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Transocean Ltd. (RIG)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 headline: Revenue rose 15% YoY and 9% QoQ to $0.99B, with revenue efficiency at 96.6% and Adjusted EBITDA margin at 34.9%; GAAP EPS was a large loss due to a non‑cash $1.128B asset impairment, but adjusted net income was $19M and free cash flow was $104M .
  • Results versus S&P Global consensus: Revenue beat by ~$12M, EBITDA beat by ~$23M, and “Primary EPS” (S&P framework) beat; note GAAP diluted EPS was -$1.06 due to the impairment while S&P “Primary EPS” reflected a small profit* .
  • Guidance: Q3 revenue guided to $1.00–$1.02B; FY25 revenue maintained at $3.90–$3.95B, with O&M raised (FX and reimbursables), G&A nudged up, capex slightly higher (reimbursed upgrades), and liquidity YE25 expected at $1.45–$1.55B .
  • Strategic: Management emphasized cost actions ($100M 2025, similar in 2026), balance sheet simplification (equitized ~$157M of 2025 exchangeables; ~59M shares issued; ~$77M principal remains), and disciplined fleet portfolio moves (retiring four lower-spec rigs), supporting mid‑term rate recovery as utilization tightens toward ~90% into late 2026/2027 .

What Went Well and What Went Wrong

  • What Went Well

    • Execution: Revenue efficiency 96.6% and total fleet ADR increased to $458.6K/day (from $443.6K in Q1; $438.3K in Q2’24), supporting a 35% adjusted EBITDA margin and positive free cash generation of $104M .
    • Cost/Balance sheet: O&M came in below guidance QoQ (timing of maintenance) and capex fell to $24M; management reiterated being “on track to reduce our debt by over $700 million this year” .
    • Market/backlog quality: CEO: “safe, reliable, and efficient operations… adjusted EBITDA margin of 35% and free cash generation of $104 million,” underscoring high operational reliability; backlog stood at ~$7.2B as of July FSR .

  • What Went Wrong

    • Non‑cash impairment: Recorded $1.128B impairment (net of tax), driving GAAP net loss of $938M (‑$1.06 diluted EPS); adjusted net income was $19M, highlighting mismatch between GAAP and underlying operations .
    • O&M baseline still elevated: O&M was $599M vs $534M in Q2’24; FY25 O&M guidance raised to $2.375–$2.425B (FX, reimbursables), partially offset by higher revenue .
    • Estimate sensitivity items: Ex‑discrete ETR was 70.0% (vs (62.3)% in Q1), a headwind if sustained; management continues to monitor evolving tariff risks though expects immaterial direct impact .

Financial Results

Results vs prior periods and estimates

MetricQ2 2024Q1 2025Q2 2025
Revenue ($M)861 906 988
Diluted EPS (GAAP)-$0.15 -$0.11 -$1.06
Adjusted Net Income (Loss) ($M)-123 -65 19
Adjusted EBITDA ($M)284 244 344
Adjusted EBITDA Margin (%)33.0% 26.9% 34.9%
Revenue Efficiency (%)96.9% 95.5% 96.6%
O&M Expense ($M)534 618 599
Cash from Operations ($M)133 26 128
Capital Expenditures ($M)84 60 24

Versus S&P Global consensus (Q2 2025)

MetricActualS&P ConsensusBeat/Miss
Revenue ($M)988 975.8*Beat
EBITDA ($M)340 317.3*Beat
“Primary EPS”0.0214*-0.0292*Beat

Note: GAAP diluted EPS was -$1.06 due to a $1.128B non‑cash impairment; S&P “Primary EPS” reflects a normalized view excluding such items .
*Values retrieved from S&P Global.

Segment revenue and mix

Segment Contract Drilling Revenue ($M)Q2 2024Q1 2025Q2 2025
Ultra-deepwater floaters606 658 699
Harsh environment floaters255 248 289
Total861 906 988

Key KPIs

KPIQ2 2024Q1 2025Q2 2025
Total fleet ADR ($/day)$438,300 $443,600 $458,600
Revenue Efficiency (%)96.9% 95.5% 96.6%
Utilization (%)57.8% 63.4% 67.3%
Backlog (as reported)$8.3B (Feb FSR) $7.9B (Apr FSR) $7.2B (Jul FSR)

Additional press/investor items during Q2 window

  • Exchangeable bonds: Closed exchange of ~$157M principal into ~59M shares, with ~$77M principal remaining outstanding; limit price amended in early July .

Guidance Changes

MetricPeriodPrevious Guidance (Q1 call)Current Guidance (Q2 call)Change
Revenue ($B)Q3 2025—1.00–1.02 New
O&M ($M)Q3 2025—600–620 New
G&A ($M)Q3 2025—50–55 New
Net cash interest ($M)Q3 2025—~136 New
Capex ($M)Q3 2025—25–30 New
Cash taxes ($M)Q3 2025—~16 New
Revenue ($B)FY 20253.85–3.95 3.90–3.95 Slightly raised low end
O&M ($B)FY 20252.30–2.40 2.375–2.425 Raised
G&A ($M)FY 2025185–195 190–200 Raised
Net cash interest ($M)FY 2025550–555 540–545 Lowered
Cash taxes ($M)FY 202575–80 70–75 Lowered
Capex ($M)FY 2025~115 ~120 (reimbursed upgrades) Raised slightly
YE Liquidity ($B)FY 20251.45–1.55 1.45–1.55 Maintained

Earnings Call Themes & Trends

TopicQ4 2024 (Q‑2)Q1 2025 (Q‑1)Q2 2025 (Current)Trend
Market/demand & dayratesBacklog additions; tech leadership and execution Constructive multi‑region tender pipeline; mostly 2026 starts; short‑term rate pressure possible but long‑term resilient Utilization troughing mid‑80s then tightening; rates improve as utilization approaches ~90% into late 2026/27 Improving into 2026/27
Cost actions—Identified ~$100M 2025, similar in 2026; liquidity lift On track; additional ~$50M annual SG&A reduction from 2026 Building momentum
Fleet strategy & supply rationalization—Cold‑stack optionality; considering sales/scrap as appropriate Retiring four lower‑spec rigs; industry attrition supportive Tightening supply
Balance sheet—Liquidity ~$1.3B; deleveraging focus Equitized ~$157M 2025 exchangeables; YE25 liquidity 1.45–1.55B targeted Deleveraging underway
Regional outlook (Brazil/West Africa/Med/Asia)—Broad pipeline across regions; Brazil Búzios/Mero; West Africa awakening Further detail on Brazil tenders; APAC/Africa multi‑rig opportunities; GOM stable Broadening
Tariffs/macro—Watching tariff regime; largely domestic sourcing No material direct impact expected; monitoring Manageable risk

Management Commentary

  • CEO: “We reported a quarter of safe, reliable, and efficient operations, resulting in an adjusted EBITDA margin of 35% and free cash generation of $104 million… We… are on track to reduce our debt by over $700 million this year” .
  • CFO: “For the third quarter, we expect contract drilling revenues to be between $1,000,000,000 and $1,020,000,000… O&M expense… $600,000,000 to $620,000,000… We now expect 2025 capital expenditures to be approximately $120,000,000,” driven by reimbursed customer upgrades .
  • Strategy/market: Management reiterated discipline on long‑term contracting at appropriate economics; utilization expected to tighten and support dayrate upside into 2026/27 .
  • Supply: “We… do not see a compelling case for reactivation of cold stacked units… decision… to remove four lower specification rigs from our fleet,” signaling ongoing supply rationalization .

Q&A Highlights

  • Dayrate trajectory/utilization: Expect near‑term trough utilization in mid‑80s, recovering with improved contracting; long‑term deals to be pursued selectively as economics warrant .
  • GOM rig rollovers: High‑spec Proteus and Conqueror likely to stay in the Gulf; customers show interest; aim to preserve term/rate value given asset quality .
  • Asset dispositions and liquidity: Recycling proceeds modeled cash break‑even per rig ($8–$12M); equitization of ~$157M exchangeables completed, ~$77M remains .
  • Leverage target: Goal to reach ~3.5x net debt/EBITDA by late 2026, a gating item for potential distributions .
  • Adjacent opportunities: Deep sea mining JV remains optionality; focus stays on core deepwater drilling .
  • Spot work/tenders: Multiple spot jobs in GOM and West Africa; several tenders/awards across Nigeria, Mozambique, Ivory Coast, Ghana .

Estimates Context

  • Q2 2025 versus S&P Global: Revenue $988M vs $975.8M consensus (beat), EBITDA $340M vs $317.3M (beat), S&P “Primary EPS” 0.0214 vs -0.0292 (beat); GAAP EPS was -$1.06 due to non‑cash impairments .
  • Forward look: Q3 2025 consensus revenue ~$1.011B and EPS ~$0.033 compare to company revenue guidance of $1.00–$1.02B, implying in‑line topline and modest EPS improvement as operations ramp* .
    *Values retrieved from S&P Global.

Key Takeaways for Investors

  • Underlying operations improving: Revenue, ADR, utilization, and revenue efficiency all moved higher; Adjusted EBITDA margin expanded to 34.9% .
  • Non‑cash impairment obscures optics: Large GAAP loss masks positive adjusted net income/FCF; monitor normalized metrics and cash conversion .
  • Guidance constructive near term: Q3 revenue guide of $1.00–$1.02B and FY revenue 3.90–3.95B are consistent with consensus; watch O&M inflation (FX/reimbursables) vs cost‑savings delivery .
  • Balance sheet catalysts: ~$157M exchangeables equitized; YE25 liquidity 1.45–1.55B targeted; continued deleveraging is a potential re‑rating driver .
  • Cycle positioning: Supply rationalization (rig retirements) and tightening utilization support dayrate resilience into 2026/27; disciplined terming should protect economics .
  • Trading setup: Near‑term beats on revenue/EBITDA and constructive Q3 guide could be supportive; impairment noise and raised O&M guide are the counterweights .
  • Watch list: Brazil/West Africa tenders, GOM re‑contracts (Proteus/Conqueror), execution on $100M+ cost actions, and progress toward net debt/EBITDA ~3.5x by late 2026 .

Notes: All financial and operational figures are from company filings and transcripts as cited. S&P Global consensus figures are marked with an asterisk and noted as “Values retrieved from S&P Global.”