Vantage Drilling CO - FORM 10-K

Vantage Drilling CO - FORM 10-K - March 15, 2012

Attached files

Attached files

Vantage Drilling CO Reports

file	filename
EX-21.1 - SUBSIDIARIES - Vantage Drilling CO	d286422dex211.htm
EX-31.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 302 - Vantage Drilling CO	d286422dex311.htm
EX-31.2 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER SECTION 302 - Vantage Drilling CO	d286422dex312.htm
EX-32.1 - CERTIFICATION OF CEO PURSUANT TO SECTION 906 - Vantage Drilling CO	d286422dex321.htm
EX-32.2 - CERTIFICATION OF PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER SECTION 906 - Vantage Drilling CO	d286422dex322.htm
EXCEL - IDEA: XBRL DOCUMENT - Vantage Drilling CO	Financial_Report.xls

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-34094

Vantage Drilling Company

(Exact name of registrant as specified in its charter)


Cayman Islands		N/A
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

777 Post Oak Boulevard, Suite 800, Houston, Texas		77056
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s telephone number, including area code:

(281) 404-4700

Securities registered pursuant to Section 12(b) of the Act:


Title of each class		Name of each exchange on which registered
Ordinary Shares, par value $.001 per share		NYSE Amex

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No x

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 x No ¨

Indicated by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 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 x

Aggregate market value of the voting and non-voting stock held by nonaffiliates as of June 30, 2011 based on the closing price of $1.82 per share on the NYSE Amex on such date, was approximately $512.9 million.

The number of the registrant’s ordinary shares outstanding as of February 17, 2012 is 291,457,669 shares.

Documents incorporated by reference

Portions of the registrant’s proxy statement for its Annual Meeting of Shareholders to be held in June 2012 are incorporated by reference into Part III of this Annual Report.

TABLE OF CONTENTS


SAFE HARBOR STATEMENT		1
PART I
Item 1.	Business	3
Item 1A.	Risk Factors	12
Item 1B.	Unresolved Staff Comments	26
Item 2.	Properties	26
Item 3.	Legal Proceedings	26
Item 4.	Mine Safety Disclosures	27
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	28
Item 6.	Selected Financial Data	31
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	43
Item 8.	Financial Statements and Supplementary Data	44
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	71
Item 9A.	Controls and Procedures	71
Item 9B.	Other Information	71
PART III
Item 10.	Directors, Executive Officers and Corporate Governance	72
Item 11.	Executive Compensation	72
Item 12.	Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters	72
Item 13.	Certain Relationships and Related Transactions, and Director Independence	72
Item 14.	Principal Accounting Fees and Services	72
PART IV
Item 15.	Exhibits, Financial Statement Schedules	73
SIGNATURES		77

SAFE HARBOR STATEMENT

This Annual Report on Form 10-K 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 Annual Report, including under “Item 1A. Risk Factors” and “Item 7. Management 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 Annual Report.

These forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. You should not place undue reliance on these forward-looking statements. Our actual results could differ materially from those anticipated in these forward-looking statements.

Among the factors that could cause actual results to differ materially are the risks and uncertainties described under “Item 1A. Risk Factors,” under “Item 7. Management Discussion and Analysis of Financial Condition and Results of Operations” and the following:

•

our limited operating history;

•

our small number of customers;

•

credit risks of our key customers and certain other third parties;

•

reduced expenditures by oil and natural gas exploration and production companies;

•

termination of our customer contracts;

•

general economic conditions and conditions in the oil and gas industry;

•

our failure to obtain delivery of drilling units;

•

delays and cost overruns in construction projects;

•

competition within our industry;

•

limited mobility between geographic regions;

•

operating hazards in the oilfield service industry;

•

the impact of the Macondo well incident on offshore drilling;

•

ability to obtain indemnity from customers;

•

adequacy of insurance coverage in the event of a catastrophic event;

•

operations in international markets;

•

governmental, tax and environmental regulation;

•

changes in legislation removing or increasing current applicable limitations of liability;

•

effects of new products and new technology on the market;

•

our substantial level of indebtedness;

•

our ability to incur additional indebtedness;

•

compliance with restrictions and covenants in our debt agreements;

•

identifying and completing acquisition opportunities;

•

levels of operating and maintenance costs;

•

our dependence on key personnel;

•

availability of workers and the related labor costs;

•

the sufficiency of our internal controls;

•

changes in tax laws, treaties or regulations;

•

any non-compliance with the U.S. Foreign Corrupt Practices Act;

•

our obligation to repurchase certain indebtedness upon a change of control;

•

potential conflicts of interest with F3 Capital and affiliates; and

•

our incorporation under the laws of the Cayman Islands and the limited rights to relief that may be available compared to U.S. laws.

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 our filings with the Securities and Exchange Commission (the “SEC”), which may be obtained by contacting us or the SEC. These filings are also available through our website at http://www.vantagedrilling.com or through the SEC’s Electronic Data Gathering and Analysis Retrieval System (EDGAR) at http://www.sec.gov. The contents of our website are not part of this Annual Report.

Unless the context indicates otherwise, all references to “we,” “our” or “us” refer to Vantage Drilling Company and its consolidated subsidiaries.

PART I

Item 1.

Business.

Our Company

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. We also provide construction supervision services for, and will operate and manage, drilling units owned by others. 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 primarily on international markets. We are an exempted company incorporated with limited liability in the Cayman Islands, organized in 2007.

Drilling Fleet

Jackups

A jackup rig is a mobile, self-elevating drilling platform equipped with legs that are lowered to the ocean floor until a foundation is established for support, at which point the hull is raised out of the water into position to conduct drilling and workover operations. All of our jackup rigs were built at PPL Shipyard in Singapore. The design of our jackup rigs is the Baker Marine Pacific Class 375. These units are ultra-premium jackup rigs with independent legs capable of drilling in up to 375 feet of water, a cantilever drilling floor, and a total drilling depth capacity of approximately 30,000 feet.

Drillships

Drillships are self-propelled, dynamically positioned and suited for drilling in remote locations because of their mobility and large load carrying capacity. The Platinum Explorer and the Dragonquest are designed for drilling in water depths of up to 12,000 feet, with a total vertical drilling depth capacity of up to 40,000 feet. The drillships’ hull design has a variable deck load of approximately 20,000 tons and measures 781 feet long by 137 feet wide. The Platinum Explorer began operating in December 2010.

The following table sets forth certain information concerning our owned and managed offshore drilling fleet.


Name	Ownership			Year Built/ Expected Delivery	Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Status
Jackups
Emerald Driller		100	%	2008		375		30,000	Operating
Sapphire Driller		100	%	2009		375		30,000	Operating
Aquamarine Driller		100	%	2009		375		30,000	Operating
Topaz Driller		100	%	2009		375		30,000	Operating

Drillships
Platinum Explorer (1)		100	%	2010		12,000		40,000	Operating
Dragonquest (1)(2)		—		2011		12,000		40,000	Commissioning
Tungsten Explorer (1)		100	%	2013		12,000		40,000	Under construction

(1)	The drillships are designed to drill in up to 12,000 feet of water, but are or will be equipped to drill in 10,000 feet of water.

(2)

The Dragonquest was formerly known as the Titanium Explorer. We are currently overseeing the construction of this drillship pursuant to a construction supervision agreement and have an eight-year contract with Petrobras to operate this vessel upon delivery. See “Drilling Unit Agreements” and “Drilling Construction Supervision and Management Service Agreements.”

Strengths

• Premium fleet. Our fleet is currently comprised of seven ultra-premium high specification drilling units, including jackup rigs and drillships, of which we own four jackup rigs and two drillships. We believe the Emerald Driller, Sapphire Driller, Aquamarine Driller and Topaz Driller are ultra-premium jackup rigs due to their ability to drill in deeper depths, as well as their enhanced operational efficiency and technical capabilities when compared to a majority of the current global jackup rig fleet, which is primarily comprised of older, smaller, less capable rigs using less modern technology. In addition, the Platinum Explorer is an ultra-deepwater drillship that is equipped to drill in water depths of up to 10,000 feet, which we believe to be the upper-limit water depth currently targeted by leading offshore exploration and production companies for new deepwater development projects.

• Strong asset coverage. Our owned fleet includes four jackups, at a cost of approximately $227.0 million each, or $908.0 million total, one drillship, at a cost of approximately $850.0 million and one drillship under construction at a current cost to date of approximately $113.4 million, (anticipated total completed cost of approximately $595.0 million), for a total of approximately $1.9 billion. These costs reflect all incurred costs associated with the purchase, construction, delivery and commissioning of the vessels, as well as significant supplies of spare major components with respect to the drillship. As of December 31, 2011, we had approximately $1.2 billion of debt outstanding, which represents a ratio of 1.6x total cost to debt outstanding.

• Proven track record. We have a proven track record of successfully managing, constructing, marketing and operating offshore drilling units, having previously managed significant drilling fleets for some of our competitors. Our in-house team of engineers and construction personnel has overseen complex rig construction projects. As a result, the Emerald Driller, Sapphire Driller, Aquamarine Driller, Topaz Driller and Platinum Explorer have been delivered within budget and either on time or ahead of schedule. Collectively, our jackup fleet has experienced approximately 99% of productive time during 2011 which we believe is above average for the industry. The Platinum Explorer experienced approximately 92% of productive time during 2011, which we believe is outstanding for the first year of operation.

• Experienced management and operational team. We benefit from our management team, which has extensive experience and an average of 29 years in the drilling industry, including international and domestic public company experience involving numerous acquisitions and debt and equity financings.

Strategy

Our strategy is to:

• Capitalize on customer demand for modern, high specification units. We own and manage high specification state-of-the-art drilling units, which are well suited to meet the requirements of customers for efficiently drilling through deep and complex geological formations, and drilling horizontally. Additionally, high specification drilling units generally provide faster drilling and moving times. Since 2009, a majority of the bid invitations for jackups that we received required high specification units. Aside from their drilling capabilities, we believe that customers generally prefer new drilling units because of improved safety features and less frequent downtime for maintenance. New, modern drilling units are also generally preferred by crews, which makes it easier to hire and retain high quality operating personnel.

• Focus on international markets. We have been able to successfully deploy and operate our drilling units in some of the most active international oil and natural gas producing regions. We believe that exposure to certain international markets with major, national and independent oil and natural gas companies will increase the predictability of our cash flows because those markets have exhibited less cyclicality than the U.S. Gulf of Mexico market, in which we do not currently operate. We also believe that our internationally diverse platform reduces our exposure to a single market. Through the continued growth of our presence in Asia and West Africa, we intend to capitalize on our existing infrastructure to better serve our customers.

• Increase our deepwater exposure. In recent years, there has been increased emphasis on exploration in deeper waters due, in part, to technological developments that have made such exploration more feasible and cost-effective. We believe that the water-depth capability of our ultra-deepwater drilling units is attractive to our customers and allows us to compete effectively in obtaining long-term deepwater drilling contracts. We will seek to manage or acquire additional deepwater drilling units to service this market.

• Expand key industry relationships. We are focused on expanding relationships with major, national and independent oil and natural gas companies, focused primarily on international markets, which we believe will allow us to obtain longer-term contracts to build our backlog of business when dayrates and operating margins justify entering into such contracts. We believe that our existing relationships with these companies have contributed to our strong contract backlog. Longer-term contracts increase revenue visibility and mitigate some of the volatility in cash flows caused by cyclical market downturns.

• Identify and pursue acquisition opportunities. We plan to continue to grow through strategic acquisitions of assets and other offshore drilling companies. As part of our acquisition strategy, we anticipate raising additional debt and equity capital which may, at times, initially increase our overall leverage, but within a level that we believe to be appropriate based on our contract backlog and other factors.

Our Industry

The offshore contract drilling industry provides drilling, workover and well construction services to oil and natural gas exploration and production companies through the use of mobile offshore drilling rigs. Historically, the offshore drilling industry has been very cyclical with periods of high demand, limited rig supply and high dayrates alternating with periods of low demand, excess rig supply and low dayrates. Periods of low demand and excess rig supply intensify the competition in the industry and often result in some rigs becoming idle for long periods of time. As is common throughout the oilfield services industry, offshore drilling is largely driven by actual or anticipated changes in oil and natural gas prices and capital spending by companies exploring for and producing oil and natural gas. Sustained high commodity prices historically have led to increases in expenditures for offshore drilling activities and, as a result, greater demand for our services. Beginning in 2008, global disruption in the financial markets and depressed oil and gas prices reduced demand for offshore drilling during 2009. These conditions improved in 2010 and 2011 as the financial markets stabilized and oil prices recovered. With the market improvement, oil and gas companies have increased spending for offshore drilling services.

We believe that market conditions will generally continue to improve in 2012 and lead to a more robust contracting environment. However, in 2011 civil unrest in the Middle East, West Africa and North Africa reduced access to these markets and resulted in force majeure terminations or postponement of drilling contracts by customers operating in these regions. Additionally, the aftermath of the Macondo incident in the U.S. Gulf of Mexico continues to constrain deepwater drilling in a major market region.

Markets

Offshore drilling rigs are generally marketed on a worldwide basis as rigs can be moved from one region to another. The cost of moving a rig and the availability of rig-moving vessels may cause the supply and demand balance to vary between regions. However, significant variations between regions do not tend to exist long-term because of rig mobility.

The offshore drilling market generally consists of shallow water (<400 ft.), midwater (>400ft.), deepwater (>4,000 ft.) and ultra-deepwater (>7,500 ft.). The global shallow water market is serviced primarily by jackups.

Our jackup fleet is focused on the “long-legged” (350+ ft) high specification market. The drillships that we operate and have agreements to operate are focused on the ultra-deepwater segment which has been very strong in recent years as demand for ultra-deepwater rigs has exceeded supply.

Customers

Our customers are primarily large multinational oil and natural gas companies, government owned oil and natural gas companies and independent oil and natural gas producers. For the years ended December 31, 2011, 2010 and 2009, the following customers accounted for more than 10% of our consolidated revenue:


	For the Years Ending December 31,
	2011			2010			2009
Oil and Natural Gas Corporation (“ONGC”)		41	%		—			—
Valencia Drilling Corporation (“Valencia”)		13	%		—			—
SeaDragon Offshore Limited		—			26	%		23	%
Pearl Oil (Thailand) Ltd.		—			21	%		46	%
VAALCO Gabon (Etame), Inc.		—			13	%		—
PetroVietnam Drilling and Well Services		—			11	%		—
Foxtrot International LDC		—			—			12	%

Drilling Unit Agreements

Our drilling contracts are the result of negotiation with our customers, and most contracts are awarded through competitive bidding against other contractors. Drilling contracts generally provide for payment on a dayrate basis, with higher rates while the drilling unit is operating and lower rates for periods of mobilization or when drilling operations are interrupted or restricted by equipment breakdowns, adverse environmental conditions or other conditions beyond our control. Currently all of our drilling contracts are on a dayrate basis. A dayrate drilling contract generally extends over a period of time covering either the drilling of a single well or group of wells or covering a stated term. Certain of our contracts with customers may be cancelable at the option of the customer upon payment of an early termination payment. Such payments may not, however, fully compensate us for the loss of the contract. Contracts also customarily provide for either automatic termination or termination at the option of the customer typically without the payment of any termination fee, under various circumstances such as non-performance, in the event of downtime or impaired performance caused by equipment or operational issues, or sustained periods of downtime due to force majeure events. Many of these events are beyond our control. The contract term in some instances may be extended by the client exercising options for the drilling of additional wells or for an additional term. Our contracts also typically include a provision that allows the client to extend the contract to finish drilling a well-in-progress. During periods of depressed market conditions, our clients may seek to renegotiate drilling contracts to reduce their obligations or may seek to repudiate their contracts. Suspension of drilling contracts will result in the reduction in or loss of dayrate for the period of the suspension. If our customers cancel some of our contracts and we are unable to secure new contracts on a timely basis and on substantially similar terms, or if contracts are suspended for an extended period of time or if a number of our contracts are renegotiated, it could adversely affect our consolidated statement of financial position, results of operations or cash flows.

The following table sets forth certain information concerning the contract status of our owned and managed offshore drilling fleet.


Name	Region	Expected Contract Duration	Actual/ Expected Contract Commencement	Average Drilling Revenue Per Day (1)	Customer
Emerald Driller	Southeast Asia	18 months	Q3 2011	$130,000	PTTEP
Sapphire Driller	West Africa	12 months	Q1 2012	$120,000	Foxtrot International
Aquamarine Driller	Southeast Asia	12 months	Q4 2011	$132,000	Petronas Carigali
Topaz Driller	Southeast Asia	14 months	Q4 2011	$187,000	Total E&P Malaysia
Platinum Explorer	India	5 years	Q4 2010	$590,500	ONGC (2)
Dragonquest (3)	U.S. Gulf of Mexico	8 years	Q3 2012	$551,300 (4)	Petrobras

(1)

Average drilling revenue per day is based on the total estimated revenue divided by the minimum number of days committed in a contract. Unless otherwise noted, the total estimated revenue includes mobilization and demobilization fees and other contractual revenues associated with the drilling services.

(2)	For more information on the contract with ONGC, see “Contract Backlog” below.

(3)	We will manage this vessel pursuant to a management services agreement and will only receive management fees pursuant to this agreement. For more information, see “Drillship Construction Supervision and Management Services Agreements.”

(4)	The average drilling revenue per day includes the achievement of a 12.5% bonus opportunity, but excludes mobilization revenues and revenue escalations included in the contract.

Contract Backlog

As of December 31, 2011, our owned fleet had total contract backlog of approximately $1.0 billion, including estimated contract backlog with ONGC for the Platinum Explorer of approximately $855.0 million. Based upon our current projections of operating expenses, we estimate that the ONGC contract will generate approximately $145.0 million to $150.0 million in annual EBITDA over the five year contract. Additionally, the Dragonquest has contract backlog of approximately $1.8 billion from which we expect to receive approximately $13.0 to $15.0 million per year in management fees over the eight year term of the contract.

Drillship Construction Supervision and Management Services Agreements

We are party to agreements to manage the construction of the Dragonquest and the Dalian Developer. Our counterparty for the Dragonquest agreement is an affiliate of F3 Capital, our largest shareholder and an affiliate of ours. During the construction of each of these drillships, these agreements entitle us to receive a fixed fee. We also have an agreement to manage the operations of the Dragonquest. Once the Dragonquest is operational, the agreement entitles us to receive a fixed fee per day plus a performance fee based on the operational performance of the drillship and marketing fees for every charter agreement we secure on behalf of the Dragonquest. Valencia may terminate their obligations under the agreement if any of the following occur: (i) we fail to meet our obligations under the agreement after being given notice and time to cure; (ii) we go into liquidation or cease to carry on our business; (iii) the Dragonquest is damaged to the point of being inoperable; or (iv) the Dragonquest is sold and no outstanding payments are owed to us. Valencia may terminate the agreement at will only if there are no outstanding bids, proposals or contractual commitments to customers.

Competition

The contract drilling industry is highly competitive. Demand for contract drilling and related services is influenced by a number of factors, including the current and expected prices of oil and natural gas and the expenditures of oil and natural gas companies for exploration and development of oil and natural gas. In addition, demand for drilling services remains dependent on a variety of political and economic factors beyond our control, including worldwide demand for oil and natural gas, the ability of the Organization of Petroleum Exporting Countries, or OPEC, to set and maintain production levels and pricing, the level of production of non-OPEC countries and the policies of the various governments regarding exploration and development of their oil and natural gas reserves.

Drilling contracts are generally awarded on a competitive bid or negotiated basis. Pricing is often the primary factor in determining which qualified contractor is awarded a job. Rig availability, capabilities, age and each contractor’s safety performance record and reputation for quality also can be key factors in the determination. Operators also may consider crew experience, rig location and efficiency. We believe that the market for drilling contracts will continue to be highly competitive for the foreseeable future. Certain competitors may have greater financial resources than we do, which may better enable them to withstand periods of low utilization, compete more effectively on the basis of price, build new rigs or acquire existing rigs.

Our competition ranges from large international companies offering a wide range of drilling and other oilfield services to smaller, locally owned companies. Competition for rigs is usually on a global basis, as these rigs are highly mobile and may be moved, at a cost that is sometimes substantial, from one region to another in response to demand.

Operating Hazards

Our operations are subject to many hazards inherent in the offshore drilling business, including, but not limited to: blowouts, craterings, fires, explosions, equipment failures, loss of well control, loss of hole, damaged or lost equipment and damage or loss from inclement weather or natural disasters.

These hazards could cause personal injury or death, serious damage to or destruction of property and equipment, suspension of drilling operations, or damage to the environment, including damage to producing formations and surrounding areas. Generally, we seek to obtain contractual indemnification from our customers for some of these risks. To the extent not transferred to customers by contract, we seek protection against some of these risks through insurance, including property casualty insurance on our rigs and drilling equipment, protection and indemnity, commercial general liability, which has coverage extension for underground resources and equipment coverage, commercial contract indemnity and commercial umbrella insurance.

There are risks that are outside of our control. Nonetheless, we believe that we are adequately insured for liability and property damage to others with respect to our operations. However, such insurance may not be sufficient to protect us against liability for all consequences of well disasters, extensive fire damage or damage to the environment. For more, see “Risk Factors—Our business involves numerous operating hazards, and our insurance and contractual indemnity rights may not be adequate to cover our losses.”

Insurance

We maintain insurance coverage that includes coverage for physical damage, third party liability, employer’s liability, war risk, general liability, vessel pollution and other coverages. However, our insurance is subject to exclusions and limitations and there is no assurance that such coverage will adequately protect us against liability from all potential consequences and damages.

Our primary marine package provides for hull and machinery coverage for our drilling units up to a scheduled value for each asset. The maximum coverage for these assets is $1.55 billion. The policies are subject to exclusions, limitations, deductibles and other conditions. Deductibles for physical damage to our jackup rigs and the Platinum Explorer are $2.5 million and $5.0 million, respectively, per occurrence. Our protection and indemnity policy provides liability coverage limits of $500 million per rig. In addition to these policies, we have separate policies providing coverage for onshore general liability, employer’s liability, auto liability and non-owned aircraft liability, with customary coverage, limits and deductibles.

Environmental Regulation

Our operations are conducted primarily in foreign jurisdictions and are subject to, and affected in varying degrees by, governmental laws and regulations in countries in which we operate, including laws and regulations relating to the importation of and operation of drilling units, currency conversions and repatriation, oil and natural gas exploration and development, environmental protection, taxation of offshore earnings and earnings of expatriate personnel, the use of local employees and suppliers by foreign contractors and duties on the importation and exportation of drilling units and other equipment. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and natural gas and other aspects of the oil and natural gas industries in their countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil and natural gas companies and may continue to do so. Operations in

less developed countries can be subject to legal systems that are not as mature or predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings. For a discussion of the effects of environmental regulation on our current operations, see “Risk Factors—Our business is subject to numerous governmental laws and regulations, including those that may impose significant costs and liability on us for environmental and natural resource damages.” As our operations increase, we anticipate that we will make expenditures to comply with environmental requirements. To date, we have not expended material amounts in order to comply and we do not believe that our compliance with such requirements will have a material adverse effect upon our results of operations or competitive position or materially increase our capital expenditures.

We currently do not have operations in the United States. However, we are contracted to operate the Dragonquest upon completion of construction, and are scheduled to commence operations in the U. S. Gulf of Mexico for Petrobras. Heightened environmental concerns in the U.S. Gulf of Mexico has led to greater and more stringent environmental regulation, higher drilling costs, and a more difficult and lengthy well permitting process, which, in general, may adversely affect drilling activity in the U.S. Gulf of Mexico. In the United States, requirements applicable to our operations will include regulations that require us to obtain and maintain specified permits or governmental approvals, control the discharge of materials into the environment, require removal and cleanup of materials that may harm the environment, or otherwise relate to the protection of the environment. Laws and regulations protecting the environment have become more stringent and may in some cases impose strict liability, rendering a person liable for environmental damage without regard to negligence or fault on the part of such person. Some of these laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts which were in compliance with all applicable laws at the time they were performed. The application of these requirements or the adoption of new or more stringent requirements could have a material adverse effect on our financial condition and results of operations.

The U.S. Federal Water Pollution Control Act of 1972, commonly referred to as the Clean Water Act, prohibits the discharge of pollutants, including petroleum, into the navigable waters of the United States without a permit. The regulations implementing the Clean Water Act require permits to be obtained by an operator before discharge from specified exploration activities occur. Certain facilities that store or otherwise handle oil are required to prepare and implement Spill Prevention Control and Countermeasure Plans and Facility Response Plans relating to the possible discharge of oil to surface waters. Violations of monitoring, reporting, permitting and other requirements can result in the imposition of civil and criminal penalties.

The U.S. Oil Pollution Act of 1990 (“OPA”) and related regulations impose a variety of requirements on “responsible parties” related to the prevention of oil spills and liability for damages resulting from such spills. A “responsible party” includes the owners or operator of a facility or vessel, or the lessee or permittee of the area in which an offshore facility is located. The OPA assigns liability to each responsible party for oil removal costs and a variety of public and private damages. While liability limits apply in some circumstances, a party cannot take advantage of liability limits if the spill was caused by gross negligence or willful misconduct or resulted from violation of a federal safety, construction or operating regulation. If the party fails to report a spill or to cooperate fully in the cleanup, liability limits likewise do not apply. The OPA establishes a liability limit for offshore facilities of all removal costs plus $75.0 million, and a lesser limit for some vessels depending on their size. Few defenses exist to the liability imposed by OPA, and the liability could be substantial. Failure to comply with ongoing requirements or inadequate cooperation in the event of a spill could subject a responsible party to civil or criminal enforcement action. Congress has been urged to consider changes to OPA that would increase or eliminate the limits on liability. OPA requires owners and operators of certain vessels to establish and maintain with the U.S. Coast Guard evidence of financial responsibility. Vessel owners and operators may evidence their financial responsibility by showing proof of insurance, surety bond, self-insurance or guarantee.

Law governing air emissions and solid and hazardous waste may also apply to our operations. The U.S. Outer Continental Shelf Lands Act authorizes regulations relating to safety and environmental protection applicable to lessees and permittees operating on the outer continental shelf. Included among these are regulations that require the preparation of spill contingency plans and establish air quality standards for certain

pollutants, including particulate matter, volatile organic compounds, sulfur dioxide, carbon monoxide and nitrogen oxides. Specific design and operational standards may apply to outer continental shelf vessels, rigs, platforms, vehicles and structures. Violations of lease conditions or regulations related to the environment issued pursuant to the Outer Continental Shelf Lands Act can result in substantial civil and criminal penalties, as well as potential court injunctions curtailing operations and canceling leases. Such enforcement liabilities can result from either governmental or citizen prosecution.

In recent years, a variety of initiatives intended to enhance vessel security were adopted to address terrorism risks, including the U.S. Coast Guard regulations implementing the Maritime Transportation and Security Act of 2002. These regulations required, among other things, the development of vessel security plans and on-board installation of automatic information systems, or AIS, to enhance vessel-to-vessel and vessel-to-shore communications.

The United States is one of approximately 165 member countries to the International Maritime Organization (“IMO”), a specialized agency of the United Nations that is responsible for developing measures to improve the safety and security of international shipping and to prevent marine pollution from ships. Among the various international conventions negotiated by the IMO is the International Convention for the Prevention of Pollution from Ships (“MARPOL”). MARPOL imposes environmental standards on the shipping industry relating to oil spills, management of garbage, the handling and disposal of noxious liquids, harmful substances in packaged forms, sewage and air emissions.

Annex VI to MARPOL sets limits on sulfur dioxide and nitrogen oxide emissions from ship exhausts and prohibits deliberate emissions of ozone depleting substances. Annex VI also imposes a global cap on the sulfur content of fuel oil and allows for specialized areas to be established internationally with more stringent controls on sulfur emissions. For vessels 400 gross tons and greater, platforms and drilling units, Annex VI imposes various survey and certification requirements. For this purpose, gross tonnage is based on the International Tonnage Certificate for the vessel. The United States has ratified Annex VI. In addition, any drilling units we operate internationally are, however, subject to the requirements of Annex VI in those countries that have implemented its provisions. We believe the drilling units we currently offer for international projects are generally exempt from the more costly compliance requirements of Annex VI. Accordingly, we do not anticipate incurring significant costs to comply with Annex VI in the near term.

Although significant capital expenditures may be required to comply with these governmental laws and regulations, such compliance has not materially adversely affected our earnings or competitive position. We believe that we are currently in compliance in all material respects with the environmental regulations to which we are subject.

Employees

At January 31, 2012, we had a managed headcount of approximately 980, of which 558 were our direct employees. As we continue to enter into construction supervision and management services agreements, as well as acquire our own vessels, we will continue to hire more employees to meet our needs.

Available Information

We file annual, quarterly and special reports, proxy statements and other information with the SEC. Our SEC filings are available to the public over the Internet at the SEC’s web site at http://www.sec.gov. You may also read and copy any document we file at the SEC’s public reference room in Washington, D.C. Please call the SEC at 1-800-SEC-0330 for further information on their public reference room. Our SEC filings are also available to the public on our website at http://www.vantagedrilling.com. Please note that information contained on our website, whether currently posted or posted in the future, is not a part of this Annual Report on Form 10-K or the documents incorporated by reference in this Annual Report on Form 10-K. This Annual Report on Form

10-K also contains summaries of the terms of certain agreements that we have entered into that are filed as exhibits to this Annual Report on Form 10-K or other reports that we have filed with the SEC. The descriptions contained in this Annual Report on Form 10-K of those agreements do not purport to be complete and are subject to, and qualified in their entirety by reference to, the definitive agreements. You may request a copy of the agreements described herein at no cost by writing or telephoning us at the following address: Attention: Associate General Counsel, Vantage Drilling Company, 777 Post Oak Boulevard, Suite 800, Houston, Texas 77056, phone number (281) 404-4700.

Item 1A.

Risk Factors.

There are numerous factors that affect our business and operating results, many of which are beyond our control. The following is a description of significant factors that might cause our future operating results to differ materially from those currently expected. The risks described below are not the only risks facing us. Additional risks and uncertainties not specified herein, not currently known to us or currently deemed to be immaterial also may materially adversely affect our business, financial position, operating results and/or cash flows.

Our business is difficult to evaluate due to our limited operating history and our prospects will be dependent on our ability to meet a number of challenges.

Because we have a limited operating history, you may not be able to evaluate our future prospects accurately. Our prospects will be primarily dependent on our ability to maintain customer drilling contracts for our drilling units and other factors listed below. If we are not able to successfully meet these challenges, our prospects, business, financial condition and results of operations would be materially and adversely affected.

A small number of customers account for a significant portion of our revenues, and the loss of one or more of these customers could materially adversely affect our financial condition and results of operations.

We derive a significant portion of our revenues from a few customers. During the fiscal year ended December 31, 2011, two customers accounted for approximately 41% and 13%, respectively, of our revenue. Our financial condition and results of operations could be materially and adversely affected if any one of these customers interrupt or curtail their activities, fail to pay for the services that have been performed, terminate their contracts, fail to renew their existing contracts or refuse to award new contracts and we are unable to enter into contracts with new customers on comparable terms. The loss of any of our significant customers could materially adversely affect our financial condition and results of operations.

We are exposed to the credit risks of our key customers, including certain affiliated companies, and certain other third parties, and nonpayment by these customers and other parties could adversely affect our financial position, results of operations and cash flows.

We are subject to risks of loss resulting from nonpayment or nonperformance by our customers, including certain companies owned by or associated with our affiliates. As of December 31, 2011, affiliates of F3 Capital owed us approximately $15.7 million on the Dragonquest for construction services rendered by us. Additionally, we have deferred $7.4 million of construction management fees until the delivery date of the Dragonquest. As a result, we have limited expenditures for this unit. In addition, under the construction supervision contract for the Cobalt Explorer, a drillship for which construction was suspended in June 2009, F3 Capital owes us approximately $3.0 million for services rendered in 2009 before the suspension of this contract. Any material nonpayment or nonperformance by these entities, other key customers and certain other third parties could adversely affect our financial position, results of operations and cash flows. If any key customers or other parties default on their obligations to us, our financial results and condition could be adversely affected. Furthermore, some of these customers and other parties may be highly leveraged and subject to their own operating and regulatory risks.

A material or extended decline in expenditures by oil and natural gas exploration and production companies due to a decline or volatility in oil and natural gas prices, a decrease in demand for oil and natural gas, or other factors, would adversely affect our business.

Our business, including the utilization rates and dayrates we achieve for our owned and managed drilling units, depends on the level of activity in oil and natural gas exploration, development and production expenditures of our customers. Oil and natural gas prices and customers’ expectations of potential changes in these prices significantly affect this level of activity. Commodity prices are affected by numerous factors, including the following:

•

changes in global economic conditions, including the continuation of the current recession;

•

the demand for oil and natural gas;

•

the cost of exploring for, producing and delivering oil and natural gas;

•

expectations regarding future prices;

•

advances in exploration, development and production technology;

•

the ability of OPEC to set and maintain production levels and pricing;

•

the availability and discovery rate of new oil and natural gas reserves in offshore areas;

•

the rate of decline of existing and new oil and natural gas reserves;

•

the level of production in non-OPEC countries;

•

domestic and international tax policies;

•

the development and exploitation of alternative fuels;

•

weather;

•

blowouts and other catastrophic events;

•

the policies of various governments regarding exploration and development of their oil and natural gas reserves; and

•

the worldwide military and political environment, uncertainty or instability resulting from an escalation or additional outbreak of armed hostilities or other crises in significant oil and natural gas producing regions or further acts of terrorism.

Gulf of Mexico drilling activity has been curtailed due to regulatory restrictions following the Macondo blowout in early 2010. A prolonged decline in demand for drilling services may materially erode dayrates and utilization rates for drilling units, which would adversely affect our business, financial condition and results of operations and could have a significant negative impact on the market price of our securities.

Our jackup drilling contracts are generally short-term, and we could experience reduced profitability if customers reduce activity levels, terminate or seek to renegotiate drilling contracts with us, or if market conditions dictate that we enter into contracts that provide for payment based on a footage or turnkey basis, rather than on a dayrate basis.

Many jackup drilling contracts are short-term, and oil and natural gas companies tend to reduce activity levels quickly in response to downward changes in oil and natural gas prices. Due to the short-term nature of most of our jackup drilling contracts, a decline in market conditions can quickly affect our business if customers reduce their levels of operations. During depressed market conditions, a customer may no longer need a unit that is currently under contract or may be able to obtain a comparable unit at a lower dayrate. As a result, customers may seek to renegotiate the terms of their existing drilling contracts or avoid their obligations under those contracts. In addition, our customers may have the right to terminate, or may seek to renegotiate, existing contracts if we experience downtime, operational problems above the contractual limit or safety-related issues, if the drilling unit is a total loss, if the drilling unit is not delivered to the customer within the period specified in the contract or in other specified circumstances, which include events beyond the control of either party.

Some of our current jackup drilling contracts, and some drilling contracts that we may enter into in the future, may include terms allowing customers to terminate contracts without cause, with little or no prior notice and without penalty or early termination payments. In addition, we could be required to pay penalties, which could be material, if some of these contracts are terminated due to downtime, operational problems or failure to deliver. Some of the contracts with customers that we enter into in the future may be cancellable at the option of the customer upon payment of a penalty, which may not fully compensate us for the loss of the contract. Early termination of a contract may result in a drilling unit being idle for an extended period of time. The likelihood

that a customer may seek to terminate a contract is increased during periods of market weakness. Under most of our contracts, it is an event of default if we file a petition for bankruptcy or reorganization, which would allow the customer to terminate such contract.

Currently, our drilling contracts are dayrate contracts, where we charge a fixed rate per day regardless of the number of days needed to drill the well. While we plan to continue to perform services on a dayrate basis, market conditions may dictate that we enter into contracts that provide for payment based on a footage basis, where we are paid a fixed amount for each foot drilled regardless of the time required or the problems encountered in drilling the well, or enter into turnkey contracts, whereby we agree to drill a well to a specific depth for a fixed price and bear some of the well equipment costs. These types of contracts are riskier for us than a dayrate contract as we would be subject to downhole geologic conditions in the well that cannot always be accurately determined and subject us to greater risks associated with equipment and downhole tool failures. Unfavorable downhole geologic conditions and equipment and downhole tool failures may result in significant cost increases or may result in a decision to abandon a well project which would result in us not being able to invoice revenues for providing services. Any such termination or renegotiation of contracts and unfavorable costs increases or loss of revenue could have a material adverse impact on our financial condition and results of operations.

Lower prices for oil and natural gas reduces demand for our services and could have a material adverse effect on our revenue and profitability.

A slowdown in economic activity caused by the recession initially reduced worldwide demand for energy and resulted in lower oil and natural gas prices. Benchmark crude prices peaked at over $140 per barrel in July 2008 and then declined to approximately $107 per barrel at year-end 2011. During 2011, the benchmark for crude prices fluctuated between the low 90’s per barrel and low 100’s per barrel. Demand for our services depends on oil and natural gas industry activity and expenditure levels that are directly affected by trends in oil and natural gas prices. In addition, demand for our services is particularly sensitive to the level of exploration, development and production activity of and the corresponding capital spending by, oil and natural gas companies. Any prolonged reduction in oil and natural gas prices could depress the near-term levels of exploration, development, and production activity. Perceptions of longer-term lower oil and natural gas prices by oil and natural gas companies could similarly reduce or defer major expenditures given the long-term nature of many large-scale development projects. Lower levels of activity result in a corresponding decline in the demand for our services, which could have a material adverse effect on our revenue and profitability. Additionally, these factors may adversely impact our financial position if they are determined to cause an impairment of our long-lived assets.

Failure to obtain delivery of the Dragonquest may have a material and adverse effect on our business.

We have secured a drilling contract for the Dragonquest which we are supervising the construction of for an affiliate of F3 Capital. We are not a party to the construction contract for this drilling unit and do not have control over any agreements between the owner and the shipyard. If this unit is not completed, completed in a timely manner, delivered to us upon completion of construction or acceptable to our customer, or if we are unable to deliver this unit or an acceptable replacement, our drilling contract may be cancelled and/or we may be required to pay damages to our customer, and our business, financial condition, results of operations and future prospects could be materially adversely affected.

Construction projects are subject to risks, including delays and cost overruns, which could have an adverse impact on our liquidity and results of operations.

As part of our growth strategy we may contract from time to time for the construction of drilling units or may enter into agreements to manage the construction of drilling units for others. Construction projects are subject to the risks of delay or cost overruns inherent in any large construction project, including costs or delays resulting from the following:

•

unexpected long delivery times for, or shortages of, key equipment, parts and materials;

•

shortages of skilled labor and other shipyard personnel necessary to perform the work;

•

unforeseen increases in the cost of equipment, labor and raw materials, particularly steel;

•

unforeseen design and engineering problems;

•

unanticipated actual or purported change orders;

•

work stoppages;

•

latent damages or deterioration to hull, equipment and machinery in excess of engineering estimates and assumptions;

•

failure or delay of third-party service providers and labor disputes;

•

disputes with shipyards and suppliers;

•

delays and unexpected costs of incorporating parts and materials needed for the completion of projects;

•

financial or other difficulties at shipyards;

•

adverse weather conditions; and

•

inability to obtain required permits or approvals.

If we experience delays and costs overruns in the construction of drilling units due to certain of the factors listed above, it could also adversely affect our business, financial condition and results of operations. We are managing the construction of the Dragonquest, which we will operate upon completion of construction and is scheduled for commencement with Petrobras in the third quarter of 2012. Delays in the delivery of this unit would result in the delay in contract commencement, resulting in financial penalties and a loss of revenue to us, and may also cause the customer to terminate or shorten the term of the drilling contract for the unit pursuant to applicable late delivery clauses. In the event this unit is not completed on a timely basis, we may not be able to secure a replacement unit that is acceptable to the customer.

Our business is affected by local, national and worldwide economic conditions and the condition of the oil and natural gas industry.

Recent economic data indicates the rate of economic growth worldwide has declined significantly from the growth rates experienced in recent years. Current economic conditions have resulted in uncertainty regarding energy and commodity prices. In addition, future economic conditions may cause many oil and natural gas production companies to further reduce or delay expenditures in order to reduce costs, which in turn may cause a further reduction in the demand for drilling services. If conditions worsen, our business and financial condition may be adversely impacted.

Our industry is highly competitive, cyclical and subject to intense price competition. Due to our limited operating history, we may be at a competitive disadvantage.

The offshore contract drilling industry is highly competitive, and contracts have traditionally been awarded on a competitive bid basis. The technical capabilities, availability and pricing of a drilling unit are often the primary factors in determining which qualified contractor is awarded a job. Other key factors include a contractor’s reputation for service, safety record, environmental record, technical and engineering support and long-term relationships with major, national and independent oil and natural gas companies. Our competitors in the offshore contract drilling industry generally have larger, more diverse fleets, longer operating histories with established safety and environmental records over a measurable period of time and long-term relationships with customers. This provides our competitors with competitive advantages that may adversely affect our efforts to contract our drilling units on favorable terms, if at all, and correspondingly negatively impact our financial position and results of operations. Additionally, we are at a competitive disadvantage to those competitors that are better capitalized because they are in a better position to withstand the effects of a downturn in our industry.

The offshore contract drilling industry, historically, has been very cyclical with periods of high demand, limited supply and high dayrates alternating with periods of low demand, excess supply and low dayrates. Many offshore drilling units are highly mobile. Competitors may move drilling units from region to region in response to changes in demand. It is currently estimated that 40 newly constructed jackup rigs will be entered into service between now and December 2012 and 44 deepwater rigs are scheduled for delivery through 2012. This could result in an excess supply of rigs in the markets in which we operate. Periods of low demand and excess supply intensify competition in the industry and often result in some drilling units becoming idle for long periods of time. Our limited operating history may put us at a competitive disadvantage and, as a result, our drilling units may become idle. Prolonged periods of low utilization and dayrates, or extended idle time, could result in the recognition of impairment charges on our drilling units if cash flow estimates, based upon information available to management at the time, indicate that the carrying value of the drilling units may not be recoverable.

There may be limits to our ability to mobilize drilling units between geographic markets and the time and costs of such drilling unit mobilizations may be material to our business.

The offshore contract drilling market is generally a global market as drilling units may be mobilized from one market to another market. However, geographic markets can, from time to time, have material fluctuations in costs and risks as the ability to mobilize drilling units can be impacted by several factors including, but not limited to, governmental regulation and customs practices, the significant costs to move a drilling unit, availability of tow boats, weather, political instability, civil unrest, military actions, and the technical capability of the drilling units to operate in various environments. Any increase in the supply of drilling units in the geographic areas in which we operate, whether through new construction, refurbishment or conversion of drilling units from other uses, remobilization or changes in the law or its application, could increase competition and result in lower dayrates and/or utilization, which would adversely affect our financial position, results of operations and cash flows. Additionally, while a drilling unit is being mobilized from one geographic market to another, we may not be paid by the customer for the time that the drilling unit is out of service. Also, we may mobilize the drilling unit to another geographic market without a customer contract which will result in costs not reimbursable by future customers.

Our business involves numerous operating hazards, and our insurance and contractual indemnity rights may not be adequate to cover our losses.

Our operations will be subject to the usual hazards inherent in the drilling and operation of oil and natural gas wells, such as blowouts, reservoir damage, loss of production, loss of well control, punchthroughs, craterings, fires and pollution. The occurrence of these events (such as events similar to the 2010 incident in the U.S. Gulf of Mexico involving the Macondo well) could result in the suspension of drilling or production operations, claims by the operator and others affected by such events, severe damage to, or destruction of, the property and equipment involved, injury or death to drilling unit personnel, environmental damage and increased insurance costs. We may also be subject to personal injury and other claims of drilling unit personnel as a result of our drilling operations. Operations also may be suspended because of machinery breakdowns, abnormal operating conditions, failure of subcontractors to perform or supply goods or services and personnel shortages.

In addition, our operations will be subject to perils peculiar to marine operations, including capsizing, grounding, collision and loss or damage from severe weather. Severe weather could have a material adverse effect on our operations. Our drilling units could be damaged by high winds, turbulent seas, or unstable sea bottom conditions which could potentially cause us to curtail operations for significant periods of time until such damages are repaired.

Damage to the environment could result from our operations, particularly through oil spillage or extensive uncontrolled fires. We may also be subject to property, environmental and other damage claims by host governments, oil and natural gas companies and other businesses operating offshore and in coastal areas, as well as claims by individuals living in or around coastal areas.

As is customary in our industry, the risks of our operations are partially covered by our insurance and partially by contractual indemnities from our customers. However, insurance policies and contractual rights to indemnity may not adequately cover losses, and we may not have insurance coverage or rights to indemnity for all risks. Moreover, pollution and environmental risks generally are not fully insurable. If a significant accident or other event resulting in damage to our drilling units, including severe weather, terrorist acts, war, civil disturbances, pollution or environmental damage, occurs and is not fully covered by insurance or a recoverable indemnity from a customer, it could adversely affect our financial condition and results of operations.

Our offshore drilling operations could be adversely impacted by the Macondo well incident and the resulting changes in regulation of offshore oil and gas exploration and development activity.

In May 2010, the U.S. Department of the Interior implemented a six-month moratorium/suspension on certain drilling activities in water depths greater than 500 feet in the U.S. Gulf of Mexico. The U.S. Department of the Interior subsequently issued NTL’s implementing additional safety and certification requirements applicable to drilling activities in the U.S. Gulf of Mexico, imposed additional requirements with respect to development and production activities in the U.S. Gulf of Mexico and has delayed the approval of applications to drill in both deepwater and shallow-water areas. On July 12, 2010, the U.S. Department of the Interior issued a revised moratorium/suspension on drilling in the U.S. Gulf of Mexico, which was lifted on October 12, 2010 after the adoption on September 30, 2010 of new regulations relating to the design of wells and testing of the integrity of wellbores, the use of drilling fluids, the functionality and testing of well control equipment, including blowout preventers, and other safety regulations.

As a condition to lifting of the moratorium/suspension, the Bureau of Ocean Energy Management, Regulation and Enforcement (the “BOEM”) was directed to require that each operator demonstrate that it has in place written and enforceable commitments that ensure that containment resources are available promptly in the event of a blowout and that the Chief Executive Officer of each operator certify to the BOEM that the operator has complied with applicable regulations.

Currently we do not have operations in the U.S. Gulf of Mexico. However, the Dragonquest, which we will operate upon completion of construction, is currently scheduled to commence drilling operations in the U.S. Gulf of Mexico in 2012 for Petrobras.

At this time, we cannot predict the full impact of the Macondo well incident and resulting changes in the regulation of offshore oil and gas exploration and development activity on our operations or contracts or what actions may be taken by our customers, other industry participants or the U.S. or other governments in response to the incident. Further legislative or regulatory enactments may impose new requirements for well control and blowout prevention equipment that could increase our costs and cause delays in our operations due to unavailability of associated equipment.

Customers may be unable or unwilling to indemnify us.

Consistent with standard industry practice, our customers generally assume liability for and indemnify us against well control and subsurface risks under our dayrate contracts, and we do not separately purchase insurance for such indemnified risks. These risks are those associated with the loss of control of a well, such as blowout or cratering (for example, the recent incident in the U.S. Gulf of Mexico involving the Macondo well), the cost to regain control or redrill the well and associated pollution. In the future, we may not be able to obtain agreements from customers to indemnify us for such damages and risks or the indemnities that we do obtain may be limited in scope and duration. Additionally, even if our customers agree to indemnify us, there can be no assurance that they will necessarily be financially able to indemnify us against all of these risks.

Our insurance coverage may not be adequate if a catastrophic event occurs.

As a result of the number and significance of catastrophic events in the offshore drilling industry in recent years, such as hurricanes and spills in the Gulf of Mexico, insurance underwriters have increased insurance premiums and increased restrictions on coverage and have made other coverages, such as Gulf of Mexico windstorm coverage, unavailable.

While we believe we have reasonable policy limits of property, casualty, liability, and business interruption insurance, including coverage for acts of terrorism, with financially sound insurers, we cannot guarantee that our policy limits for property, casualty, liability, and business interruption insurance, including coverage for severe weather, terrorist acts, war, civil disturbances, pollution or environmental damage, would be adequate should a catastrophic event occur related to our property, plant or equipment, or that our insurers would have adequate financial resources to sufficiently or fully pay related claims or damages. When any of our coverage expires, or when we seek coverage in the future, we cannot guarantee that adequate coverage will be available, offered at reasonable prices, or offered by insurers with sufficient financial soundness. The occurrence of an incident or incidents affecting any one or more of our drilling units could have a material adverse effect on our financial position and future results of operations if asset damage and/or our liability were to exceed insurance coverage limits or if an insurer was unable to sufficiently or fully pay related claims or damages.

Our international operations are subject to additional political, economic, and other uncertainties not generally associated with domestic operations.

A primary component of our business strategy is to operate in international oil and natural gas producing areas. Our international operations are subject to a number of risks inherent in any business operating in foreign countries, including:

•

political, social and economic instability, war and acts of terrorism;

•

potential seizure, expropriation or nationalization of assets;

•

damage to our equipment or violence directed at our employees, including kidnappings;

•

piracy;

•

increased operating costs;

•

complications associated with repairing and replacing equipment in remote locations;

•

repudiation, modification or renegotiation of contracts;

•

limitations on insurance coverage, such as war risk coverage in certain areas;

•

import-export quotas;

•

confiscatory taxation;

•

work stoppages;

•

unexpected changes in regulatory requirements;

•

wage and price controls;

•

imposition of trade barriers;

•

imposition or changes in enforcement of local content laws;

•

restrictions on currency or capital repatriations;

•

currency fluctuations and devaluations; and

•

other forms of government regulation and economic conditions that are beyond our control.

Our financial condition and results of operations could be susceptible to adverse events beyond our control that may occur in the particular country or region in which we are active. Additionally, we may experience currency exchange losses where, at some future date, revenues are received and expenses are paid in nonconvertible currencies or where we do not hedge exposure to a foreign currency. We may also incur losses as a result of an inability to collect revenues because of a shortage of convertible currency available in the country of operation, controls over currency exchange or controls over the repatriation of income or capital.

Many governments favor or effectively require that drilling contracts be awarded to local contractors or require foreign contractors to employ citizens of, or purchase supplies from, a particular jurisdiction. These practices may result in inefficiencies or put us at a disadvantage when bidding for contracts against local competitors.

Our offshore contract drilling operations are subject to various laws and regulations in countries in which we operate, including laws and regulations relating to the equipment and operation of drilling units, currency conversions and repatriation, oil and natural gas exploration and development, taxation of offshore earnings and earnings of expatriate personnel, the use of local employees and suppliers by foreign contractors and duties on the importation and exportation of drilling units and other equipment. Governments in some foreign countries have become increasingly active in regulating and controlling the ownership of concessions and companies holding concessions, the exploration for oil and natural gas and other aspects of the oil and natural gas industries in their countries. In some areas of the world, this governmental activity has adversely affected the amount of exploration and development work done by major oil and natural gas companies and may continue to do so. Operations in less developed countries can be subject to legal systems which are not as mature or predictable as those in more developed countries, which can lead to greater uncertainty in legal matters and proceedings.

Our business is subject to numerous governmental laws and regulations, including those that may impose significant costs and liability on us for environmental and natural resource damages.

Many aspects of our operations are affected by governmental laws and regulations that may relate directly or indirectly to the contract drilling industry, including those requiring us to control the discharge of oil and other contaminants into the environment or otherwise relating to environmental protection. Countries where we currently operate have environmental laws and regulations covering the discharge of oil and other contaminants and protection of the environment in connection with operations. Additionally, any operations and activities in the United States and its territorial waters will be subject to numerous environmental laws and regulations, including the Clean Water Act, the OPA, the Outer Continental Shelf Lands Act, the Comprehensive Environmental Response, Compensation and Liability Act and MARPOL. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and even criminal penalties, the imposition of remedial obligations, the denial or revocation of permits or other authorizations and the issuance of injunctions that may limit or prohibit our operations. Laws and regulations protecting the environment have become more stringent in recent years and may in certain circumstances impose strict liability, rendering us liable for environmental and natural resource damages without regard to negligence or fault on our part. These laws and regulations may expose us to liability for the conduct of, or conditions caused by, others or for acts that were in compliance with all applicable laws at the time the acts were performed. The application of these requirements, the modification of existing laws or regulations or the adoption of new laws or regulations curtailing exploratory or development drilling for oil and natural gas could materially limit future contract drilling opportunities or materially increase our costs. In addition, we may be required to make significant capital expenditures to comply with laws and regulations. Furthermore, some financial institutions are imposing, as a condition to financing, requirements to comply with additional non-governmental environmental and social standards, such as the Equator Principles, in connection with operations outside the United States. Such additional standards could impose significant new costs on us, which may materially and adversely affect us.

Changes in U.S. federal laws and regulations, or in those of other jurisdictions where we operate, including those that may impose significant costs and liability on us for environmental and natural resource damages, may adversely affect our operations.

If the U.S. government amends or prescribes new federal laws or regulations, our potential exposure to liability for operations and activities in the United States and its territorial waters may increase. As a result of the Macondo incident in the U.S. Gulf of Mexico, the U.S. Congress is currently considering bills to repeal federal caps on liability for pollution or contamination under the Oil Pollution Act of 1990. Even if these caps are not repealed, future bills and regulations may increase our liability for pollution or contamination resulting from any operations and activities we may have in the United States and its territorial waters including punitive damages, administrative, civil and criminal penalties. Although we are contracted to operate the Dragonquest in the U.S. Gulf of Mexico upon completion of construction, currently we have no operations in the U.S. Gulf of Mexico, however, other jurisdictions where we operate may also modify their laws and regulations in a manner that would increase our liability for pollution and other environmental damage.

New technology and/or products may cause us to become less competitive.

The offshore contract drilling industry is subject to the introduction of new drilling techniques and services using new technologies, some of which may be subject to patent protection. As competitors and others use or develop new technologies, we may be placed at a competitive disadvantage. Further, we may face competitive pressure to implement or acquire certain new technologies at a substantial cost. Some of our competitors have greater financial, technical and personnel resources that may allow them to access technological advantages and implement new technologies before we can. We cannot be certain that we will be able to implement new technology or products on a timely basis or at an acceptable cost. Thus, our inability to effectively use and implement new and emerging technology may have a material and adverse effect on our financial condition and results of operations.

Our substantial indebtedness could adversely affect our financial health and prevent us from fulfilling our debt obligations.

As of December 31, 2011, on a consolidated basis, we had total senior indebtedness outstanding of approximately $1.2 billion consisting of the 11¹/2% Senior Secured Notes and the F3 Capital Note. Subject to the restrictions in the indenture governing the 11¹/2% Senior Secured Notes, we may incur additional indebtedness. Our high level of indebtedness could have important consequences for an investment in us and significant effects on our business. For example, our level of indebtedness and the terms of our debt agreements may:

•

make it more difficult for us to satisfy our financial obligations under our indebtedness and our contractual and commercial commitments and increase the risk that we may default on our debt obligations;

•

prevent us from raising the funds necessary to repurchase 11¹/2% Senior Secured Notes tendered to us if there is a change of control or in connection with an excess cash flow offer, which would constitute a default under the indenture governing the 11¹/2% Senior Secured Notes;

•

require us to use a substantial portion of our cash flow from operations to pay interest and principal on the 11¹/2% Senior Secured Notes and other debt, which would reduce the funds available for working capital, capital expenditures and other general corporate purposes;

•

limit our ability to obtain additional financing for working capital, capital expenditures, acquisitions and other investments, or general corporate purposes, which may limit our ability to execute our business strategy;

•

heighten our vulnerability to downturns in our business, our industry or in the general economy and restrict us from exploiting business opportunities or making acquisitions;

•

place us at a competitive disadvantage compared to those of our competitors that may have proportionately less debt;

•

limit management’s discretion in operating our business;

•

limit our flexibility in planning for, or reacting to, changes in our business, the industry in which we operate or the general economy; and

•

result in higher interest expense if interest rates increase and we have outstanding floating rate borrowings.

Each of these factors may have a material and adverse effect on our financial condition and viability. Our ability to satisfy our other debt obligations will depend on our future operating performance, which will be affected by prevailing economic conditions and financial, business and other factors affecting our company and industry, many of which are beyond our control.

We may still be able to incur substantially more debt. This could exacerbate the risks associated with our substantial leverage.

Even with our existing level of debt, we and our subsidiaries may be able to incur substantial amounts of additional secured and unsecured indebtedness in the future, including debt under future credit facilities, some or all of which may be secured on a first priority basis and therefore would rank contractually senior to the 11¹/2% Senior Secured Notes to the extent of the value of that collateral. As of December 31, 2011, we would have the ability to incur additional indebtedness under the indenture for the 11¹/2% Senior Secured Notes, including up to $25.0 million of additional indebtedness under any credit agreement that may be entered into by us. Although the terms of the 11¹/2% Senior Secured Notes and any future credit facilities will limit our ability to incur additional debt, these terms do not and will not prohibit us from incurring substantial amounts of additional debt for specific purposes or under certain circumstances. In addition, the indenture governing the 11¹/2% Senior Secured Notes will allow us to issue additional 11¹/2% Senior Secured Notes under certain circumstances, which additional notes will also be guaranteed by the guarantors and will share in the collateral that will secure the 11¹/2% Senior Secured Notes and guarantees. We may also incur other additional indebtedness secured by liens that rank equal to those securing the 11¹/2% Senior Secured Notes in which case, the holders of that debt will be entitled to share equally with the holders of the 11¹/2% Senior Secured Notes in any proceeds distributed in connection with our winding up, insolvency, liquidation, reorganization or dissolution. If new debt is added to our and our subsidiaries’ current debt levels, the related risks that we and they now face could intensify and could further exacerbate the risks associated with our substantial leverage.

The indenture governing the 11¹/2% Senior Secured Notes imposes significant operating and financial restrictions on us and our subsidiaries that may prevent us from capitalizing on business opportunities and restrict our ability to operate our business.

The indenture governing the 11¹/2% Senior Secured Notes contains covenants that restrict our and our restricted subsidiaries’ ability to take various actions, such as:

•

paying dividends, redeeming subordinated indebtedness or making other restricted payments;

•

incurring or guaranteeing additional indebtedness or, with respect to our restricted subsidiaries or any other subsidiary guarantor, issuing preferred stock;

•

creating or incurring liens;

•

incurring dividend or other payment restrictions affecting our restricted subsidiaries;

•

consummating a merger, consolidation or sale of all or substantially all of our or our subsidiaries’ assets;

•

entering into transactions with affiliates;

•

transferring or selling assets;

•

engaging in business other than our current business and reasonably related extensions thereof;

•

issuing capital stock of certain subsidiaries;

•

taking or omitting to take any actions that would adversely affect or impair in any material respect the collateral securing our indebtedness;

•

terminating or amending certain material contracts;

•

amending, modifying or changing our organizational documents; and

•

employing our drilling units in certain jurisdictions.

We may also be prevented from taking advantage of business opportunities that arise if we fail to meet certain ratios or because of the limitations imposed on us by the restrictive covenants under the indenture governing the 11¹/2% Senior Secured Notes. In addition, the restrictions contained in the indenture governing the 11¹/2% Senior Secured Notes and any future credit facility may also limit our ability to plan for or react to market conditions, meet capital needs or otherwise restrict our activities or business plans and adversely affect our ability to finance our operations, enter into acquisitions, execute our business strategy, effectively compete with companies that are not similarly restricted or engage in other business activities that would be in our interest. In the future, we may also incur debt obligations that might subject us to additional and different restrictive covenants that could affect our financial and operational flexibility. We cannot assure you that we will be granted waivers or amendments to these agreements if for any reason we are unable to comply with these agreements, or that we will be able to refinance our debt on acceptable terms or at all.

Our ability to comply with these covenants will likely be affected by events beyond our control, and we cannot assure investors that we will satisfy those requirements. A breach of any of these provisions could result in a default under our existing and future debt agreements which could allow all amounts outstanding thereunder to be declared immediately due and payable. This would likely in turn trigger cross-acceleration and cross-default rights under the terms of our indebtedness outstanding at such time. If the amounts outstanding under our indebtedness were to be accelerated or were the subject of foreclosure actions, we cannot assure you that our assets would be sufficient to repay in full the money owed to the lenders or to our other debt holders.

Our financial condition may be adversely affected if we are unable to identify and complete future acquisitions, fail to successfully integrate acquired assets or businesses we acquire, or are unable to obtain financing for acquisitions on acceptable terms.

The acquisition of assets or businesses that we believe to be complementary to our drilling operations is an important component of our business strategy. We believe that acquisition opportunities may arise from time to time, and that any such acquisition could be significant. At any given time, discussions with one or more potential sellers may be at different stages. However, any such discussions may not result in the consummation of an acquisition transaction, and we may not be able to identify or complete any acquisitions. We cannot predict the effect, if any, that any announcement or consummation of an acquisition would have on the trading price of our securities. Our business is capital intensive and any such transactions could involve the payment by us of a substantial amount of cash. We may need to raise additional capital through public or private debt or equity financings to execute our growth strategy and to fund acquisitions. Adequate sources of capital may not be available when needed on favorable terms. If we raise additional capital by issuing additional equity securities, existing shareholders may be diluted. If our capital resources are insufficient at any time in the future, we may be unable to fund acquisitions, take advantage of business opportunities or respond to competitive pressures, any of which could harm our business.

Any future acquisitions could present a number of risks, including:

•

the risk of using management time and resources to pursue acquisitions that are not successfully completed;

•

the risk of incorrect assumptions regarding the future results of acquired operations;

•

the risk of failing to integrate the operations or management of any acquired operations or assets successfully and timely; and

•

the risk of diversion of management’s attention from existing operations or other priorities.

If we are unsuccessful in completing acquisitions of other operations or assets, our financial condition could be adversely affected and we may be unable to implement an important component of our business strategy successfully. In addition, if we are unsuccessful in integrating our acquisitions in a timely and cost-effective manner, our financial condition and results of operations could be adversely affected.

Operating and maintenance costs will not necessarily fluctuate in proportion to changes in operating revenues.

We do not expect operating and maintenance costs to necessarily fluctuate in proportion to changes in operating revenues. Operating revenues may fluctuate as a function of changes in dayrates. However, costs for operating a drilling unit are generally fixed or only semi-variable regardless of the dayrate being earned. In addition, should the drilling units incur idle time between contracts, we would typically maintain the crew to prepare the drilling unit for its next contract and would not reduce costs to correspond to the decrease in revenue. During times of moderate activity, reductions in costs may not be immediate as the crew may be required to prepare the drilling units for stacking, after which time the crew will be reduced to a level necessary to maintain the drilling unit in working condition with the extra crew members assigned to active drilling units or dismissed. In addition, as drilling units are mobilized from one geographic location to another, the labor and other operating and maintenance costs can vary significantly. Equipment maintenance expenses fluctuate depending upon the type of activity the drilling unit is performing and the age and condition of the equipment. Contract preparation expenses vary based on the scope and length of contract preparation required and the duration of the firm contractual period over which such expenditures are amortized.

The loss of some of our key executive officers and employees could negatively impact our business prospects.

Our future operational performance depends to a significant degree upon the continued service of key members of our management as well as marketing, sales and operations personnel. The loss of one or more of our key personnel could have a material adverse effect on our business. We believe our future success will also depend in large part upon our ability to attract, retain and further motivate highly skilled management, marketing, sales and operations personnel. We may experience intense competition for personnel, and we cannot assure you that we will be able to retain key employees or that we will be successful in attracting, assimilating and retaining personnel in the future.

Failure to employ a sufficient number of skilled workers or an increase in labor costs could hurt our operations.

We require skilled personnel to operate and provide technical services to, and support for, our drilling units. In periods of increasing activity and when the number of operating units in our areas of operation increases, either because of new construction, re-activation of idle units or the mobilization of units into the region, shortages of qualified personnel could arise, creating upward pressure on wages and difficulty in staffing. The shortages of qualified personnel or the inability to obtain and retain qualified personnel also could negatively affect the quality and timeliness of our work. In addition, our ability to expand operations depends in part upon our ability to increase the size of the skilled labor force.

While we believe that we currently have adequate internal control procedures in place, we are still exposed to potential risks from the requirement that we evaluate our internal controls under Section 404 of the Sarbanes-Oxley Act of 2002.

We have evaluated our internal controls systems in order to allow management to report on, and our independent registered public accounting firm to attest to, our internal controls, as required by Section 404 of the Sarbanes-Oxley Act. We have performed the system and process evaluation and testing required to comply with the management certification requirements of, and preparing for the auditor attestation under, Section 404. As a result, we have incurred additional expenses and a diversion of management’s time. While we have been able to fully implement the requirements relating to internal controls and all other aspects of Section 404 in a timely fashion, we cannot be certain that our internal control over financial reporting will be adequate in the future to ensure compliance with the requirements of the Sarbanes-Oxley Act or the Foreign Corrupt Practices Act. If we are not able to maintain adequate internal control over financial reporting, we may be susceptible to sanctions or investigation by regulatory authorities, such as the SEC. Any such action could adversely affect our financial results and the market price of our securities.

Changes in tax laws, treaties or regulations, effective tax rates or adverse outcomes resulting from examination of our tax returns could adversely affect our financial results.

Our future effective tax rates could be adversely affected by changes in tax laws, treaties and regulations, both internationally and domestically. Tax laws, treaties and regulations are highly complex and subject to interpretation. We are subject to changing tax laws, treaties and regulations in and between the countries in which we operate. Our income tax expense is based upon the interpretation of the tax laws in effect in various countries at the time that the expense was incurred. A change in these tax laws, treaties or regulations, or in the interpretation thereof, could result in a materially higher tax expense or a higher effective tax rate on our worldwide earnings. If any country successfully challenges our income tax filings based on our structure or the presence of our operations there, or if we otherwise lose a material dispute, our effective tax rate on worldwide earnings could increase substantially and our financial results could be materially adversely affected.

We could be adversely affected by violations of the U.S. Foreign Corrupt Practices Act and similar worldwide anti-bribery laws.

The U.S. Foreign Corrupt Practices Act, or the FCPA, and similar worldwide anti-bribery laws generally prohibit companies and their intermediaries from making improper payments to non-U.S. officials for the purpose of obtaining or retaining business. Our policies mandate compliance with these laws. We operate in many parts of the world that have experienced governmental corruption to some degree and, in certain circumstances, strict compliance with anti-bribery laws may conflict with local customs and practices. Despite our extensive training and compliance program, we cannot assure you that our internal control policies and procedures will always protect us from improper acts committed by our employees or agents. Violations of these laws, or allegations of such violations, could disrupt our business and result in a material adverse effect on our business and operations. We may be subject to competitive disadvantages to the extent that our competitors are able to secure business, licenses or other preferential treatment by making payments to government officials and others in positions of influence or using other methods that U.S. laws and regulations prohibit us from using.

In order to effectively compete in some foreign jurisdictions, we utilize local agents and seek to establish joint ventures with local operators or strategic partners. Although we have procedures and controls in place to monitor internal and external compliance, if we are found to be liable for FCPA violations (either due to our own acts or omissions, or due to the acts or omissions of others, including actions taken by our agents and our strategic or local partners, even though our agents and partners may not be subject to the FCPA), we could suffer from civil and criminal penalties or other sanctions, which could have a material adverse effect on our business, financial position, results of operations and cash flows.

We may be required to repurchase certain of our indebtedness with cash upon a change of control.

Upon the occurrence of specified change of control events in the indenture governing the 11¹/2% Senior Secured Notes, we will be required to offer to repurchase all of such outstanding notes at a price equal to 101% of the aggregate principal amount of such notes repurchased, plus accrued and unpaid interest and additional interest, if any, up to, but not including the date of repurchase. We may not have sufficient funds available to repurchase all of the notes tendered pursuant to any such offer and any other debt that would become payable upon a change of control or in connection with such an asset sale offer. Any of our future debt agreements may also limit our ability to repurchase these notes until all such debt is paid in full. Our failure to purchase these notes would be a default under the indenture governing the 11¹/2% Senior Secured Notes, which would in turn likely trigger a default under our existing and any future debt agreements. In addition, the occurrence of a change of control may also constitute an event of default under our existing and any future debt agreements. In that event, we would need to cure or refinance the applicable debt agreements before making an offer to purchase. Moreover, any future indebtedness we incur may restrict our ability to repurchase these notes, including following a change of control. We may be unable to repay all of such indebtedness or obtain a waiver of that type. Any requirement to offer to repurchase outstanding notes may therefore require us to refinance our other outstanding debt, which we may not be able to accomplish on commercially reasonable terms, if at all. These repurchase requirements may also delay or make it more difficult for others to obtain control of us.

Our related party transactions with F3 Capital and its affiliates may cause conflicts of interests that may adversely affect us.

We have entered into, and may, in the future, enter into various transactions and agreements with F3 Capital and its affiliates. F3 Capital has no fiduciary duty to make decisions in our best interest. F3 Capital is entitled to vote our ordinary shares that it owns in accordance with its interests, which may be contrary to our interests and those of other shareholders. F3 Capital and its other affiliates are not limited in their ability to compete with us and are not obligated to offer us business opportunities or to offer to sell additional assets to us. We believe that the transactions and agreements that we have entered into with F3 Capital are on terms that are at least as favorable as could reasonably have been obtained at such time from third parties. However, these relationships could create, or appear to create, potential conflicts of interest when our board of directors is faced with decisions that could have different implications for us and F3 Capital or its affiliates. The appearance of conflicts, even if such conflicts do not materialize, might adversely affect the public’s perception of us, as well as our relationship with other companies and our ability to enter into new relationships in the future, which may have a material adverse effect on our ability to do business. In addition, conflicts of interest may arise between us and F3 Capital and its affiliates. F3 Capital may favor its own interests over our interests and those of other shareholders.

F3 Capital holds a significant interest in us.

As of January 13, 2012, on a fully diluted basis, F3 Capital owned approximately 32.4% of our issued and outstanding ordinary shares, including shares issuable upon exercise of outstanding warrants. Through his ownership of F3 Capital, Hsin-Chi Su, a former director of the Company, has significant influence over matters such as the election of our directors, control over our business, policies and affairs and other matters submitted to our shareholders.

Because we are incorporated under the laws of the Cayman Islands, you may face difficulties in protecting your interests, and your ability to protect your rights through the U.S. federal courts may be limited.

We are an exempted company incorporated with limited liability under the laws of the Cayman Islands. In addition, most of our directors and executive officers are nationals or residents of jurisdictions other than the United States and all or a substantial portion of our assets are located outside the United States. As a result, it may be difficult for holders of our securities to effect service of process within the United States upon our directors or executive officers, or enforce judgments obtained in the U.S. courts against our directors or executive officers.

Our corporate affairs are governed by our amended and restated memorandum and articles of association, the Companies Law (2009 Revision) (as the same may be supplemented or amended from time to time), and the common law of the Cayman Islands. The rights of holders of our securities to take action against the directors, actions by minority shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are, to a large extent, governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, the decisions of whose courts are of persuasive authority, but are not binding on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedent in some jurisdictions in the United States. In particular, the Cayman Islands has a less developed body of securities laws thus providing significantly less protection to investors as compared to the United States, and some states, such as Delaware, which have more fully developed and judicially interpreted bodies of corporate law.

The Cayman Islands courts are also unlikely:

•

to recognize or enforce against us judgment of courts of the United States based on certain civil liability provisions of U.S. securities laws; and

•

to impose civil liabilities against us, in original actions brought in the Cayman Islands, based on certain civil liability provisions of U.S. securities laws that are penal in nature.

Additionally, Cayman Islands companies may not have standing to sue before the federal courts of the United States. There is no statutory recognition in the Cayman Islands of judgments obtained in the United States, although the courts of the Cayman Islands will in certain circumstances recognize and enforce a non-penal judgment of a foreign court of competent jurisdiction without re-examination of the merits at common law, provided such judgment:

•

is final and conclusive;

•

is one in respect of which the federal court of the United States had jurisdiction over the defendant according to Cayman Islands conflict of law rules;

•

is either for a liquidated sum not in respect of penalties or taxes or a fine or similar fiscal or revenue obligations or, in certain circumstances, for in personam non-monetary relief; and

•

was neither obtained in a manner, nor is of a kind enforcement of which is contrary to natural justice of the public policy of the Cayman Islands.

The Grand Court of the Cayman Islands may stay proceedings if concurrent proceedings are being brought elsewhere.

Item 1B.

Unresolved Staff Comments.

None.

Item 2.

Properties.

We maintain offices, land bases and other facilities worldwide, including our principal executive offices in Houston, Texas, regional operational office in Singapore and a marketing office in Dubai. We lease all of these facilities.

The description of our property included under “Item 1. Business” is incorporated by reference herein.

Item 3.

Legal Proceedings.

We may be involved in litigation, claims and disputes incidental to our business, which may involve claims for significant monetary amounts, some of which would not be covered by insurance. In the opinion of

management, none of the existing disputes to which we are a party will have a material adverse effect on our financial position, results of operations or cash flows. However, a substantial settlement payment or judgment could have a material adverse effect on our financial position, results of operations or cash flows.

In September 2009, F3 Capital asserted that we had breached agreements and understandings with F3 Capital regarding the maximum number of ordinary shares we would sell in our public offering in August 2009. F3 Capital indicated that it believed that it was damaged by the issuance of shares in excess of this amount. We disagree with F3 Capital’s assertions. We have worked to resolve these matters with F3 Capital and believe that we have done so to each party’s satisfaction, although no assurances can be given as to the ultimate resolution of this dispute.

Item 4.

Mine Safety Disclosures.

Not applicable.

PART II

Item 5.

Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Prices and Dividends

Our units, ordinary shares and warrants have been quoted on the NYSE Amex under the symbols “VTG-U,” “VTG” and VTG-WT,” respectively. The following table sets forth the range of the high and low sale prices for our ordinary shares for the periods indicated.


	Common Stock / Ordinary Shares
	High		Low
Year Ending December 31, 2012:
First quarter (through February 17, 2012)	$	1.35	$	1.01

Year Ending December 31, 2011:
Fourth quarter	$	1.56	$	1.04
Third quarter	$	1.92	$	0.97
Second quarter	$	2.05	$	1.54
First quarter	$	2.26	$	1.76

Year Ending December 31, 2010:
Fourth quarter	$	2.25	$	1.45
Third quarter	$	1.61	$	0.99
Second quarter	$	1.89	$	1.32
First quarter	$	1.77	$	1.29

As of February 17, 2012, there were approximately four holders of record of our units, and approximately 13 holders of record of our ordinary shares. Our public warrants expired on May 24, 2011. Such numbers do not include beneficial owners holding shares, warrants or units through nominee names.

We have not paid dividends on our ordinary shares to date and do not anticipate paying cash dividends in the immediate future as we contemplate that our cash flows will be used for the continued growth of our operations. The payment of future dividends, if any, will be determined by our board of directors in light of conditions then existing, including our earnings, financial condition, capital requirements, restrictions in financing agreements, business conditions and other factors. We are subject to certain restrictive covenants under the terms of the agreements governing our indebtedness, including restrictions on our ability to pay any cash dividends.

Repurchases of Equity Securities

There were no repurchases of equity securities during the fiscal fourth quarter ended December 31, 2011.

Stock Performance Graph

This graph shows the cumulative total shareholder return of our ordinary shares and the common stock of Vantage Drilling over the approximately fifty-five month period from June 8, 2007 to December 31, 2011. The graph also shows the cumulative total returns for the same period of the S&P 500 Index and the Dow Jones U.S. Oil Equipment & Services Index. The graph assumes that $100 was invested in our ordinary shares and the two indices on June 8, 2007 and that all dividends were reinvested on the date of payment.

LOGO


Indexed Returns	First Trade June 8, 2007		Dec 31, 2007		Dec 31, 2008		Dec 31, 2009		Dec 31, 2010		Dec 31, 2011
Vantage Drilling Company	$	100.00	$	102.01	$	14.77	$	21.61	$	27.25	$	15.57
S&P 500 Index	$	100.00	$	97.39	$	59.91	$	73.96	$	83.42	$	83.41
DJ U.S. Oil Equip & Service Index	$	100.00	$	117.23	$	48.31	$	78.36	$	102.64	$	94.57

Investors are cautioned against drawing any conclusions from the data contained in the graph, as past results are not necessarily indicative of future performance. The above graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933 or Securities Exchange Act of 1934, each as amended, except to the extent that we specifically incorporate it by reference into such filing.

Equity Compensation Plan Information

The following table sets forth our issuance of awards under our 2007 Long-Term Incentive Plan (“2007 LTIP”) as of December 31, 2011:


Equity Compensation Plan Information
Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights	Weighted average exercise price of outstanding options, warrants and rights	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)	(b)	(c)
Equity compensation plans approved by security holders (1)(2)	179,000	$8.40	12,030,270
Equity compensation plans not approved by security holders	N/A	N/A	N/A
Total	179,000	$8.40	12,030,270

(1)	Our only equity compensation plan is the 2007 LTIP.

(2)	Does not include an additional 9,348,325 shares of restricted stock that have been granted under the 2007 LTIP.

Item 6.

Selected Financial Data.

The following selected financial information should be read in conjunction with the consolidated financial statements and the notes thereto included in “Item 8. Financial Statements and Supplementary Data.”


	As of and For the Year Ended December 31,
	2011			2010			2009			2008			2007
	(In thousands, except per share amounts)
Consolidated Statement of Operations Data
Revenue	$	485,348		$	278,403		$	111,493		$	913		$	—
Operating costs, excluding impairment and termination costs		284,400			176,387			66,228			5,365			—
General and administrative expenses		26,317			21,719			15,690			9,334			937
Depreciation		64,477			33,384			11,218			101			10
Impairment and termination costs		—			—			—			38,286	(1)		—

Income (loss) from operations		110,154			46,913			18,357			(52,173	)		(947	)
Loss on debt extinguishment		(25,196	)(2)		(24,006	)(3)		—			—			—
Loss on acquisition of subsidiary		—			(3,780	)(4)		—			—			—
Interest income (expense)		(154,801	)		(49,265	)		(8,155	)		4,039			7,699
Other income (expense)		1,324			1,510			609			86			—

Income (loss) before income taxes		(68,519	)		(28,628	)		10,811			(48,048	)		6,752
Income tax provision (benefit)		11,432			18,951			1,972			(670	)		2,299

Net income (loss)	$	(79,951	)	$	(47,579	)	$	8,839		$	(47,378	)	$	4,453

Earnings (loss) per share
Basic	$	(0.28	)	$	(0.19	)	$	0.07		$	(0.78	)	$	0.16
Diluted	$	(0.28	)	$	(0.19	)	$	0.07		$	(0.78	)	$	0.14
Other Financial Data
EBITDA (5)	$	150,759		$	54,021		$	30,184		$	(51,986	)	$	(937	)
Adjusted EBITDA (6)		175,955			81,807			30,184			(13,700	)		(937	)
EBITDA Reconciliation
Net income (loss)	$	(79,951	)	$	(47,579	)	$	8,839		$	(47,378	)	$	4,453
Interest (income) expense		154,801			49,265			8,155			(4,039	)		(7,699	)
Income tax provision (benefit)		11,432			18,951			1,972			(670	)		2,299
Depreciation		64,477			33,384			11,218			101			10

EBITDA (5)		150,759			54,021			30,184			(51,986	)		(937	)
Loss on debt extinguishment		25,196			24,006			—			—			—
Loss on acquisition of subsidiary		—			3,780			—			—			—
Impairment and termination costs		—			—			—			38,286			—

Adjusted EBITDA (6)	$	175,955		$	81,807		$	30,184			(13,700	)	$	(937	)

Balance Sheet Data
Cash and cash equivalents	$	110,031		$	120,443		$	15,992		$	16,557		$	1,263
Total other current assets		149,221			110,426			65,228			6,963			273,196
Property and equipment, net		1,805,075			1,718,132			888,212			630,896			112
Total other assets		58,173			54,193			149,747			10,867			1,068
Total assets		2,122,500			2,003,194			1,119,179			665,283			275,639
Total current liabilities		150,171			116,065			64,043			35,832			9,230
Long-term debt		1,246,428			1,103,480			378,078			133,000			—
Other long-term liabilities		29,755			13,498			—			—			—
Ordinary shares, subject to possible redemption		—			—			—			—			79,287
Shareholders’ equity		696,146			770,151			677,058			496,451			187,122
Total liabilities and shareholders’ equity	$	2,122,500		$	2,003,194		$	1,119,179		$	665,283		$	275,639
Cash Flow Data
Net cash provided by (used in) operating activities	$	15,873		$	9,585		$	(29,785	)	$	(9,772	)	$	5,196
Net cash used in investing activities		(144,336	)		(645,536	)		(471,035	)		(107,121	)		(273,988	)
Net cash provided by financing activities		118,051			740,402			500,255			132,187			270,021

(1)	Includes $10.0 million termination fee related to the Dragonquest purchase option and write-off of the book value of the rig when the purchase option was not exercised.

(2)	Includes $21.7 million in prepayment fees and $3.5 million for the write-off of deferred financing costs associated with the early retirement of the Aquamarine Term Loan.

(3)	Includes $10.8 million in prepayment fees and $12.3 million for the write-off of deferred financing costs associated with the retirement of outstanding debt under the Credit Agreement and the 13 1/2% Senior Secured notes.

(4)	Includes a bargain purchase gain of $12.3 million in connection with the acquisition of the 55% interest in Mandarin, and a $16.1 million loss on the remeasurement of our previously held 45% in Mandarin under purchase accounting.

(5)

Earnings before Interest, Taxes and Depreciation and Amortization (“EBITDA”) represents net income (loss) before (i) interest (income) expense, (ii) provision (benefit) for income taxes and (iii) depreciation and amortization expense. EBITDA is a non-GAAP financial measure as defined under the rules of the SEC, and is intended as a supplemental measure of our performance. We believe this measure is commonly used by analysts and investors to analyze and compare companies on the basis of operating performance that have different financing and capital structures and tax rates. EBITDA is not a substitute for GAAP measures of net income, operating income or any other performance measure derived in accordance with GAAP or as an alternative to cash flows from operating activities or other liquidity measures derived in accordance with GAAP.

(6)

Adjusted EDITDA represents EBITDA adjusted to exclude loss on debt extinguishment, loss on acquisition of subsidiary and impairment and termination costs. Adjusted EBITDA is a non-GAAP financial measure as defined under the rules of the SEC, and is intended as a supplemental measure of our performance. We believe this measure is commonly used by analysts and investors to analyze and compare companies on the basis of operating performance that have different financing and capital structures and tax rates. Adjusted EBITDA is not a substitute for GAAP measures of net income, operating income or any other performance measure derived in accordance with GAAP or as an alternative to cash flows from operating activities or other liquidity measures derived in accordance with GAAP.

Item 7.

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 December 31, 2011 and 2010, and our results of operations for the years ended December 31, 2011, 2010 and 2009. The following discussion should be read in conjunction with the information contained in “Item 1. Business,” “Item 1A. Risk Factors” and “Item 8. Financial Statements and Supplementary Data” elsewhere in this Annual Report on Form 10-K. Certain previously reported amounts have been reclassified to conform to the current year presentation.

Overview

We are an international offshore drilling company focused on operating a fleet of modern, high specification drilling units. Our principal business is to contract drilling units, related equipment and work crews, primarily on a dayrate basis to drill oil and natural gas wells for our customers. We also provide construction supervision services for, and will operate and manage, drilling units owned by others. Through our fleet of six wholly-owned drilling units we are a provider of offshore contract drilling services to major, national and independent oil and natural gas companies, focused primarily on international markets. Our fleet of owned and managed drilling units is currently comprised of four jackup rigs and three drillships.

The following table sets forth certain information concerning our owned and managed offshore drilling fleet.


Name	Ownership			Year Built/ Expected Delivery		Water Depth Rating (feet)		Drilling Depth Capacity (feet)		Status
Jackups
Emerald Driller		100	%		2008		375		30,000		Operating
Sapphire Driller		100	%		2009		375		30,000		Operating
Aquamarine Driller		100	%		2009		375		30,000		Operating
Topaz Driller		100	%		2009		375		30,000		Operating

Drillships
Platinum Explorer (1)		100	%		2010		12,000		40,000		Operating
Dragonquest (1) (2)		—			2011		12,000		40,000		Commissioning
Tungsten Explorer (1)		100	%		2013		12,000		40,000		Under construction

(1)	The drillships are designed to drill in up to 12,000 feet of water, but are or will be equipped to drill in 10,000 feet of water.

(2)	The Dragonquest was formerly known as the Titanium Explorer. We are currently overseeing the construction of this drillship pursuant to a construction supervision agreement and have an eight-year contract with Petrobras to operate this vessel upon completion of construction.

Business Outlook

Expectations about future oil and natural gas prices have historically been a key driver for demand for our services. However, the availability of quality drilling prospects, exploration success, availability of qualified drilling rigs and operating personnel, relative production costs, availability and lead time requirements for drilling and production equipment, the stage of reservoir development and political and regulatory environments also affect our customers’ drilling programs.

The current outlook for global demand for oil and gas remains favorable as global economic activity continues to increase at a moderate pace. Economic activity is anticipated to be volatile as the European markets continue to experience financial uncertainty and economic growth in Asia has slowed.

In April 2010, a competitor operating in the U.S. Gulf of Mexico had a significant well control incident on the Macondo well which resulted in the sinking of the Deepwater Horizon, an ultra-deepwater semisubmersible, and a significant oil spill. Following the Macondo well incident, the U.S. government has undertaken a complete regulatory review of offshore drilling operations with the intention of strengthening the regulatory environment. Additionally, oil and gas companies have taken a more conservative approach to drilling, required more testing of rig equipment, review of maintenance procedures and in some cases, an upgrade of equipment. These additional measures taken by the oil and gas companies have resulted in increased levels of non-productive time on the worldwide drilling fleet and increased costs.

Additionally, political instability and civil unrest in the Middle East, West Africa and North Africa has already resulted in offshore drilling contracts being delayed or terminated under force majeure provisions of such contracts as access to these regions has become limited or restricted. The long-term impact of the political instability cannot be determined at this time, which may result in oil and gas companies deferring offshore drilling projects in these regions. These conditions may also result in drilling contractors strategically moving drilling rigs from these areas into different markets creating more competition in markets in which we currently operate.

We believe the market for jackups continues to improve as operators are developing oil and gas reserves in response to improved oil prices. Currently the increased demand for jackups is resulting in increasing utilization

and moderately increasing dayrates. We believe there are 20 newbuild jackups scheduled for delivery in 2012 and believe that demand will absorb the additional rigs without negatively impacting dayrates. Our jackup fleet is contracted for the majority of 2012 and will not be materially impacted by fluctuations in the jackup market. The continued improvement in the demand for modern, high specification jackup rigs will be subject to several factors including the additional deliveries of newbuild premium jackup rigs and the possible re-activation of older, less efficient rigs by our competitors.

Deepwater and ultra-deepwater projects are typically more expensive and longer in duration than shallow-water drilling programs, which reduces the volatility of dayrates and utilization to short-term fluctuations in oil and natural gas prices and general economic conditions. Deepwater operators tend to take a longer-term view of the global economy and oil and natural gas prices. We believe the long-term fundamentals for demand for oil and natural gas support a significant increase in deepwater and ultra-deepwater development. This development is further supported by significant oilfield discoveries offshore Brazil and East Africa and continued deepwater field development in West Africa and India. We believe oil and gas companies are now generally planning to increase drilling operations and that currently the market is experiencing increasing dayrates and utilization for deepwater and ultra-deepwater drilling rigs.

With the strong long-term view of deepwater and ultra-deepwater prospects, numerous parties have recently placed shipyard orders to build additional semisubmersibles and drillships. We estimate there are approximately 51 deepwater rigs scheduled for delivery, 26 of which are not yet contracted to customers, through 2013. We believe that based on current rig demand forecast, all the newbuild orders will be contracted at favorable rates.

Results of Operations

The first of our jackup rigs was delivered in December 2008 and began operations under its initial contract in February 2009. Our second jackup rig began operating under its first contract in August 2009 and our third jackup rig commenced operations in January 2010. Our fourth jackup rig was delivered in December 2009 and began operating in March 2010. Our drillship, the Platinum Explorer, was delivered in November 2010 and commenced operations in late December 2010.

The following table sets forth selected contract drilling operational information for the periods indicated:


	Years Ended December 31,
	2011			2010			2009
Jackups
Operating rigs, end of period		4			4			2
Available days (1)		1,460			1,375			434
Utilization (2)		90.0	%		98.7	%		89.9	%
Average daily revenues (3)	$	129,078		$	131,680		$	179,126
*Platinum Explorer*
Available days (1)		365			2			—
Utilization (2)		92.4	%		90.6	%		—
Average daily revenues (3)	$	583,331		$	597,770			—

(1)	Available days are the total number of rig calendar days in the period. Newbuild rigs are included upon acceptance by the client.

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

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

2011 compared to 2010

The following table is an analysis of our operating results for the years ended December 31, 2011 and 2010.


	Year Ended December 31,
	2011			2010			Change
	(In thousands)
Revenues
Contract drilling services	$	366,363		$	178,514		$	187,849
Management fees		13,727			18,107			(4,380	)
Reimbursables		105,258			81,782			23,476

Total revenues		485,348			278,403			206,945

Operating costs and expenses
Operating costs		284,400			176,387			(108,013	)
General and administrative		26,317			21,719			(4,598	)
Depreciation		64,477			33,384			(31,093	)

Total operating expenses		375,194			231,490			(143,704	)

Income from operations		110,154			46,913			63,241
Other income (expense)
Interest income		96			562			(466	)
Interest expense and financing charges		(154,897	)		(49,827	)		(105,070	)
Loss on debt extinguishment		(25,196	)		(24,006	)		(1,190	)
Loss on acquisition of subsidiary		—			(3,780	)		3,780
Other income		1,324			1,510			(186	)

Total other expense		(178,673	)		(75,541	)		(103,132	)

Income (loss) before income taxes		(68,519	)		(28,628	)		(39,891	)
Income tax provision (benefit)		11,432			18,951			(7,519	)

Net loss	$	(79,951	)	$	(47,579	)	$	(32,372	)

Revenue: Total revenue for the year ended December 31, 2011 was $485.3 million compared to $278.4 million for 2010, an increase of $206.9 million, or 74%. Contract drilling revenue totaled $366.4 million for 2011 compared with $178.5 million for 2010, an increase of $187.9 million, or 105%. These increases were primarily due to the commencement of operations of our drillship, the Platinum Explorer, in December 2010, together with the commencement of operations by two of our jackups, the Aquamarine Driller and the Topaz Driller, in January 2010 and March 2010, respectively. We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses. For 2011, reimbursable revenue was $105.3 million as compared to $81.8 million for 2010, an increase of $23.5 million or 29%. This increase was primarily due to increased rebillable oversight activities on the construction projects.

Operating costs: Operating costs for the year ended December 31, 2011 were $284.4 million compared to $176.4 million in 2010, an increase of $108.0 million, or 61%. This increase was due primarily to the commencement of the operations of the Platinum Explorer, and to the operation of all four jackups in 2011. Additionally, $19.5 million of the increase related to deepwater construction oversight expenses, primarily due to increased reimbursable activity costs.

General and administrative expenses: General and administrative expenses for the year ended December 31, 2011 were $26.3 million as compared to $21.7 million in 2010, an increase of $4.6 million, or 21%. This increase primarily reflects additional expenses for additional personnel and related expenses, consulting services, compliance expenses and marketing expenses required to support our expanded fleet and increased geographical presence.

Depreciation expense: Depreciation expense for the year ended December 31, 2011 was $64.5 million as compared to $33.4 million in 2010, an increase of $31.1 million. The increase was primarily due to the addition of the Platinum Explorer to our operating fleet.

Interest income: Interest income for the year ended December 31, 2011 was $96,000 compared to $562,000 in 2010. The decrease was primarily due to 2010 including interest earned on funds escrowed for the final Platinum Explorer construction payment which was paid in November 2010.

Interest expense: Interest expense for the year ended December 31, 2011 was $154.9 million compared to $49.8 million in 2010, an increase of $105.1 million. The increase was primarily attributable to increased levels of debt outstanding during 2011, due to the acquisition of the Platinum Explorer. The increase also reflects $2.0 million in fees incurred in the first quarter of 2011 for the amendment of the Aquamarine Term Loan.

We capitalized $7.3 million of interest and amortization costs in the year ended December 31, 2011. We capitalized $47.2 million interest expense in the year ended December 31, 2010.

Loss on extinguishment of debt: In June 2011, we paid approximately $21.7 million in prepayment fees and wrote off approximately $3.5 million of deferred financing costs in connection with the early retirement of the Aquamarine Term Loan.

In July 2010, we paid approximately $10.8 million in prepayment fees, $0.9 million to terminate an interest rate swap and wrote off approximately $12.3 million of deferred financing costs in connection with the early retirement of our jackup credit facility and our prior senior secured notes.

Loss on acquisition of subsidiary: For the year ended December 31, 2010, in connection with the acquisition of the 55% interest of Mandarin Drilling Corporation, we recorded a bargain purchase gain of $12.3 million and a $16.1 million loss on the remeasurement of our previously held 45% ownership interest in Mandarin under purchase accounting.

Income tax expense: Income tax expense for the year ended December 31, 2011 was $11.4 million compared to $19.0 million in 2010, a decrease of $7.6 million. The decrease was primarily due to decreased revenues in 2011 in certain higher tax jurisdictions, which was partially offset by increased tax expense due to a full year of operations in 2011 of the Platinum Explorer in India. In addition, our tax provision for the year ending December 31, 2011 and December 31, 2010 included adjustments related to prior periods for certain tax adjustments of approximately $0.1 million and $7.0 million, respectively. In some jurisdictions, we are subject to deemed profit tax regimes where taxes are determined based on specified percentages of revenue rather than profit (loss) before tax.

2010 compared to 2009

The following table is an analysis of our operating results for the years ended December 31, 2010 and 2009.


	2010			2009			Change
	(In thousands)
Revenues
Contract drilling services	$	178,514		$	69,919		$	108,595
Management fees		18,107			18,830			(723	)
Reimbursables		81,782			22,744			59,038

Total revenues		278,403			111,493			166,910

Operating costs and expenses
Operating costs		176,387			66,228			(110,159	)
General and administrative		21,719			15,690			(6,029	)
Depreciation		33,384			11,218			(22,166	)

Total operating expenses		231,490			93,136			(138,354	)

Income from operations		46,913			18,357			28,556
Other income (expense)
Interest income		562			23			539
Interest expense and financing charges		(49,827	)		(8,178	)		(41,649	)
Loss on debt extinguishment		(24,006	)		—			(24,006	)
Loss on acquisition of subsidiary		(3,780	)		—			(3,780	)
Other income		1,510			609			901

Total other expense		(75,541	)		(7,546	)		(67,995	)

Income (loss) before income taxes		(28,628	)		10,811			(39,439	)
Income tax provision (benefit)		18,951			1,972			(16,979	)

Net income (loss)	$	(47,579	)	$	8,839		$	(56,418	)

Revenue: Total revenue for the year ended December 31, 2010 was $278.4 million compared to $111.5 million for 2009, an increase of $166.9 million, or 150%. Contract drilling revenue totaled $178.5 million for 2010 compared with $69.9 million for 2009, an increase of $108.6 million, or 155%. This increase was primarily due to the increase in operating rigs, with available days increasing from 434 in 2009 to 1,377 in 2010 as a result of the commencement of operations by the Aquamarine Driller in January 2010, the Topaz Driller in March 2010, and the Platinum Explorer in late December 2010, and the continuing operations of the Emerald Driller and the Sapphire Driller, which entered into service in 2009. We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses. For 2010, reimbursable revenue was $81.8 million as compared to $22.7 million for 2009, an increase of $59.0 million or 260%. This increase was primarily due to increased rebillable oversight activities on the construction projects.

Operating costs: Operating costs for the year ended December 31, 2010 were $176.4 million compared to $66.2 million in 2009, an increase of $110.2 million, or 166%. This increase was due in part to the operation of four jackups in 2010 as compared to two jackups in 2009, and to the commencement of operations of our drillship, the Platinum Explorer, in late December 2010. Additionally, $56.2 million of the increase related to deepwater construction oversight expenses, primarily due to increased reimbursable activity costs.

General and administrative expenses: General and administrative expenses for the year ended December 31, 2010 were $21.7 million as compared to $15.7 million in 2009, an increase of $6.0 million, or 38%. This increase primarily reflects the increase in staffing levels necessary to support our operations and market our rigs on a worldwide basis with the growth of our drilling fleet.

Depreciation expense: Depreciation expense for the year ended December 31, 2010 was $33.4 million as compared to $11.2 million in 2009, an increase of $22.2 million. The increase was primarily due to the addition of the Aquamarine Driller and the Topaz Driller to our operating fleet in early 2010.

Interest income: Interest income for the year ended December 31, 2010 was $562,000 compared to $23,000 in 2009. The increase was primarily due to interest earned on funds escrowed for the final Platinum Explorer construction payment which was paid in November 2010.

Interest expense: Interest expense for the year ended December 31, 2010 was $49.8 million compared to $8.1 million in 2009, an increase of $41.6 million. The increase was primarily attributable to increased levels of debt outstanding during 2010, and to higher average interest rates on the increased debt. We capitalized $47.2 million of interest in 2010 as compared to $23.8 million in 2009.

Loss on extinguishment of debt: For the year ended December 31, 2010, in connection with the early retirement of the outstanding debt under our credit facility and the 13¹/2% Senior Secured Notes, we paid approximately $10.8 million in prepayment fees and $0.9 million to terminate the interest rate swap. Additionally, we wrote off approximately $12.3 million of deferred financing costs associated with our credit facility and the 13¹/2% Senior Secured Notes.

Loss on acquisition of subsidiary: For the year ended December 31, 2010, in connection with the acquisition of the 55% interest of Mandarin, we recorded a bargain purchase gain of $12.3 million and a $16.1 million loss on the remeasurement of our previously held 45% ownership interest in Mandarin under purchase accounting.

Income tax expense: Income tax expense for the year ended December 31, 2010 was $19.0 million compared to $2.0 million in 2009, an increase of $17.0 million. The increase was due primarily to the increased number of rigs operating in multiple foreign jurisdictions in 2010. In addition, our tax provision for the year ending December 31, 2010 included adjustments related to prior periods for certain tax positions of $2.5 million, returns filed during 2010 of $2.2 million and a $2.3 million reversal of a deferred tax asset recorded in 2009. In some jurisdictions, we are subject to deemed profit tax regimes where taxes are determined based on specified percentages of revenue rather than profit (loss) before tax.

Liquidity and Capital Resources

As of December 31, 2011, we had working capital of approximately $109.1 million. Included in working capital is approximately $110.0 million of cash available for general corporate purposes. Additionally, we have posted $7.0 million cash as collateral for bid tenders and performance bonds. In 2012, we anticipate spending approximately $15.6 million on sustaining capital expenditures and $16.6 million, excluding capitalized interest, on the Tungsten Explorer, which will be financed from our available working capital.

Included in our working capital is a total of $26.2 million of receivables from F3 Capital and other affiliates of Hsin Chi Su, our largest shareholder and previous member of our board of directors (although he has recommended four of the current directors for nomination to our board of directors). The balance includes $7.4 million of deferred management fees which are payable upon the delivery of the Dragonquest and $15.8 million of direct costs reimbursement and $3.0 million associated with the now terminated agreement to manage the construction of the Cobalt Explorer.

F3 Capital and its affiliates have not made timely payments on these projects, which has negatively impacted our liquidity. If F3 Capital and its affiliates fail to pay the outstanding balance and committed amounts, it will likely be necessary for us to cancel the Dragonquest management contract, negotiate the return of project equipment, source a replacement vessel to conduct the drilling contract intended for the Dragonquest and pursue

legal remedies against F3 Capital, Mr. Su and affiliates. In the event that we encounter delays in commencing operations under the Petrobras drilling contract, we may incur liquidated damages of up to approximately $5.5 million pursuant to customary liquidated damages provisions in the contract.

Even though F3 Capital had overdue amounts owed to Vantage and despite numerous demands for payment from Vantage, from late March through June 2011, Mr. Su sold a total of 1,000,000 of Vantage ordinary shares and purchased a total of 2,090,178 of our ordinary shares. Mr. Su reported these sales and purchases to us on July 26, 2011 and made a voluntary disgorgement of profit of approximately $118,000. In December 2011, Mr. Su purchased 170,646 of our ordinary shares in the open market.

Long-term Debt

As of December 31, 2011 and 2010, our long-term debt was composed of the following:


	December 31,
	2011		2010
	(In thousands)
11¹/2% Senior Secured Notes, net of discount of $12,503 and $33,304	$	1,212,497	$	966,696
Aquamarine Term Loan		—		107,134
F3 Capital note, net of discount of $26,069 and $30,350		33,931		29,650

		1,246,428		1,103,480
Less current maturities of long-term debt		—		—

Long-term debt	$	1,246,428	$	1,103,480

11¹/2% Senior Secured Notes

On July 30, 2010, Offshore Group Investment Limited, one of our wholly-owned subsidiary (the “Issuer”), issued $1.0 billion aggregate principal amount of notes under an indenture (the “Notes”). These Notes were issued at a price equal to 96.361% of their face value, and are fully and unconditionally guaranteed, on a senior secured basis, by us. The original issue discount, reported as a direct deduction from the face amount of the Notes, will be recognized over the life of the Notes using the effective interest rate method. The Notes mature on August 1, 2015, and bear interest from the date of their issuance at the rate of 11.5% per year. Interest on outstanding Notes is payable semi-annually in arrears, commencing on February 1, 2011. The net proceeds, after fees and expenses, of approximately $931.9 million were used to acquire the Platinum Explorer, retire certain outstanding debt and for general corporate purposes.

In June 2011, the Issuer issued approximately $225.0 million aggregate principal amount of additional Notes. The additional Notes were issued at a price equal to 107% of their face value, and are fully and unconditionally guaranteed, on a senior secured basis, by us. The issuance premium, reported as an addition to the face amount of the Notes, will be recognized over the remaining life of the Notes using the effective interest rate method. The weighted average yield on all $1.225 billion of the Notes is approximately 11.9%. The net proceeds, after fees and expenses, of approximately $228.1 million were used by the Issuer to purchase from the Company all of the equity interests of P2020 Rig Co., the entity that owns the Aquamarine Driller, and the related purchase of our subsidiary that is the party to the drilling contract for the Aquamarine Driller.

We used the proceeds to repay and terminate the Aquamarine Term Loan, make the initial payment to DSME under the construction contract for the Tungsten Explorer and for general corporate purposes.

ability to: (i) incur or guarantee additional indebtedness or issue disqualified capital stock; (ii) create or incur liens; (iii) pay dividends, redeem subordinated indebtedness or make other restricted payments; (iv) transfer or sell assets; (v) incur dividend or other payment restrictions affecting restricted subsidiaries; (vi) consummate a merger, consolidation or sale of all or substantially all of our assets or those of the Issuer; (vii) enter into transactions with affiliates; (viii) designate subsidiaries as unrestricted subsidiaries; (ix) engage in businesses other than a business that is the same or similar to our current business and reasonably related businesses; and (x) take or omit to take any actions that would adversely affect or impair in any material respect the collateral securing the notes. Our future subsidiaries may become restricted subsidiaries and guarantors under limited circumstances.

F3 Capital Note

The F3 Capital Note bears interest at the rate of 5% per annum, accruing and compounding daily, and will mature 90 months from the issue date. We originally valued the F3 Capital Note based on our then weighted average cost of capital resulting in a discounted present value of $27.8 million. The F3 Capital Note could have become convertible into our ordinary shares at a conversion price of $1.10 per share, however, at our shareholder’s meeting in January 2011, shareholders did not approve the conversion of the F3 Capital Note. There is also a preemptive right covenant that provides F3 Capital with the right to purchase a pro-rata portion of equity or convertible security that we offer so long as the F3 Capital Note is outstanding. If we do not repay the F3 Capital Note on its scheduled maturity date or upon the occurrence of certain customary default provisions, the interest rate on any amounts outstanding under the F3 Capital Note will rise to 10% per annum.

Aquamarine Term Loan

In September 2009, one of our wholly-owned subsidiaries entered into a loan with a lender for $100.0 million (the “Aquamarine Term Loan”). The Aquamarine Term Loan provided cash interest at 15% per annum and a maturity date of September 3, 2014. The lender held a first priority security interest in the Aquamarine Driller. In February 2011 we amended the Aquamarine Term Loan to allow us to prepay and discharge the outstanding loan thereunder according to a determined prepayment schedule. In connection with the issuance of the additional Notes discussed above, we repaid the Aquamarine Term Loan, including prepayment fees, in June 2011.

Dragonquest Construction Supervision Agreement

In connection with the SSPA, we agreed to defer our construction management fees until the delivery date of the Dragonquest. As of December 31, 2011, $7.4 million of construction management fees have been deferred. In addition to the deferred construction management fees, Valencia owes us $15.7 million on the Dragonquest for the direct costs of construction services rendered by us, including the costs of equipment, inventory, personnel and engineering.

Status and Path Forward Regarding Dragonquest

As of December 31, 2011, Valencia has paid shipyard construction installments and made payments for equipment, spares, supplies, consultants, crew and other associated costs for the Dragonquest, including $72.8 million paid to us under the construction supervision agreement. Valencia has funded these payments with equity received from its shareholder and a pre-delivery loan from commercial banks (the “Bridge Loan”). In connection with the Bridge Loan, F3 Capital and its affiliates have provided other assets as collateral and Vantage has pledged the shares of Vantage Deepwater. Valencia has not made any payments to us under the construction supervision agreement since October 2011, and as of February 29, 2012, owes us approximately $39.2 million for equipment, spare parts, and supplies (approximately $4.4 million of which has already been disbursed). Additionally, as of February 29, 2012, we have made pre-funding cash calls of $52.4 million as provided for under the construction supervision agreement.

In November 2011, we reached a preliminary understanding with Valencia to form a joint venture to own the Dragonquest with Vantage acquiring an initial 32.5% equity ownership in the project. The formation of the joint venture company and the equity investment was contingent upon closing a long-term project financing with

a group of commercial lenders to finance the delivery and mobilization of the Dragonquest. Based on a number of factors, the proposed project financing has not been concluded and alternative financing structures are being considered.

There can be no assurance that we will be able to reach an acceptable agreement with respect to the Dragonquest. In the event that we are unable to deliver the rig to our customer, our customer may seek to terminate the drilling contract. If the drilling contract is terminated, we have provided a guarantee of Vantage Deepwater’s obligation under the contract and may be subject to claims from our customer under the guarantee which could have a material impact on us.

We will continue to pursue all avenues, including legal options, to preserve and enforce our rights with respect to Valencia.

Contingent Obligations

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance.

On August 5, 2011, we sent F3 Capital and Valencia a letter notifying them of their payment breaches pursuant to the construction management agreement and requesting immediate payment. In a letter dated August 15, 2011, Valencia responded that Vantage was in breach of assisting them with their financing efforts and notifying the Company that they would not make any additional payments and were considering legal action. Although F3 Capital (Valencia) made a $36.9 million payment in October 2011, there have been no subsequent payments and no further action has been taken with respect to these letters.

On February 29, 2012, we sent Valencia a letter notifying them of their payment breaches pursuant to the construction management agreement and requesting immediate payment of approximately $41.4 million.

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 renewal options which would cause our future cash payments to change if we exercised those renewal options.

Off-Balance Sheet Arrangements, Commitments and Guarantees

In connection with the June 2009 private placement, we issued to the lead placement agent a warrant to purchase 371,429 ordinary shares at $2.10 per share. This warrant will expire on June 5, 2014.

Contractual Obligations

In the table below, we set forth our contractual obligations as of December 31, 2011. Some of the figures we include in this table are based on our estimates and assumptions about these obligations, including their duration and other factors. The contractual obligations we will actually pay in future periods may vary from those reflected in the table because the estimates and assumptions are subjective.


	For the Years Ending December 31,
	Total		2012		2013-2014		2015-2016		After 5 Years
	(In thousands)
Payments on 11¹/2% Senior Secured Notes (1)	$	1,225,000	$	—	$	—	$	1,225,000	$	—
Payments on F3 Capital Note (1)		60,000		—		—		—		60,000
Shipyard payment on Tungsten Explorer (2)		414,800		—		414,800		—		—
Operating lease payments (3)		32,781		10,329		14,996		6,962		494
Purchase obligations		24,010		24,010		—		—		—

Total as of December 31, 2011	$	1,756,591	$	34,339	$	429,796	$	1,231,962	$	60,494

(1)	Amounts represent the accreted value of the debt at maturity.

(2)	Amount represents the estimated amount due the shipyard upon delivery of the Tungsten Explorer in May 2013, exclusive of any adjustments.

(3)	Amounts represent lease payments under existing operating leases. We enter into operating leases in the normal course of business, some of which contain renewal options. Our future cash payments would change if we exercised those renewal options and if we enter into additional operating leases.

Critical Accounting Policies and Accounting Estimates

The preparation of financial statements and related disclosures in accordance with generally accepted accounting principles in the United States of America (“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. While management believes current estimates are appropriate and reasonable, actual results could materially differ from those estimates. We have identified the policies below as critical to our business operations and the understanding of our financial operations. The impact of these policies and associated risks are discussed in this Management’s Discussion and Analysis of Financial Condition and Results of Operations where such policies affect our reported and expected financial results.

Property and Equipment: Consists of the values 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 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 useful lives ranging from three to seven years on a straight-line basis. When assets are sold, retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the gain or loss is recognized.

Interest costs related to the financings of our jackups and drillship and the amortization of debt financing costs were capitalized as part of the cost while they were under construction. We completed our jackup construction program in the first quarter of 2010 and our drillship in the fourth quarter of 2010. In June 2011, we made our initial construction payments on the Tungsten Explorer and began capitalizing interest for this project. Total interest and amortization costs capitalized for the years ended December 31, 2011, 2010 and 2009 were $7.3 million, $47.2 million and $23.8 million, respectively.

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 represents the excess of the asset’s carrying value over the estimated fair value.

Debt Financing Costs: Costs incurred with debt financings are deferred and amortized over the term of the related financing facility.

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

In connection with a customer contract, we may receive lump-sum fees for the mobilization of equipment and personnel. Mobilization fees and costs incurred to mobilize a rig from one geographic market to another are deferred and recognized on a straight-line basis over the term of such contract, excluding any option periods. Costs incurred to mobilize a rig without a contract are expensed as incurred. Fees or lump-sum payments received for capital improvements to rigs are deferred and amortized to income over the term of the related drilling contract. The costs of such capital improvements are capitalized and depreciated over the useful lives of the assets.

We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses.

Rig Certifications: We are required to obtain regulatory certifications to operate our drilling rigs 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 have been provided 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 and tax basis of assets and liabilities that will result in future taxable or 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 uncertain tax positions in income tax expense.

Share-Based Compensation: We account for employee share-based compensation using the fair value method as prescribed under U.S. GAAP. Restricted share grants are valued based on the market price of our ordinary shares on the date of grant and the fair value attributable to share options is calculated based on the Black-Scholes option pricing model. The fair values are amortized to expense over the service period which is equivalent to the time required to vest the share options and share grants. For the years ended December 31, 2011, 2010 and 2009, we recognized share-based compensation of $5.9 million, $6.1 million and $5.0 million, respectively.

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

General. Market risk is the sensitivity of income to changes in interest rates, foreign exchange rates, commodity prices, equity prices and other market driven rates or prices. Although the risks associated with foreign exchange rates, commodity prices, and equity prices have not been significant in 2011, they could become more significant as our rigs are more fully utilized and our construction projects are completed and additional rigs begin operating. We do not enter into derivatives or other financial instruments for trading or speculative purposes.

Interest Rate Risk: As of December 31, 2011, we did not have any variable rate debt outstanding.

Foreign Currency Exchange Rate Risk. As we operate in international areas, we are exposed to foreign exchange risk. Our primary foreign exchange risk management strategy involves structuring customer contracts to provide for payment in both U.S. dollars, which is our functional currency, and local currency. The payment portion denominated in local currency is based on anticipated local currency requirements over the contract term. Due to various factors, including customer acceptance, local banking laws, other statutory requirements, local currency convertibility and the impact of inflation on local costs, actual foreign exchange needs may vary from those anticipated in the customer contracts, resulting in partial exposure to foreign exchange risk. Fluctuations in foreign currencies have not had a material impact on our overall results. If we find ourselves in situations where payments of local currency do not equal local currency requirements, foreign exchange derivative instruments, specifically foreign exchange forward contracts, or spot purchases, may be used to mitigate foreign currency risk. 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 December 31, 2011, we did not have any open foreign exchange derivative contracts or material foreign currency exposure risk.

Item 8.

Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of

Vantage Drilling Company:

We have audited the accompanying consolidated balance sheet of Vantage Drilling Company and subsidiaries (the “Company”) as of December 31, 2011 and 2010, the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2011. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Vantage Drilling Company and subsidiaries as of December 31, 2011 and 2010 and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Vantage Drilling Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated March 15, 2012 expressed an unqualified opinion thereon.

Houston, Texas

March 15, 2012

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of

Vantage Drilling Company:

We have audited Vantage Drilling Company’s internal control over financial reporting as of December 31, 2011, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Vantage Drilling Company’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting of Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, Vantage Drilling Company and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2011, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheet of Vantage Drilling Company and subsidiaries as of December 31, 2011 and 2010, and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2011, and our report dated March 15, 2012 expressed an unqualified opinion thereon.

Houston, Texas

March 15, 2012

Vantage Drilling Company

Consolidated Balance Sheet

(In thousands, except par value information)


	December 31,
	2011			2010
ASSETS
Current assets
Cash and cash equivalents	$	110,031		$	120,443
Restricted cash		7,028			29,004
Trade receivables		100,908			50,190
Inventory		24,376			19,760
Prepaid expenses and other current assets		16,909			11,472

Total current assets		259,252			230,869

Property and equipment
Property and equipment		1,913,596			1,762,844
Accumulated depreciation		(108,521	)		(44,712	)

Property and equipment, net		1,805,075			1,718,132

Other assets
Other assets		58,173			54,193

Total other assets		58,173			54,193

Total assets	$	2,122,500		$	2,003,194

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	46,362		$	32,332
Accrued liabilities		103,809			83,733

Total current liabilities		150,171			116,065

Long–term debt, net of discount of $38,572 and $63,654		1,246,428			1,103,480
Other long-term liabilities		29,755			13,498
Commitments and contingencies		—			—
Shareholders’ equity
Preferred shares, $0.001 par value, 10,000 shares authorized; none issued or outstanding		—			—
Ordinary shares, $0.001 par value, 400,000 shares authorized; 291,241 and 289,713 shares issued and outstanding		291			290
Additional paid-in capital		860,502			854,557
Accumulated deficit		(164,647	)		(84,696	)

Total shareholders’ equity		696,146			770,151

Total liabilities and shareholders’ equity	$	2,122,500		$	2,003,194

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

Vantage Drilling Company

Consolidated Statement of Operations

(In thousands, except per share amounts)


	Year Ended December 31,
	2011			2010			2009
Revenues
Contract drilling services	$	366,363		$	178,514		$	69,919
Management fees		13,727			18,107			18,830
Reimbursables		105, 258			81,782			22,744

Total revenues		485,348			278,403			111,493

Operating costs and expenses
Operating costs		284,400			176,387			66,228
General and administrative		26,317			21,719			15,690
Depreciation		64,477			33,384			11,218

Total operating expenses		375,194			231,490			93,136

Income from operations		110,154			46,913			18,357
Other income (expense)
Interest income		96			562			23
Interest expense and financing charges		(154,897	)		(49,827	)		(8,178	)
Loss on debt extinguishment		(25,196	)		(24,006	)		—
Loss on acquisition of subsidiary		—			(3,780	)		—
Other income		1,324			1,510			609

Total other expense		(178,673	)		(75,541	)		(7,546	)

Income (loss) before income taxes		(68,519	)		(28,628	)		10,811
Income tax provision		11,432			18,951			1,972

Net income (loss)	$	(79,951	)	$	(47,579	)	$	8,839

Earnings (loss) per share
Basic	$	(0.28	)	$	(0.19	)	$	0.07
Diluted	$	(0.28	)	$	(0.19	)	$	0.07

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

Vantage Drilling Company

Consolidated Statement of Shareholders’ Equity

(In thousands)


	Ordinary Shares
	Ordinary Shares		Amount		Additional Paid-in Capital			Accumulated Deficit			Accumulated Other Comprehensive Loss			Total Shareholders’ Equity
Balance December 31, 2008		76,083	$	76	$	542,331		$	(45,956	)	$	—		$	496,451
Issuance of ordinary shares in private placement		5,517		6		7,994			—			—			8,000
Issuance of ordinary shares in settlement of termination fee		7,299		7		9,993			—			—			10,000
Exercise of warrants		25,000		25		149,975			—			—			150,000
Adjustment to fair value of warrants exercised		—		—		(107,500	)		—			—			(107,500	)
Valuation of new warrants issued for acquisition		—		—		1,492			—			—			1,492
Issuance of ordinary shares in private placement		17,770		18		24,935			—			—			24,953
Issuance of ordinary shares in public offering, net		55,129		55		80,236			—			—			80,291
Vesting of equity awards		479		—		—			—			—			—
Interest rate swap valuation		—		—		—			—			(498	)		(498	)
Share-based compensation expense		—		—		5,030			—			—			5,030
Net income		—		—		—			8,839			—			8,839

Balance December 31, 2009		187,277		187		714,486			(37,117	)		(498	)		677,058
Issuance of ordinary shares in settlement of short-term debt		14,578		15		14,130			—			—			14,145
Issuance of ordinary shares in public offerings, net		86,423		86		101,802			—			—			101,888
Vesting of equity awards		1,435		2		(2	)		—			—			—
Beneficial conversion feature of F3 Capital note for Mandarin		—		—		18,000			—			—			18,000
Interest rate swap valuation		—		—		—			—			498			498
Share-based compensation expense		—		—		6,141			—			—			6,141
Net loss		—		—		—			(47,579	)		—			(47,579	)

Balance December 31, 2010		289,713		290		854,557			(84,696	)		—			770,151
Vesting of equity awards		1,528		1		(1	)		—			—			—
Share-based compensation expense		—		—		5,946			—			—			5,946
Net loss		—		—		—			(79,951	)		—			(79,951	)

Balance December 31, 2011		291,241	$	291	$	860,502		($	164,647	)	$	—		$	696,146

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

Vantage Drilling Company

Consolidated Statement of Cash Flows

(In thousands)


	Year Ended December 31,
	2011			2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(79,951	)	$	(47,579	)	$	8,839
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:
Depreciation expense		64,477			33,384			11,218
Amortization of debt financing costs		8,653			5,389			1,486
Non-cash loss on debt extinguishment		3,532			12,280			—
Non-cash loss on acquisition of subsidiary		—			3,780			—
Share-based compensation expense		5,946			6,141			5,030
Accretion of long-term debt		2,582			5,495			1,638
Amortization of debt discount		9,332			5,592			29
Deferred income tax expense (benefit)		(3,984	)		1,492			746
Gain on disposal of assets		226			—			—
Changes in operating assets and liabilities:
Restricted cash		21,977			(142	)		(27,163	)
Trade receivables		(50,719	)		(40,791	)		(14,350	)
Inventory		(4,616	)		(8,971	)		(10,789	)
Prepaid expenses and other current assets		(1,549	)		(3,433	)		(5,963	)
Other assets		(3,069	)		(11,945	)		(406	)
Accounts payable		14,030			16,402			12,104
Accrued liabilities		29,006			32,491			(12,204	)

Net cash provided by (used in) operating activities		15,873			9,585			(29,785	)

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment		(144,800	)		(565,759	)		(313,631	)
Acquisition of assets		—			(79,777	)		—
Investment in joint venture		—			—			(157,404	)
Proceeds from sale of property and equipment		464			—			—

Net cash used in investing activities		(144,336	)		(645,536	)		(471,035	)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of senior secured notes, net		240,750			963,610			—
Proceeds from borrowings under credit agreements		—			—			141,821
Proceeds from the issuance of 13¹/2% senior secured notes, net		—			—			130,950
Repayment of long-term debt		(109,716	)		(293,129	)		(19,360	)
Proceeds from issuance of ordinary shares in public offerings, net		—			101,889			80,291
Proceeds from issuance of ordinary shares in private placement, net		—			—			24,953
Proceeds from warrant exercise in connection with joint venture		—			—			150,000
Proceeds from short-term notes payable-shareholders		—			—			4,000
Debt issuance costs		(12,983	)		(31,968	)		(12,400	)

Net cash provided by financing activities		118,051			740,402			500,255

Net increase (decrease) in cash and cash equivalents		(10,412	)		104,451			(565	)
Cash and cash equivalents—beginning of period		120,443			15,992			16,557

Cash and cash equivalents—end of period	$	110,031		$	120,443		$	15,992

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

Vantage Drilling Company

Consolidated Statement of Cash Flows

Supplemental Information

(In thousands)


	Year Ended December 31,
	2011			2010			2009
SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for:
Interest	$	136,662		$	43,254		$	28,836
Taxes		21,317			8,506			2,958
Interest capitalized (non-cash)		(7,311	)		(47,225	)		(23,813	)
Trade-in value on equipment upgrades (non-cash)		(3,050	)		—			—
Non-cash investing and financing transactions:
Issuance of ordinary shares in settlement of short-term debt	$	—		$	14,144		$	—
Issuance of ordinary shares for performance deposit		—			—			8,000
Issuance of ordinary shares in settlement of termination fee		—			—			10,000
Adjustment to consideration for fair value of warrants		—			—			106,008
Transaction in Mandarin acquisition:
Reclassification of investment in joint venture		—			120,306			—
Reclassification of receivable		—			8,138			—
Fair value of long-term note payable		—			27,833			—
Beneficial conversion feature of long-term note payable		—			18,000			—

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

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Organization and Recent Events

Vantage Drilling Company (“we,” “our,” “us,” “Vantage Drilling” or the “Company”), organized under the laws of the Cayman Islands on November 14, 2007, is a holding corporation with no significant operations or assets other than its interests in its direct and indirect subsidiaries.

On July 6, 2010, we entered into a definitive agreement with F3 Capital, our largest shareholder and an affiliate, pursuant to which we acquired the 55% of Mandarin Drilling Corporation (“Mandarin”) that we did not already own for cash and a promissory note. The note provided that it could be converted into our ordinary shares if approved by shareholders; however, in January 2011, shareholders voted against such convertibility of the note.

On July 30, 2010, Offshore Group Investment Limited (“OGIL”), one of our wholly-owned subsidiaries, issued $1.0 billion aggregate principal amount of its 11¹/2% Senior Secured Notes due 2015 (the “Notes”) under an indenture. The proceeds, net of original issue discount, were approximately $963.6 million and were used to (i) complete the Mandarin acquisition, (ii) fund the remaining construction payments for the Platinum Explorer, (iii) retire our existing credit facility (including prepayment fees), (iv) retire the 13¹/2% Senior Secured Notes (including prepayment fees and accrued interest) and (v) for general corporate purposes.

Concurrently with the issuance of the 11¹/2% Senior Secured Notes, we sold 52,272,727 ordinary shares, including the underwriter’s over-allotment of 6,818,182 ordinary shares, for approximately $54.3 million in net proceeds.

In May 2011, we executed a turnkey construction contract with Daewoo Shipbuilding and Marine Engineering Co., Ltd. (“DSME”) to construct an ultra-deepwater drillship, to be named the Tungsten Explorer, at the DSME yard in South Korea. The agreement is a fixed price turnkey contract for the construction of the drillship with a scheduled delivery date of May 2013. We have also obtained a fixed price option for the purchase of an additional drillship. The Tungsten Explorer will be capable of operating in water depths up to 12,000 feet with a total vertical drilling depth capacity of 40,000 feet and will have accommodations for 200 personnel.

In June 2011, OGIL issued approximately $225.0 million aggregate principal amount of additional Notes. The additional Notes were issued at a price equal to 107% of their face value, and are fully and unconditionally guaranteed, on a senior secured basis, by us. The net proceeds, after fees and expenses, of approximately $227.8 million were used by OGIL to purchase from the Company all of the equity interests of P2020 Rig Co., the entity that owns the Aquamarine Driller, and the related purchase of our subsidiary that is the party to the drilling contract for the Aquamarine Driller.

We used the proceeds to repay and terminate a term loan associated with the Aquamarine Driller, make the initial payment to DSME under the construction contract for the Tungsten Explorer and for general corporate purposes.

2. Basis of Presentation and Significant Accounting Policies

The accompanying consolidated financial information as of December 31, 2011 and for the three years ended December 31, 2011 has been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) and include 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 indicated periods. Certain previously reported amounts have been reclassified to conform to the current year presentation.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

Restricted Cash: Consists of cash and cash equivalents established as debt reserves and posted as collateral for bid tenders and performance bonds.

Inventory: Consists of materials, spare parts, consumables and related supplies for our drilling rigs and is carried at average cost.

Debt Financing Costs: Costs incurred with debt financings are deferred and amortized over the term of the related financing facility.

Revenue: Revenue is recognized as services are performed based on contracted dayrates and the number of operating days during the period.

We record reimbursements from customers for rebillable costs and expenses as revenue and the related direct costs as operating expenses.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Earnings per Share: Basic earnings (loss) per share have been based on the weighted average number of ordinary shares outstanding during the applicable period. Diluted income per share has been computed based on the weighted average number of ordinary shares and ordinary share equivalents outstanding in the applicable period, as if all potentially dilutive securities were converted into ordinary shares (using the treasury stock method).

The following is a reconciliation of the number of shares used for the basic and diluted earnings (loss) per share (“EPS”) computations:


	Year Ended December 31,
	2011		2010		2009
	(In thousands)
Weighted average ordinary shares outstanding for basic EPS		290,382		255,895		123,421
Options		—		—		—
Warrants		—		—		—

Adjusted weighted average ordinary shares outstanding for diluted EPS		290,382		255,895		123,421

The calculation of diluted weighted average ordinary shares outstanding excludes 2.5 million, 42.8 million and 42.8 million ordinary shares for the years ended December 31, 2011, 2010 and 2009, respectively, issuable pursuant to outstanding warrants or stock options because their effect is anti-dilutive as the exercise price of such securities exceeded the average market price of our shares for the applicable periods.

Concentration of Credit Risk: Financial instruments that potentially subject us to a significant concentration of credit risk consist primarily of cash and cash equivalents and restricted cash. 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. Some of our restricted cash is invested in certificates of deposits.

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 revenue and expenses during the reporting period. While management believes current estimates are appropriate and reasonable, actual results could differ from those estimates.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Fair Value of Financial Instruments: The fair value of our short-term financial assets and liabilities approximates the carrying amounts represented in the balance sheets principally due to the short-term or floating rate nature of these instruments. The Notes issued in July 2010 were issued at a price equal to 96.361% of their face value and the original issue discount, reported as a direct deduction from the face amount of the notes, will be recognized over the life of the notes using the effective interest rate method. The additional Notes issued in June 2011 were issued at a price equal to 107% of their face value and the issuance premium, reported as an addition to the face amount of the Notes, will be recognized over the remaining life of the Notes using the effective interest rate method. The weighted average yield on all $1.225 billion of the Notes is approximately 11.9%. As of February 15, 2012, the Notes were trading at approximately 110% of their par value, indicating a fair value of approximately $1.35 billion.

We originally valued the $60.0 million promissory note issued to F3 Capital (the “F3 Capital Note”) based on our then weighted average cost of capital, resulting in a discounted present value of $27.8 million. The discount is reported as a direct deduction from the face amount of the note and is being recognized over the life of the note using the effective interest rate method. As of December 31, 2011, if we were to value the F3 Capital Note at our current weighted average cost of capital, the current discounted present value would be approximately $27.0 million.

Derivative Financial Instruments: We use derivative financial instruments to reduce our exposure to various market risks, primarily interest rate risk. We have documented policies and procedures to monitor and control the use of derivatives. We do not engage in derivative transactions for speculative or trading purposes. On July 30, 2010, in connection with the retirement of our credit facility, we retired all of our outstanding interest rate hedges.

All derivatives would be recorded on our consolidated balance sheet at fair value. Accounting for the gains and losses resulting from changes in the fair value of derivatives depends on the use of the derivative and whether it qualifies for hedge accounting in accordance with U.S. GAAP. For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive income and reclassified into earnings in the same line item associated with the forecasted transaction and in the period or periods during which the hedged transaction affects earnings. Our assessment for hedge effectiveness is formally documented at hedge inception, and we review hedge effectiveness and measure any ineffectiveness throughout the designated hedge period on at least a quarterly basis.

3. Transactions with F3 Capital and Affiliates

Purchase of F3 Capital’s Interest in Mandarin

Share Sale and Purchase Agreement

On July 6, 2010, we entered into a Share Sale and Purchase Agreement (“SSPA”) with F3 Capital, our largest shareholder and an affiliate, to purchase the 55% interest in Mandarin Drilling Corporation (“Mandarin”) that we did not already own for total consideration of $139.7 million, consisting of $79.7 million in cash and the F3 Capital Note. Mandarin owned the construction rights to the Platinum Explorer. The cash consideration was reduced by approximately $64.2 million for the third and fourth installment payments that were paid by us directly to the shipyard for the construction of the Platinum Explorer. The SSPA contained customary representations and warranties for both us and F3 Capital.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Registration Rights Agreement

We also entered into a registration rights agreement with F3 Capital in connection with the SSPA. Under the terms of the registration rights agreement, we agreed to register the ordinary shares issuable upon the conversion of the F3 Capital Note if it had become convertible, as well as certain other shares previously issued to F3 Capital and approved by shareholders in December 2009. The shares were registered in January 2011.

Call Option Agreement

In connection with the transactions contemplated by the SSPA, we entered into a call option agreement with Valencia Drilling Corporation (“Valencia”), an affiliate of F3 Capital. Pursuant to the terms of the call option agreement, we granted Valencia the option to purchase Vantage Deepwater Company (“Vantage Deepwater”), one of our wholly-owned subsidiaries, from us for total consideration of $1.00. The call option agreement has expired. In connection with Valencia’s financing efforts, in October 2011, we provided a share pledge of the Vantage Deepwater shares to Valencia’s lenders.

Dragonquest Agreement

In connection with the transactions contemplated by the SSPA, we, F3 Capital, Vantage Deepwater and Titanium Explorer Company (“Titanium”), another of our wholly-owned subsidiaries, entered into an agreement with Valencia regarding the financing of Dragonquest, an ultra-deepwater drillship. Under the terms of the agreement, we will take specified measures to facilitate the financing of the Dragonquest, although such measures do not include the incurrence of additional debt by us and the issuance of any guarantees by us. We have also agreed, if requested by Valencia or a third party financier, to assist Valencia in providing a security interest in or novating the drilling contract with Petrobras and deferring up to 75% of the fees payable under the management agreement between Vantage Deepwater and Valencia. If any management fees are deferred, such deferred fees will be payable annually with interest of 8%, and any deferred fees may be paid in cash or ordinary shares of Valencia, at Valencia’s election. Further, pursuant to the financing agreement, we agreed to defer Valencia’s payment of construction management fees due to Titanium under the construction management agreement between Titanium and Valencia from July 6, 2010, until the delivery date of the Dragonquest. Upon the occurrence of any default by Valencia within eight years after the date of the financing agreement, we shall have the option (subject to certain exceptions) to purchase all of the issued and outstanding shares of Valencia from F3 Capital.

Drillship Construction Supervision Agreements

We have construction supervision agreements that entitle us to payments for supervising the construction of the Dragonquest and Cobalt Explorer, another ultra-deepwater drillship. The counterparties in each of these agreements are affiliates of F3 Capital. During the construction of each of these drillships, these agreements entitle us to receive a fee of $5.0 million per drillship annually, prorated to the extent construction is completed mid-year. In addition to our annual fee, we will be reimbursed for all direct costs incurred in the performance of construction oversight services. These agreements may be terminated by either party upon the provision of notice. In connection with the SSPA, we agreed to defer our construction management fees until the delivery date of the Dragonquest. As of December 31, 2011, $7.4 million of construction management fees have been deferred. In addition to the deferred construction management fees, as of December 31, 2011, we are owed $15.7 million on the Dragonquest for the direct costs of construction services rendered by us, including the costs of equipment, inventory, personnel and engineering.

In September 2009, North Pole Drilling Corporation (“North Pole”), an affiliate of F3 Capital, and the shipyard constructing the Cobalt Explorer agreed to suspend construction activities on the Cobalt Explorer.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Consequently we agreed with North Pole to suspend for a corresponding period of time obligations under our agreement with North Pole to provide construction supervision services. In November 2009, pursuant to the terms of the construction supervision agreement, North Pole cancelled the agreement. The management fee revenue of approximately $3.0 million for construction services rendered by us in 2009 prior to the suspension and cancellation has not been paid as of December 31, 2011, and remains currently due and payable. In May 2011, we issued a demand letter to North Pole regarding payment of the overdue amount. We will continue to pursue all remedies, including legal remedies, to collect this outstanding amount.

Vantage Deepwater Share Pledge

In late October 2011, we agreed to pledge the shares of Vantage Deepwater to provide additional security to the lenders under Valencia’s credit facility for purposes of providing interim funding on the Dragonquest prior to delivery. Under the terms of the pledge agreement, the lender would be entitled to the shares of Vantage Deepwater, the entity that holds the drilling contract with Petrobras, only upon (i) a default by Valencia and (ii) the insufficiency of collateral pledged by Valencia to repay the facility. Based on our knowledge of the collateral pledged by Valencia affiliates under the credit facility, together with the credit facility’s limitations on the amount of funds that may be borrowed and discussions we had with the lenders, we believe it is unlikely that the lenders will present a claim on the shares of Vantage Deepwater in the event of Valencia’s default. As a result of our entering into the pledge agreement and the subsequent extension of funds to Valencia by the lenders under their credit facility, in October 2011, Valencia paid us approximately $36.9 million on their outstanding obligations for direct costs and unbilled equipment associated with the Dragonquest construction supervision agreement. Other than the share pledge, we have not entered into any agreement with the lenders and have no financial commitment to the lenders or Valencia with respect to the credit facility.

Drillship Management Agreements

We have an agreement to manage the operations of the Dragonquest. Once the Dragonquest is operational, the agreement entitles us to receive a fixed fee per day plus a performance fee based on the operational performance of the drillship and marketing fees for every charter agreement we secure on behalf of the Dragonquest. Valencia may terminate their obligations under the agreement if any of the following occur: (i) we fail to meet our obligations under the agreement after being given notice and time to cure; (ii) we go into liquidation or cease to carry on our business; (iii) the Dragonquest is damaged to the point of being inoperable; or (iv) the Dragonquest is sold and no outstanding payments are owed to us. Valencia may terminate the agreement at will only if there are no outstanding bids, proposals or contractual commitments to customers.

F3 Capital Note

The F3 Capital Note bears interest at the rate of 5% per annum, accruing and compounding daily, and will mature 90 months from the issue date. We originally valued the F3 Capital Note based on our then weighted average cost of capital resulting in a discounted present value of $27.8 million. The F3 Capital Note could have become convertible into our ordinary shares at a conversion price of $1.10 per share, however, at our shareholder’s meeting in January 2011, shareholders did not approve the conversion of the F3 Capital Note. There is also a preemptive right covenant in the F3 Capital Note that provides F3 Capital with the right to purchase a pro-rata portion of any equity or convertible security that we offer so long as the F3 Capital Note is outstanding. If we do not repay the F3 Capital Note on its scheduled maturity date or upon the occurrence of certain customary default provisions, the interest rate on any amounts outstanding under the F3 Capital Note will rise to 10% per annum.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

4. Construction Supervision Agreements

In addition to the Drillship Construction Supervision Agreements mentioned above, we have entered into other construction management agreements with unaffiliated third parties.

On July 21, 2010, we signed an agreement to supervise and manage the construction and marketing of the ultra-deepwater drillship the Dalian Developer. We are receiving management fees and reimbursable costs during the construction phase of the drillship.

In February 2011, we entered into an agreement with an unaffiliated third party to provide services related to the design, construction and commissioning of two ultra-deepwater drillships being built in Korea. In October 2011, the unaffiliated third party notified us of termination in accordance with specified terms of the agreement, as a result of them being acquired by another drilling contractor.

5. Debt

Long-term Debt

As of December 31, 2011 and 2010, our long-term debt was composed of the following:


	December 31,
	2011		2010
	(In thousands)
11¹/2% Senior Secured Notes, net of discount of $12,503 and $33,304	$	1,212,497	$	966,696
Aquamarine Term Loan		—		107,134
F3 Capital note, net of discount of $26,069 and $30,350		33,931		29,650

		1,246,428		1,103,480
Less current maturities of long-term debt		—		—

Long-term debt	$	1,246,428	$	1,103,480

11¹/2% Senior Secured Notes

On July 30, 2010, Offshore Group Investment Limited, one of our wholly-owned subsidiary (the “Issuer”), issued $1.0 billion aggregate principal amount of Notes under an indenture. These Notes were issued at a price equal to 96.361% of their face value, and are fully and unconditionally guaranteed, on a senior secured basis, by us. The original issue discount, reported as a direct deduction from the face amount of the Notes, will be recognized over the life of the Notes using the effective interest rate method. The Notes mature on August 1, 2015, and bear interest from the date of their issuance at the rate of 11.5% per year. Interest on outstanding Notes is payable semi-annually in arrears, commencing on February 1, 2011. The net proceeds, after fees and expenses, of approximately $931.9 million were used to acquire the Platinum Explorer, retire certain outstanding debt and for general corporate purposes.

In June 2011, the Issuer issued approximately $225.0 million aggregate principal amount of additional Notes. The additional Notes were issued at a price equal to 107% of their face value, and are fully and unconditionally guaranteed, on a senior secured basis, by us. The issuance premium, reported as an addition to the face amount of the Notes, will be recognized over the remaining life of the Notes using the effective interest rate method. The weighted average yield on all $1.225 billion of the Notes is approximately 11.9%. The net proceeds, after fees and expenses, of approximately $227.8 million were used by the Issuer to purchase from the Company all of the equity interests of P2020 Rig Co., the entity that owns the Aquamarine Driller, and the related purchase of our subsidiary that is the party to the drilling contract for the Aquamarine Driller.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

We used the proceeds to repay and terminate the Aquamarine Term Loan, make the initial payment to DSME under the construction contract for the Tungsten Explorer and for general corporate purposes.

The Notes may be redeemed, in whole or in part at specified redemption prices plus accrued and unpaid interest on the Notes redeemed. If a change of control, as defined in the indenture, occurs, each holder of Notes will have the right to require the repurchase of all or any part of its Notes at a price equal to 101% of their principal amount, plus accrued and unpaid interest to the date of repurchase. The indenture governing the Notes, among other things, limits the Issuer and any future restricted subsidiaries’ ability, and in certain cases, our ability to: (i) incur or guarantee additional indebtedness or issue disqualified capital stock; (ii) create or incur liens; (iii) pay dividends, redeem subordinated indebtedness or make other restricted payments; (iv) transfer or sell assets; (v) incur dividend or other payment restrictions affecting restricted subsidiaries; (vi) consummate a merger, consolidation or sale of all or substantially all of our assets or those of the Issuer; (vii) enter into transactions with affiliates; (viii) designate subsidiaries as unrestricted subsidiaries; (ix) engage in businesses other than a business that is the same or similar to our current business and reasonably related businesses; and (x) take or omit to take any actions that would adversely affect or impair in any material respect the collateral securing the notes. Our future subsidiaries may become restricted subsidiaries and guarantors under limited circumstances. We were in compliance with the covenants of the indenture at December 31, 2011.

Aquamarine Term Loan

In September 2009, one of our wholly-owned subsidiaries entered into a loan with a lender for $100.0 million (the “Aquamarine Term Loan”). The Aquamarine Term Loan provided cash interest at 15% per annum and had a maturity date of September 3, 2014. The lender held a first priority security interest in the Aquamarine Driller. In February 2011, we amended the Aquamarine Term Loan to allow us to prepay and discharge the outstanding loan according to a set prepayment schedule. In connection with the issuance of the additional Notes in June 2011, we repaid the Aquamarine Term Loan, plus interest through September 2011, for a total prepayment cost of $131.3 million.

Aggregate scheduled principal maturities of our long-term debt for the next five years and thereafter are as follows (in thousands):


2012	$	—
2013		—
2014		—
2015 (a)		1,225,000
Thereafter		60,000

Total debt		1,285,000
Less:
Current maturities of long-term debt		—
Future amortization of note discounts		(38,572	)

Long-term debt	$	1,246,428

(a)	Includes $12.5 million of original issuance discount, net on $1.225 billion Notes

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

6. Shareholders’ Equity

Preferred Shares

In December 2009, our shareholders approved a proposal to amend our Memorandum and Articles of Association to increase our authorized preferred shares from 1,000,000 preferred shares, par value $0.001 per share, to 10,000,000 preferred shares, par value $0.001 per share. As of December 31, 2011, no preferred shares were issued and outstanding.

Ordinary Shares

At our Extraordinary General Meeting in lieu of Annual General Meeting held in July 2011, our shareholders approved an increase in the number of shares authorized for issuance under our 2007 Long-Term Incentive Plan (the “LTIP”) to 25.0 million. During the year ended December 31, 2011, we granted 6,998,145 restricted shares to employees under our LTIP. Restricted share awards vest ratably over four years and performance unit awards may vest over a three-year period based on the attainment of pre-determined criteria. The 2011 awards are amortized to expense over the respective vesting period based on the fair value of the awards at the grant dates, which was approximately $10.2 million, based on an average share price of $1.46 per share. In the year ended December 31, 2011, we issued 1,528,227 ordinary shares pursuant to the vesting of previously granted LTIP stock awards.

2007 Long-Term Incentive Plan

We have awarded time-vested restricted share and performance units awards to officers and employees under our LITP. The restricted stock awards are valued on the date of the award at our underlying ordinary share price and the value for the ordinary shares that ultimately vest is amortized to expense over the vesting period. The ordinary shares and related par value are recorded when the restricted stock is issued and “Additional paid-in capital” is recorded as the share-based compensation expense is recognized for financial reporting purposes.

A summary of the restricted share awards for the three years ended December 31, 2011 is as follows:


	Year Ended December 31,
	2011		2010		2009
Time vested restricted shares
Shares awarded		5,240,275		429,960		3,920,750
Weighted-average share price at award date	$	1.49	$	1.53	$	1.56
Weighted average vesting period (years)		3.9		4		4
Shares vested		1,528,227		1,434,689		479,489
Shares forfeited		351,174		126,759		32,049

Performance vested restricted shares
Shares awarded		1,757,870		—		—
Weighted-average share price at award date	$	1.36		—		—
Weighted average vesting period (years)		August 2014		—		—

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

A summary of the status of nonvested restricted shares at December 31, 2011 and changes during the year ended December 31, 2011 is as follows:


	Time Vested Restricted Shares Outstanding			Weighted Average Award Date Share Price		Performance Vested Restricted Shares Outstanding (1)		Weighted Average Award Date Share Price
Nonvested restricted shares at January 1, 2011		4,229,581		$	2.88		—	$	—
Awarded		5,240,275			1.49		1,757,870		1.36
Vested		(1,528,227	)		3.40		—		—
Forfeited		(351,174	)		1.95		—		—

Nonvested restricted shares at December 31, 2011		7,590,455		$	1.51		1,757,870	$	1.36

(1)	The number of performance vested restricted shares shown equals the number of shares that would vest if the “target” level of performance is achieved. The minimum number of shares is zero and the maximum number of shares is 1.5 times the target level.

As of December 31, 2011, there was approximately $10.8 million of total unrecognized share compensation expense related to time vested restricted shares which is expected to be recognized over the remaining weighted average period of 2.9 years. The total award date value of time vested restricted shares that vested during the year ended December 31, 2011 was approximately $5.2 million.

As of December 31, 2011, there was approximately $2.1 million of total unrecognized share compensation expense related to performance vested restricted shares which is expected to be recognized over the remaining weighted average period of 2.7 years.

As of December 31, 2011, we had outstanding non-qualified stock options to acquire 179,000 ordinary shares that had been granted to key employees on June 12, 2008. The stock options have an exercise price of $8.40 per share, vest ratably over four years and have a ten-year life from date of grant. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model and the aggregate fair value of the options was approximately $553,000. As of December 31, 2011, stock options to acquire 134,250 ordinary shares were vested and exercisable; no stock options have been exercised to date. As of December 31, 2011, there was approximately $63,000 of total unrecognized share compensation expense related to stock options which is expected to be recognized over the remaining vesting period of six months.

In January 2011, certain executives of the Company surrendered for cancellation 1,112,750 stock options. The shares underlying these options were then available for issuance to other employees under the LTIP, excluding the executives that had surrendered the stock options.

For the years ended December 31, 2011, 2010 and 2009, we recognized share-based compensation of $5.9 million, $6.1 million and $5.0 million, respectively.

Warrants

During 2009, F3 Capital exercised 25.0 million warrants in connection with the SSPA. Additionally, as part of the SSPA, we issued 1,983,471 new warrants to F3 Capital to purchase one ordinary share at an exercise price of $2.50 per share. These warrants expire on November 18, 2018.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

In June 2009, in connection with a private placement, we issued to the lead placement agent a warrant to purchase 371,429 ordinary shares at $2.10 per share. This warrant will expire on June 5, 2014.

The following table summarizes certain information regarding our outstanding warrants as of December 31, 2011, 2010 and 2009.


Issuance Date	Expiration Date	Exercise Price		Warrants Outstanding
Issuance Date	Expiration Date	Exercise Price		2011		2010		2009
November 18, 2008	November 18, 2018	$	2.50		1,983,471		1,983,471		1,983,471
June 5, 2009	June 5, 2014	$	2.10		371,429		371,429		371,429

7. Income Taxes

We are a Cayman Islands entity. The Cayman Islands does not impose corporate income taxes. Consequently, we have provided income taxes based on the laws and rates in effect in the countries in which operations are conducted, or in which we and/or our subsidiaries are considered resident for income tax purposes.

The income tax expense (benefit) consisted of the following:


	Year Ended December 31,
	2011			2010		2009
	(In thousands)
Current	$	15,416		$	17,459	$	1,226
Deferred		(3,984	)		1,492		746

Total	$	11,432		$	18,951	$	1,972

A reconciliation of statutory and effective income tax rates is shown below:


	Year Ended December 31,
	2011			2010			2009
Statutory rate		0.0	%		0.0	%		0.0	%
Effect of:
Taxes on foreign earnings		(16.7	)		(41.6	)		31.3
Prior period adjustment		0.2			(15.8	)		(13.0	)
Tax reserves		(0.2	)		(8.8	)		—

Total		(16.7	)%		(66.2	)%		18.3	%

We account for income taxes pursuant to ASC 740, Accounting for Income Taxes, which requires recognition of deferred income tax assets and liabilities 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 tax credit carryforwards. A valuation allowance to reduce deferred tax assets is established when it is more likely than not that some portion or all of the deferred tax assets will not be realized.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

The components of the net deferred tax assets and liabilities were as follows:


	December 31,
	2011			2010
	(In thousands)
Deferred tax assets:
Share compensation	$	520		$	347
Accrued bonuses		340			325
Start-up costs		194			—
Deferred revenue		3,887			—
Other		41			5
Loss carry-forwards		1,553			29

Total deferred tax assets		6,535			706
Valuation allowance		(29	)		(29	)

Net deferred tax assets		6,506			677

Deferred tax liabilities:
Property and equipment		(2,390	)		(545	)

Total deferred tax liabilities		(2,390	)		(545	)

Net deferred tax asset (liability)	$	4,116		$	132

At December 31, 2011, we had foreign tax loss carry forwards of approximately $4.7 million which will begin to expire in 2029.

As of January 1, 2008, we adopted ASC 740-10-25 and ASC 740-10-30. These sections clarify the accounting for uncertain tax positions and require companies to recognize the impact of a tax position in their financial statements, if that position is not “more likely than not” of being sustained on settlement, based on the technical merits of the position. Our adoption and application of these sections did not have any impact on our total liabilities or shareholders’ equity.

We include as a component of our income tax provision potential interest and penalties related to recognized tax contingencies within our global operations. Interest and penalties expense of $0.1 million is included in 2011 income tax expense and interest and penalties of $0.4 million are accrued as of December 31, 2011.

We have unrecognized tax benefits of approximately $1.6 million as of December 31, 2011. We did not recognize any additions, settlements or lapses of statute of limitations during 2011 for unrecognized tax benefits.

Our periodic tax returns are subject to examination by taxing authorities in the jurisdictions in which we operate in accordance with the normal statutes of limitations in the applicable 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 2008 through 2011 remain open to examination in many of our jurisdictions. In October 2010 and October 2011, authorities in Thailand commenced an examination for the 2009 and 2010 tax years, respectively. In October 2011, authorities in the Philippines notified us they would begin an examination for the 2010 tax year. In April 2011, we closed a tax examination in the U.S. for the 2007 and 2008 tax years.

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

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

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.

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. Our operations in these different jurisdictions are taxed on various bases including, (i) actual income before taxes, (ii) deemed profits (which are generally determined by applying a tax rate to revenues rather than profits) and (iii) withholding taxes based on revenue. 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. Changes in tax laws, regulations, agreements and treaties, foreign currency exchange restrictions or our level of operations or profitability in each tax jurisdiction could have an impact upon the amount of income taxes that we provide during any given year. Our tax filings for various periods may be subjected to examination by tax authorities in the jurisdictions in which we operate. 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.

8. Commitments and Contingencies

We are subject to litigation, claims and disputes in the ordinary course of business, some of which may not be covered by insurance.

As of December 31, 2011, we were obligated under leases, with varying expiration dates, for office space, housing, vehicles and specified operating equipment. Future minimum annual rentals under these operating leases having initial or remaining terms in excess of one year total $10.3 million for 2012, $8.0 million for 2013, $7.0 million for 2014, $6.5 million for 2015 and $480 thousand for 2016. Rental expenses related to these leases were approximately $13.7 million, $4.9 million and $3.1 million for the three years ended December 31, 2011, 2010 and 2009, respectively.

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

9. Supplemental Financial Information

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following:


	December 31,
	2011		2010
	(In thousands)
Prepaid insurance	$	8,676	$	9,169
Sales tax receivable		1,004		1,141
Income tax receivable		280		—
Current deferred tax asset		3,887		—
Other receivables		137		340
Deferred mobilization costs		1,152		—
Other prepaid expenses		1,773		822

	$	16,909	$	11,472

Property and Equipment

Property and equipment consisted of the following:


	December 31,
	2011			2010
	(In thousands)
Drilling equipment	$	1,770,172		$	1,757,083
Assets under construction		133,369			1,219
Leasehold improvements		1,305			1,045
Office and technology equipment		8,750			3,497

		1,913,596			1,762,844
Accumulated depreciation		(108,521	)		(44,712	)

Property and equipment, net	$	1,805,075		$	1,718,132

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Other Assets

Other assets consisted of the following:


	December 31,
	2011		2010
	(In thousands)
Deferred financing costs, net	$	34,032	$	33,234
Performance bond collateral		19,472		18,251
Deposits		1,330		1,369
Deferred income taxes		245		132
Deferred survey costs		985		—
Deferred mobilization costs		2,109		—
Income tax receivable		—		1,207

	$	58,173	$	54,193

Accrued Liabilities

Accrued liabilities consisted of the following:


	December 31,
	2011		2010
	(In thousands)
Interest	$	63,127	$	49,524
Compensation		21,161		13,686
Insurance premiums		8,070		8,574
Unearned income		379		3,218
Deferred revenue		6,321		—
Property, service and franchise taxes		1,610		1,610
Income taxes payable		2,570		6,748
Other		571		373

	$	103,809	$	83,733

10. Business Segment Information

Our business activities relate to the operations of our offshore drilling units, both jackup rigs and drillship, and providing construction supervision services in South Korea and China for drilling units owned by others.

For the years ended December 31, 2011, 2010 and 2009, 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. Two customers accounted for approximately 41% and 13%, respectively, of consolidated revenue for the year ended December 31, 2011. Four customers accounted for approximately 26%, 21%, 13% and 11%, respectively, of consolidated revenue for the year ended December 31, 2010. Three customers accounted for approximately 46%, 23% and 12%, respectively, of consolidated revenue for the year ended December 31, 2009.

11. Supplemental Condensed Consolidating Financial Information

In July 2010, OGIL issued $1.0 billion aggregate principal amount of its Notes under an indenture. In June 2011, OGIL issued approximately $225.0 million aggregate principal amount of additional Notes under the

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

existing indenture. The Notes are fully and unconditionally guaranteed, jointly and severally, on a senior secured basis by us and certain subsidiaries (the “Subsidiary Guarantors”). None of our other currently existing subsidiaries (collectively, the “Non-Guarantor Subsidiaries”) have guaranteed or pledged assets to secure the Notes.

The following tables present the condensed, consolidating financial information as of December 31, 2011 and 2010 and for the three years ended December 31, 2011, 2010 and 2009, of (i) us, (ii) OGIL, (iii) the Subsidiary Guarantors, (iv) the Non-Guarantor Subsidiaries and (v) consolidating and elimination entries representing adjustments to eliminate (a) investments in our subsidiaries and (b) intercompany transactions.

The financial information reflects all adjustments which are, in management’s opinion, necessary for a fair presentation of the financial position as of December 31, 2011 and 2010 and results of operations for the three years ended December 31, 2011, 2010 and 2009, respectively.

Condensed Consolidating Balance Sheet (in thousands)


	As of December 31, 2011
	Parent			Issuer			Subsidiary Guarantors		Non- Guarantors		Eliminations			Consolidated
Cash and cash equivalents	$	14,949		$	11		$	90,896	$	4,175	$	—		$	110,031
Other current assets		557			—			115,623		33,041		—			149,221

Total current assets		15,506			11			206,519		37,216		—			259,252
Property and equipment, net		87			—			1,683,314		121,674		—			1,805,075
Investment in and advances to subsidiaries		644,594			480,632			1,835		100,111		(1,227,172	)		—
Other assets		—			34,032			22,998		1,143		—			58,173

Total assets	$	660,187		$	514,675		$	1,914,666	$	260,144	$	(1,227,172	)	$	2,122,500

Accounts payable and accrued liabilities	$	15,283		$	58,700		$	40,691	$	35,497	$	—		$	150,171
Intercompany (receivable) payable		(174,767	)		(1,087,852	)		1,220,535		42,084		—			—

Total current liabilities		(159,484	)		(1,029,152	)		1,261,226		77,581		—			150,171
Long-term debt		33,931			1,212,497			—		—		—			1,246,428
Other long term liabilities		—			—			26,005		3,750		—			29,755
Shareholders’ equity (deficit)		785,740			331,330			627,435		178,813		(1,227,172	)		696,146

Total liabilities and shareholders’ equity	$	660,187		$	514,675		$	1,914,666	$	260,144	$	(1,227,172	)	$	2,122,500

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Operations (in thousands)


	Twelve Months Ended December 31, 2011
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors		Consolidated
Revenues	$	—		$	—		$	375,091		$	110,257	$	485,348
Operating costs and expenses		16,423			30			253,209			105,532		375,194

Income (loss) from operations		(16,423	)		(30	)		121,882			4,725		110,154
Other income (expense)		(7,388	)		(136,034	)		(37,374	)		2,123		(178,673	)

Income (loss) before income taxes		(23,811	)		(136,064	)		84,508			6,848		(68,519	)
Income tax provision		576			—			10,167			689		11,432

Net income (loss)	$	(24,387	)	$	(136,064	)	$	74,341		$	6,159	$	(79,951	)

Condensed Consolidating Statement of Cash Flow (in thousands)


	Twelve Months Ended December 31, 2011
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors			Consolidated
Net cash provided by (used in) operating activities	$	(16,799	)	$	(119,672	)	$	154,886		$	(2,542	)	$	15,873
Net cash used in investing activities		—			—			(32,620	)		(111,716	)		(144,336	)
Net cash provided by (used in) financing activities		(63,536	)		118,548			(51,332	)		114,371			118,051

Net increase (decrease) in cash and cash equivalents		(80,335	)		(1,124	)		70,934			113			(10,412	)
Cash and cash equivalents—beginning of period		95,284			1,135			19,962			4,062			120,443

Cash and cash equivalents—end of period	$	14,949		$	11		$	90,896		$	4,175		$	110,031

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Balance Sheet (in thousands)


	As of December 31, 2010
	Parent			Issuer			Subsidiary Guarantors		Non- Guarantors		Eliminations			Consolidated
Cash and cash equivalents	$	95,284		$	1,135		$	19,962	$	4,062	$	—		$	120,443
Other current assets		492			—			92,605		17,329		—			110,426

Total current assets		95,776			1,135			112,567		21,391		—			230,869
Property and equipment, net		810			—			1,714,475		2,847		—			1,718,132
Investment in and advances to subsidiaries		488,170			424,451			2,545		63,974		(979,140	)		—
Other assets		—			29,249			22,526		2,418		—			54,193

Total assets	$	584,756		$	454,835		$	1,852,113	$	90,630	$	(979,140	)	$	2,003,194

Accounts payable and accrued liabilities	$	13,684		$	48,249		$	19,987	$	34,145	$	—		$	116,065
Intercompany (receivable) payable		(262,758	)		(1,033,703	)		1,251,169		45,292		—			—

Total current liabilities		(249,074	)		(985,454	)		1,271,156		79,437		—			116,065
Long-term debt		29,650			966,696			107,134		—		—			1,103,480
Other long term liabilities		—			—			9,989		3,509		—			13,498
Shareholders’ equity (deficit)		804,180			473,593			463,834		7,684		(979,140	)		770,151

Total liabilities and shareholders’ equity	$	584,756		$	454,835		$	1,852,113	$	90,630	$	(979,140	)	$	2,003,194

Condensed Consolidating Statement of Operations (in thousands)


	Twelve Months Ended December 31, 2010
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors		Consolidated
Revenues	$	—		$	—		$	191,278		$	87,125	$	278,403
Operating costs and expenses		13,973			24			144,290			73,203		231,490

Income (loss) from operations		(13,973	)		(24	)		46,988			13,922		46,913
Other income (expense)		(6,889	)		(11,766	)		(58,291	)		1,405		(75,541	)

Income (loss) before income taxes		(20,862	)		(11,790	)		(11,303	)		15,327		(28,628	)
Income tax provision (benefit)		1,438			—			10,928			6,585		18,951

Net income (loss)	$	(22,300	)	$	(11,790	)	$	(22,231	)	$	8,742	$	(47,579	)

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

Condensed Consolidating Statement of Cash Flow (in thousands)


	Twelve Months Ended December 31, 2010
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors			Consolidated
Net cash provided by (used in) operating activities	$	(1,463	)	$	(5,021	)	$	(6,894	)	$	22,963		$	9,585
Net cash used in investing activities		(748	)		—			(643,856	)		(932	)		(645,536	)
Net cash provided by (used in) financing activities		97,494			6,155			659,048			(22,295	)		740,402

Net increase (decrease) in cash and cash equivalents		95,283			1,134			8,298			(264	)		104,451
Cash and cash equivalents—beginning of period		1			1			11,664			4,326			15,992

Cash and cash equivalents—end of period	$	95,284		$	1,135		$	19,962		$	4,062		$	120,443

Condensed Consolidating Statement of Operations (in thousands)


	Twelve Months Ended December 31, 2009
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors			Consolidated
Revenues	$	—		$	—		$	76,382		$	35,111		$	111,493
Operating costs and expenses		13,884			14			56,977			22,261			93,136

Income (loss) from operations		(13,884	)		(14	)		19,405			12,850			18,357
Other income (expense)		(1,742	)		—			(6,341	)		537			(7,546	)

Income (loss) before income taxes		(15,626	)		(14	)		13,064			13,387			10,811
Income tax provision (benefit)		—			—			2,936			(964	)		1,972

Net income (loss)	$	(15,626	)	$	(14	)	$	10,128		$	14,351		$	8,839

Condensed Consolidating Statement of Cash Flow (in thousands)


	Twelve Months Ended December 31, 2009
	Parent			Issuer			Subsidiary Guarantors			Non- Guarantors			Consolidated
Net cash provided by (used in) operating activities	$	(10,766	)	$	(14	)	$	(43,179	)	$	24,174		$	(29,785	)
Net cash used in investing activities		(71	)		—			(366,824	)		(104,140	)		(471,035	)
Net cash provided by (used in) financing activities		10,812			(4,986	)		421,662			72,767			500,255

Net increase (decrease) in cash and cash equivalents		(25	)		(5,000	)		11,659			(7,199	)		(565	)
Cash and cash equivalents—beginning of period		26			5,001			5			11,525			16,557

Cash and cash equivalents—end of period	$	1		$	1		$	11,664		$	4,326		$	15,992

VANTAGE DRILLING COMPANY

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

12. Supplemental Quarterly Information (Unaudited)

The following table reflects a summary of the unaudited interim results of operations for the quarterly periods in the years ended December 31, 2011 and 2010 (in thousands except per share amounts).


	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2011
Revenues	$	124,589		$	120,925		$	118,534		$	121,300
Income from operations		24,279			32,234			26,717			26,924
Other expense		(40,024	)		(64,546	)		(36,612	)		(37,491	)
Net loss		(18,654	)		(40,070	)		(11,881	)		(9,346	)
Loss per share
Basic	$	(0.06	)	$	(0.14	)	$	(0.04	)	$	(0.03	)
Diluted	$	(0.06	)	$	(0.14	)	$	(0.04	)	$	(0.03	)
2010
Revenues	$	58,250		$	68,354		$	66,907		$	84,892
Income from operations		15,639			14,349			10,263			6,662
Other expense		(7,361	)		(12,990	)		(41,079	)		(14,111	)
Net income (loss)		5,963			(6,996	)		(33,581	)		(12,965	)
Earnings (loss) per share
Basic	$	0.03		$	(0.03	)	$	(0.12	)	$	(0.05	)
Diluted	$	0.03		$	(0.03	)	$	(0.12	)	$	(0.05	)

Net income (loss) per share is computed independently for each of the quarters presented. Therefore, the sum of the quarters’ net income (loss) per share may not agree to the total computed for the year.

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A.

Controls and Procedures.

Disclosure Controls and Procedures

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 file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized, and reported, within the time periods specified by the Securities and Exchange Commission’s (“SEC”) rules and forms.

Disclosure controls and procedures include, without limitation, controls and procedures designed to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as such term is defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of December 31, 2011, and, based upon this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that these controls and procedures are effective in providing reasonable assurance that information requiring disclosure is recorded, processed, summarized, and reported within the timeframe specified by the SEC’s rules and forms.

Management’s Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

Our management, under the supervision of and with the participation of our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of our internal control over financial reporting as of December 31, 2011. In making this assessment, management used the criteria set forth in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this assessment using these criteria, our management determined that our internal control over financial reporting was effective as of December 31, 2011.

Management’s assertion about the effectiveness of our internal control over financial reporting as of December 31, 2011, has been audited by UHY LLP, an independent registered public accounting firm, as stated in their report which appears herein.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fiscal quarter ended December 31, 2011 that materially affected, or are reasonably likely to materially affect, internal control over financial reporting.

Item 9B.

Other Information.

None.

PART III

Item 10.

Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated in this Annual Report by reference to our definitive proxy statement to be filed with the Securities and Exchange Commission not later than 120 days after the close of our fiscal year ended December 31, 2011.

We have adopted a Code of Business Conduct and Ethics that applies to directors, officers and employees, including our principal executive officer, principal financial officer and principal accounting officer. Our Code of Business Conduct and Ethics is posted on our website at http://www.vantagedrilling.com in the “Corporate Governance” area. Any waivers from our Code of Business Conduct and Ethics must be approved by our board of directors or a designated board committee. Any amendments to, or waivers from, the Code of Business Conduct and Ethics will be posted on our website and reported pursuant to applicable rules and regulations of the SEC.

Item 11.

Executive Compensation.

Item 12.

Security Ownership and Certain Beneficial Owners and Management and Related Stockholder Matters.

Item 13.

Certain Relationships and Related Transactions, and Director Independence.

Item 14.

Principal Accounting Fees and Services.

PART IV

ITEM 15.

Exhibits, Financial Statement Schedules

(a)	List of documents filed as part of this report

Exhibits. We hereby file as part of this Annual Report on Form 10-K the Exhibits listed in the attached Exhibit Index.


Exhibit No.		Description

2.1		Agreement and Plan of Merger by and among Vantage Drilling Company, a transitory U.S. merger subsidiary of Vantage Drilling Company and Vantage Energy Services, Inc. (Incorporated by reference to Annex O of the Company’s registration statement on Form S-4 (File No. 333-147797))

3.1		Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form F-4 (File No. 333-147797))

3.2		Amended and Restated Memorandum and Articles of Association of Vantage Drilling Company effective December 21, 2009 (Incorporated by reference to Exhibit 3.1 of the Company’s current report on Form 8-K filed with the SEC on December 28, 2009)

4.1		Specimen Unit certificate (Incorporated by reference to Exhibit 4.1 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.2		Specimen Ordinary Share certificate (Incorporated by reference to Exhibit 4.2 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.3		Specimen Warrant certificate (Incorporated by reference to Exhibit 4.3 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.4		Warrant Agreement between Continental Stock Transfer & Trust Company and Vantage Drilling Company (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

4.5		Registration Rights Agreement, dated June 5, 2009 (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

4.6		Warrant to Purchase Ordinary Shares, dated June 5, 2009 (Incorporated by reference to Exhibit 4.2 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

4.7		Indenture dated as of July 30, 2010 by and among Offshore Group Investment Limited, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on August 5, 2010)

4.8		First Supplemental Indenture dated as of May 20, 2011 by and among Offshore Group Investment Limited, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.2 of the Company’s current report on Form 8-K filed with the SEC on June 2, 2011)

4.9		Second Supplemental Indenture dated as of June 1, 2011 by and among Offshore Group Investment Limited, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.3 of the Company’s current report on Form 8-K filed with the SEC on June 2, 2011)


Exhibit No.		Description

10.1		Share Purchase Agreement between Vantage Energy Services, Inc., F3 Fund and Offshore Group Investment Limited dated August 30, 2007 (Incorporated by reference to Exhibit 10.1 of Vantage Energy Services Inc.’s (the Company’s predecessor) current report on Form 8-K filed with the SEC on September 5, 2007)

10.2		Vantage Drilling Company 2007 Long-Term Incentive Compensation Plan (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.3		Registration Rights Agreement between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.4		Employment and Non-Competition Agreement between Vantage Drilling Company and Paul A. Bragg dated June 12, 2008 (Incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.5		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Douglas Halkett dated June 12, 2008 (Incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.6		Employment and Non-Competition Agreement between Vantage Drilling Company and Douglas G. Smith dated June 12, 2008 (Incorporated by reference to Exhibit 10.6 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.7		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Michael R.C. Derbyshire dated June 12, 2008 (Incorporated by reference to Exhibit 10.7 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.8		Employment and Non-Competition Agreement between Vantage Drilling Company and Edward G. Brantley dated June 12, 2008 (Incorporated by reference to Exhibit 10.8 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.9		Share Sale and Purchase Agreement between F3 Capital and Vantage Deepwater Company dated November 18, 2008 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on November 20, 2008)

10.10		Loan Agreement between F3 Capital and Vantage Drilling Company dated March 3, 2009 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on March 9, 2009)

10.11		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Donald Munro dated May 1, 2008 (Incorporated by reference to Exhibit 10.9 of Amendment No. 1 to the Company’s Annual Report on Form 10-K filed with the SEC on April 30, 2009)

10.12		Securities Purchase Agreement, dated June 5, 2009 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

10.13		Term Loan Facility Agreement for P2020 Rig Co., as borrower, with Wayzata Investment Partners LLC, as administrative agent and security trustee, Wayzata Investment Partners (UK) Ltd, as technical agent and insurance agent, Wayzata Investment Partners LLC, as account agent, Wayzata Opportunities Fund II, L.P, as lender and Vantage Drilling Company, as guarantor (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 26, 2009)


Exhibit No.		Description

10.14		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and William Thomson dated October 27, 2009 (Incorporated by reference to Exhibit 10.23 of Amendment No. 1 to the Company’s Annual Report on Form 10-K filed with the SEC on April 30, 2010)

10.15		Purchase Agreement dated as of December 18, 2009 by and among Vantage Drilling Company, P2021 Rig Co., and Jefferies & Company, Inc., as representative of the initial purchasers (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on December 21, 2009)

10.16		Share Sale and Purchase Agreement dated as of July 6, 2010 between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.17		Form of Promissory Note between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.18		Form of Registration Rights Agreement between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.19		Call Option Agreement between Vantage Drilling Company and Valencia Drilling Corporation dated July 6, 2010 (Incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.20		Financing Agreement regarding the drillship Dragonquest between Vantage Drilling Company, Vantage Deepwater Company, Titanium Explorer Company and Valencia Drilling Corporation dated July 6, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.21		Registration Rights Agreement dated July 30, 2010 among Offshore Group Investment Limited, the guarantors party thereto, and Jefferies & Company, Inc. and Deutsche Bank Securities Inc., as representatives of the Initial Purchasers (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 5, 2010)

10.22		Consultancy Agreement between Vantage Drilling Company and Strand Energy dated May 6, 2009 (Incorporated by reference to Exhibit 10.7 of Amendment No. 1 to the Company’s quarterly report on Form 10-Q filed with the SEC on October 27, 2010)

10.23		Change of Control Policy dated and effective as of November 29, 2010 (Incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2011)

10.24		Letter Agreement amending certain terms of the US$100,000,000 Term Facility Agreement dated 26 August 2009 between, amongst others, P2020 Rig Co. as Borrower, Wayzata Investment Partners LLC as Administrative Agent, Wayzata Opportunities Fund II, L.P. as Lender and Vantage Drilling Company as Guarantor (Incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2011)

10.25		Registration Rights Agreement dated as of June 1, 2011 by and among the Offshore Group Investment Limited, the guarantors named party thereto and Jefferies & Company, Inc., as representative of the initial purchasers (Incorporated by reference to Exhibit 4.3 of the Company’s current report on Form 8-K filed with the SEC on June 2, 2011)

21.1		Subsidiaries of Vantage Drilling Company (Filed herewith)

31.1		Certification of CEO Pursuant to Section 302 (Filed herewith)

31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 (Filed herewith)


Exhibit No.		Description

32.1		Certification of CEO Pursuant to Section 906 (Filed herewith)

32.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 906 (Filed herewith)

101.INS		— XBRL Instance Document (Furnished herewith)

101.SCH		— XBRL Schema Document (Furnished herewith)

101.CAL		— XBRL Calculation Document (Furnished herewith)

101.DEF		— XBRL Definition Linkbase Document (Furnished herewith)

101.LAB		— XBRL Label Linkbase Document (Furnished herewith)

101.PRE		— XBRL Presentation Linkbase Document (Furnished herewith)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


VANTAGE DRILLING COMPANY

By:		/s/ Paul A. Bragg

Name:		Paul A. Bragg
Title:		Chairman and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed by the following persons in the capacities and on the dates indicated.


Name	Position	Date

/s/ Paul A. Bragg Paul A. Bragg	Chairman and Chief Executive Officer (Principal Executive Officer)	March 15, 2012

/s/ Douglas G. Smith Douglas G. Smith	Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)	March 15, 2012

/s/ Jorge E. Estrada M. Jorge E. Estrada M.	Director	March 15, 2012

/s/ Marcelo D. Guiscardo Marcelo D. Guiscardo	Director	March 15, 2012

/s/ John C.G. O’Leary John C.G. O’Leary	Director	March 15, 2012

/s/ Steinar Thomassen Steinar Thomassen	Director	March 15, 2012

/s/ Robert F. Grantham Robert F. Grantham	Director	March 15, 2012

/s/ Duke R. Ligon Duke R. Ligon	Director	March 15, 2012

/s/ Ong Tian Khiam Ong Tian Khiam	Director	March 15, 2012

/s/ Steven Bradshaw Steven Bradshaw	Director	March 15, 2012

EXHIBIT INDEX


Exhibit No.		Description

2.1		Agreement and Plan of Merger by and among Vantage Drilling Company, a transitory U.S. merger subsidiary of Vantage Drilling Company and Vantage Energy Services, Inc. (Incorporated by reference to Annex O of the Company’s registration statement on Form S-4 (File No. 333-147797))

3.1		Certificate of Incorporation (Incorporated by reference to Exhibit 3.1 of the Company’s registration statement on Form F-4 (File No. 333-147797))

3.2		Amended and Restated Memorandum and Articles of Association of Vantage Drilling Company effective December 21, 2009 (Incorporated by reference to Exhibit 3.1 of the Company’s current report on Form 8-K filed with the SEC on December 28, 2009)

4.1		Specimen Unit certificate (Incorporated by reference to Exhibit 4.1 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.2		Specimen Ordinary Share certificate (Incorporated by reference to Exhibit 4.2 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.3		Specimen Warrant certificate (Incorporated by reference to Exhibit 4.3 of Amendment No. 4 to the Company’s registration statement on Form F-4 (File No. 333-147797))

4.4		Warrant Agreement between Continental Stock Transfer & Trust Company and Vantage Drilling Company (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

4.5		Registration Rights Agreement, dated June 5, 2009 (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

4.6		Warrant to Purchase Ordinary Shares, dated June 5, 2009 (Incorporated by reference to Exhibit 4.2 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

4.7		Indenture dated as of July 30, 2010 by and among Offshore Group Investment Limited, the guarantors named therein, and Wells Fargo Bank, National Association, as trustee (Incorporated by reference to Exhibit 4.1 of the Company’s current report on Form 8-K filed with the SEC on August 5, 2010)

10.1		Share Purchase Agreement between Vantage Energy Services, Inc., F3 Fund and Offshore Group Investment Limited dated August 30, 2007 (Incorporated by reference to Exhibit 10.1 of Vantage Energy Services Inc.’s (the Company’s predecessor) current report on Form 8-K filed with the SEC on September 5, 2007)

10.2		Vantage Drilling Company 2007 Long-Term Incentive Compensation Plan (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.3		Registration Rights Agreement between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.4		Employment and Non-Competition Agreement between Vantage Drilling Company and Paul A. Bragg dated June 12, 2008 (Incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.5		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Douglas Halkett dated June 12, 2008 (Incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)


Exhibit No.		Description

10.6		Employment and Non-Competition Agreement between Vantage Drilling Company and Douglas G. Smith dated June 12, 2008 (Incorporated by reference to Exhibit 10.6 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.7		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Michael R.C. Derbyshire dated June 12, 2008 (Incorporated by reference to Exhibit 10.7 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.8		Employment and Non-Competition Agreement between Vantage Drilling Company and Edward G. Brantley dated June 12, 2008 (Incorporated by reference to Exhibit 10.8 of the Company’s current report on Form 8-K filed with the SEC on June 18, 2008)

10.9		Share Sale and Purchase Agreement between F3 Capital and Vantage Deepwater Company dated November 18, 2008 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on November 20, 2008)

10.10		Loan Agreement between F3 Capital and Vantage Drilling Company dated March 3, 2009 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on March 9, 2009)

10.11		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and Donald Munro dated May 1, 2008 (Incorporated by reference to Exhibit 10.9 of Amendment No. 1 to the Company’s Annual Report on Form 10-K filed with the SEC on April 30, 2009)

10.12		Securities Purchase Agreement, dated June 5, 2009 (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on June 8, 2009)

10.13		Term Loan Facility Agreement for P2020 Rig Co., as borrower, with Wayzata Investment Partners LLC, as administrative agent and security trustee, Wayzata Investment Partners (UK) Ltd, as technical agent and insurance agent, Wayzata Investment Partners LLC, as account agent, Wayzata Opportunities Fund II, L.P, as lender and Vantage Drilling Company, as guarantor (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 26, 2009)

10.14		Employment and Non-Competition Agreement between Vantage International Payroll Company PTE Ltd. and William Thomson dated October 27, 2009 (Incorporated by reference to Exhibit 10.23 of Amendment No. 1 to the Company’s Annual Report on Form 10-K filed with the SEC on April 30, 2010)

10.15		Purchase Agreement dated as of December 18, 2009 by and among Vantage Drilling Company, P2021 Rig Co., and Jefferies & Company, Inc., as representative of the initial purchasers (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on December 21, 2009)

10.16		Share Sale and Purchase Agreement dated as of July 6, 2010 between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.17		Form of Promissory Note between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.2 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.18		Form of Registration Rights Agreement between Vantage Drilling Company and F3 Capital (Incorporated by reference to Exhibit 10.3 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)


Exhibit No.		Description

10.19		Call Option Agreement between Vantage Drilling Company and Valencia Drilling Corporation dated July 6, 2010 (Incorporated by reference to Exhibit 10.4 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.20		Financing Agreement regarding the drillship Dragonquest between Vantage Drilling Company, Vantage Deepwater Company, Titanium Explorer Company and Valencia Drilling Corporation dated July 6, 2010 (Incorporated by reference to Exhibit 10.5 of the Company’s current report on Form 8-K filed with the SEC on July 9, 2010)

10.21		Registration Rights Agreement dated July 30, 2010 among Offshore Group Investment Limited, the guarantors party thereto, and Jefferies & Company, Inc. and Deutsche Bank Securities Inc., as representatives of the Initial Purchasers (Incorporated by reference to Exhibit 10.1 of the Company’s current report on Form 8-K filed with the SEC on August 5, 2010)

10.22		Consultancy Agreement between Vantage Drilling Company and Strand Energy dated May 6, 2009 (Incorporated by reference to Exhibit 10.7 of Amendment No. 1 to the Company’s quarterly report on Form 10-Q filed with the SEC on October 27, 2010)

10.23		Change of Control Policy dated and effective as of November 29, 2010 (Incorporated by reference to Exhibit 10.23 of the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2011)

10.24		Letter Agreement amending certain terms of the US$100,000,000 Term Facility Agreement dated 26 August 2009 between, amongst others, P2020 Rig Co. as Borrower, Wayzata Investment Partners LLC as Administrative Agent, Wayzata Opportunities Fund II, L.P. as Lender and Vantage Drilling Company as Guarantor (Incorporated by reference to Exhibit 10.24 of the Company’s Annual Report on Form 10-K filed with the SEC on March 16, 2011)

21.1		Subsidiaries of Vantage Drilling Company (Filed herewith)

31.1		Certification of CEO Pursuant to Section 302 (Filed herewith)

31.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 302 (Filed herewith)

32.1		Certification of CEO Pursuant to Section 906 (Filed herewith)

32.2		Certification of Principal Financial and Accounting Officer Pursuant to Section 906 (Filed herewith)

101.INS		— XBRL Instance Document (Furnished herewith)

101.SCH		— XBRL Schema Document (Furnished herewith)

101.CAL		— XBRL Calculation Document (Furnished herewith)

101.DEF		— XBRL Definition Linkbase Document (Furnished herewith)

101.LAB		— XBRL Label Linkbase Document (Furnished herewith)

101.PRE		— XBRL Presentation Linkbase Document (Furnished herewith)

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company