Good day, everyone. Welcome to the Transocean Q1 2012 Earnings Conference Call. Today's conference is being recorded. At this time, for opening remarks and introductions, I would like to turn the conference over to Mr. Thad Vayda, Vice President of Investor Relations. Please go ahead, sir.

Thank you, Priscilla. Good day, and welcome to Transocean's First Quarter 2012 Earnings Conference Call. A copy of the press release providing our financial results, along with supporting statements and schedules, is posted on the company's website at deepwater.com. We've also posted a file containing 3 charts that may be referenced during today's call. This file can be found on the company's website by selecting Investor Relations, Quarterly Toolkit and then PowerPoint charts. The charts include average contracted dayrates by rig type, out-of-service rig months and operating and maintenance cost trends. The Quarterly Toolkit includes 4 additional financial tables for your convenience covering revenue efficiency, other revenue detail, daily operating and maintenance cost by rig type and contract intangible revenues. Joining me on this morning's call are Steven Newman, Chief Executive Officer; Greg Cauthen, Executive Vice President and Chief Financial Officer; and Terry Bonno, Senior Vice President, Marketing. Before I turn the call over to Steve, I'd like to point out that during the course of this call, participants may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts, including future financial performance, operating results and the prospects for the contract drilling business. Such statements are based on the current expectations and certain assumptions of management and are therefore subject to certain risks and uncertainties. As you know, it's inherently difficult to make projections or other forward-looking statements in a cyclical industry since the risks, assumptions and uncertainties involved in these forward-looking statements include the level of crude oil and natural gas prices, rig demand and operational and other risks, which are described in the company's most recent Form 10-K and other filings with the U.S. Securities and Exchange Commission. Should one or more of these risks and uncertainties materialize or underlying assumptions prove incorrect, actual results may vary materially from those indicated. Transocean neither intends to nor assumes any obligation to update or revise these forward-looking statements in light of developments, which differ from those anticipated. Also note that we may use various numerical measures on the call today that are or may be considered non-GAAP financial measures under Reg G. As I indicated earlier, you will find the required supplemental financial disclosure for these measures, including the most directly comparable GAAP measure and associated reconciliation on our website at deepwater.com under Investor Relations, Quarterly Toolkit and Non-GAAP Financial Measures and Reconciliations. Finally, to give more people an opportunity to participate in this call, please limit your questions to one initial question and one follow-up. Thank you. I'll now turn the call over to Steven Newman. Steven?

Thanks, Thad, and thank you all for joining us today. Before I comment on the quarter, I'd like to make some introductory comments on the market. The outlook for offshore drillers is positive based upon strong market fundamentals. With crude oil consistently trading in a range between $100 a barrel for WTI and $120 a barrel for Brent, global commodity prices remain in a range that we believe is supportive of our customers' project economics. Dwindling available capacity in most rig categories should support increasing dayrate trends in our business. There is very little remaining ultra-deepwater availability in 2012, and operators are already urgently focused on securing 2013 capacity. This should have a further beneficial impact on the conventional deepwater and midwater markets as any supply overhang, which might have existed as a result of rigs competing down the water depth spectrum should be a thing of the past. New discoveries such as Maersk's Azul-1 well and Cobalt's Cameia-1 well in the Angolan pre-salt have added to the excitement regarding West Africa. ENI's commitment to invest $50 billion and Anadarko's recent success with the Barquentine-4 appraisal well in Mozambique are contributing to East Africa's emergence as a fast-growing petroleum province. Further successes by Petrobras, OGX and others in Brazil and Anadarko, Shell, Exxon Mobil, Chevron and others in the Gulf of Mexico, suggest significant growth opportunities in these well-established markets. Recent conversations with customers in India and the Far East show continuing interest in those markets as well. In short, we're seeing a global increase in demand for all classes of drilling rigs. Transocean is extremely well positioned to benefit from this positive market environment. First and foremost, our people are among the best in the industry and continue to set us apart from our competitors, and I thank the…

Thank you, Steven, and good morning, everyone. As Steven mentioned, we reported net income attributable to controlling interest of approximately $42 million, or $0.12 per diluted share, for the first quarter 2012. Excluding approximately $184 million in certain net unfavorable items, our diluted earnings were $0.64 per share. This compares with similarly adjusted earnings of $0.18 per diluted share in the fourth quarter 2011. Net unfavorable items include an additional noncash charge of $118 million for completing the goodwill impairment related to our contract drilling reporting unit for we -- for which we recognized an estimated impairment of $5.2 billion in the fourth quarter 2011. Net unfavorable items also included a noncash charge of $62 million after taxes for an intangible asset impairment associated with our drilling management services reporting unit. This impairment was due to the declining market outlet for these services in the shallow water of the U.S. Gulf of Mexico, as well as the increased regulatory environment for obtaining drilling permits and the diminishing demand for these services. As a result of these conditions, we have decided to exit the U.S. Gulf of Mexico in order to focus our drilling management efforts primarily on the North Sea and emerging markets in Asia and West Africa where we see greater opportunity. The remaining net unfavorable items are as follows: $17 million of impairment of the GSF Rig 136, which was sold during the quarter; $16 million of other losses, primarily from the loss of sale of Challenger Minerals (North Sea) Limited and an impairment of our U.S. oil and gas properties; and $29 million of favorable discrete tax items. Revenue for the quarter decreased by $91 million to approximately $2.3 billion. $48 million of the decrease was due to lower revenue efficiency, which declined to 90.4% from 91.9%…

Thanks, Greg, and hello to everyone. Before we cover specific markets, I would like to make a few general comments. From a marketing standpoint, 2012 started as positively as 2011 ended. Robust commodity pricing continues to drive improving levels of contracting opportunities for all asset classes within our drilling fleet for the remainder of this year and well into 2013. We have executed $1.6 billion in contracts thus far for 2012 and have over $2.5 billion more in the pipeline. Since the last earnings call, we have executed $1.1 billion of contract backlog. Utilization and dayrates are continuing to improve and have reached levels not seen since the last cycle. In this extremely tight market, we secured our last available Ultra-Deepwater drillship, the Deepwater Expedition, for a 2-year firm term at a leading-edge dayrate of $650,000 a day, with 3 8-month options at $695,000 a day, plus a substantial mobilization fee. Additionally, we have extended our Harsh-Environment, Ultra-Deepwater semi, the Transocean Spitsbergen, for 2 years at $543,000 per day in Norway. Tendering and contracting activity in the deepwater market is also increasing, with several fixtures recently announced by our competitors with rates over the mid-400s. We expect to report more positive news in the near future regarding our own fleet, with outstanding opportunities in Australia, West Africa and Southeast Asia. Midwater activities continue to improve, especially in the U.K. and Norway. Multiple tenders for longer-term exploration and development programs have further improved an already tight market. We expect this improving demand for Harsh-Environment semis in the U.K. and Norway will further improve pricing in these markets. Demand for premium and standard jackups continues to increase, resulting in higher global utilization and dayrates that has led to further reactivation of some of the world's idle standard jackups. Key areas of demand…

With that, Priscilla, we're ready to open up the Q&A.

[Operator Instructions] We'll take our first question from Angie Sedita with UBS.

So Greg, on your operating cost guidance, you mentioned that Q2 will be obviously higher than Q1. Is it fair to assume that it would be closer to Q4 levels of one -- I think it was $1.56 billion?

I think a rough rule of thumb, a lot of the operating costs that were favorable in the first quarter were really timing related and a lot of those just flipped into the second quarter because of the shipyard delays and other items. But then, in addition, as I talked about, we've got another $50 million of reactivation costs that we had not -- were not in our plans on our last earnings call. So really, you're going to see that kind of increase we expect in the second quarter. Now we'll caution you, that's assuming all the shipyards we have planned for the second quarter stay on plan for the second quarter because a lot of times weather, while in progress, will delay shipyards and that's what we saw happen in the first quarter. But right now, our best guess is we do all the shipyards and that drives a significant increase in the second quarter. And then it falls back for the rest of the year, both as we do less shipyards and as our drilling management service activity declines during the year as we phase out the Gulf of Mexico operation.

Okay, okay. And then as a follow-up to that, on the BOP recertification process, is it still your assumption, Steve or -- that it will be completed late 2013 or mid-2013? And are you seeing any improvements in the length of time to complete these BOP recertifications or the cost?

I think in general, Angie, we're starting to see the benefits of the significant efforts that our OEM, the pressure control OEMs, have gone through over the last year or 18 months. So over the course of the rest of the year, we'll continue to see those benefits come into play. It will take us beyond 2012 into 2013, and then we just get back into a routine of executing recertification as part of our normal 5-yearly SPS work.

Okay, okay. And then finally, one for Terry, real quick. On the Deepwater Nautilus, I saw that it's up for renewal here in August -- it's in the Gulf of Mexico, will shell out a nice rate of $550,000 given the dynamics that we're seeing in the market today, but assume its fair that we should see a modest bump in that rate and will that rig still stay with Shell or move elsewhere?

Well, what I can say today, Angie, is that we are in advanced discussions with Shell on the unit. But since we haven't concluded a firm contract, I'm really unable to give you a whole lot of specifics on it. But I think in the very short term, we're going to have some positive news.

And we'll take our next question from Scott Gruber with Bernstein. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: I wanted to inquire about revenue efficiency in the nonlinear improvement trajectories you described, Steven. Are rig reactivations out of the shipyard holding back improvement in that revenue efficiency number?

By holding back, do you mean are they -- is the reactivation project a distraction from the operational efficiency efforts we're making? I would say, categorically, no. There's enough technical talent focused on the efforts and the initiatives aimed at improving our revenue efficiency that a standard reactivation project doesn't really distract from that. Did I get the essence of your question, Scott? Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: Well, I was actually focused on just the fact that putting these rigs back to service out of the yard may result in more interruptions during the first well versus continuing operation, such that we just -- because of the number of shipyard reactivations that you're undertaking today may be holding back that revenue efficiency number some.

That's purely as a result of the calculus. When you undertake a reactivation project, there is always a focus on initial teething problems and break-in problems when the rig gets on location and goes to work. But I'll tell you, we have made dramatic improvements in what we call our ready-to-operate procedures that are designed to address exactly that. That's all part of the pre-deployment testing that is a key component of our operational improvement efforts. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: Got it. And then turning to the market outlook. Clearly, strength across all segments. But how would you describe the relative strength across the floating rig market? Are you seeing a -- is your ability to push rates greatest still at the high end? Is it now transferring down into the fourth gen or in the midwater?

Scott, I think that with the tremendous tightness in the near term, that you're going to see the ability to leverage on the deepwater and the midwater, and we're very confident that we will be able to push those rates up a bit. And again, it's because of the tightness that we're seeing in the deepwater -- the ultra-deepwater arena. So they all -- so the answer is yes, we will be able to leverage this tightness in the market to improve the rates in the other segment. Scott Gruber - Sanford C. Bernstein & Co., LLC., Research Division: And how confident are you in your ability to push midwater rates outside of the North Sea? Going through the projects in the queue, quite a lot of growth to come in the North Sea but we don't see a whole lot of growth outside of the North Sea, so I was wondering if you could give a little bit color on non-North Sea and midwater.

Well, we're starting to see some smaller players come into the non-North Sea markets that are showing some interest and moving into some activity in West Africa and also in Southeast Asia. We do believe that we will be able to increase the rates for that fleet outside the North Sea. And I think that in a couple -- in the very short term, you're going to see some of our opportunities come to fruition and we'll be able to prove that up.

We'll go next to Kurt Hallead from RBC Markets.

I am -- obviously, the market dynamics are improving and have been improving for the better part of 6 to 9 months. Given that indication, Terry, on your comments with respect to the marketplace, I guess I am curious now. It appears to me that the cycle here is evolving in a very similar way as it always has. So in that context, can you do some comparison and contrast? And suggest -- is it -- can you confirm that? That this is evolving in the same way that it always has? Are there elements that you think are different and better? Are there some things that we should not expect to see that we've seen in prior market cycles? So just to clarify this one last point. You just mentioned that you expect to leverage what's going on with the ultra-deepwater, with the deepwater and the midwater. So is this going to be the classic cycle where the proverbial rising tide hits all boats? Or are some assets going to be left behind in this process?

Kurt, interesting question. As we look back over the last cycle, it feels a lot like that. The one thing that I am seeing currently though, the increase in the tendering activity feels a lot stronger. And with that, I can say that we are in serious discussions on quite a few of our Ultra-Deepwater units that didn't even go to tender. So these are direct negotiation situations. And then you see the significant open demand. And I think, if you do the count and run through the list, you can see that the open demand is about 34 rigs in the Ultra-Deepwater segment alone. If we add those years up, it's over 100 years of term. So with the open demand, that doesn't account the demand that we are talking about privately, and I know our competitors are also out there talking privately with their preferred customer base. So that's why it feels a little bit different. And then also, we have to keep -- be aware of the tremendous amount of influx of newbuilds that are going to come to the market in '14. So we can't ignore that dynamic either. So we're going to have to see how this plays out, but the market has been absorbing up to 20 Ultra-Deepwater units since 2007. So it's been tremendous growth with this steady commodity price that has given the customers a lot of confidence. With depletion of production and with all the new territories that are opening up, we see that the outlook looks very supportive of continued absorption of this fleet. So we're very optimistic, and the discussions that we're having with the customers, it's even going outside the boundaries of East Africa and the Angolan pre-salt. We're now talking to our customers about opportunities in Mauritania and the Kara Sea in Uruguay. So everyone is moving into a new dynamic based on the high oil prices that have continued to stimulate exploration in other territories that we've just begun to think about.

There has been a perception in the marketplace last year in -- that the -- that more rigs were going to be essentially worthless and beached and so on and so forth. So once again, predicated on their commentary, it looks like the operators are trying to get their hands on whatever rigs they can get their hands on irrespective of, say, the asset age and the capabilities. I mean, is that a fair comment?

Yes, I think that's a fair comment, Kurt. I mean, this is my 30th year in the industry and I was on some of those rigs when they first came out, and those girls can still drill. So we're very optimistic about the opportunities that we're going to see quickly. I'm excited about getting this. I made that comment about the $2.5 billion pipeline. We've got to work very hard. Our marketing teams are out there working hard to get these things out of the pipeline and on the books. We're very optimistic. I think you're going to see a pretty positive story. We'll prove up how these old girls can find some work.

We'll take our next question from Ian Macpherson with Simmons. Ian Macpherson - Simmons & Company International, Research Division: At the risk of flogging the dead horse and some material we've already covered, the expedition seemed like a pretty good rate for what was, I think, your worst ultra-deepwater asset 6 months ago. So is that an anomaly with the scarcity in the market for Q4? Or is that the benchmark for rigs like the Nautilus and the DD1 and the Explorer that have open windows at the end of this year?

I think you've got to look at availability in the market and match it with the program and urgency of the customer. I don't think that we could paint that every opportunity out there, right now, is going to get $650,000 a day. I mean, let's look at what the competitors are announcing right now. Of course, we announce a little bit different than the competitors. We announce a clean rate and our competitors sometimes co-mingle modes and bonuses in their numbers. But I think if you look at a clean rate, right now, I think you're going to hover around $600,000 a day, dependent upon the market that you're in. So we all know that West Africa is a bit more expensive, Brazil's a bit more expensive, Gulf of Mexico is not as expensive. So I think it's going to be dependent upon when we're going to be putting these rigs to work into '13, '14. The prices are going to modulate accordingly with where we are in the market. So I think it's not a hard standard. But certainly, with 2012 availability, it looks like the number for the Ultra-Deepwater DP rigs are going to be around the $600,000 range. Ian Macpherson - Simmons & Company International, Research Division: All right. And then Terry or Steven or whomever, could you help us with our expectations for the Richardson and the 534 with respect to timing and handicapping, whether those rigs come out at a market dayrate or a discounted dayrate, et cetera?

Okay, well, I'll just take that one. We are currently in a few tendering opportunities for Richardson. So we're just waiting to see. We believe that we will have some opportunities to bring the Richardson out. And again, it has to be the right opportunity because she is going to require significant upgrade to get her out. But we're optimistic that in this incredibly tight market, that we will be able to do that. The 534, we're still looking for an opportunity. Haven't found that yet. But again, we're going to scan the markets and look to see what we can do.

And we'll take our next question from Robin Shoemaker with Citigroup.

Steven, I just wanted to go back on the creation of a jackup, Standard Jackup fleet. I think I understand, which rigs are going into that. Can you just confirm which jackups are not going to be part of that entity?

The starting point for that, Robin, is our asset strategy. And so our desire to reduce our exposure to low spec, commodity class assets. The jackups that are characterized as low spec, commodity class jackups will be essentially all of the standard jackups.

Oh, okay. All right. That you classified, all right.

Yes, the way we report them on our Fleet Status Report.

Yes, okay. And so in terms of just -- in terms of your desire to reactivate rigs within that class and spend money in doing so, how does that work if you're looking to potentially divest that asset?

Well, it's a bit of a delicate balancing act. We're trying to respond to the needs of the marketplace and meet the needs of our customers. We're trying to create as much of a robust entity as possible so that when it does come time to divest ourselves of that entity, there's working rigs in there with prompt cash flow that can sustain the ongoing business and that will, even at that time, likely to be some remaining idle capacity that would provide some long-term growth opportunities for the entity.

And we'll take our next question from Waqar Syed with Goldman Sachs.

My question at first relates to the operating costs. Now we noticed in the detail, that very good detail that you provided about the daily operating costs for the working rigs, that number did not change much from the fourth quarter levels. We've been expecting some wage cost inflation and other materials inflation so we didn't see that. Is that still to come? Do you have a different cycle in terms of wage increases? Or this is kind of going forward daily operating cost for the working rigs?

A couple of drivers here. Exactly right, a lot of our wage increases occur in the second quarter. Not all of them. They vary around the world from country to country. But a lot of them occur in the second quarter later in the year. And also that it's very hard to compare one quarter to the preceding quarter because a lot of our daily operating costs are influenced by our maintenance -- our extraordinary maintenance projects. So in the first quarter, we tend to do fewer extraordinary maintenance projects because of budget cycles and weather in the North Sea and things like that. So it's better to look at a rolling average. So we still -- we talked about on the last call, we still expect average, year-over-year average daily operating cost to increase between 5% and 10%, between wage inflation, as well as maintenance inflation.

Okay, great. Another question, on your second and third gen fleet, do you have a number of rigs that may be due for 5-year service in that class in 2013?

Just on average, there would be about 1/5 of that fleet that would be due for its SPS in any one year. That's just the way special periodic survey cycles work.

And we'll take our next question from Joe Hill with Tudor, Pickering. Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Steven, just to kind of tack on to the last question. Should we generally expect an SPS on the fifth year anniversary from delivery date of a rig?

That's probably a starting point to a rule of thumb, Joe. But there are windows within which the classification societies allow you to carry out that work. And I don't remember exactly how large the window is, but if you're in your fourth or fifth cycle, you would have probably taken advantage of that window a couple of times during the life of the rig. So you may be off the -- you may off of a simple multiple of 5. Joe Hill - Tudor, Pickering, Holt & Co. Securities, Inc., Research Division: Okay. And my next question has to do with what operators are trying to do to free up some rig time. Can you give me an idea as to how much of the rig time is actually non-drilling mode, doing stuff like intervention, completion or construction? And are you seeing any efforts by operators to use a Cat A vessel to do that sort of work now that's greater than it has been historically? Or maybe efforts to do top haul drilling with a cheaper rig?

That's a really interesting question, Joe. I can give you a couple of perspectives on that. Over time, I think we have seen the relative allocation of our rigs activity having gone from 70% of the time it was drilling and 30% of the time it was doing completions work. And now it's -- with the complexity of the completions our customers are running, now it's as much as 50% drilling, 50% completions. I'm not aware of a significant effort on the part of the customer community to address that. I think we've seen it in a couple of instances where our customer has hired a specific rig to carry out the drilling operations and another rig to carry out the completion operations. We've been involved in a project like that in West Africa with Akpo for Total. But other than those limited instances that I'm directly familiar with, I'm not sure there's a trend.

Well, I think that what we're starting to see is Norway, Statoil is going to go out for an intervention vessel opportunity. And then we also understand that Petrobras will soon be coming to the market for some intervention opportunities. So it's just starting. So I don't have a way to handicap it or quantify it at this point, but we do. We just heard of these 2 opportunities.

We will go next to Matt Conlan with Wells Fargo.

I've got a couple of cleanup timing questions for you. First, on the Richardson, Discoverer 534, what's the length of the shipyard requirements that those rigs need to get back on the payroll?

Well, it depends on if we're going to -- if we would reactivate a rig and we would add some time to meet upgrade requirements that the customer would like. So I think getting on one particular program, we're looking at a 6-month reactivation. But again, it would depend on if we won the opportunity and the customer wants to do further upgrading. So that could extend the time horizon. So it's going to be dependent on what we're going to do for a specific project that we would win.

Okay, that's very helpful. And switching to the jackups. As you're moving those standard jackups into an independent company, I assume that's so it could either be sold or perhaps even spun off. Spinning it off probably takes a little bit more time. What's the soonest you think you could be in position to be ready for a spinoff with audited financials and stuff like that?

The critical path timeline for that, Matt, would be the audited financials. And that's not a 2012 event. It's probably second half of 2013.

We'll take our next question from Robert MacKenzie from FBR Capital Markets. Robert MacKenzie - FBR Capital Markets & Co., Research Division: Rob MacKenzie here, guys. I wanted to go back to the cost question a little bit, not so much -- not the daily operating cost, but the downtime cost. That tends to vary on a per day basis. Obviously, it's quite a bit and I understand you've given us full year guidance. But what really are the moving parts there? Is it really just timing of when you pay the shipyard when a rig's down? Or what is there? Can you help us understand that better?

Sure. There's really a couple of big drivers. Some of -- a lot of our shipyards are what we refer to as contract preparation shipyards. So they're shipyards, they're being done to meet various customer requirements prior to starting a new contract. And a lot of times, under our accounting method, costs that relate to that contract preparation get deferred and amortized over the life of the contract. Now any upfront revenue related to that also gets deferred and amortized. So when we have a lot of contract prep shipyards in the quarter like we did in the first quarter, that shows a lower shipyard out-of-service daily operating cost number because costs are being deferred. Now if it's a survey shipyard or a shipyard that's within a contract, if it's an older rig that takes a lot of work, then those costs can tend to be higher. So it really varies just based on the common mix of shipyards. And that's one of the things that we see happening in the first and second quarter. First quarter, 60% of our shipyard projects were contract prep projects. In the second quarter, about 30% of our projects are contract prep projects. So that drives up the average cost of those projects. Robert MacKenzie - FBR Capital Markets & Co., Research Division: Great, that's really helpful. And then I guess my follow-up would be on the Macondo situation. Understandably, you can't say much. But is there anything you guys can tell us about kind of what the bid/ask spread might look like for a potential settlement and what your view of timing might be?

No comment, Rob.

We'll go next to Andreas Stubsrud with Pareto.

I have a very quick question for you, Terry. You talked about Transocean Richardson and the tenders you're bidding on. Are some of them in Norway?

Andreas, I can't tell you all my secrets. We've looked at opportunities before in Norway for the Richardson. And to get her in Norway, it is a pretty extensive upgrade. It's not that we can't do it and not willing to do it. It's just, again, we got to have the right economic return to take a look at that. So we're open to looking at everything. So that's kind of how we've been charging, trying to put her back to work.

We have no further questions at this time.

Thank you very much. This concludes our first quarter 2012 results conference call. Thank you very much for your participation today, and we look forward to speaking with you again when we report the second quarter. Have a good day.

This does conclude today's conference. You may disconnect at any time.