424B3

This is supplement no. 3 to the prospectus dated May 17, 2018 that relates to the offer and resale of up to (a) an aggregate of 2,841,768 units of stapled securities (the “Stapled Securities”) (including the ordinary shares of Vantage Drilling International (the “Ordinary Shares” or “New Shares”) (i) forming a part thereof that may become separated therefrom as described in the prospectus and (ii) that are issuable upon the conversion of the Notes (as defined below) forming a part thereof) and (b) an aggregate of 655,094 Ordinary Shares that are not part of any Stapled Securities, of Vantage Drilling International by the selling holders identified in the prospectus. As of February 10, 2016, the original issuance date thereof, each Stapled Security initially represented one Ordinary Share and an original issuance amount of $172.61 principal amount of 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 (the “Notes” or “Convertible Notes”), in each case subject to adjustment as further described in the prospectus. Interest on the Notes accrues at a rate of 1% per year from February 10, 2016, the issue date of the Notes, through, but not including, the fourth anniversary of February 10, 2016. From and after the fourth anniversary of February 10, 2016 and through the maturity date of the Notes, interest will accrue at a rate of 12% per year. Interest on the Notes is payable in kind, semi-annually (in arrears) on June 30 and December 31 of each year by increasing the outstanding principal amount of the Notes. The Notes are mandatorily convertible, in whole or in part, into Ordinary Shares upon the occurrence of certain events enumerated in the indenture governing the Notes, as further described in the prospectus. Accordingly, the Notes, or portions thereof, may be converted into Ordinary Shares without the consent of the holder thereof in certain circumstances, as further described in the prospectus. We are not selling any Stapled Securities or Ordinary Shares under this prospectus. We will not receive any proceeds from the sale of Stapled Securities or Ordinary Shares being offered by the selling holders.

The selling holders may offer Stapled Securities and Ordinary Shares from time to time, if and to the extent as they may determine, through public or private transactions or through other means described under “Plan of Distribution” in the prospectus at prevailing market prices, at prices different than prevailing market prices or at privately negotiated prices. The selling holders may sell Stapled Securities or Ordinary Shares through agents they select or through underwriters and dealers they select. The selling holders also may sell Stapled Securities or Ordinary Shares directly to investors. If the selling holders use agents, underwriters or dealers to sell the Stapled Securities or Ordinary Shares, we will name such agents, underwriters or dealers and describe any applicable commissions or discounts in a supplement to this prospectus if required.

Our Stapled Securities are quoted on the Over-The-Counter Bulletin Board (the “OTCBB”) and on the Over the Counter Pink Market (“OTC Pink”) under the symbol “VTGGF.” The last reported sale price per Stapled Security as quoted on the OTCBB was $260.00, on July 17, 2018. Our Ordinary Shares are not listed on any national securities exchange and no public market currently exists for our Ordinary Shares.

We have attached to this prospectus supplement the Quarterly Report on Form 10-Q of the Company for the quarterly period ended June 30, 2018 filed on August 8, 2018. The attached information updates and supplements, and should be read together with, the Company’s prospectus dated May 17, 2018, as supplemented from time to time.

Investing in our Stapled Securities and Ordinary Shares involves risks. See the section entitled “Risk Factors” in the prospectus and in our annual report on Form 10-K for the year ended December 31, 2017, as amended by our annual report on Form 10-K/A for the year ended December 31, 2017 (as so amended, the “Annual Report”), which is incorporated by reference therein, for a discussion of certain risks that you should consider before buying our Stapled Securities or Ordinary Shares.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

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. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

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.

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 July 20, 2018 is 5,000,053 shares.

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 ☐

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 in “Item 1A. Risk Factors” of our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on March 29, 2018, “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of this Quarterly Report and the following:

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,” “VDI,” “we,” “our” or “us” refer to Vantage Drilling International and its consolidated subsidiaries.

	June 30, 2018			December 31, 2017

ASSETS
Current assets
Cash and cash equivalents	$	181,860		$	195,455
Restricted cash		5,000			-
Trade receivables		41,090			45,379
Inventory		43,892			43,955
Prepaid expenses and other current assets		14,990			13,207
Total current assets		286,832			297,996
Property and equipment
Property and equipment		919,473			904,584
Accumulated depreciation		(176,431	)		(141,393	)
Property and equipment, net		743,042			763,191
Other assets		17,583			21,935
Total assets	$	1,047,457		$	1,083,122

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable	$	43,032		$	39,666
Accrued liabilities		22,171			25,117
Current maturities of long-term debt		—			4,430
Total current liabilities		65,203			69,213
Long–term debt, net of discount and financing costs of $31,294 and $56,174		947,258			919,939
Other long-term liabilities		21,452			17,195
Commitments and contingencies (Note 8)
Shareholders' equity
Ordinary shares, $0.001 par value, 50 million shares authorized; 5,000,053 shares issued and outstanding		5			5
Additional paid-in capital		373,972			373,972
Accumulated deficit		(360,433	)		(297,202	)
Total shareholders' equity		13,544			76,775
Total liabilities and shareholders’ equity	$	1,047,457		$	1,083,122

The accompanying notes are an integral part of these unaudited consolidated financial statements.

	Three Months Ended June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Revenue
Contract drilling services	$	55,183		$	47,785		$	106,778		$	85,841
Management fees		304			405			605			806
Reimbursables		4,974			5,073			10,741			8,665
Total revenue		60,461			53,263			118,124			95,312
Operating costs and expenses
Operating costs		44,650			40,363			85,635			69,361
General and administrative		6,278			11,501			13,632			22,980
Depreciation		17,711			18,554			35,579			36,993
Total operating costs and expenses		68,639			70,418			134,846			129,334
Loss from operations		(8,178	)		(17,155	)		(16,722	)		(34,022	)
Other income (expense)
Interest income		220			215			441			356
Interest expense and other financing charges		(19,412	)		(19,023	)		(38,683	)		(37,922	)
Other, net		(514	)		842			(1,084	)		1,394
Bargain purchase gain		—			1,910			—			1,910
Total other expense		(19,706	)		(16,056	)		(39,326	)		(34,262	)
Loss before income taxes		(27,884	)		(33,211	)		(56,048	)		(68,284	)
Income tax provision		3,210			3,381			7,183			4,807
Net loss	$	(31,094	)	$	(36,592	)	$	(63,231	)	$	(73,091	)
Net loss per share, basic and diluted	$	(6.22	)	$	(7.32	)	$	(12.65	)	$	(14.62	)
Weighted average ordinary shares outstanding, basic and diluted		5,000			5,000			5,000			5,000

The accompanying notes are an integral part of these unaudited consolidated financial statements.

	Six Months Ended June 30,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss	$	(63,231	)	$	(73,091	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation expense		35,579			36,993
Amortization of debt financing costs		234			234
Amortization of debt discount		24,647			24,401
Amortization of contract value		3,130			1,504
PIK interest on the Convertible Notes		3,823			3,780
Share-based compensation expense		3,772			1,727
Bargain purchase gain		—			(1,910	)
Deferred income tax benefit (expense)		592			(3,315	)
(Gain) loss on disposal of assets		(2,524	)		191
Changes in operating assets and liabilities:
Trade receivables		4,289			(12,614	)
Inventory		63			815
Prepaid expenses and other current assets		(3,833	)		(422	)
Other assets		865			5,471
Accounts payable		3,366			4,135
Accrued liabilities and other long-term liabilities		(2,441	)		(3,768	)
Net cash provided by (used in) operating activities		8,331			(15,869	)
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(771	)		(1,203	)
Down payment on rig purchase		(15,000	)		—
Cash paid for Vantage 260 acquisition		—			(13,000	)
Net proceeds from sale of Vantage 260		4,660			—
Net cash used in investing activities		(11,111	)		(14,203	)
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt		(5,815	)		(715	)
Net cash used in financing activities		(5,815	)		(715	)
Net decrease in cash and cash equivalents		(8,595	)		(30,787	)
Unrestricted and restricted cash and cash equivalents—beginning of period		195,455			231,727
Unrestricted and restricted cash and cash equivalents—end of period	$	186,860		$	200,940
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest	$	10,014		$	9,535
Income taxes (net of refunds)		7,374			8,499
Non-cash investing and financing transactions:
Payment of interest in kind on the Convertible Notes	$	3,824		$	3,780

The accompanying notes are an integral part of these unaudited consolidated financial statements.

Vantage Drilling International, a Cayman Islands exempted company, is 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 natural gas wells for our customers. Through our fleet of drilling units, we are a provider of offshore contract drilling services to major, national and independent oil and natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

On August 31, 2015, Petrobras America, Inc. (“PAI”) and Petrobras Venezuela Investments & Services, BV (“PVIS”), both subsidiaries of Petrobras (as defined below), notified the Company of the termination of the Agreement for the Provision of Drilling Services for the Titanium Explorer dated February 4, 2009 (the “Drilling Contract”) between PVIS and Vantage Deepwater Company and which had been novated to PAI and Vantage Deepwater Drilling, Inc., claiming the Company had breached its obligations under the Drilling Contract. Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. are both wholly-owned subsidiaries of the Company. We immediately filed an international arbitration claim against PAI, PVIS, and Petrobras, claiming wrongful termination of the Drilling Contract.

On July 2, 2018, an international arbitration tribunal issued an award in favor of Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. The tribunal found that PAI and PVIS breached the Drilling Contract, and awarded Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. damages in the aggregate amount of $622.0 million against PAI, PVIS, and Petrobras and dismissed the Petrobras entities’ counterclaims against the Company with prejudice. The tribunal also awarded the Company interest on the foregoing award amount at an annual rate of 15.2%, compounded monthly, to accrue from (i) April 1, 2018, with respect to $615.6 million thereof, (ii) October 20, 2015, with respect to $5.2 million thereof, and (iii) November 19, 2015, with respect to $1.2 million thereof, in each case, until final payment of the awarded sums. Per the terms of the award, each of the Company and Petrobras will bear its own legal fees, and the fees and expenses of the tribunal, including the compensation of the arbitrators, aggregating approximately $1.5 million, will be borne equally by both sides.

The Company’s ability to fully recover the award against Petrobras is subject to legal, procedural, solvency and other risks associated with enforcing arbitration awards in these circumstances. Accordingly, no assurances can be given as to whether or to what extent such award will ultimately be recovered, if at all.

On April 27, 2018, we understand that Vantage was added as an additional defendant in a legal proceeding by the Brazilian federal public prosecutor’s office in the State of Parana (the “Brazilian Federal Prosecutor”) against certain individuals, including an executive of Petrobras and two political lobbyists, in connection with the contracting of the Titanium Explorer drillship to Petrobras under the Drilling Contract, with the Brazilian Government and Petrobras as interested parties. Vantage is alleged to have been involved in and benefitted from the purported bribery scheme at Petrobras through Hamylton Padilha, the Brazilian agent our former parent company, Vantage Drilling Company (“VDC”), used in the contracting of the Titanium Explorer drillship to Petrobras, and Mr. Hsin-Chi Su, a former member of the Board of Directors and a significant shareholder of VDC. It was not until July 19, 2018 that we became aware of the legal proceeding as it was previously under seal. The Company has not been formally served nor advised by any Brazilian authorities of any particular charges. The Company understands that the legal proceeding is part of the Brazilian Federal Prosecutor’s larger “Car Wash” investigation into money laundering and corruption allegations at Petrobras.

The damages claimed in the proceeding are in the amount of BRL 102.8 million (approximately $31 million), together with a civil fine equal to three times that amount. The Company understands that the court hearing the proceeding has issued an order authorizing the seizure and freezing of the assets of the defendants in the legal proceeding, including any assets of Vantage, as a precautionary measure, in the amount of approximately $124 million. The seizure order has not had an effect on the Company’s assets or operations, as Vantage does not own any assets in Brazil. The Company intends to vigorously defend any such allegations and seizures; however, we cannot predict the ultimate outcome of this matter nor that there will not be further developments in the Car Wash investigation or in any other ongoing investigation or proceeding that could adversely affect us.

On April 5, 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of a class 154-44C jackup rig and related multi-year drilling contract for $13.0 million. A down payment of $1.3 million was made in February 2017 upon execution of the agreement and the remaining $11.7 million was paid at closing. The rig was renamed the Vantage 260. In August 2017, we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jackup rig to fulfill the drilling contract. On October 19, 2017, we entered into a purchase and sale agreement to sell the Vantage 260 for $5.1 million. The transaction closed and the Vantage 260 was sold on February 26, 2018.

On June 13, 2018, we entered into a share purchase agreement with a third party to acquire the shares of an entity that owns a Baker Marine Pacific Class 375 jackup rig, and related bareboat charter to which the entity is a party, for $84.0 million, subject to certain adjustments for working capital and liabilities of the entity not discharged by the acquisition date. We made a down payment of $15.0 million in connection with the execution of the share purchase agreement and the remaining $69.0 million (as may be adjusted pursuant to the terms of the share purchase agreement) is due at closing, which must occur not later than by the close of business on December 10, 2018. If the closing does not occur by such time, the down payment will be forfeited to the extent the failure to close resulted from (i) a breach by us of our representations, warranties, or other obligations under the share purchase agreement, or (ii) the failure by us to consummate the sale despite being otherwise obligated to do so under the terms of the share purchase agreement. Otherwise, the transaction is subject to customary closing conditions, including, to the extent required by law, certain regulatory approvals.

Restructuring Agreement and Emergence from Voluntary Reorganization under Chapter 11 Proceeding

On December 1, 2015, we and VDC, our former parent company, entered into a restructuring support agreement (the “Restructuring Agreement”) with a majority of our secured creditors. Pursuant to the terms of the Restructuring Agreement, the Company agreed to pursue a pre-packaged plan of reorganization (the “Reorganization Plan”) under Chapter 11 of Title 11 of the United States Bankruptcy Code and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for a $61.5 million promissory note (the “VDC Note”). As this transaction involved a reorganization of entities under common control, it was reflected in the consolidated financial statements, at carryover basis, on a retrospective basis. Effective as of the Company’s emergence from bankruptcy on February 10, 2016 (the “Effective Date”), VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 new ordinary shares of the reorganized Company (the “New Shares”) in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

On December 3, 2015 (the “Petition Date”), the Company, certain of its subsidiaries and certain VDC subsidiaries who were guarantors of the Company’s pre-bankruptcy secured debt, filed the Reorganization Plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged Reorganization Plan and the Company emerged from bankruptcy on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 units in the reorganized Company (the “Units”). Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Company’s 1%/12% Step-Up Senior Secured Third Lien Convertible Notes due 2030 (the “Convertible Notes”), subject to adjustment upon the payment of interest in kind (“PIK interest”) and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes), which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of June 30, 2018, after taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $176.78 of principal of Convertible Notes.

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended and restated to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans (the “2016 Term Loan Facility”).

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition term loans and senior notes claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s new 10% Senior Secured Second Lien Notes due 2020 (the “10% Second Lien Notes”). In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes and net cash proceeds to the Company of $73.9 million, after deducting the cash portion of the backstop premium.

The Reorganization Plan allowed the Company to continue business operations during the court proceedings and maintain all operating assets and agreements. The Company had adequate liquidity prior to the filing and did not have to seek any debtor-in-possession financing. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

Other Events: Since July 2015, the Company has been cooperating in an investigation by the U.S. Department of Justice (“DOJ”) and the SEC arising from allegations that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petroleo Brasileiro S.A. (“Petrobras”), and Mr. Hsin-Chi Su, a former member of the Board of Directors and a significant shareholder of our former parent company, VDC, had engaged in an alleged scheme to pay bribes to former Petrobras executives, in violation of the U.S. Foreign Corrupt Practices Act (“FCPA”). In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation and closing the investigation without any action against the Company. We have continued our cooperation in the investigation by the SEC into the same allegations and engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in 2018. In connection with the proposed offer of settlement, we accrued a liability in the amount of $5 million. If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. For more information about this matter, please see “Note 8. Commitments and Contingencies.”

Basis of Consolidation: The accompanying interim consolidated financial information as of June 30, 2018 and for the three and six months ended June 30, 2018 and 2017 has been prepared without audit, pursuant to the rules and regulations of the SEC and includes our accounts and those of our majority owned subsidiaries. All significant intercompany transactions and accounts have been eliminated. They reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the financial position and results of operations for the interim periods, on a basis consistent with the annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) have been condensed or omitted pursuant to the rules and regulations of the SEC, although we believe that the disclosures made are adequate to provide for fair presentation. The balance sheet at December 31, 2017 is derived from our December 31, 2017 audited financial statements. These interim financial statements should be read in conjunction with the financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2017. 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. Certain previously reported amounts have been reclassified to conform to the current period presentation.

Cash and Cash Equivalents: Includes deposits with financial institutions as well as short-term money market instruments with maturities of three months or less when purchased.

Inventory: Consists of materials, spare parts, consumables and related supplies for our drilling rigs.

Property and Equipment: Consists of the costs of our drilling rigs, furniture and fixtures, computer equipment and capitalized costs for computer software. Drilling rigs are depreciated on a component basis over estimated initial useful lives ranging from five to thirty-five years on a straight-line basis as of the date placed in service. Other assets are depreciated upon placement in service over estimated initial useful lives ranging from three to seven years on a straight-line basis. When assets are sold, retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the balance sheet and the resulting gain or loss is included in operating costs or general and administrative expenses, depending on nature of the asset. For the three months ended June 30, 2018 and 2017, we recognized a net loss of $158,000 and a net loss $191,000, respectively, related to the sale or retirement of assets. For the six months ended June 30, 2018 and 2017, we recognized a net gain of $2.5 million and a net loss of $191,000, respectively, related to the sale or retirement of assets.

We evaluate the realization of property and equipment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impairment loss on our property and equipment exists when estimated undiscounted cash flows expected to result from the use of the asset and its eventual disposition are less than its carrying amount. Any impairment loss recognized would be computed as the excess of the asset’s carrying value over the estimated fair value. Estimates of future cash flows require us to make long-term forecasts of our future revenues and operating costs with regard to the assets subject to review. Our business, including the utilization rates and dayrates we receive for our drilling rigs, depends on the level of our customers’ expenditures for oil and natural gas exploration, development and production expenditures. Oil and natural gas prices and customers’ expectations of potential changes in these prices, the general outlook for worldwide economic growth, political and social stability in the major oil and natural gas producing basins of the world, availability of credit and changes in governmental laws and regulations, among many other factors, significantly affect our customers’ levels of expenditures. Sustained declines in or persistent depressed levels of oil and natural gas prices, worldwide rig counts and utilization, reduced access to credit markets, reduced or depressed sale

prices of comparably equipped jackups and drillships and any other significant adverse economic news could require us to evaluate the realization of our drilling rigs. In connection with our adoption of fresh-start accounting upon our emergence from bankruptcy on February 10, 2016, an adjustment of $2.0 billion was recorded to decrease the net book value of our drilling rigs to estimated fair value. The projections and assumptions used in that valuation have not changed significantly as of June 30, 2018; accordingly, no triggering event has occurred to indicate that the current carrying value of our drilling rigs may not be recoverable.

Interest costs and the amortization of debt financing costs related to the financings of our drilling rigs are capitalized as part of the cost while they are under construction and prior to the commencement of each vessel’s first contract. We did not capitalize any interest for the reported periods.

Intangible assets: In April 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of the Vantage 260, a class 154-44C jackup rig, and a related multi-year drilling contract for $13.0 million. In connection with our acquisition, the Company recorded an identifiable intangible asset of $12.6 million for the fair value of the acquired favorable drilling contract. The resulting intangible asset is being amortized on a straight-line basis over the two-year term of the drilling contract. We recognized approximately $1.6 million and $3.2 million of amortization expense for intangible assets for the three and six months ended June 30, 2018, respectively, and approximately $1.5 million during each of the three and six months ended June 30, 2017.

Expected future intangible asset amortization as of June 30, 2018 is as follows:

Debt Financing Costs: Costs incurred with debt financings are deferred and amortized over the term of the related financing facility on a straight-line basis which approximates the interest method. Debt issuance costs related to a recognized debt liability are presented in the consolidated balance sheet as a direct deduction from the carrying amount of that debt liability.

Rig and Equipment Certifications: We are required to obtain regulatory certifications to operate our drilling rigs and certain specified equipment and must maintain such certifications through periodic inspections and surveys. The costs associated with these certifications, including drydock costs, are deferred and amortized over the corresponding certification periods.

Income Taxes: Income taxes are provided for based upon the tax laws and rates in effect in the countries in which operations are conducted and income is earned. Deferred income tax assets and liabilities are computed for differences between the financial statement basis and tax basis of assets and liabilities that will result in future taxable or tax deductible amounts and are based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred income tax assets to the amount expected to be realized. We recognize interest and penalties related to income taxes as a component of income tax expense.

Concentrations of Credit Risk: Financial instruments that potentially subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents, restricted cash and accounts receivable. We maintain deposits in federally insured financial institutions in excess of federally insured limits. We monitor the credit ratings and our concentration of risk with these financial institutions on a continuing basis to safeguard our cash deposits. We have a limited number of key customers, who are primarily large international oil and gas operators, national oil companies and other international oil and gas companies. Our contracts provide for monthly billings as services are performed and we monitor compliance with contract payment terms on an ongoing basis. Payment terms on customer invoices typically range from 30 to 45 days. Outstanding receivables beyond payment terms are promptly investigated and discussed with the specific customer. We do not have an allowance for doubtful accounts on our trade receivables as of June 30, 2018 or December 31, 2017.

Use of Estimates: The preparation of financial statements 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 revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to property and equipment, income taxes, insurance, employee benefits and contingent liabilities. Actual results could differ from these estimates.

Functional Currency: We consider the U.S. dollar to be the functional currency for all of our operations since the majority of our revenues and expenditures are denominated in U.S. dollars, which limits our exposure to currency exchange rate fluctuations. We recognize currency exchange rate gains and losses in other, net. For the three months ended June 30, 2018 and 2017, we recognized a net loss of $0.5 million and a net gain of $0.9 million, respectively, related to currency exchange rates. For the six months ended June 30, 2018 and 2017, we recognized a net loss of $1.1 million and a net gain of $1.4 million, respectively, related to currency exchange rates.

Fair Value of Financial Instruments: The fair value of our short-term financial assets and liabilities approximates the carrying amounts represented in the consolidated balance sheet principally due to the short-term nature or floating rate nature of these instruments. At June 30, 2018, the fair value of the 2016 Term Loan Facility, the 10% Second Lien Notes and the Convertible Notes was approximately $134.7 million, $74.7 million and $1.07 billion, respectively, based on quoted market prices in a less active market, a Level 2 measurement.

We adopted ASU No. 2014-09, Revenue from Contracts with Customers (ASC 606) effective January 1, 2018 using the modified retrospective implementation method. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied. The standard also requires new, expanded disclosures regarding revenue recognition. We adopted the new revenue standard using the modified retrospective approach, for which we were not required to make any changes to the prior year presentation. After evaluating all outstanding contracts, we determined there to be no cumulative effect adjustment on retained earnings and no adjustments were made to prior periods. While ASC 606 requires additional disclosure regarding revenues recognized from customer contracts, adoption did not have a material impact on our consolidated financial statements. See “Note 3. Revenue from Contracts with Customers.”

We adopted ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments, effective January 1, 2018. The standard addresses the classification and presentation of eight specific cash flow issues that previously resulted in diverse practice. Adoption of the standard had minimal impact on the presentation of cash receipts and cash payments within our consolidated statement of cash flows.

We adopted ASU No. 2016-18, Statement of Cash Flows (ASC 230): Restricted Cash, effective January 1, 2018. The standard requires amounts generally described as restricted cash or restricted cash equivalents to be included with cash and cash equivalents when reconciling the beginning and end of period total amounts presented on the statement of cash flows. The standard also requires details on the nature and amounts of restricted cash. Aside from presenting the restricted cash and restricted cash equivalents as a component of the beginning and ending cash balances on our consolidated statement of cash flows, the changes did not have a material effect on our consolidated financial statements or on the related disclosures.

We adopted ASU No. 2016-16, Income Taxes (ASC 740): Intra-Entity Transfers of Assets Other Than Inventory, effective January 1, 2018. The standard requires entities to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transaction occurs as opposed to deferring tax consequences and amortizing them into future periods. Adoption of the standard had no impact on our consolidated financial statements and related disclosures.

We adopted ASU No. 2017-01, Business Combinations (ASC 805): Clarifying the Definition of a Business, effective January 1, 2018. The standard clarifies the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. Adoption of the standard had no impact on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU No. 2016-02, Leases (ASC 842): Amendments to the FASB ASC, which requires an entity to recognize lease assets and lease liabilities on the balance sheet and to disclose key information about leasing arrangements. ASC 842 is effective for financial statements issued for fiscal years beginning after December 15, 2018, and early adoption is permitted. Based on the original guidance, lessees and lessors were required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach, including a number of optional practical expedients that entities could elect to apply. In July 2018, the FASB issued ASU No. 2018-11, Leases (ASC 842): Targeted Improvements, which provides entities with an option to apply the guidance prospectively, instead of retrospectively, and allows for other classification provisions, as described below. We currently expect to elect to recognize our lease assets and lease liabilities on a prospective basis, beginning on January 1, 2019.

Prior to the issuance of ASU No. 2018-11, we had preliminarily determined that our drilling contracts could contain a lease component, and our adoption, therefore, could require that we separately recognize revenues associated with the lease of our drilling rigs and the provision of contract drilling services. However, the recently issued ASU No. 2018-11 provides a practical expedient allowing lessors to combine the lease and non‑lease components of revenues where the revenue recognition pattern is the same and where the lease component, when accounted for separately, would be considered an operating lease. The practical expedient also allows a lessor to account for the combined lease and non-lease components under Topic 606, Revenue from Contracts with Customers, when the non-lease component is the predominant element of the combined component. We are in the process of evaluating ASU No. 2018-11 to determine whether this practical expedient might be available to us.

The adoption of ASC 842 will have an impact on how our consolidated financial statements and disclosures will be presented; however, because we are currently still evaluating the impact of ASU No. 2018-11, we are unable to quantify the overall impact at this time. Additionally, based on the lease arrangements under which we are the lessee as of June 30, 2018, we expect to recognize an

aggregate lease liability and a corresponding right‑to‑use asset of between $6.5 million and $7.5 million based on our currently identified lease portfolio. We will continue to refine this estimate, which is subject to change at the adoption date of ASC 842.

The activities that primarily drive the revenue earned in our drilling contracts with customers include (i) providing our drilling rig, work crews, related equipment and services necessary to operate the rig, (ii) delivering the drilling rig by mobilizing to and demobilizing from the drill site, and (iii) performing pre-operating activities, including rig preparation activities and/or equipment modifications required for the contract.

The integrated drilling services that we perform under each drilling contract represents a single performance obligation satisfied over time and comprised of a series of distinct time increments, or service periods.

Dayrate Drilling Revenue. Our drilling contracts generally provide for payment on a dayrate basis, with higher rates for periods when the drilling unit is operating and lower rates or zero rates for periods when drilling operations are interrupted or restricted. The dayrate billed to the customer is determined based on varying rates applicable to the specific activities performed on an hourly basis. Such dayrate consideration is allocated to the distinct hourly increment it relates to within the contract term and therefore, recognized as we perform the daily drilling services.

Mobilization/Demobilization Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for the mobilization of equipment and personnel prior to the commencement of drilling services or the demobilization of equipment and personnel upon contract completion. These activities are not considered to be distinct within the context of the contract and therefore, the associated revenue is allocated to the overall single performance obligation.

Mobilization fees received prior to commencement of drilling operations are recorded as a contract liability and amortized on a straight‑line basis over the initial contract period. Demobilization fees expected to be received upon contract completion are estimated at contract inception and recognized on a straight-line basis over the initial contract term with an offset to an accretive contract asset. In many contracts, demobilization fees are contingent upon the occurrence or non-occurrence of a future event and the estimate for such revenue may therefore be constrained. Fees received for the mobilization or demobilization of equipment and personnel are included in contract drilling revenues.

Capital Upgrade / Contract Preparation Revenue. In connection with certain contracts, we receive lump-sum fees or similar compensation for requested capital upgrades to our drilling rigs or for other contract preparation work. These activities are not considered to be distinct within the context of the contract and therefore, fees received are recorded as a contract liability and amortized to contract drilling revenues on a straight-line basis over the initial contract term.

Revenues Related to Reimbursable Expenses. We generally receive reimbursements from our customers for the purchase of supplies, equipment, personnel services and other services provided at their request in accordance with a drilling contract or other agreement. We are generally considered a principal in such transactions and therefore, recognize reimbursable revenues and the corresponding costs as we provide the customer‑requested goods and services.

We have elected to exclude from the transaction price measurement all taxes assessed by a governmental authority.

The following tables present our revenue disaggregated by revenue source for the periods indicated:

	Three Months Ended June 30, 2018								Three Months Ended June 30, 2017
	Jackups		Deepwater		Management		Consolidated		Jackups		Deepwater		Management		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	19,750	$	34,578	$	304	$	54,632	$	22,733	$	24,844	$	405	$	47,982
Amortized revenue		273		582		—		855		208		—		—		208
Reimbursable revenue		2,074		1,735		1,165		4,974		2,036		1,613		1,424		5,073
Total revenue	$	22,097	$	36,895	$	1,469	$	60,461	$	24,977	$	26,457	$	1,829	$	53,263

	Six Months Ended June 30, 2018								Six Months Ended June 30, 2017
	Jackups		Deepwater		Management		Consolidated		Jackups		Deepwater		Management		Consolidated
(unaudited, in thousands)
Dayrate revenue	$	39,699	$	65,648	$	605	$	105,952	$	35,080	$	50,553	$	806	$	86,439
Amortized revenue		274		1,157		—		1,431		208		—		—		208
Reimbursable revenue		5,201		3,312		2,228		10,741		3,396		2,779		2,490		8,665
Total revenue	$	45,174	$	70,117	$	2,833	$	118,124	$	38,684	$	53,332	$	3,296	$	95,312

Accounts receivable are recognized when the right to consideration becomes unconditional based upon contractual billing schedules. Payment terms on customer invoices typically range from 30 to 45 days.

We recognize contract liabilities, recorded in other “Accrued liabilities” and “Long-term liabilities”, for prepayments received from customers and for deferred revenue received for mobilization, contract preparation and capital upgrades.

Certain direct and incremental costs incurred for contract preparation, initial mobilization and modifications of contracted rigs represent contract fulfillment costs as they relate directly to a contract, enhance resources that will be used to satisfy our performance obligations in the future and are expected to be recovered. These costs are deferred as a current or noncurrent asset depending on the length of the initial contract term and are amortized on a straight-line basis to operating costs as services are rendered over the initial term of the related drilling contract. Costs incurred for capital upgrades are capitalized and depreciated over the useful life of the asset.

Costs incurred for the demobilization of rigs at contract completion are recognized as incurred during the demobilization process. Costs incurred to mobilize a rig without a contract are expensed as incurred.

The following table provides information about contract cost assets and contract revenue liabilities from contracts with customers:

Significant changes in contract cost assets and contract revenue liabilities during the six months ended June 30, 2018 are as follows:

We have taken the optional exemption that permits us to exclude disclosure of the estimated transaction price related to the variable portion of unsatisfied performance obligations at the end of the reporting period, as our transaction price is based on a single performance obligation consisting of a series of distinct hourly increments, the variability of which will be resolved at the time of the future services.

In April 2017, pursuant to a purchase and sale agreement with a third party, we completed the purchase of the Vantage 260, a class 154-44C jackup rig, and related multi-year drilling contract for $13.0 million. In August 2017 we substituted the Sapphire Driller, a Baker Marine Pacific Class 375 jackup rig, to fulfill the drilling contract. The Vantage 260 was classified as held for sale on acquisition and was sold on February 26, 2018.

We accounted for the acquisition of the Vantage 260 as a business combination in accordance with accounting guidance which requires, among other things, that we allocate the purchase price to the assets acquired and liabilities assumed based on their fair values as of the acquisition date.

The following table provides the acquisition date estimated fair values of the assets acquired and liabilities assumed:

Under accounting guidance, a bargain purchase gain results from an acquisition if the fair value of the purchase consideration paid in connection with such acquisition is less than the net fair value of the assets acquired and liabilities assumed. We recorded a bargain purchase gain of approximately $1.9 million related to the acquisition in the three months ended June 30, 2017. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation. The purchase of the Vantage 260 and related two-year drilling contract allowed for the reactivation of the Sapphire Driller and further extended our operational presence in West Africa.

Second Amended and Restated Credit Agreement. The Company entered into the 2016 Term Loan Facility providing for (i) a $32.0 million revolving letter of credit facility to replace the Company’s then existing $32.0 million revolving letter of credit commitment under its pre-petition credit facility and (ii) $143.0 million of term loans into which the claims of the lenders under the Company’s pre-petition credit facility were converted. The lenders under the Company’s pre-petition credit facility also received $7.0 million of cash under the Reorganization Plan. The obligations under the 2016 Term Loan Facility are guaranteed by substantially all of the Company’s subsidiaries, subject to limited exceptions, and secured on a first priority basis by substantially all of the Company’s and the guarantors’ assets, including ship mortgages on all vessels, assignments of related earnings and insurance and pledges of the capital stock of all guarantors, in each case, subject to certain exceptions. In June 2018, in conjunction with entering into a share purchase agreement with a third party to acquire the shares of an entity that owns a jackup rig, the 2016 Term Loan Facility was amended to reduce the revolving letter of credit facility from $32.0 million to $25.0 million. We have issued $12.0 million in letters of credit under the 2016 Term Loan Facility as of June 30, 2018.

The maturity date of the term loans and commitments established under the 2016 Term Loan Facility is December 31, 2019. Interest is payable on the unpaid principal amount of each term loan under the 2016 Term Loan Facility at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. The term loans are currently bearing interest at 8.6%. The 2016 Term Loan Facility has quarterly scheduled debt maturities of $357,500 which commenced in March 2016. In conjunction with the sale of the Vantage 260 in the first quarter of 2018, the Company prepaid $5.1m on the 2016 Term Loan Facility, representing prepayment of the scheduled remaining quarterly installments due through maturity date of December 31, 2019.

Fees are payable on the outstanding face amount of letters of credit at a rate per annum equal to 5.5% pursuant to the terms of the 2016 Term Loan Facility. The Company is also required to pay fees on the unused amount of letters of credit at a rate per annum equal to 0.5%.

The 2016 Term Loan Facility includes customary representations and warranties, mandatory prepayments, affirmative and negative covenants and events of default, including covenants that, among other things, restrict the granting of liens, the incurrence of indebtedness, the making of investments and capital expenditures, the sale or other conveyance of assets, including vessels, transactions with affiliates, prepayments of certain debt and the operation of vessels. The 2016 Term Loan Facility also requires that the Company maintain $75.0 million of available cash (defined to include unrestricted cash and cash equivalents plus undrawn commitments).

10% Senior Secured Second Lien Notes. The Company engaged in a rights offering for $75.0 million of new 10% Second Lien Notes for certain holders of its secured debt claims. In connection with this rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, which was paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes, and in net cash proceeds of approximately $73.9 million after deducting the cash portion of the backstop premium.

The 10% Second Lien Notes were issued at par and are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company. The 10% Second Lien Notes mature on December 31, 2020, and bear interest from the date of their issuance at the rate of 10% per year. Interest on outstanding 10% Second Lien Notes is payable semi-annually in arrears, which commenced on June 30, 2016. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months. The 10% Second Lien Notes rank behind the 2016 Term Loan Facility as to collateral.

The Indenture for the 10% Second Lien Notes includes customary covenants and events of default, including covenants that, among other things, restrict the granting of liens, restrict the making of investments, restrict the incurrence of indebtedness and the conveyance of vessels, limit transactions with affiliates, and require that the Company provide periodic financial reports.

1%/12% Step-Up Senior Secured Third Lien Convertible Notes. The Company issued 4,344,959 New Shares and $750.0 million of the Convertible Notes to certain creditors holding approximately $2.5 billion of pre-petition secured debt claims. The New Shares issued to the creditors and the Convertible Notes may only be traded together and not separately. The Convertible Notes mature on December 31, 2030 and are convertible into New Shares, in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes) which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of June 30, 2018, taking into account the payment of PIK interest on the Convertible Notes to such date, each such unit of securities was comprised of one New Share and $176.78 of principal of Convertible Notes. As of June 30, 2018, we would be required to issue approximately 8.0 million New Shares if the Convertible Notes were converted.

The Convertible Notes were initially recorded at an estimated fair value of approximately $603.1 million. The difference between face value and the fair value at date of issuance of the Convertible Notes was recorded as a debt discount and is being amortized to interest expense over the expected life of the Convertible Notes using the effective interest rate method.

Interest on the Convertible Notes is payable semi-annually in arrears commencing June 30, 2016 as a payment in kind, either through an increase in the outstanding principal amount of the Convertible Notes or, if the Company is unable to increase such principal amount, by the issuance of additional Convertible Notes. Interest is computed on the basis of a 360-day year comprised of twelve 30-day months at a rate of 1% per annum for the first four years and then increasing to 12% per annum until maturity.

The Company’s obligations under the Convertible Notes are fully and unconditionally guaranteed (except for customary release provisions), on a senior secured basis, by all of the subsidiaries of the Company, and the obligations of the Company and guarantors are secured by liens on substantially all of their respective assets. The guarantees by the Company’s subsidiaries of the Convertible Notes are joint and several. The Company has no independent assets or operations apart from the assets and operations of its wholly-owned subsidiaries. In addition, there are no significant restrictions on the Company’s or any subsidiary guarantor’s ability to obtain funds from its subsidiaries by dividend or loan. The Indenture for the Convertible Notes includes customary covenants that restrict the granting of liens and customary events of default, including, among other things, failure to issue securities upon conversion of the Convertible Notes. In addition, the Indenture, and the applicable collateral agreements, provide that any capital stock and other securities of any of the guarantors will be excluded from the collateral to the extent the pledge of such capital stock or other securities to secure the Convertible Notes would cause such guarantor to be required to file separate financial statements with the SEC pursuant to Rule 3-16 of Regulation S-X (as in effect from time to time).

The Convertible Notes will convert only (a) prior to the third anniversary of the issue date (such anniversary date, February 10, 2019), (i) upon the instruction of holders of a majority in principal amount of the Convertible Notes or (ii) upon the full and final resolution of all potential Investigation Claims (as defined below), as determined in good faith by the board of directors of the Company (the “Board”) (which determination shall require the affirmative vote of a supermajority of the non-management directors), and (b) from and after February 10, 2019 through their maturity date of December 31, 2030, upon the approval of the Board (which approval shall require the affirmative vote of a supermajority of the non-management directors). For these purposes, (i) “supermajority of the non-management directors” means five affirmative votes of non-management directors assuming six non-management directors eligible to vote and, in all other circumstances, the affirmative vote of at least 75% of the non-management directors eligible to vote and (ii) “Investigation Claim” means any claim held by a United States or Brazilian governmental unit and arising from or related to the procurement of that certain Agreement for the Provision of Drilling Services, dated as of February 4, 2009, by and between Petrobras Venezuela Investments & Services B.V. and Vantage Deepwater Company, as amended, modified, supplemented, or novated from time to time.

In the event of a change in control, the holders of our Convertible Notes have the right to require us to repurchase all or any part of the Convertible Notes at a price equal to 101% of their principal amount. We assessed the prepayment requirements and concluded that this feature met the criteria to be considered an embedded derivative and must be bifurcated and separately valued at fair value due to the discount on the Convertible Notes at issuance. We considered the probabilities of a change of control occurring and determined that the derivative had a de minimis value as of December 31, 2017 and June 30, 2018.

Upon the occurrence of specified change of control events or certain losses of our vessels in the agreements governing our 10% Second Lien Notes, Convertible Notes or 2016 Term Loan Facility, we will be required to offer to repurchase or repay all (or in the case of events of losses of vessels, an amount up to the amount of proceeds received from such event of loss) of such outstanding debt under such debt agreements at the prices and upon the terms set forth in the applicable agreements. In addition, in connection with certain asset sales, we will be required to offer to repurchase or repay such outstanding debt as set forth in the applicable debt agreements. In addition, in connection with their investigation, if the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, and if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under Convertible Notes becoming immediately due and payable at the make-whole amount specified in the Indenture governing the Convertible Notes.

We have 50,000,000 authorized ordinary shares, par value $0.001 per share. Upon emergence from bankruptcy, we issued 5,000,053 ordinary shares in connection with the settlement of Liabilities Subject To Compromise in accordance with the Reorganization Plan and the VDC Note. As of June 30, 2018, 5,000,053 ordinary shares were issued and outstanding.

On August 9, 2016, the Company adopted the Amended and Restated 2016 Management Incentive Plan (the “2016 Amended MIP”) to align the interests of participants with those of the shareholders by providing incentive compensation opportunities tied to the performance of the Company’s equity securities. Pursuant to the 2016 Amended MIP, the Compensation Committee may grant to employees, directors and consultants stock options, restricted stock, restricted stock units or other awards.

During the six months ended June 30, 2018, we granted to an employee 1,030 time-based restricted stock units (“TBGs”) and 2,403 performance-based restricted stock units (“PBGs”) under our 2016 Amended MIP. The TBGs vest annually, ratably over four years; however, accelerated vesting is provided for in the event of a qualified liquidity event as defined in the 2016 Amended MIP (a “QLE”). Otherwise, the settlement of any vested TBGs occurs upon the seventh anniversary of the Effective Date. The PBGs contain vesting eligibility provisions tied to the earlier of a QLE or seven years from the Effective Date. Upon the occurrence of a vesting eligibility event, the number of PBGs that actually vest will be dependent on the achievement of pre-determined Total Enterprise Value (“TEV”) targets specified in the grants. In the six months ended June 30, 2018, 19,419 of previously granted TBGs vested.

Both the TBGs and PBGs are classified as liabilities consistent with the classification of the underlying securities and under the provisions of ASC 718 Compensation – Stock Compensation are remeasured at each reporting period until settled. Share based compensation expense is recognized over the requisite service period until settled. We recognized approximately $3.8 million and $1.7 million of share-based compensation expense for the six months ended June 30, 2018 and 2017, respectively.

Share based compensation expense for PBGs will be recognized when it is probable that the TEV targets will be met. Once it is probable the performance condition will be met, compensation expense based on the fair value of the PBGs at the balance sheet date will be recognized for the service period completed. As of June 30, 2018, we concluded that it was not probable that the TEV performance condition would be met and therefore, no share based compensation expense was recognized for PBGs.

We are a Cayman Islands entity. The Cayman Islands do not impose corporate income taxes. Consequently, we have calculated income taxes based on the laws and tax rates in effect in the countries in which operations are conducted, or in which we and our subsidiaries are considered resident for income tax purposes. We operate in multiple countries under different legal forms. As a result, we are subject to the jurisdiction of numerous domestic and foreign tax authorities, as well as to tax agreements and treaties among these governments. Tax rates vary between jurisdictions, as does the tax base to which the rates are applied. Taxes may be levied based on net profit before taxes or gross revenues or as withholding tax on revenues. Determination of taxable income in any jurisdiction requires the interpretation of the related tax laws and regulations and the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of deductions, permissible revenue recognition methods under the tax law and the sources and character of income and tax credits. Our income tax expense may vary substantially from one period to another as a result of changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions, rig movements or our level of operations or profitability in each tax jurisdiction. Furthermore, our income taxes are generally dependent upon the results of our operations and, when we generate significant revenues in jurisdictions where the income tax liability is based on gross revenues or asset values, there is no correlation between our operating results and the income tax expense. Furthermore, in some

jurisdictions we do not pay taxes or receive benefits for certain income and expense items, including interest expense, loss on extinguishment of debt and disposal gains or losses.

On December 22, 2017, Public Law 115-97, commonly known as the Tax Cuts and Jobs Act of 2017 (the “Act”) was enacted. The Act, among other things, makes significant changes to the U.S. corporate income tax system, including reducing the federal corporate income tax rate from 35% to 21%; changes certain business-related deductions, including modifying the rules regarding limitations on certain deductions for executive compensation, introducing a capital investment deduction in certain circumstances, placing certain limitations on the interest deduction, modifying the rules regarding the usability of certain net operating losses; and transitions U.S. international taxation from a worldwide tax system to a territorial tax system. Our current tax liability and deferred tax assets in relation to the U.S. operations are based on the newly enacted corporate income tax rate. We continue to monitor and evaluate any new guidance in relation to the Act and potential impact on our financial statements.

Deferred income tax assets and liabilities are recorded for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. We provide for deferred taxes on temporary differences between the financial statements and tax bases of assets and liabilities using the enacted tax rates which are expected to apply to taxable income when the temporary differences are expected to reverse. Deferred tax assets are also provided for certain loss and tax credit carryforwards. A valuation allowance is established to reduce deferred tax assets when it is more likely than not that some portion or all of the deferred tax asset will not be realized.

In certain jurisdictions we are taxed under preferential tax regimes, which may require our compliance with specified requirements to sustain the tax benefits. We believe we are in compliance with the specified requirements and will continue to make all reasonable efforts to comply; however, our ability to meet the requirements of the preferential tax regimes may be affected by changes in laws, our business operations and other factors affecting our company and industry, many of which are beyond our control.

Our periodic tax returns are subject to examination by taxing authorities in the jurisdictions in which we operate in accordance with the normal statute of limitations applicable in a particular jurisdiction. These examinations may result in assessments of additional taxes that are resolved with the authorities or through the courts. Resolution of these matters involves uncertainties and there are no assurances as to the outcome. Our tax years 2010 and forward remain open to examination in many of our jurisdictions and we are currently involved in several tax examinations in jurisdictions where we are operating or have previously operated. As information becomes available during the course of these examinations, we may increase or decrease our estimates of tax assessments and accruals.

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance. There is an inherent risk in any litigation or dispute and no assurance can be given as to the outcome of any claims.

In July 2015, we became aware of media reports that Hamylton Padilha, the Brazilian agent VDC used in the contracting of the Titanium Explorer drillship to Petrobras, had entered into a plea arrangement with the Brazilian authorities in connection with his role in facilitating the payment of bribes to former Petrobras executives. Among other things, Mr. Padilha provided information to the Brazilian authorities of an alleged bribery scheme between former Petrobras executives and Mr. Hsin-Chi, who was, at the time of the alleged bribery scheme, a member of the Board of Directors and a significant shareholder of our former parent company, VDC. When we learned of Mr. Padilha’s plea agreement and the allegations, we voluntarily contacted the DOJ and the SEC to advise them of these developments, as well as the fact that we had engaged outside counsel to conduct an internal investigation of the allegations. Since disclosing this matter to the DOJ and SEC, we have cooperated fully in their investigation of these allegations. In connection with such cooperation, we advised both agencies that in early 2010, we engaged outside counsel to investigate a report of alleged improper payments to customs and immigration officials in Asia. That investigation was concluded in 2011, and we determined at that time that no disclosure was warranted; however, in an abundance of caution, we provided the results of this investigation to the DOJ and SEC in light of the allegations in the Petrobras matter. In August 2017, we received a letter from the DOJ acknowledging our full cooperation in the DOJ’s investigation into the Company concerning possible violations of the FCPA by VDC in the Petrobras matter and indicating that the DOJ has closed such investigation without any action. In addition, the Company has engaged in negotiations with the staff of the Division of Enforcement of the SEC to resolve their investigation. We have reached an agreement in principle with the staff of the SEC relating to terms of a proposed offer of settlement, which is being presented to the Commission for approval. While there can be no assurance that the proposed offer of settlement will be accepted by the Commission, the Company believes the proposed resolution will become final in the third quarter of 2018. In connection with the proposed offer of settlement, we have accrued a liability in the amount of $5 million. If the Commission does not accept the proposed offer of settlement and the SEC determines that violations of the FCPA have occurred, the Company could be subject to civil and criminal sanctions, including monetary penalties, as well as additional requirements or changes to our business practices and compliance programs, any or all of which could have a material adverse effect on our business and financial condition. Additionally, if we become subject to any judgment, decree, order, governmental penalty or fine, this may constitute an event of default under the terms of our secured debt agreements and, following notice from the requisite lenders and/or noteholders, as applicable, result in our outstanding debt under the 2016 Term Loan Facility and 10% Second Lien Notes becoming immediately due and payable at par, and our outstanding debt under

Convertible Notes becoming immediately due and payable at the make-whole amount specified in the indenture governing the Convertible Notes.

In connection with our bankruptcy cases, two appeals were filed relating to the confirmation of the Reorganization Plan. Specifically, on January 29, 2016, Hsin Chi Su and F3 Capital filed two appeals before the United States District Court for the District of Delaware seeking a reversal of (i) the Court’s determination that Hsin Chi Su and F3 Capital did not have standing to appear and be heard in the bankruptcy cases, which was made on the record at a hearing held on January 14, 2016, and (ii) the Court’s Findings of Fact, Conclusions of Law, and Order (I) Approving the Debtors’ (A) Disclosure Statement Pursuant to Sections 1125 and 1126(b) of the Bankruptcy Code, (B) Solicitation of Votes and Voting Procedures, and (C) Forms of Ballots, and (II) Confirming the Amended Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors [Docket No. 188], which was entered on January 15, 2016. The appeals were consolidated on June 14, 2016. We cannot predict with certainty the ultimate outcome of any such appeals. An adverse outcome could negatively affect our business, results of operations and financial condition.

On August 31, 2015, PAI and PVIS, both subsidiaries of Petrobras, notified the Company of the termination of the Drilling Contract between PVIS and Vantage Deepwater Company and which had been novated to PAI and Vantage Deepwater Drilling, Inc., claiming the Company had breached its obligations under the Drilling Contract. Vantage Deepwater Company and Vantage Deepwater Drilling, Inc. are both wholly-owned subsidiaries of the Company. We immediately filed an international arbitration claim against PAI, PVIS, and Petrobras, claiming wrongful termination of the Drilling Contract.

On April 27, 2018, we understand that Vantage was added as an additional defendant in a legal proceeding by the Brazilian federal public prosecutor’s office in the State of Parana (the “Brazilian Federal Prosecutor”) against certain individuals, including an executive of Petrobras and two political lobbyists, in connection with the contracting of the Titanium Explorer drillship to Petrobras under the Drilling Contract, with the Brazilian Government and Petrobras as interested parties. Vantage is alleged to have been involved in and benefitted from the purported bribery scheme at Petrobras through Messrs. Padilha and Hsin-Chi. It was not until July 19, 2018 that we became aware of the legal proceeding as it was previously under seal. The Company has not been formally served nor advised by any Brazilian authorities of any particular charges. The Company understands that the legal proceeding is part of the Brazilian Federal Prosecutor’s larger “Car Wash” investigation into money laundering and corruption allegations at Petrobras.

Pursuant to the terms of the Restructuring Agreement, the Company agreed to the Reorganization Plan and VDC agreed to commence official liquidation proceedings under the laws of the Cayman Islands. On December 2, 2015, pursuant to the Restructuring Agreement, the Company acquired two subsidiaries responsible for the management of the Company from VDC in exchange for the VDC Note. In connection with our separation from our former parent company, we and the Joint Official Liquidators, appointed to oversee the liquidation of VDC, are in discussions regarding the settlement of certain intercompany receivables and payables as between the Company and its subsidiaries, on the one hand, and VDC and its subsidiaries on the other. While we continue to believe that our position regarding the settlement of such amounts is correct, we cannot predict the ultimate outcome of this matter should legal proceedings between the parties transpire.

Prepaid expenses and other current assets consisted of the following as of the dates indicated:

	June 30, 2018		December 31, 2017
(unaudited, in thousands)
Prepaid insurance	$	1,244	$	294
Sales tax receivable		5,492		5,652
Income tax receivable		1,243		1,374
Other receivables		935		158
Assets held for sale		—		2,050
Deferred mobilization costs		2,249		217
Other		3,827		3,462
	$	14,990	$	13,207

Property and equipment, net, consisted of the following as of the dates indicated:

	June 30, 2018			December 31, 2017
(unaudited, in thousands)
Drilling equipment	$	883,413		$	883,598
Down payment on rig purchase		15,000			—
Assets under construction		1,443			1,043
Office and technology equipment		18,452			18,778
Leasehold improvements		1,165			1,165
		919,473			904,584
Accumulated depreciation		(176,431	)		(141,393	)
Property and equipment, net	$	743,042		$	763,191

	June 30, 2018		December 31, 2017
(unaudited, in thousands)
Interest	$	3,918	$	3,952
Compensation		6,892		10,285
Income taxes payable		2,989		3,740
SEC penalty payable		5,000		5,000
Current deferred revenue		516		—
Unearned income		1,422		510
Other		1,434		1,630
	$	22,171	$	25,117

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheet that sum to the total of the same amounts shown in the Consolidated Statement of Cash Flows as of the dates indicated:

The restricted cash balance as of June 30, 2018 relates to funds held in escrow in connection with the proposed offer of settlement with the SEC, as described in "Note 8. Commitments and Contingencies."

The following table summarizes the balances payable to VDC included in the Company's Consolidated Balance Sheet as of the dates indicated:

We aggregate our contract drilling operations into one reportable segment even though we provide contract drilling services with different types of rigs, including jackup rigs and drillships, and in different geographic regions. Our operations are dependent on the global oil and gas industry and our rigs are relocated based on demand for our services and customer requirements. Our customers consist primarily of large international oil and gas companies, national or government-controlled oil and gas companies and other international exploration and production companies.

Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs. Our management business represented less than 4% of our total revenue for each of the six months ended June 30, 2018 and 2017.

For the three and six months ended June 30, 2018 and 2017, all of our revenue was from countries outside of the United States. Consequently, we are exposed to the risk of changes in economic, political and social conditions inherent in foreign operations. Three customers accounted for approximately 46%, 15% and 13% of consolidated revenue for the three months ended June 30, 2018. For the six months ended June 30, 2018, three customers accounted for approximately 46%, 14% and 13% of consolidated revenue. Three

customers accounted for approximately 50%, 18% and 12% of consolidated revenue for the three months ended June 30, 2017. For the six months ended June 30, 2017, three customers accounted for approximately 56%, 15% and 12% of consolidated revenue.

	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
(unaudited, in thousands)
Congo	$	35,874	$	35,811	$	71,728	$	62,687
India		8,842		—		15,372		—
Malaysia		—		6,581		—		14,504
Qatar		—		5,909		—		11,693
Other countries (a)		15,745		4,962		31,024		6,428
Total revenues	$	60,461	$	53,263	$	118,124	$	95,312

Our property and equipment, net by country was as follows as of the dates indicated:

A substantial portion of our assets are mobile drilling units. Asset locations at the end of the period are not necessarily indicative of the geographic distribution of the revenues generated by such assets during the periods.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion is intended to assist you in understanding our financial position at June 30, 2018 and our results of operations for the three and six months ended June 30, 2018 and 2017. 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, 2017. 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. Certain previously reported amounts have been reclassified to conform to the current year presentation.

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 natural gas wells for our customers. Through our fleet of drilling units we are a provider of offshore contract drilling services to major, national and independent oil and natural gas companies, focused on international markets. Additionally, for drilling units owned by others, we provide construction supervision services while under construction, preservation management services when stacked and operations and marketing services for operating rigs.

The following table sets forth certain current information concerning our offshore drilling fleet as of July 20, 2018.

Name	Year Built		Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Status
Jackups
Emerald Driller		2008		375		30,000	Operating
Sapphire Driller		2009		375		30,000	Operating
Aquamarine Driller		2009		375		30,000	Operating
Topaz Driller		2009		375		30,000	Operating
Drillships (1)
Platinum Explorer		2010		12,000		40,000	Operating
Titanium Explorer		2012		12,000		40,000	Warm Stacked
Tungsten Explorer		2013		12,000		40,000	Operating

(1) The drillships are designed to drill in up to 12,000 feet of water. The Platinum Explorer, Titanium Explorer and Tungsten Explorer are currently equipped to drill in 10,000 feet of water.

On the Petition Date, we filed a reorganization plan in the United States Bankruptcy Court for the District of Delaware (In re Vantage Drilling International (F/K/A Offshore Group Investment Limited), et al., Case No. 15-12422). On January 15, 2016, the District Court of Delaware confirmed the Company’s pre-packaged reorganization plan and we emerged from bankruptcy effective on the Effective Date.

Pursuant to the terms of the Reorganization Plan, the pre-bankruptcy term loans and senior notes were retired on the Effective Date by issuing to the debtholders 4,344,959 Units in the reorganized Company. Each Unit of securities originally consisted of one New Share and $172.61 of principal of the Convertible Notes, subject to adjustment upon the payment of PIK interest and certain cases of redemption or conversion of the Convertible Notes, as well as share splits, share dividends, consolidation or reclassification of the New Shares. The New Shares and the Convertible Notes are subject to the terms of an agreement that prohibits the New Shares and Convertible Notes from being traded separately.

The Convertible Notes are convertible into New Shares in certain circumstances, at a conversion price (subject to adjustment in accordance with the terms of the Indenture for the Convertible Notes) which was $95.60 as of the issue date. The Indenture for the Convertible Notes includes customary covenants that restrict, among other things, the granting of liens and customary events of default, including among other things, failure to issue securities upon conversion of the Convertible Notes. As of June 30, 2018, taking into account the payment of PIK interest on the Convertible Notes to such date, each such Unit consisted of one New Share and $176.78 of principal of Convertible Notes.

Second Amended and Restated Credit Agreement. The Company’s pre-petition credit agreement was amended and restated to (i) replace the $32.0 million revolving letter of credit commitment under its pre-petition facility with a new $32.0 million revolving letter of credit facility and (ii) repay the $150 million of outstanding borrowings under its pre-petition facility with (a) $7.0 million of cash and (b) the issuance of $143.0 million initial term loans.

10% Senior Secured Second Lien Notes. Holders of the Company’s pre-petition secured debt claims were eligible to participate in a rights offering conducted by the Company for $75.0 million of the Company’s 10% Second Lien Notes. In connection with this

rights offering, certain creditors entered into a “backstop” agreement to purchase 10% Second Lien Notes if the offer was not fully subscribed. The premium paid to such creditors under the backstop agreement was approximately $2.2 million, paid $1.1 million in cash and $1.1 million in additional 10% Second Lien Notes, resulting in a total issued amount of $76.1 million of 10% Second Lien Notes, and in net cash proceeds of $73.9 million, after deducting the cash portion of the backstop premium.

VDC Note. Effective with the Company’s emergence from bankruptcy, VDC’s former equity interest in the Company was cancelled. Immediately following that event, the VDC Note was converted into 655,094 New Shares in accordance with the terms thereof, in satisfaction of the obligation thereunder, which, including accrued interest, totaled approximately $62.6 million as of such date.

The Reorganization Plan allowed the Company to maintain all operating assets and agreements. All trade payables, credits, wages and other related obligations were unimpaired by the Reorganization Plan.

Upon emergence from bankruptcy on the Effective Date, we adopted fresh-start accounting in accordance with ASC 852, which resulted in the Company becoming a new entity for financial reporting purposes. Upon adoption of fresh-start accounting, our assets and liabilities were recorded at their fair values as of the Effective Date. The Effective Date fair values of our assets and liabilities differed materially from the recorded values of our assets and liabilities as reflected in our historical consolidated balance sheets.

Expectations about future oil and natural gas prices have historically been a key driver of demand for our services. The International Energy Agency (the “Agency”), in their June 2018 Oil Market Report, forecasts a growth in demand of 1.4 million barrels per day for 2018 and 2019. The Agency reports that this growth, together with current forecast production levels, will result in an inventory draw of 0.6 million barrels per day for 2018. Although oil prices have partially rebounded from the historical lows experienced during early 2016 to levels above $70 per barrel at the end of June 2018, this increase has not yet resulted in a measurable increase in operators’ offshore capital expenditures.

In addition to the reduction in demand for drilling rigs, the additional supply of newbuild rigs is further depressing the market. According to Bassoe Offshore A.S. (“Bassoe”), there are currently 86 jackups and 30 deepwater/harsh environment floaters on order at shipyards with scheduled deliveries extending out to June 2021. It is unclear when these drilling rigs will actually be delivered as many rig deliveries have already been deferred to later dates and some rig orders have been canceled. In response to the oversupply of drilling rigs, a number of competitors are removing older, less efficient rigs from their fleets by either cold stacking the drilling rigs or taking them permanently out of service.

Since the oil price decline in 2014, 136 rigs, with an average age of approximately 36 years, have been removed from the drilling fleet according to Bassoe. Of these 136 rigs, 86 are semisubmersibles, 18 are drillships and 32 are jackups. While we believe rig recycling to be an important element in bringing the supply of drilling rigs back into balance with demand, we do not anticipate that it will be sufficient to materially improve market conditions in 2018.

In response to market conditions and to excessive levels of idle capacity in recent years, there has been intense pressure on operating dayrates as drilling contractors have generally preferred to maintain rigs in an active state and customers have generally favored recently operating rigs over reactivated cold-stacked rigs. Therefore, while opportunities for our services have increased over the past year, we believe the market will continue to be highly competitive for the foreseeable future and dayrates will remain depressed.

The following table reflects a summary of our contract drilling backlog coverage of days contracted and related revenue as of June 30, 2018 forward (based on information available at that time).

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 June 30,						Six Months Ended June 30,
	2018			2017			2018			2017
Jackups
Rigs available (at end of period)		4			5			4			5
Available days (1)		364			451			778			811
Utilization (2)		88.5	%		80.4	%		87.3	%		66.9	%
Average daily revenues (3)	$	62,158		$	63,259		$	58,871		$	65,032
Deepwater
Rigs available		3			3			3			3
Available days (1)		273			273			543			543
Utilization (2)		63.2	%		32.8	%		58.7	%		33.1	%
Average daily revenues (3)	$	203,801		$	277,277		$	209,646		$	281,475

Net loss for the three months ended June 30, 2018 (the “Current Quarter”) was $31.1 million, or $6.22 per basic and diluted share, on operating revenues of $60.5 million, compared to net loss for the three months ended June 30, 2017 (the “Comparable Quarter”) of $36.6 million, or $7.32 per basic and diluted share, on operating revenues of $53.3 million.

The following table is an analysis of our operating results for the three months ended June 30, 2018 and 2017.

	Three Months Ended June 30,						Change
	2018			2017			$			%
(unaudited, in thousands)
Revenues
Contract drilling services	$	55,183		$	47,785		$	7,398			15	%
Management fees		304			405			(101	)		-25	%
Reimbursables		4,974			5,073			(99	)		-2	%
Total revenues		60,461			53,263			7,198			14	%
Operating costs and expenses
Operating costs		44,650			40,363			4,287			11	%
General and administrative		6,278			11,501			(5,223	)		-45	%
Depreciation		17,711			18,554			(843	)		-5	%
Total operating costs and expenses		68,639			70,418			(1,779	)		-3	%
Loss from operations		(8,178	)		(17,155	)		8,977			-52	%
Other income (expense)
Interest income		220			215			5			2	%
Interest expense and financing charges		(19,412	)		(19,023	)		(389	)		2	%
Other, net		(514	)		842			(1,356	)		-161	%
Bargain purchase gain		—			1,910			(1,910	)		-100	%
Total other expense		(19,706	)		(16,056	)		(3,650	)		23	%
Loss before income taxes		(27,884	)		(33,211	)		5,327			-16	%
Income tax provision		3,210			3,381			(171	)		-5	%
Net loss	$	(31,094	)	$	(36,592	)	$	5,498			-15	%

Revenue: Total revenue increased 14% and contract drilling revenue increased 15% for the Current Quarter as compared to the Comparable Quarter. The increase in contract drilling revenue in the Current Quarter was primarily due to the commencement of operations on the Platinum Explorer in November 2017, which contributed an incremental $8.8 million contract drilling revenue in the Current Quarter.

Management fees and reimbursable revenue for the Current Quarter were $0.3 million and $5.0 million, respectively, as compared to $0.4 million and $5.1 million, respectively, in the Comparable Quarter.

Operating costs: Operating costs for the Current Quarter increased 11% as compared to the Comparable Quarter. Deepwater operating costs for the Current Quarter increased $7.9 million as compared to the Comparable Quarter primarily due to incremental costs for the Platinum Explorer operations. Jackup operating costs decreased $3.3 million for the Current Quarter as compared to the Comparable Quarter. The Current Quarter included 42 fewer rig operating days due to the sale of Vantage 260 in February 2018. Jackup operating costs in the Current Quarter and Comparable Quarter included $1.6 million and $1.5 million, respectively, for non-cash amortization of the contract value acquired with the Vantage 260.

General and administrative expenses: Decreases in general and administrative expenses for the Current Quarter as compared to the Comparable Quarter were primarily due to a $4.6 million decrease in legal expenses associated with our internal FCPA investigation and the Petrobras arbitration. General and administrative expenses for the Current Quarter and for the Comparable Quarter include approximately $1.4 million and $670,000, respectively, of non-cash share-based compensation expense.

Depreciation expense: Depreciation expense for the Current Quarter decreased 5% as compared to the Comparable Quarter. Depreciation expense decreased primarily due to drill pipe assets becoming fully depreciated.

Interest expense and other financing charges: Interest expense for the Current Quarter was consistent with the Comparable Quarter. Interest expense includes non-cash discount accretion, payment-in-kind interest and deferred financing costs totaling approximately $14.4 million and $14.2 million for the Current Quarter and for the Comparable Quarter, respectively.

Other, net: Our functional currency is the U.S. dollar; however a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. A net foreign currency exchange loss of $0.5 million and a net foreign currency exchange gain of $0.9 million were included in other, net, for the Current Quarter and the Comparable Quarter, respectively.

Bargain purchase gain: We recorded a bargain purchase gain of $1.9 million during the Comparable Quarter related to our Vantage 260 acquisition. The gain on bargain purchase resulted from the excess of the net fair value of the assets acquired and liabilities assumed in the acquisition over the purchase price. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation.

Income tax expense: Income tax expense decreased in the Current Quarter as compared to the Comparable Quarter due to the impact of changes in the annualized effective tax rate. Our annualized effective tax rate for the Current Quarter is negative 14.35% based on estimated annualized loss before income taxes excluding income tax discrete items. Our estimated annualized effective tax rates for the Comparable Quarter was negative 7.6% 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, loss on extinguishment of debt and disposal gains or losses.

Net loss for the six months ended June 30, 2018 (the “Current Period”) was $63.2 million, or $12.65 per basic and diluted share, on operating revenues of $118.1 million, compared to net loss for the six months ended June 30, 2017 (the “Comparable Period”) of $73.1 million, or $14.62 per basic and diluted share, on operating revenues of $95.3 million.

The following table is an analysis of our operating results for the three months ended June 30, 2018 and 2017.

	Six Months Ended June 30,						Change
	2018			2017			$			%
(unaudited, in thousands)
Revenues
Contract drilling services	$	106,778		$	85,841		$	20,937			24	%
Management fees		605			806			(201	)		-25	%
Reimbursables		10,741			8,665			2,076			24	%
Total revenues		118,124			95,312			22,812			24	%
Operating costs and expenses
Operating costs		85,635			69,361			16,274			23	%
General and administrative		13,632			22,980			(9,348	)		-41	%
Depreciation		35,579			36,993			(1,414	)		-4	%
Total operating costs and expenses		134,846			129,334			5,512			4	%
Loss from operations		(16,722	)		(34,022	)		17,300			-51	%
Other income (expense)
Interest income		441			356			85			24	%
Interest expense and financing charges		(38,683	)		(37,922	)		(761	)		2	%
Other, net		(1,084	)		1,394			(2,478	)		-178	%
Bargain purchase gain		-			1,910			(1,910	)		-100	%
Total other expense		(39,326	)		(34,262	)		(5,064	)		15	%
Loss before income taxes		(56,048	)		(68,284	)		12,236			-18	%
Income tax provision		7,183			4,807			2,376			49	%
Net loss	$	(63,231	)	$	(73,091	)	$	9,860			-13	%

Revenue: Total revenue and contract drilling revenue both increased 24% for the Current Period as compared to the Comparable Period. The increase in contract drilling revenue in the Current Period was primarily due to the commencement of operations on the Platinum Explorer, which contributed an incremental $15.2 million contract drilling revenue in the Current Period, and to improved utilization on our jackup fleet, with an aggregate of 169 incremental revenue-earning days contributing $4.7 million in increased drilling revenue in the Current Period.

Management fees and reimbursable revenue for the Current Period were $0.6 million and $10.7 million, respectively, as compared to $0.8 million and $8.7 million, respectively, in the Comparable Period. The increase in reimbursable revenue was primarily a result of the increases in jackup utilization.

Operating costs: Operating costs for the Current Period increased 23% as compared to the Comparable Period. Deepwater operating costs for the Current Period increased $17.0 million due primarily to incremental costs for the Platinum Explorer operations in India which commenced in November 2017. Operating costs on our jackup fleet for the Current Period decreased $0.6 million as compared to the Comparable Period. Jackup operating cost increases in the Current Period were offset by a gain on disposal of the Vantage 260 in the amount of $2.9 million. Jackup operating costs in the Current Period and Comparable Period included $3.1 million and $1.5 million, respectively, for non-cash amortization of the contract value acquired with the Vantage 260.

General and administrative expenses: Decreases in general and administrative expenses for the Current Period as compared to the Comparable Period were primarily due to a $9.7 million decrease in legal expenses associated with our internal FCPA investigation and the Petrobras arbitration. General and administrative expenses for the Current Period and for the Comparable Period include approximately $2.7 million and $1.3 million, respectively, of non-cash share-based compensation expense.

Depreciation expense: Depreciation expense for the Current Period decreased 4% as compared to the Comparable Period. Depreciation expense decreased primarily due to drill pipe assets becoming fully depreciated.

Interest expense and other financing charges: Interest expense for the Current Period increased 2% as compared to the Comparable Period due to rising interest rates and to increased payment-in-kind interest on the Convertible Notes. Interest expense includes non-cash discount accretion, payment-in-kind interest and deferred financing costs totaling approximately $28.7 million and $28.4 million for the Current Period and for the Comparable Period, respectively.

Other, net: Our functional currency is the U.S. dollar; however a portion of the revenues earned and expenses incurred by certain of our subsidiaries are denominated in currencies other than the U.S. dollar. These transactions are remeasured in U.S. dollars based on a combination of both current and historical exchange rates. A net foreign currency exchange loss of $1.1 million and a net foreign currency exchange gain of $1.4 million were included in other, net, for the Current Period and the Comparable Period, respectively.

Bargain purchase gain: We recorded a bargain purchase gain of $1.9 million during the Comparable Period related to our Vantage 260 acquisition. The gain on bargain purchase resulted from the excess of the net fair value of the assets acquired and liabilities assumed in the acquisition over the purchase price. We believe that we were able to negotiate a bargain purchase price as a result of our operational presence in West Africa and the seller’s liquidation.

Income tax expense: Income tax expense increased in the Current Period as compared to the Comparable Period due to an increase in revenue in the Current Period and the impact of the annualized effective tax rate. Our annualized effective tax rate for the Current Period is negative 14.35% based on estimated annualized loss before income taxes excluding income tax discrete items. Our estimated annualized effective tax rates for the Comparable Period was negative 7.6% 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, loss on extinguishment of debt and disposal gains or losses.

As of June 30, 2018, we had working capital of approximately $221.6 million, including approximately $181.9 million of cash available for general corporate purposes. Scheduled principal debt maturities and interest payments from July 1, 2018 to June 30, 2019 are approximately $23.9 million. We anticipate capital expenditures through June 30, 2019 to be approximately $22.0 million to $27.0 million, including expenditures for a managed pressure drilling system, in order to increase the marketability of our drillships, and for sustaining capital, capital spares and information technology. As our rigs obtain new contracts, we could incur reactivation and mobilization costs for these rigs, as well as customer requested equipment upgrades. These costs could be significant and may not be fully recoverable from the customer. Additionally, through June 30, 2019, we anticipate incremental expenditures for special periodic surveys, major repair and maintenance expenditures and equipment certifications to be approximately $19.0 million to $24.0 million. As of June 30, 2018, we had $13.0 million available for the issuance of letters of credit under our revolving letter of credit facility.

The table below includes a summary of our cash flow information for the periods indicated.

Changes in cash flows from operating activities are driven by changes in net income during the periods - see discussion of changes in net income in “Results of Operations” above.

Cash flows from investing activities in the Current Period are primarily a net result of a $15.0 million down payment made to acquire a rig owning entity offset by a net cash inflow of $4.7 million from the sale of the Vantage 260. Cash used for the acquisition of the Vantage 260 totaled $13.0 million in the Comparable Period. Other changes in cash flows used in investing activities are dependent upon our level of capital expenditures, which varies based on the timing of projects.

Changes in cash flows from financing activities in the Current Period include an additional payment of $5.1 million made on the 2016 Term Loan Facility, which was required in conjunction with the sale of the Vantage 260.

The significant elements of our post-petition debt are described in “Note 5. Debt” to our consolidated financial statements included elsewhere in this report.

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.

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” to our consolidated financial statements included elsewhere in this report. 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.

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 to our audited consolidated financial statements for the year ended December 31, 2017, included in our annual report on Form 10-K filed with the SEC on March 29, 2018. 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.

Our critical accounting policies are those related to fresh-start accounting, property and equipment, impairment of long-lived assets, rig and equipment certifications, intangible assets, contract revenues and income taxes. For a discussion of the critical accounting policies and estimates that we use in the preparation of our condensed consolidated financial statements, see "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies and Accounting Estimates" in Part II of our annual report on Form 10-K for the year ended December 31, 2017.

During the quarter ended June 30, 2018, there were no material changes to the judgments, assumptions or policies upon which our critical accounting estimates are based.

Recent Accounting Standards: See “Note 2. Basis of Presentation and Significant Accounting Policies” to our consolidated financial statements included elsewhere in this report.

Our rigs operate in various international locations and thus are sometimes subject to foreign exchange risk. We may from time to time also be exposed to certain commodity price risk, equity price risk and risks related to other market driven rates or prices. We do not enter into derivatives or other financial instruments for trading or speculative purposes. The significant decline in worldwide exploration and production spending as a result of the reduced oil prices since 2014 has negatively impacted the offshore contract drilling business as discussed in “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Interest Rate Risk: As of June 30, 2018, we had approximately $134.3 million face amount of variable rate debt outstanding under the 2016 Term Loan Facility. Under the 2016 Term Loan Facility, interest is payable on the unpaid principal amount of each term loan at LIBOR plus 6.5%, with a LIBOR floor of 0.5%. As of June 30, 2018, the 1-month LIBOR rate was 2.09% and the current interest rate on the 2016 Term Loan Facility is 8.59%. Increases in the LIBOR rate would impact the amount of interest that we are required to pay on these borrowings. For every 1% increase in LIBOR, we would be subject to an increase in interest expense of $1.3 million per annum based on the principal amounts outstanding at June 30, 2018. We have not entered into any interest rate hedges or swaps with regard to the 2016 Term Loan Facility.

Foreign Currency Exchange Rate Risk. Our functional currency is the U.S. Dollar, which is consistent with the oil and gas industry. However, outside the United States, a portion of our expenses are incurred in local currencies. Therefore, when the U.S. Dollar weakens (strengthens) in relation to the currencies of the countries in which we operate, our expenses reported in U.S. Dollars will increase (decrease). A substantial majority of our revenues are received in U.S. dollars, our functional currency; however, in certain countries in which we operate, local laws or contracts may require us to receive some payment in the local currency. We are exposed to foreign currency exchange risk to the extent the amount of our monetary assets denominated in the foreign currency differs from our obligations in that foreign currency. In order to mitigate the effect of exchange rate risk, we attempt to limit foreign currency holdings to the extent they are needed to pay liabilities in the local currency. To further manage our exposure to fluctuations in currency exchange rates, foreign exchange derivative instruments, specifically foreign exchange forward contracts, or spot purchases, may be used. A foreign exchange forward contract obligates us to exchange predetermined amounts of specified foreign currencies at specified exchange rates on specified dates or to make an equivalent U.S. dollar payment equal to the value of such exchange. We do not enter into derivative transactions for speculative purposes. As of June 30, 2018, we did not have any open foreign exchange derivative contracts or material foreign currency exposure risk.

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed by us in the reports we voluntarily file or submit to the SEC is recorded, processed, summarized, and reported within the time periods required by our debt agreements.

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, such officers have concluded that the design and operation of these disclosure controls and procedures were effective as of June 30, 2018 to provide reasonable assurance that information required to be disclosed on our reports filed or submitted under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) was (1) accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure and (2) recorded, summarized and reported within the time periods specified in the SEC’s rules and forms.

There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act) during the most recent fiscal quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Information regarding the Company’s legal proceedings is set forth in “Note 8. Commitments and Contingencies” located in the Notes to Unaudited Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q and is incorporated herein by reference.

Incorporated by Reference

Exhibit

Number

Exhibit Description

Filed

Herewith

Form

File Number

Exhibit

Filing

Date

2.1

Joint Prepackaged Chapter 11 Plan of Offshore Group Investment Limited and its Affiliated Debtors, dated December 1, 2015, which is Exhibit A to the Disclosure Statement

T-3

022-29012

99.T3E.1

12/02/15

3.1A

Certificate of Incorporation of the Company

S-4

333-170841

3.3

11/24/10

3.1B

Third Amended and Restated Memorandum and Articles of Association of the Company

8-K

333-159299-15

3.01

08/05/16

4.1

Second Amended and Restated Credit Agreement by and between Offshore Group Investment Limited, certain subsidiaries thereof as Guarantors, the lenders from time to time party thereto as Lenders and Royal Bank of Canada as Administrative Agent and Collateral Agent, dated as of February 17, 2016

8-K

333-159299-15

4.1

02/17/16

4.2

Second Lien Indenture by and between Offshore Group Investment Limited, the guarantors from time to time party thereto (including certain of the Assignors, as defined therein) and U.S. Bank National Association, as trustee and noteholder collateral agent, dated as of February 10, 2016

8-K

333-159299-15

4.2

02/17/16

4.3

Third Lien Indenture by and between Offshore Group Investment Limited, the guarantors from time to time party thereto (including certain of the Assignors, as defined therein) and U.S. Bank National Association, as trustee and noteholder collateral agent, dated as of February 10, 2016

8-K

333-159299-15

4.3

02/17/16

4.4

Supplemental Indenture, dated as of June 8, 2016, among Vantage Drilling International (f/k/a Offshore Group Investment Limited), the guarantors party thereto, and U.S. Bank National Association, as trustee and noteholder collateral agent, to the Third Lien Indenture dated as of February 10, 2016

S-1

333-212081

4.4

06/16/16

4.5

Shareholders Agreement by and among Offshore Group Investment Limited and the Shareholders (as defined therein) dated as of February 10, 2016

8-K

333-159299-15

10.1

02/17/16

4.6

Registration Rights Agreement by and among Offshore Group Investment Limited and each of the Holders (as defined therein) party thereto dated as of February 10, 2016

8-K

333-159299-15

10.2

02/17/16

4.7

Amendment No. 1 to the Registration Rights Agreement dated as of May 9, 2016, by and among Vantage Drilling International (f/k/a Offshore Group Investment Limited) and each of the Holders party thereto

10-Q

333-159299-15

10.3

5/13/16

4.8

Registration Rights Agreement among Vantage Drilling International, Vantage Drilling Company and the joint official liquidators of Vantage Drilling Company, dated as of April 26, 2017

10-K/A

333-212081

10.1

05/01/17

12.1

Statement re Computation of Earnings to Fixed Charges

31.1

Certification of Principal Executive Officer Pursuant to Section 302

31.2

Certification of Principal Financial and Accounting Officer Pursuant to Section 302

32.1**

Certification of Principal Executive Officer Pursuant to Section 906

32.2**

Certification of Principal Financial and Accounting Officer Pursuant to Section 906

101.INS

— XBRL Instance Document

101.SCH

— XBRL Schema Document

101.CAL

— XBRL Calculation Document

101.DEF

— XBRL Definition Linkbase Document

101.LAB

— XBRL Label Linkbase Document

101.PRE

— XBRL Presentation Linkbase Document

** These exhibits are furnished herewith and shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Exhibit 12.1
Ratio of Earnings to Fixed Charges
(In thousands, except Ratio of Earnings to Fixed Charges)

		Six Months
		Ended June
		30, 2018
Earnings (Loss)
Loss before provision for income taxes and minority interest		$ (56,048)
Fixed charges		38,810
Minority interest in pre-tax income of subsidiaries with no fixed charges		-
Loss as adjusted		$ (17,238)

Fixed Charges
Interest expense		$ 38,683
Portion of rental expense representative of the interest factor		127
Total fixed charges		$ 38,810

Ratio of earnings to fixed charges (a)		-

(a) For the six months ended June 30, 2018 earnings were not sufficient to cover fixed charges by approximately $56.0 million.

Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒ (Do not check if a smaller reporting company)	Smaller reporting company	☐
		Emerging growth company	☐

(in thousands)
Fiscal year:
2018	$	3,181
2019		1,643
Thereafter		-
Total	$	4,824

	June 30, 2018		December 31, 2017
(unaudited, in thousands)
Current contract cost assets	$	2,249	$	217
Noncurrent contract cost assets		5,361		6,216
Current contract revenue liabilities		1,938		510
Noncurrent contract revenue liabilities		5,600		6,757

	Contract Costs			Contract Revenues
(unaudited, in thousands)
Balance as of December 31, 2017	$	6,433		$	7,267
Increase due to contractual additions		4,815			790
Decrease due to recognition of revenue		(3,638	)		(519	)
Balance as of June 30, 2018	$	7,610		$	7,538

(in thousands)
Total cash consideration	$	13,000
Purchase price allocation:
Drilling contract value		12,640
Rig equipment to be sold (net of disposal costs)		2,050
Drillpipe assets		700
Severance liabilities assumed		(480	)
Net assets acquired		14,910
Bargain purchase gain	$	1,910

		Page
SAFE HARBOR STATEMENT		3
PART I—FINANCIAL INFORMATION
Item 1	Financial Statements	5
	Consolidated Balance Sheet	5
	Consolidated Statement of Operations	6
	Consolidated Statement of Cash Flows	7
	Notes to Unaudited Consolidated Financial Statements	8
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4	Controls and Procedures	29
PART II—OTHER INFORMATION
Item 1	Legal Proceedings	30
Item 6	Exhibits	31
SIGNATURES		33

	Percentage of Days Contracted				Revenues Contracted (in thousands)
	2018		2019		2018		2019		Beyond
Jackups		99%		62%	$	43,880	$	51,030	$	7,027
Drillships		55%		33%	$	53,400	$	36,896	$	33,257

	VANTAGE DRILLING INTERNATIONAL

Date: August 8, 2018	By:	/s/ THOMAS J. CIMINO
		Thomas J. Cimino
		Chief Financial Officer
		(Principal Financial and Accounting Officer)