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Equity Method Investment In ARO (Tables)

3 Months Ended

9 Months Ended

Sep. 30, 2022

Equity Method Investments and Joint Ventures [Abstract]

A reconciliation of those components is presented below (in millions):


	Three Months Ended September 30,
	2022		2021
50% interest in ARO net income	$	(0.7)	$	(1.3)
Amortization of basis differences	3.6		3.9
Equity in earnings of ARO	$	2.9	$	2.6


	Successor				Predecessor
	Nine Months Ended September 30, 2022		Five Months Ended September 30, 2021		Four Months Ended April 30, 2021
50% interest in ARO net income	$	5.0	$	1.0	$	6.0
Amortization of basis differences	10.9		6.4		(2.9)
Equity in earnings of ARO	$	15.9	$	7.4	$	3.1

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


	Three Months Ended				Nine Months Ended
	September 30, 2022		September 30, 2021		September 30, 2022		September 30, 2021
Revenues	$	111.4	$	117.7	$	339.1	$	365.2
Operating expenses
Contract drilling (exclusive of depreciation)	90.0		94.4		256.3		273.4
Depreciation	15.4		16.8		47.3		47.5
General and administrative	4.7		5.4		13.1		12.7
Operating income	1.3		1.1		22.4		31.6
Other expense, net	2.7		3.4		9.3		11.0
Provision (benefit) for income taxes	(0.1)		0.2		3.1		6.6
Net income (loss)	$	(1.3)	$	(2.5)	$	10.0	$	14.0


	September 30, 2022		December 31, 2021
Cash and cash equivalents	$	173.5	$	270.8
Other current assets	145.6		135.0
Non-current assets	800.9		775.8
Total assets	$	1,120.0	$	1,181.6

Current liabilities	$	87.3	$	79.9
Non-current liabilities	879.5		956.7
Total liabilities	$	966.8	$	1,036.6

The following table summarizes the total assets and liabilities as reflected in our Condensed Consolidated Balance Sheets as well as our maximum exposure to loss related to ARO (in millions). Our maximum exposure to loss is limited to (1) our equity investment in ARO; (2) the carrying amount of our shareholder notes receivable; and (3) other receivables and contract assets from ARO, partially offset by contract liabilities as well as payables to ARO.



	September 30, 2022		December 31, 2021
Total assets	$	366.9	$	348.1
Less: total liabilities	55.4		49.1
Maximum exposure to loss	$	311.5	$	299.0

Schedule of Related Party Transactions

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


	Three Months Ended September 30,
	2022		2021
Lease revenue	$	13.8	$	14.2


	Successor				Predecessor
	Nine Months Ended September 30, 2022		Five Months Ended September 30, 2021		Four Months Ended April 30, 2021
Lease revenue	$	42.6	$	24.5	$	21.7

The principal amount, discount and interest receivable of the shareholder notes receivable from ARO were as follows (in millions):


	September 30, 2022		December 31, 2021
Principal amount	$	402.7	$	442.7
Discount	(155.8)		(193.6)
Carrying value	$	246.9	$	249.1

Interest receivable(1)(2)	$	8.6	$	—

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

(2)We collected our 2021 interest on our long-term notes receivable from ARO in cash prior to December 31, 2021, and as such, there was no interest receivable from ARO as of December 31, 2021.

Interest income earned on the shareholder notes receivable were as follows (in millions):


	Three Months Ended September 30,
	2022		2021
Interest income	$	2.8	$	2.7
Non-cash amortization	22.4		6.9
Total interest income on the shareholder notes receivable	$	25.2	$	9.6


	Successor				Predecessor
	Nine Months Ended September 30, 2022		Five Months Ended September 30, 2021		Four Months Ended April 30, 2021
Interest income	$	8.6	$	4.4	$	3.5
Non-cash amortization	37.8		12.9		—
Total interest income on the shareholder notes receivable	$	46.4	$	17.3	$	3.5