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Transocean Ltd. (RIG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered $952M contract drilling revenues (+$4M q/q; +$211M y/y), adjusted EBITDA of $323M (33.9% margin), and adjusted diluted EPS of $(0.09); GAAP diluted loss per share was $(0.11) driven by discrete tax items and convertible bond effects; net income attributable to controlling interest was $7M .
  • Backlog stood at $8.3B (Feb 2025 Fleet Status), with management highlighting near‑full 2025 utilization and focus on converting backlog to cash to delever; quarter‑end liquidity was ~$1.5B (unrestricted cash $560M; restricted $381M; undrawn revolver $576M) .
  • Guidance: Q1 2025 contract drilling revenues $870–$890M; O&M $610–$630M; G&A $50–$55M; net interest expense ~$140–$150M; capex ~$59M; cash taxes ~$13M. FY 2025 O&M $2.3–$2.4B; G&A $190–$200M; net interest expense $550–$555M; cash taxes $65–$70M; year‑end liquidity targeted at ~$$1.35–$1.45B; enterprise‑wide cost program update expected with Q1 call .
  • Strategic catalysts: First two 20K subsea completions (Atlas, Titan); expanded use of automation/robotics and HaloGuard; CEO succession plan announced—Keelan Adamson to become CEO in Q2 2025; management sees resilient leading‑edge dayrates and tightening market into 2026–27 .

What Went Well and What Went Wrong

What Went Well

  • Adjusted EBITDA rose sharply y/y to $323M (vs $122M in Q4’23) with margin improving to 33.9% (vs 16.3% in Q4’23), supported by higher utilization and dayrates across the fleet .
  • Technology execution: “executing the first two 20K subsea completions in the history of the industry” and broader deployment of drilling automation, robotics, and HaloGuard, enhancing safety and efficiency .
  • Commercial positioning: management cites near 100% utilization throughout 2025 and direct multiyear negotiations for 2026–27; customers awarding Transocean high‑spec rigs at $500K+/day, with 8th‑gen rigs above $600K/day, underscoring asset quality premium .

What Went Wrong

  • Revenue efficiency declined to 93.5% (vs 94.5% in Q3 and 97.0% y/y), reflecting fleet downtime; management tied prior quarter issues to first‑issue 20K BOP reliability, with remediation underway .
  • O&M expense rose sequentially to $579M (from $563M) on higher in‑service maintenance, partially offset by insurance settlement; G&A increased to $56M on legal/professional fees .
  • Tax rate volatility: Effective Tax Rate spiked to 89.0% (ex‑discretes 56.7%), materially affecting GAAP EPS; management noted valuation allowance changes and discrete items .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Contract Drilling Revenues ($USD Millions)$741 $948 $952
Adjusted Contract Drilling Revenues ($USD Millions)$748 $948 $952
Net Income (Loss) Attributable to Controlling Interest ($USD Millions)$(104) $(494) $7
Diluted EPS ($USD)$(0.13) $(0.58) $(0.11)
Adjusted Net Income (Loss) ($USD Millions)$(74) $64 $27
Adjusted Diluted EPS ($USD)$(0.09) $— $(0.09)
Adjusted EBITDA ($USD Millions)$122 $342 $323
Adjusted EBITDA Margin (%)16.3% 36.0% 33.9%
Operating & Maintenance Expense ($USD Millions)$569 $563 $579
Revenue Efficiency (%)97.0% 94.5% 93.5%

Segment revenue breakdown:

SegmentQ4 2023Q3 2024Q4 2024
Ultra‑Deepwater Floaters Revenue ($USD Millions)$536 $668 $675
Harsh Environment Floaters Revenue ($USD Millions)$205 $280 $277
Total ($USD Millions)$741 $948 $952

KPIs:

KPIQ4 2023Q3 2024Q4 2024
Total Fleet Average Daily Revenue ($USD)$407,800 $436,800 $434,700
Total Fleet Revenue Efficiency (%)97.0% 94.5% 93.5%
Total Fleet Rig Utilization (%)51.6% 63.9% 66.8%

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Contract Drilling Revenues ($USD Millions)Q1 2025n/a$870–$890 New
Revenue Efficiency (%)Q1 2025n/a~96.5% working rigs New
Additional Services/Reimbursables ($USD Millions)Q1 2025n/a$55–$65 New
O&M Expense ($USD Millions)Q1 2025n/a$610–$630 New
G&A Expense ($USD Millions)Q1 2025n/a$50–$55 New
Net Interest Expense ($USD Millions)Q1 2025n/a$140–$150 New
Capex ($USD Millions)Q1 2025n/a~$59 New
Cash Taxes ($USD Millions)Q1 2025n/a~$13 New
O&M Expense ($USD Billions)FY 2025$2.3–$2.45 (prelim, Q3 call) $2.3–$2.4 Narrowed
G&A Expense ($USD Millions)FY 2025$190–$200 (prelim) $190–$200 Maintained
Net Interest Expense ($USD Millions)FY 2025n/a$550–$555 New
Cash Taxes ($USD Millions)FY 2025n/a$65–$70 New
Capex ($USD Millions)FY 2025~$130 (prelim) ~130; ~$70 customer‑required; ~$60 sustaining Clarified
Year‑End Liquidity ($USD Billions)FY 2025prelim provided (Q3 call) ~$1.35–$1.45 Quantified
Revolver Capacity ($USD Millions)Mid‑2025$576 declines to $510 late June 2025 Lower

Note: Management indicated FY 2025 revenue expectations vary due to Deepwater Skyros schedule changes and FX remeasurement in Brazil; specifics vs Q3 preliminary revenue were not fully articulated in transcript audio; O&M and G&A ranges reaffirmed .

Earnings Call Themes & Trends

TopicQ2 2024 (Prior Two)Q3 2024 (Prior One)Q4 2024 (Current)Trend
Technology/20K capabilityEmphasis on 20K operations and strong uptime; automation roll‑outs 20K BOP reliability teething issues; remediation underway Executed first two 20K subsea completions; further automation/robotics/HaloGuard deployments Improving execution; continued differentiation
Dayrates/asset qualityLeading‑edge high‑spec rates, tightening market Premium dayrates despite industry white space; contract awards >$500K/day Resilient rates (7G+ near/exceed $500K; 8th‑gen >$600K); commodity 7G may dip into $300Ks in isolated cases Resilience for high‑spec; selective softness low‑spec
Utilization/backlogActive fleet essentially fully contracted in 2024 2025 contract coverage >97%; backlog $9.3B Near 100% utilization in 2025; remaining 2025 backlog ~$3.1B to convert Strong; bridge to tighter 2026–27
Regional outlook (GoM/Brazil/Norway/Africa/Asia)GoM contracts (Atlas $635K/d 2028; Conqueror $530K/d 2025) Brazil tenders, Africa/Mediterranean programs 2026; Norway sold out GoM: 2025 flattish; Brazil: 32–33 rigs by H2’25; multiyear tenders late 2026; Norway/AP 2025 blocks up; Australia/India/Malaysia programs Multi‑region multiyear visibility
Cost structure/deleveragingFocus on free cash flow; preliminary 2025 capex ~$130M Sharpened debt reduction path; target net debt/EBITDA <3.5x by late 2026 Enterprise‑wide cost program launched; savings targets to be disclosed with Q1’25 Strengthening deleveraging
Leadership/successionn/an/aCEO succession: Keelan Adamson to become CEO Q2’25; Thigpen to Executive Chair Transition underway

Management Commentary

  • “In 2024, we continued to advance our position as the technological leader in offshore drilling by… executing the first two 20K subsea completions in the history of the industry… $2.4 billion in backlog we secured during the year.” — CEO Jeremy Thigpen .
  • “Our assets in the U.S. Gulf will remain in high demand… we are in direct discussions with a number of customers on multiyear term opportunities… starting in 2026 and 2027.” — CEO Jeremy Thigpen .
  • “During the quarter, we generated adjusted EBITDA of $323 million and cash flow from operations of approximately $206 million… quarter‑end total liquidity of approximately $1.5 billion.” — CFO Thad Vayda .
  • “We expanded the use of drilling automation… industrial robotics… HaloGuard… now operational on eight of our rigs.” — President & COO Keelan Adamson .
  • “We will commence an enterprise‑wide evaluation… identify areas… to materially improve our cost structure… savings target and timeline… when we report our first quarter 2025 results.” — CFO Thad Vayda .

Q&A Highlights

  • Dayrates and potential dips: Management sees limited fixtures in 2025 and expects resilience for high‑spec rigs; commodity 7G could see isolated dips into $300Ks, but not for Transocean’s higher‑spec units .
  • 7G cold‑stacked reactivations: Company remains disciplined; reactivation only with customer funding and acceptable returns; decisions likely aligned to 2026–27 programs given 12–18 month lead times .
  • Brazil demand trajectory: Petrobras rig count expected ~32–33 by H2’25; mix of tenders and direct negotiations; incumbency advantages support extensions and minimize white space .
  • Liquidity and cost program: Year‑end 2025 liquidity targeted at ~$$1.35–$1.45B; cost‑savings plan in progress, update due next quarter .
  • Leadership transition timing and rationale: Keelan Adamson to assume CEO role in Q2 2025 to ensure continuity; Thigpen to become Executive Chairman pending shareholder approval .

Estimates Context

  • SPGI/Capital IQ Wall Street consensus for Q4 2024 EPS and revenue was unavailable at time of request due to S&P Global daily limit and could not be retrieved; as such, we cannot present a definitive “vs. estimates” comparison for RIG’s Q4 2024. Values retrieved from S&P Global would normally be shown here; however, consensus detail was unavailable at this time.*

Where estimates may need to adjust: Given Q1 2025 guidance (revenues $870–$890M; O&M $610–$630M) and FY 2025 O&M/net interest ranges, sell‑side models should incorporate lower activity due to mobilizations/contract prep in Q1, higher O&M in H1, FX remeasurement impacts in Brazil, and cost‑savings program outcomes later in 2025 .

Key Takeaways for Investors

  • Quarter quality: Solid revenue and adjusted EBITDA progression with continued margin expansion y/y; sequential O&M/G&A pressures and lower revenue efficiency bear watching as remediation progresses .
  • Utilization/visibility: Near‑full 2025 coverage and multiyear 2026–27 negotiations support cash conversion and deleveraging narrative; backlog $8.3B remains substantial .
  • Rate resilience: High‑spec (7G+ and 8th‑gen) assets continue to price at premium dayrates; any softness is expected in commodity 7G/older assets rather than Transocean’s most differentiated fleet .
  • 2025 modeling: Bake in Q1 step‑down on mobilizations and prep, O&M uptick, and net interest expense trajectory; FY O&M $2.3–$2.4B and G&A $190–$200M guide the cost base .
  • Cost program catalyst: Management’s enterprise‑wide cost review with savings targets due next quarter is a key near‑term stock narrative driver alongside Brazil tender outcomes .
  • Leadership transition: CEO succession to Keelan Adamson in Q2 2025 emphasizes continuity of the high‑spec, tech‑lead strategy; watch for any strategic refinements post‑transition .
  • Regional mix: GoM flattish in 2025; Brazil/Norway/Africa/Asia provide multiyear demand visibility and optionality; FX remeasurement and local currency dynamics in Brazil should be monitored in models .
Sources: Company 8‑K Q4 2024 press release and exhibits, earnings call transcripts, and CEO succession 8‑K.

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