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.