Transocean Ltd. (RIG)

CIK: 0001451505. SIC: 1381 Drilling Oil & Gas Wells. Latest 10-K as of: 2026-02-23.

SIC breadcrumb: Mining > SIC Major Group 13 > SIC 1381 Drilling Oil & Gas Wells

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1451505. Latest filing source: 0001451505-26-000018.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-02-23. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001451505.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-05. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001451505.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001451505-26-000044.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-05-05. Report date: 2026-03-31.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Information

The statements included in this quarterly report regarding future financial performance and results of operations and other statements that are not historical facts are forward-looking statements within the meaning of Section 27A of the United States (“U.S.”) Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934.  Forward-looking statements in this quarterly report include, but are not limited to, statements about the following subjects:

◾the effect of any disputes and actions with respect to production levels by, among or between major oil and gas producing countries and any expectations we may have with respect thereto;

◾our results of operations, our cash flow from operations, our revenue efficiency and other performance indicators and optimization of rig-based spending;

◾the offshore drilling market, including the effects of variations in commodity prices, supply and demand, utilization rates, dayrates, customer drilling programs, customer strategy, stacking and reactivation of rigs, the impact of changes to regulations in jurisdictions in which we operate and changes in the global economy or market outlook for our industry, or the various geographies in which we operate;

◾customer drilling contracts, including contract backlog, force majeure provisions, contract awards, commencements, extensions, cancellations, terminations, renegotiations, contract option exercises, contract revenues, early termination fees, indemnity provisions and rig mobilizations;

◾the addition of renewable or other energy alternatives to meet local, regional or global demand for energy, and efforts by us or our customers, to reduce greenhouse gas emissions or operating intensity thereof;

◾liquidity, including availability under our Secured Credit Facility, as defined in this periodic report, and adequacy of cash flows for our obligations;

◾debt, including interest rates, credit ratings and our evaluation or decisions with respect to any potential liability management transactions or strategic alternatives intended to prudently manage our liquidity, debt maturities and other aspects of our capital structure and any litigation, potential or alleged defaults and discussions with creditors related thereto;

◾upgrade, shipyard, reactivations and other capital projects, including the level of expected capital expenditures and the timing and cost of completing capital projects, relinquishment or abandonment, expected downtime and lost revenues;

◾the cost and timing of acquisitions and reactivations, and the proceeds and timing of dispositions;

◾

our expectations regarding the timing, completion and anticipated benefits of the proposed business combination (the “Business Combination”) with Valaris Limited, an exempted company limited by shares incorporated under the laws of Bermuda (“Valaris”);

◾tax matters, including our effective tax rate, uncertain tax positions, changes in tax laws, treaties and regulations, tax assessments, tax incentive programs and liabilities for tax issues in the tax jurisdictions in which we operate or have a taxable presence;

◾legal and regulatory matters, including results and effects of current or potential legal proceedings and governmental audits and assessments, outcomes and effects of internal and governmental investigations, customs and environmental matters;

◾insurance matters, risk tolerance and risk response, including adequacy and solvency of insurance, renewal of insurance, insurance proceeds and cash investments of our wholly owned captive insurance company;

◾effects of accounting changes and adoption of accounting policies; and

◾investment in recruitment, retention and personnel development initiatives, the timing of, and other matters concerning, severance payments, benefit payments and maintaining agreements with labor unions.

Forward-looking statements in this quarterly report are identifiable by use of the following words and other similar expressions:

◾

anticipates

◾

budgets

◾

estimates

◾

forecasts

◾

may

◾

plans

◾

projects

◾

should

◾

believes

◾

could

◾

expects

◾

intends

◾

might

◾

predicts

◾

scheduled

​

​

Such statements are subject to numerous risks, uncertainties and assumptions, including, but not limited to:

◾those described under “Item 1A. Risk Factors” included in Part I of our annual report on Form 10-K for the year ended December 31, 2025;

◾the effects of actions by, or disputes among or between, members of the Organization of the Petroleum Exporting Countries and other oil and natural gas producing countries with respect to production levels or other matters related to the prices of oil and natural gas;

◾the adequacy of and access to our sources of liquidity;

◾our inability to renew drilling contracts at comparable, or improved, dayrates and to obtain drilling contracts for our rigs that do not have contracts;

◾our operational performance;

◾the cancellation of drilling contracts currently included in our reported contract backlog;

◾losses on impairment of long-lived assets;

◾shipyard and other delays;

◾the results of meetings of our shareholders;

◾changes in political, social and economic conditions, including the effects of political and military disputes;

◾the possibility of changes in tax, environmental, trade, immigration and other laws, regulations and policies, including the imposition of tariffs, economic or trade sanctions or other trade barriers and actions of government that impact, whether directly or indirectly, oil and gas operations;

◾the effect and results of litigation, regulatory matters, settlements, audits, assessments and contingencies;

◾the availability of borrowings under our Secured Credit Facility, as well as the timing of any amendments thereto; and

◾other factors discussed in this quarterly report and in our other filings with the U.S. Securities and Exchange Commission (“SEC”), which are available free of charge on the SEC website at www.sec.gov.

The foregoing risks and uncertainties are beyond our ability to control, and in many cases, we cannot predict the risks and uncertainties that could cause our actual results to differ materially from those indicated by the forward-looking statements.  Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated.  All subsequent written and oral forward-looking statements attributable to us or to persons acting on our behalf are expressly qualified in their entirety by reference to these risks and uncertainties.  You should not place undue reliance on forward-looking statements, each of which speaks only as of the date of the particular statement.  We expressly disclaim any obligations or undertaking to release publicly any updates or revisions to any forward-looking statement to reflect any change in our expectations or beliefs with regard to the statement or any change in events, conditions or circumstances on which any forward-looking statement is based, except as required by law.

- 12 -

Table of Contents

Introduction

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.  As of April 28, 2026, we owned or had partial ownership interests in and operated 27 mobile offshore drilling units, consisting of 20 ultra-deepwater drillships and seven harsh environment semisubmersibles.

We provide, as our primary business, contract drilling services in a single operating segment, which involves contracting our mobile offshore drilling rigs, related equipment and work crews to drill oil and gas wells.  We specialize in technically demanding regions of the global offshore drilling business with a particular focus on ultra-deepwater and harsh environment drilling services.  Our drilling fleet is one of the most versatile fleets in the world, consisting of drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services on a worldwide basis.

We perform contract drilling services by deploying our high-specification fleet in a single, global market that is geographically dispersed in oil and gas exploration and development areas throughout the world.  Although rigs can be moved from one region to another, the cost of moving rigs and the availability of rig-moving vessels may cause the supply and demand balance to fluctuate somewhat between regions.  Still, significant variations between regions do not tend to persist long term because of rig mobility.  The location of our rigs and the allocation of resources to operate, build or upgrade our rigs are determined by the activities and needs of our customers.

Our discussion and analysis of our financial condition, operating results and liquidity and capital resources are based upon, and should be read in conjunction with, our condensed consolidated financial statements and the notes thereto, included under “Item 1. Financial Statements” in this quarterly report on Form 10-Q and with “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K for the year ended December 31, 2025.

Significant Events

Agreement to acquire Valaris—On February 9, 2026, we and Valaris entered into a Business Combination Agreement (the "Agreement") providing for the Business Combination.  Pursuant to the Agreement, and on the terms and subject to the conditions thereof, we will acquire all of the issued and outstanding common shares, par value $0.01 each, of Valaris (the “Valaris Shares”) in exchange for Transocean Ltd. shares, par value $0.10 each, at an exchange ratio of 15.235 Transocean Ltd. shares for each Valaris Share.  See Notes to Consolidated Financial Statements—Note 1—Business.

Disposal of assets—In the three months ended March 31, 2026, we completed the sale of the ultra-deepwater floaters Deepwater Champion and Discoverer India, together with related assets, for aggregate net cash proceeds of $27 million, including $3 million received as a deposit in the year ended December 31, 2025.  See “—Liquidity and Capital Resources.”

Debt redemption—In March 2026, we made a cash payment of $365 million, including an early redemption premium, to retire the outstanding $358 million aggregate principal amount of the 8.375% senior secured notes due February 2028 (the “8.375% Senior Secured Notes”).  See “—Liquidity and Capital Resources.”

Exercised warrants—In April 2026, we issued 9.7 million Transocean Ltd. shares as net settlement of 22.2 million warrants exercised by holders to purchase Transocean Ltd. shares.  See “—Liquidity and Capital Resources.”

Outlook

Drilling market—Our industry outlook remains positive, supported by numerous long-term forecasts indicating that hydrocarbons will continue to be a critical source of energy for the foreseeable future.  In response to supply chain constraints, limitations of renewable energy technologies, and persistent geopolitical instability, and most recently, the conflict in the Middle East, many governments and operators appear to be reassessing their energy strategies.  Rather than accelerating a shift away from fossil fuels, many policy makers are prioritizing energy security, including from domestic sources, resulting in a diverse and resilient supply portfolio.  This shift underscores the continued need for accessible, reliable, cost-effective, and transportable energy sources, with offshore oil and gas increasingly viewed as a strategic asset.  We believe these dynamics will support sustained, long-term demand for oil and natural gas.

In the context of the natural depletion

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-02-23. Report date: 2025-12-31.

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations

Introduction

Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells.  As of February 17, 2026, we owned or had partial ownership interests in and operated 27 mobile offshore drilling units, consisting of 20 ultra-deepwater drillships and seven harsh environment semisubmersibles.

We provide, as our primary business, contract drilling services in a single operating segment, which involves contracting our mobile offshore drilling rigs, related equipment and work crews to drill oil and gas wells.  We specialize in technically demanding regions of the global offshore drilling business with a particular focus on ultra-deepwater and harsh environment drilling services.  Our drilling fleet is one of the most versatile fleets in the world, consisting of drillships and semisubmersible floaters used in support of offshore drilling activities and offshore support services on a worldwide basis.

We perform contract drilling services by deploying our high-specification fleet in a single, global market that is geographically dispersed in oil and gas exploration and development areas throughout the world.  Although rigs can be moved from one region to another, the cost of moving rigs and the availability of rig-moving vessels may cause the supply and demand balance to fluctuate somewhat between regions.  Still, significant variations between regions do not tend to persist long term because of rig mobility.  The location of our rigs and the allocation of resources to operate, build or upgrade our rigs are determined by the activities and needs of our customers.

The information contained in this section should be read in conjunction with the information contained in “Part I. Item 1. Business,” “Part I. Item 1A. Risk Factors” and the audited consolidated financial statements and the notes thereto included under “Item 8. Financial Statements and Supplementary Data” elsewhere in this annual report on Form 10-K.  The following discussion of our results of operations and liquidity and capital resources includes comparisons for the years ended December 31, 2025 and 2024.  For a discussion, including comparisons, of our results of operations and liquidity and capital resources for the years ended December 31, 2024 and 2023, see “Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our annual report on Form 10-K for the year ended December 31, 2024, filed with the United States (“U.S.”) Securities and Exchange Commission on February 18, 2025.

- 26 -

Table of Contents

Significant Events

Agreement to acquire Valaris—On February 9, 2026, we and Valaris Limited, an exempted company limited by shares incorporated under the laws of Bermuda ("Valaris"), entered into a Business Combination Agreement (the "Agreement") providing for the combination of Transocean and Valaris (the "Business Combination").  Pursuant to the Agreement, and on the terms and subject to the conditions thereof, we will acquire all of the issued and outstanding common shares, par value $0.01 each, of Valaris (the “Valaris Shares”) in exchange for Transocean Ltd. shares, par value $0.10 each, at an exchange ratio of 15.235 Transocean Ltd. shares for each Valaris Share.  See Notes to Consolidated Financial Statements—Note 1—Business.

Held-for-sale asset impairments—In the year ended December 31, 2025, we recognized an aggregate loss of $3.05 billion ($3.04 billion, or $3.16 per diluted share, net of tax), associated with the impairment of six ultra-deepwater floaters and one harsh environment floater, together with related assets, which we determined were impaired at the time we classified the assets as held for sale, and two ultra-deepwater floaters, together with related assets, which we previously classified as held for sale and determined the assets were further impaired.  See “—Operating Results.”

Disposal of assets—In the year ended December 31, 2025, we completed the sale of the ultra-deepwater floaters Development Driller III, Discoverer Americas, Discoverer Clear Leader, Discoverer Inspiration, Discoverer Luanda and GSF Development Driller I, together with related assets, for aggregate net cash proceeds of $71 million.  In January 2026, we completed the sale of the ultra-deepwater drillship Discoverer India, together with related assets, for aggregate net cash proceeds of $14 million, including $1 million received as a deposit in the year ended December 31, 2025.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Share issuance—In September 2025, we issued 143.8 million Transocean Ltd. shares and received $421 million aggregate cash proceeds, net of issue costs.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt issuance—In October 2025, we issued $500 million aggregate principal amount of 7.875% senior guaranteed notes due October 2032 (the “7.875% Senior Guaranteed Notes”) and received $492 million aggregate cash proceeds, net of issue costs.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt redemption—In October 2025, we made an aggregate cash payment of $903 million, including related costs, to fully redeem $655 million aggregate principal amount of 8.00% senior notes due February 2027 and $248 million aggregate principal amount of 6.875% senior secured notes due February 2027.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt exchanges—In the year ended December 31, 2025, we entered into separate, individually negotiated agreements (as amended, the “Exchange Agreements”) with certain holders of the 4.00% senior guaranteed exchangeable bonds due December 2025 (the “4.00% Exchangeable Bonds”).  In the year ended December 31, 2025, the holders exchanged $196 million aggregate principal amount of 4.00% Exchangeable Bonds under the terms of the Exchange Agreements and received an aggregate 73.3 million Transocean Ltd. shares.  See “—Operating Results” and “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt tender offers—In October 2025, we made an aggregate cash payment of $100 million, including related costs, to complete cash tender offers for $89 million aggregate principal amount of the validly tendered 7.35% senior notes due December 2041 (the “7.35% Senior Notes”) and $16 million aggregate principal amount of the validly tendered 7.00% notes due June 2028.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Debt repurchases—In the year ended December 31, 2025, we made an aggregate cash payment of $36 million, including related costs, to complete open market repurchases of $36 million aggregate principal amount of the 7.00% notes due June 2028 and $1 million aggregate principal amount of the 7.35% Senior Notes.  See “—Liquidity and Capital Resources—Sources and uses of liquidity.”

Outlook

Drilling market—Our industry outlook remains positive, informed by numerous long-term forecasts indicating that hydrocarbons will continue to be a critical source of energy for the foreseeable future.  In response to persistent geopolitical instability, supply chain constraints, and the limitations of renewable energy technologies, many governments and operators are reassessing their energy strategies.  Rather than accelerating a shift away from fossil fuels, many policy makers are prioritizing energy security, resulting in a diverse and resilient supply portfolio. This shift underscores the continued need for accessible, reliable, cost-effective, and transportable energy sources, with offshore oil and gas increasingly viewed as a strategic asset.  We believe these dynamics will support sustained, long-term demand for oil and natural gas.

In the context of the natural depletion of existing fields, maintaining current oil and natural gas production levels will require both the development of existing resources and continued investment in exploration to identify new reserve opportunities.  We believe that oil and natural gas producers will invest a greater portion of their budgets in offshore drilling, and particularly in deepwater, where resource potential, production longevity, and project economics are favorable, to achieve their production and reserve replacement targets.

Although hydrocarbon prices remain sensitive to geopolitical events, macroeconomic policy decisions, and short-term supply fluctuations, we expect the overall economics of deepwater projects to remain attractive.  Deepwater and harsh-environment fields continue

- 27 -

Table of Contents

to generate competitive economic returns and are of generally lower carbon intensity compared to many other hydrocarbon sources, making them consistently compelling for capital deployment.

While the long-term outlook for offshore drilling activity remains positive across all major deepwater sectors, we expect our customers to continue to be disciplined in capital spending.  Consistent with our prior expectations, tendering activity and contract awards increased during the latter part of 2025.  Additional contracting opportunities are anticipated through the first half of 2026 for projects commencing in 2027 and 2028.  In the near term, continued pressure on utilization may result in the retirement of uncompetitive rigs.

We expect demand for harsh-environment rigs to remain strong through the end of the decade, driven primarily by activity in Norway—the largest market for such units—and by emerging opportunities in new geographies suited for harsh-environment capable rigs.  Several high-specification semisubmersible rigs that previously mobilized to other harsh-environment markets such as Namibia, the Black Sea, and Australia may ultimately return to the region depending on project requirements and market conditions.

Fleet status—We refer to the availability of our rigs in terms of the uncommitted fleet rate.  The uncommitted fleet rate is defined as the number of uncommitted days divided by the total number of rig calendar days in the measurement period, expressed as a percentage.  An uncommitted day is defined as a calendar day during which a rig is idle or stacked, is not contracted to a customer and is not committed to a shipyard.  The uncommitted fleet rates exclude the effect of priced options.  As of February 19, 2026, our uncommitted fleet rates for each of the five years in the period ending December 31, 2030 were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

  ​ ​ ​

2026

  ​ ​ ​

2027

  ​ ​ ​

2028

  ​ ​ ​

2029

  ​ ​ ​

2030

Uncommitted fleet rate

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

​

36

%  

​

52

%  

​

82

%  

​

91

%  

​

98

%

​

Harsh environment floaters

​

5

%  

​

45

%  

​

97

%  

​

100

%  

​

100

%

​

Performance and Other Key Indicators

Contract backlog—We believe our contract backlog provides an indicator of our future revenue-earning opportunities.  Contract backlog is defined as the maximum contractual operating dayrate multiplied by the number of days remaining in the firm contract period, including certain performance-based provisions for which achievement is probable, excluding provisions for mobilization, demobilization, contract preparation, other incentive provisions or reimbursement revenues, which are not expected to be material to our contract drilling revenues.  The contract backlog represents the maximum contract drilling revenues that can be earned considering the reported operating dayrate in effect during the firm contract period.  The contract backlog for our fleet was as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

February 19,

​

October 15,

​

February 12,

​

  ​ ​

2026

  ​ ​

2025

  ​ ​

2025

​

​

(in millions)

Contract backlog

​

​

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

​

$

4,477

$

5,105

$

6,363

​

Harsh environment floaters

​

​

1,587

​

​

1,623

​

​

1,965

​

Total contract backlog

$

6,064

$

6,728

$

8,328

​

Our contract backlog includes only firm commitments which are represented by signed drilling contracts or, in some cases, by other definitive agreements awaiting contract execution.  It does not include conditional agreements and options to extend firm commitments.

The average contractual dayrate relative to our contract backlog is defined as the average maximum contractual operating dayrate to be earned per operating day and certain performance-based provisions expected to be achieved in the measurement period.  An operating day is defined as a day for which a rig is contracted to earn a dayrate during the firm contract period after operations commence.  At February 19, 2026, the contract backlog and average contractual dayrates for our fleet were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

For the years ending December 31,

​

  ​ ​ ​

Total

  ​ ​ ​

2026

  ​ ​ ​

2027

  ​ ​ ​

2028

  ​ ​ ​

2029

  ​ ​ ​

2030

​

​

(in millions, except average dayrates)

Contract backlog

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

$

4,477

$

1,819

$

1,576

​

$

627

​

$

359

​

$

96

​

Harsh environment floaters

​

​

1,587

​

​

922

​

​

632

​

​

33

​

​

—

​

​

—

​

Total contract backlog

$

6,064

$

2,741

$

2,208

​

$

660

​

$

359

​

$

96

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Average contractual dayrates

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

$

470,000

$

461,000

$

450,000

​

$

488,000

​

$

557,000

​

$

635,000

​

Harsh environment floaters

​

$

449,000

$

447,000

$

454,000

​

$

424,000

​

$

—

​

$

—

​

Total fleet average

​

$

464,000

$

456,000

$

451,000

​

$

484,000

​

$

557,000

​

$

635,000

​

The actual amount of revenues earned and the actual periods in which revenues are earned will differ from the amounts and periods shown in the tables above due to various factors, including shipyard and maintenance projects, unplanned downtime and other factors that result in lower applicable dayrates than the full contractual operating dayrate.  Additional factors that could affect the amount and

- 28 -

Table of Contents

timing of actual revenues to be recognized include customer liquidity issues and contract suspension or termination that may be available to our customers under certain circumstances.

The contractual operating dayrate may be higher than the actual dayrate we ultimately receive because an alternative contractual dayrate, such as a waiting-on-weather rate, waiting-on-customer rate, repair rate, standby rate or force majeure rate, may apply under certain circumstances.  The contractual operating dayrate may also be higher than the actual dayrate we ultimately receive because of a number of factors, including rig downtime or suspension of operations.  In certain contracts, the actual dayrate may be reduced to zero if, for example, repairs extend beyond a stated period of time.  See “Part I. Item 1A. Risk Factors—Risks related to our business—Our current backlog of contract drilling revenues may not be fully realized.”

Average daily revenue—We believe average daily revenue provides a comparative measurement unit for our revenue-earning performance.  Average daily revenue is defined as operating revenues, excluding revenues for contract terminations, reimbursements and contract intangible amortization, earned per operating day.  The average daily revenue for our fleet was as follows:

​

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

  ​

2025

  ​ ​ ​

2024

  ​ ​ ​

2023

Average daily revenue

​

​

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

​

$

456,900

$

428,000

​

$

393,700

​

Harsh environment floaters

​

$

456,200

​

$

435,900

​

$

354,300

​

Total fleet average daily revenue

​

$

456,700

$

430,100

​

$

382,300

​

Our average daily revenue fluctuates relative to market conditions and our revenue efficiency.  The average daily revenue may be affected by incentive performance bonuses or penalties or demobilization fee revenues.  Revenues for a newbuild unit are included in the calculation when the rig commences operations upon acceptance by the customer.  We remove a rig from the calculation upon disposal or classification as held for sale, unless we continue to operate the rig, in which case we remove the rig upon completion or novation of the contract.

Revenue efficiency—We believe revenue efficiency measures our ability to ultimately convert our contract backlog into revenues.  Revenue efficiency is defined as actual operating revenues, excluding revenues for contract terminations and reimbursements, for the measurement period divided by the maximum revenue calculated for the measurement period, expressed as a percentage.  Maximum revenue is defined as the greatest amount of contract drilling revenues the drilling unit could earn for the measurement period, excluding revenues for incentive provisions, reimbursements and contract terminations.  The revenue efficiency rates for our fleet were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

2025

  ​ ​ ​

​

2024

  ​ ​

​

2023

Revenue efficiency

​

​

​

​

​

​

​

​

Ultra-deepwater floaters

​

95.7

%

​

93.4

%

​

96.5

%

Harsh environment floaters

​

98.4

%

​

97.5

%

​

97.8

%

Total fleet average revenue efficiency

​

96.5

%

​

94.5

%

​

96.8

%

Our revenue efficiency rate varies due to revenues earned under alternative contractual dayrates, such as a waiting-on-weather rate, waiting-on-customer rate, repair rate, standby rate, force majeure rate or zero rate, that may apply under certain circumstances.  Our revenue efficiency rate is also affected by incentive performance bonuses or penalties.  We include newbuilds in the calculation when the rigs commence operations upon acceptance by the customer.  We exclude rigs that are not operating under contract, such as those that are stacked.

Rig utilization—We present our rig utilization as an indicator of our ability to secure work for our fleet.  Rig utilization is defined as the total number of operating days divided by the total number of rig calendar days in the measurement period, expressed as a percentage.  The rig utilization rates for our fleet were as follows:

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

2025

  ​ ​

​

2024

  ​ ​

​

2023

Rig utilization

​

​

  ​ ​ ​

​

​

  ​ ​ ​

​

​

Ultra-deepwater floaters

​

69.1

%

​

57.3

%

​

49.4

%

Harsh environment floaters

​

82.6

%

​

71.1

%

​

59.1

%

Total fleet average rig utilization

​

72.4

%

​

60.5

%

​

51.9

%

Our rig utilization rate declines as a result of idle and stacked rigs and during shipyard, contract preparation and mobilization periods.  We include newbuilds in the calculation when the rigs commence operations upon acceptance by the customer.  We remove a rig from the calculation upon disposal or classification as held for sale, unless we continue to operate the rig, in which case we remove the rig upon completion or novation of the contract.  Accordingly, our rig utilization can increase when we remove idle or stacked units from our fleet.

- 29 -

Table of Contents

Operating Results

Year ended December 31, 2025 compared to the year ended December 31, 2024

The following is an analysis of our operating results.  See “—Performance and Other Key Indicators” for definitions of operating days, average daily revenue, revenue efficiency and rig utilization.

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

​

​

​

​

​

  ​ ​ ​

2025

​

  ​ ​ ​

2024

​

  ​ ​ ​

Change

  ​ ​ ​

% Change

​

​

​

(in millions, except day amounts and percentages)

​

Operating days

​

​

8,220

​

​

7,848

​

​

​

372

​

5

%

Average daily revenue

$

456,700

​

​

$

430,100

​

​

$

26,600

​

6

%

Revenue efficiency

​

​

96.5

%  

​

​

94.5

%  

​

​

​

​

​

​

Rig utilization

​

​

72.4

%  

​

​

60.5

%  

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Contract drilling revenues

$

3,965

​

​

$

3,524

​

​

$

441

​

13

%

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Operating and maintenance expense

​

​

(2,406)

​

​

​

(2,199)

​

​

​

(207)

​

(9)

%

Depreciation and amortization expense

​

​

(659)

​

​

​

(739)

​

​

​

80

​

11

%

General and administrative expense

​

​

(195)

​

​

​

(214)

​

​

​

19

​

9

%

Loss on impairment of assets

​

​

(3,049)

​

​

​

(772)

​

​

​

(2,277)

​

nm

​

Gain (loss) on disposal of assets, net

​

​

7

​

​

​

(17)

​

​

​

24

​

nm

​

Operating loss

​

​

(2,337)

​

​

​

(417)

​

​

​

(1,920)

​

nm

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Other income (expense), net

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Interest income

​

​

40

​

​

​

50

​

​

​

(10)

​

(20)

%

Interest expense

​

​

(555)

​

​

​

(362)

​

​

​

(193)

​

(53)

%

Gain on retirement of debt

​

​

3

​

​

​

161

​

​

​

(158)

​

(98)

%

Other, net

​

​

(99)

​

​

​

45

​

​

​

(144)

​

nm

​

Loss before income taxes

​

​

(2,948)

​

​

​

(523)

​

​

​

(2,425)

​

nm

​

Income tax benefit

​

​

33

​

​

​

11

​

​

​

22

​

nm

​

Net loss

$

(2,915)

​

​

$

(512)

​

​

$

(2,403)

​

nm

​

“nm” means not meaningful.

Contract drilling revenues—Contract drilling revenues increased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) approximately $140 million resulting from higher average daily revenues, (b) approximately $110 million resulting from increased utilization, (c) approximately $80 million resulting from increased revenue efficiency for the fleet, (d) approximately $70 million resulting from increased activity for the operations of our newbuild ultra-deepwater drillship Deepwater Aquila and (e) approximately $50 million resulting from increased reimbursement revenues.  These increases were partially offset by approximately $10 million resulting from one less calendar day in the year ended December 31, 2025.

Costs and expenses—Operating and maintenance costs and expenses increased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) approximately $85 million resulting from increased activity for the operations of our active fleet, (b) approximately $50 million resulting from increased reimbursable costs, (c) a net increased loss of approximately $45 million associated with certain legal outcomes that resulted in a net non-cash loss of $20 million in the current year compared to a net gain of $25 million from favorable settlements in the earlier year, (d) approximately $35 million resulting from the operations of our newbuild Deepwater Aquila and (e) approximately $35 million resulting from the estimated effect of inflation on personnel and other operating costs.  These increases were partially offset by the following: (a) approximately $25 million resulting from rigs classified as held for sale or sold, (b) approximately $15 million resulting from lower supply chain costs and (c) approximately $5 million resulting from costs associated with the early retirement of certain personnel in the earlier year.

Depreciation and amortization expense decreased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) $97 million resulting from rigs sold or classified as held for sale and (b) $9 million resulting from assets that were retired or had reached the end of their useful lives, partially offset by (c) $27 million resulting from one acquired harsh environment semisubmersible, one newbuild ultra-deepwater drillship and other property and equipment placed into service in the earlier year.

General and administrative costs and expenses decreased for the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) $8 million resulting from decreased legal and professional fees, (b) $5 million resulting from decreased personnel costs, primarily associated with the early retirement of certain personnel in the earlier year, and (c) approximately $4 million resulting from decreased technology costs.

Impairment of assets—In the year ended December 31, 2025, we recognized a loss associated with the impairment of the ultra-deepwater floaters Deepwater Champion, Discoverer Americas, Discoverer Clear Leader, Discoverer India, Discoverer Luanda, GSF Development Driller I and the harsh environment semisubmersible Henry Goodrich together with related assets, which we determined were impaired at the time we classified them as held for sale, and Development Driller III and Discoverer Inspiration together with related

- 30 -

Table of Contents

assets, which were previously classified as held for sale and we determined were further impaired.  In the year ended December 31, 2024, we recognized a loss associated with the impairment of the ultra-deepwater floaters Deepwater Nautilus, Development Driller III and Discoverer Inspiration, together with related assets, which we determined were impaired at the time we classified them as held for sale.

Disposal of assets—In the year ended December 31, 2025, we recognized a net gain of $4 million associated with the disposal of rigs and related assets.  In the years ended December 31, 2025 and 2024, we recognized a net gain of $3 million and a net loss of $16 million, respectively, associated with the disposal of assets unrelated to rig sales.

Other income and expense—Interest expense increased in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) $204 million increased interest resulting from a decreased gain on the fair value adjustment of the bifurcated compound exchange feature embedded in the indenture governing the 4.625% senior guaranteed exchangeable bonds due September 2029 (the “4.625% Exchangeable Bonds”), (b) $55 million increased interest resulting from debt issued in the earlier year and (c) $15 million increased interest resulting from interest costs capitalized for our newbuild construction program completed in the earlier year, partially offset by (d) $79 million decreased interest resulting from debt repaid as scheduled or early retired.

In the year ended December 31, 2025, we recognized a net gain on retirement of debt due to the following: (a) a net gain of $4 million associated with the retirement of $105 million aggregate principal amount of notes validly tendered in the tender offers completed in the year, partially offset by (b) a net loss of $1 million associated with the redemption of $940 million aggregate principal amount of our debt securities.  In the year ended December 31, 2024, we recognized a net gain on retirement of debt due to the following: (a) a net gain of $144 million associated with the retirement of $845 million aggregate principal amount of notes validly tendered in the tender offers completed in the year and (b) a net gain of $17 million associated with the redemption of $852 million aggregate principal amount of our debt securities.

Other expense net, increased in the year ended December 31, 2025, compared to the year ended December 31, 2024, primarily due to the following: (a) a loss of $99 million associated with, pursuant to the Exchange Agreements, the issuance of additional Transocean Ltd. shares to certain holders of 4.00% Exchangeable Bonds in the current year, (b) a net increased loss of $29 million associated with currency exchange rate changes and (c) decreased income of $22 million associated with non-service components of net periodic benefit income.

Income tax expense—In the years ended December 31, 2025 and 2024, our effective tax rate was 1.1 percent and 2.2 percent, respectively, based on loss before income tax benefit.  In the years ended December 31, 2025 and 2024, the effect of various discrete period tax items was a net tax benefit of $193 million and $158 million, respectively.  In the year ended December 31, 2025, such discrete items included changes to various uncertain tax positions, valuation allowances, rig ownership changes and rig basis changes related to impairments.  In the year ended December 31, 2024, such discrete items included changes to deferred taxes resulting from operational and structural changes related to rig movements and asset impairments, changes to valuation allowances and settlements and expirations of various uncertain tax positions.  In the years ended December 31, 2025 and 2024, our effective tax rate, excluding discrete items, was 81.2 percent and 159.1 percent, respectively, based on income or loss before income tax expense.  In the year ended December 31, 2025 compared to the year ended December 31, 2024, our effective tax rate excluding discrete items increased primarily due to changes in the relative blend of income from operations in certain jurisdictions.

Due to our operating activities and organizational structure, our income tax expense or benefit does not change proportionally with our income or loss before income taxes.  We may have subsidiaries with tax expense on taxable earnings that exceeds the tax benefits in other jurisdictions, or vice versa, which sometimes results in a negative effective tax rate or unusually large effective tax rates relative to consolidated income or loss before income tax expense or benefit.  Our rig operating structures further complicate our tax calculations, especially in instances where we have more than one operating structure for the taxing jurisdiction and, thus, more than one method of calculating taxes depending on the operating structure utilized by the rig under the contract.

Liquidity and Capital Resources

Sources and uses of cash

In the year ended December 31, 2025, our primary sources of cash were net cash provided by our operating activities, net cash proceeds from the issuance of shares and net cash proceeds from the issuance of debt.  Our primary uses of cash were debt repayments and capital expenditures.

​

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

​

2025

  ​ ​

2024

  ​ ​

Change

​

​

(in millions)

Cash flows from operating activities

​

​

​

​

​

​

​

​

​

​

Net loss

​

$

(2,915)

$

(512)

$

(2,403)

​

Non-cash items, net

​

​

3,773

​

​

1,201

​

​

2,572

​

Changes in operating assets and liabilities, net

​

​

(109)

​

​

(242)

​

​

133

​

​

​

$

749

$

447

$

302

​

Net cash provided by operating activities increased primarily due to (a) increased cash received from customers and (b) decreased cash paid to suppliers, partially offset by (c) increased cash paid for personnel-related costs.

- 31 -

Table of Contents

​

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

​

2025

  ​ ​

2024

  ​ ​

Change

​

​

(in millions)

Cash flows from investing activities

​

​

​

​

​

​

​

​

​

​

Capital expenditures

​

$

(123)

$

(254)

$

131

​

Investment in loan to unconsolidated affiliates

​

​

—

​

​

(3)

​

​

3

​

Proceeds from disposal of assets, net of costs to sell

​

​

84

​

​

101

​

​

(17)

​

Proceeds from disposal of equity investment in unconsolidated affiliate

​

​

6

​

​

—

​

​

6

​

Cash acquired in acquisition of unconsolidated affiliates

​

​

—

​

​

5

​

​

(5)

​

​

​

$

(33)

$

(151)

$

118

​

Net cash used in investing activities decreased primarily due to (a) decreased capital expenditures, resulting principally from the completion of our newbuild construction program in the earlier year, partially offset by (b) decreased proceeds from disposal of assets.

​

​

​

​

​

​

​

​

​

​

​

​

​

Years ended December 31, 

​

​

​

​

2025

  ​ ​ ​

2024

  ​ ​ ​

Change

​

​

(in millions)

Cash flows from financing activities

​

​

​

​

​

​

​

​

​

​

Repayments of debt

​

$

(1,556)

​

$

(2,103)

​

$

547

​

Proceeds from issuance of debt, net of issue costs

​

​

492

​

​

1,770

​

​

(1,278)

​

Proceeds from issuance of shares, net of issue costs

​

​

421

​

​

—

​

​

421

​

Other, net

​

​

(17)

​

​

(17)

​

​

—

​

​

​

$

(660)

$

(350)

$

(310)

​

Net cash used in financing activities increased primarily due to (a) decreased net cash proceeds from the issuance of $500 million aggregate principal amount of 7.875% Senior Guaranteed Notes in the current year compared to the issuance of $900 million aggregate principal amount of 8.25% senior notes due May 2029 and $900 million aggregate principal amount of 8.50% senior secured notes due May 2031 in the earlier year, partially offset by (b) decreased cash used to repay debt, resulting principally from the early retirement of $1.05 billion aggregate principal amount of certain debt securities in redemptions, tender offers and repurchases in the current year compared to the early retirement of $1.70 billion aggregate principal amount of certain of our debt securities in redemptions and tender offers completed in the earlier year, and (c) net cash proceeds from the issuance of shares with no comparable activity in the earlier year.

Sources and uses of liquidity

Overview—We expect to use existing unrestricted cash balances, cash flows from operating activities, borrowings under our Secured Credit Facility, proceeds from the disposal of assets or proceeds from the issuance of debt or shares to fulfill anticipated near-term obligations, which may include capital expenditures, working capital and other operational requirements, scheduled debt maturities and installments or other debt-related deposits or reservations of unrestricted cash.  At December 31, 2025, we had $620 million in unrestricted cash and cash equivalents and $377 million in restricted cash and cash equivalents.  We have generated positive cash flows from operating activities over recent years and, although we cannot provide assurances, we expect that such cash flows will continue to be positive over the next year.  For example, among other factors, if we incur costs for reactivation or contract preparation of multiple rigs or to otherwise assure the marketability of our fleet or general economic, financial, industry or business conditions deteriorate, our cash flows from operations may be reduced or negative.

We have a Secured Credit Facility that provides us with a borrowing capacity of $510 million through its maturity on June 22, 2028.  Our Secured Credit Facility, which is secured by, among other things, a lien on eight of our ultra-deepwater drillships and two of our harsh environment semisubmersibles, contains certain restrictive covenants, including a minimum guarantee coverage ratio of 3.0 to 1.0, a minimum collateral coverage ratio of 2.1 to 1.0 and a minimum liquidity requirement of $200 million, among others.  The Secured Credit Facility also restricts the ability of Transocean Ltd. and certain of our subsidiaries to, among other things, merge, consolidate or otherwise make changes to the corporate structure, incur liens, incur additional indebtedness, enter into transactions with affiliates and permits, subject to certain conditions, us to pay dividends and repurchase our shares.  For more information about our Secured Credit Facility and our outstanding debt instruments, see Notes to Consolidated Financial Statements—Note 8—Debt.

Although we currently anticipate relying on these sources of liquidity, including cash flows from operating activities and borrowings under our Secured Credit Facility, among others, we may in the future consider establishing additional financing arrangements with banks or other capital providers and subject to market conditions and other factors, we may be required to provide collateral for any such future financing arrangements.  Our secured indentures include collateral rig leverage ratios.  During periods where collateral rigs have experienced reduced levels of operating efficiency or utilization, we have in the past deposited cash into the applicable debt service reserve account and taken other actions, including obtaining consents of holders of certain of our secured debt, as applicable, in order to satisfy the applicable collateral rig leverage ratio, and we may in the future take such actions from time to time, as necessary.  For more information about our indentures and our debt and equity securities, see Notes to Consolidated Financial Statements—Note 8—Debt and Notes to Consolidated Financial Statements—Note 13—Equity.

Debt and equity markets—From time to time, we seek to access the capital markets in connection with our ongoing efforts to prudently manage our capital structure and improve our liquidity position.  For example, we have completed multiple debt and equity

- 32 -

Table of Contents

transactions, including tender offers, redemptions, exchanges and retirement of existing debt.  Subject to then-existing market conditions and our expected liquidity needs, among other factors, we may also use existing unrestricted cash balances, cash flows from operating activities, or proceeds from asset sales to manage our capital structure, including by purchasing or exchanging any of our debt or equity securities in the open market, in privately negotiated transactions, or through tender or exchange offers, or by redeeming any of our outstanding debt securities pursuant to the terms of the applicable governing document, if applicable.  Any future purchases, exchanges or other transactions may be on the same terms or on terms that are more or less favorable to holders than the terms of any prior transaction.  We can provide no assurance as to which, if any, of these alternatives, or combinations thereof, we may choose to pursue in the future, if at all, or as to the timing with respect to any future transactions.  For more information about our debt and equity transactions during the three-year period ended December 31, 2025, see Notes to Consolidated Financial Statements—Note 8—Debt and Notes to Consolidated Financial Statements—Note 13—Equity.

Our ability and willingness to access the debt and equity markets is a function of a variety of factors, including, among others, general economic, industry or market conditions, market perceptions of us and our industry and credit rating agencies’ views of our debt.  General economic or market conditions could have an adverse effect on our business and financial position and on the business and financial position of our customers, suppliers and lenders and could affect our ability to access the capital markets on acceptable terms or at all and our future need or ability to borrow under our Secured Credit Facility.  In addition to our potential sources of funding, the effects of such global events could impact our liquidity or cause us to need to alter our allocation or sources of capital, implement further cost reduction measures and change our financial strategy.  Additionally, the rating of our long-term debt is below investment grade, which is causing us to experience increased fees and interest rates under our Secured Credit Facility and indentures governing certain of our senior notes.  Future downgrades may further restrict our ability to access the debt market for sources of capital and may negatively impact the cost of such capital at a time when we would like, or need, to access such markets, which could have an impact on our flexibility to react to changing economic and business conditions.

Drilling fleet—From time to time, we review possible acquisitions of businesses and drilling rigs, as well as noncontrolling ownership interests in other companies, and we may make significant future capital commitments for such purposes.  We may also consider investments related to major rig upgrades, new rig construction, or the acquisition of a rig under construction.  Any such acquisition or investment has involved, and in the future could involve, the payment by us of a substantial amount of cash or the issuance of a substantial number of additional shares or other securities.  Our failure to subsequently secure drilling contracts in these instances, if not already secured, could have an adverse effect on our results of operations or cash flows.

The ultimate amount of our capital expenditures is partly dependent upon financial market conditions, the actual level of operational and contracting activity, the costs associated with the current regulatory environment and customer requested capital improvements and equipment for which the customer agrees to reimburse us.  As with any major shipyard project that takes place over an extended period, the actual costs, the timing of expenditures and the project completion date may vary from estimates based on numerous factors, including actual contract terms, weather, exchange rates, shipyard labor conditions, availability of suppliers to recertify equipment and market demand for required components and resources.  We intend to fund the cash requirements for our projected capital expenditures by using available cash balances, cash generated from operations and asset sales, borrowings under our Secured Credit Facility and financing arrangements with banks or other capital providers.  Economic conditions and other factors could impact the availability of these sources of funding.

From time to time, we may also review the possible disposition of certain drilling assets.  During the year ended December 31, 2025, we completed the disposal of six ultra-deepwater floaters, together with related assets, in sales for recycling.  As of December 31, 2025, we had classified as held for sale two ultra-deepwater drillships and one harsh environment semisubmersible, together with related assets, and we have committed to sell these drilling units for recycling.  In January 2026, we completed the sale of one ultra-deepwater drillship, together with related assets, previously classified as held for sale.  Considering market conditions, we may identify additional drilling units to be sold for scrap, recycling or alternative purposes.  See Notes to Consolidated Financial Statements—Note 6—Long-Lived Assets.

Contractual obligations—We provide additional information about our cash requirements for known contractual and other obligations on both a short-term and long-term basis in the notes to our consolidated financial statements as follows:

◾For additional information regarding our operating and finance lease obligations, see Notes to Consolidated Financial Statements—Note 7—Leases.

◾For additional information regarding our debt obligations and scheduled maturities, see Notes to Consolidated Financial Statements—Note 8—Debt.

◾For additional information regarding the obligations to our employees under our various postemployment benefit plans, see Notes to Consolidated Financial Statements—Note 9—Benefit Plans.

◾For additional information regarding our tax obligations, see Notes to Consolidated Financial Statements—Note 10—Income Taxes.

◾For additional information regarding our obligations under long-term service agreements and our material contingencies, see Notes to Consolidated Financial Statements—Note 12—Commitments and Contingencies.

Other commercial commitments—We have other commercial commitments, such as standby letters of credit and surety bonds that guarantee certain performance activities, tax commitments and customs or other obligations in various jurisdictions.  The cash obligations of these commitments, which are primarily geographically concentrated in Brazil, are not normally called because we typically comply with the underlying performance requirements.  For additional information regarding our standby letters of credit and surety bond guarantees, see Notes to Consolidated Financial Statements—Note 12—Commitments and Contingencies.

- 33 -

Table of Contents

Critical Accounting Policies and Estimates

Overview

We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S., which require us to make estimates that affect the reported amounts of assets, liabilities, revenues, expenses and related disclosures of contingent assets and liabilities.  These estimates require significant judgments and assumptions.  We evaluate our estimates on an ongoing basis using historical experience and various other assumptions that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources.  Actual results may differ from these estimates.

We consider the following to be our critical accounting policies and estimates since they are very important to the portrayal of our financial condition and results and require our most subjective and complex judgments.  We have discussed the development, selection and disclosure of such policies and estimates with the audit committee of our board of directors.  For information about our significant accounting policies and accounting standards updates, see Notes to Consolidated Financial Statements—Note 2—Significant Accounting Policies and Notes to Consolidated Financial Statements—Note 3—Accounting Standards Updates.

Income taxes

Overview—We provide for income taxes based on expected taxable income, statutory rates and tax laws in the jurisdictions in which we operate or have a taxable presence.  The relationship between our provision for or benefit from income taxes and our income or loss before income taxes can vary significantly from period to period considering, among other factors, (a) the overall level of income before income taxes, (b) changes in the blend of income that is taxed based on gross revenues rather than income before taxes, (c) rig movements between taxing jurisdictions and (d) our rig operating structures.  Consequently, our income tax expense does not change proportionally with our income or loss before income taxes.

Uncertain tax positions—We apply significant judgment to evaluate our tax positions based on the interpretation of tax laws in various jurisdictions and with the use of estimates and assumptions regarding significant future events, such as the amount, timing and character of income, deductions and tax credits.  Our tax liability in any given year could be affected by changes in tax laws, regulations, agreements, and treaties, currency exchange restrictions or our level or profitability of operations in each jurisdiction.  The tax laws relating to the offshore drilling industry in certain jurisdictions in which we operate are not well developed, requiring us to apply incremental judgment.  Although we employ the best information available at the time we prepare our annual tax provision, a number of years may elapse before the tax liabilities in the various jurisdictions are ultimately determined.

Our tax returns are undergoing examinations in several taxing jurisdictions covering various years.  We review our assets and liabilities on an ongoing basis and, to the extent audits or other events cause us to adjust our previously recognized assets or liabilities, we record those adjustments in the period of the event.  Our potential tax liabilities are dependent on numerous factors that cannot be reasonably projected, including among others, the amount and nature of additional taxes potentially asserted by local tax authorities; the willingness of local tax authorities to negotiate a fair settlement through an administrative process; the impartiality of the local courts; and the potential for changes in the taxes paid to one country that either produce, or fail to produce, offsetting tax changes in other countries.

Unrecognized tax benefits—We establish liabilities for estimated tax exposures, and we recognize the provisions and benefits resulting from changes to those liabilities, together with related interest and penalties, in income tax expense or benefit.  Income tax exposure items primarily include potential challenges to permanent establishment or active trading positions, intercompany pricing, disposition transactions, and withholding tax rates and their applicability.  Such tax exposures may be affected by changes in applicable tax law or other factors, which could cause us to revise our prior estimates, and are generally resolved through the settlement of audits within the tax jurisdictions or by judicial means.  At December 31, 2025 and 2024, we had unrecognized tax benefits of $302 million and $414 million, respectively, including interest and penalties, against which we recorded net operating loss deferred tax assets of $235 million and $372 million, respectively, resulting in net unrecognized tax benefits of $67 million and $42 million, respectively, including interest and penalties, that upon reversal would favorably impact our effective tax rate.

Valuation allowance—We apply significant judgment to determine whether our deferred tax assets will be fully or partially realized.  To evaluate our ability to realize deferred tax assets, we consider all available positive and negative evidence, including projected future taxable income and the existence of cumulative losses in recent years.  We continually evaluate opportunities to utilize our deferred tax assets.  We record a valuation allowance for deferred tax assets when it is more likely than not that some or all of the benefit from the deferred tax asset will not be realized.  For example, we may record a valuation allowance for deferred tax assets resulting from net operating losses incurred during the year in certain jurisdictions for which the benefit of the losses will not be realized or for foreign tax credit carryforwards that may expire prior to their utilization.  During the years ended December 31, 2025 and 2024, in connection with our evaluation of the projected realizability of our deferred tax assets, we determined that our consolidated cumulative loss incurred over the recent three-year period has limited our ability to consider other subjective evidence, such as projected contract activity rather than contract backlog.  See Notes to Consolidated Financial Statements—Note 10—Income Taxes.

- 34 -

Table of Contents

Property and equipment

Overview—We apply significant judgment to account for our property and equipment, consisting primarily of offshore drilling rigs and related equipment, related to estimates and assumptions for useful lives and salvage values.  At December 31, 2025 and 2024, the carrying amount of our property and equipment was $12.58 billion and $15.83 billion, respectively, representing 80 percent and 82 percent, respectively, of our total assets.

Useful lives and salvage values—We depreciate our assets using the straight-line method over their estimated useful lives after allowing for salvage values.  We estimate useful lives and salvage values by applying judgments and assumptions that reflect both historical experience and expectations regarding future operations, rig utilization and asset performance.  Useful lives and salvage values of rigs are difficult to estimate due to a variety of factors, including (a) technological advances that impact the methods or cost of oil and gas exploration and development, (b) changes in market or economic conditions and (c) changes in laws or regulations affecting the drilling industry.  Applying different judgments and assumptions in establishing the useful lives and salvage values would likely result in materially different net carrying amounts and depreciation expense for our assets.  We reevaluate the remaining useful lives and salvage values of our rigs when certain events occur that directly impact the useful lives and salvage values of the rigs, including changes in operating condition, functional capability and market and economic factors.  We may also consider major capital upgrades required to perform certain contracts and the long-term impact of those upgrades on future marketability.  At December 31, 2025, a hypothetical one-year increase in the useful lives of all of our rigs would cause a decrease in our annual depreciation expense of approximately $22 million and a hypothetical one-year decrease would cause an increase in our annual depreciation expense of approximately $12 million.

Long-lived asset impairment—We review our property and equipment for impairment when events or changes in circumstances indicate that the carrying amounts of our assets held and used may not be recoverable.  Potential impairment indicators include rapid declines in commodity prices and related market conditions, declines in dayrates or utilization, cancellations of contracts or credit concerns of multiple customers.  During periods of oversupply, we may idle or stack rigs for extended periods of time until market conditions change, or we may elect to sell certain rigs for scrap, which in combination with other indicators above, could be an indication that an asset group may be impaired since supply and demand are the key drivers of rig utilization and our ability to contract our rigs at economical rates.  Our rigs are mobile units, equipped to operate in geographic regions throughout the world and, consequently, we may mobilize rigs from an oversupplied region to a more profitable and temporarily undersupplied region when it is economical to do so.  Many of our contracts generally allow our customers to relocate our rigs from one geographic region to another, subject to certain conditions, and our customers utilize this capability to meet their worldwide drilling requirements.  Accordingly, our rigs are considered to be interchangeable within each asset group, and we evaluate impairment by asset group.  We consider our asset groups to be ultra-deepwater floaters and harsh environment floaters.

We assess recoverability of assets held and used by projecting undiscounted cash flows for the asset group being evaluated.  When the carrying amount of the asset group is determined to be unrecoverable, we recognize an impairment loss, measured as the amount by which the carrying amount of the asset group exceeds its estimated fair value.  To estimate the fair value of each asset group, we apply a variety of valuation methods, incorporating income, market and cost approaches.  We may weigh the approaches, under certain circumstances, when relevant data is limited, when results are inconclusive or when results deviate significantly.  Our estimate of fair value generally requires us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the long-term future performance of our asset groups, such as projected revenues and costs, dayrates, rig utilization and revenue efficiency.  These projections involve uncertainties that rely on assumptions about demand for our services, future market conditions and technological developments.  Because our business is cyclical, the results of our impairment testing are expected to vary significantly depending on the timing of the assessment relative to the business cycle.  Altering either the timing of or the assumptions used to estimate fair value and development of significant unanticipated changes to the assumptions could materially alter an outcome that could otherwise result in an impairment loss.  Given the nature of these evaluations and their application to specific asset groups and specific time periods, it is not possible to reasonably quantify the impact of changes in these assumptions.

We also consider a held-for-sale asset to be impaired to the extent its carrying amount exceeds its estimated fair value less cost to sell.  In the years ended December 31, 2025, 2024, and 2023, we recognized a loss of $3.05 billion, $772 million, and $57 million, respectively, associated with the impairment of assets that we determined were impaired at the time we classified such assets as held for sale or we identified changes in circumstances that indicated assets previously classified as held for sale were further impaired.  See Notes to Consolidated Financial Statements—Note 6—Long-Lived Assets.

Other Matters

Related party transactions

During the year ended December 31, 2025, we entered into certain related party transactions with our unconsolidated affiliates.  For additional information regarding our related party transactions, see Notes to Consolidated Financial Statements—Note 4—Unconsolidated Affiliates and Notes to Consolidated Financial Statements—Note 8—Debt.

Regulatory matters

We occasionally receive inquiries from governmental regulatory agencies regarding our operations around the world, including inquiries with respect to various tax, environmental, regulatory and compliance matters.  To the extent appropriate under the circumstances,

- 35 -

Table of Contents

we investigate such matters, respond to such inquiries and cooperate with the regulatory agencies.  See Notes to Consolidated Financial Statements—Note 12—Commitments and Contingencies.

Tax matters

We conduct operations through our various subsidiaries in countries throughout the world.  Each country has its own tax regimes with varying statutory rates, deductions and tax attributes, which are subject to changes resulting from new legislation, interpretation or guidance.  From time to time, as a result of these changes, we may revise previously evaluated tax positions, which could cause us to adjust our recorded tax assets and liabilities.  Tax authorities in certain jurisdictions are examining our tax returns and, in some cases, have issued assessments.  We intend to defend our tax positions vigorously.  Although we can provide no assurance as to the outcome of the aforementioned changes, examinations or assessments, we do not expect the ultimate liability to have a material adverse effect on our financial position or results of operations; however, it could have a material adverse effect on our cash flows.  See Notes to Consolidated Financial Statements—Note 10—Income Taxes.