Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the accompanying unaudited condensed consolidated financial statements and related notes thereto included in "Item 1. Financial Statements" and with our annual report on Form 10-K for the year ended December 31, 2025. The following discussion and analysis contains forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including those set forth under “Risk Factors” in Item 1A of our annual report and elsewhere in this quarterly report. See “Forward-Looking Statements.” EXECUTIVE SUMMARY Our Business 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 August 6, 2026, we own 43 rigs, including 13 drillships, one semisubmersible rig, 29 jackup rigs and a 50% equity interest in ARO, our 50/50 unconsolidated joint venture with Saudi Aramco, which owns an additional nine rigs. Pending Business Combination with Transocean On February 9, 2026, Valaris and Transocean Ltd. ("Transocean"), entered into a 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 common share (the "Business Combination"). Upon completion and on a fully diluted basis assuming conversion to shares of Transocean’s exchangeable bonds due 2029, Transocean shareholders would own approximately 53% of the combined company, with Valaris shareholders owning the remaining 47%. The completion of the Business Combination is subject to customary closing conditions, including shareholder and regulatory approvals. See "Note 1 - Unaudited Condensed Consolidated Financial Statements - Pending Business Combination with Transocean" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Business Combination. Our Industry The offshore drilling industry is cyclical and primarily influenced by global energy demand, oil and gas supply dynamics, geopolitical factors 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 began the year in a period of oversupply, the on-going conflicts in the Middle East have reduced supply and increased uncertainty and volatility in global energy markets. The conflicts have also reinforced the strategic importance of energy security and market participants generally expect the global oil and gas market to tighten 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. 30 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 65% of this expected activity is associated with projects with breakeven oil prices below $50 per barrel and approximately 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. Inflationary pressures impact our cost base, resulting in increased personnel costs as well as in the prices of goods and services required to operate our rigs or execute capital projects. Additionally, the weakening of the U.S. dollar against foreign currencies may increase costs in certain foreign jurisdictions in which we operate. We expect that our costs will continue to rise in the near term, particularly given the potential impact of increased tariffs on global trade, and although certain of our long-term contracts contain provisions for escalating costs, we cannot predict with certainty our ability to successfully claim recoveries of higher costs from our customers under these contractual stipulations. Conflicts in the Middle East Our operations and assets located in the Middle East have recently been subject to elevated geopolitical risk due to ongoing conflicts and military activity in the region. As a result, our operating income was negatively impacted by approximately $30.0 million and $38.0 million for the three and six months ended June 30, 2026, respectively, primarily associated with incremental costs to maintain insurance coverage for war-related risks for jackups that we operate in the region (approximately $11.0 million and $19.0 million for the three and six months ended June 30, 2026, respectively) and incremental costs and lower revenues associated with project delays for VALARIS 250 and VALARIS 116 (approximately $14.0 million for both the three and six months ended June 30, 2026), which were undergoing planned maintenance and contract preparation projects in shipyards located in the region during the first half of 2026. Based on information currently available, we expect these adverse impacts to moderate in the second half of 2026 as VALARIS 250 recommenced its bareboat charter contract in July and VALARIS 116 is expected to recommence its bareboat charter in the third quarter. In addition, insurance costs to maintain war-related coverage are expected to be lower than those incurred in the first half of the year primarily due to the sale of VALARIS 104 and lower premiums from securing longer term coverage. The geopolitical environment in the Middle East remains volatile, and if the ongoing conflicts persist or escalate, including an expansion of hostilities, the negative impact on our operating income could be significantly higher than amounts incurred to date and could also adversely affect the operating performance of ARO. An escalation of conflict could result in additional military actions, economic sanctions or other governmental measures, including disruptions to regional ports or further restrictions on maritime traffic through key waterways such as the Strait of Hormuz. Continued disruptions or closures affecting the Strait of Hormuz, through which a substantial portion of the region’s maritime traffic and energy‑related logistics transit, could materially affect our ability, and that of ARO, to mobilize assets, transport personnel and supplies, or perform drilling and related services in a timely and cost‑effective manner. 31 In addition, any such escalation could lead to further increases in insurance premiums, reductions in coverage limits or scope or the unavailability of coverage, as well as limitations on vessel access or port services, delays in customs and regulatory approvals, supply chain disruptions and increased security‑related expenditures. These risks could result in prolonged rig downtime, including for rigs operated by ARO, contract suspensions or terminations, delayed commencement of contracted operations, loss of revenue, impairment of assets or additional force majeure claims by us or our customers. Ongoing or future instability in the region, including actions taken in response to geopolitical developments, could materially and adversely affect our operating costs, financial condition, and results of operations. Backlog Our contract drilling backlog reflects commitments represented by signed drilling contracts and is calculated by multiplying the contracted operating day rate by the contract period. The contracted day rate excludes certain types of lump sum fees for rig mobilization, demobilization, contract preparation, as well as customer reimbursables and bonus opportunities. Our backlog excludes ARO's backlog but includes backlog from our rigs leased to ARO at the contractual lease rates, which are subject to adjustment under the terms of the shareholder agreement governing the joint venture (the "Shareholder Agreement"). The ARO backlog presented below is 100% of ARO's backlog and is inclusive of backlog on both ARO owned rigs and rigs leased from us. As an unconsolidated 50/50 joint venture, when ARO realizes revenue from its backlog, 50% of the earnings thereon would be reflected in our results in Equity in earnings of ARO in our Condensed Consolidated Statements of Operations. The earnings from ARO backlog with respect to rigs leased from us will be net of, among other things, payments to us under bareboat charters for those rigs. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information. The following table summarizes our and 100% of ARO's contract backlog of business as of August 5, 2026 and February 17, 2026 (in millions): August 5, 2026 February 17, 2026 Floaters (1) $ 3,016.3 $ 3,030.8 Jackups (2) 1,133.4 1,125.8 Other (3) 435.5 515.7 Total $ 4,585.2 $ 4,672.3 ARO $ 1,834.1 $ 2,011.3 (1)The decrease for Floaters is primarily due to revenues realized, partially offset by a contract extension for VALARIS DS-4, which resulted in incremental aggregate backlog of approximately $426.0 million. (2)The increase for Jackups is primarily due to a 41-well contract for VALARIS 248, with an estimated duration of approximately three years, and a two-year contract extension for VALARIS 115, which resulted in incremental aggregate backlog of approximately $140.0 million and $78.0 million, respectively, partially offset by revenues realized. (3)Other includes the backlog for our managed rig services and the bareboat charter backlog for the jackup rigs leased to ARO in order for ARO to fulfill certain of its drilling contracts with Saudi Aramco. 32 BUSINESS ENVIRONMENT Floaters Within the floater segment, utilization for the global marketed drillship fleet was approximately 88% as of June 30, 2026 and included 11 drillships across the industry which were not working at quarter-end due to gaps between contracts. Market conditions are expected to improve as these rigs commence new contracts during 2026 or in early 2027, including two Valaris drillships that are scheduled to return to work this year following idle periods between contracts. Some customers continue to favor more technically capable and efficient assets, particularly to support complex deepwater developments. Seventh-generation drillships may be preferred and have achieved higher utilization and stronger day rates relative to older assets, a trend that is expected to continue. We believe we are well positioned with 12 of 13 of our drillships being seventh-generation units, although we continue to face competition from other types of floaters, including those of older generations. Utilization for benign environment semisubmersibles, such as the remaining semisubmersible in our active fleet, continues to be lower than for drillships. In response to this environment, we retired three benign environment semisubmersibles in 2025 and sold VALARIS DPS-1 for recycling in April 2026. From a supply perspective, rig attrition over the past decade has resulted in a reduced global floater fleet to meet customer demand. The supply of benign environment floaters, such as those in our fleet, has decreased by more than 45% from a peak of approximately 280 rigs in 2014 to 150 rigs as of June 30, 2026. This decrease is primarily attributable to rig retirements, including 15 benign environment floaters retired since the beginning of 2025. Further, given the expected high construction cost and lack of shipyard capacity, we do not believe that current market conditions are supportive of floater newbuild construction. Jackups Global jackup utilization remained solid at approximately 88% as of June 30, 2026, driven primarily by demand from national oil companies focused on energy security and infrastructure development. For example, seven previously suspended jackups have resumed operations with Saudi Aramco so far this year, with two additional rigs expected to recommence operations during the remainder of 2026. In addition, there are other ongoing multi-rig tenders in the Middle East, which should further support the supply and demand balance of the global jackup fleet. Meanwhile, ongoing conflicts in the Middle East have disrupted offshore operations in certain parts of the region, and although activity has largely resumed, uncertainty remains regarding when operating conditions will fully normalize, which may impact the timing of work programs associated with these tenders. From a supply perspective, as of June 30, 2026, there were 490 jackups in the global fleet, with 28% of the current jackup fleet being more than 40 years of age with limited useful lives remaining. Further, we believe that some of the jackups that are currently idle are not competitive, either due to their age or the length of time stacked. Expenditures required to reactivate some of these rigs may prove cost prohibitive and drilling contractors may instead elect to scrap certain rigs. 33 RESULTS OF OPERATIONS Management believes the comparison of the most recently completed quarter to the immediately preceding quarter provides more relevant information needed to understand and analyze the business. As such, as permitted under applicable SEC rules, we have elected to discuss any material changes in our results of operations by including a comparison of our most recently completed fiscal quarter ended June 30, 2026 (the "current quarter") to the immediately preceding fiscal quarter ended March 31, 2026 (the "preceding quarter"). We also discuss any material changes in our results of operations for the six months ended June 30, 2026 (the "current year period") compared to the corresponding period of the preceding fiscal year (the "prior year period"), as required under the applicable SEC rules. For the purposes of our discussion below, we refer to Revenues (exclusive of reimbursable revenues) and Contract drilling expenses (exclusive of depreciation and reimbursable expenses) as "revenues" and "contract drilling expenses", respectively. We typically receive reimbursements from our customers for purchases of supplies, equipment and incremental services provided at their request. These reimbursements and the related costs incurred are recognized on a gross basis within Reimbursable revenues and Reimbursable expenses, respectively. Changes within these line items generally do not have a material effect on our operating results or cash flows. Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 The following table summarizes our Condensed Consolidated Results of Operations for the three months ended June 30, 2026 and March 31, 2026 (in millions, except percentages): Three Months Ended Change % Change June 30, 2026 March 31, 2026 Operating revenues Revenues (exclusive of reimbursable revenues) $ 502.3 $ 430.1 $ 72.2 17 % Reimbursable revenues 36.9 35.3 1.6 5 % Total operating revenues 539.2 465.4 73.8 16 % Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 380.4 340.4 40.0 12 % Reimbursable expenses 35.1 33.0 2.1 6 % Total contract drilling expenses (exclusive of depreciation) 415.5 373.4 42.1 11 % Depreciation 44.6 42.7 1.9 4 % General and administrative 27.2 25.3 1.9 8 % Merger and integration expenses 11.4 13.6 (2.2) (16) % Other operating income — (2.8) 2.8 NM Total operating expenses 498.7 452.2 46.5 10 % Equity in earnings of ARO 10.6 6.8 3.8 56 % Operating income 51.1 20.0 31.1 156 % Other income (expense), net 29.5 (9.6) 39.1 NM Provision for income taxes 33.6 28.4 5.2 18 % Net income (loss) 47.0 (18.0) 65.0 (361) % Net loss attributable to noncontrolling interests 3.4 1.6 1.8 113 % Net income (loss) attributable to Valaris $ 50.4 $ (16.4) $ 66.8 NM NM - Not meaningful 34 Revenues increased in the current quarter compared to the preceding quarter, partially driven by incremental revenues of $84.4 million from VALARIS DS-17, VALARIS DS-12 and VALARIS DS-10, all of which commenced new contracts since late in the first quarter of 2026. For the remaining fleet, we had a net decrease of $4.6 million from fewer operating days compared to the preceding quarter, largely attributable to downtime for repairs, scheduled maintenance and contract upgrades for certain rigs during the current quarter. Contract drilling expense increased in the current quarter compared to the preceding quarter, primarily due to incremental operating costs of $24.9 million for VALARIS DS-17, VALARIS DS-12 and VALARIS DS-10. For the remaining fleet, we had a $22.1 million increase in repair and maintenance costs, primarily driven by planned maintenance and contract preparation projects, including those associated with VALARIS 250, VALARIS 116 and VALARIS 117, and unplanned leg repairs on VALARIS 106 during the current quarter. We also had a $3.0 million increase in insurance expenses primarily due to a full quarter of higher costs to maintain coverage for war-related risks for certain rigs within our Jackups which are located in the Middle East. These increases were partially offset by an $11.7 million non-recurring reversal of previously recognized bad debt expense during the current quarter in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020. Merger and integration expenses were $11.4 million for the current quarter and primarily related to professional fees incurred in connection with the pending Business Combination. Equity in earnings of ARO increased compared to the preceding quarter, primarily due to the recognition of $14.3 million in additional income, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our annual report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 20, 2026 (our "Annual Report"). See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO. Other income (expense), net, increased primarily due to the recognition of a $36.6 million pre-tax gain in the current quarter related to the sale of VALARIS 104. The consolidated effective tax rate, excluding the impact of discrete tax items, for the current quarter and preceding quarter was 19.8% and 25.4%, respectively. Discrete tax items during the current quarter were primarily related to the resolution of prior period matters. Discrete tax items during the preceding quarter were primarily related to the resolution of prior period matters, partially offset by changes in liabilities for unrecognized tax benefits with tax positions taken in prior years. 35 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 The following table summarizes our Condensed Consolidated Results of Operations for the six months ended June 30, 2026 and 2025 (in millions, except percentages): Six Months Ended Change % Change June 30, 2026 June 30, 2025 Operating revenues Revenues (exclusive of reimbursable revenues) $ 932.4 $ 1,150.1 $ (217.7) (19) % Reimbursable revenues 72.2 85.8 (13.6) (16) % Total operating revenues 1,004.6 1,235.9 (231.3) (19) % Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 720.8 729.2 (8.4) (1) % Reimbursable expenses 68.1 81.5 (13.4) (16) % Total contract drilling expenses (exclusive of depreciation) 788.9 810.7 (21.8) (3) % Depreciation 87.3 68.6 18.7 27 % General and administrative 52.5 43.2 9.3 22 % Merger and integration expenses 25.0 — 25.0 NM Other operating (income) loss (2.8) 7.8 (10.6) (136) % Total operating expenses 950.9 930.3 20.6 2 % Equity in earnings of ARO 17.4 1.5 15.9 NM Operating income 71.1 307.1 (236.0) (77) % Other income (expense), net 19.9 (7.1) 27.0 (380) % Provision for income taxes 62.0 225.0 (163.0) (72) % Net income 29.0 75.0 (46.0) (61) % Net loss attributable to noncontrolling interests 5.0 2.2 2.8 127 % Net income attributable to Valaris $ 34.0 $ 77.2 $ (43.2) (56) % NM - Not meaningful Revenues decreased compared to the prior year period, partially driven by lower operating revenues of $81.0 million for VALARIS 247 and VALARIS DPS-1, which completed their contracts and were sold since the end of the prior year period. For the remaining fleet, we had a net decrease of $181.4 million from fewer operating days, largely attributable to certain floaters which were either preparing for contracts or warm stacked between contracts during the current year period. These decreases were partially offset by a net increase of $37.3 million from higher average daily revenues as a result of various rigs working under higher day rate contracts compared to the prior year period. Contract drilling expense decreased primarily due to lower operating costs of $54.3 million for rigs which have been sold and $19.9 million of lower personnel-related costs for the remaining fleet, largely driven by rigs which were warm stacked or preparing for contracts during the current year period. These decreases were partially offset by higher repair and maintenance costs of $36.4 million, primarily attributable to various rigs which were undergoing scheduled maintenance and upgrade projects and/or repairs, and a $18.0 million increase in insurance expenses to maintain coverage for war-related risks for certain rigs within our Jackups and Other fleets which are located in the Middle East. There was also a net $5.4 million increase attributable to non-recurring items comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020. 36 Depreciation expense increased primarily due to new assets placed in service since the prior year period, including those related to rigs that underwent capital upgrades. General and administrative expense increased primarily due to $3.8 million of higher professional fees and $3.4 million of higher compensation costs related to our long-term incentive plans compared to the prior year period. Merger and integration expenses were $25.0 million for the six months ended June 30, 2026 and primarily related to professional fees incurred in connection with the pending Business Combination. Other operating (income) loss includes non-cash losses on impairments and related gains on remeasurements of our assets which are classified as held for sale. In connection with retirement and sale of VALARIS DPS-3, VALARIS DPS-5 and VALARIS DPS-6 (collectively, the "Retired Semis") in 2025, we recognized a non-cash loss on impairment of $7.8 million during the prior year period. During the first quarter of 2026, we reassessed the fair value less costs to sell for VALARIS DPS-1 by utilizing a preliminary sales agreement and recognized a gain on remeasurement of $2.8 million. VALARIS DPS-1 was sold in April 2026 and no additional gain or loss was recognized upon completion of the sale. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis and VALARIS DPS-1. Equity in earnings of ARO increased compared to the prior year period, primarily due to the recognition of $14.3 million additional income, which represents our proportionate share of adjustments recorded by ARO during the completion of its 2025 financial statements subsequent to the issuance of our Annual Report. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding our investment in ARO. Other income (expense), net, increased primarily due to favorable foreign currency exchange rate fluctuations relative to the prior year period of $10.9 million and a net $8.2 million increase from the recognition of pre-tax gains on sales of assets, driven by the sale of VALARIS 104 during the six months ended June 30, 2026, partially offset by gains from the sales of VALARIS 75 and an office in Angola in the prior year period. The consolidated effective tax rate, excluding the impact of discrete tax items, for the six months ended June 30, 2026 and prior year period was 21.7% and 15.2%, respectively. Discrete tax items during the six months ended June 30, 2026 were primarily related to the resolution of prior period matters. Discrete tax items during the prior year period were primarily attributable to the establishment of a $168.8 million valuation allowance in connection with the retirement of the Retired Semis. 37 Rig Counts, Utilization and Average Daily Revenue The following table summarizes the total and active offshore drilling rigs for Valaris and ARO as of the following dates: June 30, 2026 March 31, 2026 June 30, 2025 Total Fleet Floaters (1) 14 15 15 Jackups (2) 23 24 27 Other (3) 7 7 7 Total Fleet - Valaris 44 46 49 ARO (4) 9 9 9 Active Fleet (5) Floaters (6) 11 11 12 Jackups (7) 17 17 18 Other (3) 7 7 7 Active Fleet - Valaris 35 35 37 ARO (4) 9 9 9 (1)During the second quarter of 2026, we sold VALARIS DPS-1 for recycling. (2)During the second quarter of 2026, we sold VALARIS 104. During the second half of 2025, we sold VALARIS 247, VALARIS 102 and VALARIS 145. (3)This represents the jackup rigs leased to ARO through bareboat charter agreements whereby substantially all operating costs are incurred by ARO. Rigs leased to ARO operate under long-term contracts with Saudi Aramco. (4)This represents the jackup rigs owned by ARO, which are operating under long-term contracts with Saudi Aramco. This table does not include Kingdom 3 and Kingdom 4, which are newbuild jackups that are under construction in the Middle East. (5)Active fleet represents rigs that are not preservation stacked or classified as held for sale and includes rigs that are in the process of being reactivated. (6)During the fourth quarter of 2025, we classified VALARIS DPS-1 as held for sale, removing it from the active fleet. The rig was sold in the second quarter of 2026. (7)During the third quarter of 2025, we sold VALARIS 247. We provide management services in the Gulf of America on two rigs owned by a third-party that are not included in the table above. 38 Operating results for our contract drilling services segment are largely dependent on two primary revenue metrics: utilization and day rates. The following table summarizes our and ARO's rig utilization and average daily revenue by reportable segment: Three Months Ended Six Months Ended June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Rig Utilization - Total Fleet (1) Floaters 47 % 33 % 40 % 59 % Jackups 64 % 67 % 65 % 59 % Other (2) 78 % 78 % 78 % 100 % Total Valaris 61 % 58 % 60 % 66 % ARO 77 % 79 % 78 % 86 % Rig Utilization - Active Fleet (1) Floaters 62 % 45 % 53 % 80 % Jackups 90 % 94 % 92 % 89 % Other (2) 78 % 78 % 78 % 100 % Total Valaris 79 % 76 % 77 % 89 % ARO 77 % 79 % 78 % 86 % Average Daily Revenue (3) Floaters $ 451,000 $ 436,000 $ 445,000 $ 381,000 Jackups 134,000 135,000 135,000 135,000 Other (2) 53,000 66,000 60,000 47,000 Total Valaris $ 189,000 $ 171,000 $ 181,000 $ 181,000 ARO $ 113,000 $ 112,000 $ 112,000 $ 110,000 (1)Rig utilization for the total fleet and active fleet are derived by dividing the operating days by the number of days in the period for the total fleet and active fleet, respectively. Active fleet represents rigs that are not preservation stacked or classified as held for sale and includes rigs that are in the process of being reactivated. Operating days equals the total number of days that rigs have earned and recognized day rate revenue, including days associated with compensated downtime and mobilizations and excluding suspension periods. When revenue is deferred and amortized over a future period, for example, when we receive fees while mobilizing to commence a new contract or while being upgraded in a shipyard, the related days are excluded from operating days. (2)Includes our two management services contracts and our rigs leased to ARO under bareboat charter contracts. (3)Average daily revenue is derived by dividing Revenues (exclusive of reimbursable revenues), excluding contract termination fees, by the aggregate number of operating days. 39 Operating Income by Segment 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 arrangements with ARO under the bareboat charter arrangements (the "Lease Agreements"). Floaters, Jackups and ARO are also reportable segments. Our onshore support costs included within Contract drilling expenses are not allocated to our operating segments for purposes of measuring segment operating income (loss) and as such, those costs are included in “Reconciling Items." Further, General and administrative expense, Depreciation expense and Merger and integration expenses incurred by our corporate office are not allocated to our operating segments for purposes of measuring segment operating income (loss) and are included in "Reconciling Items." Because ARO is a 50/50 unconsolidated joint venture, its full operating results included below are not included within our consolidated results and thus are deducted under "Reconciling Items" and replaced with our equity in earnings of ARO. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information. Segment information for the current quarter and preceding quarter is as follows (in millions): Three Months Ended June 30, 2026 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues Revenues (exclusive of reimbursable revenues) $ 279.0 $ 183.4 $ 126.9 $ 39.9 $ (126.9) $ 502.3 Reimbursable revenues 11.0 13.8 — 12.1 — 36.9 Total operating revenues 290.0 197.2 126.9 52.0 (126.9) 539.2 Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 167.9 143.9 71.6 27.4 (30.4) 380.4 Reimbursable expenses 10.5 12.7 — 11.9 — 35.1 Total contract drilling expenses (exclusive of depreciation) 178.4 156.6 71.6 39.3 (30.4) 415.5 Depreciation 17.2 16.2 22.0 6.1 (16.9) 44.6 General and administrative — — 10.6 — 16.6 27.2 Merger and integration expenses — — — — 11.4 11.4 Total operating expenses 195.6 172.8 104.2 45.4 (19.3) 498.7 Equity in earnings of ARO — — — — 10.6 10.6 Operating income $ 94.4 $ 24.4 $ 22.7 $ 6.6 $ (97.0) $ 51.1 40 Three Months Ended March 31, 2026 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues Revenues (exclusive of reimbursable revenues) $ 192.6 $ 195.8 $ 127.4 $ 41.7 $ (127.4) $ 430.1 Reimbursable revenues 5.0 14.4 — 15.9 — 35.3 Total operating revenues 197.6 210.2 127.4 57.6 (127.4) 465.4 Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 150.6 128.8 75.1 22.7 (36.8) 340.4 Reimbursable expenses 4.9 13.2 — 14.9 — 33.0 Total contract drilling expenses (exclusive of depreciation) 155.5 142.0 75.1 37.6 (36.8) 373.4 Depreciation 15.7 16.5 24.9 6.2 (20.6) 42.7 General and administrative — — 7.1 — 18.2 25.3 Merger and integration expenses — — — — 13.6 13.6 Other operating income (2.8) — — — — (2.8) Total operating expenses 168.4 158.5 107.1 43.8 (25.6) 452.2 Equity in earnings of ARO — — — — 6.8 6.8 Operating income $ 29.2 $ 51.7 $ 20.3 $ 13.8 $ (95.0) $ 20.0 Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Floaters Floater revenues increased $86.4 million, or 45%, for the current quarter compared to the preceding quarter, primarily driven by incremental revenues of $84.4 million from VALARIS DS-17, VALARIS DS-12 and VALARIS DS-10, all of which commenced new contracts since late in the first quarter of 2026. Floater contract drilling expense increased $17.3 million, or 11%, for the current quarter compared to the preceding quarter, primarily due to incremental operating costs of $24.9 million for VALARIS DS-17, VALARIS DS-12 and VALARIS DS-10. For the remaining fleet, we had a $5.4 million increase in repair and maintenance costs, largely driven by scheduled repairs and contract preparation for certain of our drillships. These increases were partially offset by an $11.7 million non-recurring reversal of previously recognized bad debt expense during the current quarter in connection with a favorable legal settlement resulting in the collection of outstanding customer invoices from 2020. Jackups Jackup revenues decreased $12.4 million, or 6%, for the current quarter compared to the preceding quarter, primarily due to a net decrease of $4.2 million from fewer operating days, largely attributable to VALARIS 117, which completed its contract early in the current quarter and began scheduled maintenance and contract preparations in the shipyard. Further contributing to the decrease were lower average daily revenues of $3.5 million, primarily driven by certain jackups in the North Sea providing lower day rate accommodation services during the current quarter. 41 Jackup contract drilling expense increased $15.1 million, or 12%, for the current quarter compared to the preceding quarter, primarily due to a $12.3 million increase associated with repair and maintenance costs, largely attributable to scheduled maintenance for VALARIS 117 and unplanned leg repairs for VALARIS 106 in the current quarter, and a $3.0 million increase in insurance expenses primarily due to a full quarter of higher costs to maintain coverage for war-related risks for certain rigs which are located in the Middle East. ARO The operating revenues of ARO reflect revenues earned under drilling contracts with Saudi Aramco for both the ARO-owned jackup rigs and the rigs leased from us. Contract drilling expenses are inclusive of the bareboat charter fees for the rigs leased from us. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on ARO. ARO revenue remained relatively flat for the current quarter compared to the preceding quarter, primarily due to a decrease of $4.6 million from fewer operating days in the current quarter for certain rigs which were undergoing scheduled repairs or maintenance projects in the current quarter, including VALARIS 146 and VALARIS 140, which was offset by a $4.2 million increase from VALARIS 108 and VALARIS 76, which had less downtime in the current quarter. ARO contract drilling expense decreased $3.5 million, or 5%, for the current quarter compared to the preceding quarter primarily due to an aggregate $15.4 million of adjustments recorded by ARO in connection with the current quarter finalization of its 2025 financial statements. This decrease was partially offset by a $7.1 million increase in repair and maintenance costs for rigs which were in the shipyard for scheduled projects and a $4.7 million increase in personnel-related costs. Other Other revenue decreased $1.8 million, or 4%, for the current quarter compared to the preceding quarter, primarily driven by lower lease revenue from ARO, partially offset by increased revenue on our managed rigs. Other contract drilling expense increased $4.7 million, or 21%, for the current quarter compared to the preceding quarter, primarily due to a $4.5 million increase associated with repair and maintenance costs, largely driven by VALARIS 250, which was in the shipyard for planned maintenance and contract preparation projects, partially offset by a $1.5 million decrease in personnel-related costs from fewer operating days. 42 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Segment information for the six months ended June 30, 2026 and 2025 is as follows (in millions): Six Months Ended June 30, 2026 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues: Revenues (exclusive of reimbursable revenues) $ 471.6 $ 379.2 $ 254.3 $ 81.6 $ (254.3) $ 932.4 Reimbursable revenues 16.0 28.2 — 28.0 — 72.2 Total operating revenues 487.6 407.4 254.3 109.6 (254.3) 1,004.6 Operating expenses: Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 318.5 272.7 146.7 50.1 (67.2) 720.8 Reimbursable expenses 15.4 25.9 — 26.8 — 68.1 Total contract drilling expenses (exclusive of depreciation) 333.9 298.6 146.7 76.9 (67.2) 788.9 Depreciation 32.9 32.7 46.9 12.3 (37.5) 87.3 General and administrative — — 17.7 — 34.8 52.5 Merger and integration expenses — — — — 25.0 25.0 Other operating income (2.8) — — — — (2.8) Total operating expenses 364.0 331.3 211.3 89.2 (44.9) 950.9 Equity in earnings of ARO — — — — 17.4 17.4 Operating income $ 123.6 $ 76.1 $ 43.0 $ 20.4 $ (192.0) $ 71.1 Six Months Ended June 30, 2025 Floaters Jackups ARO Other Reconciling Items Consolidated Total Operating revenues Revenues (exclusive of reimbursable revenues) $ 675.7 $ 397.9 $ 274.6 $ 76.5 $ (274.6) $ 1,150.1 Reimbursable revenues 16.1 53.7 — 16.0 — 85.8 Total operating revenues 691.8 451.6 274.6 92.5 (274.6) 1,235.9 Operating expenses Contract drilling expenses (exclusive of depreciation and reimbursable expenses) 380.3 241.0 182.0 33.4 (107.5) 729.2 Reimbursable expenses 15.0 50.7 — 15.8 — 81.5 Total contract drilling expenses (exclusive of depreciation) 395.3 291.7 182.0 49.2 (107.5) 810.7 Depreciation 28.8 27.3 58.2 5.6 (51.3) 68.6 General and administrative — — 12.9 — 30.3 43.2 Other operating loss 7.8 — — — — 7.8 Total operating expenses 431.9 319.0 253.1 54.8 (128.5) 930.3 Equity in earnings of ARO — — — — 1.5 1.5 Operating income $ 259.9 $ 132.6 $ 21.5 $ 37.7 $ (144.6) $ 307.1 43 Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Floaters Floater revenues decreased $204.1 million, or 30%, during the six months ended June 30, 2026 compared to the prior year period, partially driven by lower operating revenues of $36.3 million for VALARIS DPS-1, which completed its contract and was sold for recycling since the end of the prior year period. For the remaining fleet, we had a net decrease of $188.3 million from fewer operating days, largely attributable to various rigs which were either preparing for contracts or warm stacked between contracts during the current year period, partially offset by an increase of $20.4 million from higher average daily revenues for various drillships which were operating under higher day rate contracts relative to the prior year period. Floater contract drilling expense decreased $61.8 million, or 16%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to lower operating costs of $36.5 million for rigs which have been sold since the prior year period. For the remaining fleet, there was a $33.6 million decrease from lower personnel-related costs, largely driven by rigs that were warm-stacked or preparing for contracts during the current year period. These decreases were partially offset by a $17.7 million increase in repair and maintenance costs, primarily attributable to VALARIS DS-10 and VALARIS DS-17, which were undergoing scheduled maintenance and upgrade projects during the current year period. Further contributing to the offsetting increase was a net $5.4 million increase attributable to non-recurring items, comprised of a $17.1 million accrual reversal in the prior year period related to a favorable arbitration outcome for a previously disclosed patent license litigation, partially offset by an $11.7 million reversal of previously recognized bad debt expense during the current year period in connection with the execution of a favorable settlement resulting in the collection of outstanding customer invoices from 2020. Other operating (income) loss includes a non-cash loss on impairment of $7.8 million in the prior year period in connection with the retirement of the Retired Semis and a gain on remeasurement of $2.8 million in the six months ended June 30, 2026 related to VALARIS DPS-1, which was previously classified as held for sale and was subsequently sold in April 2026 for recycling. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding the Retired Semis and VALARIS DPS-1. Jackups Jackup revenues decreased $18.7 million, or 5%, during the six months ended June 30, 2026 compared to the prior year period, largely driven by lower operating revenues of $44.7 million for VALARIS 247, which completed its contract and was sold during the third quarter of 2025. This decrease was partially offset by a net increase of $23.1 million from more operating days for the remaining jackup fleet, largely attributable to VALARIS 144, which was mobilizing to Angola in the prior year period ahead of commencing its current contract in April 2025. Jackup contract drilling expense increased $31.7 million, or 13%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to $13.8 million of incremental insurance expenses to maintain coverage for war-related risks for certain rigs which are located in the Middle East, a $12.9 million increase in personnel-related costs, partially driven by incremental operating days for VALARIS 144 and wage increases in certain regions, and a $11.1 million increase in mobilization costs, largely driven by rigs which mobilized for new contracts during the current year period. Further contributing to the increase were higher repair and maintenance costs of $9.3 million, largely attributable to scheduled maintenance for VALARIS 117 and unplanned leg repairs for VALARIS 106 during the current year period. These increases were partially offset by lower operating costs of $17.8 million for VALARIS 247. Jackup depreciation expense increased $5.4 million, or 20%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to new assets placed in service for certain rigs that underwent capital upgrades. 44 ARO ARO revenue decreased $20.3 million, or 7%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to a net decrease of $56.2 million from fewer operating days, largely driven by certain rigs, including VALARIS 250 and VALARIS 116, which were undergoing planned maintenance and contract preparation projects during the current year period. This decrease was partially offset by incremental revenues of $19.3 million for VALARIS 76, which commenced a new contract in December 2025, and a net increase of $14.0 million from higher average daily revenues as a result of the commencement of five long-term contract extensions at higher day rates than those earned in the prior year period. ARO contract drilling expense decreased $35.3 million, or 19%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to lower operating costs of $29.4 million for rigs which were undergoing scheduled maintenance projects in the current year period. Further contributing to the decrease was an aggregate $15.4 million of adjustments recorded by ARO in connection with the current quarter finalization of its 2025 financial statements. These decreases were partially offset by incremental operating costs of $9.0 million for VALARIS 76 compared to the prior year period. ARO depreciation expense decreased $11.3 million, or 19%, comparing the two periods, primarily due to assets that were fully depreciated since the prior year period. Other Other revenue increased $5.1 million, or 7%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to $10.5 million of incremental lease revenue from the commencement of operations for VALARIS 76 in December 2025 and a net increase of $6.6 million in lease revenue attributable to five long-term bareboat charter extensions at higher rates for our leased rigs to ARO since the end of the prior year period. Further contributing to the increase was $6.1 million of compensation from ARO recognized in the current year period for certain contractual obligations relating to a previously terminated bareboat charter. These increases were partially offset by a net decrease in lease revenue of $19.8 million for VALARIS 250 and VALARIS 116, which were undergoing planned maintenance and contract preparation projects during the current year period. Other contract drilling expense increased $16.7 million, or 50%, during the six months ended June 30, 2026 compared to the prior year period, primarily due to a $9.3 million increase in repair and maintenance costs, largely driven by planned maintenance and contract preparation projects for VALARIS 250 and VALARIS 116, and a $4.2 million increase in insurance expenses to maintain coverage for war-related risks for VALARIS 250 and VALARIS 116, which are located in the Middle East. Other depreciation expense increased $6.7 million, or 120%, relative to the prior year period, primarily due to capital upgrades placed in service for VALARIS 76 since the end of the prior year period. 45 Other Income (Expense) The following table summarizes other income (expense) (in millions): Three Months Ended Six Months Ended June 30, 2026 March 31, 2026 June 30, 2026 June 30, 2025 Net gain (loss) on sale of property $ 37.7 $ (1.6) $ 36.1 $ 27.9 Interest expense, net (24.0) (24.3) (48.3) (49.1) Interest income 16.3 17.0 33.3 29.5 Net foreign currency exchange losses (1.7) (1.7) (3.4) (14.3) Net periodic pension and retiree medical income (loss) 0.9 0.9 1.8 (0.5) Other, net 0.3 0.1 0.4 (0.6) $ 29.5 $ (9.6) $ 19.9 $ (7.1) Three Months Ended June 30, 2026 Compared to Three Months Ended March 31, 2026 Net gains on sale of property increased $39.3 million during the current quarter compared to the preceding quarter, primarily due to sale of VALARIS 104 during the current quarter, which resulted in the recognition of a non-recurring pre-tax gain of $36.6 million. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding VALARIS 104. Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025 Net gains on sale of property for the six months ended June 30, 2026 were largely attributable to the sale of VALARIS 104, which resulted in the recognition of a non-recurring pre-tax gain of $36.6 million. Net gains on sale of property for the prior year period primarily related to the sales of VALARIS 75 and an office in Angola, which resulted in non-recurring pre-tax gains of $23.0 million and $4.0 million, respectively. See "Note 5 - Property and Equipment" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information regarding these asset sales. Interest income increased $3.8 million, or 13%, relative to the prior year period primarily due to a $3.0 million increase in interest income earned on our outstanding 10-year shareholder notes receivable due from ARO (the "Notes Receivable from ARO"), driven by a higher outstanding principal balance relative to the prior year period due to the 2025 interest being paid in-kind in December 2025. This increase was partially offset by a lower interest rate as a result of an annual interest rate reset that occurred at the end of 2025. Net foreign currency exchange losses were $3.4 million during the six months ended June 30, 2026 compared to $14.3 million in the prior year period, primarily driven by favorable exchange rate movements in euros and British pounds, partially offset by unfavorable exchange rate movement in Malaysian ringgit relative to the prior year period. 46 LIQUIDITY AND CAPITAL RESOURCES Liquidity We expect to fund our short-term liquidity needs, including contractual obligations and anticipated capital expenditures, as well as working capital requirements, from cash and cash equivalents and cash flows from operations. Additionally, we have liquidity available under our senior secured revolving credit agreement, which matures in 2028 (the "2028 Credit Agreement"). We expect to fund our long-term liquidity needs, including contractual obligations and anticipated capital expenditures, from cash and cash equivalents, cash flows from operations, as well as cash which may be received from the distribution of earnings from ARO. We may rely on the issuance of debt and/or equity securities in the future to supplement our liquidity needs, subject to certain restrictions provided within the Business Combination Agreement. However, the Indenture governing our 2030 Second Lien Notes, as defined below, dated as of April 19, 2023 (the "Indenture"), and the 2028 Credit Agreement contain covenants that limit our ability to incur additional indebtedness. Our cash and cash equivalents as of June 30, 2026 and December 31, 2025 were $541.2 million and $599.4 million, respectively. We have no debt principal payments due until 2030 and had $375.0 million available for borrowing, including up to $150.0 million for the issuance of letters of credit, under the 2028 Credit Agreement as of July 30, 2026. See below and "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2028 Credit Agreement and the 8.375% Second Lien Notes due 2030. Cash Flows and Capital Expenditures Absent periods where we have significant financing or investing transactions or activities, such as debt or equity issuances, share repurchases, debt repayments, business combinations or asset sales, our primary sources and uses of cash are driven by cash generated from or used in operations and capital expenditures. Our net cash provided by operating activities and capital expenditures were as follows (in millions): Six Months Ended June 30, 2026 2025 Net cash provided by operating activities $ 88.1 $ 275.9 Capital expenditures $ (206.4) $ (167.4) During the six months ended June 30, 2026, we generated $88.1 million of cash flow from operating activities primarily due to operating income for the period of $71.1 million and the receipt of approximately $43.0 million of U.S. income tax refunds, which were partially offset by other changes in working capital. In addition, we collected $60.3 million of cash proceeds for the sale of assets during the current period, primarily related to the sales of VALARIS 104 and VALARIS DPS-1. Our primary use of cash was $206.4 million for maintenance and upgrades of our drilling rigs. During the six months ended June 30, 2025, we generated $275.9 million of cash flow from operating activities primarily due to operating income for the period of $307.1 million and approximately $26.0 million of tax refunds received from the Australian tax authority during the first quarter of 2025, partially offset by other changes in working capital. An additional source of cash was $24.0 million of cash proceeds related to the sale of VALARIS 75 and the sale of the Retired Semis. Our primary uses of cash were $167.4 million for maintenance and upgrades of our drilling rigs. Based on our current projections, we expect capital expenditures during 2026 to approximate $425.0 million to $475.0 million primarily relating to maintenance and upgrade projects, including contract-specific capital expenditures. Depending on market conditions, contracting activity and future opportunities, we may make additional capital expenditures to upgrade rigs for customer requirements and acquire additional rigs, subject to certain restrictions within the Business Combination Agreement. 47 We review from time to time possible acquisition opportunities relating to our business, which may include the acquisition of rigs or other businesses. The timing, size or success of any acquisition efforts and the associated potential capital commitments are unpredictable and uncertain and are subject to certain restrictions specified within the Business Combination Agreement. We may seek to fund all or part of any such efforts with cash on hand and proceeds from debt and/or equity issuances and may issue equity directly to the sellers. Our ability to obtain capital for additional projects to implement our growth strategy over the longer term will depend on our future operating performance, restrictions to incur additional debt in the Indenture and the 2028 Credit Agreement, financial condition and, more broadly, on the availability of equity and debt financing. Capital availability will be affected by prevailing conditions in our industry, the global economy, the global financial markets and other factors, many of which are beyond our control. In addition, any additional debt service requirements we take on could be based on higher interest rates and shorter maturities and could impose a significant burden on our results of operations and financial condition, and the issuance of additional equity securities could result in significant dilution to shareholders. Financing and Capital Resources 2030 Second Lien Notes In 2023, the Company and Valaris Finance Company LLC (“Valaris Finance,” together, the "Issuers"), issued and sold $1.1 billion in aggregate principal amount of 8.375% Senior Secured Second Lien Notes due 2030 (the "2030 Second Lien Notes"). The 2030 Second Lien Notes mature on April 30, 2030 and bear an interest rate of 8.375% per annum. Interest is payable semi-annually in arrears on April 30 and October 30 of each year. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2030 Second Lien Notes. 2028 Credit Agreement The 2028 Credit Agreement provides for commitments permitting borrowings of up to $375.0 million (which may be increased, subject to the satisfaction of certain conditions and the agreement of lenders to provide such additional commitments, by an additional $200.0 million pursuant to the terms of the 2028 Credit Agreement) and includes a $150.0 million sublimit for the issuance of letters of credit. See "Note 8 - Debt" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on the 2028 Credit Agreement. Investment in ARO and Notes Receivable from ARO We expect to receive cash from ARO in the future, both from the maturity of our Notes Receivable from ARO and from the distribution of earnings from ARO. The distribution of earnings to the joint-venture partners is at the discretion of the ARO board of managers, consisting of 50/50 membership of managers appointed by Saudi Aramco and managers appointed by us, with approval required by both shareholders. The timing and amount of any cash distributions to the joint-venture partners cannot be predicted with certainty and will be influenced by various factors, including the liquidity position and capital allocation priorities of ARO. ARO has not made a cash distribution of earnings to its partners since its formation. ARO had cash and cash equivalents of $47.7 million as of June 30, 2026. The Notes Receivable from ARO, which are governed by the laws of Saudi Arabia, mature during 2027 and 2028. We expect to agree to extend the maturity of the Notes Receivable from ARO to facilitate its capital allocation priorities, in particular its newbuild jackup program. Notwithstanding any extension of the maturity, in the event that ARO is unable to repay the Notes Receivable from ARO when they become due, we would require the prior consent of our joint venture partner to enforce ARO’s payment obligations. 48 See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on our investment in ARO and Notes Receivable from ARO. The following table summarizes the maturity schedule of our Notes Receivable from ARO as of June 30, 2026 (in millions): Maturity Date Principal Amount October 2027 $ 227.3 October 2028 173.4 Total $ 400.7 Share Repurchase Program Our board of directors has authorized a share repurchase program under which we may purchase up to $600.0 million of our outstanding common shares, subject to certain restrictions provided in our debt agreements and the Business Combination Agreement. As of June 30, 2026, we had approximately $175.0 million available for share repurchases pursuant to the Share Repurchase Program. There were no share repurchases under this program during the three and six months ended June 30, 2026 and 2025. See "Note 9 - Shareholders' Equity" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on our share repurchase program. Other Commitments We have other commitments that we are contractually obligated to fulfill with cash under certain circumstances. As of June 30, 2026, we were contingently liable for an aggregate amount of $111.4 million under outstanding letters of credit and surety bonds, which guarantee our performance as it relates to our drilling contracts, contract bidding, customs duties, tax appeals and other obligations in various jurisdictions. The outstanding amount includes an approximate $75.0 million customs bond obtained in the second quarter of 2026 related to the importation of VALARIS DS-10 ahead of the commencement of its contract in West Africa. Obligations under these letters of credit and surety bonds are not normally called, as we typically comply with the underlying performance requirements. As of June 30, 2026, we had collateral deposits in the amount of $15.1 million with respect to these agreements. In connection with our 50/50 unconsolidated joint venture, we have a potential obligation to fund ARO for newbuild jackup rigs. The Shareholder Agreement specifies that ARO shall purchase 20 newbuild jackup rigs. The joint venture partners intend for the newbuild jackup rigs to be financed from available cash on hand and from ARO’s operations and/or funds available from third-party financing. The first two newbuild jackups, Kingdom 1 and Kingdom 2, were delivered and commenced operations in 2023 and 2024, respectively. In October 2023, ARO entered into a $359.0 million term loan to finance the remaining payments due upon delivery of the two rigs and for general corporate purposes. The term loan matures in eight years following the related drawdown under the term loan and requires equal quarterly amortization payments during the term, with a 50% balloon payment due at maturity. Our Notes Receivable from ARO are subordinated and junior in right of payment to both ARO’s term loan and credit facility. ARO has a revolving credit facility which provides for borrowings of up to $150.0 million. As of June 30, 2026, there were no amounts outstanding under this facility. 49 In October 2024 and November 2025, ARO ordered the third and fourth newbuild jackups, Kingdom 3 and Kingdom 4, respectively, for a purchase price of approximately $300.0 million each. ARO paid a 25% down payment from cash on hand for Kingdom 3 and Kingdom 4. ARO expects these newly ordered jackup rigs to be financed from cash on hand or from operations or funds available from third-party financing. In the event ARO has insufficient cash or is unable to obtain third-party financing, each partner may periodically be required to make additional capital contributions to ARO, up to a maximum aggregate contribution of $1.25 billion from each partner to fund the newbuild program. Beginning with the delivery of the second newbuild, each partner's commitment is reduced by the lesser of the actual cost of each newbuild rig or $250.0 million, on a proportionate basis. Following the delivery of Kingdom 2, our commitment to fund the newbuild program has been reduced to $1.1 billion. See "Note 3 - Equity Method Investment in ARO" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for additional information on ARO. Tax Assessments In February 2024, one of our Malaysian subsidiaries received an unfavorable court decision regarding a tax assessment for the 2012-2017 tax years totaling approximately MYR117.0 million (approximately $29.0 million converted at current quarter-end exchange rates), including a late payment penalty. In July 2024, we received a payment demand from the Malaysian tax authority for the full assessment amount. In order to further contest the assessment, we made payments of approximately $8.0 million and $18.0 million in 2025 and 2024, respectively, for aggregate total payments of $26.0 million. These payments are included within Other assets in the Condensed Consolidated Balance Sheets. We have not recorded a liability for uncertain tax positions as of June 30, 2026, related to this assessment based on a more-likely-than-not threshold. We believe our tax returns are materially correct as filed and will vigorously contest this assessment. In December 2024, we reached a settlement agreement with the Australian tax authorities regarding tax assessments which related to the examination of certain of our tax returns for the years 2011 through 2016. In connection with this agreement, during the first quarter of 2025, we received refunds (including interest) totaling A$42.0 million (approximately $26.0 million at then-current exchange rates). Divestitures Our business strategy has been to focus on ultra-deepwater floater and premium jackup operations and de-emphasize other assets and operations that no longer meet our standards for economic returns. While taking into account certain restrictions on the sales of assets under our debt agreements and within the Business Combination Agreement, as part of our strategy, we may act opportunistically from time to time to monetize assets to enhance shareholder value and improve our liquidity profile, in addition to reduce holding costs by selling or disposing of lower-specification or non-core rigs. See "Note 8 - Debt" to our consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2025 for additional information on certain restrictions on the sales of assets. In May 2026, we entered into an agreement to sell VALARIS 109, a rig within our Jackups segment, for cash proceeds of $34.0 million, subject to certain customary closing conditions. In accordance with this agreement, we received a cash deposit of $3.4 million in June 2026. In July 2026, we completed the sale of VALARIS 109, received the remaining cash proceeds and recognized a pre-tax gain of approximately $31.0 million during the third quarter of 2026. In connection with this sale, VALARIS 109 was reclassified from Property and equipment, net to Assets held for sale on our Condensed Consolidated Balance Sheets during the second quarter of 2026. In April 2026, we entered into an agreement to sell VALARIS 104, a rig within our Jackups segment, for alternative use. The rig was sold for cash proceeds of $40.0 million, resulting in the recognition of a pre-tax gain of $36.6 million during the three months ended June 30, 2026. 50 In the fourth quarter of 2025, we approved a plan to retire VALARIS DPS-1, a semisubmersible rig within our Floaters segment, and reclassified the rig from Property and equipment, net to Assets held for sale on our Consolidated Balance Sheets at that time. In April 2026, VALARIS DPS-1 was sold for recycling and removed from service for total cash proceeds of $10.1 million. See "Note 5 – Property and Equipment" to our condensed consolidated financial statements included in “Item 1. Financial Statements” for further information regarding these divestitures. MARKET RISK Interest Rate Risk Our outstanding debt at June 30, 2026 consisted of our $1.1 billion aggregate principal amount of 2030 Second Lien Notes. We are subject to interest rate risk on our fixed-interest rate borrowings. Fixed rate debt, where the interest rate is fixed over the life of the instrument, exposes us to changes in market interest rates impacting the fair value of the debt. Our 2028 Credit Agreement provides for commitments permitting borrowings of up to $375.0 million at June 30, 2026. As the interest rates for such borrowings are at variable rates, we are subject to interest rate risk. As of June 30, 2026, we had no outstanding borrowings under the 2028 Credit Agreement. Our Notes Receivable from ARO bear interest based on the one-year term SOFR rate, set as of the end of the year prior to the applicable year, plus 2.10%. As the Notes Receivable from ARO bear interest on the applicable SOFR rate determined at the end of the preceding year, the rate governing our interest income in 2026 has already been determined. A hypothetical 1% decrease to SOFR would decrease interest income for the year ended December 31, 2026 by $4.0 million based on the principal amount outstanding at June 30, 2026 of $400.7 million. Foreign Currency Risk Our functional currency is the U.S. dollar. As is customary in the oil and gas industry, a majority of our revenues and expenses are denominated in U.S. dollars; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. We are exposed to foreign currency exchange risk to the extent the amount of our monetary assets denominated in the foreign currency differs from our obligations in the foreign currency or revenue earned differs from costs incurred in the foreign currency. We do not currently hedge our foreign currency risk. CRITICAL ACCOUNTING POLICIES The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires us to make estimates, judgments and assumptions that affect the amounts reported in our condensed consolidated financial statements and accompanying notes. Our significant accounting policies are included in Note 1 to our audited consolidated financial statements for the year ended December 31, 2025, included in our annual report on Form 10-K filed with the SEC on February 20, 2026. These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our condensed consolidated financial statements. 51 We identify our critical accounting policies as those that are the most pervasive and important to the portrayal of our financial position and operating results and that require the most difficult, subjective and/or complex judgments regarding estimates in matters that are inherently uncertain. Our critical accounting policies are those related to property and equipment, income taxes and pension and other post-retirement benefits. For a discussion of the critical accounting policies and estimates that we use in the preparation of our condensed consolidated financial statements, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Estimates" in Part II of our annual report on Form 10-K for the year ended December 31, 2025. New Accounting Pronouncements See "Note 1 - Unaudited Condensed Consolidated Financial Statements" to our condensed consolidated financial statements included in "Item 1. Financial Statements" for information on new accounting pronouncements.