Income Taxes

12 Months Ended

Dec. 31, 2022

Income Tax Disclosure [Abstract]

Income Taxes

Note 14— Income Taxes

Noble is a tax resident in the UK and, as such, is subject to UK corporation tax on its taxable profits and gains. Noble Cayman is incorporated in the Cayman Islands and therefore not subject to tax in any jurisdiction. With respect to Noble, a UK tax exemption is available in respect of qualifying dividends income and capital gains related to the sale of qualifying participations. We operate in various countries throughout the world, including the United States. The income or loss of the non-UK subsidiaries of Noble is not subject to UK corporation tax.

Consequently, we have taken account of the above exemption and provided for income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we or our subsidiaries have a taxable presence for income tax purposes.

The components of the net deferred taxes are as follows:

	Successor
	2022		2021
Deferred tax assets
United States
Net operating loss carry forwards	$	4,256	$	3,485
Excess of net tax basis over remaining book basis	18,382		—
Deferred pension plan amounts	1,945		3,427
Accrued expenses not currently deductible	5,017		5,780
Other	135		121
Non-United States
Net operating loss carry forwards	1,076,364		1,013,281
Transition attribute	871,773		888,962
Tax credits carryover	23,820		23,849
Excess of net tax basis over remaining book basis	61,530		—
Disallowed interest deduction carryforwards	30,225		13,625
Unfavorable contract value	27,901		—
Accrued expenses not currently deductible	17		170
Deferred tax assets	2,121,365		1,952,700
Less: valuation allowance	(1,985,843)		(1,899,092)
Net deferred tax assets	$	135,522	$	53,608
Deferred tax liabilities
United States
Favorable contract value	(4,954)		(10,067)
Deferred revenue	(6,777)		(3,438)
Other	(718)		(1,116)
Non-United States
Excess of net book basis over remaining tax basis	(27,166)		(690)
Favorable contract value	(1,288)		(4,173)
Other	(5,191)		(1,912)
Deferred tax liabilities	(46,094)		(21,396)
Net deferred tax assets (liabilities)	$	89,428	$	32,212

Income (loss) before income taxes consists of the following:

	Successor				Predecessor
			Period From		Period From
			February 6, 2021		January 1, 2021
	Year Ended		through		through		Year Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
United States	$	(43,381)	$	(47,686)	$	1,878,637	$	(2,150,591)
Non-United States	234,882		150,033		(1,624,986)		(2,088,271)
Total	$	191,501	$	102,347	$	253,651	$	(4,238,862)

The income tax provision (benefit) consists of the following: 

	Successor				Predecessor
			Period From		Period From
			February 6, 2021		January 1, 2021
	Year Ended		through		through		Year Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
Current- United States	$	1,058	$	(33,323)	$	—	$	(257,552)
Current- Non-United States	47,123		67,952		922		23,474
Deferred- United States	(2,886)		(7,460)		(4,689)		(57,514)
Deferred- Non-United States	(22,742)		(26,804)		7,190		31,189
Total	$	22,553	$	365	$	3,423	$	(260,403)

The following is a reconciliation of our reserve for uncertain tax positions, excluding interest and penalties.

	Successor				Predecessor
			Period From		Period From
			February 6, 2021		January 1, 2021
	Year Ended		through		through		Year Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
Gross balance at beginning of period	$	63,443	$	37,156	$	37,721	$	130,837
Additions based on tax positions related to current year	1,296		26,463		1,347		20,266
Additions for tax positions of prior years	69,163		21,465		—		206
Reductions for tax positions of prior years	(687)		(12,331)		(5)		(109,330)
Expiration of statutes	(236)		(9,310)		(1,907)		(4,258)
Tax settlements	—		—		—		—
Gross balance at end of period	132,979		63,443		37,156		37,721
Related tax benefits	(384)		(384)		(384)		(384)
Net reserve at end of period	$	132,595	$	63,059	$	36,772	$	37,337

The liabilities related to our reserve for uncertain tax positions are comprised of the following:

	Successor				Predecessor
			Period From		Period From
			February 6, 2021		January 1, 2021
	Year Ended		through		through		Year Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
Reserve for uncertain tax positions, excluding interest and penalties	$	132,595	$	63,059	$	36,772	$	37,337
Interest and penalties included in “Other liabilities”	43,313		11,930		5,273		5,164
Reserve for uncertain tax positions, including interest and penalties	$	175,908	$	74,989	$	42,045	$	42,501

At December 31, 2022, the reserves for uncertain tax positions totaled $175.9 million. If a portion or all of the December 31, 2022 reserves listed above are not realized, the provision for income taxes could be reduced by up to $154.5 million. At December 31, 2021, the reserves for uncertain tax positions totaled $75.0 million.

It is reasonably possible that our existing liabilities related to our reserve for uncertain tax positions may fluctuate in the next 12 months primarily due to the completion of open audits or the expiration of statutes of limitation.

We include, as a component of our “Income tax benefit (provision),” potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties resulted in an income tax expense of $2.7 million in 2022, $6.7 million and $0.1 million for the period from February 6, 2021 to December 31, 2021 and for the period from January 1 through February 5, 2021, respectively, and $24.1 million in 2020.

We recorded an income tax expense of $22.6 million, $0.4 million and $3.4 million for the year ended December 31, 2022, the period from February 6, 2021 to December 31, 2021 and the period from January 1 through February 5, 2021, respectively.

During the year ended December 31, 2022, our tax provision included tax benefits of $42.1 million related to a release of valuation allowance in Guyana and Luxembourg, $1.3 million related primarily to other deferred tax adjustments, and $6.6 million related to a reduction in legacy Maersk tax contingencies primarily due to favorable foreign exchange movements. Such tax benefits were offset by tax expenses of $2.3 million related to the sale of the Remedy Rigs, $10.8 million related to contract fair value amortization, and various recurring items comprised of Guyana excess withholding tax on gross revenue of $34.7 million and annual current and deferred tax expense accrual of $24.9 million primarily in Luxembourg, Switzerland, U.S, Norway, and Ghana.

During the period from February 6, 2021 to December 31, 2021, our tax provision included tax benefits of $24.3 million related to US and non-US reserve releases, $12.6 million related to a US tax refund, $22.8 million related to deferred tax assets previously not recognized, $1.9 million related to recognition of a non-US refund claim and $1.2 million related primarily to deferred tax adjustments. Such tax benefits were offset by tax expenses of $21.2 million related to various recurring items primarily comprised of Guyana withholding tax on gross revenue and $42.0 million related to non-US tax reserves.

During the period from January 1 through February 5, 2021, our income tax provision included a tax benefit of $1.7 million related to non-US reserve release and tax expense of $2.5 million related to fresh start and reorganization adjustment, and other recurring tax expenses of approximately $2.6 million.

Our gross deferred tax asset balance at year-end reflects the application of our income tax accounting policies and is based on management’s estimates, judgments and assumptions regarding realizability. If it is more likely than not that a portion of the deferred tax assets will not be realized in a future period, the deferred tax assets will be reduced by a valuation allowance based on management’s estimates.

In deriving the $42.1 million release in valuation allowance, where applicable we relied on sources of income attributable to the reversal of taxable temporary differences in the same periods as the relevant tax attributes and projected taxable income for the period covered by our relevant existing drilling contracts based on the assumption that the relevant rigs will be owned by the current rig owners during the relevant existing drilling contract periods. Given the mobile nature of our assets, we are not able to reasonably forecast the jurisdiction of our taxable income from future drilling contracts. We also have limited objective positive evidence in historical periods. Accordingly, in determining the amount of deferred tax benefits to recognize, we did not consider projected book income beyond the conclusion of existing drilling contracts with the exception of interest income projected to be generated over a finite period beyond the conclusion of the relevant existing drilling contracts. As new drilling contracts are executed, we will reassess the amount of deferred tax assets that are realizable. Finally, once we have established sufficient objective positive evidence for historical periods, we may consider reliance on forecasted taxable income from future drilling contracts.

Our tax benefits related to transition attributes in Switzerland are scheduled to expire by 2036. Our net operating losses in Luxembourg are scheduled to expire between 2035 and 2038; however, a portion of the tax losses has no expiration date.

We conduct business globally and, as a result, we file numerous income tax returns in the US and in non-US jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including, but not limited to, jurisdictions such as Australia, Denmark, Egypt, Ghana, Guyana, Mexico, Nigeria, and Saudi Arabia. We are no longer subject to US Federal income tax examinations for years before 2019 and non-US income tax examinations for years before 2007.

Noble conducted substantially all of its business through Finco and its subsidiaries in the pre-emergence period; Noble Cayman conducted substantially all of its business through Finco and its subsidiaries in the post-emergence period to

consummation of the Business Combination with Maersk Drilling; and Noble conducted substantially all of its business through Finco and Maersk Drilling, and their respective subsidiaries after the Business Combination. In the pre-emergence period, the income or loss of our non-UK subsidiaries is not subject to UK income tax. UK earnings are taxable in the United Kingdom at the UK statutory rate of 19 percent. In the post-emergence period, Noble Cayman was incorporated in the Cayman Islands and therefore not subject to tax in any jurisdiction. Following the Business Combination with Maersk Drilling, Noble is a public limited company incorporated under the laws of England and Wales. The income or loss of our non-UK subsidiaries is not subject to UK income tax. UK earnings are taxable in the United Kingdom at the UK statutory rate of 19 percent and 25 percent through March 31, 2023 and beginning on April 1, 2023, respectively. A reconciliation of tax rates outside of the United Kingdom to our Noble effective rate for 2022 is shown below:

	Successor				Predecessor
			Period From		Period From
			February 6, 2021		January 1, 2021
	Year Ended		through		through		Year Ended
	December 31, 2022		December 31, 2021		February 5, 2021		December 31, 2020
Effect of:
Tax rates which are different than the Cayman Islands (Successor) and UK (Predecessor) rates	34.9	%	22.6	%	0.5	%	0.4	%
Tax impact of asset impairment and disposition	—	%	—	%	—	%	4.5	%
Tax impact of restructuring	—	%	—	%	1.0	%	2.1	%
Tax impact of the tax regulation change	—	%	—	%	—	%	0.9	%
Tax impact of valuation allowance	(22.0)	%	(25.2)	%	—	%	(4.3)	%
Resolution of (reserve for) tax authority audits	(1.1)	%	2.9	%	(0.2)	%	2.5	%
Total	11.8	%	0.3	%	1.3	%	6.1	%

At December 31, 2022, the Company asserts that its unremitted earnings and/or book/tax outside basis differences in certain of its subsidiaries are either permanently reinvested or are not expected to result in a material taxable event in the foreseeable future. Therefore, no material deferred taxes have been recorded related to such earnings and/or investments.

Certain of the restructuring transactions effected by the Company in connection with the Plan have a material impact on the Company. For example, cancellation of indebtedness income from such restructuring transaction has significantly reduced the Company’s US tax attributes, including but not limited to NOL carryforwards. Further, the Plan was approved by the Bankruptcy Court on November 20, 2020. As a result, on the Emergence Effective Date, the Company experienced an ownership change under Section 382 of the Internal Revenue Code of 1986, as amended (the “Code”), which subjects certain remaining tax attributes to an annual limitation under Section 382 of the Code.