Valaris LtdVAL
Valaris Ltd Stock Compensation Disclosure
SHARE BASED COMPENSATION
Valaris Limited adopted the MIP as of April 30, 2021 and authorized and reserved 9.0 million Common Shares for issuance pursuant to equity incentive awards to be granted under the MIP, which may be in the form of incentive stock options, nonstatutory stock options, restricted stock, restricted stock units, stock appreciation rights, dividend equivalents and cash awards or any combination thereof. As of December 31, 2025, there were 6.2 million shares available for issuance under the MIP.
Time-Based Share Awards
Under the Company's MIP, time-based restricted stock unit awards have been granted to certain employees and senior officers which generally vest ratably over a three-year period from the date of grant. The grant-date fair value per share for these time-based restricted stock awards is equal to the closing price of the Company's stock on the grant date.
Non-employee directors receive an annual grant of time-based restricted awards which vest in full on the earlier of the first anniversary of the grant date or the next annual meeting of shareholders following the grant. Non-employee directors are permitted to elect to receive deferred share awards which can be settled and delivered on the six-month anniversary following the termination of the director's service or a specific pre-determined date.
Our time-based share awards do not have voting or participating rights as the dividend equivalent provided for in the award agreement is forfeitable (except in certain limited circumstances) and further our debt agreements limit our ability to pay dividends and none have been declared. Compensation expense for share awards is measured at fair value on the date of grant and recognized on a straight-line basis over the requisite service period (usually the vesting period). Our compensation cost is reduced for forfeited awards in the period in which the forfeitures occur.
Compensation expense for our time-based share awards is allocated to Contract drilling expenses (exclusive of depreciation and reimbursable expenses) and General and administrative expenses within our Consolidated Statements of Operations based on the award holder's employment function. The following table summarizes time-based share award compensation expense and the related income tax benefit recognized (in millions):
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Contract drilling expenses (exclusive of depreciation and reimbursable expenses) | $ | 9.3 | $ | 8.8 | $ | 6.8 | |||||||||||
| General and administrative | 8.6 | 8.7 | 9.0 | ||||||||||||||
| 17.9 | 17.5 | 15.8 | |||||||||||||||
| Tax benefit | (0.5) | (1.1) | (1.6) | ||||||||||||||
| Total | $ | 17.4 | $ | 16.4 | $ | 14.2 | |||||||||||
As of December 31, 2025, there was $28.3 million of total estimated unrecognized compensation cost related to time-based share awards, which has a weighted-average remaining vesting period of 1.4 years.
The following table summarizes the value of time-based share awards granted and vested:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Weighted-average grant date fair value of share awards granted during the period (per share) | $ | 43.58 | $ | 69.89 | $ | 63.22 | |||||||||||
Total fair value of share awards vested during the period (in millions) | $ | 13.4 | $ | 30.0 | $ | 25.2 | |||||||||||
The following table summarizes time-based share awards activity for the year ended December 31, 2025 (shares in thousands):
| Share Awards | |||||||||||
| Awards | Weighted-Average Grant Date Fair Value | ||||||||||
Share awards as of December 31, 2024 | 597 | $ | 60.58 | ||||||||
| Granted | 494 | $ | 43.58 | ||||||||
Vested | (307) | $ | 56.80 | ||||||||
| Forfeited | (3) | $ | 58.00 | ||||||||
Share awards as of December 31, 2025 | 781 | $ | 51.32 | ||||||||
Performance Awards
Under the Company's MIP, performance awards may be issued to our senior officers. Performance awards generally vest at the end of a three-year measurement period based on attainment of performance goals.
The performance awards granted in 2021 and 2022 were based on three performance goals and subject to achievement of those performance goals based on (a) designated share price hurdles whereby our closing stock price must equal or exceed certain market price targets for ninety consecutive trading days (the "Share Price Objective"); (b) relative return on capital employed ("ROCE") as compared to a specified peer group, all as defined in the award agreements (the "ROCE Objective"), and (c) specified strategic goals as established by the Compensation Committee of the board of directors (the "Strategic Goal Objective" and together with the ROCE Objective, the "Performance-Based Objectives"). In 2023, incremental awards based on the Strategic Goal Objective were granted. These awards were paid in equity during 2024 following a three-year performance period and were subject to attainment of such objectives ranging from 0% to 150% of target performance under such objectives.
The performance awards granted in 2023, 2024 and 2025 include awards which are subject to the achievement of goals based on our absolute total shareholder return and our total shareholder return relative to a specified peer group (the "TSR Objectives" and together with the Share Price Objective, the "Market-Based Objectives"). These awards are payable in equity at a range from 0% to 200% of target performance following three-year performance periods, subject to approval by the Compensation Committee of the board of directors following the end of each respective performance period.
The estimated probable outcome of attainment of the specified performance goals is based primarily on relative performance over the requisite performance period. Any subsequent changes in this estimate as it relates to the Performance-Based Objectives are recognized as a cumulative adjustment to compensation cost in the period in which the change in estimate occurs. Compensation cost for the Market-Based Objectives is recognized as long as the requisite service period is completed and will not be reversed even if the Market-Based Objectives are never satisfied. Compensation expense for performance awards is recognized over the requisite service period using the accelerated method and is reduced for forfeited awards in the period in which the forfeitures occur.
The fair value of the performance awards is measured on the date of grant. The grant-date fair value per unit for the portion of the performance awards related to Performance-Based Objectives was equal to the closing price of the Company's stock on the grant date. The portion of these awards that were based on the Company's achievement of Market-based Objectives were valued at the date of grant using a Monte Carlo simulation with the following weighted average assumptions for the grants made in the years ended December 31, 2025, 2024 and 2023:
| Years Ended December 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
| Expected price volatility | 48 | % | 49 | % | 60 | % | |||||||||||
| Expected dividend yield | — | — | — | ||||||||||||||
| Risk-free interest rate | 3.90 | % | 4.31 | % | 4.32 | % | |||||||||||
The expected price volatility assumption is estimated using market data for certain peer companies during periods in which our own trading history is limited. As our trading history increases, it will bear greater weight in determining our expected price volatility assumption.
The weighted average grant-date fair values of performance awards granted during the years ended December 31, 2025, 2024 and 2023 were $28.92, $63.05 and $62.09, respectively.
The following table summarizes the performance award activity for the year ended December 31, 2025 (shares in thousands):
Awards(2) | Weighted Average Grant Date Fair Value Price(2) | ||||||||||
Balance as of December 31, 2024 | 271 | $ | 61.69 | ||||||||
Granted - Market-Based Objectives(1) | 236 | $ | 28.92 | ||||||||
Balance as of December 31, 2025 | 507 | $ | 46.42 | ||||||||
(1)The number of awards granted reflects the shares that would be granted if the target level of performance were to be achieved. The number of shares actually issued after considering forfeitures may range from zero to 472,000.
(2)There were no forfeited or vested shares for the year ended December 31, 2025.
During the years ended December 31, 2025, 2024 and 2023, we recognized $7.7 million, $10.6 million and $11.7 million of compensation expense for performance awards, respectively, which was included in General and administrative expenses in our Consolidated Statements of Operations.
As of December 31, 2025, there was $8.4 million of total estimated unrecognized compensation cost related to performance awards, which has a weighted-average remaining vesting period of 1.6 years.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 20, 2026 | Showing above |
| 2017 | Feb 27, 2018 | |
About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.