Item 1. Business
Item 1. Business
Overview
Transocean Ltd. (together with its subsidiaries and predecessors, unless the context requires otherwise, “Transocean,” the “Company,” “we,” “us” or “our”) is a leading international provider of offshore contract drilling services for oil and gas wells. As of February 14, 2022, 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 February 14, 2022, we were constructing two ultra-deepwater drillships.
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.
Transocean Ltd. is a Swiss corporation with its registered office in Steinhausen, Canton of Zug and with principal executive offices located at Turmstrasse 30, 6312 Steinhausen, Switzerland. Our telephone number at that address is +41 41 749-0500. Our shares are listed on the New York Stock Exchange under the ticker symbol “RIG.” For information about the revenues, operating income, assets and other information related to our business, our segments and the geographic areas in which we operate, see “ Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ” and “Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements— Note 1—Business , Note 5—Revenues and Note 7—Long-Lived Assets .”
Drilling Fleet
Overview —We provide contract drilling services using our fleet of mobile offshore drilling units, including both drillships and semisubmersibles, broadly referred to as floaters. Floaters are designed to operate in locations away from port for extended periods of time and have living quarters for the crews, a helicopter landing deck and storage space for drill pipe, riser and drilling supplies. Our drilling units and related equipment are suitable for both exploration and development, and we engage in both types of activities.
Drillships are floating vessels that are shaped like conventional ships, generally self-propelled and considered to be the most mobile of the major rig types. Drillships typically have greater deck load and storage capacity than semisubmersible rigs, which provides logistical and resupply efficiency benefits for customers. Drillships are generally better suited to operations in calmer sea conditions and typically do not operate in areas considered to be harsh environments. Our high-specification drillships are equipped with dynamic positioning thruster systems, which allows them to maintain position without anchors through the use of onboard propulsion and station-keeping systems. We have 22 ultra-deepwater drillships that are, and two ultra-deepwater drillships under construction that will be, equipped with our patented dual-activity technology. Dual-activity technology employs structures, equipment and techniques using two drilling stations within a dual derrick to allow these drillships to perform simultaneous drilling tasks in a parallel, rather than a sequential manner, which reduces critical path activity and improves efficiency in both exploration and development drilling. In addition to dynamic positioning thruster systems, dual-activity technology and industry-leading hoisting capacity, our contracted newbuild drillships under construction will be equipped with at least one 20,000 pounds per square inch (“psi”) blowout preventers.
Semisubmersibles are floating vessels that can be partially submerged by means of a water ballast system such that the lower column sections and pontoons are below the water surface during drilling operations. Semisubmersibles are known for stability, making them well suited for operating in rough sea conditions. Semisubmersible floaters are capable of maintaining their position over a well either through dynamic positioning or the use of mooring systems. Although most semisubmersible rigs are relocated with the assistance of tugs, some units are self-propelled and move between locations under their own power when afloat on pontoons. Four of our 13 semisubmersibles are equipped with dual-activity technology and also have mooring capability. Two of these four dual-activity units are custom-designed, high-capacity semisubmersible drilling rigs, equipped for year-round operations in harsh environments, including those of the Norwegian continental shelf and sub-Arctic waters.
Our floater fleet consists of ultra-deepwater floaters and harsh environment floaters that are designed with high-specification capabilities to operate in the technically demanding regions of the global offshore drilling business. Ultra-deepwater floaters are equipped with high-pressure mud pumps and are capable of drilling in water depths of 4,500 feet or greater. Harsh environment floaters are capable of drilling in harsh environments in water depths between 1,500 and 10,000 feet and have greater displacement, which offers larger variable load capacity, more useable deck space and better motion characteristics.
Fleet status —Depending on market conditions, we may idle or stack our non-contracted rigs. An idle rig is between drilling contracts, readily available for operations, and operating costs are typically at or near normal operating levels. A stacked rig typically has reduced operating costs, is staffed by a reduced crew or has no crew and is (a) preparing for an extended period of inactivity, (b) expected to continue to be inactive for an extended period, or (c) completing a period of extended inactivity. Stacked rigs will continue to incur operating costs at or above normal operating levels for approximately 30 days following initiation of stacking. Some idle rigs and all stacked rigs require additional costs to return to service. The actual cost to return to service, which in many instances could be significant and could fluctuate
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over time, depends upon various factors, including the availability and cost of shipyard facilities, the cost of equipment and materials, the extent of repairs and maintenance that may ultimately be required, the length of time a rig has spent in stacking mode and time and cost of assembling and training crew. We consider these factors, together with market conditions, length of contract, dayrate and other contract terms, when deciding whether to return a stacked rig to service. We may not return some stacked rigs to work for drilling services.
Drilling units —The following tables, presented as of February 14, 2022, provide certain specifications for our rigs. Unless otherwise noted, the stated location of each rig indicates either the current drilling location, if the rig is operating, or the next operating location, if the rig is in shipyard with a follow-on contract. The dates provided represent the expected time of completion, the year placed into service, and, if applicable, the year of the most recent upgrade. As of February 14, 2022, we owned all of the drilling rigs in our fleet noted in the tables below, except for the following: (1) the harsh environment floater Transocean Norge , which is owned through our 33.0 percent ownership interest in Orion Holdings (Cayman) Limited (together with its subsidiary, “Orion”), and (2) the ultra-deepwater floater Petrobras 10000 , which is subject to a finance lease through August 2029.
Year
Water
Drilling
Contracted
entered
depth
depth
location or
service /
capacity
capacity
standby
Rig category and name
Specifications
Type
upgraded
(in feet)
(in feet)
status
Ultra-deepwater floaters (27)
Deepwater Poseidon
(a) (b) (c) (d)
Drillship
2018
12,000
40,000
U.S. Gulf
Deepwater Pontus
(a) (b) (c) (d)
Drillship
2017
12,000
40,000
U.S. Gulf
Deepwater Conqueror
(a) (b) (c) (d)
Drillship
2016
12,000
40,000
U.S. Gulf
Deepwater Proteus
(a) (b) (c) (d)
Drillship
2016
12,000
40,000
U.S. Gulf
Deepwater Thalassa
(a) (b) (c) (d)
Drillship
2016
12,000
40,000
U.S. Gulf
Ocean Rig Apollo
(a) (b)
Drillship
2015
12,000
40,000
Stacked
Deepwater Athena
(a) (b)
Drillship
2014
12,000
40,000
Stacked
Deepwater Asgard
(a) (b) (c)
Drillship
2014
12,000
40,000
U.S. Gulf
Deepwater Invictus
(a) (b) (c)
Drillship
2014
12,000
40,000
U.S. Gulf
Deepwater Skyros
(a) (b)
Drillship
2013
12,000
40,000
Angola
Deepwater Mylos
(a) (b) (c)
Drillship
2013
12,000
40,000
Stacked
Deepwater Champion
(a) (b)
Drillship
2011
12,000
40,000
Stacked
Deepwater Corcovado
(a) (b)
Drillship
2011
10,000
35,000
Brazil
Deepwater Mykonos
(a) (b)
Drillship
2011
10,000
35,000
Brazil
Deepwater Orion
(a) (b)
Drillship
2011
10,000
35,000
Idle
Deepwater Olympia
(a) (b)
Drillship
2011
10,000
35,000
Stacked
Discoverer India
(a) (b)
Drillship
2010
12,000
40,000
Stacked
Discoverer Luanda
(a) (b)
Drillship
2010
7,500
40,000
Stacked
Dhirubhai Deepwater KG2
(a)
Drillship
2010
12,000
35,000
Idle
Discoverer Inspiration
(a) (b) (c)
Drillship
2010
12,000
40,000
U.S. Gulf
Discoverer Americas
(a) (b)
Drillship
2009
12,000
40,000
Stacked
Development Driller III
(a) (b) (e)
Semisubmersible
2009
7,500
37,500
Idle
Petrobras 10000
(a) (b)
Drillship
2009
12,000
37,500
Brazil
Discoverer Clear Leader
(a) (b) (c)
Drillship
2009
12,000
40,000
Stacked
Dhirubhai Deepwater KG1
(a)
Drillship
2009
12,000
35,000
India
GSF Development Driller I
(a) (b) (e)
Semisubmersible
2005
7,500
37,500
Stacked
Deepwater Nautilus
(e)
Semisubmersible
2000
8,000
30,000
Not Disclosed
Harsh environment floaters (10)
Transocean Norge
(a) (e) (f)
Semisubmersible
2019
10,000
40,000
Norwegian N. Sea
Transocean Enabler
(a) (e) (f)
Semisubmersible
2016
1,640
28,000
Norwegian N. Sea
Transocean Encourage
(a) (e) (f)
Semisubmersible
2016
1,640
28,000
Norwegian N. Sea
Transocean Endurance
(a) (e) (f)
Semisubmersible
2015
1,640
28,000
Norwegian N. Sea
Transocean Equinox
(a) (e) (f)
Semisubmersible
2015
1,640
28,000
Norwegian N. Sea
Transocean Spitsbergen
(a) (e) (f) (g)
Semisubmersible
2010
10,000
30,000
Norwegian N. Sea
Transocean Barents
(a) (e) (g)
Semisubmersible
2009
10,000
30,000
Norwegian N. Sea
Henry Goodrich
(e)
Semisubmersible
1985/2007
5,000
30,000
Stacked
Transocean Leader
(e)
Semisubmersible
1987/1997
4,500
25,000
Stacked
Paul B. Loyd, Jr.
(e)
Semisubmersible
1990
2,000
25,000
U.K. N. Sea
(a) Dynamically positioned.
(b) Patented dual activity.
(c) Two blowout preventers.
(d) Designed to accommodate a future upgrade to 20,000 psi blowout preventers.
(e) Moored.
(f) Automated drilling control.
(g) Dual activity.
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Water
Drilling
depth
depth
Expected
capacity
capacity
Contracted
Rig category and name
Specifications
Type
completion
(in feet)
(in feet)
location
Rigs under construction (2)
Ultra-deepwater floaters
Deepwater Atlas
(a) (b) (c)
Drillship
2H2022
12,000
40,000
U.S. Gulf
Deepwater Titan
(a) (b) (d)
Drillship
1H2023
12,000
40,000
U.S. Gulf
(a)
To be dynamically positioned.
(b)
To be equipped with our patented dual activity.
(c)
To be equipped with one 20,000 psi blowout preventer and one 15,000 psi blowout preventer.
(d)
To be equipped with two 20,000 psi blowout preventers.
Drilling Contracts
Our offshore drilling services contracts are individually negotiated and vary in their terms and conditions. We obtain most of our drilling contracts through bidding processes in competition against other drilling services contractors and through direct negotiations with operators. Drilling contracts generally provide for payment on a dayrate basis, typically with higher rates for periods when drilling operations are optimized and lower or zero rates for periods during which the drilling unit is mobilized or when drilling operations are interrupted, restricted by equipment breakdowns, adverse environmental conditions or otherwise. A dayrate drilling contract generally extends over a period of time either covering the drilling of a single well or group of wells or covering a stated term. At December 31, 2021, our contract backlog was approximately $6.60 billion, representing a decrease of 18 percent and 37 percent, respectively, compared to the contract backlog at December 31, 2020 and 2019, which was $8.06 billion and $10.42 billion, respectively. See “ Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Performance and Other Key Indicators .”
Certain of our drilling contracts may be cancelable for the convenience of the customer, typically with the payment of an early termination payment. Such payments, however, may not fully compensate us for the loss of the contract. Drilling contracts also customarily provide for either automatic termination or termination at the option of the customer, typically without payment of any termination fee, under various circumstances such as non-performance, in the event of extended downtime or impaired performance due to equipment or operational issues or periods of extended downtime due to force majeure events. Many of these events are beyond our control. The contract term in some instances may be extended by the customer exercising options for the drilling of additional wells or for an additional period of time. Our contracts also typically include a provision that allows the customer to extend the contract to finish drilling a well-in-progress. During periods of depressed market conditions, our customers may seek to renegotiate drilling contracts or options to reduce the term of their obligations or the average dayrate through term extensions or may seek to early terminate or repudiate their contracts. Suspension of drilling contracts will result in the reduction in or loss of dayrate for the period of the suspension. If customers cancel some of our contracts and we are unable to secure new contracts on a timely basis and on substantially similar or more favorable terms, if some of our contracts are suspended for an extended period of time or if a number of our contracts are renegotiated on less favorable terms, our consolidated financial position, results of operations or cash flows may be adversely affected. See “ Item 1A. Risk Factors—Risks related to our business—Our drilling contracts may be terminated due to a number of events, and, during depressed market conditions, our customers may seek to repudiate or renegotiate their contracts .”
Under dayrate drilling contracts, consistent with standard industry practice, our customers, as the operators, generally assume, and grant indemnity for, subsurface and well control risks, and their consequential damages. Under all of our current drilling contracts, our customers indemnify us for pollution damages in connection with reservoir fluids stemming from operations under the contract, and we indemnify our customers for pollution that originates above the surface of the water from the rig from substances in our control, such as diesel used onboard the rig or other fluids stored onboard the rig. Also, our customers indemnify us for consequential damages they incur, damage to the well or reservoir, loss of subsurface oil and gas and the cost of bringing the well under control. However, because our drilling contracts are individually negotiated, the degree of indemnification we receive from our customers for the risks discussed above may vary from contract to contract based on market conditions, customer requirements existing when the contract was negotiated or other factors. In some instances, we have contractually agreed upon certain limits to our indemnification rights and can be responsible for certain damages up to a specified maximum dollar amount. The nature of our liability and the prevailing market conditions, among other factors, can influence such contractual terms. Notwithstanding a contractual indemnity from a customer, there can be no assurance that our customers will be financially able to indemnify us or will otherwise honor their contractual indemnity obligations.
The interpretation and enforceability of a contractual indemnity depends upon the specific facts and circumstances involved, as governed by applicable laws, and may ultimately need to be decided by a court or other proceeding, which would need to consider the specific contract language, the facts and applicable laws. Applicable laws often consider contractual indemnity for criminal fines and penalties to be against public policy. Many courts also restrict indemnification for criminal fines and penalties. The inability or other failure of our customers to fulfill their indemnification obligations, or the unenforceability of all of our contractual protections could have a material adverse effect on our consolidated financial position, results of operations or cash flows. See “ Item 1A. Risk Factors—Risks related to our business—Our business involves numerous operating hazards, and our insurance and indemnities from our customers may not be adequate to cover potential losses from our operations. ”
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Markets
Overview —Our operations are geographically dispersed in oil and gas exploration and development areas throughout the world. We operate in a single, global offshore drilling market, as our drilling rigs are mobile assets and can be moved according to prevailing market conditions. We may mobilize our drilling rigs between regions for a variety of reasons, including to respond to customer contracting requirements or to capture observed market demand. Consequently, we cannot predict the future percentage of our revenues that will be derived from particular geographic areas. As of February 14, 2022, the drilling units in our fleet, including stacked and idle rigs, but excluding rigs under construction, were located in Greece (eight units), the U.S. Gulf of Mexico (eight units), the Norwegian North Sea (seven units), Brazil (three units), Malaysia (three units), the United Kingdom (the “U.K.”) North Sea (two units), Trinidad (one unit), Angola (one unit), Canada (one unit), India (one unit), Myanmar (one unit), and Namibia (one unit).
We categorize the sectors of the floater market in which we operate as follows: (1) ultra-deepwater and deepwater, (2) harsh environment and (3) midwater. We typically employ our ultra-deepwater floaters to service the ultra-deepwater and deepwater sector, and we employ our harsh environment floaters to service all three sectors. We generally view the ultra-deepwater and deepwater market sector as water depths beginning at 4,500 feet and extending to the maximum water depths in which rigs are capable of drilling, which is currently up to 12,000 feet. The midwater market sector includes water depths from approximately 300 feet to approximately 4,500 feet. The harsh environment market sector includes regions that are more challenged by lower temperatures, harsher weather conditions and water currents.
The market for offshore drilling rigs and related services reflects our customers’ demand for equipment for drilling exploration, appraisal and development wells and for performing maintenance on existing production wells. Activity levels of energy companies, including integrated energy companies, independent energy companies and, to a lesser extent, national energy companies are largely driven by the worldwide demand for energy, including crude oil and natural gas. Worldwide energy supply and demand drives oil and natural gas prices, which, in turn, impact energy companies’ ability to fund investments in exploration, development and production activities.
Outlook —In 2014, the industry began to experience a severe cyclical downturn that has proven to be of considerably longer duration than those previously observed. Multiple years of volatile and generally weak commodity prices, exacerbated by the effects of the COVID-19 pandemic and production disputes among major oil producing countries, resulted in our customers delaying offshore investment decisions and postponing exploration and development programs. Some of our customers have also committed to invest or increase investment in low carbon and renewable energy resources, potentially affecting their expenditures in the development and production of hydrocarbons over the coming decades. Even in the context of some diversion of investment away from traditional energy sources, the structural efficiency gains achieved by the offshore oil and gas industry during the past seven years materially improved the economics of deepwater and harsh environment offshore development projects. Our services are central to the exploitation of these competitive sources of new supply.
Our overall outlook for the offshore drilling industry has improved over the past year and remains positive, particularly for high-specification assets, such as those we own and operate. During the second half of 2021, our customers’ interest in deepwater and harsh environment offshore projects was renewed due to numerous favorable factors, such as sustained higher commodity prices and comparably lower carbon intensity compared to other sources of fossil fuel. South America, including Guyana, the U.S. Gulf of Mexico and, increasingly, West Africa remain key ultra-deepwater market sectors, while Norway continues to represent the largest harsh environment market.
In addition, in 2021, we observed continued strong tendering activity for Asia and Australia. Licensing activity also indicated an increased interest in these areas as energy companies looked to explore and develop new prospects. Certain customers began to increase their exploration, production and reserve replacement activities by restarting delayed projects and commencing new campaigns. We have seen an acceleration in this trend in early 2022. While we expect this to continue in the near term, and potentially longer, it depends upon many variables, including increased global demand for hydrocarbons, the effects of the COVID-19 pandemic on consumer activity, the actions by some governments and regulators intended to curtail existing and future drilling activities, and other factors.
We expect offshore oil and gas production to be a significant part of the long-term strategy for energy companies as they strive to meet the global demand for energy sources and hydrocarbons. These projects are technically demanding due to various factors, such as water depth, complex well designs, deeper drilling depth, high pressure and temperature, sub-salt geological formations, harsh environments, and heightened regulatory standards necessitating the use of high-specification drilling units. Generally, high-specification rigs are the most modern, technologically advanced class of the offshore fleet and have capabilities that are attractive to energy companies operating in deeper water depths, other challenging environments or with complex well designs. We have led the industry and made concerted efforts since the beginning of the prolonged downturn to high-grade our fleet profile by acquiring high-specification assets and disposing of lower-specification assets. In this regard, during the years ended December 31, 2021, 2020 and 2019, we sold for scrap value one, six and eleven lower-specification drilling units, respectively.
As the hydrocarbon supply-demand balance further improves, we expect sustained prices to increase demand for our high-specification fleet of assets and, because there are now fewer offshore drilling rigs than in recent years, further improvement of dayrates. See “ Item 1A. Risk Factors—Risks related to our business .”
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Customers
We provide our offshore drilling services to most of the leading integrated energy companies or their affiliates, as well as for many government-owned or government-controlled energy companies and other independent energy companies. For the year ended December 31, 2021, our most significant customers were Shell plc (together with its affiliates, “Shell”) and Equinor ASA (together with its affiliates, “Equinor”), representing approximately 31 percent and 30 percent, respectively, of our consolidated operating revenues. No other customers accounted for 10 percent or more of our consolidated operating revenues in the year ended December 31, 2021. Additionally, as of February 14, 2022, the customers with the most significant aggregate amount of contract backlog associated with our drilling contracts were Shell, Equinor and Chevron Corporation (together with its affiliates, “Chevron”), representing approximately 54 percent, 16 percent and 15 percent, respectively, of our total contract backlog. See “ Item 1A. Risk Factors—Risks related to our business—We rely heavily on a relatively small number of customers and the loss of a significant customer or a dispute that leads to the loss of a customer could have an adverse effect on our business. ”
Human Capital Resources
Worldwide workforce —As of December 31, 2021, we had a global workforce of approximately 5,530 individuals, including approximately 530 contractors, representing 58 nationalities. At December 31, 2021, our global workforce is geographically distributed in 21 countries across five continents as follows: 34 percent in North America, 32 percent in Europe, 17 percent in South America, 12 percent in Asia and 5 percent in Africa.
FIRST Shared Values and corporate culture —Our FIRST Shared Values serve as the foundation for our corporate culture and guide us to act ethically and responsibly as we strive to deliver value for our stakeholders and to maintain a safe and respectful work environment for our people. Our Shared Values are as follows:
◾ Focused . We will consistently exceed the expectations of customers, shareholders and employees.
◾ Innovative . We will continuously advance our position as technical leaders, and relentlessly pursue improvement in all that we do.
◾ Reliable . We will execute flawlessly by ensuring that our equipment, processes and systems always perform as and when intended, and that our people are properly trained and motivated.
◾ Safe . Above all else, we will protect each other, the environment and our assets. We will conduct our operations in an incident-free environment, all the time, everywhere.
◾ Trusted . We will always act with integrity and professionalism, honor our commitments, comply with laws and regulations, respect local cultures, and be fiscally responsible.
Code of Integrity and Human Rights —We maintain a Code of Integrity and Human Rights Policy that applies to all our board members, executives, employees and business partners, including contractors, suppliers, vendors, investees and joint venture partners. We demonstrate our respect of human rights by maintaining a healthy and safe work environment, observing fair employment practices and providing competitive employment terms. Practices such as modern slavery, child labor, forced or indentured servitude, and other human rights abuses are strictly prohibited.
Labor rights —We respect the labor rights of all individuals in our workforce, including the right to collective bargaining. Approximately 42 percent of our total workforce, working primarily in Norway, Brazil and the U.K., are represented by, and some of our contracted labor work is subject to, collective bargaining agreements, substantially all of which are subject to annual salary negotiation. Negotiations over annual salary or other labor matters could result in higher personnel or other costs or increased operational restrictions or disruptions. The outcome of any such negotiation generally affects the market for all offshore employees, not only union members. A failure to reach an agreement on certain key issues could result in strikes, lockouts or other work stoppages.
Attraction, development and retention —We aim to strategically cultivate a best-in-class workforce to offer the innovation, local knowledge and experience required of the world’s premier offshore drilling contractor. We seek to maintain our competitive advantage while benefitting our local communities by offering regionally competitive compensation and benefits packages, a technically challenging work environment, global opportunities, and rotational development programs. We continually assess and adapt our offerings and our policies, based on evolving social and technological practices, to provide a modern work environment, which is essential to attract and retain top talent, and a respectful and inclusive work environment in which our global workforce can thrive. Our focus on the quality of our workforce is designed to maximize the quality of our work performance and ultimately, the value we deliver to our stakeholders.
Training —We invest in our workers by providing them with the transferrable skill sets essential to advancing their professional development. To ensure our business competes at the highest levels, we maintain a rigorous competency-based training program. Our internal training board maintains and regularly updates our training matrix to meet or exceed industry standards, and it oversees our competency assurance management system, which is accredited by the Offshore Petroleum Industry Training Organization. We provide various offshore training formats designed to encompass all learning styles through on-the-job, e-learning, customer-specific training, certifications, and leadership and licensing programs. Setting us apart from our competitors, we also offer unique simulation-based education, augmented by digital twin modeling, enabling our workforce to more accurately visualize equipment performance and target efficiencies. The certifications, skills and competencies needed for each role are clearly articulated to our workforce, and workers are required to successfully complete the relevant training and attain all necessary certifications prior to taking on new roles.
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Wellness and benefits —We offer our workforce regionally competitive medical and financial benefits, tailored to our workforce demographics. We design our wellness and benefits strategy under four pillars consisting of physical well-being, financial well-being, emotional well-being and social well-being, emphasizing during the pandemic, as a key benefit, our globally available employee assistance program.
Safety —Our safety vision is to conduct our operations in an incident-free workplace, all the time, everywhere. As a socially responsible company, we prioritize the protection of everyone aboard our rigs and in our facilities, the environment and our property at all work locations and during all operations. We require compliance with all local regulations and a comprehensive set of internal policies and procedures that govern our operations, including health and safety protocols for COVID-19 mitigation. With regular competency and effectiveness assessments, our highly trained crews are equipped to protect our operational integrity with the process-driven management of hazards to prevent and mitigate major hazard accidents. We measure our safety performance in terms of widely accepted ratios with the use of industry standards, including (a) the total recorded incidence rate (“TRIR”), which represents the number of recordable work-related injuries or illnesses for every 200,000 hours worked, and (b) the lost time incidence rate (“LTIR”), which measures the number of incidents that result in lost time due to work-related injuries or illnesses for every 200,000 hours worked. In the year ended December 31, 2021, our TRIR was 0.26, and our LTIR was 0.02.
Environmental Responsibility
We understand our business has an impact on the environment. Our objective is to deliver our services in a manner that minimizes the impact to the environment and supports the interests of our stakeholders. We constantly seek new ways to advance our commitment to safely performing our operations while simultaneously safeguarding the environment in which we operate. We maintain a global Environmental Management System (“EMS”) standard that is applied to our rigs, offices and facilities. The EMS is aligned to ISO 14001 and provides a framework to ensure that our worldwide operations are managed consistently and continuously in an environmentally responsible manner.
We regularly assess the environmental impacts of our operations, focusing on the reduction of greenhouse gas emissions, operational discharges and water use, through increasing energy efficiency and waste minimization. Our actions are designed to reduce risk in our current and future operations, to promote sound environmental management practices and to continue to be proactive in managing and reducing our environmental footprint. Our investments and deployment of capital and technology reflect our commitment to improve the energy and emission efficiency of our operations.
Another way we seek to enhance our operational performance is by setting emissions targets. We intend to reduce our operating Scope 1 and Scope 2 greenhouse gas emissions intensity by 40 percent from 2019 levels by 2030. Achieving these targets will require investments over time that result in the development and implementation of new technologies, reduced fuel consumption and other initiatives that enable us to optimize our power management capabilities.
When we have decommissioned older and less capable assets, we have demonstrated our commitment to recycle them according to established environmental regulations and guidelines. All the rigs that we have sold for scrap value have been safely and responsibly recycled following protocols established under the Basel Convention and by the International Maritime Organization at the Hong Kong International Convention.
Technological Innovation
We have a long history of technological innovation, including the first dynamically positioned drillship, the first rig to drill year-round in the North Sea, the first semisubmersible rig for year-round sub-Arctic operations, the first 10,000-ft. water depth rated ultra-deepwater drillship and numerous water depth world records over the past several decades. Twenty-two drillships and two semisubmersibles in our existing fleet are, and our two drillships that are under construction will be, equipped with our patented dual-activity technology, which allows our rigs to perform simultaneous drilling tasks in a parallel rather than sequential manner, reducing well construction critical path activities and, thereby, improving efficiency in both exploration and development drilling.
We continue to develop and deploy industry-leading technology in the pursuit of delivering safer, more efficient and environmentally responsible drilling services. In addition to our patented dual-activity drilling technology, our two drillships under construction will include industry-leading 3.5 million-pound hoisting load capability, hybrid energy storage systems for enhanced drill floor equipment reliability, fuel and emissions savings as well as advanced generator protection for power plant reliability. Ten drillships in our existing fleet are, and our two drillships that are under construction will be, outfitted with dual blowout preventers and triple liquid mud systems. Our two drillships under construction will be equipped with 20,000 psi blowout preventers and related equipment. Five drillships in our existing fleet are designed to accept 20,000 psi blowout preventers in the future. We also continue to develop and invest in technologies designed to optimize our performance and deliver ever better operational integrity through innovations, such as our proprietary fault-resistant and fault-tolerant blowout preventer control system.
Seven of our harsh environment semisubmersibles are designed and constructed specifically to provide highly efficient performance in the Norwegian North Sea and in the Barents Sea. We have installed automated drilling control systems on six harsh environment floaters, which materially improves our ability to safely and efficiently deliver wells to our customers.
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We employ a data-driven approach by deploying technology, augmented by the size of our fleet, to expand our knowledge framework for sustainable process optimization. In 2020, we deployed our smart equipment analytics tool, which delivers real-time data feeds from equipment to monitor equipment health, inferred emissions and energy consumption while identifying performance trends that allow us to systematically optimize equipment maintenance and achieve higher levels of reliability, operational efficiency and sustainability.
Driven by our continued focus on safety, we developed and deployed our patented HaloGuard ℠ system, which alarms, notifies and, if required, halts equipment to avoid injury to personnel who move into danger zones. We recently deployed the first unit of Enhanced Drilling’s EC-Monitor system to an offshore installation, enabling highly accurate understanding of well fluid dynamics and improving the efficiency and accuracy of flow-checking and detecting flow anomalies. Additionally, in 2021, we deployed on one of our ultra-deepwater drillships the first kinetic blowout stopper, a step-changing technology operations integrity and enterprise risk reduction through unrivaled shearing capability. In the first half of 2022, we expect to be the first to deploy offshore a robotic riser bolting tool on two of our ultra-deepwater drillships, improving our ability to deliver safe, efficient and operations to our customers.
We believe our efforts to continuously improve, and effectively use, innovative technologies to meet or exceed our customers’ requirements is critical to maintaining our competitive position within the contract drilling services industry by drilling more efficient wells, building greater resilience into our critical operating systems, ensuring the safety of our crews, and reducing fuel consumption and emissions.
Governmental Regulations
Our operations are subject to a variety of international, regional, national, state and local government regulations, including environmental regulations. We monitor our compliance with such government regulations in each country of operation and, while we see an increase in many government regulations, particularly general environmental regulation, we have made and will continue to make the required expenditures to comply with current and future government requirements. To date, we have not incurred material costs in order to comply with such government regulations, including environmental regulations, and do not expect to make any material capital expenditures in order to comply with such regulations in the year ending December 31, 2022, or any other period contemplated at this time. We do not believe that our compliance with such requirements will have a material adverse effect on our competitive position, consolidated results of operations or cash flows. We incorporate by reference into this subsection “— Government Relations ” the disclosures on government regulations, including environmental regulations, contained in the following sections of this annual report on Form 10-K:
◾ “ Item 1A. Risk Factors—Risks related to our laws, regulations and governmental compliance ;”
◾ “ Item 3. Legal Proceedings ;”
◾ “ Part II. Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Other Matters ;”
◾ “ Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 11—Income Taxes ;” and
◾ “ Part II. Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 13—Commitments and Contingencies .”
Joint Venture, Agency and Sponsorship Relationships and Other Investments
In some areas of the world, local customs and practice or governmental requirements necessitate the formation of joint ventures with local participation since local laws or customs in those areas effectively mandate the establishment of a relationship with a local agent or sponsor. When appropriate in these areas, we may enter into agency or sponsorship agreements. We also invest in certain companies for operational and strategic purposes. Some of these joint ventures or companies in which we are an investor are involved in researching and developing technology to improve efficiency, reliability, sustainability and safety for our drilling and other activities or are involved in businesses developed to support the transition to renewable or other energy alternatives. We may or may not control these partially owned companies. At December 31, 2021, we held partial ownership interests in companies organized in the Cayman Islands, the U.S., Norway, Canada and other countries, the most significant of which was our 33.0 percent ownership interest in Orion, an unconsolidated Cayman Islands exempted company formed to construct and own the harsh environment semisubmersible Transocean Norge . Certain affiliates of Hayfin Capital Management LLP, own the remaining 67.0 percent ownership interest in Orion not owned by us.
Available Information
Our website address is www.deepwater.com . Information contained on or accessible from our website is not incorporated by reference into this annual report on Form 10-K and should not be considered a part of this report or any other filing that we make with the SEC. Furthermore, references to our website URLs are intended to be inactive textual references only. We make available on this website free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports as soon as reasonably practicable after we electronically file those materials with, or furnish those materials to, the SEC. You may also find on our website information related to our corporate governance, board committees and company code of business conduct and ethics. The SEC also maintains a website, www.sec.gov , which contains reports, proxy statements and other information regarding SEC registrants, including us. We intend to satisfy the requirement under Item 5.05 of Form 8-K to disclose any amendments to our Code of Integrity and any waiver from any provision of our Code of Integrity by posting such information in the Governance page on our website at www.deepwater.com .
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