RIG

Market Outlook

• Global deepwater offshore drilling is in a multi-year upcycle, driven by growing sanctioned development programs, increased exploration spending, and major new discoveries. Deepwater utilization is projected to approach 100% by the end of 2027.
• Geographic expansion of exploration activity: the number of countries with at least one exploration well is expected to rise from 35 in 2025 to 51 by 2028, a 46% increase, as customers expand portfolios in less developed regions.
• Regional demand updates: Long-term fundamentals are constructive in the US Gulf of Mexico, with 2-4 rigs expected to relocate to higher-demand regions in the short term. Brazil's rig count will stay stable between 30-33 units, with future utilization projected to hold near 100% as operators secure 2028+ capacity. Norway's harsh-environment market has seen a sharp demand increase, and West Africa and Southeast Asia/India are currently the fastest-growing regions for new contracting activity.

Valaris Acquisition Progress

• The transaction remains on track to close in Q4 2025. Regulatory clearance has been secured in 5 of 7 required jurisdictions: CFIUS (US national security clearance), Saudi Arabia, Trinidad and Tobago, Egypt, Australia, and Angola. Clearance is still pending in Brazil and the US, with progress proceeding as expected.
• Integration planning is advancing rapidly, and management expects the combination to deliver benefits to both customers and shareholders.

Financial Performance

• Q2 results exceeded prior guidance: revenue hit the upper end of the guidance range, driven by longer-than-forecast operation of the Deepwater Skiros and additional recharge revenue. O&M expense and capex came in below the low end of guidance due to timing and maintenance spending deferrals.
• Leverage has improved significantly: trailing 12-month net debt to EBITDA fell to 2.8x, from 5.2x at the start of 2025. Transocean recently received credit ratings upgrades to B- (S&P) and B2 (Moody's), with a positive outlook for further upgrades pending Valaris closing.
• The company plans to continue deleveraging: it will call the remaining $200 million of outstanding 8% Deepwater Aquila notes at the end of Q3 2025, which will save ~$22 million in interest expense through maturity, and end 2025 with less than $4.8 billion in gross debt.

• 2026 full-year revenue guidance has been upwardly revised to account for contract extensions on rigs previously expected to roll off in 2026 and a new contract for the Deepwater Proteus. The guidance range's upper end assumes existing contracts extend longer than reflected in the current fleet status report, while the low end assumes customers do not exercise all contractual options.
• Full-year 2026 cost guidance has been increased slightly due to incremental activity, but G&A guidance is held steady at $170-$180 million (excluding Valaris acquisition-related costs). Full-year 2026 interest expense is guided to approximately $475 million.
• Transocean is targeting $200-$250 million in aggregate standalone cost savings between 2026 and 2027, with all initiatives already implemented and on track to hit targets.
• Management does not expect new US tariffs to have a material impact on the company's cost structure. Minor inflationary pressure is only seen in logistics and fuel, with fuel costs 20-40% above pre-Middle East conflict levels, but this has limited impact as Transocean is typically only responsible for fuel when rigs are off contract.

This transcript does not break out financial performance by separate product or business segments. Overall consolidated Q2 results: total revenue of $966 million, O&M expense of $608 million, G&A expense of $56 million (including $11 million in Valaris acquisition costs, $45 million adjusted), capital expenditures of $24 million, adjusted EBITDA of $312 million with a 32% margin, and operating cash flow of $212 million with a 22% margin.

• Regulatory clearance for the Valaris acquisition is still pending in two jurisdictions, though management notes progress is on track.
• Fuel costs remain elevated compared to pre-conflict levels, though the company's exposure is limited.
• Future day rate growth is dependent on ongoing supply-demand balancing in the global deepwater rig market, with outcomes uncertain as of the call.
• Sustained cost efficiency at current levels will require ongoing identification of new cost-saving opportunities as some near-term savings come from temporary deferrals.

Q: Given the currently tight high-spec rig market and leading day rates already in the mid-$400s, can leading day rates continue to rise next year, and what roadblocks could prevent that growth? / A: Management notes that the market is currently filling open available rig time and repositioning rigs to high-demand regions, which will create a stronger operating environment and lower relocation costs over the next 12-18 months. Ultimately, future day rate movement depends on the evolution of the global supply-demand balance, and Transocean's differentiated high-performing fleet positions it well to benefit as the market tightens further. (312 characters)

Q: The repositioning of Cat D rigs from Australia back to Norway—does this signal strengthening demand in Norway, softening demand in Australia, or both? / A: This move solely reflects sharply improved demand and attractive long-term contract terms in Norway, where Equinor needs additional rigs to maintain production through 2035. It is not a sign of softening demand in Australia. Mobile high-spec rigs can be repositioned globally to capture the most attractive long-term opportunities, which makes this 7-year backlog contract particularly valuable for Transocean. (342 characters)

Q: Are operators locking in long-term rig capacity earlier to secure favorable rates amid the recovery, and is energy security urgency accelerating project timelines for national oil companies (NOCs)? / A: Management confirms that NOCs are indeed the first to move in this upcycle, securing large volumes of long-term capacity to get competitive terms, with majors acting more gradually. All current contracting activity is based on conservative long-term break-even assumptions of $30-$40 per barrel, not elevated short-term oil prices, which signals durable, disciplined industry growth. Energy security has also shifted demand toward domestic production in many regions, supporting additional project activity. (398 characters)

Q: How do drilling efficiency gains from new technology like automation impact long-term deepwater rig demand? / A: Management emphasizes that improved efficiency does not reduce demand; instead, it unlocks more activity by enabling profitable development of more projects and freeing up customer capital for exploration and reserve replacement. Automation creates more consistent, predictable performance, which strengthens customer confidence and drives additional work. S&P projects deepwater production will rise 60% from 2024 levels by 2030, directly supported by these efficiency gains. (341 characters)