Chapter 11 ) VALARIS PLC, Et Al.,1 ) Case No

Case 20-34114 Document 23 Filed in TXSB on 08/19/20 Page 1 of 302 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) ) (Emergency Hearing Requested) DECLARATION OF JONATHAN BAKSHT, EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER OF VALARIS PLC, IN SUPPORT OF CHAPTER 11 PETITIONS AND FIRST DAY MOTIONS I, Jonathan Baksht, hereby declare under penalty of perjury: 1. I am the Executive Vice President and Chief Financial Officer of Valaris plc, a public limited company organized under the laws of England and Wales and one of the above-captioned debtors and debtors in possession. Valaris plc is the parent company of the above-captioned debtors and debtors in possession (collectively, the “Debtors” and, together with Valaris plc’s direct and indirect non-Debtor subsidiaries, “Valaris” or the “Company”). I have served as Chief Financial Officer of Valaris plc or its predecessor since November 2015 and as Executive Vice President of Valaris plc since June 2019. Introduction 2. Valaris commenced these chapter 11 cases to equitize all of its $7.1 billion of funded debt. Shortly before the Petition Date, the Debtors signed a restructuring support agreement with their unsecured bondholder group that provides for that deleveraging transaction. 1 A complete list of each of the Debtors in these chapter 11 cases may be obtained on the website of the Debtors’ proposed claims and noticing agent at http://cases.stretto.com/Valaris. The location of 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 23 Filed in TXSB on 08/19/20 Page 2 of 302 The agreement also includes a commitment for a $500 million DIP facility and a 12-month commitment for a $500 million exit financing. The DIP has a 12-month maturity, no milestones, and no cross default on account of a termination of the restructuring support agreement. The exit financing has a seven-year maturity and an option to pay interest in kind. Upon consummation of these restructuring transactions, the Debtors will have one of the best balance sheets in the offshore drilling industry. I. Company Overview. 3. Valaris—the result of a merger between Ensco plc and Rowan Companies plc in April 2019—is a leading provider of offshore drilling services. The Company, which currently operates the industry’s largest modern offshore drilling fleet, maintains drilling operations in nearly every major offshore market and has been recognized in industry surveys for its operational excellence and customer satisfaction. Despite the recent difficult world and industry events, Valaris has maintained its focus on operational excellence and its relationships with customers and stakeholders. 4. Last spring, global events forced the Debtors to quickly reevaluate their financial position and immediate next steps. The economic impact of the COVID-19 pandemic took its toll with daily demand for global oil dropping approximately 18 million barrels a day or 18% per the International Energy Agency, while supply continued to increase as a result of a dispute between the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia. As a result, the Company’s customers have significantly reduced their planned capital expenditures, with many seeking to cancel or defer projects, which has led to terminations or renegotiations of several existing contracts. Since the beginning of March 2020, approximately ten existing contracts have been canceled, and the Debtors have agreed to modify several others. 2 Case 20-34114 Document 23 Filed in TXSB on 08/19/20 Page 3 of 302 5. At the beginning of this year, the Debtors did not expect to be filing for chapter 11. The Debtors began 2020 with approximately $1.6 billion of undrawn capacity under their revolving credit facility, which was anticipated to provide sufficient liquidity to fund the Debtors’ operations for the foreseeable future. Moreover, the Debtors had financial flexibility to address their capital structure pursuant to the terms of their debt documents. In late 2019 and early 2020, the Debtors engaged advisors—including Kirkland & Ellis LLP and Slaughter and May as US and UK counsel and Lazard Frères & Co. LLC (“Lazard”) as investment banker—to consider out-of-court liability management transactions to reduce leverage and capture discount. 6. COVID-19, however, shifted the economic landscape for the Debtors. Ultimately, it became clear that the Debtors’ leverage was unsustainable in this new environment. As of the Petition Date, the Debtors have approximately $7.1 billion of funded debt. This includes: • approximately $581.0 million outstanding under an unsecured revolving credit facility (the “Revolving Credit Facility”), which is guaranteed by a number of the Company’s rig-owning subsidiaries; and • approximately $6.5 billion outstanding under 15 series of unsecured senior notes (the “Senior Notes”), which are not guaranteed by the Company’s rig-owning subsidiaries. 7. Certain series of the Senior Notes are guaranteed by non-rig-owning subsidiaries of the Debtors, and others have purported litigation claims unique to their series. Before the Petition Date, certain bonds formerly issued by Rowan plc were assumed by Valaris in connection with the Rowan Merger. Certain holders of those bonds directed the purported indenture trustee to sue certain of the Debtors and their directors in connection with those transactions (the “Rowan Bondholder Litigation”). The Rowan Bondholder Litigation was commenced in Harris County District Court in Houston, Texas on March 19, 2020 and will be stayed pursuant to the terms of the Restructuring Support Agreement. 3 Case 20-34114 Document 23 Filed in TXSB on 08/19/20 Page 4 of 302 II. Comprehensive Restructuring Negotiations. 8. Because of its debt load and the deteriorating market conditions, the Company determined that it was necessary and prudent to explore a potential comprehensive restructuring transaction that would equitize all or the vast majority of its debt and raise substantial new money, while keeping other strategic options open and under review. To that end, the Company and its advisors commenced discussions with the administrative agent under the Revolving Credit Facility (the “RCF Agent”), which organized a steering committee of lenders (the “RCF Lenders”) and engaged Shearman & Sterling LLP as restructuring counsel and Perella Weinberg Partners L.P. as investment banker. The Company also engaged with an ad hoc group of holders of the Senior Notes (the “Bondholder Group”) represented by Kramer Levin Naftalis & Frankel LLP and Akin Gump Strauss Hauer & Feld LLP as restructuring counsel and Houlihan Lokey, Inc. as investment banker. Additionally, the Company retained Alvarez & Marsal North America, LLC as restructuring advisor. 9. The Company’s discussions with the RCF Lenders and the Bondholder Group focused on a comprehensive restructuring transaction to ensure Valaris’s successful reorganization and emergence from these chapter 11 cases. These discussions, which took place over the several months leading up to the Petition Date, initially concentrated on equitizing the Debtors’ approximately $6.5 billion in outstanding principal under the Senior Notes, while providing takeback paper to the RCF Lenders for the full amount of their prepetition claims. During this time, the Company also continued to evaluate alternative proposals. 10. As these discussions progressed, the Company faced several coupon payments on multiple series of the Senior Notes throughout this summer. The Company ultimately elected not to pay approximately $138 million in coupon payments in the months leading up to these chapter 11 cases, thereby preserving much-needed liquidity and avoiding additional draws on the 4 Case 20-34114 Document 23 Filed in TXSB on 08/19/20 Page 5 of 302 Revolving Credit Facility. In connection with the skipped coupon payments, the Company entered into waiver and forbearance agreements with the RCF Lenders and the Bondholder Group, which permitted continued draws on the Revolving Credit Facility and avoided acceleration of debt. The waiver and forbearance agreements were extended a number of times and ultimately expired on August 15, 2020. 11. As the Petition Date approached, discussions between the Bondholder Group and the RCF Lenders reached an impasse regarding the terms and amount of post-emergence debt. The Debtors and their advisors also determined that pursuing a transaction that fully equitized all of their prepetition funded debt, including the RCF Lenders’ claims, would better position the post-emergence Company to succeed in a time of turmoil in the offshore drilling industry. The RCF Lenders’ proposal would have resulted in the reorganized Debtors having net debt on emergence that is approximately $580 million higher than the levels contemplated under the Restructuring Support Agreement. It also required the Bondholder Group to provide $300 million of new money, which they were ultimately unwilling to provide under the terms of the RCF Lenders’ proposal. 12. Accordingly, the Debtors and their advisors began to focus on a transaction that incorporated a broader equitization of the Debtors’ prepetition funded indebtedness, which would result in a full equitization of the Senior Notes and prepetition claims of the RCF Lenders, and a fully-committed $500 million new-money investment to refinance the DIP Facility and fund post-emergence operations. III. Restructuring Support Agreement. 13. As a result of these negotiations, the Debtors entered into a restructuring support agreement with the Bondholder Group, which is attached to this Declaration as Exhibit A (including all schedules and exhibits thereto, the “Restructuring Support Agreement”). The 5 Case 20-34114 Document 23 Filed in TXSB on 08/19/20 Page 6 of 302 Restructuring Support Agreement sets forth the terms of a restructuring of the Debtors’ funded debt obligations through a chapter 11 plan of reorganization (the “Plan”).

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