Valaris (VAL) risk factors, FY2024 10-K

Risks Related to Our Business, Operations, Financing Arrangements and Market Conditions

1. 01The success of our business depends on the level of activity in offshore oil and natural gas exploration, development and production, which can be significantly affected by volatile oil and natural gas prices
2. 02The offshore contract drilling industry is highly competitive and cyclical
3. 03Our current backlog of contract drilling revenue may not be fully realized and may decline significantly in the future
4. 04Our business will be materially adversely affected if we are unable to secure contracts on economically favorable terms or if option periods in existing contracts are not exercised as expected
5. 05Our customers may be unable or unwilling to fulfill their contractual commitments to us, including their obligations to pay for losses, damages or other liabilities
6. 06The loss of a significant customer or customer contract, as well as customer consolidation and changes to customer strategy, could materially adversely affect our business
7. 07Our long-term contracts are subject to the risk of cost increases, which could adversely impact our profitability
8. 08Our network and systems, including rig operating systems and critical data, are subject to cybersecurity risk and technical disruptions
9. 09Rig reactivation, upgrade and enhancement projects are subject to risks, including delays and cost overruns, which could materially adversely affect our financial position, operating results or cash flows
10. 10We make significant expenditures to meet customer requirements, maintain our fleet to comply with laws and the applicable regulations and standards of governmental authorities and organizations, or to expand our fleet, and we may be required to make significant expenditures to maintain our competitiveness
11. 11service for extended periods of time, with corresponding losses of revenues, in order to make such alterations or to add such equipment. In the future, market conditions may not justify these expenditures or enable us to operate our drilling rigs profitably during the remainder of their economic useful lives
12. 12Failure to recruit and retain skilled personnel could materially adversely affect our business
13. 13Our use of a shared service center creates risks relating to the processing of transactions and recording of financial information, which could materially adversely affect our financial condition, operating results or cash flows
14. 14AI presents risks and challenges that can impact our business
15. 15We may not realize the expected benefits of our ARO joint venture
16. 16Joint venture investments could be adversely affected by our joint venture partners’ actions, financial condition and liquidity and disputes between us and our joint venture partners
17. 17Our business involves operating hazards, and our insurance and indemnities from our customers may not be adequate to cover any potential losses
18. 18considers contractual indemnity for criminal fines and penalties to be against public policy, and the enforceability of an indemnity as to other matters may be limited
19. 19Geopolitical events and violence could materially adversely affect the markets for our services and have a material adverse effect on our business and cost and availability of insurance
20. 20Our drilling contracts with national oil companies may expose us to greater risks than we normally assume in drilling contracts with non-governmental customers
21. 21The impact and effects of public health crises, pandemics and epidemics could have a material adverse effect on our business, financial condition and results of operations
22. 22Unionization efforts and labor regulations in certain countries in which we operate could materially increase our costs or limit our flexibility with regard to the management of our personnel
23. 23Significant equipment or part shortages, supplier capacity constraints, supplier production disruptions, supplier quality and sourcing issues or price increases could materially adversely affect our financial position, operating results or cash flows
24. 24Our operating and maintenance costs will not necessarily fluctuate in proportion to changes in our operating revenues
25. 25Our ability to pay our operating and capital expenses and make payments due on our debt depends on many factors beyond our control
26. 26The agreements governing our debt, including the Indenture and the Credit Agreement, contain various covenants that impose restrictions on us and certain of our subsidiaries that may affect our ability to operate our business and to make payments on our debt
27. 27We may experience risks associated with future mergers, acquisitions or dispositions of businesses or assets or other strategic transactions
28. 28The exercise of all or any number of outstanding warrants or the issuance or settlement of stock-based awards may dilute the holders of our Common Shares

Regulatory, Legal and Tax Risks

1. 29Increasing regulatory complexity could adversely impact the costs associated with our offshore drilling operations and reduce demand for our services
2. 30Compliance with or breach of environmental laws can be costly and could limit our operations
3. 31The IRS may not agree with the conclusion that we should be treated as a foreign corporation for U.S. federal tax purposes
4. 32Governments may pass laws that subject us to additional taxation or may challenge our tax positions
5. 33As required by law, we file periodic tax returns that are subject to review and examination by various revenue agencies within the jurisdictions in which we operate. We are subject to tax assessments in various jurisdictions, which we are contesting
6. 34Our consolidated effective income tax rate may vary substantially over time
7. 35We are subject to litigation that could have a material adverse effect on us
8. 36We are a Bermuda company and it may be difficult to enforce judgments against us or our directors and executive officers
9. 37Our bye-laws restrict shareholders from bringing legal action against our officers and directors
10. 38Provisions in our bye-laws could delay or prevent a change in control of our company, which could materially adversely affect the price of our Common Shares
11. 39Legislation enacted in Bermuda as to Economic Substance may affect our operations
12. 40Our business could be affected as a result of activist investors

Risks Related to Our International Operations

1. 41Regulation of GHG and climate change could have a negative impact on our business
2. 42Consumer preferences for alternative fuels and electric-powered vehicles, as part of the global energy transition, may lead to reduced demand for our services
3. 43Increased scrutiny from stakeholders and others regarding climate change, as well as our sustainability practices, initiatives and reporting responsibilities, could result in additional costs or risks