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Equity Method Investment in ARO (Tables) | 12 Months Ended
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Dec. 31, 2025
Equity Method Investments and Joint Ventures [Abstract] |
Equity Method Investments | Summarized financial information for ARO is as follows (in millions):
| Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Revenues | $ | 571.0 |  |  | $ | 512.5 |  |  | $ | 496.6 |
Operating expenses |  |  |  |  |
Contract drilling expenses (exclusive of depreciation) | 360.7 |  |  | 367.7 |  |  | 365.9 |
Loss on impairment (1) | — |  |  | 28.4 |  |  | — |
Depreciation | 114.9 |  |  | 89.2 |  |  | 65.9 |
General and administrative | 28.8 |  |  | 23.7 |  |  | 22.2 |
Operating income | 66.6 |  |  | 3.5 |  |  | 42.6 |
Other expense, net | 59.5 |  |  | 55.5 |  |  | 31.8 |
Provision (benefit) for income taxes | 15.7 |  |  | (4.8) |  |  | 8.3 |
Net income (loss) | $ | (8.6) |  |  | $ | (47.2) |  |  | $ | 2.5 |
(1)In connection with 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,
| 2025 |  | 2024
Cash and cash equivalents | $ | 99.3 |  |  | $ | 50.0 |
Other current assets | 148.3 |  |  | 127.7 |
Non-current assets | 1,266.1 |  |  | 1,291.1 |
Total assets | $ | 1,513.7 |  |  | $ | 1,468.8 |
Current liabilities | $ | 139.0 |  |  | $ | 146.6 |
Non-current liabilities | 1,263.8 |  |  | 1,202.7 |
Total liabilities | $ | 1,402.8 |  |  | $ | 1,349.3 |
A reconciliation of those components is presented below (in millions):
| Years Ended December 31,
| 2025 |  | 2024 |  | 2023
50% interest in ARO net income (loss) | $ | (4.3) |  |  | $ | (23.6) |  |  | $ | 1.3 |
Amortization of basis differences | 12.7 |  |  | 12.6 |  |  | 12.0 |
Equity in earnings (losses) of ARO | $ | 8.4 |  |  | $ | (11.0) |  |  | $ | 13.3 |
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, |
| 2025 |  | 2024 |
Total assets | $ | 516.6 |  |  | $ | 426.1 |  |
Less: total liabilities | 78.1 |  |  | 57.2 |  |
Maximum exposure to loss | $ | 438.5 |  |  | $ | 368.9 |  |
Schedule of Related Party Transactions | Revenues recognized by us related to the Lease Agreements are included within Revenues (exclusive of reimbursable revenues) and revenues related to certain reimbursable expenses in accordance with the Lease Agreements are recognized within Reimbursable revenues in our Consolidated Statements of Operations and were as follows (in millions):
| Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Revenues (exclusive of reimbursable revenues) from Lease Agreements | $ | 69.4 |  |  | $ | 52.6 |  |  | $ | 69.2 |
Reimbursable revenues from Lease Agreements | 4.2 |  |  | — |  |  | — |
Total operating revenues from Lease Agreements | $ | 73.6 |  |  | $ | 52.6 |  |  | $ | 69.2 |
Our balances related to the ARO lease agreements were as follows (in millions):
| December 31, |  |  |
| 2025 |  | 2024 |  |  |
Accounts receivable | $ | 47.8 |  |  | $ | 16.5 |  |  |  |
Contract assets (1) | $ | 2.0 |  |  | $ | — |  |  |  |
Contract liabilities (1) | $ | 16.3 |  |  | $ | 14.1 |  |  |  |
Accounts payable (1) | $ | 61.8 |  |  | $ | 43.1 |  |  |  |
(1)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 assets and 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. The principal amount and discount of the Notes Receivable from ARO were as follows (in millions):
| December 31, |  |  |
| 2025 |  | 2024 |  |  |
Principal amount (1) | $ | 400.7 |  |  | $ | 376.6 |  |  |  |
Discount | (55.7) |  |  | (80.4) |  |  |  |
Carrying value | $ | 345.0 |  |  | $ | 296.2 |  |  |  |
(1)The interest on the Notes Receivable from ARO for 2025 and 2024 of approximately $24.1 million and $24.6 million, respectively, were paid in kind in December 2025 and 2024 by increasing the principal balance of the Notes Receivable from ARO in each respective period. Interest income earned on the Notes Receivable from ARO was as follows (in millions):
| Years Ended December 31,
| 2025 |  | 2024 |  | 2023
Interest income | $ | 24.1 |  |  | $ | 24.6 |  |  | $ | 30.5 |
Non-cash amortization (1)(2) | 24.7 |  |  | 40.0 |  |  | 28.3 |
Total interest income on the Notes Receivable from ARO | $ | 48.8 |  |  | $ | 64.6 |  |  | $ | 58.8 |
(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)In 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.

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