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Equity Method Investment in ARO (Tables)
 12 Months Ended
Dec. 31, 2024
Equity Method Investments and Joint Ventures [Abstract]  
Equity Method Investments
Summarized financial information for ARO is as follows (in millions):
Years Ended December 31,
202420232022
Revenues$512.5 $496.6 $459.5 
Operating expenses
   Contract drilling (exclusive of depreciation)367.7 365.9 341.8 
 Loss on impairment (1)
28.4 — — 
   Depreciation89.2 65.9 63.4 
   General and administrative23.7 22.2 18.7 
Operating income3.5 42.6 35.6 
Other expense, net55.5 31.8 11.1 
Provision (benefit) for income taxes(4.8)8.3 3.8 
Net income (loss)$(47.2)$2.5 $20.7 
(1)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 suspended and subsequently terminated during the year ended December 31, 2024. Pursuant to the requirements of the contracts, ARO had capitalized certain costs to maintain and upgrade these rigs, which were determined to be impaired due to the contract suspensions and subsequent terminations. As a result, ARO recorded a pre-tax, non-cash loss on impairment of $28.4 million during the year ended December 31, 2024. See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for more information about the contract terminations.

December 31,
20242023
Cash and cash equivalents$50.0 $92.9 
Other current assets127.7 184.0 
Non-current assets1,291.1 1,081.0 
Total assets$1,468.8 $1,357.9 
Current liabilities$146.6 $136.0 
Non-current liabilities1,202.7 1,056.8 
Total liabilities$1,349.3 $1,192.8 
A reconciliation of those components is presented below (in millions):
Years Ended December 31,
202420232022
50% interest in ARO net income (loss)$(23.6)$1.3 $10.4 
Amortization of basis differences12.6 12.0 14.1 
Equity in earnings (losses) of ARO$(11.0)$13.3 $24.5 
The following table summarizes the total assets and liabilities as reflected in our 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 Notes Receivable from ARO; and (3) other receivables and contract assets from ARO, partially offset by contract liabilities as well as payables to ARO.

December 31,
20242023
Total assets$426.1 $417.1 
Less: total liabilities57.2 73.6 
Maximum exposure to loss$368.9 $343.5 
Schedule of Related Party Transactions
Our balances related to the Lease Agreements were as follows (in millions):

December 31,
20242023
Amounts receivable (1)
$16.5 $10.2 
Contract liabilities (2)
$14.1 $15.9 
Accounts payable (2)
$43.1 $57.7 

(1)Amounts receivable from ARO is included in Accounts receivable, net in our 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 therefore, the corresponding contract liabilities are subject to adjustment during the lease term. Upon completion of the lease term, such amounts become a payable to or a receivable from ARO. As a result of the Net Settlement Agreement, as defined below, a portion of our accounts payable to ARO was reduced by $50.7 million in June 2024.
The principal amount and discount of the Notes Receivable from ARO were as follows (in millions):

December 31,
20242023
Principal amount$376.6 $402.7 
Discount(80.4)(120.4)
Carrying value$296.2 $282.3 
Interest income earned on the Notes Receivable from ARO was as follows (in millions):

Years Ended December 31,
202420232022
Interest income$24.6 $30.5 $11.3 
Non-cash amortization (1)
40.0 28.3 44.9 
Total interest income on the Notes Receivable from ARO
$64.6 $58.8 $56.2 

(1)Represents the amortization of the discount on the Notes Receivable from ARO using the effective interest method to interest income over the term of the notes. In 2024, we recognized non-cash interest income of $13.9 million related to the discount attributable to the Net Settlement Agreement. In 2022, we recognized non-cash interest income of $14.8 million attributable to a $40.0 million early principal repayment of the Notes Receivable from ARO received in September 2022.