Revenue and Customers

3 Months Ended

Mar. 31, 2023

Revenue from Contract with Customer [Abstract]

Revenue and Customers

Note 8— Revenue and Customers

Disaggregation of Revenue

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

	Three Months Ended March 31,
	2023		2022
Floaters	$	476,234	$	141,213
Jackups	99,056		53,822
Total	$	575,290	$	195,035

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 to 60 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:

	March 31, 2023		December 31, 2022
Current customer contract assets	$	12,601	$	11,169
Noncurrent customer contract assets	329		368
Total customer contract assets	12,930		11,537
Current deferred revenue	(37,282)		(40,214)
Noncurrent deferred revenue	(17,280)		(19,583)
Total deferred revenue	$	(54,562)	$	(59,797)

Significant changes in the remaining performance obligation contract assets and the contract liabilities balances for the three months ended March 31, 2023 and 2022 are as follows:

	Contract Assets		Contract Liabilities
Net balance at December 31, 2021	$	5,744	$	(27,755)
Amortization of deferred costs	(3,866)		—
Additions to deferred costs	5,052		—
Amortization of deferred revenue	—		8,219
Additions to deferred revenue	—		(19,011)
Total	1,186		(10,792)
Net balance at March 31, 2022	$	6,930	$	(38,547)
Net balance at December 31, 2022	$	11,537	$	(59,797)
Amortization of deferred costs	(5,433)		—
Additions to deferred costs	6,826		—
Amortization of deferred revenue	—		19,048
Additions to deferred revenue	—		(13,813)
Total	1,393		5,235
Net balance at March 31, 2023	$	12,930	$	(54,562)

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.

Future Amortization of Deferred Revenue

The following table reflects revenue expected to be recognized in the future related to deferred revenue, by rig type, as of March 31, 2023:    

	For the Years Ended December 31,
	2023		2024		2025		2026		2027 and beyond		Total
Floaters	$	32,302	$	8,284	$	6,861	$	—	$	—	$	47,447
Jackups	1,738		2,227		2,205		622		—		6,792
Other	$	323	$	—	$	—	$	—	$	—	$	323
Total	$	34,363	$	10,511	$	9,066	$	622	$	—	$	54,562

The revenue included above substantially 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 March 31, 2023. 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 intangible assets for certain favorable customer contracts. These intangible assets will be amortized as a reduction of contract drilling services revenue from February 5, 2021 and the Closing Date, respectively, through the remainder of the contracts.

In connection with the Business Combination with Maersk Drilling, the Company 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.

	Unfavorable contracts		Favorable contracts
Balance at December 31, 2021	$	—	$	61,849
Additions	—		—
Amortization	—		(14,099)
Balance at March 31, 2022	$	—	$	47,750
Balance at December 31, 2022	$	(181,883)	$	34,372
Additions	—		—
Amortization	60,689		(6,961)
Balance at March 31, 2023	$	(121,194)	$	27,411

Estimated future amortization over the expected remaining contract periods:

	For the Years Ended December 31,
	2023		2024		2025		Total
Unfavorable contracts	$	72,547	$	40,439	$	8,208	$	121,194
Favorable contracts	$	(16,785)	$	(10,626)	$	—	$	(27,411)
Total	$	55,762	$	29,813	$	8,208	$	93,783