10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 333-159299

VANTAGE DRILLING INTERNATIONAL

(Exact name of Registrant as specified in its charter)

Cayman Islands	98-1372204
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

c/o Vantage Energy Services, Inc.

777 Post Oak Boulevard, Suite 440

Houston, TX 77056

(Address of principal executive offices and zip code)

Registrant’s telephone number, including area code: (281) 404-4700

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes  No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes  No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer		Accelerated filer	
Non-accelerated filer		Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes  No ☒

The number of Vantage Drilling International Ordinary Shares outstanding as of August 1, 2022 is 13,115,026 shares.

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes  No 

TABLE OF CONTENTS

		Page
SAFE HARBOR STATEMENT		3
PART I—FINANCIAL INFORMATION
Item 1	Financial Statements	7
	Consolidated Balance Sheets	7
	Consolidated Statement of Operations	8
	Consolidated Statement of Shareholders’ Equity	9
	Consolidated Statement of Cash Flows	10
	Notes to Unaudited Consolidated Financial Statements	11
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4	Controls and Procedures	37
PART II—OTHER INFORMATION
Item 1	Legal Proceedings	37
Item 6	Exhibits	38
SIGNATURES		40

2

SAFE HARBOR STATEMENT

This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are included throughout this Quarterly Report, including under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” When used, statements which are not historical in nature, including those containing words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “would,” “will,” “future” and similar expressions are intended to identify forward-looking statements in this Quarterly Report.

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements.

Among the factors that could cause actual results to differ materially are the risks and uncertainties described under “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report, and the following:

•reduced expenditures by oil and gas exploration and production companies;

•general economic conditions and conditions in the oil and gas industry, including the worldwide supply and demand for oil and gas, and expectations regarding future prices of oil and gas;

•excess supply of drilling units worldwide;

•competition within our industry;

•growing focus on climate change including regulatory, social and market efforts to address climate change, and its overall impact on the level of investments being directed to fossil fuel exploration and production companies, and their associated products or services;

•our current level of indebtedness and the ability to repay existing, and incur additional, indebtedness in the near- and long-term;

•epidemics, pandemics, global health crises, or other public health events and concerns, such as the spread and resulting impact of the COVID-19 pandemic and the effectiveness of associated vaccinations and treatments;

•governmental, tax and environmental regulations and related actions and legal matters, including the actions taken by governments in response to the spread of COVID-19 and its highly contagious variants and sub-lineages, as well as the results and effects of legal proceedings and governmental audits, assessments and investigations;

•volatility in the price of commodities due to actions taken by members of OPEC, OPEC+ and other, oil-exploring countries, with respect to oil production levels and announcements of potential changes in such levels, including the ability of members of OPEC+ to agree on and comply with announced supply limitations;

•the potential for increased production from U.S. shale producers and non-OPEC countries driven by current oil prices, including the effect of such production rates on the overall global oil and gas supply, demand balance and commodity prices;

•termination or renegotiation of our customer contracts, and the invoking of force majeure clauses, including, but not limited to, as a result of the COVID-19 pandemic;

•losses on impairment of long-lived assets;

•any non-compliance with the U.S. Foreign Corrupt Practices Act, as amended, and any other anti-corruption laws;

•the sufficiency of our internal controls;

•operating hazards in the offshore drilling industry;

•operations in international markets, including geopolitical, global, regional or local economic and financial market risks and challenges, applicability of foreign laws, including foreign labor and employment laws, foreign tax and customs regimes, and foreign currency exchange rate risk;

•political disturbances, geopolitical instability and tensions, or terrorist attacks, and associated changes in global trade policies and economic sanctions, including, but not limited to, in connection with Russia's invasion of Ukraine in February 2022;

•ability to obtain indemnity from customers;

3

•adequacy of insurance coverage upon the occurrence of a catastrophic event;

•effects of new products and new technology on the market;

•the occurrence of cybersecurity incidents, attacks or other breaches to our information technology systems;

•our small number of customers;

•consolidation of our competitors and suppliers;

•termination or renegotiation of vendor contracts;

•changes in the status of pending, or the initiation of new litigation, claims or proceedings, including our ability to prevail in the defense of any appeal or counterclaim;

•changes in legislation removing or increasing current applicable limitations of liability;

•limited mobility of our drilling units between geographic regions;

•levels of operating and maintenance costs;

•our dependence on key personnel;

•availability of workers and the related labor costs;

•increased cost of obtaining supplies;

•changes in tax laws, treaties or regulations;

•credit risks of our key customers and other third parties we engage commercially;

•compliance with restrictions and covenants in our debt agreements;

•our recent lack of overall profitability and whether we will generate material revenues or profits in the near- and long-term;

•adverse macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions, as well as actions taken by central banks and regulators across the world in an attempt to reduce, curtail and address such pressures and conditions;

•our incorporation under the laws of the Cayman Islands and the limited rights to relief that may be available compared to U.S. laws; and

•our ability to identify and complete strategic and/or transformational transactions, including acquisitions, dispositions, joint ventures and mergers, as well as the impact that such transactions may have on our operations and financial condition.

Many of these factors are beyond our ability to control or predict. Any, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.

In addition, each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in filings we may make with the SEC, which may be obtained by contacting us or the SEC. These filings are also available through our website at www.vantagedrilling.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval system (EDGAR) at www.sec.gov. The contents of our website are not part of this Quarterly Report.

Unless the context indicates otherwise, all references to the “Company,” “Vantage Drilling International,” “we,” “our” or “us” refer to Vantage Drilling International and its consolidated subsidiaries. References to “VDI” refer to Vantage Drilling International, a Cayman Islands exempted company and the group parent company.

4

GLOSSARY OF TERMS

The following terms used in this Quarterly Report have the following meanings, unless specified elsewhere in this Quarterly Report:

Abbreviation/Acronym	Definition
10% Second Lien Notes	The Company's 10% Senior Secured Second Lien Notes due 2020
2016 Amended MIP	The Company's Amended and Restated 2016 Management Incentive Plan
2016 Term Loan Facility	The Company's initial term loans in place in connection with the Reorganization Plan
9.25% First Lien Notes	The Company's 9.25% Senior Secured First Lien Notes due November 15, 2023
ADES	ADES International Holding Ltd, an offshore and onshore provider of oil and gas drilling and production services in the Middle East, India and Africa
ADVantage	ADVantage Drilling Services SAE, a joint venture owned 51% by the Company and 49% by ADES
ASC	Accounting Standards Codification
Board of Directors	The Company's board of directors
Comparable Period	The six months ended June 30, 2021
Comparable Quarter	The three months ended June 30, 2021
Conversion	The conversion of all of the Convertible Notes into Ordinary Shares
Convertible Notes	The Company's 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030
COVID-19	Coronavirus disease 2019, a new strain of coronavirus caused by SARS-CoV-2
Current Period	The six months ended June 30, 2022
Current Quarter	The three months ended June 30, 2022
DOJ	U.S. Department of Justice
EDC	Emerald Driller Company
Effective Date	February 10, 2016, the date the Company emerged from bankruptcy
EPS	Earnings per share
Exchange Act	Securities Exchange Act of 1934, as amended
First Lien Indenture	First Lien Indenture, dated as of November 30, 2018, by and between Vantage Drilling International and U.S. Bank National Association
IRS	U.S. Internal Revenue Service
OPEC	The Organization of the Petroleum Exporting Countries
OPEC+	The Organization of the Petroleum Exporting Countries plus 10 non-OPEC nations
Ordinary Shares	The Company's ordinary shares, par value $0.001 per share
PBGs	Performance-based restricted stock units
QLE	A qualified liquidity event as defined in the 2016 Amended MIP
Reorganization Plan	The Company's pre-packaged plan of reorganization under Chapter 11 of Title 11 of the U.S. Bankruptcy Code
ROU	Right-of-use
SEC	Securities and Exchange Commission
Securities Act	Securities Act of 1933, as amended
Tax Election	Tax election filed with the IRS on January 22, 2020, to allow VDI to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes, with an effective date retroactive to December 9, 2019
TBGs	Time-based restricted stock units
TEV	Total enterprise value
U.S.	United States of America
U.S. GAAP	Accounting principles generally accepted in the United States of America
U.S. Holder	A beneficial owner of the Ordinary Shares that is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that was organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or such trust has a valid election in effect under applicable treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes
USD or $	U.S. Dollar
VDC	Vantage Drilling Company, the Company's former parent company
VDC Note	A $61.5 million promissory note issued by the Company in favor of VDC
VDI	Vantage Drilling International
VHI	Vantage Holdings International, a subsidiary of VDI

5

VIE Variable interest entity

6

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements

Vantage Drilling International

Consolidated Balance Sheets

(In thousands, except share and par value information)

(Unaudited)

	June 30, 2022			December 31, 2021
ASSETS
Current assets
Cash and cash equivalents	$	227,328		$	73,343
Restricted cash		3,323			1,621
Trade receivables, net of allowance for doubtful accounts of $5.0 million, each period		79,399			37,527
Materials and supplies		38,906			37,580
Assets held for sale		—			117,117
Prepaid expenses and other current assets		13,191			18,309
Total current assets		362,147			285,497
Property and equipment
Property and equipment		645,304			645,622
Accumulated depreciation		(287,314	)		(266,018	)
Property and equipment, net		357,990			379,604
Operating lease ROU assets		1,610			2,450
Other assets		32,549			31,843
Total assets	$	754,296		$	699,394
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	42,870		$	31,420
Other current liabilities		53,819			31,533
Liabilities held for sale		—			6,720
Total current liabilities		96,689			69,673
Long–term debt, net of discount and financing costs of $2,322 and $3,142, respectively		347,678			346,858
Other long-term liabilities		9,958			17,012
Commitments and contingencies (see Note 8)
Shareholders' equity
Ordinary shares, $0.001 par value, 50 million shares authorized; 13,115,026 shares issued and outstanding, each period		13			13
Additional paid-in capital		633,828			633,847
Accumulated deficit		(336,591	)		(369,792	)
Controlling interest shareholders' equity		297,250			264,068
Noncontrolling interests		2,721			1,783
Total equity		299,971			265,851
Total liabilities and shareholders' equity	$	754,296		$	699,394

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7

Vantage Drilling International

Consolidated Statement of Operations

(In thousands, except per share amounts)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Revenue
Contract drilling services	$	42,744		$	31,655		$	87,657		$	49,380
Management fees		2,840			497			3,943			595
Reimbursables and other		27,654			3,449			39,969			5,792
Total revenue		73,238			35,601			131,569			55,767
Operating costs and expenses
Operating costs		59,405			36,056			103,338			61,413
General and administrative		6,910			4,967			13,492			10,462
Depreciation		11,087			14,161			22,382			28,286
Gain on EDC Sale		(60,781	)		—			(60,781	)		—
Total operating costs and expenses		16,621			55,184			78,431			100,161
Income (loss) from operations		56,617			(19,583	)		53,138			(44,394	)
Other (expense) income
Interest income		7			10			11			110
Interest expense and other financing charges		(8,503	)		(8,511	)		(17,007	)		(17,021	)
Other, net		(1,011	)		(179	)		(1,786	)		(793	)
Total other expense		(9,507	)		(8,680	)		(18,782	)		(17,704	)
Income (loss) before income taxes		47,110			(28,263	)		34,356			(62,098	)
Income tax (benefit) provision		(1,221	)		720			217			2,882
Net income (loss)		48,331			(28,983	)		34,139			(64,980	)
Net income (loss) attributable to noncontrolling interests		232			(18	)		938			(31	)
Net income (loss) attributable to shareholders	$	48,099		$	(28,965	)	$	33,201		$	(64,949	)
Earnings (loss) per share
Basic	$	3.67		$	(2.21	)	$	2.53		$	(4.95	)
Diluted	$	3.61		$	(2.21	)	$	2.49		$	(4.95	)

The accompanying notes are an integral part of these unaudited consolidated financial statements.

8

Vantage Drilling International

Consolidated Statement of Shareholders’ Equity

(In thousands)

(Unaudited)

	Six-Month Period Ended June 30, 2021
	Ordinary Shares
	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Non-Controlling Interests			Total Equity
Balance January 1, 2021		13,115	$	13	$	634,181		$	(259,655	)	$	1,206		$	375,745
Share-based compensation		—		—		306			—			—			306
Share-based compensation - dividend equivalents		—		—		(760	)		—			—			(760	)
Net loss		—		—		—			(35,984	)		(13	)		(35,997	)
Balance March 31, 2021		13,115	$	13	$	633,727		$	(295,639	)	$	1,193		$	339,294
Share-based compensation		—		—		31			—			—			31
Net loss		—		—		—			(28,965	)		(18	)		(28,983	)
Balance June 30, 2021		13,115	$	13	$	633,758		$	(324,604	)	$	1,175		$	310,342
	Six-Month Period Ended June 30, 2022
	Ordinary Shares
	Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Non-Controlling Interests			Total Equity
Balance January 1, 2022		13,115	$	13	$	633,847		$	(369,792	)	$	1,783		$	265,851
Share-based compensation		—		—		26			—			—			26
Share-based compensation - dividend equivalents		—		—		(63	)		—			—			(63	)
Net (loss) income		—		—		—			(14,898	)		706			(14,192	)
Balance March 31, 2022		13,115	$	13	$	633,810		$	(384,690	)	$	2,489		$	251,622
Share-based compensation		—		—		18			—			—			18
Net income		—		—		—			48,099			232			48,331
Balance June 30, 2022		13,115	$	13	$	633,828		$	(336,591	)	$	2,721		$	299,971

The accompanying notes are an integral part of these consolidated financial statements.

9

Vantage Drilling International

Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

	Six Months Ended June 30,
	2022			2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	34,139		$	(64,980	)
Adjustments to reconcile net income (loss) to net cash used in operating activities
Depreciation expense		22,382			28,286
Amortization of debt financing costs		820			819
Share-based compensation expense		44			337
Deferred income tax expense		410			236
Gain on disposal of assets		(1,630	)		(2,715	)
Gain on EDC Sale		(60,781	)		—
Changes in operating assets and liabilities:
Trade receivables, net		(58,864	)		(6,888	)
Materials and supplies		(1,811	)		(1,481	)
Prepaid expenses and other current assets		3,369			(1,440	)
Other assets		(25,043	)		(1,821	)
Accounts payable		29,564			2,798
Other current liabilities and other long-term liabilities		17,696			5,905
Net cash used in operating activities		(39,705	)		(40,944	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(7,736	)		(2,711	)
Net proceeds from EDC Sale		200,000			—
Net proceeds from sale of assets		3,100			—
Net proceeds from sale of Titanium Explorer		—			13,557
Net cash provided by investing activities		195,364			10,846
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities		—			—
Net increase (decrease) in unrestricted and restricted cash and cash equivalents		155,659			(30,098	)
Unrestricted and restricted cash and cash equivalents—beginning of period		90,608			154,487
Unrestricted and restricted cash and cash equivalents—end of period	$	246,267		$	124,389
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest	$	16,229		$	16,197
Income taxes (net of refunds)		686			2,431
Non-cash investing and financing transactions:
Accrued additions to property and equipment		8,908			—

The accompanying notes are an integral part of these unaudited consolidated financial statements.

10

VANTAGE DRILLING INTERNATIONAL

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Recent Events

Vantage Drilling International, a Cayman Islands exempted company, together with its consolidated subsidiaries (collectively the “Company”), is an international offshore drilling company focused on operating a fleet of modern, high specification drilling units. Our principal business is to contract drilling units, related equipment and work crews, primarily on a dayrate basis to drill oil and gas wells for our customers. Through our fleet of drilling units, we are a provider of offshore contract drilling services to major, national and independent oil and gas companies, focused on international markets. Additionally, for third-party owned drilling units, we provide operations and marketing services for operating and stacked rigs, construction supervision services for rigs that are under construction, and preservation management services for rigs that are stacked.

Geopolitical Instability Caused by the Conflict in Ukraine and Rising Inflation

The markets generally exhibited a strong recovery in global oil prices during 2021, a trend which was further exemplified during the first quarter of 2022, reaching $125.72 per barrel in March 2022. While our management anticipates oil and gas prices to remain robust in the near-term, price volatility is still expected to continue as a result of, among other factors, (i) adverse macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions, (ii) changes in oil and gas inventories, (iii) global market demand, (iv) geopolitical instability, armed conflict and social unrest, including the invasion of Ukraine by Russia in February 2022, the associated response undertaken by western nations, such as the implementation of broad sanctions, the potential for retaliatory actions on the part of Russia and the overall impact on OPEC+ countries’ ability to reach production targets in the near term, (v) potential future disagreements among OPEC+ countries regarding the supply of oil, (vi) the potential for increased production and activity from U.S. shale producers and non-OPEC countries driven by the current oil prices, and (vii) the ongoing COVID-19 pandemic, including the transmission and presence of highly contagious and new variants and the pace of vaccine rollouts, and therefore, the Company cannot predict how long oil and gas prices will remain stable or further increase, if at all, or whether they could reverse course and materially decline.

In particular, the invasion of Ukraine by Russia has led to, and will likely continue to lead to, geopolitical instability, disruption and volatility in the markets in which we operate. While it is not possible at this time to predict or determine the ultimate consequences of the conflict in Ukraine, which could include, among other things, additional sanctions, greater regional instability, embargoes, geopolitical shifts and other material and adverse effects on macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions (and actions taken or being contemplated by central banks and regulators in an attempt to reduce, curtail and address such pressures and conditions), changes in energy policy, supply chains, financial markets and currency exchange rates, hydrocarbon price volatility in particular is likely to continue for the foreseeable future. To the extent the conflict in Ukraine and adverse macroeconomic conditions continue (or exacerbate), the implementation of further measures taken by governmental bodies and private actors, could have a lasting impact in the near- and long-term on the (i) operations and financial condition of our business and the businesses of our critical counterparties and (ii) the global economy.

While our management is actively monitoring the foregoing events and its associated financial impact on our business, it is uncertain at this time as to the full magnitude that volatile and uncertain oil and gas prices will ultimately have on our financial condition and future results of operations.

Share Purchase Agreement to Sell EDC to ADES Arabia Holding

On December 6, 2021, VHI, a wholly owned subsidiary of the Company, entered into a certain Share Purchase Agreement (the “EDC Purchase Agreement”) with ADES Arabia Holding (“ADES Arabia”), which wholly owns ADES, pursuant to which VHI agreed to sell to ADES Arabia all of the issued and outstanding equity of VHI’s wholly-owned subsidiary, EDC (the “EDC Sale”). EDC is the owner of the following jackup rigs, which are currently operating in Qatar: the Emerald Driller; the Sapphire Driller; and the Aquamarine Driller. Each of these rigs was included within our Drilling Services segment for the quarter ended June 30, 2022, and in prior quarters. The EDC Purchase Agreement became effective on December 20, 2021 and the transactions contemplated under such agreement closed on May 27, 2022 (the “EDC Closing Date”). On the EDC Closing Date, VHI received $170.0 million as purchase price consideration and $30.0 million in certain contract preparation expense reimbursement and, as a result, VHI recognized a net gain of approximately $60.8 million during the three months ended June 30, 2022, all of which is subject to potential adjustments contemplated by the EDC Purchase Agreement, any such adjustments to be finalized by September 24, 2022. Accordingly, the amount of proceeds actually received by the Company could vary from those set forth above.

Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES entered into three separate support services agreements (collectively, the “EDC Support Services Agreements”), pursuant to which a subsidiary of the Company agreed to provide, in exchange for customary fees and reimbursements, support services to EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller for a three-year term.

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The Company and ADES also entered into an agreement on December 6, 2021 (the “Collaboration Agreement”) to pursue a global strategic alliance in order to leverage both the EDC Support Services Agreements and ADVantage, the parties’ existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the parties agreed to collaborate on exploring future commercial and operational opportunities.

While the Company continues to evaluate potential uses of the proceeds derived from the EDC Sale, the Company is limited in how it may deploy and utilize such proceeds as a result of the terms of the First Lien Indenture. In particular, the Company may only use the proceeds from the EDC Sale to repay, prepay or purchase our senior secured indebtedness (including the 9.25% First Lien Notes), acquire all or substantially all of the assets or capital stock of any other entity engaged in a similar or complementary business to the Company’s lines of business, or make capital expenditures or acquire non-current assets (including vessels and related assets) that are useful in such lines of business (including any deposit or installment payments with respect thereto as well as any expenditures related to the acquisition, construction or “ready for sea” costs of such vessels). To the extent such proceeds are not so applied (or committed to be applied) within one year after receipt, the Company will be required to offer to purchase the 9.25% First Lien Notes with such proceeds.

Tungsten Explorer Contract Award

On June 9, 2022, a subsidiary of VDI entered into a drilling services contract with a subsidiary of TotalEnergies (the “TotalEnergies Contract”) in respect of VDI’s ultra-deepwater drillship, the Tungsten Explorer. The TotalEnergies Contract contains a minimum term of 225 days. The Tungsten Explorer is currently operating in the Mediterranean where it will be drilling up to two wells and the Company anticipates that it will mobilize to West Africa during the third quarter of 2022 or potentially later.

Ongoing Impact of the COVID-19 Pandemic

The global spread of COVID-19, including its highly contagious variants and sub-lineages, continues to pose significant risks and challenges worldwide, and has caused and continues to cause widespread illness and significant loss of life, leading governments across the world to impose and re-impose severely stringent and extensive limitations on movement and human interaction, with certain countries, including those where we maintain significant operations and derive material revenue, implementing quarantine, testing and vaccination requirements. These governmental reactions to the COVID-19 pandemic, as well as changes to and extensions of such approaches, have led to, and continue to result in, uncertain and volatile economic activity worldwide, including within the oil and gas industry and the regions and countries in which we operate.

While the Company has previously managed, and continues to actively manage, the business in an attempt to mitigate any ongoing and material impact from the spread of COVID-19, management anticipates that our industry, and the world at large, will need to continue to operate in, and further adapt, to the current environment for the foreseeable future.
 

2. Basis of Presentation and Significant Accounting Policies

Basis of Consolidation: The accompanying interim consolidated financial information as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, has been prepared without audit, pursuant to the rules and regulations of the SEC, and includes our accounts and those of our majority owned subsidiaries and VIEs (as discussed below). All significant intercompany transactions and accounts have been eliminated. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to provide for fair presentation. Our Consolidated Balance Sheet at December 31, 2021 is derived from our December 31, 2021 audited consolidated financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. Certain previously reported amounts have been reclassified to conform to the current period presentation.

In addition to the consolidation of our majority owned subsidiaries, we also consolidate VIEs when we are determined to be the primary beneficiary of a VIE. Determination of the primary beneficiary of a VIE is based on whether an entity has (1) the power to direct activities that most significantly impact the economic performance of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE.

ADVantage is a joint venture company formed to operate deepwater drilling rigs in Egypt. We determined that ADVantage met the criteria of a VIE for accounting purposes because its equity at risk was insufficient to permit it to carry on its activities without additional subordinated financial support from us. We also determined that we are the primary beneficiary for accounting purposes since we are entitled to use ADVantage for deepwater drilling contract opportunities rejected by ADES, and have the (a) power to direct the operating activities associated with the deepwater drilling rigs, which are the activities that most significantly impact the entity’s

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economic performance, and (b) obligation to absorb losses or the right to receive a majority of the benefits that could be potentially significant to the VIE. As a result, we consolidate ADVantage in our consolidated financial statements, we eliminate intercompany transactions and we present the interests that are not owned by us as “Noncontrolling interests” in our Consolidated Balance Sheets. The carrying amount associated with ADVantage was as follows:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current assets	$	30,337	$	8,099
Non-current assets		223		212
Current liabilities		12,510		2,838
Non-current liabilities		12,523		1,859
Net carrying amount	$	5,527	$	3,614

As ADVantage is a majority owned subsidiary of the Company, it serves as a guarantor under the First Lien Indenture relating to the 9.25% First Lien Notes. The 9.25% First Lien Notes are secured by a first priority lien on all of the assets of ADVantage, subject to certain exceptions. Creditors’ recourse against ADVantage for liabilities of ADVantage is limited to the assets of ADVantage.

See “Note 9. Supplemental Financial Information” of these “Notes to Unaudited Consolidated Financial Statements” for additional information regarding related party transactions associated with this joint venture.

Use of Estimates: The preparation of financial statements in accordance with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to property and equipment, income taxes, insurance, employee benefits and contingent liabilities. Actual results could differ from these estimates.

Cash and Cash Equivalents: Includes deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.

Materials and Supplies: Consists of materials, spare parts, consumables and related supplies for our drilling rigs. We record these materials and supplies at their average cost.

Property and Equipment: Consists of our drilling rigs, furniture and fixtures, computer equipment and capitalized costs for computer software. Drilling rigs are depreciated on a component basis over estimated useful lives ranging from five to 35 years on a straight-line basis as of the date placed in service. Other assets are depreciated upon placement in service over estimated useful lives ranging from three to seven years on a straight-line basis. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from our Consolidated Balance Sheets and the resulting gain or loss is included in “Operating costs” or “General and administrative” expenses on the Consolidated Statement of Operations, depending on the nature of the asset. For the three and six months ended June 30, 2022, we recognized a net loss of approximately $0.3 million and a net gain of approximately $1.6 million, respectively, related to the sale or retirement of assets. For the six months ended June 30, 2021, we recognized a net gain of approximately $2.7 million related to the sale or retirement of assets. The gain/loss related to the sale or retirement of assets for the three months ended June 30, 2021 was immaterial.

We evaluate the realization of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized would be computed as the excess of the asset’s carrying value over the estimated fair value. Estimates of future cash flows require us to make long-term forecasts of our future revenues and operating costs with regard to the assets subject to review. Our business, including the utilization rates and dayrates we receive for our drilling rigs, depends on the level of our customers’ expenditures for oil and gas exploration, development and production expenditures. Oil and gas prices and customers’ expectations of potential changes in these prices, the general outlook for worldwide economic growth, political and social stability in the major oil and gas producing basins of the world, availability of credit and changes in governmental laws and regulations, among many other factors, significantly affect our customers’ levels of expenditures. Sustained declines in or persistent depressed levels of oil and gas prices, worldwide rig counts and utilization, reduced access to credit markets, reduced or depressed sale prices of comparably equipped jackups and drillships and any other significant adverse economic news could require us to evaluate the realization of our drilling rigs. As of June 30, 2022, no triggering event has occurred to indicate that the carrying value of our drilling rigs may not be recoverable.

Interest costs and the amortization of debt financing costs related to the financings of our drilling rigs are capitalized as part of the cost while they are under construction and prior to the commencement of each vessel’s first contract. We did not capitalize any interest for the reported periods.

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Debt Financing Costs: Costs incurred with financing debt are deferred and amortized over the term of the related financing facility on a straight-line basis, which approximates the interest method. Debt issuance costs related to a recognized debt liability are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of that debt liability.

Rig and Equipment Certifications: We are required to obtain regulatory certifications to operate our drilling rigs and certain specified equipment, and must maintain such certifications through periodic inspections and surveys. The costs associated with these certifications, including drydock costs, are deferred and amortized over the corresponding certification periods.

Revenue Recognition: See “Note 3. Revenue from Contracts with Customers” of these “Notes to Unaudited Consolidated Financial Statements” for further information.

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. Deferred income tax assets and liabilities are computed for differences between the financial statement basis and tax basis of assets and liabilities that will result in future taxable or tax deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. We do not establish deferred tax liabilities for certain of our foreign earnings that we intend to indefinitely reinvest to finance foreign activities. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. We recognize interest and penalties related to income taxes as a component of income tax expense.

Concentrations of Credit Risk: Financial instruments that potentially subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We monitor the credit ratings and our concentration of risk with these financial institutions on a continuing basis to safeguard our cash deposits. We have a limited number of key customers, who are primarily large international oil and gas operators, national oil companies and other international oil and gas companies. Our contracts provide for monthly billings as services are performed and we monitor compliance with contract payment terms on an ongoing basis. Payment terms on customer invoices typically range from 30 to 45 days. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer.

Credit Losses – Accounts Receivable: The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. Current estimates of expected credit losses consider factors such as the historical experience and credit quality of our customers. The Company considers historical loss information as the most reasonable basis on which to determine expected credit losses unless current or forecasted future conditions for customers (or customer groups) indicate that risk characteristics have changed. We also considered the impact of the COVID-19 pandemic and the associated oil price and market share volatility on our allowance for doubtful accounts. The allowance for doubtful accounts on our trade receivables was $5.0 million as of each of June 30, 2022 and December 31, 2021, respectively. This amount represents a customer’s decision not to pay us for days impacted by what we believe were force majeure and other similar events for which we would still be entitled to receive payment under the applicable contract. We disagree with the customer's decision and are currently evaluating our remedies, if any, under the applicable contract.

Earnings (loss) per Share: We compute basic and diluted EPS in accordance with the two-class method. We include restricted stock units granted to employees and directors that contain non-forfeitable rights to dividends as such grants are considered participating securities. Basic earnings (loss) per share are based on the weighted average number of Ordinary Shares outstanding during the applicable period. Diluted EPS are computed based on the weighted average number of Ordinary Shares and ordinary share equivalents outstanding in the applicable period, as if all potentially dilutive securities were converted into Ordinary Shares (using the treasury stock method).

The following is a reconciliation of the number of shares used for the basic and diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Weighted average Ordinary Shares outstanding for basic EPS		13,115		13,115		13,115		13,115
Restricted share equity awards		217		—		215		—
Adjusted weighted average Ordinary Shares outstanding for diluted EPS		13,332		13,115		13,330		13,115

The following sets forth the number of shares excluded from diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Restricted share equity awards		—		218		—		218
Future potentially dilutive Ordinary Shares excluded from diluted EPS		—		218		—		218

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Functional Currency: We consider USD to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in USD, which limits our exposure to currency exchange rate fluctuations. We recognize currency exchange rate gains and losses in “Other, net” in our Consolidated Statement of Operations. For the three and six months ended June 30, 2022, we recognized a net gain of approximately $1.0 million and $1.8 million, respectively, related to currency exchange rates. For the three and six months ended June 30, 2021, we recognized a net loss of approximately $0.2 million and $0.8 million, respectively, related to currency exchange rates.

Fair Value of Financial Instruments: The fair value of our short-term financial assets and liabilities approximates the carrying amounts represented in our Consolidated Balance Sheets principally due to the short-term nature or floating rate nature of these instruments. As of June 30, 2022, the fair value of the 9.25% First Lien Notes was approximately $336.6 million based on quoted market prices in a less active market, a Level 2 measurement.

Share-based Compensation: TBGs granted under the 2016 Amended MIP vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a QLE. Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the date as defined in the individual award letter. PBGs granted under the 2016 Amended MIP contain vesting eligibility provisions tied to the earlier of a QLE or seven years from the Effective Date. Upon the occurrence of a vesting eligibility event, the number of PBGs that actually vest will be dependent on the achievement of pre-determined TEV targets specified in the grants.

Both the TBGs and PBGs were classified as liabilities consistent with the classification of the underlying securities prior to the Conversion. Following the Conversion, outstanding TBGs and PBGs were subject to modification accounting and were re-classified as equity awards. Under the provisions of ASC 718 Compensation – Stock Compensation share-based compensation expense is recognized over the requisite service period from the grant date to the fourth year vest date for TBGs. For PBGs, expense will be recognized when it is probable that the TEV targets will be met. Once it is probable the performance condition will be met, compensation expense based on the fair value of the PBGs at the conversion date of the Convertible Notes will be recognized for the service period completed to the seventh anniversary of the Effective Date for PBGs.

Noncontrolling Interest:

Noncontrolling interests represent the equity investments of the minority owner in ADVantage, a joint venture with ADES that we consolidate in our financial statements.

Recently Adopted Accounting Standards:

No new accounting standards were adopted during the six-month period ended June 30, 2022.

Recently Issued Accounting Standards:

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, with respect to our consolidated financial statements.

3. Revenue from Contracts with Customers

The activities that primarily drive the revenue earned in our drilling contracts with customers include (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig, (ii) delivering the drilling rig by mobilizing to (and demobilizing from) the drill site, and (iii) performing pre-operating activities, including rig preparation activities and/or equipment modifications required for the contract.

The integrated drilling services that we perform under each drilling contract represent a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority.

Dayrate Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate billed to the customer is determined based on varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term and therefore, recognized as we perform the daily drilling services.

For rigs owned by a third-party that we manage or support, the contracts generally provide for a fixed fee based on various factors, including the status of the rig or a specific duration. In addition, we may earn a marketing fee based on a percentage of the effective dayrate of a drilling contract secured on behalf of the third-party and a variable management fee of the gross margin associated with managing an operating rig.

Amortizable Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for (i) the mobilization of equipment and personnel prior to the commencement of drilling services, (ii) the demobilization of equipment and personnel upon contract completion, and (iii) postponement fees in consideration for the postponement of a contract until a later date.

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These activities are not considered to be distinct within the context of the contract and therefore, the associated revenue is allocated to the overall single performance obligation.

Mobilization fees received prior to the commencement of drilling operations are recorded as a contract liability and amortized on a straight‑line basis over the initial contract period. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the initial contract term, with an offset to an accretive contract asset. In many contracts, demobilization fees are contingent upon the occurrence or non-occurrence of a future event and the estimate for such revenue may therefore be constrained. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term. Postponement fees received that are contingent upon the occurrence or non-occurrence of a future event are recognized on a straight-line basis over the contract term. Fees received for the mobilization or demobilization of equipment and personnel are included in “Contract drilling services” in our Consolidated Statement of Operations.

Capital Upgrade/Contract Preparation Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. These activities are not considered to be distinct within the context of the contract and therefore, fees received are recorded as a contract liability and amortized to contract drilling revenues on a straight-line basis over the initial contract term.

Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. We are generally considered a principal in such transactions and therefore, recognize reimbursable revenues and the corresponding costs as we provide the customer‑requested goods and services.

Disaggregation of Revenue

The following tables present our revenue disaggregated by revenue source for the periods indicated:

	Three Months Ended June 30, 2022								Three Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	15,963	$	24,304	$	2,840	$	43,107	$	17,473	$	8,968	$	497	$	26,938
Amortized revenue		1,439		1,038		—		2,477		5,214		—		—		5,214
Reimbursable revenue		1,944		3,175		22,535		27,654		2,400		311		738		3,449
Total revenue	$	19,346	$	28,517	$	25,375	$	73,238	$	25,087	$	9,279	$	1,235	$	35,601
	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	31,294	$	50,300	$	3,943	$	85,537	$	26,371	$	17,795	$	595	$	44,761
Amortized revenue		1,659		4,404		—		6,063		5,214		—		—		5,214
Reimbursable revenue		4,151		6,151		29,667		39,969		4,722		332		738		5,792
Total revenue	$	37,104	$	60,855	$	33,610	$	131,569	$	36,307	$	18,127	$	1,333	$	55,767

Dayrate revenue and amortized revenue for “Jackups” and “Deepwater” are included within “Contract drilling services” in our Consolidated Statement of Operations. Dayrate revenue for “Managed” is included within “Management fees” in our Consolidated Statement of Operations. All other revenue are included within “Reimbursables and other” in our Consolidated Statement of Operations.

Accounts Receivable, Contract Liabilities and Contract Costs

Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on customer invoices typically range from 30 to 45 days.

We recognize contract liabilities, recorded in other “Other current liabilities” and “Other long-term liabilities”, for prepayments received from customers and for deferred revenue received for mobilization, contract preparation and capital upgrades.

Certain direct and incremental costs incurred for contract preparation, initial mobilization and modifications of contracted rigs represent contract fulfillment costs as they relate directly to a contract, enhance resources that will be used to satisfy our performance obligations in the future and are expected to be recovered. These costs are deferred as a current or noncurrent asset depending on the length of the initial contract term and are amortized on a straight-line basis to operating costs as services are rendered over the initial term of the related drilling contract. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred to mobilize a rig without a contract are expensed as incurred.

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The following table provides information about contract cost assets and contract revenue liabilities from contracts with customers:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current contract cost assets	$	896	$	1,405
Noncurrent contract cost assets		5,021		6,832
Noncurrent contract cost assets - held for sale		—		4,196
Current contract revenue assets		—		1,903
Current contract revenue liabilities		31,557		12,311
Noncurrent contract revenue liabilities		1,397		1,893

Significant changes in contract cost assets and contract revenue liabilities during the six months ended June 30, 2022 are as follows:

	Contract Cost Assets			Contract Revenue Assets			Contract Revenues
(unaudited, in thousands)
Balance as of December 31, 2021	$	12,433		$	1,903		$	14,204
Increase (decrease) due to contractual changes		(570	)		—			46,066
Decrease due to recognition of revenue		(5,946	)		(1,903	)		(27,316	)
Balance as of June 30, 2022 (1)	$	5,917		$	—		$	32,954

(1)We expect to recognize contract revenues of approximately $32.1 million during the remaining six months of 2022 and $0.9 million thereafter arising primarily from unsatisfied performance obligations existing as of June 30, 2022.

We have elected to utilize an optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly increments, the variability of which will be resolved at the time the future services are rendered.

4. Leases

We have operating leases expiring at various dates, principally for office space, onshore storage yards and certain operating equipment. Additionally, we sublease certain office space to third parties. We determine if an arrangement is a lease at inception. Operating leases with an initial term greater than 12 months are included in “Operating lease ROU assets”, “Other current liabilities”, and “Other long-term liabilities” on our Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made prior to or at the commencement date and is reduced by lease incentives received and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Certain of our leases include provisions for variable payments. These variable payments are not included in the calculation of lease liability and ROU assets.

The components of lease expense for the periods indicated were as follows:

		Three Months Ended June 30,						Six Months Ended June 30,
(unaudited, in thousands)	Classification in the Consolidated Statement of Operations	2022			2021			2022			2021
Operating lease cost(1)	Operating costs	$	313		$	713		$	568		$	1,615
Operating lease cost(1)	General and administrative		193			151			477			303
Sublease income	Operating costs		—			(121	)		—			(242	)
Sublease income	General and administrative		(224	)		(62	)		(407	)		(124	)
Total operating lease cost		$	282		$	681		$	638		$	1,552

(1) Short-term lease costs were approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2021, respectively. Operating cash flows used for operating leases approximates lease expense.

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(unaudited, in thousands)	Classification in the Consolidated Balance Sheets	June 30, 2022		December 31, 2021
Assets:
Operating lease assets	Operating lease ROU assets	$	1,610	$	2,450
	Operating lease ROU assets - Held for sale		—		197
Total leased assets		$	1,610	$	2,647
Liabilities:
Current operating	Other current liabilities	$	1,401	$	1,710
	Other current liabilities - Held for sale		—		103
Noncurrent operating	Other long-term liabilities		333		969
	Other long-term liabilities - Held for sale		—		93
Total lease liabilities		$	1,734	$	2,875

As of June 30, 2022, maturities of lease liabilities were as follows:

(unaudited, in thousands)	Operating Leases
Remaining six months of 2022	$	828
2023		996
2024		—
2025		—
2026		—
Total future lease payments	$	1,824
Less imputed interest		(90	)
Present value of lease obligations	$	1,734

The weighted average discount rate was 9.25% as of both June 30, 2022 and December 31, 2021. The weighted average remaining lease term for operating leases was 1.17 years and 1.56 years as of June 30, 2022 and December 31, 2021, respectively. ROU assets and lease liabilities recorded for leases commencing during the three and six months ended June 30, 2022 was immaterial.

5. Debt

Our debt was composed of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
9.25% First Lien Notes, net of financing costs of $2,322 and $3,142, respectively	$	347,678	$	346,858
Less current maturities of long-term debt		—		—
Long-term debt, net	$	347,678	$	346,858

9.25% First Lien Notes. On November 30, 2018, the Company issued $350.0 million in aggregate principal amount of 9.25% First Lien Notes in a private placement. The 9.25% First Lien Notes were issued at par and are fully guaranteed on a senior secured basis by the Company’s direct and indirect subsidiaries, and are secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries, in each case subject to certain exceptions. The 9.25% First Lien Notes are subject to first payment priority in favor of holders of up to $50.0 million of future super-priority debt and are subject to both mandatory and optional redemption provisions.

The 9.25% First Lien Notes mature on November 15, 2023 and bear interest from the date of their issuance at the rate of 9.25% per year. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months and is payable semi-annually in arrears, commencing on May 15, 2019. Failure to refinance the 9.25% First Lien Notes before their maturity date could have a material and adverse effect on the Company’s financial condition and may affect our ability to continue as a going concern.

The First Lien Indenture includes customary covenants and events of default, including covenants that, among other things, restrict the granting of liens, restrict the making of investments, restrict the incurrence of indebtedness and the conveyance of vessels, limit transactions with affiliates, and require that the Company provide periodic financial reports.

The net proceeds from the issuance were used (i) to repay all obligations under the formerly existing 2016 Term Loan Facility and to terminate the credit agreement governing such facility, (ii) to redeem all the then-outstanding 10% Second Lien Notes, (iii) to fund the remaining amounts to be paid in connection with the purchase of the Soehanah jackup rig, (iv) to pay fees and expenses related to the foregoing and to the offering of the 9.25% First Lien Notes, and (v) for general corporate purposes.

Concurrently with the issuance of the 9.25% First Lien Notes, we entered into a letter of credit facility to replace the letter of credit facility formerly existing under the 2016 Term Loan Facility. The facility has a capacity of $50.0 million, with all outstanding letters of credit being cash collateralized. We have issued $0.1 million in letters of credit under this facility as of June 30, 2022.

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6. Shareholders’ Equity

Stock Issuance

VDI has 50,000,000 authorized Ordinary Shares. Upon emergence from bankruptcy on the Effective Date, VDI issued 5,000,053 Ordinary Shares in connection with the settlement of Liabilities Subject to Compromise in accordance with the Reorganization Plan and the VDC Note. On December 4, 2019, VDI issued an additional 8,114,977 Ordinary Shares to convert all of the outstanding Convertible Notes. As of June 30, 2022, 13,115,026 Ordinary Shares were issued and outstanding.

Share-based Compensation

On August 9, 2016, the Company adopted the 2016 Amended MIP to align the interests of participants with those of the Company’s shareholders by providing incentive compensation opportunities tied to the performance of the Company’s equity securities. Pursuant to the 2016 Amended MIP, the Compensation Committee may grant to employees, directors and consultants stock options, restricted stock, restricted stock units or other awards.

No awards were granted to employees or directors during the six months ended June 30, 2022 and 2021. During the six months ended June 30, 2022, 1,564 of previously-granted TBGs vested.

Both the TBGs and PBGs are classified as equity awards. For the six months ended June 30, 2022, share-based compensation expense related to the TBGs was immaterial. For the six months ended June 30, 2021, we recognized share-based compensation expense related to the TBGs of approximately $0.3 million. As of June 30, 2022, we concluded that it was not probable that the TEV performance condition would be met and therefore, no share-based compensation expense was recognized for PBGs.

Pursuant to the 2016 Amended MIP and the terms of the applicable unit awards, participants holding restricted stock units are contractually entitled to receive all dividends or other distributions that are paid to VDI’s stockholders, provided that any such dividends will be subject to the same vesting requirements of the underlying units. Dividend payments accrue to outstanding awards (both vested and unvested) in the form of “Dividend Equivalents” equal to the dividend per share underlying the applicable award under the 2016 Amended MIP. As a result of a special cash distribution paid to shareholders of record on December 17, 2019, $5.3 million has been recorded in “Other current liabilities” and $3.5 million has been recorded in “Other long-term liabilities” in our Consolidated Balance Sheets at June 30, 2022 to be paid upon settlement of the TBGs.

7. Income Taxes

VDI is a Cayman Islands company operating in multiple countries through its subsidiaries. The Cayman Islands do not impose corporate income taxes. Consequently, we have calculated income taxes based on the laws and tax rates in effect in the countries in which operations are conducted, or in which we and our subsidiaries are considered resident for income tax purposes. Our income taxes are generally dependent upon the results of our operations and when we generate significant revenues in jurisdictions where the income tax liability is based on gross revenues or asset values, there is no correlation to the net operating results and the income tax expense. Furthermore, in some jurisdictions we do not pay taxes, pay taxes at lower rates or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt, gains or losses on disposal or transfer of assets, reorganization expenses and write-off of development costs.

On January 22, 2020, VDI filed the Tax Election with the IRS to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes, with an effective date retroactive to December 9, 2019. As a result, U.S. Holders are required to take into account their allocable share of items of income, gain, loss deduction and credit of VDI for each taxable year of VDI ending with or within the U.S. Holder’s taxable year, regardless of whether any distribution has been or will be received from VDI. Each item generally will have the same character and source (either U.S. or foreign) as though the U.S. Holder had realized the item directly. VDI’s change in tax status did not have a material impact on our consolidated financial statements as of June 30, 2022.

Deferred income tax assets and liabilities are recorded for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. We provide for deferred taxes on temporary differences between the financial statements and tax bases of assets and liabilities using the enacted tax rates which are expected to apply to taxable income when the temporary differences are expected to reverse. Deferred tax assets are also provided for certain tax losses and tax credit carryforwards. A valuation allowance is established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. We do not establish deferred tax liabilities for certain of our foreign earnings that we intend to indefinitely reinvest to finance foreign activities.

In certain jurisdictions we are taxed under preferential tax regimes, which may require our compliance with specified requirements to sustain the tax benefits. We believe we are in compliance with the specified requirements and will continue to make all reasonable efforts to comply; however, our ability to meet the requirements of the preferential tax regimes may be affected by changes in laws or administrative practices, our business operations and other factors affecting the Company and industry, many of which are beyond our control.

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Our periodic tax returns are subject to examination by taxing authorities in the jurisdictions in which we operate in accordance with the normal statute of limitations in the applicable jurisdiction. These examinations may result in assessments of additional taxes that are resolved with the authorities or through the courts. Resolution of these matters involves uncertainties and there are no assurances as to the outcome. Our tax years from 2012 onward remain open to examination in many of our jurisdictions and we are currently involved in several tax examinations in jurisdictions where we are operating or have previously operated. As information becomes available during the course of these examinations, we may increase or decrease our estimates of tax assessments and accruals.

8. Commitments and Contingencies

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance. There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims.

Brazil Improbity Action

On April 27, 2018, the Company was added as an additional defendant in a legal proceeding (the “Improbity Action”), initiated by the Brazilian Federal Prosecutor against certain individuals, including an executive of Petrobras and two political lobbyists, in connection with the contracting of the Titanium Explorer drillship to Petrobras under the Drilling Contract, with the Brazilian Government and Petrobras as plaintiffs. Vantage is alleged to have been involved in and benefitted from the purported bribery scheme at Petrobras through Hamylton Padilha, the Brazilian agent our former parent company, VDC, used in the contracting of the Titanium Explorer drillship to Petrobras, and Mr. Hsin-Chi Su, a former member of VDC’s board of directors and a significant shareholder of VDC. We first became aware of the legal proceeding on July 19, 2018 as it was previously under seal. On March 22, 2019, we were formally served in the United States, and we filed our preliminary statement of defense with the 11th Federal court of the Judicial Branch of Curitiba, State of Parana, Brazil (the “Brazilian Federal Court”) on April 12, 2019 in response. On August 20, 2020, the Brazilian Federal Court dismissed our preliminary statement of defense. On October 5, 2020, we subsequently filed a motion to clarify with the Brazilian Federal Court requesting the reconsideration of certain aspects of the decision dismissing our preliminary statement of defense. Our motion to clarify was denied on December 14, 2020, and on February 10, 2021 we filed an interlocutory appeal to the 4th Circuit of the Federal Court of Appeals in Porto Alegre, State of Rio Grande do Sul, Brazil (the “Brazilian Appellate Court”), the appellate court hearing appeals in the “Car Wash” cases, seeking to reverse the Brazilian Federal Court’s denial of our preliminary defense. On April 15, 2021, the Brazilian authorities served us indirectly through the U.S. Department of Justice agreeing to formally send us documents related to the Improbity Action. On May 13, 2021, the Brazilian Appellate Court’s reporting judge for our matter granted our request for preliminary relief and ordered an immediate stay of the Improbity Action as it applies to the Company until the judgment (on the merits) of the interlocutory appeal is rendered by the full three judge panel of the Brazilian Appellate Court. We will be obligated to file a statement of defense in the matter if the decision to stay the Improbity Action is later reversed. The Company understands that the Improbity Action, is a civil action and is part of the Brazilian Federal Prosecutor’s larger “Car Wash” investigation into money laundering and corruption allegations in Brazil.

The damages claimed in the proceeding are in the amount of BRL 102.8 million or approximately $20.5 million (changes in the U.S. dollar amounts result from foreign exchange rate fluctuations), together with a civil fine equal to three times that amount. The Company understands that the Brazilian Federal Court previously issued an order authorizing the seizure and freezing of the assets of the Company and the other three defendants in the legal proceeding, as a precautionary measure, in the amount of approximately $81.8 million. The Company and the other three defendants are jointly and severally liable for this amount. The seizure order has not had an effect on the Company’s assets or operations, as the Company does not own any assets in Brazil, and does not currently intend to relocate any assets to Brazil. On February 13, 2019, the Company learned that the Brazilian Federal Prosecutor had previously requested mutual legal assistance from the U.S. DOJ pursuant to the United Nations Convention against Corruption of 2003 to obtain a freezing order against the Company’s U.S. assets in the approximate amount of $81.8 million.

On April 12, 2019, the Company filed an interlocutory appeal with the Brazilian Appellate Court to stay the seizure and freezing order of the Brazilian Federal Court.

On May 20, 2019, the Company announced that the Brazilian Appellate Court's reporting judge ruled in favor of the Company’s appeal to stay the seizure and freezing order of the Brazilian Federal Court. The foregoing ruling is still subject to confirmation by a three-judge panel, and is subject to appeal, and the Company can offer no assurances that the stay will be confirmed or as to the outcome of any appeal thereof. The Company communicated the Brazilian Appellate Court’s ruling to the DOJ and has asked the Brazilian Federal Court to do the same. On July 18, 2019, the Company announced that the Brazilian Government made a filing with the Brazilian Federal Court reporting that the DOJ has advised the Brazilian Ministry of Justice that it would not be possible for the DOJ to comply with the mutual assistance request in respect of the asset freeze order. The Company also announced that it learned from the Brazilian Ministry of Justice that the DOJ’s response to the request for mutual assistance stated that no legal grounds existed for implementing the requested asset freeze, and that the DOJ was returning the request without taking action and considers the matter concluded.

The Company has defended, and intends to continue to vigorously defend, against the allegations made in the Improbity Action and oppose and defend against any attempts to seize the Company's assets. However, we can neither predict the ultimate outcome of this matter nor that there will not be further developments in the “Car Wash” investigation or in any other ongoing investigation or

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related proceeding that could adversely affect us. At this time, we are not able to determine the likelihood of loss, if any, arising from this matter.

9. Supplemental Financial Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Sales tax receivable	$	3,552	$	8,445
Other receivables		1,140		234
Income tax receivable		577		1,423
Prepaid insurance		959		257
Current deferred contract costs		896		1,405
Current contract asset		—		1,903
Other		6,067		4,642
	$	13,191	$	18,309

Assets Held for Sale

Assets held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Trade receivables, net	$	—	$	7,306
Materials and supplies		—		13,510
Prepaid expenses and other current assets		—		3,768
Property & equipment, net		—		87,441
Noncurrent deferred contract costs		—		4,196
Operating lease ROU asset		—		197
Other noncurrent assets		—		699
	$	—	$	117,117

Property and Equipment, net

Property and equipment, net, consisted of the following as of the dates indicated:

	June 30, 2022			December 31, 2021
(unaudited, in thousands)
Drilling equipment	$	624,419		$	626,546
Assets under construction		1,957			148
Office and technology equipment		18,405			18,405
Leasehold improvements		523			523
		645,304			645,622
Accumulated depreciation		(287,314	)		(266,018	)
Property and equipment, net	$	357,990		$	379,604

Other Assets

Other assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Noncurrent restricted cash	$	15,616	$	15,644
Deferred certification costs		3,976		5,199
Noncurrent deferred contract costs		5,021		6,832
Deferred income taxes		1,473		1,776
Other noncurrent assets		6,463		2,392
	$	32,549	$	31,843

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Other Current Liabilities

Other current liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Interest	$	4,136	$	4,136
Compensation (1)		5,147		7,040
2016 MIP - Dividend equivalent (2)		5,277		—
Income taxes payable		3,755		5,589
Current deferred revenue		31,557		12,311
Current portion of operating lease liabilities		1,401		1,710
Other		2,546		747
	$	53,819	$	31,533

(1) Includes $2.3 million as of December 31, 2021 related to cash awards granted to certain key employees of the Company pursuant to underlying award agreements and issued under the 2016 Amended MIP. The final payout of this cash award was made in June 2022.

(2) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Liabilities Held for Sale

Liabilities held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Accounts payable	$	—	$	4,140
Compensation		—		464
Income taxes payable		—		716
Current portion of operating lease liabilities		—		103
Deferred income taxes		—		1,190
Noncurrent operating lease liabilities		—		93
Other		—		14
	$	—	$	6,720

Other Long-term Liabilities

Other Long-term liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
2016 MIP - Dividend equivalent (1)	$	3,521	$	8,735
Noncurrent deferred revenue		1,397		1,893
Noncurrent operating lease liabilities		333		969
Other non-current liabilities		4,707		5,415
	$	9,958	$	17,012

(1) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cash and cash equivalents	$	227,328	$	73,343
Restricted cash		3,323		1,621
Restricted cash included within Other Assets		15,616		15,644
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	246,267	$	90,608

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Restricted cash represents cash held by banks as collateralizing letters of credit.

Related Party Transactions

In conjunction with the establishment of ADVantage, the Company entered into a series of agreements with ADES, including: (i) a Secondment Agreement; (ii) a Manpower Agreement; and (iii) a Supply Services Agreement. Pursuant to these agreements, the Company, largely through its seconded employees, has agreed to provide various services to ADES and ADES has agreed in turn to provide various services to ADVantage. As of June 30, 2022 and December 31, 2021, accounts receivable from ADES totaled approximately $4.3 million and $0.5 million, respectively, included in “Trade receivables” on the Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, accounts payable to ADES totaled approximately $7.3 million and $2.1 million, respectively, included in “Accounts payable,” on the Consolidated Balance Sheets.

On December 6, 2021, we entered into the EDC Purchase Agreement to sell to ADES Arabia all of the issued and outstanding equity of EDC, which owns the Emerald Driller, Sapphire Driller and Aquamarine Driller. The transactions contemplated by the EDC Purchase Agreement closed on the EDC Closing Date. Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES entered into the EDC Support Services Agreements, pursuant to which a subsidiary of the Company agreed to provide, in exchange for customary fees and reimbursements, support services to EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller for a three-year term. For additional information regarding the EDC Purchase Agreement and the transactions contemplated thereunder, please see “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” under “Note 1. Organization and Recent Events” of these Notes to Unaudited Financial Statements.

In addition, the Company and ADES also entered into an agreement on December 6, 2021 (the “Collaboration Agreement”) to pursue a global strategic alliance in order to leverage both the EDC Support Services Agreements and ADVantage, the parties’ existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the parties agreed to collaborate on exploring future commercial and operational opportunities.

VHI previously entered into Framework Agreements and related Management and Marketing Agreements, as amended, on March 16, 2021 with Aquadrill, pursuant to which certain subsidiaries of VHI agreed to provide operating, management and marketing services to Aquadrill and its subsidiaries (the “Aquadrill Entities”). Fees earned as a result of these agreements are included in “Management fees” and “Reimbursable and other” in our Consolidated Statement of Operations within the Managed Services segment as reported in “Note 10. Business Segment and Significant Customer Information.” Two of our shareholders that own a significant portion of our Ordinary shares also own an interest in Aquadrill.

We did not have any related party transactions that were not conducted in the ordinary course of business as of June 30, 2022.

10. Business Segment and Significant Customer Information

Our operations are dependent on the global oil and gas industry, and our rigs are relocated based on demand for our services and customer requirements. Our customers consist primarily of large international oil and gas companies, national or government-controlled oil and gas companies, and other international exploration and production companies. As the result of an increase in activity related to operating, management and marketing services for rigs owned by third-parties, the Company has two reportable segments: (1) “Drilling Services,” which includes activities related to owned jackup rigs and drillships; and (2) “Managed Services,” which consists of activities related to rigs owned by third parties that we manage or support. The chief operating decision maker evaluates the performance of our reportable segments using adjusted operating income (loss), which is a segment performance measure, because this financial measure reflects our ongoing profitability and performance. Adjusted operating income (loss) is defined as segment income (loss) from operations plus general and administrative expenses and depreciation. General and administrative expenses, other (expense) income, and income taxes are not allocated to the operating segments for purposes of measuring segment income (loss) from operations and are included in “Unallocated” in the table below. There are no intersegment revenues. Our segment results for the periods indicated were as follows:

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	Three Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	42,744	$	—	$	—		$	42,744
Management fees		—		2,840		—			2,840
Reimbursables and other		5,119		22,535		—			27,654
Total revenue		47,863		25,375		—			73,238
Operating costs and expenses
Operating costs		36,164		23,241		—			59,405
General and administrative		—		—		6,910			6,910
Depreciation		10,695		—		392			11,087
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		46,859		23,241		(53,479	)		16,621
Income from operations		1,004		2,134		53,479			56,617
Other (expense) income
Interest income		—		—		7			7
Interest expense and financing charges		—		—		(8,503	)		(8,503	)
Other, net		—		—		(1,011	)		(1,011	)
Total other expense		—		—		(9,507	)		(9,507	)
Income before income taxes	$	1,004	$	2,134	$	43,972		$	47,110
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	1,004	$	2,134
Depreciation		10,695		—
Segment adjusted operating income	$	11,699	$	2,134

	Three Months Ended June 30, 2021
(unaudited, in thousands)	Drilling Services			Managed Services		Unallocated			Consolidated
Revenue
Contract drilling services	$	31,655		$	—	$	—		$	31,655
Management fees		—			497		—			497
Reimbursables and other		2,711			738		—			3,449
Total revenue		34,366			1,235		—			35,601
Operating costs and expenses
Operating costs		34,867			1,189		—			36,056
General and administrative		—			—		4,967			4,967
Depreciation		13,752			—		409			14,161
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		48,619			1,189		5,376			55,184
(Loss) income from operations		(14,253	)		46		(5,376	)		(19,583	)
Other (expense) income
Interest income		—			—		10			10
Interest expense and financing charges		—			—		(8,511	)		(8,511	)
Other, net		—			—		(179	)		(179	)
Total other expense		—			—		(8,680	)		(8,680	)
(Loss) income before income taxes	$	(14,253	)	$	46	$	(14,056	)	$	(28,263	)
Reconciliation of (loss) income from operations to segment operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(14,253	)	$	46
Depreciation		13,752			—
Segment adjusted operating (loss) income	$	(501	)	$	46

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	Six Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	87,657	$	—	$	—		$	87,657
Management fees		—		3,943		—			3,943
Reimbursables and other		10,302		29,667		—			39,969
Total revenue		97,959		33,610		—			131,569
Operating costs and expenses
Operating costs		72,602		30,736		—			103,338
General and administrative		—		—		13,492			13,492
Depreciation		21,551		—		831			22,382
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		94,153		30,736		(46,458	)		78,431
Income from operations		3,806		2,874		46,458			53,138
Other (expense) income
Interest income		—		—		11			11
Interest expense and financing charges		—		—		(17,007	)		(17,007	)
Other, net		—		—		(1,786	)		(1,786	)
Total other expense		—		—		(18,782	)		(18,782	)
Income before income taxes	$	3,806	$	2,874	$	27,676		$	34,356
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	3,806	$	2,874
Depreciation		21,551		—
Segment adjusted operating income	$	25,357	$	2,874

	Six Months Ended June 30, 2021
	Drilling Services			Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	49,380		$	—	$	—		$	49,380
Management fees		—			595		—			595
Reimbursables and other		5,054			738		—			5,792
Total revenue		54,434			1,333		—			55,767
Operating costs and expenses
Operating costs		60,224			1,189		—			61,413
General and administrative		—			—		10,462			10,462
Depreciation		27,467			—		819			28,286
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		87,691			1,189		11,281			100,161
(Loss) income from operations		(33,257	)		144		(11,281	)		(44,394	)
Other (expense) income
Interest income		—			—		110			110
Interest expense and financing charges		—			—		(17,021	)		(17,021	)
Other, net		—			—		(793	)		(793	)
Total other expense		—			—		(17,704	)		(17,704	)
(Loss) income before income taxes	$	(33,257	)	$	144	$	(28,985	)	$	(62,098	)
Reconciliation of (loss) income from operations to segment adjusted operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(33,257	)	$	144
Depreciation		27,467			—
Segment adjusted operating (loss) income	$	(5,790	)	$	144

Our revenue by country and segment was as follows for the periods indicated (revenue of less than 10% are included in “Other countries”):

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		Three months ended June 30,				Six months ended June 30,
Country	Segment	2022		2021		2022		2021
(unaudited, in thousands)
UAE	Managed Services	$	19,778	$	—	$	27,966	$	—
Egypt	Drilling Services		9,738		—		26,859		—
India	Drilling Services and Managed Services		13,230		9,297		26,518		18,152
Qatar	Drilling Services		—		7,697		14,319		14,894
Indonesia	Drilling Services		—		—		—		—
Montenegro	Drilling Services		—		16,253		—		16,306
Other countries (1)	Drilling Services and Managed Services		30,492		2,354		35,907		6,415
Total revenues		$	73,238	$	35,601	$	131,569	$	55,767

(1) “Other countries” represent countries in which we operate that individually had operating revenues representing less than 10% of total revenues earned.

For the three and six months ended June 30, 2022 and 2021, a substantial amount of our revenue was derived from countries outside of the United States. Consequently, we are exposed to the risk of changes in economic, political and social conditions inherent in foreign operations, including as a direct and indirect result of Russia’s invasion of Ukraine in February 2022. Revenue with customers that contributed 10% or more of revenue for the periods indicated were as follows:

		Three months ended June 30,						Six months ended June 30,
(unaudited)	Segment	2022			2021			2022			2021
Customer 1	Managed Services		30	%		0	%		23	%		0	%
Customer 2	Drilling Services and Managed Services		18	%		26	%		20	%		33	%
Customer 3	Drilling Services		13	%		0	%		20	%		0	%
Customer 4	Drilling Services		0	%		17	%		10	%		11	%
Customer 5	Drilling Services		0	%		46	%		0	%		29	%
Customer 6	Drilling Services		0	%		0	%		0	%		16	%

Information related to the Company’s “Total Assets” as reported on the Consolidated Balance Sheets is not available by reportable segment; however, a substantial portion of our assets are mobile drilling units included in the Drilling Services segment. Asset locations at the end of the period are not necessarily indicative of the geographic distribution of the revenues generated by such assets during the periods. Our property and equipment, net by country, was as follows as of the dates indicated (property and equipment of less than 10% are included in “Other countries”):

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cyprus	$	165,754	$	—
Egypt		—		173,187
India		88,895		96,583
Indonesia		60,953		63,581
Other countries (1)		42,388		46,253
Total property and equipment	$	357,990	$	379,604

(1) “Other countries” represent countries in which we individually had property and equipment, net, representing less than 10% of total property and equipment, net.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist you in understanding our financial position as of June 30, 2022, and our results of operations for the three and six months ended June 30, 2022 and 2021. The discussion should be read in conjunction with the financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods.

Overview

We are an international offshore drilling company focused on operating a fleet of modern, high specification drilling units. Our principal business is to contract drilling units, related equipment and work crews, primarily on a dayrate basis, to drill oil and gas wells for our customers. Through our fleet of drilling units, we provide offshore contract drilling services to major, national and independent oil and gas companies, focused on international markets. Additionally, for third-party owned drilling units, we provide operations and marketing services for operating and stacked rigs, construction supervision services for rigs that are under construction and preservation management services for rigs that are stacked.

The following table sets forth certain current information concerning our offshore drilling fleet as of August 1, 2022:

Name	Year Built	Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Location	Status
Owned Rigs:
Jackups
Topaz Driller	2009		375		30,000	Malta	Contract preparation
Soehanah	2007		375		30,000	Indonesia	Mobilizing
Drillships (1)
Platinum Explorer	2010		12,000		40,000	India	Operating
Tungsten Explorer	2013		12,000		40,000	Cyprus	Operating
Managed Rigs:
Drillships
Polaris	2008		10,000		37,500	Malaysia	Reactivating
Aquarius	2008		10,000		35,000	High Seas	Reactivating
Capella	2008		10,000		37,500	Indonesia	Operating
Supported Rigs:
Jackups
Emerald Driller	2008		375		30,000	Qatar	Operating
Sapphire Driller	2009		375		30,000	Qatar	Operating
Aquamarine Driller	2009		375		30,000	Qatar	Operating

(1)The drillships are designed to drill in up to 12,000 feet of water and are currently equipped to drill in 10,000 feet of water.

Recent Developments

Geopolitical Instability Caused by the Conflict in Ukraine and Rising Inflation

The markets generally exhibited a strong recovery in global oil prices during 2021, a trend which was further exemplified during the first quarter of 2022, reaching $125.72 per barrel in March 2022. While our management anticipates oil and gas prices to remain robust in the near-term, price volatility is still expected to continue as a result of, among other factors, (i) adverse macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions, (ii) changes in oil and gas inventories, (iii) global market demand, (iv) geopolitical instability, armed conflict and social unrest, including the invasion of Ukraine by Russia in February 2022, the associated response undertaken by western nations, such as the implementation of broad sanctions, the potential for retaliatory actions on the part of Russia and the overall impact on OPEC+ countries’ ability to reach production targets in the near term, (v) potential future disagreements among OPEC+ countries regarding the supply of oil, (vi) the potential for increased production and activity from U.S. shale producers and non-OPEC countries driven by the current oil prices, and (vii) the ongoing COVID-19 pandemic, including the transmission and presence of highly contagious and new variants and the pace of vaccine rollouts, and therefore, the Company cannot predict how long oil and gas prices will remain stable or further increase, if at all, or whether they could reverse course and materially decline.

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In particular, the invasion of Ukraine by Russia has led to, and will likely continue to lead to, geopolitical instability, disruption and volatility in the markets in which we operate. While it is not possible at this time to predict or determine the ultimate consequences of the conflict in Ukraine, which could include, among other things, additional sanctions, greater regional instability, embargoes, geopolitical shifts and other material and adverse effects on macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions (and actions taken or being contemplated by central banks and regulators in an attempt to reduce, curtail and address such pressures and conditions), and material changes in energy policy, supply chains, financial markets and currency exchange rates, hydrocarbon price volatility in particular is likely to continue for the foreseeable future. To the extent the conflict in Ukraine and adverse macroeconomic conditions continue (or exacerbate), the implementation of further measures taken by governmental bodies and private actors, could have a lasting impact in the near- and long-term on the (i) operations and financial condition of our business and the businesses of our critical counterparties and (ii) the global economy. While our management is actively monitoring the foregoing events and its associated financial impact on our business, it is uncertain at this time as to the full magnitude that volatile and uncertain oil and gas prices will ultimately have on our financial condition and future results of operations.

Share Purchase Agreement to Sell EDC to ADES Arabia Holding

On December 6, 2021, VHI, a wholly owned subsidiary of the Company, entered into a certain Share Purchase Agreement (the “EDC Purchase Agreement”) with ADES Arabia Holding (“ADES Arabia”), which wholly owns ADES, pursuant to which VHI agreed to sell to ADES Arabia all of the issued and outstanding equity of VHI’s wholly-owned subsidiary, EDC (the “EDC Sale”). EDC is the owner of the following jackup rigs, which are currently operating in Qatar: the Emerald Driller; the Sapphire Driller; and the Aquamarine Driller. Each of these rigs was included within our Drilling Services segment for the quarter ended June 30, 2022, and in prior quarters. The EDC Purchase Agreement became effective on December 20, 2021 and the transactions contemplated under such agreement closed on May 27, 2022 (the “EDC Closing Date”). On the EDC Closing Date, VHI received $170.0 million as purchase price consideration and $30.0 million in certain contract preparation expense reimbursement and, as a result, VHI recognized a net gain of approximately $60.8 million during the three months ended June 30, 2022, all of which is subject to potential adjustments contemplated by the EDC Purchase Agreement, any such adjustments to be finalized by September 24, 2022. Accordingly, the amount of proceeds actually received by the Company could vary from those set forth above.

Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES entered into three separate services agreements (collectively, the “ADES Support Services Agreements”), pursuant to which a subsidiary of the Company agreed to provide, in exchange for customary fees and reimbursement, support services to EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller for a three-year term.

The Company and ADES also entered into an agreement on December 6, 2021 (the “Collaboration Agreement”) to pursue a global strategic alliance in order to leverage both the ADES Support Services Agreements and ADVantage, the parties’ existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the parties agreed to collaborate on exploring future commercial and operational opportunities.
 

While the Company continues to evaluate potential uses of the proceeds from the EDC Sale, the Company is limited in how it may deploy and utilize such proceeds as a result of the terms of the First Lien Indenture. In particular, the Company may only use the proceeds from the EDC Sale to repay, prepay or purchase our senior secured indebtedness (including the 9.25% First Lien Notes), acquire all or substantially all of the assets or capital stock of any other entity engaged in a similar or complementary business to the Company’s lines of business, or make capital expenditures or acquire non-current assets (including vessels and related assets) that are useful in such lines of business (including any deposit or installment payments with respect thereto as well as any expenditures related to the acquisition, construction or “ready for sea” costs of such vessels). To the extent such proceeds are not so applied (or committed to be applied) within one year after receipt, the Company will be required to offer to purchase the 9.25% First Lien Notes with such proceeds.

Tungsten Explorer Contract Award

On June 9, 2022, a subsidiary of VDI entered into a drilling services contract with a subsidiary of TotalEnergies (the “TotalEnergies Contract”) in respect of VDI’s ultra-deepwater drillship, the Tungsten Explorer. The TotalEnergies Contract contains a minimum term of 225 days. The Tungsten Explorer is currently operating in the Mediterranean where it will be drilling up to two wells and the Company anticipates that it will mobilize to West Africa during the third quarter of 2022 or potentially later.

Ongoing Impact of the COVID-19 Pandemic

The global spread of COVID-19, including its highly contagious variants and sub-lineages, continues to pose significant risks and challenges worldwide, and has caused and continues to cause widespread illness and significant loss of life, leading governments across the world to impose and re-impose severely stringent and extensive limitations on movement and human interaction, with certain countries, including those where we maintain significant operations and derive material revenue, implementing quarantine, testing and vaccination requirements. These governmental reactions to the COVID-19 pandemic, as well as changes to and extensions of such

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approaches, have led to, and continue to result in, uncertain and volatile economic activity worldwide, including within the oil and gas industry and the regions and countries in which we operate.

While the Company has previously managed, and continues to actively manage, the business in an attempt to mitigate any ongoing and material impact from the spread of COVID-19, management anticipates that our industry, and the world at large, will need to continue to operate in, and further adapt, to the current environment for the foreseeable future.

Business Outlook

Expectations about future oil and gas prices have historically been a key driver of demand for our services. Since 2021, global oil prices have experienced a robust recovery resulting in the strongest annual performance (on a price per barrel basis) since 2012, with Brent crude oil trading above $125.00 per barrel in March 2022. This robust recovery is due to, among other factors, the (i) OPEC+ countries’ agreement since last year to reduce production by almost 10 million barrels per day, representing approximately 10% of the world's output compared with demand for approximately 96 million barrels a day, and their recent agreement to boost production, but only in measured steps, (ii) development, efficacy, availability and utilization of vaccines for COVID-19, (iii) the reopening of global economies, (iv) injection of substantial government monetary and fiscal stimulus and (v) the ongoing energy supply crisis driven by a shortage of fuel within recovering economies and anticipated extreme weather across Europe and northeast Asia, along with years of under investment in oil reserve replacement, all of which has been exacerbated by the global turmoil and political instability caused by Russia's invasion of Ukraine in February 2022.

Notwithstanding the foregoing, the volatility and uncertainty surrounding global oil prices largely remain as the spread of the COVID-19 pandemic and its highly transmissible variants persist and, as a whole, the oil and gas industry continues to be materially impacted and shaped by external factors which have influenced its overall development and recovery, including geopolitical instability caused by Russia’s invasion of Ukraine in February 2022. While OPEC+ countries entered into an agreement in July 2021 to gradually phase out certain oil production cuts by September 2022 and subsequently acknowledged that it would continue to observe such agreement to only boost production modestly despite higher oil prices, the long-term commitment of such countries to maintain oil production at or near such levels remains uncertain. More recently, the ongoing conflict in Ukraine has caused, and could continue to cause for the foreseeable future, significant instability, disruption, uncertainty and volatility in the hydrocarbon industry and the global markets at large. Further geopolitical developments could occur, including a possible agreement relating to Iran’s nuclear deal and the subsequent suspension of U.S. sanctions in Iran (which could result in, among other things, the influx of Iranian crude oil into the global markets), any of which could significantly impact our business and operations. With higher crude oil prices there is the potential for increased production from U.S. shale producers and non-OPEC countries, which could lead to significant increase in the overall global oil and gas supply, and result in reduced commodity prices.

In addition, the opening of economies, supply chain bottlenecks occurring throughout the world and across various industries, and the injection of significant levels of governmental monetary and fiscal stimulus to avoid a recession during the peak of the COVID-19 pandemic, have collectively contributed to the highest level of inflation in decades across the U.S., the United Kingdom, Europe and the global community at large. In the U.S., for example, the Consumer Price Index reached a 40-year high in May 2022, and such rates are expected to increase in the near-term. Therefore, our operations could be materially and adversely impacted by global inflation, including in the form of increases in personnel costs and the prices of goods and services required to operate our rigs. Given that we enter into fixed dayrate contracts that have contractual terms with minimal adjustments to account for rising inflation, the majority (if not all) of these costs will be borne by us. While we are currently unable to estimate the ultimate impact of inflation and the associated rising prices of goods and services, our costs could rise in the near-term and materially impact our profitability and overall financial condition.

Furthermore, central banks and regulators across the world have raised, and it is anticipated that they will likely continue to raise, interest rates in an attempt to gain control over and reduce inflation in their respective jurisdictions. In the U.S., for example, the Federal Reserve further increased rates in late July 2022. Such efforts being undertaken by central banks and regulators could tip the global economy into a recession, which could materially and adversely impact demand for oil and gas and, in the process, demand for our services.

As a result of such volatility, disruption, instability and uncertainty, operators have faced, and will generally continue to face, difficulties when attempting to definitively plan their capital budget programs for the near- and long- term.
 

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Backlog

The following table reflects a summary of our contract backlog coverage of days contracted and related revenue as of June 30, 2022 based on information available as of that date:

	Percentage of Days Contracted			Revenues Contracted (in thousands)
	2022	2023	Beyond	2022		2023		Beyond
Jackups	50%	30%	0%	$	11,809	$	12,922	$	—
Drillships	85%	70%	0%	$	56,213	$	109,982	$	—
Managed Rigs - contracted (1)	38%	31%	0%	$	32,393	$	59,464	$	—
Managed Rigs - fees (2)	50%	31%	0%	$	3,434	$	2,250	$	—
Supported Rigs - fees	100%	100%	70%	$	1,656	$	2,628	$	1,430

(1)The amounts consist of contract backlog attributable to customer drilling contracts secured for rigs managed by us.

(2)The amounts consist of a fixed management fee paid to us pursuant to the applicable Management Agreement and a marketing fee paid to us pursuant to the applicable Marketing Agreement. The amounts exclude any variable fee payable to us pursuant to the applicable Management Agreement.

Results of Operations

Operating results for our contract drilling services are dependent on three primary metrics: available days; rig utilization; and dayrates. The following table sets forth this selected operational information for the periods indicated:

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
Jackups
Rigs available		2			5			2			5
Available days (1)		182			455			362			905
Utilization (2)		98.8	%		39.9	%		79.6	%		35.3	%
Average daily revenues (3)	$	60,694		$	124,857		$	65,807		$	98,775
Deepwater
Rigs available		2			2			2			2
Available days (1)		182			182			362			362
Utilization (2)		99.7	%		49.7	%		99.2	%		49.4	%
Average daily revenues (3)	$	139,628		$	99,194		$	152,261		$	99,549
Held for Sale (4)
Rigs available		3			0			3			0
Available days (1)		168			0			654			0
Utilization (2)		47.0	%	N/A				62.3	%	N/A
Average daily revenues (3)	$	82,127		N/A			$	34,339		N/A

(1)Available days are the total number of rig calendar days in the period.

(2)Utilization is calculated as a percentage of the actual number of revenue earning days divided by the available days in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement of operations.

(3)Average daily revenues are based on contract drilling revenues divided by revenue earning days. Average daily revenue will differ from average contract dayrate due to billing adjustments for any non-productive time, mobilization fees and demobilization fees.

(4)Each of these rigs were classified as held for sale on our Consolidated Balance Sheets during the Current Period and at December 31, 2021, up to the date of the EDC Closing Date. See “Recent Developments - Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in this Part I, Item 2 for additional information.

For the Three Months Ended June 30, 2022 and 2021

Net income attributable to shareholders for the Current Quarter was $48.1 million, or $3.67 per basic share, on operating revenues of $73.2 million, compared to net loss attributable to shareholders for the Comparable Quarter of $29.0 million, or $2.21 per basic share, on operating revenues of $35.6 million.

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The following table is an analysis of our operating results for the three months ended June 30, 2022 and 2021:

	Three Months Ended June 30,						Change
	2022			2021			$			%
(unaudited, in thousands)
Consolidated:
Revenues
Contract drilling services	$	42,744		$	31,655		$	11,089			35	%
Management fees		2,840			497			2,343			471	%
Reimbursables and other		27,654			3,449			24,205			702	%
Total revenues		73,238			35,601			37,637			106	%
Operating costs and expenses:
Operating costs		59,405			36,056			23,349			65	%
General and administrative		6,910			4,967			1,943			39	%
Depreciation		11,087			14,161			(3,074	)		-22	%
Gain on EDC Sale		(60,781	)		—			(60,781	)	**
Total operating costs and expenses		16,621			55,184			(38,563	)		-70	%
Income (loss) from operations		56,617			(19,583	)		76,200			-389	%
Other (expense) income
Interest income		7			10			(3	)		-30	%
Interest expense and financing charges		(8,503	)		(8,511	)		8			0	%
Other, net		(1,011	)		(179	)		(832	)		465	%
Total other expense		(9,507	)		(8,680	)		(827	)		10	%
Income (loss) before income taxes		47,110			(28,263	)		75,373			-267	%
Income tax (benefit) provision		(1,221	)		720			(1,941	)		-270	%
Net income (loss)		48,331			(28,983	)		77,314			-267	%
Net income (loss) attributable to noncontrolling interests		232			(18	)		250		n/m
Net income (loss) attributable to shareholders	$	48,099		$	(28,965	)	$	77,064			-266	%
Drilling Services:
Revenue
Contract drilling services	$	42,744		$	31,655		$	11,089			35	%
Management fees		—			—			—		**
Reimbursables and other		5,119			2,711			2,408			89	%
Total revenue		47,863			34,366			13,497			39	%
Operating costs and expenses:
Operating costs		36,164			34,867			1,297			4	%
General and administrative		—			—			—		**
Depreciation		10,695			13,752			(3,057.0	)		-22	%
Gain on EDC sale		—			—			—		**
Total operating costs and expenses		46,859			48,619			(1,760	)		-4	%
Income (loss) from operations		1,004			(14,253	)		15,257			-107	%
Managed Services:
Revenue
Contract drilling services	$	—		$	—		$	—		**
Management fees		2,840			497			2,343			471	%
Reimbursables and other		22,535			738			21,797		n/m
Total revenue		25,375			1,235			24,140		n/m
Operating costs and expenses:
Operating costs		23,241			1,189			22,052		n/m
General and administrative		—			—			—		**
Depreciation		—			—			—		**
Gain on EDC sale		—			—			—		**
Total operating costs and expenses		23,241			1,189			22,052		n/m
Income from operations		2,134			46			2,088		n/m
n/m = not meaningful

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Consolidated Revenue: Total revenue increased $37.6 million due primarily to an increase in operating activities in the Current Quarter as discussed below.

Drilling Services Revenue: Contract drilling revenue increased $11.1 million for the Current Quarter as compared to the Comparable Quarter. The increase in contract drilling revenue was primarily the result of the number of rigs that were operational, with seven in the Current Quarter, including three of the jackup rigs included in the EDC Sale (as discussed in “Recent Developments - Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in this Part I, Item 2), compared to four in the Comparable Quarter. Reimbursables and other revenue increased $2.4 million in the Current Quarter as compared to the Comparable Quarter primarily as a result of the number of our rigs which were operational (as discussed immediately above).

Managed Services Revenue: Management fees increased $2.3 million in the Current Quarter as compared to the Comparable Quarter as a result of the management of certain deepwater floaters owned by Aquadrill, which we began managing in late March 2021. The increase in Reimbursables and other revenue for the Current Quarter as compared to the Comparable Quarter is primarily as a result of the management of the deepwater floaters owned by Aquadrill (as discussed immediately above).

Consolidated Operating Costs: Total operating costs increased 65% due primarily to an increase in operating activities in the Current Quarter as discussed below.

Drilling Services Operating costs: Drilling Services operating costs increased 4% in the Current Quarter as compared to the Comparable Quarter primarily as the result of the changes in our drilling contracts (as discussed in “Drilling Services Revenue” above).

Managed Services Operating costs: The increase in Managed Services operating costs in the Current Quarter as compared to the Comparable Quarter is as the result the management of certain deepwater floaters (as discussed in “Managed Services Revenue above).

General and administrative expenses: Increases in general and administrative expenses for the Current Quarter as compared to the Comparable Quarter were primarily due to an increase in professional fees. Non-cash share-based compensation expense for the Current Quarter and Comparable Quarter was immaterial.

Depreciation expense: Depreciation expense is primarily related to rigs owned by us included in our Drilling Services segment. The Managed Services segment does not currently own depreciable assets. Depreciation expense for the Current Quarter decreased 22% as compared to the Comparable Quarter, due primarily to a decrease in depreciation expense related to the three jackup rigs that were classified as held for sale on December 20, 2021 and subsequently sold in connection with the EDC Sale (which closed on May 27, 2022).

Gain on EDC Sale: During the Current Quarter, we recorded a net gain of approximately $60.8 million related to the EDC Sale. See “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in Recent Development in this Part I, Item 2 for additional details.

Interest income: Decreases in interest income for the Current Quarter as compared to the Comparable Quarter were due primarily to lower interest rates earned on lower cash investments during the Current Quarter.

Interest expense and financing charges: Interest expense and financing charges includes non-cash deferred financing costs totaling approximately $0.4 million for each of the Current Quarter and the Comparable Quarter.

Other, net: Our functional currency is USD; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than USD. These transactions are re-measured in USD based on a combination of both current and historical exchange rates. Net foreign currency exchange loss of approximately $1.0 million and $0.2 million was included in “other, net,” for the Current Quarter and Comparable Quarter, respectively.

Income tax provision: Our annualized effective tax rate for the Current Quarter is negative 15.40% based on estimated annualized ordinary loss before income taxes excluding income tax discrete items. Our annualized effective tax rate for the Comparable Quarter was negative 7.06%, based on estimated annualized loss before income taxes excluding income tax discrete items.

Our income taxes are generally dependent upon the results of our operations and the local income taxes in the jurisdictions in which we operate. In some jurisdictions, we do not pay taxes or receive benefits for certain income and expense items, including interest expense and disposal gains or losses. In other jurisdictions, we recognize income taxes on a net income basis or a deemed profit basis.

For the Six Months Ended June 30, 2022 and 2021

Net income attributable to shareholders for the Current Period was $33.2 million, or $2.53 per basic share, on operating revenues of $131.6 million, compared to net loss attributable to shareholders for the Comparable Quarter of $64.9 million, or $4.95 per basic share, on operating revenues of $55.8 million.

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The following table is an analysis of our operating results for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,						Change
	2022			2021			$			%
(unaudited, in thousands)
Consolidated:
Revenues
Contract drilling services	$	87,657		$	49,380		$	38,277			78	%
Management fees		3,943			595			3,348			563	%
Reimbursables and other		39,969			5,792			34,177			590	%
Total revenues		131,569			55,767			75,802			136	%
Operating costs and expenses:
Operating costs		103,338			61,413			41,925			68	%
General and administrative		13,492			10,462			3,030			29	%
Depreciation		22,382			28,286			(5,904	)		-21	%
Gain on EDC Sale		(60,781	)		—			(60,781	)	**
Total operating costs and expenses		78,431			100,161			(21,730	)		-22	%
Income (loss) from operations		53,138			(44,394	)		97,532			-220	%
Other (expense) income
Interest income		11			110			(99	)		-90	%
Interest expense and financing charges		(17,007	)		(17,021	)		14			0	%
Other, net		(1,786	)		(793	)		(993	)		125	%
Total other expense		(18,782	)		(17,704	)		(1,078	)		6	%
Income (loss) before income taxes		34,356			(62,098	)		96,454			-155	%
Income tax provision		217			2,882			(2,665	)		-92	%
Net income (loss)		34,139			(64,980	)		99,119			-153	%
Net income (loss) attributable to noncontrolling interests		938			(31	)		969		n/m
Net income (loss) attributable to shareholders	$	33,201		$	(64,949	)	$	98,150			-151	%
Drilling Services:
Revenue
Contract drilling services	$	87,657		$	49,380		$	38,277			78	%
Management fees		—			—			—		**
Reimbursables and other		10,302			5,054			5,248			104	%
Total revenue		97,959			54,434			43,525			80	%
Operating costs and expenses:
Operating costs		72,602			60,224			12,378			21	%
General and administrative		—			—			—		**
Depreciation		21,551			27,467			(5,916	)		-22	%
Gain on EDC sale		—			—			—		**
Total operating costs and expenses		94,153			87,691			6,462			7	%
Income (loss) from operations		3,806			(33,257	)		37,063			-111	%
Managed Services:
Revenue
Contract drilling services	$	—		$	—		$	—		**
Management fees		3,943			595			3,348			563	%
Reimbursables and other		29,667			738			28,929		n/m
Total revenue		33,610			1,333			32,277		n/m
Operating costs and expenses:
Operating costs		30,736			1,189			29,547		n/m
General and administrative		—			—			—		**
Depreciation		—			—			—		**
Gain on EDC sale		—			—			—		**
Total operating costs and expenses		30,736			1,189			29,547		n/m
Income from operations		2,874			144			2,730		n/m
n/m = not meaningful

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Consolidated Revenue: Total revenue increased $75.8 million due primarily to an increase in operating activities in the Current Period as discussed below.

Drilling Services Revenue: Contract drilling revenue increased $38.3 million for the Current Period as compared to the Comparable Period. The increase in our contract drilling revenue was primarily the result of the number of rigs that were operational, with seven in the Current Period, including four of the jackup rigs included in the EDC Sale (as discussed in “Recent Developments - Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in this Part I, Item 2), compared to three in the Comparable Period. Reimbursables and other revenue increased $5.2 million in the Current Period as compared to the Comparable Period primarily as a result of the number of our rigs which were operational (as discussed immediately above).

Managed Services Revenue: Management fees increased $3.3 million in the Current Period as compared to the Comparable Period as a result of the management of certain deepwater floaters owned by Aquadrill, which we began managing in late March 2021. The increase in Reimbursables and other revenue for the Current Period as compared to the Comparable Period is primarily as a result of the management of the deepwater floaters owned by Aquadrill (as discussed immediately above).

Consolidated Operating Costs: Total operating costs increased 68% due primarily to an increase in operating activities in the Current Period as discussed below.

Drilling Services Operating costs: Drilling Services operating costs increased 21% in the Current Period as compared to the Comparable Period primarily as a result of changes to certain of our drilling contracts (as discussed in Drilling Services Revenue above). This increase was partially offset by the sale of various assets during the Current Period and the recognition of a net gain of approximately $1.9 million related to the sale of these assets. The Comparable Period includes the sale of the Titanium Explorer and the recognition of a net gain of approximately $2.8 million related to the sale of the asset.

Managed Services Operating costs: The increase in Managed Services operating costs in the Current Period as compared to the Comparable Period is as the result the management of certain deepwater floaters (as discussed in “Managed Services Revenue” above).

General and administrative expenses: Increases in general and administrative expenses for the Current Period as compared to the Comparable Period were primarily due to increased labor costs and professional fees. General and administrative expenses for the Comparable Period included approximately $0.2 million for non-cash share-based compensation expense. Non-cash share-based compensation expense for the Current Period was immaterial.

Depreciation expense: Depreciation expense is primarily related to rigs owned by us included in our Drilling Services segment. The Managed Services segment does not currently own depreciable assets. Depreciation expense for the Current Period decreased 21% as compared to the Comparable Period, due primarily to a decrease in depreciation expense on the three jackup rigs that were classified as held for sale on December 20, 2021 and subsequently sold in connection with the EDC Sale (which closed on May 27, 2022).

Gain on EDC Sale: During the Current Period, we recorded a net gain of approximately $60.8 million related to the EDC Sale. See “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in Recent Developments in this Part I, Item 2 for additional details.

Interest income: Decreases in interest income for the Current Period as compared to the Comparable Period were due primarily to lower interest rates earned on lower cash investments during the Current Period.

Interest expense and financing charges: Interest expense and financing charges includes non-cash deferred financing costs totaling approximately $0.8 million for each of the Current Period and Comparable Period, respectively.

Other, net: Our functional currency is USD; however, a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than USD. These transactions are re-measured in USD based on a combination of both current and historical exchange rates. Net foreign currency exchange loss of approximately $1.8 million and $0.8 million was included in “other, net,” for the Current Period and Comparable Period, respectively.

Income tax provision: Our annualized effective tax rate for the Current Period is negative 15.40% based on estimated annualized ordinary loss before income taxes excluding income tax discrete items. Our annualized effective tax rate for the Comparable Period was negative 7.06%, based on estimated annualized loss before income taxes excluding income tax discrete items.

Our income taxes are generally dependent upon the results of our operations and the local income taxes in the jurisdictions in which we operate. In some jurisdictions, we do not pay taxes or receive benefits for certain income and expense items, including interest expense and disposal gains or losses. In other jurisdictions, we recognize income taxes on a net income basis or a deemed profit basis.

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Liquidity and Capital Resources

The prolonged low price environment caused by the spread of COVID-19, the resulting decline in global economic activity and the oil price and market share volatility began to reduce our liquidity and capital resources in the second quarter of 2020 through 2021, a trend which extended into the second quarter of 2022 and could extend further into 2023 and beyond. Such events have had significant and adverse consequences for general financial, business and economic conditions, as well as for the financial, business and economic position of our business and the business of our customers and suppliers, and may continue to adversely impact our ability to derive cash flows from our operations and access capital funding from third parties in the future.

We experienced, and could experience further delays in the collection of certain accounts receivables due to logistical obstacles resulting from the COVID-19 pandemic, such as office closures, as well as other impacts to our long-term liquidity. Ongoing and additional governmental measures, such as widespread lock downs, nightly curfews, territorial entry restrictions and mandates, could impact our ability to operate in locations where such restrictions and requirements are in place, including those locations where we derive material revenue. In addition, the invasion of Ukraine by Russia in February 2022, and the resulting impact of sanctions imposed by western nations, could adversely impact the global oil and gas markets for the foreseeable future and, in the process, our ability to access additional capital funding sources. During these uncertain times, we have sought, and continue to seek, measures to reduce our operating costs and preserve cash. We could implement further cost reduction measures (in addition to those previously put in place in 2020 and maintained through the Current Period) and alter our general financial strategy in the near- and long-term.

Sources and Uses of Liquidity

Our anticipated cash flow needs, both in the short- and long-term, may include, among others: (i) normal recurring operating expenses; (ii) planned and discretionary capital expenditures; (iii) repayments of interest; and (iv) certain contractual cash obligations and commitments. We may, from time to time, redeem, repurchase or otherwise acquire our outstanding 9.25% First Lien Notes through open market purchases, tender offers or pursuant to the terms of such securities.
 

We currently expect to fund our cash flow needs with cash generated by our operations, cash on hand or proceeds from sales of assets. As of June 30, 2022, we believe we maintain adequate cash reserves and are continuously managing our actual cash flow and cash forecasts. Accordingly, management believes that we have adequate liquidity to fund our operations for the twelve months following the date our Consolidated Financial Statements are issued and therefore, have been prepared under the going concern assumption.

Under the First Lien Indenture, we are required to apply the proceeds derived from the EDC Sale to repay, prepay or purchase our senior secured indebtedness (including the 9.25% First Lien Notes), acquire all or substantially all of the assets or capital stock of any other entity engaged in a similar or complementary business to the Company’s lines of business, or make capital expenditures or acquire non-current assets (including vessels and related assets) that are useful in such lines of business (including any deposit or installment payments with respect thereto as well as any expenditures related to the acquisition, construction or “ready for sea” costs of such vessels). To the extent such proceeds are not so applied (or committed to be applied) within one year after receipt, the Company will be required to offer to purchase the 9.25% First Lien Notes with such proceeds.

The 9.25% First Lien Notes mature in November 2023. To the extent additional funds are necessary to meet our long-term liquidity needs as we continue to execute our business strategy, including in order to satisfy our obligations under the 9.25% First Lien Notes, we anticipate that they will be obtained through incurrence of additional indebtedness, additional equity financings, sales of assets or a combination of these potential sources of funds. However, there can be no assurance that we will be able to obtain additional funds on terms acceptable to us, on a timely basis or at all. The failure to obtain sufficient funds on acceptable terms when needed, including the ability to refinance any portion of the 9.25% First Lien Notes, could have a material and adverse effect on the results of operations, and financial condition. If we are unable to fund capital expenditures with our cash flow from operations or sales of non-strategic assets, we may be required to either incur additional borrowings or raise capital through the sale of debt or equity securities. Our ability to access the capital markets may be limited by our financial condition at the time, by certain restrictive covenants under the agreements governing our credit agreement and notes, by changes in laws and regulations or interpretation thereof and by adverse market conditions resulting from, among other things, general economic conditions and contingencies and uncertainties that are beyond our control. For example, the invasion of Ukraine by Russia in February 2022, and the resulting impact of sanctions imposed by western nations against Russia, Russian-backed separatist regions in Ukraine, certain banks, companies, government officials, and other individuals in Russia and Belarus, could adversely impact the global oil and gas markets for the foreseeable future and, in the process, our ability to access additional capital funding sources. The failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on the results of operations, and financial condition.

As of June 30, 2022, we had working capital of approximately $265.5 million, including approximately $227.3 million of cash available for general corporate purposes in accordance with our First Lien Indenture. Scheduled debt service consists of interest payments through June 30, 2023 of approximately $32.4 million. We anticipate capital expenditures through June 30, 2023 to be between approximately $4.8 million and $5.9 million. As our rigs obtain new contracts, we could incur reactivation and mobilization costs for these rigs, as well as additional customer requested equipment upgrades. These costs could be significant and may not be fully

35

recoverable from the customer. Based on our expected levels of activity, incremental expenditures through June 30, 2023 for special periodic surveys, major repair and maintenance expenditures and equipment re-certifications are anticipated to be between approximately $21.6 million and $26.4 million. As of June 30, 2022, we had approximately $49.9 million available for the issuance of letters of credit under our cash collateralized letter of credit facility.

The following table includes a summary of our cash flow information for the periods indicated:

		Six Months Ended June 30,
(unaudited, in thousands)		2022			2021
Cash flows (used in) provided by:
	Operating activities	$	(39,705	)	$	(40,944	)
	Investing activities		195,364			10,846
	Financing activities		—			—

Changes in cash flows from operating activities are driven by changes in net loss during the relevant periods (see the discussion of changes in net loss above in “Results of Operations” of this Part I, Item 2).

Cash flows from investing activities in the Current Quarter include net proceeds of $200.0 derived from the EDC Sale and $3.1 million derived from the sale of various assets. The Comparable Quarter include net proceeds of $13.6 million from the sale of the Titanium Explorer.

The significant elements of the 9.25% First Lien Notes are described in “Note 5. Debt” of the “Notes to Unaudited Consolidated Financial Statements” in Part I, Item 1 of this Quarterly Report. The information discussed therein is incorporated by reference in its entirety into this Part I, Item 2.

We enter into operating leases in the normal course of business for office space, housing, vehicles and specified operating equipment. Some of these leases contain options that would cause our future cash payments to change if we exercised those options.

Commitments and Contingencies

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance. Information regarding our legal proceedings is set forth in “Note 8. Commitments and Contingencies” of the “Notes to Unaudited Consolidated Financial Statements” in Part I, Item 1 of this Quarterly Report. The information discussed therein is incorporated by reference in its entirety into this Part I, Item 2.

There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims. We do not believe the ultimate resolution of any existing litigation, claims or disputes will have a material adverse effect on our financial position, results of operations or cash flows.

Critical Accounting Policies and Accounting Estimates

The preparation of unaudited financial statements and related disclosures in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our significant accounting policies are included in “Note 2. Basis of Presentation and Significant Accounting Policies” of the “Notes to the Unaudited Consolidated Financial Statements” in Part I, Item 1 of this Quarterly Report. These policies, along with our underlying judgments and assumptions made in their application, have a significant impact on our consolidated financial statements. While management believes current estimates are appropriate and reasonable, actual results could materially differ from those estimates. We have discussed the development, selection and disclosure of such policies and estimates with the audit committee of the Board of Directors.

Our critical accounting policies are those related to property and equipment, impairment of long-lived assets and income taxes. For a discussion of the critical accounting policies and estimates that we use in the preparation of our consolidated financial statements, see “Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Estimates” in Part II of our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. During the Current Quarter, there were no material changes to the judgments, assumptions or policies upon which our critical accounting estimates are based.

Recent Accounting Pronouncements: See “Note 2. Basis of Presentation and Significant Accounting Policies” of the “Notes to Unaudited Consolidated Financial Statements” in Part I, Item 1 of this Quarterly Report for further information. The information discussed therein is incorporated by reference in its entirety into this Part I, Item 2.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Our rigs operate in various international locations and thus are sometimes subject to foreign exchange risk. We may from time to time also be exposed to certain commodity price risk, equity price risk and risks related to other market driven rates or prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The significant decline in worldwide exploration and production spending as a result of reduced oil prices since 2014, the continual spread and exacerbation of the COVID-19 pandemic, including as a result of its highly transmittable variants and sub-lineages, geopolitical instability caused by Russia’s invasion of Ukraine, the ongoing oil price and market share volatility, and rising inflationary pressures and potential recessionary conditions have each negatively impacted the offshore contract drilling business at large (as discussed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report).

Interest Rate Risk: As of June 30, 2022, we had no variable rate debt outstanding.

Foreign Currency Exchange Rate Risk: Our functional currency is the USD, which is consistent with the oil and gas industry. However, outside the U.S., a portion of our expenses are incurred in local currencies. Therefore, when the USD weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in USD will increase (decrease). A substantial majority of our revenues are received in USD, our functional currency; however, in certain countries in which we operate, local laws or contracts may require us to receive some portion (or the entirety) of the payment in the local currency. 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 that foreign currency. In order to mitigate the effect of exchange rate risk, we attempt to limit foreign currency holdings to the extent they are needed to pay liabilities in the local currency. To further manage our exposure to fluctuations in currency exchange rates, foreign exchange derivative instruments, specifically foreign exchange forward contracts, or spot purchases, may be used. A foreign exchange forward contract obligates us to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent USD payment equal to the value of such exchange. We do not enter into derivative transactions for speculative purposes. As of June 30, 2022, we did not have any open foreign exchange derivative contracts or material foreign currency exposure risk.

Item 4. Controls and Procedures

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we voluntarily file or submit to the SEC is recorded, processed, summarized, and reported within the time periods required by our debt agreements.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report. Based on that evaluation, such officers have concluded that the design and operation of these disclosure controls and procedures were effective as of June 30, 2022 to provide reasonable assurance that information required to be disclosed on our reports filed or submitted under the Exchange Act was (1) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (2) recorded, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

While the majority of our office and management personnel are currently working under a hybrid schedule, with certain days working remotely and other days working in the office due to the spread of the COVID-19 pandemic, we have not as of the date of this Quarterly Report experienced any material impact on our internal controls over financial reporting. Our management continues to monitor and assess the current situation as it relates to our internal controls over financial reporting in order to minimize the impact, if any, to their design and operating effectiveness.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

Information regarding the Company’s legal proceedings is set forth in “Note 8. Commitments and Contingencies” of the “Notes to Unaudited Consolidated Financial Statements” in Part I, Item 1 of this Quarterly Report. The information discussed therein is incorporated by reference into this Part II, Item 1.

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Item 6. Exhibits

			Incorporated by Reference
Exhibit Number	Exhibit Description	Filed Herewith	Form	File Number	Exhibit	Filing Date
2.1	Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors, dated December 1, 2015, which is Exhibit A to the Disclosure Statement		T-3	022-29012	99.T3E.1	12/02/15
2.2	Share Purchase Agreement, dated December 6, 2021, by and between Vantage Holdings International and ADES Arabia Holding		10-K	333-159299-15	2.2	03/30/22
3.1A	Certificate of Incorporation of the Company		S-4	333-170841	3.3	11/24/10
3.1B	Fourth Amended and Restated Memorandum and Articles of Incorporation of the Company		8-K	333-159299-15	3.1	03/08/19
4.1	First Lien Indenture, dated as of November 30, 2018, by and between Vantage Drilling International, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee and first lien collateral agent		8-K	333-159299-15	4.1	12/04/18
4.2	First Supplemental Indenture by and between Vantage Drilling International, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee and first lien collateral agent, dated January 24, 2019		10-K	333-159299-15	4.4	03/10/20
4.3	Second Supplemental Indenture by and between Vantage Drilling International, the subsidiary guarantors party thereto and U.S. Bank National Association, as trustee and first lien collateral agent, dated February 13, 2019		10-K	333-159299-15	4.5	03/10/20
4.4	Shareholders Agreement dated as of February 10, 2016, by and among Offshore Group Investment Limited and the Shareholders (as defined therein)		8-K	333-159299-15	10.1	02/17/16
4.5	Amendment No. 1 to the Shareholders Agreement, dated as of February 10, 2016, by and among Offshore Group Investment Limited and the Shareholders (as defined therein)		8-K	333-159299-15	10.1	03/08/19
4.6	Registration Rights Agreement, dated as of February 10, 2016, by and among Offshore Group Investment Limited and each of the Holders (as defined therein) party thereto		8-K	333-159299-15	10.2	02/17/16
4.7	Amendment No. 1 to the Registration Rights Agreement, dated as of May 9, 2016, by and among Vantage Drilling International (f/k/a Offshore Group Investment Limited) and each of the Holders party thereto		10-Q	333-159299-15	10.3	5/13/16
4.8	Registration Rights Agreement among Vantage Drilling International, Vantage Drilling Company and the joint official liquidators of Vantage Drilling Company, dated as of April 26, 2017		10-K/A	333-212081	10.1	05/01/17
10.1	Agreement, dated June 20, 2019, among Vantage Deepwater Company, Vantage Deepwater Drilling, Inc., Petroleo Brasileiro S.A., Petrobras America, Inc. and Petrobras Venezuela Investments & Services, BV.		8-K	333-159299-15	10.1	06/24/19

38

10.2	Second Amended and Restated Employment and Non-Competition Agreement between Offshore Group Investment Limited and Linda J. Ibrahim, dated February 10, 2016		10-Q	333-159299-15	10.2	08/12/21
10.3	Form of Third Amendment to Employment Agreement between Vantage Drilling International and each Executive (as defined therein)	X
10.4	Form of Support Service Agreement, dated May 27, 2022 by and between Vantage Driller III Co, Vantage Drilling International and Emerald Driller Company	X
31.1	Certification of Principal Executive Officer Pursuant to Section 302	X
31.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 302	X
32.1**	Certification of Principal Executive Officer Pursuant to Section 906
32.2**	Certification of Principal Financial and Accounting Officer Pursuant to Section 906
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	X
101.SCH	Inline XBRL Taxonomy Extension Schema	X
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase	X
101.DEF	Inline XBRL Taxonomy Extension Definition Inline Linkbase	X
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase	X
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase	X
104	Cover Page Interactive Data File (the cover page XBRL tags are embedded in the Inline XBRL document)	X
** These exhibits are furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

39

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	VANTAGE DRILLING INTERNATIONAL
Date: August 11, 2022	By:	/s/ DOUGLAS E. STEWART
		Douglas E. Stewart
		Chief Financial Officer, General Counsel and Corporate Secretary
		(Principal Financial Officer)

40

EX-10.3

Exhibit 10.3

FORM OF THIRD AMENDMENT

THIS THIRD AMENDMENT (this “Third Amendment”) is made and entered into effective as of June 1, 2022 (the “Amendment Date”) by and between Vantage Drilling International (the “Company”) and [Executive] (“Executive”).

WHEREAS, the Company and Executive are parties to that certain Employment Agreement dated as of [date] (the “Agreement”);

WHEREAS, in light of the unprecedented global economic decline and public health crisis resulting from the spread of COVID-19, along with the collapse in oil prices worldwide, the Company previously undertook certain measures to ensure continued liquidity;

WHEREAS, for certain limited purposes, the Company and Executive previously agreed to reduce the “Base Salary” (as such term is used in the Agreement, and as the Base Salary was in effect on March 31, 2020) by 10%, effective July 1, 2020, with such reduced Base Salary remaining at such reduced amount unless or until otherwise changed by a subsequent amendment to the Agreement executed by the parties;

WHEREAS, effective as of June 1, 2022, Executive’s base salary will revert to the level of base salary under the Agreement as in effect on March 31, 2020; and

WHEREAS, pursuant to Section [19/22] of the Agreement, the Agreement may not be changed or modified or released or discharged or abandoned or otherwise terminated, in whole or in part, except by an instrument in writing signed by Executive and an officer or other authorized executive of the Company.

NOW THEREFORE, in consideration of the foregoing and of the respective covenants and agreements set forth below, the parties to this Amendment agree as follows:

1.All capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Agreement.

2.AMENDMENT

2.1Amendment to Section 2.1 Base Salary. The parties to this Amendment agree that, effective as of June 1, 2022, the Executive’s Base Salary will revert to the level of base salary under the Agreement as was in effect on March 31, 2020 (such new Base Salary, the “New Base Salary”). The New Base Salary shall remain in effect unless or until otherwise changed by a subsequent instrument in writing signed by Executive and an officer or other authorized executive of the Company.

3.Except as amended hereby, Executive and the Company hereby agree that the Agreement shall remain unmodified and in full force and effect.

[Signature Page Follows.]

IF " DOCVARIABLE "SWDocIDLocation" 1" = "1" " DOCPROPERTY "SWDocID" #4870-7680-5924v2" "" #4870-7680-5924v2

IN WITNESS WHEREOF, each of the parties hereto has executed or caused this Agreement to be executed on its behalf, all as of the Amendment Date.

COMPANY:

VANTAGE DRILLING INTERNATIONAL

By:

Title:

Name:

EXECUTIVE:

__________________________________________

IF " DOCVARIABLE "SWDocIDLocation" 1" = "1" " DOCPROPERTY "SWDocID" #4870-7680-5924v2" "" #4870-7680-5924v2

EX-10.4

Exhibit 10.4

Dated 27 May 2022

EMERALD DRILLER COMPANY

VANTAGE DRILLER III CO

VANTAGE DRILLING INTERNATIONAL

FORM OF SUPPORT SERVICES AGREEMENT

Wikborg Rein LLP 30 Cannon Street London

EC4M 6XH

TABLE OF CONTENTS

1DEFINITIONS AND INTERPRETATION 3

2TERM 7

3COMMENCEMENT AND DURATION OF THE SERVICES 7

4PERSONNEL 8

5SERVICES 8

6REMUNERATION OF VD3 10

7INSURANCE 11

8LIABILITY AND INDEMNIFICATION 11

9TERMINATION 12

10SALE OF THE DRILLING UNIT 14

11COMPLIANCE WITH LAW 14

12FORCE MAJEURE 14

13ASSIGNMENT 15

14LAW AND DISPUTE RESOLUTION 15

15NOTICES 16

16ENTIRE AGREEMENT 17

17COUNTERPARTS 17

18SEVERABILITY 17

19SURVIVAL 17

20VARIATIONS AND WAIVER OF RIGHTS 18

21REPRESENTATIONS AND WARRANTIES 18

22CONFIDENTIAL INFORMATION 18

23SANCTIONS 19

24RELATIONSHIP BETWEEN THE OWNER AND VD3 19

25RIGHTS OF THIRD PARTIES 19

26COSTS 20

27GUARANTEE 20

SSA

This SUPPORT SERVICES AGREEMENT (this "Agreement") is made and entered into on 27 May 2022 (the "Contract Date"). If the Effective Date has not already occurred, other than the Contract Date Provisions which are effective as from the Contract Date, this Agreement shall become effective when and if the Effective Date occurs. If the Effective Date has already occurred, this Agreement is effective as from the Contract Date.

BETWEEN:

(1)EMERALD DRILLER COMPANY, a company incorporated under the laws of the Cayman Islands having its registered address at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (the "Owner");

(2)VANTAGE DRILLER III CO., a company incorporated under the laws of the Cayman Islands acting through its Dubai branch at Emaar Business Park Building #1, 5th floor, Office No. 520 The Greens, Dubai, UAE ("VD3"); and

(3)VANTAGE DRILLING INTERNATIONAL, a company incorporated under the laws of the Cayman Islands having its registered address at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands (the "Guarantor").

The Owner and VD3 are hereinafter referred to individually as a "Party" and collectively as the "Parties".

WHEREAS:

(A)The Owner is the owner of or will shortly acquire title to the offshore drilling unit [____] with IMO number [_______] (the "Drilling Unit").

(B)VD3 has knowledge and expertise in the commercial and technical management and operation of drilling units.

(C)In reliance on that knowledge and expertise, the Owner wishes to engage VD3 to provide the Services subject to, and in accordance with, the terms and conditions of this Agreement.

NOW THEREFORE, in consideration of the mutual covenants and agreements hereinafter provided,

IT IS HEREBY AGREED between the Parties as follows:

1DEFINITIONS AND INTERPRETATION

1.1In this Agreement, unless the context otherwise requires, the following expressions shall have the following meanings:

"Affiliate" with respect to any Person, means any other Person which Controls, is Controlled by, or is under common Control with, such first Person, and "Affiliates" means all of them.

"Agreement" has the meaning given in the preamble.

"Applicable ABAC Laws" means all Applicable Laws applying to the Owner or VD3 prohibiting bribery, money laundering and other related forms of corruption, including fraud, tax evasion, insider dealing and market manipulation.

"Applicable Laws" means any and all laws or regulations, codes, ordinances, regulatory policies, treaties conventions, decrees, orders, permits, licenses, authorisations, directives, judgements and policies made or assumed by any competent legislative, executive,

SSA

administrative or judicial authority, having or purporting to have jurisdiction over VD3 or the Owner under this Agreement, or relating to the ownership, lease, use, maintenance, custody, operation or possession of the Drilling Unit.

"Board of Directors" means the Board of Directors or similar governing body of the Owner, including the manager or board of managers of the Owner, as applicable.

"Business Day" means a day (excluding Saturdays, Sundays and public holidays) on which banks are ordinarily open for business in New York, New York, U.S.A., Dubai, U.A.E., Cairo, Egypt and (for the purposes of Clauses 15.2 and (in respect of service upon VD3) , the place of incorporation of VD3).

"CEO" has the meaning given in Clause 14.2.

"Client" means North Oil Company or successor or permitted assign under the Drilling Contract. "Commencement Date" means the later to occur of the Contract Date and the Effective Date.

"Confidential Information" means all information, whether written, electronic or oral, together with all analyses or other documents prepared by a Party or its Representatives, which contain or otherwise reflect or are generated from such information (together with any notes, documents, files, data, analyses, summaries or other materials prepared by a Party to the extent based upon or reflecting such information), which is disclosed by, or on behalf of, a Party or any member of its Group (the "Disclosing Party") to another Party or any member of its Group (the "Receiving Party") in connection with this Agreement, the Services or the Drilling Unit or any of the transactions contemplated by this Agreement. For the avoidance of doubt, all (i) documents, computer programs and models provided by either Party in connection with the Drilling Unit or the provision of the Services, (including, without limitation, with respect to VD3, the Procedures) and all copies of such items and (ii) documents, data, results, calculations, drawings, sketches, equipment, reports and similar items or documents which are developed solely for the provision of the Services shall constitute "Confidential Information".

"Contract Date" has the meaning given in the preamble.

"Contract Date Provisions" means Clauses 9.1(g), 9.2(f), 13, 14, 15, 16, 17, 18, 20, 22, 24 and

26.

"Control" means the ability, directly or indirectly, to direct or cause the direction of management or policies of a Person, whether through the ownership of securities or partnership or other ownership interests, by contract or otherwise (and "Controls" and "Controlled" shall be interpreted accordingly).

"Crew" means the Drilling Unit's crew.

"Crew Insurances" means insurance of liabilities in respect of Crew risks which shall include death, permanent disability, sickness, injury, repatriation, shipwreck unemployment indemnity and loss of personal effects.

"Disclosing Party" has the meaning given in the definition of "Confidential Information" in this Clause 1.1.

"Dispute" has the meaning given in Clause 14.2.

"Drilling Contract" means drilling contract no. [________].

.

SSA

"Drilling Unit" has the meaning given in Recital (A).

"Effective Date" means the time and date of Closing (as defined in the SPA). "Force Majeure Event" has the meaning given in Clause 12.1.

"Good Oilfield Practice" means the standards which are generally accepted in the industry for reputable, prudent and experienced international offshore drilling contractors and which are consistent with the Drilling Contract.

"Group" means the Owner's Group or VD3's Group, or either of them, as the context requires. "Indemnified Party" has the meaning given in Clause 5.3.

"Indemnifying Party" has the meaning given in Clause 5.3.

"Insurances" has the meaning given in Clause 7.

"LCIA" has the meaning given in Clause 14.3. "Losses" has the meaning given in Clause 8.1.

"Management Fee" has the meaning given in Clause 6.1(a).

"Management Standard" means such reasonable care and diligence at all times in the provision of the Services as is customary for prudent, reputable and experienced managers in the international offshore drilling industry and which is consistent with the Drilling Contract.

"Management System" means all of the applicable systems, software and policies and procedures of VD3 relevant to the performance of the Services, including but not limited to those currently being used by VD3 and/or the Owner (including but not limited to SAP procurement and finance modules and other systems and software in respect of safety, operations, procurement and Applicable ABAC Laws).

"Owner" has the meaning given in the preamble. "Owner's Group" means the Owner and its Affiliates.

"Person" means any individual, firm, corporation, stock company, limited liability company, trust, partnership, limited liability partnership, association, joint venture or business, whether or not having legal personality.

"Procedures" has the meaning set out in Clause 5.4. "Proceedings" has the meaning set out in Clause 8.1. "Providing Party" has the meaning set out in Clause 5.3.

"Receiving Party" has the meaning given in the definition of "Confidential Information" in this Clause 1.1.

"Regardless of Cause" means without regard to cause and notwithstanding any breach of contract (including repudiatory breach), tort (including negligence of any degree or character), misrepresentation (other than fraudulent misrepresentation), fault or breach of duty (whether

SSA

statutory or otherwise), breach of any applicable laws, permits or governmental requirement, or any other ground for liability, on the part of the Party or Person seeking indemnity (or exclusion or limitation of liability, as the case may be) or on the part of any other Person, and, in each case, to the fullest extent permitted by English law and without regard to any right of limitation or exclusion of liability pursuant to the laws of any state or country or the provisions of any international convention or any other body having jurisdiction over the Party or Person seeking indemnity; provided that "Regardless of Cause" shall never include Wilful Misconduct of the Person seeking indemnity (or exclusion or limitation of liability, as the case may be).

"Reimbursable Costs" means any costs (third party or otherwise) that are pre-approved by the Owner in writing for reimbursement to VD3 by the Owner.

"Representative" or "Representatives" means, with respect to either Party, the directors, officers, employees, agents, accountants, consultants, attorneys and advisors of such Party or any member of its Group; provided that "Representative", with respect to the Owner, shall never be deemed to include a Representative of VD3 and "Representative", with respect to VD3, shall never be deemed to include a Representative of the Owner.

"Rules" has the meaning given in Clause 14.3.

"Sanctions" means any embargo, sectoral sanctions, economic or trade sanctions or restrictive measures enacted, administered, imposed or enforced by any Sanctions Authority.

"Sanctions Authority" means the U.S. Department of the Treasury's Office of Foreign Assets Control, the U.S. Department of State, Her Majesty's Treasury, the United Nations Security Council or the European Union.

"Services" means the services to be provided by VD3 to the Owner pursuant to this Agreement, as more particularly set out in Appendix 1, together with such other services as the Owner and VD3 may agree from time to time. Notwithstanding any other provision of this Agreement, legal entity management (for example, corporate filings, corporate finance and treasury and other legal entity specific support) is excluded from the scope of the Services.

"SPA" means the share purchase agreement between Vantage Holdings International (as seller) and ADES International Holdings Ltd (as buyer).

"Term" has the meaning given in Clause 2.

"Termination Date" means the date on which any termination of this Agreement takes effect. "Third Party" means any Person which is not part of VD3's Group or the Owner's Group. "VD3 Group" means VD3 and its Affiliates.

"VD3 Parent" means the Guarantor. "Wilful Misconduct" means:

(a)fraud or fraudulent misrepresentation;

(b)any intentional or reckless wrongful act (or intentional or reckless wrongful failure to act) (whether sole, joint, concurrent or otherwise) by any Person with knowledge that such act (or failure to act) is wrongful and with either an intention to cause injury to a Person or physical loss to damage to property or a reckless disregard as to whether such injury, loss or damage will be caused (provided that "Wilful Misconduct" shall not include any intentional act or failure to act where the relevant Party's good faith intention is to avoid or mitigate more serious harmful consequences).

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"Year" means a period of three hundred and sixty-five (365) calendar days.

1.2The headings in this Agreement are for ease of reference and do not limit or otherwise affect the meaning hereof.

1.3All the terms of this Agreement, whether so expressed or not, shall be binding upon the Parties and their respective successors and permitted assigns.

1.4Unless the context otherwise requires, words in the singular include the plural and vice versa.

1.5The words "include", "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation" and shall not be construed to limit any general statement which it follows to the specific or similar items or matters immediately following it.

1.6Any reference to an enactment shall be deemed to include reference to such enactment as re- enacted, amended, consolidated or extended from time to time.

1.7Any reference to (or to any specified provision of) this Agreement or any other document shall be construed as reference to this Agreement, that provision or that document as in force for the time being and as amended in accordance with the terms thereof or, as the case may be, with the agreement of the relevant parties.

1.8The Recitals form part of this Agreement. Any reference to a "Recital", "Clause" or "Appendix" shall (unless otherwise stated) be construed as reference to a Recital or Clause of, or Appendix to, this Agreement and references to this Agreement includes its Recitals and Appendices.

1.9The contract construction doctrine of ejusdem generis shall not apply to this Agreement.

1.10In this Agreement, the expression "arising out of this Agreement" means arising out of or related to this Agreement, Regardless of Cause.

1.11The words "approve", "approval", "consent" or words similar in effect shall be deemed to be completed by the expression "which shall not be unreasonably withheld, conditioned or delayed".

2TERM

With the exception of the Contract Date Provisions, which shall be effective from and after the Contract Date, this Agreement shall come into effect on the later of the Contract Date and the Effective Date and shall continue in full force and effect until the earlier of the Termination Date and the end of the last day of the third Year after the Commencement Date (such period being the "Term").

3COMMENCEMENT AND DURATION OF THE SERVICES

3.1VD3 shall perform and deliver the Services from the Commencement Date until the end of the Term, subject to, and in accordance with, the terms and conditions of this Agreement. For the avoidance of doubt, in the event of termination of this Agreement by either Party pursuant to Clause 9, VD3 shall provide to the Owner such cooperation and assistance (and shall cause its Affiliates and shall use best endeavours to cause its and its Affiliates' Representatives to provide such cooperation and assistance) as may be reasonably required by the Owner in order to transition the Services to the Owner, during the remainder of the Term.

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4PERSONNEL

4.1VD3 personnel. The Parties agree and acknowledge that VD3 shall have the exclusive right to appoint and terminate the appointment of personnel to perform the Services (but shall only exercise such right after prior consultation with the Owner). The Parties acknowledge and agree that no personnel assigned to provide the Services shall be or become employees of the Owner during the provision of the Services or as a result of termination of this Agreement. Unless otherwise agreed, all personnel assigned by VD3 to provide the Services shall report to VD3.

4.2Single point of contact. Each Party shall each nominate a suitable person as the single point of contact for such Party for the purpose of efficient and timely communication and reporting in relation to the performance of this Agreement and any and all matters pertaining to the Drilling Unit.

4.3At all times, VD3 shall exercise due diligence to ensure that:

(a)there is an adequate number of personnel assigned to provide the Services; and

(b)all personnel assigned to provide the Services are suitably skilled, qualified and experienced, adequately trained and capable of providing the applicable Services in respect of which they are engaged.

4.4Non-solicitation. The Parties agree that, during the Term and for a period of one year from the Termination Date, neither Party will, directly or indirectly, solicit to employ or employ any of the current officers or employees of the other Party without obtaining the other Party's prior written consent. Notwithstanding the foregoing, each Party shall be permitted to hire any such person who seeks employment with the other Party on an unsolicited basis or in response to any general solicitation efforts to hire employees in the ordinary course of business, including employment advertisements contained in newspapers, websites, or trade publications.

5SERVICES

5.1With effect from the Commencement Date and until the end of the Term, the Owner hereby appoints VD3, and VD3 hereby accepts the appointment as the provider of the Services to the Owner.

5.2In providing the Services, VD3 shall at all times, subject to, and in accordance with, the terms and conditions of this Agreement:

(a)act in accordance with the Management Standard and with due dispatch (and for these purposes VD3 confirms that it has been provided with a copy of and is familiar with the Drilling Contract);

(b)allocate sufficient time and resources as are necessary to provide the Services with the degree of care, diligence, skill and foresight of a reasonably prudent manager involved in providing services comparable to the Services in accordance with the Management Standard;

(c)provide the Services in accordance with all Applicable Laws and without breaching any Sanctions or Applicable ABAC Laws applicable to the Owner, any of the Owner's Group or the Drilling Unit;

(d)not discriminate against the Drilling Unit or afford preference to any vessel or company either owned by it or any member of VD3's Group or under the management of VD3 or

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any member of VD3's Group but shall, so far as practicable, ensure a fair distribution of services to all such vessels and companies from time to time under its management; and

(e)provide the Services in accordance with VD3's quality management system, including the policies and administrative procedures incorporated therein.

5.3Documents, computer programs and models provided by either Party (the "Providing Party") in connection with the Drilling Unit or the performance of the Services, and all copies of such items, shall be and shall remain the Providing Party's property. No Party shall ever use such documents, data programs, models or copies for any other purpose than the provision of the Services, and shall, unless otherwise agreed with the Providing Party, return all such items to the Providing Party on the Termination Date. Documents, data, results, calculations, drawings, sketches, equipment, reports and similar items or documents which are developed solely for the performance of the Services shall be the Owner's property. Nevertheless, VD3 is entitled to use results of a general nature which do not include the Owner's Confidential Information in its own activities, unless otherwise agreed. Each Party (the "Indemnifying Party") shall indemnify the members of the other Party's Group (and any Representative of the other Party's Group) (each an "Indemnified Party") against claims arising from the violation of patent rights or other intellectual property rights where such claims arise from the use or exploitation by the Indemnified Party of any intellectual property, information or equipment owned or supplied by the Indemnifying Party or any member of its Group (and any Representative) in connection with the Services.

5.4Notwithstanding Clause 5.3, VD3's Group has and shall retain the full and exclusive ownership of and right to use any procedures, policies, manuals and systems (collectively "Procedures") developed by VD3's Group in connection with the Services, including such Procedures which are derived from or form part of the Management System, and the Owner shall keep in strict confidence and shall not, without the prior written consent of VD3, or unless required by Applicable Law, divulge to any other Person (or allow any Third Party to use) in part or in whole, any such Procedures and information relating thereto and destroy or return all of these to VD3 on the Termination Date (save to the extent necessary for any continued use by the Owner as contemplated by this Clause 5.4). To the extent the Owner requires use of the Procedures after termination of this Agreement to operate or manage the Drilling Unit the Owner shall have a perpetual royalty free licence to use the Procedures that it then has knowledge of for such purpose (but not for any other purpose) provided always that this shall not require or oblige VD3 to maintain or extend any third party licences in favour of VD3 after termination of this Agreement.

5.5The Owner shall use reasonable endeavours to procure for VD3 reasonable access to the Crew, and all relevant documentation in respect of the Drilling Unit; provided that if VD3 is not given reasonable access to the Crew and/or all relevant documentation in respect of the Drilling Unit (whether or not the Owner has exercised reasonable endeavours as aforesaid), VD3 shall have no liability to the Owner in connection with any resulting failure to perform any obligation under this Agreement, or any resulting delay in performing any such obligation. The Owner shall furnish to VD3, and VD3 shall furnish to the Owner, all information and documentation reasonably required as expeditiously as necessary for the orderly provision of the Services, the performance of the Drilling Contract, the operation of the Drilling Unit and for any other reason that is reasonably requested by VD3 or Owner.

5.6Condition of Drilling Unit. The Owner shall provide VD3 promptly following VD3's reasonable request from time to time with copies of all relevant documentation in respect of the Drilling Unit in the English language, including detailed equipment lists, specifications, inventory, purchase orders, as-built drawings (if necessary) and other similar information (in each case to the extent these are in the Owner's possession, custody or control) to allow VD3 to perform the Services.

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6REMUNERATION OF VD3

6.1Commencing from the Commencement Date, the Owner shall pay to VD3 by depositing into an account(s) designated by VD3, the following amounts:

(a)a fixed fee calculated in respect of the relevant month as set out in Clause 6.2 (the "Management Fee") to be invoiced monthly in arrears (commencing on the last day of the month in which the Commencement Date occurs) and to be paid by the Owner within 30 days of its receipt of such invoice); and

(b)the Reimbursable Costs to be incurred in the relevant month (it being agreed that the Owner will pre-fund all Reimbursable Cost items of US$7,500 or less on the basis that (i) VD3 will submit a monthly invoice for such Reimbursable Costs anticipated to be incurred in such month; (ii) VD3 will not be required to incur such Reimbursable Costs until such invoice has been paid; and (iii) if and to the extent such Reimbursable Costs are paid to VD3 but not subsequently incurred by VD3, then VD3 will either repay or give credit to the Owner for such amount as has not been incurred either on its next monthly invoice or upon termination of this Agreement if earlier).

6.2The Management Fee shall be calculated for each month during the Term as follows:

(a)during the first Year commencing on the Commencement Date United States Dollars Three Thousand ($3,000) for each day (or pro rata for part of a day) during such month;

(b)during the second Year after the Commencement Date United States Dollars Two Thousand ($2,000) for each day (or pro rata for part of a day) during such month; and

(c)during the third Year after the Commencement Date United States Dollars Five Hundred ($500) for each day (or pro rata for part of a day) during such month.

6.3If any amount due to VD3 under this Agreement is not paid by its due date, that amount shall bear interest at the rate of three (3) percent per annum (or pro rata). Interest under this clause shall accrue on a day-to-day basis and shall be compounded on the last Business Day of each month.

6.4Any payment due from the Owner to VD3 under this Agreement shall be made free and clear of and without any deduction or withholding in respect of taxes, except as required by Applicable Law. If the Owner is required by law to make any deduction or withholding from any sum payable under this Agreement, (a) the Owner shall pay the applicable tax authorities any such required deduction or withholding and (b) if such deduction or withholding relates to a tax with respect to which the Owner has a payment or reimbursement obligation under Clause 8.3, the Owner shall pay (i.e., "gross-up") such additional amount to VD3 sufficient to ensure that the net amount VD3 receives equals the full amount which it would have received had the deduction or withholding not been required. The Owner shall provide VD3 with applicable documentation as reasonably requested by VD3 in writing to the Owner. The Parties shall work together to structure the Services in a financially efficient manner (including, for the avoidance of doubt, structuring the provision of the Services in a way that minimizes the Owner's indemnity obligation under Clause

8.3 to the extent practicable).

6.5VD3 shall provide the Owner with reasonable supporting documentation in respect of any Reimbursable Costs. VD3 shall be under no obligation to incur any cost or expense under this Agreement or otherwise on the Owner's account until VD3 is put fully in funds for such cost or expense.

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6.6VD3 shall have the right, but not the obligation, to suspend the Services in whole or in part if any payment of sums due to be paid to VD3, is overdue, and the Owner fails to make such overdue payment within thirty (30) days following the Owner's receipt of written notice from VD3 of such overdue amount.

6.7All sums payable by the Owner under this Agreement shall be paid in United States Dollars unless otherwise agreed or provided for in this Agreement. If any obligation is properly incurred in a currency other than United States Dollars, it shall be converted by application of the prevailing market rate for conversion of that currency into United States Dollars on the date the payment was or is to be made by the relevant Party in accordance with the exchange rates listed in Bloomberg Markets for exchange of international currencies.

7INSURANCE

7.1The Owner shall procure the following insurances (the "Insurances") (from financially sound insurers) throughout the Term in accordance with Good Oilfield Practice and the following provisions of this Clause 7:

(a)insurance in respect of the Drilling Unit on such terms as are required to comply with the Drilling Contract, in particular regarding conditions, insured values, deductibles, franchises and limits of liability, for:

(i)hull and machinery marine risks (including Crew negligence) and excess liabilities;

(ii)protection and indemnity risks (including pollution risks, diversion expenses and Crew Insurances);

(iii)war risks (including blocking and trapping, protection and indemnity, terrorism and Crew risks); and

(iv)such other insurances as may be mutually agreed.

7.2The Insurances shall name the Owner, VD3 and, subject to underwriters' agreement, any other person designated by VD3 and approved by the Owner (such approval not to be unreasonably withheld or delayed) or designated by the Owner as joint assured (with full coverage and without liability in respect of premiums or calls arising in connection with the Insurances).

8LIABILITY AND INDEMNIFICATION

8.1Subject to Clause 8.5, and to the extent only that such Losses fall outside the scope of cover under the policies to be procured pursuant to Clause 7.1, (including where there is no cover because of a deductible) VD3 agrees to indemnify, defend and hold harmless each member of the Owner's Group from and against all actions, proceedings, claims, or demands whatsoever and howsoever arising ("Proceedings"), which may be brought against them or incurred or suffered by them and against and in respect of all losses, damages, costs, liabilities, or expenses (including legal costs and expenses on a full indemnity basis) of whatsoever nature, whether direct or indirect ("Losses"), incurred or suffered by them to the extent caused by (a) a breach of VD3's obligations under this Agreement (whether such breach is caused by VD3 or by any member of VD3's Group or by a Representative or subcontractor of VD3's Group), or (b) any Wilful Misconduct of any member of VD3's Group.

8.2Except (a) only to the extent of any Losses caused by a breach of VD3's obligations under this Agreement (whether such breach is caused by VD3 or by any member of the VD3 Group or by a Representative or subcontractor of the VD3 Group) or (b) any Losses caused by the Wilful

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Misconduct of VD3 or any member, Representative or subcontractor of VD3's Group; or (c) any all taxes, including but not limited to withholding taxes, assessments, levies, imposts and/or duties and non-refundable VAT, by whatsoever name assessed upon VD3's Group (and any Representative or subcontractor of VD3's Group) arising out of this Agreement (and which are not the express responsibility of the Owner under this Agreement), the Owner hereby undertakes to keep each member of VD3's Group indemnified and to hold them harmless against all Proceedings which may be brought against them or incurred or suffered by them arising out of this Agreement (save as specified), and against and in respect of all Losses which any member of VD3's Group may suffer or incur (either directly or indirectly) in the course of the performance of this Agreement (but for the avoidance of doubt excluding the cost of complying with obligations arising out of this Agreement, any normal overhead or operating expenses of any member of the VD3 Group and any Losses that would have been incurred even if this Agreement had not been entered into).

8.3A Party or other Person claiming a right to indemnification under this Clause 8 shall give prompt written notice of such claim to the indemnifying Party.

8.4Neither Party shall be liable for any consequential, exemplary, special or punitive damages arising out of this Agreement including under any indemnity in this Agreement (it being acknowledged that liability for loss of bargain or loss incurred under or in connection with the Drilling Contract are not excluded).

8.5Limits of Liability. Notwithstanding any other provision of this Agreement, the aggregate liability of the VDI Group (and any Representative or subcontractor of the Owner's Group) to the Owner's Group (and any Representative or subcontractor of the Owner's Group) in respect of any and all Losses arising out of this Agreement up to the date of any event giving rise to liability on the part of VD3 (other than liabilities for losses caused by fraud or the Wilful Misconduct of VD3 or any member of VD3's Group or its Representatives or subcontractors) shall be limited to the sum of one hundred percent (100%) of the Management Fee that would have been payable to VD3 if the Agreement had continued for a period of 3 years from the Commencement Date.

8.6Owner's Group. The Owner shall procure that each member of the Owner's Group shall bound by the limit of liability referred to in Clause 8.5.

9TERMINATION

9.1Termination by the Owner. The Owner shall be entitled to terminate this Agreement with immediate effect upon giving written notice to VD3 if:

(a)VD3 commits a material breach of this Agreement, and where such breach is capable of remedy, fails to remedy or commence to remedy the breach in accordance with Good Oilfield Practice within thirty (30) days' notice by the Owner of such breach and requiring action to remedy the same;

(b)a change of Control (whether direct or indirect) occurs in respect of VD3 or theVD3 Parent;

(c)a Force Majeure Event affecting VD3 or the Owner continues for more than ninety (90) days;

(d)an agreed, arranged, compromised, constructive or actual total loss or requisition for title of the Drilling Unit has occurred as determined by the insurance underwriters;

(e)the Drilling Contract is terminated;

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(f)any member of VD3's Group or any of VD3's Representatives breaches any Applicable Laws relating to Sanctions or becomes targeted by Sanctions (other than as a result of any act or omission of any member of the Owner's Group or any of the Owner's Representatives); or

(g)the Effective Date has not occurred by the Longstop Date (as defined in the SPA).

9.2Termination by VD3. VD3 shall be entitled to terminate this Agreement with immediate effect upon giving written notice to the Owner in any of the following events:

(a)the Owner commits a material breach of this Agreement, and where such breach is capable of remedy, fails to remedy or commence to remedy the breach in accordance with Good Oilfield Practice within thirty (30) days' notice by VD3 of such breach and requiring action to remedy the same;

(b)the Owner fails to pay any amount due to VD3 within thirty (30) days following receipt of written notice from VD3 of such overdue amount;

(c)a Force Majeure Event affecting the Owner continues for more than ninety (90) days;

(d)the Drilling Contract is terminated;

(e)any member of the Owner's Group or any of the Owner's Representatives breaches any Applicable Laws relating to Sanctions or becomes targeted by Sanctions (other than as a result of any act or omission of any member of VD3's Group or any of VD3's Representatives); or

(f)the Effective Date has not occurred by the Longstop Date (as defined in the SPA).

9.3Without prejudice to Clause 9.7 or any other repudiatory breach of this Agreement by either the Owner or VD3, it is agreed that any failure by the Owner to have paid 3 consecutive invoices in respect of the Management Fee within the time required by this Agreement shall be deemed to be a repudiatory breach of this Agreement by the Owner unless the Owner has in good faith disputed any such payment because of an alleged breach by VD3 of its obligations under this Agreement.

9.4In the event of any termination of this Agreement, after the Commencement Date, for whatever reason in accordance with this Clause 9, the Owner shall settle any and all Management Fees incurred up to the date of such termination but subject Clause 9.7 neither the Owner or VD3 shall have any further liability or obligation under this Agreement.

9.5In circumstances where either Party has elected to terminate this Agreement, after the Commencement Date, in accordance with this Clause 9, so long as the Management Fee continues to be paid as it falls due (and it is acknowledged by the Owner that the Management Fee will remain payable and Clause 6 will remain effective in the following periods), VD3 shall continue to perform all of its obligations hereunder, including the Services, during any notice period following such election as provided for in this Clause 9.

9.6Within ten (10) Business Days following the Termination Date, but only if the Commencement Date has already occurred, VD3 shall deliver to the Owner such information relating to the Services as is in the possession or control of VD3.

9.7Nothing in this Clause 9 shall prevent either Party from enforcing the indemnities contained in this Agreement or pursuing any remedy to which it may be entitled, at law or in equity, in respect of any Services or monies due and payable to it under the terms of this Agreement which has

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accrued on or prior to the termination of this Agreement. The Parties further agree that any termination of this Agreement is not intended to effect any transfer (whether automatic or otherwise) of any employees of any member VD3's Group to any member of the Owner's Group and for these purposes VD3 shall ensure that no employee of VD3's Group shall be part of an organised grouping of employees which has as its principal purpose the carrying out of the Services.

10SALE OF THE DRILLING UNIT

Prior to any sale of, and in connection with any proposal to sell, the Drilling Unit by the Owner after the Commencement Date and during the Term, the Owner shall provide VD3 with reasonable notice of the proposed sale.

11COMPLIANCE WITH LAW

The Owner and VD3 both agree to comply with the provisions of any Applicable Laws regarding anti-corruption or anti-bribery Applicable Laws, including the Foreign Corrupt Practices Act of the United States of America and the UK Bribery Act 2010. VD3 and the Owner agree that no portion of the payments, fees or commissions earned by either of them under, as the case may be, this Agreement or any Drilling Contract will be knowingly transferred to any official of any governmental authority in violation of any Applicable Laws.

12FORCE MAJEURE

12.1No failure, delay or omission by either Party to perform or carry out its obligations in accordance with this Agreement shall give rise to any claim by the other Party or be deemed a breach of this Agreement if such failure, delay or omission arises from any natural phenomena that such Party could not reasonably control or prevent or any human event that such Party could not reasonably control or prevent, including adverse weather conditions, floods, storms, acts of God, acts of public enemies, military actions, wars whether declared or undeclared, insurrections, riots, labour disputes (including strikes), boycotts, governmental interference, epidemics and pandemics, disease or outbreaks (including the Covid-19 virus); or any other event whether or not similar to the matters herein specifically enumerated which was beyond the reasonable control of the Party affected (a "Force Majeure Event").Financial distress shall not, for whatever reason, excuse failure, delay or omission to perform, and no event mentioned herein shall operate to suspend or delay, the Owner's obligation to make payment as and when due under this Agreement. Financial distress shall not, for whatever reason (provided that the Owner shall have complied with its payment obligations under this Agreement), excuse failure, delay or omission to perform, or shall operate to suspend or delay VD3's obligation to provide the Services under and in accordance with this Agreement nor shall any labour disputes (including strikes) involving only a Party (or its Group's) own workforce or any failure of any supplier or subcontractor of a Party (unless such failure is also caused by a Force Majeure Event affecting that supplier or subcontractor within the meaning of this Clause 12.1).

12.2The affected Party shall:

(a)promptly after the occurrence of a Force Majeure Event, and in any event within ten (10) Business Days, provide the other Party with written details of the nature and extent of the Force Majeure Event in question, including the affected Party's reasonable estimate of the likely extent and duration of its inability to perform its obligations under this Agreement as a result of such Force Majeure Event and, thereafter, promptly provide any further information which the other Party reasonably requires; and

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(b)use reasonable endeavours to avoid, mitigate or minimise the consequences of the Force Majeure Event in question and carry out its obligations and duties in such other ways as may be reasonably practicable.

13ASSIGNMENT

13.1The rights and obligations of VD3 hereunder may not be assigned or transferred without the prior written consent of the Owner; provided, however, that VD3 may assign or transfer all or any part of its rights and obligations under this Agreement to any one or more of its Affiliates without the Owner's consent provided that prior written notice of such assignment has been received by the Owner from VD3.

13.2The rights and obligations of the Owner hereunder may not be assigned or transferred without the prior written consent of VD3; provided, however, that the Owner may assign or transfer all or any part of its rights and obligations under this Agreement without VD3's consent to: (a) a purchaser of the Drilling Unit, to the extent VD3 has been notified of such sale; (b) any member of the Owner's Group; or (c) by way of security for its obligations under any finance documents, and VD3 agrees to execute such documents as may be reasonably required to effect such assignment or charge or transfer (and VD3 shall not charge any amount(s) for executing such documents or cooperating hereunder).

14LAW AND DISPUTE RESOLUTION

14.1This Agreement and any non-contractual obligations/disputes arising out of, or in connection with, it shall be governed by, and construed in accordance with, the laws of England and Wales.

14.2Without prejudice to Clause 14.3, in the event of a dispute of any kind whatsoever between the Parties relating to this Agreement, including any question regarding its existence, validity, termination or rescission or any stipulation in this Agreement or any non-contractual obligations arising out of, or in connection with, it (in each case, a "Dispute"), either Party may at any time circulate to the other Party's chief executive officer ("CEO") or legal representative designated by the CEO, as the case may be, a memorandum or other form of statement setting out its position on the Dispute and its reasons for adopting such position. Each such memorandum or statement, if circulated, shall be considered by the CEO (or legal representative of the CEO) of the Parties who shall respectively use their reasonable endeavours to resolve the Dispute. A meeting date and place shall be established by mutual agreement of the CEO's (or legal representative), such date shall not exceed thirty (30) days from the date of the first memorandum or statement.

14.3All Disputes between the Parties shall be referred to and finally resolved and binding by arbitration pursuant to the rules of the London Court of International Arbitration (the "LCIA") (the "Rules"), which Rules are deemed to be incorporated by reference into this Clause. The number of arbitrators shall be three (3), appointed in accordance with the said Rules. Each Party shall be entitled to nominate one arbitrator and the two so appointed shall thereafter nominate the third arbitrator. For the avoidance of doubt, if VD3 includes more than one entity, VD3 shall only be entitled collectively to nominate one arbitrator. The seat of arbitration shall be London, England. The language of the arbitration shall be English. The law of the arbitration shall be the laws of England and Wales.

14.4Notwithstanding anything to the contrary under the Rules, the Parties expressly agree that they shall have the right to appeal on a point of law pursuant to section 69 of the Arbitration Act 1996.

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14.5Nothing in this Clause 14 (subject to Clause 14.6) shall restrict the right which either Party may have to seek injunctive relief in respect of a breach of this Agreement, in respect of which action for injunctive relief the Parties submit to the exclusive jurisdiction of the courts of England and Wales.

14.6VD3 hereby expressly and irrevocably waives any contractual lien or any other lien, right in rem or right to arrest the Drilling Unit or part thereof (or any other drilling unit or asset belonging to the Owner from time to time) that might otherwise vest in VD3 whether in respect of any amount that might be owed to VD3 under this Agreement (or otherwise) and VD3 undertakes to procure that no member of VD3's Group shall exercise or seek to exercise any such contractual lien or any other lien, right in rem or right to arrest (or equivalent right).

15NOTICES

15.1All notices in respect of this Agreement shall be sent by special delivery, by courier, by hand or by e-mail to the following addresses:

(a)In respect of notices to the Owner:

Emerald Driller Company

c/o Advanced Energy Services Unit 517, Level 5, Index Tower, DIFC, PO Box 507118, Dubai,

UAE

Email: [______________]

With a copy to (which shall not constitute notice): [__________________]; and

Hill Dickinson LLP

8th Floor, The Broadgate Tower

20 Primrose Street, London EC2A 2EW, United Kingdom

Attention: [____________]

Email: [ ]

(b)In respect of notices to VD3 (or the Guarantor):

Vantage Driller III Co.

c/o Vantage Energy Services, Inc. 777 Post Oak Boulevard

Suite 440

Houston, TX 77056 USA Attention: [______]

Email: [________]

With a copy to (which shall not constitute notice):

Wikborg Rein LLP 30 Cannon Street London EC4M 6XH United Kingdom

Attention: [_________]

Email: [_________]

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or to such other address as the relevant Party may from time to time designate by notice in writing in accordance with this Clause 15.

15.2Any notice required to be given pursuant to this Agreement shall be deemed to be duly received:

(a)in the case of a letter, whether delivered by special delivery, by courier or by hand, at the date and time of its actual delivery if within normal business hours (09:00–17:00) on a Business Day in the place of receipt, otherwise at the commencement of normal business hours on the next Business Day in the place of receipt; and

(b)in the case of e-mail, at the time of transmission recorded on the message if such time is within normal business hours (09:00–17:00) on a Business Day in the place of receipt, otherwise at the commencement of normal business hours on the next Business Day in the place of receipt.

15.3All notices and other communications required to be given by either the Owner or VD3 to the other under, or in connection with, this Agreement shall be in writing and in the English language.

16ENTIRE AGREEMENT

16.1This Agreement and the other agreements referred to in it represent the entire agreement between the Owner and VD3 with respect to the subject matter hereof and supersedes all prior negotiations, representations, warranties, agreements or understandings, either written or oral, with respect thereto. Each Party acknowledges that, in entering into this Agreement, it does not rely on, and shall have no remedy in respect of, any statement, representation, assurance, warranty or promise of any Person other than as expressly set out in this Agreement or an agreement referred to in it and it unconditionally and irrevocably waives any claims, rights or remedies which it might otherwise have had in relation thereto. Nothing in this Agreement operates to limit or exclude any liability for fraud or fraudulent misrepresentation.

17COUNTERPARTS

17.1This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and together shall constitute a single instrument.

18SEVERABILITY

18.1The provisions of this Agreement shall be deemed independent and severable, and the invalidity, unenforceability or partial invalidity or unenforceability of any provision hereof shall not affect the validity or enforceability of any other provision hereof. The Parties agree to substitute, for any invalid or unenforceable provision, a valid and enforceable provision which achieves to the greatest possible extent, the economic, legal and commercial objectives of the invalid or unenforceable provision.

19SURVIVAL

19.1The termination of this Agreement shall not affect the rights and obligations of the Parties which have accrued on or prior to, or arise in consequence of, such termination. Any provision of this Agreement that expressly or by implication or by its nature is intended to come into or continue in force on or after termination of this Agreement, including Clauses 6, 8, 9 and 11 to 27 (inclusive), shall remain in full force and effect.

SSA

20VARIATIONS AND WAIVER OF RIGHTS

20.1No variation of this Agreement shall be effective unless made in writing, signed by, or on behalf of, each of the Parties and expressed to be such a variation.

20.2No failure or delay by either Party or time or indulgence given in exercising any remedy or right under or in relation to this Agreement shall operate as a waiver of the same, nor shall any single or partial exercise of any remedy or right preclude any further exercise of the same or the exercise of any other remedy or right.

20.3No waiver by either Party of any requirement of this Agreement, or of any remedy or right under this Agreement, shall have effect unless given in writing and signed by such Party. No waiver of any particular breach of the provisions of this Agreement shall operate as a waiver of any repetition of such breach.

21REPRESENTATIONS AND WARRANTIES

21.1Each Party warrants and represents to the other Party as follows (and the Guarantor represents to the Owner):

(a)it is duly formed, validly existing and in good standing under Applicable Laws and is duly qualified and/or licensed to the extent and as may be required by Applicable Laws, and in good standing in the jurisdiction of its organization;

(b)it has taken all necessary action to authorize the execution, delivery and performance of this Agreement and has adequate power, authority and legal right to enter into, execute, deliver and perform this Agreement;

(c)this Agreement is legal, valid and binding with respect to it and is enforceable in accordance with its terms, except as the enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting creditors' rights generally; provided that unless and until the Effective Date occurs, from and after the Contract Date and until the Termination Date only the Contract Date Provisions shall have any force or effect;

(d)it has, or before commencing activities in any state or other jurisdiction will have, and will maintain, all requisite power, approvals, authorizations, consents, licenses, orders, franchises, rights, registrations and permits of all governmental authorities of such state or other jurisdiction required for it to commence such activities in such jurisdiction; each of the foregoing is or will be in full force and effect and has been duly and validly issued; and

(e)no permit, consent, approval, authorization or order of, and no notice to or filing with, any governmental authority or Third Party is required in connection with the execution, delivery or performance by it of this Agreement or the consummation of the transactions contemplated hereby.

22CONFIDENTIAL INFORMATION

22.1The Parties agree that the Confidential Information will not be used for any other purpose than for the provision of the Services set out in this Agreement and will be treated by each Party and its Representatives as confidential in all respects.

22.2Notwithstanding anything to the contrary contained in this Agreement, either Party and its Representatives may disclose the Confidential Information or portions thereof:

SSA

(a)in order to comply with any Applicable Law, stock exchange rules or any ruling applicable to the said Party or any of its Representatives or at the request of any government authority, regulatory bodies, stock exchange or representatives thereof,

courts or pursuant to legal process, or to such Party's or its Affiliates' professional consultants, advisors, auditors or accountants;

(b)where the Confidential Information in question is or becomes generally available to the public other than as a result of a disclosure by the Receiving Party or any of its Representatives in breach of this Agreement;

(c)to any of the following persons to the extent necessary for the proper performance of their duties or functions:

(i)the Client;

(ii)any member of the Owner's Group or VD3's Group (and their Representatives);

(iii)insurers of the Receiving Party; and

(iv)financial advisors, investment bankers, underwriters, brokers, lenders or other financial institutions advising on, providing or considering the provision of financing to the Receiving Party or any member of its Group,

provided that the Receiving Party shall exercise due diligence to ensure that no such Person in Clauses 22.2(c)(ii), (iii) and (iv) shall disclose Confidential Information to any unauthorised Person.

22.3In the event that this Agreement is terminated, the Party having received Confidential Information further agrees, upon the other Party's written request, to promptly return all written Confidential Information received or certify (email to suffice) to the Disclosing Party its destruction. Notwithstanding the return or destruction of any such material, the Party will continue to hold in confidence all Confidential Information.

23SANCTIONS

23.1Each Party represents and warrants that, at the date of this Agreement, no member of its Group nor any of its Representatives are subject to Sanctions.

23.2The Owner further confirms that it shall not require or instruct the Drilling Unit to be employed or utilised in any way which puts any of the Drilling Unit, the Owner, VD3, VD3's Group or Representatives in breach of Sanctions or liable under any laws relating to Sanctions.

24RELATIONSHIP BETWEEN THE OWNER AND VD3

24.1Nothing in this Agreement shall be deemed to establish any partnership or joint venture between the Owner and VD3 (or any members of their respective Groups).

25RIGHTS OF THIRD PARTIES

25.1Save as otherwise expressly provided in this Agreement, no provisions of this Agreement which confer rights upon any Person who is not a party to this Agreement shall be enforceable pursuant to the Contracts (Rights of Third Parties) Act 1999 by any such Person.

SSA

25.2This Agreement (including, without limitation, this Clause 25) may be terminated, rescinded, or varied in any way by the Parties without the consent of any other Person who may be expressly entitled to the benefit of any provision of this Agreement.

26COSTS

26.1Save as otherwise expressly provided in this Agreement or any agreement to be entered into pursuant hereto, each Party shall pay its own costs and expenses incurred in connection with the preparation, negotiation and execution of this Agreement.

27GUARANTEE

27.1In consideration of the Owner entering into this Agreement, the Guarantor as primary obligor (and not as surety only) hereby irrevocably and unconditionally guarantees to the Owner the due and punctual performance and observance by VD3 (and its successors and assigns) of all of their obligations (which shall include without limitation all payment obligations and performance of all covenants, agreements and all obligations in respect of representations, warranties and indemnities) pursuant to this Agreement (the "Guaranteed Obligations").

27.2It is agreed that Guarantor is entering into this Agreement solely for the purposes of giving the guarantee in this Clause 27 and the limited representations and warranties set forth in Clause 21.

27.3This guarantee is to be a continuing guarantee and accordingly is to remain in force until all of the Guaranteed Obligations shall have been performed or satisfied in full. This guarantee is in addition and without prejudice to (and not in substitution for) any rights or security which the Owner may now or hereafter have in connection with the performance and observance of the Guaranteed Obligations and the Owner may enforce this guarantee against the Guarantor without having made any prior claim against VD3 (or any of its successors and assigns).

27.4The Guarantor's obligations under this Agreement shall not be affected by any matter or thing which but for this provision might operate to affect or prejudice those obligations, including without limitation:

(a)any time or indulgence granted to, or composition with, VD3 or any other person;

(b)the taking, variation, renewal or release of any right, guarantee, remedy or security from or against VD3 or any other person;

(c)neglecting to perfect or enforce this Agreement against VD3 or any other person;

(d)any variation or change to the terms of this Agreement or any other document under which Guaranteed Obligations arise; or

(e)any unenforceability or invalidity of any obligation of the Owner under this Agreement (or under any other document under which Guaranteed Obligations arise), so that the Guaranteed Obligations shall be construed as if there were no such unenforceability or invalidity.

27.5Clauses 14, 15, 16, 17, 18, 19, 20, 22 and 26 of this Agreement shall apply between the Owner and the Guarantor (with any necessary changes) in relation to this Clause 27 and any claims the Owner may have hereunder.

[The remainder of this page is intentionally left blank.]

SSA

IN WITNESS OF WHICH each of the Parties has caused this Agreement to be duly executed on its behalf on the Contract Date.

SIGNED for and on behalf of EMERALD DRILLER COMPANY

SSA

By

SSA

lhab Toma

SSA

its duly authorized representative in the presence of: Witness:

Name: Position:

SIGNED for and on behalf of VANTAGE DRILLER III CO.

SSA

By

SSA

lhab Toma

SSA

its duly authorized representative in the presence of: Witness:

Name: Position:

SSA

 

22/23

SIGNED for and on behalf of VANTAGE DRILLING INTERNATIONAL

SSA

By

SSA

lhab Toma

SSA

its duly authorized representative in the presence of: Witness:

Name: Position:

SSA

23/23

APPENDIX 1 THE SERVICES

VD3 shall act in accordance with the Management Standard to provide the following (if applicable for the relevant Year – as indicated below) in the relevant Year during the Term:

Category	Service	First Year starting on the Commencement Date	Second Year after the Commencement Date	Third Year after the Commencement Date
Management System	Provision of the Management System.	YES	YES	YES
Drilling Contract Support	Support of Drilling Contract by personnel* in all Vantage corporate offices (currently in Houston, Singapore and Dubai).	Full access to Vantage's corporate offices (currently in Houston, Singapore and Dubai).	Full access to Vantage's corporate offices (currently in Houston, Singapore and Dubai), other than the human resource and supply chain departments.	Full access to Vantage's corporate offices (currently in Houston, Singapore and Dubai) for operational support department only.

*Including only reasonable time of the personnel working in the relevant departments listed above.

SSA

EX-31.1

Exhibit 31.1

CERTIFICATE PURSUANT TO

RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES–OXLEY ACT OF 2002

I, Ihab Toma, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Vantage Drilling International;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2022	/s/ IHAB TOMA
	Ihab Toma
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATE PURSUANT TO

RULES 13a-14(a) and 15d-14(a),

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES–OXLEY ACT OF 2002

I, Douglas E. Stewart, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Vantage Drilling International;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

August 11, 2022	/s/ DOUGLAS E. STEWART
	Douglas E. Stewart
	Chief Financial Officer, General Counsel and Corporate Secretary

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 USC. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES–OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Vantage Drilling International (the “Company”) for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Ihab Toma, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes–Oxley Act of 2002, that to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 11, 2022	/s/ IHAB TOMA
	Ihab Toma
	Chief Executive Officer

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 USC. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES–OXLEY ACT OF 2002

In connection with the Quarterly Report on Form 10-Q of Vantage Drilling International (the “Company”) for the quarter ended June 30, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Douglas E. Stewart, Chief Financial Officer, General Counsel and Corporate Secretary of the Company, hereby certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes–Oxley Act of 2002, that to the best of my knowledge:

(1)The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

August 11, 2022	/s/ DOUGLAS E. STEWART
	Douglas E. Stewart
	Chief Financial Officer, General Counsel and Corporate Secretary

XML

Document and Entity Information - shares	6 Months Ended
	Jun. 30, 2022	Aug. 01, 2022
Cover [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Jun. 30, 2022
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Entity Registrant Name	VANTAGE DRILLING INTERNATIONAL
Entity Central Index Key	0001465872
Entity Current Reporting Status	Yes
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Shell Company	false
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		13,115,026
Entity File Number	333-159299
Entity Tax Identification Number	98-1372204
Entity Address, Address Line One	777 Post Oak Boulevard
Entity Address, Address Line Two	Suite 440
Entity Address, City or Town	Houston
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	77056
City Area Code	281
Local Phone Number	404-4700
Entity Interactive Data Current	Yes
Entity Incorporation, State or Country Code	E9
Document Quarterly Report	true
Document Transition Report	false

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets
Cash and cash equivalents	$ 227,328	$ 73,343
Restricted cash	3,323	1,621
Trade receivables, net of allowance for doubtful accounts of $5.0 million, each period	79,399	37,527
Materials and supplies	38,906	37,580
Assets held for sale		117,117
Prepaid expenses and other current assets	13,191	18,309
Total current assets	362,147	285,497
Property and equipment
Property and equipment	645,304	645,622
Accumulated depreciation	(287,314)	(266,018)
Property and equipment, net	357,990	379,604
Operating lease ROU assets	1,610	2,450
Other assets	32,549	31,843
Total assets	754,296	699,394
Current liabilities
Accounts payable	42,870	31,420
Other current liabilities	53,819	31,533
Liabilities held for sale		6,720
Total current liabilities	96,689	69,673
Long-term debt, net of discount and financing costs of $2,322 and $3,412, respectively	347,678	346,858
Other long-term liabilities	9,958	17,012
Commitments and contingencies (see Note 8)
Shareholders' equity
Ordinary shares, $0.001 par value, 50 million shares authorized; 13,115,026 shares issued and outstanding, respectively	13	13
Additional paid-in capital	633,828	633,847
Accumulated deficit	(336,591)	(369,792)
Controlling interest shareholders' equity	297,250	264,068
Noncontrolling interests	2,721	1,783
Total equity	299,971	265,851
Total liabilities and shareholders' equity	$ 754,296	$ 699,394

XML

Consolidated Balance Sheets (Parenthetical) (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Allowance for doubtful accounts	$ 5,000	$ 5,000
Long-term debt, discount and financing costs	$ 2,322	$ 3,142
Ordinary shares, par value	$ 0.001	$ 0.001
Ordinary shares, shares authorized	50,000,000	50,000,000
Ordinary shares, shares issued	13,115,026	13,115,026
Ordinary shares, shares outstanding	13,115,026	13,115,026

XML

Consolidated Statement of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue
Total revenue	$ 73,238	$ 35,601	$ 131,569	$ 55,767
Operating costs and expenses
Operating costs	59,405	36,056	103,338	61,413
General and administrative	6,910	4,967	13,492	10,462
Depreciation	11,087	14,161	22,382	28,286
Gain on EDC sale	(60,781)		(60,781)
Total operating costs and expenses	16,621	55,184	78,431	100,161
(Loss) income from operations	56,617	(19,583)	53,138	(44,394)
Other (expense) income
Interest income	7	10	11	110
Interest expense and other financing charges	(8,503)	(8,511)	(17,007)	(17,021)
Other, net	(1,011)	(179)	(1,786)	(793)
Total other expense	(9,507)	(8,680)	(18,782)	(17,704)
Income (loss) before income taxes	47,110	(28,263)	34,356	(62,098)
Income tax (benefit) provision	(1,221)	720	217	2,882
Net income (loss)	48,331	(28,983)	34,139	(64,980)
Net income (loss) attributable to noncontrolling interests	232	18	938	(31)
Net income (loss) attributable to shareholders	$ 48,099	$ (28,965)	$ 33,201	$ (64,949)
Earnings (loss) per share, basic
Basic	$ 3.67	$ (2.21)	$ 2.53	$ (4.95)
Earnings (loss) per share, diluted
Diluted	$ 3.61	$ (2.21)	$ 2.49	$ (4.95)
Contract Drilling Services
Revenue
Total revenue	$ 42,744	$ 31,655	$ 87,657	$ 49,380
Management Fees
Revenue
Total revenue	2,840	497	3,943	595
Reimbursables and Other
Revenue
Total revenue	$ 27,654	$ 3,449	$ 39,969	$ 5,792

XML

Consolidated Statement of Shareholders' Equity (Unaudited) - USD ($) $ in Thousands	Total	Ordinary Shares	Additional Paid-in Capital	Accumulated Deficit	Non-Controlling Interests
Beginning Balance at Dec. 31, 2020	$ 375,745	$ 13	$ 634,181	$ (259,655)	$ 1,206
Beginning Balance (in shares) at Dec. 31, 2020		13,115,000
Share-based compensation	306		306
Share-based compensation - dividend equivalents	(760)		(760)
Net (loss) income	(35,997)			(35,984)	(13)
Ending Balance at Mar. 31, 2021	339,294	$ 13	633,727	(295,639)	1,193
Ending Balance (in shares) at Mar. 31, 2021		13,115,000
Beginning Balance at Dec. 31, 2020	375,745	$ 13	634,181	(259,655)	1,206
Beginning Balance (in shares) at Dec. 31, 2020		13,115,000
Net (loss) income	(64,980)
Ending Balance at Jun. 30, 2021	310,342	$ 13	633,758	(324,604)	1,175
Ending Balance (in shares) at Jun. 30, 2021		13,115,000
Beginning Balance at Mar. 31, 2021	339,294	$ 13	633,727	(295,639)	1,193
Beginning Balance (in shares) at Mar. 31, 2021		13,115,000
Share-based compensation	31		31
Net (loss) income	(28,983)			(28,965)	(18)
Ending Balance at Jun. 30, 2021	310,342	$ 13	633,758	(324,604)	1,175
Ending Balance (in shares) at Jun. 30, 2021		13,115,000
Beginning Balance at Dec. 31, 2021	$ 265,851	$ 13	633,847	(369,792)	1,783
Beginning Balance (in shares) at Dec. 31, 2021	13,115,026	13,115,000
Share-based compensation	$ 26		26
Share-based compensation - dividend equivalents	(63)		(63)
Net (loss) income	(14,192)			(14,898)	706
Ending Balance at Mar. 31, 2022	251,622	$ 13	633,810	(384,690)	2,489
Ending Balance (in shares) at Mar. 31, 2022		13,115,000
Beginning Balance at Dec. 31, 2021	$ 265,851	$ 13	633,847	(369,792)	1,783
Beginning Balance (in shares) at Dec. 31, 2021	13,115,026	13,115,000
Net (loss) income	$ 34,139
Ending Balance at Jun. 30, 2022	$ 299,971	$ 13	633,828	(336,591)	2,721
Ending Balance (in shares) at Jun. 30, 2022	13,115,026	13,115,000
Beginning Balance at Mar. 31, 2022	$ 251,622	$ 13	633,810	(384,690)	2,489
Beginning Balance (in shares) at Mar. 31, 2022		13,115,000
Share-based compensation	18		18
Net (loss) income	48,331			48,099	232
Ending Balance at Jun. 30, 2022	$ 299,971	$ 13	$ 633,828	$ (336,591)	$ 2,721
Ending Balance (in shares) at Jun. 30, 2022	13,115,026	13,115,000

XML

Consolidated Statement of Cash Flows (Unaudited) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2022	Jun. 30, 2021
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) income	$ 48,331	$ 34,139	$ (64,980)
Adjustments to reconcile net (loss) income to net cash used in operating activities
Depreciation expense	11,087	22,382	28,286
Amortization of debt financing costs		820	819
Share-based compensation expense		44	337
Deferred income tax expense		410	236
Gain on disposal of assets	300	(1,630)	(2,715)
Gain on EDC sale	(60,781)	(60,781)
Changes in operating assets and liabilities:
Trade receivables, net		(58,864)	(6,888)
Materials and Supplies		(1,811)	(1,481)
Prepaid expenses and other current assets		3,369	(1,440)
Other assets		(25,043)	(1,821)
Accounts payable		29,564	2,798
Other current liabilities and other long-term liabilities		17,696	5,905
Net cash used in operating activities		(39,705)	(40,944)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(7,736)	(2,711)
Net proceeds from EDC sale		200,000
Net proceeds from sale of assets		3,100	0
Net proceeds from sale of Titanium Explorer			13,557
Net cash provided by investing activities		195,364	10,846
CASH FLOWS FROM FINANCING ACTIVITIES
Net cash provided by financing activities
Net increase (decrease) in unrestricted and restricted cash and cash equivalents		155,659	(30,098)
Unrestricted and restricted cash and cash equivalents—beginning of period		90,608	154,487
Unrestricted and restricted cash and cash equivalents—end of period	$ 246,267	246,267	124,389
Cash paid for:
Interest		16,229	16,197
Income taxes (net of refunds)		686	2,431
Cash Flow, Noncash Investing and Financing Activities Disclosure [Abstract]
Accrued additions to property and equipment		$ 8,908	$ 0

XML

Organization and Recent Events

6 Months Ended

Jun. 30, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Organization and Recent Events

1. Organization and Recent Events

Vantage Drilling International, a Cayman Islands exempted company, together with its consolidated subsidiaries (collectively the “Company”), is an international offshore drilling company focused on operating a fleet of modern, high specification drilling units. Our principal business is to contract drilling units, related equipment and work crews, primarily on a dayrate basis to drill oil and gas wells for our customers. Through our fleet of drilling units, we are a provider of offshore contract drilling services to major, national and independent oil and gas companies, focused on international markets. Additionally, for third-party owned drilling units, we provide operations and marketing services for operating and stacked rigs, construction supervision services for rigs that are under construction, and preservation management services for rigs that are stacked.

Geopolitical Instability Caused by the Conflict in Ukraine and Rising Inflation

The markets generally exhibited a strong recovery in global oil prices during 2021, a trend which was further exemplified during the first quarter of 2022, reaching $125.72 per barrel in March 2022. While our management anticipates oil and gas prices to remain robust in the near-term, price volatility is still expected to continue as a result of, among other factors, (i) adverse macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions, (ii) changes in oil and gas inventories, (iii) global market demand, (iv) geopolitical instability, armed conflict and social unrest, including the invasion of Ukraine by Russia in February 2022, the associated response undertaken by western nations, such as the implementation of broad sanctions, the potential for retaliatory actions on the part of Russia and the overall impact on OPEC+ countries’ ability to reach production targets in the near term, (v) potential future disagreements among OPEC+ countries regarding the supply of oil, (vi) the potential for increased production and activity from U.S. shale producers and non-OPEC countries driven by the current oil prices, and (vii) the ongoing COVID-19 pandemic, including the transmission and presence of highly contagious and new variants and the pace of vaccine rollouts, and therefore, the Company cannot predict how long oil and gas prices will remain stable or further increase, if at all, or whether they could reverse course and materially decline.

In particular, the invasion of Ukraine by Russia has led to, and will likely continue to lead to, geopolitical instability, disruption and volatility in the markets in which we operate. While it is not possible at this time to predict or determine the ultimate consequences of the conflict in Ukraine, which could include, among other things, additional sanctions, greater regional instability, embargoes, geopolitical shifts and other material and adverse effects on macroeconomic conditions, including rising inflationary pressures and potential recessionary conditions (and actions taken or being contemplated by central banks and regulators in an attempt to reduce, curtail and address such pressures and conditions), changes in energy policy, supply chains, financial markets and currency exchange rates, hydrocarbon price volatility in particular is likely to continue for the foreseeable future. To the extent the conflict in Ukraine and adverse macroeconomic conditions continue (or exacerbate), the implementation of further measures taken by governmental bodies and private actors, could have a lasting impact in the near- and long-term on the (i) operations and financial condition of our business and the businesses of our critical counterparties and (ii) the global economy.

While our management is actively monitoring the foregoing events and its associated financial impact on our business, it is uncertain at this time as to the full magnitude that volatile and uncertain oil and gas prices will ultimately have on our financial condition and future results of operations.

Share Purchase Agreement to Sell EDC to ADES Arabia Holding

On December 6, 2021, VHI, a wholly owned subsidiary of the Company, entered into a certain Share Purchase Agreement (the “EDC Purchase Agreement”) with ADES Arabia Holding (“ADES Arabia”), which wholly owns ADES, pursuant to which VHI agreed to sell to ADES Arabia all of the issued and outstanding equity of VHI’s wholly-owned subsidiary, EDC (the “EDC Sale”). EDC is the owner of the following jackup rigs, which are currently operating in Qatar: the Emerald Driller; the Sapphire Driller; and the Aquamarine Driller. Each of these rigs was included within our Drilling Services segment for the quarter ended June 30, 2022, and in prior quarters. The EDC Purchase Agreement became effective on December 20, 2021 and the transactions contemplated under such agreement closed on May 27, 2022 (the “EDC Closing Date”). On the EDC Closing Date, VHI received $170.0 million as purchase price consideration and $30.0 million in certain contract preparation expense reimbursement and, as a result, VHI recognized a net gain of approximately $60.8 million during the three months ended June 30, 2022, all of which is subject to potential adjustments contemplated by the EDC Purchase Agreement, any such adjustments to be finalized by September 24, 2022. Accordingly, the amount of proceeds actually received by the Company could vary from those set forth above.

Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES entered into three separate support services agreements (collectively, the “EDC Support Services Agreements”), pursuant to which a subsidiary of the Company agreed to provide, in exchange for customary fees and reimbursements, support services to EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller for a three-year term.

The Company and ADES also entered into an agreement on December 6, 2021 (the “Collaboration Agreement”) to pursue a global strategic alliance in order to leverage both the EDC Support Services Agreements and ADVantage, the parties’ existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the parties agreed to collaborate on exploring future commercial and operational opportunities.

While the Company continues to evaluate potential uses of the proceeds derived from the EDC Sale, the Company is limited in how it may deploy and utilize such proceeds as a result of the terms of the First Lien Indenture. In particular, the Company may only use the proceeds from the EDC Sale to repay, prepay or purchase our senior secured indebtedness (including the 9.25% First Lien Notes), acquire all or substantially all of the assets or capital stock of any other entity engaged in a similar or complementary business to the Company’s lines of business, or make capital expenditures or acquire non-current assets (including vessels and related assets) that are useful in such lines of business (including any deposit or installment payments with respect thereto as well as any expenditures related to the acquisition, construction or “ready for sea” costs of such vessels). To the extent such proceeds are not so applied (or committed to be applied) within one year after receipt, the Company will be required to offer to purchase the 9.25% First Lien Notes with such proceeds.

Tungsten Explorer Contract Award

On June 9, 2022, a subsidiary of VDI entered into a drilling services contract with a subsidiary of TotalEnergies (the “TotalEnergies Contract”) in respect of VDI’s ultra-deepwater drillship, the Tungsten Explorer. The TotalEnergies Contract contains a minimum term of 225 days. The Tungsten Explorer is currently operating in the Mediterranean where it will be drilling up to two wells and the Company anticipates that it will mobilize to West Africa during the third quarter of 2022 or potentially later.

Ongoing Impact of the COVID-19 Pandemic

The global spread of COVID-19, including its highly contagious variants and sub-lineages, continues to pose significant risks and challenges worldwide, and has caused and continues to cause widespread illness and significant loss of life, leading governments across the world to impose and re-impose severely stringent and extensive limitations on movement and human interaction, with certain countries, including those where we maintain significant operations and derive material revenue, implementing quarantine, testing and vaccination requirements. These governmental reactions to the COVID-19 pandemic, as well as changes to and extensions of such approaches, have led to, and continue to result in, uncertain and volatile economic activity worldwide, including within the oil and gas industry and the regions and countries in which we operate.

While the Company has previously managed, and continues to actively manage, the business in an attempt to mitigate any ongoing and material impact from the spread of COVID-19, management anticipates that our industry, and the world at large, will need to continue to operate in, and further adapt, to the current environment for the foreseeable future.
 

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Basis of Presentation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

Basis of Consolidation: The accompanying interim consolidated financial information as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, has been prepared without audit, pursuant to the rules and regulations of the SEC, and includes our accounts and those of our majority owned subsidiaries and VIEs (as discussed below). All significant intercompany transactions and accounts have been eliminated. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to provide for fair presentation. Our Consolidated Balance Sheet at December 31, 2021 is derived from our December 31, 2021 audited consolidated financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. Certain previously reported amounts have been reclassified to conform to the current period presentation.

In addition to the consolidation of our majority owned subsidiaries, we also consolidate VIEs when we are determined to be the primary beneficiary of a VIE. Determination of the primary beneficiary of a VIE is based on whether an entity has (1) the power to direct activities that most significantly impact the economic performance of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE.

ADVantage is a joint venture company formed to operate deepwater drilling rigs in Egypt. We determined that ADVantage met the criteria of a VIE for accounting purposes because its equity at risk was insufficient to permit it to carry on its activities without additional subordinated financial support from us. We also determined that we are the primary beneficiary for accounting purposes since we are entitled to use ADVantage for deepwater drilling contract opportunities rejected by ADES, and have the (a) power to direct the operating activities associated with the deepwater drilling rigs, which are the activities that most significantly impact the entity’s

economic performance, and (b) obligation to absorb losses or the right to receive a majority of the benefits that could be potentially significant to the VIE. As a result, we consolidate ADVantage in our consolidated financial statements, we eliminate intercompany transactions and we present the interests that are not owned by us as “Noncontrolling interests” in our Consolidated Balance Sheets. The carrying amount associated with ADVantage was as follows:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current assets	$	30,337	$	8,099
Non-current assets		223		212
Current liabilities		12,510		2,838
Non-current liabilities		12,523		1,859
Net carrying amount	$	5,527	$	3,614

As ADVantage is a majority owned subsidiary of the Company, it serves as a guarantor under the First Lien Indenture relating to the 9.25% First Lien Notes. The 9.25% First Lien Notes are secured by a first priority lien on all of the assets of ADVantage, subject to certain exceptions. Creditors’ recourse against ADVantage for liabilities of ADVantage is limited to the assets of ADVantage.

See “Note 9. Supplemental Financial Information” of these “Notes to Unaudited Consolidated Financial Statements” for additional information regarding related party transactions associated with this joint venture.

Use of Estimates: The preparation of financial statements in accordance with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to property and equipment, income taxes, insurance, employee benefits and contingent liabilities. Actual results could differ from these estimates.

Cash and Cash Equivalents: Includes deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.

Materials and Supplies: Consists of materials, spare parts, consumables and related supplies for our drilling rigs. We record these materials and supplies at their average cost.

Property and Equipment: Consists of our drilling rigs, furniture and fixtures, computer equipment and capitalized costs for computer software. Drilling rigs are depreciated on a component basis over estimated useful lives ranging from five to 35 years on a straight-line basis as of the date placed in service. Other assets are depreciated upon placement in service over estimated useful lives ranging from three to seven years on a straight-line basis. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from our Consolidated Balance Sheets and the resulting gain or loss is included in “Operating costs” or “General and administrative” expenses on the Consolidated Statement of Operations, depending on the nature of the asset. For the three and six months ended June 30, 2022, we recognized a net loss of approximately $0.3 million and a net gain of approximately $1.6 million, respectively, related to the sale or retirement of assets. For the six months ended June 30, 2021, we recognized a net gain of approximately $2.7 million related to the sale or retirement of assets. The gain/loss related to the sale or retirement of assets for the three months ended June 30, 2021 was immaterial.

We evaluate the realization of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized would be computed as the excess of the asset’s carrying value over the estimated fair value. Estimates of future cash flows require us to make long-term forecasts of our future revenues and operating costs with regard to the assets subject to review. Our business, including the utilization rates and dayrates we receive for our drilling rigs, depends on the level of our customers’ expenditures for oil and gas exploration, development and production expenditures. Oil and gas prices and customers’ expectations of potential changes in these prices, the general outlook for worldwide economic growth, political and social stability in the major oil and gas producing basins of the world, availability of credit and changes in governmental laws and regulations, among many other factors, significantly affect our customers’ levels of expenditures. Sustained declines in or persistent depressed levels of oil and gas prices, worldwide rig counts and utilization, reduced access to credit markets, reduced or depressed sale prices of comparably equipped jackups and drillships and any other significant adverse economic news could require us to evaluate the realization of our drilling rigs. As of June 30, 2022, no triggering event has occurred to indicate that the carrying value of our drilling rigs may not be recoverable.

Interest costs and the amortization of debt financing costs related to the financings of our drilling rigs are capitalized as part of the cost while they are under construction and prior to the commencement of each vessel’s first contract. We did not capitalize any interest for the reported periods.

Debt Financing Costs: Costs incurred with financing debt are deferred and amortized over the term of the related financing facility on a straight-line basis, which approximates the interest method. Debt issuance costs related to a recognized debt liability are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of that debt liability.

Rig and Equipment Certifications: We are required to obtain regulatory certifications to operate our drilling rigs and certain specified equipment, and must maintain such certifications through periodic inspections and surveys. The costs associated with these certifications, including drydock costs, are deferred and amortized over the corresponding certification periods.

Revenue Recognition: See “Note 3. Revenue from Contracts with Customers” of these “Notes to Unaudited Consolidated Financial Statements” for further information.

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. Deferred income tax assets and liabilities are computed for differences between the financial statement basis and tax basis of assets and liabilities that will result in future taxable or tax deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. We do not establish deferred tax liabilities for certain of our foreign earnings that we intend to indefinitely reinvest to finance foreign activities. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. We recognize interest and penalties related to income taxes as a component of income tax expense.

Concentrations of Credit Risk: Financial instruments that potentially subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We monitor the credit ratings and our concentration of risk with these financial institutions on a continuing basis to safeguard our cash deposits. We have a limited number of key customers, who are primarily large international oil and gas operators, national oil companies and other international oil and gas companies. Our contracts provide for monthly billings as services are performed and we monitor compliance with contract payment terms on an ongoing basis. Payment terms on customer invoices typically range from 30 to 45 days. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer.

Credit Losses – Accounts Receivable: The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. Current estimates of expected credit losses consider factors such as the historical experience and credit quality of our customers. The Company considers historical loss information as the most reasonable basis on which to determine expected credit losses unless current or forecasted future conditions for customers (or customer groups) indicate that risk characteristics have changed. We also considered the impact of the COVID-19 pandemic and the associated oil price and market share volatility on our allowance for doubtful accounts. The allowance for doubtful accounts on our trade receivables was $5.0 million as of each of June 30, 2022 and December 31, 2021, respectively. This amount represents a customer’s decision not to pay us for days impacted by what we believe were force majeure and other similar events for which we would still be entitled to receive payment under the applicable contract. We disagree with the customer's decision and are currently evaluating our remedies, if any, under the applicable contract.

Earnings (loss) per Share: We compute basic and diluted EPS in accordance with the two-class method. We include restricted stock units granted to employees and directors that contain non-forfeitable rights to dividends as such grants are considered participating securities. Basic earnings (loss) per share are based on the weighted average number of Ordinary Shares outstanding during the applicable period. Diluted EPS are computed based on the weighted average number of Ordinary Shares and ordinary share equivalents outstanding in the applicable period, as if all potentially dilutive securities were converted into Ordinary Shares (using the treasury stock method).

The following is a reconciliation of the number of shares used for the basic and diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Weighted average Ordinary Shares outstanding for basic EPS		13,115		13,115		13,115		13,115
Restricted share equity awards		217		—		215		—
Adjusted weighted average Ordinary Shares outstanding for diluted EPS		13,332		13,115		13,330		13,115

The following sets forth the number of shares excluded from diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Restricted share equity awards		—		218		—		218
Future potentially dilutive Ordinary Shares excluded from diluted EPS		—		218		—		218

Functional Currency: We consider USD to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in USD, which limits our exposure to currency exchange rate fluctuations. We recognize currency exchange rate gains and losses in “Other, net” in our Consolidated Statement of Operations. For the three and six months ended June 30, 2022, we recognized a net gain of approximately $1.0 million and $1.8 million, respectively, related to currency exchange rates. For the three and six months ended June 30, 2021, we recognized a net loss of approximately $0.2 million and $0.8 million, respectively, related to currency exchange rates.

Fair Value of Financial Instruments: The fair value of our short-term financial assets and liabilities approximates the carrying amounts represented in our Consolidated Balance Sheets principally due to the short-term nature or floating rate nature of these instruments. As of June 30, 2022, the fair value of the 9.25% First Lien Notes was approximately $336.6 million based on quoted market prices in a less active market, a Level 2 measurement.

Share-based Compensation: TBGs granted under the 2016 Amended MIP vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a QLE. Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the date as defined in the individual award letter. PBGs granted under the 2016 Amended MIP contain vesting eligibility provisions tied to the earlier of a QLE or seven years from the Effective Date. Upon the occurrence of a vesting eligibility event, the number of PBGs that actually vest will be dependent on the achievement of pre-determined TEV targets specified in the grants.

Both the TBGs and PBGs were classified as liabilities consistent with the classification of the underlying securities prior to the Conversion. Following the Conversion, outstanding TBGs and PBGs were subject to modification accounting and were re-classified as equity awards. Under the provisions of ASC 718 Compensation – Stock Compensation share-based compensation expense is recognized over the requisite service period from the grant date to the fourth year vest date for TBGs. For PBGs, expense will be recognized when it is probable that the TEV targets will be met. Once it is probable the performance condition will be met, compensation expense based on the fair value of the PBGs at the conversion date of the Convertible Notes will be recognized for the service period completed to the seventh anniversary of the Effective Date for PBGs.

Noncontrolling Interest:

Noncontrolling interests represent the equity investments of the minority owner in ADVantage, a joint venture with ADES that we consolidate in our financial statements.

Recently Adopted Accounting Standards:

No new accounting standards were adopted during the six-month period ended June 30, 2022.

Recently Issued Accounting Standards:

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, with respect to our consolidated financial statements.

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Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

3. Revenue from Contracts with Customers

The activities that primarily drive the revenue earned in our drilling contracts with customers include (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig, (ii) delivering the drilling rig by mobilizing to (and demobilizing from) the drill site, and (iii) performing pre-operating activities, including rig preparation activities and/or equipment modifications required for the contract.

The integrated drilling services that we perform under each drilling contract represent a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority.

Dayrate Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate billed to the customer is determined based on varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term and therefore, recognized as we perform the daily drilling services.

For rigs owned by a third-party that we manage or support, the contracts generally provide for a fixed fee based on various factors, including the status of the rig or a specific duration. In addition, we may earn a marketing fee based on a percentage of the effective dayrate of a drilling contract secured on behalf of the third-party and a variable management fee of the gross margin associated with managing an operating rig.

Amortizable Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for (i) the mobilization of equipment and personnel prior to the commencement of drilling services, (ii) the demobilization of equipment and personnel upon contract completion, and (iii) postponement fees in consideration for the postponement of a contract until a later date.

These activities are not considered to be distinct within the context of the contract and therefore, the associated revenue is allocated to the overall single performance obligation.

Mobilization fees received prior to the commencement of drilling operations are recorded as a contract liability and amortized on a straight‑line basis over the initial contract period. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the initial contract term, with an offset to an accretive contract asset. In many contracts, demobilization fees are contingent upon the occurrence or non-occurrence of a future event and the estimate for such revenue may therefore be constrained. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term. Postponement fees received that are contingent upon the occurrence or non-occurrence of a future event are recognized on a straight-line basis over the contract term. Fees received for the mobilization or demobilization of equipment and personnel are included in “Contract drilling services” in our Consolidated Statement of Operations.

Capital Upgrade/Contract Preparation Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. These activities are not considered to be distinct within the context of the contract and therefore, fees received are recorded as a contract liability and amortized to contract drilling revenues on a straight-line basis over the initial contract term.

Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. We are generally considered a principal in such transactions and therefore, recognize reimbursable revenues and the corresponding costs as we provide the customer‑requested goods and services.

Disaggregation of Revenue

The following tables present our revenue disaggregated by revenue source for the periods indicated:

	Three Months Ended June 30, 2022								Three Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	15,963	$	24,304	$	2,840	$	43,107	$	17,473	$	8,968	$	497	$	26,938
Amortized revenue		1,439		1,038		—		2,477		5,214		—		—		5,214
Reimbursable revenue		1,944		3,175		22,535		27,654		2,400		311		738		3,449
Total revenue	$	19,346	$	28,517	$	25,375	$	73,238	$	25,087	$	9,279	$	1,235	$	35,601
	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	31,294	$	50,300	$	3,943	$	85,537	$	26,371	$	17,795	$	595	$	44,761
Amortized revenue		1,659		4,404		—		6,063		5,214		—		—		5,214
Reimbursable revenue		4,151		6,151		29,667		39,969		4,722		332		738		5,792
Total revenue	$	37,104	$	60,855	$	33,610	$	131,569	$	36,307	$	18,127	$	1,333	$	55,767

Dayrate revenue and amortized revenue for “Jackups” and “Deepwater” are included within “Contract drilling services” in our Consolidated Statement of Operations. Dayrate revenue for “Managed” is included within “Management fees” in our Consolidated Statement of Operations. All other revenue are included within “Reimbursables and other” in our Consolidated Statement of Operations.

Accounts Receivable, Contract Liabilities and Contract Costs

Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on customer invoices typically range from 30 to 45 days.

We recognize contract liabilities, recorded in other “Other current liabilities” and “Other long-term liabilities”, for prepayments received from customers and for deferred revenue received for mobilization, contract preparation and capital upgrades.

Certain direct and incremental costs incurred for contract preparation, initial mobilization and modifications of contracted rigs represent contract fulfillment costs as they relate directly to a contract, enhance resources that will be used to satisfy our performance obligations in the future and are expected to be recovered. These costs are deferred as a current or noncurrent asset depending on the length of the initial contract term and are amortized on a straight-line basis to operating costs as services are rendered over the initial term of the related drilling contract. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred to mobilize a rig without a contract are expensed as incurred.

The following table provides information about contract cost assets and contract revenue liabilities from contracts with customers:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current contract cost assets	$	896	$	1,405
Noncurrent contract cost assets		5,021		6,832
Noncurrent contract cost assets - held for sale		—		4,196
Current contract revenue assets		—		1,903
Current contract revenue liabilities		31,557		12,311
Noncurrent contract revenue liabilities		1,397		1,893

Significant changes in contract cost assets and contract revenue liabilities during the six months ended June 30, 2022 are as follows:

	Contract Cost Assets			Contract Revenue Assets			Contract Revenues
(unaudited, in thousands)
Balance as of December 31, 2021	$	12,433		$	1,903		$	14,204
Increase (decrease) due to contractual changes		(570	)		—			46,066
Decrease due to recognition of revenue		(5,946	)		(1,903	)		(27,316	)
Balance as of June 30, 2022 (1)	$	5,917		$	—		$	32,954

(1)We expect to recognize contract revenues of approximately $32.1 million during the remaining six months of 2022 and $0.9 million thereafter arising primarily from unsatisfied performance obligations existing as of June 30, 2022.

We have elected to utilize an optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly increments, the variability of which will be resolved at the time the future services are rendered.

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Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Lease

4. Leases

We have operating leases expiring at various dates, principally for office space, onshore storage yards and certain operating equipment. Additionally, we sublease certain office space to third parties. We determine if an arrangement is a lease at inception. Operating leases with an initial term greater than 12 months are included in “Operating lease ROU assets”, “Other current liabilities”, and “Other long-term liabilities” on our Consolidated Balance Sheets. Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future lease payments over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made prior to or at the commencement date and is reduced by lease incentives received and initial direct costs incurred. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense is recognized on a straight-line basis over the lease term. We have lease agreements with lease and non-lease components, which are generally not accounted for separately. Certain of our leases include provisions for variable payments. These variable payments are not included in the calculation of lease liability and ROU assets.

The components of lease expense for the periods indicated were as follows:

		Three Months Ended June 30,						Six Months Ended June 30,
(unaudited, in thousands)	Classification in the Consolidated Statement of Operations	2022			2021			2022			2021
Operating lease cost(1)	Operating costs	$	313		$	713		$	568		$	1,615
Operating lease cost(1)	General and administrative		193			151			477			303
Sublease income	Operating costs		—			(121	)		—			(242	)
Sublease income	General and administrative		(224	)		(62	)		(407	)		(124	)
Total operating lease cost		$	282		$	681		$	638		$	1,552

(1) Short-term lease costs were approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2021, respectively. Operating cash flows used for operating leases approximates lease expense.

(unaudited, in thousands)	Classification in the Consolidated Balance Sheets	June 30, 2022		December 31, 2021
Assets:
Operating lease assets	Operating lease ROU assets	$	1,610	$	2,450
	Operating lease ROU assets - Held for sale		—		197
Total leased assets		$	1,610	$	2,647
Liabilities:
Current operating	Other current liabilities	$	1,401	$	1,710
	Other current liabilities - Held for sale		—		103
Noncurrent operating	Other long-term liabilities		333		969
	Other long-term liabilities - Held for sale		—		93
Total lease liabilities		$	1,734	$	2,875

As of June 30, 2022, maturities of lease liabilities were as follows:

(unaudited, in thousands)	Operating Leases
Remaining six months of 2022	$	828
2023		996
2024		—
2025		—
2026		—
Total future lease payments	$	1,824
Less imputed interest		(90	)
Present value of lease obligations	$	1,734

The weighted average discount rate was 9.25% as of both June 30, 2022 and December 31, 2021. The weighted average remaining lease term for operating leases was 1.17 years and 1.56 years as of June 30, 2022 and December 31, 2021, respectively. ROU assets and lease liabilities recorded for leases commencing during the three and six months ended June 30, 2022 was immaterial.

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Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

5. Debt

Our debt was composed of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
9.25% First Lien Notes, net of financing costs of $2,322 and $3,142, respectively	$	347,678	$	346,858
Less current maturities of long-term debt		—		—
Long-term debt, net	$	347,678	$	346,858

9.25% First Lien Notes. On November 30, 2018, the Company issued $350.0 million in aggregate principal amount of 9.25% First Lien Notes in a private placement. The 9.25% First Lien Notes were issued at par and are fully guaranteed on a senior secured basis by the Company’s direct and indirect subsidiaries, and are secured by a first priority lien on substantially all of the assets of the Company and its subsidiaries, in each case subject to certain exceptions. The 9.25% First Lien Notes are subject to first payment priority in favor of holders of up to $50.0 million of future super-priority debt and are subject to both mandatory and optional redemption provisions.

The 9.25% First Lien Notes mature on November 15, 2023 and bear interest from the date of their issuance at the rate of 9.25% per year. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months and is payable semi-annually in arrears, commencing on May 15, 2019. Failure to refinance the 9.25% First Lien Notes before their maturity date could have a material and adverse effect on the Company’s financial condition and may affect our ability to continue as a going concern.

The First Lien Indenture includes customary covenants and events of default, including covenants that, among other things, restrict the granting of liens, restrict the making of investments, restrict the incurrence of indebtedness and the conveyance of vessels, limit transactions with affiliates, and require that the Company provide periodic financial reports.

The net proceeds from the issuance were used (i) to repay all obligations under the formerly existing 2016 Term Loan Facility and to terminate the credit agreement governing such facility, (ii) to redeem all the then-outstanding 10% Second Lien Notes, (iii) to fund the remaining amounts to be paid in connection with the purchase of the Soehanah jackup rig, (iv) to pay fees and expenses related to the foregoing and to the offering of the 9.25% First Lien Notes, and (v) for general corporate purposes.

Concurrently with the issuance of the 9.25% First Lien Notes, we entered into a letter of credit facility to replace the letter of credit facility formerly existing under the 2016 Term Loan Facility. The facility has a capacity of $50.0 million, with all outstanding letters of credit being cash collateralized. We have issued $0.1 million in letters of credit under this facility as of June 30, 2022.

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Shareholders' Equity

6 Months Ended

Jun. 30, 2022

Equity [Abstract]

Shareholders' Equity

6. Shareholders’ Equity

Stock Issuance

VDI has 50,000,000 authorized Ordinary Shares. Upon emergence from bankruptcy on the Effective Date, VDI issued 5,000,053 Ordinary Shares in connection with the settlement of Liabilities Subject to Compromise in accordance with the Reorganization Plan and the VDC Note. On December 4, 2019, VDI issued an additional 8,114,977 Ordinary Shares to convert all of the outstanding Convertible Notes. As of June 30, 2022, 13,115,026 Ordinary Shares were issued and outstanding.

Share-based Compensation

On August 9, 2016, the Company adopted the 2016 Amended MIP to align the interests of participants with those of the Company’s shareholders by providing incentive compensation opportunities tied to the performance of the Company’s equity securities. Pursuant to the 2016 Amended MIP, the Compensation Committee may grant to employees, directors and consultants stock options, restricted stock, restricted stock units or other awards.

No awards were granted to employees or directors during the six months ended June 30, 2022 and 2021. During the six months ended June 30, 2022, 1,564 of previously-granted TBGs vested.

Both the TBGs and PBGs are classified as equity awards. For the six months ended June 30, 2022, share-based compensation expense related to the TBGs was immaterial. For the six months ended June 30, 2021, we recognized share-based compensation expense related to the TBGs of approximately $0.3 million. As of June 30, 2022, we concluded that it was not probable that the TEV performance condition would be met and therefore, no share-based compensation expense was recognized for PBGs.

Pursuant to the 2016 Amended MIP and the terms of the applicable unit awards, participants holding restricted stock units are contractually entitled to receive all dividends or other distributions that are paid to VDI’s stockholders, provided that any such dividends will be subject to the same vesting requirements of the underlying units. Dividend payments accrue to outstanding awards (both vested and unvested) in the form of “Dividend Equivalents” equal to the dividend per share underlying the applicable award under the 2016 Amended MIP. As a result of a special cash distribution paid to shareholders of record on December 17, 2019, $5.3 million has been recorded in “Other current liabilities” and $3.5 million has been recorded in “Other long-term liabilities” in our Consolidated Balance Sheets at June 30, 2022 to be paid upon settlement of the TBGs.

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Income Taxes

6 Months Ended

Jun. 30, 2022

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

VDI is a Cayman Islands company operating in multiple countries through its subsidiaries. The Cayman Islands do not impose corporate income taxes. Consequently, we have calculated income taxes based on the laws and tax rates in effect in the countries in which operations are conducted, or in which we and our subsidiaries are considered resident for income tax purposes. Our income taxes are generally dependent upon the results of our operations and when we generate significant revenues in jurisdictions where the income tax liability is based on gross revenues or asset values, there is no correlation to the net operating results and the income tax expense. Furthermore, in some jurisdictions we do not pay taxes, pay taxes at lower rates or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt, gains or losses on disposal or transfer of assets, reorganization expenses and write-off of development costs.

On January 22, 2020, VDI filed the Tax Election with the IRS to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes, with an effective date retroactive to December 9, 2019. As a result, U.S. Holders are required to take into account their allocable share of items of income, gain, loss deduction and credit of VDI for each taxable year of VDI ending with or within the U.S. Holder’s taxable year, regardless of whether any distribution has been or will be received from VDI. Each item generally will have the same character and source (either U.S. or foreign) as though the U.S. Holder had realized the item directly. VDI’s change in tax status did not have a material impact on our consolidated financial statements as of June 30, 2022.

Deferred income tax assets and liabilities are recorded for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. We provide for deferred taxes on temporary differences between the financial statements and tax bases of assets and liabilities using the enacted tax rates which are expected to apply to taxable income when the temporary differences are expected to reverse. Deferred tax assets are also provided for certain tax losses and tax credit carryforwards. A valuation allowance is established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized. We do not establish deferred tax liabilities for certain of our foreign earnings that we intend to indefinitely reinvest to finance foreign activities.

In certain jurisdictions we are taxed under preferential tax regimes, which may require our compliance with specified requirements to sustain the tax benefits. We believe we are in compliance with the specified requirements and will continue to make all reasonable efforts to comply; however, our ability to meet the requirements of the preferential tax regimes may be affected by changes in laws or administrative practices, our business operations and other factors affecting the Company and industry, many of which are beyond our control.

Our periodic tax returns are subject to examination by taxing authorities in the jurisdictions in which we operate in accordance with the normal statute of limitations in the applicable jurisdiction. These examinations may result in assessments of additional taxes that are resolved with the authorities or through the courts. Resolution of these matters involves uncertainties and there are no assurances as to the outcome. Our tax years from 2012 onward remain open to examination in many of our jurisdictions and we are currently involved in several tax examinations in jurisdictions where we are operating or have previously operated. As information becomes available during the course of these examinations, we may increase or decrease our estimates of tax assessments and accruals.

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Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance. There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims.

Brazil Improbity Action

On April 27, 2018, the Company was added as an additional defendant in a legal proceeding (the “Improbity Action”), initiated by the Brazilian Federal Prosecutor against certain individuals, including an executive of Petrobras and two political lobbyists, in connection with the contracting of the Titanium Explorer drillship to Petrobras under the Drilling Contract, with the Brazilian Government and Petrobras as plaintiffs. Vantage is alleged to have been involved in and benefitted from the purported bribery scheme at Petrobras through Hamylton Padilha, the Brazilian agent our former parent company, VDC, used in the contracting of the Titanium Explorer drillship to Petrobras, and Mr. Hsin-Chi Su, a former member of VDC’s board of directors and a significant shareholder of VDC. We first became aware of the legal proceeding on July 19, 2018 as it was previously under seal. On March 22, 2019, we were formally served in the United States, and we filed our preliminary statement of defense with the 11th Federal court of the Judicial Branch of Curitiba, State of Parana, Brazil (the “Brazilian Federal Court”) on April 12, 2019 in response. On August 20, 2020, the Brazilian Federal Court dismissed our preliminary statement of defense. On October 5, 2020, we subsequently filed a motion to clarify with the Brazilian Federal Court requesting the reconsideration of certain aspects of the decision dismissing our preliminary statement of defense. Our motion to clarify was denied on December 14, 2020, and on February 10, 2021 we filed an interlocutory appeal to the 4th Circuit of the Federal Court of Appeals in Porto Alegre, State of Rio Grande do Sul, Brazil (the “Brazilian Appellate Court”), the appellate court hearing appeals in the “Car Wash” cases, seeking to reverse the Brazilian Federal Court’s denial of our preliminary defense. On April 15, 2021, the Brazilian authorities served us indirectly through the U.S. Department of Justice agreeing to formally send us documents related to the Improbity Action. On May 13, 2021, the Brazilian Appellate Court’s reporting judge for our matter granted our request for preliminary relief and ordered an immediate stay of the Improbity Action as it applies to the Company until the judgment (on the merits) of the interlocutory appeal is rendered by the full three judge panel of the Brazilian Appellate Court. We will be obligated to file a statement of defense in the matter if the decision to stay the Improbity Action is later reversed. The Company understands that the Improbity Action, is a civil action and is part of the Brazilian Federal Prosecutor’s larger “Car Wash” investigation into money laundering and corruption allegations in Brazil.

The damages claimed in the proceeding are in the amount of BRL 102.8 million or approximately $20.5 million (changes in the U.S. dollar amounts result from foreign exchange rate fluctuations), together with a civil fine equal to three times that amount. The Company understands that the Brazilian Federal Court previously issued an order authorizing the seizure and freezing of the assets of the Company and the other three defendants in the legal proceeding, as a precautionary measure, in the amount of approximately $81.8 million. The Company and the other three defendants are jointly and severally liable for this amount. The seizure order has not had an effect on the Company’s assets or operations, as the Company does not own any assets in Brazil, and does not currently intend to relocate any assets to Brazil. On February 13, 2019, the Company learned that the Brazilian Federal Prosecutor had previously requested mutual legal assistance from the U.S. DOJ pursuant to the United Nations Convention against Corruption of 2003 to obtain a freezing order against the Company’s U.S. assets in the approximate amount of $81.8 million.

On April 12, 2019, the Company filed an interlocutory appeal with the Brazilian Appellate Court to stay the seizure and freezing order of the Brazilian Federal Court.

On May 20, 2019, the Company announced that the Brazilian Appellate Court's reporting judge ruled in favor of the Company’s appeal to stay the seizure and freezing order of the Brazilian Federal Court. The foregoing ruling is still subject to confirmation by a three-judge panel, and is subject to appeal, and the Company can offer no assurances that the stay will be confirmed or as to the outcome of any appeal thereof. The Company communicated the Brazilian Appellate Court’s ruling to the DOJ and has asked the Brazilian Federal Court to do the same. On July 18, 2019, the Company announced that the Brazilian Government made a filing with the Brazilian Federal Court reporting that the DOJ has advised the Brazilian Ministry of Justice that it would not be possible for the DOJ to comply with the mutual assistance request in respect of the asset freeze order. The Company also announced that it learned from the Brazilian Ministry of Justice that the DOJ’s response to the request for mutual assistance stated that no legal grounds existed for implementing the requested asset freeze, and that the DOJ was returning the request without taking action and considers the matter concluded.

The Company has defended, and intends to continue to vigorously defend, against the allegations made in the Improbity Action and oppose and defend against any attempts to seize the Company's assets. However, we can neither predict the ultimate outcome of this matter nor that there will not be further developments in the “Car Wash” investigation or in any other ongoing investigation or

related proceeding that could adversely affect us. At this time, we are not able to determine the likelihood of loss, if any, arising from this matter.

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Supplemental Financial Information

6 Months Ended

Jun. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Supplemental Financial Information

9. Supplemental Financial Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Sales tax receivable	$	3,552	$	8,445
Other receivables		1,140		234
Income tax receivable		577		1,423
Prepaid insurance		959		257
Current deferred contract costs		896		1,405
Current contract asset		—		1,903
Other		6,067		4,642
	$	13,191	$	18,309

Assets Held for Sale

Assets held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Trade receivables, net	$	—	$	7,306
Materials and supplies		—		13,510
Prepaid expenses and other current assets		—		3,768
Property & equipment, net		—		87,441
Noncurrent deferred contract costs		—		4,196
Operating lease ROU asset		—		197
Other noncurrent assets		—		699
	$	—	$	117,117

Property and Equipment, net

Property and equipment, net, consisted of the following as of the dates indicated:

	June 30, 2022			December 31, 2021
(unaudited, in thousands)
Drilling equipment	$	624,419		$	626,546
Assets under construction		1,957			148
Office and technology equipment		18,405			18,405
Leasehold improvements		523			523
		645,304			645,622
Accumulated depreciation		(287,314	)		(266,018	)
Property and equipment, net	$	357,990		$	379,604

Other Assets

Other assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Noncurrent restricted cash	$	15,616	$	15,644
Deferred certification costs		3,976		5,199
Noncurrent deferred contract costs		5,021		6,832
Deferred income taxes		1,473		1,776
Other noncurrent assets		6,463		2,392
	$	32,549	$	31,843

Other Current Liabilities

Other current liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Interest	$	4,136	$	4,136
Compensation (1)		5,147		7,040
2016 MIP - Dividend equivalent (2)		5,277		—
Income taxes payable		3,755		5,589
Current deferred revenue		31,557		12,311
Current portion of operating lease liabilities		1,401		1,710
Other		2,546		747
	$	53,819	$	31,533

(1) Includes $2.3 million as of December 31, 2021 related to cash awards granted to certain key employees of the Company pursuant to underlying award agreements and issued under the 2016 Amended MIP. The final payout of this cash award was made in June 2022.

(2) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Liabilities Held for Sale

Liabilities held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Accounts payable	$	—	$	4,140
Compensation		—		464
Income taxes payable		—		716
Current portion of operating lease liabilities		—		103
Deferred income taxes		—		1,190
Noncurrent operating lease liabilities		—		93
Other		—		14
	$	—	$	6,720

Other Long-term Liabilities

Other Long-term liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
2016 MIP - Dividend equivalent (1)	$	3,521	$	8,735
Noncurrent deferred revenue		1,397		1,893
Noncurrent operating lease liabilities		333		969
Other non-current liabilities		4,707		5,415
	$	9,958	$	17,012

(1) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cash and cash equivalents	$	227,328	$	73,343
Restricted cash		3,323		1,621
Restricted cash included within Other Assets		15,616		15,644
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	246,267	$	90,608

Restricted cash represents cash held by banks as collateralizing letters of credit.

Related Party Transactions

In conjunction with the establishment of ADVantage, the Company entered into a series of agreements with ADES, including: (i) a Secondment Agreement; (ii) a Manpower Agreement; and (iii) a Supply Services Agreement. Pursuant to these agreements, the Company, largely through its seconded employees, has agreed to provide various services to ADES and ADES has agreed in turn to provide various services to ADVantage. As of June 30, 2022 and December 31, 2021, accounts receivable from ADES totaled approximately $4.3 million and $0.5 million, respectively, included in “Trade receivables” on the Consolidated Balance Sheets. As of June 30, 2022 and December 31, 2021, accounts payable to ADES totaled approximately $7.3 million and $2.1 million, respectively, included in “Accounts payable,” on the Consolidated Balance Sheets.

On December 6, 2021, we entered into the EDC Purchase Agreement to sell to ADES Arabia all of the issued and outstanding equity of EDC, which owns the Emerald Driller, Sapphire Driller and Aquamarine Driller. The transactions contemplated by the EDC Purchase Agreement closed on the EDC Closing Date. Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES entered into the EDC Support Services Agreements, pursuant to which a subsidiary of the Company agreed to provide, in exchange for customary fees and reimbursements, support services to EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller for a three-year term. For additional information regarding the EDC Purchase Agreement and the transactions contemplated thereunder, please see “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” under “Note 1. Organization and Recent Events” of these Notes to Unaudited Financial Statements.

In addition, the Company and ADES also entered into an agreement on December 6, 2021 (the “Collaboration Agreement”) to pursue a global strategic alliance in order to leverage both the EDC Support Services Agreements and ADVantage, the parties’ existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the parties agreed to collaborate on exploring future commercial and operational opportunities.

VHI previously entered into Framework Agreements and related Management and Marketing Agreements, as amended, on March 16, 2021 with Aquadrill, pursuant to which certain subsidiaries of VHI agreed to provide operating, management and marketing services to Aquadrill and its subsidiaries (the “Aquadrill Entities”). Fees earned as a result of these agreements are included in “Management fees” and “Reimbursable and other” in our Consolidated Statement of Operations within the Managed Services segment as reported in “Note 10. Business Segment and Significant Customer Information.” Two of our shareholders that own a significant portion of our Ordinary shares also own an interest in Aquadrill.

We did not have any related party transactions that were not conducted in the ordinary course of business as of June 30, 2022.

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Business Segment and Significant Customer Information

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Business Segment and Significant Customer Information

10. Business Segment and Significant Customer Information

Our operations are dependent on the global oil and gas industry, and our rigs are relocated based on demand for our services and customer requirements. Our customers consist primarily of large international oil and gas companies, national or government-controlled oil and gas companies, and other international exploration and production companies. As the result of an increase in activity related to operating, management and marketing services for rigs owned by third-parties, the Company has two reportable segments: (1) “Drilling Services,” which includes activities related to owned jackup rigs and drillships; and (2) “Managed Services,” which consists of activities related to rigs owned by third parties that we manage or support. The chief operating decision maker evaluates the performance of our reportable segments using adjusted operating income (loss), which is a segment performance measure, because this financial measure reflects our ongoing profitability and performance. Adjusted operating income (loss) is defined as segment income (loss) from operations plus general and administrative expenses and depreciation. General and administrative expenses, other (expense) income, and income taxes are not allocated to the operating segments for purposes of measuring segment income (loss) from operations and are included in “Unallocated” in the table below. There are no intersegment revenues. Our segment results for the periods indicated were as follows:

	Three Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	42,744	$	—	$	—		$	42,744
Management fees		—		2,840		—			2,840
Reimbursables and other		5,119		22,535		—			27,654
Total revenue		47,863		25,375		—			73,238
Operating costs and expenses
Operating costs		36,164		23,241		—			59,405
General and administrative		—		—		6,910			6,910
Depreciation		10,695		—		392			11,087
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		46,859		23,241		(53,479	)		16,621
Income from operations		1,004		2,134		53,479			56,617
Other (expense) income
Interest income		—		—		7			7
Interest expense and financing charges		—		—		(8,503	)		(8,503	)
Other, net		—		—		(1,011	)		(1,011	)
Total other expense		—		—		(9,507	)		(9,507	)
Income before income taxes	$	1,004	$	2,134	$	43,972		$	47,110
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	1,004	$	2,134
Depreciation		10,695		—
Segment adjusted operating income	$	11,699	$	2,134

	Three Months Ended June 30, 2021
(unaudited, in thousands)	Drilling Services			Managed Services		Unallocated			Consolidated
Revenue
Contract drilling services	$	31,655		$	—	$	—		$	31,655
Management fees		—			497		—			497
Reimbursables and other		2,711			738		—			3,449
Total revenue		34,366			1,235		—			35,601
Operating costs and expenses
Operating costs		34,867			1,189		—			36,056
General and administrative		—			—		4,967			4,967
Depreciation		13,752			—		409			14,161
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		48,619			1,189		5,376			55,184
(Loss) income from operations		(14,253	)		46		(5,376	)		(19,583	)
Other (expense) income
Interest income		—			—		10			10
Interest expense and financing charges		—			—		(8,511	)		(8,511	)
Other, net		—			—		(179	)		(179	)
Total other expense		—			—		(8,680	)		(8,680	)
(Loss) income before income taxes	$	(14,253	)	$	46	$	(14,056	)	$	(28,263	)
Reconciliation of (loss) income from operations to segment operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(14,253	)	$	46
Depreciation		13,752			—
Segment adjusted operating (loss) income	$	(501	)	$	46

	Six Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	87,657	$	—	$	—		$	87,657
Management fees		—		3,943		—			3,943
Reimbursables and other		10,302		29,667		—			39,969
Total revenue		97,959		33,610		—			131,569
Operating costs and expenses
Operating costs		72,602		30,736		—			103,338
General and administrative		—		—		13,492			13,492
Depreciation		21,551		—		831			22,382
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		94,153		30,736		(46,458	)		78,431
Income from operations		3,806		2,874		46,458			53,138
Other (expense) income
Interest income		—		—		11			11
Interest expense and financing charges		—		—		(17,007	)		(17,007	)
Other, net		—		—		(1,786	)		(1,786	)
Total other expense		—		—		(18,782	)		(18,782	)
Income before income taxes	$	3,806	$	2,874	$	27,676		$	34,356
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	3,806	$	2,874
Depreciation		21,551		—
Segment adjusted operating income	$	25,357	$	2,874

	Six Months Ended June 30, 2021
	Drilling Services			Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	49,380		$	—	$	—		$	49,380
Management fees		—			595		—			595
Reimbursables and other		5,054			738		—			5,792
Total revenue		54,434			1,333		—			55,767
Operating costs and expenses
Operating costs		60,224			1,189		—			61,413
General and administrative		—			—		10,462			10,462
Depreciation		27,467			—		819			28,286
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		87,691			1,189		11,281			100,161
(Loss) income from operations		(33,257	)		144		(11,281	)		(44,394	)
Other (expense) income
Interest income		—			—		110			110
Interest expense and financing charges		—			—		(17,021	)		(17,021	)
Other, net		—			—		(793	)		(793	)
Total other expense		—			—		(17,704	)		(17,704	)
(Loss) income before income taxes	$	(33,257	)	$	144	$	(28,985	)	$	(62,098	)
Reconciliation of (loss) income from operations to segment adjusted operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(33,257	)	$	144
Depreciation		27,467			—
Segment adjusted operating (loss) income	$	(5,790	)	$	144

Our revenue by country and segment was as follows for the periods indicated (revenue of less than 10% are included in “Other countries”):

		Three months ended June 30,				Six months ended June 30,
Country	Segment	2022		2021		2022		2021
(unaudited, in thousands)
UAE	Managed Services	$	19,778	$	—	$	27,966	$	—
Egypt	Drilling Services		9,738		—		26,859		—
India	Drilling Services and Managed Services		13,230		9,297		26,518		18,152
Qatar	Drilling Services		—		7,697		14,319		14,894
Indonesia	Drilling Services		—		—		—		—
Montenegro	Drilling Services		—		16,253		—		16,306
Other countries (1)	Drilling Services and Managed Services		30,492		2,354		35,907		6,415
Total revenues		$	73,238	$	35,601	$	131,569	$	55,767

(1) “Other countries” represent countries in which we operate that individually had operating revenues representing less than 10% of total revenues earned.

For the three and six months ended June 30, 2022 and 2021, a substantial amount of our revenue was derived from countries outside of the United States. Consequently, we are exposed to the risk of changes in economic, political and social conditions inherent in foreign operations, including as a direct and indirect result of Russia’s invasion of Ukraine in February 2022. Revenue with customers that contributed 10% or more of revenue for the periods indicated were as follows:

		Three months ended June 30,						Six months ended June 30,
(unaudited)	Segment	2022			2021			2022			2021
Customer 1	Managed Services		30	%		0	%		23	%		0	%
Customer 2	Drilling Services and Managed Services		18	%		26	%		20	%		33	%
Customer 3	Drilling Services		13	%		0	%		20	%		0	%
Customer 4	Drilling Services		0	%		17	%		10	%		11	%
Customer 5	Drilling Services		0	%		46	%		0	%		29	%
Customer 6	Drilling Services		0	%		0	%		0	%		16	%

Information related to the Company’s “Total Assets” as reported on the Consolidated Balance Sheets is not available by reportable segment; however, a substantial portion of our assets are mobile drilling units included in the Drilling Services segment. Asset locations at the end of the period are not necessarily indicative of the geographic distribution of the revenues generated by such assets during the periods. Our property and equipment, net by country, was as follows as of the dates indicated (property and equipment of less than 10% are included in “Other countries”):

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cyprus	$	165,754	$	—
Egypt		—		173,187
India		88,895		96,583
Indonesia		60,953		63,581
Other countries (1)		42,388		46,253
Total property and equipment	$	357,990	$	379,604

(1) “Other countries” represent countries in which we individually had property and equipment, net, representing less than 10% of total property and equipment, net.

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Basis of Presentation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Consolidation

Basis of Consolidation: The accompanying interim consolidated financial information as of June 30, 2022, and for the three and six months ended June 30, 2022 and 2021, has been prepared without audit, pursuant to the rules and regulations of the SEC, and includes our accounts and those of our majority owned subsidiaries and VIEs (as discussed below). All significant intercompany transactions and accounts have been eliminated. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to provide for fair presentation. Our Consolidated Balance Sheet at December 31, 2021 is derived from our December 31, 2021 audited consolidated financial statements. These interim consolidated financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021, which was filed with the SEC on March 30, 2022. The results of operations for the interim periods are not necessarily indicative of the operating results for the full fiscal year or any future periods. Certain previously reported amounts have been reclassified to conform to the current period presentation.

In addition to the consolidation of our majority owned subsidiaries, we also consolidate VIEs when we are determined to be the primary beneficiary of a VIE. Determination of the primary beneficiary of a VIE is based on whether an entity has (1) the power to direct activities that most significantly impact the economic performance of the VIE and (2) the obligation to absorb losses or the right to receive benefits of the VIE that could potentially be significant to the VIE. Our determination of the primary beneficiary of a VIE considers all relationships between us and the VIE.

ADVantage is a joint venture company formed to operate deepwater drilling rigs in Egypt. We determined that ADVantage met the criteria of a VIE for accounting purposes because its equity at risk was insufficient to permit it to carry on its activities without additional subordinated financial support from us. We also determined that we are the primary beneficiary for accounting purposes since we are entitled to use ADVantage for deepwater drilling contract opportunities rejected by ADES, and have the (a) power to direct the operating activities associated with the deepwater drilling rigs, which are the activities that most significantly impact the entity’s

economic performance, and (b) obligation to absorb losses or the right to receive a majority of the benefits that could be potentially significant to the VIE. As a result, we consolidate ADVantage in our consolidated financial statements, we eliminate intercompany transactions and we present the interests that are not owned by us as “Noncontrolling interests” in our Consolidated Balance Sheets. The carrying amount associated with ADVantage was as follows:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current assets	$	30,337	$	8,099
Non-current assets		223		212
Current liabilities		12,510		2,838
Non-current liabilities		12,523		1,859
Net carrying amount	$	5,527	$	3,614

As ADVantage is a majority owned subsidiary of the Company, it serves as a guarantor under the First Lien Indenture relating to the 9.25% First Lien Notes. The 9.25% First Lien Notes are secured by a first priority lien on all of the assets of ADVantage, subject to certain exceptions. Creditors’ recourse against ADVantage for liabilities of ADVantage is limited to the assets of ADVantage.

See “Note 9. Supplemental Financial Information” of these “Notes to Unaudited Consolidated Financial Statements” for additional information regarding related party transactions associated with this joint venture.

Use of Estimates

Use of Estimates: The preparation of financial statements in accordance with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to property and equipment, income taxes, insurance, employee benefits and contingent liabilities. Actual results could differ from these estimates.

Cash and Cash Equivalents

Cash and Cash Equivalents: Includes deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.

Materials and Supplies

Materials and Supplies: Consists of materials, spare parts, consumables and related supplies for our drilling rigs. We record these materials and supplies at their average cost.

Property and Equipment

Property and Equipment: Consists of our drilling rigs, furniture and fixtures, computer equipment and capitalized costs for computer software. Drilling rigs are depreciated on a component basis over estimated useful lives ranging from five to 35 years on a straight-line basis as of the date placed in service. Other assets are depreciated upon placement in service over estimated useful lives ranging from three to seven years on a straight-line basis. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from our Consolidated Balance Sheets and the resulting gain or loss is included in “Operating costs” or “General and administrative” expenses on the Consolidated Statement of Operations, depending on the nature of the asset. For the three and six months ended June 30, 2022, we recognized a net loss of approximately $0.3 million and a net gain of approximately $1.6 million, respectively, related to the sale or retirement of assets. For the six months ended June 30, 2021, we recognized a net gain of approximately $2.7 million related to the sale or retirement of assets. The gain/loss related to the sale or retirement of assets for the three months ended June 30, 2021 was immaterial.

We evaluate the realization of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized would be computed as the excess of the asset’s carrying value over the estimated fair value. Estimates of future cash flows require us to make long-term forecasts of our future revenues and operating costs with regard to the assets subject to review. Our business, including the utilization rates and dayrates we receive for our drilling rigs, depends on the level of our customers’ expenditures for oil and gas exploration, development and production expenditures. Oil and gas prices and customers’ expectations of potential changes in these prices, the general outlook for worldwide economic growth, political and social stability in the major oil and gas producing basins of the world, availability of credit and changes in governmental laws and regulations, among many other factors, significantly affect our customers’ levels of expenditures. Sustained declines in or persistent depressed levels of oil and gas prices, worldwide rig counts and utilization, reduced access to credit markets, reduced or depressed sale prices of comparably equipped jackups and drillships and any other significant adverse economic news could require us to evaluate the realization of our drilling rigs. As of June 30, 2022, no triggering event has occurred to indicate that the carrying value of our drilling rigs may not be recoverable.

Interest costs and the amortization of debt financing costs related to the financings of our drilling rigs are capitalized as part of the cost while they are under construction and prior to the commencement of each vessel’s first contract. We did not capitalize any interest for the reported periods.

Debt Financing Costs

Debt Financing Costs: Costs incurred with financing debt are deferred and amortized over the term of the related financing facility on a straight-line basis, which approximates the interest method. Debt issuance costs related to a recognized debt liability are presented in the Consolidated Balance Sheets as a direct deduction from the carrying amount of that debt liability.

Rig and Equipment Certifications

Rig and Equipment Certifications: We are required to obtain regulatory certifications to operate our drilling rigs and certain specified equipment, and must maintain such certifications through periodic inspections and surveys. The costs associated with these certifications, including drydock costs, are deferred and amortized over the corresponding certification periods.

Revenue Recognition

Revenue Recognition: See “Note 3. Revenue from Contracts with Customers” of these “Notes to Unaudited Consolidated Financial Statements” for further information.

The activities that primarily drive the revenue earned in our drilling contracts with customers include (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig, (ii) delivering the drilling rig by mobilizing to (and demobilizing from) the drill site, and (iii) performing pre-operating activities, including rig preparation activities and/or equipment modifications required for the contract.

The integrated drilling services that we perform under each drilling contract represent a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods. We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority.

Dayrate Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate billed to the customer is determined based on varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term and therefore, recognized as we perform the daily drilling services.

For rigs owned by a third-party that we manage or support, the contracts generally provide for a fixed fee based on various factors, including the status of the rig or a specific duration. In addition, we may earn a marketing fee based on a percentage of the effective dayrate of a drilling contract secured on behalf of the third-party and a variable management fee of the gross margin associated with managing an operating rig.

Amortizable Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for (i) the mobilization of equipment and personnel prior to the commencement of drilling services, (ii) the demobilization of equipment and personnel upon contract completion, and (iii) postponement fees in consideration for the postponement of a contract until a later date.

These activities are not considered to be distinct within the context of the contract and therefore, the associated revenue is allocated to the overall single performance obligation.

Mobilization fees received prior to the commencement of drilling operations are recorded as a contract liability and amortized on a straight‑line basis over the initial contract period. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the initial contract term, with an offset to an accretive contract asset. In many contracts, demobilization fees are contingent upon the occurrence or non-occurrence of a future event and the estimate for such revenue may therefore be constrained. In such cases, this may result in cumulative-effect adjustments to demobilization revenues upon changes in our estimates of future events during the contract term. Postponement fees received that are contingent upon the occurrence or non-occurrence of a future event are recognized on a straight-line basis over the contract term. Fees received for the mobilization or demobilization of equipment and personnel are included in “Contract drilling services” in our Consolidated Statement of Operations.

Capital Upgrade/Contract Preparation Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. These activities are not considered to be distinct within the context of the contract and therefore, fees received are recorded as a contract liability and amortized to contract drilling revenues on a straight-line basis over the initial contract term.

Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. We are generally considered a principal in such transactions and therefore, recognize reimbursable revenues and the corresponding costs as we provide the customer‑requested goods and services.

Disaggregation of Revenue

The following tables present our revenue disaggregated by revenue source for the periods indicated:

	Three Months Ended June 30, 2022								Three Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	15,963	$	24,304	$	2,840	$	43,107	$	17,473	$	8,968	$	497	$	26,938
Amortized revenue		1,439		1,038		—		2,477		5,214		—		—		5,214
Reimbursable revenue		1,944		3,175		22,535		27,654		2,400		311		738		3,449
Total revenue	$	19,346	$	28,517	$	25,375	$	73,238	$	25,087	$	9,279	$	1,235	$	35,601
	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	31,294	$	50,300	$	3,943	$	85,537	$	26,371	$	17,795	$	595	$	44,761
Amortized revenue		1,659		4,404		—		6,063		5,214		—		—		5,214
Reimbursable revenue		4,151		6,151		29,667		39,969		4,722		332		738		5,792
Total revenue	$	37,104	$	60,855	$	33,610	$	131,569	$	36,307	$	18,127	$	1,333	$	55,767

Dayrate revenue and amortized revenue for “Jackups” and “Deepwater” are included within “Contract drilling services” in our Consolidated Statement of Operations. Dayrate revenue for “Managed” is included within “Management fees” in our Consolidated Statement of Operations. All other revenue are included within “Reimbursables and other” in our Consolidated Statement of Operations.

Accounts Receivable, Contract Liabilities and Contract Costs

Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on customer invoices typically range from 30 to 45 days.

We recognize contract liabilities, recorded in other “Other current liabilities” and “Other long-term liabilities”, for prepayments received from customers and for deferred revenue received for mobilization, contract preparation and capital upgrades.

Certain direct and incremental costs incurred for contract preparation, initial mobilization and modifications of contracted rigs represent contract fulfillment costs as they relate directly to a contract, enhance resources that will be used to satisfy our performance obligations in the future and are expected to be recovered. These costs are deferred as a current or noncurrent asset depending on the length of the initial contract term and are amortized on a straight-line basis to operating costs as services are rendered over the initial term of the related drilling contract. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred to mobilize a rig without a contract are expensed as incurred.

The following table provides information about contract cost assets and contract revenue liabilities from contracts with customers:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current contract cost assets	$	896	$	1,405
Noncurrent contract cost assets		5,021		6,832
Noncurrent contract cost assets - held for sale		—		4,196
Current contract revenue assets		—		1,903
Current contract revenue liabilities		31,557		12,311
Noncurrent contract revenue liabilities		1,397		1,893

Significant changes in contract cost assets and contract revenue liabilities during the six months ended June 30, 2022 are as follows:

	Contract Cost Assets			Contract Revenue Assets			Contract Revenues
(unaudited, in thousands)
Balance as of December 31, 2021	$	12,433		$	1,903		$	14,204
Increase (decrease) due to contractual changes		(570	)		—			46,066
Decrease due to recognition of revenue		(5,946	)		(1,903	)		(27,316	)
Balance as of June 30, 2022 (1)	$	5,917		$	—		$	32,954

(1)We expect to recognize contract revenues of approximately $32.1 million during the remaining six months of 2022 and $0.9 million thereafter arising primarily from unsatisfied performance obligations existing as of June 30, 2022.

We have elected to utilize an optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly increments, the variability of which will be resolved at the time the future services are rendered.

Income Taxes

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which our operations are conducted and income is earned. Deferred income tax assets and liabilities are computed for differences between the financial statement basis and tax basis of assets and liabilities that will result in future taxable or tax deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. We do not establish deferred tax liabilities for certain of our foreign earnings that we intend to indefinitely reinvest to finance foreign activities. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. We recognize interest and penalties related to income taxes as a component of income tax expense.

Concentrations of Credit Risk

Concentrations of Credit Risk: Financial instruments that potentially subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We monitor the credit ratings and our concentration of risk with these financial institutions on a continuing basis to safeguard our cash deposits. We have a limited number of key customers, who are primarily large international oil and gas operators, national oil companies and other international oil and gas companies. Our contracts provide for monthly billings as services are performed and we monitor compliance with contract payment terms on an ongoing basis. Payment terms on customer invoices typically range from 30 to 45 days. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer.

Credit Losses – Accounts Receivable: The allowance for doubtful accounts is based on the Company’s assessment of the collectability of customer accounts. Current estimates of expected credit losses consider factors such as the historical experience and credit quality of our customers. The Company considers historical loss information as the most reasonable basis on which to determine expected credit losses unless current or forecasted future conditions for customers (or customer groups) indicate that risk characteristics have changed. We also considered the impact of the COVID-19 pandemic and the associated oil price and market share volatility on our allowance for doubtful accounts. The allowance for doubtful accounts on our trade receivables was $5.0 million as of each of June 30, 2022 and December 31, 2021, respectively. This amount represents a customer’s decision not to pay us for days impacted by what we believe were force majeure and other similar events for which we would still be entitled to receive payment under the applicable contract. We disagree with the customer's decision and are currently evaluating our remedies, if any, under the applicable contract.

Earnings (Loss) per Share

Earnings (loss) per Share: We compute basic and diluted EPS in accordance with the two-class method. We include restricted stock units granted to employees and directors that contain non-forfeitable rights to dividends as such grants are considered participating securities. Basic earnings (loss) per share are based on the weighted average number of Ordinary Shares outstanding during the applicable period. Diluted EPS are computed based on the weighted average number of Ordinary Shares and ordinary share equivalents outstanding in the applicable period, as if all potentially dilutive securities were converted into Ordinary Shares (using the treasury stock method).

The following is a reconciliation of the number of shares used for the basic and diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Weighted average Ordinary Shares outstanding for basic EPS		13,115		13,115		13,115		13,115
Restricted share equity awards		217		—		215		—
Adjusted weighted average Ordinary Shares outstanding for diluted EPS		13,332		13,115		13,330		13,115

The following sets forth the number of shares excluded from diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Restricted share equity awards		—		218		—		218
Future potentially dilutive Ordinary Shares excluded from diluted EPS		—		218		—		218

Functional Currency

Functional Currency: We consider USD to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in USD, which limits our exposure to currency exchange rate fluctuations. We recognize currency exchange rate gains and losses in “Other, net” in our Consolidated Statement of Operations. For the three and six months ended June 30, 2022, we recognized a net gain of approximately $1.0 million and $1.8 million, respectively, related to currency exchange rates. For the three and six months ended June 30, 2021, we recognized a net loss of approximately $0.2 million and $0.8 million, respectively, related to currency exchange rates.

Fair Value of Financial Instruments

Fair Value of Financial Instruments: The fair value of our short-term financial assets and liabilities approximates the carrying amounts represented in our Consolidated Balance Sheets principally due to the short-term nature or floating rate nature of these instruments. As of June 30, 2022, the fair value of the 9.25% First Lien Notes was approximately $336.6 million based on quoted market prices in a less active market, a Level 2 measurement.

Share-based Compensation

Share-based Compensation: TBGs granted under the 2016 Amended MIP vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a QLE. Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the date as defined in the individual award letter. PBGs granted under the 2016 Amended MIP contain vesting eligibility provisions tied to the earlier of a QLE or seven years from the Effective Date. Upon the occurrence of a vesting eligibility event, the number of PBGs that actually vest will be dependent on the achievement of pre-determined TEV targets specified in the grants.

Both the TBGs and PBGs were classified as liabilities consistent with the classification of the underlying securities prior to the Conversion. Following the Conversion, outstanding TBGs and PBGs were subject to modification accounting and were re-classified as equity awards. Under the provisions of ASC 718 Compensation – Stock Compensation share-based compensation expense is recognized over the requisite service period from the grant date to the fourth year vest date for TBGs. For PBGs, expense will be recognized when it is probable that the TEV targets will be met. Once it is probable the performance condition will be met, compensation expense based on the fair value of the PBGs at the conversion date of the Convertible Notes will be recognized for the service period completed to the seventh anniversary of the Effective Date for PBGs.

Noncontrolling Interest

Noncontrolling Interest:

Noncontrolling interests represent the equity investments of the minority owner in ADVantage, a joint venture with ADES that we consolidate in our financial statements.

Recently Adopted Accounting Standards

Recently Adopted Accounting Standards:

No new accounting standards were adopted during the six-month period ended June 30, 2022.

Recently Issued Accounting Standards

Recently Issued Accounting Standards:

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, with respect to our consolidated financial statements.

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Basis of Presentation and Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Schedule of Carrying Amounts of Assets and Liabilities of VIE

The carrying amount associated with ADVantage was as follows:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current assets	$	30,337	$	8,099
Non-current assets		223		212
Current liabilities		12,510		2,838
Non-current liabilities		12,523		1,859
Net carrying amount	$	5,527	$	3,614

Schedule of Reconciliation of Number of Shares Used for Basic and Diluted EPS Computations

The following is a reconciliation of the number of shares used for the basic and diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Weighted average Ordinary Shares outstanding for basic EPS		13,115		13,115		13,115		13,115
Restricted share equity awards		217		—		215		—
Adjusted weighted average Ordinary Shares outstanding for diluted EPS		13,332		13,115		13,330		13,115

Schedule of Number of Shares Excluded from Diluted EPS Computations

The following sets forth the number of shares excluded from diluted EPS computations:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(unaudited, in thousands)
Restricted share equity awards		—		218		—		218
Future potentially dilutive Ordinary Shares excluded from diluted EPS		—		218		—		218

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Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Schedule of Disaggregated by Revenue

The following tables present our revenue disaggregated by revenue source for the periods indicated:

	Three Months Ended June 30, 2022								Three Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	15,963	$	24,304	$	2,840	$	43,107	$	17,473	$	8,968	$	497	$	26,938
Amortized revenue		1,439		1,038		—		2,477		5,214		—		—		5,214
Reimbursable revenue		1,944		3,175		22,535		27,654		2,400		311		738		3,449
Total revenue	$	19,346	$	28,517	$	25,375	$	73,238	$	25,087	$	9,279	$	1,235	$	35,601
	Six Months Ended June 30, 2022								Six Months Ended June 30, 2021
	Jackups		Deepwater		Managed		Consolidated		Jackups		Deepwater		Managed		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	31,294	$	50,300	$	3,943	$	85,537	$	26,371	$	17,795	$	595	$	44,761
Amortized revenue		1,659		4,404		—		6,063		5,214		—		—		5,214
Reimbursable revenue		4,151		6,151		29,667		39,969		4,722		332		738		5,792
Total revenue	$	37,104	$	60,855	$	33,610	$	131,569	$	36,307	$	18,127	$	1,333	$	55,767

Schedule of Contract Cost Assets and Contract Revenue Liabilities from Contracts with Customers

The following table provides information about contract cost assets and contract revenue liabilities from contracts with customers:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Current contract cost assets	$	896	$	1,405
Noncurrent contract cost assets		5,021		6,832
Noncurrent contract cost assets - held for sale		—		4,196
Current contract revenue assets		—		1,903
Current contract revenue liabilities		31,557		12,311
Noncurrent contract revenue liabilities		1,397		1,893

Schedule of Significant Changes in Contract Cost Assets and Contract Revenue Liabilities

Significant changes in contract cost assets and contract revenue liabilities during the six months ended June 30, 2022 are as follows:

	Contract Cost Assets			Contract Revenue Assets			Contract Revenues
(unaudited, in thousands)
Balance as of December 31, 2021	$	12,433		$	1,903		$	14,204
Increase (decrease) due to contractual changes		(570	)		—			46,066
Decrease due to recognition of revenue		(5,946	)		(1,903	)		(27,316	)
Balance as of June 30, 2022 (1)	$	5,917		$	—		$	32,954

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Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Components of Lease Expense

The components of lease expense for the periods indicated were as follows:

		Three Months Ended June 30,						Six Months Ended June 30,
(unaudited, in thousands)	Classification in the Consolidated Statement of Operations	2022			2021			2022			2021
Operating lease cost(1)	Operating costs	$	313		$	713		$	568		$	1,615
Operating lease cost(1)	General and administrative		193			151			477			303
Sublease income	Operating costs		—			(121	)		—			(242	)
Sublease income	General and administrative		(224	)		(62	)		(407	)		(124	)
Total operating lease cost		$	282		$	681		$	638		$	1,552

(1) Short-term lease costs were approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2021, respectively. Operating cash flows used for operating leases approximates lease expense.

Schedule of Operating Leases Included in Consolidated Balance Sheet

(unaudited, in thousands)	Classification in the Consolidated Balance Sheets	June 30, 2022		December 31, 2021
Assets:
Operating lease assets	Operating lease ROU assets	$	1,610	$	2,450
	Operating lease ROU assets - Held for sale		—		197
Total leased assets		$	1,610	$	2,647
Liabilities:
Current operating	Other current liabilities	$	1,401	$	1,710
	Other current liabilities - Held for sale		—		103
Noncurrent operating	Other long-term liabilities		333		969
	Other long-term liabilities - Held for sale		—		93
Total lease liabilities		$	1,734	$	2,875

Schedule of Maturities of Operating Lease Liabilities

As of June 30, 2022, maturities of lease liabilities were as follows:

(unaudited, in thousands)	Operating Leases
Remaining six months of 2022	$	828
2023		996
2024		—
2025		—
2026		—
Total future lease payments	$	1,824
Less imputed interest		(90	)
Present value of lease obligations	$	1,734

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Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Long-term Debt

Our debt was composed of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
9.25% First Lien Notes, net of financing costs of $2,322 and $3,142, respectively	$	347,678	$	346,858
Less current maturities of long-term debt		—		—
Long-term debt, net	$	347,678	$	346,858

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Supplemental Financial Information (Tables)

6 Months Ended

Jun. 30, 2022

Balance Sheet Related Disclosures [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Sales tax receivable	$	3,552	$	8,445
Other receivables		1,140		234
Income tax receivable		577		1,423
Prepaid insurance		959		257
Current deferred contract costs		896		1,405
Current contract asset		—		1,903
Other		6,067		4,642
	$	13,191	$	18,309

Assets Held for Sale

Assets held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Trade receivables, net	$	—	$	7,306
Materials and supplies		—		13,510
Prepaid expenses and other current assets		—		3,768
Property & equipment, net		—		87,441
Noncurrent deferred contract costs		—		4,196
Operating lease ROU asset		—		197
Other noncurrent assets		—		699
	$	—	$	117,117

Property and Equipment, Net

Property and equipment, net, consisted of the following as of the dates indicated:

	June 30, 2022			December 31, 2021
(unaudited, in thousands)
Drilling equipment	$	624,419		$	626,546
Assets under construction		1,957			148
Office and technology equipment		18,405			18,405
Leasehold improvements		523			523
		645,304			645,622
Accumulated depreciation		(287,314	)		(266,018	)
Property and equipment, net	$	357,990		$	379,604

Other Assets

Other assets consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Noncurrent restricted cash	$	15,616	$	15,644
Deferred certification costs		3,976		5,199
Noncurrent deferred contract costs		5,021		6,832
Deferred income taxes		1,473		1,776
Other noncurrent assets		6,463		2,392
	$	32,549	$	31,843

Other Current Liabilities

Other current liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Interest	$	4,136	$	4,136
Compensation (1)		5,147		7,040
2016 MIP - Dividend equivalent (2)		5,277		—
Income taxes payable		3,755		5,589
Current deferred revenue		31,557		12,311
Current portion of operating lease liabilities		1,401		1,710
Other		2,546		747
	$	53,819	$	31,533

(1) Includes $2.3 million as of December 31, 2021 related to cash awards granted to certain key employees of the Company pursuant to underlying award agreements and issued under the 2016 Amended MIP. The final payout of this cash award was made in June 2022.

(2) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Liabilities Held for Sale

Liabilities held for sale consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Accounts payable	$	—	$	4,140
Compensation		—		464
Income taxes payable		—		716
Current portion of operating lease liabilities		—		103
Deferred income taxes		—		1,190
Noncurrent operating lease liabilities		—		93
Other		—		14
	$	—	$	6,720

Other Long-term Liabilities

Other Long-term liabilities consisted of the following as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
2016 MIP - Dividend equivalent (1)	$	3,521	$	8,735
Noncurrent deferred revenue		1,397		1,893
Noncurrent operating lease liabilities		333		969
Other non-current liabilities		4,707		5,415
	$	9,958	$	17,012

(1) “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

Reconciliation of Cash, Cash Equivalents and Restricted Cash

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows as of the dates indicated:

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cash and cash equivalents	$	227,328	$	73,343
Restricted cash		3,323		1,621
Restricted cash included within Other Assets		15,616		15,644
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$	246,267	$	90,608

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Business Segment and Significant Customer Information (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Schedule of Segment Reporting Information by Segment

Our segment results for the periods indicated were as follows:

	Three Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	42,744	$	—	$	—		$	42,744
Management fees		—		2,840		—			2,840
Reimbursables and other		5,119		22,535		—			27,654
Total revenue		47,863		25,375		—			73,238
Operating costs and expenses
Operating costs		36,164		23,241		—			59,405
General and administrative		—		—		6,910			6,910
Depreciation		10,695		—		392			11,087
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		46,859		23,241		(53,479	)		16,621
Income from operations		1,004		2,134		53,479			56,617
Other (expense) income
Interest income		—		—		7			7
Interest expense and financing charges		—		—		(8,503	)		(8,503	)
Other, net		—		—		(1,011	)		(1,011	)
Total other expense		—		—		(9,507	)		(9,507	)
Income before income taxes	$	1,004	$	2,134	$	43,972		$	47,110
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	1,004	$	2,134
Depreciation		10,695		—
Segment adjusted operating income	$	11,699	$	2,134

	Three Months Ended June 30, 2021
(unaudited, in thousands)	Drilling Services			Managed Services		Unallocated			Consolidated
Revenue
Contract drilling services	$	31,655		$	—	$	—		$	31,655
Management fees		—			497		—			497
Reimbursables and other		2,711			738		—			3,449
Total revenue		34,366			1,235		—			35,601
Operating costs and expenses
Operating costs		34,867			1,189		—			36,056
General and administrative		—			—		4,967			4,967
Depreciation		13,752			—		409			14,161
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		48,619			1,189		5,376			55,184
(Loss) income from operations		(14,253	)		46		(5,376	)		(19,583	)
Other (expense) income
Interest income		—			—		10			10
Interest expense and financing charges		—			—		(8,511	)		(8,511	)
Other, net		—			—		(179	)		(179	)
Total other expense		—			—		(8,680	)		(8,680	)
(Loss) income before income taxes	$	(14,253	)	$	46	$	(14,056	)	$	(28,263	)
Reconciliation of (loss) income from operations to segment operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(14,253	)	$	46
Depreciation		13,752			—
Segment adjusted operating (loss) income	$	(501	)	$	46

	Six Months Ended June 30, 2022
	Drilling Services		Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	87,657	$	—	$	—		$	87,657
Management fees		—		3,943		—			3,943
Reimbursables and other		10,302		29,667		—			39,969
Total revenue		97,959		33,610		—			131,569
Operating costs and expenses
Operating costs		72,602		30,736		—			103,338
General and administrative		—		—		13,492			13,492
Depreciation		21,551		—		831			22,382
Gain on EDC Sale		—		—		(60,781	)		(60,781	)
Total operating costs and expenses		94,153		30,736		(46,458	)		78,431
Income from operations		3,806		2,874		46,458			53,138
Other (expense) income
Interest income		—		—		11			11
Interest expense and financing charges		—		—		(17,007	)		(17,007	)
Other, net		—		—		(1,786	)		(1,786	)
Total other expense		—		—		(18,782	)		(18,782	)
Income before income taxes	$	3,806	$	2,874	$	27,676		$	34,356
Reconciliation of income from operations to segment adjusted operating income:	Drilling Services		Managed Services
Income from operations	$	3,806	$	2,874
Depreciation		21,551		—
Segment adjusted operating income	$	25,357	$	2,874

	Six Months Ended June 30, 2021
	Drilling Services			Managed Services		Unallocated			Consolidated
(unaudited, in thousands)
Revenue
Contract drilling services	$	49,380		$	—	$	—		$	49,380
Management fees		—			595		—			595
Reimbursables and other		5,054			738		—			5,792
Total revenue		54,434			1,333		—			55,767
Operating costs and expenses
Operating costs		60,224			1,189		—			61,413
General and administrative		—			—		10,462			10,462
Depreciation		27,467			—		819			28,286
Gain on EDC Sale		—			—		—			—
Total operating costs and expenses		87,691			1,189		11,281			100,161
(Loss) income from operations		(33,257	)		144		(11,281	)		(44,394	)
Other (expense) income
Interest income		—			—		110			110
Interest expense and financing charges		—			—		(17,021	)		(17,021	)
Other, net		—			—		(793	)		(793	)
Total other expense		—			—		(17,704	)		(17,704	)
(Loss) income before income taxes	$	(33,257	)	$	144	$	(28,985	)	$	(62,098	)
Reconciliation of (loss) income from operations to segment adjusted operating (loss) income:	Drilling Services			Managed Services
(Loss) income from operations	$	(33,257	)	$	144
Depreciation		27,467			—
Segment adjusted operating (loss) income	$	(5,790	)	$	144

Summary of Revenue by Country

Our revenue by country and segment was as follows for the periods indicated (revenue of less than 10% are included in “Other countries”):

		Three months ended June 30,				Six months ended June 30,
Country	Segment	2022		2021		2022		2021
(unaudited, in thousands)
UAE	Managed Services	$	19,778	$	—	$	27,966	$	—
Egypt	Drilling Services		9,738		—		26,859		—
India	Drilling Services and Managed Services		13,230		9,297		26,518		18,152
Qatar	Drilling Services		—		7,697		14,319		14,894
Indonesia	Drilling Services		—		—		—		—
Montenegro	Drilling Services		—		16,253		—		16,306
Other countries (1)	Drilling Services and Managed Services		30,492		2,354		35,907		6,415
Total revenues		$	73,238	$	35,601	$	131,569	$	55,767

(1) “Other countries” represent countries in which we operate that individually had operating revenues representing less than 10% of total revenues earned.

Summary of Revenue by Customers

Revenue with customers that contributed 10% or more of revenue for the periods indicated were as follows:

		Three months ended June 30,						Six months ended June 30,
(unaudited)	Segment	2022			2021			2022			2021
Customer 1	Managed Services		30	%		0	%		23	%		0	%
Customer 2	Drilling Services and Managed Services		18	%		26	%		20	%		33	%
Customer 3	Drilling Services		13	%		0	%		20	%		0	%
Customer 4	Drilling Services		0	%		17	%		10	%		11	%
Customer 5	Drilling Services		0	%		46	%		0	%		29	%
Customer 6	Drilling Services		0	%		0	%		0	%		16	%

Schedule of Property and Equipment, Net by Country

Our property and equipment, net by country, was as follows as of the dates indicated (property and equipment of less than 10% are included in “Other countries”):

	June 30, 2022		December 31, 2021
(unaudited, in thousands)
Cyprus	$	165,754	$	—
Egypt		—		173,187
India		88,895		96,583
Indonesia		60,953		63,581
Other countries (1)		42,388		46,253
Total property and equipment	$	357,990	$	379,604

(1) “Other countries” represent countries in which we individually had property and equipment, net, representing less than 10% of total property and equipment, net.

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Organization and Recent Events - Additional Information (Detail) $ in Thousands			3 Months Ended			6 Months Ended
	Jun. 09, 2022 Well	May 27, 2022 USD ($)	Jun. 30, 2022 USD ($)	Mar. 31, 2022 $ / bbl	Jun. 30, 2021 USD ($)	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)
Organization And Recent Events [Line Items]
Net gain			$ 48,099		$ (28,965)	$ 33,201	$ (64,949)
TotalEnergies contract minimum term	225 days
Number of wells | Well	2
EDC Support Services Agreements [Member]
Organization And Recent Events [Line Items]
Exchange for customary fees and reimbursements, support services term						3 years
Global oil prices
Organization And Recent Events [Line Items]
Global oil prices | $ / bbl				125.72
Subsidiary Agreement | EDC Purchase Agreement [Member]
Organization And Recent Events [Line Items]
Purchase price consideration		$ 170,000
Contract preparation expense reimbursement		30,000
Net gain		$ 60,800

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Basis of Presentation and Significant Accounting Policies - Schedule of Carrying Amounts of Assets and Liabilities of VIE (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Variable Interest Entity [Line Items]
Current assets	$ 362,147	$ 285,497
Current liabilities	96,689	69,673
ADVantage
Variable Interest Entity [Line Items]
Current assets	30,337	8,099
Non-current assets	223	212
Current liabilities	12,510	2,838
Non-current liabilities	12,523	1,859
Net carrying amount	$ 5,527	$ 3,614

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Basis of Presentation and Significant Accounting Policies - Additional Information (Detail) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Basis Of Presentation And Significant Accounting Policies [Line Items]
Net gain (loss) on sale or retirement of assets	$ (300,000)		$ 1,630,000	$ 2,715,000
Capitalized interest			0	0
Allowance for doubtful accounts	5,000,000.0		5,000,000.0		$ 5,000,000.0
Foreign currency transaction gain (loss)	1,000,000.0	$ (200,000)	$ 1,800,000	$ (800,000)
TBGs
Basis Of Presentation And Significant Accounting Policies [Line Items]
Vesting period			4 years
Terms of TBGs vesting and settlement			TBGs granted under the 2016 Amended MIP vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a QLE. Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the date as defined in the individual award letter.
PBGs
Basis Of Presentation And Significant Accounting Policies [Line Items]
Vesting period			7 years
9.25% First Lien Notes
Basis Of Presentation And Significant Accounting Policies [Line Items]
Fair value of notes outstanding	$ 336,600,000		$ 336,600,000
Minimum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Term of customer invoice payment			30 days
Maximum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Term of customer invoice payment			45 days
Drilling Equipment | Minimum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			5 years
Drilling Equipment | Maximum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			35 years
Office and Technology Equipment | Minimum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			3 years
Office and Technology Equipment | Maximum
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			7 years

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Basis of Presentation and Significant Accounting Policies - Schedule of Reconciliation of Number of Shares Used For Basic and Diluted EPS Computation (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Basis Of Presentation And Significant Accounting Policies [Line Items]
Weighted average Ordinary Shares outstanding for basic EPS	13,115	13,115	13,115	13,115
Adjusted weighted average Ordinary Shares outstanding for diluted EPS	13,332	13,115	13,330	13,115
Restricted Shares Equity Award
Basis Of Presentation And Significant Accounting Policies [Line Items]
Restricted share equity awards	217	0	215	0

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Basis of Presentation and Significant Accounting Policies - Schedule of Number of Shares Excluded from Diluted EPS Computation (Detail) - shares shares in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Basis Of Presentation And Significant Accounting Policies [Line Items]
Future potentially dilutive Ordinary Shares excluded from diluted EPS	0	218	0	218
Restricted Shares Equity Award
Basis Of Presentation And Significant Accounting Policies [Line Items]
Future potentially dilutive Ordinary Shares excluded from diluted EPS	0	218	0	218

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Revenue from Contracts with Customers - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2022
Minimum
Disaggregation Of Revenue [Line Items]
Term of customer invoice payment	30 days
Maximum
Disaggregation Of Revenue [Line Items]
Term of customer invoice payment	45 days

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Revenue from Contracts with Customers - Schedule of Disaggregated by Revenue (Detail) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation Of Revenue [Line Items]
Total revenue	$ 73,238	$ 35,601	$ 131,569	$ 55,767
Jackups
Disaggregation Of Revenue [Line Items]
Total revenue	19,346	25,087	37,104	36,307
Deepwater
Disaggregation Of Revenue [Line Items]
Total revenue	28,517	9,279	60,855	18,127
Managed
Disaggregation Of Revenue [Line Items]
Total revenue	25,375	1,235	33,610	1,333
Dayrate Revenue
Disaggregation Of Revenue [Line Items]
Total revenue	43,107	26,938	85,537	44,761
Dayrate Revenue | Jackups
Disaggregation Of Revenue [Line Items]
Total revenue	15,963	17,473	31,294	26,371
Dayrate Revenue | Deepwater
Disaggregation Of Revenue [Line Items]
Total revenue	24,304	8,968	50,300	17,795
Dayrate Revenue | Managed
Disaggregation Of Revenue [Line Items]
Total revenue	2,840	497	3,943	595
Amortized Revenue
Disaggregation Of Revenue [Line Items]
Total revenue	2,477	5,214	6,063	5,214
Amortized Revenue | Jackups
Disaggregation Of Revenue [Line Items]
Total revenue	1,439	5,214	1,659	5,214
Amortized Revenue | Deepwater
Disaggregation Of Revenue [Line Items]
Total revenue	1,038		4,404
Reimbursable Revenue
Disaggregation Of Revenue [Line Items]
Total revenue	27,654	3,449	39,969	5,792
Reimbursable Revenue | Jackups
Disaggregation Of Revenue [Line Items]
Total revenue	1,944	2,400	4,151	4,722
Reimbursable Revenue | Deepwater
Disaggregation Of Revenue [Line Items]
Total revenue	3,175	311	6,151	332
Reimbursable Revenue | Managed
Disaggregation Of Revenue [Line Items]
Total revenue	$ 22,535	$ 738	$ 29,667	$ 738

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Revenue from Contracts with Customers - Schedule of Contract Cost Assets and Contract Revenue Liabilities from Contracts with Customers (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Revenue from Contract with Customer [Abstract]
Current contract cost assets	$ 896	$ 1,405
Noncurrent contract cost assets	5,021	6,832
Noncurrent contract cost assets - held for sale		4,196
Current contract revenue assets		1,903
Current contract revenue liabilities	31,557	12,311
Noncurrent contract revenue liabilities	$ 1,397	$ 1,893

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Revenue from Contracts with Customers - Schedule of Significant Changes in Contract Cost Assets and Contract Revenue Liabilities (Detail) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Revenue from Contract with Customer [Abstract]
Beginning balance, contract costs assets	$ 12,433
Increase (decrease) due to contractual changes, contract cost assets	(570)
Decrease due to recognition of revenue, contract cost asset assets	(5,946)
Ending balance, contract cost assets	5,917	[1]
Beginning balance, contract revenue assets	1,903
Decrease due to recognition of revenue, contract revenue assets	(1,903)
Beginning balance, contract revenues	14,204
Increase (decrease) due to contractual changes, contract revenues	46,066
Decrease due to recognition of revenue, contract revenues	(27,316)
Ending balance, contract revenues	$ 32,954	[1]

[1] We expect to recognize contract revenues of approximately $32.1 million during the remaining six months of 2022 and $0.9 million thereafter arising primarily from unsatisfied performance obligations existing as of June 30, 2022.

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Revenue from Contracts with Customers - Schedule of Significant Changes in Contract Cost Assets and Contract Revenue Liabilities (Parenthetical) (Detail) $ in Millions	Jun. 30, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2022-07-01
Disaggregation Of Revenue [Line Items]
Contract revenues, remaining performance obligation	$ 32.1
Contract revenues, remaining performance obligation, expected timing of satisfaction, period	6 months
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date: 2023-07-01
Disaggregation Of Revenue [Line Items]
Contract revenues, remaining performance obligation	$ 0.9
Contract revenues, remaining performance obligation, expected timing of satisfaction, period

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Leases - Components of Lease Expense (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Lessee Lease Description [Line Items]
Total operating lease cost		$ 282	$ 681	$ 638	$ 1,552
Operating Costs
Lessee Lease Description [Line Items]
Total operating lease cost	[1]	313	713	568	1,615
Sublease income			(121)		(242)
General and Administrative
Lessee Lease Description [Line Items]
Total operating lease cost	[1]	193	151	477	303
Sublease income		$ (224)	$ (62)	$ (407)	$ (124)

[1] Short-term lease costs were approximately $0.2 million and $0.3 million during the three and six months ended June 30, 2022, respectively, and $0.1 million and $0.2 million during the three and six months ended June 30, 2021, respectively. Operating cash flows used for operating leases approximates lease expense.

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Leases - Components of Lease Expense (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Short term lease costs	$ 0.2	$ 0.1	$ 0.3	$ 0.2

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Leases - Schedule of Operating Leases Included in Consolidated Balance Sheet (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Assets:
Operating lease assets	$ 1,610	$ 2,450
Total leased assets	1,610	2,647
Liabilities:
Current operating	1,401	1,710
Noncurrent operating	333	969
Total lease liabilities	1,734	2,875
Operating Lease ROU Assets
Assets:
Operating lease assets	1,610	2,450
Operating Lease ROU Assets - Held for Sale
Assets:
Operating lease assets		197
Other Current Liabilities
Liabilities:
Current operating	1,401	1,710
Other Current Liabilities - Held for Sale
Liabilities:
Current operating		103
Other Long-term Liabilities
Liabilities:
Noncurrent operating	$ 333	969
Other Long-term Liabilities - Held for Sale
Liabilities:
Noncurrent operating		$ 93

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Leases - Schedule of Maturities of Operating Lease Liabilities (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
Remaining six months of 2022	$ 828
2023	996
Total future lease payments	1,824
Less imputed interest	(90)
Present value of lease obligations	$ 1,734	$ 2,875

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Leases - Additional Information (Detail)	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
Weighted average discount rate for operating leases	9.25%	9.25%
Weighted average remaining lease term for operating leases	1 year 2 months 1 day	1 year 6 months 21 days

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Debt - Long-Term Debt (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Debt Instrument [Line Items]
Less current maturities of long-term debt	$ 0	$ 0
Long-term debt, net	347,678	346,858
9.25% First Lien Notes
Debt Instrument [Line Items]
Long-term debt	$ 347,678	$ 346,858

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Debt - Long-Term Debt (Parenthetical) (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
9.25% First Lien Notes
Debt Instrument [Line Items]
Debt financing cost	$ 2,322	$ 3,142

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Debt - 9.25% First Lien Notes - Additional Information (Detail) - 9.25% First Lien Notes - USD ($) $ in Millions		6 Months Ended
	Nov. 30, 2018	Jun. 30, 2022
Debt Instrument [Line Items]
Issuance of debt	$ 350.0
Debt instrument, interest rate		9.25%
Letters of credit		$ 0.1
Debt instrument, maturity date		Nov. 15, 2023
New Letter of Credit Facility
Debt Instrument [Line Items]
Line of credit facility, maximum borrowing capacity	50.0
First Payment | Maximum
Debt Instrument [Line Items]
Repayments of debt	$ 50.0

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Shareholders' Equity - Additional Information (Detail) - USD ($)		6 Months Ended
	Dec. 04, 2019	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021	Feb. 10, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Ordinary shares, shares authorized		50,000,000		50,000,000
Ordinary shares, shares issued		13,115,026		13,115,026	5,000,053
Additional ordinary shares issued for convertible notes	8,114,977
Ordinary shares, shares outstanding		13,115,026		13,115,026
Number of shares granted		0	0
Time-based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of previously granted shares vested in period		1,564
Share based compensation expense			$ 300,000
Time-based Restricted Stock Unit | Special Cash Distribution | Other Current Liabilities
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividends cash		$ 5,300,000
Time-based Restricted Stock Unit | Special Cash Distribution | Other Long-term Liabilities
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Dividends cash		3,500,000
Performance-based Restricted Stock Unit
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Share based compensation expense		$ 0

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Income Taxes - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2022
Minimum
Income Tax Contingency [Line Items]
Open tax year	2012

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Commitments and Contingencies - Additional Information (Detail) - Brazil Improbity Action - Brazil R$ in Millions, $ in Millions			6 Months Ended
	Apr. 27, 2018 BRL (R$) Defendant	Apr. 27, 2018 USD ($) Defendant	Jun. 30, 2022
Loss Contingencies [Line Items]
Allegations - description			On April 27, 2018, the Company was added as an additional defendant in a legal proceeding (the “Improbity Action”), initiated by the Brazilian Federal Prosecutor against certain individuals, including an executive of Petrobras and two political lobbyists, in connection with the contracting of the Titanium Explorer drillship to Petrobras under the Drilling Contract, with the Brazilian Government and Petrobras as plaintiffs. Vantage is alleged to have been involved in and benefitted from the purported bribery scheme at Petrobras through Hamylton Padilha, the Brazilian agent our former parent company, VDC, used in the contracting of the Titanium Explorer drillship to Petrobras, and Mr. Hsin-Chi Su, a former member of VDC’s board of directors and a significant shareholder of VDC. We first became aware of the legal proceeding on July 19, 2018 as it was previously under seal.
Loss contingency, damages claimed	R$ 102.8	$ 20.5
Court authorization to seizure and freezing assets of defendants | $		$ 81.8
Loss contingency, number of defendants | Defendant	3	3
Loss contingency, actions taken by court			On February 13, 2019, the Company learned that the Brazilian Federal Prosecutor had previously requested mutual legal assistance from the U.S. DOJ pursuant to the United Nations Convention against Corruption of 2003 to obtain a freezing order against the Company’s U.S. assets in the approximate amount of $81.8 million.

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Supplemental Financial Information - Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Prepaid Expense and Other Assets, Current [Abstract]
Sales tax receivable	$ 3,552	$ 8,445
Other receivables	1,140	234
Income tax receivable	577	1,423
Prepaid insurance	959	257
Current deferred contract costs	896	1,405
Current contract asset		1,903
Other	6,067	4,642
Prepaid expenses and other current assets	$ 13,191	$ 18,309

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Supplemental Financial Information - Assets Held for Sale (Detail) $ in Thousands	Dec. 31, 2021 USD ($)
Assets, Current [Abstract]
Trade receivables, net	$ 7,306
Materials and supplies	13,510
Prepaid expenses and other current assets	3,768
Property & equipment, net	87,441
Noncurrent deferred contract costs	4,196
Operating lease ROU asset	197
Other noncurrent assets	699
Assets held for sale	$ 117,117

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Supplemental Financial Information - Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Property Plant And Equipment [Line Items]
Property and equipment	$ 645,304	$ 645,622
Accumulated depreciation	(287,314)	(266,018)
Property and equipment, net	357,990	379,604
Drilling Equipment
Property Plant And Equipment [Line Items]
Property and equipment	624,419	626,546
Assets under Construction
Property Plant And Equipment [Line Items]
Property and equipment	1,957	148
Office and Technology Equipment
Property Plant And Equipment [Line Items]
Property and equipment	18,405	18,405
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment	$ 523	$ 523

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Supplemental Financial Information - Other Assets (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Other Assets, Noncurrent Disclosure [Abstract]
Noncurrent restricted cash	$ 15,616	$ 15,644
Deferred certification costs	3,976	5,199
Noncurrent deferred contract costs	5,021	6,832
Deferred income taxes	1,473	1,776
Other noncurrent assets	6,463	2,392
Total other assets	$ 32,549	$ 31,843

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Supplemental Financial Information - Other Current Liabilities (Detail) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Other Liabilities Disclosure [Abstract]
Interest		$ 4,136	$ 4,136
Compensation	[1]	5,147	7,040
2016 MIP - Dividend equivalent	[2]	5,277
Income taxes payable		3,755	5,589
Current deferred revenue		31,557	12,311
Current portion of operating lease liabilities		1,401	1,710
Other		2,546	747
Other current liabilities		$ 53,819	$ 31,533

[1] Includes $2.3 million as of December 31, 2021 related to cash awards granted to certain key employees of the Company pursuant to underlying award agreements and issued under the 2016 Amended MIP. The final payout of this cash award was made in June 2022.

[2] “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

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Supplemental Financial Information - Other Current Liabilities (Parenthetical) (Detail) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Other Current Liabilities [Line Items]
Compensation	[1]	$ 5,147	$ 7,040
Cash Awards To Certain Key Employees
Other Current Liabilities [Line Items]
Compensation			$ 2,300

[1] Includes $2.3 million as of December 31, 2021 related to cash awards granted to certain key employees of the Company pursuant to underlying award agreements and issued under the 2016 Amended MIP. The final payout of this cash award was made in June 2022.

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Supplemental Financial Information - Liabilities Held for Sale (Detail) $ in Thousands	Dec. 31, 2021 USD ($)
Liabilities, Current [Abstract]
Accounts payable	$ 4,140
Compensation	464
Income taxes payable	716
Current portion of operating lease liabilities	103
Deferred income taxes	1,190
Noncurrent operating lease liabilities	93
Other	14
Liabilities Held for Sale	$ 6,720

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Supplemental Financial Information - Other Long-term Liabilities (Detail) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Liabilities, Noncurrent [Abstract]
2016 MIP - Dividend equivalents	[1]	$ 3,521	$ 8,735
Noncurrent deferred revenue		1,397	1,893
Noncurrent operating lease liabilities		333	969
Other non-current liabilities		4,707	5,415
Other long-term liabilities		$ 9,958	$ 17,012

[1] “Dividend equivalents” on vested TBGs are payable upon settlement of the applicable award.

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Supplemental Financial Information - Reconciliation of Cash, Cash Equivalents and Restricted Cash (Detail) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Cash, Cash Equivalents, Restricted Cash, and Restricted Cash Equivalents [Abstract]
Cash and cash equivalents	$ 227,328	$ 73,343
Restricted cash	3,323	1,621
Restricted cash included within Other Assets	$ 15,616	$ 15,644
Restricted Cash and Cash Equivalents, Noncurrent, Asset, Statement of Financial Position [Extensible List]	Other assets	Other assets
Total cash, cash equivalents and restricted cash shown in the Consolidated Statements of Cash Flows	$ 246,267	$ 90,608

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Supplemental Financial Information - Additional Information (Detail) - ADES - USD ($) $ in Millions	Jun. 30, 2022	Dec. 31, 2021
Supplemental Financial Information [Line Items]
Accounts receivable from related parties	$ 4.3	$ 0.5
Accounts payable to related parties	$ 7.3	$ 2.1

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Business Segment and Significant Customer Information - Additional Information (Detail)	6 Months Ended
	Jun. 30, 2022 Segment
Entity Wide Revenue Major Customer [Line Items]
Number of reportable segments	2

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Business Segment and Significant Customer Information - Summary of Segment Reporting Information by Segment (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue
Total revenue	$ 73,238	$ 35,601	$ 131,569	$ 55,767
Operating costs and expenses
Operating costs	59,405	36,056	103,338	61,413
General and administrative	6,910	4,967	13,492	10,462
Depreciation	11,087	14,161	22,382	28,286
Gain on EDC sale	(60,781)		(60,781)
Total operating costs and expenses	16,621	55,184	78,431	100,161
(Loss) income from operations	56,617	(19,583)	53,138	(44,394)
Other (expense) income
Interest income	7	10	11	110
Interest expense and other financing charges	(8,503)	(8,511)	(17,007)	(17,021)
Other, net	(1,011)	(179)	(1,786)	(793)
Total other expense	(9,507)	(8,680)	(18,782)	(17,704)
Income (loss) before income taxes	47,110	(28,263)	34,356	(62,098)
Reconciliation of income from operations to segment adjusted operating income:
(Loss) income from operations	56,617	(19,583)	53,138	(44,394)
Depreciation expense	11,087	14,161	22,382	28,286
Contract Drilling Services
Revenue
Total revenue	42,744	31,655	87,657	49,380
Management Fees
Revenue
Total revenue	2,840	497	3,943	595
Reimbursables and Other
Revenue
Total revenue	27,654	3,449	39,969	5,792
Operating Segments | Drilling Services
Revenue
Total revenue	47,863	34,366	97,959	54,434
Operating costs and expenses
Operating costs	36,164	34,867	72,602	60,224
Depreciation	10,695	13,752	21,551	27,467
Total operating costs and expenses	46,859	48,619	94,153	87,691
(Loss) income from operations	1,004	(14,253)	3,806	(33,257)
Other (expense) income
Income (loss) before income taxes	1,004	(14,253)	3,806	(33,257)
Reconciliation of income from operations to segment adjusted operating income:
(Loss) income from operations	1,004	(14,253)	3,806	(33,257)
Depreciation expense	10,695	13,752	21,551	27,467
Segment adjusted opearting income	11,699	(501)	25,357	(5,790)
Operating Segments | Drilling Services | Contract Drilling Services
Revenue
Total revenue	42,744	31,655	87,657	49,380
Operating Segments | Drilling Services | Reimbursables and Other
Revenue
Total revenue	5,119	2,711	10,302	5,054
Operating Segments | Managed Services
Revenue
Total revenue	25,375	1,235	33,610	1,333
Operating costs and expenses
Operating costs	23,241	1,189	30,736	1,189
Total operating costs and expenses	23,241	1,189	30,736	1,189
(Loss) income from operations	2,134	46	2,874	144
Other (expense) income
Income (loss) before income taxes	2,134	46	2,874	144
Reconciliation of income from operations to segment adjusted operating income:
(Loss) income from operations	2,134	46	2,874	144
Segment adjusted opearting income	2,134	46	2,874	144
Operating Segments | Managed Services | Management Fees
Revenue
Total revenue	2,840	497	3,943	595
Operating Segments | Managed Services | Reimbursables and Other
Revenue
Total revenue	22,535	738	29,667	738
Operating Segments | Unallocated
Operating costs and expenses
General and administrative	6,910	4,967	13,492	10,462
Depreciation	392	409	831	819
Gain on EDC sale	(60,781)		(60,781)
Total operating costs and expenses	(53,479)	5,376	(46,458)	11,281
(Loss) income from operations	53,479	(5,376)	46,458	(11,281)
Other (expense) income
Interest income	7	10	11	110
Interest expense and other financing charges	(8,503)	(8,511)	(17,007)	(17,021)
Other, net	(1,011)	(179)	(1,786)	(793)
Total other expense	(9,507)	(8,680)	(18,782)	(17,704)
Income (loss) before income taxes	43,972	(14,056)	27,676	(28,985)
Reconciliation of income from operations to segment adjusted operating income:
(Loss) income from operations	53,479	(5,376)	46,458	(11,281)
Depreciation expense	$ 392	$ 409	$ 831	$ 819

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Business Segment and Significant Customer Information - Summary of Revenue by Country (Detail) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
		Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Entity Wide Revenue Major Customer [Line Items]
Revenues		$ 73,238	$ 35,601	$ 131,569	$ 55,767
Egypt | Drilling Services
Entity Wide Revenue Major Customer [Line Items]
Revenues		9,738		26,859
India | Drilling Services and Managed Services
Entity Wide Revenue Major Customer [Line Items]
Revenues		13,230	9,297	26,518	18,152
UAE | Managed Services
Entity Wide Revenue Major Customer [Line Items]
Revenues		19,778		27,966
Qatar | Drilling Services
Entity Wide Revenue Major Customer [Line Items]
Revenues			7,697	14,319	14,894
Montenegro | Drilling Services
Entity Wide Revenue Major Customer [Line Items]
Revenues			16,253		16,306
Other countries | Drilling Services and Managed Services
Entity Wide Revenue Major Customer [Line Items]
Revenues	[1]	$ 30,492	$ 2,354	$ 35,907	$ 6,415

[1] “Other countries” represent countries in which we operate that individually had operating revenues representing less than 10% of total revenues earned.

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Business Segment and Significant Customer Information - Summary of Revenue by Customers (Detail) - Customer Concentration Risk - Sales	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Customer One | Managed Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	30.00%	0.00%	23.00%	0.00%
Customer Two | Drilling Services and Managed Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	18.00%	26.00%	20.00%	33.00%
Customer Three | Drilling Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	13.00%	0.00%	20.00%	0.00%
Customer Four | Drilling Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	0.00%	17.00%	10.00%	11.00%
Customer Five | Drilling Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	0.00%	46.00%	0.00%	29.00%
Customer Six | Drilling Services
Revenue, Major Customer [Line Items]
Percentage of revenue (excluding reimbursable revenue)	0.00%	0.00%	0.00%	16.00%

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Business Segment and Significant Customer Information - Schedule of Property and Equipment, Net by Country (Detail) - USD ($) $ in Thousands		Jun. 30, 2022	Dec. 31, 2021
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		$ 357,990	$ 379,604
Cyprus
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		165,754
Egypt
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment			173,187
India
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		88,895	96,583
Indonesia
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		60,953	63,581
Other countries
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment	[1]	$ 42,388	$ 46,253

[1] “Other countries” represent countries in which we individually had property and equipment, net, representing less than 10% of total property and equipment, net.