VANTAGE DRILLING INTERNATIONAL Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

The following discussion is intended to assist you in understanding our
financial position as of June 30, 2022, and our results of operations for the
three and six months ended June 30, 2022 and 2021. The discussion should be read
in conjunction with the financial statements and notes thereto included in our
Annual Report on Form 10-K for the year ended December 31, 2021, which was filed
with the SEC on March 30, 2022. The results of operations for the interim
periods are not necessarily indicative of the operating results for the full
fiscal year or any future periods.

Insight

We are an international offshore drilling company focused on operating a fleet
of modern, high specification drilling units. Our principal business is to
contract drilling units, related equipment and work crews, primarily on a
dayrate basis, to drill oil and gas wells for our customers. Through our fleet
of drilling units, we provide offshore contract drilling services to major,
national and independent oil and gas companies, focused on international
markets. Additionally, for third-party owned drilling units, we provide
operations and marketing services for operating and stacked rigs, construction
supervision services for rigs that are under construction and preservation
management services for rigs that are stacked.

The following table presents certain current information regarding our offshore drilling fleet at August 1, 2022:

                                    Water Depth       Drilling Depth
       Name          Year Built    Rating (feet)         Capacity           Location            Status
                                                          (feet)
Owned Rigs:
Jackups
Topaz Driller           2009                  375              30,000     Malta          Contract preparation
Soehanah                2007                  375              30,000     Indonesia      Mobilizing
Drillships (1)
Platinum Explorer       2010               12,000              40,000     India          Operating
Tungsten Explorer       2013               12,000              40,000     Cyprus         Operating
Managed Rigs:
Drillships
Polaris                 2008               10,000              37,500     Malaysia       Reactivating
Aquarius                2008               10,000              35,000     High Seas      Reactivating
Capella                 2008               10,000              37,500     Indonesia      Operating
Supported Rigs:
Jackups
Emerald Driller         2008                  375              30,000     Qatar          Operating
Sapphire Driller        2009                  375              30,000     Qatar          Operating
Aquamarine Driller      2009                  375              30,000     Qatar          Operating


(1)

Drillships are designed to drill in up to 12,000 feet of water and are currently equipped to drill in 10,000 feet of water.

RECENT DEVELOPMENTS

Geopolitical instability caused by the conflict in Ukraine and rising inflation

The markets generally exhibited a strong recovery in global oil prices during
2021, a trend which was further exemplified during the first quarter of 2022,
reaching $125.72 per barrel in March 2022. While our management anticipates oil
and gas prices to remain robust in the near-term, price volatility is still
expected to continue as a result of, among other factors, (i) adverse
macroeconomic conditions, including rising inflationary pressures and potential
recessionary conditions, (ii) changes in oil and gas inventories, (iii) global
market demand, (iv) geopolitical instability, armed conflict and social unrest,
including the invasion of Ukraine by Russia in February 2022, the associated
response undertaken by western nations, such as the implementation of broad
sanctions, the potential for retaliatory actions on the part of Russia and the
overall impact on OPEC+ countries' ability to reach production targets in the
near term, (v) potential future disagreements among OPEC+ countries regarding
the supply of oil, (vi) the potential for increased production and activity from
U.S. shale producers and non-OPEC countries driven by the current oil prices,
and (vii) the ongoing COVID-19 pandemic, including the transmission and presence
of highly contagious and new variants and the pace of vaccine rollouts, and
therefore, the Company cannot predict how long oil and gas prices will remain
stable or further increase, if at all, or whether they could reverse course and
materially decline.

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In particular, the invasion of Ukraine by Russia has led to, and will likely
continue to lead to, geopolitical instability, disruption and volatility in the
markets in which we operate. While it is not possible at this time to predict or
determine the ultimate consequences of the conflict in Ukraine, which could
include, among other things, additional sanctions, greater regional instability,
embargoes, geopolitical shifts and other material and adverse effects on
macroeconomic conditions, including rising inflationary pressures and potential
recessionary conditions (and actions taken or being contemplated by central
banks and regulators in an attempt to reduce, curtail and address such pressures
and conditions), and material changes in energy policy, supply chains, financial
markets and currency exchange rates, hydrocarbon price volatility in particular
is likely to continue for the foreseeable future. To the extent the conflict in
Ukraine and adverse macroeconomic conditions continue (or exacerbate), the
implementation of further measures taken by governmental bodies and private
actors, could have a lasting impact in the near- and long-term on the (i)
operations and financial condition of our business and the businesses of our
critical counterparties and (ii) the global economy. While our management is
actively monitoring the foregoing events and its associated financial impact on
our business, it is uncertain at this time as to the full magnitude that
volatile and uncertain oil and gas prices will ultimately have on our financial
condition and future results of operations.

Share purchase agreement to sell EDC to ADES Arabia Holding

On December 6, 2021, VHI, a wholly owned subsidiary of the Company, entered into
a certain Share Purchase Agreement (the "EDC Purchase Agreement") with ADES
Arabia Holding ("ADES Arabia"), which wholly owns ADES, pursuant to which VHI
agreed to sell to ADES Arabia all of the issued and outstanding equity of VHI's
wholly-owned subsidiary, EDC (the "EDC Sale"). EDC is the owner of the following
jackup rigs, which are currently operating in Qatar: the Emerald Driller; the
Sapphire Driller; and the Aquamarine Driller. Each of these rigs was included
within our Drilling Services segment for the quarter ended June 30, 2022, and in
prior quarters. The EDC Purchase Agreement became effective on December 20, 2021
and the transactions contemplated under such agreement closed on May 27, 2022
(the "EDC Closing Date"). On the EDC Closing Date, VHI received $170.0 million
as purchase price consideration and $30.0 million in certain contract
preparation expense reimbursement and, as a result, VHI recognized a net gain of
approximately $60.8 million during the three months ended June 30, 2022, all of
which is subject to potential adjustments contemplated by the EDC Purchase
Agreement, any such adjustments to be finalized by September 24, 2022.
Accordingly, the amount of proceeds actually received by the Company could vary
from those set forth above.

Simultaneously with the EDC Sale, certain subsidiaries of the Company and ADES
entered into three separate services agreements (collectively, the "ADES Support
Services Agreements"), pursuant to which a subsidiary of the Company agreed to
provide, in exchange for customary fees and reimbursement, support services to
EDC with respect to the Emerald Driller, Sapphire Driller and Aquamarine Driller
for a three-year term.

The Company and ADES also entered into an agreement on December 6, 2021 (the
"Collaboration Agreement") to pursue a global strategic alliance in order to
leverage both the ADES Support Services Agreements and ADVantage, the parties'
existing joint venture in Egypt. Pursuant to the Collaboration Agreement, the
parties agreed to collaborate on exploring future commercial and operational
opportunities.


While the Company continues to evaluate potential uses of the proceeds from the
EDC Sale, the Company is limited in how it may deploy and utilize such proceeds
as a result of the terms of the First Lien Indenture. In particular, the Company
may only use the proceeds from the EDC Sale to repay, prepay or purchase our
senior secured indebtedness (including the 9.25% First Lien Notes), acquire all
or substantially all of the assets or capital stock of any other entity engaged
in a similar or complementary business to the Company's lines of business, or
make capital expenditures or acquire non-current assets (including vessels and
related assets) that are useful in such lines of business (including any deposit
or installment payments with respect thereto as well as any expenditures related
to the acquisition, construction or "ready for sea" costs of such vessels). To
the extent such proceeds are not so applied (or committed to be applied) within
one year after receipt, the Company will be required to offer to purchase the
9.25% First Lien Notes with such proceeds.

Award of tungsten exploration contract

On June 9, 2022, a subsidiary of VDI entered into a drilling services contract
with a subsidiary of TotalEnergies (the "TotalEnergies Contract") in respect of
VDI's ultra-deepwater drillship, the Tungsten Explorer. The TotalEnergies
Contract contains a minimum term of 225 days. The Tungsten Explorer is currently
operating in the Mediterranean where it will be drilling up to two wells and the
Company anticipates that it will mobilize to West Africa during the third
quarter of 2022 or potentially later.

Ongoing impact of the COVID-19 pandemic

The global spread of COVID-19, including its highly contagious variants and
sub-lineages, continues to pose significant risks and challenges worldwide, and
has caused and continues to cause widespread illness and significant loss of
life, leading governments across the world to impose and re-impose severely
stringent and extensive limitations on movement and human interaction, with
certain countries, including those where we maintain significant operations and
derive material revenue, implementing quarantine, testing and vaccination
requirements. These governmental reactions to the COVID-19 pandemic, as well as
changes to and extensions of such

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approaches, have led and continue to lead to uncertain and volatile economic activity around the world, including within the oil and gas industry and the regions and countries in which we operate.

While the Company has previously managed, and continues to actively manage, the
business in an attempt to mitigate any ongoing and material impact from the
spread of COVID-19, management anticipates that our industry, and the world at
large, will need to continue to operate in, and further adapt, to the current
environment for the foreseeable future.

Business outlook

Expectations about future oil and gas prices have historically been a key driver
of demand for our services. Since 2021, global oil prices have experienced a
robust recovery resulting in the strongest annual performance (on a price per
barrel basis) since 2012, with Brent crude oil trading above $125.00 per barrel
in March 2022. This robust recovery is due to, among other factors, the (i)
OPEC+ countries' agreement since last year to reduce production by almost 10
million barrels per day, representing approximately 10% of the world's output
compared with demand for approximately 96 million barrels a day, and their
recent agreement to boost production, but only in measured steps, (ii)
development, efficacy, availability and utilization of vaccines for COVID-19,
(iii) the reopening of global economies, (iv) injection of substantial
government monetary and fiscal stimulus and (v) the ongoing energy supply crisis
driven by a shortage of fuel within recovering economies and anticipated extreme
weather across Europe and northeast Asia, along with years of under investment
in oil reserve replacement, all of which has been exacerbated by the global
turmoil and political instability caused by Russia's invasion of Ukraine in
February 2022.

Notwithstanding the foregoing, the volatility and uncertainty surrounding global
oil prices largely remain as the spread of the COVID-19 pandemic and its highly
transmissible variants persist and, as a whole, the oil and gas industry
continues to be materially impacted and shaped by external factors which have
influenced its overall development and recovery, including geopolitical
instability caused by Russia's invasion of Ukraine in February 2022. While OPEC+
countries entered into an agreement in July 2021 to gradually phase out certain
oil production cuts by September 2022 and subsequently acknowledged that it
would continue to observe such agreement to only boost production modestly
despite higher oil prices, the long-term commitment of such countries to
maintain oil production at or near such levels remains uncertain. More recently,
the ongoing conflict in Ukraine has caused, and could continue to cause for the
foreseeable future, significant instability, disruption, uncertainty and
volatility in the hydrocarbon industry and the global markets at large. Further
geopolitical developments could occur, including a possible agreement relating
to Iran's nuclear deal and the subsequent suspension of U.S. sanctions in Iran
(which could result in, among other things, the influx of Iranian crude oil into
the global markets), any of which could significantly impact our business and
operations. With higher crude oil prices there is the potential for increased
production from U.S. shale producers and non-OPEC countries, which could lead to
significant increase in the overall global oil and gas supply, and result in
reduced commodity prices.

In addition, the opening of economies, supply chain bottlenecks occurring
throughout the world and across various industries, and the injection of
significant levels of governmental monetary and fiscal stimulus to avoid a
recession during the peak of the COVID-19 pandemic, have collectively
contributed to the highest level of inflation in decades across the U.S., the
United Kingdom, Europe and the global community at large. In the U.S., for
example, the Consumer Price Index reached a 40-year high in May 2022, and such
rates are expected to increase in the near-term. Therefore, our operations could
be materially and adversely impacted by global inflation, including in the form
of increases in personnel costs and the prices of goods and services required to
operate our rigs. Given that we enter into fixed dayrate contracts that have
contractual terms with minimal adjustments to account for rising inflation, the
majority (if not all) of these costs will be borne by us. While we are currently
unable to estimate the ultimate impact of inflation and the associated rising
prices of goods and services, our costs could rise in the near-term and
materially impact our profitability and overall financial condition.

Furthermore, central banks and regulators across the world have raised, and it
is anticipated that they will likely continue to raise, interest rates in an
attempt to gain control over and reduce inflation in their respective
jurisdictions. In the U.S., for example, the Federal Reserve further increased
rates in late July 2022. Such efforts being undertaken by central banks and
regulators could tip the global economy into a recession, which could materially
and adversely impact demand for oil and gas and, in the process, demand for our
services.

As a result of such volatility, disruption, instability and uncertainty,
operators have faced, and will generally continue to face, difficulties when
attempting to definitively plan their capital budget programs for the near- and
long- term.





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Back

The following table reflects a summary of our contract day backlog coverage and revenue associated with the June 30, 2022 based on the information available at that date:

                                                                   Revenues Contracted
                        Percentage of Days Contracted                 (in thousands)
                       2022        2023        Beyond        2022         2023         Beyond
Jackups                50%         30%           0%        $ 11,809     $  12,922     $       -
Drillships             85%         70%           0%        $ 56,213     $ 109,982     $       -
Managed Rigs -
contracted (1)         38%         31%           0%        $ 32,393     $  59,464     $       -
Managed Rigs - fees
(2)                    50%         31%           0%        $  3,434     $   2,250     $       -
Supported Rigs -
fees                   100%        100%          70%       $  1,656     $   2,628     $   1,430


(1)

The amounts represent backlog attributable to customer drilling contracts obtained for the rigs we manage.

(2)

The amounts consist of a fixed management fee paid to us pursuant to the
applicable Management Agreement and a marketing fee paid to us pursuant to the
applicable Marketing Agreement. The amounts exclude any variable fee payable to
us pursuant to the applicable Management Agreement.


Operating results

The operating results of our contract drilling services depend on three main parameters: days available; use of the platform; and daily rates. The following table presents this selected operational information for the periods indicated:

                                 Three Months Ended June 30,             

Semester completed June 30th,

                                  2022                 2021               2022                2021
Jackups
Rigs available                            2                    5                  2                   5
Available days (1)                      182                  455                362                 905
Utilization (2)                        98.8 %               39.9 %             79.6 %              35.3 %

Average daily income (3) $60,694 $124,857 $

 65,807       $      98,775
Deepwater
Rigs available                            2                    2                  2                   2
Available days (1)                      182                  182                362                 362
Utilization (2)                        99.7 %               49.7 %             99.2 %              49.4 %
Average daily revenues (3)   $      139,628       $       99,194     $      152,261       $      99,549
Held for Sale (4)
Rigs available                            3                    0                  3                   0
Available days (1)                      168                    0                654                   0
Utilization (2)                        47.0 %                N/A               62.3 %               N/A
Average daily revenues (3)   $       82,127                  N/A     $       34,339                 N/A


(1)

The days available correspond to the total number of calendar days of drilling in the period.

(2)

Utilization is calculated as a percentage of the actual number of revenue days divided by the available days in the period. A revenue-generating day is defined as a day for which a platform earns a daily rate after the start of operations.

(3)

Average daily revenues are based on contract drilling revenues divided by
revenue earning days. Average daily revenue will differ from average contract
dayrate due to billing adjustments for any non-productive time, mobilization
fees and demobilization fees.

(4)

Each of these rigs were classified as held for sale on our Consolidated Balance
Sheets during the Current Period and at December 31, 2021, up to the date of the
EDC Closing Date. See "Recent Developments - Share Purchase Agreement to Sell
EDC to ADES Arabia Holding" in this Part I, Item 2 for additional information.

For the three months ended June 30, 2022 and 2021

Net income attributable to shareholders for the year Current term has been $48.1 millionWhere $3.67 per basic share, on operating income of $73.2 millioncompared to the net loss attributable to shareholders for Comparable quarter of
$29.0 millionWhere $2.21 per basic share, on operating income of $35.6 million.

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The following table is an analysis of our operating results for the three months ended June 30, 2022 and 2021:

                                             Three Months Ended June 30,                 Change
                                              2022                 2021              $             %
(unaudited, in thousands)
Consolidated:
Revenues
Contract drilling services               $       42,744       $       31,655     $   11,089          35 %
Management fees                                   2,840                  497          2,343         471 %
Reimbursables and other                          27,654                3,449         24,205         702 %
Total revenues                                   73,238               35,601         37,637         106 %
Operating costs and expenses:
Operating costs                                  59,405               36,056         23,349          65 %
General and administrative                        6,910                4,967          1,943          39 %
Depreciation                                     11,087               14,161         (3,074 )       -22 %
Gain on EDC Sale                                (60,781 )                  -        (60,781 )        **
Total operating costs and expenses               16,621               55,184        (38,563 )       -70 %
Income (loss) from operations                    56,617              (19,583 )       76,200        -389 %
Other (expense) income
Interest income                                       7                   10             (3 )       -30 %
Interest expense and financing charges           (8,503 )             (8,511 )            8           0 %
Other, net                                       (1,011 )               (179 )         (832 )       465 %
Total other expense                              (9,507 )             (8,680 )         (827 )        10 %
Income (loss) before income taxes                47,110              (28,263 )       75,373        -267 %
Income tax (benefit) provision                   (1,221 )                720         (1,941 )      -270 %
Net income (loss)                                48,331              (28,983 )       77,314        -267 %
Net income (loss) attributable to
noncontrolling interests                            232                  (18 )          250         n/m
Net income (loss) attributable to
shareholders                             $       48,099       $      (28,965 )   $   77,064        -266 %

Drilling Services:
Revenue
Contract drilling services               $       42,744       $       31,655     $   11,089          35 %
Management fees                                       -                    -              -          **
Reimbursables and other                           5,119                2,711          2,408          89 %
Total revenue                                    47,863               34,366         13,497          39 %
Operating costs and expenses:
Operating costs                                  36,164               34,867          1,297           4 %
General and administrative                            -                    -              -          **
Depreciation                                     10,695               13,752       (3,057.0 )       -22 %
Gain on EDC sale                                      -                    -              -          **
Total operating costs and expenses               46,859               48,619         (1,760 )        -4 %
Income (loss) from operations                     1,004              (14,253 )       15,257        -107 %

Managed Services:
Revenue
Contract drilling services               $            -       $           
-     $        -          **
Management fees                                   2,840                  497          2,343         471 %
Reimbursables and other                          22,535                  738         21,797         n/m
Total revenue                                    25,375                1,235         24,140         n/m
Operating costs and expenses:
Operating costs                                  23,241                1,189         22,052         n/m
General and administrative                            -                    -              -          **
Depreciation                                          -                    -              -          **
Gain on EDC sale                                      -                    -              -          **
Total operating costs and expenses               23,241                1,189         22,052         n/m
Income from operations                            2,134                   46          2,088         n/m
n/m = not meaningful




                                       31
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Consolidated turnover: increase in total turnover $37.6 million primarily due to an increase in operating activities in Current term as discussed below.

Drilling Services Revenue: Contract drilling revenue increased $11.1 million for
the Current Quarter as compared to the Comparable Quarter. The increase in
contract drilling revenue was primarily the result of the number of rigs that
were operational, with seven in the Current Quarter, including three of the
jackup rigs included in the EDC Sale (as discussed in "Recent Developments -
Share Purchase Agreement to Sell EDC to ADES Arabia Holding" in this Part I,
Item 2), compared to four in the Comparable Quarter. Reimbursables and other
revenue increased $2.4 million in the Current Quarter as compared to the
Comparable Quarter primarily as a result of the number of our rigs which were
operational (as discussed immediately above).

Managed Services Revenue: Management fees increased $2.3 million in the Current
Quarter as compared to the Comparable Quarter as a result of the management of
certain deepwater floaters owned by Aquadrill, which we began managing in late
March 2021. The increase in Reimbursables and other revenue for the Current
Quarter as compared to the Comparable Quarter is primarily as a result of the
management of the deepwater floaters owned by Aquadrill (as discussed
immediately above).

Consolidated operating costs: Total operating costs increased by 65% ​​mainly due to an increase in operating activities in Current term as discussed below.

Drilling Services Operating costs: Drilling Services operating costs increased
4% in the Current Quarter as compared to the Comparable Quarter primarily as the
result of the changes in our drilling contracts (as discussed in "Drilling
Services Revenue" above).

Managed Services Operating costs: The increase in Managed Services operating
costs in the Current Quarter as compared to the Comparable Quarter is as the
result the management of certain deepwater floaters (as discussed in "Managed
Services Revenue above).

General and administrative expenses: Increase in general and administrative expenses for Current term compared to the Comparable quarter are mainly attributable to an increase in professional fees. Non-cash stock-based compensation expense for Current term and Comparable quarter was unimportant.

Depreciation expense: Depreciation expense is primarily related to rigs owned by
us included in our Drilling Services segment. The Managed Services segment does
not currently own depreciable assets. Depreciation expense for the Current
Quarter decreased 22% as compared to the Comparable Quarter, due primarily to a
decrease in depreciation expense related to the three jackup rigs that were
classified as held for sale on December 20, 2021 and subsequently sold in
connection with the EDC Sale (which closed on May 27, 2022).

Gain on sale of EDC: During the Current termwe recorded a net gain of approximately $60.8 million related to the sale of EDC. See “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in Recent development in this part I, point 2 for more details.

Interest income: Decrease in interest income for Current term compared to the Comparable quarter mainly due to lower interest rates earned on lower cash investments during the Current term.

Interest expense and financing charges: Interest expense and financing charges
includes non-cash deferred financing costs totaling approximately $0.4 million
for each of the Current Quarter and the Comparable Quarter.

Other, net: Our functional currency is USD; however, a portion of the revenues
earned and expenses incurred by certain of our subsidiaries are denominated in
currencies other than USD. These transactions are re-measured in USD based on a
combination of both current and historical exchange rates. Net foreign currency
exchange loss of approximately $1.0 million and $0.2 million was included in
"other, net," for the Current Quarter and Comparable Quarter, respectively.

Income tax provision: Our annualized effective tax rate for the Current Quarter
is negative 15.40% based on estimated annualized ordinary loss before income
taxes excluding income tax discrete items. Our annualized effective tax rate for
the Comparable Quarter was negative 7.06%, based on estimated annualized loss
before income taxes excluding income tax discrete items.

Our income taxes are generally dependent upon the results of our operations and
the local income taxes in the jurisdictions in which we operate. In some
jurisdictions, we do not pay taxes or receive benefits for certain income and
expense items, including interest expense and disposal gains or losses. In other
jurisdictions, we recognize income taxes on a net income basis or a deemed
profit basis.

For the six months ended June 30, 2022 and 2021

Net profit attributable to shareholders for the current period was $33.2 millionWhere $2.53 per basic share, on operating income of $131.6 millioncompared to the net loss attributable to shareholders for Comparable quarter of
$64.9 millionWhere $4.95 per basic share, on operating income of $55.8 million.

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The following table is an analysis of our operating results for the six months
ended June 30, 2022 and 2021:

                                             Six Months Ended June 30,                Change
                                             2022                2021              $            %
(unaudited, in thousands)
Consolidated:
Revenues
Contract drilling services               $      87,657       $      49,380     $  38,277          78 %
Management fees                                  3,943                 595         3,348         563 %
Reimbursables and other                         39,969               5,792        34,177         590 %
Total revenues                                 131,569              55,767        75,802         136 %
Operating costs and expenses:
Operating costs                                103,338              61,413        41,925          68 %
General and administrative                      13,492              10,462         3,030          29 %
Depreciation                                    22,382              28,286        (5,904 )       -21 %
Gain on EDC Sale                               (60,781 )                 -       (60,781 )        **
Total operating costs and expenses              78,431             100,161       (21,730 )       -22 %
Income (loss) from operations                   53,138             (44,394 )      97,532        -220 %
Other (expense) income
Interest income                                     11                 110           (99 )       -90 %
Interest expense and financing charges         (17,007 )           (17,021 )          14           0 %
Other, net                                      (1,786 )              (793 )        (993 )       125 %
Total other expense                            (18,782 )           (17,704 )      (1,078 )         6 %
Income (loss) before income taxes               34,356             (62,098 )      96,454        -155 %
Income tax provision                               217               2,882        (2,665 )       -92 %
Net income (loss)                               34,139             (64,980 )      99,119        -153 %
Net income (loss) attributable to
noncontrolling interests                           938                 (31 )         969         n/m
Net income (loss) attributable to
shareholders                             $      33,201       $     (64,949 )   $  98,150        -151 %

Drilling Services:
Revenue
Contract drilling services               $      87,657       $      49,380     $  38,277          78 %
Management fees                                      -                   -             -          **
Reimbursables and other                         10,302               5,054         5,248         104 %
Total revenue                                   97,959              54,434        43,525          80 %
Operating costs and expenses:
Operating costs                                 72,602              60,224        12,378          21 %
General and administrative                           -                   -             -          **
Depreciation                                    21,551              27,467        (5,916 )       -22 %
Gain on EDC sale                                     -                   -             -          **
Total operating costs and expenses              94,153              87,691         6,462           7 %
Income (loss) from operations                    3,806             (33,257 )      37,063        -111 %

Managed Services:
Revenue
Contract drilling services               $           -       $           -     $       -          **
Management fees                                  3,943                 595         3,348         563 %
Reimbursables and other                         29,667                 738        28,929         n/m
Total revenue                                   33,610               1,333        32,277         n/m
Operating costs and expenses:
Operating costs                                 30,736               1,189        29,547         n/m
General and administrative                           -                   -             -          **
Depreciation                                         -                   -             -          **
Gain on EDC sale                                     -                   -             -          **
Total operating costs and expenses              30,736               1,189        29,547         n/m
Income from operations                           2,874                 144         2,730         n/m
n/m = not meaningful




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Consolidated turnover: increase in total turnover $75.8 million mainly due to an increase in operating activities during the current period, as shown below.

Drilling Services Revenue: Contract drilling revenue increased $38.3 million for
the Current Period as compared to the Comparable Period. The increase in our
contract drilling revenue was primarily the result of the number of rigs that
were operational, with seven in the Current Period, including four of the jackup
rigs included in the EDC Sale (as discussed in "Recent Developments - Share
Purchase Agreement to Sell EDC to ADES Arabia Holding" in this Part I, Item 2),
compared to three in the Comparable Period. Reimbursables and other revenue
increased $5.2 million in the Current Period as compared to the Comparable
Period primarily as a result of the number of our rigs which were operational
(as discussed immediately above).

Managed Services Revenue: Management fees increased $3.3 million in the Current
Period as compared to the Comparable Period as a result of the management of
certain deepwater floaters owned by Aquadrill, which we began managing in late
March 2021. The increase in Reimbursables and other revenue for the Current
Period as compared to the Comparable Period is primarily as a result of the
management of the deepwater floaters owned by Aquadrill (as discussed
immediately above).

Consolidated operating expenses: Total operating expenses increased by 68% mainly due to an increase in operating activities during the current period, as shown below.

Drilling Services Operating costs: Drilling Services operating costs increased
21% in the Current Period as compared to the Comparable Period primarily as a
result of changes to certain of our drilling contracts (as discussed in Drilling
Services Revenue above). This increase was partially offset by the sale of
various assets during the Current Period and the recognition of a net gain of
approximately $1.9 million related to the sale of these assets. The Comparable
Period includes the sale of the Titanium Explorer and the recognition of a net
gain of approximately $2.8 million related to the sale of the asset.

Managed Services Operating costs: The increase in Managed Services operating
costs in the Current Period as compared to the Comparable Period is as the
result the management of certain deepwater floaters (as discussed in "Managed
Services Revenue" above).

General and administrative expenses: Increases in general and administrative
expenses for the Current Period as compared to the Comparable Period were
primarily due to increased labor costs and professional fees. General and
administrative expenses for the Comparable Period included approximately $0.2
million for non-cash share-based compensation expense. Non-cash share-based
compensation expense for the Current Period was immaterial.

Depreciation expense: Depreciation expense is primarily related to rigs owned by
us included in our Drilling Services segment. The Managed Services segment does
not currently own depreciable assets. Depreciation expense for the Current
Period decreased 21% as compared to the Comparable Period, due primarily to a
decrease in depreciation expense on the three jackup rigs that were classified
as held for sale on December 20, 2021 and subsequently sold in connection with
the EDC Sale (which closed on May 27, 2022).

Gain on sale of EDC: During the current period, we recorded a net gain of approximately $60.8 million related to the sale of EDC. See “Share Purchase Agreement to Sell EDC to ADES Arabia Holding” in the recent developments of this part I, point 2 for more details.

Interest income: Decreases in interest income for the Current Period as compared
to the Comparable Period were due primarily to lower interest rates earned on
lower cash investments during the Current Period.

Interest expense and financing charges: Interest expense and financing charges
includes non-cash deferred financing costs totaling approximately $0.8 million
for each of the Current Period and Comparable Period, respectively.

Other, net: Our functional currency is USD; however, a portion of the revenues
earned and expenses incurred by certain of our subsidiaries are denominated in
currencies other than USD. These transactions are re-measured in USD based on a
combination of both current and historical exchange rates. Net foreign currency
exchange loss of approximately $1.8 million and $0.8 million was included in
"other, net," for the Current Period and Comparable Period, respectively.

Income tax provision: Our annualized effective tax rate for the Current Period
is negative 15.40% based on estimated annualized ordinary loss before income
taxes excluding income tax discrete items. Our annualized effective tax rate for
the Comparable Period was negative 7.06%, based on estimated annualized loss
before income taxes excluding income tax discrete items.

Our income taxes are generally dependent upon the results of our operations and
the local income taxes in the jurisdictions in which we operate. In some
jurisdictions, we do not pay taxes or receive benefits for certain income and
expense items, including interest expense and disposal gains or losses. In other
jurisdictions, we recognize income taxes on a net income basis or a deemed
profit basis.

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Cash and capital resources

The prolonged low price environment caused by the spread of COVID-19, the
resulting decline in global economic activity and the oil price and market share
volatility began to reduce our liquidity and capital resources in the second
quarter of 2020 through 2021, a trend which extended into the second quarter of
2022 and could extend further into 2023 and beyond. Such events have had
significant and adverse consequences for general financial, business and
economic conditions, as well as for the financial, business and economic
position of our business and the business of our customers and suppliers, and
may continue to adversely impact our ability to derive cash flows from our
operations and access capital funding from third parties in the future.

We experienced, and could experience further delays in the collection of certain
accounts receivables due to logistical obstacles resulting from the COVID-19
pandemic, such as office closures, as well as other impacts to our long-term
liquidity. Ongoing and additional governmental measures, such as widespread lock
downs, nightly curfews, territorial entry restrictions and mandates, could
impact our ability to operate in locations where such restrictions and
requirements are in place, including those locations where we derive material
revenue. In addition, the invasion of Ukraine by Russia in February 2022, and
the resulting impact of sanctions imposed by western nations, could adversely
impact the global oil and gas markets for the foreseeable future and, in the
process, our ability to access additional capital funding sources. During these
uncertain times, we have sought, and continue to seek, measures to reduce our
operating costs and preserve cash. We could implement further cost reduction
measures (in addition to those previously put in place in 2020 and maintained
through the Current Period) and alter our general financial strategy in the
near- and long-term.

Sources and uses of cash

Our anticipated cash flow needs, both in the short- and long-term, may include,
among others: (i) normal recurring operating expenses; (ii) planned and
discretionary capital expenditures; (iii) repayments of interest; and (iv)
certain contractual cash obligations and commitments. We may, from time to time,
redeem, repurchase or otherwise acquire our outstanding 9.25% First Lien Notes
through open market purchases, tender offers or pursuant to the terms of such
securities.


We currently expect to fund our cash flow needs with cash generated by our
operations, cash on hand or proceeds from sales of assets. As of June 30, 2022,
we believe we maintain adequate cash reserves and are continuously managing our
actual cash flow and cash forecasts. Accordingly, management believes that we
have adequate liquidity to fund our operations for the twelve months following
the date our Consolidated Financial Statements are issued and therefore, have
been prepared under the going concern assumption.

Under the First Lien Indenture, we are required to apply the proceeds derived
from the EDC Sale to repay, prepay or purchase our senior secured indebtedness
(including the 9.25% First Lien Notes), acquire all or substantially all of the
assets or capital stock of any other entity engaged in a similar or
complementary business to the Company's lines of business, or make capital
expenditures or acquire non-current assets (including vessels and related
assets) that are useful in such lines of business (including any deposit or
installment payments with respect thereto as well as any expenditures related to
the acquisition, construction or "ready for sea" costs of such vessels). To the
extent such proceeds are not so applied (or committed to be applied) within one
year after receipt, the Company will be required to offer to purchase the 9.25%
First Lien Notes with such proceeds.

The 9.25% First Lien Notes mature in November 2023. To the extent additional
funds are necessary to meet our long-term liquidity needs as we continue to
execute our business strategy, including in order to satisfy our obligations
under the 9.25% First Lien Notes, we anticipate that they will be obtained
through incurrence of additional indebtedness, additional equity financings,
sales of assets or a combination of these potential sources of funds. However,
there can be no assurance that we will be able to obtain additional funds on
terms acceptable to us, on a timely basis or at all. The failure to obtain
sufficient funds on acceptable terms when needed, including the ability to
refinance any portion of the 9.25% First Lien Notes, could have a material and
adverse effect on the results of operations, and financial condition. If we are
unable to fund capital expenditures with our cash flow from operations or sales
of non-strategic assets, we may be required to either incur additional
borrowings or raise capital through the sale of debt or equity securities. Our
ability to access the capital markets may be limited by our financial condition
at the time, by certain restrictive covenants under the agreements governing our
credit agreement and notes, by changes in laws and regulations or interpretation
thereof and by adverse market conditions resulting from, among other things,
general economic conditions and contingencies and uncertainties that are beyond
our control. For example, the invasion of Ukraine by Russia in February 2022,
and the resulting impact of sanctions imposed by western nations against Russia,
Russian-backed separatist regions in Ukraine, certain banks, companies,
government officials, and other individuals in Russia and Belarus, could
adversely impact the global oil and gas markets for the foreseeable future and,
in the process, our ability to access additional capital funding sources. The
failure to obtain sufficient funds on acceptable terms when needed could have a
material adverse effect on the results of operations, and financial condition.

As of June 30, 2022, we had working capital of approximately $265.5 million,
including approximately $227.3 million of cash available for general corporate
purposes in accordance with our First Lien Indenture. Scheduled debt service
consists of interest payments through June 30, 2023 of approximately $32.4
million. We anticipate capital expenditures through June 30, 2023 to be between
approximately $4.8 million and $5.9 million. As our rigs obtain new contracts,
we could incur reactivation and mobilization costs for these rigs, as well as
additional customer requested equipment upgrades. These costs could be
significant and may not be fully

                                       35
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recoverable from the customer. Based on our expected levels of activity,
incremental expenditures through June 30, 2023 for special periodic surveys,
major repair and maintenance expenditures and equipment re-certifications are
anticipated to be between approximately $21.6 million and $26.4 million. As of
June 30, 2022, we had approximately $49.9 million available for the issuance of
letters of credit under our cash collateralized letter of credit facility.

The following table includes a summary of our cash flow information for the periods indicated:

                                        Six Months Ended June 30,
(unaudited, in thousands)                 2022               2021

Cash flows (used in) provided by:

    Operating activities              $     (39,705 )     $  (40,944 )
    Investing activities                    195,364           10,846
    Financing activities                          -                -

Changes in cash flow from operating activities are driven by changes in net loss during the relevant periods (see discussion of changes in net loss above in “Results of Operations” of this part I, item 2).

Cash flows from investing activities in the Current Quarter include net proceeds
of $200.0 derived from the EDC Sale and $3.1 million derived from the sale of
various assets. The Comparable Quarter include net proceeds of $13.6 million
from the sale of the Titanium Explorer.

The significant elements of the 9.25% First Lien Notes are described in "  Note
5. Debt"   of the "Notes to Unaudited Consolidated Financial Statements" in Part
I, Item 1 of this Quarterly Report. The information discussed therein is
incorporated by reference in its entirety into this Part I, Item 2.

We enter into operating leases in the normal course of our business for office space, housing, vehicles and specified operating equipment. Some of these leases contain options that would cause our future cash payments to change if we exercised those options.

Commitments and contingencies

We are subject to litigation, claims and disputes in the ordinary course of
business, some of which may not be covered by insurance. Information regarding
our legal proceedings is set forth in "  Note 8. Commitments and
Contingencies  " of the "Notes to Unaudited Consolidated Financial Statements"
in Part I, Item 1 of this Quarterly Report. The information discussed therein is
incorporated by reference in its entirety into this Part I, Item 2.

There is an inherent risk in any litigation or dispute and no assurance can be
given as to the outcome of any claims. We do not believe the ultimate resolution
of any existing litigation, claims or disputes will have a material adverse
effect on our financial position, results of operations or cash flows.


Significant Accounting Policies and Accounting Estimates

The preparation of unaudited financial statements and related disclosures in
accordance with U.S. GAAP requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period. Our
significant accounting policies are included in "  Note 2. Basis of Presentation
and Significant Accounting Policies  " of the "Notes to the Unaudited
Consolidated Financial Statements" in Part I, Item 1 of this Quarterly Report.
These policies, along with our underlying judgments and assumptions made in
their application, have a significant impact on our consolidated financial
statements. While management believes current estimates are appropriate and
reasonable, actual results could materially differ from those estimates. We have
discussed the development, selection and disclosure of such policies and
estimates with the audit committee of the Board of Directors.

Our critical accounting policies are those related to property and equipment,
impairment of long-lived assets and income taxes. For a discussion of the
critical accounting policies and estimates that we use in the preparation of our
consolidated financial statements, see "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations - Critical Accounting
Estimates" in Part II of our Annual Report on Form 10-K for the year ended
December 31, 2021, which was filed with the SEC on March 30, 2022. During the
Current Quarter, there were no material changes to the judgments, assumptions or
policies upon which our critical accounting estimates are based.

Recent Accounting Pronouncements: See "  Note 2. Basis of Presentation and
Significant Accounting Policies  " of the "Notes to Unaudited Consolidated
Financial Statements" in Part I, Item 1 of this Quarterly Report for further
information. The information discussed therein is incorporated by reference in
its entirety into this Part I, Item 2.

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