Income Taxes

9 Months Ended

Sep. 30, 2023

Income Tax Disclosure [Abstract]

Income Taxes

Note 8— Income Taxes

At September 30, 2023, the Company had deferred tax assets of $166.2 million, net of valuation allowance. Additionally, the Company also had deferred tax liabilities of $9.2 million, inclusive of a valuation allowance of $19.2 million.

During the three months ended September 30, 2023, the Company recognized additional discrete deferred tax benefits of $17.2 million related to releases and adjustments of valuation allowance for deferred tax benefits in Guyana, Norway, Switzerland, and Luxembourg.

During the nine months ended September 30, 2023, the Company recognized additional discrete deferred tax benefits of $80.8 million, $18.1 million, $10.5 million, and $4.1 million in Guyana, Luxembourg, Switzerland, and Norway, respectively.

In deriving the above net deferred tax benefits, the Company relied on sources of income attributable to the projected taxable income for the period covered by the Company’s relevant existing drilling contracts based on the assumption that the relevant rigs will be owned by the relevant rig owners during the relevant existing drilling contract periods. Given the mobile nature of the Company’s assets, we are not able to reasonably forecast the jurisdictions in which taxable income from future drilling contracts may arise. We also have limited objective positive evidence in historical periods. Accordingly, in determining the amount of additional deferred tax assets to recognize, we did not consider projected book income beyond the conclusion of existing drilling contracts. As new drilling contracts are executed or as current contracts are extended, 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.

At September 30, 2023, the reserves for uncertain tax positions totaled $192.2 million (net of related tax benefits of $0.1 million). At December 31, 2022, the reserves for uncertain tax positions totaled $175.9 million (net of related tax benefits of $0.3 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.

During the three months ended September 30, 2023, our tax provision included tax benefits of $17.2 million related to releases and adjustments of valuation allowance for deferred tax benefits in Guyana, Norway, Switzerland, and Luxembourg and a tax benefit of $2.0 million related to a foreign tax credit refund. Such tax benefits are offset by tax

expenses related to contract fair value amortization of $7.4 million and various recurring quarterly accruals of $63.5 million primarily in Guyana, Australia, Denmark, and Luxembourg.

During the nine months ended September 30, 2023, our tax provision included tax benefits of $113.5 million related to releases of valuation allowance for deferred tax benefits in Guyana, Luxembourg, Norway, and Switzerland, a tax benefit of $6.8 million related to a Ghana uncertain tax position release, and a tax benefit of $2.0 million related to a foreign tax credit refund. Such tax benefits are offset by tax expenses related to a Mexico uncertain tax position of $9.8 million, contract fair value amortization of $16.3 million, and various recurring quarterly accruals of $131.3 million primarily in Guyana, Australia, Denmark, and Luxembourg.

In Denmark, prior to the Merger, Maersk Drilling was subject to a mandatory joint taxation scheme with all other Danish entities under the common control of A.P. Møller Holding A/S. To the extent Maersk Drilling incurred tax losses in Denmark until the Merger, such losses may be utilized by other jointly taxed entities. Noble may be compensated through a joint taxation contribution when such losses are utilized. In the event that A.P. Møller Holding A/S or any jointly taxed entity is subject to audits for years and periods prior to and until the Merger and such audits result in adjustments to relevant tax returns, adjustments to the prior year joint tax contributions may be required. This could result in additional compensation to Noble or refunds payable by Noble to A.P. Møller Holding A/S or to any previous joint taxation group administration company of previously received joint taxation contributions. Since the Merger and through September 30, 2023, Noble has recognized tax contribution payments of approximately $20.0 million under this arrangement related to the period beginning with the Merger. Approximately $18.0 million of such payments is included in “Interest income and other, net” and approximately $2.0 million is recorded as a tax benefit on our Condensed Consolidated Statements of Operations.

The Finance (No 2) Act 2023, which includes the UK’s introduction of Pillar 2, received Royal Assent on July 11, 2023. We are continuing to evaluate the impact of this legislation, but we do not currently believe the implications should have a material adverse effect on the Company’s unaudited condensed consolidated financial statements.