Transocean Ltd (Switzerland)

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Hello and welcome everyone joining today's Q4 2025 Transocean Earnings 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. To register to ask a question at any time, please press star 1 on your telephone keypad. Please note this call is being recorded. We are standing by if you should need any assistance. It is now my pleasure to turn the meeting over to David Kittington, Vice President, Treasurer. Please go ahead.

Thank you, Nikki, and good morning, everyone. Welcome to Transocean's fourth quarter earnings call. Leading today's call will be Transocean President and CEO, Keelan Adamson. Keelan will be joined by other members of Transocean's Executive Management Team, Chief Financial Officer, Thad Veda, and Chief Commercial Officer, Roddy McKenzie. In addition to the comments that will be shared on today's call, we'd like to direct you to our earnings release and fleet status report filed yesterday that contain additional information, all of which is available on Transocean's website, www.deepwater.com. Following our prepared comments, we will open the conference line for questions. Please limit your inquiries to one question and one follow-up, as this will allow us to hear from more participants. Before we begin, I'd like to remind everyone that today's call will include forward-looking statements which are subject to risks and uncertainties, that could cause actual results to differ materially. With that, I'll hand the call over to Transocean CEO, Keelan Adamson.

Thanks, David, and welcome everyone to our fourth quarter and year-end 2025 conference call. We appreciate your interest in Transocean. I will cover several topics today. First, I'll recap our key accomplishments over the last year. Next, I'll cover our 2026 priorities. Third, I'll quickly recap the highlights of our recently announced definitive agreement to acquire Valeris and why we are excited about this transformational combination. And lastly, I'll close out with some market updates from around the world. Let's get started. 2025 was an important year for Transocean. The company executed very well, both operationally and financially. Yesterday, we reported our fourth quarter results, including solid adjusted EBITDA of $385 million, and free cash flow of $321 million. Year on year, our results improved significantly, with adjusted EBITDA of $1.37 billion, up nearly 20%, and a significant increase in free cash flow to $626 million. During the year, we materially strengthened the balance sheet, retiring about $1.3 billion in debt. We executed two key capital market transactions to deliver and improve both our liquidity and the timing of our debt maturities. These actions and the additional debt payments made in 2025 reduced our annual interest expense by nearly $90 million, enhanced our financial flexibility, and increased the value of our equity currency, ultimately enabling the recently announced transaction with Valaris. We sustainably improved our cost structure by removing about $100 million in costs and are on track to decrease our costs by an additional $150 million in 2026. We took the difficult but necessary steps to rationalize shore-based support around the world, reduce G&A costs, and restructure the organization to drive efficiencies without adversely impacting our operational performance. Today, we are leaner, more efficient, and more profitable. The operational performance of our rigs, and more importantly, our people, were superb. Once again, we demonstrated why Transocean is an industry leader. We achieved record uptime performance, just shy of 98%. We had zero operational integrity events and zero lost time incidents across our entire fleet. Our process and occupational safety performance was exceptional. We completed five major planned out-of-service projects on time and on budget, and we continued to right-size and high-grade the technical capability of our fleet. We recycled six rigs in 2025, with one more completed earlier this year. We entered 2026, Transocean's 100th anniversary year, with strong momentum across the business. Now let's review Transocean's key objectives. Our first priority is to optimize the value of our differentiated assets. Transocean, through our people and fleet, has unparalleled capabilities. We strive every day to deliver best-in-class performance with the most experienced and proven team of professionals, maximizing the capabilities of our high specification fleet. We have an exceptionally capable drill ship fleet and a high spec fleet of semi-submersibles capable of executing in the harshest environment. As the technology leader in the offshore rig business, we continually innovate to improve the safety, reliability, and efficiency of our operation. Second, we are focused on generating industry-leading free cash flow. We have roughly $6 billion in backlog that will efficiently convert into cash, the key measure of value in our business. The more we generate, the faster we can reduce our leverage, which will materially benefit our shareholders. And third, as we continue to reduce our total debt, we will establish a stronger, more simplified capital structure that provides financial resilience and the ability to weather the cycles of this business. Moving now to our recently announced definitive agreement to acquire Valeris, we are incredibly excited about the capabilities of our combined business. As we head into what we anticipate will be a very constructive period for the offshore drilling business, we believe that this transaction is well-timed and know it is perfectly aligned with all of our strategic priorities. It positions us to be a leader combining the best fleet with the best team, working diligently every day to provide our customers with the best most disciplined execution in the industry. Our geographic footprint and customer base will expand. Wherever our customers go offshore to find and develop reserves, we will be able to provide a rigged solution to fit their requirements from a broader high-quality asset base. We've identified more than 200 million in cost synergies on top of our ongoing cost reduction initiatives. Our pro forma combined backlog of nearly $11 billion and cash flow generating capability are expected to accelerate debt reduction, resulting in leverage of around one and a half times within 24 months of closing. We strongly believe that this combination will enhance returns for shareholders and create an exceptional opportunity for investors desiring exposure to the offshore rig business. We expect to close the transaction in the second half of 2026, and we look forward to sharing more information on our progress in the coming months. I'll now provide a brief market update. While we had seen some near-term moderation in tendering activity, the underlying outlook for deepwater offshore drilling is strengthening. In fact, tendering activity is growing with opportunities developing in most major basins. In this market environment, we expect deepwater utilization to move meaningfully higher and to greater than 90% through 2027, setting the stage for an increasingly constructive business environment. Looking regionally, in the U.S. Gulf, long-term demand remains robust, driven by the Pelagian plays and the new lease awards with improved fiscal terms. Any apparent short-term softness will likely result in preferred assets repositioning to other increasingly active markets elsewhere. In Brazil, we expect rig activity to remain stable. Any reduction in Petrobras' projected fleet count will be small and temporary, offset by increased demand from international operators. We anticipate that Petrobras will conclude its blend and extend renegotiations by the end of the quarter, which will add multiple years of backlog. Africa continues to exhibit considerable growth potential. We expect the region's rig count to increase from roughly 15 today to at least 20 over the next year or two. In Mozambique, we anticipate three multi-year program awards from each of ENI, Exxon, and Total, all scheduled to start in 2027 and 2028. In Nigeria, Shell has already awarded its two-year program, with additional awards expected shortly from Exxon and Chevron. In addition, Total is preparing to tender this quarter. Collectively, this implies four rig lines from 2027 onward. In Angola, activity remains solid, supported by anticipated and announced extensions for rigs currently operating with Azulay Total and Exxon. We also understand Shell will re-enter the basin for a material exploration program in 2027. In Namibia, we are now seeing the first results from recent exploration success, with Total launching a major tender for the Venus development. Two rigs, three years each, beginning in early 2028. We also expect further development activity as operators assess their recent discoveries for commercial viability. And in the Ivory Coast, we understand ENI is preparing to issue a one-rig tender for three years of work beginning in early 2027. In the Mediterranean, activity has returned to pre-COVID levels, driven by strong regional gas demand in Egypt, Israel and Cyprus. Rig count is expected to increase to around eight units. In Israel, we expect two-rig fixtures to support the recently sanctioned Chevron energy and developments, In Egypt, Shell and BP will add new programs starting this year, and in Cyprus, E&I's Kronos development is expected to begin drilling in early 2027. Moving now to Southeast Asia and primarily Indonesia, we anticipate incremental demand of three to four rigs between E&I, Harbor Energy, Mubadala, and Impex. In India, momentum is building with the government's objective to drill 50 deepwater wells per year going forward. In addition to their recently awarded one incremental fixture in the region, ONGC have just issued a new tender for three drill ships and two semi-submersibles with contract durations of four years each, beginning in the first half of 2027. In Australia, the Deepwater Ski Ross will commence a minimum one-year development program in early 2027. We see stable activity from all our semi-submersible customers with programs currently out for tender by Woodside, Santos, and impacts. In Norway, utilization of the high-specification harsh environment semi-submersible fleet will remain robust through 2028, supported by recent awards from Equinor and Accra BP. Other operators are also seeking high-spec harsh environment units for 2027 starts, which is expected to drive utilization of these units to nearly 100%. In closing, tendering activity is increasing. Multi-year opportunities are now in the market, and visibility into 2027 and beyond continues to improve. As operators move ahead with new developments and meaningful exploration programs, we are well-positioned to capitalize on improving demand. I'll now hand the call over to Thad for some brief comments on the quarter and our guidance. Thad?

Thank you, Keelan, and good day to everyone. Our performance during the fourth quarter and for the full year of 2026 was very much in line with our expectations and the guidance ranges that we provided to you in November. In the fourth quarter, we generated contract drilling revenues of $1.04 billion at an average daily revenue of approximately $461,000, which is generally consistent with the average daily revenue achieved in the last several quarters. Operating and maintenance expense and G&A expense was $605 million and $50 million, respectively. Adjusted EBITDA was $385 million, implying a very healthy margin of 37%. And cash flow from operations was approximately $349 million, a sequential increase of 42%. Free cash flow of $321 million reflects $349 million of operating cash flow, that of $28 million of capital expenditures. Our free cash flow margin was notable at 31%. I highlight that this is the best quarterly free cash flow we have generated in several years and is a direct result of excellent operational performance, execution on our cost savings initiative, lower cash interest expense, and effective management of our working capital. We ended the fourth quarter with total liquidity of approximately $1.5 billion. This includes unrestricted cash and cash equivalents of $620 million, about $377 million of restricted cash, and $510 million of capacity from our undrawn credit facility. In addition to now issuing our fleet status report concurrently with our quarterly results, we have slightly changed the presentation and content of a press release. Going forward, in addition to some format and tabular modifications, the release will include our guidance ranges. This report provides guidance for the first quarter and full year 2026 for Transocean on a standalone basis, as will be the case until the Valeris transaction closes, expected later this year. The guidance ranges provided include the effects of our cost reduction initiatives and reflect slightly lower levels of activity versus 2025, specifically assuming some idle time on several rigs, including the KG2, the Deepwater Proteus, and the Deepwater Skiros. I note that the potential to achieve the upper regions of the revenue guidance range relates mostly to these rigs being extended beyond their contract end dates or commencing new contracts earlier than anticipated. Even with the assumed idle time on these rigs, we expect free cash flow to be in line with or better than that achieved in 2025 as we continue to reduce cost and interest expense and make additional improvements in the management of our working capital. We also intend to continue to utilize our free cash flow to opportunistically reduce debt in excess of our remaining 2026 scheduled obligations of approximately $380 million which includes capital lease payments. This reflects about $130 million in payments we have already made in 2026. Additionally, our stronger credit profile and improved cash flow generation may enable us to refinance some debt instruments at lower interest rates. Finally, we expect to end 2026 with liquidity of between $1.6 billion and $1.7 billion, which excludes the effect of any incremental opportunistic deleveraging. This concludes my prepared remarks. Operator, we're ready to take questions.

Thank you. And if you would like to ask a question, please press star one on your keypad. To leave the queue at any time, press star two. We ask that you please limit yourself to one question and one follow-up. Once again, that is star and one to ask a question. And we will pause for just a moment to allow everyone a chance to join the queue. We'll take our first question from Greg Lewis with BTIG. Please go ahead. Your line is open.

Yes, hi. Thank you, and good morning. You know, Keelan, I guess at this point, the market has definitely had some time to digest, you know, the acquisition of Alaris, and congrats on that again. And, you know, while it was definitely transformational to the balance sheet, you know, Transocean was already the second largest owner of high-spec ultra-deepwater rigs prior to that. I guess I'd be curious, you know, post the acquisition, does this change the chartering strategy at all? And really, what advantages could the company benefit from just simply from these new potential economies of scale?

Morning, Greg, and thanks for the question. You know, as we think about consolidation and what it means for, you know, our industry and the upstream industry in general, and our customers have been consolidating, as you know, over the last few years, is really driven around driving efficiencies into our business. It's about taking costs out of the chain and looking to provide a better service to our customers and to the consumer. So, you know, from our perspective, this combination allows us to address unnecessary costs across the combination. It allows us to ensure that our overlap of cost structure is minimized. We drive efficiencies into that structure. But more importantly, we're starting to look at how do we improve our service provision as a combination across the world to all of our customers. And ultimately, when I talk to our customers, they always are focused on project executions. in a capital discipline world where they only have a certain amount of capex to spend across their opportunities. They want to ensure they're working with, you know, partners that can deliver and can deliver in a reliable and predictable fashion. We're very proud of our operation on the deep water fleet that we own right now. And we have, you know, strived to ensure that we can deliver that level of performance no matter where we're working for whoever around the world. And I see this as a huge opportunity for us to to combine two excellent operating companies and continue to deliver that sort of level of service, improve our reliability and improve our predictability to our customers that ensures that their projects are delivered on time, on or better than budget, and ultimately reducing the cost of these projects around the world. It will enable more work in the future, and it will obviously help the consumer at the end of the day. I think the other aspect of this transaction that helps is the drilling industry has gone through, as you know, a pretty rough time over the last 10 to 15 years. Many companies have had to restructure. We've been carrying a lot of debt through the down cycle. And it doesn't help the industry where companies do not have a sustainable business structure. And I think for the benefit of the upstream as a whole and the benefit for our customers, having businesses drilling contractors that are sustainable, robust, can be resilient against the inevitable cycles in this business, I think is a huge plus. And I think this combination delivers against those.

Okay, super helpful. And then just, I did want to talk a little bit about, you know, kind of how you're thinking about the jack-up market. It's definitely on a lot of investors' minds. You know, it is, I mean, hey, drilling's drilling, but, you know, if you think about the jacket market, it's more of an NOC-heavy market where, you know, hey, Petrobras and Equinor side, the deep water market is more of an IOC market. You know, just kind of curious how we're thinking about, you know, how does that change? Does management have to change a little bit of its view or its kind of structure in dealing with, you know, these NOCs in the Middle East and Asia versus, say, you know, the traditional opportunities that you're seeing with IOCs?

Yeah, Greg, another great question. We have been a jack-up player in our history. We understand the highly competitive nature of that arena. And as we enter back into the jack-up business post-close, we're looking forward to embracing the lessons we've learned over time as an operator ourselves. And of course, Valeris have done a great job with running their jack-up fleet in a competitive environment with NOCs and international operators around the world. Clearly, it is a business that needs to be run very efficiently to generate good cash from that business. And it's important that companies who run those businesses understand the subtleties of how to manage that cost structure and ensure that they can get the efficiencies and the performance from that jack-up market. So it's not strange to us. We certainly learned from the past and I see a great opportunity for us to learn from the Valeris team that runs that Jacko fleet to continue to deliver exceptional performance and incremental cash to the combined entity going forward.

Super helpful. Thank you very much. Thank you, Greg.

Thank you. Our next question comes from Eddie Kim with Barclays. Please go ahead. Your line is open.

Hi, good morning. So this group as a whole often gets a bad rap because the offshore inflection always seems to be about 12 to 18 months away. You and your peers have been consistently saying for several quarters now that this inflection will happen in late 26 and into 2027. We don't necessarily disagree with that, but Just curious, what gives you the confidence that this is going to happen on time this time around? And outside of some sort of oil price collapse, do you see much risk of this getting pushed out?

Yeah, morning, Eddie. No, I think it really stems from twofold. It stems from our conversations that we have all the time with our customers, and it also stems from the data that comes through from the number of tenders that release, the number of prospects that are going through their field development programs, and some of the public commentary from the oil and gas company executives that are starting to talk a little bit about reserve replacement, declining production, and the need to build exploration budgets to ensure that they are able to do that. So we triangulate around lots of pieces of information, some subjective, some very objective, And that is all triangulating now to, I think what we've said all along is we felt like end of 2026 and early 2027, we were certainly going to bridge into over 90% utilization across our drill ship fleet. And that's continuing to play out. And there's been some recent news that I highlighted in my commentary that was kind of hidden from view at that point in time. Roddy, do you want to add anything to that?

Yeah, for sure. So just to pick up the walk, this is the confidence. So as we look at last year, the number of rig years that were awarded just progressively got better and better quarter over quarter. We went from like 12 rig years to 14 to 18 and then 22 rig years in the fourth quarter, which was actually disappointing for us because we were expecting probably double that to be awarded. There were several big awards that slipped into 26th. But you will see that from not only ourselves, but a lot of our competitors have booked multi-year programs. So we see a lot of multi-year programs, whereas we only saw a few last year. We see a lot more now. We're actually tracking, I think it's 32 open tenders that are expected to be awarded over the next few months. So those open tenders, the average length is well beyond a year. So there's just a lot of work being awarded now. I think you saw that period in 25 where a lot of the customers were basically kind of protecting their own balance sheets and not putting on excessive amount of commitment. But as they work through that capital discipline, what we're seeing now is a transition now clearly towards it's time to develop a lot of these assets that they discovered over the last couple of years. and a marked increase in exploration budgets because the pressure is now on to find replacement reserves. So we're very confident in terms of the number of awards that have been made. So I would say that's not a forward projection. That's data that's in the market already. We're definitely through the trough of contracting, and now we're kind of on the other side of things beginning to really pick up. So, again, just lots of opportunities, and they're all much longer in term than they were before.

Got it. That's very helpful, Collar, and great to hear. Thank you. Just wanted to ask about the Petrobras blended extends. Those negotiations have taken a little bit longer than we had anticipated, but you said you expect those to conclude by the end of the quarter term. Just curious if your full year guidance already bakes in some potential earnings risk related to those blended extends or if the results of those negotiations should be seen as an incremental impact to the guidance you've laid out.

Yeah, so thanks for the question. The guidance that we provide is representative of our best guess based on the conversations that we've had. So I wouldn't consider it to be significant incremental upside with respect to the blended extends.

Got it. Got it. Understood. Great. Thanks for the call. I'll turn it back.

Thank you.

Our next question comes from Frederick Steen with Larkson Securities. Please go ahead. Your line is open.

Thank you, Valentin. Hope all is well. And thank you for the detailed market commentary in your prepared remarks. I wanted to touch a bit on I guess, fleet placement in general. I think the way I interpreted your commentary was that, you know, the U.S. might, while it's robust long-term, might face, you know, some softness in the near term, but then you have, you know, good activity levels in West Africa, for example. I think the ONGC tender, which came out yesterday, kind of in the new format, was incremental to what most of us have expected, at least if it doesn't be a couple of months back. So just wondering, do you have any, like, on how you see your fleet positioned, let's say, a year out in time. Do you expect many rigs to move regions, or do you think some of that will be solved by the acquisition of Alaris, just thinking about, you know, you having rigs available to actually compete in most of these long-term pendants? Thank you.

Yeah, good morning, Fredrik, and thanks for the question. Yeah, look, I think what we definitely see is opportunities developing, as we've discussed in the Africa and Asia regions. We operate, as you know, in a global worldwide market that's highly competitive. We are able to move our units anywhere around the world that meets that demand. I would say because we have a very high spec fleet, our customers are always going to want all else being equal, the higher spec rig that they can find. As we experience, the Gulf has been a strong demand. It will continue to be a strong demand if there's any near-term softness in that area. We will move those rigs to the other opportunities that exist around the world. Brazil continues to be a high utilization area for drill ships. And the MED has been, it's great to see the MED back. It's great to see a lot of activity building in the Mediterranean. Obviously, the gas and energy security conversation is playing a role there. But yeah, that's the way we see the movement. And I'll just pass it over to Roddy. He'll have a couple more comments to add.

Yeah, exactly right, Caelan. And great that you noted the, the ONGC tender that came out, I mean, that's 20 to 25 rig years in one go that was on nobody's radar. So I think that stuff is extremely interesting. You know, the stuff that's coming out of Mozambique, very interesting. The stuff that's coming out of Indonesia, very interesting. And of course, we're engaged in discussions that, you know, we're not at liberty to divulge, but, you know, there's plenty of other activity going on. And as Keelan pointed out, for these hot rigs that are doing a great job performance-wise, the customers are very interested. I just think there's no shortage of opportunities. And if there is any near-term softness in the Gulf of Mexico, I mean, at the moment we're fully utilized, but if that does transpire, then don't think there's any problems in moving those rigs onto other programs. There's certainly enough work around the world for the rigs over the next couple of years. It's just a question of timing and when we move things. But yeah, we're super pumped about the opportunities that have just recently been announced that nobody's gotten their models. So I think that's really going to push utilization up.

Yeah, no, I agree. I think that probably does something with everybody's mindset about how tight this market can become. Just one follow-up, which relates to one of the U.S. Gulf rigs. I think you mentioned that the guidance included some idle time on KG2 Proteus and Skyros, but the Asgard, that's running off in June this year. Should I, by adding these two things together, assume that Asgard might have some new work coming up for it shortly?

I don't really have anything I can comment on at this time, but if anything does happen, of course, we'll announce it in due course.

All right. Thank you so much. Have a good day. Thanks, Frederick.

Thank you. We will move next with Doug Becker with Capital One. Please go ahead. Your line is open.

Thank you. Keyland investors are always voting with their pocketbooks, and it looks like they've like the Volaris acquisition. Just curious on the earlier response from customers.

Yeah, Doug, good morning. Thanks for the question. You know, the feedback I've had from our customers, and I know speaking with my counterpart, Anton, that Volaris has been overwhelmingly positive. They understand the situation in the market. They understand the the need to drive costs out of the business. They understand that the opportunity, you know, as, as they have in, you know, they've had to look at consolidation from their business perspective. They understand that it's not, it shouldn't, it doesn't surprise them that, you know, consolidation would happen in the, in the drilling contractor offshore big business as well. And I think they're very supportive of the potential of the combination. They're very supportive of both companies operations and, There are things to learn from each of us, and we'll look to grab those and where we can improve our service to our customers around the world and in a bigger scale basis, we will be doing that. And so overwhelmingly positive comments directly from the customers that we deal with on an operational basis. I'd be very pleased with that. And they can see where the synergies of these companies will come to benefit them and their project delivery.

That's very encouraging. I also wanted to circle back on the blend and extend negotiations with Petrobras. Just trying to think through, what would you consider a win-win situation for Petrobras, where maybe they get some rate relief in the near term, but to make it a successful negotiation for Transocean as well?

I'll take that one. Petrobras is all about cost reductions and optimizations. the concept is not just about day rates and what have you, but also a lot around terms and conditions and doing things in the contract that kind of, for want of a better word, reduce mutual waste. So we're feeling pretty good about that in terms of the opportunity to be more efficient with revenue. So we'll get a couple of points up on revenue efficiency, that kind of stuff. But also, again, this is kind of like the, the, the workhorse of the fleet, right? So you've got the, the sixth gen rigs down there that, um, provide a great service. They, they do a fantastic job. And, um, we love the idea about, you know, putting significant extensions on those because we are talking about quite a lot of rig years. Um, so that, that's a kind of checks everybody's boxes. If we can be a bit more efficient cost wise for them, um, and at the same time, extend our kind of, uh, core six-gen fleet and keep them busy for the foreseeable future, that's a real win. We're excited about that. We hope that does come to fruition. As we say, we'll definitely update when we have definitive developments there.

Maybe one add on that. I think every drilling contractor understands that continuity is really important for delivering performance over time. Petrobras are they have the ability to scale their operation, to drive those efficiencies, and they understand the value of continuity with their fleet as well. And so from our perspective, it addresses utilization for our 6th Gen and those 7th Gen fleet. It allows us to work with our customer to drive their costs down and to improve our T's and C's and reclaim some of that benefit to the company in that way. And we're able then to provide a service for longer on a high continuity basis, which can only be good for our cash flow generation.

That makes sense. Thank you. Thank you.

Thank you.

We will move next with Keith Beckman with Pickering Energy Partners. Please go ahead. Your line is open.

Hey, thanks for taking my question. I had a question around, you know, in a market that's much further along and everything's more positive, capacity's a little bit tighter. Do you have any feel on which of your three 7th Gen rigs could potentially come back to market first? And does that change at all with Valeris' three 7th Gen stacked rigs as well?

Yeah, it's... Look, we're going to be really excited when the utilization gets to that point. But right now, obviously, we've got an active fleet that needs to roll over. We're very encouraged by the market signs that are there right now to continue to find opportunities for the active fleet. We're very happy with the three 7th Gen units that we've kept on the sideline. And the Valeris units, obviously, are high spec as well. So, you know, we take the same standpoint. We will not bring one of these units back speculatively, and the market would need to be in a position where we could recover the investment of those reactivations inside that contract. We believe that the longer-term outlook is very strong and the opportunities will present themselves, but we don't see that in the very near term.

Awesome. That's helpful. And then... My second question kind of comes back around to the Gulf market again in the back half of the year. Whenever I look at kind of what's in the fleet and could potentially be rolling off, I look at the Conqueror, Proteus, and Asgard late this year potentially needing some work. I just wanted to know if all of those were to win work. I'm assuming there's a little bit of upside to your guidance. Just wanted to get a feel for what's baked into 26 guidance in regards to those three rigs.

Yeah, so we called out the three rigs that we think it makes sense to assume some idle time with upside associated with those under the conditions that I suggested. The other assets that you mentioned, I think, are all probable to go back to work. It's sort of what we have thought about. So there is some probability weighted assumption in the guidance range, but it would definitely move it towards the higher end.

And maybe just some color around those rigs. Obviously, as you know, they're our highest spec drill ships in the world. There are opportunities for these rigs to pick up additional work. We're fairly confident that the market will develop nicely for those units to grab some utilization. I think it's important to remember that we want to keep these rigs working. We want to keep our utilization up. And at the same time, we understand the value of those assets. So we'll be looking to fill it with short-term work, recognizing that the longer term is a little bit more constructive and ensuring that we're keeping our powder dry.

That's very helpful. I'll turn it back. Thanks for taking my questions.

Thank you.

Thank you. We will move next with Noel Parks with 2E Brothers. Please go ahead. Your line is open.

Hi, good morning. One thing I was wondering is, as you had mentioned that there has been more public commentary about reserve replacement among producers and the need for exploration. I'm just wondering, among the players out there who might have been the latest players to the party in terms of deciding that, yeah, we have to address the return to the offshore. I'm just wondering, maybe kind of characterize what some of the more recent companies approaching you have been thinking. I'm just wondering, have they been sort of sitting back and deciding that they're happy to be fast followers, or are they now feeling like, oh, we've We've hung on the sidelines too long and we need to be more aggressive given the tightness in supply. So I was wondering about, as I said, the latecomers.

I think this is really a story about many of the companies pivoting back towards oil and gas, particularly offshore and deep water. So it's really a story about, you know, there's there's there's less. or there's a pivot away from spending a tremendous amount of money in renewables and alternatives and definitely much more of a focus and an acknowledgement, if you would, that the most economic, the most reliable sources of energy are coming from traditional hydrocarbon sources. So I think that's the key shift that we're seeing is that there's a pivot back towards the business that we are directly engaged in And within that, we do offer the most cost effective and the lowest carbon barrels. So there's a lot of wins there for that. And I think it's really a case of reality is, you know, governs everything. And eventually we all kind of head towards that path. So that's definitely what we're seeing from our customers is that, They're perhaps not spending more money overall in the name of capital discipline, but they're pivoting back towards the stuff that makes the most sense, which is the business that we are focused on.

Right. Thanks. And related question, does producer M&A and A&D activity, do you see anything particularly either announced or on the horizon that you see as potentially exciting opportunity? It seems we're kind of in a mode of basin rationalization, but perhaps that's weighted more toward the independence. But even among those, there are quite a few of them that maybe went entirely onshore for a decade or so, but have a legacy of international and offshore operations. So is there anything you've seen in the sort of spate of deals we've seen recently has... interesting to you?

Yeah, I mean, obviously we've seen several consolidations there over the past couple of years. Don't see a tremendous number more on the table, but I'm sure whatever it makes sense, that's going to happen. For the same reasons that we're going through our consolidation, it's all about bringing those costs down and making ourselves more efficient. So it's actually... Not necessarily a bad thing because the industry overall with the nature of these consolidations just becomes more efficient. We become more cost effective and therefore we attract more dollars towards our type of exploration, our type of development. That's very important for us. So I think the consolidation at various sectors in the industry, it just makes sense from that point of view.

Great. Thanks a lot. Thanks, Noel.

Thank you.

At this time, there are no further questions in queue. I will now turn the meeting back to David.

All right. We'd like to thank everyone who participated in our earnings conference today and invite you to follow up with us for any additional inquiries. And with that, we'll close the call.

Thank you. This brings us to the end of today's meeting. We appreciate your time and participation. You may now disconnect.