Earnings call transcript: Transocean Q2 2025 sees revenue beat, EPS miss

Transocean Ltd. (RIG) reported its second-quarter 2025 earnings, revealing a mixed financial performance. The company posted a revenue of $988 million, surpassing analyst expectations of $969.61 million, marking a 1.9% positive surprise. However, the earnings per share (EPS) fell short of forecasts, coming in at $0 compared to the anticipated -$0.0041, resulting in a 100% negative surprise. Following the earnings release, Transocean’s stock price rose by 3.19% in after-hours trading, closing at $2.91, reflecting a positive market reaction to the revenue beat despite the EPS miss. According to InvestingPro analysis, the stock currently appears undervalued based on its Fair Value model, with strong revenue growth of 23.26% over the last twelve months.

Key Takeaways

• Transocean’s revenue exceeded forecasts by 1.9%, reaching $988 million.
• The EPS missed expectations, recording $0 against a forecasted -$0.0041.
• Stock price increased by 3.19% in after-hours trading.
• Cost reduction initiatives aim for $100 million annual savings.
• Industry-leading backlog of $7 billion supports future growth.

Company Performance

Transocean demonstrated robust revenue performance in Q2 2025, driven by high-specification ultra-deepwater and harsh environment fleet operations. Despite missing EPS expectations, the company maintained a strong industry position with significant contract drilling revenues and a strategic focus on cost reduction and debt management. The company’s performance aligns with broader industry trends, where deepwater and ultra-deepwater capital expenditures are expected to rise significantly.

Financial Highlights

• Revenue: $988 million, exceeding forecasts by 1.9%.
• Operating and Maintenance Expense: $899 million.
• Total Liquidity: $1.3 billion, with unrestricted cash at $377 million.

Earnings vs. Forecast

Transocean’s Q2 2025 EPS of $0 fell short of the forecasted -$0.0041, resulting in a 100% negative surprise. Conversely, the company delivered a revenue beat, reporting $988 million against the expected $969.61 million, a 1.9% positive surprise. The EPS miss is significant, although the revenue beat suggests operational strength.

Market Reaction

Following the earnings release, Transocean’s stock rose by 3.19% in after-hours trading, closing at $2.91. This increase reflects investor confidence in the company’s revenue performance and strategic initiatives, despite the EPS miss. The stock’s movement is notable against its 52-week range of $1.97 to $5.11, indicating a favorable market sentiment.

Outlook & Guidance

Transocean provided optimistic guidance for the remainder of 2025, with full-year contract drilling revenues projected between $3.9 billion and $3.95 billion. The company anticipates a tightening market by late 2026 or early 2027, with drillship utilization expected to return to 90%. Strategic cost reductions and debt management remain key focuses.

Executive Commentary

CEO Keelan Adamson emphasized the company’s commitment to delivering value, stating, "We are deeply committed to delivering for our customers and shareholders." He also highlighted the long-term potential of deepwater exploration, noting, "The deepwater game is a long play. The reserves are big."

Risks and Challenges

• High operating and maintenance expenses could pressure margins.
• Volatility in the stock market may impact investor confidence.
• Macroeconomic factors and geopolitical tensions could affect demand for deepwater exploration.
• Execution of cost reduction initiatives will be crucial for profitability.

Q&A

During the earnings call, analysts inquired about day rate improvements and strategic contract opportunities. Management expressed optimism about day rate recovery as utilization approaches 90% and highlighted potential spot activities in the Gulf of Mexico and West Africa. The BP Boomerang discovery was cited as a positive market signal, reinforcing exploration activity.

Full transcript - Transocean Ltd (RIG) Q2 2025:

Conference Operator: Good day, everyone, and welcome to today’s Q2 twenty twenty five Transocean’s earning call. At this time, all participants are in a listen only mode. Later, you will have the opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing star one on your touch tone phone. You may withdraw yourself in the queue by pressing star 2.

Please note this call may be recorded. I’ll be standing by should you need any assistance. It is now my pleasure to turn the

Allison Johnson, Director of Investor Relations, Transocean: conference over to Allison Johnson, Director of Investor Relations. Please go ahead. Thank you, Stephanie. Good morning, and welcome to Transocean’s second quarter two thousand twenty five earnings conference call. A copy of our press release covering financial results along with supporting statements and schedules, including reconciliations and disclosures regarding non GAAP financial measures are posted on our website at deepwater.com.

Joining

Conference Operator: me

Allison Johnson, Director of Investor Relations, Transocean: on this morning’s call are Keelan Adamson, president and chief executive officer Fab Beta, exec exec executive vice president and chief financial officer Roddy Mackenzie, executive vice president and chief commercial officer. During the course of this call, Transocean management may make certain forward looking statements regarding various matters related to our business and company that are not historical facts. Such statements are based upon current expectations and certain assumptions and therefore are subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results.

Also, please note that the company undertakes no duty to update or revise forward looking statements. Following Keelan and Thad’s prepared comments, we will conduct a question and answer session with our team. During this time, to give more participants an opportunity to speak, please limit yourself to one initial question and one follow-up. Thank you very much. I’ll now turn the call over to Keelan.

Keelan Adamson, President and Chief Executive Officer, Transocean: Thanks, Allison, and welcome, everyone, to our second quarter conference call. As always, we greatly appreciate your interest in Translotion. I want to open today’s call by sharing a few of Translotion’s key priorities. We are intensely focused on several interrelated objectives with outcomes that are entirely within our control, and we are addressing them with urgency and agility. First and foundational for everything we do is delivering best in class services for our customers.

Transocean is the partner of choice for operators requiring expertise in the most technically challenging ultra deepwater and harsh environment regions of the world, and we are committed to providing safest, most reliable, and efficient operations everywhere all the time. Next, we will continue to manage our portfolio of high spec rigs in a disciplined and selective manner, endeavoring to extract the greatest value possible from our unique fleet. And lastly, but also of paramount importance, we will continue to improve our overall financial flexibility. To do this, we will achieve and maintain the most efficient cost structure possible. We will reduce total debt as rapidly as we can, minimize interest expense, and ultimately simplify our balance sheet.

Transocean is differentiated from the competition by both its people and its assets, and our customers trust us to deliver in the world’s most technically demanding environment. Operators select Transocean because of the exceptional synergy created by our people and our assets, leveraging our technology and innovation to drive consistently high performance. This powerful this powerful combination is our value proposition differentiating our product for both customers and investors. We take exceptional pride in being the preferred offshore drilling provider and being recognized for delivering the highest quality and most efficient solutions. Just last week, Beacon Offshore Energy announced it commenced production from the Shenandoah field, which was drilled by one of our two eighth generation 20,000 psi drillships, the Deepwater Atlas.

This is the second 20,000 PSI reservoir to come online using Transocean’s ships. We are excited to be part of this achievement and thank Beacon for placing its trust in Transocean to accomplish this important milestone. Our high specification ultra deepwater and harsh environment fleet is unmatched, attracting an industry leading backlog of approximately $7,000,000,000. Under all market conditions, our fleet has maintained higher average utilization and premium day rates. We believe that we have a very effective and successful commercial strategy.

We are continually evaluating market dynamics from a supply and demand perspective, carefully assessing individual opportunities to ensure we are deploying each asset into the right project at the right time. You should expect us to continue to be disciplined and strategic in applying this portfolio approach to the management of our fleet to maximize EBITDA and cash flow. Regarding our efforts to improve our financial flexibility, recall that last quarter, we announced the plan to sustainably reduce our cash cost by about 100,000,000 in each of 2025 and 2026. This reduction is primarily from our fleet operating and maintenance expense, and we are on track to deliver these savings. As should be the case, we strive for continuous improvement.

And accordingly, we have taken additional steps to improve the efficiency of our show based organization and expect to reduce these costs by approximately 50,000,000 on an annual basis beginning in 2026. Importantly, these actions will not in any way compromise safety, customer service, or the reliability of our roof. We understand the importance of financial resilience to effectively weather the inevitable cycles in this business and generate appropriate returns for our shareholders. We have a clear path to delever significantly over the next few years, addressing our debt obligations by efficiently converting our industry leading backlog to revenue and maximizing cash flow to equity. We remain on track to reduce debt by more than $700,000,000 this year.

We will continue to take a disciplined approach to managing our balance sheet, carefully assessing how each action fits into our long term financial strategy. Moving now to our outlook for the global market. With an active fleet mostly contracted through the middle of next year, we are actively working on opportunities for the 2026. While the pace of contracting activity has been measured since the middle of last year, all projections suggest we are nearing the end of this temporary slowdown. Indeed, we are engaged in multiple conversations with customers on attractive opportunities to work well into the future and have a line of sight to a number of forthcoming tenders, which I will discuss after a brief recap of our recent fixtures.

In June, we issued a press release disclosing that a two well option was exercised on the Transocean Spitsbergen. The option, which was struck at a rate of $395,000 per day, ensures the rig has continuous work through August 2027. Next, in Brazil, the deepwater Mykonos was awarded a sixty day contract extension. The agreement also includes multiple options, which if exercised, would keep the work the rig working into next year. And finally, in the Ivory Coast, Murphy awarded the deepwater Spherox a three well contract.

The program is expected to commence late this year and includes a one well option that if exercised would keep the rig working into the second quarter next year. We continue to expect the market to tighten by late twenty twenty six and into early twenty twenty seven, at which point we expect the global active ultra deepwater fleet will once again approach utilization exceeding 90%. This should result in upward pressure on day rates. Third party analyst data supports our view. Wood Mackenzie’s latest analysis shows deep water and ultra deepwater development CapEx rising from 64,000,000,000 in 2025 to 79,000,000,000 in 2027, a 23% increase.

And in their latest commentary, both Fernley’s offshore and Westwood Global Energy Group noted that commencement dates for pent up demand have firmed up and for the most part stopped sliding to the right. For the ultra deepwater drillship market, the primary source of incremental demand is still expected to come from Africa, the Mediterranean Sea, and Asia. If known programs materialize as currently projected, there could be an incremental four drillships working in Africa in 2027 and an additional two in the Mediterranean. We are optimistic that commencement windows for these programs will continue to remain generally stable as many of them are progressing through the tender process. For example, of the three multiyear opportunities set to commence in Mozambique in 2027, one has been released, one is in the oil five stage, and one is pending release, which is expected by the September.

Moving east to the Asia Pacific region, current tenders indicate up to four incremental drillships will be required in the next two years, including the Chevron Gorgon prospect in Australia, which is expected to commence in the 2027. This will be the first time in seven years a drillship has operated in country. Demand in India also points to one additional drillship as ONGC, Reliance, and Cairn each have programs in this time frame. And finally, tenders for the remainder of Asia will likely require the rig count to move up from three active drillships today to five in 2027. Activity levels in The US, Gulf, Latin America and Brazil are expected to remain relatively stable.

Since our first quarter twenty twenty five earnings calls, bid bids were submitted for Petrobras’ Buzios program, and Petrobras released the tender for its Merrell project, which is a firm duration of nearly four years expected to commence in the 2027 for at least one rig. With respect to the previously previously mentioned Bujios tender, it is possible that four rigs could now be awarded rather than up to the three originally anticipated. Additionally, Shell is currently evaluating bids for the Gallo De Mato development, and Equinor released an RFI for a one year program with commencement likely in the 2026. Furthermore, just this week, BP announced their biggest discovery in twenty five years at the Boomerang block in the Santos Basin and indicated its intention to perform additional appraisal activities. The projected demand for harsh environment semisubmersibles remains strong in Norway and elsewhere internationally.

As a reminder, our four rigs in Norway, the Transocean Spitsbergen, Transocean Norge, Transocean Encourage, and Transocean Enabler are fully committed into 2027. In The UK, on top of BP West of Shetland, Itaka is also looking for one rig for its Campbell development, a nine hundred day program that starts in the same time frame. In the Orange Basin, meaning Namibia and South Africa, operators will soon begin the development phases of their discoveries, which will require at least one additional harsh environment semisubmersible. We expect a tighter global market to develop in the next two years. However, at this time, we do not see a compelling case for reactivation of cold stacked units.

Hence, our decision in the second quarter to remove four lower specification rigs from our fleet. We continuously assess the option value of our cold stacked rigs to ensure we maintain the best and most competitive fleet to meet our customers’ requirements. All else being equal, supply rationalization structurally improved industry dynamics. Including four of our own, a total of 11 rigs have been re retired from the global fleet this year, and we believe it is reasonable to expect additional attrition in the near term. Industry consolidation could help facilitate further reduction in rig supply, which would contribute to a more balanced industry.

With that, I will now hand it over to Thad to discuss our results and guidance. Thad? Thanks, Dylan, and good day to everyone. During today’s call, I will briefly recap our second quarter results, provide guidance for the third quarter and conclude with an update of our expectations for the full year. During the second quarter, we delivered contract drilling revenues of $988,000,000 in line with our guidance at an average daily revenue of approximately $459,000 At $899,000,000 our operating and maintenance expense in the second quarter was below our guidance, primarily due to lower costs resulting from delays in in service maintenance across the fleet and lower than expected costs for out of service projects on Transocean Endurance and Deepwater Invictus.

G and A expense in the second quarter was $49,000,000 again in line with our expectations, and we ended the quarter with total liquidity of approximately $1,300,000,000 This includes unrestricted cash and cash equivalents of $377,000,000 $395,000,000 of restricted cash, the majority of which is reserved for debt service, and $510,000,000 of liquidity from our undrawn credit facility. I’ll now provide guidance ranges for the third quarter and an update on our expectations for the full year. For the third quarter, we expect contract drilling revenues to be between $1,000,000,000 and $1,020,000,000 based upon an average fleet wide revenue efficiency of 96.5% on our working rigs. As you know, revenue efficiency is affected by uptime performance, weather and other factors. This revenue estimate also includes between 60,000,000 and $70,000,000 of additional services and reimbursable expenses, which tend to carry low single digit margins.

The expected sequential increase in contract drilling revenues is primarily due to additional in service days for the transition to Spitsbergen as it completed its fifteen year SPS in June and one additional calendar day in the third quarter. These are partially offset by lower projected activity for the deepwater skierras and deepwater conqueror in the period. We expect third quarter O and M expense to be within a range of $600,000,000 to $620,000,000 This slight quarter over quarter increase is primarily due to the timing of in service maintenance across the fleet, partially offset by completion of Transocean’s Pittsburgh and fifteen year XBS in the second quarter. We expect G and A expense for the third quarter to fall within a range of $50,000,000 to $55,000,000 Net cash interest expense for the third quarter is forecasted to be approximately $136,000,000 comprising interest expense and interest income of about $143,000,000 and approximately $7,000,000 respectively. Capital expenditures for the third quarter are expected to fall between $25,000,000 and $30,000,000 and cash taxes to be paid are expected to be approximately $16,000,000 For the full year 2025, contract drilling revenues are now expected to fall between 3,900,000,000 and $3,950,000,000 primarily reflecting potential variances in revenue efficiency.

Our guidance also includes between $255,000,000 and $255,000,000 of additional services and reimbursable expenses. We expect our full year O and M expense to be between $2,375,000,000 and $2,425,000,000 This is somewhat higher than our previous guidance, primarily due to increased reimbursable and the effects of foreign exchange. Both of these expenses are offset by increases in revenue. G and A costs in 2025 are expected to be between $190,000,000 and $200,000,000 slightly higher than previously forecast, primarily due to certain performance related accruals. For the full year, we are anticipating net cash interest expense between 540,000,000 and $545,000,000, comprising interest expense and interest income of about 575,000,000 and between $30,000,000 and $35,000,000 respectively.

This excludes any impact from the bifurcated exchange feature of our 2029 exchangeable bond. Cash taxes for the full year are forecasted to be between $70,000,000 and $75,000,000 We now expect 2025 capital expenditures to be approximately $120,000,000 slightly above our prior guidance due to customer upgrades that are fully reimbursed. Of this, approximately 55,000,000 is related to customer acquired capital upgrades for upcoming projects and capital spares and approximately $65,000,000 of sustaining capital investment. Our liquidity at year end is forecasted to be between $1,450,000,000 and $1,550,000,000 consistent with my prior guidance. This reflects our revenue, cost and capital expenditure expectations and includes the impact of our cost savings initiatives, our undrawn revolving credit facility and restricted cash of approximately $440,000,000 In late June, we announced we had entered into separate agreements with certain holders of our 4% senior exchangeable bonds due in December to exchange an aggregate principal amount of $157,000,000 Upon completion of these transactions, 59,400,000.0 shares were issued.

Approximately $77,000,000 in aggregate principal amount of the bonds remains outstanding. Our liquidity forecast currently assumes convertible instruments are equitized at maturity, but as the remaining 25 EVs are out of the money, we will evaluate the various options available to us to address this stuff. With respect to tariffs, we continue to monitor this fluid situation and have not included any potential impact in our guidance because we currently do not expect the impact of either direct or indirect tariffs to be material. This concludes my prepared remarks, and I’ll now turn the call back to Keelan for his final comments before we begin Q and A. Thanks, Pat.

Before opening up the line for questions, I want to reiterate that we are focused on addressing several key priorities with urgency and agility. Our team is committed to best in class services for our customers. We worked hard to earn their trust, and we intend to keep it. Our asset portfolio is unrivaled. We will continue to take a long term view on the market and remain disciplined as we consider future contract opportunities.

As you can tell from today’s comments, our outlook for late twenty twenty six and beyond is very constructive. Lastly, we are strengthening our balance sheet and improving our capital structure. We have high confidence in our ability to add to our backlog, and we intend to efficiently convert it into revenue, maximizing cash flow to reduce our debt as quickly as possible. In conclusion, we are deeply committed to delivering for our customers and shareholders. We have a strong team focused on executing a clear plan to create long term value.

Allison, please open the line for questions.

Allison Johnson, Director of Investor Relations, Transocean: Thanks, Keegan. Stephanie, we are now ready to take questions. And as a reminder to the participants, please limit yourself to one initial question and one follow-up question.

Conference Operator: Thank you. At this time, we will open the floor for questions. And our first question will come from Eddie Kim with Barclays.

Thad Beta, Executive Vice President and Chief Financial Officer, Transocean: Hey. Good morning. Just wanted to ask about your expectation on the trajectory of of leading edge day rates here. We we’ve been in sort of the mid to high four hundreds for some time now, but have recently seen a moderation into into the the low 400 level. You provided a very constructive market outlook and and mentioned in your prepared remarks, you you did see utilization of drillships reaching 90% by I think late next year.

So fair to say you expect Leading as Day Ridge to return back to that mid to high 400 level by end of next year? Or just curious on your thoughts on the trajectory there.

Keelan Adamson, President and Chief Executive Officer, Transocean: Good morning, Eddie, and thanks for your question. As you know, we we we have a history of being very judicious in in how we apply and and select and deploy our assets into whichever project. And I think what you’re seeing today is some of the white space that we we all anticipated. It’s no surprise to us that we were there. That some of those rates are probably a little bit lower than what we’ve seen in the past.

And and and I think what we’re going to see going forward is that capacity being absorbed. The future projections for for activity is very, very positive. And we’re going to see more of the active fleet being contracted. And as we move out into the end of this year and into 2026, we’re gonna see a lot more contracting activity and and tendering activity for the out years of ’26 and beyond. As it pertains to rates, I’ll I’ll let Roddy pertain let Lervin express his view on on where the rates we think will go right now.

Hey, Eddie. Yeah. So just to follow-up on Kieran’s comments there. So as we think about the utilization as you mentioned, you know, we we dipped down a little bit here. We’re actually expecting that the bottom of this v is is practically speaking upon us.

So we think that utilization is going to bottom out somewhere in the mid eighties as a percentage, which is only for a relatively short period of time. I think it goes to all the projections and, you know, certainly a lot of the things that Keelin touched on, we would expect things to to to recover from there. You know, one of the things that we mentioned about daily is not just being very disciplined on, you know, what we’re bidding, but it’s the overall economic package on on these tenders that we are that we’re evaluating. We’ve a very robust process, you know, between our various groups, our engineering group, our operations group, and and several other departments of the company. But it’s very important to us that we take the holistic view that we look at all of the expenses that are associated with it with the with these tenders.

And typically, the bottom of the v is when the worst deals are made. So we we apologize for not making as many long term deals right now. We’re much more focused on gap for us at the moment. But certainly to drive long term value for the company, we don’t think now is the time to to to aggressively pursue long term deals, especially though you’ve seen some recently announced that had a very significant amount of upgrades required then. But rest assured, we’ll we’ll remain disciplined in that regard and make sure that we’re very aware of all of the expenses associated with the project and upgrades.

Yeah. Maybe maybe just to add to that, Eddie, as you rightly point out, a utilization needs to bridge about 90% mark, maybe a little below that before we start seeing good pressure on day rates. So as as we move through the year and the contracting continues, you should expect the rates to improve. Certainly, from our side, we’ll be looking at it strategically from a term and location and a customer perspective to drive the best value that we can get from our unique fleet.

Thad Beta, Executive Vice President and Chief Financial Officer, Transocean: Got it. Thank thank you for that color. My follow-up is is just on the the Proteus and and the Concorde, two of your drillships, that are coming in the Gulf Of Mexico, and set to come off contract kind of mid to to late next year. We’ve seen a handful of multiyear contracts signed by your peers in the Gulf Of Mexico recently. And just based on your your outlook for that region to to be kind of stable going forward, Do you expect it’s likely that those those rigs will will stay in The Gulf or or or could they could they move elsewhere?

Keelan Adamson, President and Chief Executive Officer, Transocean: I think Roddy Roddy is jumping at that one. Yes. We we do expect to stay in The Gulf Of Mexico. We have customers who are quite interested in that class of assets, and we’re pursuing a couple of different things at the moment. So we are cautiously optimistic that those rates will be extended right where they are.

And maybe and let me just add add to that, Eddie. You’re talking about two of our highest spec units in the fleet and in the world industry. The Conqueror is, you know, right at the top, right behind our eighth generation units, and the produce has obviously been performing really well for our customers. So our crews, our operation from those rigs is stellar, and I I’m sure there’ll be a significant demand for those two assets.

Thad Beta, Executive Vice President and Chief Financial Officer, Transocean: Great. Thank you very much. I’ll turn it back.

Conference Operator: Thank you. Our next question will come from Doug Becker with Capital One.

Keelan Adamson, President and Chief Executive Officer, Transocean: Thank you. Maybe a couple for. Just curious on potential proceeds from some of the rigs that are slated for disposal. Just what are the assumptions embedded in the liquidity expectations that were laid out? So hey, Doug.

We we do have some nominal amount included in the liquidity forecast. I don’t think we disclosed the total amount for the rig. But generally speaking, when rigs go to recycling, it’s about cash breakeven type of a transaction. So in the ballpark, there’s probably 8 to $12,000,000 per asset, generally speaking. Certainly, if we have an opportunity to transact and to dispose of those assets into alternative functions, those numbers could be higher, but we would announce that as and when that would happen.

Got it. So don’t don’t assume anything beyond kind of breakeven at this point. That’s correct. In the past, you’ve given us some color on when we might get to 3.5 times net debt to EBITDA. Just any update on those assumptions?

And certainly appreciate it’s been been an uncertain market. Yeah. No change. The objective is to achieve that metric as soon as possible so that we have the option to consider distributions to shareholders. Generally speaking, I think we’re probably still in the late twenty twenty six time frame for that.

Fair enough. Thank you.

Conference Operator: Thank you. Our next question will come from Greg Lewis with BTIG.

Keelan Adamson, President and Chief Executive Officer, Transocean: I wanted to pivot a little bit about this. Kind of curious on your views. I want to go back a couple of years ago when you contributed that I believe it was the Olympia for deep sea mining. Kinda curious, you know, just given what we’re reading in the news, importantly, over the last couple months, you know, like, what where does that is is that something that Transocean is still involved in? And and if so, maybe could you maybe provide some some updates around that?

Yeah. Thanks, Greg. Yeah. We’re we’re, obviously, as you picked up, Olympia is still in that arrangement that we have. We’re we’re seeing a lot of press as you are on on DC Minerals and, essentially, US administration pushing pushing to advance their agenda in that regard.

I’ll I’ll push it over to Ravi here. He’s he’s responsible in that area and will will answer your question. Yeah. So so we continue to to pursue our technical solutions for for doing this kind of recovery. But, yeah, having that asset in the the the JV is, you know, very useful for us.

Also gives us that optionality. But, you know, these things do take a little bit of time, have to be honest But we are excited to at least have that adjacency available to us. And should it take off, if it does, then there is a possibility of additional vessel going in there. Typically, there would be our kind of lower specification drilling rigs that are actually perfectly adequate and and actually quite well specified for this kind of a venture.

Should it take off at some point in the future? Yeah. I think that the as as Roddie indicated, obviously, it’s a it’s a fairly elongated process, and it has to go through a lot of regulations. So in when you look at our core business and you see what what the drilling activity looks like it’s projected to do in the next couple of years, you know, we’re we’re very focused on on the core business and maximizing our opportunities in that. Okay.

Great. Thank thank you for that. And then just, you know, realizing, you know, you you your fleet’s very well contracted, but, you know, I I guess there does seem to be so, I mean, I guess it’s not maybe a specific question to Transocean, but maybe about the market, which is kind of indicative of maybe where we’re headed. Could you maybe talk about, as you look out over the next two, three quarters, any things we’re seeing in terms of spot activity and and, you know, are are there certain pockets? Is it certain types of customers?

Is it exploration? Just kind of if there are any kind of spot tenders or spot not tender, not even tenders. Right? Spot jobs you’re tracking, you know you know, what what’s kind of the makeup of those? Yeah.

Sure. I’ll take that one. And, yes, we’ve a number of spot jobs, and and you would have seen that we picked up a couple of them, basically, an extension on one of rigs in Brazil and also picking up the the Murphy work in Ivory Coast. Yep. As as we look at that kind of stuff, there’s there’s been several in the Gulf Of Mexico that we think are just kind of adding well.

Typically, when you have a mature basin that has a, you know, a lot of prospects, lot of developments there, there’s often work that comes up to kind of do remedial work on wells or, you know, pre completions, that kind of stuff or stimulation to to increase production. So we have seen plenty of those happen over the past couple of years. We we we know that there’s several others in, you know, places like West Africa, which in general is actually looking really positive at the moment. We’ve got there’s kind of four tenders coming up for Nigeria or think one I them has been awarded already, but, you know, Mozambique has got three and Ivory Coast has got two and Ghana has got two. So there seems to be a lot of stuff there in terms of decent long term activity, and we are seeing a number of these kind of six month opportunities just like the one we we just signed that that pop up in places like that.

So it makes a lot of sense for rigs that either have those longer term contracts available to them or are kind of rolling off hot rigs at that time frame, then it’s a kind of a win win between the contractors and the operators to pick up an operational hot rig that’s doing well and punch out a few wells. Thank you very much.

Conference Operator: Thank you. We’ve got our final question from Noel Parks with TD Brothers.

Keelan Adamson, President and Chief Executive Officer, Transocean: Hi. Good morning. You you know, I was just thinking about compared with where things stood heading into 2024 when we had such bullishness around prices and hitting new hurdles on the upside for for day rates. And where we are now, where you see good visibility to 2026 being hopefully the the wrap up of this slowdown. So with the benefit of hindsight, would would you say this this, you know, this sort of slower couple or three quarters is more typical of of a service, you know, driller business cycle?

Or would you say it was more kinda like a a ripple effect of sort of, you know, flow through from the the dislocation of the pandemic? Just curious your thoughts on that. Yeah. Thanks, Noel. I no.

I I I I wouldn’t characterize it as as conventional physical activity in our business, I don’t think. I mean, you have to look at the rates and what was set and and, you know, we’re we’re nowhere near those rates that we were in the in the pandemic period or or even before then. The rates are very, very solid, albeit a little less than what we saw in the last couple of years, and that’s simply because we have a little white space. There’s some rigs rolling off. There’s opportunity.

I think I think since there’s been a lot of capital discipline based on volatility in the market space, whether it’s related to tariffs or related to OPEC or related to oil production and need. So no. Not at all. I think I think as a reminder, the deepwater game is a long play. The reserves are big.

The investment is large. And the lead times for for the work and approval process is quite expensive. And so I think, you know, the the projections are all pointing towards our operators, our customers are starting to get back into the FID process. They look at it up to the long view on on oil price and and what the world’s demand for hydrocarbons look like. And all of those are positive indicators for continued constructive growth right now.

Ravi, do you have anything? Yeah. I think I just just add to that to say, you know, from the operator’s point of view, there’s a significant, you know, amount of turmoil in shop and and the commodity price these days. So it’s a relatively simple decision to to push out noncritical investments, you know, another quarter, another two quarters to see what we see what happens. But the one thing that that does is it kind of adds to that pent up demand.

So it kind of puts you in an interesting spot because you you have the possibility of a number of the rigs that have white space ahead of them, particularly if they’re a little lower specification, then there’s a real chance there that those rigs may be retired. So I think one of the effects you’re you’re going to see is rather than the drilling contractors spending a tremendous amount of money on assets that they’re trying to bridge significant periods of time. They’re far rather more or less than to pull those off the market, retire those rigs, which ultimately is gonna help the supply and demand, the balance there when we do get a busier time. But I would say, actually, we’re looking at the number of tenders that we’re answering and, you know, we’ve had our competitors say the same thing there. There really is a tremendous amount of potential out there.

So again, we we would reiterate that then there’s probably a few bargains to be had in the in the in the short term, but for long term work, it makes all sense in the world that the day rates will be, you know, solid going forward. Can’t really see how that would degrade materially? And to Killam’s point, you know, we may have seen a 15% drop in rates over the last couple of quarters, but already we see some more solid rates that are expected to come out as that ’27 time frame gets super busy. Expect to see the pickup beginning late twenty six, and I think you’ll see a lot of those tenders answered and announced in late twenty five. Terrific.

Thanks a lot. And, you know, I’m just wondering, would see you know, we’ve been seeing these I don’t if you call them green shoots of greater exploration activity happening across the industry. And you you did touch on exploration briefly a bit earlier. But I was wondering with the BP boomerang signed, anything you see as sort of unusual or intriguing about that that project? And I wondered if if other than the general trend of, hopefully, exploration picking up, do you see any implications from that success for either industry activity, CapEx levels?

Yeah. Yeah. For sure. I mean, if you think about just just take the Bomerang discovery. So it’s a big discovery, obviously.

Yeah. You’ll be keeping it the largest in twenty five years. That’s a, you know, a really interesting position that you find Brazil in now. So Petrobras, as you know, is out of tender on several different things, and they’ve kind of picked up the pace on that. And I think that’s partially in response to how many opportunities there are with the IOCs.

So that’s a relatively new development in Brazil, but, you know, we’re we’re looking at, you know, tenders from Shell at the moment. You know, we’re also expecting we we have some additional work that some some of it is already been announced and some will probably come as a result of this latest discovery. As you know, we’re currently in the throes of the Buzios tender and the Nero tender is out now. I think what’s interesting in that is that, kind of, the indications are that there could be, you know, maybe one extra rig than originally thought being used for the previous tender. And, of course, with the ethanol tender that I just found out was kind of incremental demand as well.

So you’re you’re kind of seeing these green shoots looking very interesting. There’s a there there is a clear point about exploration. There is actually a a reasonably good increase expected in exploration wells to be drilled in ’26 and ’27, about 25% increase in fuel. So it appears that as the operators are really shifting their focus back to oil and gas, you know, kind of retooling if you would to to to move into the profitable core business. We’re certainly beginning to see those green shoots show up in these kind of prospects.

Yeah. And I I think exploration activity increasing is great. Success is even more important. And having having quite a bit of success with EBP and some of their exploration activities as are some of our other customers. And and that only bodes well for building capacity in the market, whether it’s in Brazil or Africa or elsewhere around the world.

And so, yeah, we see it as a big positive.

Thad Beta, Executive Vice President and Chief Financial Officer, Transocean: Great. Thanks a lot.

Conference Operator: Thank you. This does conclude our question and answer session. I’d like to now turn it back to Allison Johnson for any additional or closing remarks.

Allison Johnson, Director of Investor Relations, Transocean: Thank you, Stephanie, and thank you, everyone, for your participation on today’s call. We look forward to speaking with you again when we report our third quarter two thousand twenty five results. Have a good day.

Conference Operator: Thank you, ladies and gentlemen. This does conclude today’s presentation. You may now disconnect.

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