Q4 2023 Transocean Ltd Earnings Call

Operator: Thank you for your patience and holding. We ask that you please continue to stand by. Your conference will begin momentarily. BF-WATCH TV 2021, Clark Jefferson, Jonathan David Mower, Bob Miether, Laurent Stevenson Smith, Larry Spangler, David Heyo, Maybed Lombardi, and Owen www.mustwatch.gov Thanks for watching! Thanks for watching! BF-WATCH TV 2021. Good day, everyone, and welcome to the Q4 2023 Transocean Earnings Call. At this time, all participants are in a listen-only mode.

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Conference will begin momentarily.

[music].

Operator: 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 telephone keypad. You may remove yourself by pressing star two.

Operator: Please note today's call will be recorded, and I'll be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Allison Johnson, Director of Investor Relations. Please go ahead.

Good day, everyone and welcome to the Q4 2023 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.

Allison Johnson: Thank you, Todd. Good morning, and welcome to Transocean's fourth quarter 2023 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, is posted on our website at deepwater.com. Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer; Keelan Adamson, President and Chief Operating Officer; Mark May, Executive Vice President and Chief Financial Officer; and Roddie 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 from those projected.

You May register to ask a question at any time by pressing star one on your telephone keypad.

Maybe for yourself by pressing star two.

Please note today's call will be recorded and I'll be standing by if you should 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 Todd good morning, and welcome to Transocean fourth quarter 2023 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 dotcom.

Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer, Keelan, Adamson, President and Chief Operating Officer, Mark Mey, Executive Vice President and Chief Financial Officer, and Roddie 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.

Allison Johnson: Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact future results. Also, please note that the company undertakes no duty to update or revise such forward-looking statements. Following Jeremy, Kealan, and Mark'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.

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 future results.

Also please note that the company undertakes no duty to update or revise forward looking statements.

Following Jeremy Keelan, and Mark'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 Jeremy.

Jeremy D. Thigpen: I'll now turn the call over to Jeremy. Thank you, Allison, and welcome to our employees, customers, investors, and analysts participating in today's call. As reported in yesterday's earnings release, for the fourth quarter, Transocean delivered adjusted EBITDA of $122 million on $748 million of adjusted contract drilling revenue, resulting in an adjusted EBITDA margin of approximately 16%. For the full year 2023, we delivered adjusted EBITDA of $738 million on approximately $2.9 billion of adjusted contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 26%. As always, Mark will provide a more detailed review of our financial performance during his prepared remarks and provide revised guidance for the year 2024. 2023 was a very productive year for the company. We hit the ground running in January with a number of significant contract announcements that added approximately $880 million in backlog. These included harsh environment and ultra-deep water installations in various jurisdictions around the world.

Thank you Allison and welcome to our employees customers investors and analysts participating on today's call.

As reported in yesterday's earnings release for the fourth quarter Transocean delivered adjusted EBITDA of $122 million on $748 million of adjusted contract drilling revenues.

Results in an adjusted EBITDA margin of approximately 16%.

But the full year of 2023, we delivered adjusted EBITDA of $738 million on approximately $2 9 billion of adjusted contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 26%.

As always Mark will provide a more detailed review of our financial performance during his prepared remarks and provide revised guidance for the year 2024.

2023 was a very productive year for the company we hit the ground running in January with a number of significant contract announcements that added approximately $880 million in backlog.

These included harsh environment and ultra deepwater fixtures in various jurisdictions around the world.

Jeremy D. Thigpen: We also opportunistically refinanced four senior secured notes totaling approximately $1.2 billion, and we raised $525 million from debt investors, secured in part by the Deepwater Titans five-year contract. By timely and opportunistically addressing certain debt maturities, we provided additional comfort to investors about our liquidity position. 2023 also marked the beginning of the widespread transition of our RIGS to higher revenue-generating. Throughout the year, the average daily revenue for our Ultra Deepwater fleet increased from $360,000 per day in the first quarter to $432,000 per day in the fourth quarter. Key contributors to this improvement include the Deepwater Titan, which commenced operations with Chevron in May, joining the Deepwater Atlas as the second of the only two 8th-generation drill ships in the world, both operating in 20,000 psi fields in the U.S. Gulf of Mexico. In addition to the Titan, we continue to add contracts with leading-edge day rates throughout the year, ending 2023 with an incremental $3.2 billion of backlog. Included in this total are two new fixtures added in the fourth quarter.

We also opportunistically refinance for senior secured notes totaling approximately $1 2 billion.

And we raised $525 million from debt investors secured in part by the deepwater tightened five year contract.

By timely and Opportunistically addressing certain debt maturities, we provided additional comfort to investors about our liquidity position.

These transactions were puzzled received by our investors and resulted in the beginning phase of our share price more appropriately reflect reflecting the reality of the improving offshore drilling market.

2023 also marked the beginning of the widespread transition of our rigs higher revenue generating.

Throughout the year the average daily revenue for our ultra deepwater fleet increased from $360000 per day in the first quarter to $432000 per day in the fourth quarter.

Key contributors to this improvement include the deepwater Titan, which commenced operations with Chevron and me joining the deepwater Atlas is the second of the only two eighth generation Drillships in the world both operating in 20000 PSA fields in the U S Gulf of Mexico.

In addition to the tightened we continued to add contracts with leading edge day rates throughout the year, ending 2023, with an incremental $3 $2 billion in backlog.

Included in this total are two new fixtures added in the fourth quarter first we secured a contract for the Transocean Barents with OMB Petro MSA and the Romanian Black sea at a rate of $465000 per day for a minimum of 540 day duration.

Jeremy D. Thigpen: First, we secured a contract for the Transocean Barrens with OMB Petrom S.A. and the Romanian Black Sea at a rate of $465,000 per day for a minimum of 540 days. The contract includes a rate increase to $480,000 per day for each day the rig operates beyond the initial term, including two option periods, plus a fully paid mobilization into the Black Sea. Second, the Deepwater Invictus was awarded a 40-day well in the U.S. Gulf of Mexico with an independent operator at a rate that is undisclosed at the request of the customer. In January this year, we signed a three-well extension in Angola for the Deepwater Ski Roads with Total Energies at a rate of $400,000 per day.

The contract includes a rate increase to $480000 per day for each day. The rig operates beyond the initial term, including two option periods plus a fully paid mobilization into the black sea.

Second the deepwater Invictus was awarded a 40 day well in the U S Gulf of Mexico, with an independent operator at a rate that is undisclosed at the request of the customer.

In January of this year, we signed a three well extension in Angola for the deepwater Skyros with hotel energies at a rate of $400000 per day.

Jeremy D. Thigpen: The estimated 142-day contract extends the recurrent firm term through May of 2025 at a rate that is meaningfully higher than the prior day rate. Despite the strong year of contracting, we recognize that some investors have been concerned by the pace of contract awards over the past few months. In an effort to ease that concern, it's important to note that our customers are increasingly focused on extended duration opportunities with longer lead times to contract commencement. While this tends to result in prolonged contract negotiations, it also demonstrates our customers' confidence in the longevity of this upcycle and their commitment to the offshore market. In short, we remain extremely encouraged about the current and future demand for Transocean's assets and services. With that, I'll ask Keelan to discuss what we are seeing in the offshore drilling markets around the world. Keelan?

The estimated 142 day contract extends the rig current firm term through May of 2025 at a rate that is meaningfully higher than the prior day rate.

Yeah.

Despite the strong year of contracting we recognize that some investors have been concerned by the pace of contract awards over the past few months and.

In an effort to ease that concern it's important to note that our customers are increasingly focused on extended duration opportunities with longer lead times to contract commitment well.

While this tends to result in prolonged contract negotiations. It also demonstrates our customers confidence in the longevity of this up cycle and their commitment to the offshore market.

In short we remain extremely encouraged about the current and future demand for Transocean as assets and services.

With that Alex Keeling to discuss what we're seeing in the offshore drilling markets around the world.

Sheila.

Keelan Adamson: Thanks, Jeremy. And good morning, everyone. To expand on Jeremy's last point, and as a reminder to those listening, in our corporate presentation available on our website, we provide an 18 month look ahead of floater opportunity commencement. This slide also includes a historical perspective. Over the past nine quarters, we have observed the number of tendered rig years increase nearly 90% to 91 rig years. Overlaying this with the number of programs over the same time period, our customers' programs have increased and continue to increase in duration. Now, we look closer at each region.

Thanks, Jeremy and good morning, everyone to expand on Jeremy's last point and as a reminder to those listening in our corporate presentation available on our website. We provide an 18 month look ahead, a floater opportunity Commencements. This slide also includes a historical perspective.

Over the past nine quarters, we have observed the number of tender rig years increased nearly 90% to 91 rig years overall.

Overlaying this with a number of programs over the same time period, our customers programs have increased and continue to increase in duration.

Now looking closer at each region.

Keelan Adamson: Last year in Brazil, Petrobras alone awarded seven rig lines, and we continue to see strong demand from the region with Petrobras and Equinor tendering for long-term programs. Over the next 18 months, we expect the award of 7 more rig lines based on open opportunities, including 5 between Petrobras' Sepia and Roncador tenders, which are expected to be awarded in the second quarter of this year. We anticipate that at least one of the seven rigs will come from outside the region. If this materializes as expected, including rigs currently preparing for and mobilizing to contracts for previously awarded work, the rig count in Brazil will increase from 31 there today to 36 rigs by the end of 2025.

Last year in Brazil, Petrobras alone awarded seven rig lines, and we continued to see strong demand from the region with Petrobras and Ecuador tendering for long term programs.

Over the next 18 months, we expect the award of seven more rig lines based on open opportunities, including five between Petrobras is cepheid and ranke door tenders, which are expected to be awarded in the second quarter of this year.

We anticipate that at least one of the seven rigs will come from outside the region.

If this materializes as expected, including rigs currently preparing for and mobilizing two contracts for previously awarded work the rig count in Brazil will increase from 31, there today to 36 rigs by the end of 2020 five.

Keelan Adamson: The U.S. Gulf of Mexico continues to be a source of steady demand, with several tenders and negotiations ongoing. We expect that most demand requirements over the next 18 months will be met by rigs already in the region and don't currently anticipate adding significant capacity to the area since the introduction of the Atlas, Titan, and Stena Evolution contracts. The U.S. Gulf is shifting from a market characterized by short lead time, short duration opportunities to a longer lead time, longer duration market. Beyond this 18-month horizon, additional demand for long-term work has materialized from several of the major E&P companies as they seek to secure the right high-specification assets for their ongoing development. We continue to be encouraged by demand in West Africa and currently expect that up to 13 programs will commence in the next 18 months. Notably, half of these programs are at least two years in duration.

The U S. Gulf of Mexico continues to be a source of steady demand with several tenders and negotiations ongoing.

We expect that most demand requirements over the next 18 months will be met by rigs already in the region and don't currently anticipate adding significant capacity to the area since the introduction of the Atlas Titan and Stena evolution contracts.

U S. Gulf is shifting from a market characterized by short lead time short duration opportunities to a longer lead time longer duration market.

Beyond this 18 month horizon additional demand for long term work has materialized from several of the major E&P companies as they seek to secure the right high specification assets for their ongoing developments.

We continue to be encouraged by demand in West Africa, and currently expect that up to 13 programs will CMX commence in the next 18 months.

Notably half of these programs are at least two years into duration.

Keelan Adamson: Namibia continues to exhibit significant potential, with recently announced discoveries by Total Energies, Shell, and Galp Energia, and we expect most of the four rigs currently on contract in the country to be extended. In Nigeria, Shell has issued its multi-year tender, and we expect Chevron and Exxon will issue their multi-year rig tenders in the first half of this year. And lastly, in Angola, there are seven rigs presently on contract with operators that include Total Energies, ExxonMobil, and the E&I BP joint venture Azul Energy. We expect that these rigs will remain in the country and will be extended primarily through existing contract options. Moving now to the harsh environment market, local supply of high-spec harsh environment semi-submersibles in Norway is currently fully utilized until the end of 2024, and the majority are largely contracted through 2025.

Namibia continues to exhibit significant potential with recently announced discoveries by total energies shell and Gallup energy, yet and we expect most of the four rigs currently on contracting country to be extended.

In Nigeria shell has issued its multi year tender and we expect Chevron and Exxon will issue their multiyear rig tenders in the first half of this year.

And lastly in Angola, there are seven rigs presently on contract with operators that include total energies exxonmobil and the Eni P. P joint venture Azula energy.

We expect that these rigs will remain in country, and we will be extended primarily through existing contract options.

Moving now to the harsh environment market local supply of high specification harsh environment semi submersibles in Norway is currently fully utilized until the end of 'twenty 'twenty four.

And the majority are largely contracted through 2025.

Keelan Adamson: Day rates, therefore, continue to increase, and recent fixtures have been in the high 400s, a constructive trend. We expect there to be a need for incremental supply beginning the second half of 2025. The outlook in Australia remains strong, with a number of additional programs set to start in 2026.

Day rates, therefore continued to increase and recent fixtures have been in the high four hundreds a constructive trend.

We expect there to be a need for incremental supply beginning the second half of 2020 five.

The outlook in Australia remained strong with a number of additional programs set to start in 2020 six.

Keelan Adamson: Our rigs, the Transocean Endurance and Transocean Equinox, are contracted with options through early 2026 and 2028, respectively, and are strategically well positioned for some of these future opportunities. In addition to the capability of our high-spec fleet, our strong safety and operational performance is highly valued by our customers and positions Transocean well to secure contract opportunities. Flawlessly executing large-scale drilling and completion programs that consist of a wide range of highly complex operations requires a commensurate level of operational discipline. For several years now, we've been acutely focused on improving our processes, tools, and competence as we strive to become a highly reliable organization. In 2023, we completed the implementation of what we call our Global Critical Operations Assurance Center. Located in both our Houston and Stavanger offices, these real-time monitoring centers are staffed 24 hours a day, seven days a week by teams of subject matter experts from our offshore workforce.

Our rigs the Transocean endurance and Transocean equinox are contracted with options through early 2026 and 2028, respectively.

And are strategically well positioned for some of these future opportunities.

In addition to the capability of our high specification fleet, our strong safety and operational performance is highly valued by our customers and position transocean wealth to secure contract opportunities.

Flawlessly executing large scale drilling and completion programs that consist of a wide range of highly complex operations.

Requires a commensurate level of operational discipline.

For several years now we've been acutely focused on improving our processes tools and competence as we strive to become a highly reliable organization.

In 2023, we completed the implementation of what we call our global critical operations assurance centers.

Located in both our Houston and Stavanger offices. These real time monitoring centers are staffed 24 hours a day seven days a week by teams of subject matter experts from our offshore workforce.

Keelan Adamson: Equipped with live footage from our fleet and the ability to communicate directly with our offshore crews in real time, these teams provide an additional level of assurance and verification during the performance of key steps in these critical operations. Since the introduction of this capability, we have seen a significant improvement in our operational reliability, resulting in a company record uptime performance of 97.6% in 2023. In addition to normal day-to-day operations, we took delivery of the Deepwater Aquila, brought our second, eighth-generation drill ship, the Deepwater Titan, into service, and installed the 20k BOP on the Titan sister ship, the Deepwater Aspen. We also completed contract preparation projects and subsequently mobilized six rigs. The development of a three.

Equipped with life footage from our fleet and the ability to communicate directly with our offshore crews in real time.

These teams provide an additional level of assurance and verification.

The performance of key steps in these critical operations.

Since the introduction of this capability, we have seen a significant improvement in our operational reliability, resulting in a company record uptime performance of 97, 6% for 2023.

In addition to normal day to day operations.

We took delivery of the deepwater Aquila.

Brought our second eighth generation drillship, the deepwater Titan into service.

And install the 20 K P. L. P on the tightened sister ship the deepwater Atlas.

We also completed contract preparation projects and subsequently mobilized six rigs.

The development Driller III.

Keelan Adamson: Durabide Deepwater KG2, the Deepwater Orion, Transocean Barrens, Transocean Endurance, and the Transocean Equinox to new programs in different regions with different customers around the world. Additionally, Transocean has onboarded approximately 1,000 new offshore employees in 2023. Despite these operational changes, in 2023, we delivered one of our strongest process and occupational safety performances, beating our annual target for recordable injury rates. And, much more importantly, none of our employees incurred a life-changing injury.

Thereby deepwater K G to the deepwater Orion Transocean, Barents, Transocean endurance, and the Transocean equinox to new programs in different regions with different customers around the world.

Additionally, transocean has on boarded approximately 1000, new offshore employees in 2023.

Despite these operational changes in 2020 three we delivered one of our strongest process and occupational safety performances.

Our annual target for recordable injury rates.

And much more importantly, none of our important employees incurred a life changing injury.

Keelan Adamson: We are very proud of our operational performance and the positive impact it has on our financial results, which ultimately creates value for our shareholders. This operational performance is not by chance; it is the direct result of our relentless drive to improve, our willingness to constantly challenge the status quo, and our holistic approach to optimizing how we deliver superior results for our customers. Innovation is a foundational principle at Transocean, and we continuously invest in technologies to improve the safety, reliability, and efficiency of our operations. As an example, in 2023, we deployed the third robotic riser bolting system in our fleet on deepwater tides. This system automates certain activities during riser operations, significantly reducing the exposure of our rig personnel to moving equipment on the drill floor. We have also continued to advance the automation of drilling control, where repetitive tasks are replaced with machine control sequences.

Okay.

We are very proud of our operational performance and the positive impact it has on our financial results, which ultimately creates value for our shareholders.

This operational performance is not by chance. It is the direct result of our relentless drive to improve our willingness to constantly challenge the status quo and our holistic approach to optimizing how we deliver superior results for our customers.

Innovation is a foundational principle at Transocean and we continuously invest in technologies to improve the safety reliability and efficiency of our operations.

As an example in 2023, we deployed the third robotic riser bolting system in our fleet on the deepwater Titan.

This system automate certain activities during rise Iraq operations significantly reducing the exposure of our rig personnel to make moving equipment on the drill floor.

Okay.

We have also continued to advance the automation of drilling control, where repetitive tasks are replaced with machine control sequences.

Keelan Adamson: This further improves the consistency and predictability of our operation while affording our drillers more time to focus on the well itself. We have also recently agreed to conduct a trial of an automation solution in the West Gulf of Mexico and look forward to expanding this to additional rigs. From an asset perspective, we continue to proactively manage the composition of our fleet with a strategic focus on owning and operating high-specification, ultra-deepwater, and harsh-environment floaters. In the second quarter of last year, we entered into an agreement to sell the Paul B. Lloyd Jr. and the Transocean Leader, effectively exiting the moored fourth generation semi-submersible asset class. The transaction closed last week. In the third quarter, we acquired the outstanding interest in the joint venture company that owns the Deepwater Aquila, which was selected for a three-year contract to work with Petrobras, making it the eighth 1,400-ton rig in our fleet and further strengthening our position in the high-hook load Ulster deepwater drill ship market.

This further improves the consistency and predictability of our operation while affording our drillers more time to focus on the wall itself.

We also recently agreed to conduct a trial of an automation solution and best Gulf of Mexico, and look forward to expanding this two additional rigs.

Okay.

From an asset perspective, we continued to proactively manage the composition of our fleet with our strategic focus on owning and operating high specification ultra deepwater and harsh environment floaters.

In the second quarter last year, we entered into an agreement to sell the Paul B Loyd Junior and the Transocean leader effectively exiting the moored fourth generation semi submersible asset class.

The transaction closed last week.

In the third quarter, we acquired the outstanding interest in the joint venture company that owns the deepwater Aquila, which was selected for a three year contract to work with Petrobras.

Making it the eighth 1400 ton rig in our fleet and further strengthening our position in the high hook load ultra deepwater drillship market.

Keelan Adamson: The Aquila is currently undergoing preparations for its contract in Brazil, which is expected to commence mid-year. As a result of the substantial contract preparation work we have performed and the new build delivery experience we have accumulated over the years, we are confident that when the time comes and we start to reactivate our coal-stacked assets, we will do so safely and efficiently and then transition into operations at the highest level of performance. The number of opportunities that could justify the reactivation of coal-stacked assets continues to grow. As always, we will remain disciplined in these decisions and will only do so with contracts that recover the investment required to reactivate them, plus generate an appropriate return for our shareholders. I'll now hand the call back to Jeremy.

The Aquila is currently undergoing preparations for its contract in Brazil, which is.

<unk> to commence mid year.

As a result of the substantial contract preparation work, we have performed and the Newbuild delivery experience we have accumulated over the years. We are confident that when the time comes and we start to reactivate our cold stack assets, we will do so safely and efficiently and then transition into operations at the <unk>.

Hi, its level of performance.

The number of opportunities that could justify the reactivation of cold stacked assets continues to grow as always we will remain disciplined in these decisions and will only do so to contracts that recover the investment required to reactivate plus.

Plus generate an appropriate return for our shareholders.

I'll now hand, the call back to Jeremy.

Jeremy D. Thigpen: Thanks, Keelan. 2023 will be remembered as a significant year for Transocean. We take great pride in being the sole company among our peer group of publicly traded international offshore drilling contractors to successfully navigate the financial challenges of the downturn, ensuring the preservation of value for our shareholders. Our fleet is largely contracted through 2024, and we will continue to actively seek work to fill any gaps in utilization. Having said that, our $9 billion backlog and superior assets provide us with the confidence and flexibility we need to be selective in the opportunities we pursue, as we constantly endeavor to strike the right balance between utilization and day rate optimization. As previously mentioned, we're encouraged by the longer-term programs we see materialize with start dates well into the future.

Thanks Keelan too.

2023 will be remembered as a significant year for transocean.

Great Pride in being the sole company among our peer group of publicly traded international offshore drilling contract.

Successful navigate the financial challenges of the downturn, ensuring the preservation of value for our shareholders.

Our fleet is largely contracted through 2024, and we will continue to actively seek work to fill any gaps in utilization, having said that our $9 billion backlog and superior assets provide us with the confidence and flexibility we need to be selective in the opportunities we pursued as.

As we constantly endeavor to strike the right balance between utilization and day rate optimization.

As previously mentioned, we're encouraged by the longer term programs, we see materialize with start dates well into the future.

Jeremy D. Thigpen: As we move into 2024 and further into what appears to be a sustained upcycle, our priorities remain. First, converting our industry-leading backlog to cash. We'll do this by maintaining an acute focus on safety and the uptime performance across our fleet, which directly impacts our overall revenue efficiency.

As we move into 2024 and further into what appears to be a sustained upcycle our priorities remain first converting our industry, leading backlog to cash we'll do this by maintaining an acute focus on safety and the uptime performance across our fleet, which directly impacts our overall revenue efficiency.

Jeremy D. Thigpen: Second, to leveraging the balance sheet. Assuming the market materializes as we expect, we will generate significant free cash flow over the next few years. And while we recognize that operating a growing fleet is a competing priority with deleveraging, we will be sure to balance the two in a manner that best serves our shareholders.

Second deleveraging the balance sheet, assuming the market materializes as we expect we will generate significant free cash flow over the next few years and while we recognize that operating a growing fleet is a competing priority with deleveraging will be sure to balance the two in a manner that best serves our shareholders.

Jeremy D. Thigpen: Third and finally, manage the business with the ultimate goal of returning more value to our shareholders, either through share repurchases or dividends. Before I hand the call over to Mark, I would like to thank each member of the Transocean team for their dedication to delivering safe, reliable, and efficient operations for our customers and contributing to our strong income by constantly improving operational and financial performance. You all did a great job in 2023, and I look forward to continuous improvement in 2024. With that, Mark will now discuss our financial results and future outlook. Mark.

Third and finally manage the business with the ultimate goal of returning more value to our shareholders either through share repurchases or dividends.

Before I hand, the call over to Mark I would like to thank each member of the Transocean team for their dedication to delivering safe reliable and efficient operations for our customers.

And contributing to our strong and constantly improving operational and financial performance.

All did a great job in 2023, and I look forward to continuous improvement in 2024.

With that Mark will now discuss our financial results and future outlook Mark.

Mark Mey: Thank you, Jeremy, and good day to all. As Jeremy mentioned in his remarks, we've had a very active year in the tech capital markets in 2023. In addition to the January 2023 refinancing and secured debt issuance discussed in October 2023, we issued $325 million of 8% senior secured notes due 2028. The notes are secured by a deepwater killer to support the purchase and upgrade of the rig. We also executed several liability management transactions during the year.

Thank you Jeremy and good day to all.

As Jamie mentioned in his remarks, we had a very active year.

<unk> capital buckets in 2023.

And at least into the January 23, three refinancing and secured debt issuance. He discussing October 23, we issued $325 million of 8% senior secured notes due 2028.

The notes are secured by people to support the purchase an upgrade of the rig.

We also executed civil liability management transactions during the year.

Mark Mey: These include the retirement of $243 million of outstanding principal of the 5.375 senior secured notes due in May 2023, releasing the collateral rigs Transocean Equinox and Transocean Endurance, and the completion of exchanges with approximately $339 million of previously issued exchangeable bonds with maturities in 2025, 2027, and 2029, mainly for equity, and the repayment of the remaining $49 million of the 0.5% exchangeable bonds at maturity I extend a sincere thank you to the entire Transocean team for your continued efforts as we work to optimize our capital structure. I will now briefly recap our fourth-quarter results, then provide guidance for the first quarter, as well as give an update on expectations for the full year 2024. Lastly, I'll provide an update on our liquidity forecast through the end of 2024. As reported in our press release, which includes additional details on our results, for the fourth quarter of 2023, we reported a net loss attributable to controlling interest of $104 million, or $0.13 per delivered share. After certain adjustments were extended from yesterday's press release, we reported an adjusted net loss of $74 million.

These include the retirement of $243 million outstanding principal with a 5.375 senior secured notes due in May 2023, releasing the collateral rigs transocean equinox and translation endurance.

The completion of exchanges with approximately $339 million of previously issued exchangeable bonds with maturities in 'twenty 'twenty five 'twenty 'twenty, seven and 'twenty 'twenty nine mainly for equity.

And the repayment of the remaining $49 million, but the 0.5 exchangeable bonds.

Maturity in January <unk>.

I extend a sincere thank you to the entire Transocean team for your continued efforts as we work to optimize our capital structure.

I will now briefly recap our fourth quarter results and provide guidance for the first quarter as.

As well as give an update on expectations for the full year 2024.

Lastly, I'll provide an update on our liquidity forecast through the end with trained 24.

As reported in our press release, which includes additional details on our results for the fourth quarter of 2023, we reported net loss attributable to controlling interest was $104 million or.

<unk> 13 cents per diluted share.

After certain adjustments extended in Yesterdays press release, we reported adjusted adjusted net loss of $74 million.

Mark Mey: During the quarter, we generated adjusted EBITDA of $122 million, which translated into cash flow from operations of approximately $98 million. A negative free cash flow of $122 million reflected the capex associated with a deepwater killer, including the final shipyard milestone payment upon taking delivery of the rig from the shipyard. Looking closely at our results, during the fourth quarter, we delivered adjusted contract-driven revenues of approximately $748 million, at an average daily revenue of $408,000 per day. Our reported revenue is below our guidance, primarily due to the late start of Timur and Mekinos, which is now in contract with Petrobras, and lower than anticipated revenue for managed pressure drilling services, mainly for the Deepwater Conqueror, partially offset by higher fleet-wide revenue efficiency Operating and maintenance expense in the fourth quarter was $569 million. This is slightly higher than our guidance, mainly due to certain customs duties, indirect taxes, and litigation costs incurred mostly in South America. General and administrative expenses for the fourth quarter were $50 million.

During the quarter, we generated adjusted EBITDA of $122 million.

Which translated into cash flow from operations of approximately $98 million.

Our negative free cash flow of $122 million restricted the capex associated with the people, who the killer, including the final shipyard milestone payment upon taking delivery of the rig from the shipyard.

Looking closely at our results during the fourth quarter, we delivered adjusted contract drilling revenues of approximately $748 million and average daily revenue of $408000 per day.

Our reported revenue is below our guidance primarily due to the late start people weren't making us which is now on contract with Petrobras.

And lower than anticipated revenue for managed pressure drilling services, mainly for the deepwater conqueror, partially offset by higher Fleetwide Rubin your efficiency.

Operating and maintenance expense in the fourth quarter was $569 million, which is slightly higher than our guidance, mainly due to certain customs duties indirect taxes and litigation costs incurred mostly in South America.

General and administrative expense for the fourth quarter was $50 million. This is below our guidance, primarily due to lower than anticipated professional fees and legal expenses.

Mark Mey: This is below our guidance, primarily due to lower than anticipated professional fees and legal expenses. Turning to the cash flow and balance sheet, and in the fourth quarter, total liquidity was approximately 1.6 billion.

Turning to the cash flow and balance sheet.

We ended the fourth quarter with total liquidity of approximately one point.

Mark Mey: Unrestricted cash and cash equivalents of approximately $762 million, which comprises approximately $198 million of restricted cash for debt service and approximately $600 million for my revolving credit facility. I will now provide financial guidance for our first quarter of 2024 and an update on our expectations for the full year 2024. Our revenue guidance is primarily based on firm contracts, as listed in our Fleet Standards Report, and an average fleet-wide revenue efficiency of 96.5%. For the first quarter of 2024, we expect adjusted contract rolling revenue of approximately $780 million. This quarter-over-quarter increase is largely due to increased activity on the following rigs, including the Deepwater Mykonos, Deepwater Orion, KG2 in Brazil, the Transocean Endurance in Australia, and the Deepwater Invictus in the Gulf of Mexico. This is partially offset by lower activity on the Transocean Barrens, which concluded its contract in the Eastern Mediterranean in February, and the KG1, In addition, the sale of Paul B. Lloyd Jr., which closed last Thursday, resulted in lower revenue of approximately $11 million.

Unrestricted cash and cash equivalents of approximately $762 million, which comprises approximately $198 million of restricted cash for debt service and approximately $600 million from our revolving critical <unk>.

I will now provide financial guidance for our first quarter 2024, an update on our expectations for the full year 2024.

Our revenue guidance is primarily based on firm contracts as listed in our fleet status report.

And in every street wide revenue efficiency of 96, 5%.

For the first quarter of 'twenty 'twenty four we expect adjusted contract drilling revenues were approximately $780 million.

This quarter over quarter increase is largely due to increased activity on the fully rigs, including the deepwater Mykonos people go Ryan K G. Two in Brazil.

Insertion endurance in Australia, and the deepwater invictus in the Gulf of Mexico.

This is partially offset by lower activity on the Transocean Barents, which concluded its contract in the eastern Mediterranean in February.

In the K G. One.

I pray for its next contract in India. In addition, the sale of the Paul B Loyd Junior, which closed last Thursday, which results in lower revenue of approximately $11 million.

We expect first quarter O&M expense to be approximately $545 million.

Mark Mey: We expect first quarter O&M expense to be approximately $545 million. This is less than we reported for the fourth quarter of 2023, relating mainly to reduced activity for Transocean Barons. There were maintenance costs for the operating fleet generally and for the sale of the Paul B. Lloyd Jr. and the aforementioned South American cars incurred in the preceding quarter. This will be partially offset by higher operating costs resulting from more operating days for the depot at Mykonos, for Deepwater Orion and the KG2 in Brazil, and Transocean Endurance in Australia, which commenced their new contracts. We expect GNI expense for the first quarter of $47 million.

This is less than we reported for the fourth quarter of 2020, threep relating mainly to reduce activity with Transocean Barents.

Lower maintenance costs for the operating fleet generally the.

The sale of the Paul B, Loyd Junior and the aforementioned South America costs incurred.

The preceding quarter.

This will be partially offset by higher operating costs, resulting from more operating days for the deepwater mykonos.

The deepwater Orion in the K G two in Brazil.

The Transocean endurance.

Failure, which commenced new contracts.

We expect G&A expense for the first quarter were $47 million.

For the full year 2024, we estimate.

Adjusted contract drilling revenues will be between three six and $3 $75 billion also based on 96, 5% revenue efficiency.

Mark Mey: For the full year 2024, we estimate that our adjusted contractual revenues will be between $3.6 and $3.75 billion, also based on 96.5% revenue efficiency. These expectations are lower than the prelim guidance we provided on the third quarter 2023 earnings call, mainly due to changes in fleet activity. These changes are reflected in our February 14th Fleet Status Report and include the following. Contract commencements for the Deepwater Orion, Transocean Equinox, and Transocean Endurance were delayed due to prolonged mobilization and contract preparation activities.

Expectations are lower than the premium guidance, we provided on the third quarter 2023 earnings call mainly due to changes in feed activity. These changes are affected on February 14th three finished reports and include the following.

Contract commencement of the deepwater Orion transaction equinox, and Transocean endurance were delayed due to prolonged mobilization and contract preparation activities.

No we anticipated revenue from the deepwater Atlas.

A portion of the customer's contract.

Requiring the 15 K P. S I capabilities is running longer than originally anticipated.

As a result, the rig is not yet transitioned to the higher day rate segment of its contract.

Changes in activity on the Transocean Barents versus expectations included in the private customers decision to forgo its option wells and rigs per our contract partially for security reasons in the middle East.

Mark Mey: Lower Anticipated Revenue for the Deepwater Atlas is... A portion of the customer's contract requiring the 15 kpsi capabilities is running longer than originally anticipated. As a result, the rig does not yet transition to the higher day rate segment of its contract. Changes in activity on the Transocean barons versus our expectations, including the prior customer's decision to forego its option wells under the rig's prior contract, partially for security reasons in the Middle East. In line with our prelim guidance, we're anticipating a full year 2024 O&M expense of approximately $2.2 billion and full year G&A expense of approximately $196 million. Excluding any non-cash changes associated with the Fair Value Adjustment or the Bifurcated Exchange Feature embedded in our exchangeable bonds issued in the third quarter of 2022, net interest expense for the first quarter is forecasted to be approximately $131 million. This includes capitalized interest of approximately $7 million.

In line with our prelim guidance, we're anticipating a full year 'twenty 'twenty four O&M expense to be approximately $2 $2 billion and full year G&A expense of approximately $196 million.

Excluding any noncash changes associated with the fair value adjustment with a bifurcated exchange feature embedded in our exchangeable bonds issued in the third quarter of 332 net interest expense for the first quarter is forecasted to be approximately $131 million.

This includes capitalized interest of approximately $7 million.

For the full year, we anticipate net interest expense of approximately $513 million, including capitalized interest of approximately $16 million.

Capital expenditures, including capitalized interest for the first quarter are forecasted to be approximately $120 million.

Including approximately $81 million.

So the preparation of the deepwater killer for its three year contract with Petrobras in Brazil.

Mark Mey: For the full year, we're anticipating net interest expense of approximately $513 million, including capitalized interest of approximately $16 million. Capital expenditures, including capitalized interest, for the first quarter are forecasted to be approximately $120 million, including approximately $81 million for the preparation of Deepwater Aquila for its three-year contract with Petrobras in Brazil. Cash taxes to be paid in the first quarter are expected to be approximately $10 million and approximately $51 million for the full year 2024.

Cash taxes to be paid in the first quarter.

To be approximately $10 million and approximately $51 million for the full year 2024.

I would have expected liquidity in December 'twenty 'twenty four is projected to be approximately $145 billion, reflecting a revenue and cost guidance and including the approximately $600 million.

Capacity of our revolving credit facility and restricted cash of approximately $350 million, which is mainly reserved for that service.

This liquidity forecast includes spring 'twenty, four capex expectations of $242 million, including $134 million related to the deepwater killer.

Mark Mey: Our expected liquidity in December 2024 is projected to be approximately $1.45 billion, reflecting our revenue and cost guidance and including the approximately $600 million capacity of our evolving credit facility and restricted cash of approximately $350 million, which is mainly reserved for our debt servers. This liquidity forecast includes 2024 CapEx expectations of $242 million, including $134 million related to the Deepwater Aquila. As briefly mentioned earlier and discussed in detail in our third quarter, 2023... We had significant contract preparation activities in 2023. In total, we spent more than 800 days across seven rigs preparing for new contracts. In 2024, we only expect approximately half the amount of contract preparation days we had last year. As these WICs continue to commence their respective programs, our focus is on operational education to ensure we maximize the conversion of our backlog to revenue. We could see depressively many subject maturities.

As briefly mentioned earlier and discussed in detail in our third quarter <unk>.

We had significant contract preparation activities in 2023.

In total we spent more than 800 days across seven rigs preparing for new contracts.

24, we only expected approximately half the amount of contract preparation days, we had last year.

As these rigs continue to commence their respective programs our focus is on operational expectation.

Ensure we maximize the conversion about black backlog to revenue.

We continue to proactively manage maturities.

And combined with a $9 billion of contract backlog, we believe the strength and longevity of this up cycle will support our ability to meet our priorities of deliveries that deleveraging the balance sheet.

On returning cash to shareholders.

In this regard we continue to evaluate various liability management opportunities that satisfied our objectives of reducing debt.

Extending the liquidity runway.

Simplifying the senior entity structure of our balance sheet and reducing interest expense.

This concludes my prepared comments Jeremy.

Jeremy.

Thanks Mark.

Before we transition to Q&A I'd like to take a moment to announce our preparation for a transition within our executive team.

As part of our executive succession planning Mark Mey, who has been a key member of this executive team since he joined Transocean in 2015 will soon transition his role of Chief Financial Officer to Bad data, our senior Vice President of corporate Finance and Treasurer.

Mark Mey: And combined with our $9 billion of contract backlog, we believe the strength and longevity of this upcycle will support our ability to meet our priorities of deleveraging the balance sheet and returning cash to shareholders. In this regard, we continue to evaluate various liability management opportunities that satisfy our objectives of reducing debt. Extending the Liquidity Runway by simplifying the signatory structure of our balance sheet and reducing interest expense. This concludes my prepared comments. Jeremy.

Many if not all of our analysts and investors already note that from his many years, leading our investor.

So this move will likely come as no surprise.

Needless to say that is unbelievably prepared for and deserving of this opportunity and I could not be more delighted for him as he assumed the leadership of our finance organization.

Over the next few months I will work with Mark in there to help finalize the succession planning that has been in development for several years and ensure a smooth transition, which we expect will take place during the second quarter of 2024.

Jeremy D. Thigpen: Thanks, Mark. Before we transition to Q&A, I'd like to take a moment to announce our preparation for transition within our executive team. As part of our executive succession planning, Mark Mey, who has been a key member of this executive team since he joined Transocean in 2015, will soon transition his role of Chief Financial Officer to Thad Beda, our Senior Vice President of Corporate Finance and Treasurer.

As we transition and many in the investment community already know Mark has made an incredibly significant contributions to transition success throughout his tenure here.

His leadership strategic thinking and financial discipline have been instrumental in helping guide the company through an unbelievably challenging market downturn, while also preserving and driving significant shareholder value.

Jeremy D. Thigpen: Many, if not all, of our analysts and investors already know that from as many years of leading our investors. So this move will likely come as no surprise. Needless to say, Thad is unbelievably prepared for and deserving of this opportunity, and I could not be more delighted for him as he assumes the leadership of our finance organization. Over the next few months, I will work with Mark and Thad to help finalize the succession plan that has been in development for several years and ensure a smooth transition, which we expect will take place during the second quarter of 2024. As we at Transocean and many in the investment community already know, Mark has made an incredibly significant contribution to Transocean's success throughout his tenure here. His leadership, strategic thinking, and financial discipline have been instrumental in helping guide the company through an unbelievably challenging market downturn, while also preserving and driving significant shareholder value.

From leading multiple timely and opportunistic capital markets and liquidity enhancing transactions to helping to identify and consummate numerous strategic acquisitions joint ventures and divestitures. Mark has played an absolutely critical role in fundamentally transforming transocean into a company that not only survive the downturn that forced all of our primary competitors into bankruptcy but into <unk>.

A company that is better positioned to take advantage of a multiyear up cycle with our streamline cost structure and a fleet of the most desirable and technically capable drilling rigs in the offshore industry.

So before we move forward with the rest of the call I wanted to pause and on behalf of the board of Directors every employee of Transocean and me personally. Thank mark for his dedication his leadership his service and his partnership these past nine years.

I honestly can't thank them enough for what he has done we look forward to continuing to build upon the financial discipline and strong foundation that he helped to create.

Thank you Mark.

Thank you Jeremy reflecting in my three decades in the offshore drilling industry I can say with certainty that while the last almost nine years at transocean they've been some of the most challenging they've also been the most fulfilling and enriching for my career.

Each study I've had the privilege of working alongside an extraordinary team, whose dedication talent and renovation has been nothing short of inspiring.

Jeremy D. Thigpen: From leading multiple timely and opportunistic capital markets and liquidity-enhancing transactions to helping to identify and consummate numerous strategic acquisitions, joint ventures, and divestitures, Mark has played an absolutely critical role in fundamentally transforming Transocean into a company that not only survived the downturn that forced all of our primary competitors into bankruptcy, but is better positioned to take advantage of a multi-year upcycle with a streamlined cost structure and So before we move forward with the rest of the call, I wanted to pause, and on behalf of the Board of Directors, every employee at Transocean, and me personally, thank Mark for his dedication, his leadership, his service, and his partnership these past nine years. I honestly can't thank him enough for what he has done.

To my colleagues at both past and present I extend my deepest gratitude.

Unwavering support collaboration and friendship.

Finally made the work extremely rewarding, but it also contributed significantly to our collective success.

It has been an honor to learn and grow both personally.

And proficiently within this incredible team.

To all stakeholders and partners. Thank you for your trust support and collaboration over the years. It has been a privilege to work alongside you and contribute to our mutual success.

I'm delighted that said Veda with whom I worked closely since 2015 will be elevated as CFO I look forward to working with Jeremy said and the rest of the team to facilitate a smooth transition.

Try approach with a profound sense of gratitude for their opportunities afforded me.

And the relationships formed along the way.

I will always carry with me the utmost respect and admiration for each of you.

Thank you.

Todd we are ready for questions.

Okay.

The floor is now open for your questions. If you would like to ask a question at this time. Please press star one on your telephone keypad.

They remove yourself at any time by pressing star two.

Mark Mey: We look forward to continuing to build upon the financial discipline and strong foundation that he helped to create. Thank you, Mark. Thank you, Jeremy.

As a reminder, we ask that you limit yourself to one initial question and one follow up question.

Our first question will come from Kurt palette with benchmark. Please go ahead.

Hey, good morning, everybody.

Mark Mey: Reflecting on my three decades in the offshore drilling industry, I can say with certainty that while the last almost nine years at Transocean have been some of the most challenging, they've also been the most fulfilling and enriching of my career. Each day, I have had the privilege of working alongside an extraordinary team whose dedication, talent, and motivation have been nothing short of inspiring. To my colleagues, both past and present, I extend my deepest gratitude. Your unwavering support, collaboration, and friendship have not only made the work extremely rewarding, but it has also contributed significantly to our collective success. It has been an honor to learn and grow both personally and professionally within this incredible team.

Good morning, Kurt.

Hey, Mark.

Ben pleasure working with you wish you nothing but the best manufacturer had a tough slog in Tennessee.

<unk> had a fantastic casually.

From my standpoint so.

Good luck and I appreciate everything you've done.

Thanks Kurt.

Absolutely.

Alright, Jeremy.

Looks like we've got some guidance numbers coming down relative to the prior conference call I think market did a decent job filling out some of the.

Pluses and minuses so fine.

Looking at where street consensus numbers are it looks like at least $90 million of the 125 million differential in the guidance on.

The prior guidance coming into the first quarter.

With with some more modest effects kind of going forward. So just in that context.

And my understanding that dynamic where it can be a little bit more choppy in the first half of the year and it's going to be a little bit more smooth sailing in the second half.

Operator: To all stakeholders and partners, thank you for your trust, support, and collaboration over the years. It has been a privilege to work alongside you and contribute to our mutual success. I'm delighted that Thad Vader, with whom I've worked closely since 2015, will be elevated to CFO. I look forward to working with Jeremy Vader and the rest of the team to facilitate a smooth transition, which I approach with a profound sense of gratitude for the opportunities afforded me and the relationships formed along the way. I will always carry with me the utmost respect and admiration for each of you. Thank you. Todd, we're waiting for Chris.

Yes, that's exactly right. If you look at the progress over the year quarter by quarter, we're actually.

We are net income positive are definitely in the third quarter and maybe even the second quarter with the first quarter still be at a net long. So yeah. So it does grow throughout the year as the seven rigs would sure Keith had mentioned.

Having completed the contract prep. So all those costs are now stopped for the rigs that are working and generating revenue. So I would say, it's a pretty big.

Contribution to our bottom line.

Okay, great. Thank you and then.

Operator: The floor is now open to your questions. If you would like to ask a question at this time, please press star 1 on your telephone keypad. You may remove yourself at any time by pressing star 2.

Analyst day back in January.

You guys gave some general indication that even if market rates don't improve from what you currently have in backlog that you still have line of sight to reducing your debt by something along the lines of like $3 billion over the course of the next couple of years. So given the change in your kind of got it here for <unk>.

Kurt Hallead: As a reminder, we ask that you limit yourself to one initial question and one follow-up question. Our first question will come from Kurt Hallead with Benchmark. Please go ahead. Hey, good morning, everybody.

Jeremy D. Thigpen: Morning, Kurt. Hey Mark. It's been a pleasure working with you. I wish you nothing but the best, my friend. You've had a tough slog and done a fantastic job, at least from my standpoint. So good luck and appreciate everything you've done. Thanks, Kurt. All right, Jeremy, looks like we've got some guidance numbers coming down relative to the prior conference call. I think Mark did a decent job here spelling out some of the, you know, pluses and minuses. So if I'm kind of looking at where the street consensus numbers are, it looks like at least 90 million of the 125 million differential in the guidance on the prior guidance is coming in the first quarter with some more modest effects kind of going forward.

24.

How confident are you and still able to reduce that debt load.

Assuming there is no change in market dynamics.

Yeah, I think that's the key part to this question is assuming that the market stays the way it is.

And I think we feel very confident about that I think a couple of years I think what we spoke about was really three years and if you look at our increase in EBITDA. This year versus last year on a projected basis, it's over 60% increase and you can expect but maybe not as much next year, but certainly double digit increases for 'twenty.

Six and 27 and as we mentioned, we do have $9 billion of high day rate contract.

In our backlog, so I think we're pretty well set.

Jeremy D. Thigpen: So just in that context, you know, am I understanding the dynamic where it's going to be a little bit more choppy in the first half of the year, and it's going to be a little bit more smooth sailing in the second half? Yes, Kurt, that's exactly right. If you look at the progress over the year, quarter by quarter, we're actually net income positive definitely in the third quarter, maybe even the second quarter, with the first quarter still being at a net loss.

Certainly through 2006, and maybe even into 2027 and achieving our deleveraging target.

I think I think just to add to that I think something that gets overlooked you heard killings remarks, and the number of rigs that we took delivery of our relocated in the amount of investment we had to put it.

Now these rigs are on longer term contracts and so the cost associated with them are just going to be daily operating costs, which is certainly more than covered by the day rate and where we're putting ourselves in a very very good position and as we also said on the prepared remarks. Most of the negotiations that are taking place right now or are for longer term contracts and so that's that's where you can really.

Jeremy D. Thigpen: So yeah, what grows throughout the year as the seven rigs, which Kieran mentioned, have completed the contract preparation, so all those costs have now stopped for the rigs that are working and are generating revenue. So it's a pretty big contribution to our bottom line. Okay, great.

To get that flow through and start to generate a lot of cash.

That's great. Thanks for that really appreciate it.

Jeremy D. Thigpen: And then, at your analyst day back in January, I think you guys gave some general indication that, even if market rates don't improve from what you currently have in backlog, that you still have a line of sight to reducing your debt by something along the lines of like $3 billion over the course of the next couple of years. So given the change in your kind of guidance here for 2024, how confident are you that you are still able to reduce that debt load? Assuming there's no change in market dynamics? Yeah, I think that's the key part to this question, isn't it?

Thanks Kurt.

Okay.

Thank you. Our next question comes from Fredrik Stene with Clarksons <unk> Securities. Please go ahead.

Hey, Damon.

Mark.

Thank you Ross.

That's all for our discussion somebody ourselves here.

All the best in the future and look forward to working with you as well.

Got it.

Thank you Fredrik.

Sure.

I wanted to touch a bit on the.

First the skyros rates of $400000 per day.

That was announced.

A couple of discussions with investors around the 400, Mark and Bob.

Potentially being at the low end up.

We expect when.

When when the specs of the rig so.

Jeremy D. Thigpen: Assuming that the market stays the way it is, and I think we feel very confident about that. I think a couple years. I think what we spoke about was really three years.

Can you just clarify if that was anything.

Particular on that well, if there's any social price element in it.

I'm, sorry, I missed it or was it all their considerations that made decorate their July Greg for that grateful for that work.

Mark Mey: And if you look at our increase in EBITDA, this year versus last year, on a projected basis, it's over a 60% increase. And you can expect, maybe not as much next year, but certainly double-digit increases for 26 and 27. And as we mentioned, we do have $9 billion of high day rate contracts in our backlog. So I think we're pretty well set. Certainly through 26, and maybe even into 2027, in achieving our deleveraging target.

Yeah, Hey, Frederic this is roddie M I'll take that one.

Yes, so the 400 Kt dairy I mean that was something that it's been in the works for a while so it's kind of.

And older rate, but and.

The truth of the matter for US is that you know.

A reasonably short term extension on that rig you know staying in the jurisdiction that is then doesn't have any changes doesn't have any upgrades to do.

So that was just a bridge to other opportunity shall we say so I mean they.

You know not one but.

Jeremy D. Thigpen: I think just to add to that, I think something that gets overlooked. You heard Keelan's remarks and the number of rigs that we took delivery of are relocated and the amount of investment we had to put in. You know, now these rigs are on longer-term contracts, and so the costs associated with them are just going to be daily operating costs, which are certainly more than covered by the day rate, and so we're putting ourselves in a very, very good position. And as we also said in the prepared remarks, most of the negotiations that are taking place right now are for longer-term contracts, and so that's where you can really start to get that flow through and start to generate a lot of cash. Thanks for that; I really appreciate it.

Certainly.

A decent fixture in terms of just continue to produce the EBITDA that that rig produce season, and and hang on to that steady state operation, Yeah, but yet which is obviously a preferred choice at this stage, yes, I would add to that we are fairly clear line of sight to the next opportunity and so keeping her heart and generating significant cash flow was very important to us.

Yes.

Thanks, Ken Thanks, perfect sense, I think of it like something rational behind it.

Thank you well thank you.

[laughter] idle.

Yeah.

Okay.

Second.

Inspiration on development.

Driller Theres been some idle time on bolstering the kind that you said in the prepared remarks.

Kurt Hallead: Thanks, guys. Thank you. Our next question comes from Frederick Steen with Clarkson Securities. Please go ahead.

The trade off between higher day rates and utilization that you have a short term program the holiday.

Frederick Steen: Hey team, and uh, Mark, I thank you as an analyst as well for our discussions over the years, so I wish you all the best in the future and look forward to working with you as well. Thank you, Frederick. I wanted to touch a bit on the first.

Are you able to share any.

Color on thinking around the future, both near and long term on those rates.

Roddie Mackenzie: Skyros' rate of $400,000 per day. That was announced, and we had a couple of discussions with investors around the 400 mark and potentially being in the low end of what to expect when, when we look at the specs of the rig, so can you just clarify if that was anything, you know, particular about that? Was there any sort of price element? And if there was, I'm sorry to miss it. Or was it other considerations that made the right rate for that rig and for that work? Yeah, hey, Frederick, this is Roddie.

Yeah. So it looks like it is here.

You also have a long term contract with Vale Yep.

Yes.

Yeah, Yeah. So obviously I can't give you the details of the things that we're working on but we are in discussions on several things to add some more time too.

The invictus, but as you know she has that long term contract.

Super solid Dayrates and.

And Mexico coming up so.

That one certainly I think you know stay tuned there'll be there'll be some interesting stuff that comes on that end up in the next few months.

Roddie Mackenzie: I'll take that one. Yeah, so the 400k a day day rate, I mean, that was something that's been in the works for a while. So it's kind of an older rate.

The the on the other rigs.

Roddie Mackenzie: But the truth of matter for us is, you know, a reasonably short-term extension on that rig, staying in the jurisdiction that it's in, doesn't have any changes, doesn't have any upgrades to do. So that was just a bridge to other opportunities, shall we say. So I mean, stay tuned on that one. But certainly a decent fixture in terms of just continuing to produce the EBITDA that that rig produces and, and, and hang on to that steady state operation, which is obviously our preferred choice at this stage. Yeah, I would add to that we have a fairly clear line of sight to the next opportunity, and so keeping her hot and generating significant cash flow was very important to us. Yeah, okay, that makes perfect sense. I figured there was likely something rational behind it.

We've got them embed into several different things we do.

So happens that their inspiration and the D. D. C are amongst our lower specification sixth generation assets.

So we continue to look all that that stuff there are several opportunities for it. So again I can't really give you the details of the things that we're that we're working on but.

We think there's some good things coming that way and you know.

Even if there is a.

Some additional idle time on those rigs you know where we've been very disciplined about that we're certainly not going to go and chase something for the sake of it and if we needed to we would even take them off the market.

But you know as we think about how things are evolving in the market for us today and.

I think that the guys had it rightfully pointed out this big transition towards long term contracts as I sit here and look at the charts that we have I mean.

Jeremy D. Thigpen: Second, the Invictus Inspiration and Development driller. There's been some idle time on those rigs, and as you said in your prepared remarks, there's this trade-off between higher day rates and utilization. You have a short-term program now on Invictus, but are you able to share any color or thinking around the future, both near and long-term, on those rigs? Yes, but I can't give you a long-term contract, but still.

Again, we can't give you the details of it but we're looking at.

Things that are currently in negotiation and if we are proportionately successful on those negotiations.

Then we will be looking at something like 23 25 active rigs we have in the fleet will be contracted through the end of 'twenty five.

It's been a long time since we've been able to say that in that but I think about even longer term and this is kind of to the point that <unk> made in his prepared remarks is the shift that the operators are going towards much longer term as evidenced by the fact that we could be looking at more than half of the fleet.

Roddie Mackenzie: Yeah, yeah. Obviously, I can't give you the details of the things that we're working on, but we are in discussions on several things to add some more time to Invictus. But, as you know, she has that long-term contract at super solid day rates in Mexico coming up.

By the end of this year would be fully booked through the end of 'twenty seven.

Again, it's been a very long time since we've been able to say that kind of stuff. So I.

Roddie Mackenzie: So on that one, certainly, I think, you know, stay tuned; there'll be some more interesting stuff that comes out on that and in the next few months. On the other rigs, you know, we've got them adapted to several different things. We, it just so happens that the inspiration and the DDC are amongst our lower specification, sixth-generation assets.

I think those are extremely important fixtures to happen that sets up real trend that's happening in the market at the moment and of course, that's going to guide us towards very solid EBITDA margins on those rigs because.

As Mark and Jeremy had pointed out we've put a tremendous number of these rigs back to work and we've relocated them. So now where we're looking over the next few years to keep that steady state operation going and make sure we maximize Abbott animal.

Roddie Mackenzie: So we continue to look at all that stuff; there are several opportunities for it. So again, I can't really give you the details of the things that we're working on. But we think there are some good things coming that way. And, you know, even if there is, you know, some additional idle time on those rigs, we're, we've been very disciplined about that; we're certainly not going to go and chase something for the sake of it. And if we needed to, we would even take them off the market.

Perfect.

It seems like.

The stock market.

Currently wrong.

Okay.

<unk>.

Yes far from it for me.

Good observation.

Yes.

Thanks, very much for taking.

My question I have a good day.

Thanks, Patrick.

Thank you. Our next question comes from Eddie Kim with Barclays. Please go ahead.

Hey, good morning, Mark it's been great listening to you from your days at Atwood does.

Roddie Mackenzie: But you know, as we think about how things are evolving in the market for us today, I think that the guys have rightfully pointed out this big transition towards long-term contracts. As I sit here and look at the charts that we have, I mean, again, we can't give you the details of it. But you know, we're looking at things that are currently in negotiation, and if we were proportionately successful in those negotiations, then we'd be looking at something like 23 out of the 25 active rigs we have in the fleet will be contracted through the end of 25. It's been a long time since we were able to say that.

There are a lot of credit for navigating transaction.

Difficult times, so all the best in your future endeavors.

Thanks for that.

Just my first question is on the deepwater Atlas, which is now coming off contract April next year.

As opposed to September this year.

<unk> kind of the reasons for that.

Just wanted to ask about some of the prospects for that rig when it does come off contract next year. We just saw big subsea order for shelf Sparta development in the Gulf of Mexico, which is 20 <unk>. So there's clearly at least one very strong suitor for that rig I would think probably others as well. So just any color there would be great.

Roddie Mackenzie: And when I think about even longer term, and this is kind of to the point that Caelan made in his prepared remarks, the shift that the operators are going towards much longer term is evidenced by the fact that we could be looking at more than half of the fleet by the end of this year being fully booked through the end of 27. Again, it's been a very long time since we've been able to say that kind of stuff. So I think those are extremely important fixtures to happen.

Yeah.

So currently there are four operators that are active in the 20 K market.

And there's a few more that are looking to perhaps expand into that so the opportunities for that rig are very solid.

As you know we can't divulge any details of what we're working on just now but.

We are increasingly confident.

Roddie Mackenzie: That's a real trend that's happening in the market at the moment, and of course, that's going to guide us towards very solid EBITDA margins on those rigs. Because, as Mark and Jeremy pointed out, we've put a tremendous number of these rigs back to work. We've relocated them.

That there'll be affirmed fixture on the rig very very soon.

And we never talk about letters of intent, but is it safe.

Safe to say that our that the near term future that rig is looking very positive.

And.

In due course, we'll we'll be able to give you more details as things firm up but.

Roddie Mackenzie: So now we're looking over the next few years to keep that steady state operation going and make sure we maximize the EBITDA number. Perfect. So to sum it up, it seems like the stock market is currently wrong, I would say, based on the outlook. Yes, far from it for me to say that, but it's a good observation.

I think the 20 K markets arguably never looked as good so.

We certainly think there's there's plenty of room for.

Her to pick up additional work.

For the foreseeable future so.

I think we will be pleased with the decision to bring her to market and as I say stay tuned and we will make announcements on that soon.

Frederick Steen: Thank you very much for taking my question. Thanks, Frederick. Thank you. Our next question comes from Eddie Kim with Barclays. Please go ahead. Hey, good morning.

Got it got it okay great.

And my follow up is just on hotels recent purchase of a drillship day they.

Eddie Kim: Mark, it's been great listening to you from your days at Atwood, and you deserve a lot of credit for navigating Transocean through a very difficult time. So all the best. Thanks, Siddiq.

They had a tender out for 10 year contract for a while and clearly decided that to purchase 75% of the rig instead of entering into that 10 year contract, but was that a surprise to you and do you expect we could see a few more rig purchases by operators here or was that likely more of a of a one off case.

Roddie Mackenzie: My first question is on the Deepwater Atlas, which is now coming off contract in April next year, as opposed to September this year, and you highlighted some of the reasons for that. Just wanted to ask about some of the prospects for that rig when it does come off contract next year. We just saw a big subsea order for Shell's SPARTA development in the Gulf of Mexico, which is 20 kpsi. So, there's clearly at least one very strong suitor for that rig, I would think, probably others as well. So, just any color there.

Yeah, I'll take that one I think Kim.

Kind of a unique circumstances, there I think you had two motivated parties.

I think the key messages that we get that is clearly this is like underscores the view to the long term loan.

Roddie Mackenzie: Yeah, currently, there are four operators that are active in the 20k market, and there are a few more that are looking to perhaps expand into that. So the opportunities for that rig are very solid. As you know, we can't divulge any details of what we're working on just now, but we are increasingly confident that there'll be a firm fixture on the rig very, very soon.

Prosperity of this up cycle and if you see operators looking at three.

Three and four and five year contracts, we're very excited by that.

To be <unk>.

Making fixtures for 10 years does this early in the cycle I think is super positive indicator and you know we can't comment on the specifics of the economics of it and everybody has their own drivers but.

Roddie Mackenzie: And, you know, we never talk about letters of intent, but it's safe to say that the near-term future of that rig is looking very positive. And, you know, in due course, we'll be able to give you more details as things firm up. But I think the 20K markets arguably never looked this good.

Certainly we view that as a very positive picture.

In terms of other other fixtures that would be the same I am not sure you would see exactly the same model again, but we.

We do know that there are several very long term contracts that are like that in the market.

Roddie Mackenzie: So we certainly think there's plenty of room for her to pick up additional work for the foreseeable future. So I think we'll be pleased with the decision to bring her to market, and as I say, stay tuned, and we'll make announcements on that soon.

They're even as perhaps another one or two of the 10 year variety to happen, but I think youll see kind of a flurry of fixtures for three four and five years over the next.

Eddie Kim: Okay, great. My follow-up question is just on Total's recent purchase of a drillship. They had a tender out for a 10-year contract for a while, and they clearly decided to purchase 75% of the rig instead of entering into that 10-year contract. Was that a surprise to you? And do you expect we could see a few more rig purchases by operators here? Or was that likely more of a one-off? Yeah, I'll take that one. I think you had some kind of unique circumstances there. I think you had two motivated parties.

Kind of six months selling the first half of this year.

Got it alright, great to hear thank you I'll turn it back.

Thank you. Our next question comes from David Smith, with Pickering Energy Partners. Please go ahead.

Okay. Thank you and good morning, and Mark Good morning divisions on a great run.

It's just an amazing assortment to make it through that downturn without restructuring the balance sheet.

So a lot of lot of hard work and it definitely deserve a break.

[laughter] thanks to.

I just had a housekeeping question.

How should we think about the mobilization time.

Roddie Mackenzie: I think the key messages that we get out of that clearly, this is like underscoring the view to the long term, long prosperity of this upcycle. If you see operators looking at, you know, three and four and five year contracts, we're very excited by that. To be making fixtures for 10 years this early in the cycle is, I think, a super positive indicator. But we can't comment on the specifics of the economics of it.

<unk> for the bank and to the biopsy and.

If you address I'm, sorry, but do you see the potential for that rig to work. This year ahead of the mode.

Okay, David I'll take that one I think in terms of the mobilization period for that rig.

It's largely due to the fact that we will have to take the Derrick down.

In order to get into the into the area and then put it back up again, so that's largely a project.

Roddie Mackenzie: Everybody has their own drivers, but certainly, we viewed that as a very positive fixture. In terms of other fixtures that would be the same, I'm not sure you would see exactly the same model again, but we do know that there are several very long-term contracts that are out there in the market. There may even be another one or two of the 10-year variety to happen, but I think you'll see a flurry of fixtures for three, four, and five years over the next six months, certainly the first half of this year.

And in six months is probably a reasonable timeframe for that sort of work.

In terms of opportunities obviously, we're looking for opportunities.

Upfront roddie can speak to that a little bit and we will reach a certain point in time, though where we we want to commenced that project work to get into the black sea for that work at a certain time frame. So we have a.

Small window here upfront, but I'll, let roddie talk to that.

Eddie Kim: Got it. Great to hear. Thank you. I'll turn it back.

Yeah. So so the black Sea project Super interesting for us.

David Christopher Smith: Our next question comes from David Smith with Pickering Energy Partners. Please go ahead. Thank you and good morning.

At the time, you know, we we decided hey look lets take care of the long term opportunity I mean, the dairies base solid.

Mark Mey: And Mark, congratulations on a great run. It's just an amazing achievement to make it through that downturn without restructuring the balance sheet. So a lot of a lot of hard work, and you definitely deserve a break. Thanks, dude.

Customers paying for the mobilization so that's great.

Really kind of keeps the rig busy if you would until pretty much through 'twenty, six and perhaps a little bit in 2007. So look a great long term fixture for us at very constructive day rates and a reasonable cost environment. So we're very pleased about that and also at the time there wasn't option well on.

David Christopher Smith: I just had a housekeeping question, which is, how should we think about the mobilization time for the Barrens into the Black Sea? And if you address them, I'm sorry, but do you see the potential for that rig to work this year ahead of the move? Okay, David. I'll take that one.

The rig at that.

Filled the gap that we have no perfectly. Unfortunately that didn't go ahead, but there are a couple of other opportunities that we're chasing just now so we.

Keelan Adamson: I think in terms of the mobilization period for that rig, it's largely due to the fact that we will have to take Derek down in order to get into the area and then put it back up again. So that's largely a project, and six months is probably a reasonable time frame for that sort of work. In terms of opportunities, obviously, we're looking for opportunities. Up front, Roddie can speak to that a little bit.

We do have a little bit of flexibility on when we started the rig.

And the Black sea, so as Kieran pointed out we will basically make a call at some point, if we can slot in a well or two in.

Between now and the start of the project to take it and then we would be very interested to do that and we do have a couple of bites on that so we'll let you know how that pans out soon.

Keelan Adamson: We'll reach a certain point in time, though, where we want to commence that project work to get into the Black Sea for that work within a certain time frame. So we have a small window here up front, but I'll let Roddie talk about that. Yeah, so the Black Sea project was super interesting for us. At the time, we decided, hey, look, let's take this long-term opportunity. I mean, the day rate is very solid.

Very much appreciate it that's all I got thank you.

Thank you our last question will come from Noel Parks with Tuohy Brothers. Please go ahead.

Hello, Good morning.

Hi, good morning, Thanks, Steven.

Hello.

It didn't.

Just getting some thoughts from.

From you on what Youre seeing.

In the supply chain for components at this stage just over the last quarter do you have a sense that it is improving loosening up.

Roddie Mackenzie: Customers are paying for the mobilization, so that's great and really kind of keeps the rig busy until pretty much through 26 and perhaps a little bit into 27. So look, a great long-term fixture for us at very constructive day rates in a reasonable cost environment, so we're very pleased about that. Also, at the time, there was an option well on the rig that would have filled the gap that we have now perfectly.

Still seeing tightness or the interest rate.

Sort of going to be the new normal going forward given what we have is as far as.

Limited capacity in the marketplace.

Yeah, no. That's a it's killing there I would say from a professional support from our key vendors they've been doing a very very good job of of keeping us appraised of their delivery times.

Roddie Mackenzie: Unfortunately, that didn't go ahead, but there are a couple of other opportunities that we're chasing just now. So we do have a little bit of flexibility on when we start the rig in the Black Sea. So, as Kieran pointed out, we'll basically make a call at some point if we can slot in a well or two between now and the start of the project to take it in. And we do have a couple of bites on that, so anyway, we'll let you know how that pans out soon. Very much appreciated. That's all I got.

From their suppliers I would say that our perception is that that has actually improved.

Over the last few months and a lot more predictable in terms of of delivery times, which is typically nearly more important to us at this point in time and the cost inflation hasn't been that significant to that point, it's been more that we've been focused on the lead times needed to get those components.

David Christopher Smith: Thank you. Thank you. Our last question will come from Noel Parks with the Tui Brothers. Please go ahead.

It's improving it's obviously a challenge but.

Noel Parks: Hello, good morning. I'm just interested in getting some thoughts from you on what you're seeing in the supply chain for components at this stage, just over the last quarter. Do you have a sense that it is improving, loosening up, still seeing tightness, or do you anticipate that that's sort of going to be the new normal going forward, given what we have as far as limited capacity in the market? Yeah, no. It's Keelan here.

Working with our partners.

Ensure that we get the components when we need them and we work with them to understand the components that we're going to need so that we're always prepared for that eventuality.

Great and do you have any sense of how to characterize.

How that might be.

Useful either in terms of here.

Contract visibility or.

I don't know if.

So having more confidence about timing.

Keelan Adamson: I would say, from operational support from our e-vendors, they've been doing a very, very good job of keeping us informed of their delivery times from their suppliers. I would say that our perception is that that is actually improved. Over the last few months, and they're a lot more predictable in terms of delivery times, which is typically nearly more important to us at this point in time. The cost of inflation hasn't been that significant to us at that point.

Also helps you in size.

Actual rate negotiations, but any thoughts on that would be great.

No I would say that we carry a lot of capital spares and our fleets that are based on the size of our fleet and the nature of our fleet. We keep we kept good install base available to us to be able to lever for opportunities when we need to.

We have reasonably good visibility to the opportunities that Rodney talks about.

Keelan Adamson: It's been more that we've been focused on the lead times needed to get those components, but it's improving. It's obviously a challenge, but we work with our partners to ensure that we get the components when we need them. And we work with them to understand the components that we're going to need, so that we're always prepared for that eventuality. Great. And do you have any sense of how that might be useful either in terms of your contract visibility or, I don't know if having more confidence about timing also helps you as far as, you know, actual rate negotiations go, but any thoughts on that would be great. No, I would say that we carry a lot of capital spares in our fleet that, based on the size of our fleet and the nature of our fleet, we keep a good installation base available to us to be able to leverage opportunities when we need to.

And when we're looking at the rigs that we are bidding into those jobs.

We understand the work that needs to be done to those and we build in a project plan in terms of addressing the work and any upgrades that are needed.

So to that point.

And we're not we're not really constrained.

From a parts perspective to be able to capitalize on opportunities that are coming.

Great. Thanks, a lot.

Thank you I'll now turn the call back over to Allison Johnson for any additional or closing remarks.

Thank you Todd and thank you everyone for your participation on today's call. We look forward to talking with you again for our first quarter 2024 results have a good day.

Yeah.

This does conclude today's call. We thank you for your participation you may disconnect at any time.

Keelan Adamson: We have reasonably good visibility into the opportunities that Roddie talks about, and when we're looking at the rigs that we are bidding on for those jobs, clearly, we understand the work that needs to be done to those, and we build in a project plan in terms of addressing the work and any upgrades that are needed. So, to that point, we're not really constrained from a parks perspective to be able to capitalize on opportunities that are coming.

Okay.

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Mhm.

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Okay.

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Noel Parks: Great. Thanks a lot. Thank you. I'll now turn the call back over to Allison Johnson for any additional or closing remarks. Todd, and thank you everyone for your participation on today's call. We look forward to talking with you again about our first quarter of 2024 results. Have a good day. Thank you for your participation. You may disconnect at any time, www.larryweaver.com mm-hmm www.youtube.com.au www.globalonenessproject.org. Thank you for watching and please subscribe to the channel for more videos! BF-WATCH TV 2021, Uptown Funk BF-WATCH TV 2021, Thank you for watching. BF-WATCH TV 2021

Yeah.

Okay.

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Okay.

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