VAL 10-K & 10-Q changes, risk factors and insider trading

•the desire and ability of OPEC+, its members and certain other oil-producing nations, such as Russia, to reach further agreements to set and maintain production levels and pricing and to implement existing and future agreements, including the ability of OPEC+ to successfully coordinate and enforce production quotas,

•the worldwide military or political environment, including the Russia-Ukraine conflict and the conflicts in the Middle East and any related political or economic responses, global macroeconomic effects of trade disputes and increased tariffs, such as those imposed,imposed since February 2025, or that may be imposed, by the U.S. beginning in February 2025,U.S., and sanctions and uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas or geographic areas in which we operate, or acts of terrorism,

Higher commodity prices may not necessarily translate into increased activity, however, and even during periods of high commodity prices, customers may cancel or curtail their drilling programs, or reduce their levels of capital expenditures for exploration and production for a variety of reasons, including their expectations for future oil and natural gas prices, the cost of exploration efforts, extended periods of price volatility, their lack of success in exploration efforts and re-allocating capital expenditures for alternative fuels, energy sources or renewable energy projects.

As of February 18,17, 20252026 and February 15,18, 2024,2025, our contract backlog was approximately $3.6$4.7 billion and $3.9$3.6 billion, respectively. This amount reflects the remaining firm contractual terms multiplied by the applicable contractual day rate. The contractual revenue may be higher than the actual revenue we ultimately receive because of a number of factors, including rig downtime or suspension of operations.

Our ability to renew expiring contracts or obtain new contracts and the terms of any such contracts will depend on market conditions. For example, as of February 17, 2026, we havehad fourthree drillships that are uncontracted.preservation stacked. Our customers’ decisions to exercise option periods resulting in additional work for the rig under contract also depend on market conditions. We may be unable to renew our expiring contracts, including contracts expiring due to a failure by the customer to exercise option periods, or obtain new contracts for any of our uncontracted drilling rigs or the drilling rigs under contracts that have expired or have been terminated. In addition, the day rates under any new contracts or any renegotiated contracts may be substantially below the existing day rates, which could materially adversely affect our financial position, operating results or cash flows. If customers do not exercise option periods under contracts that we currently expect to be exercised, we may face increased idle time associated with the related rigs, as we may have difficulty securing additional work to cover the option periods. In addition, we may choose to stack idle rigs that are not under contract, which would require us to incur stacking costs for such rigs.

We provide our services to major international, government-owned and independent oil and natural gas companies. During 2024,2025, our five largest customers accounted for 49% of consolidated revenues, with our largest customer representing 17% of our consolidated revenues and a significant percentage of our operating cash flows.flows, with our largest customer representing 13% of our consolidated revenues. Our financial position, operating results or cash flows may be materially adversely affected if any of our higher day rate contracts were terminated or renegotiated on less favorable terms or if a major customer terminates its contracts with us, fails to renew its existing contracts with us, requires renegotiation of our contracts or declines to award new contracts to us.

Some of our customers have consolidated and could continue to consolidate and could use their size and purchasing power to achieve economies of scale and pricing concessions. In addition, certain of our customers are increasingly focusing their business strategy on renewable energy projects and away from oil and natural gas exploration and production. Such customer consolidation and strategic transitions could result in reduced capital spending by such customers, decreased demand for our drilling services, loss of competitive position and negative pricing impacts. Some of our customers have also deferred the timing of their offshore projects as a result of a focus on capital discipline, including the deployment of additional cash to share repurchase and dividend programs, the limited availability of production equipment and protracted regulatory approvals. If we cannot maintain service and pricing levels for existing customers or replace such revenues with increased business activities from other customers, our financial position, operating results and cash flows could be materially adversely affected.

Our business depends on technologies, systems and networks, including both operational technology and information technology (“IT”), to conduct our offshore operations and help run our financial and onshore operations functions, including the collection of payments from customers, payments to vendors and employees and storage of company records. Some of these systems are managed or provided by third-party service providers, including cloud platform or cloud software providers. These systems are subject to growing risks associated with cybersecurity incidents and technical disruptions. These risks include, but may not be limited to, human error, power outages, computer, telecommunication and satellite failures, natural disasters, fraud or malice, social engineering or phishing attacks, viruses or malware, and other cyberattacks, such as denial-of-service or ransomware attacks. Entities or groups, including private and nation state actors, have mounted cyberattacks on businesses and other organizations solely to disable or disrupt computer systems, disrupt operations and, in some cases, steal data. In addition, the U.S. government has issued public warnings that indicate energy assets and companies engaging in significant transactions, such as acquisitions, might be specifictargeted targetsby ofnation cybersecuritystate threats.threat actors. Geopolitical tensions or conflicts, such as the Russia-Ukraine conflict and the conflicts in the Middle East, may further heightenincrease the risk of cybersecurity threats.

During periods of increased rig reactivation, upgrade and enhancement projects, shipyards and third-party equipment vendors may be under significant resource constraints to meet delivery obligations. Such constraints may lead to substantial delivery and commissioning delays, equipment failures increased costs and/or quality deficiencies. Furthermore, drilling rigs may face start-up or other operational complications following completion of upgrades or maintenance. Other unexpected difficulties, including equipment failures, design or engineering problems, could result in significant downtime at reduced or zero day rates or the cancellation or termination of drilling contracts.

Failure to recruitrecruit, develop and retain skilled personnel could materially adversely affect our business.

We require skilled personnel to operate our drilling rigs and to provide technical services and support for our business, and further rig reactivations will require that we hire additional skilled personnel. As demand for our services and the number of active drilling rigs increases, competitionCompetition for the labor required for drilling operations and construction projects intensifies,is intense, leading to shortages of qualified personnel in the industry. During periods of intensified competition, it is more difficult and costly to recruit, train and retain qualified employees, including in foreign countries that require a certain percentage of national employees. The most recent prolonged industry downturn and resulting reductions in offshore personnel wages further reduced the number of qualified personnel available. Hiring qualified and experienced personnel with the specialized skills and qualifications required to operate an offshore drilling rig is difficult due to the competitive labor market and lack of experience. In theperiods currentof environment whereintense competition for labor is intense,labor, we may be required to increase existing levels of compensation and benefits to stayattract competitiveand in retainingretain a skilled workforce.

AI presents risksoperational, legal and challengesreputational risks that could impact our business, including breaches of privacy or security incidents related to the use of AI. WeAs arewe integratingintegrate, AI tools into our systems,operations and ourbusiness third-partyfunctions, servicethere providers as well as our competitors may also develop or use such tools. AI may become more important to our operations or to our future growth over time. There can beis no assurance that we will realize the desiredanticipated benefits or anticipated benefits, or any benefits, and we may not properly implement such technology. Our third-party service providers may also incorporate AI into their services without disclosing such use to us or fail to disclose risks presented by their use of AI. There is a risk that AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could result in operational disruptions and harm our business, customers or reputation. In addition, wewe, or our AI service providersproviders, may not meet existing or rapidly evolving regulatory or industry standards with respect to privacy and data protection, compliance, and transparency, among others, which could inhibit our or our service providers’ ability to maintain an adequate level of functionality or service. Our service providers may also incorporate AI into their services without disclosing such use to us, or fail to disclose risks presented by their use of AI. There is a risk that AI tools used by us or by our service providers could produce inaccurate or unexpected results or behaviors that could harm our business, customers or reputation. Our competitors or other third parties may incorporate AI in their business operations more quickly or more successfully than we do, which may negatively impact our ability to compete effectively. Our internal governance, policies, procedures, and controls relating to the development, integration, and use of AI, including by third-party service providers, may be insufficient or may not operate as intended, particularly as AI technologies and regulatory expectations continue to evolve. Additionally, the complex and rapidly evolving global legal landscape around AIAI, including the EU Artificial Intelligence Act and proposed and enacted U.S. federal and state laws and regulations, may expose us to claims, inquiries, demands and proceedings by private parties and global regulatory authorities and subject us to legal liability as well as reputational harm. New laws and regulations are being adopted in various jurisdictions globally, including in Australia, the European Union (the "EU") and the U.S., and existingExisting laws and regulations may be interpreted in ways that would affect our business operations and the wayways in which we use AI. Any of these outcomes could impair our ability to compete effectively, damage our reputation, result in the loss of our or our customers’ property or information and/or materially adversely affect our financial position, operating results or cash flows.

ARO, our 50/50 unconsolidated ARO joint venture and a provider of offshore drilling services, faces many of the same risks as we face. Operating through ARO, in which we have a shared interest, may result in our having less control over many decisions made with respect to projects, operations, safety, utilization, internal controls and other operating and financial matters. ARO may not apply the same controls and policies that we follow to manage our risks, and ARO’s controls and policies may not be as effective. As a result, operational, financial and control issues may arise, including the inability to produce timely and accurate financial statements, which could materially adversely affect our financial position, operating results or cash flows. Additionally, in order to establish or preserve our relationship with our joint venture partner we may agree to risks and contributions of resources that are proportionately greater than the returns we could receive, which could reduce our income and return on our investment in ARO compared to what we may traditionally require in other areas of our business.

We have a potential obligation to fund ARO for newbuild jackup rigs. The shareholder agreement governing the joint venture (the "Shareholder Agreement") specifies that ARO shall purchase 20 newbuild jackup rigs over an approximate 10-year period.rigs. The first two newbuild jackups were ordered in January 2020. The first rig, Kingdom 1, was delivered in the fourth quarter of 2023 and the second rig, Kingdom 2, was delivered in the second quarter of 2024. In October 2024,2024 and November 2025, ARO ordered the third newbuild jackup, Kingdom 3, AROand isthe expected to commit to order one additionalfourth newbuild jackupjackup, inKingdom the4, near term.respectively. There can be no assurance that the new jackup rigs will begin operations as anticipated.

The joint venture partners intend for the newbuild jackup rigs to be financed out offrom ARO's available cash on hand or from operations and/or funds available from third-party financing. In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the first two newbuild jackups and for general corporate purposes. Further, in the event ARO has insufficient cash or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program. Beginning with the delivery of the second newbuild, each partner's commitment is reduced by the lesser of the actual cost of each newbuild rig or $250.0 million, on a proportionate basis. Following the delivery of Kingdom 2, our commitment to fund the newbuild program has been reduced to $1.1 billion. Any required capital contributions we make could negatively impact our liquidity position and financial condition.

In connection with Saudi Arabia’s announcement to limit oil production capacity and Saudi Aramco’s suspension of certain drilling contracts, the VALARIS 143, VALARIS 147 and VALARIS 148 contracts were terminated during the year ended December 31, 2024. Upon termination of these contracts, the bareboat charter agreements between us and ARO were also terminated and the rigs were returned to us and stacked. If additional drilling contracts between us and ARO are suspended or terminated in the future and we are unable to secure new contracts with substantially similar terms on a timely basis, our financial position, operating results or cash flows could be materially adversely affected. Five of our rigs leased to ARO have bareboat charter agreements expiring during 2025. While we are negotiating renewals, we may be unsuccessful in negotiating extensions or new contracts for these bareboat charters.

Our business involves operating hazards, and our insurance and indemnities from our customers or other parties may not be adequate to cover any potential losses.

The drilling of oil and natural gas wells involves numerous operating hazards, such as blowouts, reservoir damage, loss of production, loss of well control, uncontrolled formation pressures, lost or stuck drill strings, equipment failures and mechanical breakdowns, punch throughs, craterings, industrial accidents, fires, explosions, oil spills and pollution. Contract drilling requires the use of heavy equipment and exposure to hazardous conditions, which may subject us to liability claims by employees, customers and other parties or prosecution by governmental authorities. These hazards can cause personal injury or loss of life, severe damage to, or destruction of, property and equipment, pollution or environmental damage, which could lead to claims by employees, contractors or third parties and suspension of operations and contract terminations. Our drilling rigs are also subject to hazards associated with marine operations, either while docked, on site or during mobilization, such as capsizing, breaking free of moorings, sinking, grounding, allision, collision, piracy, damage from adverse weather and marine life infestations. The U.S. Gulf of MexicoAmerica and the coasts of Australia are areas subject to hurricanes, typhoons and other adverse weather conditions, and our drilling rigs in these regions may be exposed to damage or a total loss by these storms, some of which may not be covered by insurance. The occurrence of these events could result in the suspension of drilling operations, damage to or destruction of the equipment involved and injury to or death of rig personnel. Operations may also be suspended because of machinery breakdowns, abnormal drilling conditions, failure of subcontractors to perform or supply goods or services or personnel shortages. Damage to the environment could also result from our operations, particularly through spillage of hydrocarbons, fuel, lubricants or other chemicals and substances used in drilling operations or fires. We may also be subject to property damage, environmental indemnity and other claims by third parties. Drilling involves certain risks associated with the loss of control of a well, such as blowout, cratering, the cost to regain control of or redrill the well and remediation of associated pollution. Our customers may be unable or unwilling to indemnify us against such risks. In addition, a court may decide that certain indemnities in our current or future drilling contracts are not enforceable. The law generally considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited.

Our insurance policies and drilling contracts contain rights to indemnity that may not adequately cover our losses, and we do not have insurance coverage or rights to indemnity for all risks. We have two main types of insurance coverage: (1) hull and machinery coverage for physical damage to our property and equipment and (2) P&I with excess liability coverage, which generally covers our liabilities arising from our operations, such as personal injury and property claims, including wreck removal and pollution. We have no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of MexicoAmerica for our jack-up fleet and only limited coverage for our floater fleet. We also retain the risk for any liability that exceeds our excess liability coverage. Pollution and environmental risks generally are not completely insurable.

The agreements governing our debt, including the Indenture and the 2028 Credit Agreement, contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and to make payments on our debt.

The Indenture, the 2028 Credit Agreement (as each are defined below) and the related agreements governing our indebtedness contain covenants that, among other things, limit our ability and the ability of certain of our subsidiaries to:

In addition, the 2028 Credit Agreement contains financial covenants requiring us to maintain (i) a minimum book value of equity to total assets ratio, (ii) a minimum interest coverage ratio and (iii) a minimum amount of liquidity. Any future indebtedness may also require us to comply with similar or other covenants. These restrictions on our ability to operate our business could seriously harm our business by, among other things, limiting our ability to take advantage of financings, mergers, acquisitions and other business opportunities.

Various risks, uncertainties and events beyond our control could affect our ability to comply with these covenants. Failure to comply with any of the covenants in our existing or future financing agreements could result in a default under those agreements and under other agreements containing cross-default provisions. A default would permit lenders to accelerate the maturity for the debt under these agreements and to foreclose upon any collateral securing the debt. Under these circumstances, we might not have sufficient funds or other resources to satisfy all of our obligations. In addition, the limitations imposed by financing agreements on our ability to incur additional debt and to take other actions might significantly impair our ability to obtain other financing.financing, Thiswhich could havematerially seriousadversely consequences toaffect our financial conditioncondition, andoperating results ofor operationscash flows and could cause us to become bankrupt or insolvent.

We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assetsassets, including our drilling rigs, or other strategic transactions.

We may pursue mergers, acquisitions or dispositions of businesses or assetsassets, including our drilling rigs, or other strategic transactions that we believe will strengthen, streamline or expand our business.business, such as the Business Combination. Each such transaction would be dependent upon several factors, including identifying suitable companies, businesses or assets that align with our business strategies, reaching agreement with the potential counterparties on acceptable terms, the receipt of any applicable regulatory and other approvals, and other conditions. These transactions involve various risks, including among others, (1) difficulties related to integrating or managing applicable parts of an acquired business or joint venture and unanticipated changes in customer and other third-party relationships subsequent to closing, (2) diversion of management's attention from day-to-day operations, (3) applicable antitrust laws and other regulations that may limit our ability to acquire targets or require us to divest an acquired business or assets, (4) failure to realize anticipated benefits, such as cost savings, revenue enhancements or strengthening or broadening our business, (5) potentially substantial transaction costs associated with acquisitions, joint ventures or investments if we or a transaction counterparty seeks to exit or terminate an interest in the joint venture or investment, (6) potential adverse impacts on our business and relationships with customers, vendors, contractors, employees or suppliers as a result of proposed or completed transactions andtransactions, (7) potential accounting impairment or actual diminution or loss of value of our investment if future market, business or other conditions ultimately differ from our assumptions at the time such transaction is consummated.consummated, and (8) potential accounting impairment upon the decision to reclassify assets as held for sale.

The offshore contract drilling industry is dependent on demand for services from the oil and natural gas industry. Accordingly, we will be directly affected by the approval and adoption of laws and regulations limiting or curtailing exploration and development drilling for oil and natural gas for economic, environmental, safety and other policy reasons. Furthermore, we may be required to make significant capital expenditures or incur substantial additional costs to comply with new governmental laws and regulations. It is also possible that legislative and regulatory activity could materially adversely affect our financial position, operating results or cash flows by limiting drilling opportunities. In recent years, we have seen several significant regulatory changes that have affected the way we operate in the U.S. Gulf of Mexico.America. See “Item 1. Business – Governmental Regulations and Environmental Matters.”

Sustainability initiatives and high profile and catastrophic environmental events, such as the 2010 Macondo well incident, have led to increased regulation of offshore oil and natural gas drilling. We are adversely affected by restrictions on drilling in the areas in which we operate, including policies and guidelines regarding the approval of drilling permits, restrictions on development and production activities, and directives, judicial decisions and regulations that have and may further impact our operations. For example, in August 2024, the U.S. District Court of Maryland held that the 2020 biological opinion issued by the U.S. National Marine Fisheries Services (the "NMFS"), which assessed the collective impact of certain federal actions in the U.S. Gulf of Mexico on threatened and endangered species, violated the Endangered Species Act and the Administrative Procedures Act. The Court ordered the biological opinion vacated effective December 20, 2024 and extended until May 21, 2025, which the NMFS previously indicated provides sufficient time to prepare and issue a new biological opinion. If the biological opinion is vacated, offshore oil and gas activities in the U.S. Gulf of Mexico could be halted on May 21, 2025 unless a legal, regulatory or legislative solution is reached before that date. From time to time, legislative and regulatory proposals have been introduced, and legal proceedings have been initiated, that would materially limit or prohibit offshore drilling in certain areas, or that would increase the liabilities or costs associated with offshore drilling. If new laws are enacted, or if government actions are taken or judicial decisions are made that restrict or prohibit offshore drilling in our principal areas of operation or that impose environmental or other requirements that materially increase the liabilities, financial requirements or operating or equipment costs associated with offshore drilling, exploration, development, or production of oil and natural gas, our financial position, operating results or cash flows could be materially adversely affected.

There is increasing uncertainty with respect to tax laws, regulations and treaties, and the interpretation and enforcement thereof that may affect our business. For example, the Organization for Economic Cooperation and Development (“OECD”), the EU and certain other countries (including countries in which we operate) are committed to enactingenacted substantial changes to numerous long-standing tax principles impacting how large multinational enterprises are taxed. In particular, the OECD’s Pillar Two initiative introducesintroduced a 15% global minimum tax applied on a country-by-country basis. Many jurisdictions have already enacted legislation in line with Pillar Two, and the OECD continues to issue additional guidance. Based upon existing legislation and OECD guidance, Pillar Two could increase our future tax obligations in the jurisdictions in which we operate. These evolving rules, as well as any other changes in domestic and international tax rules and regulations, could have a material effect on our effective tax rate.

Legislation enacted in Bermuda as to Economic Substance may affect our operations.business.

Our non-U.S. operations involve additional risks not typically associated with U.S. operations.operations, and we are subject to additional risks associated with the expansion into new geographical markets.

Revenues from non-U.S. operations were 84%,86%, 80%84% and 78%80% of our total consolidated revenues for the years ended December 31, 2024,2025, 20232024 and 2022,2023, respectively. Our non-U.S. operations and shipyard rig construction and enhancement projectsprojects, as well as our expansion into new geographical markets, are subject to political, economic and other uncertainties, including:

Governments around the world arehave increasinglyrecently focused on enacting laws and regulations regarding climate change and regulation of GHG that may impact our operations, profitability and competitiveness. Restrictions on GHG emissions, reporting requirements or other related legislative or regulatory enactments could have an indirect effect in those industries that use significant amounts of petroleum products, which could potentially result in a reduction in demand for petroleum products and, consequently, our offshore contract drilling services. Lawmakers and regulators in the U.S. and certain other jurisdictions where we operate have proposed or enacted regulations requiring reporting of GHG emissions and the restriction thereof, including increased fuel efficiency standards, carbon taxes or cap and tradecap-and-trade systems, restrictive permitting and incentives for renewable energy. For example, the SEC has adopted a final rule implementing a mandatory climate change reporting framework; however, such framework is subject to an indefinite stay pending litigation over the rules. Should this rule become effective it would materially increase the amount of time, monitoring, diligence and reporting costs related to these matters. Likewise, in December 2023, the EPA adopted a final rule enacting a series of actions targeting methane and other emission reductions in natural gas and oil operations.operations, though the effective implementation date has been delayed. Global efforts have been made and continue to be made in the international community toward the adoption of international treaties or protocols that would address global climate change issues and impose reductions of hydrocarbon-based fuels, including plans developed in connection with the Paris climate conference in December 2015, the Katowice climate conference in December 2018 and the UN Climate Change Conferences since 2021. In January 2023, the EU enacted the Corporate Sustainability Reporting Directive,Directive which willto require sustainability reporting across a broad range of sustainability topics for both EU and non-EU companies. WeIn anticipate2025, the EU delayed the reporting timeline for many in-scope companies and, in December 2025, continued to progress on amendments that thesewould limit the number of companies obligated to report under the law. These requirements willcould apply to us as early as 20262028 (for fiscal year 20252027) for certain of our EU subsidiaries and at the consolidated entity level in 20302029 (for fiscal year 20292028). As a result of varying rules adopted by jurisdictions in which we operate, we are increasingly subject to an overlapping patchwork of laws and regulations, including disclosure requirements, which may increase the costs of compliance and the risk of violations.

In addition to potential impacts on our business resulting from climate-change legislation or regulations, our business also could be materially adversely affected by climate change-related physical changes, such as changing weather patterns. An increase in severe weather patterns could result in damage to or loss of our drilling rigs, impact our ability to conduct our operations and/or result in a disruption of our customers’ operations. Finally, increasing attention to the risks of climate change has resulted in an increased possibility of lawsuits or investigations brought by public and private entities against oil and natural gas companies in connection with their GHG emissions. Should we be targeted by any such litigation or investigations, we may incur liability, which could be imposed without regard to the causation of or contribution to the asserted damage, or to other mitigating factors. The ultimate impact of GHG emissions-related agreements, legislation and measures on our financial performance is highly uncertain because we are unable to predict, in a multitude of jurisdictions, the outcome of political decision-making processes.uncertain.

The increasing penetration of renewable energy into the energy supply mix, the increased production of electric-powered vehicles and improvements in energy storage, as well as changes in consumer preferences, including increased consumer demand for alternative fuels, energy sources and electric-powered vehicles may materially adversely affect the demand for oil and natural gas and our drilling services. This evolving transition of the global energy system from fossil-based systems of energy production and consumption to more renewable energy sources, commonly referred to as the energy transition, could have a material adverse impact on our results of operations, financial position and cash flows. As a result of changes in consumer preferences and uncertainty regarding the pace of the energy transition and expected impacts on oil and natural gas demand, some of our customers aremay transitioningtransition their businesses to renewable energy projects and away from oil and natural gas exploration and production, which maywould result in reduced capital spending by such customers on oil and natural gas projects and in turn reduced demand for our services.

In addition to such initiatives, sustainability matters have more generally have been the subject of increased focus by investors, customers, investment funds, political advocacy groups, and other market and industry participants, as well as certain regulators, including in the U.S. and the EU. We publish an annual Sustainability Report, which includes disclosuredisclosures of our sustainability practices, aspirations, targets and goals. Our disclosures on these matters rely on management’s expectations as of the date when the statements are first made, as well as standards for measuring progress that are still in development and that may change or fail to be realized. These expectations and standards may continue to evolve. Even so, our failure or inability to meet these aspirations, targets, goals or evolving stakeholder expectations for sustainability practices and reporting and even the perception of such failure or inability may potentially harm our reputation and impact employee retention, customer relationships and access to capital, among other matters. For example, certain market participants use third-party benchmarks or scores to measure a company’s sustainability practices in making investment decisions and customers and suppliers may evaluate our sustainability practices or require that we adopt or remove certain sustainability policies as a condition of awarding contracts. By electing to set and share publicly our corporate sustainability standards, our business may face increased scrutiny related to sustainability activities and be unable to satisfy all stakeholders. For example, an increasing number of stakeholders, regulators and lawmakers have expressed or pursued opposing views, legislation and investment expectations with respect to sustainability. As sustainability best-practices and voluntary or mandatory reporting standards continue to develop, we may incur increased costs related to sustainability monitoring andmonitoring, reporting and complying with sustainability initiatives,compliance, especially to the extent these standards are not harmonized or consistent. In addition, it may be difficult or expensive for us to comply with any sustainability-linked contracting policies adopted by customers and suppliers, particularly given the complexity of our supply chain, our reliance on third-party manufacturers, and the potential for jurisdictions in which we operate to enact opposing or incompatible regulations. Actions we may take to achieve our sustainability initiatives, including the development and implementation of new emissions-reduction technology, may require increased expenditures, which may materially adversely affect our financial position, operating results or cash flows.

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. WeOur ownfleet the world's largestof offshore drilling rigrigs fleet,is includingamong the largest in the world and includes one of the newesthighest specification ultra-deepwater fleetsfleets, inas thewell industry andas a leading premium jackup fleet. As of February 20, 2025,2026, we own 5246 rigs, including 13 drillships, four dynamically positionedtwo semisubmersible rigs, one moored semisubmersible rig, 3431 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.

Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of Mexico,America, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific.

We provide drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated drilling service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations as well as the economic risk relative to the success of the well.

Operating results in the offshore contract drilling industry are highly cyclical and are directly related to the demand for and the available supply of drilling rigs.rigs, Loweach demandof which affects rig utilization and excess supply can independently affect day rates and utilization of drilling rigs. Therefore, adverse changes in either of these factors can result in adverse changes in our industry.rates. While the cost of moving a rig may cause the balance of rig supply and demand tocan vary somewhat between regions, significant variations between most regions are generally of a short-term nature due to rig mobility. Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demand.

Inflationary pressures haveimpact continued,our cost base, resulting in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. Additionally, the weakening of the U.S. dollar against foreign currencies may increase costs in certain foreign jurisdictions in which we operate. We expect that our costs will continue to rise in the near termterm, particularly given the potential impact of increased tariffs on global trade, and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations.

(1)The decreaseincrease for Floaters is primarily due to revenues realized, partially offset by a multi-year contract awardawards and extensions executed for VALARISvarious DS-17 offshore Brazil and two six-month contract extensions for VALARIS DS-9 offshore Angola,drillships, which resulted in incremental aggregate backlog of approximately $570.0$2.1 million.billion, partially offset by revenues realized.

(3)Other includes the backlog for our managed rig services and the bareboat charter backlog for the jackup rigs leased to ARO in order for ARO to fulfill certain of its drilling contracts with Saudi Aramco. The increase in Other is primarily due to three-yearfive-year contract extensions for five of our managedleased rigs, VALARIS 116, VALARIS 140, VALARIS 141, VALARIS 146 and VALARIS 250, which resulted in incremental aggregate backlog of approximately $180.0$407.0 million, partially offset by revenues realized and a reduction of backlog of approximately an aggregate $35.0 million attributable to the VALARIS 143, VALARIS 147 and VALARIS 148 contracts, which were terminated during 2024.realized.

From a supply perspective, rig attrition over the past decade has resulted in a reduced global floater fleet to meet customer demand. The supply of benign environment floaters, such as those in our fleet, has decreased by more than 45% from a peak of approximately 280 rigs in 2014 to 150 rigs as of December 31, 2024,2025. theThis numberdecrease ofis primarily attributable to rig retirements, including 14 benign environment floaters including stacked rigs declined by 41% to 166 from a peak of 281retired in late2025. 2014. Given the moderate decline in utilization in the second half of 2024 for benign environment floaters, we could see further rigs retired from the global fleet. Also,Further, given the expected high construction cost and lack of shipyard capacity, we do not believe that market conditions are supportive of floater newbuild construction for the foreseeable future.

From a supply perspective, as of December 31, 2024,2025, there were 494 jackups in the numberglobal offleet, jackupswith declined by 7% to 503 from a peak of 542 in early 2015. While the number of jackups has decreased less than floaters, 28%29% of the current jackup fleet isbeing more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or the length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs. We believe there are only 11 newbuild jackups remaining at shipyards, of which eight are at Chinese shipyards, some of which are expected to be used locally in China.

For the purposes of our discussion below, we refer to Revenues (2exclusive of reimbursable revenues) and Contract drilling expenses (exclusive of depreciation and reimbursable expenses) as "revenues" and "contract drilling expenses", respectively. We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows.

Depreciation expense increased in 2024,2025 compared to 2023,2024, primarily due to new assets placed in serviceservice, forincluding certainthose related to rigs that underwent reactivation projects and capital upgrades.

General and administrative expenses increaseddecreased in 20242025 compared to 2023,2024, primarily due to higher$19.0 million of lower professional feesfees, and higher compensationpartially related to oura long-termnon-recurring incentive$7.4 plans.million cost recovery award recognized in 2025 related to fees incurred for the patent license litigation discussed above.

(23)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco. During 2024, we leased VALARIS 108 and VALARIS 76 to ARO. Separately, the contracts with ARO for VALARIS 143, VALARIS 147 and VALARIS 148 were terminated.

(34)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco, including Kingdom 2, which was delivered in the second quarter of 2024.Aramco. This table does not include Kingdom 3,3 aand Kingdom 4, which are newbuild jackupjackups orderedthat byare AROunder construction in October 2024, as the rigMiddle is under construction.East.

(45)Active fleet represents rigs that are not preservation stacked or classified as held for sale and includes rigs that are in the process of being reactivated.

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

(1)Rig utilization for the total fleet and active fleet are derived by dividing the operating days by the number of days in the period for the total fleet and active fleet, respectively. Active fleet represents rigs that are not preservation stacked or classified as held for sale and includes rigs that are in the process of being reactivated. Operating days equals the total number of days that rigs have earned and recognized day rate revenue, including days associated with early contract terminations, compensated downtime and mobilizations and excluding suspension periods. When revenue is deferred and amortized over a future period, for example, when we receive fees while mobilizing to commence a new contract or while being upgraded in a shipyard, the related days are excluded from operating days.

(3)Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues), excluding contract termination fees, by the aggregate number of operating days.

Our onshore support costs included within Contractcontract Drillingdrilling Expensesexpenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items." Further, general and administrative expenseexpenses and depreciation expense incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items."

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. Our fleet of offshore drilling rigs is among the largest in the world and includes one of the highest specification ultra-deepwater fleets, as well as a leading premium jackup fleet. As of MayAugust 5,6, 2026, we own 4543 rigs, including 13 drillships, one semisubmersible rig, 3129 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.

The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics, geopolitical factors and customer capital allocation decisions. Periods of oil oversupply generally place downward pressure on commodity prices, while periods of undersupply can result in higher and more volatile oil prices, influencing investment decisions across the upstream sector. While the oil market began the year in a period of oversupply, the currenton-going conflicts in the Middle East have constrainedreduced supply and increased uncertainty and volatility in global energy markets. ItThe hasconflicts have also reinforced the strategic importance of energy security and market participants generally expect the global oil and gas market to tighten over the next few years, driven by past underinvestment in upstream development and slowing production growth from non-OPEC sources. Industry studies, including those published by the International Energy Agency and the U.S. Energy Information Administration, indicate that substantial upstream investment is required to offset natural field declines and maintain existing production levels.

The geopolitical environment in the Middle East remains volatile, and if the ongoing conflicts persist or escalate, including an expansion of hostilities, the negative impact on our operating income could be significantly higher than amounts incurred to date and could also adversely affect the operating performance of ARO. An escalation of conflict could result in additional military actions, economic sanctions or other governmental measures, including disruptions to regional ports or further restrictions on maritime traffic through key waterways such as the Strait of Hormuz. Continued disruptions or closures affecting the Strait of Hormuz, through which a substantial portion of the region’s maritime traffic and energy‑related logistics transit, could materially affect our ability, and that of ARO, to mobilize assets, transport personnel and supplies, or perform drilling and related services in a timely and cost‑effective manner.

The following table summarizes our and 100% of ARO's contract backlog of business as of MayAugust 4,5, 2026 and February 17, 2026 (in millions):

(1)The increasedecrease for Floaters is primarily due to revenues realized, partially offset by a contract extension for VALARIS DS-4, which resulted in incremental aggregate backlog of approximately $426.0 million, partially offset by revenues realized.million.

Within the floater segment, utilization for the global marketed drillship fleet was approximately 92%88% as of MarchJune 31,30, 2026 and included 1211 drillships across the industry which were not working at quarter-end due to gaps between contracts. Market conditions are expected to improve as these rigs commence new contracts during 2026,2026 or in early 2027, including fourtwo Valaris drillships that are scheduled to return to work this year following idle periods between contracts. Some customers continue to favor more technically capable and efficient assetsassets, particularly to support complex deepwater developments. Seventh-generation drillships may be preferred and have achieved higher utilization and stronger day rates relative to older assets, a trend that is expected to continue. We believe we are well positioned with 12 of 13 of our drillships being seventh-generation units, although we continue to face competition from other types of floaters, including those of older generations.

From a supply perspective, rig attrition over the past decade has resulted in a reduced global floater fleet to meet customer demand. The supply of benign environment floaters, such as those in our fleet, has decreased by more than 45% from a peak of approximately 280 rigs in 2014 to 150 rigs as of MarchJune 31,30, 2026. This decrease is primarily attributable to rig retirements, including 1415 benign environment floaters retired insince the beginning of 2025. Further, given the expected high construction cost and lack of shipyard capacity, we do not believe that current market conditions are supportive of floater newbuild construction.

Global jackup utilization remainsremained solid,solid withat utilizationapproximately 88% as of MarchJune 31,30, 2026 of approximately 88%,2026, driven primarily by demand from national oil companies focused on energy security and infrastructure development. For example, seven previously suspended jackups have resumed operations with Saudi Aramco hasso recalledfar seventhis previously-suspendedyear, jackupswith two additional rigs expected to recommence operations induring 2026the andremainder of 2026. In addition, there are other ongoing multi-rig tenders in the Middle East, which should further support the supply and demand balance of the global jackup fleet. At the same time, theMeanwhile, ongoing conflicts in the Middle East have disrupted offshore operations in certain parts of the region, and italthough activity has largely resumed, uncertainty remains uncertainregarding when suchoperating operationsconditions will returnfully to normal,normalize, which may also impact the timing of work programs associated with these tenders.

From a supply perspective, as of MarchJune 31,30, 2026, there were 491490 jackups in the global fleet, with 28% of the current jackup fleet being more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or the length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs.

Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, as permitted under applicable SEC rules, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter ended MarchJune 31,30, 2026 (the "current quarter") to the immediately preceding fiscal quarter ended DecemberMarch 31, 20252026 (the "preceding quarter"). We also discuss any material changes in our results of operations for the threesix months ended MarchJune 31,30, 2026 (the "current year period") compared to the corresponding period of the preceding fiscal year (the "prior year period"), as required under the applicable SEC rules.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended DecemberMarch 31, 20252026

The following table summarizes our Condensed Consolidated Results of Operations for the three months ended June 30, 2026 and March 31, 2026 and December 31, 2025 (in millions, except percentages):

Revenues decreasedincreased in the current quarter compared to the preceding quarter, partially driven by $21.7incremental revenues of $84.4 million of lower revenues from ourVALARIS twoDS-17, semisubmersibleVALARIS rigs,DS-12 and VALARIS DS-10, all of which completedcommenced theirnew contracts since late in November 2025 and were warm stacked during the currentfirst quarter.quarter of 2026. For the remaining fleet, we had a net decrease of $59.0$4.6 million from fewer operating days relativecompared to the preceding quarter, largely attributable to VALARISdowntime DS‑17,for VALARISrepairs, 106scheduled maintenance and VALARIScontract 120, which were preparing and mobilizingupgrades for newcertain contractsrigs during the current quarter.

Contract drilling expense decreasedincreased in the current quarter compared to the preceding quarter, primarily due to lowerincremental operating costs of $22.0$24.9 million for ourVALARIS twoDS-17, semisubmersibleVALARIS rigs.DS-12 and VALARIS DS-10. For the remaining fleet, we had lowera personnel-related costs of $7.4$22.1 million fromincrease fewerin operating daysrepair and themaintenance deferralcosts, ofprimarily costsdriven by planned maintenance and contract preparation projects, including those associated with contractVALARIS preparation250, activitiesVALARIS in116 and VALARIS 117, and unplanned leg repairs on VALARIS 106 during the current quarter,quarter. andWe loweralso claim costs of $7.3 million. These decreases were partially offset byhad a $7.5$3.0 million increase in insurance expenses primarily due to a full quarter of higher costs to maintain coverage for war-related risks for certain rigs within our Jackups and Other segments which are located in the Middle East. These increases were partially offset by an $11.7 million non-recurring reversal of previously recognized bad debt expense during the current quarter in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020.

Other expense,income (expense), net, increased primarily due to unfavorablethe foreign currency exchange rate fluctuationsrecognition of $3.5a $36.6 million andpre-tax lower interest income of $1.7 milliongain in the current quarter.quarter related to the sale of VALARIS 104.

The consolidated effective tax rate, excluding the impact of discrete tax items, for the current quarter and preceding quarter was 25.4%19.8% and 679.5%,25.4%, respectively. Discrete tax items during the current quarter were primarily related to the resolution of prior period matters. Discrete tax items during the preceding quarter were primarily related to the resolution of prior period matters, partially offset by changes in liabilities for unrecognized tax benefits with tax positions taken in prior years. The preceding quarter tax provision included $690.7 million of tax benefit related to changes in deferred tax asset valuation allowances in certain operating jurisdictions and a $6.6 million discrete tax benefit primarily attributable to rig impairments.

The following table summarizes our Condensed Consolidated Results of Operations for the threesix months ended MarchJune 31,30, 2026 and 2025 (in millions, except percentages):

Revenues decreased compared to the prior year period, partially driven by lower operating revenues of $24.7$81.0 million for VALARIS 247,247 and VALARIS DPS-1, which completed itstheir contractcontracts and waswere sold duringsince the third quarterend of 2025.the prior year period. For the remaining fleet, we had a net decrease of $145.7$181.4 million from fewer operating days, largely attributable to certain floaters which havewere completedeither theirpreparing for contracts since the end of the prior year period and were eitheror warm stacked orbetween retired.contracts during the current year period. These decreases were partially offset by a net increase of $15.5$37.3 million from higher average daily revenues as a result of various rigs working under higher day rate contracts compared to the prior year period.

Merger and integration expenses were $13.6$25.0 million for the currentsix quartermonths ended June 30, 2026 and primarily related to professional fees incurred in connection with the pending Business Combination.

Other operating (income) loss includes non-cash losses on impairments and related gains on remeasurements of our assets which continue to beare classified as held for sale. In connection with retirement and sale of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (collectively, the "Retired Semis") in 2025, we recognized a non-cash loss on impairment of $7.8 million during the prior year period. During the currentfirst quarter,quarter of 2026, we reassessed the fair value less costs to sell for VALARIS DPS-1 by utilizing a preliminary sales agreement and recognized a gain on remeasurement of $2.8 million. VALARIS DPS-1 was sold in April 2026 and no additional gain or loss was recognized upon completion of the sale. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis and VALARIS DPS-1.

The consolidated effective tax rate, excluding the impact of discrete tax items, for the currentsix quartermonths ended June 30, 2026 and prior year period was 25.4%21.7% and 15.1%,15.2%, respectively. Discrete tax items during the currentsix quartermonths ended June 30, 2026 were primarily related to the resolution of prior period matters, partially offset by changes in liabilities for unrecognized tax benefits with tax positions taken in prior years.matters. Discrete tax items during the prior year period were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis.

(1)During the second quarter of 2025,2026, we sold VALARIS DPS-3,DPS-1 VALARISfor DPS-5 and VALARIS DPS-6 were sold.recycling.

(2)During the second quarter of 2026, we sold VALARIS 104. During the second half of 2025, we sold VALARIS 247, VALARIS 102 and VALARIS 145.

(6)During the fourth quarter of 2025, we classified VALARIS DPS-1 as held for sale, removing it from the active fleet. The rig was sold in the second quarter of 2026.

Our onshore support costs included within Contract drilling expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling ItemsItems.". Further, General and administrative expense, Depreciation expense and Merger and integration expenses 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 ItemsItems.".

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

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended DecemberMarch 31, 20252026

JackupFloater contract drilling expenserevenues increased $8.1$86.4 million, or 7%,45%, for the current quarter compared to the preceding quarterquarter, primarily duedriven toby aincremental $5.4revenues of $84.4 million increasefrom inVALARIS insuranceDS-17, expensesVALARIS toDS-12 maintainand coverageVALARIS forDS-10, war-relatedall risks for certain rigsof which arecommenced locatednew contracts since late in the Middlefirst East.quarter of 2026.

ARO revenue decreasedremained $12.2relatively million, or 9%,flat for the current quarter compared to the preceding quarter, primarily due to a decrease of $16.2$4.6 million from fewer operating days in the current quarter for certain rigs, including VALARIS 250 and VALARIS 116,rigs which were undergoing scheduled repairs or maintenance projects in the current quarter.quarter, Thisincluding decreaseVALARIS 146 and VALARIS 140, which was partially offset by a $6.0$4.2 million increase infrom revenueVALARIS from108 and VALARIS 76, which commencedhad aless new contractdowntime in Decemberthe 2025.current quarter.

ARO contract drilling expense decreased $12.0$3.5 million, or 14%,5%, for the current quarter compared to the preceding quarter,quarter primarily due to loweran operatingaggregate $15.4 million of adjustments recorded by ARO in connection with the current quarter finalization of its 2025 financial statements. This decrease was partially offset by a $7.1 million increase in repair and maintenance costs for rigs thatwhich were in the shipyard for scheduled projects ofand $11.5a million, partially offset by incremental operating costs of $2.8$4.7 million forincrease VALARISin 76.personnel-related costs.

Other revenue increaseddecreased $3.7$1.8 million, or 10%,4%, for the current quarter compared to the preceding quarter, primarily duedriven toby incrementallower lease revenue forfrom VALARISARO, 76,partially whichoffset weby leasedincreased torevenue AROon andour commencedmanaged operations late in the preceding quarter.rigs.

Other contract drilling expense increased $1.8$4.7 million, or 9%,21%, for the current quarter compared to the preceding quarter, primarily due to a $2.1$4.5 million increase inassociated insurancewith expensesrepair toand maintainmaintenance coveragecosts, forlargely war-relateddriven risks forby VALARIS 250 and VALARIS 116,250, which are locatedwas in the Middleshipyard East.for planned maintenance and contract preparation projects, partially offset by a $1.5 million decrease in personnel-related costs from fewer operating days.