10-Q 1 rig-20230331x10q.htm 10-Q
0001451505--12-312023Q1falsehttp://fasb.org/us-gaap/2022#OilAndGasServiceMemberhttp://fasb.org/us-gaap/2022#OilAndGasServiceMemberhttp://fasb.org/us-gaap/2022#OilAndGasServiceMemberhttp://fasb.org/us-gaap/2022#OilAndGasServiceMember0001451505us-gaap:CommonStockMember2023-01-012023-03-310001451505us-gaap:CommonStockMember2022-01-012022-03-310001451505us-gaap:RetainedEarningsMember2023-03-310001451505us-gaap:ParentMember2023-03-310001451505us-gaap:NoncontrollingInterestMember2023-03-310001451505us-gaap:CommonStockMember2023-03-310001451505us-gaap:AdditionalPaidInCapitalMember2023-03-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001451505us-gaap:RetainedEarningsMember2022-12-310001451505us-gaap:ParentMember2022-12-310001451505us-gaap:NoncontrollingInterestMember2022-12-310001451505us-gaap:CommonStockMember2022-12-310001451505us-gaap:AdditionalPaidInCapitalMember2022-12-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001451505us-gaap:RetainedEarningsMember2022-03-310001451505us-gaap:ParentMember2022-03-310001451505us-gaap:NoncontrollingInterestMember2022-03-310001451505us-gaap:CommonStockMember2022-03-310001451505us-gaap:AdditionalPaidInCapitalMember2022-03-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-03-310001451505us-gaap:RetainedEarningsMember2021-12-310001451505us-gaap:ParentMember2021-12-310001451505us-gaap:NoncontrollingInterestMember2021-12-310001451505us-gaap:CommonStockMember2021-12-310001451505us-gaap:AdditionalPaidInCapitalMember2021-12-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310001451505rig:DebtExchangedMember2023-01-012023-03-310001451505rig:UltraDeepwaterFloatersMemberrig:OtherGeographicalMember2023-01-012023-03-310001451505rig:UltraDeepwaterFloatersMembercountry:US2023-01-012023-03-310001451505rig:HarshEnvironmentFloatersMemberrig:OtherGeographicalMember2023-01-012023-03-310001451505rig:HarshEnvironmentFloatersMembercountry:NO2023-01-012023-03-310001451505rig:UltraDeepwaterFloatersMember2023-01-012023-03-310001451505rig:OtherGeographicalMember2023-01-012023-03-310001451505rig:HarshEnvironmentFloatersMember2023-01-012023-03-310001451505country:US2023-01-012023-03-310001451505country:NO2023-01-012023-03-310001451505rig:UltraDeepwaterFloatersMemberrig:OtherGeographicalMember2022-01-012022-03-310001451505rig:UltraDeepwaterFloatersMembercountry:US2022-01-012022-03-310001451505rig:HarshEnvironmentFloatersMemberrig:OtherGeographicalMember2022-01-012022-03-310001451505rig:HarshEnvironmentFloatersMembercountry:NO2022-01-012022-03-310001451505rig:UltraDeepwaterFloatersMember2022-01-012022-03-310001451505rig:OtherGeographicalMember2022-01-012022-03-310001451505rig:HarshEnvironmentFloatersMember2022-01-012022-03-310001451505country:US2022-01-012022-03-310001451505country:NO2022-01-012022-03-310001451505rig:TransoceanNorgeMember2023-01-012023-03-310001451505rig:PropertyAndEquipmentPlacedInToServiceMember2023-01-012023-03-310001451505rig:PropertyAndEquipmentPlacedInToServiceMember2022-01-012022-03-310001451505rig:AtMoneyProgram2021Member2022-01-012022-03-310001451505us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2023-01-012023-03-310001451505us-gaap:CapitalAdditionsMember2023-01-012023-03-310001451505us-gaap:OtherCapitalizedPropertyPlantAndEquipmentMember2022-01-012022-03-310001451505us-gaap:CapitalAdditionsMember2022-01-012022-03-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001451505us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-03-310001451505rig:GlobalSeaMineralResourcesMember2023-02-012023-02-280001451505us-gaap:RetainedEarningsMember2023-01-012023-03-310001451505us-gaap:RetainedEarningsMember2022-01-012022-03-310001451505rig:PerestroikaMemberrig:TransoceanIncMember2023-04-300001451505rig:AsbestosLitigationMemberstpr:LA2023-03-310001451505rig:AsbestosLitigationMemberrig:IllinoisAndMissouriMember2023-03-310001451505rig:AsbestosLitigationMember2023-03-310001451505rig:PeriodTwoMemberus-gaap:RevolvingCreditFacilityMember2023-03-310001451505rig:PeriodOneMemberus-gaap:RevolvingCreditFacilityMember2023-03-310001451505us-gaap:RevolvingCreditFacilityMember2023-01-012023-03-310001451505country:BRrig:IndirectTaxMember2023-01-012023-03-310001451505country:BRrig:CorporateIncomeTaxMember2023-01-012023-03-310001451505rig:SeniorSecuredNotesDue5.375PercentMay2023Member2023-01-012023-03-310001451505rig:SeniorSecuredNote6.125PercentDueAugust2025Member2023-01-012023-03-310001451505rig:SeniorNotesDue7.75PercentOctober2024Member2023-01-012023-03-310001451505rig:SeniorNotesDue6.25PercentDecember2024Member2023-01-012023-03-310001451505rig:SeniorNotesDue5.875PercentJanuary2024Member2023-01-012023-03-310001451505rig:SeniorNotesDue5.52PercentMay2022Member2022-01-012022-03-310001451505rig:LiquilaMember2023-03-310001451505rig:GlobalSeaMineralResourcesMember2023-03-310001451505rig:LiquilaMember2022-12-310001451505rig:TransoceanNorgeMember2023-03-310001451505rig:TransoceanNorgeMember2022-12-310001451505rig:SeniorSecuredNotesDue8.75PercentFebruary2030Member2023-01-012023-01-310001451505rig:SeniorSecuredNotesDue8.375PercentFebruary2028Member2023-01-012023-01-310001451505rig:SeniorUnsecuredExchangeableBonds0.5PercentMember2023-03-310001451505rig:SeniorSecuredNotesDue5.375PercentMay2023Member2023-03-310001451505rig:SeniorSecuredNote6.125PercentDueAugust2025Member2023-03-310001451505rig:SeniorNotesDue7.75PercentOctober2024Member2023-03-310001451505rig:SeniorNotesDue6.25PercentDecember2024Member2023-03-310001451505rig:SeniorNotesDue5.875PercentJanuary2024Member2023-03-310001451505rig:SeniorNotesDue5.52PercentMay2022Member2023-03-310001451505rig:SeniorSecuredNotesDue8.75PercentFebruary2030Member2023-01-310001451505rig:SeniorSecuredNotesDue8.375PercentFebruary2028Member2023-01-310001451505rig:SeniorGuaranteedExchangeableBondsDue4.00Percent2025Member2023-01-012023-03-310001451505rig:SeniorGuaranteedExchangeableBondsDue2.50PercentJanuary2027Member2023-01-012023-03-310001451505rig:SeniorGuaranteedExchangeableBonds4.625PercentDueSeptember2029Member2023-01-012023-03-310001451505rig:DebtTotalInstallmentsMember2023-03-310001451505rig:DebtPrincipalInstallmentsMember2023-03-310001451505rig:DebtOtherInstallmentsMember2023-03-310001451505rig:DebtPrincipalInstallmentsMember2022-12-310001451505us-gaap:RevolvingCreditFacilityMemberus-gaap:SecuredOvernightFinancingRateSofrOvernightIndexSwapRateMember2023-01-012023-03-310001451505rig:SeniorGuaranteedExchangeableBondsDue2.50PercentJanuary2027Member2023-04-012023-04-300001451505rig:PerestroikaMemberrig:SeniorGuaranteedExchangeableBondsDue2.50PercentJanuary2027Member2023-04-012023-04-300001451505rig:SeniorUnsecuredNotes8.00PercentDueFebruary2027Member2023-03-310001451505rig:SeniorSecuredNotesDue8.375PercentFebruary2028Member2023-03-310001451505rig:SeniorNotesDue7.50PercentJanuary2026Member2023-03-310001451505rig:SeniorNotesDue7.35PercentDecember2041Member2023-03-310001451505rig:SeniorNotesDue7.25PercentNovember2025Member2023-03-310001451505rig:SeniorNotesDue6.80PercentMarch2038Member2023-03-310001451505rig:SeniorNotesDue11.50PercentJanuary2027Member2023-03-310001451505rig:SeniorGuaranteedExchangeableBondsDue4.00Percent2025Member2023-03-310001451505rig:SeniorGuaranteedExchangeableBondsDue2.50PercentJanuary2027Member2023-03-310001451505rig:SeniorGuaranteedExchangeableBonds4.625PercentDueSeptember2029Member2023-03-310001451505rig:NotesDue7PercentJune2028Member2023-03-310001451505rig:NotesDue7.5PercentApril2031Member2023-03-310001451505rig:NotesDue7.45PercentApril2027Member2023-03-310001451505rig:DebenturesDue8PercentApril2027Member2023-03-310001451505rig:SeniorUnsecuredNotes8.00PercentDueFebruary2027Member2022-12-310001451505rig:SeniorNotesDue7.50PercentJanuary2026Member2022-12-310001451505rig:SeniorNotesDue7.35PercentDecember2041Member2022-12-310001451505rig:SeniorNotesDue7.25PercentNovember2025Member2022-12-310001451505rig:SeniorNotesDue6.80PercentMarch2038Member2022-12-310001451505rig:SeniorNotesDue11.50PercentJanuary2027Member2022-12-310001451505rig:SeniorGuaranteedExchangeableBondsDue4.00Percent2025Member2022-12-310001451505rig:SeniorGuaranteedExchangeableBondsDue2.50PercentJanuary2027Member2022-12-310001451505rig:SeniorGuaranteedExchangeableBonds4.625PercentDueSeptember2029Member2022-12-310001451505rig:NotesDue7PercentJune2028Member2022-12-310001451505rig:NotesDue7.5PercentApril2031Member2022-12-310001451505rig:NotesDue7.45PercentApril2027Member2022-12-310001451505rig:DebenturesDue8PercentApril2027Member2022-12-310001451505us-gaap:ConstructionInProgressMember2023-03-310001451505us-gaap:ConstructionInProgressMember2022-12-310001451505us-gaap:ConstructionInProgressMember2022-03-310001451505us-gaap:ConstructionInProgressMember2021-12-3100014515052022-03-3100014515052021-12-310001451505us-gaap:WarrantMember2023-01-012023-03-310001451505us-gaap:StockCompensationPlanMember2023-01-012023-03-310001451505us-gaap:ConvertibleDebtSecuritiesMember2023-01-012023-03-310001451505us-gaap:StockCompensationPlanMember2022-01-012022-03-310001451505us-gaap:ConvertibleDebtSecuritiesMember2022-01-012022-03-310001451505us-gaap:EstimateOfFairValueFairValueDisclosureMember2023-03-310001451505us-gaap:CarryingReportedAmountFairValueDisclosureMember2023-03-310001451505us-gaap:EstimateOfFairValueFairValueDisclosureMember2022-12-310001451505us-gaap:CarryingReportedAmountFairValueDisclosureMember2022-12-310001451505us-gaap:ParentMember2023-01-012023-03-310001451505us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001451505us-gaap:ParentMember2022-01-012022-03-310001451505us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-310001451505rig:UltraDeepWaterDrillShipsMember2023-03-310001451505rig:UltraDeepwaterFloatersMember2023-03-310001451505rig:HarshEnvironmentFloatersMember2023-03-310001451505rig:ShipyardFinancingArrangementMember2023-03-310001451505rig:SeniorSecuredNotesDue8.75PercentFebruary2030Member2023-03-310001451505rig:SeniorSecuredNote6.875PercentDueFebruary2027Member2023-03-3100014515052023-03-310001451505rig:ShipyardFinancingArrangementMember2022-12-310001451505rig:SeniorUnsecuredExchangeableBonds0.5PercentMember2022-12-310001451505rig:SeniorSecuredNotesDue5.375PercentMay2023Member2022-12-310001451505rig:SeniorSecuredNote6.875PercentDueFebruary2027Member2022-12-310001451505rig:SeniorSecuredNote6.125PercentDueAugust2025Member2022-12-310001451505rig:SeniorNotesDue7.75PercentOctober2024Member2022-12-310001451505rig:SeniorNotesDue6.25PercentDecember2024Member2022-12-310001451505rig:SeniorNotesDue5.875PercentJanuary2024Member2022-12-3100014515052022-12-310001451505us-gaap:DisposalGroupDisposedOfByMeansOtherThanSaleNotDiscontinuedOperationsSpinoffMemberrig:RigSalesMember2023-01-012023-03-310001451505us-gaap:RevolvingCreditFacilityMember2023-03-3100014515052022-01-012022-03-3100014515052023-04-2500014515052023-01-012023-03-31xbrli:sharesiso4217:USDxbrli:pureiso4217:USDxbrli:sharesrig:itemiso4217:CHFxbrli:sharesiso4217:BRLrig:lawsuitrig:plaintiff

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark one)

 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2023

OR

 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission file number 001-38373

Graphic

Transocean Ltd.

(Exact name of registrant as specified in its charter)

Switzerland

98-0599916

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

Turmstrasse 30

Steinhausen, Switzerland

6312

(Address of principal executive offices)

(Zip Code)

+41 (41) 749-0500

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading symbol

Name of each exchange on which registered

Shares, CHF 0.10 par value

RIG

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   Yes þ   No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   Yes þ   No 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company.  See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer  Non-accelerated filer  Smaller reporting company  Emerging growth company 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   Yes    No þ

As of April 25, 2023, 766,448,046 shares were outstanding.

TRANSOCEAN LTD. AND SUBSIDIARIES

INDEX TO QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED March 31, 2023

Page

PART I.

FINANCIAL INFORMATION

1

2

3

4

5

6

14

23

23

24

24

24

25

PART I.  FINANCIAL INFORMATION

Item I.

Financial Statements

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

(Unaudited)

Three months ended

March 31, 

   

2023

   

2022

 

Contract drilling revenues

$

649

$

586

Costs and expenses

Operating and maintenance

409

412

Depreciation and amortization

182

183

General and administrative

45

42

636

637

Gain (loss) on disposal of assets, net

(170)

1

Operating loss

(157)

(50)

Other income (expense), net

Interest income

19

2

Interest expense, net of amounts capitalized

(249)

(102)

Loss on retirement of debt

(32)

Other, net

5

1

(257)

(99)

Loss before income tax expense

(414)

(149)

Income tax expense

51

26

Net loss

(465)

(175)

Net income attributable to noncontrolling interest

Net loss attributable to controlling interest

$

(465)

$

(175)

Loss per share, basic and diluted

$

(0.64)

$

(0.26)

Weighted-average shares, basic and diluted

728

664

See accompanying notes.

- 1 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in millions)

(Unaudited)

Three months ended

March 31, 

   

2023

   

2022

    

Net loss

$

(465)

$

(175)

Net income attributable to noncontrolling interest

Net loss attributable to controlling interest

(465)

(175)

Components of net periodic benefit costs before reclassifications

(11)

(11)

Components of net periodic benefit costs reclassified to net loss

1

Other comprehensive loss before income taxes

(11)

(10)

Income taxes related to other comprehensive loss

Other comprehensive loss

(11)

(10)

Other comprehensive income attributable to noncontrolling interest

Other comprehensive loss attributable to controlling interest

(11)

(10)

Total comprehensive loss

(476)

(185)

Total comprehensive income attributable to noncontrolling interest

Total comprehensive loss attributable to controlling interest

$

(476)

$

(185)

See accompanying notes.

- 2 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

(Unaudited)

March 31, 

December 31, 

   

2023

   

2022

 

Assets

Cash and cash equivalents

 

$

747

$

683

Accounts receivable, net of allowance of $2 at March 31, 2023 and December 31, 2022

499

485

Materials and supplies, net of allowance of $201 and $199 at March 31, 2023 and December 31, 2022, respectively

390

388

Restricted cash and cash equivalents

208

308

Other current assets

187

144

Total current assets

2,031

2,008

Property and equipment

23,996

24,217

Less accumulated depreciation

(6,876)

(6,748)

Property and equipment, net

17,120

17,469

Contract intangible assets

38

56

Deferred tax assets, net

17

13

Other assets

988

890

Total assets

 

$

20,194

$

20,436

Liabilities and equity

Accounts payable

 

$

246

$

281

Accrued income taxes

28

19

Debt due within one year

283

719

Other current liabilities

496

539

Total current liabilities

1,053

1,558

Long-term debt

7,342

6,628

Deferred tax liabilities, net

533

493

Other long-term liabilities

941

965

Total long-term liabilities

8,816

8,086

Commitments and contingencies

Shares, CHF 0.10 par value, 905,094,091 authorized, 142,362,093 conditionally authorized, 797,245,335 issued

and 731,847,899 outstanding at March 31, 2023, and 905,093,509 authorized, 142,362,675 conditionally

authorized, 797,244,753 issued and 721,888,427 outstanding at December 31, 2022

72

71

Additional paid-in capital

13,992

13,984

Accumulated deficit

(3,544)

(3,079)

Accumulated other comprehensive loss

(196)

(185)

Total controlling interest shareholders’ equity

10,324

10,791

Noncontrolling interest

1

1

Total equity

10,325

10,792

Total liabilities and equity

 

$

20,194

$

20,436

See accompanying notes.

- 3 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in millions)

(Unaudited)

March 31, 

   

2023

   

2022

 

Shares

Balance, beginning of period

 

$

71

$

64

Issuance of shares

1

3

Balance, end of period

$

72

$

67

Additional paid-in capital

Balance, beginning of period

$

13,984

$

13,683

Share-based compensation

9

7

Issuance of shares

(1)

100

Balance, end of period

$

13,992

$

13,790

Accumulated deficit

Balance, beginning of period

$

(3,079)

$

(2,458)

Net loss attributable to controlling interest

(465)

(175)

Balance, end of period

$

(3,544)

$

(2,633)

Accumulated other comprehensive loss

Balance, beginning of period

$

(185)

$

(84)

Other comprehensive loss attributable to controlling interest

(11)

(10)

Balance, end of period

$

(196)

$

(94)

Total controlling interest shareholders’ equity

Balance, beginning of period

$

10,791

$

11,205

Total comprehensive loss attributable to controlling interest

(476)

(185)

Share-based compensation

9

7

Issuance of shares

103

Balance, end of period

$

10,324

$

11,130

Noncontrolling interest

Balance, beginning of period

$

1

$

1

Balance, end of period

$

1

$

1

Total equity

Balance, beginning of period

$

10,792

$

11,206

Total comprehensive loss

(476)

(185)

Share-based compensation

9

7

Issuance of shares

103

Balance, end of period

$

10,325

$

11,131

See accompanying notes.

- 4 -

TRANSOCEAN LTD. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)

Three months ended

March 31, 

    

2023

    

2022

   

Cash flows from operating activities

Net loss

 

$

(465)

$

(175)

Adjustments to reconcile to net cash used in operating activities:

Contract intangible asset amortization

18

29

Depreciation and amortization

182

183

Share-based compensation expense

9

7

(Gain) loss on disposal of assets, net

170

(1)

Fair value adjustment to bifurcated compound exchange feature

133

Loss on retirement of debt

32

Deferred income tax expense

36

23

Other, net

27

21

Changes in deferred revenues, net

6

(11)

Changes in deferred costs, net

(24)

(4)

Changes in other operating assets and liabilities, net

(171)

(73)

Net cash used in operating activities

(47)

(1)

Cash flows from investing activities

Capital expenditures

(81)

(106)

Investments in equity of unconsolidated affiliates

(10)

(15)

Proceeds from disposal of assets, net

1

1

Net cash used in investing activities

(90)

(120)

Cash flows from financing activities

Repayments of debt

(1,564)

(165)

Proceeds from issuance of debt, net of issue costs

1,665

Proceeds from issuance of shares, net of issue costs

103

Other, net

(3)

Net cash provided by (used in) financing activities

101

(65)

Net decrease in unrestricted and restricted cash and cash equivalents

(36)

(186)

Unrestricted and restricted cash and cash equivalents, beginning of period

991

1,412

Unrestricted and restricted cash and cash equivalents, end of period

 

$

955

$

1,226

See accompanying notes.

- 5 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1—Business

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 March 31, 2023, we owned or had partial ownership interests in and operated a fleet of 37 mobile offshore drilling units, consisting of 27 ultra-deepwater floaters and 10 harsh environment floaters.  As of March 31, 2023, we were constructing one ultra-deepwater drillship and held a noncontrolling ownership interest in a company that is constructing one ultra-deepwater drillship.

Note 2—Significant Accounting Policies

Presentation—We prepared our accompanying unaudited condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States (“U.S.”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission.  Pursuant to such rules and regulations, these financial statements do not include all disclosures required by accounting principles generally accepted in the U.S. for complete financial statements.  The condensed consolidated financial statements reflect all adjustments, which are, in the opinion of management, necessary for a fair presentation of financial position, results of operations and cash flows for the interim periods.  Such adjustments are considered to be of a normal recurring nature unless otherwise noted.  Operating results for the three months ended March 31, 2023, are not necessarily indicative of the results that may be expected for the year ending December 31, 2023, or for any future period.  The accompanying condensed consolidated financial statements and notes thereto should be read in conjunction with the audited consolidated financial statements and notes thereto as of December 31, 2022 and 2021, and for each of the three years in the period ended December 31, 2022, included in our annual report on Form 10-K filed on February 23, 2023.

Accounting estimates—To prepare financial statements in accordance with accounting principles generally accepted in the U.S., we must make judgments by applying estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosures of contingent assets and liabilities.  On an ongoing basis, we evaluate our estimates and assumptions, including those related to our income taxes, property and equipment, equity investments, contingencies, allowance for excess materials and supplies, intangibles, postemployment benefit plans and share-based compensation.  We base our estimates and assumptions on historical experience and other factors that we believe are reasonable.  Actual results could differ from such estimates.

Fair value measurements—We estimate fair value at an exchange price that would be received to sell an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants.  Our valuation techniques require inputs that we categorize using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) significant observable inputs, including unadjusted quoted prices for identical assets or liabilities in active markets (“Level 1”), (2) significant other observable inputs, including direct or indirect market data for similar assets or liabilities in active markets or identical assets or liabilities in less active markets (“Level 2”) and (3) significant unobservable inputs, including those that require considerable judgment for which there is little or no market data (“Level 3”).  When a valuation requires multiple input levels, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement even though we may have also utilized significant inputs that are more readily observable.

Note 3—Unconsolidated Affiliates

We hold noncontrolling equity investments in various unconsolidated companies.  In February 2023, we made a cash contribution of $10 million and a non-cash contribution of the ultra-deepwater floater Ocean Rig Olympia, which had been cold stacked, and related assets, with an estimated fair value of $85 million (see Note 5—Long-lived assets), in exchange for a noncontrolling ownership interest in Global Sea Mineral Resources NV (together with its subsidiaries, “GSR”), a Belgian company and leading developer of nodule collection technology, which is engaged in the development and exploration of deep-sea polymetallic nodules that contain metals critical to the growing renewable energy market.  We estimated the fair value of the rig using projected discounted cash flows, and our estimate required us to use significant unobservable inputs, representative of Level 3 fair value measurements, including assumptions related to the future performance of the rig, projected demand for its services, rig availability and dayrates.  At March 31, 2023, the aggregate carrying amount of our investment in GSR was $95 million.  At March 31, 2023 and December 31, 2022, the carrying amount of our investment in Liquila Ventures Ltd., the unconsolidated variable interest entity that is constructing the ultra-deepwater floater Deepwater Aquila, was $15 million, recorded in other assets.  At March 31, 2023 and December 31, 2022, the aggregate carrying amount of all of our equity investments in unconsolidated affiliates was $194 million and $113 million, respectively, recorded in other assets.

During the three months ended March 31, 2023, we incurred costs of approximately $40 million for Transocean Norge, primarily for contract preparation and upgrade shipyard costs, which are reimbursable from Orion Holdings (Cayman) Limited, the owner of the rig, to prepare for its next contract, which is expected to commence in May 2023.  At March 31, 2023 and December 31, 2022, our accounts receivable from affiliates was $75 million and $32 million, respectively, recorded in other current assets.

- 6 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

Note 4—Revenues

Overview—Our drilling services represent a single performance obligation under most of our drilling contracts with customers that is satisfied over time, the duration of which varies by contract.  As of March 31, 2023, the drilling contract with the longest expected remaining duration, excluding unexercised options, extends through July 2029.

Disaggregation—Our contract drilling revenues, disaggregated by asset group and by country in which they were earned, were as follows (in millions):

  

Three months ended March 31, 2023

Three months ended March 31, 2022

  

  

Ultra-

  

Harsh

  

Ultra-

  

Harsh

  

  

  

deepwater

  

environment

  

deepwater

  

environment

  

  

  

floaters

  

floaters

  

Total

floaters

  

floaters

  

Total

  

U.S.

 

$

352

$

$

352

$

268

$

$

268

 

Norway

148

148

193

193

Other countries (a)

132

17

149

122

3

125

Total contract drilling revenues

 

$

484

$

165

$

649

$

390

$

196

$

586

 

(a)The aggregate contract drilling revenues earned in other countries that individually represented less than 10 percent of total contract drilling revenues.

Contract liabilities—Contract liabilities for our contracts with customers were as follows (in millions):

March 31, 

December 31, 

    

2023

    

2022

 

Deferred contract revenues, recorded in other current liabilities

 

$

145

$

124

Deferred contract revenues, recorded in other long-term liabilities

189

204

Total contract liabilities

 

$

334

$

328

Significant changes in contract liabilities were as follows (in millions):

Three months ended

March 31, 

    

2023

    

2022

 

Total contract liabilities, beginning of period

$

328

$

348

Decrease due to recognition of revenues for goods and services

(34)

(26)

Increase due to goods and services transferred over time

40

15

Total contract liabilities, end of period

$

334

$

337

Pre-operating costs—In the three months ended March 31, 2023 and 2022, we recognized pre-operating costs of $10 million and $12 million, respectively, recorded in operating and maintenance costs.  At March 31, 2023 and December 31, 2022, the carrying amount of our unrecognized pre-operating costs to obtain contracts was $52 million and $26 million, respectively, recorded in other assets.

Note 5—Long-Lived Assets

Construction work in progress—The changes in our construction work in progress were as follows (in millions):

Three months ended

March 31, 

    

2023

    

2022

 

Construction work in progress, beginning of period

 

$

1,195

$

1,017

Capital expenditures

Newbuild construction program

65

92

Other equipment and construction projects

16

14

Total capital expenditures

81

106

Changes in accrued capital additions

(4)

(12)

Property and equipment placed into service

(12)

(12)

Construction work in progress, end of period

 

$

1,260

$

1,099

Disposal—In February 2023, in connection with our investment in a noncontrolling ownership interest in GSR, we made a non-cash contribution of the cold stacked ultra-deepwater floater Ocean Rig Olympia and related assets, and in the three months ended March 31, 2023, we recognized a loss of $169 million ($0.23 per diluted share), which had no tax effect, associated with the disposal of the rig and related assets.  See Note 3—Unconsolidated affiliates.

- 7 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

Note 6—Debt

Overview

Outstanding debt—The aggregate principal amounts and aggregate carrying amounts, including the contractual interest payments of previously restructured debt, a bifurcated compound exchange feature, and unamortized debt-related balances, such as discounts, premiums and issue costs, were as follows (in millions):

Principal amount

Carrying amount

 

March 31, 

December 31, 

 

March 31, 

December 31, 

 

    

2023

    

2022

  

 

2023

    

2022

  

0.50% Exchangeable Senior Bonds due January 2023

$

$

49

$

$

49

5.375% Senior Secured Notes due May 2023

243

242

5.875% Senior Secured Notes due January 2024

352

350

7.75% Senior Secured Notes due October 2024

240

238

6.25% Senior Secured Notes due December 2024

250

248

6.125% Senior Secured Notes due August 2025

336

332

7.25% Senior Notes due November 2025

354

354

351

351

4.00% Senior Guaranteed Exchangeable Bonds due December 2025

294

294

273

271

7.50% Senior Notes due January 2026

569

569

566

566

2.50% Senior Guaranteed Exchangeable Bonds due January 2027

238

238

262

265

11.50% Senior Guaranteed Notes due January 2027

687

687

973

1,008

6.875% Senior Secured Notes due February 2027

447

482

443

477

8.00% Senior Notes due February 2027

612

612

608

608

7.45% Notes due April 2027

52

52

52

52

8.00% Debentures due April 2027

22

22

22

22

4.50% Shipyard Loans due September 2027

439

439

393

389

8.375% Senior Secured Notes due February 2028

525

517

7.00% Notes due June 2028

261

261

264

264

4.625% Senior Guaranteed Exchangeable Bonds due September 2029

300

300

576

440

8.75% Senior Secured Notes due February 2030

1,175

1,150

7.50% Notes due April 2031

396

396

394

394

6.80% Senior Notes due March 2038

610

610

605

605

7.35% Senior Notes due December 2041

177

177

176

176

Total debt

7,158

6,963

7,625

7,347

Less debt due within one year

0.50% Exchangeable Senior Bonds due January 2023

49

49

5.375% Senior Secured Notes due May 2023

243

242

5.875% Senior Secured Notes due January 2024

83

81

7.75% Senior Secured Notes due October 2024

60

59

6.25% Senior Secured Notes due December 2024

62

61

6.125% Senior Secured Notes due August 2025

66

64

2.50% Senior Guaranteed Exchangeable Bonds due January 2027

6

6

11.50% Senior Guaranteed Notes due January 2027

71

70

6.875% Senior Secured Notes due February 2027

76

69

74

67

4.50% Shipyard Loans due September 2027

35

20

19

20

8.75% Senior Secured Notes due February 2030

117

113

Total debt due within one year

228

652

283

719

Total long-term debt

 

$

6,930

$

6,311

 

$

7,342

$

6,628

- 8 -

Table of Contents

TRANSOCEAN LTD. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS─continued

(Unaudited)

Scheduled maturities—At March 31, 2023, scheduled maturities of our debt, including the principal installments and other installments, representing the contractual interest payments of previously restructured debt, were as follows (in millions):

    

Principal

    

Other

    

 

    

installments

    

installments

    

Total

 

Twelve months ending March 31,

2024

$

228

$

77

$

305

2025

355

77

432

2026

1,655

78

1,733

2027

2,147

78

2,225

2028

442

442

Thereafter

2,331

2,331

Total installments of debt

$

7,158

$

310

7,468

Total unamortized debt-related balances, net

(271)

Bifurcated compound exchange feature, at estimated fair value

428

Total carrying amount of debt

$

7,625

Credit agreement

Secured Credit Facility—As of March 31, 2023, we have a secured revolving credit facility established under a bank credit agreement (as amended from time to time, the “Secured Credit Facility”), which provides us with borrowing capacity of $774 million through June 22, 2023, which thereafter is reduced to $600 million through its scheduled maturity on June 22, 2025.  We may borrow under the Secured Credit Facility at a forward-looking term rate based on the secured overnight financing rate (“Term SOFR”) plus a margin (the “Secured Credit Facility Margin”) and a Term SOFR spread adjustment of 0.10 percent.  The Secured Credit Facility is subject to permitted extensions and certain early maturity triggers, including if on any date the aggregate amount of scheduled principal repayments of indebtedness, with certain exceptions, due within 91 days thereof is equal to or in excess of $200 million and available cash is less than $250 million.  The Secured Credit Facility permits us to increase the aggregate amount of commitments by up to $250 million.  At March 31, 2023, based on the credit rating of the Secured Credit Facility as of that date, the Secured Credit Facility Margin was 3.25 percent and the facility fee was 0.75 percent.  At March 31, 2023, we had no borrowings outstanding, $8 million of letters of credit issued, and we had $765 million of available borrowing capacity under the Secured Credit Facility.

Exchangeable bonds

Exchange terms—At March 31, 2023, the (a) current exchange rates, expressed as the number of Transocean Ltd. shares per $1,000 note, (b) implied exchange prices per Transocean Ltd. share and (c) aggregate shares, expressed in millions, issuable upon exchange of our exchangeable bonds were as follows:

Implied

    

Exchange

    

exchange

    

Shares

    

    

rate

    

price

    

issuable

    

4.00% Senior Guaranteed Exchangeable Bonds due December 2025

190.47620

5.25

56.0

2.50% Senior Guaranteed Exchangeable Bonds due January 2027

162.16260

6.17

38.6

4.625% Senior Guaranteed Exchangeable Bonds due September 2029

290.66180