair values of assets acquired and liabilities assumed; therefore, the fair value estimates set forth below are subject to adjustment during a one year measurement period subsequent to the Merger Date. The estimated fair values of certainARO" 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):



	September 30, 2023		December 31, 2022
Current contract assets	$	0.5	$	4.6
Noncurrent contract assets	$	3.0	$	0.7
Current contract liabilities (deferred revenue)	$	103.4	$	78.0
Noncurrent contract liabilities (deferred revenue)	$	43.3	$	41.0

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, 2022	$	5.3	$	119.0
Revenue recognized in advance of right to bill customer	5.3		—
Increase due to revenue deferred during the period	—		119.4
Decrease due to amortization of deferred revenue that was included in the beginning contract liability balance	—		(53.3)
Decrease due to amortization of deferred revenue added during the period	—		(29.9)

Decrease due to transfer to receivables and payables during the period	(7.1)		(8.5)
Balance as of September 30, 2023	$	3.5	$	146.7

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

⁽¹⁾~~Upon closing 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 expensed as incurred~~are deferred and ~~consisted of various advisory, legal, accounting, valuation and other professional or consulting fees totaling $3.8 million and $8.0 million during~~amortized on a straight-line basis over the ~~three-month and nine-month periods ended September 30, 2017, respectively. These~~contract term. Deferred contract costs were included in ~~general~~Other current assets and ~~administrative~~Other assets on our Condensed Consolidated Balance Sheets and totaled $84.9 million and $57.3 million as of September 30, 2023 and December 31, 2022, respectively. During the three and nine months ended September 30, 2023, amortization of such costs totaled $25.0 million and $62.7 million, respectively. During the three and nine months ended September 30, 2022, amortization of such costs totaled $18.8 million and $41.0 million, respectively.

Deferred Certification Costs

We must obtain certifications from various regulatory bodies in order to operate our drilling rigs and must maintain such certifications through periodic inspections and surveys. The costs incurred in connection with

maintaining such certifications, including inspections, tests, surveys and drydock, as well as remedial structural work and other compliance costs, are deferred and amortized on a straight-line basis over the corresponding certification periods. Deferred regulatory certification and compliance costs were included in Other current assets and Other assets on our Condensed Consolidated Balance Sheets and totaled $17.9 million and $16.2 million as of September 30, 2023 and December 31, 2022, respectively. During the three and nine months ended September 30, 2023, amortization of such costs totaled $3.2 million and $9.4 million, respectively. During the three and nine months ended September 30, 2022, amortization of such costs totaled $1.4 million and $2.5 million, respectively.

Future Amortization of Contract Liabilities and Deferred Costs

The table below reflects the expected future amortization of our contract liabilities and deferred costs recorded as of September 30, 2023. In the case of our contract liabilities related to our bareboat charter arrangements with ARO, the contract liability is not amortized and as such, the amount is reflected in the table below at the end of the current lease term. See "Note 3 - Equity Method Investment in ARO" for additional information on ARO and related arrangements.


	(In millions)
	Remaining 2023		2024		2025		2026 and Thereafter		Total
Amortization of contract liabilities	$	34.8	$	95.3	$	13.4	$	3.2	$	146.7
Amortization of deferred costs	$	32.9	$	54.8	$	10.8	$	4.3	$	102.8

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 jackup drilling rigs in Saudi Arabia. As of September 30, 2023, ARO owns seven jackup rigs, has two newbuild jackup rigs on order, and leases eight rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO.

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, the first of which was delivered in October 2023 and the second is expected to be delivered in the first quarter of 2024. ARO is expected to place orders for two additional newbuild jackups in the near term. In connection with these plans, we have a potential obligation to fund ARO for newbuild jackup rigs. See "Note 11 - Contingencies" for additional information.

Summarized Financial Information

The operating revenues of ARO presented below reflect revenues earned under drilling contracts with Saudi Aramco for the 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 September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Revenues	$	121.5	$	111.4	$	362.9	$	339.1
Operating expenses
Contract drilling (exclusive of depreciation)	92.0		90.0		277.9		256.3
Depreciation	15.8		15.4		46.4		47.3
General and administrative	5.6		4.7		15.9		13.1
Operating income	8.1		1.3		22.7		22.4
Other expense, net	9.0		2.7		28.2		9.3
Provision (benefit) for income taxes	0.4		(0.1)		2.3		3.1
Net income (loss)	$	(1.3)	$	(1.3)	$	(7.8)	$	10.0


	September 30, 2023		December 31, 2022
Cash and cash equivalents	$	110.3	$	176.2
Other current assets	191.2		140.6
Non-current assets	915.3		818.1
Total assets	$	1,216.8	$	1,134.9

Current liabilities	$	173.6	$	86.3
Non-current liabilities	886.2		884.6
Total liabilities	$	1,059.8	$	970.9

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, in Equity in earnings of ARO in our ~~condensed consolidated~~Condensed Consolidated Statements of Operations.

Our equity method investment in ARO was recorded at its estimated fair value in fresh start accounting upon emergence from the chapter 11 cases on April 30, 2021 (the "Effective Date") and also on the date of our 2019 transaction where we acquired the subsidiary that held the joint venture interest. 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 relative to market 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 of ARO in our Condensed Consolidated Statements of Operations. The amortization of those basis differences is combined with our 50% interest in ARO's net income. A reconciliation of those components is presented below (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
50% interest in ARO net income (loss)	$	(0.6)	$	(0.7)	$	(3.9)	$	5.0
Amortization of basis differences	3.0		3.6		8.9		10.9
Equity in earnings of ARO	$	2.4	$	2.9	$	5.0	$	15.9

Related-Party Transactions

During the three and nine months ended September 30, 2023, revenues recognized by us related to the Lease Agreements were $19.1 million and $54.7 million, respectively. During the three and nine months ended September 30, 2022, revenues recognized by us related to the Lease Agreements were $13.8 million and $42.6 million, respectively.

Our balances related to the ARO lease agreements were as follows (in millions):


	September 30, 2023		December 31, 2022
Amounts receivable (1)	$	17.6	$	12.0
Contract liabilities(2)	$	13.1	$	16.7
Accounts payable(2)	$	54.9	$	43.2

(1)Amounts receivable from ARO is included in Accounts receivable, net in our Condensed Consolidated Balance Sheets.

(2)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 the 10-year Notes Receivable from ARO based on a one-year LIBOR rate, set as of the end of the year prior to the year applicable, plus two percent. The Notes Receivable from ARO were adjusted to the estimated fair value as of the Effective Date and the resulting discount to the principal amount is being amortized using the effective interest method to interest income over the remaining terms of the notes.

The ~~following unaudited supplemental pro forma results present consolidated information~~principal amount and discount of the Notes Receivable from ARO were as iffollows (in millions):


	September 30, 2023		December 31, 2022
Principal amount	$	402.7	$	402.7
Discount	(127.5)		(148.7)
Carrying value	$	275.2	$	254.0

Interest receivable(1)(2)	$	22.8	$	—

(1)Our interest receivable from ARO is included in Accounts receivable, net in our Condensed Consolidated Balance Sheets.

(2)We collected our 2022 interest on the ~~Merger~~Notes Receivable from ARO in cash prior to December 31, 2022, and as such, there was ~~completed~~no interest receivable from ARO as of December 31, 2022.

Interest income earned on ~~January 1, 2016. The pro forma results include, among others, (i)~~the Notes Receivable from ARO was as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Interest income	$	7.7	$	2.8	$	22.8	$	8.6
Non-cash amortization (1)(2)	7.2		22.4		21.2		37.8
Total interest income on the Notes Receivable from ARO	$	14.9	$	25.2	$	44.0	$	46.4

(1)Represents the amortization ~~associated with acquired intangible assets and liabilities, (ii) a reduction in depreciation expense for adjustments to property and equipment and (iii) a reduction~~of the discount on the Notes Receivable from ARO using the effective interest method to interest ~~expense resulting~~income over the term of the notes.

(2)We recognized non-cash interest income of $14.8 million in the third quarter of 2022 attributable to a $40.0 million early principal repayment of the Notes Receivable 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 received in September 2022.

(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

Note 34 -Fair Value Measurements

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

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

Significant Other Observable Inputs
(Level 2)

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

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

As of December 31, 2016

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

~~Supplemental Executive Retirement Plan Assets~~

Our supplemental executive retirement plans (the "SERP") are non-qualified plans that provide eligible employees an opportunity to defer a portion of their compensation for use after retirement. Assets held in the SERP were marketable securities measured at fair value on a recurring basis using Level 1 inputs and were included in other assets, net, on our condensed consolidated balance sheets. The fair value measurement of assets held in the SERP was based on quoted market prices.

~~Derivatives~~

Our derivatives were measured at fair value on a recurring basis using Level 2 inputs. See "Note 4 - Derivative Instruments" for additional information on our derivatives, including a description of our foreign currency hedging activities and related methodologies used to manage foreign currency exchange rate risk. The fair value measurement of our derivatives was based on market prices that are generally observable for similar assets or liabilities at commonly-quoted intervals.

~~Other Financial Instruments~~

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


	September 30, 2023				December 31, 2022
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
Second Lien Notes (1)	$	1,079.4	$	1,102.7	$	—	$	—
First Lien Notes (1)	$	—	$	—	$	542.4	$	545.9

Long-term debt	$	1,079.4	$	1,102.7	$	542.4	$	545.9
Long-term notes receivable from ARO (2)	$	275.2	$	429.9	$	254.0	$	336.7

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

⁽¹⁾

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

(1)The estimated fair ~~values~~value of ~~our senior notes~~the 8.375% Senior Secured Second Lien Notes due 2030 (the "Second Lien Notes") and ~~debentures~~Senior Secured First Lien Notes due 2028 (the "First Lien Notes"), which were redeemed in full on April 3, 2023, were determined using quoted market ~~prices.~~ prices, which are level 1 inputs.

(2)The ~~decline in the carrying~~estimated fair value of ~~long-term debt instruments~~our Notes Receivable from ~~December 31, 2016~~ARO was estimated using an income approach to ~~September 30, 2017 is primarily due~~value the forecasted cash flows attributed to the ~~January 2017 debt exchange and debt repurchases as discussed in "Note 7 - Debt."~~Notes Receivable from ARO using a discount rate based on a comparable yield with a country-specific risk premium, which are considered to be level 2 inputs.

The estimated fair values of our cash and cash equivalents, ~~short-term investments, receivables,~~restricted cash, accounts receivable and trade payables ~~and other liabilities~~ approximated their carrying values as of September 30, ~~2017~~2023 and December 31, ~~2016. Our short-term investments consisted of time deposits with initial maturities in excess of three months but less than one year as of each respective balance sheet date.~~2022.

Note 45 -~~Derivative Instruments~~Property and Equipment

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

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

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


	September 30, 2023		December 31, 2022
Drilling rigs and equipment	$	1,217.6	$	1,036.5
Work-in-progress	130.9		59.8
Other	39.5		38.2
	$	1,388.0	$	1,134.5

Assets held-for-use

In June 2022, the drilling contract previously awarded to VALARIS DS-11 was terminated. As of the date of termination, we had incurred costs to upgrade the rig pursuant to the requirements of the contract. Costs incurred related to these capital upgrades were included in work-in-progress and upon termination were determined to be impaired. We recorded a pre-tax, non-cash loss on impairment in the second quarter of 2022 of $34.5 million.

Assets sold

During the nine months ended September 30, 2023, we recognized a pre-tax gain of $27.3 million for the sale of VALARIS 54 in the second quarter.

During the nine months ended September 30, 2022, we recognized an aggregate pre-tax gain of $128.5 million for the sales of VALARIS 113, VALARIS 114 and VALARIS 36. Additionally, we recognized a pre-tax gain of $7.0 million related to additional proceeds received for our 2020 sale of VALARIS 68, resulting from post-sale conditions of that sale agreement.

Gains recognized on sales of assets are included in Other, net on the Condensed Consolidated Statements of Operations.

Note 6 -Pension and Other Post-retirement Benefits

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.


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

We utilize cash flow hedges to hedge forecasted foreign currency denominated transactions, primarily to reduce our exposure to foreign currency exchange rate risk associated with contract drilling expenseshave defined-benefit pension plans and ~~capital expenditures denominated in various currencies. As~~retiree medical plans that provide post-retirement health and life insurance benefits.

The components of September 30, 2017, we had cash flow hedges outstanding to exchange an aggregate $164.0 million for various foreign currencies, including $74.4 million for British pounds, $33.8 million for Australian dollars, $23.3 million for euros, $20.3 million for Brazilian realsnet periodic pension and ~~$12.2 million for other currencies.~~

~~Gains and losses, net of tax, on derivatives designated as cash flow hedges included in our condensed consolidated statements of operations and comprehensive (loss)~~retiree medical income were as follows (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022

Interest cost	$	7.9	$	5.7	$	23.4	$	16.8
Expected return on plan assets	(7.9)		(9.7)		(23.4)		(28.8)
Amortization of net gain	(0.1)		—		(0.3)		(0.1)
Net periodic pension and retiree medical income (1)	$	(0.1)	$	(4.0)	$	(0.3)	$	(12.1)

~~Three Months Ended September 30, 2017~~ ~~and~~ ~~2016~~

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

~~Nine Months Ended September 30, 2017~~ ~~and~~ ~~2016~~

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.~~

⁽⁴⁾

~~During the~~ ~~three-month~~ ~~period ended~~ ~~September 30, 2017, there were~~ no ~~net amounts reclassified from AOCI into contract drilling expense and~~ ~~$200,000~~ of ~~gains~~ ~~were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the~~ ~~three-month~~ ~~period ended~~ ~~September 30, 2016~~, ~~$2.3 million~~ of ~~losses~~ ~~were reclassified from AOCI into contract drilling expense and $200,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.~~

⁽⁵⁾

~~During the~~ ~~nine-month~~ ~~period ended~~ ~~September 30, 2017~~, ~~$1.4 million~~ of ~~losses~~ ~~were reclassified from AOCI into contract drilling expense and~~ ~~$600,000~~ of ~~gains~~ ~~were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations. During the~~ ~~nine-month~~ ~~period ended~~ ~~September 30, 2016, $10.5 million of~~ ~~losses~~ ~~were reclassified from AOCI into contract drilling expense and $600,000 of gains were reclassified from AOCI into depreciation expense in our condensed consolidated statement of operations.~~

~~We have net assets and liabilities denominated~~(1)Included in numerous foreign currencies and use various methods to manage our exposure to foreign currency exchange rate risk. We predominantly structure our drilling contracts in U.S. dollars, which significantly reduces the portion of our cash flows and assets denominated in foreign currencies. We occasionally enter into derivatives that hedge the fair value of recognized foreign currency denominated assets or liabilities but 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, including~~ ~~$94.4 million~~ ~~for euros, $12.3 million for British pounds, $10.1 million for Brazilian reals, $7.7 million for Australian dollars and~~ ~~$12.6 million~~ ~~for other currencies.~~

~~Net~~ ~~gains~~ ~~of $2.7 million and net losses~~ of ~~$400,000 associated with our derivatives not designated as hedging instruments were included in other,~~Other, net, in our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations for the~~ ~~three-month~~ ~~periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, respectively. Net~~ ~~gains~~ ~~of $8.9 million and $500,000 associated with our derivatives not designated as hedging instruments were included in other, net, in our condensed consolidated statements of operations for the~~ ~~nine-month~~ ~~periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016, respectively. These gains and losses were largely offset by net foreign currency exchange gains and losses during the respective periods.~~Operations.

~~As of~~ ~~September 30, 2017, the estimated amount of net~~ ~~gains~~ ~~associated with derivative instruments, net of tax, that would be reclassified into earnings during the next twelve months totaled~~ ~~$3.3 million~~.

~~Note 5 -~~ ~~Noncontrolling Interests~~

Third parties hold a noncontrolling ownership interest in certain of our non-U.S. subsidiaries. Noncontrolling interests are classified as equity on our condensed consolidated balance sheets, and net income attributable to noncontrolling interests is presented separately in our condensed consolidated statements of operations.

~~(Loss) income from continuing operations attributable to Ensco for the~~ ~~three-month and nine-month~~ ~~periods ended~~ ~~September 30, 2017~~ ~~and~~ ~~2016~~ ~~was as follows (in millions):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2017 2016 2017 2016
(Loss) income from continuing operations $ (28.0 ) $ 88.0
$ (96.7 ) $ 858.4
Loss (income) from continuing operations attributable to noncontrolling interests 2.8
(2.0 ) .5
(5.4 )
(Loss) income from continuing operations attributable to Ensco $ (25.2 ) $ 86.0
$ (96.2 ) $ 853.0

Note 67 -Earnings Per Share

~~We compute basic and diluted~~Basic earnings per share ~~("EPS") in accordance with the two-class method. Net (loss) income attributable to Ensco used in our computations of basic and diluted EPS~~ is ~~adjusted to exclude~~computed by dividing net income ~~allocated~~available to ~~non-vested~~common shareholders by the weighted-average number of common shares ~~granted to our employees and non-employee directors.~~outstanding during the period. Weighted-average shares outstanding used in our computation of diluted EPS is calculated using the treasury stock method and ~~excludes non-vested shares.~~includes the effect of all potentially dilutive stock equivalents, including warrants, restricted stock unit awards and performance stock unit awards.

The following table is a reconciliation of ~~(loss) income from continuing operations attributable to Ensco~~the weighted-average shares used in our basic and diluted EPS computations for the ~~three-month~~three and ~~nine-month~~ ~~periods~~nine months ended September 30, ~~2017~~2023 and ~~2016~~2022 (in millions):

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


	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Income from continuing operations attributable to our shares	$	12.9	$	74.3	$	30.2	$	147.3
Weighted average shares outstanding:
Basic	73.7		75.1		74.6		75.0

Effect of stock equivalents	1.1		0.5		1.1		0.5


Diluted	74.8		75.6		75.7		75.5


⁽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.

~~Antidilutive~~Anti-dilutive share awards totaling ~~1.3 million~~35,000 and ~~1.2 million~~104,000 were excluded from the computation of diluted EPS for the ~~three-month~~three and ~~nine-month periods~~nine months ended September 30, ~~2017~~2023, respectively.

Anti-dilutive share awards totaling 38,000 and ~~2016,~~103,000 were excluded from the computation of diluted EPS for the three and nine months ended September 30, 2022, respectively.

We had 5,470,950 warrants outstanding (the "Warrants") as of September 30, 2023 to purchase common shares of Valaris Limited (the "Common Shares") which are exercisable for one Common Share per Warrant at an initial exercise price of $131.88 per Warrant and expire on April 29, 2028. The exercise of these Warrants into Common Shares would have a dilutive effect to the ~~option~~holdings of Valaris Limited's existing shareholders. These warrants are anti-dilutive for all periods presented.

Note 8 -Debt

First Lien Notes

On April 3, 2023, the Company issued a notice of conditional redemption to ~~settle~~the holders of the Senior Secured First Lien Notes due 2028 (the "First Lien Notes") at a redemption price equal to 104.0% of the aggregate $550.0 million principal amount of the First Lien Notes plus accrued and unpaid interest to, but not including, the redemption date (the “Redemption Price”). On April 19, 2023, in connection with the issuance of our ~~2024 Convertible~~Second Lien Notes, ~~in cash, shares or a combination thereof~~as discussed below, the Company discharged its obligations under the indenture governing the First Lien Notes and deposited the Redemption Price with Wilmington Savings Fund Society, as trustee under such indenture. The First Lien Notes were redeemed on May 3, 2023 for an aggregate redemption price of $571.8 million (excluding accrued and unpaid interest). We accounted for the redemption as an extinguishment of debt and reported a corresponding loss of $29.2 million in the second quarter of 2023, which is included in our Condensed Consolidated Statements of Operations for the nine months ended September 30, 2023.

Second Lien Notes

On April 19, 2023, the Company and Valaris Finance Company LLC (“Valaris Finance”), a wholly-owned subsidiary, issued and sold $700.0 million aggregate principal amount ~~due upon conversion. Our intent~~of Second Lien Notes (the "Initial Second Lien Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act of

1933, as amended (the “Securities Act”). The Initial Second Lien Notes were issued at par for net proceeds of $681.4 million, after deducting the initial purchasers’ discount and offering expenses. A portion of the proceeds were used to fund the redemption of all of the outstanding First Lien Notes as discussed above.

On August 21, 2023, the Company and Valaris Finance issued $400.0 million aggregate principal amount of additional Second Lien Notes (the "Additional Notes") in a private placement conducted pursuant to Rule 144A and Regulation S under the Securities Act. The Additional Notes were issued at 100.75% of par, plus accrued interest from April 19, 2023. The net proceeds were approximately $396.9 million after deducting the initial purchasers’ discount and estimated offering expenses, and excluding accrued interest received of $11.4 million.

The Initial Second Lien Notes and the Additional Notes were issued under the Indenture, dated as of April 19, 2023 (the "Indenture"), and mature on April 30, 2030. The Second Lien Notes bear an interest rate of 8.375% per annum with an effective interest rate of 8.76%. Interest is payable semi-annually in arrears on April 30 and October 30 of each year, beginning on October 30, 2023. The Second Lien Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by the Guarantors and by each of the Company’s future restricted subsidiaries (other than Valaris Finance) that guarantees any debt of the Issuers or any guarantor under certain future debt in an aggregate principal amount in excess of a certain amount. The Second Lien Notes and the related guarantees are secured on a second-priority basis by the Collateral (as defined below).

On or after April 30, 2026, the Issuers may, at their option, redeem all or any portion of the Second Lien Notes, at once or over time, at the redemption prices set forth below, plus accrued and unpaid interest, if any, to, ~~settle~~but not including, the redemption date. The following prices are for Second Lien Notes redeemed during the 12-month period commencing on April 30 of the years set forth below, and are expressed as percentages of principal amount:


Redemption Year			Price
2026			104.188%
2027			102.094%
2028 and thereafter			100.000%

At any time prior to April 30, 2026, the Issuers may, on any one or more occasions, redeem up to 40.0% of the aggregate principal amount of the Second Lien Notes issued under the Indenture (including any additional Second Lien Notes issued in the future) with an amount equal to or less than the net cash proceeds of certain equity offerings, at a redemption price equal to 108.375% of the principal amount thereof, plus accrued and unpaid interest thereon, if any, to but not including, the redemption date. In addition, at any time prior to April 30, 2026, the Issuers may redeem up to 10.0% of the aggregate principal amount of the Second Lien Notes during any twelve-month period at a redemption price equal to 103.0% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the redemption date.

At any time prior to April 30, 2026, the Issuers may redeem some or all of the Second Lien Notes at a price equal to 100.0% of the principal amount of the ~~2024 Convertible~~Second Lien Notes ~~in cash upon conversion. If~~redeemed, plus accrued and unpaid interest, if any, to, but not including, the ~~conversion value exceeds~~redemption date, plus a “make-whole” premium.

The Indenture contains covenants that, among other things, restrict the ~~principal amount (i.e., our share price exceeds~~Company’s ability and the ~~exchange price on the date~~ability of ~~conversion), we expect to deliver shares equal to the remainder~~certain of ~~our conversion obligation in excess of the principal amount.~~

During each reporting period that our average share price exceeds the exchange price, an assumed number of shares required to settle the conversion obligation in excess of the principal amount will be included in our denominator for the computation of diluted EPS using the treasury stock method. Our average share price did not exceed the exchange price during the three-month or nine-month periods ended September 30, 2017.

~~Note 7 -Debt~~

~~Exchange Offers~~

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 million aggregate principal amount of our outstanding senior notes that were settled and exchanged as follows (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


⁽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.

~~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~~its subsidiaries to: (i) incur additional debt and ~~$2.7 million of transaction costs.~~

~~Open Market Repurchases~~

~~During the nine-month period ended September 30, 2017, we repurchased~~issue certain ~~of our outstanding senior notes with cash on hand~~preferred stock; (ii) incur or create liens; (iii) make certain distributions, investments 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


⁽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.~~

~~Revolving Credit Facility~~

In October 2017, we amended our revolving credit facility ("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 our 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, transferringother restricted payments; (iv) sell or otherwise ~~disposing~~dispose of certain assets; (v) engage in certain transactions with affiliates; and (vi) merge, consolidate, amalgamate or sell, transfer, lease or otherwise dispose of all or substantially all of the Company’s assets. These covenants are subject to important exceptions and qualifications. In addition, many of these covenants will be suspended with respect to the Second Lien Notes during any time that the Second Lien Notes have investment grade ratings from at least two rating agencies and no default with respect to the Second Lien Notes has occurred and is continuing. As of September 30, 2023, we were in compliance with our ~~assets; making a material change~~covenants under the Indenture.

Upon the occurrence of certain Change of Control Triggering Event (as defined in the ~~nature~~Indenture), the Issuers may be required to make an offer to repurchase all of the ~~business; paying or distributing dividends~~Second Lien Notes then outstanding at a price equal to 101.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to, but not including, the repurchase date.

Senior Secured Revolving Credit Facility

On April 3, 2023, the Company entered into a senior secured revolving credit agreement (the “Credit Agreement”). The Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, by an additional $200.0 million pursuant to the terms of the Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. Valaris Finance and certain other subsidiaries of the Company (together with Valaris Finance, the “Guarantors”) guarantee the Company’s obligations under the Credit Agreement, and the lenders have a first priority lien on ~~our ordinary shares (subject~~the assets securing the Credit Agreement. The commitments under the Credit Agreement became available to be borrowed on April 19, 2023 (the "Availability Date").

The Credit Agreement and the related guarantees are secured on a first-priority basis, subject to permitted liens, by (a) first preferred ship mortgages over each vessel owned by us and the Guarantors as of the Availability Date, with certain exceptions ~~including~~(the “Collateral Vessels”); (b) first priority assignments of certain insurances and requisition compensation in respect of the ~~ability to continue paying a quarterly dividend~~Collateral Vessels; (c) first priority pledges of ~~$0.01 per share)~~all equity interests in our subsidiaries that own Collateral Vessels and certain subsidiaries that hold equity interests in entities that own vessels (the “Collateral Rig Owners”); ~~borrowings, if after giving effect to~~(d) first priority assignments of earnings of the Collateral Vessels from the Collateral Rig Owners; (e) any ~~such borrowings~~vessels and other assets of ours and the ~~application of~~Guarantors that are pledged, at our option, to secure the Credit Agreement; and (f) all proceeds thereof (the "Collateral").

Amounts borrowed under the ~~aggregate amount~~Credit Agreement are subject to an interest rate per annum equal to, at our option, either (a) a base rate determined as the greatest of ~~available cash~~(i) a prime rate, (ii) the federal funds rate plus 0.5% and (iii) Term SOFR (as defined in the Credit ~~Facility) would exceed $150 million;~~Agreement) for a one month interest period plus 1.1% (such base rate to be subject to a 1% floor) or (b) Term SOFR plus 0.10% (subject to a 0% floor), plus, in each case of clauses (a) and ~~entering into certain transactions~~(b) above, an applicable margin ranging from 1.50% to 3.00% and 2.50% to 4.00%, respectively, based on the credit ratings that are one notch higher than the corporate family ratings provided by Standard & Poor’s Financial Services LLC (“S&P”) and Moody’s Investors Service, Inc. (“Moody’s”) with ~~affiliates.~~respect to Valaris Limited.

In addition to paying interest on outstanding borrowings under the Credit Agreement, we are required to pay a quarterly commitment fee to the lenders under the Credit Agreement with respect to the average daily unutilized commitments thereunder at a rate ranging from 0.375% to 0.75% depending on the credit ratings that are one notch higher than the corporate family ratings provided by S&P and Moody’s with respect to Valaris Limited. With respect to each letter of credit issued pursuant to the Credit Agreement, we are required to pay a letter of credit fee equal to the applicable margin in effect for Term SOFR loans and a fronting fee in an amount to be mutually agreed between us and the issuer of such letter of credit. We are also required to pay customary agency fees in respect of the Credit Agreement.

The Credit ~~Facility also includes~~Agreement contains various covenants that limit, among other things, our and our restricted subsidiaries’ ability to: incur indebtedness; grant liens; dispose of certain assets; make certain acquisitions and investments; redeem or prepay other debt or make other restricted payments such as distributions to shareholders; enter into transactions with affiliates; enter into sale-leaseback transactions; and enter into a ~~covenant restricting our ability to repay indebtedness maturing after September 2022, which is~~merger, amalgamation, consolidation or sale of assets. Further, the ~~final maturity date of our~~ Credit ~~Facility. This covenant is subject to certain exceptions~~Agreement contains financial covenants that ~~permit~~require us to ~~manage our balance sheet, including the ability~~maintain (i) a minimum book value of equity to ~~make repayments~~total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount 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.liquidity.

As of September 30, ~~2017,~~2023, we were in compliance in all material respects with our covenants under the Credit ~~Facility.~~Agreement. We had no amounts outstanding under the Credit ~~Facility~~Agreement as of September 30, ~~2017 and December 31, 2016.~~2023.

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

AsActivity in our various shareholders' equity accounts for the three and nine months ended September 30, 2023 and 2022 were as follows (in millions):


	Shares Issued	Par Value		Additional Paid-in Capital		Warrants		Retained Earnings		AOCI		Treasury Shares		Non-controlling Interest
BALANCE, December 31, 2022	75.2	$	0.8	$	1,097.9	$	16.4	$	160.1	$	14.7	$	—	$	8.0
Net income	—	—		—		—		46.7		—		—		1.9
Share-based compensation cost	—	—		5.7		—		—		—		—		—
Net changes in pension and other postretirement benefits	—	—		—		—		—		(0.1)		—		—
Net other comprehensive loss	—	—		—		—		—		(0.1)		—		—
BALANCE, March 31, 2023	75.2	$	0.8	$	1,103.6	$	16.4	$	206.8	$	14.5	$	—	$	9.9
Net income (loss)	—	—		—		—		(29.4)		—		—		2.1
Share-based compensation cost	—	—		7.0		—		—		—		—		—
Repurchase of Common Shares	—	—		—		—		—		—		(65.0)		—
Net changes in pension and other postretirement benefits	—	—		—		—		—		(0.1)		—		—
Shares withheld for taxes on vesting of share-based awards	—	—		(0.3)		—		—		—		—		—
Net other comprehensive loss	—	—		—		—		—		(0.2)		—		—
BALANCE, June 30, 2023	75.2	$	0.8	$	1,110.3	$	16.4	$	177.4	$	14.2	$	(65.0)	$	12.0
Net income	—	—		—		—		12.9		—		—		4.1
Share-based compensation cost	—	—		6.8		—		—		—		—		—
Shares issued under share-based compensation plans, net	0.2	—		—		—		—		—		—		—
Repurchase of Common Shares	—	—		—		—		—		—		(85.0)		—
Net changes in pension and other postretirement benefits	—	—		—		—		—		(0.1)		—		—
Shares withheld for taxes on vesting of share-based awards	—	—		(4.9)		—		—		—		—		—
Net other comprehensive income	—	—		—		—		—		0.1		—		—
BALANCE, September 30, 2023	75.4	$	0.8	$	1,112.2	$	16.4	$	190.3	$	14.2	(150.0)		$	16.1


	Shares Issued	Par Value		Additional Paid-in Capital		Warrants		Retained Earnings (Deficit)		AOCI		Non-controlling Interest
BALANCE, December 31, 2021	75.0	$	0.8	$	1,083.0	$	16.4	$	(16.4)	$	(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	75.0	$	0.8	$	1,086.4	$	16.4	$	(55.0)	$	(9.4)	$	1.5
Net income	—	—		—		—		111.6		—		1.2
Net changes in pension and other postretirement benefits	—	—		—		—		—		(0.1)		—
Share-based compensation cost	—	—		3.5		—		—		—		—
Shares withheld for taxes on vesting of share-based awards	—	—		(0.2)		—		—		—		—
Net other comprehensive income	—	—		—		—		—		0.3		—
BALANCE, June 30, 2022	75.0	$	0.8	$	1,089.7	$	16.4	$	56.6	$	(9.2)	$	2.7
Net income	—	—		—		—		74.3		—		3.4
Share-based compensation cost	—	—		4.6		—		—		—		—
Shares withheld for taxes on vesting of share-based awards	—	—		(2.3)		—		—		—		—
Net other comprehensive income	—	—		—		—		—		0.1		—
BALANCE, September 30, 2022	75.0	$	0.8	$	1,092.0	$	16.4	$	130.9	$	(9.1)	$	6.1

Share Repurchase Program

In 2022, our board of directors authorized a ~~U.K. company governed in part by the Companies Act,~~share repurchase program under which we cannot issue new shares (other than in limited circumstances) without being authorized by our shareholders. At our last annual general meeting held 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 or other similar issue) for a periodmay purchase up to ~~the conclusion~~$100.0 million of our ~~2018 annual general meeting (or, if earlier, at~~outstanding Common Shares. In April 2023, the ~~close~~board of ~~business on August 22, 2018).~~

~~On October 5, 2017 in conjunction with the approval of the Merger, our shareholders~~directors authorized an increase inof this amount to $300.0 million. The share repurchase program does not have a fixed expiration, may be modified, suspended or discontinued at any time and is subject to compliance with applicable covenants and restrictions under our ~~allotment to reflect our expected enlarged share capital immediately following~~financing agreements. During the ~~completion~~three months ended September 30, 2023, we repurchased 1.2 million shares at an aggregate cost of $85.0 million at an average price of $73.30. During the ~~Merger. As a result~~nine months ended September 30, 2023, we repurchased 2.3 million shares at an aggregate cost of ~~the authorization, our share allotment increased to 146.1~~$150.0 million ~~Class A ordinary shares (or 292.2 million Class A ordinary shares in connection with~~at an ~~offer by way~~average price of ~~a rights issue or other similar issue).~~$66.24.

~~In connection with the Merger on October 6, 2017, we issued 134.1 million Ensco Class A ordinary shares to Atwood shareholders.~~

Note 910 -Income Taxes

~~We have historically~~Historically, we 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 and ~~nine-month periods~~nine months ended September 30, ~~2017. We~~2023 and 2022, and therefore, we used a discrete effective tax rate method to calculate income taxes for ~~the three-month and nine-month periods ended September 30, 2017.~~each of these periods. 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~~2023 was ~~$3.2~~$2.0 million and ~~resulted~~was primarily ~~from a rig sale and resolutions~~attributable to the resolution of prior ~~year~~period 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 liabilitymatters, partially offset by changes in liabilities for unrecognized tax benefits associated with a tax ~~position~~positions taken in prior ~~years and other resolutions of prior year tax matters.~~

~~Our consolidated effective~~years. Discrete income tax ~~rate~~benefit of $39.5 million for the ~~three-month and nine-month periods~~nine months ended September 30, ~~2016, excluding the impact of discrete tax items,~~2023 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 and the resolution of other ~~resolutions of~~ prior ~~year~~period tax matters. ~~Discrete~~Excluding the aforementioned discrete tax items, income tax expense for the ~~nine-month period~~three and nine months ended September 30, ~~2016 also resulted from restructuring transactions involving certain~~2023 was $12.7 million and $47.1 million, respectively.

A substantial portion of our ~~subsidiaries.~~deferred tax assets are subject to a valuation allowance. During the three months ended September 30, 2023, we recognized a $6.2 million deferred tax benefit from the reduction of valuation allowances on deferred tax assets for a change in estimated future taxable income in certain operating jurisdictions. We intend to continue maintaining a valuation allowance on a substantial portion of our deferred tax assets until there is sufficient evidence to support a reversal of such allowances. However, given the current operating environment and our anticipated future earnings, we believe there is a reasonable possibility that sufficient positive evidence may become available to allow us to reach a conclusion that a portion of the valuation allowance on deferred tax assets will no longer be needed. A reduction in our valuation allowance would result in the recognition of a deferred tax benefit during the period in which the reduction is recognized. The timing and amount of future valuation allowance reductions are subject to future levels of contracting and profitability achieved.

Discrete income tax expense for the three months ended September 30, 2022 was $1.4 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years, partially offset by discrete tax benefits attributable to the resolution of other prior period tax matters. Discrete income tax benefit for the nine months ended September 30, 2022 was $6.9 million and was primarily attributable to changes in liabilities for unrecognized tax benefits associated with tax positions taken in prior years and resolution of other prior period tax matters, partially offset by discrete tax expense attributable to income associated with a contract termination. Excluding the aforementioned discrete tax items, income tax expense for the three and nine months ended September 30, 2022 was $12.4 million and $40.2 million, respectively.

Note 1011 -Contingencies

~~Brazil Internal Investigation~~ARO Newbuild Funding Obligations

~~Pride International LLC, formerly Pride International, Inc. (“Pride”),~~In connection with our 50/50 unconsolidated joint venture, we have a ~~company we acquired~~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. In January 2020, ARO paid 25% of the purchase price from cash on hand for each of the two newbuilds, and in ~~2011, commenced drilling operations in Brazil in 2001. In 2008, Pride~~October 2023, entered into a $359.0 million term loan to finance the remaining payments due upon delivery and for general corporate purposes. The term loan matures in eight years following the related drawdown under the term loan and requires equal quarterly amortization payments during the term, with a 50% balloon payment due at maturity. The term loan bears interest based on the three-month Secured Overnight Financing Rate (SOFR) plus a margin ranging from 1.25% to 1.4%. Our Notes Receivable from ARO are subordinated and junior in right of payment to ARO’s term loan. 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. Beginning with the delivery of the second newbuild, each partner's commitment shall be reduced by the actual cost of each newbuild rig, as delivered, on a proportionate basis.

Letters of Credit

In the ordinary course of business with customers and 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 other obligations in various jurisdictions. Letters of credit outstanding as of September 30, 2023 totaled $95.8 million and are issued under facilities provided by various banks and other financial institutions, but none were issued under the Credit Agreement. Obligations under these letters of credit are not normally called, as we typically comply with the underlying performance requirements. As of September 30, 2023, we had collateral deposits in the amount of $14.0 million with respect to these agreements.

Patent Litigation

In December 2022, a subsidiary of Transocean Ltd. commenced an arbitration proceeding against us alleging breach of a license agreement related to certain dual-activity drilling patents. We are unable to estimate our potential exposure, if any, to the proceeding at this time but do not believe that our ultimate liability, if any, resulting from this proceeding will have a material effect on our consolidated financial condition, results of operations or cash flows. We do not believe that we have breached the license agreement and intend to defend ourselves vigorously against this claim.

Brazil Administrative Proceeding

In July 2023, we received notice of an administrative proceeding initiated against us in Brazil. Specifically, the Federal Court of Accounts ("TCU") is seeking from us, Samsung Heavy Industries (“SHI”) and others, on a joint and several basis, a total of approximately BRL 601 million (approximately $120.0 million at the current quarter-end exchange rates) in damages that TCU asserts arose from the overbilling to Petrobras in 2015 in relation to the drilling services agreement with Petrobras for VALARIS DS-5 (the ~~"DSA") for ENSCO DS-5, a drillship ordered from Samsung Heavy Industries, a shipyard in South Korea ("SHI"~~“DSA”). ~~Beginning~~As fully disclosed in ~~2006, Pride conducted~~our prior periodic ~~compliance reviews~~reports, the DSA was previously the subject 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~~(1) 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 ~~U.S.~~U.S Department of Justice, ~~("DOJ"), respectively,~~each of which closed their investigation of us in 2018 without any enforcement action, (2) an arbitration proceeding against SHI in which we prevailed resulting in SHI making a $200.0 million cash payment 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 expiredus in December ~~2016.~~2019, and (3) a settlement with Petrobras normalizing our business relations in August 2018. We ~~extended our tolling agreement with~~plan to vigorously defend ourselves against 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.

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.

~~In August 2017, one of our Brazilian subsidiaries was contacted~~allegations made by the ~~Office of the Attorney General for the Brazilian state of Paraná~~TCU. Because these proceedings are in ~~connection with a criminal investigation procedure initiated against agents of both SHI and Pride in relation~~their initial stages, we are unable 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. Although our internal investigation is substantially complete, we cannot predict whether any additional allegations will be made or whether any additional facts relevant to the investigation will be uncovered during the course of the investigation and what impact those allegations and additional facts will have on the timing or conclusions of the investigation. Our Audit Committee will examine any such additional allegations and additional facts and the circumstances surrounding them.

~~DSA Dispute~~

As described above, on January 4, 2016, Petrobras sent a notice to us declaring the DSA void effective immediately, reserving its rights and stating its intention to seek any restitution to which it may be entitled. We disagree with Petrobras’ declaration that the DSA is void. We believe that Petrobras repudiated the DSA and have therefore accepted the DSA as terminated on April 8, 2016 (the "Termination Date"). At this time, we cannot reasonably determine

~~the validity of Petrobras' claim or the range of~~estimate our potential exposure, if ~~any. As a result, there can be no assurance as to how~~any, at this ~~dispute will ultimately be resolved.~~time.

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.

~~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.

~~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~~four 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.~~ third parties and the activities associated with our arrangements with ARO under the Lease Agreements. Floaters, Jackups and ARO are also reportable segments.

Our ~~two~~ ~~reportable~~onshore support costs included within Contract drilling expenses are not allocated to our operating segments ~~Floaters~~for purposes of measuring segment operating income (loss) and ~~Jackups, provide one service, contract drilling.~~

~~Segment information for the three-month and nine-month periods ended 2017 and 2016 is presented below (in millions).~~as such, those costs are included in “Reconciling Items.” 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."~~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 and nine months ended September 30, 2023 and 2022, respectively, are presented below (in millions):

Three Months Ended September 30, ~~2017~~2023


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	243.3	$	165.9	$	121.5	$	45.9	$	(121.5)	$	455.1
Operating expenses
Contract drilling (exclusive of depreciation)	215.2		121.7		92.0		18.8		(56.8)		390.9

Depreciation	14.2		10.2		15.8		1.3		(15.7)		25.8
General and administrative	—		—		5.6		—		18.6		24.2
Equity in earnings of ARO	—		—		—		—		2.4		2.4
Operating income	$	13.9	$	34.0	$	8.1	$	25.8	$	(65.2)	$	16.6
Property and equipment, net	$	609.1	$	443.0	$	873.4	$	53.3	$	(818.9)	$	1,159.9

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~~2022


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	201.7	$	195.9	$	111.4	$	39.6	$	(111.4)	$	437.2
Operating expenses
Contract drilling (exclusive of depreciation)	160.5		128.0		90.0		17.8		(59.6)		336.7

Depreciation	12.6		8.7		15.4		1.2		(15.3)		22.6
General and administrative	—		—		4.7		—		14.5		19.2

Equity in earnings of ARO	—		—		—		—		2.9		2.9
Operating income	$	28.6	$	59.2	$	1.3	$	20.6	$	(48.1)	$	61.6
Property and equipment, net	$	473.4	$	386.7	$	757.7	$	57.7	$	(721.9)	$	953.6

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~~2023


	Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	685.5	$	480.3	$	362.9	$	134.6	$	(362.9)	$	1,300.4
Operating expenses
Contract drilling (exclusive of depreciation)	586.0		394.1		277.9		57.2		(173.6)		1,141.6

Depreciation	40.8		28.8		46.4		3.8		(46.2)		73.6
General and administrative	—		—		15.9		—		59.1		75.0

Equity in earnings of ARO	—		—		—		—		5.0		5.0
Operating income	$	58.7	$	57.4	$	22.7	$	73.6	$	(197.2)	$	15.2
Property and equipment, net	$	609.1	$	443.0	$	873.4	$	53.3	$	(818.9)	$	1,159.9

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~~

2022


	Floaters		Jackups		Other		Operating Segments Total		Reconciling Items			Consolidated Total			Floaters		Jackups		ARO		Other		Reconciling Items		Consolidated Total
Revenues	$	1,468.3	$	743.0	$	60.5	$	2,271.8	$	—		$	2,271.8	Revenues	$	489.5	$	562.4	$	339.1	$	117.0	$	(339.1)	$	1,168.9
Operating expenses														Operating expenses
Contract drilling (exclusive of depreciation)	573.6		390.0		48.4		1,012.0		—			1,012.0		Contract drilling (exclusive of depreciation)	473.4		409.4		256.3		58.0		(167.3)		1,029.8
Loss on impairment														Loss on impairment	34.5		—		—		—		—		34.5
Depreciation	231.0		90.8		—		321.8		13.3			335.1		Depreciation	37.1		26.5		47.3		3.4		(46.9)		67.4
General and administrative	—		—		—		—		76.1			76.1		General and administrative	—		—		13.1		—		43.9		57.0
Operating income	$	663.7	$	262.2	$	12.1	$	938.0	$	(89.4	)	$	848.6

Equity in earnings of ARO														Equity in earnings of ARO	—		—		—		—		15.9		15.9
Operating income (loss)														Operating income (loss)	$	(55.5)	$	126.5	$	22.4	$	55.6	$	(152.9)	$	(3.9)
Property and equipment, net	$	8,360.4	$	2,537.9	$	—	$	10,898.3	$	61.4		$	10,959.7	Property and equipment, net	$	473.4	$	386.7	$	757.7	$	57.7	$	(721.9)	$	953.6

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.

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,~~2019, 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~~$0.4 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.~~2023 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~~2022, and "Item 1A. Risk ~~Factors”~~Factors" in Part II of our ~~quarterly report~~Quarterly Report on Form 10-Q for the ~~quarter ended June 30, 2017, each of~~quarterly period March 31, 2023, 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

In 2022, our board of directors authorized a share repurchase program under which we may purchase up to $100.0 million of our outstanding Common Shares. In April 2023, the board of directors authorized an increase of this amount to $300.0 million. The share repurchase program does not have a fixed expiration, may be modified, suspended or discontinued at any time and is subject to compliance with applicable covenants and restrictions under our financing agreements.

The following table ~~below~~ provides a summary of our repurchases of our equity securities during the quarter ended September 30, 2023 (in millions, except average price per share):


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

July 1 - July 31	0.4	$	70.59	0.4	$	207.6
August 1 - August 31	0.4	$	74.25	0.4	$	176.8
September 1 - September 30	0.4	$	75.15	0.4	$	150.0
Total	1.2	$	73.30	1.2	$	150.0

Item 5. Other Information

During the three months ended September 30, 2023, no director or officer of the Company adopted or terminated a "Rule 10b5-1 trading arrangement" or "non-Rule 10b5-1 trading arrangement," as each term is defined in Item 408(a) of Regulation S-K.

As disclosed in prior filings, in August 2017,: one of our Brazilian subsidiaries was contacted by the Federal Prosecutor’s Office in the State of Paraná in connection with a criminal investigation procedure initiated against agents of both Samsung Heavy Industries, a shipyard in South Korea, and Pride International LLC, a legacy Valaris entity, ("Pride") in relation to the drilling services agreement with Petrobras for VALARIS DS-5 (the "DSA"). The Brazilian authorities requested information regarding our compliance program and the findings of our internal investigations relating to the DSA. We cooperated with the Federal Prosecutor’s Office and provided documents in response to its request.

In October 2023, we were informed that the Coordination Chamber of the Brazilian Federal Prosecutor's Offices had formally closed the criminal investigation with no accusations of wrongdoing being brought against former employees of Pride. We cannot predict whether any Brazilian governmental authority will open any further investigation into Pride’s involvement in this matter, or if an additional proceeding were opened, the scope or ultimate outcome of any such investigation.

While this closes the criminal investigation, the Brazil administrative proceeding with the Federal Court of Accounts is ongoing. For more information, see "Note 1 1 - Contingencies" to our consolidated financial statements included in "Item 1. Financial Statements."

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

~~Exhibit Number~~		~~Exhibit~~
~~2.1~~			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~~*31.1			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 September 30, 2023, formatted in Inline XBRL (included with Exhibit 101 attachments).

* Filed herewith.

** Furnished herewith.

+ Management contract or compensatory plan and arrangement required to be filed as an exhibit pursuant to Item 6 of this report.

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:		November 7, 2023	/s/ CHRISTOPHER T. WEBER
			Christopher T. Weber Senior Vice President and Chief Financial Officer

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


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

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


PART I FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS



Condensed Consolidated Statements of Operations For the Three and Nine Months Ended September 30, 2023 and 2022		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 For the Three and Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022	6


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

Condensed Consolidated Balance Sheets September 30, ~~2017~~2023 and December 31, ~~2016~~2022	87

Condensed Consolidated Statements of Cash Flows For the Nine Months Ended September 30, ~~2017~~2023 and ~~2016~~2022		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		5947

ITEM 4. CONTROLS AND PROCEDURES		5947

PART II OTHER INFORMATION		48

ITEM 1. LEGAL PROCEEDINGS		6048

ITEM 1A. RISK FACTORS		6348

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS		6448

ITEM 5. OTHER INFORMATION		49

ITEM 6. EXHIBITS		6550

SIGNATURES		6651



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

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

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	301.2			298.6

CASH DIVIDENDS PER SHARE	$	0.01		$	0.01



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

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

WEIGHTED-AVERAGE SHARES OUTSTANDING
Basic and Diluted	300.9			272.0

CASH DIVIDENDS PER SHARE	$	0.03		$	0.03


	September 30, 2023		December 31, 2022
Trade	$	435.5	$	345.7
Income tax receivables	50.9		93.6
Other	21.7		24.6
	508.1		463.9
Allowance for doubtful accounts	(15.7)		(14.8)
	$	492.4	$	449.1



	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



~~(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



(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



	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	)



	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



	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



	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



	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


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



	September 30, 2017		December 31, 2016
Inventory	$	219.7	$	225.2
Prepaid taxes	35.8		30.7
Deferred costs	31.4		32.4
Prepaid expenses	14.1		7.9
Other	17.3		19.8
	$	318.3	$	316.0



	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


	September 30, 2023		December 31, 2022
Unrecognized tax benefits (inclusive of interest and penalties)	$	234.5	$	275.0
Pension and other post-retirement benefits	155.3		159.8
Noncurrent contract liabilities (deferred revenues)	43.3		41.0
Other	49.4		39.8
	$	482.5	$	515.6



	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


	Three Months Ended September 30, 2023								Three Months Ended September 30, 2022
	Floaters		Jackups		Other		Total		Floaters		Jackups		Other		Total
BP plc ("BP")	—	%	5	%	6	%	11	%	5	%	3	%	6	%	14	%
Eni S.p.A ("Eni")	1	%	4	%	—	%	5	%	—	%	4	%	—	%	4	%
Equinor ASA ("Equinor")	3	%	—	%	—	%	3	%	—	%	6	%	—	%	6	%
Other customers	49	%	28	%	4	%	81	%	41	%	32	%	3	%	76	%
	53	%	37	%	10	%	100	%	46	%	45	%	9	%	100	%


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


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


	Nine Months Ended September 30, 2023								Nine Months Ended September 30, 2022
	Floaters		Jackups		Other		Total		Floaters		Jackups		Other		Total
BP	1	%	5	%	6	%	12	%	5	%	3	%	6	%	14	%
Eni	5	%	6	%	—	%	11	%	—	%	6	%	—	%	6	%
Equinor	1	%	—	%	—	%	1	%	4	%	6	%	—	%	10	%
Other customers	46	%	26	%	4	%	76	%	33	%	33	%	4	%	70	%
	53	%	37	%	10	%	100	%	42	%	48	%	10	%	100	%


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


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


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

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

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


	November 1, 2023		February 21, 2023
Floaters (1)	$	1,986.0	$	1,376.9
Jackups(2)	921.6		742.3
Other (3)	250.5		344.0
Total	$	3,158.1	$	2,463.2
ARO (4)	$	2,290.7	$	1,731.8



	Three Months Ended				Change		% Change
	September 30, 2023		June 30, 2023
Revenues	$	455.1	$	415.2	$	39.9	10	%
Operating expenses
Contract drilling (exclusive of depreciation)	390.9		373.5		17.4		5	%

Depreciation	25.8		24.5		1.3		5	%
General and administrative	24.2		26.4		(2.2)		(8)	%
Total operating expenses	440.9		424.4		16.5		4	%

Equity in earnings (losses) of ARO	2.4		(0.7)		3.1		(443)	%
Operating income (loss)	16.6		(9.9)		26.5		(268)	%
Other income, net	11.1		7.1		4.0		56	%
Provision for income taxes	10.7		24.5		(13.8)		(56)	%
Net income (loss)	17.0		(27.3)		44.3		(162)	%
Net income attributable to noncontrolling interests	(4.1)		(2.1)		(2.0)		95	%
Net income (loss) attributable to Valaris	$	12.9	$	(29.4)	$	42.3	(144)	%


	Nine Months Ended				Change		% Change
	September 30, 2023		September 30, 2022
Revenues	$	1,300.4	$	1,168.9	$	131.5	11	%
Operating expenses
Contract drilling (exclusive of depreciation)	1,141.6		1,029.8		111.8		11	%
Loss on impairment	—		34.5		(34.5)		(100)	%
Depreciation	73.6		67.4		6.2		9	%
General and administrative	75.0		57.0		18.0		32	%
Total operating expenses	1,290.2		1,188.7		101.5		9	%

Equity in earnings of ARO	5.0		15.9		(10.9)		(69)	%
Operating income (loss)	15.2		(3.9)		19.1		(490)	%
Other income, net	30.7		187.9		(157.2)		(84)	%
Provision for income taxes	7.6		33.3		(25.7)		(77)	%
Net income	38.3		150.7		(112.4)		(75)	%
Net income attributable to noncontrolling interests	(8.1)		(3.4)		(4.7)		138	%
Net income attributable to Valaris	$	30.2	$	147.3	$	(117.1)	(79)	%



	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.~~