Good day, everyone, and welcome to today's Q1 2024 Transocean Earnings Call. [Operator Instructions] Please note this call is being recorded, and I will be standing by if you should need any assistance. It is now my pleasure to turn the conference over to Allison Johnson, Director of Investor Relations.

Thank you, [ Shelby ]. Good morning, and welcome to Transocean's First Quarter 2024 Earnings Conference Call. A copy of our press release covering financial results, along with supporting statements and schedules, including reconciliations and disclosures regarding non-GAAP financial measures are posted on our website at deepwater.com. Joining me on this morning's call are Jeremy Thigpen, Chief Executive Officer; Keelan Adamson, President and Chief Operating Officer; Mark Mey, Executive Vice President and Chief Financial Officer; and Roddie Mackenzie, Executive Vice President and Chief Commercial Officer. During the course of this call, Transocean management may make certain forward-looking statements regarding various matters related to our business and company that are not historical facts. Such statements are based upon current expectations and certain assumptions, and therefore, are subject to certain risks and uncertainties. Many factors could cause actual results to differ materially. Please refer to our SEC filings for our forward-looking statements and for more information regarding certain risks and uncertainties that could impact our future results. Also, please note that the company undertakes no duty to update or revise forward-looking statements. Following Jeremy, Keelan, and Mark's prepared comments, we will conduct a question-and-answer session with our team. During this time, to give more participants an opportunity to speak, please limit yourself to one initial question and one follow-up. Thank you very much. I will now turn the call over to Jeremy.

Thank you, Allison, and welcome to our employees, customers, investors and analysts participating on today's call. As reported in yesterday's earnings release, for the first quarter, Transocean delivered adjusted EBITDA of $199 million on $767 million of adjusted contract drilling revenues, resulting in an adjusted EBITDA margin of approximately 26%. While the pace of contract awards has moderated somewhat from this time last year, demand for high-specification ultra-deepwater drillships and harsh environment semisubmersibles remains extremely strong with improving day rates and lengthening terms. In fact, earlier this month, we announced a 365-day contract extension for the Deepwater Asgard with an independent operator in the U.S. Gulf of Mexico. The program is expected to commence in June 2024 and direct continuation of the recent program and includes additional services. The total contract value of approximately $195 million included a $10.9 million lump sum payment, which is not included in the estimated backlog of approximately $184 million. As part of the agreement, we will be upgrading the rigs' blow-out preventers with Kinetic Pressure Control Blowout Stopper units, or K-BOS. As we previously highlighted, K-BOS is a device that improves blow-out preventer sharing capability and is retrofittable to existing BOPs. Importantly, it also significantly shortens the time for the rig to complete an emergency disconnect, which facilitates the ability to expand the minimum operating water depths of deepwater floaters. Certain configurations of the device are capable of sharing any tubular and feeling the wellbore in less than 1 second. Over the past several years, Transocean has worked closely with Kinetic Pressure Control development and testing of K-BOS as well as with the regulator, the Bureau of Safety and Environment Enforcement, or BESI, to earn their support and approval. And I'm proud to report that this will mark the third unit that we have…

Thanks, Jeremy, and good morning, everyone. Jumping directly into the various regions. In the U.S. Gulf of Mexico, the rig supply/demand balance is such that in our analysis, the region could be short 1 rig in 2025. Customer behavior indicates that they understand they need to secure rigs quickly to avoid missing their project timelines. Notably, we are observing elevated demand from independent operators, both in the form of tenders and direct negotiations. Last month, 2 independent operators issued tenders for new programs that were not previously in our outlook. One includes a 6-month firm term commencing in the first half of 2025 with two 6-month options. The other is for 6 to 9 months of work commencing in the third quarter of 2025. Additionally, there are 2 major E&P companies currently out to market for multi-year programs. In Brazil, last month, Petrobras provided an update to its expected demand for floating rig 2030 requirements. This demand forecast suggests Petrobras may absorb up to 30 rigs through 2030, in line with our expectations that as a region for both Petrobras and the international oil companies, Brazil could require 36 floaters as soon as 2025. Part of this forecast is contingent upon discoveries in frontier areas such as the equatorial margin for earlier this month and for the second time this year, Petrobras disclosed another discovery. Obviously, our confidence that Petrobras will require at least 30 rig proves with each new discovery. The Roncador tender for up to 2 rigs is expected to be awarded in the third quarter with a commencement next year. The Cepea tender for up to 3 rigs is also slightly delayed as commercial proposals are now due mid-May. Petrobras also recently received approval of its discovery evaluation plan for one of its 3 resale blocks in…

Thanks, Keelan. As part of our efforts to improve the consistency, efficiency and repeatability of our operations, we continue to make progress with our automation initiatives in the first quarter. We achieved another milestone with our jointly-owned InteliWell system as we performed simultaneous fully automated online drilling, tripping and offline stand-building operations on the TRANSOCEAN NORGE in Norway, and we are currently preparing for an upcoming deployment in the U.S. Gulf of Mexico. We also achieved a milestone with our robotic riser system. We have handled more than 2,000 joints of a riser across our 3 installed systems. In addition to supporting the consistency of our operations, robotic riser also limits the exposure of our personnel to high-risk areas on the drill floor. Another way to think about this is we have now added over 1,100 working hours where our personnel were not exposed to red zone risk. Finally, before handing it over to him, I just want to recognize and thank Mark and the rest of the Transocean team who earlier this month worked together to complete a tremendous $1.8 billion refinancing, in conjunction with amending our revolving credit facility. Needless to say, these are very important transactions, which extended our liquidity runway and started the process of simplifying our balance sheet as we position ourselves for what we believe to be a multi-year upcycle. And for Mark, personally, I think these transactions represent an excellent capstone to an exceptionally successful career. This professionalism truly is something we witness across our organization as a whole day in and day out. And for that, I would like to thank each member of the Transocean team's unwavering commitment to delivering safe, reliable and efficient operations for our customers and value for our shareholders. Change and continuous improvement are the constants in our industry, and our team has continuously demonstrated an ability to adapt as we progress further into the sustained [Technical Difficulty]. In conclusion, the outlook for our assets and services remain strong. With the tightness of supply, the active negotiations, and the $500,000 per-day glass ceiling now broken in multiple jurisdictions around [Technical Difficulty], we are confident that we will continue to grow our backlog throughout the year. As we work towards securing more contract awards, we remain entirely committed to our operational execution with a focus on efficiently converting our $8.9 billion of backlog to revenue and cash flow. With that, I will now turn the call over to Mark for what I can't believe will be the last time he will discuss our financial results. Mark?

Thank you, Jeremy, and good day to all. During today's call, I will briefly recap our first quarter results and then provide guidance for the second quarter. I will conclude with an update on our expectations for the full year 2024, including our latest liquidity forecast. Before I get to the results, as Jeremy mentioned, we recently completed refinancing transactions totaling $1.8 billion, upsized by $300 million from our initial offering of $1.5 billion. The proceeds from the bond offering were utilized to fully redeem the 7.25% senior notes due 2025 and a 7.5% senior notes due 2026, and partially redeemed the 8% senior notes due 2027. The remaining outstanding balance on the ladder notes is approximately $525 million. Approximately $92 million of the 11.5% senior guaranteed [Technical Difficulty] that were not tendered remain outstanding until the end of July, at which time funds be placed into irrevocable escrow accounts will be utilized to [Indiscernible] many balance and fully retire the issue. These transactions improve our unsecured debt maturity profile, simplify our capital structure, and combined with the recent extension of our revolving credit facility through mid-2028, enhance our financial flexibility. On the ladder point, we are pleased that the current formulation of the credit facility permits us at a point in the future, the flexibility to make restricted payments, including distributions to shareholders and share repurchases. Concurrent with the aforementioned transactions, Moody's upgraded Transocean's corporate family rating to B3 from Caa1, reflecting the improvement in the agency outlook for the company and its business. We are confident we will continue to demonstrate the qualities necessary to receive further ratings upgrades as we continue to delever our balance sheet through the sustained cycle. As we reported in our press release, which includes additional detail on our results for the first…

[Operator Instructions]

[Operator Instructions] And we'll take our first question from Kurt Hallead with Benchmark.

Mark, congrats again, and good luck on what's next.

Thanks, Kurt.

I guess I just kind of -- it's always kind of fits and starts, right, in the context of getting rigs ready to work and getting them ready for contract. And I think that's the pros and cons of this business, right? So as you guys kind of risk-assess start-ups and timing and everything else, could you give us some insight as to how you guys go through the process so that we can kind of get on board with you guys and kind of think about the dynamics ourselves looking from the outside in?

Yes, Kurt. I wouldn't really say it's fits and starts. We go through a multi-phase process. We call them [Technical Difficulty] whereby we evaluate the project, we built out a timeline, we build out a team, we start ordering all the materials for that, and then we execute. But things happen because when you try and assess a rig's ability, you're doing it rather blind. Once you start getting on to the rig and you start testing systems and going into some of the hatches and holes and whatnot on the rig, this is all technical terms, obviously. Now you find things. And that causes you to expand your scope. In our case, especially, towing to Brazil was interesting this time. We've taken rigs into Brazil many times over many years. But for the first time ever, we had an interpretation of customs, which dragged out for 6 weeks and to let us getting into country. That is now being resolved and behind us. So going forward, we expect to able to get rigs in pretty comfortably. But I don't want you to think that contract prep is an ad hoc off-the-cuff type thing. It is very well-planned, and most times, very well-executed.

The other thing I'd add is we've had a lot of rig moves here over [Technical Difficulty] And most of those are getting behind us, where we're going on long-term contracts in these jurisdictions. So the cost that you've seen us accumulate over the course of the last couple of years with project costs and rig moves and customer acceptance and things like that will largely be behind us. And so I think that is going to lead to better financial results as we get into 2025 and beyond.

Yes, Kurt, it's Keelan here. And maybe just to add a little bit more color to that. The one aspect is obviously the risk associated -- the risk management associated with moving a rig, preparing a rig for a contract, getting it to the regulatory and customer acceptance processes, which do change and do migrate over time. But probably more importantly, ensuring that, that rig works very reliably and efficiently and safely when it comes out of that process. And what I am very pleased about is that the rigs that have gone through this, and we've done many of these and they've been very successful. KG2 is a fine example of a rig. Does it quite a lot. And in this particular case in Brazil, she's working at one of the top-performing rigs in Petrobras just after a few months. So I think to [Technical Difficulty] Mark's comments, we have a very robust project planning process for these events. The delays are somewhat not related to the discovery of new scope, but actually some really strange events that Mark alluded to on importation. But for instance, in India, there was a local fishermen strike outside of the harbor that we were moved in and we were blocked from getting any logistics to the rig for a couple of weeks. So there are some things clearly are difficult to manage and you have to understand that there's always risk with them.

Yes. I appreciate all that color. And it's kind of why I ask because I know it's never straightforward as it may seem on a piece of paper, right? Okay. So look, it looks like you got your contract durations extending, your day rates continue to grind higher. I guess my question really relates back to the overall market outlook. What do you think the prospects are to potentially get some, if not all, of your idle rigs back on contract between now and 2030 given the dynamics you put forward for Brazil and Africa, for example?

Yes, that's a really interesting question. As we go through what's happening around the world, we can say for the first time that every region that we're currently active in is going to have a call on rigs. So we're looking at, I think, actually bar not in every single region for rigs than they have to date. So at the moment, what's happening is there's a run on the active fleet. So basically, as the guys had alluded to in the prepared comments, there's a significant number of direct negotiations outside of tenders that are essentially trying to secure the rigs that are already active. So I think from that point of view, my view is that 2024 is going to see pretty much the entire active fleet sold out for 2 to 3 years going forward. And as we get towards the end of '24, that's when the call on the stacked fleet is going to happen. And of course, we've reiterated this many times that while there are active rigs available, we will not be [Technical Difficulty] rigs into that mix. We'll bide our time and wait until the economics are right for that. Certainly, there's no rush to do it at the moment. But I think we've got a pretty good shot at putting several of those rigs back to work, certainly before the end of the decade.

And we'll take our next question from Eddie Kim with Barclays.

Just wanted to start off with the Petrobras contracts. Last quarter, you said you expected those to be awarded in the second quarter this year. It looks like that timing has been pushed out a little bit to 3Q at least. Could you just talk about what's driving that delay? And is there a risk that these contract announcements could get pushed out even further towards the end of the year?

Yes. I think this is actually just a pretty standard operating procedure. With Petrobras pushing out by a couple of months, that's very typical. And actually, we believe that the rigs that are going to win those tenders are either already active rigs in country or they're going to have to pull new rigs in. So it's possible that pushes out a little further. But certainly, the awards should be made in '24. But I think it's for rigs that don't come off contract for some time yet. There's no real risk to that.

And then just a question on your 2 idle rigs, the Discoverer Inspiration and the DD3. I believe the Inspiration recently mobilized to Las Palmas. Is that rig effectively cold-stacked now, or is that still idle? Just any color on those 2 rigs? And if you could comment on kind of work prospects or opportunities for those rigs?

Yes, Eddie, it's Keelan again. The Inspiration essentially is repositioned into the Las Palmas area. She's not stacked, she's idle. We're obviously pitting her into plenty of opportunities, particularly in the Africa and Asia regions. The DD3 is idle in Aruba and waiting for its next opportunity. But I'll let Roddie maybe add some color to the other opportunities.

Yes. So we do have several things there, but we're looking to make sure that we get the right opportunity to put the rigs to work long term rather than moving them to short term to work. So at the moment, we're quite comfortable keeping them where they are until they get the right opportunity.

And if I could just squeeze one last one. Just on the diluted share count this quarter. It looked like a fairly material increase to about 955 million shares. Could you just comment on what drove that increase this quarter?

Yes, Eddie, we can take that offline and if you could speak to Allison, she can walk you through it. It's a pretty lengthy response.

And we'll take our next question from Doug Becker with Capital One.

Jeremy, you mentioned the Atlas getting the 15,000 work at $505,000 a day. When do you expect that rig to transition to the higher day rate? And how do you view the prospects for 20,000 work potentially next year?

I'm going to hand that to Roddie because he is neck deep in this conversation right now.

Yes. So we've got a lot of interest in that rig. And yes, so this was a prospect that we had, had with the current operator for some time. So it looks like a really good rate, but I have to say it was set a while ago when we got into negotiations on that. So the transition for her to go to the 20,000 is probably going to take place in the next contract. So basically, we finished out the one that we're currently on in the Shenandoah development. And then we go into this additional kind of 240- to 360-day program. And I think after that, we're transitioning into the much more attractive work. So that's good. And that's basically the second rig in the Gulf that's got above a high -- sorry, a 500 rate. So with the Asgard and the Atlas now contracted above 500, we actually hear that many of our competitors are at the same level or even higher, and we expect within the next few months that there will be 4 to 5 additional awards in the Gulf of Mexico above $500,000 a day.

It's definitely encouraging. Maybe just could you expand on the BOP issues with the Titan and really kind of thinking about it in the context of, is there a similar risk with the Atlas?

Yes. So the BOP, obviously, as I said in the call, the Titan's BOP is -- the first BOP is deployed and the rig is operating fully since mid-March. The issue we found was to a particular component on the second BOP. Clearly, that wasn't an issue on the first BOP. And so we've taken those components off the stack, we brought them back to town to work with our OEM provider to disassemble and inspect, and we should learn more in the next couple of weeks as to what that particular issue is. I have now based on what we have seen and the operation of the other stack, we have no concerns as to whether that's anything that would spread to the other stacks. It's simply a component reliability issue that we'll address and return to the rig.

Sounds good. And Mark, congratulations.

Thanks, Doug.

And we'll take our next question from Fredrik Stene with Clarksons Securities.

You talk a bit about the market here. I was also on the back of those discussions already. Wanting to hear what you're thinking about 7Gs versus 6Gs and how the different types of rigs are being approached in the market. You talked about repositioning the Inspiration. You talked about some extra work potentially for the Invictus, et cetera, but also how you're managing your own fleet within those 2 subsegments, keeping the Atlas and the Titan kind of away from that discussion for now. Are there any large discrepancy or bifurcation in terms of how rates are bid? Or is it all about having one rig at the right place at the right time that will still yield good rates also for 6G rigs in the future?

Yes. So I think you see -- so several of our 6th-gen rigs have got very attractive rates just in the right markets. So if the market requires a certain specification and the 6th-gen rigs qualify for that, then they do achieve very well. At the moment, there's a lot of activity around the high-specification rigs. So specifically, the Gulf of Mexico and some places in West Africa, that's where you've seen the rates really accelerate because the availability of these high-specification units is becoming more and more scarce. And the net effect of that is essentially we're securing very solid rates on the high-specification 7th-gen units, but that also trickles down to the 6th-gens when they end up being the only ones that are left. So I think you're going to see a pretty positive outlook for those rigs in the future. But at the moment, we're really seeing a lot of activity from the operators around securing the highest specification assets they can get their hands on.

Yes. And I think if you look back over the last couple of years, our approach to the market and our strategy around day rates have proven effective. We looked at our 1,400-tonne rigs, the highest load rigs in the market other than the Atlas and the Titan and started setting day rates with those rigs. And it's lifted all the 1,250-tonne rigs, where now our competitors are also pushing for $500,000 a day and then some. And then you'll definitely see a step change once we move to the new 20,000 contracts on the Atlas and the Titan.

That's very helpful. Also, you mentioned quite a lot of long-term opportunities that you foresee will materialize now over the next couple of months or quarters. There's been, I think, different approaches with different owners as to how we should price long-term work. Some will be accept a lower rate just because they would like the visibility of a longer-term contract, while others, and maybe yourself being the best example of that has been very firm on rate expectations also for long-term work. Do you expect a wide spread in the awards that we're going to see going forward? And I guess my question relates to should the market expect to be disappointed by some of these direct points, or should we see them all pulling in the same direction or being 450-plus in almost all of words?

Yes. I would say that I think you've seen 1 or 2 anomalies that may have been disappointing for the market, but those are individual companies with motivations that are definitely not aligned with our own. So for the majority of the long-term drillers, I think you're clearly going to see rates well above 450. Even for term work, I think you're going to see that there's maybe a small discount for term work, but we're talking about 10,000, 20,000 a day, we're not talking about 10% or 15%. So I think you'll see plenty of long-term work awarded, but it's going to be at very healthy rates. They might not be quite 5s, but they'll be pretty close. Certainly, some long-term stuff will be awarded above that 500 marker. But overall, the way we view it, as Jeremy has said, we've been very purposeful about which rigs get placed on which opportunities. So needless to say, for our top-spec assets we'll ensure that they are on very positive contracts with strategic importance to us as well, not just dollars.

All right. And Mark, congratulations. I think the transaction now in April was a good final milestone.

Thanks, Fredrik.

And our next question comes from Arun Jayaram with J.P. Morgan.

I was wondering if you could comment on just the 20,000 BOP market overall. One of your peers highlighted how the Paleogene in the Gulf of Mexico is one of the fastest-growing plays kind of globally. And I'm wondering if you could just maybe talk about what you're seeing there? How many rigs have that BOP capabilities and what's the future prospects there?

Yes, sure. You've basically got 4, possibly 5 operators that are active or going to be active in the 20,000 market as we would describe it. So there's plenty of work there to occupy the rigs that we have. But going forward, we think there's work to keep everything busy at the moment, not necessarily saying there's a need for adding capacity in that market at the moment. But we'll see how things shake out. There's a lot of operators that also believe that, that is a trend that will continue in the future. So as we go 4, 5, 6 years in the future, that more and more of those frontiers will require the higher pressures. But for the moment, I think we're in a very good position. We may be slightly undersupplied for that demand at the moment. But certainly, I think the operators see the value in the -- not only the equipment but the expertise and how to do it. So we're well-placed for both of our rigs at the moment.

Yes. And Arun, I think your other question was how many are capable of 20,000. There are only 2 rigs in the world with 20,000 BOP, that are the Titan and the Atlas. So we're in a very good position there.

It's a nice mix. Just broadly, can you talk about West Africa? Obviously, Namibia is an area that the market is pretty excited about. But could you talk about kind of demand trends you're seeing out of West Africa? I know in Halliburton's call, they mentioned now in 2025, you could see more deepwater activity there next year.

Yes, absolutely. So McKinsey's recent report was kind of describing what's going on in upstream investments expected in West Africa. And if you take specifically the deepwater sector, they expect to see an increase of 80% in spending between 2023 and 2027. So as we go through our chart of available opportunities in West Africa, that is the one piece of the Golden Triangle that's finally popped. North America was doing great, Gulf of Mexico, and of course, South America, we've lamented just how many rigs have gone in there and how many more will. But this last quarter, we've really seen a lot of positive movement in West Africa. And it's not just 1 or 2 countries, it's across several different areas. So I won't go through all the details on that, but certainly, the traditional players, Nigeria is back with 4 tenders. Angola's contracting activity has been very solid, and there's still a couple more to be awarded. And then as we go through Mozambique and Ghana and what have you, there's still plenty more scope to go there. So we do actually think that all the fleet that's currently in West Africa will either be renewed, extended, or put onto different programs, plus we're going to need 2 to 3 additional rigs in the next couple of years. So I think West Africa is looking very positive at the moment.

And we'll take our last question from David Smith with Pickering Energy Partners.

If I go to the data from a year ago and look at forward availability for the deepwater fleet, right, and just see what has been contracted sent, it's a much higher percentage of drillship availability that's been contracted versus the benign deepwater semis. And I was just hoping to get your thoughts on -- or what you're hearing from customers about the relative interest in drillships versus benign semis? And maybe how we should think about the natural pricing premium for the average 6th-gen drillship versus the average 6th-gen benign semi?

Maybe I'll try and answer that one, David, and then Roddie can kick in. What we're seeing from our customers, and it was a traditional view that development rigs were better suited -- semis were better suited to field developments and drillships were better suited to [Technical Difficulty] opportunities. Obviously, that has changed significantly over the last 5 to 10 years, and you will find drillships that are now a lot more versatile that our customers are perfectly comfortable developing fields with them and actually enjoy the redundancy in space and size and capability that they have as opposed to the semis. Where the semis certainly have an advantage is perhaps in shallower water or an area where there's a nation they prefer to move up that semi, but also have dynamically positioning capability in the event they need it for that particular area. So I think that speaks to why the situation is what it is right now. I consider the drillships to be the preference from what I speak to customers about. But I'll let Roddie maybe add a little bit more color to that.

Yes. No, I think that's spot on, Keelan. There are certain basins that we still have significant interest in the semis. So there's a couple of programs starting in '25 that will require, exactly as Keelan described, where you have this combination of a moved unit that can also do DP work as well. So I think it's obvious that the drillship market is extremely hot at the moment. The semi market is good. So by comparison, it may not look as good, but it's still pretty solid.

Very much appreciate the color. And if I could add one more on the market outlook. Totally agree on the future call on more rigs. Maybe one small partial solution is getting more out of the existing fleet with better calendar scheduling, right, with some rigs having 2 or 3 or more months between contracts. I wanted to ask what do you think contractors and operators can do to better manage those schedules and avoid the downtime between the end of one customer's program and the start of the next customer's job?

Yes. The #1 driver for that is the tightness in the market, right? So as we kind of described, we're in this transition over the past 6 months and certainly the next 6 months where many of the fleet are moving to longer-term contracts. So by necessity in a downturn, you may have to move the rig frequently to keep her busy to move from one customer to the next, and go through customer acceptances and those kind of things and mobilization. But as we get to this longer-term outlook, our backlog has been growing substantially now over the last couple of years. So you're going to see that transition that we're not going to be exposed to nearly as many movements of rigs. So that's going to tidy up very nicely for us certainly the remainder of this year and into next year.

That concludes the question-and-answer session. I will now turn the program back over to Allison Johnson, Director of Investor Relations, for any closing remarks.

Thank you, Shelby, and thank you, everyone, for your participation on today's call. We look forward to talking with you again when we report our second quarter 2024 results. Have a good day.

That concludes today's teleconference. Thank you for your participation. You may now disconnect.