Guarantee Of Registered Securities

12 Months Ended

Dec. 31, 2019

GUARANTEE OF REGISTERED SECURITIES

In connection with the Pride acquisition, Valaris and Pride entered into a supplemental indenture to the indenture dated as of July 1, 2004 between Pride and the Bank of New York Mellon, as indenture trustee, providing for, among other matters, the full and unconditional guarantee by Valaris of Pride’s 6.875% senior notes due 2020 and 7.875% senior notes due 2040, which had an aggregate outstanding principal balance of $422.9 million as of December 31, 2019. The Valaris guarantee provides for the unconditional and irrevocable guarantee of the prompt payment, when due, of any amount owed to the holders of the notes.

Valaris is also a full and unconditional guarantor of the 7.2% Debentures due 2027 issued by Ensco International Incorporated in November 1997, which had an aggregate outstanding principal balance of $112.1 million as of December 31, 2019.

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

The following tables present our condensed consolidating statements of operations for each of the years in the three-year period ended December 31, 2019; our condensed consolidating statements of comprehensive income (loss) for each of the years in the three-year period ended December 31, 2019; our condensed consolidating balance sheets as of December 31, 2019 and 2018; and our condensed consolidating statements of cash flows for each of the years in the three-year period ended December 31, 2019, in accordance with Rule 3-10 of Regulation S-X.



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Year Ended December 31, 2019 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING REVENUES	$	56.7		$	165.5		$	—		$	2,168.9		$	(337.9	)	$	2,053.2
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	82.6			147.1			—			1,914.2			(337.9		)	1,806.0
Loss on impairment	—			—			—			104.0			—			104.0
Depreciation	.1			17.3			—			592.3			—			609.7
General and administrative	85.5			.4			—			103.0			—			188.9
	168.2			164.8			—			2,713.5			(337.9		)	2,708.6
EQUITY IN EARNINGS OF ARO	—			—			—			(12.6		)	—			(12.6		)
OPERATING INCOME (LOSS)	(111.5		)	0.7			—			(557.2		)	—			(668.0		)
OTHER INCOME (EXPENSE), NET	723.9			(35.7		)	(80.8		)	(20.2		)	17.0			604.2
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	612.4			(35.0		)	(80.8		)	(577.4		)	17.0			(63.8		)
INCOME TAX EXPENSE	—			39.8			—			88.6			—			128.4
EQUITY EARNINGS (LOSSES) IN AFFILIATES, NET OF TAX	(810.4		)	47.8			25.0			—			737.6			—
NET LOSS	(198.0		)	(27.0		)	(55.8		)	(666.0		)	754.6			(192.2		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			(5.8		)	—			(5.8		)
NET LOSS ATTRIBUTABLE TO VALARIS	$	(198.0	)	$	(27.0	)	$	(55.8	)	$	(671.8	)	$	754.6		$	(198.0	)



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Year Ended December 31, 2018 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING REVENUES	$	49.5		$	155.2		$	—		$	1,802.8		$	(302.1	)	$	1,705.4
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	51.0			139.5			—			1,431.0			(302.1		)	1,319.4
Loss on impairment	—			—			—			40.3			—			40.3
Depreciation	—			14.2			—			464.7			—			478.9
General and administrative	46.3			.4			—			56.0			—			102.7
OPERATING INCOME (LOSS)	(47.8		)	1.1			—			(189.2		)	—			(235.9		)
OTHER INCOME (EXPENSE), NET	2.7			(135.2		)	(89.0		)	(109.0		)	27.5			(303.0		)
LOSS FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(45.1		)	(134.1		)	(89.0		)	(298.2		)	27.5			(538.9		)
INCOME TAX EXPENSE	—			43.3			—			46.3			—			89.6
DISCONTINUED OPERATIONS, NET	—			—			—			(8.1		)	—			(8.1		)
EQUITY EARNINGS (LOSSES) IN AFFILIATES, NET OF TAX	(594.6		)	121.8			93.3			—			379.5			—
NET INCOME (LOSS)	(639.7		)	(55.6		)	4.3			(352.6		)	407.0			(636.6		)
NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			(3.1		)	—			(3.1		)
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	(639.7	)	$	(55.6	)	$	4.3		$	(355.7	)	$	407.0		$	(639.7	)



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS Year Ended December 31, 2017 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING REVENUES	$	52.9		$	163.3		$	—		$	1,941.2		$	(314.4	)	$	1,843.0
OPERATING EXPENSES
Contract drilling (exclusive of depreciation)	50.0			149.9			—			1,304.0			(314.4		)	1,189.5
Loss on impairment	—			—			—			182.9			—			182.9
Depreciation	—			15.9			—			428.9			—			444.8
General and administrative	45.4			50.8			—			61.6			—			157.8
OPERATING LOSS	(42.5		)	(53.3		)	—			(36.2		)	—			(132.0		)
OTHER INCOME (EXPENSE), NET	(6.8		)	(110.5		)	(71.7		)	110.5			14.5			(64.0		)
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES	(49.3		)	(163.8		)	(71.7		)	74.3			14.5			(196.0		)
INCOME TAX EXPENSE	—			45.0			—			64.2			—			109.2
DISCONTINUED OPERATIONS, NET	—			—			—			1.0			—			1.0
EQUITY EARNINGS (LOSSES) IN AFFILIATES, NET OF TAX	(254.4		)	129.6			84.2			—			40.6			—
NET INCOME (LOSS)	(303.7		)	(79.2		)	12.5			11.1			55.1			(304.2		)
NET LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			.5			—			.5
NET INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	(303.7	)	$	(79.2	)	$	12.5		$	11.6		$	55.1		$	(303.7	)

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31, 2019

(in millions)



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

NET LOSS	$	(198.0	)	$	(27.0	)	$	(55.8	)	$	(666.0	)	$	754.6	$	(192.2	)
OTHER COMPREHENSIVE INCOME (LOSS), NET
Net changes in pension and other postretirement plan assets and benefit obligations recognized in other comprehensive loss, net of income tax benefits of ($5.9 million)	—			—			—			(21.7		)	—		$	(21.7	)
Net change in fair value of derivatives	—			1.6			—			—			—		1.6
Reclassification of net gains on derivative instruments from other comprehensive loss into net loss	—			8.3			—			—			—		8.3
Other	—			—			—			(.2		)	—		(.2		)
NET OTHER COMPREHENSIVE INCOME (LOSS)	—			9.9			—			(21.9		)	—		(12.0		)

COMPREHENSIVE LOSS	(198.0		)	(17.1		)	(55.8		)	(687.9		)	754.6		(204.2		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—			(5.8		)	—		(5.8		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO VALARIS	$	(198.0	)	$	(17.1	)	$	(55.8	)	$	(693.7	)	$	754.6	$	(210.0	)

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31, 2018

(in millions)



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

NET INCOME (LOSS)	$	(639.7	)	$	(55.6	)	$	4.3	$	(352.6	)	$	407.0	$	(636.6	)
OTHER COMPREHENSIVE LOSS, NET
Net change in fair value of derivatives	—			(9.7		)	—		—			—		(9.7		)
Reclassification of net losses on derivative instruments from other comprehensive income into net income	—			(1.0		)	—		—			—		(1.0		)
Other	—			—			—		(.5		)	—		(.5		)
NET OTHER COMPREHENSIVE LOSS	—			(10.7		)	—		(.5		)	—		(11.2		)

COMPREHENSIVE INCOME (LOSS)	(639.7		)	(66.3		)	4.3		(353.1		)	407.0		(647.8		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—		(3.1		)	—		(3.1		)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	(639.7	)	$	(66.3	)	$	4.3	$	(356.2	)	$	407.0	$	(650.9	)

VALARIS PLC AND SUBSIDIARIES

CONDENSED CONSOLIDATING STATEMENTS OF COMPREHENSIVE INCOME

Year Ended December 31, 2017

(in millions)



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

NET INCOME (LOSS)	$	(303.7	)	$	(79.2	)	$	12.5	$	11.1	$	55.1	$	(304.2	)
OTHER COMPREHENSIVE INCOME, NET
Net change in fair value of derivatives	—			8.5			—		—		—		8.5
Reclassification of net gains on derivative instruments from other comprehensive income into net loss	—			.4			—		—		—		.4
Other	—			—			—		.7		—		.7
NET OTHER COMPREHENSIVE INCOME	—			8.9			—		.7		—		9.6

COMPREHENSIVE INCOME (LOSS)	(303.7		)	(70.3		)	12.5		11.8		55.1		(294.6		)
COMPREHENSIVE LOSS ATTRIBUTABLE TO NONCONTROLLING INTERESTS	—			—			—		.5		—		.5
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO VALARIS	$	(303.7	)	$	(70.3	)	$	12.5	$	12.3	$	55.1	$	(294.1	)



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2019 (in millions)
	Valaris plc			ENSCO International Incorporated		Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	21.5		$	—	$	—		$	75.7		$	—		$	97.2
Short-term investments	—								—						—
Accounts receivable, net	0.2			19.7					500.8			—			520.7
Accounts receivable from affiliates	4,031.4			386.0					897.2			(5,314.6		)	—
Other	.6			11.6					434.3						446.5
Total current assets	4,053.7			417.3		—			1,908.0			(5,314.6		)	1,064.4
PROPERTY AND EQUIPMENT, AT COST	1.9			108.8					18,283.1						18,393.8
Less accumulated depreciation	1.9			84.7					3,210.3						3,296.9
Property and equipment, net	—			24.1		—			15,072.8			—			15,096.9
SHAREHOLDER NOTE FROM ARO	—			—		—			452.9			—			452.9
INVESTMENT IN ARO	—			—		—			128.7			—			128.7
DUE FROM AFFILIATES	73.8			—		38.9			1,775.7			(1,888.4		)	—
INVESTMENTS IN AFFILIATES	9,778.5			788.8		1,224.9			—			(11,792.2		)	—
OTHER ASSETS	7.9			3.8		—			182.6			(6.0		)	188.3
	$	13,913.9		$	1,234.0	$	1,263.8		$	19,520.7		$	(19,001.2	)	$	16,931.2
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	99.2		$	29.3	$	12.2		$	565.2		$	—		$	705.9
Accounts payable to affiliates	818.8			147.8		815.1			3,532.9			(5,314.6		)	—
Current maturities of long - term debt	—			—		124.8			—			—			124.8
Total current liabilities	918.0			177.1		952.1			4,098.1			(5,314.6		)	830.7
DUE TO AFFILIATES	710.3			478.8		586.6			112.7			(1,888.4		)	—
LONG-TERM DEBT	2,990.6			111.7		373.3			2,447.9			—			5,923.5
OTHER LIABILITIES	(14.6		)	90.6		—			797.4			(6.0		)	867.4
VALARIS SHAREHOLDERS' EQUITY (DEFICIT)	9,309.6			375.8		(648.2		)	12,065.9			(11,792.2		)	9,310.9
NONCONTROLLING INTERESTS	—			—		—			(1.3		)	—			(1.3		)
Total equity (deficit)	9,309.6			375.8		(648.2		)	12,064.6			(11,792.2		)	9,309.6
	$	13,913.9		$	1,234.0	$	1,263.8		$	19,520.7		$	(19,001.2	)	$	16,931.2



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING BALANCE SHEETS December 31, 2018 (in millions)
	Valaris plc		ENSCO International Incorporated		Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
ASSETS
CURRENT ASSETS
Cash and cash equivalents	$	199.8	$	—	$	2.7		$	72.6		$	—		$	275.1
Short-term investments	329.0		—		—			—			—			329.0
Accounts receivable, net	7.3		25.4		—			312.0			—			344.7
Accounts receivable from affiliates	1,861.2		171.4		—			131.7			(2,164.3		)	—
Other	.6		6.0		—			354.3			—			360.9
Total current assets	2,397.9		202.8		2.7			870.6			(2,164.3		)	1,309.7
PROPERTY AND EQUIPMENT, AT COST	1.8		125.2		—			15,390.0			—			15,517.0
Less accumulated depreciation	1.8		91.3		—			2,807.7			—			2,900.8
Property and equipment, net	—		33.9		—			12,582.3			—			12,616.2
DUE FROM AFFILIATES	2,413.8		234.5		125.0			2,715.1			(5,488.4		)	—
INVESTMENTS IN AFFILIATES	8,522.6		3,713.7		1,199.9			—			(13,436.2		)	—
OTHER ASSETS	8.1		—		—			89.7			—			97.8
	$	13,342.4	$	4,184.9	$	1,327.6		$	16,257.7		$	(21,088.9	)	$	14,023.7
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities	$	85.3	$	32.0	$	12.7		$	398.5		$	—		$	528.5
Accounts payable to affiliates	59.7		139.5		38.2			1,926.9			(2,164.3		)	—
Total current liabilities	145.0		171.5		50.9			2,325.4			(2,164.3		)	528.5
DUE TO AFFILIATES	1,432.0		1,226.9		1,366.5			1,463.0			(5,488.4		)	—
LONG-TERM DEBT	3,676.5		149.3		502.6			682.0			—			5,010.4
OTHER LIABILITIES	0.1		64.3		—			331.6			—			396.0
VALARIS SHAREHOLDERS' EQUITY (DEFICIT)	8,088.8		2,572.9		(592.4		)	11,458.3			(13,436.2		)	8,091.4
NONCONTROLLING INTERESTS	—		—		—			(2.6		)	—			(2.6		)
Total equity (deficit)	8,088.8		2,572.9		(592.4		)	11,455.7			(13,436.2		)	8,088.8
	$	13,342.4	$	4,184.9	$	1,327.6		$	16,257.7		$	(21,088.9	)	$	14,023.7



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Year Ended December 31, 2019 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments		Total
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities of continuing operations	$	(181.2	)	$	(57.9	)	$	(111.3	)	$	73.5		$	—	$	(276.9	)
INVESTING ACTIVITIES
Acquisition of Rowan, net of cash acquired	—			—			—			931.9			—		931.9
Maturities of short-term investments	474.0			—			—			—			—		474.0
Purchases of short-term investments	(145.0		)	—			—			—			—		(145.0		)
Additions to property and equipment	—			—			—			(227.0		)	—		(227.0		)
Net proceeds from disposition of assets				—			—			17.7			—		17.7
Other	(.1		)	—			—			.1			—		—
Net cash provided by investing activities of continuing operations	328.9			—			—			722.7			—		1,051.6
FINANCING ACTIVITIES
Reduction of long-term borrowings	(536.6		)	(30.4		)	—			(361.1		)	—		(928.1		)
Borrowings on credit facility	215.0			—			—			—			—		215.0
Repayments of credit facility borrowings	(215.0		)	—			—			—			—		(215.0		)
Advances from (to) affiliates	220.6			88.3			108.6			(417.5		)	—		—
Debt solicitation fees	—			—			—			(9.5		)	—		(9.5		)
Cash dividends paid	(4.5		)	—			—			—			—		(4.5		)
Other	(5.5		)	—			—			(4.7		)	—		(10.2		)
Net cash provided by (used in) financing activities	(326.0		)	57.9			108.6			(792.8		)	—		(952.3		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(.3		)	—		(.3		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(178.3		)	—			(2.7		)	3.1			—		(177.9		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	199.8			—			2.7			72.6			—		275.1
CASH AND CASH EQUIVALENTS, END OF YEAR	$	21.5		$	—		$	—		$	75.7		$	—	$	97.2



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Year Ended December 31, 2018 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities of continuing operations	$	18.1		$	(135.1	)	$	(97.6	)	$	158.9		$	—		$	(55.7	)
INVESTING ACTIVITIES
Maturities of short-term investments	1,030.0			—			—			—			—			1,030.0
Purchases of short-term investments	(919.0		)	—			—			—			—			(919.0		)
Additions to property and equipment	—			—			—			(426.7		)	—			(426.7		)
Net proceeds from disposition of assets	—			—			—			11.0			—			11.0
Purchase of affiliate debt	(551.7		)	—			—			—			551.7			—
Sale of affiliate debt	479.0			—			—			—			(479.0		)	—
Net cash provided by (used in) investing activities of continuing operations	38.3			—			—			(415.7		)	72.7			(304.7		)
FINANCING ACTIVITIES
Proceeds from issuance of senior notes	1,000.0			—			—			—			—			1,000.0
Advances from (to) affiliates	(845.0		)	135.1			612.5			97.4			—			—
Reduction of long-term borrowings	(159.9		)	—			(537.8		)	(0.8		)	(72.7		)	(771.2		)
Debt issuance costs	(17.0		)	—			—			—			—			(17.0		)
Cash dividends paid	(17.9		)	—			—			—			—			(17.9		)
Other	(2.0		)	—			—			(3.7		)	—			(5.7		)
Net cash provided by (used in) financing activities	(41.8		)	135.1			74.7			92.9			(72.7		)	188.2
Net cash provided by discontinued operations	—			—			—			2.5			—			2.5
Effect of exchange rate changes on cash and cash equivalents	—			—			—			(.6		)	—			(.6		)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	14.6			—			(22.9		)	(162.0		)	—			(170.3		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	185.2			—			25.6			234.6			—			445.4
CASH AND CASH EQUIVALENTS, END OF YEAR	$	199.8		$	—		$	2.7		$	72.6		$	—		$	275.1



VALARIS PLC AND SUBSIDIARIES CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS Year Ended December 31, 2017 (in millions)
	Valaris plc			ENSCO International Incorporated			Pride International LLC			Other Non-guarantor Subsidiaries of Valaris			Consolidating Adjustments			Total
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities of continuing operations	$	(18.2	)	$	(117.6	)	$	(100.1	)	$	495.3		$	—		$	259.4
INVESTING ACTIVITIES
Purchases of short-term investments	(1,022.9		)	—			—			(17.1		)	—			(1,040.0		)
Additions to property and equipment	—			—			—			(536.7		)	—			(536.7		)
Maturities of short-term investments	1,748.0			5.5			—			289.0			—			2,042.5
Net proceeds from disposition of assets	—			—			—			2.8			—			2.8
Purchase of affiliate debt	(316.3		)	—			—			—			316.3			—
Acquisition of Atwood, net of cash acquired	—			—			—			(871.6		)	—			(871.6		)
Net cash provided by (used in) investing activities of continuing operations	408.8			5.5			—			(1,133.6		)	316.3			(403.0		)
FINANCING ACTIVITIES
Reduction of long-term borrowing	(220.7		)	—			—			—			(316.3		)	(537.0		)
Cash dividends paid	(13.8		)	—			—			—			—			(13.8		)
Debt issuance costs	(12.0		)	—			—			—			—			(12.0		)
Advances from (to) affiliates	(848.9		)	112.1			105.9			630.9			—			—
Other	(2.6		)	—			—			(5.1		)	—			(7.7		)
Net cash provided by (used in) financing activities	(1,098.0		)	112.1			105.9			625.8			(316.3		)	(570.5		)
Net cash used in discontinued operations	—			—			—			(.8		)	—			(.8		)
Effect of exchange rate changes on cash and cash equivalents	—			—			—			.6			—			.6
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	(707.4		)	—			5.8			(12.7		)	—			(714.3		)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR	892.6			—			19.8			247.3			—			1,159.7
CASH AND CASH EQUIVALENTS, END OF YEAR	$	185.2		$	—		$	25.6		$	234.6		$	—		$	445.4