Q3 2024 Transocean Ltd Earnings Call

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Speaker Change: Good day everyone!

Speaker Change: and welcome to today's third quarter 2020-44 Trans Ocean earnings call.

Speaker Change: At this time, all participants are in need of an only mode.

Speaker Change: 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 the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two.

Speaker Change: Please note this call is being recorded and I will be standing by if you should be didn't you Assistant? It is now my pleasure to turn the conference over to Director of Investor Relations, Alison Johnson.

Alison Johnson: Thank you, Madison. Good morning and welcome to Transitions 3rd Quarter, 2024 earnings conference call.

Alison Johnson: A copy of our press release covering financial results along with supporting statements and schedules, including reconciliation and disclosures regarding non-gaps financial measures, or posted on our website at dbwater.com.

Alison Johnson: Joining me on this morning's call, our Jeremy Thigpen, Chief Executive Officer, Keelan Adamson, President and Chief Operating Officer, Fab Baia, Executive Vice President and Chief Financial Officer, and Roddy McKenzie, Executive Vice President and Chief Commercial Officer.

Alison Johnson: During the course of this call, Trans Ocean Management may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts.

Alison Johnson: Such statements are based upon current expectations and certain assumptions, and therefore are subject to certain risks and uncertainties.

Alison Johnson: Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results. Also, please note that the company undertakes no duty to update or arise for the statements.

Speaker Change: Following Jeremy, Keelan and Dad's repaired comments, we will conduct a question and answer session with our team. During this time, to give more participants and opportunity to speak, please let me yourself to one initial question and one follow-up. Thank you very much, all now, turn the call over to Jeremy.

Jeremy Thigpen: and welcome to our employees, customers and investors in the analyst participating on today's poll.

Jeremy Thigpen: As reported yesterday's earnings release for the third quarter of 2024, the transition delivered adjusted EBDA of $342 million on $948 million of contract-reeling revenues resulting in an adjusted EBDA margin of approximately 36%.

Jeremy Thigpen: During the quarter, our marketing team was once again exceptionally busy, securing new contracts and extensions across the fleet.

Jeremy Thigpen: With these new contracts, our current pipeline of opportunities. 2020-24 is shaping up to be a very strong contracting year for transition, ensuring excellent police utilization for the coming 12-18 months.

Jeremy Thigpen: In the US, couple of Mexico, BP awarded the Deepwater Allis, a one year contract at a rate of $635,000 per day, with no additional services provided under the contract.

Jeremy Thigpen: The contract is expected to commence in the second quarter of 2008, and it includes a one-year option at the same rate, and given our current understanding of the customer's program, we expect that this option will ultimately be exercised.

Jeremy Thigpen: Additionally, the deep water and dictus was awarded two contract extensions that are currently expected to keep the rig working into November of this year. With these extensions, our active fleet is now essentially fully contracted in 2024.

Jeremy Thigpen: Lastly for the Gulf, the Deepwater Conqueror was awarded a 1-year contract at a rate of $530,000 per day, including additional services.

Jeremy Thigpen: This program is expected to commence in October of 2025.

Jeremy Thigpen: In India, we're going to be a part of the Caging 1-6-woke contract that you rate of $410,000 per day, excluding additional services.

Jeremy Thigpen: The program is expected to commence in the second quarter of 2026, and includes multiple options in the 2020-29.

Jeremy Thigpen: Moving to the Harshin Barn of Leight.

Jeremy Thigpen: In Norway, Ecuador exercise its rewell option on the transition Spitzbergon at a current rate of $483,000 per day.

Jeremy Thigpen: Assuming all remaining options are exercise, the current wealth schedule extends through the fourth quarter or two thousand.

Jeremy Thigpen: Equinar also exercises three one-well options on the Trans Ocean Enabler at a current rate of $438,000 per day.

Jeremy Thigpen: The estimated 155 to 150 day extension extends the firm term to the third quarter of 2026.

Jeremy Thigpen: Australia Woodside Exercise 2 options for a total of six additional wells.

Jeremy Thigpen: At a rate of $390,000 per day. The firm period now runs through August of 2021, and with the remaining options, the rig is expected to remain an Australia at the RIT LEAST October of 2020.

Jeremy Thigpen: As I mentioned, the transition fleet has now solidly booked for the vast majority of 2025 and well into 2022. In fact, based on today's backlog, our active fleet utilization for 2025 exceeds 97%. And remains at roughly 86% through the first half of 2022.

Jeremy Thigpen: Through our 23-Fixters Award, it's so far this year. We have steadily eliminated utilization concerns through next year. Successfully avoiding the so-called white space, issues that most of our competitors have discussed over the past several months.

Jeremy Thigpen: We believe that our unique position relative to our peer group results from the following.

Jeremy Thigpen: We own and operate the highest capability fleet in the industry. We consistently deliver safe, reliable, and efficient operations for our customers.

Jeremy Thigpen: and we have a comprehensive understanding of the global market and use this advantage to maximize value creation from our portfolio of high specification assets.

Speaker Change: On my last point before I handed over to Keelan, I'd like to spend some time on asset quality.

Speaker Change: We have gradually but continuously optimized our portfolio of assets since 2014, resulting in a fleet that is technologically differentiated from that of our peers.

Speaker Change: Through the cycles, owning and operating the highest specification rig fleet has consistently to prove it to be the winning strategy.

Speaker Change: As your well-aware, Trans Ocean owned the only two eighth generation older deep water drill sits in the world. The water Atlas and the deep water titan. These rigs are equipped with 1700 short-time hoist and capability and 20,000 PSI well-controlled equipment.

Speaker Change: We also own 8 of the 12, 1400 short-hand real ships.

Speaker Change: Of the remaining four, two are essentially permanently deployed in the end-goland market. One is committed to shell for five years, and one was just awarded a three-year contract with Petra Brass.

Speaker Change: The result of this is that in the medium term we have the only marketable assets in the sought after class.

Speaker Change: As we discussed in previous calls, hookload is important to customers as it characterizes a rig's capability to run longer and heavier casing strings.

Speaker Change: This capability permits our customers to optimize their well-designed. Thereby reducing the number of days required to drill their wells, and if a reservoir performs dynamics allow, facilitate greater well-productiveity due to the preservation of the well-bored amateur.

Speaker Change: As evidenced by our $1.3 billion in recent contract awards, are now $9.3 billion in total backlog, which by the way represents a 7.5% sequential increase from our July 2024 fleet status report.

Speaker Change: and our 2025 contract coverage relative to our peer group. Our portfolio of high specification, older deep water and harsh environment rigs, all else being equal, seems to be clearly preferred by our customers, leading to higher full cycle utilization and enabling us to fix industry leading day rates.

Speaker Change: This has been demonstrated throughout the year by our market leading contracts across the fleet, including for example, the recent award to the Deepwater Conqueror.

Speaker Change: Although the commencement date for this specific program falls within a window during which the fleet utilization of each of our competitors is expected to be below 60%. The rig still commanded a very strong day rate that even when adjusted for additional services is in excess of $500,000 today.

Speaker Change: A clear indicator that our customers recognize and appreciate the value of transitions, assets and services.

Speaker Change: Even in the context of low global flow to fluid utilization, we have continually demonstrated that premium assets attract premium day rates as operators consistently elect to contract rigs that afford them the greatest well-programmed efficiency and flexibility.

Speaker Change: In other words, operators will utilize the most value-adding assets at every point in the cycle. With that, I'll now turn over to Keelan.

Keelan Adamson: Thanks, Jeremy, and good morning, everyone. Our confidence in the longevity of this obstacle is supported by our market studies and other third party analysis, validated by recent contract awards and further confirmed by the discussions and negotiations with our customers.

Keelan Adamson: and just under $500 billion per year for the next several years, Woodmichens IV cast global upstream capex to remain relatively flat.

Keelan Adamson: However, and importantly,

Keelan Adamson: Because the long-term economics of our customers all show a project are so compelling. The share of investment in deep water and ultra-deep water is expected to grow from 12% of that 524% to 15% in 2026.

Keelan Adamson: In addition, per right-bed energy's latest analysis, more than 75% of new projects functioning for each of the major operators is economically viable below $60 a barrel.

Keelan Adamson: Assuch, it should come as no surprise that we are in advanced discussions with numerous customers for projects beginning in 2026 and beyond.

Keelan Adamson: With minimal availability and interactive free over the next 15 months, much of our focus has moved to the market in 2026.

Keelan Adamson: In the Gulf of Mexico, the DePortar Proteus and DePortar Asgard, both 1,400-ton Huclode rigs will conclude their existing contracts in mid-2026.

Keelan Adamson: And as you might expect, we are actively engaged in direct negotiations with customers for work that would commence in immediate continuation of their current contracts.

Keelan Adamson: In Africa and the Mediterranean, we currently expect between 10 and 15 programme, an average duration of about 12 months to commence in 2026.

Keelan Adamson: This demand is driven by development programs in Nigeria and Gola, Ivory Coast and Ghana.

Keelan Adamson: Each of these opportunities also have associated long-term options.

Keelan Adamson: Moving into 2027, we believe more units may be required in the region as programs in Mozambique and the media are expected to commence.

Keelan Adamson: In Brazil, Petra Brassas, pool 3 tender results are expected imminently and we continue to believe they will award 4x, scheduled to begin operations between the end of 2025 and early 2025.

Keelan Adamson: Additionally, the Sapia program is expected to be awarded by the end of the year for up to three rigs, [inaudible]

Keelan Adamson: We also anticipate patch buffs will release another tender by year end.

Keelan Adamson: We think that these developments are well aligned with Petra Brath's strategic plan, which requires 30 rigs to 2030.

Keelan Adamson: Looking now at the high specification harsh environment market, the Norwegian market is currently sold out, but in balance.

Keelan Adamson: That said, we expect rigged demand could-out strip local suppliers early as the fourth quarter.

Keelan Adamson: Accordingly, we are in the early stages of direct negotiations for our rigs that are scheduled to roll off contract in 2026 and 2027.

Keelan Adamson: Additionally, Equinore is currently out to tender for up to two incremental families commencing in this timeframe.

Keelan Adamson: Moving to our operations, we continue to make significant progress with respect to operational discipline and the reliability of our fleet.

Keelan Adamson: In 2022, we started to implement critical operations authorization centers or COAs in Houston and in Stavanger. The COAs are staffed around the club by teams of subject matter experts from our field of steel workforce.

Keelan Adamson: The sure-based teams provide additional verification and assurance as our offshore operations crews perform critical tasks, driving the required discipline to execute our operations safely, efficiently and correctly.

Keelan Adamson: Over the past several years, we have focused on and emphasised procedural discipline in the execution of our operation.

Keelan Adamson: Since we established our COA process and centers, we have delivered a 20% improvement in our operational reliability, benefiting both the customer and transaction.

Keelan Adamson: Simply said, we continue to identify, measure and improve upon those things which are solely within our control, striving to differentiate the service we provide our customers from our peers.

Keelan Adamson: Unfortunately, and not with standing this significant progress, over the past several months we have experienced some unique reliability issues related to our new 20,000 PSI BLPs.

Keelan Adamson: Given the revolutionary nature of this first issue equipment, such reliability issues are not unexpected.

Keelan Adamson: and as we have demonstrated many times before when deploying new enabling technology, the technical strength and capability of transition and our OEM partners will quickly resolve these issues.

Keelan Adamson: This is the primary driver for our uptime performance and revenue efficiency falling slightly year over year.

Keelan Adamson: We will continue to focus on all aspects of our operational execution to best serve our customers, the company and our shareholders.

Speaker Change: on the now-hand call back to Jeremy.

Jeremy Thigpen: Our high quality backlog and a limited near term availability of our active lead, the direct result of our understanding of the market, unique quality of our assets, and our reputation for operational excellence.

Speaker Change: We are proud to be recognized as the leader in offshore drilling and are grateful for the trust our customers' place and us.

Speaker Change: As we consistently stated, our immediate focus is on the efficient conversion of our approximately $9.3 billion dollars a backlog to revenue, and then that revenue to cash.

Speaker Change: With new build cap X largely behind this, we can deploy more free cash to organically deliver the balance sheet and enhance our financial stability. In fact, based on current internal forecasts, we believe we will approach a debt level sufficient to consider shareholder distributions approaching the end of 2021.

Speaker Change: In summary, the outlook for our assets and services remain strong. We have successfully insulated ourselves from near-term utilization concerns as our contracting news to your bridge deaths through the mid-2026 timeframe, when the market is expected to continue its upward trajectory for our high specification rigs.

We are continually encouraged by conversations with our customers for programs well into the future. As these discussions reinforce our confidence that we continue to participate in a sustained upcycle.

And as you are aware, our current backlog provides clear visibility to future free casphos to be used to meaningfully deliver the balance sheet.

Speaker Change: With that, I'll now turn the call of the Fathad to review up an answer results.

Speaker Change: Thank you, Jeremy and good day to everyone.

During today's call, I will briefly recap our third quarter results, provide guidance for the fourth quarter and conclude with our preliminary expectations for the full year 5. As is our practice, we will provide updated and more specific guidance when we report our 2024 results in February of next year.

As disclose an oppressor lease for the third quarter, we reported in net loss attributable to controlling interest of $494 million, or a net loss of the V8 Senceburg Luda Chair.

During the quarter we generated adjusted EBITDA of $342 million in cash flow from operations of approximately $109.4 million.

Positive Unleavened Free Cash Flow of $136 million reflects the $194 million operating cash flow, met a 58 million capital expenditures.

Speaker Change: Capital expenditures for the quarter included $32 million related to the new bill that depot or Rikila with a balance associated with various other projects across the fleet.

Speaker Change: During the third quarter, we delivered contract to drilling revenues of $948 million at an average daily revenue of approximately $407,000.

Speaker Change: Contract rolling revenues are slightly above our guidance, mainly due to extended operations of the deep water and victims, and shorter out of the service durations for the deep water atlas and the Petrobroth 10,000.

These factors were offset by lower than expected fleet revenue efficiency, who largely to downtime caused by the reliability challenges on our new 20K PSI blowout preventers as key ones have highlighted.

Operating in maintenance expense in the third quarter was $563 dollars. This is a Barrowa guidance primarily due to the delay of non-critical and service main infectivities in the active fleet and the favorable resolution of old contingencies.

DNA Expansion III, which was $47 million. This is slightly below our guidance, mainly due to delays in a provision of professional and IT related services, which are currently expected to occur in the fourth quarter.

Speaker Change: We ended the third quarter with total liquidity of approximately $1.4 dollars. This includes unrestricted cash and cash equivalent to $435 million.

about $355 million of restricted cash, the majority of which is reserved for debt service, and $576 million of capacity from our undrawn revolving credit facility.

I will now provide guidance ranges for the fourth quarter of 2024 and preliminary guidance ranges for the full year 2025. As always, our guidance excludes speculative reactivations and upgrades.

For the fourth quarter we expect contract to drilling revenues to be between $950 million, $970 million.

Based upon an average sweet-wide midpoint revenue efficiency of 96.5% which, as you know, can vary based upon uptime performance, whether another factor is including equipment challenges similar to those I mentioned a moment ago.

This has some of it also includes between $55 million and $60 million of additional services.

Speaker Change: Francis.

Please recall that the additional services and customer reimburseables generally carry low single-digit margins.

We expect fourth quarter O&M expands to be within a range of approximately 585 million dollars.

The quarter-over-quarter increase is primarily due to an increase of in-service maintenance costs due to activity deferred from earlier in the year. And a net increase in out-of-service costs, including those related to contract preparation for the Deployer Indictus and the Translation Barons.

These are partially offset by lower costs or the Petra Brust in 1000 which completed its special periodic survey in the third quarter.

We expect DNA expense for the fourth quarter to fall within a range of approximately $15 million. This quarter of a quarter increases primarily related to the aforementioned delay and professional and IT related services that are now expected in the fourth quarter.

Net Interest Expansives forecast to be approximately $144 million for the fourth quarter, comprising interest expense and interest income of about $153 million and $9 million respectively.

Speaker Change: [inaudible]

Speaker Change: Finally, we currently estimate that we should end the year with liquidity in a $1.35 billion area, including the approximately $576 million capacity of our undrawn revolving credit facility.

Moving to the full year 2025, the currently forecast contract drilling revenue to be between $3.85 billion and $4 billion.

The range primarily reflects potential variances in revenue efficiency, assuming approximately 96.5% revenue efficiency at the midpoint, and the limited availability of our active fleet. Our guidance includes between 220 million and 230 million of additional services and

We expect our full year, O&M Extents to the between 2.3 billion and 2.45 billion dollars, and we currently anticipate Gina cost the between $190 million and $200 million.

A preliminary projected liquidity at year end 2025 is between 1.

Scholars, reflecting our revenue and cost guidance and including our Undron revolving credit facility, and restrictive cash of approximately $440 million, most of which is a ZERFER debt service.

This liquidity forecast includes $20,25 KP expectations of approximately $130 million, of which approximately $60 million is related to customer required capital upgrades for upcoming projects and capital spares, and approximately $70 million of sustaining capital investment.

Speaker Change: As a reminder for the terms of accredited agreement, the capacity of a revolving credit facility to $9,510 million from $576 million effective late June 2025.

and again, this is preliminary guidance. The expected provide updated estimates when we report our year-end 2025 results.

Finally, based upon our debt maturity schedule, we expect to reduce debt by a minimum of approximately $1,715 million in 2025, ending the year with gross debt of approximately $6.2 billion.

As we have discussed previously, we will deploy all excess cash to debt repayment in pursuit of reducing our net debt to EBITDA metric to less than 3.5 times. A prerequisite for us to contemplate distributions to shareholders.

Based upon our existing backlog and our visibility to future demand, currently suspect the threshold to the Met in Lake 2026 as Jeremy highlighted in his remarks.

However, to support and potentially accelerate this initial delivering objective, we will remain focused on operational execution and prudent cost control to ensure that we maximize the conversion of backlog to cash.

Speaker Change: This concludes my prepared remarks and I'm now trying to call back to Alison for Q&A.

Thanks, Madison. We're now ready to take questions and as a reminder to the participants, please let me yourself to one initial question and one follow-up question.

Thank you. And at this time, if you would like to ask a question, please press the store and one on your telephone keypad. You may remove yourself from the queue at any time by pressing store in two. And it will pause for a moment to allow questions to queue.

Speaker Change: and we will take our first question from Eddie Kim with Barclays. Please go ahead.

Hi, good morning. Just wanted to ask about...

Eddie Kim: Just a good morning. So what I'd ask about your expectations on the trajectory of day rates for next year, leading edge has been in that kind of high 400s range for about 12, 18 months now. Some exceptions about 500, but for the most part in the high 400s.

Just given the utilization headwinds that your peers are faced with next year, not you guys.

leading edge could maybe drift lower into the mid-400s maybe before ramping up again, 26, just yeah, how do you think about the dear progression from here?

and this is Roddy McKenzie here.

Okay, so just in our average fixture for our 1400 turn class in above in 24 has been like 520. So we're firmly in the 500's for that class of asset.

Our view on where things are if there's a little bit of soft spots here and there.

What we've witnessed is that a lot of these programs that are rigged at all, and they run a little bit longer. We also know there's a lot of direct negotiations that take place that are perhaps not in the public domain, so we use the example of the Invictive Session for our, so we think about them.

Eddie Kim: We didn't really have a contract passed April of this year, but yet the rig is still working right now And then of course we had the announcement with a long-term BP contract So I think there's a lot of stuff that you perhaps don't see My view also is that in terms of day rates for

and set up the 7th gen, premium units that we've got, maybe the 7th gen, commodity units.

There's no reason why they should get substantially.

I think if some of the six-generation or tier two assets are to go idle.

Eddie Kim: Then I think there's a very strong possibility many of them will be said land in fact that's probably tiny for them to retire So as you don't think the active utilization is going to be impacting too much

Speaker Change: and I think for a lot of those 7th gen, do BOP, Riggs, there shouldn't be a substantial differential in dairy. Yep, it is just to add to that. It doesn't impact us at all if you think...

Speaker Change: 250 ton rigs

are all a modern term contracts for the most part, and so we're not going to be really dating then for 2022.

Eddie Kim: and of course the 1400 times and 1700 times where except proven even through the depths of the downturn that would just emerged from that they can secure contracts at premium day rates and so we're not really too concerned about what happens here with course in the next several months in terms of contracting for work.

and 2025. But, you know, we are certainly keeping a close eye on our competitors and it'll be interesting to see which one's favor utilization over maximizing day rates we have no idea how that's going to work.

Now that is, as Roddy said, I think this could be a great opportunity for the industry to kind of purge some of the lower-spec assets they roll up contracted by the people to secure new ones.

Garth, can I make the mix on?

But my follow-up is just on the sideline 7G drillship capacity. There are about 10 that most considerate to be viable, 7G rigged between core stack and strain and new builds of...

Eddie Kim: which you have three of those ten. Thus far only one of those ten has secured a contract most recently that the title action. I think if you asked most people earlier this year they would have expected a little more than that. So just...

I guess looking ahead the next year just give you the life-based concerns.

and the industry faces and just based on the demand that you're seeing.

Speaker Change: How many of the nine remaining signline rigs would you expect to announce?

but contract sometime next year. Are we talking maybe two announcements or does that even seem a little too optimistic, just be somewhat sure what you're saying?

Again, we would take that and think about the city that we have, say, land, we're in no rush to bring them to market.

Speaker Change: In fact, if we look at some of the numbers that were kind of kicked around Jeremy, it might mean like the $500 billion essentially going to be spent every year going forward on upstream investment. If you think about that specifically in deep water,

The current levels of sanctioning are around about $50 billion per year at the moment But in 26 and 27, that's actually expected to double according to the latest Risedbad projections

I just don't think there's any need to push those rigs out right now. I think it would actually be far smarter to wait and target the 26 and 27 timeframe when basically there's twice as many projects are going to be.

and Sanction, does it? And having said that though, I mean, these assets are going to take a year plus to bring out a cold stack. So, you could see, you could see, you could make some time in 2025 for a contract to start in late 26th or even 7th.

But I wouldn't, I mean you said maybe maybe one, two, maybe three. I think that would be probably about it for for 2025 in terms of contracting of coal stack deserts.

Got it, got it, okay, the next sense. Great, thank you both for all that color, I'll turn it back.

Thank you and we will take our next question from A.R. and G.R. with JP Morgan, please go ahead and check.

Speaker Change: Hey Jeremy and team, I wanted to get your broader thoughts on just the overall industry structure that you see at the premium end of the market.

Speaker Change: and obviously there's been some press reports on a consolidation transaction potentially between a transition and seed. It was only if you could maybe just comment broadly around your thoughts on industry consolidation and if you care to comment on some of the press reports that we're reading.

Well, we're not going to comment on pressure reports that are out there based on speculation.

I find that the media and the press, they set their wonderful job of really getting the fact before they print a story

But regardless, I think we have been very consistent in our first consolidation. We think it is healthy for our piece of the industry. We've helped lead that consolidation. Some of our competitors have certainly done that as well. We are in a much, much healthier.

and the industry now, then we were going to go back to 2014, far fewer players in the market, far fewer assets in the market. The industry structure has been much improved over the course of the last eight, nine years, ten years.

and so I think we're in a good place as an industry. We still think there's room for a bit more consolidation in the space and think that would be healthy. They're all kinds of...

Speaker Change: All kind of incremental benefit, all kind of value that can be created through transaction and a combination.

We could take on 10, 15 additional rigs with very little increase to our sorbet support for those rigs. A lot of synergies that can be realized. We're still always looking for us that's going to be around asset quality.

It's going to have to be the right value. And so, I think it's tough to match everything up and get Deal's done in the current environment, where everybody thinks that we're up into the right for the foreseeable future, I think they have a little bit of a pause here over the next several months.

Speaker Change: I think consolidation is still a good thing but even if there isn't any consolidation, I think the industry is in a much healthier place today than it was.

When we started the downturn back in 2014.

Speaker Change: Yeah, great. Just my follow-up on the BOP kind of teething issues. Can you just elaborate on that? Is this just kind of normal type of, you know, kind of commissioning work you do on a new piece of equipment?

Yeah, and it's Keelan here.

I guess it's not nothing really normal when you're talking about it.

That the aspects that have an infant mortality that we're experiencing in somebody's control is pretty standard.

sort of expectations stuff that are the very nature of the technology that we're using the tolerances.

and the Chiefs significantly. And some of the aspects are, can be tested in qualification.

and then from don't really appear until you get into actual operation and see how things work at that time. So we're going back through some qualification testing and to amend some components to be able to...

Speaker Change: to deliver a much more robust reliability than the units going forward. So, not necessarily surprising experience and a list before we're with some of the higher specs 15K, Blue Peas, which delivered in the last cycle and they're very confident that.

and working with our partners going forward. We'll revive these 20K ones very, very quickly. Yeah, I mean, candidly given the...

[inaudible] They had a little sooner than we would have hoped, but honestly it's been a pretty good run given the first issue of equipment. Yeah, that's right, Jeremy.

Thanks for watching.

Thank you and we will take our next question from Scott Gruber with City Group. Please go ahead.

Scott Gruber: Yes, good morning. That was one of the underlying cost inflation embedded in the 25 cost guide. We're just sharing some inflation commentary coming out of Brazil and West Africa. So we're just trying to get a sense of where inflation is running this.

So, it's a good question. And it varies based upon jurisdiction, asset activity to be sure. I mean, what we've observed, I think, in 2024, was inflation that on average comprised some of between 5 and 6 percent, but it really depends upon.

Speaker Change: What it was, rig floor, think of that nature labor. We've assumed that there is a bit of inflation going forward, typically in the sort of 3% at range on average and we're pretty comfortable with it.

Speaker Change: That's kind of where we're gonna end up.

Speaker Change: That's for 2025 and beyond.

and then, just to add to that, it's important to note that in our longer term contracts, we go that into the contract and we pass it through the majority of that inflation through to the customer.

Speaker Change: It's good to know, thank you.

and then just thinking about the incremental demand that could show up in.

in 26, you know, the Nibbi is going to be big area focused. What type of rig, you know, customers discussing utilize it and the development projects offshore in the Nibbi?

I think it's combination of drill-ship ants in me, but I'll let Keelan elaborate on that.

I think it really depends on the aspect of the area of the media and the opportunities that the customers are working to.

in that area, in some cases, a harsh environment semi is preferred for the environmental conditions that can be quite extreme down there. And in other, plus, prior areas, actually, glow ships.

Can survive that, whether adequately it's as you get closer to the South Africa border and you can't get into the more harsh environment areas. So I would say it's a solution that's based on...

Speaker Change: The location of the prospects and also the type of work. If you're in drilling mode, you probably have a lot more tolerance than perhaps in running completion. So later on, a development rig like a semi-submersible.

for the completion phase approach other project would probably be more desired.

I mean, it's simply the old 24-year drill trip is a more efficient drilling machine, but you may have more waiting on weather in certain areas of Namibia. So it's an awesome environment, so it's a more sustainable good stay on location longer. And so that's what our customers have to weigh.

Catch you guys this wonder whether you know we kind of witch direction they were leaning.

Speaker Change: Appreciate the color, I'll turn it back.

Thank you and we will take our next question from David Smith, as Pickering Energy Partners.

Hey congratulations on your successful contracting and premium assets strategy that has been related to you from the light space concerns that your peer is dealing with. It's Rodney, I play the David. I play the David. Nobody asked you to say it, dude. So, thank you. It's a good process.

Speaker Change: Thank you.

I recognize that you're not facing the decision of whether or not to stack rates next year, but giving your historical, stone leadership and reducing excess capacity and task cycle, I just thought it would be valuable to make your perspective on the decision process of whether or not to stack a rig.

Speaker Change: Yeah David, we do this on it.

I would say quarterly but it's more frequent than quarterly.

But I mean, you've seen over the years we have...

Speaker Change: I thought about what is it 60 plus floaters that we have retired or scrapped.

or sold into other purposes over the course of the last decade. And so I think we demonstrated that if we see that the long-term future of a particular asset is not looking very bright, why incur the cost on it? Let's take the rig out of the supply.

I think it'll be interesting to speak for the industry in a little bit for Trans Ocean for us. As we said earlier on the call, the 1700ton rakes the 8th Gen Rakes and the 1400ton rakes, which we call, the 70G perium, I guess.

will certainly continue to work. You may see small gaps just at customer programs don't lie perfectly.

but those rules will continue to work. Our other 1250 10 rigs that are currently active are on longer term contracts. For the most part, Oregon Brazil where we expect them to hope for they to be re-contracted. Once you get to Brazil, you have a pretty good income up position.

and so it's not really a concern for us at the moment.

Speaker Change: But as we start to look around our peer group, obviously a lot of rigs rolling off contract amongst our peers, all of, you know, 1250 tonter even below, some of them are 60 rigs and you've got to wonder about, you know, the demand for some of the lower specification as we, we would.

and I deal upon to the extent that they don't secure contracts immediately following these contracts.

Speaker Change: and the other, they're just in contract with those rigs of Thailand and maybe even scrap.

but that's for our customers to decide. Our approach has always been, what's the next nearest opportunity for this asset? What do we think that they rate will be? If it's a prolonged period of time and it's uncertain, we make that decision pretty quickly to scrap the asset.

I think the strategy for a lot of our competitors on the lower spec assets has been to bring out everything that possibly can come to value from those assets. Just know, run them to the end of the contracts, minimal spend on not fixing the specs of the goal and then when the time comes.

New immediately reduced all of your expense and you know, go idle or probably quickly move them through a time and but the opportunities but it's kind of interesting is you go down that track and that's what happens and not only do you save the cash of not preserving the rigs or paying back in fees.

but by retiring we actually high-gring your fleet as well and high-grade there to be over all so I think everyone benefits from that kind of action.

Speaker Change: Yeah, appreciate the dollar. Yeah, thank you. Thank you.

Speaker Change: I just want to emphasize that it is truly...

Speaker Change: I wouldn't call it a cage fight, but it's pretty close when we sit around and we have these discussions about assets that are available.

Speaker Change: You know, when you trade off optionality, your term optionality, long term optionality, but at the end of the day, scarcity of drilling rigs in general is better for the stability of the industry through the cycles.

I think they are a great playbook. I think the industry will be stronger. You're competitive as far as some pages from that playbook.

If I could do a quick follow up, I'd like to do an opening remark, they commentary about being in.

and maybe being in a position to return cash to shareholders by late 26th, that was interesting. I wanted to ask if there are any specific metrics that you're targeting before getting comfortable shipping some of that cash flow to shareholders versus that reduction.

Well, I think the key metric is the one that I mentioned in our credit facility, which was negotiated a couple of years ago. There are some very specific criteria for a point at which we're going to be.

Speaker Change: I'm in the form of cash or share of purchases.

and the key one where we are able to actually begin to consider as 3.5 turns, net that to EBITDA. So in a hard-cold reality, that is the metric that we hope to achieve is quickly as possible so that we can begin that deliberation.

Beyond that, of course, paying down debt, you know, and we do very much have if you hold a discipline of debt unlike many of our competitors, it's just the consequences of not restructuring during the downturn.

But I think it's leading to a lot of very fruitful conversations internally about costs and things of that nature.

There is a price for having assets as highly utilized as ours, the high specification component and it's all of the, if you will, bells and whistles and things that improve the efficiency and essentially demand for them by our customers.

But it does provide us with, you know, on the positive side, the basis for a very good conversation about where every dollar of cash is deployed.

The benefits of course are paying down debt will include better credit ratings and so forth. And we've always talked about those as an interim measure, achieving a double level, which comes about the same time as the 2.5 turns.

Good, I appreciate the color, that's a correct name.

Speaker Change: Again.

Speaker Change: Thank you and we will take our next question from Kurt Hullid with Benchmark. Please go ahead.

Hey, good morning everybody.

Speaker Change: Thank you.

Speaker Change: Hey, great up, great up to date, really appreciate it.

This may be got one observation which basically give in your contract coverage and everything you said about pricing and how your customers are looking at opportunities out beyond 20.25.

I'm not really sure why you're stocked down 35% year to date but clearly investors are taking the end of cycle has already come but nonetheless I'll get off that soap box and keep it pretty good.

and I think obviously the biggest issue that investors have right now is concerned about what's going to transpire.

Speaker Change: with respect to oil supply demand out beyond 2025 and in that context, they'll already if you will placing bets that oil companies will be scaling back their investment in the deep water programs.

So you referenced a very early on that you've done extensive.

Conversation, Radic, Accent Conversations with your customer base.

Speaker Change: and that's where you kind of predicated your outlook on as we would expect that to be. So what is it that we are missing on this side of the table? But you guys are picking up on in your conversations.

and maybe is there a way that you can help express the conviction that your customers have any outlook that they are willing and to contract the rig for $600,000 a day starting in 2028.

Speaker Change: [inaudible] No, no, no, it's a good question. I certainly get the point. I understand the concern in the broader market about future demand and supply challenges.

Speaker Change: and what I would say is...

Speaker Change: I don't spend a lot of time thinking about that. I pay attention to what our customers are telling us and how they are behaving, how they are acting. And I would say that everything that we are seeing from them demonstrate that they are committed for the long term.

Speaker Change: The Dard Long Term Project, it's not a land opportunity, these take neither longer cycle projects.

You've got to remember now that the Blake even cost for our customers in D-Fotters around $40 a barrel.

and so even if oil prices drop a bit, they're still making some pretty nice returns internally. We've had several customers show us presentations at a $50 a barrel that making a 20% higher R.

So you know, they're doing very well at the moment and I think they're committed to their future program, they do need to replace, reserve the best way to do that is be raw sure. What the street doesn't see is what we see every day. You guys see tenders and maybe you hear, maybe you catch a wind up from direct negotiation.

The fact that our assets are so unique, the 1700-10 assets, the 1400-10 assets, why go at the tender? They're going to come to us. And so those are the conversations that we're having with customers and we are deep in conversations, deep in negotiations on several fronts.

for multiple years out for now. And so all of that gives us confidence. Again, you can't see that, the street can't see that, and that's probably part of what's weighing on the stock. But you know...

I believe we have come through with everything that we have said, maybe to incur on the timing that we necessary to want to make a stretched out a quarter or two.

But we continue to sign contracts at leading edge day rates and continue to keep utilization at near 100% for our active fleet. And because we believe in these conversations that we're having with our customers and with that, I'll turn over to a lot of you who's involved in this every day.

So what I would say is...

is Jeremy described, we all prices are obviously important. We will be honest, we move up and down as a stock with the commodity.

But there's really a threshold by which it would not negatively impact on business.

Speaker Change: So our customers, Jeremy mentioned, are very comfortable moving forward at these developments.

and specifically we are looking at harsh environment and deep water. So the true differential and spend is actually continuing to skew towards deep water because these are much more economical and viable projects.

and Biggest Happened to Take Along the Peter Time.

That's actually a positive for us again from the view of the question, was why do you think things are going to be good in 2027? Well, as we look at our fleet in 27, we already have half of the actively booked, right? So at this point in the cycle where we're well ahead of the game, and these...

Speaker Change: These regular boot-ton projects will be kind of transcendent, the near-term up-and-down, or because of the sanction that 3540 bucks a barrel. I think that's a really important concept for everybody understand is that the nature of what a drilling is long term.

Speaker Change: The value that is unlocked through the deep water drilling is significantly higher than

Practically any other place you could invest in energy, whether it be renewables or other forms of oil and gas, we represent the best IRR, it just so happens to take along the period of time. But yeah, so I think those are the key elements of why this is not just a long cycle, but a kind of...

You would have to see a sustained downturn in economic policies and commodity that crashes rather than, you know,

As we think about where the commodity is today, we're talking about, well, you know, I'll praise that little thought.

It's exactly what it was one year ago, but it was one year prior to that. So we've kind of had this three years stretch that there's been highly constructive all pricing even in the dips.

and making one of those things on the other area to look at is the amount of FIBs and people that have been approved.

The consumable equipment that's being ordered, the trees and the wallheads.

and that's all long lead, that all needs to go well in front and we see that data and that supports the decisions that are being made with awful ad.

and we're feeling up to a connection activity. From where we were a few years ago to what our customers are placing our rigs on as a whole going forward and that increase obviously supports potential future developments as well.

Long answer I guess. No, no, thanks. Thanks for all that color. I really appreciate it.

Thank you and we will take our next question from Brad Drake's Dean with Clarkson Securities. Please go ahead.

and Team will be all well and thank you for taking more questions. So, I wanted to...

is Circle Back a Meet To The.

and MMA questions that were all previously on the top 10th of the time at the count.

and Thomas specifically on everything that's running around in the press. But in your prepared remarks, you did spend quite a lot on the commentary around your fleet quality and your ability to use that quality and the specifications of your rigs to demand.

and Kyle Rape. So I was really wondering, should be...

If you were to participate in M&A at some point, how much should we think about a free quality to look at potential matches for transition? Or would just...

is called the benefit of being larger outweigh that. So any thinking you can give around that would be very helpful for me. Thank you.

Hi, Frederick. Yeah, thank you to the question. There's no acquisition we could make that would be a creative to the quality of our fleet. I mean, that's just true.

No one has 8 generation rigs, no one has 8,400 ton rigs

and so there's nothing we could add that would be necessarily a creator of Lee. For us, there's value obviously you can immediately grow into your balance sheet and solve some issues there. You can acquire some very good marketable assets that are currently hot.

Speaker Change: and some role in off-contracting and ready to be repriced and what we think is available.

With our $9.3 billion backlog and our marketing expertise around the globe, we would have the expertise in the patients.

to place those rigs on the best possible contracts that are in the highest possible return. And so we think there is some value in all of that. Obviously there are synergies with respect to rescue and A reductions, purchasing power. I mean, and I think just improving the overall quality consistency in service that we could provide to our customers.

There are all kinds of potential benefits from a transaction, but from a flea quality sampling itself, there's nothing we could acquire that would actually improve the quality of our fleet. We have the high specification assets, it's not debatable.

But getting hot assets that are good, marketable to 150 ton assets.

that are ready to go on to the next contract is certainly a plus.

and I mean for us to add capacity would require a reactivation of a cold-stecked asset which we have told us is. So more between $75 and $25 million potentially takes at least 12 months to do. So it would enable us to quickly grow and expand our presence and create some more value for our customers and our shareholders.

Speaker Change: The End

Speaker Change: The End

Speaker Change: Thank you, that's very helpful.

Second question, you announced a sale of the development drillers 3 under this cover inspiration earlier. This fall on a think the transaction was supposed to.

Speaker Change: will be completed in the third quarter, and then if those rings are sold and particularly if they're sold or out of drilling.

Work, you know, I think that would be great, great prices etc. So are you able to give us some update on the process around those two rigs and also, you know...

Speaker Change: If you believe they will still continue to drill or if they will be used for other purposes.

Speaker Change: So the assets were...

Solled without restriction on use once they were sold. However, the specification, the unique methods, is this a good deal that the probability of us competing against them in the future is relatively low.

with respect to the timing of the transaction. We're just working with the perspective buyer right now. We indicated in our filing that we expect a transaction, sorry, the transaction to close.

by the end of the year. How to do with the financing elements and things of that nature, but that's all we have as far as updates right now.

Okay, thank you very much. I'm going to thank the Governor for your more questions. Have a good day. Thanks for your continued to.

Thank you and we will take our next question from Greg Lewis with BTIG. Please go ahead.

Greg Lewis: Hey, thank you, and Gamoria, thanks for squeezing me in a lot, lots been covered, I'll try to keep it brief I did want to talk a little bit about Brazil, you did mention the high-spec 10 there that's going to be announced shortly in the in-sapia You kind of alluded to a third one

Less familiar with that one in terms of maybe one that starts up and then just as I think about that, Jeremy, I think you did talk about direct negotiations, you know, as we'd love and we don't need to talk specifically about the making of those, but as we look at rigs.

Greg Lewis: and Brazil rolling off contract in 25. The numbers don't match and it looks like there's going to be a couple of rigs that are idle. I guess two questions there. One is, in the past, I believe Petra Broth has done direct negotiations with rigs that were already on contract and just extending those.

Is that something that...

is still ongoing happening and then I guess it's an international contracting rig. Was I Dolan Brazil? It doesn't seem like...

I don't rig stick around Brazil too long, realistically how much white space could an international contractor have rigged being Brazil before it would mow down.

Yeah, hey, this is Roddy, I'll think that one.

Yeah, so you've got the wrong guitar tender, or already been decided and then you've got like the Sapien and the Paul Freed tender.

Yeah, quite a lot of anticipation about being additional panders to come so I think that was the first call in that you had. The second piece...

is, you know, the Latin English Asians is open to petrol rust particularly on the developed

You'll have a different ownership pattern or like a wider partner base, if you would. So there's a couple of those that could result in dead egg negotiations for extensions.

and again the concept being it's far more efficient from the operator's point of view to extend a rig rather than to bring in a new one. So even to stop a contract, have a pause and then start up again, there's a lot of friction on losses there.

Not only for the contracts, but also for the operators.

Greg Lewis: and the way to take an opportunity to learn that and to do that. We do expect that there will be a little bit of that going on in terms of the regulations. We also think there will be some additional tendered work coming out.

So I think the incumbent fleet and Brazil's going to look pretty good for the most part

Greg Lewis: and then...

You're your last piece about how long would you hang around in Brazil? Typically, there used to be a rule that you had to remove the rig from Brazil. If you were not on the contract, that is no longer a rule, so you can actually hang out in Brazil for a while. So I think that probably depends a lot on...

and the rigs that have some light space is not until you know.

Greg Lewis: Six, nine months from now, maybe longer. So they'll probably going to wait and see what these additional panders look like before making the decision on that. I know what it might.

It would wait as long as it possibly could, but I think you'll see over the next few months the anticipation for the other tenders, the possibility of some direct negotiations and you'll probably see that play out, you know, kind of by the end of the year or first quarter next year.

Speaker Change: Super helpful, thank you very much.

Thanks to you and it appears that we have reached our a lot of time for questions. I will now turn the program back to Alison Johnson.

Thank you, Madison, and thank you everyone for your participation. Paul, we look forward to speaking with you again when we report our fourth quarter, 2024 results. Have a good day.

Speaker Change: Music

Greg Lewis: The End

Greg Lewis: Music

Greg Lewis: Thanks for watching!

Greg Lewis: The

Greg Lewis: The

Greg Lewis: Music

Greg Lewis: [inaudible]

Greg Lewis: Thank you.

Speaker Change: Good day everyone and welcome to today's third quarter, 2024 Trans Ocean earnings call.

At this time, all participants are in an Alistair-only mode.

Speaker Change: 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 the star and one on your telephone keypad. You may withdraw yourself from the queue by pressing star and two.

Please note this call is being recorded and I will be standing by if you should be didn't insistence. It is now my pleasure to turn the conference over to Director of Investor Relations, Alison Johnson.

Alison Johnson: Good morning and welcome to Transitions 3rd Quarter, 2024 earnings conference call.

A copy of our press release covering financial results along with supporting statements and schedules, including reconciliation and disclosures regarding non-gap financial measures, or posted on our website at dvborder.com.

Joining me on this morning's call, our Jeremy Thigpen, Chief Executive Officer, Keelan Adamson, President and Chief Operating Officer, Fab Beta Executive Vice President and Chief Financial Officer, and Roddy McKenzie, Executive Vice President and Chief Commercial Officer.

Speaker Change: During the course of this call, Trans Ocean Management may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts.

Such statements are based upon current expectations and certain assumptions, and therefore are subject to certain risks and uncertainties.

Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward looking statements and for more information regarding certain risks and uncertainties that could impact our future results. Also, please note that the company undertakes no duty to update or arise for looking statements.

and Dad's repair comments. We will conduct a question and answer session with our team. During this time to give more participants an opportunity to speak, please let me yourself to one and a second question and one follow up. Thank you very much all now turn the call over to Jeremy.

Thank you, Alison and welcome to our employees, customers and investors in the analyst participating on today's call.

Jeremy Thigpen: As reported yesterday's earnings release for the third quarter of 2024, the transition delivered adjusted EBDA of $342 million on $948 million of contract-driven revenues. Resulting an adjusted EBDA margin approximately 36%.

During the quarter, our marketing team was once again exceptionally busy, securing new contracts and extensions across the fleet. With these new contracts, our current pipeline of opportunities, 2024 shaping up to be a very strong contracting year for transition, ensuring excellent fleet utilization from the coming 12 to 18 months.

In US Gulf of Mexico, BP awarded the Deepwater Alicing, one year contract at a rate of $635,000 per day. With no additional services provided under the contract.

The contract is expected to commence in the second quarter of 2008, and it includes a one-year option at the same rate, and given our current understanding of the customer's program, we expect that this option will ultimately be exercised.

Jeremy Thigpen: Additionally, the deep water and victims was awarded two contract extensions that are currently expected to keep the rig working into November of this year. With these extensions, our active fleet is now essentially fully contracted in 2024.

Lastly for the Gulf, the Deepwater Conqueror was awarded a 1 year contract at a rate of $530,000 per day, including additional services. This program is expected to commence in October of 2025.

In India, reliant industries awarded the Caging 1-6-Woe Contract that he rate a $410,000 per day, excluding additional services.

The program is expected to commence in the second quarter of 2026 and includes multiple options in the 2020-29.

Moving to the Harshin Barn of Leight.

and Norway, Equinoire exercise at three well-option on the transition Spitzbergon at a current rate of $483,000 per day.

Jeremy Thigpen: Assuming all remaining options are exercise, the current wealth schedule extends through the fourth quarter of 2007.

Equiner also exercised three one-well options on the Trans Ocean in Abler at a current rate of $438,000 per day.

The estimated 155 to 150 day extension extends the firm term into the third quarter of 2026.

and Australia Woodsite exercise two options for a total of six additional wells.

Jeremy Thigpen: At a rate of $390,000 per day. The firm period now runs through August of 2021, and with the remaining options, the rig is expected to remain an Australia at the RIT LEAST October of 2020.

As I mentioned, the transition fleet has now solidly booked for the vast majority of 2025 and well into 2026. In fact, based on today's backlog, our active fleet utilization for 2025 exceeds 97%. And remains at roughly 86% through the first half of 2026.

Through our 23-fifth year's award, we have steadily eliminated utilization concerns through next year, successfully avoiding the so-called white space, issues that most of our competitors have discussed over the past several months.

We believe that our unique position relative to our peer group results from the following.

We own and operate the highest capability fleet in the industry. We consistently deliver safe, reliable, and efficient operations for our customers.

and we have a comprehensive understanding of the global market and use this advantage to maximize value creation from our portfolio of high specification assets.

On my last point before I handed over to Keelan, I'd like to spend some time on asset quality.

We have gradually but continuously optimized our portfolio of assets since 2014, resulting in a fleet that is technologically differentiated from that of our peers.

Through the cycles, owning and operating the highest specification rig fleet has consistently to prove it to be the winning strategy.

Jeremy Thigpen: As your well-aware, Trans Ocean owned the only two eighth generation older-dee-bloater drill sits in the world. The broader Atlas and the Debloater Titan. These rigs are equipped with 1700 short-time hoist and capability and 20,000 PSI well-controlled equipment.

We also own 8 of the 12, 1400 short-tenderer ships.

Of the remaining four, two are essentially permanently deployed in the end-go-in-market. One is committed to shell for five years, and one was just awarded a three-year contract with Petrobras.

The result of this is that in the medium term, we have the only marketable assets in this sought-after class.

As we've discussed in previous calls, hookload is important to customers as it characterizes a rig's capability to run longer and heavier casing strings.

If capability permits our customers to optimize their well-designed, thereby reducing the number of days required to drill their wells, and if reservoir performance dynamics allow, facilitate greater well-productiveity due to the preservation of the well-bored amateur.

As evidence-fire $1.3 billion in recent contract awards, are now $9.3 billion in total backlog, which by the way represents a 7.5% sequential increase from our July 2024 fleet status report.

Jeremy Thigpen: and our 2025 contract coverage relative to our peer group. Our portfolio of high specification, old-ready-border and harsh environment rigs, all else being equal, seems to be clearly preferred by our customers, leading to higher full cycle utilization and enabling us to fix industry leading day rates.

This has been demonstrated throughout the year by our market leading contracts across the fleet, including for example the recent award to the Deepwater Conqueror.

Although the commencement date for this specific program falls within a window during which the fleet utilization of each of our competitors is expected to be below 60%. The rig still commanded a very strong day rate that even when adjusted for additional services is in excess of $500,000 today.

A clear indicator that our customers recognize and appreciate the value of transitions, assets and services.

Even in the context of low global flow to fleet utilization, we have continually demonstrated that premium assets attract premium day rates, as operators consistently elect to contract rigs that afford them the greatest well program efficiency and flexibility.

In other words, operators will utilize the most value-adding assets at every point in the cycle. With that, I'll now turn over to Keelan.

Keelan Adamson: Thanks, Jeremy, and good morning, everyone. Our confidence in the longevity of this obstacle is supported by our market studies and other third party analysis, validated by recent contract awards and further confirmed by the discussions and negotiations with our customers.

Keelan Adamson: and just under $500 billion per year for the next several years, Wood McKenzie forecast global upstream capex to remain relatively flat.

Keelan Adamson: However, and importantly,

Keelan Adamson: because the long-term economics of our customers are sure projects are so compelling.

The share of investment in deep water and ultra deep water is expected to grow from 12% of that 524% to 15% in 2026.

Keelan Adamson: In addition, per right-bed energy's latest analysis, more than 75% of new projects functioning for each of the major operators is economically viable below $60 a barrel.

Keelan Adamson: As such, it should come as no surprise that we are in advanced discussions with numerous customers for projects beginning in 2026 and beyond.

Keelan Adamson: With minimal availability and our active fleet over the next 15 months, much of our focus has moved to the market in 2026.

In the Gulf of Mexico, the De Forta Prodius and De Forta Asgard, both 1,400 ton hookload rigs will conclude their existing contracts in mid-2026.

And as you might expect, we are actively engaged in direct negotiations with customers for work that would commence in immediate continuation of their current contracts.

Keelan Adamson: In Africa and the Mediterranean, we currently expect between 10 and 15 programme, an average duration of about 12 months to commence in 2026.

Keelan Adamson: This demand is driven by development programs in Nigeria and Gola, Ivory Coast and Ghana.

Keelan Adamson: Each of these opportunities also have associated long-term options.

Moving into 2027, we believe more units may be required in the region as programs in Mozambique and the media are expected to commence.

In Brazil, Petra Brassas pool 3 Tender Results are expected imminently and we continue to believe they will award 4X, scheduled to begin operations between the end of 2025 and early 2025.

Keelan Adamson: Additionally, the Sapia Programme is expected to be awarded by the end of the year for up to three rigs, commencing early 2026.

Keelan Adamson: We also anticipate patchbrush will release another tender by year end.

Keelan Adamson: We think that these developments are well aligned with Petrobras with Strategic Plan, which requires 30 rigs through 2030.

Looking now at the high specification harsh environment market, and the wage in market is currently sold out, but in balance.

That said, we expect rig demand could-out strip local suppliers early as the fourth quarter.

Keelan Adamson: Accordingly, we are in the early stages of direct negotiations for our rigs that are scheduled to roll off contract in 2026 and 2027.

Additionally, Equinore is currently out to tender for up to two incremental families commencing in this timeframe.

Moving to our operations, we continue to make significant progress with respect to operational discipline and the reliability of our fleet.

Keelan Adamson: In 2022, we started to implement critical operations authorization centers or COAs in Houston and in the corner. The COAs are staffed around the clock by teams of subject matter experts from our offshore workforce.

The sure-based teams provide additional verification and assurance as our offshore operations crews perform critical tasks, driving the required discipline to execute our operations safely, efficiently and correctly.

Over the past several years we have focused on and emphasised procedural discipline in the execution of our operation.

Keelan Adamson: Since we established our COA process and centers, we have delivered a 20% improvement in our operational reliability, benefiting both the customer and transaction.

Keelan Adamson: Simply said, we continue to identify, measure and improve upon those things which are solely within our control, striving to differentiate the service we provide our customers from our peers.

Keelan Adamson: Unfortunately, and notwithstanding this significant progress, over the past several months we have experienced some unique reliability issues related to our new 20,000 PSI deal piece.

Given the revolutionary nature of this first issue equipment, such reliability issues are not unexpected.

and as we have demonstrated many times before when deploying new enabling technology, the technical strength and capability of transition and our OEM partners will quickly resolve these issues.

This is the primary driver for our uptime performance and revenue efficiency falling slightly year over year.

We will continue to focus on all aspects of our operational execution to best serve our customers, the company and our shareholders.

on the now-hand call back to Jeremy.

Our high quality backlog and a limited near term availability of our active lead, of the wreck result of our understanding of the market, unique quality of our assets, and our reputation for operational excellence.

Keelan Adamson: We are proud to be recognized as the leader in offshore drilling and are grateful for the trust our customers placing us.

As we consistently stated, our immediate focus is on the efficient conversion of our approximately $9.3 billion a backlog to revenue and then that revenue to cash.

With new build cap X largely behind this, we can deploy more free cash to organically deliver the balance sheet and enhance our financial stability. In fact, based on current internal forecasts, we believe we will approach a debt level sufficient to consider shareholder distributions approaching the end of 2022.

Keelan Adamson: In summary, the outlook for our assets and services remain strong. We have successfully insulated ourselves from near-term utilization concerns as our contracting needs to be your bridge desk to the mid-2026 timeframe, when the market is expected to continue its upward trajectory for our high specification rigs.

We are continually encouraged by conversations with our customers for programs well into the future. As these discussions reinforce our confidence that we continue to participate in a sustained upcycle.

And as you are aware, our current backlog provides clear visibility to future free casphos to the used mini-play deliver the balance sheet.

With that, I'll now turn the call of the Fad to review our financial results.

Thank you, Jeremy and good day to everyone.

Speaker Change: During today's call, I will briefly recap our third quarter results, provide guidance for the fourth quarter and conclude with our preliminary expectations for the full year 5. As is our practice, we will provide updated and more specific guidance when we report our 2024 results in February of next year.

As disclose an oppressor lease for the third quarter, we reported in NetWaw's attributable to controlling interest of $494 million or a NetWaw's 58 cents per glute chair.

Speaker Change: During the quarter, we generated adjusted EBITDA of $342 million and cash flow from operations of approximately $109.4 million. Positive, unlovered free cash flow of $136 million reflects the $194 million operating cash flow, net a 58 million of capital expenditures.

Capital expenditures for the quarter included $32 million related to the new bill that the reporter Rakeela, with a balance associated with various other projects across the fleet.

Speaker Change: During the third quarter, we delivered contract to drilling revenues of $948 million at an average daily revenue of approximately $40,000.

Contract ruling revenues are slightly above our guidance, mainly due to extended operations of the deep water and victims, and shorter out of the service durations for the deep water atlas in the Petrobroth 10,000.

Speaker Change: These factors were offset by lower than expected fleet revenue efficiency, who largely to downtime caused by the reliability challenges on our new 20K PSI blowout preventers at Keywinds-I Lighted.

Speaker Change: Operating a maintenance expense in the third quarter was $563. This is a Barrowa guidance primarily due to the delay of non-critical and service main Infectivities in the active fleet and the favorable resolution of old contingencies.

Speaker Change: DNA Expansion A third quarter was $47 million. This is slightly below our guidance, mainly due to delays in the provision of professional and IT related services, which are currently expected to occur in the fourth quarter.

We ended the third quarter with total liquidity of approximately $1.4 dollars. This includes unrestricted cash and cash equivalence of $435 million.

of about $355 million of restricted cash, the majority of which is reserved for debt service, and $576 million of capacity from our undrawn revolving credit facility.

I will now provide guidance ranges for the fourth quarter of 2024 and preliminary guidance ranges for the full year 2025. As always, our guidance excludes speculative reactivations and upgrades.

For the fourth quarter week, expect contract to drilling revenues to be between $950,000, $970,000.

based upon an average sweet-wide midpoint revenue efficiency of 96.5% which, as you know, can vary based upon uptime performance, whether another factor is including equipment challenges similar to those I mentioned a moment ago.

Speaker Change: This has someone also included between $55 million and $60 million of additional services.

Speaker Change: Francis.

Please recall that the additional services and customer reimburseables generally carry low single-digit margins.

Speaker Change: We expect fourth quarter O&M expense to be within a range of approximately 585 million dollars

The quarter-over-quarter increase is primarily due to an increase of in-service maintenance cost due to activity deferred from earlier in the year. And a net increase in out-of-service costs, including those related to contract preparation for the deep water indexes and the transition balance.

He was a partially offset by lower cost or the Petra Brust in 1000, which completed its special periodic survey in the third quarter.

We expect DNA expense for the fourth quarter to fall within a range of approximately $50 million $5 million. This quarter over quarter increases primarily related to the aforementioned delay and professional on IT related services that are now expected in the fourth quarter.

Net Interest Expansives forecast to be approximately $144 million for the fourth quarter, comprising interest expense and interest income of about $153 million and $9 million respectively.

Speaker Change: [inaudible]

Finally, we currently estimate that we should end the year with liquidity in the $1.35 billion area, including the approximately $576 million capacity of our undrawn revolving credit facility.

Speaker Change: Moving to the full year 2025, we currently forecast contract thrilling revenue to be between $3.85 billion and $4 billion.

Speaker Change: The range primarily reflects potential varying season revenue efficiency, assuming approximately 96.5% revenue efficiency at the midpoint and the limited availability of our active fleet.

Speaker Change: By guidance includes between 220 million and 230 million of additional services and we

Speaker Change: We expect our full year, O and I'm expansive of the between 2.3 billion and 2.45 billion dollars, and we currently anticipate Gina Coss of the between $190 million and $200 million.

Our preliminary projected liquidity at year end 2025 is between 1.

Scholars, reflecting our revenue and cost guidance and including our Undron revolving credit facility and restricted cash of approximately $440 million, most of which is our for debt service.

Speaker Change: This liquidity forecast includes $20,25 KP expectations of approximately $130 million of which approximately $60 million is related to customer required capital upgrades for upcoming projects and capital spares, and approximately $70 million of sustaining capital investment.

As reminded for the terms of a credit agreement, the capacity of a revolving credit facility to $9,510 million from $576 million, effective late June 2025.

Speaker Change: and again, this is preliminary guidance. The expect-revide updated estimates when we report our year-end 2025 results.

Speaker Change: Finally, based upon our debt maturity schedule, we expect to reduce debt by a minimum of approximately $1,715 million in 2025, ending the year with gross debt of approximately $6.2 billion.

As we have discussed previously, we will deploy all excess cash to debt repayment in pursuit of reducing our net debt to EBITDA metric to less than 3.5 times. A prerequisite for us to contemplate distributions to shareholders.

Speaker Change: Based upon our existing backlog and our visibility to future demand, currently suspect the threshold to the met in late 2026 as Jeremy highlighted in his remarks.

However, to support and potentially accelerate this initial delivering objective, we will remain focused on operational execution and prudent cost control to ensure that we maximize the conversion of backlog to cash.

This concludes my prepared remarks and I'm now turning the call back to Alison for Q&A.

Thanks, Madison, we're now ready to take questions and as a reminder to the participants, please let me yourself to one initial question and one follow-up question.

Thank you. And at this time of you would like to ask a question, please press the store and one on your telephone keypad. You may remove yourself from the queue at any time by pressing store in queue. And it will pause for a moment to allow questions to queue.

and we will take our first question from Eddie Kim with Barclays. Please go ahead.

Hi, good morning. Just wanted to ask about...

Just a good morning. So, what I'd ask about your expectations on the trajectory of day rates for next year, leading edge has been in that kind of high 400s range for about 12, 18 months now. Some exceptions of about 500, but for the most part in the high 400s.

Just given the utilization headwinds that your peers are faced with next year. Not you guys.

Speaker Change: leading edge could maybe drip lower into the mid-400s maybe before ramping up again, 26th just, yeah, how do you think about the deraille progression from here?

He had it as his buddy, he became a hero.

Speaker Change: Okay, so we're just, I mean, our average fixture for our 1400-ton class in above in 24 has been like 520.

Speaker Change: were firmly in the 500's for that class of asset.

Our view on where things are if there's a little bit of soft spots here and there.

What we've witnessed is that a lot of these programs that are rigged at all and just now they run a little bit longer. We also know there's a lot of direct negotiations that take place that are perhaps not in the public domain. But we use the example of the Invictive Session for us, so we think about them.

We didn't really have a contract passed April of this year but yet the rig is still working right now And then of course we had the the announcement with a long term BP contract so I think there's a lot of stuff that you perhaps don't see

My view also is that in terms of day rates for...

Speaker Change: and set up the 7th gen, premium units that we've got, maybe the 7th gen, come out of the units.

There's no reason why they should get substantially.

I think if some of the six-generation or tier two assets are to go idle.

and then I think there's a very strong possibility many of them will be sideline in fact that's probably time for them to.

Speaker Change: [inaudible]

Speaker Change: 450 ton rigs

and Margaret Turner, Ars are all a modern term contracts for the most part, and so we're not going to be really dating them for 26.

and of course the 1400 times and 1700 times where except proven even through the depths of the downturn that would just emerged from that they can secure contracts at premium day rates and so we're not really too concerned about what happens here with course in the next several months in terms of contracting for work.

Speaker Change: and 2025. But you know, we are certainly keeping a close eye on our competitors and it'll be interesting to see which one's favor utilization over maximizing day rates we have no idea how that goes.

Now that has, as Roddy said, I think this could be a great opportunity for the industry to kind of purge some of the lower-spec assets they roll out contracted by the people to secure new ones.

Speaker Change: God.

Speaker Change: [inaudible]

My follow-up is just on the sidelined 7G drill ship capacity. There are about 10 that most consider to be viable 7G rigs between cold stack and stranded new builds, of which you have three of those 10. Thus far, only one of those 10 has secured a contract, most recently the Tidal Action. I think if you asked most people earlier this year, they would have expected a little more than that. So just, I guess looking ahead to next year, just given the white space concerns.

that the industry faces, and just based on kind of the demand that you're seeing.

Speaker Change: How many of the nine remaining sign line rigs would you expect to announce?

a contract you know sometime next year? Are we talking maybe two announcements or does that even seem a little too optimistic just based on what you're what you're saying?

Speaker Change: Again, when you think about the three that we have sidelined, we're in no rush to bring them to market.

In fact, if we look at some of the numbers that were kind of kicked around, Jeremy had mentioned like there's $500 billion essentially going to be spent every year going forwards on upstream investment. If you think about that specifically in deep water.

Speaker Change: The current levels of sanctioning are around about $50 billion per year at the moment. But in 2026 and 2027, that's actually expected to double according to the latest RISTAD projections.

I just don't think there's any need to push those rigs out right now. I think it would actually be far smarter to wait and, you know, target the 26 and 27 time frame when basically there's twice as many projects are going to be...

sanctioned as it is not. Yeah and having said that though I mean these assets are going to take a year plus to bring out of cold stack so you know you could see decisions made sometime in 2025 for a contract that started in late 26 or 27.

But I wouldn't, I mean, you said maybe one, two, maybe three. I think that would be probably about it for 2025 in terms of contracting of cold-stacked assets.

Got it. Got it, okay. That makes sense. Great, thank you both for all that color. I'll turn it back.

Thank you. And we will take our next question from Arun Jayaram with JP Morgan. Please go ahead.

Arun Jayaram: Hey Jeremy and team, I wanted to get your broader thoughts on just the overall industry structure that you see at the premium end of the market.

And obviously there's been some press reports on a consolidation transaction potentially between TransOcean and Cedars. I was wondering if you could maybe just comment broadly around your thoughts on industry consolidation and if you care to comment on some of the press reports that we're reading.

Well, we're not going to comment on press reports

I find that the media and the press do such a wonderful job of really getting the facts before they print a story. But regardless, I said I think we have been very consistent in our approach to consolidation. We think it is healthy for our piece of the industry. We've helped lead that consolidation. Some of our competitors have certainly done that as well. We are in a much healthier

Peace of the industry now than we were if you go back to 2014 far fewer players in the market far fewer assets in the market The industry structure has been much improved

over the course of the last 8, 9 years, 10 years. And so I think we're in a good place as an industry. We still think there's room for a bit more consolidation in the space and think that would be healthy. There are all kinds of...

All kinds of incremental benefit, all kinds of value that can be created through a transaction and a combination.

You know, we could take on 10, 15 additional rigs with very little increase to our shore-based support for those rigs. A lot of synergies that can be realized. So, you know, we're still always looking, but for us it's going to be around asset quality.

It's going to have to be the right value, and so, you know, I think it's...

I think it's tough to match everything up and get deals done in the current environment where everybody thinks that we're up and to the right for the foreseeable future.

I'll pause here over the next several months, but

I think consolidation is still a good thing, but even if there isn't any consolidation,

when we started the downturn back in 2014.

Speaker Change: Thank you.

Thank you. Thank you.

Speaker Change: Yeah, great. Just my follow-up. On the BOP kind of teething issues, could you maybe just elaborate on that? Is this just kind of normal type of, you know, kind of commissioning work you do on a new piece of equipment?

Keelan Adamson: Yeah, it's Keelan here.

is it normal yeah I guess it's not nothing's really normal when you're talking about

that the aspects that have an infant mortality that we're experiencing in some of these components are pretty standard.

Keelan Adamson: sort of expectations, stuff that, by the very nature of the technology that we're using, the tolerances

Speaker Change: which changed significantly.

and some of the aspects of that can be tested in qualification.

Speaker Change: and Jeremy Thigpen.

Speaker Change: Thank you very much.

Working with our partners going forward, we'll resolve these 20K ones very, very quickly.

Jeremy Thigpen: natures of this technology. The fact that we went an entire year without really any issues at all, and then, you know, we had some piece of the equipment fail a little sooner than we would have hoped, but honestly, it's been a pretty good run, given the first issue equipment. Yes, that's right, Jeremy.

Jeremy Thigpen: Thanks, gentlemen.

and many more. Thank you. Thank you.

Thank you. And we will take our next question from Scott Gruber with Citigroup. Please go ahead.

Yes, good morning.

Dad, what level of underlying cost inflation is embedded in the 25 cost guide? We're just hearing some inflation commentary coming out of Brazil and West Africa. We're just trying to get a sense of where inflation is running these days.

It's a good question. It varies based upon jurisdiction, asset activity, to be sure. I mean, what we've observed, I think, in 2024 was inflation that, on average, comprised somewhere between 5 and 6 percent, but it really depended upon

you know what it was, rig floor, things of that nature, labor. We've assumed that there is a bit of inflation going forward typically in the sort of three percentage range on average and we're pretty comfortable that that's kind of where we're going to end up. That's for 2025 and beyond.

Jeremy Thigpen: Subs by www.zeoranger.co.uk

and many more. Thank you. Thank you.

Got it. I appreciate that, Keller. Just to add to that, just to add to that, it's important to note that in our longer-term contract, we build that into the contract and we pass it through, the majority of that inflation, through to the customer.

Got it. Yeah, no, that's good to know. Thank you. And then just thinking about the incremental demand that could show up in in 26, you know, Namibia is going to be big area focused. What type of rig, you know, are customers discussing utilizing on the development projects offshore in Namibia?

I think it's a combination of drillship and semi, but I'll let Keelan elaborate on that.

Yeah, I think it really depends on the area of Namibia and the opportunity that the customers are working to.

In that area, in some cases, a harsh environment semi is preferred for the environmental conditions that can be quite extreme down there. And in other areas, actually, drill ships.

Jeremy Thigpen: can survive that weather adequately. As you get closer to the South Africa border, you tend to get into the more harsh environment areas. I would say it's a solution that's based on

the location of the prospects.

and also the type of work.

If you're in drilling mode, you probably have a lot more tolerance than perhaps in running completion. So later on, a development rig like a semi-submersible

for the completion phase of a project would probably be more desired.

Jeremy Thigpen: I mean, said simply, the Ultra Deep Water Drill Ship is a more efficient drilling machine, but you may have more waiting on weather in certain areas of Namibia. And so a harsh environment, semi-submersible, could stay on location longer. And so that's where our customers have to wait.

Gotcha, yeah, I was just wondering whether, you know, what kind of, which direction they were leaning.

Appreciate the color. I'll turn it back.

Thank you. And we will take our next question from David Smith of Pickering Energy Partners.

Hey, congratulations on your successful contracting and premium asset strategy that has insulated you from the white space concerns that your peers are dealing with.

Did Roddy ask you to say that, David? Nobody asked me to say it, dude. Thank you. It's impressive.

Speaker Change: Thank you.

I recognize that you're not facing the decision of whether or not to stack rigs next year, but given your historically strong leadership in reducing excess capacity and task cycle, I just thought it would be valuable to get your perspective on the decision process of whether or not to stack a rig.

Yeah, David, we, you know, we redo this on a...

I would say quarterly, but it's more frequent than quarterly. But, I mean, you've seen over the years, we have, I don't know, what is it, 60-plus floaters that we have retired or scrapped?

or sold into other purposes over the course of the last decade. And so I think we've demonstrated that if we see that the long-term future of a particular asset is not looking very bright, why incur the cost on it? Let's take the rig out of the supply chain.

I think it'll be interesting to see, I'll speak for the industry and then a little bit for TransOcean. For us, as we said earlier on the call, the 1700 ton rigs, the 8th gen rigs, and the 1400 ton rigs, which we call 7G Premium, I guess.

Speaker Change: We'll certainly continue to work. You may see small gaps just if customer programs don't line perfectly.

Speaker Change: But for the most part, those rigs will continue to work. Our other 1,250-ton rigs that are currently active are on longer-term contracts, for the most part, or in Brazil, where we expect them, hope for them to be recontracted. Once you get to Brazil, you have a pretty good income of position.

and so it's not really a concern for us at the moment.

but as we start to look around our peer group obviously a lot of rigs rolling off contract amongst our peers all of you know 1,250 ton or even below some of them are 6g rigs and you've got to wonder about you know the demand for some of the lower specification assets we

create an ideal time to the extent that they don't secure contracts and immediately following these contracts.

that their existing contract that, you know, those rigs get sidelined and maybe even scrapped.

But, you know, that's for our customers to decide. Our approach has always been, hey, what's the next nearest opportunity for this asset? What do we think that day rate will be? And if it's a prolonged period of time and it's uncertain, we make the decision pretty quickly to scrap the asset.

Yeah, I think I would add to that that I think the strategy for a lot of our competitors on the lower spec assets has been really to wring out everything they possibly can in terms of value from those assets just now, to run them to the end of the contracts, minimal spend on OPEX and CAPEX as they go and then when the time comes.

You immediately reduce all of your expense and, you know, go idle or probably quickly move them to retirement without the opportunities. But it's kind of interesting as you go down that track and that's what happens, then not only do you save the cash of not preserving the rigs or paying stacking fees.

Speaker Change: But by retiring, you actually high-grade your fleet as well and high-grade the overall fleet. So I think everyone benefits from that kind of action.

Appreciate it, Collar. I think you have a great, sorry.

This gets to industry structure, a question that was asked earlier on.

I wouldn't call it a cage fight, but it's pretty close when we sit around and we have these discussions about assets that are available.

You know, you trade off optionality, near-term optionality, long-term optionality, but at the end of the day, scarcity of drilling rigs in general is better for the stability of the industry through the cycles.

Yeah, absolutely. I think you have a great playbook. I think the industry will be stronger if your competitors borrow some pages from that playbook.

If I could do a quick follow-up, I thought the opening remarks, that commentary about being in...

maybe being in a position to return cash to shareholders by late 26, that was interesting. I wanted to ask if there are any specific metrics that you're targeting before, you know, getting comfortable shipping some of that cash flow to shareholders versus that reduction.

Speaker Change: Well, I think the key metric is the one that I mentioned in our credit facility, which was negotiated a couple of years ago. There are some very specific criteria for a point at which

Thank you for watching. I'm Jeremy Thigpen. I'll see you next time.

Speaker Change: and the key one where we are able to actually begin to consider is 3.5 turns.

and Neta Tevita. So in a hard cold reality, that is the metric that we hope to achieve as quickly as possible so that we can begin that deliberation.

Beyond that, of course, paying down debt, you know, and we do very much have, if you will, the discipline of debt, unlike many of our competitors. It's just the consequence of not restructuring during the downturn.

Speaker Change: But I think it's leading to a lot of very fruitful conversations internally about costs and things of that nature.

Speaker Change: You know, there is a price for having assets as highly utilized as ours are. It's the high specification component and it's all of the, if you will, bells and whistles and things that improve the efficiency and essentially demand for them by our customers.

Speaker Change: But it does provide us with, on the positive side, the basis for a very good conversation about where every dollar of cash is deployed.

The benefits, of course, of paying down debt will include better credit ratings and so forth. And we've always talked about those as sort of an interim measure, achieving that double-double, which comes about the same time as the 2.5 terms.

Speaker Change: I appreciate the call. That's it for me.

Speaker Change: We're good.

Speaker Change: Thank you and we will take our next question from Kurt Halid with Benchmark please go ahead

Kurt Halid: Hey, good morning, everybody.

Kurt Halid: Thank you.

Hey, great update, really appreciate it.

Kurt Halid: I just maybe got one observation which basically given your contract coverage and everything you said about pricing and how your customers are looking at opportunities out beyond 2025

Speaker Change: Not really sure why your stock's down 35% year-to-date, but clearly investors are thinking the end of cycle has already come. But nonetheless, I'll get off that soapbox and get a little bit smarter. Keep preaching, we're good. A little bit smarter.

Kurt Halid: get a little bit smarter about what's going on in the business. So I think obviously the biggest issue that investors have right now is a concern about what's going to transpire.

with respect to, you know, oil supply demand out beyond 2025 and in that context are already, if you will, placing bets that, you know, oil companies will be scaling back their investment in these deepwater programs.

So, you referenced very early on that you've done extensive...

conversations with your customer base.

And that's what you kind of predicated your outlook on, as we would expect that to be. So what is it that we are missing on this side of the table that you guys are picking up on in your conversations?

And maybe, is there a way that you can help express the conviction that your customers have in the outlook that they are willing to contract a rig for $600,000 a day starting in 2028?

Kurt Halid: Yeah, Kurt, that was a long question. Well, any insight you have. It's a good question. I certainly get the point. And I understand the concern in the broader market about...

future demand and supply challenges. What I would say is...

Kurt Halid: I don't spend a lot of time thinking about that. I pay attention to what our customers are telling us and how they are behaving, how they are acting. And I would say that everything that we are seeing from them demonstrates that they are committed for the long term.

These are long-term projects. It's not a land opportunity. These are longer cycle projects.

You've got to remember now that the break-even cost for our customers in deep water is around $40 a barrel.

And so even if oil prices drop a bit, they're still making some pretty nice returns internally. We've had several customers show us, I mean, show us presentations that at $50 a barrel, they're making a 20% IRR. So, you know, they're doing very well at the moment, and I think they're committed to their future programs. They do need to replace reserves. The best way to do that is through offshore.

Speaker Change: What the street doesn't see is what we see every day. You guys see tenders, and maybe you catch wind of some direct negotiation.

The fact that our assets are so unique, the 1700 ton assets, the 1400 ton assets, why go out to tender? I mean, they're going to come to us. And so those are the conversations that we're having with customers. And we are deep in conversations, deep in negotiations on several fronts.

For multiple years out from now and so all of that gives us confidence again You can't see that the street can't see that and that's probably part of the part of what's weighing on the stock But you know

I believe we have come through with everything that we have said. Maybe it didn't occur on the timing that we necessarily wanted. Maybe it stretched out a quarter or two.

But, you know, we continue to sign contracts at leading-edge day rates and continue to keep utilization at near 100% for our active fleet. And it's because we believe in these conversations that we're having with our customers. And with that, I'll turn it over to Roddy, who's involved in this every day.

So what I would say is...

You know, as Jeremy described, the oil price is obviously important, but let's be honest, we move up and down as a stock with the commodity, but there's really a threshold by which it would not negatively impact our business. So our customers, as Jeremy mentioned, are very comfortable moving forward with these developments. And specifically, we're looking at harsh environment and deep water.

The true differential in spend is actually continuing to skew towards deepwater because these are much more economical and viable projects. They just happen to take a longer period of time.

That's actually a positive for us, again, from the view of, you know, your question was why do you think, you know, things are going to be good in 26 and 27?

These rigs are booked on projects that will transcend the near term up and down of oil because they were sanctioned at $35, $40 a barrel. I think that's a really important concept for everybody to understand is that the nature of deep water drilling is long term.

practically any other place you could invest in energy, whether it be renewables or other forms of oil and gas, we represent the best IRR. It just so happens to take a longer period of time. So I think those are the key elements of why this is not just a long cycle, but a kind of

Speaker Change: you would have to see a sustained downturn in economic policies and commodity that crashes rather than ebbs and flows. And the last thing I'll point out is.

As we think about where the commodity is today, you know, we're talking about, well, you know, oil prices are a little soft.

Speaker Change: It's exactly what it was one year ago, which is exactly what it was one year prior to that. So we've kind of had this three-year stretch that there's been highly constructive oil pricing even in the dips.

And maybe one more thing, Kurt, on that. The other area to look at is the amount of SIDs in deep water that have been approved.

Speaker Change: The consumable equipment that's being ordered, the trees and the wellheads.

Speaker Change: That's all long lead. That all needs to go well in front and we see that data and that supports the decisions that are being made. Also add, we're seeing an uptick in exploration activity from where we were a few years ago to what our customers are placing our rigs on as a whole going forward and that increase obviously supports.

Speaker Change: potential future developments as well.

long answer I guess right no no thanks for all that color really appreciate it

Speaker Change: Thank you and we will take our next question from Frederick Steen with Clerks and Securities. Please go ahead.

Speaker Change: and many more. Thank you for watching. I hope you found this video helpful. If you did, please like, share, and subscribe. Thank you for watching. I'll see you in the next video.

Hey Jeremy and team, hope you are all well and thank you for taking my question.

circle back a bit to the

Speaker Change: the M&A questions that were asked previously and obviously have

talk to understand it account comments specifically on everything that's running around in the press. But in your prepared remarks, you did spend quite a lot on, you know, the commentary around your fleet quality and your ability to use that quality and the specifications of your rigs to demand.

higher rates. So I was really wondering, should we?

Speaker Change: If you were to participate in M&A at some point, how much should we think about fleet quality to look at potential matches for Transocean, or would just a...

the benefit of being larger outweigh that. So any thinking you can give around that would be very helpful for me. Thank you.

Hi Frederick, thank you for the question. There's no acquisition we could make that would be accretive to the quality of our fleet. I mean, that's just true.

No one has 8th generation rigs, no one has 8 1,400 ton rigs.

And so there's nothing we could add that would be necessarily accretive to our fleet. For us, there's value obviously. You can immediately grow into your balance sheet and solve some issues there. You can acquire some very good marketable assets that are currently hot and some rolling off contract and ready to be repriced and what we think is a favorable.

Speaker Change: With our 9.3 billion dollar backlog and our marketing expertise around the globe, we would have the expertise and the patience

to place those rigs on the best possible contract to earn the highest possible return. And so we think there is some value in all of that. Obviously, there are synergies with respect to FG&A reductions, purchasing power. I mean, and I think just improving the overall quality and consistency of the service that we can provide to our customers.

Speaker Change: There are all kinds of potential benefits from a transaction. But from a fleet quality standpoint itself, there's nothing we could acquire that would actually improve the quality of our fleet. We have the highest specification assets. It's not debatable.

But, getting hot assets that are good, marketable, 1,250 ton assets

Speaker Change: that are ready to go on to the next contract is certainly a plus.

because I mean for us to add capacity would require a reactivation of a cold-stacked asset which we have told is somewhere between 75 and 125 million dollars potentially and takes at least 12 months to do so it would enable us to quickly grow and expand our presence and create some real value for our customers and our shareholders.

Thank you. That's very helpful. Second question. You announced the sale of the Development Driller 3 and the Discover Inspiration earlier this fall. I think the transaction was supposed to be completed in the third quarter. If those rigs are sold, and particularly if they're sold for out-of-drilling work, I think that would be great. Great prices, etc. Are you able to give us some updates on the process around those two rigs?

Speaker Change: if you believe they will still continue to drill or if they will be used for other purposes.

Speaker Change: Thank you.

sold without restriction on use once they were sold. However, the specification, the uniqueness of the assets gives us a good deal of confidence that the probability of us competing against them in the future is relatively low.

With respect to the timing of the transaction, we're just working with the prospective buyer right now. We indicated in our filing that we expect the transaction to close by the end of the year. It has to do with the financing elements and things of that nature, but that's all we have as far as updates right now.

and Jeremy Thigpen, and the entire team. Thanks so much. Thank you. Have a great day. Take care. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye. Bye.

Speaker Change: Okay, thank you very much. Thanks again for taking our questions. Have a good day. Thanks, Frederick, you too.

Thank you. And we will take our next question from Greg Lewis with BTIG. Please go ahead.

Hey, thank you and good morning and thanks for squeezing me in. A lot's been covered, so I'll try to keep it brief. I did want to talk a little bit about Brazil. You did mention, you know, the four-spec, the high-spec tender that's, you know, I guess going to be announced shortly and CEPIA. You kind of alluded to a third one.

less familiar with that one in terms of maybe when that starts up. And then just as I think about that, Jeremy, I think you did talk about direct negotiations, you know, as we'd look, and we don't need to talk specifically about the Mykonos, but as we look at RIGS.

in Brazil rolling off contract in 25.

The numbers don't match and it looks like there's going to be a couple rigs that that are idle You know, I guess two questions there. One is, you know in the past I believe Petrobras has done direct negotiations With rigs that were already on contract and just extending those Is that something that?

Speaker Change: That that it

is still ongoing, happening. And then I guess if an international contracting rig was idle in Brazil, it doesn't seem like.

Idle rig stick around Brazil too long. Realistically, how much white space could an international contractor rig be in Brazil before it would move out?

Speaker Change: Yeah, hey, this is Roddy, I'll take that one. Yeah, so you've got, you know, the Roncadore tenders have already been decided and then you've got like the SEPI and the Poll 3 tender.

There is quite a lot of anticipation about there being additional tenders to come. So I think that was the first comment that you had.

Speaker Change: direct negotiations is open to Petrobras, particularly on developing

You know, they have a different ownership pattern or like a wider partner base if you would. So there's a couple of those that could result in direct negotiations for extensions.

and again the concept being it's far more efficient from the operator's point of view to extend a rig rather than to bring in a new one so even even to you know stop a contract have a pause and then start up again there's there's a lot of frictional losses there.

not only for the contractor potential but also for the operator so like

picking up services, laying down services, going through inspections, all that kind of stuff. So we do expect that there's going to be a little bit of that going on in terms of direct negotiations. We also think there's going to be some additional tendered work coming out.

So I think the incumbent fleet in Brazil is going to look pretty good for the most part.

And then your last piece about, you know, how long would you hang around in Brazil? You know, typically there used to be a rule that you had to remove the rig from Brazil if you were not on the contract. That is no longer a rule. So you can actually hang out in Brazil for a while. So I think that probably depends a lot on...

The rigs that have some white space, it's not until six, nine months from now, maybe longer. So they're probably gonna wait and see what these additional tenders look like before making a decision on that.

they would wait as long as they possibly could but I think you'll see over the next few months the anticipation for the other tenders, the possibility of some direct negotiations and you'll probably see that play out you know kind of by the end of the year or first quarter next year.

Super helpful, thank you very much.

Speaker Change: Thank you. Bye.

Thank you, Madison, and thank you everyone for your participation. We look forward to speaking with you again when we report our fourth quarter 2024 results. Have a good day.

Speaker Change: This does conclude today's presentation. Thank you for your participation. You may disconnect at any time.