Case 20-34114 Document 1129 Filed in TXSB on 03/02/21 Page 1 of 8

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION ) In re: ) Chapter 11 ) VALARIS PLC, et al.,1 ) Case No. 20-34114 (MI) ) Debtors. ) (Jointly Administered) )

DECLARATION OF DOUGLAS A. FORDYCE IN SUPPORT OF CONFIRMATION OF THE DEBTORS’ FOURTH AMENDED JOINT CHAPTER 11 PLAN OF REORGANIZATION PURSUANT TO CHAPTER 11 OF THE BANKRUPTCY CODE

I, Douglas A. Fordyce, hereby declare under penalty of perjury:

1. I am a Managing Director in the Financial Advisory business of Lazard Frères &

Co. LLC (“Lazard”), the primary U.S. operating subsidiary of a preeminent international financial advisory and asset management firm founded in 1848. Lazard, together with its predecessors and affiliates, has been advising clients around the world for more than 170 years. Lazard’s current managing directors, directors, vice presidents, and associates have extensive experience working with financially-troubled companies in complex financial restructurings out-of-court and in chapter 11 proceedings. Over the last decade, Lazard and its principals have advised debtors, creditors, equity constituencies, and government agencies in over 500 restructurings worldwide, with an aggregate value of more than $1 trillion. I serve as the head of the group of approximately

35 professionals in the Houston office of Lazard, all of whom specialize in providing strategic and financial advice to companies, institutions, and investors in the energy sector.

2. I have more than 25 years of experience in investment banking, including in the

1 A list of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ claims and noticing agent at http://cases.stretto.com/Valaris. Debtor Ensco Incorporated’s principal place of business and the Debtors’ service address in these chapter 11 cases is 5847 San Felipe Street, Suite 3300, Houston, Texas 77057. Case 20-34114 Document 1129 Filed in TXSB on 03/02/21 Page 2 of 8

energy industry. I have a Master of Business Administration from the Darden School at the

University of Virginia as well as an A.B. from Duke University. I first started working on energy

transactions as an analyst in 1992. The energy industry became my primary focus when I joined

Lazard in April 2004. Prior to joining Lazard, I worked for eight years at Donaldson, Lufkin &

Jenrette and its successor, Credit Suisse.

3. Since joining Lazard, I have been involved in numerous restructuring and liability

management transactions, including Valaris plc, Transocean Ltd., Diamond Offshore Drilling,

Inc., FTS International, Inc., Hi-Crush, Inc., Pioneer Energy Services Corporation, Weatherford

International plc, Breitburn Energy Partners, LINN Energy, Inc., Legacy Reserves, Inc., Shelf

Drilling Ltd., AFGlobal Corporation, Paragon Offshore plc, Tidewater, Inc., Sidewinder Drilling,

Inc., Seventy Seven Energy, Inc., SandRidge Energy, Inc., and Hercules Offshore, Inc. I have also provided expert testimony in bankruptcy proceedings involving energy company reorganizations.

In addition, I have advised on numerous corporate transactions for companies in the energy sector, including Macquarie Infrastructure Corporation, Western Midstream Partners LP, Apergy

Corporation, Fluor Corporation, Baker Hughes Company, Keane Group, Inc., McDermott

International, Inc., Civeo Corporation, Clariant AG, and Furmanite Corporation.

4. I have extensive experience in the valuation of energy companies. Indeed, as an

investment banker specializing in the energy industry, companies often look to my and my team’s

valuation experience. We have issued fairness opinions and formal valuations on behalf of Lazard that require valuation expertise in the energy sector, and performed valuation work for numerous companies considering the purchase or sale of energy-related assets. In addition to my personal work on engagements as a lead professional, I have been consulted in connection with valuations in the energy sector on other Lazard engagements that I am not leading. Together these activities

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have allowed me to obtain knowledge about the methodologies used in connection with Lazard’s

valuation work more broadly.

5. On October 16, 2020, the Court entered the Order (I) Authorizing the Retention of

Lazard Frères & Co. LLC as Investment Banker, Effective as of the Petition Date, (II) Modifying

Certain Time-Keeping Requirements, and (III) Granting Related Relief [Docket No. 351] (the

“Lazard Retention Order”). At the direction of the above-captioned debtors and debtors in possession (collectively, the “Debtors”), Lazard prepared the valuation analysis (the “Valuation

Analysis”) included as Exhibit F to the Disclosure Statement Relating to the Debtors’ Third

Amended Joint Chapter 11 Plan of Reorganization, filed on December 30, 2020 [Docket No. 879]

(the “Disclosure Statement”). Lazard then updated this Valuation Analysis in connection with its

expert report, which was served on December 16, 2020.

6. I submit this declaration in support of the Debtors’ Fourth Amended Joint Chapter

11 Plan of Reorganization dated as of February 6, 2021 [Docket No. 1028] (as modified, amended,

or supplemented from time to time in accordance with its terms, the “Plan”). I am not being

specifically compensated for this testimony other than any compensation that Lazard receives as a

professional services firm retained by the Debtors pursuant to the Lazard Retention Order.

7. The statements in this declaration are, except where specifically noted, based on my personal knowledge or opinion, or on information that I have received from the Debtors’ employees or advisors, or employees of Lazard working directly with me or under my supervision, direction, or control.

Opinions

8. In my expert opinion, the estimated total enterprise value (the “Enterprise Value”) of the Reorganized Debtors, as of an assumed emergence date of March 31, 2021 (the “Assumed

Effective Date”), would be in a range between $1.945 billion and $3.240 billion with a midpoint

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of $2.560 billion. Based on the potential range of Enterprise Values less assumed debt of $550

million, pension and other benefits liabilities, and the estimated value of warrants, as well as adding

back cash—all as of the Assumed Effective Date—the imputed equity value (the “Equity Value”)

for the Reorganized Debtors as of the assumed Effective Date is between approximately $1.834

billion and $3.123 billion with a midpoint of $2.448 billion.

9. The estimated range of the Enterprise Value represents a valuation of the

Reorganized Debtors based on a sum-of-the-parts approach for its three primary assets: Valaris’ operating business (“Valaris (Operating)”), its 50% interest in the ARO Drilling joint venture with

Saudi Aramco (ARO), and its note receivable from ARO. Valaris (Operating) was valued based on the application of two generally accepted valuation techniques: (a) a discounted cash flow

(“DCF”) analysis; and (b) a comparable publicly traded companies analysis (the “Comparable

Public Companies Analysis”).2 ARO and the note receivable from ARO were each independently

valued using DCF analyses. In calculating the Reorganized Debtors’ Enterprise Value, Lazard

carefully considered but ultimately did not utilize other methodologies, including a precedent

transactions analysis, a third-party Net Asset Valuation, and a useful life DCF analysis. Lazard

did not rely on these other methodologies due to their limitations, including that, for example, precedent transactions were completed during generally more favorable periods for the offshore drilling industry and prior to COVID-19, and a lack of recent precedent rig sale transactions provides limited support for evaluating net asset values, among several other reasons.

10. Lazard estimated the Enterprise Value of Valaris (Operating) by performing a DCF

2 Lazard reviewed a variety of potential analytical techniques and analyses, including those described in this Declaration. This summary of Lazard’s analysis is not a complete description of the analyses underlying Lazard’s views. Each analytic technique has inherent strengths and weaknesses, and the nature of the available information may further impact the output of particular techniques.

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analysis of the financial projections included as Exhibit E to the Disclosure Statement (the

“Financial Projections”). The DCF analysis is a forward-looking enterprise valuation

methodology that estimates the value of an asset or business by calculating the present value of

expected future cash flows to be generated by that asset or business. Under this methodology,

projected future cash flows are discounted by the weighted average cost of capital (the “Discount

Rate”) of the business. The Discount Rate reflects the estimated rate of return required by debt

and equity investors to invest in the business based on its capital structure. The enterprise value

of the firm is determined by calculating the present value of the unlevered after-tax free cash flows

based on the financial projections provided by management plus an estimate of the value of the

firm beyond the projection period, known as the terminal value. The range of potential terminal

values in this case was calculated by applying a multiple to adjusted earnings before interest, taxes, depreciation, and amortization (“EBITDA”) in 2025 (meant to approximate normalized earnings), and by checking that value against the implied perpetuity growth rate applied to the adjusted unlevered after-tax free cash flows for the same year. The terminal value was then discounted back to the Assumed Effective Date. DCF analyses were also used to estimate the values of ARO and the ARO notes receivable held by the Debtors.

11. The Comparable Public Companies Analysis estimates the value of a company

relative to other publicly traded companies with similar business and financial characteristics.

Lazard first selected a set of publicly traded companies that it believes exhibit similar business and

operational characteristics to Valaris (Operating). Criteria for the selected reference group

included, among other relevant characteristics, similarity in lines of business, geographic and end

markets, business risks, growth prospects, financial stability, and the size and scale of business.

The selected reference group may not be comparable to Reorganized Valaris in all aspects and

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may differ materially in others. The Comparable Company methodology has several limitations

in this case, including the distress across the sector, the fact that most peer companies are undergoing restructuring or liability management exercises (including several peers in or recently exiting chapter 11), relatively low estimated earnings during the near-term projection periods, significantly high projected cash usage in the next few years combined with limited to no access to capital, a general lack of current analyst estimates for those peers (in some cases, only one estimate available), and disparate views generally around the timing of a recovery.

12. In deriving Enterprise Value ranges from the Comparable Public Company

Analysis methodology for Valaris (Operating), EBITDA multiples were the primary valuation metric. Based on 2023E, 2024E, and “multi-year cycle average”3 multiples of this reference group

and certain qualitative judgments based on differences between the characteristics of Reorganized

Valaris and the selected reference group, a range of multiples was then applied to the projected

2023E, 2024E, and “multi-year average cycle” adjusted EBITDA for Valaris (Operating). The methodology analyzed enterprise values and enterprise values adjusted for projected cash uses calculated based on both the market value and book value of debt, as appropriate.

13. In preparing its valuation, Lazard: (a) reviewed certain historical financial information of the Debtors for recent years and interim periods; (b) reviewed certain financial and operational data of the Debtors, including the Financial Projections; (c) discussed the Debtors’ operations and future prospects with the Debtors’ senior management team and third-party

advisors; (d) reviewed certain publicly available financial data for, and considered the market

value of, public companies that Lazard deemed generally relevant in analyzing the value of

Reorganized Valaris; (e) considered certain economic and industry information that Lazard

3 Defined as the average of 2018 reported EBITDA through 2024 estimated EBITDA.

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deemed generally relevant to Reorganized Valaris; and (f) conducted such other studies, analyses,

and inquiries as appropriate. Lazard assumed and relied on the accuracy and completeness of all

financial and other information furnished to it by the Debtors’ management and other parties as

well as publicly available information. Lazard did not attempt to independently audit or verify such information, nor did Lazard perform an independent appraisal of the assets or liabilities of

the Reorganized Debtors. In connection with Lazard’s work providing investment banking and valuation services to companies, Lazard generally relies on projections and financial data provided by and prepared by other entities, and it is common for experts in my field to rely on such projections and data.

Conclusion

14. Based on my work performed and from a valuation perspective, I conclude that the

total enterprise value of the Reorganized Debtors is in the range of approximately $1.945 billion and $3.240 billion, with a midpoint of $2.560 billion as of March 31, 2021.

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Pursuant to 28 U.S.C. § 1746, I declare under penalty of perjury that the foregoing statements are true and correct to the best of my knowledge, information, and belief.

Dated: March 2, 2021 /s/ Douglas A. Fordyce Managing Director Lazard Frères & Co.