Revenue and Customers

12 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

Revenue and Customers

Note 12— Revenue and Customers

Disaggregation of Revenue

The following table provides information about contract drilling revenue by rig types:

	Successor				Predecessor
			Period From		Period From
	Year		February 6, 2021		January 1, 2021		Year
	Ended		through		through		Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
Floaters	$	997,819	$	482,283	$	50,057	$	491,407
Jackups	335,022		225,848		23,994		417,829
Total	$	1,332,841	$	708,131	$	74,051	$	909,236

Contract Balances

Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on invoiced amounts are typically 30 days. Customer contract assets and liabilities generally consist of deferred revenue and contract costs resulting from past transactions related to the provision of services under contracts with customers. Current contract asset and liability balances are included in “Prepaid expenses and other current assets” and “Other current liabilities,” respectively, and noncurrent contract assets and liabilities are included in “Other assets” and “Other liabilities,” respectively, on our Consolidated Balance Sheets. Off-market customer contract assets and liabilities have been recognized in connection with our emergence from Chapter 11 and the Business Combination with Maersk Drilling and are included in “Intangible assets” and “Noncurrent contract liabilities,” respectively.

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

	Successor
	December 31, 2022		December 31, 2021
Current customer contract assets	$	11,169	$	5,744
Noncurrent customer contract assets	368		—
Total customer contract assets	11,537		5,744
Current deferred revenue	(40,214)		(18,403)
Noncurrent deferred revenue	(19,583)		(9,352)
Total deferred revenue	$	(59,797)	$	(27,755)

Significant changes in the remaining performance obligation contract assets and the contract liabilities balances for the year ended December 31, 2022, the period from February 6, 2021 to December 31, 2021, the period from January 1 through February 5, 2021 and the year ended December 31, 2020. are as follows:

	Contract Assets		Contract Liabilities
Net balance at December 31, 2020 (Predecessor)	$	13,861	$	(59,886)
Amortization of deferred costs	(1,607)		—
Additions to deferred costs	432		—
Amortization of deferred revenue	—		4,142
Additions to deferred revenue	—		(25,479)
Fresh start accounting revaluation	(12,686)		72,936
Total	(13,861)		51,599
Net balance at 2/5/21 (Predecessor)	$	—	$	(8,287)
Net balance at 2/6/21 (Successor)	$	—	$	(8,287)
Amortization of deferred costs	(3,908)		—
Additions to deferred costs	9,652		—
Amortization of deferred revenue	—		13,729
Additions to deferred revenue	—		(33,197)
Total	5,744		(19,468)
Net balance at 12/31/2021 (Successor)	$	5,744	$	(27,755)
Amortization of deferred costs	(19,875)		—
Additions to deferred costs	34,187		—
Amortization of deferred revenue	—		55,521
Additions to deferred revenue	—		(108,971)
Reclassification to held for sale and subsequent derecognition	(8,519)		21,408
Total	5,793		(32,042)
Net balance at 12/31/2022 (Successor)	$	11,537	$	(59,797)

Contract Costs

Certain direct and incremental costs incurred for upfront preparation, initial rig mobilization and modifications are costs of fulfilling a contract and are recoverable. These recoverable costs are deferred and amortized ratably to contract drilling expense as services are rendered over the initial term of the related drilling contract. Certain of our contracts include capital rig enhancements used to satisfy our performance obligations. These items are capitalized and depreciated in accordance with our existing property and equipment accounting policy.

Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred for rig modifications or upgrades required for a contract, which are considered to be capital improvements, are capitalized as drilling and other property and equipment and depreciated over the estimated useful life of the improvement.

Future Amortization of Deferred Revenue

The following table reflects revenue expected to be recognized in the future related to deferred revenue, by rig type, at the end of the reporting period:

	Year Ending December 31,
	2023		2024		2025		2026		2027 and beyond		Total
Floaters	$	36,828	$	8,280	$	6,862	$	—	$	—	$	51,970
Jackups	$	3,047	$	2,098	$	2,092	$	590	$	—	$	7,827
Total	$	39,875	$	10,378	$	8,954	$	590	$	—	$	59,797

The revenue included above consists of expected mobilization, demobilization, and upgrade revenue for unsatisfied performance obligations. The amounts are derived from the specific terms within drilling contracts that contain such provisions, and the expected timing for recognition of such revenue is based on the estimated start date and duration of each respective contract based on information known at December 31, 2022. The actual timing of recognition of such amounts may vary due to factors outside of our control. We have taken the optional exemption, permitted by accounting standards, to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly, or more frequent, periods, the variability of which will be resolved at the time of the future services.

Off-market Customer Contract Assets and Liabilities

Upon emergence from the Chapter 11 Cases and in connection with the Business Combination with Maersk Drilling, the Company recognized fair value adjustments of $113.4 million and $23.0 million, respectively, related to certain favorable customer contracts. These intangible assets will be amortized as a reduction of contract drilling services revenue from the Emergence Effective Date and Closing Date, respectively, through the remainder of the contracts.

In connection with the Business Combination with Maersk Drilling, the Company also recognized a fair value adjustment of $237.7 million related to certain unfavorable customer contracts acquired. These liabilities will be amortized as an increase to contract drilling services revenue from the Closing Date through the remainder of the contracts.

Favorable and Unfavorable contracts
	Unfavorable contacts		Favorable contracts
Balance at February 6, 2021	$	—	$	—
Additions	—		113,389
Amortization	—		(51,540)
Balance at December 31, 2021	$	—	$	61,849
Balance at January 1, 2022	$	—	$	61,849
Additions	(237,703)		22,991
Amortization	55,820		(50,468)
Balance at December 31, 2022	$	(181,883)	$	34,372

Estimated future amortization over the expected remaining contract periods:

	Year ending December 31,
	2023		2024		2025		Total
Unfavorable contracts	$	133,236	$	40,439	$	8,208	$	181,883
Favorable contracts	$	(23,746)	$	(10,626)	$	—	$	(34,372)
Total	$	109,490	$	29,813	$	8,208	$	147,511