Valaris Ltd (VAL) Business

Item 1.  Business

General

Valaris Limited is a global offshore contract drilling company. Unless the context requires otherwise, the terms "Valaris," "Company," "we," "us" and "our" refer to Valaris Limited together with all its subsidiaries and predecessors.

We are a leading provider of offshore contract drilling services to the international oil and gas industry with operations in almost every major offshore market across six continents. Our fleet of offshore drilling rigs is among the largest in the world and includes one of the highest specification ultra-deepwater fleets, as well as a leading premium jackup fleet. As of February 20, 2026, we own 46 rigs, including 13 drillships, two semisubmersible rigs, 31 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs.

Our customers include many of the leading international and government-owned oil and gas companies, in addition to many independent operators. We are among the most geographically diverse offshore drilling companies with global operations. The markets in which we operate include the Gulf of America, South America, the North Sea, the Mediterranean, the Middle East, Africa and Asia Pacific.

We provide drilling services on a day rate contract basis. Under day rate contracts, we provide an integrated drilling service that includes the provision of a drilling rig and rig crews for which we receive a daily rate that may vary between the full rate and zero rate throughout the duration of the contractual term, depending on the operations of the rig. We also may receive lump-sum fees or similar compensation for the mobilization, demobilization and capital upgrades of our rigs. Our customers bear substantially all of the costs of constructing the well and supporting drilling operations as well as the economic risk relative to the success of the well.

Pending Business Combination with Transocean

On February 9, 2026, Valaris and Transocean Ltd. ("Transocean") entered into a business combination agreement (the “Business Combination Agreement”) under which Transocean will acquire all of the issued and outstanding common shares of Valaris in exchange for shares of Transocean at an exchange ratio of 15.235 Transocean shares for each Valaris share. The Business Combination will be effected by way of a court-approved scheme of arrangement between Valaris and the holders of the Valaris shares pursuant to section 99 of the Companies Act 1981 of Bermuda, as amended. The Transocean shares are expected to be issued in reliance on the exemption from the registration requirements of the U.S. Securities Act of 1933, as amended, provided by Section 3(a)(10) thereof and pursuant to exemptions from registration under any applicable state securities laws. Following the consummation of the Business Combination, Transocean’s existing shareholders and Valaris’ existing shareholders will own approximately 53% and 47%, respectively, of the combined company on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029. See "Part II. Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Introduction - Pending Business Combination with Transocean" for further information.

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Our Industry

The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics and customer capital allocation decisions. Periods of oil oversupply generally place downward pressure on commodity prices, while periods of undersupply can result in higher and more volatile oil prices, influencing investment decisions across the upstream sector. While the oil market is currently in a period of oversupply, industry fundamentals are generally viewed as constructive over the medium to long term. Market participants generally expect the current oil supply imbalance to shift to a structurally tighter market over the next few years, driven by past underinvestment in upstream development and slowing production growth from non-OPEC sources. Industry studies, including those published by the International Energy Agency and the U.S. Energy Information Administration, indicate that substantial upstream investment is required to offset natural field declines and maintain existing production levels.

Against this backdrop, customers continue to emphasize the need for sustained investment in oil and gas to support secure, reliable and affordable energy supply, with increasing focus on offshore developments, particularly in deepwater. Compared to other sources of supply, deepwater projects typically offer large resource potential, competitive project economics and lower carbon intensity per barrel. Despite near-term commodity price uncertainty, customers are continuing to advance long-cycle offshore developments. Industry participants anticipate increased deepwater project sanctioning over the next five years across greenfield, brownfield and exploration opportunities. According to Rystad Energy estimates, approximately 70% of this expected activity is associated with projects with breakeven oil prices below $50 per barrel and over 80% is associated with projects with breakeven prices below $60 per barrel.

Operating results in the offshore drilling industry are directly related to the demand for and the available supply of drilling rigs, each of which affects rig utilization and day rates. While the balance of rig supply and demand can vary somewhat between regions, significant variations between most regions are generally short-term due to rig mobility. Rig attrition in the industry over the last decade, particularly for floaters, has resulted in a smaller global fleet of rigs that is available to meet customer demand.

Contract Drilling Operations

Our business consists of four operating segments: (1) Floaters, which includes our drillships and semisubmersible rigs, (2) Jackups, (3) ARO and (4) Other, which consists of management services on rigs owned by third parties and the activities associated with our lease arrangements with ARO. Floaters, Jackups and ARO are also reportable segments.

As of December 31, 2025, we owned 46 rigs and excluding our held-for-sale rig, 17 are located in Europe, 16 are located in Middle East and Africa, eight are located in North and South America and four are located in Asia and the Pacific Rim.

Our drilling rigs drill and complete oil and natural gas wells. From time to time, our drilling rigs may be utilized as accommodation units or for other ancillary services such as well workovers and interventions, plug and abandonment and decommissioning work and carbon capture and sequestration projects. Demand for our drilling services is based upon many factors beyond our control. See “Item 1A. Risk Factors - The success of our business depends on the level of activity in offshore oil and natural gas exploration, which can be significantly affected by volatile oil and natural gas prices.”

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Our drilling contracts are negotiated with our customers, and most contracts are awarded following competitive bidding. The terms of our drilling contracts vary, but generally contain the following commercial terms:

•contract duration or term for a specific period of time or a period necessary to drill one or more wells,

•term extension options, exercisable by our customers, upon advance notice to us, at mutually agreed, indexed, fixed rates or current rate at the date of extension,

•provisions permitting early termination of the contract, which may include (1) if the rig is lost or destroyed, (2) if operations are suspended for a specified period of time due to various events, including damage or breakdown of major rig equipment, unsatisfactory performance, "force majeure" events or breach of contract, (3) failure of the customer to receive final investment decision (FID) approval with respect to projects for which the drilling rig was contracted or (4) at the convenience (without cause) of the customer, exercisable upon advance notice to us, and in certain cases without making an early termination payment to us,

•payment of compensation to us is (generally in U.S. dollars, although some contracts require a portion of the compensation to be paid in local currency) on a day rate basis such that we receive a fixed amount for each day that the drilling rig is under contract (lower day rates generally apply for periods when operations are suspended due to various events, including during delays that are beyond our reasonable control, during repair of equipment damage or breakdown and during periods of re-drilling damaged portions of the well, and no day rate, or zero rate, generally applies when these limited periods are exceeded until the event is remediated, and during periods to remediate unsatisfactory performance or other specified conditions),

•payment by us of the operating expenses of the drilling rig, including crew labor and incidental rig supply and maintenance costs,

•mobilization and demobilization requirements of us to move the drilling rig to and from the planned drilling site, and may include reimbursement of all or a portion of these moving costs by the customer in the form of an up-front payment, additional day rate over the contract term or direct reimbursement, and

•provisions allowing us to recover certain labor and other operating cost increases from our customers through day rate adjustment or direct reimbursement for certain cost increases due to changes in applicable law or rising operational expenses.

Contract awards generally remain subject to a highly competitive bidding process, which could result in contracts that contain unfavorable contractual and commercial terms, such as certain limitations on our ability to be indemnified from operator and third-party damages caused by our negligence, gross negligence or willful misconduct, resulting in increases in the nature and amounts of liability allocated to us, which we endeavor to limit through a financial cap.

Backlog Information

See "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" for backlog information.

Major Customers

We provide our contract drilling services to major international, government-owned and independent oil and gas companies. During the year ended December 31, 2025, our five largest customers accounted for 49% of consolidated revenues. Petróleo Brasileiro S.A. ("Petrobras"), BP plc ("BP") and Azule Energy ("Azule"), our customers who account for 10% or more of consolidated revenues, accounted for 35% of consolidated revenues.

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Competition

The offshore contract drilling industry is highly competitive. Drilling contracts are, for the most part, awarded on a competitive bid basis. Price is often the primary factor in determining which contractor is awarded a contract, although quality of service, operational and safety performance, equipment suitability and availability, location of equipment, reputation and technical expertise are also factors.

Non-U.S. Operations

Revenues from non-U.S. operations were 86%, 84% and 80% of our total consolidated revenues during the years ended December 31, 2025, 2024 and 2023, respectively.

See "Item 1A. Risk Factors - Our non-U.S. operations involve additional risks not typically associated with U.S. operations."

Insurance and Indemnification Matters

Our insurance program provides coverage, subject to the policies' terms and conditions and to the extent not otherwise assumed by the customer under the indemnification provisions of the drilling contract, for third-party liability claims arising from our operations. Our insurance program provides coverage that is customary for our industry. Generally, our insurance program provides third-party liability coverage up to $855.0 million. We retain the risk for liability not indemnified by the customer in excess of, and for risks not covered by, our insurance coverage.

Our insurance program also provides hull and machinery coverage for physical damage (including total loss) to our rigs, cargo and equipment, excluding damage arising from a named windstorm in the Gulf of America. We separately purchase a small limit of named windstorm insurance for our floater rigs in the Gulf of America. We carry limited insurance for loss of hire for several of our rigs.

Our customers typically indemnify us for most well-control events. Well-control events generally include an unintended release from a well that cannot be contained by using equipment on site, such as a blowout preventer, by increasing the weight of drilling fluid or by diverting the fluids safely into production facilities. Subject to the exceptions noted below, our customers typically assume most of the responsibility for and indemnify us from any loss, damage or other liability resulting from pollution or contamination arising from operations. Such pollution or contamination may be as a result of blowouts, cratering and seepage, when the source of the pollution originates from the well or reservoir. Such indemnities typically include costs for clean-up and removal of pollution and third-party damages.

Our drilling contracts customarily provide that each party is responsible for injuries or death to their respective personnel and loss or damage to their respective property (including the personnel and property of each parties’ contractors and subcontractors) regardless of the cause of the loss or damage. However, exceptions may exist as it relates to damages due to our negligence.  In addition, our drilling contracts typically provide for our customers to indemnify us, generally based on replacement cost minus some level of depreciation, for loss or damage to our down-hole equipment. In some cases, we are indemnified by our customer for a limited amount of the repair of or replacement cost of our subsea equipment. We also maintain insurance for exposures to personal injuries, damage to or loss of property and certain business risks.

We generally indemnify the customer for legal and financial consequences of spills of waste oil, fuels, lubricants, motor oils, pipe dope, paint, solvents, ballast, bilge, garbage, debris, sewage, hazardous waste and other liquids, the discharge of which originates from our rigs or equipment above the surface of the water and in some cases from our subsea equipment. Our contracts generally provide that, in the event of any such spill from our rigs, we are also responsible for the related fines and penalties.

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The above description of our insurance program and the indemnification provisions of our drilling contracts is only a summary as of the date hereof and is general in nature. In addition, our drilling contracts are individually negotiated, and the degree of indemnification we receive from operators against the liabilities discussed above can vary from contract to contract based on market conditions and customer requirements existing when the contract was negotiated and the interpretation and enforcement of applicable law when the claim is adjudicated. Our insurance program and the terms of our drilling contracts may change in the future.

In certain cases, vendors who provide equipment or services to us limit their pollution liability to a specific monetary cap, and we assume the liability above that cap. Typically, in the case of original equipment manufacturers, the cap is a negotiated amount based on mutual agreement of the parties considering the risk profiles and thresholds of each party. However, for smaller vendors, the liability is usually limited to the value, or double the value, of the contract for the purchase of such equipment or services.

Additional information on insurance and indemnification matters and related risks is discussed in “Item 1A. Risk Factors,” which should be read in conjunction with the foregoing information.

Governmental Regulation and Environmental Matters

Our operations are affected by laws, regulations and political initiatives that relate to the oil and natural gas industry, including laws and regulations that have or may impose increased oil-spill related and financial responsibility requirements. Laws and regulations curtailing exploration and development drilling for oil and natural gas will directly affect us for economic, environmental, safety or other policy reasons. It is also possible that these laws, regulations and political initiatives could adversely affect our operations in the future by significantly increasing our operating costs or restricting areas open for drilling activity.  We incorporate by reference herein the disclosures on governmental regulations, including environmental matters, contained in the following sections of this Annual Report on Form 10-K:

•"Item 1A. Risk Factors – Regulatory, Legal and Tax Risks";

•"Item 1A. Risk Factors – Sustainability Risks";

•"Item 3. Legal Proceedings"; and

•"Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity and Capital Resources – Effects of Climate Change and Climate Change Regulation."

The International Convention on Oil Pollution Preparedness, Response and Cooperation, the International Convention on Civil Liability for Oil Pollution Damage 1992, the U.K. Merchant Shipping Act 1995, Marpol 73/78 (the International Convention for the Prevention of Pollution from Ships), the U.K. Merchant Shipping (Oil Pollution Preparedness, Response and Co-operation Convention) Regulations 1998, as amended, the Oil Pollution Act of 1990 ("OPA 90"), as amended, the Clean Water Act and other U.S. federal statutes applicable to us and our operations, as well as similar statutes in Texas, Louisiana, other coastal states and other non-U.S. jurisdictions, address oil spill prevention, reporting and control and have significantly expanded potential liability, fine and penalty exposure across many segments of the oil and natural gas industry. Such statutes and related regulations impose a variety of obligations on us related to the prevention of oil spills, disposal of waste and liability for resulting damages. For instance, OPA 90 imposes strict and, with limited exceptions, joint and several liability upon each responsible party for oil removal costs as well as a variety of fines, penalties and damages. Similar environmental laws apply in our other areas of operation.

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Sustainability

Consistent with our purpose of providing responsible solutions that deliver energy to the world, we are focused on sustainability-related matters to drive continued shareholder value and meet the demands of our stakeholders. Our board of directors' Safety and Sustainability Committee regularly meets to address sustainability topics and is responsible for overseeing the Company’s policies, programs and practices related to sustainability as well as the Company’s management of risks in such areas. We also have a dedicated department focused on sustainability and new energy and a cross-functional working group to identify and evaluate opportunities and promote sustainable business practices.

For further discussion of sustainability-related risks and considerations see “Risk Factors” in Item 1A and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this Annual Report on Form 10-K.

We encourage you to review our latest Sustainability Report, located on our website (www.valaris.com), for more detailed information regarding our sustainability programs and initiatives. Nothing on our website, including our Sustainability Report or sections thereof, shall be deemed incorporated by reference into this Annual Report on Form 10-K or other filings that we make with the SEC.

Human Capital

We believe our people are one of the most important elements of our success, and we benefit from a motivated, engaged and diverse workforce. Our approach to attracting, developing and retaining a workforce of high-performing talent is anchored in a long-term employment model that seeks to foster personal growth and engagement.

Purpose and Culture

At Valaris, our purpose is to provide responsible solutions that deliver energy to the world. Our values are designed to guide us in support of our purpose:

•Integrity – Doing the right thing, whether or not anyone is watching;

•Safety – Causing no harm is always a priority;

•Excellence – Delivering value to our customers while consistently raising the bar on performance;

•Respect – Treating others the way we would like to be treated;

•Ingenuity – Solving problems creatively; and

•Stewardship – Safeguarding where we work for the next generation.

Our Ethics and Compliance Policy and our Code of Conduct (the “Code”) form the foundation of our compliance and ethics program, which provides guidance on how to uphold our values. We have translated the Code into nine different languages, making it widely accessible to our employees across the globe. We maintain an Ethics Hotline that is available to all employees, either online or by phone, to confidentially seek guidance or raise a concern.

The Code is reviewed on a periodic basis and approved by our board of directors. To further support our values of respect and integrity, we have policies prohibiting corruption, bribery (including facilitation payments), money laundering, retaliation and reprisals for raising concerns, including those related to worker rights, working conditions, mistreatment, fraud and misconduct. In addition, we have adopted a policy against modern slavery and human trafficking in our business and our supply chains.

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Employees

We had a global workforce of approximately 5,070 persons including contractors, and approximately 3,800 persons excluding contractors, as of December 31, 2025. Our personnel represented 78 nationalities spread across 25 locations. The majority of our personnel work on our offshore rigs and are compensated on an hourly basis. A portion of our employees and contractors working outside of the U.S. are represented under collective bargaining or similar agreements, which are subject to periodic salary negotiation.

Employee Wellbeing and Engagement

We believe that one of the best ways to serve our customers is through creating a healthy, safe and engaging working and learning environment, where our employees are confident and comfortable to put their best work forward. We seek to promote a healthy environment by prioritizing the mental and physical health and other needs of our employees while recognizing them for their achievements and accomplishments. For example, in most countries where we work, we offer an employee assistance program (“EAP”) to employees and their families. Our EAP provides access to counselors and other mental health professionals as well as discounts to fitness centers, financial guidance and other benefits in support of our overall commitment to maintain a healthy workforce.

Feedback from our employees plays a key role in creating an agile, collaborative and trustworthy culture. We use surveys to measure employee engagement as well as our ability to align and execute around a common vision and foster innovation and creativity. These surveys help our leaders analyze the impact of company practices and culture on performance and have created a roadmap for improvement.

Training and Retention

We are focused on developing talent and leadership among both our onshore and offshore employees. In 2021, we launched the Building Organizational Leadership (BOLD) training program. This program is designed to engage, support and provide leadership tools for our offshore supervisors, helping them assess and develop their team’s understanding and use of our safety processes and policies. Approximately 1,620 personnel have attended the program since its launch. Also, in 2025, we launched an enhanced leadership development program for senior offshore leaders, which was delivered through targeted workshops during the year to strengthen management effectiveness and decision-making in complex operating environments.

We provide regular training in health, safety, environmental and emergency response to our employees, as relevant to their roles, and we mandate that our employees complete training related to the Code, covering topics such as anti-corruption, workplace behavior and conflicts of interest. In addition, in 2025, all employees were assigned "Workplace Harassment" training as part of supporting a more inclusive workforce. Certain employees must also complete additional training on topics ranging from trade compliance to human trafficking.

Safety

Our policies set the expectation that causing no harm is a priority while conducting our operations. We seek to control major operational hazards with effective safeguards, robust barrier management, and the disciplined implementation of management systems designed to protect the health and safety of our personnel, the environment and our assets.

As part of our focus on preventing high-consequence events, in 2025, we implemented BarrierPulseTM a barrier management and performance monitoring framework that provides structured oversight of safety-critical barriers and escalation reporting for leadership visibility. BarrierPulseTM supports the identification, verification, and monitoring of barriers intended to prevent, detect, or mitigate major accident hazards, enhancing our ability to understand barrier status and health, enhancing our ability to take timely corrective action before a major event occurs.

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Our Safe Systems of Work are designed with the aim of completing each job safely and efficiently:

●Work Instruction – Step-by-step descriptions of how to complete specific work activities, including mandatory precautions and controls to be implemented;

●Permit to Work – Formal authorization and control process for the safe execution of potentially hazardous work that may present risk to people, the environment or assets;

●Energy Isolation – Formal isolation of all energy sources before performing work on equipment;

●Job Safety Analysis – Identification and control of job-specific hazards before starting work; and

●Stop Work Authority – Empowerment to stop work if a risk to people, the environment or assets is perceived to exist.

Information about our Executive Officers

Officers generally serve for a one-year term or until successors are elected and qualified to serve. The table below sets forth certain information regarding our executive officers as of February 20, 2026:

Set forth below is certain additional information on our executive officers, including the business experience of each executive officer for at least the last five years:

Anton Dibowitz became the President and Chief Executive Officer of Valaris in December 2021, following his service as the Company’s interim President and Chief Executive Officer since September 2021. Mr. Dibowitz joined the Valaris board of directors in July 2021. Prior to joining the Valaris board of directors, he served as an advisor of Seadrill Ltd., a global offshore drilling contractor, from November 2020 until March 2021. He served as Chief Executive Officer of Seadrill Ltd. from July 2017 until October 2020. Prior to this, Mr. Dibowitz served as Executive Vice President of Seadrill Management since June 2016, and as Chief Commercial Officer since January 2013. He has over 20 years of drilling industry experience. Prior to joining Seadrill, Mr. Dibowitz held various positions within tax, process reengineering and marketing at Transocean Ltd. and Ernst & Young LLP. He is a Certified Public Accountant and a graduate of the University of Texas at Austin where he received a Bachelor's degree in Business Administration and Master's degrees in Professional Accounting (MPA) and Business Administration (MBA).

Christopher Weber became the Senior Vice President and Chief Financial Officer of Valaris in August 2022. Previously, he served as Chief Financial Officer of LUFKIN Industries, a leading global provider of rod lift optimization solutions, products, technologies and services to the oil and gas industry, from February 2021 to July 2022. Mr. Weber also served as Chief Financial Officer of Abaco Drilling Technologies from July 2019 to February 2021 and Chief Financial Officer of Halliburton Company from June 2017 to November 2018. Prior to Halliburton, Mr. Weber served as Chief Financial Officer of Parker Drilling Company and held senior finance roles at Valaris predecessor companies. He received an MBA in Finance and Strategy from the Wharton School and a BA in Economics and English Literature from Vanderbilt.

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Gilles Luca became Senior Vice President and Chief Operating Officer in December 2019. Previously, he served as Senior Vice President, Operations Support. He joined Valaris in 1997. Mr. Luca also served Valaris as Senior Vice President - Western Hemisphere, Vice President - Business Development and Strategic Planning, Vice President - Brazil Business Unit and General Manager - Europe and Africa. Before joining Valaris as an Operations Engineer in The Netherlands, Mr. Luca was employed by Foramer Drilling and Schlumberger with assignments in France and Venezuela. He holds a Master's Degree in Petroleum Engineering from the French Petroleum Institute and a Bachelor in Civil Engineering.

Matthew Lyne became the Senior Vice President and Chief Commercial Officer of Valaris in September 2022. Previously, he served as Executive Vice President, Chief Commercial and Strategy Officer of Seadrill Limited from May 2021 to September 2022. Seadrill Limited filed for bankruptcy in February 2021. Prior to this role, he held a number of senior marketing and commercial roles at Seadrill Limited for more than 10 years. He also served in a number of senior operational and functional roles with Transocean Ltd. prior to joining Seadrill Limited. Mr. Lyne has over 20 years of offshore drilling experience in various international locations. Mr. Lyne has a Bachelor of Science degree in Engineering from Montana Technological University.

Davor Vukadin was appointed Senior Vice President, General Counsel and Secretary in May 2022. Before being named to his current position, Mr. Vukadin served as Associate General Counsel and Secretary from June 2021 to May 2022. Previously, he served as Associate General Counsel and Assistant Secretary from November 2018 to June 2021. He joined Valaris as Senior Counsel in 2014. Prior to joining Valaris, Mr. Vukadin practiced corporate and securities law with the law firm of Norton Rose Fulbright for thirteen years. He holds a Bachelor of Arts degree in Economics from The University of Chicago and a law degree from The University of Texas School of Law.

Available Information

Our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports that we file with, or furnish to, the Securities and Exchange Commission ("SEC") in accordance with the Exchange Act are available free of charge on our website at www.valaris.com/investors. In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The information contained on our website is not included as part of, or incorporated by reference into, this report.