Transocean Q2 Earnings Call Highlights

Transocean NYSE: RIG reported second-quarter results that exceeded its prior revenue and cost guidance, supported by 98% fleet uptime, contract additions and lower-than-expected operating expenses. The offshore drilling contractor also said it expects to close its acquisition of Valaris in the fourth quarter, pending remaining regulatory approvals. Chief Executive Officer Keelan Adamson said the company generated an adjusted EBITDA margin of 32% during the quarter and reduced net debt to about $4.3 billion at quarter-end, down nearly $1.7 billion over the past 18 months. “The Transocean team again delivered exceptional operational performance in the second quarter, beating our guidance on both revenue and cost,” Adamson said. Second-Quarter Financial Performance Chief Financial Officer Thad Vega said second-quarter revenue totaled $966 million, at the upper end of the company’s guidance range. The result reflected the Deepwater Skyros working for the full quarter, one month longer than forecast, as well as additional recharge revenue and contractual cost-escalation provisions for certain rigs. Operations and maintenance expense was $608 million, while capital expenditures were $24 million, both below the low end of Transocean’s guidance ranges. Vega attributed the lower spending primarily to the timing and deferral of maintenance and out-of-service expenditures. General and administrative expense was $56 million, above guidance, but included approximately $11 million of Valaris acquisition-related costs. Excluding those costs, G&A was approximately $45 million, Vega said. Adjusted EBITDA was $312 million, representing a 32% margin. Free cash flow totaled $212 million, or a 22% margin, aided by operating performance and favorable working-capital changes. Unrestricted cash rose sequentially to about $510 million from $330 million. Total liquidity, including the undrawn revolving credit facility, was about $1.3 billion. Trailing 12-month net debt to EBITDA, including restricted cash primarily designated for debt repayment, improved to 2.8 times from 5.2 times at the start of 2025. Transocean plans to call the remaining $200 million principal amount of its 8% Deepwater Aquila notes at the end of the third quarter, after the next reduction in the call premium. Vega said the early retirement is expected to save about $22 million in interest expense through maturity. The company expects to finish 2026 with less than $4.8 billion in gross debt and total liquidity of $1.25 billion to $1.35 billion. Vega said Transocean increased its 2026 revenue guidance to reflect contract extensions for rigs previously expected to roll off this year and the Deepwater Proteus contract. Full-year cost guidance was also increased...