Transocean Ltd (Switzerland)

Good day, everyone, and welcome to today's QQ 2025 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 1 on your touch-shown phone. You may withdraw yourself from 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 conference over to Allison Johnson, Director of Investor Relations. Please go ahead.

Thank you, Stephanie. Good morning, and welcome to TransOcean's second quarter 2025 earnings conference call. A copy of our press release covering financial results along with supporting statements and schedules, including recommendations and disclosures regarding non-doubt financial measures, are posted on our website at dporter.com. Joining me on this morning's call are Keelan Adamson, President and Chief Executive Officer. Thad Veda, Executive Vice President and Chief Financial Officer. Roddy McKenzie, 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 companies 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 assets 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 Chad'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.

Thanks, Alison, and welcome everyone to our second quarter of conference calls. As always, we greatly appreciate your interest in Translations. I want to open today's call by sharing a few of Translations' key priorities. We are intently 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-deep-order 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 environments. 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 combination is our value proposition, differentiating our product to 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 8th generation 20,000 psi drill ships, 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-deep water and harsh environment fleet is unmatched, attracting an industry-leading backlog of approximately $7 billion. 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 a plan to sustainably reduce our cash costs by about $100 million 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 share-based organization and expect to reduce these costs by approximately $50 million on an annual basis beginning in 2026. Importantly, these actions will not in any way compromise safety, customer service, or the reliability of our rig. 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 deliver 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 million this year. We will continue to take a disciplined approach to managing our balance sheets carefully assessing how each action fits into our long-term financial strategy. Moving on 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 second half of 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 for work well into the future and have a line of sight to a number of forthcoming vendors, which I will discuss after a brief recap of our recent pictures. In June, we issued a press release disclosing that a two-well option was exercised on the TransOcean Spitzbergens. 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 60-day contract extension. The agreement also includes multiple options, which, if exercised, would keep the rig working into next year. And finally, in the Ivory Coast, Murphy awarded the Deepwater Spiros 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 2026 and into early 2027, 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 deepwater and ultra-deepwater development capex rising from $64 billion in 2025 to $79 billion. in 2027, a 23% increase. And in their latest commentary, both Fernies 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-deep-water drill ship 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 drill ships 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 multi-year opportunities set to commence in Mozambique in 2027, one has been released, one is in the RFI stage, and one is pending release, which is expected by the end of September. Moving east to the Asia-Pacific region, current tenders indicate up to four incremental drill ships will be required in the next two years, including the Chevron-Gorgon prospect in Australia, which is expected to commence in the first quarter of 2027. This will be the first time in seven years a drill ship has operated in-country. Demand in India also points to one additional drill ship as ONGC, Reliance and Cairn each have programs in this timeframe. And finally, tenders for the remainder of Asia will likely require the rig town to move up from three active dealerships today to five in 2027. Activity levels in the U.S. Gulf, Latin America, and Brazil are expected to remain relatively stable. Since our first four 2025 earnings calls, bids were submitted for Petrobras' BUSIOS program, and Petrobras released the tender for its Mero project, which is a firm duration of nearly four years. expected to commence in the first half of 2027, for at least one rig. With respect to the previously mentioned Gujias tender, it is possible that four rigs could now be awarded rather than up to the three originally anticipated. Additionally, Shell is currently evaluating rigs for the Gallo-Gamata development and Equinor released an RFI for a one-year program with commencement likely in the first half of 2026. Furthermore, Just this week, BP announced their biggest discovery in 25 years of the boomerang's loss in the Santa Fe Basin, and indicated its intention to perform additional appraisal activities. The projected demand for harsh environment semi-submersibles remains strong in Norway and elsewhere internationally. As a reminder, our four rigs in Norway, the Transocean Slitsbergen, Transocean Norge, Transocean Encourage, and Transocean Enneadra, are fully committed into 2027. In the UK, on top of DT West of Shetland, Ataka is also looking for one rig for its Cambo development, a 900-day program that starts in the same timeframe. In the Orange Bay soon, meaning Namibia and South Africa, operators will soon begin the development phases of their discoveries, which will require at least one additional harsh environment semi-submersible. 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 stack 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 stack rigs to ensure we maintain the best and most competitive fleet to meet our customers' requirements. All else unequal, supply rationalization structurally improves industry dynamics. Including four of our own, A total of 11 rigs have been 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 Fad to discuss our results and guidance. Fad?