UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
OR
For the transition period from to
Commission File Number:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
c/o Vantage Energy Services, Inc.
(Address of principal executive offices and zip code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol |
Name of each exchange on which registered |
N/A |
N/A |
N/A |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes No
The number of Vantage Drilling International Ordinary Shares outstanding as of November 1, 2022 is
Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes No
TABLE OF CONTENTS
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Page |
3 |
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PART I—FINANCIAL INFORMATION |
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Item 1 |
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7 |
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7 |
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8 |
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9 |
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10 |
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11 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
28 |
Item 3 |
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39 |
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Item 4 |
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39 |
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PART II—OTHER INFORMATION |
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Item 1 |
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39 |
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Item 6 |
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40 |
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42 |
2
SAFE HARBOR STATEMENT
This Quarterly Report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are included throughout this Quarterly Report, including under “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” When used, statements which are not historical in nature, including those containing words such as “anticipate,” “assume,” “believe,” “budget,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “would,” “will,” “future” and similar expressions are intended to identify forward-looking statements in this Quarterly Report.
These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements.
Among the factors that could cause actual results to differ materially are the risks and uncertainties described under “Item 1A. Risk Factors” 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, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report, and the following:
3
Many of these factors are beyond our ability to control or predict. Any, or a combination of these factors, could materially affect our future financial condition or results of operations and the ultimate accuracy of the forward-looking statements. These forward-looking statements are not guarantees of our future performance, and our actual results and future developments may differ materially from those projected in the forward-looking statements. Management cautions against putting undue reliance on forward-looking statements or projecting any future results based on such statements or present or prior earnings levels.
In addition, each forward-looking statement speaks only as of the date of the particular statement, and we undertake no obligation to publicly update or revise any forward-looking statements. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements. Additional information concerning factors that could cause actual results to differ materially from those in the forward-looking statements is contained from time to time in filings we may make with the SEC, which may be obtained by contacting us or the SEC. These filings are also available through our website at www.vantagedrilling.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval system (EDGAR) at www.sec.gov. The contents of our website are not part of this Quarterly Report.
Unless the context indicates otherwise, all references to the “Company,” “Vantage Drilling International,” “we,” “our” or “us” refer to Vantage Drilling International and its consolidated subsidiaries. References to “VDI” refer to Vantage Drilling International, a Cayman Islands exempted company and the group parent company.
4
GLOSSARY OF TERMS
The following terms used in this Quarterly Report have the following meanings, unless specified elsewhere in this Quarterly Report:
Abbreviation/Acronym |
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Definition |
10% Second Lien Notes |
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The Company's 10% Senior Secured Second Lien Notes due 2020 |
2016 Amended MIP |
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The Company's Amended and Restated 2016 Management Incentive Plan |
2016 Term Loan Facility |
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The Company's initial term loans in place in connection with the Reorganization Plan |
9.25% First Lien Notes |
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The Company's 9.25% Senior Secured First Lien Notes due November 15, 2023 |
ADES |
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ADES International Holding Ltd, an offshore and onshore provider of oil and gas drilling and production services in the Middle East, India and Africa |
ADVantage |
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ADVantage Drilling Services SAE, a joint venture owned 51% by the Company and 49% by ADES |
ASC |
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Accounting Standards Codification |
Board of Directors |
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The Company's board of directors |
Comparable Period |
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The nine months ended September 30, 2021 |
Comparable Quarter |
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The three months ended September 30, 2021 |
Conversion |
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The conversion of all of the Convertible Notes into Ordinary Shares |
Convertible Notes |
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The Company's 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 |
COVID-19 |
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Coronavirus disease 2019, a strain of coronavirus caused by SARS-CoV-2 |
Current Period |
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The nine months ended September 30, 2022 |
Current Quarter |
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The three months ended September 30, 2022 |
DOJ |
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U.S. Department of Justice |
EDC |
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Emerald Driller Company |
Effective Date |
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February 10, 2016, the date the Company emerged from bankruptcy |
EPS |
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Earnings per share |
Exchange Act |
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Securities Exchange Act of 1934, as amended |
First Lien Indenture |
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First Lien Indenture, dated as of November 30, 2018, by and between Vantage Drilling International and U.S. Bank National Association |
IRS |
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U.S. Internal Revenue Service |
OPEC |
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The Organization of the Petroleum Exporting Countries |
OPEC+ |
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The Organization of the Petroleum Exporting Countries plus 10 non-OPEC nations |
Ordinary Shares |
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The Company's ordinary shares, par value $0.001 per share |
PBGs |
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Performance-based restricted stock units |
QLE |
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A qualified liquidity event as defined in the 2016 Amended MIP |
Reorganization Plan |
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The Company's pre-packaged plan of reorganization under Chapter 11 of Title 11 of the U.S. Bankruptcy Code |
ROU |
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Right-of-use |
Russo-Ukrainian War |
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The ongoing war resulting from Russia's invasion of Ukraine in February 2022 |
SEC |
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Securities and Exchange Commission |
Securities Act |
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Securities Act of 1933, as amended |
Tax Election |
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Tax election filed with the IRS on January 22, 2020, to allow VDI to be treated as a partnership, rather than a corporation, for U.S. federal income tax purposes, with an effective date retroactive to December 9, 2019 |
TBGs |
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Time-based restricted stock units |
TEV |
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Total enterprise value |
U.S. |
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United States of America |
U.S. GAAP |
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Accounting principles generally accepted in the United States of America |
U.S. Holder |
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A beneficial owner of the Ordinary Shares that is, for U.S. federal income tax purposes, (i) a citizen or individual resident of the United States, (ii) a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) that was organized under the laws of the United States, any state thereof, or the District of Columbia, (iii) an estate, the income of which is subject to U.S. federal income tax regardless of its source or (iv) a trust, if a U.S. court can exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or such trust has a valid election in effect under applicable treasury regulations to be treated as a U.S. person for U.S. federal income tax purposes |
USD or $ |
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U.S. Dollar |
VDC |
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Vantage Drilling Company, the Company's former parent company |
VDC Note |
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A $61.5 million promissory note issued by the Company in favor of VDC |
VDI |
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Vantage Drilling International |
5
VHI |
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Vantage Holdings International, a subsidiary of VDI |
VIE |
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Variable interest entity |
6
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
Vantage Drilling International
Consolidated Balance Sheets
(In thousands, except share and par value information)
(Unaudited)
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September 30, 2022 |
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December 31, 2021 |
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ASSETS |
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Current assets |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Trade receivables, net of allowance for credit losses of $ |
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Materials and supplies |
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Assets held for sale |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment |
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Property and equipment |
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Accumulated depreciation |
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( |
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( |
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Property and equipment, net |
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Operating lease ROU assets |
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Other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND SHAREHOLDERS' EQUITY |
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Current liabilities |
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Accounts payable |
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$ |
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$ |
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Other current liabilities |
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Liabilities held for sale |
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— |
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Total current liabilities |
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Long–term debt, net of discount and financing costs of $ |
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Other long-term liabilities |
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Shareholders' equity |
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Ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Controlling interest shareholders' equity |
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Noncontrolling interests |
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Total equity |
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Total liabilities and shareholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
7
Vantage Drilling International
Consolidated Statement of Operations
(In thousands, except per share amounts)
(Unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2022 |
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2021 |
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2022 |
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2021 |
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Revenue |
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Contract drilling services |
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$ |
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$ |
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$ |
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$ |
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Management fees |
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Reimbursables and other |
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Total revenue |
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Operating costs and expenses |
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Operating costs |
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General and administrative |
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Depreciation |
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Gain on EDC Sale |
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( |
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— |
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( |
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— |
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Total operating costs and expenses |
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(Loss) income from operations |
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( |
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( |
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( |
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Other (expense) income |
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Interest income |
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Interest expense and other financing charges |
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( |
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( |
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( |
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( |
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Other, net |
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( |
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( |
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( |
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( |
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Total other expense |
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( |
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( |
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( |
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( |
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(Loss) income before income taxes |
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( |
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( |
) |
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( |
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Income tax provision |
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Net (loss) income |
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( |
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( |
) |
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( |
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Net (loss) income attributable to noncontrolling interests |
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( |
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( |
) |
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( |
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Net (loss) income attributable to shareholders |
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$ |
( |
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$ |
( |
) |
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$ |
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$ |
( |
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(Loss) earnings per share |
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Basic |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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Diluted |
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$ |
( |
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$ |
( |
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$ |
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$ |
( |
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The accompanying notes are an integral part of these unaudited consolidated financial statements.
8
Vantage Drilling International
Consolidated Statement of Shareholders’ Equity
(In thousands)
(Unaudited)
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Nine-Month Period Ended September 30, 2021 |
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Ordinary Shares |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Non-Controlling Interests |
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Total Equity |
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Balance January 1, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Share-based compensation - dividend equivalents |
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— |
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— |
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( |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
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( |
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Balance March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Balance June 30, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Share-based compensation - dividend equivalents |
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— |
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— |
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— |
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— |
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Contributions from holders of noncontrolling interests |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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( |
) |
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( |
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Balance September 30, 2021 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Nine-Month Period Ended September 30, 2022 |
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Ordinary Shares |
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Shares |
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Amount |
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Additional Paid-in Capital |
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Accumulated Deficit |
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Non-Controlling Interests |
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Total Equity |
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Balance January 1, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
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$ |
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Share-based compensation |
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— |
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— |
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— |
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— |
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Share-based compensation - dividend equivalents |
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— |
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— |
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( |
) |
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— |
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— |
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( |
) |
Net (loss) income |
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— |
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— |
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— |
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( |
) |
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( |
) |
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Balance March 31, 2022 |
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$ |
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$ |
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$ |