10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2017  

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: 333-212081

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.)
777 Post Oak Boulevard, Suite 800, Houston, Texas	77056
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code:

(281) 404-4700

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to 12(g) of the Act: None

---

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes ☐    No  ☒

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  ☐  

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting 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 the registrant’s ordinary shares outstanding as of February 28, 2018 is 5,000,053 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

SAFE HARBOR STATEMENT		1
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	9
Item 1B.	Unresolved Staff Comments	22
Item 2.	Properties	22
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosures	23
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 8.	Financial Statements and Supplementary Data	38
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	62
Item 9A.	Controls and Procedures	62
Item 9B.	Other Information	62
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	63
Item 11.	Executive Compensation	63
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	63
Item 13.	Certain Relationships and Related Transactions, and Director Independence	63
Item 14.	Principal Accounting Fees and Services	63
PART IV
Item 15.	Exhibits, Financial Statement Schedules	64
SIGNATURES		66

SAFE HARBOR STATEMENT

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements are included throughout this Annual Report, including under “Item 1A. Risk Factors” and “Item 7. 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 Annual 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,” under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the following:

• our small number of customers;

• credit risks of our key customers and certain other third parties;

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

• our substantial level of indebtedness;

• our ability to incur additional indebtedness;

• compliance with restrictions and covenants in our debt agreements;

• termination or renegotiation of our customer contracts;

• general economic conditions and conditions in the oil and gas industry;

• competition within our industry;

• excess supply of drilling units worldwide;

• limited mobility of our drilling units between geographic regions;

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

• operations in international markets, including geopolitical risk, applicability of foreign laws, including foreign labor and employment laws, foreign tax and customs regimes, and foreign currency exchange rate risk;

• operating hazards in the offshore drilling industry;

• ability to obtain indemnity from customers;

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

• governmental, tax and environmental regulation;

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

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

• identifying and completing acquisition opportunities;

• levels of operating and maintenance costs;

• our dependence on key personnel;

• availability of workers and the related labor costs;

• increased cost of obtaining supplies;

• the sufficiency of our internal controls;

1

• changes in tax laws, treaties or regulations;and

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

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 Securities and Exchange Commission (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 Annual Report.

Unless the context indicates otherwise, all references to the “Company,” “Vantage,” “VDI,” “we,” “our” or “us” refer to Vantage Drilling International and its consolidated subsidiaries.

2

PART I

Item  1. Business.

Our Company

Vantage Drilling International (the “Company” or “VDI”), a Cayman Islands exempted 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 natural 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 natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

Restructuring Agreement and Emergence from Voluntary Reorganization under Chapter 11 Proceeding

On December 1, 2015, we and Vantage Drilling Company (“VDC”), our former parent company, entered into a restructuring support agreement (the “Restructuring Agreement”) with a majority of our secured creditors. Pursuant to the terms of the Restructuring Agreement, the Company agreed to pursue a pre-packaged plan of reorganization (the “Reorganization Plan”) under Chapter 11 of Title 11 of the United States Bankruptcy Code and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for a $61.5 million promissory note (the “VDC Note”). As this transaction involved a reorganization of entities under common control, it was reflected in the consolidated financial statements, at carryover basis, on a retrospective basis. Effective as of the Company’s emergence from bankruptcy on February 10, 2016 (the “Effective Date”), VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 new ordinary shares of the reorganized Company (the “New Shares”) in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

On December 3, 2015 (the “Petition Date”), the Company, certain of its subsidiaries and certain VDC subsidiaries who were guarantors of the Company’s pre-bankruptcy secured debt, filed the Reorganization Plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged Reorganization Plan and the Company emerged from bankruptcy on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 units in the reorganized Company (the “Units”). Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Company’s 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 (the “Convertible Notes”), subject to adjustment upon the payment of interest in kind (“PIK interest”) and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes) which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $175.90 of principal of Convertible Notes.

Other significant elements of the Reorganization Plan included:

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended and restated (the “Credit Agreement”) to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans (the “2016 Term Loan Facility”).

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition  term loans and senior notes claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s new 10% Senior Secured Second Lien Notes due 2020 (the “10% Second Lien Notes”). In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes and net cash proceeds to the Company of $73.9 million, after deducting the cash portion of the backstop premium.

3

The Reorganization Plan allowed the Company to continue business operations during the court proceedings and maintain all operating assets and agreements. The Company had adequate liquidity prior to the filing and did not have to seek any debtor-in-possession financing. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

Drilling  

Jackups

A jackup rig is a mobile, self-elevating drilling platform equipped with legs that are lowered to the ocean floor until a foundation is established for support, at which point the hull is raised out of the water into position to conduct drilling and workover operations. All of our premium jackup rigs were built at PPL Shipyard in Singapore. The design of our premium jackup rigs is the Baker Marine Pacific Class 375. These units are ultra-premium jackup rigs with independent legs capable of drilling in up to 375 feet of water, a cantilever drilling floor and a total drilling depth capacity of approximately 30,000 feet. Additionally, during part of 2017 our fleet included a class 154-44C standard jackup rig, the Vantage 260.

Drillships

Drillships are self-propelled and suited for drilling in remote locations because of their mobility and large load carrying capacity. All of our drillships are dynamically positioned and designed for drilling in water depths of up to 12,000 feet, with a total vertical drilling depth capacity of up to 40,000 feet. The drillships’ hull design has a variable deck load of approximately 20,000 tons and measures approximately 781 feet long by 137 feet wide. All of our drillships were built at Daewoo Shipbuilding & Marine Engineering shipyard in South Korea.

The following table sets forth certain information concerning our offshore drilling fleet as of February 28, 2018.

Name	Year Built	Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Location	Status
Jackups
Emerald Driller	2008	375			30,000	Qatar	Operating
Sapphire Driller	2009	375			30,000	Congo	Operating
Aquamarine Driller	2009	375			30,000	Malaysia	Mobilizing
Topaz Driller	2009	375			30,000	Indonesia	Operating
Drillships (1)
Platinum Explorer	2010		12,000		40,000	India	Operating
Titanium Explorer	2012		12,000		40,000	South Africa	Warm stacked
Tungsten Explorer	2013		12,000		40,000	Congo	Operating

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

Recent Developments and Subsequent Events

In April 2017, we purchased the Vantage 260, a class 154-44C jackup rig, and related multi-year drilling contract. In August 2017, we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig, to fulfill the drilling contract. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260. The transaction closed and the Vantage 260 was sold on February 26, 2018.

Since July 2015, the Company has been cooperating in an investigation by the U.S. Department of Justice (“DOJ”) and the SEC arising from allegations that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petroleo Brasileiro S.A. (“Petrobras”), and Mr. Hsin-Chi Su, a former member of the Board of Directors and a significant shareholder of our former parent company, VDC, had engaged in an alleged scheme to pay bribes to former Petrobras executives, in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”). In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation and closing the investigation without any action against the Company.  We have continued our cooperation in the investigation by the SEC into the same allegations and have engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve this investigation.  The Company has reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval.  While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018.  In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million.  If the Commission does not accept the offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition.  For more information about this matter, along with information regarding certain other legal proceedings involving the Company, please see “Item 3-Legal Proceedings.”

4

During the fourth quarter 2017 our ultra-deepwater drillship the Platinum Explorer commenced its three year contract with ONGC in India.

On January 17, 2018, we announced that our premium jack-up rig, the Aquamarine Driller received a letter of award for a new 18 month contract with Carigali-PTTEPI Operating Company Sdn. Bhd. (“CPOC”).

On January 31, 2018, we announced that our premium jack-up rig, the Topaz Driller entered into a 150 day contract with a customer in West Africa.

Strengths

We believe our primary competitive strengths include the following:

Premium fleet. Our fleet is currently comprised of seven ultra-premium high specification drilling units: four jackup rigs and three drillships. We believe the Emerald Driller, Sapphire Driller, Aquamarine Driller and Topaz Driller are ultra-premium jackup rigs due to their ability to drill in deeper depths, as well as their enhanced operational efficiency and technical capabilities when compared to a majority of the current global jackup rig fleet, which is primarily comprised of older, smaller and less capable rigs using less modern technology. The Platinum Explorer, Titanium Explorer and Tungsten Explorer are ultra-deepwater drillships that are designed to drill in up to 12,000 feet of water. The Titanium Explorer and Tungsten Explorer are further upgraded to have a hook load of 2.5 million pounds, which further enhances their capabilities to drill deep and complex wells in up to 12,000 feet of water. Our drillships are currently equipped to drill in water depths of up to 10,000 feet. We believe 10,000 feet to be the upper-limit water depth currently being developed by leading offshore exploration and production companies, though we also believe that they are evaluating future deepwater development projects in water depths in excess of 10,000 feet.   

Proven safety and operational track record. We have a proven track record of safely and successfully operating, marketing, managing and constructing offshore drilling units.

Experienced and customer focused management and operational team. We benefit from our management team, which has extensive experience in the drilling industry, strong relationships with major, national and independent oil and natural gas companies and international and domestic public company experience involving numerous acquisitions and debt and equity financings.

Strategy

Our strategy includes:

Maintain a strong balance sheet and significant liquidity. In response to the significant downturn in the drilling industry, we are strategically preserving our liquidity. Completing the Reorganization Plan significantly reduced our debt service obligations and we have no significant maturities until December 2019. We are working to optimize our workforce for our current level of operations, closely monitoring maintenance and capital expenditures and working to extend our contract backlog.

Capitalize on customer demand for modern, high specification units. We own and manage high specification drilling units, which are well suited to meet the requirements of customers for efficiently drilling through deep and complex geological formations, and drilling horizontally. Additionally, high specification drilling units generally provide faster drilling and moving times. A majority of the bid invitations for jackups that we receive require high specification units. Aside from their drilling capabilities, we believe that customers generally prefer modern drilling units because of improved safety features and less frequent downtime for maintenance. Modern drilling units are also generally preferred by crews, which makes it easier to hire and retain high quality operating personnel.

Expand key industry relationships. We are focused on expanding relationships with major, national and independent oil and natural gas companies, focused on international markets, which we believe will allow us to obtain longer-term contracts to build our backlog of business when dayrates and operating margins justify entering into such contracts. We believe that our existing relationships with these companies have contributed to our historically strong contract backlog. Longer-term contracts increase revenue visibility and mitigate some of the volatility in cash flows caused by cyclical market downturns.

Maintain a balance of deepwater and jackup exposure. We believe our customers will continue an emphasis on exploration in both deep and shallow waters due, in part, to technological developments that have made such exploration more feasible and cost-effective. We believe that the water-depth capability of our ultra-deepwater drilling units is attractive to our customers and allows us to compete effectively in obtaining long-term deepwater drilling contracts. We believe our modern fleet of high specification jackups when operated efficiently also allows us to bid effectively in obtaining contracts.

We may seek to manage additional deepwater drilling units and jackup drilling units to service the market.

Our Industry

The offshore contract drilling industry provides drilling, workover and well construction services to oil and natural gas exploration and production companies through the use of mobile offshore drilling units. Historically, the offshore drilling industry has been very cyclical with periods of high demand, limited rig supply and high dayrates alternating with periods of low demand, excess

5

rig supply and low dayrates. Periods of low demand and excess rig supply intensify the competition in the industry and often result in some rigs becoming idle for long periods of time as is the case today. As is common throughout the oilfield services industry, offshore drilling is largely driven by actual or anticipated changes in oil and natural gas prices and capital spending by companies exploring for and producing oil and natural gas. Sustained high commodity prices historically have led to increases in expenditures for offshore drilling activities and, as a result, greater demand for our services. As a result of the persistence of reduced oil and gas prices since late 2014, reduced demand for offshore drilling rigs by our customers has continued. The reduced demand is occurring at the same time that drilling rigs continue to be brought into the market or scheduled for delivery resulting in an oversupply of equipment. We expect that these adverse market conditions are likely to continue for the duration of 2018 and potentially beyond.  

Offshore drilling rigs are generally marketed on a worldwide basis as rigs can be moved from one region to another. The cost of moving a rig and the availability of rig-moving vessels may cause the supply and demand balance to vary between regions. However, significant variations between regions do not tend to exist long-term because of rig mobility.

The offshore drilling market generally consists of shallow water (<400 ft.), midwater (>400 ft.), deepwater (>4,000 ft.) and ultra-deepwater (>7,500 ft.). The global shallow water market is serviced primarily by jackups.

Our jackup fleet is focused on the “long-legged” (350+ ft.) high specification market. The drillships that we operate are focused on the ultra-deepwater segment, but can operate efficiently and cost effectively in the midwater and deepwater markets as well.

Customers

Our customers are primarily large multinational oil and natural gas companies, government owned oil and natural gas companies and independent oil and natural gas producers. For the years ended December 31, 2017 and 2015 and for the periods from January 1, 2016 to February 10, 2016 and from February 10, 2016 to December 31, 2016, the following customers accounted for more than 10% of our consolidated revenue:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Total E&P Congo		51%		58%		58%		32%
ENI Congo SA		15%	---		---		---
Olio Energy Sdn Bhd (1)		13%		19%		14%	---
Total E&P Qatar		11%	---		---		---
Petronas Carigali Ketapang	---			11%		18%	---
Oil & Natural Gas Corporation	---		---		---			25%
Petrobras America Inc.	---		---		---			20%

 (1) Olio Energy Sdn Bhd is a contracting party through which we operate, or have operated, for Petronas Carigali, a subsidiary of the national oil company of Malaysia, and CPOC, a joint venture between Petronas Carigali JDA limited, a subsidiary of the national oil company of Malaysia, and PTTEP International Limited, a subsidiary of the national oil company of Thailand.

Drilling Contracts

Our drilling contracts are the result of negotiation with our customers, and most contracts are awarded through competitive bidding against other contractors. Drilling contracts generally provide for payment on a dayrate basis, with higher rates while the drilling unit is operating and lower rates for periods of mobilization or when drilling operations are interrupted or restricted by equipment breakdowns, adverse environmental conditions or other conditions beyond our control. Currently all of our drilling contracts are on a dayrate basis. A dayrate drilling contract generally extends over a period of time covering either the drilling of a single well or group of wells or covering a stated term. Certain of our contracts with customers may be cancelable at the option of the customer upon payment of an early termination fee. Such payments may not, however, fully compensate us for the loss of the contract. Contracts also customarily provide for either automatic termination or termination at the option of the customer typically without the payment of any termination fee, under various circumstances such as non-performance, in the event of extensive downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events or for convenience by the customer. Many of these events are beyond our control. The contract term in some instances may be extended by the client exercising options for the drilling of additional wells or for an additional term. Our contracts also typically include a provision that allows the client to extend the contract to finish drilling a well-in-progress. During periods of depressed market conditions, our clients may seek to renegotiate drilling contracts to reduce their obligations or may seek to repudiate their contracts. Suspension of drilling contracts will result in the reduction in or loss of dayrate for the period of the suspension. If our customers cancel some of our contracts and we are unable to secure new contracts on a timely basis and on substantially similar terms, if

6

contracts are suspended for an extended period of time or if a number of our contracts are renegotiated, it could adversely affect our consolidated statements of financial position, results of operations or cash flows.

The following table sets forth certain information concerning the current contract status of our offshore drilling fleet as of February 28, 2018.

Name	Region	Contract End Date	Customer
Emerald Driller	Middle East	Q2 2020	Total E&P Qatar
Sapphire Driller	West Africa	Q2 2019	ENI Congo SA
Aquamarine Driller	Southeast Asia	Q3 2019	CPOC through Olio Energy Sdn Bhd
Topaz Driller	Southeast Asia	Q1 2018	Petronas Carigali Ketapang
Platinum Explorer	India	Q4 2020	Oil & Natural Gas Corporation
Tungsten Explorer	West Africa	Q4 2018	Total E&P Congo

Contract Backlog

As of December 31, 2017, our owned fleet had total drilling contract backlog of approximately $282.1 million. We expect that approximately $177.4 million of our total contract backlog will be performed during 2018, with the remainder performed in subsequent years.

Competition

The contract drilling industry is highly competitive. Demand for contract drilling and related services is influenced by a number of factors, including the current and expected prices of oil and natural gas and the expenditures of oil and natural gas companies for exploration and development of oil and natural gas. In addition, demand for drilling services remains dependent on a variety of political and economic factors beyond our control, including worldwide demand for oil and natural gas, the ability of the Organization of the Petroleum Exporting Countries (“OPEC”) to set and maintain production levels and pricing, the level of production of non-OPEC countries and the policies of various governments regarding exploration and development of their oil and natural gas reserves.

Drilling contracts are generally awarded on a competitive bid or negotiated basis. Pricing (day rate) is often the primary factor in determining which qualified contractor is awarded a job. Rig availability, capabilities, age and each contractor’s safety performance record and reputation for quality also can be key factors in the determination. Operators also may consider crew experience, rig location and efficiency. We believe that the market for drilling contracts will continue to be highly competitive for the foreseeable future. Certain competitors may have greater financial resources than we do, which may better enable them to withstand periods of low utilization, compete more effectively in a low price environment, build new rigs or acquire existing rigs. In the current market, contractors that are awarded a job are more often the ones that submit proposals for contracts at very low day rates thereby depressing global pricing.

Our competition ranges from large international companies offering a wide range of drilling and other oilfield services to smaller, locally owned companies. Competition for rigs is usually on a global basis, as these rigs are highly mobile and may be moved, although at a cost that is sometimes substantial, from one region to another in response to demand.

Operating Hazards

Our operations are subject to many hazards inherent in the offshore drilling business, including, but not limited to: blowouts, craterings, fires, explosions, equipment failures, loss of well control, loss of hole, damaged or lost equipment and damage or loss from inclement weather or natural disasters.

These hazards could cause personal injury or death, serious damage to or destruction of property and equipment, suspension of drilling operations, or damage to the environment, including damage to producing formations and surrounding areas. Generally, we seek to obtain contractual indemnification from our customers for some of these risks. To the extent not transferred to customers by contract, we seek protection against some of these risks through insurance, including property casualty insurance on our rigs and drilling equipment, protection and indemnity, commercial general liability, which has coverage extension for underground resources and equipment coverage, commercial contract indemnity and commercial umbrella insurance.

There are risks that are outside of our control. Nonetheless, we believe that we are adequately insured for liability and property damage to others with respect to our operations. However, such insurance may not be sufficient to protect us against liability for all consequences of well disasters, extensive fire damage or damage to the environment. For more, see “Risk Factors—Our business involves numerous operating hazards, and our insurance and contractual indemnity rights may not be adequate to cover our losses.”

Insurance

We maintain insurance coverage that includes coverage for physical damage, third party liability, employer’s liability, war risk, general liability, vessel pollution and other coverage. However, our insurance is subject to exclusions and limitations and there is no assurance that such coverage will adequately protect us against liability from all potential consequences and damages.

7

Our primary marine package provides for hull and machinery coverage for our drilling units up to a scheduled value for each asset, which we believe approximates replacement cost. The maximum coverage for our seven drilling units is $1.4 billion. The policies are subject to certain exclusions, limitations, deductibles and other conditions. Deductibles for physical damage to our jackup rigs and our drillships are $2.5 million and $5.0 million, respectively, per occurrence. Our protection and indemnity policy provides liability coverage limits of $500 million per rig. In addition to these policies, we have separate policies providing coverage for onshore general liability, employer’s liability, auto liability and non-owned aircraft liability, with customary coverage, limits and deductibles.

Foreign Regulation

Our operations are conducted in foreign jurisdictions and are subject to, and affected in varying degrees by, governmental laws and regulations in countries in which we operate, including laws, regulations and duties relating to the importation and exportation of and operation of drilling units and other equipment, currency conversions and repatriation, oil and natural gas exploration and development, environmental protection, taxation of offshore earnings and earnings of expatriate personnel and the use of local employees and suppliers by foreign contractors. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and natural gas and other aspects of the oil and natural gas industries in their countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil and natural gas companies and may continue to do so. Furthermore, these regulations have limited the opportunities for international drilling contracts to participate in tenders for contracts or to perform services in certain countries as the governments have strongly favored local service providers. Operations in less developed countries may be subject to legal systems that are not as predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings.

The shipment of goods, services and technology across international borders subjects us to extensive trade laws and regulations.  Our import and export activities are governed by unique customs laws and regulations in each of the countries where we operate.  The laws and regulations concerning import and export activity, recordkeeping and reporting, import and export control and economic sanctions are complex and constantly changing.  These laws and regulations may be enacted, amended, enforced or interpreted in a manner materially impacting our operations.  Governments also may impose economic sanctions against certain countries, persons and other entities that may restrict or prohibit transactions involving such countries, persons and entities. Shipments can be delayed and denied import or export for a variety of reasons, some of which are outside our control and some of which may result from failure to comply with existing legal and regulatory regimes.  Shipping delays or denials could cause unscheduled operational downtime.

Environmental Regulation

For a discussion of the effects of environmental regulation on our current operations, see “Risk Factors—Our business is subject to numerous governmental laws and regulations, including those that may impose significant costs and liability on us for environmental and natural resource damages.” We anticipate that we will continue to make expenditures to comply with environmental requirements. To date, we have not expended material amounts beyond those amounts spent on our basic rig designs in order to comply and we do not believe that our compliance with such requirements will have a material adverse effect upon our results of operations or competitive position or materially increase our capital expenditures.

We have historically conducted work in the U.S. Gulf of Mexico and may conduct such work in the future. Although we are not currently conducting any operations under the jurisdiction of U.S. environmental and natural resource agencies, similar restrictions and concerns apply in the jurisdictions in which we currently operate. These requirements and concerns may be more or less stringent than those associated with the following U.S. laws.

Heightened environmental concerns have in many locations, led to greater and more stringent environmental regulation, higher drilling costs, and a more difficult and lengthy well permitting process. Requirements applicable to our operations include regulations that would require us to obtain and maintain specified permits or governmental approvals, control the discharge of materials into the environment, require removal and cleanup of materials that may harm the environment, or otherwise relate to the protection of the environment. Laws and regulations protecting the environment have become more stringent and may in some cases impose strict liability, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. Some of these laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts which were in compliance with all applicable laws at the time they were performed. The application of these requirements or the adoption of new or more stringent requirements could have a material adverse effect on our financial condition and results of operations.

Environmental requirements include water quality laws, regulations and policies that prohibit and/or regulate the discharge of pollutants, including petroleum, into the waters. Certain facilities that store or otherwise handle oil are required to prepare and implement Spill Prevention Control and Countermeasure Plans and Facility Response Plans relating to the possible discharge of oil to surface waters. Violations of monitoring, reporting, permitting and other requirements can result in the imposition of administrative, civil and criminal penalties. Laws governing air emissions and solid and hazardous waste also apply to our operations.

8

A variety of initiatives intended to enhance vessel security have been adopted in certain jurisdictions where we operate.  For example, these initiatives may require the development of vessel security plans and on-board installation of automatic information systems, or AIS, to enhance vessel-to-vessel and vessel-to-shore communications.

The International Maritime Organization (“IMO”), a specialized agency of the United Nations is responsible for developing measures to improve the safety and security of international shipping and to prevent marine pollution from ships. Among the various international conventions negotiated by the IMO is the International Convention for the Prevention of Pollution from Ships (“MARPOL”). MARPOL imposes environmental standards on the shipping industry relating to oil spills, management of garbage, the handling and disposal of noxious liquids, harmful substances in packaged forms, sewage and air emissions.

Annex VI to MARPOL sets limits on sulfur dioxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances. Annex VI also imposes a global cap on the sulfur content of fuel oil and allows for specialized areas to be established internationally with more stringent controls on sulfur emissions. For vessels 400 gross tons and greater, platforms and drilling units, Annex VI imposes various survey and certification requirements. For this purpose, gross tonnage is based on the International Tonnage Certificate for the vessel. The United States has ratified Annex VI. In addition, any drilling units we operate internationally are subject to the requirements of Annex VI in those countries that have implemented its provisions. We believe the drilling units we currently offer for international projects comply with Annex VI, but changes to our equipment and ratifying countries’ regulatory interpretations of the Annex VI requirements could impose additional costs on us, which could be significant.

Although significant capital expenditures may be required to comply with these governmental laws and regulations, such compliance has not materially adversely affected our earnings or competitive position. We believe that we are currently in compliance in all material respects with the environmental regulations to which we are subject.

Employees

At December 31, 2017, we managed a workforce of approximately 930 people, of which approximately 440 were our direct employees.

Available Information

This Annual Report on Form 10-K also contains summaries of the terms of certain agreements that we have entered into that are filed as exhibits to this Annual Report on Form 10-K. The descriptions contained in this Annual Report on Form 10-K of those agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to, the respective definitive agreements. You may request a copy of the agreements described herein at no cost by writing or telephoning us at the following address: Vantage Drilling International, Attention: General Counsel, 777 Post Oak Boulevard, Suite 800, Houston, Texas 77056, phone number (281) 404-4700. You can also obtain copies of any of the agreements that are filed as exhibits to this Annual Report on Form 10-K from the SEC through the SEC’s website at www.sec.gov.

Item 1A. Risk Factors.

There are numerous factors that affect our business and operating results, many of which are beyond our control. The following is a description of significant factors that might cause our future operating results to differ materially from those currently expected. The risks described below are not the only risks facing us. Additional risks and uncertainties not specified herein, not currently known to us or currently deemed to be immaterial also may materially adversely affect our business, financial position, operating results or cash flows.

Our industry is highly competitive, cyclical and subject to intense price competition.  

The offshore contract drilling industry, historically, has been cyclical and volatile with periods of high demand, limited supply and high dayrates alternating with periods of low demand, excess supply and low dayrates. Many offshore drilling units are highly mobile. Competitors may move drilling units from region to region in response to changes in demand. According to Bassoe Offshore A.S., there are currently 99 jackups and 29 deepwater/harsh environment floaters on order at shipyards with scheduled deliveries extending out to April 2021. It is unclear when or whether delivery of these drilling rigs will occur as many rig deliveries have been deferred and some have been canceled. Notwithstanding such deferrals and cancellations, excess supply may continue to depress the markets in which we operate. Periods of low demand and excess supply intensify competition in our industry and often result in some of our drilling units becoming idle for long periods of time. Prolonged periods of low utilization and dayrates, or extended idle time, could result in the recognition of impairment charges on our drilling units if cash flow estimates, based upon information available to management at the time, indicate that the carrying value of the drilling units may not be recoverable.

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.

As of December 31, 2017, we had approximately $980.5 million aggregate principal amount of debt outstanding, consisting of $140.1 million under the 2016 Term Loan Facility, $76.1 million of our 10% Second Lien Notes and approximately $764.3 million of our Convertible Notes (collectively, the “notes”). Subject to the restrictions in our Credit Agreement and the indentures governing our

9

notes, we may incur additional indebtedness. Our high level of indebtedness could have important consequences for an investment in us and significant effects on our business. For example, our level of indebtedness and the terms of our debt agreements may:

• make it more difficult for us to satisfy our financial obligations under our indebtedness and our contractual and commercial commitments and increase the risk that we may default on our debt obligations;

• prevent us from raising the funds necessary to repurchase notes tendered to us if there is a change of control or other repayment event under the instruments governing our indebtedness, which would constitute a default under the indenture governing the notes;

• require us to use a substantial portion of our cash flow from operations to pay interest and principal on the notes and other debt, which would reduce the funds available for working capital, capital expenditures and other general corporate purposes;

• limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments, or general corporate purposes, which may limit our ability to execute our business strategy;

• limit our ability to refinance our indebtedness on terms that are commercially reasonable, or at all;

• heighten our vulnerability to downturns in our business, our industry or in the general economy and restrict us from exploiting business opportunities or making acquisitions;

• place us at a competitive disadvantage compared to those of our competitors that may have proportionately less debt;

• limit management’s discretion in operating our business;

• limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate or the general economy; and

• result in higher interest expense if interest rates increase and we have outstanding floating rate borrowings.

Each of these factors may have a material and adverse effect on our financial condition and viability. Our ability to satisfy our other debt obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors affecting our company and industry, many of which are beyond our control.

Additionally, each of the agreements governing the 2016 Term Loan Facility and the notes is subject to terms, conditions and covenants, a violation of which would constitute an event of default and could result in the acceleration of the maturity of the obligations. Compliance with certain of these covenants may be beyond our control and we cannot assure you that we will satisfy those requirements. In the event (A) the Company, any guarantor, or any restricted subsidiary that is a significant subsidiary or a group of subsidiaries that, taken together would constitute a significant subsidiary, within the meaning of bankruptcy law (i) commences a voluntary case, (ii) consents to the entry of an order for relief against it in an involuntary case, (iii) consents to the appointment of a custodian of it or for all or substantially all of its property, (iv) makes a general assignment for the benefit of its creditors or (v) is generally not paying its debts as they come due, or (B) a court of competent jurisdiction enters an order or decree under any bankruptcy law that is for relief in an involuntary case, appoints a custodian or orders the liquidation of the Company, any guarantor, or any restricted subsidiary that is a significant subsidiary or a group of subsidiaries that, taken together would constitute a significant subsidiary (and the order or decree remains unstayed and in effect for 60 consecutive days), the secured debt obligations will automatically accelerate with no further action or notice by the debt holders.  

If any other event of default occurs under the terms of the notes, the trustee or holders of at least 25% in aggregate principal amount of the then outstanding secured debt may declare the obligation due and payable.  If there is any other event of default under the terms of the Credit Agreement, the Administrative Agent may declare the obligations under the Credit Agreement immediately due and payable. An event of default or acceleration of any of the secured debt obligations will likely cross default and accelerate the other secured debt obligations.

In the event the Convertible Notes accelerate, the holders are entitled to the outstanding principal, accrued interest and a premium (“Applicable Premium”). The Applicable Premium is calculated as the greater of (i) 1% of the then outstanding principal amount and (ii) the difference between the present value, computed using a discount rate equal to the treasury rate plus 50 basis points, of the accreted value at maturity, less the outstanding principal of the Convertible Notes. The estimated Applicable Premium is in excess of $1.0 billion.

10

If the amounts outstanding in respect of our Credit Agreement, notes or any other indebtedness outstanding at such time were to be accelerated or were the subject of foreclosure actions, we cannot assure you that our assets would be sufficient to repay in full the money owed to the lenders or to our other debt holders.

We may be required to repurchase certain of our indebtedness with cash upon a change of control or other triggering events.

Upon the occurrence of specified change of control events or certain losses of our vessels in the agreements governing our 2016 Term Loan Facility and our notes, we will be required to offer to repurchase or repay all (or in the case of events of losses of vessels, an amount up to the amount of proceeds received from such event of loss) of such outstanding debt under such debt agreements at the prices and upon the terms set forth in the applicable agreements. In addition, in connection with certain asset sales, we will be required to offer to repurchase or repay such outstanding debt as set forth in the applicable debt agreements. We may not have sufficient funds available to repurchase or repay all of the debt that becomes due and payable pursuant to any such offer, which would constitute an event of default which in turn would likely trigger a default under our existing and any future debt agreements. Moreover, the holders and lenders under such debt agreements and any other of our future debt agreements may also limit our ability to repurchase debt. In that event, we would need to cure or refinance the applicable debt agreements before making an offer to purchase. Additionally, our existing debt agreements and any future indebtedness we incur may restrict our ability to repurchase these notes, including following a fundamental change. We may be unable to repay all of such indebtedness or obtain a waiver. Any requirement to offer to repurchase or repay any of our existing debt may therefore require us to refinance some or all of our other outstanding debt, which we may not be able to accomplish on commercially reasonable terms, if at all. These repurchase requirements may also delay or make it more difficult for others to obtain control of us.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

The FCPA and similar worldwide anti-bribery laws (together, anti-corruption laws) prohibit companies and their intermediaries from making improper payments to government officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our extensive training and compliance program, we cannot assure you that our internal control policies and procedures will always protect us from improper acts committed by our directors, employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our business and operations. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or using other methods that U.S. laws and regulations prohibit us from using.

In order to effectively compete in some foreign jurisdictions, we utilize local agents and seek to establish joint ventures with local operators or strategic partners. Although we have procedures and controls in place to monitor internal and external compliance, if we are found to be liable for violations of anti-corruption laws (either due to our own acts or omissions, or due to the acts or omissions of others, including actions taken by our agents and our strategic or local partners, even though our agents and partners may not be subject to the FCPA), we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on our business, financial position, results of operations and cash flows. In July 2015, we became aware that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petrobras, had entered into a plea arrangement with the Brazilian authorities in connection with his role in facilitating the payment of bribes to former Petrobras executives. Among other things, Mr. Padilha provided information to the Brazilian authorities of an alleged bribery scheme between former Petrobras executives and Mr. Hsin-Chi Su, who was, at the time of the alleged bribery scheme, a member of the Board of Directors and a significant shareholder of our former parent company, VDC. When we learned of Mr. Padilha’s plea agreement and the allegations, we voluntarily contacted the DOJ and the SEC to advise them of these developments, as well as the fact that we had engaged outside counsel to conduct an internal investigation of the allegations. Since disclosing this matter to the DOJ and SEC, we have cooperated fully in their investigation of these allegations. In connection with such cooperation, we advised both agencies that in early 2010, we engaged outside counsel to investigate a report of alleged improper payments to customs and immigration officials in Asia. That investigation was concluded in 2011, and we determined at that time that no disclosure was warranted; however, in an abundance of caution, we provided the results of this investigation to the DOJ and SEC in light of the allegations in the Petrobras matter. In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation into the Company concerning possible violations of the FCPA by VDC in the Petrobras matter and indicating that the DOJ has closed such investigation without any action. In addition, the Company has engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation.  We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval.  While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018.  In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million.  If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of

11

default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

The international nature of our operations results in additional political, economic, legal and other uncertainties not generally associated with domestic operations.

Our business strategy is to operate in international oil and natural gas producing areas. Our international operations are subject to a number of risks inherent in any business operating in foreign countries, including:

• political, social and economic instability, war and acts of terrorism;

• government corruption;

• potential seizure, expropriation or nationalization of assets;

• damage to our equipment or violence directed at our employees, including kidnappings;

• piracy;

• increased operating costs;

• complications associated with repairing and replacing equipment in remote locations;

• repudiation, modification or renegotiation of contracts;

• limitations on insurance coverage, such as war risk coverage in certain areas;

• import-export quotas;

• confiscatory taxation;

• work stoppages;

• unexpected changes in regulatory requirements;

• wage and price controls;

• imposition of trade barriers;

• imposition or changes in enforcement of local content laws;

• restrictions on currency or capital repatriations;

• currency fluctuations and devaluations; and

• other forms of government regulation and economic conditions that are beyond our control.

Our financial condition and results of operations could be susceptible to adverse events beyond our control that may occur in the particular countries or regions in which we are active. Additionally, we may experience currency exchange losses where, at some future date, revenues are received and expenses are paid in nonconvertible currencies or where we do not hedge exposure to a foreign currency. We may also incur losses as a result of an inability to collect revenues because of a shortage of convertible currency available in the country of operation, controls over currency exchange or controls over the repatriation of income or capital.

Many governments favor or effectively require that drilling contracts be awarded to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may result in inefficiencies or put us at a disadvantage when bidding for contracts against local competitors.

Our offshore contract drilling operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to the equipment and operation of drilling units, currency conversions and repatriation, oil and natural gas exploration and development, taxation of offshore earnings and earnings of expatriate personnel, the use of local employees and suppliers by foreign contractors and duties on the importation and exportation of drilling units and other equipment. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and natural gas and other aspects of the oil and natural gas industries in their countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil and natural gas companies and may continue to do so. Operations in less developed countries can be subject to legal systems which are not as predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings.

12

Political disturbances, war, or terrorist attacks and changes in global trade policies and economic sanctions could adversely impact our operations.

Our operations are subject to political and economic risks and uncertainties, including instability resulting from civil unrest, political demonstrations, mass strikes, or an escalation or additional outbreak of armed hostilities or other crises in oil or natural gas producing areas, which may result in extended business interruptions, suspended operations and danger to our employees, or result in claims by our customers of a force majeure situation and payment disputes. Additionally, we are subject to risks of terrorism, piracy, political instability, hostilities, expropriation, confiscation or deprivation of our assets or military action impacting our operations, assets or financial performance in many of our areas of operations.  

A continued low amount of, or further reduction in, expenditures by oil and natural gas exploration and production companies due to the recent low level of oil and natural gas prices, a decrease in demand for oil and natural gas, or other factors, would adversely affect our business.

Our business, including the utilization rates and dayrates we achieve for our drilling units, depends on the level of activity in oil and natural gas exploration, development and production expenditures of our customers. Oil and natural gas prices and customers’ expectations of potential changes in these prices significantly affect this level of activity. Commodity prices are affected by numerous factors, including the following:

• changes in global economic conditions;

• the worldwide supply and demand for oil and natural gas;

• the cost of exploring for, producing and delivering oil and natural gas;

• expectations regarding future prices;

• advances in exploration, development and production technology;

• the ability or willingness of the OPEC to set and maintain production levels and pricing;

• the availability and discovery rate of new oil and natural gas reserves in offshore areas;

• the rate of decline of existing and new oil and natural gas reserves;

• the level of production in non-OPEC countries;

• domestic and international tax policies;

• the development and exploitation of alternative fuels;

• weather;

• blowouts and other catastrophic events;

• governmental laws and regulations, including environmental laws and regulations;

• the policies of various governments regarding exploration and development of their oil and natural gas reserves;

• volatility in the exchange rate of the U.S. dollar against other currencies; and

• the worldwide political environment, uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in significant oil and natural gas producing regions or further acts of terrorism.

In addition to oil and gas prices, the offshore drilling industry is influenced by additional factors, including:

• the availability of competing offshore drilling vessels and the level of construction activity for new drilling vessels;

• the level of costs for associated offshore oilfield and construction services;

• oil and gas transportation costs;

• the discovery of new oil and gas reserves;

• the cost of non-conventional hydrocarbons; and

• regulatory restrictions on offshore drilling.

Any of these factors could reduce demand for or prices paid for our services and adversely affect our business and results of operations.

13

Low prices for oil and natural gas may reduce demand for our services and could have a material adverse effect on our revenue and profitability.

Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices. In addition, demand for our services is particularly sensitive to the level of exploration, development and production activity of and the corresponding capital spending by, oil and natural gas companies. Any prolonged weakness in oil and natural gas prices could depress the near-term levels of exploration, development and production activity. Perceptions of longer-term lower oil and natural gas prices by oil and natural gas companies could similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects. Lower levels of activity result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability. Additionally, these factors may adversely impact our financial position if they are determined to cause an impairment of our long-lived assets.

A small number of customers account for a significant portion of our revenues, and the loss of one or more of these customers could materially adversely affect our financial condition and results of operations. The concentration of revenue with a small number of customers also exposes us to credit risk of these customers for non-payment or contract termination.

We derive a significant portion of our revenues from a few customers. During the fiscal year ended December 31, 2017, four customers accounted for approximately 90% of our revenue. Our financial condition and results of operations could be materially and adversely affected if any one of these customers interrupts or curtails their activities, fails to pay for the services that have been performed, terminates their contracts, fails to renew their existing contracts or refuses to award new contracts and we are unable to enter into contracts with new customers on comparable terms. The loss of any of our significant customers could materially adversely affect our financial condition and results of operations.

Our drilling contracts are generally short-term, and we could experience reduced profitability if customers reduce activity levels, terminate or seek to renegotiate drilling contracts with us, or if market conditions dictate that we enter into contracts that provide for payment based on a footage or turnkey basis, rather than on a dayrate basis.

Many drilling contracts are short-term, and oil and natural gas companies tend to reduce shallow water activity levels quickly in response to downward changes in oil and natural gas prices. Due to the short-term nature of most of our drilling contracts, a decline in market conditions can quickly affect our business if customers reduce their levels of operations. During depressed market conditions, a customer may no longer need a unit that is currently under contract or may be able to obtain a comparable unit at a lower dayrate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. In addition, our customers may have the right to terminate, or may seek to renegotiate, existing contracts if we experience excessive downtime, operational problems above the contractual limit or safety-related issues, if the drilling unit is a total loss, if the drilling unit is not delivered to the customer within the period specified in the contract or in other specified circumstances, which include events beyond the control of either party.

Some of our current drilling contracts, and some drilling contracts that we may enter into in the future, may include terms allowing customers to terminate contracts without cause, with little or no prior notice and without penalty or early termination payments. In addition, we could be required to pay penalties, which could be material, if some of these contracts are terminated due to downtime, operational problems or failure to deliver. Some of the contracts with customers that we enter into in the future may be cancellable at the option of the customer upon payment of a penalty, which may not fully compensate us for the loss of the contract. Early termination of a contract may result in a drilling unit being idle for an extended period of time. The likelihood that a customer may seek to terminate a contract is increased during periods of market weakness. Under most of our contracts, it is an event of default if we file a petition for bankruptcy or reorganization, which would allow the customer to terminate such contract.

Currently, all of our drilling contracts are dayrate contracts, where we charge a fixed rate per day regardless of the number of days needed to drill the well. While we plan to continue to perform services on a dayrate basis, market conditions may dictate that we enter into contracts that provide for payment based on a footage basis, where we are paid a fixed amount for each foot drilled regardless of the time required or the problems encountered in drilling the well, or enter into turnkey contracts, where we agree to drill a well to a specific depth for a fixed price and bear some of the well equipment costs. These types of contracts are riskier for us than a dayrate contract as we would be subject to downhole geologic conditions in the well that cannot always be accurately determined and subject us to greater risks associated with equipment and downhole tool failures. Unfavorable downhole geologic conditions and equipment and downhole tool failures may result in significant cost increases or may result in a decision to abandon a well project which would result in us not being able to invoice revenues for providing services. Any such termination or renegotiation of contracts and unfavorable costs increases or loss of revenue could have a material adverse impact on our financial condition and results of operations.

Our financial results may not reflect historical trends.

Our past financial performance may not be indicative of our future financial performance. We have a limited operating history since our emergence from bankruptcy on February 10, 2016. Further, we became a new entity for financial reporting purposes when

14

we adopted fresh-start accounting as of our emergence from bankruptcy.  As a result, our financial results for periods following our emergence from bankruptcy are different from historical trends and the differences may be material.

Our current backlog of contract drilling revenue may not be fully realized, which may have a material adverse impact on our consolidated statement of financial position, results of operations or cash flows.

As of December 31, 2017, our owned fleet had total drilling contract backlog of approximately $282.4 million. This amount was calculated based on certain estimates and assumptions regarding operations and payments to be received under such drilling contracts. Although management believes that such estimates and assumptions are reasonable, actual amounts received under these contracts could materially differ from the projected amount.  Material differences between the projected contract backlog amount and the amounts actually received pursuant to such contracts could be caused by a number of factors, including rig downtime or suspension of operations. We may not be able to realize the full amount of our contract backlog due to events beyond our control.

We may not be able to replace expiring or terminated contracts for our existing rigs at dayrates that are economically feasible for us.  

Due to the cyclical nature and high level of competition in our industry, we may not be able to replace expiring or terminated contracts. Our ability to replace expiring or terminated contracts will depend on prevailing market conditions, the specific needs of our customers, and numerous other factors beyond our control. Additionally, any contracts for our drilling units may be at dayrates that are below existing dayrates, which could have a material adverse effect on our overall business, financial condition, results of operations and future prospects.  

The agreements governing our 2016 Term Loan Facility and our notes impose significant operating and financial restrictions on us and our subsidiaries that may prevent us from capitalizing on business opportunities and restrict our ability to operate our business.

The agreements governing our 2016 Term Loan Facility and our notescontain covenants that restrict our and our restricted subsidiaries’ ability to take various actions, such as:

• paying dividends, redeeming subordinated indebtedness or making other restricted payments;

• incurring or guaranteeing additional indebtedness or, with respect to our restricted subsidiaries or any other subsidiary guarantor, issuing preferred shares;

• creating or incurring liens;

• incurring dividend or other payment restrictions affecting our restricted subsidiaries;

• consummating a merger, consolidation or sale of all or substantially all of our or our subsidiaries’ assets;

• entering into transactions with affiliates;

• transferring or selling assets, including to a master limited partnership or similar entity;

• engaging in business other than our current business and reasonably related extensions thereof;

• issuing capital stock of certain subsidiaries;

• taking or omitting to take any actions that would adversely affect or impair in any material respect the collateral securing our indebtedness;

• terminating or amending certain material contracts;

• amending, modifying or changing our organizational documents; and

• employing our drilling units in certain jurisdictions.

We may also be prevented from taking advantage of business opportunities because of the limitations imposed on us by the restrictive covenants under the agreements governing the credit agreement and our notes. In addition, restrictions may also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions, execute our business strategy, effectively compete with companies that are not similarly restricted or engage in other business activities that would be in our interest. We are also subject to additional restrictions in our 2016 Term Loan Facility and Credit Agreement, and in the future, we may also incur additional debt obligations that might subject us to additional and different restrictive covenants that could further affect our financial and operational flexibility. We cannot assure you that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements, or that we will be able to refinance our debt on acceptable terms or at all.

15

Our business is affected by local, national and worldwide economic conditions and the condition of the oil and natural gas industry.

Current economic conditions have resulted in uncertainty regarding energy and commodity prices. In addition, future economic conditions may cause many oil and natural gas production companies to further reduce or delay expenditures in order to reduce costs, which in turn may cause a further reduction in the demand for drilling services. If conditions worsen, our business and financial condition may be adversely impacted due to a decrease in demand of our drilling units.

There may be limits to our ability to mobilize drilling units between geographic markets and the time and costs of such drilling unit mobilizations may be material to our business.

The offshore contract drilling market is generally a global market as drilling units may be mobilized from one market to another market. However, geographic markets can, from time to time, have material fluctuations in costs and risks as the ability to mobilize drilling units can be impacted by several factors including, but not limited to, governmental regulation and customs practices, the significant costs to move a drilling unit, availability of tow boats or heavy lift vessels, weather, political instability, civil unrest, military actions and the technical capability of the drilling units to operate in various environments. Any increase in the supply of drilling units in the geographic areas in which we operate, whether through new construction, refurbishment or conversion of drilling units from other uses, remobilization or changes in the law or its application, could increase competition and result in lower dayrates and/or utilization, which would adversely affect our financial position, results of operations and cash flows. Additionally, while a drilling unit is being mobilized from one geographic market to another, we may not be paid by the customer for the time that the drilling unit is out of service. Also, we may mobilize the drilling unit to another geographic market without a customer contract which will result in costs not reimbursable by future customers.

Our business involves numerous operating hazards, and our insurance and contractual indemnity rights may not be adequate to cover our losses.

Our operations are subject to the usual hazards inherent in the drilling and operation of oil and natural gas wells, such as blowouts, reservoir damage, loss of production, loss of well control, punch-throughs, craterings, fires and pollution. The occurrence of these events could result in the suspension of drilling or production operations, claims by the operator and others affected by such events, severe damage to, or destruction of, the property and equipment involved, injury or death to drilling unit personnel, environmental damage and increased insurance costs. We may also be subject to personal injury and other claims of drilling unit personnel as a result of our drilling operations. Operations also may be suspended because of machinery breakdowns, abnormal operating conditions, failure of subcontractors to perform or supply goods or services and personnel shortages.

In addition, our operations will be subject to perils particular to marine operations, including capsizing, grounding, collision and loss or damage from severe weather. Severe weather could have a material adverse effect on our operations. Our drilling units could be damaged by high winds, turbulent seas or unstable sea bottom conditions which could potentially cause us to curtail operations for significant periods of time until such damages are repaired.

Damage to the environment could result from our operations, particularly through oil spillage or extensive uncontrolled fires. We may also be subject to property, environmental and other damage claims by host governments, oil and natural gas companies and other businesses operating offshore and in coastal areas, as well as claims by individuals living in or around coastal areas.

As is customary in our industry, the risks of our operations are partially covered by our insurance and partially by contractual indemnities from our customers. However, insurance policies and contractual rights to indemnity may not adequately cover losses, and we may not have insurance coverage or rights to indemnity for all risks. Moreover, pollution and environmental risks generally are not fully insurable. If a significant accident or other event resulting in damage to our drilling units, including severe weather, terrorist acts, war, civil disturbances, pollution or environmental damage, occurs and is not fully covered by insurance or a recoverable indemnity from a customer, it could adversely affect our financial condition and results of operations.

Our offshore drilling operations could be adversely impacted by changes in regulation of offshore oil and gas exploration and development activity.

Offshore drilling operations could be adversely impacted by changes in regulation of offshore oil and gas exploration and development activities. New regulatory requirements in the future could impose greater costs on our operations, which could have a material adverse impact on our results of operations. We do not currently operate in the United States, but may do so in the future. The jurisdictions in which we currently operate have imposed requirements for offshore oil and gas exploration and development activities and, like the U.S., may impose new regulatory requirements in the future.

Customers may be unable or unwilling to indemnify us.

Consistent with standard industry practice, our customers generally assume liability for and indemnify us against well control and subsurface risks under our dayrate contracts, and we do not separately purchase insurance for such indemnified risks. These risks are those associated with the loss of control of a well, such as blowout or cratering, the cost to regain control or redrill the well and associated pollution. In the future, we may not be able to obtain agreements from customers to indemnify us for such damages and

16

risks or the indemnities that we do obtain may be limited in scope and duration or subject to exceptions. Additionally, even if our customers agree to indemnify us, there can be no assurance that they will necessarily be financially able to indemnify us against all of these risks.

Our insurance coverage may not be adequate if a catastrophic event occurs.

As a result of the number and significance of catastrophic events in the history of the offshore drilling industry, insurance underwriters have increased insurance premiums and increased restrictions on coverage and have made other coverages unavailable to us on commercially reasonable terms. During the recent industry downturn, in addition to paying lower day rates, many oil and gas companies  have negotiated less favorable terms with respect to risk allocation and indemnity rights in the drilling service contracts to which we are or may become a party.

While we believe we have reasonable policy limits of property, casualty and liability insurance, including coverage for acts of terrorism, with financially sound insurers, we cannot guarantee that our policy limits for property, casualty, liability and business interruption insurance, including coverage for severe weather, terrorist acts, war, civil disturbances, pollution or environmental damage, would be adequate should a catastrophic event occur related to our property, plant or equipment, or that our insurers would have adequate financial resources to sufficiently or fully pay related claims or damages. When any of our coverage expires, or when we seek coverage in the future, we cannot guarantee that adequate coverage will be available, offered at reasonable prices, or offered by insurers with sufficient financial soundness. Additionally, we do not have third party windstorm insurance and we may not have windstorm insurance for any vessel that we operate in the Gulf of Mexico in the future. The occurrence of an incident or incidents affecting any one or more of our drilling units could have a material adverse effect on our financial position and future results of operations if asset damage and/or our liability were to exceed insurance coverage limits or if an insurer was unable to sufficiently or fully pay related claims or damages.

Our business is subject to numerous governmental laws and regulations, including those that may impose significant costs and liability on us for environmental and natural resource damages.

Many aspects of our operations are affected by governmental laws, regulations and policies that may relate directly or indirectly to the contract drilling industry, including those requiring us to control the discharge of oil and other contaminants into the environment or otherwise relating to environmental protection. Countries where we currently operate have environmental laws and regulations covering the discharge of oil and other contaminants and protection of the environment in connection with operations. Operations and activities in the United States and its territorial waters are subject to numerous environmental laws and regulations, including the Clean Water Act, the OPA, the Outer Continental Shelf Lands Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Clean Air Act, the Resource Conservation and Recovery Act and MARPOL. Many of the countries in which we currently operate have similar requirements. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and criminal penalties, the imposition of remedial obligations, the denial or revocation of permits or other authorizations and the issuance of injunctions that may limit or prohibit operations.

Laws and regulations protecting the environment have become more stringent in recent years and may in certain circumstances impose strict liability, rendering us liable for environmental and natural resource damages without regard to negligence or fault on our part. These laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time the acts were performed. The application of these requirements, the modification of existing laws or regulations or the adoption of new laws or regulations relating to exploratory or development drilling for oil and natural gas could materially limit future contract drilling opportunities or materially increase our costs. In addition, we may be required to make significant capital expenditures to comply with such laws and regulations.

In addition some financial institutions are imposing, as a condition to financing, requirements to comply with additional non-governmental environmental and social standards in connection with operations outside the United States, such as the Equator Principles, a credit risk management framework for determining, assessing and managing environmental and social risk in project finance transactions. Such additional standards could impose significant new costs on us, which may materially and adversely affect us.

Further, certain governments at the international, national, regional and state level are at various stages of considering or implementing treaties and environmental laws that could limit emissions of greenhouse gases, including carbon dioxide, associated with the burning of fossil fuels.  It is not possible to predict how new laws to address greenhouse gas emissions would impact our business or that of our customers, but these laws and regulations could impose costs on us or negatively impact the market for offshore drilling services, and consequently, our business.

17

Changes in laws and regulations of jurisdictions where we operate, including those that may impose significant costs and liability on us for environmental and natural resource damages, may adversely affect our operations. The jurisdictions where we operate have modified or may in the future modify their laws and regulations in a manner that would increase our liability for pollution and other environmental damage.

We may be required to make substantial capital and operating expenditures to maintain and upgrade our fleet to maintain our competitiveness and to comply with laws and the applicable regulations and standards of governmental authorities and organizations, each of which could negatively affect our financial condition, results of operations and cash flows.

Our business is highly capital intensive and dependent on having sufficient cash flow and or available sources of financing in order to fund capital expenditure requirements. We can provide no assurance that we will have access to adequate or economical sources of capital to fund necessary capital expenditures. Such capital expenditures could increase as a result of changes in the following:

• the cost of labor and materials;

• customer requirements;

• fleet size;

• the cost of replacement parts for existing drilling rigs;

• the geographic location of the drilling rigs;

• the length of drilling contracts;

• governmental regulations and maritime self-regulatory organization and technical standards relating to safety, security or the environment; and

• industry standards.

Changes in offshore drilling technology, customer requirements for new or upgraded equipment and competition within our industry may require us to make significant capital expenditures in order to maintain our competitiveness.  In addition, changes in governmental regulations, safety or other equipment standards, as well as compliance with standards imposed by maritime self-regulatory organizations, may require us to make additional unforeseen capital expenditures.  As a result, we may be required to take our rigs out of service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment.  In the future, market conditions may not justify these expenditures or enable us to operate our older rigs profitably during the remainder of their economic lives.

In addition, we may require additional capital in the future.  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.  If we raise funds by issuing equity securities, existing shareholders may experience dilution.  Our failure to obtain the funds for necessary future capital expenditures could have a material adverse effect on our business and on our consolidated statements of financial condition, results of operations and cash flows.

Construction projects are subject to risks, including delays and cost overruns, which could have an adverse impact on our liquidity and results of operations.

As part of our growth strategy we may contract from time to time for the construction of drilling units or may enter into agreements to manage the construction of drilling units for others. Construction projects are subject to the risks of delay or cost overruns inherent in any large construction project, including costs or delays resulting from the following:

• unexpected long delivery times for, or shortages of, key equipment, parts and materials;

• shortages of skilled labor and other shipyard personnel necessary to perform the work;

• unforeseen increases in the cost of equipment, labor and raw materials, particularly steel;

• unforeseen design and engineering problems;

• unanticipated actual or purported change orders;

• work stoppages;

• latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;

• failure or delay of third-party service providers and labor disputes;

• disputes with shipyards and suppliers;

• delays and unexpected costs of incorporating parts and materials needed for the completion of projects;

18

• financial or other difficulties at shipyards;

• adverse weather conditions; and

• inability to obtain required permits or approvals.

If we experience delays and costs overruns in the construction of drilling units due to certain of the factors listed above, it could also adversely affect our business, financial condition and results of operations.

New technology and/or products may cause us to become less competitive.

The offshore contract drilling industry is subject to the introduction of new drilling techniques and services using new technologies, some of which may be subject to patent protection. As competitors and others use or develop new technologies, we may be placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources that may allow them to access technological advantages and implement new technologies before we can. We cannot be certain that we will be able to implement new technology or products on a timely basis or at an acceptable cost. Thus, our inability to effectively use and implement new and emerging technology may have a material and adverse effect on our financial condition and results of operations.

Our information technology systems and those of our service providers are subject to cybersecurity risks and threats.

We depend on information technology systems that we manage, and others that are managed by our third-party service and equipment providers, to conduct our operations, including critical systems on our drilling units, and these systems are subject to risks associated with cyber incidents or attacks. It has been reported that unknown entities or groups have mounted cyber-attacks on businesses and other organizations solely to disable or disrupt computer systems, disrupt operations and, in some cases, steal data. Due to the nature of cyber-attacks, breaches to our or our service or equipment providers’ systems could go unnoticed for a prolonged period of time. These cybersecurity risks could disrupt our operations and result in downtime, loss of revenue or the loss of critical data as well as result in higher costs to correct and remedy the effects of such incidents. If our or our service or equipment providers’ systems for protecting against cyber incidents or attacks prove to be insufficient and an incident were to occur, it could have a material adverse effect on our business, financial condition, results of operations or cash flows. Currently, we do not carry insurance for losses related to cybersecurity attacks and may elect to not obtain such insurance in the future.

Our financial condition may be adversely affected if we are unable to identify and complete future acquisitions, fail to successfully integrate acquired assets or businesses we acquire, or are unable to obtain financing for acquisitions on acceptable terms.

The acquisition of assets or businesses that we believe to be complementary to our drilling operations is an important component of our business strategy. We believe that acquisition opportunities may arise from time to time, and that any such acquisition could be significant. At any given time, discussions with one or more potential sellers may be at different stages. However, any such discussions may not result in the consummation of an acquisition transaction, and we may not be able to identify or complete any acquisitions. We cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the price of our securities. Our business is capital intensive and any such transactions could involve the payment by us of a substantial amount of cash. We may need to raise additional capital through public or private debt or equity financings to execute our growth strategy and to fund acquisitions. Adequate sources of capital may not be available when needed on acceptable terms. If we raise additional capital by issuing additional equity securities, existing shareholders may be diluted. If our capital resources are insufficient at any time in the future, we may be unable to fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

Any future acquisitions could present a number of risks, including:

• the risk of using management time and resources to pursue acquisitions that are not successfully completed;

• the risk of incorrect assumptions regarding the future results of acquired operations;

• the risk of failing to integrate the operations or management of any acquired operations or assets successfully and timely; and

• the risk of diversion of management’s attention from existing operations or other priorities.

If we are unsuccessful in completing acquisitions of other operations or assets, our financial condition could be adversely affected and we may be unable to implement an important component of our business strategy successfully. In addition, if we are unsuccessful in integrating our acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected.

19

Operating and maintenance costs will not necessarily fluctuate in proportion to changes in operating revenues.

We cannot predict what operating and maintenance costs will fluctuate in proportion to changes in operating revenues. Operating revenues may fluctuate as a function of changes in dayrates. However, costs for operating a drilling unit are generally fixed or only semi-variable regardless of the dayrate being earned. In addition, should the drilling units incur idle time between contracts, we would typically maintain the crew to prepare the drilling unit for its next contract and may not be able to reduce costs to correspond to the decrease in revenue. During times of moderate activity, reductions in costs may not be immediate as the crew may be required to prepare the drilling units for stacking, after which time the crew will be reduced to a level necessary to maintain the drilling unit in working condition with the extra crew members assigned to active drilling units or dismissed. In addition, as drilling units are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. Equipment maintenance expenses fluctuate depending upon the type of activity the drilling unit is performing and the age and condition of the equipment. Contract preparation expenses vary based on the scope and length of contract preparation required and the duration of the firm contractual period over which such expenditures are amortized.

The loss of some of our key executive officers and employees could negatively impact our business prospects.

Our future operational performance depends to a significant degree upon the continued service of key members of our management as well as marketing, technical and operations personnel. The loss of one or more of our key personnel could have a material adverse effect on our business. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, technical and operations personnel. We may experience intense competition for personnel, and we cannot assure you that we will be able to retain key employees or that we will be successful in attracting, assimilating and retaining personnel in the future.

Failure to employ a sufficient number of skilled workers or an increase in labor costs could hurt our operations.

We require skilled personnel to operate and provide technical services to, and support for, our drilling units. In periods of increasing activity and when the number of operating units in our areas of operation increases, either because of new construction, re-activation of idle units or the mobilization of units into the region, shortages of qualified personnel could arise, creating upward pressure on wages and difficulty in staffing. The shortages of qualified personnel or the inability to obtain and retain qualified personnel also could negatively affect the quality and timeliness of our work. In addition, our ability to expand operations depends in part upon our ability to increase the size of the skilled labor force. Due to the extremely weak conditions in the offshore drilling market, the lack of employment and lower wages for offshore personnel have caused and will continue to cause many of our current offshore personnel to permanently leave the industry for employment opportunities in other industries. If industry conditions improve, there is no guarantee these workers will return to the offshore industry resulting in a shortage of qualified personnel that we will be able to employ.

Consolidation of suppliers may increase the cost of obtaining supplies, which may have a material adverse effect on our results of operations and financial condition.

We rely on certain third parties to provide supplies and services necessary for our offshore drilling operations, including, but not limited to, drilling equipment suppliers, catering and machinery suppliers. Recent mergers have reduced the number of available suppliers, resulting in fewer alternatives for sourcing key supplies. Such consolidation, combined with a high volume of drilling units under construction, may result in a shortage of supplies and services thereby increasing the cost of supplies and/or potentially inhibiting the ability of suppliers to deliver on time, or at all. These cost increases, delays or unavailability could have a material adverse effect on our results of operations and result in drilling unit downtime, and delays in the repair and maintenance of our drilling units.

We are exposed to potential risks from the requirement that we evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002.

We have evaluated our internal controls systems in order to allow management to report on our internal controls, as required by Section 404 of the Sarbanes-Oxley Act of 2002. We have performed the system and process evaluation and testing required to comply with the management certification requirements of Section 404. As a result, we have incurred additional expenses and a diversion of management’s time. While we have been able to fully implement the requirements relating to internal controls and all other aspects of Section 404 in a timely fashion, we cannot be certain that our internal control over financial reporting will be adequate in the future to ensure compliance with the requirements of the Sarbanes-Oxley Act or the FCPA. If we are not able to maintain adequate internal control over financial reporting, we may be susceptible to sanctions or investigation by regulatory authorities, such as the DOJ and the SEC. Any such action could adversely affect our financial results.

Changes in tax laws, treaties or regulations, effective tax rates or adverse outcomes resulting from examination of our tax returns could adversely affect our financial results.

Our future effective tax rates could be adversely affected by changes in tax laws, treaties, and regulations both internationally and domestically. On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Act”)

20

was enacted.  The Act , among other things, makes significant changes to the U.S. corporate income tax system, including reducing the federal corporate income tax rate from 35% to 21%; changes certain business-related deductions, including modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses; and transitions U.S. international taxation from a worldwide tax system to a territorial tax system.  Our existing deferred tax assets and liabilities are revalued at the newly enacted U.S. corporate rate, and the impact is recognized in our tax expense in 2017; the year of enactment. We continue to examine the potential impact this tax legislation may have on our business and financial results.Tax laws, treaties and regulations are highly complex and subject to interpretation. We are subject to changing tax laws, treaties and regulations in and between the countries in which we operate. Our income tax expense is based upon the interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings. If any country’s tax authority successfully challenges our income tax filings based on our structure or the presence of our operations there, or if we otherwise lose a material dispute, our effective tax rate on worldwide earnings could increase substantially and our financial results could be materially adversely affected.

Because we are incorporated under the laws of the Cayman Islands, stakeholders may face difficulties in protecting their interests, and their ability to protect their rights through the U.S. federal courts may be limited.

We are an exempted company incorporated with limited liability under the laws of the Cayman Islands. In addition, substantially all of our assets are located outside the United States. As a result, it may be difficult for holders of our securities to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the U.S. courts against our directors or executive officers.

Our corporate affairs are governed by our third amended and restated memorandum and articles of association, the Companies Law (as the same may be supplemented or amended from time to time) of the Cayman Islands, and the common law of the Cayman Islands. The rights of holders of our securities to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are, to a large extent, governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are different from those under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a different body of securities laws which may provide significantly less protection to investors as compared to the United States, and some states, such as Delaware, which have more fully developed and judicially interpreted bodies of corporate law.

The Cayman Islands courts are also unlikely:

• to recognize or enforce against us judgments of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

• to impose liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

Additionally, Cayman Islands companies may not have standing to sue before the federal courts of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without re-examination of the merits of the underlying dispute, provided such judgment:

• is final;

• imposes on the judgment debtor a liability to pay a liquidated sum for which the judgment has been given;

• is not in respect of taxes, a fine, or a penalty; and

• was neither obtained in a manner, nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.

The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere.

We remain subject to litigation relating to our reorganization proceedings.

In connection with our bankruptcy cases, two appeals were filed relating to the confirmation of the Reorganization Plan. Specifically, on January 29, 2016, Hsin Chi Su and F3 Capital filed two appeals before the United States District Court for the District of Delaware seeking a reversal of (i) the Court’s determination that Hsin Chi Su and F3 Capital did not have standing to appear and be heard in the bankruptcy cases, which was made on the record at a hearing held on January 14, 2016, and (ii) the Court’s Findings of Fact, Conclusions of Law, and Order (I) Approving the Debtors’ (A) Disclosure Statement Pursuant to Sections 1125 and 1126(b) of the Bankruptcy Code, (B) Solicitation of Votes and Voting Procedures, and (C) Forms of Ballots, and (II) Confirming the Amended

21

Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors [Docket No. 188], which was entered on January 15, 2016. The appeals were consolidated on June 14, 2016. We cannot predict with certainty the ultimate outcome of any such appeals. An adverse outcome could negatively affect our business, results of operations and financial condition.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We maintain offices, land bases and other facilities in several worldwide locations, including our principal executive offices in Houston, Texas, an operational, executive and marketing office in Dubai and a regional administrative office in Singapore. We lease all of these facilities.

The description of our drilling fleet included under “Item 1. Business” is incorporated by reference herein.

Item 3. Legal Proceedings.

We may be involved in litigation, claims and disputes incidental to our business, which may involve claims for significant monetary amounts, some of which would not be covered by insurance. In the opinion of management, none of the existing disputes to which we are a party will have a material adverse effect on our financial position, results of operations or cash flows.

In July 2015, we became aware that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petrobras, had entered into a plea arrangement with the Brazilian authorities in connection with his role in facilitating the payment of bribes to former Petrobras executives. Among other things, Mr. Padilha provided information to the Brazilian authorities of an alleged bribery scheme between former Petrobras executives and Mr. Hsin-Chi Su, who was, at the time of the alleged bribery scheme, a member of the Board of Directors and a significant shareholder of our former parent company, VDC. When we learned of Mr. Padilha’s plea agreement and the allegations, we voluntarily contacted the DOJ and the SEC to advise them of these developments, as well as the fact that we had engaged outside counsel to conduct an internal investigation of the allegations. Since disclosing this matter to the DOJ and SEC, we have cooperated fully in their investigation of these allegations. In connection with such cooperation, we advised both agencies that in early 2010, we engaged outside counsel to investigate a report of alleged improper payments to customs and immigration officials in Asia. That investigation was concluded in 2011, and we determined at that time that no disclosure was warranted; however, in an abundance of caution, we provided the results of this investigation to the DOJ and SEC in light of the allegations in the Petrobras matter. In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation into the Company concerning possible violations of the FCPA by VDC in the Petrobras matter and indicating that the DOJ has closed such investigation without any action. In addition, the Company has engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million. If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

On August 31, 2015, VDC received notice from Petrobras America, Inc. (“PAI”) and Petrobras Venezuela Investments & Services B.V. (“PVIS”) stating that PAI and PVIS were terminating the Agreement for the Provision of Drilling Services dated February 4, 2009 (the “Drilling Contract”). The Drilling Contract was initially entered into between PVIS and Vantage Deepwater Company, one of our wholly-owned indirect subsidiaries, and was later novated by PVIS to PAI and by Vantage Deepwater Company to Vantage Deepwater Drilling, Inc., another of our wholly-owned indirect subsidiaries. The notice stated that PAI and PVIS were terminating the Drilling Contract because Vantage had allegedly breached its obligations under the agreement. Under the terms of the Drilling Contract, we initiated arbitration proceedings before the American Arbitration Association on August 31, 2015, challenging PVIS and PAI’s wrongful attempt to terminate the Drilling Contract. Vantage has maintained that it complied with all of its obligations under the Drilling Contract and that PVIS and PAI’s attempt to terminate the agreement is both improper and a breach of the Drilling Contract.

In the ongoing arbitration proceeding, the hearing on the merits has concluded and the parties have exchanged post-hearing briefs. Vantage has asserted claims against PAI and PVIS for declaratory relief and monetary damages based on breach of contract. Vantage has also asserted a claim against Petroleo Brasileiro S.A. (“PBP”) to enforce a guaranty provided by PBP.  The Petrobras entities (PVIS, PAI and PBP) have asserted that the Drilling Contract is void as illegally procured, that PVIS and PBP are not proper

22

parties to the arbitration, and that PAI and PVIS properly terminated the contract. PAI has further counterclaimed for attorneys’ fees and costs alleging that Vantage failed to negotiate in good faith before commencing arbitration proceedings and is seeking disgorgement damages of approximately $102 million. We are vigorously pursuing our claims in the arbitration and deny that any of the claims or defenses asserted by the Petrobras entities have merit.

In connection with our bankruptcy cases, two appeals were filed relating to the confirmation of the Reorganization Plan. Specifically, on January 29, 2016, Hsin Chi Su and F3 Capital filed two appeals before the United States District Court for the District of Delaware seeking a reversal of (i) the Court’s determination that Hsin Chi Su and F3 Capital did not have standing to appear and be heard in the bankruptcy cases, which was made on the record at a hearing held on January 14, 2016, and (ii) the Court’s Findings of Fact, Conclusions of Law, and Order (I) Approving the Debtors’ (A) Disclosure Statement Pursuant to Sections 1125 and 1126(b) of the Bankruptcy Code, (B) Solicitation of Votes and Voting Procedures, and (C) Forms of Ballots, and (II) Confirming the Amended Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors [Docket No. 188], which was entered on January 15, 2016. The appeals were consolidated on June 14, 2016. We cannot predict with certainty the ultimate outcome of any such appeals. An adverse outcome could negatively affect our business, results of operations and financial condition.

Item 4. Mine Safety Disclosures.

Not applicable.

23

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Prices and Dividends

There is no established trading market for our New Shares and there has not been an established trading market for our New Shares since we emerged from bankruptcy on February 10, 2016. Therefore, we are not able to provide information regarding the trading prices for the New Shares.  

We have not paid dividends on our New Shares to date and do not anticipate paying cash dividends in the immediate future as we contemplate that our cash flows will be used for debt reduction and growth. The payment of future dividends, if any, will be determined by our board of directors in light of conditions then existing, including our earnings, financial condition, capital requirements, restrictions in financing agreements, business conditions and other factors. We are subject to certain restrictive covenants under the terms of the agreements governing our indebtedness, including restrictions on our ability to pay any cash dividends.

Repurchases of Equity Securities

There were no repurchases of equity securities during the fiscal fourth quarter ended December 31, 2017.

24

Item 6. Selected Financial Data.

The following selected financial information should be read in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data.”

25

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016				Year Ended December 31, 2015				2014				2013
(in thousands)
Consolidated Statement of Operations Data
Revenue	$	212,846		$	158,648		$	23,540			$	772,265			$	882,904			$	728,256
Operating costs		161,668			123,022			25,213				359,610				405,697				324,767
General and administrative expenses		41,648			36,922			2,558				25,322				25,390				22,714
Depreciation and amortization		73,925			67,920			10,696				127,359				126,610				106,609
Income (loss) from operations		(64,395	)		(69,216	)		(14,927	)			259,974				325,207				274,166
Gain (loss) on debt extinguishment		—			—			—				10,823		(1)		4,408		(2)		(98,327	)	(3)
Interest expense, net		(75,633	)		(67,005	)		(1,725	)			(173,550	)	(4)		(196,089	)			(198,545	)
Other income (expense)		2,501			1,132			(69	)			4,231				(596	)			3,010
Reorganization items		-			(1,380	)		(452,919	)	(5)		(39,354	)	(6)		—				—
Bargain purchase gain		1,910			—			—				—				—				—
Income (loss) before income taxes		(135,617	)		(136,469	)		(469,640	)			62,124				132,930				(19,696	)
Income tax provision		14,168			10,948			2,371				39,870				39,817				27,921
Net income  (loss)		(149,785	)		(147,417	)		(472,011	)			22,254				93,113				(47,617	)
Net income (loss) attributable to noncontrolling interests		—			—			(969	)			5,036				257				(463	)
Net income (loss) attributable to VDI	$	(149,785	)	$	(147,417	)	$	(471,042	)		$	17,218			$	92,856			$	(47,154	)
Net loss per share, basic and diluted	$	(29.96	)	$	(29.48	)	N/A				N/A					N/A				N/A
Other Financial Data
EBITDA Reconciliation
Net income (loss)	$	(149,785	)	$	(147,417	)	$	(472,011	)		$	22,254			$	93,113			$	(47,617	)
Interest expense		75,633			67,005			1,725				173,550				196,089				198,545
Income tax provision		14,168			10,948			2,371				39,870				39,817				27,921
Depreciation		73,925			67,920			10,696				127,359				126,610				106,609
EBITDA (7)		13,941			(1,544	)		(457,219	)			363,033				455,629				285,458
Gain (loss) on debt extinguishment		—			—			—				(10,823	)			(4,408	)			98,327
Reorganization items		—			1,380			452,919				39,354				—				—
Bargain purchase gain		(1,910	)		—			—				—				—				—
Adjusted EBITDA (8)	$	12,031		$	(164	)	$	(4,300	)		$	391,564			$	451,221			$	383,785
Balance Sheet Data (as of end of period)
Cash and cash equivalents	$	195,455		$	231,727		N/A				$	203,420			$	75,801			$	50,326
Total other current assets		102,541			78,479		N/A					157,323				245,537				243,186
Property and equipment, net		763,191			834,528		N/A					2,948,387				3,032,568				3,126,598
Total other assets		21,935			15,694		N/A					23,050				71,226				89,773
Total assets	$	1,083,122		$	1,160,428		N/A				$	3,332,180			$	3,425,132			$	3,509,883
Total current liabilities	$	69,213		$	55,161		N/A				$	132,616			$	341,380			$	389,070
Long-term debt		919,939			867,372		N/A					—		(9)		2,497,103				2,669,705
Other long-term liabilities		17,195			11,335		N/A					33,097				85,243				41,820
Liabilities subject to compromise		—			—		N/A					2,694,456				—				—
VDI shareholder's equity		76,775			226,560		N/A					456,756				490,689				397,833

26

Noncontrolling interests		—			—		N/A				15,255			10,717			11,455
Total liabilities and shareholders’ equity	$	1,083,122		$	1,160,428		N/A			$	3,332,180		$	3,425,132		$	3,509,883
Cash Flow Data
Net cash provided by (used in) operating activities	$	(19,873	)	$	(3,874	)	$	(21,365	)	$	92,587		$	239,724		$	27,416
Net cash provided by (used in) investing activities		(14,969	)		(11,964	)		116			(46,490	)		(35,693	)		(532,299	)
Net cash provided by (used in) financing activities		(1,430	)		(1,481	)		66,875			81,522			(178,556	)		67,977

(1) Includes redemption discounts totaling $11.5 million in connection with discretionary open market repurchases of our pre-bankruptcy indebtedness offset by $0.7 million for the write-off of associated issuance discounts and deferred financing costs.

(2) Includes redemption discounts totaling $7.1 million in connection with discretionary open market repurchases of our pre-bankruptcy indebtedness offset by $2.7 million for the write-off of associated issuance discounts and deferred financing costs.

(3) Includes $92.3 million in prepayment and consent fees and $24.0 million for the write-off of deferred financing costs offset by $18.0 million of issuance premium associated with the early retirement of $1 billion of our pre-bankruptcy 11.5% Senior Notes due 2015.

(4) Contractual interest of $178,049 during the year ended December 31, 2015.

(5) Includes $2.1 billion in adjustments as a result of the adoption of fresh-start accounting and $22.7 million of post-petition professional fees incurred in connection with our bankruptcy proceedings offset by $1.6 billion net gain on settlement of Liabilities Subject to Compromise (“LSTC”) in accordance with the Reorganization Plan.

(6) Includes the write-off of $31.4 million of deferred finance charges and $5.7 million of debt discount and $2.2 million of post-petition professional fees incurred in connection with our bankruptcy proceedings.

(7) Earnings before interest, taxes and depreciation and amortization (“EBITDA”) represents net income (loss) before (i) interest expense, (ii) provision for income taxes and (iii) depreciation and amortization expense. EBITDA is not a financial measure under generally accepted accounting principles (“GAAP”) as defined under the rules of the SEC, and is intended as a supplemental measure of our performance. We believe this measure is commonly used by analysts and investors to analyze and compare companies on the basis of operating performance.

(8) Adjusted EBITDA represents EBITDA adjusted to exclude gain (loss) on debt extinguishment, reorganization items and bargain purchase gain. Adjusted EBITDA is a non-GAAP financial measure as defined under the rules of the SEC, and is intended as a supplemental measure of our performance. We believe this measure is commonly used by analysts and investors to analyze and compare companies on the basis of operating performance.
EBITDA and Adjusted EBITDA are not a substitute for GAAP measures of net income, operating income or any other performance measure derived in accordance with GAAP or as an alternative to cash flows from operating activities or other liquidity measures derived in accordance with GAAP.

(9) $2.7 billion of long-term debt was classified as LSTC as of December 31, 2015.

Item 7. 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 at December 31, 2017 and 2016 and our results of operations for the years ended December 31, 2017 and 2015 and for the periods from February 10, 2016 to December 31, 2016 (the “Successor Period”) and from January 1, 2016 to February 10, 2016 (the “Predecessor Period”). The Successor Period and the Predecessor Period referred to in the results of operations are two distinct reporting periods as a result of our emergence from bankruptcy on February 10, 2016. The following discussion should be read in conjunction with the information contained in “Item 1. Business,” “Item 1A. Risk Factors” and “Item 8. Financial Statements and Supplementary Data” elsewhere in this Annual Report on Form 10-K. Certain previously reported amounts have been reclassified to conform to the current year presentation.

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 natural 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 natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

27

The following table sets forth certain information concerning our offshore drilling fleet as of February 28, 2018.

Name	Year Built	Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Location	Status
Jackups
Emerald Driller	2008	375			30,000	Qatar	Operating
Sapphire Driller	2009	375			30,000	Congo	Operating
Aquamarine Driller	2009	375			30,000	Malaysia	Mobilizing
Topaz Driller	2009	375			30,000	Indonesia	Operating
Drillships (1)
Platinum Explorer	2010		12,000		40,000	India	Operating
Titanium Explorer	2012		12,000		40,000	South Africa	Warm stacked
Tungsten Explorer	2013		12,000		40,000	Congo	Operating

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

In April 2017, we purchased the Vantage 260, a class 154-44C jackup rig, and related multi-year drilling contract. In August 2017, we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig, to fulfill the drilling contract. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260. The transaction closed and the Vantage 260 was sold on February 26, 2018.

Reorganization

On December 3, 2015, we filed a reorganization plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged reorganization plan and we emerged from bankruptcy effective on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 Units in the reorganized Company. Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Convertible Notes, subject to adjustment upon the payment of PIK interest and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, after taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $175.90 of principal of Convertible Notes.

Other significant elements of the Reorganization Plan included:

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended and restated to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings under its pre-petition facility with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans.

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition  secured debt claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s 10% Second Lien Notes. In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes, and in net cash proceeds of $73.9 million, after deducting the cash portion of the backstop premium.

VDC Note. Effective as of the Company’s emergence from bankruptcy, VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 New Shares in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

The Reorganization Plan allowed the Company to maintain all operating assets and agreements. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

28

Upon emergence from bankruptcy on the Effective Date, in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852, Reorganizations (“ASC 852”), we adopted fresh-start accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes.Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilitiesas reflected in our historical consolidated balance sheets. The effects of theReorganization Plan and the application of fresh-start accounting are reflected in our consolidated balance sheet as of December 31, 2016and the related adjustments thereto were recorded in our consolidated statements of operations as reorganization items. As a result, our consolidated balance sheets and consolidated statements of operations subsequent to the Effective Date are notcomparable to our consolidated balance sheets and statements of operations prior to the Effective Date. Our consolidated financial statements and related notes are presented with a black line division which delineates the lack of comparability between amounts presented on or after February 10, 2016 and dates prior. Our financial results for periods following the application of fresh-start accounting are different from historical trends and the differences may be material.

Business Outlook

Expectations about future oil and natural gas prices have historically been a key driver of demand for our services. The International Energy Agency (the “Agency”), in their January 2018 Oil Market Report, forecasts a growth in demand of 1.3 million barrels per day for 2018, with global demand estimated to reach 99.1 million barrels per day. While this represents favorable growth in demand, it is not expected to fully offset surplus production and high inventories remain, which continue to negatively impact oil prices. Continuing uncertainty around the viability and length of reductions in production agreed to by OPEC and the incremental production capacity in non-OPEC countries, including growing production from the U.S. shale activity, continue to contribute to an uncertain oil price environment.

As a result of the reduced oil prices since 2014, exploration and development companies have significantly reduced capital expenditures during this period and continued low levels of spending are expected for 2018. Recent analyst surveys of exploration and production spending indicate that oil and gas companies continue to operate with reduced capital expenditures and we expect that the offshore drilling programs of operators will remain curtailed until higher, sustainable crude oil prices are achieved. Accordingly, we anticipate that our industry will continue to experience depressed market conditions through 2018.

In addition to the reduction in demand for drilling rigs, the additional supply of newbuild rigs is further depressing the market. According to Bassoe Offshore A.S., there are currently 99 jackups and 29 deepwater/harsh environment floaters on order at shipyards with scheduled deliveries extending out to April 2021. It is unclear when these drilling rigs will actually be delivered as many rig deliveries have already been deferred to later dates and some rig orders have been canceled. In response to the oversupply of drilling rigs, a number of competitors are removing older, less efficient rigs from their fleets by either cold stacking the drilling rigs or taking them permanently out of service.

Since the oil price decline in 2014, 123 rigs, with an average age of approximately 36 years, have been removed from the drilling fleet according to Bassoe Offshore AS. Of these 123 rigs, 83 are semisubmersibles, 18 are drillships and 22 are jackups. We expect drilling rig cold stacking, scrapping and conversion to non-drilling use to continue during 2018. While we believe this is an important element in bringing the supply of drilling rigs back into balance with demand, we do not anticipate that it will be sufficient to materially improve market conditions in 2018.

The following table reflects a summary of our contract drilling backlog coverage of days contracted and related revenue as of December 31, 2017 forward (based on information available at that time).

	Percentage of Days Contracted				Revenues Contracted (in thousands)
	2018		2019		2018		2019		Beyond
Jackups		56%		32%	$	53,212	$	27,765	$	7,027
Drillships		61%		33%	$	124,186	$	36,896	$	33,055

29

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:

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
Jackups
Rigs available		5			4			4			4
Available days (1)		1,657			1,304			160			1,460
Utilization (2)		82.0	%		42.3	%		53.6	%		76.7	%
Average daily revenues (3)	$	62,556		$	88,450		$	88,347		$	133,870
Deepwater
Rigs available		3			3			3			3
Available days (1)		1,095			978			120			1,095
Utilization (2)		36.2	%		33.3	%		33.3	%		83.0	%
Average daily revenues (3)	$	265,887		$	263,043		$	332,715		$	635,061

(1) Available days are the total number of rig calendar days in the period.Rigs are removed upon classification as held for sale and no longer eligible to earn revenue.

(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.

30

Year Ended December 31, 2017, Successor Period and Predecessor Period

Net loss for the year ended December 31, 2017 (the “Current Year”) was $149.8 million, or $29.96 per basic and diluted share, on operating revenues of $212.8 million and net loss for the Successor Period was $147.4 million, or $29.48 per basic and diluted share, on operating revenues of $158.6 million. Net loss attributable to VDI for the Predecessor Period was $471.0 million, on operating revenues of $23.5 million.

The following table is an analysis of our operating results for the Current Year, the Successor Period and the Predecessor Period.

		Successor						Predecessor
		Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016
(in thousands)
Revenues
	Contract drilling services	$	190,553		$	134,370		$	20,891
	Management fees		1,455			4,074			752
	Reimbursables		20,838			20,204			1,897
	Total revenues		212,846			158,648			23,540
Operating costs and expenses
	Operating costs		161,668			123,022			25,213
	General and administrative		41,648			36,922			2,558
	Depreciation		73,925			67,920			10,696
	Total operating costs and expenses		277,241			227,864			38,467
Income (loss) from operations			(64,395	)		(69,216	)		(14,927	)
Other income (expense)
	Interest income		808			18			3
	Interest expense and financing charges		(76,441	)		(67,023	)		(1,728	)
	Other, net		2,501			1,132			(69	)
	Reorganization items		-			(1,380	)		(452,919	)
	Bargain purchase gain		1,910			-			-
	Total other expense		(71,222	)		(67,253	)		(454,713	)
Income (loss) before income taxes			(135,617	)		(136,469	)		(469,640	)
Income tax provision			14,168			10,948			2,371
Net income (loss)			(149,785	)		(147,417	)		(472,011	)
Net income (loss) attributable to noncontrolling interests			-			-			(969	)
Net income (loss) attributable to VDI		$	(149,785	)	$	(147,417	)	$	(471,042	)

Revenue: : During the Current Year jackup utilization averaged 82% with both the Emerald Driller and the Aquamarine Driller working throughout while the remaining three jackups working a combined additional 633 days, which generated a combined average daily revenue of $62,556 across the jackup fleet. During the Successor Period, the Aquamarine Driller worked throughout, the Topaz Driller completed its contract in early July 2016, and the Sapphire Driller worked approximately 31 days on a short-term contract in West Africa. Additionally, the Emerald Driller commenced a contract in Qatar in November 2016, working approximately 56 days during the Successor Period. These rigs generated average daily revenue of approximately $88,450 per day for the Successor Period. In the Predecessor Period, we had two jackups working at an average daily revenue of approximately $88,347 per day as the Sapphire Driller completed its contract in November 2015 and did not work during the Predecessor Period and the Emerald Driller completed its contract in early January 2016.

Deepwater utilization for the Current Year averaged 36% with the Tungsten Explorer working throughout and the Platinum Explorer commencing its contract in India in late November 2017. Deepwater utilization for both the Successor Period and the Predecessor Period averaged 33% as only the Tungsten Explorer worked throughout these periods. Neither of our other two ultra-deepwater drillships worked during the Successor Period and Predecessor Period as the Platinum Explorer completed its initial 5-year contract during the fourth quarter of 2015 and the Titanium Explorer drilling contract was cancelled by the operator in August 2015. Our ultra-deepwater drillships generated average daily revenue of $265,887 per day, $263,043 per day and $332,715 per day for the Current Year, the Successor Period and the Predecessor Period, respectively.

Average daily revenues have declined for both jackups and drillships since 2015 because drilling contractors have reduced dayrates in an effort to keep rigs working in a market where the supply of drilling rigs continues to exceed demand for the rigs. At the end of 2017 all of our jackups and two of our drillships were contracted whereas only one drillship and two jackup rigs were operating at the end of 2016.

31

Management fees for the Current Year and the Successor Period averaged approximately $4,000 per day and $12,500per day, respectively. During the Predecessor Period management fees averaged approximately $18,800 per day. Per day management fees have decreased as we completed the pre-delivery construction phase of a management contract to supervise and manage the construction of two ultra-deepwater drillships for a third party.Reimbursable revenue for the Current Year and the Successor Period was $20.8 million and $20.2 million, respectively.Reimbursable revenue for the Predecessor Period was $1.9 million. Reimbursable revenue is dependent on rig utilization and the project status of our construction management contracts.

Operating costs: Operating costs for the Current Year were approximately $161.7 million including $12.2 million of reimbursable costs, or an average daily cost of approximately $54,300 per available day excluding reimbursables. Operating costs for the Successor Period were approximately $123.0 million including $15.9 million of reimbursable costs, or an average daily cost of approximately $47,000 per available day excluding reimbursables. The increase in per day costs in the Current Year is primarily a result of increased operations together with costs associated with the reactivation of the Platinum Explorer, the Topaz Driller and the Sapphire Driller during 2017. For the Predecessor Period, operating costs were approximately $25.2 million, including approximately $1.4 million of reimbursable costs, or an average of approximately $85,200 per available day excluding reimbursables.

General and administrative expenses: General and administrative expenses for the Current Year and the Successor Period were $41.6 million and $36.9 million, respectively, including approximately $18.9 million and $12.2 million, respectively in expenses associated with our internal FCPA investigation, the Petrobras arbitration and non-routine legal matters. Similar charges incurred in the Predecessor Period totaled $531,000 with total general and administrative charges of approximately $2.6 million. General and administrative expenses for the Successor Period also included accrued severance costs of $5.7 million in connection with the resignations of former executives. Additionally, general and administrative expenses for the Current Year and for the Successor Period include approximately $4.0 million and $402,000 of non-cash share-based compensation expense, respectively. There was no share-based compensation expense in the Predecessor Period.

Depreciation expense: For the Predecessor Period, depreciation expense was based on the historical cost basis of our property and equipment. Upon our emergence from bankruptcy, we applied the provisions of fresh-start accounting and revalued our property and equipment to fair value which resulted in a significant decrease in those historical values. Depreciation expense for the Current Year and for the Successor Period is based on the reduced asset values of property and equipment resulting from the adoption of fresh-start accounting.

Interest expense and other financing charges: Interest expense for the Current Year and for the Successor Period is calculated on the debt that was issued in connection with our emergence from bankruptcy in February 2016. Interest expense for the Predecessor Period was calculated on the debt under our prior credit agreement as provided for in the Reorganization Plan and on the debt under the VDC Note issued in connection with the Reorganization Plan. Interest expense for the Current Year and for the Successor Period includes approximately $57.0 million and $50.3 million, respectively, of non-cash payment in kind interest and amortization of debt discount and deferred financing costs.

Reorganization items: In the Predecessor Period, we incurred $22.7 million of post-petition professional fees associated with the bankruptcy cases. Additionally, we incurred non-cash charges of $2.06 billion in fresh-start accounting adjustments, offset by a $1.63 billion non-cash gain on settlement of LSTC. During the Successor Period we incurred $1.4 million in professional fee expenses in connection with our bankruptcy cases. No reorganization related expenses were incurred in the Current Year.

Bargain purchase gain: We recorded a bargain purchase gain of $1.9 million during the Current Year related to our Vantage 260 acquisition. The gain on bargain purchase resulted from the excess of the net fair value of the assets acquired and liabilities assumed in the acquisition over the purchase price. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation.

Income tax expense: For the Current Year, the Successor Period and the Predecessor Period, we had losses before income taxes resulting in negative tax rates. Our income taxes are generally dependent upon the results of our operations and the local income taxes in the jurisdictions in which we operate. Increase in taxes in the Current Year is primarily due to increases in income before tax due to operational status of some of the rigs in 2017 and impact of the corporate tax rate decrease on the deferred tax assets we have in relation to the U.S. activity. In some jurisdictions we do not pay taxes or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt and reorganization expenses.

32

Successor Period, Predecessor Period and the year ended December 31, 2015

Net loss for the Successor Period was $147.4 million, or $29.48 per basic and diluted share, on operating revenues of $158.6 million. Net loss attributable to VDI for the Predecessor Period was $471.0 million, on operating revenues of $23.5 million and net income attributable to VDI for the year ended December 31, 2015 was $17.2 million, on operating revenues of $772.3 million.

The following table is an analysis of our operating results for the Successor Period, the Predecessor Period and the year ended December 31, 2015.

		Successor			Predecessor
		Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Revenues
	Contract drilling services	$	134,370		$	20,891		$	726,717
	Management fees		4,074			752			7,501
	Reimbursables		20,204			1,897			38,047
	Total revenues		158,648			23,540			772,265
Operating costs and expenses
	Operating costs		123,022			25,213			359,610
	General and administrative		36,922			2,558			25,322
	Depreciation		67,920			10,696			127,359
	Total operating costs and expenses		227,864			38,467			512,291
Income (loss) from operations			(69,216	)		(14,927	)		259,974
Other income (expense)
	Interest income		18			3			84
	Interest expense and financing charges		(67,023	)		(1,728	)		(173,634	)
	Gain on debt extinguishment		-			-			10,823
	Other, net		1,132			(69	)		4,231
	Reorganization items		(1,380	)		(452,919	)		(39,354	)
	Total other expense		(67,253	)		(454,713	)		(197,850	)
Income (loss) before income taxes			(136,469	)		(469,640	)		62,124
Income tax provision			10,948			2,371			39,870
Net income (loss)			(147,417	)		(472,011	)		22,254
Net income (loss) attributable to noncontrolling interests			-			(969	)		5,036
Net income (loss) attributable to VDI		$	(147,417	)	$	(471,042	)	$	17,218

Revenue: During the Successor Period, the Aquamarine Driller worked throughout, the Topaz Driller completed its contract in early July 2016 and the Sapphire Driller worked approximately 31 days on a short-term contract in West Africa. Additionally, the Emerald Driller commenced a contract in Qatar in November 2016, which resulted in it working approximately 56 days during the Successor Period. These rigs generated average daily revenue of approximately $88,450 per day for the Successor Period. Deepwater utilization for the Successor Period averaged 33% as only the Tungsten Explorer worked during this period. Neither of our other two ultra-deepwater drillships worked during the Successor Period as the Platinum Explorer completed its initial 5-year contract during the fourth quarter of 2015 and the Titanium Explorer drilling contract was cancelled by the operator in August 2015. Average daily revenues declined for both jackups and drillships as drilling contractors reduced dayrates in an effort to keep their rigs working in a market where the supply of drilling rigs exceeded demand for the rigs. Only one drillship and two jackup rigs were operating in 2016.

In the Predecessor Period, we had two jackups working at an average daily revenue of approximately $88,347 per day as the Sapphire Driller completed its contract in November 2015 and did not work during the Predecessor Period and the Emerald Driller completed its contract in early January 2016. Deepwater utilization for the Predecessor Period averaged 33% with the Tungsten Explorer being the only drillship operating throughout the period.

For the year ended December 31, 2015, our seven rigs were operating for most of the year under contracts with customers at substantially higher dayrates than in the Successor Period. During the year ended December 31, 2015, the utilization of our four jackups averaged approximately 77% with average daily revenue of $133,870, while our three drillships had average utilization of 83% with average daily revenue of $635,061.

Management fees for the Successor Period averaged approximately $12,497 per day. During the Predecessor Period management fees averaged approximately $18,800 per day in 2016 and approximately $20,551 per day in 2015. Reimbursable

33

revenue for the Successor Period was $20.2 millionwith four rigs working during the period.Reimbursable revenue for the Predecessor Period was $1.9 million in 2016 when three rigs worked for the entire period and $38.0 million in 2015 when seven rigs worked during the period.

Operating costs: Operating costs for the Successor Period were approximately $123.0 million or approximately $53,900 per rig per day, including $15.9 million of reimbursable costs. For the Predecessor Period, operating costs were $25.2 million or approximately $90,000 per day based on total available days. Operating costs for the year ended December 31, 2015 were approximately $359.6 million, including $26.3 million of reimbursable costs. The reduction in operating costs reflects reduced costs associated with idled rigs as well as cost saving initiatives implemented in 2016 for both operating and stacked rigs.

General and administrative expenses: General and administrative expenses for the Successor Period includes expenses of approximately $12.2 million associated with our internal FCPA investigation, the Petrobras arbitration and other non-routine legal matters and accrued severance costs of $5.7 million in connection with the resignations of former executives, in addition to normal recurring general and administrative expenses. There were no similar severance charges incurred in the Predecessor Period or for the year ended December 31, 2016.

Depreciation expense: For the Predecessor Period, depreciation expense is based on the historical cost basis of our property and equipment which was approximately $3.5 billion at December 31, 2015. Upon our emergence from bankruptcy, we applied the provisions of fresh-start accounting and revalued our property and equipment to fair value which resulted in a significant decrease in those historical values. Depreciation expense for the Successor Period is based on the reduced asset value of approximately $891.1 million at February 10, 2016 as a result of the adoption of fresh-start accounting.

Interest expense and other financing charges: Interest expense for the Successor Period is calculated on the debt that was issued in connection with our emergence from bankruptcy on February 10, 2016. In the Successor Period, we had cash interest expense of approximately $16.7 million. Additionally, we recorded non-cash PIK interest expense of $6.7 million and recorded non-cash amortization of debt discount and deferred financing costs of $43.6 million. Interest expense for the Predecessor Period is calculated on the old debt under our prior credit agreement as provided for in the Reorganization Plan and on the debt under the VDC Note issued in connection with the Reorganization Plan. Interest expense for the year ended December 31, 2015 is calculated on the outstanding debt during that period, which was significantly higher than the post-petition debt.

Gain on extinguishment of debt: During the year ended December 31, 2015, we repurchased in the open market, at a discount to face value, $31.8 million of our 7.5% Senior Notes and $7.5 million of our 2017 Term Loan and recognized gains of $9.3 million and $1.5 million, respectively, including the write-off of deferred financing costs of $1.0 million.

Reorganization items: In the Predecessor Period, we incurred $22.7 million of post-petition professional fees associated with the bankruptcy cases. Additionally, we incurred non-cash charges of $2.06 billion in fresh-start accounting adjustments, offset by a $1.63 billion non-cash gain on settlement of LSTC.

Income tax expense: For the Successor Period and Predecessor Period, we had a loss before income taxes resulting in negative tax rates. Our income taxes are generally dependent upon the results of our operations and the local income taxes in the jurisdictions in which we operate. Decreases in taxes in the Successor Period and Predecessor Period were primarily due to decreases in income before income taxes due to the nonoperational status of the majority of our rigs in 2016. In some jurisdictions we did not pay taxes or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt and reorganization expenses.

Liquidity and Capital Resources

As of December 31, 2017, we had working capital of approximately $228.8 million, including approximately $195.5 million of cash available for general corporate purposes. Scheduled principal debt maturities and interest payments through December 31, 2018 are approximately $28.2 million. We anticipate expenditures through December 31, 2018 for sustaining capital expenditures on our rig fleet, capital spares, information technology and other general corporate projects to be approximately $1.5 million to $2.0 million. As our rigs obtain new contracts, we could incur reactivation and mobilization costs for these rigs, as well as customer requested equipment upgrades. These costs could be significant and may not be fully recoverable from the customer. Additionally, through December 31, 2018, we anticipate incremental expenditures for special periodic surveys, major repair and maintenance expenditures and equipment certifications to be approximately $18.0 million to $22.0 million. As of December 31, 2017 we had $14.9 million available for the issuance of letters of credit under our revolving letter of credit facility.

In February 2017, we executed a purchase and sale agreement with a third party to acquire the Vantage 260 jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made upon execution of the agreement and the remaining $11.7 million was paid upon closing on April 5, 2017. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260. The transaction closed and the Vantage 260 was sold on February 26, 2018.

The table below includes a summary of our cash flow information for the periods indicated.

34

		Successor						Predecessor
		Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Cash flows provided by (used in):
	Operating activities	$	(19,873	)	$	(3,874	)	$	(21,365	)	$	92,587
	Investing activities		(14,969	)		(11,964	)		116			(46,490	)
	Financing activities		(1,430	)		(1,481	)		66,875			81,522

Changes in cash flows from operating activities are driven by changes in net income (see discussion of changes in net income in “Results of Operations” above) during the periods. Changes in cash flows used in investing activities are dependent upon our level of capital expenditures, which varies based on the timing of projects. Cash used for the acquisition of the Vantage 260 and related drilling contract totaled $13.0 million in the Current Year. Cash used for capital expenditures of approximately $12.0 million in the Successor Period related primarily to final installment payments on capital spares for our drilling fleet.In each of the Current Year and the Successor Period, we made scheduled maturity payments on post-bankruptcy debt totaling $1.4 million. In the Predecessor Period we received proceeds of $73.9 million, net of debt issuance costs of $2.3 million, from the issuance of the 10% Second Lien Notes. Additionally, we made a $7.0 million payment on our pre-petition credit agreement during the Predecessor Period.  

The significant elements of our post-petition debt are described in “Note 5. Debt” to our consolidated financial statements included elsewhere in this report.

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.

Contractual Obligations

In the table below, we set forth our contractual obligations as of December 31, 2017. Some of the figures included in this table are based on our estimates and assumptions about these obligations, including their duration and other factors. The contractual obligations we may actually pay in future periods may vary from those reflected in the table because the estimates and assumptions are subjective.

	Total		2018		2019-2020		2021-2022		After 5 Years
	(in thousands)
Principal payments on 2016 Term Loan Facility	$	140,140	$	4,430	$	135,710	$	—	$	—
Principal payments on 10% Second Lien Notes		76,125		—		76,125		—		—
Principal payments on Convertible Notes (1)		2,775,628		—		—		—		2,775,628
Interest payments (2)		51,059		23,757		27,302		—		—
Operating lease payments (3)		9,370		2,434		3,185		2,703		1,048
Purchase obligations (4)		9,356		9,356		—		—		-
Total as of December 31, 2017	$	3,061,678	$	39,977	$	242,322	$	2,703	$	2,776,676

(1) Amount represents the December 31, 2030 maturity value, including PIK interest, of the Convertible Notes.

(2) Interest on the 2016 Term Loan Facility is payable at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. As of December 31, 2017, the interest rate was 8.069% and that rate was used to calculate interest payments until the maturity date of December 31, 2019.

(3)      Amounts represent lease payments under existing operating leases. We enter into operating leases in the normal course of business, some of which contain renewal options. Our future cash payments would change if we exercised those renewal options and if we enter into additional operating leases.

(4) Amounts consist of obligations to external vendors primarily related to materials, spare parts, consumables and related supplies for our drilling rigs.

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” to our consolidated financial statements included elsewhere in this report. 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.

35

Critical Accounting Estimates

The preparation of 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. While management believes current estimates are appropriate and reasonable, actual results could materially differ from those estimates. We have identified the policies below as critical to our business operations and the understanding of our financial operations.

Fresh-start Accounting:Effective as of our bankruptcy filing on December 3, 2015, we were subject to the requirements of ASC 852. All expenses, realized gains and losses and provisions for losses directly associated with the bankruptcy proceedings were classified as “reorganization items” in the consolidated statements of operations. Certain pre-petition liabilities subject to Chapter 11 proceedings were considered LSTC on the Petition Date and just prior to our emergence from bankruptcy on the Effective Date. The LSTC classification distinguished such liabilities from the liabilities that were not expected to be compromised and liabilities incurred post-petition.

Upon emergence from bankruptcy, we adopted fresh-start accounting, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets. The effects of the Reorganization Plan and the application of fresh-start accounting are reflected in our consolidated balance sheet as of December 31, 2016 and the related adjustments thereto were recorded in our consolidated statement of operations as reorganization items for the period January 1, 2016 to February 10, 2016.  

Property and Equipment: Our long-lived assets, primarily consisting of the values of our drilling rigs, are the most significant amount of our total assets. We make judgments with regard to the carrying value of these assets, including amounts capitalized, componentization, depreciation and amortization methods, salvage values and estimated useful lives. Drilling rigs are depreciated on a component basis over estimated useful lives on a straight-line basis as of the date placed in service. Other assets are depreciated upon placement in service over estimated useful lives on a straight-line basis.

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 natural gas exploration, development and production expenditures. Oil and natural 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 natural 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 natural 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. In connection with our adoption of fresh-start accounting upon our emergence from bankruptcy on February 10, 2016, an adjustment of $2.0 billion was recorded to decrease the net book value of our drilling rigs to estimated fair value. As of December 31, 2017, no triggering event has occurred to indicate that the current carrying value of our drilling rigs may not be recoverable.

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

In connection with a customer contract, we may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees and costs incurred to mobilize a rig from one geographic market to another are deferred and recognized on a straight-line basis over the term of such contract, excluding any option periods. Costs incurred to mobilize a rig without a contract are expensed as incurred. Fees or lump-sum payments received for capital improvements to rigs are deferred and amortized to income over the term of the related drilling contract. The costs of such capital improvements are capitalized and depreciated over the useful lives of the assets. Revenue deferred under drilling contracts totaled $6.8 million at December 31, 2017. We had no deferred revenues under drilling contracts at December 31, 2016. Deferred revenue is included in either accrued liabilities or other long-term liabilities in our consolidated balance sheet, based upon the initial term of the related drilling contract.

Change in Revenue Recognition Standard (Adoption of ASC Topic 606). We will adopt ASC Topic 606, Revenue from Contracts with Customers, on January 1, 2018. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regarding revenue recognition.

We will adopt the new revenue standard using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard to all outstanding contracts as an increase to the opening balance of retained earnings. We expect this adjustment to be immaterial.

36

When applying the new standard, we plan to account for the integrated services provided within our drilling contracts as a single performance obligation composed of a series of distinct time increments, which will be satisfied over time. Consideration that does not relate to a distinct good or service, such as mobilization and demobilization revenue, will be allocated across the single performance obligation and recognized over the series of distinct time increments within the term of the contract. All other components of consideration within a contract, including the dayrate revenue, will continue to be recognized in the period when the services are performed because the associated payments relate specifically to our efforts to provide those services. We expect our revenue recognition under ASC 606 to differ from our current revenue recognition pattern only as it relates to demobilization revenue. Demobilization revenue, which is currently recognized upon completion of a drilling contract, will be estimated at contract commencement and recognized over the term of the contract under the new guidance. Additionally, we currently expect that the cumulative effect adjustment to the opening balance of retained earnings will not be significant as it will primarily consist of the impact of the timing difference related to recognition of demobilization revenue for affected contracts. Only one of our current contracts includes demobilization revenue.

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.

Intangible assets: In connection with our acquisition of the Vantage 260 and related multi-year drilling contract, the Company recorded an identifiable intangible asset of $12.6 million for the fair value of the acquired favorable drilling contract. The fair value of the contract was calculated using estimates of future performance under the contract including operating efficiency, operating expenditures and income taxes. The resulting intangible asset is being amortized on a straight-line basis over the remaining two-year term of the drilling contract.

Income Taxes: Income taxes have been provided based upon the tax laws and rates in effect in the countries in which 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. 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.

Recent Accounting Standards: See “Note 2. Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included elsewhere in this report.

Item 7A. 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 the persistence of reduced oil prices since 2014 has negatively impacted the offshore contract drilling business as discussed in “Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.”   

Interest Rate Risk: As of December 31, 2017, we had approximately $140.1 million face amount of variable rate debt outstanding under the 2016 Term Loan Facility. Under the 2016 Term Loan Facility, interest is payable on the unpaid principal amount of each term loan at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. As of December 31, 2017, the 1-month LIBOR rate was 1.569% and the current interest rate on the 2016 Term Loan Facility is 8.069%. Increases in the LIBOR rate would impact the amount of interest that we are required to pay on these borrowings. For every 1% increase in LIBOR (above the LIBOR floor), we would be subject to an increase in interest expense of $1.4 million per annum based on the principal amounts outstanding at December 31, 2017. We have not entered into any interest rate hedges or swaps with regard to the 2016 Term Loan Facility.

Foreign Currency Exchange Rate Risk. Our functional currency is the U.S. Dollar, which is consistent with the oil and gas industry. However, outside the United States, a portion of our expenses are incurred in local currencies. Therefore, when the U.S. Dollar weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in U.S. Dollars will increase (decrease). A substantial majority of our revenues are received in U.S. dollars, our functional currency; however, in certain countries in which we operate, local laws or contracts may require us to receive some 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 U.S. dollar payment equal to the value of such exchange. We do not enter into derivative transactions for speculative purposes. As of December 31, 2017, we did not have any open foreign exchange derivative contracts or material foreign currency exposure risk.

37

Item 8. Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors of

Vantage Drilling International

Houston, Texas

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Vantage Drilling International (the “Company”) and subsidiaries as of December 31, 2017 and 2016 (Successor), the related consolidated statements of operations, shareholders’ equity and cash flows for the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 (Successor) and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015 (Predecessor) and the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company and subsidiaries at December 31, 2017 and 2016 (Successor), and the results of their operations and their cash flows for the year ended December 31, 2017 and for the period from February 10, 2016 to December 31, 2016 (Successor) and from January 1, 2016 to February 10, 2016 and for year ended December 31, 2015 (Predecessor), in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Emphasis of Matter

As discussed in Note 2 to the consolidated financial statements, upon emerging from bankruptcy proceedings on February 10, 2016, the Company became a new entity for financial reporting purposes and applied fresh-start accounting. The Company’s assets and liabilities were recorded at their fair values, which differed materially from the previously recorded values. As a result, the consolidated financial statements for periods following the application of fresh-start accounting are not comparable to the financial statements for previous periods. 

/s/ BDO USA, LLP

We have served as the Company's auditor since 2014

Houston, Texas

March 29, 2018

38

Vantage Drilling International

Consolidated Balance Sheet

(In thousands)

	December 31, 2017			December 31, 2016
ASSETS
Current assets
Cash and cash equivalents	$	195,455		$	231,727
Trade receivables		45,379			20,850
Inventory		43,955			45,206
Prepaid expenses and other current assets		13,207			12,423
Total current assets		297,996			310,206
Property and equipment
Property and equipment		904,584			902,241
Accumulated depreciation		(141,393	)		(67,713	)
Property and equipment, net		763,191			834,528
Other assets		21,935			15,694
Total assets	$	1,083,122		$	1,160,428
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	39,666		$	35,283
Accrued liabilities		25,117			18,448
Current maturities of long-term debt		4,430			1,430
Total current liabilities		69,213			55,161
Long–term debt, net of discount and financing costs of $56,174 and $105,568		919,939			867,372
Other long-term liabilities		17,195			11,335
Commitments and contingencies (Note 8)
Shareholders' equity
Ordinary shares, $0.001 par value, 50 million shares authorized; 5,000,053 shares issued and outstanding		5			5
Additional paid-in capital		373,972			373,972
Accumulated deficit		(297,202	)		(147,417	)
Total shareholders' equity		76,775			226,560
Total liabilities and shareholders’ equity	$	1,083,122		$	1,160,428

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

39

Vantage Drilling International

Consolidated Statement of Operations

(In thousands, except per share data)

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
Revenue
Contract drilling services	$	190,553		$	134,370		$	20,891		$	726,717
Management fees		1,455			4,074			752			7,501
Reimbursables		20,838			20,204			1,897			38,047
Total revenue		212,846			158,648			23,540			772,265
Operating costs and expenses
Operating costs		161,668			123,022			25,213			359,610
General and administrative		41,648			36,922			2,558			25,322
Depreciation		73,925			67,920			10,696			127,359
Total operating costs and expenses		277,241			227,864			38,467			512,291
Income (loss) from operations		(64,395	)		(69,216	)		(14,927	)		259,974
Other income (expense)
Interest income		808			18			3			84
Interest expense and other financing charges		(76,441	)		(67,023	)		(1,728	)		(173,634	)
Gain on debt extinguishment		—			—			—			10,823
Other, net		2,501			1,132			(69	)		4,231
Reorganization items		—			(1,380	)		(452,919	)		(39,354	)
Bargain purchase gain		1,910			—			—			—
Total other expense		(71,222	)		(67,253	)		(454,713	)		(197,850	)
Income (loss) before income taxes		(135,617	)		(136,469	)		(469,640	)		62,124
Income tax provision		14,168			10,948			2,371			39,870
Net income (loss)		(149,785	)		(147,417	)		(472,011	)		22,254
Net income (loss) attributable to noncontrolling interests		—			—			(969	)		5,036
Net income (loss) attributable to VDI	$	(149,785	)	$	(147,417	)	$	(471,042	)	$	17,218
Net loss per share, basic and diluted	$	(29.96	)	$	(29.48	)	N/A			N/A
Weighted average successor ordinary shares outstanding, basic and diluted		5,000			5,000		N/A			N/A

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

40

Vantage Drilling International

Consolidated Statement of Shareholder’s Equity

(In thousands)

	Ordinary Shares
	Shares			Amount		Additional Paid-in Capital			Accumulated Deficit			Non-Controlling Interests			Total Equity
Predecessor balance December 31, 2014		1			—		646,270			(155,581	)		10,717			501,406
Note issued in acquisition of management entities		—			—		(61,477	)		—						(61,477	)
Contributions from VDC		—			—		10,326			—						10,326
Distributions to VDC		—			—		—			—			(498	)		(498	)
Net income		—			—		—			17,218			5,036			22,254
Predecessor balance December 31, 2015		1			—		595,119			(138,363	)		15,255			472,011
Net loss (period January 1, 2016 through February 10, 2016)		—			—		—			(471,042	)		(969	)		(472,011	)
Acquisition of non-controlling interest		—			—		—			14,286			(14,286	)		—
Cancellation of Predecessor company equity		(1	)		—		(595,119	)		595,119			—			-
Predecessor balance February 10, 2016		—			—		—			—			—			—
Successor balance February 10, 2016		—			—		—			—			—			—
Issuance of Successor company equity		4,345			4		311,346			—			—			311,350
Issuance of shares in settlement of VDC Note		655			1		62,626			—			—			62,627
Net loss (period February 10, 2016 through December 31, 2016)		—			—		—			(147,417	)		—			(147,417	)
Successor balance December 31, 2016		5,000		$	5	$	373,972		$	(147,417	)	$	—		$	226,560
Net loss		—			—		—			(149,785	)		—			(149,785	)
Successor balance December 31, 2017		5,000		$	5	$	373,972		$	(297,202	)	$	—		$	76,775

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

41

Vantage Drilling International

Consolidated Statement of Cash Flows

(In thousands)

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(149,785	)	$	(147,417	)	$	(472,011	)	$	22,254
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense		73,925			67,920			10,696			127,359
Amortization of debt financing costs		468			427			—			7,800
Amortization of debt discount		48,925			43,208			—			2,242
Amortization of contract value		4,686			—			—			—
PIK interest on the Convertible Notes		7,604			6,712			—			—
Reorganization items		—			—			430,210			37,129
Share-based compensation expense		3,997			402			—			—
Gain on bargain purchase		(1,910	)		—			—			—
Non-cash gain on debt extinguishment		—			—			—			(10,814	)
Accelerated deferred mobilization income		—			—			—			(21,508	)
Deferred income tax benefit		(1,964	)		(3,368	)		—			2,122
Loss on disposal of assets		335			652			—			1,108
Changes in operating assets and liabilities:
Restricted cash		—			1,000			(1,000	)		—
Trade receivables		(24,529	)		53,447			(3,575	)		80,903
Inventory		1,251			(964	)		223			1,397
Prepaid expenses and other current assets		1,267			2,790			6,893			5,991
Other assets		2,638			(3,409	)		941			8,549
Accounts payable		4,383			736			(14,890	)		(154,922	)
Accrued liabilities and other long-term liabilities		8,836			(26,010	)		21,148			(17,023	)
Net cash provided by (used in) operating activities		(19,873	)		(3,874	)		(21,365	)		92,587
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(2,224	)		(11,964	)		116			(46,490	)
Cash paid for Vantage 260 acquisition		(13,000	)		—			—			—
Cash received for Vantage 260 sale		255			—			—			—
Net cash provided by (used in) investing activities		(14,969	)		(11,964	)		116			(46,490	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(1,430	)		(1,430	)		(7,000	)		(67,980	)
Proceeds from issuance of 10% Second Lien Notes		—			—			75,000			-
Proceeds from borrowings under credit agreements		—			—			—			150,000
Distributions to VDC		—			—			—			(498	)
Debt issuance costs		—			(51	)		(1,125	)		—
Net cash provided by (used in) financing activities		(1,430	)		(1,481	)		66,875			81,522
Net increase (decrease) in cash and cash equivalents		(36,272	)		(17,319	)		45,626			127,619
Cash and cash equivalents—beginning of period		231,727			249,046			203,420			75,801
Cash and cash equivalents—end of period	$	195,455		$	231,727		$	249,046		$	203,420
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest	$	15,596		$	16,704		$	1,568		$	124,295
Income taxes (net of refunds)		17,679			16,659			(1,864	)		50,840
Non-cash investing and financing transactions:
Payment of interest in kind on the Convertible Notes	$	7,604		$	6,691		$	—		$	—
Additional notes issued for backstop premium		—			—			1,125			—
Note issued in acquisition of management entities		—			—			—			61,477

42

Contributions from VDC — — — 10,326

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

43

VANTAGE DRILLING INTERNATIONAL
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Recent Events

Vantage Drilling International (the “Company” or “VDI”), a Cayman Islands exempted 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 natural 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 natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

On April 5, 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of a class 154-44C jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made in February 2017 upon execution of the agreement and the remaining $11.7 million was paid at closing. The rig was renamed the Vantage 260. In August 2017 we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig to fulfill the drilling contract. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260. The transaction closed and the Vantage 260 was sold on February 26, 2018.

Restructuring Agreement and Emergence from Voluntary Reorganization under Chapter 11 Proceeding

On December 1, 2015, we and Vantage Drilling Company (“VDC”), our former parent company, entered into a restructuring support agreement (the “Restructuring Agreement”) with a majority of our secured creditors. Pursuant to the terms of the Restructuring Agreement, the Company agreed to pursue a pre-packaged plan of reorganization (the “Reorganization Plan”) under Chapter 11 of Title 11 of the United States Bankruptcy Code and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for a $61.5 million promissory note (the “VDC Note”). As this transaction involved a reorganization of entities under common control, it was reflected in the consolidated financial statements, at carryover basis, on a retrospective basis. Effective as of the Company’s emergence from bankruptcy on February 10, 2016 (the “Effective Date”), VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 new ordinary shares of the reorganized Company (the “New Shares”) in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

On December 3, 2015 (the “Petition Date”), the Company, certain of its subsidiaries and certain VDC subsidiaries who were guarantors of the Company’s pre-bankruptcy secured debt, filed the Reorganization Plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged Reorganization Plan and the Company emerged from bankruptcy on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 units in the reorganized Company (the “Units”). Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Company’s 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 (the “Convertible Notes”), subject to adjustment upon the payment of interest in kind (“PIK interest”) and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, after taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $175.90 of principal of Convertible Notes.

Other significant elements of the Reorganization Plan included:

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans (the “2016 Term Loan Facility”).

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition  term loans and senior notes claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s new 10% Senior Secured Second Lien Notes due 2020 (the “10% Second Lien Notes”). In connection with this rights offering, certain creditors entered into a

44

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

“backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes and net cash proceeds to the Company of $73.9 million, after deducting the cash portion of the backstop premium.

The Reorganization Plan allowed the Company to continue business operations during the court proceedings and maintain all operating assets and agreements. The Company had adequate liquidity prior to the filing and did not have to seek any debtor-in-possession financing. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

  Other Events: Since July 2015, the Company has been cooperating in an investigation by the U.S. Department of Justice (“DOJ”) and the SEC arising from allegations that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petroleo Brasileiro S.A. (“Petrobras”), and Mr. Hsin-Chi Su, a former member of the Board of Directors and a significant shareholder of our former parent company, VDC, had engaged in an alleged scheme to pay bribes to former Petrobras executives, in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”). In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation and closing the investigation without any action against the Company. We have continued our cooperation in the investigation by the SEC into the same allegations and engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million.  If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

2. Basis of Presentation and Significant Accounting Policies

Basis of Consolidation: The accompanying consolidated financial information as of December 31, 2017 and 2016, for the years ended December 31, 2017 and 2015, and for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 has been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and include our accounts and those of our majority owned subsidiaries and variable interest entities (“VIEs”) discussed below. All significant intercompany transactions and accounts have been eliminated.

In connection with our bankruptcy filing, we were subject to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852 Reorganizations (“ASC 852”). All expenses, realized gains and losses and provisions for losses directly associated with the bankruptcy proceedings were classified as reorganization items in the consolidated statements of operations. Certain pre-petition liabilities subject to Chapter 11 proceedings were considered as LSTC on the Petition Date and just prior to our emergence from bankruptcy on the Effective Date. The LSTC classification distinguished such liabilities from the liabilities that were not expected to be compromised and liabilities incurred post-petition.

ASC 852 requires that subsequent to the Petition Date, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization of the business be reported separately as reorganization items in the consolidated statements of operations. We were required to distinguish pre-petition liabilities subject to compromise from those that were not and post-petition liabilities in our balance sheet. Liabilities that were subject to compromise were reported at the amounts expected to be allowed by the Bankruptcy Court, even if they were settled for lesser amounts as a result of the Reorganization Plan.

Upon emergence from bankruptcy on the Effective Date, we adopted fresh-start accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets. The effects of the Reorganization Plan and the application of fresh-start accounting were reflected in our consolidated financial statements as of February 10, 2016 and the related adjustments thereto were recorded in our consolidated statements of operations as reorganization items for the Predecessor Period January 1 to February 10, 2016.  

As a result, our consolidated balance sheets and consolidated statement of operations subsequent to the Effective Date are not comparable to our consolidated balance sheets and statements of operations prior to the Effective Date. Our consolidated financial statements and related notes are presented with a black line division which delineates the lack of comparability between amounts

45

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

presented on or after February 10, 2016 and dates prior. Our financial results for periods following the application of fresh-start accounting are different from historical trends and the differences may be material.

References to “Successor” relate to the Company on and subsequent to the Effective Date. References to “Predecessor” refer to the Company prior to the Effective Date. The consolidated financial statements of the Successor have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

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. Certain subsidiaries of VDC, who were guarantors of our pre-petition debt and part of the Reorganization Plan, became our subsidiaries upon emergence from bankruptcy on the Effective Date. We consolidated these entities in our Predecessor consolidated financial statements because we determined that they were VIEs and that we were the primary beneficiary. The following table summarizes the net effect of consolidating these entities on our Predecessor consolidated statement of operations.  

	Predecessor
	Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Revenue	$	1,219		$	21,791
Operating costs and expenses		1,240			19,850
Income before taxes		22			2,206
Income tax provision		991			(2,830	)
Net income (loss) attributable to noncontrolling interests		(969	)		5,036

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.

Inventory: Consists of materials, spare parts, consumables and related supplies for our drilling rigs.

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 thirty-five 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 the accounts and a gain or loss is recognized.

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 natural gas exploration, development and production expenditures. Oil and natural 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 natural 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 natural 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. In connection with our adoption of fresh-start accounting upon our emergence from bankruptcy on February 10, 2016, an adjustment of $2.0 billion was recorded to decrease the net book value of our drilling rigs to estimated fair value. The projections and assumptions used in that valuation have not changed significantly as of December 31, 2017; accordingly, no triggering event has occurred to indicate that the current 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.

46

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Intangible assets: In connection with our acquisition of the Vantage 260 and related multi-year drilling contract, the Company recorded an identifiable intangible asset of $12.6 million for the fair value of the acquired favorable drilling contract. The resulting intangible asset is being amortized on a straight-line basis over the two-year term of the drilling contract. We recognized approximately $4.7 million of amortization expense for intangible assets for the year ended December 31, 2017. We did not recognize any amortization expense for intangible assets for the period from February 10, 2016 to December 31, 2016 or for the period from January 1, 2016 to February 10, 2016.

Expected future intangible asset amortization as of December 31, 2017 is as follows:

(in thousands)
Fiscal year:
2018	$	6,311
2019		1,643
Thereafter		-
Total	$	7,954

Debt Financing Costs: Costs incurred with debt financings 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 sheet as a direct deduction from the carrying amount of that debt liability.  

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

In connection with a customer contract, we may receive lump-sum fees for the mobilization of equipment and personnel or the demobilization of equipment and personnel upon completion. Mobilization fees received and costs incurred to mobilize a rig from one geographic market to another are deferred and recognized on a straight-line basis over the term of such contract, excluding any option periods. Costs incurred to mobilize a rig without a contract are expensed as incurred. Fees or lump-sum payments received for capital improvements to rigs are deferred and amortized to income over the term of the related drilling contract. The costs of such capital improvements are capitalized and depreciated over the useful lives of the assets. Upon completion of drilling contracts, any demobilization fees received are recorded as revenue. We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses.

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.

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which 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. 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. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer. We do not have an allowance for doubtful accounts on our trade receivables as of December 31, 2017 and 2016.

Use of Estimates: The preparation of financial statements 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 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.

Functional Currency: We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.  We recognize currency exchange rate gains and losses in other, net.  For the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015, we

47

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

recognized a net gain of $2.8 million, a net gain of $1.1 million, a net loss of $5,000 and a net gain of $5.1 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 the balance sheet principally due to the short-term nature or floating rate nature of these instruments. At December 31, 2017, the fair value of the 2016 Term Loan Facility, the 10% Second Lien Notes and the Convertible Notes was approximately $142.9 million, $74.6 million and $838.6 million, respectively, based on quoted market prices in a less active market, a Level 2 measurement.

Recent Accounting Standards:  In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes most of the existing revenue recognition requirements in U.S. GAAP, including industry-specific guidance. The ASU is based on the principle that revenue is recognized when an entity transfers promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significant additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, using either a full or a modified retrospective application approach.

We will adopt the new revenue standard effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard to all outstanding contracts as an increase to the opening balance of retained earnings. We expect this adjustment to be immaterial.

When applying the new standard, we plan to account for the integrated services provided within our drilling contracts as a single performance obligation composed of a series of distinct time increments, which will be satisfied over time. Consideration that does not relate to a distinct good or service, such as mobilization and demobilization revenue, will be allocated across the single performance obligation and recognized over the series of distinct time increments within the term of the contract. All other components of consideration within a contract, including the dayrate revenue, will continue to be recognized in the period when the services are performed because the associated payments relate specifically to our efforts to provide those services. We expect our revenue recognition under ASU 2014-09 to differ from our current revenue recognition pattern only as it relates to demobilization revenue. Demobilization revenue, which is currently recognized upon completion of a drilling contract, will be estimated at contract commencement and recognized over the term of the contract under the new guidance. Additionally, we currently expect that the cumulative effect adjustment to opening retained earnings required by the modified retrospective adoption approach will not be significant as it will primarily consist of the impact of the timing difference related to recognition of demobilization revenue for affected contracts. Only one of our current contracts includes demobilization revenue.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification, to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and early adoption is permitted.  A modified retrospective approach is required. We expect to adopt ASU 2016-02 on January 1, 2019. Under the updated accounting standards, we have concluded that our drilling contracts contain a lease component, and our adoption, therefore, could require that we separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. Our adoption of ASU No. 2016-02, and the ultimate effect on our consolidated financial statements, will be based on an evaluation of the contract-specific facts and circumstances, and such effect could result in differences in the timing of our revenue recognition relative to current accounting standards. With respect to leases whereby we are the lessee we expect to recognize lease liabilities and corresponding “right of use” assets.  We are continuing to evaluate the requirements with regard to arrangements under which we are either the lessor or lessee, to determine the effect such requirements may have on our consolidated statements of financial position, operations and cash flows and on the disclosures contained in our notes to consolidated financial statements.  

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update should be applied using a retrospective transition method to each period presented. We continue to evaluate the provisions of ASU 2016-15 but do not expect the standard update to have a significant impact on the presentation of cash receipts and cash payments within our consolidated statements of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. We have completed the evaluation of ASU No. 2016-16 and determined that it has no impact on our financial statements and related disclosures.

48

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU No. 2017-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017 utilizing a prospective basis on or after the effective date. We will adopt ASU No. 2017-01 effective January 1, 2018 but do not expect the standard update to have any impact on our financial statements and related disclosures.

3. Acquisitions

On April 5, 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of a class 154-44C jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made in February 2017 upon execution of the agreement and the remaining $11.7 million was paid at closing. The rig has been renamed the Vantage 260. In August 2017 we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig to fulfill the contract. The Vantage 260 was classified as held for sale and was sold on February 26, 2018. We accounted for the acquisition as a business combination in accordance with accounting guidance which requires, among other things, that we allocate the purchase price to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. The following table provides the estimated fair values of the assets acquired and liabilities assumed.    

(in thousands)
Total cash consideration	$	13,000
Purchase price allocation:
Drilling contract value		12,640
Rig equipment to be sold (net of disposal costs)		2,050
Drillpipe assets		700
Severance liabilities assumed		(480	)
Net assets acquired		14,910
Bargain purchase gain	$	1,910

Under accounting guidance, a bargain purchase gain results from an acquisition if the fair value of the purchase consideration paid in connection with such acquisition is less than the net fair value of the assets acquired and liabilities assumed. We recorded a bargain purchase gain of approximately $1.9 million related to the acquisition in the year ended December 31, 2017. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation. The purchase of the Vantage 260 and related two-year drilling contract allowed for the reactivation of the Sapphire Driller and further extended our operational presence in West Africa.

Pro forma results of operations related to the acquisition have not been presented because they are not material to our consolidated statement of operations.Acquisition-related costs were not material and were expensed as incurred.

4. Reorganization Items

Reorganization items represent amounts incurred subsequent to the Petition Date as a direct result of the filing of the Reorganization Plan and are comprised of the following:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Professional fees	$	—	$	1,380	$	22,712		$	39,354
Net gain on settlement of LSTC		—		—		(1,630,025	)		—
Fresh-start adjustments		—		—		2,060,232			—
	$	—	$	1,380	$	452,919		$	39,354

For the year ended December 31, 2017, and for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016, cash payments for reorganization items totaled $208,000, $16.6 million and $7.3 million, respectively.

49

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

5. Debt

Our debt was composed of the following:

	December 31,
	2017		2016
(in thousands)
2016 Term Loan Facility	$	140,140	$	141,570
10% Second Lien Notes, net of financing costs of $1,404 and $1,873		74,721		74,252
Convertible Notes, net of discount of $54,770 and $103,695		709,508		652,980
		924,369		868,802
Less current maturities of long-term debt		4,430		1,430
Long-term debt, net	$	919,939	$	867,372

 Aggregate scheduled principal maturities of our debt for the next five years and thereafter are as follows (in thousands):          

2018	$	4,430
2019		135,710
2020		76,125
2021		—
2022		—
Thereafter		2,775,628
Total debt (1)		2,991,893
Less:
Current maturities of long-term debt		(4,430	)
Future amortization of note discounts		(54,770	)
Future amortization of financing costs		(1,404	)
Future PIK interest		(2,011,350	)
Long-term debt	$	919,939

(1) Excludes original issuance discount of $54.8 million on the Convertible Notes and financing costs of $1.4 million on the 10% Second Lien Notes.

Second Amended and Restated Credit Agreement. The Company entered into the 2016 Term Loan Facility providing for (i) a $32.0 million revolving letter of credit facility to replace the Company’s existing $32.0 million revolving letter of credit commitment under its pre-petition credit facility and (ii) $143.0 million of term loans into which the claims of the lenders under the Company’s pre-petition credit facility were converted. The lenders under the Company’s pre-petition credit facility also received $7.0 million of cash under the Reorganization Plan. The obligations under the 2016 Term Loan Facility are guaranteed by substantially all of the Company’s subsidiaries, subject to limited exceptions, and secured on a first priority basis by substantially all of the Company’s and the guarantors’ assets, including ship mortgages on all vessels, assignments of related earnings and insurance and pledges of the capital stock of all guarantors, in each case, subject to certain exceptions. We have issued $17.1 million in letters of credit as of December 31, 2017.

The maturity date of the term loans and commitments established under the 2016 Term Loan Facility is December 31, 2019. Interest is payable on the unpaid principal amount of each term loan under the 2016 Term Loan Facility at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. The initial term loans are currently bearing interest at 8.069%. The 2016 Term Loan Facility has quarterly scheduled debt maturities of $357,500 which commenced in March 2016.

Fees are payable on the outstanding face amount of letters of credit at a rate per annum equal to 5.50% and such rate may be increased from time to time pursuant to the terms of the 2016 Term Loan Facility.

The 2016 Term Loan Facility includes customary representations and warranties, mandatory prepayments, affirmative and negative covenants and events of default, including covenants that, among other things, restrict the granting of liens, the incurrence of indebtedness, the making of investments and capital expenditures, the sale or other conveyance of assets, including vessels, transactions with affiliates, prepayments of certain debt and the operation of vessels. The 2016 Term Loan Facility also requires that the Company maintain $75.0 million of available cash (defined to include unrestricted cash and cash equivalents plus undrawn commitments).

10% Senior Secured Second Lien Notes. The Company engaged in a rights offering for $75.0 million of new 10% Second Lien Notes for certain holders of its secured debt claims. In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the

50

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes, and in net cash proceeds ofapproximately $73.9 million after deducting the cash portion of the backstop premium.

The 10% Second Lien Notes were issued at par and are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company. The 10% Second Lien Notes mature on December 31, 2020, and bear interest from the date of their issuance at the rate of 10% per year. Interest on outstanding 10% Second Lien Notes is payable semi-annually in arrears, which commenced on June 30, 2016. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The 10% Second Lien Notes rank behind the 2016 Term Loan Facility as to collateral.

The Indenture for the 10% Second Lien Notes 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.

1%/12% Step-Up Senior Secured Third Lien Convertible Notes. The Company issued 4,344,959 New Shares and $750.0 million of the Convertible Notes to certain creditors holding approximately $2.5 billion of pre-petition secured debt claims. The New Shares issued to the creditors and the Convertible Notes may only be traded together and not separately. The Convertible Notes mature on December 31, 2030 and are convertible into New Shares, in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, taking into account the payment of PIK interest on the Convertible Notes to such date, each such unit of securities was comprised of one New Share and $175.90 of principal of Convertible Notes. As of December 31, 2017, we would be required to issue approximately 8.0 million New Shares if the Convertible Notes were converted.

In connection with the adoption of fresh-start accounting, the Convertible Notes were recorded at an estimated fair value of approximately $603.1 million. The difference between face value and the fair value at date of issuance of the Convertible Notes was recorded as a debt discount and is being amortized to interest expense over the expected life of the Convertible Notes using the effective interest rate method.

Interest on the Convertible Notes is payable semi-annually in arrears commencing June 30, 2016 as a payment in kind, either through an increase in the outstanding principal amount of the Convertible Notes or, if the Company is unable to increase such principal amount, by the issuance of additional Convertible Notes. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months at a rate of 1% per annum for the first four years and then increasing to 12% per annum until maturity.

The Company’s obligations under the Convertible Notes are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company, and the obligations of the Company and guarantors are secured by liens on substantially all of their respective assets. The guarantees by the Company’s subsidiaries of the Convertible Notes are joint and several. The Company has no independent assets or operations apart from the assets and operations of its wholly-owned subsidiaries. In addition, there are no significant restrictions on the Company’s or any subsidiary guarantor’s ability to obtain funds from its subsidiaries by dividend or loan. The Indenture for the Convertible Notes includes customary covenants that restrict the granting of liens and customary events of default, including, among other things, failure to issue securities upon conversion of the Convertible Notes. In addition, the Indenture, and the applicable Collateral Agreements, provide that any capital stock and other securities of any of the guarantors will be excluded from the collateral to the extent the pledge of such capital stock or other securities to secure the Convertible Notes would cause such guarantor to be required to file separate financial statements with the SEC pursuant to Rule 3-16 of Regulation S-X (as in effect from time to time).  

The Convertible Notes will convert only (a) prior to the third anniversary of the issue date (February 10, 2016), (i) upon the instruction of holders of a majority in principal amount of the Convertible Notes or (ii) upon the full and final resolution of all potential Investigation Claims (as defined below), as determined in good faith by the board of directors of the Company (the “Board”) (which determination shall require the affirmative vote of a supermajority of the non-management directors), and (b) from and after February 10, 2019 through their maturity date of December 31, 2030, upon the approval of the Board (which approval shall require the affirmative vote of a supermajority of the non-management directors). For these purposes, (i) “supermajority of the non-management directors” means five affirmative votes of non-management directors assuming six non-management directors eligible to vote and, in all other circumstances, the affirmative vote of at least 75% of the non-management directors eligible to vote and (ii) “Investigation Claim” means any claim held by a United States or Brazilian governmental unit and arising from or related to the procurement of that certain Agreement for the Provision of Drilling Services, dated as of February 4, 2009, by and between Petrobras Venezuela Investments & Services B.V. and Vantage Deepwater Company, as amended, modified, supplemented, or novated from time to time.

In the event of a change in control, the holders of our Convertible Notes have the right to require us to repurchase all or any part of the Convertible Notes at a price equal to 101% of their principal amount. We assessed the prepayment requirements and concluded that this feature met the criteria to be considered an embedded derivative and must be bifurcated and separately valued at fair value

51

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

due to the discount on the Convertible Notes at issuance. We considered the probabilities of a change of control occurring and determined that the derivative had a de minimis value at February 10, 2016, December 31, 2016 and December 31, 2017, respectively.

Upon the occurrence of specified change of control events or certain losses of our vessels in the agreements governing our 10% Second Lien Notes, Convertible Notes or 2016 Term Loan Facility, we will be required to offer to repurchase or repay all (or in the case of events of losses of vessels, an amount up to the amount of proceeds received from such event of loss) of such outstanding debt under such debt agreements at the prices and upon the terms set forth in the applicable agreements. In addition, in connection with certain asset sales, we will be required to offer to repurchase or repay such outstanding debt as set forth in the applicable debt agreements. In addition, in connection with their investigation, if the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, and if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes. 

52

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Shareholder’s Equity

We have 50,000,000 authorized ordinary shares, par value $0.001 per share. Upon emergence from bankruptcy, we issued 5,000,053 ordinary shares in connection with the settlement of LSTC and the VDC Note. As of December 31, 2017, 5,000,053 ordinary shares were issued and outstanding.

   On August 9, 2016, the Company adopted the Amended and Restated 2016 Management Incentive Plan (the “2016 Amended MIP”) to align the interests of participants with those of the 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.

During the first quarter of 2017, we granted to employees and directors 30,668 time-based restricted stock units (“TBGs”) and 67,686 performance-based restricted stock units (“PBGs”) under our 2016 Amended MIP. The TBGs vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a qualified liquidity event as defined in the 2016 Amended MIP (a “QLE”). Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the Effective Date. The PBGs 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 Total Enterprise Value (“TEV”) targets specified in the grants.

Both the TBGs and PBGs are classified as liabilities consistent with the classification of the underlying securities and under the provisions of ASC 718 Compensation – Stock Compensation are remeasured at each reporting period until settled. Share-based compensation expense is recognized over the requisite service period from the grant date to the fourth anniversary of the Effective Date for TBGs and the seventh anniversary of the Effective Date for PBGs. For the years ended December 31, 2017 and 2016, we recognized share-based compensation related to the TBG’s of approximately $4.0 million and $402,000, respectively. As of December 31, 2017, there was approximately $10.2 million of total unrecognized share-based compensation expense related to TBGs which is expected to be recognized over the remaining weighted average vesting period of approximately 2.7 years. The total award date value of time vested restricted shares that vested during the year ended December 31, 2017 was approximately $0.9 million.

Share-based compensation expense for PBGs 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 balance sheet date will be recognized for the service period completed. As of December 31, 2017, 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.

A summary of the restricted unit awards for the year ended December 31, 2017 is as follows:

	Year Ended December 31, 2017
Time vested restricted units
Units awarded		30,668
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		4.0
Units vested		11,237
Units forfeited		—
Performance vested restricted units
Units awarded		67,686
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		7.0
Units vested		—
Units forfeited		—

53

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the status of non-vested restricted units at December 31, 2017 and changes during the year ended December 31, 2017 is as follows:

	Time Vested Restricted Units Outstanding			Weighted Average Award Date Unit Price		Performance Vested Restricted Units Outstanding		Weighted Average Award Date Unit Price
Nonvested restricted units at December 31, 2016		44,946		$	80.00		97,749	$	80.00
Awarded		30,668			160.00		67,686		160.00
Vested		(11,237	)		80.00		—		—
Forfeited		—			—		—		—
Nonvested restricted units at December 31, 2017		64,377		$	118.11		165,435	$	112.73

7. Income Taxes

We are a Cayman Islands entity. The Cayman Islands does not impose corporate income taxes. We do not have any domestic earnings; all of our earnings are foreign. 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. We operate in multiple countries under different legal forms. As a result, we are subject to the jurisdiction of numerous domestic and foreign tax authorities, as well as to tax agreements and treaties among these governments. Tax rates vary between jurisdictions, as does the tax base to which the rates are applied. Taxes may be levied based on net profit before taxes or gross revenues or as withholding taxes on revenue. Determination of income tax expense in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Our income tax expense may vary substantially from one period to another as a result of changes in the tax laws, regulations, agreements and treaties, foreign currency exchange restrictions, rig movements or our level of operations or profitability in each tax jurisdiction. Furthermore, 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 operating results and the income tax expense. Furthermore, in some jurisdictions we do not pay taxes or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt, reorganization expenses and write-off of development costs.

The income tax expense (benefit), all of which relates to foreign income taxes, consisted of the following (in thousands):

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Current	$	16,132		$	14,316		$	2,371	$	37,748
Deferred		(1,964	)		(3,368	)		—		2,122
Total	$	14,168		$	10,948		$	2,371	$	39,870

54

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A reconciliation of statutory and effective income tax rates is shown below:

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
Statutory rate		0.0	%		0.0	%		0.0	%		0.0	%
Effect of:
Taxes on foreign earnings		(9.2)	%		(7.2)	%		(0.3)	%		69.4	%
Settlement of prior years’ tax audits		(0.5)	%		1.1	%		0.0	%		(7.7)	%
Tax rate change impact		(1.4)	%		0.0	%		0.0	%		0.0	%
Uncertain tax positions		0.8	%		(0.7)	%		(0.2)	%		0.3	%
Other		(0.2)	%		(1.2)	%		0.0	%		2.2	%
Total		(10.5)	%		(8.0)	%		(0.5)	%		64.2	%

On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted.  The Act, among other things, makes significant changes to the U.S. corporate income tax system, including reducing the federal corporate income tax rate from 35% to 21%; changes certain business-related deductions, including modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses; and transitions U.S. international taxation from a worldwide tax system to a territorial tax system.  Our existing deferred tax assets and liabilities are revalued at the newly enacted U.S. corporate rate, and the impact is recognized in our tax expense in 2017; the year of enactment. We continue to examine the potential impact this tax legislation may have on our business and financial results.

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 loss 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. The increase to the valuation allowance during the year, which is included in the taxes on foreign earnings rate in the above table, is related to net loss carry forwards generated during the year where we believe it is more likely than not that substantially all of the deferred tax asset will not be realized.

The components of the net deferred tax assets and liabilities were as follows:

	December 31, 2017			December 31, 2016
(in thousands)
Deferred tax assets:
Share-based compensation	$	366		$	99
Accrued bonuses/compensation		547			1,839
Start-up costs		54			106
Loss carry-forwards		6,638			15,214
Deferred revenue		1,548			—
Total deferred tax assets		9,153			17,258
Valuation allowance		(5,103	)		(13,056	)
Net deferred tax assets		4,050			4,202
Deferred tax liabilities:
Property and equipment		(931	)		(2,430	)
Deferred revenue		—			(649	)
Mobilization		—			(233	)
Other deferred tax liability		(253	)		(5	)
Total deferred tax liabilities		(1,184	)		(3,317	)
Net deferred tax asset	$	2,866		$	885

55

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

At December 31, 2017, we had foreign tax loss carry forwards of approximately $22.7 million which will begin to expire in 2018.

We include as a component of our income tax provision potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties expense of approximately $0.3 million is included in 2017 income tax expense and interest and penalties of approximately $1.5 million are accrued as of December 31, 2017.

A reconciliation of our unrecognized tax benefits amount is as follows (in thousands):

Gross balance at January 1, 2017	$	3,355
Additions based on tax positions related to the current year		-
Additions for tax positions of prior years		1,115
Reductions for tax positions of prior years		-
Expiration of statues		(1,019	)
Tax settlements		(411	)
Gross balance at December 31, 2017		3,040
Related tax benefits		-
Net reserve at December 31, 2017	$	3,040

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, our business operations and other factors affecting our 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 2010 and forward 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

In July 2015, we became aware of media reports that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petrobras, had entered into a plea arrangement with the Brazilian authorities in connection with his role in facilitating the payment of bribes to former Petrobras executives. Among other things, Mr. Padilha provided information to the Brazilian authorities of an alleged bribery scheme between former Petrobras executives and Nobu Su, who was, at the time of the alleged bribery scheme, a member of the Board of Directors and a significant shareholder of our former parent company, VDC. When we learned of Mr. Padilha’s plea agreement and the allegations, we voluntarily contacted the DOJ and the SEC to advise them of these  developments, as well as the fact that we had engaged outside counsel to conduct an internal investigation of the allegations. Since disclosing this matter to the DOJ and SEC, we have cooperated fully in their investigation of these allegations. In connection with such cooperation, we advised both agencies that in early 2010, we engaged outside counsel to investigate a report of alleged improper payments to customs and immigration officials in Asia. That investigation was concluded in 2011, and we determined at that time that no disclosure was warranted; however, in an abundance of caution, we provided the results of this investigation to the DOJ and SEC in light of the allegations in the Petrobras matter. In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation into the Company concerning possible violations of the FCPA by VDC in the Petrobras matter and indicating that the DOJ has closed such investigation without any action. In addition, the Company has engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million. If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payableat par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

56

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In connection with our bankruptcy cases, two appeals were filed relating to the confirmation of the Reorganization Plan. Specifically, on January 29, 2016, Hsin Chi Su and F3 Capital filed two appeals before the United States District Court for the District of Delaware seeking a reversal of (i) the Court’s determination that Hsin Chi Su and F3 Capital did not have standing to appear and be heard in the bankruptcy cases, which was made on the record at a hearing held on January 14, 2016, and (ii) the Court’s Findings of Fact, Conclusions of Law, and Order (I) Approving the Debtors’ (A) Disclosure Statement Pursuant to Sections 1125 and 1126(b) of the Bankruptcy Code, (B) Solicitation of Votes and Voting Procedures, and (C) Forms of Ballots, and (II) Confirming the Amended Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors [Docket No. 188], which was entered on January 15, 2016. The appeals were consolidated on June 14, 2016. We cannot predict with certainty the ultimate outcome of any such appeals. An adverse outcome could negatively affect our business, results of operations and financial condition.

On August 31, 2015, VDC received notice from Petrobras America, Inc. (“PAI”) and Petrobras Venezuela Investments & Services B.V. (“PVIS”) stating that PAI and PVIS were terminating the Agreement for the Provision of Drilling Services dated February 4, 2009 (the “Drilling Contract”). The Drilling Contract was initially entered into between PVIS and Vantage Deepwater Company, one of our wholly-owned indirect subsidiaries, and was later novated by PVIS to PAI and by Vantage Deepwater Company to Vantage Deepwater Drilling, Inc., another of our wholly-owned indirect subsidiaries. The notice stated that PAI and PVIS were terminating the Drilling Contract because Vantage had allegedly breached its obligations under the agreement. Under the terms of the Drilling Contract we initiated arbitration proceedings before the American Arbitration Association on August 31, 2015, challenging PVIS and PAI’s wrongful attempt to terminate the Drilling Contract. Vantage has maintained that it complied with all of its obligations under the Drilling Contract and that PVIS and PAI’s attempt to terminate the agreement is both improper and a breach of the Drilling Contract.

In the ongoing arbitration proceeding, the hearing on the merits has concluded and the parties have exchanged post-hearing briefs. Vantage has asserted claims against PAI and PVIS for declaratory relief and monetary damages based on breach of contract. Vantage has also asserted a claim against Petroleo Brasileiro S.A. (“PBP”) to enforce a guaranty provided by PBP.  The Petrobras entities (PVIS, PAI and PBP) have asserted that the Drilling Contract is void as illegally procured, that PVIS and PBP are not proper parties to the arbitration, and that PAI and PVIS properly terminated the contract. PAI has further counterclaimed for attorneys’ fees and costs alleging that Vantage failed to negotiate in good faith before commencing arbitration proceedings and is seeking disgorgement damages of approximately $102 million. We are vigorously pursuing our claims in the arbitration and deny that any of the claims or defenses asserted by the Petrobras entities have merit.

Pursuant to the terms of the Restructuring Agreement, the Company agreed to the Reorganization Plan and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for the VDC Note.  In connection with our separation from our former parent company, we and the Joint Official Liquidators, appointed to oversee the liquidation of VDC, are in discussions regarding the settlement of certain intercompany receivables and payables as between the Company and its subsidiaries, on the one hand, and VDC and its subsidiaries on the other. While we continue to believe that our position regarding the settlement of such amounts is correct, we cannot predict the ultimate outcome of this matter should legal proceedings between the parties transpire.

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 renewal options which would cause our future cash payments to change if we exercised those renewal options. As of December 31, 2017, we were obligated under leases, with varying expiration dates, for office space, housing, vehicles and specified operating equipment. Future minimum annual rentals under these operating leases having initial or remaining terms in excess of one year are $2.4 million, $1.7 million, $1.5 million, $1.3 million and $1.4 million for each of the years ending December 31, 2018, 2019, 2020, 2021 and 2022 respectively, and $1.0 million in the aggregate for the years 2023 and thereafter. Rental expenses for the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015 were approximately $4.3 million, $4.1 million, $678,000 and $15.2 million, respectively.

At December 31, 2017, we had purchase commitments of $9.4 million. Our purchase commitments consist of obligations outstanding to external vendors primarily related to materials, spare parts, consumables and related supplies for our drilling rigs.

57

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Supplemental Financial Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	December 31,
	2017		2016
(in thousands)
Prepaid insurance	$	294	$	782
Sales tax receivable		5,652		7,129
Income tax receivable		1,374		1,025
Other receivables		158		74
Assets held for sale		2,050		—
Other		3,679		3,413
	$	13,207	$	12,423

 Property and Equipment, net

Property and equipment, net consisted of the following:

	December 31,
	2017			2016
(in thousands)
Drilling equipment	$	883,598		$	880,267
Assets under construction		1,043			2,138
Office and technology equipment		18,778			18,764
Leasehold improvements		1,165			1,072
		904,584			902,241
Accumulated depreciation		(141,393	)		(67,713	)
Property and equipment, net	$	763,191		$	834,528

Other Assets

Other assets consisted of the following:

	December 31,
	2017		2016
(in thousands)
Contract value, net	$	7,954	$	—
Performance bond collateral		—		3,197
Deferred certification costs		3,497		4,885
Deferred mobilization costs		6,216		4,194
Deferred income taxes		3,162		2,237
Deposits		1,106		1,181
	$	21,935	$	15,694

58

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Accrued Liabilities

Accrued liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Interest	$	3,952	$	104
Compensation		10,285		11,289
Income taxes payable		3,740		5,008
Loss contingency accrual		5,000		—
Other		2,140		2,047
	$	25,117	$	18,448

Long-term Liabilities

Long-term liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Deferred mobilization revenue	$	6,757	$	—
Deferred income taxes		296		1,352
2016 MIP		4,399		402
Other non-current liabilities		5,743		9,581
	$	17,195	$	11,335

Transactions with Former Parent Company

Our consolidated statement of operations includes the following transactions with VDC for the periods indicated:

	Successor					Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Reimbursable revenues	$	—	$	—		$	—		$	6,212
Interest income		—		(3	)		3			27
Interest expense		—		—			(662	)		(489	)
	$	—	$	(3	)	$	(659	)	$	5,750

The following table summarizes the balances payable to VDC included in our consolidated balance sheet as of the dates indicated:

	December 31,
	2017		2016
(in thousands)
Accounts payable to related parties, net	$	17,278	$	17,278
	$	17,278	$	17,278

Pursuant to the terms of the Restructuring Agreement, the Company agreed to the Reorganization Plan and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for the

59

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

VDC Note. In connection with our separation from our former parent company, we and the Joint Official Liquidators, appointed to oversee the liquidation of VDC, are in discussions regarding the settlement of certain intercompany receivables and payables as between the Company and its subsidiaries, on the one hand, and VDC and its subsidiaries on the other. While we continue to believe that our position regarding the settlement of such amounts is correct, we cannot predict the ultimate outcome of this matter should legal proceedings between the parties transpire.

10. Business Segment Information

We aggregate our contract drilling operations into one reportable segment even though we provide contract drilling services with different types of rigs, including jackup rigs and drillships, and in different geographic regions. 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.

Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs. In September 2013, we signed an agreement to supervise and manage the construction of two ultra-deepwater drillships for a third party. We receive management fees and reimbursable costs during the construction phase of the two drillships, subject to a maximum amount for each drillship. This business represented approximately 0.7%, 2.6%, 3.2% and 1.0% of our total revenue for the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015, respectively.

For the years ended December 31, 2017, 2016 and 2015, the majority of our revenue was 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. Four customers accounted for approximately 51%, 15%, 13% and 11% of consolidated revenue for the year ended December 31, 2017. Three customers accounted for approximately 58%, 19% and 11% of consolidated revenue for the period from February 10, 2016 to December 31, 2016. Three customers accounted for approximately 58%, 18% and 14% of consolidated revenue for the period from January 1, 2016 to February 10, 2016. Three customers accounted for approximately 32%, 25% and 20% of consolidated revenue for the year ended December 31, 2015.   

Our revenues by country were as follows:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Congo	$	139,579	$	91,435	$	13,769	$	247,415
Malaysia		26,983		30,397		3,319		—
Indonesia		23,477		18,075		4,214		—
India		—		—		—		189,973
U.S.		—		—		—		128,157
Other countries (a)		22,807		18,741		2,238		206,720
Total revenues	$	212,846	$	158,648	$	23,540	$	772,265

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

Our property and equipment, net by country were as follows:

	December 31, 2017		December 31, 2016
Congo	$	256,200	$	277,305
India		155,362		—
Malaysia		103,603		280,689
South Africa		179,468		196,473
Other countries (a)		68,558		80,061
Total property and equipment	$	763,191	$	834,528

60

VANTAGE DRILLING INTERNATIONAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(a) Other countries represent countries in which we operate that individually had property equipment, net representing less than 10 percent of total property and equipment.

A substantial portion of our assets are mobile drilling units. 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.

11. Supplemental Quarterly Information (Unaudited)

The following table reflects a summary of the unaudited interim results of operations for the years ended December 31, 2017 and 2016 (in thousands except per share amounts).

	Successor
	Quarter Ended
	March 31			June 30			September 30			December 31
2017
Revenues	$	42,049		$	53,263		$	57,696		$	59,838
Loss from operations (1)		(16,867	)		(16,976	)		(17,639	)		(12,913	)
Other expense		(18,206	)		(16,235	)		(18,169	)		(18,612	)
Net loss		(36,499	)		(36,592	)		(40,068	)		(36,626	)
Loss per share
Basic and diluted	$	(7.30	)	$	(7.32	)	$	(8.01	)	$	(7.33	)

(1) During the quarter ended December 31, 2017 we recorded a loss contingency in the amount of $5 million in connection with the proposed offer of settlement with the SEC, as described in “Note 8. Commitments and Contingencies”.  

	Predecessor			Successor
	Period from			Period from			Quarter Ended
	January 1, 2016 to February 10, 2016			February 10, 2016 to March 31, 2016			June 30			September 30			December 31
2016
Revenues	$	23,540		$	29,786		$	48,511		$	39,942		$	40,409
Loss from operations		(14,927	)		(18,897	)		(13,530	)		(20,146	)		(16,643	)
Other expense		(454,713	)		(8,964	)		(20,766	)		(18,007	)		(19,516	)
Net loss		(472,011	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Net loss attributable to noncontrolling interests		(969	)		—			—			—			—
Net loss attributable to VDI		(471,042	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Loss per share
Basic and diluted	N/A			$	(5.81	)	$	(7.15	)	$	(8.31	)	$	(8.23	)

Loss per share is computed independently for each of the periods presented. Therefore, the sum of the periods’ earnings (loss) per share may not agree to the total computed for the year.

61

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Disclosure 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 file or submit to the SEC is recorded, processed, summarized, and reported, within the time periods required by our debt agreements.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit to the SEC is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of December 31, 2017 and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures were effective in providing reasonable assurance that information requiring disclosure is recorded, processed, summarized, and reported within the time periods required by our debt agreements.

Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed 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.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting as of December 31, 2017. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the 2013 framework). Based on this assessment using these criteria, our management determined that our internal control over financial reporting was effective as of December 31, 2017.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2017 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Item 9B. Other Information.

None.

62

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item will be filed by amendment to this Annual Report on Form 10-K to be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2017.

We have adopted a Code of Business Conduct and Ethics that applies to directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Our Code of Business Conduct and Ethics is posted on our website at www.vantagedrilling.com in the “Corporate Governance” area. Any waivers from our Code of Business Conduct and Ethics must be approved by our board of directors or a designated board committee. Any amendments to, or waivers from, the Code of Business Conduct and Ethics will be posted on our website and reported pursuant to applicable rules and regulations of the SEC.

Item 11. Executive Compensation.

The information required by this item will be filed by amendment to this Annual Report on Form 10-K to be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2017.

Item 12. Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters.

The information required by this item will be filed by amendment to this Annual Report on Form 10-K to be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2017.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item will be filed by amendment to this Annual Report on Form 10-K to be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2017.

Item 14. Principal Accounting Fees and Services.

The information required by this item will be filed by amendment to this Annual Report on Form 10-K to be filed with the SEC not later than 120 days after the close of our fiscal year ended December 31, 2017.

63

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) List of documents filed as part of this report  

Exhibit No.	Description
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 (Incorporated by reference to Exhibit 99.T3E.1 of the Form T-3 filed by Offshore Group Investment Limited with the SEC on December 2, 2015).
3.1	Third Amended and Restated Memorandum and Articles of Incorporation of the Company effective as of August 4, 2016 (Incorporated by reference by Exhibit 3.01 of the Company’s current report on Form 8-K filed with the SEC on August 5, 2016)
4.1	Second Amended and Restated Credit Agreement by and between Offshore Group Investment Limited, certain subsidiaries thereof as Guarantors, the lenders from time to time party thereto as Lenders and Royal Bank of Canada as Administrative Agent and Collateral Agent, dated as of February 17, 2016 (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
4.2	Second Lien Indenture by and between Offshore Group Investment Limited, the guarantors from time to time party thereto (including certain of the Assignors, as defined therein) and U.S. Bank National Association, as trustee and noteholder collateral agent, dated as of February 10, 2016 (Incorporated by reference to Exhibit 4.2 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
4.3	Third Lien Indenture by and between Offshore Group Investment Limited, the guarantors from time to time party thereto (including certain of the Assignors, as defined therein) and U.S. Bank National Association, as trustee and noteholder collateral agent, dated as of February 10, 2016 (Incorporated by reference to Exhibit 4.3 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
4.4	Supplemental Indenture, dated as of June 8, 2016, among Vantage Drilling International (f/k/a Offshore Group Investment Limited), the guarantors party thereto, and U.S. Bank National Association, as trustee and noteholder collateral agent, to the Third Lien Indenture dated as of February 10, 2016 (Incorporated by reference to Exhibit 4.4 of the Company’s Form S-1 filed with the SEC on June 16, 2016)
10.1	Shareholders Agreement by and among Offshore Group Investment Limited and the Shareholders (as defined therein) dated as of February 10, 2016 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.2	Registration Rights Agreement by and among Offshore Group Investment Limited and each of the Holders (as defined therein) party thereto dated as of February 10, 2016 (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.3	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 (as defined therein) party thereto (Incorporated by reference to Exhibit 10.3 of the Form 10-Q filed with the SEC on May 13, 2016)
10.4	Vantage Drilling International Amended and Restated 2016 Management Incentive Plan (Incorporated by reference to Exhibit 10.4 of the Amendment No. 3 to Form S-1 filed with the SEC on November 3, 2016)
10.5	Form of Restricted Stock Unit Award Agreement (Performance-Based) under the Vantage Drilling International Amended and Restated 2016 Management Incentive Plan (Incorporated by reference to Exhibit 10.5 of the Amendment No. 3 to Form S-1 filed with the SEC on November 3, 2016)
10.6	Form of Restricted Stock Unit Award Agreement (Time-Based) under the Vantage Drilling International Amended and Restated 2016 Management Incentive Plan (Incorporated by reference to Exhibit 10.6 of the Amendment No. 3 to Form S-1 filed with the SEC on November 3, 2016)
10.7	Offshore Group Investment Limited 2016 Management Incentive Plan by and between Offshore Group Investment Limited, its executive officers and certain other employees dated as of February 10, 2016 (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.8	Form of Restricted Stock Unit Award Agreement (Performance-Based) between Offshore Group Investment Limited and each Participant (as defined therein) dated as of February 10, 2016 (Incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.9	Form of Restricted Stock Unit Award Agreement (Time-Based) between Offshore Group Investment Limited and each Participant (as defined therein) dated as of February 10, 2016 (Incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.10	Form of Petrobras Litigation Award Agreement (Incorporated by reference to Exhibit 10.6 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)

64

Exhibit No.	Description
10.11	Form of Petrobras Litigation Letter (Incorporated by reference to Exhibit 10.7 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.12	Third Amended and Restated Employment and Non-Competition Agreement between Offshore Group Investment Limited and Douglas W. Halkett, dated February 10, 2016  (Incorporated by reference to Exhibit 10.10 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.13	Third Amended and Restated Employment and Non-Competition Agreement between Offshore Group Investment Limited and William L. Thomson, dated February 10, 2016 (Incorporated by reference to Exhibit 10.11 of the Company’s current report on Form 8-K filed with the SEC on February 17, 2016)
10.14	Employment Agreement between Vantage Drilling International and Douglas E. Stewart, dated May 10, 2016 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on May 17, 2016)
10.15	Employment Agreement between Vantage Drilling International and Ihab Toma, dated August 9, 2016  (Incorporated by reference to Exhibit 10.13 of the Amendment No. 1 to Form S-1 filed with the SEC on August 25, 2016)
10.16	Employment Agreement Between Vantage Drilling International and Thomas J. Cimino, dated September 22, 2016 (Incorporated by reference to Exhibit 10.14 of the Amendment No. 1 to Form S-1 filed with the SEC on October 11, 2016)
10.17	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 (Incorporated by reference to Exhibit 10.1 of the Form 10-K/A filed with the SEC on May 1, 2017)
12.1	Statement re Computation of Earnings to Fixed Charges (Filed herewith)
21.1	Subsidiaries of Vantage Drilling International (Filed herewith)
31.1	Certification of Principal Executive Officer Pursuant to Section 302 (Filed herewith)
31.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 302 (Filed herewith)
32.1	Certification of Principal Executive Officer Pursuant to Section 906 (Filed herewith)
32.2	Certification of Principal Financial and Accounting Officer Pursuant to Section 906 (Filed herewith)
101.INS	— XBRL Instance Document (Filed herewith)
101.SCH	— XBRL Schema Document (Filed herewith)
101.CAL	— XBRL Calculation Document (Filed herewith)
101.DEF	— XBRL Definition Linkbase Document (Filed herewith)
101.LAB	— XBRL Label Linkbase Document (Filed herewith)
101.PRE	— XBRL Presentation Linkbase Document (Filed herewith)

Item 16. Form 10-K Summary.

           None.

65

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

VANTAGE DRILLING INTERNATIONAL
By:	/s/ THOMAS J. CIMINO
Name:	Thomas J. Cimino
Title:	Chief Financial Officer
Date:	March 29, 2018

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.

Name	Position	Date
/s/ Ihab Toma	Chief Executive Officer (Principal Executive Officer)	March 29, 2018
Ihab Toma
/s/ Thomas J. Cimino	Chief Financial Officer (Principal Financial and Accounting Officer)	March 29, 2018
Thomas J. Cimino
/s/ Thomas R. Bates, Jr.	Chairman and Director	March 29, 2018
Thomas R. Bates, Jr.
/s/ Nils E. Larsen	Director	March 29, 2018
Nils E. Larsen
/s/ L. Spencer Wells	Director	March 29, 2018
L. Spencer Wells
/s/ Esa Ikaheimonen	Director	March 29, 2018
Esa Ikaheimonen
/s/ Scott McCarty	Director	March 29, 2018
Scott McCarty
/s/ Matthew Bonanno	Director	March 29, 2018
Matthew Bonanno

66

EX-12.1

Exhibit 12.1
Ratio of Earnings to Fixed Charges
(In thousands, except Ratio of Earnings to Fixed Charges)
	Successor
	Year Ended
	December 31, 2017
Earnings (Loss)
Loss before provision for income taxes and minority interest	$           (135,618)
Fixed charges	76,807
Minority interest in pre-tax income of subsidiaries with no fixed charges	-
Loss as adjusted	$           (58,811)
Fixed Charges
Interest expense	$               76,441
Portion of rental expense representative of the interest factor	366
Total fixed charges	$               76,807
Ratio of earnings to fixed charges (a)	-
(a) For the year ended December 31, 2017 earnings were not sufficient to cover fixed charges by approximately $135.6 million.

EX-21

Exhibit 21.1

Subsidiaries of the Registrant

Entity Name	Type of Entity	Jurisdiction of Formation
Dragonquest Holdings Company	Exempted Company	Cayman Islands
Emerald Driller Company	Exempted Company	Cayman Islands
P2020 Rig Co.	Exempted Company	Cayman Islands
P2021 Rig Co.	Exempted Company	Cayman Islands
PT Vantage Drilling Company Indonesia	Limited Liability Company	Indonesia
Sapphire Driller Company	Exempted Company	Cayman Islands
Vantage Deepwater Company	Exempted Company	Cayman Islands
Vantage Deepwater Drilling, Inc.	Corporation	Delaware
Vantage Delaware Holdings LLC	Limited Liability Company	Delaware
Vantage Driller I Co.	Exempted Company	Cayman Islands
Vantage Driller II Co.	Exempted Company	Cayman Islands
Vantage Driller III Co.	Exempted Company	Cayman Islands
Vantage Driller IV Co.	Exempted Company	Cayman Islands
Vantage Driller ROCO S.R.L.	Limited Liability Company	Romania
Vantage Driller VI Co.	Exempted Company	Cayman Islands
Vantage Drilling (Malaysia) I Sdn. Bhd.	Limited Liability Company	Malaysia
Vantage Drilling Africa	Exempted Company	Cayman Islands
Vantage Drilling Labuan I Ltd.	Labuan Company	Malaysia
Vantage Drilling Netherlands B.V.	Limited Liability Company	The Netherlands
Vantage Energy Services, Inc.	Corporation	Delaware
Vantage Holding Hungary Kft	Limited Liability Company	Hungary
Vantage Holdings Cyprus ODC Ltd.	Limited Liability Company	Cyprus
Vantage Holdings Malaysia I Co.	Exempted Company	Cayman Islands
Vantage International Management Co.	Exempted Company	Cayman Islands
Vantage International Management Company Pte. Ltd.	Corporation	Singapore

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 Annual Report on Form 10-K 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.

March 29, 2018	/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, Thomas J. Cimino, certify that:

1. I have reviewed this Annual Report on Form 10-K 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.

March 29, 2018	/s/  THOMAS J. CIMINO
	Thomas J. Cimino
	Chief Financial Officer

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 Annual Report on Form 10-K of Vantage Drilling International (the “Company”) for the fiscal year ended December 31, 2017 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:

(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.

March 29, 2018	/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 Annual Report on Form 10-K of Vantage Drilling International (the “Company”) for the fiscal year ended December 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Thomas J. Cimino, Chief Financial 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:

(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.

March 29, 2018	/s/  THOMAS J. CIMINO
	Thomas J. Cimino
	Chief Financial Officer

XML

Document and Entity Information - USD ($)	12 Months Ended
	Dec. 31, 2017	Feb. 28, 2018	Jun. 30, 2017
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	FY
Trading Symbol	VDI
Entity Registrant Name	VANTAGE DRILLING INTERNATIONAL
Entity Central Index Key	0001465872
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	Yes
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		5,000,053
Entity Public Float			$ 0

XML

Consolidated Balance Sheet - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Current assets
Cash and cash equivalents	$ 195,455	$ 231,727
Trade receivables	45,379	20,850
Inventory	43,955	45,206
Prepaid expenses and other current assets	13,207	12,423
Total current assets	297,996	310,206
Property and equipment
Property and equipment	904,584	902,241
Accumulated depreciation	(141,393)	(67,713)
Property and equipment, net	763,191	834,528
Other assets	21,935	15,694
Total assets	1,083,122	1,160,428
Current liabilities
Accounts payable	39,666	35,283
Accrued liabilities	25,117	18,448
Current maturities of long-term debt	4,430	1,430
Total current liabilities	69,213	55,161
Long–term debt, net of discount and financing costs of $56,174 and $105,568	919,939	867,372
Other long-term liabilities	17,195	11,335
Commitments and contingencies (Note 8)
Shareholders' equity
Ordinary shares, $0.001 par value, 50 million shares authorized; 5,000,053 shares issued and outstanding	5	5
Additional paid-in capital	373,972	373,972
Accumulated deficit	(297,202)	(147,417)
Total shareholders' equity	76,775	226,560
Total liabilities and shareholders’ equity	$ 1,083,122	$ 1,160,428

XML

Consolidated Balance Sheet (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Statement Of Financial Position [Abstract]
Long-term debt unamortized discount	$ 56,174	$ 105,568
Ordinary shares, par value	$ 0.001	$ 0.001
Ordinary shares, shares authorized	50,000,000	50,000,000
Ordinary shares, shares issued	5,000,053	5,000,053
Ordinary shares, shares outstanding	5,000,053	5,000,053

XML

Consolidated Statement of Operations - USD ($) shares in Thousands, $ in Thousands	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Revenue
Contract drilling services		$ 134,370	$ 190,553
Management fees		4,074	1,455
Reimbursables		20,204	20,838
Total revenue		158,648	212,846
Operating costs and expenses
Operating costs		123,022	161,668
General and administrative		36,922	41,648
Depreciation		67,920	73,925
Total operating costs and expenses		227,864	277,241
Income (loss) from operations		(69,216)	(64,395)
Other income (expense)
Interest income		18	808
Interest expense and other financing charges		(67,023)	(76,441)
Other, net		1,132	2,501
Reorganization items		(1,380)
Bargain purchase gain			1,910
Total other expense		(67,253)	(71,222)
Income (loss) before income taxes		(136,469)	(135,617)
Income tax provision		10,948	14,168
Net income (loss)		(147,417)	(149,785)
Net income (loss) attributable to VDI		$ (147,417)	$ (149,785)
Net loss per share, basic and diluted		$ (29.48)	$ (29.96)
Weighted average successor ordinary shares outstanding, basic and diluted		5,000	5,000
Predecessor
Revenue
Contract drilling services	$ 20,891			$ 726,717
Management fees	752			7,501
Reimbursables	1,897			38,047
Total revenue	23,540			772,265
Operating costs and expenses
Operating costs	25,213			359,610
General and administrative	2,558			25,322
Depreciation	10,696			127,359
Total operating costs and expenses	38,467			512,291
Income (loss) from operations	(14,927)			259,974
Other income (expense)
Interest income	3			84
Interest expense and other financing charges	(1,728)			(173,634)
Gain on debt extinguishment				10,823
Other, net	(69)			4,231
Reorganization items	(452,919)			(39,354)
Total other expense	(454,713)			(197,850)
Income (loss) before income taxes	(469,640)			62,124
Income tax provision	2,371			39,870
Net income (loss)	(472,011)			22,254
Net income (loss) attributable to noncontrolling interests	(969)			5,036
Net income (loss) attributable to VDI	$ (471,042)			$ 17,218

XML

Consolidated Statement of Shareholders' Equity - USD ($) $ in Thousands	Total	Ordinary Shares	Additional Paid-in Capital	Accumulated Deficit	Non-Controlling Interests
Beginning Balance (Predecessor) at Dec. 31, 2014	$ 501,406		$ 646,270	$ (155,581)	$ 10,717
Beginning Balance (in shares) (Predecessor) at Dec. 31, 2014		1,000
Note issued in acquisition of management entities | Predecessor	(61,477)		(61,477)
Contributions from VDC | Predecessor	10,326		10,326
Distributions to VDC | Predecessor	(498)				(498)
Net income (loss) | Predecessor	22,254			17,218	5,036
Ending Balance (Predecessor) at Dec. 31, 2015	472,011		595,119	(138,363)	15,255
Ending Balance (in shares) (Predecessor) at Dec. 31, 2015		1,000
Acquisition of non-controlling interest | Predecessor				14,286	(14,286)
Cancellation of Predecessor company equity | Predecessor			(595,119)	595,119
Cancellation of Predecessor company equity (in shares) | Predecessor		(1,000)
Net income (loss) | Predecessor	(472,011)			(471,042)	(969)
Ending Balance (Predecessor) at Feb. 09, 2016
Ending Balance at Feb. 09, 2016
Ending Balance (in shares) (Predecessor) at Feb. 09, 2016
Ending Balance (in shares) at Feb. 09, 2016
Issuance of Successor company equity	311,350	$ 4	311,346
Issuance of Successor company equity (in shares)		4,345,000
Issuance of shares in settlement of VDC Note	62,627	$ 1	62,626
Issuance of shares in settlement of VDC Note (in shares)		655,000
Net income (loss)	(147,417)			(147,417)
Ending Balance at Dec. 31, 2016	$ 226,560	$ 5	373,972	(147,417)
Ending Balance (in shares) at Dec. 31, 2016	5,000,053	5,000,000
Net income (loss)	$ (149,785)			(149,785)
Ending Balance at Dec. 31, 2017	$ 76,775	$ 5	$ 373,972	$ (297,202)
Ending Balance (in shares) at Dec. 31, 2017	5,000,053	5,000,000

XML

Consolidated Statement of Cash Flows - USD ($) $ in Thousands	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)		$ (147,417)	$ (149,785)
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense		67,920	73,925
Amortization of debt financing costs		427	468
Amortization of debt discount		43,208	48,925
Amortization of contract value			4,686
PIK interest on the Convertible Notes		6,712	7,604
Share-based compensation expense		402	3,997
Gain on bargain purchase			(1,910)
Deferred income tax benefit		(3,368)	(1,964)
Loss on disposal of assets		652	335
Changes in operating assets and liabilities:
Restricted cash		1,000
Trade receivables		53,447	(24,529)
Inventory		(964)	1,251
Prepaid expenses and other current assets		2,790	1,267
Other assets		(3,409)	2,638
Accounts payable		736	4,383
Accrued liabilities and other long-term liabilities		(26,010)	8,836
Net cash provided by (used in) operating activities		(3,874)	(19,873)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(11,964)	(2,224)
Cash paid for Vantage 260 acquisition			(13,000)
Cash received for Vantage 260 sale			255
Net cash provided by (used in) investing activities		(11,964)	(14,969)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(1,430)	(1,430)
Debt issuance costs		(51)
Net cash provided by (used in) financing activities		(1,481)	(1,430)
Net increase (decrease) in cash and cash equivalents		(17,319)	(36,272)
Cash and cash equivalents—beginning of period		249,046	231,727
Cash and cash equivalents—end of period	$ 249,046	231,727	195,455
Cash paid for:
Interest		16,704	15,596
Income taxes (net of refunds)		16,659	17,679
Non-cash investing and financing transactions:
Payment of interest in kind on the Convertible Notes		6,691	$ 7,604
Predecessor
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	(472,011)			$ 22,254
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense	10,696			127,359
Amortization of debt financing costs				7,800
Amortization of debt discount				2,242
Reorganization items	430,210			37,129
Non-cash gain on debt extinguishment				(10,814)
Accelerated deferred mobilization income				(21,508)
Deferred income tax benefit				2,122
Loss on disposal of assets				1,108
Changes in operating assets and liabilities:
Restricted cash	(1,000)
Trade receivables	(3,575)			80,903
Inventory	223			1,397
Prepaid expenses and other current assets	6,893			5,991
Other assets	941			8,549
Accounts payable	(14,890)			(154,922)
Accrued liabilities and other long-term liabilities	21,148			(17,023)
Net cash provided by (used in) operating activities	(21,365)			92,587
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment	116			(46,490)
Net cash provided by (used in) investing activities	116			(46,490)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt	(7,000)			(67,980)
Proceeds from issuance of 10% Second Lien Notes	75,000
Proceeds from borrowings under credit agreements				150,000
Distributions to VDC				(498)
Debt issuance costs	(1,125)
Net cash provided by (used in) financing activities	66,875			81,522
Net increase (decrease) in cash and cash equivalents	45,626			127,619
Cash and cash equivalents—beginning of period	203,420	$ 249,046		75,801
Cash and cash equivalents—end of period	249,046			203,420
Cash paid for:
Interest	1,568			124,295
Income taxes (net of refunds)	(1,864)			50,840
Non-cash investing and financing transactions:
Additional notes issued for backstop premium	$ 1,125
Note issued in acquisition of management entities				61,477
Contributions from VDC				$ 10,326

XML

Consolidated Statement of Cash Flows (Parenthetical)	Feb. 09, 2016
Predecessor
Debt Instrument, interest rate	10.00%

XML

Organization and Recent Events

12 Months Ended

Dec. 31, 2017

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Organization and Recent Events

1. Organization and Recent Events

Vantage Drilling International (the “Company” or “VDI”), a Cayman Islands exempted 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 natural 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 natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

On April 5, 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of a class 154-44C jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made in February 2017 upon execution of the agreement and the remaining $11.7 million was paid at closing. The rig was renamed the Vantage 260. In August 2017 we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig to fulfill the drilling contract. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260. The transaction closed and the Vantage 260 was sold on February 26, 2018.

Restructuring Agreement and Emergence from Voluntary Reorganization under Chapter 11 Proceeding

On December 1, 2015, we and Vantage Drilling Company (“VDC”), our former parent company, entered into a restructuring support agreement (the “Restructuring Agreement”) with a majority of our secured creditors. Pursuant to the terms of the Restructuring Agreement, the Company agreed to pursue a pre-packaged plan of reorganization (the “Reorganization Plan”) under Chapter 11 of Title 11 of the United States Bankruptcy Code and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for a $61.5 million promissory note (the “VDC Note”). As this transaction involved a reorganization of entities under common control, it was reflected in the consolidated financial statements, at carryover basis, on a retrospective basis. Effective as of the Company’s emergence from bankruptcy on February 10, 2016 (the “Effective Date”), VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 new ordinary shares of the reorganized Company (the “New Shares”) in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

On December 3, 2015 (the “Petition Date”), the Company, certain of its subsidiaries and certain VDC subsidiaries who were guarantors of the Company’s pre-bankruptcy secured debt, filed the Reorganization Plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged Reorganization Plan and the Company emerged from bankruptcy on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 units in the reorganized Company (the “Units”). Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Company’s 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 (the “Convertible Notes”), subject to adjustment upon the payment of interest in kind (“PIK interest”) and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, after taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $175.90 of principal of Convertible Notes.

Other significant elements of the Reorganization Plan included:

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans (the “2016 Term Loan Facility”).

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition  term loans and senior notes claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s new 10% Senior Secured Second Lien Notes due 2020 (the “10% Second Lien Notes”). In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes and net cash proceeds to the Company of $73.9 million, after deducting the cash portion of the backstop premium.

The Reorganization Plan allowed the Company to continue business operations during the court proceedings and maintain all operating assets and agreements. The Company had adequate liquidity prior to the filing and did not have to seek any debtor-in-possession financing. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

  Other Events: Since July 2015, the Company has been cooperating in an investigation by the U.S. Department of Justice (“DOJ”) and the SEC arising from allegations that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petroleo Brasileiro S.A. (“Petrobras”), and Mr. Hsin-Chi Su, a former member of the Board of Directors and a significant shareholder of our former parent company, VDC, had engaged in an alleged scheme to pay bribes to former Petrobras executives, in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”). In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation and closing the investigation without any action against the Company. We have continued our cooperation in the investigation by the SEC into the same allegations and engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million.  If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

XML

Basis of Presentation and Significant Accounting Policies

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies

2. Basis of Presentation and Significant Accounting Policies

Basis of Consolidation: The accompanying consolidated financial information as of December 31, 2017 and 2016, for the years ended December 31, 2017 and 2015, and for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 has been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and include our accounts and those of our majority owned subsidiaries and variable interest entities (“VIEs”) discussed below. All significant intercompany transactions and accounts have been eliminated.

In connection with our bankruptcy filing, we were subject to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852 Reorganizations (“ASC 852”). All expenses, realized gains and losses and provisions for losses directly associated with the bankruptcy proceedings were classified as reorganization items in the consolidated statements of operations. Certain pre-petition liabilities subject to Chapter 11 proceedings were considered as LSTC on the Petition Date and just prior to our emergence from bankruptcy on the Effective Date. The LSTC classification distinguished such liabilities from the liabilities that were not expected to be compromised and liabilities incurred post-petition.

ASC 852 requires that subsequent to the Petition Date, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization of the business be reported separately as reorganization items in the consolidated statements of operations. We were required to distinguish pre-petition liabilities subject to compromise from those that were not and post-petition liabilities in our balance sheet. Liabilities that were subject to compromise were reported at the amounts expected to be allowed by the Bankruptcy Court, even if they were settled for lesser amounts as a result of the Reorganization Plan.

Upon emergence from bankruptcy on the Effective Date, we adopted fresh-start accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets. The effects of the Reorganization Plan and the application of fresh-start accounting were reflected in our consolidated financial statements as of February 10, 2016 and the related adjustments thereto were recorded in our consolidated statements of operations as reorganization items for the Predecessor Period January 1 to February 10, 2016.  

As a result, our consolidated balance sheets and consolidated statement of operations subsequent to the Effective Date are not comparable to our consolidated balance sheets and statements of operations prior to the Effective Date. Our consolidated financial statements and related notes are presented with a black line division which delineates the lack of comparability between amounts presented on or after February 10, 2016 and dates prior. Our financial results for periods following the application of fresh-start accounting are different from historical trends and the differences may be material.

References to “Successor” relate to the Company on and subsequent to the Effective Date. References to “Predecessor” refer to the Company prior to the Effective Date. The consolidated financial statements of the Successor have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

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. Certain subsidiaries of VDC, who were guarantors of our pre-petition debt and part of the Reorganization Plan, became our subsidiaries upon emergence from bankruptcy on the Effective Date. We consolidated these entities in our Predecessor consolidated financial statements because we determined that they were VIEs and that we were the primary beneficiary. The following table summarizes the net effect of consolidating these entities on our Predecessor consolidated statement of operations.  

	Predecessor
	Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Revenue	$	1,219		$	21,791
Operating costs and expenses		1,240			19,850
Income before taxes		22			2,206
Income tax provision		991			(2,830	)
Net income (loss) attributable to noncontrolling interests		(969	)		5,036

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.

Inventory: Consists of materials, spare parts, consumables and related supplies for our drilling rigs.

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 thirty-five 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 the accounts and a gain or loss is recognized.

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 natural gas exploration, development and production expenditures. Oil and natural 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 natural 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 natural 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. In connection with our adoption of fresh-start accounting upon our emergence from bankruptcy on February 10, 2016, an adjustment of $2.0 billion was recorded to decrease the net book value of our drilling rigs to estimated fair value. The projections and assumptions used in that valuation have not changed significantly as of December 31, 2017; accordingly, no triggering event has occurred to indicate that the current 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.

Intangible assets: In connection with our acquisition of the Vantage 260 and related multi-year drilling contract, the Company recorded an identifiable intangible asset of $12.6 million for the fair value of the acquired favorable drilling contract. The resulting intangible asset is being amortized on a straight-line basis over the two-year term of the drilling contract. We recognized approximately $4.7 million of amortization expense for intangible assets for the year ended December 31, 2017. We did not recognize any amortization expense for intangible assets for the period from February 10, 2016 to December 31, 2016 or for the period from January 1, 2016 to February 10, 2016.  

Expected future intangible asset amortization as of December 31, 2017 is as follows:

(in thousands)
Fiscal year:
2018	$	6,311
2019		1,643
Thereafter		-
Total	$	7,954

Debt Financing Costs: Costs incurred with debt financings 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 sheet as a direct deduction from the carrying amount of that debt liability.  

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

In connection with a customer contract, we may receive lump-sum fees for the mobilization of equipment and personnel or the demobilization of equipment and personnel upon completion. Mobilization fees received and costs incurred to mobilize a rig from one geographic market to another are deferred and recognized on a straight-line basis over the term of such contract, excluding any option periods. Costs incurred to mobilize a rig without a contract are expensed as incurred. Fees or lump-sum payments received for capital improvements to rigs are deferred and amortized to income over the term of the related drilling contract. The costs of such capital improvements are capitalized and depreciated over the useful lives of the assets. Upon completion of drilling contracts, any demobilization fees received are recorded as revenue. We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses.

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.

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which 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. 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. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer. We do not have an allowance for doubtful accounts on our trade receivables as of December 31, 2017 and 2016.

Use of Estimates: The preparation of financial statements 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 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.

Functional Currency: We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.  We recognize currency exchange rate gains and losses in other, net.  For the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015, we recognized a net gain of $2.8 million, a net gain of $1.1 million, a net loss of $5,000 and a net gain of $5.1 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 the balance sheet principally due to the short-term nature or floating rate nature of these instruments. At December 31, 2017, the fair value of the 2016 Term Loan Facility, the 10% Second Lien Notes and the Convertible Notes was approximately $142.9 million, $74.6 million and $838.6 million, respectively, based on quoted market prices in a less active market, a Level 2 measurement.

Recent Accounting Standards:  In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes most of the existing revenue recognition requirements in U.S. GAAP, including industry-specific guidance. The ASU is based on the principle that revenue is recognized when an entity transfers promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significant additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, using either a full or a modified retrospective application approach.

We will adopt the new revenue standard effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard to all outstanding contracts as an increase to the opening balance of retained earnings. We expect this adjustment to be immaterial.

When applying the new standard, we plan to account for the integrated services provided within our drilling contracts as a single performance obligation composed of a series of distinct time increments, which will be satisfied over time. Consideration that does not relate to a distinct good or service, such as mobilization and demobilization revenue, will be allocated across the single performance obligation and recognized over the series of distinct time increments within the term of the contract. All other components of consideration within a contract, including the dayrate revenue, will continue to be recognized in the period when the services are performed because the associated payments relate specifically to our efforts to provide those services. We expect our revenue recognition under ASU 2014-09 to differ from our current revenue recognition pattern only as it relates to demobilization revenue. Demobilization revenue, which is currently recognized upon completion of a drilling contract, will be estimated at contract commencement and recognized over the term of the contract under the new guidance. Additionally, we currently expect that the cumulative effect adjustment to opening retained earnings required by the modified retrospective adoption approach will not be significant as it will primarily consist of the impact of the timing difference related to recognition of demobilization revenue for affected contracts. Only one of our current contracts includes demobilization revenue.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification, to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and early adoption is permitted.  A modified retrospective approach is required. We expect to adopt ASU 2016-02 on January 1, 2019. Under the updated accounting standards, we have concluded that our drilling contracts contain a lease component, and our adoption, therefore, could require that we separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. Our adoption of ASU No. 2016-02, and the ultimate effect on our consolidated financial statements, will be based on an evaluation of the contract-specific facts and circumstances, and such effect could result in differences in the timing of our revenue recognition relative to current accounting standards. With respect to leases whereby we are the lessee we expect to recognize lease liabilities and corresponding “right of use” assets.  We are continuing to evaluate the requirements with regard to arrangements under which we are either the lessor or lessee, to determine the effect such requirements may have on our consolidated statements of financial position, operations and cash flows and on the disclosures contained in our notes to consolidated financial statements.  

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update should be applied using a retrospective transition method to each period presented. We continue to evaluate the provisions of ASU 2016-15 but do not expect the standard update to have a significant impact on the presentation of cash receipts and cash payments within our consolidated statements of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. We have completed the evaluation of ASU No. 2016-16 and determined that it has no impact on our financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU No. 2017-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017 utilizing a prospective basis on or after the effective date. We will adopt ASU No. 2017-01 effective January 1, 2018 but do not expect the standard update to have any impact on our financial statements and related disclosures.

XML

Acquisitions

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Acquisitions

3. Acquisitions

On April 5, 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of a class 154-44C jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made in February 2017 upon execution of the agreement and the remaining $11.7 million was paid at closing. The rig has been renamed the Vantage 260. In August 2017 we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jack-up rig to fulfill the contract. The Vantage 260 was classified as held for sale and was sold on February 26, 2018. We accounted for the acquisition as a business combination in accordance with accounting guidance which requires, among other things, that we allocate the purchase price to the assets acquired and liabilities assumed based on their fair values as of the acquisition date. The following table provides the estimated fair values of the assets acquired and liabilities assumed.    

(in thousands)
Total cash consideration	$	13,000
Purchase price allocation:
Drilling contract value		12,640
Rig equipment to be sold (net of disposal costs)		2,050
Drillpipe assets		700
Severance liabilities assumed		(480	)
Net assets acquired		14,910
Bargain purchase gain	$	1,910

Under accounting guidance, a bargain purchase gain results from an acquisition if the fair value of the purchase consideration paid in connection with such acquisition is less than the net fair value of the assets acquired and liabilities assumed. We recorded a bargain purchase gain of approximately $1.9 million related to the acquisition in the year ended December 31, 2017. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation. The purchase of the Vantage 260 and related two-year drilling contract allowed for the reactivation of the Sapphire Driller and further extended our operational presence in West Africa.

Pro forma results of operations related to the acquisition have not been presented because they are not material to our consolidated statement of operations.Acquisition-related costs were not material and were expensed as incurred.

XML

Reorganization Items

12 Months Ended

Dec. 31, 2017

Reorganization Items [Abstract]

Reorganization Items

4. Reorganization Items

Reorganization items represent amounts incurred subsequent to the Petition Date as a direct result of the filing of the Reorganization Plan and are comprised of the following:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Professional fees	$	—	$	1,380	$	22,712		$	39,354
Net gain on settlement of LSTC		—		—		(1,630,025	)		—
Fresh-start adjustments		—		—		2,060,232			—
	$	—	$	1,380	$	452,919		$	39,354

For the year ended December 31, 2017, and for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016, cash payments for reorganization items totaled $208,000, $16.6 million and $7.3 million, respectively.

XML

Debt

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Debt

5. Debt

Our debt was composed of the following:

	December 31,
	2017		2016
(in thousands)
2016 Term Loan Facility	$	140,140	$	141,570
10% Second Lien Notes, net of financing costs of $1,404 and $1,873		74,721		74,252
Convertible Notes, net of discount of $54,770 and $103,695		709,508		652,980
		924,369		868,802
Less current maturities of long-term debt		4,430		1,430
Long-term debt, net	$	919,939	$	867,372

 Aggregate scheduled principal maturities of our debt for the next five years and thereafter are as follows (in thousands):          

2018	$	4,430
2019		135,710
2020		76,125
2021		—
2022		—
Thereafter		2,775,628
Total debt (1)		2,991,893
Less:
Current maturities of long-term debt		(4,430	)
Future amortization of note discounts		(54,770	)
Future amortization of financing costs		(1,404	)
Future PIK interest		(2,011,350	)
Long-term debt	$	919,939

(1) Excludes original issuance discount of $54.8 million on the Convertible Notes and financing costs of $1.4 million on the 10% Second Lien Notes.

Second Amended and Restated Credit Agreement. The Company entered into the 2016 Term Loan Facility providing for (i) a $32.0 million revolving letter of credit facility to replace the Company’s existing $32.0 million revolving letter of credit commitment under its pre-petition credit facility and (ii) $143.0 million of term loans into which the claims of the lenders under the Company’s pre-petition credit facility were converted. The lenders under the Company’s pre-petition credit facility also received $7.0 million of cash under the Reorganization Plan. The obligations under the 2016 Term Loan Facility are guaranteed by substantially all of the Company’s subsidiaries, subject to limited exceptions, and secured on a first priority basis by substantially all of the Company’s and the guarantors’ assets, including ship mortgages on all vessels, assignments of related earnings and insurance and pledges of the capital stock of all guarantors, in each case, subject to certain exceptions. We have issued $17.1 million in letters of credit as of December 31, 2017.

The maturity date of the term loans and commitments established under the 2016 Term Loan Facility is December 31, 2019. Interest is payable on the unpaid principal amount of each term loan under the 2016 Term Loan Facility at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. The initial term loans are currently bearing interest at 8.069%. The 2016 Term Loan Facility has quarterly scheduled debt maturities of $357,500 which commenced in March 2016.

Fees are payable on the outstanding face amount of letters of credit at a rate per annum equal to 5.50% and such rate may be increased from time to time pursuant to the terms of the 2016 Term Loan Facility.

The 2016 Term Loan Facility includes customary representations and warranties, mandatory prepayments, affirmative and negative covenants and events of default, including covenants that, among other things, restrict the granting of liens, the incurrence of indebtedness, the making of investments and capital expenditures, the sale or other conveyance of assets, including vessels, transactions with affiliates, prepayments of certain debt and the operation of vessels. The 2016 Term Loan Facility also requires that the Company maintain $75.0 million of available cash (defined to include unrestricted cash and cash equivalents plus undrawn commitments).

10% Senior Secured Second Lien Notes. The Company engaged in a rights offering for $75.0 million of new 10% Second Lien Notes for certain holders of its secured debt claims. In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes, and in net cash proceeds of approximately $73.9 million after deducting the cash portion of the backstop premium.

The 10% Second Lien Notes were issued at par and are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company. The 10% Second Lien Notes mature on December 31, 2020, and bear interest from the date of their issuance at the rate of 10% per year. Interest on outstanding 10% Second Lien Notes is payable semi-annually in arrears, which commenced on June 30, 2016. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The 10% Second Lien Notes rank behind the 2016 Term Loan Facility as to collateral.

The Indenture for the 10% Second Lien Notes 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.

1%/12% Step-Up Senior Secured Third Lien Convertible Notes. The Company issued 4,344,959 New Shares and $750.0 million of the Convertible Notes to certain creditors holding approximately $2.5 billion of pre-petition secured debt claims. The New Shares issued to the creditors and the Convertible Notes may only be traded together and not separately. The Convertible Notes mature on December 31, 2030 and are convertible into New Shares, in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of December 31, 2017, taking into account the payment of PIK interest on the Convertible Notes to such date, each such unit of securities was comprised of one New Share and $175.90 of principal of Convertible Notes. As of December 31, 2017, we would be required to issue approximately 8.0 million New Shares if the Convertible Notes were converted.

In connection with the adoption of fresh-start accounting, the Convertible Notes were recorded at an estimated fair value of approximately $603.1 million. The difference between face value and the fair value at date of issuance of the Convertible Notes was recorded as a debt discount and is being amortized to interest expense over the expected life of the Convertible Notes using the effective interest rate method.

Interest on the Convertible Notes is payable semi-annually in arrears commencing June 30, 2016 as a payment in kind, either through an increase in the outstanding principal amount of the Convertible Notes or, if the Company is unable to increase such principal amount, by the issuance of additional Convertible Notes. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months at a rate of 1% per annum for the first four years and then increasing to 12% per annum until maturity.

The Company’s obligations under the Convertible Notes are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company, and the obligations of the Company and guarantors are secured by liens on substantially all of their respective assets. The guarantees by the Company’s subsidiaries of the Convertible Notes are joint and several. The Company has no independent assets or operations apart from the assets and operations of its wholly-owned subsidiaries. In addition, there are no significant restrictions on the Company’s or any subsidiary guarantor’s ability to obtain funds from its subsidiaries by dividend or loan. The Indenture for the Convertible Notes includes customary covenants that restrict the granting of liens and customary events of default, including, among other things, failure to issue securities upon conversion of the Convertible Notes. In addition, the Indenture, and the applicable Collateral Agreements, provide that any capital stock and other securities of any of the guarantors will be excluded from the collateral to the extent the pledge of such capital stock or other securities to secure the Convertible Notes would cause such guarantor to be required to file separate financial statements with the SEC pursuant to Rule 3-16 of Regulation S-X (as in effect from time to time).  

The Convertible Notes will convert only (a) prior to the third anniversary of the issue date (February 10, 2016), (i) upon the instruction of holders of a majority in principal amount of the Convertible Notes or (ii) upon the full and final resolution of all potential Investigation Claims (as defined below), as determined in good faith by the board of directors of the Company (the “Board”) (which determination shall require the affirmative vote of a supermajority of the non-management directors), and (b) from and after February 10, 2019 through their maturity date of December 31, 2030, upon the approval of the Board (which approval shall require the affirmative vote of a supermajority of the non-management directors). For these purposes, (i) “supermajority of the non-management directors” means five affirmative votes of non-management directors assuming six non-management directors eligible to vote and, in all other circumstances, the affirmative vote of at least 75% of the non-management directors eligible to vote and (ii) “Investigation Claim” means any claim held by a United States or Brazilian governmental unit and arising from or related to the procurement of that certain Agreement for the Provision of Drilling Services, dated as of February 4, 2009, by and between Petrobras Venezuela Investments & Services B.V. and Vantage Deepwater Company, as amended, modified, supplemented, or novated from time to time.

In the event of a change in control, the holders of our Convertible Notes have the right to require us to repurchase all or any part of the Convertible Notes at a price equal to 101% of their principal amount. We assessed the prepayment requirements and concluded that this feature met the criteria to be considered an embedded derivative and must be bifurcated and separately valued at fair value due to the discount on the Convertible Notes at issuance. We considered the probabilities of a change of control occurring and determined that the derivative had a de minimis value at February 10, 2016, December 31, 2016 and December 31, 2017, respectively.

Upon the occurrence of specified change of control events or certain losses of our vessels in the agreements governing our 10% Second Lien Notes, Convertible Notes or 2016 Term Loan Facility, we will be required to offer to repurchase or repay all (or in the case of events of losses of vessels, an amount up to the amount of proceeds received from such event of loss) of such outstanding debt under such debt agreements at the prices and upon the terms set forth in the applicable agreements. In addition, in connection with certain asset sales, we will be required to offer to repurchase or repay such outstanding debt as set forth in the applicable debt agreements. In addition, in connection with their investigation, if the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, and if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes. 

XML

Shareholder's Equity

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Shareholder's Equity

6. Shareholder’s Equity

We have 50,000,000 authorized ordinary shares, par value $0.001 per share. Upon emergence from bankruptcy, we issued 5,000,053 ordinary shares in connection with the settlement of LSTC and the VDC Note. As of December 31, 2017, 5,000,053 ordinary shares were issued and outstanding.

   On August 9, 2016, the Company adopted the Amended and Restated 2016 Management Incentive Plan (the “2016 Amended MIP”) to align the interests of participants with those of the 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.

During the first quarter of 2017, we granted to employees and directors 30,668 time-based restricted stock units (“TBGs”) and 67,686 performance-based restricted stock units (“PBGs”) under our 2016 Amended MIP. The TBGs vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a qualified liquidity event as defined in the 2016 Amended MIP (a “QLE”). Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the Effective Date. The PBGs 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 Total Enterprise Value (“TEV”) targets specified in the grants.

Both the TBGs and PBGs are classified as liabilities consistent with the classification of the underlying securities and under the provisions of ASC 718 Compensation – Stock Compensation are remeasured at each reporting period until settled. Share-based compensation expense is recognized over the requisite service period from the grant date to the fourth anniversary of the Effective Date for TBGs and the seventh anniversary of the Effective Date for PBGs. For the years ended December 31, 2017 and 2016, we recognized share-based compensation related to the TBG’s of approximately $4.0 million and $402,000, respectively. As of December 31, 2017, there was approximately $10.2 million of total unrecognized share-based compensation expense related to TBGs which is expected to be recognized over the remaining weighted average vesting period of approximately 2.7 years. The total award date value of time vested restricted shares that vested during the year ended December 31, 2017 was approximately $0.9 million.

Share-based compensation expense for PBGs 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 balance sheet date will be recognized for the service period completed. As of December 31, 2017, 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.

A summary of the restricted unit awards for the year ended December 31, 2017 is as follows:

	Year Ended December 31, 2017
Time vested restricted units
Units awarded		30,668
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		4.0
Units vested		11,237
Units forfeited		—
Performance vested restricted units
Units awarded		67,686
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		7.0
Units vested		—
Units forfeited		—

A summary of the status of non-vested restricted units at December 31, 2017 and changes during the year ended December 31, 2017 is as follows:

	Time Vested Restricted Units Outstanding			Weighted Average Award Date Unit Price		Performance Vested Restricted Units Outstanding		Weighted Average Award Date Unit Price
Nonvested restricted units at December 31, 2016		44,946		$	80.00		97,749	$	80.00
Awarded		30,668			160.00		67,686		160.00
Vested		(11,237	)		80.00		—		—
Forfeited		—			—		—		—
Nonvested restricted units at December 31, 2017		64,377		$	118.11		165,435	$	112.73

XML

Income Taxes

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Taxes

7. Income Taxes

We are a Cayman Islands entity. The Cayman Islands does not impose corporate income taxes. We do not have any domestic earnings; all of our earnings are foreign. 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. We operate in multiple countries under different legal forms. As a result, we are subject to the jurisdiction of numerous domestic and foreign tax authorities, as well as to tax agreements and treaties among these governments. Tax rates vary between jurisdictions, as does the tax base to which the rates are applied. Taxes may be levied based on net profit before taxes or gross revenues or as withholding taxes on revenue. Determination of income tax expense in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Our income tax expense may vary substantially from one period to another as a result of changes in the tax laws, regulations, agreements and treaties, foreign currency exchange restrictions, rig movements or our level of operations or profitability in each tax jurisdiction. Furthermore, 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 operating results and the income tax expense. Furthermore, in some jurisdictions we do not pay taxes or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt, reorganization expenses and write-off of development costs.

The income tax expense (benefit), all of which relates to foreign income taxes, consisted of the following (in thousands):

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Current	$	16,132		$	14,316		$	2,371	$	37,748
Deferred		(1,964	)		(3,368	)		—		2,122
Total	$	14,168		$	10,948		$	2,371	$	39,870

A reconciliation of statutory and effective income tax rates is shown below:

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
Statutory rate		0.0	%		0.0	%		0.0	%		0.0	%
Effect of:
Taxes on foreign earnings		(9.2)	%		(7.2)	%		(0.3)	%		69.4	%
Settlement of prior years’ tax audits		(0.5)	%		1.1	%		0.0	%		(7.7)	%
Tax rate change impact		(1.4)	%		0.0	%		0.0	%		0.0	%
Uncertain tax positions		0.8	%		(0.7)	%		(0.2)	%		0.3	%
Other		(0.2)	%		(1.2)	%		0.0	%		2.2	%
Total		(10.5)	%		(8.0)	%		(0.5)	%		64.2	%

On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted.  The Act, among other things, makes significant changes to the U.S. corporate income tax system, including reducing the federal corporate income tax rate from 35% to 21%; changes certain business-related deductions, including modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses; and transitions U.S. international taxation from a worldwide tax system to a territorial tax system.  Our existing deferred tax assets and liabilities are revalued at the newly enacted U.S. corporate rate, and the impact is recognized in our tax expense in 2017; the year of enactment. We continue to examine the potential impact this tax legislation may have on our business and financial results.

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 loss 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. The increase to the valuation allowance during the year, which is included in the taxes on foreign earnings rate in the above table, is related to net loss carry forwards generated during the year where we believe it is more likely than not that substantially all of the deferred tax asset will not be realized.

The components of the net deferred tax assets and liabilities were as follows:

	December 31, 2017			December 31, 2016
(in thousands)
Deferred tax assets:
Share-based compensation	$	366		$	99
Accrued bonuses/compensation		547			1,839
Start-up costs		54			106
Loss carry-forwards		6,638			15,214
Deferred revenue		1,548			—
Total deferred tax assets		9,153			17,258
Valuation allowance		(5,103	)		(13,056	)
Net deferred tax assets		4,050			4,202
Deferred tax liabilities:
Property and equipment		(931	)		(2,430	)
Deferred revenue		—			(649	)
Mobilization		—			(233	)
Other deferred tax liability		(253	)		(5	)
Total deferred tax liabilities		(1,184	)		(3,317	)
Net deferred tax asset	$	2,866		$	885

At December 31, 2017, we had foreign tax loss carry forwards of approximately $22.7 million which will begin to expire in 2018.

We include as a component of our income tax provision potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties expense of approximately $0.3 million is included in 2017 income tax expense and interest and penalties of approximately $1.5 million are accrued as of December 31, 2017.

A reconciliation of our unrecognized tax benefits amount is as follows (in thousands):

Gross balance at January 1, 2017	$	3,355
Additions based on tax positions related to the current year		-
Additions for tax positions of prior years		1,115
Reductions for tax positions of prior years		-
Expiration of statues		(1,019	)
Tax settlements		(411	)
Gross balance at December 31, 2017		3,040
Related tax benefits		-
Net reserve at December 31, 2017	$	3,040

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, our business operations and other factors affecting our 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 2010 and forward 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.

XML

Commitments and Contingencies

12 Months Ended

Dec. 31, 2017

Commitments And Contingencies Disclosure [Abstract]

Commitments and Contingencies

8. Commitments and Contingencies

In July 2015, we became aware of media reports that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petrobras, had entered into a plea arrangement with the Brazilian authorities in connection with his role in facilitating the payment of bribes to former Petrobras executives. Among other things, Mr. Padilha provided information to the Brazilian authorities of an alleged bribery scheme between former Petrobras executives and Nobu Su, who was, at the time of the alleged bribery scheme, a member of the Board of Directors and a significant shareholder of our former parent company, VDC. When we learned of Mr. Padilha’s plea agreement and the allegations, we voluntarily contacted the DOJ and the SEC to advise them of these  developments, as well as the fact that we had engaged outside counsel to conduct an internal investigation of the allegations. Since disclosing this matter to the DOJ and SEC, we have cooperated fully in their investigation of these allegations. In connection with such cooperation, we advised both agencies that in early 2010, we engaged outside counsel to investigate a report of alleged improper payments to customs and immigration officials in Asia. That investigation was concluded in 2011, and we determined at that time that no disclosure was warranted; however, in an abundance of caution, we provided the results of this investigation to the DOJ and SEC in light of the allegations in the Petrobras matter. In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation into the Company concerning possible violations of the FCPA by VDC in the Petrobras matter and indicating that the DOJ has closed such investigation without any action. In addition, the Company has engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the second quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million. If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payableat par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

In connection with our bankruptcy cases, two appeals were filed relating to the confirmation of the Reorganization Plan. Specifically, on January 29, 2016, Hsin Chi Su and F3 Capital filed two appeals before the United States District Court for the District of Delaware seeking a reversal of (i) the Court’s determination that Hsin Chi Su and F3 Capital did not have standing to appear and be heard in the bankruptcy cases, which was made on the record at a hearing held on January 14, 2016, and (ii) the Court’s Findings of Fact, Conclusions of Law, and Order (I) Approving the Debtors’ (A) Disclosure Statement Pursuant to Sections 1125 and 1126(b) of the Bankruptcy Code, (B) Solicitation of Votes and Voting Procedures, and (C) Forms of Ballots, and (II) Confirming the Amended Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors [Docket No. 188], which was entered on January 15, 2016. The appeals were consolidated on June 14, 2016. We cannot predict with certainty the ultimate outcome of any such appeals. An adverse outcome could negatively affect our business, results of operations and financial condition.

On August 31, 2015, VDC received notice from Petrobras America, Inc. (“PAI”) and Petrobras Venezuela Investments & Services B.V. (“PVIS”) stating that PAI and PVIS were terminating the Agreement for the Provision of Drilling Services dated February 4, 2009 (the “Drilling Contract”). The Drilling Contract was initially entered into between PVIS and Vantage Deepwater Company, one of our wholly-owned indirect subsidiaries, and was later novated by PVIS to PAI and by Vantage Deepwater Company to Vantage Deepwater Drilling, Inc., another of our wholly-owned indirect subsidiaries. The notice stated that PAI and PVIS were terminating the Drilling Contract because Vantage had allegedly breached its obligations under the agreement. Under the terms of the Drilling Contract we initiated arbitration proceedings before the American Arbitration Association on August 31, 2015, challenging PVIS and PAI’s wrongful attempt to terminate the Drilling Contract. Vantage has maintained that it complied with all of its obligations under the Drilling Contract and that PVIS and PAI’s attempt to terminate the agreement is both improper and a breach of the Drilling Contract.

In the ongoing arbitration proceeding, the hearing on the merits has concluded and the parties have exchanged post-hearing briefs. Vantage has asserted claims against PAI and PVIS for declaratory relief and monetary damages based on breach of contract. Vantage has also asserted a claim against Petroleo Brasileiro S.A. (“PBP”) to enforce a guaranty provided by PBP.  The Petrobras entities (PVIS, PAI and PBP) have asserted that the Drilling Contract is void as illegally procured, that PVIS and PBP are not proper parties to the arbitration, and that PAI and PVIS properly terminated the contract. PAI has further counterclaimed for attorneys’ fees and costs alleging that Vantage failed to negotiate in good faith before commencing arbitration proceedings and is seeking disgorgement damages of approximately $102 million. We are vigorously pursuing our claims in the arbitration and deny that any of the claims or defenses asserted by the Petrobras entities have merit.

Pursuant to the terms of the Restructuring Agreement, the Company agreed to the Reorganization Plan and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for the VDC Note.  In connection with our separation from our former parent company, we and the Joint Official Liquidators, appointed to oversee the liquidation of VDC, are in discussions regarding the settlement of certain intercompany receivables and payables as between the Company and its subsidiaries, on the one hand, and VDC and its subsidiaries on the other. While we continue to believe that our position regarding the settlement of such amounts is correct, we cannot predict the ultimate outcome of this matter should legal proceedings between the parties transpire.

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 renewal options which would cause our future cash payments to change if we exercised those renewal options. As of December 31, 2017, we were obligated under leases, with varying expiration dates, for office space, housing, vehicles and specified operating equipment. Future minimum annual rentals under these operating leases having initial or remaining terms in excess of one year are $2.4 million, $1.7 million, $1.5 million, $1.3 million and $1.4 million for each of the years ending December 31, 2018, 2019, 2020, 2021 and 2022 respectively, and $1.0 million in the aggregate for the years 2023 and thereafter. Rental expenses for the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015 were approximately $4.3 million, $4.1 million, $678,000 and $15.2 million, respectively.

At December 31, 2017, we had purchase commitments of $9.4 million. Our purchase commitments consist of obligations outstanding to external vendors primarily related to materials, spare parts, consumables and related supplies for our drilling rigs.

XML

Supplemental Financial Information

12 Months Ended

Dec. 31, 2017

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:

	December 31,
	2017		2016
(in thousands)
Prepaid insurance	$	294	$	782
Sales tax receivable		5,652		7,129
Income tax receivable		1,374		1,025
Other receivables		158		74
Assets held for sale		2,050		—
Other		3,679		3,413
	$	13,207	$	12,423

 Property and Equipment, net

Property and equipment, net consisted of the following:

	December 31,
	2017			2016
(in thousands)
Drilling equipment	$	883,598		$	880,267
Assets under construction		1,043			2,138
Office and technology equipment		18,778			18,764
Leasehold improvements		1,165			1,072
		904,584			902,241
Accumulated depreciation		(141,393	)		(67,713	)
Property and equipment, net	$	763,191		$	834,528

Other Assets

Other assets consisted of the following:

	December 31,
	2017		2016
(in thousands)
Contract value, net	$	7,954	$	—
Performance bond collateral		—		3,197
Deferred certification costs		3,497		4,885
Deferred mobilization costs		6,216		4,194
Deferred income taxes		3,162		2,237
Deposits		1,106		1,181
	$	21,935	$	15,694

Accrued Liabilities

Accrued liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Interest	$	3,952	$	104
Compensation		10,285		11,289
Income taxes payable		3,740		5,008
Loss contingency accrual		5,000		—
Other		2,140		2,047
	$	25,117	$	18,448

Long-term Liabilities

Long-term liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Deferred mobilization revenue	$	6,757	$	—
Deferred income taxes		296		1,352
2016 MIP		4,399		402
Other non-current liabilities		5,743		9,581
	$	17,195	$	11,335

Transactions with Former Parent Company

Our consolidated statement of operations includes the following transactions with VDC for the periods indicated:

	Successor					Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Reimbursable revenues	$	—	$	—		$	—		$	6,212
Interest income		—		(3	)		3			27
Interest expense		—		—			(662	)		(489	)
	$	—	$	(3	)	$	(659	)	$	5,750

The following table summarizes the balances payable to VDC included in our consolidated balance sheet as of the dates indicated:

	December 31,
	2017		2016
(in thousands)
Accounts payable to related parties, net	$	17,278	$	17,278
	$	17,278	$	17,278

Pursuant to the terms of the Restructuring Agreement, the Company agreed to the Reorganization Plan and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for the VDC Note. In connection with our separation from our former parent company, we and the Joint Official Liquidators, appointed to oversee the liquidation of VDC, are in discussions regarding the settlement of certain intercompany receivables and payables as between the Company and its subsidiaries, on the one hand, and VDC and its subsidiaries on the other. While we continue to believe that our position regarding the settlement of such amounts is correct, we cannot predict the ultimate outcome of this matter should legal proceedings between the parties transpire.

XML

Business Segment Information

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Business Segment Information

10. Business Segment Information

We aggregate our contract drilling operations into one reportable segment even though we provide contract drilling services with different types of rigs, including jackup rigs and drillships, and in different geographic regions. 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.

Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs. In September 2013, we signed an agreement to supervise and manage the construction of two ultra-deepwater drillships for a third party. We receive management fees and reimbursable costs during the construction phase of the two drillships, subject to a maximum amount for each drillship. This business represented approximately 0.7%, 2.6%, 3.2% and 1.0% of our total revenue for the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015, respectively.

For the years ended December 31, 2017, 2016 and 2015, the majority of our revenue was 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. Four customers accounted for approximately 51%, 15%, 13% and 11% of consolidated revenue for the year ended December 31, 2017. Three customers accounted for approximately 58%, 19% and 11% of consolidated revenue for the period from February 10, 2016 to December 31, 2016. Three customers accounted for approximately 58%, 18% and 14% of consolidated revenue for the period from January 1, 2016 to February 10, 2016. Three customers accounted for approximately 32%, 25% and 20% of consolidated revenue for the year ended December 31, 2015.   

Our revenues by country were as follows:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Congo	$	139,579	$	91,435	$	13,769	$	247,415
Malaysia		26,983		30,397		3,319		—
Indonesia		23,477		18,075		4,214		—
India		—		—		—		189,973
U.S.		—		—		—		128,157
Other countries (a)		22,807		18,741		2,238		206,720
Total revenues	$	212,846	$	158,648	$	23,540	$	772,265

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

Our property and equipment, net by country were as follows:

	December 31, 2017		December 31, 2016
Congo	$	256,200	$	277,305
India		155,362		—
Malaysia		103,603		280,689
South Africa		179,468		196,473
Other countries (a)		68,558		80,061
Total property and equipment	$	763,191	$	834,528

(a) Other countries represent countries in which we operate that individually had property equipment, net representing less than 10 percent of total property and equipment.

A substantial portion of our assets are mobile drilling units. 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.

XML

Supplemental Quarterly Information (Unaudited)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Supplemental Quarterly Information (Unaudited)

11. Supplemental Quarterly Information (Unaudited)

The following table reflects a summary of the unaudited interim results of operations for the years ended December 31, 2017 and 2016 (in thousands except per share amounts).

	Successor
	Quarter Ended
	March 31			June 30			September 30			December 31
2017
Revenues	$	42,049		$	53,263		$	57,696		$	59,838
Loss from operations (1)		(16,867	)		(16,976	)		(17,639	)		(12,913	)
Other expense		(18,206	)		(16,235	)		(18,169	)		(18,612	)
Net loss		(36,499	)		(36,592	)		(40,068	)		(36,626	)
Loss per share
Basic and diluted	$	(7.30	)	$	(7.32	)	$	(8.01	)	$	(7.33	)

(1) During the quarter ended December 31, 2017 we recorded a loss contingency in the amount of $5 million in connection with the proposed offer of settlement with the SEC, as described in “Note 8. Commitments and Contingencies”.  

	Predecessor			Successor
	Period from			Period from			Quarter Ended
	January 1, 2016 to February 10, 2016			February 10, 2016 to March 31, 2016			June 30			September 30			December 31
2016
Revenues	$	23,540		$	29,786		$	48,511		$	39,942		$	40,409
Loss from operations		(14,927	)		(18,897	)		(13,530	)		(20,146	)		(16,643	)
Other expense		(454,713	)		(8,964	)		(20,766	)		(18,007	)		(19,516	)
Net loss		(472,011	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Net loss attributable to noncontrolling interests		(969	)		—			—			—			—
Net loss attributable to VDI		(471,042	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Loss per share
Basic and diluted	N/A			$	(5.81	)	$	(7.15	)	$	(8.31	)	$	(8.23	)

Loss per share is computed independently for each of the periods presented. Therefore, the sum of the periods’ earnings (loss) per share may not agree to the total computed for the year.

XML

Basis of Presentation and Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Basis of Consolidation

Basis of Consolidation: The accompanying consolidated financial information as of December 31, 2017 and 2016, for the years ended December 31, 2017 and 2015, and for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 has been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the SEC and include our accounts and those of our majority owned subsidiaries and variable interest entities (“VIEs”) discussed below. All significant intercompany transactions and accounts have been eliminated.

In connection with our bankruptcy filing, we were subject to the provisions of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 852 Reorganizations (“ASC 852”). All expenses, realized gains and losses and provisions for losses directly associated with the bankruptcy proceedings were classified as reorganization items in the consolidated statements of operations. Certain pre-petition liabilities subject to Chapter 11 proceedings were considered as LSTC on the Petition Date and just prior to our emergence from bankruptcy on the Effective Date. The LSTC classification distinguished such liabilities from the liabilities that were not expected to be compromised and liabilities incurred post-petition.

ASC 852 requires that subsequent to the Petition Date, expenses, realized gains and losses and provisions for losses that can be directly associated with the reorganization of the business be reported separately as reorganization items in the consolidated statements of operations. We were required to distinguish pre-petition liabilities subject to compromise from those that were not and post-petition liabilities in our balance sheet. Liabilities that were subject to compromise were reported at the amounts expected to be allowed by the Bankruptcy Court, even if they were settled for lesser amounts as a result of the Reorganization Plan.

Upon emergence from bankruptcy on the Effective Date, we adopted fresh-start accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets. The effects of the Reorganization Plan and the application of fresh-start accounting were reflected in our consolidated financial statements as of February 10, 2016 and the related adjustments thereto were recorded in our consolidated statements of operations as reorganization items for the Predecessor Period January 1 to February 10, 2016.  

As a result, our consolidated balance sheets and consolidated statement of operations subsequent to the Effective Date are not comparable to our consolidated balance sheets and statements of operations prior to the Effective Date. Our consolidated financial statements and related notes are presented with a black line division which delineates the lack of comparability between amounts presented on or after February 10, 2016 and dates prior. Our financial results for periods following the application of fresh-start accounting are different from historical trends and the differences may be material.

References to “Successor” relate to the Company on and subsequent to the Effective Date. References to “Predecessor” refer to the Company prior to the Effective Date. The consolidated financial statements of the Successor have been prepared assuming that the Company will continue as a going concern and contemplate the realization of assets and the satisfaction of liabilities in the normal course of business.

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. Certain subsidiaries of VDC, who were guarantors of our pre-petition debt and part of the Reorganization Plan, became our subsidiaries upon emergence from bankruptcy on the Effective Date. We consolidated these entities in our Predecessor consolidated financial statements because we determined that they were VIEs and that we were the primary beneficiary. The following table summarizes the net effect of consolidating these entities on our Predecessor consolidated statement of operations.  

	Predecessor
	Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Revenue	$	1,219		$	21,791
Operating costs and expenses		1,240			19,850
Income before taxes		22			2,206
Income tax provision		991			(2,830	)
Net income (loss) attributable to noncontrolling interests		(969	)		5,036

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.

Inventory

Inventory: Consists of materials, spare parts, consumables and related supplies for our drilling rigs.

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 thirty-five 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 the accounts and a gain or loss is recognized.

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 natural gas exploration, development and production expenditures. Oil and natural 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 natural 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 natural 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. In connection with our adoption of fresh-start accounting upon our emergence from bankruptcy on February 10, 2016, an adjustment of $2.0 billion was recorded to decrease the net book value of our drilling rigs to estimated fair value. The projections and assumptions used in that valuation have not changed significantly as of December 31, 2017; accordingly, no triggering event has occurred to indicate that the current 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.

Intangible Assets

Intangible assets: In connection with our acquisition of the Vantage 260 and related multi-year drilling contract, the Company recorded an identifiable intangible asset of $12.6 million for the fair value of the acquired favorable drilling contract. The resulting intangible asset is being amortized on a straight-line basis over the two-year term of the drilling contract. We recognized approximately $4.7 million of amortization expense for intangible assets for the year ended December 31, 2017. We did not recognize any amortization expense for intangible assets for the period from February 10, 2016 to December 31, 2016 or for the period from January 1, 2016 to February 10, 2016.  

Expected future intangible asset amortization as of December 31, 2017 is as follows:

(in thousands)
Fiscal year:
2018	$	6,311
2019		1,643
Thereafter		-
Total	$	7,954

Debt Financing Costs

Debt Financing Costs: Costs incurred with debt financings 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 sheet as a direct deduction from the carrying amount of that debt liability.

Revenue

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

In connection with a customer contract, we may receive lump-sum fees for the mobilization of equipment and personnel or the demobilization of equipment and personnel upon completion. Mobilization fees received and costs incurred to mobilize a rig from one geographic market to another are deferred and recognized on a straight-line basis over the term of such contract, excluding any option periods. Costs incurred to mobilize a rig without a contract are expensed as incurred. Fees or lump-sum payments received for capital improvements to rigs are deferred and amortized to income over the term of the related drilling contract. The costs of such capital improvements are capitalized and depreciated over the useful lives of the assets. Upon completion of drilling contracts, any demobilization fees received are recorded as revenue. We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses.

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.

Income Taxes

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which 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. 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. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer. We do not have an allowance for doubtful accounts on our trade receivables as of December 31, 2017 and 2016.

Use of Estimates

Use of Estimates:The preparation of financial statements 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 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.

Functional Currency

Functional Currency: We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations.  We recognize currency exchange rate gains and losses in other, net.  For the year ended December 31, 2017, for the periods from February 10, 2016 to December 31, 2016 and from January 1, 2016 to February 10, 2016 and for the year ended December 31, 2015, we recognized a net gain of $2.8 million, a net gain of $1.1 million, a net loss of $5,000 and a net gain of $5.1 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 the balance sheet principally due to the short-term nature or floating rate nature of these instruments. At December 31, 2017, the fair value of the 2016 Term Loan Facility, the 10% Second Lien Notes and the Convertible Notes was approximately $142.9 million, $74.6 million and $838.6 million, respectively, based on quoted market prices in a less active market, a Level 2 measurement.

Recent Accounting Standards

Recent Accounting Standards:  In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers. ASU No. 2014-09 supersedes most of the existing revenue recognition requirements in U.S. GAAP, including industry-specific guidance. The ASU is based on the principle that revenue is recognized when an entity transfers promised goods and services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significant additional disclosures regarding the nature, amount, timing and uncertainty of revenue and cash flows arising from contracts with customers. ASU No. 2014-09 is effective for annual reporting periods beginning after December 15, 2017, and interim periods within those years, using either a full or a modified retrospective application approach.

We will adopt the new revenue standard effective January 1, 2018 using the modified retrospective approach by recognizing the cumulative effect of initially applying the new standard to all outstanding contracts as an increase to the opening balance of retained earnings. We expect this adjustment to be immaterial.

When applying the new standard, we plan to account for the integrated services provided within our drilling contracts as a single performance obligation composed of a series of distinct time increments, which will be satisfied over time. Consideration that does not relate to a distinct good or service, such as mobilization and demobilization revenue, will be allocated across the single performance obligation and recognized over the series of distinct time increments within the term of the contract. All other components of consideration within a contract, including the dayrate revenue, will continue to be recognized in the period when the services are performed because the associated payments relate specifically to our efforts to provide those services. We expect our revenue recognition under ASU 2014-09 to differ from our current revenue recognition pattern only as it relates to demobilization revenue. Demobilization revenue, which is currently recognized upon completion of a drilling contract, will be estimated at contract commencement and recognized over the term of the contract under the new guidance. Additionally, we currently expect that the cumulative effect adjustment to opening retained earnings required by the modified retrospective adoption approach will not be significant as it will primarily consist of the impact of the timing difference related to recognition of demobilization revenue for affected contracts. Only one of our current contracts includes demobilization revenue.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842): Amendments to the FASB Accounting Standards Codification, to increase transparency and comparability among organizations by recognizing lease assets and liabilities on the balance sheet and disclosing key information about leasing arrangements. ASU No. 2016-02 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and early adoption is permitted.  A modified retrospective approach is required. We expect to adopt ASU 2016-02 on January 1, 2019. Under the updated accounting standards, we have concluded that our drilling contracts contain a lease component, and our adoption, therefore, could require that we separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. Our adoption of ASU No. 2016-02, and the ultimate effect on our consolidated financial statements, will be based on an evaluation of the contract-specific facts and circumstances, and such effect could result in differences in the timing of our revenue recognition relative to current accounting standards. With respect to leases whereby we are the lessee we expect to recognize lease liabilities and corresponding “right of use” assets.  We are continuing to evaluate the requirements with regard to arrangements under which we are either the lessor or lessee, to determine the effect such requirements may have on our consolidated statements of financial position, operations and cash flows and on the disclosures contained in our notes to consolidated financial statements.  

In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, which addresses the classification and presentation of eight specific cash flow issues that currently result in diverse practice. ASU No. 2016-15 is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. The amendments in this update should be applied using a retrospective transition method to each period presented. We continue to evaluate the provisions of ASU 2016-15 but do not expect the standard update to have a significant impact on the presentation of cash receipts and cash payments within our consolidated statements of cash flows.

In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory, which requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. This update is effective for annual and interim periods beginning after December 15, 2017. A modified retrospective approach with a cumulative-effect adjustment directly to retained earnings at the beginning of the period of adoption is required. We have completed the evaluation of ASU No. 2016-16 and determined that it has no impact on our financial statements and related disclosures.

In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. ASU No. 2017-01 is effective for financial statements issued for fiscal years beginning after December 15, 2017 utilizing a prospective basis on or after the effective date. We will adopt ASU No. 2017-01 effective January 1, 2018 but do not expect the standard update to have any impact on our financial statements and related disclosures.

XML

Basis of Presentation and Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2017

Accounting Policies [Abstract]

Summary of Net Effect of Consolidating Entities on Predecessor Consolidated Statement of Operations

The following table summarizes the net effect of consolidating these entities on our Predecessor consolidated statement of operations.

	Predecessor
	Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Revenue	$	1,219		$	21,791
Operating costs and expenses		1,240			19,850
Income before taxes		22			2,206
Income tax provision		991			(2,830	)
Net income (loss) attributable to noncontrolling interests		(969	)		5,036

Summary of Expected Future Intangible Asset Amortization

Expected future intangible asset amortization as of December 31, 2017 is as follows:

(in thousands)
Fiscal year:
2018	$	6,311
2019		1,643
Thereafter		-
Total	$	7,954

XML

Acquisitions (Tables)

12 Months Ended

Dec. 31, 2017

Business Combinations [Abstract]

Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed

The following table provides the estimated fair values of the assets acquired and liabilities assumed.

(in thousands)
Total cash consideration	$	13,000
Purchase price allocation:
Drilling contract value		12,640
Rig equipment to be sold (net of disposal costs)		2,050
Drillpipe assets		700
Severance liabilities assumed		(480	)
Net assets acquired		14,910
Bargain purchase gain	$	1,910

XML

Reorganization Items (Tables)

12 Months Ended

Dec. 31, 2017

Reorganization Items [Abstract]

Schedule of Reorganization Items

Reorganization items represent amounts incurred subsequent to the Petition Date as a direct result of the filing of the Reorganization Plan and are comprised of the following:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Professional fees	$	—	$	1,380	$	22,712		$	39,354
Net gain on settlement of LSTC		—		—		(1,630,025	)		—
Fresh-start adjustments		—		—		2,060,232			—
	$	—	$	1,380	$	452,919		$	39,354

XML

Debt (Tables)

12 Months Ended

Dec. 31, 2017

Debt Disclosure [Abstract]

Long-term Debt

Our debt was composed of the following:

	December 31,
	2017		2016
(in thousands)
2016 Term Loan Facility	$	140,140	$	141,570
10% Second Lien Notes, net of financing costs of $1,404 and $1,873		74,721		74,252
Convertible Notes, net of discount of $54,770 and $103,695		709,508		652,980
		924,369		868,802
Less current maturities of long-term debt		4,430		1,430
Long-term debt, net	$	919,939	$	867,372

Schedule of Aggregate Principal Maturities of Long-term Debt

 Aggregate scheduled principal maturities of our debt for the next five years and thereafter are as follows (in thousands):          

2018	$	4,430
2019		135,710
2020		76,125
2021		—
2022		—
Thereafter		2,775,628
Total debt (1)		2,991,893
Less:
Current maturities of long-term debt		(4,430	)
Future amortization of note discounts		(54,770	)
Future amortization of financing costs		(1,404	)
Future PIK interest		(2,011,350	)
Long-term debt	$	919,939

(1) Excludes original issuance discount of $54.8 million on the Convertible Notes and financing costs of $1.4 million on the 10% Second Lien Notes.

XML

Shareholder's Equity (Tables)

12 Months Ended

Dec. 31, 2017

Equity [Abstract]

Summary of Restricted Unit Awards

A summary of the restricted unit awards for the year ended December 31, 2017 is as follows:

	Year Ended December 31, 2017
Time vested restricted units
Units awarded		30,668
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		4.0
Units vested		11,237
Units forfeited		—
Performance vested restricted units
Units awarded		67,686
Weighted-average unit price at award date	$	160.00
Weighted average vesting period (years)		7.0
Units vested		—
Units forfeited		—

Summary of Status of Non-Vested Restricted Units and Changes

A summary of the status of non-vested restricted units at December 31, 2017 and changes during the year ended December 31, 2017 is as follows:

	Time Vested Restricted Units Outstanding			Weighted Average Award Date Unit Price		Performance Vested Restricted Units Outstanding		Weighted Average Award Date Unit Price
Nonvested restricted units at December 31, 2016		44,946		$	80.00		97,749	$	80.00
Awarded		30,668			160.00		67,686		160.00
Vested		(11,237	)		80.00		—		—
Forfeited		—			—		—		—
Nonvested restricted units at December 31, 2017		64,377		$	118.11		165,435	$	112.73

XML

Income Taxes (Tables)

12 Months Ended

Dec. 31, 2017

Income Tax Disclosure [Abstract]

Income Tax Expense (Benefit) Related to Foreign Income Taxes

The income tax expense (benefit), all of which relates to foreign income taxes, consisted of the following (in thousands):

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Current	$	16,132		$	14,316		$	2,371	$	37,748
Deferred		(1,964	)		(3,368	)		—		2,122
Total	$	14,168		$	10,948		$	2,371	$	39,870

Reconciliation of Statutory and Effective Income Tax Rates

A reconciliation of statutory and effective income tax rates is shown below:

	Successor						Predecessor
	Year Ended December 31, 2017			Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
Statutory rate		0.0	%		0.0	%		0.0	%		0.0	%
Effect of:
Taxes on foreign earnings		(9.2)	%		(7.2)	%		(0.3)	%		69.4	%
Settlement of prior years’ tax audits		(0.5)	%		1.1	%		0.0	%		(7.7)	%
Tax rate change impact		(1.4)	%		0.0	%		0.0	%		0.0	%
Uncertain tax positions		0.8	%		(0.7)	%		(0.2)	%		0.3	%
Other		(0.2)	%		(1.2)	%		0.0	%		2.2	%
Total		(10.5)	%		(8.0)	%		(0.5)	%		64.2	%

Components of Net Deferred Tax Assets and Liabilities

The components of the net deferred tax assets and liabilities were as follows:

	December 31, 2017			December 31, 2016
(in thousands)
Deferred tax assets:
Share-based compensation	$	366		$	99
Accrued bonuses/compensation		547			1,839
Start-up costs		54			106
Loss carry-forwards		6,638			15,214
Deferred revenue		1,548			—
Total deferred tax assets		9,153			17,258
Valuation allowance		(5,103	)		(13,056	)
Net deferred tax assets		4,050			4,202
Deferred tax liabilities:
Property and equipment		(931	)		(2,430	)
Deferred revenue		—			(649	)
Mobilization		—			(233	)
Other deferred tax liability		(253	)		(5	)
Total deferred tax liabilities		(1,184	)		(3,317	)
Net deferred tax asset	$	2,866		$	885

Reconciliation of Unrecognized Tax Benefits

A reconciliation of our unrecognized tax benefits amount is as follows (in thousands):

Gross balance at January 1, 2017	$	3,355
Additions based on tax positions related to the current year		-
Additions for tax positions of prior years		1,115
Reductions for tax positions of prior years		-
Expiration of statues		(1,019	)
Tax settlements		(411	)
Gross balance at December 31, 2017		3,040
Related tax benefits		-
Net reserve at December 31, 2017	$	3,040

XML

Supplemental Financial Information (Tables)

12 Months Ended

Dec. 31, 2017

Balance Sheet Related Disclosures [Abstract]

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:

	December 31,
	2017		2016
(in thousands)
Prepaid insurance	$	294	$	782
Sales tax receivable		5,652		7,129
Income tax receivable		1,374		1,025
Other receivables		158		74
Assets held for sale		2,050		—
Other		3,679		3,413
	$	13,207	$	12,423

Property and Equipment, Net

Property and equipment, net consisted of the following:

	December 31,
	2017			2016
(in thousands)
Drilling equipment	$	883,598		$	880,267
Assets under construction		1,043			2,138
Office and technology equipment		18,778			18,764
Leasehold improvements		1,165			1,072
		904,584			902,241
Accumulated depreciation		(141,393	)		(67,713	)
Property and equipment, net	$	763,191		$	834,528

Other Assets

Other assets consisted of the following:

	December 31,
	2017		2016
(in thousands)
Contract value, net	$	7,954	$	—
Performance bond collateral		—		3,197
Deferred certification costs		3,497		4,885
Deferred mobilization costs		6,216		4,194
Deferred income taxes		3,162		2,237
Deposits		1,106		1,181
	$	21,935	$	15,694

Accrued Liabilities

Accrued liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Interest	$	3,952	$	104
Compensation		10,285		11,289
Income taxes payable		3,740		5,008
Loss contingency accrual		5,000		—
Other		2,140		2,047
	$	25,117	$	18,448

Long-term Liabilities

Long-term liabilities consisted of the following:

	December 31,
	2017		2016
(in thousands)
Deferred mobilization revenue	$	6,757	$	—
Deferred income taxes		296		1,352
2016 MIP		4,399		402
Other non-current liabilities		5,743		9,581
	$	17,195	$	11,335

Consolidated Statement of Operations Transactions with Former Parent Company

Our consolidated statement of operations includes the following transactions with VDC for the periods indicated:

	Successor					Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016			Period from January 1, 2016 to February 10, 2016			Year Ended December 31, 2015
(in thousands)
Reimbursable revenues	$	—	$	—		$	—		$	6,212
Interest income		—		(3	)		3			27
Interest expense		—		—			(662	)		(489	)
	$	—	$	(3	)	$	(659	)	$	5,750

Consolidated Balance Sheet Balances Payable to Former Parent Company

The following table summarizes the balances payable to VDC included in our consolidated balance sheet as of the dates indicated:

	December 31,
	2017		2016
(in thousands)
Accounts payable to related parties, net	$	17,278	$	17,278
	$	17,278	$	17,278

XML

Business Segment Information (Tables)

12 Months Ended

Dec. 31, 2017

Segment Reporting [Abstract]

Summary of Revenues by Country

Our revenues by country were as follows:

	Successor				Predecessor
	Year Ended December 31, 2017		Period from February 10, 2016 to December 31, 2016		Period from January 1, 2016 to February 10, 2016		Year Ended December 31, 2015
Congo	$	139,579	$	91,435	$	13,769	$	247,415
Malaysia		26,983		30,397		3,319		—
Indonesia		23,477		18,075		4,214		—
India		—		—		—		189,973
U.S.		—		—		—		128,157
Other countries (a)		22,807		18,741		2,238		206,720
Total revenues	$	212,846	$	158,648	$	23,540	$	772,265

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

Schedule of Property, Plant and Equipment, Net by Country

Our property and equipment, net by country were as follows:

	December 31, 2017		December 31, 2016
Congo	$	256,200	$	277,305
India		155,362		—
Malaysia		103,603		280,689
South Africa		179,468		196,473
Other countries (a)		68,558		80,061
Total property and equipment	$	763,191	$	834,528

(a) Other countries represent countries in which we operate that individually had property equipment, net representing less than 10 percent of total property and equipment.

XML

Supplemental Quarterly Information (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2017

Quarterly Financial Information Disclosure [Abstract]

Summary of Unaudited Interim Results of Operations

The following table reflects a summary of the unaudited interim results of operations for the years ended December 31, 2017 and 2016 (in thousands except per share amounts).

	Successor
	Quarter Ended
	March 31			June 30			September 30			December 31
2017
Revenues	$	42,049		$	53,263		$	57,696		$	59,838
Loss from operations (1)		(16,867	)		(16,976	)		(17,639	)		(12,913	)
Other expense		(18,206	)		(16,235	)		(18,169	)		(18,612	)
Net loss		(36,499	)		(36,592	)		(40,068	)		(36,626	)
Loss per share
Basic and diluted	$	(7.30	)	$	(7.32	)	$	(8.01	)	$	(7.33	)

(1) During the quarter ended December 31, 2017 we recorded a loss contingency in the amount of $5 million in connection with the proposed offer of settlement with the SEC, as described in “Note 8. Commitments and Contingencies”.  

	Predecessor			Successor
	Period from			Period from			Quarter Ended
	January 1, 2016 to February 10, 2016			February 10, 2016 to March 31, 2016			June 30			September 30			December 31
2016
Revenues	$	23,540		$	29,786		$	48,511		$	39,942		$	40,409
Loss from operations		(14,927	)		(18,897	)		(13,530	)		(20,146	)		(16,643	)
Other expense		(454,713	)		(8,964	)		(20,766	)		(18,007	)		(19,516	)
Net loss		(472,011	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Net loss attributable to noncontrolling interests		(969	)		—			—			—			—
Net loss attributable to VDI		(471,042	)		(29,028	)		(35,734	)		(41,526	)		(41,129	)
Loss per share
Basic and diluted	N/A			$	(5.81	)	$	(7.15	)	$	(8.31	)	$	(8.23	)

XML

Organization and Recent Events - Additional Information (Detail)					1 Months Ended	12 Months Ended
	Apr. 05, 2017 USD ($)	Feb. 11, 2016 USD ($) shares	Dec. 03, 2015 USD ($) $ / shares shares	Dec. 02, 2015 USD ($) Subsidiary	Feb. 28, 2017 USD ($)	Dec. 31, 2017 USD ($) $ / shares shares
Organization And Recent Events [Line Items]
Repayments of Parent Note		$ 62,600,000
Number of share embedded in each note holder units | shares						1
Convertible notes payable						$ 172.61
Loss contingency accrual						$ 5,000,000
1%/12% Step-Up Senior Secured Third Lien Convertible Notes
Organization And Recent Events [Line Items]
Share issued during period for repayment of debt | shares			4,344,959
Debt Instrument, interest rate						0.083%
Debt instrument, maturity year						2030
Second Amended and Restated Credit Agreement
Organization And Recent Events [Line Items]
Revolving letter of credit commitment			$ 32,000,000
Repayments of lines of credit			7,000,000
Second Amended and Restated Credit Agreement | Term Loan
Organization And Recent Events [Line Items]
Issuance of senior notes			$ 143,000,000
New 10% Senior Secured Second Lien Notes
Organization And Recent Events [Line Items]
Debt Instrument, interest rate			10.00%
Debt instrument, maturity year			2020
Senior notes, noncurrent			$ 75,000,000
10% Senior Secured Second Lien Notes
Organization And Recent Events [Line Items]
Debt Instrument, interest rate			10.00%
Issuance of senior notes			$ 76,100,000
Backstop agreement premium paid			2,200,000
Backstop agreement premium paid in cash			1,100,000
Backstop agreement premium paid in senior secured second lien notes			1,100,000
Net cash proceeds from issuance of senior notes			73,900,000
Chapter Eleven Restructuring Agreement and Emergence from Voluntary Reorganization
Organization And Recent Events [Line Items]
Number of subsidiaries acquired | Subsidiary				2
Promissory note issue to acquire subsidiaries				$ 61,500,000
Letter Of Credit | Second Amended and Restated Credit Agreement
Organization And Recent Events [Line Items]
Revolving letter of credit commitment			32,000,000
Repayments of lines of credit			$ 150,000,000
Ordinary Shares | 1%/12% Step-Up Senior Secured Third Lien Convertible Notes
Organization And Recent Events [Line Items]
Number of share embedded in each note holder units | shares						1
Convertible notes payable						$ 175.90
Convertible notes, conversion price | $ / shares			$ 95.60			$ 95.60
Ordinary Shares | Promissory Notes
Organization And Recent Events [Line Items]
Share issued during period for repayment of debt | shares		655,094
Drilling Equipment | Purchase and Sale Agreement
Organization And Recent Events [Line Items]
Purchase price of assets	$ 13,000,000
Payments to acquire assets	$ 11,700,000				$ 1,300,000

XML

Basis of Presentation and Significant Accounting Policies - Summary of Net Effect of Consolidating Entities on Consolidated Statement of Operations (Detail) - USD ($) $ in Thousands	1 Months Ended	2 Months Ended	3 Months Ended							11 Months Ended	12 Months Ended
	Feb. 09, 2016	Mar. 31, 2016	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Variable Interest Entity [Line Items]
Revenue		$ 29,786	$ 59,838	$ 57,696	$ 53,263	$ 42,049	$ 40,409	$ 39,942	$ 48,511	$ 158,648	$ 212,846
Operating costs and expenses										227,864	277,241
Income before taxes										(136,469)	(135,617)
Income tax provision										$ 10,948	$ 14,168
Predecessor
Variable Interest Entity [Line Items]
Revenue	$ 23,540											$ 772,265
Operating costs and expenses	38,467											512,291
Income before taxes	(469,640)											62,124
Income tax provision	2,371											39,870
Net income (loss) attributable to noncontrolling interests	(969)											5,036
Variable Interest Entity, Primary Beneficiary | Predecessor
Variable Interest Entity [Line Items]
Revenue	1,219											21,791
Operating costs and expenses	1,240											19,850
Income before taxes	22											2,206
Income tax provision	991											(2,830)
Net income (loss) attributable to noncontrolling interests	$ (969)											$ 5,036

XML

Basis of Presentation and Significant Accounting Policies - Additional Information (Detail)	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016 USD ($)	Dec. 31, 2016 USD ($)	Dec. 31, 2017 USD ($) Contract	Dec. 31, 2015 USD ($)	Dec. 03, 2015
Basis Of Presentation And Significant Accounting Policies [Line Items]
Capitalized interest		$ 0	$ 0
Decrease the net book value of property and equipment			2,000,000,000
Recognition of amortization expense of intangible assets			4,686,000
Allowance for doubtful accounts on trade receivables		0	0
Foreign currency transaction gain (loss)	$ (5,000)	$ 1,100,000	$ 2,800,000	$ 5,100,000
Number of contracts under demobilzation revenue | Contract			1
Convertible Notes Payable
Basis Of Presentation And Significant Accounting Policies [Line Items]
Fair value of notes outstanding			$ 838,600,000
2016 Term Loan Facility
Basis Of Presentation And Significant Accounting Policies [Line Items]
Fair value of notes outstanding			$ 142,900,000
Debt Instrument, interest rate			8.069%
10% Second Lien Notes
Basis Of Presentation And Significant Accounting Policies [Line Items]
Fair value of notes outstanding			$ 74,600,000
Debt Instrument, interest rate		10.00%	10.00%		10.00%
Vantage 260
Basis Of Presentation And Significant Accounting Policies [Line Items]
Identifiable intangible assets			$ 12,600,000
Recognition of amortization expense of intangible assets	$ 0	$ 0	$ 4,700,000
Vantage 260 | Intangible Assets, Amortization Period
Basis Of Presentation And Significant Accounting Policies [Line Items]
Intangible asset being amortized over a straight-line basis of drilling contract			2 years
Minimum | Drilling Equipment
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			5 years
Minimum | Office and Technology Equipment
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			3 years
Maximum | Drilling Equipment
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			35 years
Maximum | Office and Technology Equipment
Basis Of Presentation And Significant Accounting Policies [Line Items]
Property, plant and equipment, useful lives			7 years

XML

Basis of Presentation and Significant Accounting Policies - Summary of Expected Future Intangible Asset Amortization (Detail) - Vantage 260 $ in Thousands	Dec. 31, 2017 USD ($)
Fiscal year:
2018	$ 6,311
2019	1,643
Total	$ 7,954

XML

Acquisitions - Additional Information (Detail) - USD ($) $ in Thousands		1 Months Ended	12 Months Ended
	Apr. 05, 2017	Feb. 28, 2017	Dec. 31, 2017
Business Acquisition [Line Items]
Bargain purchase gain			$ 1,910
Drilling Equipment | Purchase and Sale Agreement
Business Acquisition [Line Items]
Purchase price of assets	$ 13,000
Payments to acquire assets	$ 11,700	$ 1,300

XML

Acquisitions - Schedule of Estimated Fair Values of Assets Acquired and Liabilities Assumed (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Business Combinations [Abstract]
Total cash consideration	$ 13,000
Purchase price allocation:
Drilling contract value	12,640
Rig equipment to be sold (net of disposal costs)	2,050
Drillpipe assets	700
Severance liabilities assumed	(480)
Net assets acquired	14,910
Bargain purchase gain	$ 1,910

XML

Reorganization Items - Schedule of Reorganization Items (Detail) - USD ($) $ in Thousands	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2015
Reorganization Items [Line Items]
Professional fees		$ 1,380
Reorganization Items		$ 1,380
Predecessor
Reorganization Items [Line Items]
Professional fees	$ 22,712		$ 39,354
Net gain on settlement of LSTC	(1,630,025)
Fresh-start adjustments	2,060,232
Reorganization Items	$ 452,919		$ 39,354

XML

Reorganization Items - Additional Information (Detail) - USD ($)	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017
Reorganization Items [Line Items]
Cash payment for reorganization items		$ 16,600,000	$ 208,000
Predecessor
Reorganization Items [Line Items]
Cash payment for reorganization items	$ 7,300,000

XML

Long-Term Debt (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Debt Instrument [Line Items]
Long-term debt	$ 924,369	$ 868,802
Current maturities of long-term debt	4,430	1,430
Long-term debt, net	919,939	867,372
2016 Term Loan Facility
Debt Instrument [Line Items]
Long-term debt	140,140	141,570
10% Second Lien Notes
Debt Instrument [Line Items]
Long-term debt	74,721	74,252
Convertible Notes Payable
Debt Instrument [Line Items]
Long-term debt	$ 709,508	$ 652,980

XML

Long-Term Debt (Parenthetical) (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 03, 2015
Debt Instrument [Line Items]
Debt financing cost	$ 1,404
Debt discount	$ 54,770
10% Second Lien Notes
Debt Instrument [Line Items]
Debt Instrument, interest rate	10.00%	10.00%	10.00%
Debt financing cost	$ 1,404	$ 1,873
Convertible Notes Payable
Debt Instrument [Line Items]
Debt discount	$ 54,770	$ 103,695

XML

Schedule of Aggregate Principal Maturities of Long-term Debt (Detail) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Debt Disclosure [Abstract]
2018		$ 4,430
2019		135,710
2020		76,125
Thereafter		2,775,628
Total debt	[1]	2,991,893
Current maturities of long-term debt		(4,430)	$ (1,430)
Future amortization of note discounts		(54,770)
Future amortization of financing costs		(1,404)
Future PIK interest		(2,011,350)
Long-term debt		$ 919,939	$ 867,372

[1] Excludes original issuance discount of $54.8 million on the Convertible Notes and financing costs of $1.4 million on the 10% Second Lien Notes.

XML

Schedule of Aggregate Principal Maturities of Long-term Debt (Parenthetical) (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016	Dec. 03, 2015
Debt Instrument [Line Items]
Debt financing cost	$ 1,404
Debt discount	$ 54,770
10% Second Lien Notes
Debt Instrument [Line Items]
Debt Instrument, interest rate	10.00%	10.00%	10.00%
Debt financing cost	$ 1,404	$ 1,873
Convertible Notes Payable
Debt Instrument [Line Items]
Debt discount	$ 54,770	$ 103,695

XML

Debt - Second Amended and Restated Credit Agreement - Additional Information (Detail) - USD ($)		3 Months Ended	12 Months Ended
	Dec. 03, 2015	Dec. 31, 2015	Dec. 31, 2017
Debt Instrument [Line Items]
Letters of credit			$ 17,100,000
2016 Term Loan Facility
Debt Instrument [Line Items]
Issuance of debt	$ 143,000,000
Credit Facility settled in cash	7,000,000
Debt Instrument, interest rate			8.069%
Quarterly scheduled debt maturities			$ 357,500
Unrestricted cash and cash equivalents			$ 75,000,000
2016 Term Loan Facility | LIBOR
Debt Instrument [Line Items]
Applicable margin on interest			6.50%
Debt Instrument Floor Rate			0.50%
2016 Term Loan Facility | Letter Of Credit
Debt Instrument [Line Items]
Revolving letter of credit commitment	$ 32,000,000
Fees payable on outstanding face amount of letters of credit at rate			5.50%
2016 Term Loan Facility | Pre Petition Credit Facility
Debt Instrument [Line Items]
Extinguishment of debt amount		$ 32,000,000

XML

Debt - 10% Senior Secured Second Lien Notes - Additional Information (Detail) - USD ($) $ in Millions		12 Months Ended
	Dec. 03, 2015	Dec. 31, 2017	Dec. 31, 2016
New 10% Second Lien Notes
Debt Instrument [Line Items]
Debt Instrument, interest rate	10.00%
Senior notes, noncurrent	$ 75.0
10% Second Lien Notes
Debt Instrument [Line Items]
Debt Instrument, interest rate	10.00%	10.00%	10.00%
Backstop agreement premium paid	$ 2.2
Backstop agreement premium paid in cash	1.1
Backstop agreement premium paid in senior secured second lien notes	1.1
Issuance of debt	76.1
Net cash proceeds from issuance of senior notes	73.9
Debt instrument, maturity date		Dec. 31, 2020
Debt instrument, payment terms		Interest on outstanding 10% Second Lien Notes is payable semi-annually in arrears, which commenced on June 30, 2016. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months.
2016 Term Loan Facility
Debt Instrument [Line Items]
Debt Instrument, interest rate		8.069%
Issuance of debt	$ 143.0
2016 Term Loan Facility | Collateral
Debt Instrument [Line Items]
Debt Instrument, interest rate		10.00%

XML

Debt - 1%/12% Step-Up Senior Secured Third Lien Convertible Notes - Additional Information (Detail) - USD ($)		12 Months Ended
	Dec. 03, 2015	Dec. 31, 2017
Debt Instrument [Line Items]
Number of share embedded in each note holder units		1
Convertible notes payable		$ 172.61
1%/12% Step-Up Senior Secured Third Lien Convertible Notes
Debt Instrument [Line Items]
Debt Instrument, interest rate		0.083%
Shares issued for convertible notes	4,344,959
Pre-petition secured debt claims	$ 2,500,000,000
Convertible notes	$ 750,000,000
Debt instrument, maturity date		Dec. 31, 2030
Debt conversion of shares to be issued		8,000,000
Debt instrument, payment terms		Interest is computed on the basis of a 360-day year comprised of twelve 30-day months at a rate of 1% per annum for the first four years and then increasing to 12% per annum until maturity.
Interest rate per annum for the first four years		1.00%
Interest rate per annum until maturity		12.00%
Minimum affirmative vote percentage	75.00%
Percentage of repurchase of convertible notes		101.00%
1%/12% Step-Up Senior Secured Third Lien Convertible Notes | Convertible Notes Payable
Debt Instrument [Line Items]
Debt instrument estimated fair value		$ 603,100,000
1%/12% Step-Up Senior Secured Third Lien Convertible Notes | Ordinary Shares
Debt Instrument [Line Items]
Convertible notes	$ 95.60	$ 95.60
Number of share embedded in each note holder units		1
Convertible notes payable		$ 175.90

XML

Shareholder's Equity - Additional Information (Detail) - USD ($)	3 Months Ended	12 Months Ended
	Mar. 31, 2017	Dec. 31, 2017	Dec. 31, 2016
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Ordinary shares, shares authorized		50,000,000	50,000,000
Ordinary shares, par value		$ 0.001	$ 0.001
Ordinary shares, shares issued		5,000,053	5,000,053
Ordinary shares, shares outstanding		5,000,053	5,000,053
Time-Based Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted		30,668
Share based compensation expense allocated from VDC		$ 4,000,000	$ 402,000
Unrecognized share based compensation expense		$ 10,200,000
Weighted average vesting period (years)		2 years 8 months 12 days
Total award date value of time vested restricted shares		$ 900,000
Performance-Based Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted		67,686
Terms of award		The TBGs vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a qualified liquidity event as defined in the 2016 Amended MIP (a “QLE”). Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the Effective Date. The PBGs contain vesting eligibility provisions tied to the earlier of a QLE or seven years from the Effective Date.
Share based compensation expense allocated from VDC		$ 0
Performance-Based Restricted Stock Units | Maximum
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Award vesting period		7 years
Employee and Director | Time-Based Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted	30,668
Employee and Director | Performance-Based Restricted Stock Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Number of shares granted	67,686

XML

Shareholder's Equity - Summary of Restricted Unit Awards (Detail)	12 Months Ended
	Dec. 31, 2017 $ / shares shares
Time Vested Restricted Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units awarded	30,668
Weighted-average unit price at award date | $ / shares	$ 160.00
Weighted average vesting period (years)	4 years
Units vested	11,237
Performance Vested Restricted Units
Share Based Compensation Arrangement By Share Based Payment Award [Line Items]
Units awarded	67,686
Weighted-average unit price at award date | $ / shares	$ 160.00
Weighted average vesting period (years)	7 years

XML

Shareholder's Equity - Summary of Status of Non-Vested Restricted Units and Changes (Detail)	12 Months Ended
	Dec. 31, 2017 $ / shares shares
Time Vested Restricted Units
Non-vested restricted units
Nonvested restricted units, Beginning balance | shares	44,946
Units awarded | shares	30,668
Vested | shares	(11,237)
Nonvested restricted units, Ending balance | shares	64,377
Weighted Average Award Date Unit Price
Weighted Average Award Date Unit Price, Beginning balance | $ / shares	$ 80.00
Weighted Average Award Date Unit Price, Awarded | $ / shares	160.00
Weighted Average Award Date Unit Price, Vested | $ / shares	80.00
Weighted Average Award Date Unit Price, Ending balance | $ / shares	$ 118.11
Performance Vested Restricted Units
Non-vested restricted units
Nonvested restricted units, Beginning balance | shares	97,749
Units awarded | shares	67,686
Nonvested restricted units, Ending balance | shares	165,435
Weighted Average Award Date Unit Price
Weighted Average Award Date Unit Price, Beginning balance | $ / shares	$ 80.00
Weighted Average Award Date Unit Price, Awarded | $ / shares	160.00
Weighted Average Award Date Unit Price, Ending balance | $ / shares	$ 112.73

XML

Income Tax Expense (Benefit) Related to Foreign Income Taxes (Detail) - USD ($) $ in Thousands	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Components Of Income Tax Expense Benefit Continuing Operations [Line Items]
Current		$ 14,316	$ 16,132
Deferred		(3,368)	(1,964)
Total		$ 10,948	$ 14,168
Predecessor
Components Of Income Tax Expense Benefit Continuing Operations [Line Items]
Current	$ 2,371			$ 37,748
Deferred				2,122
Total	$ 2,371			$ 39,870

XML

Reconciliation of Statutory and Effective Income Tax Rates (Detail)	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Effective Income Tax Rate Continuing Operations Tax Rate Reconciliation [Line Items]
Statutory rate		0.00%	0.00%
Taxes on foreign earnings		(7.20%)	(9.20%)
Settlement of prior years’ tax audits		1.10%	(0.50%)
Tax rate change impact		0.00%	(1.40%)
Uncertain tax positions		(0.70%)	0.80%
Other		(1.20%)	(0.20%)
Total		(8.00%)	(10.50%)
Predecessor
Effective Income Tax Rate Continuing Operations Tax Rate Reconciliation [Line Items]
Statutory rate	0.00%			0.00%
Taxes on foreign earnings	(0.30%)			69.40%
Settlement of prior years’ tax audits	0.00%			(7.70%)
Tax rate change impact	0.00%			0.00%
Uncertain tax positions	(0.20%)			0.30%
Other	0.00%			2.20%
Total	(0.50%)			64.20%

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	11 Months Ended	12 Months Ended
	Dec. 31, 2016	Dec. 31, 2018	Dec. 31, 2017
Income Tax Contingency [Line Items]
Corporate income tax rate	0.00%		0.00%
Foreign Tax loss carry forwards			$ 22.7
Foreign Tax loss carry forwards year of expiration			2018
Income tax interest and penalties expense			$ 0.3
Income Tax expense accrued interest and penalties			$ 1.5
Minimum
Income Tax Contingency [Line Items]
Open tax year			2010
Scenario, Forecast
Income Tax Contingency [Line Items]
Corporate income tax rate		21.00%

XML

Components of Net Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Deferred tax assets:
Share-based compensation	$ 366	$ 99
Accrued bonuses/compensation	547	1,839
Start-up costs	54	106
Loss carry-forwards	6,638	15,214
Deferred revenue	1,548
Total deferred tax assets	9,153	17,258
Valuation allowance	(5,103)	(13,056)
Net deferred tax assets	4,050	4,202
Deferred tax liabilities:
Property and equipment	(931)	(2,430)
Deferred revenue		(649)
Mobilization		(233)
Other deferred tax liability	(253)	(5)
Total deferred tax liabilities	(1,184)	(3,317)
Net deferred tax asset	$ 2,866	$ 885

XML

Reconciliation of Unrecognized Tax Benefits (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2017 USD ($)
Reconciliation Of Unrecognized Tax Benefits Excluding Amounts Pertaining To Examined Tax Returns Roll Forward
Gross Beginning Balance	$ 3,355
Additions for tax positions of prior years	1,115
Expiration of statues	(1,019)
Tax settlements	(411)
Gross Ending Balance	3,040
Net Reserve Ending Balance	$ 3,040

XML

Commitments and Contingencies - Additional Information (Detail) - USD ($)	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Loss Contingencies [Line Items]
Loss contingency accrual			$ 5,000,000
Debt default description of event of default			if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes
Future minimum annual rentals under operating leases in 2018			$ 2,400,000
Future minimum annual rentals under operating leases in 2019			1,700,000
Future minimum annual rentals under operating leases in 2020			1,500,000
Future minimum annual rentals under operating leases in 2021			1,300,000
Future minimum annual rentals under operating leases in 2022			1,400,000
Future minimum annual rentals under operating leases in 2023 and thereafter			1,000,000
Lease rental expenses	$ 678,000	$ 4,100,000	4,300,000	$ 15,200,000
Purchase commitments			9,400,000
Petrobras America, Inc.
Loss Contingencies [Line Items]
Loss contingency, disgorgement damages			$ 102,000,000

XML

Prepaid Expenses and Other Current Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Prepaid Expense And Other Assets Current [Abstract]
Prepaid insurance	$ 294	$ 782
Sales tax receivable	5,652	7,129
Income tax receivable	1,374	1,025
Other receivables	158	74
Assets held for sale	2,050
Other	3,679	3,413
Prepaid expenses and other current assets	$ 13,207	$ 12,423

XML

Property and Equipment, Net (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Property Plant And Equipment [Line Items]
Property and equipment	$ 904,584	$ 902,241
Accumulated depreciation	(141,393)	(67,713)
Property and equipment, net	763,191	834,528
Drilling Equipment
Property Plant And Equipment [Line Items]
Property and equipment	883,598	880,267
Assets under Construction
Property Plant And Equipment [Line Items]
Property and equipment	1,043	2,138
Office and Technology Equipment
Property Plant And Equipment [Line Items]
Property and equipment	18,778	18,764
Leasehold Improvements
Property Plant And Equipment [Line Items]
Property and equipment	$ 1,165	$ 1,072

XML

Other Assets (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Other Assets Noncurrent Disclosure [Abstract]
Contract value, net	$ 7,954
Performance bond collateral		$ 3,197
Deferred certification costs	3,497	4,885
Deferred mobilization costs	6,216	4,194
Deferred income taxes	3,162	2,237
Deposits	1,106	1,181
Total other assets	$ 21,935	$ 15,694

XML

Accrued Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Disclosure Accrued Liabilities [Abstract]
Interest	$ 3,952	$ 104
Compensation	10,285	11,289
Income taxes payable	3,740	5,008
Loss contingency accrual	5,000
Other	2,140	2,047
Accrued liabilities	$ 25,117	$ 18,448

XML

Long-term Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Liabilities Noncurrent [Abstract]
Deferred mobilization revenue	$ 6,757
Deferred income taxes	296	$ 1,352
2016 MIP	4,399	402
Other non-current liabilities	5,743	9,581
Long-term liabilities	$ 17,195	$ 11,335

XML

Consolidated Statement of Operations Transactions with Former Parent Company (Detail) - USD ($) $ in Thousands	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016	Dec. 31, 2016	Dec. 31, 2015
Interest income		$ (3)
Operating income with related parties		$ (3)
Predecessor
Reimbursable revenues			$ 6,212
Interest income	$ 3		27
Interest expense	(662)		(489)
Operating income with related parties	$ (659)		$ 5,750

XML

Consolidated Balance Sheet Balances Payable to Former Parent Company (Detail) - USD ($) $ in Thousands	Dec. 31, 2017	Dec. 31, 2016
Disclosure Balances Payable To Related Parties Included In Company Consolidated Balance Sheet [Abstract]
Accounts payable to related parties, net	$ 17,278	$ 17,278
Total payable to related parties	$ 17,278	$ 17,278

XML

Supplemental Financial Information - Additional Information (Detail)	Dec. 02, 2015 Subsidiary
Chapter Eleven Restructuring Agreement and Emergence from Voluntary Reorganization
Supplemental Financial Information [Line Items]
Number of subsidiaries acquired	2

XML

Business Segment Information - Additional Information (Detail)	1 Months Ended	11 Months Ended	12 Months Ended
	Feb. 09, 2016 Customer	Dec. 31, 2016 Customer	Dec. 31, 2017 Segment Customer	Dec. 31, 2015 Customer	Sep. 30, 2013 Drillship
Entity Wide Revenue Major Customer [Line Items]
Number of reportable segments | Segment			1
Number of ultra deepwater drillships for supervise and manage construction | Drillship					2
Customer Concentration Risk | Sales
Entity Wide Revenue Major Customer [Line Items]
Number of customers accounted for revenues | Customer	3	3	4	3
Customer Concentration Risk | Sales | Customer One
Entity Wide Revenue Major Customer [Line Items]
Percentage of revenue	58.00%	58.00%	51.00%	32.00%
Customer Concentration Risk | Sales | Customer Two
Entity Wide Revenue Major Customer [Line Items]
Percentage of revenue	18.00%	19.00%	15.00%	25.00%
Customer Concentration Risk | Sales | Customer Three
Entity Wide Revenue Major Customer [Line Items]
Percentage of revenue	14.00%	11.00%	13.00%	20.00%
Customer Concentration Risk | Sales | Customer Four
Entity Wide Revenue Major Customer [Line Items]
Percentage of revenue			11.00%
Customer Concentration Risk | Sales | Ultra Deep Water Drillship
Entity Wide Revenue Major Customer [Line Items]
Percentage of revenue	3.20%	2.60%	0.70%	1.00%

XML

Business Segment Information - Summary of Revenues by Country (Detail) - USD ($) $ in Thousands		1 Months Ended	2 Months Ended	3 Months Ended							11 Months Ended	12 Months Ended
		Feb. 09, 2016	Mar. 31, 2016	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Entity Wide Revenue Major Customer [Line Items]
Revenues			$ 29,786	$ 59,838	$ 57,696	$ 53,263	$ 42,049	$ 40,409	$ 39,942	$ 48,511	$ 158,648	$ 212,846
Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues		$ 23,540											$ 772,265
Congo
Entity Wide Revenue Major Customer [Line Items]
Revenues											91,435	139,579
Congo | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues		13,769											247,415
India | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues													189,973
Indonesia
Entity Wide Revenue Major Customer [Line Items]
Revenues											18,075	23,477
Indonesia | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues		4,214
U.S. | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues													128,157
Malaysia
Entity Wide Revenue Major Customer [Line Items]
Revenues											30,397	26,983
Malaysia | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues		3,319
Other countries
Entity Wide Revenue Major Customer [Line Items]
Revenues	[1]										$ 18,741	$ 22,807
Other countries | Predecessor
Entity Wide Revenue Major Customer [Line Items]
Revenues	[1]	$ 2,238											$ 206,720

[1] Other countries represent countries in which we operate that individually had operating revenues representing less than 10% of total revenues earned.

XML

Business Segment and Significant Customer Information - Schedule of Property,Plant and Equipment,Net by Country (Detail) - USD ($) $ in Thousands		Dec. 31, 2017	Dec. 31, 2016
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		$ 763,191	$ 834,528
Congo
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		256,200	277,305
Malaysia
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		103,603	280,689
India
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		155,362
South Africa
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment		179,468	196,473
Other countries
Revenues From External Customers And Long Lived Assets [Line Items]
Total property and equipment	[1]	$ 68,558	$ 80,061

[1] Other countries represent countries in which we operate that individually had property equipment, net representing less than 10 percent of total property and equipment.

XML

Supplemental Quarterly Information (Unaudited) - Summary of Unaudited Interim Results of Operations (Detail) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended	2 Months Ended	3 Months Ended											11 Months Ended	12 Months Ended
	Feb. 09, 2016	Mar. 31, 2016	Dec. 31, 2017		Sep. 30, 2017		Jun. 30, 2017		Mar. 31, 2017		Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Dec. 31, 2016	Dec. 31, 2017	Dec. 31, 2015
Quarterly Financial Information [Line Items]
Revenues		$ 29,786	$ 59,838		$ 57,696		$ 53,263		$ 42,049		$ 40,409	$ 39,942	$ 48,511	$ 158,648	$ 212,846
Income (Loss) from operations		(18,897)	(12,913)	[1]	(17,639)	[1]	(16,976)	[1]	(16,867)	[1]	(16,643)	(20,146)	(13,530)	(69,216)	(64,395)
Other expense		(8,964)	(18,612)		(18,169)		(16,235)		(18,206)		(19,516)	(18,007)	(20,766)	(67,253)	(71,222)
Net income (loss)		(29,028)	$ (36,626)		$ (40,068)		$ (36,592)		$ (36,499)		(41,129)	(41,526)	(35,734)	(147,417)	(149,785)
Net income (loss) attributable to VDI		$ (29,028)									$ (41,129)	$ (41,526)	$ (35,734)	$ (147,417)	$ (149,785)
Earnings (loss) per share
Basic and diluted		$ (5.81)	$ (7.33)		$ (8.01)		$ (7.32)		$ (7.30)		$ (8.23)	$ (8.31)	$ (7.15)	$ (29.48)	$ (29.96)
Predecessor
Quarterly Financial Information [Line Items]
Revenues	$ 23,540															$ 772,265
Income (Loss) from operations	(14,927)															259,974
Other expense	(454,713)															(197,850)
Net income (loss)	(472,011)															22,254
Net income (loss) attributable to noncontrolling interests	(969)															5,036
Net income (loss) attributable to VDI	$ (471,042)															$ 17,218

[1] During the quarter ended December 31, 2017 we recorded a loss contingency in the amount of $5 million in connection with the proposed offer of settlement with the SEC, as described in “Note 8. Commitments and Contingencies”.

XML

Supplemental Quarterly Information (Unaudited) - Summary of Unaudited Interim Results of Operations (Parenthetical) (Detail) $ in Thousands	Dec. 31, 2017 USD ($)
Quarterly Financial Information Disclosure [Abstract]
Loss contingency accrual	$ 5,000