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Transocean Ltd. (RIG)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue of $906M rose 18.7% year over year and was above S&P Global consensus by ~2.2%; adjusted EBITDA was $244M (26.9% margin) but declined sequentially vs Q4 due to lower activity and higher O&M costs .
  • EPS missed on a GAAP diluted basis at -$0.11, but was better than S&P consensus on “Primary EPS” (-$0.074 actual vs -$0.097 estimate); adjusted diluted EPS was -$0.10 after $14M discrete tax items .
  • Backlog stood at $7.9B; management guided Q2 revenue to $970–$990M and maintained FY25 revenue at $3.85–$3.95B while lowering FY25 CapEx to $115M and G&A to $185–$195M; cash cost savings of ~$100M in 2H25 are expected, with a similar magnitude in 2026 .
  • Call tone was confident despite tariff/OPEC-related macro volatility; RIG emphasized strong contract coverage into 2026, constructive deepwater demand and disciplined portfolio decisions on dayrates and rig placement .

What Went Well and What Went Wrong

  • What Went Well
    • Revenue beat and utilization improvements: Q1 contract drilling revenue exceeded internal guidance, helped by delayed out-of-service periods and early commencements on Barents and Invictus; revenue efficiency improved to 95.5% .
    • Balance sheet progress: repaid $210M of debt in Q1, with year-end 2025 liquidity now forecast at $1.45–$1.55B after cost initiatives .
    • Strategic positioning and customer engagement: priced option on Deepwater Asgard and exercised options on Transocean Equinox ($540k/day; ~$40M backlog), plus high contract coverage into 2026 supports cash conversion .
  • What Went Wrong
    • Sequential revenue and margin compression: revenue fell to $906M from $952M and adjusted EBITDA margin dropped to 26.9% from 33.9%, driven by lower activity, idle/shipyard time, and higher O&M .
    • Legal charge/headwind: unfavorable legal outcome contributed to higher O&M; a customer dispute resulted in a $34M non-cash receivable write-off .
    • Tax volatility: Q1 effective tax rate was -95.8% (ex-discrete -62.3%), reflecting lower operating income and discrete items; cash taxes were $13M in Q1 .

Financial Results

MetricQ3 2024Q4 2024Q1 2025
Contract Drilling Revenues ($USD Millions)$948 $952 $906
Operating & Maintenance Expense ($USD Millions)$563 $579 $618
Adjusted EBITDA ($USD Millions)$342 $323 $244
Adjusted EBITDA Margin (%)36.0% 33.9% 26.9%
Net Income (Loss) Attributable to Controlling Interest ($USD Millions)$(494) $7 $(79)
Diluted EPS ($USD)$(0.58) $(0.11) $(0.11)
Cash from Operations ($USD Millions)$194 $206 $26
Capital Expenditure ($USD Millions)$58 $29 $60
Backlog ($USD Billions)$9.3 $8.3 $7.9

Segment breakdown (Contract Drilling Revenues):

SegmentQ3 2024Q4 2024Q1 2025
Ultra-deepwater Floaters ($USD Millions)$668 $675 $658
Harsh Environment Floaters ($USD Millions)$280 $277 $248
Total ($USD Millions)$948 $952 $906

KPIs:

KPIQ3 2024Q4 2024Q1 2025
Average Daily Revenue (Total Fleet) ($USD)$436,800 $434,700 $443,600
Revenue Efficiency (Total Fleet) (%)94.5% 93.5% 95.5%
Rig Utilization (Total Fleet) (%)63.9% 66.8% 63.4%

Non-GAAP reconciliation snapshots:

  • Adjusted Net Loss Q1 2025: $(65)M; adjusted diluted EPS: $(0.10) (adds back $14M discrete tax items) .

Balance sheet snapshots:

  • Cash and cash equivalents: $263M; Restricted cash: $428M; Long-term debt: $5,936M; Total equity: $10,211M (Mar 31, 2025) .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Contract Drilling Revenues ($USD Millions)Q2 2025—$970–$990 New Q2 guide
Revenue Efficiency (%)Q2 2025—~96.5% (working rigs) New Q2 guide
Additional Services/Reimbursables ($USD Millions)Q2 2025—$55–$65 New Q2 guide
O&M Expense ($USD Millions)Q2 2025—$610–$630 New Q2 guide
G&A Expense ($USD Millions)Q2 2025—$45–$50 New Q2 guide
Net Cash Interest Expense ($USD Millions)Q2 2025—~$140 New Q2 guide
CapEx ($USD Millions)Q2 2025—~$20 New Q2 guide
Cash Taxes ($USD Millions)Q2 2025—~$30 New Q2 guide
Contract Drilling Revenues ($USD Billions)FY 2025$3.85–$3.95 (unchanged) $3.85–$3.95 Maintained
O&M Expense ($USD Billions)FY 2025$2.3–$2.4 (unchanged) $2.3–$2.4 Maintained
G&A Expense ($USD Millions)FY 2025~$190–$200 (implied) $185–$195 Lowered (~$5M)
Net Cash Interest Expense ($USD Millions)FY 2025—$550–$555 New/maintained
Cash Taxes ($USD Millions)FY 2025Lower prior (unspecified) $75–$80 Raised vs prior guide
CapEx ($USD Millions)FY 2025$130 $115 Lowered
Year-end Liquidity ($USD Billions)FY 2025~lower prior (unspecified) $1.45–$1.55 Raised (cost savings)
Revolving Credit Facility Capacity ($USD Millions)Late Jun 2025$576 $510 Reduced per agreement

Notes:

  • Management has not explicitly included potential tariff impacts in guidance; exposure viewed as limited directly and manageable indirectly; local sourcing >60% in Brazil and ~87% domestic sourcing in U.S. operations .
  • Cost savings: ~$100M cash savings targeted in 2025 (predominantly 2H), with similar magnitude expected in 2026; largely via vendor renegotiations, technology, national crews, and procurement localization .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q-2: Q3 2024; Q-1: Q4 2024)Current Period (Q1 2025)Trend
Deepwater demand & backlog~$1.3B booked in Q3; 97% fleet contracted in 2025 mentioned; strong demand in Golden Triangle 97% contracted in 2025; constructive tender cadence through 2026; $7.9B backlog focus on conversion to cash Stable-to-improving
Dayrates & pricing disciplineLeading-edge mid-high $400k/day; caution near-term efficiency Possible near-term pressure for short-term work; long-term rates resilient; portfolio approach on Shell awards Resilient long-term
Technology leadershipExecuted first two 20K subsea completions; innovation recognized by customers Continued emphasis on high-spec fleet, operational execution, options exercised (Equinox $540k/day) Ongoing leadership
Macro/tariffsTax rate volatility (Q3 discrete benefit); macro commentary limited in press release Macro volatility acknowledged (tariffs/OPEC); limited direct tariff exposure; mitigation via sourcing/localization Managing risks
Regional outlookBrazil, GoM strong; visibility to awards Detailed multi-region pipeline (Brazil, Africa, Med, Australia, Norway, UK, Canada) with 2026–2028 starts Expanding pipeline
Cost & efficiency programNot highlighted in Q3/Q4 press releases~$100M 2025 cash savings identified; similar in 2026; liquidity uplift ~$100M Positive execution

Management Commentary

  • “The Transocean team delivered a solid quarter, with an adjusted EBITDA of $244 million on revenues of $906 million. We also improved our balance sheet with the repayment of $210 million in outstanding debt.” — CEO Jeremy Thigpen .
  • “We are committed to…conversion of our $7.9 billion of backlog to revenue and that revenue to cash to create sustainable value for our shareholders.” — Keelan Adamson .
  • “For the second quarter, we expect contract drilling revenues to be between $970 million and $990 million…we have identified approximately $100 million of cash cost savings…with a similar quantum of savings expected in 2026.” — CFO R. (Thad) Vayda .
  • “You could probably see some near-term pressure for short-term work, but…for long-term work, [rates] are largely unchanged going forward.” — EVP CCO Roddie Mackenzie .

Q&A Highlights

  • Contract award timing: Several awards expected over summer and into year-end; second half could be “prolific” for long-term awards; 97% booked in 2025 .
  • Dayrates: Near-term pressure possible for short-term gaps; long-term rates expected to hold; portfolio discipline on Shell-related decisions .
  • West Africa: Region “woken up,” multi-year/multi-rig opportunities likely to consume incremental rigs in 2026–2027 .
  • Cost savings: ~$100M in 2025 and similar in 2026, with no significant costs to achieve identified to date; focused on O&M, SG&A, CapEx efficiencies .
  • Fleet strategy: Assets held for sale (DD3 and Discoverer Inspiration) remain warm/idle; cold-stacked optionality maintained with minimal sustaining costs; no covenants limiting transactions .

Estimates Context

MetricQ3 2024Q4 2024Q1 2025
Revenue Consensus Mean ($USD Millions)947.9*962.7*886.4*
Revenue Actual ($USD Millions)948.0 952.0 906.0
Primary EPS Consensus Mean ($USD)-0.0443*0.0013*-0.0970*
Primary EPS Actual ($USD)0.0671*0.0386*-0.0736*
EBITDA Consensus Mean ($USD Millions)295.1*329.0*228.6*
EBITDA Actual ($USD Millions)338.0*340.0*238.0*
Revenue - # of Estimates9*10*8*
Primary EPS - # of Estimates10*10*6*

Values retrieved from S&P Global*.
Observations:

  • Q1 2025: Revenue beat (+$19.6M; +2.2%) vs consensus; Primary EPS beat (less negative by $0.023); EBITDA modest beat ($9.4M).
  • Q4 2024: Revenue modest miss vs consensus; EPS and EBITDA above consensus.
  • Q3 2024: Revenue in line; EPS and EBITDA above consensus.

Note: GAAP diluted EPS in Q1 2025 was -$0.11 per 8-K, while S&P “Primary EPS actual” shows -$0.074; basis definitions differ (Primary/normalized vs GAAP diluted) .

Key Takeaways for Investors

  • Revenue/EBITDA beat vs consensus in Q1 with higher revenue efficiency; sequential margin compression reflects idled/shipyard time and legal items—watch Q2 guidance for margin recovery .
  • Backlog and 2026 visibility provide downside protection; 97% of active fleet contracted in 2025 supports cash generation and deleveraging .
  • Cost savings program is a catalyst: ~$100M cash savings in 2H25 and similar in 2026; liquidity uplift and lower FY25 CapEx/G&A enhance FCF trajectory .
  • Dayrate narrative: short-term pressure possible; long-term rates resilient—management prioritizes portfolio quality over rate concessions (especially in GoM) .
  • Tariff risk manageable near term given localized sourcing; contracts may allow relief via escalation/change-in-law provisions—monitor supplier pass-throughs .
  • Near-term trading lens: Potential contract award headlines and Q2 revenue guide ($970–$990M) are upside catalysts; watch for macro volatility but management indicates limited business impact to programs .
  • Medium-term thesis: Deepwater investment expected to rise ~40% by 2030; RIG’s high-spec fleet and execution track record position it to capture long-duration work at resilient rates .

Citations: Q1 2025 8‑K press release and exhibits ; Q4 2024 8‑K ; Q3 2024 8‑K ; Q1 2025 call transcripts .