The following discussion is intended to assist you in understanding our
financial position as of March 31, 2022, and our results of operations for the
three months ended March 31, 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.

Overview



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 sets forth certain current information concerning our offshore drilling fleet as of May 9, 2022:



                                    Water Depth       Drilling Depth
       Name          Year Built    Rating (feet)         Capacity           Location            Status
                                                          (feet)
Jackups
Topaz Driller           2009                  375              30,000     Tunisia        Operating
Soehanah                2007                  375              30,000     Thailand       Operating
Drillships (1)
Platinum Explorer       2010               12,000              40,000     India          Operating
Tungsten Explorer       2013               12,000              40,000     Egypt          Operating
Managed Rigs
Polaris                 2008               10,000              37,500     Sri Lanka      Warm stacked
Aquarius                2008               10,000              35,000     Newfoundland   Cold stacked
Capella                 2008               10,000              37,500     Indonesia      Operating
Held For Sale (2)
Emerald Driller         2008                  375              30,000     Qatar          Operating
Sapphire Driller        2009                  375              30,000     Qatar          Operating
Aquamarine Driller      2009                  375              30,000

Qatar Contract preparation

(1)

The 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.

(2)


On December 20, 2021, we entered into the ADES Purchase Agreement (as defined
below under "Recent Developments - Share Purchase Agreement to Sell EDC to ADES
Arabia Holding") to sell to ADES Arabia (as defined below under "Recent
Developments - Share Purchase Agreement to Sell EDC to ADES Arabia Holding") all
of the issued and outstanding equity of EDC, which owns the Emerald Driller,
Sapphire Driller and Aquamarine Driller. These rigs are currently classified as
held for sale on our Consolidated Balance Sheets as of March 31, 2022 and
December 31, 2021.

Recent Developments

Geopolitical Instability Caused by the Conflict in Ukraine



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 the
continuation of the upward trend in the near-term, oil and gas prices are still
expected to continue to be volatile as a result of, among other factors, (i) the
ongoing COVID-19 pandemic, including the transmission and presence of highly
contagious and new variants and the pace of vaccine rollouts, (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, and (vi)
the potential for increased production and activity from U.S. shale producers
and non-OPEC countries driven by the current oil prices, 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 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 with 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, supply chains, financial markets and currency exchange
rates, hydrocarbon price volatility in particular is likely to continue for the
foreseeable future. To the extent negotiations of a cease fire between Russia
and Ukraine are unsuccessful, the potential destruction of critical oil-related
infrastructure in Ukraine, and the implementation of further sanctions and other
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 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 "ADES Purchase Agreement") with ADES
Arabia Holding ("ADES Arabia"), which wholly owns ADES, pursuant to which VHI
agreed to sell to ADES Arabia (the "ADES Sale") all of the issued and
outstanding equity of VHI's wholly-owned subsidiary, EDC. EDC is the owner of
the following jackup rigs, each of which are currently operating in Qatar: the
Emerald Driller; the Sapphire Driller; and the Aquamarine Driller. The ADES
Purchase Agreement became effective on December 20, 2021 and the transactions
contemplated under such agreement are expected to close in the second quarter of
2022. Pursuant to the ADES Purchase Agreement, VHI will receive an aggregate
cash consideration payment of $170.0 million (the "Cash Consideration Payment").
In addition to the Cash Consideration Payment, the Company anticipates that it
will receive from ADES Arabia approximately $34 million in certain reimbursable
amounts in relation to the preparation and mobilization costs associated with
the Sapphire Driller and Aquamarine Driller Qatari contracts incurred prior to
closing of the ADES Sale (the "Reimbursable Amounts"). However, both the Cash
Consideration Payment and Reimbursable Amounts are subject to potential
adjustments contemplated by the ADES Purchase Agreement, and therefore, the
actual amounts of the Cash Consideration Payment and Reimbursable Amounts that
are ultimately received by the Company could vary from those set forth above.

Moreover, certain subsidiaries of the Company and ADES agreed, in connection
with the ADES Purchase Agreement, to enter into a three-year support services
agreement (the "ADES Support Services Agreement"), pursuant to which a
subsidiary of the Company agreed to provide support services to EDC with respect
to the Emerald Driller, Sapphire Driller and Aquamarine Driller. 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 Agreement 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 it
anticipates will be derived from the ADES 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 ADES
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.

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 approaches, have led to, and continue to
result in, uncertain and volatile economic activity worldwide, 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.

                                       26
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Business Outlook



Expectations about future oil and gas prices have historically been a key driver
of demand for our services. Against the backdrop of challenging industry
conditions which began in 2015, the initial onset, and continued global spread
of the COVID-19 pandemic and the resulting decline in global economic activity,
coupled with the short-lived price war between Saudi Arabia and Russia, led to
significant reductions and delays in oil and gas exploration and development
plans on the part of operators during 2020, largely impeding and unwinding the
improvements experienced by the industry in 2019. These reductions and delays
led to a substantial drop in oil prices and demand for offshore drilling
services globally, including for our services, during, and subsequent to, the
second quarter of 2020. However, as a whole, global oil prices experienced a
strong recovery during 2021 resulting in the best annual performance (on a price
per barrel basis) since 2012, with Brent crude oil trading close to $85.00 per
barrel in October 2021 and more recently trading above $125.00 per barrel in
March 2022. This strong 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. 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. In addition, 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. As a result of such volatility, disruption,
instability and uncertainty, it has been difficult, and will generally continue
to be difficult, for operators to definitively plan their capital budget
programs in the near term.


In addition to macroeconomic challenges, including those set forth above, which
have led to reduced demand for drilling rigs, the excess supply of delivered and
new-build rigs continues to impact overall market demand. It is unclear when
these new-build drilling rigs will actually be delivered, if at all, as many rig
deliveries have (i) already been deferred to later dates or (ii) been canceled
entirely.


In response to the oversupply of drilling rigs, a number of our competitors
removed older, less competitive rigs from their fleets by cold stacking the
drilling rigs, repurposing rigs for use in other industries or taking them
permanently out of service. A substantial number of rigs have been removed from
the drilling fleet since the oil price decline in 2014 and this trend has only
accelerated since the second quarter of 2020. However, we have recently observed
instances where cold-stacked rigs are being reactivated for new contracts as the
supply of ready-to-go rigs diminishes. This could result in more rigs competing
with us in the market, and in turn cause any recovery in dayrates to stall or
reverse, which may materially impact the environment in which we operate and
compete.


In addition many offshore drillers with significant levels of debt on their
balance sheets have recently completed, are currently pursuing, or may elect to
pursue in the near-term, debt restructurings. As drillers emerged and continue
to emerge from these debt restructurings, consolidation in the industry
transpired and it is likely that further consolidation will occur, reducing the
number of industry participants and ultimately lowering cost structures. The
combination of recycling, restructuring and consolidation will be necessary for
the industry to regain firmer footing. Any industry recovery will also depend
significantly on continued and demonstrable improvement in global macroeconomic
conditions including the ability to mitigate COVID-19's highly contagious
variants and mutations.


In response to both global market conditions and excessive levels of idle
capacity in recent years, operating dayrates began to experience intense
downward pressure in 2015, a trend which continued through 2021, as most
drilling contractors had preferred, and continue to prefer, to maintain rigs in
an active state to mitigate the risks and costs of stacking and reactivating
rigs and to benefit from the fact that customers had generally favored operating
rigs over reactivated cold-stacked rigs. However, dayrates have shown signs of

                                       27
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improvement as of 2022, resembling pricing trends exhibited prior to the onset of the COVID-19 pandemic.




With the distribution of vaccines in certain jurisdictions in an attempt to
inoculate populations against COVID-19 along with significant governmental
assistance directed at combatting the challenging economic environment caused by
the COVID-19 pandemic, economic activity in certain portions of the world
generally improved during 2021. This improvement has contributed to, among other
things, a general increase in the demand for oil and gas. In addition, during
the last seven years, oil and gas producers restrained their investment as
priorities shifted from exploring and producing to returning capital to
investors and minimizing cost during the challenging oil and gas price
environment. As a result of these shifting priorities and the restraint on
overall investment, reserves have generally decreased. This trend (along with
other factors) has contributed to crude oil prices reaching decade- high levels
in 2022. The jackup segment experienced visible recovery in 2021 with respect to
utilization rates and the deepwater segment continues to exhibit signs of
notable recovery regarding utilization rates. In addition, dayrates for both the
jack-up and deepwater segments have begun to increase in 2022.


Notwithstanding the foregoing, the recovery experienced could be short lived
especially given the quickly changing and ever-evolving dynamics of the COVID-19
pandemic and its highly transmittable variants and sub-lineages. With the
COVID-19 pandemic unlikely to completely subside in the near term, the
possibility exists that the world will need to continue to learn to operate in
and further adapt to the current environment for the foreseeable future.
Volatility in global oil and gas prices and how our industry manages the
logistical challenges stemming from the COVID-19 pandemic will continue to play
a significant role in determining the outlook for the industry, both in the
short- and long-term.


Backlog

The following table reflects a summary of our contract drilling backlog coverage
of days contracted and related revenue as of March 31, 2022 based on information
available as of that date:

                                                           Revenues Contracted (1)
                 Percentage of Days Contracted                  (in thousands)
                2022          2023        Beyond        2022         2023        Beyond
Jackups          38%           0%               0 %   $ 14,286     $      -     $      -
Drillships       82%           45%              0 %   $ 69,065     $ 47,580     $      -
Managed Rigs     33%           0%               0 %   $ 39,358     $  4,700     $      -
Held for Sale    95%           78%             43 %   $ 61,966     $ 57,670     $ 64,011


(1)
Includes contract(s) with operating dayrates that may vary based on a variable
oil price index rate mechanism calculated utilizing the then applicable average
price of Brent crude. For purposes of calculating the backlog with contracts
that contain a variable oil price indexed rate mechanism we utilize the
applicable oil price as of quarter end multiplied by the number of days
remaining in the firm contract period. The average dayrate over the term of the
contract could be lower or higher depending upon the average price of Brent
crude for such measurable period and such adjustments are not estimated in the
backlog dayrate. As certain of our drilling contracts are denominated in
currencies other than the USD, backlog could also vary due to movements in the
applicable exchange rates.


                                       28

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Results of Operations



Operating results for our contract drilling services are dependent on three
primary metrics: available days, rig utilization and dayrates. The following
table sets forth this selected operational information for the periods
indicated:

                                Three Months Ended March 31,
                                  2022                 2021
Jackups
Rigs available                             2                   5
Available days (1)                       180                 450
Utilization (2)                         60.3 %              30.7 %
Average daily revenues (3)   $        74,295       $      64,448
Deepwater
Rigs available                             2                   2
Available days (1)                       180                 180
Utilization (2)                         98.8 %              49.1 %
Average daily revenues (3)   $       165,159       $      99,911
Held for Sale (4)
Rigs available                             3                   0
Available days (1)                       270                   0
Utilization (2)                         41.5 %               N/A
Average daily revenues (3)   $        66,813                 N/A


(1)

Available days are the total number of rig calendar days in the period.

(2)

Utilization is calculated as a percentage of the actual number of revenue earning days divided by the available days in the period. A revenue earning day is defined as a day for which a rig earns dayrate after commencement 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)


On December 20, 2021, we entered into the ADES Purchase Agreement to sell to
ADES Arabia all of the issued and outstanding equity of EDC, which owns the
Emerald Driller, Sapphire Driller and Aquamarine Driller. Each of these rigs are
currently classified as held for sale on our Consolidated Balance Sheets as of
March 31, 2022 and December 31, 2021.

For the Three Months Ended March 31, 2022 and 2021



Net loss attributable to shareholders for the Current Quarter was $14.9 million,
or $1.14 per basic share, on operating revenues of $58.3 million, compared to
net loss attributable to shareholders for the Comparable Quarter of $36.0
million, or $2.74 per basic share, on operating revenues of $20.2 million.

                                       29
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The following table is an analysis of our operating results for the three months ended March 31, 2022 and 2021:



                                            Three Months Ended March 31,               Change
                                              2022                 2021             $           %
(unaudited, in thousands)
Consolidated:
Revenues
Contract drilling services               $       44,913       $       17,725     $ 27,188        153 %
Management fees                                   1,103                   98        1,005        n/m
Reimbursables and other                          12,315                2,343        9,972        426 %
Total revenues                                   58,331               20,166       38,165        189 %
Operating costs and expenses:
Operating costs                                  43,933               25,357       18,576         73 %
General and administrative                        6,582                5,495        1,087         20 %
Depreciation                                     11,295               14,125       (2,830 )      -20 %
Total operating costs and expenses               61,810               44,977       16,833         37 %
Loss from operations                             (3,479 )            (24,811 )     21,332        -86 %
Other (expense) income
Interest income                                       4                  100          (96 )      -96 %
Interest expense and financing charges           (8,504 )             (8,510 )          6          0 %
Other, net                                         (775 )               (614 )       (161 )       26 %
Total other expense                              (9,275 )             (9,024 )       (251 )        3 %
Loss before income taxes                        (12,754 )            (33,835 )     21,081        -62 %
Income tax provision                              1,438                2,162         (724 )      -33 %
Net loss                                        (14,192 )            (35,997 )     21,805        -61 %
Net income (loss) attributable to
noncontrolling interests                            706

(13 ) 719 n/m Net loss attributable to shareholders $ (14,898 ) $ (35,984 ) $ 21,086 -59 %



Drilling Services:
Revenue
Contract drilling services               $       44,913       $       17,725     $ 27,188        153 %
Management fees                                       -                    -            -         **
Reimbursables and other                           5,183                2,343        2,840        121 %
Total revenue                                    50,096               20,068       30,028        150 %
Operating costs and expenses:
Operating costs                                  36,438               25,357       11,081         44 %
General and administrative                            -                    -            -         **
Depreciation                                     10,856               13,715       (2,859 )      -21 %
Total operating costs and expenses               47,294               39,072        8,222         21 %
Income (loss) from operations                     2,802

(19,004 ) 21,806 -115 %



Managed Services:
Revenue
Contract drilling services               $            -       $            -     $      -         **
Management fees                                   1,103                   98        1,005        n/m
Reimbursables and other                           7,132                    -        7,132         **
Total revenue                                     8,235                   98        8,137        n/m
Operating costs and expenses:
Operating costs                                   7,495                    -        7,495         **
General and administrative                            -                    -            -         **
Depreciation                                          -                    -            -         **
Total operating costs and expenses                7,495                    -        7,495         **
Income from operations                              740                   98          642        655 %

Consolidated Revenue: Total revenue increased $38.2 million due primarily to an increase in operating activities in the Current Quarter.


                                       30
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Drilling Services Revenue: Contract drilling revenue increased $27.2 million for
the Current Quarter as compared to the Comparable Quarter. The increase in our
contract drilling revenue was primarily the result of the number of rigs that
were operational, with six in the Current Quarter (including two of the jackup
rigs classified as held for 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 Quarter. Reimbursables and other revenue
increased $2.8 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 $1.0 million in the Current
Quarter as compared to the Comparable Quarter as a result of the management of
certain deepwater floaters owned by the Aquadrill Entities, which we began
managing in late March during the Comparable Quarter. 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 the Aquadrill Entities (as discussed immediately above.)

Consolidated Operating Costs: Total operating costs increased 73% due primarily to an increase in operating activities in the Current Quarter.



Drilling Services Operating costs: Drilling Services operating costs increased
44% in the Current Quarter as compared to the Comparable Quarter primarily as
the result of the changes in our drilling contracts discussed above. This
increase was partially offset by the sale of various assets during the Current
Quarter and the recognition of a net gain of $1.9 million related to the sale of
these assets. The Comparable Quarter includes the sale of the Titanium Explorer
and the recognition of a net gain of $2.8 million in related to the sale of the
asset.

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 discussed above.

General and administrative expenses: Increases in general and administrative expenses for the Current Quarter as compared to the Comparable Quarter were primarily due to increased labor costs offset by lower professional fees. General and administrative expenses for the Comparable Quarter included approximately $0.3 million for non-cash share-based compensation expense. Non-cash share-based compensation expense for the Current Quarter 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
Quarter decreased 20% as compared to the Comparable Quarter, due primarily to
the decreased depreciation expense on the three jackup rigs classified as held
for sale on December 20, 2021.

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



Interest expense and financing charges: Interest expense and financing charges
includes non-cash deferred financing costs totaling approximately $0.4 million
for the Current Quarter and for the Comparable Quarter, 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 $0.8 million and $0.6 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 17.51% 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 6.0%, 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.

Liquidity 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 first quarter of
2022 and could extend further into 2022 and beyond. Such events have had
significant 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 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. Governmental measures, such as widespread lock downs, nightly curfews
, territorial entry restrictions and mandates, could impact our ability to
operate

                                       31
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in locations where such restrictions and requirements are in place, including
those locations where we derive material revenue. 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 Liquidity



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 March 31, 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. In the event the ADES Sale is
not consummated (or should the amount of anticipated proceeds from the ADES Sale
differ from our estimates), we nevertheless believe that the cash generated by
our operations (including through our $184.7 million of backlog expected to be
realized in fiscal year 2022) together with cash on hand will still be
sufficient to fund our cash flow needs for the next twelve months.

Under the First Lien Indenture, we are required to apply the proceeds derived
from the ADES 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.

Our 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 could have a material 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 March 31, 2022, we had working capital of approximately $212.6 million,
including approximately $62.2 million of cash available for general corporate
purposes. Scheduled debt service consists of interest payments through December
31, 2022 of approximately $32.4 million. We anticipate capital expenditures
through December 31, 2022 to be between approximately $4.0 million and $4.9
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
recoverable from the customer. Based on our expected levels of activity,
incremental expenditures through December 31, 2022 for special periodic surveys,
major repair and maintenance expenditures and equipment re-certifications to be
between approximately $21.0 million and $25.7 million. Approximately $1.0
million and $6.8 million of capital expenditures and incremental expenditures,
respectively, are anticipated to be reimbursed to the Company at the close of
the ADES Sale. As of March 31, 2022, we had approximately $49.9 million
available for the issuance of letters of credit under our cash collateralized
letter of credit facility.

                                       32
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The following table includes a summary of our cash flow information for the periods indicated:



                                         Three Months Ended March 31,
(unaudited, in thousands)                 2022                 2021

Cash flows (used in) provided by:


    Operating activities              $      (8,205 )     $       (15,351 )
    Investing activities                     (3,799 )              13,101
    Financing activities                          -                     -

Changes in cash flows from operating activities are driven by changes in net loss during the relevant periods (see the 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 $3.1 million 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 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.

Critical 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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