Transocean Ltd.

Company Overview

Business Model: Transocean Ltd. is a leading international provider of offshore contract drilling services for oil and gas wells. Its primary business involves contracting mobile offshore drilling rigs, related equipment, and work crews to drill oil and gas wells. The Company specializes in technically demanding regions of the global offshore drilling business, with a particular focus on ultra-deepwater and harsh environment drilling services. Its fleet consists of drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services worldwide. Revenue generation is primarily on a dayrate basis, with rates varying based on operational optimization, interruptions, or restrictions.

Market Position: Transocean Ltd. operates in a single, global offshore drilling market, deploying its high-specification fleet in geographically dispersed oil and gas exploration and development areas. The Company's fleet, as of February 11, 2025, consists of 34 mobile offshore drilling units: 26 ultra-deepwater floaters and eight harsh environment floaters. The Company views the ultra-deepwater and deepwater market sector as water depths of 4,500 feet or greater, and the harsh environment market sector includes regions challenged by lower temperatures, harsher weather conditions, and water currents. The Company's contract backlog was $8.33 billion as of February 12, 2025, which it believes distinguishes it from the competition. The Company has a long history of technological innovation, including the first dynamically positioned drillship and the first eighth-generation drillships.

Recent Strategic Developments:

• Acquisition: In June 2024, Transocean Ltd. acquired the outstanding 67.0% ownership interest in Orion Holdings (Cayman) Limited, which owned the harsh environment floater Transocean Norge. The noncash consideration had an aggregate fair value of $431 million, including 55.5 million Transocean Ltd. shares and $130 million aggregate principal amount of 8.00% senior notes due February 2027.
• Asset Disposals:
  • In February 2024, the Company sold the harsh environment floaters Paul B. Loyd, Jr. and Transocean Leader, and related assets, for aggregate net cash proceeds of $49 million.
  • In July 2024, the Company sold the ultra-deepwater floater Deepwater Nautilus and related assets for aggregate net cash proceeds of $53 million. A loss of $143 million ($138 million net of tax) was recognized on impairment.
  • In September 2024, the Company executed agreements for the sale of ultra-deepwater floaters Development Driller III and Discoverer Inspiration, and related assets, for aggregate expected net cash proceeds of $343 million. A loss of $629 million ($617 million net of tax) was recognized on impairment. These agreements were canceled in January 2025 due to the buyers' failure to deliver proceeds.
• Debt Management:
  • In April 2024, the Secured Credit Facility maturity date was extended from June 22, 2025, to June 22, 2028, and borrowing capacity was reduced from $600 million to $576 million (through June 22, 2025) and then to $510 million (through June 22, 2028).
  • In April 2024, Transocean International Limited issued $900 million aggregate principal amount of 8.25% senior notes due May 2029 and $900 million aggregate principal amount of 8.50% senior notes due May 2031, receiving $1.77 billion aggregate cash proceeds, net of issue costs.
  • In April 2024, the Company completed tender offers for $596 million of 11.50% senior guaranteed notes due January 2027 and $249 million of 7.25% senior notes due November 2025, with an aggregate cash payment of $886 million.
  • In April 2024, the Company redeemed $569 million of 7.50% senior notes due January 2026 and partially redeemed $87 million of 8.00% senior notes due February 2027, with an aggregate cash payment of $658 million.
  • In 2024, the Company redeemed the remaining $105 million of 7.25% senior notes and $91 million of 11.50% senior guaranteed notes, with an aggregate cash payment of $204 million.

Geographic Footprint: As of February 12, 2025, Transocean Ltd.'s drilling units (including stacked and idle rigs) were located in the U.S. Gulf of Mexico (nine units), Greece (seven units), Brazil (six units), the Norwegian North Sea (four units), Malaysia (two units), Australia (two units), Angola (one unit), Canada (one unit), India (one unit), and Romania (one unit). The Company's operations are geographically dispersed worldwide, and it can mobilize rigs between regions based on market conditions.

Financial Performance

Revenue Analysis

Profitability Metrics (2024):

• Gross Margin: 37.60%
• Operating Margin: -11.83%
• Net Margin: -14.53%

Investment in Growth:

• R&D Expenditure: The Company made aggregate cash payments of $14 million in 2024 to its unconsolidated affiliates primarily for research and development and for equipment.
• Capital Expenditures: $254 million
• Strategic Investments:
  • Acquisition of 67.0% ownership in Orion Holdings (Cayman) Limited for $431 million (fair value of noncash consideration).
  • Construction of Deepwater Aquila completed for a total cost of $440 million.

Business Segment Analysis

Transocean Ltd. provides contract drilling services in a single operating segment. However, it categorizes its floater market operations into ultra-deepwater and harsh environment, and provides disaggregated revenue and operational metrics for these categories.

Ultra-deepwater floaters

Financial Performance:

• Revenue: $2,518 million (+21.5% YoY)
• Average Daily Revenue: $428,000 (+8.7% YoY)
• Revenue Efficiency: 93.4%
• Rig Utilization: 57.3%
• Key Growth Drivers: Increased utilization and improved average daily revenues, operations of newbuild ultra-deepwater floaters Deepwater Titan and Deepwater Aquila, and decreased amortization of contract intangible assets.

Product Portfolio:

• As of February 11, 2025, the Company owned or had partial ownership interests in and operated 26 ultra-deepwater floaters.
• These include drillships and semisubmersibles capable of drilling in water depths of 4,500 feet or greater.
• 23 ultra-deepwater drillships are equipped with patented dual-activity technology.
• Two ultra-deepwater drillships (Deepwater Titan, Deepwater Atlas) are equipped with 1,700 short ton hoisting capacity and 20,000 psi blowout preventers.
• Deepwater Aquila (newbuild 2024) is equipped with 1,400 short ton hoisting capacity and one 15,000 psi blowout preventer, designed to accommodate a future 20,000 psi blowout preventer.
• Seven drillships include hybrid energy storage systems.
• Twelve drillships are outfitted with dual blowout preventers and triple liquid mud systems.
• Six drillships are designed to accept 20,000 psi blowout preventers in the future.
• The kinetic blowout stopper technology is deployed on two floaters and being installed on a third.

Market Dynamics:

• Offshore drilling activity remains robust in every major deepwater geographic sector.
• Customers are planning further into the future, signing contracts with longer lead times and durations, and higher dayrates.
• Tendering activity improved during 2024 in the golden triangle area (North America, South America, West Africa).
• Uncommitted fleet rate for ultra-deepwater floaters: 40% (2025), 52% (2026), 69% (2027), 87% (2028), 95% (2029).

Harsh environment floaters

Financial Performance:

• Revenue: $1,006 million (+32.4% YoY)
• Average Daily Revenue: $435,900 (+23.0% YoY)
• Revenue Efficiency: 97.5%
• Rig Utilization: 71.1%
• Key Growth Drivers: Increased operating activity, including operations of Transocean Norge.

Product Portfolio:

• As of February 11, 2025, the Company owned or had partial ownership interests in and operated eight harsh environment floaters.
• These semisubmersibles are capable of drilling in harsh environments in water depths between 1,500 and 10,000 feet, with greater displacement, larger variable load capacity, more useable deck space, and better motion characteristics.
• Two harsh environment units (Transocean Spitsbergen, Transocean Barents) are equipped with dual-activity technology and mooring capability.
• Six harsh environment floaters are equipped with an automated drilling control system.
• The rotary multi-tool pipe cleaner and wellbore protector were deployed on one harsh environment floater in 2024, with two additional systems in progress.

Market Dynamics:

• In Norway, the largest region for harsh environment rigs, demand is anticipated to accelerate and extend through the end of the decade.
• Contract durations and dayrates are favorably influenced by increasing competition for high-specification semisubmersibles.
• Uncommitted fleet rate for harsh environment floaters: 20% (2025), 36% (2026), 82% (2027), 94% (2028), 100% (2029).

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No shares were repurchased in 2024. As of December 31, 2024, the authorization remaining under the share repurchase program was for up to CHF 3.24 billion, equivalent to $3.57 billion.
• Dividend Payments: Not mentioned in the filing.
• Dividend Yield: Not mentioned in the filing.
• Future Capital Return Commitments: The Company intends to fund any repurchases using available cash balances and cash from operating activities. Decisions are based on capital requirements, share price, regulatory/tax considerations, cash flow, contract backlog, market conditions, and debt rating.

Balance Sheet Position (as of December 31, 2024):

• Cash and Equivalents: $560 million
• Total Debt: $6,881 million (carrying amount)
• Net Cash Position: -$6,321 million
• Credit Rating: The Company's debt ratings are below investment grade, which could limit access to debt markets, result in less favorable terms, increase fees and interest rates, and reduce the willingness of current and prospective customers, suppliers, and creditors to transact business.
• Debt Maturity Profile (as of December 31, 2024, principal amounts):
  • 2025: $714 million
  • 2026: $541 million
  • 2027: $1,255 million
  • 2028: $664 million
  • 2029: $1,276 million
  • Thereafter: $2,494 million
  • Total Principal Amount: $6,944 million

Cash Flow Generation (Year ended December 31, 2024):

• Operating Cash Flow: $447 million

Operational Excellence

Production & Service Model: Transocean Ltd. provides contract drilling services by deploying its fleet of mobile offshore drilling units, including drillships and semisubmersibles, along with related equipment and work crews. The Company specializes in technically demanding regions, focusing on ultra-deepwater and harsh environment drilling. Operations are governed by a comprehensive set of internal requirements and compliance with local regulations. The Company maintains a rigorous competency-based training program, accredited by the Offshore Petroleum Industry Training Organization, including on-the-job, e-learning, customer-specific training, certifications, and leadership/licensing programs, augmented by unique simulation-based education.

Supply Chain Architecture: Key Suppliers & Partners: The Company relies on a significant supply of capital and consumable spare parts and equipment for maintenance and repair, as well as ancillary services (supply boats, helicopters) and subcontracted services (casing, managed pressure drilling). Certain parts and equipment may be available from a small number of suppliers or a single source, requiring long lead times.

• Original Equipment Manufacturers: Provide services and parts, primarily for pressure control systems and drilling systems, under long-term service agreements.
• Shipyards: Engaged for newbuild construction, renewals, replacements, and improvements.

Facility Network:

• Manufacturing: Not explicitly detailed as owned manufacturing facilities. The Company relies on shipyards for newbuilds and major projects.
• Research & Development: The Company invests in companies for operational and strategic purposes, some of which are involved in researching and developing technology to improve efficiency, reliability, sustainability, and safety for drilling and other activities.
• Distribution: Not explicitly detailed as owned distribution centers. The Company's rigs are mobile assets, relocated as needed.
• Office Spaces: Principal executive offices in Steinhausen, Switzerland, and corporate offices in Houston, Texas, and Bermuda. Additional facilities in various countries in North America, Europe, South America, Asia, Africa, and Australia.

Operational Metrics (Year ended December 31, 2024):

• Operating Days: 7,848 (+11% YoY)
• Average Daily Revenue: $430,100 (+13% YoY)
• Revenue Efficiency: 94.5%
• Rig Utilization: 60.5%
• Total Recordable Incident Rate (TRIR): 0.15
• Lost Time Incident Rate (LTIR): 0.00

Market Access & Customer Relationships

Go-to-Market Strategy: Distribution Channels:

• Direct Sales: The Company obtains most drilling contracts through competitive bidding processes and direct negotiations with operators.
• Channel Partners: Not explicitly detailed as formal channel partners, but the Company engages with customers and service providers to optimize operations and develop solutions.
• Digital Platforms: Not explicitly detailed as online sales channels.

Customer Portfolio: Enterprise Customers: Transocean Ltd. provides offshore drilling services to most leading integrated energy companies or their affiliates, as well as government-owned or government-controlled energy companies and other independent energy companies.

• Tier 1 Clients (2024 Operating Revenues):
  • Shell plc: 27% of consolidated operating revenues
  • Petróleo Brasileiro S.A.: 21% of consolidated operating revenues
  • Equinor ASA: 13% of consolidated operating revenues
• Customer Concentration (as of February 12, 2025, Contract Backlog):
  • Petróleo Brasileiro S.A.: 24% of total contract backlog
  • Shell plc: 17% of total contract backlog

Geographic Revenue Distribution (Year ended December 31, 2024):

• U.S.: 44.4% of total revenue
• Brazil: 20.6% of total revenue
• Norway: 18.6% of total revenue
• Other countries: 16.4% of total revenue
• Growth Markets: Offshore drilling activity remains robust in every major deepwater geographic sector, with several new exploration and development programs commencing. Tendering activity improved during 2024 in the golden triangle area (North America, South America, West Africa).

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The offshore contract drilling industry is highly competitive and cyclical, characterized by intense price competition. Demand for services is largely driven by worldwide energy demand, crude oil and natural gas prices, and energy companies' capital spending on exploration, development, and production. Prolonged reductions or perceptions of longer-term lower oil and natural gas prices can depress activity and reduce demand for services. The industry has experienced periods of high demand and dayrates followed by low demand and excess rig supply. The current market is experiencing an upcycle in expected customer demands, particularly for high-specification drilling units, leading to a more balanced marketable supply and demand for ultra-deepwater and harsh environment rigs.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The offshore contract drilling industry has numerous participants, none with a dominant market share. Drilling contracts are traditionally awarded on a competitive bid basis. Emerging Competitive Threats: Increased competition for customers’ drilling budgets could come from land-based energy markets and renewable energy projects worldwide. The introduction of new units delivered without contracts, combined with an increased number of rigs completing contracts, may intensify price competition. Competitive Response Strategy: The Company aims to maintain its competitive position by continuously improving and effectively using innovative technologies to meet or exceed customer requirements, ensuring crew safety, drilling more efficient wells, building greater resilience into critical operating systems, and reducing fuel consumption and emissions. It also focuses on strategically cultivating a best-in-class workforce.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Oil & Gas Price Volatility: Demand for services is highly sensitive to volatile oil and gas prices, which are affected by global demand, OPEC actions, non-OPEC production, inventory levels, government policies, sanctions, technology advances, alternative energy sources, discovery rates, accidents, and geopolitical events. Prolonged price reductions or perceptions of long-term lower prices can reduce or defer major expenditures.
• Industry Competition & Cyclicality: Highly competitive with intense price competition. Periods of high demand are followed by low demand, excess rig supply, and low dayrates. Oversupply can intensify competition and lead to idling of older rigs.
• Contract Backlog Realization: The $8.33 billion contract backlog may not be fully realized due to rig downtime, suspension of operations (equipment breakdowns, weather, labor strikes, regulatory issues), customer liquidity issues, or contract renegotiations/terminations.
• Customer Concentration: Heavy reliance on a small number of customers (Shell plc, Petróleo Brasileiro S.A., Equinor ASA) means the loss of a significant customer or a dispute could adversely affect the business.
• Climate Change & ESG Sentiment: Changing sentiment towards climate change, fossil fuels, and ESG matters could negatively impact business, cost of capital, and stock price. Efforts to discourage investment in energy companies, increased ESG reporting requirements, and failure to meet sustainability standards could lead to loss of investors or increased capital costs.
• Public Health Threats: Pandemics/epidemics can disrupt operations (temporary shutdowns, supply chain issues, increased costs for precautionary measures, labor shortages) and reduce global economic activity, leading to decreased demand for oil and gas and drilling services.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Supplier Dependency: Reliance on a significant supply of capital and consumable spare parts and equipment, ancillary services, and subcontracted services. Certain items may be available from a small number of suppliers or a single source, requiring long lead times. Disruptions, capacity constraints, or quality issues could adversely affect commitments to customers, increase operating costs, and cause rig downtime.
• Shipyard Projects & Operations: Subject to delays and cost overruns due to shipyard availability, equipment/labor shortages, design problems, latent damages, change orders, disputes, recertification requirements, weather, terrorism, pandemics, and permit delays. This can impact contract commencement and lead to revenue loss or contract termination.
• Operating & Maintenance Costs: Costs may not fluctuate proportionally with revenues and are affected by inflation. Adjustments for inflation in contracts may lag actual impact. Unplanned downtime or idle time may not lead to immediate cost reductions. Labor and maintenance costs vary by geographic location and rig condition.
• Capacity Constraints: As of February 12, 2025, 10 uncontracted rigs, with seven out of service for over five years, may remain out of service for extended periods, impacting results and cash flows if new contracts are not secured.

Financial & Regulatory Risks

Market & Financial Risks:

• Substantial Debt: Total debt of $6.88 billion (Dec 31, 2024), with $2.36 billion secured. This limits future financing, dedicates cash flow to debt service, increases vulnerability to economic conditions and interest rate increases, and may lead to covenant breaches or foreclosure on collateral.
• Credit Rating: Debt rated below investment grade, which could limit access to capital, lead to less favorable terms, increased fees/interest rates, reduced willingness of counterparties, and potential requirements for additional collateral.
• Access to Capital Markets: Worldwide financial and economic conditions could restrict access to capital markets, impacting flexibility and reducing demand for services.
• Foreign Exchange: Exposure to currency exchange rate risk from revenues, compensation, and purchasing costs denominated in non-U.S. dollar currencies. While techniques are used to minimize exposure, actual local currency needs may vary, leading to partial exposure.
• Credit Risk: Concentrations of credit risk related to cash/cash equivalents (held at high-credit-rating banks) and customer receivables (from energy companies).

Regulatory & Compliance Risks:

• Environmental & Safety Laws: Increasingly stringent international, national, regional, state, and local regulations. Compliance can be costly, expose to liability, and limit operations. Strict liability for environmental damage without regard to negligence. Failure to comply can result in penalties, sanctions, or operational suspension.
• Greenhouse Gas Emissions & Climate Change: Regulatory and litigation risks related to greenhouse gas emissions and climate change could adversely impact business and demand for services. Increased regulations (e.g., Inflation Reduction Act of 2022), non-binding agreements (e.g., UN Climate Change Conference 2023), and climate-related litigation could increase compliance costs, restrict operations, or reduce demand for fossil fuels.
• U.S. Outer Continental Shelf (OCS) Restrictions: Actions by the U.S. Department of the Interior to limit oil and gas activities on the OCS could impact demand for drilling services.
• Global Operations Risks: Exposure to political uncertainties, terrorism, piracy, civil unrest, asset seizure, customs delays, trade barriers, wage/price controls, changes in laws, judicial proceedings in unfavorable jurisdictions, and difficulties in personnel movement (visas/work permits).
• Anti-bribery Statutes: Failure to comply with FCPA, U.K. Bribery Act 2010, and similar laws could result in fines, criminal penalties, contract terminations, and reputational damage.
• Investigations & Litigation: Subject to various disputes, investigations, and litigation (e.g., asbestos, environmental damage, tax disputes). Outcomes are uncertain, and insurance/indemnities may not be adequate, potentially leading to material adverse effects.
• Cybersecurity Risks: Dependence on data and digital technologies exposes the Company to cybersecurity risks and threats (human error, fraud, malice, technological failure, AI-related threats). Breaches could lead to system disruptions, data loss, operational impairments, misappropriation of assets, increased costs, legal claims, and reputational damage. Increasing regulation of data privacy and security adds compliance challenges and potential penalties.

Geopolitical & External Risks

Geopolitical Exposure:

• Geographic Dependencies: Operations in various regions worldwide expose the Company to political and other uncertainties.
• Trade Relations: Changes to foreign trade policies, imposition of additional trade barriers and tariffs could impact operations and procurement.
• Sanctions & Export Controls: Subject to U.S. Treasury Department’s Office of Foreign Assets Control ("OFAC") and other U.S. and non-U.S. laws governing international operations, which can restrict transactions and lead to criminal/civil penalties.

Innovation & Technology Leadership

Research & Development Focus: Transocean Ltd. has a long history of technological innovation and continues to develop and invest in technologies to differentiate its service offerings, optimize performance, improve operational integrity, and reduce greenhouse gas emissions. Core Technology Areas:

• Dual-Activity Technology: Patented technology on 23 drillships and one semisubmersible, allowing simultaneous drilling tasks to improve efficiency.
• High-Capacity Systems: Two drillships with 1,700 short ton hoisting capacity and 20,000 psi blowout preventers. Six drillships designed for future 20,000 psi BOP upgrades.
• Energy Efficiency: Seven drillships equipped with hybrid energy storage systems for enhanced reliability, fuel, and emissions savings.
• Well Control: Industry's first kinetic blowout stopper deployed on two floaters, with installation in progress on a third.
• Automated Drilling Platforms & Robotics:
  • Inteliwell™ drilling automation platform installed on one harsh environment floater and one ultra-deepwater floater, integrating automation sequences with digital well planning and smart well monitoring.
  • Six harsh environment floaters and two ultra-deepwater floaters equipped with an automated drilling control system.
  • Offshore robotics riser bolting system deployed on three ultra-deepwater drillships, handling over 3,000 riser joints without human intervention.
• Automated Safety & Monitoring Tools: Patented HaloGuard℠ system deployed on eight drilling units, designed to alarm, notify, and halt equipment to prevent personnel injury in danger zones. Smart equipment analytics tool launched in 2020, providing real-time data for equipment health, inferred emissions, energy consumption, and performance trend identification.

Intellectual Property Portfolio:

• Patent Strategy: Holds patented dual-activity technology.
• Licensing Programs: Not explicitly detailed.
• IP Litigation: Patent for dual-activity technology has been successfully challenged in certain jurisdictions.

Technology Partnerships:

• Strategic Alliances: Invests in certain companies for operational and strategic purposes, some involved in researching and developing technology to improve efficiency, reliability, sustainability, and safety for drilling and other activities.
• Research Collaborations: Supported the development of the Inteliwell™ drilling automation platform.

Leadership & Governance

Executive Leadership Team (as of February 11, 2025)

Leadership Continuity: The filing does not explicitly detail succession planning or leadership development initiatives beyond the executive team's prior roles within the Company.

Board Composition: The information required for board composition is incorporated by reference to the definitive Proxy Statement for the 2025 annual general meeting of shareholders.

Human Capital Strategy

Workforce Composition (as of December 31, 2024):

• Total Employees: Approximately 5,800 individuals, including approximately 330 contractors.
• Geographic Distribution: 62 nationalities, distributed across 22 countries: 37% North America, 26% South America, 24% Europe, 6% Australia, 4% Africa, and 3% Asia.
• Skill Mix: Not explicitly detailed, but the Company aims to cultivate a best-in-class workforce with transferrable skill sets, innovation, local knowledge, and experience.

Talent Management: Acquisition & Retention:

• Hiring Strategy: Seeks to maintain a competitive advantage by offering regionally competitive compensation and benefits packages, a technically challenging work environment, global opportunities, and rotational development programs.
• Retention Metrics: Not explicitly detailed, but the Company continually assesses and adapts offerings and policies to provide a modern work environment.
• Employee Value Proposition: Wellness and benefits strategy designed under four pillars: physical, financial, emotional, and social well-being, including a globally available employee assistance program. Diversity & Development:
• Diversity Metrics: Not explicitly detailed in the provided text.
• Development Programs: Maintains a rigorous competency-based training program, accredited by the Offshore Petroleum Industry Training Organization. Provides various offshore training formats (on-the-job, e-learning, customer-specific, certifications, leadership, licensing programs). Offers unique simulation-based education augmented by digital twin modeling.
• Culture & Engagement: Corporate culture founded on "FIRST Shared Values" guiding ethical and responsible actions, striving for value delivery, and maintaining a safe and respectful work environment. Code of Integrity and Human Rights Policy apply to all board members, executives, employees, and business partners. Respects labor rights, including collective bargaining.

Environmental & Social Impact

Environmental Commitments: Climate Strategy:

• Emissions Targets: In 2021, the Company conducted a sustainability-focused materiality assessment and announced sustainability goals, including a greenhouse gas emissions intensity reduction goal. However, due to slower technological advances and higher costs than anticipated, and shifts in shareholder and customer priorities, the Company has suspended its previously announced sustainability goals, including the greenhouse emissions intensity reduction goal.
• Carbon Neutrality: Not explicitly detailed.
• Renewable Energy: Engaged in the development and exploration of deep-sea polymetallic nodules through Global Sea Mineral Resources NV, which contain metals critical to the growing renewable energy market. Some investments are in businesses developed to support renewable or other energy alternatives.
• Environmental Management System: Maintains a global Environmental Management System ("EMS") standard, aligned to ISO 14001, applied to rigs, offices, and facilities. Regularly assesses environmental impact, focusing on reduction of greenhouse gas emissions, operational discharges, water use, and waste.

Supply Chain Sustainability:

• Supplier Engagement: Not explicitly detailed beyond general reliance on suppliers.
• Responsible Sourcing: Not explicitly detailed.

Social Impact Initiatives:

• Community Investment: Aims to benefit local communities by offering regionally competitive compensation and benefits packages.
• Product Impact: Not explicitly detailed.
• Human Rights: Maintains a Human Rights Policy, strictly prohibiting modern slavery, child labor, forced or indentured servitude, and other human rights abuses.

Business Cyclicality & Seasonality

Demand Patterns:

• Seasonal Trends: The filing does not explicitly detail seasonal trends in demand patterns. However, rig utilization rates can decline during shipyard, contract preparation, and mobilization periods, which may have seasonal components depending on project scheduling.
• Economic Sensitivity: The Company's business is highly dependent on the level of activity in the offshore oil and gas industry, which is significantly affected by volatile oil and gas prices and other factors. Demand for services is driven by worldwide energy demand, oil and natural gas prices, and energy companies' capital spending. Prolonged reductions in oil and natural gas prices, or perceptions of longer-term lower prices, can reduce or defer major expenditures, leading to a decline in demand for services.
• Industry Cycles: The offshore contract drilling industry is highly cyclical. Periods of high customer demand, limited rig supply, and high dayrates have been followed by periods of low customer demand, excess rig supply, and low dayrates. The Company is currently experiencing an upcycle in expected customer demands, particularly for high-specification drilling units, leading to a more balanced marketable supply and demand for ultra-deepwater and harsh environment rigs.

Planning & Forecasting: Customers are planning further into the future to ensure rig availability for their drilling programs, resulting in contracts with longer lead times and durations, as well as higher dayrates.

Regulatory Environment & Compliance

Regulatory Framework: Industry-Specific Regulations: Operations are subject to a variety of international, national, regional, state, and local government regulations, including environmental and safety laws. Compliance may require significant capital expenditures and operational changes. U.S. federal agencies have adopted enhanced governmental safety and environmental requirements for U.S. Gulf of Mexico operations, increasing compliance costs and potentially affecting drilling permits.

• International Compliance: Compliance with international conventions and treaties.
• Trade & Export Controls: Subject to extensive trade laws and regulations, including customs and export control laws in each country of operation. Governments may impose economic sanctions, import-export quotas, and trade barriers.
• Local Content Requirements: Many governments favor or require awarding drilling contracts to local contractors or employing citizens of a particular jurisdiction.

Trade & Export Controls:

• Export Restrictions: Governments control the import and export of certain goods, services, and technology.
• Sanctions Compliance: Subject to U.S. Treasury Department’s Office of Foreign Assets Control ("OFAC") and other U.S. and non-U.S. laws governing international operations.
• Anti-boycott Laws: Subject to U.S. anti-boycott laws.

Legal Proceedings:

• Asbestos Litigation: Several subsidiaries are named in lawsuits alleging personal injury from asbestos exposure. While the Company intends to defend vigorously and believes it has sufficient resources, outcomes are uncertain.
• Environmental Matters: Potential liabilities under CERCLA and similar state acts for hazardous substance cleanup. One subsidiary was named as a PRP for a site in Santa Fe Springs, California, with ongoing operating and maintenance costs.
• Regulatory Investigations: Occasionally receives inquiries from governmental regulatory agencies regarding operations, including tax, environmental, regulatory, and compliance matters.
• Clean Water Act (CWA) Settlement: In January 2024, Transocean Offshore Deepwater Drilling Inc. ("TODDI") entered into a civil consent decree with the U.S. Department of Justice and EPA to resolve alleged CWA violations related to administrative monitoring and reporting obligations. TODDI agreed to an immaterial monetary civil penalty and corrective actions.

Tax Strategy & Considerations

Tax Profile:

• Effective Tax Rate (2024): 2.2% (based on loss before income tax expense or benefit).
• Effective Tax Rate (excluding discrete items, 2024): 159.1% (based on loss before income tax expense or benefit).
• Tax Rate Drivers: Varies significantly due to overall income/loss level, blend of income taxed on gross revenues vs. income before taxes, rig movements between taxing jurisdictions, and rig operating structures.
• Unrecognized Tax Benefits (as of December 31, 2024): $414 million (including interest and penalties), with net unrecognized tax benefits of $42 million after offsetting deferred tax assets.
• Valuation Allowance (as of December 31, 2024): $2.089 billion on net operating losses and other deferred tax assets due to uncertainty of realization, driven by consolidated cumulative loss over the recent three-year period.

Geographic Tax Planning:

• International Tax Structure: Operates through various subsidiaries in countries worldwide, each with its own tax regimes.
• Transfer Pricing: Income tax exposure items include potential challenges to intercompany pricing.
• Swiss Tax Treatment: Transocean Ltd., a holding company and Swiss resident, is subject to Swiss federal, cantonal, and communal income tax. Qualifying net dividend income and net capital gains on the sale of qualifying investments in subsidiaries are exempt from Swiss taxation. Distributions to shareholders in the form of par value reduction or out of qualifying additional paid-in capital are exempt from Swiss withholding tax.

Tax Reform Impact:

• Organization for Economic Co-operation and Development Pillar 2: Several jurisdictions are implementing or expected to implement Pillar 2 provisions aimed at preventing base erosion and profit shifting.
• Swiss Federal Act on Tax Reform and AHV Financing ("TRAF"): Agreement with Swiss tax authorities allows access to historic depreciation and financing asset costs to offset taxable income.
• U.S. Inflation Reduction Act of 2022: Proposed regulations could impose a 1% excise tax on stock repurchases if funded by a U.S. subsidiary.

Insurance & Risk Transfer

Risk Management Framework:

• Insurance Coverage:
  • Hull and machinery coverage for physical damage to property and equipment.
  • Excess liability coverage for offshore risks (personal injury, third-party property claims, wreck removal, pollution).
  • Per occurrence deductibles generally up to $10 million for various third-party liabilities.
  • Self-insures up to $75 million of the $750 million excess liability coverage through a wholly owned captive insurance company.
  • Retains risk for liability exceeding excess liability coverage.
  • Generally no hull and machinery insurance coverage for damages caused by named storms in the U.S. Gulf of Mexico.
  • Pollution and environmental risks are generally not completely insurable.
  • Limited insurance for assets covering physical damage losses from certain risks, such as terrorist acts, piracy, vandalism, sabotage, civil unrest, expropriation, and acts of war.
  • Does not carry insurance for loss of revenue.
• Risk Transfer Mechanisms:
  • Customers, as operators, generally assume and grant indemnity for subsurface and well control risks and consequential damages.
  • Customers indemnify for pollution damages from reservoir fluids; Transocean Ltd. indemnifies for pollution originating above water from the rig for substances in its control.
  • Customers indemnify for consequential damages, damage to well/reservoir, loss of subsurface oil/gas, and well control costs.
  • Indemnification degree may vary by contract based on market conditions and customer requirements. Contractual limits to indemnification rights exist, with responsibility for certain damages up to a specified maximum.
  • No assurance that customers will be financially able to indemnify or honor obligations. Enforceability of indemnities may be limited by law (e.g., against public policy for criminal fines/penalties).