XML 21 R9.htm IDEA: XBRL DOCUMENT
v3.25.3

Equity Method Investment In ARO Equity Method Investment In ARO | 9 Months Ended
--- | ---
Sep. 30, 2025
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investment In ARO | 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, 2025, ARO owned nine jackup rigs, had ordered one newbuild jackup rig and leased seven rigs from us through bareboat charter arrangements (the "Lease Agreements") whereby substantially all operating costs are incurred by ARO. 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. The first two newbuild jackups, Kingdom 1 and Kingdom 2, were ordered in January 2020 and commenced operations in the fourth quarter of 2023 and the third quarter of 2024, respectively. In October 2024, ARO ordered the third newbuild jackup, Kingdom 3, and is expected to commit to order one additional newbuild jackup 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. Equity in earnings (losses) 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 (loss), adjusted for basis differences as discussed below, in Equity in earnings (losses) of ARO in our 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 bankruptcy in 2021. 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") at that date. 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 measurement date. Basis differences are amortized over the remaining life of the assets or liabilities to which they relate and are recognized as an adjustment to the Equity in earnings (losses) 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 (loss). A reconciliation of those components is presented below (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
50% interest in ARO net income (loss)(1) | $ | 1.2 |  |  | $ | (27.0) |  |  | $ | (3.6) |  |  | $ | (31.2) |
Amortization of basis differences | 3.2 |  |  | 3.2 |  |  | 9.5 |  |  | 9.5 |
Equity in earnings (losses) of ARO | $ | 4.4 |  |  | $ | (23.8) |  |  | $ | 5.9 |  |  | $ | (21.7) |
(1) ARO's net loss (prior to determining our 50% interest) for the three and nine months ended September 30, 2024 includes a non-cash loss on impairment of $28.4 million related to costs which were capitalized pursuant to certain contractual maintenance and upgrade requirements for VALARIS 143, VALARIS 147 and VALARIS 148. The contracts associated with these rigs were terminated in 2024 in connection with Saudi Arabia’s announcement during the prior year period to limit oil production capacity. Related-Party Transactions Revenues recognized by us related to the Lease Agreements are included within Operating revenues in our Condensed Consolidated Statements of Operations and were as follows (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Revenues from Lease Agreements | $ | 22.5 |  |  | $ | 11.3 |  |  | $ | 52.9 |  |  | $ | 42.9 |
Our balances related to the ARO lease agreements were as follows (in millions):
| September 30, 2025 |  | December 31, 2024 |  |  |
Amounts receivable (1) | $ | 18.7 |  |  | $ | 16.5 |  |  |  |
Contract liabilities (2) | $ | 12.2 |  |  | $ | 14.1 |  |  |  |
Accounts payable (2) | $ | 59.7 |  |  | $ | 43.1 |  |  |  |
(1)Amounts receivable from ARO are 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 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. In addition, the accounts payable balance includes amounts owed to ARO for certain reimbursable costs. During 2017 and 2018, the Company contributed assets to ARO in exchange for a 10-year shareholder notes receivable due from ARO (the "Notes Receivable from ARO"), which bear interest based on a one-year term SOFR, set as of the end of the year prior to the applicable year, plus 2.10%. The Notes Receivable from ARO were adjusted to their estimated fair value in fresh start accounting in 2021 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 principal amount and discount of the Notes Receivable from ARO were as follows (in millions):
| September 30, 2025 |  | December 31, 2024 |  |  |
Principal amount | $ | 376.6 |  |  | $ | 376.6 |  |  |  |
Discount | (61.9) |  |  | (80.4) |  |  |  |
Carrying value | $ | 314.7 |  |  | $ | 296.2 |  |  |  |
Interest receivable (1)(2) | $ | 18.0 |  |  | $ | — |  |  |  |
(1)Our interest receivable from ARO is included in Accounts receivable, net in our Condensed Consolidated Balance Sheets. (2)The 2024 interest on the Notes Receivable from ARO of approximately $24.6 million was paid in kind in December 2024 by increasing the principal balance of the Notes Receivable from ARO. Interest income earned on the Notes Receivable from ARO was as follows (in millions):
| Three Months Ended September 30, |  | Nine Months Ended September 30,
| 2025 |  | 2024 |  | 2025 |  | 2024
Interest income | $ | 10.0 |  |  | $ | 6.2 |  |  | $ | 18.0 |  |  | $ | 18.4 |
Non-cash amortization (1)(2) | 6.2 |  |  | 6.2 |  |  | 18.5 |  |  | 33.8 |
Total interest income on the Notes Receivable from ARO | $ | 16.2 |  |  | $ | 12.4 |  |  | $ | 36.5 |  |  | $ | 52.2 |
(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. (2)During the nine months ended September 30, 2024, we recognized $13.9 million of non-cash interest income attributable to a settlement agreement executed in June 2024 whereby $50.7 million of accounts payable due to ARO was net settled against a portion of the Notes Receivable from ARO.

X
- References No definition available. + Details
Name: | us-gaap_EquityMethodInvestmentsAndJointVenturesAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/recommendedDisclosureRef -Topic 740 -SubTopic 323 -Name Accounting Standards Codification -Section 50 -Paragraph 2 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147478156/740-323-50-2 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (a)(3) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 3: http://www.xbrl.org/2003/role/disclosureRef -Topic 323 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 3 -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org/1943274/2147481687/323-10-50-3 Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Name Accounting Standards Codification -Topic 323 -Publisher FASB -URI https://asc.fasb.org/323/tableOfContent + Details
Name: | us-gaap_EquityMethodInvestmentsDisclosureTextBlock
Namespace Prefix: | us-gaap_
Data Type: | dtr-types:textBlockItemType
Balance Type: | na
Period Type: | duration