Transocean(RIG) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - For Q3 2024, Transocean reported adjusted EBITDA of $342 million on contract drilling revenues of$948 million, resulting in an adjusted EBITDA margin of approximately 36% [8][41] - The company experienced a net loss attributable to controlling interest of $494 million, equating to a net loss of$0.58 per diluted share [41] - Total liquidity at the end of Q3 2024 was approximately $1.4 billion, including$435 million in unrestricted cash and cash equivalents [44] Business Line Data and Key Metrics Changes - Contract drilling revenues were slightly above guidance due to extended operations of the Deepwater Invictus and shorter out-of-service durations for other rigs [42] - Operating and maintenance expenses were $563 million, below guidance due to delays in non-critical maintenance activities [43] - The average daily revenue for contract drilling was approximately$437,000 [42] Market Data and Key Metrics Changes - The active fleet utilization for 2025 exceeds 97% and remains at roughly 86% through the first half of 2026 [15] - The company secured $1.3 billion in recent contract awards, increasing total backlog to$9.3 billion, a 7.5% sequential increase [21] - Global upstream CapEx is forecasted to remain flat at just under $500 billion per year, with deepwater investment expected to grow from 12$9.3 billion backlog to revenue and cash, focusing on financial stability and potential shareholder distributions by late 2026 [37][51] - Transocean emphasizes the importance of owning and operating a high-specification rig fleet, which has proven to be a successful strategy through market cycles [17][22] - The company is actively engaged in discussions for projects beginning in 2026 and beyond, indicating a focus on long-term growth [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the longevity of the current upcycle, supported by market studies and customer discussions [24] - The company noted that the breakeven cost for deepwater projects is around $40 per barrel, allowing customers to remain profitable even with lower oil prices [105] - Management highlighted that premium assets attract premium day rates, and the company is well-positioned to capitalize on this trend [22][23] Other Important Information - The company has implemented Critical Operations Authorization Centers to improve operational reliability, achieving a 20$520,000, suggesting stability in day rates despite potential soft spots in the market [55][60] Question: Thoughts on industry consolidation - Management believes consolidation is healthy for the industry and sees room for more, emphasizing the benefits of combining assets for operational efficiency [70][72] Question: Clarification on BOP reliability issues - Management acknowledged the reliability challenges as part of the commissioning process for new technology, but expressed confidence in resolving these issues quickly [74][75] Question: Underlying cost inflation in 2025 guidance - Management noted an average inflation rate of 3% for 2025, with higher inflation observed in specific jurisdictions and activities [79][81] Question: Incremental demand in Namibia - Management indicated that both drillships and semisubmersibles are being discussed for projects in Namibia, depending on environmental conditions [82][84] Question: Decision process for stacking rigs - Management highlighted their historical approach to reducing excess capacity and emphasized the importance of asset quality in making decisions about rig utilization [87][91]