Income Taxes

6 Months Ended

Jun. 30, 2024

Income Tax Disclosure [Abstract]

Income Taxes

Note 8 — Income Taxes

At June 30, 2024, the Company had deferred tax assets of $248.8 million, net of valuation allowance. Additionally, the Company also had deferred tax liabilities of $7.8 million, inclusive of a valuation allowance of $18.5 million.

During the three months ended June 30, 2024, the Company recognized additional discrete deferred tax benefits of $63.1 million related to releases and adjustments of valuation allowance for deferred tax benefits in Guyana and Luxembourg.

During the six months ended June 30, 2024, the Company recognized additional discrete deferred tax benefits of $81.6 million related to releases and adjustments of valuation allowance for deferred tax benefits in Guyana, Nigeria, Switzerland, and Luxembourg.

During the three months ended June 30, 2023, the Company recognized additional discrete deferred tax benefits of $50.7 million related to releases and adjustments of valuation allowance for deferred tax benefits in Guyana, Norway, Switzerland, and Luxembourg.

During the six months ended June 30, 2023, the Company recognized additional deferred tax benefits of $84.6 million, $3.9 million, and $7.2 million in Guyana, Norway, and Switzerland, 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 June 30, 2024, the reserves for uncertain tax positions totaled $183.6 million (net of related tax benefits of $0.1 million). At December 31, 2023, the reserves for uncertain tax positions totaled $202.3 million (net of related tax benefits of $0.1 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 June 30, 2024, our tax provision included tax benefits of $63.1 million mainly related to releases of valuation allowance for deferred tax benefits in Luxembourg. Such tax benefits are offset by tax expenses related to recurring quarterly accruals of $57.8 million mostly in Guyana, Luxembourg, Switzerland, and Nigeria.

During the six months ended June 30, 2024, our tax provision included tax benefits of $81.6 million related to releases and adjustments of valuation allowance for deferred tax benefits in Nigeria, Switzerland, and Luxembourg. Such tax benefits are offset by tax expenses related to a net increase in uncertain tax positions of $6.9 million and recurring quarterly accruals of $59.3 million mostly in Guyana, Luxembourg, Switzerland, and Nigeria

The OECD, which represents a coalition of member countries, issued various white papers addressing Tax Base Erosion and Jurisdictional Profit Shifting. The recommendations in these white papers are generally aimed at combating what they believe is tax avoidance. Numerous jurisdictions in which we operate have been influenced by these white papers as well as other factors and are increasingly active in evaluating changes to their tax laws. In addition, the OECD has advanced reforms focused on global profit allocation and implementing a global minimum tax rate of at least 15% for large multinational corporations on a jurisdiction-by-jurisdiction basis, known as “Pillar Two.” On October 8, 2021, the OECD announced an accord endorsing and providing an implementation plan for Pillar Two agreed upon by 136 nations. On December 15, 2022, the European Council formally adopted a European Union directive on the implementation of the plan by January 1, 2024. Numerous countries, including the UK, have enacted legislation implementing Pillar Two effective January 1, 2024. While we continue to review additional guidance and regulations as they become available, we do not currently believe the impact of this legislation will result in a material adverse effect on our consolidated financial statements.