Revenue and Customers

9 Months Ended

Sep. 30, 2023

Revenue from Contract with Customer [Abstract]

Revenue and Customers

Note 7— Revenue and Customers

Disaggregation of Revenue

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

	Three Months Ended September 30,				Nine Months Ended September 30,
	2023		2022		2023		2022
Floaters	$	549,130	$	217,923	$	1,519,346	561,826
Jackups	121,874		71,571		333,128		185,166
Total	$	671,004	$	289,494	$	1,852,474	$	746,992

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 Condensed 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:

	September 30, 2023		December 31, 2022
Current customer contract assets	$	2,824	$	11,169
Noncurrent customer contract assets	347		368
Total customer contract assets	3,171		11,537
Current deferred revenue	(19,160)		(40,214)
Noncurrent deferred revenue	(14,403)		(19,583)
Total deferred revenue	$	(33,563)	$	(59,797)

Significant changes in the remaining performance obligation contract assets and the contract liabilities balances for the nine months ended September 30, 2023 and 2022, are as follows:

	Contract Assets		Contract Liabilities
Net balance at December 31, 2022	$	11,537	$	(59,797)
Amortization of deferred costs	(21,722)		—
Additions to deferred costs	13,356		—
Amortization of deferred revenue	—		62,125
Additions to deferred revenue	—		(35,891)
Total	(8,366)		26,234
Net balance at September 30, 2023	$	3,171	$	(33,563)
Net balance at December 31, 2021	$	5,744	$	(27,755)
Amortization of deferred costs	(17,793)		—
Additions to deferred costs	28,561		—
Amortization of deferred revenue	—		37,942
Additions to deferred revenue	—		(71,489)
Reclassification to held for sale	(8,584)		20,002
Total	2,184		(13,545)
Net balance at September 30, 2022	$	7,928	$	(41,300)

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.

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, 2022	$	(181,883)	$	34,372
Additions	—		—
Amortization	118,571		(23,031)
Balance at September 30, 2023	$	(63,312)	$	11,341
Balance at December 31, 2021	$	—	$	61,849
Additions	—		—
Amortization	—		(36,526)
Balance at September 30, 2022	$	—	$	25,323

Estimated future amortization over the expected remaining contract periods:

	For the Years Ended December 31,
	2023		2024		2025		Total
Unfavorable contracts	$	14,665	$	40,439	$	8,208	$	63,312
Favorable contracts	—		(8,891)		(2,450)		(11,341)
Total	$	14,665	$	31,548	$	5,758	$	51,971