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Transocean (NYSE:RIG) Q4 2025 Earnings call February 20, 2026 09:00 AM ET Speaker8Hello, and welcome everyone joining today's Q4 2025 Transocean earnings call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. To register to ask a question at any time, please press star one on your telephone keypad. Please note, this call is being recorded. We are standing by if you should need any assistance. It is now my ...

Core Viewpoint - SFL Corporation Ltd. announced preliminary financial results for Q4 2025, including a quarterly cash dividend of $0.20 per share, marking the 88th consecutive dividend payment [1][3]. Financial Performance - Total operating revenues for Q4 2025 were $176 million, with approximately 87% derived from shipping and 13% from energy [7]. - Adjusted EBITDA was reported at $109 million, which includes $8 million from associated companies [7]. - The company experienced a reported net loss of $4.7 million, equating to $0.04 per share [7]. Dividend Information - The Board of Directors declared a quarterly cash dividend of $0.20 per share, scheduled for payment on or around March 30, 2026, with a record date of March 12, 2026 [3][7]. Asset Transactions - The company generated $52 million in net proceeds from the sale of two Suezmax tankers built in 2015, with deliveries occurring in December and February [7]. - An aggregate investment of $23 million was made in two Suezmax tankers built in 2020, capitalizing on a strong tanker market [7]. Company Overview - SFL Corporation has maintained a unique track record in the maritime industry, paying dividends every quarter since its initial listing on the New York Stock Exchange in 2004 [8]. - The company's fleet includes tanker vessels, bulkers, container vessels, car carriers, and offshore drilling rigs, supported by long-term charters and significant asset growth [8].

Core Viewpoint - Transocean has agreed to acquire Valaris in an all-stock transaction valued at approximately $5.8 billion, creating a combined offshore drilling company with a diversified fleet of 73 rigs [1][2] Group 1: Transaction Details - The merger will result in Transocean shareholders owning about 53% of the combined entity, while Valaris shareholders will hold roughly 47% [1] - The pro forma enterprise value of the merged company is projected at $17 billion, with a market capitalization of approximately $12.3 billion [2] - The combined backlog is estimated at around $10 billion, enhancing cash flow visibility for Transocean [4] Group 2: Management and Operations - The new board will consist of nine existing Transocean directors and two current Valaris directors [2] - The merged entity will operate in deep-water, harsh environment, and shallow-water markets globally, maintaining its registration in Switzerland and primary administrative headquarters in Houston [2][6] Group 3: Strategic Benefits - The transaction is expected to generate over $200 million in cost synergies, complementing ongoing cost-reduction efforts targeting more than $250 million in savings through 2026 [4][5] - Transocean's president and CEO highlighted the merger as a timely opportunity to capitalize on an emerging offshore drilling upcycle, benefiting investors and customers through an expanded fleet of high-specification rigs [3][5] Group 4: Regulatory and Approval Process - The agreement has been unanimously approved by both boards and will require regulatory clearance, shareholder approval from each company, and satisfaction of standard closing conditions [6]

Core Viewpoint - The oil and gas services industry is experiencing consolidation, highlighted by the acquisition of Valaris by Transocean, which significantly increased Valaris' stock price by over 34% [1][3]. Group 1: Acquisition Details - Valaris shareholders will receive 15.235 shares of Transocean stock for each Valaris share, valuing Valaris at approximately $5.8 billion, representing a premium of over 35% compared to its closing price prior to the announcement [3]. - The transaction is expected to close in the second half of 2026, pending shareholder and regulatory approval [9]. Group 2: Fleet and Operational Strength - The combined entity will have the world's highest-quality offshore drilling fleet, consisting of 73 rigs, including 33 ultra-deepwater drillships and 31 modern jackups [6]. - Valaris CEO Anton Dibowitz emphasized the strategic advantage of combining high-specification deepwater assets with jackup expertise, enabling operations across various offshore environments [7]. Group 3: Financial Implications - The merger is projected to create a combined backlog of about $10 billion and generate estimated cost savings of $200 million, enhancing Transocean's cash flow and supporting debt reduction efforts [8].

Core Viewpoint - Transocean Ltd. (RIG) is expected to report third-quarter results on October 29, with a consensus estimate of a profit of 4 cents per share and revenues of $1.01 billion [1]. Group 1: Previous Quarter Performance - In the second quarter of 2025, Transocean reported breakeven adjusted earnings per share, surpassing the Zacks Consensus Estimate of a loss of 1 cent, attributed to strong segment performance [2]. - Total adjusted revenues for Q2 were $988 million, exceeding the Zacks Consensus Estimate of $968 million, driven by higher revenues from ultra-deepwater and harsh environment floaters [2]. Group 2: Earnings Estimates and Trends - RIG has missed the Zacks Consensus Estimate in three of the last four quarters, with an average negative surprise of 195.83% [3]. - The consensus estimate for Q3 2025 earnings has seen no upward revisions and a downward trend in the past week, with an expected break-even EPS compared to the previous year's results [3]. Group 3: Revenue and Utilization Projections - Revenues are anticipated to improve in the upcoming quarter, particularly from the Ultra-Deepwater Floaters segment, projected to grow by 9.9% year-over-year to $733.9 million [5]. - Average utilization rates are estimated at 75%, reflecting an 11.1% increase compared to the same period last year, with total rig operating days expected to rise by 5.3% [6]. Group 4: Cost Considerations - Total costs and expenses for RIG are projected to increase by 1.5% year-over-year to $811.6 million, influenced by inflationary pressures and a tight labor market [7]. Group 5: Earnings Prediction - The model predicts a potential earnings beat for Transocean, supported by a positive Earnings ESP of +31.58% [10].

Group 1 - The Iranian Offshore Oil Company (IOOC) has signed two agreements to acquire advanced offshore drilling rigs to enhance production from oil and gas fields, with approval from the National Iranian Oil Company (NIOC) [1][2] - The new drilling rigs, measuring 350ft and 400ft, will be deployed in Iran's offshore joint oil and gas fields in the Persian Gulf, following a comprehensive deployment strategy [2] - The acquisition of these rigs is expected to accelerate the development of joint oil and gas fields and significantly increase national oil and gas output [2][3] Group 2 - Iran has achieved a new seven-year high in oil and gas production, with average crude oil production exceeding four million barrels per day in 2024, marking a recovery in field capacity [4] - The increase in daily oil production by 247,000 barrels compared to the previous year indicates improved production management by key national companies [4] - The National Iranian South Oil Company contributed nearly 75% of the total output, producing over 914 million barrels of crude oil throughout the year [5] - In the gas sector, Iran's total production reached 1.11 trillion cubic meters, equivalent to the yearly consumption of several medium-sized nations, with the Pars Oil and Gas Company producing 245.9 billion cubic meters [5]

Industry Overview - The Zacks Oil and Gas - Drilling industry includes companies that provide rigs and services for oil and gas exploration and development on a contractual basis [2] - Drilling for hydrocarbons is costly and technically challenging, with future prospects primarily dependent on contracting activity and rig availability rather than oil or gas prices [2] - Offshore drilling companies experience higher volatility compared to onshore counterparts, with their share prices more closely correlated to oil prices [2] Current Market Conditions - The industry is currently facing uncertainty and volatility due to cautious customer spending, geopolitical risks, and fluctuating oil prices [1][3] - Contracting activity has slowed, with operators deferring work to maintain capital discipline, impacting near-term earnings visibility [3] - Day rates have decreased from previous highs, and rig utilization is expected to bottom in the mid-80% range before recovery [5] Long-Term Outlook - A structural rise in LNG demand is anticipated to drive drilling activity, particularly from 2026 onward, providing a more stable outlook for drillers [1][4] - The global expansion of LNG is expected to support rig utilization and long-cycle contracts tied to offshore basins [1][4] Industry Performance - The Zacks Oil and Gas - Drilling industry ranks 210 out of 244 Zacks industries, placing it in the bottom 14% [6][7] - The industry's earnings estimates for 2025 have decreased by 94.6% over the past year, and estimates for 2026 have fallen by 66% [9][8] - Over the past year, the industry has declined by 20%, underperforming the broader Zacks Oil - Energy sector, which increased by 5.7%, and the S&P 500, which gained 20.2% [10] Valuation Metrics - The industry is currently trading at an EV/EBITDA ratio of 5.50X, significantly lower than the S&P 500's 17.94X but above the sector's 5X [13][12] - Historical trading ranges for the industry show a high of 24.81X and a low of 4.97X over the past five years, with a median of 14.54X [13] Notable Companies - **Transocean**: A leading offshore drilling contractor with a focus on ultra-deepwater and harsh environment drilling, reported contract drilling revenues of $988 million for Q2 2025, a nearly 15% increase year-over-year [15][16] - **Helmerich & Payne**: The largest land drilling contractor in the U.S., known for its FlexRig fleet and advanced automation, has a market capitalization of $2 billion and has lost 33% in a year [18][20] - **Precision Drilling**: A top drilling rig contractor in Canada with operations in the U.S. and the Middle East, has a market capitalization of $743.3 million and has seen its earnings estimates for 2025 rise from $3.89 to $4.70 per share in the past 60 days [22][24]

Core Viewpoint - SFL Corporation Ltd. announced preliminary financial results for Q2 2025, reporting a net income of $1.5 million and a quarterly cash dividend of $0.20 per share, reflecting ongoing efforts to strengthen its charter backlog and improve operational efficiency [1][4][5]. Financial Performance - The company reported a net income of $1.5 million, equating to $0.01 per share for the second quarter [7]. - Charter hire received in the quarter totaled $194 million, with approximately 87% from shipping and 13% from energy [7]. - Adjusted EBITDA from consolidated subsidiaries was $104 million, with $97 million from shipping and $7 million from energy, plus an additional $8 million from associated vessel owning companies [7]. Strategic Actions - SFL has taken decisive steps to enhance its charter backlog by securing agreements with strong counterparties and investing in cargo-handling and fuel-efficiency upgrades [3]. - The company has divested older, less efficient vessels, which has improved the operational and fuel consumption efficiency of its fleet [3]. - A five-year time charter extension for three 9,500 TEU container vessels with Maersk is expected to add approximately $225 million to the backlog from 2026 through 2031 [7]. Dividend Information - The Board of Directors declared a quarterly cash dividend of $0.20 per share, to be paid on or around September 29, 2025, with a record date of September 12, 2025 [5][6]. - Since its inception in 2004, SFL has distributed a total of $2.9 billion to shareholders through 86 consecutive quarterly cash dividends [5]. Market Conditions - The market for the legacy drilling rig Hercules remains challenging due to recent market uncertainty and oil price volatility, which has delayed new employment opportunities [4]. - The company is optimistic about finding new employment for the rig while exploring strategic opportunities [4].

Financial Highlights - Noble Corporation's market capitalization is $6.2 billion[6] - The company's 2023 Free Cash Flow (FCF) was $184 million[6] - The company's 2023 Adjusted EBITDA was $810 million[6] - The company's backlog stands at $4.6 billion[6] - The company's quarterly dividend is $0.40[6] - The company's 2023 Adjusted EBITDA margin was 31%[6] Market Overview - Average deepwater greenfield investment is expected to increase by 60% in 2025-27 compared to 2021-24[9] - Tier-1 Ultra-Deepwater (UDW) marketed utilization is at 100%[14] - Total UDW marketed utilization is at 97%[14] - Total floater marketed utilization is at 95%[14]